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MERRILL LYNCH LIFE INSURANCE COMPANY
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT II
SUPPLEMENT DATED JUNE 1, 1996
TO
PROSPECTUSES DATED MAY 1, 1993
PRIME PLAN I
PRIME PLAN II
PRIME PLAN III
PROSPECTUSES DATED JANUARY 2, 1991
DIRECTED LIFE
PRIME PLAN VI
PROSPECTUSES DATED APRIL 30, 1991
PRIME PLAN 7
PRIME PLAN INVESTOR
DIRECTED LIFE 2
The following information modifies and supplements information provided in the
most recent prospectus for your policy.
NEW INVESTMENT DIVISIONS
Beginning on June 1, 1996, five additional investment divisions of
Merrill Lynch Life Variable Life Separate Account II (the "Separate Account")
will be available for allocations of payments and investment base. These
divisions will invest in series of The Merrill Lynch Variable Series Funds,
Inc. (the "Variable Series Funds"), which is registered with the Securities and
Exchange Commission as an open-end management investment company. A policy
owner may select up to five of the investment divisions of the Separate Account
available under the policy for allocation of investment base.
The investment objectives of the funds in which the new divisions of
the Separate Account invest are described below. THERE IS NO GUARANTEE THAT
ANY FUND WILL MEET ITS INVESTMENT OBJECTIVE.
Basic Value Focus Fund seeks capital appreciation, and secondarily,
income by investing in securities, primarily equities, that management of the
Fund believes are undervalued and therefore represent basic investment value.
Particular emphasis is placed on securities which provide an above-average
dividend return and sell at a below-average price/earnings ratio.
Global Utility Focus Fund seeks to obtain capital appreciation and
current income through investment of at least 65% of its total assets in equity
and debt securities issued by
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domestic and foreign companies which are, in the opinion of management of the
Fund, primarily engaged in the ownership or operation of facilities used to
generate, transmit or distribute electricity, telecommunications, gas or water.
International Equity Focus Fund seeks to obtain capital appreciation,
and secondarily, income by investing in a diversified portfolio of equity
securities of issuers located in countries other than the United States. Under
normal conditions, at least 65% of the Fund's net assets will be invested in
such equity securities.
Developing Capital Markets Focus Fund seeks long-term capital
appreciation by investing in securities, principally equities, of issuers in
countries having smaller capital markets. For purposes of its investment
objective, the Fund considers countries having smaller capital markets to be
all countries other than the four countries having the largest equity market
capitalizations.
Equity Growth Fund seeks to attain long-term growth of capital by
investing in a diversified portfolio of securities, primarily common stocks, of
relatively small companies that management of the Fund believes have special
investment value and emerging growth companies regardless of size. Such
companies are selected by management on the basis of their long-term potential
for expanding their size and profitability or for gaining increased market
recognition for their securities. Current income is not a factor in such
selection.
MLAM is the investment adviser for each of the Variable Series Funds.
Each portfolio of the Variable Series Funds, as part of its operating expenses,
pays an investment advisory fee to MLAM. See "Expenses of The Variable Series
Funds," below.
Shares of the Variable Series Funds are sold to separate accounts of
other Merrill Lynch insurance companies, and other insurance companies not
affiliated with Merrill Lynch Life or Merrill Lynch & Co., Inc. to fund
benefits under certain variable life insurance and variable annuity contracts.
Shares of each Fund of the Variable Series Funds may be made available to the
separate accounts of additional insurance companies in the future.
RISKS
IN GENERAL. Because investment in each investment division of the
Separate Account entails certain risks, including the risk of loss of income or
principal, it may not be appropriate to allocate all payments and investment
base to only one investment division.
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RISKS ASSOCIATED WITH THE DEVELOPING CAPITAL MARKETS FOCUS FUND. The
Developing Capital Markets Focus Fund of the Variable Series Funds has no
established rating criteria for the debt securities in which it may invest, and
will rely on the investment adviser's judgment in evaluating the credit
worthiness of an issuer of such securities. In an effort to minimize the risk,
the fund will diversify its holdings among many issuers. However, there can be
no assurance that diversification will protect the fund from widespread
defaults during periods of sustained economic downturn.
EXPENSES OF THE VARIABLE SERIES FUNDS
The Variable Series Funds incurs operating expenses and pays monthly
advisory fees to MLAM. For the Basic Value Focus Fund and Global Utility Focus
Fund, the fee equals an annual rate of .60% of average daily net assets. For
the International Equity Focus Fund, the Developing Capital Markets Focus Fund,
and the Equity Growth Fund, the fee equals an annual rate of .75%, 1.00%, and
.75%, respectively, of average daily net assets.
Under its investment advisory agreement, MLAM has agreed to reimburse
the Variable Series Funds if and to the extent that in any fiscal year the
operating expenses of any Fund exceeds the most restrictive expense limitations
then in effect under any state securities laws or published regulations
thereunder. Expenses for this purpose include MLAM's fee but exclude interest,
taxes, brokerage commissions and extraordinary expenses, such as litigation.
No fee payments will be made to MLAM with respect to any Fund during any fiscal
year which would cause the expenses of such Fund to exceed the pro rata expense
limitation applicable to such Fund at the time of such payment. This
reimbursement agreement will remain in effect so long as the advisory agreement
remains in effect and cannot be amended without Variable Series Funds approval.
MLAM and Merrill Lynch Life Agency, Inc. have entered into two
agreements which limit the operating expenses paid by each Fund in a given year
to 1.25% of its average daily net assets, which is less than the expense
limitations imposed by state securities laws or published regulations
thereunder. These reimbursement agreements provide that any expenses in excess
of 1.25% of average daily net assets will be reimbursed to the Fund by MLAM
which, in turn, will be reimbursed by Merrill Lynch Life Agency, Inc.
ILLUSTRATIONS
The hypothetical illustrations that are set forth in the most recent
prospectus for your policy do not reflect current
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expense levels for the Variable Series Funds or the Merrill Lynch Series Fund,
Inc. The average of 1995 expenses (including monthly advisory fees) for these
funds and portfolios is higher than the average expenses reflected in the
prospectus illustrations. VALUES AND BENEFITS SHOWN IN THE PROSPECTUS
ILLUSTRATIONS WOULD BE LOWER IF CURRENT EXPENSES WERE REFLECTED.
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