<PAGE>
Registration No. 2-75412
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
Post-Effective Amendment No. 17/X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 17/x/
Massachusetts Mutual Variable Annuity Separate Account 1
(Exact Name of Registrant)
Massachusetts Mutual Life Insurance Company
(Name of Depositor)
1295 State Street, Springfield, Massachusetts 01111
(Address of Depositor's Principal Executive Offices)
(413) 788-8411
Thomas F. English
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: Continuous.
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b) of Rule 485.
- ---
X on May 1, 1998 pursuant to paragraph (b) of Rule 485.
- ---
60 days after filing pursuant to paragraph (a) of Rule 485.
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on (date) pursuant to paragraph (a) of Rule 485.
- ---
STATEMENT PURSUANT TO RULE 24f-2
The Registrant has registered an indefinite number or amount of its variable
annuity contracts under the Securities Act of 1933 pursuant to Rule 24f-2 under
the Investment Company Act of 1940. The Rule 24f-2 Notice for Registrant's
fiscal year ended December 31, 1997 was filed on March 20, 1998.
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CROSS REFERENCE TO ITEMS
REQUIRED BY FORM N-4
N-4 Item Caption in Prospectus
- -------- ---------------------
1 ..........................Cover Page
2 ..........................Glossary
3 ..........................Table of Fees and Expenses
4 ..........................Condensed Financial
Information; Performance
Measures
5 ..........................MassMutual, the Separate
Accounts and the Trust
6 ..........................Contract Charges;
Distribution
7 ..........................Miscellaneous Provisions;
An Explanation of the Contracts; Reservation of
Rights; Contract Owner's Voting Rights
8 ..........................The Annuity (Pay-Out Period)
9 ..........................The Death Benefit
10..........................The Accumulation (Pay-In)
Period; Distribution
11..........................Right to Return Contract;
Redemption Privilege
12..........................Federal Tax Status
13..........................None
14..........................Additional Information
2
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Caption in Statement of
-----------------------
Additional Information
----------------------
15..........................Cover Page
16..........................Table of Contents
17..........................General Information
18..........................Service Arrangements and
Distribution
19..........................Performance Measures
20..........................Contract Value Calculations
21..........................Reports of Independent
Accountants and Financial Statements
3
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PART A
INFORMATION REQUIRED IN A PROSPECTUS
1
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PROSPECTUS
MAY 1, 1998
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, 1997, 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 ANNUITY SERVICE CENTER, H305, P.O. BOX 9067,
SPRINGFIELD, MASSACHUSETTS 01102-9067, 1-800-234-5606. 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,
1998) 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.
1
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Table Of Contents Page
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
An Explanation of the Contracts.......................................... 7
General................................................................ 7
The Accumulation (Pay-In) Period....................................... 7
How Contracts Were Purchased......................................... 7
Subsequent Purchases............................................... 7
Wire Transfers..................................................... 7
Purchase of Accumulation Units....................................... 7
Transfers Among Divisions............................................ 8
Right to Return Contracts............................................ 8
The Death Benefit.................................................... 8
The Annuity (Pay-Out) Period........................................... 8
Annuity Benefits..................................................... 8
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)..... 9
Payments After Death of Variable Annuitant........................... 10
Special Limitations.................................................. 10
Redemption Privilege................................................... 10
Tax-Sheltered Annuity Redemption Restrictions........................ 10
Charges................................................................ 10
Asset Charge......................................................... 11
Administrative Charge................................................ 11
Contingent Deferred Sales Charge..................................... 11
Deduction for Premium Taxes.......................................... 12
Deduction for Fund Expenses.......................................... 12
Waiver of Certain Charges............................................ 12
Distribution............................................................. 12
Miscellaneous Provisions................................................. 13
Termination of Liability............................................. 13
Adjustment of Units and Unit Values.................................. 13
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....................................... 14
Penalty Taxes.......................................................... 14
Annuity Distribution Rules of Section 72(s)............................ 14
Tax Withholding........................................................ 14
Tax Reporting.......................................................... 15
Taxation of Qualified Plans, IRAs and TSAs............................. 15
Performance Measures..................................................... 15
Standardized Average Annual Total Return............................. 15
Additional Performance Measures........................................ 16
Percentage Change In Accumulation Unit Values........................ 16
Yield and Effective Yield............................................ 16
Additional Information................................................... 16
2
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Glossary
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.
Service Center: The office at which the administration of the Contract occurs.
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.
You or Your refers to the Contract Owner.
3
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Table Of Fees And Expenses
Contract Owner Transaction Expenses
- -----------------------------------
Sales Load Imposed on Purchases.............................................None
Deferred Sales Load (as a percentage of the current value of the accumulation
units purchased in each level now being redeemed)
<TABLE>
<CAPTION>
Level Cumulative Purchase Payments Deferred Sales Load
- ----- ---------------------------- -------------------
<S> <C> <C>
1 ......................................... First $3,000 11% in year purchase is made, decreasing 1%
per year until it is O.
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 $35/2/
<CAPTION>
Separate Account Annual Expenses (as a percentage of average account values)
- ----------------------------------------------------------------------------
<S> <C>
Asset Change for Mortality and Expense Risk Fee 1.25%
Account Fees and Expenses 0.00%
-----
Total 1.25%
<CAPTION>
MML Series Investment Fund Annual Expenses (as a percentage of Fund average net assets)/3/
- ---------------------------------------------------------------------------------------
MML Equity Fund MML Money Market Fund MML Managed Bond Fund MML Blend Fund
--------------- --------------------- --------------------- --------------
<S> <C> <C> <C> <C>
Management Fees......... 0.35% 0.48% 0.44% 0.37%
Other Expenses.......... 0.00% 0.04% 0.03% 0.00%
Total................... 0.35% 0.52% 0.47% 0.37%
</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/4/
1 ....................................... $103 $104 $104 $103
---- ---- ---- ----
3 ....................................... 139 145 143 140
--- --- --- ---
5 ....................................... 157 166 163 159
--- --- --- ---
10 ....................................... 217 234 229 219
--- --- --- ---
If your Contract is not redeemed at end of year:/4/
1 ....................................... 18 19 19 18
-- -- -- --
3 ....................................... 54 60 58 55
-- -- -- --
5 ....................................... 94 103 100 95
-- --- --- --
10 ....................................... 204 222 217 207
--- --- --- ---
</TABLE>
/1/ 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.
/2/ This is a current charge MassMutual reserves the right to increase the
charge up to $50 For more information please see -- Administrative Charge.
/3/ The expenses listed are for the year ended December 31, 1997.
/4/ The figures shown include a portion of the $35 Annual Administrative Fee,
pro-rated for a Contract with $26,923 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
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FLEX-ANNUITY CONDENSED FINANCIAL INFORMATION
Accumulation Unit Values (Audited)
<TABLE>
<CAPTION>
Massachusetts Mutual
Variable Annuity Money Managed
Separate Account I - Flex-Annuity (Qualified) Equity Market Bond Blend
Accumulation Unit Values Division Division Division Division
-------- -------- -------- --------
<S> <C> <C> <C> <C>
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
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
Number of Accumulation December 31, 1997....... 12,873.716 4,264,075 3,129,633 48,121,541
Units Outstanding December 31, 1996....... 14,317,232 4,615,046 3,717,153 54,207,831
December 31, 1995....... 15,282,232 5,241,173 4,286,573 61,250,763
December 31, 1994....... 16,469,073 6,974,443 4,945,453 70,616,166
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
<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>
December 31, 1997....... $9.70 $2.22 $3.90 $5.11
December 31, 1996....... 7.64 2.13 3.59 4.28
December 31, 1995....... 6.43 2.06 3.52 3.80
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
Number of Accumulation December 31, 1997....... 1,252,526 1,467,953 461,926 5,943,641
Units Outstanding December 31, 1996....... 1,519,742 3,131,074 510,781 6,685,070
December 31, 1995....... 1,762,666 2,571,690 635,797 7,357,523
December 31, 1994....... 2,013,658 2,706,939 679,696 8,272,609
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
</TABLE>
Financial Statements
For audited financial statements and other information concerning the financial
condition of the Massachusetts Mutual Variable Annuity Separate Accounts 1 -
Flex-Annuity (Qualified) and 2 - Flex-Annuity (Non-Qualified) and of MassMutual,
see the Statement of Additional Information.
5
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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.
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.
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.
The Contracts entitle the purchaser to a 10-day revocation right more fully
described under Right to Return Contracts.
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, Puerto Rico and certain provinces of Canada. As of
December 31, 1997, MassMutual had estimated unconsolidated statutory assets in
excess of $57 billion, and estimated total assets under management in excess of
$152 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 management investment company consisting of six
separate series of shares, four of which are available to Contract Owners (the
"Funds"). Each Fund 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. David L. Babson and Company, Inc. ("Babson"), a subsidiary of
MassMutual serves as the investment sub-adviser to MML Equity Fund and the
Equity Sector of the MML Blend Fund. Both MassMutual and Babson are registered
as investment advisers under the Investment Advisers Act of 1940.
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 Mar-
6
<PAGE>
ket Fund are to achieve high current income, the preservation of capital, and
liquidity.
(3) The Managed Bond Fund
The assets of the Managed Bond Fund are invested primarily in investment grade,
publicly traded, 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.
(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.
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.
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, but for state
and local governmental 457 plans, amounts have to be held for the exclusive
benefit of plan participants. For 457 plans for tax-exempt organizations, all
Contract Values will be subject to the claims of the employer's creditors. In
either case, the employee is only entitled to payment in accordance with the
Section 457 plan provisions.
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
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
7
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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 its general account under
interest payment settlement options 5.65% 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
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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 TSAs, 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 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
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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.
In addition, a purchase payment amount is not available to satisfy a redemption
request until the check, or other instrument by which the purchase payment was
made, has been honored.
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.
CHARGES
There are five types of charges which MassMutual may assess: (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; (4) a deduction for premium
taxes, if any, payable by MassMutual in connection with a Contract; and (5) a
deduction for Fund Expenses.
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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.
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%
Previous Year 10.0 4.0
2nd Previous Year 9.0 3.0
3rd Previous Year 8.0 2.0
4th Previous Year 7.0 1.0
5th Previous Year 6.0
6th Previous Year 5.0
7th Previous Year 4.0
8th Previous Year 3.0 NO CHARGE
9th Previous Year 2.0
10th Previous Year 1.0
11th or Earlier Previous Year
</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.
This charge may increase or decrease to reflect either any change in the tax or
any change of residence. You should notify MassMutual of any change in
residence. Any change in this charge would be effective immediately. MassMutual
does not expect to make a profit from this charge.
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.
Deduction for Fund Expenses. There are other deductions from and expenses paid
out of the assets of the Fund, including amounts paid for advisory and
management fees, which are described in the accompanying Fund Prospectus. (See,
also, Table of Fees and Expenses.)
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., 1414 Main Street, Springfield, MA 01144-1013
("MMLISI"), a wholly-owned subsidiary of MassMutual, acted 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,
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however, to make purchase payments under existing Contracts. MMLISI is the
current broker-dealer for the 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 Accumulation 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 by dividing the Contract's value held in each
Division of the Separate Account, if any, by $100. Fractional votes are counted.
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
13
<PAGE>
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 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, IRAs and
TSAs). 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
14
<PAGE>
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 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. Effective for calendar years
beginning January 1, 2000, five year averaging of lump-sum distributions will no
longer be available.
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; (5)
payment after age 55 and separation from service (not applicable to IRAs); (6)
payments to an alternate payee pursuant to a qualified domestic relations order
under Code Section 414(p) (not applicable to IRAs); (7) effective for calendar
years beginning January 1, 1997, withdrawals from IRAs by certain unemployed
persons for payment of health insurance premiums; (8) effective for calendar
years beginning January 1, 1998, withdrawals for IRAs for the payment of certain
qualified higher education expenses; and (9) effective for calendar years
beginning January 1, 1998, withdrawals from IRAs for certain first-time
homebuyer expenses, subject to a $10,000 lifetime cap.
IRAs are subject to limitations on the amount which may be contributed. The
deductibility of contributions by individuals or their spouses 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 by 5% owners and from IRAs beginning at age 70 1/2 and from all
others in qualified plans and TSAs at the later of age 70 1/2 or when the
employee retires. 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 Securities and Exchange Commission, 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.
15
<PAGE>
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-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 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
To obtain a (Statement of Additional Information) call 1-800-234-5606
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, 1998 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 1-800-234-5606. The
Table of Contents for the Statement of Additional Information appears on the
last page of this Prospectus.
................................................................................
To: Massachusetts Mutual Life Insurance Company
Annuity Service Center, H305
P.O. Box 9067
Springfield, Massachusetts 01102-9067
Please send me a Statement of Additional Information for MassMutual
Flex-Annuity.
Name
------------------------------------------------------------------------
Address
------------------------------------------------------------------------
------------------------------------------------------------------------
City State Zip
--------------------------------- --------------------- ---------
Telephone
----------------------------------------------------------------------
17
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PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
1
<PAGE>
FLEX-ANNUITY
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
(Depositor)
MASSACHUSETTS MUTUAL VARIABLE ANNUITY SEPARATE ACCOUNT 1
MASSACHUSETTS MUTUAL VARIABLE ANNUITY SEPARATE ACCOUNT 2
(Registrants)
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the prospectus of Massachusetts Mutual Variable Annuity
Separate Accounts 1 and 2 dated May 1, 1998 (the "Prospectus"). The Prospectus
may be obtained from Massachusetts Mutual Life Insurance Company, Annuity
Service Center, H305, P.O. Box 9067, Springfield, Massachusetts 01102-9067,
1-800-234-5606.
Dated May 1, 1998
TABLE OF CONTENTS
General Information and History.......................................... 2
Service Arrangements and Distribution.................................... 4
Contract Value Calculations and Annuity Payments......................... 5
Performance Measures..................................................... 9
Reports of Independent
Accountants and Financial
Statements...........................................................Final Pages
1
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GENERAL INFORMATION AND HISTORY
MassMutual
----------
Massachusetts Mutual Life Insurance Company ("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 registered as an investment adviser under the Investment Advisers
Act of 1940. MassMutual serves as investment adviser for the six funds in the
MML Series Investment Fund, four of which are available to Contract Owners: MML
Money Market Fund, MML Managed Bond Fund, MML Blend Fund and MML Equity Fund
(collectively the MML "Funds"). David L. Babson and Company, Inc. ("Babson"), a
subsidiary of MassMutual, serves as the investment sub-adviser to MML Equity
Fund and the Equity Sector of the MML Blend Fund. Babson is also registered as
an investment adviser under the Investment Advisers Act of 1940.
The Separate Accounts
---------------------
Massachusetts Mutual Variable Annuity Separate Account 1 ("Separate Account 1")
was established as a separate investment account of MassMutual on April 8, 1981
in accordance with the provisions of Chapter 175 of the Massachusetts General
Laws. Massachusetts Mutual Variable Annuity Separate Account 2 ("Separate
Account 2") was established as a separate investment account of MassMutual on
October 14, 1981 in accordance with the provisions of Chapter 175 of the
Massachusetts General Laws. Each Separate Account is registered as a unit
investment trust under the Investment Company Act of 1940. A unit investment
trust is a type of investment company which invests its assets in the shares of
one or more management investment companies rather than directly in its own
portfolio of investment securities. Registration under the Investment Company
Act of 1940 does not involve supervision of the management or investment
practices or policies of the Separate Accounts or of MassMutual. Under
Massachusetts law, however, both MassMutual and each Separate Account are
subject to regulation by the Division of Insurance of the Commonwealth of
Massachusetts.
Each Separate Account is divided into four Divisions. The Equity Division
invests in shares of MML Equity Fund, the Money Market Division invests in
shares of MML Money Market Fund, the Managed Bond Division invests in shares of
MML Managed Bond Fund and the Blend Division invests in shares of MML Blend
Fund. The value of both Accumulation Units (see "The Accumulation (Pay-In)
Period" section) and Annuity Units (see "The Annuity (Pay Out) Period" section)
in each Division reflects the investment results of its underlying Fund. Each
Fund is a series of MML Series Investment Fund (the "Trust").
Although the assets of each Separate Account are assets of MassMutual, assets of
each Separate Account equal to the reserves and other Flex-Annuity 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
Flex-Annuity Contracts (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 six separate series of shares, four of which are available to
Contract Owners - MML Equity Fund, MML Money Market Fund, MML Managed Bond Fund,
and MML Blend Fund (the "Funds") each of which has its own investment objectives
and policies. MassMutual organized the Trust for the purpose of providing a
vehicle for the investment of assets held in various separate investment
accounts, including the Separate Accounts, established by MassMutual or life
insurance company subsidiaries of MassMutual. A Separate Account purchases and
redeems shares of the Funds at their net asset value next determined after
receipt of the purchase order or redemption request without the imposi-
2
<PAGE>
tion 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. MassMutual serves as
investment manager of each of the Funds pursuant to separate investment
management agreements executed by MassMutual and each Fund. Babson manages the
investment and reinvestment of the assets of the MML Equity Fund and the Equity
Sector of the MML Blend Fund. The Trust's prospectus and Statement of Additional
Information contains a description of the Funds, their investment objectives,
policies and restrictions, their expenses, the risks attendant therein, and
aspects of their operation.
Possible Conflicts
------------------
Assets of registered variable life separate investment accounts of MassMutual
and its wholly-owned subsidiary, MML Bay State Life Insurance Company ("MML Bay
State") are invested in the MML Funds. Because registered variable annuity
separate investment accounts of MassMutual and MML Bay State are also invested
in the MML Funds, it is possible that material conflicts could arise between
owners of the Contracts and owners of variable life insurance policies funded by
the various life separate accounts. Possible conflicts could arise if: (i) state
insurance regulators should disapprove or require changes in investment
policies, investment advisers or principal underwriters, or if MassMutual or MML
Bay State should be permitted to act contrary to actions approved by holders of
the variable life insurance policies under rules of the Securities and Exchange
Commission ("SEC"); (ii) adverse tax treatment of the Contracts or the variable
life insurance policies would result from utilizing the same Funds; (iii)
different investment strategies would be more suitable for the Contracts than
for the variable life insurance policies; or (iv) state insurance laws or
regulations or other applicable laws would prohibit the funding of variable
annuity separate accounts and variable life separate accounts by the same MML
Funds. The Board of Trustees of the Trust will follow monitoring procedures
which have been developed to determine whether material conflicts have arisen.
Such Board will have a majority of Trustees who are not interested persons of
the Trust or MassMutual and determinations whether or not a material conflict
exists will be made by a majority of such disinterested Trustees. If a material
irreconcilable conflict exists, MassMutual and MML Bay State will take such
action at their own expense as may be required to cause MassMutual's and MML Bay
State's variable life separate accounts to be invested solely in shares of
mutual funds which offer their shares exclusively to variable life insurance
separate accounts, unless, in certain cases, the holders of both the variable
life insurance policies and the variable annuity contracts vote not to effect
such segregation.
Assignment of Contract
----------------------
MassMutual will not be charged with notice of any assignment of a Contract or of
the interest of any beneficiary or of any other person unless the assignment is
in writing and the original or a true copy thereof is received at its Home
Office. MassMutual assumes no responsibility for the validity of any assignment.
While the Contracts are generally assignable, all non-tax qualified (Separate
Account 2) Contracts must carry a non-transferability endorsement which
precludes their assignment. For qualified (Separate Account 1) Contracts, the
following exceptions and provisions should be noted:
(1) No person entitled to receive annuity payments under a Contract or
part or all of the Contract's value will be permitted to commute, anticipate,
encumber, alienate or assign such amounts, except upon the written authority of
the Contract Owner given during the Variable Annuitant's lifetime and received
in good order by MassMutual at its Home Office. To the extent permitted by law,
no Contract nor any proceeds or interest payable thereunder will be subject to
the Variable Annuitant's or any other person's debts, contracts or engagements,
nor to any levy or attachment for payment thereof;
(2) If an assignment of a Contract is in effect on the maturity date,
MassMutual reserves the right to pay to the assignee in one sum the amount of
the Contract's maturity value to which he is entitled, and to pay any balance of
such value in one sum to the Contract Owner, regardless of any payment options
which the Contract Owner may have elected. Moreover, if an assignment of a
Contract is in effect at the death of the Variable Annuitant prior to the
maturity date, MassMutual will pay to the assignee in one sum, to the extent
that he is entitled, the greater of (a) the total of all purchase payments, less
the net amount of all partial redemptions, and (b) the Accumulated Value of the
Contract less the Adminis-
3
<PAGE>
trative Charge, and any balance of such value will be paid to the beneficiary in
one sum or applied under one or more of the payment options elected;
(3) Contracts used in connection with a tax-qualified retirement plan must
be endorsed to provide that they may not be sold, assigned or pledged for any
purpose unless they are owned by the trustee of a trust described in Section
401(a) or by the administrator of an annuity plan described under Section 403(a)
of the Code;
(4) Contracts used in connection with 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") must be endorsed to
provide that they are non-transferable;
(5) Contracts issued under a plan for an Individual Retirement Annuity
pursuant to Section 408 of the Code must be endorsed to provide that they are
non-transferable. Such Contracts may not be sold, assigned, discounted, or
pledged as collateral for a loan or as security for the performance of an
obligation or for any other purpose by the Variable Annuitant to any person or
party other than MassMutual, except to a former spouse of the Annuitant in
accordance with the terms of a divorce decree of other written instrument
incident to a divorce.
Assignments for value may be subject to federal income tax.
RESTRICTIONS ON REDEMPTION
Redemptions of TSAs may be restricted as required by Section 403(b)(11) of the
Internal Revenue Code (see, "Tax-Sheltered Annuity Redemption Restrictions" in
the prospectus for details). In restricting any such redemption, MassMutual
relies on the relief from sections 22(e), 27(c) and 27(d) of the Investment
Company Act of 1940 granted in American Council of Life Insurance [1988 Transfer
Binder] Fed. Sec. L. Rep (CCH) 78,904 (November 22, 1988) (the "No Action
Letter"). In relying on such relief, MassMutual hereby represents that it
complies with the provisions of paragraphs (1)-(4) as set forth in the No Action
Letter.
SERVICE ARRANGEMENTS AND DISTRIBUTION
Independent Accountants
-----------------------
The financial statements of the Separate Accounts and the statutory financial
statements of MassMutual included in this Statement of Additional Information
have been included herein in reliance on the reports of Coopers & Lybrand
L.L.P., Springfield, Massachusetts 01101, independent accountants, given on the
authority of that firm as experts in accounting and auditing. Coopers &
Lybrand's report on the statutory financial statements of MassMutual includes
explanatory paragraphs relating to the use of statutory accounting practices
rather than generally accepted accounting principles.
Distribution and Administration
-------------------------------
Under a Servicing Agreement between MML Investors Services, Inc. ("MMLISI"), a
wholly-owned subsidiary of MassMutual, and the Separate Accounts, MMLISI agreed
to act as principal underwriter for each Separate Account and each Separate
Account agreed that MMLISI would be its exclusive principal underwriter.
Under the Servicing Agreement, MMLISI may receive compensation for its
activities as principal underwriter. In 1997 there was no such compensation.
Under Administration Agreements, MassMutual has agreed to provide, or provide
for, and assume: (1) all services and expenses required for the administration
of those Contracts which depend in whole or in part on the investment
performance of the Separate Accounts; and (2) all services and expenses required
for the administration of the Separate Accounts other than the services and
expenses referred to in (1). MassMutual also has agreed to provide, or provide
for, and assume all services and expenses required for the Separate Accounts'
management-related services. MassMutual receives no compensation for such
services apart from the various charges against the Contract described in the
Prospectus.
4
<PAGE>
These Servicing and Administrative Agreements may be terminated by the parties
without the payment of any penalty upon thirty days' written notice. The
agreements immediately terminate in the event of their assignment (within the
meaning of the Investment Company Act of 1940). The agreements may be amended at
any time by the mutual consent of the parties. The Contract Owner will not
receive notice with respect of changes in the agreement.
As of March 31, 1988, the Contracts are no longer offered for sale. Purchase
payments will, however, continue to be accepted under the Contracts.
Purchase of Securities Being Offered
------------------------------------
Interests in the Separate Account are sold to contractholders as accumulation
units. Charges associated with such securities are discussed in the Contract
--------
Charges section of the prospectus.
- -------
CONTRACT VALUE CALCULATIONS AND ANNUITY PAYMENTS
The Accumulation (Pay-In) Period
--------------------------------
Valuation Date, Valuation Time and Valuation Period
---------------------------------------------------
Each day on which the net asset value of the shares of any of the Funds is
determined is a "Valuation Date." The value of shares of the Funds held in each
Separate Account is determined as of the "Valuation Time," which is the time of
the close of trading on the New York Stock Exchange (currently 4:00 p.m. New
York time) on a Valuation Date. A "Valuation Period" is the period, consisting
of one or more days, from one Valuation Time to the next succeeding Valuation
Time.
Accumulation Unit Value
-----------------------
The value of an Accumulation Unit (the "Accumulation Unit Value") for each
Division will vary from Valuation Date to Valuation Date. The initial
Accumulation Unit Value for each Division was set at $1.00000000. The
Accumulation Unit Value for each Division on any date thereafter is equal to the
product of the "Net Investment Factor" for that Division (as defined below) for
the Valuation Period which includes such date and the Accumulation Unit Value
for that Division on the preceding Valuation Date.
Purchase of Accumulation Units in a Division
--------------------------------------------
of a Separate Account
---------------------
You may allocate purchase payments among the four investment Divisions of the
Separate Account. At the end of each Valuation Period MassMutual will apply your
purchase payment (after deducting any applicable premium taxes) to purchase
Accumulation Units of the designated Division(s). These Accumulation Units will
be used in determining the value of amounts in the Separate Account credited to
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 and expenses of that Division (which
in turn will reflect the investment performance of the Fund in which the assets
of the Division are invested), any applicable taxes and the applicable Asset
Charge.
The Accumulation Unit Value is determined as of the Valuation Time. Provided
that the Contract application is complete, Accumulation Units are purchased at
their Accumulation Unit Value on the date a purchase payment is received in good
order by MassMutual in the mail or by wire transfer at the Home Office Service
Center or a designated bank lock box. If the date of receipt is not a Valuation
Date, or if the purchase payment is received after the Valuation Time or other
than by mail or wire transfer, the value of the Accumulation Units purchased
will be determined as of the next Valuation Time following the date the 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.
5
<PAGE>
Net Investment Factor
---------------------
The Net Investment Factor for each Division for any Valuation Period is equal to
the sum of the Gross Investment Rate for that Division (as defined below) for
the Valuation Period and 1.00000000, decreased by the applicable Asset Charge.
The Net Investment Factor may be greater than or less than 1.00000000.
Gross Investment Rate
---------------------
The Gross Investment Rate for each Division of a Separate Account is equal to
the net earnings of that Division during the Valuation Period, divided by the
value of the net assets of that Division at the beginning of the Valuation
Period. The net earnings of each Division are equal to the accrued investment
income and capital gains and losses (realized and unrealized) of that Division
and an adjustment for taxes paid or provided for. The Gross Investment Rate will
be determined in accordance with generally accepted accounting principles and
applicable laws, rules and regulations. The Gross Investment Rate may be
positive or negative.
The policy of each Separate Account is to take dividends and capital gain
distributions on shares of the Funds held by each Separate Account in additional
shares and not in cash.
See the "General Formulas" section for the general formulas used to compute the
----------------
value of an Accumulation Unit for any Division of a Separate Account, and for a
hypothetical illustration using such formulas.
The Annuity (Pay-Out) Period
----------------------------
When your Contract approaches its maturity date, you may choose to have the
Accumulated Value of the Contract provide you at maturity with 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 lump sum. If you elect a Fixed Annuity or a lump
sum payment, a contingent deferred Sales Charge (as described in the Prospectus)
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, then 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, then each annuity payment will be
based upon the value of the Annuity Units. This value will vary with and reflect
the investment performance of each Division to which Annuity Units are credited.
The number of Annuity Units will not vary, but will remain fixed during the
annuity period unless a joint and survivor payment option with reduced survivor
income is elected. Variable Monthly Annuity payments will be made by withdrawal
of assets from the Separate Account.
Annuity Units and Monthly Payments
----------------------------------
The number of Annuity Units in each Division to be credited to a Contract is
determined in the following manner. First, the value attributable to each
Division of the Contract is determined by multiplying the number of Accumulation
Units credited to a Division on the maturity date of the Contract by the
Accumulation Unit value of that Division
6
<PAGE>
on the Payment Calculation Date for the first Variable Monthly Annuity payment.
Such value is then multiplied by the purchase rate (as defined below) to
determine the amount of the first Variable Monthly Annuity payment attributable
to each Division. Finally, the amount of the first Variable Monthly Annuity
payment attributable to each Division is divided by the Annuity Unit Value for
that Division on the Payment Calculation Date for such payment to determine the
number of Annuity Units for that Division.
The dollar amount of each Variable Monthly Annuity payment (other than the first
payment under a Contract) is equal to the sum of the products obtained by
multiplying the number of Annuity Units in each Division credited to the
Contract by their value (the "Annuity Unit Value") on the Payment Calculation
Date.
Purchase Rate
-------------
The purchase rate for each Division is the amount of Variable Monthly Annuity
payment purchased by $1,000 of Accumulated Value at maturity date applied to
that Division. The purchase rates which will be applied will be those specified
in the Contract or those in use by MassMutual when the first Variable Monthly
Annuity payment is due, whichever provides the higher income. The purchase rate
will differ according to the payment option which you elect and takes into
account the age and year of birth of the Variable Annuitant or Annuitants. The
sex of the Annuitant or Annuitants will also be considered unless the Contract
is issued on a unisex basis, including cases issued in connection with an
employer-sponsored plan covered by the United States Supreme Court case of
Arizona Governing Committee v. Norris.
- -------------------------------------
Assumed Investment Rates
------------------------
The Assumed Investment Rate for each Division will be 4% per annum unless a
lower rate is required by state law.
The Assumed Investment Rate will affect the amount by which Variable Monthly
Annuity payments will vary from month to month. If the actual net investment
performance for a Separate Account Division for the period between the date any
Variable Monthly Annuity payment is determined and the date the next Variable
Monthly Annuity payment is determined is equivalent on an annual basis to an
investment return at the Assumed Investment Rate, then the amount of the next
payment attributable to that Division will be equal to the amount of the last
payment. If such net investment performance for a Division is equivalent to an
investment return greater than the Assumed Investment Rate, the next payment
attributable to that Division will be larger than the last; if such net
investment performance for a Division is equivalent to a return smaller than the
Assumed Investment Rate, then the next payment attributable to that Division
will be smaller than the last.
Annuity Unit Value
------------------
The Annuity Unit Value for a Division depends on the Assumed Investment Rate and
on the Net Investment Factor for that Division. The initial Annuity Unit Value
for each Division was set at $1.00000000. An Annuity Unit Value for a Division
on any date thereafter is equal to the Net Investment Factor for the Valuation
Period which includes such date divided by the sum of 1.00000000 plus the rate
of interest for the number of days in such Valuation Period at an effective
annual rate equal to the Assumed Investment Rate, and multiplied by the Annuity
Unit Value for the Division on the preceding Valuation Date.
7
<PAGE>
General Formulas
----------------
General Formulas to Determine Accumulation Unit Value and
---------------------------------------------------------
Annuity Unit Value for any Division of a Separate Account.
----------------------------------------------------------
Gross Investment = Net Earnings during Valuation Period
Rate Value of Net Assets at beginning of Valuation Period
Net Investment = Gross Investment Rate + 1.00000000 - Asset
Factor Charge
Accumulation = Accumulation Unit Value on Preceding
Unit Value Valuation Date X Net Investment Factor
Annuity Unit Annuity Unit Value on Preceding Valuation
Value = Date X Net Investment Factor
------------------------------------
1.00000000 plus rate of interest for number of days
in current Valuation Period at Assumed Investment
Rate
Illustration of Computation of Accumulation
-------------------------------------------
and Annuity Unit Value Using Hypothetical Example
-------------------------------------------------
The above computations may be illustrated by the following hypothetical example:
Assume that the net earnings of the Division for the Valuation Period were
$11,760; that the value of net assets at the beginning of the Valuation Period
was $30,000,000; that the Asset Charge was .00003425 per day; that the values of
an Accumulation Unit and an Annuity Unit in the Division of the Separate Account
on the preceding Valuation Date were $1.13500000 and $1.06700000, respectively;
that the corresponding Assumed Investment Rate was 4% and that the Valuation
Period was one day.
The Gross Investment Rate for the Valuation Period would be .00039200 ($11,760
divided by $30,000,000). The Net Investment Factor would be 1.00035775
(.00039200 plus 1.00000000 minus .00003425). The new Accumulation Unit Value
would be $1.13540605 ($1.13500000 x 1.00035775). At an effective annual rate of
4%, the rate of interest for one day is .00010746, and the new Annuity Unit
Value would be $1.06726703 ($1.06700000 x 1.00035775 divided by 1.00010746).
General Formulas to Determine Variable Monthly Annuity
------------------------------------------------------
Payments and Number of Annuity Units for Any
--------------------------------------------
Division of a Separate Account
------------------------------
First Variable Accumulation Units Applied X Accumulation
Monthly Annuity = Unit Value on Payment Calculation Date for
Payment First Variable Monthly Annuity Payment X
Purchase Rate
Number of First Variable Monthly Annuity Payment
Annuity Units = Annuity Unit Value on Payment Calculation
Date for First Variable Monthly Annuity
Payment
8
<PAGE>
Amount of
Subsequent Variable
Monthly Annuity = Number of Annuity Units X Annuity Unit Value
Payments on the Applicable Payment Calculation Date
Illustration of Computation of Variable Monthly Annuity
-------------------------------------------------------
Payments for a Contract Using Hypothetical Example
--------------------------------------------------
The above computations may be illustrated by the following hypothetical example:
Assume that 35,000 Accumulation Units in a Division of a Separate Account were
to be applied; that the purchase rate for the Assumed Investment Rate and
payment option elected was $5.65 per $1,000; that the Accumulation Unit Value of
such Division on the Payment Calculation Date for the first Variable Monthly
Annuity payment was $1.35000000; and that the Annuity Unit Value of such
Division on the Payment Calculation Date for the first Variable Monthly Annuity
payment was $1.20000000 and for the second Variable Monthly Annuity payment was
$1.20050000.
The first Variable Monthly Annuity payment would be $266.96 (35,000 x 1.35000000
x .00565). The number of Annuity Units of such Division credited would be
222.467 ($266.96 divided by $1.20000000). The amount of the second Variable
Monthly Annuity payment would be $267.07 (222.467 x $1.20050000). If the
Contract has Annuity Units credited in more than one Division of a Separate
Account, the above computation would be made for each Division and the Variable
Monthly Annuity Payment would be equal to the sum thereof.
PERFORMANCE MEASURES
MassMutual may show the performance for the Division of the Separate Accounts in
the following ways.
Standardized Average Annual Total Return
----------------------------------------
MassMutual will show the "Standardized Average Annual Total Return," formulated
as prescribed by the rules of the SEC, for each Division of the Separate
Account. The Standardized Average Annual Total Return 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
calculation assumes a single $1,000 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 and all other Fund and Contract level charges
except premium taxes, if any.
The following tables show the Standardized Average Annual Total Return for the
Divisions of the Separate Accounts for the periods ended December 31, 1997:
Separate Account 1 - Flex-Annuity
(Tax-Qualified Contracts)
<TABLE>
<CAPTION>
1-Year 5-Year 10-Year
------ ------ -------
<S> <C> <C> <C>
Equity Division 17.58% 15.03% 14.32%
Money Market Division -4.92 1.75 4.00
Managed Bond Division -0.27 4.98 7.41
Blend Division 9.09 9.63 11.02
</TABLE>
9
<PAGE>
Separate Account 2 - Flex-Annuity
(Non-Tax-Qualified Contracts)
<TABLE>
<CAPTION>
1-Year 5-Year 10-Year
------ ------ -------
<S> <C> <C> <C>
Equity Division 17.62% 15.06% 14.32%
Money Market Division -4.96 1.71 4.00
Managed Bond Division -0.27 4.98 7.43
Blend Division 9.09 9.63 11.01
</TABLE>
Additional Performance Measures
Percentage Change in Accumulation Unit Values. MassMutual may also show the
percentage change in the value of an Accumulation Unit for a Division of the
Separate Account with respect to one or more periods. These percentages do not
reflect the $35 annual Administrative Charge or the Contingent Deferred Sales
Charge, which if included would reduce the percentages reported by
MassMutual.
The following tables show the Percentage Change in Accumulation Unit Values for
the Divisions of the Separate Accounts for the periods ended December 31,
1997:
Percentage Change in Accumulation Unit Values
---------------------------------------------
Separate Account 1 - Flex-Annuity
(Tax Qualified Contracts)
<TABLE>
<CAPTION>
1-Year 5-Year 10-Year
------ ------ -------
<S> <C> <C> <C>
Equity Division 27.06% 117.48% 304.51%
Money Market Division 3.89 16.97 52.87
Managed Bond Division 8.58 36.78 110.91
Blend Division 19.45 79.55 218.78
</TABLE>
Separate Account 2 - Flex-Annuity
(Non-Tax Qualified Contracts)
<TABLE>
<CAPTION>
1-Year 5-Year 10-Year
------ ------ -------
<S> <C> <C> <C>
Equity Division 27.06% 117.49% 304.45%
Money Market Division 3.89 16.97 52.87
Managed Bond Division 8.58 36.77 111.32
Blend Division 19.45 79.55 218.62
</TABLE>
10
<PAGE>
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-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 reflect a deduction for all Fund and Separate Account and Contract
level charges. The figures do not reflect the Contingent Deferred Sales Charge
or premium tax deductions (if any), which if included would reduce the yields
reported.
The following tables show the 7-day Yield and Effective Yield for the Money
Market Division of the Separate Accounts for the periods ended December 31,
1997:
<TABLE>
<CAPTION>
Before Annual Maintenance Charge Deduction
7-Day Yield:
- -----------
<S> <C>
Separate Account 1 - Flex-Annuity
(Tax-Qualified Contracts).......................................... 4.54%
Separate Account 2 - Flex-Annuity
(Non-Tax Qualified Contracts)...................................... 3.97%
<CAPTION>
7-Day Effective Yield:
- ---------------------
<S> <C>
Separate Account 1 - Flex-Annuity
(Tax-Qualified Contracts).......................................... 4.64%
Separate Account 2 - Flex-Annuity
(Non-Tax-Qualified Contracts)...................................... 4.05%
After Annual Maintenance Charge Deduction (0.13%)
<CAPTION>
7-Day Yield:
- -----------
<S> <C>
Separate Account 1
(Tax-Qualified Contracts).......................................... 4.41%
Separate Account 2
(Non-Tax Qualified Contracts)...................................... 3.84%
<CAPTION>
7-Day Effective Yield:
- ----------------------
<S> <C>
Separate Account 1
(Tax-Qualified Contracts).......................................... 4.51%
Separate Account 2
(Non-Tax Qualified Contracts)...................................... 3.92%
</TABLE>
Both of the additional performance measures described above reflect historical
results of the Funds and are not intended to indicate or to predict future
performance.
11
<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 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 4, 1998
F-1
<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.
F-2
<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.
F-3
<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 7,373,762
------------- ------------- ------------- -------------
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.
F-4
<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.
F-5
<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.
F-6
<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
charges 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
premium taxes under Variable Annuity Fund 4 Contracts 3,573 14,728 1,290 11,391
Less deductions 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>
F-7
<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>
F-8
<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
asssets 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
MML Money Managed MML
Equity Market Bond Blend
Division Division Division Division
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Total assets $ 1,681,068,834 $ 81,866,648 $ 126,726,663 $ 1,996,744,040
Total liabilities 6,473,624 304,046 468,183 6,404,412
--------------- --------------- --------------- ---------------
Net assets $ 1,674,595,210 $ 81,562,601 $ 126,258,480 $ 1,990,339,628
=============== =============== =============== ===============
Net assets consist of:
Accumulation units-Value $ 1,673,535,433 $ 81,469,025 $ 126,048,573 $ 1,988,168,324
Annuity reserves 1,059,777 93,576 209,907 2,171,304
--------------- --------------- --------------- ---------------
Net assets $ 1,674,595,210 $ 81,562,601 $ 126,258,480 $ 1,990,339,628
=============== =============== =============== ===============
<CAPTION>
*Oppenheimer *Oppenheimer *Oppenheimer
Capital Global Strategic
Appreciation Securities Bond
Division Division Division
--------------- --------------- ---------------
<S> <C> <C> <C>
Total assets $ 307,002,156 $ 201,046,413 $ 66,249,794
Total liabilities 985,390 670,005 185,390
--------------- --------------- ---------------
Net assets $ 306,016,766 $ 200,376,408 $ 66,064,404
=============== =============== ===============
Net assets consist of:
Accumulation units-Value $ 305,981,239 $ 200,355,611 $ 66,037,957
Annuity reserves 35,527 20,797 26,447
--------------- --------------- ---------------
Net assets $ 306,016,766 $ 200,376,408 $ 66,064,404
=============== =============== ===============
</TABLE>
*Offered on the Flex Extra (Qualified) Contracts only.
F-9
<PAGE>
Report Of Independent Accountants
To the Contract Owners of Massachusetts Mutual Variable Annuity Separate Account
2 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 Flex-Annuity IV (Non-Qualified) segment of Massachusetts Mutual
Variable Annuity Separate Account 2 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 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
Flex-Annuity IV (Non-Qualified) segment of Massachusetts Mutual Variable Annuity
Separate Account 2 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 4, 1998
F-1
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 2 --
Flex-Annuity IV (Non-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) 323,885 3,277,610 148,705 1,187,191
=========== =========== =========== ===========
Identified cost (Note 3B) $ 7,425,361 $ 3,277,610 $ 1,800,538 $21,737,337
=========== =========== =========== ===========
Value (Note 3A) $11,479,501 $ 3,277,610 $ 1,845,280 $28,587,067
Dividends receivable 925,609 13,980 29,670 2,142,988
Other assets 32 - 6 274
----------- ----------- ---------- -----------
Total assets 12,405,142 3,291,590 1,874,956 30,730,329
LIABILITIES
Annuitant mortality fluctuation reserve (Note 3D) 5,340 419 1,586 5,943
Payable to Massachusetts Mutual Life Insurance Company 67,263 21,758 19,722 152.097
----------- ----------- ---------- -----------
Total liabilities 72,603 22,177 21,308 158,040
----------- ----------- ---------- -----------
NET ASSETS $12,332,539 $ 3,269,413 $ 1,853,648 $30,572,289
=========== =========== =========== ===========
Net Assets:
Accumulation units--Value $12,154,548 $ 3,255,428 $1,800,796 $ 30,374,196
Annuity reserves (Note 3E) 177,991 13,985 52,852 198,093
----------- ----------- ---------- -----------
Net assets $12,332,539 $ 3,269,413 $1,853,648 $30,572,289
=========== =========== =========== ===========
Contract owners accumulation units (Note 8) 1,252,526 1,467,953 461,926 5,943,641
=========== =========== =========== ===========
NET ASSET VALUE PER ACCUMULATION UNIT
Flex Annuity IV Contracts (Note 8)
December 31, 1997 $ 9.70 $ 2.22 $ 3.90 $ 5.11
December 31, 1996 7.64 2.13 3.59 4.28
December 31, 1995 6.43 2.06 3.52 3.80
December 31, 1994 4.96 1.97 2.99 3.12
December 31, 1993 4.83 1.92 3.15 3.08
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 2 --
Flex-Annuity IV (Non-Qualified)
STATEMENT OF OPERATIONS
For The Year Ended December 31, 1997
<TABLE>
<CAPTION>
MML
MML Money Managed MML
Equity Market Bond Blend
Division Division Division Division
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Investment income
Dividends (Note 3B) $ 925,761 $ 154,631 $ 117,442 $ 2,908,094
Expenses
Mortality and expense risk fees and administrative expenses (Note 4) 154,076 38,186 22,626 369,569
----------- --------- ----------- -----------
Net investment income (Note 3C) 771,685 116,445 94,816 2,538,525
----------- --------- ----------- -----------
Net realized and unrealized gain on investments
Net realized gain on investments (Notes 3B, 30 and 7) 1,888,269 - 17,470 1,757,050
Change in net unrealized appreciation of investments 253,100 - 36,708 939,006
----------- --------- ----------- -----------
Net gain on investments 2,141,369 - 54,178 2,696,056
----------- --------- ----------- -----------
Net increase in net assets resulting from operations $ 2,913,054 $ 116,445 $ 148,994 $ 5,234,581
=========== ========= =========== ===========
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 2 --
Flex-Annuity IV (Non-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 $ 771,685 $ 116,445 $ 94,816 $ 2,538,525
Net realized gain on investments 1,888,269 -- 17,470 1,757,050
Change in net unrealized appreciation
of investments 253,100 -- 36,708 939,006
------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations 2,913,054 116,445 148,994 5,234,581
------------ ------------ ------------ ------------
Capital transactions: (Note 8)
Net contract payments (Note 6) 93,455 139,335 11,527 215,112
Withdrawal of funds (2,009,951) (3,604,494) (162,050) (4,041,646)
Payment of accumulation unit
value fluctuation 3,292 (2,577) 50,178 (61,327)
Net charge (credit) to
annuitant mortality fluctuation
reserve (Note 3D) 1,973 406 (52,609) (845)
Annuity benefit payments (16,272) (1,665) (4,541) (24,487)
Withdrawal due to administrative
charges and contingent deferred
sales charges (Note 6) (12,847) (2,378) (2,465) (31,749)
Divisional transfers (398,256) (73,891) (21,812) 493,959
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from capital transactions (2,338,606) (3,545,264) (181,772) (3,450,983)
------------ ------------ ------------ ------------
Total increase (decrease) 574,448 (3,428,819) (32,778) 1,783,598
NET ASSETS, at beginning
of the year 11,758,091 6,698,232 1,886,426 28,788,691
------------ ------------ ------------ ------------
NET ASSETS, at end
of the year $ 12,332,539 $ 3,269,413 $ 1,853,648 $ 30,572,289
============ ============ ============ ============
<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 $ 373,030 $ 200,511 $ 101,736 $ 1,400,905
Net realized gain on investments 1,030,839 -- 32,133 1,103,611
Change in net unrealized appreciation
of investments 682,233 -- (107,976) 860,526
------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations 2,086,102 200,511 25,893 3,365,042
------------ ------------ ------------ ------------
Capital transactions: (Note 8)
Net contract payments (Note 6) 96,927 12,174 19,135 285,680
Withdrawal of funds (1,135,524) (206,033) (377,918) (2,372,419)
Payment of accumulation unit
value fluctuation 28 233 (2,693) (990)
Net charge (credit) to
annuitant mortality fluctuation
reserve (Note 3D) 1,013 284 467 (646)
Annuity benefit payments (13,158) (1,541) (4,401) (21,655)
Withdrawal due to administrative
charges and contingent deferred
sales charges (Note 6) (12,045) (1,972) (2,844) (37,197)
Divisional transfers (736,176) 1,387,529 (67,925) (583,428)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from capital transactions (1,798,935) 1,190,674 (436,179) (2,730,655)
------------ ------------ ------------ ------------
Total increase (decrease) 287,167 1,391,185 (410,286) 634,387
NET ASSETS, at beginning
of the year 11,470,924 5,307,047 2,296,712 28,154,304
------------ ------------ ------------ ------------
NET ASSETS, at end
of the year $ 11,758,091 $ 6,698,232 $ 1,886,426 $ 28,788,691
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 2 -
Flex-Annuity IV (Non-Qualified)
Notes To Financial Statements
1. HISTORY
Massachusetts Mutual Variable Annuity Separate Account 2 ("Separate Account
2") is a separate investment account established on October 14, 1981 by
Massachusetts Mutual Life Insurance Company ("MassMutual"). Separate Account
2 operates as a registered unit investment trust pursuant to the Investment
Company Act of 1940 and the rules promulgated thereunder.
MassMutual maintains two segments within Separate Account 2. The segments
are Flex-Annuity IV (Non-Qualified) and Flex Extra (Non-Qualified). These
notes and the financial statements presented herein, with the exception of
Note 9, describe and consist only of the Flex-Annuity IV (Non-Qualified)
segment (the "Segment").
2. INVESTMENT OF THE SEGMENT'S ASSETS
The Segment maintains 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, 1997. Both Concert and Babson are
wholly-owned subsidiaries of Babson 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 the preparation of the financial statements
in conformity with generally accepted accounting principles.
A. Investment Valuation
The 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.
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.
5
<PAGE>
Notes To Financial Statements (Continued)
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 the Segment to
MassMutual totaled $29,402 and $1,441 for the years ended December 31, 1997
and 1996. 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
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
Segment's Contracts.
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.
MMLISI is the current broker-dealer for the existing contracts.
Pursuant to the underwriting and servicing agreements, commissions or other
fees due to registered representatives for servicing the contracts are paid
by MassMutual on behalf of MMLISI. MMLISI also receives compensation for its
activities as underwriter of the contracts.
6
<PAGE>
Notes To Financial Statements (Continued)
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 $ 94,151 $ 140,373 $ 11,613 $ 216,715
Less deduction for premium taxes 696 1,038 86 1,603
----------- ---------- ----------- -----------
Net contract payments $ 93,455 $ 139,335 $ 11,527 $ 215,112
=========== ========== =========== ===========
Administrative and contingent deferred sales charges $ 12,847 $ 2,378 $ 2,465 $ 31,749
=========== ========== =========== ===========
<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 $ 96,946 $ 12,176 $ 19,139 $ 285,736
Less deduction for premium taxes 19 2 4 56
----------- ---------- ----------- -----------
Net contract payments $ 96,927 $ 12,174 $ 19,135 $ 285,680
=========== ========== =========== ===========
Administrative and contingent deferred sales charges $ 12,045 $ 1,972 $ 2,844 $ 37,197
=========== ========== =========== ===========
</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 $ 1,693,237 $2,294,388 $ 273,502 $ 3,269,194
Proceeds from sales 3,594,147 5,687,813 340,837 5,227,849
</TABLE>
7
<PAGE>
Notes To Financial Statements (Continued)
8. NET INCREASE (DECREASE) IN ACCUMULATION UNITS
<TABLE>
<CAPTION>
MML MML
MML Money Managed MML
For the Year Ended Equity Market Bond Blend
December 31, 1997 Division Division Division Division
------------------ --------- ----------- ---------- ----------
Units purchased 10,422 63,128 3,139 35,300
Units withdrawn (237,757) (1,687,119) (44,739) (885,001)
Units transferred between divisions (39,881) (39,130) (7,255) 108,272
--------- ---------- ---------- ----------
Net decrease (267,216) (1,663,121) (48,855) (741,429)
Units, at beginning of the year 1,519,742 3,131,074 510,781 6,685,070
--------- ---------- ---------- ----------
Units, at end of the year 1,252,526 1,467,953 461,926 5,943,641
========= ========== ========== ==========
<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>
Units purchased 14,186 5,817 5,497 72,051
Units withdrawn (164,694) (99,189) (110,542) (603,111)
Units transferred between divisions (92,416) 652,756 (19,971) (141,393)
---------- ---------- ---------- ----------
Net increase (decrease) (242,924) 559,384 (125,016) (672,453)
Units, at beginning of the year 1,762,666 2,571,690 635,797 7,357,523
---------- ---------- ---------- ----------
Units, at end of the year 1,519,742 3,131,074 510,781 6,685,070
========== ========== ========== ==========
</TABLE>
9. CONSOLIDATED MASSACHUSETTS MUTUAL VARIABLE ANNUITY SEPARATE ACCOUNT 2
As discussed in Note 1, the financial statements only represent activity of
the Flex-Annuity IV (Non-Qualified) segment of Separate Account 2. The
combined net assets as of December 31, 1997 for Separate Account 2, which
includes the segments pertaining to Flex-Annuity IV (Non-Qualified) and
Flex Extra (Non-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 $481,258,433 $ 33,937,805 $ 48,461,650 $527,902,365 $115,179,135 $ 86,094,806 $ 44,792,525
Total Liabilities 1,470,647 131,412 172,084 1,713,289 353,821 256,373 118,736
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net Assets $479,787,786 $ 33,806,393 $ 48,289,566 $526,189,076 $114,825,314 $ 85,838,433 $ 44,673,789
============ ============ ============ ============ ============ ============ ============
Net assets consist of:
---------------------
Accumulation units--value 478,736,140 33,743,314 48,214,218 525,349,870 114,742,673 85,798,913 44,654,652
Annuity reserves 1,051,646 63,079 75,348 839,206 82,641 39,520 19,137
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net assets $479,787,786 $ 33,806,393 $ 48,289,566 $526,189,076 $114,825,314 $ 85,838,433 $ 44,673,789
============ ============ ============ ============ ============ ============ ============
</TABLE>
*Offered on the Flex Extra (Non-Qualified) contracts only
8
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
STATUTORY FINANCIAL STATEMENTS
as of December 31, 1997 and 1996
and for the years ended December 31, 1997, 1996 and 1995
<PAGE>
Report Of Independent Accountants
To the Board of Directors and Policyholders of
Massachusetts Mutual Life Insurance Company
We have audited the accompanying statutory statements of financial position of
Massachusetts Mutual Life Insurance Company as of December 31, 1997 and 1996,
and the related statutory statements of income, changes in policyholders'
contingency reserves, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the statutory
financial statements of Connecticut Mutual Life Insurance Company ("Connecticut
Mutual") for the year ended December 31, 1995, which statements reflect total
revenue and net gain from operations constituting 26% and 22% of the related
Company totals after restatement for the merger of the two companies. Those
statements were audited by other auditors whose report has been furnished to us,
and our opinion, insofar as it relates to the amounts included for Connecticut
Mutual, is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
As described more fully in Note 1, these financial statements were prepared in
conformity with statutory accounting practices of the National Association of
Insurance Commissioners and the accounting practices prescribed or permitted by
the Division of Insurance of the Commonwealth of Massachusetts and, for the
pre-merger balances of Connecticut Mutual, the Department of Insurance of the
State of Connecticut (collectively "statutory accounting practices"), which
practices differ from generally accepted accounting principles. The effects on
the financial statements of the variances between the statutory basis of
accounting and generally accepted accounting principles, although not reasonably
determinable at this time, are presumed to be material.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Massachusetts Mutual Life Insurance Company at December 31, 1997 and 1996, or
the results of its operations or its cash flows for each of the three years in
the period ended December 31, 1997.
In our opinion, based upon our audits and the report of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Massachusetts Mutual Life Insurance Company at
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997, on the
statutory basis of accounting described in Note 1.
Coopers & Lybrand L.L.P.
Springfield, Massachusetts
February 6, 1998
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF FINANCIAL POSITION
December 31,
1997 1996
---- ----
(In Millions)
Assets:
Bonds............................................. $23,890.3 $24,299.3
Common stocks..................................... 354.7 336.6
Mortgage loans.................................... 4,863.7 4,852.8
Real estate....................................... 1,697.7 1,840.9
Other investments................................. 1,963.8 1,425.6
Policy loans...................................... 4,950.4 4,752.3
Cash and short-term investments................... 1,941.2 1,075.4
--------- ---------
39,661.8 38,582.9
Investment and insurance amounts receivable....... 1,064.9 1,102.4
Other assets...................................... 104.8 97.9
--------- ---------
40,831.5 39,783.2
Separate account assets........................... 16,803.1 13,563.5
--------- ---------
$57,634.6 $53,346.7
========= =========
See notes to statutory financial statements.
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF FINANCIAL POSITION, Continued
December 31,
1997 1996
---- ----
(In Millions)
Liabilities:
Policyholders' reserves and funds................. $33,783.2 $33,341.5
Policyholders' dividends.......................... 954.1 885.3
Policyholders' claims and other benefits.......... 353.4 373.8
Federal income taxes.............................. 436.5 440.7
Asset valuation reserve........................... 840.6 689.2
Investment reserves............................... 132.8 208.4
Amounts due on investments puchased and
other liabilities................................ 1,457.9 1,206.1
--------- ---------
37,958.5 37,145.0
Separate account reserves and liabilities......... 16,802.8 13,563.1
--------- ---------
54,761.3 50,708.1
Policyholders' contingency reserves............... 2,873.3 2,638.6
--------- ---------
$57,634.6 $53,346.7
========= =========
See notes to statutory financial statements.
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years ended December 31,
1997 1996 1995
---- ---- ----
(In Millions)
<S> <C> <C> <C>
Revenue:
Premium income............................................ $6,764.8 $6,328.6 $5,727.7
Net investment and other income........................... 2,904.4 2,861.1 2,898.4
-------- -------- --------
9,669.2 9,189.7 8,626.1
-------- -------- --------
Benefits and expenses:
Policy benefits and payments.............................. 6,597.3 6,048.2 5,152.2
Addition to policyholder's reserves and funds............. 720.8 854.7 1,205.4
Commissions and operating expenses........................ 766.1 763.5 833.7
State taxes, licenses and fees............................ 81.5 96.4 89.4
Merger restructuring costs................................ - 66.1 44.0
-------- -------- --------
8,165.7 7,828.9 7,324.7
-------- -------- --------
Net gain before federal income taxes and dividends........ 1,503.5 1,360.8 1,301.4
Federal income taxes...................................... 284.4 276.7 206.2
-------- -------- --------
Net gain from operations before dividends................. 1,219.1 1,084.1 1,095.2
Dividends to policyholders................................ 919.5 859.9 819.0
-------- -------- --------
Net gain from operations.................................. 299.6 224.2 276.2
Net realized capital gain (loss).......................... (42.5) 40.3 (85.8)
-------- -------- --------
Net income................................................ $ 257.1 $ 264.5 $ 190.4
======== ======== ========
</TABLE>
See notes to statutory financial statements.
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF CHANGES
IN POLICYHOLDERS' CONTINGENCY RESERVES
<TABLE>
<CAPTION>
Years ended December 31,
1997 1996 1995
---- ---- ----
(In Millions)
<S> <C> <C> <C>
Policyholder's contingency reserves, beginning of year.... $2,638.6 $2,600.9 $2,569.1
-------- -------- --------
Increases (decreases) due to:
Net income............................................... 257.1 264.5 190.4
Net unrealized capital gain (loss)....................... 119.1 (1.7) 88.7
Merger restructuring costs, net of fax................... - - (45.4)
Change in asset valuation and investment reserves........ (76.0) (142.4) (75.6)
Change in prior year policyholders' reserves............. (55.4) (72.2) (108.2)
Change in non-admitted assets and other.................. (10.1) (10.5) (18.1)
-------- -------- --------
234.7 37.7 31.8
-------- -------- --------
Policyholders' contingency reserves, end of year.......... $2,873.3 $2,638.6 $2,600.9
======== ======== ========
</TABLE>
See notes to statutory financial statements.
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
1997 1996 1995
---- ---- ----
(In Millions)
<S> <C> <C> <C>
Operating acitivites:
Net income............................................... $ 257.1 $ 264.5 $ 190.4
Addition to policyholders' reserves and funds,
net of transfers to separate accounts................... 421.3 426.7 575.8
Net realized capital (gain) loss......................... 42.5 (40.3) 85.8
Other changes............................................ (58.1) (232.8) (25.2)
--------- --------- ---------
Net cash provided by operating activities................ 662.8 418.1 826.8
--------- --------- ---------
Investing activities:
Purchases of investments and loans....................... (12,292.7) (10,171.5) (10,364.2)
Sales or maturities of investments and receipts
from repayment of loans................................. 12,545.7 8,539.3 9,671.1
--------- --------- ---------
Net cash provided by (used in) investing activities...... 253.0 (1,632.2) (693.1)
--------- --------- ---------
Financing activities:
Repayments of long-term debt............................. (50.0) (53.3) (46.4)
--------- --------- ---------
Net cash used by financing activities.................... (50.0) (53.3) (46.4)
--------- --------- ---------
Increase (decrease) in cash and short-term investments... 865.8 (1,267.4) 87.3
Cash and short-term investments, beginning of year....... 1,075.4 2,342.8 2,255.5
--------- --------- ---------
Cash and short-term investments, end of year............. $ 1,941.2 $ 1,075.4 $ 2,342.8
========= ========= =========
</TABLE>
See Notes to Statutory Financial Statements.
<PAGE>
Notes To Statutory Financial Statements
Massachusetts Mutual Life Insurance Company ("the Company") is a mutual life
insurance company and as such has no shareholders. The Company's primary
business is individual life insurance, annuity and disability income products
distributed primarily through career agents. The Company also provides a wide
range of pension products and services, as well as investment services to
individuals, corporations and institutions in all 50 states and the District of
Columbia.
On March 1, 1996, the operations of the former Connecticut Mutual Life Insurance
Company ("Connecticut Mutual") were merged into the Company. This merger was
accounted for under the pooling of interests method of accounting. For the
purposes of this presentation, these financial statements reflect historical
amounts giving retroactive effect as if the merger had occurred on January 1,
1995 in conformity with the practices of the National Association of Insurance
Commissioners and the accounting practices prescribed or permitted by the
Division of Insurance of the Commonwealth of Massachusetts. In 1996,
merger-related expenses totaling $66.1 million were recorded in the Statutory
Statement of Income. In 1995, merger-related expenses incurred by Massachusetts
Mutual (the Company prior to the merger) of $44.0 million, were recorded in the
Statutory Statement of Income and the expenses incurred by Connecticut Mutual of
$45.4 million, net of tax, were recorded as a component of changes in
policyholders' contingency reserves, as permitted by each company's regulatory
authority. On the merger date, policyholders' reserves attributable to
disability income contracts were strengthened by $75.0 million, investment
reserves for real estate were increased by $49.8 million and net prepaid pension
assets were increased by $10.4 million with all adjustments reflected as a
change to policyholders' contingency reserves. The separate results of each
company prior to the merger for the year ended December 31, 1995, were as
follows: (a) revenue was $6,443.8 million for Massachusetts Mutual and $2,182.3
million for Connecticut Mutual; (b) net income was $160.7 million for
Massachusetts Mutual and $29.6 million for Connecticut Mutual and (c)
policyholders' contingency reserves increased by $143.7 million for
Massachusetts Mutual and decreased by $112.0 million for Connecticut Mutual.
On March 31, 1996, the Company sold MassMutual Holding Company Two, Inc., a
wholly-owned subsidiary, and its subsidiaries, including Mirus Life Insurance
Company (formerly the MML Pension Insurance Company; currently doing business as
"UniCARE"), which comprised the Company's group life and health business, to
WellPoint Health Networks, Inc. The Company received total consideration of
$402.2 million ($340.0 million in cash and $62.2 million in notes receivable)
and recognized a before tax gain of $187.9 million. The Company, pursuant to a
1994 reinsurance agreement, cedes its group life, accident and health business
to UniCARE. The Company's investment in MassMutual Holding Company Two, Inc.
amounted to $187.8 million at December 31, 1995; its gain from operations
included a $41.0 million dividend received from MIRUS in 1995. Additionally,
this investment produced an unrealized gain of $13.9 million in 1995.
1. SUMMARY OF ACCOUNTING PRACTICES
The accompanying statutory financial statements, except as to form, have been
prepared in conformity with the statutory accounting practices of the National
Association of Insurance Commissioners ("NAIC") and the accounting practices
prescribed or permitted by the Division of Insurance of the Commonwealth of
Massachusetts and, for the pre-merger balances of Connecticut Mutual, the
Department of Insurance of the State of Connecticut (collectively "statutory
accounting practices"), which practices were at one time also considered to be
in conformity with generally accepted accounting principles ("GAAP").
The accompanying statutory financial statements are different in some respects
from GAAP financial statements. The more significant differences are as follows:
(a) acquisition costs, such as commissions and other costs directly related to
acquiring new business, are charged to current operations as incurred, whereas
GAAP would require these expenses to be capitalized and recognized over the life
of the policies; (b) policy reserves are based upon statutory mortality and
interest requirements without consideration of withdrawals, whereas GAAP
reserves would be based upon reasonably conservative estimates of mortality,
morbidity, interest and withdrawals; (c) bonds are generally carried at
amortized cost whereas GAAP generally requests they be valued at fair value; (d)
deferred income taxes are not provided for book-tax timing differences as would
be required by GAAP, and (e) payments received for universal and variable life
products, variable annuities and investment related products are reported as
premium revenue, whereas under GAAP, these payments would be recorded as
deposits to policyholders' account balances.
The NAIC is currently engaged in an extensive project ("Codification") to codify
statutory accounting principles with a goal of providing a comprehensive guide
of statutory accounting principles for use by insurers in all states. This
comprehensive guide, which has not been approved by the NAIC or any state
insurance department, includes seventy-two Statements of Statutory Accounting
Principles ("SSAPs") and is expected to be effective no earlier than January 1,
1999. The effect of adopting these SSAPs shall be reported as an adjustment to
surplus on the effective date. Management is currently reviewing the impact of
Codification. However, since the SSAPs have not been finalized, the ultimate
impact cannot be determined at this time.
<PAGE>
Notes To Statutory Financial Statements (Continued)
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, as
well as disclosures of contingent assets and liabilities at the date of the
financial statements. Management must also make estimates and assumptions that
affect the amounts of revenues and expenses during the reporting period. Future
events, including changes in the levels of mortality, morbidity, interest rates
and asset valuations, could cause actual results to differ from the estimates
used in these financial statements.
The following is a description of the Company's principal accounting policies
and practices.
A. Investments
Bonds and stocks are valued in accordance with rules established by the National
Association of Insurance Commissioners. Generally, bonds are valued at amortized
cost, preferred stocks in good standing at cost, and common stocks, except for
unconsolidated subsidiaries, at fair value.
Mortgage loans are valued at unpaid principal less unamortized discount. Real
estate is valued at cost less accumulated depreciation, impairment allowances
and mortgage encumbrances. Encumbrances totaled $14.2 million in 1997 and $27.3
million in 1996. Depreciation on investment real estate is calculated using the
straight-line and constant yield methods.
Policy loans are carried at the outstanding loan balance less amounts unsecured
by the cash surrender value of the policy.
Short-term investments are stated at amortized cost, which approximates fair
value.
Investments in unconsolidated subsidiaries and affiliates, joint ventures and
other forms of partnerships are included in other investments on the Statutory
Statement of Financial Position and are accounted for using the equity method.
In compliance with regulatory requirements, the Company maintains an Asset
Valuation Reserve and an Interest Maintenance Reserve. The Asset Valuation
Reserve and other investment reserves stabilize the policyholders' contingency
reserves against fluctuations in the value of stocks, as well as declines in the
value of bonds, mortgage loans and real estate investments.
The Interest Maintenance Reserve captures after-tax realized capital gains and
losses which result from changes in the overall level of interest rates for all
types of fixed income investments, as well as other financial instruments,
including financial futures, U.S. Treasury purchase commitments, options,
interest rate swaps, interest rate caps and interest rate floors. These interest
rate related gains and losses are amortized into income using the grouped method
over the remaining life of the investment sold or over the remaining life of the
underlying asset. Net realized after tax capital gains of $95.4 million in 1997,
$73.1 million in 1996, and net realized after tax capital losses of $130.7
million in 1995 were charged to the Interest Maintenance Reserve. Amortization
of the Interest Maintenance Reserve into net investment income amounted to $31.0
million in 1997, $26.9 million in 1996, and $5.0 million in 1995.
Realized capital gains and losses, less taxes, not includable in the Interest
Maintenance Reserve, are recognized in net income. Realized capital gains and
losses are determined using the specific identification method. Unrealized
capital gains and losses are included in policyholders' contingency reserves.
B. Separate Accounts
Separate account assets and liabilities represent segregated funds administered
and invested by the Company for the benefit of pension, variable annuity and
variable life insurance contract holders. Assets consist principally of
marketable securities reported at fair value. Premiums, benefits and expenses of
the separate accounts are reported in the Statutory Statement of Income. The
Company receives administrative and investment advisory fees from these
accounts.
C. Non-admitted Assets
Assets designated as "non-admitted" (principally certain fixed assets,
receivables and Interest Maintenance Reserve, when in a net loss deferral
position) are excluded from the Statutory Statement of Financial Position by an
adjustment to policyholders' contingency reserves.
<PAGE>
Notes To Statutory Financial Statements (Continued)
D. Policyholders' Reserves and Funds
Policyholders' reserves for life contracts are developed using accepted
actuarial methods computed principally on the net level premium and the
Commissioners' Reserve Valuation Method bases using the American Experience and
the 1941, 1958 and 1980 Commissioners' Standard Ordinary mortality tables with
assumed interest rates ranging from 2.5 to 6.0 percent.
Reserves for individual annuities, guaranteed investment contracts and deposit
administration and immediate participation guarantee funds are based on accepted
actuarial methods principally at interest rates ranging from 2.25 to 11.25
percent. Reserves for policies and contracts considered investment contracts
have a carrying value of $8,077.9 million and $9,073.8 million at December 31,
1997 and 1996, respectively (fair value of $8,250.0 million and $9,324.6 million
at December 31, 1997 and 1996, respectively as determined by discounted cash
flow projections). Accident and health policy reserves are generally calculated
using the two-year preliminary term, net level premium and fixed net premium
methods and various morbidity tables.
The Company made certain changes in the valuation of policyholders' reserves of
$55.4 million in 1997 and $72.2 million in 1996. The effects of these changes
were recorded as a decrease to policyholders' contingency reserves.
E. Premium and Related Expense Recognition
Life insurance premium revenue is recognized annually on the anniversary date of
the policy. Annuity premium is recognized when received. Accident and health
premiums are recognized as revenue when due. Commissions and other costs related
to issuance of new policies, maintenance and settlement costs are charged to
current operations when incurred.
F. Policyholders' Dividends
The Board of Directors annually approves dividends to be paid in the following
year. These dividends are allocated to reflect the relative contribution of each
group of policies to policyholders' contingency reserves and consider investment
and mortality experience, expenses and federal income tax charges. The liability
for policyholders' dividends is equal to the estimated amount of dividends to be
paid in the following calendar year.
G. Cash and Short-term Investments
For purposes of the Statutory Statement of Cash Flows, the Company considers all
highly liquid investments purchased with a maturity of twelve months or less to
be cash and short-term investments.
2. POLICYHOLDERS' CONTINGENCY RESERVES
Policyholders' contingency reserves represent surplus of the Company as reported
to regulatory authorities and are intended to protect policyholders against
possible adverse experience.
The Company issued surplus notes of $100.0 million at 7 1/2 percent and $250.0
million at 7 5/8 percent in 1994 and 1993, respectively. These notes are
unsecured and subordinate to all present and future indebtedness of the Company,
policy claims and prior claims against the Company as provided by the
Massachusetts General Laws. Issuance was approved by the Commissioner of
Insurance of the Commonwealth of Massachusetts ("the Commissioner").
All payments of interest and principal are subject to the prior approval of the
Commissioner. Sinking fund payments are due as follows: $62.5 million in 2021,
$87.5 million in 2022, $150.0 million in 2023 and $50.0 million in 2024.
Interest on the notes issued in 1994 is scheduled to be paid on March 1 and
September 1 of each year, to holders of record on the preceding February 15 or
August 15, respectively. Interest on the notes issued in 1993 is scheduled to be
paid on May 15 and November 15 of each year, to holders of record on the
preceding May 1 or November 1, respectively. Interest expense is not recorded
until approval for payment is received from the Commissioner. Interest of $26.6
million was approved and paid in 1997, 1996 and 1995.
<PAGE>
Notes To Statutory Financial Statements (Continued)
The proceeds of the notes, less a $28.3 million reserve in 1997, and a $32.2
million reserve in 1996 for contingencies associated with the issuance of the
notes, are recorded as a component of the Company's policyholders' contingency
reserves as approved by the Commissioner. These reserves, as permitted by the
Division of Insurance, are included in investment reserves on the Statutory
Statement of Financial Position.
3. EMPLOYEE BENEFIT PLANS
The Company's employee benefit plans include plans in place for the employees of
Massachusetts Mutual and Connecticut Mutual prior to the merger. Employees
previously covered by the Connecticut Mutual pension plans will continue
coverage under these plans. All other employees, including employees hired after
the merger date, will be covered by the Massachusetts Mutual benefit plans.
A. Pension
The Company has two non-contributory defined benefit plans covering
substantially all of its employees. One plan includes employees previously
employed by Connecticut Mutual; the other includes all other eligible employees.
Benefits are based on the employees' years of service, compensation during the
last five years of employment and estimated social security retirement benefits.
The Company accounts for these plans following Financial Accounting Standards
Board Statement No. 87, "Employers' Accounting for Pensions." Accordingly, as
permitted by the Massachusetts Division of Insurance, the Company has recognized
a pension asset of $157.4 million and $97.2 million at December 31, 1997 and
1996, respectively. On the merger date, the accounting for Connecticut Mutual
pension plans was conformed to the Company's policy of recording pension plan
assets and liabilities, resulting in a $10.4 million increase in policyholders'
contingency reserves. Company policy is to fund pension costs in accordance with
the requirements of the Employee Retirement Income Security Act of 1974 and,
based on such requirements, no funding was required for the years ended December
31, 1997, 1996 and 1995. The assets of the plans are invested in the Company's
general account and separate accounts.
The benefit status of the defined benefit plans as of December 31 is as follows:
1997 1996
---- ----
(In Millions)
Accumulated benefit obligation $ 663.1 $ 611.5
Vested benefit obligation 653.8 606.5
Projected benefit obligation 713.9 665.5
Plan assets at fair value 1,154.2 1,201.7
The following assumptions were used in determining the actuarial present value
of both the accumulated and projected benefit obligations.
MassMutual Connecticut Mutual
Plan Plan
---- ----
Discount rate - 1997 7.25% 7.25%
Discount rate - 1996 7.75 7.75
Increase in future compensation levels 4.00 5.00
Long-term rate of return on assets 10.00 9.00
In 1997, there was a significant reduction in plan participants in the
Connecticut Mutual Plan which resulted in recognition of a pension plan
curtailment gain of $10.7 million.
As a result of the sale of Mirus Life Insurance Company, there was a significant
reduction in plan participants which resulted in recognition of a pension plan
curtailment gain of $15.3 million in 1996.
The Company also has defined contribution plans for employees and agents. The
expense credited to operations for all pension plans is $38.9 million in 1997,
$32.7 million in 1996 and $10.9 million in 1995.
<PAGE>
Notes To Statutory Financial Statements (Continued)
B. Life and Health
Certain life and health insurance benefits are provided to retired employees and
agents through group insurance contracts. Substantially all of the Company's
employees may become eligible for these benefits if they reach retirement age
while working for the Company. The Company adopted the National Association of
Insurance Commissioners' accounting standard for post-retirement life and health
benefit costs, requiring these benefits to be accounted for using the accrual
method for employees and agents eligible to retire and current retirees.
The following assumptions were used in determining the accumulated
postretirement benefit liability.
MassMutual Connecticut Mutual
Plan Plan
---- ----
Discount - 1997 7.25% 7.25%
Discount - 1996 7.75 7.75
Assumed increases in medical cost
rates in the first year 6.25 - 6.75 9.50
declining to 4.75 5.00
within 5 years 5 years
The initial transition obligation of $137.9 million is being amortized over
twenty years through 2012. At December 31, 1997 and 1996, the net unfunded
accumulated benefit obligation was $124.2 million and $124.1 million,
respectively, for employees and agents eligible to retire or currently retired
and $34.7 million and $33.8 million, respectively, for participants not eligible
to retire. A Retired Lives Reserve Trust was funded to pay life insurance
premiums for certain retired employees. Trust assets available for benefits were
$21.7 million and $23.0 million at December 31, 1997 and 1996, respectively.
As a result of the sale of Mirus Life Insurance Company, there was a significant
reduction in plan participants which resulted in recognition of a life and
health plan curtailment loss of $13.9 million in 1996.
The expense for 1997, 1996 and 1995 was $16.5 million, $17.6 million, and $22.9
million, respectively. A one percent increase in the annual assumed increase in
medical cost rates would increase the 1997 accumulated postretirement benefit
liability and benefit expense by $10.9 million and $1.4 million, respectively.
4. RELATED PARTY TRANSACTIONS
Pursuant to two 1994 reinsurance agreements with Mirus Life Insurance Company
(Mirus) whereby the Company assumed all of the single premium immediate annuity
business written by Mirus and ceded all of its group life, accident and health
business to Mirus. A gain from operations of this business was reflected in 1995
as a $41.0 million dividend received from Mirus, which was recorded as net
investment income on the Statutory Statement of Income. As previously discussed,
on March 31, 1996, the Company sold MassMutual Holding Company Two, Inc. a
wholly-owned subsidiary, and its subsidiaries, including Mirus Life Insurance
Company to WellPoint Health Networks, Inc.
The Company has a modified coinsurance quota-share reinsurance agreement with a
wholly-owned subsidiary, C.M. Life Insurance Company, whereby the Company
assumes 75% of the premiums on certain universal life policies issued by C.M.
Life. The Company pays a stipulated expense allowance, death and surrender
benefits, and a modified coinsurance adjustment. Reserves for payment of future
benefits are retained by C.M. Life.
5. FEDERAL INCOME TAXES
Provision for federal income taxes is based upon the Company's best estimate of
its current tax liability. No deferred tax effect is recognized for temporary
differences that may exist between financial reporting and taxable income.
Accordingly, the reporting of equity tax (essentially a reduction in the
deduction for policyholder dividends) and miscellaneous temporary differences,
such as reserves, acquisition costs and restructuring costs, resulted in
effective tax rates which differ from the statutory tax rate.
The Internal Revenue Service has completed examining the Company's income tax
returns through the year 1992 for Massachusetts Mutual and 1991 for Connecticut
Mutual, and is currently examining Massachusetts Mutual for the years 1993 and
1994, and Connecticut Mutual for the years 1992 through 1995. The Company
believes any adjustments resulting from such examinations will not materially
affect its financial statements.
<PAGE>
Notes to Statutory Financial Statements (Continued)
Components of the formula authorized by the Internal Revenue Service for
determining deductible policyholder dividends have not been finalized for 1997
or 1996. The Company records the estimated effects of anticipated revisions in
the Statutory Statement of Income.
The Company plans to file its 1997 federal income tax return on a consolidated
basis with its life and non-life affiliates with the exception of C.M. Life
Insurance Company. The Company and its eligible life and non-life affiliates
are subject to a written tax allocation agreement, which allocates the group's
consolidated tax liability for payment purposes. Generally, the agreement
provides that members with losses shall be compensated for the use of their
losses and credits by other members.
The Company made federal tax payments of $353.4 million in 1997, $330.7 million
in 1996 and $147.3 million in 1995.
6. INVESTMENTS
The Company maintains a diversified investment portfolio. Investment policies
limit concentration in any asset class, geographic region, industry group,
economic characteristic, investment quality or individual investment. In the
normal course of business, the Company enters into commitments to purchase
privately placed bonds and to issue mortgage loans.
A. Bonds
The carrying value and estimated fair value of bonds are as follows:
December 31, 1997
-----------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
----- ----- ------ -----
(In Millions)
U.S. Treasury securities $ 6,241.0 $ 470.5 $10.3 $ 6,701.2
and obligations of U.S.
government corporations
and agencies
Debt securities issued by
foreign governments 83.5 4.4 3.0 84.9
Mortgage-backed securities 3,390.8 187.9 9.0 3,569.7
State and local governments 361.9 23.9 .6 385.2
Corporate debt securities 12,148.9 765.2 46.9 12,867.2
Utilities 871.8 100.1 2.2 969.7
Affiliates 792.4 2.8 1.0 794.2
--------- -------- ----- ---------
TOTAL $23,890.3 $1,554.8 $73.0 $25,372.1
========= ======== ===== =========
December 31, 1996
-----------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
----- ----- ------ -----
(In Millions)
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies $ 8,042.6 $ 344.0 $ 56.3 $ 8,330.3
Debt securities issued by 95.2 10.2 .5 104.9
foreign governments
Mortgage-backed securities 3,014.0 119.0 43.3 3,089.6
State and local governments 173.2 13.1 2.1 184.2
Corporate debt securities 11,675.2 528.0 133.3 12,069.9
Utilities 975.0 87.0 18.5 1,043.5
Affiliates 324.1 4.3 3.5 324.9
--------- -------- ------ ---------
TOTAL $24,299.3 $1,105.6 $257.5 $25,147.3
========= ======== ====== =========
<PAGE>
Notes To Statutory Financial Statements (Continued)
The carrying value and estimated fair value of bonds at December 31, 1997 by
contractual maturity are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without prepayment penalties.
Estimated
Carrying Fair
Value Value
----- -----
(In Millions)
Due in one year or less $ 519.7 $ 523.0
Due after one year through five years 3,972.1 4,104.6
Due after five years through ten years 7,423.3 7,838.1
Due after ten years 5,254.9 5,888.1
--------- ---------
17,170.0 18,353.8
Mortgage-backed securities, including
securities guaranteed by the U.S.
Government 6,720.3 7,018.3
--------- ---------
TOTAL $23,890.3 $25,372.1
========= =========
Proceeds from sales of investments in bonds were $11,427.8 million during 1997,
$6,390.7 million during 1996 and $8,068.8 million during 1995. Gross capital
gains of $200.7 million in 1997, $188.8 million in 1996 and $255.5 million in
1995 and gross capital losses of $68.8 million in 1997, $255.5 million in 1996
and $67.1 million in 1995 were realized on those sales, portions of which were
included in the Interest Maintenance Reserve. The estimated fair value of
non-publicly traded bonds is determined by the Company using a pricing matrix.
B. Stocks
Preferred stocks in good standing had fair values of $145.5 million in 1997 and
$150.8 million in 1996, using a pricing matrix for non-publicly traded stocks
and quoted market prices for publicly traded stocks. Common stocks, except for
unconsolidated subsidiaries, had a cost of $250.3 million in 1997 and $249.2
million in 1996.
C. Mortgages
The fair value of mortgage loans, as determined from a pricing matrix for
performing loans and the estimated underlying real estate value for
non-performing loans, approximated carrying value.
The Company had restructured loans with book values of $202.3 million, and
$383.5 million at December 31, 1997 and 1996, respectively. These loans
typically have been modified to defer a portion of the contracted interest
payments to future periods. Interest deferred to future periods totaled $5.1
million in 1997, $2.2 million in 1996 and $2.5 million in 1995.
D. Other
The carrying value of investments which were non-income producing for the
preceding twelve months was $5.7 million and $23.1 million at December 31, 1997
and 1996, respectively. The Company made voluntary contributions to the Asset
Valuation Reserve of $6.8 million 1996. No additional voluntary contribution to
the Asset Valuation Reserve was made in 1997.
It is not practicable to determine the fair value of policy loans as they do not
have a stated maturity.
7. PORTFOLIO RISK MANAGEMENT
The Company manages its investment risks, primarily to reduce interest rate and
duration imbalances determined in asset/liability analyses. The fair values of
these instruments, described below, which are not recorded in the financial
statements, are based upon market prices or prices obtained from brokers. The
Company does not hold or issue these financial instruments for trading purposes.
<PAGE>
Notes To Statutory Financial Statements (Continued)
The notional amounts described do not represent amounts exchanged by the parties
and, thus, are not a measure of the exposure of the Company. The amounts
exchanged are calculated on the basis of the notional amounts and the other
terms of the instruments, which relate to interest rates, exchange rates,
security prices or financial or other indexes.
The Company enters into financial futures contracts for the purpose of managing
interest rate exposure. Margin requirements are met with the deposit of
securities. Futures contracts are generally settled with offsetting
transactions. Gains and losses on financial futures contracts are recorded when
the contract is closed and amortized through the Interest Maintenance Reserve
over the remaining life of the underlying asset. As of December 31, 1997 and
1996, the Company did not have any open financial futures contracts.
The Company utilizes interest rate swap agreements, options, and purchased caps
and floors to reduce interest rate exposures arising from mismatches between
assets and liabilities and to modify portfolio profiles to manage other risks
identified. Under interest rate swaps, the Company agrees to an exchange, at
specified intervals, between streams of variable rate and fixed rate interest
payments calculated by reference to an agreed-upon notional principal amount.
Net amounts receivable and payable are accrued as adjustments to interest income
and included in investment and insurance amounts receivable on the Statutory
Statement of Financial Position. Gains and losses realized on the termination of
contracts are amortized through the Interest Maintenance Reserve over the
remaining life of the associated contract. At December 31, 1997 and 1996, the
Company had swaps with notional amounts of $3,220.2 million and $2,090.3
million, respectively. The fair values of these instruments were $20.9 million
at December 31, 1997 and $14.8 million at December 31, 1996.
Options grant the purchaser the right to buy or sell a security or enter into a
derivative transaction at a stated price within a stated period. The Company's
option contracts have terms of up to fifteen years. The amounts paid for options
purchased are included in other investments on the Statutory Statement of
Financial Position. Gains and losses on these contracts are recorded at the
expiration or termination date and are amortized through the Interest
Maintenance Reserve over the remaining life of the option contract. At December
31, 1997 and 1996, the Company had option contracts with notional amounts of
$5,388.2 million and $1,928.4 million, respectively. The Company's credit risk
exposure was limited to the unamortized costs of $59.0 million and $18.1
million, which had fair values of $99.6 million and $19.2 million at December
31, 1997 and 1996, respectively.
Interest rate cap agreements grant the purchaser the right to receive the excess
of a referenced interest rate over a given rate calculated by reference to an
agreed upon notional amount. Interest rate floor agreements grant the purchaser
the right to receive the excess of a given rate over a referenced interest rate
calculated by reference to an agreed upon notional amount. Amounts paid for
interest rate caps and floors are amortized into interest income over the life
of the asset on a straight-line basis. Unamortized costs are included in other
investments on the Statutory Statement of Financial Position. Amounts receivable
and payable are accrued as adjustments to interest income and included in the
Statutory Statement of Financial Position as investment and insurance amounts
receivable. Gains and losses on these contracts, including any unamortized cost,
are recognized upon termination and are amortized through the Interest
Maintenance Reserve over the remaining life of the associated cap or floor
agreement. At December 31, 1997 and 1996, the company had agreements with
notional amounts of $3,348.6 million and $3,859.6 million, respectively. The
Company's credit risk exposure on these agreements is limited to the unamortized
costs of $18.2 million and $22.0 million at December 31, 1997 and 1996,
respectively. The fair values of these instruments were $23.4 million and $15.2
million at December 31, 1997 and 1996, respectively.
The Company utilizes asset swap agreements to reduce exposures, such as currency
risk and prepayment risk, built into certain assets acquired. Cross-currency
interest rate swaps allow investment in foreign currencies, increasing access to
additional investment opportunities, while limiting foreign exchange risk. The
net cash flows from asset and currency swaps are recognized as adjustments to
the underlying assets' interest income. Gains and losses realized on the
termination of these contracts adjusts the bases of the underlying asset.
Notional amounts relating to asset and currency swaps totaled $225.6 million and
$364.7 million at December 31, 1997 and 1996, respectively. The fair values of
these instruments were an unrecognized loss of $1.7 million at December 31, 1997
and an unrecognized gain of $7.8 million at December 31, 1996.
<PAGE>
Notes To Statutory Financial Statements (Continued)
Equity swap agreements are utilized to hedge exposure to market risk on public
and private equity positions held in the Company's investment portfolio. Under
equity swaps, the Company agrees to an exchange, at points in time specified in
each contract, between streams of variable or fixed rate interest payments and
the change in an underlying index, equity or basket of equities. The change in
the underlying item is calculated by reference to the level of such item
specified in the agreement. Net amounts receivable and payable are accrued as
adjustments to interest income and included in investment and insurance amounts
receivable on the Statutory Statement of Financial Position. Changes in the
value of these contracts are recorded as realized gains and losses in the
Statutory Statement of Income when contracts are closed. At December 31, 1997
and 1996, the Company had equity swap contracts with notional amounts of $160.0
million and $149.2 million, respectively. The fair values of these instruments
were an unrealized loss of $5.1 million at December 31, 1997 and an unrealized
gain of $11.9 million at December 31, 1996.
The Company enters into forward U.S. Treasury commitments for the purpose of
managing interest rate exposure. The Company generally does not take delivery on
forward commitments. These commitments are instead settled with offsetting
transactions. Gains and losses on forward commitments are recorded when the
commitment is closed and amortized through the Interest Maintenance Reserve over
the remaining life of the asset. At December 31, 1997 and 1996, the Company had
U. S. Treasury purchase commitments which will settle during the following year
with contractual amounts of $1,100.7 million and $1,639.4 million with fair
values of $1,117.6 million and $1,627.4 million, respectively including net
unrealized gains of $16.9 million at December 31, 1997 and net unrealized losses
of $12.0 million at December 31, 1996.
The Company is exposed to credit-related losses in the event of nonperformance
by counterparties to derivative financial instruments. This exposure is limited
to contracts with a positive fair value. The amounts at risk in a net gain
position were $146.7 million and $53.9 million at December 31, 1997 and 1996,
respectively. The Company monitors exposure to ensure counterparties are credit
worthy and concentration of exposure is minimized. Additionally, contingent
collateral positions have been obtained with counterparties when considered
prudent.
8. REINSURANCE
The Company cedes all of its group life and health business to UniCARE and has
other reinsurance agreements with other insurance companies in the normal course
of business. Premiums, benefits to policyholders and provisions for future
benefits are stated net of reinsurance. The Company remains liable to the
insured for the payment of benefits if the reinsurer cannot meet its obligations
under the reinsurance agreements. Premiums ceded were $294.6 million in 1997,
$793.5 million in 1996 and $904.1 million in 1995.
9. LIQUIDITY
The withdrawal characteristics of the policyholders' reserves and funds,
including separate accounts, and the invested assets which support them at
December 31, 1997 are illustrated below:
(In Millions)
Total policyholders' reserves and funds and
separate account liabilities $50,804.2
Not subject to discretionary withdrawal (5,283.7)
Policy loans (4,950.4)
---------
Subject to discretionary withdrawal $40,570.1
=========
Total invested assets, including separate $56,464.7
Policy loans and other invested assets (14,823.3)
---------
Marketable investments $41,641.4
=========
10. BUSINESS RISKS AND CONTINGENCIES
The Company is subject to insurance guaranty fund laws in the states in which it
does business. These laws assess insurance companies amounts to be used to pay
benefits to policyholders and claimants of insolvent insurance companies. Many
states allow these assessments to be credited against future premium taxes. The
Company believes such assessments in excess of amounts accrued will not
materially affect its financial position, results of operations or liquidity. In
1997 and 1996, the Company elected not to admit $21.4 million and $15.3 million,
respectively, of guaranty fund premium tax offset receivables relating to prior
assessments.
<PAGE>
Notes To Statutory Financial Statements (Continued)
The Company is involved in litigation arising in and out of the normal course of
its business. Management intends to defend these actions vigorously. While the
outcome of litigation cannot be foreseen with certainty, it is the opinion of
management, after consultation with legal counsel, that the ultimate resolution
of these matters will not materially affect its financial position, results of
operations or liquidity.
11. RECLASSIFICATIONS
Certain 1996 and 1995 amounts have been reclassified to conform with the current
year presentation.
12. SUBSIDIARIES AND AFFILIATED COMPANIES
A summary of ownership and relationship of the Company and its subsidiaries and
affiliated companies as of December 31, 1997 is illustrated below. The Company
provides management or advisory services to these companies. Subsidiaries are
wholly-owned, except as noted.
Parent
- ------
Massachusetts Mutual Life Insurance Company
Subsidiaries of Massachusetts Mutual Life Insurance Company
- -----------------------------------------------------------
C.M. Assurance Company
C.M. Benefit Insurance Company
C.M. Life Insurance Company
MassMutual Holding Company
MassMutual Holding Company Two, Inc. (Sold in March 1996)
MassMutual of Ireland, Limited
MML Bay State Life Insurance Company
MML Distributors, LLC
Subsidiaries of MassMutual Holding Company
------------------------------------------
GR Phelps, Inc.
MassMutual Holding Trust I
MassMutual Holding Trust II
MassMutual Holding MSC, Inc.
MassMutual International, Inc.
MassMutual Reinsurance Bermuda (Sold in December 1996)
MML Investor Services, Inc.
State House One (Liquidated in December 1996)
Subsidiaries of MassMutual Holding Trust I
------------------------------------------
Antares Leveraged Capital Corporation -- 98.5%
Charter Oak Capital Management, Inc. -- 80.0%
Cornerstone Real Estate Advisors, Inc.
DLB Acquisition Corporation -- 84.8%
Oppenheimer Acquisition Corporation -- 88.55%
Subsidiaries of MassMutual Holding Trust II
-------------------------------------------
CM Advantage, Inc. -- (Liquidated in December 1997)
CM International, Inc.
CM Property Management, Inc. -- (Liquidated in December 1997)
High Yield Management, Inc.
MMHC Investments, Inc.
MML Realty Management
Urban Properties, Inc.
Westheimer 335 Suites, Inc.
<PAGE>
Notes To Statutory Financial Statements (Continued)
Subsidiaries of MassMutual International
----------------------------------------
Compensa de Seguros de Vida S.A. -- 33.5%
MassLife Seguros de Vida (Argentina) S. A.
MassMutual International (Bermuda) Ltd.
Mass Seguros de Vida (Chile) S. A. -- 33.5%
MassMutual International (Luxemburg) S. A.
MassMutual Holding MSC, Incorporated
MassMutual/Carlson CBO N. V. -- 100%
MassMutual Corporate Value Limited -- 46%
9048 -- 5434 Quebec, Inc.
Affiliates of Massachusetts Mutual Life Insurance Company
- ---------------------------------------------------------
MML Series Investment Fund
MassMutual Institutional Funds
Oppenheimer Value Stock Fund
<PAGE>
Part C
Other Information
Item 24. Financial Statements and Exhibits
- ------------------------------------------
(a) Financial Statements:
Financial Statements Included in Part A
---------------------------------------
Condensed Financial Information
Financial Statements Included in Part B
---------------------------------------
The Registrant
--------------
Report of Independent Accountants
Statement of Assets and Liabilities as of December 31, 1997
Statement of Operations for the year ended December 31, 1997
Statement of Changes in Net Assets for the years ended
December 31, 1997, and 1996
Notes to Financial Statements
The Depositor
-------------
Report of Independent Accountants
Statutory Statement of Financial Position as of December 31,
1997 and 1996
Statutory Statement of Income for the years ended December 31,
1997, 1996 and 1995
Statutory Statement of Changes in Policyholders' Contingency
Reserves for the years ended December 31, 1997, 1996 and 1995
Statutory Statement of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
Notes to Statutory Financial Statements
(b) Exhibits:
Exhibit 1 Copy of Resolution of the Executive Committee of
the Board of Directors of Massachusetts Mutual
Life Insurance Company, authorizing the
establishment of the Registrant.
Exhibit 2 None
Exhibit 3 (i) Copy of Distribution Agreement between the
Registrant and MML Investors Services, Inc.
(ii) None
Exhibit 4 (i) Form of Flexible Purchase Payment Multi-Fund
Variable Annuity Contract.
Exhibit 5 Form of Application used with the Flexible
Purchase Payment Multi-Fund Variable Annuity
Contract in Exhibit 4 above.
Exhibit 6 (i) Copy of the Charter of Incorporation of
Massachusetts Mutual Life Insurance Company,
incorporated by reference to Registration
Statement File No. 333-22557, filed on
February 28, 1997.
(ii) Copy of the By-Laws of Massachusetts Mutual
Life Insurance Company incorporated by reference
to Registration Statement File No. 333-22557,
filed on February 28, 1997.
16
<PAGE>
Exhibit 7 None
Exhibit 8 None
Exhibit 9 Opinion of and Consent of Counsel.
Exhibit 10 (i) Written consent of Coopers & Lybrand L.L.P.,
Independent Accountants.
(ii) Copy of the Powers of Attorney, incorporated
by reference to Registration Statement File
No. 333-22557, filed on February 28, 1997.
Exhibit 11 None
Exhibit 12 None
Exhibit 13 Copy of the form of Schedule of Computation of
Performance, incorporated by reference to
Registrants Post Effective Amendment No. 16 to
File No. 2-75412.
Exhibit 14 None
Item 25. Directors and Executive Officers of MassMutual
----------------------------------------------
The directors and executive vice presidents of MassMutual, their
positions and their other business affiliations and business
experience for the past five years are listed below.
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Name and Position Principal Occupation(s) During Past Five Years
- --------------------------------------------------------------------------------
Roger G. Ackerman, Director Chairman and Chief Executive Officer, since
One Riverfront Plaza, HQE 2 1996, President and Chief Operating Officer,
Corning, NY 14831 1990-1996, Corning, Inc.
- --------------------------------------------------------------------------------
James R. Birle, Director Chairman, since 1997, and Founder, since 1994,
2 Southview Drive President, 1994-1997, Resolute Partners, LLC;
Greenwich, CT 06836 General Partner, Blackstone Group, 1988-1994
- --------------------------------------------------------------------------------
Gene Chao, Director Chairman, President and CEO, Computer
733 SW Vista Avenue Projections, Inc., since 1991
Portland, OR 97205
- --------------------------------------------------------------------------------
Patricia Diaz Dennis, Director Senior Vice President and Assistant General
175 East Houston, Room 4-A-70 Counsel, SBC Communications Inc., since 1995;
San Antonio, TX 78205 Special Counsel, Sullivan & Cromwell, 1993-
1995; Assistant Secretary of State for Human
Rights and Humanitarian Affairs, U.S.
Department of State, 1992-1993
- --------------------------------------------------------------------------------
Anthony Downs, Director Senior Fellow, The Brookings Institution,
1775 Massachusetts Ave., N.W. since 1977
Washington, DC 20036-2188
- --------------------------------------------------------------------------------
James L. Dunlap, Director President and Chief Operating Officer, United
1201 Louisiana, Suite 1400 Meridian Corporation, since 1996; Senior Vice
Houston, TX 77002-5603 President, Texaco, Inc. 1987-1996
- --------------------------------------------------------------------------------
William B. Ellis, Director Senior Fellow, Yale University School of
31 Pound Foolish Lane Forestry and Environmental Studies, since
Glastonbury, CT 06033 1995; Chairman and Chief Executive Officer,
Northeast Utilities, 1983-1995
- --------------------------------------------------------------------------------
Robert M. Furek, Director Chairman, State Board of Trustees for the
1 State Street, Suite 2310 Hartford School System, since 1997; President
Hartford, CT 06103 and Chief Executive Officer, Heublein, Inc.,
1987-1996
- --------------------------------------------------------------------------------
Charles K. Gifford, Director Chairman and Chief Executive Officer, since
100 Federal Street 1995, and President, 1989-1995, Bank-Boston,
Boston, MA 02110 N.A. and Chairman, since 1998, and Chief
Executive Officer, since 1985, BankBoston
Corporation
- --------------------------------------------------------------------------------
William N. Griggs, Director Managing Director, Griggs & Santow, Inc.,
75 Wall Street, 20/(th)/ Floor since 1983
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
New York, NY 10005
- --------------------------------------------------------------------------------
George B. Harvey, Director Retired Chairman, President and CEO, Pitney
One Landmark Square Bowes, since 1996
Suite 1905, 19/(th)/ Floor
Stamford, CT 06901
- --------------------------------------------------------------------------------
Barbara B. Hauptfuhrer, Director Director of various corporations, since 1972
1700 Old Welsh Road
Huntingdon Valley, PA 19006
- --------------------------------------------------------------------------------
Sheldon B. Lubar, Director Chairman, Lubar & Co. Incorporated,
700 North Water Street, since 1977
Suite 1200
Milwaukee, WI 53202
- --------------------------------------------------------------------------------
William B. Marx, Jr., Director Retired Senior Executive Vice President,
5 Peacock Lane Lucent Technologies, since 1996; Executive
Village of Golf, FL 33436-5299 Vice President and CEO Multimedia Products
Group, AT&T, 1994-1996; Executive Vice
President and CEO, Network Systems Group,
1993-1994; Group Executive and President, AT&T
Network Systems, 1989-1993
- --------------------------------------------------------------------------------
John F. Maypole, Director Managing Partner, Peach State Real Estate
55 Sandy Hook Road - North Holding Company, since 1984
Sarasota, FL 34242
- --------------------------------------------------------------------------------
John J. Pajak, Director, President and Chief Operating Officer, since
President and Chief 1996, Vice Chairman and Chief Administrative
Chief Operating Officer Officer, 1996-1996, Executive Vice President,
1295 State Street 1987-1996, MassMutual
Springfield, MA 01111
- --------------------------------------------------------------------------------
Thomas B. Wheeler, Director, Chairman and Chief Executive Officer, since
Chairman and Chief Executive 1996, President and Chief Executive Officer,
Officer 1988-1996, MassMutual
1295 State Street
Springfield, MA 01111
- --------------------------------------------------------------------------------
Alfred M. Zeien, Director Chairman and Chief Executive Officer, The
Prudential Tower Gillette Company, since 1991
Boston, MA 02199
- --------------------------------------------------------------------------------
Executive Vice Presidents:
- --------------------------------------------------------------------------------
Lawrence V. Burkett, Jr. Executive Vice President and General Counsel,
1295 State Street since 1993, Senior Vice President and Deputy
Springfield, MA 01111 General Counsel, 1992-1993, MassMutual
- --------------------------------------------------------------------------------
Peter J. Daboul Executive Vice President and Chief Information
1295 State Street Officer, since 1997, Senior Vice President,
Springfield, MA 01111 1990-1997, MassMutual
- --------------------------------------------------------------------------------
John B. Davies Executive Vice President, since 1994,
1295 State Street Associate Executive Vice President, 1994-1994,
Springfield, MA 01111 General Agent, 1982-1993, MassMutual
- --------------------------------------------------------------------------------
Daniel J. Fitzgerald Executive Vice President, since 1994,
1295 State Street Corporate Financial Operations, 1994-1997,
Springfield, MA 01111 Senior Vice President, 1991-1994
- --------------------------------------------------------------------------------
James E. Miller Executive Vice President, since 1997 and 1987-
1295 State Street 1996, MassMutual; Senior Vice President,
Springfield, MA 01111 UniCare Life and Health Insurance Company,
1996-1997
- --------------------------------------------------------------------------------
John V. Murphy Executive Vice President, since 1997,
1295 State Street MassMutual; Executive Vice President and Chief
Springfield, MA 01111 Operating Officer, David L. Babson & Co.,
Inc., 1995-1997; Chief Operating Officer,
Concert Capital Management, Inc., 1993-1995;
Senior Vice President and Chief Financial
Officer, Liberty Financial Companies, 1977-
1993
- --------------------------------------------------------------------------------
Gary E. Wendlandt Executive Vice President and Chief Investment
1295 State Street Officer, since 1993, Executive Vice President,
Springfield, MA 01111 1992-1993, MassMutual
- --------------------------------------------------------------------------------
Joseph M. Zubretsky Executive Vice President and Chief Financial
1295 State Street Officer, since 1997, MassMutual; Chief
Springfield, MA 01111 Financial Officer, 1996, HealthSource;
Coopers & Lybrand, 1990-1996
- --------------------------------------------------------------------------------
18
<PAGE>
Item 26. Persons Controlled by or Under Common Control with the Depositor
----------------------------------------------------------------
or Registrant
-------------
The assets of the Registrant, under state law, are assets of
MassMutual.
The Registrant may also be deemed to be under common control
with other separate accounts established by MassMutual and its
life insurance subsidiaries, C.M. Life Insurance Company and MML
Bay State Life Insurance Company, which are registered as unit
investment trusts under the Investment Company Act of 1940.
LIST OF SUBSIDIARIES AND AFFILIATES
The following entities are, or may be deemed to be, controlled by MassMutual
through the direct or indirect ownership of such entities' stock.
1. CM Assurance Company, a Connecticut life, accident, disability and health
insurer, all the stock of which is owned by MassMutual.
2. CM Benefit Insurance Company, a Connecticut life, accident, disability and
health insurer, all the stock of which is owned by MassMutual.
3. C.M. Life Insurance Company, a Connecticut life, accident, disability and
health insurer, all the stock of which is owned by MassMutual.
4. MML Bay State Life Insurance Company, a Connecticut life and health
insurer, all the stock of which is owned by MassMutual.
5. MML Distributors, LLC, formerly known as Connecticut Mutual Financial
Services, LLC, a registered broker-dealer incorporated as a limited
liability company in Connecticut. MassMutual has a 99% ownership interest
and G.R. Phelps & Co. has a 1% ownership interest herein.
6. MassMutual Holding Company, a Delaware holding company, all the stock of
which is owned by MassMutual.
7. MassMutual of Ireland, Limited., incorporated in the Republic of Ireland,
to operate a group life and health claim office for MassMutual, all of the
stock of which is owned by MassMutual.
8. MML Series Investment Fund, a registered open-end investment company
organized as a Massachusetts business trust, all of the shares of which are
owned by separate accounts of MassMutual and companies controlled by
MassMutual.
9. MassMutual Institutional Funds, a registered open-end investment company
organized as a Massachusetts business trust, all of the shares are owned by
MassMutual.
10. G.R. Phelps & Company, Inc., Connecticut corporation which formerly
operated as a securities broker-dealer, all the stock of which is owned by
MassMutual Holding Company.
11. MML Investors Services, Inc., registered broker-dealer incorporated in
Massachusetts, MassMutual Holding Company owns 86% of the capital stock and
F.R. Phelps & Co., Inc. owns 14% of the capital stock of MML Investors
Services, Inc..
12. MassMutual Holding MSC, Inc., a Massachusetts corporation, which acts as a
holding company for MassMutual positions in investment entities organized
outside the United States. MassMutual Holding Company owns all the
outstanding shares of MassMutual Holding MSC, Inc.
13. MassMutual Holding Trust I, a Massachusetts business trust, which acts as a
holding company for certain MassMutual investment subsidiaries. MassMutual
Holding Company owns all the outstanding shares of MassMutual Holding Trust
I.
14. MassMutual Holding Trust II, a Massachusetts business trust, which acts as
a holding company for certain MassMutual investment subsidiaries.
MassMutual Holding Company owns all the outstanding shares of MassMutual
Holding Trust II.
19
<PAGE>
15. MassMutual International, Inc., a Delaware corporation that acts as a
holding company of and provides services to international insurance
companies, all of the stock of which is owned by MassMutual Holding
Company.
16. MML Insurance Agency, Inc., a licensed insurance broker incorporated in
Massachusetts, all of the stock of which is owned by MML Investors
Services, Inc.
17. MML Securities Corporation, a "Massachusetts Securities Corporation", all
of the stock of which is owned by MML Investors Services, Inc.
18. DISA Insurance Services Agency of America, Inc. (Alabama), a licensed
insurance broker incorporated in Alabama. MML Insurance Agency, Inc. owns
all the shares of outstanding stock.
19. Diversified Insurance Services Agency of America, Inc. (Hawaii), a licensed
insurance broker incorporated in Hawaii. MML Insurance Agency, Inc. owns
all the shares of outstanding stock.
20. MML Insurance Agency of Mississippi, P.C., a Mississippi professional
corporation that operates as an insurance broker, and is controlled by MML
Insurance Agency, Inc.
21. MML Insurance Agency of Nevada, Inc., a Nevada corporation that operates as
an insurance broker, all of the stock of which is owned by MML Insurance
Agency, Inc.
22. MML Insurance Agency of Ohio, Inc., a subsidiary of MML Insurance Agency,
Inc., is incorporated in the state of Ohio and operates as an insurance
broker. The outstanding capital stock is controlled by MML Insurance
Agency, Inc. through a voting trust agreement.
23. MML Insurance Agency of Texas, Inc., a subsidiary of MML Insurance Agency,
Inc., is incorporated in the state of Texas and operates as an insurance
broker. The outstanding capital stock is controlled by MML Insurance
Agency, Inc. through an irrevocable proxy arrangement.
24. MassMutual/Carlson CBO N.V., a Netherlands Antilles corporation which
operated a collateralized bond obligation fund. MassMutual Holding MSC,
Inc. and Carlson Investment Management Co. each owns 99% of the outstanding
shares.
25. MassMutual Corporate Value Limited, a Cayman Islands corporation that owns
approximately 93% of MassMutual Corporate Value Partners Limited.
MassMutual Holding MSC, Inc. owns 46.19% of the outstanding capital stock
of MassMutual Corporate Value Limited.
26. MassMutual Corporate Value Partners Limited, a Cayman Islands corporation
that operates as a high yield bond fund. MassMutual Corporate Value Limited
holds an approximately 93% ownership interest in this company.
27. 9048-5434 Quebec, Inc., a Quebec corporation, which operates as the owner
of hotel property in Montreal, Quebec, Canada. MassMutual Holdings MSC,
Inc. owns all the shares of 9048-5434 Quebec, Inc.
28. Antares Leveraged Capital Corp., a Delaware corporation that operates as a
finance company. MassMutual Holding Trust I owns approximately 98.7% of the
capital stock of Antares.
29. Charter Oak Capital Management, Inc., a Delaware corporation that operates
as an investment manager. MassMutual Holding Trust I owns 80% of the
capital stock of Charter Oak.
30. Cornerstone Real Estate Advisers, Inc., a Massachusetts equity real estate
advisory corporation, all the stock of which is owned by MassMutual Holding
Trust I.
31. DLB Acquisition Corporation ("DLB") is a Delaware corporation, which serves
as a holding company for David L. Babson and Company, Incorporated.
MassMutual Holding Trust I owns 83.7% of the outstanding capital stock of
DLB.
32. Oppenheimer Acquisition Corporation ("OAC") is a Delaware corporation,
which serves as a holding company for OppenheimerFunds, Inc. MassMutual
Holding Trust I owns 86% of the capital stock of OAC.
33. David L. Babson and Company, Incorporated, a registered investment adviser
incorporated in Massachusetts, all of the
20
<PAGE>
stock of which is owned by DLB.
34. Babson Securities Corporation, a registered broker-dealer incorporated in
Massachusetts, all of the stock of which is owned by David L. Babson and
Company, Incorporated.
35. Babson-Stewart-Ivory International, a Massachusetts general partnership,
which operates as a registered investment adviser. David L. Babson and
Company Incorporated holds a 50% ownership interest in the partnership.
36. Potomac Babson Incorporated, a Massachusetts corporation, is a registered
investment adviser. David L. Babson and Company Incorporated owns 60% of
the outstanding shares of Potomac Babson Incorporated.
37. OppenheimerFunds, Inc., a registered investment adviser incorporated in
Colorado, all of the stock of which is owned by Oppenheimer Acquisition
Corporation.
38. Centennial Asset Management Corporation, a Delaware corporation that serves
as the investment adviser and general distributor of the Centennial Funds.
OppenheimerFunds, Inc. owns all the stock of Centennial Asset Management
Corporation.
39. HarbourView Asset Management Corporation, a registered investment adviser
incorporated in New York, all the stock of which is owned by
OppenheimerFunds, Inc.
40. MultiSource Service, Inc., a Colorado corporation that operates as a
clearing broker, 80% of the stock of which is owned by OppenheimerFunds,
Inc.
41. OppenheimerFunds Distributor, Inc., a registered broker-dealer incorporated
in New York, all the stock of which is owned by OppenheimerFunds, Inc.
42. Oppenheimer Partnership Holdings, Inc., a Delaware holding company, all the
stock of which is owned by OppenheimerFunds, Inc.
43. Oppenheimer Real Asset Management, Inc., a commodity pool operator
incorporated in Delaware, all the stock of which is owned by
OppenheimerFunds, Inc.
44. Shareholder Financial Services, Inc., a transfer agent incorporated in
Colorado, all the stock of which is owned by OppenheimerFunds, Inc.
45. Shareholder Services, Inc., a transfer agent incorporated in Colorado, all
the stock of which is owned by OppenheimerFunds, Inc.
46. Centennial Capital Corporation, a Delaware corporation that formerly
sponsor a unit investment trust. Centennial Asset Management Corporation
owns all the outstanding shares of Centennial Capital Corporation.
47. Cornerstone Office Management, LLC, a Delaware limited liability company
that is 50% owned by Cornerstone Real Estate Advisers, Inc. and 50% owned
by MML Realty Management Corporation.
48. Cornerstone Suburban Office Investors, LP, a Delaware limited partnership,
which operates as a real estate operating company. Cornerstone Office
Management, LLC holds a 1% general partnership interest in this fund and
MassMutual holds a 99% limited partnership interest.
49. CM Advantage, Inc., a Connecticut corporation that acts as a general
partner in real estate limited partnerships. MassMutual Holding Trust II
owns all of the outstanding stock.
50. CM International, Inc., a Delaware corporation that holds a mortgage pool
and issues collateralized bond obligations. MassMutual Holding Trust II
owns all the outstanding stock of CM International, Inc.
51. CM Property Management, Inc., a Connecticut real estate holding company,
all the stock of which is owned by MassMutual Holding Trust II.
52. HYP Management, Inc., a Delaware corporation which is the LLC Manager for
MassMutual High Yield Partners LLC and
21
<PAGE>
owns 1.28% of the LLC units of such entity. MassMutual Holding Trust II
owns all the outstanding stock of HYP Management, Inc.
53. MMHC Investment, Inc., a Delaware corporation which is a passive investor
in MassMutual/Darby CBO LLC, MassMutual High Yield Partners LLC and other
MassMutual investments. MassMutual Holding Trust II owns all the
outstanding stock of MMHC Investment, Inc.
54. MassMutual High Yield Partners LLC, a Delaware limited liability company,
that operates as a high yield bond fund. MassMutual holds 5.28%, MMHC
Investment Inc. holds 35.99%, and HYP Management, Inc. hold 1.28% for a
total of 42.55% of the ownership interest in this company.
55. MML Realty Management Corporation, a property manager incorporated in
Massachusetts, all the stock of which is owned by MassMutual Holding Trust
II.
56. 505 Waterford Park Limited Partnership, a Delaware limited partnership,
which holds title to an office building in Minneapolis, Minnesota. MML
Realty Management Corporation holds a 1% general partnership interest in
this partnership and MassMutual holds a 99% limited partnership interest.
57. MassMutual/Darby CBO IM Inc., a Delaware corporation which operates as the
LLC Manager of MassMutual/Darby CBO LLC MMHC Investment, Inc. owns 50% of
the capital stock of this company.
58. MassMutual/Darby CBO LLC, a Delaware limited liability company that
operates as a fund investing in high yield debt securities of U.S. and
emerging market issuers. MassMutual holds 1.79%, MMHC Investment holds
44.91% and MassMutual High Yield Partners LLC holds 2.39% of the ownership
interest in this company.
59. Urban Properties, Inc., a Delaware real estate holding and development
company, all the stock of which is owned by MassMutual Holding Trust II.
60. Westheimer 335 Suites, Inc., was incorporated in Delaware to serve as a
general partner of the Westheimer 335 Suites Limited Partnership.
MassMutual Holding Trust II owns all the stock of Westheimer 335 Suites,
Inc.
61. Westheimer 335 Suites Limited Partnership, a Texas limited partnership of
which Westheimer 335 Suites, Inc. is the general partner.
62. MassMutual Internacional (Argentina) S.A., an Argentine corporation, which
operates as a holding company. MassMutual International Inc. owns 99.9% of
the outstanding shares and MassMutual Holding Company owns the remaining
0.1% of the shares.
63. MassMutual Internacional (Chile) S.A. a Chilean corporation, which operates
as a holding company. MassMutual International Inc. owns 99% of the
outstanding shares and MassMutual Holding Company owns the remaining 0.1%
of the shares.
64. MassMutual International (Bermuda) Ltd., a Bermuda life insurance company,
all of the stock of which is owned by MassMutual International Inc.
65. MassMutual International (Luxembourg) S.A. a Luxembourg corporation, which
operates as an insurance company. MassMutual International Inc. owns 99.9%
of the outstanding shares and MassMutual Holding Company owns the
remaining 0.1% of the shares.
66. MassLife Seguros de Vida S.A., a life insurance company incorporated in
Argentina. MassMutual International Inc. owns 99.9% of the outstanding
capital stock of MassLife Seguros de Vida S.A.
67. MassMutual Services, S.A., an Argentine corporation, which operates as a
service company. MassMutual Internacional (Argentina) S.A. owns 99.9% of
the outstanding shares and MassMutual International, Inc. own 0.1% of the
shares.
68. Mass Seguros de Vida S.A., a life insurance company incorporated in Chile.
MassMutual Internacional (Chile S.A.) owns 33.5% of the outstanding capital
stock of Mass Seguros de Vida S.A.
69. Origen Inversiones S.A., a Chilean corporation which operates as a holding
company. MassMutual Internacional (Chile)
22
<PAGE>
S.A. holds a 33.5% ownership interest in this corporation.
70. Compania Seguros de Vida Corp, S.A., a Chilean insurance company. Origen
Inversiones S.A. owns 99% of the outstanding shares of this company
71. Oppenheimer Series Fund Inc., a Maryland corporation and a registered
open-end investment company of which MassMutual and its affiliates own a
majority of the outstanding shares issued by the fund.
72. Panorama Series Fund, Inc., a registered open-end investment company
organized as a Maryland corporation. Shares of the fund are sold only to
MassMutual and its affiliates.
73. The DLB Fund Group, an open-end management investment company, advised by
David L. Babson and Company Incorporated. MassMutual owns at least 25% of
each series.
MassMutual acts as the investment adviser to each of the following investment
companies and as such may be deemed to control them.
1. MML Series Investment Fund, a registered open-end Massachusetts business
trust, all of the shares are owned by separate accounts of MassMutual and
companies controlled by MassMutual.
2. MassMutual Corporate Investors, a registered closed-end Massachusetts
business trust.
3. MassMutual Corporate Value Partners, Limited, a Cayman Islands corporation
that operates as a high-yield bond fund. MassMutual Corporate Value Limited
holds an approximately 93% ownership interest in this company.
4. MassMutual High Yield Partners LLC, a Delaware limited liability company,
that operates as a high yield bond fund. MassMutual holds 5.28%, MMHC
Investment Inc. holds 35.99%, and HYP Management, Inc. hold 1.28% for a
total of 42.55% of the ownership interest in this company.
5. MassMutual Institutional Funds, a registered open-end Massachusetts
business trust, all of the shares are owned by MassMutual.
6. MassMutual Participation Investors, a registered closed-end Massachusetts
business trust.
7. MassMutual/Carlson CBO N.V., a Netherlands Antilles corporation which
operates a collateralized bond obligation fund. MassMutual Holding MSC,
Inc. and Carlson Investment Management Co. each own 50% of the outstanding
shares.
8. MassMutual/Darby CBO, LLC, a Delaware limited liability company that
operates as a fund investing in high yield debt securities of U.S. and
emerging market issuers. MassMutual owns 1.79% , MMHC investment, Inc. owns
44.91% and MassMutual High Yield Partners LLC owns 2.39% of the ownership
interest in this company.
Item 27. Number of Contract Owners
-------------------------
As of February 6, 1998, 12,980 Separate Account 1 Contracts were
in force.
Item 28. Indemnification
---------------
MassMutual directors and officers are indemnified under its by-
laws. No indemnification is provided with respect to any
liability to any entity which is registered as an investment
company under the Investment Company Act of 1940 or to the
security holders thereof, where the basis for such liability is
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of office.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of MassMutual pursuant to the foregoing
provisions, or otherwise, MassMutual has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by MassMutual of expenses incurred or
23
<PAGE>
paid by a director, officer or controlling person of MassMutual
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, MassMutual
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
Item 29. Principal Underwriters
----------------------
(a) MML Investors Services, Inc., a wholly-owned subsidiary of
MassMutual, acts as principal underwriter for registered
separate accounts of MassMutual, C.M. Life and MML Bay State.
(b)(1) MML Investors Services, Inc. acted as the underwriter of the
Contracts. The following people are the officers and directors
of the co-underwriter.
MML INVESTORS SERVICES, INC.
OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
OFFICER BUSINESS ADDRESS
- -------------------------------------------------------------------------------------
<S> <C>
Kenneth M. Rickson One Monarch Place
President 1414 Main Street
Springfield, MA 01144-1013
Michael L. Kerley One Monarch Place
Vice President, Chief Legal Officer, 1414 Main Street
Chief Compliance Officer, Assistant Secretary Springfield, MA 01144-1013
Ronald E. Thomson One Monarch Place
Vice President, Treasurer 1414 Main Street
Springfield, MA 01144-1013
Ann F. Lomeli 1295 State Street
Secretary Springfield, MA 01111
John E. Forrest One Monarch Place
Vice President 1414 Main Street
National Sales Director Springfield, MA 01144-1013
Eileen D. Leo One Monarch Place
Assistant Secretary, 1414 Main Street
Assistant Treasurer Springfield, MA 01144-1013
David Deonarine One Monarch Place
Sr. Registered Options Principal 1414 Main Street
Springfield, MA 01144-1013
Nicholas J. Orphan 245 Peach Tree Center Ave., Suite 2330
Regional Supervisor (South) Atlanta, GA 30303
Robert W. Kumming 1295 State Street
Regional Pension Management Supervisor (East/Central) Springfield, MA 01111
Peter J. Zummo 1295 State Street
Regional Pension Management Supervisor (South/West) Springfield, MA 01111
Bruce Lukowiak 6263 North Scottsdale Rd., Suite 222
Regional Supervisor (West) Scottsdale, AZ 85250
Gary L. Greenfield 1 Lincoln Center, Suite 1490
Regional Supervisor (Central) Oakbrook Terrace, IL 60181
Burvin E. Pugh, Jr. 1295 State Street
</TABLE>
24
<PAGE>
<TABLE>
<S> <C>
Chief Agency Field Force Supervisor Springfield, MA 01111
John P. McCloskey 1295 State Street
Regional Supervisor (East) Springfield, MA 01144
Susan Alfano 1295 State Street
Director Springfield, MA 01111
Lawrence V. Burkett, Jr. 1295 State Street
Chairman of the Board of Directors Springfield, MA 01111
Peter Cuozzo, CLU, ChFC 140 Garden Street
Director Hartford, CT 06154
John B. Davies 1295 State Street
Director Springfield, MA 01111
Anne Melissa Dowling 140 Garden Street
Director Hartford, CT 01654
Maureen R. Ford 140 Garden Street
Director Hartford, CT 01654
Gary T. Huffman 1295 State Street
Director Springfield, MA 01111
Douglas J. Jangraw 140 Garden Street
Director Hartford, CT 01654
</TABLE>
(c) See the section captioned "Service Arrangements and Distribution"
in the Statement of Additional Information.
Item 30. Location of Accounts and Records
--------------------------------
All accounts, books, or other documents required to be
maintained by Section 31(a) of the Investment Company Act of
1940 and the rules promulgated thereunder are maintained by the
Registrant through Massachusetts Mutual Life Insurance Company,
1295 State Street, Springfield, Massachusetts 01111.
Item 31. Management Related Services
---------------------------
None
Item 32. Undertakings
------------
(a) Registrant undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure
that the audited financial statements in the Registration
Statement are never more than 16 months old for so long as
payments under the variable annuity contracts may be accepted.
(b) Registrant undertakes to include either (1) as part of any
application to purchase a contract offered by the prospectus, a
space that an applicant can check to request a Statement of
Additional Information, or (2) a post card or similar written
communication affixed to or included in the prospectus that the
applicant can remove to send for a Statement of Additional
Information;
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made
available under this Form promptly upon written or oral request.
(d) Registrant asserts that the Separate Account meets the
definition of a separate account under the Investment Company
Act of 1940.
(e) Massachusetts Mutual Life Insurance Company hereby represents
that the fees and charges deducted under the flexible purchase
payment individual variable annuity contracts described in this
Registration Statement in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be
incurred, and risks assumed by Massachusetts Mutual Life
Insurance Company.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Massachusetts Mutual Variable Annuity Separate Account 1, certifies that it
meets all of the requirements for effectiveness of this Post-Effective Amendment
No. 17 pursuant to Rule 485(b) under the Securities Act of 1933 and has caused
this Post-Effective Amendment No. 17 to Registration Statement No. 2-75412 to be
signed on its behalf by the undersigned thereunto duly authorized, all in the
city of Springfield and the Commonwealth of Massachusetts, on the 10th day of
April, 1998.
MASSACHUSETTS MUTUAL VARIABLE ANNUITY SEPARATE
ACCOUNT 1
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
(Depositor)
By: /s/ Thomas B. Wheeler*
-------------------------------------
Thomas B. Wheeler, Chief Executive Officer
Massachusetts Mutual Life Insurance Company
/s/ Richard M. Howe On April 10, 1998, as Attorney-in-Fact pursuant to
- ------------------- powers of attorney incorporated by reference.
*Richard M. Howe
As required by the Securities Act of 1933, this Post-Effective Amendment
No. 17 to Registration Statement No. 2-75412 has been signed by the following
persons in the capacities and on the duties indicated.
Signature Title Date
- --------- ----- ----
/s/ Thomas B. Wheeler* Chief Executive Officer and April 10, 1998
- ---------------------- Chairman of the Board
Thomas B. Wheeler
/s/ John J. Pajak* President, Chief Operating April 10, 1998
- ------------------ Officer and Director
John J. Pajak
/s/ Joseph M. Zubretsky* Executive Vice President, April 10, 1998
- ------------------------ Chief Financial Officer &
Joseph M. Zubretsky Chief Accounting Officer
/s/ Roger G. Ackerman Director --
- ---------------------
Roger G. Ackerman
/s/ James R. Birle* Director April 10, 1998
- -------------------
James R. Birle
/s/ Gene Chao* Director April 10, 1998
- --------------
Gene Chao, Ph.D.
/s/ Patricia Diaz Dennis* Director April 10, 1998
- -------------------------
Patricia Diaz Dennis
26
<PAGE>
/s/ Anthony Downs* Director April 10, 1998
- ------------------
Anthony Downs
/s/ James L. Dunlap* Director April 10, 1998
- --------------------
James L. Dunlap
/s/ William B. Ellis* Director April 10, 1998
- ---------------------
William B. Ellis, Ph.D.
/s/ Robert M. Furek* Director April 10, 1998
- --------------------
Robert M. Furek
/s/ Charles K. Gifford* Director April 10, 1998
- -----------------------
Charles K. Gifford
/s/ William N. Griggs* Director April 10, 1998
- ----------------------
William N. Griggs
/s/ George B. Harvey* Director April 10, 1998
- ---------------------
George B. Harvey
/s/ Barbara B. Hauptfuhrer* Director April 10, 1998
- ---------------------------
Barbara B. Hauptfuhrer
/s/ Sheldon B. Lubar* Director April 10, 1998
- ---------------------
Sheldon B. Lubar
/s/ William B. Marx, Jr.* Director April 10, 1998
- -------------------------
William B. Marx, Jr.
/s/ John F. Maypole* Director April 10, 1998
- --------------------
John F. Maypole
/s/ Alfred M. Zeien* Director April 10, 1998
- --------------------
Alfred M. Zeien
/s/ Richard M. Howe On April 10, 1998, as Attorney-in-Fact pursuant to
- ------------------- powers of attorney.
*Richard M. Howe
27
<PAGE>
REPRESENTATION BY REGISTRANT'S COUNSEL
--------------------------------------
As counsel to the Registrant, I, Lynn S. Mercier, have reviewed this
Post-Effective Amendment No. 17 to Registration Statement No. 2-75412, and
represent, pursuant to the requirement of paragraph (e) of Rule 485 under the
Securities Act of 1933, that this Amendment does not contain disclosures which
would render it ineligible to become effective pursuant to paragraph (b) of said
Rule 485.
/s/ Lynn S. Mercier
------------------
Lynn S. Mercier
Attorney
Massachusetts Mutual Life
Insurance Company
28
<PAGE>
EXHIBIT LIST
Exhibit 1 Copy of Massachusetts Mutual Life Insurance Company Board of
Directors Resolution establishing the Separate Account.
Exhibit 3 Copy of Form of Distribution Agreement between the Registrant
and MML Investors Services, Inc.
Exhibit 4 Form of Flexible Purchase Payment Multi-Fund Variable Annuity
Contract.
Exhibit 5 Form of Application used with the Flexible Purchase Payment
Multi-Fund Variable Annuity Contract.
Exhibit 9 Opinion of and Consent of Counsel.
Exhibit 10(i) Written consent of Coopers & Lybrand L.L.P., Independent
Accountants.
29
<PAGE>
EXHIBIT 1 - Copy of Resolution of the Executive Committee of the Board of
Directors of Massachusetts Mutual Life Insurance Company, authorizing the
establishment of the Separate Account.
April 8, 1981
VOTED: That the Company establish a separate investment account, to be known as
"Massachusetts Mutual Variable Annuity Fund 4", in accordance with the
provisions of Section 132G of Chapter 175 of the Massachusetts General Laws for
the purpose of investing payments received under variable annuity contracts to
be issued by the Company for tax-qualified plans (the "Contracts"); that the
assets of the Fund be invested in shares of MML Investment Company, Inc., MML
Money Market Investment Company, Inc., and MML Managed Bond Investment Company,
Inc. or, in lieu thereof or in addition thereto, in the shares of any other
investment company registered under the Investment Act of 1940, at the net asset
value of such shares; and that all necessary steps be taken to comply with
applicable federal and state laws in order that the Contracts may be sold in all
jurisdictions in which the Company is authorized to do a variable annuity
business.
VOTED: That Massachusetts Mutual Variable Annuity Fund 4 be registered with the
United States Securities and Exchange Commission under the Investment Act of
1940 as a unit investment trust, and that the Contracts be registered under the
Securities Act of 1933; and that for that purpose the Chairman, the President,
any Vice President and the Secretary of the Company be and they are, and each of
them singly is, hereby authorized to execute and file or cause to be filed with
the Securities and Exchange Commission, in the name of and on behalf of the
Company and the Fund, a Notification of Registration on Form N-8A, a
Registration Statement on Form N-8B-2 and a Registration Statement on Form S-6,
or on any other forms which the rules of said Commission may permit, and to
execute and file or cause to be filed, in the name of and on behalf of the
Company and the Fund, such application or applications for exemptions from
provisions of the Investment Act of 1940 and the rules thereunder and such other
documents and such amendments (including post-effective amendments) and to take
such other action as the officer or officers so acting may consider necessary or
desirable.
30
<PAGE>
EXHIBIT 3
Copy of Distribution Agreement
SERVICING AGREEMENT
This SERVICING AGREEMENT is made this 2nd day of January, 1988, by and between
MML Investors Services, Inc. ("MMLISI") and Massachusetts Mutual Life Insurance
Company ("MMLIC"), on its own behalf and on behalf of Mass Mutual variable
Annuity Separate Account 1 and Mass Mutual Variable Annuity Separate Account 2
(the "Separate Accounts"), separate accounts of MMLIC, as follows:
WHEREAS, the Separate Accounts were each established under authority of
resolutions of MMLIC's Board of Directors in order to set aside and invest
assets attributable to certain variable annuity contracts (hereinafter
collectively the "Contracts") issued by MMLIC and sold by its agents;
WHEREAS, MMLIC has registered each Separate Account as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act") and has registered the
Contracts under the Securities Act of 1933;
WHEREAS, MMLIC is registered as a broker-dealer with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended (the "1934
Act") and is a member of the National Association of Securities Dealers,
Inc.(the "NASD");
WHEREAS, MMLIC has served as principal underwriter of the Contracts and has
provided supervision to its agents who sell the Contracts and has been
responsible for compliance with broker-dealer requirements under Federal and
state securities laws and NASD regulations;
WHEREAS, MMLIC desires to reregister as a broker-dealer and to engage MMLISI, a
registered broker-dealer, to assume the above responsibilities with respect to
the distribution of the Contracts and serve as principal underwriter of the
Contracts, as required by applicable law, and MMLISI desires to assume such
responsibilities and to serve as principal underwriter of the Contracts;
NOW, THEREFORE, the parties hereto agree as follows:
1. MMLIC grants to MMLISI the right to be, and MMLISI agrees to serve as,
principal underwriter of the Contracts during the term of this Agreement for
the purposes of Federal and state securities laws. MMLISI agrees, on behalf
of MMLIC, to undertake, at its own expense except as otherwise provided
herein, to provide sales services relative to the Contracts and otherwise to
perform all duties and functions that are necessary and proper for the
distribution of the Contracts as required under Federal and state securities
laws and NASD regulations.
2. MMLISI represents that it is a duly registered broker-dealer under the 1934
Act and is a member in good standing of the NASD and, to the extent
necessary to perform the activities contemplated hereunder, is duly
registered, or otherwise qualified, under the securities laws of every state
or other jurisdiction in which the Contracts are available for sale. MMLISI
shall be fully responsible for carrying out all compliance, supervisory and
other obligations hereunder required by the NASD Rules of Fair Practice and
Federal and state securities laws. Without limiting the generality of the
foregoing, MMLISI agrees that it shall be fully responsible for:
(a) Ensuring that no person shall offer or sell the Contracts on behalf of
MMLIC until such person is duly registered as a representative of
MMLISI, and appropriately licensed, registered, or otherwise, qualified
to offer and sell such Contracts under the Federal securities laws and
any applicable securities laws of each state or other jurisdiction in
which such Contracts may be sold, in which MMLIC is licensed to sell the
Contracts, and in which such person shall offer or sell the Contracts;
(b) Training and supervising MMLIC's agents for purposes of complying on a
continuous basis with the NASD Rules of Fair Practice and with Federal
and State securities laws applicable in connection with the offering and
sale of the Contracts. In this connection, MMLISI shall:
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A. Jointly conduct with MMLIC such training (including the preparation and
utilization of training materials) as in the opinion of MMLISI is necessary
to accomplish the purposes of this Agreement;
B. Establish and implement reasonable written procedures for supervision of
sales practices of representatives of MMLISI who sell the Contracts;
C. Ensure that MMLIC's agents who are also representatives of MMLISI shall
recommend the purchase of Contracts only upon reasonable grounds to believe
that the purchase of the Contract is suitable for such applicant;
D. Provide a sufficient number of registered principals and an adequately
staffed compliance department to carry out the responsibilities as set
forth herein; and
E. Impose disciplinary measures on agents of MMLIC who are also registered
representatives of MMLISI as required.
(c) MMLISI shall assume full responsibility for the securities activities
of all persons engaged directly or indirectly in operations of MMLISI
and MMLIC in connection with the offer or sale of the Contracts; each
such person shall be considered a "person associated" of MMLISI is
defined in Section 3(a)(18) of the 1934 Act. MMLISI shall have full
responsibility for each such person in connection with his or her
training, supervision, and control, as contemplated by Section 15 of
the 1934 Act.
3. MMLIC represents and warrants that the Contracts are registered under the
Securities Act of 1933, and that the Contracts are qualified to be sold
under the insurance and securities laws of all states in which Contracts
are authorized for sale. MMLIC further represents and warrants that it is
an insurance company duly organized under the laws of the Commonwealth of
Massachusetts and in good standing and authorized to conduct business under
the laws of each state in which the Contracts are sold, and that it has
legally and validly established the Separate Accounts as segregated asset
accounts under the Insurance Code of Massachusetts and has registered the
Separate Accounts as unit investment trusts in accordance with the
provisions of the 1940 Act to serve as segregated investment accounts for
the Contracts.
4. MMLISI agrees to ensure that its registered representatives use only the
prospectus or other applicable and authorized sales literature then in
effect in soliciting and selling the Contracts. MMLISI is not authorized to
give any information or to make any representations concerning the
Contracts other than those contained in the current prospectus therefore
filed with the Securities and Exchange Commission or in such sales
literature as may be authorized by MMLIC.
5. All applications for Contracts shall be made on application forms supplied
by MMLIC, and all payments collected by MMLISI shall be remitted by MMLISI
promptly in full, together with such application forms and any other
required documentation, directly to MMLIC at the address indicated on such
application or to such other address as MMLIC may, from time to time,
designate in writing. MMLISI shall review all such applications for
suitability. Checks or money orders in payment on any contract shall be
drawn to the order of "Massachusetts Mutual Life Insurance Company." All
applications are subject to acceptance or rejection by MMLIC at its sole
discretion.
6. All money payable in connection with any of the Contracts whether as
premiums, purchase payments or otherwise, and whether paid by, or on behalf
of any applicant or contract owner, is the property of MMLIC and shall be
transmitted immediately in accordance with the administrative procedures of
MMLIC without any deduction or offset for any reason,. including by example
but not limitation, any deduction or offset for compensation claimed by
MMLISI. No cash payments shall be accepted by MMLISI in connection with the
Contracts.
7. MMLIC agrees to pay the costs of printing the prospectuses and sales
material used in connection with the solicitation of applications for the
Contracts. MMLIC shall provide to MMLISI copies of such prospectuses and
sales material in such number as MMLISI shall reasonably request. MMLIC
shall make available to MMLISI copies of all financial statements and other
documents that MMLISI reasonably requests for use in connection with the
distribution of the Contracts.
8. Notwithstanding anything in this Agreement to the contrary, MMLISI may
enter into sales agreements with independent broker-dealers for the sale of
the Contracts, subject to the prior written approval of MMLIC of each such
sales agreement and the terms thereof. All such sales agreements entered
into by MMLISI shall provide that each independent broker-dealer will
assume full responsibility for continued compliance by itself and its
associated persons with the NASD Rules of Fair Practice and applicable
Federal and state securities and insurance laws, and shall contain
substantially identical provisions to those set forth herein. All
associated persons of such, independent broker-dealer soliciting
applications for the Contracts shall be duly and appropriately licensed or
appointed for the sale of the Contracts under the NASD Rules of Fair
Practice and Federal and
32
<PAGE>
state securities and insurance laws in which such person shall offer or
sell the Contracts.
9. MMLIC shall apply for and maintain the proper insurance licenses for each
of the agents and brokers selling the Contracts in all states or
jurisdictions in which the Contracts are offered for sale by such agent or
broker. MMLIC reserves the right to refuse to appoint any proposed agent or
broker, or independent broker-dealer, and to terminate an agent, broker or
independent broker-dealer once appointed. MMLIC agrees to be responsible
for all licensing or other fees required under pertinent state insurance
laws to properly authorize brokers or agents for the sale of the Contracts;
however, the foregoing shall not limit MMLIC's right to collect such amount
from any person or entity other than MMLISI.
10. Commissions or other fees due all brokers and agents in connection with the
sale of Contracts shall be paid by MMLIC to the persons entitled thereto in
accordance with both the applicable agreement between each such broker or
agent and MMLIC. MMLISI shall assist MMLIC in the payment of such amounts
as MMLIC shall reasonably request, provided that MMLISI shall not be
required to perform any acts that would subject it to registration under
the insurance laws of any state. The responsibility of MMLISI shall include
the performance of all activities by MMLISI necessary in order that the
payment of such amounts fully complies with all applicable state and
Federal securities laws. Unless applicable state or Federal securities law
shall require, MMLIC retains the ultimate right to determine the commission
rate paid to its agents. Unless otherwise agreed to by MMLIC in writing,
neither MMLISI nor any of MMLIC's agents nor any independent broker-dealer
shall have an interest in any surrender charges, deductions, or other fees
payable to MMLIC as set forth herein.
11. With respect to the first calendar year of this Agreement, MMLISI shall be
compensated for its services under this Agreement in the amount of three
hundred two thousand dollars ($302,000) The amount of compensation to be
paid to MMLISI in subsequent years shall be negotiated by the parties prior
thereto.
12. The services of MMLISI and MMLIC to the Separate Accounts hereunder are not
to be deemed exclusive and MMLISI and MMLIC shall be free to render similar
services to others so long as their services hereunder are not impaired or
interfered with hereby.
13. The parties hereto recognize that any person selling the Contracts as
contemplated by this Agreement shall be acting as an insurance agent of
MMLIC or as an insurance broker, and that the rights of MMLISI to supervise
such persons shall be limited to the extent specifically described herein
or required under applicable Federal or state securities laws or NASD
regulations. Such persons shall not be considered employees of MMLISI and
shall be considered agents of MMLISI only as and to the extent required by
such laws and regulations. Further, it is intended by the parties hereto
that such persons are and shall continue to be considered to have a common
law independent contractor relationship with MMLIC and not to be common law
employees of MMLIC.
14. Subject to termination, as hereinafter provided, the Agreement shall remain
in full force and effect for the initial term of this Agreement, which
shall be for a two-year period commencing the date first above written, and
this Agreement shall continue in full force and effect from year to year
thereafter, until terminated as herein provided, each such additional year
being an additional term of this Agreement.
(a) (a)This Agreement may be terminated by either party hereto upon 60
days written notice to the other party, or at any time upon the mutual
written consent of the parties hereto.
(b) This Agreement shall automatically be terminated in the event of its
assignment.
(c) Upon termination of this Agreement, all authorizations, rights, and
obligations shall cease except the obligations to settle accounts
hereunder, including the settlement of monies (due in connection with
Contracts in effect at the time of termination issued pursuant to
applications received by MMLIC prior to termination.
15. This Agreement shall be subject to the provisions of the 1934 Act and the
1940 Act and the rules, regulations, and rulings thereunder and of the
NASD), from time to time in effect, including such exemptions from the 1940
Act as the SEC may grant, and the terms hereof shall be interpreted and
construed in accordance therewith. Without limiting the generality of the
foregoing, the term "assigned" shall not include any transactions exempted
from section 15(b)(2) of the 1940 Act. MMLISI and MMLIC shall each submit
to all regulatory and administrative bodies having jurisdiction over the
sales of the Contracts, present or future, any information reports, or
other material that any such body by reason of this Agreement may request,
or require pursuant to applicable law or regulations. In particular,
without limiting the foregoing, MMLIC agrees that any books and records it
maintains pursuant to paragraph 16 of this Servicing Agreement which are
required to be maintained under Rule l7a-3 or 17a-4 of the 1934 Act shall
be subject to inspection by the Securities and Exchange Commission in
accordance
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<PAGE>
with Section 17(a) of the 1934 Act.
16. MMLISI and MMLIC shall each cause to be maintained and preserved for the
periods prescribed, such accounts, books, and other documents as are
required of it by the 1934 Act and 1940 Act and any other applicable laws
and regulations. In particular, without limiting the foregoing, MMLISI
shall cause all the books and records in connection with the offer and sale
of the Contracts to be maintained and preserved in conformity with the
requirements of Rules 17a-3 and 17a-4 under the 1934 Act, to the extent
that such requirements are applicable to the Contracts. The books,
accounts, and records of MMLISI and MMLIC as to all transactions hereunder
shall be maintained so as to disclose clearly and accurately the nature and
details of the transactions. The payment of premiums, purchase payments,
commissions and other fees and payments in connection with the Contracts
shall be reflected on the books and records of MMLISI as required under
applicable NASD regulations and Federal and State securities laws
requirements. MMLISI and MMLIC, from time to time during the term of this
Agreement, shall divide the administrative responsibility for maintaining
and preserving the books, records and accounts kept in connection with the
Contracts; provided, however, in the case of books, records and accounts
kept pursuant to a requirement of applicable law or regulation, the
ultimate and legal responsibility for maintaining and preserving such
books, records and accounts shall be that of the party which is required to
maintain or preserve such books, records and accounts under the applicable
law or regulation, and such books, records and accounts shall be maintained
and preserved under the supervision of that party. MMLISI and MMLIC shall
each cause the other to be furnished with such reports as may reasonably
request for the purpose of meeting its reporting and record keeping
requirements under such regulations and laws, and under the insurance laws
of the Commonwealth of Massachusetts and any other applicable states or
jurisdictions.
17. MMLISI and MMLIC each agree and understand that all documents, reports,
records, books, files, and other materials required under applicable NASD
regulation and Federal and state securities laws relative to the sale of
Contracts shall be the property of MMLISI, unless such documents, reports,
records, books, files and other materials are required by applicable
regulation or law to be maintained also by MMLIC, in which case such
material shall be the joint property of MMLISI and MMLIC. All other
documents, reports, records, books, files and other materials maintained
relative to this Agreement shall be the property of MMLIC. Upon termination
of this Agreement, all said material shall be returned to the applicable
party.
18. MMLISI and MMLIC shall establish and maintain facilities and procedures for
the safekeeping of all books, accounts, records, files, and other materials
relative to this Agreement. Such books, accounts, records, files, and other
materials shall remain confidential and shall not be voluntarily disclosed
to any other person or entity.
19. MMLIC agrees to prepare and mail a confirmation for each transaction in
connection with the Contracts at or before the completion thereof as
required by the 1934 Act, including Rule lOb-10 thereunder. Each such
confirmation shall reflect the facts of the transaction, and the form
thereof will show that it is being sent on behalf of MMLISI acting in
capacity of Agent for MMLIC.
20. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule, or otherwise, the remainder of this Agreement
shall not be affected thereby.
21. This Agreement constitutes the entire agreement between the parties hereto
and may not be modified except in a written instrument executed by all
parties hereto.
22. This Agreement shall be interpreted in accordance with the laws of the
Commonwealth of Massachusetts.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their respective officials thereunto duly authorized and, seals to be
affixed, as of the day and year first above written.
MASSACHUSETTS MUTUAL LIFE
ATTEST: INSURANCE COMPANY, on its behalf
And on behalf of MASS MUTUAL
VARIABLE ANNUITY SEPARATE
ACCOUNT and MassMutual
VARIABLE ANNUITY SEPARATE
ACCOUNT 2
By: /s/ Thomas B. Wheeler
---------------------------
Thomas B. Wheeler
Secretary President
ATTEST MML INVESTORS SERVICES, INC.
By: /s/ Peter D. Cuozzo
---------------------------
Secretary Peter D. Cuozzo
President
35
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EXHIBIT 4
FORM OF FLEXIBLE PURCHASE PAYMENT
MULTI-FUND VARIABLE ANNUITY CONTRACT (935-1A-8200)
36
<PAGE>
[LOGO OF MASSACHUSETTS MUTUAL
LIFE INSURANCE COMPANY APPEARS HERE]
SPRINGFIELD, MASSACHUSETTS 01111
Flexible Purchase Payment Multi-Fund
Variable Annuity Contract
================================================================================
Contract Number
Annuitant
Amount
================================================================================
Dear Contract Owner:
READ YOUR CONTRACT CAREFULLY. It has been written in readable language to help
you understand its terms. We have used examples to explain some of the
provisions. These examples do not reflect the actual amounts or status of this
contract. As you read through the contract, remember the words "we", "us" and
"our" refer to Massachusetts Mutual Life Insurance Company.
We will pay the maturity benefit to the Owner when this contract matures if
the Annuitant is living at that time. If the Annuitant dies before this contract
matures, we will pay the death benefit to the Beneficiary when due proof of the
Annuitant's death is received at our Home Office. Either payment is subject to
the terms of this contract which are contained on this and the following pages.
For service or information on this contract, contact the agent who sold the
contract, any of our agency offices or our Home Office.
YOU HAVE A RIGHT TO RETURN THIS CONTRACT. If you decide not to keep this
contract, return it within ten days after you receive it. It may be returned by
delivering or mailing it to our Home Office, to any of our agency offices or to
the agent who sold the contract. Then, the contract will be as though it had
never been issued. We will promptly refund the greater of:
(a) The purchase payments made, reduced by the net amount of any partial
redemptions;
(b) The value of this contract on the date we receive it, plus any deductions
the purchase payments.
Signed for Massachusetts Mutual Life Insurance Company at Springfield,
Massachusetts.
Sincerely yours,
/s/ William J. Clark /s/ [SIGNATURE APPEARS HERE]
President Secretary
This Contract provides that: A monthly life income is payable beginning on
the date this contract matures if the
Annuitant is living at that time
A death benefit is payable if the Annuitant
dies before this contract matures
Flexible purchase payments may be made to the
date this contract matures or to the
Annuitant's death, if earlier.
This Contract is not participating. It does not provide for the payment of
dividends.
All values provided by this contract on or before the date it matures and
annuity payments under any Variable Monthly Income settlement are based on the
investment performance of the Separate Account shown on the Schedule Page. These
values and payments are variable and not guaranteed as to dollar amount.
[STAMP OF STATE OF TENNESSEE
DEPARTMENT OF INSURANCE APPEARS HERE]
<PAGE>
Contract Summary
This Summary briefly describes some of the major contract provisions. Since it
does not go into detail, the actual provisions will control. See those
provisions for full information and any limits that may apply. The "Where To
Find It" on the inside of the back cover shows where these provisions may be
found.
We will pay a maturity benefit if the Annuitant is living on the maturity date
and the contract is in force at that time. We will pay a death benefit if the
Annuitant dies before this contract matures sand while it is in force. "In
force" means that the contract has not terminated. Since this is a variable
annuity contract, neither of these benefits is guaranteed as to dollar amount.
Instead, all values and benefits depend on the investment performance of the
Separate Account shown on the Schedule Page.
The first purchase payment for this contract is shown on the Schedule Page. Any
normal purchase payment elected is also shown on the Schedule Page. However,
purchase payments for this contract are flexible. Therefore, after the first one
has been paid, there is no requirement that any specific amount of purchase
payment be made on any date. Instead, within the limits stated in the contract,
any amount may be paid on any date before the maturity date or the death of the
Annuitant. if earlier.
Rights available under this contract include:
. The right to assign this contract.
. The right to change the Owner or any Beneficiary.
. The right to redeem this contract.
. The right to make partial redemptions.
. The right to change the date this contract matures.
. The right to allocate purchase payments among divisions of the Separate
Account.
. The right to transfer values between divisions of the Separate Account.
This contract also includes a number of Payment Options. These provide alternate
ways to pay the maturity value, the death benefit or the amount payable upon
redemption of this contract.
935-1A-8200
<PAGE>
THE SCHEDULE PAGE
THIS PAGE SHOWS SPECIFIC INFORMATION ABOUT THIS CONTRACT AND IS REFERRED TO
THROUGHOUT THE CONTRACT
CONTRACT NUMBER 0 000 000
ANNUITANT JOHN A DOE
AMOUNT MONTHLY INCOME PROVIDED BY MATURITY VALUE
ISSUE DATE FEB 15 1982
CONTRACT DATE FEB 15 1982
MATURITY DATE FEB 15 2012
ANNUITANT'S AGE ON CONTRACT DATE 35 MALE
- --------------------------------------------------------------------------------
BASIC CONTRACT INFORMATION
- --------------------------
PLAN SEPARATE ACCOUNT
---- ----------------
VARIABLE ANNUITY MASSACHUSETTS MUTUAL VARIABLE ANNUITY
SEPARATE ACCOUNT 2.
- --------------------------------------------------------------------------------
PURCHASE PAYMENT INFORMATION AS OF FEB 15 1982
- ----------------------------
FIRST PURCHASE PAYMENT $ 1,200.00
NORMAL PURCHASE PAYMENTS THEREAFTER AS FOLLOWS
ANNUAL SEMI ANNUAL QUARTERLY
------ ----------- ---------
$ 1,200.00 $ 600.00 $ 300.00
- --------------------------------------------------------------------------------
OTHER INFORMATION
OWNER AND BENEFICIARY - SEE APPLICATION ATTACHED TO THIS CONTRACT
935-1A-8200
<PAGE>
Part 1. The Basics Of This Contract
In this Part we discuss some basic concepts that
are necessary to understand this contract.
The Parties Involved -- The Owner is the person who owns this contract, as
Owner, Annuitant, shown on our records.
Beneficiary, Irrevocable The Annuitant is the person on whose life this
Beneficiary contract is issued. Payment of the maturity benefit
will be made if that person is living when this
contract matures. The Annuitant may be the Owner of
this contract, or someone else may be the Owner.
Example: You buy a contract on your own life and name
yourself as Owner. In this case, you are both
the Annuitant and Owner. If you buy a
contract on your spouse's life and name
yourself as Owner, then the Annuitant and
Owner are different people.
A Beneficiary is any person named on our records to
receive death proceeds after the Annuitant dies. There
may be different classes' of Beneficiaries, such as
primary and secondary. These classes set the order of
payment. There may be more than one Beneficiary in a
class.
Example: Debbie is named as primary (first)
Beneficiary. Anne and Scott are named as
Beneficiaries in the secondary class. If
Debbie is alive when the Annuitant dies, she
receives any death benefit. But if Debbie is
dead and Anne and Scott are alive when the
Annuitant dies, Anne and Scott receive any
death benefit.
Any Beneficiary may be named an Irrevocable
Beneficiary. An Irrevocable Beneficiary is one whose
consent is needed to change that Beneficiary. Also,
this Beneficiary must consent to the exercise of other
contract rights.
Dates -- Contract Date, Two important dates (shown on the Schedule Page) are
Contract Anniversary the Contract Date and the Issue Date.
Date, Contract Year,
Issue Date, Maturity The Contract Date is the starting point for
Date determining Contract Anniversary Dates and Contract
Years. The first Contract Anniversary Date is one
year after the Contract Date. The period from the
Contract Date to the first Contract Anniversary Date,
or from one Contract Anniversary Date to the next, is
called a Contract Year.
Example: The Contract Date is June 10,19X1. The first
Contract Anniversary Date is June 10,19X2.
The period from June 10,19X1 to June 10,19X2
is a Contract Year.
The Issue Date is used to determine the start of the
contestability period. We discuss contestability
below.
Another important date is the maturity date shown on
the Schedule Page. This is the date the maturity
benefit is payable unless an earlier or later maturity
date is elected. The maturity benefit will be payable
only if this contract is in force and the Annuitant is
living on the maturity date.
This Is A Legal This annuity is a legal contract between the Owner
Contract and us. The entire contract consists of the
application and the annuity, which includes any
riders. We have issued this contract in return for the
application and the payment of the first purchase
payment. Any change or waiver of its terms must be in
writing and signed by our Secretary or an Assistant
Secretary to be effective.
-2-
935-1A-8200
<PAGE>
-3-
Representations And We rely on all statements made by or for the
Contestability Annuitant in the application. Legally, these
statements are considered to be representations and
not warranties. We can contest the validity of this
contract for any material misrepresentation of a fact.
To do so, however, the misrepresentation must have
been made in the application and a copy of the
application must have been attached to this contract
when issued.
We must bring any legal action to contest the validity
of this contract within two years from its Issue Date.
After that we cannot contest its validity.
Misstatement Of Age One of the questions in the application concerns the
Annuitant's date of birth. If the date of birth given
is not correct, all benefits and amounts payable under
this contract will be what would have been provided if
the correct date of birth had been given.
No monthly life income payments will be made unless
satisfactory proof of the Annuitant's date of birth
has been received.
Meaning Of In Force "In force" means that this contract has not
terminated. This contract is in force from its Issue
Date or, if later, the date the first purchase payment
is paid. Payment of future purchase payments is not
required to continue this contract in force.
Home Office Our main office in Springfield, Massachusetts is
called the Home Office. The address is Massachusetts
Mutual Life Insurance Company, Springfield,
Massachusetts 01111.
Contract State This contract shall be construed according to the
laws of the state in which it was entered into.
Part 2. Purchase Payments
Purchase payments are the amounts that may be paid to
us under this contract. Purchase payments for this
contract are discussed in this Part.
The First Purchase The first purchase payment for this contract is shown
Payment on the Schedule Page. It is due on the Contract Date.
This contract will not be in force until the first
purchase payment has been paid to us.
Normal Purchase The normal annual purchase payment for this contract
Payments is shown on the Schedule Page. Other frequencies of
payment are also shown. The frequency for this
contract is as elected in the application. This
frequency may be changed by giving us advance written
notice.
Purchase Payment After the first purchase payment has been paid, we
Flexibility And Notices will send notices for the normal purchase payment on
the frequency in effect. However, payment of those
purchase payments is not required to continue the
contract in force. Instead, any amount may be paid at
any time before the maturity date, or the death of the
Annuitant if earlier, provided that each purchase
payment must be at least $25.
We will stop sending notices if no purchase payment
has been made for 18 consecutive months. However, if a
purchase payment is paid after that time, we will send
notices again.
We have the right to set a maximum limit on the total
amount of purchase payments that may be made under
this contract, Any such limit will not be less than
$500,000.
935-1A-8200
<PAGE>
Where To Pay All purchase payments are payable to us at our Home
Office. Upon request, a receipt signed by our
Secretary or an Assistant Secretary will be given for
any purchase payment.
Part 3. Values And Charges
The values of a variable annuity are not guaranteed.
Rather, they depend on the investment results of the
Separate Account shown on the Schedule Page. This Part
gives information about the Separate Account, and the
values and charges connected with it.
The Separate Account The Separate Account shown on the Schedule Page is a
separate investment account which we have established
under Massachusetts law. This Separate Account has
three divisions. They are:
. The Equity Division. Amounts credited to this
division are invested in shares of MML Equity
Investment Company, Inc., or its successor. This
Company invests primarily in common stocks and
other equity securities.
. The Money Market Division. Amounts credited to
this division are invested in shares of MML Money
Market Investment Company, Inc., or its successor.
This Company invests primarily in short-term debt
instruments.
. The Managed Bond Division. Amounts credited to
this division are invested in shares of MML
Managed Bond Investment Company, Inc., or its
successor. This Company invests primarily in
fixed-income securities.
We have the right to establish additional divisions of
the Separate Account from time to time. Amounts
credited to any additional divisions established would
be invested in shares of other investment companies.
For any division, we have the right to substitute new
investment companies.
Valuation Date And The value of this contract is determined on each
Valuation Period valuation date. A valuation date is any date on which
the valuation period is the period of time from the
end of one valuation date to the end of the next
valuation date.
Accumulation Units Accumulation units are used to measure the value of
And Annuity Units this contract on or before its maturity date. Annuity
units are used to determine the amount of each payment
of Variable Monthly Income after those payments have
begun. The value of any unit can vary from valuation
date to valuation date. That value reflects the
investment performance of the division of the Separate
Account applicable to that unit.
Purchase Of Each purchase payment received (less any premium tax
Accumulation Units we deduct at that time) will be applied to purchase
accumulation units. The amount applied will be
allocated among the divisions of the Separate Account,
as directed in the application. The allocation will
remain in effect until changed by any later written
direction satisfactory to us and received at our .Home
Office.
Date Of Purchase Accumulation units will be purchased in any division
of the Separate Account as of the valuation date which
is on or next follows the date the purchase payment is
received by us at our Home Office, but not earlier
than the Contract Date. However, if any purchase
payment is received other than by mail at our Home
Office after the time set for valuation of the
Separate Account, that purchase payment will be deemed
to have been received on the next day. Accumulation
units will be purchased at the unit value on the date
of purchase. The number of units purchased will be the
amount applied divided by the accumulation unit value
on the date of purchase.
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Example: The amount applied is $550. The date of
purchase is June 10, 19X4. The accumulation
unit value on that date is $10. The number of
units purchased would be 55. ($550 / $10 =
55). If instead, the unit value was $11, then
the amount applied would purchase 50 units.
($550 + $11 = 50).
Identification Of For the purpose of identifying accumulation units,
Accumulation Units the total purchase payments made under this contract
are divided into three levels. They are:
. Level #1 - The first $3,000 of purchase payments.
. Level #2 - The next $32,000 of purchase payments.
. Level #3 - All purchase payments in excess of
$35,000.
Accumulation units purchased by each of these levels
in each division of the Separate Account in each
Contract Year are referred to as "blocks" of
accumulation units. We maintain records of each of
these blocks separately so that any sales charges
(discussed later in this Part) can be properly
allocated.
Example: You pay $4,500 in the first Contract Year to
be allocated equally among the divisions of
the Separate Account. Since $3,000 of this
amount is in Level #1, it will buy three
blocks of accumulation units. That is, one
block in each of the three divisions. The
remaining $1,500 is all in Level #2. As such,
it will buy three additional blocks of units.
This results in a total of six blocks of
units purchased with purchase payments made
in the first Contract Year.
If, in the second Contract Year, you pay
$3,000 to be allocated equally, that would
all be in Level #2. However, since this was
paid in the second Contract Year, it would
buy three more blocks of units. At the end of
that Year, a total of nine blocks would have
been purchased.
Accumulated Value The value of the accumulation units credited to this
Of Contract contract in a division of the Separate Account is
equal to the accumulation unit value in that division
on the date the value is determined, multiplied by the
number of those units in that division.
The value of this contract on any date is the total of
the values of this contract in each division of the
Separate Account.
Premium Tax The amount of any premium tax will be deducted from
the purchase payments as they are received if the tax
is incurred at that time. Otherwise, the tax will be
deducted from the contract value when the tax is
incurred.
Administrative Charge An administrative charge will be assessed each year on
the Contract Anniversary Date. This charge will also
be assessed between Contract Anniversary Dates on:
. Termination of this contract; or
. Maturity of this contract; or
. The death of the Annuitant before the maturity
date (but only if the death benefit is the
contract value).
The amount of this administrative charge will be
determined each year by us. However, it will not be
greater than $50, or any lower limit required by law.
This charge, when assessed, will be made by a pro rata
reduction in each block of accumulation units under
the contract at the time the charge is made.
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Deductions For Sales charges are not deducted from purchase payments
Sales Charges when received by us. Instead, we will make deductions
for sales charges from amounts payable upon full or
partial redemption of this contract. We will also make
deductions for sales charges from any maturity value
which is not applied under a Variable Payment Option.
There are, however, two limits on the deduction for
sales charges. They are:
. The amount we deduct for sales charges at any
time, plus any sales charges previously deducted,
will not be more than 8 1/2% of the total purchase
payments made to that time.
. Beginning with the fifth Contract Year, part of
the accumulation units in each division of the
Separate Account will be free from the deduction
for sales charges. That part is equal to 10% of
the number of accumulation units in that division
on the last day of the preceding Contract Year.
Example: You have l00 accumulation units in each
division as of the last day of the sixth
Contract Year. During the seventh
Contract Year, you can redeem 10 units in
each division without any deduction for
sales charges.
The 10% limit is not cumulative. That is, any unused
portion of this limit cannot be carried over to the
next Contract Year. Instead, a new 10% limit will be
determined for the next Year.
Amount Of Sales Deductions for sales charges vary according to the
Charge Deduction blocks of accumulation units to which they apply.
(Blocks of units were discussed earlier in this Part.)
Specifically:
. Blocks of units purchased with Level #1 purchase
payments have a sales charge deduction of 11% for
the Contract Year in which they are purchased. This
reduces by 1% each year until it reaches zero in
the eleventh and subsequent years after the year of
purchase.
Example: A block of units was purchased with Level
#1 purchase payments in the first Contract
Year. If units in that block are redeemed
in that Year, 11% of the value would be
deducted for sales charges. If instead
those units were redeemed in the fifth
Contract Year, the deduction would be 7%
of the value.
. Blocks of units purchased with Level #2 purchase
payments have a sales charge deduction of 5% for
the Contract Year in which they are purchased.
This reduces by 1% each year until it reaches zero
in the fifth and subsequent years after the year
of purchase.
. There is no deduction for sales charges for any
payments.
For any redemption from any division, we will redeem
blocks of accumulation units with the smallest sales
charge percentage first. Any unused portion of the 10%
limit (for which no sales charge would be made) will
be applied in the same order to the units being
redeemed, including any for which the sales charge is
zero.
Example: You have two blocks totaling 100
accumulation units in one division of the
Separate Account. Block one has five units
with no sales charge. Block two has 95 units
with a sales charge of 4%. Your unused 10%
limit is 10 units and you are redeeming 35
units at this time. The units would be
redeemed in the following order. First would
be five units from block one with no sales
charge. Second would be five units from
block two, but with no sales charge. This is
the balance of the 1090 limit. Last would
be25 units from block two with a 4% sales
charge. Thus, after the redemption, you
would have 65 units in block two.
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Part 4. Life Benefits
A variable annuity contract provides a maturity
benefit if the Annuitant is living on the maturity
date and the contract is in force at that time. It
provides a death benefit if the Annuitant dies before
the maturity date while the contract is in force.
There are other rights and benefits available under
this contract. These "Life Benefits" are discussed in
this Part.
Contract Ownership
Rights Of Owner While the Annuitant is living, the Owner may exercise
all rights given by this contract or allowed by us.
These rights include assigning this contract, changing
Beneficiaries, changing ownership, enjoying all
contract benefits and exercising all contract options.
The consent of any Irrevocable Beneficiary is needed
to exercise any contract right.
Assigning This This contract may be assigned. But for any assignment
Contract to be binding on us, we must receive a signed copy of
it at our Home Office. We will not be responsible for
the validity of any assignment.
Once we receive a signed copy, the rights of the Owner
and the interest of any Beneficiary or any other
person will be subject to the assignment.
Changing The Owner The Owner or Beneficiary may be changed while the
Or Beneficiary Annuitant is living. We do not limit the number of
changes that may be made. To make a change, a written
request, satisfactory to us, must be received at our
Home Office. The change will take effect as of the
date the request is signed, even if the Annuitant dies
before we receive it. Each change will be subject to
any payment we made or other action we took before
receiving the request.
Transfer Of Transfers of values between divisions of the Separate
Accumulation Units Account may be made upon written direction received at
our Home Office. Transfers will be made by cancelling
all or part of the accumulation units in a division
and applying the value of the cancelled units to
purchase units in any other division. Unit values will
be determined as of the valuation date which is on or
next follows the date the written direction is
received at our Home Office.
The sales charge percent and any 10% limit that
applies to the units being cancelled will continue to
apply to the units purchased by the value of the
cancelled units. Transfers between divisions of the
Separate Account can be made up to 30 days before the
maturity date of this contract.
Redeeming This Contract
Right To Redeem This contract may be redeemed for its cash redemption
value any time before it matures and while the
Annuitant is living. Redemption will be effective on
the date we receive this contract and a written
redemption request, satisfactory to us, at our Home
Office. A later effective date may be elected in the
redemption request.
Cash Redemption Value The cash redemption value of this contract is the
accumulated value on the valuation date which is on or
next follows the effective date of redemption less the
administrative charge and less any deductions for
sales charges and any premium tax incurred at that
time.
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The accumulated value is the total of the values of
this contract in each division of the Separate
Account. The value in each division is equal to the
number of accumulation units credited to this contract
in that division multiplied by the unit value of
accumulation units in that division on the date the
value is determined.
Partial Redemptions Partial redemptions may be made at any time before
this contract matures and while the Annuitant is
living. The request for a partial redemption must
state the division (or divisions) of the Separate
Account from which the partial redemption will be
made. Then, a sufficient number of accumulation units
in the stated division (or divisions) will be
cancelled to provide the partial redemption including
any sales charge deductions that apply to the units
being cancelled. Any partial redemption will be
subject to the limits set forth below.
. Any partial redemption must be for at least $100.
. The accumulated value of the contract remaining
after a partial redemption must be at least $600.
When And How Any partial redemption made will be paid in one sum.
We Pay However, if the entire contract is redeemed, the cash
redemption value may be paid in one sum, or it may be
applied under any payment option elected. See "Part 6.
Payment Options".
We will pay all redemptions within seven days after
the written request for the redemption is received by
us at our Home Office. This time period is subject to
any extension permitted under federal laws, rules and
regulations which apply to the redemption of variable
annuity contracts.
Right To Change The Maturity Date
Electing An Early Before this contract matures and while it is in
Maturity Date force, the maturity date may be changed to any date
that is earlier than the maturity date then in effect.
To elect an earlier maturity date, we require that a
written election for the change be received at our
Home Office within 31 days before the early maturity
date wanted.
Electing A Later Before this contract matures and while it is in
Maturity Date force, the maturity date may be changed to any date
that is later than the maturity date then in effect.
However, that later maturity date must be on or before
the Contract Anniversary Date nearest the Annuitant's
85th birthday. To elect a later maturity date, we
require that a written election be received at our
Home Office within 90 days before the maturity date
then in effect. Any rider this contract has will be
cancelled when the change is made.
Other Provisions Regarding Life Benefits
Periodic Statements While this contract is in force before the maturity
date, or the Annuitant's death if earlier, we will
send a Status Report to the Owner at least
semiannually. This Report will show:
. The number of accumulation units in each division
of the Separate Account; and
. The accumulation unit value in each division of the
Separate Account; and
. The accumulated value of this contract.
All this information will be as of a date which is not
more than 45 days before the date the Status Report is
mailed.
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We will also give the Owner any other periodic
reports, containing information about the Separate
Account, that may be required by federal or state law.
Receipt Of Papers Any written directions, requests or other papers
received other than by mail at our Home Office after
the time set for valuation of the Separate Account
will be deemed to have been received the next day;
Contract Is Not "Not participating" means that this contract does not
Participating share in any distribution of our divisible surplus.
Part 5. Maturity Benefit And Death Benefit
The maturity benefit is the payment we will make when
this contract matures if the Annuitant is living at
that time. The death benefit is the amount of money we
will pay when we receive due proof at our Home Office
that the Annuitant has died before the contract
matures. These benefits are discussed in this Part.
Maturity Benefit
Maturity Value The maturity value is the accumulated value of this
contract on the valuation date which is on or next
follows the maturity date with these deductions:
. The administrative charge for the year in
which the contract matures.
. Any premium tax that we are required to deduct
and pay at maturity of this contract.
. Any deductions for sales charges. (These
deductions will not be made for any part of the
maturity value that is applied under a Variable
Payment Option.)
Monthly Life Income When this contract matures, the maturity value will
be applied to provide a monthly life income under
Variable Payment Option C, as described in "Part 6.
Payment Options". This income will be based on the
life of the Annuitant and win be paid for the lifetime
of the Annuitant. The first payment is due on the
maturity date. Future payments will be due on the same
day of the month as the maturity date. The final
payment will be the last one due before the
Annuitant's death.
There is a guarantee as to the first 120 income
payments. If the Annuitant dies before all these
payments are made, we will pay the commuted value of
any of these payments that did not become due before
the Annuitant's death. See "Part 6. Payment Options"
for a discussion of commuted value.
Alternate Settlements There are other settlements available when this
At Maturity contract matures. That is, the maturity value may be
applied under any other Payment Option discussed in
Part 6, or taken in one sum.
In any case, if an assignment of this contract is in
effect on the maturity date, we have the right to pay
the maturity value in one sum.
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<PAGE>
Death Benefit
Amount Of Death If the Annuitant dies before this contract matures
Benefit and while it is in force, the death benefit will be
the greater of:
. The total of all purchase payments made, less the
net amount of any partial redemptions, or
. The accumulated value of this contract on the
valuation date which is on or next follows the date
written notice of death is received at our Home
Office, less the administrative charge.
In either case, we deduct any premium tax incurred at
that time.
Interest On Maturity Or Death Benefit
Interest Payable If the maturity value is paid in one sum after this
contract matures, we will add interest from the
valuation date which is on or next follows the
maturity date to the date of payment. If the death
benefit is paid in one sum, we will add interest from
the valuation date which is on or next follows the
date written notice of death is received to the date
of payment. In either case, the amount of interest
will be the same as would be paid under Option D of
the payment options for that period of time. See "Part
6. Payment Options" for a description of Option D.
If the death benefit is applied under a payment
option, interest will be paid from the valuation date
which is on or next follows the date written notice of
death is received to the effective date of that
option. It will be paid in one sum to the Beneficiary
living on the effective date. The amount of interest
will be the same as would be paid under Option D for
that period of time.
Part 6. Payment Options
These are Optional Methods of Settlement. They provide
alternate ways in which payment can be made. This
contract provides Fixed Income payment options. It
also provides Variable Income payment options. These
two types of options are discussed below. Any other
payment option agreed to by us may be elected.
Fixed Income Payment A Fixed Income payment option is one which provides
Options payments that are guaranteed by us under our general
account. The amounts of these payments do not depend
on the investment performance of the Separate Account.
All the payment options described in this Part are
available on a Fixed Income basis. They are described
in terms of monthly payments. However, annual,
semiannual or quarterly payments may be requested
instead. The amount of these payments will be
determined in a way which is consistent with monthly
payments and will be quoted on request.
Variable Income A Variable Income payment option is one which provides
Payment Options that payments are not guaranteed as to dollar amount.
Instead, they are based on the investment performance
of the Separate Account.
Payment options C, E and F are available on a Variable
Income basis. Payment can only be made monthly. The
manner in which the dollar amounts of Variable Income
payments are computed is set forth in "Part 7. Notes
On Our Computations".
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Availability Of All or part of the death benefit, the maturity value or
Payment Options the cash redemption value may be applied under any payment
option. If the contract is assigned, any amount due to the
assignee will be paid in one sum. The balance, if any, may
be applied under any payment option.
Minimum Amounts If the amount to be applied under any option is less than
$2,000, we may pay that amount in one sum instead. If
payments under a Fixed Income option amount to less than
$20 each, we have the right to make payments at less
frequent intervals. If the first payment under a Variable
Income option amounts to less than $20, we have the right
to make a one sum payment.
Option A Fixed Income Payment Option (Not available as a Variable
Income option). Each monthly payment will be for an
agreed fixed amount. The amount of each payment may not
be less-than $10 for each $1,000 applied. Interest will
be credited each month on the unpaid balance and added
to it. This interest will be at a rate determined by us,
but not less than the equivalent of 3% per year.
Payments continue until the amount we hold runs out. The
last payment will be for the balance only.
Option B Fixed Time Payment Option (Not available as a Variable
Income option). Equal monthly payments will be made for
any period selected, up to 30 years. The amount of each
payment depends on the total amount applied, the period
selected and the monthly payment rates we are using when
the first payment is due. The rate of any payment will
not be less than shown in the Option B Table.
----------------------------------------------------------
Option B Table
Minimum Monthly Payment Rates For Each $1,000 Applied
Monthly Monthly
Years Payment Years Payment
1 $84.47 16 $ 6.53
2 42.86 17 6.23
3 28.99 18 5.96
4 22.06 19 5.73
5 17.91 20 5.51
6 15.14 21 5.32
7 13.16 22 5.15
8 11.68 23 4.99
9 10.53 24 4.84
10 9.61 25 4.71
11 8.86 26 4.59
12 8.24 27 4.47
13 7.71 28 4.37
14 7.26 29 4.27
15 6.87 30 4.18
For quarterly payment, multiply by 2.993. For
semiannual payment, multiply by 5.963. For annual
payment, multiply by 11.839.
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Option C Lifetime Payment Option (Available as a Fixed Income option and
as a Variable Income option). For Fixed Income Option C, the
monthly payments are equal. For Variable Income Option C, the
payments are not guaranteed as to amount and may vary. For either
option, the payments are based on the life of a named person.
Payments will continue for the life of that person. The three
variations are:
(1) Payments for life only. No specific number of payments is
guaranteed. Payments stop when the named person dies.
(2) Payments guaranteed for amount applied. Payments stop when
they equal the amount applied or when the named person dies,
whichever is later. For Fixed Income Option C, "amount
applied" means the dollar amount used to provide the income.
For Variable Income Option C, "amount applied" means a number
of monthly payments. This number is equal to the dollar
amount used to provide the income divided by the dollar
amount of the first monthly payment.
(3) Payments guaranteed for 5 or 10 years. Payments stop at the
end of the selected guaranteed period or when the named
person dies, whichever is later.
The Fixed Income Option C Table shows the minimum monthly payment
for each $1,000 applied. The Variable Income Option C Table shows
the minimum amount of the first monthly payment for each $1,000
applied. The actual payments will be based on the monthly payment
rates we are using when the first payment is due. They will not
be less than shown in the Table.
-------------------------------------------------------------------
Fixed Income Option C Table
Minimum Monthly Payment Rates For Each $1,000 Applied
Payments Payments Guaranteed For
Age* For Life Amount 5 10
Male Female Only Applied Years Years
35 40 $3.55 $3.48 $3.54 $3.53
40 45 3.78 3.68 3.77 3.76
45 50 4.09 3.94 4.08 4.06
50 55 4.49 4.26 4.48 4.43
55 60 5.01 4.66 4.98 4.90
60 65 5.70 5.17 5.65 5.50
65 70 6.68 5.85 6.57 6.25
70 75 8.09 6.77 7.84 7.17
75 80 10.19 8.01 9.58 8.14
80 85 13.40 9.75 11.80 8.96
85 18.44 12.20 14.27 9.43
* Age on birthday nearest the due date of the first payment.
Monthly payment rates for ages not shown will be furnished on
request. Monthly payment rates for ages over 85 are the same as
those for 85.
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Variable Income Option C Table
Minimum Monthly Payment Rates For First Payment For Each
$1,000 Applied, Based On 4% Assumed Investment Rate
Payments Payments Guaranteed For
Adjusted For Life Amount 5 10
Age* Only Applied Years Years
M F M F M F M F
40 $4.11 $3.92 $4.04 $3.87 $4.10 $3.91 $4.09 $3.90
45 4.31 4.07 4.20 4.01 4.30 4.06 4.28 4.05
50 4.55 4.26 4.40 4.18 4.54 4.25 4.51 4.23
55 4.85 4.50 4.64 4.39 4.83 4.49 4.78 4.47
60 5.22 4.82 4.94 4.66 5.19 4.80 5.11 4.77
65 5.70 5.23 5.31 5.00 5.66 5.21 5.53 5.15
70 6.35 5.80 5.79 5.44 6.28 5.76 6.06 5.65
75 7.23 6.59 6.40 6.00 7.08 6.52 6.70 6.28
80 8.42 7.68 7.19 6.68 8.14 7.50 7.45 7.01
85 10.07 9.10 8.21 7.47 9.51 8.70 8.25 7.72
* Age on birthday nearest the due date of the first payment, adjusted according
to the table in the Basis Of Computation provision in Part 7. Monthly payment
rates for adjusted ages not shown will be furnished on request. Monthly
payment rates for adjusted ages over 85 are the same as those for 85.
- --------------------------------------------------------------------------------
Option D Interest Payment Option (Not available as a Variable Income
option). We will hold any amount applied under this option.
Interest on the unpaid balance will be paid each month at a rate
determined by us. This rate will not be less than the equivalent
of 3% per year.
Option E Joint Lifetime Payment Option (Available as a Fixed Income
option and as a Variable Income option). For a Fixed Income
Option E, the monthly payments are equal. For Variable Income
Option E, the payments are not guaranteed as to amount and may
vary. For either option, the payments are based on the lives of
two named persons. While both are living, one payment will be
made each month. When one dies, payments continue for the
lifetime of the other. The two variations are:
(1) Payments for two lives only. No specific number of payments
is guaranteed. Payments stop when both persons have died.
(2) Payments guaranteed for 10 years. Payments stop at the end of
10 years, or when both named persons have died, whichever is
later.
The Fixed Income Option E Table shows the minimum monthly payment
for each $1,000 applied. The Variable Income Option E Table shows
the minimum amount of the first monthly payment for each $1,000
applied. The actual payments will be based on the monthly rates
we are using when the first payment is due. They will not be less
than shown in the Table.
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Fixed Income Option E Table
Minimum Monthly Payment Rates For Each $1,000 Applied
Payments For Two Lives Only
M 50 M 55 M 60 M 65 M 70 M 75
Age* F 55 F 60 F 65 F 70 F 75 F 80
M F
50 55 $3.90 $4.05 $4.17 $4.28 $4.36 $4.41
55 60 4.05 4.26 4.46 4.63 4.76 4.86
60 65 4.17 4.46 4.74 5.02 5.25 5.42
65 70 4.28 4.63 5.02 5.42 5.80 6.12
70 75 4.36 4.76 5.25 5.80 6.39 6.95
75 80 4.41 4.86 5.42 6.12 6.95 7.83
80 85 4.45 4.93 5.55 6.36 7.40 8.65
Payments Guaranteed For 10 Years
M 50 M 55 M 60 M 65 M 70 M 75
Age* F 55 F 60 F 65 F 70 F 75 F 80
M F
50 55 $3.89 $4.04 $4.17 $4.27 $4.34 $4.39
55 60 4.04 4.25 4.45 4.61 4.74 4.83
60 65 4.17 4.45 4.73 4.99 5.21 5.36
65 70 4.27 4.61 4.99 5.38 5.73 6.00
70 75 4.34 4.74 5.21 5.73 6.25 6.69
75 80 4.39 4.83 5.36 6.00 6.69 7.35
80 85 4.42 4.87 5.45 6.16 6.99 7.82
* Age on birthday nearest the due date of the first payment. Monthly
payment rates for ages not shown will be furnished on request. Monthly
payment rates for ages over 85 are the same as those for 85.
- --------------------------------------------------------------------------------
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Variable Income Option E Table
Minimum Monthly Payment Rates For First Payment For Each
$1,000 Applied, Based On 4% Assumed Investment Rate
Payments For Two Lives Only -- Both Males
Adjusted
Age* M 50 M 55 M 60 M 65 M 70 M 75 M 80 M 85
M 50 $4.05 $4.14 $4.22 $4.29 $4.35 $4.40 $4.45 $4.48
M 55 4.14 4.25 4.35 4.45 4.54 4.62 4.69 4.74
M 60 4.22 4.35 4.49 4.63 4.76 4.88 4.98 5.05
M 65 4.29 4.45 4.63 4.81 5.00 5.17 5.32 5.44
M 70 4.35 4.54 4.76 5.00 5.25 5.49 5.72 5.91
M 75 4.40 4.62 4.88 5.17 5.49 5.83 6.16 6.46
M 80 4.45 4.69 4.98 5.32 5.72 6.16 6.63 7.08
M 85 4.48 4.74 5.05 5.44 5.91 6.46 7.08 7.74
(continued)
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Payments For Two Lives Only -- Both Females
Adjusted
Age* F 50 F 55 F 60 F 65 F 70 F 75 F 80 F 85
F 50 $3.90 $3.97 $4.04 $4.09 $4.14 $4.17 $4.20 $4.22
F 55 3.97 4.07 4.15 4.23 4.30 4.36 4.40 4.43
F 60 4.04 4.15 4.27 4.39 4.49 4.58 4.65 4.70
F 65 4.09 4.23 4.39 4.55 4.70 4.84 4.95 5.04
F 70 4.14 4.30 4.49 4.70 4.91 5.12 5.30 5.45
F 75 4.17 4.36 4.58 4.84 5.12 5.42 5.70 5.93
F 80 4.20 4.40 4.65 4.95 5.30 5.70 6.10 6.46
F 85 4.22 4.43 4.70 5.04 5.45 5.93 6.46 6.98
Payments For Two Lives Only -- One Male, One Female
Adjusted
Age* F 50 F 55 F 60 F 65 F 70 F 75 F 80 F 85
M 50 $3.97 $4.06 $4.15 $4.23 $4.30 $4.37 $4.42 $4.46
M 55 4.03 4.14 4.26 4.37 4.48 4.57 4.64 4.71
M 60 4.08 4.22 4.37 4.52 4.66 4.80 4.91 5.00
M 65 4.13 4.29 4.47 4.66 4.86 5.05 5.22 5.36
M 70 4.16 4.35 4.56 4.80 5.06 5.33 5.57 5.78
M 75 4.19 4.39 4.63 4.92 5.25 5.60 5.95 6.26
M 80 4.21 4.43 4.69 5.01 5.41 5.86 6.34 6.79
M 85 4.23 4.45 4.73 5.09 5.54 6.09 6.70 7.32
Payments Guaranteed For 10 Years -- Two Males
Adjusted
Age* M 50 M 55 M 60 M 65 M 70 M 75 M 80 M 85
M 50 $4.04 $4.13 $4.21 $4.28 $4.34 $4.39 $4.44 $4.47
M 55 4.13 4.24 4.34 4.44 4.53 4.61 4.67 4.72
M 60 4.21 4.34 4.48 4.62 4.75 4.86 4.95 5.02
M 65 4.28 4.44 4.62 4.80 4.98 5.15 5.28 5.39
M 70 4.34 4.53 4.75 4.98 5.22 5.46 5.66 5.83
M 75 4.39 4.61 4.86 5.15 5.46 5.77 6.07 6.32
M 80 4.44 4.67 4.95 5.28 5.66 6.07 6.48 6.85
M 85 4.47 4.72 5.02 5.39 5.83 6.32 6.85 7.35
Payments Guaranteed For 10 Years -- Two Females
Adjusted
Age* F 50 F 55 F 60 F 65 F 70 F 75 F 80 F 85
F 50 $3.89 $3.96 $4.03 $4.08 $4.13 $4.16 $4.19 $4.21
F 55 3.96 4.06 4.14 4.22 4.29 4.35 4.39 4.42
F 60 4.03 4.14 4.26 4.38 4.48 4.57 4.64 4.69
F 65 4.08 4.22 4.38 4.54 4.69 4.83 4.94 5.02
F 70 4.13 4.29 4.48 4.69 4.90 5.11 5.28 5.41
F 75 4.16 4.35 4.57 4.83 5.11 5.39 5.65 5.86
F 80 4.19 4.39 4.64 4.94 5.28 5.65 6.01 6.31
F 85 4.21 4.42 4.69 5.02 5.41 5.86 6.31 6.72
(continued)
935-1A-8200
<PAGE>
<TABLE>
<CAPTION>
Payments Guaranteed For 10 Years - One Male, One Female
Adjusted
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Age* F 50 F 55 F 60 F 65 F 70 F 75 F 80 F 85
M 50 $3.96 $4.05 $4.14 $4.22 $4.29 $4.36 $4.41 $4.45
M 55 4.02 4.13 4.25 4.36 4.47 4.56 4.63 4.69
M 60 4.07 4.21 4.36 4.51 4.65 4.79 4.89 4.97
M 65 4.12 4.28 4.46 4.65 4.85 5.04 5.19 5.31
M 70 4.15 4.34 4.55 4.79 5.05 5.30 5.53 5.71
M 75 4.18 4.38 4.62 4.91 5.23 5.56 5.88 6.14
M 80 4.20 4.42 4.68 5.00 5.38 5.80 6.23 6.59
M 85 4.22 4.44 4.72 5.06 5.50 6.00 6.53 7.00
</TABLE>
*Age on birthday nearest the due date of the first payment,
adjusted according to the table in the Basis Of Computation
provision in Part 7. Monthly payment rates for adjusted ages
not shown will be furnished on request. Monthly payment rates
for adjusted ages over 85 are the same as those for 85.
----------------------------------------------------------------
Option F Joint Lifetime Payment Option With Reduced Payments (Available
as a Fixed Income option and as a Variable Income option).
Monthly payments are based on the lives of two named persons.
Payments will continue while both are living. When one dies,
reduced payments will continue for the lifetime of the other.
These reduced payments will be two-thirds of what they would have
been if both persons had continued to live. Payments stop when
both persons have died.
The Fixed Income Option F Table shows the minimum monthly payment
for each $1,000 applied. The Variable Income Option F Table shows
the minimum amount of the first monthly payment for each $1,000
applied. The actual payments will be based on the rates we are
using when the first payment is due. They will not be less than
shown in the Table.
------------------------------------------------------------
Fixed Income Option F Table
Minimum Monthly Payment Rates For Each $1,000 Applied
<TABLE>
<CAPTION>
M 50 M 55 M 60 M 65 M 70 M 75
Age* F 55 F 60 F 65 F 70 F 75 F 80
M F
<S> <C> <C> <C> <C> <C> <C> <C>
50 55 $4.27 $4.48 $4.70 $4.95 $5.21 $5.48
55 60 4.48 4.73 5.00 5.30 5.62 5.96
60 65 4.70 5.00 5.34 5.72 6.13 6.55
65 70 4.95 5.30 5.72 6.20 6.73 7.29
70 75 5.21 5.62 6.13 6.73 7.43 8.20
75 80 5.48 5.96 6.55 7.29 8.20 9.26
80 85 5.74 6.28 6.97 7.86 9.00 10.40
</TABLE>
*Age on birthday nearest the due date of the first
payment. Monthly payment rates for ages not shown will
be furnished on request. Monthly payment rates for ages
over 85 are the same as those for 85.
------------------------------------------------------------
-16-
935-1A-8200
<PAGE>
-17-
--------------------------------------------------------
Variable Income Option F Table
Minimum Monthly Payment Rates For First Payment For Each
$1,000 Applied, Based On 4% Assumed Investment Rate
<TABLE>
<CAPTION>
Payments For Two Lives Only - Both Males
Adjusted
Age* M 50 M 55 M 60 M 65 M 70 M 75 M 80 M 85
<S> <C> <C> <C> <C> <C> <C> <C> <C>
M 50 $4.37 $4.49 $4.62 $4.77 $4.94 $5.13 $5.33 $5.53
M 55 4.49 4.63 4.78 4.95 5.14 5.35 5.57 5.81
M 60 4.62 4.78 4.95 5.15 5.37 5.61 5.87 6.14
M 65 4.77 4.95 5.15 5.37 5.63 5.92 6.22 6.54
M 70 4.94 5.14 5.37 5.63 5.94 6.28 6.65 7.04
M 75 5.13 5.35 5.61 5.92 6.28 6.69 7.15 7.65
M 80 5.33 5.57 5.87 6.22 6.65 7.15 7.72 8.35
M 85 5.53 5.81 6.14 6.54 7.04 7.65 8.35 9.15
<CAPTION>
Payments For Two Lives Only - Both Females
Adjusted
Age* F 50 F 55 F 60 F 65 F 70 F 75 F 80 F 85
<S> <C> <C> <C> <C> <C> <C> <C> <C>
F 50 $4.12 $4.23 $4.34 $4.47 $4.61 $4.78 $4.97 $5.15
F 55 4.23 4.34 4.47 4.61 4.78 4.97 5.18 5.38
F 60 4.34 4.47 4.62 4.78 4.98 5.19 5.43 5.66
F 65 4.47 4.61 4.78 4.98 5.20 5.46 5.73 6.00
F 70 4.61 4.78 4.98 5.20 5.47 5.78 6.11 6.44
F 75 4.78 4.97 5.19 5.46 5.78 6.15 6.56 6.98
F 80 4.97 5.18 5.43 5.73 6.11 6.56 7.07 7.60
F 85 5.15 5.38 5.66 6.00 6.44 6.98 7.60 8.27
<CAPTION>
Payments For Two Lives Only - One Male, One Female
Adjusted
Age* F 50 F 55 F 60 F 65 F 70 F 75 F 80 F 85
<S> <C> <C> <C> <C> <C> <C> <C> <C>
M 50 $4.24 $4.35 $4.48 $4.63 $4.80 $5.00 $5.21 $5.42
M 55 4.35 4.48 4.62 4.79 4.98 5.20 5.44 5.68
M 60 4.46 4.61 4.77 4.96 5.18 5.44 5.71 5.98
M 65 4.59 4.75 4.94 5.16 5.42 5.71 6.03 6.36
M 70 4.74 4.92 5.13 5.38 5.69 6.04 6.42 6.81
M 75 4.90 5.10 5.34 5.63 5.98 6.40 6.87 7.36
M 80 5.07 5.29 5.56 5.89 6.30 6.80 7.37 7.98
M 85 5.25 5.49 5.79 6.16 6.63 7.23 7.92 8.68
</TABLE>
*Age on birthday nearest the due date of the first
payment, adjusted according to the table in the
Basis Of Computation provision in Part 7. Monthly
payment rates for adjusted ages not shown will be
furnished on request. Monthly payment rates for
adjusted ages over 85 are the same as those for 85.
--------------------------------------------------------
Electing A Payment To elect any option, we require that a written request,
Option satisfactory to us, be received at our Home Office. The
Owner may elect an option during the Annuitant's
lifetime. If the death benefit is payable in one sum when
the Annuitant dies, the Beneficiary may elect an option
with our consent.
935-1A-8200
<PAGE>
Options for any amount payable to an association,
corporation, partnership or fiduciary are available
with our consent. However, a corporation or partnership
may apply any amount payable to it under Option C, E or
F if the option payments are based on the life or lives
of the Annuitant, the Annuitant's spouse, any child of
the Annuitant, or any other person agreed to by us.
Effective Date And The effective date of an option is the date the amount
Payment Date is applied under that option. For a death benefit, this
is the date that due proof of the Annuitant's death is
received at our Home Office. For a maturity value, it
is the date the contract matures. For the cash
redemption value, it is the effective date of
redemption.
The first payment is due on the effective date, except
that the first payment under Option D is due one month
later. A later date for the first payment may be
requested in the payment option election. All payment
dates will fall on the same day of the month as the
first one. No payment will become due until a payment
date. No part payment will be made for any period
shorter than the time between payment dates.
Example: Monthly payments are being made to your son on
the 1st of each month. He dies on the 10th. No
part payment is due your son or his estate for
the period between the 1st and the 10th.
Withdrawals And If provided in the payment option election, the
Changes following rights will be available:
. Under Options A and D, all or part of the unpaid
balance may be withdrawn or applied under any
other payment option.
. Under Option B, the commuted value of the future
payments may be withdrawn or applied under any
other option. We discuss commuted value below.
. Under Options C and E, the commuted value of the
guaranteed future payments, if any, may be
withdrawn. The withdrawal will not affect any
payments that may become due after the guaranteed
period. This means that if any person on whose
life these payments depend lives beyond that
period, payments will start up again.
Withdrawals of amounts applied under any Variable
Income option will be paid within seven days after the
written request for withdrawal is received at our Home
Office. This time period is subject to any extension
permitted under federal laws, rules and regulations
which apply to that withdrawal.
Commuted Value When computing the payments under Fixed Income Options
B, C and E, we include interest from the effective date
of the option to the date of each payment. If future
payments are withdrawn or paid early, we must deduct
the amount of interest included for the period after
withdrawal or early payment. The commuted value of
future payments is the sum of those payments, less the
interest from the date of withdrawal or early payment
to the date of each future payment. The interest rate
originally used in computing the option payments will
be the rate used to determine the commuted value.
Example: An option payment of $105 is due a year from
now. The annual interest rate we used in
figuring this payment was 5%. Today you
withdraw the commuted value of that payment.
Since the interest we included was $5, the
commuted value of the payment today will be
the payment less that interest, or $100.
For a Variable Income option, the number of annuity
units that option has in each division of the Separate
Account will be commuted at the Assumed Investment
Rate. The commuted units in each division will be
multiplied by the annuity unit value for that
-18-
935-1A-8200
<PAGE>
-19-
division on the date the commuted value is determined.
The commuted value will be the sum of the values
determined for each division.
Income Protection To the extent permitted by law, each option payment and
any withdrawal shall be free from legal process and the
claim of any creditor of the person entitled to them.
No option payment and no amount held under an option
can be taken or assigned in advance of its payment
date, unless the Owner's written consent is given
before the Annuitant dies. This consent must be
received at our Home Office.
Part 7. Notes On Our Computations
This Part covers some technical points about this
contract.
Net Investment Factor For each division of the Separate Account, the Net
Investment Factor for any valuation period is the gross
investment rate for that period plus 1.00000000 and
minus an asset charge. This asset charge will be
.00003425 for each day of a valuation.period. The Net
Investment Factor may be greater or less than
1.00000000.
For each division of the Separate Account, the gross
investment rate for any valuation period is equal to:
. The net earnings of that division during the
valuation period, divided by
. The value of the total assets of that division at
the beginning of the valuation period.
The net earnings of each division are equal to the
accrued investment income and capital gains and losses
(realized and unrealized) of that division reduced by
any amount charged against that division for taxes paid
or reserved for by us. The gross investment rate will
be determined by us in accordance with generally
accepted accounting principals and applicable laws,
rules and regulations. This determination shall be
conclusive upon the Owner, the Annuitant, any
Beneficiary and any assignee and any other person under
this contract.
Accumulation Unit The value of an accumulation unit in each division was
Value set at $1.00000000, on the first valuation date
selected by us. The value on any date thereafter is
equal to the product of the Net Investment Factor for
that division for the valuation period which includes
that date and the value of the corresponding
accumulation unit value on the preceding valuation
date.
Annuity Unit Value All annuity unit values in each division were set at
$1.00000000 on the first valuation date selected by us.
The value on any date thereafter is equal to (a) the
Net Investment Factor for that division for the
valuation period which includes that date divided by
(b) the sum of 1.00000000 and the rate of interest for
the number of days in the valuation period, computed at
an effective annual rate equal to the Assumed
Investment Rate, and multiplied by (c) the
corresponding annuity unit value on the preceding
valuation date.
Assumed Investment The Assumed Investment Rate is the annual interest rate
Rate assumed,in determining the first payment of variable
payment options. The amount of each subsequent payment
from each division of the Separate Account will depend
on the relationship between the Assumed Investment Rate
and the actual investment performance of that division.
The Assumed Investment Rate will be 4% per annum. If a
4% rate would result in a first variable payment larger
than that permitted under applicable state law, we will
select a lower rate which will comply with that law.
935-1A-8200
<PAGE>
Adjustment Of Units We have the right to split or consolidate the number of
And Values accumulation units or annuity units credited to this
contract, with a corresponding increase or decrease in
the unit values. We may exercise this right whenever we
consider an adjustment of units to be desirable.
However, strict equity will be preserved in making any
adjustment. No adjustment will have any material effect
on the benefits, provisions or investment return of
this contract, or on the Owner, Annuitant, any
Beneficiary, any assignee or other person, or on us.
Payment Calculation Payments under a Variable Income option are calculated
Date on a payment calculation date. That date is the
earliest valuation date which is not more than 10 days
before the due date of the payment.
Computing Variable The amount payable from each division of the Separate
Income Payments Account is multiplied by the rates we are using for the
option as of the date the first payment is due. For
each division, the figure which results is multiplied
by the ratio of the value of an accumulation unit on
the first payment calculation date to the value of an
accumulation unit on the date the first payment is due.
The total of the amount of income determined for each
division is the first payment. It is due on the first
payment date.
Future payments under a Variable Income option are
measured by annuity units. The number of annuity units
in each division is the portion of the first payment
provided by that division divided by the annuity unit
value for that division on the first payment
calculation date.
For payments after the first one, the annuity units in
each division are multiplied by the annuity unit value
on the payment calculation date that applies. The
payment to be made on the payment due date is the sum
of the amounts provided by each division.
Basis Of Computation Minimum payments under Payment Options C, E and F are
shown in the Tables in Part 6. In computing the
payments under Fixed Income options, we use mortality
rates from the a-1949 Annuitants Mortality Table with
Projection B for 30 years and with female rates set
back five years. The annual interest rate used is 3%.
For Variable Income options C, E and F, we use
mortality rates based on the 1971 Individual Annuity
Mortality Table (1971 IAM) projected to decrease l%%
annually from 1971. The Variable Income Option C, E and
F Tables are computed for annuitants born in 1942. For
all other years of birth, the mortality improvement is
determined by adjusting the annuitant's age according
to the following table:
Date of Birth Adjustment to Actual Age
1900-1904 +8 Years
1905-1909 +7 Years
1910-1914 +6 Years
1915-1919 +5 Years
1920-1924 +4 Years
1925-1929 +3 Years
1930-1934 +2 Years
1935-1939 +l Year
1940-1944 +0 Years
1945-1949 -1 Year
1950-1954 -2 Years
1955-1959 -3 Years
1960-1964 -4 Years
1965-1969 -5 Years
1970-1974 -6 Years
1975-1979 -7 Years
-20-
935-1A-8200
<PAGE>
-21-
1980-1984 -8 Years
1985-1989 -9 Years
1990-1994 -10 Years
1995-1999 -11 Years
The annual interest rate used is the Assumed Investment
Rate discussed in this Part.
Guarantees All benefits, payments and values under this contract
which depend on the investment performance of the
Separate Account may increase or decrease, as discussed
in this Part. However, we guarantee that the dollar
amounts of variable benefits will not be adversely
affected by variations of actual expenses from expense
charges stated in this contract. Also, those benefits
will not be adversely affected by variations in actual
mortality from the mortality assumptions stated in this
contract.
A part of the assets of the Separate Account is the
reserve for variable benefits and liabilities which
depend on the investment performance of that Account.
That part of the assets shall not be charged with any
liabilities we have which arise from any business we
conduct which does not depend on the performance of
that Account.
935-1A-8200
<PAGE>
WHERE TO FIND IT
Page No.
The Schedule Page.......................................................... 1
Part 1. -The Basics Of This Contract......................................... 2
The Parties Involved - Owner, Annuitant,
Beneficiary, Irrevocable Beneficiary..................................... 2
Dates - Contract Date, Contract Anniversary
Date, Contract Year, Issue Date, Maturity Date........................... 2
This Is A Legal Contract................................................... 2
Representations And Contestability......................................... 3
Misstatement Of Age........................................................ 3
Meaning Of In Force........................................................ 3
Home Office................................................................ 3
Contract State............................................................. 3
Part 2. - Purchase Payments.................................................. 3
The First Purchase Payment................................................. 3
Normal Purchase Payments................................................... 3
Purchase Payment Flexibility And Notices................................... 3
Where To Pay............................................................... 4
Part 3. - Values And Charges................................................. 4
The Separate Account....................................................... 4
Valuation Date And Valuation Period........................................ 4
Accumulation Units And Annuity Units....................................... 4
Purchase Of Accumulation Units............................................. 4
Date Of Purchase........................................................... 4
Identification Of Accumulation Units....................................... 5
Accumulated Value Of Contract.............................................. 5
Premium Tax................................................................ 5
Administrative Charge...................................................... 5
Deductions For Sales Charges............................................... 6
Amount Of Sales Charge Deduction........................................... 6
Part 4. - Life Benefits...................................................... 7
Contract Ownership......................................................... 7
Rights Of Owner.......................................................... 7
Assigning This Contract.................................................. 7
Changing The Owner Or Beneficiary........................................ 7
Transfer Of Accumulation Units........................................... 7
Redeeming This Contract.................................................... 7
Right To Redeem.......................................................... 7
Cash Redemption Value.................................................... 7
Partial Redemptions...................................................... 8
When And How We Pay...................................................... 8
Right To Change The Maturity Date.......................................... 8
Electing An Early Maturity Date.......................................... 8
Electing A Later Maturity Date........................................... 8
Other Provisions Regarding Life Benefits................................... 8
Periodic Statements...................................................... 8
Receipt Of Papers........................................................ 9
Contract Is Not Participating............................................ 9
Part 5. - Maturity Benefit And Death Benefit................................. 9
Maturity Benefit........................................................... 9
Maturity Value........................................................... 9
Monthly Life Income...................................................... 9
Alternate Settlements At Maturity........................................ 9
Death Benefit.............................................................. 10
Amount Of Death Benefit.................................................. 10
Interest On Maturity Or Death Benefit...................................... 10
Interest Payable......................................................... 10
Part 6. - Payment Options.................................................... 10
Fixed Income Payment Options............................................... 10
Variable Income Payment Options............................................ 10
Availability Of Payment Options............................................ 11
Minimum Amounts............................................................ 11
Electing A Payment Option.................................................. 17
Effective Date And Payment Date............................................ 18
Withdrawals And Changes.................................................... 18
Commuted Value............................................................. 18
Income Protection.......................................................... 19
Part 7. - Notes On Our Computations.......................................... 19
Net Investment Factor...................................................... 19
Accumulation Unit Value.................................................... 19
Annuity Unit Value......................................................... 19
Assumed Investment Rate.................................................... 19
Adjustment Of Units And Values............................................. 20
Payment Calculation Date................................................... 20
Computing Variable Income Payments......................................... 20
Basis Of Computation....................................................... 20
Guarantees................................................................. 21
Any Riders and Endorsements, and a Copy of The Application For The Contract,
Follow Page 21.
<PAGE>
[LOGO OF MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY APPEARS HERE]
SPRINGFIELD, MASSACHUSETTS 01111
Flexible Purchase Payment Multi-Fund
Variable Annuity Contract
This Contract provides that:
A monthly life income is payable beginning on the date this contract matures
if the Annuitant is living at that time
A death benefit is payable if the Annuitant dies before this contract
matures
Flexible purchase payments may be made to the date this contract matures or
to the Annuitant's death, if earlier
This Contract is not participating. It does not provide for the payment of
dividends.
Notice Of Annual Meeting
The Owner is hereby notified that by virtue of this contract he or she is a
member of Massachusetts Mutual Life Insurance Company and is entitled to
vote either in person or by proxy at any and all meetings of said Company.
The annual meetings are held at its Home Office, in Springfield,
Massachusetts, on the second Wednesday of April in each year at 2 o'clock
p.m.
<PAGE>
EXHIBIT 5
FORM OF APPLICATION (A1673-8200)
37
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
[_] APPLICATION FOR A APPLICATION
[_] VARIABLE ANNUITY (PART 1)
TO MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
SPRINGFIELD, MASSACHUSETTS 6XXXX
- --------------------------------------------------------------------------------------------------------------
SECTION A -- Complete this Section for ALL cases
- --------------------------------------------------------------------------------------------------------------
1. The annuity applied for will depend on the investment performance of Massachusetts Mutual Variable Annuity
Separate Account 2. All payments and values which are based on the investment performance of this Account
are not guaranteed as to dollar amount.
- --------------------------------------------------------------------------------------------------------------
2. Purchaser's
Full Name (Print)
- --------------------------------------------------------------------------------------------------------------
3. Purchaser's Street & No. City State ZIP
--------------------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------------------------------------
Proposed Annuitant
- --------------------------------------------------------------------------------------------------------------
4. Annuitant's First Name Middle Name or Names Last Name
--------------------------------------------------------------------------------------------
Full Name (Print) John A. Doe
- --------------------------------------------------------------------------------------------------------------
5. Date of Birth: Month 2 Day Year 47 6. Citizen of U.S.A. [_] YES: [_] NO: What country?
- --------------------------------------------------------------------------------------------------------------
7. Sex [X] M [_] F 8. Birthplace: 9. Social Security No. | | | | | | | | | | |
- --------------------------------------------------------------------------------------------------------------
10. Annuitant's Street & No. City State ZIP
--------------------------------------------------------------------------------------------
Residence
- --------------------------------------------------------------------------------------------------------------
11. (a) First Payment due on Contract Date $1200.00 (b) Deduct any Rider Premiums from First Payments
-------- and from Normal Payments on Frequency Elected
Normal Payments on Frequency Elected $1200.00 [_] Yes [_] No
--------
- --------------------------------------------------------------------------------------------------------------
12. Purchase Payment Allocation: (a) [X] Equity Division 50 % (c) [_] Managed Bond Division 25 %
----- -----
(b) [X] Money Market Division 25 %
-----
- --------------------------------------------------------------------------------------------------------------
13. Frequency of Normal Payments and Rider Premiums:
Type:
[X] Annual [X] Regular [_] Monthly Invoice
[_] Semiannual [_] Invoice [_] Triple M
[_] Quantity
- --------------------------------------------------------------------------------------------------------------
14. RIDERS -- [_] Disability Waiver [_]
-------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
15. (a) Contract to be dated Feb 15, 1982
---------------
(b) Maturity Date Feb 15, 2012 OR Contract Anniversary Date nearest age .
------------------ -----------
- --------------------------------------------------------------------------------------------------------------
16. OWNER 17. BENEFICIARY (Print full name and relationship to
[X] Annuitant [_] Purchaser [_] Other (Print Annuitant)
full name, address and relationship to Annuitant) Mary C. Doe, wife
If two or more persons are the beneficiaries in any
class, payment shall be made to them equally or to
the survivor(s), unless otherwise requested.
Owner's Tax Identification # _________________________ If there is no beneficiary entitled to payment when a
If the last owner is other than the Annuitant, and if death benefit is payable, payment will be made to the
all owners are dead and that Annuitant is living, the estate of whichever of the Annuitant and all
Owner shall be that Annuitant, unless otherwise beneficiaries is the last to die, unless otherwise
requested. requested.
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Page 2
- --------------------------------------------------------------------------------
SECTION A - (Continued)
- --------------------------------------------------------------------------------
18. Will the contract now being applied for replace or change, or is it intended
to replace or change, any insurance or annuity, in whole or in part, issued
by this or any other Company?
[_] Yes [_] No If "Yes", give details in #21.
- --------------------------------------------------------------------------------
19. Are funds from any annuity or life insurance in this or any other company
being used in the purchase of this contract?
[_] Yes [_] No If "Yes", give details in #21.
- --------------------------------------------------------------------------------
20. Amount paid, if any $ 1200.00 Date paid 2-13-82
------------ ----------
- --------------------------------------------------------------------------------
21. REMARKS AND SPECIAL REQUESTS
- --------------------------------------------------------------------------------
SECTION B - Complete this section only IF EVIDENCE OF INSURABILITY IS REQUIRED
- --------------------------------------------------------------------------------
22. Occupation of Proposed Annuitant.
- --------------------------------------------------------------------------------
23. Within the last 3 years has he/she been, or does he/she now plan to become a
pilot, student pilot or crew member of any type of aircraft? If "Yes",
Aviation Supplement to be completed. [_] Yes [_] No
- --------------------------------------------------------------------------------
24. Within the last 3 years has he/she taken part in underwater diving, hang
gliding, para sailing, para kiting, parachuting, skydiving or mountain
climbing or racing by automobile, motorcycle, motorboat or snowmobile?
[_] Yes [_] No
Does he/she now plan to take part in any of these activities? [_] Yes [_] No
If "Yes", Avocation Supplement to be completed.
- --------------------------------------------------------------------------------
If a separate Part 2 is now being submitted, omit #25 through #29. For "Yes"
answers, explain in #30.
- --------------------------------------------------------------------------------
25. Height in shoes Weight in clothing .
------ --------
- --------------------------------------------------------------------------------
26. Is there now, or within the last year has he/she had, any known indication
of, or been told by any physician, psychologist or other practitioner of the
healing arts that he/she had any illness, sickness, injury or impairment of
health? [_] Yes [_] No
- --------------------------------------------------------------------------------
27. Within the last year has he/she had advice from or attendance or treatment
by any physician, psychologist or other practitioner of the healing arts?
[_] Yes [_] No
- --------------------------------------------------------------------------------
28. Within the last 10 years has he/she applied for either life or health
insurance and been declined, postponed or had insurance modified as to
amount or rate? If "Yes", give reasons in #30. [_] Yes [_] No
- --------------------------------------------------------------------------------
29. Within the last year has he/she been examined for insurance purposes, or is
he/she now applying to any other company for insurance or reinstatement?
[_] Yes [_] No
- --------------------------------------------------------------------------------
30. Explanatory Details for "Yes" answers. (For medical histories, include
nature of ailment, date, duration and names and addresses of attending
physicians.)
- --------------------------------------------------------------------------------
SECTION C -- STATEMENT OF SUITABILITY OF VARIABLE ANNUITY CONTRACT
- --------------------------------------------------------------------------------
Massachusetts Mutual Life Insurance Company is required to make inquiries as to
the Annuitant's financial condition so that an informed judgement can be made as
to the suitability of a variable annuity for the Annuitant's purpose. It is
urged that this Section be completed. If it is not, the following entry must be
checked.
[X] The undersigned prefer(s) not to disclose the information requested in this
Section.
- --------------------------------------------------------------------------------
31. FAMILY MEMBERS OR DEPENDENTS (Give name, relationship, date of birth.)
- --------------------------------------------------------------------------------
32. What is the Annuitant's:
A. Annual earned income after deduction
for business expenses other than taxes? $
B. Annual income from other sources? ---------
Give amount and describe source. $
---------
- --------------------------------------------------------------------------------
33. OTHER FAMILY ASSETS
Real Estate $
---------
Net Business Worth $
---------
Stocks (Including Mutual Fund Shares) $
---------
Bonds (Including Savings Bonds) $
---------
Bank Accounts $
---------
Other Assets $
---------
Total $
---------
- --------------------------------------------------------------------------------
34. INCOME OF OTHER FAMILY MEMBERS (Amount and Source)
- --------------------------------------------------------------------------------
<PAGE>
Page 3
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SECTION C -- (Continued)
- --------------------------------------------------------------------------------
35. Total amount of insurance now in force
on life of the Annuitant $
--------------
How much of this total is in group
term insurance? $
--------------
- --------------------------------------------------------------------------------
36. Will the annuitant be eligible for Social Security Retirement Benefits?
[_] Yes [_] No
- --------------------------------------------------------------------------------
37. ANNUITANT'S OTHER ANTICIPATED RETIREMENT INCOME (Include annuities and
pension plans. Indicate whether fixed, variable or combinations.)
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AGREEMENT AND SIGNATURE SECTION
- --------------------------------------------------------------------------------
The person(s) signing below agree that:
THE APPLICATION -- This is Part 1 of an application for a variable annuity. This
application also includes any Part 2 that may be required and any amendments
or supplements to either Part. To the best of the knowledge and belief of the
person(s) signing below, all statements in this application are complete and
true and were correctly recorded. Each person signing below adopts all the
statements made in the application and agrees to be bound by them.
LIABILITY OF COMPANY -- If any rider(s) are applied for, the first purchase
payment for the contract and first premium for the rider(s) may be paid to the
Company's agent in exchange for a Conditional Receipt signed by that agent. If
this is done the Company shall be liable under the rider(s) only as set forth in
that Receipt. If the first purchase payment and premium arc not paid, the
Company shall have no liability under the rider(s) unless and until:
. The application has been approved by the Company at its Home Office; and
. The first purchase payment and premium have been paid during the
lifetime of the Annuitant; and
. The contract has been delivered to the person named as owner in the
contract; and
. At the time of payment and delivery all statements in the application
are complete and true as though they were made at that time.
If any of these conditions is not met, the contract and rider(s) applied for
shall not take effect.
AUTHORITY OF AGENTS -- No agent of the Company can change the terms of this
application or any contract issued by he Company. No agent can waive any of the
Company's rights or requirements, or extend the time for any premium payment.
CHANGES AND CORRECTIONS -- Any change or correction of the application will be
shown on an Amendment of Application attached to the contract. Acceptance of any
contract issued shall be acceptance of any change or correction of the
application made by the Company. However, any correction or change of amount,
classification, or plan of annuity or riders must be agreed to in writing.
The undersigned has (have) received Prospectuses for the contract being applied
for and understand(s) that all payments and values which are based on the
investment performance of the Separate Account are variable and not guaranteed
as to dollar amount.
- --------------------------------------------------------------------------------
SPECIMEN
(John A. Doe)
- -------------------------------- ----------------------------------------------
Proposed Annuitant Purchaser (If other than Proposed Annuitant)
Signed at Springfield MA on 2-13-82
--------------------------------------------------- -----------------
City State Date
- --------------------------------------------------------------------------------
Address for The same as [_] #3; [_] #10? Otherwise, complete next 3
lines (Print)
-----------------------------------------------------------
all mail including Name
-----------------------------------------------------------
billing notices: Street & No.
-----------------------------------------------------------
City State ZIP
- --------------------------------------------------------------------------------
Richard Roe John Q. Agent
- --------------------------------------- ----------------------------------------
General Agent submitting application Signature of Agent who actually
solicited this application
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 9
April, 1998
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Re: Post-Effective Amendment No. 17 to Registration Statement
No. 2-75412 filed on Form N-4
Ladies and Gentlemen:
This opinion is furnished in connection with the filing of Post-Effective
Amendment No. 17 to Registration Statement No. 2-75412 on Form N-4 under the
Securities Act of 1933 for Massachusetts Mutual Life Insurance Company's
("MassMutual") flexible premium variable annuity contract (the "Contract").
Massachusetts Mutual Variable Annuity Separate Account 1 issues the Contract.
As Attorney for MassMutual, I provide legal advice to MassMutual in connection
with the operation of its variable products. In such role I am familiar with the
Post-Effective Amendment for the Contract. In so acting, I have made such
examination of the law and examined such records and documents as in my judgment
are necessary or appropriate to enable me to render the opinion expressed below.
I am of the following opinion:
1. MassMutual is a valid and subsisting corporation, organized and operated
under the laws of the Commonwealth of Massachusetts and is subject to regulation
by the Massachusetts Commissioner of Insurance.
2. Massachusetts Mutual Variable Annuity Separate Account 1 is a separate
account validly established and maintained by MassMutual in accordance with
Massachusetts law.
3. All of the prescribed corporate procedures for the issuance of the Contract
have been followed, and all applicable state laws have been complied with.
I hereby consent to the use of this opinion as an exhibit to this Post-Effective
Amendment.
Very truly yours,
/s/ Lynn S. Mercier
- -------------------
Lynn S. Mercier
Attorney
38
<PAGE>
EXHIBIT 10(i)
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Massachusetts Mutual Life Insurance Company
We consent to the inclusion in this Post-Effective Amendment No. 17 to the
Registration Statement of Massachusetts Mutual Variable Annuity Separate Account
1 - Flex-Annuity IV (Qualified) segment on Form N-4 (Registration No. 2-75412)
of our report dated February 3, 1998 and February 4, 1998 on our audits of
Massachusetts Mutual Variable Annuity Separate Account 1 - Variable Annuity Fund
4 and Flex-Annuity IV (Qualified) segments and Massachusetts Mutual Variable
Annuity Separate Account 2 - Flex-Annuity IV (Non-Qualified) segment,
respectively, and of our report dated February 6, 1998, on our of statutory
financial statements of Massachusetts Mutual Life Insurance Company, which
includes explanatory paragraphs relating to the use of statutory accounting
practices, which differ from generally accepted accounting principles. We also
consent to the reference to our Firm under the caption "Independent Accountants"
in the Statement of Additional Information.
Coopers & Lybrand, L.L.P.
Springfield, Massachusetts
April 24, 1998
39
