<PAGE>
As filed with the Securities and Exchange Commission on September 20, 1999.
File Nos. 333-81015
811-08619
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM N-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
Post-Effective Amendment No.
Pre-Effective Amendment No. 1
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No.
(Check appropriate box or boxes.)
---------------
MASSACHUSETTS MUTUAL VARIABLE ANNUITY SEPARATE ACCOUNT 4
(Exact Name of Registrant)
---------------
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
(Name of Depositor)
---------------
1295 State Street, Springfield, Massachusetts
01111
(Address of Depositor's Principal Executive Offices)
(Zip Code)
Depositor's Telephone Number, including Area Code (413) 744-78411
Name and Address of Agent for Service
Stephen R. Bosworth
Vice President and Associate General Counsel
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, Massachusetts--01111
---------------
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this filing.
It is proposed that this filing will become effective
[_] immediately upon filing pursuant to paragraph (b) of Rule 485
[_] on pursuant to paragraph (b) of Rule 485
[_] 60 days after filing pursuant to paragraph (a) of Rule 485
[_] on (date) pursuant to paragraph (a) of the Rule 485
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Individual Certificate issued under a
Group Variable Deferred Annuity Contract with Flexible Purchase Payments
---------------
This Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to
Section 8(a) may determine.
================================================================================
<PAGE>
CROSS REFERENCE TO ITEMS
REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 Item Caption in Prospectus
- -------- ---------------------
<S> <C>
1........................................ Cover Page
2........................................ Definitions
3........................................ Table of Fees and Expenses
4........................................ (Not applicable)
5........................................ The Company; Investment Choices
6........................................ Expenses; Distribution
7........................................ Ownership; Purchasing a Certificate;
Voting Rights; Reservation of Rights;
Certificate Value; Cover Page
8........................................ The Income Phase
9........................................ Death Benefit
10........................................ The Accumulation Phase; Distributors
11........................................ Highlights; Withdrawals
12........................................ Taxes
13........................................ Legal Proceedings
14........................................ Additional Information
<CAPTION>
Caption in the
Statement of Additional Information
-----------------------------------
<S> <C>
15........................................ Cover Page
16........................................ Table of Contents
17........................................ Company
18........................................ Experts; Distribution
19........................................ Purchase of Securities Being Offered
20........................................ Distribution
21........................................ Performance Measures
22........................................ Annuity Payments
23........................................ Financial Statements
</TABLE>
2
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
4
<PAGE>
Massachusetts Mutual Life Insurance Company
Massachusetts Mutual Variable Annuity
Separate Account 4
Panorama Passage Variable Annuity
This prospectus describes the Panorama Passage individual certificates issued
under a group variable deferred annuity contract with flexible purchase
payments offered by Massachusetts Mutual Life Insurance Company. It provides
for accumulation of certificate value and annuity payments on a fixed and
variable basis.
You, the participant, have a number of investment choices in this certificate.
These investment choices include three fixed account options as well as the
following twenty-eight funds which are offered through our separate account,
Massachusetts Mutual Variable Annuity Separate Account 4.
Panorama Series Fund, Inc.
. Panorama Total Return Portfolio
. Panorama Growth Portfolio
. Oppenheimer International Growth Fund/VA
Oppenheimer Variable Account Funds
. Oppenheimer Money Fund/VA
. Oppenheimer Aggressive Growth Fund/VA
. Oppenheimer Strategic Bond Fund/VA
. Oppenheimer Main Street Growth & Income Fund/VA
. Oppenheimer High Income Fund/VA
. Oppenheimer Capital Appreciation Fund/VA
. Oppenheimer Global Securities Fund/VA
Fidelity Variable Insurance Products Fund
. VIP Growth Portfolio - Service Class
Fidelity Variable Insurance Products Fund II
. VIP II Contrafund(R) Portfolio - Initial Class
Fidelity Variable Insurance Products Fund III
. VIP III Growth Opportunities Portfolio - Service Class
American Century Variable Portfolios, Inc.
. American Century VP Income & Growth Fund
. American Century VP Value Fund
T. Rowe Price Equity Series, Inc.
. T. Rowe Price Mid-Cap Growth Portfolio
MML Series Investment Fund
. MML Equity Fund
. MML Blend Fund
. MML Equity Index Fund
. MML Small Cap Value Equity Fund
. MML Growth Equity Fund
. MML Small Cap Growth Equity Fund
. MML Managed Bond Fund
Janus Aspen Series
. Janus Aspen Worldwide Growth Portfolio
. Janus Aspen Capital Appreciation Portfolio
Templeton Variable Products Series Fund
. Templeton International Fund - Class 2 Shares
BT Insurance Funds Trust
. BT Small Cap Index Fund
MFS(R) Variable Insurance TrustSM
. MFS(R) Growth With Income Series
Please read this prospectus before investing. You should keep it for future
reference. It contains important information about the Panorama Passage
Variable Annuity.
To learn more about the Panorama Passage certificate, you can obtain a copy of
the Statement of Additional Information (SAI), dated September 30, 1999. We
filed the SAI with the Securities and Exchange Commission (SEC) and it is
legally a part of this prospectus. The SEC maintains a Web site
(http://www.sec.gov) that contains the SAI, material incorporated by reference
and other information regarding companies that file electronically with the
SEC. The Table of Contents of the SAI is on page 35 of this prospectus. For a
free copy of the SAI, or for general inquiries, call our Annuity Service Center
at (800) 366-8226 or write to: Panorama Passage, Annuity Products, W578 P.O.
Box 9067, Springfield, Massachusetts 01102-9067.
The certificates:
. are not bank deposits.
. are not federally insured.
. are not endorsed by any bank or governmental agency.
. are not guaranteed and may be subject to loss of principal.
The SEC has not approved these certificates or determined that this
prospectus is accurate or complete. Any representation that it has is a
criminal offense.
September 30, 1999.
1
<PAGE>
Table Of Contents
<TABLE>
<S> <C>
Highlights 4
Massachusetts Mutual Variable Annuity Separate Account 4 -Panorama Passage
Segment Table of Fees and Expenses 5
The Company 10
The Panorama Passage Individual Certificate Issued under a Group Deferred
Variable Annuity Contract - General Overview 10
Ownership 11
Contract Owner 11
Participant 11
Joint Participant 11
Annuitant 11
Beneficiary 11
Purchasing a Certificate 12
Purchase Payments 12
Allocation of Purchase Payments 12
Investment Choices 13
The Separate Account 13
The Funds 13
The Fixed Accounts 18
DCA Fixed Accounts 18
The Fixed Account 18
Certificate Value 19
Accumulation Units 19
Transfers 19
Transfers During the Accumulation Phase 19
Transfers During the Income Phase 20
Dollar Cost Averaging Program 20
Automatic Rebalancing Program 21
Withdrawals 21
Systematic Withdrawal Program 22
Expenses 23
Insurance Charges 23
Mortality and Expense Risk Charge 23
Administrative Charge 23
Annual Certificate Maintenance Charge 23
Premium Taxes 23
Transfer Fee 24
Income Taxes 24
Fund Expenses 24
The Income Phase 25
Fixed Annuity Payments 25
Variable Annuity Payments 25
Annuity Unit Value 26
Annuity Options 26
Death Benefit 27
Death of Participant During the Accumulation Phase 27
Death Benefit Amount During the Accumulation Phase 27
Basic Death Benefit 27
Reset Death Benefit 27
Ratchet Death Benefit 28
Death Benefit Payment Options During the Accumulation Phase 29
Death of Participant During the Income Phase 29
Death of Annuitant 29
Taxes 30
Annuity Certificates in General 30
Qualified and Non-Qualified Certificates 30
Withdrawals - Non-Qualified Certificates 31
Withdrawals - Qualified Certificates 31
Withdrawals - Tax Sheltered Annuities 32
Other Information 33
Performance 33
Standardized Total Returns 33
Nonstandard Total Returns 33
Yield and Effective Yield 33
Related Performance 33
Year 2000 33
Distributors 34
Electronic Transmission of Application Information 34
Assignment 34
Voting Rights 34
Reservation of Rights 35
Suspension of Payments or Transfers 35
Legal Proceedings 35
Financial Statements 35
Additional Information 35
</TABLE>
Table Of Contents
2
<PAGE>
Index Of Special Terms
We have tried to make this prospectus as readable and understandable for you as
possible. By the very nature of the certificate, however, certain technical
words or terms are unavoidable. We have identified the following as some of
these words or terms. The page that is indicated here is where we believe you
will find the best explanation for the word or term.
<TABLE>
<CAPTION>
Page
<S> <C>
Accumulation Phase 10
Accumulation Unit 19
Annuitant 11
Annuity Date 25
Annuity Options 26
Annuity Payments 25
Annuity Service Center 1
Annuity Unit Value 26
Certificate 10
Certificate Anniversary 27
Contract Owner 11
Income Phase 25
Non-Qualified 30
Participant 11
Purchase Payment 12
Qualified 30
Separate Account 13
Tax Deferral 10
</TABLE>
Index Of Special Terms
3
<PAGE>
Highlights
This prospectus describes the general provisions of the certificate. You may
review a copy of the certificate upon request.
Free Look
You have a right to examine your certificate. If you change your mind about
owning your certificate, you can cancel it within 10 days after receiving it.
However, this time period may vary by state. You will receive your certificate
value as of the business day we receive your certificate and written request at
our Annuity Service Center.
If you purchase this certificate as an IRA or your state requires it, we will
return the greater of your purchase payments less any withdrawals you took, or
the certificate value.
Sales Charge
We do not assess a sales charge when you make a purchase payment or if you
withdraw all or any part of your certificate value.
Federal Income Tax Penalty
If you withdraw any of the certificate value from your non-qualified
certificate, a 10% federal income tax penalty may be applied to the amount of
the withdrawal that is includible in your gross income for tax purposes. Some
withdrawals may be exempt from the penalty tax. They include any amounts:
. paid on or after you reach age 59 1/2;
. paid to your beneficiary after you die;
. paid if you become totally disabled as that term is defined in the Internal
Revenue Code;
. paid in a series of substantially equal payments made annually or more
frequently, for life or your life expectancy or for the joint life
expectancies of you and your designated beneficiary;
. paid under an immediate annuity; or
. which come from purchase payments made before August 14, 1982.
The Internal Revenue Code (the Code) treats any withdrawals (1) allocable to
purchase payments made after August 13, 1982 in an annuity certificate entered
into prior to August 14, 1982 and (2) from an annuity certificate entered into
after August 14, 1982, as first coming from earnings and then from your
purchase payments. Separate tax penalties and restrictions apply to withdrawals
under qualified contracts. Please refer to the Taxes section of this prospectus
for more information.
Highlights
4
<PAGE>
Massachusetts Mutual Variable Annuity
Separate Account 4 - Panorama Passage Segment
Table Of Fees And Expenses
Participant Transaction Expenses
Transfer Fee:
During Accumulation Phase: We will not charge for the first 12
transfers in a calendar year;
thereafter we reserve the right to
assess a fee which is the lesser of
$20 or 2% of the amount transferred.
During Income Phase: We allow only 6 transfers in a
calendar year and we will not assess
a fee for these 6 transfers.
Sales Load on Purchase Payments: None
Contingent Deferred Sales Charge: None
Annual Certificate Maintenance Charge:
$40 per Certificate Year*; waived if
certificate value is $100,000 or
greater.
Separate Account Annual Expenses
(as a percentage of the average account value)
Mortality and Expense Risk Charge:
Certificate Years 1 through 10: 1.34%**
Certificate Years 11+: 1.09%**
Administrative Charge:
0.15% per Certificate Year.***
Total Separate Account Annual Expenses:
Certificate Years 1 through 10: 1.49%
Certificate Years 11+: 1.24%
* We may increase this charge, but it will not exceed $60.
** We may increase this charge, but it will not exceed 1.50% in certificate
years 1 through 10, or 1.35% in certificate years 11 and after.
*** We may increase this charge, but it will not exceed 0.25%.
Table Of Fees And Expenses
5
<PAGE>
Annual Fund Expenses
(as a percentage of average net assets as of December 31, 1998)
<TABLE>
<CAPTION>
Total
Management Other Operating
Fees After Expenses After Expenses After
Expense Expense 12b-1 Expense
Reimbursements Reimbursements Fees Reimbursements
<S> <C> <C> <C> <C>
Oppenheimer Money
Fund/VA 0.45% 0.05% -- 0.50%
Oppenheimer Aggressive
Growth Fund/VA 0.69% 0.02% -- 0.71%
Oppenheimer Strategic
Bond Fund/VA 0.74% 0.06% -- 0.80%
Oppenheimer Main Street
Growth & Income Fund/VA 0.74% 0.05% -- 0.79%
Oppenheimer High Income
Fund/VA 0.74% 0.04% -- 0.78%
Oppenheimer Capital
Appreciation Fund/VA 0.72% 0.03% -- 0.75%
Oppenheimer Global
Securities Fund/VA 0.68% 0.06% -- 0.74%
Panorama Growth
Portfolio 0.52% 0.01% -- 0.53%
Oppenheimer
International Growth
Fund/VA 1.00% 0.09% -- 1.09%
Panorama Total Return
Portfolio 0.53% 0.02% -- 0.55%
Fidelity's VIP Growth
Portfolio - Service
Class 0.59% 0.11% 0.10% 0.80%/3/
Fidelity's VIP II
Contrafund(R) Portfolio
- Initial Class 0.59% 0.11% -- 0.70%/3/
Fidelity's VIP III
Growth Opportunities
Portfolio - Service
Class 0.59% 0.11% 0.10% 0.80%/3/
American Century VP
Income & Growth Fund 0.70% 0.00% -- 0.70%
American Century VP
Value Fund 1.00% 0.00% -- 1.00%
T. Rowe Price Mid-Cap
Growth Portfolio 0.85% 0.00% -- 0.85%
MML Managed Bond Fund 0.45% 0.03%/2/ -- 0.48%
MML Small Cap Value
Equity Fund 0.39% 0.05%/2/ -- 0.44%
MML Equity Fund 0.37% 0.00%/2/ -- 0.37%
MML Blend Fund 0.37% 0.00%/2/ -- 0.37%
MML Equity Index Fund 0.30% 0.20% -- 0.50%
MML Growth Equity Fund 0.80% 0.11%/2/ -- 0.91%/1/
MML Small Cap Growth
Equity Fund 1.08% 0.11%/2/ -- 1.19%/1/
Janus Aspen Worldwide
Growth Portfolio 0.65% 0.07% -- 0.72%/4/
Janus Aspen Capital
Appreciation Portfolio 0.70% 0.22% -- 0.92%/4/
Templeton International
Fund - Class 2 Shares/6/ 0.69% 0.17% 0.25% 1.11%
BT Small Cap Index Fund 0.35% 0.10% -- 0.45%/5/
MFS(R) Growth With
Income Series 0.75% 0.13% -- 0.88%
</TABLE>
Table Of Fees And Expenses
6
<PAGE>
/1/The MML Growth Equity Fund and the MML Small Cap Growth Equity Fund began
operations in 1999 and therefore had no operating expenses as of December 31,
1998. The investment manager estimates that the total operating expenses for
these Funds in 1999 will be as shown.
/2/We agreed to bear expenses of the MML Equity Fund, MML Blend Fund, MML
Managed Bond Fund, MML Small Cap Value Equity Fund, MML Growth Equity Fund, MML
Managed Bond and MML Small Cap Growth Equity Fund (other than the management
fee, interest, taxes, brokerage commissions and extraordinary expenses) in
excess of 0.11% of the average daily net asset value of the Funds through April
30, 2000. The expenses shown for the MML Growth Equity Fund and MML Small Cap
Growth Equity Fund include this reimbursement. If not included, the other
expenses for these Funds in 1999 are estimated to be 0.25%, for the MML Growth
Equity Fund, increasing the MML Growth Equity Fund's total fund expenses to
1.05% and 0.25% for the MML Small Cap Growth Equity Fund, increasing the MML
Small Cap Growth Equity Fund's total fund expenses to 1.33%. We do not expect
that we will be required to reimburse any expenses of the MML Equity Fund, MML
Blend Fund, MML Managed Bond Fund and MML Small Cap Value Equity Fund in 1999.
/3/A portion of the brokerage commissions that the VIP Growth Portfolio, the
VIP II Contrafund(R) Portfolio, and the VIP III Growth Opportunities Portfolio
pay was used to reduce the other expenses for the Portfolios. In addition,
these Portfolios have entered into arrangements with their custodian whereby
credits realized as a result of uninvested cash balances were used to reduce
custodian expenses. Including these reductions, the other expenses for the VIP
Growth Portfolio would have been 0.06%, decreasing the VIP Growth Portfolio's
total fund expenses to 0.75%; the other expenses for the VIP II Contrafund(R)
Portfolio would have been 0.07%, decreasing the VIP II Contrafund(R)
Portfolio's total fund expenses to 0.66%; and the other expenses for the VIP
III Growth Opportunities Portfolio would have been 0.10%, decreasing the VIP
III Growth Opportunities Portfolio's total fund expenses to 0.79%.
/4/Janus Capital has agreed to reduce the management fee of the Janus Aspen
Worldwide Growth Portfolio and the Janus Aspen Capital Appreciation Portfolio
to the level of their corresponding Janus retail funds. Other waivers, if
applicable, are first applied against the management fee and then against other
expenses. Janus Capital has agreed to continue the waivers and fee reductions
until at least the next annual renewal of the advisory agreement. Without such
reductions, the total fund expenses for the Janus Aspen Worldwide Growth
Portfolio and the Janus Aspen Capital Appreciation Portfolio would have been
0.74% and 0.97%, respectively.
/5/Bankers Trust Company has voluntarily undertaken to waive its management fee
and reimburse the BT Small Cap Index Fund certain expenses so that the total
fund expenses for the BT Small Cap Index Fund will not exceed 0.45%. Bankers
Trust Company may not recoup any of its waived investment advisory fees. Such
waivers by Bankers Trust Company should stay in effect for at least 12 months.
Without such waivers and reimbursements, the total fund expenses for the BT
Small Cap Index Fund would have been 1.58%.
/6/The Fund's Class 2 distribution plan or '"Rule 12b-1 plan" is described in
the Fund's prospectus.
(See the funds' prospectuses for more information.)
Table Of Fees And Expenses
7
<PAGE>
Example
The following example is designed to help you understand the expenses in the
certificate. The example shows the cumulative expenses you would pay assuming
you invested $1,000 in a certificate and allocated all of it to a fund which
earned 5% each year. The example assumes that you withdrew all your money or
decided to begin the income phase at the end of each year shown. (Currently,
the income phase is not available until the end of your 1st certificate year.)
All the expenses shown in the table of fees and expenses, including the annual
fund expenses, are assumed to apply.
<TABLE>
<CAPTION>
Sub-Account Year 1 3 5 10
<S> <C> <C> <C> <C> <C>
Oppenheimer Money $21 $66 $112 $242
Oppenheimer Aggressive Growth 23 72 123 264
Oppenheimer Strategic Bond 24 75 128 273
Oppenheimer Main Street Growth & Income 24 74 127 272
Oppenheimer High Income 24 74 127 271
Oppenheimer Capital Appreciation 24 73 125 268
Oppenheimer Global Securities 24 73 125 267
Panoroma Growth 22 66 114 245
Oppenheimer International Growth 27 84 143 302
Panorama Total Return 22 67 115 247
Fidelity's VIP Growth 24 75 128 273
Fidelity's VIP II Contrafund(R) 23 72 123 263
Fidelity's VIP III Growth Opportunities 24 75 128 273
American Century VP Income & Growth 23 72 123 263
American Century VP Value 26 81 138 293
T. Rowe Price Mid-Cap Growth 25 76 130 278
MML Managed Bond 21 65 111 240
MML Small Cap Value Equity 21 64 109 236
MML Equity 20 61 106 228
MML Blend 20 61 106 228
MML Equity Index 21 65 112 242
MML Growth Equity 25 78 134 284
MML Small Cap Growth Equity 28 87 148 312
Janus Aspen Worldwide Growth 23 72 124 265
Janus Aspen Capital Appreciation 26 78 134 285
Templeton International 27 84 144 304
BT Small Cap Index 21 64 110 237
MFS(R) Growth With Income 25 77 132 281
</TABLE>
Table Of Fees And Expenses
8
<PAGE>
The purpose of the Table of Fees and Expenses is to assist you in understanding
the various costs and expenses that you will incur. The table reflects expenses
of the separate account and the funds.
The examples reflect the $40 annual certificate maintenance charge as an annual
charge of 0.08 % of the assets. This charge is based on an anticipated average
certificate value of $50,000.
The examples do not reflect any premium taxes. However, premium taxes may
apply.
The examples should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
Table Of Fees And Expenses
9
<PAGE>
The Company
Massachusetts Mutual Life Insurance Company, ("MassMutual") is a mutual life
insurance company specially chartered by the Commonwealth of Massachusetts on
May 14, 1851. It is currently licensed to transact life, accident, and health
insurance business in all states, the District of Columbia, Puerto Rico and
certain provinces of Canada. MassMutual had consolidated statutory assets in
excess of $67 billion and estimated total assets under management of $176.8
billion as of December 31, 1998.
The Panorama Passage Individual Certificate Issued under a Group Deferred
Variable Annuity Contract
General Overview
This annuity is a certificate between you, the participant and us,
Massachusetts Mutual Life Insurance Company. The certificate is intended for
retirement savings or other long-term investment purposes. We do not assess a
sales charge when you make a purchase payment or if you withdraw any part of
your certificate value.
In exchange for your purchase payments, we agree to pay you an income when you
choose to receive it. You select the income period beginning on a date you
designate. According to your certificate, this date must be at least 5 years
from when you purchase the certificate. However, we currently allow you to
select a date that is at least 1 year from when you purchase the certificate.
The certificate, like all deferred annuity certificates, has two phases--the
accumulation phase and the income phase. Your certificate is in the
accumulation phase until you decide to begin receiving annuity payments. During
the accumulation phase we provide a death benefit. You can choose from three
death benefit choices. Once you begin receiving annuity payments, your
certificate enters the income phase.
You are not taxed on certificate earnings until you take money from your
certificate. This is known as tax deferral.
The certificate is called a flexible premium annuity because you may select the
timing, amount and number of purchase payments.
The certificate is called a variable annuity because you can choose to allocate
your purchase payments among various funds. Your investment choices include
twenty-eight funds and three fixed accounts. The amount of money you are able
to accumulate in your certificate during the accumulation phase depends upon
the amount of your purchase payments, the investment performance of the funds
you select and the interest we credit to any amounts you invest in the fixed
accounts.
At the beginning of the income phase, you can choose to receive annuity
payments on a variable basis, fixed basis or a combination of both. If you
choose variable payments, the amount of the annuity payments you receive will
fluctuate depending on the investment performance of the funds you select for
the income phase. If you choose to receive payments on a fixed basis, the
payments you receive will remain level.
The Company/General Overview
10
<PAGE>
Ownership
Contract Owner
The contract owner is the person or non-natural person who maintains the
ownership rights stated in the contract that are not delegated to the
participants. The owner of the contract is usually an employer, trustee or
other sponsor of a group that is comprised of participants. If the contract is
purchased as part of an employee benefit plan, the plan may govern which
ownership rights are maintained by the contract owner and which are delegated
to participants.
Participant
The participant is named at time of application. The participant can be an
individual or a non-natural person. We will not issue a certificate to you if
you have reached your 85th birthday as of the date we proposed to issue the
certificate.
As the participant of the certificate, you exercise all rights under the
certificate. The participant names the beneficiary. You may change the
participant of the certificate at any time prior to the annuity date by written
request. If you change the participant, the change is subject to our
underwriting rules. Changing the participant may result in tax consequences. On
and after the annuity date, you continue as the participant.
Joint Participant
The certificate can be owned by joint participants. Unless prohibited by a
state, only you and your spouse can be joint participants. We will not issue a
certificate to you if either proposed joint participant has reached their 85th
birthday as of the date we proposed to issue the certificate.
Upon the death of either joint participant, the surviving spouse will be the
designated beneficiary and may continue the certificate unless prohibited by a
state. We will treat any other beneficiary designation at the time of death as
a contingent beneficiary. Unless otherwise indicated on the application, both
signatures will be required for all transactions, if there are joint
participants.
Annuitant
The annuitant is the person on whose life we base annuity payments. You
designate the annuitant at the time of application. We will not issue a
certificate to you if the proposed annuitant has reached his/her 85th birthday
as of the date we proposed to issue the certificate. You may change the
annuitant before the annuity date, subject to our underwriting rules. However,
the annuitant may not be changed on a certificate owned by a non-natural
person.
Beneficiary
The beneficiary is the person(s) or entity you name to receive any death
benefit. You name the beneficiary at the time of application. Unless an
irrevocable beneficiary has been named, you can change the beneficiary at any
time before you die. If you name an irrevocable beneficiary, you must get
consent from the irrevocable beneficiary to change the beneficiary.
A beneficiary who is your surviving spouse may elect to continue the
certificate in his or her own name, elect a lump sum payment of the death
benefit, or apply the death benefit to an annuity option.
Ownership
11
<PAGE>
Purchasing a Certificate
Purchase Payments
The minimum amount we accept for your initial purchase payment is $25,000.
You can make additional purchase payments of $250 or more to your certificate.
We will accept as little as $100 if you have selected our automatic investment
plan option.
The maximum amount of cumulative purchase payments we accept without our prior
approval is based on your age when we issued the certificate. The maximum
amount is:
. $1 million up to age 75 1/2; or
. $500,000 if older than age 75 1/2.
If the participant is not a natural person, these purchase payment limits will
apply to the annuitant's age. If there are joint participants, age refers to
the oldest participant.
You may make your initial purchase payment by giving it and your complete
application to your agent/broker. You can make additional purchase payments by
mailing them to our Annuity Service Center. You may also instruct your bank to
wire transfer funds to:
Chase Manhattan Bank, New York,
New York
ABA #021000021
MassMutual Account 323131921
Ref: Certificate #
Name: (Your Name)
We have the right to reject any application or purchase payment.
Allocation of Purchase Payments
When you purchase your certificate, you choose how we will apply your purchase
payments among the investment choices. If you make additional purchase
payments, we will apply them in the same way as your first purchase payment,
unless you tell us otherwise.
Once we receive your purchase payment and the necessary information at our
Annuity Service Center, we will issue your certificate and apply your first
purchase payment within 2 business days. If you do not give us all of the
information we need, we will contact you to get it. If for some reason we are
unable to complete this process within 5 business days, we will either send
back your money or get your permission to keep it until we get all of the
necessary information.
If you add more money to your certificate by making additional purchase
payments, we will credit these amounts to your certificate on the business day
we receive them at our Annuity Service Center. Our business day closes when the
New York Stock Exchange closes, usually 4:00 p.m. Eastern time. If we receive
your purchase payment at our Annuity Service Center on a non-business day or
after the business day closes, we will credit the amount to your certificate
effective the next business day.
Purchasing a Certificate
12
<PAGE>
Investment Choices
The Separate Account
We established a separate account, Massachusetts Mutual Variable Annuity
Separate Account 4 (separate account), to hold the assets that underlie the
certificates. Our Board of Directors adopted a resolution to establish the
separate account under Massachusetts insurance law on July 9, 1997. We have
registered the separate account with the Securities and Exchange Commission as
a unit investment trust under the Investment Company Act of 1940.
We own the assets of the separate account. However, those separate account
assets equal to the reserves and other certificate liabilities are not
chargeable with liabilities arising out of any other business we may conduct.
All the income, gains and losses (realized or unrealized) resulting from these
assets are credited to, or charged against, the certificates and not against
any other certificates we may issue.
We established a segment of the separate account for the certificates. We
currently divide this segment into 28 sub-accounts. Each of these sub-accounts
invests in a fund. You bear the complete investment risk for purchase payments
that you allocate to a fund.
The Funds
The certificate offers 28 funds which are listed below. Additional funds may be
added in the future.
Panorama Series Fund, Inc.
Panorama Series Fund, Inc. ("Panorama Fund") is an open-end investment company.
OppenheimerFunds, Inc. ("OFI"), an investment adviser registered with the SEC
under the Investment Advisers Act of 1940, as amended, ("Investment Advisers
Act") is the investment adviser to the Panorama Fund. It performs
administrative functions relative to the Panorama Fund, including the keeping
of all records not maintained by the custodian.
OFI has operated as an investment adviser since 1959 and, together with a
subsidiary, manages companies with $95 billion in assets and 4 million
shareholder accounts as of December 31, 1998. OFI is owned by Oppenheimer
Acquisition Corporation, a holding company that is owned in part by senior
officers for OFI and controlled by MassMutual. The address of OFI is Two World
Trade Center, New York, NY 10048-0203.
Panorama Total Return Portfolio. The Panorama Total Return Portfolio seeks to
maximize total investment return (including both capital appreciation and
income) by allocating its assets among stocks, corporate bonds, U.S. Government
securities and its instrumentalities, and money market instruments according to
changing market conditions.
Panorama Growth Portfolio. The Panorama Growth Portfolio seeks long-term growth
of capital by investing primarily in common stocks with low price-earnings
ratios and better than anticipated earnings. Realization of current income is a
secondary consideration.
Oppenheimer International Growth Fund/VA. The Oppenheimer International Growth
Fund/VA seeks long-term growth of capital by investing primarily in equity
securities of companies wherever located, the primary stock market of which is
outside the United States.
Oppenheimer Variable Account Funds
Oppenheimer Variable Account Funds ("Oppenheimer Funds") is an investment
company consisting of 10 separate series of shares known as funds. Seven of
these funds are available as investment options in the certificate. The
Oppenheimer Funds are also advised by OFI.
Oppenheimer Money Fund/VA. The Oppenheimer Money Fund/VA seeks maximum current
income from investments in money market securities that is consistent with low
capital risk and maintenance of liquidity. The Fund invests in short-term, high
quality "money market" securities.
Oppenheimer Aggressive Growth Fund/VA. The Oppenheimer Aggressive Growth
Fund/VA seeks long-term capital appreciation by investing in "growth-type"
companies.
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Oppenheimer Strategic Bond Fund/VA. The Oppenheimer Strategic Bond Fund/VA
seeks a high level of current income principally derived from interest on debt
securities and seeks to enhance such income by writing covered call options on
debt securities. The Fund invests in three market sectors: debt securities of
foreign governments and companies, U.S. Government securities and lower-rated
high yield securities of U.S. Companies.
Oppenheimer Main Street Growth & Income Fund/VA. The Oppenheimer Main Street
Growth & Income Fund/VA seeks total return (which includes growth in the value
of its shares as well as current income) from equity and debt securities.
Oppenheimer High Income Fund/VA. The Oppenheimer High Income Fund/VA seeks a
high level of current income. The Fund invests in unrated securities or high
risk securities in the lower rating categories, commonly known as "junk
bonds," which are subject to a greater risk of loss of principal and
nonpayment of interest than higher-rated securities.
Oppenheimer Capital Appreciation Fund/VA. The Oppenheimer Capital Appreciation
Fund/VA seeks long-term capital appreciation by investing in securities of
well-known established companies. It invests mainly in equity securities.
Oppenheimer Global Securities Fund/VA. The Oppenheimer Global Securities
Fund/VA seeks long-term capital appreciation by investing a substantial
portion of assets in securities of foreign issuers, "growth-type" companies,
cyclical industries and special situations which are considered to have
appreciation possibilities. It invests in equity securities of U.S. and
foreign issuers.
MML Series Investment Fund ("MML Trust")
MML Trust is a no-load, open-end, investment company having eight series of
shares, each of which has different investment objectives designed to meet
different investment needs. Seven of the series are available as investment
options within the certificate. MassMutual serves as the investment adviser to
the MML Trust.
MassMutual has entered into a subadvisory agreement with David L. Babson and
Company, Inc. ("Babson"), a controlled subsidiary of the MassMutual, whereby
Babson manages the investment of the assets of the MML Small Cap Value Equity
Fund, the MML Equity Fund, and the equity sector of the MML Blend Fund.
MassMutual has entered into a subadvisory agreement with Massachusetts
Financial Services Company ("MFS"), whereby MFS manages the investment of the
MML Growth Equity Fund.
MassMutual has entered into subadvisory agreements with J.P. Morgan Investment
Management Company Inc. ("J.P. Morgan") and Waddell & Reed Investment
Management Company ("Waddell & Reed"), whereby J.P. Morgan and Waddell & Reed
each manage 50% of the portfolio of MML Small Cap Growth Equity Fund.
MassMutual has entered into a subadvisory agreement with Mellon Equity
Associates, LLP ("Mellon Equity") whereby Mellon Equity manages the
investments of the MML Equity Index Fund.
MML Small Cap Value Equity Fund. The MML Small Cap Value Equity Fund seeks
growth of capital and income over time by investing primarily in small company
stocks.
MML Equity Fund. The MML Equity Fund seeks to achieve a superior rate of
return over time from both capital appreciation and current income and to
preserve capital by investing in equity securities.
MML Blend Fund. The MML Blend Fund seeks a high total rate of return over
time, consistent with prudent investment risk and capital preservation, by
investing in equity, fixed income and money market securities.
MML Equity Index Fund. The MML Equity Index Fund seeks investment results that
correspond to the price and yield performance of publicly traded common stocks
in the aggregate, as represented by the Standard & Poor's 500 Composite Stock
Price Index./1/
/1/"Standard & Poor's," "Standard & Poor's 500" and "S&P 500" are trademarks
of The McGraw-Hill Companies and have been licensed for use by the Fund. The
Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's, a
division of The McGraw-Hill Companies ("S&P"), or The McGraw-Hill Companies,
Inc. Standard & Poor's makes no representation regarding the advisability of
investing in the Fund.
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MML Growth Equity Fund. The MML Growth Equity Fund seeks growth of capital and
income over time by investing primarily in equity securities of large companies
with long-term growth potential.
MML Small Cap Growth Equity Fund. The MML Small Cap Growth Equity Fund seeks
growth of capital over time by investing primarily in equity securities of
smaller and medium-size companies with long-term growth potential.
MML Managed Bond Fund. The MML Managed Bond Fund seeks a high rate of return,
consistent with capital preservation, by investing primarily in investment
grade, publicly-traded, fixed income securities.
T. Rowe Price Equity Series, Inc.
T. Rowe Price Equity Series, Inc. is a diversified, open-end investment company
incorporated in Maryland in 1994. The T. Rowe Price Mid-Cap Growth Portfolio is
a separate series of shares of T. Rowe Price Equity Series, Inc. T. Rowe Price
Associates, Inc. (" T. Rowe Price") was founded in 1937 and is the investment
adviser to the Portfolio. Its business address is 100 East Pratt Street,
Baltimore, MD 21202.
T. Rowe Price Mid-Cap Growth Portfolio. The T. Rowe Price Mid-Cap Growth
Portfolio seeks long-term capital appreciation by investing in mid-cap stocks
with potential for above-average earnings growth. T. Rowe Price defines mid-cap
companies as those with market capitalizations within the range of companies in
the S&P 400 Mid-Cap Index.
American Century Variable Portfolios, Inc.
American Century Variable Portfolios, Inc. ("American Century VP") was
organized as a Maryland corporation in 1987 and is a diversified, open-end
management investment company. American Century Investment Management, Inc.
("American Century") is the investment manager of American Century VP. American
Century has been providing investment advisory services to investment companies
and institutional investors since it was founded in 1958. American Century's
address is American Century Tower, 4500 Main Street, Kansas City Missouri
64111.
American Century VP Income & Growth Fund. The American Century VP Income &
Growth Fund seeks dividend growth, income and capital appreciation by investing
in common stocks.
American Century VP Value Fund. The American Century VP Value Fund seeks long-
term capital growth by investing primarily in common stocks that the management
team believes to be undervalued at the time of purchase. Income is a secondary
objective.
Fidelity Variable Insurance Products Fund
Fidelity Variable Insurance Products Fund ("VIP") is an open-end management
investment company organized as a Massachusetts business trust in 1981.
Fidelity's VIP Growth Portfolio is a diversified fund of VIP.
Fidelity Management & Research Company ("FMR") is the investment adviser to
Fidelity's VIP Growth Portfolio. FMR is the management arm of Fidelity
Investments(R). Fidelity Investments has its principal place of business
address at 82 Devonshire Street, Boston, MA 02109.
Fidelity's VIP Growth Portfolio-Service Class. Fidelity's VIP Growth Portfolio
seeks to achieve capital appreciation by investing primarily in common stocks.
This Portfolio invests in companies that the manager believes have above-
average growth potential.
Fidelity Variable Insurance Products Fund II
Fidelity Variable Insurance Products Fund II ("VIP II") is an open-end
management investment company, organized as a Massachusetts business trust in
1988. Fidelity's VIP II Contrafund(R) Portfolio is a diversified fund of VIP
II.
FMR is the investment adviser to Fidelity's VIP II Contrafund(R) Portfolio.
Fidelity Management & Research (U.K.) Inc. ("FMR U.K."), in London, England,
and Fidelity Management & Research (Far East) Inc. ("FMR Far East"), in Tokyo,
Japan, assist FMR with foreign investments. They each serve as subadvisors for
Fidelity's VIP II Contrafund(R) Portfolio.
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Fidelity's VIP II Contrafund(R) Portfolio-Initial Class. Fidelity's VIP II
Contrafund(R) Portfolio seeks long term capital appreciation by investing in
the securities of companies whose value is not fully recognized by the public.
Fidelity Variable Insurance Products Fund III
Fidelity Variable Insurance Products Fund III ("VIP III") is an open-end
management investment company organized as a Massachusetts business trust in
1994. Fidelity's VIP III Growth Opportunities Portfolio is a diversified fund
of VIP III.
FMR is the investment adviser to Fidelity's VIP III Growth Opportunities
Portfolio. FMR U.K. and FMR Far East assist FMR with foreign investments. They
each serve as subadvisors for Fidelity's VIP III Growth Opportunities
Portfolio.
Fidelity's VIP III Growth Opportunities Portfolio--Service Class. Fidelity's
VIP III Growth Opportunities Portfolio seeks to provide capital growth by
investing primarily in common stocks.
Janus Aspen Series
Janus Aspen Series ("Janus Aspen") is an open-end management investment
company. Janus Aspen Worldwide Growth Portfolio and Janus Aspen Capital
Appreciation are each a separate series of Janus Aspen.
Janus Capital is the investment adviser to the Janus Aspen Worldwide Growth
Portfolio and the Janus Aspen Capital Appreciation Portfolio. Janus Capital is
located at 100 Fillmore Street, Denver, CO 80206-4928.
Janus Aspen Worldwide Growth Portfolio. The Janus Aspen Worldwide Growth
Portfolio seeks long-term growth of capital in a manner consistent with the
preservation of capital. The Portfolio invests primarily in common stocks of
companies of any size throughout the world.
Janus Aspen Capital Appreciation Portfolio. The Janus Aspen Capital
Appreciation Portfolio seeks long-term growth of capital. The Portfolio
invests primarily in common stocks selected for their growth potential. The
Portfolio may invest in companies of any size, from larger, well-established
companies to smaller, emerging growth companies.
Templeton Variable Products Series Fund
The Templeton Variable Products Series Fund ("Templeton Fund") is an open-end
management investment company organized as a Massachusetts business trust on
February 25, 1988. The Templeton International Fund is a separate series of
the Templeton Fund.
Templeton Investment Counsel, Inc. ("Templeton Investment Counsel") is the
investment manager of the Templeton International Fund. Templeton Investment
Counsel is located at 500 East Broward Boulevard, Fort Lauderdale, FL 33394-
3091.
Templeton International Fund - Class 2 Shares. The Templeton International
Fund seeks long-term capital growth. The Fund, under normal market conditions,
will invest at least 65% of its total assets in the equity securities of
companies located outside the U.S., including in emerging markets.
BT Insurance Funds Trust
BT Insurance Funds Trust ("BT Insurance Funds") was organized as a Massachusetts
business trust in 1996. The BT Small Cap Index Fund is a separate series of the
BT Insurance Funds.
Bankers Trust Company is the investment adviser to the BT Small Cap Index
Fund. Bankers Trust Company is located at 130 Liberty Street, New York, NY
10006.
BT Small Cap Index Fund. The BT Small Cap Index Fund seeks to match, as
closely as possible, before expenses, the performance of the Russell 2000(R)
Small Stock Index*, which emphasizes stocks of small U.S. companies.
*"Frank Russell Company is the owner of the trademarks and copyrights relating
to the Russell indexes."
MFS(R) Variable Insurance Trust SM
The MFS(R) Variable Insurance Trust SM ("MFS Trust") is an open-end management
investment company, organized as a Massachusetts business
Investment Choices
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trust in 1994. The MFS(R) Growth With Income Series is a separate series of the
MFS Trust.
Massachusetts Financial Services Company ("MFS") advises the MFS(R) Growth With
Income Series. MFS is located at 500 Boylston Street, Boston, MA 02116.
MFS(R) Growth With Income Series. The MFS(R) Growth With Income Series seeks to
provide reasonable current income and long-term growth of capital and income.
This Series invests, under normal market conditions, at least 65% of its total
assets in common stocks and related securities, such as preferred stocks,
convertible securities and depository receipts for those securities.
There is no assurance that the funds will achieve their stated objective. The
fund prospectuses contain more detailed information about the funds. Current
copies of the fund prospectuses are attached to this prospectus. You should
read the information contained in the funds' prospectuses carefully before
investing.
Investment Choices
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The Fixed Accounts
We offer three fixed accounts as investment options--two fixed accounts for
Dollar Cost Averaging (the "DCA Fixed Accounts"), each with a different
maximum term, and The Fixed Account (collectively, "the fixed accounts"). The
fixed accounts are investment options within our general account.
Amounts that you allocate to the fixed accounts become part of our general
account assets and are subject to the claims of all our creditors. All of our
general account assets will be available to fund benefits under a certificate.
You do not participate in the investment performance of the assets in the
fixed accounts. Instead, we credit your certificate with interest at a
specified rate that we declare in advance. We guarantee this rate will be at
least 3% per year. We may credit a higher rate of interest at our discretion.
DCA Fixed Accounts. Each DCA Fixed Account is a fixed account from which
assets are systematically transferred to any fund(s). During the accumulation
phase, you may choose to have your purchase payments allocated to a DCA Fixed
Account for the period of the DCA Fixed Account Term (DCA Term). Your election
must be in writing.
Currently, you have a choice of two DCA Fixed Accounts:
(a) DCA Fixed Account with a DCA Term of 6 months; or
(b) DCA Fixed Account with a DCA Term of 12 months.
To the extent permitted by law, we reserve the right to change the duration of
the DCA Terms in the future. You may participate in one DCA Fixed Account at a
time.
We will only accept a purchase payment as of the beginning of a DCA Term. We
will only accept a new purchase payment of at least $5,000. Purchase payments
which originate from any contract, certificate or policy issued by us or any
of our affiliates cannot be allocated to a DCA Fixed Account. You cannot
transfer current certificate values to a DCA Fixed Account. We reserve the
right to reject purchase payments.
We make scheduled monthly transfers from the DCA Fixed Account according to
the rules of our Dollar Cost Averaging Program. You may not make unscheduled
transfers or take partial withdrawals from the DCA Fixed Account.
We reserve the right to assess a fee for processing transactions under the DCA
Fixed Account.
If you elect to make an allocation to a DCA Fixed Account at a time when your
annuity date would be less than your elected DCA Term, the expiration of your
DCA Term will be your annuity date. No amounts will remain in the DCA Fixed
Account after the expiration of the DCA Term. We guarantee the interest rate
for the full DCA Term.
The Fixed Account. You may allocate purchase payments to The Fixed Account.
You can also make transfers of your certificate value into or out of The Fixed
Account, subject to certain limitations.
Investment Choices
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Certificate Value
Your certificate value is the sum of your value in the separate account and the
fixed account(s).
Your value in the separate account will vary depending on the investment
performance of the funds you choose. In order to keep track of your certificate
value, we use a unit of measure called an accumulation unit. During the income
phase of your certificate we call the unit an annuity unit.
Accumulation Units
Every business day we determine the value of an accumulation unit for each of
the funds. Changes in the accumulation unit value reflect the investment
performance of the fund as well as deductions for insurance and other charges.
The value of an accumulation unit may go up or down from business day to
business day.
The Statement of Additional Information contains more information on the
calculation of the accumulation unit value.
When you make a purchase payment, we credit your certificate with accumulation
units. We determine the number of accumulation units to credit by dividing the
amount of the purchase payment allocated to a fund by the value of the
accumulation unit for that fund. When you make a withdrawal, we deduct from
your certificate accumulation units representing the withdrawal amount.
We calculate the value of an accumulation unit for each investment portfolio
after the New York Stock Exchange closes each business day. Any change in the
accumulation unit value will be reflected in your certificate value.
Example:
On Monday we receive an additional purchase payment of $5,000 from you. You
have told us you want this to go to the Oppenheimer Money Fund/VA. When the New
York Stock Exchange closes on that Monday, we determine that the value of an
accumulation unit for the Oppenheimer Money Fund/VA is $13.90. We then divide
$5,000 by $13.90 and credit your certificate on Monday night with 359.71
accumulation units for the Oppenheimer Money Fund/VA.
Transfers
You can transfer all or part of your certificate value. You can make transfers
by telephone, internet or by other means we authorize. To make transfers other
than by telephone or internet, you must submit a written request. If you own
the certificate with a joint participant, we will accept transfer instructions
from either you or the other participant, unless we are instructed otherwise.
We will use reasonable procedures to confirm that instructions given to us are
genuine. We may be liable for any losses due to unauthorized or fraudulent
instructions, if we fail to use such procedures. We may tape record all
telephone instructions.
Your transfer is effective on the business day at the accumulation unit values
next determined after we receive your fully completed request at our Annuity
Service Center. Our business day closes when the New York Stock Exchange
closes, usually 4:00 p.m. Eastern time. If we receive your fully completed
transfer request at our Annuity Service Center on a non-business day or after
our business day closes, your transfer request will be effective on the next
business day.
Transfers During the Accumulation Phase
You may transfer all or part of your assets in a fund or The Fixed Account. You
can make a transfer to or from The Fixed Account and to or from any fund. You
can make 12 transfers every calendar year during the accumulation phase without
charge. If you make more than 12 transfers in a year, we reserve the right to
deduct a transfer fee. The fee is $20 per transfer or, if less, 2% of the
amount you transfer. The following rules apply to any transfer during the
accumulation phase:
(1) The minimum amount which you can transfer is:
. $1,000; or
. the entire value in a fund or The Fixed Account, if less.
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After a transfer, the minimum amount which must remain in the fund is $1,000
unless you transfer the entire fund value. We waive these requirements if the
transfer is made in connection with the Rebalancing Program.
(2) You must clearly indicate the amount and investment choices from and to
which you wish to transfer.
(3) During any certificate year, we limit transfers out of The Fixed Account
to 30% of your certificate value in The Fixed Account as of the end of the
previous certificate year. We measure a certificate year from the
anniversary of the day we issued your certificate. Transfers out of The
Fixed Account are done on a first-in, first-out basis. In other words,
amounts attributed to the oldest purchase payments are transferred first;
then amounts attributed to the next oldest purchase payment are
transferred; and so on.
(4) We do not allow transfers between competing accounts. For this purpose, we
consider The Fixed Account and the Oppenheimer Money Fund/VA "competing
accounts." We restrict other transfers involving any competing account for
certain periods:
. for a period of 90 days following a transfer out of a competing account,
you may not transfer into the other competing account.
. for a period of 90 days following a transfer into a competing account,
you may not transfer out of the other competing account.
(5) We do not count transfers made as part of the Dollar Cost Averaging
Program or the Rebalancing Program in determining the number of transfers
you make in a year.
Transfers During the Income Phase
You may make 6 transfers between the funds each calendar year without
incurring a fee. You cannot transfer certificate value from the general
account to a fund, but you can transfer certificate value from one or more
funds to the general account once a certificate year. The minimum amount which
you can transfer is $1,000 or your entire interest in the fund, if less. After
a transfer, the minimum amount which must remain in a fund is $1,000 unless
you have transferred the entire value.
We have the right to terminate or modify these transfer provisions.
Dollar Cost Averaging Program
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount from a selected fund to any of the other funds. By allocating amounts
on a regular schedule as opposed to allocating the total amount at one
particular time, you may be less susceptible to the impact of market
fluctuations. The Dollar Cost Averaging Program is available only during the
accumulation phase.
Dollar Cost Averaging does not assure a profit and does not protect you
against loss in declining markets. Since Dollar Cost Averaging involves
continuous investment in securities regardless of fluctuating price levels of
such securities, you should consider your financial ability to continue the
Dollar Cost Averaging Program through periods of fluctuating price levels. The
minimum amount you can transfer is $250.
The minimum duration of participation in any Dollar Cost Averaging Program is
currently 6 months. You can choose the frequency at which the Dollar Cost
Averaging transfers are to be made, i.e., monthly, quarterly, semi-annually or
annually. You will also choose the specific date when the first Dollar Cost
Averaging transfer is made. However, if you select a date that is less than 5
business days from the date the election form is received at our Annuity
Service Center, we may defer the first transfer for one month. If you do not
select a start date, we will automatically start the Dollar Cost Averaging
Program within 5 business days from the date we receive your election form.
You may make changes to your selection, including termination of the program,
by written request.
If you participate in the Dollar Cost Averaging Program, we do not take the
transfers made under the program into account in determining any transfer fee.
Certificate Value
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We consider each DCA Fixed Account to be a Dollar Cost Averaging Program. You
can only participate in one Dollar Cost Averaging Program at a time. Further,
if you are participating in the Dollar Cost Averaging Program you cannot also
participate in the Rebalancing Program or a DCA Fixed Account.
The Dollar Cost Averaging option will terminate:
. if you withdraw your total certificate value;
. upon your death or the annuitant's death;
. if the last transfer you selected has been made;
. if there is insufficient certificate value to make the transfer; or
. if we receive from you a written request to terminate the program at our
Annuity Service Center at least 5 business days prior to the next transfer
date.
We currently do not charge you for participation in the Dollar Cost Averaging
Program. However, we reserve the right to charge for this feature in the
future. We have the right to modify, terminate or suspend any Dollar Cost
Averaging Program.
Automatic Rebalancing Program
Over time, the performance of each fund may cause your allocation to shift from
your original allocation. You can direct us to automatically rebalance your
certificate to return to your original percentage allocations by selecting our
Rebalancing Program. You can tell us whether to rebalance monthly, quarterly,
semi-annually or annually. The Rebalancing Program is available only during the
accumulation phase. If you participate in the Rebalancing Program, the
transfers made under the program are not taken into account in determining any
transfer fee.
You cannot participate in the Rebalancing Program if you have purchase payments
allocated to the fixed accounts. You cannot participate in the Rebalancing
Program if you are participating in a Dollar Cost Averaging Program.
You can terminate the Rebalancing Program at anytime by giving us written
notice. Any unscheduled transfer request will automatically terminate the
Rebalancing Program election.
Example:
Assume that you want your initial purchase payment split between 2 funds. You
want 40% to be in the MML Managed Bond Fund and 60% to be in the Panorama
Growth Portfolio. Over the next 2 1/2 months the bond market does very well
while the stock market performs poorly. At the end of the first quarter, the
MML Managed Bond Fund now represents 50% of your holdings because of its
increase in value. If you had chosen to have your holdings rebalanced
quarterly, on the first day of the next quarter, we would sell some of your
units in the MML Managed Bond Fund to bring its value back to 40% and use the
money to buy more units in the Panorama Growth Portfolio to increase those
holdings to 60%.
Withdrawals
During the accumulation phase you may make either partial or total withdrawals
of your certificate value. Your withdrawal is effective on the business day we
receive your written request at our Annuity Service Center. If we receive your
written request at our Annuity Service Center on a non-business day or after
our business day closes, your withdrawal request will be effective on the next
business day. We will pay any withdrawal amount within 7 days of our receipt of
your fully completed written request at our Annuity Service Center unless we
are required to suspend or postpone withdrawal payments.
Unless you instruct us otherwise, we will take any partial withdrawal
proportionally from your certificate value in the funds and The Fixed Account.
You must withdraw at least $250 or the entire value in a fund or The Fixed
Account, if less. We require that after you make a partial withdrawal you keep
at least $25,000 in your certificate, unless you are taking distributions as
required by the Internal Revenue Code or receiving payments under the
Systematic Withdrawal Program.
When you make a total withdrawal you will receive the value of your
certificate:
. less any applicable premium tax;
. less any certificate maintenance charge; and
. less any purchase payments we credited to your certificate that have not
cleared the bank, until they clear the bank.
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Systematic Withdrawal Program
This program provides for an automatic monthly, quarterly, semi-annual or
annual payment to you from your certificate of at least $250. Your certificate
value must be at least $25,000 to initiate the withdrawal plan. Currently, we
do not have a charge for this program, but we reserve the right to charge in
the future.
Your systematic withdrawal program will begin on the start date you selected
as long as we receive a fully completed written request at our Annuity Service
Center at least 5 business days before the start date you selected. We may
defer the start of your systematic withdrawal program for one month if the
start date you selected is less than 5 business days after we receive your
written request. If you do not select a start date, we will automatically
begin systematic withdrawals within 5 business days after we receive your
request. Your request must be in writing.
If you terminate your Systematic Withdrawal Program from The Fixed Account,
you may not elect a new program involving withdrawals from The Fixed Account
for 6 months.
Your systematic withdrawal program ends:
.if you withdraw your total certificate value;
.upon your death or the annuitant's death;
.if we process the last withdrawal you selected;
.if your value in a selected fund or The Fixed Account is insufficient to
complete the withdrawal;
.if you begin receiving annuity payments; or
.if you give us a written request to terminate your program. We must receive
your request at least 5 business days before the next withdrawal date.
Income taxes, tax penalties and
certain restrictions may apply
to any withdrawal you make.
Certificate Value
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Expenses
There are charges and other expenses associated with the certificates that
reduce the return on your investment in the certificate. These charges and
expenses are:
Insurance Charges
Each business day we deduct our insurance charges from the assets of the
separate account. We do this as part of our calculation of the value of the
accumulation units and the annuity units. The insurance charge has two parts:
(1) the mortality and expense risk charge and (2) the administrative charge.
Mortality and Expense Risk Charge
The mortality and expense risk charge is for:
. the mortality risk associated with the insurance benefits provided,
including our obligation to make annuity payments after the annuity date
regardless of how long all annuitants live, the death benefits, and the
guarantee of rates used to determine your annuity payments during the income
phase; and
. the expense risk that the current charges will be insufficient to cover the
actual cost of administering the certificate.
For certificate years 1 through 10, the mortality and expense risk charge is
currently equal, on an annual basis, to 1.34% of the daily value of the assets
invested in each fund, after fund expenses are deducted. For certificate years
11 and after, this charge currently equals 1.09%.
We may increase the mortality and expense risk charge, but it will not exceed
1.50% in certificate years 1 through 10, or 1.35% in certificate years 11 and
after.
Administrative Charge
This charge reimburses us for the expenses associated with the administration
of the certificate and the separate account. Some of these expenses are:
preparation of the certificate, confirmations, annual reports and statements,
maintenance of certificate records, personnel costs, legal and accounting fees,
filing fees, and computer and systems costs.
Currently this charge is equal, on an annual basis, to 0.15% of the daily value
of the assets invested in each fund, after fund expenses are deducted. This
charge is guaranteed not to be greater than 0.25%.
Annual Certificate Maintenance Charge
At the end of each certificate year, we deduct $40 from your certificate as an
annual certificate maintenance charge. We may increase this charge, but it will
not exceed $60. If we increase this charge, we will give you 90 days prior
notice. Currently, we will not deduct this charge if, when we are to make the
deduction, the value of your certificate is $100,000 or more. Furthermore, if
you purchased your certificate prior to April 30, 2000 and your certificate
value is $100,000 or more at the end of your fifth certificate year, we will
apply a one-time credit to your certificate value equal to the amount of any
annual certificate maintenance charges that you paid during your first five
certificate years. We will apply this credit to the Oppenheimer Money Fund.
Subject to state regulations, we will deduct the annual certificate maintenance
charge proportionately from the investment choices you have selected.
If you make a total withdrawal of your certificate, and the certificate value
is less than $100,000, we will deduct the full annual certificate maintenance
charge. If your certificate enters the income phase on a date other than its
certificate anniversary and the certificate value is less than $100,000, we
will deduct a pro rata portion of the charge. During the income phase, we will
deduct the annual certificate maintenance charge pro rata from each payment
regardless of the certificate value.
Premium Taxes
Some states and other governmental entities charge premium taxes or similar
taxes. We are responsible for the payment of these taxes and
Expenses
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will make a deduction from your certificate value for them. Some of these
taxes are due when your certificate is issued, others are due when annuity
payments begin. Currently we do not charge you for these taxes until you begin
receiving annuity payments or you make a total withdrawal. We may discontinue
this practice and assess the charge when the tax is due. Premium taxes
generally range from 0% to 3.5%, depending on the state.
Transfer Fee
During the accumulation phase, you can make 12 free transfers every calendar
year. If you make more than 12 transfers a calendar year, we reserve the right
to deduct a transfer fee of $20 or 2% of the amount that is transferred,
whichever is less.
If you request to transfer a dollar amount, we will deduct any transfer fee
from the amount transferred. If you request to transfer a percentage of your
value in an investment choice, we will deduct any transfer fee from the amount
remaining in the investment choice. If you transfer the entire amount in an
investment choice, we will deduct the transfer fee from the amount you
transfer.
During the income phase, we allow 6 transfers and they are not subject to a
transfer fee. We consider all transfers made on one business day as one
transfer.
Income Taxes
We will deduct from the certificate any income taxes which we incur because of
the operation of the separate account. At the present time, we are not making
any such deductions. We will deduct any withholding taxes required by law.
Fund Expenses
There are deductions from and expenses paid out of the assets of the various
funds, which are described in the attached fund prospectuses. We may enter
into certain arrangements under which we are reimbursed by the funds'
advisors, distributors and/or affiliates for the administrative service that
we provide.
Expenses
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The Income Phase
If you want to receive regular income from your annuity, you can choose to
receive fixed and/or variable annuity payments under one of six options. You
can choose the month and year in which those payments begin. We call that date
the annuity date. Your annuity date must be the first day of a calendar month.
According to your certificate, your annuity date cannot be earlier than 5 years
after you buy the certificate. However, we currently allow you to select an
annuity date that is at least 1 year after you buy the certificate.
You choose your annuity date when you purchase your certificate. You can change
it at any time before the annuity date provided you give us 30 days written
notice. If you do not choose an annuity option, we will assume that you
selected Option B with 10 years of payments guaranteed.
At the annuity date, you have the same fund choices that you had in the
accumulation phase. You can choose whether payments will be fixed, variable, or
a combination of both. If you do not tell us otherwise, we will base your
annuity payments on the investment allocations that are in place on the annuity
date. Therefore, any amounts in the funds will be applied to a variable payout
and any amounts in The Fixed Account will be applied to a fixed payout.
Annuity payments must begin by the earlier of:
(1) The annuitant's 90th birthday or the 90th birthday of the oldest joint
annuitant;
(2) Your 90th birthday if you are not the annuitant or the 90th birthday of the
oldest joint participant; or
(3) The latest age permitted under state law.
We make annuity payments based on the age and sex of the annuitant under all
options except Option E. We may require proof of age and sex before annuity
payments begin.
If your certificate value is less than $2,000 on the annuity date, we reserve
the right to pay you a lump sum rather than a series of annuity payments. If
any annuity payment is less than $100, we reserve the right to change the
payment basis to equivalent less frequent payments.
In order to avoid adverse tax consequences, you should begin to take
distributions at least equal to the minimum amount required by the Internal
Revenue Service, no later than the required beginning date. If your certificate
is an IRA that date should be no later than April 1st of the calendar year
after the year you reach age 70 1/2. For qualified plans, that date is no later
than April 1st of the calendar year after the later of (a) the calendar year in
which you retire or (b) the year in which you attain age 70 1/2.
Fixed Annuity Payments
If you choose fixed payments, the payment amount will not vary. The payment
amount will depend upon the following 5 things:
. the value of your certificate on the annuity date;
. the deduction of premium taxes, if applicable;
. the deduction of the annual certificate maintenance charge;
. the annuity option you select; and
. the age and sex of the annuitant (and the age and sex of the joint
annuitant, if any).
Variable Annuity Payments
If you choose variable payments, the payment amount will vary with the
investment performance of the funds. The first payment amount will depend on
the following 6 things:
. the value of your certificate on the annuity date;
. the deduction of premium taxes, if applicable;
. the deduction of the annual certificate maintenance charge;
. the annuity option you select;
. the age and sex of the annuitant (and the age and sex of the joint
annuitant, if any); and
. an assumed investment rate (AIR) of 4% per year.
The Income Phase
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Future variable payments will depend on the performance of the funds you
selected. If the actual performance exceeds the 4% assumed investment rate
plus the deductions for expenses, your annuity payments will increase.
Similarly, if the actual rate is less than 4% plus the amount of the
deductions, your annuity payments will decrease.
Annuity Unit Value
In order to keep track of the value of your variable annuity payment, we use a
unit of measure called an annuity unit. We calculate the number of your
annuity units at the beginning of the income phase. During the income phase,
the number of annuity units will not change. However, the value of your
annuity units will change to reflect the investment performance of the funds
you selected. The Statement of Additional Information contains more
information on how annuity payments and annuity unit values are calculated.
Annuity Options
The following annuity options are available for fixed or variable payments.
After annuity payments begin, you cannot change the annuity option or the
frequency of annuity payments. In addition, during the income phase we do not
allow withdrawals.
Annuity Option A - Life Income. Under this option we make periodic payments as
long as the annuitant is alive. After the annuitant dies we stop making
payments.
Annuity Option B - Life Income with Period Certain. We will make periodic
payments for a guaranteed period, or as long as the annuitant lives, whichever
is longer. The guaranteed period may be 5, 10 or 20 years. If the beneficiary
chooses, he/she may elect a lump sum payment equal to the present value of the
remaining guaranteed annuity payments.
For a fixed annuity payment under Option B, we compute the present value of
the remaining guaranteed annuity payments at a 3% interest rate. For a
variable annuity payment under Option B, we compute the present value of the
number of annuity units in each fund for the remainder of the guarantee period
at the assumed investment rate (AIR). We multiply the present value of these
units in each fund by the annuity unit value for that fund on the date we
determine the present value. The present value will be the sum of the values
determined for each fund.
Annuity Option C - Joint and Last Survivor Payments. We will make periodic
payments during the joint lifetime of 2 annuitants. When one dies, we will
continue making these payments to the survivor as if both annuitants were
alive. We will not make payments after both annuitants have died.
Annuity Option D - Joint and 2/3 Survivor Annuity. We will make periodic
payments during the joint lifetime of 2 annuitants. We will continue making
payments during the lifetime of the surviving annuitant. We will compute these
payments for the surviving annuitant on the basis of two-thirds of the annuity
payment (or units) in effect during the joint lifetime. We will not make
payments after both annuitants have died.
Annuity Option E - Period Certain. We will make periodic payments for a
specified period. The specified period must be at least 5 years and cannot be
more than 30 years. In most states, if you do not want payments to continue
for the remainder of the specified period, you may elect to have an amount
equal to the present value of the remaining guaranteed annuity payments paid
as a lump sum or applied to another annuity option.
For a fixed annuity payment under Option E, we compute the present value of
the remaining guaranteed annuity payments at a 3% interest rate. For a
variable annuity payment under Option E, we compute the present value of the
number of annuity units in each fund for the remainder of the guarantee period
at the assumed investment rate (AIR). We multiply the present value of these
units in each fund by the annuity unit value for that fund on the date we
determine the present value. The present value will be the sum of the values
determined for each fund.
Annuity Option F - Special Income Settlement Agreement. We will pay you in
accordance with terms agreed upon in writing by both you and us.
The Income Phase
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Death Benefit
Death Of Participant During The Accumulation Phase
If you or the joint participant dies during the accumulation phase, we will pay
a death benefit to your primary beneficiary. If the joint participant dies, we
will treat the surviving joint participant, if any, as the primary beneficiary.
We will treat any other beneficiary designation on record at the time of death
as a contingent beneficiary.
Your beneficiary may request that the death benefit be paid under one of the
death benefit options. If the beneficiary is your spouse, he or she may elect
to become the participant of the certificate at the then current certificate
value, which may be less than the death benefit. If joint participants die
simultaneously, the death benefit will become payable.
You may choose from three death benefits:
.Basic death benefit;
.Reset death benefit; or
.Ratchet death benefit.
You will automatically receive the basic death benefit unless you select one of
the other two death benefits. However, if you are age 80 or over when we issue
your certificate, the reset death benefit is not available. Therefore, you will
automatically receive the basic death benefit unless you select the ratchet
death benefit.
If you choose either the reset death benefit or the ratchet death benefit, you
will pay an additional charge. You must elect your death benefit at time of
issue and cannot change your choice once you elect it.
If the certificate is owned by a non-natural person, participant means
annuitant for purposes of determining the death benefit amount.
Death Benefit Amount During The Accumulation Phase
Basic Death Benefit. You will automatically receive the basic death benefit
unless you select one of the other two death benefits. The basic death benefit
before you or the oldest joint participant reaches age 80 will be the greater
of:
(1) your purchase payments, less any withdrawals and any applicable charges; or
(2) your certificate value as of the business day we receive proof of death at
our annuity service center and election of the payment method.
If you or the oldest joint participant reaches age 80, the basic death benefit
is your certificate value as of the business day we receive proof of death at
our Annuity Service Center and election of the payment method.
Reset Death Benefit. If you choose the reset death benefit, and before the date
you or the oldest joint participant reaches age 75, the death benefit will be
the greatest of:
(1) your purchase payments, less any withdrawals and any applicable charges;
(2) your certificate value as of the business day we receive proof of death at
our Annuity Service Center and election of the payment method; or
(3) your certificate value on the most recent 3 year certificate anniversary,
plus any subsequent purchase payments, less any subsequent withdrawals,
including any applicable charges. Your first certificate anniversary is one
calendar year from the date we issued your certificate.
If you choose the reset death benefit, and you or the oldest joint participant
reaches age 75, the death benefit will be the greatest of:
(1) your purchase payments, less any withdrawals and any applicable charges;
(2) your certificate value as of the business day we receive proof of death at
our Annuity Service Center and election of the payment method; or
(3) your certificate value on the most recent 3 year certificate anniversary
prior to the participant or the oldest joint participant reaching age 75,
plus any subsequent
Death Benefit
27
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purchase payments, less any subsequent withdrawals, including any applicable
charges. Your first certificate anniversary is one calendar year from the
date we issued your certificate.
We will deduct a quarterly charge for the reset death benefit from the value of
the assets in the investment choices. This charge is currently 0.10% on an
annual basis of the daily value of the assets invested in the investment
choices. We will deduct this charge proportionately from the investment choices
you have selected. This charge is guaranteed not to exceed 0.20%.
Ratchet Death Benefit. If you choose the ratchet death benefit, the death
benefit will be the greater of:
(1) your certificate value as of the business day we receive proof of death at
our Annuity Service Center and election of the payment method; or
(2) the annual ratchet death benefit amount.
We calculate the annual ratchet death benefit amount as follows:
When we issue your certificate, the annual ratchet death benefit is equal to
your initial purchase payment. Thereafter, and prior to the date you, or the
oldest joint participant or the annuitant if the certificate is owned by a non-
natural entity reaches age 80, we will calculate the ratchet death benefit:
a. when you make a purchase payment;
b. when you make a partial withdrawal; and
c. on your certificate anniversary.
You will increase your ratchet death benefit if you make a purchase payment. If
you make a subsequent purchase payment, the annual ratchet death benefit is
equal to the most recently calculated annual ratchet death benefit plus the
additional purchase payment.
You will decrease your ratchet death benefit if you make a partial withdrawal.
If you make a withdrawal, the annual ratchet death benefit is equal to the most
recently calculated annual ratchet death benefit, minus a withdrawal amount. We
calculate the withdrawal amount as follows:
. divide the amount withdrawn by the most recent certificate value; and
. multiply it by the most recent annual ratchet death benefit.
On your certificate anniversary, the annual ratchet death benefit is equal to
the greater of your certificate value or the most recently calculated annual
ratchet death benefit.
If you do not make any additional purchase payments or any withdrawals, the
annual ratchet death benefit will be the greatest of all certificate
anniversary certificate values on or prior to the date we calculate the death
benefit.
When you, or the oldest joint participant, or the annuitant if the certificate
is owned by a non-natural entity, reaches age 80, the death benefit is the
greater of:
(1) your certificate value as of the business day we receive proof of death at
our Annuity Service Center and election of the payment method; or
(2) the annual ratchet death benefit amount calculated on the certificate
anniversary just prior to age 80, and adjusted for subsequent purchase
payments and/or partial withdrawals in the same manner as described under
(a) and (b) above.
We will deduct a quarterly charge for the ratchet death benefit from the value
of the assets in the investment choices. This charge is currently 0.25% on an
annual basis of the daily value of the assets invested in the investment
choices. We will deduct this charge proportionately from the investment choices
you have selected. This charge is guaranteed not to exceed 0.35% if you were
age 60 or less when we issued your certificate; 0.50% if you were age 61
through age 70 when we issued your certificate; or 0.70% if you were age 71 and
older when we issued your certificate.
Death Benefit
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Death Benefit Payment Options During The Accumulation Phase
A beneficiary who is not your surviving spouse must elect to receive the death
benefit under one of the following payment options, in the event you die during
the accumulation phase.
Option 1 - lump sum payment of the death benefit; or
Option 2 - the payment of the entire death benefit within 5 years of the date
of death; or
Option 3 - payment of the death benefit under an annuity option over the
lifetime of the beneficiary or over a period not extending beyond the life
expectancy of the beneficiary with distribution beginning within 1 year of the
date of your death or any joint participant.
If a lump sum payment is requested, we will pay the amount within 7 days after
we receive due proof of death and other necessary information at our Annuity
Service Center unless we are required to suspend or delay payment. Payment to
the beneficiary, in any form other than a lump sum, may only be elected during
the 60-day period beginning with the date of receipt by us of proof of death.
Death Of Participant During The Income Phase
If you or the joint participant dies during the income phase, but the annuitant
is still alive, we will pay the remaining payments under the annuity option
elected at least as rapidly as under the method of distribution in effect at
the time of your death.
Death Of Annuitant
If the annuitant, who is not the participant or joint participant, dies during
the accumulation phase, you can name a new annuitant subject to the
underwriting rules we have in effect at the time. If you do not name an
annuitant within 30 days of the death of the annuitant, you will become the
annuitant. However, if the participant is a non-natural person we will treat
the death of the annuitant as the death of the participant, and you may not
name a new annuitant.
Upon the death of the annuitant on or after the annuity date, the death
benefit, if any, is as specified in the annuity option elected. We will pay
death benefits at least as rapidly as under the method of distribution in
effect at the annuitant's death.
Death Benefit
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Taxes
NOTE: We have prepared the following information on taxes as a general
discussion of the subject. It is not intended as tax advice to any individual.
You should consult your own tax adviser about your own circumstances. We have
included in the Statement of Additional Information an additional discussion
regarding taxes.
Annuity Certificates In General
Annuity certificates are a means of setting aside money for future needs -
usually retirement. Congress recognized how important saving for retirement
was and provided special rules in the Internal Revenue Code (Code) for
annuities.
Simply stated, these rules provide that you will not be taxed on the earnings
on the money held in your annuity certificate until you take the money out.
This is referred to as tax deferral.
For variable annuity certificates, tax deferral depends on the insurance
company and not you having control of the assets held in the separate accounts.
You can allocate account value from one fund of the separate account to another
but cannot direct the investments each fund makes. If you have too much
"investor control" of the assets supporting the separate account funds, then
you will be taxed on the gain in the contract as it is earned rather than when
it is withdrawn.
The Internal Revenue Service (IRS) has provided some guidance on investor
control but several issues remain unclear. One unanswered question is whether a
participant can have too much investor control if the variable certificate
offers a large choice of funds in which to invest account values.
We do not know if the IRS will issue any guidance on this question. We do not
know if any guidance would have a retroactive effect. Consequently, we reserve
the right to modify the certificate as necessary, so that you will not be
treated as having investor control of the assets held under the separate
account.
There are different rules as to how you are taxed depending on how you take the
money out and the type of certificate - qualified or non-qualified (see
following sections).
You, as the participant of a non-qualified annuity, will generally not be taxed
on increases in the value of your certificate until a distribution occurs -
either as a withdrawal or as annuity payments. When you make a withdrawal, you
are taxed on the amount of the withdrawal that is earnings. For annuity
payments, different rules apply. A portion of each annuity payment is treated
as a partial return of your purchase payments and is not taxed. The remaining
portion of the annuity payment is treated as ordinary income. How the annuity
payment is divided between taxable and non-taxable portions depends upon the
period over which the annuity payments are expected to be made. Annuity
payments received after you have recovered all of your purchase payments are
fully includible in income.
When a non-qualified certificate is owned by a non-natural person (e.g.,
corporation or certain other entities other than a trust holding the
certificate as an agent for a natural person), the certificate will generally
not be treated as an annuity for tax purposes.
Qualified And Non-Qualified Certificates
If you purchase the certificate as an individual and not under any pension
plan, specially sponsored program or an individual retirement annuity, your
certificate is referred to as a non-qualified certificate.
If you purchase the certificate under a pension plan, specially sponsored
program, or an individual retirement annuity, your certificate is referred to
as a qualified certificate. Examples of qualified plans are: deductible and
non-deductible Individual Retirement Annuities (IRAs), and pension and profit-
sharing plans, which include 401(k) plans and H.R. 10 Plans.
Taxes
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Withdrawals - Non-Qualified Certificates
The Code treats any withdrawals (1) allocable to purchase payments made after
August 13, 1982 in an annuity certificate entered into prior to August 14, 1982
and (2) from an annuity certificate entered into after August 14, 1982, as
first coming from earnings and then from your purchase payments. The withdrawn
earnings are includible in income.
The Code also provides that any amount received under an annuity certificate
which is included in income may be subject to a penalty. The amount of the
penalty is equal to 10% of the amount that is includible in income. Some
withdrawals may be exempt from the penalty. They include any amounts:
(1) paid on or after you reach age 59 1/2;
(2) paid to your beneficiary after you die;
(3) paid if you become totally disabled (as that term is defined in the Code);
(4) paid in a series of substantially equal payments made annually (or more
frequently) for life or your life expectancy or for the joint life
expectancies of you and your designated beneficiary;
(5) paid under an immediate annuity; or
(6) which come from purchase payments made before August 14, 1982.
Withdrawals - Qualified Certificates
If you have no cost basis for your interest in a qualified certificate, the
full amount of any distribution is taxable to you as ordinary income. If you do
have a cost basis for your interest, a portion of the distribution is taxable,
generally based on the ratio of your cost basis to your total certificate
value. Special tax rules may be available for certain distributions from a
qualified certificate.
Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion of
any distribution from qualified retirement plans, including certificates issued
and qualified under Code Sections 401 (Pension and Profit-Sharing Plans), 408
(Individual Retirement Annuities - IRAs), and 408A (Roth IRAs). Exceptions from
the penalty tax are as follows:
. distributions made on or after you reach age 59 1/2;
. distributions made after your death or disability (as defined in Code
Section 72(m)(7);
. after separation from service, distributions that are part of substantially
equal periodic payments made not less frequently than annually for your life
(or life expectancy) or the joint lives (or joint life expectancies) of you
and your designated beneficiary (in applying this exception to distributions
from IRAs, a separation from service is not required);
. distributions made after separation of service if you have reached age 55
(not applicable to distributions from IRAs);
. distributions made to you up to the amount allowable as a deduction to you
under Code Section 213 for amounts you paid during the taxable year for
medical care;
. distributions made to an alternate payee pursuant to a qualified domestic
relations order (not applicable to distributions from IRAs);
. distributions from an IRA for the purchase of medical insurance (as
described in Code Section 213(d)(1)(D)) for you and your spouse and
dependents if you received unemployment compensation for at least 12 weeks
and have not been re-employed for at least 60 days);
. distributions from an IRA to the extent they do not exceed your qualified
higher education expenses (as defined in Code Section 72(t)(7) for the
taxable year; and
. distributions from an IRA which are qualified first-time home buyer
distributions (as defined in Code Section 72(t)(8)).
Generally, distributions from a qualified plan must begin no later than April
1st of the calendar year following the later of (a) the year in which you
attain age 70 1/2 or (b) the calendar year in which you retire. The date set
forth in (b) does not apply to an IRA. Required distributions do not apply to a
Roth IRA during your lifetime. Required distributions must be over a period not
Taxes
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exceeding your life expectancy or the joint lives or joint life expectancies
of you and your designated beneficiary. If required minimum distributions are
not made, a 50% penalty tax is imposed on the shortfall amount.
Withdrawals - Tax-Sheltered Annuities
Pursuant to Revenue Ruling 90-24, we will allow partial or full transfers of a
participant's interest in a non-ERISA Tax-Sheltered Annuity to this
certificate. However, this certificate cannot be used for salary reduction
contributions.
The Code limits the withdrawal of purchase payments made by participants
through salary reductions from certain Tax-Sheltered Annuities. Withdrawals of
salary reduction amounts and their earnings can only be made when an
participant:
(1) reaches age 59 1/2;
(2) leaves his/her job;
(3) dies;
(4) becomes disabled, as that term is defined in the Code; or
(5) in the case of hardship.
In the case of hardship, the participant can only withdraw the purchase
payments and not any earnings.
Any certificate value as of December 31, 1988 is not subject to these
restrictions. Additionally, return of "excess contributions" or amounts paid
to a spouse as a result of a qualified domestic relations order are not
subject to these restrictions.
Taxes
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Other Information
Performance
We may advertise certain performance-related information. This information
reflects historical performance and is not intended to indicate or predict the
future performance.
Standardized Total Returns
We will show standardized average annual total returns for sub-accounts that
have been in existence for more than one year. These returns assume you made a
single $1,000 payment at the beginning of the period and withdrew the entire
amount at the end of the period. The return reflects the annual certificate
maintenance charge and all other separate account and certificate level
charges, except premium taxes, if any.
If a sub-account has been in existence for less than one year, we will show the
aggregate total return. This assumes you made a single $1,000 payment at the
beginning of the period and withdrew the entire amount at the end of the
period. The return reflects the change in unit value.
Nonstandard Total Returns
We will also show total returns based on historical performance of the sub-
accounts and underlying funds. We may assume the certificates were in existence
prior to their inception date, which they were not. Total return percentages
include all fund level and separate account level charges. They do not include
a certificate maintenance charge, or premium taxes, if any. If these charges
were included, returns would be less than those shown.
Total Returns compare the value of an accumulation unit at the beginning of a
period with the value of an accumulation unit at the end of the period.
Average Annual Total Returns measure this performance over a period of time
greater than one year. Average annual total returns compare values over a given
period of time and express the percentage as an average annual rate.
Yield and Effective Yield
We may also show yield and effective yield for the Oppenheimer Money Fund/VA
over a seven-day period, which we then "annualize". This means that when we
calculate yield, we assume that the amount of money the investment earns for
the week is earned each week over a 52-week period. We show this as a
percentage of the investment. We calculate the "effective yield" similarly, but
when we annualize the amount, we assume the income earned is re-invested.
Therefore, the effective yield is slightly higher than the yield because of the
compounding effect.
Related Performance
Some of the funds available to you may be similar to mutual funds offered in
the retail marketplace. These funds generally have the same investment
objectives, policies and portfolio managers as the retail mutual funds and
usually were formed after the retail mutual funds. While these funds generally
have identical investment objectives, policies and portfolio managers, they are
separate and distinct from retail mutual funds. In fact, performance of these
funds may be dramatically different from the performance of the retail mutual
funds. This is due to differences in the funds' sizes, dates shares of stocks
are purchased and sold, cash flows and expenses. You should remember that
retail mutual fund performance is not the performance of the funds available in
this certificate and is not an indication of future performance of these funds.
Year 2000
Like other businesses and governments around the world, we could be adversely
affected if the computer systems used by us and those with which we do business
do not properly recognize the year 2000. This is commonly known as the "Year
2000 issue".
In 1996, we began an enterprise-wide process of identifying, evaluating and
implementing changes to computer systems and applications software to address
the Year 2000 issue on our behalf and on behalf of certain subsidiaries. We are
addressing
Other Information
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the Year 2000 issue internally with modifications to existing programs and
conversions to new programs. We are also seeking assurances from vendors,
customers, service providers, governments and others with which we conduct
business, to determine their year 2000 readiness.
The costs related to the Year 2000 issue are currently being expensed, and
when measured against net gain from operations, are not material to us.
Distributors
MML Distributors, LLC ("MML Distributors") serves as principal underwriter for
the certificates. MML Investors Services, Inc. ("MMLISI") serves as co-
underwriter for the certificates. Their purpose as underwriters is to
distribute the certificates. MML Distributors and MMLISI are wholly owned
subsidiaries of MassMutual. Both are located at 1414 Main Street, Springfield,
Massachusetts 01144-1013.
We will pay commissions to broker-dealers who sell the certificates.
Currently, we pay an amount up to 1% of purchase payments made during the
first certificate year. Thereafter, we pay a maximum commission of 1.25% of
the certificate value.
From time to time, MML Distributors may enter into special arrangements with
certain broker-dealers. These special arrangements may provide for the payment
of higher compensation to such broker-dealers for selling the certificates.
Electronic Transmission Of Application Information
Upon agreement with a limited number of broker-dealers, we will accept
electronic data transmissions of application information. Our Annuity Service
Center will accept this information at the time the initial purchase payment
is transmitted by wire. We will not allow you to exercise any ownership rights
in the certificate until you have signed and returned to us one of the
following: an application; a delivery receipt; or what we consider to be their
equivalent. Please contact your representative for more information.
Assignment
You can assign the certificate at any time during your lifetime. We will not
be bound by the assignment until we receive written notice of the assignment.
We will not be liable for any payment or other action we take in accordance
with the certificate before we receive notice of the assignment. We are not
responsible for the validity of an assignment. You may be subject to tax
consequences if you assign your certificate.
If the certificate is issued pursuant to a qualified plan, there may be
limitations on your ability to assign the certificate. If you assign your
certificate, your rights may only be exercised with the consent of the
assignee of record. We require consent of any irrevocable beneficiary before
we assign proceeds.
Voting Rights
We are the legal owner of the fund shares. However, when a fund solicits
proxies in conjunction with a vote of shareholders, it is required to obtain
from you and other participants, instructions as to how to vote those shares.
When we receive those instructions, we will vote all of the shares, for which
we have not received voting instructions, in proportion to those instructions.
This will also include any shares that we own on our own behalf. If we
determine that we are no longer required to comply with the above, we will
vote the shares in our own right.
During the accumulation phase of your certificate and while the annuitant is
living, we determine the number of shares you may vote by dividing your
certificate value in each fund, if any, by $100. Fractional shares are
counted. During the income phase or after the annuitant dies, we determine the
number of shares you may vote based on our liability for future variable
monthly annuity payments.
Other Information
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Reservation Of Rights
In addition to any other rights reserved under the certificate, we reserve the
right to:
. substitute another fund for one of the funds you selected;
. add or eliminate sub-accounts; and
. change the name of any sub-account and/or fund.
If we exercise any of these rights, we will receive prior approval from the
Securities and Exchange Commissions, if necessary. We will also give you
notice of our intent to exercise any of these rights.
Suspension Of Payments Or Transfers
We may be required to suspend or postpone payments for withdrawals or
transfers from the funds for any period when:
. the New York Stock Exchange is closed (other than customary weekend and
holiday closings); or
. trading on the New York Stock Exchange is restricted; or
. an emergency exists as a result of which disposal of shares of the funds is
not reasonably practicable or we cannot reasonably value the shares of the
funds; or
. during any other period when the Securities and Exchange Commission, by
order, so permits for your protection.
We reserve the right to defer payment for a withdrawal from The Fixed Account
for the period permitted by law but not for more than six months.
Legal Proceedings
We are currently not involved in any legal proceedings that might adversely
impact the certificates.
Financial Statements
We have included our company financial statements in the Statement of
Additional Information.
Additional Information
For further information about the certificate, you may obtain a Statement of
Additional Information. You can call the telephone number indicated on the
cover page or you can write to us. For your convenience we have included a
form for that purpose.
The Table of Contents of this statement is as follows:
1. Company
2. Custodian
3. Assignment of Certificate
4. Distribution
5. Purchase of Securities Being Offered
6. Accumulation Units and Unit Value
7. Transfers During the Income Phase
8. Payment of Death Benefit
9. Annuity Payments
10. Matters Performance Measures
11. Federal Tax
12. Experts
13. Financial Statements
Other Information
35
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[This page intentionally left blank]
36
- --------------------------------------------------------------
<PAGE>
To: Massachusetts Mutual Life Insurance Company
Annuity Products, W578
P.O. Box 9067
Springfield, Massachusetts 01102-9067
Please send me a Statement of Additional Information for Massachusetts Mutual
Life Insurance Company's Panorama Passage.
Name___________________________________
Address________________________________
--------------------------------
City________________State ___ Zip ____
Telephone______________________________
37
- --------------------------------------------------------------
<PAGE>
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
PANORAMA PASSAGE VARIABLE ANNUITY
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
(Depositor)
MASSACHUSETTS MUTUAL VARIABLE ANNUITY SEPARATE ACCOUNT 4
(Registrant)
STATEMENT OF ADDITIONAL INFORMATION
September 30, 1999
This is not a prospectus. This Statement of Additional Information should be
read in conjunction with the prospectus dated September 30, 1999, for the
Individual Certificates issued under a Group Deferred Variable Annuity Contract
with Flexible Purchase Payments which are referred to herein.
For a copy of the prospectus call 1-800-366-8226 or write to: Massachusetts
Mutual Life Insurance Company, Panorama Passage, Annuity Service Center, W578,
P.O. Box 9067, Springfield, MA 01102-9067.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Company.................................................................... 2
Custodian.................................................................. 2
Assignment of Certificate.................................................. 2
Distribution............................................................... 3
Purchase of Securities Being Offered....................................... 3
Accumulation Units and Unit Value.......................................... 3
Transfers During The Income Phase.......................................... 4
Payment of Death Benefit................................................... 4
Annuity Payments........................................................... 5
Performance Measures....................................................... 6
Federal Tax Matters........................................................ 7
Experts.................................................................... 14
Financial Statements....................................................... FF-1
</TABLE>
1
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COMPANY
Massachusetts Mutual Life Insurance Company ("MassMutual"), 1295 State
Street, Springfield, Massachusetts, 01111, is a mutual life insurance company
specially chartered by the Commonwealth of Massachusetts on May 14, 1851. It is
currently licensed to transact life, accident, and health insurance business in
all states, the District of Columbia, Puerto Rico and certain provinces of
Canada. MassMutual had consolidated statutory assets in excess of $67 billion,
and estimated total assets under management of $176.8 billion as of December
31, 1998.
CUSTODIAN
The shares of the underlying funds purchased by the sub-accounts are held by
MassMutual as custodian of Massachusetts Mutual Variable Annuity Separate
Account 4 ("the separate account").
ASSIGNMENT OF CERTIFICATE
MassMutual will not be charged with notice of any assignment of a
certificate or of the interest of any beneficiary or of any other person unless
the assignment is in writing and MassMutual receives the original or a true
copy thereof at its Annuity Service Center. MassMutual assumes no
responsibility for the validity of any assignment.
While the certificates are generally assignable, all non-tax qualified
certificates must carry a non-transferability endorsement which precludes their
assignment. For qualified certificates, the following exceptions and provisions
should be noted:
(1) No person entitled to receive annuity payments under a certificate or
part or all of the certificate's value will be permitted to commute,
anticipate, encumber, alienate or assign such amounts, except upon the written
authority of the participant given during the annuitant's lifetime and received
in good order by MassMutual at its Annuity Service Center. To the extent
permitted by law, no certificate nor any proceeds or interest payable
thereunder will be subject to the annuitant's or any other person's debts,
contracts or engagements, nor to any levy or attachment for payment thereof;
(2) If an assignment of a certificate is in effect on the maturity date,
MassMutual reserves the right to pay to the assignee in one sum the amount of
the certificate's maturity value to which he is entitled, and to pay any
balance of such value in one sum to the participant, regardless of any payment
options which the participant may have elected. Moreover, if an assignment of a
certificate is in effect at the death of the annuitant prior to the maturity
date, MassMutual will pay to the assignee in one sum, the death benefit amount
which corresponds to the death benefit choice in effect at the time of the
annuitant's death. (See Death Benefit in the prospectus);
(3) Certificates used in connection with a tax-qualified retirement plan
must be endorsed to provide that they may not be sold, assigned or pledged for
any purpose unless they are owned by the trustee of a trust described in
Section 401(a) or by the administrator of an annuity plan described under
Section 403(a) of the Code; and
(4) Certificates issued under a plan for an Individual Retirement Annuity
pursuant to Section 408 of the Code must be endorsed to provide that they are
non-transferable. Such certificates may not be sold, assigned, discounted, or
pledged as collateral for a loan or as security for the performance of an
obligation or for any other purpose by the Annuitant to any person or party
other than MassMutual, except to a former spouse of the annuitant in accordance
with the terms of a divorce decree or other written instrument incident to a
divorce.
Assignments may be subject to federal income tax.
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DISTRIBUTION
MML Distributors, LLC ("MML Distributors"), is the principal underwriter of
the certificates. MML Investors Services, Inc. ("MMLISI") serves as co-
underwriter of the certificates. Both MML Distributors and MMLISI are broker-
dealers registered with the Securities and Exchange Commission and members of
the National Association of Securities Dealers, Inc. MML Distributors and
MMLISI are indirect wholly-owned subsidiaries of MassMutual and affiliates of
MassMutual.
Pursuant to the Underwriting and Servicing Agreement, both MML Distributors
and MMLISI will receive compensation for their activities as underwriters for
the Separate Account. Commissions will be paid through MMLISI and MML
Distributors to agents and selling brokers for selling the Certificates.
MML Distributors may enter into selling agreements with other broker-
dealers which are registered with the Securities and Exchange Commission and
are members of the National Association of Securities Dealers, Inc. ("selling
brokers"). Certificates are sold through agents who are licensed by state
insurance officials to sell the Certificates. These agents are also registered
representatives of selling brokers or of MMLISI.
MML Distributors does business under different variations of its name;
including the name MML Distributors, L.L.C. in the states of Illinois,
Michigan, Oklahoma, South Dakota, and Washington, and the name MML
Distributors, Limited Liability Company in the states of Maine, Ohio, and West
Virginia.
The offering is on a continuous basis.
PURCHASE OF SECURITIES BEING OFFERED
MassMutual sells interests in the separate account to participants as
accumulation units. Charges associated with such securities are discussed in
the Expenses section of the prospectus. Any special purchase plan or exchange
program offered by this certificate is mentioned in the prospectus.
ACCUMULATION UNITS AND UNIT VALUE
During the accumulation phase, accumulation units shall be used to account
for all amounts allocated to or withdrawn from the sub-accounts of the
separate account as a result of purchase payments, withdrawals, transfers, or
fees and charges. MassMutual will determine the number of accumulation units
of a sub-account purchased or canceled. This will be done by dividing the
amount allocated to (or the amount withdrawn from) the sub-account by the
dollar value of one accumulation unit of the sub-account as of the end of the
business day during which the transaction is received at the annuity service
center.
The accumulation unit value for each sub-account was arbitrarily set
initially at $10. Subsequent accumulation unit values for each sub-account are
determined for each day in which the New York Stock Exchange is open for
business ("business day") by multiplying the accumulation unit value for the
immediately preceding business day by the net investment factor for the sub-
account for the current business day.
The net investment factor for each sub-account is determined by dividing A
by B and subtracting C where:
A is (i) the net asset value per share of the funding vehicle or portfolio
of a funding vehicle held by the sub-account for the current business day;
plus (ii) any dividend per share declared on behalf of such funding vehicle or
portfolio of a funding vehicle that has an ex-dividend date within the current
business day; less (iii) the cumulative charge or credit for taxes reserved
which is determined by MassMutual to have resulted from the operation or
maintenance of the sub-account.
B is the net asset value per share of the funding vehicle or portfolio held
by the sub-account for the immediately preceding business day.
C is the cumulative charge for the mortality and expense risk charge and
for the administrative charge.
The accumulation unit value may increase or decrease from business day to
business day.
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<PAGE>
TRANSFERS DURING THE INCOME PHASE
Transfers of annuity reserves between sub-accounts will be made by
converting the number of annuity units attributable to the annuity reserves
being transferred to the number of annuity units of the sub-account to which
the transfer is made, so that the next annuity payment if it were made at that
time would be the same amount that it would have been with out the transfer.
Thereafter, annuity payments will reflect changes in the value of the new
annuity units.
The amount transferred to the general account from a sub-account will be
based on the annuity reserves for the participant in that sub-account.
Transfers to the general account will be made by converting the annuity units
being transferred to purchase fixed annuity payments under the annuity option
in effect and based on the age of the annuitant at the time of the transfer.
See the Transfers During the Income Phase section in the prospectus for
more information about transfers during the income phase.
PAYMENT OF DEATH BENEFIT
MassMutual will require due proof of death before any death benefit is
paid. Due proof of death will be:
1. a certified death certificate;
2. a certified decree of a court of competent jurisdiction as to the
finding of death; or
3. any other proof satisfactory to MassMutual.
All death benefits will be paid in accordance with applicable law or
regulations governing death benefit payments.
The beneficiary designation in effect on the date we issue the certificate
will remain in effect until changed. Unless the participant provides
otherwise, the death benefit will be paid in equal shares to the
beneficiary(ies) as follows:
1. to the primary beneficiary(ies) who survive the participant's and/or the
annuitant's death, as applicable; or if there are none
2. to the contingent beneficiary(ies) who survive the participant's and/or
the annuitant's death, as applicable; or if there are none
3. to the estate of the participant.
You may name an irrevocable beneficiary(ies). In that case, a change of
beneficiary requires the consent of any irrevocable beneficiary. If an
irrevocable beneficiary is named, the participant retains all other rights.
See the Death Benefit section in the prospectus for more information on
death benefits.
4
<PAGE>
ANNUITY PAYMENTS
A variable annuity payment is an annuity with payments which; (1) are not
predetermined as to dollar amount; and (2) will vary in amount with the net
investment results of the applicable sub-accounts of the separate account.
Annuity payments also depend upon the age of the annuitant and any joint
annuitant and the assumed interest factor utilized. The annuity table used will
depend upon the annuity option chosen. The dollar amount of annuity payments
after the first is determined as follows;
1. The dollar amount of the first annuity payment is divided by the
value of an annuity unit as of the annuity date. This establishes the
number of annuity units for each annuity payment. The number of annuity
units remains fixed during the annuity period.
2. For each sub-account, the fixed number of annuity units is
multiplied by the annuity unit value on each subsequent annuity payment
date.
3. The total dollar amount of each variable annuity payment is the sum
of all sub-account variable annuity payments.
The number of annuity units is determined as follows:
1. The number of annuity units credited in each sub-account will be
determined by dividing the product of the portion of the certificate value to
be applied to the sub-account and the annuity purchase rate by the value of one
annuity unit in that sub-account on the annuity date. The purchase rates are
set forth in the variable annuity rate tables in the certificate.
2. For each sub-account, the amount of each annuity payment equals the
product of the annuitant's number of annuity units and the annuity unit value
on the payment date. The amount of each payment may vary.
The value of any annuity unit for each sub-account of the separate account
was arbitrarily set initially at $10. The sub-account annuity unit value at the
end of any subsequent valuation period is determined as follows:
1. The net investment factor for the current business day is multiplied by
the value of the annuity unit for the sub-account for the immediately preceding
business day.
2. The result in (1) is then divided by an assumed investment rate factor.
The assumed investment rate factor equals 1.00 plus the assumed investment rate
for the number of days since the preceding business day. The assumed investment
rate is based on an effective annual rate of 4%.
The value of an annuity unit may increase or decrease from business day to
business day. See the Income Phase section in the prospectus for more
information.
5
<PAGE>
PERFORMANCE MEASURES
MassMutual may advertise certain performance-related information. This
information reflects historical performance and is not intended to indicate or
predict future performance.
Standardized Average Annual Total Return
MassMutual will show standardized average annual total returns for each sub-
account that has been in existence for more than one year. These returns assume
you made a single $1,000 payment at the beginning of the period and withdrew
the entire amount at the end of the period. The return reflects a deduction for
the annual certificate maintenance charge and all other fund, separate account
and certificate level charges, except premium taxes, if any.
If a sub-account has been in existence for less than one year, MassMutual
will show the aggregate total return. This assumes you made a single $1,000
payment at the beginning of the period and withdrew the entire amount at the
end of the period. The return reflects the change in unit value.
Non-Standard Total Returns
MassMutual will also show total returns based on historical performance of
the sub-accounts and underlying funds. MassMutual may assume the certificates
were in existence prior to their inception date, which they were not. Total
return percentages will include all fund level and separate account level
charges. They do not include the annual certificate maintenance charge, or
premium taxes, if any. If these charges were included, returns would be less
than those shown.
Total Returns compare the value of an accumulation unit at the beginning of
a period with the value of an accumulation unit at the end of the period.
Average Annual Total Returns measure this performance over a period of time
greater than one year. Average annual total returns compare values over a given
period of time and express the percentage as an average annual rate.
The performance figures will be calculated on the basis of the historical
performance of the funds, and may assume the certificates were in existence
prior to their inception date (which they were not). Beginning as of the date
the certificates are available (inception date), actual accumulation unit
values are used for the calculations.
MassMutual may also show yield and effective yield for the Money Sub-Account
over a seven-day period, which we then "annualize." This means that when we
calculate yield, we assume that the amount of money the investment earns for
the week is earned each week over a 52-week period. We show this as a
percentage of the investment. We calculate the "effective yield" similarly but
when we annualize the amount, we assume the income earned is re-invested.
Therefore, the effective yield is slightly higher than the yield because of the
compounding effect.
These figures reflect as deduction for all fund, separate account and
contract level charges assuming the contract remains in force. The figures do
not reflect premium tax deductions, if any, which if included, would reduce the
percentages reported.
6
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FEDERAL TAX MATTERS
General
Note: The following description is based upon MassMutual's understanding of
current federal income tax law applicable to annuities in general. MassMutual
cannot predict the probability that any changes in such laws will be made.
Purchasers are cautioned to seek competent tax advice regarding the possibility
of such changes. MassMutual does not guarantee the tax status of the
certificates. Purchasers bear the complete risk that the certificates may not
be treated as "annuity contracts" under federal income tax laws. It should be
further understood that the following discussion is not exhaustive and that
special rules not described herein may be applicable in certain situations.
Moreover, no attempt has been made to consider any applicable state or other
tax laws.
Section 72 of the Code governs taxation of annuities in general. An
owner/participant is generally not taxed on increases in the value of a
certificate until distribution occurs, either in the form of a lump sum payment
or as annuity payments under the annuity option selected. For a lump sum
payment received as a total withdrawal (total surrender), the recipient is
taxed on the portion of the payment that exceeds the cost basis of the
certificate. For non-qualified certificates, this cost basis is generally the
purchase payments, while for qualified certificates there may be no cost basis.
The taxable portion of the lump sum payment is taxed at ordinary income tax
rates.
For annuity payments, a portion of each payment in excess of an exclusion
amount is includible in taxable income. The exclusion amount for payments based
on a fixed annuity option is determined by multiplying the payment by the ratio
that the cost basis of the certificate (adjusted for any period or refund
feature) bears to the expected return under the certificate. The exclusion
amount for payments based on a variable annuity option is determined by
dividing the cost basis of the certificate (adjusted for any period certain or
refund guarantee) by the number of years over which the annuity is expected to
be paid. Payments received after the investment in the certificate has been
recovered (i.e. when the total of the excludable amount equals the investment
in the certificate) are fully taxable. The taxable portion is taxed at ordinary
income tax rates. For certain types of qualified plans there may be no cost
basis in the certificate within the meaning of Section 72 of the Code.
Owner/participants, annuitants and beneficiaries under the certificates should
seek competent financial advice about the tax consequences of any
distributions.
MassMutual is taxed as a life insurance company under the Code. For federal
income tax purposes, the separate account is not a separate entity from
MassMutual, and its operations form a part of MassMutual.
Diversification
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity certificates. The Code provides that a
variable annuity certificate will not be treated as an annuity certificate for
any period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the
certificate as an annuity contract would result in the imposition of federal
income tax to the owner/participant with respect to earnings allocable to the
certificate prior to the receipt of payments under the certificate. The Code
contains a safe harbor provision which provides that annuity certificates such
as the certificate meet the diversification requirements if, as of the end of
each quarter, the underlying assets meet the diversification standards for a
regulated investment company and no more than fifty-five percent (55%) of the
total assets consist of cash, cash items, U.S. Government securities and
securities of other regulated investment companies.
On March 2, 1989, the Treasury Department issued Regulations (Treas.
Reg.1.817-5), which established diversification requirements for the investment
portfolios underlying variable certificates such as the certificate. The
regulations amplify the diversification requirements for variable certificates
set forth in the Code and provide an alternative to the safe harbor provision
described above. Under the regulations, an investment
7
<PAGE>
portfolio will be deemed adequately diversified if: (1) no more than 55% of the
value of the total assets of the portfolio is represented by any one
investment; (2) no more than 70% of the value of the total assets of the
portfolio is represented by any two investments; (3) no more than 80% of the
value of the total assets of the portfolio is represented by any three
investments; and (4) no more than 90% of the value of the total assets of the
portfolio is represented by any four investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable
certificates by Section 817(h) of the Code have been met, "each United States
government agency or instrumentality shall be treated as a separate issuer."
MassMutual intends that all investment portfolios underlying the
certificates will be managed in such a manner as to comply with these
diversification requirements.
The Treasury Department has indicated that the diversification regulations
do not provide guidance regarding the circumstances in which owner control of
the investments of the separate account will cause the owner/participant to be
treated as the owner of the assets of the separate account, thereby resulting
in the loss of favorable tax treatment for the certificate. At this time it
cannot be determined whether additional guidance will be provided and what
standards may be contained in such guidance.
The amount of owner/participant control which may be exercised under the
certificate is different in some respects from the situations addressed in
published rulings issued by the Internal Revenue Service in which it was held
that the policy owner was not the owner of the assets of the separate account.
It is unknown whether these differences, such as the owner/participant's
ability to transfer among investment choices or the number and type of
investment choices available, would cause the owner/participant to be
considered as the owner/participant of the assets of the separate account
resulting in the imposition of federal income tax to the owner/participant with
respect to earnings allocable to the certificate prior to receipt of payments
under the certificate.
In the event any forthcoming guidance or ruling is considered to set forth a
new position, such guidance or ruling will generally be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the
owner/participant being retroactively determined to be the owner/participant of
the assets of the separate account.
Due to the uncertainty in this area, MassMutual reserves the right to modify
the certificate in an attempt to maintain favorable tax treatment.
Multiple Certificates
The Code provides that multiple non-qualified annuity certificates which are
issued within a calendar year to the same participant by one company or its
affiliates are treated as one annuity certificate for purposes of determining
the tax consequences of any distribution. Such treatment may result in adverse
tax consequences including more rapid taxation of the distributed amounts from
such combination of certificates. Owner/participants should consult a tax
adviser prior to purchasing more than one non-qualified annuity certificate in
any calendar year.
Certificates Owned by Other than Natural Persons
Under Section 72(u) of the Code, the investment earnings on premiums for the
certificates will be taxed currently to the owner/participant if the
owner/participant is a non-natural person, e.g., a corporation or certain other
entities. Such certificates generally will not be treated as annuities for
federal income tax purposes. However, this treatment is not applied to a
certificate held by a trust or other entity as an agent for a natural person
nor to certificates held by qualified plans. Purchasers should consult their
own tax counsel or other tax adviser before purchasing a certificate to be
owned by a non-natural person.
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Tax Treatment of Assignments
An assignment or pledge of a certificate may be a taxable event.
Owner/participants should therefore consult competent tax advisers should they
wish to assign or pledge their certificates.
Income Tax Withholding
All distributions or the portion thereof which is includible in the gross
income of the owner/participant are subject to federal income tax withholding.
Generally, amounts are withheld from periodic payments at the same rate as
wages and at the rate of 10% from non-periodic payments. However, the
owner/participant, in some cases, may elect not to have taxes withheld or to
have withholding done at a different rate.
Effective January 1, 1993, certain distributions from retirement plans
qualified under Section 401 of the Code, which are not directly rolled over to
another eligible retirement plan or individual retirement account or individual
retirement annuity, are subject to a mandatory 20% withholding for federal
income tax. The 20% withholding requirement generally does not apply to: a) a
series of substantially equal payments made at least annually for the life or
life expectancy of the participant or joint and last survivor expectancy of the
participant and a designated beneficiary or for a specified period of 10 years
or more; or b) distributions which are required minimum distributions; or c)
the portion of the distributions not includible in gross income (i.e. returns
of after-tax contributions). The 20% withholding requirement also may not apply
to hardship distributions from a 401(k) plan or a tax-sheltered annuity made
after December 31, 1998. Participants should consult their own tax counsel or
other tax adviser regarding withholding requirements.
Tax Treatment of Withdrawals--Non-Qualified Certificates
Section 72 of the Code governs treatment of distributions from annuity
certificates. It provides that if the certificate value exceeds the aggregate
purchase payments made, any amount withdrawn will be treated as coming first
from the earnings and then, only after the income portion is exhausted, as
coming from the principal. This treatment is applicable to withdrawals
allocable to purchase payments made after August 13, 1982 in an annuity
contract entered into prior to August 14, 1992 and withdrawals from an annuity
contract entered into after August 14, 1982. Withdrawn earnings are includible
in gross income. It further provides that a ten percent (10%) penalty will
apply to the income portion of any premature distribution. However, the penalty
is not imposed on amounts received: (a) after the taxpayer reaches age 59 1/2;
(b) after the death of the owner/participant; (c) if the taxpayer is totally
disabled (for this purpose disability is as defined in Section 72(m)(7) of the
Code); (d) in a series of substantially equal periodic payments made not less
frequently than annually for the life (or life expectancy) of the taxpayer or
for the joint lives (or joint life expectancies) of the taxpayer and his or her
beneficiary; (e) under an immediate annuity; or (f) which are allocable to
purchase payments made prior to August 14, 1982.
With respect to (d) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% tax penalty), but for the exception, plus interest for the tax
years in which the exception was used.
The above information does not apply to qualified certificates. However,
separate tax withdrawal penalties and restrictions may apply to such qualified
certificates. (See "Tax Treatment of Withdrawals--Qualified Certificates"
below.)
Qualified Plans
The certificates offered herein are designed to be suitable for use under
various types of qualified plans. Taxation of participants in each qualified
plan varies with the type of plan and terms and conditions of each specific
plan. Owner/participants, annuitants and beneficiaries are cautioned that
benefits under a qualified plan may be subject to the terms and conditions of
the plan regardless of the terms and conditions of the certificates
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<PAGE>
issued pursuant to the plan. Some retirement plans are subject to distribution
and other requirements that are not incorporated into MassMutual's
administrative procedures. Owner/participants, and beneficiaries are
responsible for determining that contributions, distributions and other
transactions with respect to the certificates comply with applicable law.
Following are general descriptions of the types of qualified plans with which
the certificates may be used. Such descriptions are not exhaustive and are for
general informational purposes only. The tax rules regarding qualified plans
are very complex and will have differing applications depending on individual
facts and circumstances. Each purchaser should obtain competent tax advice
prior to purchasing a certificate issued under a qualified plan.
Certificates issued pursuant to qualified plans include special provisions
restricting certificate provisions that may otherwise be available as described
herein. Generally, certificates issued pursuant to qualified plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from qualified certificates. (See "Tax
Treatment of Withdrawals--Qualified Certificates" below.)
On July 6, 1983, the Supreme Court decided in Arizona Governing Committee v.
Norris that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The certificates sold by MassMutual in connection
with qualified plans will utilize annuity tables which do not differentiate on
the basis of sex. Such annuity tables will also be available for use in
connection with certain non-qualified deferred compensation plans.
a. H.R. 10 Plans
Section 401 of the Code permits self-employed individuals to establish
qualified plans for themselves and their employees, commonly referred to as
"H.R. 10" or "Keogh" plans. Contributions made to the plan for the benefit of
the employees will not be included in the gross income of the employees until
distributed from the Plan. The tax consequences to participants may vary
depending upon the particular plan design. However, the Code places limitations
and restrictions on all plans including on such items as: amount of allowable
contributions; form, manner and timing of distributions; transferability of
benefits; vesting and nonforfeitability of interests; nondiscrimination in
eligibility and participation; and the tax treatment of distributions,
withdrawals and surrenders. (See "Tax Treatment of Withdrawals--Qualified
Certificates" below.) Purchasers of certificates for use with an H.R. 10 Plan
should obtain competent tax advice as to the tax treatment and suitability of
such an investment.
b. Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to an
IRA which will be deductible from the individual's gross income. These IRAs are
subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Withdrawals--Qualified Certificates"
below.) Under certain conditions, distributions from other IRAs and other
Qualified Plans may be rolled over or transferred on a tax-deferred basis into
an IRA. Sales of certificates for use with IRAs are subject to special
requirements imposed by the Code, including the requirement that certain
informational disclosure be given to persons desiring to establish an IRA.
Purchasers of certificates to be qualified as Individual Retirement Annuities
should obtain competent tax advice as to the tax treatment and suitability of
such an investment.
Roth IRAs
Section 408A of the Code provides that beginning in 1998, individuals may
purchase a new type of non-deductible IRA, known as a Roth IRA. Purchase
payments for a Roth IRA are limited to a maximum of $2,000
10
<PAGE>
per year. Lower maximum limitations apply to individuals with adjusted gross
incomes between $95,000 and $110,000 in the case of single taxpayers, between
$150,000 and $160,000 in the case of married taxpayers filing joint returns,
and between $0 and $10,000 in the case of married taxpayers filing separately.
An overall $2,000 annual limitation continues to apply to all of a taxpayer's
IRA contributions, including Roth IRA and non-Roth IRAs.
Qualified distributions from Roth IRAs are free from federal income tax. A
qualified distribution requires that an individual has held the Roth IRA for at
least five years and, in addition, that the distribution is made either after
the individual reaches age 59 1/2, on the individual's death or disability, or
as a qualified first-time home purchase, subject to a $10,000 lifetime maximum,
for the individual, a spouse, child, grandchild, or ancestor. Any distribution
which is not a qualified distribution is taxable to the extent of earnings in
the distribution. Distributions are treated as made from contributions first
and therefore no distributions are taxable until distributions exceed the
amount of contributions to the Roth IRA. The 10% penalty tax and the regular
IRA exceptions to the 10% penalty tax apply to taxable distributions from a
Roth IRA.
Amounts may be rolled over from one Roth IRA to another Roth IRA.
Furthermore, an individual may make a rollover contribution from a non-Roth IRA
to a Roth IRA, unless the individual has adjusted gross income over $100,000 or
the individual is a married taxpayer filing a separate return. The individual
must pay tax on any portion of the IRA being rolled over that represents income
or a previously deductible IRA contribution.
Purchasers of certificates to be qualified as a Roth IRA should obtain
competent tax advice as to the tax treatment and suitability of such an
investment.
c. Corporate Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit corporate employers to
establish various types of retirement plans for employees. These retirement
plans may permit the purchase of the certificates to provide benefits under the
plan. Contributions to the plan for the benefit of employees will not be
includible in the gross income of the employees until distributed from the
plan. The tax consequences to participants may vary depending upon the
particular plan design. However, the Code places limitations and restrictions
on all Plans including on such items as: amount of allowable contributions;
form, manner and timing of distributions; transferability of benefits; vesting
and nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders. (See "Tax Treatment of Withdrawals--Qualified Certificates" below.)
Purchasers of certificates for use with Corporate Pension or Profit Sharing
Plans should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
d. Tax Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax sheltered annuities"
by public schools and certain charitable, educational and scientific
organizations described in Section 501(c)(3) of the Code. These qualifying
employers may make contributions to the certificates for the benefit of their
employees. Such contributions are not includible in the gross income of the
employees until the employees receive distributions from the certificates. The
amount of contributions to the tax-sheltered annuity is limited to certain
maximums imposed by the Code. Furthermore, the Code sets forth additional
restrictions governing such items as transferability, distributions,
nondiscrimination and withdrawals. (See "Tax Treatment of Withdrawals--
Qualified Certificates" and "Tax Sheltered Annuities--Withdrawal Limitations"
below.) Employee loans are not allowable under the certificates. Any employee
should obtain competent tax advice as to the tax treatment and suitability of
such an investment.
11
<PAGE>
Tax Treatment of Withdrawals--Qualified Certificates
In the case of a withdrawal under a qualified certificate, a ratable portion
of the amount received is taxable, generally based on the ratio of the
individual's cost basis to the individual's total accrued benefit under the
retirement plan. Special tax rules may be available for certain distributions
from a qualified certificate. Section 72(t) of the Code imposes a 10% penalty
tax on the taxable portion of any distribution from qualified retirement plans,
including certificates issued and qualified under Code Sections 401 (H.R. 10
and Corporate Pension and Profit-Sharing Plans), and 408 (Individual Retirement
Annuities) and 408A (Roth IRAs). To the extent amounts are not includible in
gross income because they have been rolled over to an IRA or to another
eligible qualified plan, no tax penalty will be imposed. The tax penalty will
not apply to the following distributions: (a) if distribution is made on or
after the date on which the owner/participant or annuitant (as applicable)
reaches age 59 1/2; (b) distributions following the death or disability of the
owner/participant or annuitant (as applicable) (for this purpose disability is
as defined in Section 72(m) (7) of the Code); (c) after separation from
service, distributions that are part of substantially equal periodic payments
made not less frequently than annually for the life (or life expectancy) of the
owner/participant or annuitant (as applicable) or the joint lives (or joint
life expectancies) of such owner/participant or annuitant (as applicable) and
his or her designated beneficiary; (d) distributions to an owner/participant or
annuitant (as applicable) who has separated from service after he has attained
age 55; (e) distributions made to the owner/participant or annuitant (as
applicable) to the extent such distributions do not exceed the amount allowable
as a deduction under Code Section 213 to the owner/participant or annuitant (as
applicable) for amounts paid during the taxable year for medical care; (f)
distributions made to an alternate payee pursuant to a qualified domestic
relations order; (g) distributions from an IRA or the purchase of medical
insurance (as described in Section 213(d)(1)(D) of the Code) for the
owner/participant or annuitant (as applicable) and his or her spouse and
dependents if the owner/participant or annuitant (as applicable) has received
unemployment compensation for at least 12 weeks (this exception will no longer
apply after the owner/participant or annuitant (as applicable) has been re-
employed for at least 60 days); (h) distributions from an IRA made to the
owner/participant or annuitant (as applicable) to the extent such distributions
do not exceed the qualified higher education expenses (as defined in Section
72(t)(7) of the Code) of the owner/participant or annuitant (as applicable) for
the taxable year; and (i) distributions from an IRA made to the
owner/participant or annuitant (as applicable) which are qualified first-time
home buyer distributions (as defined in Section 72(t)(8) of the Code.) The
exceptions stated in (d) and (f) above do not apply in the case of an IRA. The
exception stated in (c) above applies to an IRA without the requirement that
there be a separation from service.
With respect to (c) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
Generally, distributions from a qualified plan must begin no later than
April 1st of the calendar year following the later of (a) the year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an IRA Required
distributions do not apply to a Roth IRA during the lifetime of the
owner/participant. Required distributions must be over a period not exceeding
the life expectancy of the individual or the joint lives or life expectancies
of the individual and his or her designated beneficiary. If the required
minimum distributions are not made, a 50% penalty tax is imposed on the amount
of the shortfall.
Tax Sheltered Annuities--Withdrawal Limitations
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the owner/participant: (1) attains age 59-
1/2; (2) separates from service; (3) dies; (4) becomes disabled (within the
meaning of Section 72(m)(7) of the Code; or (5) in the case of hardship.
However, withdrawals for hardship are restricted to the portion of the
participant's value which represents contributions made by the
owner/participant
12
<PAGE>
and does not include any investment results. The limitations on withdrawals
became effective on January 1, 1989 and apply only to salary reduction
contributions made after December 31, 1988, to income attributable to such
contributions and to income attributable to amounts held as of December 31,
1988. The limitations on withdrawals do not affect transfers between tax
sheltered annuity plans. Participants should consult their own tax counsel or
other tax adviser regarding any distributions.
Section 457 Deferred Compensation ("Section 457") Plans
Employees of (and independent contractors who perform services for) certain
state and local governmental units, or certain tax-exempt employers, may
participate in a Section 457 plan of the employer, allowing them to defer part
of their salary or other compensation. The amount deferred, and accrued income
thereon, will not be taxable until it is 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 generally one-third of the employee's includible compensation, up to
$8,000 (in 1999). Includible compensation means earnings for services rendered
to the employer which are includible in the employee's gross income, excluding
the contributions under the Section 457 plan or a Tax-Sheltered Annuity.
Certain catch-up deferrals are permitted during the last three (3) years before
an employee attains normal retirement age. The certificate purchased is issued
to the employer, and the employee has no rights or vested interest in the
certificate. All certificate value must be held for the exclusive benefit of
the employee, and payments can only be made in accordance with Section 457 plan
provisions. Presently, tax-free transfers of assets in a section 457 plan can
only be made to another section 457 plan in certain limited cases.
Purchasers of certificates for use with Section 457 plans should obtain
competent tax advice as to the tax treatment and suitability of such an
investment.
13
<PAGE>
EXPERTS
We have included the financial statements of MassMutual in this Statement of
Additional Information in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as an expert in
accounting and auditing.
PricewaterhouseCoopers LLP's report on the statutory financial statements of
MassMutual includes explanatory paragraphs relating to the use of statutory
accounting practices rather than generally accepted accounting principles.
We have not included financial statements for the Separate Account herein
because, as of the date of this Statement of Additional Information, the sub-
accounts available under the certificates had no assets.
Effective July 22, 1999, MassMutual dismissed PricewaterhouseCoopers LLP as
its independent certified public accountants and appointed Deloitte & Touche
LLP, City Place, 185 Asylum Street, Hartford, CT 06103, as its independent
certified public accountants. Deloitte & Touche LLP has not audited or reviewed
the financial statements of MassMutual contained in this Statement of
Additional Information.
14
<PAGE>
Report Of Independent Accountants
To the Board of Directors and Policyholders of
Massachusetts Mutual Life Insurance Company
We have audited the accompanying statutory statements of financial position of
Massachusetts Mutual Life Insurance Company as of December 31, 1998 and 1997,
and the related statutory statements of income and changes in policyholders'
contingency reserves, and of cash flows for each of the three years in the
period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 1, these financial statements were prepared in conformity
with accounting practices prescribed or permitted by the Division of Insurance
of the Commonwealth of Massachusetts, which practices differ from generally
accepted accounting principles. The effects on the financial statements of the
variances between the statutory basis of accounting and generally accepted
accounting principles, although not reasonably determinable, are presumed to be
material.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements audited by us do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Massachusetts Mutual Life Insurance Company as of December 31, 1998 and 1997,
or the results of its operations or its cash flows for each of the three years
in the period ended December 31, 1998.
In our opinion, the financial statements audited by us present fairly, in all
material respects, the financial position of Massachusetts Mutual Life Insurance
Company as of December 31, 1998 and 1997, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1998, on the basis of accounting described in Note 1.
PricewaterhouseCoopers LLP
Springfield, Massachusetts
February 25, 1999
FF-1
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF FINANCIAL POSITION
December 31,
1998 1997
-------- --------
(In Millions)
Assets:
Bonds $ 25,215.8 $ 23,508.2
Common stocks 296.3 354.7
Mortgage loans 5,916.5 5,245.8
Real estate 1,739.8 1,697.7
Other investments 2,263.7 1,963.8
Policy loans 5,224.2 4,950.4
Cash and short-term investments 1,123.3 1,941.2
----------- -----------
41,779.6 39,661.8
Other assets 1,306.2 1,169.7
----------- -----------
43,085.8 40,831.5
Separate account assets 19,589.7 16,803.1
----------- -----------
$ 62,675.5 $ 57,634.6
=========== ===========
See notes to statutory financial statements.
FF-2
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF FINANCIAL POSITION, Continued
December 31,
1998 1997
-------- --------
(In Millions)
Liabilities:
Policyholders' reserves and funds $ 35,277.0 $ 33,783.2
Policyholders' dividends 1,021.6 954.1
Policyholders' claims and other benefits 332.4 353.4
Federal income taxes 634.9 436.5
Asset valuation and other investment reserves 1,053.4 973.4
Other liabilities 1,578.9 1,457.9
----------- -----------
39,898.2 37,958.5
Separate account liabilities 19,588.5 16,802.8
----------- -----------
59,486.7 54,761.3
Policyholders' contingency reserves 3,188.8 2,873.3
----------- -----------
$ 62,675.5 $ 57,634.6
=========== ===========
See notes to statutory financial statements.
FF-3
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
-------- -------- --------
(In Millions)
<S> <C> <C> <C>
Revenue:
Premium income $ 7,482.2 $ 6,764.8 $ 6,328.6
Net investment income 2,956.8 2,870.2 2,834.4
Fees and other income 154.0 126.7 117.2
--------- --------- ---------
10,593.0 9,761.7 9,280.2
--------- --------- ---------
Benefits and expenses:
Policyholders' benefits and payments 5,873.9 6,583.8 6,048.2
Addition to policyholders' reserves and funds 2,299.6 826.8 945.2
Operating expenses 509.5 450.8 428.0
Commissions 299.3 315.3 335.5
State taxes, licenses and fees 88.1 81.5 96.4
Merger restructuring costs - - 66.1
--------- --------- ---------
9,070.4 8,258.2 7,919.4
--------- --------- ---------
Net gain before federal income taxes and dividends 1,522.6 1,503.5 1,360.8
Federal income taxes 199.3 284.4 276.7
--------- --------- ---------
Net gain from operations before dividends 1,323.3 1,219.1 1,084.1
Dividends to policyholders 982.9 919.5 859.9
--------- --------- ---------
Net gain from operations 340.4 299.6 224.2
Net realized capital gain (loss) 25.4 (42.5) 40.3
--------- --------- ---------
Net income $ 365.8 $ 257.1 $ 264.5
========= ========= =========
</TABLE>
See notes to statutory financial statements.
FF-4
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF CHANGES
IN POLICYHOLDERS' CONTINGENCY RESERVES
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
-------- -------- --------
(In Millions)
<S> <C> <C> <C>
Policyholders' contingency reserves,
beginning of year $2,873.3 $2,638.6 $2,600.9
-------- -------- --------
Increases (decreases) due to:
Net income 365.8 257.1 264.5
Net unrealized capital gain (loss) 17.4 119.1 (1.7)
Change in asset valuation and other investment reserves (81.0) (76.0) (142.4)
Change in prior year policyholders' reserves 8.6 (55.4) (72.2)
Other 4.7 (10.1) (10.5)
-------- -------- --------
315.5 234.7 37.7
-------- -------- --------
Policyholders' contingency reserves,
end of year $3,188.8 $2,873.3 $2,638.6
======== ======== ========
</TABLE>
See notes to statutory financial statements.
FF-5
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
-------- -------- --------
(In Millions)
<S> <C> <C> <C>
Operating activities:
Net income $ 365.8 $ 257.1 $ 264.5
Addition to policyholders' reserves and funds,
net of transfers to separate accounts 1,472.8 421.3 426.7
Net realized capital (gain) loss (25.4) 42.5 (40.3)
Other changes 15.4 (108.1) (286.1)
--------- --------- ---------
Net cash provided by operating activities 1,828.6 612.8 364.8
--------- --------- ---------
Investing activities:
Loans and purchases of investments (15,981.2) (12,292.7) (10,171.5)
Sales or maturities of investments and receipts
from repayment of loans 13,334.7 12,545.7 8,539.3
--------- --------- ---------
Net cash provided by (used in) investing activities (2,646.5) 253.0 (1,632.2)
--------- --------- ---------
Increase (decrease) in cash and short-term investments (817.9) 865.8 (1,267.4)
Cash and short-term investments, beginning of year 1,941.2 1,075.4 2,342.8
--------- --------- ---------
Cash and short-term investments, end of year $ 1,123.3 $ 1,941.2 $ 1,075.4
========= ========= =========
</TABLE>
See notes to statutory financial statements.
FF-6
<PAGE>
Notes To Statutory Financial Statements
Massachusetts Mutual Life Insurance Company ("the Company") is a mutual life
insurance company and as such has no shareholders. The Company's primary
business is individual life insurance, annuity and disability income
products distributed primarily through career agents. The Company also
provides either directly or through its subsidiaries, a wide range of
pension products and services, as well as investment services to
individuals, corporations and institutions in all 50 states and the District
of Columbia.
On March 1, 1996, the operations of the former Connecticut Mutual Life
Insurance Company ("Connecticut Mutual") were merged into the Company. This
merger was accounted for under the pooling of interests method of
accounting. For the purposes of this presentation, these financial
statements reflect historical amounts giving retroactive effect as if the
merger had occurred on January 1, 1996 in conformity with the practices of
the National Association of Insurance Commissioners ("NAIC") and the
accounting practices prescribed or permitted by the Division of Insurance of
the Commonwealth of Massachusetts. In 1996, merger-related expenses totaling
$66.1 million were recorded in the Statutory Statement of Income. On the
merger date, policyholders' reserves attributable to disability income
contracts were strengthened by $75.0 million, investment reserves for real
estate were increased by $49.8 million and net prepaid pension assets were
increased by $10.4 million with all adjustments reflected as a charge to
policyholders' contingency reserves.
On March 31, 1996, the Company sold MassMutual Holding Company Two, Inc., a
wholly-owned subsidiary, and its subsidiaries, including Mirus Life
Insurance Company (formerly the MML Pension Insurance Company; currently
doing business as "UniCARE"), which comprised the Company's group life and
health business, to WellPoint Health Networks, Inc. The Company received
total consideration of $402.2 million ($340.0 million in cash and $62.2
million in notes receivable) and recognized a before tax gain of $187.9
million. The Company, pursuant to a 1994 reinsurance agreement, cedes its
group life, accident and health business to UniCARE.
1. SUMMARY OF ACCOUNTING PRACTICES
The accompanying statutory financial statements, have been prepared in
conformity with the statutory accounting practices of the NAIC and the
accounting practices prescribed or permitted by the Division of Insurance of
the Commonwealth of Massachusetts and are different in some respects from
financial statements prepared in accordance with generally accepted
accounting principles ("GAAP"). The more significant differences are as
follows: (a) acquisition costs, such as commissions and other costs directly
related to acquiring new business, are charged to current operations as
incurred, whereas GAAP would require these expenses to be capitalized and
recognized over the life of the policies; (b) policy reserves are based upon
statutory mortality, morbidity and interest requirements without
consideration of withdrawals, whereas GAAP reserves would be based upon
reasonably conservative estimates of mortality, morbidity, interest and
withdrawals; (c) bonds are generally carried at amortized cost whereas GAAP
generally requires they be reported at fair value; (d) deferred income taxes
are not provided for book-tax timing differences as would be required by
GAAP, and (e) payments received for universal and variable life products,
variable annuities and investment related products are reported as premium
income and changes in reserves, whereas under GAAP, these payments would be
recorded as deposits to policyholders' account balances.
In March 1998, the NAIC adopted the Codification of Statutory Accounting
Principles ("Codification"). Codification provides a comprehensive guide of
statutory accounting principles for use by insurers in all states and is
expected to become effective no later than January 1, 2001. The effect of
adopting Codification shall be reported as an adjustment to policyholders'
contingency reserves on the effective date. The Company is currently
reviewing the impact of Codification; however, since the Division of
Insurance of the Commonwealth of Massachusetts has not approved
Codification, the ultimate impact cannot be determined at this time.
FF-7
<PAGE>
Notes To Statutory Financial Statements (Continued)
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, as well as disclosures of contingent assets and liabilities at
the date of the financial statements. Management must also make estimates
and assumptions that affect the amounts of revenues and expenses during the
reporting period. Future events, including changes in the levels of
mortality, morbidity, interest rates and asset valuations, could cause
actual results to differ from the estimates used in these financial
statements.
Certain 1997 and 1996 amounts have been reclassified to conform with the
current year presentation.
The following is a description of the Company's principal accounting
policies and practices.
A. Investments
Bonds and stocks are valued in accordance with rules established by the
NAIC. Generally, bonds are valued at amortized cost, preferred stocks in
good standing at cost, and common stocks, except for unconsolidated
subsidiaries, at fair value.
Mortgage loans are valued at unpaid principal net of unamortized premium or
discount. The Company discontinues the accrual of interest on mortgage loans
which are delinquent more than 90 days or when collection is uncertain. Real
estate is valued at cost less accumulated depreciation, impairment
allowances and mortgage encumbrances. Encumbrances totaled $63.5 million in
1998 and $14.2 million in 1997. Depreciation on investment real estate is
calculated using the straight-line and constant yield methods.
Policy loans are carried at the outstanding loan balance less amounts
unsecured by the cash surrender value of the policy.
Short-term investments are stated at amortized cost, which approximates fair
value.
Investments in unconsolidated subsidiaries and affiliates, joint ventures
and other forms of partnerships are included in other investments on the
Statutory Statement of Financial Position and are accounted for using the
equity method.
In compliance with regulatory requirements, the Company maintains an Asset
Valuation Reserve ("AVR") and an Interest Maintenance Reserve ("IMR"). The
AVR and other investment reserves stabilize the policyholders' contingency
reserves against fluctuations in the value of stocks, as well as declines in
the value of bonds, mortgage loans and real estate investments. The IMR
captures after-tax realized capital gains and losses which result from
changes in the overall level of interest rates for all types of fixed income
investments and interest related hedging activities. These interest rate
related gains and losses are amortized into income using the grouped method
over the remaining life of the investment sold or over the remaining life of
the underlying asset. Net realized after tax capital gains of $189.1 million
in 1998, $95.4 million in 1997 and $73.1 million in 1996 were charged to the
IMR. Amortization of the IMR into net investment income amounted to $40.3
million in 1998, $31.0 million in 1997, and $26.9 million in 1996.
Realized capital gains and losses, less taxes, not includible in the IMR,
are recognized in net income. Realized capital gains and losses are
determined using the specific identification method. Unrealized capital
gains and losses are included in policyholders' contingency reserves.
B. Separate Accounts
Separate account assets and liabilities represent segregated funds
administered and invested by the Company for the benefit of pension,
variable annuity and variable life insurance contractholders. Assets consist
principally of marketable securities reported at fair value. Premiums,
benefits and expenses of the separate
FF-8
<PAGE>
Notes To Statutory Financial Statements (Continued)
accounts are reported in the Statutory Statement of Income. The Company
receives administrative and investment advisory fees from these accounts.
Net transfers to separate accounts of $821.3 million, $355.7 million and
$636.5 million in 1998, 1997 and 1996, respectively, are included in the
addition of policyholders' reserves and funds.
C. Non-admitted Assets
Assets designated as "non-admitted" (principally certain furniture,
equipment and other receivables) are excluded from the Statutory Statement
of Financial Position by an adjustment to policyholders' contingency
reserves.
D. Policyholders' Reserves and Funds
Policyholders' reserves for life insurance contracts are developed using
accepted actuarial methods computed principally on the net level premium and
the Commissioners' Reserve Valuation Method bases using the American
Experience and the 1941, 1958 and 1980 Commissioners' Standard Ordinary
mortality tables with assumed interest rates ranging from 2.5 to 6.75
percent.
Reserves for individual annuities, guaranteed investment contracts and
deposit administration and immediate participation guarantee contracts are
based on accepted actuarial methods principally at interest rates ranging
from 2.25 to 11.25 percent. Reserves for policies and contracts considered
investment contracts have a carrying value of $7,734.6 million and $8,077.9
million at December 31, 1998 and 1997, respectively with a fair value of
$7,940.6 million and $8,250.0 million at December 31, 1998 and 1997,
respectively, as determined by discounted cash flow projections.
Disability income policy reserves are generally calculated using the two-
year preliminary term, net level premium and fixed net premium methods and
various morbidity tables.
The Company made certain changes in the valuation of policyholders' reserves
which increased policyholders' contingency reserves by $8.6 million in 1998
and decreased policyholders' contingency reserves by $55.4 million and $72.2
million in 1997 and 1996, respectively.
E. Premium and Related Expense Recognition
Life insurance premium revenue is recognized annually on the anniversary
date of the policy. Annuity premium is recognized when received. Disability
income premiums are recognized as revenue when due. Commissions and other
costs related to issuance of new policies, maintenance and settlement costs
are charged to current operations when incurred.
F. Policyholders' Dividends
The Board of Directors annually approves dividends to be paid in the
following year. These dividends are allocated to reflect the relative
contribution of each group of policies to policyholders' contingency
reserves and consider investment and mortality experience, expenses and
federal income tax charges. The liability for policyholders' dividends is
equal to the estimated amount of dividends to be paid in the following
calendar year.
FF-9
<PAGE>
Notes To Statutory Financial Statements (Continued)
G. Cash and Short-term Investments
For purposes of the Statutory Statement of Cash Flows, the Company considers
all highly liquid investments purchased with a maturity of twelve months or
less to be short-term investments.
H. Policyholders' Contingency Reserves
Policyholders' contingency reserves represent surplus of the Company as
reported to regulatory authorities and are intended to protect policyholders
against possible adverse experience.
2. SURPLUS NOTES
The Company issued surplus notes of $100.0 million at 7.50 percent and $250.0
million at 7.625 percent in 1994 and 1993, respectively. These notes are
unsecured and subordinate to all present and future indebtedness of the
Company, policy claims and prior claims against the Company as provided by
the Massachusetts General Laws. Issuance was approved by the Commissioner of
Insurance of the Commonwealth of Massachusetts ("the Commissioner").
All payments of interest and principal are subject to the prior approval of
the Commissioner. Sinking fund payments are due as follows: $62.5 million in
2021, $87.5 million in 2022, $150.0 million in 2023 and $50.0 million in
2024.
Interest on the notes issued in 1994 is scheduled to be paid on March 1 and
September 1 of each year, to holders of record on the preceding February 15
or August 15, respectively. Interest on the notes issued in 1993 is scheduled
to be paid on May 15 and November 15 of each year, to holders of record on
the preceding May 1 or November 1, respectively. Interest expense is not
recorded until approval for payment is received from the Commissioner.
Interest of $26.6 million was approved and paid in 1998, 1997 and 1996.
The proceeds of the notes, less a $24.4 million reserve in 1998, and a $28.3
million reserve in 1997 for contingencies associated with the issuance of the
notes, are recorded as a component of the Company's policyholders'
contingency reserves as permitted by the Division of Insurance. These surplus
note reserves are included in asset valuation and other investment reserves
on the Statutory Statement of Financial Position.
3. BENEFIT PLANS
The Company provides multiple benefit plans to employees, agents and retirees
including retirement plans and life and health benefits.
Retirement Plans
The Company has two non-contributory defined benefit plans covering
substantially all of its employees. One plan includes active employees and
retirees previously employed by Connecticut Mutual Life Insurance Company
which merged with MassMutual in 1996; the other plan includes all other
eligible employees and retirees. Benefits are based on the employees' years
of service, compensation during the last five years of employment and
estimated social security retirement benefits. The Company accounts for these
plans following Financial Accounting Standards Board Statement No. 87,
"Employers' Accounting for Pensions". Accordingly, as permitted by the
Massachusetts Division of Insurance, the Company has recognized a pension
asset of $216.0 million and $157.4 million at December 31, 1998 and 1997,
respectively. Company policy is to fund pension costs in accordance with the
requirements of the Employee Retirement Income Security Act of 1974 and,
based on such requirements, no funding was required for the years ended
December 31, 1998, and 1997. The assets of the plans are invested in the
Company's general account and separate accounts.
FF-10
<PAGE>
Notes To Statutory Financial Statements (Continued)
The Company also has defined contribution plans for employees and agents. The
Company funds the plans by matching employee contributions, subject to
statutory limits. Company contributions and any earnings on them are vested
based on years of vesting service using a graduated vesting schedule in 20
percent increments over a five-year period.
Life and Health
Life and health insurance benefits are provided to employees and agents
through group insurance contracts. Substantially all of the Company's
employees and agents may become eligible for continuation of certain of these
benefits if they retire as active employees or agents of the Company. The
Company adopted the National Association of Insurance Commissioners'
accounting standard for post retirement life and health benefit costs,
requiring these benefits to be accounted for using the accrual method for
employees and agents eligible to retire and current retirees. The initial
transition obligation of $137.9 million is being amortized over twenty years
through 2012. During 1998, the Company transferred the administration of the
retiree life and health plan benefit obligations and supporting assets to an
unconsolidated subsidiary.
The status of the defined benefit plans as of December 31 is as follows:
Retirement Life and Health
1998 1997 1998 1997
---- ---- ---- ----
(In Millions)
Accumulated benefit obligation
at December 31 $ 822.8 $ 663.1 $ 185.6 $ 145.9
Fair value of plan assets
at December 31 1,160.2 1,154.2 21.0 21.7
--------- --------- -------- --------
Funded status $ 337.4 $ 491.1 $ (164.6) $ (124.2)
========= ========= ======== ========
The following rates were used in determining the actuarial present value of the
accumulated benefit obligations.
<TABLE>
<CAPTION>
Retirement Life and Health
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Discount rate 6.75% 7.25% 6.75% 7.25%
Increase in future compensation
levels 4.00-5.00% 4.00-5.00% 5.00% 5.00-5.50%
Long-term rate of return on assets 9.00-10.00% 9.00-10.00% 6.75% 6.75%
Assumed increases in medical cost
Rates in the first year - - 7.00% 6.25-9.50%
declining to - - 4.25% 4.75-5.00%
within - - 5 years 5 years
</TABLE>
A one percent increase in the annual assumed inflation rate in medical cost
rates would increase the 1998 accumulated postretirement benefit liability and
benefit expense by $9.2 million and $1.1 million, respectively. A one percent
decrease in the annual assumed inflation rate in medical costs rates would
decrease the 1998 accumulated postretirement benefit liability and benefit
expense by $8.5 million and $1.0 million, respectively.
FF-11
<PAGE>
Notes To Statutory Financial Statements (Continued)
The expense charged to operations for all employee benefit plans is $32.1
million in 1998, $23.9 million in 1997 and $38.1 million in 1996. In 1997,
there was a significant reduction in plan participants in the Connecticut
Mutual Plan which resulted in recognition of a pension plan curtailment gain
of $10.7 million.
4. RELATED PARTY TRANSACTIONS
The company has management and service contracts or cost sharing arrangements
with various subsidiaries and affiliates whereby the Company, for a fee, will
furnish a subsidiary or affiliate, as required, operating facilities, human
resources, computer software development and managerial services. Fees earned
under the terms of the contracts or arrangements were $205.0 million and
$137.3 million for 1998 and 1997, respectively.
The Company has reinsurance agreements with its subsidiaries, C.M. Life
Insurance Company and MML Bay State Life Insurance Company, including stop-
loss and modified coinsurance agreements on life insurance products. Total
premiums assumed on these agreements were $38.4 million in 1998, $40.9
million in 1997 and $44.1 million in 1996.
5. FEDERAL INCOME TAXES
Provision for federal income taxes is based upon the Company's estimate of
its current tax liability. No deferred tax effect is recognized for temporary
differences that may exist between financial reporting and taxable income.
Accordingly, the reporting of miscellaneous temporary differences, such as
reserves, acquisition costs and restructuring costs and of permanent
differences such as the equity tax, resulted in effective tax rates which
differ from the statutory tax rate.
The Company plans to file its 1998 federal income tax return on a
consolidated basis with its eligible life affiliates and non-life affiliates.
C.M. Life Insurance Company, which is not an eligible life affiliate, files a
separate return. The Company and its eligible life insurance and non-life
affiliates are subject to a written tax allocation agreement, which allocates
the group's consolidated tax liability for payment purposes. Generally, the
agreement provides that affiliates with losses shall be compensated for the
use of their losses and credits by other affiliates.
The Internal Revenue Service has completed examining the Company's income tax
returns through the year 1992 for Massachusetts Mutual and 1995 for
Connecticut Mutual, and is currently examining Massachusetts Mutual for the
years 1993 and 1994. The Company believes adjustments which may result from
such examinations will not materially affect its financial position.
Components of the formula authorized by the Internal Revenue Service for
determining deductible policyholder dividends have not been finalized for
1998 or 1997. The Company records the estimated effects of anticipated
revisions in the Statutory Statement of Income.
Federal tax payments were $152.4 million in 1998, $353.4 million in 1997 and
$330.7 million in 1996.
6. INVESTMENTS
The Company maintains a diversified investment portfolio. Investment policies
limit concentration in any asset class, geographic region, industry group,
economic characteristic, investment quality or individual investment. In the
normal course of business, the Company enters into commitments to purchase
privately placed bonds and to issue mortgage loans.
FF-12
<PAGE>
Notes To Statutory Financial Statements (Continued)
A. Bonds
The carrying value and estimated fair value of bonds are as follows:
<TABLE>
<CAPTION>
December 31, 1998
-----------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
---------- ---------- ---------- ----------
(In Millions)
<S> <C> <C> <C> <C>
U. S. Treasury securities $ 4,945.3 $ 473.0 $ 20.4 $ 5,397.9
and obligations of U. S.
government corporations
and agencies
Debt securities issued by 41.2 1.5 1.3 41.4
foreign governments
Mortgage-backed securities 3,734.4 188.0 13.9 3,908.5
State and local governments 360.5 33.2 7.9 385.8
Corporate debt securities 14,133.3 845.3 118.4 14,860.2
Utilities 885.8 102.6 0.3 988.1
Affiliates 1,115.3 0.6 0.9 1,115.0
----------- ---------- -------- -----------
TOTAL $ 25,215.8 $ 1,644.2 $ 163.1 $ 26,696.9
=========== ========== ======== ===========
<CAPTION>
December 31, 1997
-----------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
---------- ---------- ---------- ----------
(In Millions)
<S> <C> <C> <C> <C>
U. S. Treasury securities $ 6,241.0 $ 470.5 $ 10.3 $ 6,701.2
and obligations of U. S.
government corporations
and agencies
Debt securities issued by 83.5 4.4 3.0 84.9
foreign governments
Mortgage-backed securities 3,008.7 187.9 9.0 3,187.6
State and local governments 361.9 23.9 .6 385.2
Corporate debt securities 12,148.9 765.2 46.9 12,867.2
Utilities 871.8 100.1 2.2 969.7
Affiliates 792.4 2.8 1.0 794.2
----------- ---------- -------- -----------
TOTAL $ 23,508.2 $ 1,554.8 $ 73.0 $ 24,990.0
=========== ========== ======== ===========
</TABLE>
FF-13
<PAGE>
Notes To Statutory Financial Statements (Continued)
The carrying value and estimated fair value of bonds at December 31, 1998 by
contractual maturity are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without prepayment penalties.
Estimated
Carrying Fair
Value Value
--------- ---------
(In Millions)
Due in one year or less $ 556.5 $ 560.7
Due after one year through five years 4,150.6 4,270.5
Due after five years through ten years 8,622.8 9,045.0
Due after ten years 5,319.5 5,999.6
--------- ---------
18,649.4 19,875.8
Mortgage-backed securities, including
securities guaranteed by the U.S.
Government 6,566.4 6,821.1
--------- ---------
TOTAL $25,215.8 $26,696.9
========= =========
Proceeds from sales of investments in bonds were $11,663.4 million during
1998, $11,427.8 million during 1997 and $6,390.7 million during 1996. Gross
capital gains of $331.8 million in 1998, $200.7 million in 1997 and $188.8
million in 1996 and gross capital losses of $47.3 million in 1998, $68.8
million in 1997 and $255.5 million in 1996 were realized on those sales,
portions of which were included in the IMR. The estimated fair value of non-
publicly traded bonds is determined by the Company using a pricing matrix and
quoted market prices for publicly traded bonds.
B. Stocks
Common stocks, except for unconsolidated subsidiaries, had a cost of $238.4
million in 1998 and $250.3 million in 1997.
C. Mortgages
The fair value of mortgage loans, as determined from a pricing matrix for
performing loans and the estimated underlying real estate value for non-
performing loans, was $6,178.8 million and $5,039.1 million at December 31,
1998 and 1997, respectively.
The Company had restructured loans with book values of $126.6 million, and
$202.3 million at December 31, 1998 and 1997, respectively. These loans
typically have been modified to defer a portion of the contractual interest
payments to future periods. Interest deferred to future periods totaled $0.1
million in 1998, $5.1 million in 1997 and $2.2 million in 1996. At December
31, 1998, scheduled commercial mortgage loan maturities were as follows:
1999 - $341.0 million; 2000 - $333.0 million; 2001 - $305.2 million; 2002 -
$210.6 million; 2003 - $299.0 million; and $3,106.4 million thereafter.
D. Policy Loans
Policy loans are recorded at cost as it is not practicable to determine the
fair value since they do not have a stated maturity.
E. Other
Preferred stocks in good standing had fair values of $116.0 million in 1998
and $145.5 million in 1997, using a pricing matrix for non-publicly traded
stocks and quoted market prices for publicly traded stocks.
FF-14
<PAGE>
Notes To Statutory Financial Statements (Continued)
The carrying value of investments which were non-income producing for the
preceding twelve months was $13.2 million and $5.7 million at December 31,
1998 and 1997, respectively.
7. PORTFOLIO RISK MANAGEMENT
The Company manages its investment risks, primarily to reduce interest rate
and duration imbalances determined in asset/liability analyses. The fair
values of these financial instruments, described below, which are not
recorded in the financial statements, unless otherwise noted, are based upon
market prices or prices obtained from brokers. The Company does not hold or
issue these financial instruments for trading purposes.
The notional amounts described do not represent amounts exchanged by the
parties and, thus, are not a measure of the exposure of the Company. The
amounts exchanged are calculated on the basis of the notional amounts and the
other terms of the instruments, which relate to interest rates, exchange
rates, security prices or financial or other indexes.
The Company utilizes interest rate swap agreements, options, and purchased
caps and floors to reduce interest rate exposures arising from mismatches
between assets and liabilities and to modify portfolio profiles to manage
other risks identified. Under interest rate swaps, the Company agrees to an
exchange, at specified intervals, between streams of variable rate and fixed
rate interest payments calculated by reference to an agreed-upon notional
principal amount. Gains and losses realized on the termination of contracts
are deferred and amortized through the IMR over the remaining life of the
associated contract. IMR amortization is included in net investment income on
the Statutory Statement of Income. Net amounts receivable and payable are
accrued as adjustments to investment income and included in other assets on
the Statutory Statement of Financial Position. At December 31, 1998 and 1997,
the Company had swaps with notional amounts of $4,382.0 million and $3,220.2
million, respectively. The fair values of these instruments were $84.1
million at December 31, 1998 and $20.9 million at December 31, 1997.
Options grant the purchaser the right to buy or sell a security or enter into
a derivative transaction at a stated price within a stated period. The
Company's option contracts have terms of up to fifteen years. The amounts
paid for options purchased are amortized into investment income over the life
of the contract on a straight-line basis. Unamortized costs are included in
other investments on the Statutory Statement of Financial Position. Gains and
losses on these contracts are recorded at the expiration or termination date
and are deferred and amortized through the IMR over the remaining life of the
option contract. At December 31, 1998 and 1997, the Company had option
contracts with notional amounts of $12,704.4 million and $5,388.2 million,
respectively. The Company's credit risk exposure was limited to the
unamortized costs of $92.5 million and $59.0 million, which had fair values
of $161.9 million and $99.6 million at December 31, 1998 and 1997,
respectively.
Interest rate cap agreements grant the purchaser the right to receive the
excess of a referenced interest rate over a stated rate calculated by
reference to an agreed upon notional amount. Interest rate floor agreements
grant the purchaser the right to receive the excess of a stated rate over a
referenced interest rate calculated by reference to an agreed upon notional
amount. Amounts paid for interest rate caps and floors are amortized into
investment income over the life of the asset on a straight-line basis.
Unamortized costs are included in other investments on the Statutory
Statement of Financial Position. Amounts receivable and payable are accrued
as adjustments to investment income and included in the Statutory Statement
of Financial Position as other assets. Gains and losses on these contracts,
including any unamortized cost, are recognized upon termination and are
deferred and amortized through the IMR over the remaining life of the
associated cap or floor agreement. At December 31, 1998 and 1997, the company
had agreements with notional amounts of $4,337.9 million and $3,348.6
million, respectively. The Company's credit risk exposure on these agreements
is limited to the unamortized costs of $22.7 million and $18.2 million at
December 31, 1998 and 1997, respectively. The fair values of these
instruments were $43.9 million and $23.4 million at December 31, 1998 and
1997, respectively.
FF-15
<PAGE>
Notes To Statutory Financial Statements (Continued)
The Company enters into forward U.S. Treasury, and Government National
Mortgage Association ("GNMA") and Federal National Home Mortgage Association
("FNMA") commitments for the purpose of managing interest rate exposure. The
Company generally does not take delivery on forward commitments. These
commitments are instead settled with offsetting transactions. Gains and
losses on forward commitments are recorded when the commitment is closed and
amortized through the IMR over the remaining life of the asset. At December
31, 1998 and 1997, the Company had U. S. Treasury, GNMA and FNMA purchase
commitments which will settle during the following year with contractual
amounts of $603.4 million and $1,100.7 million, respectively. The fair values
of these commitments were $604.1 million and $1,117.6 million, including net
unrealized gains of $0.7 million and $16.9 million at December 31, 1998 and
1997, respectively.
The Company utilizes other agreements to reduce exposures to various risks.
Notional amounts relating to these agreements totaled $384.2 million and
$385.6 million at December 31, 1998 and 1997, respectively. The fair values
of these instruments resulted in an unrealized gain of $7.2 million at
December 31, 1998 and an unrealized loss of $6.8 million at December 31,
1997.
The Company is exposed to credit-related losses in the event of
nonperformance by counterparties to derivative financial instruments. This
exposure is limited to contracts with a positive fair value. The amounts at
risk in a net gain position were $272.5 million and $146.7 million at
December 31, 1998 and 1997, respectively. The Company monitors exposure to
ensure counterparties are credit worthy and concentration of exposure is
minimized. Additionally, collateral positions have been obtained with
counterparties when considered prudent.
8. INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES
MassMutual has two primary insurance subsidiaries, C.M. Life, which primarily
writes variable annuities and universal life insurance, and MML Bay State,
which primarily writes variable life and annuity business. MassMutual's
wholly-owned non-insurance subsidiary MassMutual Holding Company, Inc.
("MMHC") owns subsidiaries which include retail and institutional asset
management, registered broker dealer and international life and annuity
operations.
MassMutual accounts for the value of its investments in subsidiaries at their
underlying net equity. Operating results for such subsidiaries are reflected
as net unrealized capital gains in the Statement of Changes in Policyholders'
Contingency Reserves. Net investment income is recorded by MassMutual to the
extent that dividends are declared by the subsidiaries. The Company holds
debt issued by MMHC and its subsidiaries of $1,111.3 million and $792.4
million at December 31, 1998 and 1997, respectively.
Below is summarized financial information for the unconsolidated subsidiaries
as of December 31 and for the year then ended:
1998 1997
-------- --------
(In Millions)
Domestic Life Insurance Subsidiaries:
Total revenue $ 1,151.4 $ 1,086.9
Net income (loss) $ (3.2) $ 1.1
Assets $ 4,741.4 $ 3,766.8
Other Subsidiaries:
Total revenue $ 1,137.4 $ 967.2
Net income $ 73.6 $ 75.4
Assets $ 2,839.5 $ 2,018.8
FF-16
<PAGE>
Notes To Statutory Financial Statements (Continued)
9. REINSURANCE
The Company has reinsurance agreements with other insurance companies in the
normal course of business. In addition, the Company cedes the remainder of
its group life and health business to UniCARE. Premiums, benefits to
policyholders and provisions for future benefits are stated net of
reinsurance. The Company remains liable to the insured for the payment of
benefits if the reinsurer cannot meet its obligations under the reinsurance
agreements. Total premiums ceded were $183.9 million in 1998, $294.6 million
in 1997 and $793.5 million in 1996.
10. BUSINESS RISKS AND CONTINGENCIES
The Company is subject to insurance guaranty fund laws in the states in
which it does business. These laws assess insurance companies amounts to be
used to pay benefits to policyholders and claimants of insolvent insurance
companies. Many states allow these assessments to be credited against future
premium taxes. The Company believes such assessments in excess of amounts
accrued will not materially affect its financial position, results of
operations or liquidity.
The Company is involved in litigation arising in and out of the normal
course of its business. Management intends to defend these actions
vigorously. While the outcome of litigation cannot be foreseen with
certainty, it is the opinion of management, after consultation with legal
counsel, that the ultimate resolution of these matters will not materially
affect its financial position, results of operations or liquidity.
11. SUBSIDIARIES AND AFFILIATED COMPANIES
A summary of ownership and relationship of the Company and its subsidiaries
and affiliated companies as of December 31, 1998 is illustrated below. The
Company provides management or advisory services to these companies.
Subsidiaries are wholly-owned, except as noted.
Parent
------
Massachusetts Mutual Life Insurance Company
Subsidiaries of Massachusetts Mutual Life Insurance Company
-----------------------------------------------------------
CM Assurance Company
CM Benefit Insurance Company
C.M. Life Insurance Company
MassMutual Holding Company
MassMutual of Ireland, Limited
MML Bay State Life Insurance Company
MML Distributors, LLC
MassMutual Mortgage Finance, LLC
Subsidiaries of MassMutual Holding Company
------------------------------------------
GR Phelps & Co., Inc.
MassMutual Holding Trust I
MassMutual Holding Trust II
MassMutual Holding MSC, Inc.
MassMutual International, Inc.
MML Investor Services, Inc.
FF-17
<PAGE>
Notes To Statutory Financial Statements (Continued)
Subsidiaries of MassMutual Holding Trust I
------------------------------------------
Antares Capital Corporation - 99.4%
Charter Oak Capital Management, Inc. - 80.0%
Cornerstone Real Estate Advisors, Inc.
DLB Acquisition Corporation - 85.8%
Oppenheimer Acquisition Corporation - 89.36%
Subsidiaries of MassMutual Holding Trust II
-------------------------------------------
CM Advantage, Inc.
CM International, Inc.
CM Property Management, Inc.
HYP Management, Inc.
MMHC Investments, Inc.
MML Realty Management
Urban Properties, Inc.
MassMutual Benefits Management, Inc.
Subsidiaries of MassMutual International, Inc.
----------------------------------------------
Compensa de Seguros de Vida S.A. - 33.5%
MassLife Seguros de Vida (Argentina) S.A.
MassMutual International (Bermuda) Ltd.
Mass Seguros de Vida (Chile) S.A. - 33.5%
MassMutual International (Luxembourg) S.A.
MassMutual Holding MSC, Inc.
----------------------------
MassMutual Corporate Value Limited - 40.93%
9048 - 5434 Quebec, Inc.
1279342 Ontario Limited
Affiliates of Massachusetts Mutual Life Insurance Company
---------------------------------------------------------
MML Series Investment Fund
MassMutual Institutional Funds
Oppenheimer Value Stock Fund
FF-18
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements
Financial Statements Included in Part A
Condensed Financial Information
Financial Statements Included in Part B
The Registrant
No financial statements for the Separate Account have been included because
as of the date of this Registration Statement, the Sub-Accounts available under
the certificates had no assets.
The Depositor
Report of Independent Accountants
Statutory Statements of Financial Position as of December 31, 1998 and 1997
Statutory Statements of Income for the years ended December 31, 1998, 1997
and 1996
Statutory Statements of Changes in Shareholder's equity for the years ended
December 31, 1998, 1997 and 1996
Statutory Statements of Cash Flows for the years ended December 31, 1998,
1997 and 1996
Notes to Statutory Financial Statements
(b) Exhibits
Exhibit 1 Resolution of Board of Directors of MassMutual authorizing the
establishment of the Separate Account./5/
Exhibit 2 Not Applicable.
Exhibit 3 (i) Principal Underwriting Agreement./1/
(ii) Variable Products Dealer Agreement./3/
(iii) Underwriting and Servicing Agreement./1/
Exhibit 4 Individual Certificate issued under a Group Variable Deferred
Annuity Contract with Flexible Purchase Payments/7/
Exhibit 5 Application Form./7/
Exhibit 6 (i) Copy of Articles of Incorporation of MassMutual./5/
(ii) Copy of the Bylaws of MassMutual./5/
Exhibit 7 Not Applicable.
Exhibit 8 (a) Form of Participation Agreement with Oppenheimer Variable
Account Funds./2/
(b) Form of Participation Agreement with Panorama Series Fund,
Inc./2/
15
<PAGE>
(c) Form of Participation Agreement with T. Rowe Price Equity
Series, Inc./3/
(d) Form of Participation Agreement with Fidelity Variable
Insurance Products Fund, Fidelity Variable Insurance Products
Fund II, and Fidelity Variable Insurance Products Fund III./3/
(e) Form of Participation Agreement with American Century
Variable Portfolios, Inc./4/
(f) Form of Participation Agreement with BT Insurance Funds
Trust./8/
(g) Form of Participation Agreement with Janus Aspen Series./8/
(h) Form of Participation Agreement with Templeton Variable
Products Series Fund./8/
(i) Form of Participation Agreement with MFS Variable Insurance
Trust./9/
Exhibit 9 Opinion of and Consent of Counsel./7/
Exhibit 10 (i) Consent of Independent Accountants,
PricewaterhouseCoopers LLP./10/
(ii) Powers of Attorney./5/
(iii) Power of Attorney for Robert J. O'Connell and Thomas
Wheeler./6/
(iii) Power of Attorney for Roger G. Ackerman./4/
Exhibit 11 Not Applicable.
Exhibit 12 Not Applicable.
Exhibit 13 Form of Schedule of Computation of Performance. [to be filed
with Post-Effective Amendment #1]
Exhibit 14 Not Applicable.
- --------
/1 /Incorporated by reference to Pre-Effective Amendment No. 1 to Registration
Statement 333-45039 filed on June 4, 1998.
/2 /Incorporated by reference to Registration Statement File No. 333-22557,
filed on February 28, 1997.
/3 /Incorporated by reference to Initial Registration Statement No. 333-65887,
filed on October 20, 1998.
/4 /Incorporated by reference to Pre-Effective Amendment No. 1 to Registration
Statement No. 333-45039 filed on June 4, 1998.
/5 /Incorporated by reference to Initial Registration Statement No. 333-45039
filed on January 28, 1998.
/6 /Incorporated by reference to Pre-Effective Amendment No. 1 to Registration
Statement No. 333-65887, filed on January 28, 1999.
/7 /Incorporated by reference to Initial Registration Statement No. 333-81015,
filed on Form N-4 with the Commission on June 20, 1999.
/8 /Incorporated by reference to Pre-Effective Amendment No. 1 to Registration
Statement No. 333-80991.
/9 /Incorporated by reference to Initial Registration Statement No. 333-65887
filed on October 20, 1998.
/10/Filed herewith.
16
<PAGE>
ITEM 25. Directors And Officers Of The Depositor
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
Name, Position, Business
Address Principal Occupation(s) During Past Five Years
------------------------ ----------------------------------------------
<C> <S>
Roger G. Ackerman, Director Corning, Inc.
One Riverfront Plaza, HQE 2 Chairman and Chief Executive Officer (since
Corning, NY 14831 1996)
President and Chief Operating Officer (1990-
1996)
James R. Birle, Director Resolute Partners, LLC
2 Soundview Drive Chairman (since 1997), Founder (1994)
Greenwich, CT 06836 President (1994-1997)
Blackstone Group
General Partner (1988-1994)
Gene Chao, Director Computer Projections, Inc.
733 SW Vista Avenue Chairman, President and CEO (since 1991)
Portland, OR 97205
Patricia Diaz Dennis, Director SBC Communications Inc.
175 East Houston, Room 5-A-70 Senior Vice President--Regulatory and Public
San Antonio, TX 78205 Affairs (since 1998)
Senior Vice President and Assistant General
Counsel (1995-1998)
Sullivan & Cromwell
Special Counsel (1993-1995)
Anthony Downs, Director The Brookings Institution
1775 Massachusetts Ave., N.W. Senior Fellow (since 1977)
Washington, DC 20036-2168
James L. Dunlap, Director Ocean Energy, Inc.
1201 Louisiana, Suite 1400 Vice Chairman (since 1998)
Houston, TX 77002-5603 United Meridian Corporation
President and Chief Operating Officer (1996-
1998)
Texaco, Inc.
Senior Vice President (1987-1996)
William B. Ellis, Director Yale University School of Forestry and
31 Pound Foolish Lane Environmental Studies Senior Fellow (since
Glastonbury, CT 06033 1995)
Northeast Utilities
Chairman of the Board (1993-1995) and
Chief Executive Officer (1983-1993)
Robert M. Furek, Director Resolute Partners LLC
1 State Street, Suite 2310 Partner (since 1997)
Hartford, CT 06103 State Board of Trustees for the Hartford School
System
Chairman (since 1997)
Heublein, Inc.
President and Chief Executive Officer (1987-
1996)
Charles K. Gifford, Director BankBoston, N.A.
100 Federal Street Chairman and Chief Executive Officer (since
Boston, MA 02110 1996)
President (1989-1996)
BankBoston Corporation
Chairman (since 1998) and Chief Executive
Officer (since 1995)
President (1989-1996)
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation(s) During Past
Name, Position, Business Address Five Years
-------------------------------- -----------------------------------
<C> <S>
William N. Griggs, Director Griggs & Santow, Inc.
75 Wall Street, 20th Floor Managing Director (since 1983)
New York, NY 10005
George B. Harvey, Director Pitney Bowes
One Landmark Square, Suite 1905 Chairman, President and CEO (1983-1996)
Stamford, CT 06901
Barbara B. Hauptfuhrer, Director Director of various corporations (since
1700 Old Welsh Road 1972)
Huntingdon Valley, PA 19006
Sheldon B. Lubar, Director Lubar & Co. Incorporated
700 North Water Street, Suite 1200 Chairman (since 1977)
Milwaukee, WI 53202
William B. Marx, Jr., Director Lucent Technologies
5 Peacock Lane Senior Executive Vice President (1996-
Village of Golf, FL 33436-5299 1996)
AT&T Multimedia Products Group
Executive Vice President and CEO
(1994-1996)
AT&T Network Systems Group
Executive Vice President and CEO
(1993-1994)
John F. Maypole, Director Peach State Real Estate Holding Company
55 Sandy Hook Road - North Managing Partner (since 1984)
Sarasota, FL 34242
Robert J. O'Connell, Director, MassMutual
President and Chief Executive Officer President and Chief Executive Officer
1295 State Street (since 1999)
Springfield, MA 01111 American International Group, Inc.
Senior Vice President (1991-1998)
AIG Life Companies
President and Chief Executive Officer
(1991-1998)
Thomas B. Wheeler, Director MassMutual
and Chairman of the Board Chairman of the Board (since 1996)
1295 State Street President (1988-1996) and Chief
Springfield, MA 01111 Executive Officer (1988-1999)
Alfred M. Zeien, Director The Gillette Company
Prudential Tower Chairman and Chief Executive Officer
Boston, MA 02199 (1991-1999)
Executive Vice Presidents:
Lawrence V. Burkett, Jr. MassMutual
1295 State Street Executive Vice President and General
Springfield, MA 01111 Counsel (since 1993)
Peter J. Daboul MassMutual
1295 State Street Executive Vice President and Chief
Springfield, MA 01111 Information Officer (since 1997)
Senior Vice President (1990-1997)
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Name, Position, Business
Address Principal Occupation(s) During Past Five Years
------------------------ ----------------------------------------------
<C> <S>
John B. Davies MassMutual
1295 State Street Executive Vice President (since 1994)
Springfield, MA 01111 Associate Executive Vice President (1994-1994)
Daniel J. Fitzgerald MassMutual
1295 State Street Executive Vice President (since 1994)
Springfield, MA 01111 Corporate Financial Operations (1994-1997)
Senior Vice President (1991-1994)
James E. Miller MassMutual
1295 State Street Executive Vice President (since 1997 and 1987-
Springfield, MA 01111 1996)
UniCare Life & Health
Senior Vice President (1996-1997)
John V. Murphy MassMutual
1295 State Street Executive Vice President (since 1997)
Springfield, MA 01111 David L. Babson & Co., Inc.
Executive Vice President and Chief Operating
Officer (1995-1997)
Concert Capital Management, Inc.
Chief Operating Officer (1993-1995)
Stuart H. Reese MassMutual
1295 State Street Executive Vice President and Chief Investment
Springfield, MA 01111 Officer (since 1999)
Chief Executive Director-Investment Management
(1997-1999)
Senior Vice President (1993-1997)
Joseph M. Zubretsky MassMutual
1295 State Street Executive Vice President and Chief Financial
Springfield, MA 01111 Officer (since 1997)
HealthSource
Chief Financial Officer (1996-1996)
Coopers & Lybrand
Partner (1990-1996)
</TABLE>
ITEM 26. Persons Controlled By Or Under Common Control With The Depositor Or
Registrant
The assets of the Registrant, under state law, are assets of MassMutual.
The registrant may also be deemed to be under common control with other
separate accounts established by MassMutual and its life insurance
subsidiaries, C.M. Life Insurance Company and MML Bay State Life Insurance
Company, which are registered as unit investment trusts under the Investment
Company Act of 1940.
The discussion that follows indicates those entities owned directly or
indirectly by MassMutual.
A. DIRECT SUBSIDIARIES OF MASSMUTUAL
MassMutual is the sole owner of each subsidiary unless otherwise indicated.
1. CM Assurance Company, a Connecticut corporation which operates as a life
and health insurance company. This subsidiary is inactive.
2. CM Benefit Insurance Company, a Connecticut corporation which operates as
a life and health insurance company. This subsidiary is inactive.
3. C.M. Life Insurance Company, a Connecticut corporation which operates as
a life and health insurance company.
19
<PAGE>
4. MML Bay State Life Insurance Company, a Connecticut corporation which
operates as a life and health insurance company.
5. MML Distributors, LLC, a Connecticut limited liability company which
operates as a securities broker-dealer. (MassMutual--99%; G.R. Phelps & Co.,
Inc.--1%)
6. MassMutual of Ireland, Limited, a corporation organized in the Republic
of Ireland which formerly operated to provide claims service to holders of
MassMutual group life and accident and health insurance contracts. This
subsidiary is inactive and will be dissolved in the near future.
7. MassMutual Holding Company, a Delaware corporation which operates as a
holding company for certain MassMutual entities.
8. MassMutual Mortgage Finance, LLC, a Delaware limited liability company
which makes, acquires, holds and sells mortgage loans.
B. MASSMUTUAL HOLDING COMPANY GROUP
MassMutual Holding Company is the sole owner of each subsidiary or affiliate
unless otherwise indicated.
1. G.R. Phelps & Co, Inc., a Connecticut corporation which formerly
operated as a securities broker-dealer. This subsidiary is inactive and
expected to be dissolved.
2. MML Investors Services, Inc., a Massachusetts corporation which operates
as a securities broker-dealer. (MassMutual Holding Company--86%; G.R. Phelps &
Co., Inc.--14%)
3. MassMutual Holding MSC, Inc., a Massachusetts corporation which operates
as a holding company for MassMutual positions in investment entities organized
outside of the United States. This subsidiary qualifies as a "Massachusetts
Security Corporation" under Chapter 63 of the Massachusetts General Laws.
4. MassMutual Holding Trust I, a Massachusetts business trust which
operates as a holding company for separately-staffed MassMutual investment
subsidiaries.
5. MassMutual Holding Trust II, a Massachusetts business trust which
operates as a holding company for non-staffed MassMutual investment
subsidiaries.
6. MassMutual International, Inc., a Delaware corporation which operates as
a holding company for those entities constituting MassMutual's international
insurance operations.
C. MML INVESTORS SERVICES, INC. GROUP
Set forth below are the direct and indirect subsidiaries of MML Investors
Services, Inc. The parent is the sole owner of each subsidiary unless
otherwise indicated.
Direct Subsidiaries of MML Investors Services, Inc.
1. MML Insurance Agency, Inc., a Massachusetts corporation which operates
as an insurance broker.
2. MML Securities Corporation, a Massachusetts corporation which operates
as a "Massachusetts Security Corporation" under Section 63 of the
Massachusetts General Laws.
Direct Subsidiaries of MML Insurance Agency, Inc.
1. DISA Insurance Services of America, Inc., an Alabama corporation which
operates as an insurance broker.
20
<PAGE>
2. Diversified Insurance Services of America, Inc., a Hawaii corporation
which operates as an insurance broker.
3. MML Insurance Agency of Mississippi, P.C., a Mississippi corporation
which operates as an insurance broker.
4. MML Insurance Agency of Nevada, Inc., a Nevada corporation which
operates as an insurance broker.
5. MML Insurance Agency of Ohio, Inc. an Ohio corporation which operates as
an insurance broker. (Controlled by MML Insurance Agency, Inc. through a
voting trust agreement.)
6. MML Insurance Agency of Texas, Inc., a Texas corporation which operates
as an insurance broker. (Controlled by MML Insurance Agency, Inc. through an
irrevocable proxy arrangement.)
D. MASSMUTUAL HOLDING MSC, INC. GROUP
MassMutual Holding MSC, Inc. is the sole owner of each subsidiary or
affiliate unless otherwise indicated.
1. MassMutual Corporate Value Limited, a Cayman Islands corporation which
holds a 90% ownership interest in MassMutual Corporate Value Partners Limited,
another Cayman Islands corporation operating as a high-yield bond fund.
(MassMutual Holding MSC, Inc.--46%)
2. 9048-5434 Quebec, Inc., a Canadian corporation which operates as the
owner of Hotel du Parc in Montreal, Quebec, Canada.
3. 1279342 Ontario Limited, a Canadian corporation which operates as the
owner of Deerhurst Resort in Huntsville, Ontario, Canada.
E. MASSMUTUAL HOLDING TRUST I GROUP
Set forth below are the direct and indirect subsidiaries and affiliates of
MassMutual Holding Trust I. The parent is the sole owner of each subsidiary
unless otherwise indicated.
Direct Subsidiaries of MassMutual Holding Trust I
1. Antares Capital Corporation, a Delaware corporation which operates as a
finance company. (MassMutual Holding Trust I--99%)
2. Charter Oak Capital Management, Inc., a Delaware corporation which
operates as a manager of institutional investment portfolios. (MassMutual
Holding Trust I--80%)
3. Cornerstone Real Estate Advisers, Inc., a Massachusetts corporation
which operates as an investment adviser.
4. DLB Acquisition Corporation, a Delaware corporation which operates as a
holding company for the David L. Babson companies (MassMutual Holding Trust
I--85%).
5. Oppenheimer Acquisition Corp., a Delaware corporation which operates as
a holding company for the Oppenheimer companies (MassMutual Holding Trust I--
89%).
Direct Subsidiary of DLB Acquisition Corporation
David L. Babson and Company Incorporated, a Massachusetts corporation which
operates as an investment adviser.
21
<PAGE>
Direct Affiliates of David L. Babson and Company Incorporated
1. Babson Securities Corporation, a Massachusetts corporation which
operates as a securities broker-dealer.
2. Babson-Stewart Ivory International, a Massachusetts general partnership
which operates as an investment adviser. (David L. Babson and Company
Incorporated--50%).
3. Potomac Babson Incorporated, a Massachusetts corporation which operates
as an investment adviser (David L. Babson and Company Incorporated--60%).
Direct Subsidiary of Oppenheimer Acquisition Corp.
OppenheimerFunds, Inc., a Colorado corporation which operates as the
investment adviser to the Oppenheimer Funds.
Trinity Investment Management Corporation, a Pennsylvania corporation and
registered investment adviser which provides portfolio management and equity
research services primarily to institutional clients.
Direct Subsidiaries of OppenheimerFunds, Inc.
1. Centennial Asset Management Corporation, a Delaware corporation which
operates as investment adviser and general distributor of the Centennial
Funds.
2. HarbourView Asset Management Corporation, a New York corporation which
operates as an investment adviser.
3. OppenheimerFunds Distributor, Inc., a New York corporation which
operates as a securities broker-dealer.
4. Oppenheimer Partnership Holdings, Inc., a Delaware corporation which
operates as a holding company.
5. Oppenheimer Real Asset Management, Inc., a Delaware corporation which is
the sub-adviser to a mutual fund investing in the commodities markets.
6. Shareholder Financial Services, Inc., a Colorado corporation which
operates as a transfer agent for mutual funds.
7. Shareholder Services, Inc., a Colorado corporation which operates as a
transfer agent for various Oppenheimer and MassMutual funds.
Direct Subsidiary of Centennial Asset Management Corporation
Centennial Capital Corporation, a Delaware corporation which formerly
sponsored a unit investment trust.
Direct Affiliate of Cornerstone Real Estate Advisers, Inc.
Cornerstone Office Management, LLC, a Delaware limited liability company
which serves as the general partner of Cornerstone Suburban Office, L.P.
(Cornerstone Real Estate Advisers, Inc.--50%; MML Realty Management
Corporation--50%).
F. MASSMUTUAL HOLDING TRUST II GROUP
MassMutual Holding Trust II is the sole owner of each subsidiary.
1. CM Advantage, Inc., a Connecticut corporation which serves as a general
partner of real estate limited partnerships. The subsidiary is largely
inactive and will be dissolved in the near future.
22
<PAGE>
2. CM International, a Delaware corporation which is the issuer of
collateralized mortgage obligation securities.
3. CM Property Management, Inc., a Connecticut corporation which serves as
the general partner of Westheimer 335 Suites Limited Partnership. The
partnership holds a ground lease with respect to hotel property in Houston,
Texas.
4. HYP Management, Inc., a Delaware corporation which operates as the "LLC
Manager" of MassMutual High Yield Partners II LLC, a high yield bond fund.
5. MassMutual Benefits Management, Inc., a Delaware corporation which
supports MassMutual with benefit plan administration and planning services.
6. MMHC Investment, Inc., a Delaware corporation which is a passive investor
in MassMutual/Darby CBO IM, Inc., MassMutual/Darby CBO LLC, MassMutual High
Yield Partners II LLC, and other MassMutual investments.
7. MML Realty Management Corporation, a Massachusetts corporation which
formerly operated as a manager of properties owned by MassMutual.
8. Urban Properties, Inc., a Delaware corporation which serves as a general
partner of real estate limited partnerships and as a real estate holding
company.
Direct Affiliate of MMHC Investment, Inc.
MassMutual/Darby CBO IM Inc., a Delaware corporation which operates as the
"LLC Manager" of MassMutual/Darby CBO LLC, a collateralized bond obligation
fund. (MMHC Investment, Inc.--50%)
Direct Affiliate of MML Realty Management Corporation
Cornerstone Office Management, LLC, a Delaware limited liability company
which serves as the general partner of Cornerstone Suburban Office, L.P. (MML
Realty Management Corporation--50%; Cornerstone Real Estate Advisers, Inc.--
50%).
G. MASSMUTUAL INTERNATIONAL, INC. GROUP
Set forth below are the direct or indirect subsidiaries and affiliates of
MassMutual International, Inc. The parent is the sole owner of each
subsidiary or affiliate unless otherwise indicated.
Direct Affiliates of MassMutual International, Inc.
1. MassMutual Internacional (Argentina) S.A., a corporation organized in the
Argentine Republic which operates as a holding company. (MassMutual
International, Inc.--99%; MassMutual Holding Company--1%)
2. MassMutual Internacional (Chile) S.A., a corporation organized in the
Republic of Chile which operates as a holding company. (MassMutual
International, Inc.--99%; MassMutual Holding Company--1%)
3. MassMutual International (Bermuda) Ltd., a corporation organized in
Bermuda which operates as a life insurance company.
4. MassMutual International (Luxembourg) S.A., a corporation organized in
the Grand Duchy of Luxembourg which operates as a life insurance company.
(MassMutual International, Inc.--99%; MassMutual Holding Company--1%)
23
<PAGE>
5. MassLife Seguros de Vida, S.A., a corporation organized in the Argentine
Republic which operates as a life insurance company. (MassMutual International,
Inc.--99.9%)
Direct Subsidiaries of MassMutual Internacional (Argentina) S.A.
MassMutual Services S.A., a corporation organized in the Argentine Republic
which operates as a service company. (MassMutual Internacional (Argentina)
S.A.--99%; MassMutual International, Inc.--1%)
Direct Affiliate of MassMutual Internacional (Chile) S.A.
1. Mass Seguros de Vida S.A., a corporation organized in the Republic of
Chile which operates as a life insurance company. (MassMutual Internacional
(Chile) S.A.--33.5%)
2. Origen Inversiones S.A., a corporation organized in the Republic of Chile
which operates as a holding company. (MassMutual Internacional (Chile) S.A.--
33.5%)
Direct Subsidiary of Origen Inversiones S.A.
Compania de Seguros Vida Corp S.A., corporation organized in the Republic of
Chile which operates as an insurance company. (Origen Inversiones S.A.--99%)
H. REGISTERED INVESTMENT COMPANY AFFILIATES
Each of the following entities is a registered investment company sponsored by
MassMutual or one of its affiliates.
1. DLB Fund Group, a Massachusetts business trust which operates as an open-
end investment company advised by David L. Babson and Company Incorporated.
MassMutual owns at least 25% of each series of shares issued by the fund.
2. MML Series Investment Fund, a Massachusetts business trust which operates
as an open-end investment company. All shares issued by the trust are owned by
MassMutual and certain of its affiliates.
3. MassMutual Corporate Investors, a Massachusetts business trust which
operates as a closed-end investment company. MassMutual serves as investment
adviser to the trust.
4. MassMutual Institutional Funds, a Massachusetts business trust which
operates as an open-end investment company. All shares issued by the trust are
owned by MassMutual.
5. MassMutual Participation Investors, a Massachusetts business trust which
operates as a closed-end investment company. MassMutual serves as investment
adviser to the trust.
6. Oppenheimer Series Fund, Inc., a Maryland corporation which operates as
an open-end investment company. MassMutual and affiliates own a majority of
certain series of shares issued by the fund.
7. Panorama Series Fund, Inc., a Maryland corporation which operates as an
open-end investment company. All shares issued by the fund are owned by
MassMutual and certain affiliates.
ITEM 27. Number Of Participants
Not applicable because there were no certificates sold as of the date of
this Registration Statement.
ITEM 28. Indemnification
The Bylaws of MassMutual provide that:
24
<PAGE>
MassMutual directors and officers are indemnified under its by-laws. No
indemnification is provided with respect to any liability to any entity which
is registered as an investment company under the Investment Company Act of 1940
or to the security holders thereof, where the basis for such liability is
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
MassMutual pursuant to the foregoing provisions, or otherwise, MassMutual has
been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities
Act of 1933, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by MassMutual
of expenses incurred or paid by a director, officer or controlling person of
MassMutual 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, MassMutual 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 Securities Act of 1933 and will be
governed by the final adjudication of such issue.
ITEM 29. Principal Underwriters
(a) MML Distributors, LLC, a controlled subsidiary of MassMutual, acts as
principal underwriter for registered separate accounts of MassMutual, C.M. Life
and MML Bay State.
(b)(1) MML Distributors, LLC, is the principal underwriter for the
certificates. The following people are officers and member representatives of
the principal underwriter.
OFFICERS AND MEMBER REPRESENTATIVES
MML DISTRIBUTORS, LLC
<TABLE>
<S> <C> <C>
Kenneth M. Rickson Member Representative One Monarch Place
G.R. Phelps & Co., Inc. 1414 Main Street
Springfield, MA 01144-1013
Margaret Sperry Member Representative 1295 State Street
Massachusetts Mutual Life Springfield, MA 01111-0001
Insurance Co.
Kenneth M. Rickson Chief Executive Officer, One Monarch Place
President, 1414 Main Street
and Main OSJ Supervisor Springfield, MA 01144-1013
John E. Forrest Vice President One Monarch Place
1414 Main Street
Springfield, MA 01144-1013
Michael L. Kerley Vice President One Monarch Place
Assistant Secretary 1414 Main Street
Springfield, MA 01144-1013
Ronald E. Thomson Vice President One Monarch Place
1414 Main Street
Springfield, MA 01144-1013
</TABLE>
<TABLE>
<S> <C> <C>
James T. Bagley Treasurer 1295 State Street
Springfield, MA 01111
Bruce C. Frisbie Assistant Treasurer 1295 State Street
Springfield, MA 01111-0001
</TABLE>
25
<PAGE>
<TABLE>
<S> <C> <C>
Raymond W. Anderson Assistant Treasurer 140 Garden Street
Hartford, CT 06154
Ann F. Lomeli Secretary 1295 State Street
Springfield, MA 01111-0001
Marilyn A. Sponzo Chief Legal Officer One Monarch Place
Assistant Secretary 1414 Main Street
Springfield, MA 01144-1013
Robert Rosenthal Compliance Officer One Monarch Place
1414 Main Street
Springfield, MA 01144-1013
Melissa Thompson Registration Manager One Monarch Place
1414 Main Street
Springfield, MA 01144-1013
Ruth B. Howe Director of Continuing Education One Monarch Place
1414 Main Street
Springfield, MA 01144-1013
Peter D. Cuozzo Variable Life Supervisor and 140 Garden Street
Hartford OSJ Supervisor Hartford, CT 06154
Anne Melissa Dowling Large Corporate Markets Supervisor 140 Garden Street
Hartford, CT 06154
</TABLE>
(b)(2) MML Investors Services, Inc. is the co-underwriter of the
certificates. The following people are the officers and directors of the co-
underwriter.
MML INVESTORS SERVICES, INC.
OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
Officer Business Address
------- ----------------
<S> <C>
Kenneth M. Rickson One Monarch Place
President 1414 Main Street
Springfield, MA 01144-1013
Michael L. Kerley One Monarch Place
Vice President, Chief Legal Officer, 1414 Main Street
Chief Compliance Officer, Assistant Secretary Springfield, MA 01144-1013
Ronald E. Thomson One Monarch Place
Vice President, Treasurer 1414 Main Street
Springfield, MA 01144-1013
Ann F. Lomeli 1295 State Street
Secretary/Clerk Springfield, MA 01111
John E. Forrest One Monarch Place
Vice President 1414 Main Street
National Sales Director Springfield, MA 01144-1013
Marilyn A. Sponzo One Monarch Place
Assistant Secretary 1414 Main Street
Springfield, MA 01144-1013
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Officer Business Address
------- ----------------
<S> <C>
James Furlong One Monarch Place
Chief Operations Officer 1414 Main Street
Springfield, MA 01144-1013
James T. Bagley One Monarch Place
Controller 1414 Main Street
Springfield, MA 01144-1013
David Deonarine One Monarch Place
Sr. Registered Options Principal 1414 Main Street
Compliance Registered Options Springfield, MA 01144-1013
Principal
Nicholas J. Orphan 245 Peach Tree Center Ave., Suite 2330
Regional Supervisor (South) Atlanta, GA 30303
Robert W. Kumming 1295 State Street
Retirement Services Regional Su- Springfield, MA 01111
pervisor (East/Central)
Peter J. Zummo 1295 State Street
Retirement Services Regional Su- Springfield, MA 01111
pervisor (South/West)
Bruce Lukowiak 6263 North Scottsdale Rd., Suite 222
Regional Supervisor (West) Scottsdale, AZ 85250
Gary L. Greenfield 1 Lincoln Center, Suite 1490
Regional Supervisor (Central) Oakbrook Terrace, IL 60181
Burvin E. Pugh, Jr. 1295 State Street
Chief Agency Field Force Supervi- Springfield, MA 01111
sor
John P. McCloskey 1295 State Street
Regional Supervisor (East) Springfield, MA 01144
Robert J. O'Connell 1295 State Street
Chairman of the Board of Direc- Springfield, MA 01144
tors
Susan Alfano 1295 State Street
Director Springfield, MA 01111
Lawrence V. Burkett, Jr. 1295 State Street
Director Springfield, MA 01111
John B. Davies 1295 State Street
Director Springfield, MA 01111
Anne Melissa Dowling 140 Garden Street
Director Hartford, CT 01654
Douglas J. Jangraw 140 Garden Street
Director Hartford, CT 01654
Burvin E. Pugh, Jr. 1295 State Street
Director Springfield, MA 01111
</TABLE>
27
<PAGE>
ITEM 30. Location of Accounts and Records
All accounts, books, or other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder are maintained by the Registrant at 140 Garden Street, Hartford CT.
ITEM 31. Management Services
Not Applicable.
ITEM 32. Undertakings
a. Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than sixteen
(16) months old for so long as payment under the variable annuity certificates
may be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a certificate offered by the Prospectus, a space that
an applicant can check to request a Statement of Additional Information, or (2)
a postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statement required to be made available under
this Form promptly upon written or oral request.
d. Massachusetts Mutual Life Insurance Company hereby represents that the
fees and charges deducted under the individual certificates issued under a
group deferred variable annuity contract with flexible purchase payments
described in this Registration Statement in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and
the risks assumed by Massachusetts Mutual Life Insurance Company.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Massachusetts Mutual Variable Annuity Separate Account 4, certifies that it has
caused this Pre-Effective Amendment No. 1 to Registration Statement No. 333-
81015 to be signed on its behalf by the undersigned thereunto duly authorized,
all in the city of Springfield and the Commonwealth of Massachusetts, on the
8th day of September, 1999.
Massachusetts Mutual Variable
Annuity Separate Account/4/
Massachusetts Mutual Life Insurance
Company (Depositor)
/s/ Robert J. O'Connell*
By: _________________________________
Robert J. O'Connell,President and
Chief Executive Officer
Massachusetts Mutual Life Insurance
Company
/s/ Richard M. Howe
By: _________________________________ On September 8, 1999, as
*Richard M. Howe Attorney-in-Fact pursuant
to powers of attorney.
As required by the Securities Act of 1933, this Pre-Effective Amendment No.
1 to Registration Statement No. 333-81015 has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert J. O'Connell* President and Chief September 8, 1999
______________________________________ Executive Officer
Robert J. O'Connell
/s/ Joseph M. Zubretsky* Executive Vice President, September 8, 1999
______________________________________ Chief Financial Officer &
Joseph M. Zubretsky Chief Accounting Officer
/s/ Roger G. Ackerman* Director September 8, 1999
______________________________________
Roger G. Ackerman
/s/ James R. Birle* Director September 8, 1999
______________________________________
James R. Birle
/s/ Gene Chao* Director September 8, 1999
______________________________________
Gene Chao, Ph.D.
/s/ Patricia Diaz Dennis* Director September 8, 1999
______________________________________
Patricia Diaz Dennis
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Anthony Downs* Director September 8, 1999
______________________________________
Anthony Downs
/s/ James L. Dunlap* Director September 8, 1999
______________________________________
James L. Dunlap
/s/ William B. Ellis* Director September 8, 1999
______________________________________
William B. Ellis, Ph.D.
/s/ Robert M. Furek* Director September 8, 1999
______________________________________
Robert M. Furek
/s/ Charles K. Gifford* Director September 8, 1999
______________________________________
Charles K. Gifford
/s/ William N. Griggs* Director September 8, 1999
______________________________________
William N. Griggs
/s/ George B. Harvey* Director September 8, 1999
______________________________________
George B. Harvey
/s/ Barbara B. Hauptfuhrer* Director September 8, 1999
______________________________________
Barbara B. Hauptfuhrer
/s/ Sheldon B. Lubar* Director September 8, 1999
______________________________________
Sheldon B. Lubar
/s/ William B. Marx, Jr.* Director September 8, 1999
______________________________________
William B. Marx, Jr.
/s/ John F. Maypole* Director September 8, 1999
______________________________________
John F. Maypole
/s/ Thomas B. Wheeler* Director September 8, 1999
______________________________________
Thomas B. Wheeler
/s/ Alfred M. Zeien* Director September 8, 1999
______________________________________
Alfred M. Zeien
/s/ Richard M. Howe On September 8, 1999, as
*By: _________________________________ Attorney-in-Fact pursuant
*Richard M. Howe to powers of attorney.
</TABLE>
30
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
10(i) Consent of Independent Public Accountants
</TABLE>
<PAGE>
EXHIBIT 10(i)
Consent of Independent Accountants
We hereby consent to the use in this Pre-Effective Amendment No. 1 to the
Registration Statement of Massachusetts Mutual Variable Annuity Separate
Account 4 on Form N-4 (File No. 333-81015) of our report, which includes
explanatory paragraphs relating to the use of statutory accounting practices,
which practices differ from generally accepted accounting principles, dated
February 25, 1999 relating to the financial statements of Massachusetts Mutual
Life Insurance Company, which appear in such Registration Statement. We also
consent to the reference to us under the caption "Experts" in the Statement of
Additional Information in such Registration Statement.
PricewaterhouseCoopers LLP
Hartford, Connecticut
September 17, 1999
