<PAGE>
September 14, 1995
Dear Flex-Annuity Contract Owner:
The information below supplements Massachusetts Mutual Life Insurance Company's
Flex-Annuity Prospectus dated May 1, 1995. Please place this supplement with
your prospectus and retain it for future reference.
--------------------------------------------------------------------------------
FLEX-ANNUITY
Supplement dated September 14, 1995
to the Prospectus dated May 1, 1995
The following should be read in conjunction with the information under the
heading MassMutual on page 6 of the Flex-Annuity Prospectus:
As of September 13, 1995, the Boards of Directors of Massachusetts Mutual Life
Insurance Company and Connecticut Mutual Life Insurance Company had approved the
merger of Connecticut Mutual into MassMutual. The companies plan to execute a
definitive merger agreement in the near future. The merger is subject to
certain conditions, including member and regulatory approvals and is expected to
be completed as soon thereafter as possible. As a result of the merger,
MassMutual would become the nation's fifth largest mutual life insurance company
with estimated consolidated assets of $49 billion and estimated consolidated
contingency reserves of $2.5 billion. The companies believe that the merger of
MassMutual and Connecticut Mutual would be in the best interests of
policyholders because the combined enterprise will enjoy a strong capital
position, a diverse product portfolio and a competitive cost structure. The
merger will not affect any terms of contracts issued by MassMutual.
September 14, 1995
<PAGE>
PROSPECTUS
MAY 1, 1995
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
FLEX-ANNUITY
FLEXIBLE PURCHASE PAYMENT INDIVIDUAL
VARIABLE ANNUITY CONTRACTS
MASSACHUSETTS MUTUAL VARIABLE ANNUITY SEPARATE ACCOUNT 1
(FOR TAX QUALIFIED ARRANGEMENTS)
MASSACHUSETTS MUTUAL VARIABLE ANNUITY SEPARATE ACCOUNT 2
(FOR NON-TAX QUALIFIED ARRANGEMENTS)
1295 STATE STREET
SPRINGFIELD, MASSACHUSETTS
(413) 788-8411
THIS PROSPECTUS (THE "PROSPECTUS") SETS FORTH THE INFORMATION ABOUT
MASSACHUSETTS MUTUAL VARIABLE ANNUITY SEPARATE ACCOUNTS 1 AND 2 (THE "SEPARATE
ACCOUNTS") THAT A PROSPECTIVE INVESTOR OUGHT TO KNOW BEFORE INVESTING. CERTAIN
ADDITIONAL INFORMATION ABOUT THE SEPARATE ACCOUNTS IS CONTAINED IN A STATEMENT
OF ADDITIONAL INFORMATION DATED MAY 1, 1995, WHICH HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION AND IS INCORPORATED HEREIN BY REFERENCE. THE
ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST AND WITHOUT CHARGE. TO OBTAIN
SUCH INFORMATION, PLEASE CONTACT VA SERVICE UNIT C-351, 1295 STATE STREET,
SPRINGFIELD, MASSACHUSETTS 01111, (413) 788-8411. THE TABLE OF CONTENTS FOR THE
STATEMENT OF ADDITIONAL INFORMATION APPEARS ON PAGE 16 OF THIS PROSPECTUS.
THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE TO INFORMATION ABOUT THE
SEPARATE ACCOUNTS.
----------------------
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE PROSPECTUS (DATED MAY 1,
1995) OF MML SERIES INVESTMENT FUND (THE "TRUST"), WHICH IS ATTACHED HERETO. THE
PROSPECTUS FOR THE TRUST DESCRIBES THE INVESTMENT OBJECTIVES AND RISKS OF
INVESTING IN THE FOUR AVAILABLE FUNDS: MML EQUITY FUND; MML MONEY MARKET FUND;
MML MANAGED BOND FUND; AND MML BLEND FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
<TABLE>
<CAPTION>
Table Of Contents
Page
<S> <C>
Glossary............................................................. 3
Table of Fees and Expenses........................................... 4
Flex-Annuity Condensed Financial Information......................... 5
Special Information.................................................. 6
The Contracts, MassMutual, The Separate Accounts and The Trust....... 6
The Contracts....................................................... 6
MassMutual.......................................................... 6
The Separate Accounts............................................... 6
The Trust........................................................... 6
Investments and Objectives......................................... 6
Possible Conflicts.................................................. 7
An Explanation of the Contracts...................................... 7
General............................................................. 7
The Accumulation (Pay-In) Period.................................... 7
How Contracts Were Purchased....................................... 7
Subsequent Purchases.............................................. 7
Wire Transfers.................................................... 8
Purchase of Accumulation Units..................................... 8
Transfers Among Divisions.......................................... 8
Right to Return Contracts.......................................... 8
The Death Benefit.................................................. 8
The Annuity (Pay-Out) Period......................................... 9
Annuity Benefits................................................... 9
Fixed Annuity...................................................... 9
Variable Monthly Annuity........................................... 9
Payment Options.................................................... 9
Life Income Payments............................................... 9
Joint and Survivor Life Income Payments............................ 9
Joint and Survivor Life Income Payments (Two Thirds to Survivor)...10
Payments After Death of Variable Annuitant.........................10
Special Limitations................................................10
Redemption Privilege................................................10
Tax-Sheltered Annuity Redemption Restrictions......................10
Contract Charges.....................................................10
Asset Charge........................................................11
Administrative Charge...............................................11
Contingent Deferred Sales Charge....................................11
Deduction for Premium Taxes.........................................12
Waiver of Certain Charges...........................................12
Distribution.........................................................12
Miscellaneous Provisions.............................................12
Termination of Liability............................................12
Adjustment of Units and Unit Values.................................12
Periodic Statements.................................................13
Contract Owner's Voting Rights.......................................13
Reservation of Rights................................................13
Federal Tax Status...................................................13
Introduction........................................................13
Tax Status of MassMutual............................................13
Taxation of Contracts In General....................................13
Penalty Taxes.......................................................14
Annuity Distribution Rules of Section 72(s).........................14
Tax Withholding.....................................................14
Tax Reporting.......................................................14
Taxation of Qualified Plans, IRAs and TSAs..........................15
Performance Measures.................................................15
Standardized Average Annual Total Return............................15
Additional Performance Measures.....................................15
Percentage Change In Accumulation Unit Values......................15
Additional Information...............................................16
</TABLE>
2
<PAGE>
Glossary
You or Your refers to the Contract Owner.
Accumulated Value: The value of a Contract on or prior to the maturity date,
equal to the sum of the products obtained by multiplying the number of
Accumulation Units in each Division then credited to the Contract by the
appropriate Accumulation Unit Value.
Accumulation Unit: A unit of measurement used in determining the amount of a
Contract on or prior to its maturity date.
Annuity Unit: A unit of measurement used in determining the amount of each
Variable Monthly Annuity payment.
Contract Owner: The owner of a Contract. The Contract Owner could be the
Variable Annuitant, an employer, a trust, a custodian or any entity specified in
an employee benefit plan, except that where the Contract is issued for use in
arrangements other than retirement plans which qualify for special federal tax
treatment, the Contract Owner may be only the Variable Annuitant, a custodian
for a minor annuitant under the Uniform Gifts (or Transfers) to Minors Act, or a
non-individual third-party. If the Contract is issued under Section 403(b),
Section 408(b) or Section 408(k) of the Internal Revenue Code, the Contract
Owner must be the Variable Annuitant.
Contract Year: A period of 12 months starting on the effective date of your
Contract and on each anniversary of the effective date.
Division: A sub-account of a Separate Account, the assets of which consist of
shares of a specified Fund.
Fixed Annuity: A benefit providing for periodic payments of a fixed-dollar
amount throughout the annuity period. The benefit does not vary with or reflect
the investment performance of any Division of a Separate Account.
Funds: The four separate series of shares of MML Series Investment Fund, the
open-end, diversified management investment company in which the Divisions of
the Separate Accounts invest.
Home Office: Massachusetts Mutual Life Insurance Company ("MassMutual"), 1295
State Street, Springfield, MA 01111.
Maturity Date: The date designated by the Contract Owner as of which Variable
Monthly or Fixed Annuity payments or a payment in one sum (whichever is elected)
will commence.
Payment Calculation Date: The date as of which the dollar amount of any Variable
Monthly Annuity payment is determined. Such date is the earliest Valuation Date
which is not more than 10 days before the payment is due.
Purchase Payment: An amount paid to MassMutual by or on behalf of the Variable
Annuitant.
Valuation Date: Each day on which the net asset value of the shares of any of
the Funds is determined.
Valuation Period: The period, consisting of one or more days, from one Valuation
Time to the next succeeding Valuation Time.
Valuation Time: The time of the close of the New York Stock Exchange (currently
4:00 p.m. New York time) on a Valuation Date. All actions which are to be
performed on a Valuation Date will be performed as of the Valuation Time.
Variable Annuitant: The person or persons on whose life or lives the Contract is
issued.
Variable Monthly Annuity: A benefit providing for periodic payments which vary
with and reflect the investment performance of one or more Divisions of a
Separate Account.
3
<PAGE>
Table Of Fees And Expenses
<TABLE>
<CAPTION>
Contract Owner Transaction Expenses
<S> <C>
Sales Load Imposed on Purchases................................................... None
</TABLE>
<TABLE>
<CAPTION>
Deferred Sales Load (as a percentage of the current value of the accumulation units
purchased in each level now being redeemed)
<S> <C> <C>
Level Cumulative Purchase Payments Deferred Sales Load*
1..........................First $3,000 11% in year purchase is made, decreasing 1%
per year until it is 0.
2..........................Next $32,000 5% in year purchase payment made,
decreasing 1% per year until it is 0.
3..........................Over $35,000 0%
Redemption Fees The annual administration charge is
assessed if the Contract is redeemed
off-anniversary.
Transfer Fee None
Annual Administrative Fee $35
Separate Account Annual Expenses (as a percentage of average account values)
Mortality and Expense
Risk Fee.................. 1.25%
Account Fees and Expenses.. 0.00%
Total...................... 1.25%
</TABLE>
<TABLE>
<CAPTION>
MML Series Investment Fund Annual Expenses (as a percentage of Fund average net assets)
MML Equity Fund MML Money Market Fund MML Managed Bond Fund MML Blend Fund
<S> <C> <C> <C> <C>
Management Fees........... 0.41% 0.50% 0.49% 0.38%
Other Expenses............ 0.02% 0.05% 0.03% 0.01%
Total..................... 0.43% 0.55% 0.52% 0.39%
</TABLE>
Example
You would pay the following cumulative expenses on a $1,000 investment assuming
a 5% annual return on assets:
<TABLE>
<CAPTION>
Money Market Managed Bond
Equity Division Division Division Blend Division
<S> <C> <C> <C> <C>
If your Contract is redeemed at
end of year:**
1............................ $104 $105 $105 $104
3............................ 144 148 147 143
5............................ 165 170 169 163
10............................ 232 245 242 228
If your Contract is not redeemed
at end of year:**
1............................ 19 20 20 19
3............................ 59 63 62 58
5............................ 102 108 106 100
10............................ 220 233 230 216
</TABLE>
*Sales charges are subject to certain limitations. On the first redemption
starting in year five, no sales charge will be deducted on an amount up to 10%
of the accumulated amount. See Contract Charges Contingent Deferred Sales
Charge, for further information.
**The figures shown include a portion of the $35 Annual Administrative Fee,
pro-rated for a Contract with $17,500 in Accumulated Value. Expenses you would
bear if the Contract were annuitized will be the same as either the "redeemed"
or "not redeemed" Contract expenses shown in the Example above, depending upon
the payment option you choose. No Sales Charges will be assessed upon maturity
if the Accumulation Value of the Contract is applied to certain payment options
described in the Contract Charges SALES CHARGE section of the Prospectus.
The purpose of the table set forth above is to assist you in understanding the
various costs and expenses that Contract Owners bear directly or indirectly. The
table is based on estimated amounts for the most recent fiscal year and reflects
expenses of the Separate Account as well as MML Series Investment Fund (see
Contract Charges in the Prospectus and INVESTMENT MANAGER in the MML Series
Prospectus). The table does not include any premium tax expenses which may
apply. Premium taxes currently range up to 3.5% of premiums paid (see Contract
Charges PREMIUM TAXES).
The above examples should not be considered representative of past or future
expenses; actual expenses may be greater or less than those shown.
4
<PAGE>
<TABLE>
<CAPTION>
FLEX-ANNUITY CONDENSED FINANCIAL INFORMATION
Accumulation Unit Values (Audited)
Massachusetts Mutual
Variable Annuity Money Managed
Separate Account 1 - Flex-Annuity IV (Qualified) Equity Market Bond Blend
Accumulation Unit Values Division Division Division Division
<S> <C> <C> <C> <C> <C>
December 31, 1994.... $5.14 $1.95 $2.80 $3.05
December 31, 1993.... 5.00 1.90 2.95 3.01
December 31, 1992.... 4.62 1.88 2.67 2.78
December 31, 1991.... 4.24 1.84 2.52 2.57
December 31, 1990.... 3.42 1.75 2.19 2.10
December 31, 1989.... 3.48 1.64 2.04 2.08
December 31, 1988.... 2.86 1.52 1.83 1.75
December 31, 1987.... 2.49 1.44 1.73 1.57
December 31, 1986.... 2.47 1.37 1.71 1.54
December 31, 1985.... 2.08 1.30 1.51 1.32
December 31, 1984.... 1.61 1.22 1.28 1.07
December 31, 1983.... 1.55 1.11 1.16 -
December 31, 1982.... 1.27 1.03 1.09 -
*August 18, 1982..... 1.00 1.00 1.00 -
Number of Accumulation December 31, 1994.... 16,469,073 6,974,443 4,945,453 70,616,166
Units Outstanding December 31, 1993.... 17,562,315 8,006,953 5,750,922 76,447,631
December 31, 1992.... 17,875,111 10,519,720 5,930,663 79,879,754
December 31, 1991.... 18,399,891 14,021,162 6,296,661 84,037,712
December 31, 1990.... 19,165,311 16,823,422 6,887,453 88,687,128
December 31, 1989.... 20,324,896 15,177,104 7,739,167 95,071,411
December 31, 1988.... 21,895,930 17,106,899 8,050,176 102,155,836
December 31, 1987.... 32,211,658 20,609,664 9,846,797 146,093,259
December 31, 1986.... 29,261,495 13,843,529 12,198,337 111,370,803
December 31, 1985.... 22,357,064 14,552,679 10,726,747 47,367,398
December 31, 1984.... 17,145,504 15,990,964 10,159,887 19,103,671
December 31, 1983.... 14,995,651 8,607,985 10,733,640 -
December 31, 1982.... 1,611,843 3,502,160 3,301,385 -
</TABLE>
<TABLE>
<CAPTION>
Massachusetts Mutual
Variable Annuity Money Managed
Separate Account 2 - Flex-Annuity IV (Non-Qualified) Equity Market Bond Blend
Accumulation Unit Values Division Division Division Division
<S> <C> <C> <C> <C> <C>
December 31, 1994.... $4.96 $1.97 $2.99 $3.12
December 31, 1993.... 4.83 1.92 3.15 3.08
December 31, 1992.... 4.46 1.90 2.85 2.85
December 31, 1991.... 4.09 1.86 2.69 2.64
December 31, 1990.... 3.30 1.77 2.33 2.15
December 31, 1989.... 3.35 1.66 2.18 2.13
December 31, 1988.... 2.76 1.54 1.95 1.80
December 31, 1987.... 2.40 1.45 1.84 1.60
December 31, 1986.... 2.38 1.38 1.82 1.58
December 31, 1985.... 2.01 1.31 1.61 1.35
December 31, 1984.... 1.56 1.23 1.36 1.09
December 31, 1983.... 1.48 1.13 1.25 -
December 31, 1982.... 1.26 1.05 1.17 -
*July 15, 1982....... 1.00 1.00 1.00 -
Number of Accumulation December 31, 1994.... 2,013,658 2,706,939 679,696 8,272,609
Units Outstanding December 31, 1993.... 2,035,263 2,954,111 897,140 9,139,911
December 31, 1992.... 2,051,039 3,743,611 1,054,692 10,152,013
December 31, 1991.... 2,064,417 5,466,614 1,219,069 10,031,827
December 31, 1990.... 2,204,866 5,473,347 1,220,315 11,131,588
December 31, 1989.... 2,371,065 6,421,931 1,736,773 12,818,548
December 31, 1988.... 2,843,200 8,707,917 1,591,704 14,008,177
December 31, 1987.... 4,909,158 6,352,013 1,701,373 27,436,967
December 31, 1986.... 4,594,088 4,071,319 2,229,978 22,267,159
December 31, 1985.... 3,133,430 3,828,708 1,948,774 6,937,546
December 31, 1984.... 2,458,154 4,025,995 1,737,352 2,175,142
December 31, 1983.... 2,819,487 1,881,747 2,711,262 -
December 31, 1982.... 478,348 862,901 980,853 -
</TABLE>
---------
*Commencement of Public Offerings.
Financial Statements
For financial statements and other information concerning the financial
condition of the Massachusetts Mutual Variable Annuity Separate Accounts 1 -
Flex-Annuity IV (Qualified) and 2 - Flex-Annuity IV (Non-Qualified) and of
MassMutual, see the Statement of Additional Information.
5
<PAGE>
Special Information
The Contracts are subject to a contingent deferred sales charge at a maximum
rate of 11% of the amount redeemed or the maturity value (but in no case greater
than 8.5% of purchase payments) and certain other charges more fully described
under CONTRACT CHARGES on page 10.
Certain distributions under the Contracts may be subject to a penalty tax of 10%
of the amount of the distribution that is includable in gross income as
described in the FEDERAL TAX STATUS section on page 13.
Partial or full redemption of a Contract may require MassMutual to withhold 20%
of the amount redeemed as more fully described in the TAXATION OF QUALIFIED
PLANS, IRAs and TSAs section on page 15.
The Contracts entitle the purchaser to a 10-day revocation right more fully
described under Right to Return Contracts on page 8.
The Contracts, MassMutual,
The Separate Accounts, and
The Trust
The Contracts
This Prospectus describes two individual variable annuity contracts (the
"Contracts") that were offered by Massachusetts Mutual Life Insurance Company
("MassMutual"). The Contracts are no longer offered for sale to the public.
Contract Owners may continue, however, to make purchase payments under the
Contract.
MassMutual
MassMutual is a mutual life insurance company specially chartered by the
Commonwealth of Massachusetts on May 14, 1851. Its Home Office is located in
Springfield, Massachusetts. MassMutual is licensed to transact a life, accident
and health insurance business in all fifty states of the United States, the
District of Columbia and certain provinces of Canada. As of December 31, 1994,
MassMutual had total consolidated assets of $35.7 billion and consolidated
contingency reserves in excess of $1.9 billion.
The Separate Accounts
Separate Account 1 was established on April 8, 1981 and Separate Account 2 was
established on October 14, 1981. Each is a separate account of MassMutual
registered with the Securities and Exchange Commission as a unit investment
trust.
Each Separate Account is divided into four Divisions. The Equity Division
invests in shares of MML Equity Fund (the "Equity Fund"). The Money Market
Division invests in shares of MML Money Market Fund (the "Money Market Fund").
The Managed Bond Division invests in shares of MML Managed Bond Fund (the
"Managed Bond Fund"). The Blend Division invests in shares of MML Blend Fund
(the "Blend Fund"). The value of both Accumulation Units and Annuity Units in
each Division reflects the investment results of its underlying Fund. Each Fund
is a series of the Trust.
Although the assets of each Separate Account are owned by MassMutual, assets of
each Separate Account equal to the reserves and other Contract liabilities which
depend on the investment performance of the Separate Account are not chargeable
with liabilities arising out of any other business MassMutual may conduct. The
income and capital gains and losses, realized or unrealized, of each Division of
a Separate Account are credited to or charged against such Division without
regard to the income and capital gains and losses of the other Divisions or
other accounts of MassMutual. All obligations arising under the Contracts,
however, are general corporate obligations of MassMutual.
The Trust
The Trust is a no-load, open-end, diversified management investment company
consisting of four separate series of shares (the "Funds") each of which has its
own investment objectives and policies. MassMutual serves as investment manager
of each of the Funds. Accordingly MassMutual is responsible for providing all
necessary investment advisory, management, and administrative services needed by
the Funds pursuant to investment management agreements. MassMutual has entered
into investment sub-advisory agreements with Concert Capital Management, Inc.
("Concert Capital"), a second tier wholly-owned subsidiary of MassMutual. These
agreements provide that Concert Capital manages the investment and reinvestment
of the assets of the Equity Fund and the Equity Sector of the Blend Fund. The
Separate Accounts purchase and redeem shares of the Funds at their net asset
value next determined after receipt of the purchase order or redemption request
without the imposition of any sales or redemption charge. Distributions made on
the shares of each Fund held by a Division of a Separate Account are immediately
reinvested in shares of the Fund at net asset value, which shares are added to
the assets of the appropriate Division of the Separate Account.
Investments and Objectives:
(1) The Equity Fund
The assets of the Equity Fund are invested primarily in common stocks and other
equity type securities. The primary investment objective of the Equity Fund is
to achieve a superior total rate of return over an extended period of time from
both capital appreciation and current income. A secondary investment objective
is the preservation of capital when business and economic conditions indicate
that investing for defensive purposes is appropriate.
(2) The Money Market Fund
The assets of the Money Market Fund are invested in short-term debt instruments,
including but not limited to commercial paper, certificates of deposit, bankers'
acceptances, and obligations issued, sponsored, or guaranteed by the United
States government or its agencies or instrumentalities. The investment
objectives of the Money Market Fund are to achieve high current income, the
preservation of capital, and liquidity.
6
<PAGE>
(3) The Managed Bond Fund
The assets of the Managed Bond Fund are invested primarily in publicly issued,
readily marketable, fixed income securities of such maturities as MassMutual, as
investment manager, deems appropriate from time to time in light of market
conditions and prospects. The investment objective of the Managed Bond Fund is
to achieve as high a total rate of return on an annual basis as is considered
consistent with the preservation of capital values.
(4) The Blend Fund
The assets of the Blend Fund are invested in a portfolio of common stocks and
other equity-type securities, bonds and other debt securities with maturities
generally exceeding one year, and money market instruments and other debt
securities with maturities generally not exceeding one year. The investment
objective of the Blend Fund is to achieve as high a level of total rate of
return over an extended period of time as is considered consistent with prudent
investment risk and the preservation of capital values.
A description of the Funds, their investment objectives, policies and
restrictions, their expenses, the risks attendant to investment therein, and
other aspects of their operations is contained in the attached MML Series
Investment Fund Prospectus, which an investor should read carefully before
investing.
Possible Conflicts
Assets of variable life insurance separate accounts are also invested in the
Trust. It is possible that under this arrangement conflicts could arise between
the interests of Contract Owners and owners of variable life insurance policies.
The Trustees of the Trust will follow monitoring procedures to determine whether
material conflicts have arisen. If an irreconcilable material conflict exists,
the assets of the variable life insurance separate accounts may be invested
solely in shares of mutual funds which offer their shares exclusively to
variable life insurance separate accounts, unless in certain cases the owners of
the variable life insurance policies and the variable annuity contracts vote
otherwise. For a discussion of other separate accounts investing in the Trust
and possible conflicts arising from such an arrangement, see the Statement of
Additional Information.
An Explanation Of The Contracts
The principal provisions of the Contracts are described below. If you desire
additional information, you should refer to the Contracts and to the Statement
of Additional Information. For a complete understanding of your rights you
should also review any applicable employee benefit plan documents.
General
The two Contracts described herein are individual variable annuity contracts
issued by MassMutual. Both Contracts are identical except for differences
associated with tax-qualified plans.
One Contract was sold for use in retirement plans which qualify (with necessary
endorsement) for special federal tax treatment under the Internal Revenue Code
of 1986, as amended (the "Code"). These Contracts were issued by Separate
Account 1. The tax-qualified retirement plans for which Separate Account 1
Contracts were offered are: (1) pension and profit-sharing plans qualified under
Section 401(a) or 403(a) of the Code ("Qualified Plans") which may also
constitute participant-directed individuals account plans under Section 404(c)
of ERISA; (2) annuity purchase plans adopted by public school systems and
certain tax-exempt organizations pursuant to Section 403(b) of the Code ("Tax
Sheltered Annuities" or "TSAs"); (3) deferred compensation plans for state and
local governments and tax-exempt organizations established under the provisions
of Section 457 of the Code; and (4) Individual Retirement Annuities established
in accordance with Section 408 of the Code ("IRAs"), including those established
by employer contributions under a Simplified Employee Pension Plan arrangement.
Under tax-qualified retirement plans except TSAs and IRAs, participants may not
be the Contract Owners and, therefore, may have no Contract Owner's rights.
Under Section 457 deferred compensation plans, the state or political
subdivision or tax-exempt organization must be the Contract Owner and a plan
participant will not have any secured interest in the Contract and must be a
general unsecured creditor of the state or political subdivision or tax-exempt
organization.
The other Contract was sold for use in arrangements other than retirement plans
which qualify for special federal tax treatment. These Contracts were issued by
Separate Account 2. The following discussion applies to both Contracts unless
otherwise indicated.
The Accumulation (Pay-In) Period
How Contracts Were Purchased. The minimum initial purchase payment was $600
divided by the number of installments (not more than 12) which you expected to
make each year. If you intended to make only one purchase payment over the
lifetime of the Contract, however, your minimum initial purchase payment had to
be at least $2,000. After making your initial payment, you may make as many or
as few subsequent purchase payments as you desire. The amount of each subsequent
purchase payment may vary but must be at least $25. The Contract permits
MassMutual to establish a maximum on the total purchase payments which can be
made under the Contract. This maximum will not be less than $500,000.
Subsequent Purchases
You may make all purchase payments for additional Accumulation Units by mailing
your check, clearly indicating your name and Contract number, to:
MASSMUTUAL VA
P.O. Box 92714
Chicago, IL 60675-2714
7
<PAGE>
Wire Transfers
You may make purchase payments by instructing your bank to wire funds to:
Chase Manhattan, New York, New York
ABA #021000021
MassMutual Account #910-2-517290
Ref: VA Income Contract #
Name: (Contract Owner)
Purchase of Accumulation Units. At any time prior to the maturity date of a
Contract, you may direct that your purchase payments (after deducting any
applicable premium taxes) be applied to purchase Accumulation Units of the
Division or Divisions which you have designated. To be effective, a written
designation must be received at MassMutual's Home Office. The number of
Accumulation Units purchased will be the amount applied divided by the
Accumulation Unit Value on the date of purchase. These Accumulation Units will
be used in determining the value of the Contract on or prior to the maturity
date and the amount of annuity benefits at maturity. The value of the
Accumulation Units in each Division will vary with and will reflect the
investment performance of that Division (which in turn will reflect the
investment performance and expenses of the Fund in which the assets of that
Division are invested), any applicable taxes and the applicable Asset Charge. A
more detailed description of how the value of an Accumulation Unit is calculated
is contained in the Statement of Additional Information.
The value of the Accumulation Units (the "Accumulation Unit Value") which you
purchase is determined as of the Valuation Time on the date on which MassMutual
(at its Home Office, or a designated bank lock box), in the mail, or by wire
transfer, receives your payment. If, however, the date of receipt or the
Contract Date is not a Valuation Date, or if the purchase payment is received
otherwise than by mail or wire transfer, the value of the Accumulation Units
purchased will be determined as of the next Valuation Time after the time the
purchase payment is received. If a purchase payment is not applied to purchase
Accumulation Units within five business days after receipt (due to incomplete or
ambiguous instructions, for example), the payment will be refunded unless
specific consent to retain the payment for a longer period is obtained from the
prospective purchaser.
Transfers Among Divisions. You may transfer funds among Divisions without charge
or restriction at any time prior to 30 days before the Maturity Date. To make
such a transfer, you direct MassMutual to cancel all or part of the Accumulation
Units in any Division of a Separate Account and use the value thereof to acquire
Accumulation Units in any other Division of the same Separate Account. Any such
acquisition will be made at the value of an Accumulation Unit in that Division
determined on the date the transfer is effective. For the purpose of determining
the applicable sales charge upon a subsequent redemption, Accumulation Units
acquired in such a transfer will be deemed to have been acquired in the Contract
Year and with the cumulative purchase payment used to purchase the original
Accumulation Units. In addition, a proportionate part of any unused portion of
the 10% "free corridor" is transferred. (See, Contingent Deferred Sales Charge.)
Such transfers will be effective as of the Valuation Date which is on, or next
follows, the date your written direction is received by mail at the Home Office.
Any written direction delivered at the Home Office otherwise than by mail,
however, will be effective as of the first Valuation Time after receipt.
MassMutual has commenced operations, on a limited basis, of an automated
telephone system which permits certain Contract Owners to perform transfers by
toll-free telephone call and to obtain information concerning current Contract
Account Values. This service is available to Contract Owners, (other than tax
qualified plan trustees), who have supplied MassMutual with the necessary
authorization form. MassMutual will take reasonable steps to ensure that
telephone transactions received are genuine. These measures may include
requiring forms of personal identification before completing requested telephone
transactions. If MassMutual fails to take such precautions, it may be liable for
any resultant losses due to fraudulent transfer requests. Normal transfer
restrictions apply. Contract Owners who use this system are required to amend
their Contracts and authorize MassMutual to complete any transfer requested for
which the caller uses the personal identification number needed for access to a
Contract. The availability of the automated telephone transfer system is subject
to state insurance department approval.
Right to Return Contracts. You may return your Contract to MassMutual any time
within 10 days after the Contract has been delivered to you. If you exercise
this right you will receive the greater of: (a) the Accumulated Value of the
Contract plus any deductions for premium taxes which have been made from
purchase payments; or, (b) the amount of purchase payments made less the net
amount of all partial redemptions. For this purpose the Accumulated Value of the
Contract will be determined as of the Valuation Time on the date on which the
Contract is received by mail at MassMutual's Home Office or at the next
Valuation Time after receipt if the Contract is received on other than a
Valuation Date or is received other than by mail.
The Death Benefit. If the Variable Annuitant dies prior to the Maturity Date,
the beneficiary named in the Contract will receive the greater of (a) the total
of all purchase payments made to the Contract, less the net amount of all
partial redemptions, or (b) the Accumulated Value of the Contract, less the
Administrative Charge (see, Administrative Charge), determined as of the
Valuation Date which is on or next follows the date on which written notice of
death is received in the mail at MassMutual's Home Office. Any written notice
delivered at the Home Office otherwise than by mail, however, will be effective
as of the first Valuation Time after receipt. The death benefit may be paid in
one sum or, with MassMutual's consent, applied under one or more of the payment
options provided by the Contract (see Payment Options). No Contingent Deferred
Sales Charge is imposed upon the death of the Variable Annuitant. Within three
business days after such receipt of the written notice of death, MassMutual will
send the beneficiary a letter describing the options available and the
requirements of formal proof of death and documents necessary to elect payment
of the death benefit in one sum or application under a payment option. This
letter will advise the beneficiary that such payment or application will be made
promptly after receipt of the formal proof of death and the election documents.
Until such time, the death benefit will earn interest at the greater of the rate
then being paid by MassMutual on amounts held in
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its general account under interest payment settlement options (5.75% at the date
of this Prospectus), or the rate earned by the Money Market Division of the
Separate Account, as adjusted to remove mortality and expense risk charges, or
such greater rate as may be required by law.
THE ANNUITY (PAY-OUT) PERIOD
Annuity Benefits. Each Contract specifies a Maturity Date which you have
selected. You may elect, however, by written notice received by MassMutual at
its Home Office within 90 days prior to the Maturity Date specified in the
Contract, to defer the Maturity Date to any date not later than the Contract
anniversary either nearest the Variable Annuitant's 85th birthday (if your
purchase payments are being allocated to Separate Account 2) or nearest the
Variable Annuitant's 75th birthday (if your purchase payments are being
allocated to Separate Account 1). In general, in order to avoid adverse tax
consequences, distributions either by partial redemption or by maturing the
contract, from a Contract issued as an IRA or as a Tax Sheltered Annuity or
under a qualified plan should begin for the calendar year in which the Annuitant
reaches age 70 1/2 and should be made each year thereafter in an amount no
less than the Accumulated Value of the Contract at the end of the previous year
divided by the applicable life expectancy (see Taxation of Qualified Plans, TSAs
and IRAs for additional information). You may also elect to advance the Maturity
Date to a date prior to the specified Maturity Date, or prior to any new
Maturity Date you may have selected, provided that written notice is received by
MassMutual at its Home Office at least 31 days before the Maturity Date elected.
For additional rules regarding TSA's, see Tax-Sheltered Annuity Redemption
Restrictions.
When your Contract approaches its Maturity Date, you may choose to receive
either Fixed Annuity payments (referred to as the "Fixed Income Option" in your
Contract), Variable Monthly Annuity payments (referred to as the "Variable
Income Option" in your Contract), or a combination of the two. You also may
elect to receive the Accumulated Value in one sum. If you elect a Fixed Annuity
or a lump sum payment, a Contingent Deferred Sales Charge may be deducted from
the Accumulated Value of your Contract at maturity. If, however, you elect a
Variable Monthly Annuity, no Contingent Deferred Sales Charge will be deducted
from the Accumulated Value of your Contract. Variable Monthly Annuity payments
may be received under several different payment options. If you have made no
election within a reasonable time after the Maturity Date, the Contract will
provide you with the automatic payment of a Variable Monthly Annuity under a
life income option with payments guaranteed for 10 years.
Fixed Annuity. If you select a Fixed Annuity, each annuity payment will be for a
fixed-dollar amount and will not vary with or reflect the investment performance
of a Separate Account or its Divisions. For further information regarding the
type of annuity benefit and the payment options available thereunder, you should
refer to the Contracts.
Variable Monthly Annuity. If you select a Variable Monthly Annuity each annuity
payment will be based upon the value of the Annuity Units credited to your
Contract. The number of Annuity Units in each Division to be credited to your
Contract is based on the value of the Accumulation Units in that Division and
the applicable Purchase Rate. The Purchase Rate will differ according to the
payment option you have elected and takes into account the age of the Variable
Annuitant or Annuitants. The value of the Annuity Units will vary with and
reflect the investment performance of each Division to which Annuity Units are
credited based on an Assumed Investment Rate of 4% per year. This Rate is a
fulcrum rate around which Variable Monthly Annuity payments will vary. An actual
net rate of return for a Division for the month greater than the Assumed
Investment Rate will increase Variable Monthly Annuity payments attributable to
that Division. An actual net rate of return for a Division for the month less
than the Assumed Investment Rate will decrease Variable Monthly Annuity payments
attributable to that Division.
For a more detailed description of how the value of an Annuity Unit and the
amount of Variable Monthly Annuity payments are calculated, see the Statement of
Additional Information for this Prospectus.
Payment Options. Below is a description of Variable Monthly Annuity payment
options which you may elect. For a description of payment options available in
connection with Fixed Annuity benefits, you should refer to the Contracts.
To elect a certain type of payment option, please submit your request in writing
to MassMutual. This request must be received by MassMutual in form satisfactory
to us at its Home Office prior to the Maturity Date of the Contract.
If the value of a Contract applied to any payment option is less than $2,000 or
produces an initial Variable Monthly Annuity payment of less than $20,
MassMutual may discharge its obligation by paying the value applied, less any
applicable Contingent Deferred Sales Charge, in one sum to the person entitled
to receive the first annuity payment.
Upon your request, MassMutual will endorse a Contract to eliminate or restrict
any payment option in order that the plan pursuant to which the Contract is
issued remains qualified under the Code, provided such endorsement is not
otherwise contrary to law. MassMutual may make available payment options in
addition to those set forth in the Contract.
Life Income Payments. If you elect this option, Variable Monthly Annuity
payments will be made during the lifetime of the person on whose life payments
depend, either: (1) without payments certain; or (2) with payments certain on an
"installment refund" basis; or (3) with payments certain for 5 or 10 years. Of
these three alternatives, alternative (1) offers the maximum level of monthly
payments since there is no guarantee of a minimum number of payments or
provision for payments to the beneficiary upon the death of the Variable
Annuitant. Since there is no such guarantee, however, it would be possible to
receive only one annuity payment if the Variable Annuitant died prior to the due
date of the second annuity payment, two if he died before the third annuity
payment date, and so forth. Alternative (2) provides for payments certain for a
term equal to the nearest whole number of months determined by dividing the
value applied under a Contract by the dollar amount of the first Variable
Monthly Annuity payment.
Joint and Survivor Life Income Payments. If you elect this option, Variable
Monthly Annuity payments will be made during the joint lifetime of the two
persons on whose
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survival payments depend and thereafter during the lifetime of the survivor,
either (1) without payments certain, or (2) with payments certain for 10 years.
Joint and Survivor Life Income Payments (Two-Thirds to the Survivor). If you
elect this option, Variable Monthly Annuity payments will be made during the
joint lifetime of the two persons on whose survival payments depend and
thereafter during the lifetime of the survivor, without payment certain. The
number of Annuity Units for each Division will be reduced by one-third upon the
first death.
Payments After Death of Variable Annuitant. Generally, if a payment option
providing for payments certain is elected, and the Variable Annuitant and any
survivor Variable Annuitant should die before the payments certain have been
completed, MassMutual will pay in one sum to the designated beneficiary, unless
otherwise requested, the present value of any unpaid payments certain under the
option. Present value will be determined as of the Valuation Time which is on,
or next follows, the date on which written notice of death is received in good
order at MassMutual's Home Office.
Special Limitations. Where the Contract is issued pursuant to a Tax Sheltered
Annuity or an IRA there are special limitations on the types of payment options
which you may elect.
Redemption Privilege
Subject to the special rules regarding tax sheltered annuities, discussed below,
you may redeem all or part of the Accumulated Value of a Contract on or prior to
its maturity date if the Variable Annuitant is alive at the time of redemption.
In a partial redemption, however, the amount redeemed must be at least $100, and
the remaining value of the Contract must be at least $600. Any partial
redemption request which would reduce the value of the Contract to less than
$600 will be treated as a request for a full redemption. If you exercise your
redemption rights as described, you may be assessed a Contingent Deferred Sales
Charge. (See, Contract Charges for a detailed description of how the Contingent
Deferred Sales Charge is calculated.) The amount redeemed may be taken in one
sum or, where a full redemption is made, applied under one or more of the
payment options provided by the Contract. In the case of a partial redemption,
You must designate the Division or Divisions from which the redemption is to be
made. A partial redemption will result in a reduction in the number of
Accumulation Units credited to the Contract in that Division equal to the dollar
amount of the Contingent Deferred Sales Charge assessed against the redeemed
Accumulation Units plus the dollar amount of the redemption payment from that
Division divided by the appropriate Accumulation Unit Value. The appropriate
Accumulation Unit Value is that determined as of the Valuation Time on the date
on which the written request for redemption is received in the mail at
MassMutual's Home Office. If, however, the date on which such request is
received is not a Valuation Date or if the request is made other than through
the mail, the appropriate Accumulation Unit Value will be determined as of the
next Valuation Time after receipt. (See Deduction for Premium Taxes for
information concerning a possible refund of premium tax in the event of a full
or partial redemption.)
After the Maturity Date of the Contract, the Variable Annuitant may, without the
imposition of a Contingent Deferred Sales Charge, redeem up to the full amount
of the then present value of any remaining unpaid payments certain under the
payment option. Where Fixed Monthly Annuity payments are being made under a
Contract subsequent to its Maturity Date, the Variable Annuitant may, without
the imposition of any further Contingent Deferred Sales Charge, redeem up to the
full amount of the then present value of any remaining unpaid payments certain
under the payment option. After the death of the Variable Annuitant, the
designated beneficiary may make such redemptions. The Contract Owner, however,
may specify in the election of the payment option that the Variable Annuitant
shall not have the right to redeem unpaid payments certain under the life income
or joint and survivor option. The present value of unpaid Variable Monthly
Annuity payments certain will be calculated at the Assumed Investment Rate and
the appropriate Annuity Unit Values. The appropriate Annuity Unit Values will be
determined in the same manner as the appropriate Accumulation Unit Values are
determined in the case of a redemption prior to the Maturity Date.
Redemption payments will be made within seven days (or a shorter period if
required by law) after receipt of the necessary written request by MassMutual at
its Home Office. However, the right of redemption may be suspended or payments
postponed whenever: (1) the New York Stock Exchange is closed; except for
holidays and weekends; (2) the Securities and Exchange Commission has determined
that trading on the New York Stock Exchange is restricted; (3) the Securities
and Exchange Commission permits suspension or postponement and so orders; or (4)
an emergency exists, as defined by the Securities and Exchange Commission, so
that valuation of the assets of each Separate Account or disposal of securities
held by it is not reasonably practicable.
Redemption payments may be subject to federal income tax and elective and/or
mandatory tax withholding. (See FEDERAL TAX STATUS.)
Tax-Sheltered Annuity Redemption Restrictions. The redemption of Internal
Revenue Code Section 403(b) annuities (Tax Sheltered Annuities, "TSAs") may be
restricted. Specifically, salary reduction contributions after 1988 and
post-1988 earnings on all salary reduction contributions may not be withdrawn
until age 59 1/2, death, disability, or separation from service with the
TSA employer. Salary reduction contributions may be withdrawn, however, for
"hardship".
No redemptions may be made in connection with a Contract issued pursuant to the
Texas Optional Retirement Program for faculty members of Texas public
institutions of higher learning prior to the Variable Annuitant's termination of
employment in all such institutions, retirement, death or attainment of age
70 1/2.
Contract Charges
There are four types of charges which MassMutual may assess against the
Contracts: (1) an Asset Charge for mortality and expense risks assumed by
MassMutual; (2) an Administrative Charge for administrative expenses of
MassMutual in connection with the Contracts; (3) a Contingent Deferred Sales
Charge; and (4) a deduction for premium taxes, if any, payable by MassMutual in
connection with a Contract.
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The Separate Accounts do not bear any expenses other than the charges stated
below.
Asset Charge. MassMutual assumes the risk that the mortality experience under
the Contracts may be less favorable than that assumed in determining the amount
of annuity payments, and thereby assures that the amount of such payments will
not be affected by the Variable Annuitant's longevity or by an improvement in
life expectancy generally. If the mortality assumptions used should in fact
prove to be inadequate, MassMutual will absorb the resulting loss by making
transfers to the appropriate Divisions of the Separate Account. Conversely, if
the mortality assumptions used should prove to be more than adequate, the
resulting surplus may be withdrawn from the appropriate Divisions of the
Separate Account by MassMutual from time to time.
MassMutual also assumes the risk that the Contingent Deferred Sales Charge and
the Administrative Charge (described below) may be insufficient to cover the
sales and administrative expenses associated with the Contracts. If such
expenses exceed these charges, MassMutual will pay the excess out of its
surplus. Conversely, while the charges are not designed to increase MassMutual's
surplus, if they are more than sufficient to meet expenses, an increase in
surplus will result.
Since the Contracts are nonparticipating, they will not share in the
distribution of any surplus which might result from the operation of the
mortality and expense risk charges.
To compensate MassMutual for assuming the mortality and expense risks, an Asset
Charge is subtracted in determining the value of each Contract at the end of a
Valuation Period. The Asset Charge will be equivalent to 1.25% of the current
value of the Contract on an annual basis, of which MassMutual estimates .45% is
for the assumption of mortality risks and .80% is for the assumption of expense
risks including distribution expense risks. (MassMutual, as the investment
manager of each of the Funds, also receives a quarterly fee from each Fund at
the annual rate of .50% of the first $100,000,000 of the Fund's average daily
net asset value, .45% of the next $200,000,000, .40% of the next $200,000,000
and .35% of any excess over $500,000,000.) For a further explanation of the fees
paid for such services please see the attached Prospectus for the Trust.
Administrative Charge. Each year on the Contract anniversary (or if not a
Valuation Date, on the next Valuation Date), MassMutual deducts an
Administrative Charge of $35 from the Accumulated Value of the Contract to
reimburse it for administrative expenses relating to the issue and maintenance
of the Contract. The Administrative Charge will be deducted from the Divisions
of the Separate Account in the same proportion that the Contract Owner's
interest in each Division bears to the total Accumulated Value of the contract,
and the number of Accumulation Units will be reduced accordingly. The
Administrative Charge is designed only to reimburse MassMutual for such expenses
and MassMutual does not expect to recover from this charge any amount in excess
of accumulated expenses. In any Contract year when a Contract is redeemed for
its full value other than on the Contract anniversary, the amount of the
Administrative Charge will be deducted at the time of such redemption. This
charge will also be assessed when the Contract matures, or upon the death of the
Variable Annuitant prior to the maturity date if the death benefit paid at that
time is the Accumulated Value of the Contract. The amount of the Administrative
Charge may be increased by MassMutual to a maximum of $50 per year.
Contingent Deferred Sales Charge. Sales charges are not deducted from purchase
payments at the time the payments are made. Instead, the full amount of your
purchase payments (less any premium taxes in those states that impose such a
tax) will be applied to purchase Accumulation Units in one or more Divisions of
a Separate Account. MassMutual does, however, incur sales expenses for
commissions, sales literature, and related costs. A Contingent Deferred Sales
Charge may be imposed upon full or partial redemption of the Contract prior to
maturity and at the maturity date of the Contract if a Fixed Annuity or a
lump-sum payment is elected. If a Variable Monthly Annuity is elected, no
Contingent Deferred Sales Charge will be deducted at the Maturity Date of the
Contract.
Where applicable, Contingent Deferred Sales Charges are assessed as a percentage
of the amount redeemed. The percentages vary depending upon two factors:
(1) the cumulative amount of purchase payments made under the Contract at the
time the Accumulation Units being redeemed were purchased; and
(2) the time elapsed between the Contract year in which the Accumulation Units
being redeemed were purchased and the Contract year of their redemption.
Accumulation Units with the lowest applicable sales charge percentages will be
redeemed first.
Generally, Accumulation Units purchased with your first $3,000 of cumulative
purchase payments under the Contract are subject to a charge of 11% of the value
of the Accumulation Units if they are redeemed in the same Contract year in
which they were purchased, declining 1% each Contract year to 0% eleven or more
years after the Contract year in which they were purchased. Accumulation Units
purchased with cumulative purchase payments in excess of $3,000 but not more
than $35,000 are subject to a charge of 5% of the value of the Accumulation
Units if they are redeemed in the same Contract year in which they were
purchased, declining 1% each Contract year to 0% five or more years after the
Contract year in which they were purchased. Accumulation Units purchased with
cumulative purchase payments in excess of $35,000 may be redeemed at any time
without the imposition of any charge.
There are two limits on the Contingent Deferred Sales Charge. First, during each
Contract year, beginning with the fifth Contract year, 10% of the number of
Accumulation Units in each Division on the last day of the preceding Contract
year may be redeemed at any time during the Contract year without the imposition
of any sales charge. This 10% "free corridor" is non-cumulative in that any
unused balance at the end of the Contract year is not carried over into the
following Contract year. Second, the total sales charges under a Contract will
never exceed 8 1/2% of the cumulative purchase payments made to that time
under the Contract.
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The Contingent Deferred Sales Charge percentage, if any, applicable to a
particular redemption is illustrated by the table which follows.
-------------------------------------------------------------------------------
Contingent Deferred Sales Charge
Determination of Applicable Percentage
Charge (if any) upon Redemption
<TABLE>
<CAPTION>
Accumulation Units Purchased With
Cumulative Purchase Payments
(1) (2) (3)
Contract year in which the Excess over
Accumulation Units being First $3,000 Next $32,000 $35,000 of
redeemed were purchased of Payments of Payments Payments
<S> <C> <C> <C>
Current Contract Year 11.0%* 5.0% NO CHARGE
Previous Year 10.0 4.0 NO CHARGE
2nd Previous Year 9.0 3.0 NO CHARGE
3rd Previous Year 8.0 2.0 NO CHARGE
4th Previous Year 7.0 1.0 NO CHARGE
5th Previous Year 6.0 NO CHARGE NO CHARGE
6th Previous Year 5.0 NO CHARGE NO CHARGE
7th Previous Year 4.0 NO CHARGE NO CHARGE
8th Previous Year 3.0 NO CHARGE NO CHARGE
9th Previous Year 2.0 NO CHARGE NO CHARGE
10th Previous Year 1.0 NO CHARGE NO CHARGE
11th or Earlier Previous Year NO CHARGE NO CHARGE NO CHARGE
</TABLE>
*Percentage of the value of Accumulation Units being redeemed.
-------------------------------------------------------------------------------
Deduction for Premium Taxes. Any applicable premium tax will be deducted when
incurred. Premium taxes imposed by some states and governmental entities
presently range from 0% to 3.5%. Such taxes will be deducted from purchase
payments when received, except when and as permitted by state law MassMutual
postpones the computation and deduction of premium taxes until the surrender,
death, maturity or annuitization date of the Contract, at which time they will
be deducted from the Accumulated Value of the Contract. If no premium tax was
deducted but is subsequently determined due, MassMutual reserves the right to
reduce the Accumulation or Annuity Units under the Contract by the amount of the
tax due.
Full or partial redemption of a Contract, or the death of the Variable Annuitant
prior to the maturity date of a Contract, may result in a reduction in the
amount of premium tax paid by MassMutual with respect to that Contract. In such
event, in addition to the dollar amount redeemed or the Accumulated Value of the
Contract upon death, MassMutual will make payment of the lesser of: (1) the
amount by which its premium tax is reduced, or (2) the amount previously
deducted from purchase payments for the premium tax.
Waiver of Certain Charges. The Contingent Deferred Sales Charge will not be
assessed against any redemption of Accumulation Units which have been purchased
with proceeds payable in a lump sum prior to or at maturity under: (i) a
variable annuity contract issued by MassMutual which was subject to an initial
sales charge; or (ii) any fixed-dollar life insurance or fixed-dollar annuity
contract issued by MassMutual where such proceeds were not subject to a
surrender charge; or (iii) a variable annuity contract held under the MassMutual
Agent Pension Plan. Furthermore, the annual Administrative Charge will not be
assessed against any Contract purchased with such proceeds if, within six months
of the purchase of a Contract with these proceeds, the purchaser also purchases,
or had purchased, a new Contract and subsequently keeps both Contracts in force.
The Contingent Deferred Sales Charge will, however, be assessed against any
redemption of Accumulation Units which have been purchased with proceeds payable
in a lump sum prior to or at maturity under any fixed-dollar life insurance or
fixed-dollar annuity contracts which have been issued by MassMutual where the
proceeds were subject to a surrender charge. A person considering the
desirability of applying the proceeds of an existing contract to purchase a
Contract should consider whether charges under the Contract are higher than
under their existing contract. The Contingent Deferred Sales Charge will not be
assessed against a redemption of a Contract if the Contract is exchanged to a
Flex-Extra variable annuity contract.
Distribution
MML Investors Services, Inc., 1 Financial Plaza, 1350 Main Street, Springfield,
MA 01103-1686 ("MMLISI"), a wholly-owned subsidiary of MassMutual, acts as the
principal underwriter of the Contracts. MMLISI is registered as a broker-dealer
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. The Contracts are no longer offered for
sale to the public. Contract Owners may continue, however, to make purchase
payments under existing Contracts.
Miscellaneous Provisions
Termination of Liability. MassMutual's liability under a Contract terminates on
the death of the Variable Annuitant(s) and on the completion of any payments
certain. There is no liability for any proportionate Variable Monthly Annuity
payment from the date of the last payment to the date of death.
Adjustment of Units and Unit Values. MassMutual reserves the right to split or
consolidate the number of Accu-
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mulation Units or Annuity Units for any Division and correspondingly decrease or
increase the Accumulation or Annuity Unit Values for any Division whenever it
deems such action to be desirable. Any such adjustment will have no adverse
effect on rights under the Contract.
Periodic Statements. While a Contract is in force prior to the maturity date and
before the death of the Variable Annuitant, MassMutual will furnish to the
Contract Owner at least semi-annually a status report showing, as of a date not
more than 45 days before the date of mailing, the number of Accumulation Units
credited to each Division of the Contract, the corresponding Accumulation Unit
Values and the Accumulated Value of the Contract.
Contract Owner's Voting Rights
As long as a Separate Account continues to operate as a unit investment trust
under the Investment Company Act of 1940, the Contract Owner during the lifetime
of the Variable Annuitant, or the beneficiary after the Variable Annuitant's
death, will be entitled to give instructions as to how the shares of the Funds
held in the Separate Account (or other securities held in lieu of such shares)
deemed attributable to the Contract should be voted at meetings of shareholders
of the Funds or the Trust. Those persons entitled to give voting instructions
will be determined as of the record date for the meeting.
The number of Fund shares held in a Separate Account deemed attributable to a
Contract prior to its maturity date and during the lifetime of the Variable
Annuitant will be determined on the basis of the value of Accumulation Units
credited to the Contract in the corresponding Division of the Separate Account
as of the record date. After the maturity date or after the death of the
Variable Annuitant, the number of Fund shares deemed attributable to the
Contract will be based on the liability for future Variable Monthly Annuity
payments under the Contract as of the record date and thus the voting rights
will decrease as payments are made.
Contract Owners or beneficiaries will receive proxy material and a form with
which voting instructions may be given. Fund shares held by a Separate Account
as to which no effective instructions have been received or which are
attributable to assets transferred from MassMutual's general account will be
voted for or against any proposition in the same proportion as the shares as to
which instructions have been received.
In situations where the Variable Annuitant is not the Contract Owner, the
Variable Annuitant will have the right to instruct the Contract Owner with
respect to the votes attributable to any vested interest he has in the Contract.
MassMutual's obligation in this instance will be to make available to the
Contract Owner copies of the proxy material for distribution to the Variable
Annuitant. Votes representing interests as to which the Contract Owner is not
instructed may, in turn, be voted by the Contract Owner in his discretion.
The Contract Owner is a member of MassMutual and is entitled to vote at all
meetings of the members of MassMutual.
Reservations Of Rights
MassMutual may, at any time, make any change in a Contract to the extent that
such change is required in order to make the Contract conform with any law or
regulation issued by any governmental agency to which MassMutual is subject. If
shares of any Fund should not be available, or, if in the judgment of
MassMutual, investment in shares of a Fund is no longer appropriate in view of
the purposes of a Division of a Separate Account, shares of other series of the
Trust or of other registered, open-end investment companies may be substituted
for such Fund shares. Payments received after a date specified by MassMutual may
be applied to the purchase of shares of another Trust series in lieu of shares
of that Fund. In either event, approval of the Securities and Exchange
Commission must be obtained. MassMutual reserves the right to change the name of
a Separate Account or to add Divisions to a Separate Account for the purpose of
investing in additional investment vehicles.
Federal Tax Status
Introduction
The ultimate effect of federal income taxes on the value of the Contract, on
annuity payments, and on the economic benefit to the Contract Owner, Variable
Annuitant or beneficiary depends on a variety of factors including the type of
retirement plan for which the Contract is purchased and the tax and employment
status of the individual concerned. The discussion contained herein is general
in nature and is not intended as tax advice. Each person concerned should
consult a competent tax adviser for complete information and advice. No attempt
is made to consider any applicable state or other local tax laws. Moreover, the
discussion herein is based upon MassMutual's understanding of current federal
income tax laws as they are currently interpreted. No representation is made
regarding the likelihood of continuation of those current federal income tax
laws or of the current interpretations by the Internal Revenue Service (the
"IRS").
Tax Status of MassMutual
Under existing federal law, no taxes are payable on investment income and
realized capital gains of the Separate Accounts credited to the Contracts.
Accordingly, MassMutual does not intend to make any charge to the Separate
Accounts to provide for company income taxes. MassMutual may, however, make such
a charge in the future if an unanticipated construction of current law or a
change in law results in a company tax liability attributable to the Separate
Accounts.
MassMutual may incur state and local taxes (in addition to premium taxes) in
several states. At present, these taxes are not significant. If they increase,
however, charges for such taxes attributable to the Separate Accounts may be
made.
Taxation of Contracts in General
Under Section 817(h) of the Code a Contract (other than one used in a
tax-qualified retirement plan) will not be treated as
13
<PAGE>
an annuity contract, and will be taxed on the annual increase in earnings, if,
as of the end of any quarter, the Funds or the Fund on which the Contract is
based are not adequately diversified in accordance with regulations prescribed
by the Treasury Department. The Funds anticipate complying with the
diversification requirements.
Subject to certain annuity distribution rules (see Annuity Distribution Rules of
Section 72(s)) annuity payments under the Contracts are taxable under Section 72
of the Code. For contributions made after February 28, 1986 a Contract Owner
that is not a natural person will be taxed on the annual increase in earnings of
a Contract unless the Contract Owner holds the Contract as agent for a natural
person. Otherwise, increases in the value of a Contract are not subject to tax
until actually or constructively received.
Amounts received prior to the maturity date from Contracts under non-tax
qualified arrangements (see Taxation of Qualified Plans, IRAs and TSAs for a
discussion of Contracts used in the qualified plan market) are subject to tax to
the extent of any earnings or gains in the Contract; amounts received which are
in excess of such earnings or gains are considered a return of capital.
Similarly, amounts borrowed upon assignment or pledge of the Contract will be
treated as amounts received under the Contract, and will be taxable to the same
extent.
These rules apply to investments made in annuity contracts after August 13,
1982. If the Contract is obtained in a tax-free exchange of contracts under
Section 1035 of the Code, different tax rules may apply. If a distribution prior
to the maturity date of a Contract obtained in such an exchange is entirely
attributable to investments in the surrendered contract prior to August 14,
1982, the distribution will first be considered a return of capital to the
extent of those investments and only the amounts received in excess of those
investments will be regarded as taxable earnings or gains.
Penalty Taxes
In addition to the foregoing tax consequences, certain distributions under the
Contract will be subject to a penalty tax under Code Sections 72(q) (for non-tax
qualified contracts) or 72(t) (for contracts in tax-qualified plans (see
Taxation of Qualified Plans) of 10% of the amount of the distribution that is
includable in gross income. However, the following distributions from non-tax
qualified contracts are not subject to the penalty tax: (1) the withdrawal is
made after the Contract Owner is 59 1/2 years old; (2) the payment is made
to a beneficiary (or to the estate of a Variable Annuitant) on or after the
death of the Variable Annuitant; (3) the payment is attributable to a Contract
Owner becoming disabled; or (4) payments are made for the lifetime (or life
expectancy) of the Contract Owner or for the joint lifetimes (or joint life
expectancies) of the Contract Owner and the beneficiary.
When monthly Annuity payments commence, they are taxable as ordinary income in
the year of receipt to the extent that they exceed that portion of the
"investment in the Contract" which is allocable to that year. The investment in
the Contract is normally the gross amount of purchase payments made under the
Contract less any amount that was previously received under the Contract but was
not included in gross income. The investment in the Contract would also be
increased by any amount that was previously included in gross income, but was
not received. This amount, divided by the anticipated number of Variable Monthly
Annuity payments, gives the "excludable amount", which is the portion of each
annuity payment considered to be a return of capital and, therefore, not
taxable. For Contracts with a maturity date after December 31, 1986, this
exclusion ratio is modified so that the total amount excluded from payments
actually received is limited to the investments in the Contract. The rules for
determining the excludable amount are contained in Section 72 of the Code and
regulations thereunder and require adjustment when the payment option elected
provides a feature such as payments certain.
Annuity Distribution Rules of Section 72(s)
Annuity distribution requirements are imposed under Section 72(s) of the Code.
MassMutual understands that these requirements do not apply to Contracts issued
to or under Qualified Plans.
Under Section 72(s), a Contract will not be treated as an annuity subject to
Section 72 of the Code, unless it provides for certain required distributions
from and after the date of death of the Owner of the Contract. The Contracts
will be endorsed before issue to provide that annuity payments be made only in
accordance with these distribution requirements, as applicable.
Tax Withholding
Certain tax withholding is imposed on payments that are made under the Contracts
(for Contracts in tax qualified plans see Taxation of Qualified Plans, IRA's and
TSA's). Amounts withheld do not constitute an additional tax, but are fully
creditable on the individual tax return of each payee who is affected by tax
withholding. Furthermore, no payments will be subject to the withholding if (1)
it is reasonable to believe that the payments are not includable in gross
income, or (2) the payee elects not to have withholding apply. The payee may
make such an election either by filing an election form with MassMutual or, in
the case of redemptions, by following procedures that MassMutual has established
to afford payees an opportunity to elect out of withholding. These forms and
procedures will be provided to payees by MassMutual upon a request for payment.
Unless the Payee elects not to have withholding apply (for Contracts in tax
qualified plans see Taxation of Qualified Plan), MassMutual is required to
withhold, for federal income tax purposes, 10% of the taxable portion of any
redemption payment or non-periodic distribution under the Contracts. Periodic
annuity payments under the Contracts are subject to withholding at the payee's
wage base rate. If the payee of these annuity payments does not file an
appropriate withholding certificate (obtainable from any local IRS office) with
MassMutual, it will be presumed that the payee is married claiming three
exemptions.
Tax Reporting
MassMutual is required to report all taxable payments and distributions to the
IRS and to the payees. Payees will receive
14
<PAGE>
reports of taxable payments and distributions by January 31 of the year
following the year of payment.
Taxation of Qualified Plans, IRAs and TSAs
The tax rules applicable to participants in retirement plans which qualify for
special federal income tax treatment ("Qualified Plans") vary according to the
type of plan and its terms and conditions.
Increases in the value of a Contract are not subject to tax until received by
the employee or his beneficiary. Variable Monthly Annuity payments under
Qualified Plans are taxed as described above (see Taxation of Contracts in
General) except that the "investment in the Contract" under a Qualified Plan is
normally the gross amount of purchase payment made by the employee under the
Contract or made by the employer on the employee's behalf and included in the
employee's taxable income when made.
If the Variable Annuitant receives a distribution which qualifies as a "lump sum
distribution" under the Code, he or she may be eligible for special "5 year
averaging" treatment of the funds received (or "10-year averaging treatment" if
he or she was age 50 or older on January 1, 1986). TSAs and IRAs are not
eligible for the "lump sum distribution" rules.
Certain TSA contributions may not be distributed until age 59 1/2, death,
disability, separation of service or hardship (see Redemption Privilege.)
Distributions from Qualified Plans, IRAs and TSAs may be subject to a 10%
penalty tax on amounts withdrawn before age 59 1/2. However, the following
distributions from Qualified Plans (and TSAs and IRAs except as otherwise noted)
are not subject to the penalty: (1) payments made to a beneficiary (or estate of
an Annuitant) on or after the death of the Annuitant; (2) payments attributable
to an Annuitant becoming disabled; (3) substantially equal periodic payments
made (at least annually) for the lifetime (or life expectancy) of the Annuitant
or for the joint lifetimes (or joint life expectancies) of the Annuitant and the
beneficiary (for Qualified Plans and TSAs, payments can only begin after the
employee separates from service); (4) payment for certain medical expenses (not
applicable to IRAs); (5) payment after age 55 and separation from service (not
applicable to IRAs); and (6) payments to an alternate payee pursuant to a
qualified domestic relations order under Code Section 414(p) (not applicable to
IRAs). Excess retirement accumulations may be subject to a 15% penalty tax.
Excess distributions may be subject to a 15% excise tax.
IRAs are subject to limitations on the amount which may be contributed. The
deductibility of contributions by individuals or their spouses who are active
participants in an employer-maintained pension or profit-sharing plan may be
reduced based on the individual's adjusted gross income. In addition, certain
distributions from Qualified Plans and TSAs may be placed on a tax-deferred
basis into an IRA.
In general, tax law requires that minimum distributions must be made from
qualified plans, TSAs and IRAs beginning at age 70 1/2. To avoid penalty
taxes of 50 percent or more, required distributions, including distributions
which should have been distributed in prior years, should not be rolled over to
IRAs.
Distributions from qualified plans and TSAs are subject to mandatory federal
income tax withholding. MassMutual is required to withhold 20% when a payment
from a qualified plan or TSA is an "eligible rollover distribution" and such
payment is not directly rolled over to another qualified plan, TSA or IRA. In
general, an "eligible rollover distribution" is any taxable distribution other
than: (1) payments for the life (or life expectancy) of the Annuitant or for
joint life (or joint life expectancies) of the Annuitant and the beneficiary;
(2) payments made over a period of ten years or more; and (3) required minimum
distributions (see above). Plan Administrators should be able to tell annuitants
what other payments are not "eligible rollover distributions."
Taxable distributions which are not "eligible rollover distributions" are
subject to the withholding rules for annuities (see Tax Withholding above).
Performance Measures
MassMutual may show the performance under the Contracts in the following ways:
Standardized Average Annual Total Return. MassMutual will show the Standardized
Average Annual Total Return for a Division of the Separate Account which, as
prescribed by the rules of the U.S. Securities and Exchange Commission ("SEC"),
is the effective annual compounded rate of return that would have produced the
cash redemption value over the stated period had the performance remained
constant throughout. The Standardized Average Annual Total Return assumes a
single $1000 payment made at the beginning of the period and full redemption at
the end of the period. It reflects a deduction for the Contingent Deferred Sales
Charge, the annual administrative charge and all other Fund, Separate Account
and Contract level charges except premium taxes, if any. The annual
administrative charge is apportioned among the Divisions of the Separate Account
based upon the percentages of inforce contracts investing in each of the
Divisions.
Additional Performance Measures
The performance figures discussed below are calculated on the basis of the
historical performance of the Contracts, and are based on the Contracts' actual
Accumulation Unit values.
Percentage Change in Accumulation Unit Values. MassMutual will also show the
percentage change in the value of an Accumulation Unit under the Contracts with
respect to one or more periods. These percentages do not reflect the $35 annual
Administrative Charge, the Contingent Deferred Sales Charge or premium taxes (if
any), which if included would reduce the percentages reported by MassMutual.
The figures reflect historical results and are not intended to indicate or
predict future performance. For more detailed information see the Statement of
Additional Information.
Yield and Effective Yield. MassMutual may also show yield and effective yield
figures for the Money Market Division of the Separate Account. "Yield" refers to
the income generated by an investment in the Money Market Division over a
seven-
15
<PAGE>
day period, which is then "annualized". That is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the Money Market Division is assumed to be
re-invested. Therefore the effective yield will be slightly higher than the
yield because of the compounding effect of this assumed reinvestment. These
figures do not reflect the $35 annual administrative charge, the Contingent
Deferred Sales Charge or premium taxes (if any), which if included would reduce
the yields reported.
Additional Information
For further information about the Contracts you may obtain a Statement of
Additional Information prepared by MassMutual.
The Table of Contents of this Statement is as follows:
1. General Information and History
2. Service Arrangements and Distribution
3. Contract Value Calculations and Annuity Payments
4. Performance Measures
5. Reports of Independent Accountants and Financial Statements
16
<PAGE>
This Prospectus sets forth the information about Massachusetts Mutual Variable
Annuity Separate Accounts 1 and 2 (the "Separate Accounts") that a prospective
investor ought to know before investing. Certain additional information about
the Separate Accounts is contained in a Statement of Additional Information
dated May 1, 1995 which has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. The Additional Information
is available upon request and without charge. To obtain such information, return
this request form to the address shown below or telephone (413) 788-8411. The
Table of Contents for the Statement of Additional Information appears on page 16
of this Prospectus.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
To: Massachusetts Mutual Life Insurance Company
VA Service Unit, C351
1295 State Street
Springfield, Massachusetts 01111
Please send me a Statement of Additional Information for MassMutual
Flex-Annuity.
Name
Address
City State Zip
Telephone
<PAGE>
PROSPECTUS
DATED MAY 1, 1995
MML SERIES INVESTMENT FUND
1295 STATE STREET
SPRINGFIELD, MASSACHUSETTS
(413) 788-8411
MML Series Investment Fund (the "MML Trust") is a no-load, diversified, open-end
management investment company having four separate series of shares (the
"Funds"), each of which has different investment objectives and is designed to
meet different investment needs.
THE FUNDS
MML EQUITY FUND - The investment objectives are primarily to achieve a superior
total rate of return over an extended period of time from both capital
appreciation and current income and secondarily, depending upon business and
economic conditions, to preserve capital. The Fund invests primarily in
equity-type securities.
MML MONEY MARKET FUND - The investment objectives are to achieve high current
income, the preservation of capital, and liquidity. The Fund invests in
short-term debt instruments, including commercial paper, certificates of
deposit, bankers' acceptances, and obligations of the United States, its
agencies and instrumentalities. AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUND
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
MML MANAGED BOND FUND - The investment objective is to achieve as high a total
rate of return on an annual basis as is considered consistent with the
preservation of capital. The Fund invests primarily in investment grade,
publicly-traded, fixed income securities.
MML BLEND FUND - The investment objective is to achieve as high a level of total
rate of return over an extended period of time as is considered consistent with
prudent investment risk and the preservation of capital. The Fund invests in a
portfolio of common stocks and other equity-type securities, bonds and other
debt securities with maturities generally exceeding one year, and money market
instruments and other debt securities with maturities not exceeding one year.
For further information about each Fund's investment objectives and policies,
see "THE FUNDS" on page 8. There is no assurance that the investment objectives
of the Funds will be realized.
This Prospectus sets forth concisely the information about MML Trust and the
Funds that a prospective investor ought to know before investing. Certain
additional information about MML Trust and the Funds is contained in a Statement
of Additional Information dated May 1, 1995, which has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. This
additional information is available upon request and without charge. To obtain
such information, please contact the Secretary, MML Series Investment Fund, 1295
State Street, Springfield, Massachusetts 01111.
This Prospectus should be retained for future reference for information about
MML Trust and the Funds.
_________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
_________________________________
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C>
FINANCIAL HIGHLIGHTS..................................................... 2
MANAGEMENT DISCUSSION.................................................... 5
GENERAL INFORMATION...................................................... 8
THE FUNDS................................................................ 8
INVESTMENT PRACTICES OF THE FUNDS AND RELATED RISKS...................... 10
INVESTMENT RESTRICTIONS.................................................. 13
INVESTMENT MANAGERS...................................................... 13
CAPITAL SHARES........................................................... 14
NET ASSET VALUE.......................................................... 15
SALE AND REDEMPTION OF SHARES............................................ 15
TAX STATUS............................................................... 15
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS................................ 16
INVESTMENT PERFORMANCE................................................... 16
MANAGEMENT OF MML TRUST.................................................. 16
</TABLE>
I. FINANCIAL HIGHLIGHTS
The information in the following tables has been audited by Coopers & Lybrand
L.L.P., independent accountants, whose report on the financial statements of the
Funds is included in MML Trust's Annual Report and in its Statement of
Additional Information. Further information about the performance of the Funds
is contained in the Annual Report which may be obtained from MML Trust's
Secretary without charge.
MML EQUITY FUND
Selected per share data for each series share outstanding throughout each year
ended December 31:
<TABLE>
<CAPTION>
1994 1993* 1992 1991 1990 1989 1988 1987 1986 1985
---- ----- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of year.............. $20.510 $19.862 $18.735 $15.659 $16.764 $14.929 $13.828 $15.591 $13.832 $11.749
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from investment
operations:
Net investment income........... .594 .524 .543 .563 .636 .694 .646 .525 .495 .551
Net realized and
unrealized gain (loss)
on investments................. .248 1.365 1.420 3.440 (.722) 2.746 1.660 (.066) 2.174 2.792
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations..................... .842 1.889 1.963 4.003 (.086) 3.440 2.306 .459 2.669 3.343
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income.............. (.594) (.524) (.543) (.562) (.665) (.711) (.639) (.988) (.412) (.738)
Distribution from net
realized gains................. (.238) (.717) (.288) (.365) (.354) (.894) (.566) (1.234) (.498) (.522)
Distribution in excess of
net realized gains............. - - (.005) - - - - - - -
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions............. (.832) (1.241) (.836) (.927) (1.019) (1.605) (1.205) (2.222) (.910) (1.260)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value:
End of year.................... $20.520 $20.510 $19.862 $18.735 $15.659 $16.764 $14.929 $13.828 $15.591 $13.832
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total return.................... 4.10% 9.52% 10.48% 25.56% (.51)% 23.04% 16.68% 2.10% 20.15% 30.54%
Net assets (in millions):
End of year.................... $ 820.8 $ 663.1 $ 490.6 $ 355.0 $ 235.4 $ 226.4 $ 172.8 $ 150.4 $ 141.5 $ 104.7
Ratio of expenses to
average net assets............. .43% .44% .46% .48% .49% .50% .50% .51% .52% .55%
Ratio of net investment
income to average net assets... 3.04% 3.23% 3.09% 3.43% 4.09% 4.30% 4.05% 3.44% 3.54% 4.49%
Portfolio turnover rate......... 9.99% 11.28% 9.07% 9.37% 13.50% 15.71% 15.97% 15.73% 14.73% 20.83%
</TABLE>
*As of January 1, 1993, Concert Capital Management, Inc. became the Investment
Sub-Adviser. See Investment Managers, page 13 for further information.
2
<PAGE>
MML MONEY MARKET FUND
Selected per share data for each series share outstanding throughout each year
ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of year.................. $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income............... .038 .027 .034 .059 .078 .088 .072 .063 .064 .078
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations.... .038 .027 .034 .059 .078 .088 .072 .063 .064 .078
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income.................. (.038) (.027) (.034) (.059) (.078) (.088) (.072) (.063) (.064) (.078)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions................. (.038) (.027) (.034) (.059) (.078) (.088) (.072) (.063) (.064) (.078)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value:
End of year........................ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return........................ 3.84% 2.75% 3.48% 6.01% 8.12% 9.16% 7.39% 6.49% 6.60% 8.03%
Net assets (in millions):
End of year........................ $ 91.8 $ 73.7 $ 84.6 $ 94.4 $114.6 $ 70.2 $ 66.4 $ 52.3 $ 33.5 $ 36.4
Ratio of expenses to
average net assets................. .55% .54% .53% .52% .54% .54% .55% .57% .57% .59%
Ratio of net investment
income to average net assets....... 3.81% 2.71% 3.42% 5.91% 7.80% 8.79% 7.20% 6.35% 6.44% 7.76%
</TABLE>
MML MANAGED BOND FUND
Selected per share data for each series share outstanding throughout each year
ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of year................ $12.405 $12.041 $12.219 $11.318 $11.354 $10.919 $11.052 $12.541 $11.978 $11.160
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income............. .792 .785 .870 .903 .943 .918 .906 .969 1.061 1.227
Net realized and unrealized gain
(loss) on investments and forward
commitments..................... (1.264) .618 .001 .916 (.036) .454 (.133) (.673) .597 .851
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment operations.. (.472) 1.403 .871 1.819 .907 1.372 .773 .296 1.658 2.078
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income................ (.792) (.784) (.869) (.902) (.943) (.918) (.906) (1.229) (1.095) (1.260)
Distribution from net realized
gains............................ - (.255) (.158) (.016) - (.019) - (.556) - -
Distribution in excess
of net realized gains............ - - (.022) - - - - - - -
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions............... (.792) (1.039) (1.049) (.918) (.943) (.937) (.906) (1.785) (1.095) (1.260)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value:
End of year...................... $11.141 $12.405 $12.041 $12.219 $11.318 $11.354 $10.919 $11.052 $12.541 $11.978
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total return...................... (3.76%) 11.81% 7.31% 16.66% 8.38% 12.83% 7.13% 2.60% 14.46% 19.94%
Net assets (in millions):
End of year...................... $ 121.2 $ 129.1 $ 88.2 $ 67.0 $ 43.1 $ 40.0 $ 31.3 $ 26.2 $ 30.4 $ 24.7
Ratio of expenses to
average net assets............... .52% .54% .56% .57% .57% .59% .61% .60% .60% .62%*
Ratio of net investment
income to average net assets..... 6.69% 6.37% 7.28% 7.96% 8.40% 8.35% 8.25% 8.24% 8.87% 10.73%*
Portfolio turnover rate........... 32.77% 58.81% 39.51% 61.85% 69.93% 64.77% 74.92% 55.60% 203.76% 154.48%
</TABLE>
*Computed after giving effect to the expense reduction in management fee by
MassMutual. Without this reduction, (a) the ratio of expenses to average net
assets would have been .65% for the year ended December 31, 1985, and (b) the
ratio of net investment income to average net assets would have been 10.70% for
the year ended December 31, 1985.
3
<PAGE>
MML BLEND FUND
Selected per share data for each series share outstanding throughout each year
ended December 31:
<TABLE>
<CAPTION>
1994 1993* 1992 1991 1990 1989 1988 1987 1986 1985
-------- -------- -------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of year............ $ 18.305 $ 17.846 $ 17.307 $14.839 $15.428 $13.876 $13.095 $13.774 $12.244 $10.392
-------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Income from investment
operations:
Net investment income......... .707 .655 .707 .736 .792 .823 .734 .624 .540 .608
Net realized and
unrealized gain (loss)
on investments and
forward commitments.......... (.271) 1.057 .880 2.771 (.445) 1.921 1.000 (.148) 1.653 1.887
-------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations................... .436 1.712 1.587 3.507 .347 2.744 1.734 .476 2.193 2.495
-------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income............ (.707) (.655) (.707) (.736) (.811) (.835) (.728) (.747) (.560) (.613)
Distribution from net
realized gains............... (.359) (.598) (.326) (.303) (.125) (.357) (.225) (.408) (.103) (.030)
Distribution in excess of
net realized gains........... (.003) - (.015) - - - - - - -
-------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Total distributions........... (1.069) (1.253) (1.048) (1.039) (.936) (1.192) (.953) (1.155) (.663) (.643)
-------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Net asset value:
End of year.................. $ 17.672 $ 18.305 $ 17.846 $17.307 $14.839 $15.428 $13.876 $13.095 $13.774 $12.244
======== ======== ======== ======= ======= ======= ======= ======= ======= =======
Total return.................. 2.48% 9.70% 9.36% 24.00% 2.37% 19.96% 13.40% 3.12% 18.30% 24.88%
Net assets (in millions):
End of year.................. $1,444.3 $1,296.5 $1,013.3 $ 797.0 $ 574.2 $ 524.3 $ 401.2 $ 346.1 $ 236.2 $ 91.6
Ratio of expenses to
average net assets........... .39% .40% .41% .42% .44% .45% .46% .48% .51% .57%
Ratio of net investment
income to average net assets. 3.93% 3.60% 4.07% 4.54% 5.37% 5.57% 5.29% 4.77% 4.81% 6.29%
Portfolio turnover rate....... 26.59% 20.20% 25.43% 26.92% 24.55% 22.39% 25.70% 36.56% 58.75% 31.06%
</TABLE>
*As of January 1, 1993, Concert Capital Management, Inc. became the Investment
Sub-Adviser. See Investment Managers page 13 for further information.
Total return information shown in the Financial Highlights tables does not
reflect expenses that apply at the separate account level or to related
insurance products. Inclusion of these charges would reduce the total return
figures for all periods shown.
4
<PAGE>
II. MANAGEMENT DISCUSSION
A. ECONOMIC AND INVESTMENT ENVIRONMENT
The U.S. economy turned in a strong economic performance during 1994 with real
Gross Domestic Product growth in the 3.5 to 4 percent range. The force behind
the expansion continued to be the consumer, whose confidence rose early during
the year and remained high throughout the period. This performance is
especially impressive given that the growth occurred against a background of
sharply rising interest rates and a Federal Reserve Board (``Fed'') determined
to keep the economy from overheating. The Fed moved strongly during 1994,
raising the discount rate 3 times and the Fed funds' target 6 times. Reflecting
this tightening, yields on three month Treasury bills climbed more than 2.5
percent during the year.
One of the most notable economic statistics for 1994 was the growth in nonfarm
payrolls. Approximately $3.5 million new additions were made to nonfarm
payrolls throughout the year. This figure clearly benefited the consumer
causing personal incomes to rise at a pace around 6 percent. Another strong
point for the U.S. economy last year was the price picture which remained calm
as the Consumer Price Index moved up at roughly a 2.7 percent pace. Housing
starts remained high during 1994, despite an almost 2 percent increase in
mortgage rates. Other bright spots last year included business investment, auto
and truck sales, consumer durables and productivity in the manufacturing sector.
A notable drag on the economy was the performance of the trade deficit which
widened during the year. Our strong economy, combined with slower than expected
recoveries in other parts of the world, caused our net imports to rise. Another
drag on the economy, as noted above, was the 1994 performance of interest rates.
Three month Treasury bills climbed by more than 2.5 percent, while 30 year
Treasury bonds rose by more than 1.5 percent. Price increases were also evident
last year with base commodities climbing at double digit rates. Another concern
with regard to pricing is the level of capacity utilization (a measure of
producer output), which is at levels where price increases have historically
developed.
B. INVESTMENT OUTLOOK
In response to the Fed's tightening, interest rates moved significantly higher
during 1994, resulting in poorly performing bond markets. As an example, the
total return of the Lehman Government/Corporate index was a negative 3.5 percent
for 1994. Despite increasing corporate profits, the stock markets were hampered
by the sharp increase in rates. As a result, the 1994 total return for the
Standard & Poor's 500 index was only 1.3 percent.
During the first quarter of 1995, the bond market will likely be impacted by the
actions of the Federal Reserve. It seems reasonable to assume that the Fed will
continue to increase rates in early-mid 1995. This should cause economic growth
to moderate over the second half, which would be more beneficial to bonds. The
stock market will take its cue from the interaction of interest rate moves and
corporate profits.
C. MML EQUITY
The Standard & Poor's 500 Stock Index closed out 1994 with the third consecutive
year of very low volatility. However, the narrow trading range for the S & P
500 masked considerable volatility within the market. This internal volatility,
although possibly detrimental to investment performance, is not totally
unwelcome because it creates opportunities for value-oriented investors.
In the second half of 1994, we repurchased two portfolio companies previously
sold a few years ago, and implemented three new equity positions. In an effort
to increase the portfolio's exposure to the health care area, Schering-Plough, a
pharmaceutical and personal care products company, was repurchased after being
sold in 1990. Roadway Services, a diversified transportation company, was
repurchased at an attractive price after being sold off in 1992 at a substantial
gain. New companies to the portfolio included Honeywell, a leading factor in
commercial avionic systems and industrial process controls, Kerr-McGee, a medium
sized integrated energy company, and Pepsico, the leading producer of salty
snacks in the U. S. and the number two producer of soft drink concentrates in
the world.
5
<PAGE>
Three stocks were eliminated from the portfolio during the period. Gerber
Products was sold at a substantial gain subsequent to a tender offer; Crane
Company, a relatively small holding in the fund, was sold at a more modest
profit, and Lehman Brothers Holdings was sold. Fourteen positions were reduced
in size during the fourth quarter, while 16 were increased through additional
purchases. For the full year, eleven new stocks were added to the portfolio
while ten were eliminated.
EQUITY FUND
[EQUITY FUND GRAPH APPEARS HERE]
D. MML MONEY MARKET
The Fed aggressively tightened monetary policy throughout 1994 as it strived to
maintain economic expansion at a sustainable pace. During 1994 the Fed raised
the Federal funds target rate on six occasions between February and November for
an increase of 250 basis points to 5.50 percent. Additionally, the Fed
increased the discount rate three times for a total of 175 basis points to 4.75
percent.
As anticipation of the Fed's actions continued to convey uncertainty to the
market, the portfolio's average life fluctuated in the range of 32 to 52 days.
The Fund ended the year with an average life of 36 days as the portfolio was
continually monitored and adjusted to optimize return. Appropriately, given the
higher interest rate environment, the portfolio's seven-day yield increased
nearly 240 basis points to end the year at 5.31 percent.
MONEY MARKET FUND
[MONEY MARKET FUND GRAPH APPEARS HERE]
E. MML MANAGED BOND
This past calendar year was one of the worst in the bond market's history.
Negative returns were posted across almost the entire maturity spectrum and
across almost all market sectors. Only short maturities posted positive returns
for the year. Short-term rates responded dramatically to the Fed's actions as
they increased between 261 and 350 basis points. Intermediate-term Treasuries
rose approximately 250 basis points. The long-end of the market, thirty-year
bonds, reacted modestly in comparison by rising only 153 basis points. The
Treasury yield curve flattened dramatically during the year as short-term
interest rates rose more than long rates. The bulk of the flattening of the
curve occurred beyond the two year area.
The Managed Bond Fund has remained relatively consistent in its sector
allocations over the course of the year. Early in the first quarter, we
increased our position in the corporate sector, however by year-end we moved
this position back slightly. The reduction in our corporate holdings was made as
spreads declined to historically low levels. During the later part of the third
quarter and the first part of the fourth quarter, additional purchases of
asset-backed securities were made. Our mortgage position, however, was
relatively unchanged over the year. The remaining holdings are invested in
Treasuries, U.S. government agencies, and money market instruments.
6
<PAGE>
MANAGED BOND FUND
[MANAGED BOND FUND GRAPH APPEARS HERE]
F. MML BLEND
The Blend Fund combines the profiles of the MML Equity, Bond, and Money Market
Funds into a single portfolio. The specific allocation of stocks, bonds, and
money market issues is based upon the interrelation of current economic and
financial conditions and the values available in the stock and bond markets. As
these relationships change, the exposure to each capital market is gradually
adjusted within the designated ranges. On December 31, 1994, 53 percent of the
Fund was invested in common stocks, 19 percent in marketable bonds, and 28
percent in short-term securities.
BLEND FUND
[BLEND FUND GRAPH APPEARS HERE]
7
<PAGE>
III. GENERAL INFORMATION
MML Trust is a no-load, diversified, open-end management investment company,
objectives and policies. MML Trust was organized as a business trust under the
laws of The Commonwealth of Massachusetts pursuant to an Agreement and
Declaration of Trust dated December 19, 1984, as most recently amended on or
about April 16, 1993. MML Trust was established by Massachusetts Mutual Life
Insurance Company ("MassMutual") for the purpose of providing a vehicle for the
investment of assets of various separate investment accounts established by
MassMutual and its life insurance company subsidiaries, including MML Bay State
Life Insurance Company ("MML Bay State").
Shares of the Funds are offered solely to separate investment accounts
established by MassMutual and any life insurance company subsidiary.
MassMutual is responsible for providing all investment advisory, management, and
administrative services needed by the Funds pursuant to investment management
agreements. MassMutual has entered into investment sub-advisory agreements with
Concert Capital Management, Inc. ("Concert"), a second tier, wholly-owned
subsidiary of MassMutual. These agreements provide that Concert will manage the
equity investments of MML Equity Fund ("MML Equity") and the Equity Sector (the
"Equity Sector") of MML Blend Fund ("MML Blend"). Both MassMutual and Concert
are registered with the Securities and Exchange Commission (the "SEC") as
investment advisers (MassMutual and Concert referred to hereafter as
"Advisers"). For further information, see "Investment Managers" p.13.
IV. THE FUNDS
The investment objectives of each Fund discussed below are fundamental policies
and may not be changed without the vote of a majority of that Fund's outstanding
voting shares (as used in this Prospectus, a majority of the outstanding voting
shares of any Fund means the lesser of (1) 67% of that Fund's outstanding shares
present at a meeting of the shareholders if more than 50% of the outstanding
shares are present in person or by proxy, or (2) more than 50% of that Fund's
outstanding shares). There is no assurance that the investment objectives of the
Funds will be realized. The success of these objectives depends to a great
extent upon managements' ability to assess changes in business and economic
conditions. For further information about investment policies and techniques,
see "Investment Practices of the Fund and Related Risks," at page 10.
A. MML EQUITY FUND
THE PRIMARY INVESTMENT OBJECTIVE OF MML EQUITY FUND ("MML EQUITY") IS TO
ACHIEVE A SUPERIOR TOTAL RATE OF RETURN OVER AN EXTENDED PERIOD OF TIME FROM
BOTH CAPITAL APPRECIATION AND CURRENT INCOME.
A secondary investment objective is the preservation of capital when business
and economic conditions indicate that investing for defensive purposes is
appropriate. Occasional investments may be made with the objective of short-term
appreciation when in the judgment of Concert general economic conditions dictate
that they may benefit MML Equity and are consistent with sound investment
procedure.
Normally, the assets of MML Equity will be invested primarily in common stocks
and other equity-type securities such as preferred stocks, securities
convertible into common stocks and warrants. Investments are made in securities
of companies which, in the opinion of Concert Capital, are of high quality,
offer above-average dividend growth potential and are attractively valued in the
marketplace. Investment quality and dividend growth potential are evaluated
using fundamental analysis emphasizing each issuer's historical financial
performance, balance sheet strength, management capability and competitive
position. Various valuation parameters are examined to determine the
attractiveness of individual securities. On average, the Fund's portfolio
securities will have price/earnings ratios and price/book value ratios below
those of the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500
Stock Index"). Consideration is also given to securities of companies whose
current prices do not adequately reflect, in the opinion of Concert Capital, the
ongoing business value of the enterprise. These investments may be maintained in
both rising and declining markets. Concert intends to engage in the active
management of MML Equity's portfolio. The portfolio of the Fund is managed by
David B. Salerno, Managing Director of the Value Equity Group of Concert
Capital. He has been associated with MassMutual since 1975 and with Concert
Capital since January 1, 1993.
B. MML MONEY MARKET FUND
THE INVESTMENT OBJECTIVES OF MML MONEY MARKET FUND ("MML MONEY MARKET") ARE TO
ACHIEVE HIGH CURRENT INCOME, THE PRESERVATION OF CAPITAL, AND LIQUIDITY. THESE
OBJECTIVES ARE OF EQUAL IMPORTANCE.
MML Money Market will invest only in short-term (i.e., 397 days or less
remaining to maturity) debt instruments, including but not limited to commercial
paper; certificates of deposit; bankers' acceptances; short-term corporate
obligations; obligations issued, sponsored, assumed or guaranteed as to
principal and interest by the government of the United States, its agencies or
instrumentalities ("U.S. Government securities"); and certain repurchase
agreements with respect to any of the securities listed above (which underlying
securities must be of the highest quality at the time the repurchase agreement
is entered into but which securities may have maturities of more than one year).
MML Money Market's dollar-weighted average portfolio maturity will be maintained
at 90 days or less.
MML Money Market's non-fundamental investment policy is that, at the time it
acquires a security, it will invest 100% of its net assets in Tier 1 Securities,
but it retains the right to invest no more than 5% of its net assets in Tier 2
Securities. A Tier 1 Security is one that is rated in the highest rating
category by at least one nationally recognized statistical rating organization
("NRSRO") such as Standard & Poor's Corporation ("S&P") or Moody's Investors
Service, Inc. ("Moody's"). MML Money Market will invest no more than 5% of its
total assets in Tier 2 Securities. A Tier 2 Security is one that is rated in the
second highest rating category by at least one NRSRO. Securities which are
unrated may also qualify as
8
<PAGE>
Tier 1 and Tier 2 Securities if so determined by the Board of Trustees of MML
Trust (the "Board of Trustees"). For a description of S&P and Moody's ratings,
see the Statement of Additional Information.
Certificates of deposit and bankers' acceptances will be limited to obligations
of banks having deposits of at least $1,000,000,000 as of their most recently
published financial statements. The obligations of U.S. banks in which MML Money
Market may invest include Eurodollar obligations of their foreign branches. In
the case of foreign banks, the $1,000,000,000 deposit requirement will be
computed using exchange rates in effect at the time of their most recently
published financial statements.
Obligations of foreign issuers, including foreign branches of U.S. banks, will
not be acquired if MML Money Market's investment in such obligations would
exceed in the aggregate 25% of its net assets. Foreign obligations may be
affected by foreign governmental action, including imposition of currency
controls, interest limitations, withholding taxes, seizure of assets or the
declaration of a moratorium or restriction on payments of principal or interest.
Foreign branches of U.S. banks and foreign banks may provide less public
information than, and may not be subject to the same accounting, auditing and
financial record-keeping standards, as domestic banks.
MML Money Market will make portfolio investments primarily in anticipation of or
in response to changing economic and money market conditions and trends. Trading
activity is expected to be relatively low. However, it is anticipated that from
time to time, MML Money Market will take advantage of temporary disparities in
the yield relationships among the different segments of the money market or
among particular instruments within the same segment of the market to make
purchases and sales when MassMutual deems that such transactions will improve
the yield or the quality of the portfolio.
The high quality debt instruments in which MML Money Market invests may not
offer as high a yield as may be achieved from lower quality instruments having
less safety. While MML Money Market invests exclusively in First and Second Tier
Securities, investment in MML Money Market is not without risk. If MML Money
Market disposes of an obligation prior to maturity, it may realize a loss or
gain. An increase in interest rates will generally reduce the value of portfolio
investments. In addition, investments are subject to the ability of the issuer
to make payment at maturity. MML Money Market will reassess whether a particular
security presents minimal credit risks in certain circumstances. For example, if
a security ceases to be a Second Tier Security, MML Money Market would dispose
of any such security as soon as practical.
C. MML MANAGED BOND FUND
THE INVESTMENT OBJECTIVE OF MML MANAGED BOND FUND ("MML MANAGED BOND") IS TO
ACHIEVE AS HIGH A TOTAL RATE OF RETURN ON AN ANNUAL BASIS AS IS CONSIDERED
CONSISTENT WITH THE PRESERVATION OF CAPITAL.
Normally, the assets of MML Managed Bond will be invested primarily in
investment grade, publicly-traded, fixed income securities of such maturities as
MassMutual deems appropriate from time to time in light of market conditions and
prospects. Except when invested for defensive purposes, at least 80% of total
invested assets at market value at the time of a purchase will consist of U.S.
Government securities and investment grade quality debt securities which have
been rated in the top four rating categories by S&P (AAA, AA, A or BBB) or
Moody's (Aaa, Aa, A or Baa) or, if unrated, which are judged by MassMutual to be
of equivalent quality to securities so rated. While debt securities rated BBB or
Baa are investment grade securities, they have speculative characteristics and
are subject to greater credit risk, and may be subject to greater market risk,
than higher-rated investment grade securities.
The remaining 20% of MML Managed Bond's total invested assets may be invested in
lower quality debt instruments and preferred stocks. Lower quality debt
instruments generally provide higher yields but are generally subject to greater
market fluctuations and risk of loss of income and principal than higher quality
debt securities. MassMutual seeks to reduce these risks through diversification,
credit analysis and attention to current developments and trends in both the
economy and the financial markets. During 1994, no debt securities were acquired
by MML Managed Bond which were not rated at least BBB/-/ by S&P or Baa/3/ by
Moody's.
In implementing the policies set forth in the preceding two paragraphs, MML
Managed Bond may also invest in the following:
(1) obligations (payable in U.S. dollars) issued or guaranteed as to principal
and interest by the Government of Canada, a Province of Canada, or any
instrumentality or political subdivision thereof, provided that no such
investment will be made if it would result in more than 25% of MML Managed
Bond's net assets being invested in such securities;
(2) publicly-traded debt securities issued or guaranteed by a national or state
bank holding company (as defined in the Federal Bank Holding Company Act, as
amended) having a rating within the three highest grades as determined by
Moody's (Aaa, Aa, or A) or S&P (AAA, AA, or A), and certificates of deposit of
such banks; and
(3) securities of foreign issuers, provided however, MML Managed Bond may invest
not more than 10% of its net assets in such securities, except as provided in
(1) above.
If MML Managed Bond disposes of an obligation prior to maturity, it may realize
a loss or a gain. An increase in interest rates will generally reduce the value
of portfolio investments, and a decline in interest rates will generally
increase the value of portfolio investments. In addition, investments are
subject to the ability of the issuer to make payment at maturity.
Normally, the Fund's duration will range from four to seven years. Portfolio
changes will be accomplished primarily through the reinvestment of cash flows
and selective trading.
The portfolio of the Fund is managed by Mary E. Wilson, Vice President and
Managing Director of MassMutual, with which she has been associated since 1982.
As such, she oversees all public fixed income trading for MassMutual and its
related subsidiaries and affiliates.
9
<PAGE>
D. MML BLEND FUND
THE INVESTMENT OBJECTIVE OF MML BLEND FUND ("BLEND") IS TO ACHIEVE AS HIGH
A LEVEL OF TOTAL RATE OF RETURN OVER AN EXTENDED PERIOD OF TIME AS IS CONSIDERED
CONSISTENT WITH PRUDENT INVESTMENT RISK AND THE PRESERVATION OF CAPITAL.
The Advisers will adjust the mix of investments among its three market sectors
to capitalize on perceived variations in return potential produced by the
interaction of changing financial market and economic conditions. The Advisers
expects that such adjustments will normally be made in a gradual manner over a
period of time. No investment will be made that would result in more than 90% of
MML Blend's net assets being invested in the Equity Sector or in more than 50%
of MML Blend's net assets being invested in the Bond Sector. Up to 100% of MML
Blend's net assets may be invested in the Money Market Sector. No minimum
percentage has been established for any of the sectors.
In addition to MML Blend's investment objective, each of its market sectors has
a specific investment objective. Within the Equity Sector, MML Blend will
attempt to achieve a superior total rate of return over an extended period of
time from both capital appreciation and current income. Within the Bond Sector,
MML Blend will attempt to achieve as high a total rate of return on an annual
basis as is considered consistent with the preservation of capital. Within the
Money Market Sector, MML Blend will attempt to achieve high current income, the
preservation of capital, and liquidity. The portfolio of the Fund is managed by
committee.
In seeking a high rate of return from dividends, interest income and capital
appreciation as well as in seeking to preserve capital, Advisers intend to
engage in the active management of MML Blend's portfolio. (See "Portfolio
Management" on page 12).
The portfolio of MML Blend will be invested in the following three market
sectors:
1. EQUITY SECTOR
The Equity Sector generally invests in equity-type securities in a substantially
similar manner as described in the discussion of MML Equity Fund on page 8.
2. BOND SECTOR
The Bond Sector generally invests in the types of bonds and other debt
securities described in the discussion of MML Managed Bond on page 9 with
maturities usually exceeding one year. The Bond Sector may also invest in debt
securities not described above, including lower quality securities and non-rated
securities acquired directly from issuers in direct placement transactions,
provided no such transaction shall cause such debt securities to exceed 10% of
MML Blend's total assets. Lower quality debt instruments generally provide
higher yields but are generally subject to greater market fluctuations and risk
of loss of income and principal than higher quality debt securities. During
1994, no debt securities were acquired by MML Blend which were not rated at
least BBB by S&P or Baa by Moody's.
3. MONEY MARKET SECTOR
The Money Market Sector invests in money market instruments and other debt
securities with maturities generally not exceeding one year, including:
(a) U.S. Treasury Bills and other U.S. Government securities;
(b) obligations (payable in U.S. dollars) issued or guaranteed as to principal
and interest by the Government of Canada, a Province of Canada, or any
instrumentality or political subdivision thereof, provided such obligations do
not exceed 25% of MML Blend Fund's total assets;
(c) obligations payable in U.S. dollars (including certificates of deposit, time
deposits or bankers' acceptances) of U.S. or Canadian chartered banks having
total deposits in excess of $1,000,000,000, U.S. branches of foreign banks where
said foreign banks have total deposits in excess of $1,000,000,000, U.S. savings
and loan associations having total deposits in excess of $1,000,000,000, and
Eurodollar certificates of deposit issued by foreign branches of U.S. banks
where said U.S. banks have total deposits in excess of $1,000,000,000;
Obligations of foreign banks and of foreign branches of U.S. banks may be
affected by foreign governmental action, including imposition of currency
controls, interest limitations, withholding taxes, seizure of assets or the
declaration of a moratorium or restriction on payments of principal or interest.
Foreign banks and foreign branches of U.S. banks may provide less public
information than, and may not be subject to the same accounting, auditing and
financial record-keeping standards as, domestic banks;
(d) commercial paper, including variable amount master notes, having a rating at
the time of purchase within the two highest grades as determined by Moody's (P-1
or P-2) or S&P (A-1 or A-2), or commercial paper or notes issued by companies
with an unsecured debt issue outstanding having a rating at the time of purchase
within the three highest grades as determined by Moody's (Aaa, Aa or A) or S&P
(AAA, AA or A) and U.S. dollar denominated foreign commercial paper;
(e) publicly-traded bonds, debentures and notes having a rating within the four
highest grades as determined by Moody's (Aaa, Aa, A or Baa) or S&P (AAA, AA, A
or BBB);
(f) repurchase agreements on any of the securities listed in paragraphs (a)
through (e) above, and
(g) securities of foreign issuers; provided, however, MML Blend may invest not
more than 10% of its net assets in such securities except as provided in (b) and
(c) above.
While debt securities rated BBB or Baa are investment grade securities, they
have speculative characteristics and are subject to greater credit risk, and may
be subject to greater market risk, than higher-rated investment grade
securities.
10
<PAGE>
V. INVESTMENT PRACTICES
OF THE FUNDS AND
RELATED RISKS
In managing their portfolios of investments, the Funds, pursuant to policies
adopted by the Board of Trustees or where considered appropriate by Advisers,
may engage in various investment-related practices. The Funds' significant
investment practices, which are pursuant to non-fundamental policies and
therefore may be changed by the Board of Trustees without consent of
shareholders, regarding these investment transactions and practices are
discussed below. For further information see the Statement of Additional
Information.
A. DERIVATIVES TRANSACTIONS
Each Fund is authorized to engage in transactions involving derivatives, as more
fully described in the Statement of Additional Information. For example, the
Funds may enter into financial futures transactions, write and purchase call and
put options, including call options on securities and futures, enter into
forward contracts and swap agreements, and other similar instruments
(collectively referred to as "Derivatives").
The Funds may use Derivatives to attempt to: (a) protect against possible
declines in the market value of a Fund's portfolio resulting from downward
trends in the debt securities markets generally due to increasing interest
rates, (b) protect a Fund's unrealized gains or limit unrealized losses in the
value of its securities, (c) to establish a position in the debt securities
markets as a temporary substitute for purchasing or selling particular debt
securities, (d) to manage the effective maturity or duration of fixed-income
securities in a Fund's portfolio, or (e) to manage its exposure to changing
security prices (collectively, "Derivatives Transactions"). Most, if not all, of
the hedging activity will involve the portfolios of MML Managed Bond and the
Bond Sector of MML Blend as MML Trust has no present intent to enter into
derivatives transactions with regard to MML Money Market, MML Equity, or the
Equity or Money Market Sectors of MML Blend. The Funds will not use Derivatives
for speculative purposes.
1. DERIVATIVES
Some of the Derivatives a Fund may use in Derivatives Transactions are described
below.
a. FINANCIAL FUTURES: Each Fund may enter into exchange-traded futures contracts
for the purchase or sale of debt obligations in order to hedge against
anticipated changes in interest rates. The purpose of hedging in debt
obligations is to establish with more certainty than would otherwise be possible
the effective rate of return on portfolio securities. A futures contract on debt
obligations is a binding contractual commitment which, if held to maturity, will
result in an obligation to make or accept delivery, during a particular month,
of obligations having a standardized face value and rate of return. However,
positions taken in the futures markets are not normally held to maturity, but
are instead liquidated through offsetting transactions which may result in a
gain or a loss.
b. CALL AND PUT OPTIONS: Each Fund may write covered call options which are
traded on a national securities exchange with respect to securities in its
portfolio, provided that at all times it will have in its portfolio the
securities which it may be obligated to deliver if the option is exercised or
securities currently convertible into those securities. Each Fund may write call
options on securities in its portfolio in an attempt to realize a greater
current return than would be realized on the securities alone. The Fund may also
enter into "closing purchase transactions" in order to terminate its obligation
as a writer of a call option prior to the expiration of the option.
Each Fund may write covered put options. Put options are "covered" by a Fund,
for example, when it has established a segregated account of cash, short-term
money market instruments or high quality debt securities that can be liquidated
quickly to satisfy any obligation of the Fund to purchase the underlying
security. Each Fund may also write straddles (combinations of calls and puts on
the same underlying security). The writing of straddles generates additional
premium income but may present greater risk.
c. FORWARD CONTRACTS: Each Fund may purchase or sell securities on a "when
issued" or delayed delivery or on a forward commitment basis ("forward
contracts"). When such transactions are negotiated, the price is fixed at the
time of commitment, but delivery and payment for the securities can take place a
month or more after the commitment date. The securities so purchased or sold are
subject to market fluctuations, and no interest accrues to the purchaser during
this period. At the time of delivery, the securities may be worth more or less
than the purchase or sale price.
If a Fund enters into a forward contract, it will establish a segregated account
consisting of cash or high-grade obligations having a current market value equal
to or greater than the aggregate amount of that Fund's commitment under forward
contracts (that is, the purchase price of the underlying security on the
delivery date). While the Funds may also enter into forward contracts with the
initial intention of acquiring securities for its portfolio, they may dispose of
a commitment prior to settlement if Advisers deems it appropriate to do so. The
Funds may realize short-term gains or losses upon the sale of forward contracts.
As an alternative to maintaining all or part of the segregated account, a Fund
could buy call or put options to "cover" the forward contracts.
d. INTEREST RATE SWAP AGREEMENTS: Each Fund may enter into interest rate swap
agreements and related products, such as interest rate caps and floors, in an
attempt to preserve a return or spread on a particular investment or portion of
its portfolio, or, to protect against any increase in the price of securities a
Fund might consider purchasing at a later date. Interest rate swaps involve the
exchange by a Fund with another party of their respective commitments to pay or
receive interest, such as an exchange of floating rate payments for fixed rate
payments.
e. CURRENCY TRANSACTIONS: The Bond Fund and the Bond Sector of MML Blend may
invest in foreign securities that are not denominated in U.S. dollars only if
the Fund contemporaneously enters into a foreign currency transaction to hedge
the currency risk associated with the particular foreign security.
11
<PAGE>
f. OTHER INSTRUMENTS: Each Fund may use other Derivatives and enter into other
Derivatives transactions that are, or become, appropriate in the context of each
Fund's investment objectives and policies - and in a manner and to the extent
permitted by law and authorized by the Board of Trustees.
2. DERIVATIVES - RISK FACTORS
There can be no assurance that the use of Derivatives by any of the Funds will
assist it in achieving its investment objectives. Risks inherent in the use of
Derivatives include: (1) the risk that interest rates and securities prices will
not move in the direction anticipated; (2) imperfect correlation between the
prices of futures, options, and forward contracts and the prices of the
securities being hedged; (3) the fact that skills needed to use these strategies
are different from those needed to select portfolio securities; (4) the possible
absence of a liquid secondary market for any particular instrument at any time;
(5) futures contracts and options can be highly volatile; (6) the writing of
call options could result in increases in the Funds' portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate; (7) the possible need to defer closing out certain hedged positions
to avoid adverse tax consequences; (8) the risk that a Fund will not be able to
effect closing purchase transactions as to call options it has written at any
particular time or at any acceptable price; (9) forward contracts involve a risk
of a loss if the value of the security to be purchased declines prior to the
settlement date, which is in addition to the risk of decline of the Funds' other
assets, and (10) the inability of counterparties to perform.
3. DERIVATIVES - LIMITATIONS
MML Trust has imposed certain specific limitations on its use of derivatives.
For example: (1) a Fund would not enter into a futures contract if, as a result,
more than 5% of the Fund's total assets would be committed to initial margin
deposits on such contracts; (2) a Fund will not purchase a put or call option on
securities or investment related instruments if as a result more than 5% of its
total assets would be attributable to premiums paid for such options; (3) a Fund
would not write a covered call or put option if as a result more than 20% of the
Fund's total assets would be in one or more segregated accounts covering call
and put options; and (4) a Fund would not enter into a forward contract if as a
result more than 25% of the Fund's total assets would be in one or more
segregated accounts covering forward contracts.
B. PORTFOLIO MANAGEMENT
Advisers intend to use trading as a means of managing the portfolios of the
Funds in seeking to achieve their investment objectives. Advisers, on behalf of
the Funds, will engage in trading when they believe that the trade, net of
transaction costs, will improve interest income or capital appreciation
potential, or will lessen capital loss potential.
Whether the goals discussed above will be achieved through trading depends on
Advisers' ability to evaluate particular securities and anticipate relevant
market factors, including interest rate trends and variations from such trends.
Such trading places a premium on Advisers' ability to obtain relevant
information, evaluate it properly and take advantage of their evaluations by
completing transactions on a favorable basis. If Advisers' evaluations and
expectations prove to be incorrect, a Fund's income or capital appreciation may
be reduced and its capital losses may be increased. Portfolio trading involves
transaction costs, but, as explained above, will be engaged in when Advisers
believe that the result of the trading, net of transaction costs, will benefit
the Funds.
C. RESTRICTED AND ILLIQUID SECURITIES
The Funds may invest in illiquid securities up to 15% (10% in the case of MML
Money Market) of each Fund's net assets. Each Fund currently expects to invest,
if anything, no more than 10% of its net assets in such securities. This policy
does not limit purchases of securities eligible for resale to qualified
institutional buyers pursuant to Rule 144A under the Securities Act of 1933 that
are determined to be liquid by the Board of Trustees or by Advisers pursuant to
Board approved guidelines. Such guidelines take into account trading activity
for such securities and the availability of reliable pricing information, among
other factors. If there is a lack of trading interest in particular Rule 144A
securities, a Fund's holdings of those securities may be illiquid. There may be
undesirable delays in selling these securities at prices representing fair
value.
D. REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
MML Money Market, MML Managed Bond and MML Blend may engage in repurchase
agreements and MML Blend may engage in reverse repurchase agreements. A
repurchase agreement is a contract pursuant to which a Fund agrees to purchase a
security and simultaneously agrees to resell it at an agreed-upon price at a
stated time, thereby determining the yield during the Fund's holding period. A
reverse repurchase agreement is a contract pursuant to which a Fund agrees to
sell a security and simultaneously agrees to repurchase it at an agreed-upon
price at a stated time. For a more detailed description of repurchase agreements
and reverse repurchase agreements, see the Statement of Additional Information.
E. SECURITIES LENDING
MML Managed Bond and MML Blend may make loans of portfolio securities of not
more than 10% of their respective total assets taken at current value, thereby
realizing additional income. Although lending portfolio securities may involve
the risk of delay in recovery of the securities loaned or possible loss of
rights in the collateral should the borrower fail financially, loans will be
made only to borrowers deemed by MassMutual to be of good standing.
F. FEDERAL TAXES
The extent to which the Funds may enter into Derivatives transactions and engage
in portfolio trading may be limited by the Internal Revenue Code's requirements
for qualification for regulated investment companies. It is each Fund's
intention to qualify as such. See "Certain Tax and Accounting Information" in
the Statement of Additional Information.
12
<PAGE>
G. CASH POSITIONS
Each Fund, other than MML Money Market, may hold cash or cash equivalents to
provide for liquidity (e.g. expenses and anticipated redemption payments) and so
that an orderly investment program may be carried out in accordance with the
Fund's investment policies. To provide liquidity or for temporary defensive
purposes, each Fund may invest any portion of its assets in investment grade
debt securities and MML Equity may also invest in non-convertible preferred
stocks.
VI. INVESTMENT RESTRICTIONS
The following is a description of certain investment restrictions, and
exceptions to such restrictions, that apply to each Fund which may not be
changed without a vote of a majority of the outstanding shares of such Fund.
(For a description of additional investment restrictions, reference should be
made to the Statement of Additional Information.)
A. INVESTMENT RESTRICTIONS
Each Fund will not:
(1) Pledge or mortgage assets taken at market to an extent greater than 15% of
the total assets of the Fund taken at cost;
(2) Borrow money, except from banks as a temporary measure for extraordinary or
emergency purposes (but not for the purpose of making investments), and except
to the extent that each Fund engages in financial futures transactions (as
described on page 11) and in reverse repurchase agreements (as described on page
12), provided (a) that the aggregate amount of all such borrowings at the time
of borrowing does not exceed 10% of the total assets of the Fund taken at cost,
and (b) that immediately after the borrowing, and at all times thereafter, there
will be an asset coverage of at least 300% for all of the Fund's borrowings
(including all obligations under financial futures contracts on debt
obligations); and
(3) Concentrate its investments in any one industry, as determined by the Board
of Trustees, and in this connection it will not acquire securities of companies
in any one industry if, immediately after giving effect to any such acquisition,
more than 25% of the value of the total assets of the Fund would be invested in
such industry, with the following exceptions:
(a) In the case of MML Money Market there is no limitation in respect of
certificates of deposit and bankers' acceptances (see "The Funds - MML Money
Market Fund" on pages 8-9).
(b) MML Money Market, MML Managed Bond and the Bond Sector of MML Blend each
may invest up to 40% of the value of their respective total assets in each
of the electric utility and telephone industries. However, it currently is
MassMutual's intent not to invest more than 25% of any one of these funds
total assets in either the electric utility or telephone industries.
B. EXCEPTIONS
(1) Notwithstanding any of the above investment restrictions or those set forth
in the Statement of Additional Information, and in addition to the authority
each Fund had as of April 30, 1993, each Fund may engage in derivatives
transactions, techniques, and practices using futures, options, swap agreements,
and similar instruments, to the extent and in a manner permitted by law.
(2) Notwithstanding any of the above investment restrictions or those set forth
in the Statement of Additional Information, each Fund may invest in any security
or investment related instrument, or engage in any investment related
transaction or practice, such as newly developed debt securities or hedging
programs, provided that the Board of Trustees has determined that to do so is
consistent with the Fund's investment objectives and policies, has adopted
reasonable guidelines for use by the Fund's Advisers and provided further that
at the time of entering into such investment or transaction such investments or
instruments account for no more than 10% of the Fund's total assets.
VII. INVESTMENT MANAGERS
MassMutual serves as investment manager of each Fund pursuant to a separate
investment management agreement executed by MassMutual and each Fund. Under the
agreements, which are substantially identical, MassMutual is authorized to
engage in portfolio transactions on behalf of the Funds, subject to such general
or specific instructions as may be given by the Board of Trustees. MassMutual
also acts as the transfer agent and the dividend paying agent.
The investment management agreements between MassMutual and the Funds provide
that MassMutual will perform all administrative functions relating to the Funds
and will bear all expenses of the Funds except (1) taxes and corporate fees
payable to government agencies, (2) brokerage commissions (which may be higher
than other brokers charge if paid to a broker which provides brokerage and
research services to Advisers or for use in providing investment advice and
management to the Funds and other accounts over which Advisers exercise
investment discretion) and other capital items payable in connection with the
purchase or sale of Fund investments, (3) interest on account of any borrowings
by the Funds, (4) fees and expenses of Trustees of MML Trust who are not
interested persons, as defined in the Investment Company Act of 1940, as amended
(the "1940 Act"), of the Advisers or MML Trust, and (5) fees of the Funds'
independent certified public accountants.
For providing the services described above, MassMutual is paid a quarterly fee
at the annual rate of .50% of the first $100,000,000 of the average daily net
asset value of each Fund, .45% of the next $200,000,000, .40% of the next
$200,000,000 and .35% of any excess over $500,000,000. MassMutual has agreed to
bear expenses of each Fund (other than the management fee, interest, taxes,
brokerage commissions and extraordinary expenses) in excess of .11% of average
daily net asset value through April 30, 1996. In 1994 MML Equity, MML Money
Market, MML Managed Bond, and MML Blend paid fees to MassMutual amounting to
.41%, .50%, .49% and .38%, respectively, of their average daily net assets
during the year.
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<PAGE>
The investment management agreement between MassMutual and each Fund
automatically terminates: (1) unless its continuance is specifically approved at
least annually by the affirmative vote of a majority of the Board of Trustees,
which affirmative vote shall include a majority of the members of the Board who
are not interested persons (as defined in the 1940 Act) of MassMutual or of MML
Trust, or (2) upon its assignment. Under the terms of each investment management
agreement, each Fund recognizes MassMutual's control of the initials "MML" and
each Fund agrees that its right to use these initials is non-exclusive and can
be terminated by MassMutual at any time. Under each agreement, MassMutual's
liability regarding its investment management obligations and duties is limited
to situations involving its willful misfeasance, bad faith, gross negligence or
reckless disregard of such obligations and duties.
MassMutual is a mutual life insurance company organized in 1851 under the laws
of The Commonwealth of Massachusetts. MassMutual is licensed to transact a life,
accident and health insurance business in all states of the United States, the
District of Columbia and certain Provinces of Canada. At December 31, 1994
MassMutual had total assets of approximately $35.2 billion, including
approximately $17.7 billion in debt securities, $3.0 billion in mortgage loans,
$197.0 million in common stocks (excluding investments in subsidiaries), $1.3
billion in real estate and $2.4 billion in other investments. The persons who
are responsible for the management of the bond and money market portfolios of
MassMutual are also responsible for managing investments of the Funds.
As of January 1, 1993, MassMutual transferred its equity investment advisory
operations to Concert. All of the senior investment professionals of
MassMutual's Equity Management Department transferred to and became employees of
Concert. MassMutual indirectly owns 100% of Concert's voting stock and a
majority of Concert's Directors are officers and employees of MassMutual.
Concert manages institutional investment advisory accounts pursuant to written
contracts. As of December 31, 1994, Concert had $4.4 billion of assets under
management.
Pursuant to two investment sub-advisory agreements with MassMutual, Concert
manages the investment of the assets of MML Equity and the Equity Sector of MML
Blend and MassMutual pays Concert a quarterly fee equal to an annual rate of
.13% of the average daily net asset value. The agreements provide that they
automatically terminate upon the termination of the respective investment
management agreements between MassMutual and MML Equity and MML Blend. Concert
also serves as the investment sub-adviser to Oppenheimer Value Stock Fund which
had net assets of $104 million as of December 31, 1994.
Securities held by the Funds are also frequently held by Advisers in their
investment accounts and by other investment companies for which Advisers act as
investment advisers. If the same security is purchased or sold for any Fund and
such investment account or companies at the same time, such purchases or sales
normally will be combined, to the extent practicable, and will be allocated as
nearly as practicable on a pro rata basis in proportion to the amounts to be
purchased or sold for each. In determining the amounts to be purchased or sold,
the main factors to be considered will be the investment objectives of the
respective portfolios, the relative size of portfolio holdings of the same or
comparable security, availability of cash for investment by the various
portfolios and the size of their respective investment commitments. It is
believed that the ability of the Funds to participate in larger volume
transactions will, in most cases, produce better execution for the Funds. In
some cases, however, this procedure could have a detrimental effect on the price
and amount of a security available to a Fund or the price at which a security
may be sold. It is the opinion of MML Trust's management that, such execution
advantage and the desirability of retaining Advisers as investment managers of
the Funds outweigh the disadvantages, if any, which might result from this
procedure.
VIII. CAPITAL SHARES
MML Trust is a "series" company which is authorized to issue shares in separate
series of the same class. Shares of four series have been authorized,
constituting the interests in the four Funds described in this Prospectus. Under
MML Trust's Declaration of Trust, however, the Board of Trustees is authorized
to create new shares in addition to the Funds without the necessity of a vote of
shareholders of MML Trust. MML Trust may issue an unlimited number of shares of
the same class, in one or more series as MML Trustees may authorize, with or
without par value as MML Trustees may prescribe. Each share of a particular
series represents an equal proportionate interest in that series with each other
share of the same series, none having priority or preference over another. Each
series shall be preferred over all other series in respect of the assets
allocated to that series. Each share of a particular series is entitled to a pro
rata share of any distributions declared by that series and, in the event of
liquidation, a pro rata share of the net assets of that series remaining after
satisfaction of outstanding liabilities. When issued, shares are fully paid and
nonassessable and have no preemptive, conversion or subscription rights.
MML Trust is not required to hold annual meetings of shareholders. Special
meetings may be called for purposes such as electing MML Trustees, voting on
management agreements, and with respect to such additional matters relating to
MML Trust as may be required by MML Trust's Declaration of Trust and the 1940
Act. Shareholders holding 10% of the shares of MML Trust may call a meeting to
be held to consider removal of MML Trustees. On any matter submitted to
shareholders, shares of each Fund entitle their holder to one vote per share
(with proportionate voting for fractional shares), irrespective of the relative
net asset values of the Funds' shares. On any matters submitted to a vote of
shareholders, all shares of MML Trust then entitled to vote shall be voted by
individual Fund, except that (i) when required by the 1940 Act, shares shall be
voted in the aggregate and not by individual Fund, and (ii) when MML Trustees
have determined that any matter affects only the interests of one or more Funds,
then only shareholders of such Fund or Funds shall be entitled to vote thereon.
Shareholder inquiries should be made by contacting the Secretary, MML Series
Investment Fund, 1295 State Street, Springfield, Massachusetts 01111.
The assets of certain variable annuity and variable life insurance separate
accounts for which MassMutual or an affiliate is the depositor are invested in
shares of the Funds. Because these separate accounts are invested in the same
underlying Funds it is possible that material conflicts could arise between
owners of the variable life insurance contracts and owners
14
<PAGE>
of the variable annuity contracts. Possible conflicts could arise if (i) state
insurance regulators should disapprove or require changes in investment
policies, investment advisers or principal underwriters or if the depositor
should be permitted to act contrary to actions approved by holders of the
variable life or variable annuity contracts under rules of the Securities and
Exchange Commission, (ii) adverse tax treatment of the variable life or variable
annuity contracts would result from utilizing the same underlying Funds, (iii)
different investment strategies would be more suitable for the variable annuity
contracts than the variable life contracts, or (iv) state insurance laws or
regulations or other applicable laws would prohibit the funding of both variable
life and variable annuity separate accounts by the same Funds.
The Board of Trustees will follow monitoring procedures which have been
developed to determine whether material conflicts have arisen and what action,
if any, should be taken in the event of such conflicts. If a material
irreconcilable conflict should arise between owners of the variable life
insurance contracts and owners of the variable annuity contracts, one or the
other group of owners may have to terminate its participation in the Funds. More
information regarding possible conflicts between variable annuity and variable
life insurance contracts is contained in the prospectuses for those contracts.
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of MML Trust. However, MML Trust's
Declaration of Trust disclaims liability of the shareholders, MML Trustees, or
officers of MML Trust for acts or obligations of MML Trust, which are binding
only on the assets and property of MML Trust, and requires that notice of such
disclaimer be given in each agreement, obligation, or instrument entered into or
executed by MML Trust or MML Trustees. MML Trust's Declaration of Trust provides
for indemnification out of MML Trust property for all loss and expense of any
shareholder held personally liable for the obligations of MML Trust. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is considered remote since it is limited to circumstances in which the
disclaimer is inoperative and MML Trust itself would be unable to meet its
obligations.
IX. NET ASSET VALUE
The net asset value of each Fund's shares is determined once daily as of the
normal close of trading on the New York Stock Exchange (presently 4:00 p.m.) on
each day on which the Exchange is open for trading.
A. MML MONEY MARKET FUND
It is the intention of MML Money Market to maintain a per share net asset value
of $1.00, although this cannot be assured. Since the net income of MML Money
Market is declared as a dividend each time it is determined, the net asset value
per share of MML Money Market remains at $1.00 per share immediately after each
determination and dividend declaration. Any increase in the value of a
shareholder's investment in MML Money Market representing the reinvestment of
dividend income is reflected by an increase in the number of shares of MML Money
Market in the shareholder's account, which increase is recorded promptly after
the end of each calendar month. MML Money Market's portfolio instruments are
valued on the basis of amortized cost.
B. OTHER FUNDS
Generally, the other Funds value portfolio securities on the basis of market
value. For example, equity securities, including those traded on national
securities exchanges, the NASDAQ national market system, or over-the-counter
securities not so listed, are valued by one or more pricing services, as
authorized by the Board of Trustees. Normally, the values are based upon the
last reported sale price of the security. Long-term bonds are valued on the
basis of valuations furnished by a pricing service, authorized by the Board of
Trustees, which determines valuations taking into account appropriate factors
such as institutional-size trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, trading characteristics and other
market data. Debt obligations with less than one year but more than sixty days
to maturity are valued on the basis of their market value, and debt obligations
having a maturity of sixty days or less are generally valued at amortized cost
when the Board of Trustees believes that amortized cost approximates market
value. If acquired, preferred stocks will be valued on the basis of their market
value if market quotations are readily available. Futures contracts are valued
based on market prices unless such prices do not reflect the fair value of the
contract, in which case they will be valued by or under the direction of the
Board of Trustees. In all other cases, assets (including restricted securities)
will be valued at fair value as determined in good faith by the Board of
Trustees, although the actual calculations may be made by persons acting
pursuant to the direction of the Board of Trustees.
X. SALE AND REDEMPTION OF SHARES
The shares of each Fund are sold at their net asset value (which in the case of
MML Money Market is expected to remain at $1.00) as next computed after receipt
of the purchase order, without the deduction of any selling commission or "sales
load."
Each Fund redeems its shares at their net asset value (which in the case of MML
Money Market is expected to remain at $1.00) as next computed after receipt of
the request for redemption. The redemption price for shares of MML Equity, MML
Managed Bond and MML Blend may be more or less than the shareholder's cost. No
fee is charged on redemption.
Redemption payments will be made within seven days after receipt of the written
request therefore by MML Trust, except that the right of redemption may be
suspended or payments postponed when permitted by applicable law and
regulations.
XI. TAX STATUS
It is the policy of each Fund to comply, and in 1994 each Fund did comply, with
the provisions of the Internal Revenue Code applicable to regulated investment
companies. As a result, none of the Funds will be subject to federal income tax
on
15
<PAGE>
any net income or any capital gains to the extent they are distributed or are
deemed to have been distributed to shareholders.
Regulations issued under Internal Revenue Code Section 817(h) require each of
the Funds to be adequately diversified in order for a variable annuity and
variable life contract funded by MML Trust to receive favorable tax treatment as
an annuity or life insurance contract. Among other requirements, the regulations
limit each Fund's investment in a single issuer to 55% of its assets; while this
requirement applies to U.S. Government securities, each government agency or
instrumentality is treated for this purpose as a separate issuer. The Funds
intend to comply with these diversification requirements. For further
information, see the Statement of Additional Information.
Tax consequences to investors in the separate investment accounts which are
invested in the Funds are described in the prospectuses for such accounts.
XII. DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Funds intend to declare capital gain and ordinary income dividends and to
distribute such dividends in a manner designed to avoid a 4% excise tax on
undistributed regulated investment company income, imposed by the Tax Reform Act
of 1986. The declaration and distribution policies specific to each Fund are
outlined below.
A. MML EQUITY FUND
Distributions, if any, are declared and paid annually. Distributions may be
taken either in cash or in additional shares of MML Equity at net asset value on
the day after the record date for the distribution, at the option of the
shareholder.
B. MML MONEY MARKET FUND
The net income of MML Money Market, as defined below, is determined as of the
normal close of trading on the New York Stock Exchange on each day on which the
Exchange is open, and all the net income so determined is declared as a dividend
to shareholders of record as of that time. Dividends are distributed promptly
after the end of each calendar month in additional shares of MML Money Market at
the then current net asset value, or in cash, at the option of the shareholder.
For this purpose the net income of MML Money Market (from the time of the
immediately preceding determination thereof) consists of all interest income
accrued on its portfolio, plus realized gains or minus realized losses, and less
all expenses and liabilities chargeable against income. Interest income includes
discount earned (including both original issue and market discount) on paper
purchased at a discount, less amortization of premium, accrued ratably to the
date of maturity. Expenses, including the compensation payable to MassMutual,
are accrued each day.
Should MML Money Market incur or anticipate any unusual expense, or loss or
depreciation which would adversely affect its net asset value per share or
income for a particular period, the Board of Trustees would at that time
consider whether to adhere to the present dividend policy described above or to
revise it in the light of the then prevailing circumstances. For example, if MML
Money Market's net asset value per share were reduced, or were anticipated to be
reduced, below $1.00, the Board of Trustees might suspend further dividend
payments until the net asset value returned to $1.00. Thus, such expenses or
losses or depreciation might result in an investor receiving no dividends for
the period during which he held his shares and in his receiving upon redemption
a price per share lower than that which he paid.
C. MML MANAGED BOND AND MML BLEND FUNDS
Dividends out of net investment income are declared and paid quarterly. Capital
gains declarations and distributions of net capital gains, if any, for the year
are made annually. Distributions may be taken either in cash or in additional
shares of the applicable Fund at net asset value on the day after the record
date for the distribution, at the option of the shareholder.
XIII. INVESTMENT PERFORMANCE
Each of the Funds may from time to time advertise certain investment performance
figures. These figures are based on historical earnings and are not intended to
indicate future performance.
MML Money Market may quote its yield and its effective yield. The yield of MML
Money Market refers to the income generated by the Fund over a seven-day period
(which period will be stated in the advertisement). This income is then assumed
to be earned each week over a 52-week period. The effective yield is calculated
similarly, but the income earned by an investment in the Fund is assumed to be
reinvested.
MML Managed Bond, MML Blend and MML Equity may also quote yield. The yield for
each of these Funds refers to the net investment income earned by the Fund over
a 30-day period (which period will be stated in the advertisement). This income
is then assumed to be earned for a full year and to be reinvested each month for
six months. The resulting semi-annual yield is doubled.
Each of the Funds may advertise its total return and its holding period return
for various periods of time. Total return is calculated by determining, over a
period of time, which will be stated in the advertisement, the average annual
compounded rate of return that an investment in the Fund earned over that
period, assuming reinvestment of all distributions. Holding period return refers
to the percentage change in the value of an investment in a Fund over a period
of time (which period will be stated in the advertisement), assuming
reinvestment of all distributions. Total return and holding period return differ
from yield in that the return figures include capital changes in an investment
while yield measures the rate of net income generated by a Fund. Total return
differs from holding period return principally in that total return is an
average annual figure while holding period return is an aggregate figure for the
entire period.
These investment performance figures may be of limited use for comparative
purposes because they do not reflect charges imposed by the separate investment
accounts invested in the Funds which, if included, would decrease the
performance fig-
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<PAGE>
ures. For more information about the investment performance of the Funds, see
the Statement of Additional Information.
XIV. MANAGEMENT OF MML TRUST
The affairs of MML Trust are generally supervised by its Board of Trustees and
officers. As stated previously, MassMutual acts as investment manager of each of
the Funds and Concert is the sub-adviser to MML Equity and the Equity Sector of
MML Blend. In those capacities, MassMutual and Concert are part of the
management of MML Trust. For more information concerning the management of MML
Trust, reference should be made to the Statement of Additional Information.
The name MML Series Investment Fund is the designation of Trustees under a
Declaration of Trust dated December 19, 1984, as amended from time to time. The
obligations of MML Trust are not personally binding upon, nor shall resort be
had to the property of, any of the Trustees, shareholders, officers, employees
or agents of MML Trust, but MML Trust's property only shall be bound.
17
<PAGE>
MML SERIES INVESTMENT FUND
1295 State Street
Springfield, Massachusetts 01111
--------------------
INVESTMENT MANAGER
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
1295 State Street
Springfield, Massachusetts 01111
INVESTMENT SUB-ADVISOR
CONCERT CAPITAL MANAGEMENT, INC.
125 High Street
Boston, Massachusetts 02110
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
2300 BayBank Tower
Springfield, Massachusetts 01101
CUSTODIAN
CITIBANK N.A.
111 Wall Street
New York, New York 10005
--------------------
This Prospectus does not constitute an offering in any jurisdiction in which
such offering may not lawfully be made. No person is authorized to make any
representations in connection with this offering other than those contained in
this Prospectus.
<PAGE>
Page 6
--------------------------------------------------------------------------------
Top of page: a line graph reflecting the growth of a hypothetical investment
of $10,000 invested in the MML Equity Fund and the Standard & Poor's Index.
In the upper left portion of the graph is a table listing the average annual
total returns for the MML Equity Fund for the 1, 5, and 10 year time periods.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Plot points for table:
<S> <C>
1 Yr 4.10%
5 Yr 9.49%
10 Yr 13.72%
</TABLE>
<TABLE>
<CAPTION>
Plot points for graph: MML Equity S & P 500
<S> <C> <C>
1/1/85 10,000 10,000
1985 13,049 13,177
1986 15,678 15,639
1987 16,007 16,460
1988 18,677 19,192
1989 22,981 25,278
1990 22,863 24,476
1991 28,707 31,934
1992 31,715 34,367
1993 34,733 37,828
1994 36,159 38,324
</TABLE>
Page 6
--------------------------------------------------------------------------------
Bottom of page: a table listing the average annual total returns for the
MML Money Market Fund and the Lipper Taxable Money Market Fund Average for
the 1, 5, and 10 year time periods.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MML Money Lipper Taxable
Plot points for table: Market Money Mkt
<S> <C> <C>
1 Yr 3.84% 3.65%
5 Yr 4.82% 4.59%
10 Yr 6.17% 5.89%
</TABLE>
<PAGE>
Page 7
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Top of page: a line graph reflecting the growth of a hypothetical investment of
$10,000 invested in the MML Managed Bond Fund and the Lehman Brothers
Government/Corporate Bond Index. In the upper left portion of the graph is a
table listing the average annual total returns for the MML Managed Bond Fund
for the 1, 5, and 10 year time periods.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Plot points for table:
<S> <C>
1 Yr -3.76%
5 Yr 7.86%
10 Yr 9.53%
</TABLE>
<TABLE>
<CAPTION> MML Managed Lehman Brothers
Plot points for graph: Bond G/C Bond
<S> <C> <C>
1/1/85 10,000 10,000
1985 11,994 12,134
1986 13,729 14,022
1987 14,086 14,346
1988 15,090 15,431
1989 17,026 17,631
1990 18,452 19,091
1991 21,526 22,170
1992 23,099 23,848
1993 25,827 26,486
1994 24,855 25,556
</TABLE>
Page 7
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Bottom of page: a line graph reflecting the growth of a hypothetical investment
of $10,000 invested in the MML Blend Fund and the Lipper Balanced Fund Index.
In the upper left portion of the graph is a table listing the average annual
total returns for the MML Blend Fund for the 1, 5, and 10 year time periods.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Plot points for table:
<S> <C>
1 Yr 2.48%
5 Yr 9.31%
10 Yr 12.46%
</TABLE>
<TABLE>
<CAPTION>
Lipper
Plot points for graph: MML Blend Balanced
<S> <C> <C>
1/1/85 10,000 10,000
1985 12,488 12,983
1986 14,774 15,376
1987 15,234 16,010
1988 17,276 17,800
1989 20,725 21,306
1990 21,216 21,446
1991 26,309 26,985
1992 28,772 28,942
1993 31,561 32,329
1994 32,343 31,523
</TABLE>
