<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 1-
Flex Extra (Qualified)
Part II
Part II was not included with the Semiannual Report (N30-D filing) sent to the
Contract Owners in August, 1998. The Contract Owners did receive the
accompanying Separate Account financial statements and the respective underlying
Fund reports that the Massachusetts Mutual Variable Annuity Separate Account
1-Flex Extra (Qualified) invest in.
The following underlying Funds that were sent to the Contract Owners are
incorporated by reference in this filing to the SEC as part of the Edgarization
filing.
1. The MML Series Investment Fund was edgarized and filed with the SEC in
August, 1998 under File number 811-0224.
2. The Oppenheimer Variable Account Fund was edgarized and filed with the SEC
in August, 1998 under File number 811-04108.
<PAGE>
A Message To Our Contract Owners:
We are pleased to forward this combined Semiannual Report of the segment of
Massachusetts Mutual Variable Annuity Separate Account 1 ("Separate Account 1")
pertaining to Flex Extra (Qualified) (the "Segment"), four Funds of the MML
Series Investment Fund, and three Funds of the Oppenheimer Variable Account
Funds available to owners of Flex Extra contracts. These reports are for the
period ended June 30, 1998.
The Semiannual Report for the Segment begins on page 3. The Segment has net
assets of $4,471,546,022 as of June 30, 1998. Net asset values per accumulation
unit for the MML Equity, MML Money Market, MML Managed Bond, MML Blend,
Oppenheimer Capital Appreciation, Oppenheimer Global Securities and Oppenheimer
Strategic Bond Divisions as of June 30, 1998 are shown in detail in the table on
page 3.
The Semiannual Report for the MML Series Investment Fund begins on page 11. This
report contains a detailed description of the financial results of the MML
Equity Fund, MML Money Market Fund, MML Managed Bond Fund and MML Blend Fund for
the period ended June 30, 1998.
The Semiannual Report for the Oppenheimer Variable Account Funds begins on page
40. This report contains a detailed description of the financial results of the
Oppenheimer Aggressive Growth Fund (Prior to May 1, 1998, this Fund was called
Oppenheimer Capital Appreciation Fund), Oppenheimer Global Securities Fund and
Oppenheimer Strategic Bond Fund for the period ended June 30, 1998.
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
August 3, 1998
1
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Massachusetts Mutual Variable Annuity Separate Account 1 - Flex Extra (Qualified)
Statement of Assets and Liabilities as of June 30, 1998.................................... 3
Statement of Operations For the Six Months Ended June 30, 1998............................. 4
Statement of Changes in Net Assets For the Six Months Ended June 30, 1998 and 1997......... 5-6
Notes to Financial Statements.............................................................. 7-10
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Massachusetts Mutual Variable Annuity Separate Account 1 - Flex Extra (Qualified)
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
MML MML
MML Money Managed MML
Equity Market Bond Blend
Division Division Division Division
---------------- --------------- --------------- ---------------
ASSETS
<S> <C> <C> <C> <C>
Investments
Number of shares (Note 2) 44,812,467 69,746,841 9,552,595 72,808,982
=============== =============== =============== ===============
Identified cost (Note 6) $ 1,113,834,725 $ 69,746,841 $ 117,174,443 $ 1,392,528,783
=============== =============== =============== ===============
Value (Note 3A) $ 1,722,449,390 $ 69,746,841 $ 121,612,915 $ 1,860,594,002
Dividends receivable -- 297,663 -- --
Receivable for accumulation units sold 1,079,676 345,770 78,392 1,437,618
Divisional transfers pending settlement 528,112 8,618 (32,496) (544,915)
Other assets 1,795 19 267 4,480
--------------- --------------- --------------- ---------------
Total assets 1,724,058,973 70,398,911 121,659,078 1,861,491,185
LIABILITIES
Redemptions pending settlement 1,222,195 1,247 2,184 1,271,489
Annuitant mortality fluctuation reserve
(Note 3D) 26,273 385 2,827 55,489
Payable to Massachusetts Mutual
Life Insurance Company 5,626,549 210,001 476,955 6,081,445
--------------- --------------- --------------- ---------------
Total liabilities 6,875,017 211,633 481,966 7,408,423
--------------- --------------- --------------- ---------------
NET ASSETS $ 1,717,183,956 $ 70,187,278 $ 121,177,112 $ 1,854,082,762
=============== =============== =============== ===============
Net Assets:
Accumulation units--Value $ 1,716,308,202 $ 70,174,430 $ 121,082,891 $ 1,852,233,139
Annuity reserves (Note 3E) 875,754 12,848 94,221 1,849,623
--------------- --------------- --------------- ---------------
Net assets $ 1,717,183,956 $ 70,187,278 $ 121,177,112 $ 1,854,082,762
=============== =============== =============== ===============
Accumulation units (Note 8)
Contract owners 430,787,650 43,579,900 53,976,730 577,043,911
Massachusetts Mutual Life
Insurance Company -- -- -- --
--------------- --------------- --------------- ---------------
Total Units 430,787,650 43,579,900 53,976,730 577,043,911
=============== =============== =============== ===============
NET ASSET VALUE PER
ACCUMULATION UNIT
June 30, 1998 $ 3.98 $ 1.61 $ 2.24 $ 3.21
June 30, 1997 3.36 1.55 2.04 2.80
June 30, 1996 2.64 1.49 1.91 2.36
June 30, 1995 2.18 1.44 1.85 2.06
June 30, 1994 1.83 1.39 1.66 1.80
<CAPTION>
*Oppenheimer Oppenheimer Oppenheimer
Capital Global Strategic
Appreciation Securities Bond
Division Division Division
--------------- --------------- ---------------
<S> <C> <C> <C>
ASSETS
Investments
Number of shares (Note 2) 8,253,980 11,355,074 15,145,647
=============== =============== ===============
Identified cost (Note 6) $ 304,666,235 $ 202,824,589 $ 76,438,214
=============== =============== ===============
Value (Note 3A) $ 386,616,409 $ 246,405,104 $ 77,848,623
Dividends receivable -- -- --
Receivable for accumulation units sold 270,282 232,410 74,611
Divisional transfers pending settlement 88,713 26,675 (74,707)
Other assets 338 244 58
--------------- --------------- ---------------
Total assets 386,975,742 246,664,433 77,848,585
LIABILITIES
Redemptions pending settlement 116,264 27,748 24,144
Annuitant mortality fluctuation reserve
(Note 3D) 2,227 651 765
Payable to Massachusetts Mutual
Life Insurance Company 1,185,902 860,488 355,657
--------------- --------------- ---------------
Total liabilities 1,304,393 888,887 380,566
--------------- --------------- ---------------
NET ASSETS $ 385,671,349 $ 245,775,546 $ 77,468,019
=============== =============== ===============
Net Assets:
Accumulation units--Value $ 385,597,132 $ 245,753,834 $ 77,442,503
Annuity reserves (Note 3E) 74,217 21,712 25,516
--------------- --------------- ---------------
Net assets $ 385,671,349 $ 245,775,546 $ 77,468,019
=============== =============== ===============
Accumulation units (Note 8)
Contract owners 191,810,089 172,775,998 56,921,291
Massachusetts Mutual Life
Insurance Company 5,000 5,000 5,000
--------------- --------------- ---------------
Total Units 191,815,089 172,780,998 56,926,291
=============== =============== ===============
NET ASSET VALUE PER
ACCUMULATION UNIT
June 30, 1998 $ 2.01 $ 1.42 $ 1.36
June 30, 1997 1.65 1.21 1.28
June 30, 1996 1.56 0.98 1.15
June 30, 1995 1.13 0.91 1.05
June 30, 1994 -- -- --
</TABLE>
* This division invests in the Oppenheimer Aggressive Growth Fund. Prior to
May 1, 1998, the Oppenheimer Aggressive Growth Fund was called the Oppenheimer
Capital Appreciation Fund.
See Notes to Financial Statements.
3
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 1 - Flex Extra
(Qualified)
STATEMENT OF OPERATIONS
For The Six Months Ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
MML MML *Oppenheimer
MML Money Managed MML Capital
Equity Market Bond Blend Appreciation
Division Division Division Division Division
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Investment income
Dividends (Note 3B) $ 14,966 $ 1,764,980 $ 1,789,586 $ 14,708,450 $ 9,010,634
Expenses
Mortality and expense risk fees and
administrative expenses (Note 4) 10,726,282 449,634 752,476 11,770,249 2,199,551
------------- ------------- ------------- ------------- -------------
Net investment income (loss) (Note 3C) (10,711,316) 1,315,346 1,037,110 2,938,201 6,811,083
------------- ------------- ------------- ------------- -------------
Net realized and unrealized
gain (loss) on investments
Net realized gain (loss) on investments
(Notes 3B, 3C and 7) 8,838,119 -- (8,480) 17,688,498 1,534,134
Change in net unrealized appreciation/
depreciation of investments 121,027,514 -- 3,007,837 88,649,900 44,688,336
------------- ------------- ------------- ------------- -------------
Net gain on investments 129,865,633 -- 2,999,357 106,338,398 46,222,470
------------- ------------- ------------- ------------- -------------
Net increase in net assets
resulting from operations $ 119,154,317 $ 1,315,346 $ 4,036,467 $ 109,276,599 $ 53,033,553
============= ============= ============= ============= =============
<CAPTION>
Oppenheimer Oppenheimer
Global Strategic
Securities Bond
Division Division
------------- -------------
<S> <C> <C>
Investment income
Dividends (Note 3B) $ 21,281,303 $ 2,003,867
Expenses
Mortality and expense risk fees and
administrative expenses (Note 4) 1,451,987 461,796
------------- -------------
Net investment income (loss) (Note 3C) 19,829,316 1,542,071
------------- -------------
Net realized and unrealized
gain (loss) on investments
Net realized gain (loss) on investments
(Notes 3B, 3C and 7) 534,238 394,886
Change in net unrealized appreciation/
depreciation of investments 3,369,931 (156,887)
------------- -------------
Net gain on investments 3,904,169 237,999
------------- -------------
Net increase in net assets
resulting from operations $ 23,733,485 $ 1,780,070
============= =============
</TABLE>
* This division invests in the Oppenheimer Aggressive Growth Fund. Prior to
May 1, 1998, the Oppenheimer Aggressive Growth Fund was called the
Oppenheimer Capital Appreciation Fund.
See Notes to Financial Statements.
4
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 1 - Flex Extra
(Qualified)
STATEMENT OF CHANGES IN NET ASSETS
For The Six Months Ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
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 (loss) $ (10,711,316) $ 1,315,346 $ 1,037,110 $ 2,938,201
Net realized gain (loss) on investments 8,838,119 -- (8,480) 17,688,498
Change in net unrealized appreciation/
depreciation of investments 121,027,514 -- 3,007,837 88,649,900
--------------- --------------- --------------- ---------------
Net increase in net assets resulting from operations 119,154,317 1,315,346 4,036,467 109,276,599
--------------- --------------- --------------- ---------------
Capital transactions: (Note 8)
Net contract payments (Note 6) 130,865,516 20,299,499 10,459,450 119,159,458
Transfer to Guaranteed Principal Account (2,911,839) (1,299,113) (136,958) (2,704,584)
Withdrawal of funds (75,847,405) (6,456,235) (5,283,548) (98,497,845)
Reimbursement (payment) of accumulation
unit value fluctuation 56,997 10,978 (94,408) (94,354)
Net charge (credit) to annuitant mortality
fluctuation reserve (Note 3D) 57,465 (1) 2,700 8,582
Annuity benefit payments (78,519) (665) (6,296) (101,513)
Withdrawals due to administrative and
contingent deferred sales charges (Note 6) (2,069,066) (118,406) (410,169) (2,543,857)
Divisional transfers 16,997,377 (13,200,844) (243,355) (6,256,776)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets
resulting from capital transactions 67,070,526 (764,787) 4,287,416 8,969,111
--------------- --------------- --------------- ---------------
Total increase 186,224,843 550,559 8,323,883 118,245,710
NET ASSETS, at beginning of the year 1,530,959,113 69,636,719 112,853,229 1,735,837,052
--------------- --------------- --------------- ---------------
NET ASSETS, at end of the period $ 1,717,183,956 $ 70,187,278 $ 121,177,112 $ 1,854,082,762
=============== =============== =============== ===============
<CAPTION>
*Oppenheimer Oppenheimer Oppenheimer
Capital Global Strategic
Appreciation Securities Bond
Division Division Division
--------------- --------------- ---------------
<S> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss) $ 6,811,083 $ 19,829,316 $ 1,542,071
Net realized gain (loss) on investments 1,534,134 534,238 394,886
Change in net unrealized appreciation/
depreciation of investments 44,688,336 3,369,931 (156,887)
--------------- --------------- ---------------
Net increase in net assets resulting from operations 53,033,553 23,733,485 1,780,070
--------------- --------------- ---------------
Capital transactions: (Note 8)
Net contract payments (Note 6) 42,999,322 27,575,099 14,581,468
Transfer to Guaranteed Principal Account (384,591) (213,987) (45,367)
Withdrawal of funds (15,022,538) (9,569,335) (3,965,821)
Reimbursement (payment) of accumulation
unit value fluctuation 55,411 (63,215) (118,046)
Net charge (credit) to annuitant mortality
fluctuation reserve (Note 3D) 6,552 (312) 1,912
Annuity benefit payments (3,689) (55) (297)
Withdrawals due to administrative and
contingent deferred sales charges (Note 6) (378,829) (193,992) (53,059)
Divisional transfers (650,608) 4,131,451 (777,245)
--------------- --------------- ---------------
Net increase (decrease) in net assets
resulting from capital transactions 26,621,030 21,665,654 9,623,545
--------------- --------------- ---------------
Total increase 79,654,583 45,399,139 11,403,615
NET ASSETS, at beginning of the year 306,016,766 200,376,407 66,064,404
--------------- --------------- ---------------
NET ASSETS, at end of the period $ 385,671,349 $ 245,775,546 $ 77,468,019
=============== =============== ===============
</TABLE>
* This division invests in the Oppenheimer Aggressive Growth Fund. Prior to
May 1, 1998, the Oppenheimer Aggressive Growth Fund was called the
Oppenheimer Capital Appreciation Fund.
See Notes to Financial Statements.
5
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 1 - Flex Extra
(Qualified)
STATEMENT OF CHANGES IN NET ASSETS
For The Six Months Ended June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
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 (loss) $ (7,647,679) $ 1,383,644 $ 1,005,550 $ 3,393,412
Net realized gain on investments 5,773,363 -- 14,933 7,789,304
Change in net unrealized appreciation/depreciation
of investments 175,009,634 -- 1,372,539 142,697,262
--------------- ------------- ------------- --------------
Net increase in net assets resulting from operations 173,135,318 1,383,644 2,393,022 153,879,978
--------------- ------------- ------------- --------------
Capital transactions: (Note 8)
Net contract payments (Note 6) 107,873,010 20,699,400 8,348,446 106,738,513
Transfer to Guaranteed Principal Account (2,877,347) (1,301,846) (516,973) (2,199,434)
Withdrawal of funds (54,788,884) (5,237,163) (4,804,539) (73,030,131)
Reimbursement (payment) of accumultation
unit value fluctuation 287,811 (16,836) (9,816) 237,947
Net charge (credit) to annuitant mortality
fluctuation reserve (Note 3D) (22,742) 61 2,618 (318,044)
Annuity benefit payments (15,654) (552) (1,860) (68,980)
Withdrawals due to administrative and
contingent deferred sales charges (Note 6) (1,649,317) (94,355) (399,901) (2,365,739)
Divisional transfers 12,462,141 (18,848,875) (5,520,596) (10,258,605)
--------------- ------------- ------------- --------------
Net increase (decrease) in net assets
resulting from capital transactions 61,269,018 (4,800,166) (2,902,621) 18,735,527
--------------- ------------- ------------- --------------
Total increase (decrease) 234,404,336 (3,416,522) (509,599) 172,615,505
NET ASSETS, at beginning of the year 1,089,202,902 78,032,972 104,667,778 1,433,165,306
--------------- ------------- ------------- --------------
NET ASSETS, at end of the period $ 1,323,607,238 $ 74,616,450 $ 104,158,179 $1,605,780,811
=============== ============= ============= ==============
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer
Capital Global Strategic
Appreciation Securities Bond
Division Division Division
--------------- ------------ ------------
<S> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss) $ 9,222,841 $ 708,603 $ 1,627,066
Net realized gain on investments 1,210,894 727,170 70,924
Change in net unrealized appreciation/depreciation
of investments 5,850,707 18,714,771 (85,183)
--------------- ------------ ------------
Net increase in net assets resulting from operations 16,284,442 20,150,544 1,612,807
--------------- ------------ ------------
Capital transactions: (Note 8)
Net contract payments (Note 6) 45,700,722 25,022,327 12,787,871
Transfer to Guaranteed Principal Account (349,157) (135,968) (196,249)
Withdrawal of funds (7,289,992) (4,881,511) (1,196,284)
Reimbursement (payment) of accumultation
unit value fluctuation (98,627) (1,354,762) (17,073)
Net charge (credit) to annuitant mortality
fluctuation reserve (Note 3D) (22,166) -- --
Annuity benefit payments (1,484) (1,024) (1,117)
Withdrawals due to administrative and
contingent deferred sales charges (Note 6) (220,143) (101,976) (22,940)
Divisional transfers 11,605,767 8,380,011 2,180,157
--------------- ------------ ------------
Net increase (decrease) in net assets
resulting from capital transactions 49,324,920 26,927,097 13,534,365
--------------- ------------ ------------
Total increase (decrease) 65,609,362 47,077,641 15,147,172
NET ASSETS, at beginning of the year 196,843,732 113,395,164 37,546,689
--------------- ------------ ------------
NET ASSETS, at end of the period $ 262,453,094 $160,472,805 $ 52,693,861
=============== ============ ============
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 1 - Flex Extra(Qualified)
Notes To Financial Statements
(Unaudited)
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 Flex Extra
(Qualified) segment (the "Segment").
On September 13, 1994, MassMutual paid $15,000 to provide the initial
capital for the Segment's three new divisions: 1,516 shares were purchased
in the management investment company described in Note 2 supporting the
three new Oppenheimer divisions of the Segment.
2. INVESTMENT OF THE SEGMENT'S ASSETS
The Flex Extra (Qualified) Segment maintains seven 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, the MML Blend Division invests
in shares of MML Blend Fund, the Oppenheimer Capital Appreciation Division
invests in shares of Oppenheimer Aggressive Growth Fund (Prior to May 1,
1998, this Fund was called Oppenheimer Capital Appreciation Fund), the
Oppenheimer Global Securities Division invests in shares of Oppenheimer
Global Securities Fund and the Oppenheimer Strategic Bond Division invests
in shares of Oppenheimer Strategic Bond 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. David
L. Babson and Company, Inc., a controlled subsidiary of MassMutual, serves
as the investment sub-adviser to MML Equity Fund and the Equity Sector of
the MML Blend Fund.
Oppenheimer Aggressive Growth Fund, Oppenheimer Global Securities Fund and
Oppenheimer Strategic Bond Fund (the "Oppenheimer Funds") are part of the
Oppenheimer Variable Account Funds (the "Oppenheimer Trust"). The
Oppenheimer Trust is a registered, open-end, diversified management
investment company, for which OppenheimerFunds, Inc. ("OFI"), a controlled
subsidiary of MassMutual, serves as investment adviser.
In addition to the seven divisions of the Segment, a Contract Owner may also
allocate funds to the Guaranteed Principal Account, which is part of
MassMutual's general account. Because of exemptive and exclusionary
provisions, interests in the Guaranteed Principal Account, which is part of
MassMutual's general account, are not registered under the Securities Act of
1933; and the general account is not registered as an investment company
under the Investment Company Act of 1940.
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.
7
<PAGE>
Notes To Financial Statements (Continued)
A. Investment Valuation
Investments in MML Trust and Oppenheimer Trust are each stated at market
value which is the net asset value of each of the respective underlying
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.
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 (the "Contracts"). 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 Segment. Net transfers from MassMutual to the
Segment totaled $249,822 for the six months ended June 30, 1998 and net
transfers from the segment to MassMutual totaled $336,784 for the six months
ended June 30, 1997. 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 AND ADMINISTRATIVE EXPENSES
Daily charges are made which are currently equivalent on an annual basis to
1.30% of the net asset value of the Segment (the "Net Asset Value"). The
mortality and expense risk part of this charge is made daily at an annual
rate which is currently equal to 1.15%, and will not exceed 1.25% of the Net
Asset Value. The administrative expense part of this charge is made daily at
an annual rate of 0.15% of the Net Asset Value.
8
<PAGE>
Notes To Financial Statements (Continued)
5. DISTRIBUTION AGREEMENT
MML Distributors, LLC ("MML Distributors"), a wholly-owned subsidiary of
MassMutual, serves as principal underwriter of the contracts pursuant to an
underwriting and servicing agreement among MML Distributors, MassMutual and
Separate Account I. MML Distributors is registered with the Securities and
Exchange Commission (the "SEC") as a broker-dealer under the Securities
Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc. (the "NASD"). MML Distributors may enter into
selling agreements with other broker-dealers who are registered with the SEC
and are members of the NASD in order to sell the contracts.
MMLISI serves as co-underwriter of the contracts pursuant to underwriting
and servicing agreements among MMLISI, MassMutual and Separate Account 1.
MMLISI is registered with the SEC as a broker-dealer under the Securities
Exchange Act of 1934 and is a member of the NASD. Registered representatives
of MMLISI sell the contracts as authorized variable life insurance agents
under applicable state insurance laws.
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 MML Distributors or MMLISI.
MML Distributors and MMLISI also receive compensation for their activities
as underwriters of the contracts.
6. CHARGES/DEDUCTIONS FOR ADMINISTRATIVE CHARGES, CONTINGENT DEFERRED
SALES CHARGES AND PREMIUM TAXES
<TABLE>
<CAPTION>
MML MML Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Global Strategic
For The Six Months Ended Equity Market Bond Blend Appreciation Securities Bond
June 30, 1998 Division Division Division Division Division Division Division
- ------------- ------------ ----------- ----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross contract
payments $130,898,582 $20,304,628 $10,462,093 $119,189,567 $43,010,187 $27,582,067 $14,585,152
Less deduction for
premium taxes 33,066 5,129 2,643 30,109 10,865 6,968 3,684
------------ ----------- ----------- ------------ ------------ ------------ -----------
Net contract payments $130,865,516 $20,299,499 $10,459,450 $119,159,458 $42,999,322 $27,575,099 $14,581,468
============ =========== =========== ============ ============ ============ ===========
Administrative and contingent
deferred sales charges $ 2,069,066 $ 118,406 $ 410,169 $ 2,543,857 $ 378,829 $ 193,992 $ 53,059
============ =========== =========== ============ ============ ============ ===========
</TABLE>
<TABLE>
<CAPTION>
MML MML Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Global Strategic
For The Six Months Ended Equity Market Bond Blend Appreciation Securities Bond
June 30, 1997 Division Division Division Division Division Division Division
- ------------- ------------ ----------- ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross contract
payments $107,912,932 $20,707,060 $ 8,351,535 $106,778,014 $45,717,635 $25,031,587 $12,792,603
Less deduction for
premium taxes 39,921 7,660 3,090 39,502 16,913 9,260 4,733
------------ ----------- ----------- ------------ ----------- ----------- -----------
Net contract payments $107,873,011 $20,699,400 $ 8,348,445 $106,738,512 $45,700,722 $25,022,327 $12,787,870
============ =========== =========== ============ =========== =========== ===========
Administrative and contingent
deferred sales charges $ 1,649,317 $ 94,355 $ 399,901 $ 2,365,739 $ 220,143 $ 101,976 $ 22,940
============ =========== =========== ============ =========== =========== ===========
</TABLE>
7. PURCHASES AND SALES OF INVESTMENTS
<TABLE>
<CAPTION>
MML MML Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Global Strategic
For The Six Months Ended Equity Market Bond Blend Appreciation Securities Bond
June 30, 1998 Division Division Division Division Division Division Division
- ------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cost of purchases $188,315,150 $ 28,607,002 $ 10,997,503 $176,216,190 $ 37,338,393 $ 43,526,859 $ 15,014,091
Proceeds from sales $ 16,696,805 $ 27,922,241 $ 3,775,883 $ 41,425,408 $ 3,831,049 $ 1,991,136 $ 3,660,299
</TABLE>
9
<PAGE>
Notes To Financial Statements (Continued)
8. NET INCREASE (DECREASE) IN ACCUMULATION UNITS
<TABLE>
<CAPTION>
MML MML Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Global Strategic
For the Six Months Ended Equity Market Bond Blend Appreciation Securities Bond
June 30, 1998 Division Division Division Division Division Division Division
- ------------- ----------- ---------- ---------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Units purchased 33,056,046 12,745,684 4,706,210 37,489,749 23,172,671 20,013,817 10,683,182
Units withdrawn and transferred to
Guaranteed Principal Account (20,466,718) (4,952,591) (2,648,268) (32,677,072) (8,500,460) (7,266,543) (3,000,728)
Units transferred between divisions 4,307,672 (8,274,014) (116,216) (1,937,047) (444,016) 2,965,102 (582,622)
Units transferred to annuity reserves (44,362) -- -- (44,590) (17,205) -- --
----------- ---------- ---------- ----------- ----------- ----------- ----------
Net increase (decrease) 16,852,638 (480,921) 1,941,726 2,831,040 14,210,990 15,712,376 7,099,832
Units, at beginning of the year 413,935,012 44,060,821 52,035,004 574,212,871 177,604,099 157,068,622 49,826,459
----------- ---------- ---------- ----------- ----------- ----------- ----------
Units, at end of the period 430,787,650 43,579,900 53,976,730 577,043,911 191,815,089 172,780,998 56,926,291
=========== ========== ========== =========== =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
MML MML Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Global Strategic
For the Six Months Ended Equity Market Bond Blend Appreciation Securities Bond
June 30, 1997 Division Division Division Division Division Division Division
- ------------- ---------- ---------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Units purchased 35,150,102 13,636,359 4,175,704 40,680,148 30,525,480 22,370,628 10,300,007
Units withdrawn and transferred to
Guaranteed Principal Account (19,204,245) (4,476,319) (2,861,315) (29,395,578) (5,258,493) (4,567,033) (1,137,785)
Units transferred between divisions 4,018,558 (12,291,608) (2,762,369) (3,934,793) 7,551,084 7,450,383 1,757,552
Units transferred to annuity reserves (8,684) -- (2,569) (353,046) (16,873) (16,307) (16,538)
------------ ------------ ----------- ----------- ----------- ----------- ----------
Net increase (decrease) 19,955,731 (3,131,568) (1,450,549) 6,996,731 32,801,198 25,237,671 10,903,236
Units, at beginning of the year 374,083,546 51,271,090 52,403,544 566,300,198 125,989,293 107,702,603 30,405,082
------------ ------------ ----------- ----------- ----------- ----------- ----------
Units, at end of the period 394,039,277 48,139,522 50,952,995 573,296,929 158,790,491 132,940,274 41,308,318
============ ============ =========== =========== =========== =========== ==========
</TABLE>
9. CONSOLIDATED MASSACHUSETTS MUTUAL VARIABLE ANNUITY SEPARATE
ACCOUNT 1
As discussed in Note 1, the financial statements only represent activity of
the Flex Extra (Qualified) segment of the Massachusetts Mutual Variable
Annuity Separate Account 1. The combined net assets as of June 30, 1998 for
the 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 $1,873,403,632 $81,678,386 $135,105,276 $2,115,504,840 $386,975,742 $246,664,433 $77,848,585
Total liabilities 7,352,411 249,292 547,465 8,164,130 1,304,393 888,887 380,566
-------------- ----------- ------------ -------------- ------------ ------------ -----------
Net assets $1,866,051,221 $81,429,094 $134,557,811 $2,107,340,710 $385,671,349 $245,775,546 $77,468,019
============== =========== ============ ============== ============ ============ ===========
Net assets consist of:
Accumulation units--Value $1,864,793,705 $81,340,459 $134,373,117 $2,105,004,141 $385,597,132 $245,753,834 $77,442,503
Annuity reserves 1,257,516 88,635 184,694 2,336,569 74,217 21,712 25,516
-------------- ----------- ------------ -------------- ------------ ------------ -----------
Net assets $1,866,051,221 $81,429,094 $134,557,811 $2,107,340,710 $385,671,349 $245,775,546 $77,468,019
============== =========== ============ ============== ============ ============ ===========
</TABLE>
*Offered on the Flex Extra (Qualified) Contracts only
10
