<PAGE> 1
As Filed with the Securities and Exchange Commission on December 22, 2000
Registration File No. 333-47844
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
------------------------
PRE-EFFECTIVE
AMENDMENT
NO. 1 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 REGISTRANT)
MERRILL LYNCH LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
7 ROSZEL ROAD
PRINCETON, NEW JERSEY 08540
(COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
BARRY G. SKOLNICK, ESQ.
SENIOR VICE PRESIDENT & GENERAL COUNSEL
MERRILL LYNCH LIFE INSURANCE COMPANY
7 ROSZEL ROAD
PRINCETON, NEW JERSEY 08540
(NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE)
COPY TO:
STEPHEN E. ROTH, ESQ.
KIMBERLY J. SMITH, ESQ.
SUTHERLAND ASBILL & BRENNAN LLP
1275 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, DC 20004-2415
It is proposed that this filing will become effective as soon as practicable
after the effective date.
TITLE OF SECURITIES BEING REGISTERED: Modified Single Premium Variable Life
Insurance Contracts.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration shall become effective on such
date as the Commission, acting pursuant to Section 8(a), may determine.
<PAGE> 2
PROSPECTUS
___________, 2000
Merrill Lynch Variable Life Separate Account
MODIFIED SINGLE PREMIUM VARIABLE 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
Springfield, Massachusetts 01144-1007
Phone: (800) 354-5333
offered through
Merrill Lynch, Pierce, Fenner & Smith Incorporated
This prospectus describes contracts which generally are modified endowment
contracts ("MECs") under federal tax law. Most distributions will have tax
consequences and/or penalties.
Generally, through the first 14 days following a Contract's in force date, we
will invest your initial payment in the subaccount of the Merrill Lynch Variable
Life Separate Account (the "Separate Account") investing in the Merrill Lynch
Domestic Money Market Fund. Afterward, you may reallocate your account value
among any five of the subaccounts of the Separate Account. We then invest each
subaccount's assets in corresponding portfolios ("Funds") of the following:
<TABLE>
<S> <C>
- MERRILL LYNCH VARIABLE SERIES FUNDS, INC. - MERCURY HW VARIABLE TRUST
- Basic Value Focus Fund - Mercury HW International Value
- Domestic Money Market Fund VIP Portfolio
- Fundamental Growth Focus Fund - DAVIS VARIABLE ACCOUNT FUND, INC.
- Government Bond Fund - Davis Value Portfolio
- Index 500 Fund - DELAWARE GROUP PREMIUM FUND
- AIM VARIABLE INSURANCE FUNDS - Trend Series
- AIM V.I. International Equity Fund - PIMCO VARIABLE INSURANCE TRUST
- AIM V.I. Value Fund - Total Return Bond Portfolio
- ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC. - SELIGMAN PORTFOLIOS, INC
- Growth and Income Portfolio - Seligman Small-Cap Value
- Premier Growth Portfolio Portfolio
- MFS(R)-VARIABLE INSURANCE TRUST(SM) - VAN KAMPEN LIFE INVESTMENT TRUST
- MFS Emerging Growth Series - Emerging Growth Portfolio
- MFS Growth With Income Series
</TABLE>
<PAGE> 3
Currently, you may transfer your account value as often as you like without
charge.
During the guarantee period, we cannot terminate the Contract, regardless of
investment results, unless loan debt exceeds the surrender value. The "guarantee
period" extends from the contract date to the insured's attained age 100. The
death benefit during the guarantee period may vary to reflect the investment
results of the subaccounts chosen, but will never be less than the guaranteed
minimum death benefit. The "guaranteed minimum death benefit" is the face amount
of the contract. After the guarantee period, the Contract will remain in effect
as long as the net surrender value is sufficient to cover all charges due, and
the death benefit will be equal to the contract value.
Subject to certain conditions, you may:
- make additional premium payments in the first contract year
- make partial withdrawals
- borrow up to the loan value of your Contract
- cancel the Contract for its net surrender value
The account value will vary with the investment results of the subaccounts
chosen. We don't guarantee any minimum surrender value.
Within certain limits, you may return the Contract or exchange it for a contract
with benefits that don't vary with the investment results of a separate account.
It may not be advantageous to replace existing insurance with the Contract.
PURCHASING THIS CONTRACT INVOLVES CERTAIN RISKS. INVESTMENT RESULTS CAN VARY
BOTH UP AND DOWN AND CAN EVEN DECREASE THE VALUE OF PREMIUM PAYMENTS. THEREFORE,
YOU COULD LOSE ALL OR PART OF THE MONEY YOU INVEST. EXCEPT FOR THE GUARANTEED
DEATH BENEFIT WE PROVIDE, YOU BEAR ALL INVESTMENT RISKS. WE DO NOT GUARANTEE HOW
ANY OF THE SUBACCOUNTS OR FUNDS WILL PERFORM.
LIFE INSURANCE IS INTENDED TO BE A LONG-TERM INVESTMENT. YOU SHOULD EVALUATE
YOUR INSURANCE NEEDS AND THE CONTRACT'S LONG-TERM INVESTMENT POTENTIAL AND RISKS
BEFORE PURCHASING THE CONTRACT.
CURRENT PROSPECTUSES FOR MERRILL LYNCH VARIABLE SERIES FUNDS, INC.; AIM VARIABLE
INSURANCE FUNDS; ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.; MFS(R)-VARIABLE
INSURANCE TRUST(SM); MERCURY HW VARIABLE TRUST; SELIGMAN PORTFOLIOS, INC.; DAVIS
VARIABLE ACCOUNT FUND, INC.; DELAWARE GROUP PREMIUM FUND; PIMCO VARIABLE
INSURANCE TRUST; AND VAN KAMPEN LIFE INVESTMENT TRUST MUST ACCOMPANY THIS
PROSPECTUS. PLEASE READ THESE DOCUMENTS CAREFULLY AND RETAIN THEM FOR FUTURE
REFERENCE.
2
<PAGE> 4
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THESE CONTRACTS OR
DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE HAVE NOT AUTHORIZED ANY PERSON TO
MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS.
3
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C>
IMPORTANT TERMS.................................................................................6
SUMMARY OF THE CONTRACT.........................................................................8
What The Contract Provides...........................................................8
Availability and Payments............................................................9
The Account Value....................................................................9
The Subaccounts......................................................................9
Illustrations.......................................................................10
Replacement of Existing Coverage....................................................10
Right to Cancel ("Free Look" Period) or Exchange....................................10
Distributions From The Contract.....................................................10
Charges, Fees and Credits...........................................................11
Annual Expenses.....................................................................13
Notes to Fee Table..................................................................14
FACTS ABOUT MERRILL LYNCH LIFE INSURANCE COMPANY, MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED, AND THE SEPARATE ACCOUNT...............................15
Merrill Lynch Life Insurance Company................................................15
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S").......................15
Net Rate of Return for a Subaccount.................................................16
Changes within the Separate Account.................................................17
THE FUNDS......................................................................................17
Merrill Lynch Variable Series Funds, Inc............................................18
AIM Variable Insurance Funds........................................................19
Alliance Variable Products Series Fund, Inc.........................................20
Mercury HW Variable Trust...........................................................21
Davis Variable Account Fund, Inc....................................................21
Delaware Group Premium Fund.........................................................22
PIMCO Variable Insurance Trust......................................................22
Seligman Portfolios, Inc............................................................23
Van Kampen Life Investment Trust....................................................23
The Operation of the Funds..........................................................23
FACTS ABOUT THE CONTRACT.......................................................................25
Who May Be Covered..................................................................25
Initial Payment.....................................................................26
Right To Cancel ("Free Look" Period)................................................26
Making Additional Payments..........................................................26
Account Value.......................................................................27
Owner's Right to Transfer Account Value.............................................28
Charges.............................................................................28
Charges Deducted From The Account Value...................................29
Charges To The Separate Account...........................................30
Transaction Charges.................................................................30
Transaction Charges.......................................................31
Fund Expenses.......................................................................31
</TABLE>
4
<PAGE> 6
<TABLE>
<S> <C>
Credits Added to the Account Value..................................................31
Guarantee Period....................................................................31
Surrender Value.....................................................................32
Canceling To Receive Net Surrender Value............................................32
Partial Withdrawals.................................................................32
Loans...............................................................................33
DEATH BENEFIT..................................................................................35
Death Benefit Proceeds..............................................................36
Payment Of Death Benefit Proceeds...................................................36
MORE ABOUT THE CONTRACT........................................................................36
Using The Contract..................................................................36
Dollar Cost Averaging...............................................................38
Right To Exchange Contract..........................................................39
Choosing an Income Option...........................................................40
Reports To Contract Owners..........................................................41
Some Administrative Procedures......................................................41
Other Contract Provisions...........................................................42
Group Or Sponsored Arrangements.....................................................43
Unisex Legal Considerations.........................................................44
Selling The Contracts...............................................................44
Tax Considerations..................................................................45
Reinsurance.........................................................................49
ILLUSTRATIONS.......................................................................49
MORE ABOUT MERRILL LYNCH LIFE INSURANCE COMPANY................................................55
Directors And Executive Officers....................................................55
Services Arrangement................................................................56
State Regulation....................................................................56
Legal Proceedings...................................................................56
Experts.............................................................................56
Legal Matters.......................................................................57
Registration Statements.............................................................57
Financial Statements................................................................57
Effect of Additional Payment on Face Amount.........................................58
Effect of Partial Withdrawals on Face Amount........................................59
</TABLE>
5
<PAGE> 7
IMPORTANT TERMS
account value: is the amount available for investment under this Contract at any
time. It is the sum of the value in each of the subaccounts.
accumulation unit: is a unit of measure used to compute the value of your
interest in a subaccount.
attained age: is the issue age of the insured plus the number of full contract
years since the contract date.
beneficiary: is the person to whom we pay the death benefit proceeds upon the
insured's death.
Company: Merrill Lynch Life Insurance Company, also referred to as "we" or "us."
contract anniversary: is the same date of each year as the contract date.
contract date: is used to determine processing dates, contract years and
contract anniversaries. It is usually the business day next following the
receipt of the initial premium payment at the Service Center.
contract value: is the account value plus loan debt, less any charges we accrue
for. Accrued charges are collected as of a processing date or contract
anniversary, and upon surrender.
death benefit: is the greater of the guaranteed minimum death benefit and the
variable insurance amount.
death benefit proceeds: is the amount payable to the beneficiary upon the death
of the insured. It equals the death benefit less any loan debt.
due proof of death: is a certified copy of the death certificate, beneficiary
statement and any additional paperwork necessary to process payment of a death
claim when the insured dies.
fixed base: is used to determine any adjustments to the face amount due to
additional premium payments or withdrawals. The fixed based on the contract date
equals the contract value. On subsequent processing date we calculate the fixed
base by adding premium payments and subtracting withdrawals, adding interest
from the dates of the payments or withdrawal at an annual rate of 4%, and
subtracting guaranteed maximum cost of insurance charge, Thereafter, the fixed
base is calculated for each processing date as follows:
- we add premiums and subtract withdrawals;
- we add interest from the date of each premium payment or withdrawal
at an annual rate of 4%; and
- we subtract guaranteed maximum cost of insurance charges.
6
<PAGE> 8
After the expiration of the guarantee period, the fixed based is set to zero.
Fund: is an investment portfolio of an open-end management investment company or
unit investment trust in which a subaccount invests.
guarantee period: extends from the contract date to the insured's attained age
100. We cannot terminate the Contract during the guarantee period unless any
loan debt exceeds the surrender value on a processing date.
guaranteed minimum death benefit: is the death benefit payable regardless of the
investment results of the subaccounts during the guarantee period. The
guaranteed minimum death benefit equals the face amount.
in force date: is the date when the underwriting process is complete, and we
receive the initial premium payment and any outstanding contract amendments at
the Service Center.
issue age: is the insured's age as of his or her birthday nearest the contract
date.
issue date: is the date this contract is issued at the Service Center. The
contestable and suicide periods are measured from this date.
loan debt: is the loan amount on the last contract anniversary (including
capitalized loan interest), plus any new loans since that anniversary, less any
repayments since that anniversary, plus accrued loan interest.
net amount at risk: is the excess of the death benefit over the contract value,
adjusted for interest at 4%.
net contract value: is the contract value less any loan debt.
net loan cost: is the difference between loan interest charged and interest
credited to loan collateral.
net single premium factor: is used to determine the amount of death benefit
purchased by $1.00 of contract value. We use 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 (IRC).
net surrender value: is equal to surrender value less any loan debt.
premiums: is the money paid into this Contract.
processing dates: are the days when we may deduct charges or add credits, or
determine the amount of a charge or credit. Processing dates begin on the
contract date and occur on the same day of the month as the contract date, at
the end of each three-month processing period.
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<PAGE> 9
processing period: is the three-month period between consecutive processing
dates.
Separate Account: is the investment vehicle used to fund the Contract. The
Separate Account has multiple subaccounts, which invest in corresponding shares
or units of the Funds.
surrender value: is the contract value less any applicable surrender charges.
valuation period: is each business day together with any non-business days
before it. A business day is any day the New York Stock Exchange (NYSE) is open
for trading, or any day on which the SEC otherwise requires that the Funds be
valued. We calculate the value of an accumulation unit for each subaccount at
the end of each valuation period.
variable insurance amount: is the contract value multiplied by the appropriate
net single premium factor.
SUMMARY OF THE CONTRACT
WHAT THE CONTRACT PROVIDES
The Contract offers a choice of investments and an opportunity for the account
value and death benefit to grow based on the investment results of the Funds.
We don't guarantee that contract values will increase. Depending on the
investment results of the subaccounts you select, the account value and death
benefit may go up or down on any day. You bear the investment risk for any
amount allocated to a subaccount.
You should purchase the Contract for its death benefit. You may use the
Contract's net surrender value, as well as its death benefit, to provide
proceeds for various individual and business planning purposes. However, partial
withdrawals and loans will affect the net surrender value and death benefit
proceeds. Loans may cause the Contract to terminate. The Contract is designed to
provide benefits on a long-term basis. Before purchasing a Contract in
connection with a specialized purpose, you should consider whether the long-term
nature of the Contract, its investment risks, and the potential impact of any
contemplated loans and partial withdrawals, are consistent with the purposes you
may be considering. Moreover, using a Contract for a specialized purpose may
have tax consequences. (See "Tax Considerations".)
Death Benefit. During the guarantee period, the death benefit equals the
guaranteed minimum death benefit or variable insurance amount, whichever is
larger. The variable insurance amount increases or decreases depending on the
investment results of the subaccounts you select. Therefore, the death benefit
may go up or down depending on investment performance, but it will never drop
below the guaranteed minimum death benefit. After the expiration of the
guarantee period (described below), the death benefit is equal to the contract
value. We will reduce the death benefit by any loan debt to determine the death
benefit proceeds payable to the beneficiary.
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<PAGE> 10
Guarantee Period. During the guarantee period, we cannot terminate the Contract,
regardless of investment results, unless loan debt exceeds the surrender value.
The "guarantee period" extends from the contract date to the insured's attained
age 100.
Tax Benefits and Tax Considerations. We believe the Contract generally provides
at least the minimum death benefit required to qualify as "life insurance" under
federal tax law (See "Tax Considerations). By satisfying this requirement, the
Contract provides two important tax benefits:
1) Its death benefit is generally not subject to income tax;
2) Any increases in the Contract's account value are not taxable
until distributed from the Contract.
AVAILABILITY AND PAYMENTS
You may apply for a Contract for an insured age 20-79. We will also consider
issuing Contracts for insureds from age 80 through 85 on an individual basis. A
Contract can be purchased with a minimum single payment of $10,000.
Subject to certain conditions, you may make additional premium payments during
the first contract year. (See "Additional Premium Payments".)
THE ACCOUNT VALUE
A Contract's account value is the amount available for investment at any time.
On the contract date (usually the next business day after our Service Center
receives your initial payment), the account value is equal to the initial
payment. Afterwards, it varies daily based on the investment performance of your
selected subaccounts. You bear the risk of poor investment performance and
receive the benefit of favorable investment performance. You may wish to
consider diversifying your investment in the Contract by allocating the account
value to two or more subaccounts.
THE SUBACCOUNTS
We invest your premium payments in subaccounts of the Separate Account.
Generally, through the first 14 days following the in force date, we will invest
the initial premium payment only in the subaccount of the Separate Account
investing in the Merrill Lynch Domestic Money Market Fund. Afterwards, we will
reallocate the account value according to your instructions among up to five of
the subaccounts. (See "Changing the Allocation".)
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<PAGE> 11
ILLUSTRATIONS
Illustrations in this Prospectus or used in connection with the purchase of the
Contract are based on hypothetical investment rates of return. We don't
guarantee these rates. They are illustrative only, and not a representation of
past or future performance. Actual rates of return may be more or less than
those shown in the illustrations. Actual values will be different than those
illustrated.
REPLACEMENT OF EXISTING COVERAGE
Generally, it is not advisable to purchase an insurance contract as a
replacement for existing coverage. Before you buy a Contract, ask your Merrill
Lynch Financial Consultant if changing, or adding to, current insurance coverage
would be advantageous. Don't base your decision to replace existing coverage
solely on a comparison of illustrations.
RIGHT TO CANCEL ("FREE LOOK" PERIOD) OR EXCHANGE
Once you receive the Contract, review it carefully to make sure it is what you
want. Generally, you may return a Contract for a refund within ten days after
you receive it. Some states allow a longer period of time to return the
Contract. If required by your state, you may return the Contract within the
later of ten days after receiving it or 45 days from the date the application is
completed. If you return the Contract during the "free look" period, we will
refund your initial premium payment without interest.
You may also exchange your Contract within 18 months for a contract with
benefits that do not vary with the investment results of a separate account.
DISTRIBUTIONS FROM THE CONTRACT
Partial Withdrawals. Subject to certain limits you may make partial withdrawals
beginning in the second contract year. The maximum number of withdrawals
permitted each contract year is six. Partial withdrawals may be subject to a
surrender charge. (See "Partial Withdrawals".)
Partial withdrawals may also have tax consequences. (See "Tax Considerations".)
Surrenders. You may cancel your Contract at any time and receive the net
surrender value. The net surrender value is equal to the surrender value less
any loan debt. The surrender value is equal to the contract value less any
applicable surrender charge.
Surrendering your Contract may have tax consequences. (See "Tax
Considerations".)
Loans. You may borrow money from us, using your Contract as collateral, subject
to limits. We deduct loan debt from the amount payable on surrender of the
Contract and from any death benefit payable. Loan interest accrues daily and, if
it is not paid each year, it is treated as a new loan ("capitalized") and added
to the outstanding loan amount. With a MEC, both the loan amount and the amount
of capitalized loan interest are treated as taxable distributions. Depending
upon investment performance of the subaccounts and the amounts borrowed, loans
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<PAGE> 12
may cause a Contract to lapse. If the Contract lapses with loan debt
outstanding, adverse tax consequences may result. Loan debt is considered part
of the contract value, which is used to calculate taxable gain, and therefore
loan debt increases taxable gain. Loans may have other adverse tax consequences.
(See "Loans" and "Tax Considerations--Tax Treatment of Loans and Other
Distributions".)
CHARGES, FEES AND CREDITS
Account Value Charges. We invest the entire amount of all premium payments in
the Separate Account. We then deduct certain charges from your account value on
processing dates. (See "Charges Deducted From the Account Value"). These charges
are:
- EXPENSE CHARGE - The expense charge is accrued for daily between
processing dates. It is calculated on the contract date and on
each subsequent processing date, and deducted in arrears on each
processing date through the 10th contract anniversary. The
quarterly charge is .1125% (.45% annually) of your contract value;
- COST OF INSURANCE CHARGE - The cost of insurance charge is accrued
for daily between processing dates. It is calculated on the
contract date and on each subsequent processing date, and deducted
in arrears on each processing date. The current charge is an
asset-based charge applied to contract value, and depends upon the
underwriting class, issue age and sex of the insured. The current
charge cannot exceed our guaranteed maximum charge.
- NET LOAN COST - The net loan cost is accrued daily, and deducted
on each contract anniversary if there has been any loan debt
during the prior year. It currently equals 1.00% and is guaranteed
not to exceed 2.00% of the loan debt per year.
Separate Account Charge. We deduct an asset-based charge daily from the net
asset value of each subaccount. It is equal to .003699% (1.35% annually).
Surrender Charge. We deduct certain charges upon withdrawal or surrender under
the Contract. The surrender charge consists of a contingent deferred sales load
and an unamortized expense charge. The surrender charge is a percentage of each
premium withdrawn or surrendered from your account value during the first 10
years following payment of the premium. It decreases over time, as shown below.
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<TABLE>
<CAPTION>
COMPLETED YEARS SINCE PREMIUM PAYMENT
-------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2 3 4 5 6 7 8 9 10 11+
------------------------------------------------------------------------------------------
% OF PREMIUM WITHDRAWN
----------------------
CDSL 6.0 5.4 4.8 4.2 3.6 3.0 2.4 1.8 1.2 0.6 0
-----------------------------------------------------------------------------------------------------------------------------------
Unamortized Expense Charge 4.0 3.6 3.2 2.8 2.4 2.0 1.6 1.2 0.8 0.4 0
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL SURRENDER CHARGE 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
For purposes of calculating the surrender charge, gain is never subject to a
surrender charge. "Gain" is equal to the contract value less premiums remaining
in the Contract. To calculate the surrender value we determine the amount of any
surrender charge payable by assuming that gain is withdrawn first, followed by
premiums on a first-in, first-out basis. To calculate any surrender charge for a
partial withdrawal, unloaned gain is assumed to be withdrawn first. For this
purpose, "unloaned gain" is equal to the contract value less the premiums
remaining in the Contract, less loan interest credited to the loan collateral
account that has not been repaid.
Transfer Charge. We reserve the right to charge $25 for each transfer of account
value in excess of 12 transfers in a contract year.
Credits To Account Value. Starting at the end of the first processing period of
the 11th contract year, we add an asset-based credit to your account value. The
quarterly credit is .1125% (.45% annually) of the account value, credited on
each processing date. This credit effectively reduces the separate account
charge.
Advisory Fees and Fund Expenses. The Funds pay monthly advisory fees and other
expenses. The following table helps you understand the costs and expenses you
will bear, directly or indirectly. The table shows Fund expenses for the year
ended December 31, 1999, as a percentage of each Fund's average net assets. For
more information on fees and charges, see "Charges to Fund Assets".
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<TABLE>
<CAPTION>
ANNUAL EXPENSES
MERRILL LYNCH VARIABLE SERIES FUNDS, INC. (CLASS A SHARES)
FUNDAMENTAL
BASIC VALUE DOMESTIC GROWTH
Annual Expenses FOCUS MONEY MARKET FOCUS (a) GOVERNMENT BOND INDEX 500
--------------- ----- ------------ --------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees ................. .60% .50% .65% .50% .30%
Other Expenses............................ .06% .05% .15% .05% .05%
Total Annual Operating
Expenses............................ .66% .55% .80% .55% .35%
Expense Reimbursements.................... --- --- --- --- ---
Net Expenses.............................. .66% .55% .80% .55% .35%
</TABLE>
<TABLE>
<CAPTION>
AIM ALLIANCE VARIABLE
VARIABLE PRODUCTS SERIES MFS(R) MERCURY HW
INSURANCE FUND, INC. VARIABLE VARIABLE
FUNDS (CLASS A SHARES) INSURANCE TRUST TRUST
----- ---------------- --------------- -----
AIM V.I. MERCURY HW
INTERNATIONAL AIM V.I. GROWTH AND PREMIER MFS EMERGING MFS GROWTH INTERNATIONAL
Annual Expenses EQUITY VALUE INCOME GROWTH GROWTH (c) WITH INCOME (c) VALUE VIP
--------------- ------ ----- ------ ------ ---------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees ..... .75% .61% .63% 1.00% .75% .75% .75%
Other Expenses................ .22% .15% .08% .05% .09% .13% .26%
Total Annual Operating
Expenses............... .97% .76% .71% 1.05% .84% .88% 1.01%
--------------- ------------ ------------- ---------- ---------------- -------------- ---------
Expense Reimbursements........ --- --- --- --- --- --- ---
Net Expenses.................. .97% .76% .71% 1.05% .84% .88% 1.01%
--------------- ------------ ------------- ---------- ---------------- -------------- ---------
</TABLE>
<TABLE>
<CAPTION>
PIMCO
VARIABLE
DAVIS DELAWARE INSURANCE
VARIABLE GROUP TRUST VAN KAMPEN
ACCOUNT PREMIUM (ADMINISTRATIVE SELIGMAN LIFE INVESTMENT
FUND, INC. FUND CLASS SHARES) PORTFOLIOS, INC. TRUST
---------- ---- ------------- ---------------- -----
TOTAL SELIGMAN
DAVIS TREND RETURN SMALL-CAP EMERGING
Annual Expenses VALUE SERIES BOND (e) VALUE (b) GROWTH (d)
--------------- ----------------- ------------- ------------------ ----------------- --------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees ............ .75% .75% .40% 1.00% .70%
Other Expenses....................... .25% .07% .35% .41% .18%
Total Annual Operating
Expenses....................... 1.00% .82% .75% 1.41% .88%
----------------- ------------- ------------------ ----------------- --------------------
Expense Reimbursements............... --- --- .10% --- ---
Net Expenses......................... 1.00% .82% .65% 1.41% .88%
----------------- ------------- ------------------ ----------------- --------------------
</TABLE>
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NOTES TO FEE TABLE
(a) "Other Expenses" and "Net Expenses" shown for the Fundamental Growth
Focus Fund are based on expenses estimated for the current fiscal year.
(b) The Fee Table does not reflect fees waived or expenses assumed by J. & W.
Seligman & Co. Incorporated ("Seligman") for the Seligman Small-Cap Value
Portfolio during the year ended December 31, 1999. Such waivers and
assumption of expenses were made on a voluntary basis, and may be
discontinued or reduced at any time without notice. During the fiscal
year ended December 31, 1999, Seligman waived fees and expense totaling
0.41% for the Seligman Small-Cap Value Portfolio. Considering such
reimbursements, "Net Expenses" would have been 1.00%.
(c) The MFS Emerging Growth Series and the MFS Growth With Income Series have
an expense offset arrangement which reduces each Fund's custodial fee
based upon the amount of cash maintained by the Fund with its custodian
and dividend disbursing agent. Each Fund may enter into such arrangements
and directed brokerage arrangements, which would also have the effect of
reducing the Fund's expenses. "Other Expenses" do not take into account
these expense reductions, and are therefore higher than the actual
expenses of the Funds. Had these fee reductions been taken into account,
"Net Expenses" would have been 0.83% for the Emerging Growth Series and
0.87% for the Growth With Income Series.
(d) The Fee Table does not reflect fees waived or expenses assumed by Van
Kampen Asset Management Inc. ("Van Kampen Management") for the Emerging
Growth Portfolio during the year ended December 31, 1999. Such waivers
and assumption of expenses were made on a voluntary basis, and may be
discontinued or reduced at any time without notice. During the fiscal
year ended December 31, 1999, Van Kampen Management waived fees and
expense totaling 0.03% for the Emerging Growth Portfolio. Considering
such reimbursements, "Net Expenses" would have been 0.85%.
(e) Pacific Investment Management Company ("PIMCO") has agreed to reduce its
0.25% administrative fee (which is included in "Other Expenses" in the
Fee Table) to the extent that total Fund operating expenses would exceed
0.65% of average daily net assets, due to organizational expenses and the
payment by the Fund of its pro rata portion of the Trust's Trustees'
fees. Any such waiver is subject to potential future reimbursement within
three years from the date the fee was waived.
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<PAGE> 16
FACTS ABOUT MERRILL LYNCH LIFE INSURANCE COMPANY, MERRILL LYNCH,
PIERCE, FENNER & SMITH INCORPORATED, AND THE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
Merrill Lynch Life Insurance Company ("we" or "us") is a stock life insurance
company organized under the laws of the State of Washington on January 27, 1986
and redomesticated under the laws of the State of Arkansas on August 31, 1991.
We are an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc. We are
authorized to sell life insurance and annuities in 49 states, Guam, the U.S.
Virgin Islands and the District of Columbia. We are also authorized to sell
variable life insurance and variable annuities in most jurisdictions.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ("MLPF&S")
MLPF&S provides a world-wide broad range of securities brokerage and investment
banking services. It provides marketing services for us and is the principal
underwriter of the Contracts issued through the Separate Account. We retain
MLPF&S to provide services relating to the Contracts under a distribution
agreement. (See "Selling the Contracts".)
THE SEPARATE ACCOUNT
We established the Separate Account, a separate investment account, on November
16, 1990. It is registered with the Securities and Exchange Commission as a unit
investment trust under the Investment Company Act of 1940. This registration
does not involve any supervision by the Securities and Exchange Commission over
the investment policies or practices of the Separate Account. The Separate
Account meets the definition of a separate account under the federal securities
laws. We use the Separate Account to support the Contract as well as other
variable life insurance contracts we issue. The Separate Account is also
governed by the laws of the State of Arkansas, our state of domicile.
We own all of the assets in the Separate Account. We keep the Separate Account's
assets apart from our general account and any other separate accounts we may
have. 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 we conduct.
Obligations to contract owners and beneficiaries that arise under the Contract
are our obligations. Income, gains, and losses, whether or not realized, from
assets allocated to the Separate Account are, in accordance with the Contracts,
credited to or charged against the Separate Account without regard to our other
income, gains or losses. The assets in the Separate Account will always be at
least equal to the reserves and other liabilities of the Separate Account. If
the Separate Account's assets exceed the required reserves and other Contract
liabilities, we may transfer the excess to our general account.
15
<PAGE> 17
There are currently 17 subaccounts in the Separate Account that are available
for investment.
- Five invest in Class A shares of a Fund of the Merrill Lynch
Variable Series Funds, Inc. (the "Variable Series Funds").
- Two invest in shares of a Fund of the AIM Variable Insurance Funds
(the "AIM V.I. Funds").
- Two invest in shares of a Fund of the Alliance Variable Products
Series Fund, Inc. (the "Alliance Fund").
- Two invest in shares of a Fund of the MFS(R) - Variable Insurance
Trust-(SM)- (the "MFS Trust").
- One invests in shares of a Fund of the Mercury HW Variable Trust
(the "Mercury HW Trust").
- One invests in shares of a Fund of the Davis Variable Account
Fund, Inc. (the "Davis Fund").
- One invests in shares of a Fund of the Delaware Group Premium Fund
(the "Delaware Fund").
- One invests in shares of a Fund of the PIMCO Variable Insurance
Trust (the "PIMCO Trust").
- One invests in shares of a Fund of Seligman Portfolios, Inc. (the
"Seligman Portfolios").
- One invests in shares of a Fund of the Van Kampen Life Investment
Trust (the "Van Kampen Trust").
You'll find complete information about the Funds, including the risks associated
with each portfolio in the accompanying prospectuses. They should be read along
with this Prospectus.
NET RATE OF RETURN FOR A SUBACCOUNT
Each subaccount has a distinct unit value (also referred to as "price",
"accumulation unit value" or "AUV" in reports we furnish to you). When we
allocate your payments or account value to a subaccount, we purchase units based
on the value of a unit of the subaccount as of the end of the valuation period
during which the allocation occurs. When we transfer or deduct amounts out of a
subaccount, we redeem units in a similar manner. A valuation period is each
business day together with any non-business days before it. A business day is
any day the New York Stock Exchange is open or there's enough trading in
portfolio securities to materially affect the unit value of a subaccount.
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<PAGE> 18
The AUV for each subsequent valuation period fluctuates based upon the net rate
of return for that period. We determine the net rate of return of a subaccount
at the end of each valuation period. The net rate of return reflects the
investment performance of the Fund for the valuation period and the charges to
the Separate Account. Fund shares are valued at net asset value and reflect
reinvestment of any dividends or capital gains distributions declared by the
Funds.
CHANGES WITHIN THE SEPARATE ACCOUNT
We may add new subaccounts. We can also eliminate subaccounts, combine two or
more subaccounts, or substitute a new Fund for the Fund in which a subaccount
invests. A substitution may become necessary if, in our judgment, a Fund no
longer suits the purposes of the Contracts. This may happen due to a change in
laws or regulations, or a change in a Fund's investment objectives or
restrictions, or because the Fund is no longer available for investment, or for
some other reason. If necessary, we would get prior approval from the Arkansas
State Insurance Department and the Securities and Exchange Commission and any
other required approvals before making such a substitution.
Subject to any required regulatory approvals, we can transfer assets of the
Separate Account or of any of the subaccounts to another separate account or
subaccount.
When permitted by law, we also can:
- deregister the Separate Account under the Investment Company Act
of 1940;
- make any changes required by applicable law;
- operate the Separate Account as a management company under the
Investment Company Act of 1940 or in any other form of
organization permitted by applicable law;
- reserve, restrict or eliminate any voting rights of contract
owners, or other persons who have voting rights as to the Separate
Account;
- combine and reserve the Separate Account with other separate
accounts; and
- create new separate accounts.
THE FUNDS
GENERAL INFORMATION AND INVESTMENT RISKS
Information about investment objectives, management, policies, restrictions,
expenses, risks, and all other aspects of Fund operations can be found in the
Fund prospectuses and Statements of Additional Information. Read these carefully
before investing. Fund shares are currently sold to our separate accounts as
well as separate accounts of ML Life Insurance Company of New York (an indirect
wholly owned subsidiary of Merrill Lynch & Co., Inc.), and insurance companies
not affiliated with us, to support benefits under certain variable annuity and
variable life insurance contracts. Shares of these funds may be offered in the
future to certain pension or retirement plans.
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<PAGE> 19
Although the investment objectives and policies of certain Funds are similar to
the investment objectives and policies of other portfolios that may be managed
or sponsored by the same investment adviser, manager, or sponsor, we do not
represent or assure that the investment results will be comparable to any other
portfolio, even where the investment adviser or manager is the same. Differences
in portfolio size, actual investments held, fund expenses, and other factors all
contribute to differences in fund performance. For all of these reasons, you
should expect investment results to differ. In particular, certain funds
available only through the Contract have names similar to funds not available
through the Contract. The performance of a fund not available through the
Contract does not indicate performance of the similarly named Fund available
through the Contract.
Generally, you should consider the Funds as long-term investments and vehicles
for diversification, but not as a balanced investment program. Many of these
Funds may not be appropriate as the exclusive investment to fund a Contract for
all contract owners. The Fund prospectuses also describe certain additional
risks, including investing on an international basis or in foreign securities
and investing in lower rated or unrated fixed income securities. There is no
guarantee that any Fund will be able to meet its investment objectives. Meeting
these objectives depends upon future economic conditions and upon how well Fund
management anticipates changes in economic conditions.
Below we list the Funds in which the subaccounts invest. There is no guarantee
that any Fund will be able to meet its investment objective.
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
The Merrill Lynch Variable Series Funds, Inc. ("Variable Series Funds") is
registered with the Securities and Exchange Commission as an open-end management
investment company. It currently offers the Separate Account Class A shares of 5
of its Funds for investment through the Contract.
Merrill Lynch Investment Managers, L.P. ("MLIM") is the investment adviser to
the Variable Series Funds. MLIM, together with its affiliates, Fund Asset
Management, L.P., and Mercury Advisors, is a worldwide mutual fund leader, and
had a total of $550.07 billion in investment company and other portfolio assets
under management as of the end of January 31, 2000. It is registered as an
investment adviser under the Investment Advisers Act of 1940. MLIM is an
indirect subsidiary of Merrill Lynch & Co., Inc. MLIM's principal business
address is 800 Scudders Mill Road, Plainsboro, New Jersey 08536. As the
investment adviser, it is paid fees by these Funds for its services. The fees
charged to each of these Funds are set forth in the summary below.
MLIM and Merrill Lynch Life Agency, Inc. have entered into a Reimbursement
Agreement that limits the operating expenses paid by each Fund of the Variable
Series Funds in a given year to 1.25% of its average net assets (see "Selling
the Contract").
BASIC VALUE FOCUS FUND. This Fund seeks capital appreciation and, secondarily,
income by investing in securities, primarily equities, that management of the
Fund believes are undervalued
18
<PAGE> 20
and therefore represent basic investment value. MLIM receives an advisory fee
from the Fund at the annual rate of 0.60% of the average daily net assets of the
Fund.
DOMESTIC MONEY MARKET FUND. This Fund seeks to preserve capital, maintain
liquidity, and achieve the highest possible current income consistent with the
foregoing objectives by investing in short-term domestic money market
securities. MLIM receives an advisory fee from the Fund at the annual rate of
0.50% of the average daily net assets of the Fund.
FUNDAMENTAL GROWTH FOCUS FUND. This Fund seeks long-term growth of capital. The
Fund purchases primarily common stocks of U.S. companies that Fund management
believes have shown above-average rates of growth earnings over the long-term.
The Fund will invest at least 65% of its total assets in equity securities. MLIM
receives an advisory fee from the Fund at an annual rate of 0.65% of the average
daily net assets of the Fund.
GOVERNMENT BOND FUND. This Fund seeks the highest possible current income
consistent with the protection of capital afforded by investing in debt
securities issued or guaranteed by the United States Government, its agencies or
instrumentalities. MLIM receives an advisory fee from the Fund at an annual rate
of 0.50% of the average daily net assets of the Fund.
INDEX 500 FUND. This Fund seeks investment results that, before expenses,
correspond to the aggregate price and yield performance of the Standard & Poor's
500 Composite Stock Price Index (the "S&P 500 Index"). MLIM receives an advisory
fee from the Fund at an annual rate of 0.30% of the average daily net assets of
the Fund.
AIM VARIABLE INSURANCE FUNDS
A I M Variable Insurance Funds ("AIM V.I. Funds") is registered with the
Securities and Exchange Commission as an open-end, series, management investment
company. It currently offers the Separate Account two of its Funds.
AIM Advisors, Inc. ("AIM"), 11 Greenway Plaza, Suite 100, Houston, Texas
77046-1173, serves as the investment adviser to each of the AIM V.I. Funds. AIM
has acted as an investment adviser since its organization in 1976. Today AIM,
together with its subsidiaries, advises or manages over 120 investment
portfolios, including the Funds, encompassing a broad range of investment
objectives. As the investment adviser, AIM receives compensation from the Funds
for its services. The fees charged to each of these Funds are set forth in the
summary of investment objectives below.
AIM V.I. INTERNATIONAL EQUITY FUND. This Fund seeks to provide long-term growth
of capital by investing in a diversified portfolio of international equity
securities whose issuers are considered to have strong earnings momentum. AIM
receives an advisory fee from the Fund at an annual rate of 0.75% of the average
daily net assets of the Fund.
AIM V.I. VALUE FUND. This Fund seeks to achieve long-term growth of capital by
investing primarily in equity securities judged by AIM to be undervalued
relative to AIM's appraisal of the
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<PAGE> 21
current or projected earnings of the companies issuing the securities, or
relative to current market values of assets owned by the companies issuing the
securities or relative to the equity market generally. Income is a secondary
objective. AIM receives an advisory fee from the Fund at an annual rate of 0.65%
of the first $250 million of the Fund's average daily net assets and 0.60% of
the Fund's average daily net assets in excess of $250 million.
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Alliance Variable Products Series Fund, Inc. ("Alliance Fund") is registered
with the Securities and Exchange Commission as an open-end management investment
company. It currently offers the Separate Account Class A shares of two of its
Funds. Alliance Capital Management L.P. ("Alliance"), a Delaware limited
partnership with principal offices at 1345 Avenue of the Americas, New York, New
York 10105 serves as the investment adviser to each Fund of the Alliance Fund.
Alliance Capital Management Corporation ("CMC"), the sole general partner of
Alliance, is an indirect wholly owned subsidiary of The Equitable Life Assurance
Society of the United States, which is in turn a wholly owned subsidiary of AXA
Financial, Inc., a holding company which is controlled by AXA, a French
insurance holding company for an international group of insurance and related
financial services companies. As the investment adviser, Alliance is paid fees
by the Funds for its services. The fees charged to each Fund are set forth in
the summary of investment objective below.
GROWTH AND INCOME PORTFOLIO. This Fund seeks reasonable current income and
reasonable opportunity for appreciation through investing primarily in
dividend-paying stocks of good quality. Alliance receives an advisory fee from
the Fund at an annual rate of 0.63% of the average daily net assets of the Fund.
PREMIER GROWTH PORTFOLIO. This Fund seeks growth of capital by pursuing
aggressive investment policies. Since investments will be made based upon their
potential for capital appreciation, current income is incidental to the
objective of capital growth. Alliance receives an advisory fee from the Fund at
an annual rate of 1.00% of the average daily net assets of the Fund.
MFS(R) VARIABLE INSURANCE TRUST(TM)
MFS(R) Variable Insurance Trust(TM) ("MFS Trust") is registered with the
Securities and Exchange Commission as an open-end management investment company.
It currently offers the Separate Account two of its Funds.
Massachusetts Financial Services Company ("MFS"), a Delaware corporation, 500
Boylston Street, Boston, Massachusetts 02116, serves as the investment adviser
to each Fund of MFS Trust. MFS is a subsidiary of Sun Life of Canada (U .S.)
Financial Services Holdings, Inc., which, in turn, is an indirect wholly owned
subsidiary of Sun Life Assurance Company of Canada. As the investment adviser,
MFS is paid fees by these Funds for its services. The fees charged to each Fund
are set forth in the summary of investment objective below.
MFS EMERGING GROWTH SERIES. This Fund seeks long-term growth of capital. The
Fund invests, under normal market conditions, at least 65% of its total assets
in common stocks and
20
<PAGE> 22
related securities of emerging growth companies. These companies are companies
that the Fund's adviser believes are either early in their life cycle but have
the potential to become major enterprises or are major enterprises whose rates
of earnings growth are expected to accelerate. MFS receives an advisory fee from
the Fund at an annual rate of 0.75% of the average daily net assets of the Fund.
MFS GROWTH WITH INCOME SERIES. This Fund seeks to provide reasonable current
income and long-term growth of capital and income. Under normal conditions, the
Fund invests at least 65% of its total assets in common stock and related
securities. Although the Fund may invest in companies of any size, it primarily
invests in companies with larger market capitalizations and attractive
valuations based on current and expected earnings or cash flow. MFS receives an
advisory fee from the Fund at an annual rate of 0.75% of the average daily net
assets of the Fund.
MERCURY HW VARIABLE TRUST
Mercury HW Variable Trust ("Mercury HW Trust"), a Massachusetts business trust,
is registered with the Securities and Exchange Commission as an open-end
management investment company. The Mercury HW Trust is intended to serve as the
investment medium for variable annuity contracts and variable life insurance
policies to be offered by the separate accounts of certain insurance companies.
Mercury Advisors, 725 S. Figueroa Street, Suite 4000, Los Angeles, California
90017-5400, serves as the investment adviser to the International Value VIP
Portfolio and generally administers the affairs of the Mercury HW Trust. Mercury
Advisors is a division of MLIM. As the investment adviser, Mercury Advisors is
paid fees by the Fund for its services. The fees charged to the Fund for
advisory services are set forth in the summary of investment objective below.
MERCURY HW INTERNATIONAL VALUE VIP PORTFOLIO. The Fund's investment objective is
to provide current income and long-term growth of income, accompanied by growth
of capital. The Fund invests at least 65% of its total assets in stocks in at
least ten foreign markets. In investing the Fund, Mercury Advisors follows a
value style. This means that it buys stocks that it believes are currently
undervalued by the market and thus have a lower price than their true worth.
Mercury Advisors receives from the Fund an advisory fee at an annual rate of
0.75% of the average daily net assets of the Fund.
DAVIS VARIABLE ACCOUNT FUND, INC.
Davis Variable Account Fund, Inc. ("Davis Fund") is registered with the
Securities and Exchange Commission as an open-end management investment company.
It currently offers the Separate Account one of its Funds, the Davis Value
Portfolio. Davis Selected Advisers, LP ("Davis Advisers"), located at 2949 East
Elvira Road, Tucson, Arizona 85706, is the investment adviser to the Davis Value
Portfolio. Davis Selected Advisers-NY, Inc. ("Davis Advisers-NY"), located at
609 Fifth Avenue, New York, New York 10017 serves as the sub-adviser to the
Davis Value Portfolio. Davis Advisers-NY is a wholly owned subsidiary of Davis
Advisers. Davis
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<PAGE> 23
Advisers pays the sub-advisory fee, not the Davis Value Portfolio. The fees
charged to the Fund for advisory services are set forth in the summary of
investment objective below.
DAVIS VALUE PORTFOLIO. This Fund seeks to provide growth of capital. The Fund
invests primarily in common stock of U .S. companies with market capitalizations
of at least $5 billion. These companies are selected based on their potential
for long-term growth, long-term return, and minimum risk. Davis Advisers
receives an advisory fee at an annual rate of 0.75% of the average daily net
assets of the Fund.
DELAWARE GROUP PREMIUM FUND
Delaware Group Premium Fund ("Delaware Fund") is registered with the Securities
and Exchange Commission as an open-end management investment company. It
currently offers the Separate Account one of its Funds, the Trend Series.
Delaware Management Company, located at One Commerce Square, Philadelphia,
Pennsylvania 19103, serves as the investment adviser to the Trend Series.
Delaware Management Company is a series of Delaware Management Business Trust,
which is an indirect, wholly owned subsidiary of Delaware Management Holdings,
Inc. The fees charged to the Fund for advisory services are set forth in the
summary of investment objective below.
TREND SERIES. This Fund seeks long-term capital appreciation. The Fund invests
primarily in stocks of small, growth-oriented companies that Fund management
believes are responsive to changes within the marketplace and which management
believes have fundamental characteristics to support continued growth. Delaware
Management Company receives an advisory fee from the Fund at an annual rate of
0.75% on the first $500 million, 0.70% on the next $500 million, 0.65% on the
next $1.5 million, and 0.60% on assets over $2.5 million of the average daily
net assets of the Fund.
PIMCO VARIABLE INSURANCE TRUST
PIMCO Variable Insurance Trust ("PIMCO Trust") is registered with the Securities
and Exchange Commission as an open-end management investment company. It
currently offers one of its Funds, the Total Return Bond Portfolio, to the
Separate Account. Pacific Investment Management Company ("PIMCO"), located at
840 Newport Center Drive, Suite 300 Newport Beach, California 92660, serves as
the investment adviser to the Total Return Bond Portfolio. PIMCO is a wholly
owned subsidiary partnership of PIMCO Advisers, L.P. The fees charged to the
Fund for advisory services are set forth in the summary of investment objective
below.
TOTAL RETURN BOND PORTFOLIO. This Fund seeks to maximize total return,
consistent with preservation of capital and prudent investment management. Under
normal circumstances, the Fund invests at least 65% of its assets in a
diversified portfolio of fixed income instruments of varying maturities. The
average portfolio duration normally varies within a three- to six-year time
frame based on PIMCO's forecast for interest rates. PIMCO receives an advisory
fee at an annual rate of 0.40% of the average daily net assets of the Fund.
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<PAGE> 24
SELIGMAN PORTFOLIOS, INC.
Seligman Portfolios, Inc. ("Seligman Portfolios") is registered with the
Securities and Exchange Commission as an open-end management investment company.
It currently offers the Separate Account one of its Funds, the Small-Cap Value
Portfolio. J. & W. Seligman & Co. Incorporated ("Seligman"), located at 100 Park
Avenue, New York, New York 10017 serves as the investment manager to the
Seligman Small-Cap Value Portfolio. The fees charged to the Fund for advisory
services are set forth in the summary of investment objective below.
SELIGMAN SMALL-CAP VALUE PORTFOLIO. This Fund seeks long-term capital
appreciation. Generally, the Fund invests at least 65% of its total assets in
the common stocks of "value" companies with small market capitalization that the
Fund manager believes have been undervalued, either historically, by the market,
or by their peers. Seligman receives an advisory fee at an annual rate of 1.00%
on the first $500 million, .90% on the next $500 million, and .80% thereafter of
the average daily net assets of the Fund.
VAN KAMPEN LIFE INVESTMENT TRUST
Van Kampen Life Investment Trust ("Van Kampen Trust") is registered with the
Securities and Exchange Commission as a diversified open-end management company.
It currently offers the Separate Account one of its Funds, the Emerging Growth
Portfolio. Van Kampen Asset Management Inc. ("Van Kampen Management") is the
portfolio's investment adviser. Van Kampen Management is located at 1 Parkview
Plaza, Oakbrook Terrace, Illinois 60181-5555, and is a wholly owned subsidiary
of Van Kampen Investments, Inc. Van Kampen Funds Inc., the distributor of the
Fund, is also a wholly owned subsidiary of Van Kampen Investments Inc. Van
Kampen Investments, Inc. is an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co. As the investment adviser, Van Kampen Management is
paid fees by the Fund for its services. The fees to the Fund are set forth in
the summary of investment objective below.
EMERGING GROWTH PORTFOLIO. The investment objective of the Fund is to seek
capital appreciation. Under normal market conditions, the Fund's investment
adviser seeks to achieve the Fund's investment objective by investing at least
65% of the Fund's total assets in common stocks of emerging growth companies.
Emerging growth companies are those companies in the early stages of their life
cycles that the Fund's investment adviser believes have the potential to become
major enterprises. Van Kampen Management receives an advisory fee from the Fund
at an annual rate of 0.70% of the average daily net assets of the Fund.
THE OPERATION OF THE FUNDS
Purchases and Redemptions of Fund Shares; Reinvestment. The Separate Account
will purchase and redeem shares of the Funds at net asset value to provide
benefits under the Contracts. Fund distributions to the Separate Account are
automatically reinvested at net asset value in additional shares of the Funds.
Voting Rights. We own all Fund shares held in the Separate Account. As the
owner, we have the right to vote on any matter put to vote at any Funds'
shareholder meetings. However, we will vote all Fund shares attributable to
Contracts by following instructions we receive from you. If
23
<PAGE> 25
we don't receive voting instructions, we'll vote those shares in the same
proportion as shares for which we receive instructions. We determine the number
of shares you may give voting instructions on by dividing your interest in a
subaccount by the net asset value per share of the corresponding Fund. We'll
determine the number of shares you may give voting instructions on as of a
record date we choose. We may vote Fund shares in our own right if laws change
to permit us to do so.
You have voting rights until the Contract terminates. You may give voting
instructions concerning:
(1) the election of a Fund's Board of Directors;
(2) ratification of a Fund's independent accountant;
(3) approval of the investment advisory agreement for a Fund
corresponding to one of your selected subaccounts;
(4) any change in a fundamental investment policy of a Fund
corresponding to one of your selected subaccounts; and
(5) any other matter requiring a vote of the Fund's shareholders.
Material Conflicts, Substitution of Investments and Changes to the Separate
Account. It is conceivable that material conflicts could arise as a result of
both variable annuity and variable life insurance separate accounts investing in
the Funds. Although no material conflicts are foreseen, the participating
insurance companies will monitor events in order to identify any material
conflicts between variable annuity and variable life insurance contract owners
to determine what action, if any, should be taken. Material conflicts could
result from such things as (1) changes in state insurance law, (2) changes in
federal income tax law or (3) differences between voting instructions given by
variable annuity and variable life insurance contract owners. If a conflict
occurs, we may be required to eliminate one or more subaccounts of the Separate
Account or substitute a new subaccount. In responding to any conflict, we will
take the action we believe necessary to protect our Contract owners.
We may substitute a different investment option for any of the current Funds. We
can do this for both existing investments and the investment of future premiums.
However, before any such substitution, we would need the approval of the
Securities and Exchange Commission and applicable state insurance departments.
We will notify you of any substitutions.
We may also add new subaccounts to the Separate Account, eliminate subaccounts
in the Separate Account, deregister the Separate Account under the Investment
Company Act of 1940 (the "1940 Act"), make any changes required by the 1940 Act,
operate the Separate Account as a managed investment company under the 1940 Act
or any other form permitted by law, transfer all or a portion of the assets of a
subaccount or separate account to another subaccount or separate account
pursuant to a combination or otherwise, and create new separate accounts.
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<PAGE> 26
Before we make certain changes we need approval of the Securities and Exchange
Commission and applicable state insurance departments. We will notify you of any
changes.
Administrative Service Arrangements. The investment adviser of a Fund (or its
affiliates) pays compensation to us or our affiliates, which may be significant,
in connection with administration, distribution, or other services provided with
respect to the Funds and their availability through the Contracts. The amount of
this compensation is based upon a percentage of the assets of the Fund
attributable to the Contracts and other contracts that we or our affiliates
issue, and may include 12b-1 fees. These percentages differ, and some advisers
(or affiliates) may pay more than others.
FACTS ABOUT THE CONTRACT
WHO MAY BE COVERED
You may apply for a Contract for an insured age 20 through 79. We will consider
issuing Contracts for insureds from age 80 through 85 on an individual basis.
The insured's issue age is his or her age as of the birthday nearest the
contract date. Before we'll issue a Contract, the insured must meet our medical
and other underwriting and insurability requirements.
We use two methods of underwriting:
- simplified underwriting, with no physical exam; and
- medical underwriting with a physical exam.
The initial payment amount and the age of the insured determine whether we'll do
underwriting on a simplified or medical basis. The chart below shows the maximum
initial payment that we'll underwrite on a simplified basis:
<TABLE>
<CAPTION>
Age Maximum
--- -------
<S> <C>
20-29....................................... $25,000
30-39....................................... $40,000
40-49....................................... $60,000
50-59....................................... $100,000
60-64....................................... $120,000
65-69....................................... $150,000
70-74....................................... $200,000
75-79....................................... $275,000
</TABLE>
We assign insureds to underwriting classes. In assigning insureds to
underwriting classes, we distinguish between those insureds underwritten on a
simplified basis and those underwritten on a medical basis. Under both
simplified and medical underwriting methods we may issue Contracts either in the
standard or non-smoker class. We may also issue Contracts in a
25
<PAGE> 27
"substandard" underwriting class. Individuals in substandard classes have health
or lifestyle factors less favorable than the average person. For a discussion of
the effect of underwriting classification on cost of insurance, see "Cost of
Insurance Charge".
INITIAL PAYMENT
Minimum. To purchase a Contract, you must complete an application and make a
payment. We require the payment to put the Contract into effect. The minimum
single payment for a Contract is $10,000. You may make additional premium
payments during the first contract year. (See "Making Additional Payments".)
Coverage. Insurance coverage generally begins on the contract date. This is
usually the next business day following our issuance of a Contract and receipt
of the initial premium payment at our Service Center.
Initial Investment Allocation. Generally, during the first 14 days following the
in force date, the initial premium payment will remain in the subaccount
investing in the Merrill Lynch Domestic Money Market Fund. Afterward, we'll
reallocate the account value to the subaccounts you've selected. You may invest
in up to five of the subaccounts.
The Initial Face Amount. Your initial payment determines the face amount. At any
time, the face amount is the amount which will provide a guarantee period to the
insured's attained age 100. (See "Guarantee Period.")
RIGHT TO CANCEL ("FREE LOOK" PERIOD)
You may cancel your Contract during the "free look" period by returning it for a
refund. Generally, the "free look" period ends 10 days after you receive the
Contract. Some states allow a longer period of time to return the Contract. If
required by your state, the "free look" period ends the later of 10 days after
you receive the Contract and 45 days from the date you complete the application.
To cancel the Contract during the "free look" period, you must mail or deliver
the Contract to our Service Center or to the Financial Consultant who sold it.
We will refund your premium payments without interest. We may require you to
wait six months before applying for another contract.
MAKING ADDITIONAL PAYMENTS
After fourteen days following the in force date, you may make up to four
additional premium payments during the first contract year provided the attained
age of the insured is not over 80. The minimum additional premium payment is
$2,000. You need to use an Application for Additional Payment.
We require satisfactory evidence of insurability before we accept an additional
payment. Currently, we won't accept an additional payment where the evidence of
insurability would put
26
<PAGE> 28
the insured in a different underwriting class with different guaranteed or
higher current cost of insurance rates.
Unless you specify otherwise, if there is any loan debt, we will apply any
payment made first as a loan repayment with any excess applied as an additional
premium payment. (See "Loans".)
We invest an additional payment in the subaccount investing in the Domestic
Money Market Fund on the business day after we receive it. Once we complete the
underwriting and accept the payment, we credit the payment to your Contract and
allocate the payment either according to your instructions or, if you don't give
us instructions, proportionately to the account value in each of the Contract's
subaccounts.
Effect on Account Value And Variable Insurance Amount. On the date we accept the
additional premium payment, we increase the account value by the amount of the
payment. In addition, we increase the variable insurance amount by the amount of
the payment multiplied by the applicable net single premium factor. This means
the increase in the variable insurance amount will always be greater than the
amount of the payment.
Effect on Face Amount. We increase the Contract's face amount as of the
effective date of the additional premium payment. See "Guaranteed Benefits" for
a discussion of how the new face amount is determined.
ACCOUNT VALUE
A Contract's account value is the sum of the amounts invested in each of the
subaccounts. On the contract date, the account value equals the initial premium
payment. We adjust the account value daily to reflect the investment performance
of the subaccounts you've selected. (See "Net Rate of Return for a Subaccount".)
The investment performance reflects the deduction of Separate Account charges.
(See "Charges to the Separate Account".)
Deductions for the expense charge, cost of insurance charge, net loan cost, and
surrender charges and any partial withdrawals and loans decrease the account
value. (See "Charges Deducted from the Account Value", "Partial Withdrawals" and
"Loans".) Any deductions for transaction charges, such as for transfers in
excess of 12 in a single contract year, or for exchanging the Contract for a
fixed life insurance contract or changing the insured, also decrease the account
value. An asset-based credit that begins after the tenth contract year, and any
loan repayments and additional payments increase the account value.
You may elect from which subaccounts loans and partial withdrawals are taken and
to which subaccounts repayments and additional payments are added. If you don't
make an election, we will allocate increases and decreases proportionately to
the account value in each of the subaccounts.
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<PAGE> 29
OWNER'S RIGHT TO TRANSFER ACCOUNT VALUE
You may transfer all or part of the account value among the subaccounts. To make
a transfer, you must provide us with satisfactory notice at our Service Center.
The transfer takes effect when we receive the notice. The following features
apply to transfers under this Contract:
- The minimum amount that may be transferred from any subaccount in
any transaction is $100 or the remaining balance, if less.
- You select the subaccount to which to allocate a transfer. The
maximum number of subaccounts in which you may have account value
at any one time is five.
- There is a maximum of 12 transfers allowed without charge each
contract year; we reserve the right to deduct a $25 charge for the
13th and each additional transfer.
- We consider all telephone and/or written requests processed on the
same day to be one transfer, regardless of the number of
subaccounts affected by the transfer(s).
- We deduct the transfer charge from the amount being transferred.
- Transfers due to dollar cost averaging, loans, or the initial
reallocation of account value from the Domestic Money Market
subaccount do not count as transfers for purposes of assessing
this charge.
An excessive number of transfers, including short-term "market timing"
transfers, may adversely affect the performance of the Fund in which a
subaccount invests. If, in our sole opinion, a pattern of an excessive number of
transfers develops for a Contract, we reserve the right not to process a
transfer request. We also reserve the right not to process a transfer request
when the sale or purchase of shares or units of a Fund is not reasonably
practicable due to actions taken or limitations imposed by the Fund.
CHARGES
We deduct the charges described below to cover costs and expenses, services
provided, and risks assumed under the Contracts. The amount of a charge may not
necessarily correspond to the costs associated with providing the services or
benefits indicated by the designation of the charge or associated with a
particular Contract. For example, the contingent deferred sales load or CDSL may
not fully cover all of the sales and distribution expenses we actually incur. We
may use proceeds from other charges, including the asset-based risk charge and
cost of insurance charges, in part to cover such expenses.
We deduct certain charges on processing dates from each subaccount in proportion
to the account value in that subaccount. (See "Charges Deducted from the Account
Value".) We also deduct certain charges daily from the investment results of
each subaccount in determining its net rate of return. We also deduct charges
upon surrender of the Contract. (See "Charges to the Separate Account".) We also
deduct certain transaction charges. (See "Transaction Charges".) The Funds also
pay monthly advisory fees and other expenses. (See "Fund Expenses".)
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<PAGE> 30
CHARGES DEDUCTED FROM THE ACCOUNT VALUE
Expense Charge. The expense charge compensates us, in part, for the cost of any
federal or state tax we pay in connection with the issuance of the Contract. The
expense charge is a quarterly charge equal to .1125% (.45% annually) of your
contract value. We accrue the expense charge daily and deduct it in arrears from
your account value on each processing date through the tenth contract
anniversary.
Cost Of Insurance Charge. This charge compensates us for the cost of providing
life insurance coverage on the insured. The cost of insurance charge is accrued
for daily between processing dates and deducted in arrears from the account
value on each processing date. If a contract is surrendered on a date that is
not a processing date, we deduct a pro-rata portion of the cost of insurance
charge for the period between processing dates to determine the surrender value.
Current Cost of Insurance Charge. The current cost of insurance charge is an
asset-based charge applied to contract value and based upon underwriting class
and issue age of the insured. We determine the cost of insurance charge on each
processing date by multiplying the current cost of insurance rate by the
Contract value. We deduct this amount on the next processing date.
Current cost of insurance rates distinguish between insureds in the simplified
underwriting class and medical underwriting class. Current cost of insurance
rates would be lower for an insured in a medical underwriting class than for a
similarly situated insured in a simplified underwriting class. The current cost
of insurance rates for the simplified underwriting class are higher because we
perform less underwriting and therefore we incur more risk. Current rates also
distinguish between insureds in a smoker (standard) underwriting class and
insureds in a non-smoker underwriting class. For Contracts issued on insureds
under the same underwriting method, current cost of insurance rates are lower
for non-smokers than for smokers.
We have the right to increase our current cost of insurance rates, but in no
case can we increase them beyond the guaranteed maximum rates. (See Guaranteed
Maximum Cost of Insurance Charge Below.) Any change in the current cost of
insurance rates will apply to all insureds of the same age, sex and underwriting
class whose Contracts have been in force for the same length of time.
Guaranteed Maximum Cost of Insurance Charge. We guarantee that the cost of
insurance charges will never exceed the applicable guaranteed maximum rates
shown in the Contract multiplied by the net amount at risk divided by 1000. The
guaranteed maximum rates for Contracts (except those issued on a substandard
basis) do not exceed the rates based on the 1980 Smoker/Non-Smoker Male/Female
Commissioners Standard Ordinary Mortality Table (1980 CSO Table). We may use
rates that are equal to or less than these rates, but never greater. The maximum
rates for Contracts issued on a substandard basis are based on a multiple of the
1980 CSO Table.
Net Loan Cost. The net loan cost is explained under "Loans."
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<PAGE> 31
CHARGES TO THE SEPARATE ACCOUNT
Asset-Based Charge. We deduct an asset-based charge daily from the investment
results of each subaccount in determining its rate of return. This charge is
intended to compensate us for:
- the risk we assume that insureds as a group will live for a
shorter time than actuarial tables predict. As a result, we would
be paying more in death benefits than planned; and
- the risk we assume that it will cost us more to issue and
administer the Contracts than expected; and
- the risk we assume for potentially unfavorable investment results.
One risk is that the current asset-based cost of insurance charge
will not be sufficient to cover the expense of the insurance
benefits being provided. Another risk is that we may have to limit
the deduction for the cost of insurance charge (see "Guaranteed
Maximum Cost of Insurance Charge" above).
The asset-based charge is a daily charge equal to .003699% (1.35% annually). If
the asset-based charge is not enough to cover the actual expenses of mortality,
maintenance, and administration, we will bear the loss. If the charge exceeds
actual expenses, we will add the excess to our profit and we may use it to
finance distribution expenses. We cannot increase the total charge.
TRANSACTION CHARGES
Surrender Charges. The surrender charge is equal to a percentage of each premium
withdrawn or surrendered during the first 10 years following payment of the
premium. The surrender charge consists of a contingent deferred sales load and
an unamortized expense charge. The contingent deferred sales load is intended to
cover, at least in part, the costs associated with the distribution of the
Contract. The unamortized expense charge is intended to cover, at least in part,
the costs of administering the Contract.
The surrender charge is deducted from your account value. It decreases over
time, as shown below.
<TABLE>
<CAPTION>
COMPLETED YEARS SINCE PREMIUM PAYMENT
-------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2 3 4 5 6 7 8 9 10 11+
------------------------------------------------------------------------------------------
% OF PREMIUM WITHDRAWN
----------------------
CDSL 6.0 5.4 4.8 4.2 3.6 3.0 2.4 1.8 1.2 0.6 0
-----------------------------------------------------------------------------------------------------------------------------------
Unamortized Expense Charge 4.0 3.6 3.2 2.8 2.4 2.0 1.6 1.2 0.8 0.4 0
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL SURRENDER CHARGE 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
For purposes of deducting the surrender charge, gain is never subject to the
charge. "Gain" is equal to the contract value less premiums remaining in the
Contract. To calculate the surrender
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<PAGE> 32
value, we determine the amount of any surrender charge payable by assuming gain
is withdrawn first, followed by premiums on a first-in, first-out basis.
To determine the amount of any surrender charge applicable to a partial
withdrawal and the premiums remaining in the Contract, unloaned gain is assumed
to be withdrawn first. For this purpose, "unloaned gain" is equal the contract
value less the premiums remaining in the Contract, less loan interest credited
to the loan collateral account that has not been repaid.
TRANSACTION CHARGES
Transfer Charges. We reserve the right to charge $25 for each transfer of
account value in excess of 12 transfers in a contract year.
Change of Insured Charge. We reserve the right to charge up to $500 if you
change the insured under the Contract.
Exchange for Fixed Contract Charge. We reserve the right to charge up to $500 if
you exchange this Contract for a contract with benefits that do not vary with
the investment results of a separate account.
FUND EXPENSES
In calculating its net asset value, each of the Funds deducts advisory fees and
operating expenses from its assets. Information about those fees and expenses
can be found in the prospectus and Statement of Additional Information for each
Fund.
CREDITS ADDED TO THE ACCOUNT VALUE
Starting at the end of the first processing period of the 11th contract year, we
add an asset-based credit to the account value. The quarterly credit is .1125%
(.45% annually) of account value, credited on each processing date. This credit
effectively reduces the annual asset-based charge (see "Separate Account
Charge").
GUARANTEE PERIOD
During the guarantee period, we cannot terminate the Contract regardless of
investment results unless loan debt exceeds the surrender value. The guarantee
period extends to the insured's attained age 100. The guarantee period will not
change as a result of additional premium payments, or partial withdrawals. We
hold a reserve in our general account to support this guarantee. After the
guarantee period, the Contract will remain in effect as long as the net
surrender value is sufficient to cover all charges due.
Cancellation Due to Excess Loan Debt. If the loan debt exceeds the surrender
value on a processing date, you will have 61 days to repay a portion of loan
debt. If we haven't received the required payment by the end of the 61-day
period, we'll cancel the Contract.
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<PAGE> 33
SURRENDER VALUE
We don't guarantee any minimum surrender value. On any contract anniversary the
surrender value equals:
- the Contract's account value on that date;
- plus loan debt
- minus any applicable surrender charge.
On any other processing date, the surrender value equals the above, less the
accrued net loan cost.
If the date of calculation is not a processing date, we also subtract the
accrued cost of insurance charge and expense charges. (See Charges.)
CANCELING TO RECEIVE NET SURRENDER VALUE
A contract owner may cancel the Contract at any time while the insured is living
and receive the net surrender value in a lump sum or under an income option. The
net surrender value is equal to the surrender value less any loan debt.
You must make the request in writing in a form satisfactory to us. All rights to
death benefits will end on the date you send the written request to us. The
effective date of the cancellation is the valuation date our Service Center
receives a cancellation request. Canceling the Contract may have tax
consequences. (See "Tax Considerations".)
PARTIAL WITHDRAWALS
After the first contract year, you may make up to six partial withdrawals each
year by submitting a request in a form satisfactory to us. The amount of any
partial withdrawal may not exceed an amount which would reduce the face amount
below the minimum face amount for which we would issue the Contract. The amount
of the withdrawal also may not exceed the loan value less any loan debt, and in
any event the withdrawal amount may not exceed 80% of the net surrender value.
The minimum amount for each partial withdrawal is $1,000. The effective date of
the withdrawal is the valuation date our Service Center receives a withdrawal
request. A partial withdrawal may not be repaid.
The surrender charge may apply to a partial withdrawal. (See "Surrender
Charge".)
Partial withdrawals are treated as distributions under the Contract for federal
tax purposes and may also be subject to a 10% penalty tax. (See "Tax
Considerations".)
Effect On Account Value And Variable Insurance Amount. As of the effective date
of the withdrawal, we reduce the account value by the amount of the partial
withdrawal and any
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<PAGE> 34
applicable surrender charge. Unless you tell us differently, we allocate this
reduction proportionately to the account value in each of your subaccounts. In
addition, we reduce the variable insurance amount by the amount of the
withdrawal multiplied by the appropriate net single premium factor. This means
the reduction in the variable insurance amount prior to insured's attained age
100 will always be greater than the amount of the withdrawal.
Effect On Face Amount. As of the effective date of a partial withdrawal, we
reduce the Contract's face amount. See "Guaranteed Benefits" for a discussion of
how the new face amount is determined.
LOANS
You may use the Contract as collateral to borrow funds from us. The minimum loan
is $500. You may repay all or part of the loan debt any time during the
insured's lifetime. Each repayment must be for at least $500 or the amount of
the loan debt, if less. Certain states don't permit us to set a minimum amount
to be borrowed or repaid.
Loans taken from modified endowment contracts ("MECs") are generally treated as
distributions under the Contract for federal tax purposes and may also be
subject to a 10% penalty tax. (See "Tax Considerations".)
When you take a loan, we transfer from your account value the amount of the loan
and hold it as collateral in our general account. When a loan repayment is made,
we transfer the amount of the repayment from the general account to the
subaccounts. You may select the subaccounts you want to borrow from, and the
subaccounts you want to repay (including interest payments). If you don't
specify, we'll take the borrowed amounts proportionately from and make
repayments proportionately to your account value as then allocated to each of
the subaccounts.
If you have the CMA Insurance Service, you can transfer loan proceeds and loan
repayments to and from your CMA account.
Effect On Death Benefit And Surrender Value. Whether or not you repay a loan,
taking a loan will have a permanent effect on a Contract's surrender value and
may have a permanent effect on its death benefit. This is because the collateral
for a loan does not participate in the performance of the subaccounts while the
loan is outstanding. If the amount credited to the collateral is more than what
is earned in the subaccounts, the surrender value will be higher as a result of
the loan, as may be the death benefit. Conversely, if the amount credited is
less, the surrender value will be lower, as may be the death benefit. In that
case, the lower surrender value may cause the Contract to terminate sooner than
if no loan had been taken.
Loan Value. The loan value of a Contract equals 90% of its surrender value. The
sum of all outstanding loans plus loan interest capitalized plus accrued
interest is called loan debt. The maximum amount that can be borrowed at any
time is the difference between the loan value and the loan debt. The surrender
value is the net surrender value plus any loan debt.
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<PAGE> 35
Interest. While loan debt remains unpaid, we charge interest at a maximum of
6.00% annually (currently, 5%). Interest accrues each day and payments are due
at the end of each contract year. If you don't pay the interest when due, it is
treated as a new loan and we add it to the unpaid loan amount. Since this is
generally a MEC, the unpaid interest added to the unpaid loan amount is treated
as a distribution and taxed accordingly.
The amount held in our general account as collateral for a loan earns interest
at a rate of 4% annually.
Net Loan Cost. On each contract anniversary we reduce the account value by the
net loan cost (the difference between the loan interest charged and the earnings
on the amount held as collateral in the general account) and add that amount to
the amount held in the general account as collateral for the loan. Since the
interest charged is a maximum of 6% (currently 5%) and the collateral earnings
on such amounts are 4%, the maximum net loan cost on loaned amounts is 2%. The
current net loan cost is 1%. We take the net loan cost into account in
determining the net surrender value of the Contract if the date of surrender is
not a contract anniversary.
Cancellation Due To Excess Debt. If the loan debt exceeds the surrender value on
a processing date, including a processing date during the guarantee period, we
will mail a notice of intent to terminate the Contract to you. 61 days after we
mail this notice, the Contract will terminate unless in the meantime we have
received at least the minimum repayment amount specified in the notice.
GUARANTEED BENEFITS
The death benefit can never be less than the guaranteed minimum death benefit.
The guaranteed minimum death benefit is equal to the face amount. The face
amount increases as a result of an additional premium payment or decreases as a
result of a partial withdrawal as of the effective date of the transaction. We
use the fixed base to determine the adjustments to the face amount due to
payments or withdrawals.
As of the effective date of the transaction, the fixed base is increased by the
amount of a premium payment or decreased by the amount of a withdrawal. If the
effective date is not a processing date, we also increase the fixed base by an
amount of interest on the premium paid, from the effective date to the next
processing date, equivalent to an annual rate of 4%. We likewise decrease the
fixed base by the amount of interest on the withdrawal, from the effective date
to the next processing date, at the same 4% annual rate.
Effect of Additional Premium Payment on the Face Amount. The face amount will
increase. The amount of the increase is determined by multiplying the increase
in the fixed base due to the payment by the appropriate net single premium
factor.
Effect of Withdrawal on the Face Amount. The face amount will decrease. The
amount of the decrease is determined by multiplying the decrease in the fixed
base due to the withdrawal by the appropriate net single premium factor.
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<PAGE> 36
The appropriate net single premium factor is the factor as of the processing
date on or next following the effective date of the transaction. See "Net
Single Premium Factor" under Variable Insurance Amount.
DEATH BENEFIT
The death benefit for this Contract on any day is the greater of the Guaranteed
Minimum Death Benefit and the Variable Insurance Amount.
The Guaranteed Minimum Death Benefit. The guaranteed minimum death benefit is
equal to the face amount. The guaranteed minimum death benefit will increase as
a result of an additional premium payment, or it will decrease as a result of a
partial withdrawal. During the guarantee period, the guaranteed minimum death
benefit is not affected by investment results or the allocation of the account
value among the subaccounts. After the insured's attained age 100, there is no
guaranteed minimum death benefit.
Variable Insurance Amount. We determine the variable insurance amount daily by
multiplying the contract value by the appropriate net single premium factor.
--------------------------------------------------------------------------------
NET SINGLE PREMIUM FACTOR
In calculating the variable insurance amount, we use the net single premium
factor to determine the amount of death benefit purchased by $1.00 of contract
value. The net single premium factor is based on the insured's sex, attained
age, and underwriting class on the date of calculation. It decreases daily as
the insured's age increases. As a result, the variable insurance amount as a
multiple of the contract value will decrease over time. Also, net single premium
factors may be higher for a woman than for a man of the same age. Your contract
contains a table of net single premium factors as of each anniversary. The net
single premium factor at attained age 100 and after is equal to 1.0.
Table Of Illustrative Net Single Premium Factors
On Anniversaries
Non-Smoker Underwriting Class
<TABLE>
<CAPTION>
ATTAINED AGE MALE
------------ ----
<S> <C>
[35..................................................... 4.29039
45...................................................... 3.07406
55...................................................... 2.24426
65...................................................... 1.70152
75...................................................... 1.36814
100+.................................................... 1.00000]
</TABLE>
--------------------------------------------------------------------------------
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<PAGE> 37
DEATH BENEFIT PROCEEDS
Amount Of Death Benefit Proceeds. Prior to the insured's attained age 100, the
death benefit proceeds are the larger of the guaranteed minimum death benefit
and the variable insurance amount, less any loan debt. After the insured's
attained age 100, the death benefit proceeds are the contract value, less any
loan debt.
The values used in calculating the death benefit proceeds are as of the date of
death. If the insured dies during the 61-day period after we mail notice of our
intent to terminate (see "Cancellation Due To Excess Debt"), the death benefit
proceeds equal the death benefit proceeds in effect immediately before the
61-day period minus any overdue charges.
PAYMENT OF DEATH BENEFIT PROCEEDS
We will pay the death benefit proceeds to the beneficiary when we receive all
information needed to process the payment, including due proof of the insured's
death. When we first receive reliable notification of the insured's death from a
representative of the owner or the insured, we may transfer the account value to
the subaccount investing in the Domestic Money Market Fund, pending payment of
death benefit proceeds.
We will generally pay the death benefit proceeds to the beneficiary within seven
days after our Service Center receives all the information needed to process the
payment. We may delay payment, however, if we are contesting the Contract or
under the circumstances described in "Using the Contract" and "Other Contract
Provisions".
We will add interest from the date of the insured's death to the date of payment
at an annual rate of at least 4%. The beneficiary may elect to receive the
proceeds either in a single payment or under one or more income options
described under "Choosing an Income Option."
MORE ABOUT THE CONTRACT
USING THE CONTRACT
Ownership. The contract owner is the insured, unless someone other than the
insured has been named as the owner in the application. The contract owner has
all rights and options described in the Contract.
If you are not the insured, you may want to name a contingent owner. If you die
before the insured, the contingent owner will own your interest in the Contract
and have all your rights. If you don't name a contingent owner and you die
before the insured, your estate will then own your interest in the Contract.
If there is more than one contract owner, we will treat the owners as joint
tenants with rights of survivorship unless the ownership designation provides
otherwise. We may require completion
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<PAGE> 38
of additional forms. The owners must exercise their rights and options jointly,
except that any one of the owners may transfer the Contract's account value by
phone if the owner provides the personal identification number as well as the
Contract number. One contract owner must be designated, in writing, to receive
all notices, correspondence and tax reporting to which contract owners are
entitled under the Contract.
Changing The Owner. During the insured's lifetime, you have the right to
transfer ownership of the Contract. However, if you've named an irrevocable
beneficiary, that person will need to consent. The new owner will have all
rights and options described in the Contract. The change will be effective as of
the date the notice is signed, but will not affect any payment we've made or
action we've taken before our Service Center receives the notice of the change.
Changing the owner may have tax consequences.
Assigning The Contract As Collateral. You may assign the Contract as collateral
security for a loan or other obligation. This does not change the ownership.
However, your rights and any beneficiary's rights are subject to the terms of
the assignment. You must give satisfactory written notice at our Service Center
in order to make or release an assignment. We are not responsible for the
validity of any assignment.
A collateral assignment will generally be treated as a taxable distribution and
may also be subject to a 10% penalty tax.
Naming Beneficiaries. We will pay the primary beneficiary the death benefit
proceeds of the Contract on the insured's death. If the primary beneficiary has
died before the insured, we will pay the contingent beneficiary. If no
contingent beneficiary is living, we will pay the insured's estate.
You may name more than one person as primary or contingent beneficiaries. We
will pay proceeds in equal shares to the surviving beneficiaries unless the
beneficiary designation provides differently.
You have the right to change beneficiaries during the insured's lifetime.
However, if your primary beneficiary designation is irrevocable, the primary
beneficiary must consent when certain contract rights and options are exercised.
If you change the beneficiary, the change will take effect as of the date the
notice is signed, but will not affect any payment we've made or action we've
taken before our Service Center receives notice of the change.
Changing The Insured. Subject to certain requirements, you may request a change
of insured once each contract year. We must receive a written request signed by
you and the proposed new insured. Neither the original nor the new insured can
have attained ages as of the effective date of the change that are less than the
minimum nor more than the maximum ages for which we would then issue this
Contract. The new insured must have been alive at the time the Contract was
issued. We will also require evidence of insurability for the proposed new
insured. The proposed new insured must qualify for a standard or better
underwriting classification. Outstanding loan debt must first be repaid and the
Contract cannot be under a collateral assignment. If we approve the request for
change, insurance coverage on the new insured will
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<PAGE> 39
take effect on the processing date on or next following the date of approval,
provided the new insured is still living at that time and the Contract is still
in effect.
We will change the Contract as follows on the effective date:
- The issue date of this Contract is changed to the effective date
of change.
- The issue age for the new insured is the new insured's age as of
his or her birthday nearest the contract date.
- The guaranteed maximum cost of insurance rates and attained age
factors are those in effect on the contract date for a person with
the same issue age, sex, and underwriting class as the new
insured.
- The initial face amount is recalculated based on the issue age,
sex and underwriting class of the new insured.
- The face amount and guaranteed benefits are recalculated.
- A change of insured charge (maximum of $500) is deducted from the
account value.
Changing the insured will generally be treated as a taxable transaction.
The initial face amount is recalculated as of effective date of the change of
insured, and is based on any additional premium payments and partial withdrawals
since the Contract Date.
When We Make Payments. We generally pay death benefit proceeds, partial
withdrawals, loans and the net surrender value within seven days after our
Service Center receives all the information needed to process the payment.
However, we may delay payment if it isn't practical for us to value or dispose
of Fund shares because:
- the New York Stock Exchange is closed, other than for a customary
weekend or holiday; or
- trading on the New York Stock Exchange is restricted by the
Securities and Exchange Commission; or
- the Securities and Exchange Commission declares that an emergency
exists such that it is not reasonably practical to dispose of
securities held in the Separate Account or to determine the value
of their assets; or
- the Securities and Exchange Commission by order so permits for the
protection of contract owners.
DOLLAR COST AVERAGING
What Is It? The Contract offers an optional transfer feature called Dollar Cost
Averaging ("DCA"). This feature allows you to make automatic monthly transfers
from the subaccount investing in the Domestic Money Market Fund to up to four
other subaccounts, depending on your current allocation of account value. The
DCA program will terminate and no transfers will be made if transfers under DCA
would cause you to be invested in more than five subaccounts.
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The DCA feature is intended to reduce the effect of short-term price
fluctuations on investment cost. Since the same dollar amount is transferred to
selected subaccounts each month, more units of a subaccount are purchased when
their value is low and fewer units are purchased when their value is high.
Therefore, over the long term a DCA program may let you buy units at a lower
average cost. However, a DCA program does not assure a profit or protect against
a loss in declining markets.
You can choose the DCA feature any time. Once you start using it, you must
continue it for at least three months. You can select a duration in months for
the DCA program. If you do not choose a duration, we will make transfers at
monthly intervals until the balance in the subaccount investing in the Domestic
Money Market Fund is zero. While the DCA program is in place any amount in the
Domestic Money Market Subaccount is available for transfer.
Minimum Amounts. To elect DCA, you need to have a minimum amount in the Domestic
Money Market Subaccount. We determine the amount required by multiplying the
specified length of your DCA program ("DCA duration") in months by your
specified monthly transfer amount. If you do not select a DCA duration, we
determine the minimum amount required by multiplying your monthly transfer
amount by 3 months. You must specify at least $100 for transfer each month.
Allocations may be made in specific whole dollar amounts or in whole-number
percentage increments of at least 1%. We reserve the right to change these
minimums.
Should the amount in your Domestic Money Market Subaccount be less than the
selected monthly transfer amount, we'll notify you that you need to put more
money in the Domestic Money Market Subaccount to continue DCA. If you do not
select a DCA duration or the DCA duration you selected has not been reached and
the amount in the Domestic Money Market Subaccount is less than the monthly
transfer amount, we will transfer your remaining balance in the Domestic Money
Market Subaccount. Transfers are made based on your DCA allocation instructions
or pro-rata based on your specified transfer amounts.
When Do We Make DCA Transfers? We'll make the first DCA transfer on the first
monthly anniversary date after the later of the date our Service Center receives
your election or fourteen days after the in force date. We'll make additional
DCA transfers on each subsequent monthly anniversary. We don't charge for DCA
transfers. These transfers are in addition to other transfers permitted under
the Contract.
RIGHT TO EXCHANGE CONTRACT
Within 18 months of the issue date you may exchange your Contract for a contract
with benefits that do not vary with the investment results of a separate
account. Your request must be in writing. Also, you must return the original
Contract to our Service Center.
The new contract will have the same owner and beneficiary as those of the
original Contract on the date of the exchange. It will also have the same issue
age, issue date, face amount, surrender value, benefit riders and underwriting
class as the original Contract on the date of the exchange. Any loan debt will
be carried over to the new contract.
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We won't require evidence of insurability to exchange for a new "fixed"
contract. We reserve the right to impose a charge of $500 if you elect this
right to exchange.
CHOOSING AN INCOME OPTION
In addition to payments in a lump sum, we offer several income options to
provide for payment of the death benefit proceeds to the beneficiary. Payments
under these options do not depend on the investment results of a separate
account. You may choose one or more income options at any time during the
insured's lifetime. If you haven't selected an option when the insured dies, the
beneficiary has one year to apply the death benefit proceeds either paid or
payable to one or more of the options. In addition, if you cancel the Contract
for its net surrender value, you may also choose one or more income options for
payment of the proceeds.
We need to approve any option where:
- the person named to receive payment ("payee") is other than you or
the beneficiary;
- the payee is not a natural person, such as a corporation; or
- any income payment would be less than $100.
Income options include:
- Income For A Fixed Period. We make payments in equal installments
for up to a fixed number of years.
- Income For Life. We make payments in equal monthly installments
until the death of a named person or the end of a designated
period, whichever is later. The designated period may be for 10 or
20 years. Other designated periods and payment schedules may be
available on request.
- Interest Payment. You can leave amounts with us to earn interest
at an annual rate of at least 3%. Interest payments can be made
annually, semi-annually, quarterly or monthly.
- Income Of A Fixed Amount. We make payments in equal installments
until proceeds applied under this option and interest on the
unpaid balance at not less than 3% per year are exhausted.
- Joint Life Income. We make payments in monthly installments as
long as at least one of two named persons is living. Other payment
schedules may be available on request. While both are living, full
payments are made. If one dies, payments of at least two-thirds of
the full amount are made. Payments end completely when both named
persons die.
- Immediate Annuity. You can use amounts to purchase any single
premium immediate annuity we offer.
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REPORTS TO CONTRACT OWNERS
At the end of each processing period, we will send you a statement showing the
allocation of your account value, death benefit, surrender value, and any loan
debt and, if there has been a change, the new 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 account value during the
processing period. The statement will also include any other information that
may be currently required by your state.
You will receive confirmation of all financial transactions. These confirmations
will show the price per unit of each of your subaccounts, the number of units
you have in the subaccount and the value of the subaccount computed by
multiplying the quantity of units by the price per unit. (See "Net Rate of
Return for a Subaccount".)
We will also send you an annual and a semi-annual report containing financial
statements and a list of portfolio securities of the Funds, as required by the
1940 Act.
SOME ADMINISTRATIVE PROCEDURES
We reserve the right to modify or eliminate the procedures described below. For
administrative and tax purposes, we may from time to time require that specific
forms be completed for certain transactions. These include premium payments,
transfers, loans and partial withdrawals.
If you have the Cash Management Account(R)* Insurance Service, payments may be
withdrawn automatically from your CMA account and transferred to your Contract.
--------------------------------------------------------------------------------
CMA Account Reporting
If you have a Merrill Lynch Cash Management Account(R), * you may elect to have
your Contract linked electronically to that account. We call this the CMA
Insurance Service. With this service, certain Contract information is included
as part of your regular monthly CMA Statement. However, the Contract is not an
asset held in your CMA. Your CMA Statement will list the account value
allocation, death benefit, net surrender value, loan debt and any CMA activity
affecting the Contract during the month. However, the Contract is not an asset
held in your CMA.
--------------------------------------------------------------------------------
*Cash Management Account and CMA are registered trademarks of Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
Personal Identification Number. We will send you a four-digit personal
identification number ("PIN") within 14 days after the In Force Date. You must
give this number when you call the Service Center to get information about the
Contract or, if all required authorization forms are on file, to make a
transfer, loan, partial withdrawal, or to make other requests.
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Transferring Account Value. You can transfer your account value either in
writing or by telephone. If you request the transfer by telephone, you must give
your Contract number, name, and PIN. We will give a confirmation number over the
telephone and then follow up in writing.
Requesting A Loan. You may request a loan in writing or, by telephone. If you
request the loan by telephone, you must give your Contract number, name and PIN,
and tell us the loan amount and the subaccounts from which the loan should be
taken.
Upon request, we will wire the funds to the account at the financial institution
named on your authorization. We will generally wire the funds within two working
days of receipt of the request. If you have the CMA Insurance Service, funds may
be transferred directly to that CMA account.
Requesting Partial Withdrawals. You may request partial withdrawals in writing
or by telephone. If you request the withdrawal by telephone, you must give your
Contract number, name and PIN, and tell us how much to withdraw and from which
subaccounts.
Upon request, we will wire the funds to the account at the financial institution
named on your authorization. We will usually wire the funds within two working
days of receipt of the request. If you have the CMA Insurance Service, funds can
be transferred directly to that CMA account.
Telephone Requests. Once our Service Center receives your authorization you can
call the Service Center to make a transfer, loan or partial withdrawal. A
telephone request for a loan, partial withdrawal or a transfer received before 4
p.m. (ET) will generally be processed the same day. A request received at or
after 4 p.m. (ET) will be processed the following business day. We reserve the
right to change procedures or discontinue the ability to make telephone
transfers.
We will employ reasonable procedures to confirm that instructions communicated
by telephone are genuine. These procedures may include, but are not limited to,
possible recording of telephone calls and obtaining appropriate identification
before effecting any telephone transactions. We will not be liable for following
telephone instructions that we reasonably believe to be genuine.
OTHER CONTRACT PROVISIONS
In Case Of Errors In The Application. If an age or sex stated in the application
is wrong, it could mean that the face amount or any other Contract benefit is
wrong. We will pay the correct benefits for the true age and sex.
Incontestability. We will rely on statements made in the applications. We can
contest the validity of a Contract if any material misstatements are made in the
application. In addition, we can contest any amount of death benefit
attributable to an additional payment if any material misstatements are made in
the application required with the additional payment. Subject to state
regulation, we won't contest the validity of a Contract after it has been in
effect during the insured's lifetime for two years from the date of issue. Nor
will we contest any amount of death
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benefit attributable to an additional payment after the death benefit has been
in effect during the insured's lifetime for two years from the date the payment
was received and accepted.
Changes in Contract Cost Factors. Any changes in contract cost factors (current
cost of insurance rates and loan charges) that we have reserved the right to
make will be by class and based upon changes in future expectations for such
elements as mortality, persistency, expenses and taxes. The contract cost
factors are determined prospectively. We will not recoup prior losses by means
of contract cost factor changes. We will determine any change in contract cost
factors in accordance with procedures and standards on file, if required, with
the insurance supervisory official of the jurisdiction in which we deliver this
Contract.
Payment In Case Of Suicide. Subject to state regulation, if the insured commits
suicide within two years from the Contract's issue date, we will pay only a
limited death benefit. The benefit will be equal to the amount of the payments
made less withdrawals and loan debt.
If the insured commits suicide within two years of any date an additional
payment is received and accepted, any amount of death benefit attributable to
the additional payment will be limited to the amount of the payment less
withdrawals and loan debt attributable to the additional payment.
Contract Changes--Applicable Federal Tax Law. To receive the tax treatment
accorded to life insurance under federal income tax law, the Contract must
qualify initially and continue to qualify as life insurance under the Internal
Revenue Code or successor law. To maintain this qualification to the maximum
extent of the law, we reserve the right to return any additional payments that
would cause the Contract to fail to qualify as life insurance under applicable
federal tax law as we may interpret it. Further, we reserve the right to make
changes in the Contract or its riders or to make distributions from the Contract
to the extent necessary to continue to qualify the Contract as life insurance.
Any changes will apply uniformly to all Contracts that are affected and you will
be given advance written notice of such changes.
State Variations. Certain Contract features, including the "free look" right,
are subject to state variation. You should read your Contract carefully to
determine whether any variations apply in the state in which the Contract is
issued.
GROUP OR SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce or eliminate
surrender charges, asset-based charges, expense charges, and the minimum
payment, and may modify cost of insurance rates and 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 us to sell Contracts to
its employees on an individual basis.
Costs for sales, administration, and mortality generally vary with the size and
stability of the group and the reasons the Contracts are purchased, among other
factors. We take all these
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factors into account when reducing charges. To qualify for reduced charges, a
group or sponsored arrangement must meet certain requirements, including
requirements for size and number of years in existence. Group or sponsored
arrangements that have been set up solely to buy Contracts or that have been in
existence less than six months will not qualify for reduced charges.
We make any reductions according to rules in effect when an application for a
Contract or additional payment is approved. We may change these rules from time
to time. However, reductions in charges will not discriminate unfairly against
any person.
UNISEX LEGAL CONSIDERATIONS
In 1983 the Supreme Court held in Arizona Governing Committee v. Norris that
optional annuity benefits provided under an employee's deferred compensation
plan could not, under Title VII of the Civil Rights Act of 1964, vary between
men and women. In addition, legislative, regulatory or decisional authority of
some states may prohibit use of sex-distinct mortality tables under certain
circumstances.
The Contracts offered by this Prospectus are based on mortality tables that
distinguish between men and women. As a result, the Contract pays different
benefits to men and women of the same age. Employers and employee organizations
should check with their legal advisers before purchasing these Contracts.
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. You
should disregard references made in this prospectus to such sex-based
distinctions.
SELLING THE CONTRACTS
Role Of Merrill Lynch, Pierce, Fenner & Smith, Incorporated. MLPF&S is the
principal underwriter of the Contract. It was organized in 1958 under the laws
of the state of Delaware and is registered as a broker-dealer under the
Securities Exchange Act of 1934. It is a member of the National Association of
Securities Dealers, Inc. ("NASD"). The principal business address of MLPF&S is
World Financial Center, 250 Vesey Street, New York, New York 10080. MLPF&S also
acts as principal underwriter of other variable life insurance and variable
annuity contracts we issue, as well as variable life insurance and variable
annuity contracts issued by ML Life Insurance Company of New York, an affiliate
of ours. MLPF&S also acts as principal underwriter of certain mutual funds
managed by Merrill Lynch Investment Managers, the investment adviser for the
Variable Series Funds.
MLPF&S may arrange for sales of the Contract by other broker-dealers who are
registered under the Securities Exchange Act of 1934 and are members of the
NASD. Registered representatives
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of these other broker-dealers may be compensated on a different basis than
MLPF&S Financial Consultants.
Role Of Merrill Lynch Life Agencies. Contracts are sold by registered
representatives of MLPF&S who are also licensed through various Merrill Lynch
Life Agencies as insurance agents for us. We have entered into a distribution
agreement with MLPF&S and companion sales agreements with the Merrill Lynch Life
Agencies through which the Contracts and other variable life insurance contracts
issued through the Separate Account are sold and the registered representatives
are compensated by Merrill Lynch Life Agencies and/or MLPF&S. The amounts paid
under the distribution and sales agreements for the Separate Account for the
year ended December 31, 1999, December 31, 1998, and December 31, 1997 were
$23,810,374, $22,517,219, and $15,107,535, respectively.
Commissions. The maximum commission we will pay to Financial Consultants ("FCs")
is ___% of each premium. Additional annual compensation of no more than ____% of
the account value may also be paid to your FC. FCs may elect to receive a lower
commission as a percent of each premium in exchange for higher compensation as a
percent of the account value. In such a case, the maximum additional annual
compensation is _____% of the account value. Commissions may be paid in the form
of non-cash compensation, subject to applicable regulatory requirements.
The maximum commission we will pay to the applicable insurance agency to be used
to pay commissions to the FCs is ____% of each premium, and up to ____% of the
account value.
TAX CONSIDERATIONS
Introduction. The following summary discussion is based on our understanding of
current Federal income tax law as the Internal Revenue Service (IRS) now
interprets it. We can't guarantee that the law or the IRS's interpretation won't
change. It does not purport to be complete or to cover all tax situations. This
discussion is not intended as tax advice. Counsel or other tax advisers should
be consulted for further information.
We haven't considered any applicable federal gift, estate or any state or other
tax laws. Of course, your own tax status or that of your beneficiary can affect
the tax consequences of ownership or receipt of distributions.
Tax Status Of The Contract. In order to qualify as a life insurance contract for
Federal income tax purposes and to receive the tax treatment normally accorded
life insurance contracts under Federal tax law, a Contract must satisfy certain
requirements which are set forth in the IRC. Although guidance as to how these
requirements are to be applied is limited, we believe that a Contract should
satisfy the applicable requirements. However, there is less guidance with
respect to Contracts issued on a substandard basis (i.e., a premium class
involving a higher than standard mortality risk). If it is subsequently
determined that a Contract does not satisfy the applicable requirements, we may
take appropriate steps to bring the Contract into compliance with such
requirements and reserve the right to restrict Contract transactions in order to
do so.
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Diversification Requirements. IRC section 817(h) and the regulations under it
provide that separate account investments underlying a Contract must be
"adequately diversified" for it to qualify as a life insurance contract under
IRC section 7702. The Separate Account intends to comply with the
diversification requirements of the regulations under section 817(h). This will
affect how we make investments.
In certain circumstances, owners of variable life contracts have been considered
for Federal income tax purposes to be the owners of the assets of the separate
account supporting their contracts due to their ability to exercise investment
control over those assets. Where this is the case, the contract owners have been
currently taxed on income and gains attributable to the separate account assets.
There is little guidance in this area, and some features of the Contract such as
the flexibility of an owner to allocate premium payments and transfer account
value have not been explicitly addressed in published IRS rulings. While we
believe that the Contracts do not give owners investment control over variable
account assets, we reserve the right to modify the Contracts as necessary to
prevent an owner from being treated as the owner of the variable account assets
supporting the Contract.
The following discussion assumes that the Contract will qualify as a life
insurance contract for Federal income tax purposes.
Tax Treatment Of Contract Benefits In General. We believe that the death benefit
under a Contract should generally be excludible from the gross income of the
beneficiary. Federal, state and local transfer, and other tax consequences of
ownership or receipt of Contract proceeds depend on the circumstances of each
owner or beneficiary. A tax adviser should be consulted on these consequences.
Generally, the owner will not be deemed to be in constructive receipt of the
contract value until there is a distribution. When distributions from a Contract
occur, or when loans are taken out from or secured by (e.g., by assignment) a
Contract, the tax consequences depend on whether the Contract is classified as a
"MEC." If a loan is outstanding when a Contract is cancelled or lapses or when
benefits are paid under such a Contract at maturity, the amount of the
indebtedness will be added to any amount distributed and taxed accordingly.
"Modified Endowment Contract". Under the IRC, certain life insurance contracts
are classified as "MECs," with less favorable tax treatment than other life
insurance contracts. In most cases the Contract will be classified as a MEC. Any
Contract issued in exchange for a MEC will be a MEC. A Contract issued in
exchange for a life insurance contract that is not a MEC will generally not be
treated as a MEC. The payment of additional premiums at the time of or after the
exchange or certain changes to the Contract after it is issued may, however,
cause the Contract to become a MEC. A prospective owner should consult a tax
adviser before effecting an exchange.
Distributions Other Than Death Benefits From MECs. Contracts classified as MECs
are subject to the following tax rules:
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(1) All pre-death distributions, (including partial withdrawals,
loans, collateral assignments, capitalized interest or complete
surrender) will be treated as ordinary income on an income first
basis up to the amount of any income in the Contract (generally
the contract value less the owner's investment in the Contract)
immediately before the distribution.
(2) A 10 percent additional income tax is also imposed on the amount
included in income except where the distribution (including loans,
capitalized interest, assignments, partial withdrawals or complete
surrender) is made when the owner has attained age 59 1/2 or
becomes disabled, or where the distribution is part of a series of
substantially equal periodic payments for the life (or life
expectancy) of the owner or the joint lives (or joint life
expectancies) of the owner and the owner's beneficiary.
If a contract that is not originally issued as a MEC but subsequently becomes a
MEC, distributions that occur during the contract year will be taxed as
distributions from a MEC. In addition, distributions from the Contract within
two years before it becomes a MEC will be taxed in this manner. This means that
a distribution made from a Contract that is not a MEC at the time of such
distribution could later become taxable as a distribution from a MEC
Distributions Other Than Death Benefits From Contracts That Are Not MECs.
Distributions from a Contract that is not a MEC are generally treated first as a
recovery of an owner's investment in the Contract and, only after the recovery
of all investment in the Contract, as taxable income. However, certain
distributions which must be made in order to enable the Contract to continue to
qualify as a life insurance contract for Federal income tax purposes. If
Contract benefits are reduced during the first 15 contract years, these
distributions may be treated in whole or in part as ordinary income subject to
tax.
Loans from or secured by a Contract that is not a MEC are generally not treated
as distributions. Finally, neither distributions from nor loans from or secured
by a Contract that is not a MEC are subject to the 10 percent additional tax.
Investment In The Contract. Your investment in the Contract is generally your
aggregate premiums. When a distribution is taken from the Contract, your
investment in the Contract is generally reduced by the amount of the
distribution that is tax-free.
Loans. In general, interest on a loan from a Contract will not be deductible.
Before taking out a Contract loan, an Owner should consult a tax adviser as to
the tax consequences.
Multiple Contracts. All MECs that are issued by us (or our affiliates) to the
same owner during any calendar year are treated as one MEC for purposes of
determining the amount includible in the owner's income when a taxable
distribution occurs.
Transfers. The transfer of the Contract or designation of a beneficiary may have
federal, state, and/or local transfer and inheritance tax consequences,
including the imposition of gift, estate, and generation-skipping transfer
taxes. For example, the transfer of the Contract to, or the
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designation as a beneficiary of, or the payment of proceeds to, a person who is
assigned to a generation which is two or more generations below the generation
assignment of the owner may have generation skipping transfer tax consequences
under federal tax law. The individual situation of each owner or beneficiary
will determine the extent, if any, to which federal, state, and local transfer
and inheritance taxes may be imposed and how ownership or receipt of Contract
proceeds will be treated for purposes of federal, state and local estate,
inheritance, generation skipping and other taxes.
Contracts Used For Business Purposes. The Contract can be used in various
arrangements, including nonqualified deferred compensation or salary continuance
plans, split dollar insurance plans, executive bonus plans, tax exempt and
nonexempt welfare benefit plans, retiree medical benefit plans and others. The
tax consequences of such arrangements may vary depending on the particular facts
and circumstances. If you are purchasing the Contract for any arrangement the
value of which depends in part on its tax consequences, you should consult a
qualified tax adviser. In recent years, moreover, Congress has adopted new rules
relating to life insurance owned by businesses. Any business contemplating the
purchase of a new Contract or a change in an existing Contract should consult a
tax adviser.
Possible Tax Law Changes. Although the likelihood of legislative changes is
uncertain, there is always the possibility that the tax treatment of the
Contract could change by legislation or otherwise. It is possible that any
legislative change could be retroactive (that is, effective prior to the date of
the change). Consult a tax adviser with respect to legislative developments and
their effect on the Contract.
We don't make any guarantee regarding the tax status of any contract or any
transaction regarding the Contract.
The above discussion is not intended as tax advice. For tax advice you should
consult a competent tax adviser. Although this tax discussion is based on our
understanding of federal income tax laws as they are currently interpreted, we
can't guarantee that those laws or interpretations will remain unchanged.
OUR 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 will result in a significantly higher corporate
income tax liability for us in early contract years. We make a charge, included
in the Contract's expense charge, to compensate us for the anticipated higher
corporate income taxes that result from the sale of a Contract. (See "Charges".)
We currently make no other charges to the Separate Account for any federal,
state or local taxes that we incur that may be attributable to the Separate
Account or to the Contracts. We reserve the right, however, to make a charge for
any tax or other economic burden resulting from the application of tax laws that
we determine to be properly attributable to the Separate Account or to the
Contracts.
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REINSURANCE
We intend to reinsure some of the risks assumed under the Contracts.
ILLUSTRATIONS
Illustrations of Death Benefits, Account Value, Surrender Value and Accumulated
Payments: The tables below demonstrate the way in which the Contract works. The
tables are based on the following face amounts, payments and guarantee periods
and assume maximum mortality charges.
1. The illustration on page __ is for a Contract issued to a male age 55
in the simplified non-smoker underwriting class with a single payment of
$100,000, a face amount of $_____ and a guarantee period to the insured's
attained age 100.
2. The illustration on page __ is for a Contract issued to a female age
60 in the simplified non-smoker underwriting class with a single payment of
$100,000, a face amount of $_____ and a guarantee period to the insured's
attained age 100.
3. The illustration on page __ is for a Contract issued to a male age 70
in the simplified non-smoker underwriting class with a single payment of
$100,000, a face amount of $_____ and a guarantee period to the insured's
attained age 100.
4. The illustration on page __ is for a Contract issued to a male age 65
in the medical non-smoker underwriting class with a single payment of $200,000,
a face amount of $_____ and a guarantee period to the insured's attained age
100.
The tables show how the death benefit, account value and 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, account value and 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, account value and surrender value as of
the end of each contract year take into account Contract charges and the
asset-based charge equivalent to an annual rate of 1.35%.
The amounts shown in the tables also assume an additional charge of .83%. This
charge assumes that the account value is allocated equally among all the
subaccounts and is based on the 1999 expenses (including monthly advisory fees
and operating expenses) for the Funds. This charge also reflects expenses
reimbursements made in 1999 to certain Funds by the investment adviser
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to the respective portfolio. Values illustrated would be lower if these
reimbursements had not been taken into account. The actual charge under a
Contract for Fund expenses will depend on the actual allocation of the account
value and may be higher or lower depending on how the account value is
allocated.
Taking into account the 1.35% asset charge in the Separate Account and the .83%
charge described above, the gross annual rates of investment return of 0%, 6%
and 12% correspond to net annual rates of ____%, ____%, and ____%, respectively.
The gross returns are before any deductions and should not be compared to rates
which reflect deduction of charges.
The hypothetical returns shown on the tables are without any income expense
charges that may be attributable to the Separate Account in the future (although
they do reflect the charge for federal income taxes included in the expense
charge). 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
expense 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 at an after-tax rate
of 5% compounded annually.
We will furnish upon request a personalized illustration reflecting the proposed
insured's age, face amount and the payment amounts requested. The illustration
will also use current cost of insurance rates.
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MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
MALE ISSUE AGE 55
$100,000 INITIAL PAYMENT FOR SIMPLIFIED NON-SMOKER UNDERWRITING CLASS
FACE AMOUNT: $_______ GUARANTEE PERIOD: TO INSURED'S ATTAINED AGE 100
BASED ON MAXIMUM COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
End of Year
Total Payments Made Plus DEATH BENEFIT(2)
Interest at 5% as of End Assuming Hypothetical Gross
Contract Year Payments (1) of Year Annual Investment Return of
------------- ------------- ------- ---------------------------
<S> <C> <C> <C> <C> <C>
0% 6% 12%
-- -- ---
</TABLE>
<TABLE>
<CAPTION>
End of Year End of Year
ACCOUNT VALUE(2) SURRENDER VALUE(2)
Assuming Hypothetical Gross Assuming Hypothetical Gross
Contract Year Annual Investment Return of Annual Investment Return of
------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
0% 6% 12% 0% 6% 12%
-- -- --- -- -- ---
</TABLE>
-----------------
(1) All payments are illustrated as if made at the beginning of the contract
year.
(2) Assumes no loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST RATES AND RATES OF
INFLATION. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF RETURN AVERAGED 0%, 6%
AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY US OR
THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
51
<PAGE> 53
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
FEMALE ISSUE AGE 60
$100,000 INITIAL PAYMENT FOR SIMPLIFIED NON-SMOKER UNDERWRITING CLASS
FACE AMOUNT: $_____ GUARANTEE PERIOD: TO INSURED'S ATTAINED AGE 100
BASED ON MAXIMUM COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
Total End of Year
Payments Made DEATH BENEFIT (2)
Plus Interest at 5% as of Assuming Hypothetical Gross
Contract Year Payments (1) End of Year Annual Investment Return of
------------- ------------ ----------- ---------------------------
<S> <C> <C> <C> <C> <C>
0% 6% 12%
-- -- ---
</TABLE>
<TABLE>
<CAPTION>
End of Year End of Year
ACCOUNT VALUE (2) SURRENDER VALUE (2)
Assuming Hypothetical Gross Assuming Hypothetical Gross
Contract Year Annual Investment Return of Annual Investment Return of
------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
0% 6% 12% 0% 6% 12%
-- -- --- -- -- ---
</TABLE>
-----------------
(1) All payments are illustrated as if made at the beginning of the contract
year.
(2) Assumes no loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST RATES AND RATES OF
INFLATION. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF RETURN AVERAGED 0%, 6%
AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY US OR
THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
52
<PAGE> 54
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
MALE ISSUE AGE 70
$100,000 INITIAL PAYMENT FOR SIMPLIFIED NON-SMOKER UNDERWRITING CLASS
FACE AMOUNT: $_____ GUARANTEE PERIOD: TO INSURED'S ATTAINED AGE 100
BASED ON MAXIMUM COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
End of Year
Total Payments Made Plus DEATH BENEFIT (2)
Interest at 5% as of End Assuming Hypothetical Gross
Contract Year Payments (1) of Year Annual Investment Return of
------------- ------------- ------- ---------------------------
<S> <C> <C> <C> <C> <C>
0% 6% 12%
-- -- ---
</TABLE>
<TABLE>
<CAPTION>
End of Year End of Year
ACCOUNT VALUE (2) SURRENDER VALUE (2)
Assuming Hypothetical Gross Assuming Hypothetical Gross
Contract Year Annual Investment Return of Annual Investment Return of
------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
0% 6% 12% 0% 6% 12%
-- -- --- -- -- ---
</TABLE>
-----------------
(1) All payments are illustrated as if made at the beginning of the contract
year.
(2) Assumes no loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST RATES AND RATES OF
INFLATION. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF RETURN AVERAGED 0%, 6%
AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY US OR
THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
53
<PAGE> 55
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
MALE ISSUE AGE 65
$200,000 INITIAL PAYMENT FOR MEDICAL NON-SMOKER UNDERWRITING CLASS
FACE AMOUNT: $_____ GUARANTEE PERIOD: TO INSURED'S ATTAINED AGE 100
BASED ON MAXIMUM COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
End of Year
Total Payments Made Plus DEATH BENEFIT (2)
Interest at 5% as Of End Assuming Hypothetical Gross
Contract Year Payments (1) of Year Annual Investment Return of
------------- ------------- ------- ---------------------------
<S> <C> <C> <C> <C> <C>
0% 6% 12%
-- -- ---
</TABLE>
<TABLE>
<CAPTION>
End of Year End of Year
ACCOUNT VALUE (2) SURRENDER VALUE (2)
Assuming Hypothetical Gross Assuming Hypothetical Gross
Contract Year Annual Investment Return of Annual Investment Return of
------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
0% 6% 12% 0% 6% 12%
-- -- --- -- -- ---
</TABLE>
-----------------
(1) All payments are illustrated as if made at the beginning of the contract
year.
(2) Assumes no loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST RATES AND RATES OF
INFLATION. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF RETURN AVERAGED 0%, 6%
AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY US OR
THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
54
<PAGE> 56
MORE ABOUT MERRILL LYNCH LIFE INSURANCE COMPANY
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers and their positions with us are as follows:
<TABLE>
<CAPTION>
NAME POSITION WITH THE COMPANY
---- -------------------------
<S> <C>
Anthony J. Vespa Chairman of the Board, President, and Chief Executive
Officer
Matthew Rider Director, Senior Vice President, Chief Financial Officer,
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
Diana Joyner Senior Vice President, Variable Life Administration
Deborah J. Adler Vice President and Chief Actuary
</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 our indirect
parent, Merrill Lynch & Co., Inc. The principal positions of our directors and
executive officers for the past five years are listed below:
Mr. Vespa joined Merrill Lynch Life in January 1994. Since February 1994, he has
held the position of Senior Vice President of MLPF&S.
[Insert re: Mr. Rider]
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 and Assistant General Counsel 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.
[Insert re: Ms. Joyner]
[Insert re: Ms. Adler]
None of our shares are owned by any of our officers or directors, as it is a
wholly owned subsidiary of Merrill Lynch Insurance Group, Inc. ("MLIG"). Our
officers and directors, both
55
<PAGE> 57
individually and as a group, own less than one percent of the outstanding shares
of common stock of Merrill Lynch & Co., Inc.
SERVICES ARRANGEMENT
We and MLIG are parties to a service agreement pursuant to which MLIG has agreed
to provide certain accounting, data processing, legal, actuarial, management,
advertising and other services to us, including services related to the Separate
Account and the Contracts. We reimburse expenses incurred by MLIG under this
service agreement on an allocated cost basis. Charges billed to us by MLIG under
the agreement were $43.4 million for the year ended December 31, 1999.
STATE REGULATION
We are subject to the laws of the State of Arkansas and to the regulations of
the Arkansas Insurance Department (the "Insurance Department"). We file a
detailed financial statement in the prescribed form (the "Annual Statement")
with the Insurance Department each year covering our operations for the
preceding year and our financial condition as of the end of that year.
Regulation by the Insurance Department includes periodic examination to
determine contract liabilities and reserves so that the Insurance Department may
certify that these items are correct. Our books and accounts are subject to
review by the Insurance Department at all times. A full examination of our
operations is conducted periodically by the Insurance Department and under the
auspices of the National Association of Insurance Commissioners. We are also
subject to the insurance laws and regulations of all jurisdictions in which we
are licensed to do business.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. We and MLPF&S are engaged
in various kinds of routine litigation that, in our judgment, is not material to
our total assets or to MLPF&S.
EXPERTS
Our financial statements as of December 31, 1999 and 1998 and for each of the
three years in the period ended December 31, 1999 and of the Separate Account as
of December 31, 1999 and for the periods presented, included in this Prospectus,
have been audited by Deloitte and Touche, 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 and Touche's principal business address is _________________.
Actuarial matters included in this Prospectus have been examined by Deborah J.
Adler, F.S.A., our Vice President and Chief Actuary, as stated in her opinion
filed as an exhibit to the registration statement.
56
<PAGE> 58
LEGAL MATTERS
The organization of the Company, its authority to issue the Contract, and the
validity of the form of the Contract have been passed upon by Barry G. Skolnick,
our Senior Vice President and General Counsel. Sutherland Asbill & Brennan LLP
of Washington, D.C. has provided advice on certain matters relating to federal
securities laws.
REGISTRATION STATEMENTS
Registration statements have been filed with the Securities and Exchange
Commission under the Securities Act of 1933 and the Investment Company Act of
1940 that relate to the Contract and its investment options. This Prospectus
does not contain all of the information in the registration statements as
permitted by Securities and Exchange Commission regulations. The omitted
information can be obtained from the Securities and Exchange Commission's
principal office in Washington, D.C., upon payment of a prescribed fee.
FINANCIAL STATEMENTS
Our financial statements, included herein, should be distinguished from the
financial statements of the Separate Account and should be considered only as
bearing upon our ability to meet our obligations under the Contracts.
57
<PAGE> 59
APPENDIX A
EFFECT OF ADDITIONAL PAYMENT ON FACE AMOUNT
--------------------------------------------------------------------------------
EXAMPLE. The effect of an additional premium payment on the face amount will
depend on the amount of the additional payment. If you make additional payments
of different amounts at the same time to equivalent Contracts, the Contract to
which the larger payment is applied would have a proportionately larger increase
in face amount.
Example 1 shows the effect on face amount of a $2,000 additional payment.
Example 2 shows the effect of a $4,000 additional payment. The examples assume
that no other contract transactions have been made.
Male Issue Age: 55
Initial Payment: $10,000 Face Amount: $22,443
EXAMPLE 1
<TABLE>
<CAPTION>
ADDITIONAL INCREASE IN NEW FACE
PAYMENT FACE AMOUNT AMOUNT
------- ----------- ------
<S> <C> <C>
$2,000 $4,357 $26,800
</TABLE>
EXAMPLE 2
<TABLE>
<CAPTION>
ADDITIONAL INCREASE IN NEW FACE
PAYMENT FACE AMOUNT AMOUNT
------- ----------- ------
<S> <C> <C>
$4,000 $8,714 $31,157
</TABLE>
--------------------------------------------------------------------------------
58
<PAGE> 60
EFFECT OF PARTIAL WITHDRAWALS ON FACE AMOUNT
--------------------------------------------------------------------------------
EXAMPLE. The effect of a partial withdrawal on the face amount depends on the
amount of the partial withdrawal and the contract year in which the withdrawal
is made. If made at the same time to equivalent Contracts, a larger withdrawal
would result in a greater reduction in the face amount than a smaller
withdrawal. A partial withdrawal made in a later contract year would result in a
smaller decrease in the face amount than if the same amount was withdrawn in an
earlier year.
Examples 1 and 2 show the effect on the face amount of partial withdrawals for
$1,000 and $2,000 taken at the beginning of contract year three. Example 3 shows
the effect on the face amount of a $2,000 partial withdrawal taken at the
beginning of contract year eight. All three examples assume no other contract
transactions have been made.
Male Issue Age: 55
Initial Payment: $10,000 Face Amount: $22,443
EXAMPLE 1
<TABLE>
<CAPTION>
PARTIAL DECREASE NEW
CONTRACT YEAR WITHDRAWAL IN FACE AMOUNT FACE AMOUNT
------------- ---------- -------------- -----------
<S> <C> <C> <C>
3..................................... $1,000 $ $20,327
</TABLE>
EXAMPLE 2
<TABLE>
<CAPTION>
PARTIAL DECREASE NEW
CONTRACT YEAR WITHDRAWAL IN FACE AMOUNT FACE AMOUNT
------------- ---------- -------------- -----------
<S> <C> <C> <C>
3..................................... $2,000 $ $18,212
</TABLE>
EXAMPLE 3
<TABLE>
<CAPTION>
PARTIAL DECREASE NEW
CONTRACT YEAR WITHDRAWAL IN FACE AMOUNT FACE AMOUNT
------------- ---------- -------------- -----------
<S> <C> <C> <C>
8..................................... $2,000 $ $18,764
</TABLE>
--------------------------------------------------------------------------------
59
<PAGE> 61
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 judgement 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 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.
2
<PAGE> 62
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.
3
<PAGE> 63
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
OFFICERS AND DIRECTORS
AS OF MAY 2000
DIRECTORS
John L. Steffens
E. Stanley O'Neal
Thomas H. Patrick
George A. Schieren
OFFICERS
John L. Steffens Chairman of the Board and Chief Executive
Officer
George A. Schieren General Counsel
John C. Stomber Treasurer
Andrea L. Dulberg Secretary
EXECUTIVE VICE PRESIDENTS
Thomas W. Davis E. Stanley O'Neal
Barry S. Friedberg Thomas H. Patrick
Edward L. Goldberg Winthrop H. Smith, Jr.
Jerome P. Kenney Roger M. Vasey
SENIOR VICE PRESIDENTS
<TABLE>
<S> <C> <C>
Harry P. Allex Theresa Lang George A. Schieren
Daniel H. Bayly Michael J.P. Marks Robert D. Sherman
Rosemary T. Berkery G. Kelly Martin James F. Shoaf
Michael J. Castellano Robert J. McCann Barry G. Skolnick
Michael R. Cowan John T. McGowan Howard P. Sorgen
Richard A. Dunn Andrew J. Melnick John C. Stomber
Ahmass L. Fakahany(1) Athanassios N. Michas G. Stephen Thoma
Richard M. Fuscone Joseph H. Moglia Arthur L. Thomas
Donald N. Gershuny Carlos M. Morales Anthony J. Vespa
J. Michael Giles Hisashi Moriya Kevan V. Watts
Mark B. Goldfus Thomas O. Muller III Madeline A. Weinstein
Allen N. Jones John Qua Joseph T. Willet
</TABLE>
----------------------------------
(1) Mr. Fakahany is also Chief Financial Officer.
4
<PAGE> 64
FIRST VICE PRESIDENTS
Matthias B. Bowman Barry J. Mandel
Dominic A. Carone(2) Lawrence W. Roberts
Richard M. Drew Eric M. Rosenberg
Harry J. Ferguson Stanley Schaefer
Richard K. Gordon Arthur H. Sobel
Brian C. Henderson Kenneth S. Spirer
Michael Koeneke John B. Sprung
Jack Levy Paul A. Stein
Frank M. Macioce, Jr. Nathan C. Thorne
Donald N. Malawsky James R. Vallone
VICE PRESIDENTS ASSISTANT VICE PRESIDENTS
Leonard E. Accardo Gregory R. Krolikowski
Rudley B. Anthony Edward A. Mallaney
Joseph A. Boccuzzi
Robert G. Dieckmann
Freddy Enriquez ASSISTANT SECRETARIES
Edward J. Gallagher, Jr.
Scott C. Harrison Darryl W. Colletti
Peter C. Lee Lawrence M. Egan, Jr.
Richard D. Lilleston Andrea Lowenthal
Daniel R. Mayo Margaret E. Nelson
Avadhesh K. Nigam
David D. Northrop
George A. Ruth
John M. Sabatino
Michael S. Schreier
John P. Smith
-------------------------------------
(2) Mr. Carone is also the Controller.
5
<PAGE> 65
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The Prospectus consisting of _____ pages.
Undertaking to file reports.
Rule 484 Undertaking.
Representation Pursuant to Section 26(e).
The signatures.
Written Consents of the Following Persons:
(a) Barry G. Skolnick, Esq.
(b) Deborah J. Adler, F.S.A.
(c) Sutherland Asbill & Brennan LLP
(d) Deloitte & Touche LLP, Independent Auditors
The following exhibits:
<TABLE>
<S> <C>
1.A. (1) Resolution of the Board of Directors of
Merrill Lynch Life Insurance Company
establishing the Separate Account
(Incorporated by Reference to Registrant's
Post-Effective Amendment No. 8 to Form S-6
Registration No. 33-55472 Filed April 29,
1997)
(2) Not applicable
(3) (a) Distribution Agreement between Merrill
Lynch Life Insurance Company and Merrill
Lynch, Pierce, Fenner & Smith Incorporated
(Incorporated by Reference to Registrant's
Post-Effective Amendment No. 8 to Form S-6
Registration No. 33-55472 Filed April 29,
1997)
(b) Sales Agreement between Merrill Lynch Life
Insurance Company and Merrill Lynch Life
Agency Inc. (Incorporated by Reference to
Registrant's Post-Effective Amendment No.
8 to Form S-6 Registration No. 33-55472
Filed April 29, 1997)
(c) Schedules of Sales Commissions. See
Exhibit A(3)(b) (Incorporated by Reference
to Registrant's Post-Effective Amendment
No. 8 to Form S-6 Registration No.
33-55472 Filed April 29, 1997)
(d) Indemnity Agreement between Merrill Lynch
Life Insurance Company and Merrill Lynch
Life Agency, Inc. (Incorporated by
Reference to Registrant's Post-Effective
Amendment No. 8 to Form S-6 Registration
No. 33-55472 Filed April 29, 1997)
(4) Not applicable
(5) (a) Modified Single Premium Variable Life
Insurance Policy
(b) (1) Backdating Endorsement (Incorporated by
Reference to Registrant's Form S-6
Registration Statement No. 333-47844
Filed October 12, 2000)
</TABLE>
<PAGE> 66
<TABLE>
<S> <C>
(2) Guaranteed Benefits Rider for Modified
Single Premium Variable Life Insurance
Policy (Incorporated by Reference to
Registrant's Form S-6 Registration
Statement No. 333-47844 Filed October 12,
2000)
(3) Change of Insured Rider for Modified
Single Premium Variable Life Insurance
Policy (Incorporated by Reference to
Registrant's Form S-6 Registration
Statement No. 333-47844 Filed October 12,
2000)
(c) (1) Variable Life Insurance Application
(Incorporated by Reference to Registrant's
Form S-6 Registration Statement No. 333-47844
Filed October 12, 2000)
(2) Application for Reinstatement
(Incorporated by Reference to Registrant's
Pre-Effective Amendment No. 1 to Form S-6
Registration No. 33-41829 Filed April 16,
1992)
(6) (a) Articles of Amendment, Restatement, and
Redomestication of the Articles of
Incorporation of Merrill Lynch Life
Insurance Company (Incorporated by
Reference to Registrant's Post-Effective
Amendment No. 8 to Form S-6 Registration
No. 33-55472 Filed April 29, 1997)
(b) Amended and Restated By-Laws of Merrill
Lynch Life Insurance Company (Incorporated
by Reference to Registrant's
Post-Effective Amendment No. 8 to Form S-6
Registration No. 33-55472 Filed April 29,
1997)
(7) Not applicable
(8) (a) 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)
(b) 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)
(c) 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)
(d) Form of Participation Agreement among
Merrill Lynch Life Insurance Company,
Hotchkis and Wiley Variable Trust, and
Hotchkis and Wiley (Incorporated by
reference to Merrill Lynch Life Variable
Annuity Separate Account A's
Post-Effective Amendment No. 12 to Form
N-4 Registration No. 33-43773 Filed May 1,
1998)
(e) Form of Participation Agreement among
Davis Variable Account Inc., Davis
Distributors, LLC and Merrill Lynch Life
Insurance Company (Incorporated by
Reference to Registrant's Pre-Effective
Amendment No. 2 to Form N-4 Registration
No. 333-90243 Filed March 31, 2000)
(f) Form of Participation Agreement among
Delaware Group Premium Fund, Delaware
Distributors, LP and Merrill Lynch Life
Insurance Company (Incorporated by
Reference to Registrant's Pre-Effective
Amendment No. 2 to Form N-4 Registration
No. 333-90243 Filed March 31, 2000)
(g) Form of Participation Agreement among
PIMCO Variable Insurance Trust, PIMCO
Funds Distributors, LLC and Merrill Lynch
Life Insurance Company (Incorporated by
Reference to Registrant's Pre-Effective
Amendment No. 2 to Form N-4 Registration
No. 333-90243 Filed March 31, 2000)
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(h) Form of Participation Agreement among
Seligman Portfolios Inc., Seligman
Advisors, Inc. and Merrill Lynch Life
Insurance Company (Incorporated by
Reference to Registrant's Pre-Effective
Amendment No. 2 to Form N-4 Registration
No. 333-90243 Filed March 31, 2000)
(i) Form of Participation Agreement among Van
Kampen Life Investment Trust, Van Kampen
Funds Inc., Van Kampen Asset Management
Inc. and Merrill Lynch Life Insurance
Company (Incorporated by Reference to
Registrant's Pre-Effective Amendment No. 2
to Form N-4 Registration No. 333-90243
Filed March 31, 2000)
(j) Form of Participation Agreement Between
Merrill Lynch Variable Series Funds, Inc.
and Merrill Lynch Life Insurance 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).
(k) Amendment to the Participation Agreement
Between Merrill Lynch Variable Series
Funds, Inc. and Merrill Lynch Life
Insurance Company dated April 15, 1998.
(Incorporated by Reference to Merrill
Lynch Life Variable Annuity Separate
Account A's Registration Statement on Form
N-4, Registration No. 333-90243 Filed
November 3, 1999.)
(l) Amendment to the Participation Agreement
Among Merrill Lynch Life Insurance
Company, Alliance Capital Management L.P.,
and Alliance Fund Distributors, Inc. dated
May 1, 1997. (Incorporated by Reference to
Merrill Lynch Life Variable Annuity
Separate Account A's Registration
Statement on Form N-4, Registration No.
333-90243 Filed November 3, 1999.)
(m) Amendment to the Participation Agreement
Among Merrill Lynch Life Insurance
Company, Alliance Capital Management L.P.,
and Alliance Fund Distributors, Inc. dated
June 5, 1998. (Incorporated by Reference
to Merrill Lynch Life Variable Annuity
Separate Account A's Registration
Statement on Form N-4, Registration No.
333-90243 Filed November 3, 1999.)
(n) Amendment to the Participation Agreement
Among Merrill Lynch Life Insurance
Company, Alliance Capital Management L.P.,
and Alliance Fund Distributors, Inc. dated
July 22, 1999. (Incorporated by Reference
to Merrill Lynch Life Variable Annuity
Separate Account A's Registration
Statement on Form N-4, Registration No.
333-90243 Filed November 3, 1999.)
(o) Amendment to the Participation Agreement
Among MFS(R) Variable Insurance Trust,
Merrill Lynch Life Insurance Company, and
Massachusetts Financial Services Company
dated May 1, 1997. (Incorporated by
Reference to Merrill Lynch Life Variable
Annuity Separate Account A's Registration
Statement on Form N-4, Registration No.
333-90243 Filed November 3, 1999.)
(p) Amendment to the Participation Agreement
By And Among AIM Variable Insurance Funds,
Inc., AIM Distributors, Inc., and Merrill
Lynch Life Insurance Company dated May 1,
1997. (Incorporated by Reference to
Merrill Lynch Life Variable Annuity
Separate Account A's Registration
Statement on Form N-4, Registration No.
333-90243 Filed November 3, 1999.)
(q) Amendment to the Participation Agreement
Among Merrill Lynch Life Insurance Company
and Hotchkis and Wiley Variable Trust.
(Incorporated by Reference to Merrill
Lynch Life Variable Annuity Separate
Account A's Registration Statement on Form
N-4, Registration No. 333-90243 Filed
November 3, 1999.)
(9) (a) Agreement between Merrill Lynch Life
Insurance Company and Merrill Lynch Series
Fund, Inc. (Incorporated by Reference to
Registrant's Post-Effective Amendment No.
8 to Form S-6 Registration No. 33-55472
Filed April 29, 1997)
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(b) Agreement between Merrill Lynch Life
Insurance Company and Merrill Lynch Funds
Distributor, Inc. (Incorporated by
Reference to Registrant's Post-Effective
Amendment No. 8 to Form S-6 Registration
No. 33-55472 Filed April 29, 1997)
(c) Agreement between Merrill Lynch Life
Insurance Company and Merrill Lynch,
Pierce, Fenner & Smith Incorporated
(Incorporated by Reference to Registrant's
Post-Effective Amendment No. 8 to Form S-6
Registration No. 33-55472 Filed April 29,
1997)
(d) Management Agreement between Merrill Lynch
Life Insurance Company and Merrill Lynch
Asset Management, Inc. (Incorporated by
Reference to Registrant's Post-Effective
Amendment No. 8 to Form S-6 Registration
No. 33-55472 Filed April 29, 1997)
(10) Memorandum describing Merrill Lynch Life
Insurance Company's Issuance, Transfer and
Redemption Procedures*
2. Opinion and Consent of Barry G. Skolnick,
Esq. as to the legality of the securities
being registered*
3. Not applicable
4. Not applicable
5. Opinion and Consent of Deborah J. Adler,
F.S.A. as to actuarial matters pertaining
to the securities being registered*
6. (a) 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)
(b) 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)
(c) 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)
(d) 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)
(e) Power of Attorney of Matthew J. Rider
(Incorporated by Reference to Registrant's
Form S-6 Registration Statement No. 333-47844
Filed October 12, 2000)
7. (a) Written Consent of Barry G. Skolnick, Esq.*
(b) Written Consent of Deborah J. Adler,
F.S.A.
(c) Written Consent of Sutherland Asbill &
Brennan LLP*
(d) Written Consent of Deloitte & Touche LLP,
Independent Auditors*
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* To be filed by pre-effective amendment.
<PAGE> 69
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Merrill Lynch Variable Life Separate Account, has duly caused this
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 22nd day of December,
2000.
Merrill Lynch Variable Life Separate Account
(Registrant)
By: Merrill Lynch Life Insurance Company
(Depositor)
/s/ EDWARD W. DIFFIN, JR. /s/ BARRY G. SKOLNICK
---------------------------- ------------------------------
Attest: Vice President By: Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on December 22, 2000.
SIGNATURE TITLE
---------- -------
/s/ Anthony J. Vespa* Chairman of the Board, President, and Chief
-------------------------------- Executive Officer
Anthony J. Vespa
/s/ Matthew J. Rider Director, Senior Vice President, and Chief
-------------------------------- Financial Officer
Matthew J. Rider
/s/ David M. Dunford* Director, Senior Vice President, and Chief
-------------------------------- Investment Officer
David M. Dunford
/s/ Gail R. Farkas* Director and Senior Vice President
--------------------------------
Gail R. Farkas
*By: /s/ Barry G. Skolnick In his own capacity as
-------------------------------- Director, Senior Vice
Barry G. Skolnick President, Secretary,
General Counsel, and as
Attorney-In-Fact
10
<PAGE> 70
EXHIBIT INDEX
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1.A. (5) (a) Modified Single Premium Variable Life Insurance Policy
</TABLE>
