<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 2000
REGISTRATION NO. 33-43058
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST EFFECTIVE AMENDMENT NO. 10
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
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MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
(EXACT NAME OF TRUST)
MERRILL LYNCH LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------
BARRY G. SKOLNICK, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
MERRILL LYNCH LIFE INSURANCE COMPANY
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE)
------------------------------
COPY TO:
STEPHEN E. ROTH, ESQ.
KIMBERLY J. SMITH, ESQ.
SUTHERLAND ASBILL & BRENNAN LLP
1275 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20004-2415
------------------
It is proposed that this filing will become effective (check
appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/X/ on May 1, 2000 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a) (1)
/ / on (date) pursuant to paragraph (a) (1) of Rule 485
/ / this post-effective amendment designates a new effective date
for a previously filed post-effective amendment
Title of Securities Being Registered: Units of Interest in Single Premium
Variable Life Insurance Policies.
Check box if it is proposed that the filing will become effective on (date) at
(time) pursuant to Rule 487 / /
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- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
May 1, 2000
Merrill Lynch Life Variable Life Separate Account II
SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
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 a single premium variable life insurance policy
Merrill Lynch Life Insurance Company issues. We do not currently offer this
policy for sale to new purchasers.
Until the end of the "free look" period, we will invest your initial payment in
the investment division of the Merrill Lynch Life Variable Life Separate Account
II (the "Separate Account") investing in the Money Reserve Portfolio. Afterward,
you may reallocate your investment base to any five of the investment divisions
of the Separate Account. We then invest each investment division's assets in
corresponding portfolios of the following:
- - MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
- Basic Value Focus Fund
- Balanced Capital Focus Fund
- Global Growth Focus Fund
- Utilities and Telecommunications Focus Fund
- Developing Capital Markets Focus Fund
- Small Cap Value Focus Fund
- Index 500 Fund
- - MERRILL LYNCH SERIES FUND, INC.
- Money Reserve Portfolio
- Intermediate Government Bond Portfolio
- Long-Term Corporate Bond Portfolio
- High Yield Portfolio
- Capital Stock Portfolio
- Growth Stock Portfolio
- Multiple Strategy Portfolio
- Natural Resources Portfolio
- Global Strategy Portfolio
- Balanced Portfolio
- - AIM VARIABLE INSURANCE FUNDS
- AIM V.I. Capital Appreciation Fund
- AIM V.I. Value Fund
- - ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
- Premier Growth Portfolio
- Quasar Portfolio
- - HOTCHKIS AND WILEY VARIABLE TRUST
- International VIP Portfolio
- - MFS VARIABLE INSURANCE TRUST
- MFS Emerging Growth Series
- MFS Research Series
- - MERCURY ASSET MANAGEMENT V.I. FUNDS, INC.
- Mercury V.I. U.S. Large Cap Fund
- - MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES
Fourteen maturity dates ranging from February 15, 2001--February 15, 2019
Currently, you may change your investment allocation as often as you like.
We guarantee that regardless of investment results, insurance coverage will
continue for the insured's life, or, as you may select, for a shorter time if
the face amount chosen is above the minimum face amount required for the initial
payment. During this guarantee period, we will terminate the policy only if any
loan debt exceeds certain policy values. After the guarantee period ends, the
policy will remain in effect as long as the net cash surrender value is
sufficient to cover all charges due. While the policy is in effect, the death
benefit may vary to reflect the investment results of the investment divisions
chosen, but will never be less than the face amount.
<PAGE>
You may:
- make additional payments subject to certain conditions
- redeem the policy for its net cash surrender value
- borrow up to the loan value of your policy
The net cash surrender value will vary with the investment results of the
investment divisions chosen. We don't guarantee any minimum cash surrender
value.
Within certain limits, you may return the policy or exchange it for a policy
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 policy.
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 INVESTMENT DIVISIONS 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 THE MERRILL LYNCH SERIES FUND, INC; THE MERRILL LYNCH
VARIABLE SERIES FUNDS, INC.; THE AIM VARIABLE INSURANCE FUNDS; THE ALLIANCE
VARIABLE PRODUCTS SERIES FUND, INC.; THE MFS-REGISTERED TRADEMARK- VARIABLE
INSURANCE TRUST-SM-; THE HOTCHKIS AND WILEY VARIABLE TRUST; THE MERCURY ASSET
MANAGEMENT V.I. FUNDS, INC.; AND THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES MUST ACCOMPANY THIS PROSPECTUS. PLEASE READ THESE
DOCUMENTS CAREFULLY AND RETAIN THEM FOR FUTURE REFERENCE.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THESE POLICIES OR
DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
--------
<S> <C>
IMPORTANT TERMS............................................. 5
SUMMARY OF THE POLICY....................................... 6
What the Policy Provides................................ 6
Availability and Payments............................... 6
The Investment Base..................................... 7
The Investment Divisions................................ 7
Illustrations........................................... 7
Replacement of Existing Coverage........................ 7
Right to Cancel ("Free Look" Period) or Exchange........ 7
Distributions From The Policy........................... 8
Fees and Charges........................................ 8
FACTS ABOUT MERRILL LYNCH LIFE INSURANCE COMPANY, MERRILL
LYNCH, PIERCE, FENNER & SMITH INCORPORATED, THE SEPARATE
ACCOUNT, THE FUNDS, AND THE TRUSTS........................ 9
Merrill Lynch Life Insurance Company.................... 9
Merrill Lynch, Pierce, Fenner & Smith Incorporated...... 9
Assumption of Previously Issued Policies and Subsequent
Merger.................................................. 9
The Separate Account.................................... 10
Net Rate of Return for an Investment Division........... 11
Changes Within the Account.............................. 11
THE FUNDS................................................... 12
The Series Fund......................................... 12
The Variable Series Funds............................... 13
The AIM V.I. Funds...................................... 14
The Alliance Fund....................................... 15
The MFS Trust........................................... 15
The Hotchkis and Wiley Trust............................ 16
The Mercury V.I. Funds.................................. 16
Special Risks In Certain Funds.......................... 16
The Operation of the Funds.............................. 17
The Trusts.............................................. 18
FACTS ABOUT THE POLICY...................................... 19
Who May be Covered...................................... 19
Initial Payment......................................... 20
Right to Cancel ("Free Look" Period).................... 20
Making Additional Payments.............................. 21
Investment Base......................................... 22
Charges................................................. 22
Charges Deducted from the Investment Base............... 23
Charges to the Separate Account......................... 24
Charges to Fund Assets.................................. 25
Guarantee Period........................................ 26
Net Cash Surrender Value................................ 27
Policy Loans............................................ 27
Death Benefit Proceeds.................................. 28
Payment of Death Benefit Proceeds....................... 29
Dollar Cost Averaging................................... 29
Right to Exchange Policy................................ 30
Income Plans............................................ 30
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Reports to Policy Owners................................ 31
MORE ABOUT THE POLICY....................................... 32
Using the Policy........................................ 32
Some Administrative Procedures.......................... 34
Other Policy Provisions................................. 35
Group or Sponsored Arrangements......................... 35
Unisex Legal Considerations for Employers............... 36
Selling the Policies.................................... 36
Tax Considerations...................................... 37
Merrill Lynch Life Insurance Company's Income Taxes..... 40
Reinsurance............................................. 40
ILLUSTRATIONS............................................... 40
MORE ABOUT MERRILL LYNCH LIFE INSURANCE COMPANY............. 47
Directors and Executive Officers........................ 47
Services Arrangement.................................... 47
State Regulation........................................ 48
Legal Proceedings....................................... 48
Experts................................................. 48
Legal Matters........................................... 48
Registration Statements................................. 48
Financial Statements.................................... 48
Financial Statements of Merrill Lynch Life Variable Life
Separate Account II..................................... S-1
Financial Statements of Merrill Lynch Life Insurance
Company................................................. G-1
</TABLE>
This prospectus does not constitute an offering in any jurisdiction in which
such offering may not lawfully be made. We have not authorized any person to
make any representations in connection with this offering other than those
contained in this prospectus.
4
<PAGE>
IMPORTANT TERMS
ATTAINED AGE: is the issue age of the insured plus the number of full years
since the policy date.
CASH SURRENDER VALUE: is equal to the investment base less the deferred policy
loading and, depending on the date it is calculated, less all or a portion of
certain other charges not yet deducted, plus any loan debt.
FACE AMOUNT: is the minimum death benefit as long as the policy remains in
force. The face amount may increase as a result of an additional payment.
GUARANTEE PERIOD: is the time we guarantee that the policy will remain in force
regardless of investment experience, unless loan debt exceeds certain policy
values. It is the period that a comparable fixed life insurance policy (same
face amount, single premium, withdrawals, guaranteed mortality table and
loading) would remain in force if credited with 4% interest per year.
INVESTMENT BASE: is the amount available under a policy for investment in the
Separate Account at any time.
ISSUE AGE: is the insured's age as of his or her birthday nearest the policy
date.
LOAN DEBT: is the sum of all outstanding loans on a policy plus accrued
interest.
MONTHIVERSARY: is the same day each month as the policy date.
NET CASH SURRENDER VALUE: is equal to cash surrender value less any loan debt.
NET SINGLE PREMIUM FACTOR: We use this factor in the calculation of the variable
insurance amount to make sure that the policy always meets the guidelines of
what constitutes a life insurance policy under the Internal Revenue Code (IRC).
POLICY DATE: is used to determine processing dates, policy years and policy
anniversaries. It is usually the business day next following the receipt of the
single premium payment at the Service Center.
POLICY PROCESSING DATES: are the policy date and the first day of each policy
quarter thereafter. Policy processing dates after the policy date are the days
when we deduct charges from the investment base and redetermine the death
benefit.
PROCESSING PERIOD: is the period between consecutive policy processing dates.
TABULAR VALUE: is equal to the cash surrender value when we issue your policy.
From then on, it is equal to the cash surrender value for a comparable fixed
life policy with the same face amount, single premium, loading, and guarantee
period (based on a 4% interest and the guaranteed mortality table). The tabular
value equals zero after the guarantee period. It is the value we use to limit
your mortality cost deductions as well as our right to cancel your policy during
the guarantee period.
VARIABLE INSURANCE AMOUNT: is determined on each processing date by multiplying
the cash surrender value by the net single premium factor.
5
<PAGE>
SUMMARY OF THE POLICY
WHAT THE POLICY PROVIDES
The policy offers a choice of investments and an opportunity for the policy's
investment base, net cash surrender value and death benefit to grow based on
investment results.
We don't guarantee that policy values will increase. Depending on the investment
results of the investment divisions you select, the investment base, net cash
surrender value and death benefit may go up or down on any day. You bear the
investment risk for any amount allocated to an investment division.
We offer other variable life insurance contracts that have different features
and charges. These different charges would affect your investment division
performance and investment base. To obtain more information about these other
contracts, contact our Service Center or your Financial Consultant.
DEATH BENEFIT. The death benefit equals the face amount or variable insurance
amount, whichever is larger. The variable insurance amount increases or
decreases on each policy processing date depending on the investment results of
the investment divisions you select. We will reduce the death benefit by any
loan debt.
TAX BENEFITS AND TAX CONSIDERATIONS. We believe the Contract generally provides
at least the minimum death benefit required under federal tax law (although
there is less guidance and therefore some uncertainty with respect to Contracts
issued on a substandard basis and Contracts insuring two lives). By satisfying
this requirement, the policy provides two important tax benefits:
1) Its death benefit is generally not subject to income tax;
2) Any increases in the policy's cash surrender value are not taxable until
distributed from the policy.
GUARANTEE PERIOD. Generally, during the guarantee period, we guarantee the
policy will remain in effect and provide the death benefit regardless of
investment performance, unless loan debt exceeds certain policy values. (See
"Policy Loans" for an explanation of how any loan debt affects the policy's
value.) A guarantee period may last for the insured's lifetime or a shorter
period. The chart below shows how the face amount of your policy (assuming the
same premium) affects the guarantee period.
INSURED MALE AGE 60
INITIAL PREMIUM 100,000
<TABLE>
<CAPTION>
LENGTH OF GUARANTEE PERIOD (YEARS) FACE AMOUNT
---------------------------------- ------------
<S> <C>
5 $1,103,366
10 512,940
20 240,607
30 164,843
Insured's lifetime 162,034
</TABLE>
AVAILABILITY AND PAYMENTS
We will issue a policy for an insured up to age 75. The minimum single payment
for a policy is the lesser of (a) $5,000 for an insured under age 20 and $10,000
for an insured age 20 and over, or (b) the payment required to purchase a face
amount of at least $100,000.
6
<PAGE>
Subject to certain conditions, you may make additional unplanned payments (See
"Making Additional Payments.")
The policy is not available to insure residents of certain municipalities in
Kentucky where premium taxes in excess of a certain level are imposed.
We are not currently offering the policies for sale to new purchasers.
THE INVESTMENT BASE
A policy's investment base is the amount available for investment at any time.
On the policy date (usually the next business day after our Service Center
receives your single premium), the investment base is equal to the single
premium. Afterwards, it varies daily based on the investment performance of your
selected investment divisions. 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 policy by allocating the investment
base to two or more investment divisions.
THE INVESTMENT DIVISIONS
Payments are invested in investment divisions of the Separate Account.
Generally, until the end of the "free look" period, the initial payment will be
invested only in the investment division of the Separate Account investing in
the Money Reserve Portfolio. Afterwards, the investment base is reallocated to
up to five of the investment divisions. (See "Changing the Allocation.")
ILLUSTRATIONS
Illustrations in this Prospectus or used in connection with the purchase of the
policy 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 policy as a replacement
for existing coverage. Before you buy a Policy, 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 policy illustrations.
RIGHT TO CANCEL ("FREE LOOK" PERIOD) OR EXCHANGE
Once you receive the policy, review it carefully to make sure it is what you
want. Generally, you may return a policy for a refund within ten days after you
receive it. Some states allow a longer period of time to return the policy. If
required by your state, you may return the policy within the later of ten days
after receiving it or 45 days from the date the application is completed. If you
return the policy during the "free look" period, we will refund the payment
without interest.
You may also exchange your policy within 18 months for a policy with benefits
that do not vary with the investment results of a separate account.
7
<PAGE>
DISTRIBUTIONS FROM THE POLICY
SURRENDERS. You may surrender your policy at any time and receive the net cash
surrender value. On a policy processing date which is also your policy
anniversary, the net cash surrender value equals the investment base minus the
balance of any deferred policy loading not yet deducted.
- If we calculate the net cash surrender value on a date that is not a
policy processing date, we also subtract a pro-rata mortality cost.
- If we calculate the net cash surrender value on a date that is not a
policy anniversary and you have loan debt we will also subtract any
pro-rata net loan cost.
Surrendering your policy may have tax consequences. (See "Tax Considerations".)
LOANS. You may borrow money from us, using your policy as collateral, subject to
limits. We deduct loan debt from the amount payable on surrender of the policy
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. Depending upon investment performance of the investment
divisions and the amounts borrowed, loans may cause a policy to lapse. If the
policy lapses with loan debt outstanding, adverse tax consequences may result.
Loan debt is considered part of the cash surrender value which is used to
calculate taxable gain. Loans may have other adverse tax consequences. (See
"Loans" and "Tax Considerations -- Tax Treatment of Loans and Other
Distributions.")
FEES AND CHARGES
INVESTMENT BASE CHARGES. We invest the entire amount of all premium payments in
the Separate Account. We then deduct certain charges from your investment base
on policy processing dates. These charges are:
- DEFERRED POLICY LOADING equal to 7% of each payment we receive in the
first year. It consists of a sales load of 4.0%, a charge for
administrative expenses during the first year of .5%, and a premium tax
charge of 2.5%. The deferred policy loading for any additional payment we
receive after the first year equals 6.5%. It consists of a sales load of
4.0% and a premium tax charge of 2.5%. We deduct the deferred policy
loading in equal installments of .70% of each payment we receive during
the first policy year and .65% of each payment thereafter. We make this
deduction on the ten policy anniversaries following the date we receive
and accept the payment. However, in determining a policy's net cash
surrender value, we subtract the balance of the deferred policy loading
not yet deducted.
- MORTALITY COST -- on all policy processing dates after the policy date, we
deduct a cost for the life insurance coverage we provide (see "Mortality
Cost"); and
- REALLOCATION CHARGES may be deducted on policy processing dates if you
change your investment base allocation more than five times per policy
year (see "Reallocation Charges.")
- NET LOAN COST -- on each policy anniversary, if there has been any loan
debt during the prior year, we deduct a net loan cost. It equals a maximum
of .75% of the loan debt per year for the first ten policy years and .60%
thereafter (see "Charges Deducted From the Investment Base" and "Net Loan
Cost").
SEPARATE ACCOUNT CHARGES. We deduct certain charges daily from the investment
results of the investment divisions in the Separate Account. These charges are:
8
<PAGE>
- A MORTALITY AND EXPENSE RISK CHARGE deducted from all investment
divisions. It is equivalent to .60% annually at the beginning of the year;
and
- A TRUST CHARGE deducted from only those investment divisions investing in
the Trusts. It is currently equivalent to .34% annually at the beginning
of the year. It will never exceed .50% annually.
ADVISORY FEES AND FUND EXPENSES. The portfolios in the Funds pay monthly
advisory fees and other expenses. (See "Charges to Fund Assets.")
THIS SUMMARY PROVIDES ONLY A BRIEF OVERVIEW OF THE MORE SIGNIFICANT ASPECTS OF
THE POLICY. THIS PROSPECTUS AND THE POLICY PROVIDE FURTHER DETAIL. YOU SHOULD
RETAIN THE POLICY TOGETHER WITH ITS ATTACHED APPLICATIONS, MEDICAL EXAM(S),
AMENDMENTS, RIDERS, AND ENDORSEMENTS. THESE ARE THE ENTIRE AGREEMENT BETWEEN YOU
AND US.
FOR THE DEFINITIONS OF SOME IMPORTANT TERMS USED IN THIS PROSPECTUS, SEE
"IMPORTANT TERMS."
FACTS ABOUT MERRILL LYNCH LIFE INSURANCE COMPANY,
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
THE SEPARATE ACCOUNT, THE FUNDS, AND THE TRUSTS
MERRILL LYNCH LIFE INSURANCE COMPANY
Merrill Lynch Life Insurance Company 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 policies issued through the Separate Account. We retain
MLPF&S to provide services relating to the policies under a distribution
agreement. (See "Selling the Policies".)
ASSUMPTION OF PREVIOUSLY ISSUED POLICIES AND SUBSEQUENT MERGER
Monarch Life Insurance Company ("Monarch") originally issued the policies. On
November 14, 1990, we entered into an indemnity reinsurance and assumption
agreement with Monarch and certain other Merrill Lynch insurance companies.
Under this agreement, Tandem Insurance Group, Inc. ("Tandem"), one of the
Merrill Lynch insurance companies, acquired, on an assumption reinsurance basis,
certain of the variable life insurance policies Monarch issued through its
Variable Account A, including the policies described in this prospectus. On
October 1, 1991, Tandem was merged with and into us (the "merger"), and we
succeeded to all of Tandem's liabilities and obligations. Thus, we have all the
liabilities and obligations under the policies. All further payments made under
the policies will be made directly to or by us.
You have the same rights and values under your policy as you did before the
merger transaction. However, you will look to us instead of to Monarch or Tandem
to fulfill the terms of your policy. Pursuant to the reinsurance and assumption
agreement, all the assets of Monarch's Variable Account A relating to the
reinsured policies were transferred to Tandem and allocated to the Separate
Account. By virtue of the merger, the Separate Account became our separate
account.
9
<PAGE>
THE SEPARATE ACCOUNT
Tandem established the Separate Account, a separate investment account, on
November 19, 1990. We acquired it on October 1, 1991 in the merger. 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 policy as well as other variable life
insurance policies 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 policy owners and beneficiaries that arise under the policy are
our obligations. Income, gains, and losses, whether or not realized, from assets
allocated to the Separate Account are, in accordance with the policies, 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 policy
liabilities, we may transfer the excess to our general account.
There are currently 39 investment divisions in the Separate Account that are
available for investment.
- Seven invest in shares of a specific portfolio of the Merrill Lynch
Variable Series Funds, Inc. (the "Variable Series Funds").
- Ten invest in shares of a specific portfolio of the Merrill Lynch
Series Fund, Inc. (the "Series Fund").
- Two invest in shares of a specific portfolio of the AIM Variable Insurance
Funds (the "AIM V.I. Funds").
- Two invest in shares of a portfolio of the Alliance Variable Products
Series Fund, Inc. (the "Alliance Fund").
- Two invest in shares of a specific portfolio of the
MFS-Registered Trademark- Variable Insurance Trust-SM- (the "MFS Trust").
- One invests in shares of a portfolio of the Hotchkis and Wiley Variable
Trust (the "Hotchkis and Wiley Trust").
- One invests in Class A shares of a portfolio of the Mercury Asset
Management V.I. Funds, Inc. (the "Mercury V.I. Funds").
- Fourteen invest in specific units of The Merrill Lynch Fund of Stripped
("Zero") U.S. Treasury Securities (the "Trust").
On July 22, 1999, two investment divisions previously available under the
Separate Account (the International Equity Focus Fund and the Global Bond Focus
Fund of the Variable Series Funds) closed to allocations of premiums and
investment base.
10
<PAGE>
For more information, see "The Funds" below. You'll find complete information
about the Funds and the Trusts, including the risks associated with each
portfolio in the accompanying prospectuses. They should be read along with this
Prospectus.
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 advisers 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 policy have names similar to funds not
available through the policy. The performance of any fund not available through
the policy is not indicative of performance of the similarly named fund
available through the policy.
NET RATE OF RETURN FOR AN INVESTMENT DIVISION
Each investment division has a distinct unit value (also referred to as "price"
or "separate account index" in reports we furnish to you). When we allocate your
payments or investment base to an investment division, we purchase units based
on the value of a unit of the investment division as of the end of the valuation
period during which the allocation occurs. When we transfer or deduct amounts
out of an investment division, 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 an
investment division.
For each investment division, the separate account index was initially set at
$10.00. The separate account index for each subsequent valuation period
fluctuates based upon the net rate of return for that period. We determine the
net rate of return of an investment division at the end of each valuation
period. The net rate of return reflects the investment performance of the
investment division for the valuation period and the charges to the Separate
Account.
For investment divisions investing in the Funds, shares are valued at net asset
value and reflect reinvestment of any dividends or capital gains distributions
declared by the Funds.
For investment divisions investing in the Trusts, units of each Trust are valued
at the sponsor's repurchase price, as explained in the prospectus for the
Trusts.
CHANGES WITHIN THE SEPARATE ACCOUNT
We may add new investment divisions. We can also eliminate investment divisions,
combine two or more investment divisions, or substitute a new portfolio for the
portfolio in which an investment division invests. A substitution may become
necessary if, in our judgment, a portfolio no longer suits the purposes of the
policies. This may happen due to a change in laws or regulations, or a change in
a portfolio's investment objectives or restrictions, or because the portfolio is
no longer available for investment, or for some other reason. 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 investment divisions to another separate
account or investment division.
11
<PAGE>
When permitted by law, we also can:
- deregister the Separate Account under the Investment Company Act of 1940;
- operate the Separate Account as a management company under the Investment
Company Act of 1940;
- restrict or eliminate any voting rights of policy owners, or other persons
who have voting rights as to the Separate Account; and
- combine the Separate Account with other separate accounts.
THE FUNDS
Below we list the funds into which the investment divisions may invest. There is
no guarantee that any fund or portfolio will be able to meet its investment
objective.
THE SERIES FUND
The Series Fund is registered with the Securities and Exchange Commission as an
open-end management investment company and its investment adviser is Merrill
Lynch Asset Management, L.P. ("MLAM"). All of its ten mutual fund portfolios are
currently available through the Separate Account. The investment objectives and
certain investment policies of the Series Fund portfolios are described below.
MONEY RESERVE PORTFOLIO seeks to preserve capital, maintain liquidity and
achieve the highest possible current income consistent with those objectives by
investing in short-term money market securities.
INTERMEDIATE GOVERNMENT BOND PORTFOLIO seeks to obtain the highest level of
current income consistent with the protection of capital afforded by investing
in intermediate-term debt securities issued or guaranteed by the U.S. Government
or its agencies. The Portfolio will invest in such securities with a maximum
maturity of 15 years.
LONG-TERM CORPORATE BOND PORTFOLIO primarily seeks to provide a high level of
current income. In addition, the Portfolio seeks the preservation of capital. In
seeking to achieve these objectives, under normal circumstances the Portfolio
invests at least 80% of the value of its total assets in debt securities that
have a rating within the three highest grades of Moody's Investors
Service, Inc. ("Moody's") or Standard & Poor's Ratings Group ("Standard &
Poor's").
HIGH YIELD PORTFOLIO primarily seeks a high level of current income.
Secondarily, the Portfolio seeks capital appreciation when consistent with its
primary objective. The Portfolio seeks to achieve its investment objective by
investing principally in fixed-income securities rated in the lower categories
of the established rating services or in unrated securities of comparable
quality (including securities commonly known as "junk bonds").
CAPITAL STOCK PORTFOLIO seeks long-term growth of capital and income, plus
moderate current income. It generally invests in equity securities considered to
be of good or improving quality or considered to be undervalued based on
criteria such as historical price/book value and price/earnings ratios.
GROWTH STOCK PORTFOLIO seeks long-term growth of capital by investing in a
diversified portfolio of securities, primarily common stocks, of companies with
the potential to achieve above-average earnings growth.
12
<PAGE>
MULTIPLE STRATEGY PORTFOLIO seeks high total investment return through a fully
managed investment policy utilizing equity securities, intermediate and
long-term debt securities and money market securities.
NATURAL RESOURCES PORTFOLIO seeks capital appreciation and to protect the
purchasing power of shareholders' capital by investing primarily in equity
securities of domestic and foreign companies with substantial natural resource
assets.
GLOBAL STRATEGY PORTFOLIO seeks high total investment return by investing
primarily in a portfolio of equity and fixed-income securities, including
convertible securities, of U.S. and foreign issuers.
BALANCED PORTFOLIO seeks a level of current income and a degree of stability of
principal not normally available from an investment solely in equity securities
and the opportunity for capital appreciation greater than that normally
available from an investment solely in debt securities by investing in a
balanced portfolio of fixed-income and equity securities.
MLAM is indirectly owned and controlled by Merrill Lynch & Co., Inc. and is a
registered adviser under the Investment Advisers Act of 1940. The Series Fund,
as part of its operating expenses, pays an investment advisory fee to MLAM. (See
"Charges to Fund Assets".)
THE VARIABLE SERIES FUNDS
The Variable Series Funds is registered with the Securities and Exchange
Commission as an open-end management investment company and its investment
adviser is MLAM. Seven of its portfolios are currently available through the
Separate Account. Two of its other portfolios are now closed to further
investment. The investment objectives and certain investment policies of these
Variable Series Funds portfolios are described below.
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. The
Fund seeks special opportunities in securities that are selling at a discount,
either from book value or historical price-earnings ratios, or seem capable of
recovering from temporarily out of favor considerations. Particular emphasis is
placed on securities that provide an above-average dividend return and sell at a
below-average price/earnings ratio.
GLOBAL BOND FOCUS FUND seeks to provide high total investment return by
investing in a global portfolio of fixed-income securities denominated in
various currencies, including multinational currency units. The Fund will invest
in fixed-income securities that have a credit rating of A or better by
Standard & Poor's or by Moody's or commercial paper rated A-1 by Standard &
Poor's or Prime-1 by Moody's or obligations that MLAM has determined to be of
similar creditworthiness.
The investment division corresponding to this Fund closed to allocations of
premiums and investment base on July 22, 1999.
UTILITIES AND TELECOMMUNICATIONS FOCUS FUND (FORMERLY THE GLOBAL UTILITY FOCUS
FUND) seeks both capital appreciation and current income through investment of
at least 65% of its total assets in equity and debt securities issued by
domestic and foreign companies which are, in the opinion of MLAM, primarily
engaged in the ownership or operation of facilities used to generate, transmit
or distribute electricity, telecommunications, gas or water.
13
<PAGE>
INTERNATIONAL EQUITY FOCUS FUND seeks 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
and at least 65% of the Fund's total assets will be invested in the securities
of issuers from at least three different foreign countries.
The investment division corresponding to this Fund closed to allocations of
premiums and investment base on July 22, 1999.
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.
SMALL CAP VALUE FOCUS FUND (FORMERLY THE SPECIAL VALUE FOCUS FUND) seeks
long-term growth of capital by investing in a diversified portfolio of
securities, primarily common stocks, of relatively small companies that
management of the Variable Series Funds believes have special investment value,
and of emerging growth companies regardless of size. 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.
INDEX 500 FUND seeks to provide investment results that, before expenses,
correspond to the aggregate price and yield performance of the Standard & Poor's
500 Composite Stock Price Index (the "S&P 500 Index").
BALANCED CAPITAL FOCUS FUND (FORMERLY THE CAPITAL FOCUS FUND) seeks to achieve
high total investment return. To do this, management of the Fund uses a flexible
"fully managed" investment policy that shifts the emphasis among equity, debt
(including money market), and convertible securities.
GLOBAL GROWTH FOCUS FUND seeks long-term growth of capital. The Fund invests in
a diversified portfolio of equity securities of issuers located in various
countries and the United States, placing particular emphasis on companies that
have exhibited above-average growth rates in earnings.
The Variable Series Funds, as part of its operating expenses, pays an investment
advisory fee to MLAM. (See "Charges to Fund Assets".)
THE AIM V.I. FUNDS
The AIM V.I. Funds is registered with the Securities and Exchange Commission as
an open-end management investment company and its investment adviser is A I M
Advisors, Inc. ("AIM"). Two of its mutual fund portfolios are currently
available through the Separate Account. The investment objectives of the two
available AIM V.I. Funds portfolios are described below.
AIM V.I. CAPITAL APPRECIATION FUND seeks growth of capital through investments
in common stocks, with emphasis on medium and small-sized growth companies. AIM
will be particularly interested in companies that are likely to benefit from new
or innovative products, services or processes, as well as those that have
experienced above-average, long-term growth in earnings and have excellent
prospects for future growth.
AIM V.I. VALUE FUND seeks to achieve long-term growth of capital by investing
primarily in equity securities judged by AIM to be undervalued relative to AIM's
appraisal of the current or projected earnings of the companies issuing the
securities, or relative to current market values of assets owned by the
companies issuing the securities or relative to the equity markets generally.
Income is a secondary objective.
14
<PAGE>
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173 has served as an
investment advisor 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. The AIM V.I. Funds,
as part of its operating expenses, pays an investment advisory fee to AIM. (See
"Charges to Fund Assets".)
THE ALLIANCE FUND
The Alliance Fund is registered with the Securities and Exchange Commission as
an open-end management investment company and its investment adviser is Alliance
Capital Management L.P. ("Alliance"). Two of its mutual fund portfolios are
currently available through the Separate Account. The investment objectives of
these Alliance Fund portfolios are described below.
PREMIER GROWTH PORTFOLIO seeks growth of capital by pursuing aggressive
investment policies. Since investments will be made based upon their potential
for capital appreciation, current income is incidental to the objective of
capital growth. Because of the market risks inherent in any investment, the
selection of securities on the basis of their appreciation possibilities cannot
ensure against possible loss in value. This Fund is therefore not intended for
policy owners whose principal objective is assured income and conservation of
capital.
QUASAR PORTFOLIO seeks growth of capital by pursuing aggressive investment
policies. The Fund invests principally in a diversified portfolio of equity
securities of any company and industry and in any type of security which is
believed to offer possibilities for capital appreciation, and invests only
incidentally for current income. The selection of securities based on the
possibility of appreciation cannot prevent loss in value. Moreover, because the
Fund's investment policies are aggressive, an investment in the Fund is risky
and is not intended for policy owners who want assured income or preservation of
capital.
Alliance is a Delaware limited partnership with principal offices at 1345 Avenue
of the Americas, New York, New York 10105. Alliance Capital Management
Corporation ("ACMC"), the sole general partner of Alliance, is an indirect
wholly owned subsidiary of The Equitable Life Assurance Society of the United
States, which is in turn a wholly owned subsidiary of AXA Financial, Inc., a
holding company which is controlled by AXA, a French insurance holding company.
The Alliance Fund, as part of its operating expenses, pays an investment
advisory fee to Alliance. (See "Charges to Fund Assets".)
THE MFS TRUST
The MFS Trust is registered with the Securities and Exchange Commission as an
open-end management investment company and its investment adviser is
Massachusetts Financial Services Company ("MFS"). Two of its mutual fund
portfolios are currently available through the Separate Account. The investment
objectives of the available MFS Trust portfolios are described below.
MFS EMERGING GROWTH SERIES will seek long-term growth of capital. The series
invests, under normal market conditions, at least 65% of its total assets in
common stocks and related securities, such as preferred stocks, convertible
securities and depositary receipts for those securities, of emerging growth
companies. These companies are companies that the series' 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 RESEARCH SERIES will seek to provide long-term growth of capital and future
income. The series invests, under normal market conditions, at least 80% of its
total assets in common stocks and related securities, such as preferred stocks,
convertible securities and depositary receipts. The series focuses on companies
that the series' adviser believes have favorable prospects for long-term growth,
attractive valuations based on current and expected earnings or cash flow,
dominant or growing market share and superior management.
15
<PAGE>
MFS, a Delaware corporation, 500 Boylston Street, Boston, Massachusetts 02116,
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. The MFS Trust, as part of its operating expenses, pays an
investment advisory fee to MFS. (See "Charges to Fund Assets".)
THE HOTCHKIS AND WILEY TRUST
The Hotchkis and Wiley Trust is registered with the Securities and Exchange
Commission as an open-end management investment company, and its adviser is
Hotchkis and Wiley. One if its mutual fund portfolios is available through the
Separate Account. The investment objective of this Hotchkis and Wiley Trust
portfolio is described below.
HOTCHKIS AND WILEY INTERNATIONAL VIP PORTFOLIO seeks to provide current income
and long-term growth of income, accompanied by growth of capital. The Fund
invests at least 65% of its total assets in stocks in at least ten foreign
markets. In investing the Fund, Hotchkis and Wiley follows a value style. This
means that it buys stocks that it believes are currently undervalued by the
market and thus have a lower price than their true worth.
Hotchkis and Wiley, 725 S. Figueroa Street, Suite 4000, Los Angeles, California
90017-5400, is a division of MLAM. The Hotchkis and Wiley Trust, as part of its
operating expenses, pays an investment advisory fee to Hotchkis and Wiley. (See
"Charges to Fund Assets".)
THE MERCURY V.I. FUNDS
The Mercury V.I. Funds is registered with the Securities and Exchange Commission
as an open-end management investment company, and its adviser is Mercury Asset
Management International Ltd. Class A shares of one of its mutual fund
portfolios are available through the Separate Account. The investment objective
of the Mercury V.I. U.S. Large Cap Fund is described below.
MERCURY V.I. US. LARGE CAP FUND'S main goal is long-term capital growth. The
Fund invests primarily in a diversified portfolio of equity securities of large
cap companies (which are companies whose market capitalization is at least $5
billion) located in the U.S. that Fund management believes are undervalued or
have good prospects for earnings growth. The Fund may also invest up to 10% of
its assets in stocks of companies located in Canada.
Mercury Asset Management International Ltd. is located at 33 King William
Street, London EC4R 9AS, England. Its intermediate parent is Mercury Asset
Management Group Ltd. a London-based holding company. The ultimate parent of
Mercury Asset Management Group Ltd. is Merrill Lynch & Co., Inc. The Mercury
V.I. U.S. Large Cap Fund, as part of its operating expenses, pays an investment
advisory fee to Mercury Asset Management International Ltd. (See "Charges to
Fund Assets".)
SPECIAL RISKS IN CERTAIN FUNDS
Investment in lower-rated debt securities, such as those in which the High Yield
Portfolio of the Series Fund, and the Developing Capital Markets Focus and
International Equity Focus Funds of the Variable Series Funds, expect to invest,
entails relatively greater risk of loss of income or principal. The Developing
Capital Markets Focus Fund of the Variable Series Funds has no established
rating criteria for the debt securities in which it may invest, and will rely on
MLAM's judgment in evaluating the creditworthiness of an issuer of such
securities. In an effort to minimize risk, these portfolios will diversify
holdings among many issuers. However, there can be no assurance that
diversification will protect these portfolios from widespread defaults during
periods of sustained economic downturn.
16
<PAGE>
Because a substantial portion of the Global Growth Focus Fund's assets may be
invested on an international basis, you should be aware of certain risks, such
as fluctuations in foreign exchange rates, future political and economic
developments, different legal systems, and the possible imposition of exchange
controls or other foreign government laws or restrictions. An investment in the
Fund may be appropriate only for long-term investors who can assume the risk of
loss of principal, and do not seek current income.
In seeking to protect the purchasing power of capital, the Natural Resources
Portfolio of the Series Fund reserves the right, when management anticipates
significant economic, political, or financial instability, such as high
inflationary pressures or upheaval in foreign currency exchange markets, to
invest a majority of its assets in companies that explore for, extract, process
or deal in gold or in asset-based securities indexed to the value of gold
bullion. The Natural Resources Portfolio will not concentrate its investments in
such securities until it has been advised that the Policies' federal tax status
will not be adversely affected as a result.
For the MFS Emerging Growth Series, the nature of investing in emerging growth
companies involves greater risk than is customarily associated with investments
in more established companies. Emerging growth companies often have limited
product lines, markets or financial resources, and they may be dependent on one-
person management. In addition, there may be less research available on many
promising small and medium-sized emerging growth companies, making it more
difficult to find and analyze these companies. The securities of emerging growth
companies may have limited marketability and may be subject to abrupt or erratic
market movements than securities of larger, more established growth companies or
the market averages in general. Shares of the MFS Emerging Growth Series,
therefore, are subject to greater fluctuation in value than shares of a
conservative equity fund or of a growth fund which invests entirely in proven
growth stocks.
For the Hotchkis and Wiley International VIP Portfolio, investing in emerging
market and other foreign securities involves certain risk considerations not
typically associated with investing in securities of U.S. issuers, including
currency devaluations and other currency exchange rate fluctuations, political
uncertainty and instability, more substantial government involvement in the
economy, higher rates of inflation, less government supervision and regulation
of the securities markets and participants in those markets, controls on foreign
investment and limitations on repatriation of invested capital and on the Fund's
ability to exchange local currencies for U.S. dollars, greater price volatility,
substantially less liquidity and significantly smaller capitalization of
securities markets, absence of uniform accounting and auditing standards,
generally higher commission expenses, delay in settlement of securities
transactions, and greater difficulty in enforcing shareholder rights and
remedies.
Investment in these portfolios entails relatively greater risk of loss of income
or principal. In addition, as described in the accompanying prospectus for the
portfolios, many portfolios should be considered a long-term investment and a
vehicle for diversification, and not as a balanced investment program. It may
not be appropriate to allocate all payments and investment base to a single
investment division.
THE OPERATION OF THE FUNDS
BUYING AND REDEEMING SHARES. The Funds sell and redeem their shares at net asset
value. Any dividend or capital gain distribution will be reinvested at net asset
value in shares of the same portfolio.
VOTING RIGHTS. We are the legal owner of all Fund shares held in the Separate
Account. We have the right to vote on any matter put to vote at the Funds'
shareholder meetings. However, we will vote all Fund shares attributable to
policies according to instructions we receive from policy owners. We will vote
shares attributable to policies for which we receive no voting instructions in
the same proportion as shares in the respective investment divisions for which
we receive instructions. We will also vote shares not attributable to policies
in the same proportion as shares in the respective divisions for which we
received instructions. We may vote Fund shares in our own right if any federal
securities laws or regulations, or their present interpretation, change to
permit us to do so.
17
<PAGE>
We determine the number of shares attributable to you by dividing your policy's
investment base in a division by the net asset value of one share of the
corresponding portfolio. We count fractional votes.
Under certain circumstances, state regulatory authorities may require us to
disregard voting instructions. This may happen if following the instructions
would mean voting to change the sub-classification or investment objectives of
the portfolios, or to approve or disapprove an investment advisory policy.
We may also disregard instructions to vote for changes in the investment policy
or the investment adviser if it disapproves of the proposed changes. We would
disapprove a proposed change only if it was:
- contrary to state law;
- prohibited by state regulatory authorities; or
- decided by management that the change would result in overly speculative
or unsound investments.
If we disregard voting instructions, we will include a summary of our actions in
the next semi-annual report.
RESOLVING MATERIAL CONFLICTS. Shares of the Series Fund are available for
investment by us, ML Life Insurance Company of New York (an indirect wholly
owned subsidiary of Merrill Lynch & Co., Inc.) and Monarch. Shares of the
Variable Series Funds, the AIM V.I. Funds, the Alliance Fund, the MFS Trust and
the Hotchkis and Wiley Trust are sold to separate accounts of ours, ML Life
Insurance Company of New York, and insurance companies not affiliated with us or
Merrill Lynch & Co., Inc. to fund benefits under variable life insurance and
variable annuity policies, and may be sold to certain qualified plans. Shares of
the Mercury V.I. Funds are sold to separate accounts of ours, ML Life Insurance
Company of New York, and may in the future be sold to insurance companies not
affiliated with us or Merrill Lynch & Co., Inc. to fund benefits under variable
life insurance and variable annuity policies, and may be sold to certain
qualified plans.
It is possible that differences might arise between our Separate Account and one
or more of the other separate accounts which invest in the Funds. In some cases,
it is possible that the differences could be considered "material conflicts."
Such a "material conflict" could also arise due to changes in the law (such as
state insurance law or federal tax law) which affect these different variable
life insurance and variable annuity separate accounts. It could also arise by
reason of differences in voting instructions from our policy owners and those of
the other insurance companies, or for other reasons. We will monitor events to
determine how to respond to conflicts. If a conflict occurs, we may need to
eliminate one or more investment divisions of the Separate Account which invest
in the Funds or substitute a new portfolio for a portfolio in which a division
invests. In responding to any conflict, we will take the action we believe
necessary to protect you consistent with applicable legal requirements.
ADMINISTRATIVE SERVICE ARRANGEMENTS. The investment adviser of a Fund (or its
affiliates) may pay 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 policies.
The amount of this compensation is based upon a percentage of the assets of the
Fund attributable to the policies and other policies that we or our affiliates
issue. These percentages differ, and some advisers (or affiliates) may pay more
than others.
THE TRUSTS
The Trusts are intended to provide safety of capital and a competitive yield to
maturity. The Trusts purchase at a deep discount U.S. Government-backed
investments which make no periodic interest payments. When held to maturity the
investments should receive approximately a fixed yield. The value of Trust units
before maturity varies more than it would if the Trusts contained
interest-bearing U.S. Treasury securities of comparable maturities.
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<PAGE>
The Trust portfolios consist mainly of:
- bearer debt obligations issued by the U.S. Government stripped of their
unmatured interest coupons;
- coupons stripped from U.S. debt obligations; and
- receipts and certificates for such stripped debt obligations and coupons.
The Trusts currently available are shown below:
<TABLE>
<CAPTION>
TARGETED
RATE OF
RETURN TO
MATURITY AS OF
TRUST MATURITY DATE APRIL 19, 2000
- --------------------- ----------------- ----------------
<S> <C> <C>
2001 February 15, 2001 4.00%
2002 February 15, 2002 4.60%
2003 August 15, 2003 4.95%
2004 February 15, 2004 5.01%
2005 February 15, 2005 4.80%
2006 February 15, 2006 4.53%
2007 February 15, 2007 4.67%
2008 February 15, 2008 5.00%
2009 February 15, 2009 4.97%
2010 February 15, 2010 5.08%
2011 February 15, 2011 4.96%
2013 February 15, 2013 4.96%
2014 February 15, 2014 5.04%
2019 February 15, 2019 4.91%
</TABLE>
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of
Merrill Lynch & Co., Inc., is the sponsor for the Trusts. The sponsor will sell
units of the Trusts to the Separate Account and has agreed to repurchase units
we need to sell them to pay benefits and make reallocations. We pay the sponsor
a fee for these transactions and are reimbursed through the trust charge
assessed to the divisions investing in the Trusts. (See "Charges to Divisions
Investing in the Trusts".)
TARGETED RATE OF RETURN TO MATURITY. Because the underlying securities in the
Trusts will grow to their face value on the maturity date, we can estimate a
compound rate of return to maturity for the Trust units. But because the
Separate Account holds the units, we need to take into account the asset charge
and the trust charge (described in "Charges to the Separate Account") in
estimating the net rate of return. That rate depends on the compound rate of
return adjusted for these charges. It does not, however, represent the actual
return on a payment that we might receive under the policy on that date, since
it does not reflect the charges deducted from a policy's investment base
(described in "Charges Deducted from the Investment Base").
Since the value of the Trust units will vary daily to reflect the market value
of the underlying securities, the compound rate of return to maturity for the
Trust units and the net rate of return to maturity for the Separate Account will
vary correspondingly.
FACTS ABOUT THE POLICY
WHO MAY BE COVERED
We are no longer selling the policies.
We use two methods of underwriting:
- simplified underwriting, with no physical exam; and
- para-medical or medical underwriting with a physical exam.
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<PAGE>
The single premium and the age of the insured determine whether we do
underwriting on a simplified or medical basis. The chart below shows the maximum
premium that we'll underwrite on a simplified basis:
<TABLE>
<CAPTION>
AGE MAXIMUM
- --- --------
<S> <C>
0-14........................... $ 25,000
15-29.......................... 50,000
30-39.......................... 75,000
40-49.......................... 100,000
50-75.......................... 150,000
</TABLE>
However, if you select the maximum face amount (see "Selecting the Initial Face
Amount" below), we take "the net amount at risk" into account in determining the
method of underwriting. The net amount at risk is the death benefit minus the
cash surrender value.
We assign insureds to underwriting classes which determine the mortality rates
we will use in calculating mortality cost deductions, and which determine the
guaranteed mortality rates we use in calculating net single premium factors and
guarantee periods. In assigning insureds to underwriting classes, we distinguish
between those insureds underwritten on a simplified basis and those on a
para-medical or medical basis. Under both the simplified and medical
underwriting methods we may issue policies either in the standard or non-smoker
underwriting class. We may also issue policies on insureds in a "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 mortality cost deductions, see "Mortality
Cost".
INITIAL PAYMENT
MINIMUM. To purchase a policy, you must complete an application and make a
payment. We require the payment to put the policy into effect. The minimum
single payment for a policy is the lesser of (a) $5,000 for an insured under age
20 and $10,000 for an insured age 20 and over, or (b) the payment required to
purchase a face amount of at least $100,000. You may make additional payments.
(See "Making Additional Payments".)
SELECTING THE INITIAL FACE AMOUNT. Your initial payment determines the face
amount. For a given initial payment you may choose your initial face amount. The
minimum face amount is the amount which will provide a guarantee period for the
insured's entire life. The maximum face amount is the amount which will give you
the minimum guarantee period we require for the insured's age, sex, and
underwriting class. As the face amount is increased for a given single premium,
the guarantee period becomes shorter and the mortality costs in the early policy
years are larger to cover the increased amounts of insurance.
GUARANTEE PERIOD. The guarantee period is the period of time we guarantee that
the policy will remain in force regardless of investment experience unless loan
debt exceeds certain policy values. We base the guarantee period on the payments
made, the guaranteed maximum mortality rates in the policy, the deferred policy
loading and a 4% interest assumption. This means that for a given payment and
face amount different insureds will have different guarantee periods depending
on their age, sex and underwriting class. For example, an older insured will
have a shorter guarantee period than a younger insured of the same sex and in
the same underwriting class.
RIGHT TO CANCEL ("FREE LOOK" PERIOD)
You may cancel your policy during the "free look" period by returning it for a
refund. Generally, the "free look" period ends 10 days after you receive the
policy. Some states allow a longer period of time to return the policy. If
required by your state, the "free look" period ends the later of 10 days after
you receive the policy and 45 days from the date you execute the application. To
cancel the policy during the "free look" period, you must mail or deliver the
policy to our Service Center or to the registered representative who sold it. We
will refund your payment without interest. We may require you to wait six months
before applying for another policy.
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<PAGE>
Corporations that purchase one or more policies at the same time with an
aggregate single premium of at least $250,000, where the investment base has at
all times been allocated in the division investing in the Money Reserve
Portfolio and where no additional payments have been made nor policy loans
taken, may cancel a policy(ies) and receive the greater of the premium paid
without interest and the net cash surrender value.
MAKING ADDITIONAL PAYMENTS
After the end of the "free look" period, you may make additional payments any
time you choose up to four times a policy year. In Kentucky, you cannot make
additional payments until after the first policy year. The minimum additional
payment we will accept is $1,000. We may require satisfactory evidence of
insurability before we accept a payment if the payment increases the net amount
at risk under the policy, or if the guarantee period at the time of payment is
less than one year. You must submit a form when you make additional payments.
If an additional payment requires evidence of insurability, we will invest that
payment in the division investing in the Money Reserve Portfolio on the next day
after we receive it. Once we complete the underwriting and accept the payment,
we will 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 investment base in the policy's investment divisions.
EFFECT OF ADDITIONAL PAYMENTS. Currently, we will generally accept any
additional payment not requiring evidence of insurability the day we receive it.
On the date we accept an additional payment we will:
- increase the policy's investment base by the amount of the payment; and
- increase the deferred policy loading (see "Deferred Policy Loading").
If an additional payment requires evidence of insurability, once we complete
underwriting and accept the payment, the additional payment will be reflected in
policy values as described above.
As of the processing date on or next following receipt and acceptance of an
additional payment, we will reflect the payment in the calculation of the
variable insurance amount (see "Variable Insurance Amount") and increase either
the guarantee period or face amount or both. If the guarantee period before
acceptance of an additional payment is less than for life, we will first use
payments to extend the guarantee period. Any amount greater than that required
to extend the guarantee period to the insured's lifetime or any subsequent
additional payment will be used to increase the policy's face amount.
If the insured dies after we receive and accept an additional payment and before
the next policy processing date, we'll pay the beneficiary the larger of:
- The amount of the death benefit we calculate as of the prior policy
processing date plus the amount of the additional payment; and
- The cash surrender value as of the date we receive and accept the
additional payment multiplied by the net single premium factor as of such
date (see "Net Single Premium Factor").
We will reduce the death benefit by any loan debt and any overdue charges if the
policy is in grace period. (See "Guarantee Period".)
Unless you specify otherwise, if there is any loan debt, we will apply any
unplanned payment made first as a loan repayment and we will return any excess
amount to you. (See "Policy Loans".)
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<PAGE>
GUARANTEE OF INSURABILITY RIDER. This rider gives you guaranteed options to make
certain additional payments without evidence of insurability. It is available
only to insureds in a standard or non-smoker underwriting class. We will limit
the amount of the payments under the rider. While the rider is in effect you
will have a guaranteed option on each of your first five policy anniversaries.
Subject to evidence of insurability and a maximum age requirement, you may also
extend the guaranteed options to include your next five policy anniversaries.
To exercise an option we must receive the additional payment while the insured
is alive and within 30 days before or after your policy anniversary. If you
don't exercise an option you will forfeit any remaining options and the rider
will end.
INVESTMENT BASE
A policy's investment base is the sum of the amounts invested in each of the
investment divisions. We adjust the investment base daily to reflect the
investment performance of the investment divisions you've selected. (See "Net
Rate of Return for an Investment Division".)
Certain charges and policy loans decrease the investment base. (See "Charges
Deducted from the Investment Base" and "Policy Loans".) Loan repayments and
additional payments increase it. You may elect in writing from which investment
divisions loans are taken and to which investment divisions repayments and
additional payments are added. If you don't make an election, we will allocate
increases and decreases proportionately to your investment base in the
investment divisions selected.
INVESTMENT BASE ALLOCATION DURING THE "FREE LOOK" PERIOD. We will place the
single premium you submit with your application in the division investing in the
Money Reserve Portfolio. Your application sets forth this designation. We won't
make an allocation change during the "free look" period. Afterward, we'll
reallocate the investment base to the investment divisions you've selected. You
may invest in up to five of the investment divisions.
CHANGING THE ALLOCATION. Currently, you may change investment allocations as
often as you wish. However, we may limit the number of changes permitted but not
to less than five each policy year. We'll notify you if we impose any
limitations. We may assess a charge for each allocation change in excess of five
per policy year. To change your investment base allocation, call or write our
Service Center. (See "Some Administrative Procedures".) A dollar cost averaging
feature is also available. (See "Dollar Cost Averaging".)
TRUST ALLOCATIONS. If your investment base is in any of the Trusts, we'll notify
you 30 days before that Trust matures. Tell us in writing at least seven days
before the maturity date how to reinvest the proceeds. If you don't tell us,
we'll move the proceeds to the investment division investing in the Money
Reserve Portfolio, and it will not count as one of the five allocations in a
policy year. When we receive a request for allocation, units of a specific Trust
may no longer be available. Should this occur, we'll attempt to notify you
immediately so that you can change the request.
ALLOCATION TO THE DIVISION INVESTING IN THE NATURAL RESOURCES PORTFOLIO. We
reserve the right to suspend the sale of units of the investment division
investing in the Natural Resources Portfolio in response to conditions in the
securities markets or otherwise.
CHARGES
We deduct the charges described below to cover costs and expenses, services
provided, and risks assumed under the policies. 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 the
particular policy. For example, the sales load may not fully cover all of the
sales and distribution expenses we actually incur. We may
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<PAGE>
use proceeds from other charges, including the mortality and expense risk charge
and cost of insurance, in part to cover such expenses.
We deduct certain charges from the investment base on policy processing dates.
(See "Charges Deducted from the Investment Base".) We also deduct certain
charges daily from the investment results of each investment division in the
Separate Account in determining its net rate of return. (See "Charges to the
Separate Account".) The portfolios in the Funds also pay monthly advisory fees
and other expenses. (See "Charges to Fund Assets".)
CHARGES DEDUCTED FROM THE INVESTMENT BASE
DEFERRED POLICY LOADING. We assess a deferred policy loading charge of 7% of
each payment made in the first year, and 6.5% of each payment made after the
first. This charge consists of a sales load, first year administrative expense
(not assessed against additional payments we receive after the first policy
year), and a premium tax charge.
The sales load is equal to a maximum of 4.0% of the single premium and any
additional payments. It compensates us for sales expenses. The first year
administrative expense is equal to a maximum of .5% of the single premium and
any additional payments we receive in the first policy year. It compensates us
for the expenses associated with issuing the policies. We may reduce the sales
load and first year administrative expense if cumulative payments are
sufficiently high to reach certain breakpoints, and in certain group or
sponsored arrangements.
The state and local premium tax charge is equal to 2.5% of the single premium
and any additional payments.
Although chargeable to each payment, we advance the amount of the deferred
policy loading to the Separate Account as part of your investment base. We then
take back these funds in equal installments on the ten policy anniversaries
following the date we receive and accept a payment. However, in determining the
amount payable on surrender of the Policy, we subtract from the investment base
the balance of the deferred policy loading chargeable to any payment made that
has not yet been deducted.
We currently do not make any charges for administrative expenses beyond the
first year. We will not impose any in the future.
MORTALITY COST (COST OF INSURANCE). We deduct a mortality cost from the
investment base on each processing date after the policy date. This charge
compensates us for the cost of providing life insurance coverage on the insured.
It is based on the insured's underwriting class, sex (except for Montana and
Massachusetts) and attained age, and the policy's net amount at risk. (See
"Legal Considerations for Employers".)
To determine the mortality cost, we multiply the current cost of insurance rate
by the policy's net amount at risk. The net amount at risk is the difference, as
of the previous processing date, between the death benefit and the cash
surrender value adjusted for interest at 4%.
Current mortality rates may be equal to or less than the guaranteed mortality
rates. For insureds age 20 and over, current mortality rates also distinguish
between insureds in a smoker (standard) underwriting class and insureds in a
non-smoker underwriting class. Because we do less underwriting under the
simplified underwriting method, the guaranteed maximum mortality rates are
higher for the simplified classes than for the medical underwriting classes. The
current mortality rates for the simplified classes may be higher than the
guaranteed rates for the medical classes depending on the age and sex of the
insured.
We guarantee that the current mortality rates will never exceed the maximum
guaranteed rates shown in the policy. We use the 1980 Commissioners Standard
Ordinary Mortality Table (1980 CSO Table) for policies
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<PAGE>
underwritten on a medical basis and the 1980 Commissioners Extended Term
Mortality Table (1980 CET Table) for policies underwritten on a simplified basis
to determine these maximum rates if the policies are issued on insureds in a
standard or non-smoker underwriting class. For policies issued on substandard
basis we use a multiple of the 1980 CSO Table. The maximum guaranteed mortality
rates we may charge using the 1980 CET Table are equivalent to 130% of the 1980
CSO Table for male ages 38 and above and female ages 41 and above. At younger
ages, the rates vary from 130% of the 1980 CSO Table to 212% at ages where the
1980 CSO rates are the lowest.
Even though we can charge up to the 1980 CET Table, the current mortality rates
we use for insureds in the non-smoker simplified underwriting class are equal to
or less than the 1980 CSO Table.
To the extent the 1980 CET Table is considered substandard we would in effect be
charging you a substandard mortality cost, even if the insured was healthy, to
the extent:
- we ever increased the current mortality rates above the 1980 CSO Table for
those insureds in the non-smoker simplified underwriting class, or
- the insured is underwritten under the simplified method but is not in the
non-smoker class.
During the period between processing dates, the net cash surrender value takes
the mortality cost into account on a pro-rated basis.
MAXIMUM MORTALITY COST. During the guarantee period, we limit the deduction for
mortality cost if investment results are unfavorable. We do this by substituting
in our calculation, the tabular value for the cash surrender value in
determining the net amount at risk, and multiplying by the guaranteed maximum
mortality rate. We will deduct this alternate amount from the investment base
when it is less than the mortality cost that we would have otherwise deducted.
(See "The Policy's Fixed Base".)
REALLOCATION CHARGES. We may deduct reallocation charges on policy processing
dates if you change your investment base allocation more than five times per
policy year. The charge equals $25.00 for each allocation change you make during
a policy processing period, which exceeds five for the policy year.
NET LOAN COST. The net loan cost is explained under "Policy Loans".
CHARGES TO THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE. Each day we deduct an asset charge from each
division of the Separate Account to cover our mortality, expense, and guaranteed
benefits risks. The total amount of this charge is .60% annually at the
beginning of the year.
- The mortality risk is 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.
- The expense risk is the risk we assume that it will cost us more to issue
and administer the policies than expected.
- The guaranteed benefits risks are the risks we assume for potentially
unfavorable investment results. One risk is that the policy's net cash
surrender value cannot cover the charges due during the guarantee period.
The other risk is that we may have to limit the deduction for mortality
cost (see "Maximum Mortality Cost" above).
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<PAGE>
If the mortality and expense risk charge is not enough to cover the actual
expenses of mortality, maintenance, and administration, we will bear the loss.
If the charge exceeds the actual expenses, the excess will be added to our
profit and may be used to finance distribution expenses. We cannot increase the
total charge.
CHARGES TO DIVISIONS INVESTING IN THE TRUSTS. We assess a daily trust charge
against the assets of each division investing in the Trusts. This charge
reimburses us for the transaction charge paid to MLPF&S when units are sold to
the Separate Account. The trust charge is currently equivalent to .34% annually
at the beginning of the year. We may increase it, but it won't exceed .50%
annually at the beginning of the year. The charge is based on cost with no
expected profit.
CHARGES TO FUND ASSETS
CHARGES TO SERIES FUND ASSETS. The Series Fund incurs operating expenses and
pays a monthly advisory fee to MLAM. This fee equals an annual rate of:
- .50% of the first $250 million of the aggregate average daily net assets
of the Series Fund;
- .45% of the next $50 million of such assets;
- .40% of the next $100 million of such assets;
- .35% of the next $400 million of such assets; and
- .30% of such assets over $800 million.
We have agreed to reimburse the Series Fund so that the ordinary expenses of
each portfolio (which include the monthly advisory fee) do not exceed .50% of
the portfolio's average daily net assets.
CHARGES TO VARIABLE SERIES FUNDS ASSETS. The Variable Series Funds incurs
operating expenses and pays a monthly advisory fee to MLAM at an annual rate of
the average daily net assets of each portfolio. The fee for each is shown as
follows:
<TABLE>
<CAPTION>
ADVISORY
PORTFOLIO NAME FEE
- -------------- --------
<S> <C>
Basic Value Focus Fund................... .60%
Utilities and Telecommunications Focus
Fund................................... .60%
Global Bond Focus Fund................... .60%
Index 500 Fund........................... .30%
International Equity Focus Fund.......... .75%
Developing Capital Markets Focus Fund.... 1.00%
Small Cap Value Focus Fund............... .75%
Balanced Capital Focus Fund.............. .60%
Global Growth Focus Fund................. .75%
</TABLE>
MLAM and Merrill Lynch Life Agency, Inc. have entered into agreements which
limit the operating expenses, exclusive of any distribution fees imposed on
Class B shares, paid by each fund in a given year to 1.25% of its average daily
net assets. These reimbursement agreements provide that any such expenses
greater than 1.25% of average daily net assets will be reimbursed to the fund by
MLAM which, in turn, will be reimbursed by Merrill Lynch Life Agency, Inc.
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<PAGE>
CHARGES TO AIM V.I. FUNDS ASSETS. The AIM V.I. Funds incurs operating expenses
and pays a monthly advisory fee to AIM at an annual rate of .65% of the first
$250 million of each fund's average daily net assets and .60% of each fund's
average daily net assets in excess of $250 million.
CHARGES TO ALLIANCE FUND ASSETS. The Alliance Fund incurs operating expenses and
pays a monthly advisory fee to Alliance at an annual rate of 1.00% of each of
the Alliance Premier Growth Portfolio's and the Alliance Quasar Portfolio's
average daily net assets.
CHARGES TO MFS TRUST ASSETS. The MFS Trust incurs operating expenses and pays a
monthly advisory fee to MFS at an annual rate of .75% of the average daily net
assets of each of the MFS Emerging Growth Series and MFS Research Series.
CHARGES TO HOTCHKIS AND WILEY TRUST ASSETS. The Hotchkis and Wiley Trust incurs
operating expenses and pays a monthly advisory fee to Hotchkis and Wiley at an
annual rate of .75% of the average daily net assets of the Hotchkis and Wiley
International VIP Portfolio.
Hotchkis and Wiley has agreed to make reimbursements so that the regular annual
operating expenses of the Fund do not exceed 1.35% of its average net assets.
This agreement will not be terminated without notice to investors.
CHARGES TO MERCURY V.I. FUNDS ASSETS. The Mercury V.I. Funds incurs operating
expenses and pays a monthly advisory fee to Mercury Asset Management
International Ltd. at an annual rate of .65% of the average daily net assets of
the Mercury V.I. U.S. Large Cap Fund.
Mercury Asset Management International Ltd. has agreed to limit the operating
expenses paid by the Mercury V.I. U.S. Large Cap Fund for one year to 1.25% of
its average daily net assets.
GUARANTEE PERIOD
We guarantee that the policy will stay in force for the insured's life, or for a
shorter guarantee period depending on the face amount selected for a given
premium. We won't cancel the policy during the guarantee period unless the loan
debt exceeds certain policy values. We hold a reserve in our general account to
support this guarantee.
WHEN THE GUARANTEE PERIOD IS LESS THAN FOR LIFE. After the end of the guarantee
period, we will cancel the policy if the net cash surrender value on a policy
processing date won't cover the charges due. (See "Charges Deducted from the
Investment Base".)
We will notify you before canceling the policy. You will then have 61 days to
pay us three times the charges due on the policy processing date when your net
cash surrender value became insufficient. If we haven't received the required
payment by the end of this grace period, we'll cancel the policy. We will treat
any excess payment above the overdue charges as an additional payment.
If we cancel a policy, you may reinstate it while the insured is still living
if:
- You request the reinstatement within three years after the end of the
grace period;
- We receive satisfactory evidence of insurability; and
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<PAGE>
- You make a premium payment which is sufficient to give you a guarantee
period of at least five years from the reinstated policy's effective date.
We will treat your premium payment as an additional payment requiring
underwriting.
The effective date of a reinstated policy is the processing date on or next
following the date the reinstatement application is approved
NET CASH SURRENDER VALUE
Because investment results vary daily, we don't guarantee any minimum net cash
surrender value. On a processing date which is also your policy anniversary the
net cash surrender value equals:
- the policy's investment base on that date;
- minus the balance of the deferred policy loading which has not yet been
deducted from the investment base (see "Deferred policy loading").
If the date of calculation is not a processing date, we also subtract a pro-rata
portion of the mortality cost. If there is any existing loan debt, we will also
subtract a pro-rata net loan cost on dates other than the policy anniversary.
CANCELLING TO RECEIVE NET CASH SURRENDER VALUE. A policy owner may cancel the
policy at any time while the insured is living to receive the net cash surrender
value in a lump sum or under an income plan. You must make the request in
writing in a form satisfactory to us. All rights to the death benefit will end
on the date you send the written request to us. Cancelling the policy may have
tax consequences. See "Tax Considerations."
POLICY LOANS
You may use the policy as collateral to borrow funds from us. The minimum loan
is $1,000 unless you are borrowing to make a payment on another of our variable
life insurance contracts. In that case, you may borrow the exact amount required
even if it's less than $1,000. You may repay all or part of loan debt any time
during the insured's lifetime. Each repayment must be for at least $1,000 or the
amount of the loan debt, if less. Certain states won't permit a minimum amount
that can be borrowed or repaid.
When you take a loan, we transfer from your investment base the amount of the
loan and hold it as collateral in our general account. You may select the
divisions you want to borrow from, and the divisions 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
investment base as then allocated to the investment divisions.
EFFECT ON DEATH BENEFIT AND CASH SURRENDER VALUE. Whether or not you repay loan
debt, taking a loan will have a permanent effect on a policy's cash 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 investment
divisions while the loan is outstanding. If the amount credited to the
collateral is more than what is earned in the investment divisions, the cash
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 cash surrender value
will be lower, as may be the death benefit. In that case, the lower cash
surrender value may cause the policy to lapse sooner than if no loan had been
taken.
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<PAGE>
LOAN VALUE. The loan value of a policy equals:
- 75% of the policy's cash surrender value during the first three years; or
- 90% of the policy's cash surrender value after the first three years.
In certain states, the loan value may differ from that above for particular
years. The sum of all outstanding loan amounts 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 cash surrender value is the net
cash surrender value plus any loan debt.
INTEREST. While a loan remains unpaid, we charge interest of 4.75% annually.
Interest accrues each day and payments are due at the end of each policy 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. Loan debt is considered part of cash surrender
value which is used to calculate gain. Interest paid on a policy loan is not
tax-deductible.
The amount held in our general account as collateral for a loan earns interest
at a minimum rate of 4% annually for the first ten policy years and 4.15%
thereafter.
NET LOAN COST. In addition to the loan interest we charge, on each policy
anniversary we reduce the investment base by the net loan cost (the difference
between the interest charged and the earnings on the amount held as collateral
in the general account) and add that amount to the amount held in the general
account as collateral for the loan. For the first ten policy years, the net loan
cost equals .75% of the loan debt on the previous policy anniversary (taking
into account any loans and repayments since then). After the first ten policy
years, the net loan cost equals .60%. We will not increase the net loan cost. We
take the net loan cost into account in determining the net cash surrender value
of the policy if the date of surrender is not a policy anniversary.
CANCELLATION DUE TO EXCESS DEBT. If the loan debt exceeds the larger of the cash
surrender value and the tabular value, we'll mail you a notice of our intent to
cancel the policy, specifying the minimum repayment amount. We will cancel the
Policy 61 days after we mail a notice of intent to terminate the Policy to you
unless we have received at least the minimum repayment amount specified in the
notice. Depending upon the investment performance of the divisions and the
amounts you borrow, loans may cause the policy to lapse. If the policy lapses
with loan debt outstanding, adverse tax consequences may result. (See "Tax
Considerations".)
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 by a
representative of the owner or the insured, we may transfer the investment base
to the division investing in the Money Reserve Portfolio, pending payment of
death benefit proceeds.
AMOUNT OF DEATH BENEFIT PROCEEDS. The death benefit proceeds equal:
- the death benefit, which is the larger of the current face amount and the
variable insurance amount; less
- any loan debt; and less
- any overdue charges if the policy is in a grace period (see "When Your
Guarantee Period is Less Than for Life").
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<PAGE>
The values used in calculating the death benefit proceeds are as of the date of
death. The death benefit will never be less than the amount required to keep the
policy qualified as life insurance under Federal income tax laws.
The amount we pay on death will be greater when we receive and accept an
additional payment during a policy processing period and the insured dies prior
to the next policy processing date (see "Making Additional Payments").
VARIABLE INSURANCE AMOUNT. We determine the variable insurance amount on each
policy processing date by multiplying the cash surrender value by the net single
premium factor.
NET SINGLE PREMIUM FACTOR
The net single premium factor is based on the
insured's sex, underwriting class, and attained age on
the policy processing date. It decreases as the
insured's age increases. As a result, the variable
insurance amount will decrease in relationship to the
policy's cash surrender value. Also, net single
premium factors may be higher for a woman than for a
man of the same age. Your policy contains a table of
net single premium factors as of each anniversary.
<TABLE>
<CAPTION>
TABLE OF ILLUSTRATIVE NET SINGLE PREMIUM FACTORS
ON POLICY ANNIVERSARIES
STANDARD-SIMPLIFIED ISSUE STANDARD MEDICAL ISSUE
ATTAINED ATTAINED
AGE MALE FEMALE AGE MALE FEMALE
<S> <C> <C> <C> <C> <C>
5 8.61444 10.08769 5 10.26605 12.37298
15 6.45795 7.65253 15 7.41158 8.96292
25 4.89803 5.70908 25 5.50384 6.48170
35 3.59024 4.18342 35 3.97197 4.64894
45 2.62620 3.06419 45 2.87749 3.36465
55 1.97694 2.29528 55 2.14058 2.48940
65 1.55349 1.75357 65 1.65786 1.87562
75 1.28954 1.38615 75 1.35394 1.45952
85 1.14214 1.17173 85 1.18029 1.21265
</TABLE>
PAYMENT OF DEATH BENEFIT PROCEEDS
We will generally pay the death benefit proceeds to the beneficiary within seven
days after we receive all the information needed to process the payment. We may
delay payment, however, if we are contesting the policy or under the
circumstances described in "Using the Policy" and "Other Policy 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 plans described
below.
DOLLAR COST AVERAGING
WHAT IS IT? The policy offers an optional transfer feature called Dollar Cost
Averaging ("DCA"). This feature allows you to make automatic monthly transfers
from the Money Reserve investment division to up to four other investment
divisions depending on your current allocation of investment base. The DCA
program will terminate and no transfers will be made if transfers under DCA
would cause you to be invested in more than 5 divisions.
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<PAGE>
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 divisions each month, more units of a division are purchased when their
value is low and fewer units are purchased when their value is high. Therefore,
over the long haul 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.
Once available, 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
reallocations at monthly intervals until the balance in the Money Reserve
investment division is zero. While the DCA program is in place any amount in the
Money Reserve investment division is available for transfer.
MINIMUM AMOUNTS. To elect DCA, you need to have a minimum amount in the Money
Reserve investment division. We determine the amount required by multiplying the
specified length of your DCA program in months by your specified monthly
transfer amount. If you do not select a 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 percentage increments of 1%. We reserve the
right to change these minimums.
Should the amount in your Money Reserve investment division be less than the
selected monthly transfer amount, we'll notify you that you need to put more
money in the Money Reserve investment division to continue DCA. If you do not
specify a duration or the specified duration has not been reached and the amount
in the Money Reserve investment division is less than the monthly transfer
amount, the entire amount will be transferred. Transfers are made based on your
selected DCA percentage allocations or are made pro-rata based on your specified
DCA transfer amounts.
WHEN DO WE MAKE DCA TRANSFERS? We'll make the first DCA transfer on the first
monthiversary 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 monthiversary. We don't charge for DCA transfers.
These transfers are in addition to reallocations permitted under the policy.
RIGHT TO EXCHANGE POLICY
Within 18 months of the issue date you may exchange your policy for a policy
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
policy.
The new policy will have the same owner and beneficiary as those of the original
policy on the date of the exchange. It will also have the same issue age, issue
date, face amount, cash surrender value, benefit riders and underwriting class
as the original policy. Any loan debt will be carried over to the new policy.
We won't require evidence of insurability to exchange for a new "fixed" policy.
INCOME PLANS
We offer several income plans to provide for payment of the death benefit
proceeds to the beneficiary. Payments under these plans do not depend on the
investment results of a separate account. You may choose one or more income
plans at any time during the insured's lifetime. If you haven't selected a plan,
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 plans. In addition, if you
cancel the policy for its net cash surrender value, you may also choose one or
more income plans for payment of the proceeds.
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<PAGE>
We need to approve any plan where any income payment would be less than $100.
Income plans include:
- ANNUITY PLAN. An amount can be used to purchase a single premium immediate
annuity.
- INTEREST PAYMENT. You can leave amounts with us to earn interest at an
annual rate of at least 3%.
- INCOME FOR A FIXED PERIOD. We make payments in equal installments for up
to 30 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.
- 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, we make full payments. If one
dies, we make payments of at least two-thirds of the full amount. Payments
end completely when both named persons die.
UNDER THE INCOME FOR LIFE AND JOINT LIFE INCOME OPTIONS, OUR POLICY OBLIGATION
MAY BE SATISFIED WITH ONLY ONE PAYMENT IF AFTERWARD THE NAMED PERSON OR PERSONS
DIES. IN ADDITION, ONCE IN EFFECT, SOME OF THE INCOME PLANS MAY NOT PROVIDE ANY
SURRENDER RIGHTS.
REPORTS TO POLICY OWNERS
After the end of each policy quarter, we will send you a statement showing the
allocation of your investment base, death benefit, net cash surrender value, any
loan debt and, if there has been a change, new face amount and guarantee period.
All figures will be as of the first day of the current policy quarter. The
statement will show the amounts deducted from or added to the investment base
during the policy quarter. We will project your policy's value at a net rate of
return of 8%, and based on this value tell you when the policy will terminate
unless you make additional payments. 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 investment divisions, the number of
units you have in the investment division and the value of the investment
division computed by multiplying the quantity of units by the price per unit.
(See "Net Rate of Return for an Investment Division".)
We will also send you semi-annual reports containing financial statements for
the Separate Account and a list of portfolio securities of the Funds, as
required by the Investment Company Act of 1940.
SINGLE PREMIUM IMMEDIATE ANNUITY RIDER. If your state allows, you may have added
a Single Premium Immediate Annuity Rider ("SPIAR") to your policy. This rider
would provide you with a fixed income for a period of ten years. If you are the
insured and you die before the period ends, we'll pay the rider value in a lump
sum to the beneficiary under the policy. For tax purposes, this payment won't be
considered part of the life insurance death benefit.
If you surrender the rider before the end of the period, we'll pay you the rider
value over five years or apply it to a lifetime income for you, as you choose.
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If you are not the insured and you die before the income period ends, we'll pay
the remaining payments to the new owner.
If you change the owner of the policy, we will change the owner of the SPIAR to
the new owner of the policy.
If the policy ends because the insured dies (where you are not the insured),
because we terminate the policy, or because you've cancelled it for its net cash
surrender value, we'll continue the annuity under the same terms but under a
separate written agreement. You can also choose one of the options available
upon surrender of the rider.
The rider won't have any effect on your policy's loan value.
We hold the reserves for this rider in our general account.
If you pledge, assign, or gift a policy with a SPIAR, you may have tax
consequences. We advise you to consult your tax advisor prior to effecting an
assignment, pledge or gift of such a policy. For a discussion of the tax issues
associated with use of a SPIAR, see "Tax Consequences."
MORE ABOUT THE POLICY
USING THE POLICY
OWNERSHIP. The policy owner is the insured, unless someone other than the
insured has been named as the owner in the application. The policy owner has all
rights and options described in the policy.
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 policy
and have all your rights. If you don't name a contingent owner, your estate will
then own your interest in the policy at your death.
If there is more than one policy owner, we will treat the owners as joint
tenants with rights of survivorship unless the ownership designation provides
otherwise. We may require completion of additional forms. The owners must
exercise their rights and options jointly, except that any one of the owners may
reallocate the policy's investment base by phone if the owner provides the
personal identification number as well as the policy number. One policy owner
must be designated, in writing, to receive all notices, correspondence and tax
reporting to which policy owners are entitled under the policy.
CHANGING THE OWNER. During the insured's lifetime, you have the right to
transfer ownership of the policy. The new owner will have all rights and options
described in the policy. 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.
ASSIGNING THE POLICY AS COLLATERAL. You may assign the policy 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.
NAMING BENEFICIARIES. We will pay the primary beneficiary the death benefit
proceeds of the policy 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.
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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 you exercise certain policy rights and options. 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 the notice of the change.
CHANGING THE INSURED. Subject to certain requirements, you may request a change
of insured once each policy year. We must receive a written request signed by
you and the proposed new insured. 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 policy cannot be under a collateral assignment. If we approve
the request for change, insurance coverage on the new insured will take effect
on the policy processing date on or next following the date of approval,
provided the new insured is still living at that time and the policy is still in
force.
We will change the policy as follows on the effective date:
- the issue age will be the new insured's issue age (the new insured's age
as of the birthday nearest the policy date);
- the guaranteed maximum mortality rates will be those in effect on the
policy date for the new insured's issue age, sex and underwriting class;
- we will deduct a charge for changing the insured from the policy's
investment base on the effective date. The charge will equal $1.50 per
$1,000 of face amount with a minimum charge of $200 and a maximum of
$1,500;
- the variable insurance amount will reflect the change of insured; and
- the policy's issue date will be the effective date of the change.
We may also change the face amount or guarantee period on the effective date
depending on the new insured's age, sex and underwriting class.
MATURITY PROCEEDS. The maturity date is the policy anniversary nearest the
insured's 100th birthday. On the maturity date, we will pay you the net cash
surrender value, provided the insured is still living at that time and the
policy is in effect.
WHEN WE MAKE PAYMENTS. We generally pay death benefit proceeds, loans and net
cash surrender value on cancellation 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 Trust units or
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; or
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- 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 policy owners.
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, including surrenders.
SIGNATURE GUARANTEES. In order for you to make certain policy transactions and
changes, we may require that your signature be guaranteed. Your signature can
only be guaranteed by a national bank or trust company (not a savings bank or
federal savings and loan association), a member bank of the Federal Reserve
System or a member firm of a national securities exchange.
Currently, we may require a signature guarantee on:
- written requests for cash surrenders or policy loans;
- change of owner;
- multiple owner form; and
- telephone authorization forms if not submitted with your application.
PERSONAL IDENTIFICATION CODE. We will send you a four-digit personal
identification code shortly after the policy is placed in force and before the
end of the "free look" period. You must give this number when you call the
Service Center to get information about the policy, to make a loan (if an
authorization is on file), or to make other requests.
REALLOCATING THE INVESTMENT BASE. Policy owners can reallocate their investment
base either in writing in a form satisfactory to us or by telephone. If you
request the reallocation by telephone, you must give your personal
identification code as well as your policy number. 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, if all required forms
are on file with us, by telephone. Once our Service Center receives the
authorization, you can call the Service Center, give your policy number, name
and personal identification code, and tell us the loan amount and the divisions
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.
TELEPHONE REQUESTS. A telephone request for a loan or a reallocation received
before 4 p.m. (ET) generally will be processed the same day. A request received
at or after 4 p.m. (ET) will be processed the following business day. We reserve
the right to change procedures or discontinue the ability to make telephone
transfers.
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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 POLICY 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, guarantee period, or any other
policy benefit is wrong. We will pay what the premium would have bought for the
true age or sex assuming the same guarantee period.
INCONTESTABILITY. We will rely on statements made in the applications. Legally
they are considered representations, not warranties. We can contest the validity
of a policy 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.
We won't contest the validity of a policy 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 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 we received and accepted the payment.
PAYMENT IN CASE OF SUICIDE. If the insured commits suicide within two years from
the policy's issue date, we will pay only a limited death benefit. The benefit
will be equal to the amount of the payments made. If the insured commits suicide
within two years of any date we receive and accept an additional payment, any
amount of death benefit attributable to the additional payment will be limited
to the amount of the payment. The death benefit will be reduced by any loan
debt.
POLICY CHANGES -- APPLICABLE FEDERAL TAX LAW. To receive the tax treatment
accorded to life insurance under federal income tax law, the policy must qualify
initially and continue to qualify as life insurance under the Internal Revenue
Code or successor law. We reserve the right to make changes in the policy or its
riders or to make distributions from the policy to the extent necessary to
continue to qualify the policy as life insurance. Any changes will apply
uniformly to all policies that are affected and you will be given advance
written notice of such changes.
DIVIDENDS. Our variable life insurance policies are non-participating. This
means that they don't provide for dividends. Investment results under these
variable life policies are reflected in benefits.
STATE VARIATIONS. Certain policy features are subject to state variation. You
should read your policy carefully to determine whether any variations apply in
the state in which the policy is issued.
GROUP OR SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce the sales load,
first-year administrative expense, mortality cost, and the minimum payment, and
may modify underwriting classifications.
Group arrangements include those in which a trustee or an employer, for example,
purchases policies covering a group of individuals on a group basis. Sponsored
arrangements include those in which an employer allows us to sell policies to
its employees on an individual basis.
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Our costs for sales, administration, and mortality generally vary with the size
and stability of the group and the reasons the policies are purchased, among
other factors. We take all these factors into account when reducing charges. To
qualify for reduced charges, a group or sponsored arrangement must meet certain
requirements, including requirements for size and number of years in existence.
Group or sponsored arrangements that have been set up solely to buy policies 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
policy or additional payment is approved. Our current rules call for reductions
resulting in a sales load of not more than 3% of the premium. 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 policies offered by this Prospectus are based on mortality tables that
distinguish between men and women. As a result, the policy pays different
benefits to men and women of the same age. Employers and employee organizations
should check with their legal advisers before purchasing these policies.
Some states prohibit the use of actuarial tables that distinguish between men
and women in determining payments and policy benefits for policies issued on the
lives of their residents. (Previously, certain policies we issue on the life of
a Massachusetts resident were also issued on a unisex basis.) Therefore,
policies offered in this Prospectus to insure residents of Montana will have
payments and benefits which are based on actuarial tables that do not
differentiate on the basis of sex. You should consult the policy.
SELLING THE POLICIES
MLPF&S is the principal underwriter of the policy. 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 policies we issue, as well as variable life insurance and
variable annuity policies 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 Asset Management, the investment adviser for the
Series Fund and the Variable Series Funds.
We have companion sales agreements with MLPF&S and various Merrill Lynch Life
Agencies. Under these agreements, financial consultants of MLPF&S solicit
applications for the policies. The financial consultants are authorized under
applicable state regulations to sell variable life insurance as insurance
agents.
The maximum commission as a percentage of a premium payable to financial
consultants will, in no event, exceed 3.1%. Additional annual compensation of no
more than .13% of the investment base may also be paid to your financial
consultant. Commissions may be paid in the form of non-cash compensation,
subject to applicable regulatory requirements.
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The maximum commission we will pay to the applicable insurance agency to be used
to pay commissions to financial consultants is 7% of each premium paid and up to
.10% of the investment base.
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 $140,496, $190,553, and $273,924, respectively.
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 advisors should
be consulted for further information.
We haven't considered any applicable federal gift, estate or any state or other
tax laws. Of course, your own tax status or that of your beneficiary can affect
the tax consequences of ownership or receipt of distributions.
TAX STATUS OF THE POLICY. In order to qualify as a life insurance contract for
Federal tax purposes, this policy must meet the definition of a life insurance
contract which is set forth in Section 7702 of the Internal Revenue Code. The
Section 7702 definition can be met if a life insurance policy satisfies either
one of two tests that are contained in that section. The manner in which these
tests should be applied to certain innovative features of the policy offered by
this prospectus is not directly addressed by Section 7702 or the proposed
regulations issued thereunder. The presence of these innovative policy features,
and the absence of final regulations or any other pertinent interpretations of
the tests, thus creates some uncertainty about the application of the tests to
this policy.
Nevertheless, we believe that the policy offered by this prospectus qualifies as
a life insurance contract for Federal tax purposes. This means that:
- the death benefit should be fully excludable from the gross income of the
beneficiary under Section 101(a)(1) of the Internal Revenue Code; and
- the policyowner should not be considered in constructive receipt of the
policy's cash surrender value, including any increases, until actual
cancellation of the policy.
We have reserved the right to make changes in this policy if such changes are
deemed necessary to assure its qualification as a life insurance contract for
tax purposes (see "Policy Changes--Applicable Federal Tax Law").
DIVERSIFICATION REQUIREMENTS. IRC section 817(h) and the regulations under it
provide that separate account investments underlying a policy must be
"adequately diversified" for it to qualify as a life insurance policy 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 policies have been considered
for Federal income tax purposes to be the owners of the assets of the separate
account supporting their policies due to their ability to exercise investment
control over those assets. Where this is the case, the policy owners have been
currently taxed on income and gains attributable to the separate account assets.
There is little guidance in this area, and some features such as the flexibility
of an owner to allocate premium payments and transfer policy accumulation values
have not been explicitly addressed in published rulings. While we believe that
the policies do not give
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owners investment control over variable account assets, we reserve the right to
modify the policies as necessary to prevent an owner from being treated as the
owner of the variable account assets supporting the policy.
The following discussion assumes that the policy will qualify as a life
insurance policy for Federal income tax purposes.
POLICY LOANS. Under current law policy loans are considered indebtedness of a
policyowner and no part of a loan constitutes income to an owner. However, any
interest paid on policy loans will not be tax-deductible.
TAX TREATMENT OF POLICY LOANS AND OTHER DISTRIBUTIONS. Federal Tax Laws
establishes a class of life insurance policies referred to as modified endowment
contracts. A modified endowment contract is any contract which satisfies the
definition of life insurance set forth in Section 7702 of the Code but fails to
meet the 7-pay test. This test applies a cumulative limit on the amount of
premiums that can be paid into a contract each year in the first seven contract
years in order to avoid modified endowment contract treatment.
Loans from, as well as collateral assignments of, modified endowment contracts
will be treated as distributions to the policyowner. All pre-death distributions
(including loans, capitalized interest, surrenders, and collateral assignments)
from these policies will be included in gross income on an income first basis to
the extent of any income in the policy immediately before the distribution.
The law also imposes a 10% penalty tax on pre-death distributions (including
loans, collateral assignments, capitalized interest, and surrenders) from
modified endowment contracts to the extent they are included in income, unless
such amounts are distributed on or after the taxpayer attains age 59 1/2 because
the taxpayer is disabled, or as substantially equal periodic payments over the
taxpayer's life (or life expectancy) or over the joint lives (or joint life
expectancies) of the taxpayer and his beneficiary.
These provisions apply to policies entered into on or after June 21, 1988.
However, a policy that is not originally classified as a modified endowment
contract can become so classified if a material change is made in the policy at
any time. A material change includes, but is not limited to, a change in the
benefits that was not reflected in a prior 7-pay test computation. Certain
changes made to your policy may cause it to become subject to these provisions.
We believe that these changes include your contractual right to make certain
additional premium payments. You may choose not to exercise this right in order
to preserve your policy's current tax treatment.
If you do preserve your policy's current tax treatment, policy loans will be
considered your indebtedness and no part of a policy loan will constitute income
to you. However, a lapse of a policy with an outstanding loan will result in the
treatment of the loan cancellation (including the accrued interest) as a
distribution under the policy and may be taxable. Pre-death distributions will
generally not be included in gross income to the extent that the amount received
does not exceed your investment in the policy.
Any policy received in exchange for a modified endowment contract is considered
a modified endowment contract.
If there is any borrowing against your policy, whether a modified endowment
contract or not, the interest paid on loans is not tax deductible.
AGGREGATION OF MODIFIED ENDOWMENT CONTRACTS. In the case of a pre-death
distribution (including loans, collateral assignments, capitalized interest, and
surrenders) from a policy that is treated as a modified endowment contract, a
special aggregation requirement may apply for purposes of determining the amount
of the income on the contract. Specifically, if we or any of our affiliates
issue to the same policyowner more than one
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modified endowment contract during a calendar year, then for purposes of
measuring the income on the contract with respect to a distribution from any of
those contracts, the income on the contract for all such contracts will be
aggregated and attributed to that distribution.
TAXATION OF SINGLE PREMIUM IMMEDIATE ANNUITY RIDER. If a SPIAR was added to the
policy at issue to make the payments on the policy, a portion of each payment
from the annuity will be includible in income for federal tax purposes when
distributed. The amount of taxable income consists of the excess of the payment
amount over the exclusion amount. The exclusion amount is defined as the payment
amount multiplied by the ratio of the investment in the annuity rider to the
total amount expected to be paid by us under the annuity.
If payments cease because of death before the investment in the annuity rider
has been fully recovered, a deduction is allowed for the unrecovered amount.
Moreover, if the payments continue beyond the time at which the investment in
the annuity rider has been fully recovered, the full amount of each payment will
be includible in income. If the SPIAR is surrendered before all of the scheduled
payments have been made by us, the remaining income in the annuity rider will be
taxed just as in the case of life insurance policies.
Payments under an immediate annuity rider are not subject to the 10% penalty tax
that is generally applicable to distributions from annuities made before the
recipient attains age 59 1/2.
Other than the tax consequences described above, and assuming that the SPIAR is
not subjected to an assignment, gift or pledge, no income will be recognized to
the policyowners or beneficiary.
The SPIAR does not exist independently of a policy. Accordingly, there are tax
consequences if a policy with a SPIAR is assigned, transferred by gift, or
pledged. An owner of a policy with a SPIAR is advised to consult a tax advisor
prior to effecting an assignment, gift or pledge of the policy.
OTHER TRANSACTIONS. Changing the owner or the insured may have tax consequences.
Exchanging this policy for another involving the same insured will have no tax
consequences if there is no loan debt and no cash or other property is received,
according to Section 1035(a)(1) of the Internal Revenue Code. In addition,
exchanging this policy for more than one policy, or exchanging this policy and
one or more other policies for a single policy, in certain circumstances, may be
treated as an exchange under Section 1035, as long as all such policies involve
the same insured(s). Any new policy or policies would have to satisfy the 7-pay
test from the date of exchange to avoid characterization as a modified endowment
contract. In addition, any exchange for a new policy or policies may result in a
loss of grandfathering status for statutory changes made after the old policy or
policies were issued. A tax advisor should be consulted before effecting any
exchange, since even if an exchange is within Section 1035(a), the exchange may
have tax consequences other than immediate recognition of income.
In addition, the policy may be used in various arrangements, including
non-qualified deferred compensation or salary continuance plans, split dollar
insurance plans, executive bonus plans, retiree medical benefit plans and
others. The tax consequences of such plans may vary depending on the particular
facts and circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a policy in any arrangement the value of which depends
in part on its tax consequences, you should be sure to consult a qualified tax
advisor regarding the tax attributes of the particular arrangement.
OTHER TAXES. Federal estate and state and local estate, inheritance and other
taxes depend upon your or the beneficiary's specific situation.
OWNERSHIP OF POLICIES BY NON-NATURAL PERSONS. The above discussion of the tax
consequences arising from the purchase, ownership, and transfer of a policy has
assumed that the owner of the policy consists of one or more
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individuals. Organizations exempt from taxation under Section 501(a) of the Code
may be subject to additional or different tax consequences with respect to
transactions such as policy loans.
In recent years, moreover, Congress has adopted new rules relating to life
insurance owned by businesses. Any business should consult a tax advisor
regarding possible tax consequences associated with a policy prior to the
acquisition of this policy and also before entering into any subsequent changes
to or transactions under this policy.
POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative changes is
uncertain, there is always the possibility that the tax treatment of the policy
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 advisor with respect to legislative developments and
their effect on the policy.
We don't make any guarantee regarding the tax status of any policy or any
transaction regarding the policy.
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.
MERRILL LYNCH LIFE INSURANCE COMPANY'S INCOME TAXES
FEDERAL INCOME TAXES. We don't expect to incur any Federal income tax liability
that would be chargeable to the separate account. As a result we do not
currently deduct charges for Federal income taxes from the separate account.
Changes in Federal tax treatment of variable life insurance or in our tax status
may mean that we will have to pay Federal income taxes chargeable to the
separate account in the future. If we make a charge for taxes, we expect to
accumulate it daily and transfer it from each investment division and into the
general account monthly. We would keep any investment earnings on any tax
charges accumulated in an investment division.
Any tax charges we impose will not apply to policies issued in connection with
qualified pension arrangements.
STATE AND LOCAL INCOME TAXES. Under current laws, we may incur state and local
income taxes (in addition to premium taxes) in several states, although these
taxes are not significant. If the amount of these taxes changes substantially,
we may make charges to the separate account.
REINSURANCE
We have to reinsured some of the risks assumed under the policies.
ILLUSTRATIONS
ILLUSTRATIONS OF DEATH BENEFITS, INVESTMENT BASE, CASH SURRENDER VALUES AND
ACCUMULATED PAYMENTS
The tables below demonstrate the way in which the policy works. The tables
are based on the following ages, face amounts, payments and guarantee periods.
1. The illustration on page 42 is for a policy issued to a male age 5 in
the standard-simplified underwriting class with a single payment of $5,000, a
face amount of $40,057 and a guarantee period for life.
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2. The illustration on page 43 is for a policy issued to a male age 40 in
the standard-simplified underwriting class with a single payment of $10,000, a
face amount of $28,477 and a guarantee period for life.
3. The illustration on page 44 is for a policy issued to a male age 55 in
the standard-simplified underwriting class with a single payment of $10,000, a
face amount of $18,386 and a guarantee period for life.
4. The illustration on page 45 is for a policy issued to a female age 65 in
the standard-simplified underwriting class with a single payment of $10,000, a
face amount of $16,308 and a guarantee period for life.
5. The illustration on page 46 is for a policy issued to a male age 40 in
the standard-simplified underwriting class with a single payment of $10,000, a
face amount of $123,712 and a guarantee period of 15 years. This illustration
also demonstrates the effects of additional payments.
The tables show how the death benefit, investment base and cash surrender value
may vary over an extended period of time assuming hypothetical rates of return
(I.E., investment income and capital gains and losses, realized or unrealized)
equivalent to constant gross annual rates of 0%, 4%, 8% and 12%.
The death benefit, investment base and cash surrender value for a policy would
be different from those shown if the actual rates of return averaged 0%, 4%, 8%
and 12% over a period of years, but also fluctuated above or below those
averages for individual policy years.
The amounts shown for the death benefit, investment base and cash surrender
value as of the end of each policy year take into account the daily asset charge
in the Separate Account equivalent to .60% (annually at the beginning of the
year) of assets attributable to the policies at the beginning of the year.
The amounts shown in the tables also assume an additional charge of 0.58%. This
charge assumes that the investment base is allocated equally among all the
investment divisions and is based on the 1999 expenses (including monthly
advisory fees and operating expenses) for the Funds and the current trust
charge. This charge also reflects expenses reimbursements made in 1999 to
certain portfolios by the investment advisor to the respective portfolio. These
reimbursements amounted to .09%, .42%, .24%, and 1.58% of the average daily net
assets of the Natural Resources Portfolio, the Developing Capital Markets Focus
Fund, the Alliance Quasar Portfolio, and the Mercury V.I. U.S. Large Cap Fund,
respectively (See "Charges to Fund Assets"). Values illustrated would be lower
if these reimbursements had not been taken into account. The actual charge under
a policy for Fund expenses and the trust charge will depend on the actual
allocation of the investment base and may be higher or lower depending on how
the investment base is allocated.
Taking into account the .60% asset charge in the Separate Account and the .58%
charge described above, the gross annual rates of investment return of 0%, 4%,
8% and 12% correspond to net annual rates of -1.18%, 2.8%, 6.78% and 10.75%,
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 tax charges
that may be attributable to the Separate Account in the future. In order to
produce after tax returns of 0%, 4%, 8% and 12%, the Funds would have to earn a
sufficient amount in excess of 0% or 4% or 8% or 12% to cover any tax charges.
The second column of the tables shows the amount which would accumulate if an
amount equal to the single premium was invested to earn interest (after taxes)
at 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 and will assume that the proposed
insured is in a standard underwriting class. In addition, if a purchase is made,
a personal illustration will be included at the delivery of a policy reflecting
the insured's actual underwriting class.
41
<PAGE>
SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 5
$5,000 SINGLE PREMIUM FOR STANDARD-SIMPLIFIED UNDERWRITING RISK
FACE AMOUNT: $40,057 GUARANTEE PERIOD: FOR LIFE
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
TOTAL DEATH BENEFIT (2)
PREMIUMS ASSUMING HYPOTHETICAL GROSS (AFTER TAX)
PAID PLUS ANNUAL INVESTMENT RETURN OF
INTEREST AT 5% AS ----------------------------------------------
END OF POLICY YEAR PAYMENTS (1) OF END OF YEAR 0% 4% 8% 12%
- ------------------ ------------ ----------------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
1............................ $5,000 $ 5,250 $40,057 $40,057 $ 41,328 $ 42,980
2............................ 0 5,513 40,057 40,057 42,607 46,054
3............................ 0 5,788 40,057 40,057 43,897 49,289
4............................ 0 6,078 40,057 40,057 45,199 52,700
5............................ 0 6,381 40,057 40,057 46,514 56,298
6............................ 0 6,700 40,057 40,057 47,844 60,098
7............................ 0 7,036 40,057 40,057 49,191 64,114
8............................ 0 7,387 40,057 40,057 50,555 68,363
9............................ 0 7,757 40,057 40,057 51,939 72,863
10........................... 0 8,144 40,057 40,057 53,344 77,630
15........................... 0 10,395 40,057 40,057 60,877 106,418
20........................... 0 13,266 40,057 40,057 69,471 145,874
30........................... 0 21,610 40,057 40,057 90,452 273,963
60........................... 0 93,396 40,057 40,057 199,770 1,817,512
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR END OF YEAR
INVESTMENT BASE (2) CASH SURRENDER VALUE (2)
ASSUMING HYPOTHETICAL GROSS (AFTER TAX) ASSUMING HYPOTHETICAL GROSS (AFTER TAX)
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
------------------------------------------- -------------------------------------------
END OF POLICY YEAR 0% 4% 8% 12% 0% 4% 8% 12%
- ------------------ -------- -------- -------- ---------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1............................ $4,848 $5,046 $ 5,243 $ 5,440 $4,533 $4,731 $ 4,928 $ 5,125
2............................ 4,700 5,095 5,503 5,926 4,420 4,815 5,223 5,646
3............................ 4,555 5,147 5,780 6,460 4,310 4,902 5,535 6,215
4............................ 4,413 5,202 6,076 7,050 4,203 4,992 5,866 6,840
5............................ 4,275 5,261 6,393 7,700 4,100 5,086 6,218 7,525
6............................ 4,138 5,321 6,729 8,416 3,998 5,181 6,589 8,276
7............................ 4,002 5,382 7,085 9,202 3,897 5,277 6,980 9,097
8............................ 3,865 5,442 7,460 10,063 3,795 5,372 7,390 9,993
9............................ 3,725 5,498 7,851 11,000 3,690 5,463 7,816 10,965
10........................... 3,581 5,551 8,260 12,021 3,581 5,551 8,260 12,021
15........................... 2,986 5,947 10,803 18,885 2,986 5,947 10,803 18,885
20........................... 2,398 6,370 14,183 29,782 2,398 6,370 14,183 29,782
30........................... 1,395 7,502 25,194 76,308 1,395 7,502 25,194 76,308
60........................... 0 8,221 128,593 1,169,947 0 8,221 128,593 1,169,947
</TABLE>
- --------
(1) All payments are illustrated as if made at the beginning of the policy
year.
(2) Assumes no policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND
CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL GROSS RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER A PERIOD OF YEARS,
BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS.
NO REPRESENTATIONS CAN BE MADE BY US OR THE FUNDS OR THE TRUSTS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
42
<PAGE>
SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 40
$10,000 SINGLE PREMIUM FOR STANDARD-SIMPLIFIED UNDERWRITING RISK
FACE AMOUNT: $28,477 GUARANTEE PERIOD: FOR LIFE
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
TOTAL DEATH BENEFIT (2)
PREMIUMS ASSUMING HYPOTHETICAL GROSS (AFTER TAX)
PAID PLUS ANNUAL INVESTMENT RETURN OF
INTEREST AT 5% AS --------------------------------------------
END OF POLICY YEAR PAYMENTS (1) OF END OF YEAR 0% 4% 8% 12%
- ------------------ ------------ ----------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1.............................. $10,000 $10,500 $28,477 $28,477 $29,379 $ 30,553
2.............................. 0 11,025 28,477 28,477 30,287 32,734
3.............................. 0 11,576 28,477 28,477 31,203 35,032
4.............................. 0 12,155 28,477 28,477 32,127 37,453
5.............................. 0 12,763 28,477 28,477 33,061 40,008
6.............................. 0 13,401 28,477 28,477 34,006 42,707
7.............................. 0 14,071 28,477 28,477 34,962 45,561
8.............................. 0 14,775 28,477 28,477 35,931 48,580
9.............................. 0 15,513 28,477 28,477 36,915 51,777
10............................. 0 16,289 28,477 28,477 37,913 55,165
15............................. 0 20,789 28,477 28,477 43,267 75,620
20............................. 0 26,533 28,477 28,477 49,379 103,679
25............................. 0 33,864 28,477 28,477 56,359 142,176
30............................. 0 43,219 28,477 28,477 64,333 195,011
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR END OF YEAR
INVESTMENT BASE (2) CASH SURRENDER VALUE (2)
ASSUMING HYPOTHETICAL GROSS (AFTER TAX) ASSUMING HYPOTHETICAL GROSS (AFTER TAX)
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
----------------------------------------- -----------------------------------------
END OF POLICY YEAR 0% 4% 8% 12% 0% 4% 8% 12%
- ------------------ -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1............................... $9,738 $10,134 $10,530 $ 10,925 $9,108 $ 9,504 $ 9,900 $ 10,295
2............................... 9,473 10,267 11,087 11,938 8,913 9,707 10,527 11,378
3............................... 9,206 10,397 11,674 13,046 8,716 9,907 11,184 12,556
4............................... 8,936 10,526 12,291 14,258 8,516 10,106 11,871 13,838
5............................... 8,664 10,651 12,939 15,584 8,314 10,301 12,589 15,234
6............................... 8,388 10,774 13,620 17,033 8,108 10,494 13,340 16,753
7............................... 8,109 10,893 14,335 18,618 7,899 10,683 14,125 18,408
8............................... 7,826 11,010 15,087 20,349 7,686 10,870 14,947 20,209
9............................... 7,541 11,123 15,878 22,243 7,471 11,053 15,808 22,173
10.............................. 7,252 11,232 16,708 24,310 7,252 11,232 16,708 24,310
15.............................. 6,066 12,054 21,885 38,251 6,066 12,054 21,885 38,251
20.............................. 4,667 12,689 28,341 59,507 4,667 12,689 28,341 59,507
25.............................. 3,016 13,054 36,279 91,520 3,016 13,054 36,279 91,520
30.............................. 1,033 13,005 45,783 138,782 1,033 13,005 45,783 138,782
</TABLE>
- --------
(1) All payments are illustrated as if made at the beginning of the policy
year.
(2) Assumes no policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND
CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL GROSS RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER A PERIOD OF YEARS,
BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS.
NO REPRESENTATIONS CAN BE MADE BY US OR THE FUNDS OR THE TRUSTS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
43
<PAGE>
SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 55
$10,000 SINGLE PREMIUM FOR STANDARD-SIMPLIFIED UNDERWRITING RISK
FACE AMOUNT: $18,386 GUARANTEE PERIOD: FOR LIFE
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
TOTAL DEATH BENEFIT (2)
PREMIUMS ASSUMING HYPOTHETICAL GROSS (AFTER TAX)
PAID PLUS ANNUAL INVESTMENT RETURN OF
INTEREST AT 5% AS --------------------------------------------
END OF POLICY YEAR PAYMENTS (1) OF END OF YEAR 0% 4% 8% 12%
- ------------------ ------------ ----------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1.............................. $10,000 $10,500 $18,386 $18,386 $18,969 $ 19,727
2.............................. 0 11,025 18,386 18,386 19,556 21,139
3.............................. 0 11,576 18,386 18,386 20,149 22,626
4.............................. 0 12,155 18,386 18,386 20,748 24,194
5.............................. 0 12,763 18,386 18,386 21,353 25,848
6.............................. 0 13,401 18,386 18,386 21,965 27,597
7.............................. 0 14,071 18,386 18,386 22,585 29,445
8.............................. 0 14,775 18,386 18,386 23,213 31,401
9.............................. 0 15,513 18,386 18,386 23,850 33,472
10............................. 0 16,289 18,386 18,386 24,497 35,666
15............................. 0 20,789 18,386 18,386 27,963 48,921
20............................. 0 26,533 18,386 18,386 31,921 67,115
30............................. 0 43,219 18,386 18,386 41,614 126,423
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR END OF YEAR
INVESTMENT BASE (2) CASH SURRENDER VALUE (2)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
----------------------------------------- -----------------------------------------
END OF POLICY YEAR 0% 4% 8% 12% 0% 4% 8% 12%
- ------------------ -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1............................... $9,690 $10,085 $10,480 $ 10,874 $9,060 $ 9,455 $ 9,850 $ 10,244
2............................... 9,375 10,165 10,979 11,822 8,815 9,605 10,419 11,262
3............................... 9,056 10,239 11,499 12,853 8,566 9,749 11,009 12,363
4............................... 8,733 10,306 12,041 13,971 8,313 9,886 11,621 13,551
5............................... 8,405 10,368 12,606 15,186 8,055 10,018 12,256 14,836
6............................... 8,074 10,423 13,193 16,504 7,794 10,143 12,913 16,224
7............................... 7,737 10,471 13,803 17,932 7,527 10,261 13,593 17,722
8............................... 7,394 10,509 14,436 19,479 7,254 10,369 14,296 19,339
9............................... 7,045 10,538 15,092 21,152 6,975 10,468 15,022 21,082
10.............................. 6,688 10,556 15,769 22,959 6,688 10,556 15,769 22,959
15.............................. 5,135 10,839 19,900 34,815 5,135 10,839 19,900 34,815
20.............................. 3,363 10,827 24,754 52,046 3,363 10,827 24,754 52,046
30.............................. 0 9,539 36,435 110,689 0 9,539 36,435 110,689
</TABLE>
- --------
(1) All payments are illustrated as if made at the beginning of the policy
year.
(2) Assumes no policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND
CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL GROSS RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER A PERIOD OF YEARS,
BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS.
NO REPRESENTATIONS CAN BE MADE BY US OR THE FUNDS OR THE TRUSTS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
44
<PAGE>
SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
FEMALE ISSUE AGE 65
$10,000 SINGLE PREMIUM FOR STANDARD-SIMPLIFIED UNDERWRITING RISK
FACE AMOUNT: $16,308 GUARANTEE PERIOD: FOR LIFE
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
TOTAL DEATH BENEFIT (2)
PREMIUMS ASSUMING HYPOTHETICAL GROSS (AFTER TAX)
PAID PLUS ANNUAL INVESTMENT RETURN OF
INTEREST AT 5% AS --------------------------------------------
END OF POLICY YEAR PAYMENTS (1) OF END OF YEAR 0% 4% 8% 12%
- ------------------ ------------ ----------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1............................... $10,000 $10,500 $16,308 $16,308 $16,826 $17,499
2............................... 0 11,025 16,308 16,308 17,347 18,751
3............................... 0 11,576 16,308 16,308 17,873 20,071
4............................... 0 12,155 16,308 16,308 18,405 21,462
5............................... 0 12,763 16,308 16,308 18,941 22,930
6............................... 0 13,401 16,308 16,308 19,485 24,482
7............................... 0 14,071 16,308 16,308 20,035 26,122
8............................... 0 14,775 16,308 16,308 20,592 27,857
9............................... 0 15,513 16,308 16,308 21,157 29,695
10.............................. 0 16,289 16,308 16,308 21,731 31,642
15.............................. 0 20,789 16,308 16,308 24,807 43,405
20.............................. 0 26,533 16,308 16,308 28,321 59,559
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR END OF YEAR
INVESTMENT BASE (2) CASH SURRENDER VALUE (2)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
----------------------------------------- -----------------------------------------
END OF POLICY YEAR 0% 4% 8% 12% 0% 4% 8% 12%
- ------------------ -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1................................. $9,680 $10,076 $10,470 $10,864 $9,050 $ 9,446 $ 9,840 $10,234
2................................. 9,356 10,146 10,959 11,801 8,796 9,586 10,399 11,241
3................................. 9,029 10,211 11,469 12,818 8,539 9,721 10,979 12,328
4................................. 8,700 10,271 12,001 13,925 8,280 9,851 11,581 13,505
5................................. 8,369 10,327 12,557 15,128 8,019 9,977 12,207 14,778
6................................. 8,035 10,378 13,138 16,435 7,755 10,098 12,858 16,155
7................................. 7,697 10,423 13,742 17,854 7,487 10,213 13,532 17,644
8................................. 7,352 10,458 14,369 19,389 7,212 10,318 14,229 19,249
9................................. 6,999 10,481 15,014 21,045 6,929 10,411 14,944 20,975
10................................ 6,636 10,491 15,677 22,827 6,636 10,491 15,677 22,827
15................................ 5,011 10,683 19,646 34,375 5,011 10,683 19,646 34,375
20................................ 3,127 10,517 24,170 50,830 3,127 10,517 24,170 50,830
</TABLE>
- --------
(1) All payments are illustrated as if made at the beginning of the policy
year.
(2) Assumes no policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND
CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL GROSS RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER A PERIOD OF YEARS,
BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS.
NO REPRESENTATIONS CAN BE MADE BY US OR THE FUNDS OR THE TRUSTS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
45
<PAGE>
SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 40
$10,000 SINGLE PREMIUM FOR STANDARD-SIMPLIFIED UNDERWRITING RISK
FACE AMOUNT: $123,712 GUARANTEE PERIOD AT ISSUE: 15 YEARS
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
TOTAL DEATH BENEFIT (2)
PREMIUMS ASSUMING HYPOTHETICAL GROSS (AFTER TAX)
PAID PLUS ANNUAL INVESTMENT RETURN OF
INTEREST AT 5% AS --------------------------------------------
END OF POLICY YEAR PAYMENTS (1) OF END OF YEAR 0% 4% 8% 12%
- ------------------ ------------ ----------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1........................... $10,000 $ 10,500 $123,712 $123,712 $123,712 $123,712
2........................... 1,500 12,600 123,712 123,712 123,712 123,712
3........................... 1,500 14,805 123,712 123,712 123,712 123,712
4........................... 1,500 17,120 123,712 123,712 123,712 123,712
5........................... 1,500 19,551 123,712 123,712 123,712 123,712
6........................... 1,500 22,104 123,712 123,712 123,712 123,712
7........................... 1,500 24,784 123,712 123,712 123,712 123,712
8........................... 1,500 27,598 123,712 123,712 123,712 123,712
9........................... 1,500 30,553 123,712 123,712 123,712 123,712
10.......................... 1,500 33,656 123,712 123,712 123,712 123,712
15.......................... 1,500 51,657 123,712 123,712 123,712 139,259
20.......................... 1,500 74,632 123,712 123,712 123,712 207,626
25.......................... 1,500 103,954 123,712 123,712 131,827 299,503
30.......................... 0 132,675 * 123,712 150,627 411,064
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR END OF YEAR
INVESTMENT BASE (2) CASH SURRENDER VALUE (2)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
----------------------------------------- -----------------------------------------
END OF POLICY YEAR 0% 4% 8% 12% 0% 4% 8% 12%
- ------------------ -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1........................... $ 9,364 $ 9,755 $ 10,146 $ 10,538 $ 8,734 $ 9,125 $ 9,516 $ 9,908
2........................... 10,170 10,997 11,857 12,750 9,523 10,349 11,209 12,102
3........................... 10,923 12,229 13,641 15,158 10,268 11,574 12,985 14,503
4........................... 11,620 13,448 15,499 17,783 10,966 12,794 14,845 17,129
5........................... 12,257 14,649 17,435 20,647 11,614 14,006 16,793 20,004
6........................... 12,833 15,829 19,451 23,775 12,211 15,208 18,830 23,153
7........................... 13,349 16,989 21,556 27,200 12,759 16,398 20,966 26,610
8........................... 13,804 18,125 23,753 30,956 13,254 17,575 23,204 30,407
9........................... 14,200 19,239 26,054 35,086 13,701 18,740 25,555 34,587
10.......................... 14,526 20,318 28,455 39,626 14,088 19,879 28,016 39,187
15.......................... 15,416 25,459 42,679 70,880 14,977 25,020 42,240 70,441
20.......................... 13,922 28,811 60,889 119,607 13,483 28,373 60,451 119,168
25.......................... 9,022 28,857 85,297 193,232 8,584 28,418 84,859 192,793
30.......................... * 12,929 107,294 292,640 * 12,832 107,197 292,543
</TABLE>
- --------
(1) All payments are illustrated as if made at the beginning of the policy
year.
(2) Assumes no policy loan has been made.
* Additional payment will be required to prevent policy termination.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND
CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL GROSS RATES OF RETURN AVERAGED 0%, 4%, 8% AND 12% OVER A PERIOD OF YEARS,
BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS.
NO REPRESENTATIONS CAN BE MADE BY US OR THE FUNDS OR THE TRUSTS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
46
<PAGE>
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(S) WITH THE COMPANY
- ---- ----------------------------
<S> <C>
Anthony J. Vespa............. Chairman of the Board, President, and Chief Executive
Officer
Joseph E. Crowne, Jr......... Director, Senior Vice President, Chief Financial Officer,
Chief Actuary, and Treasurer
Barry G. Skolnick............ Director, Senior Vice President, General Counsel, and
Secretary
David M. Dunford............. Director, Senior Vice President, and Chief Investment
Officer
Gail R. Farkas............... Director and Senior Vice President
Robert J. Boucher............ Senior Vice President, Variable Life Administration
</TABLE>
Each director is elected to serve until the next annual meeting of shareholders
or until his or her successor is elected and shall have qualified. Each has held
various executive positions with insurance company subsidiaries of 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.
Mr. Crowne joined Merrill Lynch Life in June 1991.
Mr. Skolnick joined Merrill Lynch Life in November 1990. Since May 1992, he has
held the position of Assistant General Counsel of Merrill Lynch & Co., Inc. and
First Vice President 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.
Mr. Boucher joined Merrill Lynch Life in May 1992.
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 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 data processing, legal, actuarial, management, advertising
and other services to us, including services related to the Separate Account and
the policies. 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.
47
<PAGE>
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 policy 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 & Touche LLP, independent auditors, as stated in
their reports appearing herein, and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing. Deloitte & Touche LLP's principal business address is Two World
Financial Center, New York, New York 10281-1433.
Actuarial matters included in this Prospectus have been examined by Joseph E.
Crowne, Jr., F.S.A., our Chief Actuary and Chief Financial Officer, as stated in
his opinion filed as an exhibit to the registration statement.
LEGAL MATTERS
Our organization, its authority to issue the policy, and the validity of the
form of the policy have been passed upon by Barry G. Skolnick, our Senior Vice
President and General Counsel.
REGISTRATION STATEMENTS
We have filed a Registration statement with the Securities and Exchange
Commission under the Securities Act of 1933 and the Investment Company Act of
1940 that relate to the policy and its investment options. This Prospectus does
not contain all of the information in the registration statement 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 policies.
48
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Merrill Lynch Life Insurance Company:
We have audited the accompanying statements of assets and
liabilities of each of the divisions of Merrill Lynch Life
Variable Life Separate Account II, comprised of divisions
investing in the Money Reserve Portfolio, Intermediate Government
Bond Portfolio, Long-Term Corporate Bond Portfolio, Capital Stock
Portfolio, Growth Stock Portfolio, Multiple Strategy Portfolio,
High Yield Portfolio, Natural Resources Portfolio, Global
Strategy Portfolio, Balanced Portfolio, Global Utility Focus
Fund, International Equity Focus Fund, Global Bond Focus Fund,
Basic Value Focus Fund, Developing Capital Markets Focus Fund,
Special Value Focus Fund, Index 500 Fund, Capital Focus Fund
(commencement of operations July 21, 1999), Global Growth Focus
Fund (commencement of operations July 21,1999), International VIP
Portfolio (commencement of operations July 21, 1999), Mercury V.
I. US Large Cap (commencement of operations July 21, 1999),
Quasar Portfolio (commencement of operations July 21, 1999),
Premier Growth Portfolio, MFS Emerging Growth Series, MFS
Research Series, AIM V.I. Value Fund, AIM V.I. Capital
Appreciation Fund, 1997 Trust (matured on February 18, 1997),
1998 Trust (matured on February 17, 1998), 1999 Trust (matured on
February 16, 1999), 2000 Trust, 2001 Trust, 2002 Trust, 2003
Trust, 2004 Trust, 2005 Trust, 2006 Trust, 2007 Trust, 2008
Trust, 2009 Trust, 2010 Trust, 2011 Trust, 2013 Trust, 2014
Trust, 2019 Trust (commencement of operations July 21, 1999)
(collectively, the "Divisions"), as of December 31, 1999 and the
related statements of operations and changes in net assets for
each of the three years in the period then ended. These
financial statements are the responsibility of the management of
Merrill Lynch Life Insurance Company. Our responsibility is to
express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our
procedures included confirmation of mutual fund and unit
investment trust securities owned at December 31, 1999. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Divisions as of
December 31, 1999, the results of their operations and the
changes in their net assets for each of the three years in the
period then ended, in conformity with generally accepted
accounting principles.
February 14, 2000
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Divisions Investing In
---------------- --------------------------------------------------
Intermediate Long-Term
Money Government Corporate Capital
Reserve Bond Bond Stock
(In thousands) Portfolio Portfolio Portfolio Portfolio
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
Investments in Merrill Lynch Series Fund, Inc. (Note 1):
Money Reserve Portfolio, 378,112 shares
(Cost $378,112) $ 378,112 $ 0 $ 0 $ 0
Intermediate Government Bond Portfolio, 15,826 shares
(Cost $176,132) 0 165,381 0 0
Long-Term Corporate Bond Portfolio, 7,478 shares
(Cost $86,619) 0 0 80,987 0
Capital Stock Portfolio, 10,457 shares
(Cost $242,628) 0 0 0 307,742
---------------- ---------------- ---------------- ----------------
Total Assets 378,112 165,381 80,987 307,742
Liabilities
Due to (from) Merrill Lynch Life Insurance Company 28,695 (110) (61) 156
---------------- ---------------- ---------------- ----------------
Net Assets $ 349,417 $ 165,491 $ 81,048 $ 307,586
================ ================ ================ ================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-------------------------------------------------------------------
Growth Multiple High Natural
Stock Strategy Yield Resources
(In thousands) Portfolio Portfolio Portfolio Portfolio
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
Investments in Merrill Lynch Series Fund, Inc. (Note 1):
Growth Stock Portfolio, 11,669 shares
(Cost $355,352) $ 443,787 $ 0 $ 0 $ 0
Multiple Strategy Portfolio, 65,878 shares
(Cost $1,085,788) 0 1,198,324 0 0
High Yield Portfolio, 8,647 shares
(Cost $74,372) 0 0 64,417 0
Natural Resources Portfolio, 1,111 shares
(Cost $8,577) 0 0 0 9,219
---------------- ---------------- ---------------- ----------------
Total Assets 443,787 1,198,324 64,417 9,219
Liabilities
Due to (from) Merrill Lynch Life Insurance Company 13 169 (454) (37)
---------------- ---------------- ---------------- ----------------
Net Assets $ 443,774 $ 1,198,155 $ 64,871 $ 9,256
================ ================ ================ ================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-------------------------------------------------------------------
Global International
Global Utility Equity
Strategy Balanced Focus Focus
(In thousands) Portfolio Portfolio Fund Fund
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
Investments in Merrill Lynch Series Fund, Inc. (Note 1):
Global Strategy Portfolio, 9,297 shares
(Cost $142,246) $ 159,353 $ 0 $ 0 $ 0
Balanced Portfolio, 5,718 shares
(Cost $80,855) 0 84,394 0 0
Investments in Merrill Lynch Variable
Series Funds, Inc. (Note 1):
Global Utility Focus Fund, 421 shares
(Cost $6,767) 0 0 7,096 0
International Equity Focus Fund, 533 shares
(Cost $6,023) 0 0 0 7,457
---------------- ---------------- ---------------- ----------------
Total Assets 159,353 84,394 7,096 7,457
Liabilities
Due to (from) Merrill Lynch Life Insurance Company 60 12 1 1
---------------- ---------------- ---------------- ----------------
Net Assets $ 159,293 $ 84,382 $ 7,095 $ 7,456
================ ================ ================ ================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-------------------------------------------------------------------
Global Basic Developing Special
Bond Value Capital Value
Focus Focus Markets Focus Focus
(In thousands) Fund Fund Fund Fund
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable
Series Funds, Inc. (Note 1):
Global Bond Focus Fund, 37 shares
(Cost $360) $ 318 $ 0 $ 0 $ 0
Basic Value Focus Fund, 4,145 shares
(Cost $59,064) 0 56,365 0 0
Developing Capital Markets Focus Fund, 706 shares
(Cost $6,281) 0 0 7,297 0
Special Value Focus Fund, 409 shares
(Cost $8,008) 0 0 0 9,560
---------------- ---------------- ---------------- ----------------
Total Assets 318 56,365 7,297 9,560
Liabilities
Due to (from) Merrill Lynch Life Insurance Company 0 (5) 21 169
---------------- ---------------- ---------------- ----------------
Net Assets $ 318 $ 56,370 $ 7,276 $ 9,391
================ ================ ================ ================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-------------------------------------------------------------------
Global
Index Capital Growth International
500 Focus Focus VIP
(In thousands) Fund Fund Fund Portfolio
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable
Series Funds, Inc. (Note 1):
Index 500 Fund, 1,693 shares
(Cost $27,513) $ 31,705 $ 0 $ 0 $ 0
Capital Focus Fund, 44 shares
(Cost $450) 0 449 0 0
Global Growth Focus Fund, 147 shares
(Cost $1,865) 0 0 2,179 0
Investments in Hotchkis & Wiley Variable Trust (Note 1):
International VIP Portfolio, 199 shares
(Cost $2,222) 0 0 0 2,297
---------------- ---------------- ---------------- ----------------
Total Assets 31,705 449 2,179 2,297
Liabilities
Due to (from) Merrill Lynch Life Insurance Company (415) 0 0 (45)
---------------- ---------------- ---------------- ----------------
Net Assets $ 32,120 $ 449 $ 2,179 $ 2,342
================ ================ ================ ================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-------------------------------------------------------------------
Mercury MFS
V.I. U.S. Premier Emerging
Large Cap Quasar Growth Growth
(In thousands) Fund Portfolio Portfolio Series
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
Investments in Mercury Asset Management
V. I. Funds, Inc. (Note 1):
Mercury V. I. U. S. Large Cap Fund, 267 shares
(Cost $2,848) $ 3,212 $ 0 $ 0 $ 0
Investments in Alliance Variable Products
Series Fund, Inc. (Note 1):
Quasar Portfolio, 53 shares
(Cost $601) 0 691 0 0
Premier Growth Portfolio, 1,269 shares
(Cost $40,170) 0 0 51,330 0
Investments in MFS Variable Insurance Trust (Note 1):
MFS Emerging Growth Series, 599 shares
(Cost $13,867) 0 0 0 22,726
---------------- ---------------- ---------------- ----------------
Total Assets 3,212 691 51,330 22,726
Liabilities
Due to (from) Merrill Lynch Life Insurance Company 6 1 (283) 78
---------------- ---------------- ---------------- ----------------
Net Assets $ 3,206 $ 690 $ 51,613 $ 22,648
================ ================ ================ ================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-------------------------------------------------------------------
AIM
MFS AIM V.I. Capital
Research V.I. Value Appreciation 2000
(In thousands) Series Fund Fund Trust
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
Investments in MFS Variable Insurance Trust (Note 1):
MFS Research Series, 364 shares
(Cost $6,685) $ 8,499 $ 0 $ 0 $ 0
Investments in AIM Variable Insurance Funds, Inc. (Note 1):
AIM V.I. Value Fund, 765 shares
(Cost $20,854) 0 25,636 0 0
AIM V.I. Capital Appreciation Fund, 154 shares
(Cost $4,306) 0 0 5,463 0
Investments in the Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series A through L (Note 1):
2000 Trust, 19,827 trust units
(Cost $16,416) 0 0 0 19,750
---------------- ---------------- ---------------- ----------------
Total Assets 8,499 25,636 5,463 19,750
Liabilities
Due to (from) Merrill Lynch Life Insurance Company 20 (30) 1 5
---------------- ---------------- ---------------- ----------------
Net Assets $ 8,479 $ 25,666 $ 5,462 $ 19,745
================ ================ ================ ================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-------------------------------------------------------------------
2001 2002 2003 2004
(In thousands) Trust Trust Trust Trust
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
Investments in the Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series A through L (Note 1):
2001 Trust, 43,052 trust units
(Cost $25,072) $ 40,429 $ 0 $ 0 $ 0
2002 Trust, 9,426 trust units
(Cost $6,827) 0 8,286 0 0
2003 Trust, 43,740 trust units
(Cost $19,985) 0 0 34,881 0
2004 Trust, 9,074 trust units
(Cost $6,198) 0 0 0 6,981
---------------- ---------------- ---------------- ----------------
Total Assets 40,429 8,286 34,881 6,981
Liabilities
Due to (from) Merrill Lynch Life Insurance Company 27 2 14 2
---------------- ---------------- ---------------- ----------------
Net Assets $ 40,402 $ 8,284 $ 34,867 $ 6,979
================ ================ ================ ================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-------------------------------------------------------------------
2005 2006 2007 2008
(In thousands) Trust Trust Trust Trust
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
Investments in the Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series A through L (Note 1):
2005 Trust, 22,497 trust units
(Cost $11,650) $ 16,332 $ 0 $ 0 $ 0
2006 Trust, 8,244 trust units
(Cost $4,664) 0 5,701 0 0
2007 Trust, 16,279 trust units
(Cost $6,889) 0 0 10,483 0
2008 Trust, 28,876 trust units
(Cost $10,564) 0 0 0 16,989
---------------- ---------------- ---------------- ----------------
Total Assets 16,332 5,701 10,483 16,989
Liabilities
Due to (from) Merrill Lynch Life Insurance Company 11 1 2 3
---------------- ---------------- ---------------- ----------------
Net Assets $ 16,321 $ 5,700 $ 10,481 $ 16,986
================ ================ ================ ================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
--------------------------------------------------------------------
2009 2010 2011 2013
(In thousands) Trust Trust Trust Trust
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
Investments in the Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series A through L (Note 1):
2009 Trust, 14,839 trust units
(Cost $5,510) $ 8,159 $ 0 $ 0 $ 0
2010 Trust, 11,110 trust units
(Cost $5,838) 0 5,648 0 0
2011 Trust, 2,908 trust units
(Cost $1,150) 0 0 1,396 0
2013 Trust, 2,484 trust units
(Cost $874) 0 0 0 1,032
---------------- ---------------- ---------------- ----------------
Total Assets 8,159 5,648 1,396 1,032
Liabilities
Due to (from) Merrill Lynch Life Insurance Company 2 2 0 0
---------------- ---------------- ---------------- ----------------
Net Assets $ 8,157 $ 5,646 $ 1,396 $ 1,032
================ ================ ================ ================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
----------------------------------
2014 2019
(In thousands) Trust Trust
---------------- ----------------
<S> <C> <C>
Assets
Investments in the Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series A through L (Note 1):
2014 Trust, 37,663 trust units
(Cost $15,993) $ 14,424 $ 0
2019 Trust, 17,391 trust units
(Cost $4,888) 0 4,810
---------------- ----------------
Total Assets 14,424 4,810
Liabilities
Due to (from) Merrill Lynch Life Insurance Company 11 1
---------------- ----------------
Net Assets $ 14,413 $ 4,809
================ ================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Intermediate Long-Term
Money Government Corporate Capital
Reserve Bond Bond Stock
(In thousands) Portfolio Portfolio Portfolio Portfolio
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 19,119 $ 11,862 $ 6,112 $ 50,286
Mortality and Expense Charges (Note 3) (2,249) (1,015) (499) (1,531)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 16,870 10,847 5,613 48,755
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 0 (2,183) (1,070) 5,891
Net Change in Unrealized Appreciation
(Depreciation) During the Year 0 (12,023) (7,170) 19,330
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 0 (14,206) (8,240) 25,221
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 16,870 (3,359) (2,627) 73,976
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 408 68 163 263
Policy Loading, Net (Note 3) (652) (28) (29) (100)
Contract Owner Deaths (6,747) (3,109) (1,538) (2,479)
Contract Owner Terminations (25,469) (3,719) (2,680) (6,363)
Policy Loans, Net (4,436) (1,301) (953) (2,029)
Cost of Insurance (7,272) (3,240) (1,643) (4,220)
Policy Loan Processing Charges (1,081) (300) (188) (415)
Transfers Among Investment Divisions 8,033 (7,272) (387) (3,930)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (37,216) (18,901) (7,255) (19,273)
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets (20,346) (22,260) (9,882) 54,703
Net Assets Beginning of Period 369,763 187,751 90,930 252,883
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 349,417 $ 165,491 $ 81,048 $ 307,586
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Growth Multiple High Natural
Stock Strategy Yield Resources
(In thousands) Portfolio Portfolio Portfolio Portfolio
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 104,798 $ 201,590 $ 7,989 $ 328
Mortality and Expense Charges (Note 3) (2,079) (6,533) (412) (58)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 102,719 195,057 7,577 270
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 13,482 16,160 (4,326) (1,289)
Net Change in Unrealized Appreciation
(Depreciation) During the Year 5,943 (9,831) 230 3,070
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 19,425 6,329 (4,096) 1,781
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 122,144 201,386 3,481 2,051
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 388 263 46 8
Policy Loading, Net (Note 3) (29) (14) 7 1
Contract Owner Deaths (2,646) (18,753) (1,568) (102)
Contract Owner Terminations (6,886) (33,978) (2,310) (567)
Policy Loans, Net (3,021) (9,366) (880) 124
Cost of Insurance (5,300) (18,096) (1,248) (187)
Policy Loan Processing Charges (587) (1,667) (154) (29)
Transfers Among Investment Divisions 17,243 (42,896) (10,512) (883)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (838) (124,507) (16,619) (1,635)
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 121,306 76,879 (13,138) 416
Net Assets Beginning of Period 322,468 1,121,276 78,009 8,840
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 443,774 $ 1,198,155 $ 64,871 $ 9,256
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Global International
Global Utility Equity
Strategy Balanced Focus Focus
(In thousands) Portfolio Portfolio Fund Fund
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 18,526 $ 14,230 $ 873 $ 336
Mortality and Expense Charges (Note 3) (875) (518) (38) (40)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 17,651 13,712 835 296
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 1,918 570 259 991
Net Change in Unrealized Appreciation
(Depreciation) During the Year 8,119 (7,843) (369) 949
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 10,037 (7,273) (110) 1,940
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 27,688 6,439 725 2,236
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 180 157 2 15
Policy Loading, Net (Note 3) (59) (40) (6) 18
Contract Owner Deaths (1,316) (637) (56) (91)
Contract Owner Terminations (4,570) (2,703) (121) (216)
Policy Loans, Net (2,698) (479) (53) (44)
Cost of Insurance (2,271) (1,464) (115) (108)
Policy Loan Processing Charges (243) (130) (14) (14)
Transfers Among Investment Divisions (14,487) (3,638) 571 (924)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (25,464) (8,934) 208 (1,364)
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 2,224 (2,495) 933 872
Net Assets Beginning of Period 157,069 86,877 6,162 6,584
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 159,293 $ 84,382 $ 7,095 $ 7,456
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Global Basic Developing Special
Bond Value Capital Value
Focus Focus Markets Focus Focus
(In thousands) Fund Fund Fund Fund
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 42 $ 11,145 $ 100 $ 1,063
Mortality and Expense Charges (Note 3) (4) (282) (24) (44)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 38 10,863 76 1,019
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) (99) 95 183 (1,035)
Net Change in Unrealized Appreciation
(Depreciation) During the Year (46) (3,146) 1,827 2,266
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments (145) (3,051) 2,010 1,231
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (107) 7,812 2,086 2,250
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 0 34 4 9
Policy Loading, Net (Note 3) 0 (4) (1) 13
Contract Owner Deaths 0 (798) (34) (41)
Contract Owner Terminations 1 (1,251) (25) (340)
Policy Loans, Net (16) (265) (98) (46)
Cost of Insurance (3) (891) (71) (130)
Policy Loan Processing Charges 0 (94) (7) (14)
Transfers Among Investment Divisions (1,967) 12,522 2,846 (15)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (1,985) 9,253 2,614 (564)
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets (2,092) 17,065 4,700 1,686
Net Assets Beginning of Period 2,410 39,305 2,576 7,705
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 318 $ 56,370 $ 7,276 $ 9,391
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Global
Index Capital Growth International
500 Focus Focus VIP
(In thousands) Fund Fund Fund Portfolio
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 999 $ 11 $ 27 $ 12
Mortality and Expense Charges (Note 3) (155) (1) (2) (4)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 844 10 25 8
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 1,789 (7) 72 86
Net Change in Unrealized Appreciation
(Depreciation) During the Year 1,924 (1) 314 75
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 3,713 (8) 386 161
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 4,557 2 411 169
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 13 0 0 0
Policy Loading, Net (Note 3) (7) 0 0 3
Contract Owner Deaths (79) 0 0 0
Contract Owner Terminations (748) 0 0 0
Policy Loans, Net 397 0 (10) (9)
Cost of Insurance (453) (7) (17) (23)
Policy Loan Processing Charges (57) (1) (2) (2)
Transfers Among Investment Divisions 11,821 455 1,797 2,204
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 10,887 447 1,768 2,173
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 15,444 449 2,179 2,342
Net Assets Beginning of Period 16,676 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 32,120 $ 449 $ 2,179 $ 2,342
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Mercury MFS
V.I. U.S. Premier Emerging
Large Cap Quasar Growth Growth
(In thousands) Fund Portfolio Portfolio Series
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 19 $ 0 $ 496 $ 0
Mortality and Expense Charges (Note 3) (6) (1) (237) (68)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 13 (1) 259 (68)
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 70 5 2,734 705
Net Change in Unrealized Appreciation
(Depreciation) During the Year 364 90 7,695 8,004
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 434 95 10,429 8,709
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 447 94 10,688 8,641
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 0 0 3 14
Policy Loading, Net (Note 3) 0 0 (5) 1
Contract Owner Deaths 0 0 (248) (18)
Contract Owner Terminations 1 1 (584) (72)
Policy Loans, Net (36) (1) (730) (206)
Cost of Insurance (33) (6) (696) (191)
Policy Loan Processing Charges (4) (1) (81) (16)
Transfers Among Investment Divisions 2,831 603 21,100 7,664
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 2,759 596 18,759 7,176
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 3,206 690 29,447 15,817
Net Assets Beginning of Period 0 0 22,166 6,831
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 3,206 $ 690 $ 51,613 $ 22,648
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
AIM
MFS AIM V.I. Capital
Research V.I. Value Appreciation 1999
(In thousands) Series Fund Fund Trust
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 78 $ 413 $ 108 $ 0
Mortality and Expense Charges (Note 3) (42) (103) (17) (15)
Transaction Charges (Note 3) 0 0 0 (8)
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 36 310 91 (23)
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 227 576 206 4,332
Net Change in Unrealized Appreciation
(Depreciation) During the Year 1,284 3,600 996 (4,232)
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 1,511 4,176 1,202 100
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,547 4,486 1,293 77
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 8 13 4 0
Policy Loading, Net (Note 3) 0 (2) 2 (3)
Contract Owner Deaths (131) (51) (168) (134)
Contract Owner Terminations (156) (142) (193) (194)
Policy Loans, Net (32) 73 (144) (124)
Cost of Insurance (106) (306) (59) 68
Policy Loan Processing Charges (11) (29) (6) 17
Transfers Among Investment Divisions 2,250 13,189 2,735 (21,237)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 1,822 12,745 2,171 (21,607)
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 3,369 17,231 3,464 (21,530)
Net Assets Beginning of Period 5,110 8,435 1,998 21,530
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 8,479 $ 25,666 $ 5,462 $ 0
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
2000 2001 2002 2003
(In thousands) Trust Trust Trust Trust
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (Note 3) (111) (245) (54) (212)
Transaction Charges (Note 3) (68) (144) (29) (126)
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) (179) (389) (83) (338)
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 752 3,334 525 3,321
Net Change in Unrealized Appreciation
(Depreciation) During the Year 137 (2,069) (432) (3,999)
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 889 1,265 93 (678)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 710 876 10 (1,016)
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 0 4 0 21
Policy Loading, Net (Note 3) (4) (15) (8) (7)
Contract Owner Deaths (175) (193) (44) (668)
Contract Owner Terminations (914) (1,747) (188) (1,438)
Policy Loans, Net (188) (401) 45 (700)
Cost of Insurance (380) (739) (145) (586)
Policy Loan Processing Charges (31) (106) (10) (63)
Transfers Among Investment Divisions 1,243 (1,377) (362) (1,153)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (449) (4,574) (712) (4,594)
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 261 (3,698) (702) (5,610)
Net Assets Beginning of Period 19,484 44,100 8,986 40,477
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 19,745 $ 40,402 $ 8,284 $ 34,867
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
2004 2005 2006 2007
(In thousands) Trust Trust Trust Trust
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (Note 3) (40) (98) (37) (69)
Transaction Charges (Note 3) (24) (61) (20) (40)
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) (64) (159) (57) (109)
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 159 1,723 66 1,108
Net Change in Unrealized Appreciation
(Depreciation) During the Year (320) (2,506) (437) (2,043)
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments (161) (783) (371) (935)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (225) (942) (428) (1,044)
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 0 3 0 0
Policy Loading, Net (Note 3) 9 17 8 6
Contract Owner Deaths (67) (191) 0 (143)
Contract Owner Terminations 1 (1,105) (18) (473)
Policy Loans, Net (129) (125) (121) (1)
Cost of Insurance (118) (304) (113) (211)
Policy Loan Processing Charges (8) (30) (14) (19)
Transfers Among Investment Divisions 1,347 (1,062) 163 (716)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 1,035 (2,797) (95) (1,557)
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 810 (3,739) (523) (2,601)
Net Assets Beginning of Period 6,169 20,060 6,223 13,082
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 6,979 $ 16,321 $ 5,700 $ 10,481
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
------------------------------------------------------------------------------------
2008 2009 2010 2011
(In thousands) Trust Trust Trust Trust
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (Note 3) (111) (50) (41) (9)
Transaction Charges (Note 3) (65) (30) (23) (5)
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) (176) (80) (64) (14)
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 1,547 558 583 113
Net Change in Unrealized Appreciation
(Depreciation) During the Year (3,348) (1,472) (1,371) (302)
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments (1,801) (914) (788) (189)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (1,977) (994) (852) (203)
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 0 0 3 0
Policy Loading, Net (Note 3) 6 (7) 8 (2)
Contract Owner Deaths (121) (216) (82) 0
Contract Owner Terminations (781) (61) (413) (7)
Policy Loans, Net (4) (93) 71 (65)
Cost of Insurance (330) (191) (104) (29)
Policy Loan Processing Charges (37) (28) (8) (3)
Transfers Among Investment Divisions (905) 435 (1,000) (103)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (2,172) (161) (1,525) (209)
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets (4,149) (1,155) (2,377) (412)
Net Assets Beginning of Period 21,135 9,312 8,023 1,808
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 16,986 $ 8,157 $ 5,646 $ 1,396
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
---------------------------------------------------------------
2013 2014 2019
(In thousands) Trust Trust Trust
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0 $ 0
Mortality and Expense Charges (Note 3) (8) (114) (7)
Transaction Charges (Note 3) (4) (69) (4)
-------------------- -------------------- --------------------
Net Investment Income (Loss) (12) (183) (11)
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 51 (582) 130
Net Change in Unrealized Appreciation
(Depreciation) During the Year (214) (2,223) (78)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments (163) (2,805) 52
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (175) (2,988) 41
-------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 0 4 0
Policy Loading, Net (Note 3) 8 255 (39)
Contract Owner Deaths 0 (39) 0
Contract Owner Terminations (8) (402) (1)
Policy Loans, Net (84) (119) (10)
Cost of Insurance (19) (404) (46)
Policy Loan Processing Charges (3) (57) (8)
Transfers Among Investment Divisions (50) (1,048) 4,872
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (156) (1,810) 4,768
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets (331) (4,798) 4,809
Net Assets Beginning of Period 1,363 19,211 0
-------------------- -------------------- --------------------
Net Assets End of Period $ 1,032 $ 14,413 $ 4,809
==================== ==================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Intermediate Long-Term
Money Government Corporate Capital
Reserve Bond Bond Stock
(In thousands) Portfolio Portfolio Portfolio Portfolio
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 20,678 $ 11,475 $ 5,926 $ 30,927
Mortality and Expense Charges (Note 3) (2,250) (1,031) (525) (1,436)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 18,428 10,444 5,401 29,491
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 0 (600) (269) 1,706
Net Change in Unrealized Appreciation
(Depreciation) During the Year 0 4,453 1,724 1,570
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 0 3,853 1,455 3,276
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 18,428 14,297 6,856 32,767
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 556 115 164 470
Policy Loading, Net (Note 3) (244) (89) (86) (128)
Contract Owner Deaths (4,820) (4,442) (3,529) (4,111)
Contract Owner Terminations (23,048) (4,917) (3,086) (7,273)
Policy Loans, Net (2,913) (1,695) (1,194) (3,436)
Cost of Insurance (7,458) (3,213) (1,647) (3,933)
Policy Loan Processing Charges (1,183) (308) (188) (382)
Transfers Among Investment Divisions 38,073 12,218 803 (4,838)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (1,037) (2,331) (8,763) (23,631)
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 17,391 11,966 (1,907) 9,136
Net Assets Beginning of Period 352,372 175,785 92,837 243,747
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 369,763 $ 187,751 $ 90,930 $ 252,883
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Growth Multiple High Natural
Stock Strategy Yield Resources
(In thousands) Portfolio Portfolio Portfolio Portfolio
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 46,257 $ 151,200 $ 8,761 $ 296
Mortality and Expense Charges (Note 3) (1,588) (6,531) (527) (65)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 44,669 144,669 8,234 231
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 11,955 11,190 (974) (861)
Net Change in Unrealized Appreciation
(Depreciation) During the Year 30,828 (48,158) (11,946) (895)
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 42,783 (36,968) (12,920) (1,756)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 87,452 107,701 (4,686) (1,525)
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 683 573 75 (32)
Policy Loading, Net (Note 3) (123) (281) (37) (11)
Contract Owner Deaths (1,741) (13,333) (1,716) (141)
Contract Owner Terminations (7,584) (26,961) (2,527) (202)
Policy Loans, Net (5,838) (16,639) (555) (59)
Cost of Insurance (4,167) (18,102) (1,569) (195)
Policy Loan Processing Charges (490) (1,670) (177) (27)
Transfers Among Investment Divisions 12,016 (24,177) (5,916) (2,151)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (7,244) (100,590) (12,422) (2,818)
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 80,208 7,111 (17,108) (4,343)
Net Assets Beginning of Period 242,260 1,114,165 95,117 13,183
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 322,468 $ 1,121,276 $ 78,009 $ 8,840
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Global International
Global Utility Equity
Strategy Balanced Focus Focus
(In thousands) Portfolio Portfolio Fund Fund
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 28,859 $ 7,797 $ 369 $ 634
Mortality and Expense Charges (Note 3) (1,010) (504) (31) (44)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 27,849 7,293 338 590
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 227 814 576 (1,340)
Net Change in Unrealized Appreciation
(Depreciation) During the Year (14,358) 2,026 144 1,244
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments (14,131) 2,840 720 (96)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 13,718 10,133 1,058 494
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 329 224 (118) 35
Policy Loading, Net (Note 3) (124) (63) (2) 46
Contract Owner Deaths (2,672) (714) (2) (4)
Contract Owner Terminations (4,527) (2,600) (261) (145)
Policy Loans, Net 94 (977) (79) (85)
Cost of Insurance (2,703) (1,385) (80) (103)
Policy Loan Processing Charges (303) (133) (10) (12)
Transfers Among Investment Divisions (25,004) 1,569 611 (888)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (34,910) (4,079) 59 (1,156)
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets (21,192) 6,054 1,117 (662)
Net Assets Beginning of Period 178,261 80,823 5,045 7,246
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 157,069 $ 86,877 $ 6,162 $ 6,584
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Global Basic Developing Special
Bond Value Capital Value
Focus Focus Markets Focus Focus
(In thousands) Fund Fund Fund Fund
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 57 $ 4,934 $ 68 $ 1,819
Mortality and Expense Charges (Note 3) (7) (229) (23) (52)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 50 4,705 45 1,767
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 46 (30) (1,573) (2,087)
Net Change in Unrealized Appreciation
(Depreciation) During the Year (1) (2,209) 164 (333)
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 45 (2,239) (1,409) (2,420)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 95 2,466 (1,364) (653)
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 0 71 16 66
Policy Loading, Net (Note 3) (1) (69) (3) (4)
Contract Owner Deaths 0 (122) (6) (60)
Contract Owner Terminations 0 (983) (117) (495)
Policy Loans, Net (29) (393) (15) (165)
Cost of Insurance (22) (681) (33) (147)
Policy Loan Processing Charges (2) (72) (1) (15)
Transfers Among Investment Divisions 1,905 7,414 (1,576) 1,483
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 1,851 5,165 (1,735) 663
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 1,946 7,631 (3,099) 10
Net Assets Beginning of Period 464 31,674 5,675 7,695
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 2,410 $ 39,305 $ 2,576 $ 7,705
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
MFS
Index Premier Emerging MFS
500 Growth Growth Research
(In thousands) Fund Portfolio Series Series
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 515 $ 12 $ 41 $ 86
Mortality and Expense Charges (Note 3) (83) (80) (31) (25)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 432 (68) 10 61
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 580 1,424 444 235
Net Change in Unrealized Appreciation
(Depreciation) During the Year 1,864 3,488 949 461
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 2,444 4,912 1,393 696
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 2,876 4,844 1,403 757
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 11 35 41 6
Policy Loading, Net (Note 3) (5) (5) 0 (1)
Contract Owner Deaths (135) 0 0 0
Contract Owner Terminations (60) (203) (105) 168
Policy Loans, Net (441) (23) (172) (104)
Cost of Insurance (247) (283) (85) (63)
Policy Loan Processing Charges (33) (41) (8) (5)
Transfers Among Investment Divisions 5,813 13,107 3,097 1,705
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 4,903 12,587 2,768 1,706
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 7,779 17,431 4,171 2,463
Net Assets Beginning of Period 8,897 4,735 2,660 2,647
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 16,676 $ 22,166 $ 6,831 $ 5,110
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
AIM
AIM V.I. Capital
V.I. Value Appreciation 1998 1999
(In thousands) Fund Fund Trust Trust
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 386 $ 53 $ 0 $ 0
Mortality and Expense Charges (Note 3) (36) (10) (32) (126)
Transaction Charges (Note 3) 0 0 (17) (73)
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 350 43 (49) (199)
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 140 (81) 13,149 520
Net Change in Unrealized Appreciation
(Depreciation) During the Year 1,226 281 (12,887) 700
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 1,366 200 262 1,220
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,716 243 213 1,021
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 12 5 23 4
Policy Loading, Net (Note 3) (3) (1) (4) (19)
Contract Owner Deaths 0 0 (131) (87)
Contract Owner Terminations (140) 1 (619) (198)
Policy Loans, Net (65) 3 36 (438)
Cost of Insurance (99) (29) 116 (340)
Policy Loan Processing Charges (8) (3) 28 (15)
Transfers Among Investment Divisions 3,514 407 (43,723) 1,662
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 3,211 383 (44,274) 569
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 4,927 626 (44,061) 1,590
Net Assets Beginning of Period 3,508 1,372 44,061 19,940
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 8,435 $ 1,998 $ 0 $ 21,530
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
2000 2001 2002 2003
(In thousands) Trust Trust Trust Trust
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (Note 3) (114) (255) (55) (224)
Transaction Charges (Note 3) (71) (151) (31) (136)
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) (185) (406) (86) (360)
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 1,154 2,901 415 2,433
Net Change in Unrealized Appreciation
(Depreciation) During the Year 258 560 389 1,825
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 1,412 3,461 804 4,258
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,227 3,055 718 3,898
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 3 28 16 25
Policy Loading, Net (Note 3) (7) (29) (9) (18)
Contract Owner Deaths (72) (300) (121) (306)
Contract Owner Terminations (237) (689) (141) (849)
Policy Loans, Net (419) (452) (79) (443)
Cost of Insurance (448) (726) (134) (575)
Policy Loan Processing Charges (63) (91) (8) (61)
Transfers Among Investment Divisions 1,197 (979) 537 (1,214)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (46) (3,238) 61 (3,441)
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 1,181 (183) 779 457
Net Assets Beginning of Period 18,303 44,283 8,207 40,020
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 19,484 $ 44,100 $ 8,986 $ 40,477
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
2004 2005 2006 2007
(In thousands) Trust Trust Trust Trust
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (Note 3) (35) (108) (39) (71)
Transaction Charges (Note 3) (21) (67) (21) (42)
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) (56) (175) (60) (113)
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 358 1,198 348 500
Net Change in Unrealized Appreciation
(Depreciation) During the Year 305 1,147 469 1,217
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 663 2,345 817 1,717
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 607 2,170 757 1,604
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 0 7 4 (1)
Policy Loading, Net (Note 3) (3) (5) (6) (5)
Contract Owner Deaths (4) (524) (72) (97)
Contract Owner Terminations (59) (567) (380) (49)
Policy Loans, Net (269) 224 (45) (61)
Cost of Insurance (82) (322) (103) (192)
Policy Loan Processing Charges (5) (32) (14) (18)
Transfers Among Investment Divisions (4) (66) 3 (12)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (426) (1,285) (613) (435)
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 181 885 144 1,169
Net Assets Beginning of Period 5,988 19,175 6,079 11,913
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 6,169 $ 20,060 $ 6,223 $ 13,082
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
2008 2009 2010 2011
(In thousands) Trust Trust Trust Trust
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (Note 3) (123) (52) (46) (9)
Transaction Charges (Note 3) (72) (31) (26) (6)
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) (195) (83) (72) (15)
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 2,393 712 516 49
Net Change in Unrealized Appreciation
(Depreciation) During the Year 670 677 598 196
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 3,063 1,389 1,114 245
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 2,868 1,306 1,042 230
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 16 7 6 0
Policy Loading, Net (Note 3) (12) (12) 17 (3)
Contract Owner Deaths (327) (69) (77) 0
Contract Owner Terminations (1,453) (68) (335) (15)
Policy Loans, Net (226) (147) (210) 5
Cost of Insurance (335) (138) (109) (24)
Policy Loan Processing Charges (39) (22) (10) (3)
Transfers Among Investment Divisions (41) (522) 448 180
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (2,417) (971) (270) 140
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 451 335 772 370
Net Assets Beginning of Period 20,684 8,977 7,251 1,438
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 21,135 $ 9,312 $ 8,023 $ 1,808
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
------------------------------------------
2013 2014
(In thousands) Trust Trust
-------------------- --------------------
<S> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0
Mortality and Expense Charges (Note 3) (8) (95)
Transaction Charges (Note 3) (4) (56)
-------------------- --------------------
Net Investment Income (Loss) (12) (151)
-------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 32 4,032
Net Change in Unrealized Appreciation
(Depreciation) During the Year 145 (1,787)
-------------------- --------------------
Net Gain (Loss) on Investments 177 2,245
-------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 165 2,094
-------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 4 5
Policy Loading, Net (Note 3) (2) 24
Contract Owner Deaths 0 (85)
Contract Owner Terminations (15) 39
Policy Loans, Net (5) (381)
Cost of Insurance (20) (294)
Policy Loan Processing Charges (5) (43)
Transfers Among Investment Divisions 140 3,209
-------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 97 2,474
-------------------- --------------------
Total Increase (Decrease) in Net Assets 262 4,568
Net Assets Beginning of Period 1,101 14,643
-------------------- --------------------
Net Assets End of Period $ 1,363 $ 19,211
==================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Divisions Investing In
------------------------------------------------------------------------------------
Intermediate Long-Term
Money Government Corporate Capital
Reserve Bond Bond Stock
(In thousands) Portfolio Portfolio Portfolio Portfolio
-------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 21,214 $ 11,595 $ 6,088 $ 12,675
Mortality and Expense Charges (Note 3) (2,299) (992) (520) (1,388)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- --------------------- --------------------
Net Investment Income (Loss) 18,915 10,603 5,568 11,287
-------------------- -------------------- --------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 0 (535) (202) 2,726
Net Change in Unrealized Appreciation
(Depreciation) During the Year 0 2,841 1,668 32,160
-------------------- -------------------- --------------------- --------------------
Net Gain (Loss) on Investments 0 2,306 1,466 34,886
-------------------- -------------------- --------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 18,915 12,909 7,034 46,173
-------------------- -------------------- --------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 923 177 157 706
Policy Loading, Net (Note 3) (1,053) (320) (204) (401)
Contract Owner Deaths (8,941) (2,646) (2,101) (2,898)
Contract Owner Terminations (34,271) (3,913) (3,195) (5,970)
Policy Loans, Net (6,765) (2,242) (445) (3,110)
Cost of Insurance (7,238) (3,041) (1,618) (3,460)
Policy Loan Processing Charges (1,191) (319) (199) (372)
Transfers Among Investment Divisions (4,942) (3,629) 2,574 (3,680)
-------------------- -------------------- --------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (63,478) (15,933) (5,031) (19,185)
-------------------- -------------------- --------------------- --------------------
Total Increase (Decrease) in Net Assets (44,563) (3,024) 2,003 26,988
Net Assets Beginning of Period 396,935 178,809 90,834 216,759
-------------------- -------------------- --------------------- --------------------
Net Assets End of Period $ 352,372 $ 175,785 $ 92,837 $ 243,747
==================== ==================== ===================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
------------------------------------------------------------------------------------
Growth Multiple High Natural
Stock Strategy Yield Resources
(In thousands) Portfolio Portfolio Portfolio Portfolio
-------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 20,623 $ 71,122 $ 9,066 $ 147
Mortality and Expense Charges (Note 3) (1,253) (6,354) (550) (106)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- --------------------- --------------------
Net Investment Income (Loss) 19,370 64,768 8,516 41
-------------------- -------------------- --------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 14,671 12,219 256 1,250
Net Change in Unrealized Appreciation
(Depreciation) During the Year 24,491 105,219 279 (2,951)
-------------------- -------------------- --------------------- --------------------
Net Gain (Loss) on Investments 39,162 117,438 535 (1,701)
-------------------- -------------------- --------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 58,532 182,206 9,051 (1,660)
-------------------- -------------------- --------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 665 889 135 39
Policy Loading, Net (Note 3) (365) (2,172) (198) (48)
Contract Owner Deaths (592) (16,781) (945) (43)
Contract Owner Terminations (6,065) (26,196) (2,466) (3,005)
Policy Loans, Net (3,209) (12,909) (1,158) (138)
Cost of Insurance (3,121) (16,311) (1,585) (330)
Policy Loan Processing Charges (428) (1,652) (198) (45)
Transfers Among Investment Divisions 17,777 (9,715) 3,211 (1,207)
-------------------- -------------------- --------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 4,662 (84,847) (3,204) (4,777)
-------------------- -------------------- --------------------- --------------------
Total Increase (Decrease) in Net Assets 63,194 97,359 5,847 (6,437)
Net Assets Beginning of Period 179,066 1,016,806 89,270 19,620
-------------------- -------------------- --------------------- --------------------
Net Assets End of Period $ 242,260 $ 1,114,165 $ 95,117 $ 13,183
==================== ==================== ===================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
------------------------------------------------------------------------------------
Global International
Global Utility Equity
Strategy Balanced Focus Focus
(In thousands) Portfolio Portfolio Fund Fund
-------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 12,186 $ 9,159 $ 99 $ 149
Mortality and Expense Charges (Note 3) (1,101) (473) (19) (49)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- --------------------- --------------------
Net Investment Income (Loss) 11,085 8,686 80 100
-------------------- -------------------- --------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 2,989 856 281 325
Net Change in Unrealized Appreciation
(Depreciation) During the Year 5,049 2,241 464 (842)
-------------------- -------------------- --------------------- --------------------
Net Gain (Loss) on Investments 8,038 3,097 745 (517)
-------------------- -------------------- --------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 19,123 11,783 825 (417)
-------------------- -------------------- --------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 407 431 0 54
Policy Loading, Net (Note 3) (419) (171) (8) (22)
Contract Owner Deaths (1,803) (309) (114) (30)
Contract Owner Terminations (3,799) (2,906) (113) (287)
Policy Loans, Net (2,502) (1,018) (28) (202)
Cost of Insurance (2,796) (1,279) (64) (129)
Policy Loan Processing Charges (343) (137) (10) (24)
Transfers Among Investment Divisions (3,610) (1,500) 3,086 2,763
-------------------- -------------------- --------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (14,865) (6,889) 2,749 2,123
-------------------- -------------------- --------------------- --------------------
Total Increase (Decrease) in Net Assets 4,258 4,894 3,574 1,706
Net Assets Beginning of Period 174,003 75,929 1,471 5,540
-------------------- -------------------- --------------------- --------------------
Net Assets End of Period $ 178,261 $ 80,823 $ 5,045 $ 7,246
==================== ==================== ===================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
------------------------------------------------------------------------------------
Global Basic Developing Special
Bond Value Capital Value
Focus Focus Markets Focus Focus
See notes to financial statements Fund Fund Fund Fund
-------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 9 $ 1,612 $ 98 $ 239
Mortality and Expense Charges (Note 3) 0 (153) (39) (43)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- --------------------- --------------------
Net Investment Income (Loss) 9 1,459 59 196
-------------------- -------------------- --------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 1 728 459 1,108
Net Change in Unrealized Appreciation
(Depreciation) During the Year 5 1,987 (1,006) (577)
-------------------- -------------------- --------------------- --------------------
Net Gain (Loss) on Investments 6 2,715 (547) 531
-------------------- -------------------- --------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 15 4,174 (488) 727
-------------------- -------------------- --------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 0 62 35 15
Policy Loading, Net (Note 3) 0 (49) (15) (17)
Contract Owner Deaths 0 (114) (17) (43)
Contract Owner Terminations 0 (754) (147) (321)
Policy Loans, Net (44) 36 161 (133)
Cost of Insurance (6) (485) (102) (127)
Policy Loan Processing Charges (1) (63) (18) (18)
Transfers Among Investment Divisions 500 14,257 1,972 3,054
-------------------- -------------------- --------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 449 12,890 1,869 2,410
-------------------- -------------------- --------------------- --------------------
Total Increase (Decrease) in Net Assets 464 17,064 1,381 3,137
Net Assets Beginning of Period 0 14,610 4,294 4,558
-------------------- -------------------- --------------------- --------------------
Net Assets End of Period $ 464 $ 31,674 $ 5,675 $ 7,695
==================== ==================== ===================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
------------------------------------------------------------------------------------
MFS
Index Premier Emerging MFS
500 Growth Growth Research
(In thousands) Fund Portfolio Series Series
-------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 2 $ 0 $ 0
Mortality and Expense Charges (Note 3) (26) (11) (8) (7)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- --------------------- --------------------
Net Investment Income (Loss) (26) (9) (8) (7)
-------------------- -------------------- --------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 241 197 152 15
Net Change in Unrealized Appreciation
(Depreciation) During the Year 403 (24) (94) 68
-------------------- -------------------- --------------------- --------------------
Net Gain (Loss) on Investments 644 173 58 83
-------------------- -------------------- --------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 618 164 50 76
-------------------- -------------------- --------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 6 8 5 0
Policy Loading, Net (Note 3) (14) (3) (2) (1)
Contract Owner Deaths 0 0 0 0
Contract Owner Terminations (15) 24 (88) (6)
Policy Loans, Net (1,123) 12 (97) (29)
Cost of Insurance (115) (56) (31) (28)
Policy Loan Processing Charges (24) (7) (4) (3)
Transfers Among Investment Divisions 9,564 4,593 2,827 2,638
-------------------- -------------------- --------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 8,279 4,571 2,610 2,571
-------------------- -------------------- --------------------- --------------------
Total Increase (Decrease) in Net Assets 8,897 4,735 2,660 2,647
Net Assets Beginning of Period 0 0 0 0
-------------------- -------------------- --------------------- --------------------
Net Assets End of Period $ 8,897 $ 4,735 $ 2,660 $ 2,647
==================== ==================== ===================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
------------------------------------------------------------------------------------
AIM
AIM V.I. Capital
V.I. Value Appreciation 1997 1998
(In thousands) Fund Fund Trust Trust
-------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 127 $ 18 $ 0 $ 0
Mortality and Expense Charges (Note 3) (9) (5) (32) (278)
Transaction Charges (Note 3) 0 0 (17) (161)
-------------------- -------------------- --------------------- --------------------
Net Investment Income (Loss) 118 13 (49) (439)
-------------------- -------------------- --------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 29 101 11,566 4,091
Net Change in Unrealized Appreciation
(Depreciation) During the Year (45) (120) (11,355) (1,475)
-------------------- -------------------- --------------------- --------------------
Net Gain (Loss) on Investments (16) (19) 211 2,616
-------------------- -------------------- --------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 102 (6) 162 2,177
-------------------- -------------------- --------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 3 3 0 49
Policy Loading, Net (Note 3) (1) 0 (32) (106)
Contract Owner Deaths 0 0 (85) (2,335)
Contract Owner Terminations (17) (7) (486) (1,310)
Policy Loans, Net 8 (2) (25) (828)
Cost of Insurance (39) (20) 107 (763)
Policy Loan Processing Charges (4) (2) 27 (71)
Transfers Among Investment Divisions 3,456 1,406 (42,396) (1,241)
-------------------- -------------------- --------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 3,406 1,378 (42,890) (6,605)
-------------------- -------------------- --------------------- --------------------
Total Increase (Decrease) in Net Assets 3,508 1,372 (42,728) (4,428)
Net Assets Beginning of Period 0 0 42,728 48,489
-------------------- -------------------- --------------------- --------------------
Net Assets End of Period $ 3,508 $ 1,372 $ 0 $ 44,061
==================== ==================== ===================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
------------------------------------------------------------------------------------
1999 2000 2001 2002
(In thousands) Trust Trust Trust Trust
-------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (Note 3) (120) (104) (256) (49)
Transaction Charges (Note 3) (69) (64) (151) (27)
-------------------- -------------------- --------------------- --------------------
Net Investment Income (Loss) (189) (168) (407) (76)
-------------------- -------------------- --------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 754 1,093 2,349 231
Net Change in Unrealized Appreciation
(Depreciation) During the Year 462 145 861 408
-------------------- -------------------- --------------------- --------------------
Net Gain (Loss) on Investments 1,216 1,238 3,210 639
-------------------- -------------------- --------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,027 1,070 2,803 563
-------------------- -------------------- --------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 15 2 10 35
Policy Loading, Net (Note 3) (34) (27) (106) (17)
Contract Owner Deaths (467) (819) (726) (38)
Contract Owner Terminations (694) (445) (1,129) (81)
Policy Loans, Net (225) (99) (553) (83)
Cost of Insurance (315) (324) (685) (118)
Policy Loan Processing Charges (15) (33) (90) (7)
Transfers Among Investment Divisions 363 1,204 (214) 1,395
-------------------- -------------------- ------------------ --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (1,372) (541) (3,493) 1,086
-------------------- -------------------- ------------------ --------------------
Total Increase (Decrease) in Net Assets (345) 529 (690) 1,649
Net Assets Beginning of Period 20,285 17,774 44,973 6,558
-------------------- -------------------- --------------------- --------------------
Net Assets End of Period $ 19,940 $ 18,303 $ 44,283 $ 8,207
==================== ==================== ===================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
------------------------------------------------------------------------------------
2003 2004 2005 2006
(In thousands) Trust Trust Trust Trust
-------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (Note 3) (224) (37) (100) (37)
Transaction Charges (Note 3) (135) (22) (62) (20)
-------------------- -------------------- --------------------- --------------------
Net Investment Income (Loss) (359) (59) (162) (57)
-------------------- -------------------- --------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 2,426 585 791 416
Net Change in Unrealized Appreciation
(Depreciation) During the Year 1,289 46 1,221 266
-------------------- -------------------- --------------------- --------------------
Net Gain (Loss) on Investments 3,715 631 2,012 682
-------------------- -------------------- --------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 3,356 572 1,850 625
-------------------- -------------------- --------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 25 0 11 4
Policy Loading, Net (Note 3) (65) (13) (22) (13)
Contract Owner Deaths (574) (328) (77) (28)
Contract Owner Terminations (1,034) (569) (156) (127)
Policy Loans, Net (577) (2) 63 (76)
Cost of Insurance (567) (92) (299) (90)
Policy Loan Processing Charges (61) (3) (32) (13)
Transfers Among Investment Divisions (815) (621) 68 (725)
-------------------- -------------------- --------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (3,668) (1,628) (444) (1,068)
-------------------- -------------------- --------------------- --------------------
Total Increase (Decrease) in Net Assets (312) (1,056) 1,406 (443)
Net Assets Beginning of Period 40,332 7,044 17,769 6,522
-------------------- -------------------- --------------------- --------------------
Net Assets End of Period $ 40,020 $ 5,988 $ 19,175 $ 6,079
==================== ==================== ===================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
------------------------------------------------------------------------------------
2007 2008 2009 2010
(In thousands) Trust Trust Trust Trust
-------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (Note 3) (63) (116) (49) (45)
Transaction Charges (Note 3) (37) (68) (30) (25)
-------------------- -------------------- --------------------- --------------------
Net Investment Income (Loss) (100) (184) (79) (70)
-------------------- -------------------- --------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 481 1,537 568 896
Net Change in Unrealized Appreciation
(Depreciation) During the Year 914 1,170 679 160
-------------------- -------------------- --------------------- --------------------
Net Gain (Loss) on Investments 1,395 2,707 1,247 1,056
-------------------- -------------------- --------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,295 2,523 1,168 986
-------------------- -------------------- --------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 0 20 22 5
Policy Loading, Net (Note 3) (19) (47) (21) (21)
Contract Owner Deaths (100) (158) (356) 0
Contract Owner Terminations (173) (635) (238) (113)
Policy Loans, Net (155) (208) (231) (43)
Cost of Insurance (179) (313) (144) (93)
Policy Loan Processing Charges (19) (41) (23) (12)
Transfers Among Investment Divisions 1,686 (678) (74) (723)
-------------------- -------------------- --------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 1,041 (2,060) (1,065) (1,000)
-------------------- -------------------- --------------------- --------------------
Total Increase (Decrease) in Net Assets 2,336 463 103 (14)
Net Assets Beginning of Period 9,577 20,221 8,874 7,265
-------------------- -------------------- --------------------- --------------------
Net Assets End of Period $ 11,913 $ 20,684 $ 8,977 $ 7,251
==================== ==================== ===================== ====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
----------------------------------------------------------------
2011 2013 2014
(In thousands) Trust Trust Trust
-------------------- -------------------- ---------------------
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0 $ 0
Mortality and Expense Charges (Note 3) (7) (7) (87)
Transaction Charges (Note 3) (5) (4) (51)
-------------------- -------------------- ---------------------
Net Investment Income (Loss) (12) (11) (138)
-------------------- -------------------- ---------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 63 68 1,452
Net Change in Unrealized Appreciation
(Depreciation) During the Year 150 129 1,391
-------------------- -------------------- ---------------------
Net Gain (Loss) on Investments 213 197 2,843
-------------------- -------------------- ---------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 201 186 2,705
-------------------- -------------------- ---------------------
Contract Transactions:
Net Premiums Received from Contract Owners 0 3 30
Policy Loading, Net (Note 3) (7) (4) 1
Contract Owner Deaths 0 (70) 0
Contract Owner Terminations 2 (14) (896)
Policy Loans, Net 4 15 52
Cost of Insurance (21) (19) (300)
Policy Loan Processing Charges (3) (5) (55)
Transfers Among Investment Divisions (111) (28) (2,485)
-------------------- -------------------- ---------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (136) (122) (3,653)
-------------------- -------------------- ---------------------
Total Increase (Decrease) in Net Assets 65 64 (948)
Net Assets Beginning of Period 1,373 1,037 15,591
-------------------- -------------------- ---------------------
Net Assets End of Period $ 1,438 $ 1,101 $ 14,643
==================== ==================== =====================
See notes to financial statements
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
MERRILL LYNCH LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Merrill Lynch Life Variable Life Separate Account II
("Account"), a separate account of Merrill Lynch Life
Insurance Company ("Merrill Lynch Life"), was established to
support Merrill Lynch Life's operations with respect to
certain variable life insurance contracts ("Contracts"). The
Account is governed by Arkansas State Insurance Law. Merrill
Lynch Life is an indirect wholly owned subsidiary of Merrill
Lynch & Co., Inc. ("Merrill Lynch & Co."). The Account is
registered as a unit investment trust under the Investment
Company Act of 1940 and consists of forty-two investment
divisions (forty-three during the year). The investment
divisions are as follows:
Merrill Lynch Series Fund, Inc.: Ten of the investment
divisions each invest in the securities of a single mutual
fund portfolio of the Merrill Lynch Series Fund, Inc.
("Merrill Series Fund"). The investment advisor to the
funds of the Merrill Series Fund is Merrill Lynch Asset
Management, L.P. ("MLAM"), an indirect subsidiary of
Merrill Lynch & Co.
Merrill Lynch Variable Series Funds, Inc: Nine of the
investment divisions each invest in the securities of a
single mutual fund portfolio of the Merrill Lynch Variable
Series Funds,Inc. ("Merrill Variable Funds"). The investment
advisor to the funds of the Merrill Variable Funds is MLAM.
The Capital Focus Fund and Global Growth Focus Fund
commenced operations on July 21, 1999. Effective following
the close of business on August 15, 1997, the Equity Growth
Fund was renamed the Special Value Focus Fund. The Fund's
investment objective was not modified.
Hotchkis & Wiley Variable Trust: One of the investment
divisions invests in the securities of a single mutual fund
portfolio of the Hotchkis & Wiley Variable Trust ("H&W
Trust"). The investment advisor to the fund of the H&W Trust
is Hotchkis & Wiley, a division of MLAM. This investment
division commenced operations on July 21, 1999.
Mercury Asset Management V.I. Funds, Inc.: One of the
investment divisions invests in the securities of a single
mutual fund portfolio of the Mercury Asset Management V.I.
Funds, Inc. ("Mercury Funds"). The investment advisor to the
fund of the Mercury Funds is Mercury Asset Management
International Ltd., an indirect subsidiary of Merrill Lynch
and Co. This investment division commenced operations on
July 21, 1999.
Alliance Variable Products Series Fund, Inc.: Two of the
investment divisions invests in the securities of a single
mutual fund portfolio of the Alliance Variable Products
Series Fund, Inc. ("Alliance Variable Fund"). The investment
advisor to the funds of the Alliance Variable Fund is
Alliance Capital Management L.P. The Quasar Portfolio Fund
commenced operations on July 21, 1999.
MFS Variable Insurance Trust:Two of the investment divisions
each invest in the securities of a single mutual fund
portfolio of the MFS Variable Insurance Trust ("MFS Variable
Trust"). The investment advisor to the funds of the MFS
Variable Trust is Massachusetts Financial Services Company.
AIM Variable Insurance Funds:Two of the investment divisions
each invest in the securities of a single mutual fund
portfolio of the AIM Variable Insurance Funds, Inc. ("AIM
Variable Funds"). The investment advisor to the funds of the
AIM Variable Funds is AIM Advisors, Inc.
The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury
Securities, Series A through L: Fifteen of the investment
divisions ( sixteen during the year) each invest in the
securities of a single trust of the Merrill Lynch Fund of
Stripped ("Zero") U.S. Treasury Securities, Series A through
L ("Merrill Zero Trusts"). Each trust of the Merrill Zero
Trusts consists of Stripped Treasury Securities with a fixed
maturity date and a Treasury Note deposited to provide
income to pay expenses of the trust. Merrill Zero Trusts are
sponsored by Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S"), a wholly owned subsidiary of Merrill Lynch & Co.
The 2019 Trust commenced operations on July 21,1999. The 1999
Trust matured on February 16, 1999.
The assets of the Account are registered in the name of
Merrill Lynch Life. The portion of the Account's assets
applicable to the Contracts are not chargeable with
liabilities arising out of any other business Merrill Lynch
Life may conduct.
The change in net assets accumulated in the Account provides
the basis for the periodic determination of the amount of
increased or decreased benefits under the Contracts.
The net assets may not be less than the amount required under
Arkansas State Insurance Law to provide for death benefits
(without regard to the minimum death benefit guarantee) and
other Contract benefits.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements included herein have been prepared in
accordance with generally accepted accounting principles for
variable life separate accounts registered as unit investment
trusts. The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
Investments of the investment divisions are included in the
statement of assets and liabilities at the net asset value of
the shares/units held in the underlying funds/trusts, which
value their investments at market value.
Dividend income is recognized on the ex-dividend date. All
dividends are automatically reinvested.
Realized gains and losses on the sales of investments are
computed on the first in first out method.
Investment transactions are recorded on the trade date.
The operations of the Account are included in the Federal
income tax return of Merrill Lynch Life. Under the provisions
of the Contracts, Merrill Lynch Life has the right to charge
the Account for any Federal income tax attributable to the
Account. No charge is currently being made against the Account
for such tax since, under current tax law, Merrill Lynch Life
pays no tax on investment income and capital gains reflected
in variable life insurance contract reserves. However, Merrill
Lynch Life retains the right to charge for any Federal income
tax incurred that is attributable to the Account if the law is
changed. Charges for state and local taxes, if any,
attributable to the Account may also be made.
3. CHARGES AND FEES
Merrill Lynch Life assumes mortality and expense risks related
to Contracts investing in the Account and deducts daily
charges to cover these risks. The daily charges vary by
Contract type as follows:
Directed Life 100L, 200D, 7Pay and Prime Plan I - IV,
collectively referred to as Contract Type 1, charge .5%
(on an annual basis) of the net assets for Contract owners.
Prime Plan V, referred to as Contract Type 2, charges .6%
(on an annual basis) of the net assets for Contract owners.
Directed Life 2 and Prime Plan VI, collectively referred to
as Contract Type 3, charge .75% (on an annual basis) of the
net assets for Contract owners
Prime Plan VII and Prime Plan Investor, collectively
referred to as Contract Type 4, charge .9% (on an annual
basis) of the net assets for Contract owners.
Merrill Lynch Life makes certain deductions from each premium.
For certain Contracts, the deductions are made before the
premium is allocated to the Account. For other Contracts, the
deductions are taken in equal installments on the first
through the tenth Contract anniversaries. The deductions are
for (1) premiums for optional benefits (2) additional premiums
for extra mortality risks, (3) sales load, (4) administrative
expenses, (5) state premium taxes and (6) a risk charge for
the guaranteed minimum death benefit.
In addition, the cost of providing life insurance coverage for
the insureds is deducted on the dates specified by the
Contract. This cost will vary dependent upon the insured's
underwriting class, sex (except where unisex rates are
required by state law), attained age of each insured and the
Contract's net amount at risk.
Merrill Lynch Life pays all transaction charges to MLPF&S on
the sale of Zero Trust units to the Account. Merrill Lynch
Life deducts a daily asset charge against the assets of each
trust for the reimbursement of these transaction charges. The
asset charge is equivalent to an effective annual rate of .34%
(annually at the beginning of the year) of net assets for
Contract owners.
<PAGE>
4. UNIT VALUES
The following is a summary of unit values and units outstanding for variable
life insurance contracts and the expenses as a percentage of average net
assets, excluding expenses of the underlying funds for each of the five years
in the period ended December 31, 1999 or lesser time period, if applicable.
Total return calculations represent the one year total return (or from
inception to December 31 if less than one year) and do not reflect the cost of
insurance charge.
<TABLE>
<CAPTION>
Money Reserve Portfolio
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 4,648 4,731 860 251
Unit Value $ 33.79 $ 33.14 $ 32.20 $ 31.29
-------------------- -------------------- ------------------- --------------------
Net Assets $ 157,067 $ 156,784 $ 27,700 $ 7,866
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 4.50% 4.39% 4.23% 4.08%
1998
Units 5,073 5,333 971 215
Unit Value $ 32.33 $ 31.74 $ 30.89 $ 30.06
-------------------- -------------------- ------------------- --------------------
Net Assets $ 164,026 $ 169,282 $ 29,982 $ 6,473
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 4.90% 4.80% 4.64% 4.48%
1997
Units 5,203 5,264 898 210
Unit Value $ 30.82 $ 30.29 $ 29.52 $ 28.77
-------------------- -------------------- ------------------- --------------------
Net Assets $ 160,385 $ 159,452 $ 26,503 $ 6,032
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 4.92% 4.81% 4.65% 4.50%
1996
Units 6,226 6,091 1,077 278
Unit Value $ 29.38 $ 28.90 $ 28.21 $ 27.54
-------------------- -------------------- ------------------- --------------------
Net Assets $ 182,907 $ 176,018 $ 30,368 $ 7,642
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 4.82% 4.71% 4.55% 4.39%
1995
Units 7,170 6,628 1,146 274
Unit Value $ 28.03 $ 27.60 $ 26.98 $ 26.38
-------------------- -------------------- ------------------- --------------------
Net Assets $ 200,984 $ 182,932 $ 30,929 $ 7,223
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 5.29% 5.19% 5.03% 4.87%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
Intermediate Government Bond Portfolio
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 1,508 1,500 259 73
Unit Value $ 50.24 $ 49.27 $ 47.88 $ 46.52
-------------------- -------------------- ------------------- --------------------
Net Assets $ 75,770 $ 73,892 $ 12,421 $ 3,408
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return -1.74% -1.84% -1.99% -2.14%
1998
Units 1,653 1,671 318 81
Unit Value $ 51.13 $ 50.19 $ 48.85 $ 47.54
-------------------- -------------------- ------------------- --------------------
Net Assets $ 84,510 $ 83,856 $ 15,556 $ 3,827
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 8.40% 8.29% 8.13% 7.96%
1997
Units 1,657 1,718 317 84
Unit Value $ 47.17 $ 46.35 $ 45.18 $ 44.03
-------------------- -------------------- ------------------- --------------------
Net Assets $ 78,143 $ 79,622 $ 14,325 $ 3,695
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 7.88% 7.77% 7.60% 7.44%
1996
Units 1,844 1,901 313 81
Unit Value $ 43.73 $ 43.01 $ 41.99 $ 40.98
-------------------- -------------------- ------------------- --------------------
Net Assets $ 80,619 $ 81,744 $ 13,144 $ 3,302
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 2.10% 1.99% 1.84% 1.68%
1995
Units 2,071 2,117 343 86
Unit Value $ 42.83 $ 42.17 $ 41.23 $ 40.31
-------------------- -------------------- ------------------- --------------------
Net Assets $ 88,685 $ 89,279 $ 14,140 $ 3,473
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 18.28% 18.16% 17.98% 17.80%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
Long-Term Corporate Bond Portfolio
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 642 608 148 36
Unit Value $ 57.36 $ 56.25 $ 54.66 $ 53.11
-------------------- -------------------- ------------------- --------------------
Net Assets $ 36,824 $ 34,217 $ 8,090 $ 1,917
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return -2.83% -2.93% -3.08% -3.23%
1998
Units 702 668 159 33
Unit Value $ 59.03 $ 57.95 $ 56.40 $ 54.88
-------------------- -------------------- ------------------- --------------------
Net Assets $ 41,423 $ 38,738 $ 8,975 $ 1,794
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 7.91% 7.80% 7.64% 7.48%
1997
Units 805 699 168 47
Unit Value $ 54.70 $ 53.75 $ 52.39 $ 51.06
-------------------- -------------------- ------------------- --------------------
Net Assets $ 44,061 $ 37,592 $ 8,787 $ 2,397
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 8.26% 8.14% 7.98% 7.82%
1996
Units 828 766 170 56
Unit Value $ 50.53 $ 49.71 $ 48.52 $ 47.36
-------------------- -------------------- ------------------- --------------------
Net Assets $ 41,817 $ 38,098 $ 8,250 $ 2,669
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 2.25% 2.15% 1.99% 1.84%
1995
Units 923 826 196 59
Unit Value $ 49.42 $ 48.66 $ 47.57 $ 46.51
-------------------- -------------------- ------------------- --------------------
Net Assets $ 45,594 $ 40,206 $ 9,333 $ 2,757
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 20.06% 19.94% 19.76% 19.58%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
Capital Stock Portfolio
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 1,232 1,054 234 111
Unit Value $ 118.67 $ 116.37 $ 113.08 $ 109.89
-------------------- -------------------- ------------------- --------------------
Net Assets $ 146,257 $ 122,668 $ 26,484 $ 12,177
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 30.98% 30.84% 30.65% 30.45%
1998
Units 1,287 1,159 264 122
Unit Value $ 90.60 $ 88.94 $ 86.56 $ 84.24
-------------------- -------------------- ------------------- --------------------
Net Assets $ 116,642 $ 103,059 $ 22,873 $ 10,309
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 14.98% 14.86% 14.69% 14.52%
1997
Units 1,405 1,291 307 135
Unit Value $ 78.80 $ 77.43 $ 75.47 $ 73.56
-------------------- -------------------- ------------------- --------------------
Net Assets $ 110,717 $ 99,952 $ 23,175 $ 9,903
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 21.86% 21.73% 21.55% 21.37%
1996
Units 1,529 1,375 350 143
Unit Value $ 64.66 $ 63.61 $ 62.09 $ 60.61
-------------------- -------------------- ------------------- --------------------
Net Assets $ 98,863 $ 87,458 $ 21,744 $ 8,693
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 15.95% 15.83% 15.66% 15.48%
1995
Units 1,568 1,454 362 146
Unit Value $ 55.77 $ 54.91 $ 53.68 $ 52.48
-------------------- -------------------- ------------------- --------------------
Net Assets $ 87,447 $ 79,837 $ 19,424 $ 7,675
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 20.13% 20.00% 19.82% 19.64%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
Growth Stock Portfolio
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 1,766 1,567 332 130
Unit Value $ 118.66 $ 116.36 $ 113.07 $ 109.87
-------------------- -------------------- ------------------- --------------------
Net Assets $ 209,524 $ 182,370 $ 37,570 $ 14,310
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 38.30% 38.16% 37.95% 37.74%
1998
Units 1,744 1,607 329 132
Unit Value $ 85.80 $ 84.23 $ 81.97 $ 79.77
-------------------- -------------------- ------------------- --------------------
Net Assets $ 149,646 $ 135,321 $ 26,992 $ 10,509
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 37.49% 37.35% 37.14% 36.94%
1997
Units 1,744 1,705 346 140
Unit Value $ 62.40 $ 61.32 $ 59.77 $ 58.25
-------------------- -------------------- ------------------- --------------------
Net Assets $ 108,843 $ 104,542 $ 20,691 $ 8,184
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 33.09% 32.95% 32.75% 32.55%
1996
Units 1,648 1,711 369 141
Unit Value $ 46.89 $ 46.12 $ 45.02 $ 43.95
-------------------- -------------------- ------------------- --------------------
Net Assets $ 77,294 $ 78,927 $ 16,628 $ 6,216
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 18.97% 18.85% 18.67% 18.48%
1995
Units 1,455 1,661 361 156
Unit Value $ 39.41 $ 38.81 $ 37.94 $ 37.09
-------------------- -------------------- ------------------- --------------------
Net Assets $ 57,333 $ 64,451 $ 13,694 $ 5,770
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 34.68% 34.54% 34.34% 34.13%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
Multiple Strategy Portfolio
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 5,555 14,940 796 339
Unit Value $ 56.10 $ 55.26 $ 54.05 $ 52.87
-------------------- -------------------- ------------------- --------------------
Net Assets $ 311,621 $ 825,590 $ 42,997 $ 17,947
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 19.61% 19.49% 19.31% 19.13%
1998
Units 6,198 16,678 944 370
Unit Value $ 46.91 $ 46.25 $ 45.30 $ 44.38
-------------------- -------------------- ------------------- --------------------
Net Assets $ 290,720 $ 771,371 $ 42,745 $ 16,440
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 10.28% 10.16% 10.00% 9.83%
1997
Units 6,716 18,349 1,013 408
Unit Value $ 42.53 $ 41.98 $ 41.19 $ 40.41
-------------------- -------------------- ------------------- --------------------
Net Assets $ 285,659 $ 770,288 $ 41,730 $ 16,488
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 18.57% 18.45% 18.27% 18.09%
1996
Units 7,217 19,894 1,094 432
Unit Value $ 35.87 $ 35.44 $ 34.82 $ 34.21
-------------------- -------------------- ------------------- --------------------
Net Assets $ 258,882 $ 705,034 $ 38,105 $ 14,785
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 13.75% 13.63% 13.45% 13.28%
1995
Units 7,935 21,994 1,199 445
Unit Value $ 31.54 $ 31.19 $ 30.69 $ 30.20
-------------------- -------------------- ------------------- --------------------
Net Assets $ 250,258 $ 686,049 $ 36,793 $ 13,430
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 16.97% 16.85% 16.67% 16.49%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
High Yield Portfolio
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 691 1,133 149 38
Unit Value $ 32.63 $ 32.17 $ 31.52 $ 30.87
-------------------- -------------------- ------------------- --------------------
Net Assets $ 22,539 $ 36,457 $ 4,711 $ 1,164
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 5.06% 4.95% 4.79% 4.63%
1998
Units 824 1,465 202 49
Unit Value $ 31.06 $ 30.66 $ 30.08 $ 29.50
-------------------- -------------------- ------------------- --------------------
Net Assets $ 25,592 $ 44,899 $ 6,079 $ 1,439
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return -5.66% -5.76% -5.90% -6.04%
1997
Units 918 1,726 223 52
Unit Value $ 32.92 $ 32.53 $ 31.96 $ 31.40
-------------------- -------------------- ------------------- --------------------
Net Assets $ 30,224 $ 56,140 $ 7,133 $ 1,620
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 10.18% 10.07% 9.91% 9.74%
1996
Units 954 1,754 260 47
Unit Value $ 29.88 $ 29.55 $ 29.08 $ 28.62
-------------------- -------------------- ------------------- --------------------
Net Assets $ 28,517 $ 51,844 $ 7,550 $ 1,359
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 11.76% 11.64% 11.47% 11.30%
1995
Units 914 1,755 254 44
Unit Value $ 26.74 $ 26.47 $ 26.09 $ 25.71
-------------------- -------------------- ------------------- --------------------
Net Assets $ 24,434 $ 46,470 $ 6,622 $ 1,119
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 16.54% 16.42% 16.25% 16.07%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
Natural Resources Portfolio
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 359 380 100 59
Unit Value $ 10.44 $ 10.30 $ 10.11 $ 9.92
-------------------- -------------------- ------------------- --------------------
Net Assets $ 3,748 $ 3,917 $ 1,009 $ 582
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 24.88% 24.75% 24.56% 24.37%
1998
Units 397 503 105 64
Unit Value $ 8.36 $ 8.26 $ 8.12 $ 7.98
-------------------- -------------------- ------------------- --------------------
Net Assets $ 3,322 $ 4,157 $ 852 $ 509
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return -14.00% -14.08% -14.21% -14.34%
1997
Units 528 649 124 69
Unit Value $ 9.72 $ 9.61 $ 9.46 $ 9.31
-------------------- -------------------- ------------------- --------------------
Net Assets $ 5,134 $ 6,239 $ 1,169 $ 641
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return -11.41% -11.50% -11.64% -11.77%
1996
Units 782 819 127 74
Unit Value $ 10.97 $ 10.86 $ 10.71 $ 10.56
-------------------- -------------------- ------------------- --------------------
Net Assets $ 8,579 $ 8,899 $ 1,361 $ 782
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 14.15% 14.03% 13.86% 13.68%
1995
Units 710 814 168 77
Unit Value $ 9.61 $ 9.53 $ 9.41 $ 9.29
-------------------- -------------------- ------------------- --------------------
Net Assets $ 6,824 $ 7,756 $ 1,576 $ 714
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 11.66% 11.55% 11.38% 11.21%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
Global Strategy Portfolio
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 1,743 2,177 520 219
Unit Value $ 34.60 $ 34.16 $ 33.52 $ 32.90
-------------------- -------------------- ------------------- --------------------
Net Assets $ 60,292 $ 74,377 $ 17,417 $ 7,207
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 20.55% 20.42% 20.24% 20.06%
1998
Units 1,941 2,729 609 253
Unit Value $ 28.71 $ 28.37 $ 27.88 $ 27.40
-------------------- -------------------- ------------------- --------------------
Net Assets $ 55,738 $ 77,428 $ 16,984 $ 6,919
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 8.95% 8.84% 8.67% 8.51%
1997
Units 2,422 3,373 749 289
Unit Value $ 26.35 $ 26.07 $ 25.65 $ 25.25
-------------------- -------------------- ------------------- --------------------
Net Assets $ 63,815 $ 87,920 $ 19,222 $ 7,304
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 11.17% 11.05% 10.88% 10.72%
1996
Units 2,583 3,740 781 305
Unit Value $ 23.70 $ 23.47 $ 23.14 $ 22.81
-------------------- -------------------- ------------------- --------------------
Net Assets $ 61,211 $ 87,778 $ 18,061 $ 6,952
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 13.21% 13.09% 12.92% 12.75%
1995
Units 2,725 3,962 827 330
Unit Value $ 20.94 $ 20.75 $ 20.49 $ 20.23
-------------------- -------------------- ------------------- --------------------
Net Assets $ 57,051 $ 82,207 $ 16,942 $ 6,680
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 9.89% 9.78% 9.62% 9.45%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
Balanced Portfolio
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 932 1,146 313 179
Unit Value $ 33.24 $ 32.85 $ 32.27 $ 31.71
-------------------- -------------------- ------------------- --------------------
Net Assets $ 30,982 $ 37,628 $ 10,107 $ 5,665
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 8.01% 7.90% 7.74% 7.58%
1998
Units 1,038 1,316 316 183
Unit Value $ 30.78 $ 30.44 $ 29.96 $ 29.48
-------------------- -------------------- ------------------- --------------------
Net Assets $ 31,954 $ 40,048 $ 9,474 $ 5,401
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 12.89% 12.77% 12.60% 12.43%
1997
Units 1,012 1,428 358 198
Unit Value $ 27.26 $ 26.99 $ 26.60 $ 26.22
-------------------- -------------------- ------------------- --------------------
Net Assets $ 27,596 $ 38,529 $ 9,518 $ 5,180
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 16.35% 16.23% 16.05% 15.88%
1996
Units 1,097 1,589 379 204
Unit Value $ 23.43 $ 23.23 $ 22.92 $ 22.62
-------------------- -------------------- ------------------- --------------------
Net Assets $ 25,714 $ 36,915 $ 8,692 $ 4,609
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 9.21% 9.10% 8.93% 8.77%
1995
Units 1,174 1,795 426 203
Unit Value $ 21.46 $ 21.29 $ 21.04 $ 20.80
-------------------- -------------------- ------------------- --------------------
Net Assets $ 25,197 $ 38,210 $ 8,966 $ 4,226
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 20.98% 20.86% 20.68% 20.50%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
Global Utility Focus Fund
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 158 113 33 4
Unit Value $ 23.13 $ 22.99 $ 22.80 $ 22.60
-------------------- -------------------- ------------------- --------------------
Net Assets $ 3,645 $ 2,597 $ 757 $ 96
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 12.07% 11.96% 11.79% 11.62%
1998
Units 134 139 26 0
Unit Value $ 20.64 $ 20.54 $ 20.39 $ 0.00
-------------------- -------------------- ------------------- --------------------
Net Assets $ 2,765 $ 2,861 $ 536 $ 0
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% N/A
Total Return 23.44% 23.31% 23.13% N/A
1997
Units 132 148 23 0
Unit Value $ 16.72 $ 16.65 $ 16.56 $ 0.00
-------------------- -------------------- ------------------- --------------------
Net Assets $ 2,205 $ 2,461 $ 379 $ 0
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% N/A
Total Return 25.28% 25.15% 24.96% N/A
1996
Units 37 60 13 1
Unit Value $ 13.34 $ 13.31 $ 13.25 $ 13.20
-------------------- -------------------- ------------------- --------------------
Net Assets $ 490 $ 792 $ 172 $ 17
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 14.78% 14.68% 14.54% 11.94%
1995
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
International Equity Focus Fund
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 162 242 87 2
Unit Value $ 15.21 $ 15.12 $ 14.99 $ 14.87
-------------------- -------------------- ------------------- --------------------
Net Assets $ 2,462 $ 3,661 $ 1,303 $ 30
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 36.94% 36.80% 36.60% 36.39%
1998
Units 186 300 106 4
Unit Value $ 11.11 $ 11.05 $ 10.98 $ 10.90
-------------------- -------------------- ------------------- --------------------
Net Assets $ 2,061 $ 3,316 $ 1,167 $ 40
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 7.27% 7.16% 6.99% 6.83%
1997
Units 219 318 159 6
Unit Value $ 10.36 $ 10.32 $ 10.26 $ 10.20
-------------------- -------------------- ------------------- --------------------
Net Assets $ 2,264 $ 3,284 $ 1,635 $ 63
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return -5.03% -5.13% -5.27% -5.41%
1996
Units 188 212 103 7
Unit Value $ 10.90 $ 10.87 $ 10.83 $ 10.79
-------------------- -------------------- ------------------- --------------------
Net Assets $ 2,045 $ 2,303 $ 1,114 $ 77
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 0.08% -0.01% -0.14% 5.65%
1995
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
Global Bond Focus Fund
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 0 18 7 0
Unit Value $ 0.00 $ 12.77 $ 12.66 $ 0.00
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 228 $ 90 $ 0
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% N/A
Total Return N/A -8.73% -8.87% N/A
1998
Units 0 161 10 1
Unit Value $ 0.00 $ 13.99 $ 13.89 $ 13.80
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 2,246 $ 144 $ 20
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 11.95% 11.78% 11.61%
1997
Units 0 22 15 0
Unit Value $ 0.00 $ 12.50 $ 12.43 $ 0.00
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 276 $ 188 $ 0
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% N/A
Total Return N/A 11.28% 11.12% N/A
1996
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1995
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
Basic Value Focus Fund
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 896 1,149 215 36
Unit Value $ 24.67 $ 24.53 $ 24.32 $ 24.11
-------------------- -------------------- ------------------- --------------------
Net Assets $ 22,093 $ 28,182 $ 5,223 $ 872
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 20.51% 20.39% 20.21% 20.03%
1998
Units 716 986 193 33
Unit Value $ 20.47 $ 20.37 $ 20.23 $ 20.09
-------------------- -------------------- ------------------- --------------------
Net Assets $ 14,653 $ 20,086 $ 3,904 $ 662
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 8.90% 8.79% 8.62% 8.46%
1997
Units 541 931 179 39
Unit Value $ 18.80 $ 18.73 $ 18.62 $ 18.52
-------------------- -------------------- ------------------- --------------------
Net Assets $ 10,167 $ 17,445 $ 3,341 $ 721
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 20.02% 19.90% 19.72% 19.54%
1996
Units 267 493 131 45
Unit Value $ 15.66 $ 15.62 $ 15.56 $ 15.49
-------------------- -------------------- ------------------- --------------------
Net Assets $ 4,177 $ 7,706 $ 2,031 $ 696
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 7.73% 7.63% 7.49% 19.60%
1995
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
Developing Capital Markets Focus Fund
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 284 304 55 18
Unit Value $ 11.05 $ 10.98 $ 10.89 $ 10.80
-------------------- -------------------- ------------------- --------------------
Net Assets $ 3,140 $ 3,334 $ 603 $ 199
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 64.70% 64.53% 64.28% 64.03%
1998
Units 107 208 49 21
Unit Value $ 6.71 $ 6.68 $ 6.63 $ 6.58
-------------------- -------------------- ------------------- --------------------
Net Assets $ 721 $ 1,388 $ 326 $ 141
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return -29.74% -29.81% -29.92% -30.02%
1997
Units 232 273 69 23
Unit Value $ 9.55 $ 9.51 $ 9.46 $ 9.41
-------------------- -------------------- ------------------- --------------------
Net Assets $ 2,211 $ 2,595 $ 649 $ 220
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return -7.00% -7.09% -7.23% -7.37%
1996
Units 193 162 51 12
Unit Value $ 10.27 $ 10.24 $ 10.20 $ 10.15
-------------------- -------------------- ------------------- --------------------
Net Assets $ 1,982 $ 1,661 $ 525 $ 126
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return -1.90% 1.99% -2.12% 9.58%
1995
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
Special Value Focus Fund
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 225 177 42 6
Unit Value $ 20.90 $ 20.78 $ 20.60 $ 20.43
-------------------- -------------------- ------------------- --------------------
Net Assets $ 4,709 $ 3,683 $ 867 $ 132
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 33.48% 33.34% 33.14% 32.94%
1998
Units 221 207 60 6
Unit Value $ 15.66 $ 15.58 $ 15.47 $ 15.37
-------------------- -------------------- ------------------- --------------------
Net Assets $ 3,461 $ 3,232 $ 924 $ 88
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return -6.97% -7.06% -7.20% -7.34%
1997
Units 198 206 43 11
Unit Value $ 16.83 $ 16.77 $ 16.68 $ 16.58
-------------------- -------------------- ------------------- --------------------
Net Assets $ 3,333 $ 3,460 $ 719 $ 183
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return 11.17% 11.05% 10.88% 10.72%
1996
Units 108 157 28 9
Unit Value $ 15.14 $ 15.10 $ 15.04 $ 14.98
-------------------- -------------------- ------------------- --------------------
Net Assets $ 1,634 $ 2,365 $ 423 $ 137
Expenses as a % of
Average Net Assets 0.50% 0.60% 0.75% 0.90%
Total Return -5.02% -5.10% -5.23% -4.42%
1995
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
Index 500 Fund
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 0 1,321 205 45
Unit Value $ 0.00 $ 20.46 $ 20.36 $ 20.27
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 27,023 $ 4,176 $ 921
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 19.78% 19.60% 19.41%
1998
Units 0 824 124 30
Unit Value $ 0.00 $ 17.08 $ 17.03 $ 16.97
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 14,068 $ 2,107 $ 501
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 27.51% 27.32% 27.12%
1997
Units 0 603 57 5
Unit Value $ 0.00 $ 13.39 $ 13.37 $ 13.35
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 8,073 $ 759 $ 65
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 33.21% 33.03% 32.84%
1996
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1995
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
Capital Focus Fund
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 0 43 0 0
Unit Value $ 0.00 $ 10.43 $ 0.00 $ 0.00
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 449 $ 0 $ 0
Expenses as a % of
Average Net Assets N/A 0.60% N/A N/A
Total Return N/A -2.20% N/A N/A
1998
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1997
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1996
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1995
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
Global Growth Focus Fund
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 0 122 19 6
Unit Value $ 0.00 $ 14.86 $ 14.83 $ 14.79
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 1,807 $ 286 $ 86
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 69.78% 69.59% 69.39%
1998
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1997
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1996
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1995
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
International VIP Portfolio
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 0 182 14 8
Unit Value $ 0.00 $ 11.53 $ 11.50 $ 11.47
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 2,097 $ 158 $ 87
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 16.17% 16.00% 15.84%
1998
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1997
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1996
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1995
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
Mercury V.I. U.S. Large Cap Fund
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 0 213 49 4
Unit Value $ 0.00 $ 12.06 $ 12.05 $ 12.04
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 2,567 $ 596 $ 43
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 35.26% 35.08% 34.91%
1998
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1997
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1996
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1995
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
Quasar Portfolio
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 0 65 2 0
Unit Value $ 0.00 $ 10.31 $ 10.28 $ 0.00
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 668 $ 22 $ 0
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% N/A
Total Return N/A 20.79% 20.63% N/A
1998
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1997
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1996
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1995
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
Premier Growth Portfolio
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 0 1,685 251 71
Unit Value $ 0.00 $ 25.75 $ 25.63 $ 25.51
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 43,374 $ 6,429 $ 1,810
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 31.52% 31.32% 31.12%
1998
Units 0 961 134 37
Unit Value $ 0.00 $ 19.58 $ 19.52 $ 19.46
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 18,814 $ 2,625 $ 727
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 47.08% 46.86% 46.64%
1997
Units 0 279 65 12
Unit Value $ 0.00 $ 13.31 $ 13.29 $ 13.27
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 3,716 $ 861 $ 158
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 34.38% 34.19% 34.01%
1996
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1995
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
MFS Emerging Growth Series
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 0 693 98 21
Unit Value $ 0.00 $ 27.92 $ 27.79 $ 27.67
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 19,336 $ 2,736 $ 576
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 75.65% 75.39% 75.13%
1998
Units 0 363 57 10
Unit Value $ 0.00 $ 15.90 $ 15.85 $ 15.80
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 5,769 $ 904 $ 158
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 33.36% 33.16% 32.95%
1997
Units 0 187 33 3
Unit Value $ 0.00 $ 11.92 $ 11.90 $ 11.88
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 2,228 $ 395 $ 38
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 36.39% 36.20% 36.01%
1996
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1995
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
MFS Research Series
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 0 388 52 26
Unit Value $ 0.00 $ 18.23 $ 18.14 $ 18.06
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 7,067 $ 942 $ 470
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 23.30% 23.12% 22.93%
1998
Units 0 291 35 21
Unit Value $ 0.00 $ 14.78 $ 14.74 $ 14.69
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 4,294 $ 514 $ 302
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 22.65% 22.46% 22.28%
1997
Units 0 190 25 5
Unit Value $ 0.00 $ 12.05 $ 12.03 $ 12.01
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 2,287 $ 302 $ 58
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 25.45% 25.27% 25.10%
1996
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1995
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
AIM V.I. Value Fund
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 0 969 161 68
Unit Value $ 0.00 $ 21.44 $ 21.34 $ 21.24
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 20,784 $ 3,431 $ 1,451
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 29.12% 28.92% 28.73%
1998
Units 0 416 44 48
Unit Value $ 0.00 $ 16.60 $ 16.55 $ 16.50
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 6,908 $ 729 $ 798
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 31.61% 31.41% 31.21%
1997
Units 0 235 32 11
Unit Value $ 0.00 $ 12.62 $ 12.60 $ 12.58
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 2,966 $ 408 $ 134
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 28.77% 28.60% 28.42%
1996
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1995
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
AIM V.I. Capital Appreciation
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 0 254 26 3
Unit Value $ 0.00 $ 19.29 $ 19.20 $ 19.11
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 4,904 $ 496 $ 62
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 43.75% 43.53% 43.31%
1998
Units 0 131 16 2
Unit Value $ 0.00 $ 13.42 $ 13.38 $ 13.33
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 1,756 $ 219 $ 23
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 18.59% 18.41% 18.23%
1997
Units 0 98 22 2
Unit Value $ 0.00 $ 11.31 $ 11.30 $ 11.28
-------------------- -------------------- ------------------- --------------------
Net Assets $ 0 $ 1,105 248 $ 20
Expenses as a % of
Average Net Assets N/A 0.60% 0.75% 0.90%
Total Return N/A 26.31% 26.13% 25.96%
1996
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1995
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
1997 Trust
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1998
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1997
Units
Unit Value Division matured during the year
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1996
Units 646 1,029 282 15
Unit Value $ 21.86 $ 21.64 $ 21.33 $ 21.02
-------------------- -------------------- ------------------- --------------------
Net Assets $ 14,124 $ 22,273 $ 6,018 $ 313
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 4.27% 4.16% 4.00% 3.83%
1995
Units 671 1,163 333 14
Unit Value $ 20.97 $ 20.78 $ 20.51 $ 20.24
-------------------- -------------------- ------------------- --------------------
Net Assets $ 14,065 $ 24,155 $ 6,821 $ 284
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 9.85% 9.74% 9.57% 9.41%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
1998 Trust
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1998
Units
Unit Value Division matured during the year
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1997
Units 758 970 281 31
Unit Value $ 21.78 $ 21.56 $ 21.25 $ 20.94
-------------------- -------------------- ------------------- --------------------
Net Assets $ 16,518 $ 20,923 $ 5,967 $ 653
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 4.81% 4.70% 4.54% 4.39%
1996
Units 834 1,162 322 34
Unit Value $ 20.78 $ 20.59 $ 20.33 $ 20.06
-------------------- -------------------- ------------------- --------------------
Net Assets $ 17,340 $ 23,929 $ 6,547 $ 673
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 3.84% 3.73% 3.57% 3.41%
1995
Units 896 1,284 350 41
Unit Value $ 20.01 $ 19.85 $ 19.63 $ 19.40
-------------------- -------------------- ------------------- --------------------
Net Assets $ 17,927 $ 25,491 $ 6,871 $ 794
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 12.81% 12.69% 12.52% 12.35%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
1999 Trust
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units
Unit Value Division matured during the year
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1998
Units 515 276 102 83
Unit Value $ 22.27 $ 22.04 $ 21.72 $ 21.41
-------------------- -------------------- ------------------- --------------------
Net Assets $ 11,459 $ 6,079 $ 2,209 $ 1,783
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 4.80% 4.87% 4.71% 4.55%
1997
Units 486 272 103 87
Unit Value $ 21.21 $ 21.02 $ 20.74 $ 20.47
-------------------- -------------------- ------------------- --------------------
Net Assets $ 10,304 $ 5,725 $ 2,135 $ 1,776
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 5.30% 5.19% 5.03% 4.87%
1996
Units 523 296 108 88
Unit Value $ 20.14 $ 19.98 $ 19.75 $ 19.52
-------------------- -------------------- ------------------- --------------------
Net Assets $ 10,526 $ 5,908 $ 2,137 $ 1,714
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 3.14% 3.03% 2.88% 2.72%
1995
Units 569 292 105 84
Unit Value $ 18.53 $ 19.39 $ 19.20 $ 19.01
-------------------- -------------------- ------------------- --------------------
Net Assets $ 10,546 $ 5,661 $ 2,025 $ 1,604
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 15.50% 15.38% 15.21% 15.04%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
2000 Trust
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 556 285 52 6
Unit Value $ 22.08 $ 21.86 $ 21.54 $ 21.23
-------------------- -------------------- ------------------- --------------------
Net Assets $ 12,273 $ 6,232 $ 1,121 $ 119
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 3.64% 3.53% 3.38% 3.22%
1998
Units 534 321 59 6
Unit Value $ 21.31 $ 21.12 $ 20.84 $ 20.57
-------------------- -------------------- ------------------- --------------------
Net Assets $ 11,368 $ 6,770 $ 1,228 $ 118
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 6.16% 6.05% 5.89% 5.73%
1997
Units 567 295 46 8
Unit Value $ 20.07 $ 19.91 $ 19.68 $ 19.45
-------------------- -------------------- ------------------- --------------------
Net Assets $ 11,378 $ 5,874 $ 903 $ 148
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 5.94% 5.83% 5.67% 5.51%
1996
Units 550 337 47 8
Unit Value $ 18.95 $ 18.82 $ 18.63 $ 18.44
-------------------- -------------------- ------------------- --------------------
Net Assets $ 10,413 $ 6,333 $ 880 $ 148
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 2.29% 2.19% 2.03% 1.87%
1995
Units 550 367 56 8
Unit Value $ 18.52 $ 18.41 $ 18.26 $ 18.10
-------------------- -------------------- ------------------- --------------------
Net Assets $ 10,180 $ 6,749 $ 1,029 $ 147
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 18.02% 17.90% 17.72% 17.54%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
2001 Trust
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 396 320 101 2
Unit Value $ 49.88 $ 49.11 $ 48.01 $ 46.93
-------------------- -------------------- ------------------- --------------------
Net Assets $ 19,732 $ 15,711 $ 4,858 $ 101
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 2.18% 2.08% 1.92% 1.77%
1998
Units 407 384 109 14
Unit Value $ 48.81 $ 48.11 $ 47.10 $ 46.12
-------------------- -------------------- ------------------- --------------------
Net Assets $ 19,871 $ 18,462 $ 5,121 $ 646
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 7.20% 7.09% 6.93% 6.77%
1997
Units 447 411 110 14
Unit Value $ 45.53 $ 44.92 $ 44.05 $ 43.19
-------------------- -------------------- ------------------- --------------------
Net Assets $ 20,349 $ 18,458 $ 4,859 $ 617
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 6.59% 6.48% 6.32% 6.16%
1996
Units 484 447 117 14
Unit Value $ 42.72 $ 42.19 $ 41.43 $ 40.68
-------------------- -------------------- ------------------- --------------------
Net Assets $ 20,688 $ 18,854 $ 4,842 $ 589
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 1.47% 1.36% 1.21% 1.05%
1995
Units 546 490 118 14
Unit Value $ 42.10 $ 41.62 $ 40.94 $ 40.26
-------------------- -------------------- ------------------- --------------------
Net Assets $ 22,987 $ 20,391 $ 4,848 $ 581
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 20.51% 20.38% 20.20% 20.02%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
2002 Trust
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 154 178 81 59
Unit Value $ 17.74 $ 17.60 $ 17.40 $ 17.20
-------------------- -------------------- ------------------- --------------------
Net Assets $ 2,736 $ 3,127 $ 1,407 $ 1,014
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 0.32% 0.21% 0.06% -0.09%
1998
Units 182 187 84 60
Unit Value $ 17.69 $ 17.56 $ 17.39 $ 17.21
-------------------- -------------------- ------------------- --------------------
Net Assets $ 3,220 $ 3,278 $ 1,455 $ 1,033
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 8.48% 8.37% 8.21% 8.04%
1997
Units 192 180 76 59
Unit Value $ 16.30 $ 16.21 $ 16.07 $ 15.93
-------------------- -------------------- ------------------- --------------------
Net Assets $ 3,131 $ 2,918 $ 1,217 $ 941
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 7.33% 7.22% 7.06% 6.90%
1996
Units 179 128 67 60
Unit Value $ 15.19 $ 15.12 $ 15.01 $ 14.90
-------------------- -------------------- ------------------- --------------------
Net Assets $ 2,726 $ 1,933 $ 1,006 $ 894
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 0.74% 0.63% 0.48% 0.32%
1995
Units 211 131 62 61
Unit Value $ 15.08 $ 15.02 $ 14.94 $ 14.86
-------------------- -------------------- ------------------- --------------------
Net Assets $ 3,175 $ 1,973 $ 928 $ 901
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 22.94% 22.81% 22.62% 22.44%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
2003 Trust
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 237 156 46 9
Unit Value $ 78.55 $ 77.28 $ 75.48 $ 73.71
-------------------- -------------------- ------------------- --------------------
Net Assets $ 18,637 $ 12,068 $ 3,468 $ 694
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -2.50% -2.60% -2.74% -2.89%
1998
Units 278 174 47 9
Unit Value $ 80.56 $ 79.34 $ 77.61 $ 75.91
-------------------- -------------------- ------------------- --------------------
Net Assets $ 22,376 $ 13,778 $ 3,611 $ 712
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 10.32% 10.21% 10.04% 9.88%
1997
Units 303 190 51 9
Unit Value $ 73.02 $ 71.99 $ 70.52 $ 69.09
-------------------- -------------------- ------------------- --------------------
Net Assets $ 22,113 $ 13,701 $ 3,576 $ 630
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 8.89% 8.78% 8.62% 8.45%
1996
Units 321 223 53 9
Unit Value $ 67.06 $ 66.18 $ 64.93 $ 63.70
-------------------- -------------------- ------------------- --------------------
Net Assets $ 21,551 $ 14,761 $ 3,436 $ 584
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -0.39% -0.50% -0.65% -0.80%
1995
Units 358 238 59 8
Unit Value $ 67.32 $ 66.51 $ 65.36 $ 64.22
-------------------- -------------------- ------------------- --------------------
Net Assets $ 24,130 $ 15,815 $ 3,831 $ 530
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 26.75% 26.62% 26.43% 26.24%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
2004 Trust
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 224 193 57 0
Unit Value $ 14.78 $ 14.69 $ 14.56 $ 0.00
-------------------- -------------------- ------------------- --------------------
Net Assets $ 3,315 $ 2,830 $ 834 $ 0
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% N/A
Total Return -3.35% -3.45% -3.59% N/A
1998
Units 183 172 50 0
Unit Value $ 15.29 $ 15.21 $ 15.11 $ 0.00
-------------------- -------------------- ------------------- --------------------
Net Assets $ 2,801 $ 2,613 $ 755 $ 0
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% N/A
Total Return 10.75% 10.64% 10.47% N/A
1997
Units 220 166 49 0
Unit Value $ 13.80 $ 13.75 $ 13.67 $ 13.60
-------------------- -------------------- ------------------- --------------------
Net Assets $ 3,034 $ 2,282 $ 667 $ 5
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 9.50% 9.39% 9.22% 9.06%
1996
Units 257 230 71 2
Unit Value $ 12.61 $ 12.57 $ 12.52 $ 12.47
-------------------- -------------------- ------------------- --------------------
Net Assets $ 3,236 $ 2,890 $ 894 $ 24
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -0.81% -0.91% -1.06% -1.21%
1995
Units 230 128 84 2
Unit Value $ 12.71 $ 12.69 $ 12.65 $ 12.62
-------------------- -------------------- ------------------- --------------------
Net Assets $ 2,919 $ 1,623 $ 1,059 $ 21
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 27.79% 27.65% 27.46% 27.27%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
2005 Trust
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 181 89 11 1
Unit Value $ 58.19 $ 57.29 $ 56.01 $ 54.75
-------------------- -------------------- ------------------- --------------------
Net Assets $ 10,549 $ 5,107 $ 634 $ 31
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -4.95% -5.04% -5.19% -5.33%
1998
Units 197 114 18 1
Unit Value $ 61.22 $ 60.33 $ 59.07 $ 57.84
-------------------- -------------------- ------------------- --------------------
Net Assets $ 12,077 $ 6,859 $ 1,088 $ 36
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 11.63% 11.52% 11.35% 11.18%
1997
Units 214 118 19 1
Unit Value $ 54.84 $ 54.10 $ 53.05 $ 52.02
-------------------- -------------------- ------------------- --------------------
Net Assets $ 11,745 $ 6,397 $ 999 $ 34
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 10.55% 10.44% 10.27% 10.11%
1996
Units 215 119 26 1
Unit Value $ 49.60 $ 48.99 $ 48.11 $ 47.25
-------------------- -------------------- ------------------- --------------------
Net Assets $ 10,650 $ 5,837 $ 1,249 $ 33
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -1.51% -1.61% -1.76% -1.91%
1995
Units 247 110 22 1
Unit Value $ 50.36 $ 49.79 $ 48.97 $ 48.17
-------------------- -------------------- ------------------- --------------------
Net Assets $ 12,422 $ 5,491 $ 1,055 $ 51
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 30.21% 30.07% 29.88% 29.68%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
2006 Trust
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 62 79 6 33
Unit Value $ 32.21 $ 31.76 $ 31.11 $ 30.47
-------------------- -------------------- ------------------- --------------------
Net Assets $ 1,996 $ 2,503 $ 202 $ 999
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -6.77% -6.86% -7.00% -7.14%
1998
Units 62 83 4 33
Unit Value $ 34.55 $ 34.10 $ 33.45 $ 32.81
-------------------- -------------------- ------------------- --------------------
Net Assets $ 2,135 $ 2,847 $ 147 $ 1,094
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 13.06% 12.94% 12.77% 12.60%
1997
Units 59 102 7 34
Unit Value $ 30.56 $ 30.19 $ 29.66 $ 29.14
-------------------- -------------------- ------------------- --------------------
Net Assets $ 1,799 $ 3,092 $ 201 $ 987
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 11.53% 11.42% 11.25% 11.08%
1996
Units 67 131 9 34
Unit Value $ 27.40 $ 27.10 $ 26.66 $ 26.24
-------------------- -------------------- ------------------- --------------------
Net Assets $ 1,829 $ 3,559 $ 233 $ 902
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -2.05% -2.16% -2.31% -2.46%
1995
Units 42 99 10 3
Unit Value $ 27.97 $ 27.69 $ 27.29 $ 26.90
-------------------- -------------------- ------------------- --------------------
Net Assets $ 1,187 $ 2,753 $ 262 $ 94
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 32.75% 32.62% 32.42% 32.22%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
2007 Trust
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 100 190 20 0
Unit Value $ 34.18 $ 33.73 $ 33.09 $ 32.46
-------------------- -------------------- ------------------- --------------------
Net Assets $ 3,415 $ 6,406 $ 654 $ 6
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -8.12% -8.22% -8.35% -8.49%
1998
Units 119 211 26 0
Unit Value $ 37.20 $ 36.75 $ 36.11 $ 35.48
-------------------- -------------------- ------------------- --------------------
Net Assets $ 4,413 $ 7,737 $ 922 $ 10
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 13.85% 13.73% 13.56% 13.39%
1997
Units 123 218 26 0
Unit Value $ 32.67 $ 32.31 $ 31.80 $ 31.29
-------------------- -------------------- ------------------- --------------------
Net Assets $ 4,022 $ 7,055 $ 827 $ 9
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 12.40% 12.29% 12.12% 11.95%
1996
Units 113 201 17 0
Unit Value $ 29.07 $ 28.78 $ 28.36 $ 27.95
-------------------- -------------------- ------------------- --------------------
Net Assets $ 3,292 $ 5,781 $ 494 $ 9
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -2.73% -2.83% -2.98% -3.13%
1995
Units 109 210 25 0
Unit Value $ 29.89 $ 29.62 $ 29.23 $ 28.85
-------------------- -------------------- ------------------- --------------------
Net Assets $ 3,244 $ 6,205 $ 736 $ 10
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 35.14% 35.00% 34.80% 34.59%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
2008 Trust
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 198 284 55 2
Unit Value $ 31.81 $ 31.43 $ 30.88 $ 30.34
-------------------- -------------------- ------------------- --------------------
Net Assets $ 6,311 $ 8,923 $ 1,692 $ 60
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -9.62% -9.72% -9.85% -9.99%
1998
Units 224 314 65 2
Unit Value $ 35.20 $ 34.81 $ 34.26 $ 33.71
-------------------- -------------------- ------------------- --------------------
Net Assets $ 7,880 $ 10,945 $ 2,242 $ 68
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 14.61% 14.49% 14.31% 14.14%
1997
Units 239 353 83 4
Unit Value $ 30.72 $ 30.41 $ 29.97 $ 29.53
-------------------- -------------------- ------------------- --------------------
Net Assets $ 7,330 $ 10,747 $ 2,493 $ 114
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 13.42% 13.31% 13.14% 12.96%
1996
Units 264 392 94 2
Unit Value $ 27.08 $ 26.84 $ 26.49 $ 26.14
-------------------- -------------------- ------------------- --------------------
Net Assets $ 7,139 $ 10,529 $ 2,494 $ 58
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -3.35% -3.45% -3.59% -3.74%
1995
Units 311 433 97 3
Unit Value $ 28.02 $ 27.80 $ 27.48 $ 27.16
-------------------- -------------------- ------------------- --------------------
Net Assets $ 8,704 $ 12,040 $ 2,660 $ 75
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 37.11% 36.97% 36.77% 36.56%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
2009 Trust
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 174 78 34 4
Unit Value $ 28.37 $ 28.05 $ 27.60 $ 27.16
-------------------- -------------------- ------------------- --------------------
Net Assets $ 4,936 $ 2,184 $ 928 $ 109
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -10.57% -10.66% -10.80% -10.93%
1998
Units 172 82 38 4
Unit Value $ 31.72 $ 31.40 $ 30.95 $ 30.50
-------------------- -------------------- ------------------- --------------------
Net Assets $ 5,444 $ 2,566 $ 1,173 $ 129
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 15.04% 14.92% 14.75% 14.58%
1997
Units 198 85 40 4
Unit Value $ 27.57 $ 27.32 $ 26.97 $ 26.62
-------------------- -------------------- ------------------- --------------------
Net Assets $ 5,458 $ 2,316 $ 1,090 $ 113
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 14.26% 14.14% 13.97% 13.80%
1996
Units 222 94 50 4
Unit Value $ 24.13 $ 23.94 $ 23.66 $ 23.39
-------------------- -------------------- ------------------- --------------------
Net Assets $ 5,348 $ 2,257 $ 1,172 $ 96
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -3.98% -4.08% -4.23% -4.38%
1995
Units 223 108 60 4
Unit Value $ 25.13 $ 24.96 $ 24.71 $ 24.46
-------------------- -------------------- ------------------- --------------------
Net Assets $ 5,592 $ 2,704 $ 1,482 $ 94
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 39.12% 38.98% 38.77% 38.56%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
2010 Trust
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 82 97 16 14
Unit Value $ 27.16 $ 26.89 $ 26.50 $ 26.11
-------------------- -------------------- ------------------- --------------------
Net Assets $ 2,237 $ 2,620 $ 415 $ 374
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -11.22% -11.31% -11.44% -11.58%
1998
Units 102 114 17 32
Unit Value $ 30.59 $ 30.32 $ 29.92 $ 29.53
-------------------- -------------------- ------------------- --------------------
Net Assets $ 3,106 $ 3,452 $ 519 $ 946
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 15.03% 14.91% 14.73% 14.56%
1997
Units 102 118 18 37
Unit Value $ 26.60 $ 26.38 $ 26.08 $ 25.78
-------------------- -------------------- ------------------- --------------------
Net Assets $ 2,718 $ 3,122 $ 464 $ 947
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 15.11% 14.99% 14.82% 14.64%
1996
Units 94 165 26 32
Unit Value $ 23.10 $ 22.94 $ 22.71 $ 22.49
-------------------- -------------------- ------------------- --------------------
Net Assets $ 2,181 $ 3,776 $ 584 $ 725
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -4.45% -4.55% -4.70% -4.84%
1995
Units 90 171 21 28
Unit Value $ 24.18 $ 24.04 $ 23.83 $ 23.63
-------------------- -------------------- ------------------- --------------------
Net Assets $ 2,178 $ 4,116 $ 506 $ 670
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 41.03% 40.88% 40.67% 40.46%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
2011 Trust
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 48 9 4 1
Unit Value $ 22.53 $ 22.33 $ 22.04 $ 21.75
-------------------- -------------------- ------------------- --------------------
Net Assets $ 1,078 $ 210 $ 95 $ 13
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -11.73% -11.82% -11.96% -12.09%
1998
Units 53 13 5 1
Unit Value $ 25.53 $ 25.33 $ 25.03 $ 24.75
-------------------- -------------------- ------------------- --------------------
Net Assets $ 1,344 $ 332 $ 117 $ 15
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 14.84% 14.72% 14.55% 14.38%
1997
Units 48 13 3 1
Unit Value $ 22.23 $ 22.08 $ 21.85 $ 21.64
-------------------- -------------------- ------------------- --------------------
Net Assets $ 1,066 $ 288 $ 70 $ 14
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 16.24% 16.12% 15.94% 15.77%
1996
Units 53 15 3 1
Unit Value $ 19.12 $ 19.01 $ 18.85 $ 18.69
-------------------- -------------------- ------------------- --------------------
Net Assets $ 1,007 $ 294 $ 61 $ 12
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -4.57% -4.67% -4.81% -4.96%
1995
Units 44 18 11 0
Unit Value $ 20.04 $ 19.94 $ 19.80 $ 0.00
-------------------- -------------------- ------------------- --------------------
Net Assets $ 890 $ 353 $ 224 $ 0
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% N/A
Total Return 43.67% 43.52% 43.30% N/A
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
2013 Trust
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 9 40 12 2
Unit Value $ 16.51 $ 16.40 $ 16.23 $ 16.07
-------------------- -------------------- ------------------- --------------------
Net Assets $ 155 $ 650 $ 192 $ 35
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -13.21% -13.30% -13.43% -13.56%
1998
Units 11 47 13 2
Unit Value $ 19.02 $ 18.91 $ 18.75 $ 18.59
-------------------- -------------------- ------------------- --------------------
Net Assets $ 200 $ 884 $ 238 $ 41
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 14.66% 14.54% 14.37% 14.20%
1997
Units 8 45 11 2
Unit Value $ 16.59 $ 16.51 $ 16.39 $ 16.28
-------------------- -------------------- ------------------- --------------------
Net Assets $ 137 $ 751 $ 180 $ 33
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 18.70% 18.58% 18.40% 18.22%
1996
Units 15 48 10 2
Unit Value $ 13.98 $ 13.92 $ 13.85 $ 13.77
-------------------- -------------------- ------------------- --------------------
Net Assets $ 206 $ 671 $ 135 $ 26
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -5.54% -5.64% -5.78% -5.93%
1995
Units 51 35 10 2
Unit Value $ 14.80 $ 14.76 $ 14.70 $ 14.64
-------------------- -------------------- ------------------- --------------------
Net Assets $ 756 $ 522 $ 150 $ 25
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 47.64% 47.48% 47.26% 47.04%
</TABLE>
<PAGE>
4. UNIT VALUES(continued)
<TABLE>
<CAPTION>
2014 Trust
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 497 330 62 6
Unit Value $ 16.16 $ 16.06 $ 15.93 $ 15.79
-------------------- -------------------- ------------------- --------------------
Net Assets $ 8,036 $ 5,294 $ 995 $ 88
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -14.00% -14.09% -14.22% -14.35%
1998
Units 530 356 136 5
Unit Value $ 18.79 $ 18.70 $ 18.57 $ 18.44
-------------------- -------------------- ------------------- --------------------
Net Assets $ 9,950 $ 6,650 $ 2,525 $ 86
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 14.35% 14.23% 14.06% 13.88%
1997
Units 458 276 155 5
Unit Value $ 16.43 $ 16.37 $ 16.28 $ 16.19
-------------------- -------------------- ------------------- --------------------
Net Assets $ 7,517 $ 4,520 $ 2,526 $ 80
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 20.14% 20.01% 19.83% 19.65%
1996
Units 507 501 128 6
Unit Value $ 13.68 $ 13.64 $ 13.58 $ 13.53
-------------------- -------------------- ------------------- --------------------
Net Assets $ 6,939 $ 6,832 $ 1,740 $ 81
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -6.16% -6.26% -6.41% -6.55%
1995
Units 315 347 107 1
Unit Value $ 14.58 $ 14.55 $ 14.51 $ 14.48
-------------------- -------------------- ------------------- --------------------
Net Assets $ 4,596 $ 5,050 $ 1,560 $ 10
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return 47.93% 47.77% 47.55% 47.33%
</TABLE>
<PAGE>
4. UNITVALUES(continued)
<TABLE>
<CAPTION>
2019 Trust
1999
(In thousands, Contract Contract Contract Contract
except unit value) Type 1 Type 2 Type 3 Type 4
-------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Units 377 127 42 0
Unit Value $ 8.80 $ 8.79 $ 8.79 $ 8.78
-------------------- -------------------- ------------------- --------------------
Net Assets $ 3,315 $ 1,119 $ 372 $ 3
Expenses as a % of
Average Net Assets 0.84% 0.94% 1.09% 1.24%
Total Return -15.23% -15.33% -15.47% -15.61%
1998
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1997
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1996
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
1995
Units
Unit Value Division was not available
Net Assets
Expenses as a % of
Average Net Assets
Total Return
</TABLE>
<PAGE>
5. ALLOCATION OF INCOME TO SERIES
<TABLE>
<CAPTION>
The following table presents income by investment division for the year ended December 31, 1999:
(In thousands) Contract Contract Contract Contract
1999 Type 1 Type 2 Type 3 Type 4 Total
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Investments in Merrill Lynch Series Fund, Inc.:
Money Reserve Portfolio $ 7,731 $ 7,503 $ 1,281 $ 355 $ 16,870
Intermediate Government Bond Portfolio (1,471) (1,524) (283) (81) (3,359)
Long-Term Corporate Bond Portfolio (1,161) (1,119) (278) (69) (2,627)
Capital Stock Portfolio 35,285 29,472 6,326 2,893 73,976
Growth Stock Portfolio 57,805 50,150 10,290 3,899 122,144
Multiple Strategy Portfolio 52,629 138,642 7,150 2,965 201,386
High Yield Portfolio 1,236 1,946 240 59 3,481
Natural Resources Portfolio 834 866 223 128 2,051
Global Strategy Portfolio 10,546 12,908 3,002 1,232 27,688
Balanced Portfolio 2,395 2,868 759 417 6,439
Investments in Merrill Lynch Variable
Series Funds, Inc.:
Global Utility Focus Fund 376 262 77 10 725
International Equity Focus Fund 741 1,097 389 9 2,236
Global Bond Focus Fund 0 (77) (30) 0 (107)
Basic Value Focus Fund 3,082 3,897 715 118 7,812
Developing Capital Markets Focus Fund 902 956 172 56 2,086
Special Value Focus Fund 1,132 881 206 31 2,250
Index 500 Fund 0 3,840 588 129 4,557
Capital Focus Fund 0 2 0 0 2
Global Growth Focus Fund 0 341 54 16 411
Investments in Hotchkis & Wiley Variable Trust:
International VIP Portfolio 0 151 11 7 169
Investments in Mercury Asset Management V.I. Funds, Inc.
Mercury V.I. U.S. Large Cap Fund 0 358 83 6 447
Investments in Alliance Variable Products Series Fund, Inc.:
Quasar Portfolio 0 91 3 0 94
Premier Growth Portfolio 0 8,991 1,325 372 10,688
Investments in MFS Variable Insurance Trust:
MFS Emerging Growth Series 0 7,381 1,042 218 8,641
MFS Research Series 0 1,292 170 85 1,547
Investments in AIM Variable Insurance Funds, Inc.:
AIM V.I. Value Fund 0 3,638 599 249 4,486
AIM V.I. Capital Appreciation Fund 0 1,161 117 15 1,293
Investments in the Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series A through L:
1999 Trust 42 22 7 6 77
2000 Trust 449 219 38 4 710
2001 Trust 452 325 98 1 876
2002 Trust 6 5 0 (1) 10
2003 Trust (531) (356) (107) (22) (1,016)
2004 Trust (104) (92) (29) 0 (225)
2005 Trust (600) (301) (39) (2) (942)
2006 Trust (147) (188) (15) (78) (428)
2007 Trust (338) (638) (67) (1) (1,044)
2008 Trust (729) (1,040) (201) (7) (1,977)
2009 Trust (597) (267) (116) (14) (994)
2010 Trust (334) (394) (63) (61) (852)
2011 Trust (156) (31) (14) (2) (203)
2013 Trust (26) (111) (32) (6) (175)
2014 Trust (1,659) (1,096) (215) (18) (2,988)
2019 Trust 29 10 2 0 41
</TABLE>
<PAGE>
5. ALLOCATION OF INCOME TO SERIES (continued)
<TABLE>
<CAPTION>
The following table presents income by investment division for the year ended December 31, 1998:
(In thousands) Contract Contract Contract Contract
1998 Type 1 Type 2 Type 3 Type 4 Total
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Investments in Merrill Lynch Series Fund, Inc.:
Money Reserve Portfolio $ 8,295 $ 8,393 $ 1,442 $ 298 $ 18,428
Intermediate Government Bond Portfolio 6,496 6,363 1,159 279 14,297
Long-Term Corporate Bond Portfolio 3,152 2,918 662 124 6,856
Capital Stock Portfolio 15,211 13,332 2,920 1,304 32,767
Growth Stock Portfolio 40,688 36,667 7,277 2,820 87,452
Multiple Strategy Portfolio 28,185 73,951 4,038 1,527 107,701
High Yield Portfolio (1,509) (2,709) (377) (91) (4,686)
Natural Resources Portfolio (570) (717) (149) (89) (1,525)
Global Strategy Portfolio 4,923 6,756 1,454 585 13,718
Balanced Portfolio 3,765 4,667 1,087 614 10,133
Investments in Merrill Lynch Variable
Series Funds, Inc.:
Global Utility Focus Fund 478 489 91 0 1,058
International Equity Focus Fund 157 250 84 3 494
Global Bond Focus Fund 0 89 5 1 95
Basic Value Focus Fund 936 1,255 237 38 2,466
Developing Capital Markets Focus Fund (382) (734) (173) (75) (1,364)
Special Value Focus Fund (290) (276) (79) (8) (653)
Index 500 Fund 0 2,427 362 87 2,876
Investments in Alliance Variable Products Series Fund, Inc.:
Premier Growth Portfolio 0 4,115 571 158 4,844
Investments in MFS Variable Insurance Trust:
MFS Emerging Growth Series 0 1,186 185 32 1,403
MFS Research Series 0 636 76 45 757
Investments in AIM Variable Insurance Funds, Inc.:
AIM V.I. Value Fund 0 1,407 147 162 1,716
AIM V.I. Capital Appreciation Fund 0 214 26 3 243
Investments in the Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series A through K:
1998 Trust 82 101 27 3 213
1999 Trust 553 288 101 79 1,021
2000 Trust 714 429 77 7 1,227
2001 Trust 1,391 1,274 347 43 3,055
2002 Trust 258 264 116 80 718
2003 Trust 2,168 1,322 341 67 3,898
2004 Trust 277 257 73 0 607
2005 Trust 1,310 740 116 4 2,170
2006 Trust 264 345 17 131 757
2007 Trust 545 947 111 1 1,604
2008 Trust 1,076 1,483 300 9 2,868
2009 Trust 765 360 163 18 1,306
2010 Trust 407 448 67 120 1,042
2011 Trust 172 42 14 2 230
2013 Trust 25 107 28 5 165
2014 Trust 1,097 721 267 9 2,094
</TABLE>
<PAGE>
5. ALLOCATION OF INCOME TO SERIES (continued)
<TABLE>
<CAPTION>
The following table presents income by investment division for the year ended December 31, 1997:
(In thousands) Contract Contract Contract Contract
1997 Type 1 Type 2 Type 3 Type 4 Total
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Investments in Merrill Lynch Series Fund, Inc.:
Money Reserve Portfolio $ 8,746 $ 8,507 $ 1,364 $ 298 $ 18,915
Intermediate Government Bond Portfolio 5,792 5,820 1,034 263 12,909
Long-Term Corporate Bond Portfolio 3,379 2,832 651 172 7,034
Capital Stock Portfolio 21,058 18,924 4,346 1,845 46,173
Growth Stock Portfolio 26,384 25,232 4,964 1,952 58,532
Multiple Strategy Portfolio 46,962 125,844 6,754 2,646 182,206
High Yield Portfolio 2,901 5,333 667 150 9,051
Natural Resources Portfolio (643) (785) (149) (83) (1,660)
Global Strategy Portfolio 6,908 9,418 2,037 760 19,123
Balanced Portfolio 4,052 5,615 1,375 741 11,783
Investments in Merrill Lynch Variable
Series Funds, Inc.:
Global Utility Focus Fund 362 402 61 0 825
International Equity Focus Fund (129) (189) (95) (4) (417)
Global Bond Focus Fund 0 9 6 0 15
Basic Value Focus Fund 1,348 2,301 435 90 4,174
Developing Capital Markets Focus Fund (187) (223) (58) (20) (488)
Special Value Focus Fund 320 324 66 17 727
Index 500 Fund 0 561 53 4 618
Investments in Alliance Variable Products Series Fund, Inc.:
Premier Growth Portfolio 0 128 30 6 164
Investments in MFS Variable Insurance Trust:
MFS Emerging Growth Series 0 42 7 1 50
MFS Research Series 0 66 8 2 76
Investments in AIM Variable Insurance Funds, Inc.;
AIM V.I. Value Fund 0 86 12 4 102
AIM V.I. Capital Appreciation Fund 0 (5) (1) 0 (6)
Investments in the Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series A through K:
1997 Trust 56 84 21 1 162
1998 Trust 835 1,025 286 31 2,177
1999 Trust 540 293 107 87 1,027
2000 Trust 672 339 51 8 1,070
2001 Trust 1,303 1,164 299 37 2,803
2002 Trust 217 201 83 62 563
2003 Trust 1,872 1,139 294 51 3,356
2004 Trust 294 215 63 0 572
2005 Trust 1,140 614 93 3 1,850
2006 Trust 187 319 20 99 625
2007 Trust 440 765 89 1 1,295
2008 Trust 900 1,311 299 13 2,523
2009 Trust 714 301 139 14 1,168
2010 Trust 376 421 62 127 986
2011 Trust 149 40 10 2 201
2013 Trust 23 127 30 6 186
2014 Trust 1,402 819 469 15 2,705
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED
<TABLE>
<CAPTION>
Units issued and redeemed by the investment divisions during 1999, 1998 and 1997 were as follows:
Money Reserve Portfolio
Contract Contract Contract Contract
(In thousands) Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 6,226 6,091 1,077 278 13,672
Activity during 1997:
Issued 2,282 4,173 1,265 131 7,851
Redeemed (3,305) (5,000) (1,444) (199) (9,948)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 5,203 5,264 898 210 11,575
Activity during 1998:
Issued 2,605 4,877 1,033 150 8,665
Redeemed (2,735) (4,808) (960) (145) (8,648)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 5,073 5,333 971 215 11,592
Activity during 1999:
Issued 2,506 4,427 996 202 8,131
Redeemed (2,931) (5,029) (1,107) (166) (9,233)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 4,648 4,731 860 251 10,490
================ ================ ================ ================ ================
Intermediate Government Bond Portfolio
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ----------------- ---------------- ---------------- ----------------
Outstanding at January 1, 1997 1,844 1,901 313 81 4,139
Activity during 1997:
Issued 154 161 84 16 415
Redeemed (341) (344) (80) (13) (778)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 1,657 1,718 317 84 3,776
Activity during 1998:
Issued 321 407 82 6 816
Redeemed (325) (454) (81) (9) (869)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 1,653 1,671 318 81 3,723
Activity during 1999:
Issued 281 313 46 8 648
Redeemed (426) (484) (105) (16) (1,031)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 1,508 1,500 259 73 3,340
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION> Long-Term Corporate Bond Portfolio
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
(In thousands) ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 828 766 170 56 1,820
Activity during 1997:
Issued 137 117 34 2 290
Redeemed (160) (184) (36) (11) (391)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 805 699 168 47 1,719
Activity during 1998:
Issued 104 189 29 15 337
Redeemed (207) (220) (38) (29) (494)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 702 668 159 33 1,562
Activity during 1999:
Issued 74 94 16 10 194
Redeemed (134) (154) (27) (7) (322)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 642 608 148 36 1,434
================ ================ ================ ================ ================
Capital Stock Portfolio
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at January 1, 1997 1,529 1,375 350 143 3,397
Activity during 1997:
Issued 364 313 61 14 752
Redeemed (488) (397) (104) (22) (1,011)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 1,405 1,291 307 135 3,138
Activity during 1998:
Issued 212 248 39 6 505
Redeemed (330) (380) (82) (19) (811)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 1,287 1,159 264 122 2,832
Activity during 1999:
Issued 208 150 39 2 399
Redeemed (263) (255) (69) (13) (600)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 1,232 1,054 234 111 2,631
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION> Growth Stock Portfolio
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
(In thousands) ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 1,648 1,711 369 141 3,869
Activity during 1997:
Issued 848 900 406 30 2,184
Redeemed (752) (906) (429) (31) (2,118)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 1,744 1,705 346 140 3,935
Activity during 1998:
Issued 645 620 102 11 1,378
Redeemed (645) (718) (119) (19) (1,501)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 1,744 1,607 329 132 3,812
Activity during 1999:
Issued 463 459 88 16 1,026
Redeemed (441) (499) (85) (18) (1,043)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 1,766 1,567 332 130 3,795
================ ================ ================ ================ ================
Multiple Strategy Portfolio
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at January 1, 1997 7,217 19,894 1,094 432 28,637
Activity during 1997:
Issued 385 691 97 16 1,189
Redeemed (886) (2,236) (178) (40) (3,340)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 6,716 18,349 1,013 408 26,486
Activity during 1998:
Issued 365 725 39 13 1,142
Redeemed (883) (2,396) (108) (51) (3,438)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 6,198 16,678 944 370 24,190
Activity during 1999:
Issued 368 726 38 13 1,145
Redeemed (1,011) (2,464) (186) (44) (3,705)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 5,555 14,940 796 339 21,630
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION>
High Yield Portfolio
Contract Contract Contract Contract
(In thousands) Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 954 1,754 260 47 3,015
Activity during 1997:
Issued 236 897 182 15 1,330
Redeemed (272) (925) (219) (10) (1,426)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 918 1,726 223 52 2,919
Activity during 1998:
Issued 228 568 128 10 934
Redeemed (322) (829) (149) (13) (1,313)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 824 1,465 202 49 2,540
Activity during 1999:
Issued 118 382 139 2 641
Redeemed (251) (714) (192) (13) (1,170)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 691 1,133 149 38 2,011
================ ================ ================ ================ ================
Natural Resources Portfolio
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at January 1, 1997 782 819 127 74 1,802
Activity during 1997:
Issued 355 268 119 4 746
Redeemed (609) (438) (122) (9) (1,178)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 528 649 124 69 1,370
Activity during 1998:
Issued 213 316 47 10 586
Redeemed (344) (462) (66) (15) (887)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 397 503 105 64 1,069
Activity during 1999:
Issued 353 566 36 8 963
Redeemed (391) (689) (41) (13) (1,134)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 359 380 100 59 898
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION> Global Strategy Portfolio
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
(In thousands) ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 2,583 3,740 781 305 7,409
Activity during 1997:
Issued 427 659 130 26 1,242
Redeemed (588) (1,026) (162) (42) (1,818)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 2,422 3,373 749 289 6,833
Activity during 1998:
Issued 262 334 53 16 665
Redeemed (743) (978) (193) (52) (1,966)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 1,941 2,729 609 253 5,532
Activity during 1999:
Issued 182 144 54 7 387
Redeemed (380) (696) (143) (41) (1,260)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 1,743 2,177 520 219 4,659
================ ================ ================ ================ ================
Balanced Portfolio
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at January 1, 1997 1,097 1,589 379 204 3,269
Activity during 1997:
Issued 145 137 32 18 332
Redeemed (230) (298) (53) (24) (605)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 1,012 1,428 358 198 2,996
Activity during 1998:
Issued 213 280 37 9 539
Redeemed (187) (391) (79) (24) (681)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 1,038 1,316 316 183 2,854
Activity during 1999:
Issued 138 134 50 19 341
Redeemed (244) (304) (53) (23) (624)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 932 1,146 313 179 2,571
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION> Global Utility Focus Fund
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
(In thousands) ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 37 60 13 1 111
Activity during 1997:
Issued 130 390 38 0 558
Redeemed (35) (302) (28) (1) (366)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 132 148 23 0 303
Activity during 1998:
Issued 132 214 31 4 381
Redeemed (130) (223) (28) (4) (385)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 134 139 26 0 299
Activity during 1999:
Issued 91 69 12 4 176
Redeemed (67) (95) (5) 0 (167)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 158 113 33 4 308
================ ================ ================ ================ ================
International Equity Focus Fund
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at January 1, 1997 188 212 103 7 510
Activity during 1997:
Issued 282 867 584 23 1,756
Redeemed (251) (761) (528) (24) (1,564)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 219 318 159 6 702
Activity during 1998:
Issued 48 923 874 26 1,871
Redeemed (81) (941) (927) (28) (1,977)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 186 300 106 4 596
Activity during 1999:
Issued 78 868 834 32 1,812
Redeemed (102) (926) (853) (34) (1,915)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 162 242 87 2 493
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION>
Global Bond Focus Fund
Contract Contract Contract Contract
(In thousands) Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 0 0 0 0 0
Activity during 1997:
Issued 0 35 15 0 50
Redeemed 0 (13) 0 0 (13)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 0 22 15 0 37
Activity during 1998:
Issued 0 372 11 1 384
Redeemed 0 (233) (16) 0 (249)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 0 161 10 1 172
Activity during 1999:
Issued 0 108 0 0 108
Redeemed 0 (251) (3) (1) (255)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 0 18 7 0 25
================ ================ ================ ================ ================
Basic Value Focus Fund
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at January 1, 1997 267 493 131 45 936
Activity during 1997:
Issued 518 1,053 147 25 1,743
Redeemed (244) (615) (99) (31) (989)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 541 931 179 39 1,690
Activity during 1998:
Issued 439 637 75 9 1,160
Redeemed (264) (582) (61) (15) (922)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 716 986 193 33 1,928
Activity during 1999:
Issued 485 737 98 14 1,334
Redeemed (305) (574) (76) (11) (966)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 896 1,149 215 36 2,296
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION> Developing Capital Markets Focus Fund
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
(In thousands) ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 193 162 51 12 418
Activity during 1997:
Issued 355 857 366 25 1,603
Redeemed (316) (746) (348) (14) (1,424)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 232 273 69 23 597
Activity during 1998:
Issued 83 442 89 0 614
Redeemed (208) (507) (109) (2) (826)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 107 208 49 21 385
Activity during 1999:
Issued 737 633 100 15 1,485
Redeemed (560) (537) (94) (18) (1,209)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 284 304 55 18 661
================ ================ ================ ================ ================
Special Value Focus Fund
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at January 1, 1997 108 157 28 9 302
Activity during 1997:
Issued 354 635 55 8 1,052
Redeemed (264) (586) (40) (6) (896)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 198 206 43 11 458
Activity during 1998:
Issued 196 264 113 4 577
Redeemed (173) (263) (96) (9) (541)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 221 207 60 6 494
Activity during 1999:
Issued 225 115 60 15 415
Redeemed (221) (145) (78) (15) (459)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 225 177 42 6 450
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION> Index 500 Fund
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
(In thousands) ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 0 0 0 0 0
Activity during 1997:
Issued 0 926 133 9 1,068
Redeemed 0 (323) (76) (4) (403)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 0 603 57 5 665
Activity during 1998:
Issued 0 999 136 29 1,164
Redeemed 0 (778) (69) (4) (851)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 0 824 124 30 978
Activity during 1999:
Issued 0 1,124 295 33 1,452
Redeemed 0 (627) (214) (18) (859)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 0 1,321 205 45 1,571
================ ================ ================ ================ ================
Capital Focus Fund
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at January 1, 1997 0 0 0 0 0
Activity during 1997:
Issued 0 0 0 0 0
Redeemed 0 0 0 0 0
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 0 0 0 0 0
Activity during 1998:
Issued 0 0 0 0 0
Redeemed 0 0 0 0 0
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 0 0 0 0 0
Activity during 1999:
Issued 0 73 0 0 73
Redeemed 0 (30) 0 0 (30)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 0 43 0 0 43
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION>
Global Growth Focus Fund
Contract Contract Contract Contract
(In thousands) Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 0 0 0 0 0
Activity during 1997:
Issued 0 0 0 0 0
Redeemed 0 0 0 0 0
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 0 0 0 0 0
Activity during 1998:
Issued 0 0 0 0 0
Redeemed 0 0 0 0 0
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 0 0 0 0 0
Activity during 1999:
Issued 0 164 56 6 226
Redeemed 0 (42) (37) 0 (79)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 0 122 19 6 147
================ ================ ================ ================ ================
International V I P Portfolio
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at January 1, 1997 0 0 0 0 0
Activity during 1997:
Issued 0 0 0 0 0
Redeemed 0 0 0 0 0
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 0 0 0 0 0
Activity during 1998:
Issued 0 0 0 0 0
Redeemed 0 0 0 0 0
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 0 0 0 0 0
Activity during 1999:
Issued 0 1,155 377 27 1,559
Redeemed 0 (973) (363) (19) (1,355)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 0 182 14 8 204
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION> Mercury V.I. U.S. Large Cap Fund
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
(In thousands) ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 0 0 0 0 0
Activity during 1997:
Issued 0 0 0 0 0
Redeemed 0 0 0 0 0
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 0 0 0 0 0
Activity during 1998:
Issued 0 0 0 0 0
Redeemed 0 0 0 0 0
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 0 0 0 0 0
Activity during 1999:
Issued 0 380 50 4 434
Redeemed 0 (167) (1) 0 (168)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 0 213 49 4 266
================ ================ ================ ================ ================
Quasar Portfolio
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at January 1, 1997 0 0 0 0 0
Activity during 1997:
Issued 0 0 0 0 0
Redeemed 0 0 0 0 0
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 0 0 0 0 0
Activity during 1998:
Issued 0 0 0 0 0
Redeemed 0 0 0 0 0
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 0 0 0 0 0
Activity during 1999:
Issued 0 71 12 0 83
Redeemed 0 (6) (10) 0 (16)
---------------- ---------------- ---------------- ---------------- ---------------
Outstanding at December 31, 1999 0 65 2 0 67
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION> Premier Growth Portfolio
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
(In thousands) ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 0 0 0 0 0
Activity during 1997:
Issued 0 637 73 12 722
Redeemed 0 (358) (9) 0 (367)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 0 279 65 12 356
Activity during 1998:
Issued 0 2,068 242 29 2,339
Redeemed 0 (1,386) (173) (4) (1,563)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 0 961 134 37 1,132
Activity during 1999:
Issued 0 1,919 193 41 2,153
Redeemed 0 (1,195) (76) (7) (1,278)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 0 1,685 251 71 2,007
================ ================ ================ ================ ================
MFS Emerging Growth Series
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at January 1, 1997 0 0 0 0 0
Activity during 1997:
Issued 0 602 45 3 650
Redeemed 0 (415) (12) 0 (427)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 0 187 33 3 223
Activity during 1998:
Issued 0 561 45 14 620
Redeemed 0 (385) (21) (7) (413)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 0 363 57 10 430
Activity during 1999:
Issued 0 581 79 44 704
Redeemed 0 (251) (38) (33) (322)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 0 693 98 21 812
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION>
MFS Research Series
Contract Contract Contract Contract
(In thousands) Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 0 0 0 0 0
Activity during 1997:
Issued 0 212 31 5 248
Redeemed 0 (22) (6) 0 (28)
---------------- ---------------- ---------------- ---------------- ---------------
Outstanding at December 31, 1997 0 190 25 5 220
Activity during 1998:
Issued 0 324 23 45 392
Redeemed 0 (223) (13) (29) (265)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 0 291 35 21 347
Activity during 1999:
Issued 0 200 40 7 247
Redeemed 0 (103) (23) (2) (128)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 0 388 52 26 466
================ ================ ================ ================ ================
AIM V.I. Value Fund
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at January 1, 1997 0 0 0 0 0
Activity during 1997:
Issued 0 290 33 11 334
Redeemed 0 (55) (1) 0 (56)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 0 235 32 11 278
Activity during 1998:
Issued 0 328 31 40 399
Redeemed 0 (147) (19) (3) (169)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 0 416 44 48 508
Activity during 1999:
Issued 0 819 151 22 992
Redeemed 0 (266) (34) (2) (302)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 0 969 161 68 1,198
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION> AIM V.I. Capital Appreciation Fund
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
(In thousands) ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 0 0 0 0 0
Activity during 1997:
Issued 0 312 23 2 337
Redeemed 0 (214) (1) 0 (215)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 0 98 22 2 122
Activity during 1998:
Issued 0 280 1 0 281
Redeemed 0 (247) (7) 0 (254)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 0 131 16 2 149
Activity during 1999:
Issued 0 245 22 3 270
Redeemed 0 (122) (12) (2) (136)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 0 254 26 3 283
================ ================ ================ ================ ================
1997 Trust
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at January 1, 1997 646 1,029 282 15 1,972
Activity during 1997:
Issued 0 0 3 0 3
Redeemed (646) (1,029) (285) (15) (1,975)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 0 0 0 0 0
Activity during 1998:
Issued 0 0 0 0 0
Redeemed 0 0 0 0 0
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 0 0 0 0 0
Activity during 1999:
Issued 0 0 0 0 0
Redeemed 0 0 0 0 0
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 0 0 0 0 0
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION> 1998 Trust
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
(In thousands) ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 834 1,162 322 34 0
Activity during 1997:
Issued 78 93 16 0 0
Redeemed (154) (285) (57) (3) 0
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 758 970 281 31 0
Activity during 1998:
Issued 0 0 0 0 0
Redeemed (758) (970) (281) (31) 0
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 0 0 0 0 0
Activity during 1999:
Issued 0 0 0 0 0
Redeemed 0 0 0 0 0
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 0 0 0 0 0
================ ================ ================ ================ ================
1999 Trust
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at January 1, 1997 523 296 108 88 1,015
Activity during 1997:
Issued 77 23 2 0 102
Redeemed (114) (47) (7) (1) (169)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 486 272 103 87 948
Activity during 1998:
Issued 29 4 1 0 34
Redeemed 0 0 (2) (4) (6)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 515 276 102 83 976
Activity during 1999:
Issued 0 0 0 0 0
Redeemed (515) (276) (102) (83) (976)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 0 0 0 0 0
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION>
2000 Trust
Contract Contract Contract Contract
(In thousands) Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 550 337 47 8 942
Activity during 1997:
Issued 156 41 8 0 205
Redeemed (139) (83) (9) 0 (231)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 567 295 46 8 916
Activity during 1998:
Issued 141 66 26 0 233
Redeemed (174) (40) (13) (2) (229)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 534 321 59 6 920
Activity during 1999:
Issued 84 33 2 0 119
Redeemed (62) (69) (9) 0 (140)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 556 285 52 6 899
================ ================ ================ ================ ================
2001 Trust
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at January 1, 1997 484 447 117 14 1,062
Activity during 1997:
Issued 20 9 9 0 38
Redeemed (57) (45) (16) 0 (118)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 447 411 110 14 982
Activity during 1998:
Issued 20 40 6 0 66
Redeemed (60) (67) (7) 0 (134)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 407 384 109 14 914
Activity during 1999:
Issued 26 13 3 0 42
Redeemed (37) (77) (11) (12) (137)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 396 320 101 2 819
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION> 2002 Trust
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
(In thousands) ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 179 128 67 60 434
Activity during 1997:
Issued 61 70 16 0 147
Redeemed (48) (18) (7) (1) (74)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 192 180 76 59 507
Activity during 1998:
Issued 94 23 24 2 143
Redeemed (104) (16) (16) (1) (137)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 182 187 84 60 513
Activity during 1999:
Issued 28 23 3 0 54
Redeemed (56) (32) (6) (1) (95)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 154 178 81 59 472
================ ================ ================ ================ ================
2003 Trust
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at January 1, 1997 321 223 53 9 606
Activity during 1997:
Issued 27 6 2 0 35
Redeemed (45) (39) (4) 0 (88)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 303 190 51 9 553
Activity during 1998:
Issued 9 8 0 1 18
Redeemed (34) (24) (4) (1) (63)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 278 174 47 9 508
Activity during 1999:
Issued 19 5 4 0 28
Redeemed (60) (23) (5) 0 (88)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 237 156 46 9 448
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION> 2004 Trust
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
(In thousands) ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 257 230 71 2 560
Activity during 1997:
Issued 43 12 0 0 55
Redeemed (80) (76) (22) (2) (180)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 220 166 49 0 435
Activity during 1998:
Issued 45 10 2 0 57
Redeemed (82) (4) (1) 0 (87)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 183 172 50 0 405
Activity during 1999:
Issued 74 45 8 0 127
Redeemed (33) (24) (1) 0 (58)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 224 193 57 0 474
================ ================ ================ ================ ================
2005 Trust
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at January 1, 1997 215 119 26 1 361
Activity during 1997:
Issued 22 13 4 0 39
Redeemed (23) (14) (11) 0 (48)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 214 118 19 1 352
Activity during 1998:
Issued 23 6 2 0 31
Redeemed (40) (10) (3) 0 (53)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 197 114 18 1 330
Activity during 1999:
Issued 7 7 2 0 16
Redeemed (23) (32) (9) 0 (64)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 181 89 11 1 282
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION>
2006 Trust
Contract Contract Contract Contract
(In thousands) Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 67 131 9 34 241
Activity during 1997:
Issued 4 3 1 0 8
Redeemed (12) (32) (3) 0 (47)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 59 102 7 34 202
Activity during 1998:
Issued 7 13 2 0 22
Redeemed (4) (32) (5) (1) (42)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 62 83 4 33 182
Activity during 1999:
Issued 3 1 2 0 6
Redeemed (3) (5) 0 0 (8)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 62 79 6 33 180
================ ================ ================ ================ ================
2007 Trust
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ---------------
Outstanding at January 1, 1997 113 201 17 0 331
Activity during 1997:
Issued 20 38 10 0 68
Redeemed (10) (21) (1) 0 (32)
---------------- ---------------- ---------------- ---------------- ---------------
Outstanding at December 31, 1997 123 218 26 0 367
Activity during 1998:
Issued 8 8 1 0 17
Redeemed (12) (15) (1) 0 (28)
---------------- ---------------- ---------------- ---------------- ---------------
Outstanding at December 31, 1998 119 211 26 0 356
Activity during 1999:
Issued 2 9 1 0 12
Redeemed (21) (30) (7) 0 (58)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 100 190 20 0 310
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION> 2008 Trust
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
(In thousands) ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 264 392 94 2 752
Activity during 1997:
Issued 24 21 2 2 49
Redeemed (49) (60) (13) 0 (122)
---------------- ---------------- ---------------- ---------------- ---------------
Outstanding at December 31, 1997 239 353 83 4 679
Activity during 1998:
Issued 29 37 6 0 72
Redeemed (44) (76) (24) (2) (146)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 224 314 65 2 605
Activity during 1999:
Issued 9 13 2 0 24
Redeemed (35) (43) (12) 0 (90)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 198 284 55 2 539
================ ================ ================ ================ ================
2009 Trust
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at January 1, 1997 222 94 50 4 370
Activity during 1997:
Issued 4 4 1 0 9
Redeemed (28) (13) (11) 0 (52)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 198 85 40 4 327
Activity during 1998:
Issued 7 6 0 0 13
Redeemed (33) (9) (2) 0 (44)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 172 82 38 4 296
Activity during 1999:
Issued 29 7 1 0 37
Redeemed (27) (11) (5) 0 (43)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 174 78 34 4 290
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION> 2010 Trust
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
(In thousands) ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 94 165 26 32 317
Activity during 1997:
Issued 33 38 217 20 308
Redeemed (25) (85) (225) (15) (350)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 102 118 18 37 275
Activity during 1998:
Issued 14 17 68 8 107
Redeemed (14) (21) (69) (13) (117)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 102 114 17 32 265
Activity during 1999:
Issued 8 9 81 26 124
Redeemed (28) (26) (82) (44) (180)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 82 97 16 14 209
================ ================ ================ ================ ================
2011 Trust
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at January 1, 1997 53 15 3 1 72
Activity during 1997:
Issued 9 0 0 0 9
Redeemed (14) (2) 0 0 (16)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 48 13 3 1 65
Activity during 1998:
Issued 8 1 2 0 11
Redeemed (3) (1) 0 0 (4)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 53 13 5 1 72
Activity during 1999:
Issued 1 2 0 0 3
Redeemed (6) (6) (1) 0 (13)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 48 9 4 1 62
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION>
2013 Trust
Contract Contract Contract Contract
(In thousands) Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 15 48 10 2 75
Activity during 1997:
Issued 2 4 2 0 8
Redeemed (9) (7) (1) 0 (17)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 8 45 11 2 66
Activity during 1998:
Issued 3 4 3 0 10
Redeemed 0 (2) (1) 0 (3)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 11 47 13 2 73
Activity during 1999:
Issued 0 3 0 0 3
Redeemed (2) (10) (1) 0 (13)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 9 40 12 2 63
================ ================ ================ ================ ================
2014 Trust
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at January 1, 1997 507 501 128 6 1,142
Activity during 1997:
Issued 206 416 66 2 690
Redeemed (255) (641) (39) (3) (938)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 458 276 155 5 894
Activity during 1998:
Issued 286 1,005 93 0 1,384
Redeemed (214) (925) (112) 0 (1,251)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 530 356 136 5 1,027
Activity during 1999:
Issued 390 256 46 18 710
Redeemed (423) (282) (120) (17) (842)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 497 330 62 6 895
================ ================ ================ ================ ================
</TABLE>
<PAGE>
6. UNITS ISSUED AND REDEEMED (CONTINUED)
<TABLE>
<CAPTION> 2019 Trust
Contract Contract Contract Contract
Type 1 Type 2 Type 3 Type 4 Total
(In thousands) ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 0 0 0 0 0
Activity during 1997:
Issued 0 0 0 0 0
Redeemed 0 0 0 0 0
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1997 0 0 0 0 0
Activity during 1998:
Issued 0 0 0 0 0
Redeemed 0 0 0 0 0
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1998 0 0 0 0 0
Activity during 1999:
Issued 839 133 69 2 1,043
Redeemed (462) (6) (27) (2) (497)
---------------- ---------------- ---------------- ---------------- ----------------
Outstanding at December 31, 1999 377 127 42 0 546
================ ================ ================ ================ ================
</TABLE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
Merrill Lynch Life Insurance Company:
We have audited the accompanying balance sheets of Merrill Lynch
Life Insurance Company (the "Company"), a wholly owned subsidiary
of Merrill Lynch Insurance Group, Inc., as of December 31, 1999
and 1998, and the related statements of earnings, comprehensive
income, stockholder's equity, and cash flows for each of the
three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Company at
December 31, 1999 and 1998, and the results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1999 in conformity with generally accepted
accounting principles.
February 28, 2000
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
(Dollars in thousands, except common stock par value and shares)
<TABLE>
<CAPTION>
ASSETS 1999 1998
- ------ ------------ ------------
<S> <C> <C>
INVESTMENTS:
Fixed maturity securities, at estimated fair value
(amortized cost: 1999 - $2,228,921; 1998 - $2,504,599) $ 2,138,335 $ 2,543,097
Equity securities, at estimated fair value
(cost: 1999 - $214,153; 1998 - $162,710) 186,575 158,591
Trading account securities, at estimated fair value 22,212 17,280
Real estate held-for-sale 20,072 25,960
Policy loans on insurance contracts 1,159,163 1,139,456
------------ -----------
Total Investments 3,526,357 3,884,384
CASH AND CASH EQUIVALENTS 92,181 95,377
ACCRUED INVESTMENT INCOME 73,167 73,459
DEFERRED POLICY ACQUISITION COSTS 475,915 405,640
FEDERAL INCOME TAXES - DEFERRED 37,383 9,403
REINSURANCE RECEIVABLES 4,194 2,893
AFFILIATED RECEIVABLES - NET 287 -
RECEIVABLES FROM SECURITIES SOLD 566 14,938
OTHER ASSETS 47,437 46,512
SEPARATE ACCOUNTS ASSETS 12,860,562 10,571,489
------------ ------------
TOTAL ASSETS $17,118,049 $15,104,095
============ ============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY 1999 1998
- ------------------------------------ ------------ ------------
<S> <C> <C>
LIABILITIES:
POLICYHOLDER LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 3,587,867 $ 3,816,744
Claims and claims settlement expenses 85,696 63,925
------------ ------------
Total policyholder liabilities and accruals 3,673,563 3,880,669
OTHER POLICYHOLDER FUNDS 25,095 20,802
LIABILITY FOR GUARANTY FUND ASSESSMENTS 14,889 13,864
FEDERAL INCOME TAXES - CURRENT 12,806 15,840
AFFILIATED PAYABLES - NET - 822
PAYABLES FOR SECURITIES PURCHASED 339 10,541
UNEARNED POLICY CHARGE REVENUE 77,663 55,235
OTHER LIABILITIES 25,868 24,273
SEPARATE ACCOUNTS LIABILITIES 12,853,960 10,559,459
------------ ------------
Total Liabilities 16,684,183 14,581,505
------------ ------------
STOCKHOLDER'S EQUITY:
Common stock ($10 par value; authorized: 1,000,000 shares;
issued and outstanding: 1999 - 250,000 shares,
1998 - 200,000 shares) 2,500 2,000
Additional paid-in capital 347,324 347,324
Retained earnings 134,127 173,496
Accumulated other comprehensive loss (50,085) (230)
------------ ------------
Total Stockholder's Equity 433,866 522,590
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $17,118,049 $15,104,095
============ ============
</TABLE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 253,835 $ 272,038 $ 308,702
Net realized investment gains 8,875 12,460 13,289
Policy charge revenue 233,029 197,662 178,933
------------ ------------- ------------
Total Revenues 495,739 482,160 500,924
------------ ------------- ------------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 175,839 195,676 209,542
Market value adjustment expense 2,400 5,528 4,079
Policy benefits (net of reinsurance recoveries: 1999 - $14,175;
1998 - $9,761; 1997 - $10,439) 32,983 31,891 27,029
Reinsurance premium ceded 21,691 19,972 17,879
Amortization of deferred policy acquisition costs 65,607 44,835 72,111
Insurance expenses and taxes 53,377 51,735 49,105
------------ ------------ ------------
Total Benefits and Expenses 351,897 349,637 379,745
------------ ------------ ------------
Earnings Before Federal Income Tax Provision 143,842 132,523 121,179
FEDERAL INCOME TAX PROVISION (BENEFIT):
Current 48,846 40,535 52,705
Deferred (1,135) (773) (12,261)
------------ ------------ ------------
Total Federal Income Tax Provision 47,711 39,762 40,444
------------ ------------ ------------
NET EARNINGS $ 96,131 $ 92,761 $ 80,735
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
NET EARNINGS $ 96,131 $ 92,761 $ 80,735
------------ ------------ ------------
OTHER COMPREHENSIVE INCOME (LOSS):
Net unrealized gains (losses) on available-for-sale securities:
Net unrealized holding gains (losses) arising during the period (143,202) (31,718) 22,347
Reclassification adjustment for gains included in net earnings (8,347) (15,932) (12,390)
------------ ------------ ------------
Net unrealized gains (losses) on investment securities (151,549) (47,650) 9,957
Adjustments for:
Policyholder liabilities 31,959 14,483 10,094
Deferred policy acquisition costs 42,890 5,129 (822)
Deferred federal income taxes 26,845 9,813 (6,730)
------------ ------------ ------------
Total other comprehensive income (loss), net of tax (49,855) (18,225) 12,499
------------ ------------ ------------
COMPREHENSIVE INCOME $ 46,276 $ 74,536 $ 93,234
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in thousands, except common stock par value and shares)
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common paid-in Retained comprehensive stockholder's
stock capital earnings income (loss) equity
----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 $ 2,000 $ 402,937 $ 79,387 $ 5,496 $ 489,820
Dividend to Parent (55,613) (79,387) (135,000)
Net earnings 80,735 80,735
Other comprehensive income, net of tax 12,499 12,499
----------- ----------- ----------- ------------- -------------
BALANCE, DECEMBER 31, 1997 2,000 347,624 80,735 17,995 448,054
Net earnings 92,761 92,761
Other comprehensive loss, net of tax (18,225) (18,225)
----------- ----------- ----------- ------------- -------------
BALANCE, DECEMBER 31, 1998 2,000 347,324 173,496 (230) 522,590
Stock dividend paid to parent
($10 par value, 500 shares) 500 (500) -
Cash dividend paid to parent (135,000) (135,000)
Net earnings 96,131 96,131
Other comprehensive loss, net of tax (49,855) (49,855)
----------- ----------- ----------- ------------- -------------
BALANCE, DECEMBER 31, 1999 $ 2,500 $ 347,324 $ 134,127 $ (50,085) $ 433,866
=========== =========== =========== ============= =============
</TABLE>
See accompanying notes to financial statements.
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 96,131 $ 92,761 $ 80,735
Noncash items included in earnings:
Amortization of deferred policy acquisition costs 65,607 44,835 72,111
Capitalization of policy acquisition costs (92,992) (80,241) (71,577)
Amortization (accretion) of investments (1,649) (5,350) (4,672)
Interest credited to policyholders' account balances 175,839 195,676 209,542
Benefit for deferred Federal income tax (1,135) (773) (12,261)
(Increase) decrease in operating assets:
Trading account securities (154) (287) (14,928)
Accrued investment income 292 4,765 7,962
Affiliated receivables (287) 166 (166)
Other (2,230) 1,565 (5,470)
Increase (decrease) in operating liabilities:
Claims and claims settlement expenses 21,771 13,351 10,908
Other policyholder funds 4,293 (6,358) 7,740
Liability for guaranty fund assessments 1,025 (1,510) (3,399)
Federal income taxes - current (3,034) (8,598) 3,470
Affiliated payables (822) 822 (6,164)
Unearned policy charge revenue 22,428 23,133 11,269
Other 1,595 1,941 5,922
Other operating activities:
Net realized investment gains (excluding gains on cash and
cash equivalents) (8,892) (12,460) (13,289)
------------ ------------ ------------
Net cash and cash equivalents provided by operating activities 277,786 263,438 277,733
------------ ------------ ------------
Cash Flow From Investing Activities:
Proceeds from (payments for):
Sales of available-for-sale securities 595,836 893,619 846,041
Maturities of available-for-sale securities 378,914 451,759 595,745
Purchases of available-for-sale securities (748,436) (1,028,086) (1,156,222)
Mortgage loans principal payments received - - 68,864
Purchases of mortgage loans - - (5,375)
Sales of real estate held-for-sale 13,282 14,135 6,060
Policy loans on insurance contracts (19,707) (21,317) (26,068)
Recapture of investment in separate accounts 12,267 - 11,026
Investment in separate accounts (5,381) (12,000) (21)
------------ ------------ ------------
Net cash and cash equivalents provided by investing activities 226,775 298,110 340,050
------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements. (Continued)
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Continued) (Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Financing Activities:
Proceeds from (payments for):
Dividends paid to parent $ (135,000) $ - $ (135,000)
Policyholder deposits 1,196,120 1,042,509 1,101,934
Policyholder withdrawals (including transfers to/from separate (1,568,877) (1,595,068) (1,593,320)
accounts) ------------ ------------ ------------
Net cash and cash equivalents used by financing activities: (507,757) (552,559) (626,386)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,196) 8,989 (8,603)
CASH AND CASH EQUIVALENTS
Beginning of year 95,377 86,388 94,991
------------ ------------ ------------
End of year $ 92,181 $ 95,377 $ 86,388
============ ============ ============
Supplementary Disclosure of Cash Flow Information:
Cash paid to affiliates for:
Federal income taxes $ 51,880 $ 49,133 $ 49,235
Interest 688 860 842
</TABLE>
See accompanying notes to financial statements.
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Merrill Lynch Insurance Group,Inc.)
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business: Merrill Lynch Life Insurance Company
(the "Company") is a wholly owned subsidiary of Merrill Lynch
Insurance Group, Inc. ("MLIG"). The Company is an indirect
wholly owned subsidiary of Merrill Lynch & Co., Inc. ("Merrill
Lynch & Co.").
The Company sells non-participating life insurance and annuity
products including variable life insurance, variable annuities,
market value adjusted annuities and immediate annuities. The
Company is currently licensed to sell insurance in forty-nine
states, the District of Columbia, Puerto Rico, the U.S. Virgin
Islands and Guam. The Company markets its products solely
through the retail network of Merrill Lynch, Pierce, Fenner &
Smith, Incorporated ("MLPF&S"), a wholly owned broker-dealer
subsidiary of Merrill Lynch & Co.
Basis of Reporting: The accompanying financial statements have
been prepared in conformity with generally accepted accounting
principles and prevailing industry practices, both of which
require management to make estimates that affect the reported
amounts and disclosure of contingencies in the financial
statements. Actual results could differ from those estimates.
For the purpose of reporting cashflows, cash and cash
equivalents include cash on hand and on deposit and short-term
investments with original maturities of three months or less.
To facilitate comparisons with the current year, certain
amounts in the prior years have been reclassified.
Revenue Recognition: Revenues for the Company's interest-
sensitive life, interest-sensitive annuity, variable life and
variable annuity products consist of policy charges for
mortality risks and the cost of insurance, deferred sales
charges, policy administration charges and/or withdrawal
charges assessed against policyholders' account balances during
the period.
Investments: The Company's investments in debt and equity
securities are classified as either available-for-sale or
trading and are reported at estimated fair value. Unrealized
gains and losses on available-for-sale securities are included
in stockholder's equity as a component of accumulated other
comprehensive loss, net of tax. Unrealized gains and losses on
trading account securities are included in net realized
investment gains (losses). If management determines that a
decline in the value of a security is other-than-temporary, the
carrying value is adjusted to estimated fair value and the
decline in value is recorded as a net realized investment loss.
For fixed maturity securities, premiums are amortized to the
earlier of the call or maturity date, discounts are accreted to
the maturity date, and interest income is accrued daily. For
equity securities, dividends are recognized on the ex-dividend
date. Realized gains and losses on the sale or maturity of the
investments are determined on the basis of specific
identification. Investment transactions are recorded on the
trade date.
Certain fixed maturity securities are considered non-investment
grade. The Company defines non-investment grade fixed maturity
securities as unsecured debt obligations that do not have a
rating equivalent to Standard and Poor's (or similar rating
agency) BBB- or higher.
All outstanding mortgage loans were repaid during 1997. The
Company recognized income from mortgage loans based on the cash
payment interest rate of the loan, which may have been
different from the accrual interest rate of the loan for
certain mortgage loans. The Company recognized a realized gain
at the date of the satisfaction of the loan at contractual
terms for loans where there was a difference between the cash
payment interest rate and the accrual interest rate. For all
loans the Company stopped accruing income when an interest
payment default either occurred or was probable. Impairments of
mortgage loans were established as valuation allowances and
recorded as a net realized investment loss.
Real estate held-for-sale is stated at estimated fair value
less estimated selling costs.
Policy loans on insurance contracts are stated at unpaid
principal balances.
Investments in limited partnerships are carried at cost.
Deferred Policy Acquisition Costs: Policy acquisition costs for
life and annuity contracts are deferred and amortized based on
the estimated future gross profits for each group of contracts.
These future gross profit estimates are subject to periodic
evaluation by the Company, with necessary revisions applied
against amortization to date. The impact of these revisions on
cumulative amortization is recorded as a charge or credit to
current operations. It is reasonably possible that estimates of
future gross profits could be reduced in the future, resulting
in a material reduction in the carrying amount of deferred
policy acquisition costs.
Policy acquisition costs are principally commissions and a
portion of certain other expenses relating to policy
acquisition, underwriting and issuance that are primarily
related to and vary with the production of new business.
Insurance expenses and taxes reported in the statements of
earnings are net of amounts deferred. Policy acquisition costs
can also arise from the acquisition or reinsurance of existing
in-force policies from other insurers. These costs include
ceding commissions and professional fees related to the
reinsurance assumed. The deferred costs are amortized in
proportion to the estimated future gross profits over the
anticipated life of the acquired insurance contracts utilizing
an interest methodology.
During 1990, the Company entered into an assumption
reinsurance agreement with an unaffiliated insurer. The
acquisition costs relating to this agreement are being
amortized over a twenty-five year period using an effective
interest rate of 7.5%. This reinsurance agreement provides for
payment of contingent ceding commissions based upon the
persistency and mortality experience of the insurance contracts
assumed. Any payments made for the contingent ceding
commissions are capitalized and amortized using an identical
methodology as that used for the initial acquisition costs. The
following is a reconciliation of the acquisition costs related
to the reinsurance agreement for the years ended December 31:
1999 1998 1997
---------- ---------- ----------
Beginning balance $ 101,793 $ 102,252 $ 112,249
Capitalized amounts 11,759 6,085 5,077
Interest accrued 7,634 7,669 9,653
Amortization (19,112) (14,213) (24,727)
---------- ---------- ----------
Ending balance $ 102,074 $ 101,793 $ 102,252
========== ========== ==========
The following table presents the expected amortization, net of
interest accrued, of these deferred acquisition costs over the
next five years. The amortization may be adjusted based on
periodic evaluation of the expected gross profits on the
reinsured policies.
2000 $6,110
2001 $5,670
2002 $5,400
2003 $5,386
2004 $5,619
Separate Accounts: Separate Accounts are established in
conformity with Arkansas State Insurance law, the Company's
domiciliary state, and are generally not chargeable with
liabilities that arise from any other business of the Company.
Separate Accounts assets may be subject to general claims of
the Company only to the extent the value of such assets exceeds
Separate Accounts liabilities. At December 31, 1999 and 1998,
the Company's Separate Accounts assets exceeded Separate
Accounts liabilities by $6,602 and $12,030, respectively. This
excess represents the Company's temporary investment in certain
Separate Accounts investment divisions that were made to
facilitate the establishment of those investment divisions.
Net investment income and net realized and unrealized gains
(losses) attributable to Separate Accounts assets accrue
directly to the policyholder and are not reported as revenue in
the Company's Statement of Earnings.
Assets and liabilities of Separate Accounts, representing net
deposits and accumulated net investment earnings less fees,
held primarily for the benefit of policyholders, are shown as
separate captions in the balance sheets.
Policyholders' Account Balances: Liabilities for the Company's
universal life type contracts, including its life insurance and
annuity products, are equal to the full accumulation value of
such contracts as of the valuation date plus deficiency
reserves for certain products. Interest-crediting rates for the
Company's fixed-rate products are as follows:
Interest-sensitive life products 4.00% - 4.85%
Interest-sensitive deferred annuities 3.60% - 8.61%
Immediate annuities 3.00% - 10.00%
These rates may be changed at the option of the Company,
subject to minimum guarantees, after initial guaranteed rates
expire.
Claims and Claims Settlement Expenses: Liabilities for claims
and claims settlement expenses equal the death benefit for
claims that have been reported to the Company and an estimate
based upon prior experience for unreported claims.
Additionally, the Company has established a mortality benefit
accrual for its variable annuity products.
Income Taxes: The results of operations of the Company are
included in the consolidated Federal income tax return of
Merrill Lynch & Co. The Company has entered into a tax-sharing
agreement with Merrill Lynch & Co. whereby the Company will
calculate its current tax provision based on its operations.
Under the agreement, the Company periodically remits to Merrill
Lynch & Co. its current Federal income tax liability.
The Company uses the asset and liability method in providing
income taxes on all transactions that have been recognized in
the financial statements. The asset and liability method
requires that deferred taxes be adjusted to reflect the tax
rates at which future taxable amounts will be settled or
realized. The effects of tax rate changes on future deferred
tax liabilities and deferred tax assets, as well as other
changes in income tax laws, are recognized in net earnings in
the period such changes are enacted. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amounts expected to be realized.
Insurance companies are generally subject to taxes on premiums
and in substantially all states are exempt from state income
taxes.
Unearned Policy Charge Revenue: Certain variable life insurance
products contain policy charges that are assessed at policy
issuance. These policy charges are deferred and amortized into
policy charge revenue based on the estimated future gross
profits for each group of contracts. The Company records a
liability equal to the unamortized balance of these policy
charges.
Accounting Pronouncements: In June 1999, the Financial
Accounting Standards Board deferred for one year the effective
date of the accounting and reporting requirements of SFAS No.
133, Accounting for Derivative Instruments and Hedging
Activities. The Company will adopt the provisions of SFAS No.
133 on January 1, 2001. The adoption of the standard is not
expected to have a material impact on the Company's financial
position or results of operations.
NOTE 2. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments are carried at fair value or amounts that
approximate fair value. The carrying value of financial
instruments as of December 31 were:
1999 1998
------------ ------------
Assets:
Fixed maturity securities (1) $ 2,138,335 $ 2,543,097
Equity securities (1), (2) 186,575 158,591
Trading account securities (1) 22,212 17,280
Policy loans on insurance contracts (3) 1,159,163 1,139,456
Cash and cash equivalents (4) 92,181 95,377
Separate Accounts assets (5) 12,860,562 10,571,489
------------ ------------
Total financial instruments $16,459,028 $14,525,290
============ ============
(1) For publicly traded securities, the estimated fair value is
determined using quoted market prices. For securities without a
readily ascertainable market value, the Company utilizes pricing
services and broker quotes. Such estimated fair values do not
necessarily represent the values for which these securities could
have been sold at the dates of the balance sheets. At December
31, 1999 and 1998, securities without a readily ascertainable
market value, having an amortized cost of $440,947 and $376,993,
had an estimated fair value of $417,710 and $375,470,
respectively.
(2) The Company has investments in two limited partnerships that
do not have readily ascertainable market values. Management has
estimated the fair value as equal to cost based on the review of
the underlying investments of the partnerships. At December 31,
1999 and 1998, the Company's limited partnership investments were
$10,427 and $11,569, respectively.
(3) The Company estimates the fair value of policy loans as
equal to the book value of the loans. Policy loans are fully
collateralized by the account value of the associated insurance
contracts, and the spread between the policy loan interest rate
and the interest rate credited to the account value held as
collateral is fixed.
(4) The estimated fair value of cash and cash equivalents
approximates the carrying value.
(5) Assets held in Separate Accounts are carried at the net
asset value provided by the fund managers.
NOTE 3. INVESTMENTS
The amortized cost and estimated fair value of investments in
fixed maturity securities and equity securities (excluding
trading account securities) as of December 31 were:
<TABLE>
<CAPTION>
1999
---------------------------------------------------------
Cost/ Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Fixed maturity securities:
Corporate debt securities $ 1,912,965 $ 8,778 $ 85,108 $ 1,836,635
Mortgage-backed securities 119,195 1,760 1,036 119,919
U.S. Government and agencies 149,835 408 12,306 137,937
Foreign governments 25,290 61 2,969 22,382
Municipals 21,636 152 326 21,462
------------ ------------ ------------ ------------
Total fixed maturity securities $ 2,228,921 $ 11,159 $ 101,745 $ 2,138,335
============ ============ ============ ============
Equity securities:
Non-redeemable preferred stocks $ 203,726 $ 43 $ 27,621 $ 176,148
Limited partnerships 10,427 - - 10,427
------------ ------------ ------------ ------------
Total equity securities $ 214,153 $ 43 $ 27,621 $ 186,575
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
1998
---------------------------------------------------------
Cost/ Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Fixed maturity securities:
Corporate debt securities $ 2,079,867 $ 56,703 $ 29,078 $ 2,107,492
Mortgage-backed securities 229,197 7,908 43 237,062
U.S. Government and agencies 150,500 6,393 1,328 155,565
Foreign governments 21,157 35 2,996 18,196
Municipals 23,878 905 1 24,782
------------ ------------ ------------ ------------
Total fixed maturity securities $ 2,504,599 $ 71,944 $ 33,446 $ 2,543,097
============ ============ ============ ============
Equity securities:
Non-redeemable preferred stocks $ 151,130 $ 699 $ 4,823 $ 147,006
Limited partnerships 11,569 - - 11,569
Common stocks 11 5 - 16
------------ ------------ ------------ ------------
Total equity securities $ 162,710 $ 704 $ 4,823 $ 158,591
============ ============ ============ ============
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities at December 31, 1999 by contractual maturity were:
Estimated
Amortized Fair
Cost Value
Fixed maturity securities: ----------- -----------
Due in one year or less $ 250,435 $ 250,396
Due after one year through five years 935,856 912,037
Due after five years through ten years 563,026 524,231
Due after ten years 360,409 331,752
----------- -----------
2,109,726 2,018,416
Mortgage-backed securities 119,195 119,919
----------- -----------
Total fixed maturity securities $2,228,921 $2,138,335
=========== ===========
Fixed maturity securities not due at a single maturity date
have been included in the preceding table in the year of final
maturity. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment
penalties.
The amortized cost and estimated fair value of fixed maturity
securities at December 31, 1999 by rating agency equivalent
were:
Estimated
Amortized Fair
Cost Value
----------- -----------
AAA $ 396,644 $ 380,538
AA 196,792 188,710
A 670,531 645,929
BBB 884,446 847,858
Non-investment grade 80,508 75,300
----------- -----------
Total fixed maturity securities $2,228,921 $2,138,335
=========== ===========
The Company has recorded certain adjustments to deferred policy
acquisition costs and policyholders' account balances in
connection with unrealized holding gains or losses on
investments classified as available-for-sale. The Company
adjusts those assets and liabilities as if the unrealized
holding gains or losses had actually been realized, with
corresponding credits or charges reported in accumulated other
comprehensive loss, net of taxes. The components of net
unrealized gains (losses) included in accumulated other
comprehensive loss at December 31 were as follows:
1999 1998
------------ -----------
Assets:
Fixed maturity securities $ (90,586) $ 38,498
Equity securities (27,578) (4,119)
Deferred policy acquisition costs 42,567 (323)
Federal income taxes - deferred 26,969 124
Other assets (4) -
Separate Accounts assets 1,028 30
------------ -----------
(47,604) 34,210
------------ -----------
Liabilities:
Policyholders' account balances 2,481 34,440
------------ -----------
Stockholder's equity:
Accumulated other comprehensive loss $ (50,085) $ (230)
============ ===========
The Company maintains a trading portfolio comprised of
convertible debt and equity securities. The net unrealized
holdings gains on trading account securities included in net
realized investment gains were $3,112, $932 and $520 at
December 31, 1999, 1998 and 1997, respectively.
Proceeds and gross realized investment gains and losses from
the sale of available-for-sale securities for the years ended
December 31 were:
1999 1998 1997
---------- ---------- ----------
Proceeds $ 595,836 $ 893,619 $ 846,041
Gross realized investment gains 12,196 20,232 16,783
Gross realized investment losses 15,936 17,429 7,193
The Company had investment securities with a carrying value
of $24,697 and $27,189 that were deposited with insurance
regulatory authorities at December 31, 1999 and 1998,
respectively.
Excluding investments in U.S. Government and Agencies the
Company is not exposed to any significant concentration of
credit risk in its fixed maturity securities portfolio.
Net investment income arose from the following sources for the
years ended December 31:
1999 1998 1997
---------- ---------- ----------
Fixed maturity securities $ 170,376 $ 202,313 $ 236,325
Equity securities 16,630 9,234 3,020
Mortgage loans - - 4,627
Real estate held-for-sale 3,792 2,264 1,939
Policy loans on insurance contracts 60,445 59,236 57,998
Cash and cash equivalents 7,995 3,912 9,570
Other 88 761 709
---------- ---------- ----------
Gross investment income 259,326 277,720 314,188
Less investment expenses (5,491) (5,682) (5,486)
---------- ---------- ----------
Net investment income $ 253,835 $ 272,038 $ 308,702
========== ========== ==========
Net realized investment gains (losses), including changes in
valuation allowances for the years ended December 31 were as follows:
1999 1998 1997
---------- ---------- ----------
Fixed maturity securities $ (3,721) $ 2,617 $ 6,149
Equity securities (19) 186 3,441
Trading account securities 4,778 1,368 697
Investment in Separate Accounts 460 - 1,005
Mortgage loans - - 6,252
Real estate held-for-sale 7,394 8,290 (4,252)
Cash and cash equivalents (17) (1) (3)
---------- ---------- ----------
Net realized investment gains $ 8,875 $ 12,460 $ 13,289
========== ========== ==========
NOTE 4. FEDERAL INCOME TAXES
The following is a reconciliation of the provision for income
taxes based on earnings before income taxes, computed using the
Federal statutory tax rate, with the provision for income taxes
for the years ended December 31:
1999 1998 1997
--------- --------- ---------
Provision for income taxes
computed at Federal stautory rate $ 50,345 $ 46,383 $ 42,413
Decrease in income taxes resulting from:
Dividend received deduction (1,594) (3,664) (1,969)
Foreign tax credit (1,040) (2,957) -
--------- --------- ---------
Federal income tax provision $ 47,711 $ 39,762 $ 40,444
========= ========= =========
The Federal statutory rate for each of the three years in the
period ended December 31, 1999 was 35%.
The Company provides for deferred income taxes resulting from
temporary differences that arise from recording certain
transactions in different years for income tax reporting
purposes than for financial reporting purposes. The sources of
these differences and the tax effect of each are as follows:
1999 1998 1997
---------- ---------- ----------
Deferred policy acquisition costs $ 8,822 $ 11,062 $ (2,422)
Policyholders' account balances (9,635) (10,950) (16,099)
Liability for guaranty fund assessments (359) 529 1,190
Investment adjustments (27) (1,350) 5,070
Other 64 (64) -
---------- ---------- ----------
Deferred Federal income tax benefit $ (1,135) $ (773) $ (12,261)
========== ========== ==========
Deferred tax assets and liabilities as of December 31 are
determined as follows:
1999 1998
----------- -----------
Deferred tax assets:
Policyholders' account balances $ 115,767 $ 106,132
Investment adjustments 1,978 1,951
Liability for guaranty fund assessments 5,211 4,852
Net unrealized investment loss on
investment securities 26,969 124
---------- -----------
Total deferred tax assets 149,925 113,059
----------- -----------
Deferred tax liabilities:
Deferred policy acquisition costs 108,554 99,732
Other 3,988 3,924
----------- -----------
Total deferred tax liabilities 112,542 103,656
----------- -----------
Net deferred tax asset $ 37,383 $ 9,403
=========== ===========
The Company anticipates that all deferred tax assets will be
realized; therefore no valuation allowance has been provided.
NOTE 5. REINSURANCE
In the normal course of business, the Company seeks to limit
its exposure to loss on any single insured life and to recover
a portion of benefits paid by ceding reinsurance to other
insurance enterprises or reinsurers under indemnity reinsurance
agreements, primarily excess coverage and coinsurance
agreements. The maximum amount of mortality risk retained by
the Company is approximately $500 on single life policies and
$750 on joint life policies.
Indemnity reinsurance agreements do not relieve the Company
from its obligations to policyholders. Failure of reinsurers to
honor their obligations could result in losses to the Company.
The Company regularly evaluates the financial condition of its
reinsurers so as to minimize its exposure to significant losses
from reinsurer insolvencies. The Company holds collateral under
reinsurance agreements in the form of letters of credit and
funds withheld totaling $686 that can be drawn upon for
delinquent reinsurance recoverables.
As of December 31, 1999 the Company had the following life
insurance inforce:
<TABLE>
<CAPTION>
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed to
amount companies companies amount net
------------ ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Life insurance in force $14,356,639 $ 3,670,860 $ 2,001 $10,687,780 0.02%
</TABLE>
The Company has entered into an indemnity reinsurance agreement
with an unaffiliated insurer whereby the Company coinsures, on
a modified coinsurance basis, 50% of the unaffiliated insurer's
variable annuity premiums sold through the Merrill Lynch & Co.
distribution system.
NOTE 6. RELATED PARTY TRANSACTIONS
The Company and MLIG are parties to a service agreement whereby
MLIG has agreed to provide certain accounting, data processing,
legal, actuarial, management, advertising and other services to
the Company. Expenses incurred by MLIG in relation to this
service agreement are reimbursed by the Company on an allocated
cost basis. Charges billed to the Company by MLIG pursuant to
the agreement were $43,410, $43,179 and $43,028 for the years
ended December 31, 1999, 1998 and 1997, respectively. Charges
attributable to this agreement are included in insurance
expenses and taxes, except for investment related expenses,
which are included in net investment income. The Company is
allocated interest expense on its accounts payable to MLIG that
approximates the daily Federal funds rate. Total intercompany
interest incurred was $688, $860 and $842 for 1999, 1998 and
1997, respectively. Intercompany interest is included in net
investment income.
The Company and Merrill Lynch Asset Management, L.P. ("MLAM")
are parties to a service agreement whereby MLAM has agreed to
provide certain invested asset management services to the
Company. The Company pays a fee to MLAM for these services
through the MLIG service agreement. Charges attributable to
this agreement and allocated to the Company by MLIG were
$1,823, $1,915 and $1,913 for 1999, 1998 and 1997,
respectively.
MLIG has entered into agreements with MLAM and Hotchkis & Wiley
("H&W"), a division of MLAM, with respect to administrative
services for the Merrill Lynch Series Fund, Inc., Merrill Lynch
Variable Series Funds, Inc., and Hotchkis & Wiley Variable
Trust (collectively, "the Funds"). The Company invests in the
various mutual fund portfolios of the Funds in connection with
the variable life insurance and annuity contracts the Company
has inforce. Under this agreement, MLAM and H&W pay
compensation to MLIG in an amount equal to a portion of the
annual gross investment advisory fees paid by the Funds to MLAM
and H&W. The Company received from MLIG its allocable share of
such compensation in the amount of $21,630, $20,289 and $19,057
during 1999, 1998 and 1997, respectively. Revenue attributable
to these agreements is included in policy charge revenue.
The Company has a general agency agreement with Merrill Lynch
Life Agency Inc. ("MLLA") whereby registered representatives of
MLPF&S, who are the Company's licensed insurance agents,
solicit applications for contracts to be issued by the Company.
MLLA is paid commissions for the contracts sold by such agents.
Commissions paid to MLLA were $88,955, $79,117 and $72,729 for
1999, 1998 and 1997, respectively. Substantially all of these
commissions were capitalized as deferred policy acquisition
costs and are being amortized in accordance with the policy
discussed in Note 1.
Affiliated agreements generally contain reciprocal indemnity
provisions pertaining to each party's representations and
contractual obligations thereunder.
During 1997, the Company sold its investment in 2141 E.
Camelback, Corp. to Merrill Lynch Mortgage Capital, Inc. The
investment was sold at its carrying value of $5,375.
NOTE 7. STOCKHOLDER'S EQUITY AND STATUTORY REGULATIONS
During 1999 and 1997, the Company paid cash dividends of
$135,000 to MLIG. Of these cash dividends, $105,793 and
$110,030, respectively, were extraordinary dividends as defined
by Arkansas Insurance Law and were paid pursuant to approval
granted by the Arkansas Insurance Commissioner. The Company
also paid a $500 stock dividend to MLIG during 1999. The
Company paid no cash or stock dividends in 1998.
At December 31, 1999 and 1998, approximately $26,518 and
$29,707, respectively, of stockholder's equity was available
for distribution to MLIG. Statutory capital and surplus at
December 31, 1999 and 1998, were $267,679 and $299,069,
respectively.
Applicable insurance department regulations require that the
Company report its accounts in accordance with statutory
accounting practices. Statutory accounting practices differ
from principles utilized in these financial statements as
follows: policy acquisition costs are expensed as incurred,
future policy benefit reserves are established using different
actuarial assumptions, there is no provision for deferred
income taxes, and securities are valued on a different basis.
The Company's statutory net income for 1999, 1998 and 1997 was
$106,266, $55,813 and $81,963, respectively.
The National Association of Insurance Commissioners ("NAIC")
utilizes the Risk Based Capital ("RBC") adequacy monitoring
system. The RBC calculates the amount of adjusted capital that
a life insurance company should have based upon that company's
risk profile. As of December 31, 1999 and 1998, based on the
RBC formula, the Company's total adjusted capital level was in
excess of the minimum amount of capital required to avoid
regulatory action.
In March 1998, the NAIC adopted the Codification of Statutory
Accounting Principles ("Codification"). The Codification,
which is intended to standardize regulatory accounting and
reporting for the insurance industry, is proposed to be
effective January 1, 2001. However, statutory accounting
principles will continue to be established by individual state
laws and permitted practices. Codification is not expected to
have a material impact on the Company's capital requirements or
statutory financial statements.
NOTE 8. COMMITMENTS AND CONTINGENCIES
State insurance laws generally require that all life insurers
who are licensed to transact business within a state become
members of the state's life insurance guaranty association.
These associations have been established for the protection of
policyholders from loss (within specified limits) as a result
of the insolvency of an insurer. At the time an insolvency
occurs, the guaranty association assesses the remaining members
of the association an amount sufficient to satisfy the
insolvent insurer's policyholder obligations (within specified
limits). The Company has utilized public information to
estimate what future assessments it will incur as a result of
insolvencies. At December 31, 1999 and 1998, the Company has
established an estimated liability for future guaranty fund
assessments of $14,889 and $13,864, respectively. The Company
regularly monitors public information regarding insurer
insolvencies and adjusts its estimated liability as appropriate.
In the normal course of business, the Company is subject to
various claims and assessments. Management believes the
settlement of these matters would not have a material effect on
the financial position or results of operations of the Company.
During 1994, the Company committed to participate in a limited
partnership that invests in leveraged transactions. As of
December 31, 1999, $8,116 has been advanced towards the
Company's $10,000 commitment to the limited partnership.
NOTE 9. SEGMENT INFORMATION
In reporting to management, the Company's operating results are
categorized into two business segments: Life Insurance and
Annuities. The Company's Life Insurance segment consists of
variable life insurance products and interest-sensitive life
products. The Company's Annuity segment consists of variable
annuities and interest sensitive annuities.
The Company's organization is structured in accordance with its
two business segments. Each segment has its own administrative
service center that provides product support to the Company and
customer service support to the Company's policyholders.
Additionally, marketing and sales management functions, within
MLIG, are organized according to these two business segments.
The accounting policies of the business segments are the same
as those described in the summary of significant accounting
policies. All revenue and expense transactions are recorded at
the product level and accumulated at the business segment level
for review by management.
The "Other" category, presented in the following segment
financial information, represents assets and the earnings on
those assets that do not support policyholder liabilities.
The following table summarizes each business segment's
contribution to the consolidated amounts:
<TABLE>
<CAPTION>
Life
1999 Insurance Annuities Other Total
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net interest spread (a) $ 36,805 $ 31,098 $ 10,093 $ 77,996
Other revenues 94,821 140,541 6,542 241,904
------------ ------------ ------------ ------------
Net revenues 131,626 171,639 16,635 319,900
------------ ------------ ------------ ------------
Policy benefits 16,569 16,414 - 32,983
Reinsurance premium ceded 21,691 - - 21,691
Amortization of deferred policy
acquisition costs 22,464 43,143 - 65,607
Other non-interest expenses 16,728 39,049 - 55,777
------------ ------------ ------------ ------------
Total non-interest expenses 77,452 98,606 - 176,058
------------ ------------ ------------ ------------
Net earnings before Federal income
tax provision 54,174 73,033 16,635 143,842
Income tax expense 18,442 23,447 5,822 47,711
------------ ------------ ------------ ------------
Net earnings $ 35,732 $ 49,586 $ 10,813 $ 96,131
============ ============ ============ ============
Balance Sheet Information:
Total assets $ 6,492,686 $10,523,453 $ 101,910 $17,118,049
Deferred policy acquisition costs 251,017 224,898 - 475,915
Policyholder liabilities and accruals 2,150,671 1,522,892 - 3,673,563
Other policyholder funds 18,345 6,750 - 25,095
</TABLE>
<TABLE>
<CAPTION>
Life
1998 Insurance Annuities Other Total
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net interest spread (a) $ 35,228 $ 32,765 $ 8,369 $ 76,362
Other revenues 84,836 124,864 422 210,122
------------ ------------ ------------ ------------
Net revenues 120,064 157,629 8,791 286,484
------------ ------------ ------------ ------------
Policy benefits 18,397 13,494 - 31,891
Reinsurance premium ceded 19,972 - - 19,972
Amortization of deferred policy
acquisition costs 13,040 31,795 - 44,835
Other non-interest expenses 18,030 39,233 - 57,263
------------ ------------ ------------ ------------
Total non-interest expenses 69,439 84,522 - 153,961
------------ ------------ ------------ ------------
Net earnings before Federal
income tax provision 50,625 73,107 8,791 132,523
Income tax expense 16,033 20,653 3,076 39,762
------------ ------------ ------------ ------------
Net earnings $ 34,592 $ 52,454 $ 5,715 $ 92,761
============ ============ ============ ============
Balance Sheet Information:
Total assets $ 6,069,649 $ 8,885,981 $ 148,465 $15,104,095
Deferred policy acquisition costs 207,713 197,927 - 405,640
Policyholder liabilities and accruals 2,186,001 1,694,668 - 3,880,669
Other policyholder funds 16,033 4,769 - 20,802
</TABLE>
<TABLE>
<CAPTION>
Life
1997 Insurance Annuities Other Total
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net interest spread (a) $ 38,826 $ 47,973 $ 12,361 $ 99,160
Other revenues 86,301 102,782 3,139 192,222
------------ ------------ ------------ ------------
Net revenues 125,127 150,755 15,500 291,382
------------ ------------ ------------ ------------
Policy benefits 15,876 11,153 - 27,029
Reinsurance premium ceded 17,879 - - 17,879
Amortization of deferred policy
acquisition costs 36,180 35,931 - 72,111
Other non-interest expenses 16,545 36,639 - 53,184
------------ ------------ ------------ ------------
Total non-interest expenses 86,480 83,723 - 170,203
------------ ------------ ------------ ------------
Net earnings before Federal
income tax provision 38,647 67,032 15,500 121,179
Income tax expense 12,753 22,265 5,426 40,444
------------ ------------ ------------ ------------
Net earnings $ 25,894 $ 44,767 $ 10,074 $ 80,735
============ ============ ============ ============
Balance Sheet Information:
Total assets $ 5,925,872 $ 7,998,461 $ 129,248 $14,053,581
Deferred policy acquisition costs 182,610 182,495 - 365,105
Policyholder liabilities and accruals 2,229,533 2,009,151 - 4,238,684
Other policyholder funds 18,788 8,372 - 27,160
</TABLE>
(a) Management considers investment income net of interest
credited to policyholders' account balances in evaluating
results.
The table below summarizes the Company's net revenues by
product for 1999, 1998, and 1997:
1999 1998 1997
---------- ---------- ----------
Life Insurance
Variable life insurance $ 104,036 $ 91,806 $ 92,245
Interest-sensitive life insurance 27,590 28,258 32,882
---------- ---------- ----------
Total Life Insurance 131,626 120,064 125,127
---------- ---------- ----------
Annuities
Variable annuities 130,039 105,545 88,509
Interest-sensitive annuities 41,600 52,084 62,246
---------- ---------- ----------
Total Annuities 171,639 157,629 150,755
---------- ---------- ----------
Other 16,635 8,791 15,500
---------- ---------- ----------
Total $ 319,900 $ 286,484 $ 291,382
========== ========== ==========
* * * * *
<PAGE>
PART 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
Merrill Lynch Life Insurance Company's By-Laws provide, in Article VI, as
follows:
SECTION 1. ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation) by reason of the fact that he
is or was a director, officer or employee of the Corporation, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
SECTION 2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Corporation to procure a judgment in its favor by reason of the fact that
he is or was a director, officer or employee of the Corporation, against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the Court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other Court shall deem proper.
SECTION 3. RIGHT TO INDEMNIFICATION. To the extent that a director,
officer or employee of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Sections 1
and 2 of this Article, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
SECTION 4. DETERMINATION OF RIGHT TO INDEMNIFICATION. Any indemnification
under Sections 1 and 2 of this Article (unless ordered by a Court) shall be made
by the Corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, or employee is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Sections 1 and 2 of this Article. Such determination shall be made (i) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (ii) if such a quorum is
not obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders.
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 & Co., Inc. are entitled to indemnification from Merrill Lynch & Co. Inc.,
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 & Co., Inc. or such other
II-1
<PAGE>
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 & Co., Inc. prior to such initiation.
DIRECTORS' AND OFFICERS' INSURANCE
Merrill Lynch & Co., Inc. 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 & Co., Inc. with respect to such insurance policy.
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 judgements, 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 Policy, 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.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
OFFICERS AND DIRECTORS
AS OF OCTOBER 19, 1999
DIRECTORS
John L. Steffens
E. Stanley O'Neal
George A. Schieren
OFFICERS
<TABLE>
<S> <C>
John L. Steffens Chairman of the Board and Chief
Executive Officer
George A. Schieren General Counsel
John C. Stomber Treasurer
Andrea L. Dulberg Secretary
</TABLE>
II-2
<PAGE>
EXECUTIVE VICE PRESIDENTS
<TABLE>
<S> <C>
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
</TABLE>
SENIOR VICE PRESIDENTS
<TABLE>
<S> <C> <C>
Harry P. Allex Michael J.P. Marks Howard A. Shallcross
Daniel H. Bayly G. Kelly Martin Robert D. Sherman
Rosemary T. Berkery Robert J. McCann James F. Shoaf
Michael J. Castellano John T. McGowan Howard P. Sorgen
Michael R. Cowan Andrew J. Melnick John C. Stomber
Richard A. Dunn Athanassios N. Michas G. Stephen Thoma
Ahmass L. Fakahany Joseph H. Moglia Arthur L. Thomas
Richard M. Fuscone Carlos M. Morales Anthony J. Vespa
Donald N. Gershuny Hisashi Moriya Kevan V. Watts
J. Michael Giles Thomas O. Muller III Madeline A. Weinstein
Mark B. Goldfus Daniel T. Napoli Joseph T. Willett
Allen N. Jones John Qua
Theresa Lang George A. Schieren
</TABLE>
<TABLE>
<S> <C>
FIRST VICE PRESIDENTS
Charles P. Borkowski, Jr. Lawrence W. Roberts
Matthias B. Bowman Eric M. Rosenberg
Richard M. Drew Stanley Schaefer
Harry J. Ferguzon Barry G. Skolnick
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
Barry J. Mandel
</TABLE>
<TABLE>
<S> <C>
VICE PRESIDENTS ASSISTANT VICE PRESIDENTS
Leonard E. Accardo Gregory R. Krolikowski
Rudley B. Anthony Edward A. Mallaney
Joseph A. Boccuzzi ASSISTANT SECRETARIES
Robert G. Dieckmann Darryl W. Colletti
Freddy Enriquez Lawrence M. Egan, Jr.
Edward J. Gallagher, Jr. Andrea Lowenthal
Scott C. Harrison Margaret E. Nelson
Peter C. Lee
Richard D. Lilleston
Daniel R. Mayo
Avadhesh K. Nigam
David D. Northrop
George A. Ruth
John M. Sabatino
Michael S. Schreier
John P. Smith
</TABLE>
II-3
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The Prospectus consisting of 123 pages.
The undertaking to file reports.
Rule 484 Undertaking.
Representation Pursuant to Section 26(e).
Merrill Lynch, Pierce, Fenner & Smith Incorporated Officers and Directors.
The signatures.
Written Consents of the following persons:
1. Barry G. Skolnick, Esq.
2. Joseph E. Crowne, Jr., F.S.A.
3. Deloitte & Touche LLP, Independent Auditors
The following exhibits:
<TABLE>
<S> <C>
6. Opinion and Consent of Joseph E. Crowne, Jr., F.S.A.
8. (a) Written Consent of Barry G. Skolnick, Esq.
8. (b) Written Consent of Joseph E. Crowne, Jr., F.S.A. See Exhibit
6.
8. (c) Written Consent of Deloitte & Touche LLP, Independent
Auditors.
</TABLE>
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Merrill Lynch Life Variable Life Separate Account II, hereby certifies that this
Post-Effective Amendment No. 10 meets all of the requirements for effectiveness
pursuant to paragraph (b) of Rule 485 under the Securities Act of 1933, and has
duly caused this Post-Effective Amendment No. 10 to the Registration Statement
to be signed on its behalf by the undersigned thereunto duly authorized, and its
seal to be hereunto affixed and attested, all in the City of Plainsboro and the
State of New Jersey, on the 24th day of April 2000.
MERRILL LYNCH LIFE VARIABLE LIFE SEPARATE ACCOUNT II
(REGISTRANT)
BY: MERRILL LYNCH LIFE INSURANCE COMPANY
(DEPOSITOR)
<TABLE>
<S> <C> <C> <C>
Attest: /s/ EDWARD W. DIFFIN, JR. By: /s/ BARRY G. SKOLNICK
------------------------------------- -------------------------------------
Edward W. Diffin, Jr. Barry G. Skolnick
Vice President Senior Vice President
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 10 to the Registration Statement has been signed below by the
following persons in the capacities indicated on April 24, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C> <C>
*
- ------------------------------------------- Chairman of the Board, President and Chief
Anthony J. Vespa Executive Officer
*
- ------------------------------------------- Director, Senior Vice President, Chief Financial
Joseph E. Crowne, Jr. Officer, Chief Actuary and Treasurer
*
- ------------------------------------------- Director, Senior Vice President and Chief
David M. Dunford Investment Officer
*
- ------------------------------------------- Director and Senior Vice President
Gail R. Farkas
/s/ BARRY G. SKOLNICK * In his own capacity as Director, Senior Vice
- ------------------------------------------- President, Secretary, General Counsel, and as
Barry G. Skolnick Attorney-In-Fact
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <C> <S> <C>
1.A. (1) Resolutions of the Board of Directors of Merrill Lynch Life
Insurance Company establishing the Separate Account. Incorporated
by Reference to Post-Effective Amendment No. 7 to the Registration
Statement filed by the Registrant on Form S-6 (File No. 33-43057).
(2) Not applicable.
(3) Distributing Contracts.
(a) Distribution Agreement between Merrill Lynch Life Insurance
Company and Merrill Lynch, Pierce, Fenner & Smith
Incorporated. Incorporated by Reference to Post-Effective
Amendment No. 8 to the Registration Statement filed by
Merrill Lynch Variable Life Separate Account on Form S-6
(File No. 33-55472).
(b) Amended Sales Agreement between Merrill Lynch Life Insurance
Company and Merrill Lynch Life Agency, Inc. Incorporated by
Reference to Post-Effective Amendment No. 8 to the
Registration Statement filed by Merrill Lynch Variable Life
Separate Account on Form S-6 (File No. 33-55472).
(c) Schedule of Sales Commissions. See Exhibit A (3)(b).
(4) Not applicable.
(5) (a) Modified Single Premium Variable Life Insurance Policy.
Incorporated by Reference to Post-Effective Amendment No. 7
filed by the Registrant on Form S-6 (File No. 33-43058).
(5) (b1) Guarantee of Insurability Rider. Incorporated by Reference
to Post-Effective Amendment No. 7 filed by the Registrant on
Form S-6 (File No. 33-43058).
(5) (b2) Death Benefit Proceeds Rider. Incorporated by Reference to
Post-Effective Amendment No. 7 filed by the Registrant on
Form S-6 (File No. 33-43058).
(5) (b3) Single Premium Immediate Annuity Rider. Incorporated by
Reference to Post-Effective Amendment No. 7 filed by the
Registrant on Form S-6 (File No. 33-43058).
(5) (b4) Change of Insured Rider. Incorporated by Reference to
Post-Effective Amendment No. 7 filed by the Registrant on
Form S-6 (File No. 33-43058).
(5) (b5) Partial Withdrawal Rider. Incorporated by Reference to
Post-Effective Amendment No. 7 filed by the Registrant on
Form S-6 (File No. 33-43058).
(5) (b6) Special Allocation Rider. Incorporated by Reference to
Post-Effective Amendment No. 7 filed by the Registrant on
Form S-6 (File No. 33-43058).
(5) (b7) Backdating Endorsement. Incorporated by Reference to
Post-Effective Amendment No. 7 filed by the Registrant on
Form S-6 (File No. 33-43058).
(5) (b8) Additional Payment Endorsement. Incorporated by Reference to
Post-Effective Amendment No. 7 filed by the Registrant on
Form S-6 (File No. 33-43058).
(5) (c) Certificate of Assumption. Incorporated by Reference to
Post-Effective Amendment No. 7 filed by the Registrant on
Form S-6 (File No. 33-43058).
(5) (d) Company Name Change Endorsement. Incorporated by Reference
to Post-Effective Amendment No. 7 filed by the Registrant on
Form S-6 (File No. 33-43058).
(6) (a) Articles of Amendment, Restatement, and Redomestication of
the Articles of Incorporation of Merrill Lynch Life
Insurance Company. Incorporated by Reference to
Post-Effective Amendment No. 8 to the Registration Statement
filed by Merrill Lynch Variable Life Separate Account on
Form S-6 (File No. 33-55472).
</TABLE>
II-6
<PAGE>
<TABLE>
<C> <C> <S> <C>
(b) Amended and Restated By-Laws of Merrill Lynch Life Insurance
Company. Incorporated by Reference to Post-Effective
Amendment No. 8 to the Registration Statement filed by
Merrill Lynch Variable Life Separate Account on Form S-6
(File No. 33-55472).
(7) Not applicable.
(8) (a) Agreement between Merrill Lynch Life Insurance Company and
Merrill Lynch Series Fund, Inc. Incorporated by Reference to
Post-Effective Amendment No. 8 to the Registration Statement
filed by Merrill Lynch Variable Life Separate Account on
Form S-6 (File No. 33-55472).
(b) Agreement between Merrill Lynch Life Insurance Company and
Merrill Lynch Funds Distributor, Inc. Incorporated by
Reference to Post-Effective Amendment No. 8 to the
Registration Statement filed by Merrill Lynch Variable Life
Separate Account on Form S-6 (File No. 33-55472).
(c) Agreement between Merrill Lynch Life Insurance Company and
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
Incorporated by Reference to Post-Effective Amendment No. 8
to the Registration Statement filed by Merrill Lynch
Variable Life Separate Account on Form S-6 (File No.
33-55472).
(d) Participation Agreement among Merrill Lynch Life Insurance
Company, ML Life Insurance Company of New York, and Monarch
Life Insurance Company. Incorporated by Reference to
Post-Effective Amendment No. 3 to the Registration Statement
filed by Merrill Lynch Variable Life Separate Account on
Form S-6 (File No. 33-55472).
(e) Form of Participation Agreement among Merrill Lynch Life
Insurance Company, ML Life Insurance Company of New York and
Family Life Insurance Company. Incorporated by reference to
Post-Effective Amendment No. 4 to the Registration Statement
filed by the Registrant on Form S-6 (File No. 33-43058).
(g) Form of Participation Agreement Among Merrill Lynch Life
Insurance Company, Alliance Capital Management L.P., and
Alliance Fund Distributors, Inc. Incorporated by Reference
to Merrill Lynch Life Variable Annuity Separate Account A's
Post-Effective Amendment No. 10 to the Registration
Statement filed on Form N-4 (File No. 33-43773).
(h) Form of Participation Agreement Among MFS Variable Insurance
Trust, Merrill Lynch Life Insurance Company, and
Massachusetts Financial Services Company. Incorporated by
Reference to Merrill Lynch Life Variable Annuity Separate
Account A's Post-Effective Amendment No. 10 to the
Registration Statement filed on Form N-4 (File No.
33-43773).
(i) Participation Agreement By and Among AIM Variable Insurance
Funds, Inc., AIM Distributors, Inc., and Merrill Lynch Life
Insurance Company. Incorporated by Reference to Merrill
Lynch Life Variable Annuity Separate Account A's
Post-Effective Amendment No. 11 to the Registration
Statement filed on Form N-4 (File No. 33-43773).
(j) 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)
(k) Form of Participation Agreement between Merrill Lynch Life
Insurance Company and Mercury Asset Management V.I. Funds,
Inc. (Incorporated by reference to Merrill Lynch Life
Variable Annuity Separate Account A's Post-Effective
Amendment No. 15 to Form N-4 Registration No. 33-43773
Filed April 14, 1999)
</TABLE>
II-7
<PAGE>
<TABLE>
<C> <C> <S> <C>
(l) 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).
(m) Amendment to the 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
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 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.)
(o) Amendment to the Participation Agreement Among Merrill Lynch
Life Insurance Company, Alliance Capital Management L.P.,
and Alliance Fund Distributors, Inc. dated June 5, 1998.
(Incorporated by Reference to 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 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.)
(q) Amendment to the Participation Agreement Among
MFS-Registered Trademark- Variable Insurance Trust-SM-,
Merrill Lynch Life Insurance Company, and Massachusetts
Financial Services Company dated May 1, 1997. (Incorporated
by Reference to Merrill Lynch Life Variable Annuity Separate
Account A's Registration Statement on Form N-4, Registration
No. 333-90243 Filed November 3, 1999.)
(r) Amendment to the Participation Agreement By And Among AIM
Variable Insurance Funds, Inc., AIM Distributors, Inc., and
Merrill Lynch Life Insurance Company. (Incorporated by
Reference to Merrill Lynch Life Variable Annuity Separate
Account A's Registration Statement on Form N-4, Registration
No. 333-90243 Filed November 3, 1999.)
(s) 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) Amended form of terminated Service Agreement between Merrill
Lynch Life Insurance Company and Monarch Life Insurance
Company. Incorporated by Reference to Post-Effective
Amendment No. 7 filed by the Registrant on Form S-6 (File
No. 33-43058).
(b) Board Resolution for Merger and Combination of Accounts.
Incorporated by Reference to Post-Effective Amendment No. 7
filed by the Registrant on Form S-6 (File No. 33-43058).
(c) Plan and Agreement of Merger between Tandem Insurance Group,
Inc. and Merrill Lynch Life Insurance Company. Incorporated
by Reference to Post-Effective Amendment No. 7 filed by the
Registrant on Form S-6 (File No. 33-43058).
(d) Service Agreement among Merrill Lynch Life Insurance
Company, Family Life Insurance Company and Merrill Lynch
Insurance Group, Inc. Incorporated by reference to
Post-Effective Amendment No. 4 filed by the Registrant on
Form S-6 (File No. 33-43058).
(10) Application form for Modified Single Premium Variable Life
Insurance Policy. Incorporated by Reference to Post-Effective
Amendment No. 7 filed by the Registrant on Form S-6 (File No.
33-43058).
</TABLE>
II-8
<PAGE>
<TABLE>
<C> <C> <S> <C>
(11) (a) Memorandum describing Merrill Lynch Life Insurance Company's
Issuance, Transfer and Redemption Procedures. Incorporated
by reference to Post-Effective Amendment No. 4 filed by the
Registrant on Form S-6 (File No. 33-43058).
(11) (b) Supplement to Memorandum describing Merrill Lynch Life
Insurance Company's Issuance, Transfer and Redemption
Procedures. Incorporated by Reference to Registrant's
Post-Effective Amendment No. 8 to the Registration Statement
filed on Form S-6 (File No. 33-55472).
2. See 1.A.(5).
3. Opinion and Consent of Barry G. Skolnick, Esq. as to the legality of the
securities being registered. Incorporated by Reference to Post-Effective
Amendment No. 6 to the Registration Statement filed by the Registrant on
Form S-6 (File No. 33-43058).
4. Not applicable.
5. Not applicable.
6. Opinion and Consent of Joseph E. Crowne, Jr., F.S.A. as to actuarial
matters pertaining to the securities being registered.
7. (a) Power of Attorney of Joseph E. Crowne, Jr. Incorporated by
Reference to Post-Effective Amendment No. 2 to the Registration
Statement filed by Merrill Lynch Variable Life Separate Account on
Form S-6 (File No. 33-55472).
(b) Power of Attorney of David E. Dunford. Incorporated by Reference
to Post-Effective Amendment No. 2 to the Registration Statement
filed by Merrill Lynch Variable Life Separate Account on Form S-6
(File No. 33-55472).
(c) Power of Attorney of Gail R. Farkas. Incorporated by Reference to
Post-Effective Amendment No. 6 to the Registration Statement filed
by Merrill Lynch Variable Life Separate Account on Form S-6 (File
No. 33-55472).
(d) Power of Attorney of John C.R. Hele. Incorporated by Reference to
Post-Effective Amendment No. 2 to the Registration Statement filed
by Merrill Lynch Variable Life Separate Account on Form S-6 (File
No. 33-55472).
(e) Power of Attorney of Allen N. Jones. Incorporated by Reference to
Post-Effective Amendment No. 2 to the Registration Statement filed
by Merrill Lynch Variable Life Separate Account on Form S-6 (File
No. 33-55472).
(f) Power of Attorney of Barry G. Skolnick. Incorporated by Reference
to Post-Effective Amendment No. 2 to the Registration Statement
filed by Merrill Lynch Variable Life Separate Account on Form S-6
(File No. 33-55472).
(g) Power of Attorney of Anthony J. Vespa. Incorporated by Reference
to Post-Effective Amendment No. 2 to the Registration Statement
filed by Merrill Lynch Variable Life Separate Account on Form S-6
(File No. 33-55472).
8. (a) Written Consent of Barry G. Skolnick, Esq.
(b) Written Consent of Joseph E. Crowne, Jr., F.S.A. See Exhibit 6.
(c) Written Consent of Deloitte & Touche LLP, Independent Auditors.
</TABLE>
II-9
<PAGE>
Exhibit 6
[MERRILL LYNCH LIFE INSURANCE COMPANY]
April 24, 2000
Board of Directors
Merrill Lynch Life Insurance Company
800 Scudders Mill Road
Plainsboro, New Jersey 08536
To the Board of Directors:
This opinion is furnished in connection with the filing of Post-Effective
Amendment No. 10 to the Registration Statement on Form S-6 (as so amended, the
"Registration Statement") (File No. 33-43058) which covers premiums received
under the single premium variable life insurance policies ("Policies" or
"Policy") issued by Merrill Lynch Life Insurance Company (the "Company").
The Prospectus included in the Registration Statement describes Policies
which are issued by the Company. The Policy forms were reviewed under my
direction, and I am familiar with the Registration Statement and Exhibits
thereto. In my opinion:
1. The illustrations of death benefits, investment base, cash surrender
values and accumulated premiums included in the Registration Statement
for the Policy and based on the assumptions stated in the
illustrations, are consistent with the provision of the Policy. The
rate structure of the Policies has not been designed so as to make
the relationship between premiums and benefits, as shown in the
illustrations, appear more favorable to a prospective purchaser of a
Policy for the ages and sexes shown, than to prospective purchasers of
a Policy for other ages and sexes.
2. The table of illustrative net single premium factors included in the
"Death Benefit" section is consistent with the provisions of the
Polices.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the use of my name relating to actuarial matters
under the heading "Experts" in the Prospectus.
Very truly yours,
/s/ JOSEPH E. CROWNE
-------------------
Joseph E. Crowne, FSA
Senior Vice President & Chief
Financial Officer
<PAGE>
Exhibit 8(a)
CONSENT
I hereby consent to the reference to my name under the heading "Legal Matters"
in the prospectus included in Post-Effective Amendment No. 10 to the
Registration Statement on Form S-6 for certain variable life insurance contracts
issued through Merrill Lynch Life Variable Life Separate Account II of Merrill
Lynch Life Insurance Company (File No. 33-43058).
/s/ Barry G. Skolnick
------------------
Barry G. Skolnick, Esq.
Senior Vice President and General Counsel
April 24, 2000
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Exhibit 8(c)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 10 to the
Registration Statement No. 33-43058 of Merrill Lynch Life Variable Life Separate
Account II on Form S-6 of our reports on (i) Merrill Lynch Life Insurance
Company dated February 28, 2000, and (ii) Merrill Lynch Life Variable Life
Separate Account II dated February 14, 2000, appearing in the Prospectus, which
is a part of such Registration Statement, and to the reference to us under the
heading "Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
New York, New York
April 24, 2000
