<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 7, 1994
REGISTRATION NO. 33-60290
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
POST-EFFECTIVE AMENDMENT NO. 3
TO
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MERRILL LYNCH LIFE INSURANCE COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ARKANSAS
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
6312
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER
91-1325756
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(609) 282-1429
(ADDRESS INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
------------------------
BARRY G. SKOLNICK, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
MERRILL LYNCH LIFE INSURANCE COMPANY
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(609) 282-1429
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE OF AGENT FOR SERVICE)
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COPY TO:
STEPHEN E. ROTH, ESQ.
SUTHERLAND, ASBILL & BRENNAN
1275 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20004
If any of the securities that have been registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box /X/.
Pursuant to Rule 429 under the Securities Act of 1933, the prospectus contained
herein also relates to Registration Statement Nos. 33-26322, 33-46827 and
33-52254.
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MERRILL LYNCH LIFE INSURANCE COMPANY
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CROSS REFERENCE SHEET
PURSUANT TO REGULATION S-K, ITEM 501(b)
<TABLE>
<CAPTION>
FORM S-1 ITEM NO. AND CAPTION LOCATION
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<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus..... Outside Front Cover Page
2. Inside Front and Outside Back Cover of
Prospectus................................. Capsule Summary of the Contract; Table of
Contents
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............... Outside Front Cover Page; Capsule Summary
of the Contract; Definitions
4. Use of Proceeds............................ Investments Supporting the Contracts
5. Determination of Offering Price............ Not Applicable
6. Dilution................................... Not Applicable
7. Selling Security Holders................... Not Applicable
8. Plan of Distribution....................... Distribution of the Contracts
9. Description of Securities to be
Registered................................. Capsule Summary of the Contract;
Description of the Contract
10. Interest of Named Experts and Counsel...... Legal Matters
11. Information with Respect to the
Registrant................................. Merrill Lynch Life Insurance Company;
Federal Income Taxes; More Information
About Merrill Lynch Life Insurance Company;
Directors and Executive Officers; Legal
Proceedings
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Part II, Item 14
</TABLE>
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PROSPECTUS
DECEMBER , 1994
MERRILL LYNCH ASSET I (SM)
GROUP MODIFIED GUARANTEED ANNUITY CONTRACT
ISSUED BY
MERRILL LYNCH LIFE INSURANCE COMPANY
Home Office: Little Rock, Arkansas 72201
Service Center: P.O. Box 44222, Jacksonville, Florida 32231-4222
4804 Deer Lake Drive East, Jacksonville, Florida 32246
Phone: (800) 535-5549
OFFERED THROUGH
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
The group contract described in this Prospectus (the "Contract") is issued by
Merrill Lynch Life Insurance Company ("Merrill Lynch Life") and is designed to
provide annuity payments in connection with retirement plans that may or may not
qualify for special federal income tax treatment under the Internal Revenue
Code. The Contract permits participants to make one or more single premium
payments to be accumulated at a guaranteed rate or rates of interest depending
upon the Guarantee Period or Periods selected by the participant. A certificate
of participation (the "Certificate") will be issued for each single premium.
Guarantee Periods currently range from one to ten years. At the end of any
Guarantee Period the accumulated value may be reinvested for one or more new
Guarantee Periods at the current interest rates then offered by Merrill Lynch
Life. A WITHDRAWAL MADE PRIOR TO THE END OF A GUARANTEE PERIOD WILL BE SUBJECT
TO A MARKET VALUE ADJUSTMENT, WHICH COULD HAVE THE EFFECT OF EITHER INCREASING
OR DECREASING THE PARTICIPANTS' ACCOUNT VALUES.
Eligible members of a group, including account holders of Merrill Lynch, Pierce,
Fenner & Smith Incorporated, may become participants under the Contract.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS............................................................................ 3
CAPSULE SUMMARY OF THE CONTRACT........................................................ 5
MERRILL LYNCH LIFE INSURANCE COMPANY................................................... 7
DESCRIPTION OF THE CONTRACT............................................................ 7
A. GENERAL....................................................................... 7
B. PREMIUMS...................................................................... 7
C. SELECTING THE GUARANTEE PERIOD................................................ 8
D. SUBACCOUNT AND ACCOUNT VALUES................................................. 8
E. SUBACCOUNT TRANSFERS.......................................................... 8
F. FIXING GUARANTEED INTEREST RATES.............................................. 9
G. WITHDRAWALS................................................................... 9
H. MARKET VALUE ADJUSTMENT....................................................... 10
I. WITHDRAWAL CHARGE............................................................. 11
J. PAYMENT ON DEATH.............................................................. 12
K. ANNUITY PROVISIONS............................................................ 13
L. OTHER PROVISIONS.............................................................. 15
DISTRIBUTION OF THE CONTRACTS.......................................................... 16
FEDERAL TAX CONSIDERATIONS............................................................. 16
PREMIUM TAXES.......................................................................... 21
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 PROVISIONS............................. 21
MORE INFORMATION ABOUT MERRILL LYNCH LIFE INSURANCE COMPANY............................ 21
A. HISTORY AND BUSINESS.......................................................... 21
B. SELECTED FINANCIAL DATA....................................................... 26
C. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS........................................... 26
D. REINSURANCE................................................................... 32
E. CONTRACT OWNER ACCOUNT BALANCES............................................... 32
F. INVESTMENTS................................................................... 32
G. COMPETITION................................................................... 33
H. CERTAIN AGREEMENTS............................................................ 33
I. EMPLOYEES..................................................................... 33
J. PROPERTIES.................................................................... 33
K. STATE REGULATION.............................................................. 34
DIRECTORS AND EXECUTIVE OFFICERS....................................................... 35
EXECUTIVE COMPENSATION................................................................. 36
LEGAL PROCEEDINGS...................................................................... 38
LEGAL MATTERS.......................................................................... 38
EXPERTS................................................................................ 38
REGISTRATION STATEMENT................................................................. 38
FINANCIAL STATEMENTS OF MERRILL LYNCH LIFE INSURANCE COMPANY........................... 39
APPENDIX............................................................................... A-1
</TABLE>
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No person has been authorized to give any information or to make any
representation other than that contained in this Prospectus in connection with
the offer contained in this Prospectus and, if given or made, such information
or representation must not be relied upon as having been authorized. This
Prospectus does not constitute an offer of, or solicitation of an offer to
acquire, any Contracts or Certificates thereunder offered by this Prospectus in
any jurisdiction to anyone to whom it is unlawful to make such an offer or
solicitation in such jurisdiction.
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<PAGE> 5
DEFINITIONS
account value: The sum of all subaccount values.
annuitant: The person on whose continuation of life annuity payments may
depend.
annuitant's beneficiary: The person to whom payment is to be made upon the
death of the annuitant.
annuity: A series of predetermined periodic payments.
annuity date: The date shown in the Certificate on which payment of an annuity
under the Contract will commence.
beneficiary: The person to whom payment is to be made on the death of the
participant or annuitant. There may be both a participant's beneficiary and an
annuitant's beneficiary if the participant is not an annuitant.
Certificate: An individual certificate of participation issued by Merrill Lynch
Life to each participant as evidence of his or her rights and benefits under the
Contract.
certificate anniversary: Each anniversary of the certificate date.
certificate date: The date on which a Certificate is issued under the Contract.
certificate year: The year starting on the certificate date or a certificate
anniversary and ending on the day immediately prior to the next certificate
anniversary.
co-annuitant: If two persons are named as annuitants in the Certificate, each
is a co-annuitant. In that case, "annuitant" means the co-annuitants, and death
of the annuitant refers to the death of the last co-annuitant.
Contract: The Contract described in and offered by this Prospectus.
Guarantee Period: The period of years for which a rate of interest is
guaranteed to be credited to a subaccount.
Market Value Adjustment: A positive or negative adjustment made to subaccount
value. It is applied on withdrawal of all or part of the subaccount value prior
to the end of the Guarantee Period. If the annuity date is prior to the end of a
Guarantee Period, the Market Value Adjustment is also generally applied at the
annuity date. In addition, a Market Value Adjustment is applied in the event of
payment on the death of the participant or annuitant prior to the annuity date
unless the combined Market Value Adjustments of all affected subaccounts would
reduce the participant's account value. (See "Market Value Adjustment" on page
10.)
Maximum Guarantee Period Option: An option to have subaccount values
automatically transferred to a subaccount with a Guarantee Period equal to the
longest Guarantee Period then offered by Merrill Lynch Life which (i) does not
exceed the length of the participant's longest Guarantee Period immediately
prior to transfer and (ii) ends on or prior to the annuity date. If the
participant's annuity date is less than one year from the date of transfer, the
subaccount value will be transferred to a subaccount with a one year Guarantee
Period.
net account value: The sum of all net subaccount values.
net subaccount value: The subaccount value after adjustment for any Market
Value Adjustment and withdrawal charge applied in connection with a full
withdrawal, annuitization or the payment of death benefits on the death of the
participant or annuitant prior to the annuity date.
nonqualified certificate: A Certificate issued in connection with a
nonqualified plan.
nonqualified plan: A retirement plan other than a qualified plan.
participant: The individual participating under the Contract to whom a
Certificate has been issued.
participant's beneficiary: The person to whom payment is to be made upon the
death of the participant.
qualified certificate: A Certificate issued in connection with a qualified
plan.
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qualified plan: A retirement plan that receives favorable tax treatment under
Section 401, 403, 404, 408, 457 or any similar provision of the Internal Revenue
Code.
subaccount: An account maintained for a participant corresponding to a
specified interest rate and Guarantee Period selected by the participant.
subaccount value: An amount equal to that part of a single premium allocated by
a participant to a subaccount, or any reinvestment in a subaccount, plus
credited interest, as adjusted for any prior withdrawals, Market Value
Adjustments and withdrawal charges.
withdrawal charge: A charge deducted from subaccount value upon a withdrawal
made prior to the end of a Guarantee Period.
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CAPSULE SUMMARY OF THE CONTRACT
THE CONTRACT
This Prospectus describes a group modified guaranteed annuity contract (the
"Contract") issued by Merrill Lynch Life. The Contract may be purchased by any
employer, entity or other organized group acceptable to Merrill Lynch Life. The
Contract is a group allocated contract, which means that specific accounts are
maintained for each individual within the group ("participant"). A Certificate
is issued to each participant summarizing his or her rights and benefits under
the Contract. Values and benefits provided under the Contract, including annuity
payments, are funded by the general assets of Merrill Lynch Life.
The Contract may be issued pursuant to nonqualified retirement plans or plans
qualifying for special tax treatment as "H.R. 10" plans, Individual Retirement
Annuities or Accounts, corporate pension and profit-sharing plans, Tax-Sheltered
Annuities or Section 457 deferred compensation ("Section 457") plans.
APPLICATION AND PREMIUMS
The applicant must complete and return a Contract application to Merrill Lynch
Life's Service Center. Merrill Lynch Life reserves the right to reject any
application. One Certificate will be issued for each single premium payment made
under the Contract. The minimum single premium is $5,000.
THE SUBACCOUNTS
One or more subaccounts are maintained for each participant. The minimum which
may be allocated to a subaccount is $5,000. A subaccount is established for each
specified interest rate and Guarantee Period selected by the participant. A
Guarantee Period is the period of years for which a rate of interest is
guaranteed. Currently, the participant may select Guarantee Periods of from one
to ten years. Merrill Lynch Life may, at its discretion, offer additional
Guarantee Periods.
At the end of a Guarantee Period, subaccount value for that Guarantee Period
will be transferred to one or more subaccounts designated by the participant. If
Merrill Lynch Life does not receive notice from the participant designating the
subaccounts to which the subaccount value is to be transferred, the subaccount
value will be transferred automatically to a subaccount with a one year
Guarantee Period unless the Maximum Guarantee Period Option is chosen. If the
Maximum Guarantee Period Option has been chosen, the subaccount value will be
transferred to a new subaccount with a Guarantee Period equal to the longest
Guarantee Period then offered by Merrill Lynch Life which (i) does not exceed
the length of the participant's longest Guarantee Period immediately prior to
transfer and (ii) ends on or prior to the annuity date.
CHARGES
Merrill Lynch Life makes no deductions from each single premium. Except for the
Market Value Adjustment described below, the only charge made is a withdrawal
charge in the event all or part of a net subaccount value is withdrawn. However,
no withdrawal charge is made for a withdrawal at the end of a Guarantee Period
if Merrill Lynch Life receives written notice of the withdrawal prior to the end
of the Guarantee Period. The withdrawal charge is equal to six months of
interest on the amount withdrawn based on the guaranteed interest rate of the
subaccount from which the withdrawal is made. No withdrawal charge is imposed in
the event of payment upon the death of the annuitant or participant or,
currently, upon annuitization. Premium taxes, if any, will be deducted from the
net account value at the annuity date.
MARKET VALUE ADJUSTMENT
A Market Value Adjustment is applied to any withdrawal from a subaccount prior
to the end of its Guarantee Period. It will also be applied to any subaccount if
the annuity date is prior to the end of the Guarantee Period for that
subaccount. For Certificates issued in certain states, a Market Value Adjustment
will not be applied at the annuity date if (i) combined Market Value Adjustments
of all affected subaccounts would reduce the participant's account value and
(ii) annuity payments will be made for at least ten years or a life contingency
5
<PAGE> 8
or life expectancy annuity option has been chosen. In addition, a Market Value
Adjustment will be applied in the event of payment upon the death of the
participant or annuitant prior to the annuity date unless the combined effect of
the Market Value Adjustments of all affected subaccounts would reduce the
account value. The amount of the Market Value Adjustment is determined in
accordance with the formula set forth on page 11 and may be positive or
negative.
ANNUITY PAYMENTS
Annuity payments will start on the annuity date. The participant selects the
annuity date and an annuity payment option. Each participant may select a
different annuity date or annuity payment option later.
On the annuity date the net account value, less any applicable premium taxes, is
multiplied by Merrill Lynch Life's then current annuity purchase rates to
determine the amount of each annuity payment. Currently, withdrawal charges do
not apply upon annuitization. The net account value is the sum of all net
subaccount values. In determining the net account value, a Market Value
Adjustment may be applied. If the net account value on the annuity date is less
than $5,000, Merrill Lynch Life may pay the net account value in a lump sum in
lieu of annuity payments. For tax consequences of a lump sum payment, see
"Federal Tax Considerations-- Partial Withdrawals and Surrenders" on page 18. If
any annuity payment would be less than $50, Merrill Lynch Life may change the
frequency of payments to intervals that will result in payments of at least $50.
PAYMENT ON DEATH
If either the participant or the annuitant (if other than the participant) dies
prior to the annuity date, Merrill Lynch Life will pay to the participant's
beneficiary or annuitant's beneficiary, as applicable, the greater of the
account value or the net account value on the date of payment. In determining
the net account value, no withdrawal charge will be applied.
If the participant dies after the annuity date, any amounts remaining unpaid
will be paid to the participant's beneficiary pursuant to the same method of
distribution in force at the date of death. If the annuitant dies after the
annuity date, the annuitant's beneficiary may choose either to have any
guaranteed amounts remaining unpaid continue to be paid for the amount or period
guaranteed or to receive the present value of the remaining guaranteed payments
in a lump sum.
WITHDRAWALS
The participant may withdraw all or part of the net account value prior to the
earlier of the annuity date or the death of the annuitant. For partial
withdrawals, the withdrawal must be at least $500, the remaining subaccount
value of each subaccount, after adjustment for any Market Value Adjustment and
withdrawal charge, must be at least $1,000, and the remaining account value must
be at least $5,000. Withdrawals from qualified plans may be restricted. (See
"Qualified Plans" on page 19.) Withdrawals may have federal income tax
consequences, including a 10% penalty tax on the amount withdrawn. (See "Federal
Tax Considerations-- Penalty Tax on Certain Withdrawals" on page 18.)
REPORTS TO PARTICIPANTS
At least once each year prior to the annuity date, participants will be sent a
report outlining their account value, subaccount values, Guarantee Periods,
withdrawal charges and Market Value Adjustments, if any, applied during the
year. The report will not include financial statements.
FREE LOOK RIGHT
When the participant receives the Certificate, it should be reviewed carefully
to make sure it is what the participant intended to purchase. Generally, within
ten days after the participant receives the Certificate, he or she may return it
for a refund. Some states allow a longer period of time to return the
Certificate. The Certificate must be delivered to Merrill Lynch Life's Service
Center or to the Financial Consultant who sold it
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for a refund to be made. Merrill Lynch Life will then refund to the participant
all premiums paid into the Certificate. The Certificate will then be deemed void
from the beginning.
MERRILL LYNCH LIFE INSURANCE COMPANY
Merrill Lynch Life Insurance Company ("Merrill Lynch Life") is a stock life
insurance company organized under the laws of the State of Washington in 1986
and redomesticated under the laws of the State of Arkansas in 1991. Merrill
Lynch Life is an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc.
("Merrill Lynch"), a corporation whose common stock is traded on the New York
Stock Exchange.
Merrill Lynch Life's home office is in Little Rock, Arkansas. The Service
Center's address and phone number are P.O. Box 44222, Jacksonville, Florida
32231-4222, (800) 535-5549.
All communications concerning the Contract and Certificate should be addressed
to Merrill Lynch Life's Service Center.
DESCRIPTION OF THE CONTRACT
A. GENERAL
The Contract is a group allocated contract pursuant to which specific accounts
are maintained for each participant. The Contract may be issued to any employer,
entity or other organized group acceptable to Merrill Lynch Life. The Contract
may be issued in connection with either qualified or nonqualified plans.
Qualified plans include "H.R. 10" plans, Individual Retirement Annuities or
Accounts, corporate pension and profit-sharing plans, Tax-Sheltered Annuities
and Section 457 deferred compensation plans.
An eligible member of a group to which a Contract has been issued may become a
participant by completing an application and forwarding payment of a single
premium to Merrill Lynch Life's Service Center. The application is subject to
Merrill Lynch Life's acceptance.
The rights and benefits of a participant are summarized in the Certificate.
Provisions of the Contract are controlling. All such rights and benefits may be
exercised without the consent of the contract owner. However, provisions of any
plan in connection with which the Contract has been issued may restrict a
person's eligibility to participate under the Contract, the minimum or maximum
amount of the single premium, and the participant's ability to exercise the
rights and/or receive the benefits provided under the Contract. Merrill Lynch
Life reserves the right to terminate a Contract as to eligible members of the
group not accepted as participants at the time of termination.
Contracts have been issued to Asset Group Trust (Sussex Trust Company,
Georgetown, Delaware, Trustee) as Contract holder for a group comprised of
account holders of Merrill Lynch, Pierce, Fenner & Smith Incorporated. Contracts
covering the same group have also been issued directly to Merrill Lynch, Pierce,
Fenner & Smith Incorporated. Participation under this group is not permissible
in some states.
B. PREMIUMS
One Certificate will be issued for each single premium paid under the Contract.
Only one Certificate will be issued to any one person on a given day. The single
premium must be at least $5,000. If the amount of any single premium is more
than $500,000, Merrill Lynch Life reserves the right to limit the amount of the
premium. The premium will be allocated to one or more subaccounts as selected by
the participant. The minimum allocation to a subaccount is $5,000. Merrill Lynch
Life will confirm its receipt of the payment and the subaccounts established for
the payment. The Certificate does not permit the payment of additional premiums.
An application for a separate Certificate must accompany each single premium.
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C. SELECTING THE GUARANTEE PERIOD
The participant may select one or more Guarantee Periods for each single premium
or portion thereof. Merrill Lynch Life has discretion to determine the number of
Guarantee Periods it will offer. Currently it offers Guarantee Periods ranging
from one to ten years. Currently, the participant may select any of the ten
Guarantee Periods. Merrill Lynch Life will establish a subaccount corresponding
to each specified interest rate and Guarantee Period selected. Once a Guarantee
Period has been selected, it cannot be changed. Amounts cannot be transferred
from one subaccount to another prior to the end of the Guarantee Period. The
participant may, however, withdraw amounts from a subaccount, subject to the
restrictions described below and a Market Value Adjustment and withdrawal
charge. (See "Market Value Adjustment" on page 10 and "Withdrawal Charge" on
page 11.) Withdrawals may have federal income tax consequences, including a 10%
penalty on amounts withdrawn. (See "Federal Tax Considerations--In General" on
page 17.)
D. SUBACCOUNT AND ACCOUNT VALUES
A participant's account value is the sum of all of his or her subaccount values.
Each subaccount value is equal to the amount the participant allocated to the
subaccount (either as part of the single premium or as part of the reinvestment
of subaccount value at the end of a Guarantee Period), plus the interest
credited thereto at the guaranteed rate, as adjusted for any prior withdrawals,
Market Value Adjustments or withdrawal charges. Merrill Lynch Life offers a
guaranteed interest rate for each subaccount. The participant is credited with
the guaranteed interest rate in effect on the date Merrill Lynch Life receives
his or her premium or reinvestment. The guaranteed interest rate will be
credited to the subaccount daily (except on a February 29th) to yield the quoted
guaranteed interest rate. Interest will be compounded annually on each
certificate anniversary.
E. SUBACCOUNT TRANSFERS
At the end of a subaccount's Guarantee Period, the participant may transfer
amounts in that subaccount to one or more new subaccounts with new Guarantee
Periods of any length then offered by Merrill Lynch Life. Interest rates for the
subaccounts to which transfers are made are guaranteed to be the same as the
initial guaranteed interest rates being offered at the time of transfer on new
Certificates.
Merrill Lynch Life will notify the participant of his or her right to transfer
amounts to new subaccounts at least 30 days prior to the end of the Guarantee
Period. Prior to the end of the current Guarantee Period, the participant may
advise Merrill Lynch Life of the new subaccounts to which the subaccount value
is to be transferred. The minimum amount that can be transferred to any one
subaccount is the lesser of (i) $5,000 or (ii) the total subaccount value at the
time of transfer. No withdrawal charge or Market Value Adjustment is applied in
connection with such transfers. If timely instructions are not received, Merrill
Lynch Life will transfer the subaccount value to a new subaccount with a
one-year Guarantee Period, unless the Maximum Guarantee Period Option has been
chosen by the participant. Subject to contractual and federal tax restrictions,
the participant may change his or her annuity date so that the Guarantee Period
of the new subaccount will end on or prior to the annuity date. (See "Annuity
Provisions--Change of Annuity Date or Annuity Option" on page 13.)
The Maximum Guarantee Period Option may be selected at any time prior to the end
of a Guarantee Period. If it has been chosen, at the end of a subaccount's
Guarantee Period the subaccount value will be transferred to a new subaccount
with a Guarantee Period equal to the longest Guarantee Period then offered by
Merrill Lynch Life which (i) does not exceed the length of the participant's
longest Guarantee Period immediately prior to transfer and (ii) ends on or prior
to the participant's annuity date. Under this option, if the subaccount value
cannot be transferred to the longest Guarantee Period in which the participant's
account value is invested immediately prior to transfer because such Guaranteed
Period would end after the participant's annuity date, the subaccount value will
be transferred to a subaccount with the next longest Guarantee Period then
offered by Merrill Lynch Life that ends on or prior to the participant's annuity
date. For example, assume that the Maximum Guarantee Period Option is chosen,
that a transfer occurs on March 1, 1995, that the participant's annuity date is
on August 1, 2000, and that the longest Guarantee Period in which the
participant's account value is invested is five years. If Merrill Lynch Life is
then offering a five year Guarantee
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Period, the subaccount value will be transferred to a subaccount with a five
year Guarantee Period since the Guarantee Period will end prior to August 1,
2000. If, however, the longest Guarantee Period in which the participant's
account value is invested is six years or more, the subaccount value will be
transferred to a subaccount with a five year Guarantee Period (or, if Merrill
Lynch Life is not then offering a five year Guarantee Period, the longest
Guarantee Period of less than five years then offered by Merrill Lynch Life)
since a subaccount with a Guarantee Period of six years would end after August
1, 2000. If the participant's annuity date is less than one year from the date
of transfer, Merrill Lynch Life will transfer the subaccount value to a
subaccount with a one year Guarantee Period.
F. FIXING GUARANTEED INTEREST RATES
Merrill Lynch Life has no specific formula for establishing the guaranteed
interest rates for the different Guarantee Periods. The determination made will
be influenced by, but not necessarily correspond to, interest rates available on
fixed income investments which Merrill Lynch Life may acquire with the amounts
it receives as premiums under the Contracts. These amounts will be invested
primarily in investment-grade fixed income securities including: securities
issued by the United States Government or its agencies or instrumentalities,
which issues may or may not be guaranteed by the United States Government; debt
securities that have an investment grade, at the time of purchase, within the
four highest grades assigned by Moody's Investor Services, Inc. (Aaa, Aa, A or
Baa), Standard & Poor's Corporation (AAA, AA, A or BBB) or any other nationally
recognized rating service; mortgage-backed securities collateralized by real
estate mortgage loans, or securities collateralized by other assets, that are
insured or guaranteed by the Federal Home Loan Mortgage Association, the Federal
National Mortgage Association or the Government National Mortgage Association,
or that have an investment grade at the time of purchase within the four highest
grades described above; other debt instruments; commercial paper; and cash or
cash equivalents. Participants will have no direct or indirect interest in these
investments. Merrill Lynch Life will also consider other factors in determining
the guaranteed rates, including regulatory and tax requirements, sales
commissions and administrative expenses borne by Merrill Lynch Life, general
economic trends and competitive factors. MERRILL LYNCH LIFE'S MANAGEMENT WILL
MAKE THE FINAL DETERMINATION OF THE GUARANTEED RATES IT DECLARES. MERRILL LYNCH
LIFE CANNOT PREDICT OR GUARANTEE THE LEVEL OF FUTURE INTEREST RATES.
G. WITHDRAWALS
Subject to certain conditions, a participant may withdraw all or part of his or
her net account value or net subaccount value prior to the earlier of the
annuity date or the death of the participant or annuitant upon written notice
received at Merrill Lynch Life's Service Center before the annuity date.
Withdrawals may have federal income tax consequences, including a 10% penalty
tax. (See "Federal Tax Considerations--In General" on page 17.) For full
withdrawal, the withdrawal notice must be accompanied by the Certificate. Under
qualified plans, withdrawals may be permitted only in circumstances specified in
the plan, the consent of the participant's spouse may be required, and under
Tax-Sheltered Annuities and certain Section 401 plans, withdrawals attributable
to contributions made pursuant to a salary reduction agreement may be made only
after the participant reaches age 59 1/2 and in other limited circumstances.
(See "Qualified Plans" on page 19.)
Partial withdrawals must be at least $500, and the net subaccount value
remaining after the withdrawal must be at least $1,000, unless the entire
subaccount value is withdrawn. The remaining account value must be at least
$5,000. Otherwise, the partial withdrawal will not be permitted. The participant
must specify the subaccounts from which the withdrawal is to be made. If two or
more subaccounts from which the withdrawal is to be made have the same Guarantee
Period, the participant must first withdraw from the subaccount with the
shortest period of time remaining in its Guarantee Period until that subaccount
has been depleted.
The amount of the withdrawal will be paid to the participant, and any Market
Value Adjustment will be made to, and any withdrawal charge will be deducted
from, the subaccounts from which the withdrawal is made. Immediately after a
partial withdrawal, the subaccount value will equal the subaccount value prior
to the withdrawal, plus or minus any applicable Market Value Adjustment, minus
any applicable withdrawal charge, and minus the amount withdrawn. In the case of
a request to withdraw the entire amount from a subaccount, the participant
receives the net subaccount value (which reflects any adjustments to the
subaccount value for
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the withdrawal charge and Market Value Adjustment applied in connection with
such withdrawal). Upon such full withdrawal, the subaccount value is reduced by
the amount withdrawn as well as any applicable withdrawal charge, and the Market
Value Adjustment is applied, thereby reducing the subaccount value to zero. (See
"Market Value Adjustment" on page 10 and "Withdrawal Charge" on page 11.) The
tables which appear in the Appendix illustrate the effect of a full withdrawal
from a subaccount on the subaccount value.
H. MARKET VALUE ADJUSTMENT
The Contract provides for the imposition of a Market Value Adjustment,
determined by application of the formula described below, in three
circumstances. First, whenever the participant makes a withdrawal from a
subaccount, other than one made at, and for which Merrill Lynch Life has
received written notice prior to, the end of such subaccount's Guarantee Period,
a Market Value Adjustment will be made.
Second, a Market Value Adjustment will be applied at the annuity date to any
subaccount if the annuity date is prior to the end of the Guarantee Period for
that subaccount. For Certificates issued in certain states, a Market Value
Adjustment will not be applied at the annuity date if (i) combined Market Value
Adjustments of all affected subaccounts would reduce the participant's account
value and (ii) annuity payments will be made for at least ten years or a life
contingency or life expectancy annuity option has been chosen. Participants
should refer to their Certificates to determine when a Market Value Adjustment
will be applied.
Third, a Market Value Adjustment is applied in the event of payment upon the
death of the participant or the annuitant prior to the annuity date unless the
combined Market Value Adjustments of all affected subaccounts would reduce the
participant's account value.
Because of the market value adjustment provision of the Contract, the
participant bears the investment risk that the guaranteed interest rates offered
by Merrill Lynch Life at the time the participant makes a withdrawal from a
subaccount or starts receiving annuity payments may be higher than the
guaranteed interest rate of the subaccount to which the Market Value Adjustment
is applied, with the result that the participant's subaccount value may be
substantially reduced.
The Market Value Adjustment will depend on the remaining time in the Guarantee
Period of the subaccount from which the withdrawal is made or to which the
adjustment is being applied and on the relationship between the guaranteed
interest rate of the subaccount from which the withdrawal or payment, as
applicable, is made to the guaranteed interest rates offered on new Certificates
at the time the Market Value Adjustment is applied. The Appendix contains tables
which illustrate the application of the Market Value Adjustment in the context
of full withdrawals from a hypothetical subaccount. The Market Value Adjustment
may result in either an increase or decrease in subaccount value, depending on
the relationship of (1) the current guaranteed interest rate for a period equal
to the time remaining in the subaccount, which rate is interpolated from the
rates currently offered by Merrill Lynch Life for subaccounts with Guarantee
Periods closest to such period, to (2) the guaranteed interest rate for the
subaccount. If the current guaranteed interest rate of (1) above is lower than
the guaranteed rate of (2), application of the Market Value Adjustment will
result in an increase in subaccount value; if (1) is higher than (2),
application of the Market Value Adjustment will result in a decrease in
subaccount value. If the adjustment is positive, the additional amount will be
credited to the subaccount. If negative, the amount of the adjustment will be
deducted from the subaccount value and will be retained by Merrill Lynch Life
for its own benefit.
The amount of the Market Value Adjustment is based on the relationship of the
guaranteed interest rates offered on new Certificates issued at the time the
Market Value Adjustment is applied to the guaranteed interest rate credited to
the subaccount from which the withdrawal or payment, as applicable, is made. If
the remaining period of time in the Guarantee Period is a whole number of years,
Merrill Lynch Life uses the guaranteed interest rate currently offered by it for
a Guarantee Period equal to the number of remaining years. If the remaining
period of time in the Guarantee Period is not a whole number of years, the
interest rate is derived from the guaranteed interest rates currently offered
for the Guarantee Periods nearest the remaining period of time. This derivation
is by straight line interpolation, except where the remaining period of time is
less than one year, in which case Merrill Lynch Life uses the current guaranteed
rate for a Guarantee Period of one year. For example, if the remaining period is
5.75 years, the interpolated guaranteed interest rate will be
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equal to the sum of one-fourth of the five year rate and three-fourths of the
six year rate. If the five year rate were 4.6% and the six year rate were 4.8%,
the interpolated rate would be 4.75%, 4.6% times .25 plus 4.8% times .75.
The amount of the market value adjustment is determined from the following
formula:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
1 + B n/365
A X [ 1- ( -------- ) ]
1 + C
</TABLE>
where "A" is (i) the amount withdrawn from the subaccount, in the case of a
partial withdrawal, or (ii) the net subaccount value, in the case of (a) a full
withdrawal from a subaccount, (b) a payment made due to the death of the
participant or annuitant prior to the annuity date, or (c) annuitization, "B" is
the current guaranteed interest rate that Merrill Lynch Life is offering for a
subaccount with a Guarantee Period of a duration of years equal to "n"/365 or
that is interpolated for "n"/365 based on the guaranteed interest rates offered
for subaccounts nearest "n"/365 (if n/365 is less than 1, we will assume B is
equal to the rate for a one-year Guarantee Period), "C" is the guaranteed
interest rate for the subaccount, and "n" is the remaining number of days in the
Guaranteed Period of the subaccount from which the withdrawal is made or to
which the adjustment is applied.
For example, assume that a withdrawal of $20,000 is made from a subaccount with
2,099 days (5.75 years) remaining in the Guarantee Period and a guaranteed
interest rate of 4.5%. Assume also that the guaranteed interest rates currently
offered for Guarantee Periods of 5 and 6 years are 4.6% and 4.8%, respectively.
"B" is equal to 4.75%, the sum of 4.8% times .75 and 4.6% times .25. To
calculate the Market Value Adjustment Merrill Lynch Life divides the sum of 1
and "B", 1.0475, by the sum of 1 and the guaranteed interest rate for the
affected subaccount, 1.045. The resulting figure, 1.0023923, is then taken to
the "n"/365 power, or 5.75 (2,099/365), which is 1.0138341. 1.0138341 is
subtracted from 1 and the resulting figure, -.0138341, is multiplied by the
amount of the withdrawal, $20,000, to give -$276.69. Since this figure is a
negative number, it is subtracted from the remaining subaccount value together
with any applicable withdrawal charge. If "B" had been 4.25%, instead of 4.75%,
the Market Value Adjustment would have been +$273.56, which would have been
added to the remaining subaccount value.
The greater the difference in interest rates, the greater the effect of the
Market Value Adjustment. If in the above example "B" had been 7%, 8%, and 9%,
the Market Value Adjustment would have been -$2,912.27, -$4,171.18 and
- -$5,486.70, respectively. The Market Value Adjustment is also affected by the
remaining period in the Guarantee Period of the subaccount from which the
withdrawal is made, which is "n" in the formula. Thus, if in the first example
above "n"/365 were 2.5 or 1.5, the Market Value Adjustment would be -$119.83 or
- -$71.81, respectively. Tables showing the impact of the Market Value Adjustment
and withdrawal charge on hypothetical full withdrawals are set forth in the
Appendix.
I. WITHDRAWAL CHARGE
A withdrawal charge is imposed if the participant makes a withdrawal from a
subaccount other than at the end of a subaccount's Guarantee Period. No
withdrawal charge is imposed if a withdrawal is made at the end of a Guarantee
Period where prior written notice was received at Merrill Lynch Life's Service
Center. The charge is equal to six months of simple interest computed on the
amount withdrawn based on the guaranteed interest rate of the subaccount from
which the withdrawal is made. Thus, if the guaranteed interest rate is 5% per
year, the withdrawal charge will be 2.5%. The amount of the charge remains the
same whether or not six months' interest has been credited to the subaccount.
For a full withdrawal, the amount withdrawn is the net account value. For a
partial withdrawal, the withdrawal charge will be deducted from the remaining
value of the subaccounts from which the withdrawal was made. For a full
withdrawal, the withdrawal charge is reflected in the net account value
distributed to the participant. Currently withdrawal charges do not apply upon
annuitization. However, Merrill Lynch Life reserves the right to apply the
withdrawal charge on annuitization to any subaccount if the annuity date is
prior to the end of the Guarantee Period for that subaccount. Withdrawal charges
also do not apply to annuity payments or to any payment made due to the death of
the annuitant or participant.
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The application of the withdrawal charge may be illustrated by the following
example. Assume a partial withdrawal of $7,000 made from two subaccounts, one
with a Guarantee Period of five years and a guaranteed interest rate of 4.5%,
the other with a Guarantee Period of three years and a guaranteed interest rate
of 3.65%, and each having a subaccount value of $5,000. Assume further that the
participant directs that the partial withdrawal should be taken from the
subaccount having the five year Guarantee Period to the maximum extent possible
and the remainder taken from the subaccount having the three year Guarantee
Period. Assume also that the Market Value Adjustment applied to the five year
Guarantee Period operates to reduce its value by 22.75% and that the adjustment
applied to the three year Guarantee Period operates to reduce its value by 17%.
The maximum withdrawal that can be taken from the subaccount with the five year
Guarantee Period is $4,000, since the Market Value Adjustment applied to the
$4,000 withdrawal reduces the subaccount value by $910 (22.75% of $4,000) and
the withdrawal charge of $90 (4.5% divided by 2, times $4,000) exhausts the
remaining subaccount value. The remaining portion of the requested withdrawal,
$3,000 is deducted from the subaccount with the three year Guarantee Period.
Also deducted from that subaccount are the Market Value Adjustment applicable to
the $3,000 withdrawal, $510 (17% of $3,000), and the withdrawal charge, $54.75
(3.65% divided by 2 times $3,000), resulting in a remaining subaccount value of
$1,435.25.
J. PAYMENT ON DEATH
Death Prior to the Annuity Date. Subject to the rights of a participant's
surviving spouse in certain circumstances (described below), if the participant
or the annuitant (under a Contract where the participant is not an annuitant)
dies prior to the annuity date, Merrill Lynch Life will pay to the participant's
beneficiary or the annuitant's beneficiary, as applicable, the greater of the
account value or the net account value on the date of payment (the "death
benefit"). In determining the net account value, no withdrawal charge will be
applied. Payment will be made upon receipt by Merrill Lynch Life of proof of the
death of the participant or annuitant, as applicable (e.g., certified copy of
death certificate), and, subject to the special rules applicable to any
participant's death (discussed below), will be made in a lump sum unless an
annuity option is chosen.
In the event of a participant's death, the death benefit generally must be
distributed within five years of the death of the participant. The participant's
beneficiary may, however, elect to receive the death benefit pursuant to a
payment option under which payments commence within one year of the
participant's death and which does not extend beyond the life expectancy of the
beneficiary. In addition, if the surviving spouse of a deceased participant is
the participant's beneficiary, the spouse may choose to become the participant
and to continue the Certificate in force on the same terms as before the
participant's death, in which event no death benefit is paid upon the death of
the deceased participant, and the spouse thereafter shall be the participant and
the annuitant. If the Certificate names more than one participant, the death of
the participant will be deemed to occur when the first participant dies.
If the participant is not the annuitant, the participant may irrevocably elect,
prior to the annuitant's death and prior to the annuity date, to continue the
Certificate in force in the event of the annuitant's death prior to the annuity
date on the same terms as before the annuitant's death. If the participant makes
this election, no death benefit is paid upon the death of the annuitant, and the
person designated by the participant at the time of the election shall become
the annuitant upon the death of the original annuitant prior to the annuity
date. This option is available only if the participant is a natural person or
the Certificate is issued in connection with a plan entitled to special tax
treatment under Sections 401 or 408 of the Internal Revenue Code.
If a beneficiary does not survive the participant or annuitant, as applicable,
the estate or heirs of the beneficiary have no rights under the Contract. If no
beneficiary survives the participant or annuitant, payment will be made to the
participant, if living, and if the participant is not living, to the
participant's estate.
If the participant is not an individual, the primary annuitant as determined in
accordance with Section 72(s) of the Internal Revenue Code (i.e., the individual
the events in the life of whom are of primary importance in affecting the timing
or amount of distributions under the Contract) will be treated as the
participant for purposes of these distribution requirements, and any change in
the primary annuitant will be treated as the death of the participant.
Death After the Annuity Date. If the participant dies after the annuity date,
any amounts remaining unpaid will be paid at least as rapidly as under the same
method of distribution in force at the date of death. If the
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<PAGE> 15
annuitant dies after the annuity date, the annuitant's beneficiary may choose
either to have any guaranteed amounts remaining unpaid continue to be paid for
the amount or period guaranteed or to receive the present value of the remaining
guaranteed payments in a lump sum. (See "Annuity Provisions" below.) The present
value will be determined using the interest rate on which annuity payments were
determined, and will be less than the sum of the remaining guaranteed payments.
If the annuitant's beneficiary dies while guaranteed amounts remain unpaid, the
present value of the remaining payments will be paid in a lump sum to the
beneficiary's estate.
K. ANNUITY PROVISIONS
General. Annuity payments will be paid to the participant and will commence on
the annuity date. The participant may or may not be the annuitant. The
participant designates the annuitant in the Certificate application and may
later change the annuitant upon written notice to Merrill Lynch Life. The
participant may also designate a co-annuitant, in which case the death of the
annuitant is deemed to occur when both co-annuitants are deceased.
The amount of monthly annuity payments, other than payments made pursuant to the
qualified plan option, will be determined by applying the net account value at
the annuity date, less any premium taxes, to the annuity option chosen using
Merrill Lynch Life's then current annuity rates. Currently, withdrawal charges
do not apply upon annuitization. Current annuity rates are guaranteed to be no
less favorable than the minimum guaranteed annuity rates shown in the annuity
tables contained in the Contract. Premium taxes imposed by states and local
jurisdictions currently range from 0% to 5% depending on the tax treatment of
the Contract. In determining the net account value, a Market Value Adjustment
will be applied to any subaccount if the annuity date is prior to the end of the
Guarantee Period for that subaccount. For Certificates issued in certain states,
a Market Value Adjustment will not be applied at the annuity date if (i)
combined Market Value Adjustments of all affected subaccounts would reduce the
participant's account value and (ii) annuity payments will be made for at least
ten years or a life contingency or life expectancy annuity option has been
chosen.
Selection of Annuity Date and Annuity Options. The participant may select the
annuity date and an annuity option in the Certificate application. If the
participant does not select an annuity date, the annuity date will be the first
day of the next month after the annuitant's 75th birthday and the annuity option
will be a life annuity with a 10 year guarantee. The annuity date must be the
first day of a calendar month. It may not be later than the first day of the
next month after the annuitant's 85th birthday. (For qualified Certificates, the
annuity date generally may not be later than April 1 of the calendar year after
the calendar year in which the annuitant attains age 70 1/2.)
Change of Annuity Date or Annuity Option. The participant may change the
annuity date or the annuity option on written notice received at Merrill Lynch
Life's Service Center at least 30 days prior to the current annuity date.
Changes of the annuity date are subject to federal tax restrictions. (See
"Federal Tax Considerations" on page 16.)
Annuity Options. The participant may select any one of the following annuity
options or any other option satisfactory to the participant and Merrill Lynch
Life. For qualified Certificates, certain restrictions may apply.
PAYMENTS OF A FIXED AMOUNT: Equal payments in the amount chosen will be
made until the net account value applied under this option is exhausted.
The period over which payments are made must be at least five years.
PAYMENTS FOR A FIXED PERIOD: Payments will be made for the period chosen.
The period must be at least five years.
*LIFE ANNUITY: Payments will be made for the life of the annuitant.
Payments will cease with the last payment due prior to the annuitant's
death.
LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 OR 20 YEARS: Payments will be
made for the guaranteed period chosen (10 or 20 years) and as long
thereafter as the annuitant lives.
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<PAGE> 16
LIFE ANNUITY WITH GUARANTEED RETURN OF NET ACCOUNT VALUE: Payments will be
made until the sum of the annuity payments equals the net account value
applied under this option, and as long thereafter as the annuitant lives.
*JOINT AND SURVIVOR LIFE ANNUITY: Payments will be made during the
lifetimes of the annuitant and a designated second person. Payments will
continue as long as either is living.
QUALIFIED PLAN OPTION: This option is available only under qualified
Certificates. It is not available under Section 457 plans. Payments may be
based on (a) the life expectancy of the annuitant, (b) the joint life
expectancy of the annuitant and his or her spouse, or (c) the life
expectancy of the surviving spouse if the annuitant dies before the annuity
date. Payments will be made annually. Each payment will be equal to the net
account value on the first day of the calendar year divided by applicable
current life expectancy based on Internal Revenue Service regulations. Each
subsequent payment will be made on the anniversary of the annuity date.
Interest will be credited at Merrill Lynch Life's then current rate for
this option. The rate will not be less than that shown in the Contract. On
death of the measuring life or lives, any unpaid net account value will be
paid to the beneficiary in a lump sum.
*THESE OPTIONS ARE LIFE ANNUITIES UNDER WHICH IT IS POSSIBLE FOR THE PARTICIPANT
TO RECEIVE ONLY ONE ANNUITY PAYMENT IF THE ANNUITANT (OR THE ANNUITANT AND A
DESIGNATED SECOND PERSON) DIES AFTER THE FIRST PAYMENT, OR TO RECEIVE ONLY TWO
ANNUITY PAYMENTS IF THE ANNUITANT (OR THE ANNUITANT AND A DESIGNATED SECOND
PERSON) DIES AFTER THE SECOND PAYMENT, AND SO ON.
Minimum Annuity Payments. Annuity payments will be made monthly unless the
participant chooses less frequent payments or the qualified plan option,
provided that if any payment would be less than $50, Merrill Lynch Life may
change the frequency so payments are at least $50 each. If the net account value
to be applied at the annuity date is less than $5,000 ($3,500 for certain
qualified Certificates), Merrill Lynch Life may elect to pay that amount in a
lump sum. (For tax consequences of a lump sum payment, see "Federal Tax
Considerations" on page 16.)
Annuity Rates. Annuity rates will be no less favorable than those shown in the
annuity tables contained in the Contract. Those tables show the minimum
guaranteed amount of each monthly payment for each $1,000 applied according to
the age and sex of the annuitant at the annuity date. The tables are based on
the 1983 Table "a" projected forward to 1995 for Individual Annuity Valuation
with current mortality adjustments. When required by law, Merrill Lynch Life
will use annuity tables that do not differentiate on the basis of sex.
The Contract contains a formula for adjusting the age of the annuitant based on
the annuity date for purposes of determining minimum monthly annuity payments.
If the annuity date is prior to the year 2000, there is no age adjustment. If
the annuity date is between the years 2000 and 2009, the annuitant's age is
reduced by one year. For each decade thereafter, the annuitant's age is reduced
one additional year. The maximum age adjustment is four years.
An age adjustment results in a reduction in the minimum monthly annuity payments
that would otherwise be made. Therefore, if the rates Merrill Lynch Life is
using are the minimum rates shown in the annuity tables contained in the
Contract, it may be advantageous for the participant to designate an annuity
date that immediately precedes the date on which an age adjustment would occur
under the Contract. For example, the annuity payment rates in the annuity tables
for an annuitant with an annuity date in the year 2010 are the same as those for
an annuity date twelve months earlier, even though the annuitant is one year
older, because the new decade results in the annuitant's age being reduced by an
additional year. Current annuity rates, unlike the guaranteed rates, do not
involve any age adjustment.
Proof of Age, Sex and Survival. Merrill Lynch Life may require satisfactory
proof of the age, sex or survival of any person on whose continued life any
payment under the Certificate depends.
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Misstatement of Age or Sex. If the age or sex of an annuitant is misstated,
annuity payments will be adjusted to reflect the correct age and sex. Any amount
overpaid as the result of such misstatement will be deducted from the next
payments due. Any amount underpaid will be paid in full with the next payment
due.
L. OTHER PROVISIONS
Beneficiary. The beneficiary is the person or persons named in the Certificate
application to whom payment is to be made upon the death of the participant or
annuitant. If the participant is not the annuitant, the participant may name one
beneficiary to receive payment on death of the participant and a different
beneficiary to receive payment on death of the annuitant. If the participant is
the annuitant, the participant's beneficiary and the annuitant's beneficiary
must be the same. Unless a beneficiary has been irrevocably designated, the
participant's beneficiary may be changed while the participant is alive, and the
annuitant's beneficiary may be changed while the annuitant is alive. The change
of a beneficiary who was named by the participant irrevocably may only be made
with the consent of the beneficiary. The estate or heirs of a beneficiary who
dies prior to the participant or annuitant have no rights under the Contract. If
no beneficiary survives the participant or annuitant, payment will be made to
the participant, if living, or to the participant's estate if the participant
has died. Certain restrictions may apply in the case of qualified Certificates.
Assignment. Upon notice to Merrill Lynch Life, the participant may make a
collateral assignment of his or her rights under the Contract by transferring
the participant's Certificate to a creditor as a security for a debt. If the
Contract is issued pursuant to a qualified Plan, the participant's rights under
the Contract may not be assigned, pledged or transferred, unless permitted by
law. A collateral assignment does not change ownership of the Certificate. The
rights of a collateral assignee have priority over the rights of a beneficiary.
A collateral assignment may have federal income tax consequences. (See "Federal
Tax Considerations--Transfers, Assignments, or Exchanges of a Certificate" on
page 19.)
Notices and Elections. All notices, changes and choices the participant makes
under the Contract must be in writing, signed by the proper party and received
at Merrill Lynch Life's Service Center to be effective. The selection of
subaccounts in which the subaccount value at the end of a Guarantee Period is to
be invested or from which partial withdrawals are to be made may be made by
telephone. In addition, choices regarding the Maximum Guarantee Period Option,
pursuant to which Merrill Lynch Life transfers subaccount values in the absence
of instructions from a participant, may be made by telephone. Merrill Lynch Life
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. Merrill Lynch Life will not be
liable for following telephone instructions that it reasonably believes to be
genuine. Notices, changes and choices relating to beneficiaries will take effect
as of the date signed unless Merrill Lynch Life has already acted in reliance on
the prior status.
Amendment of Contract and Certificates. Merrill Lynch Life may amend the
Contract and the Certificates at any time as may be necessary to conform to any
applicable law, regulation or ruling issued by a government agency.
Deferral of Payments. All sums payable by Merrill Lynch Life are payable at its
Service Center. Merrill Lynch Life may require return of a Certificate prior to
making payment. Merrill Lynch Life may defer payments of partial or full
withdrawals for up to six months.
Free Look Right. When the participant receives the Contract, it should be
reviewed carefully to make sure it is what the participant intended to purchase.
Generally, within ten days after the participant receives the Certificate, he or
she may return it for a refund. Some states allow a longer period of time to
return the Certificate. The Certificate must be delivered to Merrill Lynch
Life's Service Center or to the Financial Consultant who sold it for a refund to
be made. Merrill Lynch Life will then refund to the participant all premiums
paid into the Certificate. The Certificate will then be deemed void from the
beginning. If a participant exercises his or her free look right, that
participant may not submit another application with the same annuitant for
ninety days.
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Guarantee of Contracts and Certificates. The federal government or its
instrumentalities does not guarantee the Contracts or Certificates. Merrill
Lynch Life backs the guarantees associated with the Contracts and Certificates.
DISTRIBUTION OF THE CONTRACTS
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"). MLPF&S' principal business address is World Financial
Center, 250 Vesey Street, New York, New York 10281.
Contracts are sold by registered representatives (Financial Consultants) of
MLPF&S who are also licensed through various Merrill Lynch Life Agencies
("MLLA") as insurance agents for Merrill Lynch Life. Merrill Lynch Life has
entered into a distribution agreement with MLPF&S and companion sales agreements
with MLLA through which agreements the Contracts are sold and the Financial
Consultants are compensated by MLLA and/or MLPF&S. The maximum commission paid
to the Financial Consultant is 3.2% of each premium. In addition, the maximum
compensation paid to the Financial Consultant for each reinvestment is 2.8% of
account value reinvested. Commissions may be paid in the form of non-cash
compensation.
The maximum commission Merrill Lynch Life will pay to the applicable insurance
agency to be used to pay commissions to Financial Consultants is 7% of each
premium. In addition, the maximum compensation Merrill Lynch Life will pay to
the applicable insurance agency to be used to pay compensation to Financial
Consultants for reinvestment is 4.8% of account value reinvested.
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.
FEDERAL TAX CONSIDERATIONS
INTRODUCTION
The following discussion is general and is not intended as tax advice.
This discussion is not intended to address the tax consequences resulting from
all of the situations in which a person may be entitled to or may receive a
distribution under the Contract. Any person concerned about these tax
implications should consult a competent tax adviser before initiating any
transaction. This discussion is based upon Merrill Lynch Life's understanding of
the present federal income tax laws as they are currently interpreted by the
Internal Revenue Service. No representation is made as to the likelihood of the
continuation of the present federal income tax laws or of the current
interpretation by the Internal Revenue Service. Moreover, no attempt has been
made to consider any applicable state or other tax laws.
MERRILL LYNCH LIFE DOES NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY
CONTRACT OR CERTIFICATE ISSUED THEREUNDER OR ANY TRANSACTION INVOLVING THE
CONTRACTS OR CERTIFICATES.
The Contract may be purchased on a non-qualified tax basis ("non-qualified
Contract") or purchased and used in connection with plans qualifying for
favorable tax treatment ("qualified Contract"). The qualified Contracts were
designed for use by individuals whose premium payment is comprised solely of
proceeds from and/or contributions under retirement plans which are intended to
qualify as plans entitled to special income tax treatment under Section 401(a),
403, 404, 408, or 457 of the Internal Revenue Code. The ultimate effect of
federal income taxes on the amounts held under a Contract, on annuity payments,
and on the economic benefit to the participant, the annuitant, or the
beneficiary depends on the type of retirement plan, on the tax and employment
status of the individual concerned and on Merrill Lynch Life's tax status. In
addition, certain requirements must be satisfied in purchasing a qualified
Contract with proceeds from a tax qualified plan and receiving distributions
from a qualified Contract in order to continue receiving favorable tax
treatment.
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<PAGE> 19
Therefore, purchasers of qualified Contracts or Certificates issued thereunder
should seek competent legal and tax advice regarding the suitability of a
Contract for their situation, the applicable requirements, and the tax treatment
of the rights and benefits of a Contract. The following discussion assumes that
qualified Contracts are purchased with proceeds from and/or contributions under
retirement plans that qualify for the intended special federal income tax
treatment.
TAXATION OF MERRILL LYNCH LIFE
Merrill Lynch Life is taxed as a life insurance company under Part I of
Subchapter L of the Internal Revenue Code. The assets underlying the Contracts
will be owned by Merrill Lynch Life. The income earned on such assets will be
income to Merrill Lynch Life.
TAX STATUS OF THE CONTRACT
Merrill Lynch Life believes that the Contract will be treated as an annuity
contract and that Merrill Lynch Life will be treated as owning the assets
supporting the Contract for federal income tax purposes. Merrill Lynch Life,
however, reserves the right to modify the Contract as necessary to prevent the
contract owner or participant from being considered the owner of the assets
supporting the Contract for federal tax purposes.
Furthermore, in order to be treated as an annuity contract for federal income
tax purposes, Section 72(s) of the Internal Revenue Code requires any
non-qualified Contract to provide that (a) if any participant dies on or after
the annuity commencement date but prior to the time the entire interest in the
Certificate has been distributed, the remaining portion of such interest will be
distributed at least as rapidly as under the method of distribution being used
as of the date of that participant's death; and (b) if any participant dies
prior to the annuity commencement date, the entire interest in the Certificate
will be distributed within five years after the date of the participant's death.
These requirements will be considered satisfied as to any portion of the
participant's interest which is payable to or for the benefit of a "designated
beneficiary" and which is distributed over the life of such "designated
beneficiary" or over a period not extending beyond the life expectancy of that
beneficiary, provided that such distributions begin within one year of that
participant's death. The participant's "designated beneficiary" (referred to
herein as the "participant's beneficiary") is the person designated by such
participant as a beneficiary and to whom the participant's interest in the
Certificate passes by reason of death and must be a natural person. However, if
the participant's "designated beneficiary" is the surviving spouse of the
participant, the Certificate may be continued with the surviving spouse as the
new participant. Solely for purposes of applying the provisions of Section 72(s)
of the Code, when non-qualified Contracts are held by other than a natural
person, the death of the annuitant is treated as the death of the participant.
The non-qualified Contracts contain provisions which are intended to comply with
the requirements of Section 72(s) of the Internal Revenue Code, although no
regulations interpreting these requirements have yet been issued. Merrill Lynch
Life intends to review such provisions and modify them if necessary to assure
that they comply with the requirements of Internal Revenue Code Section 72(s)
when clarified by regulation or otherwise.
Other rules may apply to qualified Contracts.
THE FOLLOWING DISCUSSION ASSUMES THAT THE CONTRACTS WILL QUALIFY AS ANNUITY
CONTRACTS FOR FEDERAL INCOME TAX PURPOSES.
FEDERAL TAX CONSIDERATIONS
a. In General
Section 72 of the Internal Revenue Code governs taxation of annuities in
general. Merrill Lynch Life believes that a participant who is a natural person
generally is not taxed on increases in the value of a Contract until
distribution occurs by withdrawing all or part of the account value (e.g.,
partial withdrawals and surrenders) or as annuity payments under the annuity
option elected. For this purpose, the assignment, pledge, or agreement to assign
or pledge any portion of the account value (and in the case of a qualified
Contract, any portion of an
17
<PAGE> 20
interest in the qualified plan) generally will be treated as a distribution. The
taxable portion of a distribution (in the form of a single sum payment or an
annuity) is taxable as ordinary income.
A participant in any annuity contract who is not a natural person generally must
include in income any increase in the excess of the Contract's account value
over the "investment in the contract" (discussed below) during the taxable year.
There are some exceptions to this rule and a prospective participant that is not
a natural person may wish to discuss these with a competent tax adviser.
The following discussion generally applies to Contracts whose participants are
natural persons.
b. Partial Withdrawals and Surrenders
In the case of a partial withdrawal or surrender under a qualified Contract or
Certificate issued thereunder, under Section 72(e) of the Internal Revenue Code
a ratable portion of the amount received is taxable, generally based on the
ratio of the "investment in the contract" to the participant's total accrued
benefit or balance under the retirement plan. The "investment in the contract"
generally equals the portion, if any, of any premium payments paid by or on
behalf of any individual under a Contract which was not excluded from the
individual's gross income. For Contracts issued in connection with qualified
plans, a participant's "investment in the contract" can be zero. Special tax
rules may be available for certain distributions under qualified Contracts.
In the case of a partial withdrawal under a non-qualified Contract before the
annuity date, under Internal Revenue Code Section 72(e) amounts received are
generally first treated as taxable income to the extent that the account value
immediately before the partial withdrawal (increased by the net excess, if any,
of the sum of all Market Value Adjustments that increase any subaccount value
over the sum of all Market Value Adjustments that decrease any subaccount value
which result from the partial withdrawal) exceeds the "investment in the
contract" at that time. Any additional amount withdrawn is not taxable.
It is important to note that the Contract is an integrated annuity contract and
that therefore in determining the extent to which a withdrawal from one
subaccount is taxable, the account value and "investment in the contract" for
the entire Contract, not just the subaccount from which the withdrawal is made,
will be taken into account.
In the case of a surrender under a non-qualified Contract, under Section 72(e)
amounts received are generally treated as taxable income to the extent the net
amount received exceeds the "investment in the contract" at that time.
c. Annuity Payments
Although tax consequences may vary depending on the annuity option elected under
the Contract, under Internal Revenue Code Section 72(b), generally gross income
does not include that part of any amount received as an annuity under an annuity
contract that bears the same ratio to such amount as the investment in the
contract bears to the expected return at the annuity date. In this respect
(prior to recovery of the investment in the contract), there is generally no tax
on the amount of each payment which represents the same ratio that the
"investment in the contract" bears to the total expected value of the annuity
payments for the term of the payments; however, the remainder of each income
payment is taxable. In all cases, after the "investment in the contract" is
recovered, the full amount of any additional annuity payments is taxable.
d. Penalty Tax on Certain Withdrawals
In the case of a distribution under a non-qualified Contract, there may be
imposed a federal penalty tax equal to 10% of the amount treated as taxable
income. In general, however, there is no penalty tax on distributions: (1) made
on or after the date on which the participant attains age 59 1/2; (2) made as a
result of death or disability of the participant; (3) received in substantially
equal periodic payments over the life or life expectancy of the participant (or
joint life or life expectancy of the participant and a designated beneficiary).
In certain circumstances, other exceptions may apply. Other tax penalties may
apply to certain distributions under a qualified Contract.
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<PAGE> 21
e. Taxation of Death Benefit Proceeds
Amounts may be distributed from a Contract because of the death of the
participant, the annuitant, or the coannuitant. Generally, such amounts are
includable in the income of the recipient as follows: (1) if distributed in a
lump sum, they are taxed in the same manner as a full surrender of the Contract,
as described above, or (2) if distributed under an annuity option, they are
taxed in the same manner as annuity payments, as described above.
f. Transfers, Assignments, or Exchanges of a Certificate
A transfer of ownership of a Certificate, the designation of an annuitant, payee
or other beneficiary who is not also the participant, or the exchange of a
Certificate may result in certain tax consequences to the participant that are
not discussed herein. A participant contemplating any such transfer, assignment,
or exchange of a Certificate should contact a competent tax adviser with respect
to the potential tax effects of such a transaction.
g. Multiple Contracts or Certificates
All non-qualified annuity Contracts or Certificates issued thereunder entered
into after October 21, 1988 that are issued by Merrill Lynch Life (or its
affiliates) to the same owner during any calendar year are treated as one
annuity Contract for purposes of determining the amount includable in gross
income under Section 72(e) of the Internal Revenue Code. In addition, the
Treasury Department has specific authority to issue regulations that prevent the
avoidance of Section 72(e) through the serial purchase of annuity Contracts or
otherwise. Congress has also indicated that the Treasury Department may have
authority to treat the combination purchase of an immediate annuity Contract and
a separate deferred annuity Contract as a single annuity Contract under its
general authority to prescribe rules as may be necessary to enforce the income
tax laws.
h. Withholding
Pension and annuity distributions generally are subject to withholding for the
recipient's federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not to have tax withheld from
distributions. As of January 1, 1993, Merrill Lynch Life is generally required
to withhold on distributions under qualified Contracts.
i. Other Tax Consequences
As noted above, the foregoing discussion of the federal income tax consequences
under the Contract or Certificate issued thereunder is not exhaustive and
special rules are provided with respect to other tax situations not discussed in
this Prospectus. Further, the federal income tax consequences discussed herein
reflect Merrill Lynch Life's understanding of current law and the law, or its
interpretation by the Internal Revenue Service, may change. Federal estate and
state and local income, estate, inheritance, and other tax consequences of
ownership or receipt of distributions under a Contract depend on the individual
circumstances of each participant or recipient of the distribution. A competent
tax adviser should be consulted for further information.
QUALIFIED PLANS
The Contract is designed for use with several types of qualified plans. These
retirement plans may permit the purchase of the Certificates to accumulate
retirement savings under the plans. Adverse tax or other legal consequences to
the plan, to the participant or to both may result if the Certificate is
assigned or transferred to any individual as a means to provide benefit
payments, unless the plan complies with all legal requirements applicable to
such benefits prior to transfer of the Certificate. The tax rules applicable to
participants in qualified plans, including restrictions on contributions and
benefits, taxation of distributions, and any tax penalties, vary according to
the type of plan and the terms and conditions of the plan itself. Various tax
penalties may apply to contributions in excess of specified limits, aggregate
distributions in excess of $150,000
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<PAGE> 22
annually, distributions that do not satisfy specified requirements, and certain
other transactions with respect to qualified plans. Therefore, no attempt is
made to provide more than general information about the use of the Contracts
with the various types of qualified plans. Participants, annuitants, and
beneficiaries are cautioned that the rights of any person to any benefits under
qualified plans may be subject to the terms and conditions of the plans
themselves, regardless of the terms and conditions of the Contract. Some
retirement plans are subject to distribution and other requirements that are not
incorporated into Merrill Lynch Life's administration procedures. Owners,
participants, and beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the
Certificates comply with applicable law. Following are brief descriptions of the
various types of qualified plans in connection with which Merrill Lynch Life
will issue a Contract. When issued in connection with a qualified plan, a
Contract will be amended as necessary to conform to the requirements of the
Internal Revenue Code.
H.R. 10 Plans
The Self-Employed Individuals' Tax Retirement Act of 1962, as amended, commonly
referred to as "H.R. 10," permits self-employed individuals to establish
qualified plans for themselves and their employees. In order to establish such a
plan, a plan document, often in prototype form preapproved by the Internal
Revenue Service, is adopted and implemented by or for the self-employed person.
Purchasers of Contracts for use with H.R. 10 Plans should seek competent advice
regarding the suitability of the proposed plan documents and of the Contract to
their specific needs.
Individual Retirement Annuities and Individual Retirement Accounts
Section 408 of the Internal Revenue Code permits eligible individuals to
contribute to an individual retirement program known as an Individual Retirement
Annuity or Individual Retirement Account (each hereinafter referred to as
"IRA"). Also, distributions from certain other types of qualified plans may be
"rolled over" on a tax-deferred basis into an IRA. Sales of the Certificates for
use with or as IRAs may be subject to special disclosure requirements of the
Internal Revenue Service. Purchasers of the Contract for use with or as IRAs
will be provided with supplemental information required by the Internal Revenue
Service or other appropriate agency. Such purchasers will have the right to
revoke their purchase within 7 days of the earlier of the establishment of the
IRA or their purchase. Purchasers should seek competent advice as to the
suitability of the Contract and Certificate for use with or as IRAs.
Corporate Pension and Profit Sharing Plans
Section 401(a) of the Internal Revenue Code permits corporate employers to
establish various types of retirement plans for employees. Such retirement plans
may permit the purchase of the Contracts in order to provide benefits under the
plans. Corporate employers intending to use the Contracts in connection with
such plans should seek competent advice.
Tax-Sheltered Annuities
Section 403(b) of the Internal Revenue Code permits public school employees and
employees of certain types of religious, charitable, educational and scientific
organizations specified in Section 501(c)(3) of the Internal Revenue Code to
purchase annuity contracts and, subject to certain limitations, exclude the
amount of premiums from gross income for tax purposes. These annuity contracts
are commonly referred to as "Tax-Sheltered Annuities." Premiums excluded from
gross income will be subject to FICA taxes. Purchasers using the Contracts or
Certificates as Tax-Sheltered Annuities should seek competent advice as to
eligibility, limitations on permissible amounts of premiums and tax consequences
on distribution. Withdrawals under Tax-Sheltered Annuities which are
attributable to contributions made pursuant to salary reduction agreements are
prohibited unless made after the participant attains age 59 1/2, upon the
participant's separation of service, upon the participant's death or disability,
or for an amount not greater than the total of such contributions in the case of
hardship.
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<PAGE> 23
Section 457 Deferred Compensation ("Section 457") Plans
Under Section 457 of the Internal Revenue Code, employees and independent
contractors who perform services for tax-exempt employers may participate in a
Section 457 plan of their employer allowing them to defer part of their salary
or other compensation. The amount deferred and any income on such amount will
not be taxable until paid or otherwise made available to the employee.
The maximum amount that can be deferred under a Section 457 plan in any tax year
is ordinarily one-third of the employee's includable compensation, up to $7,500.
Includable compensation means earnings for services rendered to the employer
which is includable in the employee's gross income, but excluding any
contributions under the Section 457 plan or a Tax-Sheltered Annuity. During the
last three years before an individual attains normal retirement age additional
"catch-up" deferrals are permitted.
The deferred amounts will be used by the employer to purchase Certificates under
the Contracts. Certificates will be issued to the employer, and all account
values will be subject to the claims of the employer's creditors. The employee
has no rights or vested interest in the Contract or Certificate and is only
entitled to payment in accordance with the Section 457 plan provisions. Present
federal income tax law does not allow tax-free transfers or rollovers for
amounts accumulated in a Section 457 plan except for transfers to other Section
457 plans in certain limited cases.
PREMIUM TAXES
Various states, municipalities and jurisdictions impose a premium tax on annuity
premiums when they are received by an insurance company. In other jurisdictions,
a premium tax is paid on the contract value on the annuity date.
Merrill Lynch Life will pay these taxes when due, and a charge for any premium
taxes imposed by a state, local government or jurisdiction will be deducted from
the contract value on the annuity date. Premium tax rates vary from jurisdiction
to jurisdiction and currently range from 0% to 5%.
Premium tax rates are subject to change by law, administrative interpretations,
or court decisions. Premium tax amounts will depend on, among other things, the
participant's state or jurisdiction of residence, Merrill Lynch Life's status
within that state or jurisdiction, and the premium tax laws of that state or
jurisdiction.
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 PROVISIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes fiduciary, prohibited transaction and other requirements with respect to
employee benefit plans to which it applies. In certain circumstances these
requirements may be applicable to the management of an insurance company
account. Merrill Lynch Life believes that the account established for the
Contracts is a guaranteed contract separate account within the meaning of
Prohibited Transaction Class Exemption 81-82 and that assets attributed to the
account will not be treated as "plan assets" under regulations promulgated by
the Department of Labor. Prior to purchasing a Contract or Certificate, however,
the fiduciary responsible for investments of a plan subject to ERISA should
become fully informed regarding the relevant terms of the Contract, including
the market value adjustment and withdrawal charge, and should take account of
the anticipated liquidity needs of the plan in determining whether to purchase
the Contract or Certificate.
MORE INFORMATION ABOUT MERRILL LYNCH LIFE INSURANCE COMPANY
A. HISTORY AND BUSINESS
Merrill Lynch Life was incorporated under the laws of the State of Washington on
January 27, 1986 by Family Life Insurance Company ("Family Life") which at the
time was an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc.
("Merrill Lynch"). Merrill Lynch Life is engaged in the sale of life insurance
and annuity products. During 1986 and 1987 its insurance activities were limited
as Merrill Lynch Life sought
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<PAGE> 24
to obtain licenses from various jurisdictions to conduct life insurance and
annuity business. Merrill Lynch Life commenced the public sale of insurance
products in 1988. The products introduced during 1988 consisted of single
premium and flexible premium annuity contracts.
Effective December 28, 1990, Merrill Lynch Life entered into an indemnity
reinsurance agreement with Family Life (the "Family Life agreement"), whereby
Merrill Lynch Life agreed to indemnify Family Life for all of its liabilities
under life insurance and annuity contracts issued by it and distributed by
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"). As a result of
the Family Life agreement, Merrill Lynch Life received from Family Life
$2,361,197,000, representing the value of the statutory reserve liabilities
attributable to such contracts, excluding variable annuity contracts, less a
ceding commission payable to Family Life. In March of 1991, Family Life and
Merrill Lynch Life entered into an assumption reinsurance agreement. Under the
terms of the assumption reinsurance agreement, as state regulatory approvals are
obtained, these contracts become direct contract owner obligations of Merrill
Lynch Life. At various dates during 1991, Merrill Lynch Life and two affiliates,
Tandem Insurance Group, Inc. ("Tandem") and Royal Tandem Life Insurance Company
(now named ML Life Insurance Company of New York), assumption reinsured
substantially all of the contracts under the Family Life agreement. Merrill
Lynch Life transferred to the two affiliates assets approximately equal to the
statutory reserve liabilities attributable to the contracts assumption reinsured
by them. Contracts not assumed remain subject to the Family Life agreement, and
Merrill Lynch Life is responsible for the servicing of these contracts. Those
contracts assumed by Tandem subsequently became contracts of Merrill Lynch Life
as a result of the merger of Tandem with and into Merrill Lynch Life, as
described below.
On June 12, 1991, Family Life was sold to Financial Industries Corporation, and
contemporaneously Merrill Lynch Life became a direct wholly owned subsidiary of
Merrill Lynch Insurance Group, Inc. ("MLIG"), an indirect wholly owned
subsidiary of Merrill Lynch.
On August 30, 1991, Merrill Lynch Life redomesticated from the State of
Washington to the State of Arkansas and is subject to primary regulation by the
Arkansas Insurance Department.
On October 1, 1991, Tandem Insurance Group, Inc. ("Tandem"), an affiliate of
Merrill Lynch Life, was merged with and into Merrill Lynch Life. Tandem, which
at the time of its organization in 1952 was named Cornbelt Insurance Company,
had various names and was under various ownership until 1986. Tandem became a
wholly owned subsidiary of Tandem Financial Group, Inc. ("TFG"), a joint venture
between Merrill Lynch and The Equitable Life Assurance Society of the United
States ("the Equitable"), on July 31, 1986, and in October 1989, Merrill Lynch
purchased the remaining interest in TFG from the Equitable and became its sole
shareholder. At that time, TFG and Tandem became indirect wholly owned
subsidiaries of Merrill Lynch. On September 6, 1990, TFG changed its name to
Merrill Lynch Insurance Group, Inc.
On December 31, 1990, pursuant to an indemnity reinsurance and assumption
agreement entered into on November 14, 1990 by Tandem and Royal Tandem Life
Insurance Company, Tandem and Royal Tandem Life Insurance Company reinsured on a
100% indemnity basis all variable life insurance policies ("reinsured policies")
issued by Monarch Life Insurance Company ("Monarch Life") and sold through an
affiliate of MLPF&S. As a result, Tandem became obligated to reimburse Monarch
Life for its net amount at risk with regard to the reinsured policies. In
connection with the indemnity reinsurance agreement, assets of approximately
$553 million supporting general account reserves were transferred from Monarch
Life to Tandem.
On various dates during 1991, Tandem and Royal Tandem Life Insurance Company
assumed the reinsured policies, wherever permitted by appropriate regulatory
authorities, replacing Monarch Life. In connection with the assumption, separate
account assets and reserves associated with the reinsured policies of
approximately $2,625 million were transferred to Tandem. The aggregate face
amount of the reinsured policies assumed by Tandem was approximately $6,200
million.
Information pertaining to contract owner deposits, contract owner account
balances, and capital contributions can be found in Merrill Lynch Life's
financial statements which are contained herein.
Merrill Lynch Life is currently licensed in 49 states, the District of Columbia,
the Virgin Islands, and Guam. During 1993, life insurance and annuity sales were
made in all states Merrill Lynch Life was licensed in, with
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<PAGE> 25
the largest concentration in Florida, 16%, California, 13%, and Texas, 13%, as
measured by total contract owner deposits.
Merrill Lynch Life's insurance products are sold primarily by licensed agents
affiliated with Merrill Lynch Life Agency, Inc. and other life insurance
agencies affiliated with MLPF&S. Insurance sales will be made by career life
insurance agents whose sole responsibility is the sale and servicing of
insurance and by Financial Consultants of MLPF&S who are also licensed as
insurance agents. At September 30, 1994, approximately 11,148 agents affiliated
with Merrill Lynch Life Agencies were authorized to act for Merrill Lynch Life.
RECENT DEVELOPMENTS
The following information on Recent Developments should be read in conjunction
with the accompanying unaudited financial statements and notes thereto, in
addition to the 1993 Financial Statements and Notes to Financial Statements and
the Management's Discussion and Analysis of Financial Condition and Results of
Operations contained herein. The condensed financial statements for the nine
months ended September 30, 1994 contained in this prospectus are unaudited;
however, in the opinion of management of Merrill Lynch Life, all adjustments
(consisting only of normal recurring accruals) necessary for a fair statement of
the results of operations have been included. Results for the nine months ended
September 30, 1994 and 1993 are not necessarily indicative of annual results.
Income Statement Information
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
SEPTEMBER SEPTEMBER
30, 30,
1994 1993
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Net Investment Income............................................. $ 333,167 $ 434,415
Earnings Before Federal Income Tax................................ $ 51,436 $ 46,443
Net Earnings...................................................... $ 40,434 $ 30,707
</TABLE>
Balance Sheet Information
<TABLE>
<CAPTION>
SEPTEMBER DECEMBER
30, 31,
1994 1993
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Total Assets...................................................... $11,854,301 $12,249,577
Stockholder's Equity.............................................. $ 690,493 $ 687,055
</TABLE>
Business Overview
Merrill Lynch Life's earnings are principally derived from two sources; the net
investment income from investment of fixed rate life insurance and annuity
contract owner deposits less interest credited to contract owners, commonly
known as spread, and fees charged to variable life insurance and variable
annuity contract owners. The costs associated with acquiring contract owner
deposits are amortized over the period in which Merrill Lynch Life anticipates
holding those funds. In addition, Merrill Lynch Life incurs expenses associated
with the maintenance of inforce contracts.
Life insurance and annuity deposits received in the first nine months of 1994
increased $307.8 million to $771.8 million, when compared to the same period in
1993. The increase was primarily attributable to sales of Merrill Lynch Life's
variable annuity product.
During 1994, approximately $1.892 billion of fixed deferred annuity liabilities
will reach the expiration of their interest rate guarantee period. This
represents approximately 28% of Merrill Lynch Life's policy liabilities and
accruals as of December 31, 1993. During the first nine months of 1994,
approximately $1.599 billion of these fixed deferred annuity liabilities reached
the expiration of their interest rate guarantee period. At the expiration of an
interest rate guarantee period, the contract owner has an option to either
surrender the contract without incurring a surrender charge, or to "renew" with
an adjustment of the interest crediting rate
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<PAGE> 26
to the prevailing rate at the time of renewal. Merrill Lynch Life has offered
those contract owners electing to surrender the opportunity to exchange their
contract for either a variable annuity or market value adjusted annuity
contract. The following table summarizes the contract owners' selections for the
first nine months of 1994 and for the year ended December 31, 1993:
<TABLE>
<CAPTION>
1994 1993
--------------- ---------------
AMOUNT % AMOUNT %
------ ---- ------ ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Renewed with an adjustment to the applicable interest
crediting rate.......................................... $ 262 17% $ 273 22%
Exchanged into either the variable annuity product or the
market value adjusted annuity product offered by Merrill
Lynch Life.............................................. 735 45% 453 36%
Surrendered............................................... 602 38% 543 42%
------ ---- ------ ----
Total..................................................... $1,599 100% $1,269 100%
====== ===== ====== =====
</TABLE>
The rates of renewal, exchange and surrender experienced are consistent with
management's expectations. For 1995 and 1996, fixed deferred annuity liabilities
which will reach the expiration of their interest rate guarantee period will
decline significantly from the 1993 and 1994 levels to $453.3 million and $192.6
million, respectively.
To fund all business activities, Merrill Lynch Life maintains a high quality and
liquid investment portfolio. As of September 30, 1994, Merrill Lynch Life's
invested assets and cash equivalents less policy loans on insurance contracts
consist of approximately 75% liquid or readily marketable securities.
As of September 30, 1994, approximately $391.0 million (9.3%) of Merrill Lynch
Life's fixed maturity securities were considered non-investment grade. Merrill
Lynch Life defines non-investment grade as unsecured corporate debt obligations
which do not have a rating equivalent to Standard and Poor's BBB or higher (or
similar rating agency), and are not guaranteed by an agency of the federal
government. Non-investment grade securities are speculative and are subject to
significantly greater risks related to the creditworthiness of the issuers and
the liquidity of the market for such securities. Merrill Lynch Life carefully
selects, and closely monitors, such investments.
Results of Operations
For the nine month periods ended September 30, 1994 and 1993, Merrill Lynch Life
reported net earnings of $40.4 million and $30.7 million, respectively.
Net investment income and interest credited to policyholders' account balances
for the nine months ended September 30, 1994 as compared to the same period in
1993 have declined by approximately $121.2 million and $113.7 million,
respectively, resulting in a $7.5 million reduction in interest spread. The
reductions in net investment income, interest credited to policyholders' account
balances and interest spread are primarily attributable to the reduction in
fixed rate contracts inforce.
Merrill Lynch Life experienced net realized investment losses of $10.6 million
during the current nine month period as compared to net realized investment
gains of $32.0 million for the same period during 1993. During the first nine
months of 1994 there was significant volatility in both the equity and debt
markets with ending values generally being lower at September 30, 1994 than they
were at December 31, 1993. Reflecting the general declines in value, Merrill
Lynch Life's trading portfolios experienced $11.6 million of realized and
unrealized losses during the current period as compared to $6.0 million of
realized and unrealized gains during the same period in 1993. As well,
dispositions in the available for sale portfolios resulted in substantially
reduced net realized investment gains during the current nine month period as
compared to the same period during 1993.
Policy charge revenue increased approximately $15.6 million during the current
nine month period as compared to the same period in 1993. This increase is
primarily attributable to the 80% increase in policyholders' account balances,
as compared to December 31, 1993, of the variable annuity product.
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<PAGE> 27
The market value adjustment expense is attributable to Merrill Lynch Life's
market value adjusted annuity product. This contract provision results in a
market value adjustment to the cash surrender value of those contracts which are
surrendered before the expiration of their interest rate guarantee period. Due
to the current lower level of interest rates as compared to the average
guaranteed interest rate of the inforce contracts, this market value adjustment
generally has resulted in an expense to Merrill Lynch Life. Merrill Lynch Life's
market value adjusted annuity has experienced a decrease in surrenders during
the first nine months of 1994 as compared to the same period during 1993. The
decrease in surrender activity and the recent rise in interest rates has
resulted in the $12.8 million decrease in the market value adjustment expense.
Policy benefits decreased approximately $1.7 million from $14.1 million for the
first nine months of 1993 to $12.4 million for the current nine month period.
This decrease is primarily attributable to a reduction in mortality claims
during the current nine month period as compared to the same period during 1993.
Reinsurance premium ceded increased approximately $1.0 million from $9.4 million
during the first nine months of 1993 to $10.4 million for the current period.
This increase is primarily attributable to the increase in average attained age
of Merrill Lynch Life's life insurance policyholders. As the average age of the
policyholders increases the cost to Merrill Lynch Life of reinsurance increases.
Amortization of deferred policy acquisition costs declined $17.7 million during
the current period as compared to the same period during 1993. Merrill Lynch
Life adjusts the amortization of deferred policy acquisition costs based on
realized investment gains recognized on normal dispositions in Merrill Lynch
Life's investment portfolios. The decline in realized investment gains during
the current nine month period as compared to the same period during 1993
contributed to the reduction in amortization of deferred acquisition costs.
Additionally, contributing to the decrease in amortization is a decline in fixed
annuity contracts inforce partially offset by the increase in the variable
annuity contracts inforce.
Insurance expenses and taxes decreased $8.5 million during the current nine
month period as compared to the same period in 1993. Approximately $2.7 million
of the decrease was attributable to a period to period reduction in the amount
of allowances established for future assessments related to the rehabilitation
of insolvent and/or impaired life insurance companies. The remaining reduction
in expenses is attributable to operational efficiencies and the completion
during 1993 of certain policy administration system enhancements.
Merrill Lynch Life's effective federal income tax rate decreased from 34% during
the first nine months of 1993 to 21% for the same period during 1994 principally
as a result of recording a prior year tax adjustment during the current period.
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<PAGE> 28
B. SELECTED FINANCIAL DATA
The following selected financial data for Merrill Lynch Life should be read in
conjunction with the financial statements and notes thereto included in this
Prospectus. For additional information see "Recent Developments" on page 23.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA*
FOR THE PERIODS ENDED DECEMBER 31,
-------------------------------------------------------------------------
1993 1992 1991 1990 1989
----------- ----------- ----------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net Investment Income..... $ 586,461 $ 712,739 $ 787,603 $ 465,866 $ 352,651
Earnings Before Federal
Income Tax.............. $ 72,775 $ 25,667 $ 14,068 $ 39,784 $ 39,155
Net Earnings.............. $ 47,860 $ 17,031 $ 11,608 $ 23,977 $ 25,589
Total Assets.............. $12,249,577 $11,783,961 $12,241,054 $8,806,682** $4,603,433
Stockholder's Equity...... $ 687,055 $ 762,474 $ 741,314 $ 648,452 $ 348,933
</TABLE>
- ---------------
* The financial information presented herein has been restated to reflect the
merger of Tandem with and into Merrill Lynch Life.
** If business derived from the indemnity reinsurance agreement were excluded,
total assets in 1990 would have been $6,310,069.
C. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Financial Statements and Notes
to Financial Statements included herein. For additional information see "Recent
Developments" on page 23.
Business Environment
The current business environment remains challenging for the life insurance
industry. Major modifications to state regulations based on model laws of the
National Association of Insurance Commissioners ("NAIC"), and the process of
NAIC state accreditation are being debated and implemented by the NAIC.
Competition remains keen as innovative products are introduced to the
marketplace. Interest rates have fallen over the previous three years reaching
historically low levels during 1993. Additionally, during 1993, increases in
both corporate and individual federal income tax rates were adopted.
Both the increase in the marginal individual income tax rates and the current
interest rate environment have resulted in individual investors seeking higher
tax deferred returns than are currently available with traditional interest
sensitive products. The insurance industry has responded with variable life
insurance and variable annuity products that provide insurance features similar
to those of traditional interest sensitive products, but with the opportunity to
achieve comparatively higher returns through diversified investing in mutual
fund portfolios.
The current interest rate environment has spurred debt refinancings in both the
institutional and individual sectors. Directly related to this refinancing
activity has been an increased use of the call feature on corporate bonds and
accelerated principal repayments of mortgage-backed securities. Holders of these
securities have reinvested cash proceeds into the historically low yield curve.
This effect, coupled with the increase in the corporate federal income tax rate,
will contribute adversely to net earnings in the industry.
Summary
During 1991, Merrill Lynch Life changed its strategic marketing emphasis from
sales of fixed interest rate life insurance and annuity products to sales of
variable life insurance, variable annuity and market value adjusted annuity
products. Beginning in 1991 and continuing into 1993, Merrill Lynch Life
developed both variable life insurance and variable annuity products and
proceeded to obtain regulatory approvals to market these
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<PAGE> 29
products. Merrill Lynch Life began sales of its variable annuity product during
the second quarter of 1992 in those jurisdictions in which it had regulatory
authority. Deposits received from the sales of this product were $1.348 billion
and $169 million for 1993 and 1992, respectively. For 1993 and 1992,
approximately $649 million and $80 million, respectively, of deposits were a
result of internal transfers from Merrill Lynch Life's fixed rate annuity
products. The remaining change in sales volume is reflective of the product
being available in more jurisdictions in 1993 as compared to 1992, and the
popularity of variable annuity products during 1993.
During 1993 and 1992, Merrill Lynch Life had approximately $1.269 billion and
$1.300 billion, respectively, of fixed deferred annuities which reached the
expiration of their interest rate guarantee periods. At the expiration of an
interest rate guarantee period, the contract owner has an option to either
surrender the contract without incurring a surrender charge, or to "renew" with
an adjustment of the interest crediting rate to the prevailing rate at the time
of renewal. Merrill Lynch Life has offered those contract owners electing to
surrender the opportunity to exchange their contract for either a variable
annuity or market value adjusted annuity contract. The following table
summarizes the contract owners' selections for 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
------------- -------------
AMOUNT % AMOUNT %
------ --- ------ ---
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Renewed with an adjustment to the applicable interest
crediting rate.............................................. $ 273 22% $ 195 15%
Exchanged into either the variable annuity product or the
market value adjusted annuity product....................... 453 36% 325 25%
Surrendered................................................... 543 42% 780 60%
------ --- ------ ---
Total............................................... $1,269 100% $1,300 100%
====== === ====== ===
</TABLE>
The rates of renewal, exchange and surrender experienced are consistent with
management's projections. The increase in contracts exchanging into Merrill
Lynch Life's available annuity products is primarily attributable to the
variable annuity product being more widely available in 1993 than it was in
1992. The increase in renewals during 1993 as compared to 1992 is attributable
to the minimum contractual rate available on the fixed deferred annuity products
approximating or exceeding the crediting rates available on Merrill Lynch Life's
market value adjusted annuity product.
During 1994, Merrill Lynch Life has $1.892 billion of fixed deferred annuities
which will reach the expiration of their interest rate guarantee periods (see
"Liquidity and Capital Resources" on page 29). Merrill Lynch Life is
anticipating increases in sales volume of its variable annuity and variable life
insurance products. Partially offsetting these increases is an anticipated
decrease in sales volume of Merrill Lynch Life's market value adjusted annuity.
Merrill Lynch Life has been strategically migrating from underwriting interest
sensitive, general account products to underwriting variable, separate account
products. Such products address the need of the consumer to diversify insurance
related invested assets through the use of mutual fund portfolios and unit
investment trusts with the associated insulation of a separate account. Since
the contract owner assumes most investment risks with variable products, the
conventional risks of a general account such as interest rate risk,
asset/liability matching and asset default risk are not borne by Merrill Lynch
Life. Since Merrill Lynch Life does not bear those risks, capital needs should
be significantly reduced. In this regard, Merrill Lynch Life has developed a
comprehensive capital management plan which will continue to provide appropriate
levels of capital for the risks which Merrill Lynch Life assumes, but will allow
Merrill Lynch Life to reduce its absolute level of surplus. As a first step in
implementing this plan, on December 20, 1993, Merrill Lynch Life paid a $45
million ordinary dividend and a $75 million extraordinary dividend to MLIG.
Merrill Lynch Life received approval from the Arkansas Insurance Commissioner
prior to the declaration and payment of the extraordinary dividend.
Effective December 31, 1993, Merrill Lynch Life has adopted Statement of
Financial Accounting Standards No. 115 "Accounting for Certain Investments in
Debt and Equity Securities" ("SFAS No. 115"). (See Note 1 of the Notes to
Financial Statements.) SFAS No. 115 requires that certain invested assets be
carried at estimated fair value with the difference between fair value and
amortized cost being recorded in
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<PAGE> 30
stockholder's equity as a component of net unrealized gain (loss). The
Securities and Exchange Commission has additionally announced that companies
should adjust other assets and liabilities that would be adjusted had the
unrealized holding gains or losses been realized with corresponding credits or
charges reported directly to stockholder's equity. The effect of adopting SFAS
No. 115 was a $228 million increase in the carrying value of fixed maturity
securities offset by a $36 million decrease in deferred policy acquisition
charges and a $193 million increase in policyholders' account balances. The
impact of SFAS No. 115 on stockholder's equity was minimal. These adjustments
will ultimately be recorded in the statement of earnings at the time of sale of
the investments or withdrawal of the contract owners' liability. Additionally,
normal amortization of deferred policy acquisition costs will be unaffected.
During 1993, Merrill Lynch Life established an investment trading portfolio with
an objective of maximizing total return subject to Merrill Lynch Life's quality
guidelines. Investments in the portfolio consist primarily of marketable fixed
maturity and equity securities. Merrill Lynch Life records these securities at
estimated fair value with the change in the difference between estimated fair
value and amortized cost being recorded in net realized investment gains
(losses). At December 31, 1993, Merrill Lynch Life had $165 million invested in
this portfolio. During 1993, the portfolio contributed $19 million to earnings.
FINANCIAL CONDITION
At December 31, 1993, Merrill Lynch Life's assets were $12.250 billion, or $466
million higher than the $11.784 billion at December 31, 1992. Approximately $192
million of the increase was a result of adoption of SFAS No. 115. The remainder
of the increase was primarily attributable to sales of Merrill Lynch Life's
variable annuity product partially offset by surrenders of Merrill Lynch Life's
fixed rate annuity products. As Merrill Lynch Life strategically changes its
marketing efforts from the sale of fixed rate products to the sale of variable
products, Merrill Lynch Life's assets will be reallocated between the general
account and its separate account. As of December 31, 1993 and 1992, Merrill
Lynch Life's percentage of separate accounts assets to total assets was 38% and
27%, respectively. Merrill Lynch Life anticipates that the percentage of
separate accounts assets to total assets will continue to increase.
Merrill Lynch Life maintains a conservative investment portfolio. Merrill Lynch
Life's investment in equity securities, mortgages and real estate are
significantly below the industry average. Additionally, Merrill Lynch Life's
investment in non-investment grade bonds approximates the industry average. The
following schedule identifies Merrill Lynch Life's general account invested
assets by type:
<TABLE>
<S> <C>
Investment Grade Fixed Maturity Securities............................................ 78%
Policy Loans.......................................................................... 13%
Non-Investment Grade Fixed Maturity Securities........................................ 5%
Mortgage Loans on Real Estate......................................................... 3%
Equity Securities..................................................................... 1%
Real Estate........................................................................... 0%
---
100%
===
</TABLE>
Merrill Lynch Life's investment in collateralized mortgage obligations ("CMO")
and mortgage-backed securities ("MBS") accounts for approximately 37% and 50% of
Merrill Lynch Life's investment in fixed maturity securities as of December 31,
1993 and 1992, respectively. At December 31, 1993 and 1992, approximately 41%
and 73%, respectively, of Merrill Lynch Life's CMO and MBS holdings were fully
collateralized by the Government National Mortgage Association, the Federal
National Mortgage Association or the Federal Home Loan Mortgage Corporation.
Merrill Lynch Life held at December 31, 1993 and 1992 approximately $174 million
and $220 million, respectively, of principal only strips, interest only strips
and residuals. CMOs and MBS securities are structured to allow the investor to
determine, within certain limits, the amount of interest rate risk, prepayment
risk and default risk which the investor is willing to accept. It is the level
of risk that the investor is willing to accept that determines the degree to
which the yields on CMOs and MBS securities will exceed the yields which can be
obtained from similarly rated corporate securities.
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<PAGE> 31
The historical low interest rate environment has resulted in Merrill Lynch Life
experiencing increases in both calls of corporate bonds and accelerated
principal repayments of mortgage-backed securities during both 1993 and 1992.
During 1993 approximately $2.077 billion or 64% of proceeds from disposal of
bonds was attributable to calls and mortgage backed security repayments. The net
cash inflows from the investment portfolios, including interest, calls,
repayments and maturities, have been reinvested at lower yields than the
investments from which the cash inflow was generated.
During 1993 eight commercial mortgage loans with a carrying value of $30 million
were foreclosed upon by Merrill Lynch Life. The carrying values approximate the
fair values of the properties. This compares with one foreclosure during 1992
with a carrying value of $3 million. The increase in foreclosures was
anticipated by Merrill Lynch Life and the carrying value of the mortgages
foreclosed upon had previously been adjusted. Merrill Lynch Life anticipates
further foreclosures in its commercial real estate portfolio. Substantially all
Merrill Lynch Life's investments in mortgage loans have balloon payments due at
the expiration of their loan term. It is anticipated that for those loans where
the securitized property is performing well in its market, the mortgage will be
fully satisfied at the maturity date as the borrower obtains alternative
financing. For those loans where the securitized property is not performing well
in its market, it is anticipated that the borrowers will be unable to obtain
alternative financing. Merrill Lynch Life will determine on an individual loan
basis the appropriate actions to maximize the return on its investment,
including both restructurings and foreclosures. Merrill Lynch Life continues to
carry reserves for future potential losses from mortgage loans.
As of December 31, 1993, Merrill Lynch Life had 130,099 life insurance and
annuity contracts in-force with interest rate guarantees. The estimated average
rate of interest credited on behalf of contract owners was 6.45% during 1993.
The liabilities related to insurance contracts with interest rate guarantees
were supported by invested assets with an estimated effective yield of 8.25%
during 1993.
During 1991, and to a lesser extent 1992, there were certain highly publicized
life insurance insolvencies. Merrill Lynch Life has utilized public information
to estimate what future assessments it will incur as a result of these
insolvencies. At December 31, 1993 and 1992, Merrill Lynch Life had accrued an
estimated liability for future guaranty fund assessments of $28 million and $27
million, respectively. Merrill Lynch Life regularly monitors public information
regarding insurer insolvencies and will adjust its estimated liability where
appropriate. (See Note 9 of the Notes to the Financial Statements for more
information concerning guaranty fund assessments.)
Liquidity and Capital Resources
Merrill Lynch Life's liquidity requirements include the payment of sales
commissions and other underwriting expenses and the funding of its contractual
obligations for the life insurance and annuity contracts it has in force.
Merrill Lynch Life has developed and utilizes a cash flow projection system and
regularly performs asset/liability duration matching in the management of its
asset and liability portfolios.
As previously noted, during 1994, Merrill Lynch Life will have $1.892 billion of
fixed deferred annuities reaching the expiration of their interest rate
guarantee periods. Merrill Lynch Life anticipates that approximately 80% of
these liabilities will either externally surrender or exchange into Merrill
Lynch Life's variable annuity or market value adjusted annuity products. In
either circumstance, Merrill Lynch Life will require cash to fund the surrender
benefit or the transfer of the liability to a separate account. During 1991, in
anticipation of the liquidity needs required to fund the surrenders and
exchanges experienced during 1993 and 1992 and anticipated for 1994, Merrill
Lynch Life initiated a program whereby the duration of its investment portfolio
was shortened and the quality of the investment portfolio improved. This program
was substantially completed during 1991.
Merrill Lynch Life anticipates funding the cash requirements of the projected
policy surrenders and exchanges utilizing cash from operations, normal
investment maturities and anticipated calls and repayments, consistent with 1992
and 1993. As of December 31, 1993 Merrill Lynch Life had $4.699 billion of cash,
short-term investments and investment grade publicly-traded bonds which could be
liquidated if funds were required.
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<PAGE> 32
In order to continue to market life insurance and annuity products, Merrill
Lynch Life must meet or exceed the statutory capital and surplus requirements of
the insurance departments of the states in which it conducts business. Statutory
accounting practices differ from generally accepted accounting principles in two
major respects: under statutory accounting practices, the acquisition costs of
new business are charged to expense; and the required additions to statutory
reserves for new business in some cases may initially exceed the statutory
revenues attributable to such business. These practices result in a reduction of
statutory income and surplus at the time of recording new business.
The NAIC has developed and implemented, effective December 31, 1993, the Risk
Based Capital ("RBC") adequacy monitoring system. The RBC calculates the amount
of adjusted capital which a life insurance company should have based upon that
company's risk profile. The NAIC has established four different levels of
regulatory action with respect to the RBC adequacy monitoring system. Each of
these levels may be triggered if an insurer's total adjusted capital is less
than a corresponding level of RBC. (See Note 5 of the Notes to Financial
Statements for a complete explanation of these levels.) As of December 31, 1993,
based on the RBC formula, Merrill Lynch Life's total adjusted capital level was
in excess of the minimum amount of capital required to avoid regulatory action.
Merrill Lynch Life believes that it will be able to fund the capital and surplus
requirements of projected new business from current statutory earnings and
existing statutory capital and surplus. If sales of new business significantly
exceeds projections, Merrill Lynch Life may have to look to its parent and other
affiliated companies to provide the capital or borrowings necessary to support
its current marketing efforts. Merrill Lynch Life's future marketing efforts
could be hampered should its parent and/or affiliates be unwilling to commit
additional funding.
Results of Operations
Merrill Lynch Life's gross earnings are principally derived from two sources:
the net income from investment of fixed rate life insurance and annuity contract
owner deposits less interest credited to contract owners, commonly known as
spread; and the charges imposed on variable life insurance and variable annuity
contracts. The costs associated with acquiring contract owner deposits are
amortized over the period in which Merrill Lynch Life anticipates holding those
funds. In addition, Merrill Lynch Life incurs expenses associated with the
maintenance of in-force contracts.
1993 compared to 1992
Merrill Lynch Life recorded net earnings of $48 million and $17 million for 1993
and 1992, respectively.
Net investment income and interest credited to policyholders' account balances
for 1993 as compared to 1992 have declined by approximately $126 million and $92
million, respectively, resulting in a net decline in interest spread of $34
million. The decline in interest spread is attributable to the low interest rate
environment and a declining block of fixed rate life insurance and annuity
contracts, partially offset by adjustment of the guaranteed interest crediting
rate to the prevailing rate on those contracts which have reached the end of
their interest rate guarantee period.
Merrill Lynch Life experienced net realized investment gains of $63 million
during 1993 as compared to net realized investment losses of $(30) million for
the same period during 1992. Approximately $28 million of the increase in net
realized investment gains was attributable to sales of investments to fund
surrenders of Merrill Lynch Life's market value adjusted annuity product. The
investment trading portfolio contributed $8.0 million of investment gains during
1993. During 1993 and 1992 Merrill Lynch Life established $14 million and $41
million, respectively, of valuation allowances for invested assets. The
remaining $30 million increase in realized investment gains is attributable to
normal trading activity in Merrill Lynch Life's investment portfolios.
Policy charge revenue increased approximately $14 million during 1993 as
compared to 1992 primarily as a result of an increase in the number of variable
annuity contracts in-force due to current sales volume.
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<PAGE> 33
The market value adjustment expense is attributable to Merrill Lynch Life's
market value adjusted annuity product. This contract provision results in a
market value adjustment to the cash surrender value of those contracts which are
surrendered before the expiration of their interest rate guarantee period. Due
to the decline in interest rates, this market value adjustment has resulted in
an expense to Merrill Lynch Life. Merrill Lynch Life's market value adjusted
annuity has experienced an increase in surrenders during 1993 as compared to
1992. Many of these contract owners have exchanged their contracts for variable
annuity contracts sold by Merrill Lynch Life or its competitors. The increase in
surrender activity has resulted in the $25 million increase in the market value
adjustment expense. Offsetting this expense were net realized investment gains
attributable to the sale of investments to fund the surrenders.
Policy benefits increased approximately $5 million from $12 million for 1992 to
$17 million for 1993. Merrill Lynch Life's variable annuity product includes a
contract provision which guarantees a minimum death benefit. The Company accrues
the expected cost of this benefit and records the expense in policy benefits.
The increase in policy benefits during 1993 as compared to 1992 is attributable
to this accrual and is reflective of the growth in variable annuity contracts
in-force.
Merrill Lynch Life adjusts the amortization of deferred policy acquisition costs
based on realized investment gains recognized on normal trading activity in
Merrill Lynch Life's investment portfolios. The $21 million increase in
amortization of deferred policy acquisition costs is primarily attributable to
the increase during 1993 in realized investment gains.
Insurance expenses and taxes decreased $25 million during 1993 as compared to
1992. Approximately $16 million of the decrease was attributable to a period to
period reduction in the amount of allowances established for future assessments
related to the rehabilitation of insolvent and/or impaired life insurance
companies. Also, beginning in 1991, Merrill Lynch Life began initiatives to
review and modify its policy administration systems with the aim of establishing
cost and operational efficiencies and improving customer service. One of the
major projects associated with these initiatives was completed during the second
quarter of 1993, resulting in a $3 million reduction in systems development
expenses, as compared to 1992. The remaining reduction in expenses is a result
of operational efficiencies.
During 1993 the Federal corporate income tax rate was increased from 34% to 35%.
The increased rate was utilized in revaluing the deferred tax asset and resulted
in a $631,000 decrease in the deferred tax provision.
1992 compared to 1991
Merrill Lynch Life recorded net earnings of $17 million and $12 million for 1992
and 1991, respectively.
Net investment income declined approximately $75 million during 1992 as compared
to 1991. The decline in net investment income was attributable to multiple
factors including the 1991 shortening of the investment portfolio duration, the
reduction in total investments as a result of contract surrenders, and the
current interest rate environment.
Net realized investment losses increased $8 million from $22 million during 1991
to $30 million during 1992. During 1992, Merrill Lynch Life established a $41
million valuation allowance on the mortgage loans on real estate portfolio. This
valuation allowance was partially offset by net gains on the sale of fixed
maturity securities.
Interest credited to contract owners' account balances declined $93 million
during 1992 compared to 1991 as a result of contract surrenders and the
resetting of interest rates on contract renewals.
During 1992 and 1991, Merrill Lynch Life underwrote life insurance and annuity
products of approximately $217 million and $437 million, respectively. The
decrease was attributable to management's decision to significantly de-emphasize
sales of fixed rate products. As discussed previously, the product development
and regulatory approvals for the variable products were in progress during 1992
and substantially completed during 1992. The unavailability of the variable
products during a portion of 1992 as well as not having the variable products
approved by the regulatory authorities in all jurisdictions in which Merrill
Lynch Life does business significantly impacted Merrill Lynch Life's marketing
efforts for that period.
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<PAGE> 34
Segment Information
Merrill Lynch Life's operations consist of one business segment, which is the
sale of life insurance and annuity products. Merrill Lynch Life is not dependent
upon any single customer, and no single customer accounted for more than 10% of
its revenues during 1993.
Inflation
Merrill Lynch Life's operations have not been materially impacted by inflation
and changing prices during the preceding three years.
D. REINSURANCE
Portions of life insurance risks are reinsured with other companies. Merrill
Lynch Life has reinsurance agreements with a number of other insurance companies
for individual life insurance. The maximum retention on any one life is
$500,000.
E. CONTRACT OWNER ACCOUNT BALANCES
Merrill Lynch Life records on its books liabilities for life insurance and
annuity products which are equal to the full accumulation value of such
contracts plus a mortality provision for life insurance products, which will be
sufficient to meet Merrill Lynch Life's contract obligations at their maturities
or in the event of a participant's death.
F. INVESTMENTS
Merrill Lynch Life's assets must be invested in accordance with applicable state
laws. These laws govern the nature and quality of investments that may be made
by life insurance companies and the percentage of their assets that may be
committed to any particular type of investment. In general, these laws permit
investments, within specified limits and subject to certain qualifications, in
federal, state, and municipal obligations, corporate bonds, preferred or common
stocks, real estate mortgages, real estate and certain other investments. All of
Merrill Lynch Life's assets, except for separate account assets supporting
variable products, are available to meet its obligations under the Contracts.
Merrill Lynch Life makes investments in accordance with investment guidelines
that take into account investment quality, liquidity and diversification, and
invests assets supporting Contract guarantees primarily in investment grade
fixed income assets such as mortgage-backed securities, collateralized mortgage
obligations and corporate debentures. At December 31, 1993 invested assets
supporting Contract guarantees consisted of $5,597 million of fixed maturity
securities available for sale, $144 million of fixed maturity securities held
for trading, $925 million of policy loans, $191 million of mortgage loans on
real estate, $25 million of equity securities available for sale, $21 million of
equity securities held for trading and $30 million of real estate.
At December 31, 1993, approximately 69% of Merrill Lynch Life's invested assets
and cash equivalents supporting Contract guarantees consisted of liquid or
readily marketable securities.
At December 31, 1993, approximately $1,615 million was invested in fixed
maturity securities rated BBB by Standard and Poor's (or similar rating agency).
Fixed maturity securities rated BBB may have speculative characteristics and
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity of the issuer to make principal and interest payments than
is the case with higher rated fixed maturity securities.
At December 31, 1993, approximately $279 million (4.9%) of Merrill Lynch Life's
fixed maturity securities was invested in securities considered non-investment
grade. Merrill Lynch Life defines non-investment grade as unsecured corporate
debt obligations which do not have a rating equivalent to Standard and Poor's
(or
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<PAGE> 35
similar rating agency) BBB or higher and are not guaranteed by an agency of the
federal government. Non-investment grade securities are speculative and are
subject to significantly greater risks related to the creditworthiness of the
issuers and the liquidity of the market for such securities. Merrill Lynch Life
carefully selects, and closely monitors, such investments.
G. COMPETITION
Merrill Lynch Life is engaged in a business that is highly competitive because
of the large number of stock and mutual life insurance companies and other
entities marketing insurance products. There are approximately 2,100 stock,
mutual and other types of insurers in the life insurance business in the United
States, a number of which are substantially larger than Merrill Lynch Life.
H. CERTAIN AGREEMENTS
Investment Management Agreement
Merrill Lynch Life has entered into an investment management agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"), a subsidiary of Merrill Lynch,
pursuant to which MLAM provides investment management and related accounting
services with respect to Merrill Lynch Life's publicly traded investments.
Merrill Lynch Life pays a fee to MLAM for these services. Merrill Lynch Life
paid reimbursements of $2.0 million, $2.8 million, $3.7 million and $3.3 million
during the nine months ended September 30, 1994 and the years ended December 31,
1993, 1992 and 1991, respectively, to MLAM for such services.
Service Agreement
Merrill Lynch Life and MLIG are parties to a service agreement pursuant to which
MLIG has agreed to provide certain data processing, legal, actuarial,
management, advertising and other services to Merrill Lynch Life. Expenses
incurred by MLIG in relation to this service agreement are reimbursed by Merrill
Lynch Life on an allocated cost basis. Charges billed to Merrill Lynch Life by
MLIG pursuant to the agreement were $34.9 million, $55.8 million, $63.3 million
and $78.3 million for the nine months ended September 30, 1994 and for the years
ended December 31, 1993, 1992 and 1991, respectively.
General Agency Agreement
In addition, Merrill Lynch Life has entered into a general agency agreement with
Merrill Lynch Life Agency, Inc. ("MLLA") pursuant to which registered
representatives of MLPF&S who are also Merrill Lynch Life's licensed insurance
agents solicit applications for contracts issued by Merrill Lynch Life. MLLA is
paid commissions for the contracts sold by such agents. Commissions paid to MLLA
by Merrill Lynch Life under the general agency agreement were $69.0 million,
$67.1 million, $25.2 million and $27.9 million during the nine months ended
September 30, 1994 and the years ended December 31, 1993, 1992 and 1991,
respectively. (See "Distribution of the Contracts" on page 16.)
I. EMPLOYEES
Merrill Lynch Life, as a result of its Management Services Agreement with MLIG,
has no direct employees. Instead, various management services are provided by
MLIG, as described above under "Service Agreement". The cost of these services
is allocated to Merrill Lynch Life.
Certain officers of Merrill Lynch Life are also officers of ML Life Insurance
Company of New York and their salaries are allocated between the two companies.
(See "Directors and Executive Officers" on page 35.)
J. PROPERTIES
Merrill Lynch Life's home office is located in Little Rock, Arkansas. In
addition, personnel performing services for Merrill Lynch Life pursuant to its
Management Services Agreement operate in MLIG office space. Merrill Lynch
Insurance Group Services, Inc. ("MLIGS"), an affiliate of MLIG, owns office
space in
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<PAGE> 36
Jacksonville, Florida. MLIGS also subleases certain office space in Springfield,
Massachusetts from Monarch Life Insurance Company. MLIG occupies certain office
space in Plainsboro, New Jersey through Merrill Lynch. An allocable share of the
cost of each of these premises is paid by Merrill Lynch Life through the service
agreement with MLIG.
K. STATE REGULATION
Merrill Lynch Life is subject to the laws of the State of Arkansas governing
insurance companies and to the regulations of the Arkansas Insurance Department
(the "Insurance Department"). A detailed financial statement in the prescribed
form (the "Annual Statement") is filed with the Insurance Department each year
covering Merrill Lynch Life's operations for the preceding year and its
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. Merrill Lynch Life's books and accounts are subject to review by the
Insurance Department at all times. A full examination of Merrill Lynch Life's
operations is conducted periodically by the Insurance Department and under the
auspices of the National Association of Insurance Commissioners.
In addition, Merrill Lynch Life is subject to regulation under the insurance
laws of all jurisdictions in which it operates. The laws of the various
jurisdictions establish supervisory agencies with broad administrative powers
with respect to various matters, including licensing to transact business,
overseeing trade practices, licensing agents, approving contract forms,
establishing reserve requirements, fixing maximum interest rates on life
insurance contract loans and minimum rates for accumulation of surrender values,
prescribing the form and content of required financial statements and regulating
the type and amounts of investments permitted. Merrill Lynch Life is required to
file the Annual Statement with supervisory agencies in each of the jurisdictions
in which it does business, and its operations and accounts are subject to
examination by these agencies at regular intervals.
The National Association of Insurance Commissioners ("NAIC") has adopted several
regulatory initiatives designed to improve the surveillance and financial
analysis regarding the solvency of insurance companies in general. These
initiatives include the development and implementation of a risk-based capital
formula for determining adequate levels of capital and surplus. Insurance
companies are required to calculate their risk-based capital in accordance with
this formula and to include the results in their Annual Statement. It is
anticipated that these standards will have no significant effect upon Merrill
Lynch Life. For additional information about the risk-based capital adequacy
monitoring system and Merrill Lynch Life, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources" on page 29.
In addition, many states regulate affiliated groups of insurers, such as Merrill
Lynch Life, and its affiliates, under insurance holding company legislation.
Under such laws, inter-company transfers of assets and dividend payments from
insurance subsidiaries may be subject to prior notice or approval, depending on
the size of the transfers and payments in relation to the financial positions of
the companies involved.
Under insurance guaranty fund laws in most states, insurers doing business
therein can be assessed (up to prescribed limits) for contract owner losses
incurred by other insurance companies which have become insolvent. Most of these
laws provide that an assessment may be excused or deferred if it would threaten
an insurer's own financial strength. For information regarding Merrill Lynch
Life's estimated liability for future guaranty fund assessments, see Note 9 of
Notes to Financial Statements.
Although the federal government generally does not directly regulate the
business of insurance, federal initiatives often have an impact on the business
in a variety of ways. Certain insurance products of Merrill Lynch Life are
subject to various federal securities laws and regulations. In addition, current
and proposed federal measures which may significantly affect the insurance
business include regulation of insurance company solvency, employee benefit
regulation, removal of barriers preventing banks from engaging in the insurance
business, tax law changes affecting the taxation of insurance companies and the
tax treatment of insurance products and its impact on the relative desirability
of various personal investment vehicles.
34
<PAGE> 37
DIRECTORS AND EXECUTIVE OFFICERS
Merrill Lynch Life's directors and executive officers and their positions with
the Company are as follows:
<TABLE>
<CAPTION>
NAME (AGE) POSITION(S) WITH THE COMPANY
- --------------------------------------------- ---------------------------------------------
<S> <C>
Anthony J. Vespa (52)........................ Chairman of the Board, President, and Chief
Executive Officer
Joseph E. Crowne (47)........................ Director, Senior Vice President, Chief
Financial Officer, Chief Actuary, and
Treasurer
Barry G. Skolnick (42)....................... Director, Senior Vice President, General
Counsel, and Secretary
David M. Dunford (45)........................ Director, Senior Vice President, and Chief
Investment Officer
John C. R. Hele (35)......................... Director and Senior Vice President
Allen N. Jones (51).......................... Director
Robert J. Boucher (48)....................... Senior Vice President, Variable Life
Administration
</TABLE>
Each director is elected to serve until the next annual meeting of shareholders
or until his or her successor is elected and shall have qualified. Some
directors have held various executive positions with insurance company
subsidiaries of the Company's indirect parent, Merrill Lynch & Co., Inc. The
principal positions of the Company's directors and executive officers for the
past five years are listed below:
Mr. Vespa joined Merrill Lynch Life in January 1994. Since February 1994, he has
held the position of Senior Vice President of Merrill Lynch, Pierce, Fenner &
Smith Incorporated. From February 1991 to February 1994, he held the position of
District Director and First Vice President of Merrill Lynch, Pierce, Fenner &
Smith Incorporated. From September 1988 to February 1991, he held the position
of Senior Resident Vice President of Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
Mr. Crowne joined Merrill Lynch Life in June 1991. From January 1989 to May
1991, he was a Principal with Coopers & Lybrand.
Mr. Skolnick joined Merrill Lynch Life in November 1990. He joined Merrill
Lynch, Pierce, Fenner & Smith Incorporated in July 1984. Since May 1992, he has
held the position of Assistant General Counsel of Merrill Lynch & Co., Inc. and
First Vice President of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
Prior to May 1992, he held the position of Senior Counsel of Merrill Lynch &
Co., Inc.
Mr. Dunford joined Merrill Lynch Life in July 1990. He joined Merrill Lynch,
Pierce, Fenner & Smith Incorporated in September 1989. Prior to September 1989,
he held the position of President of Travelers Investment Management Co.
Mr. Hele joined Merrill Lynch Life in December 1990. He joined Merrill Lynch,
Pierce, Fenner & Smith Incorporated in August 1988.
Mr. Jones joined Merrill Lynch Life in June 1992. Since May 1992, he has held
the position of Senior Vice President of Merrill Lynch, Pierce, Fenner & Smith
Incorporated. From June 1992 to February 1994, he held the position of Chairman
of the Board, President, and Chief Executive Officer of Merrill Lynch Life .
From January 1992 to June 1992, he held the position of First Vice President of
Merrill Lynch, Pierce, Fenner & Smith Incorporated. From January 1991 to January
1992, he held the position of District Director of Merrill Lynch, Pierce, Fenner
& Smith Incorporated. Prior to January 1991, he held the position of Senior
Regional Vice President of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
Mr. Boucher joined Merrill Lynch Life in May 1992. Prior to May 1992, he held
the position of Vice President of Monarch Financial Services, Inc. (formerly
Monarch Resources, Inc.).
No shares of Merrill Lynch Life are owned by any of its directors or executive
officers, as it is a wholly owned subsidiary of Merrill Lynch Insurance Group,
Inc. The directors and executive officers of Merrill Lynch Life,
35
<PAGE> 38
both individually and as a group, own less than one percent of the outstanding
shares of common stock of Merrill Lynch & Co., Inc.
EXECUTIVE COMPENSATION
Certain executive officers and directors of Merrill Lynch Life are also
executive officers and directors of ML Life Insurance Company of New York ("ML
of New York"), and the salaries of all such individuals are allocated between
Merrill Lynch Life and ML of New York.
COMPENSATION TABLES AND OTHER INFORMATION
The following tables set forth information with respect to the former Chief
Executive Officer and the four most highly compensated executive officers of
Merrill Lynch Life as to whom the total annual salary and bonus for the fiscal
year ended December 31, 1993 paid by Merrill Lynch Life exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
AWARDS(1) PAYOUTS
----------------------- ---------
RESTRICTED LONG-TERM
ANNUAL COMPENSATION STOCK SECURITIES INCENTIVE
-------------------------- AWARDS UNDERLYING PLAN ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (2)(3)(4) OPTIONS PAYOUTS COMPENSATION
- ---------------------------------- ---- -------- -------- ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Allen N. Jones 1993 $ 68,700 $288,900 $ 44,138 4,077 $ 0 9,733(6)
Chairman of the Board, President 1992 0 400,273 120,915 7,224 0 0
and Chief Executive Officer
(June 1992 through February 1994)
Joseph E. Crowne 1993 109,800 219,600 32,940 1,017 0 5,766(6)
Senior Vice President, Chief 1992 134,195 200,601 39,619 794 0 1,621
Actuary and Chief Financial 1991 68,000 91,000 36,697 855 0 0
Officer (Since June 1991)
David M. Dunford 1993 159,950 173,660 41,130 1,270 0 5,143(6)
Senior Vice President, Chief 1992 160,650 131,779 39,471 791 0 2,636
Investment Officer 1991 166,000 118,000 38,328 893 0 0
Robert J. Boucher 1993 107,000 192,600 38,520 1,190 0 6,583(6)
Senior Vice President, Variable 1992 69,404 119,930 39,520 792 0 2,139
Life Administration (Since May
1992)
Barry G. Skolnick 1993 84,150 153,000 51,638 1,591 0(5) 5,701(6)
Senior Vice President, General 1992 81,167 88,269 49,604 986 12,018 2,491
Counsel 1991 92,000 95,000 37,104 865 0 0
</TABLE>
- ---------------
(1) Awards were made in January or February of the succeeding fiscal year for
performance in the year indicated.
(2) Amounts shown are for awards granted in February 1994 for performance in
1993, in February 1993 for performance in 1992, and in February 1992 for
performance in 1991. Awards shown include equal numbers of Restricted
Shares and Restricted Units. All awards have been valued for this table
using closing prices of Common Stock of Merrill Lynch & Co. on the
Consolidated Transaction Reporting System on the dates of grant of such
awards; the closing price on February 1, 1994, the date of the grant for
performance in 1993, was $43.875. Such shares and units generally have four
year vesting periods, but can vest earlier upon the achievement of specific
cumulative, after-tax return on equity ("Cumulative ROE") goals.
Specifically, shares and units granted in February 1994 may vest at the end
of the 1995 or 1996 fiscal year upon the achievement of a Cumulative ROE of
60%; shares and units granted in February 1993 may vest at the end of the
1994 or the 1995 fiscal year upon the achievement of a Cumulative ROE of
45%. Shares and units granted in 1992 vested at the end of the 1993 fiscal
year based on the achievement of a Cumulative ROE of 40%.
(3) Dividends are paid on unvested Restricted Shares and dividend equivalents
are paid on unvested Restricted Units. Such dividends and dividend
equivalents are equal in amount to the dividends paid on shares of Merrill
Lynch & Co. Common Stock.
36
<PAGE> 39
(4) The number and value of Restricted Shares and Restricted Units held by
executive officers named in the table as of December 31, 1993 are as
follows: Mr. Jones (1,806 shares and 1,806 units--$151,704); Mr. Crowne
(592 shares and 592 units--$49,728); Mr. Dunford (590 shares and 590
units--$49,560); Mr. Boucher (590 shares and 590 units--$49,560); and Mr.
Skolnick (741 shares and 741 units-- $62,244). These amounts do not include
Restricted Shares and Restricted Units awarded in 1994 for performance in
1993.
(5) Amount shown consists of cash payments, under Merrill Lynch & Co.'s
now-expired ROE Incentive Compensation Plan, made in 1992 based on the
return on equity achieved by Merrill Lynch & Co. in 1991.
(6) Amounts shown for 1993 consist of the following: (i) contributions made in
1993 by Merrill Lynch Life to accounts of employees under the 401(k)
Savings and Investment Plan--Mr. Jones ($687), Mr. Dunford ($1,371), Mr.
Boucher ($1,284) and Mr. Skolnick ($1,148); (ii) allocations made in 1993
to accounts of employees under the defined contribution retirement program
(including allocations and cash payments made because of limitations
imposed by the Internal Revenue Code)--Mr. Jones ($9,046), Mr. Crowne
($3,021), Mr. Dunford ($3,772), Mr. Boucher ($5,299) and Mr. Skolnick
($4,554); and (iii) contributions made in 1993 to account of employee under
the Employee Stock Purchase Plan--Mr. Crowne ($2,745).
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
FISCAL OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME YEAR(1) GRANTED FISCAL YEAR ($ PER SHARE) DATE(2) VALUE(3)
- ------------------------------- ------- ---------- ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Allen N. Jones................. 1993 4,077 .09% $40.625 1/26/2004 $ 48,068
Joseph E. Crowne............... 1993 1,017 .02% $40.625 1/26/2004 11,990
David M. Dunford............... 1993 1,270 .03% $40.625 1/26/2004 14,973
Robert J. Boucher.............. 1993 1,190 .03% $40.625 1/26/2004 14,030
Barry G. Skolnick.............. 1993 1,591 .03% $40.625 1/26/2004 18,758
</TABLE>
- ---------------
(1) Reflects awards made in January 1994 for performance in 1993. Does not
include awards made in January 1993 for performance in 1992; these awards
were reflected in Merrill Lynch Life's Prospectus for the Contracts dated
May 1, 1993.
(2) All options are exercisable as follows: 25% after one year, 50% after two
years, 75% after three years, and 100% after four years.
(3) Valued using a modified Black-Scholes option pricing model. The exercise
price of each option ($40.625) is equal to the average of the high and low
prices on the Consolidated Transaction Reporting System of a share of
Merrill Lynch & Co. Common Stock on January 26, 1994, the date of grant. The
assumptions used for the variables in the model were: 27% volatility (which
is the volatility of the Common Stock for the 36 months preceding grant); a
6.03% risk-free rate of return (which is the yield as of January 26, 1994
(the date of grant) on a U.S. Strip Treasury zero-coupon bond expiring in
February 2004); a 2% dividend yield (which was the dividend yield on the
date of grant); and a 10-year option term (which is the term of the option
when granted). A discount of 25% was applied to the option value yielded by
the model to reflect the non-transferability of employee options. The actual
gain executives will realize on the options will depend on the future price
of the Common Stock and cannot be accurately forecast by application of an
option pricing model.
37
<PAGE> 40
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Allen N. Jones................ 0 $ 0 0 0 0 $ 0
Joseph E. Crowne.............. 0 0 428 2,870 5,283 28,826
David M. Dunford.............. 2,423 91,091 447 7,767 5,888 181,224
Robert J. Boucher............. 0 0 72 1,800 888 15,634
Barry G. Skolnick............. 580 15,927 433 4,429 5,345 68,478
</TABLE>
- ---------------
(1) This valuation represents the difference between $42.00, the closing price
of Merrill Lynch & Co. Common Stock on December 31, 1993 on the Consolidated
Transaction Reporting System, and the exercise price of these options.
Directors of Merrill Lynch Life receive no compensation in addition to their
compensation as officers of Merrill Lynch Life.
LEGAL PROCEEDINGS
There is no material pending litigation to which Merrill Lynch Life is a party
or of which any of its property is the subject, and there are no legal
proceedings contemplated by any governmental authorities against Merrill Lynch
Life of which it has any knowledge.
LEGAL MATTERS
The organization of Merrill Lynch Life, its authority to issue the Contracts,
and the validity of the form of the Contracts have been passed upon by Barry G.
Skolnick, Merrill Lynch Life's Senior Vice President and General Counsel.
Sutherland, Asbill & Brennan of Washington, D.C. has provided advice on certain
matters relating to federal securities laws.
EXPERTS
The financial statements of Merrill Lynch Life as of December 31, 1993 and 1992
and for each of the three years in the period ended December 31, 1993 included
in this Prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein, and have been so included
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing. Other financial statements included in the
Prospectus are unaudited. Deloitte & Touche LLP's principal business address is
Two World Financial Center, New York, New York 10281-1433.
REGISTRATION STATEMENT
Registration statements have been filed with the Securities and Exchange
Commission under the Securities Act of 1933 that relate to the Contract. 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.
38
<PAGE> 41
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly-owned subsidiary of Merrill Lynch Insurance Group,
Inc.)
- -------------------------------------------------------------------------------
BALANCE SHEETS
(Dollars in Thousands) (Unaudited)
===============================================================================
<TABLE>
<CAPTION>
ASSETS September 30, December 31,
- ------ 1994 1993
-------------- --------------
<S> <C> <C>
INVESTMENTS:
Fixed maturity securities available for sale, at estimated fair value
(amortized cost: 1994 - $4,121,412; 1993 - $5,369,236) $ 4,042,858 $ 5,597,359
Fixed maturity securities held for trading, at estimated fair value
(amortized cost: 1994 - $146,735; 1993 - $140,635) 141,649 144,035
Equity securities available for sale, at estimated fair value
(cost: 1994 - $8,965; 1993 - $24,424) 10,605 24,970
Equity securities held for trading, at estimated fair value
(cost: 1994 - $11,336; 1993 - $19,694) 11,568 20,585
Mortgage loans on real estate 153,663 191,214
Real estate available for sale 24,557 29,761
Policy loans on insurance contracts 969,130 924,579
------------- -------------
Total Investments 5,354,030 6,932,503
CASH AND CASH EQUIVALENTS 96,797 122,218
ACCRUED INVESTMENT INCOME 101,782 120,337
DEFERRED POLICY ACQUISITION COSTS 434,623 318,903
FEDERAL INCOME TAXES - DEFERRED 46,026 16,878
REINSURANCE RECEIVABLES 1,960 1,190
RECEIVABLES FROM AFFILIATES - NET 3,605 789
OTHER ASSETS 31,818 21,481
SEPARATE ACCOUNTS ASSETS 5,783,660 4,715,278
------------- -------------
TOTAL ASSETS $ 11,854,301 $ 12,249,577
============= =============
See notes to financial statements. (Continued)
</TABLE>
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly-owned subsidiary of Merrill Lynch Insurance Group,
Inc.)
- -------------------------------------------------------------------------------
BALANCE SHEETS
(Concluded) (Dollars in Thousands) (Unaudited)
===============================================================================
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY September 30, December 31,
- ------------------------------------ 1994 1993
-------------- --------------
<S> <C> <C>
LIABILITIES:
POLICY LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 5,272,934 $ 6,691,811
Claims and claims settlement expenses 25,711 20,295
------------- -------------
Total policy liabilities and accruals 5,298,645 6,712,106
OTHER POLICYHOLDER FUNDS 13,413 28,768
LIABILITY FOR GUARANTY FUND ASSESSMENTS 25,113 28,083
OTHER LIABILITIES 49,302 68,165
FEDERAL INCOME TAXES - CURRENT 9,213 10,122
SEPARATE ACCOUNTS LIABILITIES 5,768,122 4,715,278
------------- -------------
Total Liabilities 11,163,808 11,562,522
------------- -------------
STOCKHOLDER'S EQUITY:
Common stock, $10 par value - 200,000 shares
authorized, issued and outstanding 2,000 2,000
Additional paid-in capital 637,590 637,590
Retained earnings 88,294 47,860
Net unrealized investment loss (37,391) (395)
------------- -------------
Total Stockholder's Equity 690,493 687,055
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 11,854,301 $ 12,249,577
============= =============
</TABLE>
See notes to financial statements.
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly-owned subsidiary of Merrill Lynch Insurance Group,
Inc.)
- ------------------------------------------------------------------------------
STATEMENTS OF EARNINGS
(Dollars in Thousands) (Unaudited)
===============================================================================
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------------------
1994 1993
-------------- --------------
<S> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 333,167 $ 454,415
Net realized investment gains (losses) (10,587) 32,028
Policy charge revenue 83,211 67,653
------------- -------------
Total Revenues 405,791 554,096
------------- -------------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 243,735 357,398
Market value adjustment expense 6,143 18,946
Policy benefits (net of reinsurance recoveries: 1994 - $4,647;
1993 - $5,282) 12,353 14,126
Reinsurance premium ceded 10,444 9,362
Amortization of deferred policy acquisition costs 53,624 71,288
Insurance expenses and taxes 28,056 36,533
------------- -------------
Total Benefits and Expenses 354,355 507,653
------------- -------------
Earnings Before Federal Income Tax Provision 51,436 46,443
FEDERAL INCOME TAX PROVISION (BENEFIT):
Current 20,229 12,834
Deferred (9,227) 2,902
------------- -------------
Total Federal Income Tax Provision 11,002 15,736
------------- -------------
NET EARNINGS $ 40,434 $ 30,707
============= =============
</TABLE>
See notes to financial statements.
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly-owned subsidiary of Merrill Lynch Insurance Group,
Inc.)
- -------------------------------------------------------------------------------
STATEMENTS OF STOCKHOLDER'S EQUITY
(Dollars in Thousands) (Unaudited)
===============================================================================
<TABLE>
<CAPTION>
Net
Additional unrealized Total
Common paid-in Retained investment stockholder's
stock capital earnings gain (loss) equity
--------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 $ 2,000 $ 654,717 $ 102,873 $ 2,884 $ 762,474
Dividend to Parent 0 (17,127) (102,873) 0 (120,000)
Net earnings 0 0 47,860 0 47,860
Net unrealized investment loss 0 0 0 (3,279) (3,279)
--------- --------- --------- ---------- ---------
BALANCE, DECEMBER 31, 1993 2,000 637,590 47,860 (395) 687,055
Net earnings 0 0 40,434 0 40,434
Net unrealized investment loss 0 0 0 (36,996) (36,996)
--------- --------- --------- ---------- ---------
BALANCE, SEPTEMBER 30, 1994 $ 2,000 $ 637,590 $ 88,294 $ (37,391) $ 690,493
========= ========= ========= ========== =========
</TABLE>
See notes to financial statements.
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly-owned subsidiary of Merrill Lynch Insurance Group,
Inc.)
- -------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
(Dollars in Thousands) (Unaudited)
===============================================================================
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------------
1994 1993
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 40,434 $ 30,707
Adjustments to reconcile net earnings to net cash and cash
equivalents provided (used) by operating activities:
Amortization of deferred policy acquisition costs 53,624 71,288
Capitalization of policy acquisition costs (90,955) (56,268)
Depreciation and amortization (2,985) 1,514
Net realized investment (gains) losses 10,587 (32,028)
Interest credited to policyholders' account balances 243,735 357,398
Provision (benefit) for deferred Federal income tax (9,227) 2,902
Cash and cash equivalents provided (used) by changes in
operating assets and liabilities:
Accrued investment income 18,555 (8,075)
Claims and claims settlement expenses 5,416 13,785
Federal income taxes - current (909) 12,835
Other policyholder funds (15,355) 35,618
Liability for guaranty fund assessments (2,970) (2,518)
Receivable from affiliates - net (2,816) (8,599)
Change in policy loans (44,551) (66,613)
Change in investment trading securities 873 (126,578)
Other, net (29,897) 33,846
Net cash and cash equivalents provided by operating ------------- -------------
activities 173,559 259,214
------------- -------------
INVESTING ACTIVITIES:
Fixed maturity securities sold 653,327 326,864
Fixed maturity securities matured 1,066,944 2,000,480
Fixed maturity securities purchased (467,420) (1,518,487)
Equity securities available for sale sold 16,876 4,516
Equity securities available for sale purchased 0 (3,324)
Mortgage loans on real estate principal payments received 31,872 20,543
Real estate encumbrances paid off 0 (956)
Real estate available for sale - improvements acquired (1,323) 0
Real estate available for sale sold 8,616 0
Investment in Separate Accounts (15,076) (20,000)
Recapture of investment in Separate Accounts 0 9,841
Net cash and cash equivalents provided by investing ------------- -------------
activities 1,293,816 819,477
------------- ------------
</TABLE>
See notes to financial statements (continued)
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly-owned subsidiary of Merrill Lynch Insurance Group,
Inc.)
- -------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
(Concluded) (Dollars in Thousands) (Unaudited)
===============================================================================
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------------
1994 1993
------------- -------------
<S> <C> <C>
FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits 771,832 464,029
Withdrawals (includes transfers to Separate Accounts) (2,264,628) (1,650,924)
------------- -------------
Net cash and cash equivalents used by financing activities (1,492,796) (1,186,895)
------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (25,421) (108,204)
CASH AND CASH EQUIVALENTS:
Beginning of year 122,218 172,124
------------- -------------
End of period $ 96,797 $ 63,920
============= =============
</TABLE>
See notes to financial statements
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly-owned subsidiary of Merrill Lynch Insurance Group,
Inc.)
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1994 (Unaudited)
===============================================================================
NOTE 1: BASIS OF PRESENTATION:
Merrill Lynch Life Insurance Company (the "Company") is a wholly-
owned subsidiary of Merrill Lynch Insurance Group, Inc. ("MLIG").
The Company is an indirect wholly-owned subsidiary of Merrill
Lynch & Co., Inc. ("Merrill Lynch & Co."). The Company sells life
insurance and annuity products, including variable life insurance
and variable annuities.
The condensed financial statements included herein have been
prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. In the opinion of
management, the unaudited financial statements presented herein
include all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation of the financial
position and the results of operations in accordance with
generally accepted accounting principles for the periods
presented. Results for the nine months ended September
30, 1994 and 1993 are not necessarily indicative of annual
results. To facilitate comparison with the current periods,
certain amounts in the prior periods have been reclassified.
These unaudited financial statements should be read in
conjunction with the financial statements and the notes thereto
included in the Company's 1993 Annual Report on Form 10-K ("1993
Report").
The Company paid Federal income taxes of $21.1 million during the
first nine months of 1994. The Company did not pay any Federal
income taxes during the first nine months of 1993. The Company
paid interest on affiliated borrowings of $0.6 million and $0.3
million for the nine months ended September 30, 1994 and 1993,
respectively.
NOTE 2. STATUTORY ACCOUNTING PRACTICES:
The Company maintains its statutory accounting records in
conformity with accounting practices prescribed or permitted by
the Insurance Department of the State of Arkansas and the
National Association of Insurance Commissioners. Statutory
capital and surplus at September 30, 1994 and December 31, 1993,
was $395.7 million and $374.2 million, respectively. For the
nine months ended September 30, 1994 and 1993, statutory net
income was $15.2 million and $35.7 million, respectively.
<PAGE>
NOTE 3. COMMITMENTS:
The Company had previously entered into interest rate swap
contracts for the purpose of minimizing exposure to fluctuations
in interest rates of specific assets held. Termination of these
commitments as of September 30, 1994 would not have a material
effect on the financial condition of the Company.
39
<PAGE> 42
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, 1993
and 1992, and the related statements of earnings, stockholder's
equity, and cash flows for each of the three years in the period
ended December 31, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Company at
December 31, 1993 and 1992, and the results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1993 in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the financial statements, in 1993 the
Company changed its method of accounting for certain investments
in debt and equity securities to conform with Statement of
Financial Accounting Standards No. 115.
/s/Deloitte & Touche
February 28, 1994
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
- ------------------------------------------------------------------
BALANCE SHEETS
AS OF DECEMBER 31, 1993 AND 1992
(Dollars in Thousands)
==============================================================================
<TABLE>
<CAPTION>
ASSETS 1993 1992
- ------ ---- ----
<S> <C> <C>
INVESTMENTS:
Fixed maturity securities available for sale, at estimated fair value
(amortized cost: 1993 - $5,369,236; 1992 - $334,638) $ 5,597,359 $ 335,916
Fixed maturity securities held for trading, at estimated fair value
(amortized cost: 1993 - $140,635) 144,035 0
Fixed maturity securities to be held to maturity, at amortized cost
(estimated fair value: 1992 - $6,713,831) 0 6,449,981
Equity securities available for sale, at estimated fair value
(cost: 1993 - $24,424; 1992 - $31,598) 24,970 33,186
Equity securities held for trading, at estimated fair value
(cost 1993 - $19,694) 20,585 0
Mortgage loans on real estate 191,214 264,966
Real estate available for sale
(accumulated depreciation: 1993 - $850; 1992 - $321) 29,761 12,847
Policy loans on insurance contracts 924,579 834,461
------------- -------------
Total Investments 6,932,503 7,931,357
CASH AND CASH EQUIVALENTS 122,218 172,124
ACCRUED INVESTMENT INCOME 120,337 138,797
DEFERRED POLICY ACQUISITION COSTS 318,903 373,214
FEDERAL INCOME TAXES - DEFERRED 16,878 19,982
REINSURANCE RECEIVABLES 1,190 856
RECEIVABLES FROM AFFILIATES - NET 789 0
OTHER ASSETS 21,481 19,864
SEPARATE ACCOUNTS ASSETS 4,715,278 3,127,767
------------- -------------
TOTAL ASSETS $ 12,249,577 $ 11,783,961
============= =============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY 1993 1992
- ------------------------------------ ---- ----
LIABILITIES:
<S> <C> <C>
POLICY LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 6,691,811 $ 7,804,447
Claims and claims settlement expenses 20,295 7,565
------------- -------------
Total policy liabilities and accruals 6,712,106 7,812,012
OTHER POLICYHOLDER FUNDS 28,768 14,637
LIABILITY FOR GUARANTY FUND ASSESSMENTS 28,083 27,104
OTHER LIABILITIES 68,165 16,790
FEDERAL INCOME TAXES - CURRENT 10,122 30,010
PAYABLE TO AFFILIATES - NET 0 2,638
SEPARATE ACCOUNTS LIABILITIES 4,715,278 3,118,296
------------- -------------
Total Liabilities 11,562,522 11,021,487
------------- -------------
STOCKHOLDER'S EQUITY:
Common stock, $10 par value - 200,000 shares
authorized, issued and outstanding 2,000 2,000
Additional paid-in capital 637,590 654,717
Retained earnings 47,860 102,873
Net unrealized investment gain (loss) (395) 2,884
------------- -------------
Total Stockholder's Equity 687,055 762,474
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 12,249,577 $ 11,783,961
============= =============
</TABLE>
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
- ------------------------------------------------------------------
STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(Dollars in Thousands)
==============================================================================
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 586,461 $ 712,739 $ 787,603
Net realized investment gains (losses) 63,052 (29,639) (21,957)
Policy charge revenue 95,684 81,653 82,745
----------- ----------- -----------
Total Revenues 745,197 764,753 848,391
----------- ----------- -----------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account
balances 454,671 546,979 638,984
Market value adjustment expense 30,816 6,229 1,198
Policy benefits (reinsurance recoveries: 1993 - $6,004;
1992 - $5,555; 1991 - $6,328) 17,030 12,066 9,537
Reinsurance premium ceded 12,665 12,457 12,765
Amortization of deferred policy acquisition costs 109,456 88,795 93,391
Insurance expenses and taxes 47,784 72,560 78,448
----------- ----------- -----------
Total Benefits and Expenses 672,422 739,086 834,323
----------- ----------- -----------
Earnings Before Federal Income
Tax Provision 72,775 25,667 14,068
----------- ----------- -----------
FEDERAL INCOME TAX PROVISION (BENEFIT):
Current 20,112 28,549 42,919
Deferred 4,803 (19,913) (40,459)
----------- ----------- -----------
Total Federal Income Tax Provision 24,915 8,636 2,460
----------- ----------- -----------
NET EARNINGS $ 47,860 $ 17,031 $ 11,608
=========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
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, 1993, 1992 AND 1991
(Dollars in Thousands)
==============================================================================
<TABLE>
<CAPTION>
Net
Additional unrealized Total
Common paid-in Retained investment stockholder's
stock capital earnings gain (loss) equity
-------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1991 $ 2,000 $ 572,321 $ 74,234 $ (103) $ 648,452
Capital contribution 82,396 82,396
Net earnings 11,608 11,608
Net unrealized investment loss (1,142) (1,142)
BALANCE, DECEMBER 31, 1991 2,000 654,717 85,842 (1,245) 741,314
Net earnings 17,031 17,031
Net unrealized investment gain 4,129 4,129
-------- ----------- ---------- ----------- -------------
BALANCE, DECEMBER 31, 1992 2,000 654,717 102,873 2,884 762,474
Dividend to Parent (17,127) (102,873) (120,000)
Net earnings 47,860 47,860
Net unrealized investment loss (1) (3,279) (3,279)
-------- ----------- ---------- ----------- -------------
BALANCE, DECEMBER 31, 1993 $ 2,000 $ 637,590 $ 47,860 $ ( 395) $ 687,055
======== =========== ========== =========== =============
</TABLE>
(1) Asset gains less adjustment of policyholders' account balances
and deferred policy acquisition costs (See Note 1).
See notes to financial statements.
<PAGE>
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, 1993, 1992 AND 1991
(Dollars in Thousands)
==============================================================================
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 47,860 $ 17,031 $ 11,608
Adjustments to reconcile net earnings to net
cash and cash equivalents provided (used)
by operating activities:
Amortization of deferred policy acquisition
costs 109,456 88,795 93,391
Capitalization of policy acquisition costs (91,189) (39,146) (149,440)
Depreciation and amortization 1,142 (16,033) (25,417)
Net realized investment (gains) losses (63,052) 29,639 21,957
Interest credited to policyholders' account balances 454,671 546,979 638,984
Provision for deferred Federal
income tax 4,803 (19,913) (40,459)
Cash and cash equivalents provided (used) by
changes in operating assets and liabilities:
Accrued investment income 18,460 6,018 (9,271)
Policy liabilities and accruals 12,730 7,775 101,521
Federal income taxes - current (19,888) 14,955 44,782
Other policyholder funds 14,131 12,826 (25,035)
Liability for guaranty fund assessments 979 16,439 10,665
Payable to Family Life Insurance Company 0 0 (28,224)
Policy loans (90,118) (126,925) (88,362)
Investment trading securities (145,972) 0 0
Other, net 49,425 (26,296) (30,343)
------------ ------------- -------------
Net cash and cash equivalents provided
by operating activities 303,438 512,144 526,357
------------ ------------- -------------
</TABLE>
(Continued)
<PAGE>
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, 1993, 1992 AND 1991
(Concluded) (Dollars In Thousands)
==============================================================================
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
INVESTING ACTIVITIES:
Fixed maturity securities sold 571,337 1,281,705 4,005,959
Fixed maturity securities matured 2,776,992 2,206,447 746,273
Fixed maturity securities purchased (1,866,857) (2,806,416) (5,142,471)
Equity securities available for sale purchased (8,983) (17,843) (67,348)
Equity securities available for sale sold 6,451 44,188 20,768
Mortgage loans on real estate principal payments received 35,561 8,548 5,977
Mortgage loans on real estate acquired (674) (853) (740)
Real estate available for sale purchased 0 (340) (22,706)
Real estate available for sale sold 7,408 178 25,000
Interest rate swaps sold 0 2,302 0
Recapture of investment in Separate Accounts 29,389 0 0
Investment in Separate Accounts (20,000) (3,841) 0
------------ ------------- -------------
Net cash and cash equivalents provided (used)
by investing activities 1,530,624 714,075 (429,288)
------------ ------------- -------------
FINANCING ACTIVITIES:
Paid-in capital from parent 0 0 82,396
Dividend paid to parent (120,000) 0 0
Affiliated notes payable (3,427) (83,200) 18,794
Policyholders' account balances:
Deposits 814,314 217,410 436,564
Withdrawals (net of transfers to Separate Accounts) (2,574,854) (1,338,034) (772,811)
Net cash and cash equivalents used ------------ ------------- -------------
by financing activities (1,883,967) (1,203,824) (235,057)
------------ ------------- -------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (49,906) 22,395 (137,988)
CASH AND CASH EQUIVALENTS
Beginning of year 172,124 149,729 287,717
------------ ------------- -------------
End of year $ 122,218 $ 172,124 $ 149,729
============ ============= =============
</TABLE>
See notes to financial statements.
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly-owned subsidiary of Merrill Lynch Insurance Group,
Inc.)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Reporting: Merrill Lynch Life Insurance Company (the
"Company") is a wholly-owned subsidiary of Merrill Lynch
Insurance Group, Inc. ("MLIG"). The Company is an indirect
wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("Merrill
Lynch & Co.").
The Company sells life insurance and annuity products which
comprise one business segment. The primary products that the
Company currently markets are immediate annuities, market value
adjusted annuities, variable life insurance and variable
annuities. The Company is currently licensed to sell insurance
in forty-nine states, the District of Columbia, the U.S. Virgin
Islands and Guam. The Company markets its products solely
through the Merrill Lynch & Co. retail network.
On June 12, 1991, the Company's former parent, Family Life
Insurance Company ("Family Life"), was sold to a non-affiliated
entity. Immediately prior to this sale, Family Life, through a
dividend, transferred its 100% ownership interest in the
Company to its parent MLIG. (See Note 8).
On October 1, 1991, Tandem Insurance Group, Inc. ("Tandem"), a
wholly-owned subsidiary of MLIG, was merged with and into the
Company. This merger has been accounted for as a combination
of entities under common control. The assets, liabilities,
stockholder's equity, earnings and cash flows as presented in
these financial statements are reported on a combined
historical basis for all periods presented.
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles for
stock life insurance companies.
Revenue Recognition: Revenues for the Company's interest
sensitive life, interest sensitive annuity, variable life and
variable annuity products consist of policy charges for the
cost of insurance, deferred sales charges, policy
administration charges and/or withdrawal charges assessed
against policyholder account balances during the period.
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 4.0% - 8.8%
Interest sensitive deferred annuities 2.4% - 9.0%
Immediate annuities 4.0% - 10.0%
These rates may be changed at the option of the Company,
subject to minimum guarantees, after initial guaranteed rates
expire.
Liabilities for unpaid claims equal the death benefit for those
claims which have been reported to the Company and an estimate
based upon prior experience for those claims which are
unreported as of the valuation date.
<PAGE>
Reinsurance: Effective during 1992, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 113
"Accounting and Reporting for Reinsurance of Short-Duration and
Long-Duration Contracts" ("SFAS No. 113"), which requires that
reinsurance receivables and prepaid reinsurance premium ceded
be reported as assets. SFAS No. 113 eliminates the practice by
insurance enterprises of reporting assets and liabilities
relating to reinsured contracts net of the effects of
reinsurance. The impact of adopting SFAS No. 113 was not
material.
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. On life insurance contracts which the Company is
currently marketing, the maximum amount of mortality risk
retained by the Company is $500,000 on a single life.
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 $1,024,000 that
can be drawn upon for delinquent reinsurance recoverables.
As of December 31, 1993, the Company had life insurance in-
force which was ceded to other life insurance companies of
$2,005,191,000.
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.
Policy acquisition costs are principally commissions and a
portion of certain other expenses relating to policy
acquisition, underwriting and issuance, which are primarily
related to and vary with the production of new business.
Certain costs and expenses reported in the statements of
earnings are net of amounts deferred. Policy acquisition costs
can also arise from the acquisition or reinsurance of existing
in-force policies from other insurers. These costs include
ceding commissions and professional fees related to the
reinsurance assumed.
Included in deferred policy acquisition costs are those costs
related to the acquisition by assumption reinsurance of
insurance contracts from unaffiliated insurers. The deferred
costs will be amortized in proportion to the future gross
profits over the anticipated life of the acquired insurance
contracts utilizing an interest methodology.
In December 1990, the Company entered into an assumption
reinsurance agreement with a non-affiliated insurer (See Note
6). The acquisition costs relating to this agreement are being
amortized over a twenty-year period using an effective interest
rate of 9.01%. This reinsurance agreement provides for payment
of contingent ceding commissions based upon the persistency and
mortality experience of the insurance contracts assumed. Any
payments made for the contingent ceding commissions will be
capitalized and amortized using an identical methodology as
that used for the initial acquisition costs. The following is
a reconciliation of the acquisition costs for the reinsurance
transaction for the three years ended December 31,:
<PAGE>
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Beginning balance $ 150,450 $ 160,235 $ 24,294
Capitalized amounts 6,987 6,060 156,641
Interest accrued 13,136 15,401 14,071
Amortization (30,926) (31,246) (34,771)
---------- ---------- ----------
Ending balance $ 139,647 $ 150,450 $ 160,235
========== ========== ==========
</TABLE>
The following table presents the expected amortization 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.
1994 $18,732,000
1995 17,840,000
1996 16,056,000
1997 12,488,000
1998 8,925,000
Investments: Effective December 31, 1993, the Company has
adopted SFAS No. 115 "Accounting for Certain Investments in
Debt and Equity Securities" ("SFAS No. 115"). In compliance
with SFAS No. 115, the Company classified its investments in
fixed maturity securities and equity securities in two
categories, each separately identified:
Available for sale securities include both fixed maturity
and equity securities. These securities may be sold for the
Company's general liquidity needs, asset/liability
management strategy, credit dispositions and investment
opportunities. These securities are carried at estimated
fair value with unrealized gains and losses included in
stockholder's equity (net of tax). If a decline in value of
a security is determined by management to be other than
temporary, the carrying value is adjusted to the estimated
fair value at the date of this determination and recorded
in the net realized investment gains (losses) caption of
the statement of earnings.
Trading securities represent securities that are managed
with an investment objective to maximize total return
subject to the Company's quality guidelines. Investments in
this portfolio will consist primarily of marketable fixed
maturity and equity investments. These securities are
carried at estimated fair value with unrealized gains and
losses included in the statement of earnings. The debt and
equity securities classified as trading securities as of
December 31, 1993 were acquired in 1993 and immediately
classified as trading securities in compliance with SFAS
No. 60 "Accounting and Reporting by Insurance Enterprises",
prior to the adoption of SFAS No. 115.
SFAS No. 115 allows fixed maturity securities to be carried at
amortized cost if the Company has both the ability and positive
intent to hold these securities to maturity. The Company has
determined that it can not guarantee that it will not have the
need or opportunity to sell any particular security in its
investment holdings. As such, the Company did not utilize this
classification as of December 31, 1993.
In compliance with a recent Securities and Exchange Commissions
("SEC") staff announcement, the Company has recorded certain
adjustments to deferred policy acquisition costs and
policyholders' account balances in conjunction with its
adoption of SFAS No. 115. The SEC requires that companies
adjust those assets and liabilities that would have been
adjusted had the unrealized investment gains or losses from
securities classified as available for sale actually been
realized with corresponding credits or charges reported
directly to shareholder's equity. Accordingly, deferred policy
acquisition costs have
<PAGE>
been decreased by $36,044,000 and
policyholders' account balances have been increased by
$193,233,000 as of December 31, 1993.
As of December 31, 1992, the Company classified its investments
in fixed maturity securities as either "to be held to maturity"
or "available for sale." Fixed maturity securities to be held
to maturity are stated in the balance sheets at amortized cost.
Fixed maturity securities available for sale are stated at
estimated fair value. The net unrealized gain and loss on these
securities are reflected as a component of stockholder's
equity.
For fixed maturity securities, premiums are amortized to the
earlier of the call or maturity date, discounts are accrued to
the maturity date and interest income is accrued daily.
Realized gains and losses on the sale or maturity of the
investments are determined on the basis of identified cost.
Fixed maturity securities may contain securities which are
considered high yield. The Company defines high yield fixed
maturity securities as unsecured corporate debt obligations
which do not have a rating equivalent to Standard and Poor's
(or similar rating agency) BBB or higher, and are not
guaranteed by an agency of the federal government. Probable
losses are recognized in the period that a decline in value is
determined to be other than temporary.
Mortgage loans on real estate are stated at unpaid principal
balances net of valuation allowances. Such valuation allowances
are based on the decline in value expected by management to be
realized on in-substance foreclosures of mortgage loans and on
mortgage loans which management believes may not be collectible
in full. In establishing valuation allowances management
considers, among other things, the estimated fair value of the
underlying collateral.
The Company has previously made mortgage loans collateralized
by real estate and direct investments in real estate. The
return on and the ultimate recovery of these loans and
investments are generally dependent on the successful
operation, sale or refinancing of the real estate. In many
parts of the country, current real estate markets are
characterized by above-normal vacancy rates, a lack of ready
sources of credit for real estate financing, reduced or
declining real estate values, and similar factors.
The Company employs a system to monitor the effects of current
and expected real estate market conditions and other factors
when assessing the collectability of mortgage loans and the
recoverability of the Company's real estate investments. When,
in management's judgment, these assets are impaired,
appropriate losses are recorded. Such estimates necessarily
include assumptions, which may include anticipated improvements
in selected market conditions for real estate, which may or may
not occur. The more significant assumptions management
considers involve estimates of the following: lease, absorption
and sales rate; real estate values and rates of return;
operating expenses; required capital improvements; inflation;
and sufficiency of any collateral independent of the real
estate.
Resulting from the Company's management and valuation of its
mortgage loans on real estate, management believes that the
carrying value approximates the fair value of these
investments.
During 1993 the Financial Accounting Standards Board issued
SFAS No. 114 "Accounting by Creditors for Impairment of a Loan"
("SFAS No. 114"). SFAS No. 114 requires that for impaired
loans, the impairment shall be measured based on the present
value of expected future cash flows discounted at the loan's
effective interest rate or the fair value of the collateral.
Impairments of mortgage loans on real estate are established as
valuation allowances and recorded to net realized investment
gains (losses). SFAS No. 114 must be adopted for fiscal years
beginning after December 15, 1994. The Company has decided
not to early adopt this statement. The Company estimates
that the impact on both financial position and earnings
from adopting SFAS No. 114 would be immaterial.
Real estate available for sale, including real estate acquired
in satisfaction of debt subsequent to its acquisition date, is
stated at depreciated cost less valuation allowances and
estimated selling costs.
<PAGE>
Depreciation is computed using the
straight-line method over the estimated useful lives of the
properties, which generally is 40 years.
Policy loans on insurance contracts are stated at unpaid
principal balances. The Company estimates the fair market 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.
Fair Value of Financial Instruments: Beginning in 1992, the
Company adopted SFAS No. 107, "Disclosures about Fair Value of
Financial Instruments", which requires companies to report the
fair value of financial instruments, for certain assets and
liabilities both on and off - balance sheet.
Federal Income Taxes: The results of the 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 tax
liability.
Effective the first quarter 1992, the Company adopted SFAS No.
109, "Accounting for Income Taxes" ("SFAS No. 109") which
requires an asset and liability method in recording income
taxes on all transactions that have been recognized in the
financial statements. SFAS No. 109 provides that deferred
taxes be adjusted to reflect tax rates at which future tax
liabilities or assets are expected to be settled or realized.
Previously, the Company accounted for income taxes in
accordance with SFAS No. 96, "Accounting for Income Taxes."
The effect of adopting SFAS No. 109 was not material.
Separate Accounts: The Separate Accounts are established in
conformity with Arkansas insurance law, the Company's
domiciliary state, and under such law, if and to the extent
provided under the applicable insurance contracts, assets held
in the Separate Accounts equal to the reserves and other
contract liabilities with respect to the Separate Accounts may
not be chargeable with liabilities that arise from any other
business of the Company. Separate Accounts assets may be
subject to General Account claims only to the extent the value
of such assets exceeds the Separate Accounts liabilities.
Assets and liabilities of the Separate Accounts, representing
net deposits and accumulated net investment earnings less fees,
held for the benefit of policyholders, are shown as separate
captions in the balance sheets. Assets held in the Separate
Accounts are carried at quoted market values.
The carrying value for Separate Accounts assets and liabilities
approximates the estimated fair value of the underlying assets.
Postretirement Benefits Other Than Pensions: During the fourth
quarter 1992, the Company adopted SFAS No. 106, "Employer's
Accounting for Postretirement Benefits Other Than Pensions"
("SFAS No. 106"). SFAS No. 106 requires the accrual of
postretirement benefits (such as health care benefits) during
the years an employee provides service. Prior to 1992, the
cost of these benefits were expensed on a modified pay-as-you-go
basis when such cost was allocated from MLIG as a component of
the Company's operating expenses. The effect of adopting SFAS
No. 106 was not material.
Statements of Cash Flows: For the purpose of reporting cash
flows, cash and cash equivalents include cash on hand and on
deposit and short-term investments with original maturities of
three months or less.
The carrying amounts approximate the estimated fair value of
cash and cash equivalents.
Reclassifications: To facilitate comparisons with the current
year, certain amounts in the prior years have been
reclassified.
<PAGE>
NOTE 2. INVESTMENTS
The amortized cost (original cost for equity securities) less
valuation allowances and estimated fair value of investments in
fixed maturity securities and equity securities as of December
31 are:
<TABLE>
<CAPTION>
1993
----
Amortized
Cost less Gross Gross Estimated
Valuation Unrealized Unrealized Fair
Allowances Gains Losses Value
------------ ------------ ------------ ------------
(In Thousands)
<S> <C> <C> <C> <C>
Fixed maturity securities available for sale:
Corporate securities $ 3,181,667 $ 159,233 $ 18,440 $ 3,322,460
Mortgage-backed securities 2,015,328 79,645 3,998 2,090,975
U.S. Treasury securitiesand obligations of
U.S. government corporations and
agencies 159,329 10,887 126 170,090
Obligations of states and political
subdivisions 12,912 922 0 13,834
------------ ------------ ------------ ------------
Total fixed maturity securities available
for sale $ 5,369,236 $ 250,687 $ 22,564 $ 5,597,359
============ ============ ============ ============
Equity securities available for sale:
Common stocks $ 4,481 $ 577 $ 657 $ 4,401
Non-redeemable preferred stocks 19,943 757 131 20,569
------------ ------------ ------------ ------------
Total equity securities available for sale $ 24,424 $ 1,334 $ 788 $ 24,970
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
1992
----
Amortized
Cost less Gross Gross Estimated
Valuation Unrealized Unrealized Fair
Allowances Gains Losses Value
------------ ------------ ------------ ------------
(In Thousands)
<S> <C> <C> <C> <C>
Fixed maturity securities to be held to
maturity:
Corporate securities $ 3,052,333 $ 134,016 $ 7,721 $ 3,178,628
Mortgage-backed securities 3,292,132 141,387 5,215 3,428,304
U.S. Treasury securities and obligations of
U.S. government corporations and
agencies 97,976 1,798 1,396 98,378
Obligations of states and political
subdivisions 7,540 981 0 8,521
------------ ------------ ------------ ------------
Total fixed maturity securities to be
held to maturity $6,449,981 $ 278,182 $ 14,332 $ 6,713,831
============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1992
----
Amortized
Cost less Gross Gross Estimated
Valuation Unrealized Unrealized Fair
Allowances Gains Losses Value
------------ ------------ ------------ ------------
(In Thousands)
<S> <C> <C> <C> <C>
Fixed maturity securities available for sale:
Corporate securities $ 134,675 $ 6,648 $ 938 $ 140,385
Mortgage-backed securities 117,248 3,316 8,337 112,227
U.S. Treasury securities and obligations of
U.S. government corporations and
agencies 74,109 916 560 74,465
Obligations of states and political
subdivisions 8,606 233 0 8,839
------------ ------------ ------------ ------------
Total fixed maturity securities
available for sale $ 334,638 $ 11,113 $ 9,835 $ 335,916
============ ============ ============ ============
Equity securities available for sale:
Common stocks $ 12,980 $ 762 $ 0 $ 13,742
Non-redeemable preferred stocks 18,618 826 0 19,444
------------ ------------ ------------ ------------
Total equity securities available for sale $ 31,598 $ 1,588 $ 0 $ 33,186
============ ============ ============ ============
</TABLE>
For publicly traded securities, the estimated fair value is
determined using quoted market prices. For securities without
a readily ascertainable market value, the Company has
determined an estimated fair value using a discounted cash flow
approach, including provision for credit risk, based upon the
assumption that such securities will be held to maturity. 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, 1993 and 1992,
respectively, securities without a readily ascertainable market
value, having an amortized cost less valuation allowances of
approximately $773,965,000 and $992,340,000, had an estimated
fair value of approximately $819,866,000 and $1,064,915,000,
respectively.
The amortized cost less valuation allowances and estimated fair
value of fixed maturity securities available for sale at
December 31, 1993 by contractual maturity are shown below:
<TABLE>
<CAPTION>
Amortized
Cost less Estimated
Valuation Fair
Allowances Value
------------ ------------
(In Thousands)
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 293,809 $ 299,884
Due after one year through five years 1,162,162 1,207,307
Due after five years through ten years 1,499,057 1,585,524
Due after ten years 398,880 413,669
------------ ------------
3,353,908 3,506,384
Mortgage-backed securities 2,015,328 2,090,975
------------ ------------
Total fixed maturity securities
available for sale $ 5,369,236 $ 5,597,359
============ ============
</TABLE>
<PAGE>
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 will differ from contractual
maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment
penalties.
The Company's investment in mortgage loans on real estate
consists principally of loans collateralized by commercial real
estate. The largest concentrations of commercial real estate
mortgage loans are for properties located in California
($53,795,000 or 24%), Illinois ($28,294,000 or 13%) and
Pennsylvania ($27,558,000 or 12%).
For the years ended December 31, 1993 and 1992, $29,555,000 and
$3,126,000, respectively, of real estate was acquired in
satisfaction of debt.
Net investment income arose from the following sources for the
years ended December 31,:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Fixed maturity securities $ 511,655 $ 652,136 $ 715,102
Equity securities 4,143 4,813 2,852
Mortgage loans on real estate 20,342 25,954 32,827
Real estate available for sale 32 1,004 310
Policy loans on insurance contracts 46,129 40,843 34,366
Other 11,135 5,924 13,015
------------ ------------ ------------
Gross investment income 593,436 730,674 798,472
Less expenses (6,975) (17,935) (10,869)
------------ ------------ ------------
Net investment income $ 586,461 $ 712,739 $ 787,603
============ ============ ============
</TABLE>
Net realized investment gains (losses), including changes in
valuation allowances, determined by specific identification for
the years ended December 31,:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Fixed maturity securities available for sale $ 67,473 $ 15,907 $ (12,689)
Fixed maturity securities held for trading 5,562 0 0
Equity securities available for sale 22 (3,051) (804)
Equity securities held for trading 2,587 0 0
Mortgage loans on real estate (9,310) (42,997) (12,913)
Real estate available for sale (4,733) (1,800) 3,224
Other 1,451 2,302 1,225
------------ ------------ ------------
Net realized investment gains (losses) $ 63,052 $ (29,639) $ (21,957)
============ ============ ============
</TABLE>
<PAGE>
Valuation allowances have been established to reflect other than
temporary declines in estimated fair value of the following
classification of investments as of December 31,:
<TABLE>
<CAPTION>
1993 1992
---- ----
(In Thousands)
<S> <C> <C>
Fixed maturity securities to be held to maturity $ 0 $ 19,711
Fixed maturity securities available for sale 850 0
Equity securities available for sale 0 210
Mortgage loans on real estate 45,924 55,610
Real estate available for sale 20,797 5,600
------------ ------------
$ 67,571 $ 81,131
============ ============
</TABLE>
Proceeds, gains and losses from the sale or maturity of fixed
maturity securities available for sale and held to maturity for
the years ended December 31,:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Proceeds $ 3,348,329 $ 3,488,152 $ 4,752,232
Realized investment gains 71,599 51,925 88,230
Realized investment losses 4,126 25,732 91,745
</TABLE>
Approximately $4,291,000 of unrealized holding gains from
investment trading securities were recorded in net realized
investment gains during 1993.
The Company held investments at December 31, 1993 of
$22,672,000 which have been non-income producing for the
preceding twelve months.
The Company had investment securities of $28,702,000 and
$19,030,000 held on deposit with insurance regulatory
authorities at December 31, 1993 and 1992, respectively.
At December 31, 1992, the Company retained $9,741,000 in the
Separate Accounts, including unrealized gains of $1,504,000.
The investments in the Separate Accounts were for the purpose
of providing original funding of certain mutual funds available
as investment options to variable life and annuity
policyholders. No funds were retained in the Separate Accounts
at December 31, 1993.
The Company has restructured the terms of certain of its
investments in fixed maturity securities and mortgage loans on
real estate during 1993 and 1992. The following table provides
the amortized cost less valuation allowances immediately prior
to restructuring, gross interest income that would have been
earned had the loans been current per their original terms
("Expected Income"), gross interest income recorded during the
year ("Actual Income") and equity interests which were received
in the restructuring:
<PAGE>
<TABLE>
<CAPTION>
1993 1992
---- ----
(In Thousands)
<S> <C> <C>
Fixed maturity securities:
Amortized cost less valuation allowances $ 3,743 $ 13,148
Expected income 916 2,781
Actual income 103 1,011
Equity interest received 1,833 2,003
Mortgage loans on real estate:
Amortized cost less valuation allowance $ 79,624 $ 0
Expected income 6,859 0
Actual income 5,076 0
</TABLE>
NOTE 3. FEDERAL INCOME TAXES
The Company's operating results (excluding Tandem prior to
September 30, 1991) are consolidated with those of MLIG. MLIG
and the Company are included in Merrill Lynch & Co.'s
consolidated Federal income tax returns. It is the policy of
Merrill Lynch & Co. to allocate the tax associated with such
operating results to its respective subsidiaries on a separate
company basis. The Company has the intent to pay accumulated
Federal income tax to MLIG upon request. For the nine months
ended September 30, 1991, Tandem filed a separate Federal
income tax return.
The following is a reconciliation of the provision for income
taxes based on income before income taxes, computed using the
Federal statutory tax rate, with the provision for income taxes
for the three years ended December 31,:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Provision for income taxes computed at Federal
statutory rate $ 25,471 $ 8,726 $ 4,783
Increase (decrease) in income taxes resulting from:
Federal tax rate increase (631)
Recognition of prior year capital loss tax
benefits (2,219)
Other 75 (90) (104)
------------ ------------ ------------
Federal income tax provision $ 24,915 $ 8,636 $ 2,460
============ ============ ============
</TABLE>
The Federal statutory rate for 1993, 1992 and 1991 was 35%, 34%
and 34%, respectively.
The Company provides for deferred income taxes resulting from
temporary differences which 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 were as follows:
<PAGE>
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Deferred policy acquisition costs $ (9,030) $ (17,633) $ (32,834)
Policyholders' account balances 6,433 21,301 (6,282)
Estimated liability for guaranty fund assessments (1,066) (2,735) (3,626)
Investment adjustments 7,941 (21,875) 2,437
Other 525 1,029 (154)
------------ ------------ ------------
Deferred Federal income tax
provision (benefit) $ 4,803 $ (19,913) $ (40,459)
============ ============ ============
</TABLE>
Deferred tax assets and liabilities as of December 31, are
determined as follows:
<TABLE>
<CAPTION>
1993 1992
---- ----
(In Thousands)
<S> <C> <C>
Deferred tax assets:
Policyholders' account balances $ 99,475 $ 105,908
Investment adjustments 19,596 27,537
Estimated liability for guaranty fund assessments 7,427 6,361
------------ ------------
Total deferred tax asset 126,498 139,806
------------ ------------
Deferred tax liabilities:
Deferred policy acquisition costs 92,625 101,655
Net unrealized investment gain (loss) (213) 1,486
Other 17,208 16,683
------------ ------------
Total deferred tax liability 109,620 119,824
------------ ------------
Net deferred tax asset $ 16,878 $ 19,982
============ ============
</TABLE>
The Company anticipates that all deferred tax assets will be
realized, therefore no valuation allowance has been provided.
Federal income taxes paid (recovered) totaled $40,000,000,
$13,594,000 and $(1,560,000) in 1993, 1992 and 1991,
respectively.
NOTE 4. RELATED PARTY TRANSACTIONS
The Company and MLIG are parties to a service agreement whereby
MLIG has agreed to provide certain 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 $55,843,000, $63,300,000 and $78,306,000 for the
years ended December 31, 1993, 1992 and 1991, respectively.
The Company and Merrill Lynch Asset Management, L.P. ("MLAM")
are parties to a service agreement whereby MLAM has agreed to
provide certain invested asset management to the Company. The
Company pays a fee to MLAM for these services, through the MLIG
service agreement.
The Company has a general agency agreement with Merrill Lynch
Life Agency Inc. ("MLLA") whereby registered representatives of
Merrill Lynch, Pierce, Fenner and Smith, Inc. ("MLPF&S") who
are the
<PAGE>
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 approximately $67,102,000,
$25,158,000 and $27,974,000 for 1993, 1992 and 1991,
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.
In connection with the acquisition of a block of variable life
insurance business from Monarch Life Insurance Company
("Monarch Life"), the Company borrowed funds from Merrill Lynch
& Co. to partially finance the transaction. As of December 31,
1991, the outstanding balance of these loans was approximately
$83,200,000. These loans were repaid during 1992. Interest
was calculated on these loans at LIBOR plus 150 basis points.
Intercompany interest paid on these loans during 1992 and 1991
was approximately $4,025,000 and $6,300,000, respectively.
The Company and Merrill Lynch Trust Company ("ML Trust") were
parties to an agreement whereby the Company retained ML Trust
to hold certain invested assets upon the terms and conditions
of the agreement. ML Trust was paid a fee based on its current
fee schedule. This agreement was terminated during 1993.
The Company has entered into certain other marketing and
administrative service agreements with affiliates in connection
with the variable life and annuity policies it sells.
During 1993, 1992 and 1991, the Company allowed the recapture
of certain policies previously indemnity reinsured by the
Company from Family Life. Simultaneously with the recapture,
the Company's affiliate, ML Life Insurance Company of New York
("ML Life"), assumption reinsured these policies. These
transactions resulted in the transfer of approximately
$11,900,000 $2,000,000 $19,200,000 of policy reserves during
1993, 1992 and 1991, respectively.
The fair value of the Company's payables to affiliates is
estimated at carrying value. These borrowings are payable on
demand and bear a variable interest rate based on LIBOR.
Total intercompany interest paid was $737,000, $5,409,000 and
$8,567,000 for 1993, 1992 and 1991, respectively.
NOTE 5. STOCKHOLDER'S EQUITY AND STATUTORY REGULATIONS
On December 20, 1993, the Company paid a $44,988,000 ordinary
dividend and a $75,012,000 extraordinary dividend to MLIG. The
Company received approval from the Arkansas Insurance
Commissioner prior to the declaration and payment of the
extraordinary dividend.
At December 31, 1993 and 1992, approximately $37,221,000 and
$44,988,000, respectively, of retained earnings was available
for distribution to the Company's stockholder. Statutory
capital and surplus at December 31, 1993 and 1992, was
$374,209,000 and $451,888,000, respectively.
During 1991, MLIG contributed capital to the Company of
$82,396,000. The contribution was made to support the
underwriting of additional insurance premiums and deposits. No
contributions were received during 1993 and 1992.
Applicable insurance department regulations require that the
Company report its accounts in accordance with statutory
accounting practices. Statutory accounting practices primarily
differ from the principles utilized in these financial statements
by charging policy acquisition costs to expense as incurred,
establishing future policy benefit reserves using different
actuarial assumptions, not providing for deferred taxes and
valuing securities on a different basis. The Company's
statutory net income for the years ended December 31, 1993,
1992 and 1991 was $45,604,000, $60,140,000 and $65,771,000,
respectively.
<PAGE>
The National Association of Insurance Commissioners ("NAIC")
has developed and implemented effective December 31,
1993, the Risk Based Capital ("RBC") adequacy monitoring
system. The RBC calculates the amount of adjusted capital which
a life insurance company should have based upon that company's
risk profile. The NAIC has established four different levels of
regulatory action with respect to the RBC adequacy monitoring
system. Each of these levels may be triggered if an insurer's
total adjusted capital is less than a corresponding level of
RBC. These levels are as follows:
For companies with capital levels which are below 100% of
the basic RBC level (company action level) calculated for
that company, the company must submit to the domiciliary
insurance commissioner, and implement, an approved plan to
increase adjusted capital to at least 100% of the basic
RBC.
For companies with capital levels which are below 75% of
the basic RBC level calculated for that company, the
company must submit to an examination by the domiciliary
insurance department and as a result of the findings of the
examination, corrective orders may be issued.
For companies with capital levels which are below 50% of
the basic RBC level (authorized control level) calculated
for that company, the domiciliary insurance commissioner
will have the authority to place the company into
conservatorship or liquidation.
For companies with capital levels which are below 35% of
the basic RBC level calculated for that company, the
domiciliary insurance commissioner will be required to
place the company into conservatorship or liquidation.
As of December 31, 1993, based on the RBC formula, the
Company's total adjusted capital level was 279% of the basic
RBC level.
NOTE 6. REINSURANCE AGREEMENTS
On December 28, 1990, the Company entered into an indemnity
reinsurance agreement with Family Life, in which the Company
100% coinsured substantially all of Family Life's general
account interest-sensitive life and annuity business, and
modified coinsured all of the separate account variable annuity
business. As of December 31, 1993, substantially all of this
business has been assumption reinsured by the Company and an
affiliate.
On December 31, 1990, the Company and an affiliate entered into
a 100% reinsurance agreement with respect to all variable life
policies issued by Monarch Life and sold through the Merrill
Lynch & Co. retail network. As a result of the indemnity
provisions of the agreement, the Company became obligated to
reimburse Monarch Life for its net amount at risk with regard
to the reinsured policies. At the date of acquisition, assets
of approximately $553,000,000 supporting general account
reserves, on a statutory accounting basis, were transferred
from Monarch Life to the Company. This agreement provides for
contingent ceding commission payments to Monarch Life dependent
upon the lapse rate during the five years ending in 1995 and
mortality experience during the ten years ending in 2000. To
date, the Company has paid approximately $225,900,000 to
Monarch Life under the terms of the agreement. As of December
31, 1993, the Company has accrued $7,673,000 for such payments.
On various dates during 1992 and 1991, the Company and an
affiliate assumption reinsured substantially all such policies,
wherever permitted by appropriate regulatory authorities. Upon
assumption, the policy liabilities and the underlying assets of
approximately $2,625,000,000 were transferred to the Merrill
Lynch Life Variable Life Separate Account II. As a result of
the assumptions, the Company became directly obligated to the
policyholders, rather than to Monarch Life. Certain contract
owners of the reinsured policies elected to remain with Monarch
Life as permitted under certain
<PAGE>
state insurance laws. Assets
and liabilities of those policies not assumption reinsured by
the Company or its affiliate have remained with Monarch Life.
The Company and its affiliate have indemnified Monarch Life
against its net amount at risk on such policies. As of
December 31, 1993, approximately 10 life insurance policies
with $1,499,000 life insurance in force remain under the
indemnity provisions of the reinsurance agreement.
During 1992, the Company, and its affiliates, entered into an
agreement with Monarch Life for the purchase, transfer or
assignment of certain services and assets owned, licensed or
leased by Monarch Life. Additionally, the Company along with
its affiliates were allowed to actively solicit the employment
of individuals employed by Monarch Life, who are required to
service the Company's and its affiliates' variable life
insurance policies and Monarch Life's variable life insurance
policies. In consideration of this, the Company and its
affiliate, ML Life, transferred title to Monarch Life certain
telecommunications equipment owned by Merrill Lynch Insurance
Group Services, Inc., an affiliate of the Company, with a net
book value of $1,753,000. The Company agreed to service
Monarch Life's variable life insurance policies for a period of
five years at an annual rate of $100 per policy. Monarch Life
has an option to terminate the service agreement upon proper
notification.
NOTE 7. INTEREST RATE SWAP CONTRACTS
The Company enters into interest rate swap contracts for the
purpose of minimizing exposure to fluctuations in interest
rates of specific assets held. The notional amount of such
swaps outstanding at December 31, 1993 and 1992 was
approximately $155,082,000 and $197,024,000 respectively. The
average unexpired term at December 31, 1993 and 1992 was 3.2
and 3.5 years, respectively.
The current amount at risk, on a present value basis, of
terminating or replacing at current market rates all
outstanding matched swaps in a loss position at December 31,
1993 and 1992 was $0 and $0, respectively. During 1992 and
1991, a net investment gain of approximately $2,302,000 and
$4,750,000, respectively, was recorded in connection with
interest rate swap activity. The Company did not realize net
investment gains (losses) from interest rate swap activity
during 1993.
During 1993, 1992 and 1991, the Company did not enter into
unmatched interest rate swap arrangements and did not act as an
intermediary or broker in interest rate swaps.
Estimated fair values for the Company's interest rate swaps are
based on broker quotes. At December 31, 1993 and 1992, the
estimated fair value for these contracts was $4,317,000 and
$10,551,000, respectively.
NOTE 8. SALE OF FAMILY LIFE INSURANCE COMPANY
On June 12, 1991, MLIG sold Family Life to a non-affiliated
entity. Prior to closing, MLIG transferred to affiliates of
Family Life, to the extent permitted by law, all assets and
liabilities of Family Life that were not related to Family
Life's mortgage protection life insurance business. Certain
life insurance and annuity products sold through the retail
network of Merrill Lynch & Co. and underwritten by Family Life
have been or will be assumption reinsured by the Company or its
affiliate in those jurisdictions in which the Company or its
affiliate has the authority to do so. (See Note 6)
NOTE 9. 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). During 1991, and to a lesser extent 1992, there were
certain highly
<PAGE>
publicized life insurance insolvencies. The
Company has utilized public information to estimate what future
assessments it will incur as a result of these insolvencies.
At December 31, 1993 and 1992, the Company had accrued an
estimated liability for future guaranty fund assessments of
$28,083,000 and $27,104,000, respectively. The Company
regularly monitors public information regarding insurer
insolvencies and will adjust its estimated liability where
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.
* * * * * *
40
<PAGE> 43
APPENDIX
The tables below are designed to show the impact of the Market Value Adjustment
and withdrawal charge on a single premium of $10,000. Table 1 assumes the
premium is allocated to a subaccount with a 10 year Guarantee Period with a
guaranteed rate of interest of 5.25%. Table 2 assumes the premium is allocated
to a subaccount with a 5 year Guarantee Period with a guaranteed rate of 4.50%.
The Market Value Adjustments are based on interpolated current interest rates
(defined in the Contract as "B") of 3.25%, 5.25% and 7.25% in the 10 year
guarantee table (see Table 1 below) and 2.50%, 4.50% and 6.50% in the 5 year
guarantee table (see Table 2 below). The net subaccount values shown in the
tables are the maximum amount available as cash withdrawals. Although the
withdrawal charge is in each case a fixed percentage of the amount withdrawn,
the amount of the charge for withdrawals made at the end of each year varies as
a result of the Market Value Adjustment. Values shown in the tables have been
rounded to the nearest dollar, and therefore the figures under the net
subaccount value columns may not precisely equal amounts set forth in the
subaccount value, plus the Market Value Adjustment, less the withdrawal charge
columns.
TABLE 1
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
MARKET VALUE ADJUSTMENTS, WITHDRAWAL CHARGES AND NET SUBACCOUNT VALUE BASED ON
INTERPOLATED CURRENT INTEREST RATES OF:
---------------------------------------------------------------------------------------------------------
3.25% 5.25% 7.25%
- --------------------------------------------------------------------------------------------------------------------------------
MARKET MARKET
END OF SUB- MARKET VALUE WITH- NET SUB- VALUE WITH- NET SUB- VALUE WITH- NET SUB-
CERTIFICATE ACCOUNT ADJUST- DRAWAL ACCOUNT ADJUST- DRAWAL ACCOUNT ADJUST- DRAWAL ACCOUNT
YEAR VALUE MENT CHARGE VALUE MENT CHARGE VALUE MENT CHARGE VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,525 1,924 318 12,130 -0- 269 10,256 (1,605) 228 8,692
2 11,078 1,783 329 12,532 -0- 283 10,794 (1,514) 245 9,318
3 11,659 1,627 340 12,946 -0- 298 11,361 (1,407) 262 9,990
4 12,271 1,454 351 13,374 -0- 314 11,957 (1,281) 281 10,710
5 12,915 1,264 363 13,817 -0- 330 12,585 (1,133) 301 11,481
6 13,594 1,054 375 14,273 -0- 348 13,246 (963) 323 12,308
7 14,307 825 387 14,745 -0- 366 13,941 (767) 346 13,194
8 15,058 573 400 15,232 -0- 385 14,673 (543) 371 14,144
9 15,849 299 413 15,735 -0- 405 15,444 (288) 398 15,163
10 16,681 -0- -0- 16,681 -0- -0- 16,681 -0- -0- 16,681
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TABLE 2
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
MARKET VALUE ADJUSTMENTS, WITHDRAWAL CHARGES AND NET SUBACCOUNT VALUE BASED ON
INTERPOLATED CURRENT INTEREST RATES OF:
---------------------------------------------------------------------------------------------------------
2.50% 4.50% 6.50%
- --------------------------------------------------------------------------------------------------------------------------------
MARKET MARKET
END OF SUB- MARKET VALUE WITH- NET SUB- VALUE WITH- NET SUB- VALUE WITH- NET SUB-
CERTIFICATE ACCOUNT ADJUST- DRAWAL ACCOUNT ADJUST- DRAWAL ACCOUNT ADJUST- DRAWAL ACCOUNT
YEAR VALUE MENT CHARGE VALUE MENT CHARGE VALUE MENT CHARGE VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,450 820 248 11,022 -0- 230 10,220 (748) 214 9,489
2 10,920 637 254 11,303 -0- 240 10,680 (591) 227 10,102
3 11,412 439 261 11,590 -0- 251 11,161 (416) 242 10,754
4 11,925 227 267 11,885 -0- 262 11,663 (219) 258 11,448
5 12,462 -0- -0- 12,462 -0- -0- 12,462 -0- -0- 12,462
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-1
<PAGE> 44
The formulas used in determining the amounts shown in the above tables are as
follows:
<TABLE>
<S> <C>
Subaccount Value
------------------------------------------------------------------
Guaranteed Interest Rate 1 + Current Interest Rate n/365
(1) Net Subaccount Value = ( ------------------------- ) + ( ----------------------------- )
2 1 + Guaranteed Interest Rate
</TABLE>
Where "n" is the number of days remaining in the Guaranteed Period of the
subaccount, but not less than 365.
<TABLE>
<S> <C>
Guaranteed Interest Rate
(2) Withdrawal Charge = Net Subaccount Value X ---------------------------
2
</TABLE>
<TABLE>
<S> <C>
1 + Current Interest Rate n/365
(3) Market Value Adjustment = Net Subaccount Value X [ 1 - ( ------------------------------ ) ]
1 + Guaranteed Interest Rate
</TABLE>
(4) "n" is the number of days remaining in the Guarantee Period of the
subaccount, but not less than 365.
A-2
<PAGE> 45
PART II
INFORMATION NOT REQUIRED IN A PROSPECTUS
<PAGE> 46
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Not applicable.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The following provisions regarding the Indemnification of Directors and Officers
of the Registrant are applicable:
AMENDED AND RESTATED BY-LAWS OF MERRILL LYNCH LIFE INSURANCE COMPANY, ARTICLE VI
Sections 1, 2, 3 and 4--Indemnification of Directors, Officers, Employees
and Incorporators
Section 1. Actions Other Than by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation) by reason of the fact that he
is or was a director, officer or employee of the Corporation, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section 2. Actions by or in the Right of the Corporation. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer or employee of the Corporation, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the Court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other Court shall deem proper.
Section 3. Right to Indemnification. To the extent that a director, officer or
employee of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 1 and 2 of
this Article, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
Section 4. Determination of Right to Indemnification. Any indemnification under
Sections 1 and 2 of this Article (unless ordered by a Court) shall be made by
the Corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, or employee is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Sections 1 and 2 of this Article. Such determination shall be made (i) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (ii) if such a quorum is
not obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders.
II-1
<PAGE> 47
BY-LAWS OF MERRILL LYNCH & CO., INC.,
Section 2--Indemnification by Corporation
Any persons serving as an officer, director or trustee of a corporation, trust,
or other enterprise, including the Registrant, at the request of Merrill Lynch
are entitled to indemnification from Merrill Lynch, to the fullest extent
authorized or permitted by law, for liabilities with respect to actions taken or
omitted by such persons in any capacity in which such persons serve Merrill
Lynch or such other corporation, trust, or other enterprise. Any action
initiated by any such person for which indemnification is provided shall be
approved by the Board of Directors of Merrill Lynch prior to such initiation.
DIRECTORS' AND OFFICERS' INSURANCE
Merrill Lynch has purchased from Corporate Officers' and Directors' Assurance
Company directors' and officers' liability insurance policies which cover, in
addition to the indemnification described above, liabilities for which
indemnification is not provided under the By-Laws. The Company will pay an
allocable portion of the insurance premium paid by Merrill Lynch with respect to
such insurance policy.
ARKANSAS BUSINESS CORPORATION LAW
In addition, Section 4-26-814 of the Arkansas Business Corporation Law generally
provides that a corporation has the power to indemnify a director or officer of
the corporation, or a person serving at the request of the corporation as a
director or officer of another corporation or other enterprise against any
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).
SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities Act of
1933 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.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Not applicable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<S> <C>
1 Underwriting Agreement Between Merrill Lynch Life Insurance Company and
Merrill Lynch, Pierce, Fenner & Smith Incorporated (Incorporated by Reference
to Registrant's Pre-Effective Amendment No. 1 to Form S-1 Registration No.
33-26322, Filed February 23, 1989.)
</TABLE>
II-2
<PAGE> 48
<TABLE>
<S> <C>
2(a) Merrill Lynch Life Insurance Company Board of Directors Resolution in
Connection With the Merger Between Merrill Lynch Life Insurance Company and
Tandem Insurance Group, Inc. (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 4 to Form S-1 Registration No. 33-26322, Filed
September 5, 1991.)
2(b) Plan and Agreement of Merger Between Merrill Lynch Life Insurance Company and
Tandem Insurance Group, Inc. (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 4 to Form S-1 Registration No. 33-26322, Filed
September 5, 1991.)
3(a) Articles of Incorporation of Merrill Lynch Life Insurance Company
(Incorporated by Reference to Registrant's Form S-1 Registration No.
33-26322, Filed January 3, 1989.)
3(b) By-Laws of Merrill Lynch Life Insurance Company (Incorporated by Reference to
Registrant's Form S-1 Registration No. 33-26322, Filed January 3, 1989.)
3(c) Articles of Amendment, Restatement and Redomestication of the Articles of
Incorporation of Merrill Lynch Life Insurance Company (Incorporated by
Reference to Registrant's Form S-1 Registration No. 33-46827, Filed March 30,
1992.)
3(d) Amended and Restated By-laws of Merrill Lynch Life Insurance Company
(Incorporated by Reference to Registrant's Form S-1 Registration No.
33-46827, Filed March 30, 1992.)
4(a)(1) Group Modified Guaranteed Annuity Contract, ML-AY-361 (Incorporated by
Reference to Registrant's Pre-Effective Amendment No. 1 to Form S-1
Registration No. 33-26322, Filed February 23, 1989.)
4(a)(2) Group Modified Guaranteed Annuity Contract, ML-AY-361/94.
4(b)(1) Individual Certificate, ML-AY-362 (Incorporated by Reference to Registrant's
Pre-Effective Amendment No. 1 to Form S-1 Registration No. 33-26322, Filed
February 23, 1989.)
4(b)(2) Individual Certificate, ML-AY-362 KS (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 1 to Form S-1 Registration No.
33-26322, Filed March 9, 1990.)
4(b)(3) Individual Certificate, ML-AY-378 (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 1 to Form S-1 Registration No. 33-26322, Filed
March 9, 1990.)
4(b)(4) Individual Certificate, ML-AY-362/94.
4(c)(1) Individual Tax-Sheltered Annuity Certificate, ML-AY-372 (Incorporated by
Reference to Registrant's Pre-Effective Amendment No. 1 to Form S-1
Registration No. 33-26322, Filed February 23, 1989.)
4(c)(2) Individual Tax-Sheltered Annuity Certificate, ML-AY-372 KS (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 1 to Form S-1
Registration No. 33-26322, Filed March 9, 1990.)
4(c)(3) Individual Tax-Sheltered Annuity Certificate, ML-AY-372/94.
4(d)(1) Qualified Retirement Plan Certificate, ML-AY-373 (Incorporated by Reference
to Registrant's Form S-1 Registration No. 33-26322, Filed January 3, 1989.)
4(d)(2) Qualified Retirement Plan Certificate, ML-AY-373 KS (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 1 to Form S-1
Registration No. 33-26322, Filed March 9, 1990.)
4(d)(3) Qualified Retirement Plan Certificate, ML-AY-373/94.
4(e)(1) Individual Retirement Annuity Certificate, ML-AY-374 (Incorporated by
Reference to Registrant's Form S-1 Registration No. 33-26322, Filed January
3, 1989.)
4(e)(2) Individual Retirement Annuity Certificate, ML-AY-374 KS (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 1 to Form S-1
Registration No. 33-26322, Filed March 9, 1990.)
</TABLE>
II-3
<PAGE> 49
<TABLE>
<S> <C>
4(e)(3) Individual Retirement Annuity Certificate, ML-AY-375 KS (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 1 to Form S-1
Registration No. 33-26322, Filed March 9, 1990.)
4(e)(4) Individual Retirement Annuity Certificate, ML-AY-379 (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 1 to Form S-1
Registration No. 33-26322, Filed March 9, 1990.)
4(e)(5) Individual Retirement Annuity Certificate, ML-AY-374/94.
4(f)(1) Individual Retirement Account Certificate, ML-AY-375 (Incorporated by
Reference to Registrant's Pre-Effective Amendment No. 1 to Form S-1
Registration No. 33-26322, Filed February 23, 1989.)
4(f)(2) Individual Retirement Account Certificate, ML-AY-380 (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 1 to Form S-1
Registration No. 33-26322, Filed March 9, 1990.)
4(f)(3) Individual Retirement Account Certificate, ML-AY-375/94.
4(g)(1) Section 457 Deferred Compensation Plan Certificate, ML-AY-376 (Incorporated
by Reference to Registrant's Form S-1 Registration No. 33-26322, Filed
January 3, 1989.)
4(g)(2) Section 457 Deferred Compensation Plan Certificate, ML-AY-376 KS
(Incorporated by Reference to Registrant's Post-Effective Amendment No. 1 to
Form S-1 Registration No. 33-26322, Filed March 9, 1990.)
4(g)(3) Section 457 Deferred Compensation Plan Certificate, ML-AY-376/94.
4(h)(1) Tax-Sheltered Annuity Endorsement, ML-AY-366 (Incorporated by Reference to
Registrant's Form S-1 Registration No. 33-26322, Filed January 3, 1989.)
4(h)(2) Tax-Sheltered Annuity Endorsement, ML-AY-366 190 (Incorporated by Reference
to Registrant's Post-Effective Amendment No. 1 to Form S-1 Registration No.
33-26322, Filed March 9, 1990.)
4(h)(3) Tax-Sheltered Annuity Endorsement, ML-AY-366 190 (Incorporated by Reference
to Registrant's Post-Effective Amendment No. 1 to Form S-1 Registration No.
33-26322, Filed March 9, 1990.)
4(i)(1) Qualified Retirement Plan Endorsement, ML-AY-364 (Incorporated by Reference
to Registrant's Form S-1 Registration No. 33-26322, Filed January 3, 1989.)
4(i)(2) Qualified Retirement Plan Endorsement, ML-AY-364 190. (Incorporated by
Reference to Registrant's Form S-1 Registration No. 33-26322, Filed March 9,
1990.)
4(j)(1) Individual Retirement Annuity Endorsement, ML-AY-368 (Incorporated by
Reference to Registrant's Form S-1 Registration No. 33-26322, Filed January
3, 1989.)
4(j)(2) Individual Retirement Annuity Endorsement, ML-AY-368 190 (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 1 to Form S-1
Registration No. 33-26322, Filed March 9, 1990.)
4(j)(3) Individual Retirement Annuity Endorsement, ML009. (Incorporated by Reference
to Registrant's Post-Effective Amendment No. 1 to Form S-1 Registration No.
33-60290, Filed March 31, 1994.)
4(k)(1) Individual Retirement Account Endorsement, ML-AY-365 (Incorporated by
Reference to Registrant's Form S-1 Registration No. 33-26322, Filed January
3, 1989.)
4(k)(2) Individual Retirement Account Endorsement, ML-AY-365 190 (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 1 to Form S-1
Registration No. 33-26322, Filed March 9, 1990.)
4(l)(1) Section 457 Deferred Compensation Plan Endorsement, ML-AY-367 (Incorporated
by Reference to Registrant's Form S-1 Registration No. 33-26322, Filed
January 3, 1989.)
</TABLE>
II-4
<PAGE> 50
<TABLE>
<S> <C>
4(l)(2) Section 457 Deferred Compensation Plan Endorsement, ML-AY-367 190
(Incorporated by Reference to Registrant's Post-Effective Amendment No. 1 to
Form S-1 Registration No. 33-26322, Filed March 9, 1990.)
4(m)(1) Qualified Plan Endorsement, ML-AY-369 (Incorporated by Reference to
Registrant's Form S-1 Registration No. 33-26322, Filed January 3, 1989.)
4(m)(2) Qualified Plan Endorsement, ML-AY-448 (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 1 to Form S-1 Registration No.
33-26322, Filed March 9, 1990.)
4(m)(3) Qualified Plan Endorsement, ML-AY-448/94.
4(n) Application for Group Modified Guaranteed Annuity Contract (Incorporated by
Reference to Registrant's Form S-1 Registration No. 33-26322, Filed January
3, 1989.)
4(o) Application for Individual Certificate Under Modified Guaranteed Annuity
Contract (Incorporated by Reference to Registrant's Form S-1 Registration No.
33-26322, Filed January 3, 1989.)
4(p) Form of Company name change endorsement (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 4 to Form S-1 Registration No.
33-26322, Filed September 5, 1991.)
5 Opinion of Barry G. Skolnick, Esq. and Consent to its use as to the legality
of the securities being registered.
10(a) Management Services Agreement Between Merrill Lynch Life Insurance Company
and Family Life Insurance Company (Incorporated by Reference to Registrant's
Form S-1 Registration No. 33-26322, Filed January 3, 1989.)
10(b) General Agency Agreement Between Merrill Lynch Life Insurance and Merrill
Lynch Life Agency, Inc. (Incorporated by Reference to Registrant's
Pre-Effective Amendment No. 1 to Form S-1 Registration No. 33-26322, Filed
February 23, 1989.)
10(c) Amended Service Agreement Between Merrill Lynch Life Insurance Company and
Merrill Lynch Insurance Group, Inc. (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 1 to Form S-1 Registration No.
33-60290, Filed March 31, 1994.)
10(d) Indemnity Reinsurance Agreement Between Merrill Lynch Life Insurance Company
and Family Life Insurance Group (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 2 to Form S-1 Registration No. 33-26322, Filed
March 13, 1991.)
10(e) Amendment No. 1 to Indemnity Reinsurance Agreement Between Merrill Lynch Life
Insurance Company and Family Life Insurance Group (Incorporated by Reference
to Registrant's Post-Effective Amendment No. 3 to Form S-1 Registration No.
33-26322, Filed April 24, 1991.)
10(f) Assumption Reinsurance Agreement Between Merrill Lynch Life Insurance
Company, Tandem Insurance Group, Inc. and Royal Tandem Life Insurance Company
and Family Life Insurance Company (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 4 to Form S-1 Registration No. 33-26322, Filed
September 5, 1991.)
10(g) Amended General Agency Agreement Between Merrill Lynch Life Insurance Company
and Merrill Lynch Life Agency Inc. (Incorporated by Reference to Registrant's
Form S-1 Registration No. 33-46827, Filed March 30, 1992.)
10(h) Indemnity Agreement Between Merrill Lynch Life Insurance Company and Merrill
Lynch Life Agency Inc. (Incorporated by Reference to Registrant's Form S-1
Registration No. 33-46827, Filed March 30, 1992.)
10(i) Management Agreement Between Merrill Lynch Life Insurance Company and Merrill
Lynch Asset Management, Inc. (Incorporated by Reference to Registrant's Form
S-1 Registration No. 33-46827, Filed March 30, 1992.)
23(a) Written Consent of Sutherland, Asbill & Brennan.
</TABLE>
II-5
<PAGE> 51
<TABLE>
<S> <C>
23(b) Written Consent of Deloitte & Touche, independent auditors.
24(a) Power of Attorney from Joseph E. Crowne. (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 1 to Form S-1 Registration No.
33-60290, Filed March 31, 1994.)
24(b) Power of Attorney from David M. Dunford. (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 1 to Form S-1 Registration No.
33-60290, Filed March 31, 1994.)
24(c) Power of Attorney from John C.R. Hele. (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 1 to Form S-1 Registration No.
33-60290, Filed March 31, 1994.)
24(d) Power of Attorney from Allen N. Jones. (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 1 to Form S-1 Registration No.
33-60290, Filed March 31, 1994.)
24(e) Power of Attorney from Barry G. Skolnick. (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 1 to Form S-1 Registration No.
33-60290, Filed March 31, 1994.)
24(f) Power of Attorney from Anthony J. Vespa. (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 1 to Form S-1 Registration No.
33-60290, Filed March 31, 1994.)
26 Proxy Statement of Merrill Lynch & Co., Inc. dated April 22, 1991
(Incorporated by Reference to Registrant's Post-Effective Amendment No. 2 to
Form S-1 Registration No. 33-26322, Filed April 24, 1991.)
</TABLE>
(b) Financial Statement Schedules.
<TABLE>
<S> <C>
None.
</TABLE>
II-6
<PAGE> 52
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-7
<PAGE> 53
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this amendment to its registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Plainsboro,
State of New Jersey, on this 7th day of December, 1994.
<TABLE>
<S> <C>
ATTEST: MERRILL LYNCH LIFE INSURANCE COMPANY
(Registrant)
/s/ SANDRA K. KELLY By: /s/ BARRY G. SKOLNICK
- --------------------------------------------- --------------------------------------------
Sandra K. Kelly Barry G. Skolnick
Assistant Vice President Senior Vice President
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the registration statement has been signed below by the following persons in the
capacities indicated on this 7th day of December, 1994.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ---------------------------------------------
<S> <C>
* Chairman of the Board, President, and Chief
- --------------------------------------------- Executive Officer
Anthony J. Vespa
* Director, Senior Vice President, Chief
- --------------------------------------------- Financial Officer, Chief Actuary, and
Joseph E. Crowne Treasurer
* Director, Senior Vice President, and Chief
- --------------------------------------------- Investment Officer
David M. Dunford
* Director and Senior Vice President
- ---------------------------------------------
John C.R. Hele
* Director
- ---------------------------------------------
Allen N. Jones
*By: /s/ BARRY G. SKOLNICK In his own capacity as Director, Senior Vice
---------------------------------------- President, and General Counsel and as
Barry G. Skolnick Attorney-in-Fact
</TABLE>
II-8
<PAGE> 54
EXHIBIT INDEX
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- --------- -------------------------------------------------------------------------- -----
<S> <C> <C>
4(a)(2) Group Modified Guaranteed Annuity Contract, ML-AY-361/94.................. II-
4(b)(4) Individual Certificate, ML-AY-362/94...................................... II-
4(c)(3) Individual Tax-Sheltered Annuity Certificate, ML-AY-372/94................ II-
4(d)(3) Qualified Retirement Plan Certificate, ML-AY-373/94....................... II-
4(e)(5) Individual Retirement Annuity Certificate, ML-AY-374/94................... II-
4(f)(3) Individual Retirement Account Certificate, ML-AY-375/94................... II-
4(g)(3) Section 457 Deferred Compensation Plan Certificate, ML-AY-376/94.......... II-
4(m)(3) Qualified Plan Endorsement, ML-AY-448/94.................................. II-
5 Opinion of Barry G. Skolnick, Esq. and Consent to its use as to the II-
legality of the securities being registered...............................
23(a) Written Consent of Sutherland, Asbill & Brennan........................... II-
23(b) Written Consent of Deloitte & Touche, independent auditors................ II-
</TABLE>
II-9
<PAGE> 1
MERRILL LYNCH LIFE INSURANCE COMPANY
Home Office: Little Rock Arkansas
Administrative Office: P.O. Box 44223, Jacksonville, Florida, 32231-4223
1-800-535-5549
CONTRACT SCHEDULE
<TABLE>
<S> <C>
Contract Holder Group Contract No.
------------------------------------ ---------------------------------
Delivered In Effective Date
--------------------------------------- -------------------------------------
(STATE)
Class of Eligible Participants
---------------------------------------------------------------------------------
</TABLE>
MERRILL LYNCH LIFE INSURANCE COMPANY agrees to pay annuity benefits as provided
in this contract. Payments will be made to the Participant starting on the
Annuity Date.
<TABLE>
<CAPTION>
_____________________________________________________________________________________
TABLE OF CONTENTS
Section Page
- ------- ----
<S> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Participant Eligibility . . . . . . . . . . . . . . . . . . . . . . . 3
3. Sub-Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. Contract Values . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5. Market Value Adjustment . . . . . . . . . . . . . . . . . . . . . . . 3
6. Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
7. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . 4
8. Payment at Death of Participant or Annuitant . . . . . . . . . . . . . 5
9. Annuity Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . 6
10. Annuity Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
11. Annuity Option Tables . . . . . . . . . . . . . . . . . . . . . . . . 8
_____________________________________________________________________________________
</TABLE>
/s/ Barry G. Skolnick /s/ Anthony J. Vespa
- --------------------- --------------------
President Secretary
------------------------------------------------
Registrar
Group Modified Guaranteed Annuity Contract
Account Value Is Subject to Market Value Adjustment
Nonparticipating
ML-AY-361/94
<PAGE> 2
1. DEFINITIONS
1.1 ANNUITY: A series of predetermined periodic payments. See Section 9.
1.2 ANNUITANT: Annuity payments may depend upon the continuation of life of a
person. That person is called an annuitant. The Annuitant is named in the
Certificate.
1.3 ANNUITY DATE: The date shown in the Certificate on which payment of an
annuity under this contract is to start. See Section 9.1.
1.4 PREMIUMS: The single premium paid for each Certificate issued under this
contract.
1.5 SUB-ACCOUNT: Each single premium will be allocated to one or more
Sub-Accounts as directed by the Participant. Each Sub-Account will correspond
to a specified interest rate and Guarantee Period. See Section 3.
1.6 SUB-ACCOUNT VALUE: An amount equal to that part of a single premium
allocated by a Participant to a Sub-Account, or any reinvestment in a
Sub-Account, plus credited interest, as adjusted for any prior withdrawals,
Market Value Adjustments and withdrawal charges. See Section 4.1.
1.7 NET SUB-ACCOUNT VALUE: The Sub-Account Value after adjustment for any
current Market Value Adjustment and withdrawal charge.
1.8 ACCOUNT VALUE: The sum of all Sub-Account Values. See Section 4.2.
1.9 NET ACCOUNT VALUE: The sum of all Net Sub-Account Values.
1.10 WITHDRAWAL CHARGE: A charge deducted from any Sub-Account from which a
withdrawal is made prior to the end of a Guarantee Period. See Section 6.2.
1.11 MARKET VALUE ADJUSTMENT: An adjustment made to Sub-Account Value. It is
applied upon withdrawal of all or part of the Sub-Account Value prior to the
end of the Guarantee Period. If the Annuity Date is prior to the end of a
Guarantee Period, the Market Value Adjustment is also applied at the Annuity
Date. See Section 5.1. The adjustment may be either a deduction from or an
addition to Sub-Account Value. The formula for this adjustment is shown in
Section 5.2.
1.12 GUARANTEE PERIOD: The period for which we guarantee to credit a specified
interest rate for a Sub-Account. See Section 3.2.
1.13 MAXIMUM GUARANTEE PERIOD OPTION: An option to have Sub-Account Values
automatically transferred to the Sub-Account for the longest Guarantee Period
in which Sub-Account Values are currently invested or reinvested, provided such
Guarantee Period matures prior to the Annuity Date. See Section 3.4.
1.14 PARTICIPANT: A person meeting the requirements of Section 2 to whom a
Certificate has been issued under this contract.
1.15 CERTIFICATE: An individual certificate of participation issued by us as
evidence of an annuity under this contract. See Section 7.12.
1.16 CERTIFICATE ANNIVERSARY: Each anniversary of the Certificate Date.
1.17 CERTIFICATE DATE: The date on which a Certificate is issued under this
contract.
1.18 CERTIFICATE YEAR: The year starting on the Certificate Date or a
Certificate Anniversary and ending with the day just prior to the next
Certificate Anniversary.
1.19 CO-ANNUITANTS: If two persons are named as Co-Annuitants on the schedule
page of a Certificate, then wherever used in this contract: "Annuitant" means
the Co-Annuitants; death of the Participant or Annuitant refers to death of
both Participants or Co-Annuitants (except under Section 8:1); and age of the
Annuitant refers to age of the older Co-Annuitant. The Co-Annuitants are
joint Participants, and each is the contingent participant of the other's
interest in the Certificate. Only Options 1, 2, and 6 of Section 10 are
available while both Co-Annuitants are alive, and Option 6 will apply if no
annuity option is chosen.
1.20 OTHER DEFINITIONS:
Beneficiary: See Section 7.1
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2. PARTICIPANT ELIGIBILITY
2.1 ELIGIBLE PARTICIPANTS: No person may be a Participant unless he or she is
a member of the class described in the Contract Schedule.
2.2 PARTICIPATION: To participate under this contract, a Participant must pay
a single premium and make a signed written application for an annuity under
this contract. One Certificate will be issued for each single premium paid by
each Participant.
2.3 TERMINATION: We reserve the right to terminate this contract as to new
Participants.
3. SUB-ACCOUNTS
3.1 SUB-ACCOUNT: Each single premium will be allocated to one or more
Sub-Accounts as chosen by the Participant. That part of the single premium
allocated to a Sub-Account must be at least $5,000.
3.2 AVAILABLE GUARANTEE PERIODS: Guarantee Periods offered by us will be for
terms of 1 year through 10 years. We may at our discretion offer additional
Guarantee Periods.
3.3 TRANSFER OF SUB-ACCOUNT VALUE: Sub-Account Values may not be transferred
to another Sub-Account, in full or in part, prior to the end of the Guarantee
Period. At the end of a Guarantee Period, the Sub-Account Value may be
transferred to another Sub-Account. The minimum amount that can be transferred
to any one Sub-Account is the lesser of (a) $5,000, or (b) the total
Sub-Account Value to be transferred.
Upon notice to us prior to the end of the current Guarantee Period, the
Sub-Account Value may be transferred at the end of the Guarantee Period to one
or more Sub-Accounts as chosen by the Participant. See Section 7.3. We will
notify the Participant of such right at least 30 days prior to the end of the
Guarantee Period. If no notice is received from the Participant, the
Sub-Account Value will be automatically transferred to the Sub-Account for the
one year Guarantee Period, unless the Maximum Guarantee Period Option has been
chosen. See Section 3.4.
3.4 MAXIMUM GUARANTEE PERIOD OPTION: This choice may be made by the
Participant in the Certificate application or made or changed prior to the end
of a Guarantee Period. See Section 7.3. Under this option, if no notice is
received for transfer, all Sub-Account Values will be automatically transferred
to the Sub-Account for the longest Guarantee Period in which that Participant's
Sub-Account Values are then currently invested, provided such Guarantee Period
matures prior to the Annuity Date. If this option has not been chosen,
automatic transfer will occur as stated in Section 3.3.
4. CONTRACT VALUES
4.1 SUB-ACCOUNT VALUE: The current Sub-Account Value at any time prior to the
Annuity Date is an amount equal to the investment or reinvestment in the
Sub-Account plus credited interest, as adjusted for any prior withdrawals,
Market Value Adjustments and withdrawal charges.
4.2 ACCOUNT VALUE: The current Account Value at any time prior to the Annuity
Date is equal to the sum of all Sub-Account Values.
4.3 INTEREST RATES: Simple interest will be credited daily and compounded
annually for each Certificate Year at the guaranteed interest rate for each
Sub-Account in which the Account Value is invested. There are no guaranteed
minimum interest rates for reinvestments of Sub-Account Values, except we
guarantee that rates on reinvestment will be the same as the guaranteed
interest rates offered for any new contracts on the same form as this contract.
5. MARKET VALUE ADJUSTMENT
5.1 MARKET VALUE ADJUSTMENT: The Market Value Adjustment may be either
negative or positive. It will be deducted from or added to Sub-Account Value
according to the formula shown in Section 5.2 in the following events:
(a) Upon withdrawal of all or part of the Sub-Account Value prior
to the end of the Guarantee Period for that Sub-Account, or
(b) At the Annuity Date if the Annuity Date is prior to the end of
the Guarantee Period for that Sub-Account.
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5.2 FORMULA: The Market Value Adjustment is determined by the following
formula:
(1 + B) n/365
A x [1 - ------- ]
(1 + C)
Where:
"n" = The remaining number of days in the Guarantee Period;
"A" = The amount withdrawn from the Sub-Account;
"B" = The current guaranteed interest rate that we are offering for
a Guarantee Period of a duration of years represented by
"n/365." When n/365 is not a whole number, we determine B by
straight-line interpolation. If n/365 is less than 1, we will
assume B is equal to the rate for a one-year Guarantee Period;
and
"C" = The guaranteed interest rate for the Sub-Account.
6. WITHDRAWALS
6.1 WITHDRAWALS: A Participant may withdraw all or part of the Net Account
Value applied under this option upon notice to us received prior to the earlier
of the Annuity Date or the death of the Participant or Annuitant. See Section
7.3. For full withdrawal, the Certificate must be surrendered at our
administrative office.
For partial withdrawals, the withdrawal must be at least $500. The Sub-Account
Value of any remaining Sub-Accounts, after adjustment for any current Market
Value Adjustment and withdrawal charge, must be at least $1,000. The remaining
Account Value must be at least $5,000. The Participant MUST specify the
Sub-Accounts from which the withdrawal is to be made. See Section 7.3. If a
Sub-Account has the same Guarantee Period as any other Sub-Account, the
Participant may specify only the Sub-Account with the shortest time remaining
in the Guarantee Period.
6.2 WITHDRAWAL CHARGE: The amount of the withdrawal charge will equal 6 months
of simple interest on the amount withdrawn. Such interest will be computed at
the rate we are crediting the Sub-Account from which the withdrawal is made.
The withdrawal charge will be deducted from the Sub-Account from which the
withdrawal is made. Withdrawal charges do not apply to:
(a) Death payments under Section 8,
(b) Annuity payments under Section 9, or
(c) Withdrawal at the end of the Guarantee Period for the Sub-Account
if we receive written notice from the Participant of such
withdrawal prior to the end of the Guarantee Period.
7. GENERAL PROVISIONS
7.1 BENEFICIARY: A beneficiary is the person who is to receive payment on
death of the Participant or Annuitant under Section 8 or under Section 10 if
guaranteed amounts remain unpaid. If the Participant is not the Annuitant, the
Participant may name one beneficiary to receive payment on death of the
Participant ("Participant's Beneficiary") and a different beneficiary to
receive payment on death of the Annuitant ("Annuitant's Beneficiary"). If the
Participant is the Annuitant, then the Participant's Beneficiary must be the
same person as the Annuitant's Beneficiary.
The Participant chooses the beneficiary in the Certificate application. The
Participant's Beneficiary may be changed while the Participant is alive. The
Annuitant's Beneficiary may be changed while the Annuitant is alive.
A beneficiary may be named irrevocably, in which case a change can be made
later only with the beneficiary's written consent. We will not require such
beneficiary's consent for withdrawals.
If a beneficiary does not survive the Participant or Annuitant, the estate or
heirs of such beneficiary have no rights under this contract. If no beneficiary
survives the Participant or Annuitant, payment will be made to the Participant,
if living, otherwise to the Participant's estate.
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7.2 COLLATERAL ASSIGNMENT: Upon notice to us the Participant may make a
collateral assignment of his or her rights under this contract to a creditor as
security for a debt. The rights of an assignee have priority over the rights of
a beneficiary.
7.3 NOTICES, CHANGES AND CHOICES: To be effective, all notices, changes and
choices the Participant makes under this contract must be in writing, signed
and received by us at our administrative office, except that the following may
be made by telephone:
(a) Notices regarding transfers of Sub-Account Values under Section
3.3;
(b) Choices regarding the Maximum Guarantee Period Option under Section
3.4; and
(c) Specifications of Sub-Account deductions for withdrawals under
Section 6.1.
We are not responsible for their validity. When recorded by us, notices,
changes and choices relating to beneficiaries will take effect as of the date
signed unless we have already acted in reliance on the prior status.
7.4 MISSTATEMENT OF AGE OR SEX: If the age or sex of an Annuitant or a joint
annuitant is misstated, annuity payments will be adjusted to reflect the
correct age and sex. Any amount we have overpaid as the result of such
misstatement will be deducted from the next payments due under this contract.
Interest on the overpayment will be charged at the rate of 6% per year. Any
amount we have underpaid will be paid in full with the next payment due under
this contract. We will pay interest on the underpayment at the rate of 6% per
year.
7.5 PROOF OF AGE, SEX OR SURVIVAL: We may require satisfactory proof of the
age, sex or survival of any person on whose continued life any payment under
this contract depends.
7.6 INCONTESTABILITY: We will not contest this contract or any Certificates
issued under this contract.
7.7 THE CONTRACT: This contract, its attached application and any endorsements
are the entire contract. It is issued in consideration of the application and
payment of the first single premium. Only our President, a Vice President,
Secretary or Assistant Secretary may change the contract. Any change must be in
writing.
7.8 NONPARTICIPATING: This contract is nonparticipating. It does not share in
our surplus.
7.9 PAYMENTS: All sums payable to or by us are payable at our administrative
office. We may require return of a Certificate prior to making payment. We may
defer payments of partial or full withdrawals for up to 6 months.
7.10 PROTECTION OF PROCEEDS: Payments under this contract may not be assigned
by the payee prior to their due dates. To the extent allowed by law, payments
are not subject to legal process for debts of a payee.
7.11 REPORTS: Prior to the Annuity Date we will furnish the Participant a
report at least once each year. it will show the Participant's Account Value,
Sub-Account Values and current interest rates.
7.12 CERTIFICATES: We will issue individual Certificates to each Participant.
Each Certificate will summarize the provisions of the contract and show the
annuity provided to the Participant.
7.13 RIGHT TO CANCEL CERTIFICATE: The Participant may cancel his or her
Certificate within ten days after he or she receives it by returning or mailing
it to us or our agent. We will refund his or her premium within ten days after
the Certificate is received by us or our agent. The Certificate will be void
from the beginning.
7.14 COMPLIANCE WITH STATE AND FEDERAL LAW: We reserve the right to change the
provisions of this contract and the Certificates issued under this contract to
conform to any applicable law, regulation or ruling issued by a government
agency.
8. PAYMENT AT DEATH OF PARTICIPANT OR ANNUITANT
8.1 DEATH PRIOR TO ANNUITY DATE: On death of a Participant or Annuitant
prior to the Annuity Date, we will pay to the Participant's Beneficiary or
Annuitant's Beneficiary, as the case may be, an amount equal to the greater of
the Account Value or the Net Account Value on the date of payment. Payment will
be made in a lump sum unless Section 8.2 is chosen.
8.2 ANNUITY OPTION: If the beneficiary is the surviving spouse of the
deceased Participant or Annuitant, he or she may choose to receive payments
under any of the annuity options of this contract. For any other beneficiary,
only those options are available that provide for full payment within 5 years
of the date of such Participant's or Annuitant's death.
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8.3 CERTIFICATE CONTINUATION OPTION ON PARTICIPANT'S DEATH: If the surviving
spouse of a deceased Participant is the Participant's Beneficiary, such spouse
may choose to become the Participant and continue the Certificate in force on
the same terms as before such Participant's death, and the spouse shall
thereafter be the Annuitant. This option is also available if the surviving
spouse and the deceased Participant were Co-Annuitants.
8.4 CERTIFICATE CONTINUATION OPTION ON ANNUITANT'S DEATH: If the Participant
is not the Annuitant, the Participant may irrevocably choose prior to the
Annuitant's death, to continue the Certificate in force upon the death of the
Annuitant on the same terms as before such Annuitant's death. The Participant,
or a person designated by the Participant, shall thereafter be the Annuitant.
This option is not available if the Participant is not an individual, except
for tax-qualified plans under Section 401 or 408 of the Internal Revenue Code.
8.5 DEATH AFTER ANNUITY DATE: See Section 10.8.
9. ANNUITY PROVISIONS
9.1 ANNUITY DATE: The Annuity Date must be on the first day of a month. It may
not be later than the first day of the next month after the Annuitant's 85th
birthday. If the Participant has not chosen an Annuity Date, it will be the
first day of the next month after the Annuitant's 75th birthday. The
Participant may change the Annuity Date up to 30 days prior to the Annuity
Date. A MARKET VALUE ADJUSTMENT MAY BE APPLIED ON THE ANNUITY DATE. SEE SECTION
5.1.
9.2 ANNUITY OPTIONS: If the Participant has not chosen an annuity option,
Option 4 will apply with a 10-year guarantee period. The Participant may change
options only up to 30 days prior to the Annuity Date. An option not set forth
in the contract may be chosen if acceptable to us.
9.3 MINIMUM ANNUITY PAYMENT: If the Net Account Value to be applied at the
Annuity Date is less than $5,000, we may pay such amount in a lump sum. If any
payment would be less than $50, we may change the frequency so payments are at
least $50 each.
9.4 AMOUNT OF ANNUITY PAYMENTS: Any premium taxes imposed by a state or other
government will be deducted from the Net Account Value at the Annuity Date. The
remaining Net Account Value will be applied to the annuity option chosen at our
current annuity rates, which will be furnished on request. The rates will
assume interest of not less than 3%. They will not be less favorable than those
shown in the annuity tables in this contract. The tables show the minimum
guaranteed amount of each monthly payment for each $1,000 so applied, according
to age and sex at the Annuity Date. The tables are based on the 1983 Table "a"
projected forward to 1995 for Individual Annuity Valuation with interest at 3%.
10. ANNUITY OPTIONS
10.1 OPTION 1 - PAYMENTS OF A FIXED AMOUNT: Equal payments in the amount chosen
will be made until the Net Account Value applied under this option is
exhausted. The term over which such payments are made must be at least 5 years.
10.2 OPTION 2 - PAYMENTS FOR A FIXED PERIOD: Payments will be made for the
period chosen. The period must be at least 5 years.
10.3 OPTION 3 - LIFE ANNUITY: Payments will be made for the life of the
Annuitant. Payments will cease with the last payment due prior to the
Annuitant's death.
10.4 OPTION 4 - LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 OR 20 YEARS:
Payments will be made for the guaranteed period chosen (10 or 20 years) and as
long thereafter as the Annuitant lives.
10.5 OPTION 5 - LIFE ANNUITY WITH GUARANTEED RETURN OF NET ACCOUNT VALUE:
Payments will be made until the sum of the annuity payments equals the Net
Account Value applied under this option, and as long thereafter as the
Annuitant lives.
10.6 OPTION 6 - JOINT AND SURVIVOR LIFE ANNUITY: Payments will be made during
the lifetimes of the Annuitant and a designated second person. Upon death of
one, payments for the life of the other will be made in the same amount.
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10.7 OPTION 7 - QUALIFIED PLAN OPTION: This option is available only for
tax-qualified plans under Section 401, 403, 404, 408, or any similar provision
of the Internal Revenue Code. Annuity payments may be based on (a) the life
expectancy of the Annuitant, (b) the joint life expectancy of the Annuitant and
his or her spouse, or (c) the life expectancy of the surviving spouse if the
Annuitant dies before the Annuity Date. Payments will be made annually. Each
annual payment will be equal to the Net Account Value on the first day of that
calendar year divided by the applicable current life expectancy, as defined by
Internal Revenue Service regulations. Each subsequent payment will be made on
the anniversary of the Annuity Date. Interest will be credited at our current
rate for this option. The rate will not be less than 3%. On death of the
measuring life or lives prior to full distribution of the net account value,
the remaining Net Account Value will be paid to the beneficiary in a lump sum.
10.8 DEATH OF PARTICIPANT OR ANNUITANT AFTER ANNUITY DATE: On death of the
Participant after the annuity date, any amounts remaining unpaid will be paid
to the Participant's Beneficiary under the same method of distribution in force
at the date of the death.
On death of the Annuitant while guaranteed amounts remain unpaid, the
Annuitant's Beneficiary may choose either:
(a) To have the payments continue for the amount or period guaranteed,
or
(b) To receive the present value of the remaining guaranteed payments
in a lump sum.
If a beneficiary dies while guaranteed amounts remain unpaid, the present value
will be paid in a lump sum to the beneficiary's estate.
Present values will be computed at the interest rate or rates that were used to
compute the amount of the initial annuity payment.
10.9 PAYMENT: Except for Option 7, payment will be made on the first day of
each month starting with the Annuity Date, but prior to the Annuity Date the
Participant may choose a less frequent payment interval instead. The amount of
each payment on an annual, semiannual or quarterly basis will be not less than
the monthly payment computed from the annuity tables in this contract
multiplied by the appropriate factor:
Annual Semiannual Quarterly
------ ---------- ---------
11.839 5.963 2.993
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11. ANNUITY OPTION TABLES
MINIMUM GUARANTEED MONTHLY ANNUITY PAYMENT FOR EACH $1,000 APPLIED UNDER OPTION
OPTION 2 (Payments for a Fixed Period)
<TABLE>
<CAPTION>
Years Each Years Each Years Each Years Each
Payable Payment Payable Payment Payable Payment Payable Payment
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
5 17.91 9 10.53 13 7.71 17 6.23
6 15.14 10 9.61 14 7.26 18 5.96
7 13.16 11 8.86 15 6.87 19 5.73
8 11.68 12 8.24 16 6.53 20 5.51
</TABLE>
OPTION 3 (Life Annuity), OPTION 4 (Life Annuity with 10 or 20 Years Guaranteed)
and OPTION 5 (Return of Net Account Value Guaranteed)
<TABLE>
<CAPTION>
*Adjusted Life 10 Years 20 Years Return of * Adjusted Life 10 Years 20 Years Return of
Male Age Annuity Guaranteed Guaranteed Net Account Value Female Age Annuity Guaranteed Guaranteed Net Account Value
- -------- ------- ---------- ---------- ----------------- ---------- ------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56 4.62 4.56 4.34 4.37 56 4.19 4.16 4.06 4.05
57 4.72 4.65 4.41 4.45 57 4.27 4.24 4.12 4.12
58 4.83 4.75 4.47 4.53 58 4.35 4.32 4.19 4.19
59 4.94 4.85 4.54 4.61 59 4.44 4.40 4.25 4.26
60 5.06 4.95 4.60 4.70 60 4.54 4.49 4.32 4.34
61 5.19 5.07 4.67 4.80 61 4.64 4.58 4.39 4.42
62 5.33 5.19 4.73 4.90 62 4.74 4.68 4.46 4.50
63 5.47 5.31 4.80 5.00 63 4.86 4.79 4.53 4.59
64 5.63 5.44 4.86 5.11 64 4.98 4.90 4.60 4.69
65 5.80 5.58 4.92 5.23 65 5.11 5.01 4.67 4.79
66 5.98 5.72 4.98 5.35 66 5.25 5.14 4.74 4.89
67 6.17 5.86 5.04 5.48 67 5.40 5.27 4.82 5.00
68 6.37 6.02 5.10 5.61 68 5.55 5.40 4.89 5.12
69 6.59 6.18 5.15 5.75 69 5.72 5.55 4.95 5.25
70 6.82 6.34 5.20 5.90 70 5.91 5.70 5.02 5.38
71 7.07 6.50 5.24 6.06 71 6.11 5.86 5.08 4.52
72 7.34 6.67 5.28 6.22 72 6.32 6.03 5.14 5.66
73 7.62 6.85 5.32 6.39 73 6.56 6.20 5.19 5.82
74 7.92 7.02 5.35 6.57 74 6.81 6.38 5.24 5.99
75 8.24 7.20 5.38 6.76 75 7.08 6.57 5.29 6.16
76 8.58 7.38 5.40 6.97 76 7.37 6.76 5.33 6.35
77 8.95 7.55 5.42 7.17 77 7.69 6.96 5.36 6.55
78 9.35 7.72 5.44 7.39 78 8.03 7.16 5.39 6.75
79 9.77 7.89 5.46 7.63 79 8.40 7.36 5.41 6.98
80 10.22 8.06 5.47 7.87 80 8.80 7.56 5.44 7.21
81 10.71 8.22 5.48 8.13 81 9.23 7.75 5.45 7.45
82 11.22 8.37 5.49 8.40 82 9.70 7.94 5.47 7.71
83 11.77 8.51 5.50 8.68 83 10.21 8.13 5.48 7.98
84 12.35 8.65 5.50 8.97 84 10.76 8.30 5.49 8.27
85 12.97 8.77 5.50 9.29 85 11.35 8.46 5.50 8.57
</TABLE>
OPTION 6 (Joint and Survivor Life Annuity)
<TABLE>
<CAPTION>
*Adjusted *Adjusted Male Age *Adjusted
Female ------------------------------------------------------------------------------------------------ Female
Age 50 55 60 65 70 75 80 85 Age
- --------- ---- ---- ---- ---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 3.52 3.60 3.66 3.71 3.74 3.76 3.78 3.78 50
55 3.65 3.77 3.87 3.95 4.01 4.05 4.08 4.09 55
60 3.78 3.94 4.10 4.23 4.34 4.41 4.46 4.49 60
65 3.88 4.10 4.33 4.54 4.72 4.86 4.96 5.02 65
70 3.96 4.23 4.54 4.85 5.15 5.40 5.59 5.72 70
75 4.02 4.34 4.72 5.14 5.59 6.01 6.37 6.64 75
80 4.06 4.41 4.85 5.38 5.99 6.63 7.24 7.76 80
85 4.09 4.46 4.94 5.55 6.30 7.17 8.11 9.01 85
</TABLE>
Information for ages not shown will be furnished on request.
*"Adjusted Age" means attained age at last birthday adjusted as follows:
ANNUITY DATE ADJUSTED AGE
------------ ------------
Before 2000 Actual Age
2000-2009 Subtract 1 year from actual age
2010-2019 Subtract 2 years from actual age
2020-2029 Subtract 3 years from actual age
2030 and after Subtract 4 years from actual age
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<PAGE> 1
MERRILL LYNCH LIFE INSURANCE COMPANY
Home Office: Little Rock, Arkansas
Administrative Office: P.O. 44223, Jacksonville, FL 32231-4223
1-800-535-5549
CERTIFICATE OF PARTICIPATION
This Certificate is a summary of your rights under the Group Modified
Guaranteed Annuity Contract identified in the Certificate Schedule. See Section
2. It is subject to all provisions of the Contract, whether or not summarized
in this Certificate. The Contract alone governs the rights of all parties. A
copy of the Contract will be furnished on request.
MERRILL LYNCH LIFE INSURANCE COMPANY certifies that the person named as
Participant in the Certificate Schedule is a Participant under the Contract.
<TABLE>
<CAPTION>
_____________________________________________________________________________________
TABLE OF CONTENTS
Section Page
- ------- ----
<S> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Certificate Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Sub-Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. Contract Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5. Market Value Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . 4
6. Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8. Payment at Death of Participant . . . . . . . . . . . . . . . . . . . . . 6
9. Annuity Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
10. Annuity Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
11. Annuity Option Tables . . . . . . . . . . . . . . . . . . . . . . . . . . 8
_____________________________________________________________________________________
</TABLE>
TEN DAY RIGHT TO REVIEW CERTIFICATE
You may cancel your Certificate within ten days after you receive it by
returning or mailing it to us or our agent. We will refund your premium within
ten days after the Certificate is received by us or our agent. The Certificate
will be void from the beginning.
/s/ Anthony J. Vespa /s/ Barry G. Skolnick
- -------------------- ---------------------
President Secretary
-----------------------------------
Registrar
Individual Certificate under
Group Modified Guaranteed Annuity Contract
Account Value is Subject to Market Value Adjustment
Nonparticipating
ML-AY-362/94
<PAGE> 2
1. DEFINITIONS
1.1 CONTRACT: The group modified guaranteed annuity contract under which this
Certificate has been issued. See Section 2.
1.2 ANNUITY: A series of predetermined periodic payments. See Section 9.
1.3 ANNUITANT: Annuity payments may depend upon the continuation of life of a
person. That person is called an annuitant. The Annuitant for this Certificate
is named in the Certificate Schedule. See Section 2.
1.4 ANNUITY DATE: The date shown in the Certificate Schedule on which payment
of an annuity under the Contract is to start. See Sections 2 and 9.1.
1.5 PREMIUM: The money you paid us for this Certificate. See Section 2.
1.6 SUB-ACCOUNT: Your single premium will be allocated to one or more
Sub-Accounts as directed by you. Each Sub-Account will correspond to a
specified interest rate and Guarantee Period. See Section 3.
1.7 SUB-ACCOUNT VALUE: An amount equal to that part of your single premium
allocated to a Sub-Account, or any reinvestment in a Sub-Account, plus credited
interest, as adjusted for any prior withdrawals, Market Value Adjustments and
withdrawal charges. See Section 4.1.
1.8 NET SUB-ACCOUNT VALUE: The Sub-Account Value after adjustment for any
current Market Value Adjustment and withdrawal charge.
1.9 ACCOUNT VALUE:The sum of all Sub-Account Values. See Section 4.2.
1.10 NET ACCOUNT VALUE: The sum of all Net Sub-Account Values.
1.11 WITHDRAWAL CHARGE: A charge deducted from any Sub-Account from which a
withdrawal is made prior to the end of a Guarantee Period. See Section 6.2.
1.12 MARKET VALUE ADJUSTMENT: An adjustment made to Sub-Account Value. It is
applied upon withdrawal of all or part of the Sub-Account Value prior to the
end of the Guarantee Period. If the Annuity Date is prior to the end of a
Guarantee Period, the Market Value Adjustment is also applied at the Annuity
Date. See Section 5.1. The adjustment may be either a deduction from or an
addition to Sub-Account Value. The formula for this adjustment is shown in
Section 5.2.
1.13 GUARANTEE PERIOD: The period for which we guarantee to credit a specified
interest rate for a Sub-Account. See Section 3.2.
1.14 MAXIMUM GUARANTEE PERIOD OPTION: An option to have Sub-Account Values
automatically transferred to the Sub-Account for the longest Guarantee Period
in which Sub-Account Values are currently invested or reinvested, provided such
Guarantee Period matures prior to the Annuity Date. See Section 3.4.
1.15 PARTICIPANT: The person named in the Certificate Schedule to whom this
Certificate has been issued; referred to herein as "you."
1.16 CERTIFICATE ANNIVERSARY: Each anniversary of the Certificate Date.
1.17 CERTIFICATE DATE: The date on which this Certificate was issued.
1.18 CERTIFICATE YEAR: The year starting on the Certificate Date or a
Certificate Anniversary and ending with the day just prior to the next
Certificate Anniversary.
1.19 CO-ANNUITANTS: If two persons are named as Co-Annuitants on the
Certificate Schedule, then wherever used in this Certificate: "Annuitant" means
the Co-Annuitants; death of the Participant or Annuitant refers to death of
both Participants or Co-Annuitants (except under Section 8.1); and age of the
Annuitant refers to age of the older Co-Annuitant. The Co-Annuitants are joint
Participants, and each is the Contingent Participant of the other's interest in
this Certificate. Only Options 1, 2 and 6 of Section 10 are available while
both Co-Annuitants are alive, and Option 6 will apply if no annuity option is
chosen.
1.20 OTHER DEFINITIONS: Beneficiary: See Section 7.1.
________
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<PAGE> 3
2. CERTIFICATE SCHEDULE
<TABLE>
<S> <C>
PARTICIPANT ANNUITANT
MARTHA WASHINGTON GEORGE WASHINGTON
-- --
GROUP CONTRACT HOLDER ANNUITY DATE
REVOLUTIONARY WIDGETS, INC. JULY 1, 2014
-- --
GROUP CONTRACT NUMBER CERTIFICATE NUMBER
890123456 897654321
-- --
CERTIFICATE DATE AGE OF ANNUITANT
July 1, 1989 FIFTY
-- --
SINGLE PREMIUM SEX OF ANNUITANT
$10,000 MALE
</TABLE>
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<PAGE> 4
3. SUB-ACCOUNTS
3.1 SUB-ACCOUNT: Your single premium will be allocated to one or more
Sub-Accounts as chosen by you. That part of your single premium allocated to a
Sub-Account must be at least $5,000.
3.2 AVAILABLE GUARANTEE PERIODS: Guarantee Periods offered by us will be for
terms of 1 year through 10 years. We may at our discretion offer additional
Guarantee Periods.
3.3 TRANSFER OF SUB-ACCOUNT VALUE: Sub-Account Values may not be transferred
to another Sub-Account, in full or in part, prior to the end of the Guarantee
Period. At the end of a Guarantee Period, the Sub-Account Value may be
transferred to another Sub-Account. The minimum amount that can be transferred
to any one Sub-Account is the lesser of (a) $5,000, or (b) the total
Sub-Account Value to be transferred.
Upon notice to us prior to the end of the current Guarantee Period, the
Sub-Account Value may be transferred at the end of the Guarantee Period to one
or more Sub-Accounts as chosen by you. See Section 7.3. We will notify you of
such right at least 30 days prior to the end of the Guarantee Period. If no
notice is received from you, the Sub-Account Value will be automatically
transferred to the Sub-Account for the 1-year Guarantee Period, unless the
Maximum Guarantee Period Option has been chosen (see Section 3.4).
3.4 MAXIMUM GUARANTEE PERIOD OPTION: This choice may be made by you in the
application for this Certificate or made or changed prior to the end of a
Guarantee Period. See Section 7.3. Under this option, if no notice is received
for transfer, all Sub-Account Values will be automatically transferred to the
Sub-Account for the longest Guarantee Period in which your Sub-Account Values
are currently invested, provided such Guarantee Period matures prior to the
Annuity Date. If this option has not been chosen, automatic transfer will occur
as stated in Section 3.3.
4. CONTRACT VALUES
4.1 SUB-ACCOUNT VALUE: The current Sub-Account Value at any time prior to the
Annuity Date is an amount equal to the investment or reinvestment in the
Sub-Account plus credited interest, as adjusted for any prior withdrawals,
Market Value Adjustments and withdrawal charges.
4.2 ACCOUNT VALUE: The current Account Value at any time prior to the Annuity
Date is equal to the sum of all Sub Account Values.
4.3 INTEREST RATES: Simple interest will be credited daily and compounded
annually for each Certificate Year at the guaranteed interest rate for each
Sub-Account in which the Account Value is invested. There are no guaranteed
minimum interest rates for reinvestment of Sub-Account Values, except we
guarantee that rates on reinvestment will be the same as the guaranteed
interest rates offered for any new contracts on the same form as the Contract.
5. MARKET VALUE ADJUSTMENT
5.1 MARKET VALUE ADJUSTMENT: The Market Value Adjustment may be either
negative or positive. It will be deducted from or added to Sub-Account Value
according to the formula shown in Section 5.2 in the following events:
(a) Upon withdrawal of all or part of the Sub-Account Value prior to
the end of the Guarantee Period for that Sub-Account, or
(b) At the Annuity Date if the Annuity Date is prior to the end of the
Guarantee Period for that Sub-Account.
5.2 FORMULA: The Market Value Adjustment is determined by the following
formula:
(1 + B) n/365
A x [1- ------- ]
(1 + C)
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<PAGE> 5
Where:
"n" = The remaining number of days in the Guarantee Period;
"A" = The amount withdrawn from the Sub-Account;
"B" = The current guaranteed interest rate that we are offering for
a Guarantee Period of a duration of years represented by
"n/365." When n/365 is not a whole number, we determine B by
straight-line interpolation. If n/365 is less than 1, we will
assume B is equal to the rate for a one-year Guarantee Period;
and
"C" = The guaranteed interest rate for the Sub-Account.
6. WITHDRAWALS
6.1 WITHDRAWALS: You may withdraw all or part of the Net Account Value applied
under this option upon notice to us received prior to the earlier of the
Annuity Date or the death of the Participant or Annuitant. See Section 7.3. For
full withdrawal, the Certificate must be surrendered at our administrative
office.
For partial withdrawals, the withdrawal must be at least $500. The Sub-Account
Value of any remaining Sub-Accounts, after adjustment for any current Market
Value Adjustment and withdrawal charge, must be at least $1,000. The remaining
Account Value must be at least $5,000. You MUST specify the Sub-Accounts from
which the withdrawal charges are to be made. See Section 7.3. If a Sub-Account
has the same Guarantee Period as any other Sub-Account, the Participant may
specify only the Sub-Account with the shortest time remaining in the Guarantee
Period.
6.2 WITHDRAWAL CHARGE: The amount of the withdrawal charge will equal 6 months
of simple interest on the amount withdrawn. Such interest will be computed at
the rate we are crediting the Sub-Account from which the withdrawal is made.
The withdrawal charge will be deducted from the Sub-Account from which the
withdrawal was made. Withdrawal charges do not apply to:
(a) Death payments under Section 8,
(b) Annuity payments under Section 9, or
(c) Withdrawal at the end of the Guarantee Period for the Sub-Account
if we receive written notice from you of such withdrawal prior to
the end of the Guarantee Period.
7. GENERAL PROVISIONS
7.1 BENEFICIARY: A beneficiary is the person who is to receive payment on
death of the Participant or Annuitant under Section 8 or under Section 10 if
guaranteed amounts remain unpaid. If the Participant is not the Annuitant, you
may, if you desire, name one beneficiary to receive payment on death of the
Participant ("Participant's Beneficiary") and a different beneficiary to
receive payment on death of the Annuitant ("Annuitant's Beneficiary"). If the
Participant is the Annuitant, then the Participant's Beneficiary must be the
same person as the Annuitant's Beneficiary.
You chose the beneficiary in the application for this Certificate. The
Participant's Beneficiary may be changed while the Participant is alive. The
Annuitant's Beneficiary may be changed while the Annuitant is alive.
A beneficiary may be named irrevocably, in which case a change can be made
later only with the beneficiary's written consent. We will not require such
beneficiary's consent for withdrawals.
If a beneficiary does not survive the Participant or Annuitant, the estate or
heirs of such beneficiary have no rights under the Contract. If no beneficiary
survives the Participant or Annuitant, payment will be made to the Participant,
if living, otherwise to the Participant's estate.
7.2 COLLATERAL ASSIGNMENT: Upon notice to us, you may make a collateral
assignment of your rights under the Contract to a creditor as security for a
debt. The rights of an assignee have priority over the rights of a beneficiary.
7.3 NOTICES, CHANGES AND CHOICES: To be effective, all notices, changes and
choices you make under the Contract must be in writing, signed and received by
us at our administrative office, except that the following may be made by
telephone:
(a) Notices regarding transfers of Sub-Account Values under Section
3.3;
(b) Choices regarding the Maximum Guarantee Period Option under Section
3.4; and
(c) Specifications of Sub-Account deductions for withdrawals under
Section 6.1.
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<PAGE> 6
We are not responsible for their validity. When recorded by us, notices,
changes and choices relating to beneficiaries will take effect as of the date
signed unless we have already acted in reliance on the prior status.
7.4 MISSTATEMENT OF AGE OR SEX: If the age or sex of an Annuitant or a joint
annuitant is misstated, annuity payments will be adjusted to reflect the
correct age and sex. Any amount we have overpaid as the result of such
misstatement will be deducted from the next payments due under the Contract.
Interest on the overpayment will be charged at the rate of 6% per year. Any
amount we have underpaid will be paid in full with the next payment due under
the Contract. We will pay interest on the underpayment at the rate of 6% per
year.
7.5 PROOF OF AGE, SEX OR SURVIVAL: We may require satisfactory proof of the
age, sex or survival of any person on whose continued life any payment under
the Contract depends.
7.6 INCONTESTABILITY: We will not contest the Contract or this Certificate.
7.7 THE CONTRACT: The Contract, its attached application and any endorsements
are the entire contract. Only our President, a Vice President, Secretary or
Assistant Secretary may change the Contract. Any change must be in writing.
7.8 PAYMENTS: All sums payable to or by us are payable at our administrative
office. We may require return of this Certificate prior to making payment. We
may defer payments of partial or full withdrawals for up to 6 months.
7.9 REPORTS: Prior to the Annuity Date we will furnish you a report at least
once each year. It will show your Account Value, Sub-Account Values and current
interest rates.
7.10 COMPLIANCE WITH STATE AND FEDERAL LAW: We reserve the right to change the
provisions of the Contract and the Certificates issued under the Contract to
conform to any applicable law, regulation or ruling issued by a government
agency.
8. PAYMENT AT DEATH OF PARTICIPANT OR ANNUITANT
8.1 DEATH PRIOR TO ANNUITY DATE: On death of the Participant or Annuitant
prior to the Annuity Date, we will pay to the Participant's Beneficiary or
Annuitant's Beneficiary, as the case may be, an amount equal to the greater of
the Account Value or the Net Account Value on the date of payment. Payment will
be made in a lump sum unless Section 8.2 is chosen.
8.2 ANNUITY OPTION: If the beneficiary is the surviving spouse of the deceased
Participant or Annuitant, he or she may choose to receive payments under any of
the annuity options of the Contract. For any other beneficiary, only those
options are available that provide for full payment within 5 years of the date
of such Participant's or Annuitant's death.
8.3 CERTIFICATE CONTINUATION OPTION ON PARTICIPANT'S DEATH: If the surviving
spouse of the deceased Participant is the Participant's Beneficiary, such
spouse may choose to become the Participant and continue the Certificate in
force on the same terms as before the Participant's death, and the spouse shall
thereafter be the Annuitant. This option is also available if the surviving
spouse and the deceased Participant were Co-Annuitants.
8.4 CERTIFICATE CONTINUATION OPTION ON ANNUITANT'S DEATH: If the Participant
is not the Annuitant, the Participant may irrevocably choose, prior to the
Annuitant's death, to continue the Certificate in force upon the death of the
Annuitant on the same terms as before such Annuitant's death. The Participant,
or a person designated by the Participant, shall thereafter be the Annuitant.
This option is not available if the Participant is not an individual.
8.5 DEATH AFTER ANNUITY DATE: See Section 10.8.
9. ANNUITY PROVISIONS
9.1 ANNUITY DATE: The Annuity Date must be on the first day of a month. It may
not be later than the first day of the next month after the Annuitant's 85th
birthday. If you have not chosen an Annuity Date, it will be the first day of
the next month after the Annuitant's 75th birthday. You may change the Annuity
Date up to 30 days prior to the Annuity Date. A MARKET VALUE ADJUSTMENT MAY BE
APPLIED ON THE ANNUITY DATE. SEE SECTION 5.1.
9.2 ANNUITY OPTIONS: If you have not chosen an annuity option, Option 4 will
apply with a 10-year guarantee period. You may change options only up to 30
days prior to the Annuity Date. An option not set forth in the Contract may be
chosen if acceptable to us.
9.3 MINIMUM ANNUITY PAYMENT: If the Net Account Value to be applied at the
Annuity Date is less than $5,000, we may pay such amount in a lump sum. If any
payment would be less than $50, we may change the frequency so payments are at
least $50 each.
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<PAGE> 7
9.4 AMOUNT OF ANNUITY PAYMENTS: Any premium taxes imposed by a state or other
government will be deducted from the Net Account Value at the Annuity Date. The
remaining Net Account Value will be applied to the annuity option chosen at our
current annuity rates, which will be furnished on request. The rates will
assume interest of not less than 3%. They will not be less favorable than those
shown in the annuity tables in the Contract and this Certificate. The tables
show the minimum guaranteed amount of each monthly payment for each $ 1,000 so
applied, according to age and sex at the Annuity Date. The tables are based on
the 1983 Table "a" projected forward to 1995 for Individual Annuity Valuation
with interest at 3%.
10. ANNUITY OPTIONS
10.1 OPTION 1--PAYMENTS OF A FIXED AMOUNT: Equal payments in the amount chosen
will be made until the Net Account Value applied under this option is
exhausted. The term over which such payments are made must be at least 5 years.
10.2 OPTION 2--PAYMENTS FOR A FIXED PERIOD: Payments will be made for the
period chosen. The period must be at least 5 years.
10.3 OPTION 3--LIFE ANNUITY: Payments will be made for the life of the
Annuitant. Payments will cease with the last payment due prior to the
Annuitant's death.
10.4 OPTION 4--LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 OR 20 YEARS:
Payments will be made for the guaranteed period chosen (10 or 20 years) and as
long thereafter as the Annuitant lives.
10.5 OPTION 5--LIFE ANNUITY WITH GUARANTEED RETURN OF NET ACCOUNT VALUE:
Payments will be made until the sum of the annuity payments equals the Net
Account Value applied under this option, and as long thereafter as the
Annuitant lives.
10.6 OPTION 6--JOINT AND SURVIVOR LIFE ANNUITY: Payments will be made during
the lifetimes of the Annuitant and a designated second person. Upon death of
one, payments for the life of the other will be made in the same amount.
10.7 OPTION 7--QUALIFIED PLAN OPTION: This option is available only for
tax-qualified plans under Section 401, 403, 404, 408 or any similar provision
of the Internal Revenue Code. Annuity payments may be based on (a) the life
expectancy of the Annuitant, (b) the joint life expectancy of the Annuitant and
his or her spouse, or (c) the life expectancy of the surviving spouse if the
Annuitant dies before the Annuity Date. Payments will be made annually. Each
annual payment will be equal to the Net Account Value on the first day of that
calendar year divided by the applicable current life expectancy, as defined by
Internal Revenue Service regulations. Each subsequent payment will be made on
the anniversary of the Annuity Date. Interest will be credited at our current
rate for this option. The rate will not be less than 3%. On death of the
measuring life or lives prior to full distribution of the Net Account Value,
the remaining Net Account Value will be paid to the beneficiary in a lump sum.
10.8 DEATH OF PARTICIPANT OR ANNUITANT: On death of the Participant after the
Annuity Date, any amounts remaining unpaid will be paid to the Participant's
Beneficiary under the same method of distribution in force at the date of
death.
On death of the Annuitant while guaranteed amounts remain unpaid, the
Annuitant's Beneficiary may choose either:
(a) To have the payments continue for the amount or period guaranteed, or
(b) To receive the present value of the remaining guaranteed payments
in a lump sum.
If a beneficiary dies while guaranteed amounts remain unpaid, the present value
will be paid in a lump sum to the beneficiary's estate.
Present values will be computed at the interest rate or rates that were used to
compute the amount of the initial annuity payment.
10.9 PAYMENT: Except for Option 7, payment will be made on the first day of
each month starting with the Annuity Date, but prior to the Annuity Date you
may choose a less frequent payment interval instead. The amount of each payment
on an annual, semiannual or quarterly basis will be not less than the
monthly payment computed from the annuity tables in the Contract and this
Certificate multiplied by the appropriate factor.
Annual Semiannual Quarterly
------ ---------- ---------
11.839 5.963 2.993
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<PAGE> 8
11. ANNUITY OPTION TABLES
MINIMUM GUARANTEED MONTHLY ANNUITY PAYMENT FOR EACH $1,000 APPLIED UNDER OPTION
OPTION 2 (Payments for a Fixed Period)
<TABLE>
<CAPTION>
Years Each Years Each Years Each Years Each
Payable Payment Payable Payment Payable Payment Payable Payment
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
5 17.91 9 10.53 13 7.71 17 6.23
6 15.14 10 9.61 14 7.26 18 5.96
7 13.16 11 8.86 15 6.87 19 5.73
8 11.68 12 8.24 16 6.53 20 5.51
</TABLE>
OPTION 3 (Life Annuity), OPTION 4 (Life Annuity with 10 or 20 years guaranteed)
and OPTION 5 (Return of Net Account Value Guaranteed)
<TABLE>
<CAPTION>
*Adjusted Life 10 Years 20 Years Return of *Adjusted Life 10 Years 20 Years Return of
Male Age Annuity Guaranteed Guaranteed Net Account Value Female Age Annuity Guaranteed Guaranteed Net Account Value
- -------- ------- ---------- ---------- ----------------- ---------- ------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56 4.62 4.56 4.34 4.37 56 4.19 4.16 4.06 4.05
57 4.72 4.65 4.41 4.45 57 4.27 4.24 4.12 4.12
58 4.83 4.75 4.47 4.53 58 4.35 4.32 4.19 4.19
59 4.94 4.85 4.54 4.61 59 4.44 4.40 4.25 4.26
60 5.06 4.95 4.60 4.70 60 4.54 4.49 4.32 4.34
61 5.19 5.07 4.67 4.80 61 4.64 4.58 4.39 4.42
62 5.33 5.19 4.73 4.90 62 4.74 4.68 4.46 4.50
63 5.47 5.31 4.80 5.00 63 4.86 4.79 4.53 4.59
64 5.63 5.44 4.86 5.11 64 4.98 4.90 4.60 4.69
65 5.80 5.58 4.92 5.23 65 5.11 5.01 4.67 4.79
66 5.98 5.72 4.98 5.35 66 5.25 5.14 4.74 4.89
67 6.17 5.86 5.04 5.48 67 5.40 5.27 4.82 5.00
68 6.37 6.02 5.10 5.61 68 5.55 5.40 4.89 5.12
69 6.59 6.18 5.15 5.75 69 5.72 5.55 4.95 5.25
70 6.82 6.34 5.20 5.90 70 5.91 5.70 5.02 5.38
71 7.07 6.50 5.24 6.06 71 6.11 5.86 5.08 5.52
72 7.34 6.67 5.28 6.22 72 6.32 6.03 5.14 5.66
73 7.62 6.85 5.32 6.39 73 6.56 6.20 5.19 5.82
74 7.92 7.02 5.35 6.57 74 6.81 6.38 5.24 5.99
75 8.24 7.20 5.38 6.76 75 7.08 6.57 5.29 6.16
76 8.58 7.38 5.40 6.97 76 7.37 6.76 5.33 6.35
77 8.95 7.55 5.42 7.17 77 7.69 6.96 5.36 6.55
78 9.35 7.72 5.44 7.39 78 8.03 7.16 5.39 6.75
79 9.77 7.89 5.46 7.63 79 8.40 7.36 5.41 6.98
80 10.22 8.06 5.47 7.87 80 8.80 7.56 5.44 7.21
81 10.71 8.22 5.48 8.13 81 9.23 7.75 5.45 7.45
82 11.22 8.37 5.49 8.40 82 9.70 7.94 5.47 7.71
83 11.77 8.51 5.50 8.68 83 10.21 8.13 5.48 7.98
84 12.35 8.65 5.50 8.97 84 10.76 8.30 5.49 8.27
85 12.97 8.77 5.50 9.29 85 11.35 8.46 5.50 8.57
</TABLE>
OPTION 6 (Joint and Survivor Life Annuity)
<TABLE>
<CAPTION>
*Adjusted *Adjusted Male Age *Adjusted
Female ------------------------------------------------------- Female
Age 50 55 60 65 70 75 80 85 Age
- --------- ---- ---- ---- ---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 3.52 3.60 3.66 3.71 3.74 3.76 3.78 3.78 50
55 3.65 3.77 3.87 3.95 4.01 4.05 4.08 4.09 55
60 3.78 3.94 4.10 4.23 4.34 4.41 4.46 4.49 60
65 3.88 4.10 4.33 4.54 4.72 4.86 4.96 5.02 65
70 3.96 4.23 4.54 4.85 5.15 5.40 5.59 5.72 70
75 4.02 4.34 4.72 5.14 5.59 6.01 6.37 6.64 75
80 4.06 4.41 4.85 5.38 5.99 6.63 7.24 7.76 80
85 4.09 4.46 4.94 5.55 6.30 7.17 8.11 9.01 85
</TABLE>
Information for ages not shown will be furnished on request.
"Adjusted Age" means attained age at last birthday adjusted as follows:
<TABLE>
<S> <C>
ANNUITY DATE ADJUSTED AGE
------------ ------------
Before 2000 Actual age
2000-2009 Subtract 1 year from actual age
2010-2019 Subtract 2 years from actual age
2020-2029 Subtract 3 years from actual age
2030 and after Subtract 4 years from actual age
</TABLE>
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<PAGE> 9
MERRILL LYNCH LIFE INSURANCE COMPANY
Home Office: Little Rock, Arkansas
Administrative Office: P.O. 44223, Jacksonville, FL 32231-4223
1-800-535-5549
Individual Certificate under
Group Modified Guaranteed Annuity Contract
Account Value is Subject to Market Value Adjustment
Nonparticipating
<PAGE> 1
MERRILL LYNCH LIFE INSURANCE COMPANY
Home Office: Little Rock, Arkansas
Administrative Office: P.O. 44223, Jacksonville, FL 32231-4223
1-800-535-5549
CERTIFICATE OF PARTICIPATION
This Certificate is a summary of your rights under the Group Modified
Guaranteed Annuity Contract identified in the Certificate Schedule. See Section
2. It is subject to all provisions of the Contract, whether or not summarized
in this Certificate. The Contract alone governs the rights of all parties. A
copy of the Contract will be furnished on request.
MERRILL LYNCH LIFE INSURANCE COMPANY certifies that the person named as
Participant in the Certificate Schedule is a Participant under the Contract.
<TABLE>
<CAPTION>
____________________________________________________________________________________
TABLE OF CONTENTS
Section Page
- ------- ----
<S> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Certificate Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Sub-Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. Contract Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5. Market Value Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . 4
6. Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8. Payment at Death of Participant . . . . . . . . . . . . . . . . . . . . 6
9. Annuity Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
10. Annuity Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
11. Annuity Option Tables . . . . . . . . . . . . . . . . . . . . . . . . . 8
____________________________________________________________________________________
</TABLE>
TEN DAY RIGHT TO REVIEW CERTIFICATE
You may cancel your Certificate within ten days after you receive it by
returning or mailing it to us or our agent. We will refund your premium within
ten days after the Certificate is received by us or our agent. The Certificate
will be void from the beginning.
/s/ Anthony J. Vespa /s/ Barry G. Skolnick
- -------------------- ---------------------
President Secretary
--------------------------------------------------
Registrar
Individual Tax-Sheltered Annuity Certificate under
Group Modified Guaranteed Annuity Contract
Account Value is Subject to Market Value Adjustment
Nonparticipating
ML-AY-372/94
<PAGE> 2
1. DEFINITIONS
1.1 CONTRACT: The group modified guaranteed annuity contract under which this
Certificate has been issued. See Section 2.
1.2 ANNUITY: A series of predetermined periodic payments. See Section 9.
1.3 ANNUITANT: Annuity payments may depend upon the continuation of life of a
person. That person is called an annuitant. The Annuitant for this Certificate
is named in the Certificate Schedule and is the same person as the Participant.
See Section 2.
1.4 ANNUITY DATE: The date shown in the Certificate Schedule on which payment
of an annuity under the Contract is to start. See Sections 2 and 9.1.
1.5 PREMIUM: The money paid to us for this Certificate. See Section 2. It must
have been paid by an organization described in Section 403(b)(1)(A) of the
Internal Revenue Code.
1.6 SUB-ACCOUNT: Your single premium will be allocated to one or more
Sub-Accounts as directed by you. Each Sub-Account will correspond to a
specified interest rate and Guarantee Period. See Section 3.
1.7 SUB-ACCOUNT VALUE: An amount equal to that part of your single premium
allocated to a Sub-Account, or any reinvestment in a Sub-Account, plus credited
interest, as adjusted for any prior withdrawals, Market Value Adjustments and
withdrawal charges. See Section 4.1.
1.8 NET SUB-ACCOUNT VALUE: The Sub-Account Value after adjustment for any
current Market Value Adjustment and withdrawal charge.
1.9 ACCOUNT VALUE: The sum of all Sub-Account Values. See Section 4.2.
1.10 NET ACCOUNT VALUE: The sum of all Net Sub-Account Values.
1.11 WITHDRAWAL CHARGE: A charge deducted from any Sub-Account from which a
withdrawal is made prior to the end of a Guarantee Period. See Section 6.2.
1.12 MARKET VALUE ADJUSTMENT: An adjustment made to Sub-Account Value. It is
applied upon withdrawal of all or part of the Sub-Account Value prior to the
end of the Guarantee Period. If the Annuity Date is prior to the end of a
Guarantee Period, the Market Value Adjustment is also applied at the Annuity
Date. See Section 5.1. The adjustment may be either a deduction from or an
addition to Sub-Account Value. The formula for this adjustment is shown in
Section 5.2.
1.13 GUARANTEE PERIOD: The period for which we guarantee to credit a specified
interest rate for a Sub-Account. See Section 3.2.
1.14 MAXIMUM GUARANTEE PERIOD OPTION: An option to have Sub-Account Values
automatically transferred to the Sub-Account for the longest Guarantee Period
in which Sub-Account Values are currently invested or reinvested, provided such
Guarantee Period matures prior to the Annuity Date. See Section 3.4.
1.15 PARTICIPANT: The person named in the Certificate Schedule to whom this
Certificate has been issued; referred to herein as "you." You must be an
employee of an organization described in Section 403(b)(1)(A) of the
Internal Revenue Code.
1.16 CERTIFICATE ANNIVERSARY: Each anniversary of the Certificate Date.
1.17 CERTIFICATE DATE: The date on which this Certificate was issued.
1.18 CERTIFICATE YEAR: The year starting on the Certificate Date or a
Certificate Anniversary and ending with the day just prior to the next
Certificate Anniversary.
1.19 OTHER DEFINITIONS: Beneficiary: See Section 7.1.
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<PAGE> 3
2. CERTIFICATE SCHEDULE
PARTICIPANT ANNUITANT
MARTHA WASHINGTON MARTHA WASHINGTON
-- --
GROUP CONTRACT HOLDER ANNUITY DATE
ABC SCHOOL DISTRICT JULY 1, 2004
-- --
GROUP CONTRACT NUMBER CERTIFICATE NUMBER
890123456 897654321
-- --
CERTIFICATE DATE AGE OF ANNUITANT
JULY 1, 1989 FIFTY
-- --
SINGLE PREMIUM
$10,000
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<PAGE> 4
3. SUB-ACCOUNTS
3.1 SUB-ACCOUNT: Your single premium will be allocated to one or more
Sub-Accounts as chosen by you. That part of your single premium allocated to a
Sub-Account must be at least $5,000.
3.2 AVAILABLE GUARANTEE PERIODS: Guarantee Periods offered by us will be for
terms of 1 year through 10 years. We may at our discretion offer additional
Guarantee Periods.
3.3 TRANSFER OF SUB-ACCOUNT VALUE: Sub-Account Values may not be transferred to
another Sub-Account, in full or in part, prior to the end of the Guarantee
Period. At the end of a Guarantee Period, the Sub-Account Value may be
transferred to another Sub-Account. The minimum amount that can be transferred
to any one Sub-Account is the lesser of (a) $5,000, or (b) the total
Sub-Account Value to be transferred.
Upon notice to us prior to the end of the current Guarantee Period, the
Sub-Account Value may be transferred at the end of the Guarantee Period to one
or more Sub-Accounts as chosen by you. See Section 7.3. We will notify you of
such right at least 30 days prior to the end of the Guarantee Period. If no
notice is received from you, the Sub-Account Value will be automatically
transferred to the Sub-Account for the 1-year Guarantee Period, unless the
Maximum Guarantee Period Option has been chosen (see Section 3.4).
3.4 MAXIMUM GUARANTEE PERIOD OPTION: This choice may be made by you in the
application for this Certificate or made or changed prior to the end of a
Guarantee Period. See Section 7.3. Under this option, if no notice is received
for transfer, all Sub-Account Values will be automatically transferred to the
Sub-Account for the longest Guarantee Period in which your Sub-Account Values
are currently invested, provided such Guarantee Period matures prior to the
Annuity Date. If this option has not been chosen, automatic transfer will occur
as stated in Section 3.3.
4. CONTRACT VALUES
4.1 SUB-ACCOUNT VALUE: The current Sub-Account Value at any time prior to the
Annuity Date is an amount equal to the investment or reinvestment in the
Sub-Account plus credited interest, as adjusted for any prior withdrawals,
Market Value Adjustments and withdrawal charges.
4.2 ACCOUNT VALUE: The Current Account Value at any time prior to the Annuity
Date is equal to the sum of all Sub-Account Values.
4.3 INTEREST RATES: Simple interest will be credited daily and compounded
annually for each Certificate Year at the guaranteed interest rate for each
Sub-Account in which the Account Value is invested. There are no guaranteed
minimum interest rates for reinvestment of Sub-Account Values, except we
guarantee that rates on reinvestment will be the same as the guaranteed
interest rates offered for any new contracts on the same form as the Contract.
5. MARKET VALUE ADJUSTMENT
5.1 MARKET VALUE ADJUSTMENT: The Market Value Adjustment may be either negative
or positive. It will be deducted from or added to Sub-Account Value according
to the formula shown in Section 5.2 in the following events:
(a) Upon withdrawal of all or part of the Sub-Account Value prior to the
end of the Guarantee Period for that Sub-Account, or
(b) At the Annuity Date if the Annuity Date is prior to the end of the
Guarantee Period for that Sub-Account.
5.2 FORMULA: The Market Value Adjustment is determined by the following
formula:
(1 + B) n/365
A x [1 - ------- ]
(1 + C)
Where:
"n" = The remaining number of days in the Guarantee Period;
"A" = The amount withdrawn from the Sub-Account;
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<PAGE> 5
"B" = The current guaranteed interest rate that we are offering
for a Guarantee Period of a duration of years represented
by "n/365." When n/365 is not a whole number, we determine
B by straight-line interpolation. If n/365 is less than 1,
we will assume B is equal to the rate for a one-year
Guarantee Period; and
"C" = The guaranteed interest rate for the Sub-Account.
6. WITHDRAWALS
6.1 WITHDRAWALS: You may withdraw all or part of the Net Account Value applied
under this option upon notice to us received prior to the earlier of the
Annuity Date or the death of the Participant. See Section 7.3. However,
withdrawals under the Contract attributable to contributions made pursuant to a
salary reduction agreement may be made only (1) after you attain age 59 1/2,
(2) upon separation from service, (3) upon death or disability, or (4) for an
amount not greater than the total of such contributions in the case of
hardship. Any withdrawal shall effect a surrender of the Certificate to the
extent of such withdrawal. For full withdrawal, the Certificate must be
surrendered at our administrative office.
For partial withdrawals, the withdrawal must be at least $500. The Sub-Account
Value of any remaining Sub-Accounts, after adjustment for any current Market
Value Adjustment and withdrawal charge, must be at least $1,000. The remaining
Account Value must be at least $5,000. You MUST specify the Sub-Accounts from
which the withdrawal is to be made. See Section 7.3. If a Sub-Account has the
same Guarantee Period as any other Sub-Account, the Participant may specify only
the Sub-Account with the shortest time remaining in the Guarantee Period.
6.2 WITHDRAWAL CHARGE: The amount of the withdrawal charge will equal 6 months
of simple interest on the amount withdrawn. Such interest will be computed at
the rate we are crediting the Sub-Account from which the withdrawal is made.
The withdrawal charge will be deducted from the Sub-Account from which the
withdrawal was made. Withdrawal charges do not apply to:
(a) Death payments under Section 8,
(b) Annuity payments under Section 9, or
(c) Withdrawal at the end of the Guarantee Period for the Sub-Account if
we receive written notice from you of such withdrawal prior to the
end of the Guarantee Period.
7. GENERAL PROVISIONS
7.1 BENEFICIARY: The beneficiary is the person who is to receive payment on
death of the Participant under Section 8 or under Section 10 if guaranteed
amounts remain unpaid.
You chose the beneficiary in the application for this Certificate. The
beneficiary may be changed while the Participant is alive.
The beneficiary may be named irrevocably, in which case a change can be made
later only with the beneficiary's written consent. We will not require such
beneficiary's consent for withdrawals.
If a beneficiary does not survive the Participant, the estate or heirs of such
beneficiary have no rights under the Contract. If no beneficiary survives the
Participant, payment will be made to the Participant's estate.
7.2 NONTRANSFERABILITY: This Certificate is not transferable. It may not be
sold, assigned, discounted or pledged as security for a loan or a security for
any other obligation, other than to us. Your interest under the Contract is
nonforfeitable.
7.3 NOTICES, CHANGES AND CHOICES: To be effective, all notices, changes and
choices you make under the Contract must be in writing, signed and received by
us at our administrative office, except that the following may be made by
telephone:
(a) Notices regarding transfers of Sub-Account Values under Section
3.3;
(b) Choices regarding the Maximum Guarantee Period Option under
Section 3.4; and
(c) Specifications of Sub-Account deductions for withdrawals under
Section 6.1.
We are not responsible for their validity. When recorded by us, notices,
changes and choices relating to beneficiaries will take effect as of the date
signed unless we have already acted in reliance on the prior status.
7.4 MISSTATEMENT OF AGE: If the age of an Annuitant or a joint annuitant is
misstated, annuity payments will be
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<PAGE> 6
adjusted to reflect the correct age. Any amount we have overpaid as the result
of such misstatement will be deducted from the next payments due under the
Contract. Interest on the overpayment will be charged at the rate of 6% per
year. Any amount we have underpaid will be paid in full with the next payment
due under the Contract. We will pay interest on the underpayment at the rate of
6% per year.
7.5 PROOF OF AGE OR SURVIVAL: We may require satisfactory proof of the age or
survival of any person on whose continued life any payment under the Contract
depends.
7.6 INCONTESTABILITY: We will not contest the Contract or this Certificate.
7.7 THE CONTRACT: The Contract, its attached application and any endorsements
are the entire contract. Only our President, a Vice President, Secretary or
Assistant Secretary may change the Contract. Any change must be in writing.
7.8 PAYMENTS: All sums payable to or by us are payable at our administrative
office. We may require return of this Certificate prior to making payment. We
may defer payments of partial or full withdrawals for up to 6 months.
7.9 REPORTS: Prior to the Annuity Date we will furnish you a report at least
once each year. It will show your Account Value, Sub-Account Values and current
interest rates.
7.10 COMPLIANCE WITH STATE AND FEDERAL LAW: We reserve the right to change the
provisions of the Contract and the Certificates issued under the Contract to
conform to any applicable law, regulation or ruling issued by a government
agency.
8. PAYMENT AT DEATH OF PARTICIPANT
8.1 DEATH PRIOR TO ANNUITY DATE: On death of the Participant prior to the
Annuity Date, we will pay to the beneficiary an amount equal to the greater of
the Account Value or the Net Account Value on the date of payment. Payment will
be made in a lump sum unless Section 8.2 is chosen.
8.2 ANNUITY OPTION: If the beneficiary is the surviving spouse of the deceased
Participant, he or she may choose to receive payments under any of the annuity
options of the Contract. For any other beneficiary, only those options are
available that provide for full payment within 5 years of the date of such
Participant's death.
8.3 CERTIFICATE CONTINUATION OPTION: If the surviving spouse of the deceased
Participant is the Participant's Beneficiary, such spouse may choose to become
the Participant and continue the Certificate in force on the same terms as
before the Participant's death, and the spouse shall thereafter be the
Annuitant.
8.4 DEATH AFTER ANNUITY DATE: See Section 10.8.
9. ANNUITY PROVISIONS
9.1 ANNUITY DATE: The Annuity Date must be on the first day of a month. If
annuity payments are attributable to contributions made pursuant to a salary
reduction agreement, the Annuity Date may not be earlier than (1) after you
attain age 59 1/2, (2) upon separation from service, or (3) upon disability.
The Annuity Date may not be later than April 1 of the year after the year in
which you attain age 70 1/2 and will be such date if you have not chosen an
Annuity Date. You may change the Annuity Date up to 30 days prior to the
Annuity Date. A MARKET VALUE ADJUSTMENT MAY BE APPLIED ON THE ANNUITY DATE. SEE
SECTION 5.1.
9.2 ANNUITY OPTIONS: If you have not chosen an annuity option, Option 4 will
apply with a 10-year guarantee period or a period of years no greater than your
life expectancy, whichever is less. You may change options only up to 30 days
prior to the Annuity Date. An option not set forth in the Contract may be
chosen if acceptable to us. When applicable, life expectancy will be determined
according to Internal Revenue Service regulations and rulings.
9.3 MINIMUM ANNUITY PAYMENT: If the Net Account Value to be applied at the
Annuity Date is less than $5,000, we may pay such amount in a lump sum. If any
payment would be less than $50, we may change the frequency so payments are at
least $50 each.
9.4 AMOUNT OF ANNUITY PAYMENTS: Any premium taxes imposed by a state or other
government will be deducted from the Net Account Value at the Annuity Date. The
remaining Net Account Value will be applied to the annuity option chosen at our
current annuity rates, which will be furnished on request. The rates will
assume interest of not less than 3%. They will not be less favorable than those
shown in the annuity tables in the Contract and this Certificate. The tables
show the minimum guaranteed amount of each monthly payment for each $1,000 so
applied, according to age at the Annuity Date. The tables are based on the
combined male/female 1983 Table "a" projected forward to 1995 for Individual
Annuity Valuation with interest at 3%.
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<PAGE> 7
10. ANNUITY OPTIONS
10.1 OPTION 1 -- PAYMENTS OF A FIXED AMOUNT: Equal payments in the amount
chosen will be made until the Net Account Value applied under this option is
exhausted. The term over which such payments are made must be at least 5 years
and may not exceed your life expectancy, or the joint life expectancy of you
and your spouse (or, if you are not married, a designated second person), at
the Annuity Date. If you die before the Annuity Date, the period may not exceed
the life expectancy of your surviving spouse.
10.2 OPTION 2 -- PAYMENTS FOR A FIXED PERIOD: Payments will be made for the
period chosen. The period must be at least 5 years and may not exceed your life
expectancy, or the joint life expectancy of you and your spouse (or, if you are
not married, a designated second person), at the Annuity Date. If you die
before the Annuity Date, the period may not exceed the life expectancy of your
surviving spouse.
10.3 OPTION 3 -- LIFE ANNUITY: Payments will be made for the life of the
Annuitant. Payments will cease with the last payment due prior to the
Annuitant's death.
10.4 OPTION 4 -- LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 OR 20 YEARS:
Payments will be made for the guaranteed period chosen (10 or 20 years) and as
long thereafter as you live. The guaranteed period selected may not exceed your
life expectancy, or the joint life expectancy of you and your spouse (or, if
you are not married, a designated second person), at the Annuity Date. If you
die before the Annuity Date, the period may not exceed the life expectancy of
your surviving spouse.
10.5 OPTION 5--LIFE ANNUITY WITH GUARANTEED RETURN OF NET ACCOUNT VALUE:
Payments will be made until the sum of the annuity payments equals the Net
Account Value applied under this option, and as long thereafter as the
Annuitant lives. The period required for distribution of the Net Account Value
may not exceed your life expectancy or the joint life expectancy of you and
your spouse (or, if you are not married, a designated second person), at the
Annuity Date. If you die before the Annuity Date, the period required for
distribution of the Net Account Value may not exceed the life expectancy of
your surviving spouse.
10.6 OPTION 6 -- JOINT AND SURVIVOR LIFE ANNUITY: Payments will be made during
the lifetimes of the Annuitant and a designated second person. The second
person must be your spouse if you have a spouse. Upon death of one, payments
for the life of the other will be made in the same amount. Option 6 is not
available to the beneficiary.
10.7 OPTION 7 -- QUALIFIED PLAN OPTION: Annuity payments may be based on (a)
your life expectancy, (b) the joint life expectancy of you and your spouse, or
(c) the life expectancy of your surviving spouse if you die before the Annuity
Date. Payments will be made annually. Each annual payment will be equal to the
Net Account Value on the first day of that calendar year divided by the
applicable current life expectancy, as defined by Internal Revenue Service
regulations. Each subsequent payment will be made on the anniversary of the
Annuity Date. Interest will be credited at our current rate for this option.
The rate will not be less than 3%. On death of the measuring life or lives
prior to full distribution of the Net Account Value, the remaining Net Account
Value will be paid to the beneficiary in a lump sum.
10.8 DEATH OF PARTICIPANT: On death of the Participant after the Annuity Date
while guaranteed amounts remain unpaid, the beneficiary may choose either:
(a) To have the payments continue for the amount or period
guaranteed, or
(B) To receive the present value of the remaining guaranteed
payments in a lump sum.
If a beneficiary dies while guaranteed amounts remain unpaid, the present value
will be paid in a lump sum to the beneficiary's estate.
Present values will be computed at the interest rate or rates that were used to
compute the amount of the initial annuity payment.
10.9 PAYMENT: Except for Option 7, payment will be made on the first day of
each month starting with the Annuity Date, but prior to the Annuity Date you
may choose a less frequent payment interval instead. The amount of each payment
on an annual, semiannual or quarterly basis will be not less than the monthly
payment computed from the annuity tables in the Contract and this Certificate
multiplied by the appropriate factor:
Annual Semiannual Quarterly
------ ---------- ---------
11.839 5.963 2.993
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<PAGE> 8
11. ANNUITY OPTION TABLES
MINIMUM GUARANTEED MONTHLY ANNUITY PAYMENT FOR EACH $1,000 APPLIED UNDER OPTION
OPTION 2 (Payments for a Fixed Period)
<TABLE>
<CAPTION>
Years Each Years Each Years Each Years Each
Payable Payment Payable Payment Payable Payment Payable Payment
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
9 10.53 13 7.71 17 6.23
6 15.14 10 9.61 14 7.26 18 5.96
7 13.16 11 8.86 15 6.87 19 5.73
8 11.68 12 8.24 16 6.53 20 5.51
</TABLE>
OPTION 3 (Life Annuity), OPTION 4 (Life Annuity with 10 or 20 Years Guaranteed)
and OPTION 5 (Return of Net Account Value Guaranteed)
<TABLE>
<CAPTION>
*Adjusted Life 10 Years 20 Years Return of *Adjusted Life 10 Years 20 Years Return of
Age Annuity Guaranteed Guaranteed Net Account Value Age Annuity Guaranteed Guaranteed Net Account Value
- -------- ------- ---------- ---------- ----------------- --------- ------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 3.97 3.94 3.87 3.85 68 5.96 5.72 5.00 5.37
51 4.03 4.01 3.92 3.90 69 6.16 5.87 5.06 5.50
70 6.36 6.03 5.12 5.64
52 4.10 4.07 3.97 3.96 71 6.59 6.19 5.17 5.79
53 4.17 4.14 4.03 4.02
54 4.25 4.21 4.09 4.08 72 6.83 6.36 5.22 5.94
55 4.33 4.28 4.15 4.14 73 7.08 6.54 5.26 6.10
56 4.41 4.36 4.21 4.21 74 7.36 6.71 5.30 6.28
75 7.65 6.90 5.34 6.46
57 4.50 4.45 4.27 4.26
58 4.59 4.54 4.34 4.36 76 7.97 7.08 5.37 6.65
59 4.69 4.63 4.40 4.44 77 8.31 7.27 5.40 6.86
60 4.80 4.73 4.47 4.52 78 8.68 7.46 5.42 7.07
61 4.92 4.83 4.54 4.61 79 9.08 7.64 5.44 7.30
80 9.50 7.82 5.46 7.54
62 5.04 4.94 4.60 4.70
63 5.17 5.05 4.67 4.80 81 9.96 8.00 5.47 7.79
64 5.31 5.17 4.74 4.90 82 10.45 8.17 5.48 8.05
65 5.45 5.30 4.81 5.01 83 10.98 8.33 5.49 8.33
66 5.61 5.43 4.87 5.12 84 11.54 8.49 5.50 8.62
67 5.78 5.57 4.94 5.24 85 12.15 8.63 5.50 8.93
</TABLE>
OPTION 6 (Joint and Survivor Life Annuity)
<TABLE>
<CAPTION>
*Adjusted Age of Joint Annuitant
------------------------------------------------------------------------------------------------------------
*Adjusted 50 55 60 65 70 75 80 85 *Adjusted
Age of ------------------------------------------------------------------------------------------------------------ Age of
Annuitant 100% 2/3 100% 2/3 100% 2/3 100% 2/3 100% 2/3 100% 2/3 100% 2/3 100% 2/3 Annuitant
- --------- ------------------------------------------------------------------------------------------------------------ ---------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 3.54 3.81 3.65 3.96 3.74 4.12 3.81 4.30 3.86 4.49 3.90 4.69 3.93 4.90 3.94 5.10 50
55 3.79 4.13 3.93 4.32 4.05 4.53 4.14 4.76 4.21 5.00 4.26 5.25 4.29 5.49 55
60 4.13 4.55 4.31 4.81 4.46 5.09 4.58 5.39 4.67 5.69 4.73 5.97 60
65 4.58 5.13 4.82 5.48 5.03 5.85 5.19 6.23 5.30 6.60 65
70 5.19 5.92 5.54 6.41 5.82 6.91 6.04 7.40 70
75 6.06 7.04 6.55 7.72 6.94 8.40 75
80 7.30 8.63 7.98 9.59 80
85 9.06 10.91 85
</TABLE>
Information for ages not shown will be furnished on request.
*"Adjusted Age" means attained age at last birthday adjusted as follows:
ANNUITY DATE ADJUSTED AGE
- ------------ ------------
Before 2000 Actual Age
2000-2009 Subtract 1 year from actual age
2010-2019 Subtract 2 years from actual age
2020-2029 Subtract 3 years from actual age
2030 and after Subtract 4 years from actual age
THE ABOVE TABLES ARE BASED ON THE COMBINED MALE/FEMALE 1983 TABLE "A" PROJECTED
FORWARD TO 1995 FOR INDIVIDUAL ANNUITY VALUATION WITH INTEREST AT 3%.
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<PAGE> 9
MERRILL LYNCH LIFE INSURANCE COMPANY
Home Office: Little Rock Arkansas
Administrative Office: P.O. 44223, Jacksonville, FL 32231-4223
1-800-535-5549
Individual Tax-Sheltered Annuity Certificate under
Group Modified Guaranteed Annuity Contract
Account Value is Subject to Market Value Adjustment
Nonparticipating
<PAGE> 1
MERRILL LYNCH LIFE INSURANCE COMPANY
Home Office: Little Rock, Arkansas
Administrative Office: P.O. 44223, Jacksonville, FL 32231-4223
1-800-535-5549
CERTIFICATE OF PARTICIPATION
This Certificate is a summary of your rights under the Group Modified
Guaranteed Annuity Contract identified in the Certificate Schedule. See Section
2. It is subject to all provisions of the Contract, whether or not summarized
in this Certificate. The Contract alone governs the rights of all parties. A
copy of the Contract will be furnished on request.
MERRILL LYNCH LIFE INSURANCE COMPANY certifies that the person named as
Participant in the Certificate Schedule is a Participant under the Contract.
________________________________________________________________________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Certificate Schedule . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Sub-Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. Contract Values . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5. Market Value Adjustment . . . . . . . . . . . . . . . . . . . . . . 4
6. Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 5
8. Payment at Death of Annuitant . . . . . . . . . . . . . . . . . . . 6
9. Annuity Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 6
10. Annuity Options . . . . . . . . . . . . . . . . . . . . . . . . . . 7
11. Annuity Option Tables . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
________________________________________________________________________________
TEN DAY RIGHT TO REVIEW CERTIFICATE
You may cancel your Certificate within ten days after you receive it by
returning or mailing it to us or our agent. We will refund your premium within
ten days after the Certificate is received by us or our agent. The Certificate
will be void from the beginning.
/s/ Anthony J. Vespa /s/ Barry G. Skolnick
- -------------------- ---------------------
President Secretary
-------------------------------------------
Registrar
Qualified Retirement Plan Certificate under
Group Modified Guaranteed Annuity Contract
Account Value is Subject to Market Value Adjustment
Nonparticipating
ML-AY-373/94
<PAGE> 2
1. DEFINITIONS
1.1 CONTRACT: The group modified guaranteed annuity contract under which this
Certificate has been issued. See Section 2.
1.2 ANNUITY: A series of predetermined periodic payments. See Section 9.
1.3 ANNUITANT: Annuity payments may depend upon the continuation of life of a
person. That person is called an annuitant. The Annuitant for this Certificate
is named in the Certificate Schedule. See Section 2.
1.4 ANNUITY DATE: The date shown in the Certificate Schedule on which payment
of an annuity under the Contract is to start. See Sections 2 and 9.1.
1.5 PREMIUM: The money you paid us for this Certificate. See Section 2.
1.6 SUB-ACCOUNT: Your single premium will be allocated to one or more
Sub-Accounts as directed by you. Each Sub-Account will correspond to a
specified interest rate and Guarantee Period. See Section 3.
1.7 SUB-ACCOUNT VALUE: An amount equal to that part of your single premium
allocated to a Sub-Account, or any reinvestment in a Sub-Account, plus credited
interest, as adjusted for any prior withdrawals, Market Value Adjustments and
withdrawal charges. See Section 4.1.
1.8 NET SUB-ACCOUNT VALUE: The Sub-Account Value after adjustment for any
current Market Value Adjustment and withdrawal charge.
1.9 ACCOUNT VALUE: The sum of all Sub-Account Values. See Section 4.2.
1.10 NET ACCOUNT VALUE: The sum of all Net Sub-Account Values.
1.11 WITHDRAWAL CHARGE: A charge deducted from any Sub-Account from which a
withdrawal is made prior to the end of a Guarantee Period. See Section 6.2.
1.12 MARKET VALUE ADJUSTMENT: An adjustment made to Sub-Account Value. It is
applied upon withdrawal of all or part of the Sub-Account Value prior to the
end of the Guarantee Period. If the Annuity Date is prior to the end of a
Guarantee Period, the Market Value Adjustment is also applied at the Annuity
Date. See Section 5.1. The adjustment may be either a deduction from or an
addition to Sub-Account Value. The formula for this adjustment is shown in
Section 5.2.
1.13 GUARANTEE PERIOD: The period for which we guarantee to credit a specified
interest rate for a Sub-Account. See Section 3.2.
1.14 MAXIMUM GUARANTEE PERIOD OPTION: An option to have Sub-Account Values
automatically transferred to the Sub-Account for the longest Guarantee Period
in which Sub-Account Values are currently invested or reinvested, provided such
Guarantee Period matures prior to the Annuity Date. See Section 3.4.
1.15 PARTICIPANT: The custodian or trustee of a qualified retirement plan named
in the Certificate Schedule to whom this Certificate has been issued; referred
to herein as "you." The Participant and Contract Holder are the same. However,
if this Certificate is distributed by the Contract Holder to the Annuitant, the
Annuitant becomes the Participant.
1.16 CERTIFICATE ANNIVERSARY: Each anniversary of the Certificate Date.
1.17 CERTIFICATE DATE. The date on which this Certificate was issued.
1.18 CERTIFICATE YEAR. The year starting on the Certificate Date or a
Certificate Anniversary and ending with the day just prior to the next
Certificate Anniversary.
1.19 OTHER DEFINITIONS: Beneficiary: See Section 7.1.
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<PAGE> 3
2. CERTIFICATE SCHEDULE
PARTICIPANT ANNUITANT
ABC COMPANY PENSION PLAN MARTHA WASHINGTON
-- --
GROUP CONTRACT HOLDER ANNUITY DATE
ABC COMPANY PENSION PLAN JULY 1, 2004
-- --
GROUP CONTRACT NUMBER CERTIFICATE NUMBER
890123456 897654321
-- --
CERTIFICATE DATE AGE OF ANNUITANT
JULY 1, 1989 FIFTY
-- --
SINGLE PREMIUM
$10,000
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3. SUB-ACCOUNTS
3.1 SUB-ACCOUNT: Your single premium will be allocated to one or more
Sub-Accounts as chosen by you. That part of your single premium allocated to a
Sub-Account must be at least $5,000.
3.2 AVAILABLE GUARANTEE PERIODS: Guarantee Periods offered by us will be for
terms of 1 year through 10 years. We may at our discretion offer additional
Guarantee Periods.
3.3 TRANSFER OF SUB-ACCOUNT VALUE: Sub-Account Values may not be transferred to
another Sub-Account, in full or in part, prior to the end of the Guarantee
Period. At the end of a Guarantee Period, the Sub-Account Value may be
transferred to another Sub-Account. The minimum amount that can be transferred
to any one Sub-Account is the lesser of (a) $5,000, or (b) the total
Sub-Account Value to be transferred.
Upon notice to us prior to the end of the current Guarantee Period, the
Sub-Account Value may be transferred at the end of the Guarantee Period to one
or more Sub-Accounts as chosen by you. See Section 7.3. We will notify you of
such right at least 30 days prior to the end of the Guarantee Period. If no
notice is received from you, the Sub-Account Value will be automatically
transferred to the Sub-Account for the 1-year Guarantee Period, unless the
Maximum Guarantee Period Option has been chosen (see Section 3.4).
3.4 MAXIMUM GUARANTEE PERIOD OPTION: This choice may be made by you in the
application for this Certificate or made or changed prior to the end of a
Guarantee Period. See Section 7.3. Under this option, if no notice is received
for transfer, all Sub-Account Values will be automatically transferred to the
Sub-Account for the longest Guarantee Period in which your Sub-Account Values
are currently invested, provided such Guarantee Period matures prior to the
Annuity Date. If this option has not been chosen, automatic transfer will occur
as stated in Section 3.3.
4. CONTRACT VALUES
4.1 SUB-ACCOUNT VALUE: The current Sub-Account Value at any time prior to the
Annuity Date is an amount equal to the investment or reinvestment in the
Sub-Account plus credited interest, as adjusted for any prior withdrawals,
Market Value Adjustments and withdrawal charges.
4.2 ACCOUNT VALUE: The current Account Value at any time prior to the Annuity
Date is equal to the sum of all Sub-Account Values.
4.3 INTEREST RATES: Simple interest will be credited daily and compounded
annually for each Certificate Year at the guaranteed interest rate for each
Sub-Account in which the Account Value is invested. There are no guaranteed
minimum interest rates for reinvestments of Sub-Account Values, except we
guarantee that rates on reinvestment will be the same as the guaranteed
interest rates offered for any new contracts on the same form as the Contract.
5. MARKET VALUE ADJUSTMENT
5.1 MARKET VALUE ADJUSTMENT: The Market Value Adjustment may be either negative
or positive. It will be deducted from or added to Sub-Account Value according
to the formula shown in Section 5.2 in the following events:
(a) Upon withdrawal of all or part of the Sub-Account Value prior
to the end of the Guarantee Period for that Sub-Account, or
(b) At the Annuity Date if the Annuity Date is prior to the end of
the Guarantee Period for that Sub-Account.
5.2 FORMULA: The Market Value Adjustment is determined by the following
formula:
(1 + B) n/365
A x [1 - ------- ]
(1 + C)
Where:
"n" = The remaining number of days in the Guarantee Period;
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"A" = The amount withdrawn from the Sub-Account;
"B" = The current guaranteed interest rate that we are
offering for a Guarantee Period of a duration of
years represented by "n/365." When n/365 is not a
whole number, we determine B by straight-line
interpolation. If n/365 is less than 1, we will
assume B is equal to the rate for a one-year
Guarantee Period; and
"C" = The guaranteed interest rate for the Sub-Account.
6. WITHDRAWALS
6.1 WITHDRAWALS: You may withdraw all or part of the Net Account Value applied
under this option upon notice to us received prior to the earlier of the
Annuity Date or the death of the Annuitant. See Section 7.3. If this
Certificate is distributed by the Contract Holder to the Annuitant, an
Annuitant who is married must have the consent of his or her spouse to withdraw
all or part of the Net Account Value. The form of the spouse's consent must
satisfy Section 417 of the Internal Revenue Code. For full withdrawal, the
Certificate must be surrendered at our administrative office.
For partial withdrawals, the withdrawal must be at least $500. The Sub-Account
Value of any remaining Sub-Accounts, after adjustment for any current Market
Value Adjustment and withdrawal charge, must be at least $1,000. The remaining
Account Value must be at least $5,000. You MUST specify the Sub-Accounts from
which the withdrawal is to be made. See Section 7.3. If a Sub-Account has the
same Guarantee Period as any other Sub-Account, the Participant may specify
only the Sub-Account with the shortest time remaining in the Guarantee Period.
6.2 WITHDRAWAL CHARGE: The amount of the withdrawal charge will equal 6 months
of simple interest on the amount withdrawn. Such interest will be computed at
the rate we are crediting the Sub-Account from which the withdrawal is made.
The withdrawal charge will be deducted from the Sub-Account from which the
withdrawal was made. Withdrawal charges do not apply to:
(a) Death payments under Section 8,
(b) Annuity payments under Section 9, or
(c) Withdrawal at the end of the Guarantee Period for the
Sub-Account if we receive written notice from you of such
withdrawal prior to the end of the Guarantee Period.
7. GENERAL PROVISIONS
7.1 BENEFICIARY: A beneficiary is the person or entity that is to receive
payment on death of the Annuitant under Section 8 or under Section 10 if
guaranteed amounts remain unpaid. The Contract Holder is the beneficiary
unless this Certificate is distributed to the Annuitant, in which case the
following provisions apply:
The beneficiary may be changed while the Annuitant is alive.
The beneficiary may be named irrevocably, in which case a change can
be made later only with the beneficiary's written consent. We will not
require such beneficiary's consent for withdrawals.
If a beneficiary does not survive the Annuitant, the estate or heirs of
such beneficiary have no rights under the Contract. If no beneficiary
survives the Annuitant, payment will be made to the Annuitant's estate.
7.2 CERTIFICATE NONFORFEITABLE AFTER DISTRIBUTION: If this Certificate is
distributed by the Contract Holder to the Annuitant, it is not transferable and
may not be sold, assigned, discounted or pledged as security for a loan or as
security for any other obligation, other than to us. Annuity payments under the
Contract cannot be surrendered, commuted, assigned, encumbered or anticipated
in any way. The interest of the Annuitant under the Contract is nonforfeitable.
7.3 NOTICES, CHANGES AND CHOICES: To be effective, all notices, changes and
choices you make under the Contract must be in writing, signed and received by
us at our administrative office, except that the following may be made by
telephone:
(a) Notices regarding transfers of Sub-Account Values under
Section 3.3;
(b) Choices regarding the Maximum Guarantee Period Option 3.4; and
(c) Specifications of Sub-Account deductions for withdrawals under
Section 6.1.
We are not responsible for their validity. When recorded by us, notices,
changes and choices relating to beneficiaries will take effect as of the date
signed unless we have already acted in reliance on the prior status.
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7.4 MISSTATEMENT OF AGE: If the age of an Annuitant or a joint annuitant is
misstated, annuity payments will be adjusted to reflect the correct age. Any
amount we have overpaid as the result of such misstatement will be deducted
from the next payments due under the Contract. Interest on the overpayment will
be charged at the rate of 6% per year. Any amount we have underpaid will be
paid in full with the next payment due under the Contract. We will pay interest
on the underpayment at the rate of 6% per year.
7.5 PROOF OF AGE OR SURVIVAL: We may require satisfactory proof of the age or
survival of any person on whose continued life any payment under the Contract
depends.
7.6 INCONTESTABILITY: We will not contest the Contract or this Certificate.
7.7 THE CONTRACT: The Contract, its attached application and any endorsements
are the entire contract. Only our President, a Vice President, Secretary or
Assistant Secretary may change the Contract. Any change must be in writing.
7.8 PAYMENTS: All sums payable to or by us are payable at our administrative
office. We may require return of this Certificate prior to making payment. We
may defer payments of partial or full withdrawals for up to 6 months.
7.9 REPORTS: Prior to the Annuity Date we will furnish you a report at least
once each year. It will show your Account Value, Sub-Account Values and current
interest rates.
7.10 COMPLIANCE WITH STATE AND FEDERAL LAW: We reserve the right to change the
provisions of the Contract and the Certificates issued under the Contract to
conform to any applicable law, regulation or ruling issued by a government
agency.
8. PAYMENT AT DEATH OF ANNUITANT
8.1 DEATH PRIOR TO ANNUITY DATE: On death of the Annuitant prior to the Annuity
Date, we will pay to the beneficiary an amount equal to the greater of the
Account Value or the Net Account Value on the date of payment. Payment will be
made in a lump sum unless Section 8.2 is chosen.
8.2 ANNUITY OPTION: If the beneficiary is the surviving spouse of the deceased
Annuitant, he or she may choose to receive payments under any of the annuity
options of the Contract. For any other beneficiary, only those options are
available that provide for full payment within 5 years of the date of such
Annuitant's death.
8. 3 CERTIFICATE CONTINUATION OPTION: If the Participant is not the Annuitant,
the Participant may irrevocably choose, prior to the Annuitant's death, to
continue the Certificate in force upon the death of the Annuitant on the same
terms as before such Annuitant's death. A person designated by the Participant
shall thereafter be the Annuitant.
8.4 DEATH AFTER ANNUITY DATE: See Section 10.8.
9. ANNUITY PROVISIONS
9.1 ANNUITY DATE: The Annuity Date must be on the first day of a month. It may
be as late as the first day of the next month after the Annuitant's 85th
birthday, except as stated below. If you have not chosen an Annuity Date, it
will be the first day of the next month after the Annuitant's 75th birthday,
except as stated below. You may change the Annuity Date up to 30 days prior to
the Annuity Date. A MARKET VALUE ADJUSTMENT MAY BE APPLIED ON THE ANNUITY DATE.
SEE SECTION 5.1.
If this Certificate is distributed by the Contract Holder to the
Annuitant, the Annuity Date may not be later than April 1 of the year after the
year in which the Annuitant attains age 70 1/2 and will be such date if you have
not chosen an Annuity Date (unless the Annuitant is then still a covered
employee of the employer maintaining the plan and is not then a "5% owner" as
defined in Section 416 of the Internal Revenue Code).
9.2 ANNUITY OPTIONS: If you have not chosen an annuity option, Option 4 will
apply with a 10-year guarantee period, except as stated below. You may change
options only up to 30 days prior to the Annuity Date. An option not set forth
in the Contract may be chosen if acceptable to us. When applicable, life
expectancy will be determined according to Internal Revenue Service regulations
and rulings.
If this Certificate is distributed by the Contract Holder to the Annuitant, an
Annuitant who is married must have the consent of his or her spouse to choose
an annuity option other than "OPTION 6 -- JOINT AND SURVIVOR LIFE ANNUITY." (If
no annuity option is chosen, Option 6 will be automatic.) Upon death of the
Annuitant prior to the annuity date, leaving a spouse surviving, the death
benefit will be paid under "OPTION 3 -- LIFE ANNUITY" unless the spouse has
consented to the designation of someone else as beneficiary or elects a
different annuity option. The form of the spouse's consent must satisfy Section
417 of the Internal Revenue Code. If an Annuitant is not married on the annuity
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date, and if no other annuity option is chosen, "OPTION 3--LIFE ANNUITY" will
be automatic.
9.3 MINIMUM ANNUITY PAYMENT: If the Net Account Value to be applied at the
Annuity Date is less than $3,500, we may pay such amount in a lump sum. If any
payment would be less than $50, we may change the frequency so payments are at
least $50 each.
9.4 AMOUNT OF ANNUITY PAYMENTS: Any premium taxes imposed by a state or other
government will be deducted from the Net Account Value at the Annuity Date. The
remaining Net Account Value will be applied to the annuity option chosen at our
current annuity rates, which will be furnished on request. The rates will
assume interest of not less than 3%. They will not be less favorable than those
shown in the annuity tables in the Contract and this Certificate. The tables
show the minimum guaranteed amount of each monthly payment for each $1,000 so
applied, according to age at the Annuity Date. The tables are based on the
combined male/female 1983 Table "a" projected forward to 1995 for Individual
Annuity Valuation with interest at 3%.
10. ANNUITY OPTIONS
10.1 OPTION 1--PAYMENTS OF A FIXED AMOUNT: Equal payments in the amount chosen
will be made until the Net Account Value applied under this option is
exhausted. The term over which such payments are made must be at least 5 years.
If this Certificate is distributed by the Contract Holder to the Annuitant, the
term may not exceed the Annuitant's life expectancy, or the joint life
expectancy of the Annuitant and the Annuitant's spouse (or, if the Annuitant is
not married, a designated second person), at the Annuity Date. If the Annuitant
dies before the Annuity Date, the period may not exceed the life expectancy of
the Annuitant's surviving spouse.
10.2 OPTION 2--PAYMENTS FOR A FIXED PERIOD: Payments will be made for the
period chosen. The period must be at least 5 years. If this Certificate is
distributed by the Contract Holder to the Annuitant, the period may not exceed
the Annuitant's life expectancy, or the joint life expectancy of the Annuitant
and the Annuitant's spouse (or, if the Annuitant is not married, a designated
second person), at the Annuity Date. If the Annuitant dies before the Annuity
Date, the period may not exceed the life expectancy of the Annuitant's
surviving spouse.
10.3 OPTION 3--LIFE ANNUITY: Payments will be made for the life of the
Annuitant. Payments will cease with the last payment due prior to the
Annuitant's death.
10.4 OPTION 4--LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 OR 20) YEARS:
Payments will be made for the guaranteed period chosen (10 or 20 years) and as
long thereafter as the Annuitant lives. If this Certificate is distributed by
the Contract Holder to the Annuitant, the guaranteed period selected may not
exceed the Annuitant's life expectancy, or the joint life expectancy of the
Annuitant and the Annuitant's spouse (or, if the Annuitant is not married, a
designated second person), at the Annuity Date. If the Annuitant dies before
the Annuity Date, the period may not exceed the life expectancy of the
Annuitant's surviving spouse.
10.5 OPTION 5--LIFE ANNUITY WITH GUARANTEED RETURN OF NET ACCOUNT VALUE:
Payments will be made until the sum of the annuity payments equals the Net
Account Value applied under this option, and as long thereafter as the
Annuitant lives. If this Certificate is distributed by the Contract Holder to
the Annuitant, the period required for distribution of the Net Account Value
may not exceed the Annuitant's life expectancy or the joint life expectancy of
the Annuitant and his or her spouse (or, if the Annuitant is not married, a
designated second person), at the Annuity Date. If the Annuitant dies before
the Annuity Date, the period required for distribution of the Net Account Value
may not exceed the life expectancy of the surviving spouse.
10.6 OPTION 6--JOINT AND SURVIVOR LIFE ANNUITY: Payments will be made during
the lifetimes of the Annuitant and a designated second person. Upon death of
one, payments for the life of the other will be made in the same amount. If
this Certificate is distributed by the Contract Holder to the Annuitant, the
second person must be the Annuitant's spouse if the Annuitant has a spouse, and
Option 6 is not available to the beneficiary.
10.7 OPTION 7--QUALIFIED PLAN OPTION: Annuity payments may be based on (a) the
life expectancy of the Annuitant, (b) the joint life expectancy of the
Annuitant and his or her spouse, or (c) the life expectancy of the surviving
spouse if the Annuitant dies before the Annuity Date. Payments will be made
annually. Each annual payment will be equal to the Net Account Value on the
first day of that calendar year divided by the applicable current life
expectancy as defined by Internal Revenue Service regulations. Each subsequent
payment will be made on the anniversary of the Annuity Date. Interest will be
credited at our current rate for this option. The rate will not be less than
3%. On death of the measuring life or lives prior to full distribution of the
Net Account Value, the remaining Net Account Value will be paid to the
beneficiary in a lump sum.
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10.8 DEATH OF ANNUITANT: On death of the Annuitant after the Annuity Date while
guaranteed amounts remain unpaid, the beneficiary may choose either:
(a) To have the payments continue for the amount or period
guaranteed, or
(b) To receive the present value of the remaining guaranteed
payments in a lump sum.
If a beneficiary dies while guaranteed amounts remain unpaid, the present value
will be paid in a lump sum to the beneficiary's estate.
Present values will be computed at the interest rate or rates that were used to
compute the amount of the initial annuity payment.
10.9 PAYMENT: Except for Option 7, payment will be made on the first day of
each month starting with the Annuity Date, but prior to the Annuity Date you
may choose a less frequent payment interval instead. The amount of each payment
on an annual, semiannual or quarterly basis will be not less than the monthly
payment computed from the annuity tables in the Contract and this Certificate
multiplied by the appropriate factor.
Annual Semiannual Quarterly
------ ---------- ---------
11.839 5.963 2.993
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11. ANNUITY OPTION TABLES
MINIMUM GUARANTEED MONTHLY ANNUITY PAYMENT FOR EACH $1,000 APPLIED UNDER OPTION
OPTION 2 (Payments for a Fixed Period)
<TABLE>
<CAPTION>
Years Each Years Each Years Each Years Each
Payable Payment Payable Payment Payable Payment Payable Payment
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
9 10.53 13 7.71 17 6.23
6 15.14 10 9.61 14 7.26 18 5.96
7 13.16 11 8.86 15 6.87 19 5.73
8 11.68 12 8.24 16 6.53 20 5.51
</TABLE>
OPTION 3 (Life Annuity), OPTION 4 (Life Annuity with 10 or 20 Years Guaranteed)
and OPTION 5 (Return of Net Account Value Guaranteed)
<TABLE>
<CAPTION>
*Adjusted Life 10 Years 20 Years Return of *Adjusted Life 10 Years 20 Years Return of
Age Annuity Guaranteed Guaranteed Net Account Value Age Annuity Guaranteed Guaranteed Net Account Value
- -------- ------- ---------- ---------- ----------------- --------- ------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 3.97 3.94 3.87 3.85 68 5.96 5.72 5.00 5.37
51 4.03 4.01 3.92 3.90 69 6.16 5.87 5.06 5.50
70 6.36 6.03 5.12 5.64
52 4.10 4.07 3.97 3.96 71 6.59 6.19 5.17 5.79
53 4.17 4.14 4.03 4.02
54 4.25 4.21 4.09 4.08 72 6.83 6.36 5.22 5.94
55 4.33 4.28 4.15 4.14 73 7.08 6.54 5.26 6.10
56 4.41 4.36 4.21 4.21 74 7.36 6.71 5.30 6.28
75 7.65 6.90 5.34 6.46
57 4.50 4.45 4.27 4.28
58 4.59 4.54 4.34 4.36 76 7.97 7.08 5.37 6.65
59 4.69 4.63 4.40 4.44 77 8.31 7.27 5.40 6.86
60 4.80 4.73 4.47 4.52 78 8.68 7.46 5.42 7.07
61 4.92 4.83 4.54 4.61 79 9.08 7.64 5.44 7.30
80 9.50 7.82 5.46 7.54
62 5.04 4.94 4.60 4.70
63 5.17 5.05 4.67 4.80 81 9.96 8.00 5.47 7.79
64 5.31 5.17 4.74 4.90 82 10.45 8.17 5.48 8.05
65 5.45 5.30 4.81 5.01 83 10.98 8.33 5.49 8.33
66 5.61 5.43 4.87 5.12 84 11.54 8.49 5.50 8.62
67 5.78 5.57 4.94 5.24 85 12.15 8.63 5.50 8.93
</TABLE>
OPTION 6 (Joint and Survivor Life Annuity)
<TABLE>
<CAPTION>
*Adjusted Age of Joint Annuitant
------------------------------------------------------------------------------------------------------------
*Adjusted 50 55 60 65 70 75 80 85 *Adjusted
Age of ------------------------------------------------------------------------------------------------------------ Age of
Annuitant 100% 2/3 100% 2/3 100% 2/3 100% 2/3 100% 2/3 100% 2/3 100% 2/3 100% 2/3 Annuitant
- --------- ------------------------------------------------------------------------------------------------------------ ---------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 3.54 3.81 3.65 3.96 3.74 4.12 3.81 4.30 3.86 4.49 3.90 4.69 3.93 4.90 3.94 5.10 50
55 3.79 4.13 3.93 4.32 4.05 4.53 4.14 4.76 4.21 5.00 4.26 5.25 4.29 5.49 55
60 4.13 4.55 4.31 4.81 4.46 5.09 4.58 5.39 4.67 5.69 4.73 5.97 60
65 4.58 5.13 4.82 5.48 5.03 5.85 5.19 6.23 5.30 6.60 65
70 5.19 5.92 5.54 6.41 5.82 6.91 6.04 7.40 70
75 6.06 7.04 6.55 7.72 6.94 8.40 75
80 7.30 8.63 7.98 9.59 80
85 9.06 10.91 85
</TABLE>
Information for ages not shown will be furnished on request.
"Adjusted Age" means attained age at last birthday adjusted as follows:
ANNUITY DATE ADJUSTED AGE
- ------------ ------------
Before 2000 Actual Age
2000-2009 Subtract 1 year from actual age
2010-2019 Subtract 2 years from actual age
2020-2029 Subtract 3 years from actual age
2030 and after Subtract 4 years from actual age
The above tables are based on the combined male/female 1983 Table "a"
projected forward to 1995 for Individual Annuity Valuation with interest at 3%.
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MERRILL LYNCH LIFE INSURANCE COMPANY
Home Office: Little Rock, Arkansas
Administrative Office: P.O. 44223, Jacksonville, FL 32231-4223
1-800-535-5549
Qualified Retirement Plan Certificate under
Group Modified Guaranteed Annuity Contract
Account Value is Subject to Market Value Adjustment
Nonparticipating
<PAGE> 1
MERRILL LYNCH LIFE INSURANCE COMPANY
Home Office: Little Rock, Arkansas
Administrative Office: P.O. 44223, Jacksonville, FL 32231-4223
1-800-535-5549
CERTIFICATE OF PARTICIPATION
This Certificate is a summary of your rights under the Group Modified
Guaranteed Annuity Contract identified in the Certificate Schedule. See Section
2. It is subject to all provisions of the Contract, whether or not summarized
in this Certificate. The Contract alone governs the rights of all parties. A
copy of the Contract will be furnished on request.
MERRILL LYNCH LIFE INSURANCE COMPANY certifies that the person named as
Participant in the Certificate Schedule is a Participant under the Contract.
________________________________________________________________________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Certificate Schedule . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Sub-Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. Contract Values . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5. Market Value Adjustment . . . . . . . . . . . . . . . . . . . . . . 4
6. Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 5
8. Payment at Death of Annuitant . . . . . . . . . . . . . . . . . . . 6
9. Annuity Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 6
10. Annuity Options . . . . . . . . . . . . . . . . . . . . . . . . . . 7
11. Annuity Option Tables . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
________________________________________________________________________________
TEN DAY RIGHT TO REVIEW CERTIFICATE
You may revoke your Certificate by mailing or delivering, at your option, a
written notice of revocation on or before the tenth day after your receipt of
the Certificate. Upon revocation, you are entitled to a return of the entire
premium without adjustment for such items as sales commissions, administrative
expenses or fluctuation in market value. If you mail the notice, it shall be
deemed mailed on the date of the postmark if deposited in the mail in the
United States in an envelope or other appropriate wrapper, first class postage
prepaid and properly addressed. If sent by certified or registered mail it will
be deemed mailed on the date of the certification or registration.
/s/ Anthony J. Vespa /s/ Barry G. Skolnick
- -------------------- ---------------------
President Secretary
------------------------------------------------
Registrar
Individual Retirement Annuity Certificate under
Group Modified Guaranteed Annuity Contract
Account Value is Subject to Market Value Adjustment
Nonparticipating
ML-AY-374/94
<PAGE> 2
1. DEFINITIONS
1.1 CONTRACT: The group modified guaranteed annuity contract under which this
Certificate has been issued. See Section 2.
1.2 ANNUITY: A series of predetermined periodic payments. See Section 9.
1.3 ANNUITANT: Annuity payments may depend upon the continuation of life of a
person. That person is called an annuitant. The Annuitant for this Certificate
is named in the Certificate Schedule and is the same person as the Participant.
See Section 2.
1.4 ANNUITY DATE: The date shown in the Certificate Schedule on which payment
of an annuity under the Contract is to start. See Sections 2 and 9.1.
1.5 PREMIUM: The money you paid us for this Certificate. See Section 2.
1.6 SUB-ACCOUNT: Your single premium will be allocated to one or more
Sub-Accounts as directed by you. Each Sub-Account will correspond to a specified
interest rate and Guarantee Period. See Section 3.
1.7 SUB-ACCOUNT VALUE: An amount equal to that part of your single premium
allocated to a Sub-Account, or any reinvestment in a Sub-Account, plus credited
interest, as adjusted for any prior withdrawals, Market Value Adjustments and
withdrawal charges. See Section 4.1.
1.8 NET SUB-ACCOUNT VALUE: The Sub-Account Value after adjustment for any
current Market Value Adjustment and withdrawal charge.
1.9 ACCOUNT VALUE: The sum of all Sub-Account Values. See Section 4.2.
1.10 NET ACCOUNT VALUE: The sum of all Net Sub-Account Values.
1.11 WITHDRAWAL CHARGE: A charge deducted from any Sub-Account from which a
withdrawal is made prior to the end of a Guarantee Period. See Section 6.2.
1.12 MARKET VALUE ADJUSTMENT: An adjustment made to Sub-Account Value. It is
applied upon withdrawal of all or part of the Sub-Account Value prior to the
end of the Guarantee Period. If the Annuity Date is prior to the end of a
Guarantee Period, the Market Value Adjustment is also applied at the Annuity
Date. See Section 5.1. The adjustment may be either a deduction from or an
addition to Sub-Account Value. The formula for this adjustment is shown in
Section 5.2.
1.13 GUARANTEE PERIOD: The period for which we guarantee to credit a specified
interest rate for a Sub-Account. See Section 3.2.
1.14 MAXIMUM GUARANTEE PERIOD OPTION: An option to have Sub-Account Values
automatically transferred to the Sub-Account for the longest Guarantee Period
in which Sub-Account Values are currently invested or reinvested, provided such
Guarantee Period matures prior to the Annuity Date. See Section 3.4.
1.15 PARTICIPANT: The person named in the Certificate Schedule to whom this
Certificate has been issued; referred to herein as "you."
1.16 CERTIFICATE ANNIVERSARY: Each anniversary of the Certificate Date.
1.17 CERTIFICATE DATE: The date on which this Certificate was issued.
1.18 CERTIFICATE YEAR: The year starting on the Certificate Date or a
Certificate Anniversary and ending with the day just prior to the next
Certificate Anniversary.
1.19 OTHER DEFINITIONS: Beneficiary: See Section 7.1.
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2. CERTIFICATE SCHEDULE
PARTICIPANT ANNUITANT
MARTHA WASHINGTON MARTHA WASHINGTON
-- --
GROUP CONTRACT HOLDER ANNUITY DATE
ABC COMPANY JULY 1, 2004
-- --
GROUP CONTRACT NUMBER CERTIFICATE NUMBER
890123456 897654321
-- --
CERTIFICATE DATE AGE OF ANNUITANT
July 1, 1989 FIFTY
-- --
SINGLE PREMIUM SEX OF ANNUITANT
$10,000 MALE
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3.SUB-ACCOUNTS
3.1 SUB-ACCOUNT: Your single premium will be allocated to one or more
Sub-Accounts as chosen by you. That part of your single premium allocated to a
Sub-Account must be at least $5,000.
3.2 AVAILABLE GUARANTEE PERIODS: Guarantee Periods offered by us will be for
terms of 1 year through 10 years. We may at our discretion offer additional
Guarantee Periods.
3.3 TRANSFER OF SUB-ACCOUNT VALUE: Sub-Account Values may not be transferred to
another Sub-Account, in full or in part, prior to the end of the Guarantee
Period. At the end of a Guarantee Period, the Sub-Account Value may be
transferred to another Sub-Account. The minimum amount that can be transferred
to any one Sub-Account is the lesser of (a) $5,000, or (b) the total
Sub-Account Value to be transferred.
Upon notice to us prior to the end of the current Guarantee Period, the
Sub-Account Value may be transferred at the end of the Guarantee Period to one
or more Sub-Accounts as chosen by you. See Section 7.3. We will notify you of
such right at least 30 days prior to the end of the Guarantee Period. If no
notice is received from you, the Sub-Account Value will be automatically
transferred to the Sub-Account for the 1-year Guarantee Period, unless the
Maximum Guarantee Period Option has been chosen (see Section 3.4).
3.4 MAXIMUM GUARANTEE PERIOD OPTION: This choice may be made by you in the
application for this Certificate or made or changed prior to the end of a
Guarantee Period. See Section 7.3. Under this option, if no notice is received
for transfer, all Sub-Account Values will be automatically transferred to the
Sub-Account for the longest Guarantee Period in which your Sub-Account Values
are currently invested, provided such Guarantee Period matures prior to the
Annuity Date. If this option has not been chosen, automatic transfer will occur
as stated in Section 3.3.
4.CONTRACT VALUES
4.1 SUB-ACCOUNT VALUE: The current Sub-Account Value at any time prior to the
Annuity Date is an amount equal to the investment or reinvestment in the
Sub-Account plus credited interest, as adjusted for any prior withdrawals,
Market Value Adjustments and withdrawal charges.
4.2 ACCOUNT VALUE: The Current Account Value at any time prior to the Annuity
Date is equal to the sum of all Sub-Account Values.
4.3 INTEREST RATES: Simple interest will be credited daily and compounded
annually for each Certificate Year at the guaranteed interest rate for each
Sub-Account in which the Account Value is invested. There are no guaranteed
minimum interest rates for reinvestments of Sub-Account Values, except we
guarantee that rates on reinvestment will be the same as the guaranteed
interest rates offered for any new contracts on the same form as the Contract.
5.MARKET VALUE ADJUSTMENT
5.1 MARKET VALUE ADJUSTMENT: The Market Value Adjustment may be either negative
or positive. It will be deducted from or added to Sub-Account Value according
to the formula shown in Section 5.2 in the following events:
(a) Upon withdrawal of all or part of the Sub-Account Value prior to the
end of the Guarantee Period for that Sub-Account, or
(b) At the Annuity Date if the Annuity Date is prior to the end of the
Guarantee Period for that Sub-Account.
5.2 FORMULA: The Market Value Adjustment is determined by the following
formula:
(1 + B) n/365
A x [1 - ------- ]
(1 + C)
Where:
"n" = The remaining number of days in the Guarantee Period;
"A" = The amount withdrawn from the Sub-Account;
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"B" = The current guaranteed interest rate that we are offering for a
Guarantee Period of a duration of years represented by "n/365."
When n/365 is not a whole number, we determine B by straight-line
interpolation. If n/365 is less than 1, we will assume B is equal
to the rate for a one-year Guarantee Period; and
"C" = The Guaranteed Interest Rate for the Sub-Account.
6. WITHDRAWALS
6.1 WITHDRAWALS: You may withdraw all or part of the Net Account Value applied
under this option upon notice to us received prior to the earlier of the
Annuity Date or the death of the Participant. See Section 7.3. For full
withdrawal, the Certificate must be surrendered at our administrative office.
For partial withdrawals, the withdrawal must be at least $500. The Sub-Account
Value of any remaining Sub-Accounts, after adjustment for any current Market
Value Adjustment and withdrawal charge, must be at least $1 ,000. The remaining
Account Value must be at least $5,000. You MUST specify the Sub-Accounts from
which the withdrawal is to be made. See Section 7.3. If a Sub-Account has the
same Guarantee Period as any other Sub-Account, the Participant may specify
only the Sub-Account with the shortest time remaining in the Guarantee Period.
6.2 WITHDRAWAL CHARGE: The amount of the withdrawal charge will equal 6 months
of simple interest on the amount withdrawn. Such interest will be computed at
the rate we are crediting the Sub-Account from which the withdrawal is made.
The withdrawal charge will be deducted from the Sub-Account from which the
withdrawal was made. Withdrawal charges do not apply to:
(a) Death payments under Section 8,
(b) Annuity payments under Section 9, or
(c) Withdrawal at the end of the Guarantee Period for the Sub-Account if we
receive written notice from you of such withdrawal prior to the end
of the Guarantee Period.
7. GENERAL PROVISIONS
7.1 BENEFICIARY: The beneficiary is the person who is to receive payment on
death of the Participant under Section 8 or under Section 10 if guaranteed
amounts remain unpaid.
You chose the beneficiary in the application for this Certificate. The
beneficiary may be changed while the Participant is alive.
The beneficiary may be named irrevocably, in which case a change can be made
later only with the beneficiary's written consent. We will not require such
beneficiary's consent for withdrawals.
If the beneficiary does not survive the Participant, the estate or heirs of
such beneficiary have no rights under the Contract. If no beneficiary survives
the Participant, payment will be made to the Participant's estate.
7.2 NONTRANSFERABILITY: This Certificate is established for the exclusive
benefit of you and your beneficiaries. It is not transferable. It may not be
sold, assigned, discounted or pledged as security for a loan or as security for
any other obligation. Annuity payments under the Contract cannot be
surrendered, commuted, assigned, encumbered or anticipated in any way. Your
interest under the Contract is nonforfeitable.
7.3 NOTICES, CHANGES AND CHOICES: To be effective, all notices, changes and
choices you make under the Contract must be in writing, signed and received by
us at our administrative office, except that the following may be made by
telephone:
(a) Notices regarding transfers of Sub-Account Values under Section 3.3;
(b) Choices regarding the Maximum Guarantee Period Option under Section
3.4; and
(c) Specifications of Sub-Account deductions for withdrawals under
Section 6.1.
We are not responsible for their validity. When recorded by us, notices changes
and choices relating to beneficiaries will take effect as of the date signed
unless we have already acted in reliance on the prior status.
7.4 MISSTATEMENT OF AGE OR SEX: If the age or sex of an Annuitant or a joint
annuitant is misstated, annuity payments will be adjusted to reflect the
correct age and sex. Any amount we have overpaid as the result of such
misstatement will be deducted from the next payments due under the Contract.
Interest on the overpayment will be
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<PAGE> 6
charged at the rate of 6% per year. Any amount we have underpaid will be paid
in full with the next payment due under the Contract. We will pay interest on
the underpayment at the rate of 6% per year.
7.5 PROOF OF AGE, SEX OR SURVIVAL: We may require satisfactory proof of the
age, sex or survival of any person on whose continued life any payment under
the Contract depends.
7.6 INCONTESTABILITY: We will not contest the Contract or this Certificate.
7.7 THE CONTRACT: The Contract, its attached application and any endorsements
are the entire contract. Only our President, a Vice President, Secretary or
Assistant Secretary may change the Contract. Any change must be in writing.
7.8 PAYMENTS: All sums payable to or by us are payable at our administrative
office. We may require return of this Certificate prior to making payment. We
may defer payments of partial or full withdrawals for up to 6 months. Except in
the case of the Participant's death or disability or attainment of age 59 1/2,
before distributing any amount under the Contract we must receive from you a
signed declaration of your intention as to the disposition of the amount
distributed.
7.9 REPORTS: Prior to the Annuity Date we will furnish you a report at least
once each year. It will show your Account Value, Sub-Account Values and current
interest rates.
7.10 COMPLIANCE WITH STATE AND FEDERAL LAW: We reserve the right to change the
provisions of the Contract and the Certificates issued under the Contract to
conform to any applicable law, regulation or ruling issued by a government
agency. Such right is subject to the approval of the insurance regulator of the
state in which the Contract was issued. We will promptly provide you with a
copy of any such amendment.
8. PAYMENT AT DEATH OF PARTICIPANT
8.1 DEATH PRIOR TO ANNUITY DATE: On death of the Participant prior to the
Annuity Date, we will pay to the beneficiary an amount equal to the greater of
the Account Value or the Net Account Value on the date of payment. Payment will
be made in a lump sum unless Section 8.2 is chosen.
8.2 ANNUITY OPTION: If the beneficiary is the surviving spouse of the deceased
Participant, he or she may choose to receive payments under any of the annuity
options of the Contract. For any other beneficiary, only those options are
available that provide for full payment within 5 years of the date of such
Participant's death.
8.3 CERTIFICATE CONTINUATION OPTION: If the surviving spouse of the deceased
Participant is the Participant's Beneficiary, such spouse may choose to become
the Participant and continue the Certificate in force on the same terms as
before the Participant's death, and the spouse shall thereafter be the
Annuitant.
8.4 DEATH AFTER ANNUITY DATE: See Section 10.8.
9. ANNUITY PROVISIONS
9.1 ANNUITY DATE: The Annuity Date must be on the first day of a month. The
Annuity Date may not be later than April 1 of the year after the year in which
you attain age 70 1/2 and will be such date if you have not chosen an Annuity
Date. You may change the Annuity Date up to 30 days prior to the Annuity Date.
A MARKET VALUE ADJUSTMENT MAY BE APPLIED ON THE ANNUITY DATE. SEE SECTION 5.1.
9.2 ANNUITY OPTIONS: If you have not chosen an annuity option, Option 4 will
apply with a 10-year guarantee period or a period of years no greater than your
life expectancy, whichever is less. You may change options only up to 30 days
prior to the Annuity Date. An option not set forth in the Contract may be
chosen if acceptable to us. When applicable, life expectancy will be determined
according to Internal Revenue Service regulations and rulings.
9.3 MINIMUM ANNUITY PAYMENT: If the Net Account Value to be applied at the
Annuity Date is less than $5,000, we may pay such amount in a lump sum. If any
payment would be less than $50, we may change the frequency so payments are at
least $50 each.
9.4 AMOUNT OF ANNUITY PAYMENTS: Any premium taxes imposed by a state or other
government will be deducted from the Net Account Value at the Annuity Date. The
remaining Net Account Value will be applied to the annuity option chosen at our
current annuity rates, which will be furnished on request. The rates will
assume interest of not less than 3%. They will not be less favorable than those
shown in the annuity tables in the Contract and this Certificate. The tables
show the minimum guaranteed amount of each monthly payment for each $1,000 so
applied, according to age and sex at the Annuity Date. The tables are based on
the 1983 Table "a" projected forward to 1995 for Individual Annuity Valuation
with interest at 3%.
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10. ANNUITY OPTIONS
10.1 OPTION 1 -- PAYMENTS OF A FIXED AMOUNT: Equal payments in the amount
chosen will be made until the Net Account Value applied under this option is
exhausted. The term over which such payments are made must be at least 5 years
and may not exceed your life expectancy, or the joint life expectancy of you
and your spouse (or, if you are not married, a designated second person), at
the Annuity Date. If you die before the Annuity Date, the period may not exceed
the life expectancy of your surviving spouse.
10.2 OPTION 2 -- PAYMENTS FOR A FIXED PERIOD: Payments will be made for the
period chosen. The period must be at least 5 years and may not exceed your life
expectancy, or the joint life expectancy of you and your spouse (or, if you are
not married, a designated second person), at the Annuity Date. If you die
before the Annuity Date, the period may not exceed the life expectancy of your
surviving spouse.
10.3 OPTION 3 -- LIFE ANNUITY: Payments will be made for the life of the
Annuitant. Payments will cease with the last payment due prior to the
Annuitant's death.
10.4 OPTION 4 -- LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 OR 20 YEARS:
Payments will be made for the guaranteed period chosen (10 or 20 years) and as
long thereafter as the Annuitant lives. The guaranteed period selected may not
exceed your life expectancy, or the joint life expectancy of you and your
spouse (or, if you are not married, a designated second person), at the Annuity
Date. If you die before the Annuity Date, the period may not exceed the life
expectancy of your surviving spouse.
10.5 OPTION 5 -- LIFE ANNUITY WITH GUARANTEED RETURN OF NET ACCOUNT VALUE:
Payments will be made until the sum of the annuity payments equals the Net
Account Value applied under this option, and as long thereafter as the
Annuitant lives. The period required for distribution of the Net Account Value
may not exceed your life expectancy or the joint life expectancy of you and
your spouse (or, if you are not married, a designated second person), at the
Annuity Date. If you die before the Annuity Date, the period required for
distribution of the Net Account VALUE MAY not exceed the life expectancy of
your surviving spouse.
10.6 OPTION 6 -- JOINT AND SURVIVOR LIFE ANNUITY: Payments will be made during
the lifetimes of you and a designated second person. The second person must be
your spouse if you have a spouse. Upon death of one, payments for the life of
the other will be made in the same amount. Option 6 is not available to the
beneficiary.
10.7 OPTION 7 -- QUALIFIED PLAN OPTION: Annuity payments may be based on (a)
your life expectancy, (b) the joint life expectancy of you and your spouse, or
(c) the life expectancy of your surviving spouse if you die before the Annuity
Date. Payments will be made annually. Each annual payment will be equal to the
Net Account Value on THE FIRST DAY of that calendar year divided by the
applicable current life expectancy, as defined by Internal Revenue Service
regulations. Each subsequent payment will be made on the anniversary of the
Annuity Date. Interest will be credited at our current rate for this option.
The rate will not be less than 3%. On death of the measuring life or lives
prior to full distribution of the Net Account Value, the remaining Net Account
Value will be paid to the beneficiary in a lump sum.
10.8 DEATH OF PARTICIPANT: On death of the Participant after the Annuity Date
while guaranteed amounts remain unpaid, the beneficiary may choose either:
(a) To have the payments continue for the amount or period guaranteed, or
(b) To receive the present value of the remaining guaranteed payments in
a lump sum.
If a beneficiary dies while guaranteed amounts remain unpaid, the present value
will be paid in a lump sum to the beneficiary's estate.
Present values will be computed at the interest rate or rates that were used to
compute the amount of the initial annuity payment.
10.9 PAYMENT: Except for Option 7, payment will be made on the first day of
each month starting with the Annuity Date, but prior to the Annuity Date you
may choose a less frequent payment interval instead. The amount of each payment
on an annual, semiannual or quarterly basis will not be less than the monthly
payment computed from the annuity tables in the Contract and this Certificate
multiplied by the appropriate factor.
Annual Semiannual Quarterly
------ ---------- ---------
11.839 5.963 2.993
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11. ANNUITY OPTION TABLES
MINIMUM GUARANTEED MONTHLY ANNUITY PAYMENT FOR EACH $1,000 APPLIED UNDER OPTION
OPTION 2 (Payments for a Fixed Period)
<TABLE>
<CAPTION>
Years Each Years Each Years Each Years Each
Payable Payment Payable Payment Payable Payment Payable Payment
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
5 17.91 9 10.53 13 7.71 17 6.23
6 15.14 10 9.61 14 7.26 18 5.96
7 13.16 11 8.86 15 6.87 19 5.73
8 11.68 12 8.24 16 6.53 20 5.51
</TABLE>
<TABLE>
<CAPTION>
OPTION 3 (Life Annuity), OPTION 4 (Life Annuity with 10 or 20 Years Guaranteed)
and OPTION 5 (Return of Net Account Value Guaranteed)
*Adjusted Life 10 Years 20 Years Return of *Adjusted Life 10 Years 20 Years Return of
Male Age Annuity Guaranteed Guaranteed Net Account Value Female Age Annuity Guaranteed Guaranteed Net Account Value
- -------- ------- ---------- ---------- ----------------- ---------- ------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56 4.62 4.56 4.34 4.37 56 4.19 4.16 4.06 4.05
57 4.72 4.65 4.41 4.45 56 4.27 4.24 4.12 4.12
58 4.83 4.75 4.47 4.53 58 4.35 4.32 4.19 4.19
59 4.94 4.85 4.54 4.61 59 4.44 4.40 4.25 4.26
60 5.06 4.95 4.60 4.70 60 4.54 4.49 4.32 4.34
61 5 19 5.07 4.67 4.80 61 4.64 4.58 4.39 4.42
62 5.33 5.19 4.73 4.90 62 4.74 4.68 4.46 4.50
63 5.47 5.31 4.80 5.00 63 4.86 4.79 4 53 4.59
64 5.63 5.44 4.86 5.11 64 4.98 4.90 4.60 4.69
65 5.80 5.58 4.92 5.23 65 5.11 5.01 4.67 4.79
66 5.98 5.72 4.98 5.35 66 5.25 5.14 4.74 4.89
67 6.17 5.86 5.04 5.48 67 5.40 5.27 4.82 5.00
68 6.37 6.02 5.10 5.61 68 5.55 5.40 4.89 5.12
69 6.59 6.18 5.15 5.75 69 5.72 5.55 4.95 5.25
70 6.82 6.34 5.20 5.90 70 5.91 5.70 5.02 5.38
71 7.07 6.50 5.24 6.06 71 6.11 5.86 5.08 5.52
72 7.34 6.67 5.28 6.22 72 6.32 6.03 5.14 5.66
73 7.62 6.85 5.32 6.39 73 6.56 6.20 5.19 5.82
74 7.92 7.02 5.35 6.57 74 6.81 6.38 5.24 5.99
75 8.24 7.20 5.38 6.76 75 7.08 6.57 5.29 6.16
76 8.58 7.38 5.40 6.97 76 7.37 6.76 5.33 6.35
77 8.95 7.55 5.42 7.17 77 7.69 6.96 5.36 6.55
78 9.35 7.72 5.44 7.39 78 8.03 7.16 5.39 6.75
79 9.77 7.89 5.46 7.63 79 8.40 7.36 5.41 6.98
80 10.22 8.06 5.47 7.87 80 8.80 7.56 5.44 7.21
81 10.71 8.22 5.48 8.13 81 9.23 7.75 5.45 7.45
82 11.22 8.37 5.49 8.40 82 9.70 7.94 5.47 7.71
83 11.77 8.51 5.50 8.68 83 10.21 8.13 5.48 7.98
84 12 35 8.65 5.50 8.97 84 10.76 8.30 5.49 8.27
85 12.97 8.77 5.50 9.29 85 11.35 8.46 5.50 8.57
</TABLE>
OPTION 6 (Joint and Survivor Life Annuity)
<TABLE>
<CAPTION>
*Adjusted *Adjusted Male Age *Adjusted
Female ----------------------------------------------------------------------------- Female
Age 50 55 60 65 70 75 80 35 Age
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 3.52 3.60 3.66 3.71 3.74 3.76 3.78 3.78 50
55 3.65 3.77 3.87 3.95 4.01 4.05 4.08 4.09 55
60 3.78 3.94 4.10 4.23 4.34 4.41 4.46 4.49 60
65 3.88 4.10 4.33 4.54 4.72 4.86 4.96 5.02 65
70 3.96 4.23 4.54 4.85 5.15 5.40 5.59 5.72 70
75 4.02 4.34 4.72 5.14 5.59 6.01 6.37 6.64 75
80 4.06 4.41 4.85 5.38 5.99 6.63 7.24 7.76 80
85 4.09 4.46 4.94 5.55 6.30 7.17 8.11 9.01 85
</TABLE>
Information for ages not shown will be furnished on request.
*Adjusted Age" means attained age at last birthday adjusted as follows:
ANNUITY DATE ADJUSTED AGE
------------ ------------
Before 2000 Actual age
2000-2009 Subtract 1 year from actual age
2010-2019 Subtract 2 years from actual age
2020-2029 Subtract 3 years from actual age
2030 and after Subtract 4 years from actual age
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MERRILL LYNCH LIFE INSURANCE COMPANY
Home Office: Little Rock, Arkansas
Administrative Office: P.O. 44223, Jacksonville, FL 32231-4223
1-800-535-5549
Individual Retirement Annuity Certificate under
Group Modified Guaranteed Annuity Contract
Account Value is Subject to Market Value Adjustment
Nonparticipating
<PAGE> 1
MERRILL LYNCH LIFE INSURANCE COMPANY
Home Office: Little Rock, Arkansas
Administrative Office: P. O. Box 44223, Jacksonville, Florida, 32231-4223
1-800-535-5549
CERTIFICATE OF PARTICIPATION
This Certificate is a summary of your rights under the Group Modified
Guaranteed Annuity Contract identified in the Certificate Schedule. See Section
2. It is subject to all provisions of the Contract, whether or not summarized
in this Certificate. The Contract alone governs the rights of all parties. A
copy of the Contract will be furnished on request.
MERRILL LYNCH LIFE INSURANCE COMPANY certifies that the person named as
Participant in the Certificate Schedule is a Participant under the Contract.
<TABLE>
<CAPTION>
________________________________________________________________________________________
TABLE OF CONTENTS
Section Page
- ------- ----
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Certificate Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Sub-Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. Contract Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5. Market Value Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6. Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8. Payment at Death of Annuitant . . . . . . . . . . . . . . . . . . . . . . . 6
9. Annuity Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
10. Annuity Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
11. Annuity Option Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
________________________________________________________________________________________
</TABLE>
TEN DAY RIGHT TO REVIEW CERTIFICATE
You may cancel your Certificate within ten days after you receive it by
returning or mailing it to us or our agent. We will refund your premium within
ten days after the Certificate is received by us or our agent. The Certificate
will be void from the beginning.
/s/ Anthony J. Vespa /s/ Barry G. Skolnick
- -------------------- ---------------------
President Secretary
------------------------------------------------
Registrar
Individual Retirement Account Certificate under
Group Modified Guaranteed Annuity Contract
Account Value is Subject to Market Value Adjustment
Nonparticipating
ML-AY-375/94
<PAGE> 2
1. DEFINITIONS
1.1 CONTRACT: The group modified guaranteed annuity contract under which this
Certificate has been issued. See Section 2.
1.2 ANNUITY: A series of predetermined periodic payments. See Section 9.
1.3 ANNUITANT: Annuity payments may depend upon the continuation of life of a
person. That person is called an annuitant. The Annuitant for this Certificate
is named in the Certificate Schedule. See Section 2.
1.4 ANNUITY DATE: The date shown in the Certificate Schedule on which payment
of an annuity under the Contract is to start. See Sections 2 and 9.1.
1.5 PREMIUM: The money you paid us for this Certificate. See Section 2.
1.6 SUB-ACCOUNT: Your single premium will be allocated to one or more
SubAccounts as directed by you. Each Sub-Account will correspond to a specified
interest rate and Guarantee Period. See Section 3.
1.7 SUB-ACCOUNT VALUE: An amount equal to that part of your single premium
allocated to a Sub-Account, or any reinvestment in a Sub-Account, plus credited
interest, as adjusted for any prior withdrawals, Market Value Adjustments and
withdrawal charges. See Section 4.1.
1.8 NET SUB-ACCOUNT VALUE: The Sub-Account Value after adjustment for any
current Market Value Adjustment and withdrawal charge.
1.9 ACCOUNT VALUE: The sum of all Sub-Account Values. See Section 4.2.
1.10 NET ACCOUNT VALUE: The sum of all Net Sub-Account Values.
1.11 WITHDRAWAL CHARGE: A charge deducted from any Sub-Account from which a
withdrawal is made prior to the end of a Guarantee Period. See Section 6.2.
1.12 MARKET VALUE ADJUSTMENT: An adjustment made to Sub-Account Value. It is
applied upon withdrawal of all or part of the Sub-Account Value prior to the
end of the Guarantee Period. If the Annuity Date is prior to the end of a
Guarantee Period, the Market Value Adjustment is also applied at the Annuity
Date. See Section 5.1. The adjustment may be either a deduction from or an
addition to Sub-Account Value. The formula for this adjustment is shown in
Section 5.2.
1.13 GUARANTEE PERIOD: The period for which we guarantee to credit a specified
interest rate for a Sub-Account. See Section 3.2.
1.14 MAXIMUM GUARANTEE PERIOD OPTION: An option to have Sub-Account Values
automatically transferred to the Sub-Account for the longest Guarantee Period
in which Sub-Account Values are currently invested or reinvested, provided such
Guarantee Period matures prior to the Annuity Date. See Section 3.4.
1.15 PARTICIPANT: The custodian or trustee of an Individual Retirement Account
named in the Certificate Schedule to whom this Certificate has been issued;
referred to herein as "you." The Participant and Contract Holder are the same.
1.16 CERTIFICATE ANNIVERSARY: Each anniversary of the Certificate Date.
1.17 CERTIFICATE DATE: The date on which this Certificate was issued.
1.18 CERTIFICATE YEAR: The year starting on the Certificate Date or a
Certificate Anniversary and ending with the day just prior to the next
Certificate Anniversary.
1.19 OTHER DEFINITIONS: Beneficiary: See Section 7.1.
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2. CERTIFICATE SCHEDULE
PARTICIPANT ANNUITANT
ABC CUSTODIAN MARTHA WASHINGTON
FBO MARTHA WASHINGTON
-- --
GROUP CONTRACT HOLDER ANNUITY DATE
ABC CUSTODIAN July 1, 2004
FBO MARTHA WASHINGTON
-- --
GROUP CONTRACT NUMBER CERTIFICATE NUMBER
890123456 897654321
-- --
CERTIFICATE DATE AGE OF ANNUITANT
July 1, 1989 FIFTY
-- --
SINGLE PREMIUM SEX OF ANNUITANT
$10,000 MALE
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3.SUB-ACCOUNTS
3.1 SUB-ACCOUNT: Your single premium will be allocated to one or more
Sub-Accounts as chosen by you. That part of your single premium allocated to a
Sub-Account must be at least $5,000.
3.2 AVAILABLE GUARANTEE PERIODS: Guarantee Periods offered by us will be for
terms of 1 year through 10 years. We may at our discretion offer additional
Guarantee Periods.
3.3 TRANSFER OF SUB-ACCOUNT VALUE: Sub-Account Values may not be transferred to
another Sub-Account, in full or in part, prior to the end of the Guarantee
Period. At the end of a Guarantee Period, the Sub-Account Value may be
transferred to another Sub-Account. The minimum amount that can be transferred
to any one Sub-Account is the lesser of (a) $5,000, or (b) the total
Sub-Account Value to be transferred.
Upon notice to us prior to the end of the current Guarantee Period, the
Sub-Account Value may be transferred at the end of the Guarantee Period to one
or more Sub-Accounts as chosen by you. See Section 7.3. We will notify you of
such right at least 30 days prior to the end of the Guarantee Period. If no
notice is received from you, the Sub-Account Value will be automatically
transferred to the Sub-Account for the 1-year Guarantee Period, unless the
Maximum Guarantee Period Option has been chosen (see Section 3.4).
3.4 MAXIMUM GUARANTEE PERIOD OPTION: This choice may be made by you in the
application for this Certificate or made or changed prior to the end of a
Guarantee Period. See Section 7.3. Under this option, if no notice is received
for transfer, all Sub-Account Values will be automatically transferred to the
Sub-Account for the longest Guarantee Period in which your Sub-Account Values
are currently invested, provided such Guarantee Period matures prior to the
Annuity Date. If this option has not been chosen, automatic transfer will occur
as stated in Section 3.3.
4.CONTRACT VALUES
4.1 SUB-ACCOUNT VALUE: The current Sub-Account Value at any time prior to the
Annuity Date is an amount equal to the investment or reinvestment in the
Sub-Account plus credited interest, as adjusted for any prior withdrawals,
Market Value Adjustments and withdrawal charges.
4.2 ACCOUNT VALUE: The Current Account Value at any time prior to the Annuity
Date is equal to the sum of all Sub-Account Values.
4.3 INTEREST RATES: Simple interest will be credited daily and compounded
annually for each Certificate Year at the guaranteed interest rate for each
Sub-Account in which the Account Value is invested. There are no guaranteed
minimum interest rates for reinvestments of Sub-Account Values, except we
guarantee that rates on reinvestment will be the same as the guaranteed
interest rates offered for any new contracts on the same form as the Contract.
5.MARKET VALUE ADJUSTMENT
5.1 MARKET VALUE ADJUSTMENT: The Market Value Adjustment may be either negative
or positive. It will be deducted from or added to Sub-Account Value according
to the formula shown in Section 5.2 in the following events:
(a) Upon withdrawal of all or part of the Sub-Account Value prior to the
end of the Guarantee Period for that Sub-Account, or
(b) At the Annuity Date if the Annuity Date is prior to the end of the
Guarantee Period for that Sub-Account.
5.2 FORMULA: The Market Value Adjustment is determined by the following
formula:
(1 + B) n/365
A x [1- ------- ]
(1 + C)
Where:
"n" = The remaining number of days in the Guarantee Period;
"A" = The amount withdrawn from the Sub-Account;
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"B" = The current guaranteed interest rate that we are offering for a
Guarantee Period of a duration of years represented by "n/365."
When n/365 is not a whole number, we determine B by
straight-line interpolation. If n/365 is less than 1, we will
assume B is equal to the rate for a one-year Guarantee Period;
and
"C" = The guaranteed interest rate for the Sub-Account.
6. WITHDRAWALS
6.1 WITHDRAWALS: You may withdraw all or part of the Net Account Value applied
under this option upon notice to us received prior to the earlier of the
Annuity Date or the death of the Annuitant. See Section 7.3. For full
withdrawal, the Certificate must be surrendered at our administrative office.
For partial withdrawals, the withdrawal must be at least $500. The Sub-Account
Value of any remaining SubAccounts, after adjustment for any current Market
Value Adjustment and withdrawal charge, must beat least $1,000. The remaining
Account Value must beat least $5,000. You MUST specify the Sub-Accounts from
which the withdrawal is to be made. See Section 7.3. If a Sub-Account has the
same Guarantee Period as any other Sub-Account, the Participant may specify
only the Sub-Account with the shortest time remaining in the Guarantee Period.
6.2 WITHDRAWAL CHARGE: The amount of the withdrawal charge will equal 6 months
of simple interest on the amount withdrawn. Such interest will be computed at
the rate we are crediting the Sub-Account from WHICH THE withdrawal is made.
The withdrawal charge will be deducted from the Sub-Account from which the
withdrawal was made. Withdrawal charges do not apply to:
(a) Death payments under Section 8,
(b) Annuity payments under Section 9, or
(c) Withdrawal at the end of the Guarantee Period for the Sub-Account if we
receive written notice from you of such withdrawal prior to the end of
the Guarantee Period.
7. GENERAL PROVISIONS
7.1 BENEFICIARY: A beneficiary is the person or entity that is to receive
payment on death of the Annuitant under Section 8 or under Section 10 if
guaranteed amounts remain unpaid. The Contract Holder is the beneficiary.
7.2 ANNUITANT'S INTEREST NONFORFEITABLE: Annuity payments under the Contract
cannot be surrendered, commuted, assigned, encumbered or anticipated in any
way. The interest of the Annuitant under the Contract is nonforfeitable.
7.3 NOTICES, CHANGES AND CHOICES: To be effective, all notices, changes and
choices you make under the Contract must be in writing, signed and received by
us at our administrative office, except that the following may be made by
telephone:
(a) Notices regarding transfers of Sub-Account Values under Section 3.3;
(b) Choices regarding the Maximum Guarantee Period Option under Section 3.4;
and
(c) Specifications of Sub-Account deductions for withdrawals under Section
6.1.
We are not responsible for their validity. When recorded by us, notices,
changes and choices relating to beneficiaries will take effect as of the date
signed unless we have already acted in reliance on the prior status.
7.4 MISSTATEMENT OF AGE OR SEX: If the age or sex of an Annuitant or a joint
annuitant is misstated, annuity payments will be adjusted to reflect the
correct age and sex. Any amount we have overpaid as the result of such
misstatement will be deducted from the next payments due under the Contract.
Interest on the overpayment will be charged at the rate of 6% per year. Any
amount we have underpaid will be paid in full with the next payment due under
the Contract. We will pay interest on the underpayment at the rate of 6% per
year.
7.5 PROOF OF AGE, SEX OR SURVIVAL: We may require satisfactory proof of the
age, sex or survival of any person on whose continued life any payment under
the Contract depends.
7.6 INCONTESTABILITY: We will not contest the Contract or this Certificate.
7.7 THE CONTRACT: The Contract, its attached application and any endorsements
are the entire contract. Only our President, a Vice President, Secretary or
Assistant Secretary may change the Contract. Any change must be in writing.
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7.8 PAYMENTS: All sums payable to or by us are payable at our administrative
office. We may require return of this Certificate prior to making payment. We
may defer payments of partial or full withdrawals for up to 6 months.
7.9 REPORTS: Prior to the Annuity Date we will furnish you a report at least
once each year. It will show your Account Value, Sub-Account Values and
current interest rates.
7.10 COMPLIANCE WITH STATE AND FEDERAL LAW: We reserve the right to change
the provisions of the Contract and the Certificates issued under the Contract
to conform to any applicable law, regulation or ruling issued by a government
agency. Such right is subject to the approval of the insurance regulator of
the state in which the Contract was issued. We will promptly provide you with a
copy of any such amendment.
8. PAYMENT AT DEATH OF ANNUITANT
8.1 DEATH PRIOR TO ANNUITY DATE: On death of the Annuitant prior to the Annuity
Date, we will pay to the beneficiary an amount equal to the greater of the
Account Value or the Net Account Value on the date of payment. Payment will be
made in a lump sum unless Section 8.2 is chosen.
8. 2 ANNUITY OPTION: If the beneficiary is the surviving spouse of the deceased
Annuitant, he or she may choose to receive payments under any of the annuity
options of the Contract. For any other beneficiary, only those options are
available that provide for full payment within 5 years of the date of such
Annuitant's death.
8.3 CERTIFICATE CONTINUATION OPTION: The Participant may irrevocably choose,
prior to the Annuitant's death, to continue the Certificate in force upon the
death of the Annuitant on the same terms as before such Annuitant's death. A
person designated by the Participant shall thereafter be the Annuitant.
8.4 DEATH AFTER ANNUITY DATE: See Section 10.8.
9. ANNUITY PROVISIONS
9.1 ANNUITY DATE: The Annuity Date must be on the first day of a month. The
Annuity Date may not be later than April 1 of the year after the year in which
the Annuitant attains age 70 1/2 and will be such date if you have not chosen
an Annuity Date. You may change the Annuity Date up to 30 days prior to the
Annuity Date. A MARKET VALUE ADJUSTMENT MAY BE APPLIED ON THE ANNUITY DATE. SEE
SECTION 5.1.
9.2 ANNUITY OPTIONS: If you have not chosen an annuity option, Option 4 will
apply with a 10-year guarantee period or a period of years no greater than the
Annuitant's life expectancy, whichever is less. You may change options only up
to 30 days prior to the Annuity Date. An option not set forth in the Contract
may be chosen if acceptable to us. When applicable, life expectancy will be
determined according to Internal Revenue Service regulations and rulings.
9.3 MINIMUM ANNUITY PAYMENT: If the Net Account Value to be applied at the
Annuity Date is less than $5,000, we may pay such amount in a lump sum. If any
payment would be less than $50, we may change the frequency so payments are at
least $50 each.
9.4 AMOUNT OF ANNUITY PAYMENTS: Any premium taxes imposed by a state or other
government will be deducted from the Net Account Value at the Annuity Date. The
remaining Net Account Value will be applied to the annuity option chosen at our
current annuity rates, which will be furnished on request. The rates will
assume interest of not less than 3%. They will not be less favorable than those
shown in the annuity tables in the Contract and this Certificate. The tables
show the minimum guaranteed amount of each monthly payment for each $1,000 so
applied, according to age and sex at the Annuity Date. The tables are based on
the 1983 Table "a" projected forward to 1995 for Individual Annuity Valuation
with interest at 3%.
10. ANNUITY OPTIONS
10.1 OPTION 1 -- PAYMENTS OF A FIXED AMOUNT: Equal payments in the amount chosen
will be made until the Net Account Value applied under this option is
exhausted. The term over which such payments are made must be at least 5 years
and may not exceed the Annuitant's life expectancy, or, the joint life
expectancy of the Annuitant and the Annuitant's spouse (or, if the Annuitant is
not married, a designated second person), at the Annuity Date. If the Annuitant
dies before the Annuity Date, the period may not exceed the life expectancy of
the Annuitant's surviving spouse.
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10.2 OPTION 2 -- PAYMENTS FOR A FIXED PERIOD: Payments will be made for the
period chosen. The period must be at least 5 years and may not exceed your life
expectancy, or the joint life expectancy of you and your spouse (or, if you are
not married, a designated second person), at the Annuity Date. If you die
before the Annuity Date, the period may not exceed the life expectancy of your
surviving spouse.
10.3 OPTION 3 -- LIFE ANNUITY: Payments will be made for the life of the
Annuitant. Payments will cease with the last payment due prior to the
Annuitant's death.
10.4 OPTION 4 -- LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 OR 20 YEARS:
Payments will be made for the guaranteed period chosen (10 or 20 years) and as
long thereafter as the Annuitant lives. The guaranteed period selected may not
exceed your life expectancy, or the joint life expectancy of you and your
spouse (or, if you are not married, a designated second person), at the Annuity
Date. If you die before the Annuity Date, the period may not exceed the life
expectancy of your surviving spouse.
10.5 OPTION 5 -- LIFE ANNUITY WITH GUARANTEED RETURN OF NET ACCOUNT VALUE:
Payments will be made until the sum of the annuity payments equals the Net
Account Value applied under this option, and as long thereafter as the
Annuitant lives. The period required for distribution of the Net Account Value
may not exceed your life expectancy or the joint life expectancy of you and
your spouse (or, if you are not married, a designated second person), at the
Annuity Date. If you die before the Annuity Date, the period required for
distribution of the Net Account value may not exceed the life expectancy of
your surviving spouse.
10.6 OPTION 6 -- JOINT AND SURVIVOR LIFE ANNUITY: Payments will be made during
the lifetimes of you and a designated second person. The second person must be
your spouse if you have a spouse. Upon death of one, payments for the life of
the other will be made in the same amount. Option 6 is not available to the
beneficiary.
10.7 OPTION 7 -- QUALIFIED PLAN OPTION: Annuity payments may be based on (a)
your life expectancy, (b) the joint life expectancy of you and your spouse, or
(c) the life expectancy of your surviving spouse if you die before the Annuity
Date. Payments will be made annually. Each annual payment will be equal to the
Net Account Value on THE FIRST DAY of that calendar year divided by the
applicable current life expectancy, as defined by Internal Revenue Service
regulations. Each subsequent payment will be made on the anniversary of the
Annuity Date. Interest will be credited at our current rate for this option.
The rate will not be less than 3%. On death of the measuring life or lives
prior to full distribution of the Net Account Value, the remaining Net Account
Value will be paid to the beneficiary in a lump sum.
10.8 DEATH OF PARTICIPANT: On death of the Participant after the Annuity Date
while guaranteed amounts remain unpaid, the beneficiary may choose either:
(a) To have the payments continue for the amount or period guaranteed, or
(b) To receive the present value of the remaining guaranteed payments
in a lump sum.
If a beneficiary dies while guaranteed amounts remain unpaid, the present value
will be paid in a lump sum to the beneficiary's estate.
Present values will be computed at the interest rate or rates that were used to
compute the amount of the initial annuity payment.
10.9 PAYMENT: Except for Option 7, payment will be made on the first day of
each month starting with the Annuity Date, but prior to the Annuity Date you
may choose a less frequent payment interval instead. The amount of each payment
on an annual, semiannual or quarterly basis will not be less than the monthly
payment computed from the annuity tables in the Contract and this Certificate
multiplied by the appropriate factor.
Annual Semiannual Quarterly
------ ---------- ---------
11.839 5.963 2.993
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<TABLE>
<CAPTION>
11. ANNUITY OPTION TABLES
MINIMUM GUARANTEED MONTHLY ANNUITY PAYMENT FOR EACH $1,000 APPLIED UNDER OPTION
OPTION 2 (Payments for a Fixed Period)
Years Each Years Each Years Each Years Each
Payable Payment Payable Payment Payable Payment Payable Payment
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
5 17.91 9 10.53 13 7.71 17 6.23
6 15.14 10 9.61 14 7.26 18 5.96
7 13.16 11 8.86 15 6.87 19 5.73
8 11.68 12 8.24 16 6.53 20 5.51
</TABLE>
<TABLE>
<CAPTION>
OPTION 3 (Life Annuity), OPTION 4 (Life Annuity with 10 or 20 Years Guaranteed)
and OPTION 5 (Return of Net Account Value Guaranteed)
*Adjusted Life 10 Years 20 Years Return of *Adjusted Life 10 Years 20 Years Return of
Male Age Annuity Guaranteed Guaranteed Net Account Value Female Age Annuity Guaranteed Guaranteed Net Account Value
- --------- ------- ---------- ---------- ----------------- ---------- ------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56 4.62 4.56 4.34 4.37 56 4.19 4.16 4.06 4.05
57 4.72 4.65 4.41 4.45 57 4.27 4.24 4.12 4.12
58 4.83 4.75 4.47 4.53 58 4.35 4.32 4.19 4.19
59 4.94 4.85 4.54 4.61 59 4.44 4.40 4.25 4.26
60 5.06 4.95 4.60 4.70 60 4.54 4.49 4.32 4.34
61 5 19 5.07 4.67 4.80 61 4.64 4.58 4.39 4.42
62 5.33 5.19 4.73 4.90 62 4.74 4.68 4.46 4.50
63 5.47 5.31 4.80 5.00 63 4.86 4.79 4.53 4.59
64 5.63 5.44 4.86 5.11 64 4.98 4.90 4.60 4.69
65 5.80 5.58 4.92 5.23 65 5.11 5.01 4.67 4.79
66 5.98 5.72 4.98 5.35 66 5.25 5.14 4.74 4.89
67 6.17 5.86 5.04 5.48 67 5.40 5.27 4.82 5.00
68 6.37 6.02 5.10 5.61 68 5.55 5.40 4.89 5.12
69 6.59 6.18 5.15 5.75 69 5.72 5.55 4.95 5.25
70 6.82 6.34 5.20 5.90 70 5.91 5.70 5.02 5.38
71 7.07 6.50 5.24 6.06 71 6.11 5.86 5.08 5.52
72 7.34 6.67 5.28 6.22 72 6.32 6.03 5.14 5.66
73 7.62 6.85 5.32 6.39 73 6.56 6.20 5.19 5.82
74 7.92 7.02 5.35 6.57 74 6.81 6.38 5.24 5.99
75 8.24 7.20 5.38 6.76 75 7.08 6.57 5.29 6.16
76 8.58 7.38 5.40 6.97 76 7.37 6.76 5.33 6.35
77 8.95 7.55 5.42 7.17 77 7.69 6.96 5.36 6.55
78 9.35 7.72 5.44 7.39 78 8.03 7.16 5.39 6.75
79 9.77 7.89 5.46 7.63 79 8.40 7.36 5.41 6.98
80 10.22 8.06 5.47 7.87 80 8.80 7.56 5.44 7.21
81 10.71 8.22 5.48 8.13 81 9.23 7.75 5.45 7.45
82 11.22 8.37 5.49 8.40 82 9.70 7.94 5.47 7.71
83 11.77 8.51 5.50 8.68 83 10.21 8.13 5.48 7.98
84 12 35 8.65 5.50 8.97 84 10.76 8.30 5.49 8.27
85 12.97 8.77 5.50 9.29 85 11.35 8.46 5.50 8.57
</TABLE>
OPTION 6 (Joint and Survivor Life Annuity)
<TABLE>
<CAPTION>
*Adjusted *Adjusted Male Age *Adjusted
Female ----------------------------------------------------------------------------- Female
Age 50 55 60 65 70 75 80 35 Age
- ---------- ---- ---- ---- ---- ---- ---- ---- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 3 52 3.60 3.66 3.71 3.74 3.76 3.78 3.78 50
55 3.65 3.77 3.87 3.95 4.01 4.05 4.08 4.09 55
60 3.78 3.94 4.10 4.23 4.34 4.41 4.46 4.49 60
65 3.88 4.10 4.33 4.54 4.72 4.86 4.96 5.02 65
70 3.96 4.23 4.54 4.85 5.15 5.40 5.59 5.72 70
75 4.02 4.34 4.72 5.14 5.59 6.01 6.37 6.64 75
80 4.06 4.41 4.85 5.38 5.99 6.63 7.24 7.76 80
85 4.09 4.46 4.94 5.55 6.30 7.17 8.11 9.01 85
</TABLE>
Information for ages not shown will be furnished on request.
*"Adjusted Age" means attained age at last birthday adjusted as follows:
Annuity Date Adjusted Age
------------ ------------
Before 2000 Actual age
2000-2009 Subtract 1 year from actual age
2010-2019 Subtract 2 years from actual age
2020-2029 Subtract 3 years from actual age
2030 and after Subtract 4 years from actual age
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MERRILL LYNCH LIFE INSURANCE COMPANY
Home Office: Little Rock, Arkansas
Administrative Office: P.O. 44223, Jacksonville, FL 32231-4223
1-800-535-5549
Individual Retirement Account Certificate under
Group Modified Guaranteed Annuity Contract
Account Value is Subject to Market Value Adjustment
Nonparticipating
<PAGE> 1
MERRILL LYNCH LIFE INSURANCE COMPANY
Home Office: Little Rock, Arkansas
Administrative Office: P.O. 44223, Jacksonville, FL 32231-4223
1-800-535-5549
CERTIFICATE OF PARTICIPATION
This Certificate is a summary of your rights under the Group Modified
Guaranteed Annuity Contract identified in the Certificate Schedule. See Section
2. It is subject to all provisions of the Contract, whether or not summarized
in this Certificate. The Contract alone governs the rights of all parties. A
copy of the Contract will be furnished on request.
MERRILL LYNCH LIFE INSURANCE COMPANY certifies that the person named as
Participant in the Certificate Schedule is a Participant under the Contract.
________________________________________________________________________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Certificate Schedule . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Sub-Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. Contract Values . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5. Market Value Adjustment . . . . . . . . . . . . . . . . . . . . . . . 4
6. Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8. Payment at Death of Annuitant . . . . . . . . . . . . . . . . . . . . 6
9. Annuity Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . 6
10. Annuity Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
11. Annuity Option Tables . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
_______________________________________________________________________________
TEN DAY RIGHT TO REVIEW CERTIFICATE
You may cancel your Certificate within ten days after you receive it by
returning or mailing it to us or our agent. We will refund your premium within
ten days after the Certificate is received by us or our agent. The Certificate
will be void from the beginning.
/s/ Anthony J. Vespa /s/ Barry G. Skolnick
- -------------------- ---------------------
President Secretary
------------------------------------------------
Registrar
Section 457 Deferred Compensation Plan Certificate under
Group Modified Guaranteed Annuity Contract
Account Value is Subject to Market Value Adjustment
Nonparticipating
ML-AY-376/94
<PAGE> 2
1. DEFINITIONS
1.1 CONTRACT: The group modified guaranteed annuity contract under which this
Certificate has been issued. See Section 2.
1.2 ANNUITY: A series of predetermined periodic payments. See Section 9.
1.3 ANNUITANT: Annuity payments may depend upon the continuation of life of a
person. That person is called an annuitant. The Annuitant for this Certificate
is named in the Certificate Schedule. See Section 2. The Annuitant has no
vested rights in the Contract or this Certificate.
1.4 ANNUITY DATE: The date shown in the Certificate Schedule on which payment
of an annuity under the Contract is to start. See Sections 2 and 9.1.
1.5 PREMIUM: The money paid to us for this Certificate. See Section 2.
1.6 SUB-ACCOUNT: Your single premium will be allocated to one or more
Sub-Accounts as directed by you. Each Sub-Account will correspond to a specified
interest rate and Guarantee Period. See Section 3.
1.7 SUB-ACCOUNT VALUE: An amount equal to that part of your single premium
allocated to a Sub-Account, or any reinvestment in a Sub-Account, plus credited
interest, as adjusted for any prior withdrawals, Market Value Adjustments and
withdrawal charges. See Section 4.1.
1.8 NET SUB-ACCOUNT VALUE: The Sub-Account Value after adjustment for any
current Market Value Adjustment and withdrawal charge.
1.9 ACCOUNT VALUE: The sum of all Sub-Account Values. See Section 4.2.
1.10 NET ACCOUNT VALUE: The sum of all Net Sub-Account Values.
1.11 WITHDRAWAL CHARGE: A charge deducted from any Sub-Account from which a
withdrawal is made prior to the end of a Guarantee Period. See Section 6.2.
1.12 MARKET VALUE ADJUSTMENT: An adjustment made to Sub-Account Value. It is
applied upon withdrawal of all or part of the Sub-Account Value prior to the
end of the Guarantee Period. If the Annuity Date is prior to the end of a
Guarantee Period, the Market Value Adjustment is also applied at the Annuity
Date. See Section 5.1. The adjustment may be either a deduction from or an
addition to SubAccount Value. The formula for this adjustment is shown in
Section 5.2.
1.13 GUARANTEE PERIOD: The period for which we guarantee to credit a specified
interest rate for a Sub-Account. See Section 3.2.
1.14 MAXIMUM GUARANTEE PERIOD OPTION: An option to have Sub-Account Values
automatically transferred to the Sub-Account for the longest Guarantee Period
in which Sub-Account Values are currently invested or reinvested, provided such
Guarantee Period matures prior to the Annuity Date. See Section 3.4.
1.15 PARTICIPANT: An eligible employer as defined in Section 457 of the
Internal Revenue Code to whom this Certificate has been issued; referred to
herein as "you." The Participant is named in the Certificate Schedule. The
Participant and Contract Holder are the same.
1.16 CERTIFICATE ANNIVERSARY: Each anniversary of the Certificate Date.
1.17 CERTIFICATE DATE: The date on which this Certificate was issued.
1.18 CERTIFICATE YEAR: The year starting on the Certificate Date or a
Certificate Anniversary and ending with the day just prior to the next
Certificate Anniversary.
1.19 OTHER DEFINITIONS: Beneficiary: See Section 7.1.
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2. CERTIFICATE SCHEDULE
PARTICIPANT ANNUITANT
ABC COMPANY MARTHA WASHINGTON
-- --
GROUP CONTRACT HOLDER ANNUITY DATE
ABC COMPANY JULY 1, 2004
-- --
GROUP CONTRACT NUMBER CERTIFICATE NUMBER
890123456 897654321
-- --
CERTIFICATE DATE AGE OF ANNUITANT
July 1, 1989 FIFTY
-- --
SINGLE PREMIUM
$10,000
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3. SUB-ACCOUNTS
3.1 SUB-ACCOUNT: Your single premium will be allocated to one or more
Sub-Accounts as chosen by you. That part of your single premium allocated to a
Sub-Account must be at least $5,000.
3.2 AVAILABLE GUARANTEE PERIODS: Guarantee Periods offered by us will be for
terms of 1 year through 10 years. We may at our discretion offer additional
Guarantee Periods.
3.3 TRANSFER OF SUB-ACCOUNT VALUE: Sub-Account Values may not be transferred to
another Sub-Account, in full or in part, prior to the end of the Guarantee
Period. At the end of a Guarantee Period, the Sub-Account Value may be
transferred to another Sub-Account. The minimum amount that can be transferred
to any one Sub-Account is the lesser of (a) $5,000, or (b) the total
Sub-Account Value to be transferred.
Upon notice to us prior to the end of the current Guarantee Period, the
Sub-Account Value may be transferred at the end of the Guarantee Period to one
or more Sub-Accounts as chosen by you. See Section 7.3. We will notify you of
such right at least 30 days prior to the end of the Guarantee Period. If no
notice is received from you, the SubAccount Value will be automatically
transferred to the Sub-Account for the 1-year Guarantee Period, unless the
Maximum Guarantee Period Option has been chosen (see Section 3.4).
3.4 MAXIMUM GUARANTEE PERIOD OPTION: This choice may be made by you in the
application for this Certificate or made or changed prior to the end of a
Guarantee Period. See Section 7.3. Under this option, if no notice is received
for transfer, all Sub-Account Values will be automatically transferred to the
Sub-Account for the longest Guarantee Period in which your Sub-Account Values
are currently invested, provided such Guarantee Period matures prior to the
Annuity Date. If this option has not been chosen, automatic transfer will occur
as stated in Section 3.3.
4. CONTRACT VALUES
4.1 SUB-ACCOUNT VALUE: The current Sub-Account Value at any time prior to the
Annuity Date is an amount equal to the investment or reinvestment in the
Sub-Account plus credited interest, as adjusted for any prior withdrawals,
Market Value Adjustments and withdrawal charges.
4.2 ACCOUNT VALUE: The Current Account Value at any time prior to the Annuity
Date is equal to the sum of all Sub-Account Values.
4.3 INTEREST RATES: Simple interest will be credited daily and compounded
annually for each Certificate Year at the guaranteed interest rate for each
Sub-Account in which the Account Value is invested. There are no guaranteed
minimum interest rates for reinvestments of Sub-Account Values, except we
guarantee that rates on reinvestment will be the same as the guaranteed
interest rates offered for any new contracts on the same form as the Contract.
5. MARKET VALUE ADJUSTMENT
5.1 MARKET VALUE ADJUSTMENT: The Market Value Adjustment may be either negative
or positive. It will be deducted from or added to Sub-Account Value according
to the formula shown in Section 5.2 in the following events:
(a) Upon withdrawal of all or part of the Sub-Account Value prior to the
end of the Guarantee Period for that Sub-Account, or
(b) At the Annuity Date if the Annuity Date is prior to the end of the
Guarantee Period for that Sub-Account.
5.2 FORMULA: The Market Value adjustment is determined by the following
formula:
(1 + B) n/365
A x [1 - ------- ]
(1 + C)
Where:
"n" = The remaining number of days in the Guarantee Period;
"n" = The amount withdrawn from the Sub-Account;
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<PAGE> 5
"B" = The current guaranteed interest rate that we are offering for a
Guarantee Period of a duration of years represented by "n/365."
When n/365 is not a whole number, we determine B by straight-line
interpolation. If n/365 is less than 1, we will assume B is
equal to the rate for a one-year Guarantee Period; and
"C" = The guaranteed interest rate for the Sub-Account.
6. WITHDRAWALS
6.1 WITHDRAWALS: You may withdraw all or part of the Net Account Value applied
under this option upon notice to us received prior to the earlier of the
Annuity Date or the death of the Annuitant. See Section 7.3. For full
withdrawal, the Certificate must be surrendered at our administrative office.
For partial withdrawals, the withdrawal must be at least $500. The Sub-Account
Value of any remaining Sub-Accounts, after adjustment for any current Market
Value Adjustment and withdrawal charge, must be at least $1,000. The remaining
Account Value must be at least $5,000. You MUST specify the Sub-Accounts from
which the withdrawal is to be made. See Section 7.3. If a Sub-Account has the
same Guarantee Period as any other Sub-Account, the Participant may specify
only the Sub-Account with the shortest time remaining in the Guarantee Period.
6.2 WITHDRAWAL CHARGE: The amount of the withdrawal charge will equal 6 months
of simple interest on the amount withdrawn. Such interest will be computed at
the rate we are crediting the Sub-Account from which the withdrawal is made.
The withdrawal charge will be deducted from the Sub-Account from which the
withdrawal was made. Withdrawal charges do not apply to:
(a) Death payments under Section 8.
(b) Annuity payments under Section 9, or
(c) Withdrawal at the end of the Guarantee Period for the Sub-Account if we
receive written notice from you of such withdrawal prior to the end of
the Guarantee Period.
7. GENERAL PROVISIONS
7.1 BENEFICIARY: A beneficiary is the person or entity that is to receive
payment on death of the Annuitant under Section 8 or under Section 10 if
guaranteed amounts remain unpaid. The Contract Holder is the beneficiary.
7.2 COLLATERAL ASSIGNMENT: Upon notice to us, you may make a collateral
assignment of your rights under the Contract to a creditor as security for a
debt. The rights of an assignee have priority over the rights of a beneficiary.
7.3 NOTICES, CHANGES AND CHOICES: To be effective, all notices, changes and
choices you make under the Contract must be in writing, signed and received by
us at our administrative office, except that the following may be made by
telephone:
(a) Notices regarding transfers of Sub-Account Values under Section 3.3;
(b) Choices regarding the Maximum Guarantee Period Option under Section 3.4;
and
(c) Specifications of Sub-Account deductions for withdrawals under Section
6.1.
We are not responsible for their validity. When recorded by us, notices,
changes and choices relating to beneficiaries will take effect as of the date
signed unless we have already acted in reliance on the prior status.
7.4 MISSTATEMENT OF AGE: If the age of an Annuitant or a joint annuitant is
misstated, annuity payments will be adjusted to reflect the correct age. Any
amount we have overpaid as the result of such misstatement will be deducted
from the next payments due under the Contract. Interest on the overpayment will
be charged at the rate of 6% per year. Any amount we have underpaid will be
paid in full with the next payment due under the Contract. We will pay interest
on the underpayment at the rate of 6% per year.
7.5 PROOF OF AGE OR SURVIVAL: We may require satisfactory proof of the age or
survival of any person on whose continued life any payment under the Contract
depends.
7.6 INCONTESTABILITY: We will not contest the Contract or this Certificate
7.7 THE CONTRACT: The Contract, its attached application and any endorsements
are the entire contract. Only our President, a Vice President, Secretary or
Assistant Secretary may change the Contract. Any change must be in writing.
__________
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__________
<PAGE> 6
7.8 PAYMENTS: All sums payable to or by us are payable at our administrative
office. We may require return of this Certificate prior to making payment. We
may defer payments of partial or full withdrawals for up to 6 months. The
Participant agrees that amounts payable under the Contract will not be made
available to the Annuitant any earlier than when the Annuitant (1) separates
from service, or (2) is faced with an unforseeable emergency, as defined by
federal tax laws and regulations.
7.9 REPORTS: Prior to the Annuity Date we will furnish you a report at least
once each year. It will show your Account Value, Sub-Account Values and current
interest rates.
7.10 COMPLIANCE WITH STATE AND FEDERAL LAW: We reserve the right to change the
provisions of the Contract and the Certificates issued under the Contract to
conform to any applicable law, regulation or ruling issued by a government
agency. Such right is subject to the approval of the insurance regulator of the
state in which the Contract was issued. We will promptly provide you with a
copy of any such amendment.
8. PAYMENT AT DEATH OF ANNUITANT
8.1 DEATH PRIOR TO ANNUITY DATE: On death of the Annuitant prior to the Annuity
Date, we will pay to the beneficiary an amount equal to the greater of the
Account Value or the Net Account Value on the date of payment. Payment will be
made in a lump sum unless Section 8.2 is chosen.
8.2 ANNUITY OPTION: If the beneficiary is the surviving spouse of the deceased
Annuitant, he or she may choose to receive payments under any of the annuity
options of the Contract. For any other beneficiary, only those options are
available that provide for full payment within 5 years of the date of such
Annuitant's death.
8.3 DEATH AFTER ANNUITY DATE: See Section 10.7.
9. ANNUITY PROVISIONS
9.1 ANNUITY DATE: The Annuity Date must be on the first day of a month. The
Annuity Date may not be later than April 1 of the year after the year in which
the Annuitant attains age 70 1/2 and will be such date if you have not chosen
an Annuity Date. You may change the Annuity Date up to 30 days prior to the
Annuity Date. A MARKET VALUE ADJUSTMENT MAY BE APPLIED ON THE ANNUITY DATE. SEE
SECTION 5.1.
9.2 ANNUITY OPTIONS: If you have not chosen an annuity option, Option 4 will
apply with a 10-year guarantee period or a period of years no greater than the
Annuitant's life expectancy, whichever is less. You may change options only up
to 30 days prior to the Annuity Date. An option not set forth in the Contract
may be chosen if acceptable to us. When applicable, life expectancy will be
determined according to Internal Revenue Service regulations and rulings.
9.3 MINIMUM ANNUITY PAYMENT: If the Net Account Value to be applied at the
Annuity Date is less than $5,000, we may pay such amount in a lump sum. If any
payment would be less than $50, we may change the frequency so payments are at
least $50 each.
9.4 AMOUNT OF ANNUITY PAYMENTS: Any premium taxes imposed by a state or other
government will be deducted from the Net Account Value at the Annuity Date. The
remaining Net Account Value will be applied to the annuity option chosen at our
current annuity rates, which will be furnished on request. The rates will
assume interest of not less than 3%. They will not be less favorable than those
shown in the annuity tables in the Contract and this Certificate. The tables
show the minimum guaranteed amount of each monthly payment for each $1,000 so
applied, according to age at the Annuity Date. The tables are based on the
combined male/female 1983 Table "a" projected forward to 1995 for Individual
Annuity Valuation with interest at 3%.
10. ANNUITY OPTIONS
10.1 OPTION 1--PAYMENTS OF A FIXED AMOUNT: Equal payments in the amount chosen
will be made until the Net Account Value applied under this option is
exhausted. The term over which such payments are made must be at least 5 years
and may not exceed the Annuitant's life expectancy, or the joint life
expectancy of the Annuitant and the Annuitant's spouse (or, if the Annuitant is
not married, a designated second person), at the Annuity Date. If the Annuitant
dies before the Annuity Date, the period may not exceed the life expectancy of
the Annuitant's surviving spouse.
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__________
<PAGE> 7
10.2 OPTION 2 -- PAYMENTS FOR A FIXED PERIOD: Payments will be made for the
period chosen. The period must be at least 5 years and may not exceed the
Annuitant's life expectancy, or the joint life expectancy of the Annuitant and
the Annuitant's spouse (or, if the Annuitant is not married, a designated
second person), at the Annuity Date. If the Annuitant dies before the Annuity
Date, the period may not exceed the life expectancy of the Annuitant's
surviving spouse.
10.3 OPTION 3 -- LIFE ANNUITY: Payments will be made for the life of the
Annuitant. PAYMENTS WILL CEASE WITH THE last payment due prior to the
Annuitant's death.
10.4 OPTION 4 -- LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 OR 20 YEARS:
Payments will be made for the guaranteed period chosen (10 or 20 years) and as
long thereafter as the Annuitant lives. The guaranteed period selected may not
exceed the Annuitant's life expectancy, or the joint life expectancy of the
Annuitant and the Annuitant's spouse (or, if the Annuitant is not married, a
designated second person), at the Annuity Date. If the Annuitant dies before
the Annuity Date, the period may not exceed the life expectancy of the
Annuitant's surviving spouse.
10.5 OPTION 5 -- LIFE ANNUITY WITH GUARANTEED RETURN OF NET ACCOUNT VALUE:
Payments will be made until the sum of the annuity payments equals the Net
Account Value applied under this option, and as long thereafter as the
Annuitant lives. The period required for distribution of the Net Account Value
may not exceed the Annuitant's life expectancy or the joint life expectancy of
the Annuitant and his or her spouse (or, if the Annuitant is not married, a
designated second person), at the Annuity Date. If the Annuitant dies before
the Annuity Date, the period required for distribution of the Net Account Value
may not exceed the life expectancy of the surviving spouse.
10.6 OPTION 6 -- JOINT AND SURVIVOR LIFE ANNUITY: Payments will be made during
the lifetimes of the Annuitant and a designated second person. The second
person must be the Annuitant's spouse if the Annuitant has a spouse. Upon death
of one, payments for the life of the other will be made in the same amount.
Option 6 is not available to the beneficiary.
10.7 DEATH OF ANNUITANT: On death of the Annuitant after the Annuity Date while
guaranteed amounts remain unpaid, the beneficiary may choose either:
(a) To have the payments continue for the amount or period guaranteed, or
(b) To receive the present value of the remaining guaranteed payments in a
lump sum.
Present values will be computed at the interest rate or rates that were used to
compute the amount of the initial annuity payment.
10.8 PAYMENT: Payment will be made on the first day of each month starting with
the Annuity Date, but prior to the Annuity Date you may choose a less frequent
payment interval instead. The amount of each payment on an annual, semiannual
or quarterly basis will be not less than the monthly payment computed from the
annuity tables in the Contract and this Certificate multiplied by the
appropriate factor.
Annual Semiannual Quarterly
------ ---------- ---------
11.839 5.963 2.993
__________
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__________
<PAGE> 8
11. ANNUITY OPTION TABLES
MINIMUM GUARANTEED MONTHLY ANNUITY PAYMENT FOR EACH $1,000 APPLIED UNDER OPTION
OPTION 2 (Payments for a Fixed Period)
<TABLE>
<CAPTION>
Years Each Years Each Years Each Years Each
Payable Payment Payable Payment Payable Payment Payable Payment
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
9 10.53 13 7.71 17 6.23
6 15.14 10 9.61 14 7.26 18 5.96
7 13.16 11 8.86 15 6.87 19 5.73
8 11.68 12 8.24 16 6.53 20 5.51
</TABLE>
OPTION 3 (Life Annuity), OPTION 4 (Life Annuity with 10 or 20 Years Guaranteed)
and OPTION 5 (Return of Net Account Value Guaranteed)
<TABLE>
<CAPTION>
*Adjusted Life 10 Years 20 Years Return of *Adjusted Life 10 Years 20 Years Return of
Age Annuity Guaranteed Guaranteed Net Account Value Age Annuity Guaranteed Guaranteed Net Account Value
- -------- ------- ---------- ---------- ----------------- --------- ------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 3.97 3.94 3.87 3.85 68 5.96 5.72 5.00 5.37
51 4.03 4.01 3.92 3.90 69 6.16 5.87 5.06 5.50
70 6.36 6.03 5.12 5.64
52 4.10 4.07 3.97 3.96 71 6.59 6.19 5.17 5.79
53 4.17 4.14 4.03 4.02
54 4.25 4.21 4.09 4.08 72 6.83 6.36 5.22 5.94
55 4.33 4.28 4.15 4.14 73 7.08 6.54 5.26 6.10
56 4.41 4.36 4.21 4.21 74 7.36 6.71 5.30 6.28
75 7.65 6.90 5.34 6.46
57 4.50 4.45 4.27 4.26
58 4.59 4.54 4.34 4.36 76 7.97 7.08 5.37 6.65
59 4.69 4.63 4.40 4.44 77 8.31 7.27 5.40 6.86
60 4.80 4.73 4.47 4.52 78 8.68 7.46 5.42 7.07
61 4.92 4.83 4.54 4.61 79 9.08 7.64 5.44 7.30
80 9.50 7.82 5.46 7.54
62 5.04 4.94 4.60 4.70
63 5.17 5.05 4.67 4.80 81 9.96 8.00 5.47 7.79
64 5.31 5.17 4.74 4.90 82 10.45 8.17 5.48 8.05
65 5.45 5.30 4.81 5.01 83 10.98 8.33 5.49 8.33
66 5.61 5.43 4.87 5.12 84 11.54 8.49 5.50 8.62
67 5.78 5.57 4.94 5.24 85 12.15 8.63 5.50 8.93
</TABLE>
OPTION 6 (Joint and Survivor Life Annuity)
<TABLE>
<CAPTION>
*Adjusted Age of Joint Annuitant
------------------------------------------------------------------------------------------------------------
*Adjusted 50 55 60 65 70 75 80 85 *Adjusted
Age of ------------------------------------------------------------------------------------------------------------ Age of
Annuitant 100% 2/3 100% 2/3 100% 2/3 100% 2/3 100% 2/3 100% 2/3 100% 2/3 100% 2/3 Annuitant
- --------- ------------------------------------------------------------------------------------------------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 3.54 3.81 3.65 3.96 3.74 4.12 3.81 4.30 3.86 4.49 3.90 4.69 3.93 4.90 3.94 5.10 50
55 3.79 4.13 3.93 4.32 4.05 4.53 4.14 4.76 4.21 5.00 4.26 5.25 4.29 5.49 55
60 4.13 4.55 4.31 4.81 4.46 5.09 4.58 5.39 4.67 5.69 4.73 5.97 60
65 4.58 5.13 4.82 5.48 5.03 5.85 5.19 6.23 5.30 6.60 65
70 5.19 5.92 5.54 6.41 5.82 6.91 6.04 7.40 70
75 6.06 7.04 6.55 7.72 6.94 8.40 75
80 7.30 8.63 7.98 9.59 80
85 9.06 10.91 85
</TABLE>
Information for ages not shown will be furnished on request.
*"Adjusted Age" means attained age at last birthday adjusted as follows:
Annuity Date Adjusted Age
- ------------ ------------
Before 2000 Actual Age
2000-2009 Subtract 1 year from actual age
2010-2019 Subtract 2 years from actual age
2020-2029 Subtract 3 years from actual age
2030 and after Subtract 4 years from actual age
THE ABOVE TABLES ARE BASED ON THE COMBINED MALE/FEMALE 1983 TABLE "A" PROJECTED
FORWARD TO 1995 FOR INDIVIDUAL ANNUITY VALUATION WITH INTEREST AT 3%.
__________
Page Eight
__________
<PAGE> 9
MERRILL LYNCH LIFE INSURANCE COMPANY
Home Office: Little Rock, Arkansas
Administrative Office: P.O. 44223, Jacksonville, FL 32231-4223
1-800-535-5549
Section 457 Deferred Compensation Plan Certificate under
Group Modified Guaranteed Annuity Contract
Account Value is Subject to Market Value Adjustment
Nonparticipating
<PAGE> 1
MERRILL LYNCH LIFE INSURANCE COMPANY
QUALIFIED PLAN ENDORSEMENT
The following tables are substituted for the tables set forth in the contract
to which this endorsement is attached:
ANNUITY OPTION TABLES
MINIMUM GUARANTEED MONTHLY ANNUITY PAYMENT FOR EACH $1,000 APPLIED UNDER OPTION
OPTION 2 (Payments for a Fixed Period)
<TABLE>
<CAPTION>
Years Each Years Each Years Each Years Each
Payable Payment Payable Payment Payable Payment Payable Payment
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
9 10.53 13 7.71 17 6.23
6 15.14 10 9.61 14 7.26 18 5.96
7 13.16 11 8.86 15 6.87 19 5.73
8 11.68 12 8.24 16 6.53 20 5.51
</TABLE>
OPTION 3 (Life Annuity), OPTION 4 (Life Annuity with 10 or 20 Years Guaranteed)
and OPTION 5 (Return of Net Account Value Guaranteed)
<TABLE>
<CAPTION>
*Adjusted Life 10 Years 20 Years Return of *Adjusted Life 10 Years 20 Years Return of
Age Annuity Guaranteed Guaranteed Net Account Value Age Annuity Guaranteed Guaranteed Net Account Value
- -------- ------- ---------- ---------- ----------------- --------- ------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 3.97 3.94 3.87 3.85 68 5.96 5.72 5.00 5.37
51 4.03 4.01 3.92 3.90 69 6.16 5.87 5.06 5.50
70 6.36 6.03 5.12 5.64
52 4.10 4.07 3.97 3.96 71 6.59 6.19 5.17 5.79
53 4.17 4.14 4.03 4.02
54 4.25 4.21 4.09 4.08 72 6.83 6.36 5.22 5.94
55 4.33 4.28 4.15 4.14 73 7.08 6.54 5.26 6.10
56 4.41 4.36 4.21 4.21 74 7.36 6.71 5.30 6.28
75 7.65 6.90 5.34 6.46
57 4.50 4.45 4.27 4.28
58 4.59 4.54 4.34 4.36 76 7.97 7.08 5.37 6.65
59 4.69 4.63 4.40 4.44 77 8.31 7.27 5.40 6.86
60 4.80 4.73 4.47 4.52 78 8.68 7.46 5.42 7.07
61 4.92 4.83 4.54 4.61 79 9.08 7.64 5.44 7.30
80 9.50 7.82 5.46 7.54
62 5.04 4.94 4.60 4.70
63 5.17 5.05 4.67 4.80 81 9.96 8.00 5.47 7.79
64 5.31 5.17 4.74 4.90 82 10.45 8.17 5.48 8.05
65 5.45 5.30 4.81 5.01 83 10.98 8.33 5.49 8.33
66 5.61 5.43 4.87 5.12 84 11.54 8.49 5.50 8.62
67 5.78 5.57 4.94 5.24 85 12.15 8.63 5.50 8.93
</TABLE>
OPTION 6 (Joint and Survivor Life Annuity)
<TABLE>
<CAPTION>
*Adjusted Age of Joint Annuitant
------------------------------------------------------------------------------------------------------------
*Adjusted 50 55 60 65 70 75 80 85 *Adjusted
Age of ------------------------------------------------------------------------------------------------------------ Age of
Annuitant 100% 2/3 100% 2/3 100% 2/3 100% 2/3 100% 2/3 100% 2/3 100% 2/3 100% 2/3 Annuitant
- --------- ------------------------------------------------------------------------------------------------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 3.54 3.81 3.65 3.96 3.74 4.12 3.81 4.30 3.86 4.49 3.90 4.69 3.93 4.90 3.94 5.10 50
55 3.79 4.13 3.93 4.32 4.05 4.53 4.14 4.76 4.21 5.00 4.26 5.25 4.29 5.49 55
60 4.13 4.55 4.31 4.81 4.46 5.09 4.58 5.39 4.67 5.69 4.73 5.97 60
65 4.58 5.13 4.82 5.48 5.03 5.85 5.19 6.23 5.30 6.60 65
70 5.19 5.92 5.54 6.41 5.82 6.91 6.04 7.40 70
75 6.06 7.04 6.55 7.72 6.94 8.40 75
80 7.30 8.63 7.98 9.59 80
85 9.06 10.91 85
</TABLE>
Information for ages not shown will be furnished on request.
*"Adjusted Age" means attained age at last birthday adjusted as follows:
ANNUITY DATE ADJUSTED AGE
- ------------ ------------
Before 2000 Actual Age
2000-2009 Subtract 1 year from actual age
2010-2019 Subtract 2 years from actual age
2020-2029 Subtract 3 years from actual age
2030 and after Subtract 4 years from actual age
THE ABOVE TABLES ARE BASED ON THE COMBINED MALE/FEMALE 1983 TABLE "A" PROJECTED
FORWARD TO 1995 FOR INDIVIDUAL ANNUITY VALUATION WITH INTEREST AT 3%.
MERRILL LYNCH LIFE INSURANCE COMPANY
By /s/ Barry G. Skolnick
---------------------------------
ML-AY-448/94
<PAGE> 1
December 7, 1994
Board of Directors
Merrill Lynch Life Insurance Company
320 West Capitol Avenue
Little Rock, Arkansas 72201
Gentlemen:
In my capacity as General Counsel of Merrill Lynch Life Insurance Company
("Company"), I have supervised the preparation of the registration statement
for the ASSET I group modified guaranteed annuity contract ("Contract") to be
filed by the Company with the Securities and Exchange Commission under the
Securities Act of 1933.
I am of the following opinion:
(1) The Company was organized in accordance with the laws of the
State of Washington and redomesticated in accordance with the
laws of the State of Arkansas and is a duly authorized stock
life insurance company under the laws of Arkansas and the laws
of those states in which the Company is admitted to do
business;
(2) The Company is authorized to issue the Contracts in those
states in which it is admitted and upon compliance with
applicable local law;
(3) The Contracts, when issued in accordance with the prospectus
contained in the aforesaid registration statement and upon
compliance with applicable local law, will be legal and
binding obligations of the Company in accordance with their
terms.
In arriving at the foregoing opinion, I have made such examination of law and
examined such records and other documents as in my judgment are necessary or
appropriate.
I hereby consent to the filing of this opinion as an exhibit to the aforesaid
registration statement and to the reference to me under the caption "Legal
Matters" in the prospectus contained in said registration statement.
Sincerely,
/s/ Barry G. Skolnick
Barry G. Skolnick
Senior Vice President and
General Counsel
<PAGE> 1
[Letterhead]
CONSENT OF SUTHERLAND, ASBILL & BRENNAN
We consent to the reference to our firm under the heading
"Legal Matters" in the prospectus included in Post-Effective Amendment No. 3
to the Registration Statement on Form S-1 (File No. 33-60290) for certain
modified guaranteed annuity contracts issued by Merrill Lynch Life Insurance
Company. 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.
/s/ Sutherland, Asbill & Brennan
SUTHERLAND, ASBILL & BRENNAN
Washington, D.C.
December 5, 1994
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 3 to Registration
Statement No. 33-60290 of Merrill Lynch Life Insurance Company of our report
dated February 28, 1994 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 and Touche
New York, New York
December 7, 1994
