<PAGE>
A Message To Our Contract Owners:
We are pleased to forward this combined Annual Report of the segment of
Massachusetts Mutual Variable Annuity Separate Account 1 ("Separate Account 1")
pertaining to Variable Annuity Fund 4 and Flex-Annuity IV (Qualified) (the
"Segment"), and the MML Series Investment Fund ("MML Trust"). These reports are
for the year ended December 31, 1997.
The Annual Report for the Segment begins on page 3. The Segment has net assets
of $423,469,806 as of December 31, 1997. Net asset values per accumulation unit
for the MML Equity, MML Money Market, MML Managed Bond and MML Blend Divisions
of the Segment as of December 31, 1997 are shown in detail in the table on page
3.
The Annual Report for the MML Trust begins on page 12. This report contains a
detailed description of the financial results of four series of the MML Trust -
MML Equity Fund, MML Money Market Fund, MML Managed Bond Fund and MML Blend Fund
for the year ended December 31, 1997.
We appreciate the interest and confidence you have shown in Separate Account 1.
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
/s/ Thomas B. Wheeler
Thomas B. Wheeler
Chairman and Chief Executive Officer
February 3, 1998
1
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Massachusetts Mutual Variable Annuity Separate Account 1
Statement of Assets and Liabilities as of December 31, 1997 ......................... 3
Statement of Operations For the Year Ended December 31, 1997 ........................ 4
Statement of Changes in Net Assets For the Years Ended December 31, 1997 and 1996 ... 5
Notes to Financial Statements ....................................................... 6-10
Report of Independent Accountants ................................................... 11
MML Series Investment Fund
To Our Shareholders ................................................................. 12-17
Statement of Assets and Liabilities as of December 31, 1997 ......................... 18
Statement of Operations For the Year Ended December 31, 1997 ........................ 19
Statement of Changes in Net Assets For the Years Ended December 31, 1997 and 1996 ... 20
Financial Highlights ................................................................ 21-23
Schedule of Investments as of December 31, 1997
MML Equity Fund .................................................................... 24-25
MML Money Market Fund .............................................................. 26
MML Managed Bond Fund .............................................................. 27-29
MML Blend Fund ..................................................................... 30-35
Notes to Financial Statements ....................................................... 36-38
Report of Independent Accountants ................................................... 39
</TABLE>
2
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 1 --
Variable Annuity Fund 4 and Flex-Annuity IV (Qualified)
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<CAPTION>
MML MML
MML Money Managed MML
Equity Market Bond Blend
Division Division Division Division
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Investment in the MML Series Investment Fund
Number of shares (Note 2) 3,784,739 11,909,264 1,071,888 9,863,504
============ ============ ============ ============
Identified cost (Note 3B) $ 76,564,043 $ 11,909,264 $ 13,033,510 $172,894,094
============ ============ ============ ============
Value (Note 3A) $134,143,049 $ 11,909,264 $ 13,301,024 $237,509,035
Dividends receivable 10,816,148 53,153 213,865 17,804,519
Receivable from Massachusetts Mutual Life Insurance Company
Receivable for accumulation units sold 2,995 378 404 5,305
Other assets 1,367 367 124 2,657
------------ ------------ ------------ ------------
Total assets 144,963,559 11,963,162 13,515,417 255,321,516
LIABILITIES
Redemptions pending settlement 874,508 0 65,242 58,579
Annuitant mortality fluctuation reserve (Note 3D) 11,285 2,411 3,409 14,428
Payable to Massachusetts Mutual Life Insurance Company 441,669 34,869 41,515 745,933
------------ ------------ ------------ ------------
Total liabilities 1,327,462 37,280 110,166 818,940
------------ ------------ ------------ ------------
NET ASSETS $143,636,097 $ 11,925,882 $ 13,405,251 $254,502,576
============ ============ ============ ============
Net Assets:
Accumulation units--Value $143,259,942 $ 11,845,521 $ 13,291,612 $254,021,652
Annuity reserves (Note 3E) 376,155 80,361 113,639 480,924
------------ ------------ ------------ ------------
Net assets $143,636,097 $ 11,925,882 $ 13,405,251 $254,502,576
============ ============ ============ ============
Contractowners accumulation units (Note 8) 14,146,907 5,237,439 3,561,780 50,707,228
============ ============ ============ ============
NET ASSET VALUE PER ACCUMULATION UNIT
Variable Annuity Fund 4 Contracts
December 31, 1997 $ 10.86 $ 2.55 $ 4.29 $ 5.36
December 31, 1996 8.51 2.45 3.93 4.47
December 31, 1995 7.12 2.34 3.84 3.95
December 31, 1994 5.47 2.24 3.24 3.23
December 31, 1993 5.29 2.17 3.39 3.17
Flex Annuity IV Contracts
December 31, 1997 $ 10.05 $ 2.20 $ 3.65 $ 4.99
December 31, 1996 7.91 2.11 3.37 4.18
December 31, 1995 6.66 2.04 3.30 3.71
December 31, 1994 5.14 1.95 2.80 3.05
December 31, 1993 5.00 1.90 2.95 3.01
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 1 --
Variable Annuity Fund 4 and Flex-Annuity IV (Qualified)
STATEMENT OF OPERATIONS
For The Year Ended December 31, 1997
<TABLE>
<CAPTION>
MML MML
MML Money Managed MML
Equity Market Bond Blend
Division Division Division Division
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment income
Dividends (Note 3B) $10,817,812 $ 614,711 $ 895,518 $24,230,285
Expenses
Mortality and expense risk fees and administrative expenses (Note 4) 1,647,686 137,494 164,448 3,027,056
----------- ----------- ----------- -----------
Net investment income (Note 3C) 9,170,126 477,217 731,070 21,203,229
----------- ----------- ----------- -----------
Net realized and unrealized gain (loss) on investments
Net realized gain on investments (Notes 3B, 3C and 7) 11,189,116 -- 94,985 15,516,402
Change in net unrealized appreciation/depreciation of investments 12,290,703 -- 316,741 7,373,762
----------- ----------- ----------- -----------
Net gain on investments 23,479,819 -- 411,726 22,890,164
----------- ----------- ----------- -----------
Net increase in net assets resulting from operations $32,649,945 $ 477,217 $ 1,142,796 $44,093,393
=========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 1 --
Variable Annuity Fund 4 and Flex-Annuity IV (Qualified)
STATEMENT OF CHANGES IN NET ASSETS
For The Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997
----------------------------------------------------------------
MML MML
MML Money Managed MML
Equity Market Bond Blend
Division Division Division Division
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Increase (decrease) in net
assets
Operations:
Net investment income $ 9,170,126 $ 477,217 $ 731,070 $ 21,203,229
Net realized gain
on investments 11,189,116 -- 94,985 15,516,402
Change in net unrealized
appreciation/depreciation
of investments 12,290,703 -- 316,741 7,379,762
------------- ------------- ------------- -------------
Net increase in net assets
resulting from operations 32,649,945 477,217 1,142,796 44,093,393
------------- ------------- ------------- -------------
Capital transactions: (Note 8)
Net contract payments (Note 6) 3,001,622 494,755 265,014 6,144,790
Withdrawal of funds (18,454,626) (4,005,052) (2,012,392) (32,691,847)
Payment of accumulation unit
value fluctuation (151,405) (7,987) (11,044) (55,938)
Net charge (credit) to
annuitant mortality fluctuation
reserve (Note 3D) 5,582 1,201 7,629 8,245
Annuity benefit payments (30,566) (8,972) (12,113) (40,838)
Withdrawal due to administrative
charges and contingent deferred
sales charges (Note 6) (169,948) (20,592) (22,076) (397,954)
Divisional transfers 1,518,854 2,329,197 (755,323) (3,092,728)
------------- ------------- ------------- -------------
Net decrease in net assets
assets resulting from capital
transactions (14,280,487) (1,217,450) (2,540,305) (30,126,270)
------------- ------------- ------------- -------------
Total increase (decrease) 18,369,458 (740,233) (1,397,509) 13,967,123
NET ASSETS, at beginning
of the year 125,266,639 12,666,115 14,802,760 240,535,453
------------- ------------- ------------- -------------
NET ASSETS, at end
of the year $ 143,636,097 $ 11,925,882 $ 13,405,251 $ 254,502,576
============= ============= ============= =============
<CAPTION>
1996
----------------------------------------------------------------
MML MML
MML Money Managed MML
Equity Market Bond Blend
Division Division Division Division
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Increase (decrease) in net
assets
Operations:
Net investment income $ 4,151,951 $ 482,017 $ 794,853 $ 11,835,481
Net realized gain
on investments 5,420,157 -- 214,016 10,879,672
Change in net unrealized
appreciation/depreciation
of investments 11,000,776 -- (734,475) 5,725,613
------------- ------------- ------------- -------------
Net increase in net assets
resulting from operations 20,572,884 482,017 274,394 28,440,766
------------- ------------- ------------- -------------
Capital transactions: (Note 8)
Net contract payments (Note 6) 2,803,471 1,167,659 342,621 7,052,941
Withdrawal of funds (12,383,283) (3,058,432) (2,219,804) (34,435,533)
Payment of accumulation unit
value fluctuation (40,371) (6,348) (3,204) (164,050)
Net charge (credit) to
annuitant mortality fluctuation
reserve (Note 3D) 1,916 (3,240) 1,707 859
Annuity benefit payments (24,127) (8,874) (11,536) (32,671)
Withdrawal due to administrative
charges and contingent deferred
sales charges (Note 6) (182,949) (24,475) (26,842) (454,750)
Divisional transfers 1,963,353 527,987 (398,408) (2,092,932)
------------- ------------- ------------- -------------
Net decrease in net assets
assets resulting from capital
transactions (7,861,990) (1,405,723) (2,315,466) (30,126,136)
------------- ------------- ------------- -------------
Total increase (decrease) 12,710,894 (923,706) (2,041,072) (1,685,370)
NET ASSETS, at beginning
of the year 112,555,745 13,589,821 16,843,832 242,220,823
------------- ------------- ------------- -------------
NET ASSETS, at end
of the year $ 125,266,639 $ 12,666,115 $ 14,802,760 $ 240,535,453
============= ============= ============= =============
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 1--
Variable Annuity Fund 4 and Flex-Annuity IV (Qualified)
Notes To Financial Statements
1. HISTORY
Massachusetts Mutual Variable Annuity Separate Account 1 ("Separate Account
1") is a separate investment account established on April 8, 1981 by
Massachusetts Mutual Life Insurance Company ("MassMutual"). Separate
Account 1 operates as a registered unit investment trust pursuant to the
Investment Company Act of 1940 and the rules promulgated thereunder.
MassMutual maintains three segments within Separate Account 1. The segments
are Variable Annuity Fund 4, Flex-Annuity IV (Qualified) and Flex Extra
(Qualified). These notes and the financial statements presented herein,
with the exception of Note 9, describe and consist only of the Variable
Annuity Fund 4 and Flex-Annuity IV (Qualified) segments (the "Segment").
2. INVESTMENT OF THE SEGMENT'S ASSETS
The Variable Annuity Fund 4 and the Flex-Annuity IV (Qualified) segments
each have four divisions. The MML Equity Division invests in shares of MML
Equity Fund, the MML Money Market Division invests in shares of MML Money
Market Fund, the MML Managed Bond Division invests in shares of MML Managed
Bond Fund and the MML Blend Division invests in shares of MML Blend Fund.
MML Equity Fund, MML Money Market Fund, MML Managed Bond Fund and MML Blend
Fund are four series of shares of MML Series Investment Fund (the "MML
Trust"). The MML Trust is a registered, no-load, open-end, management
investment company for which MassMutual serves as investment manager.
Concert Capital Management, Inc. ("Concert") served as the investment
sub-adviser to MML Equity Fund and the Equity Sector of the MML Blend Fund
from 1993-1996. Concert merged with and into David L. Babson and Company,
Inc. ("Babson") effective December 31, 1996. At such time, both Concert and
Babson were wholly-owned subsidiaries of DLB Acquisition Corporation, which
is a controlled subsidiary of MassMutual. Thus, effective January 1, 1997,
Babson serves as the investment sub-adviser to MML Equity Fund and the
Equity Sector of the MML Blend Fund.
3. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
consistently by the Segment in preparation of the financial statements in
conformity with generally accepted accounting principles.
A. Investment Valuation
Investments in MML Equity Fund, MML Money Market Fund, MML Managed Bond
Fund and MML Blend Fund are each stated at market value which is the net
asset value of each of the respective funds.
B. Accounting For Investments
Investment transactions are accounted for on trade date and identified cost
is the basis followed in determining the cost of investments sold for
financial statement purposes. Dividend income is recorded on the
ex-dividend date.
6
<PAGE>
Notes To Financial Statements (Continued)
C. Federal Income Taxes
Operations of the Segment form a part of the total operations of
MassMutual, and the Segment is not taxed separately. MassMutual is taxed as
a life insurance company under the provisions of the 1986 Internal Revenue
Code, as amended. The Segment will not be taxed as a "regulated investment
company" under Subchapter M of the Internal Revenue Code. Under existing
federal law, no taxes are payable on investment income and realized capital
gains attributable to Contracts which depend on the Segment's investment
performance. Accordingly, no provision for federal income tax has been
made. MassMutual may, however, make such a charge in the future if an
unanticipated change of current law results in a company tax liability
attributable to the Segment.
D. Annuitant Mortality Fluctuation Reserve
The Segment maintains a reserve as required by regulatory authorities to
provide for mortality losses incurred. The reserve is increased quarterly
for mortality gains and its proportionate share of any increases in value.
The reserve is charged quarterly for mortality losses and its proportionate
share of any decreases in value. Transfers to or from MassMutual are then
made quarterly to adjust the Segments. Net transfers from MassMutual to the
Segments totaled $31,303 and $4,324 for the years ended December 31, 1997
and 1996 respectively. The reserve is subject to a maximum of 3% of the
Segment's annuity reserves. Any mortality losses in excess of this reserve
will be assumed by MassMutual. The reserve is not available to owners of
Contracts except to the extent necessary to cover mortality losses under
the Contracts.
E. Annuity Reserves
Annuity reserves are developed by using accepted actuarial methods and are
computed using the 1971 Individual Annuity Mortality Table, as modified.
F. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
4. CHARGES FOR MORTALITY AND EXPENSE RISKS
A. Variable Annuity Fund 4 Contracts
Currently, daily charges for mortality and expense risks assumed by
MassMutual are made which are equivalent on an annual basis to 0.730% of
the value of the Variable Annuity Fund 4 Contracts. Effective on January 1
of any year after the first Contract year, the daily charge made for the
assumption of mortality and expense risks will be as determined by
MassMutual, but in no event will such charge be at an annual rate of more
than 1.2045% of the value of the Variable Annuity Fund 4 Contracts.
B. Flex-Annuity IV (Qualified) Contracts
Daily charges for mortality and expense risks assumed by MassMutual are
made which are equivalent on an annual basis to 1.25% of the value of the
Flex-Annuity IV Contracts.
7
<PAGE>
Notes To Financial Statements (Continued)
5. DISTRIBUTION AGREEMENT
MML Investors Services, Inc. ("MMLISI"), a wholly-owned subsidiary of
MassMutual, serves 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.
Pursuant to the underwriting and servicing agreements, commissions or other
fees due to registered representatives for selling and servicing the
contracts are paid by MassMutual on behalf of MMLISI. MMLISI also receives
compensation for its activities as underwriter of the contracts.
6. CHARGES/DEDUCTIONS FOR ADMINISTRATIVE CHARGES, CONTINGENT DEFERRED SALES
CHARGES AND PREMIUM TAXES
<TABLE>
<CAPTION>
MML MML
MML Money Managed MML
For The Year Ended Equity Market Bond Blend
December 31, 1997 Division Division Division Division
----------------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Gross contract payments $ 3,011,071 $ 496,555 $ 266,245 $ 6,154,432
Less deductions for administrative and sales expenses and
premium taxes under Variable Annuity Fund 4 Contracts 7,601 1,498 1,072 5,762
Less deductions for premium taxes under Flex-Annuity IV Contracts 1,848 302 159 3,880
----------- ----------- ----------- -----------
Net contract payments $ 3,001,622 $ 494,755 $ 265,014 $ 6,144,790
=========== =========== =========== ===========
Administrative and contingent deferred sales
changes under Flex-Annuity IV Contracts $ 169,948 $ 20,592 $ 22,076 $ 397,954
=========== =========== =========== ===========
<CAPTION>
MML MML
MML Money Managed MML
For The Year Ended Equity Market Bond Blend
December 31, 1996 Division Division Division Division
------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Gross contract payments $ 2,808,491 $ 1,182,904 $ 344,082 $ 7,067,956
Less deductions for administrative and sales expenses and
preminum taxes under Variable Annuity Fund 4 Contracts 3,573 14,728 1,290 11,391
Less deductons for premium taxes under Flex-Annuity IV Contracts 1,447 517 171 3,624
----------- ----------- ----------- -----------
Net contract payments $ 2,803,471 $ 1,167,659 $ 342,621 $ 7,052,941
=========== =========== =========== ===========
Administrative and contingent deferred sales
charges under Flex-Annuity IV Contracts $ 182,950 $ 24,475 $ 26,842 $ 454,750
=========== =========== =========== ===========
</TABLE>
7. PURCHASES AND SALES OF INVESTMENTS
<TABLE>
<CAPTION>
MML MML
MML Money Managed MML
For The Year Ended Equity Market Bond Blend
December 31, 1997 Division Division Division Division
----------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cost of purchases $10,305,615 5,506,266 $ 1,520,691 $18,208,479
Proceeds from sales 19,377,756 6,214,960 3,210,649 36,368,065
</TABLE>
8
<PAGE>
Notes To Financial Statements (Continued)
8. NET INCREASE (DECREASE) IN ACCUMULATION UNITS
Variable Annuity Fund 4 Contracts
<TABLE>
<CAPTION>
MML MML
MML Money Managed MML
Equity Market Bond Blend
For the Year Ended December 31, 1997 Division Division Division Division
------------------------------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Units purchased 12,886 9,284 4,161 18,677
Units withdrawn (109,962) (255,951) (95,987) (501,192)
Units transferred between divisions (3,063) 62,543 (29,721) (3,475)
------------ ------------ ------------ ------------
Net decrease (100,139) (184,124) (121,547) (485,990)
Units, at beginning of the year 1,373,330 1,157,488 553,694 3,071,677
------------ ------------ ------------ ------------
Units, at end of the year 1,273,191 973,364 432,147 2,585,687
============ ============ ============ ============
<CAPTION>
MML MML
MML Money Managed MML
Equity Market Bond Blend
For the Year Ended December 31, 1996 Division Division Division Division
------------------------------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Units purchased 5,682 75,720 4,193 33,807
Units withdrawn (144,918) (151,393) (81,113) (610,402)
Units transferred between divisions 40,087 29,636 (40,519) (49,992)
------------ ------------ ------------ ------------
Net decrease (99,149) (46,037) (117,439) (626,587)
Units, at beginning of the year 1,472,479 1,203,525 671,133 3,698,264
------------ ------------ ------------ ------------
Units, at end of the year 1,373,330 1,157,488 553,694 3,071,677
============ ============ ============ ============
Flex-Annuity IV Contracts
<CAPTION>
MML MML
MML Money Managed MML
Equity Market Bond Blend
For the Year Ended December 31, 1997 Division Division Division Division
------------------------------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Units purchased 329,886 219,786 72,450 1,364,806
Units withdrawn (1,945,969) (1,580,385) (474,106) (6,749,621)
Units transferred between divisions 175,415 1,009,628 (185,864) (688,140)
Units transferred to annuity reserves (2,848) -- -- (13,335)
------------ ------------ ------------ ------------
Net decrease (1,443,516) (350,971) (587,520) (6,086,290)
Units, at beginning of the year 14,317,232 4,615,046 3,717,153 54,207,831
------------ ------------ ------------ ------------
Units at end of the year 12,873,716 4,264,075 3,129,633 48,121,541
============ ============ ============ ============
<CAPTION>
MML MML
MML Money Managed MML
Equity Market Bond Blend
For the Year Ended December 31, 1996 Division Division Division Division
------------------------------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Units purchased 388,620 480,230 100,612 1,783,209
Units withdrawn (1,589,083) (1,319,030) (594,986) (8,303,737)
Units transferred between divisions 236,790 212,673 (75,046) (479,440)
Units transferred to annuity reserves (1,327) -- -- (42,964)
------------ ------------ ------------ ------------
Net decrease (965,000) (626,127) (569,420) (7,042,932)
Units, at beginning of the year 15,282,232 5,241,173 4,286,573 61,250,763
------------ ------------ ------------ ------------
Units, at end of the year 14,317,232 4,615,046 3,717,153 54,207,831
============ ============ ============ ============
</TABLE>
9
<PAGE>
Notes To Financial Statements (Continued)
9. CONSOLIDATED MASSACHUSETTS MUTUAL VARIABLE ANNUITY SEPARATE ACCOUNT 1
As discussed in Note 1, the financial statements only represent activity of
the Variable Annuity Fund 4 and Flex-Annuity IV (Qualified) segment of the
Massachusetts Mutual Variable Annuity Separate Account 1. The combined net
assets as of December 31, 1997 for Massachusetts Mutual Variable Annuity
Separate Account 1, which includes the segments pertaining to the Variable
Annuity Fund 4, Flex-Annuity IV (Qualified) and Flex Extra (Qualified) are as
follows:
<TABLE>
<CAPTION>
MML MML *Oppenheimer *Oppenheimer *Oppenheimer
MML Money Managed MML Capital Global Strategic
Equity Market Bond Blend Appreciation Securities Bond
Division Division Division Division Division Division Division
---------------- ------------- -------------- ---------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets $1,681,068,834 $81,866,648 $126,726,663 $1,996,744,040 $307,002,156 $201,046,413 $66,249,794
Total liabilities 6,473,624 304,046 468,183 6,404,412 985,390 670,005 185,390
---------------- ------------- -------------- ---------------- -------------- -------------- -------------
Net assets $1,674,595,210 $81,562,601 $126,258,480 $1,990,339,628 $306,016,766 $200,376,408 $66,064,404
================ ============= ============== ================ ============== ============== =============
Net assets consist of:
Accumulation units--Value $1,673,535,433 $81,469,025 $126,048,573 $1,988,168,324 $305,981,239 $200,355,611 $66,037,957
Annuity reserves 1,059,777 93,576 209,907 2,171,304 35,527 20,797 26,447
--------------- ------------- -------------- ---------------- -------------- -------------- -------------
Net assets $1,674,595,210 $81,562,601 $126,258,480 $1,990,339,628 $306,016,766 $200,376,408 $66,064,404
================ ============= ============== ================ ============== ============== =============
</TABLE>
*Offered on the Flex Extra (Qualified) Contracts only.
10
<PAGE>
Report Of Independent Accountants
To the Contract Owners of Massachusetts Mutual Variable Annuity Separate Account
1 and the Board of Directors of Massachusetts Mutual Life Insurance Company
We have audited the statements of assets and liabilities of the MML Equity
Division, MML Money Market Division, MML Managed Bond Division and MML Blend
Division of the Variable Annuity Fund 4 and Flex-Annuity IV (Qualified) segments
of Massachusetts Mutual Variable Annuity Separate Account 1 as of December 31,
1997, the related statements of operations for the year then ended, and the
statements of changes in net assets for each of the two years in the period then
ended. These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test a basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included verification of investments owned as of December 31, 1997 by
examination of the records of MML Series Investment Fund. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the MML Equity Division, MML
Money Market Division, MML Managed Bond Division and MML Blend Division of the
Variable Annuity Fund 4 and Flex-Annuity IV (Qualified) segments of
Massachusetts Mutual Variable Annuity Separate Account 1 at December 31, 1997,
the results of their operations for the year then ended, and the changes in
their net assets for each of the two years in the period then ended, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Springfield, Massachusetts
February 3, 1998
11
