-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QUHYnM92NCEn6GcZGHLskZayco6D/c+M3NpeFoz42HGY3xHlur/CrQ4yY5EMGITB NA8T9AZQfFJFVUrSGsBD2Q== 0000950133-02-001663.txt : 20020426 0000950133-02-001663.hdr.sgml : 20020426 ACCESSION NUMBER: 0000950133-02-001663 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20020426 EFFECTIVENESS DATE: 20020426 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT CENTRAL INDEX KEY: 0000869799 IRS NUMBER: 911325756 STATE OF INCORPORATION: AR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 333-47844 FILM NUMBER: 02623375 BUSINESS ADDRESS: STREET 1: 800 SCUDDERS MILL RD STREET 2: C/O MERRILL LYNCH LIFE INSURANCE CO CITY: PLAINSBORO STATE: NJ ZIP: 08536 BUSINESS PHONE: 6092821429 MAIL ADDRESS: STREET 1: 800 SCUDDERS MILL ROAD CITY: PLAINSBORO STATE: NJ ZIP: 08536 485BPOS 1 w57652e485bpos.txt MERRILL LYNCH VARIABLE LIFE SEP ACCT FORM S-6 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 26, 2002 REGISTRATION FILE NO. 333-47844 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------------ POST-EFFECTIVE AMENDMENT NO. 2 TO FORM S-6 FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF THE SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2 MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT (EXACT NAME OF REGISTRANT) MERRILL LYNCH LIFE INSURANCE COMPANY (NAME OF DEPOSITOR) 7 ROSZEL ROAD PRINCETON, NEW JERSEY 08540 (COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) BARRY G. SKOLNICK, ESQ. SENIOR VICE PRESIDENT AND GENERAL COUNSEL MERRILL LYNCH LIFE INSURANCE COMPANY 7 ROSZEL ROAD PRINCETON, NEW JERSEY 08540 (NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE) Copy To: STEPHEN E. ROTH, ESQ. SUTHERLAND ASBILL & BRENNAN LLP 1275 PENNSYLVANIA AVENUE, N.W. WASHINGTON, DC 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, 2002 pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1) [ ] on (date) pursuant to paragraph (a)(1) of Rule 485 TITLE OF SECURITIES BEING REGISTERED: Units of Interest in Modified Single Premium Variable Life Insurance Contracts. [ ] Check box if it is proposed that the filing will become effective on (date) at (time) pursuant to Rule 487. PROSPECTUS May 1, 2002 MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT ISSUED BY MERRILL LYNCH LIFE INSURANCE COMPANY HOME OFFICE: LITTLE ROCK, ARKANSAS SERVICE CENTER: 4804 DEER LAKE DRIVE EAST JACKSONVILLE, FLORIDA 32246 PHONE: (800) 354-5333 OFFERED THROUGH MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED This Prospectus describes modified single premium variable life insurance contracts (the "Contract") which generally are modified endowment contracts ("MECs") under federal tax law. Most distributions will have tax consequences and/or penalties. Generally, through the first 14 days following a Contract's in-force date, we will invest your initial payment in the subaccount of the Merrill Lynch Variable Life Separate Account (the "Separate Account") investing in the Merrill Lynch Domestic Money Market V.I. Fund. Afterward, you may reallocate your account value among any five of the subaccounts of the Separate Account. We then invest each subaccount's assets in corresponding portfolios ("Funds") of the following: -- MERRILL LYNCH VARIABLE SERIES FUNDS, INC. -- Basic Value V.I. Fund -- Domestic Money Market V.I. Fund -- Fundamental Growth V.I. Fund -- Government Bond V.I. Fund -- Index 500 V.I. Fund -- AIM VARIABLE INSURANCE FUNDS -- AIM V.I. International Growth Fund -- AIM V.I. Premier Equity Fund -- ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC. -- Growth and Income Portfolio -- Premier Growth Portfolio -- DAVIS VARIABLE ACCOUNT FUND, INC. -- Davis Value Portfolio -- DELAWARE VIP TRUST -- Delaware VIP Trend Series -- MERCURY VARIABLE TRUST -- Mercury International Value V.I. Fund -- MFS(R) VARIABLE INSURANCE TRUSTS(SM) -- MFS Emerging Growth Series -- MFS Investors Trust Series -- PIMCO VARIABLE INSURANCE TRUST -- Total Return Portfolio -- SELIGMAN PORTFOLIOS, INC. -- Seligman Small-Cap Value Portfolio -- VAN KAMPEN LIFE INVESTMENT TRUST -- Emerging Growth Portfolio Currently, you may transfer your account value as often as you like without charge. During the guarantee period, we cannot terminate the Contract, regardless of investment results, unless loan debt exceeds the surrender value. The "guarantee period" extends from the contract date to the insured's attained age 100. The death benefit during the guarantee period may vary to reflect the investment results of the subaccounts chosen, but will never be less than the guaranteed minimum death benefit. The "guaranteed minimum death benefit" is the face amount of the contract. After the guarantee period, the Contract will remain in effect as long as the net surrender value is sufficient to cover all charges due, and the death benefit will be equal to the contract value. Subject to certain conditions, you may: -- make additional premium payments in the first contract year -- make partial withdrawals -- borrow up to the loan value of your Contract -- cancel the Contract for its net surrender value The account value will vary with the investment results of the subaccounts chosen. We don't guarantee any minimum surrender value. Within certain limits, you may return the Contract or exchange it for a contract with benefits that don't vary with the investment results of a separate account. It may not be advantageous to replace existing insurance with the Contract. PURCHASING THIS CONTRACT INVOLVES CERTAIN RISKS. INVESTMENT RESULTS CAN VARY BOTH UP AND DOWN AND CAN EVEN DECREASE THE VALUE OF PREMIUM PAYMENTS. THEREFORE, YOU COULD LOSE ALL OR PART OF THE MONEY YOU INVEST. EXCEPT FOR THE GUARANTEED DEATH BENEFIT WE PROVIDE, YOU BEAR ALL INVESTMENT RISKS. WE DO NOT GUARANTEE HOW ANY OF THE SUBACCOUNTS OR FUNDS WILL PERFORM. LIFE INSURANCE IS INTENDED TO BE A LONG-TERM INVESTMENT. YOU SHOULD EVALUATE YOUR INSURANCE NEEDS AND THE CONTRACT'S LONG-TERM INVESTMENT POTENTIAL AND RISKS BEFORE PURCHASING THE CONTRACT. CURRENT PROSPECTUSES FOR THE MERRILL LYNCH VARIABLE SERIES FUNDS, INC., AIM VARIABLE INSURANCE FUNDS, ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC., DAVIS VARIABLE ACCOUNT FUND, INC., DELAWARE VIP TRUST, MERCURY VARIABLE TRUST, MFS(R) VARIABLE INSURANCE TRUST(SM), PIMCO VARIABLE INSURANCE TRUST, SELIGMAN PORTFOLIOS, INC., AND VAN KAMPEN LIFE INVESTMENT TRUST MUST ACCOMPANY THIS PROSPECTUS. PLEASE READ THESE DOCUMENTS CAREFULLY AND RETAIN THEM FOR FUTURE REFERENCE. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THESE CONTRACTS OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. TABLE OF CONTENTS
PAGE ---- IMPORTANT TERMS............................................. 5 SUMMARY OF THE CONTRACT..................................... 6 What the Contract Provides................................ 6 Availability and Payments................................. 7 The Account Value......................................... 7 The Subaccounts........................................... 7 Illustrations............................................. 7 Replacement of Existing Coverage.......................... 7 Right to Cancel ("Free Look" Period) or Exchange.......... 8 Distributions from the Contract........................... 8 Charges, Fees and Credits................................. 8 Annual Expenses........................................... 10 Notes to Fee Table........................................ 10 FACTS ABOUT MERRILL LYNCH LIFE INSURANCE COMPANY, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, AND THE SEPARATE ACCOUNT.......................................... 11 Merrill Lynch Life Insurance Company...................... 11 Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S")............................................. 11 The Separate Account...................................... 11 Net Rate of Return for a Subaccount....................... 12 Changes Within the Separate Account....................... 12 THE FUNDS................................................... 13 General Information and Investment Risks.................. 13 Merrill Lynch Variable Series Funds, Inc.................. 13 AIM Variable Insurance Funds.............................. 14 Alliance Variable Products Series Fund, Inc............... 14 Davis Variable Account Fund, Inc.......................... 15 Delaware VIP Trust........................................ 15 Mercury Variable Trust.................................... 15 MFS(R) Variable Insurance Trust(SM)....................... 16 PIMCO Variable Insurance Trust............................ 16 Seligman Portfolios, Inc.................................. 16 Van Kampen Life Investment Trust.......................... 17 The Operation of the Funds................................ 17 FACTS ABOUT THE CONTRACT.................................... 18 State Variations.......................................... 18 Who May Be Covered........................................ 18 Initial Payment........................................... 19 Right To Cancel ("Free Look" Period)...................... 19 Making Additional Payments................................ 19 Account Value............................................. 20 Owner's Right to Transfer Account Value................... 20 Charges, Fees and Credits................................. 21 Charges Deducted from the Account Value................... 21 Charges to the Separate Account........................... 22 Surrender Charge.......................................... 22 Transaction Charges....................................... 23 Fund Expenses............................................. 23 Credits Added to the Account Value........................ 23 Surrender Value........................................... 23
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PAGE ---- Canceling to Receive Net Surrender Value.................. 23 Partial Withdrawals....................................... 24 Loans..................................................... 24 Guarantee Period.......................................... 25 Guaranteed Benefits....................................... 25 DEATH BENEFIT............................................... 25 Death Benefit Proceeds.................................... 26 Payment Of Death Benefit Proceeds......................... 26 MORE ABOUT THE CONTRACT..................................... 27 Using the Contract........................................ 27 Dollar Cost Averaging..................................... 28 Asset Allocation Program.................................. 29 Rebalancing Program....................................... 30 Right to Exchange the Contract............................ 31 Choosing an Income Option................................. 31 Reports to Contract Owners................................ 31 Some Administrative Procedures............................ 32 Other Contract Provisions................................. 33 Group or Sponsored Arrangements........................... 34 Unisex Legal Considerations............................... 34 Selling the Contracts..................................... 34 Tax Considerations........................................ 35 Foreign Tax Credits....................................... 38 Our Income Taxes.......................................... 38 Reinsurance............................................... 38 ILLUSTRATIONS............................................... 38 MORE ABOUT MERRILL LYNCH LIFE INSURANCE COMPANY............. 44 Directors And Executive Officers.......................... 44 Services Arrangement...................................... 44 State Regulation.......................................... 45 Legal Proceedings......................................... 45 Experts................................................... 45 Legal Matters............................................. 45 Registration Statements................................... 45 Financial Statements...................................... 45 Appendix A................................................ A-1 Financial Statements of Merrill Lynch Variable Life Separate Account....................................... S1 Financial Statements of Merrill Lynch Life Insurance Company................................................ G1
4 IMPORTANT TERMS account value: is the amount available for investment under this Contract at any time. It is the sum of the value in each of the subaccounts. accumulation unit: is a unit of measure used to compute the value of your interest in a subaccount. attained age: is the issue age of the insured plus the number of full contract years since the contract date. beneficiary: is the person to whom we pay the death benefit proceeds upon the insured's death. Company: Merrill Lynch Life Insurance Company, also referred to as "we" or "us." contract anniversary: is the same date of each year as the contract date. contract date: is used to determine processing dates, contract years and contract anniversaries. It is usually the business day next following the receipt of the initial premium payment at our Service Center. contract value: is the account value plus loan debt, less any charges we accrue for. Accrued charges are collected as of a processing date and upon surrender. death benefit: is the greater of the guaranteed minimum death benefit and the variable insurance amount. death benefit proceeds: is the amount payable to the beneficiary upon the death of the insured. It equals the death benefit less any loan debt. due proof of death: is a certified copy of the death certificate, beneficiary statement and any additional paperwork necessary to process payment of a death claim when the insured dies. fixed base: is calculated on each processing date in the same manner as the contract value except all calculations are based on the guaranteed maximum cost of insurance charges and 4% interest. On any date other than a processing date, the fixed base is equal to the fixed base as of the next processing date. The fixed base calculation does not reflect policy loans and repayments. After the expiration of the guarantee period, the fixed base is set to zero. Fund: is an investment portfolio of an open-end management investment company or unit investment trust in which a subaccount invests. guarantee period: extends from the contract date to the insured's attained age 100. We cannot terminate the Contract during the guarantee period unless loan debt exceeds the surrender value on a processing date. guaranteed minimum death benefit: is the death benefit payable regardless of the investment results of the subaccounts during the guarantee period. The guaranteed minimum death benefit equals the face amount. After the insured's attained age 100, the guaranteed minimum death benefit is zero. in-force date: is the date when the underwriting process is complete, and we receive the initial premium payment and any outstanding contract amendments at our Service Center. issue age: is the insured's age as of his or her birthday nearest the contract date. issue date: is the date this contract is issued at our Service Center. The contestable and suicide periods are measured from this date. loan debt: is the loan amount on the last contract anniversary (including capitalized loan interest), plus any new loans since that anniversary, less any repayments since that anniversary, plus accrued loan interest. net amount at risk: is the excess of the death benefit over the contract value, adjusted for interest at 4% per year. net contract value: is the contract value less any loan debt. net loan cost: is the difference between loan interest charged and interest credited to loan collateral. 5 net single premium factor: is used to determine the amount of death benefit purchased by $1.00 of contract value. We use this factor in the calculation of the variable insurance amount to make sure that the Contract always meets the requirements of what constitutes a life insurance contract under the Internal Revenue Code (IRC). net surrender value: is equal to surrender value less any loan debt. premiums: is the money paid into this Contract. processing dates: are the days when we may deduct charges or add credits, or determine the amount of a charge or credit. Processing dates begin on the contract date and occur on the same day of the month as the contract date, at the end of each three-month processing period. processing period: is the three-month period between consecutive processing dates. Separate Account: is the investment vehicle used to fund the Contract. The Separate Account has multiple subaccounts, which invest in corresponding shares or units of the Funds. surrender value: is the contract value less any applicable surrender charges. valuation period: is each business day together with any non-business days before it. A business day is any day the New York Stock Exchange (NYSE) is open for trading, or any day on which the SEC otherwise requires that the Funds be valued. We calculate the value of an accumulation unit for each subaccount at the end of each valuation period. variable insurance amount: is the contract value multiplied by the appropriate net single premium factor. SUMMARY OF THE CONTRACT WHAT THE CONTRACT PROVIDES The Contract offers a choice of investments and an opportunity for the account value and death benefit to grow based on the investment results of the Funds. You should purchase the Contract for its death benefit. You may use the Contract's net surrender value, as well as its death benefit, to provide proceeds for various individual and business planning purposes. However, partial withdrawals and loans will affect the net surrender value and death benefit proceeds. Loans may cause the Contract to terminate. The Contract is designed to provide benefits on a long-term basis. Before purchasing a Contract in connection with a specialized purpose, you should consider whether the long-term nature of the Contract, its investment risks, and the potential impact of any contemplated loans and partial withdrawals, are consistent with the purposes you may be considering. Moreover, using a Contract for a specialized purpose may have tax consequences. (See "Tax Considerations.") We don't guarantee that contract values will increase. Depending on the investment results of the subaccounts you select, the account value and death benefit may go up or down on any day. You bear the investment risk for any amount allocated to a subaccount. We offer other variable life insurance contracts that have different features and charges. These different charges would affect your subaccount performance and account value. To obtain more information about these other contracts, contact our Service Center or your Financial Advisor. For information concerning compensation paid for the sale of the Contracts, see "Selling the Contracts." Death Benefit. During the guarantee period, the death benefit equals the guaranteed minimum death benefit or variable insurance amount, whichever is larger. The variable insurance amount increases or decreases depending on the investment results of the subaccounts you select. Therefore, the death benefit may go up or down depending on investment performance, but it will never drop below the guaranteed minimum death benefit. After the expiration of the guarantee period (described below), the death benefit is equal to the 6 contract value. We will reduce the death benefit by any loan debt to determine the death benefit proceeds payable to the beneficiary. Guarantee Period. During the guarantee period, we cannot terminate the Contract, regardless of investment results, unless loan debt exceeds the surrender value. The "guarantee period" extends from the contract date to the insured's attained age 100. Tax Benefits and Tax Considerations. We believe the Contract generally provides at least the minimum death benefit required to qualify as "life insurance" under federal tax law (See "Tax Considerations"). By satisfying this requirement, the Contract provides two important tax benefits: 1) Its death benefit is generally not subject to income tax; 2) Any increases in the Contract's account value are not taxable until distributed from the Contract. (Since the Contract generally is a modified endowment contract, distributions are subject to tax, and, if taken before you reach age 59 1/2, may also be subject to a 10% Federal penalty tax. See "Tax Considerations".) AVAILABILITY AND PAYMENTS You may apply for a Contract for an insured age 20-79. We will also consider issuing Contracts for insureds from ages 80 through 85 on an individual basis. A Contract can be purchased with a minimum single payment of $10,000. Subject to certain conditions, you may make additional premium payments during the first contract year. (See "Making Additional Payments.") THE ACCOUNT VALUE A Contract's account value is the amount available for investment at any time. On the contract date (usually the next business day after our Service Center receives your initial payment), the account value is equal to the initial payment. Afterwards, it varies daily based on the investment performance of your selected subaccounts. You bear the risk of poor investment performance and receive the benefit of favorable investment performance. You may wish to consider diversifying your investment in the Contract by allocating the account value among two or more subaccounts. THE SUBACCOUNTS We invest your premium payments in subaccounts of the Separate Account. Generally, through the first 14 days following the in-force date, we will invest the initial premium payment only in the subaccount of the Separate Account investing in the Domestic Money Market V.I. Fund. Afterwards, we will reallocate the account value according to your instructions among up to five of the subaccounts. (See "Owner's Right to Transfer Account Value.") ILLUSTRATIONS Illustrations in this Prospectus or used in connection with the purchase of the Contract are based on hypothetical investment rates of return. We don't guarantee these rates. They are illustrative only, and not a representation of past or future performance. Actual rates of return may be more or less than those shown in the illustrations. Actual values will be different than those illustrated. REPLACEMENT OF EXISTING COVERAGE Generally, it is not advisable to purchase an insurance contract as a replacement for existing coverage. Before you buy a Contract, ask your Merrill Lynch Financial Advisor if changing, or adding to, current insurance coverage could be advantageous. Don't base your decision to replace existing coverage solely on a comparison of illustrations. 7 You should talk to your tax advisor to make sure that this purchase will qualify as a tax-free exchange. If you surrender your existing contract for cash and then buy the Contract, you may have to pay federal income taxes, including possible penalty taxes, on the surrender. Also, because we will not issue the Contract until we have received the initial premium from your existing insurance company, the issuance of the Contract may be delayed. RIGHT TO CANCEL ("FREE LOOK" PERIOD) OR EXCHANGE Once you receive the Contract, review it carefully to make sure it is what you want. Generally, you may return a Contract for a refund within ten days after you receive it. Some states allow a longer period of time to return the Contract. If required by your state, you may return the Contract within the later of ten days after receiving it or 45 days from the date the application is completed. If you return the Contract during the "free look" period, we will refund your initial premium payment without interest. You may also exchange your Contract within 18 months of the issue date (24 months in some states) for a contract with benefits that do not vary with the investment results of a separate account. DISTRIBUTIONS FROM THE CONTRACT Partial Withdrawals. Subject to certain limits you may make partial withdrawals beginning in the second contract year. The maximum number of withdrawals permitted each contract year is six. Partial withdrawals may be subject to a surrender charge. (See "Partial Withdrawals.") Partial withdrawals may also have tax consequences. (See "Tax Considerations.") Surrenders. You may cancel your Contract at any time and receive the net surrender value. The net surrender value is equal to the surrender value less any loan debt. The surrender value is equal to the contract value less any applicable surrender charge. Surrendering your Contract may have tax consequences. (See "Tax Considerations.") Loans. You may borrow money from us, using your Contract as collateral, subject to limits. We deduct loan debt from the amount payable on surrender of the Contract and from any death benefit payable. Loan interest accrues daily and, IF IT IS NOT PAID EACH YEAR, IT IS TREATED AS A NEW LOAN ("CAPITALIZED") AND ADDED TO THE OUTSTANDING LOAN AMOUNT. With a MEC, both the loan amount and the amount of capitalized loan interest are treated as taxable distributions. Depending upon investment performance of the subaccounts and the amounts borrowed, loans may cause a Contract to lapse. If the Contract lapses with loan debt outstanding, adverse tax consequences may result. Loan debt is considered part of the contract value, which is used to calculate taxable gain. Loans may have other adverse tax consequences. (See "Loans" and "Tax Considerations.") CHARGES, FEES AND CREDITS Account Value Charges. We invest the entire amount of all premium payments in the Separate Account. We then deduct certain charges from your account value on processing dates. (See "Charges Deducted from the Account Value.") These charges are: - EXPENSE CHARGE -- The expense charge is calculated on the contract date and on each subsequent processing date, and deducted in arrears on the next processing date following the calculation date through the 10th contract anniversary. The quarterly charge is .1125% (.45% annually) of your contract value. It accrues daily between processing dates. - COST OF INSURANCE CHARGE -- The cost of insurance charge is calculated on the contract date and on each subsequent processing date, and deducted in arrears on the next processing date following the calculation date. The current charge is an asset-based charge applied to contract value, and depends upon the underwriting class, and issue age of the insured. We have the right to increase the current rate. However, the current cost of insurance charge cannot exceed the guaranteed maximum charge. The cost of insurance charge is accrued for daily between processing dates. 8 - NET LOAN COST -- The net loan cost is accrued daily, and deducted on each contract anniversary if there has been any loan debt during the prior year. It currently equals 1.00% and is guaranteed not to exceed 2.00% of the loan debt per year. Separate Account Charge. We deduct an asset-based charge daily from the net asset value of each subaccount. It is equal to .003699% (1.35% annually). Surrender Charge. We deduct certain charges upon withdrawal or surrender under the Contract. The surrender charge consists of a contingent deferred sales load and an unamortized expense charge. The surrender charge is a percentage of each premium withdrawn or surrendered from your account value during the first 10 years following payment of the premium. It decreases over time, as shown below.
% OF PREMIUM PAYMENT 1 2 3 4 5 6 7 8 9 10 11+ COMPLETED YEARS SINCE PREMIUM PAYMENT ---- --- --- --- --- --- --- --- --- --- --- Contingent Deferred Sales Load.......................... 6.0 5.4 4.8 4.2 3.6 3.0 2.4 1.8 1.2 0.6 0 Unamortized Expense Charge.............................. 4.0 3.6 3.2 2.8 2.4 2.0 1.6 1.2 0.8 0.4 0 ---- --- --- --- --- --- --- --- --- --- --- Total Surrender Charge.................................. 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0
For purposes of calculating the surrender charge, gain is never subject to a surrender charge. "Gain" is equal to the contract value less premiums remaining in the Contract. To calculate the surrender value we determine the amount of any surrender charge payable by assuming that gain is withdrawn first, followed by premiums on a first-in, first-out basis. To calculate any surrender charge for a partial withdrawal, unloaned gain is assumed to be withdrawn first. For this purpose, "unloaned gain" is equal to the contract value less the premiums remaining in the Contract, less loan interest credited to the loan collateral account that has not been repaid. Transfer Charge. We reserve the right to charge $25 for each transfer of account value in excess of 12 transfers in a contract year. Change of Insured Charge. We reserve the right to charge up to $500 if you change the insured under the Contract. Exchange for Fixed Contract Charge. We reserve the right to charge up to $500 if you exchange this Contract for a contract with benefits that do not vary with the investment results of a separate account. Credits To Account Value. Starting at the end of the first processing period of the 11th contract year, we add an asset-based credit to your account value. The quarterly credit is .1125% (.45% annually) of the account value, credited on each processing date. We add this credit solely for the purpose of reducing the separate account charge. Advisory Fees and Fund Expenses. The Funds pay monthly advisory fees and other expenses. The following table helps you understand the costs and expenses you will bear, directly or indirectly. The table shows Fund expenses for the year ended December 31, 2001, as a percentage of each Fund's average net assets. For more information on fees and charges, see "Fund Expenses." 9 ANNUAL EXPENSES
MERRILL LYNCH VARIABLE SERIES FUNDS, INC. (CLASS A SHARES) ---------------------------------------------------------------- DOMESTIC BASIC MONEY FUNDAMENTAL GOVERNMENT INDEX 500 ANNUAL EXPENSES VALUE V.I. MARKET V.I. GROWTH V.I. BOND V.I. V.I. --------------- ---------- ----------- ----------- ---------- ---------- Investment Advisory Fees................................... .60% .50% .65% .50% .30% Other Expenses............................................. .08% .07% .14% .09% .10% ---- ---- ---- ---- ---- Total Annual Operating Expenses............................ .68% .57% .79% .59% .40% Expense Reimbursements..................................... -- -- -- -- -- ---- ---- ---- ---- ---- Net Expenses............................................... .68% .57% .79% .59% .40%
ALLIANCE VARIABLE DAVIS AIM VARIABLE PRODUCTS VARIABLE DELAWARE MERCURY INSURANCE FUNDS SERIES FUND, INC. ACCOUNT VIP TRUST VARIABLE (SERIES I SHARES) (CLASS A SHARES) FUND, INC. (STANDARD CLASS) TRUST ------------------------ --------------------- ------------ ---------------- ------------- AIM V.I. AIM V.I. ALLIANCE ALLIANCE DELAWARE MERCURY INTERNATIONAL PREMIER GROWTH AND PREMIER DAVIS VIP TREND INTERNATIONAL ANNUAL EXPENSES GROWTH EQUITY INCOME GROWTH VALUE SERIES VALUE V.I. --------------- ------------- -------- ---------- -------- ------------ ---------------- ------------- Investment Advisory Fees..... .73% .60% .63% 1.00% .75% .74% .75% Other Expenses............... .32% .25% .04% .04% .12% .16% .26% ----- ---- ---- ----- ----- ---- ----- Total Annual Operating Expenses................... 1.05% .85% .67% 1.04% .87% .90% 1.01% Expense Reimbursements....... -- -- -- -- -- -- -- ----- ---- ---- ----- ----- ---- ----- Net Expenses................. 1.05% .85% .67% 1.04% .87% .90% 1.01%
PIMCO VARIABLE SELIGMAN VAN KAMPEN INSURANCE PORTFOLIOS, LIFE INVESTMENT MFS(R) VARIABLE TRUST INC. TRUST INSURANCE TRUST(SM) (ADMINISTRATIVE (CLASS 1 (CLASS I (INITIAL CLASS SHARES) CLASS SHARES) SHARES) SHARES) ----------------------- ---------------------- ----------- --------------- MFS MFS SELIGMAN EMERGING INVESTORS TOTAL SMALL-CAP EMERGING ANNUAL EXPENSES GROWTH(a) TRUST(a) RETURN(b) VALUE(c) GROWTH --------------- ----------- --------- ---------------------- ----------- --------------- Investment Advisory Fees....................... .75% .75% .25% 1.00% .70% Other Expenses................................. .12% .15% .41% .22% .06% ----- ----- ---- ----- ---- Total Annual Operating Expenses................ .87% .90% .66% 1.22% .76% Expense Reimbursements......................... -- -- .01% .03% -- ----- ----- ---- ----- ---- Net Expenses................................... .87% .90% .65% 1.19% .76%
NOTES TO FEE TABLE (a) The MFS Emerging Growth Series and the MFS Investors Trust Series have expense offset arrangements which reduce each Fund's custodial fee based upon the amount of cash maintained by the Fund with its custodian and dividend disbursing agent. Each Fund may enter into such arrangements and directed brokerage arrangements, which would also have the effect of reducing the Fund's expenses. "Other Expenses" does not take into account these expense reductions, and is therefore higher than the actual expenses of the Funds. Had these fee reductions been taken into account, "Net Expenses" would have been .86% for the Emerging Growth Series and .89% for the Investors Trust Series. (b) Pacific Investment Management Company LLC ("PIMCO") has agreed to reduce total annual operating expenses to the extent that they would exceed 0.65% of average daily net assets, due to organizational expenses and the payment by the Fund of its pro rata portion of the Trust's Trustees' fees. Any such waiver is subject to potential future reimbursement within three years from the date the fee was waived. (c) Effective March 1, 2001, Seligman, at its complete discretion, has agreed to reimburse expenses, other than the management fee, which exceed 0.20% of average net assets of Seligman Small-Cap Value Portfolio. 10 FACTS ABOUT MERRILL LYNCH LIFE INSURANCE COMPANY, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, AND THE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY Merrill Lynch Life Insurance Company ("we" or "us") is a stock life insurance company organized under the laws of the State of Washington on January 27, 1986 and redomesticated under the laws of the State of Arkansas on August 31, 1991. We are an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc. We are authorized to sell life insurance and annuities, including variable life insurance and variable annuities, in 49 states, Puerto Rico, Guam, the U.S. Virgin Islands and the District of Columbia. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ("MLPF&S") MLPF&S provides a world-wide broad range of securities brokerage and investment banking services. It provides marketing services for us and is the principal underwriter of the Contracts issued through the Separate Account. We retain MLPF&S to provide services relating to the Contracts under a distribution agreement. (See "Selling the Contracts.") THE SEPARATE ACCOUNT We established the Separate Account, a separate investment account, on November 16, 1990. It is registered with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940. This registration does not involve any supervision by the Securities and Exchange Commission over the investment policies or practices of the Separate Account. The Separate Account meets the definition of a separate account under federal securities laws. We use the Separate Account to support the Contract as well as other variable life insurance contracts we issue. The Separate Account is also governed by the laws of the State of Arkansas, our state of domicile. We own all of the assets in the Separate Account. We keep the Separate Account's assets apart from our general account and any other separate accounts we may have. Arkansas insurance law provides that the Separate Account's assets, to the extent of its reserves and liabilities, may not be charged with liabilities arising out of any other business we conduct. Obligations to contract owners and beneficiaries that arise under the Contract are our obligations. Income, gains, and losses, whether or not realized, from assets allocated to the Separate Account are, in accordance with the Contracts, credited to or charged against the Separate Account without regard to our other income, gains or losses. The assets in the Separate Account will always be at least equal to the reserves and other liabilities of the Separate Account. If the Separate Account's assets exceed the required reserves and other Contract liabilities, we may transfer the excess to our general account. There are currently 17 subaccounts in the Separate Account that are available for investment. - Five invest in shares of Funds of the Merrill Lynch Variable Series Funds, Inc. (the "Variable Series Funds"). - Two invest in shares of Funds of the AIM Variable Insurance Funds (the "AIM V.I. Funds"). - Two invest in shares of Funds of the Alliance Variable Products Series Fund, Inc. (the "Alliance Fund"). - One invests in shares of a Fund of the Davis Variable Account Fund, Inc. (the "Davis Fund"). - One invests in shares of a Fund of the Delaware VIP Trust (the "Delaware Trust"). - One invests in shares of a Fund of the Mercury Variable Trust (the "Mercury Trust"). - Two invest in shares of Funds of the MFS(R) Variable Insurance Trust(SM) (the "MFS Trust"). 11 - One invests in shares of a Fund of the PIMCO Variable Insurance Trust (the "PIMCO Trust"). - One invests in shares of a Fund of Seligman Portfolios, Inc. (the "Seligman Portfolios"). - One invests in shares of a Fund of the Van Kampen Life Investment Trust (the "Van Kampen Trust"). You'll find complete information about the Funds, including the risks associated with each portfolio in the accompanying prospectuses. They should be read along with this Prospectus. NET RATE OF RETURN FOR A SUBACCOUNT Each subaccount has a distinct unit value (also referred to as "price", "accumulation unit value" or "AUV" in reports we furnish to you). When we allocate your payments or transfers or add amounts to a subaccount, we purchase units based on the value of a unit of the subaccount as of the end of the valuation period during which the allocation occurs. When we transfer or deduct amounts out of a subaccount, we redeem units in a similar manner. A valuation period is each business day together with any non-business days before it. A business day is any day the New York Stock Exchange is open or there's enough trading in portfolio securities to materially affect the unit value of a subaccount. The AUV for each valuation period fluctuates based upon the net rate of return for that period. We determine the net rate of return of a subaccount at the end of each valuation period. The net rate of return reflects the investment performance of the Fund for the valuation period and the charges to the Separate Account. Fund shares are valued at net asset value and reflect reinvestment of any dividends or capital gains distributions declared by the Funds. CHANGES WITHIN THE SEPARATE ACCOUNT We may add new subaccounts. We can also eliminate subaccounts, combine two or more subaccounts, or substitute a new fund for the fund in which a subaccount invests without your consent. A substitution may become necessary if, in our judgment, a fund no longer suits the purposes of the Contracts or for any other reason in our sole discretion. This may happen due to a change in laws or regulations, or a change in a Fund's investment objectives or restrictions, or because the Fund is no longer available for investment, or for some other reason. If necessary, we would get prior approval from the Arkansas State Insurance Department and the Securities and Exchange Commission and any other required approvals before making such a substitution. The substituted portfolio may have different fees and expenses. Substitution may be made with respect to existing investment base or the investment of future premium payments, or both for some or all classes of Contracts. Furthermore, we may close investment divisions to allocations of premium payments or investment base, or both, for some or all classes of Contracts at any time in our sole discretion. Subject to any required regulatory approvals, we can transfer assets of the Separate Account or of any of the subaccounts to another separate account or subaccount. When permitted by law, we also can: - deregister the Separate Account under the Investment Company Act of 1940; - make any changes required by applicable law; - operate the Separate Account as a management company under the Investment Company Act of 1940 or in any other form of organization permitted by applicable law; - reserve, restrict or eliminate any voting rights of contract owners, or other persons who have voting rights as to the Separate Account; - combine and reserve the Separate Account with other separate accounts; and - create new separate accounts. 12 THE FUNDS GENERAL INFORMATION AND INVESTMENT RISKS Information about investment objectives, management, policies, restrictions, expenses, risks, and all other aspects of Fund operations can be found in the Fund prospectuses and Statements of Additional Information. Read these carefully before investing. Fund shares are currently sold to our separate accounts as well as separate accounts of ML Life Insurance Company of New York (an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc.), and insurance companies not affiliated with us, to support benefits under certain variable annuity and variable life insurance contracts. Shares of these Funds may be offered in the future to certain pension or retirement plans. Although the investment objectives and policies of certain Funds are similar to the investment objectives and policies of other portfolios that may be managed by the same investment adviser or manager, we do not represent or assure that the investment results will be comparable to any other portfolio, even where the investment adviser or manager is the same. Differences in portfolio size, actual investments held, fund expenses, and other factors all contribute to differences in fund performance. For all of these reasons, you should expect investment results to differ. In particular, certain Funds available only through the Contract have names similar to funds not available through the Contract. The performance of a fund not available through the Contract does not indicate performance of the similarly named Fund available through the Contract. Generally, you should consider the Funds as long-term investments and vehicles for diversification, but not as a balanced investment program. Many of these Funds may not be appropriate as the exclusive investment to fund a Contract for all contract owners. The Fund prospectuses also describe certain additional risks, including investing on an international basis or in foreign securities and investing in lower rated or unrated fixed income securities. There is no guarantee that any Fund will be able to meet its investment objectives. Meeting these objectives depends upon future economic conditions and upon how well Fund management anticipates changes in economic conditions. Below we list the Funds in which the subaccounts invest. MERRILL LYNCH VARIABLE SERIES FUNDS, INC. The Merrill Lynch Variable Series Funds, Inc. ("Variable Series Funds") is registered with the Securities and Exchange Commission as an open-end management investment company. It currently offers the Separate Account Class A shares of five of its Funds for investment through the Contract. Merrill Lynch Investment Managers, L.P. ("MLIM") is the investment adviser to the Variable Series Funds. MLIM, together with its affiliates, Fund Asset Management, L.P., Merrill Lynch Asset Management U.K., Ltd., and Merrill Lynch Investment Managers International Ltd. (all of which may operate under the name "Mercury Advisors"), is a worldwide mutual fund leader, and had a total of $515 billion in investment company and other portfolio assets under management as of February, 2002. It is registered as an investment adviser under the Investment Advisers Act of 1940. MLIM is an indirect subsidiary of Merrill Lynch & Co., Inc. MLIM's principal business address is 800 Scudders Mill Road, Plainsboro, and New Jersey 08536. As the investment adviser, it is paid fees by these Funds for its services. A summary of the investment objectives and strategies for each Fund is set forth below. MLIM and Merrill Lynch Life Agency, Inc. have entered into a Reimbursement Agreement that limits the operating expenses paid by each Fund of the Variable Series Funds in a given year to 1.25% of its average net assets. Basic Value V.I. Fund (formerly the Basic Value Focus Fund). This Fund seeks capital appreciation and, secondarily, income by investing in securities, primarily equities, that management of the Fund believes are undervalued and therefore represent basic investment value. 13 Domestic Money Market V.I. Fund (formerly the Domestic Money Market Fund). This Fund seeks to preserve capital, maintain liquidity, and achieve the highest possible current income consistent with the foregoing objectives by investing in short-term domestic money market securities. Although the Domestic Money Market V.I. Fund seeks to preserve capital, it is possible to lose money by investing in this Fund. During extended periods of low interest rates, the yields of the Domestic Money Market V.I. Subaccount also may become extremely low and possibly negative. Fundamental Growth V.I. Fund (formerly the Fundamental Growth Focus Fund). This Fund seeks long-term growth of capital. The Fund purchases primarily common stocks of U.S. companies that Fund management believes have shown above-average rates of growth earnings over the long-term. The Fund will invest at least 65% of its total assets in equity securities. Government Bond V.I. Fund (formerly the Government Bond Fund). This Fund seeks the highest possible current income consistent with the protection of capital afforded by investing in debt securities issued or guaranteed by the United States Government, its agencies or instrumentalities. Index 500 V.I. Fund (formerly the Index 500 Fund). This Fund seeks investment results that, before expenses, correspond to the aggregate price and yield performance of the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index"). AIM VARIABLE INSURANCE FUNDS AIM Variable Insurance Funds ("AIM V.I. Funds") is registered with the Securities and Exchange Commission as an open-end, series, management investment company. It currently offers the Separate Account Series I shares of two of its Funds. A I M Advisors, Inc. ("AIM"), 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, serves as the investment adviser to each of the AIM V.I. Funds. AIM has acted as an investment adviser since its organization in 1976. Today AIM, together with its subsidiaries, advises or manages over 150 investment portfolios, including the Funds, encompassing a broad range of investment objectives. As the investment adviser, AIM is paid fees by the Funds for its services. A summary of the investment objectives and strategies for each Fund is set forth below. AIM V.I. International Growth Fund (formerly the AIM V.I. International Equity Fund). This Fund seeks to provide long-term growth of capital by investing in a diversified portfolio of international equity securities whose issuers are considered to have strong earnings momentum. AIM V.I. Premier Equity Fund (formerly the AIM V.I. Value Fund). This Fund seeks to achieve long-term growth of capital. Income is a secondary objective. The Fund invests normally at least 80% of its net assets in equity securities including convertible securities. The Fund may also invest in preferred stocks or debt instruments that have prospects for growth of capital. ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC. Alliance Variable Products Series Fund, Inc. ("Alliance Fund") is registered with the Securities and Exchange Commission as an open-end management investment company. It currently offers the Separate Account Class A shares of two of its Funds. Alliance Capital Management L.P. ("Alliance"), a Delaware limited partnership with principal offices at 1345 Avenue of the Americas, New York, New York 10105 serves as the investment adviser to each Fund of the Alliance Fund. Alliance Capital Management Corporation ("CMC"), the sole general partner of Alliance, is an indirect wholly owned subsidiary of The Equitable Life Assurance Society of the United States, which is in turn a wholly owned subsidiary of AXA Financial, Inc., a holding company which is controlled by AXA, a French insurance holding company for an international group of insurance and related financial services companies. As the investment adviser, Alliance is paid fees by the Funds for its services. A summary of the investment objective and strategy of each Fund is set forth below. 14 Alliance Growth and Income Portfolio. This Fund seeks reasonable current income and reasonable opportunity for appreciation through investing primarily in dividend-paying stocks of good quality. Alliance Premier Growth Portfolio. This Fund seeks growth of capital by pursuing aggressive investment policies. Since investments will be made based upon their potential for capital appreciation, current income is incidental to the objective of capital growth. DAVIS VARIABLE ACCOUNT FUND, INC. Davis Variable Account Fund, Inc. ("Davis Fund") is registered with the Securities and Exchange Commission as an open-end management investment company. It currently offers the Separate Account one of its Funds, the Davis Value Portfolio. Davis Selected Advisers, LP ("Davis Advisers"), located at 2949 East Elvira Road, Tucson, Arizona 85706, is the investment adviser to the Davis Value Portfolio. Davis Selected Advisers-NY, Inc. ("Davis Advisers-NY"), located at 609 Fifth Avenue, New York, New York 10017 serves as the subadviser to the Davis Value Portfolio. Davis Advisers-NY is a wholly owned subsidiary of Davis Advisers. Davis Advisers pays the subadvisory fee, not the Davis Value Portfolio. As the investment adviser, Davis Advisers is paid fees by the Fund for its services. A summary of the investment objective and strategy of the Fund is set forth below. Davis Value Portfolio. This Fund seeks to provide growth of capital. The Fund invests primarily in common stock of U.S. companies with market capitalizations of at least $5 billion. These companies are selected based on their potential for long-term growth, long-term return, and minimum risk. DELAWARE VIP TRUST (FORMERLY, DELAWARE GROUP PREMIUM FUND) Delaware VIP Trust ("Delaware Trust") is registered with the Securities and Exchange Commission as an open-end management investment company. It currently offers the Separate Account Standard Class Shares of one of its Funds, the Delaware VIP Trend Series. Delaware Management Company, located at One Commerce Square, Philadelphia, Pennsylvania 19103, serves as the investment adviser to the Delaware VIP Trend Series. Delaware Management Company is a series of Delaware Management Business Trust, which is an indirect, wholly owned subsidiary of Delaware Management Holdings, Inc. As the investment adviser, Delaware Management Company is paid fees by the Fund for its services. Until April 30, 2003, Delaware Management Company has agreed to waive its management fee and reimburse the Delaware VIP Trend Series for expenses to the extent that total expenses will not exceed 0.95%. A summary of the investment objective and strategy of the Fund is set forth below. Delaware VIP Trend Series (formerly the Trend Series). This Fund seeks long-term capital appreciation. The Fund invests primarily in stocks of small, growth-oriented emerging companies that Fund management believes are responsive to changes within the marketplace and which management believes have fundamental characteristics to support continued growth. MERCURY VARIABLE TRUST (FORMERLY THE MERCURY HW VARIABLE TRUST) Mercury Variable Trust ("Mercury Trust"), a Massachusetts business trust, is registered with the Securities and Exchange Commission as an open-end management investment company. The Mercury Trust is intended to serve as the investment medium for variable annuity contracts and variable life insurance policies to be offered by the separate accounts of certain insurance companies. Mercury Advisors, 800 Scudders Mill Road, Plainsboro, New Jersey 08536, serves as the investment adviser to the Mercury International Value V.I. Fund and generally administers the affairs of the Mercury Trust. As the investment adviser, Mercury Advisors is paid fees by the Fund for its services. Merrill Lynch Asset Management, U.K. Limited ("MLAM U.K."), located at Ropemaker Place, 25 Ropemaker Street, London, England E2Y 9LY, serves as the subadviser to the Mercury International Value V.I. Fund. MLAM U.K. is an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. Mercury Advisors pays the subadvisory fee, not 15 the Mercury International Value V.I. Fund. A summary of the investment objective and strategy of the Fund is set forth below. Mercury International Value V.I. Fund (formerly the Mercury HW International Value VIP Portfolio). The Fund's investment objective is to provide current income and long-term growth of income, accompanied by growth of capital. The Fund invests at least 65% of its total assets in stocks in at least ten foreign markets. In investing the Fund, Mercury Advisors follows a value style. This means that it buys stocks that it believes are currently undervalued by the market and thus have a lower price than their true worth. MFS(R)VARIABLE INSURANCE TRUST(SM) MFS(R)Variable Insurance Trust(SM) ("MFS Trust") is registered with the Securities and Exchange Commission as an open-end management investment company. It currently offers the Separate Account Initial Class shares of two of its Funds. Massachusetts Financial Services Company ("MFS"), a Delaware corporation, 500 Boylston Street, Boston, Massachusetts 02116, serves as the investment adviser to each Fund of the MFS Trust. MFS is a subsidiary of Sun Life of Canada (U.S.) Financial Services Holdings, Inc., which, in turn, is an indirect wholly owned subsidiary of Sun Life Assurance Company of Canada. As the investment adviser, MFS is paid fees by these Funds for its services. A summary of the investment objectives and strategies for each Fund is set forth below. MFS Emerging Growth Series. This Fund seeks long-term growth of capital. The Fund invests, under normal market conditions, at least 65% of its net assets in common stocks and related securities of emerging growth companies. These companies are companies that the Fund's adviser believes are either early in their life cycle but have the potential to become major enterprises or are major enterprises whose rates of earnings growth are expected to accelerate. MFS Investors Trust Series. This Fund seeks mainly to provide long-term growth of capital and secondarily to provide reasonable current income. Under normal conditions, the Fund invests at least 65% of its net assets in common stock and related securities. Although the Fund may invest in companies of any size, it primarily invests in companies with larger market capitalizations and attractive valuations based on current and expected earnings or cash flow. PIMCO VARIABLE INSURANCE TRUST PIMCO Variable Insurance Trust ("PIMCO Trust") is registered with the Securities and Exchange Commission as an open-end management investment company. It currently offers Administrative Class shares of one of its Funds, the Total Return Portfolio, to the Separate Account. Pacific Investment Management Company LLC ("PIMCO"), located at 840 Newport Center Drive, Suite 300, Newport Beach, California 92660, serves as the investment adviser to the Total Return Portfolio. PIMCO is a wholly owned subsidiary partnership of PIMCO Advisers, L.P. As the investment adviser, PIMCO is paid fees by the Fund for its services. A summary of the investment objective and strategy of the Fund is set forth below. Total Return Portfolio (formerly, Total Return Bond Portfolio). This Fund seeks to maximize total return, consistent with preservation of capital and prudent investment management. Under normal circumstances, the Fund invests at least 65% of its assets in a diversified portfolio of fixed income instruments of varying maturities. The average portfolio duration normally varies within a three- to six-year time frame based on PIMCO's forecast for interest rates. SELIGMAN PORTFOLIOS, INC. Seligman Portfolios, Inc. ("Seligman Portfolios") is registered with the Securities and Exchange Commission as an open-end management investment company. It currently offers the Separate Account Class 1 shares of one of its Funds, the Small-Cap Value Portfolio. J. & W. Seligman & Co. Incorporated ("Seligman"), located at 100 Park Avenue, New York, New York 10017 serves as the investment manager to the Seligman Small- 16 Cap Value Portfolio. As the investment adviser, Seligman is paid fees by the Fund for its services. A summary of the investment objective and strategy of the Fund is set forth below. Seligman Small-Cap Value Portfolio. This Fund seeks long-term capital appreciation. Generally, the Fund invests at least 65% of its total assets in the common stocks of "value" companies with small market capitalization up to $2 billion that the Fund manager believes have been undervalued, either historically, by the market, or by their peers. VAN KAMPEN LIFE INVESTMENT TRUST Van Kampen Life Investment Trust ("Van Kampen Trust") is registered with the Securities and Exchange Commission as a diversified open-end management company. It currently offers the Separate Account Class I shares of one of its Funds, the Emerging Growth Portfolio. Van Kampen Asset Management Inc. ("Van Kampen Management") is the portfolio's investment adviser. Van Kampen Management is located at 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555, and is a wholly owned subsidiary of Van Kampen Investments, Inc. Van Kampen Funds Inc., the distributor of the Fund, is also a wholly owned subsidiary of Van Kampen Investments, Inc. Van Kampen Investments, Inc. is an indirect wholly owned subsidiary of Morgan Stanley Dean Witter & Co. As the investment adviser, Van Kampen Management is paid fees by the Fund for its services. A summary of the investment objective and strategy of the Fund is set forth below. Emerging Growth Portfolio. The investment objective of the Fund is to seek capital appreciation. Under normal market conditions, the Fund's investment adviser seeks to achieve the Fund's investment objective by investing at least 65% of the Fund's total assets in a portfolio of common stocks of emerging growth companies. Emerging growth companies are those domestic or foreign companies that the Fund's investment adviser believes have rates of earnings growth expected to accelerate or whose rates of earnings growth are expected to exceed that of the overall economy (because of factors such as new or rejuvenated managements, new products, services or markets, extended product cycles, acquisitions or as a result of changing markets or industry conditions), are early life cycle companies with the potential to become major enterprises, or have rising earnings expectations or rising valuations. Emerging growth companies may be of any size, including larger, more established companies or smaller, developing companies. THE OPERATION OF THE FUNDS Purchases and Redemptions of Fund Shares; Reinvestment. The Separate Account will purchase and redeem shares of the Funds at net asset value to provide benefits under the Contracts. Fund distributions to the Separate Account are automatically reinvested at net asset value in additional shares of the Funds. Voting Rights. We own all Fund shares held in the Separate Account. As the owner, we have the right to vote on any matter put to vote at any Fund's shareholder meetings. However, we will vote all Fund shares attributable to Contracts by following instructions we receive from you. If we don't receive voting instructions, we'll vote those shares in the same proportion as shares for which we receive instructions. We determine the number of shares you may give voting instructions on by dividing your interest in a subaccount by the net asset value per share of the corresponding Fund. We'll determine the number of shares you may give voting instructions on as of a record date we choose. We may vote Fund shares in our own right if laws change to permit us to do so. You have voting rights until the Contract terminates. You may give voting instructions concerning: (1) the election of a Fund's Board of Directors; (2) ratification of a Fund's independent accountant; (3) approval of the investment advisory agreement for a Fund corresponding to one of your selected subaccounts; (4) any change in a fundamental investment policy of a Fund corresponding to one of your selected subaccounts; and 17 (5) any other matter requiring a vote of the Fund's shareholders. Material Conflicts, Substitution of Investments and Changes to the Separate Account. It is conceivable that material conflicts could arise as a result of both variable annuity and variable life insurance separate accounts investing in the Funds. Although no material conflicts are foreseen, the participating insurance companies will monitor events in order to identify any material conflicts between variable annuity and variable life insurance contract owners to determine what action, if any, should be taken. Material conflicts could result from such things as (1) changes in state insurance law, (2) changes in federal income tax law or (3) differences between voting instructions given by variable annuity and variable life insurance contract owners. If a conflict occurs, we may be required to eliminate one or more subaccounts of the Separate Account or substitute a new subaccount. In responding to any conflict, we will take the action we believe necessary to protect our Contract owners. We may substitute a different investment option for any of the current Funds. We can do this for both existing investments and the investment of future premiums. However, before any such substitution, we would need the approval of the Securities and Exchange Commission and applicable state insurance departments. We will notify you of any substitutions. We may also add new subaccounts to the Separate Account, eliminate subaccounts in the Separate Account, deregister the Separate Account under the Investment Company Act of 1940 (the "1940 Act"), make any changes required by the 1940 Act, operate the Separate Account as a managed investment company under the 1940 Act or any other form permitted by law, transfer all or a portion of the assets of a subaccount or separate account to another subaccount or separate account pursuant to a combination or otherwise, and create new separate accounts. Before we make certain changes we need approval of the Securities and Exchange Commission and applicable state insurance departments. We will notify you of any changes. Administrative Service Arrangements. The investment adviser of a Fund (or its affiliates) pays compensation to us or our affiliates, which may be significant, in connection with administration, distribution, or other services provided with respect to the Funds and their availability through the Contracts. The amount of this compensation is based upon a percentage of the assets of the Fund attributable to the Contracts and other contracts that we or our affiliates issue, and may include 12b-1 fees. These percentages differ, and some advisers (or affiliates) may pay more than others. FACTS ABOUT THE CONTRACT STATE VARIATIONS Contracts issued in your state may provide different features and benefits from those described in this Prospectus. This Prospectus provides a general description of the Contracts. Your actual Contract and any endorsements are the controlling documents. If you would like to review a copy of the Contract or any endorsements, contact our Service Center. WHO MAY BE COVERED You may apply for a Contract for an insured age 20 through 79. We will consider issuing Contracts for insureds from ages 80 through 85 on an individual basis. The insured's issue age is his or her age as of the birthday nearest the contract date. Before we'll issue a Contract, the insured must meet our medical and other underwriting and insurability requirements. We use two methods of underwriting: - simplified underwriting, with no physical exam; and - medical underwriting with a physical exam. 18 The initial payment amount and the age of the insured determine whether we'll do underwriting on a simplified or medical basis. The chart below shows the maximum initial payment that we'll underwrite on a simplified basis:
INSURED'S MAXIMUM AGE PREMIUM - --------- -------- 20-29 $ 25,000 30-39 $ 40,000 40-49 $ 60,000 50-59 $100,000 60-64 $120,000 65-69 $150,000 70-74 $200,000 75-79 $275,000
We Assign Insureds to Underwriting Classes. In assigning insureds to underwriting classes, we distinguish between those insureds underwritten on a simplified basis and those underwritten on a medical basis. Under both simplified and medical underwriting methods we may issue Contracts either in the standard or non-smoker class. We may also issue Contracts in a "substandard" underwriting class. Individuals in substandard classes have health or lifestyle factors less favorable than the average person. For a discussion of the effect of underwriting classification on cost of insurance, see "Charges Deducted from the Account Value -- Cost of Insurance Charge." INITIAL PAYMENT Minimum. To purchase a Contract, you must complete an application and make a payment. We require the payment to put the Contract into effect. The minimum single payment for a Contract is $10,000. You may make additional premium payments during the first contract year. (See "Making Additional Payments.") Coverage. Insurance coverage generally begins on the contract date. This is usually the next business day following our receipt of the initial premium payment at our Service Center. Initial Investment Allocation. Generally, during the first 14 days following the in-force date, the initial premium payment will remain in the subaccount investing in the Domestic Money Market V.I. Fund. Afterward, we'll reallocate the account value to the subaccounts you've selected. You may invest in up to five of the subaccounts. The Initial Face Amount. Your initial payment determines the face amount. At any time, the face amount is the amount which will provide a guarantee period to the insured's attained age 100. (See "Guarantee Period.") RIGHT TO CANCEL ("FREE LOOK" PERIOD) You may cancel your Contract during the "free look" period by returning it for a refund. Generally, the "free look" period ends 10 days after you receive the Contract. Some states allow a longer period of time to return the Contract. If required by your state, the "free look" period ends the later of 10 days after you receive the Contract and 45 days from the date you complete the application. To cancel the Contract during the "free look" period, you must mail or deliver the Contract to our Service Center or to the Financial Advisor who sold it. We will refund your premium payments without interest. We may require you to wait six months before applying for another contract. MAKING ADDITIONAL PAYMENTS After fourteen days following the in-force date, you may make up to four additional premium payments during the first contract year provided the attained age of the insured is not over 80. The minimum additional premium payment is $2,000. You need to use an Application for Additional Payment. 19 We require satisfactory evidence of insurability before we accept an additional payment. Currently, we won't accept an additional payment where the evidence of insurability would put the insured in a different underwriting class with different guaranteed or higher current cost of insurance rates. If mandated under applicable law, we may be required to reject a payment. Unless you specify otherwise, if there is any loan debt, we will apply any payment made first as a loan repayment with any excess applied as an additional premium payment. (See "Loans.") We invest an additional payment in the subaccount investing in the Domestic Money Market V.I. Fund on the business day after we receive it. Once we complete the underwriting and accept the payment, we credit the payment to your Contract and allocate the payment either according to your instructions or, if you don't give us instructions, proportionately to the account value in each of the Contract's subaccounts. Effect on Account Value and Variable Insurance Amount. On the date we accept the additional premium payment, we increase the account value by the amount of the payment. In addition, we increase the variable insurance amount by the amount of the payment multiplied by the applicable net single premium factor. This means the increase in the variable insurance amount will always be greater than the amount of the payment. Effect on Face Amount. We increase the Contract's face amount as of the effective date of the additional premium payment. See "Guaranteed Benefits" for a discussion of how the new face amount is determined. ACCOUNT VALUE A Contract's account value is the sum of the amounts invested in each of the subaccounts. On the contract date, the account value equals the initial premium payment. We adjust the account value daily to reflect the investment performance of the subaccounts you've selected. (See "Net Rate of Return for a Subaccount.") The investment performance reflects the deduction of Separate Account charges. (See "Charges to the Separate Account.") Deductions for the expense charge, cost of insurance charge, net loan cost, and surrender charges and any partial withdrawals and loans decrease the account value. (See "Charges Deducted from the Account Value," "Partial Withdrawals" and "Loans.") Any deductions for transaction charges, such as for transfers in excess of 12 in a single contract year, or for exchanging the Contract for a fixed life insurance contract or changing the insured, also decrease the account value. An asset-based credit that begins after the tenth contract year, and any loan repayments and additional payments increase the account value. You may elect from which subaccounts loans and partial withdrawals are taken and to which subaccounts repayments and additional payments are added. If you don't make an election, we will allocate increases and decreases in proportion to the account value in each of the subaccounts. OWNER'S RIGHT TO TRANSFER ACCOUNT VALUE You may transfer all or part of the account value among the subaccounts. To make a transfer, you must provide us with satisfactory notice at our Service Center. The transfer takes effect on the business day we receive the notice. The following features apply to transfers under this Contract: - The minimum amount that may be transferred from any subaccounts in any transaction is $100 or the remaining balance, if less. - You select the subaccount(s) to which to make a transfer. The maximum number of subaccounts in which you may have account value at any one time is five. - There is a maximum of 12 transfers allowed without charge each contract year; we reserve the right to deduct a $25 charge for the 13th and each additional transfer. - We consider all telephone and/or written requests processed on the same day to be one transfer, regardless of the number of subaccounts affected by the transfer(s). - We deduct the transfer charge from the amount being transferred. 20 - Transfers due to dollar cost averaging, loans, or the initial reallocation of account value from the Domestic Money Market V.I. subaccount do not count as transfers for purposes of assessing the transfer charge. An excessive number of transfers, including short-term "market timing" transfers, may adversely affect the performance of the Fund in which a subaccount invests. If, in our sole opinion, a pattern of an excessive number of transfers develops for a Contract, we reserve the right not to process a transfer request. We also reserve the right not to process a transfer request when the sale or purchase of shares or units of a Fund is not reasonably practicable due to actions taken or limitations imposed by the Fund. CHARGES, FEES AND CREDITS We deduct the charges described below to cover costs and expenses, services provided, and risks assumed under the Contracts. The amount of a charge may not necessarily correspond to the costs associated with providing the services or benefits indicated by the designation of the charge or associated with a particular Contract. For example, the contingent deferred sales load (or "CDSL") may not fully cover all of the sales and distribution expenses we actually incur. We may use proceeds from other charges, including the asset-based charge and cost of insurance charge, in part to cover such expenses. We deduct certain charges on processing dates from each subaccount in proportion to the account value in that subaccount. (See "Charges Deducted from the Account Value.") We deduct certain charges daily from the investment results of each subaccount in determining its net rate of return. (See "Charges to the Separate Account.") We may also deduct charges upon surrender of the Contract. (See "Surrender Charge.") We may deduct certain transaction charges. (See "Transaction Charges.") The Funds also pay monthly advisory fees and other expenses. (See "Fund Expenses.") Starting at the end of the first processing period of the 11th Contract year, we add an asset-based credit to the account value which effectively reduces the amount of the asset-based charge we collect. (See "Credits Added to Account Value.") CHARGES DEDUCTED FROM THE ACCOUNT VALUE Expense Charge. The expense charge compensates us, in part, for the cost of any federal or state tax we pay in connection with the issuance of the Contract. The expense charge is a quarterly charge equal to .1125% (.45% annually) of the contract value. It is calculated on each processing date, beginning with the Contract date by multiplying the quarterly charge by the Contract value. We accrue the expense charge daily between processing dates and deduct it in arrears from the account value on the next processing date following the calculation date through the tenth contract anniversary. We deduct the accrued expense charge to determine the Contract value and therefore the surrender value. Cost of Insurance Charge. This charge compensates us for the cost of providing life insurance coverage on the insured. The current cost of insurance charge cannot exceed the guaranteed maximum cost of insurance charge. Current Cost of Insurance Charge. The current cost of insurance charge is an asset-based charge applied to the contract value and is based upon the underwriting class and issue age of the insured. We calculate the cost of insurance charge on each processing date beginning with the Contract date by multiplying the current cost of insurance rate by the Contract value. We accrue the cost of insurance charge daily between processing dates and deduct it in arrears from the account value on the next processing date following the calculation date. We deduct the accrued charge to determine the Contract value and therefore the surrender value. Current cost of insurance rates distinguish between insureds in the simplified underwriting class and medical underwriting class. Current cost of insurance rates would be lower for an insured in a medical underwriting class than for a similarly situated insured in a simplified underwriting class. The current cost of insurance rates for the simplified underwriting class are higher because we perform less underwriting and therefore we incur more risk. Current rates also distinguish between insureds in a smoker (standard) underwriting class and 21 insureds in a non-smoker underwriting class. For Contracts issued on insureds under the same underwriting method, current cost of insurance rates are lower for non-smokers than for smokers. For Contracts issued on a substandard basis, current cost of insurance rates are higher than for a similarly situated Contract issued in a standard (unrated) underwriting class. We have the right to increase our current cost of insurance rates. In no case will the current cost of insurance charge exceed the Guaranteed Maximum Cost of Insurance Charge described below. Any change in the current cost of insurance rates will apply to all insureds of the same age, sex and underwriting class whose Contracts have been in-force for the same length of time. Guaranteed Maximum Cost of Insurance Charge. The Guaranteed Maximum Cost of Insurance Charge is determined by multiplying the applicable guaranteed maximum rate shown in the Contract by the net amount at risk divided by 1000. The guaranteed maximum rates for Contracts (except those issued on a substandard basis) do not exceed the rates based on the 1980 Smoker/Non-Smoker Male/Female Commissioners Standard Ordinary Mortality Table (1980 CSO Table). The maximum rates for Contracts issued on a substandard basis are based on a multiple of the 1980 CSO Table. Net Loan Cost. The net loan cost is explained under "Loans." CHARGES TO THE SEPARATE ACCOUNT Asset-Based Charge. We deduct an asset-based charge daily from the investment results of each subaccount in determining its rate of return. This charge is intended to compensate us for: - the risk we assume that insureds as a group will live for a shorter time than actuarial tables predict. As a result, we would be paying more in death benefits than planned; and - the risks we assume that it will cost us more to issue and administer the Contracts than expected; and - the risk we assume for potentially unfavorable investment results. One risk is that the current asset-based cost of insurance charge will not be sufficient to cover the expense of the insurance benefits being provided. Another risk is that we may have to limit the deduction for the cost of insurance charge (see "Guaranteed Maximum Cost of Insurance Charge" above). The asset-based charge is a daily charge equal to .003699% (1.35% annually). If the asset-based charge is not enough to cover the actual expenses of mortality, maintenance, and administration, we will bear the loss. If the charge exceeds actual expenses, we will add the excess to our profit and we may use it to finance distribution expenses. We cannot increase the total charge. SURRENDER CHARGE The surrender charge is equal to a percentage of each premium withdrawn or surrendered during the first 10 years following payment of the premium. The surrender charge consists of a contingent deferred sales load and an unamortized expense charge. The contingent deferred sales load is intended to cover, at least in part, the costs associated with the distribution of the Contract. The unamortized expense charge is intended to cover, at least in part, the expenses incurred at issuance of the Contract resulting from certain taxes. The surrender charge is deducted from your account value. It decreases over time, as shown below.
% OF PREMIUM WITHDRAWN ------------------------------------------------------ 1 2 3 4 5 6 7 8 9 10 11+ COMPLETED YEARS SINCE PREMIUM PAYMENT ---- --- --- --- --- --- --- --- --- --- --- Contingent Deferred Sales Load............................ 6.0 5.4 4.8 4.2 3.6 3.0 2.4 1.8 1.2 0.6 0 Unamortized Expense Charge................................ 4.0 3.6 3.2 2.8 2.4 2.0 1.6 1.2 0.8 0.4 0 ---- --- --- --- --- --- --- --- --- --- --- Total Surrender Charge.................................... 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0
For purposes of calculating the surrender charge, gain is never subject to the charge. "Gain" is equal to the contract value less premiums remaining in the Contract. To calculate the surrender value, we determine the 22 amount of any surrender charge payable by assuming gain is withdrawn first, followed by premiums on a first-in, first-out basis. To determine the amount of any surrender charge applicable to a partial withdrawal and the premiums remaining in the Contract, unloaned gain is assumed to be withdrawn first. For this purpose, "unloaned gain" is equal the contract value less the premiums remaining in the Contract, less loan interest credited to the loan collateral account that has not been repaid. TRANSACTION CHARGES Transfer Charges. We reserve the right to charge $25 for each transfer of account value in excess of 12 transfers in a contract year. Change of Insured Charge. We reserve the right to charge up to $500 if you change the insured under the Contract. Exchange for Fixed Contract Charge. We reserve the right to charge up to $500 if you exchange this Contract for a contract with benefits that do not vary with the investment results of a separate account. FUND EXPENSES In calculating net asset values, the Funds deduct advisory fees and operating expenses from assets. (See "Charges, Fees and Credits".) Information about those fees and expenses also can be found in the prospectus and Statement of Additional Information for each Fund. CREDITS ADDED TO THE ACCOUNT VALUE Starting at the end of the first processing period of the 11th contract year, we add an asset-based credit to the account value. The quarterly credit is .1125% (.45% annually) of account value, credited on each processing date. This credit effectively reduces the annual asset-based charge (see "Charges to the Separate Account"). SURRENDER VALUE We don't guarantee any minimum surrender value. On any contract anniversary the surrender value equals: - the Contract's account value on that date; - plus loan debt - minus any applicable surrender charge. On any other processing date, the surrender value equals the above, less any accrued net loan cost. If the date of calculation is not a processing date, we also subtract the accrued cost of insurance charge and accrued expense charge. (See "Charges, Fees and Credits.") CANCELING TO RECEIVE NET SURRENDER VALUE A contract owner may cancel the Contract at any time while the insured is living and receive the net surrender value in a lump sum or under an income option. The net surrender value is equal to the surrender value less any loan debt. You must make the request in writing in a form satisfactory to us. All rights to the death benefit will end on the date you send the written request to us. The effective date of the cancellation is the valuation date our Service Center receives a cancellation request. Canceling the Contract may have tax consequences. (See "Tax Considerations.") 23 PARTIAL WITHDRAWALS After the first contract year, you may make up to six partial withdrawals each Contract year by submitting a request in a form satisfactory to us. The amount of any partial withdrawal may not exceed an amount which would reduce the face amount below the minimum face amount for which we would then issue the Contract. The amount of the withdrawal also may not exceed the loan value less any loan debt, and in any event the withdrawal amount may not exceed 80% of the net surrender value. The minimum amount for each partial withdrawal is $1,000. The effective date of the withdrawal is the valuation date our Service Center receives a withdrawal request. A partial withdrawal may not be repaid. A surrender charge may apply to a partial withdrawal. (See "Surrender Charge.") Partial withdrawals are treated as distributions under the Contract for federal tax purposes and may also be subject to a 10% penalty tax. (See "Tax Considerations.") Effect on Account Value and Variable Insurance Amount. As of the effective date of the withdrawal, we reduce the account value by the amount of the partial withdrawal and any applicable surrender charge. Unless you tell us differently, we allocate this reduction in proportion to the account value in each of your subaccounts. In addition, we reduce the variable insurance amount by the amount of the withdrawal and any surrender charge multiplied by the appropriate net single premium factor. This means the reduction in the variable insurance amount prior to insured's attained age 100 will always be greater than the amount of the withdrawal and any surrender charge. Effect on Face Amount. As of the effective date of a partial withdrawal, we reduce the Contract's face amount. See "Guaranteed Benefits" for a discussion of how the new face amount is determined. LOANS You may use the Contract as collateral to borrow funds from us. The minimum loan is $500. You may repay all or part of the loan debt any time during the insured's lifetime. Each repayment must be for at least $500 or the amount of the loan debt, if less. Certain states don't permit us to set a minimum amount to be borrowed or repaid. Loans taken from modified endowment contracts ("MECs") are generally treated as distributions under the Contract for federal tax purposes and may also be subject to a 10% penalty tax. (See "Tax Considerations.") When you take a loan, we transfer from your account value the amount of the loan and hold it as collateral in our general account. When a loan repayment is made, we transfer the amount of the repayment from the general account to the subaccounts. You may select the subaccounts you want to borrow from, and the subaccounts you want to repay (including interest payments). If you don't specify, we'll take the borrowed amounts proportionately from and make repayments proportionately to your account value as then allocated to each of the subaccounts. If you have the CMA Insurance Service, you can transfer loan proceeds and loan repayments to and from your CMA account. Effect On Death Benefit And Surrender Value. Whether or not you repay a loan, taking a loan will have a permanent effect on a Contract's surrender value and may have a permanent effect on its death benefit. This is because the collateral for a loan does not participate in the performance of the subaccounts while the loan is outstanding. If the amount credited to the collateral is more than what is earned in the subaccounts, the surrender value will be higher as a result of the loan, as may be the death benefit. Conversely, if the amount credited is less, the surrender value will be lower, as may be the death benefit. In that case, the lower surrender value may cause the Contract to terminate sooner than if no loan had been taken. Loan Value. The loan value of a Contract equals 90% of its surrender value. The maximum amount that can be borrowed at any time is the difference between the loan value and the loan debt. The surrender value is the net surrender value plus any loan debt. 24 Interest. While loan debt remains unpaid, we can charge interest at a maximum of 6.00% annually (we currently charge 5%). Interest accrues each day and payments are due at the end of each contract year. IF YOU DON'T PAY THE INTEREST WHEN DUE, IT IS TREATED AS A NEW LOAN AND WE ADD IT TO THE UNPAID LOAN AMOUNT. Since this Contract is generally issued as a MEC, the unpaid interest added to the unpaid loan amount is treated as a distribution and taxed accordingly. (See "Tax Considerations.") The amount held in our general account as collateral for a loan earns interest at a rate of 4% annually. Net Loan Cost. On each contract anniversary we reduce the account value by the net loan cost (the difference between the loan interest charged and the earnings on the amount held as collateral in the general account) and add that amount to the amount held in the general account as collateral for the loan. Since the interest charged is a maximum of 6% (currently 5%) and the collateral earnings on such amounts are 4%, the maximum net loan cost on loaned amounts is 2% (currently 1%). We take the accrued net loan cost into account in determining the net surrender value of the Contract if the date of surrender is not a contract anniversary. Cancellation Due to Excess Loan Debt. If the loan debt exceeds the surrender value on a processing date, INCLUDING A PROCESSING DATE DURING THE GUARANTEE PERIOD, we will mail a notice of intent to terminate the Contract to you. The Contract will terminate 61 days after we mail this notice, unless we have received at least the minimum repayment amount specified in the notice. GUARANTEE PERIOD During the guarantee period, we cannot terminate the Contract regardless of investment results unless loan debt exceeds the surrender value. The guarantee period extends to the insured's attained age 100. The guarantee period will not change as a result of additional premium payments, or partial withdrawals. We hold a reserve in our general account to support this guarantee. After the guarantee period, the Contract will remain in effect as long as the net surrender value is sufficient to cover all charges due. (See "Loans -- Cancellation Due to Excess Loan Debt.") GUARANTEED BENEFITS The guaranteed minimum death benefit is equal to the face amount. The face amount increases as a result of an additional premium payment or decreases as a result of a partial withdrawal as of the effective date of the transaction. We use the fixed base to determine the adjustments to the face amount due to payments or withdrawals. As of the effective date of the transaction, the fixed base is increased by the amount of a premium payment or decreased by the amount of a withdrawal. If the effective date is not a processing date, we also increase the fixed base by an amount of interest on the premium paid, from the effective date to the next processing date, equivalent to an annual rate of 4%. We likewise decrease the fixed base by the amount of interest on the withdrawal, from the effective date to the next processing date, at the same 4% annual rate. Increase in Face Amount Due to Additional Premium Payment. The amount of the increase is determined by multiplying the increase in the fixed base due to the payment by the appropriate net single premium factor. Decrease in Face Amount Due to Withdrawal. The amount of the decrease is determined by multiplying the decrease in the fixed base due to the withdrawal by the appropriate net single premium factor. The appropriate net single premium factor is the factor as of the processing date on or next following the effective date of the transaction. See "Net Single Premium Factor" under Variable Insurance Amount. DEATH BENEFIT The death benefit for this Contract on any day on or prior to the Insured's Attained Age 100 is the greater of the guaranteed minimum death benefit and the variable insurance amount. The death benefit on any day after the insured's attained age 100 is the contract value. The tax consequences of continuing your Contract beyond 25 the insured's attained age 100 are unclear and a tax advisor should be consulted if you intend to keep your Contract in force beyond the insured's attained age 100. Guaranteed Minimum Death Benefit. The guaranteed minimum death benefit is equal to the face amount. The guaranteed minimum death benefit will increase as a result of an additional premium payment, or it will decrease as a result of a partial withdrawal. The guaranteed minimum death benefit is not affected by investment results or the allocation of the account value among the subaccounts. After the insured's attained age 100, there is no guaranteed minimum death benefit. Variable Insurance Amount. We determine the variable insurance amount daily by multiplying the contract value by the appropriate net single premium factor. - -------------------------------------------------------------------------------- NET SINGLE PREMIUM FACTOR In calculating the variable insurance amount, we use the net single premium factor to determine the amount of death benefit purchased by $1.00 of contract value. The net single premium factor is based on the insured's sex, attained age, and underwriting class on the date of calculation. It decreases daily as the insured's age increases. As a result, the variable insurance amount as a multiple of the contract value will decrease over time. Also, net single premium factors may be higher for a woman than for a man of the same age. Your Contract contains a table of net single premium factors as of each anniversary. The net single premium factor at Insured's attained age 100 and after is equal to 1.0. Table Of Illustrative Net Single Premium Factors On Anniversaries Non-Smoker Underwriting Class
ATTAINED AGE MALE - ------------ ------- 35........................................................ 4.29039 45........................................................ 3.07406 55........................................................ 2.24426 65........................................................ 1.70152 75........................................................ 1.36814 100+...................................................... 1.00000
- -------------------------------------------------------------------------------- DEATH BENEFIT PROCEEDS Amount of Death Benefit Proceeds. The death benefit proceeds equals the death benefit, less any loan debt. The values used in calculating the death benefit proceeds are as of the date of death. If the insured dies during the 61-day period after we mail notice of our intent to terminate (see "Loans -- Cancellation Due to Excess Loan Debt"), the death benefit proceeds equals the death benefit proceeds in effect immediately before the 61-day period minus any overdue charges. PAYMENT OF DEATH BENEFIT PROCEEDS We will pay the death benefit proceeds to the beneficiary when we receive all information needed to process the payment, including due proof of the insured's death. When we first receive reliable notification of the insured's death from a representative of the owner or the insured, we may transfer the account value to the subaccount investing in the Domestic Money Market V.I. Fund, pending payment of death benefit proceeds. We will generally pay the death benefit proceeds to the beneficiary within seven days after our Service Center receives all the information needed to process the payment. We may delay payment, however, if we are 26 contesting the Contract or under the circumstances described in "Using the Contract" and "Other Contract Provisions". We will add interest from the date of the insured's death to the date of payment at an annual rate of at least 4%. The beneficiary may elect to receive the proceeds either in a single payment or under one or more income options described under "Choosing an Income Option." MORE ABOUT THE CONTRACT USING THE CONTRACT Ownership. The contract owner is the insured, unless someone other than the insured has been named as the owner in the application. The contract owner has all rights and options described in the Contract. If you are not the insured, you may want to name a contingent owner. If you die before the insured, the contingent owner will own your interest in the Contract and have all your rights. If you don't name a contingent owner and you die before the insured, your estate will then own your interest in the Contract. If there is more than one contract owner, we will treat the owners as joint tenants with rights of survivorship unless the ownership designation provides otherwise. We may require completion of additional forms. The owners must exercise their rights and options jointly, except that any one of the owners may transfer the Contract's account value by phone if that owner provides the personal identification number as well as the Contract number. One contract owner must be designated, in writing, to receive all notices, correspondence and tax reporting to which contract owners are entitled under the Contract. Changing the Owner. During the insured's lifetime, you have the right to transfer ownership of the Contract. However, if you've named an irrevocable beneficiary, that person will need to consent. The new owner will have all rights and options described in the Contract. The change will be effective as of the date the notice is signed, but will not affect any payment we've made or action we've taken before our Service Center receives the notice of the change. Changing the owner may have tax consequences. Assigning the Contract As Collateral. You may assign the Contract as collateral security for a loan or other obligation. This does not change the ownership. However, your rights and any beneficiary's rights are subject to the terms of the assignment. You must give satisfactory written notice at our Service Center in order to make or release an assignment. We are not responsible for the validity of any assignment. A collateral assignment will generally be treated as a taxable distribution and may also be subject to a 10% penalty tax. Naming Beneficiaries. We will pay the primary beneficiary the death benefit proceeds of the Contract on the insured's death. If the primary beneficiary has died before the insured, we will pay the contingent beneficiary. If no contingent beneficiary is living, we will pay the insured's estate. You may name more than one person as primary or contingent beneficiaries. We will pay proceeds in equal shares to the surviving beneficiaries unless the beneficiary designation provides differently. You have the right to change beneficiaries during the insured's lifetime. However, if your primary beneficiary designation is irrevocable, the primary beneficiary must consent when certain contract rights and options are exercised. If you change the beneficiary, the change will take effect as of the date the notice is signed, but will not affect any payment we've made or action we've taken before our Service Center receives notice of the change. Changing the Insured. Subject to certain requirements, you may request a change of insured once each contract year. We must receive a written request signed by you and the proposed new insured. Neither the original nor the new insured can have attained ages as of the effective date of the change that are less than the minimum nor more than the maximum ages for which we would then issue this Contract. The new insured must have been alive at the time the Contract was issued. We will also require evidence of insurability for the 27 proposed new insured. The proposed new insured must qualify for a standard or better underwriting classification. Outstanding loan debt must first be repaid and the Contract cannot be under a collateral assignment. If we approve the request for change, insurance coverage on the new insured will take effect on the processing date on or next following the date of approval, provided the new insured is still living at that time and the Contract is still in effect. We will change the Contract as follows on the effective date: - The issue date of this Contract is changed to the effective date of change. - The issue age for the new insured is the new insured's age as of his or her birthday nearest the contract date. - The guaranteed maximum cost of insurance rates and net single premium factors are those in effect on the contract date for a person with the same issue age, sex, and underwriting class as the new insured. - The initial face amount is recalculated based on the issue age, sex and underwriting class of the new insured. - The face amount is recalculated if there have been any additional premium payments or partial withdrawals since the Contract Date. - A change of insured charge (maximum of $500) is deducted from the account value. Changing the insured will generally be treated as a taxable transaction. When We Make Payments. We generally pay death benefit proceeds, partial withdrawals, loans and the net surrender value within seven days after our Service Center receives all the information needed to process the payment. However, we may delay payment if it isn't practical for us to value or dispose of Fund shares because: - the New York Stock Exchange is closed, other than for a customary weekend or holiday; - trading on the New York Stock Exchange is restricted by the Securities and Exchange Commission; - the Securities and Exchange Commission declares that an emergency exists such that it is not reasonably practical to dispose of securities held in the Separate Account or to determine the value of their assets; or - the Securities and Exchange Commission by order so permits for the protection of contract owners. If mandated under applicable law, we may be required to block a contract owner's account and thereby refuse to accept any request for transfers, withdrawals, surrenders, loans or death benefits, until instructions are received from the appropriate regulator. DOLLAR COST AVERAGING What Is It? The Contract offers an optional transfer feature called Dollar Cost Averaging ("DCA"). This feature allows you to make automatic monthly transfers from the subaccount investing in the Domestic Money Market V.I. Fund to up to four other subaccounts, depending on your current allocation of account value. The DCA program will terminate and no transfers will be made if transfers under DCA would cause you to be invested in more than five subaccounts including the Domestic Money Market V.I. Fund. The DCA feature is intended to reduce the effect of short-term price fluctuations on investment cost. Since the same dollar amount is transferred to selected subaccounts each month, more units of a subaccount are purchased when their value is low and fewer units are purchased when their value is high. Therefore, over the long term a DCA program may let you buy units at a lower average cost. However, a DCA program does not assure a profit or protect against a loss in declining markets. You can choose the DCA feature at 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 28 make transfers at monthly intervals until the balance in the subaccount investing in the Domestic Money Market V.I. Fund is zero. While the DCA program is in place any amount in the Domestic Money Market V.I. Subaccount is available for transfer. Minimum Amounts. To elect DCA, you need to have a minimum amount in the Domestic Money Market V.I. Subaccount. We determine the amount required by multiplying the specified length of your DCA program ("DCA duration") in months by your specified monthly transfer amount. If you do not select a DCA duration, we determine the minimum amount required by multiplying your monthly transfer amount by 3 months. You must specify at least $100 for transfer each month. Allocations may be made in specific whole dollar amounts or in whole-number percentage increments of at least 1%. We reserve the right to change these minimums. Should the amount in your Domestic Money Market V.I. Subaccount be less than the selected monthly transfer amount, we'll notify you that you need to put more money in the Domestic Money Market V.I. Subaccount to continue DCA. If you do not select a DCA duration or the DCA duration you selected has not been reached and the amount in the Domestic Money Market V.I. Subaccount is less than the monthly transfer amount, we will transfer your remaining balance in the Domestic Money Market V.I. Subaccount. Transfers are made based on your DCA allocation instructions or pro-rata based on your specified transfer amounts. When Do We Make DCA Transfers? We'll make the first DCA transfer on the first monthly anniversary date after the later of the date our Service Center receives your election or fourteen days after the in-force date. We'll make additional DCA transfers on each subsequent monthly anniversary. We don't charge for DCA transfers. These transfers are in addition to other transfers permitted under the Contract. ASSET ALLOCATION PROGRAM Under the Asset Allocation Program, we allocate your premiums and rebalance your account value quarterly according to an asset allocation model you have selected based on your investment goals and risk tolerance. There are currently five asset allocation models to choose from: - Capital Preservation - Current Income - Income and Growth - Long-Term Growth - Aggressive Growth Each model identifies specific subaccounts and the percentage of premium or account value that should be allocated to each of those subaccounts. We may periodically adjust the composition of each model. These adjustments become effective at the end of the calendar quarter. The asset allocation models are not recommendations, have not been designed with your specific financial circumstances in mind, and may not be appropriate for any particular individual. There may be other allocations that would be more appropriate to satisfy your needs and goals. Asset Allocation can be elected at issue or at any time after issue. You may elect the Asset Allocation Program in writing or by telephone, once we get proper telephone transfer authorization. If you elect the Asset Allocation Program, you must include all account value in the program. We allocate all premiums, unless you instruct us otherwise, in accordance with your selected model. If you elect the Asset Allocation Program at issue, we rebalance your account value 14 days following the in-force date. If you elect the Asset Allocation Program after issue, we rebalance your account value upon receipt of your notice of election, but not earlier than 14 days following the in-force date. 29 On the last business day of each calendar quarter, we automatically rebalance your account value to maintain the subaccounts and percentages for your selected model. We perform this periodic rebalancing to take account of: - increases and decreases in account value in each subaccount due to subaccount performance, - increases and decreases in account value in each subaccount due to withdrawals, transfers, and premium payments, and - any adjustments we make to your selected model. The asset allocation model that you select under the program will override any prior percentage allocations that you have chosen, and we will allocate all future premiums according to your selected model. You may change your selected model at any time, and we will rebalance your account value upon receipt of the notice of the change. You may also switch to the Rebalancing Program at any time, and we will rebalance your account value upon receipt of the notice of the change. Once elected, you may instruct us, in a written form satisfactory to us, at any time to terminate the program. Currently, we don't charge for transfers under this program. These transfers are in addition to other transfers permitted under the Contract. We reserve the right to make changes to this program at any time. If you choose the Rebalancing Program or the DCA Program, you cannot use the Asset Allocation Program. REBALANCING PROGRAM Under the Rebalancing Program, we allocate your premiums and rebalance your account value quarterly according to the subaccounts and percentages you have selected based on your investment goals and risk tolerance. The Rebalancing Program can be elected at issue or at any time after issue. You may elect the Rebalancing Program in writing or by telephone, once we get proper telephone transfer authorization. If you elect the Rebalancing Program, you must include all account value in the program. We allocate all premiums, unless you instruct us otherwise, in accordance with the particular percentage allocation among the subaccounts that you have selected. If you elect the Rebalancing Program at issue, we rebalance your account value 14 days following the in-force date. If you elect the Rebalancing Program after issue, we rebalance your account value upon receipt of your notice of election, but not earlier than 14 days following the in-force date. On the last business day of each calendar quarter, we automatically rebalance your account value to maintain the particular percentage allocation among the subaccounts that you have selected. We perform this periodic rebalancing to take account of: - increases and decreases in account value in each subaccount due to subaccount performance, and - increases and decreases in account value in each subaccount due to withdrawals, transfers, and premium payments. The percentages that you select under the Rebalancing Program will override any prior percentage allocations that you have chosen and we will allocate all future premiums according to your percentage allocations. You may change your allocations at any time, and we will rebalance your account value upon receipt of the notice of the change. You may also switch to the Asset Allocation Program at any time, and we will rebalance your account value upon receipt of the notice of the change. Once elected, you may instruct us, in a written form satisfactory to us, at any time to terminate the program. Currently, we don't charge for transfers under this program. These transfers are in addition to other transfers permitted under the Contract. We reserve the right to make changes to this program at any time. If you choose the Asset Allocation Program or the DCA Program, you cannot use the Rebalancing Program. 30 RIGHT TO EXCHANGE THE CONTRACT Within 18 months of the issue date (24 months in some states) you may exchange your Contract for a contract with benefits that do not vary with the investment results of a separate account. Your request must be in writing. Also, you must return the original Contract to our Service Center. The new contract will have the same owner and beneficiary as those of the original Contract on the date of the exchange. It will also have the same issue age, issue date, face amount, surrender value, benefit riders and underwriting class as the original Contract on the date of the exchange. Any loan debt will be carried over to the new contract. We won't require evidence of insurability to exchange for a new "fixed" contract. We reserve the right to impose a charge of $500 if you exercise this right to exchange. CHOOSING AN INCOME OPTION In addition to payments in a lump sum, we offer several income options to provide for payment of the death benefit proceeds to the beneficiary. Payments under these options do not depend on the investment results of a separate account. You may choose one or more income options at any time during the insured's lifetime. If you haven't selected an option when the insured dies, the beneficiary has one year to apply the death benefit proceeds either paid or payable to one or more of the options. In addition, if you cancel the Contract for its net surrender value, you may also choose one or more income options for payment of the proceeds. We need to approve any option where: - the person named to receive payment ("payee") is other than you or the beneficiary; - the payee is not a natural person, such as a corporation; or - any income payment would be less than $100. Income options include: - Income for a Fixed Period. We make payments in equal installments for a fixed number of years. - Income for Life. We make payments in equal monthly installments until the death of a named person or the end of a designated period, whichever is later. The designated period may be for 10 or 20 years. Other designated periods and payment schedules may be available on request. - Interest Payment. You can leave amounts with us to earn interest at an annual rate of at least 3%. Interest payments can be made annually, semi-annually, quarterly or monthly. - Income of a Fixed Amount. We make payments in equal installments until proceeds applied under this option, and interest on the unpaid balance at not less than 3% per year, are exhausted. - Joint Life Income. We make payments in monthly installments as long as at least one of two named persons is living. Other payment schedules may be available on request. While both are living, full payments are made. If one dies, payments of at least two-thirds of the full amount are made. Payments end completely when both named persons die. - Immediate Annuity. You can use amounts to purchase any single premium immediate annuity we offer. REPORTS TO CONTRACT OWNERS At the end of each processing period, we will send you a statement showing the allocation of your account value, death benefit, surrender value, and any loan debt and the guaranteed minimum death benefit. All figures will be as of the end of the immediately preceding processing period. The statement will show the amounts deducted from or added to the account value during the processing period. The statement will also include any other information that may be currently required by your state. 31 You will receive confirmation of all financial transactions. These confirmations will show the price per unit of each of your subaccounts, the number of units you have in the subaccount and the value of the subaccount computed by multiplying the quantity of units by the price per unit. (See "Net Rate of Return for a Subaccount.") We will also send you an annual and a semi-annual report containing financial statements and a list of portfolio securities of the Funds, as required by the 1940 Act. SOME ADMINISTRATIVE PROCEDURES We reserve the right to modify or eliminate the procedures described below. For administrative and tax purposes, we may from time to time require that specific forms be completed for certain transactions. These include premium payments, transfers, loans and partial withdrawals. If you have the Cash Management Account(R)* ("CMA") Insurance Service, payments may be withdrawn automatically from your CMA account and transferred to your Contract. - -------------------------------------------------------------------------------- CMA INSURANCE SERVICE If you have a Merrill Lynch Cash Management Account(R) ("CMA"(R)),* you may elect to have your Contract linked electronically to that account. We call this the CMA Insurance Service. With this service, certain Contract information is included as part of your regular monthly CMA Statement. However, the Contract is not an asset held in your CMA. Your CMA Statement will list the account value allocation, death benefit, net surrender value, loan debt and any CMA activity affecting the Contract during the month. - --------------- * Cash Management Account and CMA are registered trademarks of MLPF&S. - -------------------------------------------------------------------------------- Personal Identification Number. We will send you a four-digit personal identification number ("PIN") within 14 days after the in-force date. You must give this number when you call our Service Center to get information about the Contract or, if all required authorization forms are on file, to make a transfer, loan, partial withdrawal, or other request. You should protect your PIN, because telephone transactions will be available to anyone who provides your PIN. We may not be able to verify that you are the person providing telephone instructions, or that you have authorized any such person to act for you. Transferring Account Value. You can transfer your account value either in writing or by telephone. If you request the transfer by telephone, you must give your Contract number, name, and PIN. We will give a confirmation number over the telephone and then follow up in writing. Requesting A Loan. You may request a loan in writing or, by telephone. If you request the loan by telephone, you must give your Contract number, name and PIN, and tell us the loan amount and the subaccounts from which the loan should be taken. Upon request, we will wire the funds to the account at the financial institution named on your authorization. We will generally wire the funds within two business days of receipt of the request. If you have the CMA Insurance Service, funds may be transferred directly to that CMA account. Requesting Partial Withdrawals. You may request partial withdrawals in writing or by telephone. If you request the withdrawal by telephone, you must give your Contract number, name and PIN, and tell us how much to withdraw and from which subaccounts. Upon request, we will wire the funds to the account at the financial institution named on your authorization. We will usually wire the funds within two business days of receipt of the request. If you have the CMA Insurance Service, funds can be transferred directly to that CMA account. 32 Telephone Requests. Once our Service Center receives your authorization you can call our Service Center to make a transfer, loan or partial withdrawal. A telephone request for a transfer, loan, or partial withdrawal received before 4 p.m. (ET) will generally be processed the same day. A request received at or after 4 p.m. (ET) will be processed the following business day. We reserve the right to change procedures or discontinue the ability to make telephone transfers. We will employ reasonable procedures to confirm that instructions communicated by telephone are genuine. These procedures may include, but are not limited to, possible recording of telephone calls and obtaining appropriate identification before effecting any telephone transactions. We will not be liable for following telephone instructions that we reasonably believe to be genuine. Telephone systems may not always be available. Any telephone system, whether it is yours, your service provider's, your Financial Advisor's, or ours, can experience outages or slowdowns for a variety of reasons. These outages or slowdowns may delay or prevent our processing of your request. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances. If you are experiencing problems, you should make your request by writing to our Service Center. OTHER CONTRACT PROVISIONS Errors in the Application. If an age or sex stated in the application is wrong, it could mean that the face amount or any other Contract benefit is wrong. We will pay the correct benefits for the true age and sex. Incontestability. We will rely on statements made in the applications. We can contest the validity of a Contract if any material misstatements are made in the application. In addition, we can contest any amount of death benefit attributable to an additional payment if any material misstatements are made in the application required with the additional payment. Subject to state regulation, we won't contest the validity of a Contract after it has been in effect during the insured's lifetime for two years from the date of issue. Nor will we contest any amount of death benefit attributable to an additional payment after the death benefit has been in effect during the insured's lifetime for two years from the date the payment was received and accepted. Changes in Contract Cost Factors. Any changes in contract cost factors (current cost of insurance rates and loan charges) that we have reserved the right to make will be by class and based upon changes in future expectations for such elements as mortality, persistency, expenses and taxes. The contract cost factors are determined prospectively. We will not recoup prior losses by means of contract cost factor changes. We will determine any change in contract cost factors in accordance with procedures and standards on file, if required, with the insurance supervisory official of the jurisdiction in which we deliver this Contract. Payment In Case Of Suicide. Subject to state regulation, if the insured commits suicide within two years from the Contract's issue date, we will pay only a limited death benefit. The benefit will be equal to the amount of the payments made less withdrawals and loan debt. If the insured commits suicide within two years of any date an additional payment is received and accepted, any amount of death benefit attributable to the additional payment will be limited to the amount of the payment less withdrawals and loan debt attributable to the additional payment. Contract Changes -- Applicable Federal Tax Law. To receive the tax treatment accorded to life insurance under federal income tax law, the Contract must qualify initially and continue to qualify as life insurance under the Internal Revenue Code or successor law. To maintain this qualification to the maximum extent of the law, we reserve the right to return any additional payments that would cause the Contract to fail to qualify as life insurance under applicable federal tax law as we may interpret it. Further, we reserve the right to make changes in the Contract or its riders or to make distributions from the Contract to the extent necessary to continue to qualify the Contract as life insurance. Any changes will apply uniformly to all Contracts that are affected and you will be given advance written notice of such changes. 33 State Variations. Certain Contract features, including the "free look" right, are subject to state variation. You should read your Contract carefully to determine whether any variations apply in the state in which the Contract is issued. GROUP OR SPONSORED ARRANGEMENTS For certain group or sponsored arrangements, we may reduce or eliminate surrender charges, asset-based charges, asset-based credits, expense charges, and the minimum payment, and may modify cost of insurance rates and underwriting classifications and requirements. Group arrangements include those in which a trustee or an employer, for example, purchases Contracts covering a group of individuals on a group basis. Sponsored arrangements include those in which an employer allows us to sell Contracts to its employees on an individual basis. Costs for sales, administration, and mortality generally vary with the size and stability of the group and the reasons the Contracts are purchased, among other factors. We take all these factors into account when reducing charges. To qualify for reduced charges, a group or sponsored arrangement must meet certain requirements, including requirements for size and number of years in existence. Group or sponsored arrangements that have been set up solely to buy Contracts or that have been in existence less than six months will not qualify for reduced charges. We make any reductions according to rules in effect when an application for a Contract or additional payment is approved. We may change these rules from time to time. However, reductions in charges will not discriminate unfairly against any person. UNISEX LEGAL CONSIDERATIONS In 1983 the Supreme Court held in Arizona Governing Committee v. Norris that optional annuity benefits provided under an employee's deferred compensation plan could not, under Title VII of the Civil Rights Act of 1964, vary between men and women. In addition, legislative, regulatory or decisional authority of some states may prohibit use of sex-distinct mortality tables under certain circumstances. The Contracts offered by this Prospectus are based on mortality tables that distinguish between men and women. As a result, the Contract pays different benefits to men and women of the same age. Employers and employee organizations should check with their legal advisors before purchasing these Contracts. Some states prohibit the use of actuarial tables that distinguish between men and women in determining payments and contract benefits for contracts issued on the lives of their residents. Therefore, Contracts offered in this Prospectus to insure residents of these states will have unisex payments and benefits which are based on actuarial tables that do not differentiate on the basis of sex. You should disregard references made in this Prospectus to such sex-based distinctions. SELLING THE CONTRACTS Role Of Merrill Lynch, Pierce, Fenner & Smith, Incorporated. MLPF&S is the principal underwriter of the Contract. It was organized in 1958 under the laws of the state of Delaware and is registered as a broker-dealer under the Securities Exchange Act of 1934. It is a member of the National Association of Securities Dealers, Inc. ("NASD"). The principal business address of MLPF&S is 4 World Financial Center, New York, New York 10080. MLPF&S also acts as principal underwriter of other variable life insurance and variable annuity contracts we issue, as well as variable life insurance and variable annuity contracts issued by ML Life Insurance Company of New York, an affiliate of ours. MLPF&S also acts as principal underwriter of certain mutual funds managed by Merrill Lynch Investment Managers, L.P., the investment adviser for the Variable Series Funds. MLPF&S may arrange for sales of the Contract by other broker-dealers who are registered under the Securities Exchange Act of 1934 and are members of the NASD. Registered representatives of these other broker-dealers may be compensated on a different basis than MLPF&S Financial Advisors; however, 34 commissions paid to registered representatives of these broker-dealers will not exceed those described below. Selling firms may retain a portion of commissions. We pay commissions through the registered broker-dealer, and may pay additional compensation to the broker-dealer and/or reimburse it for a portion of its expenses relating to sales of the Contract. The registered representative may receive a portion of the expense reimbursement allowance paid to the broker-dealer. Role Of Merrill Lynch Life Agencies. Contracts are sold by registered representatives of MLPF&S who are registered with the NASD. Registered representatives of MLPF&S are licensed as insurance agents in the states in which they do business and appointed through various Merrill Lynch Life Agencies as insurance agents for us. We have entered into a distribution agreement with MLPF&S and companion sales agreements with the Merrill Lynch Life Agencies through which the Contracts and other variable life insurance contracts issued through the Separate Account are sold and the registered representatives are compensated by Merrill Lynch Life Agencies and/or MLPF&S. The amounts paid under the distribution and sales agreements for the Separate Account for the year ended December 31, 2001, December 31, 2000 and December 31, 1999 were $11,233,773, $24,344,271, and $23,810,374, respectively. Commissions. The maximum commission we will pay to Financial Advisors ("FAs") is 4.40% of each premium. Additional annual compensation of no more than .20% of the account value may also be paid to your FA. FAs may elect to receive a lower commission as a percent of each premium in exchange for higher compensation as a percent of the account value. In such a case, the maximum additional annual compensation is .96% of the account value. The maximum commission we will pay to the applicable insurance agency to be used to pay commissions to the FAs is 6.30% of each premium, and up to 1.10% of the account value. Registered representatives of MLPF&S are eligible for various cash benefits, such as bonuses, insurance benefits and financing arrangements, and non-cash compensation programs that MLPF&S offers, such as conferences, trips, and awards. Other payments may be made for services that do not directly involve the sale of the Contracts. These services may include the recruitment and training of personnel, production of promotional literature, and similar services. We intend to recoup commissions paid and other sales expenses through fees and charges imposed under the Contract. Commissions paid on the Contract, including other incentives or payments, are not charged directly to the contract owner or the Separate Account. We offer the Contracts to the public on a continuous basis. We anticipate continuing to offer the Contracts, but reserve the right to discontinue the offering. 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 Contract. In order to qualify as a life insurance contract for Federal income tax purposes and to receive the tax treatment normally accorded life insurance contracts under Federal tax law, a Contract must satisfy certain requirements which are set forth in the IRC. Although guidance as to how these requirements are to be applied is limited, we believe that a standard premium class Contract should satisfy the applicable requirements. However, there is less guidance with respect to Contracts issued on a substandard basis (i.e., a premium class involving a higher than standard mortality risk). If it is subsequently determined that a Contract does not satisfy the applicable requirements, we may take appropriate steps to bring the 35 Contract into compliance with such requirements and reserve the right to restrict Contract transactions in order to do so. Diversification Requirements. IRC section 817(h) and the regulations under it provide that separate account investments underlying a Contract must be "adequately diversified" for it to qualify as a life insurance contract under IRC section 7702. The Separate Account intends to comply with the diversification requirements of the regulations under section 817(h). This will affect how we make investments. In certain circumstances, owners of variable life contracts have been considered for Federal income tax purposes to be the owners of the assets of the separate account supporting their contracts due to their ability to exercise investment control over those assets. Where this is the case, the contract owners have been currently taxed on income and gains attributable to the separate account assets. There is little guidance in this area, and some features of the Contract such as the flexibility of an owner to allocate premium payments and transfer account value have not been explicitly addressed in published IRS rulings. While we believe that the Contracts do not give owners investment control over variable account assets, we reserve the right to modify the Contracts as necessary to prevent an owner from being treated as the owner of the variable account assets supporting the Contract. The following discussion assumes that the Contract will qualify as a life insurance contract for Federal income tax purposes. Tax Treatment Of Contract Benefits In General. We believe that the death benefit under a Contract should generally be excludible from the gross income of the beneficiary. Federal, state and local transfer, and other tax consequences of ownership or receipt of Contract proceeds depend on the circumstances of each owner or beneficiary. A tax advisor should be consulted on these consequences. Generally, the owner will not be deemed to be in constructive receipt of the contract value until there is a distribution. When distributions from a Contract occur, or when loans are taken out from or secured by (e.g., by assignment) a Contract, the tax consequences depend on whether the Contract is classified as a "MEC." If a loan is outstanding when a Contract is cancelled or lapses or when benefits are paid under such a Contract at maturity, the amount of the indebtedness will be added to any amount distributed and taxed accordingly. "Modified Endowment Contracts". Under the IRC, certain life insurance contracts are classified as "MECs," with less favorable tax treatment than other life insurance contracts. In most cases the Contract will be classified as a MEC. Any Contract issued in exchange for a MEC will be a MEC. A Contract issued in exchange for a life insurance contract that is not a MEC will generally not be treated as a MEC. The payment of additional premiums at the time of or after the exchange or certain changes to the Contract after it is issued may, however, cause the Contract to become a MEC. A prospective owner should consult a tax advisor before effecting an exchange. Distributions (Other Than Death Benefits) From MECs. Contracts classified as MECs are subject to the following tax rules: (1) All pre-death distributions, (including partial withdrawals, loans, collateral assignments, capitalized interest or complete surrender) will be treated as ordinary income on an income first basis up to the amount of any income in the Contract (generally the contract value less the owner's investment in the Contract) immediately before the distribution. (2) A 10 percent additional income tax is also imposed on the amount included in income except where the distribution (including loans, capitalized interest, assignments, partial withdrawals or complete surrender) is made when the owner has attained age 59 1/2 or becomes disabled, or where the distribution is part of a series of substantially equal periodic payments for the life (or life expectancy) of the owner or the joint lives (or joint life expectancies) of the owner and the owner's beneficiary. If a contract that is not originally issued as a MEC but subsequently becomes a MEC, distributions that occur during the contract year will be taxed as distributions from a MEC. In addition, distributions from the 36 Contract within two years before it becomes a MEC will be taxed in this manner. This means that a distribution made from a Contract that is not a MEC at the time of such distribution could later become taxable as a distribution from a MEC Distributions Other Than Death Benefits From Contracts That Are Not MECs. Distributions from a Contract that is not a MEC are generally treated first as a recovery of an owner's investment in the Contract and, only after the recovery of all investment in the Contract, as taxable income. However, certain distributions which must be made in order to enable the Contract to continue to qualify as a life insurance contract for Federal income tax purposes, if Contract benefits are reduced during the first 15 contract years, may be treated in whole or in part as ordinary income subject to tax. Loans from or secured by a Contract that is not a MEC are generally not treated as distributions. Finally, neither distributions from nor loans from or secured by a Contract that is not a MEC are subject to the 10 percent additional tax. Investment In The Contract. Your investment in the Contract is generally your aggregate premiums. When a distribution is taken from the Contract, your investment in the Contract is generally reduced by the amount of the distribution that is tax-free. Loans. In general, interest on a loan from a Contract will not be deductible. Before taking out a Contract loan, an Owner should consult a tax advisor as to the tax consequences. Multiple Contracts. All MECs that are issued by us (or our affiliates) to the same owner during any calendar year are treated as one MEC for purposes of determining the amount includible in the owner's income when a taxable distribution occurs. Continuation of Contract Beyond Age 100. The tax consequences of continuing the Contract beyond the insured's attained age 100 are unclear. You should consult a tax advisor if you intend to keep the Contract in force beyond the insured's attained age 100. Withholding. To the extent that Contract distributions are taxable, they are generally subject to withholding for the recipient's federal tax liability. Recipients can generally elect, however, not to have tax withheld from distributions. Transfers. The transfer of the Contract or designation of a beneficiary may have federal, state, and/or local transfer and inheritance tax consequences, including the imposition of gift, estate, and generation-skipping transfer taxes. For example, the transfer of the Contract to, or the designation as a beneficiary of, or the payment of proceeds to, a person who is assigned to a generation which is two or more generations below the generation assignment of the owner may have generation skipping transfer tax consequences under federal tax law. The individual situation of each owner or beneficiary will determine the extent, if any, to which federal, state, and local transfer and inheritance taxes may be imposed and how ownership or receipt of Contract proceeds will be treated for purposes of federal, state and local estate, inheritance, generation skipping and other taxes. Contracts Used For Business Purposes. The Contract can be used in various arrangements, including nonqualified deferred compensation or salary continuance plans, split dollar insurance plans, executive bonus plans, tax exempt and nonexempt welfare benefit plans, retiree medical benefit plans and others. The tax consequences of such arrangements may vary depending on the particular facts and circumstances. If you are purchasing the Contract for any arrangement the value of which depends in part on its tax consequences, you should consult a qualified tax advisor. In recent years, moreover, Congress has adopted new rules relating to life insurance owned by businesses. Any business contemplating the purchase of a new Contract or a change in an existing Contract should consult a tax advisor. In particular, you should consult an advisor with respect to split dollar insurance given new guidance recently issued by the IRS on these types of plans. 37 FOREIGN TAX CREDITS To the extent that any Fund makes the appropriate election, certain foreign taxes paid by the Fund will be treated as being paid by the Company, which may deduct or claim a tax credit for such taxes. The benefits of any such deduction or credit will not be passed through to the contract owners. Alternative Minimum Tax. There may also be an indirect tax upon the income in the Contract or the proceeds of a Contract under the Federal corporate alternative minimum tax, if you are subject to that tax. Possible Tax Law Changes. Although the likelihood of legislative changes is uncertain, there is always the possibility that the tax treatment of the Contract could change by legislation or otherwise. It is possible that any legislative change could be retroactive (that is, effective prior to the date of the change). Consult a tax advisor with respect to legislative developments and their effect on the Contract. We don't make any guarantee regarding the tax status of any contract or any transaction regarding the Contract. The above discussion is not intended as tax advice. For tax advice you should consult a competent tax advisor. Although this tax discussion is based on our understanding of federal income tax laws as they are currently interpreted, we can't guarantee that those laws or interpretations will remain unchanged. OUR INCOME TAXES Insurance companies are generally required to capitalize and amortize certain policy acquisition expenses over a ten year period rather than currently deducting such expenses. This treatment applies to the deferred acquisition expenses of a Contract and will result in a significantly higher corporate income tax liability for us in early contract years. We make a charge, included in the Contract's expense charge, to compensate us for the anticipated higher corporate income taxes that result from the sale of a Contract. (See "Charges, Fees and Credits.") We currently make no other charges to the Separate Account for any federal, state or local fees and credit that we incur that may be attributable to the Separate Account or to the Contracts. We reserve the right, however, to make a charge for any tax or other economic burden resulting from the application of tax laws that we determine to be properly attributable to the Separate Account or to the Contracts. REINSURANCE We intend to reinsure some of the risks assumed under the Contracts. ILLUSTRATIONS Illustrations of Death Benefits, Contract Value, Surrender Value and Accumulated Payments: The tables below demonstrate the way in which the Contract works. The tables are based on the following face amounts, and premium payments and assume maximum mortality charges. 1. The illustration on page 40 is for a Contract issued to a male age 55 in the simplified non-smoker underwriting class with a single payment of $100,000 and a face amount of $224,426. 2. The illustration on page 41 is for a Contract issued to a female age 60 in the simplified non-smoker underwriting class with a single payment of $100,000 and a face amount of $218,196. 3. The illustration on page 42 is for a Contract issued to a male age 71 in the simplified non-smoker underwriting class with a single payment of $100,000 and a face amount of $148,053. 4. The illustration on page 43 is for a Contract issued to a male age 65 in the medical non-smoker underwriting class with a single payment of $200,000 and a face amount of $340,304. The tables show how the death benefit, Contract value and surrender value may vary over an extended period of time assuming hypothetical rates of return (i.e., investment income and capital gains and losses, realized or unrealized) equivalent to constant gross annual rates of 0%, 6% and 12%. 38 The death benefit, Contract value and surrender value for a Contract would be different from those shown if the actual rates of return averaged 0%, 6% and 12% over a period of years, but also fluctuated above or below those averages for individual contract years. The amounts shown for the death benefit, Contract value and surrender value as of the end of each contract year take into account Contract charges and credits and the asset-based charge equivalent to an annual rate of 1.35%. The amounts shown in the tables also assume an additional charge of .83%. This charge assumes that the account value is allocated equally among all the subaccounts and is based on the 2001 expenses (including monthly advisory fees and operating expenses) for the Funds. This charge also reflects expense reimbursements made in 2001 to certain Funds by the investment adviser to the respective portfolio. (We cannot guarantee that these reimbursements will continue in the future.) Values illustrated would be lower if these reimbursements had not been taken into account. The actual charge under a Contract for Fund expenses will depend on the actual allocation of the Contract value and may be higher or lower depending on how the Contract value is allocated. Taking into account the 1.35% asset charge in the Separate Account and the .83% charge described above, the gross annual rates of investment return of 0%, 6% and 12% correspond to net annual rates of -2.16%, 3.76%, and 9.68%, 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 (although they do reflect the charge for federal income taxes included in the expense charge). In order to produce after-tax returns of 0%, 6% and 12%, the Funds would have to earn a sufficient amount in excess of 0% or 6% or 12% to cover any tax charges attributable to the Separate Account. The second column of the tables shows the amount which would accumulate if an amount equal to the premium payment was invested to earn interest at an after-tax rate of 5% compounded annually. We will furnish upon request a personalized illustration reflecting the proposed insured's age, face amount and the payment amounts requested. The illustration will also use current cost of insurance rates. 39 MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT MALE ISSUE AGE 55 $100,000 INITIAL PAYMENT FOR SIMPLIFIED NON-SMOKER UNDERWRITING CLASS FACE AMOUNT: $224,426 BASED ON MAXIMUM COST OF INSURANCE CHARGES
END OF YEAR TOTAL DEATH BENEFIT(2) PAYMENTS ASSUMING HYPOTHETICAL GROSS MADE PLUS ANNUAL INVESTMENT RETURN OF INTEREST AT 5% AS -------------------------------- CONTRACT YEAR PAYMENTS(1) OF END OF YEAR 0% 6% 12% ------------- ----------- ----------------- -------- -------- ---------- 1..................................................... $100,000 $105,000 $224,426 $224,426 $ 235,671 2..................................................... 0 $110,250 $224,426 $224,426 $ 247,481 3..................................................... 0 $115,763 $224,426 $224,426 $ 259,883 4..................................................... 0 $121,551 $224,426 $224,426 $ 272,908 5..................................................... 0 $127,628 $224,426 $224,426 $ 286,588 6..................................................... 0 $134,010 $224,426 $224,426 $ 300,954 7..................................................... 0 $140,710 $224,426 $224,426 $ 316,043 8..................................................... 0 $147,746 $224,426 $224,426 $ 331,891 9..................................................... 0 $155,133 $224,426 $224,426 $ 348,537 10..................................................... 0 $162,889 $224,426 $224,426 $ 366,018 15..................................................... 0 $207,893 $224,426 $224,426 $ 488,863 20..................................................... 0 $265,330 $224,426 $224,426 $ 653,080 30..................................................... 0 $432,194 $224,426 $224,426 $1,166,388
END OF YEAR END OF YEAR CONTRACT VALUE (2) SURRENDER VALUE(2) ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ------------------------------ ------------------------------ CONTRACT YEAR 0% 6% 12% 0% 6% 12% ------------- -------- -------- -------- -------- -------- -------- 1..................................................... $ 96,421 $102,316 $108,180 $86,779 $ 92,316 $ 98,180 2..................................................... $ 92,799 $104,625 $116,975 $84,447 $ 95,625 $107,975 3..................................................... $ 89,123 $106,924 $126,434 $81,993 $ 98,924 $118,434 4..................................................... $ 85,383 $109,212 $136,605 $79,406 $102,212 $129,605 5..................................................... $ 81,550 $111,475 $147,530 $76,657 $105,475 $141,530 6..................................................... $ 77,601 $113,703 $159,253 $73,721 $108,703 $154,253 7..................................................... $ 73,508 $115,887 $171,826 $70,568 $111,887 $167,826 8..................................................... $ 69,239 $118,013 $185,299 $67,162 $115,013 $182,299 9..................................................... $ 64,746 $120,058 $199,713 $63,451 $118,058 $197,713 10..................................................... $ 59,976 $122,000 $215,112 $59,376 $121,000 $214,112 15..................................................... $ 32,194 $136,246 $323,102 $32,194 $136,246 $323,102 20..................................................... 0 $147,608 $477,349 0 $147,608 $477,349 30..................................................... 0 $132,400 $986,316 0 $132,400 $986,316
(1) All payments are illustrated as if made at the beginning of the contract year. (2) Assumes no loan has been made. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL RATES OF RETURN WILL FLUCTUATE OVER TIME, MAY BE HIGHER OR LOWER THAN THOSE ILLUSTRATED, AND LIKELY WILL BE BOTH POSITIVE AND NEGATIVE. ACTUAL RATES OF RETURN WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST RATES, AND RATES OF INFLATION. THE DEATH BENEFIT, CONTRACT VALUE, AND SURRENDER VALUE COULD BE SIGNIFICANTLY DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF RETURN AVERAGED 0%, 6% AND 12%, BUT FLUCTUATED OVER AND UNDER THOSE AVERAGES THROUGHOUT THE YEARS SHOWN. DEPENDING ON THE TIMING AND DEGREE OF FLUCTUATION, THE ACTUAL VALUES COULD BE SUBSTANTIALLY LOWER THAN THOSE SHOWN, AND MAY, UNDER CERTAIN CIRCUMSTANCES, RESULT IN THE LAPSE OF THE CONTRACT UNLESS THE OWNER PAYS MORE THAN THE STATED PREMIUM. NO REPRESENTATIONS CAN BE MADE BY US OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 40 MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT FEMALE ISSUE AGE 60 $100,000 INITIAL PAYMENT FOR SIMPLIFIED NON-SMOKER UNDERWRITING CLASS FACE AMOUNT: $218,196 BASED ON MAXIMUM COST OF INSURANCE CHARGES
END OF YEAR TOTAL DEATH BENEFIT(2) PAYMENTS ASSUMING HYPOTHETICAL GROSS MADE PLUS ANNUAL INVESTMENT RETURN OF INTEREST AT 5% AS -------------------------------- CONTRACT YEAR PAYMENTS(1) OF END OF YEAR 0% 6% 12% ------------- ----------- ------------------------- -------- -------- ---------- 1.............................................. $100,000 $105,000 $218,196 $218,196 $ 229,129 2.............................................. 0 $110,250 $218,196 $218,196 $ 240,611 3.............................................. 0 $115,763 $218,196 $218,196 $ 252,668 4.............................................. 0 $121,551 $218,196 $218,196 $ 265,333 5.............................................. 0 $127,628 $218,196 $218,196 $ 278,632 6.............................................. 0 $134,010 $218,196 $218,196 $ 292,601 7.............................................. 0 $140,710 $218,196 $218,196 $ 307,272 8.............................................. 0 $147,746 $218,196 $218,196 $ 322,680 9.............................................. 0 $155,133 $218,196 $218,196 $ 338,861 10.............................................. 0 $162,889 $218,196 $218,196 $ 355,857 15.............................................. 0 $207,893 $218,196 $218,196 $ 475,256 20.............................................. 0 $265,330 $218,196 $218,196 $ 634,879 30.............................................. 0 $432,194 $218,196 $218,196 $1,133,868
END OF YEAR END OF YEAR CONTRACT VALUE(2) SURRENDER VALUE(2) ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ------------------------------ ------------------------------ CONTRACT YEAR 0% 6% 12% 0% 6% 12% ------------- -------- -------- -------- -------- -------- -------- 1...................................................... $96,384 $102,280 $108,142 $86,746 $ 92,280 $ 98,142 2...................................................... $92,753 $104,582 $116,929 $84,405 $ 95,582 $107,929 3...................................................... $89,077 $106,884 $126,390 $81,951 $ 98,884 $118,390 4...................................................... $85,325 $109,170 $136,558 $79,352 $102,170 $129,558 5...................................................... $81,463 $111,422 $147,468 $76,575 $105,422 $141,468 6...................................................... $77,467 $113,630 $159,167 $73,594 $108,630 $154,167 7...................................................... $73,316 $115,790 $171,711 $70,383 $111,790 $167,711 8...................................................... $68,995 $117,902 $185,170 $66,925 $114,902 $182,170 9...................................................... $64,491 $119,971 $199,624 $63,201 $117,971 $197,624 10...................................................... $59,780 $121,992 $215,153 $59,182 $120,992 $214,153 15...................................................... $32,360 $136,970 $324,817 $32,360 $136,970 $324,817 20...................................................... 0 $148,416 $481,075 0 $148,416 $481,075 30...................................................... 0 $116,272 $995,687 0 $116,272 $995,687
(1) All payments are illustrated as if made at the beginning of the contract year. (2) Assumes no loan has been made. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL RATES OF RETURN WILL FLUCTUATE OVER TIME, MAY BE HIGHER OR LOWER THAN THOSE ILLUSTRATED, AND LIKELY WILL BE BOTH POSITIVE AND NEGATIVE. ACTUAL RATES OF RETURN WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST RATES, AND RATES OF INFLATION. THE DEATH BENEFIT, CONTRACT VALUE, AND SURRENDER VALUE COULD BE SIGNIFICANTLY DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF RETURN AVERAGED 0%, 6% AND 12%, BUT FLUCTUATED OVER AND UNDER THOSE AVERAGES THROUGHOUT THE YEARS SHOWN. DEPENDING ON THE TIMING AND DEGREE OF FLUCTUATION, THE ACTUAL VALUES COULD BE SUBSTANTIALLY LOWER THAN THOSE SHOWN, AND MAY, UNDER CERTAIN CIRCUMSTANCES, RESULT IN THE LAPSE OF THE CONTRACT UNLESS THE OWNER PAYS MORE THAN THE STATED PREMIUM. NO REPRESENTATIONS CAN BE MADE BY US OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 41 MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT MALE ISSUE AGE 71 $100,000 INITIAL PAYMENT FOR SIMPLIFIED NON-SMOKER UNDERWRITING CLASS FACE AMOUNT: $148,053 BASED ON MAXIMUM COST OF INSURANCE CHARGES
END OF YEAR TOTAL DEATH BENEFIT(2) PAYMENTS ASSUMING HYPOTHETICAL GROSS MADE PLUS ANNUAL RATE OF RETURN OF INTEREST AT 5% AS ------------------------------ CONTRACT YEAR PAYMENTS(1) OF END OF YEAR 0% 6% 12% ------------- ----------- ----------------- -------- -------- -------- 1...................................................... $100,000 $105,000 $148,053 $148,053 $155,489 2...................................................... 0 $110,250 $148,053 $148,053 $163,298 3...................................................... 0 $115,763 $148,053 $148,053 $171,501 4...................................................... 0 $121,551 $148,053 $148,053 $180,119 5...................................................... 0 $127,628 $148,053 $148,053 $189,171 6...................................................... 0 $134,010 $148,053 $148,053 $198,680 7...................................................... 0 $140,710 $148,053 $148,053 $208,669 8...................................................... 0 $147,746 $148,053 $148,053 $219,162 9...................................................... 0 $155,133 $148,053 $148,053 $230,184 10...................................................... 0 $162,889 $148,053 $148,053 $241,763 15...................................................... 0 $207,893 $148,053 $148,053 $323,146 20...................................................... 0 $265,330 $148,053 $148,053 $432,008 29...................................................... 0 $411,614 $148,053 $148,053 $731,813
END OF YEAR END OF YEAR CONTRACT VALUE(2) SURRENDER VALUE (2) ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ------------------------------ ------------------------------ CONTRACT YEAR 0% 6% 12% 0% 6% 12% ------------- -------- -------- -------- -------- -------- -------- 1...................................................... $95,443 $101,389 $107,224 $85,899 $ 91,389 $ 97,224 2...................................................... $90,612 $102,702 $114,916 $82,457 $ 93,702 $105,916 3...................................................... $85,386 $103,880 $123,056 $78,555 $ 95,880 $115,056 4...................................................... $79,655 $104,895 $131,652 $74,079 $ 97,895 $124,652 5...................................................... $73,304 $105,724 $140,727 $68,906 $ 99,724 $134,727 6...................................................... $66,195 $106,341 $150,307 $62,885 $101,341 $145,307 7...................................................... $58,160 $106,714 $160,421 $55,834 $102,714 $156,421 8...................................................... $49,004 $106,809 $171,111 $47,534 $103,809 $168,111 9...................................................... $38,461 $106,569 $182,412 $37,692 $104,569 $180,412 10...................................................... $26,168 $105,911 $194,354 $25,906 $104,911 $193,354 15...................................................... 0 $ 97,236 $276,200 0 $ 97,236 $276,200 20...................................................... 0 $ 30,989 $386,720 0 $ 30,989 $386,720 29...................................................... 0 0 $731,813 0 0 $731,813
(1) All payments are illustrated as if made at the beginning of the contract year. (2) Assumes no loan has been made. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL RATES OF RETURN WILL FLUCTUATE OVER TIME, MAY BE HIGHER OR LOWER THAN THOSE ILLUSTRATED, AND LIKELY WILL BE BOTH POSITIVE AND NEGATIVE. ACTUAL RATES OF RETURN WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST RATES, AND RATES OF INFLATION. THE DEATH BENEFIT, CONTRACT VALUE, AND SURRENDER VALUE COULD BE SIGNIFICANTLY DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF RETURN AVERAGED 0%, 6% AND 12%, BUT FLUCTUATED OVER AND UNDER THOSE AVERAGES THROUGHOUT THE YEARS SHOWN. DEPENDING ON THE TIMING AND DEGREE OF FLUCTUATION, THE ACTUAL VALUES COULD BE SUBSTANTIALLY LOWER THAN THOSE SHOWN, AND MAY, UNDER CERTAIN CIRCUMSTANCES, RESULT IN THE LAPSE OF THE CONTRACT UNLESS THE OWNER PAYS MORE THAN THE STATED PREMIUM. NO REPRESENTATIONS CAN BE MADE BY US OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 42 MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT MALE ISSUE AGE 65 $200,000 INITIAL PAYMENT FOR MEDICAL NON-SMOKER UNDERWRITING CLASS FACE AMOUNT: $340,304 BASED ON MAXIMUM COST OF INSURANCE CHARGES
END OF YEAR TOTAL DEATH BENEFIT(2) PAYMENTS ASSUMING HYPOTHETICAL GROSS MADE PLUS ANNUAL INVESTMENT RETURN OF INTEREST AT 5% AS -------------------------------- CONTRACT YEAR PAYMENTS(1) OF END OF YEAR 0% 6% 12% ------------- -------------- ----------------- -------- -------- ---------- 1.................................................. $200,000 $210,000 $340,304 $340,304 $ 357,378 2.................................................. 0 $220,500 $340,304 $340,304 $ 375,310 3.................................................. 0 $231,525 $340,304 $340,304 $ 394,144 4.................................................. 0 $243,101 $340,304 $340,304 $ 413,925 5.................................................. 0 $255,256 $340,304 $340,304 $ 434,705 6.................................................. 0 $268,019 $340,304 $340,304 $ 456,527 7.................................................. 0 $281,420 $340,304 $340,304 $ 479,456 8.................................................. 0 $295,491 $340,304 $340,304 $ 503,536 9.................................................. 0 $310,266 $340,304 $340,304 $ 528,830 10.................................................. 0 $325,779 $340,304 $340,304 $ 555,404 15.................................................. 0 $415,786 $340,304 $340,304 $ 742,164 20.................................................. 0 $530,660 $340,304 $340,304 $ 991,940 30.................................................. 0 $864,388 $340,304 $340,304 $1,772,738
END OF YEAR END OF YEAR CONTRACT VALUE(2) SURRENDER VALUE(2) ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF -------------------------------- -------------------------------- CONTRACT YEAR 0% 6% 12% 0% 6% 12% ------------- -------- -------- ---------- -------- -------- ---------- 1................................................. $191,763 $203,592 $ 215,284 $172,587 $183,592 $ 195,284 2................................................. $183,208 $207,058 $ 231,590 $166,719 $189,058 $ 213,590 3................................................. $174,268 $210,384 $ 248,984 $160,327 $194,384 $ 232,984 4................................................. $164,864 $213,555 $ 267,535 $153,323 $199,555 $ 253,535 5................................................. $154,894 $216,543 $ 287,307 $145,600 $204,543 $ 275,307 6................................................. $144,218 $219,303 $ 308,354 $137,007 $209,303 $ 298,354 7................................................. $132,537 $221,706 $ 330,630 $127,236 $213,706 $ 322,630 8................................................. $119,871 $223,827 $ 354,348 $116,275 $217,827 $ 348,348 9................................................. $105,801 $225,502 $ 379,449 $103,685 $221,502 $ 375,449 10................................................. $ 89,974 $226,629 $ 405,955 $ 89,074 $224,629 $ 403,955 15................................................. 0 $233,977 $ 588,137 0 $233,977 $ 588,137 20................................................. 0 $212,056 $ 838,801 0 $212,056 $ 838,801 30................................................. 0 0 $1,651,932 0 0 $1,651,932
(1) All payments are illustrated as if made at the beginning of the contract year. (2) Assumes no loan has been made. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL RATES OF RETURN WILL FLUCTUATE OVER TIME, MAY BE HIGHER OR LOWER THAN THOSE ILLUSTRATED, AND LIKELY WILL BE BOTH POSITIVE AND NEGATIVE. ACTUAL RATES OF RETURN WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST RATES, AND RATES OF INFLATION. THE DEATH BENEFIT, CONTRACT VALUE, AND SURRENDER VALUE COULD BE SIGNIFICANTLY DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF RETURN AVERAGED 0%, 6% AND 12%, BUT FLUCTUATED OVER AND UNDER THOSE AVERAGES THROUGHOUT THE YEARS SHOWN. DEPENDING ON THE TIMING AND DEGREE OF FLUCTUATION, THE ACTUAL VALUES COULD BE SUBSTANTIALLY LOWER THAN THOSE SHOWN, AND MAY, UNDER CERTAIN CIRCUMSTANCES, RESULT IN THE LAPSE OF THE CONTRACT UNLESS THE OWNER PAYS MORE THAN THE STATED PREMIUM. NO REPRESENTATIONS CAN BE MADE BY US OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 43 MORE ABOUT MERRILL LYNCH LIFE INSURANCE COMPANY DIRECTORS AND EXECUTIVE OFFICERS Our directors and executive officers and their positions with us are as follows:
NAME POSITION WITH THE COMPANY ---- ------------------------- Michael Cogswell Director and Senior Vice President H. McIntyre Gardner Director and Chairman of the Board Christopher Grady Director and Senior Vice President Diana Joyner Senior Vice President, Administration Nikos K. Kardassis Director, President, and Chief Executive Officer Matthew J. Rider Director, Senior Vice President, Chief Financial Officer, and Treasurer Barry G. Skolnick Director, Senior Vice President, and General Counsel
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. Cogswell joined Merrill Lynch Life in November 1990. Since April 2001, he has been Senior Vice President and Director of Products and Investment Management. Mr. Gardner joined Merrill Lynch Life in 2000. From 1997 to 2000, he served as President and Chief Operating Officer of Helen of Troy Limited. Mr. Grady joined Merrill Lynch Life in September 1995. Since November, 2000, he has been Senior Vice President and Director of Sales and Marketing. Ms. Joyner joined Merrill Lynch Life in May 1992 as Vice President, Life Insurance Services. In February 1998, she became Director of Business Acquisition Services, and in July 2001 became President and Chairman of the Board of Merrill Lynch Insurance Group Services. Mr. Kardassis joined Merrill Lynch Life in August 2001 as President and Chief Executive Officer. From July 1999 to July 2001, he was President of GE Capital Aviation Training. From August 1994 to July 1999, he was Chief Executive Officer of Jet Airway, S.M. Center. Mr. Rider joined Merrill Lynch Life in January 1994. From January 1994 to September 2000, he held the position of Financial Actuary. He has been Chief Financial Officer and Treasurer since October 2000. Mr. Skolnick joined Merrill Lynch Life in November 1990. Since May 1992, he has held the position of First Vice President and Assistant General Counsel of MLPF&S. None of our shares are owned by any of our officers or directors, as we are 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 accounting, data processing, legal, actuarial, management, advertising and other services to us, including services related to the Separate Account and the Contracts. We reimburse expenses incurred by MLIG under 44 this service agreement on an allocated cost basis. Charges billed to us by MLIG under the agreement were $50.6 million for the year ended December 31, 2001. STATE REGULATION We are subject to the laws of the State of Arkansas and to the regulations of the Arkansas Insurance Department (the "Insurance Department"). We file a detailed financial statement in the prescribed form (the "Annual Statement") with the Insurance Department each year covering our operations for the preceding year and our financial condition as of the end of that year. Regulation by the Insurance Department includes periodic examination to determine contract liabilities and reserves so that the Insurance Department may certify that these items are correct. Our books and accounts are subject to review by the Insurance Department at all times. A full examination of our operations is conducted periodically by the Insurance Department and under the auspices of the National Association of Insurance Commissioners. We are also subject to the insurance laws and regulations of all jurisdictions in which we are licensed to do business. LEGAL PROCEEDINGS There are no legal proceedings to which the Separate Account is a party or to which the assets of the Separate Account are subject. We and MLPF&S are engaged in various kinds of routine litigation that, in our judgment, is not material to our total assets or to MLPF&S. EXPERTS Our financial statements as of December 31, 2001 and 2000 and for each of the three years in the period ended December 31, 2001 and of the Separate Account as of December 31, 2001 and for the periods presented, included in this Prospectus, have been audited by Deloitte and Touche, independent auditors, as stated in their reports appearing herein, and have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. Deloitte and Touche's principal business address is 2 World Financial Center, New York, NY 10281. Actuarial matters included in this Prospectus have been examined by Deborah J. Adler, FSA, MAAA, our Vice President and Chief Actuary, as stated in her opinion filed as an exhibit to the registration statement. LEGAL MATTERS The organization of the Company, its authority to issue the Contract, and the validity of the form of the Contract have been passed upon by Barry G. Skolnick, our General Counsel. Sutherland Asbill & Brennan LLP of Washington, D.C. has provided advice on certain matters relating to federal securities laws. REGISTRATION STATEMENTS Registration statements have been filed with the Securities and Exchange Commission under the Securities Act of 1933 and the Investment Company Act of 1940 that relate to the Contract and its investment options. This Prospectus does not contain all of the information in the registration statements as permitted by Securities and Exchange Commission regulations. The omitted information can be obtained from the Securities and Exchange Commission's principal office in Washington, D.C., upon payment of a prescribed fee. FINANCIAL STATEMENTS Our financial statements, included herein, should be distinguished from the financial statements of the Separate Account and should be considered only as bearing upon our ability to meet our obligations under the Contracts. 45 APPENDIX A EFFECT OF ADDITIONAL PAYMENTS ON FACE AMOUNT - -------------------------------------------------------------------------------- EXAMPLE. The effect of an additional premium payment on the face amount will depend on the amount of the additional payment. If you make additional payments of different amounts at the same time to equivalent Contracts, the Contract to which the larger payment is applied would have a proportionately larger increase in face amount. Example 1 shows the effect on the face amount of a $2,000 additional payment made at the beginning of the third quarter. Example 2 shows the effect of a $4,000 additional payment. The examples assume that no other contract transactions have been made. MALE ISSUE AGE: 55 INITIAL PAYMENT: $10,000 FACE AMOUNT: $22,443
EXAMPLE 1 - ----------------------------------------------------- INCREASE IN ADDITIONAL FACE NEW FACE PAYMENT AMOUNT AMOUNT - ---------- ----------- -------- $2,000 $4,422 $26,865 EXAMPLE 2 - ----------------------------------------------------- INCREASE IN ADDITIONAL FACE NEW FACE PAYMENT AMOUNT AMOUNT - ---------- ----------- -------- $4,000 $8,845 $31,288
A-1 EFFECT OF PARTIAL WITHDRAWALS ON FACE AMOUNT - -------------------------------------------------------------------------------- EXAMPLE. The effect of a partial withdrawal on the face amount depends on the amount of the partial withdrawal and the contract year in which the withdrawal is made. If made at the same time to equivalent Contracts, a larger withdrawal would result in a greater reduction in the face amount than a smaller withdrawal. A partial withdrawal made in a later contract year would result in a smaller decrease in the face amount than if the same amount was withdrawn in an earlier year. Examples 1 and 2 show the effect on the face amount of partial withdrawals for $1,000 and $2,000 taken at the beginning of contract year three. Example 3 shows the effect on the face amount of a $2,000 partial withdrawal taken at the beginning of contract year eight. All three examples assume no other contract transactions have been made. MALE ISSUE AGE: 55 INITIAL PAYMENT: $10,000 FACE AMOUNT: $22,443
EXAMPLE 1 - ------------------------------------------------------------------------------- CONTRACT PARTIAL DECREASE NEW YEAR WITHDRAWAL IN FACE AMOUNT FACE AMOUNT - -------- ---------- -------------- ----------- 3 $1,000 $2,116 $20,327 EXAMPLE 2 - ------------------------------------------------------------------------------- CONTRACT PARTIAL DECREASE NEW YEAR WITHDRAWAL IN FACE AMOUNT FACE AMOUNT - -------- ---------- -------------- ----------- 3 $2,000 $4,232 $18,211 EXAMPLE 3 - ------------------------------------------------------------------------------- CONTRACT PARTIAL DECREASE NEW YEAR WITHDRAWAL IN FACE AMOUNT FACE AMOUNT - -------- ---------- -------------- ----------- 8 $2,000 $3,679 $18,764
A-2 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 Variable Life Separate Account, comprised of divisions (for Investor Contracts and Legacy Power Contracts) investing in the Money Reserve Portfolio, Intermediate Government Bond Portfolio, Core Bond Strategy Portfolio (formerly Long-Term Corporate Bond Portfolio), Capital Stock Portfolio, Fundamental Growth Strategy Portfolio (formerly Growth Stock Portfolio), Balanced Capital Strategy Portfolio (formerly Multiple Strategy Portfolio), High Yield Portfolio, Natural Resources Portfolio, Global Allocation Strategy Portfolio (formerly Global Strategy Portfolio), Balanced Portfolio, Utilities and Telecommunications Focus Fund , International Equity Focus Fund, Global Bond Focus Fund, Basic Value Focus Fund, Developing Capital Markets Focus Fund, Small Cap Value Focus Fund , Index 500 Fund, Balanced Capital Focus Fund , Global Growth Focus Fund, American Balanced Fund (commencement of operations April 27, 2001), Large Cap Value Focus Fund (commencement of operations May 1, 2001), Mercury HW International Value VIP Portfolio , Large Cap Growth Focus Fund (formerly Mercury V. I. US Large Cap Fund), Quasar Portfolio, Premier Growth Portfolio, Growth and Income Portfolio, MFS Emerging Growth Series, MFS Research Series, MFS Investor Trust Series, AIM V.I. Value Fund, AIM V.I. Capital Appreciation Fund, AIM V.I. International Equity Fund, Domestic Money Market Fund, Fundamental Growth Focus Fund, Government Bond, Davis Value Portfolio, Trend Series, Total Return Bond Portfolio, Seligman Small-Cap Value Portfolio, Emerging Growth Portfolio, 1999 Trust (matured on February 16, 1999), 2000 Trust (matured on February 15, 2000), 2001 Trust (matured on February 15, 2001), 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 (collectively, the "Divisions"), as of December 31, 2001 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 auditing standards generally accepted in the United States of America. 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, 2001. 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, 2001, 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 accounting principles generally accepted in the United States of America. Deloitte & Touche, LLP New York, New York March 1, 2002 MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES INVESTOR CONTRACTS DECEMBER 31, 2001
Divisions Investing In ------------------------------------------------------------------- Intermediate Core Money Government Bond Capital Reserve Bond Strategy Stock (In thousands, except unit values) Portfolio Portfolio Portfolio Portfolio ---------------- ---------------- ---------------- ---------------- Assets Investments in Merrill Lynch Series Fund, Inc. (Note 1): Money Reserve Portfolio, 71,874 shares (Cost $71,874) $ 71,874 $ 0 $ 0 $ 0 Intermediate Government Bond Portfolio, 2,796 shares (Cost $30,584) 0 31,089 0 0 Core Bond Strategy Portfolio, 2,895 shares (Cost $32,908) 0 0 32,864 0 Capital Stock Portfolio, 2,324 shares (Cost $53,986) 0 0 0 40,081 ---------------- ---------------- ---------------- ---------------- Total Assets 71,874 31,089 32,864 40,081 Liabilities Due to (from) Merrill Lynch Life Insurance Company 275 63 67 82 ---------------- ---------------- ---------------- ---------------- Net Assets $ 71,599 $ 31,026 $ 32,797 $ 39,999 ================ ================ ================ ================ Units Outstanding (Note 5) 2,106 569 532 457 ================ ================ ================ ================ Unit Value $ 34.00 $ 54.54 $ 61.62 $ 87.57 ================ ================ ================ ================ See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES INVESTOR CONTRACTS DECEMBER 31, 2001 (continued)
Divisions Investing In ------------------------------------------------------------------- Fundamental Balanced Growth Capital High Natural Strategy Strategy Yield Resources (In thousands, except unit values) Portfolio Portfolio Portfolio Portfolio ---------------- ---------------- ---------------- ---------------- Assets Investments in Merrill Lynch Series Fund, Inc. (cont'd), (Note 1): Fundamental Growth Strategy Portfolio, 3,266 shares (Cost $98,462) $ 71,255 $ 0 $ 0 $ 0 Balanced Capital Strategy Portfolio, 3,434 shares (Cost $52,849) 0 45,125 0 0 High Yield Portfolio, 4,149 shares (Cost $32,876) 0 0 24,269 0 Natural Resources Portfolio, 209 shares (Cost $2,001) 0 0 0 2,165 ---------------- ---------------- ---------------- ---------------- Total Assets 71,255 45,125 24,269 2,165 Liabilities Due to (from) Merrill Lynch Life Insurance Company 145 92 49 4 ---------------- ---------------- ---------------- ---------------- Net Assets $ 71,110 $ 45,033 $ 24,220 $ 2,161 ================ ================ ================ ================ Units Outstanding (Note 5) 867 978 828 174 ================ ================ ================ ================ Unit Value $ 82.01 $ 46.03 $ 29.25 $ 12.40 ================ ================ ================ ================ See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES INVESTOR CONTRACTS DECEMBER 31, 2001 (continued)
Divisions Investing In ------------------------------------------------------------------- Global Utilities & Global Basic Allocation Telecomm Bond Value Strategy Focus Focus Focus (In thousands, except unit values) Portfolio Fund Fund Fund ---------------- ---------------- ---------------- ---------------- Assets Investments in Merrill Lynch Series Fund, Inc. (cont'd), (Note 1): Global Allocation Strategy Portfolio, 3,492 shares (Cost $53,837) $ 41,795 $ 0 $ 0 $ 0 Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1): Utilities & Telecomm Focus Fund, 380 shares (Cost $3,500) 0 3,132 0 0 Global Bond Focus Fund, 92 shares (Cost $827) 0 0 707 0 Basic Value Focus Fund, 7,019 shares (Cost $97,245) 0 0 0 94,549 ---------------- ---------------- ---------------- ---------------- Total Assets 41,795 3,132 707 94,549 Liabilities Due to (from) Merrill Lynch Life Insurance Company 85 6 1 192 ---------------- ---------------- ---------------- ---------------- Net Assets $ 41,710 $ 3,126 $ 706 $ 94,357 ================ ================ ================ ================ Units Outstanding (Note 5) 1,554 168 59 3,393 ================ ================ ================ ================ Unit Value $ 26.84 $ 18.57 $ 11.98 $ 27.81 ================ ================ ================ ================ See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES INVESTOR CONTRACTS DECEMBER 31, 2001 (continued)
Divisions Investing In ------------------------------------------------------------------- Developing Small Cap Global Capital Markets Value Index Growth Focus Focus 500 Focus (In thousands, except unit values) Fund Fund Fund Fund ---------------- ---------------- ---------------- ---------------- Assets Investments in Merrill Lynch Variable Series Funds, Inc. (cont'd), (Note 1): Developing Capital Markets Focus Fund, 431 shares (Cost $3,672) $ 3,170 $ 0 $ 0 $ 0 Small Cap Value Focus Fund, 728 shares (Cost $16,854) 0 18,261 0 0 Index 500 Fund, 2,411 shares (Cost $39,967) 0 0 35,160 0 Global Growth Focus Fund, 577 shares (Cost $7,539) 0 0 0 5,144 ---------------- ---------------- ---------------- ---------------- Total Assets 3,170 18,261 35,160 5,144 Liabilities Due to (from) Merrill Lynch Life Insurance Company 6 37 72 10 ---------------- ---------------- ---------------- ---------------- Net Assets $ 3,164 $ 18,224 $ 35,088 $ 5,134 ================ ================ ================ ================ Units Outstanding (Note 5) 413 609 2,218 540 ================ ================ ================ ================ Unit Value $ 7.67 $ 29.90 $ 15.82 $ 9.50 ================ ================ ================ ================ See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES INVESTOR CONTRACTS DECEMBER 31, 2001 (continued)
Divisions Investing In ------------------------------------------------------------------- Large Cap Mercury HW Large Cap American Value International Growth Balanced Focus Value VIP Focus (In thousands, except unit values) Fund Fund Portfolio Fund ---------------- ---------------- ---------------- ---------------- Assets Investments in Merrill Lynch Variable Series Funds, Inc. (cont'd), (Note 1): American Balanced Fund, 56 shares (Cost $656) $ 626 $ 0 $ 0 $ 0 Large Cap Value Focus Fund, 43 shares (Cost $424) 0 445 0 0 Investments in Mercury HW Variable Trust (Note 1): Mercury HW International Value VIP Portfolio, 1,353 shares (Cost $14,630) 0 0 13,113 0 Investments in Mercury V.I. Funds, Inc. (Note 1): Large Cap Growth Focus Fund, 351 shares (Cost $3,523) 0 0 0 3,166 ---------------- ---------------- ---------------- ---------------- Total Assets 626 445 13,113 3,166 Liabilities Due to (from) Merrill Lynch Life Insurance Company 1 1 27 6 ---------------- ---------------- ---------------- ---------------- Net Assets $ 625 $ 444 $ 13,086 $ 3,160 ================ ================ ================ ================ Units Outstanding (Note 5) 24 43 1,297 351 ================ ================ ================ ================ Unit Value $ 26.33 $ 10.23 $ 10.09 $ 9.00 ================ ================ ================ ================ See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES INVESTOR CONTRACTS DECEMBER 31, 2001 (continued)
Divisions Investing In ------------------------------------------------------------------- MFS Premier Emerging MFS Quasar Growth Growth Research (In thousands, except unit values) Portfolio Portfolio Series Series ---------------- ---------------- ---------------- ---------------- Assets Investments in Alliance Variable Products Series Fund, Inc (Note 1): Quasar Portfolio, 155 shares (Cost $1,577) $ 1,556 $ 0 $ 0 $ 0 Premier Growth Portfolio, 2,024 shares (Cost $70,095) 0 50,925 0 0 Investments in MFS Variable Insurance Trust (Note 1): MFS Emerging Growth Series, 1,188 shares (Cost $36,158) 0 0 21,364 0 MFS Research Series, 1,176 shares (Cost $22,619) 0 0 0 16,835 ---------------- ---------------- ---------------- ---------------- Total Assets 1,556 50,925 21,364 16,835 Liabilities Due to (from) Merrill Lynch Life Insurance Company 3 104 43 34 ---------------- ---------------- ---------------- ---------------- Net Assets $ 1,553 $ 50,821 $ 21,321 $ 16,801 ================ ================ ================ ================ Units Outstanding (Note 5) 188 2,936 1,467 1,264 ================ ================ ================ ================ Unit Value $ 8.25 $ 17.31 $ 14.53 $ 13.29 ================ ================ ================ ================ See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES INVESTOR CONTRACTS DECEMBER 31, 2001 (continued)
Divisions Investing In ------------------------------------------------------------------- AIM AIM V.I. Capital V.I. Value Appreciation 2002 2003 (In thousands, except unit values) Fund Fund Trust Trust ---------------- ---------------- ---------------- ---------------- Assets Investments in AIM Variable Insurance Funds, Inc. (Note 1): AIM V.I. Value Fund, 1,430 shares (Cost $41,448) $ 33,391 $ 0 $ 0 $ 0 AIM V.I. Capital Appreciation Fund, 478 shares (Cost $13,943) 0 10,378 0 0 Investments in the Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities, Series A through L (Note 1): 2002 Trust, 935 trust units (Cost $758) 0 0 935 0 2003 Trust, 475 trust units (Cost $358) 0 0 0 455 ---------------- ---------------- ---------------- ---------------- Total Assets 33,391 10,378 935 455 Liabilities Due to (from) Merrill Lynch Life Insurance Company 68 21 2 1 ---------------- ---------------- ---------------- ---------------- Net Assets $ 33,323 $ 10,357 $ 933 $ 454 ================ ================ ================ ================ Units Outstanding (Note 5) 2,140 807 49 5 ================ ================ ================ ================ Unit Value $ 15.57 $ 12.83 $ 19.09 $ 86.47 ================ ================ ================ ================ See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES INVESTOR CONTRACTS DECEMBER 31, 2001 (continued)
Divisions Investing In ------------------------------------------------------------------- 2004 2005 2006 2007 (In thousands, except unit values) Trust Trust Trust Trust ---------------- ---------------- ---------------- ---------------- Assets Investments in the Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities, Series A through L (cont'd), (Note 1): 2004 Trust, 1,346 trust units (Cost $931) $ 1,260 $ 0 $ 0 $ 0 2005 Trust, 988 trust units (Cost $647) 0 885 0 0 2006 Trust, 541 trust units (Cost $369) 0 0 468 0 2007 Trust, 316 trust units (Cost $199) 0 0 0 257 ---------------- ---------------- ---------------- ---------------- Total Assets 1,260 885 468 257 Liabilities Due to (from) Merrill Lynch Life Insurance Company 3 2 1 1 ---------------- ---------------- ---------------- ---------------- Net Assets $ 1,257 $ 883 $ 467 $ 256 ================ ================ ================ ================ Units Outstanding (Note 5) 73 13 13 6 ================ ================ ================ ================ Unit Value $ 17.14 $ 65.90 $ 37.19 $ 39.96 ================ ================ ================ ================ See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES INVESTOR CONTRACTS DECEMBER 31, 2001 (continued)
Divisions Investing In ------------------------------------------------------------------- 2008 2009 2010 2011 (In thousands, except unit values) Trust Trust Trust Trust ---------------- ---------------- ---------------- ---------------- Assets Investments in the Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities, Series A through L (cont'd), (Note 1): 2008 Trust, 880 trust units (Cost $481) $ 659 $ 0 $ 0 $ 0 2009 Trust, 158 trust units (Cost $88) 0 111 0 0 2010 Trust, 696 trust units (Cost $453) 0 0 452 0 2011 Trust, 338 trust units (Cost $139) 0 0 0 209 ---------------- ---------------- ---------------- ---------------- Total Assets 659 111 452 209 Liabilities Due to (from) Merrill Lynch Life Insurance Company 1 0 1 0 ---------------- ---------------- ---------------- ---------------- Net Assets $ 658 $ 111 $ 451 $ 209 ================ ================ ================ ================ Units Outstanding (Note 5) 17 3 14 8 ================ ================ ================ ================ Unit Value $ 37.64 $ 33.82 $ 32.54 $ 27.29 ================ ================ ================ ================ See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES INVESTOR CONTRACTS DECEMBER 31, 2001 (continued)
Divisions Investing In --------------------------------------------------- 2013 2014 2019 (In thousands, except unit values) Trust Trust Trust ---------------- ---------------- ---------------- Assets Investments in the Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities, Series A through L (cont'd), (Note 1): 2013 Trust, 67 trust units (Cost $30) $ 36 $ 0 $ 0 2014 Trust, 6,967 trust units (Cost $2,765) 0 3,465 0 2019 Trust, 287 trust units (Cost $88) 0 0 103 ---------------- ---------------- ---------------- Total Assets 36 3,465 103 Liabilities Due to (from) Merrill Lynch Life Insurance Company 0 7 0 ---------------- ---------------- ---------------- Net Assets $ 36 $ 3,458 $ 103 ================ ================ ================ Units Outstanding (Note 5) 2 173 9 ================ ================ ================ Unit Value $ 20.33 $ 20.00 $ 11.09 ================ ================ ================ See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES LEGACY POWER CONTRACTS DECEMBER 31, 2001
Divisions Investing In ------------------------------------------------------------------- Domestic Basic Fundamental Money Value Index Growth Market Focus 500 Focus (In thousands, except unit values) Fund Fund Fund Fund ---------------- ---------------- ---------------- ---------------- Assets Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1): Domestic Money Market Fund, 1,841 shares (Cost $1,841) $ 1,841 $ 0 $ 0 $ 0 Basic Value Focus Fund, 23 shares (Cost $322) 0 314 0 0 Index 500 Fund, 12 shares (Cost $206) 0 0 181 0 Fundamental Growth Focus Fund, 68 shares (Cost $506) 0 0 0 512 ---------------- ---------------- ---------------- ---------------- Total Assets 1,841 314 181 512 Liabilities Due to (from) Merrill Lynch Life Insurance Company 339 1 0 1 ---------------- ---------------- ---------------- ---------------- Net Assets $ 1,502 $ 313 $ 181 $ 511 ================ ================ ================ ================ Units Outstanding (Note 5) 109 12 12 69 ================ ================ ================ ================ Unit Value $ 13.75 $ 26.87 $ 15.50 $ 7.42 ================ ================ ================ ================ See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES LEGACY POWER CONTRACTS DECEMBER 31, 2001 (continued)
Divisions Investing In ------------------------------------------------------------------- Mercury HW Government International Premier Growth and Bond Value VIP Growth Income (In thousands, except unit values) Fund Portfolio Portfolio Portfolio ---------------- ---------------- ---------------- ---------------- Assets Investments in Merrill Lynch Variable Series Funds, Inc. (cont'd), (Note 1): Government Bond Fund, 23 shares (Cost $256) $ 249 $ 0 $ 0 $ 0 Investments in Mercury HW Variable Trust (Note 1): Mercury HW International Value VIP Portfolio, 14 shares (Cost $148) 0 133 0 0 Investments in Alliance Variable Products Series Fund, Inc (Note 1): Premier Growth Portfolio, 3 shares (Cost $106) 0 0 77 0 Growth and Income Portfolio, 13 shares (Cost $270) 0 0 0 282 ---------------- ---------------- ---------------- ---------------- Total Assets 249 133 77 282 Liabilities Due to (from) Merrill Lynch Life Insurance Company 1 0 0 1 ---------------- ---------------- ---------------- ---------------- Net Assets $ 248 $ 133 $ 77 $ 281 ================ ================ ================ ================ Units Outstanding (Note 5) 22 13 5 26 ================ ================ ================ ================ Unit Value $ 11.38 $ 9.93 $ 16.92 $ 10.70 ================ ================ ================ ================ See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES LEGACY POWER CONTRACTS DECEMBER 31, 2001 (continued)
Divisions Investing In ------------------------------------------------------------------- MFS MFS AIM V.I. Emerging Investor AIM International Growth Trust V.I. Value Equity (In thousands, except unit values) Series Series Fund Fund ---------------- ---------------- ---------------- ---------------- Assets Investments in MFS Variable Insurance Trust (Note 1): MFS Emerging Growth Series, 5 shares (Cost $146) $ 86 $ 0 $ 0 $ 0 MFS Investor Trust Series, 3 shares (Cost $52) 0 52 0 0 Investments in AIM Variable Insurance Funds, Inc. (Note 1): AIM V.I. Value Fund, 4 shares (Cost $105) 0 0 85 0 AIM V.I. International Equity Fund, 3 shares (Cost $42) 0 0 0 39 ---------------- ---------------- ---------------- ---------------- Total Assets 86 52 85 39 Liabilities Due to (from) Merrill Lynch Life Insurance Company 0 0 0 0 ---------------- ---------------- ---------------- ---------------- Net Assets $ 86 $ 52 $ 85 $ 39 ================ ================ ================ ================ Units Outstanding (Note 5) 6 6 6 7 ================ ================ ================ ================ Unit Value $ 14.21 $ 8.01 $ 15.22 $ 5.73 ================ ================ ================ ================ See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES LEGACY POWER CONTRACTS DECEMBER 31, 2001 (continued)
Divisions Investing In ------------------------------------------------------------------- Seligman Davis Total Return Small-Cap Value Trend Bond Value (In thousands, except unit values) Portfolio Series Portfolio Portfolio ---------------- ---------------- ---------------- ---------------- Assets Investments in Davis Variable Account Fund, Inc. (Note 1): Davis Value Portfolio, 46 shares (Cost $446) $ 451 $ 0 $ 0 $ 0 Investments in Delaware Group Premium Fund, Inc. (Note 1): Trend Series, 4 shares (Cost $102) 0 103 0 0 Investments in PIMCO Variable Insurance Trust (Note 1): Total Return Bond Portfolio, 47 shares (Cost $477) 0 0 468 0 Investments in Seligman Portfolios, inc. (Note 1): Seligman Small-Cap Value Portfolio, 10 shares (Cost $117) 0 0 0 127 ---------------- ---------------- ---------------- ---------------- Total Assets 451 103 468 127 Liabilities Due to (from) Merrill Lynch Life Insurance Company 1 0 1 0 ---------------- ---------------- ---------------- ---------------- Net Assets $ 450 $ 103 $ 467 $ 127 ================ ================ ================ ================ Units Outstanding (Note 5) 52 15 41 9 ================ ================ ================ ================ Unit Value $ 8.59 $ 6.80 $ 11.48 $ 14.82 ================ ================ ================ ================ See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES LEGACY POWER CONTRACTS DECEMBER 31, 2001 (continued)
Divisions Investing In ----------------- Emerging Growth (In thousands, except unit values) Portfolio ---------------- Assets Investments in Van Kampen Life Investment Trust (Note 1): Emerging Growth Portfolio, 2 shares (Cost $53) $ 57 ---------------- Total Assets 57 Liabilities Due to (from) Merrill Lynch Life Insurance Company 0 ---------------- Net Assets $ 57 ================ Units Outstanding (Note 5) 11 ================ Unit Value $ 5.24 ================ See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2001
Divisions Investing In ----------------------------------------------------------------------------------- Intermediate Core Money Government Bond Capital Reserve Bond Strategy Stock (In thousands) Portfolio Portfolio Portfolio Portfolio -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 3,144 $ 1,640 $ 1,699 $ 375 Mortality and Expense Charges (Note 3) (672) (272) (280) (389) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income(Loss) 2,472 1,368 1,419 (14) -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 0 67 (60) (1,443) Net Change in Unrealized Appreciation (Depreciation) During the Year 0 271 627 (3,985) -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments 0 338 567 (5,428) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 2,472 1,706 1,986 (5,442) -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 23,231 597 1,246 1,953 Policy Loading, Net (Note 3) 926 (60) 0 (38) Contract Owner Deaths (1,595) (175) (116) (334) Contract Owner Terminations (4,698) (410) (384) (2,073) Policy Loans, Net (825) (139) (193) (305) Cost of Insurance (Note 3) (1,853) (557) (605) (795) Policy Loan Processing Charges (33) (9) (8) (31) Transfers Among Investment Divisions (24,377) 2,997 2,498 (1,775) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions (9,224) 2,244 2,438 (3,398) -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets (6,752) 3,950 4,424 (8,840) Net Assets, Beginning of Period 78,351 27,076 28,373 48,839 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 71,599 $ 31,026 $ 32,797 $ 39,999 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2001 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- Fundamental Balanced Growth Capital High Natural Strategy Strategy Yield Resources (In thousands) Portfolio Portfolio Portfolio Portfolio -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 407 $ 1,087 $ 2,598 $ 20 Mortality and Expense Charges (Note 3) (667) (375) (223) (24) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) (260) 712 2,375 (4) -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) (749) (1,040) (1,017) (196) Net Change in Unrealized Appreciation (Depreciation) During the Year (16,016) (2,711) (1,196) (29) -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments (16,765) (3,751) (2,213) (225) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations (17,025) (3,039) 162 (229) -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 3,907 1,668 1,249 105 Policy Loading, Net (Note 3) (144) 11 206 41 Contract Owner Deaths (276) (270) (192) (46) Contract Owner Terminations (1,815) (1,681) (558) (176) Policy Loans, Net (528) (176) (108) (25) Cost of Insurance (Note 3) (1,516) (899) (517) (52) Policy Loan Processing Charges (40) (14) (10) 0 Transfers Among Investment Divisions 2,537 15,123 418 (183) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 2,125 13,762 488 (336) -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets (14,900) 10,723 650 (565) Net Assets, Beginning of Period 86,010 34,310 23,570 2,726 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 71,110 $ 45,033 $ 24,220 $ 2,161 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2001 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- Global Utilities & International Allocation Telecomm Equity Strategy Balanced Focus Focus (In thousands) Portfolio Portfolio Fund Fund -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 808 $ 188 $ 239 $ 127 Mortality and Expense Charges (Note 3) (382) (53) (32) (24) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 426 135 207 103 -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) (668) (3,199) (1,756) (885) Net Change in Unrealized Appreciation (Depreciation) During the Year (4,036) 2,090 1,000 (12) -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments (4,704) (1,109) (756) (897) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations (4,278) (974) (549) (794) -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 2,280 242 179 0 Policy Loading, Net (Note 3) (30) 51 (1,368) (494) Contract Owner Deaths (152) (183) 0 0 Contract Owner Terminations (1,019) (390) (158) (33) Policy Loans, Net (339) (3) (59) (46) Cost of Insurance (Note 3) (960) (117) (75) (36) Policy Loan Processing Charges (16) (2) (1) 1 Transfers Among Investment Divisions (247) (15,689) 1,404 (7,542) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions (483) (16,091) (78) (8,150) -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets (4,761) (17,065) (627) (8,944) Net Assets, Beginning of Period 46,471 17,065 3,753 8,944 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 41,710 $ 0 $ 3,126 $ 0 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2001 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- Global Basic Developing Small Cap Bond Value Capital Value Focus Focus Markets Focus Focus (In thousands) Fund Fund Fund Fund -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 26 $ 5,428 $ 30 $ 1,056 Mortality and Expense Charges (Note 3) (7) (810) (29) (117) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 19 4,618 1 939 -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) (15) (96) (203) 339 Net Change in Unrealized Appreciation (Depreciation) During the Year (36) (1,589) 218 2,074 -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments (51) (1,685) 15 2,413 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations (32) 2,933 16 3,352 -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 0 5,369 273 861 Policy Loading, Net (Note 3) (294) (336) (471) 7 Contract Owner Deaths 0 (755) 0 (132) Contract Owner Terminations (3) (2,188) (113) (48) Policy Loans, Net (3) (430) (39) (190) Cost of Insurance (Note 3) (17) (1,889) (77) (242) Policy Loan Processing Charges (1) (26) (2) (3) Transfers Among Investment Divisions 261 6,280 (75) 6,439 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions (57) 6,025 (504) 6,692 -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets (89) 8,958 (488) 10,044 Net Assets, Beginning of Period 795 85,399 3,652 8,180 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 706 $ 94,357 $ 3,164 $ 18,224 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2001 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- Balanced Global Index Capital Growth American 500 Focus Focus Balanced (In thousands) Fund Fund Fund Fund -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 349 $ 6 $ 55 $ 16 Mortality and Expense Charges (Note 3) (319) (2) (52) (4) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 30 4 3 12 -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 78 (20) (774) (2) Net Change in Unrealized Appreciation (Depreciation) During the Year (5,171) (7) (864) (31) -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments (5,093) (27) (1,638) (33) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations (5,063) (23) (1,635) (21) -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 2,082 18 520 0 Policy Loading, Net (Note 3) (84) 59 (39) (6) Contract Owner Deaths (342) 0 (54) 0 Contract Owner Terminations (720) (2) (101) (25) Policy Loans, Net (36) 0 (36) 0 Cost of Insurance (Note 3) (935) (5) (178) (11) Policy Loan Processing Charges (5) 0 (1) 0 Transfers Among Investment Divisions 3,548 (671) 20 688 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 3,508 (601) 131 646 -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets (1,555) (624) (1,504) 625 Net Assets, Beginning of Period 36,643 624 6,638 0 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 35,088 $ 0 $ 5,134 $ 625 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2001 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- Large Cap Mercury HW Large Cap Value International Growth Focus Value VIP Focus Quasar (In thousands) Fund Portfolio Fund Portfolio -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 2 $ 612 $ 1 $ 53 Mortality and Expense Charges (Note 3) (1) (104) (29) (14) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 1 508 (28) 39 -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) (12) (591) (353) (481) Net Change in Unrealized Appreciation (Depreciation) During the Year 21 (1,686) 59 174 -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments 9 (2,277) (294) (307) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 10 (1,769) (322) (268) -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 3 767 283 81 Policy Loading, Net (Note 3) (1) (316) (1,472) (286) Contract Owner Deaths 0 (71) 0 (8) Contract Owner Terminations (1) (130) (33) (20) Policy Loans, Net (10) (157) (10) (35) Cost of Insurance (Note 3) (4) (239) (112) (33) Policy Loan Processing Charges 0 (5) 0 (1) Transfers Among Investment Divisions 447 8,476 2,141 605 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 434 8,325 797 303 -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets 444 6,556 475 35 Net Assets, Beginning of Period 0 6,530 2,685 1,518 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 444 $ 13,086 $ 3,160 $ 1,553 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2001 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- MFS Premier Emerging MFS AIM Growth Growth Research V.I. Value (In thousands) Portfolio Series Series Fund -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 2,947 $ 1,639 $ 2,426 $ 723 Mortality and Expense Charges (Note 3) (488) (219) (165) (321) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 2,459 1,420 2,261 402 -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 36 (916) (68) 311 Net Change in Unrealized Appreciation (Depreciation) During the Year (13,723) (12,025) (7,001) (6,029) -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments (13,687) (12,941) (7,069) (5,718) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations (11,228) (11,521) (4,808) (5,316) -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 4,592 1,617 1,289 2,619 Policy Loading, Net (Note 3) (72) 123 159 29 Contract Owner Deaths (317) (166) (104) (86) Contract Owner Terminations (960) (305) (245) (868) Policy Loans, Net (311) (266) (116) (146) Cost of Insurance (Note 3) (1,373) (575) (435) (839) Policy Loan Processing Charges (15) (4) (5) (8) Transfers Among Investment Divisions 77 (534) 244 (180) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 1,621 (110) 787 521 -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets (9,607) (11,631) (4,021) (4,795) Net Assets, Beginning of Period 60,428 32,952 20,822 38,118 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 50,821 $ 21,321 $ 16,801 $ 33,323 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2001 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- AIM V.I. Capital Appreciation 2001 2002 2003 (In thousands) Fund Trust Trust Trust -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 834 $ 0 $ 0 $ 0 Mortality and Expense Charges (Note 3) (103) 0 (8) (4) Transaction Charges (Note 3) 0 0 (4) (2) -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 731 0 (12) (6) -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) (3,212) 65 32 7 Net Change in Unrealized Appreciation (Depreciation) During the Year (912) (63) 16 31 -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments (4,124) 2 48 38 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations (3,393) 2 36 32 -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 1,059 0 0 2 Policy Loading, Net (Note 3) 22 84 54 61 Contract Owner Deaths (157) 0 0 0 Contract Owner Terminations (114) 0 0 0 Policy Loans, Net (58) 0 (2) (2) Cost of Insurance (Note 3) (284) (1) (14) (7) Policy Loan Processing Charges (1) 0 0 (1) Transfers Among Investment Divisions (294) (416) 62 27 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 173 (333) 100 80 -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets (3,220) (331) 136 112 Net Assets, Beginning of Period 13,577 331 797 342 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 10,357 $ 0 $ 933 $ 454 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2001 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- 2004 2005 2006 2007 (In thousands) Trust Trust Trust Trust -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0 Mortality and Expense Charges (Note 3) (11) (8) (4) (2) Transaction Charges (Note 3) (4) (3) (2) (1) -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) (15) (11) (6) (3) -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 34 12 4 6 Net Change in Unrealized Appreciation (Depreciation) During the Year 76 59 33 14 -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments 110 71 37 20 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 95 60 31 17 -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 2 6 0 0 Policy Loading, Net (Note 3) 51 90 89 91 Contract Owner Deaths (17) 0 0 0 Contract Owner Terminations 0 (12) 0 0 Policy Loans, Net (2) 0 0 0 Cost of Insurance (Note 3) (18) (12) (4) (6) Policy Loan Processing Charges (1) 0 0 0 Transfers Among Investment Divisions (47) 0 8 (100) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions (32) 72 93 (15) -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets 63 132 124 2 Net Assets, Beginning of Period 1,194 751 343 254 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 1,257 $ 883 $ 467 $ 256 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2001 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- 2008 2009 2010 2011 (In thousands) Trust Trust Trust Trust -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0 Mortality and Expense Charges (Note 3) (6) (1) (5) (2) Transaction Charges (Note 3) (2) 0 (2) (1) -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) (8) (1) (7) (3) -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 8 1 37 4 Net Change in Unrealized Appreciation (Depreciation) During the Year 34 5 (14) 5 -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments 42 6 23 9 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 34 5 16 6 -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 45 3 0 3 Policy Loading, Net (Note 3) 97 0 44 116 Contract Owner Deaths 0 0 (55) 0 Contract Owner Terminations 0 0 (1) 0 Policy Loans, Net 0 0 0 0 Cost of Insurance (Note 3) (8) (2) (6) (3) Policy Loan Processing Charges 0 0 0 0 Transfers Among Investment Divisions (111) (1) (62) (117) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 23 0 (80) (1) -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets 57 5 (64) 5 Net Assets, Beginning of Period 601 106 515 204 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 658 $ 111 $ 451 $ 209 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2001 (continued)
Divisions Investing In ----------------------------------------------------------- 2013 2014 2019 (In thousands) Trust Trust Trust -------------------- ----------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 Mortality and Expense Charges (Note 3) (1) (38) (1) Transaction Charges (Note 3) 0 (14) 0 -------------------- ----------------- -------------------- Net Investment Income (Loss) (1) (52) (1) -------------------- ----------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 78 578 27 Net Change in Unrealized Appreciation (Depreciation) During the Year (73) (473) (28) -------------------- ----------------- -------------------- Net Gain (Loss) on Investments 5 105 (1) -------------------- ----------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 4 53 (2) -------------------- ----------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 0 103 1 Policy Loading, Net (Note 3) 141 (95) 61 Contract Owner Deaths 0 0 0 Contract Owner Terminations 0 (30) 0 Policy Loans, Net 0 0 (17) Cost of Insurance (Note 3) 0 (68) (2) Policy Loan Processing Charges 0 0 0 Transfers Among Investment Divisions (531) (1,183) (165) -------------------- ----------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions (390) (1,273) (122) -------------------- ----------------- -------------------- Total Increase (Decrease) in Net Assets (386) (1,220) (124) Net Assets, Beginning of Period 422 4,678 227 -------------------- ----------------- -------------------- Net Assets, End of Period $ 36 $ 3,458 $ 103 ==================== ================= ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS LEGACY POWER CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2001
Divisions Investing In ----------------------------------------------------------------------------------- Domestic Basic Fundamental Money Value Index Growth Market Focus 500 Focus (In thousands) Fund Fund Fund Fund -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 21 $ 18 $ 2 $ 1 Mortality and Expense Charges (Note 3) (6) (3) (2) (2) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income(Loss) 15 15 0 (1) -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 0 0 0 (4) Net Change in Unrealized Appreciation (Depreciation) During the Year 0 (5) (7) 6 -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments 0 (5) (7) 2 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 15 10 (7) 1 -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 4,557 18 23 30 Policy Loading, Net (Note 3) 0 0 0 0 Contract Owner Deaths 0 0 0 0 Contract Owner Terminations (3) (8) (4) (1) Policy Loans, Net 0 0 0 0 Cost of Insurance (Note 3) (7) 0 (5) (2) Policy Loan Processing Charges 0 0 0 0 Transfers Among Investment Divisions (3,060) 293 174 483 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 1,487 303 188 510 -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets 1,502 313 181 511 Net Assets, Beginning of Period 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 1,502 $ 313 $ 181 $ 511 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS LEGACY POWER CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2001 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- Mercury HW Government International Premier Growth and Bond Value VIP Growth Income (In thousands) Fund Portfolio Portfolio Portfolio -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 3 $ 6 $ 4 $ 1 Mortality and Expense Charges (Note 3) (1) (1) (1) (1) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 2 5 3 0 -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 3 (4) 0 (4) Net Change in Unrealized Appreciation (Depreciation) During the Year (8) (8) (13) 12 -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments (5) (12) (13) 8 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations (3) (7) (10) 8 -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 0 8 7 0 Policy Loading, Net (Note 3) 0 0 0 0 Contract Owner Deaths 0 0 0 0 Contract Owner Terminations 2 (1) (2) 0 Policy Loans, Net 0 0 0 0 Cost of Insurance (Note 3) (1) (2) (2) (1) Policy Loan Processing Charges 0 0 0 0 Transfers Among Investment Divisions 250 135 84 274 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 251 140 87 273 -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets 248 133 77 281 Net Assets, Beginning of Period 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 248 $ 133 $ 77 $ 281 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS LEGACY POWER CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2001 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- MFS MFS AIM V.I. Emerging Investor AIM International Growth Trust V.I. Value Equity (In thousands) Series Series Fund Fund -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 7 $ 0 $ 2 $ 1 Mortality and Expense Charges (Note 3) (1) 0 (1) 0 Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 6 0 1 1 -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) (4) 0 1 0 Net Change in Unrealized Appreciation (Depreciation) During the Year (1) 1 (6) (3) -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments (5) 1 (5) (3) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 1 1 (4) (2) -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 7 0 7 0 Policy Loading, Net (Note 3) 0 0 0 0 Contract Owner Deaths 0 0 0 0 Contract Owner Terminations (1) 0 (2) 0 Policy Loans, Net 0 0 0 0 Cost of Insurance (Note 3) (2) 0 (2) 0 Policy Loan Processing Charges 0 0 0 0 Transfers Among Investment Divisions 81 51 86 41 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 85 51 89 41 -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets 86 52 85 39 Net Assets, Beginning of Period 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 86 $ 52 $ 85 $ 39 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS LEGACY POWER CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2001 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- Total Seligman Davis Return Small Cap Value Trend Bond Value (In thousands) Portfolio Series Portfolio Portfolio -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 2 $ 0 $ 12 $ 0 Mortality and Expense Charges (Note 3) (2) 0 (2) 0 Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 0 0 10 0 -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) (3) 0 2 0 Net Change in Unrealized Appreciation (Depreciation) During the Year 5 1 (10) 11 -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments 2 1 (8) 11 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 2 1 2 11 -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 30 24 30 0 Policy Loading, Net (Note 3) 0 0 0 0 Contract Owner Deaths 0 0 0 0 Contract Owner Terminations (1) 1 0 0 Policy Loans, Net 0 0 0 0 Cost of Insurance (Note 3) (2) (1) (2) 0 Policy Loan Processing Charges 0 0 0 0 Transfers Among Investment Divisions 421 78 437 116 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 448 102 465 116 -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets 450 103 467 127 Net Assets, Beginning of Period 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 450 $ 103 $ 467 $ 127 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS LEGACY POWER CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2001 (continued)
Divisions Investing In -------------------- Emerging Growth (In thousands) Portfolio -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 0 Mortality and Expense Charges (Note 3) 0 Transaction Charges (Note 3) 0 -------------------- Net Investment Income (Loss) 0 -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) (2) Net Change in Unrealized Appreciation (Depreciation) During the Year 4 -------------------- Net Gain (Loss) on Investments 2 -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 2 -------------------- Contract Transactions: Net Premiums Received from Contract Owners 0 Policy Loading, Net (Note 3) 0 Contract Owner Deaths 0 Contract Owner Terminations (1) Policy Loans, Net 0 Cost of Insurance (Note 3) 0 Policy Loan Processing Charges 0 Transfers Among Investment Divisions 56 -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 55 -------------------- Total Increase (Decrease) in Net Assets 57 Net Assets, Beginning of Period 0 -------------------- Net Assets, End of Period $ 57 ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2000
Divisions Investing In ----------------------------------------------------------------------------------- Intermediate Core Money Government Bond Capital Reserve Bond Strategy Stock (In thousands) Portfolio Portfolio Portfolio Portfolio -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 5,336 $ 1,513 $ 1,627 $ 13,706 Mortality and Expense Charges (Note 3) (741) (228) (228) (498) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income(Loss) 4,595 1,285 1,399 13,208 -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 0 (209) (196) 1,258 Net Change in Unrealized Appreciation (Depreciation) During the Year 0 1,527 960 (20,227) -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments 0 1,318 764 (18,969) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 4,595 2,603 2,163 (5,761) -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 69,004 441 1,321 2,428 Policy Loading, Net (Note 3) 2,877 (151) (108) (184) Contract Owner Deaths (488) (223) (48) (285) Contract Owner Terminations (2,175) (17) (374) (659) Policy Loans, Net (511) (39) (127) (981) Cost of Insurance (Note 3) (1,878) (393) (429) (791) Policy Loan Processing Charges (181) 0 2 (10) Transfers Among Investment Divisions (79,912) 606 2,221 (698) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions (13,264) 224 2,458 (1,180) -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets (8,669) 2,827 4,621 (6,941) Net Assets, Beginning of Period 87,020 24,249 23,752 55,780 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 78,351 $ 27,076 $ 28,373 $ 48,839 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2000 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- Fundamental Balanced Growth Capital High Natural Strategy Strategy Yield Resources (In thousands) Portfolio Portfolio Portfolio Portfolio -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 21,388 $ 5,794 $ 2,519 $ 25 Mortality and Expense Charges (Note 3) (855) (332) (229) (19) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 20,533 5,462 2,290 6 -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 2,292 590 (1,110) 574 Net Change in Unrealized Appreciation (Depreciation) During the Year (29,884) (8,146) (2,710) 99 -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments (27,592) (7,556) (3,820) 673 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations (7,059) (2,094) (1,530) 679 -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 5,020 1,428 1,454 72 Policy Loading, Net (Note 3) (242) (158) (90) (9) Contract Owner Deaths (418) (162) (423) 0 Contract Owner Terminations (948) (920) (219) (31) Policy Loans, Net (1,233) (178) (206) 3 Cost of Insurance (Note 3) (1,516) (587) (438) (38) Policy Loan Processing Charges (19) 2 3 0 Transfers Among Investment Divisions 5,397 (45) (1,930) 254 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 6,041 (620) (1,849) 251 -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets (1,018) (2,714) (3,379) 930 Net Assets, Beginning of Period 87,028 37,024 26,949 1,796 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 86,010 $ 34,310 $ 23,570 $ 2,726 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2000 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- Global Utilities & International Allocation Telecomm Equity Strategy Balanced Focus Focus (In thousands) Portfolio Portfolio Fund Fund -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 6,748 $ 2,009 $ 1,448 $ 552 Mortality and Expense Charges (Note 3) (451) (161) (34) (95) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 6,297 1,848 1,414 457 -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 631 74 25 329 Net Change in Unrealized Appreciation (Depreciation) During the Year (12,189) (2,270) (1,588) (2,850) -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments (11,558) (2,196) (1,563) (2,521) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations (5,261) (348) (149) (2,064) -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 2,963 760 178 1 Policy Loading, Net (Note 3) (154) (107) (18) (49) Contract Owner Deaths (304) (361) 0 (82) Contract Owner Terminations (628) (449) (25) (136) Policy Loans, Net (365) (54) (17) (77) Cost of Insurance (Note 3) (873) (334) (60) (172) Policy Loan Processing Charges (2) 0 0 0 Transfers Among Investment Divisions 469 (119) (46) (633) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 1,106 (664) 12 (1,148) -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets (4,155) (1,012) (137) (3,212) Net Assets, Beginning of Period 50,626 18,077 3,890 12,156 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 46,471 $ 17,065 $ 3,753 $ 8,944 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2000 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- Global Basic Developing Small Cap Bond Value Capital Value Focus Focus Markets Focus Focus (In thousands) Fund Fund Fund Fund -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 39 $ 8,698 $ 37 $ 1,808 Mortality and Expense Charges (Note 3) (8) (688) (45) (60) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 31 8,010 (8) 1,748 -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) (35) 17 (178) 426 Net Change in Unrealized Appreciation (Depreciation) During the Year (6) 801 (1,424) (1,409) -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments (41) 818 (1,602) (983) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations (10) 8,828 (1,610) 765 -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 0 4,422 401 369 Policy Loading, Net (Note 3) (7) (322) (10) (24) Contract Owner Deaths 0 (1,268) (5) 0 Contract Owner Terminations (41) (1,234) (95) (30) Policy Loans, Net 0 (121) 19 (14) Cost of Insurance (Note 3) (17) (1,314) (80) (98) Policy Loan Processing Charges (1) 1 (1) 0 Transfers Among Investment Divisions (183) 6,003 (295) 2,119 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions (249) 6,167 (66) 2,322 -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets (259) 14,995 (1,676) 3,087 Net Assets, Beginning of Period 1,054 70,404 5,328 5,093 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 795 $ 85,399 $ 3,652 $ 8,180 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2000 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- Balanced Global Mercury HW Index Capital Growth International 500 Focus Focus Value VIP (In thousands) Fund Fund Fund Portfolio -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 396 $ 17 $ 444 $ 90 Mortality and Expense Charges (Note 3) (331) (3) (41) (44) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 65 14 403 46 -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 410 0 96 179 Net Change in Unrealized Appreciation (Depreciation) During the Year (4,376) 11 (1,630) 60 -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments (3,966) 11 (1,534) 239 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations (3,901) 25 (1,131) 285 -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 1,937 63 382 350 Policy Loading, Net (Note 3) (184) (1) (17) (10) Contract Owner Deaths (726) 0 0 (21) Contract Owner Terminations (344) 0 (74) (42) Policy Loans, Net (44) (3) (18) 23 Cost of Insurance (Note 3) (692) (5) (98) (79) Policy Loan Processing Charges 3 0 (1) (1) Transfers Among Investment Divisions 8,502 290 6,826 3,824 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 8,452 344 7,000 4,044 -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets 4,551 369 5,869 4,329 Net Assets, Beginning of Period 32,092 255 769 2,201 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 36,643 $ 624 $ 6,638 $ 6,530 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2000 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- Large Cap MFS Growth Premier Emerging Focus Quasar Growth Growth (In thousands) Fund Portfolio Portfolio Series -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 43 $ 28 $ 3,477 $ 1,903 Mortality and Expense Charges (Note 3) (20) (9) (591) (324) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 23 19 2,886 1,579 -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 58 134 4,259 5,603 Net Change in Unrealized Appreciation (Depreciation) During the Year (546) (247) (19,471) (15,444) -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments (488) (113) (15,212) (9,841) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations (465) (94) (12,326) (8,262) -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 112 68 4,968 2,418 Policy Loading, Net (Note 3) (6) (3) (291) (89) Contract Owner Deaths 0 0 (2,041) (287) Contract Owner Terminations (1) (1) (796) (532) Policy Loans, Net 15 (1) (541) (428) Cost of Insurance (Note 3) (54) (14) (1,158) (539) Policy Loan Processing Charges 0 0 0 0 Transfers Among Investment Divisions 1,647 1,051 14,888 9,464 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 1,713 1,100 15,029 10,007 -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets 1,248 1,006 2,703 1,745 Net Assets, Beginning of Period 1,437 512 57,725 31,207 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 2,685 $ 1,518 $ 60,428 $ 32,952 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2000 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- AIM MFS AIM V.I. Capital Research V.I. Value Appreciation 2000 (In thousands) Series Fund Fund Trust -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 1,224 $ 1,741 $ 388 $ 0 Mortality and Expense Charges (Note 3) (179) (349) (122) (1) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 1,045 1,392 266 (1) -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 211 1,560 2,526 136 Net Change in Unrealized Appreciation (Depreciation) During the Year (2,674) (9,670) (5,046) (133) -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments (2,463) (8,110) (2,520) 3 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations (1,418) (6,718) (2,254) 2 -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 1,374 2,653 986 0 Policy Loading, Net (Note 3) (67) (153) (68) (6) Contract Owner Deaths (44) (658) (730) (43) Contract Owner Terminations (224) (362) (364) 0 Policy Loans, Net (70) (230) (49) (1) Cost of Insurance (Note 3) (344) (648) (217) (1) Policy Loan Processing Charges (2) 1 1 0 Transfers Among Investment Divisions 4,679 10,417 6,010 (609) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 5,302 11,020 5,569 (660) -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets 3,884 4,302 3,315 (658) Net Assets, Beginning of Period 16,938 33,816 10,262 658 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 20,822 $ 38,118 $ 13,577 $ 0 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2000 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- 2001 2002 2003 2004 (In thousands) Trust Trust Trust Trust -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0 Mortality and Expense Charges (Note 3) (3) (7) (3) (10) Transaction Charges (Note 3) 0 (4) (1) (4) -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) (3) (11) (4) (14) -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 3 6 3 36 Net Change in Unrealized Appreciation (Depreciation) During the Year 17 51 28 83 -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments 20 57 31 119 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 17 46 27 105 -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 1 0 4 8 Policy Loading, Net (Note 3) (4) (5) (2) (12) Contract Owner Deaths 0 0 0 (67) Contract Owner Terminations 0 0 0 0 Policy Loans, Net 3 (2) 3 0 Cost of Insurance (Note 3) (5) (10) (5) (14) Policy Loan Processing Charges (1) 0 (1) 0 Transfers Among Investment Divisions (1) 101 24 116 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions (7) 84 23 31 -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets 10 130 50 136 Net Assets, Beginning of Period 321 667 292 1,058 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 331 $ 797 $ 342 $ 1,194 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2000 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- 2005 2006 2007 2008 (In thousands) Trust Trust Trust Trust -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0 Mortality and Expense Charges (Note 3) (6) (3) (2) (5) Transaction Charges (Note 3) (2) (1) (1) (2) -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) (8) (4) (3) (7) -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 41 6 2 17 Net Change in Unrealized Appreciation (Depreciation) During the Year 48 40 35 76 -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments 89 46 37 93 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 81 42 34 86 -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 13 1 0 47 Policy Loading, Net (Note 3) (7) 0 (2) (1) Contract Owner Deaths (44) 0 0 0 Contract Owner Terminations 0 0 0 0 Policy Loans, Net 0 0 0 0 Cost of Insurance (Note 3) (10) (3) (4) (6) Policy Loan Processing Charges 0 0 0 0 Transfers Among Investment Divisions (27) (15) 0 (65) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions (75) (17) (6) (25) -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets 6 25 28 61 Net Assets, Beginning of Period 745 318 226 540 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 751 $ 343 $ 254 $ 601 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2000 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- 2009 2010 2011 2013 (In thousands) Trust Trust Trust Trust -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0 Mortality and Expense Charges (Note 3) (1) (5) (2) (3) Transaction Charges (Note 3) 0 (2) (1) (1) -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) (1) (7) (3) (4) -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 1 98 3 14 Net Change in Unrealized Appreciation (Depreciation) During the Year 17 20 37 73 -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments 18 118 40 87 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 17 111 37 83 -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 2 5 3 51 Policy Loading, Net (Note 3) 0 2 (1) 2 Contract Owner Deaths 0 0 0 0 Contract Owner Terminations 0 0 0 0 Policy Loans, Net 0 0 0 (1) Cost of Insurance (Note 3) (2) (5) (3) (3) Policy Loan Processing Charges 0 0 0 0 Transfers Among Investment Divisions 0 (51) (1) (35) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 0 (49) (2) 14 -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets 17 62 35 97 Net Assets, Beginning of Period 89 453 169 325 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 106 $ 515 $ 204 $ 422 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 2000 (continued)
Divisions Investing In -------------------------------------- 2014 2019 (In thousands) Trust Trust -------------------- ----------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 0 $ 0 Mortality and Expense Charges (Note 3) (38) (2) Transaction Charges (Note 3) (14) (1) -------------------- ----------------- Net Investment Income (Loss) (52) (3) -------------------- ----------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 120 8 Net Change in Unrealized Appreciation (Depreciation) During the Year 885 51 -------------------- ----------------- Net Gain (Loss) on Investments 1,005 59 -------------------- ----------------- Net Increase (Decrease) in Net Assets Resulting from Operations 953 56 -------------------- ----------------- Contract Transactions: Net Premiums Received from Contract Owners 264 14 Policy Loading, Net (Note 3) (23) 0 Contract Owner Deaths 0 0 Contract Owner Terminations (51) 0 Policy Loans, Net (2) 0 Cost of Insurance (Note 3) (71) (2) Policy Loan Processing Charges 1 0 Transfers Among Investment Divisions (200) (43) -------------------- ----------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions (82) (31) -------------------- ----------------- Total Increase (Decrease) in Net Assets 871 25 Net Assets, Beginning of Period 3,807 202 -------------------- ----------------- Net Assets, End of Period $ 4,678 $ 227 ==================== ================= See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECEMBER 31, 1999
Divisions Investing In ----------------------------------------------------------------------------------- Intermediate Core Money Government Bond Capital Reserve Bond Strategy Stock (In thousands) Portfolio Portfolio Portfolio Portfolio -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 4,416 $ 1,619 $ 1,694 $ 9,292 Mortality and Expense Charges (Note 3) (748) (220) (217) (434) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 3,668 1,399 1,477 8,858 -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 0 19 76 1,509 Net Change in Unrealized Appreciation (Depreciation) During the Year 0 (1,928) (2,338) 2,899 -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments 0 (1,909) (2,262) 4,408 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 3,668 (510) (785) 13,266 -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 77,909 495 1,286 2,813 Policy Loading, Net (Note 3) 3,924 (131) (116) (176) Contract Owner Deaths (1,164) (57) (282) (735) Contract Owner Terminations (2,691) (292) (290) (975) Policy Loans, Net (635) (45) (37) (1,062) Cost of Insurance (Note 3) (1,672) (340) (364) (656) Policy Loan Processing Charges 126 (14) (13) (26) Transfers Among Investment Divisions (68,863) 3,198 1,687 (4,221) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 6,934 2,814 1,871 (5,038) -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets 10,602 2,304 1,086 8,228 Net Assets, Beginning of Period 76,418 21,945 22,666 47,552 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 87,020 $ 24,249 $ 23,752 $ 55,780 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECCMBER 31, 1999 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- Fundamental Balanced Growth Capital High Natural Strategy Strategy Yield Resources (In thousands) Portfolio Portfolio Portfolio Portfolio -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 20,509 $ 6,006 $ 3,095 $ 57 Mortality and Expense Charges (Note 3) (642) (300) (248) (15) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 19,867 5,706 2,847 42 -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 3,341 385 (885) (100) Net Change in Unrealized Appreciation (Depreciation) During the Year 652 (98) (734) 409 -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments 3,993 287 (1,619) 309 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 23,860 5,993 1,228 351 -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 4,627 1,541 1,764 86 Policy Loading, Net (Note 3) (229) (154) (113) (8) Contract Owner Deaths (1,097) (197) (341) (23) Contract Owner Terminations (1,839) (1,334) (757) (51) Policy Loans, Net (1,121) (243) (278) (9) Cost of Insurance (Note 3) (1,080) (506) (441) (28) Policy Loan Processing Charges (42) (15) (17) (1) Transfers Among Investment Divisions 712 78 (2,399) (17) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions (69) (830) (2,582) (51) -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets 23,791 5,163 (1,354) 300 Net Assets, Beginning of Period 63,237 31,861 28,303 1,496 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 87,028 $ 37,024 $ 26,949 $ 1,796 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECCMBER 31, 1999 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- Global Utilities & International Allocation Telecomm Equity Strategy Balanced Focus Focus (In thousands) Portfolio Portfolio Fund Fund -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 5,762 $ 2,777 $ 474 $ 532 Mortality and Expense Charges (Note 3) (404) (157) (33) (96) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 5,358 2,620 441 436 -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 388 290 180 (218) Net Change in Unrealized Appreciation (Depreciation) During the Year 2,763 (1,617) (209) 3,195 -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments 3,151 (1,327) (29) 2,977 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 8,509 1,293 412 3,413 -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 3,386 711 192 446 Policy Loading, Net (Note 3) (124) (86) (17) (47) Contract Owner Deaths (523) (133) 0 (109) Contract Owner Terminations (908) (514) (130) (272) Policy Loans, Net (234) (426) (16) (66) Cost of Insurance (Note 3) (746) (283) (53) (178) Policy Loan Processing Charges (24) (7) (2) (4) Transfers Among Investment Divisions (2,689) 1,954 391 (1,579) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions (1,862) 1,216 365 (1,809) -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets 6,647 2,509 777 1,604 Net Assets, Beginning of Period 43,979 15,568 3,113 10,552 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 50,626 $ 18,077 $ 3,890 $ 12,156 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECCMBER 31, 1999 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- Global Basic Developing Small Cap Bond Value Capital Value Focus Focus Markets Focus Focus (In thousands) Fund Fund Fund Fund -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 70 $ 14,764 $ 113 $ 550 Mortality and Expense Charges (Note 3) (11) (578) (35) (38) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 59 14,186 78 512 -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) (38) 379 (617) (715) Net Change in Unrealized Appreciation (Depreciation) During the Year (132) (3,865) 2,531 1,400 -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments (170) (3,486) 1,914 685 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations (111) 10,700 1,992 1,197 -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 76 4,204 452 316 Policy Loading, Net (Note 3) (8) (275) (17) (40) Contract Owner Deaths 0 (872) (66) 0 Contract Owner Terminations (35) (1,947) (285) (719) Policy Loans, Net 0 (555) (87) (25) Cost of Insurance (Note 3) (22) (1,044) (65) (57) Policy Loan Processing Charges (1) (37) (3) (1) Transfers Among Investment Divisions (248) 6,369 (101) 602 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions (238) 5,843 (172) 76 -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets (349) 16,543 1,820 1,273 Net Assets, Beginning of Period 1,403 53,861 3,508 3,820 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 1,054 $ 70,404 $ 5,328 $ 5,093 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECCMBER 31, 1999 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- Balanced Global Mercury HW Index Capital Growth International 500 Focus Focus Value VIP (In thousands) Fund Fund Fund Portfolio -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 940 $ 6 $ 10 $ 10 Mortality and Expense Charges (Note 3) (226) (1) (1) (4) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 714 5 9 6 -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 1,015 1 14 12 Net Change in Unrealized Appreciation (Depreciation) During the Year 2,882 (5) 99 101 -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments 3,897 (4) 113 113 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 4,611 1 122 119 -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 1,415 8 8 36 Policy Loading, Net (Note 3) (179) (1) 0 3 Contract Owner Deaths (236) 0 0 0 Contract Owner Terminations (1,393) (1) 1 (1) Policy Loans, Net 3 (18) (1) 0 Cost of Insurance (Note 3) (420) (2) (2) (9) Policy Loan Processing Charges (11) 0 0 (1) Transfers Among Investment Divisions 14,043 268 641 2,054 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 13,222 254 647 2,082 -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets 17,833 255 769 2,201 Net Assets, Beginning of Period 14,259 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 32,092 $ 255 $ 769 $ 2,201 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECCMBER 31, 1999 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- Large Cap MFS Growth Premier Emerging Focus Quasar Growth Growth (In thousands) Fund Portfolio Portfolio Series -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 7 $ 0 $ 531 $ 0 Mortality and Expense Charges (Note 3) (3) (1) (365) (149) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 4 (1) 166 (149) -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 17 0 2,951 1,617 Net Change in Unrealized Appreciation (Depreciation) During the Year 130 53 8,737 10,816 -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments 147 53 11,688 12,433 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 151 52 11,854 12,284 -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 24 12 2,952 1,290 Policy Loading, Net (Note 3) (1) 0 (136) (20) Contract Owner Deaths 0 0 (169) (43) Contract Owner Terminations 0 0 (641) (219) Policy Loans, Net 0 0 (135) (13) Cost of Insurance (Note 3) (5) (1) (640) (262) Policy Loan Processing Charges (1) 0 (21) (8) Transfers Among Investment Divisions 1,269 449 19,919 7,808 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 1,286 460 21,129 8,533 -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets 1,437 512 32,983 20,817 Net Assets, Beginning of Period 0 0 24,742 10,390 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 1,437 $ 512 $ 57,725 $ 31,207 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECCMBER 31, 1999 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- AIM MFS AIM V.I. Capital Research V.I. Value Appreciation 1999 (In thousands) Series Fund Fund Trust -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 153 $ 556 $ 211 $ 0 Mortality and Expense Charges (Note 3) (116) (210) (55) (1) Transaction Charges (Note 3) 0 0 0 0 -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) 37 346 156 (1) -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 283 251 624 255 Net Change in Unrealized Appreciation (Depreciation) During the Year 2,729 5,748 2,023 (249) -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments 3,012 5,999 2,647 6 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 3,049 6,345 2,803 5 -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 922 1,283 410 0 Policy Loading, Net (Note 3) (60) (97) (23) (3) Contract Owner Deaths 0 (127) (91) 0 Contract Owner Terminations (436) (450) (34) 0 Policy Loans, Net (66) (1) (4) 0 Cost of Insurance (Note 3) (232) (368) (92) (1) Policy Loan Processing Charges (7) (13) (3) 0 Transfers Among Investment Divisions 4,112 13,379 3,141 (1,178) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 4,233 13,606 3,304 (1,182) -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets 7,282 19,951 6,107 (1,177) Net Assets, Beginning of Period 9,656 13,865 4,155 1,177 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 16,938 $ 33,816 $ 10,262 $ 0 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECCMBER 31, 1999 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- 2000 2001 2002 2003 (In thousands) Trust Trust Trust Trust -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0 Mortality and Expense Charges (Note 3) (7) (3) (7) (3) Transaction Charges (Note 3) (3) (1) (2) (1) -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) (10) (4) (9) (4) -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 90 8 44 5 Net Change in Unrealized Appreciation (Depreciation) During the Year (55) 2 (37) (10) -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments 35 10 7 (5) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 25 6 (2) (9) -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 3 1 0 6 Policy Loading, Net (Note 3) (16) (4) (6) (2) Contract Owner Deaths (131) 0 0 0 Contract Owner Terminations (65) 0 (62) 0 Policy Loans, Net (13) 0 3 0 Cost of Insurance (Note 3) (11) (4) (9) (4) Policy Loan Processing Charges 0 (1) 0 (1) Transfers Among Investment Divisions (60) 2 (8) (1) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions (293) (6) (82) (2) -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets (268) 0 (84) (11) Net Assets, Beginning of Period 926 321 751 303 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 658 $ 321 $ 667 $ 292 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECCMBER 31, 1999 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- 2004 2005 2006 2007 (In thousands) Trust Trust Trust Trust -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0 Mortality and Expense Charges (Note 3) (10) (7) (3) (2) Transaction Charges (Note 3) (4) (3) (1) (1) -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) (14) (10) (4) (3) -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 72 18 37 24 Net Change in Unrealized Appreciation (Depreciation) During the Year (102) (51) (59) (41) -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments (30) (33) (22) (17) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations (44) (43) (26) (20) -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 11 28 40 0 Policy Loading, Net (Note 3) (11) (3) 0 (2) Contract Owner Deaths 0 0 0 0 Contract Owner Terminations (65) 0 0 0 Policy Loans, Net (2) 0 0 0 Cost of Insurance (Note 3) (12) (10) (2) (3) Policy Loan Processing Charges (1) 0 0 0 Transfers Among Investment Divisions (66) (33) (115) 0 -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions (146) (18) (77) (5) -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets (190) (61) (103) (25) Net Assets, Beginning of Period 1,248 806 421 251 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 1,058 $ 745 $ 318 $ 226 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECCMBER 31, 1999 (continued)
Divisions Investing In ----------------------------------------------------------------------------------- 2008 2009 2010 2011 (In thousands) Trust Trust Trust Trust -------------------- -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0 Mortality and Expense Charges (Note 3) (5) (1) (6) (2) Transaction Charges (Note 3) (2) 0 (2) (1) -------------------- -------------------- -------------------- -------------------- Net Investment Income (Loss) (7) (1) (8) (3) -------------------- -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 10 17 (60) 22 Net Change in Unrealized Appreciation (Depreciation) During the Year (60) (27) (13) (44) -------------------- -------------------- -------------------- -------------------- Net Gain (Loss) on Investments (50) (10) (73) (22) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations (57) (11) (81) (25) -------------------- -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 48 17 2 4 Policy Loading, Net (Note 3) (2) 0 (5) 0 Contract Owner Deaths 0 0 (158) 0 Contract Owner Terminations 0 0 0 0 Policy Loans, Net (5) 0 0 0 Cost of Insurance (Note 3) (6) (2) (6) (3) Policy Loan Processing Charges (1) 0 0 0 Transfers Among Investment Divisions (10) (14) (63) (42) -------------------- -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 24 1 (230) (41) -------------------- -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets (33) (10) (311) (66) Net Assets, Beginning of Period 573 99 764 235 -------------------- -------------------- -------------------- -------------------- Net Assets, End of Period $ 540 $ 89 $ 453 $ 169 ==================== ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS INVESTOR CONTRACTS FOR THE YEAR ENDED DECCMBER 31, 1999 (continued)
Divisions Investing In -------------------------------------------------------------- 2013 2014 2019 (In thousands) Trust Trust Trust -------------------- -------------------- -------------------- Investment Income (Loss): Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 Mortality and Expense Charges (Note 3) (3) (40) (1) Transaction Charges (Note 3) (1) (15) 0 -------------------- -------------------- -------------------- Net Investment Income (Loss) (4) (55) (1) -------------------- -------------------- -------------------- Realized and Unrealized Gains (Losses) on Investments: Net Realized Gains (Losses) (Note 2) 27 319 0 Net Change in Unrealized Appreciation (Depreciation) During the Year (72) (972) (9) -------------------- -------------------- -------------------- Net Gain (Loss) on Investments (45) (653) (9) -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Operations (49) (708) (10) -------------------- -------------------- -------------------- Contract Transactions: Net Premiums Received from Contract Owners 53 156 2 Policy Loading, Net (Note 3) 2 (25) 0 Contract Owner Deaths 0 0 0 Contract Owner Terminations 0 0 0 Policy Loans, Net 0 (10) 0 Cost of Insurance (Note 3) (3) (71) (1) Policy Loan Processing Charges 0 (2) 0 Transfers Among Investment Divisions (37) (543) 211 -------------------- -------------------- -------------------- Net Increase (Decrease) in Net Assets Resulting from Contract Transactions 15 (495) 212 -------------------- -------------------- -------------------- Total Increase (Decrease) in Net Assets (34) (1,203) 202 Net Assets, Beginning of Period 359 5,010 0 -------------------- -------------------- -------------------- Net Assets, End of Period $ 325 $ 3,807 $ 202 ==================== ==================== ==================== See accompanying notes to financial statements.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT MERRILL LYNCH LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION Merrill Lynch Variable Life Separate Account ("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, as amended, and consists of thirty- nine investment divisions (forty during the year) that support Investor contracts and seventeen investment divisions that support Legacy Power contracts. Investor contracts are comprised of Investor Life, Investor Life Plus, and Estate Investor contracts. Legacy Power contracts were introduced on March 5, 2001. The investment divisions supporting Investor contracts are as follows: - Merrill Lynch Series Fund, Inc.: Nine of the investment divisions each invest in the shares 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 Investment Managers, L.P. ("MLIM"), an indirect subsidiary of Merrill Lynch & Co. Effective May 1, 2001, (i) the Long-term Corporate Bond Portfolio was renamed the Core Bond Strategy Portfolio, (ii) the Growth Stock Portfolio was renamed the Fundamental Growth Strategy Portfolio, (iii) the Multiple Strategy Portfolio was renamed the Balanced Capital Strategy Portfolio, and (iv) the Global Strategy Portfolio was renamed the Global Allocation Strategy Portfolio. Following the close of business on May 11, 2001, the Balanced Portfolio merged with and into the Balanced Capital Strategy Portfolio. - Merrill Lynch Variable Series Funds, Inc.: Nine of the investment divisions each invest in the shares 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 MLIM. Following the close of business on April 27, 2001, the Balanced Capital Focus Fund merged with and into the American Balanced Fund and the fund was closed to allocations of premiums and contract value. The Large Cap Value Focus Fund commenced operations on May 1, 2001. - Mercury HW Variable Trust: One of the investment divisions invests in the shares of a single mutual fund portfolio of the Mercury HW Variable Trust ("Mercury Trust"). The investment advisor to the fund of the Mercury Trust is Mercury Advisors, a division of MLIM. Effective following the close of business on April 27, 2001, the International Equity Focus Fund of the Merrill Variable Funds merged with and into the Mercury HW International Value VIP Portfolio of the Mercury HW Variable Trust. - Mercury V.I. Funds, Inc.: One of the investment divisions invests in the shares of a single mutual fund portfolio of the Mercury V.I. Funds, Inc. ("Mercury Funds"). The investment advisor to the fund of the Mercury Funds is Mercury Advisors. Effective May 1, 2001, the Mercury V.I. US Large Cap Fund was renamed the Large Cap Growth Focus Fund. - Alliance Variable Products Series Fund, Inc.: Two of the investment divisions invest in the shares 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. - MFS Variable Insurance Trust: Two of the investment divisions each invest in the shares 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 shares 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: Thirteen of the investment divisions (fourteen during the year) each invest in the units 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 2001 Trust matured on February 15, 2001, the 2000 Trust matured on February 15, 2000, and the 1999 Trust matured on February 16, 1999. The investment divisions supporting Legacy Power contracts are as follows: - Merrill Lynch Variable Series Funds, Inc.: Five of the investment divisions each invest in the shares of a single mutual fund portfolio of the Merrill Variable Funds. - Mercury HW Variable Trust: One of the investment divisions invests in the shares of a single mutual fund portfolio of the Mercury Trust. - Alliance Variable Products Series Fund,Inc.:Two of the investment divisions each invest in the shares of a single mutual fund portfolio of the Alliance Variable Fund. - MFS Variable Insurance Trust:Two of the investment divisions each invest in the shares of a single mutual fund portfolio of the MFS Variable Trust. - AIM Variable Insurance Funds, Inc. : Two of the investment divisions each invest in the shares of a single mutual fund portfolio of the AIM Variable Funds. - Davis Variable Account Fund, Inc. : One of the investment divisions invests in the shares of a single mutual fund portfolio of the Davis Variable Account Fund, Inc. ("Davis Fund"). The investment advisor to the Davis Fund is Davis Selected Advisers, L.P. - Delaware Group Premium Fund: One of the investment divisions invests in the shares a single mutual fund portfolio of the Delaware Group Premium Fund ("Delaware Fund"). The investment advisor to the Delaware Fund is Delaware Management Company. - PIMCO Variable Insurance Trust: One of the investment divisions invests in the shares of a single mutual fund portfolio of the PIMCO Variable Insurance Trust ("PIMCO Trust"). The investment advisor to the PIMCO Trust is Pacific Investment Management Company. - Seligman Portfolios, Inc.: One of the investment divisions invests in the shares of a single mutual fund portfolio of the Seligman Portfolios, Inc. ("Seligman Portfolios"). The investment advisor to the Seligman Portfolios is J. & W. Seligman & Co. Inc. - Van Kampen Life Investment Trust: One of the investment divisions invests in the shares of a single mutual fund portfolio of the Van Kampen Life Investment Trust ("Van Kampen Trust"). The investment advisor to the Van Kampen Trust is Van Kampen Asset Management, Inc. 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 accounting principles generally accepted in the United States of America for variable life separate accounts registered as unit investment trusts. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Contract loading, however, includes a charge for a significantly higher Federal income tax liability of Merrill Lynch Life (see Note 3). Charges for state and local taxes, if any, attributable to the Account may also be made. 3. 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. Mortality and expense risk charges are as follows: Investor Contracts 0.90% Legacy Power Contracts 1.35% For Investor Contracts, Merrill Lynch Life makes certain deductions from each premium. For certain Contracts, the deductions are made before the premium is allocated to the Account. For other Contracts, the deductions are taken in equal installments on the first through tenth Contract anniversaries. The deductions are for (1) sales load, (2) Federal income taxes, and (3) state and local premium taxes. For Investor Contracts, 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. For Investor Contracts, Merrill Lynch Life pays all transaction charges to MLPF&S on the sale of Zero Trusts 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 0.34% (annually at the beginning of the year) of net assets for Contract owners. 4. UNIT VALUES - INVESTOR CONTRACTS The following is a summary of unit values and units outstanding for variable life insurance contracts and the expense ratios, excluding expenses of the underlying funds for each of the five years in the period ended December 31, 2001 or lesser time period, if applicable. Total return calculations represent the one year total return and do not reflect the cost of insurance charge.
Intermediate Core Money Government Bond Capital Reserve Bond Strategy Stock (In thousands, except unit values) Portfolio Portfolio Portfolio Portfolio --------------------- --------------------- --------------------- --------------------- 2001 Units 2,106 569 532 457 Unit Value $ 34.00 $ 54.54 $ 61.62 $ 87.57 --------------------- --------------------- --------------------- --------------------- Net Assets $ 71,599 $ 31,026 $ 32,797 $ 39,999 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return 3.22% 5.97% 6.85% -10.78% 2000 Units 2,379 526 492 498 Unit Value $ 32.94 $ 51.47 $ 57.67 $ 98.15 --------------------- --------------------- --------------------- --------------------- Net Assets $ 78,351 $ 27,076 $ 28,373 $ 48,839 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return 5.29% 10.64% 8.59% -10.68% 1999 Units 2,781 521 447 508 Unit Value $ 31.29 $ 46.52 $ 53.11 $ 109.89 --------------------------------------------------------------------------------------- Net Assets $ 87,020 $ 24,249 $ 23,752 $ 55,780 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return 4.08% -2.14% -3.23% 30.45% 1998 Units 2,542 462 413 564 Unit Value $ 30.06 $ 47.54 $ 54.88 $ 84.24 --------------------------------------------------------------------------------------- Net Assets $ 76,418 $ 21,945 $ 22,666 $ 47,552 Expenses as a percent of 0.90% 0.90% 0.90% 0.90% Average Net Assets 4.48% 7.96% 7.48% 14.52% Total Return 1997 Units 1,768 380 295 524 Unit Value $ 28.77 $ 44.03 $ 51.06 $ 73.56 --------------------- --------------------- --------------------- --------------------- Net Assets $ 50,859 $ 16,710 $ 15,074 $ 38,544 Expenses as a percent of 0.90% 0.90% 0.90% 0.90% Average Net Assets 4.50% 7.44% 7.82% 21.37% Total Return
4. UNIT VALUES (continued)- INVESTOR CONTRACTS
Fundamental Balanced Growth Capital High Natural Strategy Strategy Yield Resources (In thousands, except unit values) Portfolio Portfolio Portfolio Portfolio --------------------- --------------------- --------------------- --------------------- 2001 Units 867 978 828 174 Unit Value $ 82.01 $ 46.03 $ 29.25 $ 12.40 --------------------- --------------------- --------------------- --------------------- Net Assets $ 71,110 $ 45,033 $ 24,220 $ 2,161 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return -19.55% -7.60% 0.78% -10.20% 2000 Units 844 689 812 197 Unit Value $ 101.94 $ 49.82 $ 29.02 $ 13.81 --------------------- --------------------- --------------------- --------------------- Unit Value $ 86,010 $ 34,310 $ 23,570 $ 2,726 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return -7.22% -5.77% -5.99% 39.17% 1999 Units 792 700 873 181 Unit Value $ 109.87 $ 52.87 $ 30.87 $ 9.92 --------------------- --------------------- --------------------- --------------------- Net Assets $ 87,028 $ 37,024 $ 26,949 $ 1,796 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return 37.74% 19.13% 4.63% 24.37% 1998 Units 793 718 959 187 Unit Value $ 79.77 $ 44.38 $ 29.50 $ 7.98 --------------------- --------------------- --------------------- --------------------- Net Assets $ 63,237 $ 31,861 $ 28,303 $ 1,496 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return 36.94% 9.83% -6.04% -14.34% 1997 Units 732 686 782 239 Unit Value $ 58.25 $ 40.41 $ 31.40 $ 9.31 --------------------- --------------------- --------------------- --------------------- Net Assets $ 42,622 $ 27,735 $ 24,566 $ 2,228 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return 32.55% 18.09% 9.74% -11.77%
4. UNIT VALUES (continued)- INVESTOR CONTRACTS
Global Utilities & International Allocation Telecomm Equity Strategy Balanced Focus Focus (In thousands, except unit values) Portfolio Portfolio Fund Fund --------------------- --------------------- --------------------- --------------------- 2001 Units 1,554 Division 168 Division Unit Value $ 26.84 closed during $ 18.57 closed during --------------------- the year --------------------- the year Net Assets $ 41,710 $ 3,126 Expenses as a percent of Average Net Assets 0.90% 0.90% Total Return -9.26% -14.79% 2000 Units 1,571 549 172 734 Unit Value $ 29.58 $ 31.08 $ 21.79 $ 12.19 --------------------- --------------------- --------------------- --------------------- Unit Value $ 46,471 $ 17,065 $ 3,753 $ 8,944 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return -10.08% -1.99% -3.59% -18.02% 1999 Units 1,539 570 172 817 Unit Value $ 32.90 $ 31.71 $ 22.60 $ 14.87 --------------------- --------------------- --------------------- --------------------- Net Assets $ 50,626 $ 18,077 $ 3,890 $ 12,156 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return 20.06% 7.58% 11.62% 36.39% 1998 Units 1,605 528 154 968 Unit Value $ 27.40 $ 29.48 $ 20.25 $ 10.90 --------------------- --------------------- --------------------- --------------------- Net Assets $ 43,979 $ 15,568 $ 3,113 $ 10,552 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return 8.51% 12.43% 22.94% 6.83% 1997 Units 1,556 464 117 1,018 Unit Value $ 25.25 $ 26.22 $ 16.47 $ 10.20 --------------------- --------------------- --------------------- --------------------- Net Assets $ 39,288 $ 12,159 $ 1,935 $ 10,380 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return 10.72% 15.88% 24.77% -5.41%
4. UNIT VALUES (continued)- INVESTOR CONTRACTS
Global Basic Developing Small Cap Bond Value Capital Value Focus Focus Markets Focus Focus (In thousands, except unit values) Fund Fund Fund Fund --------------------- --------------------- --------------------- --------------------- 2001 Units 59 3,393 413 609 Unit Value $ 11.98 $ 27.81 $ 7.67 $ 29.90 --------------------- --------------------- --------------------- --------------------- Net Assets $ 706 $ 94,357 $ 3,164 $ 18,224 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return -4.07% 3.31% 0.55% 28.71% 2000 Units 64 3,172 479 352 Unit Value $ 12.49 $ 26.92 $ 7.63 $ 23.23 --------------------- --------------------- --------------------- --------------------- Total Return $ 795 $ 85,399 $ 3,652 $ 8,180 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return -0.53% 11.64% -29.33% 13.72% 1999 Units 84 2,920 493 249 Unit Value $ 12.55 $ 24.11 $ 10.80 $ 20.43 --------------------- --------------------- --------------------- --------------------- Net Assets $ 1,054 $ 70,404 $ 5,328 $ 5,093 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return -9.01% 20.03% 64.03% 32.94% 1998 Units 102 2,681 533 249 Unit Value $ 13.80 $ 20.09 $ 6.58 $ 15.37 --------------------- --------------------- --------------------- --------------------- Net Assets $ 1,403 $ 53,861 $ 3,508 $ 3,820 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return 11.61% 8.46% -30.02% -7.34% 1997 Units 81 2,205 601 214 Unit Value $ 12.36 $ 18.52 $ 9.41 $ 16.58 --------------------- --------------------- --------------------- --------------------- Net Assets $ 1,006 $ 40,837 $ 5,656 $ 3,551 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return 1.03% 19.54% -7.37% 10.72%
4. UNIT VALUES (continued)- INVESTOR CONTRACTS
Balanced Global Index Capital Growth American 500 Focus Focus Balanced (In thousands, except unit values) Fund Fund Fund Fund --------------------- --------------------- --------------------- --------------------- 2001 Units 2,218 Division 540 24 Unit Value $ 15.82 closed during $ 9.50 $ 26.33 --------------------- the year --------------------- --------------------- Net Assets $ 35,088 $ 5,134 $ 625 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% Total Return -13.07% -23.73% -2.90% 2000 Units 2,013 57 533 Division Unit Value $ 18.20 $ 10.95 $ 12.46 was not --------------------- --------------------- --------------------- available Units $ 36,643 $ 624 $ 6,638 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% Total Return -10.18% 5.48% -15.76% 1999 Units 1,583 25 52 Division Unit Value $ 20.27 $ 10.38 $ 14.79 was not --------------------- --------------------- --------------------- available Net Assets $ 32,092 $ 255 $ 769 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% Total Return 19.41% -2.50% 69.39% 1998 Units 840 Division Division Division Unit Value $ 16.97 was not was not was not --------------------- available available available Net Assets $ 14,259 Expenses as a percent of Average Net Assets 0.90% Total Return 27.12% 1997 Units 333 Division Division Division Unit Value $ 13.35 was not was not was not --------------------- available available available Net Assets $ 4,451 Expenses as a percent of Average Net Assets 0.90% Total Return 32.84%
4. UNIT VALUES (continued)- INVESTOR CONTRACTS
Large Cap Mercury HW Large Cap Value International Growth Focus Value VIP Focus Quasar (In thousands, except unit values) Fund Portfolio Fund Portfolio --------------------- --------------------- --------------------- --------------------- 2001 Units 43 1,297 351 188 Unit Value $ 10.23 $ 10.09 $ 9.00 $ 8.25 --------------------- --------------------- --------------------- --------------------- Net Assets $ 444 $ 13,086 $ 3,160 $ 1,553 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return -1.38% -13.69% -10.15% -13.54% 2000 Units Division 559 268 159 Unit Value was not $ 11.69 $ 10.03 $ 9.55 available --------------------- --------------------- --------------------- Average Net Assets $ 6,530 $ 2,685 $ 1,518 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% Total Return 1.94% -16.70% -6.93% 1999 Units Division 192 119 50 Unit Value was not $ 11.47 $ 12.04 $ 10.26 available --------------------- --------------------- --------------------- Net Assets $ 2,201 $ 1,437 $ 512 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% Total Return 15.84% 34.91% 20.46% 1998 Units Division Division Division Division Unit Value was not was not was not was not available available available available Net Assets Expenses as a percent of Average Net Assets Total Return 1997 Units Division Division Division Division Unit Value was not was not was not was not available available available available Net Assets Expenses as a percent of Average Net Assets Total Return
4. UNIT VALUES (continued)- INVESTOR CONTRACTS
MFS Emerging MFS AIM Premier Growth Research V.I. Value (In thousands, except unit values) Growth Series Series Fund --------------------- --------------------- --------------------- --------------------- 2001 Units 2,936 1,467 1,264 2,140 Unit Value $ 17.31 $ 14.53 $ 13.29 $ 15.57 --------------------- --------------------- --------------------- --------------------- Net Assets $ 50,821 $ 21,321 $ 16,801 $ 33,323 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return -17.96% -34.09% -21.96% -13.35% 2000 Units 2,865 1,495 1,223 2,121 Unit Value $ 21.09 $ 22.04 $ 17.03 $ 17.97 --------------------- --------------------- --------------------- --------------------- Net Assets $ 60,428 $ 32,952 $ 20,822 $ 38,118 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return -17.33% -20.33% -5.70% -15.41% 1999 Units 2,263 1,128 938 1,592 Unit Value $ 25.51 $ 27.67 $ 18.06 $ 21.24 --------------------- --------------------- --------------------- --------------------- Net Assets $ 57,725 $ 31,207 $ 16,938 $ 33,816 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return 31.12% 75.13% 22.93% 28.73% 1998 Units 1,271 658 657 840 Unit Value $ 19.46 $ 15.80 $ 14.69 $ 16.50 --------------------- --------------------- --------------------- --------------------- Net Assets $ 24,742 $ 10,390 $ 9,656 $ 13,865 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return 46.64% 32.95% 22.28% 31.21% 1997 Units 455 278 284 278 Unit Value $ 13.27 $ 11.88 $ 12.01 $ 12.58 --------------------- --------------------- --------------------- --------------------- Net Assets $ 6,035 $ 3,300 $ 3,412 $ 3,503 Expenses as a percent of Average Net Assets 0.90% 0.90% 0.90% 0.90% Total Return 34.01% 36.01% 25.10% 28.42%
4. UNIT VALUES (continued)- INVESTOR CONTRACTS
AIM V.I. Capital Appreciation 1998 1999 2000 (In thousands, except unit values) Fund Trust Trust Trust --------------------- --------------------- --------------------- --------------------- 2001 Units 807 Division Division Division Unit Value $ 12.83 was not was not was not --------------------- available available available Net Assets $ 10,357 Expenses as a percent of Average Net Assets 0.90% Total Return -23.98% 2000 Units 805 Division Division Division Unit Value $ 16.87 was not was not matured during --------------------- available available the year $ 13,577 Expenses as a percent of Average Net Assets 0.90% Total Return -11.71% 1999 Units 537 Division Division 31 Unit Value $ 19.11 was not matured during $ 21.23 --------------------- available the year --------------------- Net Assets $ 10,262 $ 658 Expenses as a percent of Average Net Assets 0.90% 1.24% Total Return 43.31% 3.22% 1998 Units 312 Division 55 45 Unit Value $ 13.33 matured during $ 21.41 $ 20.57 --------------------- the year --------------------- --------------------- Net Assets $ 4,155 $ 1,177 $ 926 Expenses as a percent of Average Net Assets 0.90% 1.24% 1.24% Total Return 18.23% 4.55% 5.73% 1997 Units 120 48 60 48 Unit Value $ 11.28 $ 20.94 $ 20.47 $ 19.45 --------------------- --------------------- --------------------- --------------------- Net Assets $ 1,348 $ 1,009 $ 1,222 $ 936 Expenses as a percent of Average Net Assets 0.90% 1.24% 1.24% 1.24% Total Return 25.96% 4.39% 4.87% 5.51%
4. UNIT VALUES (continued)- INVESTOR CONTRACTS
2001 2002 2003 2004 (In thousands, except unit values) Trust Trust Trust Trust --------------------- --------------------- --------------------- --------------------- 2001 Units Division 49 5 73 Unit Value matured during $ 19.09 $ 86.47 $ 17.14 the year --------------------- --------------------- --------------------- Net Assets $ 933 $ 454 $ 1,257 Expenses as a percent of Average Net Assets 1.24% 1.24% 1.24% Total Return 4.13% 7.54% 7.96% 2000 Units 7 43 4 75 Unit Value $ 49.30 $ 18.33 $ 80.41 $ 15.88 --------------------- --------------------- --------------------- --------------------- $ 331 $ 797 $ 342 $ 1,194 Expenses as a percent of Average Net Assets 1.24% 1.24% 1.24% 1.24% Total Return 5.04% 6.58% 9.08% 9.95% 1999 Units 7 39 4 73 Unit Value $ 46.93 $ 17.20 $ 73.71 $ 14.44 --------------------- --------------------- --------------------- --------------------- Net Assets $ 321 $ 667 $ 292 $ 1,058 Expenses as a percent of Average Net Assets 1.24% 1.24% 1.24% 1.24% Total Return 1.77% -0.09% -2.89% -3.74% 1998 Units 7 44 4 83 Unit Value $ 46.12 $ 17.21 $ 75.91 $ 15.00 --------------------- --------------------- --------------------- --------------------- Net Assets $ 321 $ 751 $ 303 $ 1,248 Expenses as a percent of Average Net Assets 1.24% 1.24% 1.24% 1.24% Total Return 6.77% 8.04% 9.88% 10.31% 1997 Units 7 45 5 92 Unit Value $ 43.19 $ 15.93 $ 69.09 $ 13.60 --------------------- --------------------- --------------------- --------------------- Net Assets $ 298 $ 711 $ 351 $ 1,253 Expenses as a percent of Average Net Assets 1.24% 1.24% 1.24% 1.24% Total Return 6.16% 6.90% 8.45% 9.06%
4. UNIT VALUES (continued)- INVESTOR CONTRACTS
2005 2006 2007 2008 (In thousands, except unit values) Trust Trust Trust Trust --------------------- --------------------- --------------------- --------------------- 2001 Units 13 13 6 17 Unit Value $ 65.90 $ 37.19 $ 39.96 $ 37.64 --------------------- --------------------- --------------------- --------------------- Net Assets $ 883 $ 467 $ 256 $ 658 Expenses as a percent of Average Net Assets 1.24% 1.24% 1.24% 1.24% Total Return 7.72% 7.42% 6.62% 5.79% 2000 Units 12 10 7 17 Unit Value $ 61.18 $ 34.63 $ 37.48 $ 35.58 --------------------- --------------------- --------------------- --------------------- $ 751 $ 343 $ 254 $ 601 Expenses as a percent of Average Net Assets 1.24% 1.24% 1.24% 1.24% Total Return 11.73% 13.64% 15.45% 17.26% 1999 Units 14 10 7 18 Unit Value $ 54.75 $ 30.47 $ 32.46 $ 30.34 --------------------- --------------------- --------------------- --------------------- Net Assets $ 745 $ 318 $ 226 $ 540 Expenses as a percent of Average Net Assets 1.24% 1.24% 1.24% 1.24% Total Return -5.33% -7.14% -8.49% -9.99% 1998 Units 14 13 7 17 Unit Value $ 57.84 $ 32.81 $ 35.48 $ 33.71 --------------------- --------------------- --------------------- --------------------- Net Assets $ 806 $ 421 $ 251 $ 573 Expenses as a percent of Average Net Assets 1.24% 1.24% 1.24% 1.24% Total Return 11.18% 12.60% 13.39% 14.14% 1997 Units 15 10 6 14 Unit Value $ 52.02 $ 29.14 $ 31.29 $ 29.53 --------------------- --------------------- --------------------- --------------------- Net Assets $ 763 $ 297 $ 181 $ 419 Expenses as a percent of Average Net Assets 1.24% 1.24% 1.24% 1.24% Total Return 10.11% 11.08% 11.95% 12.96%
4. UNIT VALUES (continued)- INVESTOR CONTRACTS
2009 2010 2011 2013 (In thousands, except unit values) Trust Trust Trust Trust --------------------- --------------------- --------------------- --------------------- 2001 Units 3 14 8 2 Unit Value $ 33.82 $ 32.54 $ 27.29 $ 20.33 --------------------- --------------------- --------------------- --------------------- Net Assets $ 111 $ 451 $ 209 $ 36 Expenses as a percent of Average Net Assets 1.24% 1.24% 1.24% 1.24% Total Return 4.77% 3.44% 2.85% 1.78% 2000 Units 3 16 8 21 Unit Value $ 32.28 $ 31.46 $ 26.53 $ 19.98 --------------------- --------------------- --------------------- --------------------- (In thousands, except unit values) $ 106 $ 515 $ 204 $ 422 Expenses as a percent of Average Net Assets 1.24% 1.24% 1.24% 1.24% Total Return 18.84% 20.47% 21.97% 24.31% 1999 Units 3 17 8 20 Unit Value $ 27.16 $ 26.11 $ 21.75 $ 16.07 --------------------- --------------------- --------------------- --------------------- Net Assets $ 89 $ 453 $ 169 $ 325 Expenses as a percent of Average Net Assets 1.24% 1.24% 1.24% 1.24% Total Return -10.93% -11.58% -12.09% -13.56% 1998 Units 3 26 9 19 Unit Value $ 30.50 $ 29.53 $ 24.75 $ 18.59 --------------------- --------------------- --------------------- --------------------- Net Assets $ 99 $ 764 $ 235 $ 359 Expenses as a percent of Average Net Assets 1.24% 1.24% 1.24% 1.24% Total Return 14.58% 14.56% 14.38% 14.20% 1997 Units 3 21 8 12 Unit Value $ 26.62 $ 25.78 $ 21.64 $ 16.28 --------------------- --------------------- --------------------- --------------------- Net Assets $ 81 $ 542 $ 169 $ 203 Expenses as a percent of Average Net Assets 1.24% 1.24% 1.24% 1.24% Total Return 13.80% 14.64% 15.77% 18.22%
4. UNIT VALUES (continued)- INVESTOR CONTRACTS
2014 2019 (In thousands, except unit values) Trust Trust --------------------- --------------------- 2001 Units 173 9 Unit Value $ 20.00 $ 11.09 --------------------- --------------------- Net Assets $ 3,458 $ 103 Expenses as a percent of Average Net Assets 1.24% 1.24% Total Return 0.94% -1.74% 2000 Units 236 20 Unit Value $ 19.82 $ 11.29 --------------------- --------------------- Net Assets $ 4,678 $ 227 Expenses as a percent of Average Net Assets 1.24% 1.24% Total Return 25.50% 28.66% 1999 Units 241 23 Unit Value $ 15.79 $ 8.78 --------------------- --------------------- Net Assets $ 3,807 $ 202 Expenses as a percent of Average Net Assets 1.24% 1.24% Total Return -14.35% -15.61% 1998 Units 272 Division Unit Value $ 18.44 was not --------------------- available Net Assets $ 5,010 Expenses as a percent of Average Net Assets 1.24% Total Return 13.88% 1997 Units 229 Division Unit Value $ 16.19 was not --------------------- available Net Assets $ 3,711 Expenses as a percent of Average Net Assets 1.24% Total Return 19.65%
4. UNIT VALUES - LEGACY POWER CONTRACTS The following is a summary of unit values and units outstanding for variable life insurance contracts, the expense ratios, excluding expenses of the under- lying funds, and total return calculations for the period March 5, 2001 (commencement of operations) to December 31, 2001. Total return calculations do not reflect the cost of insurance charge.
Domestic Basic Fundamental Money Value Index Growth Market Focus 500 Focus (In thousands, except unit values) Fund Fund Fund Fund --------------------- --------------------- --------------------- --------------------- 2001 Units 109 12 12 69 Unit Value $ 13.75 $ 26.87 $ 15.50 $ 7.42 --------------------- --------------------- --------------------- --------------------- Net Assets $ 1,502 $ 313 $ 181 $ 511 Expenses as a percent of Average Net Assets 1.35% 1.35% 1.35% 1.35% Total Return 1.74% -1.23% -7.87% -13.50%
4. UNIT VALUES (continued)- LEGACY POWER
Mercury HW Growth Government International Premier and Bond Value VIP Growth Income (In thousands, except unit values) Fund Portfolio Portfolio Portfolio --------------------- --------------------- --------------------- -------------------- 2001 Units 22 13 5 26 Unit Value $ 11.38 $ 9.93 $ 16.92 $ 10.70 --------------------- --------------------- --------------------- --------------------- Net Assets $ 248 $ 133 $ 77 $ 281 Expenses as a percent of Average Net Assets 1.35% 1.35% 1.35% 1.35% Total Return 3.98% -12.45% -10.77% -3.22%
4. UNIT VALUES (continued)- LEGACY POWER
MFS MFS AIM Emerging Investor AIM V.I. International Growth Trust V.I. Value Equity (In thousands, except unit values) Series Series Fund Fund --------------------- --------------------- --------------------- --------------------- 2001 Units 6 6 6 7 Unit Value $ 14.21 $ 8.01 $ 15.22 $ 5.73 --------------------- --------------------- --------------------- --------------------- Net Assets $ 86 $ 52 $ 85 $ 39 Expenses as a percent of Average Net Assets 1.35% 1.35% 1.35% 1.35% Total Return -17.24% -11.63% -9.90% -14.52%
4. UNIT VALUES (continued)- LEGACY POWER
Total Seligman Davis Return Small-Cap Value Trend Bond Value (In thousands, except unit values) Portfolio Series Portfolio Portfolio --------------------- --------------------- --------------------- -------------------- 2001 Units 52 15 41 9 Unit Value $ 8.59 $ 6.80 $ 11.48 $ 14.82 --------------------- --------------------- --------------------- --------------------- Net Assets $ 450 $ 103 $ 467 $ 127 Expenses as a percent of Average Net Assets 1.35% 1.35% 1.35% 1.35% Total Return -6.75% 2.46% 5.05% 18.46%
4. UNIT VALUES (continued)- LEGACY POWER
Emerging Growth (In thousands, except unit values) Portfolio --------------------- 2001 Units 11 Unit Value $ 5.24 --------------------- Net Assets $ 57 Expenses as a percent of Average Net Assets 1.35% Total Return -19.09%
5. UNITS ISSUED AND REDEEMED - INVESTOR CONTRACTS Units issued and redeemed by the investment divisions during 2001, 2000 and 1999 were as follows:
Intermediate Core Money Government Bond Capital Reserve Bond Strategy Stock (In thousands) Portfolio Portfolio Portfolio Portfolio ------------------- ------------------- ------------------- ------------------- Outstanding at January 1, 1999 2,542 462 413 564 Activity during 1999: Issued 7,488 168 352 106 Redeemed (7,249) (109) (318) (162) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 1999 2,781 521 447 508 Activity during 2000: Issued 6,796 171 168 66 Redeemed (7,198) (166) (123) (76) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2000 2,379 526 492 498 Activity during 2001: Issued 4,316 171 948 77 Redeemed (4,589) (128) (908) (118) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2001 2,106 569 532 457 =================== =================== =================== =================== Fundamental Balanced Growth Capital High Natural Strategy Strategy Yield Resources Portfolio Portfolio Portfolio Portfolio ------------------- ------------------- ------------------- ------------------- Outstanding at January 1, 1999 793 718 959 187 Activity during 1999: Issued 225 118 179 220 Redeemed (226) (136) (265) (226) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 1999 792 700 873 181 Activity during 2000: Issued 163 84 124 642 Redeemed (111) (95) (185) (626) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2000 844 689 812 197 Activity during 2001: Issued 511 500 192 1,228 Redeemed (488) (211) (176) (1,251) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2001 867 978 828 174 =================== =================== =================== ===================
5. UNITS ISSUED AND REDEEMED (continued) - INVESTOR CONTRACTS
Global Utilities & International Allocation Telecomm Equity Strategy Balanced Focus Focus (In thousands) Portfolio Portfolio Fund Fund ------------------- ------------------- ------------------- ------------------- Outstanding at January 1, 1999 1,605 528 154 968 Activity during 1999: Issued 346 158 115 840 Redeemed (412) (116) (97) (991) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 1999 1,539 570 172 817 Activity during 2000: Issued 302 88 160 8 Redeemed (270) (109) (160) (91) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2000 1,571 549 172 734 Activity during 2001: Issued 725 0 251 0 Redeemed (742) (549) (255) (734) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2001 1,554 0 168 0 =================== =================== =================== =================== Developing Global Basic Capitals Small Cap Bond Value Markets Value Focus Focus Focus Focus Fund Fund Fund Fund ------------------- ------------------- ------------------- ------------------- Outstanding at January 1, 1999 102 2,681 533 249 Activity during 1999: Issued 88 1,112 285 168 Redeemed (106) (873) (325) (168) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 1999 84 2,920 493 249 Activity during 2000: Issued 0 957 172 218 Redeemed (20) (705) (186) (115) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2000 64 3,172 479 352 Activity during 2001: Issued 6 2,251 151 567 Redeemed (11) (2,030) (217) (310) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2001 59 3,393 413 609 =================== =================== =================== ===================
5. UNITS ISSUED AND REDEEMED (continued) - INVESTOR CONTRACTS
Balanced Global Index Capital Growth American 500 Focus Focus Balanced (In thousands) Fund Fund Fund Fund ------------------- ------------------- ------------------- ------------------- Outstanding at January 1, 1999 840 0 0 0 Activity during 1999: Issued 1,207 38 101 0 Redeemed (464) (13) (49) 0 ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 1999 1,583 25 52 0 Activity during 2000: Issued 996 37 617 0 Redeemed (566) (5) (136) 0 ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2000 2,013 57 533 0 Activity during 2001: Issued 691 0 311 28 Redeemed (486) (57) (304) (4) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2001 2,218 0 540 24 =================== =================== =================== =================== Large Cap Mercury HW Large Cap Value International Growth Focus Value VIP Focus Quasar Fund Portfolio Fund Portfolio ------------------- ------------------- ------------------- ------------------- Outstanding at January 1, 1999 0 0 0 0 Activity during 1999: Issued 0 552 152 50 Redeemed 0 (360) (33) 0 ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 1999 0 192 119 50 Activity during 2000: Issued 0 1,102 227 257 Redeemed 0 (735) (78) (148) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2000 0 559 268 159 Activity during 2001: Issued 141 2,164 286 575 Redeemed (98) (1,426) (203) (546) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2001 43 1,297 351 188 =================== =================== =================== ===================
5. UNITS ISSUED AND REDEEMED (continued) - INVESTOR CONTRACTS
MFS Premier Emerging MFS AIM Growth Growth Research V.I. Value (In thousands) Portfolio Series Series Fund ------------------- ------------------- ------------------- ------------------- Outstanding at January 1, 1999 1,271 658 657 840 Activity during 1999: Issued 1,829 880 423 990 Redeemed (837) (410) (142) (238) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 1999 2,263 1,128 938 1,592 Activity during 2000: Issued 1,828 1,183 425 1,037 Redeemed (1,226) (816) (140) (508) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2000 2,865 1,495 1,223 2,121 Activity during 2001: Issued 1,349 666 363 542 Redeemed (1,278) (694) (322) (523) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2001 2,936 1,467 1,264 2,140 =================== =================== =================== =================== AIM V.I. Capital Appreciation 1999 2000 2001 Fund Trust Trust Trust ------------------- ------------------- ------------------- ------------------- Outstanding at January 1, 1999 312 55 45 7 Activity during 1999: Issued 406 0 8 1 Redeemed (181) (55) (22) (1) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 1999 537 0 31 7 Activity during 2000: Issued 1,336 0 0 0 Redeemed (1,068) 0 (31) 0 ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2000 805 0 0 7 Activity during 2001: Issued 791 0 0 0 Redeemed (789) 0 0 (7) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2001 807 0 0 0 =================== =================== =================== ===================
5. UNITS ISSUED AND REDEEMED (continued) - INVESTOR CONTRACTS
2002 2003 2004 2005 (In thousands) Trust Trust Trust Trust ------------------- ------------------- ------------------- ------------------- Outstanding at January 1, 1999 44 4 83 14 Activity during 1999: Issued 5 0 3 1 Redeemed (10) 0 (13) (1) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 1999 39 4 73 14 Activity during 2000: Issued 6 0 14 2 Redeemed (2) 0 (12) (4) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2000 43 4 75 12 Activity during 2001: Issued 14 2 4 2 Redeemed (8) (1) (6) (1) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2001 49 5 73 13 =================== =================== =================== =================== 2006 2007 2008 2009 Trust Trust Trust Trust ------------------- ------------------- ------------------- ------------------- Outstanding at January 1, 1999 13 7 17 3 Activity during 1999: Issued 1 2 2 2 Redeemed (4) (2) (1) (2) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 1999 10 7 18 3 Activity during 2000: Issued 1 0 1 0 Redeemed (1) 0 (2) 0 ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2000 10 7 17 3 Activity during 2001: Issued 3 2 2 0 Redeemed 0 (3) (2) 0 ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2001 13 6 17 3 =================== =================== =================== ===================
5. UNITS ISSUED AND REDEEMED (continued) - INVESTOR CONTRACTS
2010 2011 2013 2014 (In thousands) Trust Trust Trust Trust ------------------- ------------------- ------------------- ------------------- Outstanding at January 1, 1999 26 9 19 272 Activity during 1999: Issued 215 0 6 45 Redeemed (224) (1) (5) (76) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 1999 17 8 20 241 Activity during 2000: Issued 268 0 3 16 Redeemed (269) 0 (2) (21) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2000 16 8 21 236 Activity during 2001: Issued 261 0 0 9 Redeemed (263) 0 (19) (72) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2001 14 8 2 173 =================== =================== =================== =================== 2019 Trust ------------------- Outstanding at January 1, 1999 0 Activity during 1999: Issued 23 Redeemed 0 ------------------- Outstanding at December 31, 1999 23 Activity during 2000: Issued 13 Redeemed (16) ------------------- Outstanding at December 31, 2000 20 Activity during 2001: Issued 2 Redeemed (13) ------------------- Outstanding at December 31, 2001 9 ===================
5. UNITS ISSUED AND REDEEMED - LEGACY POWER CONTRACTS Units issued and redeemed by the investment divisions during 2001 were as follows:
Domestic Basic Fundamental Money Value Index Growth Market Focus 500 Focus (In thousands) Fund Fund Fund Fund ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2000 0 0 0 0 Activity during 2001: Issued 1,217 19 20 97 Redeemed (1,108) (7) (8) (28) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2001 109 12 12 69 =================== =================== =================== =================== Mercury HW Growth Government International Premier and Bond Value VIP Growth Income Fund Portfolio Portfolio Portfolio ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2000 0 0 0 0 Activity during 2001: Issued 44 19 5 35 Redeemed (22) (6) 0 (9) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2001 22 13 5 26 =================== =================== =================== ===================
5. UNITS ISSUED AND REDEEMED (continued) - LEGACY POWER CONTRACTS
MFS MFS AIM Emerging Investor AIM V.I. International Growth Trust V.I. Value Equity (In thousands) Series Series Fund Fund ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2000 0 0 0 0 Activity during 2001: Issued 7 13 7 7 Redeemed (1) (6) (1) 0 ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2001 6 7 6 7 =================== =================== =================== =================== Seligman Davis Total Return Small-Cap Value Trend Bond Value Portfolio Series Portfolio Portfolio ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2000 0 0 0 0 Activity during 2001: Issued 66 19 64 21 Redeemed (14) (4) (23) (12) ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2001 52 15 41 9 =================== =================== =================== ===================
5. UNITS ISSUED AND REDEEMED (continued) - LEGACY POWER CONTRACTS
Emerging Growth (In thousands) Portfolio ------------------- Outstanding at December 31, 2000 0 Activity during 2001: Issued 22 Redeemed (11) ------------------- Outstanding at December 31, 2001 11 ===================
6. PURCHASES AND SALES OF INVESTMENTS - INVESTOR CONTRACTS The cost of purchases and proceeds from sales of investments for the year ended December 31, 2001 were as follows:
(In thousands) 2001 Purchases Sales --------------------- --------------------- Investments in Merrill Lynch Series Fund, Inc.: Money Reserve Portfolio $ 36,327 $ 47,359 Intermediate Government Bond Portfolio 6,695 3,178 Core Bond Strategy Portfolio 11,215 6,705 Capital Stock Portfolio 2,938 6,042 Fundamental Growth Strategy Portfolio 8,657 6,552 Balanced Capital Strategy Portfolio 20,473 4,907 High Yield Portfolio 4,987 2,164 Natural Resources Portfolio 14,835 15,157 Global Allocation Strategy Portfolio 4,079 3,387 Balanced Portfolio 779 16,776 Investments in Merrill Lynch Variable Series Funds, Inc.: Utilities & Telecommunications Focus Fund 4,366 4,137 International Equity Focus Fund 197 8,318 Global Bond Focus Fund 26 66 Basic Value Focus Fund 21,414 7,165 Developing Capital Markets Focus Fund 269 757 Small Cap Value Focus Fund 11,631 3,170 Index 500 Fund 5,999 1,926 Balanced Capital Focus Fund 186 745 Global Growth Focus Fund 1,703 1,417 American Balanced Fund 764 89 Large Cap Value Focus Fund 1,037 599 Investments in Mercury HW Variable Trust: Mercury HW International Value VIP Portfolio 20,173 11,303 Investments in Mercury V.I. Funds, Inc.: Large Cap Growth Focus Fund 2,082 1,313 Investments in Alliance Variable Products Series Fund, Inc.: Quasar Portfolio 3,607 3,254 Premier Growth Portfolio 11,931 7,952 Investments in MFS Variable Insurance Trust: MFS Emerging Growth Series 7,265 6,223 MFS Research Series 4,900 1,868 Investments in AIM Variable Insurance Funds, Inc.; AIM V.I. Value Fund 4,986 3,971 AIM V.I. Capital Appreciation Fund 8,224 7,305 Investments in the Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities Series A through L: 2001 Trust 0 334 2002 Trust 203 116 2003 Trust 96 21 2004 Trust 53 102 2005 Trust 97 38 2006 Trust 98 11 2007 Trust 0 18 2008 Trust 40 27 2009 Trust 3 4 2010 Trust 7,386 7,474 2011 Trust 3 7 2013 Trust 0 392 2014 Trust 104 1,440 2019 Trust 16 141 --------------------- --------------------- $ 229,843 $ 193,930 ===================== =====================
6. PURCHASES AND SALES OF INVESTMENTS - LEGACY POWER CONTRACTS The cost of purchases and proceeds from sales of investments for the year ended December 31, 2001 were as follows:
(In thousands) 2001 Purchases Sales --------------------- --------------------- Investments in Merrill Lynch Variable Series Funds, Inc.: Domestic Money Market Fund $ 4,715 $ 2,870 Basic Value Focus Fund 59 0 Index 500 Fund 29 0 Fundamental Growth Focus Fund 533 22 Government Bond Fund 473 219 Investments in Mercury HW Variable Trust: Mercury HW International Value VIP Portfolio 204 29 Investments in Alliance Variable Products Series Fund, Inc.: Premier Growth Portfolio 30 0 Growth and Income Portfolio 294 21 Investments in MFS Variable Insurance Trust: MFS Emerging Growth Series 29 0 MFS Investor Trust Series 52 0 Investments in AIM Variable Insurance Funds, Inc.; AIM V.I. Value Fund 7 0 AIM V.I. International Equity Fund 42 0 Investments in Davis Variable Account Fund, Inc.: Davis Value Portfolio 474 24 Investments in Delaware Group Premium Fund: Trend Series 103 1 Investments in PIMCO Variable Insurance Trust: Total Return Bond Portfolio 551 67 Investments in Seligman Portfolios, Inc.: Seligman Small-Cap Value Portfolio 122 5 Investments in Van Kampen Life Investment Trust: Emerging Growth Portfolio 75 19 --------------------- --------------------- $ 7,793 $ 3,277 ===================== =====================
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, 2001 and 2000, 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, 2001. 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 auditing standards generally accepted in the United States of America. 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 as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche, LLP New York, New York February 25, 2002 MERRILL LYNCH LIFE INSURANCE COMPANY (A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.) BALANCE SHEETS AS OF DECEMBER 31, 2001 AND 2000 (Dollars in thousands, except common stock par value and shares) ================================================================================
ASSETS 2001 2000 - ------ ---- ---- INVESTMENTS: Fixed maturity securities, at estimated fair value (amortized cost: 2001 - $2,009,129; 2000 - $2,050,333) $ 2,007,123 $ 2,012,016 Equity securities, at estimated fair value (cost: 2001 - $167,959; 2000 - $218,632) 163,701 204,617 Trading account securities, at estimated fair value 23,636 24,859 Real estate held-for-sale 19,447 19,447 Limited partnerships, at cost 11,270 10,413 Policy loans on insurance contracts 1,194,478 1,193,690 ------------------ ----------------- Total Investments 3,419,655 3,465,042 CASH AND CASH EQUIVALENTS 130,429 92,730 ACCRUED INVESTMENT INCOME 69,884 71,001 DEFERRED POLICY ACQUISITION COSTS 470,938 494,088 FEDERAL INCOME TAXES - DEFERRED - 10,902 REINSURANCE RECEIVABLES 9,428 3,090 AFFILIATED RECEIVABLES - NET - 667 RECEIVABLES FROM SECURITIES SOLD 2,317 2,578 OTHER ASSETS 41,912 40,614 SEPARATE ACCOUNTS ASSETS 11,305,453 12,362,798 ------------------ ----------------- TOTAL ASSETS $ 15,450,016 $ 16,543,510 ================== =================
See accompanying notes to financial statements. ================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY 2001 2000 - ------------------------------------ ---- ---- LIABILITIES: POLICYHOLDER LIABILITIES AND ACCRUALS: Policyholders' account balances $ 3,255,791 $ 3,421,873 Claims and claims settlement expenses 95,020 85,673 ------------------ ----------------- Total policyholder liabilities and accruals 3,350,811 3,507,546 OTHER POLICYHOLDER FUNDS 14,239 17,678 LIABILITY FOR GUARANTY FUND ASSESSMENTS 8,449 10,250 FEDERAL INCOME TAXES - DEFERRED 13,931 - FEDERAL INCOME TAXES - CURRENT 5,522 5,134 PAYABLES FOR SECURITIES PURCHASED 29,795 1,328 AFFILIATED PAYABLES - NET 3,736 - UNEARNED POLICY CHARGE REVENUE 113,676 101,182 OTHER LIABILITIES 7,594 32,074 SEPARATE ACCOUNTS LIABILITIES 11,298,821 12,356,035 ------------------ ----------------- Total Liabilities 14,846,574 16,031,227 ------------------ ----------------- STOCKHOLDER'S EQUITY: Common stock ($10 par value; authorized: 1,000,000 shares; issued and outstanding: 250,000 shares) 2,500 2,500 Additional paid-in capital 347,324 347,324 Retained earnings 273,046 194,808 Accumulated other comprehensive loss (19,428) (32,349) ------------------ ----------------- Total Stockholder's Equity 603,442 512,283 ------------------ ----------------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 15,450,016 $ 16,543,510 ================== =================
MERRILL LYNCH LIFE INSURANCE COMPANY (A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.) STATEMENTS OF EARNINGS FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Dollars in thousands) ================================================================================
2001 2000 1999 ---- ---- ---- REVENUES: Policy charge revenue $ 253,837 $ 268,252 $ 233,029 Net investment income 221,872 239,173 253,835 Net realized investment gains (losses) (13,844) 59 8,875 ------------- ------------- -------------- Total Revenues 461,865 507,484 495,739 ------------- ------------- -------------- BENEFITS AND EXPENSES: Interest credited to policyholders' account balances 153,111 164,216 175,839 Market value adjustment expense 2,296 481 2,400 Policy benefits (net of reinsurance recoveries: 2001 - $16,562; 2000 - $14,594; 1999 - $14,175) 37,773 21,616 32,983 Reinsurance premium ceded 24,535 23,913 21,691 Amortization of deferred policy acquisition costs 59,335 53,523 65,607 Insurance expenses and taxes 65,700 57,592 53,377 ------------- ------------- -------------- Total Benefits and Expenses 342,750 321,341 351,897 ------------- ------------- -------------- Earnings Before Federal Income Tax Provision 119,115 186,143 143,842 ------------- ------------- -------------- FEDERAL INCOME TAX PROVISION (BENEFIT): Current 23,002 43,531 48,846 Deferred 17,875 16,931 (1,135) ------------- ------------- -------------- Total Federal Income Tax Provision 40,877 60,462 47,711 ------------- ------------- -------------- NET EARNINGS $ 78,238 $ 125,681 $ 96,131 ============= ============= ==============
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, 2001, 2000 AND 1999 (Dollars in thousands) ================================================================================
2001 2000 1999 ---- ---- ---- NET EARNINGS $ 78,238 $ 125,681 $ 96,131 ------------- ------------- ------------- OTHER COMPREHENSIVE INCOME (LOSS): Net unrealized gains (losses) on available-for-sale securities: Net unrealized holding gains (losses) arising during the period 31,567 64,027 (143,202) Reclassification adjustment for (gains) losses included in net earnings 13,361 428 (8,347) ------------- ------------- ------------- Net unrealized gains (losses) on investment securities 44,928 64,455 (151,549) Adjustments for: Policyholder liabilities (9,498) (13,859) 31,959 Deferred policy acquisition costs (15,551) (23,310) 42,890 Deferred federal income taxes (6,958) (9,550) 26,845 ------------- ------------- ------------- Total other comprehensive income (loss), net of tax 12,921 17,736 (49,855) ------------- ------------- ------------- COMPREHENSIVE INCOME $ 91,159 $ 143,417 $ 46,276 ============= ============= =============
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, 2001, 2000 AND 1999 (Dollars in thousands, except common stock par value and shares) ================================================================================
Accumulated Additional other Total Common paid-in Retained comprehensive stockholder's stock capital earnings loss equity ----------- ------------- ------------ ----------------- -------------- BALANCE, JANUARY 1, 1999 $ 2,000 $ 347,324 $ 173,496 $ (230) $ 522,590 Stock dividend paid to parent ($10 par value, 50,000 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 Cash dividend paid to parent (65,000) (65,000) Net earnings 125,681 125,681 Other comprehensive income, net of tax 17,736 17,736 ----------- ------------- ------------ ----------------- -------------- BALANCE, DECEMBER 31, 2000 2,500 347,324 194,808 (32,349) 512,283 Net earnings 78,238 78,238 Other comprehensive income, net of tax 12,921 12,921 ----------- ------------- ------------ ----------------- -------------- BALANCE, DECEMBER 31, 2001 $ 2,500 $ 347,324 $ 273,046 $ (19,428) $ 603,442 =========== ============= ============ ================= ==============
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, 2001, 2000 AND 1999 (Dollars in thousands) ================================================================================
2001 2000 1999 ---- ---- ---- Cash Flows From Operating Activities: Net earnings $ 78,238 $ 125,681 $ 96,131 Noncash items included in earnings: Amortization of deferred policy acquisition costs 59,335 53,523 65,607 Capitalization of policy acquisition costs (51,736) (95,006) (92,992) Accretion of investments (1,033) (1,338) (1,649) Interest credited to policyholders' account balances 153,111 164,216 175,839 Provision (benefit) for deferred Federal income tax 17,875 16,931 (1,135) (Increase) decrease in operating assets: Accrued investment income 1,117 2,166 292 Reinsurance receivables (6,338) 1,104 (1,301) Affiliated receivables 667 (380) (287) Other (1,298) 6,827 (929) Increase (decrease) in operating liabilities: Claims and claims settlement expenses 9,347 (23) 21,771 Other policyholder funds (3,439) (7,417) 4,293 Liability for guaranty fund assessments (1,801) (4,639) 1,025 Federal income taxes - current 388 (7,672) (3,034) Affiliated payables 3,736 - (822) Unearned policy charge revenue 12,494 23,519 22,428 Other (24,695) 6,206 1,595 Other operating activities: Net realized investment (gains) losses (excluding losses on cash and cash equivalents) 13,844 (60) (8,892) ---------------- ---------------- ---------------- Net cash and cash equivalents provided by operating activities 259,812 283,638 277,940 ---------------- ---------------- ---------------- Cash Flow From Investing Activities: Proceeds from (payments for): Sales of available-for-sale securities 279,420 143,373 595,836 Maturities of available-for-sale securities 342,148 260,953 378,914 Purchases of available-for-sale securities (512,979) (243,292) (748,436) Trading account securities (214) (372) (154) Sales of real estate held-for-sale - 1,375 13,282 Policy loans on insurance contracts (788) (34,527) (19,707) Recapture of investment in separate accounts - 665 12,267 Investment in separate accounts (1,009) (2,195) (5,381) ---------------- ---------------- ---------------- Net cash and cash equivalents provided by investing activities 106,578 125,980 226,621 ---------------- ---------------- ----------------
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, 2001, 2000 AND 1999 (Continued)(Dollars in thousands) ================================================================================
2001 2000 1999 ---- ---- ---- Cash Flows from Financing Activities: Proceeds from (payments for): Dividends paid to parent $ - $ (65,000) $ (135,000) Policyholder deposits 1,090,788 1,469,839 1,196,120 Policyholder withdrawals (including transfers to/from separate accounts) (1,419,479) (1,813,908) (1,568,877) --------------- --------------- -------------- Net cash and cash equivalents used by financing activities (328,691) (409,069) (507,757) --------------- --------------- -------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 37,699 549 (3,196) CASH AND CASH EQUIVALENTS Beginning of year 92,730 92,181 95,377 --------------- --------------- -------------- End of year $ 130,429 $ 92,730 $ 92,181 =============== =============== ============== Supplementary Disclosure of Cash Flow Information: Cash paid to affiliates for: Federal income taxes $ 22,614 $ 51,203 $ 51,880 Interest 639 850 688
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 is domiciled in the State of Arkansas. The Company sells non-participating life insurance and annuity products including variable life insurance, variable annuities, market value adjusted annuities and immediate annuities. During 2001, the Company discontinued manufacturing and marketing estate planning life insurance products. The Company is currently licensed to sell insurance and annuities 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 accounting principles generally accepted in the United States of America 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. The significant accounting policies and related judgements underlying the Company's financial statements are summarized below. In applying these policies, management makes subjective and complex judgements that frequently require estimates about matters that are inherently uncertain. Many of these policies are common in the insurance industry; others are specific to the Company's business and operations. 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 variable annuity contracts consist of policy charges for mortality and expense risks, administration fees, and annual contract maintenance charges, as well as withdrawal charges assessed on contracts surrendered during the withdrawal charge period. Revenues for variable life insurance contracts consist of policy charges for mortality and expense risks, cost of insurance fees, and amortization of front-end and deferred sales charges, as well as withdrawal charges assessed on contracts surrendered during the withdrawal charge period. Revenues for interest-sensitive annuity contracts (market value adjusted annuities and immediate annuities) and interest-sensitive life insurance contracts (single premium whole life insurance - not currently marketed) consist of investment income and withdrawal charges assessed on contracts surrendered during the withdrawal charge 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, based on the review of current market conditions and credit quality, 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 dividend declaration date. Realized gains and losses on the sale or maturity of 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. 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 inforce 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 provided for payment of contingent ceding commissions, for a ten year period, based upon the persistency and mortality experience of the insurance contracts assumed. Any payments made for the contingent ceding commissions were 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:
2001 2000 1999 ---- ---- ---- Beginning balance $ 105,503 $ 102,074 $ 101,793 Capitalized amounts 147 10,891 11,759 Interest accrued 7,913 7,656 7,634 Amortization (17,694) (15,118) (19,112) ---------------- ---------------- ---------------- Ending balance $ 95,869 $ 105,503 $ 102,074 ================ ================ ================
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. 2002 $ 5,043 2003 $ 5,169 2004 $ 5,506 2005 $ 5,910 2006 $ 6,810
SEPARATE ACCOUNTS: Separate Accounts are established in conformity with Arkansas State Insurance law 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, 2001 and 2000, the Company's Separate Accounts assets exceeded Separate Accounts liabilities by $6,632 and $6,763, 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 contract owners and are not reported as revenue in the Company's statements of earnings. Assets and liabilities of Separate Accounts, representing net deposits and accumulated net investment earnings less fees, held primarily for the benefit of contract owners, 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 1.00% - 7.40% Immediate annuities 3.00% - 11.00%
These rates may be changed at the option of the Company after initial guaranteed rates expire, unless contracts are subject to minimum interest rate guarantees. CLAIMS AND CLAIMS SETTLEMENT EXPENSES: Liabilities for claims and claims settlement expenses equal the death benefit (plus accrued interest) for claims that have been reported to the Company but have not settled 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. DERIVATIVES: On January 1, 2001, the Company adopted the provisions of SFAS No. 133, as amended, Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133"). SFAS No.133 requires the Company to recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. At December 31, 2001, the fair value of derivatives was immaterial. The accounting treatment for changes in fair value for derivatives is dependent upon whether the derivative qualifies for hedge accounting. As defined by SFAS No. 133, the Company does not have any derivatives that qualify for hedge accounting and, as such, changes in fair value of the Company's derivatives instruments are recorded in earnings. At December 31, 2001, the change in fair value of derivatives did not have a material impact on earnings. 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:
2001 2000 --------------- --------------- Assets: Fixed maturity securities (1) $ 2,007,123 $ 2,012,016 Equity securities (1) 163,701 204,617 Trading account securities (1) 23,636 24,859 Limited partnerships (2) 11,270 10,413 Policy loans on insurance contracts (3) 1,194,478 1,193,690 Cash and cash equivalents (4) 130,429 92,730 Separate Accounts assets (5) 11,305,453 12,362,798 --------------- --------------- Total financial instruments $ 14,836,090 $ 15,901,123 =============== ===============
(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, 2001 and 2000, securities without a readily ascertainable market value, having an amortized cost of $443,607 and $479,301, had an estimated fair value of $438,897 and $469,397, respectively. (2) The Company has investments in three 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. (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:
2001 -------------------------------------------------------------- Cost / Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value -------------- -------------- -------------- ------------- Fixed maturity securities: Corporate debt securities $ 1,807,398 $ 36,673 $ 41,417 $ 1,802,654 Mortgage-backed securities 69,216 3,246 30 72,432 U.S. Government and agencies 97,905 1,503 2,104 97,304 Foreign governments 18,739 263 765 18,237 Municipals 15,871 637 12 16,496 -------------- -------------- -------------- ------------- Total fixed maturity securities $ 2,009,129 $ 42,322 $ 44,328 $ 2,007,123 ============== ============== ============== ============= Equity securities: Non-redeemable preferred stocks $ 167,959 $ 1,479 $ 5,737 $ 163,701 ============== ============== ============== =============
2000 -------------------------------------------------------------- Cost / Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value -------------- -------------- -------------- -------------- Fixed maturity securities: Corporate debt securities $ 1,765,321 $ 14,566 $ 50,489 $ 1,729,398 Mortgage-backed securities 96,815 2,609 73 99,351 U.S. Government and agencies 147,648 721 3,227 145,142 Foreign governments 24,451 115 2,870 21,696 Municipals 16,098 339 8 16,429 -------------- -------------- -------------- -------------- Total fixed maturity securities $ 2,050,333 $ 18,350 $ 56,667 $ 2,012,016 ============== ============== ============== ============== Equity securities: Non-redeemable preferred stocks $ 218,632 $ 501 $ 14,516 $ 204,617 ============== ============== ============== ==============
The amortized cost and estimated fair value of fixed maturity securities at December 31, 2001 by contractual maturity were:
Estimated Amortized Fair Cost Value ----------------- ----------------- Fixed maturity securities: Due in one year or less $ 280,072 $ 282,495 Due after one year through five years 873,873 883,759 Due after five years through ten years 478,164 469,448 Due after ten years 307,804 298,989 ----------------- ----------------- 1,939,913 1,934,691 Mortgage-backed securities 69,216 72,432 ----------------- ----------------- Total fixed maturity securities $ 2,009,129 $ 2,007,123 ================= =================
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, 2001 by rating agency equivalent were:
Estimated Amortized Fair Cost Value ----------------- ----------------- AAA $ 291,597 $ 294,516 AA 184,301 183,964 A 555,642 561,610 BBB 887,364 883,612 Non-investment grade 90,225 83,421 ----------------- ----------------- Total fixed maturity securities $ 2,009,129 $ 2,007,123 ================= =================
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:
2001 2000 ---- ---- Assets: Fixed maturity securities $ (2,006) $ (38,317) Equity securities (4,258) (14,015) Deferred policy acquisition costs 3,706 19,257 Federal income taxes - deferred - 17,419 Separate Accounts assets (1,493) (353) ---------------- ---------------- (4,051) (16,009) ---------------- ---------------- Liabilities: Federal income taxes - deferred (10,461) - Policyholders' account balances 25,838 16,340 ---------------- ---------------- 15,377 16,340 ---------------- ---------------- Stockholder's equity: Accumulated other comprehensive loss $ (19,428) $ (32,349) ================ ================
The Company maintains a trading portfolio comprised of convertible debt and equity securities. The net unrealized holdings gains (losses) on trading account securities included in net realized investment gains (losses) were $462, ($3,614) and $3,112 at December 31, 2001, 2000 and 1999, respectively. Proceeds and gross realized investment gains and losses from the sale of available-for-sale securities for the years ended December 31 were:
2001 2000 1999 ---- ---- ---- Proceeds $ 279,420 $ 143,373 $ 595,836 Gross realized investment gains 4,913 1,342 12,196 Gross realized investment losses (17,320) 4,319 15,936
The Company had investment securities with a carrying value of $25,859 and $25,118 that were deposited with insurance regulatory authorities at December 31, 2001 and 2000, 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:
2001 2000 1999 ---- ---- ---- Fixed maturity securities $ 139,285 $ 155,664 $ 170,376 Equity securities 15,342 17,011 16,670 Real estate held-for-sale 924 3,375 3,792 Policy loans on insurance contracts 62,695 61,411 60,445 Cash and cash equivalents 7,578 7,504 7,955 Other 335 35 88 ---------------- ---------------- ---------------- Gross investment income 226,159 245,000 259,326 Less investment expenses (4,287) (5,827) (5,491) ---------------- ---------------- ---------------- Net investment income $ 221,872 $ 239,173 $ 253,835 ================ ================ ================
Net realized investment gains (losses), including other-than-temporary writedowns in carrying value, for the years ended December 31 were as follows:
2001 2000 1999 ---- ---- ---- Fixed maturity securities $ (12,035) $ (1,531) $ (3,721) Equity securities (372) (1,446) (19) Trading account securities (1,437) 2,275 4,778 Investment in Separate Accounts - 12 460 Real estate held-for-sale - 750 7,394 Cash and cash equivalents - (1) (17) ---------------- ---------------- ---------------- Net realized investment gains (losses) $ (13,844) $ 59 $ 8,875 ================ ================ ================
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, versus the reported provision for income taxes for the years ended December 31:
2001 2000 1999 ---- ---- ---- Provision for income taxes computed at Federal statutory rate $ 41,690 $ 65,150 $ 50,345 Increase (decrease) in income taxes resulting from: Dividend received deduction (1,024) (1,758) (1,594) Foreign tax credit (310) (2,930) (1,040) Non-deductible fees 521 - - --------------- -------------- --------------- Federal income tax provision $ 40,877 $ 60,462 $ 47,711 =============== ============== ===============
The Federal statutory rate for each of the three years in the period ended December 31, 2001 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:
2001 2000 1999 ---- ---- ---- Deferred policy acquisition costs $ (2,336) $ 13,254 $ 8,822 Policyholders' account balances 19,520 2,589 (9,635) Liability for guaranty fund assessments 630 1,624 (359) Investment adjustments 61 (536) (27) Other - - 64 ------------- ------------ ------------- Deferred Federal income tax provision (benefit) $ 17,875 $ 16,931 $ (1,135) ============= ============ =============
Deferred tax assets and liabilities as of December 31 are determined as follows:
2001 2000 ---- ---- Deferred tax assets: Policyholders' account balances $ 93,658 $ 113,178 Investment adjustments 2,453 2,514 Liability for guaranty fund assessments 2,957 3,587 Net unrealized investment loss on investment securities 10,461 17,419 --------------- ---------------- Total deferred tax assets 109,529 136,698 --------------- ---------------- Deferred tax liabilities: Deferred policy acquisition costs 119,472 121,808 Other 3,988 3,988 --------------- ---------------- Total deferred tax liabilities 123,460 125,796 --------------- ---------------- Net deferred tax asset (liability) $ (13,931) $ 10,902 =============== ================
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 $731 that can be drawn upon for delinquent reinsurance recoverables. As of December 31, 2001 the Company had the following life insurance inforce:
Percentage Ceded to Assumed of amount Gross other from other Net assumed to amount companies companies amount net -------------- -------------- -------------- --------------- ------------- Life insurance inforce $14,036,930 $4,334,463 $1,128 $9,703,595 0.01%
The Company had 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. During 2001, the agreement was amended whereby the Company ceased reinsuring variable annuity premiums sold subsequent to June 30, 2001. 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 $50,575, $47,732 and $43,410 for the years ended December 31, 2001, 2000 and 1999, 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 $639, $850 and $688 for 2001, 2000 and 1999, respectively. Intercompany interest is included in net investment income. While management believes that these fees are calculated on a reasonable basis, they may not necessarily be indicative of the costs that would have been incurred on a stand-alone basis. The Company and Merrill Lynch Investment Managers, L.P. ("MLIM") are parties to a service agreement whereby MLIM has agreed to provide certain invested asset management services to the Company. The Company pays a fee to MLIM for these services through the MLIG service agreement. Charges attributable to this agreement and allocated to the Company by MLIG were $1,990, $2,042 and $1,823 for 2001, 2000 and 1999, respectively. MLIG has entered into agreements with MLIM and Mercury Advisors ("Mercury"), a division of MLIM and formerly known as Hotchkis & Wiley, with respect to administrative services for the Merrill Lynch Series Fund, Inc., Merrill Lynch Variable Series Funds, Inc., and Mercury HW Variable Trust, formerly known as 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, MLIM and Mercury pay compensation to MLIG in an amount equal to a portion of the annual gross investment advisory fees paid by the Funds to MLIM and Mercury. The Company received from MLIG its allocable share of such compensation in the amount of $21,667, $23,269 and $21,630 during 2001, 2000 and 1999, 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 $65,021, $94,841 and $88,955 for 2001, 2000 and 1999, 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. NOTE 7. STOCKHOLDER'S EQUITY AND STATUTORY REGULATIONS The Company paid no dividends in 2001. During 2000 and 1999, the Company paid cash dividends to MLIG of $65,000 and $135,000, respectively. Of these cash dividends, $38,482 and $105,793, 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. At December 31, 2001 and 2000, approximately $30,899 and $25,020, respectively, of stockholder's equity was available for distribution to MLIG. Statutory capital and surplus at December 31, 2001 and 2000, were $311,490 and $252,704, 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, provisions for deferred income taxes are limited to temporary differences that will be recognized within one year, and securities are valued on a different basis. The Company's statutory net income for 2001, 2000 and 1999 was $48,108, $49,533 and $106,266, respectively. On January 1, 2001, the Company adopted the Codification of Statutory Accounting Principles ("Codification"). The purpose of Codification is to standardize regulatory accounting and reporting for the insurance industry. However, statutory accounting principles will continue to be established by individual state laws and permitted practices. The Company's state of domicile has adopted Codification. The impact of adopting Codification resulted in a $4,779 increase in statutory surplus. 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, 2001 and 2000, 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. 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, 2001 and 2000, the Company has established an estimated liability for future guaranty fund assessments of $8,449 and $10,250, 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 2000, the Company committed to participate in a limited partnership. As of December 31, 2001, $3,220 has been advanced towards the Company's $10,000 commitment to the limited partnership. NOTE 9. SERVICE CENTER INTEGRATION During the second quarter 2001, the Company announced plans to consolidate its life and annuity policy administration service centers into one location. The consolidation was completed during the third quarter 2001. Costs incurred related to the consolidation were $10.7 million and are reported in insurance expenses and taxes. At December 31, 2001, costs incurred and unpaid were $6.0 million. NOTE 10. 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 insurance products. The Company's Annuity segment consists of variable annuities and interest-sensitive annuities. 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 net revenues and earnings on assets that do not support life or annuity contract owner liabilities. The following table summarizes each business segment's contribution to the consolidated amounts:
Life 2001 Insurance Annuities Other Total --------------- ---------------- ------------- --------------- Net interest spread (a) $ 34,815 $ 31,302 $ 2,644 $ 68,761 Other revenues 101,685 139,727 (1,419) 239,993 --------------- ---------------- ------------- --------------- Net revenues 136,500 171,029 1,225 308,754 --------------- ---------------- ------------- --------------- Policy benefits 21,320 16,453 - 37,773 Reinsurance premium ceded 24,531 4 - 24,535 Amortization of deferred policy acquisition costs 30,913 28,422 - 59,335 Other non-interest expenses 18,097 49,899 - 67,996 --------------- ---------------- ------------- --------------- Total non-interest expenses 94,861 94,778 - 189,639 --------------- ---------------- ------------- --------------- Net earnings before Federal income tax provision 41,639 76,251 1,225 119,115 Income tax expense 15,607 24,841 429 40,877 --------------- ---------------- ------------- --------------- Net earnings $ 26,032 $ 51,410 $ 796 $ 78,238 =============== ================ ============= =============== Balance Sheet Information: Total assets $ 5,674,704 $ 9,625,104 $ 150,208 $ 15,450,016 Deferred policy acquisition costs 251,245 219,693 - 470,938 Policyholder liabilities and accruals 2,094,195 1,256,616 - 3,350,811 Other policyholder funds 9,236 5,003 - 14,239
Life 2000 Insurance Annuities Other Total --------------- ---------------- ------------- --------------- Net interest spread (a) $ 38,265 $ 27,199 $ 9,493 $ 74,957 Other revenues 107,030 160,955 326 268,311 --------------- ---------------- ------------- --------------- Net revenues 145,295 188,154 9,819 343,268 --------------- ---------------- ------------- --------------- Policy benefits 20,371 1,245 - 21,616 Reinsurance premium ceded 23,913 - - 23,913 Amortization of deferred policy acquisition costs 5,025 48,498 - 53,523 Other non-interest expenses 16,656 41,417 - 58,073 --------------- ---------------- ------------- --------------- Total non-interest expenses 65,965 91,160 - 157,125 --------------- ---------------- ------------- --------------- Net earnings before Federal income tax provision 79,330 96,994 9,819 186,143 Income tax expense 26,362 30,663 3,437 60,462 --------------- ---------------- ------------- --------------- Net earnings $ 52,968 $ 66,331 $ 6,382 $ 125,681 =============== ================ ============= =============== Balance Sheet Information: Total assets $ 6,175,339 $ 10,285,993 $ 82,178 $ 16,543,510 Deferred policy acquisition costs 277,408 216,680 - 494,088 Policyholder liabilities and accruals 2,133,700 1,373,846 - 3,507,546 Other policyholder funds 11,243 6,435 - 17,678
Life 1999 Insurance Annuities Other Total --------------- ---------------- ------------- --------------- 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
(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 2001, 2000 and 1999:
2001 2000 1999 ------------- ------------ ------------ Life Insurance Variable life insurance $ 110,842 $ 116,664 $ 104,036 Interest-sensitive life insurance 25,658 28,631 27,590 ------------- ------------ ------------ Total Life Insurance 136,500 145,295 131,626 ------------- ------------ ------------ Annuities Variable annuities 152,427 154,200 130,039 Interest-sensitive annuities 18,602 33,954 41,600 ------------- ------------ ------------ Total Annuities 171,029 188,154 171,639 ------------- ------------ ------------ Other 1,225 9,819 16,635 ------------- ------------ ------------ Total $ 308,754 $ 343,268 $ 319,900 ============= ============ ============
* * * * * PART II. OTHER INFORMATION UNDERTAKING TO FILE REPORTS Subject to the terms and conditions of Section 15(d) of the Securities Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with the Securities and Exchange Commission such supplementary and periodic information, documents and reports as may be prescribed by any rule or regulation of the Commission heretofore or hereafter duly adopted pursuant to authority conferred in that section. RULE 484 UNDERTAKING The Insurance Company's By-Laws provide, in Article VI, Section 1, 2, 3 and 4, as follows: Section 1. Actions Other Than by or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer or employee of the Corporation, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Section 2. Actions by or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer or employee of the Corporation, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the Court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other Court shall deem proper. Section 3. Right to Indemnification. To the extent that a director, officer of employee of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorney's fees) actually and reasonably incurred by him in connection therewith. Section 4. Determination of Right to Indemnification. Any indemnification under Sections 1 and 2 of this Article (unless ordered by a Court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, or employee is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 1 and 2 of this Article. Such determination shall be made (i) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders. Any persons serving as an officer, director or trustee of a corporation, trust, or other enterprise, including the Registrant, at the request of Merrill Lynch are entitled to indemnification from Merrill Lynch, to the fullest II-1 extent authorized or permitted by law, for liabilities with respect to actions taken or omitted by such persons in any capacity in which such persons serve Merrill Lynch or such other corporation, trust, or other enterprise. Any action initiated by any such person for which indemnification is provided shall be approved by the Board of Directors of Merrill Lynch prior to such initiation. DIRECTORS' AND OFFICERS' INSURANCE Merrill Lynch has purchased from Corporate Officers' and Directors' Assurance Company directors' and officers' liability insurance policies which cover, in addition to the indemnification described above, liabilities for which indemnification is not provided under the By-Laws. The Company will pay an allocable portion of the insurance premium paid by Merrill Lynch with respect to such insurance policies. ARKANSAS BUSINESS CORPORATION LAW In addition, Section 4-26-814 of the Arkansas Business Corporation Law generally provides that a corporation has the power to indemnify a director or officer of the corporation, or a person serving at the request of the corporation as a director or officer of another corporation or other enterprise against any judgments, amounts paid in settlement, and reasonably incurred expenses in a civil or criminal action or proceeding if the director or officer acted in good faith in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation (or, in the case of a criminal action or proceeding, if he or she in addition had no reasonable cause to believe that his or her conduct was unlawful). Insofar as indemnification for liability arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. REPRESENTATION PURSUANT TO SECTION 26(f) Merrill Lynch Life Insurance Company hereby represents that the fees and charges deducted under the Contract, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by Merrill Lynch Life Insurance Company. II-2 MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED OFFICERS AND DIRECTORS AS OF FEBRUARY 1, 2002 DIRECTORS E. Stanley O'Neal Thomas H. Patrick George A. Schieren OFFICERS E. Stanley O'Neal Chairman of the Board and Chief Executive Officer George A. Schieren General Counsel John C. Stomber Treasurer Andrea L. Dulberg Secretary
EXECUTIVE VICE PRESIDENTS Rosemary T. Berkery Jerome P. Kenney Thomas W. Davis John A. McKinley Barry S. Friedberg Thomas H. Patrick James P. Gorman Arshad R. Zakaria
SENIOR VICE PRESIDENTS Daniel H. Bayly H. McIntyre Gardner John T. McGowan Samuel R. Chapin Donald N. Gershuny Andrew J. Melnick Daniel C. Cochran Mark B. Goldfus Carlos M. Morales Michael R. Cowan Jeffrey L. Humber Robert E. Mulholland Paul W. Critchlow Alfred F. Hurley, Jr. John C. Qua John W. Cummings Claudia J. Kahn George A. Schieren Robert W. Dineen Terry Kassel Daniel C. Sontag D. Kevin Dolan Barry J. Mandel John C. Stomber Richard A. Dunn G. Kelly Martin Arthur L. Thomas Ahamass L. Fakahany Robert J. McCann
FIRST VICE PRESIDENTS Mark D. Alexander Anne Flannery Robert J. Mooney Steven A. Baronoff John J. Fosina (2) Allan I. Morris I. Scott Bieler Michael Gaffney Kevin Moynihan Andrew Berry Jeffrey A. Gelfand Ronald S. Oppenheimer Gary M. Carlin Richard K. Gordon Richard B. Saltzman Dominic A. Carone (1) Daniel Kane Barry G. Skolnick Chris Corrado Thomas J. Kerestes Laurence Tosi Allan Dinkoff David Kornberg James R. Vallone Andrea L. Dulberg John McDermott Byron Vielehr Jonathan N. Eisenberg Susan W. Mink William Wong
- --------------- (1) Mr. Carone is also the Controller. (2) Mr. Fosina is also the Chief Financial Officer. II-3 VICE PRESIDENTS Catherine Bolz ASSISTANT VICE PRESIDENTS Jon Dye Gregory R. Krolikowski Wendell A. Kapustiak Edward A. Mallaney, Jr. Richard D. Lilleston Robert A. Manfredo ASSISTANT SECRETARIES Daniel R. Mayo Blair Duncan Avadhesh K. Nigam Lawrence M. Egan, Jr. David Oller Bina Kalola Leonard Pugliese Michael A. LaMaina Daniel R. Roccato Patrick J. Moran George A. Ruth Margaret E. Nelson John M. Sabatino Andrew J. Quigley Michael S. Schreier Jonathan Santelli John P. Smith Howard Sutherland
II-4 CONTENTS OF REGISTRATION STATEMENT This Registration Statement comprises the following papers and documents: The facing sheet. The Prospectus consisting of 117 pages. Undertaking to file reports. Rule 484 Undertaking. Representation Pursuant to Section 26(f). The signatures. Written Consents of the Following Persons: (a) Barry G. Skolnick, Esq. (b) Deborah J. Adler, FSA, MAAA (c) Sutherland Asbill & Brennan LLP (d) Deloitte & Touche LLP, Independent Auditors The following exhibits: 1.A. (1) Resolution of the Board of Directors of Merrill Lynch Life Insurance Company establishing the Separate Account (Incorporated by Reference to Registrant's Post-Effective Amendment No. 8 to Form S-6 Registration No. 33-55472 Filed April 29, 1997) (2) Not applicable (3) (a) Distribution Agreement between Merrill Lynch Life Insurance Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated (Incorporated by Reference to Registrant's Post-Effective Amendment No. 8 to Form S-6 Registration No. 33-55472 Filed April 29, 1997) (b) Sales Agreement between Merrill Lynch Life Insurance Company and Merrill Lynch Life Agency Inc. (Incorporated by Reference to Registrant's Post-Effective Amendment No. 8 to Form S-6 Registration No. 33-55472 Filed April 29, 1997) (c) Schedules of Sales Commissions. See Exhibit A(3)(b) (Incorporated by Reference to Registrant's Post-Effective Amendment No. 8 to Form S-6 Registration No. 33-55472 Filed April 29, 1997) (d) Indemnity Agreement between Merrill Lynch Life Insurance Company and Merrill Lynch Life Agency, Inc. (Incorporated by Reference to Registrant's Post-Effective Amendment No. 8 to Form S-6 Registration No. 33-55472 Filed April 29, 1997) (4) Not applicable (5) (a) Modified Single Premium Variable Life Insurance Policy (Incorporated by Reference to Registrant's Pre-Effective Amendment No. 1 to Form S-6 Registration Statement No. 333-47844 Filed on December 22, 2000) (b) (1) Backdating Endorsement (Incorporated by Reference to Registrant's Form S-6 Registration Statement No. 333-47844 Filed on October 12, 2000) (2) Guaranteed Benefits Rider for Modified Single Premium Variable Life Insurance Policy (Incorporated by Reference to Registrant's Form S-6 Registration Statement No. 333-47844 Filed on October 12, 2000) (3) Change of Insured Rider for Modified Single Premium Variable Life Insurance Policy (Incorporated by Reference to Registrant's Form S-6 Registration Statement No. 333-47844 Filed on October 12, 2000) (c) (1) Variable Life Insurance Application (Incorporated by Reference to Registrant's Form S-6 Registration Statement No. 333-47844 Filed on October 12, 2000) (2) Application for Reinstatement (Incorporated by Reference to Registrant's Pre-Effective Amendment No. 1 to Form S-6 Registration No. 33-41829 Filed April 16, 1992)
II-5 (6) (a) Articles of Amendment, Restatement, and Redomestication of the Articles of Incorporation of Merrill Lynch Life Insurance Company (Incorporated by Reference to Registrant's Post-Effective Amendment No. 8 to Form S-6 Registration No. 33-55472 Filed April 29, 1997) (b) Amended and Restated By-Laws of Merrill Lynch Life Insurance Company (Incorporated by Reference to Registrant's Post-Effective Amendment No. 8 to Form S-6 Registration No. 33-55472 Filed April 29, 1997) (7) Not applicable (8) (a) Form of Participation Agreement Among Merrill Lynch Life Insurance Company, Alliance Capital Management L.P., and Alliance Fund Distributors, Inc. (Incorporated by Reference to Merrill Lynch Life Variable Annuity Separate Account A's Post-Effective Amendment No. 10 to Form N-4 Registration No. 33-43773 Filed December 10, 1996) (b) Form of Participation Agreement Among MFS Variable Insurance Trust, Merrill Lynch Life Insurance Company, and Massachusetts Financial Services Company (Incorporated by Reference to Merrill Lynch Life Variable Annuity Separate Account A's Post-Effective Amendment No. 10 to Form N-4 Registration No. 33-43773 Filed December 10, 1996) (c) Participation Agreement By and Among AIM Variable Insurance Funds, Inc., AIM Distributors, Inc., and Merrill Lynch Life Insurance Company (Incorporated by Reference to Merrill Lynch Life Variable Annuity Separate Account A's Post-Effective Amendment No. 11 to Form N-4 Registration No. 33-43773 Filed April 24, 1997) (d) Form of Participation Agreement among Merrill Lynch Life Insurance Company, Hotchkis and Wiley Variable Trust, and Hotchkis and Wiley (Incorporated by reference to Merrill Lynch Life Variable Annuity Separate Account A's Post-Effective Amendment No. 12 to Form N-4 Registration No. 33-43773 Filed May 1, 1998) (e) Form of Participation Agreement among Davis Variable Account Inc., Davis Distributors, LLC and Merrill Lynch Life Insurance Company (Incorporated by Reference to Registrant's Pre-Effective Amendment No. 2 to Form N-4 Registration No. 333-90243 Filed March 31, 2000) (f) Form of Participation Agreement among Delaware Group Premium Fund, Delaware Distributors, LP and Merrill Lynch Life Insurance Company (Incorporated by Reference to Registrant's Pre-Effective Amendment No. 2 to Form N-4 Registration No. 333-90243 Filed March 31, 2000) (g) Form of Participation Agreement among PIMCO Variable Insurance Trust, PIMCO Funds Distributors, LLC and Merrill Lynch Life Insurance Company (Incorporated by Reference to Registrant's Pre-Effective Amendment No. 2 to Form N-4 Registration No. 333-90243 Filed March 31, 2000) (h) Form of Participation Agreement among Seligman Portfolios Inc., Seligman Advisors, Inc. and Merrill Lynch Life Insurance Company (Incorporated by Reference to Registrant's Pre-Effective Amendment No. 2 to Form N-4 Registration No. 333-90243 Filed March 31, 2000) (i) Form of Participation Agreement among Van Kampen Life Investment Trust, Van Kampen Funds Inc., Van Kampen Asset Management Inc. and Merrill Lynch Life Insurance Company (Incorporated by Reference to Registrant's Pre-Effective Amendment No. 2 to Form N-4 Registration No. 333-90243 Filed March 31, 2000) (j) Form of Participation Agreement Between Merrill Lynch Variable Series Funds, Inc. and Merrill Lynch Life Insurance Company. (Incorporated by Reference to Merrill Lynch Life Variable Annuity Separate Account A's Post-Effective Amendment No. 10 to Form N-4, Registration No. 33-43773 Filed December 10, 1996). (k) Amendment to the Participation Agreement Between Merrill Lynch Variable Series Funds, Inc. and Merrill Lynch Life Insurance Company dated April 15, 1998. (Incorporated by Reference to Merrill Lynch Life Variable Annuity Separate Account A's Registration Statement on Form N-4, Registration No. 333-90243 Filed November 3, 1999.) (l) Amendment to the Participation Agreement Among Merrill Lynch Life Insurance Company, Alliance Capital Management L.P., and Alliance Fund Distributors, Inc. dated May 1, 1997. (Incorporated by Reference to Merrill Lynch Life Variable Annuity Separate Account A's Registration Statement on Form N-4, Registration No. 333-90243 Filed November 3, 1999.)
II-6 (m) Amendment to the Participation Agreement Among Merrill Lynch Life Insurance Company, Alliance Capital Management L.P., and Alliance Fund Distributors, Inc. dated June 5, 1998. (Incorporated by Reference to Merrill Lynch Life Variable Annuity Separate Account A's Registration Statement on Form N-4, Registration No. 333-90243 Filed November 3, 1999.) (n) Amendment to the Participation Agreement Among Merrill Lynch Life Insurance Company, Alliance Capital Management L.P., and Alliance Fund Distributors, Inc. dated July 22, 1999. (Incorporated by Reference to Merrill Lynch Life Variable Annuity Separate Account A's Registration Statement on Form N-4, Registration No. 333-90243 Filed November 3, 1999.) (o) Amendment to the Participation Agreement Among MFS(R)Variable Insurance Trust, Merrill Lynch Life Insurance Company, and Massachusetts Financial Services Company dated May 1, 1997. (Incorporated by Reference to Merrill Lynch Life Variable Annuity Separate Account A's Registration Statement on Form N-4, Registration No. 333-90243 Filed November 3, 1999.) (p) Amendment to the Participation Agreement By And Among AIM Variable Insurance Funds, Inc., AIM Distributors, Inc., and Merrill Lynch Life Insurance Company dated May 1, 1997. (Incorporated by Reference to Merrill Lynch Life Variable Annuity Separate Account A's Registration Statement on Form N-4, Registration No. 333-90243 Filed November 3, 1999.) (q) Amendment to the Participation Agreement Among Merrill Lynch Life Insurance Company and Hotchkis and Wiley Variable Trust. (Incorporated by Reference to Merrill Lynch Life Variable Annuity Separate Account A's Registration Statement on Form N-4, Registration No. 333-90243 Filed November 3, 1999.) (9) (a) Agreement between Merrill Lynch Life Insurance Company and Merrill Lynch Series Fund, Inc. (Incorporated by Reference to Registrant's Post-Effective Amendment No. 8 to Form S-6 Registration No. 33-55472 Filed April 29, 1997) (b) Agreement between Merrill Lynch Life Insurance Company and Merrill Lynch Funds Distributor, Inc. (Incorporated by Reference to Registrant's Post-Effective Amendment No. 8 to Form S-6 Registration No. 33-55472 Filed April 29, 1997) (c) Agreement between Merrill Lynch Life Insurance Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated (Incorporated by Reference to Registrant's Post-Effective Amendment No. 8 to Form S-6 Registration No. 33-55472 Filed April 29, 1997) (d) Management Agreement between Merrill Lynch Life Insurance Company and Merrill Lynch Asset Management, Inc. (Incorporated by Reference to Registrant's Post-Effective Amendment No. 8 to Form S-6 Registration No. 33-55472 Filed April 29, 1997) (10) Memorandum describing Merrill Lynch Life Insurance Company's Issuance, Transfer and Redemption Procedures (Incorporated by reference to Registrant's Form S-6 Registration No. 333-47844 Filed February 9, 2001) 2. Opinion and Consent of Barry G. Skolnick, Esq. as to the legality of the securities being registered (Incorporated by reference to Registrant's Form S-6 Registration No. 333-47844 Filed February 9, 2001) 3. Not applicable 4. Not applicable 5. Opinion and Consent of Deborah J. Adler, FSA, MAAA as to actuarial matters pertaining to the securities being registered 6. (a) Power of Attorney of Barry G. Skolnick (Incorporated by Reference to Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration No. 33-55472 Filed March 1, 1994) (b) Power of Attorney of Matthew J. Rider (Incorporated by Reference to Registrant's Form S-6 Registration Statement No. 333-47844 Filed on October 12, 2000)
II-7 (c) Power of Attorney from Michael Cogswell. (Incorporated by Reference to Merrill Lynch Life Variable Annuity Separate Account A's Pre-Effective Amendment No. 1 to Form N-4, Registration No. 333-63904 Filed September 10, 2001.) (d) Power of Attorney from H. McIntyre Gardner. (Incorporated by Reference to Merrill Lynch Life Variable Annuity Separate Account A's Registration Statement on Form N-4, Registration No. 333-63904 Filed June 26, 2001.) (e) Power of Attorney from Christopher J. Grady. (Incorporated by Reference to Merrill Lynch Life Variable Annuity Separate Account A's Registration Statement on Form N-4, Registration No. 333-63904 Filed June 26, 2001.) (f) Power of Attorney from Nikos K. Kardassis. (Incorporated by Reference to Merrill Lynch Life Variable Annuity Separate Account A's Pre-Effective Amendment No. 1 to Form N-4, Registration No. 333-63904 Filed September 10, 2001.) 7. (a) Written Consent of Barry G. Skolnick, Esq. (b) Written Consent of Deborah J. Adler, FSA, MAAA (See Exhibit Item 5) (c) Written Consent of Sutherland Asbill & Brennan LLP (d) Written Consent of Deloitte & Touche LLP, Independent Auditors
II-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant, Merrill Lynch Variable Life Separate Account, hereby certifies that this Post-Effective Amendment No. 2 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. 2 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 township of Princeton and the State of New Jersey, on the 25th day of April, 2002. MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT (REGISTRANT) BY: MERRILL LYNCH LIFE INSURANCE COMPANY (DEPOSITOR) Attest: /s/ EDWARD W. DIFFIN, JR. By: /s/ BARRY G. SKOLNICK ----------------------------------------------- ----------------------------------------------------- Edward W. Diffin, Jr. Barry G. Skolnick Vice President and Senior Counsel Senior Vice President and General Counsel
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 2 to the Registration Statement has been signed below by the following persons in the capacities indicated on April 25, 2002.
SIGNATURE TITLE --------- ----- * Director and Senior Vice President - ----------------------------------------------------------- Michael P. Cogswell * Director and Chairman of the Board - ----------------------------------------------------------- H. McIntyre Gardner * Director and Senior Vice President - ----------------------------------------------------------- Christopher J. Grady * Director, President, and Chief Executive Officer - ----------------------------------------------------------- Nikos K. Kardassis * Director, Senior Vice President, Chief Financial Officer, - ----------------------------------------------------------- and Treasurer Matthew J. Rider *By: /s/ BARRY G. SKOLNICK In his own capacity as Director, Senior Vice President, and --------------------------------------------------- General Counsel, and as Attorney-In-Fact Barry G. Skolnick
II-9 EXHIBIT INDEX 5. Opinion and Consent of Deborah J. Adler, FSA, MAAA as to actuarial matters pertaining to the securities being registered 7. (a) Written Consent of Barry G. Skolnick, Esq. (c) Written Consent of Sutherland Asbill & Brennan LLP (d) Written Consent of Deloitte & Touche LLP, Independent Auditors
II-10 EX-99.5 3 w57652ex99-5.txt OPINION AND CONSENT OF DEBORAH J. ADLER, FSA, MAAA EXHIBIT 5 [Merrill Lynch Life Insurance Company] April 25, 2002 Board of Directors Merrill Lynch Life Insurance Company 7 Roszel Road, third floor Princeton, New Jersey 08540 To The Board of Directors: This opinion is furnished in connection with the filing of Post-Effective Amendment No. 2 to the Registration Statement on Form S-6 (the "Registration Statement") (File No. 333-47844) which covers premiums received under certain modified single premium life insurance contracts ("Contracts" or "Contract") issued by Merrill Lynch Life Insurance Company (the "Company"). The Prospectus included in the Registration Statement describes Contracts which are issued by the Company. The Contract forms were reviewed under my direction, and I am familiar with the Registration Statement and Exhibits thereto. In my opinion: 1. The illustrations of death benefits, account value, surrender values and accumulated payments included in the Registration Statement for the Contract and based on the assumptions stated in the illustrations, are consistent with the provisions of the Contract. The rate structure of the Contract has not been designed so as to make the relationship between premiums and benefits, as shown in the illustrations, appear more favorable to a prospective purchaser of a Contract for the ages and sexes shown, than to prospective purchasers of a Contract for other ages and sex. 2. The table of illustrative net single premium factors included in the "Death Benefit" section is consistent with the provisions of the Contract. 3. The information with respect to the Contract contained in (i) the illustrations of the change in face amount included in the "Effect of Additional Payment on Face Amount" section in Appendix A, and (ii) the illustrations of the changes in face amount included in the "Effect of Partial Withdrawals on Face Amount" section in Appendix A, based on the assumptions specified, are consistent with the provisions of the Contract. I hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the use of my name relating to actuarial matters under the heading "Experts" in the Prospectus. Very truly yours, /s/Deborah J. Adler Deborah J. Adler, FSA, MAAA Vice President and Chief Actuary EX-99.7.A 4 w57652ex99-7_a.txt CONSENT OF BARRY G SKOLNICK, ESQ. EXHIBIT 7(a) [MERRILL LYNCH LIFE INSURANCE COMPANY LETTERHEAD] CONSENT OF BARRY G. SKOLNICK, ESQ. I hereby consent to the reference to my name under the heading "Legal Matters" in the Prospectus included in Post-Effective Amendment No. 2 to the Registration Statement on Form S-6 for certain modified single premium variable life insurance contracts issued through Merrill Lynch Variable Life Separate Account of Merrill Lynch Life Insurance Company (File No. 333-47844). By: /s/ BARRY G. SKOLNICK --------------------------------------- Barry G. Skolnick, Esq. Senior Vice President and General Counsel April 25, 2002 EX-99.7.C 5 w57652ex99-7_c.txt CONSENT OF SUTHERLAND ASBILL & BRENNAN LLP EXHIBIT 7(c) [SUTHERLAND ASBILL & BRENNAN LLP] CONSENT OF SUTHERLAND ASBILL & BRENNAN LLP We consent to the reference to our firm under the heading "Legal Matters" in the Prospectus included in Post-Effective Amendment No. 2 to the Registration Statement on Form S-6 for certain modified single premium variable life insurance contracts issued through Merrill Lynch Variable Life Separate Account of Merrill Lynch Life Insurance Company (File No. 333-47844). In giving this consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933. SUTHERLAND ASBILL & BRENNAN LLP By: /s/ STEPHEN E. ROTH --------------------------------------- Stephen E. Roth Washington, D.C. April 25, 2002 EX-99.7.D 6 w57652ex99-7_d.txt CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 7(d) INDEPENDENT AUDITORS' CONSENT We consent to the use in this Post-Effective Amendment No. 2 to the Registration Statement No. 333-47844 of Merrill Lynch Variable Life Separate Account on Form S-6 of our reports on (i) Merrill Lynch Life Insurance Company dated February 25, 2002 and (ii) Merrill Lynch Variable Life Separate Account dated March 1, 2002, 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 25, 2002 -----END PRIVACY-ENHANCED MESSAGE-----