Free Declaration - District Court of California - California

Case 3:07-cv-02245-BTM-NLS

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EXHIBIT 2

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As filed with the Securities and Exchange Commission on April 18, 2007 File No. 333-102461 File No. 811-21279

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x] Pre-Effective Amendment No. [ ] Post-Effective Amendment No. 6 [x] and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x] Amendment No. 7 [x] THE MERGER FUND VL

(Exact Name of Registrant as Specified in Charter) 100 Summit Lake Drive Valhalla, New York 10595

(Address of Principal Executive Offices)

(Zip Code)

Registrant's Telephone Number, including Area Code: (914) 741-5600

Frederick W. Green, President THE MERGER FUND VL 100 Summit Lake Drive Valhalla, New York 10595

Copy to:

William H. Bohnett Fulbright & Jaworski L.L.P. 666 Fifth Avenue New York, NY 10103

(Name and Address of Agent for Service) It is proposed that this filing will become effective (check appropriate box): [x] [] [] Immediately upon filing pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1) 75 days after filing pursuant to paragraph (a)(2) [] [] On (date) pursuant to paragraph (b) On (date) pursuant to paragraph (a)(1) On (date) pursuant to paragraph (a)(2) of Rule 485

Source: MERGER FUND VL, 485BPOS, April 18, 2007

Case 3:07-cv-02245-BTM-NLS
If appropriate, check the following box:

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[ ] This post-effective amendment designates a new effective date for a previously filed post-effective amendment.

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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The Merger Fund VL
100 Summit Lake Drive Valhalla, New York 10595

April 18, 2007

PROSPECTUS

Investment Adviser Westchester Capital Management, Inc.

The Securities and Exchange Commission has not approved or disapproved of these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.

Shares of the Fund are not offered directly to the general public. The Fund's shares are currently offered only to separate accounts funding variable annuity and variable life insurance contracts issued by participating life insurance companies ("Contracts"). Due to the differences in tax treatment and other considerations, the interests of the various Contract owners may conflict. The Fund's Board of Trustees will monitor events in order to identify the existence of any material irreconcilable conflicts and to determine what action, if any, should be taken in response to any such conflict. The Contracts are described in the separate prospectuses issued by the participating insurance companies, as to which the Fund assumes no responsibility. This Prospectus should be read in conjunction with the prospectus of the Contracts. This Prospectus is designed to help you make an informed decision about one of the funds that is available to you.

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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TABLE OF CONTENTS

RISK/RETURN SUMMARY BAR CHART AND PERFORMANCE TABLE FEES AND EXPENSES INVESTMENT OBJECTIVES AND POLICIES INVESTMENT RISKS INVESTMENT ADVISER DISTRIBUTION, PURCHASE AND REDEMPTION PRICE NET ASSET VALUE TAX STATUS, DIVIDENDS AND DISTRIBUTIONS MIXED AND SHARED FUNDING FINANCIAL HIGHLIGHTS ADDITIONAL INFORMATION

1 2 3 5 8 10 11 12 13 13 15 17

i

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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RISK/RETURN SUMMARY
Investment Objective: The Merger Fund VL (the "Fund") seeks to achieve capital growth by engaging in merger arbitrage. Under normal market conditions, the Fund will invest at least 80% of its assets principally in the equity securities of companies which are involved in publicly announced mergers, takeovers, tender offers, leveraged buyouts, spin-offs, liquidations and other corporate reorganizations. Merger arbitrage is a highly specialized investment approach generally designed to profit from the successful completion of such transactions. Westchester Capital Management, Inc. (the "Adviser") believes that the Fund's investment results should be less volatile than the returns typically associated with conventional equity investing. The principal risk associated with the Fund's merger-arbitrage investment strategy is that certain of the proposed reorganizations in which the Fund invests may be renegotiated or terminated, in which case losses may be realized. The Fund's investment strategy may result in short-term capital appreciation. This can be expected to increase the portfolio turnover rate, which may adversely affect the Fund's performance, and cause increased brokerage commission costs. More rapid portfolio turnover also would expose any taxable shareholders to a higher current realization of capital gains and a potentially larger current tax liability. The Fund is not a "diversified" fund within the meaning of the Investment Company Act of 1940, as amended (the "1940 Act"). Accordingly, the Fund may invest its assets in a relatively small number of issuers, thus making an investment in the Fund potentially more risky than an investment in a diversified fund which is otherwise similar to the Fund. Loss of money is a risk of investing in the Fund. The Fund is not intended to provide a balanced investment program. The Fund is intended to be an investment vehicle only for that portion of an investor's capital which can appropriately be exposed to risk. Each investor should evaluate an investment in the Fund in terms of the investor's own investment goals. Shares of the Fund are not offered directly to the general public. The Fund is currently available only to separate accounts funding variable annuity and variable life insurance contracts issued by participating life insurance companies ("Contracts"). Due to the differences in tax treatment and other considerations, the interests of the various Contract owners may conflict. The Fund's Board of Trustees will monitor events in order to identify the existence of any material irreconcilable conflicts and to determine what action, if any, should be taken in response to any such conflict.

Principal Investment Strategy:

Principal Investment Risks:

Who Should Invest in the Fund:

1

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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Closing/Opening the Fund:

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The Fund reserves the right to close to new investors at any time. The Adviser may open or close the Fund to maintain its assets at a level believed to be optimal for the Fund in attempting to achieve its investment objective.

BAR CHART AND PERFORMANCE TABLE The bar chart and table shown below indicate the risks of investing in the Fund but do not reflect the deduction of taxes that a shareholder would pay on distributions or redemptions. The bar chart shows the performance of the Fund's shares over a one-year period. The table following the bar chart shows how the Fund's average annual returns for the listed period compare to those of the S&P 500, a widely used composite index of 500 publicly traded stocks. The Fund's past performance does not necessarily indicate how the Fund will perform in the future.

The Fund commenced operations on May 26, 2004. Its non-annualized total return from inception through December 31, 2004 was 6.00%. During the two-year period shown in the above chart, the highest quarterly return was 5.75% (for the quarter ended March 31, 2006) and the lowest quarterly return was (0.71)% (for the quarter ended December 31, 2005).
2

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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Average annual total returns for the year ended December 31, 2006

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Past 1 Year Return Before Taxes 16.55% Return After Taxes on Distributions 12.68% Return After Taxes on Distributions and Sale of Fund Shares 10.76% S&P 500 Index (reflects no deduction for fees, expenses or taxes) 15.79%

Life of Fund 10.34% 8.75% 7.96%

11.74%

After-tax returns are calculated using the historical highest individual federal marginal income tax rate and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements. Return After Taxes on Distributions measures the effect of taxable distributions, but assumes the underlying shares are held for the entire period. Return After Taxes on Distributions and Sale of Fund Shares shows the effect of both taxable distributions and any taxable gain or loss that would be realized if the underlying shares were purchased at the beginning and sold at the end of the period (for purposes of the calculation, it is assumed that income dividends and capital gain distributions are reinvested at NAV and that the entire account is redeemed at the end of the period, including reinvested amounts). FEES AND EXPENSES As an investor, you may pay certain fees and expenses if you buy and hold shares of the Fund. These fees are described in the table below and further explained in the example that follows. There are no shareholder fees assessed by the Fund, although you may be assessed additional fees under your separate Contracts. The table below and the example that follows do not include fees and charges that you may be assessed under your separate Contracts. If these fees and charges were included, the Fund's operating expenses would be higher. For information on those fees, please refer to the applicable Contract prospectus.

SHAREHOLDER FEES (fees paid directly from your account) Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) Maximum Deferred Sales Charge (Load) (as a percentage of offering price) Maximum Sales Charge (Load) Imposed on Reinvested Dividends and Other Distributions (as a percentage of offering price) Redemption Fee (as a percentage of amount redeemed) on shares held less than 30 days Exchange Fee N/A

N/A

N/A

None

None

3

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) Management Fees Distribution and Service (12b-1) Fees Other Expenses, Including Dividends on Short Positions and Interest Expense Total Annual Operating Expenses Less Dividends on Short Positions and Interest Expense Total Annual Operating Expenses, Less Dividends on Short Positions and Interest Expense Less Expense Reimbursement(1) Net Annual Operating Expenses 1.25% None 6.81%

8.06%

2.03% 6.03%

4.63% 1.40%

(1)

The Adviser has contractually agreed to absorb expenses of the Fund and/or waive fees due to the Adviser in order to ensure that total Fund operating expenses, excluding dividends on short positions and interest expense, on an annual basis do not exceed 1.40%. This contract expires July 1, 2013, but may be annually renewed by mutual agreement thereafter. The Adviser may recapture some or all of the amounts it waives or absorbs on behalf of the Fund over a period of three years if it is able to do so without causing Fund operating expenses, excluding dividends on short positions and interest expense, to exceed the 1.40% cap.

Example: This example is intended to help compare the cost of investing in the Fund with the cost of investing in other mutual funds. This example does not include fees and charges that you may be assessed under your separate Contracts. If these fees and charges were included, your costs would be higher. This example assumes that: (1) you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods, your investment has a 5% return each year, and all dividends and distributions have been reinvested, and the Fund operating expenses remain the same.

(2) (3)

Although your actual costs may be higher or lower, based on these assumptions your costs would be:

1 year $143

3 years $443

5 years $766

10 years* $4,237

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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* Excludes effect of fee waiver in years eight, nine and ten.

4

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objective of achieving capital growth by engaging in merger arbitrage is a fundamental policy, which may not be changed without shareholder approval. Except as otherwise stated, the Fund's other investment policies are not fundamental and may be changed without obtaining approval by the Fund's shareholders. While the Fund makes every effort to achieve its objective, there is no guarantee that the Fund will do so. The Fund's investment adviser is Westchester Capital Management, Inc. (the "Adviser"). Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its total assets principally in the equity securities of companies which are involved in publicly announced mergers, takeovers and other corporate reorganizations ("merger-arbitrage investments"). The Fund will not change this policy without providing shareholders with 60 days' advance written notice. Depending upon the level of merger activity and other economic and market conditions, the Fund may temporarily invest a substantial portion of its assets in cash or cash equivalents, including money market instruments such as Treasury bills and other short-term obligations of the United States Government, its agencies or instrumentalities; negotiable bank certificates of deposit; prime commercial paper; and repurchase agreements with respect to the above securities. The Fund may also invest in various types of corporate debt obligations as part of its merger-arbitrage strategy or otherwise. See "Investment Objectives and Policies" in the Statement of Additional Information. Merger arbitrage is a highly specialized investment approach generally designed to profit from the successful completion of proposed mergers, takeovers, tender offers, leveraged buyouts, spin-offs, liquidations and other types of corporate reorganizations. Although a variety of strategies may be employed depending upon the nature of the reorganizations selected for investment, the most common merger-arbitrage activity involves purchasing the shares of an announced acquisition target at a discount to their expected value upon completion of the acquisition. The Adviser believes the Fund's investment results should be less volatile than the returns typically associated with conventional equity investing. While some periods will be more conducive to a merger-arbitrage strategy than others, a systematic, disciplined arbitrage program may produce attractive rates of return, even in flat or down markets. In making investments for the Fund, the Adviser is guided by the following general principles: (1) Securities are purchased only after a reorganization is announced or when one or more publicly disclosed events point toward the likelihood of some type of reorganization within a reasonable period of time; Before an initial position is established, a preliminary analysis is made of the proposed transaction to determine the probability and timing of a successful completion. A more detailed review then takes place before the position is enlarged;

(2)

5

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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(3)

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In deciding whether or to what extent to invest in any given reorganization, the Adviser places particular emphasis on the credibility, strategic motivation and financial resources of the participants, and the liquidity of the securities involved in the transaction; The risk-reward characteristics of each arbitrage position are assessed on an ongoing basis, and the Fund's holdings may be adjusted accordingly; The Adviser attempts to invest in as many attractive reorganizations as can be effectively monitored in order to minimize the impact on the Fund of losses resulting from the termination of any given proposed transaction; and The Adviser may invest the Fund's assets in both negotiated, or "friendly," reorganizations and non-negotiated, or "hostile," takeover attempts, but in either case the Adviser's primary consideration is the likelihood that a transaction will be successfully completed.

(4)

(5)

(6)

The Fund may employ various hedging techniques, such as short selling and the purchase and sale of put and call options. The Adviser believes that, when used for hedging purposes, short sales and option transactions should be viewed less as speculative strategies than as techniques to help protect the assets of the Fund against unfavorable market conditions that might otherwise adversely affect certain of its investments. Nonetheless, a substantial percentage of the investments made by the Fund may not lend themselves to hedging strategies and, even when available, such strategies may not be successful. See Short Sale Risks and Put and Call Options Risks. ·

Short Selling: The Fund may sell securities short, primarily as a hedging technique, in conjunction with one or more of i arbitrage strategies. For example, when the terms of a proposed acquisition call for the exchange of stock, the shares of the company to be acquired may be purchased and, at approximately the same time, an equivalent amount of the acquiring company's shares may be sold short. The Fund will make these short sales with the intention of later closing out ("covering") the short position with the shares of the acquiring company received when the acquisition is consummated. The purpose of the short sale is to protect against a decline in the market value of the acquiring company's shares prior to the acquisition's completion. At all times when the Fund does not own securities which are sold short, the Fund will maintain collateral consisting of cash, cash equivalents and liquid securities equal in value on a daily marked-to-market basis to the securities sold short.

·

Put and Call Options: As part of its merger-arbitrage strategy, the Fund may engage in various transactions involving put an call options. For hedging purposes, for example, the Fund may purchase put options or sell ("write") call options. A put option is a short-term contract which gives the purchaser of the option, in return for a premium paid, the right to sell the underlying security at a specified price upon exercise of the option at any time prior to the expiration of the option. The market price of a put option will normally vary inversely with the market price of the underlying security. Consequently, by purchasing put options on securities which the Fund holds or has the prospective right to receive, it may be possible for the Fund to partially offset any decline in the market value of these securities. A call option is a short-term contract entitling the purchaser, in return for a premium paid, the right to buy the underlying security at a specified price upon exercise of the option at any time prior to its expiration. The market price of a call option will, in most instances, move in conjunction with the price of the underlying security. The premiums received by the Fund from the sale of call options may be used by the Fund to reduce the risks associated with individual investments and to increase total investment return.

6

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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·

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Leverage Through Borrowing: The Fund may borrow from banks to increase its portfolio holdings of securities on a secure or unsecured basis at fixed or variable interest rates. When borrowing money, the Fund must follow specific guidelines under the 1940 Act, which allow the Fund to borrow an amount equal to as much as 50% of the value of its net assets (not including the amount borrowed). The Fund also may borrow money for temporary or emergency purposes, but these borrowings, together with all other borrowings, may not exceed 33% of the value of the Fund's gross assets at the time the loan is made.

·

Temporary Defensive Positions and Cash Investments: The Fund may from time to time invest a significant portion of its assets in cash or cash equivalents. The Fund may not achieve its investment objective during those periods when it engages in such a defensive strategy.

·

Investments in Foreign Securities: The Fund is permitted to hold both long and short positions in foreign securities. Investments in foreign companies involved in pending mergers, takeovers and other corporate reorganizations may entail political, cultural, regulatory, legal and tax risks different from those associated with comparable transactions in the United States. In addition, the dividends and interest payable on certain foreign securities may be subject to foreign withholding taxes. Also, in conjunction with its investments in foreign securities, the Fund normally attempts to hedge its exposure to foreign currencies. Such hedging activities involve additional expenses and, in the case of reorganizations that are terminated, the risk of loss when the currency hedge is unwound. Portfolio Holdings: A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the Fund's Statement of Additional Information. Currently, disclosure of the Fund's holdings is required to be made quarterly within 60 days of the end of each fiscal quarter, in the Annual Report and Semi-Annual Report to Fund shareholders and in the quarterly holdings report on Form N-Q. The Annual and Semi-Annual Reports are available by contacting The Merger Fund VL c/o U.S. Bancorp Fund Services, LLC, P.O. Box 701, Milwaukee, Wisconsin 53201-0701 or calling (800) 343-8959.

·

7

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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INVESTMENT RISKS
The Fund's investment strategy involves investment techniques and securities holdings that entail risks, in some cases different from the risks ordinarily associated with investments in equity securities. · Merger Arbitrage Risks: The principal risk associated with the Fund's merger-arbitrage investments is that certain of the proposed reorganizations in which the Fund invests may be renegotiated or terminated, in which case the Fund may lose money. If a transaction takes a longer time to close than the Adviser originally anticipated, the Fund may realize a lower-than-expected rate of return. Non-Diversification Risks: Because the Fund's assets are invested in a smaller number of companies, there is a somewhat greater risk associated with investment in the Fund than there would be if investing in a diversified investment company. Non-diversification makes the value of the Fund's shares more susceptible to adverse developments affecting any single position and the greater losses that may result.

·

·

High Portfolio Turnover Risks: Due to the nature of the Fund's merger-arbitrage strategy, a substantial percentage of th Fund's investments may be held for relatively short periods of time. Shorter holding periods, in turn, result in higher portfolio turnover and increased brokerage commission costs.

·

Short Sale Risks: Although the Fund engages in short selling primarily to hedge against the market-related risks associate with certain of its merger-arbitrage investments, it is possible that, under certain circumstances, such short sales may result in increased losses to the Fund. For example, if a proposed stock-for-stock acquisition in which the Fund holds a hedged investment position is terminated, the Fund will be required to cover its short position in the acquiring company's shares by purchasing the shares in the open market, and the prices paid by the Fund may be above the prices realized when the shares were sold short. Put and Call Options Risks: Option transactions involve special risks. Because option premiums are influenced by market conditions and developments affecting the underlying security, the price movements of the option and the security may be less closely correlated than expected, in which case it may not be possible for the Fund to close out an option position prior to expiration at a favorable price. The lack of a liquid secondary market may also make it difficult to effect closing option transactions. In addition, the option activities of the Fund may increase its portfolio turnover rate and the amount of brokerage commissions paid by the Fund.

·

·

Borrowing Risks: The Fund's borrowing activities will exaggerate any increase or decrease in the net asset value of the Fund. In addition, the interest which the Fund must pay on borrowed money, together with any additional fees to maintain a line of credit or any minimum average balances required to be maintained, are additional costs which will reduce or eliminate any net investment profits. Unless profits on securities acquired with borrowed funds exceed the costs of borrowing, the use of borrowing will diminish the investment performance of the Fund compared with what it would have been without borrowing.

8

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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·

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Corporate Debt Obligations: Although generally not as risky as equity securities of the same issuer, debt securities may fluctuate in value due to changes in interest rates and other general economic conditions, industry fundamentals, market sentiment and the issuer's operating results, balance sheet and credit ratings. The market value of convertible debt securities will also be affected to a greater or lesser degree by changes in the price of the underlying equity securities, and the Fund may attempt to hedge certain of its investments in convertible debt securities by selling short the issuer's common stock. The market value of debt securities issued by companies involved in pending corporate mergers and takeovers may be determined in large part by the status of the transaction and its eventual outcome, especially if the debt securities are subject to change-of-control provisions that entitle the holder to be paid par value or some other specified dollar amount upon completion of the merger or takeover. Accordingly, the principal risk associated with investing in these debt securities is the possibility that the transaction may not be completed.

9

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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INVESTMENT ADVISER
Westchester Capital Management, Inc., 100 Summit Lake Drive, Valhalla, New York 10595, a registered investment adviser since 1980, is the Fund's investment adviser. Westchester Capital Management, Inc. and its affiliates also manage merger-arbitrage programs for other institutional investors, including The Merger Fund, a registered open-end investment company; offshore funds; and private limited partnerships. Subject to the authority of the Fund's Board of Trustees, the Adviser is responsible for the overall management of the Fund's business affairs. The management fee charged the Fund by the Adviser is higher than those typically paid by other mutual funds. This higher fee is attributable in part to the higher expense incurred by the Adviser and the specialized skills required to manage a portfolio of merger-arbitrage investments. The Adviser is entitled to receive from the Fund an advisory fee of 1.25% of the Fund's average daily net assets. The Adviser waived this fee for the most recent fiscal year pursuant to the Amended and Restated Expense Waiver and Reimbursement Agreement described below. The Adviser and/or the Fund may pay a fee to various investment professionals for shareholder services. A discussion regarding the basis for the Board of Trustees approving the investment advisory contract is available in the Fund's semi-annual report to shareholders. Frederick W. Green has served as President of the Adviser since 1980 and also serves as the President and a Trustee of the Fund. Mr. Green and Bonnie L. Smith were primarily responsible for the day-to-day management of the Fund's portfolio from 2004 until January 2007. Effective as of January 2007, Mr. Green, Mr. Michael T. Shannon and Mr. Roy D. Behren are primarily responsible for the day-to-day management of the Fund's portfolio. Mr. Shannon served as the Adviser's Director of Research from May 1996 until April 2005, and has served as a research analyst and portfolio strategist for the Adviser since May 2006. From April 2005 to April 2006, Mr. Shannon was Senior Vice President in charge of the Special Situations and Mergers Group of D.E. Shaw & Co. Mr. Shannon has served as a portfolio manager for the Fund since January 2007. Mr. Behren has served as a research analyst for the Adviser since 1994 and as the Adviser's Chief Compliance Officer since 2004, and has served as a portfolio manager for the Fund since January 2007. Mr. Behren also serves as Chief Compliance Officer of the Fund. The Statement of Additional Information provides additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio managers' ownership of securities in the Fund.

Investment Advisory Fee and Other Expenses. For its services, the Adviser is entitled to a fee, which is calculated daily and paid monthly, at an annual rate of 1.25% of the Fund's average daily net assets. The Adviser has signed an Amended and Restated Expense Waiver and Reimbursement Agreement, which contractually requires the Adviser to either waive fees due to it or subsidize various operating expenses of the Fund so that the total annual Fund operating expenses do not exceed 1.40%, excluding dividends on short positions and interest expense, of the average daily net assets of the Fund. The Agreement expires on July 1, 2013, but may be renewed annually by mutual agreement. The Agreement permits the Adviser to recapture any waivers or subsidies it makes only if the amounts can be recaptured within three years without causing the Fund's total annual operating expenses, excluding dividends on short positions and interest expense, to exceed the applicable cap.

10

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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DISTRIBUTION, PURCHASE AND REDEMPTION PRICE
Currently, shares of the Fund are not sold to the general public. Fund shares are offered for purchase by separate accounts to serve as an investment medium for Contracts issued by participating insurance companies. Purchase and redemption orders are placed only by participating insurance companies. The participating insurance companies that issued the Contracts are responsible for investing in the Fund according to the investment options chosen by the investors in the Contracts. Investors in the Contracts should consult their Contract prospectus for additional information. The price at which a purchase or redemption is effected is based on the next calculation of net asset value after an order for purchase or redemption is received by the Fund. All purchases received before 4:00 p.m. (Eastern Time) will be processed on that same day. Purchases received after 4:00 p.m. will receive the next business day's net asset value per share. The redemption price may be more or less than the shareholder's cost. All redemption requests will be processed and payment with respect thereto normally will be made within seven days after receipt by the Fund. The Fund may suspend redemptions, if permitted by the 1940 Act, for any period during which the New York Stock Exchange ("NYSE") is closed or during which trading is restricted by the Securities and Exchange Commission ("SEC") or during which the SEC declares that an emergency exists. Redemptions may also be suspended during other periods permitted by the SEC for the protection of the Fund's shareholders. The Board of Trustees has adopted policies and procedures applicable to the separate accounts with respect to frequent purchases and redemptions of Fund shares by Fund shareholders. The Fund discourages, and does not accommodate, frequent purchases and redemptions of Fund shares by Fund shareholders. The Fund restricts or rejects such trading or takes other action if, in the judgment of the Adviser or the Fund's transfer agent, such trading may interfere with the efficient management of the Fund's portfolio, may materially increase the Fund's transaction costs, administrative costs or taxes, or may otherwise be detrimental to the interests of the Fund and its shareholders. While the Fund (directly and with the assistance of its service providers) identifies and restricts frequent trading, there is no guarantee that the Fund will be able to detect frequent purchases and redemptions or the participants engaged in such activity, or, if it is detected, to prevent its recurrence. The Fund's policies and procedures are separate from, and in addition to, any policies and procedures applicable to Contract transactions. The Board recognizes that the Fund must rely on the insurance company to both monitor frequent purchases and redemptions and attempt to prevent it through its own policies and procedures with respect to the Contracts. The Fund receives purchase and sale orders through financial intermediaries and cannot always detect frequent trading that may be facilitated by the use of such intermediaries or by the use of group or omnibus accounts maintained by those intermediaries. Purchase and redemption transactions submitted to the Fund by insurance company separate accounts reflect the transactions of multiple variable product owners whose individual transactions are not disclosed to the Fund. In situations in which the Fund becomes aware of possible market timing activity, it will notify the insurance company separate account in order to help facilitate the enforcement of its market timing policies and procedures. These policies will be applied uniformly to all insurance companies. However, there is no assurance that the insurance company will investigate or stop any activity that proves to be inappropriate. There is a risk that the Fund's and insurance company's policies and procedures will prove ineffective in whole or in part to detect or prevent frequent trading. Whether or not the Fund or the insurance company detects it, if market timing activity occurs, then you should anticipate that you will be subject to the disruptions and increased expenses discussed above.

11

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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Anti-Money Laundering Compliance

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The Fund is required to comply with various anti-money laundering laws and regulations. Consequently, the Fund may request additional information from you to verify your identity and source of funds. As requested on the application, you must supply your full name, date of birth, social security number and permanent street address. Mailing addresses containing only a P.O. Box will not be accepted. If the Fund determines that the information submitted does not provide for adequate identity verification, it reserves the right to reject any purchase. If at any time the Fund believes an investor in a Contract may be involved in suspicious activity or if certain account information matches information on government lists of suspicious persons, it may choose not to establish a new account or may be required to "freeze" an account. It also may be required to provide a governmental agency or another financial institution with information about transactions that have occurred in an account or to transfer monies received to establish a new account, transfer an existing account or transfer the proceeds of an existing account to a governmental agency. In some circumstances, the law may not permit the Fund to inform the shareholder that it has taken the actions described above. Shares of the Fund have not been registered for sale outside the United States. The Fund generally does not sell shares to investors residing outside the United States, even if they are United States citizens or lawful permanent residents, except to investors with United States military APO or FPO addresses.

NET ASSET VALUE
The net asset value per share of the Fund will be determined on each day when the NYSE is open for business at the close of the NYSE and will be computed by determining the aggregate market value of all assets of the Fund less its liabilities, and then dividing by the total number of shares outstanding. On holidays or other days when the NYSE is closed, the net asset value is not calculated, and the Fund does not transact purchase or redemption requests. On those days, however, the value of the Fund's assets may be affected to the extent that the Fund holds foreign securities that trade on foreign markets that are open. From time to time, the Fund may employ fair-value pricing to value securities for which market quotations are not readily available or for which market quotations are believed to be unrepresentative of fair market value. The determination of net asset value for a particular day is applicable to all requests for the purchase of shares as well as all requests for the redemption of shares received at or before the close of trading on the NYSE on that day. The NYSE is regularly closed on Saturdays and Sundays and on New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.

12

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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Portfolio securities and options positions for which market quotations are readily available are stated at the Nasdaq Official Closing Price or the last sale price reported by the principal exchange for each such security as of the exchange's close of business, as applicable. Securities and options for which no sale has taken place during the day and securities which are not listed on an exchange are valued at the mean of the current closing bid and asked prices. All other securities and assets for which (a) market quotations are not readily available, (b) market quotations are believed to be unrepresentative of fair market value or (c) valuation is normally made at the last sale price on a foreign exchange and a significant event occurs after the close of that exchange but before the NYSE close, are valued at their fair value as determined in good faith by the Fund's Adviser acting pursuant to the direction of the Board of Trustees. Certain assets of the Fund may also be valued on the basis of valuations provided by one or more pricing services approved by or on behalf of the Board of Trustees. When fair-value pricing is employed, the prices of securities used by the Fund to calculate its NAV may differ from quoted or published prices for the same securities. In addition, due to the subjective and variable nature of fair-value pricing, it is possible that the value determined for a particular asset may be materially different from the value realized upon such asset's sale. The Adviser will include any fair-value pricing of securities in a written report to the Board of Trustees for their consideration and approval on a quarterly basis.

TAX STATUS, DIVIDENDS AND DISTRIBUTIONS
The Fund intends to qualify each year as a "regulated investment company" under the Internal Revenue Code of 1986, as amended (the "Code"). By so qualifying, the Fund will generally not be subject to federal income tax to the extent that its net investment income and net realized capital gains are distributed to Contracts at least annually. In addition, the Fund does not expect to be subject to federal excise taxes with respect to undistributed income. Further, the Fund intends to meet certain diversification requirements applicable to mutual funds underlying variable life insurance and variable annuity contracts. If the Fund fails to meet such diversification requirements, income with respect to Contracts invested in the Fund at any time during the calendar quarter in which the failure occurred could become currently taxable to the owners of the Contracts and income for prior periods with respect to such Contracts also could be taxable, most likely in the year of the failure to achieve the required diversification. Other adverse tax consequences could also ensue. Because the shareholders of the Fund are the Contracts, Code provisions applicable to Contracts apply. For more information concerning the federal income tax consequences to the owners of Contracts, see the separate prospectus for such Contracts and consult a tax advisor.

MIXED AND SHARED FUNDING
The Fund was originally established exclusively for the purpose of providing an investment vehicle for insurance company separate accounts in connection with variable annuity contracts or variable life insurance policies issued by Metropolitan Life Insurance Company of Connecticut (formerly known as The Travelers Insurance Company) or MetLife Life and Annuity Company of Connecticut (formerly known as The Travelers Life and Annuity Company).

13

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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However, under an order granted by the SEC on March 8, 2004, the Fund is permitted to engage in "mixed and shared funding" (the "Mixed and Shared Funding Order"). This allows the Fund to sell shares to other separate accounts funding Contracts and certain other permitted parties, which the Fund has done with Hartford Life Insurance Company. The Fund intends to engage in mixed and shared funding arrangements in the future and in doing so must comply with conditions of the Mixed and Shared Funding Order that are designed to protect investors. Due to the differences in tax treatment and other considerations, the interests of the various Contract owners may conflict. The Fund's Board of Trustees will monitor events in order to identify the existence of any material irreconcilable conflicts and to determine what action, if any, should be taken in response to any such conflict. Such action could result in one or more participating insurance companies withdrawing their investment in the Fund.

14

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's financial performance for the period of the Fund's operations. Certain information reflects financial results for a single Fund share. The total returns in the table represents the rate that an investor would have earned on an investment in the Fund (assuming reinvestment of all dividends and distributions). The total returns in the table do not include fees and charges that you may be assessed under your separate Contracts at either the separate account or Contract level. If these fees and charges were included, the Fund's total returns would be lower. This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's financial statements, are included in the Fund's Annual Report, which is available upon request. For the Period May 26, 2004,(1) through December 31, 2004 $ 10.00 (0.02) 0.62 0.60 -- -- 10.60 6.00%(3)

Per Share Data: Net Asset Value, beginning of period Income from investment operations: Net investment loss Net realized and unrealized gain on investments Total from investment operations Less distributions: Distributions from net realized gains Total distributions Net Asset Value, end of period Total Return Supplemental data and ratios: Net Assets, end of period (000's) Ratio of operating expenses to average net assets including interest expense and dividends on short positions: Before expense waiver After expense waiver Ratio of operating expenses to average net assets excluding interest expense and dividends on short positions: Before expense waiver After expense waiver Ratio of net investment loss to average net assets: Before expense waiver After expense waiver Portfolio turnover rate(4)
(1) (2) (3) (4)

Year Ended December 31, 2006 $ 10.96 (0.02) 1.83 1.81

Year Ended December 31, 2005 $ 10.60 (0.05) 0.53 0.48

$

(1.21) (1.21) 11.56 $ 16.55%

(0.12) (0.12) 10.96 $ 4.53%

$

3,794

$

5,574

$

1,362

8.06% 3.43%

7.40% 2.39%

43.30%(2) 1.62%(2)

6.03% 1.40% (5.99)% (1.36)% 555.55%

6.41% 1.40% (5.58)% (0.57)% 497.59%

43.08%(2) 1.40%(2) (42.14%)(2) (0.46%)(2) 501.71%(3)

Commencement of operations. Annualized. Not Annualized. The numerator for the portfolio turnover rate includes the lesser of purchases or sales (excluding short positions). The denominator includes the average long positions throughout the period.

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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Further information regarding the Fund's performance is contained in the Fund's Annual Report, a copy of which may be obtained without charge.

16

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ADDITIONAL INFORMATION
Additional information about the Fund is available in the Fund's Statement of Additional Information ("SAI"), which is incorporated by reference into this Prospectus and is available free of charge upon request. Annual reports, semi-annual reports and quarterly performance updates will also be made available to shareholders. The annual report contains a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during the fiscal year. The Fund's reports and SAI are available without charge by contacting your investment professional or the Fund's transfer agent, U.S. Bancorp Fund Services, LLC, P.O. Box 701, Milwaukee, WI 53201-0701, or (800) 343-8959. Correspondence sent by overnight courier should be sent to U.S. Bancorp Fund Services, LLC, Third Floor, 615 East Michigan Street, Milwaukee, WI 53202-5207. The Fund's reports and SAI may also be reviewed and copied at the SEC's Public Reference Room. Information on the operation of the Public Reference Room may be obtained by calling the SEC at (202) 551-8090. Text-only copies can be obtained from the SEC for a fee by writing to the SEC's Public Reference Room, Washington, D.C. 20549-0102, or by electronic request at [email protected]. Copies also can be obtained for free from the SEC's website at www.sec.gov. The Fund does not have an Internet website.
Investment Company Act File No. 811-21279

17

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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The Merger Fund VL 100 Summit Lake Drive Valhalla, New York 10595

An open-end, non-diversified investment company which seeks capital growth by engaging in merger arbitrage.

STATEMENT OF ADDITIONAL INFORMATION April 18, 2007

This Statement of Additional Information is not a prospectus and should be read in conjunction with the prospectus of The Merger Fund VL (the "Fund") dated April 18, 2007, a copy of which may be obtained without charge by contacting your investment professional or the Fund's transfer agent, U.S. Bancorp Fund Services, LLC, P.O. Box 701, Milwaukee, Wisconsin 53201-0701 or (800) 343-8959. The Fund's shares are currently offered only to separate accounts funding variable annuity and variable life insurance contracts issued by participating life insurance companies ("Contracts"). Due to the differences in tax treatment and other considerations, the interests of the various Contract owners may conflict. The Fund's Board of Trustees monitors events in order to identify the existence of any material irreconcilable conflicts and to determine what action, if any, should be taken in response to any such conflict. Shares of the Fund are not offered to the general public. This Statement of Additional Information is designed to help you make an informed decision about one of the funds that is available to you. The Fund's financial statements are incorporated by reference into this Statement of Additional Information from the Fund's Annual Report, a copy of which may be obtained without charge by contacting the Fund's transfer agent, U.S. Bancorp Fund Services, LLC, P.O. Box 701, Milwaukee, Wisconsin 53201-0701 or (800) 343-8959.
B-1

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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TABLE OF CONTENTS

INVESTMENT OBJECTIVES AND POLICIES MERGER ARBITRAGE INVESTMENTS IN CORPORATE DEBT OBLIGATIONS OVER-THE-COUNTER OPTION TRANSACTIONS UNCOVERED OPTION TRANSACTIONS EQUITY SWAP CONTRACTS CREDIT DEFAULT SWAP CONTRACTS INVESTMENT RESTRICTIONS PORTFOLIO HOLDINGS INVESTMENT ADVISER INVESTMENT ADVISER AND ADVISORY CONTRACT OTHER SERVICE PROVIDERS MANAGEMENT TRUSTEES AND OFFICERS BOARD COMMITTEES COMPENSATION BOARD INTEREST IN THE FUND CODES OF ETHICS PROXY AND CORPORATE ACTION VOTING POLICIES AND PROCEDURES ANTI-MONEY LAUNDERING PROGRAM THE ADMINISTRATOR THE TRANSFER AGENT CUSTODIAN PORTFOLIO MANAGERS ALLOCATION OF PORTFOLIO BROKERAGE PORTFOLIO TURNOVER NET ASSET VALUE DISTRIBUTION, PURCHASE AND REDEMPTION OF SHARES PERFORMANCE INFORMATION AVERAGE ANNUAL TOTAL RETURN OTHER INFORMATION COMPARISON OF FUND PERFORMANCE TAX STATUS ORGANIZATION AND CAPITALIZATION GENERAL CONTROL PERSONS AND PRINCIPAL HOLDERS
B-2

Page B-4 B-4 B-5 B-5 B-6 B-6 B-7 B-7 B-8 B-9 B-9 B-11 B-11 B-11 B-13 B-13 B-14 B-14 B-14 B-15 B-15 B-16 B-16 B-17 B-18 B-19 B-19 B-20 B-20 B-20 B-21 B-21 B-22 B-24 B-24 B-24

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B-25 B-25 B-25

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM COUNSEL FINANCIAL STATEMENTS
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INVESTMENT OBJECTIVES AND POLICIES The Merger Fund VL (the "Fund") is a no-load, open-end, non-diversified, registered management investment company, organized as a Delaware statutory trust on November 22, 2002, that seeks to achieve capital growth by engaging in merger arbitrage. The Fund's investment objective to achieve capital growth by engaging in merger arbitrage is a fundamental policy, which may not be changed without shareholder approval. Except as otherwise stated, the Fund's other investment policies are not fundamental and may be changed without obtaining approval by the Fund's shareholders. The Fund's investment adviser is Westchester Capital Management, Inc., 100 Summit Lake Drive, Valhalla, New York 10595 (the "Adviser"). Trading to seek short-term capital appreciation can be expected to cause the Fund's portfolio turnover rate to be substantially higher than that of the average equity-oriented investment company and, as a result, may involve increased brokerage commission costs which will be borne directly by the Fund and ultimately by its investors. See "Allocation of Portfolio Brokerage" and "Portfolio Turnover." Certain investments of the Fund may, under certain circumstances, be subject to rapid and sizable losses, and there are additional risks associated with the Fund's overall investment strategy, which may be considered speculative. Merger Arbitrage. Under normal circumstances, the Fund invests at least 80% of its total assets principally in the equity securities of companies which are involved in publicly announced mergers, takeovers, tender offers, leveraged buyouts, spin-offs, liquidations and other corporate reorganizations. The Fund will not change this policy without providing shareholders with 60 days' advance written notice. Although a variety of strategies may be employed depending upon the nature of the reorganizations selected for investment, the most common merger-arbitrage activity involves purchasing the shares of an announced acquisition target at a discount to the expected value of such shares upon completion of the acquisition. The size of the discount, or "spread", and whether the potential reward justifies the potential risk, are functions of numerous factors affecting the riskiness and timing of the acquisition. Such factors include the status of the negotiations between the two companies (for example, spreads typically narrow as the parties advance from an agreement in principle to a definitive agreement), the complexity of the transaction, the number of regulatory approvals required, the likelihood of government intervention on antitrust or other grounds, the type of consideration to be received and the possibility of competing offers for the target company. Because the expected gain on an individual arbitrage investment is normally considerably smaller than the possible loss should the transaction be unexpectedly terminated, Fund assets will not be committed unless the proposed acquisition or other reorganization plan appears to the Adviser to have a substantial probability of success. The expected timing of each transaction is also important since the length of time that the Fund's capital must be committed to any given reorganization will affect the rate of return realized by the Fund, and delays can substantially reduce such returns. See "Portfolio Turnover."
B-4

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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Investments in Corporate Debt Obligations.

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As part of its merger-arbitrage strategy, the Fund may invest in corporate bonds and other evidences of indebtedness ("Debt Securities") issued by companies involved in publicly announced mergers, takeovers and other corporate reorganizations, including reorganizations undertaken pursuant to Chapter 11 of the U.S. Bankruptcy Code. The Fund may also invest in other Debt Securities, subject only to the requirement that, under normal market conditions, at least 80% of the Fund's assets will be invested in merger-arbitrage situations. Although generally not as risky as the equity securities of the same issuer, Debt Securities may gain or lose value due to changes in interest rates and other general economic conditions, industry fundamentals, market sentiment and the issuer's operating results, balance sheet and credit ratings. The market value of convertible Debt Securities will also be affected to a greater or lesser degree by changes in the price of the underlying equity securities, and the Fund may attempt to hedge certain of its investments in convertible Debt Securities by selling short the issuer's common stock. The market value of Debt Securities issued by companies involved in pending corporate mergers and takeovers may be determined in large part by the status of the transaction and its eventual outcome, especially if the Debt Securities are subject to change-of-control provisions that entitle the holder to be paid par value or some other specified dollar amount upon completion of the merger or takeover. Accordingly, the principal risk associated with investing in these Debt Securities is the possibility that the transaction may not be completed. Over-the-Counter Option Transactions. As part of its merger-arbitrage strategy, the Fund may engage in transactions involving options and futures contracts which are traded over-the-counter ("OTC contracts"). OTC contracts differ from exchange-traded contracts in important respects. OTC contracts are transacted directly with broker-dealers, and the performance of these contracts is not guaranteed by the Options Clearing Corporation. Also, OTC contract pricing is normally done by reference to information from market makers, which information is carefully monitored by the Adviser and verified in appropriate cases. Because OTC contracts are transacted directly with broker-dealers, there is a risk of non-performance by the broker-dealer as a result of the insolvency of such broker-dealer or otherwise, in which case the Fund may experience a loss. An OTC contract may only be terminated voluntarily by entering into a closing transaction with the broker-dealer with whom the Fund originally dealt. Any such cancellation, if agreed to, may require the Fund to pay a premium to that broker-dealer. It is the Fund's intention to enter into OTC contracts only with broker-dealers which agree to, and which are expected to be capable of, entering into closing transactions with the Fund, although there is no assurance that a broker-dealer will voluntarily agree to terminate the transaction. There is also no assurance that the Fund will be able to liquidate an OTC contract at any time prior to expiration.
B-5

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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Uncovered Option Transactions.

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As one of its hedging strategies, the Fund may sell uncovered, or "naked," options. When the Fund sells an uncovered call option, it does not simultaneously have a long position in the underlying security. When the Fund sells an uncovered put option, it does not simultaneously have a short position in the underlying security. The Fund typically sells uncovered call options as an alternative to selling short the acquirer's shares in a stock-for-stock merger. The Fund typically sells uncovered put options as an alternative to selling covered call options, a functionally equivalent strategy where the risk exposure is virtually the same. For a discussion of the risks associated with covered call options, please see "Investment Risks" in the Fund's Prospectus. The risks associated with selling uncovered call options for hedging purposes are similar to those associated with selling short the acquirer's securities in a stock-for-stock merger, including the possibility that should the merger fail to be completed, the Fund may be required to purchase the underlying security in the open market at a price substantially above the strike price of the option. For a discussion of the risks associated with short sales, please see "Investment Risks" in the Fund's Prospectus. Equity Swap Contracts. The Fund may enter into both long and short equity swap contracts with qualified broker-dealer counterparties. A long equity swap contract entitles the Fund to receive from the counterparty any appreciation and dividends paid on an individual security, while obligating the Fund to pay the counterparty any depreciation on the security as well as interest on the notional amount of the contract. A short equity swap contract obligates the Fund to pay the counterparty any appreciation and dividends paid on an individual security, while entitling the Fund to receive from the counterparty any depreciation on the security as well as interest on the notional value of the contract. The Fund may also enter into equity swap contracts whose value is determined by the spread between a long equity position and a short equity position. This type of swap contract obligates the Fund to pay the counterparty an amount tied to any increase in the spread between the two securities over the term of the contract. The Fund is also obligated to pay the counterparty any dividends paid on the short equity holding as well as any net financing costs. This type of swap contract entitles the Fund to receive from the counterparty any gains based on a decrease in the spread as well as any dividends paid on the long equity holding and any net interest income. Fluctuations in the value of an open contract are recorded daily as a net unrealized gain or loss. The Fund will realize gain or loss upon termination or reset of the contract. Either party, under certain conditions, may terminate the contract prior to the contract's expiration date. Credit risk may arise as a result of the failure of the counterparty to comply with the terms of the contract. The Fund considers the creditworthiness of each counterparty to a contract in evaluating potential credit risk. The counterparty risk to the Fund is limited to the net unrealized gain, if any, on the contract, along with dividends receivable on long equity contracts and interest receivable on short equity contracts. Additionally, risk may arise from unanticipated movements in interest rates or in the value of the underlying securities.
B-6

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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Credit Default Swap Contracts.

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The Fund may enter into credit default swap contracts with qualified broker-dealer counterparties. In a credit default swap, one party makes a stream of payments to another party in exchange for the right to receive a specified return in the event of a default by a referenced entity, typically corporate issues, on its obligation. The Fund may use the swaps as part of a merger arbitrage strategy involving pending corporate reorganizations. The Fund may purchase credit protection on the referenced entity of the credit default swap. Swap contracts involve, to varying degrees, elements of market risk and exposure to loss. The notional amounts reflect the extent of the total investment exposure that the Fund has under the swap contract. The primary risks associated with the use of swap agreements are imperfect correlation between movements in the notional amount and the price of the underlying securities and the inability of counterparties to perform. The Fund bears the risk of loss of the amount expected to be received under a swap contract in the event of default or bankruptcy of the swap contract counterparty. Investment Restrictions. The following investment restrictions have been adopted by the Fund as fundamental policies and may be changed only by the affirmative vote of a majority of the outstanding shares of the Fund. As used in this Statement of Additional Information, the term "majority of the outstanding shares of the Fund" means the vote of the lesser of: (a) 67% or more of the Fund's shares present at a meeting, if the holders of more than 50% of the outstanding shares of the Fund are present or represented by proxy, or (b) more than 50% of the Fund's outstanding shares. These investment restrictions provide that: (1) The Fund may not issue senior securities, except that this restriction shall not be deemed to prohibit the Fund from (a) making any permitted borrowings, loans, mortgages, or pledges, (b) entering into options, futures contracts, forward contracts, repurchase transactions or reverse repurchase transactions, or (c) making short sales of securities to the extent permitted by the Investment Company Act of 1940, as amended (the "1940 Act"), and any rule or order thereunder, or Securities and Exchange Commission ("SEC") staff interpretation thereof. (2) The Fund may not borrow money except that it may borrow: (a) from banks to purchase or carry securities or other investments, (b) from banks for temporary or emergency purposes, (c) by entering into reverse repurchase agreements, or (d) by entering into equity swap contracts if, immediately after any such borrowing, the value of the Fund's assets, including all borrowings then outstanding less its liabilities, is equal to at least 300% of the aggregate amount of borrowings then outstanding (for the purpose of determining the 300% asset coverage, the Fund's liabilities will not include amounts borrowed). Any such borrowings may be secured or unsecured.
B-7

Source: MERGER FUND VL, 485BPOS, April 18, 2007

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(3) The Fund may not underwrite or participate in the marketing of securities issued by other persons except to the extent that the Fund may be deemed to be an underwriter under federal securities laws in connection with the disposition of portfolio securities. (4) The Fund may not purchase any securities that would cause more than 25% of the total assets of the Fund to be invested in the securities of one or more issuers conducting their principal business activities in the same industry, provided that this limitation does not apply to the securities of other investment companies, investments in obligations issued or guaranteed by the United States Government, its agencies or instrumentalities or tax-exempt municipal securities. (5) The Fund may not purchase or sell real estate or real estate mortgag