<PAGE>
Registration No. 33-82060
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Post-Effective Amendment No. 3
to
Form S-6
FOR REGISTRATION UNDER THE SECURITIES
ACT OF 1933 OF SECURITIES OF
UNIT INVESTMENT TRUSTS REGISTERED
ON FORM N-8B-2
A. Exact name of Trust: MML Bay State Variable Life Separate Account I
B. Name of Depositor: MML Bay State Life Insurance Company
C. Complete address of 1295 State Street
Depositor's principal Springfield, MA 01111
executive offices:
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b) of Rule 485.
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X on May 1, 1998 pursuant to paragraph (b) of Rule 485.
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60 days after filing pursuant to paragraph (a) of Rule 485.
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on (date) pursuant to paragraph (a) of Rule 485.
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- -----------------------------
STATEMENT PURSUANT TO RULE 24F-2
The Registrant has registered an indefinite number or amount of its variable
life insurance 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 ending December 31, 1997 was filed on March 20, 1998.
<PAGE>
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
Item No. of
Form N-8B-2 Caption
- ----------- -------
1 Cover Page; Glossary; The Separate Account
2 Cover Page; MML Bay State and the Separate Account
3 Investment Advisors and the Portfolio Managers
4 Sales and Other Agreements
5 MML Bay State and the Separate Account
6 MML Bay State and the Separate Account
7 Not Applicable
8 Not Applicable
9 Legal Proceedings
10 Cover Page; Summary of the Policy; Detailed Information
about the Policy; Flexibility to Adjust the Amount of Death
Benefit; Transfers; Surrender of the Policy; Withdrawal of
Cash Surrender Value; Death Benefit; Voting Rights
11 MML Bay State and the Separate Account
12 MML Bay State and the Separate Account; Sales and Other
Agreements
13 MML Bay State and the Separate Account; Charges and
Deductions
14 Summary of the Policy; MML Bay State and the Separate
Account; Detailed Information About the Policy; The
Investment Advisors and Portfolio Managers; MML Bay State
and the Separate Account; Surrender Charges; Other Charges;
Sales and Other Agreements
15 Summary of the Policy; Detailed Information About the
Policy
16 Summary of the Policy; MML Bay State and the Separate
Account; Detailed Information About the Policy
17 Summary of the Policy; Account Value and Cash Surrender
Value; Withdrawal Fee
18 MML Bay State and the Separate Account
19 Service Agreement; Records and Reports
20 Not Applicable
21 Summary of the Policy; Policy Loan Privilege
22 Not Applicable
23 Bonding Arrangement
24 Limits on Our Right to Challenge the Policy; Suicide;
Misstatement of Age or Sex; Assignment; Beneficiary; Our
Rights; MML Bay State and the Separate Account
25 Detailed Information About the Policy
26 Not Applicable
27 Detailed Information About the Policy
<PAGE>
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
Item No. of
Form N-8B-2 Caption
- ----------- -------
28 Directors and Executive Officers of MML Bay State
29 MML Bay State and the Separate Account
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Detailed Information about the Policy
36 Not Applicable
37 Not Applicable
38 Sales and Other Agreements
39 Sales and Other Agreements
40 Sales and Other Agreements
41 Sales and Other Agreements
42 Not Applicable
43 Sales and Other Agreements
44 MML Bay State and the Separate Account; Charges for
Federal Income Tax;
45 Not Applicable
46 MML Bay State and the Separate Account
47 MML Bay State and the Separate Account
48 MML Bay State and the Separate Account
49 Not Applicable
50 MML Bay State and the Separate Account
51 Cover Page; Detailed Information About the Policy
52 MML Bay State and the Separate Account; Reservation of
Rights
53 Federal Income Tax Considerations
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Report of Independent Accountants and Financial Statements
<PAGE>
FLEXIBLE PREMIUM VARIABLE WHOLE LIFE INSURANCE POLICIES*
ISSUED BY
MML BAY STATE LIFE INSURANCE COMPANY
This Prospectus describes a flexible premium variable whole life insurance
policy (the "Policy") offered by MML Bay State Life Insurance Company ("MML Bay
State"). The Policy, for so long as it remains in force, provides lifetime
insurance protection on the Insured named in the Policy. The Policy is designed
to provide maximum flexibility in connection with premium payments and Death
Benefits by permitting the Policyowner, subject to certain restrictions, to vary
the frequency and amount of Planned Premium Payments and to increase or decrease
the Death Benefit payable under the Policy. This flexibility allows a
Policyowner to provide for changing insurance needs under a single insurance
policy. A Policy may also be surrendered for its Cash Surrender Value.
The Policyowner may allocate Net Premiums and Account Value among the divisions
(the "Divisions") of the designated segment of MML Bay State Variable Life
Separate Account I (the "Separate Account") and a Guaranteed Principal Account
(the "GPA"). The assets of each Division will be used to purchase, at net asset
value, shares of a designated investment fund. Currently, the available funds
include the following funds of either MML Series Investment Fund (the "MML
Trust") or Oppenheimer Variable Account Funds (the "Oppenheimer Trust"):
MML Trust: Oppenheimer Trust:
--------- -----------------
MML Equity Fund Oppenheimer Aggressive Growth Fund
MML Money Market Fund Oppenheimer Global Securities Fund
MML Managed Bond Fund Oppenheimer Growth Fund
MML Blend Fund Oppenheimer Strategic Bond Fund
The Policyowner bears the investment risk of any Account Value allocated to the
Separate Account. The Death Benefit may, and the Cash Surrender Value will, vary
up and down depending on the investment performance of the Divisions. While
there is no guaranteed minimum Cash Surrender Value for funds invested in the
Separate Account, a Policy's Death Benefit will never be less than the Selected
Face Amount less any Policy Debt and any unpaid Monthly Charges. Furthermore,
the Policy will not lapse provided there are sufficient funds available to pay
certain monthly charges.
All Policies are serviced through MML Bay State's Principal Administrative
Office, located at 1295 State Street, Springfield, Massachusetts 01111-0001. The
telephone number is (413) 788-8411.
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.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE PROSPECTUSES FOR MML
SERIES INVESTMENT FUND AND OPPENHEIMER VARIABLE ACCOUNT FUNDS.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FURTHER REFERENCE.
THE PURPOSE OF THE POLICY WE ARE OFFERING IS TO PROVIDE INSURANCE PROTECTION FOR
THE BENEFICIARY OF A POLICY. WE DO NOT CLAIM THAT THE POLICY IS IN ANY WAY
SIMILAR TO OR COMPARABLE WITH A MUTUAL FUND'S SYSTEMATIC INVESTMENT PLAN.
REPLACING EXISTING INSURANCE WITH THE POLICY DESCRIBED IN THIS PROSPECTUS MAY
NOT BE TO YOUR ADVANTAGE.
This Prospectus does not constitute an offer of, or solicitation of, an offer to
acquire any interest or participation in the flexible premium variable life
insurance policies offered by this Prospectus in any jurisdiction to anyone to
whom it is unlawful to make such an offer or solicitation in such jurisdiction.
The date of this Prospectus is May 1, 1998.
* Title may vary in some jurisdictions.
<PAGE>
<TABLE>
<CAPTION>
Table Of Contents Page
<S> <C>
Definition Of Terms ....................................................... 4
I. SUMMARY OF THE POLICY .................................................. 6
The Policy ................................................................ 6
The Separate Account and the Guaranteed Principal Account ................. 6
Availability of the Policy ................................................ 6
The Death Benefit ......................................................... 6
Flexibility to Adjust the Amount of Death Benefit ......................... 6
Premium Features .......................................................... 7
Transfers ................................................................. 7
Charges and Deductions .................................................... 7
- - Deductions from Premiums ................................................ 7
- - Monthly Charges ......................................................... 7
- - Surrender Charge ........................................................ 8
- - Administrative Surrender Charge ......................................... 8
- - Sales Load Surrender Charge ............................................. 8
- - Mortality and Expense Risk Charge ....................................... 8
- - Other Charges ........................................................... 8
Policy Loan Privilege ..................................................... 8
Surrender of the Policy ................................................... 8
Withdrawal of Cash Surrender Value ........................................ 8
II.INFORMATION ABOUT MML BAY STATE AND THE SEPARATE ACCOUNT ............... 8
MML Bay State and MassMutual .............................................. 8
OppenheimerFunds, Inc ..................................................... 9
The Separate Account ...................................................... 9
MML Trust and Oppenheimer Trust ........................................... 9
- - MML Equity Fund ......................................................... 10
- - MML Money Market Fund ................................................... 10
- - MML Managed Bond Fund ................................................... 10
- - MML Blend Fund .......................................................... 10
- - Oppenheimer Aggressive Growth Fund ...................................... 10
- - Oppenheimer Global Securities Fund ...................................... 10
- - Oppenheimer Growth Fund ................................................. 11
- - Oppenheimer Strategic Bond Fund ......................................... 11
The Investment Advisers and Portfolio Managers ............................ 11
- - Rates of Return ......................................................... 11
- - Tables I, II and III .................................................... 12
- - Table IV ................................................................ 13
Performance Illustration .................................................. 14
- - Table V ................................................................. 14
- - Tables VI and VII ....................................................... 15
- - Tables VIII and IX ...................................................... 16
- - Tables X through XII .................................................... 17
III. DETAILED INFORMATION ABOUT THE POLICY
Availability of Policy .................................................... 18
Unisex Policies ........................................................... 18
Death Benefit ............................................................. 18
- - Death Benefit Options ................................................... 18
- - Minimum Face Amount ..................................................... 18
- - Examples ................................................................ 18
- - Changes in Death Benefit Option ......................................... 19
- - Changes in Selected Face Amount ......................................... 19
- - Increases in Selected Face Amount ....................................... 19
- - Decreases in Selected Face Amount ....................................... 19
Premiums .................................................................. 19
- - Premium Flexibility ..................................................... 19
- - Planned Annual Premium .................................................. 20
- - Premium Limitations ..................................................... 20
Allocation of Net Premium Payments ........................................ 20
Transfers ................................................................. 20
Dollar Cost Averaging ..................................................... 20
Policy Lapse and Reinstatement ............................................ 21
- - Policy Lapse ............................................................ 21
- - Reinstatement Option .................................................... 21
Charges and Deductions .................................................... 21
- - Deductions from Premiums ................................................ 21
- - Sales Charge ............................................................ 21
- - Premium Tax Charge ...................................................... 21
Monthly Charges ........................................................... 22
- - Administrative Charge ................................................... 22
- - Mortality Charge ........................................................ 22
- - Rider Charge ............................................................ 22
Daily Charges against Separate Account .................................... 22
- - Mortality and Expense Risk Charge ....................................... 22
- - Charges for Federal Taxes ............................................... 22
- - Investment Management Fee and Other Expenses ............................ 22
Surrender Charges ......................................................... 22
- - General ................................................................. 22
- - Administrative Surrender Charge ......................................... 22
- - Sales Load Surrender Charge ............................................. 22
- - Surrender Charge Upon Decrease in Selected Face Amount .................. 23
Other Charges ............................................................. 23
- - Withdrawal Fee .......................................................... 23
- - Charge for Increase in Selected Face Amount ............................. 23
- - Charge for Change from Option 1 to Option 2 ............................. 23
Account Value and Cash Surrender Value .................................... 23
- - Account Value ........................................................... 23
- - Investment Return ....................................................... 23
- - Cash Surrender Value .................................................... 23
- - Withdrawals ............................................................. 23
Policy Loan Privilege ..................................................... 24
- - General ................................................................. 24
- - Source of Loan .......................................................... 24
- - Interest Charged ........................................................ 24
- - Repayment ............................................................... 24
- - Interest on Loaned Value ................................................ 24
- - Effect of Loan .......................................................... 24
Free Look Provision ....................................................... 24
The Guaranteed Principal Account .......................................... 25
Federal Income Tax Considerations ......................................... 25
- - MML Bay State's Tax Status .............................................. 25
- - Policy Proceeds, Premiums and Loans ..................................... 26
- - Modified Endowment Contracts ............................................ 26
- - Qualified Plans ......................................................... 27
- - Diversification Standards ............................................... 27
Your Voting Rights ........................................................ 28
Reservation of Rights ..................................................... 28
Additional Provisions of the Policy ....................................... 28
- - Additional Benefits You Can Get by Rider ................................ 28
- - Disability Benefit Rider ................................................ 28
</TABLE>
2
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<TABLE>
<S> <C>
- - Accidental Death Benefit Rider .......................................... 28
- - Insurability Protection Rider ........................................... 28
- - Death Benefit Guarantee Rider ........................................... 28
- - Accelerated Death Benefit Rider ......................................... 29
- - Right to Exchange Insured Endorsement ................................... 29
Exchange Privilege ........................................................ 29
Beneficiary ............................................................... 29
Assignment ................................................................ 29
Limits on Our Right to Challenge the Policy ............................... 29
Error of Age or Sex ....................................................... 29
Suicide ................................................................... 29
When We Pay Proceeds ...................................................... 30
Payment Options ........................................................... 30
Fixed Account Payment Option .............................................. 30
Fixed Time Payment Option ................................................. 30
Interest Payment Option ................................................... 30
Lifetime Payment Option ................................................... 30
Joint Lifetime Payment Option ............................................. 30
Joint Lifetime Payment Option with Reduced Payments ....................... 30
Withdrawal Rights Under Payment Option .................................... 30
Records and Reports ....................................................... 30
Sales and Other Agreements ................................................ 31
Compensation .............................................................. 31
Bonding Arrangement ....................................................... 31
Directors and Officers of MML Bay State.................................... 31
Legal Proceedings ......................................................... 33
Experts ................................................................... 33
Financial Statements ...................................................... 33
Appendix A
Illustrations of Death Benefits, Cash Surrender Values,
Account Values and Accumulated Premiums ................................ A
</TABLE>
3
<PAGE>
Definition Of Terms
Account Value: The sum of the Variable Account Value and the Fixed Account Value
of the Policy.
Attained Age: The Issue Age of the Insured plus the number of completed Policy
Years since the Policy Date.
Beneficiary(ies): The person or persons specified by the Policyowner to receive
some or all of the Death Benefit when the Insured dies.
Cash Surrender Value: The amount payable to a Policyowner upon surrender of the
Policy. It is equal to the Account Value less any surrender charges and less any
Policy Debt and any unpaid Monthly Charges.
Death Benefit: The net amount paid to a Beneficiary following receipt of due
proof of the death of the Insured. The Death Benefit is equal to the benefit
provided by the Death Benefit Option less any Policy Debt and any unpaid Monthly
Charges.
Death Benefit Option: The Policy offers two Death Benefit Options for
determination of the amount of the Death Benefit. The amount of benefit provided
under Option 1 is the greater of the Selected Face Amount or Minimum Face Amount
on the date of death. The amount of benefit provided under Option 2 is the
greater of the Selected Face Amount plus the Account Value on the date of death
and the Minimum Face Amount on the date of death. The Death Benefit Option is
elected at time of application and, subject to certain limitations, may be
changed at a later date.
Effective Annual Rate of Return: The interest rate which, if applied to the
value of an investment at the beginning of a stated period and compounded
annually, would result in the value of that investment at the end of the period.
Fixed Account Value: The current Account Value which is allocated to the GPA.
Guaranteed Principal Account ("GPA"): A fixed account to which a Policyowner may
make allocations.
Insured: The person whose life this Policy insures.
Issue Age: The age of the Insured at his or her birthday nearest the Policy
Date. The Issue Age is shown on the schedule page of the Policy.
Minimum Face Amount: An amount equal to the applicable percentage times the
Account Value. The applicable percentage depends on the sex, smoking
classification, and Attained Age of the Insured. The applicable percentages are
shown in the Policy.
Monthly Calculation Date: The monthly date on which the Monthly Charges for the
Policy are deducted from the Account Value. The first Monthly Calculation Date
will be the Policy Date, and subsequent Monthly Calculation Dates will be on the
same day of each succeeding calendar month.
Monthly Charges: The charges assessed against the Policy's Account Value on each
Monthly Calculation Date. Each Monthly Charge includes an administrative charge,
a mortality charge, and a rider charge (if any).
Net Premium: The remainder of the premium after the deduction of the Premium
Expense Charge.
Policy: The flexible premium variable life insurance policy offered by MML Bay
State that is described in this Prospectus.
Policy Anniversary: An anniversary of the Policy Date.
Policyowner: The person or entity that owns the Policy.
Policy Date: The date shown on the Policy that is the starting point for
determining Policy Anniversary Dates, Policy Years, and Monthly Calculation
Dates.
Policy Debt: The amount of the obligation owed by the Policyowner to MML Bay
State from outstanding loans made to the Policyowner under the Policy. This
amount includes any loan interest accrued.
Policy Year: The twelve-month period commencing with the Policy Date, and each
twelve-month period thereafter.
Premium Expense Charge: The amount deducted from a premium payment consisting of
the premium tax charge and the sales charge.
Principal Administrative Office: MML Bay State's Principal Administrative Office
is located at 1295 State Street, Springfield, Massachusetts 01111-0001.
Register Date: The date when a completed Part 1 of the Application is received
or when the first Net Premium is allocated to the Divisions and/or GPA. The
Register Date cannot be prior to the Policy Date.
Selected Face Amount: The amount of insurance coverage issued under the Policy.
Subject to certain limitations, the Policyowner may change the Selected Face
Amount after issue.
Separate Account: The segregated asset account called "MML Bay State Variable
Life Separate Account I" established by MML Bay State under the laws of
Missouri, maintained under the laws of Connecticut and registered as a unit
investment trust with the Securities and Exchange Commission pursuant to the
Investment Company Act of 1940, as amended ("1940 Act"). The Separate Account is
used to receive and invest premiums for this Policy.
Valuation Date: A date on which the net asset value of the shares of the
Divisions is determined. Generally, this will be any date on which the New York
Stock Exchange (or its successor) is open for trading.
4
<PAGE>
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. eastern 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 Account Value: The value equal to the number of Accumulation Units
multiplied by the number of units in the Division that the Policyowner owns.
We or Us: Refers to MML Bay State.
You or Yours: Refers to the Policyowner.
5
<PAGE>
I. SUMMARY OF THE POLICY
This summary is intended to provide a brief overview of the more significant
aspects of the Policy. Further detail is provided elsewhere in this Prospectus.
Additionally, You should consult Your Policy for a further understanding of its
terms and conditions.
The Policy
The Policy is a life insurance contract providing a death benefit, cash values,
surrender rights, policy loan privileges, and other features traditionally
associated with life insurance. It provides that the Policyowner may, subject to
certain limitations, make premium payments in any amount and at any frequency
while the Insured is living.
The Policy is a "flexible premium" policy because, unlike traditional insurance
policies, there is no fixed schedule of premium payments. Although the
Policyowner may establish a schedule of premium payments ("Planned Premium
Payments"), failure to make a Planned Premium Payment will not necessarily cause
a Policy to lapse nor will making the Planned Premium payments guarantee that a
Policy will remain in force. Thus, a Policyowner may, but is not required to,
pay additional premiums after making an initial premium payment. This
flexibility permits a Policyowner to provide for changing insurance needs within
a single insurance policy.
The Policy is "variable" because, unlike the fixed benefits of traditional
insurance policies, the Death Benefits may, and the Cash Surrender Value most
likely will, vary in relation to the investment experience of the Divisions to
which a Policyowner has allocated Net Premiums. Additionally, the GPA's
crediting rate, although it will not go below 3%, may be adjusted periodically.
The Policy will enter a grace period when the Account Value less any Policy Debt
is insufficient to pay the Monthly Charges on a particular Monthly Calculation
Date. At the beginning of the grace period, We will mail You a notice stating
the amount of premium needed to cover the difference between the Account Value,
less any Policy Debt, and the Monthly Charges. During the grace period, the
Policy remains in force. The grace period ends the later of 61 days after the
Monthly Calculation Date on which the Account Value, less any Policy Debt is
insufficient to pay the Monthly Charges, or 30 days after We mail the notice. If
the required premium is not paid within the grace period, the Policy will lapse
and terminate without value.
The Separate Account And The Guaranteed Principal Account
The Policyowner may allocate Net Premiums to one or more Divisions of the
Separate Account and to the GPA. Each Division invests in shares of a designated
fund. Currently these funds include the following MML Trust and Oppenheimer
Trust Funds:
MML Trust Oppenheimer Trust
- --------- -----------------
MML Equity Fund Oppenheimer Aggressive Growth Fund*
MML Money Market Fund Oppenheimer Growth Fund
MML Managed Bond Fund Oppenheimer Global Securities Fund
MML Blend Fund Oppenheimer Strategic Bond Fund
* Note: Prior to May 1, 1998, this Fund was known as the Oppenheimer Captial
Appreciation Fund.
Although a Policy has no guaranteed minimum Cash Surrender Value for amounts
invested in the Separate Account, the Death Benefit will not be less than the
Selected Face Amount so long as the Policy has not lapsed. Furthermore, the
Policy will not lapse while there is sufficient value to cover applicable
Monthly Charges.
Availability Of The Policy
The Policy may be issued on an Insured up to (or through) Issue Age 80. The
minimum Selected Face Amount is $50,000. Before issuing the Policy, MML Bay
State will require satisfactory evidence of insurability, which may include a
medical examination.
The Death Benefit
While the Policy remains in force, MML Bay State will pay the Death Benefit of
the Policy to the Beneficiary upon receipt of due proof of the death of the
Insured. The Death Benefit will be the amount of the benefit provided under the
Death Benefit Option then in effect, reduced by any Policy Debt and any unpaid
Monthly Charges.
The Policy provides a choice of two Death Benefit Options. The benefit provided
under Option 1 is the Policy's Selected Face Amount or, if greater, the Policy's
Minimum Face Amount. The benefit provided under Option 2 is the sum of the
Policy's Selected Face Amount and the Account Value or, if greater, the Policy's
Minimum Face Amount.
In order for the Policy to qualify as life insurance under current federal tax
laws, the Policy must have a Minimum Face Amount. The Minimum Face Amount is
equal to an applicable percentage of the Account Value. The applicable
percentages depend on the sex, smoking classification, and Attained Age of the
Insured, and are set forth in the Policy.
Flexibility To Adjust The Amount Of Death Benefit
Subject to certain restrictions, the Policyowner may request a change in the
Death Benefit Option or an increase or decrease in the Selected Face Amount of
the Policy.
6
<PAGE>
After the first Policy Year, the Policyowner may change the Death Benefit
Option. Changes from Option 2 to Option 1 may be made without submitting
satisfactory evidence of insurability. Changes from Option 1 to Option 2,
however, will require evidence of insurability satisfactory to MML Bay State. To
cover the cost of processing this type of change, a $75 charge is deducted on a
pro rata basis among the Divisions and the GPA (MML Bay State currently does not
charge the $75 fee for this change, but it reserves the right to do so.) The
Policyowner may not change from Option 1 to Option 2 after reaching Attained Age
80.
Additional evidence of insurability is required for an increase in the Selected
Face Amount. An increase cannot be for less than $15,000 and will not be
permitted after the Insured reaches an Attained Age of 80. To cover the cost of
processing a requested increase, a $75 charge is deducted, on a pro rata basis
among the Divisions of the Separate Account and the GPA, from the Account Value.
Decreases in coverage are allowed after the first Policy Year, although MML Bay
State believes such decreases are not in the best interest of a Policyowner. A
decrease will not be allowed if the Death Benefit Option amount would fall below
$50,000. A decrease may result in the imposition of surrender charges applied on
a pro-rata basis among the Divisions of the Separate Account and the GPA on the
effective date of the decrease.
Premium Features
MML Bay State requires You to pay a minimum initial premium. Thereafter, subject
to certain limitations, You may pay premiums at any time and in any amount.
When applying for a Policy, You select a planned annual premium and a payment
frequency. According to this schedule, MML Bay State will send You a premium
notice. You may change the Planned Premium and payment frequency by sending a
written notice requesting such change to our Principal Administrative Office.
There is no penalty if the Planned Premium is not paid, nor does payment of the
Planned Premium guarantee coverage for any period of time. Instead, the duration
of the Policy depends upon the Policy's Account Value. Even if Planned Premiums
are paid, the Policy will lapse whenever the Account Value less Policy Debt
becomes insufficient to pay current Monthly Charges and a grace period expires
without sufficient payment.
Transfers
By written request, You may transfer all or part of the value of Your
Accumulation Units in a Division to one or more other Divisions of the Separate
Account or to the GPA. Although under current practice we impose no limitations
on your right to make transfers, we reserve the right to limit transfers to not
more than one every 90 days to comply with Section 404(c) of ERISA. Any
limitation would not apply to a transfer of the entire Variable Account Value to
the GPA and to automated transfers in connection with any program we have put in
place.
Transfers of values from the GPA to the Separate Account are limited to one per
Policy Year. Any transfer from the GPA to a Division of the Separate Account
cannot exceed 25% of the Fixed Account Value (less any Policy Debt) at the time
of the transfer.
Charges and Deductions
Deductions from Premiums. A Sales Charge and a Premium Tax Charge will be
deducted from each premium payment prior to allocation to the Separate Account
and GPA. The Sales Charge is 2.0% of premium payments and the Premium Tax Charge
is 2.0% of premium payments.
The Premium Tax Charge is intended to compensate MML Bay State for taxes imposed
by various states and local jurisdictions on MML Bay State's receipt of premiums
from Policyowners. Premium taxes vary from state to state, and, in some
instances, among localities; the range of premium taxes is .75% to 4%. The 2.0%
rate approximates the average tax rate expected to be paid on premiums from all
states. The Premium Tax Charge may be higher or lower than the actual premium
tax imposed by the jurisdiction in which the Policy is written. MML Bay State
does not expect to make a profit from this charge. MML Bay State currently
intends to waive both charges after Policy Year 20; however, MML Bay State
reserves the right not to waive the charge(s), or to reimpose such charge(s)
after initially waiving such charges. During 1997, the aggregate amount of such
deductions from premiums was $2,143,478 for sales charges and $2,143,478 for
state premium tax charges.
Monthly Charges. On each Monthly Calculation Date, the Account Value will be
reduced by a Monthly Charge, consisting of an Administrative Charge, a Mortality
Charge and a charge for any additional benefits added by Rider. The
Administrative Charge is currently $6 and it is guaranteed not to exceed $9.
During 1997, the aggregate amount of such charges was $2,145,342.
The Mortality Charge will be determined by multiplying the "amount at risk under
the Policy" (that is, the Death Benefit, discounted at the monthly equivalent
rate of 3% per year, less the Account Value) by the monthly mortality rate,
which will depend on the sex, rate class and Issue Age of the Insured, the
duration of the Policy, and MML Bay State's expectations as to future mortality
and expense experience. The monthly mortality rates will not exceed the
guaranteed maximum monthly mortality rates set forth in the Policy which are
based on the sex, rate class, and Attained Age of the Insured and the "1980
Commissioners Standard Ordinary Mortality Table." During 1997, the aggregate
mortality charges were $18,066,440.
7
<PAGE>
Surrender Charges. During the first 15 Policy Years and during the first 15
years following any increase in the Selected Face Amount, MML Bay State will
impose a Surrender Charge if the Policyowner surrenders the Policy or decreases
the Selected Face Amount under the Policy. The surrender charge has two parts --
an Administrative Surrender Charge and a Sales Load Surrender Charge.
Administrative Surrender Charge. This charge is $5 for each $1,000 of Selected
Face Amount. It remains level for the first five Policy Years, then grades down
to zero over the next five policy years. This charge reimburses MML Bay State
for expenses incurred in issuing the Policy (or increase in the Selected Face
Amount), such as processing the applications (including underwriting) and
setting up computer records. It is not designed to produce a profit.
Sales Load Surrender Charge. This charge is equal to 26% of the premiums paid up
to the Surrender Charge Band, plus 4% of premiums paid in excess of the
Surrender Charge Band but less than three times the Surrender Charge Band. The
Surrender Charge Band is set forth in the Policy and is an amount generally
calculated on the basis of the Selected Face Amount and varies by the age and
sex of the Insured at the time of purchase.
Example of Surrender Charge Bands per $1,000
Age 25 Age 40 Age 55
------ ------ ------
$6.26 $9.91 $28.49
The Sales Load Surrender Charge remains level for the first 10 years, then
grades down to zero over the next five Policy Years in accordance with the
percentages set forth in the Policy.
Mortality and Expense Risk Charge. MML Bay State assesses a charge against each
of the Divisions for the mortality and expense risk it assumes. Currently, the
charge is equal, on an annual basis, to 0.55% of the daily net asset value of
the Separate Account. MML Bay State reserves the right to increase the charge up
to a maximum effective annual rate of 0.90%. This charge is not deducted from
the GPA. The aggregate amount of such charges, which are paid quarterly against
the Separate Account divisions, in 1997 was $597,441.
Other Charges. If the Policyowner requests and MML Bay State accepts an increase
in Selected Face Amount or a change in the Death Benefit Option from Option 1 to
Option 2, a charge of $75 will be deducted from the Account Value on the
effective date of the increase or option change to cover processing costs. (MML
Bay State currently does not charge a $75 fee for a change in the Death Benefit
Option, but it reserves the right to do so.)
Policy Loan Privilege
After the first Policy Year (or sooner if required by law), the Policyowner may
at any time borrow from the Policy an amount up to 90% of the Account Value less
any Surrender Charge, reduced by any outstanding Policy Debt.
At time of application, the Policyowner may elect a fixed loan rate of 6% or (in
all jurisdictions except Arkansas) an adjustable loan rate, based on the monthly
average of the corporate yield on seasoned corporate bonds as published by
Moody's Investors Service, Inc.
If interest is not paid when due, it will be added to the outstanding loan
balance. The capitalization of unpaid loan interest may have tax consequences
upon surrender or lapse of the Policy (See Policy Proceeds, Premiums and Loans.)
Policy loans may be repaid at any time while the Insured is living.
Surrender Of The Policy
The Policyowner may at any time fully surrender the Policy and receive its Cash
Surrender Value. The Cash Surrender Value will equal the Account Value less any
applicable Surrender Charge and less any Policy Debt and any unpaid Monthly
Charges. Surrender of the Policy with outstanding Policy Debt may have tax
consequences. (See Policy Proceeds, Premiums and Loans.)
Withdrawal Of Cash Surrender Value
After the first Policy Year, the Policyowner may, subject to certain
restrictions, request a withdrawal of up to 75% of the Policy's Cash Surrender
Value. For each withdrawal, a fee of $25 (or 2% of the amount withdrawn, if
less) is deducted from the amount withdrawn. This fee is guaranteed not to
increase for the duration of the Policy and is intended to compensate MML Bay
State for processing associated with the withdrawal. MML Bay State does not
intend to make a profit from this fee. The minimum amount of a withdrawal is
$100 (before deducting the withdrawal fee). If Death Benefit Option 1 is in
effect, MML Bay State will reduce the Selected Face Amount by the amount of the
withdrawal unless satisfactory evidence of insurability is provided. A surrender
charge is not assessed if a withdrawal is taken. Withdrawal of the Cash
Surrender Value may have tax consequences. (See Policy Proceeds, Premiums and
Loans.)
II. INFORMATION ABOUT MML BAY STATE AND THE SEPARATE ACCOUNT
MML Bay State And MassMutual
MML Bay State Life Insurance Company ("MML Bay State") is a life insurance
company incorporated under the laws of Missouri in 1894 and is now domiciled in
Connecticut. It is currently licensed to transact life, accident, and health
insurance business in the District of Columbia and all states except New York.
8
<PAGE>
MML Bay State is a wholly-owned subsidiary of Massachusetts Mutual Life
Insurance Company ("MassMutual"), a mutual life insurance company chartered in
Massachusetts in 1851. MassMutual's Home Office is located in Springfield,
Massachusetts. It is authorized to do business in all states, the District of
Columbia, Puerto Rico and certain provinces of Canada.
As of December 31, 1997, MassMutual had estimated total assets under management
of $152.5 billion and total unconsolidated MassMutual assets in excess of $57.5
billion.
OppenheimerFunds, Inc.
OppenheimerFunds, Inc. ("OFI") is an investment adviser organized under the laws
of Colorado as a corporation; it was originally organized in 1959. It (including
a subsidiary) currently advises U.S. investment companies with assets
aggregating over $75 billion as of December 31, 1997, with over 3.5 million
shareholder accounts. OFI is owned by Oppenheimer Acquisition Corporation, a
holding company owned in part by senior management of OFI and ultimately
controlled by MassMutual. OFI serves as investment adviser to the Oppenheimer
Trust. OFI is registered as an investment adviser under the Investment Advisers
Act of 1940.
The Separate Account
The Separate Account was established on June 9, 1982, as a separate investment
account of MML Bay State by MML Bay State's Board of Directors in accordance
with the provisions of Chapter 376 of the Missouri Statutes. The Separate
Account is registered with the Securities and Exchange Commission as a unit
investment trust pursuant to the provisions of the Investment Company Act of
1940. Registration does not involve supervision of the management or investment
practices of either the Separate Account or of MML Bay State. Under Missouri
law, however, both MML Bay State and the Separate Account are subject to
regulation by the Division of Insurance of the State of Missouri. The Separate
Account meets the definition of a "Separate Account" under the federal
securities laws.
MML Bay State owns the assets in the Separate Account and is required to
maintain sufficient assets in the Separate Account to meet anticipated
obligations of the Policies funded by the Separate Account. The Separate Account
is divided into subaccounts called Divisions. The income, gains, or losses,
realized or unrealized, of each Division are credited to or charged against the
assets held in the Division without regard to the other income, gains, or losses
of MML Bay State. Assets in the Separate Account attributable to the reserves
and other liabilities under the Policies are not chargeable with liabilities
arising from any other business conducted by MML Bay State. MML Bay State may
transfer to its General Account, however, any assets which exceed anticipated
obligations of the Separate Account. All obligations arising under the Policy
are general corporate obligations of MML Bay State. MML Bay State may accumulate
in the Separate Account proceeds from various Policy charges and investment
results applicable to those assets.
The Separate Account is currently divided into eight Divisions. Each Division
invests in a corresponding series of shares of a designated Fund of either MML
Trust or Oppenheimer Trust. MML Bay State may in the future establish additional
divisions within the Separate Account, which may invest in other investment
funds, including those of MML Trust or Oppenheimer Trust, or in any other
investment fund MML Bay State deems to be appropriate.
MML Trust And Oppenheimer Trust
The MML Trust is a no-load, open-end, management investment company that is
registered under the Investment Company Act of 1940. The Oppenheimer Trust is an
open-end, diversified, management investment company registered under the
Investment Company Act of 1940.
MassMutual established the MML Trust for the purpose of providing a vehicle for
the investment of assets of various separate investment accounts, including the
Separate Account, established by MassMutual and other life insurance company
subsidiaries of MassMutual. Similarly, OFI established the Oppenheimer Trust to
provide an investment vehicle for the separate investment accounts of variable
life and variable annuity contracts offered by companies such as MassMutual.
Shares of the MML Trust and the Oppenheimer Trust are not offered to the general
public.
The assets of certain variable annuity separate accounts for which MassMutual or
an affiliate is the depositor are invested in shares of the MML Trust's Funds.
Because these separate accounts are invested in the same underlying MML Funds,
it is possible that material irreconcilable conflicts could arise between
Policyowners and owners of the variable annuity contracts. Possible conflicts
could arise if: (i) state insurance regulators should disapprove or require
changes in investment policies, investment advisers or principal underwriters or
if MML Bay State should be permitted to act contrary to actions approved by
holders of the Policies under rules of the Securities and Exchange Commission;
(ii) adverse tax treatment of the Policies or the variable annuity contracts
would result from utilizing the same underlying funds; (iii) different
investment strategies would be more suitable for the variable annuity contracts
than for the Policies; or (iv) state insurance laws or regulations or other
applicable laws would prohibit the funding of both the Separate Account and
other investment accounts by the same 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
9
<PAGE>
MML Bay State will take such action at their own expense as may be required to
cause the Separate Account 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 Policies and the variable
annuity contracts vote not to effect such segregation.
The Oppenheimer Trust was established for use as an investment vehicle by
variable contract separate accounts such as the Separate Account. Accordingly,
it is possible that a material irreconcilable conflict may develop between the
interests of contract owners and other separate accounts investing in the
Oppenheimer Trust. The Board of Trustees of the Oppenheimer Trust (the
"Trustees") will monitor the Oppenheimer Funds for the existence of any such
conflicts. If it is determined that a conflict exists, the Trustees will notify
MassMutual, and appropriate action will be taken to eliminate such
irreconcilable conflicts. Such steps may include: (i) withdrawing the assets
allocable to some or all of the separate accounts from the particular
Oppenheimer Fund and reinvesting such assets in a different investment medium,
including (but not limited to) another Oppenheimer Fund; (ii) submitting the
question whether such segregation should be implemented to a vote of all
affected contract owners; and (iii) establishing a new registered management
investment company or managed separate account.
MML Bay State purchases the shares of each Fund for the corresponding Division
at net asset value. All dividends and capital gain distributions received from a
Fund are automatically reinvested in such Fund at net asset value, unless MML
Bay State, on behalf of the Separate Account, elects otherwise. Shares of the
MML Trust and the Oppenheimer Trust will be redeemed by MML Bay State at their
net asset value to the extent necessary to make payments under the Policies.
The following is a summary of the investment objectives of each Fund. Please
note that there can be no assurance that any Fund will achieve its objectives.
More detailed information concerning these investment objectives is contained in
the accompanying prospectuses of the MML Trust and Oppenheimer Trust, including
information on the risks associated with the investments and investment
techniques of each of the Funds.
THE PROSPECTUSES FOR MML TRUST AND OPPENHEIMER TRUST ACCOMPANYING THIS
PROSPECTUS SHOULD BE READ CAREFULLY BEFORE INVESTING.
MML Equity Fund
MML Equity Fund seeks to achieve a superior total rate of return over an
extended period of time from both capital appreciation and current income. A
secondary objective is the preservation of capital when business and economic
conditions indicate that investing for defensive purposes is appropriate. The
assets of this Fund are normally expected to be invested primarily in common
stocks and other equity-type securities.
MML Money Market Fund
MML Money Market Fund seeks to achieve high current income, while preserving
capital, and liquidity. This Fund invests in short-term debt instruments,
including but not limited to commercial paper, certificates of deposit, bankers'
acceptances, and obligations of the United States government, its agencies and
instrumentalities.
MML Managed Bond Fund
MML Managed Bond Fund seeks to achieve as high a total rate of return on an
annual basis as is considered consistent with the preservation of capital
values. This Fund invests primarily in publicly issued, readily marketable,
fixed income securities of such maturities as MassMutual deems appropriate from
time to time in light of market conditions and prospects.
MML Blend Fund
MML Blend Fund seeks to achieve as high a level of total rate of return over an
extended period of time as is considered consistent with prudent investment risk
and the preservation of capital values. This Fund invests in a portfolio of
common stocks and other equity-type securities, bonds and other debt securities
with maturities generally exceeding one year, and money market instruments and
other debt securities with maturities generally not exceeding one year.
Oppenheimer Aggressive Growth Fund
Oppenheimer Aggressive Growth Fund seeks to achieve capital appreciation by
investing in "growth type" companies. Prior to May 1, 1998, this Fund was named
Oppenheimer Capital Appreciation Fund.
Oppenheimer Global Securities Fund
Oppenheimer Global Securities Fund seeks long-term capital appreciation by
investing a substantial portion of its assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special situations, such as
anticipated acquisitions, mergers or other unusual developments, which are
considered to have appreciation possibilities, but which may be considered to be
speculative.
10
<PAGE>
Oppenheimer Growth Fund
Oppenheimer Growth Fund seeks to achieve capital appreciation by investing in
securities of well-known established companies.
Oppenheimer Strategic Bond Fund
Oppenheimer Strategic Bond Fund seeks a high level of current income principally
derived from interest on debt securities; and seeks to enhance such income by
writing covered call options on debt securities. The Fund intends to invest
principally in: (i) foreign government and corporate debt securities; (ii) U.S.
Government securities; and (iii) lower-rated, high-yield domestic debt
securities, commonly known as "junk bonds", which are subject to a greater risk
of loss of principal and nonpayment of interest than higher-rated securities.
Current income is not an objective.
For information concerning the risks associated with this Fund's investments,
please refer to the accompanying prospectus for the Oppenheimer Trust.
The Investment Advisers And Portfolio Managers
MassMutual serves as investment manager of each of the MML Funds pursuant to
investment management agreements. Pursuant to such agreements, MassMutual is
paid a quarterly fee at the annual rate of 0.50% of the first $100,000,000 of
the Fund's average daily net asset value, 0.45% of the next $200,000,000, 0.40%
of the next $200,000,000 and 0.35% of any excess over $500,000,000.
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 & Company, Inc.
("Babson") effective December 31, 1996. 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. Both
MassMutual and Babson are registered investment advisers under the Investment
Advisers Act of 1940.
During 1997, MassMutual earned the following investment management fee from each
of the following funds:
MML Equity Fund ..................................................... $8,082,863
MML Money Market Fund ............................................... $ 703,344
MML Managed Bond Fund ............................................... $ 913,026
MML Blend Fund ...................................................... $8,933,947
OFI serves as Investment Adviser to the Oppenheimer Funds. OFI receives a
monthly management fee in its capacity as investment adviser to the Oppenheimer
Funds. This fee is computed separately on the net assets of each Fund as of the
close of each business day. The management fee rate for the Aggressive Growth
Fund, the Growth Fund, and the Global Securities Fund is .75% of the first $200
million of net assets, .72% of the next $200 million, .69% of the next $200
million, .66% of the next $200 million and .60% of net assets in excess of $800
million. Strategic Bond Fund's management fee rate is .75% on the first $200
million of net assets, .72% on the next $200 million, .69% on the next $200
million, .66% on the next $200 million, .60% on the next $200 million, and .50%
of net assets in excess of $1 billion.
During 1997, OFI earned the following investment management fee from each of the
following funds.
Oppenheimer Aggressive Growth Fund .................................. $5,324,309
Oppenheimer Growth Fund ............................................. $2,859,202
Oppenheimer Global Securities Fund .................................. $5,615,606
Oppenheimer Strategic Bond Fund ..................................... $1,197,613
Citibank N.A., with its home office located at 111 Wall Street, New York, NY,
10005, acts as custodian for the MML Trust. Bank of New York, with its home
office at One Wall Street, New York, NY 10015, acts as custodian for the
Oppenheimer Trust.
MassMutual is also the investment adviser to MassMutual Corporate Investors and
MassMutual Participation Investors, closed-end investment companies, certain
wholly-owned subsidiaries of MassMutual, and various employee benefit plans.
MassMutual is the investment sub-adviser to Oppenheimer Investment Grade Bond
Fund and Oppenheimer Value Stock Fund, open-end management investment companies.
Rates of Return. The following tables show the Effective Annual Rates of Return
based on the actual investment performance (after deduction of investment
management fees and direct operating expenses) of the Fund underlying each
Division of the Separate Account. Tables I and II show figures for periods ended
December 31, 1997, while Tables III and IV show annualized figures. These rates
do not reflect the mortality and expense risk charges assessed against the
Separate Account. Also, they do not reflect deductions from premiums or Monthly
Charges assessed against the Account Value of the Policies, nor do they reflect
the Policy's Surrender Charges. (For a discussion of these charges, please see
CHARGES AND DEDUCTIONS.) Therefore, these rates are not illustrative of how
actual investment performance will affect the benefits under the Policy (see,
however, Performance Illustration). The rates of return shown are not
necessarily indicative of future performance. These rates of return may be
considered, however, in assessing the competence and performance of MassMutual,
Babson and OFI as investment advisers. An individualized hypothetical
illustration may be available. An individualized hypothetical illustration is a
document that shows how Death Benefits and Cash Surrender Values will develop
11
<PAGE>
based on certain assumptions. The assumptions used are the sex, Issue Age, rate
class and contract state of the applicant, and the Death Benefit Option and
premium frequency proposed by the registered representative or the applicant.
The individualized hypothetical illustrations reflect both current and
guaranteed charges and all basic policy charges are reflected (rider charges
may also be reflected if so requested). These illustrations will also assume
certain interest rates within the limits prescribed by federal and state law. An
applicant or Policyowner may obtain an individualized hypothetical illustration
at no charge by requesting one from his/her registered representative or from
MML Bay State at its Principal Administrative Office.
TABLE I - MML FUNDS
EFFECTIVE ANNUAL RATES OF RETURN
- --------------------------------------------------------------------------------
Fund 20 Years 15 Years 10 Years 5 Years 1 Year
- --------------------------------------------------------------------------------
Equity 16.20% 16.19% 16.44% 18.25% 28.59%
- --------------------------------------------------------------------------------
Money Market -- 6.44 5.63 4.47 5.18
- --------------------------------------------------------------------------------
Managed Bond -- 9.73 89.08 7.79 9.91
- --------------------------------------------------------------------------------
Blend -- 13.13* 13.68 13.81 20.89
- --------------------------------------------------------------------------------
* The figures shown are from inception of the MML Blend Fund, which commenced
operations on February 3, 1984.
TABLE II - OPPENHEIMER FUNDS
EFFECTIVE ANNUAL RATES OF RETURN
- --------------------------------------------------------------------------------
Fund Since Inception 5 Years 1 Year
- --------------------------------------------------------------------------------
Oppenheimer Aggressive Growth** 15.31%* 15.92% 11.67%
- --------------------------------------------------------------------------------
Oppenheimer Global Securities 12.26* 18.81 22.42
- --------------------------------------------------------------------------------
Oppenheimer Growth 15.43* 18.61 26.68
- --------------------------------------------------------------------------------
Oppenheimer Strategic Bond 7.64* -- 8.71
- --------------------------------------------------------------------------------
The Oppenheimer Aggressive Growth** Fund, Oppenheimer Global Securities Fund,
Oppenheimer Growth Fund, and the Oppenheimer Strategic Bond Fund commenced
operations on August 15, 1986, November 12, 1990, April 3, 1985 and May 3, 1993,
respectively.
** Prior to May 1, 1998, this Fund was named Oppenheimer Capital Appreciation
Fund.
TABLE III
MML FUNDS
ANNUALIZED ONE YEAR TOTAL RETURNS
- --------------------------------------------------------------------------------
For the MML Equity MML Money MML Managed MML Blend
Year Ended Fund Market Fund Bond Fund Fund
- --------------------------------------------------------------------------------
1997 28.59% 5.18% 9.91% 20.89%
1996 20.25% 5.01% 3.25% 13.95%
1995 31.13% 5.58% 19.14% 23.28%
1994 4.10% 3.84% (3.76)% 2.48%
1993 9.52% 2.75% 11.81% 9.70%
1992 10.48% 3.48% 7.31% 9.36%
1991 25.56% 6.01% 16.66% 24.00%
1990 (0.51)% 8.12% 8.38% 2.37%
1989 23.04% 9.16% 12.83% 19.96%
1988 16.68% 7.39% 7.13% 13.40%
1987 2.10% 6.49% 2.60% 3.12%
1986 20.15% 6.60% 14.46% 18.30%
1985 30.54% 8.03% 19.94% 24.88%
1984 5.40% 10.39% 11.69% 8.24%*
1983 22.85% 8.97% 7.26% --
1982 25.67% 11.12%* 22.79%* --
1981 6.67% -- -- --
1980 27.62% -- -- --
1979 19.54% -- -- --
1978 3.71% -- -- --
1977 (0.52)% -- -- --
1976 24.77% -- -- --
1975 32.85% -- -- --
1974 (17.61)%* -- -- --
- --------------------------------------------------------------------------------
* The figures shown are from inception of the Funds. The MML Equity Fund
received initial funding September 15, 1971 (performance information prior to
1974 is not available). The MML Money Market and MML Managed Bond Funds received
initial funding on December 16, 1981. The MML Blend Fund received initial
funding on February 3, 1984.
12
<PAGE>
TABLE IV
OPPENHEIMER FUNDS
ANNUALIZED ONE YEAR TOTAL RETURNS
- --------------------------------------------------------------------------------
Oppenheimer
Oppenheimer Aggressive Oppenheimer
For the Oppenheimer Strategic Growth** Global
Year Ended Growth Fund Bond Fund Fund Securities
- --------------------------------------------------------------------------------
1997 26.68% 8.71% 11.67% 22.42%
1996 25.20% 12.07% 20.16% 17.80%
1995 36.65% 15.33% 32.52% 2.24%
1994 .98% (5.85)% (7.50)% (5.72)%
1993 7.25% 4.25%* 27.32% 70.32%
1992 14.53% -- 15.42% (7.11)%
1991 25.54% -- 54.72% 3.39%
1990 (8.21)% -- (16.32)% 0.40%*
1989 23.59% -- 27.39% --
1988 22.09% -- 13.41% --
1987 3.32% -- 14.34% --
1986 17.76% -- (1.65)%* --
1985 9.50%* -- -- --
- --------------------------------------------------------------------------------
* The figures shown are from inception of the Oppenheimer Funds. The Aggressive
Growth** Fund, Global Securities Fund, Growth Fund, and the Strategic Bond
Fund commenced operations on August 15, 1986, November 12, 1990, April 3, 1985
and May 3, 1993, respectively.
** Prior to May 1, 1998, this Fund was named Oppenheimer Capital Appreciation
Fund.
13
<PAGE>
Performance Illustration
The following tables show how the actual investment performance of the Funds
would have affected the Death Benefits and Cash Surrender Values of hypothetical
Policies. Each table illustrates a Policy as of the earliest date for which
performance figures are available for the illustrated Fund. Each table assumes
that the illustrated Policy was issued for a Selected Face Amount of $100,000
and Issue Age 35 male, using Death Benefit Option 1, with annual premiums of
$1,200 paid at the beginning of each year and the full Account Value
continuously reinvested in the Division corresponding with the particular Fund
illustrated. One set of figures reflects the current schedule of charges; the
other set of figures reflects guaranteed mortality and expense charges and
current fund level charges.
TABLE V
MML EQUITY FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Using Guaranteed Mortality and
Using Current Schedule of Charges Expense Charges and Current Fund
Level Charges
- ------------------------------------------------------------------------------------------------------------
Cash Cash
Total Annual Surrender Death Surrender Death
Calendar Year Premiums Value Benefit Value Benefit
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1974 $ 1,200 0 $100,000 0 $100,000
1975 2,400 $ 1,181 100,000 $ 1,059 100,000
1976 3,600 2,663 100,000 2,452 100,000
1977 4,800 3,388 100,000 3,121 100,000
1978 6,000 4,297 100,000 3,959 100,000
1979 7,200 6,254 100,000 5,777 100,000
1980 8,400 9,184 100,000 8,486 100,000
1981 9,600 10,612 100,000 9,775 100,000
1982 10,800 14,371 100,000 13,206 100,000
1983 12,000 18,584 100,000 17,022 100,000
1984 13,200 20,187 100,000 18,406 100,000
1985 14,400 27,197 100,000 24,704 100,000
1986 15,600 33,378 100,000 30,194 100,000
1987 16,800 34,575 100,000 31,137 100,000
1988 18,000 40,941 100,000 36,712 100,000
1989 19,200 50,844 115,417 45,436 103,140
1990 20,400 50,785 112,235 45,253 100,009
1991 21,600 64,023 137,648 56,870 122,270
1992 22,800 70,700 147,763 62,553 130,737
1993 24,000 77,263 157,616 68,047 138,816
1994 25,200 80,191 159,581 70,218 139,734
1995 26,400 104,736 203,188 91,188 176,904
1996 27,600 124,958 236,171 108,161 204,425
1997 28,800 159,036 294,217 136,858 253,187
- ------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
TABLE VI
MML MONEY MARKET FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Using Guaranteed Mortality and
Using Current Schedule of Charges Expense Charges and Current Fund
Level Charges
- ---------------------------------------------------------------------------------------------------------------
Cash Cash
Total Annual Surrender Death Surrender Death
Calendar Year Premiums Value Benefit Value Benefit
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1982 $ 1,200 $ 170 $100,000 $ 115 $100,000
1983 2,400 1,096 100,000 982 100,000
1984 3,600 2,146 100,000 1,965 100,000
1985 4,800 3,209 100,000 2,955 100,000
1986 6,000 4,255 100,000 3,922 100,000
1987 7,200 5,421 100,000 5,000 100,000
1988 8,400 6,695 100,000 6,166 100,000
1989 9,600 8,163 100,000 7,501 100,000
1990 10,800 9,617 100,000 8,807 100,000
1991 12,000 10,910 100,000 9,949 100,000
1992 13,200 11,864 100,000 10,760 100,000
1993 14,400 12,719 100,000 11,468 100,000
1994 15,600 13,714 100,000 12,291 100,000
1995 16,800 14,964 100,000 13,330 100,000
1996 18,000 16,151 100,000 14,295 100,000
1997 19,200 17,271 100,000 15,176 100,000
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
TABLE VII
MML BLEND FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Using Guaranteed Mortality and
Using Current Schedule of Charges Expense Charges and Current Fund
Level Charges
- ---------------------------------------------------------------------------------------------------------------
Cash Cash
Total Annual Surrender Death Surrender Death
Calendar Year Premiums Value Benefit Value Benefit
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1984 $ 1,200 $ 142 $100,000 $ 87 $100,000
1985 2,400 1,364 100,000 1,237 100,000
1986 3,600 2,688 100,000 2,480 100,000
1987 4,800 3,575 100,000 3,302 100,000
1988 6,000 5,007 100,000 4,632 100,000
1989 7,200 7,130 100,000 6,604 100,000
1990 8,400 8,008 100,000 7,470 100,000
1991 9,600 11,107 100,000 10,244 100,000
1992 10,800 12,954 100,000 11,905 100,000
1993 12,000 14,971 100,000 13,706 100,000
1994 13,200 15,907 100,000 14,489 100,000
1995 14,400 10,370 100,000 18,474 100,000
1996 15,600 23,834 100,000 21,517 100,000
1997 16,800 29,469 100,000 26,486 100,000
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
TABLE VIII
MML MANAGED BOND FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Using Guaranteed Mortality and
Using Current Schedule of Charges Expense Charges and Current Fund
Level Charges
- ---------------------------------------------------------------------------------------------------------------
Cash Cash
Total Annual Surrender Death Surrender Death
Calendar Year Premiums Value Benefit Value Benefit
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1982 $ 1,200 $ 285 $100,000 $ 226 $100,000
1983 2,400 1,186 100,000 1,069 100,000
1984 3,600 2,283 100,000 2,097 100,000
1985 4,800 3,840 100,000 3,554 100,000
1986 6,000 5,366 100,000 4,972 100,000
1987 7,200 6,327 100,000 5,854 100,000
1988 8,400 7,646 100,000 7,059 100,000
1989 9,600 9,536 100,000 8,784 100,000
1990 10,800 11,129 100,000 10,216 100,000
1991 12,000 13,834 100,000 12,654 100,000
1992 13,200 15,465 100,000 14,076 100,000
1993 14,400 17,923 100,000 16,235 100,000
1994 15,600 17,686 100,000 15,930 100,000
1995 16,800 21,694 100,000 19,444 100,000
1996 18,000 22,841 100,000 20,360 100,000
1997 19,200 25,447 100,000 22,550 100,000
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
TABLE IX
OPPENHEIMER GROWTH FUND
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Using Guaranteed Mortality and
Using Current Schedule of Charges Expense Charges and Current Fund
Level Charges
- ----------------------------------------------------------------------------------------------------------------
Cash Cash
Total Annual Surrender Death Surrender Death
Calendar Year Premiums Value Benefit Value Benefit
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1986 $ 1,200 $ 235 $100,000 $ 178 $100,000
1987 2,400 1,055 100,000 944 100,000
1988 3,600 2,432 100,000 2,237 100,000
1989 4,800 4,171 100,000 3,866 100,000
1990 6,000 4,402 100,000 4,064 100,000
1991 7,200 6,749 100,000 6,248 100,000
1992 8,400 8,718 100,000 8,059 100,000
1993 9,600 10,174 100,000 9,377 100,000
1994 10,800 10,964 100,000 10,064 100,000
1995 12,000 16,090 100,000 14,732 100,000
1996 13,200 20,974 100,000 19,128 100,000
1997 14,400 27,373 100,000 24,867 100,000
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
TABLE X
OPPENHEIMER AGGRESSIVE GROWTH* FUND
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Using Guaranteed Mortality and
Using Current Schedule of Charges Expense Charges and Current Fund
Level Charges
- ----------------------------------------------------------------------------------------------------------
Cash Cash
Total Annual Surrender Death Surrender Death
Calendar Year Premiums Value Benefit Value Benefit
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1987 $ 1,200 $ 202 $100,000 $ 145 $100,000
1988 2,400 1,216 100,000 1,097 100,000
1989 3,600 2,785 100,000 2,573 100,000
1990 4,800 2,791 100,000 2,562 100,000
1991 6,000 6,004 100,000 5,572 100,000
1992 7,200 7,972 100,000 7,397 100,000
1993 8,400 11,345 100,000 10,516 100,000
1994 9,600 11,094 100,000 10,239 100,000
1995 10,800 15,833 100,000 14,579 100,000
1996 12,000 19,920 100,000 18,280 100,000
1997 13,200 22,917 100,000 20,941 100,000
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Prior to May 1, 1998, this fund was named the Oppenheimer Capital Appreciation
Fund.
TABLE XI
OPPENHEIMER GLOBAL SECURITIES FUND
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Using Guaranteed Mortality and
Using Current Schedule of Charges Expense Charges and Current Fund
Level Charges
- ----------------------------------------------------------------------------------------------------------
Cash Cash
Total Annual Surrender Death Surrender Death
Calendar Year Premiums Value Benefit Value Benefit
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1990 $ 1,200 $ 65 $100,000 $ 13 $100,000
1991 2,400 881 100,000 776 100,000
1992 3,600 1,448 100,000 1,301 100,000
1993 4,800 4,471 100,000 4,146 100,000
1994 6,000 4,832 100,000 4,464 100,000
1995 7,200 5,756 100,000 5,313 100,000
1996 8,400 7,823 100,000 7,218 100,000
1997 9,600 10,631 100,000 9,795 100,000
- ----------------------------------------------------------------------------------------------------------
</TABLE>
TABLE XII
OPPENHEIMER STRATEGIC BOND FUND
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Using Guaranteed Mortality and
Using Current Schedule of Charges Expense Charges and Current Fund
Level Charges
- ----------------------------------------------------------------------------------------------------------
Cash Cash
Total Annual Surrender Death Surrender Death
Calendar Year Premiums Value Benefit Value Benefit
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993 $ 1,200 $ 103 $100,000 $ 50 $100,000
1994 2,400 751 100,000 652 100,000
1995 3,600 1,891 100,000 1,721 100,000
1996 4,800 3,082 100,000 2,833 100,000
1997 6,000 4,222 100,000 3,889 100,000
- ----------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
These illustrations are not indicative of future performance. They assume the
Policies were issued based on full underwriting and that there have been no
increases or decreases in Selected Face Amounts, no Policy loans and no
transaction charges incurred. Further, they assume that Death Benefit Option 1
was selected. The Cash Surrender Values shown reflect all Deductions from
Premiums, Charges, Surrender Charges, and Mortality and Expense Risk Charges.
Illustrations of Death Benefits, Cash Surrender Values and Accumulated Premiums
based on assumed hypothetical gross annual investment returns of 0%, 6% and 12%
are shown in APPENDIX A. APPENDIX A also describes, in more detail, the
assumptions underlying these illustrations.
III. DETAILED INFORMATION ABOUT THE POLICY
Availability of Policy
Individuals wishing to purchase a Policy must send a completed application to
MML Bay State's Principal Administrative Office. Under our current rules, the
minimum Selected Face Amount of a Policy is $50,000. The Policy can be issued
for Insureds with Issue Ages 0 through 80. Before issuing a Policy, however, MML
Bay State will require satisfactory evidence of insurability, which may include
a medical examination.
The Policy is available to Policyowners who are purchasing a Policy in
connection with employee benefit plans which qualify for tax benefits under the
Internal Revenue Code (the "qualified market") and other Policyowners (the
"nonqualified market").
Unisex Policies
Policies issued in states requiring "unisex" policies (currently Montana; MML
Bay State has retained "unisex" rates in Massachusetts where they were
previously required) provide for policy values which do not vary by the sex of
the Insured. In addition, Policies issued in conjunction with employee benefit
plans provide for policy values which do not vary by the sex of the insured.
Thus, references in this Prospectus to sex-distinct policy values which vary by
the sex of the Insured are not applicable to Policies issued in Montana or
Massachusetts, or issued in conjunction with employee benefit plans.
Illustrations showing the effect of these unisex rates on premiums, Cash
Surrender Values, and Death Benefits are available from MML Bay State on
request.
Death Benefit
As long as the Policy remains in force, MML Bay State will, upon due proof of
the Insured's death, pay the Death Benefit of the Policy to the named
Beneficiary. Although MML Bay State will normally pay the Death Benefit within
seven days of receiving satisfactory proof of the Insured's death, the Company
may delay payments under certain circumstances. All or part of the Death Benefit
can be paid in cash or under one or more of the payment options set forth in the
Policy.
The Death Benefit is the amount of the benefit provided under Death Benefit
Option 1 or Death Benefit Option 2, whichever is in effect on the date of the
Insured's death, less any outstanding Policy Debt and less any unpaid Monthly
Deduction.
Death Benefit Options. The Policyowner may choose one of two Death Benefit
Options: Option 1 (a level amount option) and Option 2 (a variable amount
option). The Policyowner designates the Death Benefit Option in the application
and may subsequently change the option subject to certain restrictions described
in CHANGES IN THE DEATH BENEFIT OPTION.
Options 1 and 2 provide the following benefits:
Option 1 - Under Option 1, the Account Value is included in the Selected Face
Amount. The benefit provided under Option 1 is the greater of: (a) the Selected
Face Amount on the date of death; and (b) the Minimum Face Amount on the date of
death of the Insured.
Option 2 - Under Option 2, the Account Value is not included in the Selected
Face Amount. The benefit provided under Option 2 is the greater of: (a) the
Selected Face Amount plus the Account Value on the date of death; and (b) the
Minimum Face Amount on the date of death of the Insured.
Minimum Face Amount. In order to qualify as life insurance under current federal
tax laws, the Policy has a Minimum Face Amount. The Minimum Face Amount is equal
to an applicable percentage of the Account Value. This applicable percentage
depends on the sex, smoking classification and Attained Age of the Insured. The
applicable percentages are set forth in the Policy.
The following examples illustrate how changes in the Account Value may affect
the Death Benefits under Options 1 and 2.
Example I
Assume that the Policyowner has selected Option 1 with a Selected Face Amount of
$100,000 and that the Account Value equals $5,000. The Death Benefit in this
case is $100,000. If the Account Value increases to $8,000, the Death Benefit
remains at $100,000. If the Account Value decreases to $3,000, the Death Benefit
still remains at $100,000.
Under Option 1, the Death Benefit will remain at the Selected Face Amount, in
this example $100,000, until the applicable percentage of the Account Value
exceeds the Selected Face Amount.
Example II
Assume the Policyowner has selected Option 2 with a Selected Face Amount of
$100,000 and the Account Value
18
<PAGE>
is equal to $5,000. The Death Benefit in this case is $105,000 (Selected Face
Amount plus Account Value). If the Account Value increases to $8,000, the Death
Benefit will increase to $108,000. If the Account Value decreases to $3,000, the
Death Benefit will decrease to $103,000.
Under Option 2, the Death Benefit will be the Selected Face Amount plus the
Account Value (if greater than $0.00), until the Minimum Face Amount exceeds the
sum of the Selected Face Amount plus the Account Value.
If the Policyowner seeks to have premium payments and favorable investment
performance reflected partly in the form of an increasing Death Benefit, the
Policyowner should choose Option 2. If a Policyowner is satisfied with the
amount of the Insured's existing insurance coverage and instead seeks to have
premium payments and investment performance reflected to the maximum extent in
the Policy's Account Value, the Policyowner should choose Option 1.
Changes in Death Benefit Option. After the first Policy Year, the Policyowner
may change the Death Benefit Option. A change from Option 2 to Option 1 may be
made without submitting satisfactory evidence of insurability. A change from
Option 1 to Option 2, however, will require evidence of insurability
satisfactory to MML Bay State. In addition, a charge of $75 will be deducted
from the Account Value on the effective date of the change. This charge will be
deducted from the Division(s) and the GPA in proportion to the non-loaned values
in each Division(s) and the GPA. (MML Bay State currently does not charge the
$75 fee for this change, but it reserves the right to do so.) The Policyowner
may not change from Option 1 to Option 2 after reaching Attained Age 80. The
effective date of any change will be the Monthly Calculation Date on or which
next follows the date MML Bay State approves the change.
A change in the Death Benefit Option will not in and of itself result in an
immediate change in the amount of a Policy's Death Benefit. For a change from
Option 2 to Option 1, the Selected Face Amount is increased by the amount of the
Account Value on the effective date of the change. For a change from Option 1 to
Option 2, the Selected Face Amount will be decreased by the amount of Account
Value on the effective date of the change. This change will not be permitted if
it would reduce the Selected Face Amount below $50,000.
An increase or decrease in Selected Face Amount resulting from a change in the
Death Benefit Option will affect the Monthly Charges, as the monthly mortality
charge depends on the Selected Face Amount. The charge for certain additional
benefits may also be affected. The Surrender Charge, however, will not be
affected by an increase or decrease in Selected Face Amount resulting from a
change in the Death Benefit Option.
Changes in Selected Face Amount. The Policyowner may request an increase or
decrease in the Selected Face Amount subject to the approval of MML Bay State.
Any request for an increase or decrease must be submitted in writing to MML Bay
State's Principal Administrative Office. It will become effective on the Monthly
Calculation Date on or which next follows MML Bay State's acceptance of the
request.
Increases in Selected Face Amount. For an increase in the Selected Face Amount,
MML Bay State requires satisfactory evidence of insurability. An increase may
not be less than $15,000, and no increase will be permitted after Attained Age
80. To cover the cost of processing the request, a charge of $75 will be
deducted from the Account Value on the effective date of the increase in the
Selected Face Amount. The charge will be deducted from the Divisions of the
Separate Account and the GPA in proportion to the non-loaned value in each
Division(s) and the GPA.
Decreases in Selected Face Amount. Decreases in coverage are allowed after the
first Policy Year, although MML Bay State believes such decreases generally are
not in the best interests of a Policyowner. A decrease will not generally be
permitted if the Death Benefit Option amount would fall below $50,000. No
processing charge is applied to decreases in coverage.
A decrease may result in the imposition of Surrender Charges. (For a discussion
of the Surrender Charges associated with a decrease, see Surrender Charges). Any
Surrender Charge applicable to a decrease will be deducted from the Division(s)
of the Separate Account and the GPA in proportion to the non-loaned values in
each.
For purpose of determining Surrender Charges and mortality charges, a decrease
will reduce the Selected Face Amount in the following order: (a) the Selected
Face Amount provided by the most recent increase; (b) the Selected Face Amounts
provided by the next most recent increases successively; and finally (c) the
initial Selected Face Amount.
A decrease may result in the Policy becoming a "modified endowment contract".
(See Policy Proceeds, Premiums and Loans.)
Premiums
Subject to certain limitations, the Policyowner has flexibility in determining
the frequency and amount of premium payments.
Premium Flexibility
Unlike traditional insurance policies, this Policy frees the Policyowner from
the requirement that premiums be paid in accordance with a rigid and inflexible
premium schedule. Instead, MML Bay State requires a Policyowner to pay a minimum
initial premium at the time of application or at any time before delivery of the
Policy. After the first premium has been paid, subject to certain limitations,
premiums may be paid in any amount and at any interval.
The minimum initial premium depends on the planned frequency of premium
payments, and the Issue Age, sex,
19
<PAGE>
and rating class of the Insured, as well as the initial Death Benefit Option and
Selected Face Amount of the Policy.
Planned Annual Premium
When applying for a Policy, the Policyowner will select a planned annual premium
and payment frequency (annual, semiannual, quarterly, or monthly). The planned
annual premium is shown on the schedule page of the Policy. MML Bay State will
send premium notices for the planned premium according to the amount and
frequency selected. The Policyowner may change the amount and frequency of
planned premiums at any time by sending written notice to MML Bay State's
Principal Administrative Office.
A Policyowner may elect to pay premiums by means of a pre-authorized check
procedure called MassMutual Monthly ("Triple M"). Under Triple M, premium
payments are deducted automatically on a monthly basis from a designated bank
account. A Policyowner does not receive a "bill" for these payments, and
confirmation of payments is provided in the Policy's quarterly statement.
There is no penalty if the planned premium is not paid, nor does payment of this
amount guarantee coverage for any period of time. Instead, the duration of the
Policy depends upon the Policy's Account Value. Even if planned premiums are
paid, the Policy terminates when the Account Value becomes insufficient to pay
the Monthly Charges and the grace period expires without sufficient payment.
Premium Limitations
The minimum premium payment is $10. The maximum premium which may be paid in any
Policy Year without evidence of insurability is the greater of: (a) the premium
which will not increase the net amount at risk under the Policy; (b) twice the
Policy's basic premium plus $100; (c) the annual premium paid in the preceding
Policy Year; and (d) the minimum annual premium under a Death Benefit Guarantee
Rider, if part of the Policy. Premium payments should be sent either to MML Bay
State's Principal Administrative Office or to the address indicated on the
billing notice.
Allocation of Net Premium Payments
The Net Premium equals the premium paid less the Premium Expense Charge. (See,
Deductions from Premiums.) In the Application, the Policyowner indicates how Net
Premiums are to be allocated among the Divisions and the GPA. The allocation
percentages must be in whole numbers and the sum of the allocation percentages
must equal 100%. During the Free Look Provision, New Premiums are allocated as
requested by the Policyowner.
(See, Free Look Provision.)
The allocation percentages may be changed by the Policy-owner without charge at
any time by providing written notice to MML Bay State's Principal Administrative
Office.
Transfers
By written request, the Policyowner may transfer all or part of the Variable
Value of a Division of the Separate Account to any other Division or to the GPA.
Although MML Bay State currently imposes no limitation of the right of the
Insured to make transfers, we reserve the right to limit transfers to not more
than one every 90 days in connection with compliance with Section 404(c) of
ERISA. Any limitation would not apply to a transfer of all funds in the Separate
Account to the GPA and to automated transfers made in connection with any
program MML Bay State has in place.
Transfers of values from the GPA to the Separate Account are limited to one each
Policy Year. Any transfer from the GPA cannot exceed 25% of the Fixed Account
Value (less any Policy Debt) at the time of the transfer.
Any transfer is effective on the Valuation Date that we receive a written
request in good order at our Principal Administrative Office. There are no
charges for transfers. Transfer percentages must be in whole numbers and the
amount of the "to" funds must equal 100% or total dollars.
Dollar Cost Averaging
The Policyowner may specify a specific dollar amount to be periodically
transferred from any Division of the Separate Account to any combination of
Divisions and the GPA. Once elected, these transfers occur automatically. The
Policyowner will specify the specific dollar amounts to be transferred and the
Division to transfer money from, the Division(s) and/or GPA to transfer money
to, the date on which transfers will be made (subject to MML Bay State rules),
the frequency of transfers, which may be either monthly, quarterly, semiannually
or annually, and the amount of time that such dollar cost averaging will
continue. The minimum allowable transfer to any Division or the GPA is $50. This
process is called Dollar Cost Averaging. Dollar Cost Averaging transfers are not
available for transfers from the GPA, but these transfers may be made into the
GPA. To elect Dollar Cost Averaging transfers, the Account Value in the Division
from which transfers will be made must be at least $5,000.
The main objective of Dollar Cost Averaging is to shield the Policyowner's
investment from short-term price fluctuations. Since the same dollar amount is
transferred to a Division with each transfer, more units are purchased in a
Division if the value per unit is low and fewer units are purchased if the value
per unit is high. Therefore, a lower than average cost per unit may be achieved
over the long term. This plan of investing allows investors to take advantage of
market fluctuations but does not assure a profit or protect against a loss in
declining markets.
MML Bay State will make all Dollar Cost Averaging transfers either on the day of
each calendar month specified by the Policyowner, or on the next business day.
The Policyowner may specify any day of the month up through
20
<PAGE>
the 28th day. In order to process a Dollar Cost Averaging transfer, MML Bay
State must have received a request in writing no later than one week prior to
the date Dollar Cost Averaging transfers are to commence.
The Dollar Cost Averaging option can be started, changed or canceled at any
time; however, we must be given seven business days notice to change any
transfer arrangement. If the value of the Division from which transfers are
being made falls below the total transfer amount, the remaining value in that
Division will be transferred on a pro rata basis to all the designated Divisions
and the GPA, and no more automated transfers will be processed.
Dollar Cost Averaging transfers are not subject to any transfer charges or any
limitations on the number of transfers in a Policy Year.
Policy Lapse And Reinstatement
Policy Lapse
This Policy does not lapse for failure to pay premiums since payments, other
than the initial premium, are not specifically required. Rather, if the Account
Value less any Policy Debt is not enough to cover the Monthly Charges on a
Monthly Calculation Date, the Policy will enter a 61-day grace period.
At the beginning of the grace period, MML Bay State will mail a notice, to the
Policyowner's last known address, stating the amount of premium needed to cover
the shortfall in Account Value. During the grace period, the Policy remains in
force. If the required premium is not paid within 61 days after the Monthly
Calculation Date (or, if later, within 30 days after we mail the written
notice), the Policy terminates without value.
Reinstatement Option
For a period of five years after a Policy terminates, the Policyowner can
request that We reinstate the Policy during the lifetime of the Insured. The
Policy cannot be reinstated if it has been surrendered for its Cash Surrender
Value. Please note that a termination or reinstatement may cause the Policy to
become a modified endowment contract. (See, Modified Endowment Contracts.)
Before We will reinstate the Policy, We must receive the following:
(a) Evidence of insurability satisfactory to MML Bay State;
(b) A premium payment at least equal to the amount necessary to produce an
Account Value equal to three times the Monthly Charges on the Monthly
Calculation Date on or next following the date of reinstatement; and
(c) Where applicable, a signed acknowledgement that the Policy has become a
modified endowment contract.
If We do reinstate the Policy, the Selected Face Amount for the reinstated
Policy will be the same as it would have been if the Policy had not terminated.
Charges And Deductions
Charges will be deducted in connection with the Policy to compensate MML Bay
State for: (a) providing the insurance benefits under the Policy (including any
riders); (b) administering the Policy; (c) assuming certain risks in connection
with the Policy (including any riders); and (d) expenses incurred in
distributing the Policy.
Deductions from Premiums
MML Bay State deducts a Sales Charge and a Premium Tax Charge from each Premium
Payment. The total of these charges is called the Premium Expense Charge. The
amount remaining after MML Bay State has deducted the Premium Expense Charge is
referred to as the Net Premium. The Net Premium is allocated to the Division(s)
and the GPA according to the allocation instructions of the Policyowner.
Sales Charge. A Sales Charge of 2.0% of each premium payment made will be
deducted to partially compensate MML Bay State for the expenses relating to the
distribution of the Policy, including commissions, advertising, and the printing
of the prospectuses and sales literature. MML Bay State currently intends to
waive this charge after Policy Year 20; however, MML Bay State reserves the
right not to waive the charge, or to reimpose it once it has been waived.
Premium Tax Charge. A Premium Tax Charge of 2.0% of each premium payment will be
deducted to pay applicable state and local premium taxes. The Premium Tax Charge
is intended to compensate MML Bay State for taxes imposed by various states and
local jurisdictions on MML Bay State's receipt of premiums from Policyowners.
Premium taxes vary from state to state, and, in some instances, among
localities. The 2.0% rate approximates the average tax rate expected to be paid
on premiums from all states. The Premium Tax Charge may be higher or lower than
the actual premium tax imposed by the jurisdiction in which the contract is
written. MML Bay State does not expect to make a profit from this charge. MML
Bay State currently intends to waive this charge after Policy Year 20; however,
MML Bay State reserves the right not to waive the charge, or to reimpose it once
it has been waived.
21
<PAGE>
Monthly Charges
Charges will be deducted from the Account Value on each Monthly Calculation
Date. The Monthly Charge consists of: (a) an administrative charge; (b) a
mortality charge; and (c) a rider charge for any additional benefits provided by
rider. The Monthly Charges will be deducted from the Division(s) of the Separate
Account and the GPA in proportion to the non-loaned values in the Division(s)
and the GPA.
Administrative Charge. This monthly charge is currently $6. This charge
reimburses MML Bay State for expenses incurred in administering the Policy, such
as processing claims, maintaining records and communicating with Policyowners.
This charge is not designed to make a profit. MML Bay State reserves the right
to change this charge in the future, but guarantees it will never exceed $9 per
month.
Mortality Charges. The mortality charge for a Policy is equal to the "amount at
risk" under the Policy, multiplied by the monthly mortality charge rate for that
Policy month. The amount at risk is determined on the first day of the Policy
month and is the amount by which the Death Benefit (discounted at the monthly
equivalent of 3% per year) exceeds the Account Value.
Monthly mortality rates will be based on the sex, Issue Age, and rate class of
the Insured, and the length of time the Policy has been in force. The actual
monthly mortality rates will be based on MML Bay State's expectations as to
future mortality and expense experience. They will not, however, be greater than
the guaranteed mortality rates set forth in the Policy. These guaranteed rates
are based on the 1980 Standard Commissioners Standard Ordinary (CSO) Mortality
Tables, and the sex, Attained Age, and rate class of the Insured. For standard
rate classes, these will not exceed the rates contained in the 1980 CSO Tables.
The rate class of an Insured will affect the monthly mortality rates. MML Bay
State currently places Insureds into the following three standard rate classes:
Preferred Nonsmoker, Nonsmoker, and Smoker; as well as substandard rate classes
involving a higher mortality risk. In an otherwise identical Policy, the monthly
mortality rate is generally higher for smokers than for nonsmokers and higher
for nonsmokers than for preferred nonsmokers.
Rider Charge. The Monthly Charge will include charges for any additional
benefits provided by Rider.
Daily Charges Against The Separate Account
Mortality and Expense Risk Charge. MML Bay State assesses a daily charge against
net asset value of the Separate Account for the mortality and expense risks it
assumes. Currently, the charge is at the rate of 0.55% on an annual basis. MML
Bay State reserves the right to increase the charge rate, up to a maximum
equivalent annual rate of 0.90%. This charge is not deducted from the assets in
the GPA.
The mortality risk we assume is that the group of lives insured under our
Policies may, on average, live for shorter periods of time than we estimated.
The expense risk we assume is that our costs of issuing and administering
Policies may be more than we estimated.
If all the money MML Bay State collects from this charge is not needed to cover
death benefits and expenses, it will be our gain and will be used for any proper
purpose, including payment of sales commissions. Conversely, even if the money
we collect is insufficient, we will provide for all death benefits and expenses.
Charges for Federal Taxes. MML Bay State does not currently make any charge
against the Separate Account for federal income taxes attributable to them. We
may make such a charge eventually in order to provide for the future federal
income tax liability of the Separate Account.
Investment Management Fee and Other Expenses. Because the Divisions of the
Separate Account purchase shares of either MML Trust or Oppenheimer Trust, the
value of Accumulation Units of the Divisions will reflect the investment
management fee and other expenses incurred by MML Trust and Oppenheimer Trust.
The Prospectuses of MML Trust and Oppenheimer Trust contain additional
information concerning such fees and expenses.
Surrender Charges
General. The Surrender Charge has two parts -- an Administrative Surrender
Charge and a Sales Load Surrender Charge. The Administrative Surrender Charge
will be imposed by MML Bay State during the first 10 Policy Years, and during
the first 10 Policy Years following any requested increase in the Selected Face
Amount if the Policyowner surrenders the Policy or decreases the Selected Face
Amount. The Sales Load Surrender Charge will be imposed by MML Bay State for the
first 15 Policy Years, and during the first 15 years following any requested
increase in the Selected Face Amount if the Policyowner surrenders or decreases
the Selected Face Amount.
Administrative Surrender Charge. This charge is $5 for each $1,000 of Selected
Face Amount. It remains level for five years, then grades down to zero over the
next five years. This charge reimburses MML Bay State for expenses incurred in
issuing the Policy, such as processing the applications (including underwriting)
and setting up computer records. It is not designed to generate a profit.
Sales Load Surrender Charge. This charge is equal to 26% of the premiums paid up
to the Surrender Charge Band, plus 4% of premiums paid in excess of the
Surrender Charge Band, but less than three times the Surrender Charge Band. The
Surrender Charge Band is set forth in the Policy and is an amount generally
calculated on the basis of the
22
<PAGE>
Selected Face Amount and varies by the age and sex of the Insured at the time of
purchase.
Example of Surrender Charge Bands per $1,000
Age 25 Age 40 Age 55
------ ------ ------
$6.26 $9.91 $28.49
The Sales Load Surrender Charge remains level for the first 10 years, then
grades down to zero over the next five years in accordance with the percentages
set forth in the Policy.
Surrender Charges are calculated separately for the initial Selected Face Amount
and for each increase in the Selected Face Amount. Premiums are allocated to the
original Selected Face Amount and any subsequent increases in Selected Face
Amount in proportion to the respective guideline annual premiums.
Surrender Charge Upon Decrease in Selected Face Amount. A Surrender Charge may
be deducted on a decrease in the Selected Face Amount. In the event of a
decrease in Selected Face Amount, the Surrender Charge deducted is a fraction of
the charge that would apply to a full surrender of the Policy. If there have
been no increases in the Selected Face Amount, the fraction will be determined
by dividing the amount of the decrease by the current Selected Face Amount and
multiplying the result by the Surrender Charge. If more than one Surrender
Charge is in effect (pursuant to one or more increases in the Selected Face
Amount), the Surrender Charge will be applied in the following order: (1) the
most recent increase followed by (2) the next most recent increases,
successively, and (3) the initial Selected Face Amount. Where a decrease causes
a partial reduction in an increase or in the initial Selected Face Amount, a
proportionate share of the Surrender Charge for that increase or for the initial
Selected Face Amount will be deducted from the Account Value.
Other Charges
Withdrawal Fee. For each Withdrawal, a charge of $25 (or 2% of the amount
withdrawn, if less) will be deducted from the amount withdrawn. This fee is
guaranteed not to increase for the duration of the Policy. MML Bay State does
not anticipate making a profit on this fee.
Charge for Increase in Selected Face Amount. For each increase in Selected Face
Amount, a charge of $75 will be deducted from the Account Value. The charge is
designed to reimburse Us for underwriting and administrative costs associated
with the increase. This fee is guaranteed not to increase for the duration of
the Policy. MML Bay State does not expect to make a profit on this charge.
Charge for Change from Option 1 to Option 2. For each change in the Death
Benefit Option from Option 1 to Option 2, a charge of $75 will be deducted from
the Account Value. The charge is designed to reimburse MML Bay State for the
underwriting and administrative costs associated with the change. This fee is
guaranteed not to increase for the duration of the Policy. MML Bay State does
not expect to make a profit on this charge. (MML Bay State currently does not
charge the $75 fee for this change, but it reserves the right to do so.)
Account Value And Cash Surrender Value
Account Value. The Account Value of the Policy is the sum of all Net Premium
payments adjusted by periodic charges and credits and by Withdrawals. The
Account Value of the Policy is held in one or more Divisions and the GPA.
Initially, this value equals the net amount of the first premium paid under the
Policy. This amount is allocated among the Divisions and the GPA according to
the allocation requested in the Application.
Investment Return. The investment return of a Policy is based on:
(a) The Account Value held in each Division of the Separate Account for that
Policy;
(b) The investment experience of each Division as measured by its actual net
rate of return; and
(c) The interest rate credited on Account Values held in the GPA.
The investment experience of a Division reflects increases and decreases in the
net asset value of the shares of the underlying Fund, any dividend or capital
gains distributions declared by the Fund, and any charges assessed against
assets of the Division. The investment experience is determined each day on
which the net asset value of the underlying Fund is determined -- that is, on
each Valuation Date. The actual net rate of return for a Division measures the
investment experience from the end of one Valuation Date to the end of the next
Valuation Date.
Cash Surrender Value. The Policy may be fully surrendered for its Cash Surrender
Value at any time during the life of the Insured. The Cash Surrender Value is
equal to the Account Value less any applicable Surrender Charges and less any
Policy Debt.
A Policyowner may surrender a Policy by sending a written request together with
the Policy to MML Bay State's Principal Administrative Office. The proceeds will
be determined as of the end of the Valuation Period during which the request for
surrender is received.
Withdrawals. After the first Policy Year, the Policyowner may, subject to
certain restrictions, withdraw up to 75% of the Cash Surrender Value. For each
Withdrawal, a fee of $25 (or 2% of the amount withdrawn, if less) is deducted
from the amount withdrawn. The minimum amount of a partial Withdrawal is $100
(before deducting the Withdrawal fee). We reserve the right to
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prohibit Withdrawals that would cause Selected Face Amount to be reduced to an
amount less than $25,000. The Policyowner specifies the GPA or the Division(s)
from which the Withdrawal is to be made. The Withdrawal amount attributable to a
Division of the Separate Account or the GPA may not exceed the non-loaned
Account Value of the Division or GPA. If Death Benefit Option 1 is in effect,
MML Bay State will reduce the Selected Face Amount by the amount of the
Withdrawal unless satisfactory evidence of insurability is provided. A Surrender
Charge is not assessed for a Withdrawal.
Policy Loan Privilege
General. After the first Policy Year (or sooner if required by law), the
Policyowner may obtain a loan from the Policy by sending a written request in a
form satisfactory to Us. The maximum amount that can be borrowed at any time is
90% (unless a greater amount is required by law) of the Policy's Account Value
less any Surrender Charge, reduced by any outstanding Policy Debt. The Policy
must be assigned to MML Bay State as collateral for the loan.
Source of Loan. The loan amount requested is taken from Divisions of the
Separate Account and the GPA in proportion to the non-loaned Account Value of
each Division and the GPA on the date of the loan. Shares taken from the
Divisions are liquidated and the resulting dollar amounts are transferred to the
GPA. The Policy loan is then taken against the value in the GPA. We may delay
the granting of any loan attributable to the GPA for up to six months. We may
also delay the granting of any loan attributable to the Separate Account during
any period that: (1) the New York Stock Exchange is closed (other than customary
weekend and holiday closings); or (ii) trading is restricted; or (iii) the SEC
determines that a state of emergency exists; or (iv) during any period in which
the Securities and Exchange Commission permits MML Bay State to delay payment
for the protection of our Policyowners.
Whenever total Policy Debt (which includes accrued interest) exceeds the Account
Value less Surrender Charges, MML Bay State will send a notice to the
Policyowner. This notice will state the amount necessary to bring the Policy
Debt back within the limit. If we do not receive payment of that amount within
31 days after the date we mailed the notice, and if Policy Debt exceeds the
Account Value less any Surrender Charges at the end of those 31 days, the Policy
terminates without value.
Interest Charged. At time of Application, the Policyowner may select a loan
interest rate of 6% or (in all jurisdictions except Arkansas) an adjustable loan
rate. MML Bay State each year will set the adjustable rate that will apply for
the next Policy Year. The maximum loan rate is based on the monthly average of
the composite yield on seasoned corporate bonds as published by Moody's
Investors Service, Inc., or, if it is no longer published, a substantially
similar average. The maximum rate is the published monthly average for the
calendar month ending two months before the Policy Year begins, or 4%,
whichever is higher. If the maximum limit is not at least 1/2% higher than the
rate in effect for the previous year, we will not increase the rate. If the
maximum limit is at least 1/2% lower than the rate in effect for the previous
year, we will decrease the rate.
Interest accrues daily and becomes part of the Policy Debt as it accrues. It is
due on each Policy Anniversary. If not paid when due, the interest will be added
to the loan and, as part of the loan, will bear interest at the same rate. Any
interest capitalized on a Policy Anniversary will be treated the same as a new
loan and will be taken from the Divisions and the GPA in proportion to the
non-loaned Account Value in each.
Repayment. All or part of any Policy Debt may be repaid at any time while the
Insured is living and while the Policy is in force. Any loan repayment will
first be allocated to the GPA until the Policyowner has repaid all loan amounts
that originated from the GPA. Any additional loan repayments will be allocated
according to the premium allocation factors in effect.
Any outstanding Policy Debt will be deducted from the proceeds payable upon the
death of the Insured or the surrender of the Policy.
Interest on Loaned Value. Any loaned amount is held in the GPA and earns
interest at a rate determined by MML Bay State, equal to the greater of 3% or
the Policy loan rate less the Policy loan expense charge. The current loan
expense charge rate is .90%, it is guaranteed not to exceed 2%.
Effect of Loan. A Policy loan affects the Policy since the Death Benefit and
Cash Surrender Value under a Policy are reduced by the amount of the loan.
Repayment of the loan increases the Death Benefit and Cash Surrender Value under
the Policy by the amount of the repayment. Surrender of a Policy with
outstanding Policy Debt may have tax consequences. (See Policy Proceeds,
Premiums and Loans.)
As long as a loan is outstanding, a portion of the Policy's Account Value equal
to the loan is held in the GPA. This amount is not affected by the Separate
Account's investment performance. The Account Value is also affected because the
portion of the Account Value equal to the Policy loan is credited with an
interest rate declared by MML Bay State rather than a rate of return reflecting
the investment performance of the Separate Account.
Free Look Provision
The Policyowner may cancel the Policy within 10 days (or longer if required by
state law) after the Policyowner receives it, or 10 days after MML Bay State
mails or delivers a written notice of withdrawal right to the Policyowner, or
within 45 days after signing Part I of the Application, whichever is latest. The
Policyowner may cancel increases in the Selected Face Amount under the same time
limitations.
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The Policyowner should mail or deliver the Policy and Policy delivery receipt
either to MML Bay State's Principal Administrative Office or to the agent who
sold the Policy or to one of our agency offices. If the Policy is canceled in
this fashion, a refund will be made to the Policyowner. The refund equals the
sum of: (i) the difference between the premiums paid and the amounts allocated
to any Division(s) of the Separate Account and the GPA under the Policy; (ii)
the total amount of monthly deductions made and any other charges imposed on
amounts allocated to the Division(s) and the GPA; and (iii) the value of amounts
allocated to the Division(s) or the GPA on the date we receive the returned
Policy. For canceled increases in the Selected Face Amount, the refund equals
the sum of: (i) the difference between the premiums paid attributable to the
increase and the amounts allocated to any Division(s) and the GPA under the
Policy; (ii) the total amount of monthly deductions and any other charges
imposed on amounts attributable to the increase allocated to the Division(s) and
the GPA; and (iii) the value on the day we receive the returned Policy of any
amounts attributable to the increase allocated to the Division(s) for the GPA.
If state law does not authorize the calculation above, the refund equals the
total of all premiums paid for the Policy or increase, reduced by any amounts
borrowed or withdrawn.
The Guaranteed Principal Account
A Policyowner may allocate some or all of the Net Premium and transfer some or
all of the Account Value, to the Guaranteed Principal Account ("GPA"). Because
of exemptive and exclusionary provisions, interests in MML Bay State's general
account (which include interests in the Guaranteed Principal Account) are not
registered under the Securities Act of 1933 and the general account is not
registered as an investment company under the Investment Company Act of 1940.
Accordingly, neither the general account nor any interests therein are subject
to the provisions of these Acts, and MML Bay State has been advised that the
staff of the Securities and Exchange Commission has not reviewed the disclosures
in the Prospectus relating to the general account. Disclosures regarding the
general account may, however, be subject to certain generally applicable
provisions of the federal securities laws relating to the accuracy and
completeness of statements made in prospectuses.
Amounts allocated to the Guaranteed Principal Account become part of the General
Account of MML Bay State, which consists of all assets owned by MML Bay State
other than those in the Separate Account and other separate accounts of MML Bay
State. Subject to applicable law, MML Bay State has sole discretion over the
investment of the assets of its General Account.
The Policyowner may allocate some or all of the Net Premium to the Guaranteed
Principal Account. MML Bay State guarantees that those amounts allocated to the
GPA in excess of any Policy Debt (which includes accrued interest) will accrue
interest daily at an effective annual rate at least equal to 3%. For amounts in
the GPA equal to any Policy Debt, the guaranteed minimum interest rate is an
effective annual rate of 3% or, if greater, the Policy loan rate less an MML Bay
State declared charge for expenses and taxes. This charge will not be greater
than 2% per year. Such interest will be paid regardless of the actual investment
experience of the GPA. Although MML Bay State is not obligated to credit
interest at a rate higher than the guaranteed minimum, it may declare a higher
rate applicable for such periods as it deems appropriate.
Federal Income Tax Considerations
The ultimate effect of federal income taxes on values under this Policy and on
the economic benefit to the Policyowner or Beneficiary depends on MML Bay
State's tax status and upon the tax status of the individual concerned. The
discussion contained herein is general in nature and is not an exhaustive
discussion of all tax questions that might arise under the Policy, and is not
intended as tax advice. Moreover, no representation is made as to the likelihood
of continuation of current federal income tax laws and Treasury Regulations or
of the current interpretations of the Internal Revenue Service. MML Bay State
reserves the right to make changes in the Policy to assure that it continues to
qualify as life insurance for tax purposes. For complete information on federal
and state tax law considerations, a qualified tax adviser should be consulted.
No attempt is made herein to consider any applicable state or other tax laws.
MML Bay State's Tax Status. MML Bay State is taxed as a life insurance company
under Subchapter L of the Internal Revenue Code of 1986 (the "Code"). The
Separate Account is not a separate entity from MML Bay State and its operations
form a part of MML Bay State.
Investment income and realized capital gains on the assets of the Separate
Account are reinvested and taken into account in determining Account Value. The
investment income and realized capital gains are automatically applied to
increase book reserves associated with the Policy. Under existing federal income
tax law, the Separate Account's investment income, including net capital gains,
is not taxed to MML Bay State to the extent applied to increase reserves
associated with the Policy. The reserve items taken into account at the close of
the taxable year for purposes of determining net increases and net decreases
must be adjusted for tax purposes by subtracting an amount attributable to
appreciation in the value of assets and by adding any amount attributable to
depreciation. MML Bay State's basis in the Policy's share of the assets
underlying the Separate Account will be adjusted for appreciation or
depreciation, to the extent the reserves are adjusted. Thus, corporate-level
capital gains and losses, and the tax effect thereof, are eliminated.
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Due to MML Bay State's current tax status, no charge is made to the Separate
Account for MML Bay State's federal income taxes that may be attributable to the
Separate Account. Periodically, MML Bay State reviews the question of a charge
to the Separate Account for MML Bay State's federal income taxes. A charge may
be made for any federal income taxes incurred by MML Bay State that are
attributable to the Separate Account. Depending on the method of calculating
interest on Policy values allocated to the Guaranteed Principal Account (see
preceding section), a charge may be imposed for the Policy's share of MML Bay
State's federal income taxes attributable to that account.
Under current laws, MML Bay State may incur state or local taxes (in addition to
premium taxes) in several states. At present, these taxes are not significant.
If there is a material change in applicable state or local tax laws, MML Bay
State reserves the right to charge the Separate Account for such taxes, if any,
attributable to the Separate Account.
Policy Proceeds, Premiums and Loans. MML Bay State believes that the Policy
meets the statutory definition of life insurance under Code Section 7702 and
hence receives the same tax treatment as that accorded to fixed benefit life
insurance. Thus, the Death Benefit under the Policy is generally excludible from
the gross income of the Beneficiary under Section 101(a)(1) of the Code. As an
exception to this general rule, where a Policy has been transferred for value,
only the portion of the Death Benefit which is equal to the total consideration
paid for the Policy may be excluded from gross income. The Policyowner is not
deemed to be in constructive receipt of the cash values, including increments
thereon, under the Policy until a full surrender or partial withdrawal is made
(unless the Policy is a "modified endowment contract," as discussed below).
Upon a full surrender of a Policy for its Cash Surrender Value, the Policyowner
may recognize ordinary income for federal income tax purposes. Ordinary income
is computed to be the amount by which the Account Value, unreduced by any
outstanding Policy Debt but less any Surrender Charges assessed, exceeds the
premiums paid but not previously recovered and any other consideration paid for
the Policy.
Decreases in Selected Face Amount and Withdrawals may be taxable depending on
the circumstances. Code Section 7702(f)(7) provides that where a reduction of
future benefits occurs during the first 15 years after a Policy is issued and
where there is a cash distribution associated with that reduction, the
Policyowner may be taxed on all or a part of the amount distributed. Where the
provisions of Code Section 7702(f) do not cause a taxable event, a withdrawal is
taxable only to the extent that it exceeds the Policyowner's unrecovered
premiums. After 15 years, such cash distributions are not subject to federal
income tax, except to the extent they exceed the total amount of premiums paid
but not previously recovered. MML Bay State suggests that you consult with your
tax adviser in advance of a proposed decrease in Selected Face Amount or
withdrawal as to the portion, if any, which would be subject to federal income
tax.
A change of the Policyowner or the Insured or an exchange or assignment of the
Policy may have tax consequences depending on the circumstances.
MML Bay State also believes that under current law any loan received under the
Policy will be treated as Policy Debt of a Policyowner, and that no part of any
loan under a Policy will constitute income to the Policyowner unless the Policy
has become a "modified endowment contract." If the Policy is a modified
endowment contract under Code Section 7702A, loans will be fully taxable to the
extent of income in the Policy and could be subject to an additional 10 percent
tax. See the discussion on modified endowment contracts below. Under the
"personal" interest limitation provisions of the Tax Reform Act of 1986,
interest on Policy loans used for personal purposes, which otherwise meet the
requirements of Code Section 264, will no longer be tax-deductible. However,
other rules may apply to allow all or part of the interest expense as a
deduction if the loan proceeds are used for "trade or business" or "investment"
purposes. See your tax adviser for further guidance.
If the Policy is owned by a business or corporation, the 1986 Act may impose
additional restrictions. The Act limits the interest deduction available for
loans against a business-owned Policy. It imposes an indirect tax upon the gain
in corporate-owned life insurance policies by way of the corporate alternative
minimum tax, for those corporations subject to the alternative minimum tax. The
corporate alternative minimum tax could also apply to a portion of the amount by
which Death Benefits received exceed the Policy's date-of-death cash surrender
value.
Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Policyowner or Beneficiary.
MML Bay State cannot make any guarantee regarding the future tax treatment of
any Policy. For complete information on the impact of changes with respect to
the Policy and federal and state tax considerations, a qualified tax adviser
should be consulted.
Modified Endowment Contracts. Contrary to the rules described above, loans,
collateral assignments, and other amounts distributed under a "modified
endowment contract" are taxable to the extent of any accumulated income in the
Policy. In general, the amount which may be subject to taxation is the excess of
the Account Value (both loaned and unloaned) over the previously unrecovered
premiums paid. Death benefits paid under a modified endowment contract, however,
are not taxed any differently from death benefits payable under other life
insurance contracts.
A Policy is a modified endowment contract if it satisfies the definition of life
insurance set out in the Internal Revenue Code but fails the additional "7-pay
test." A Policy fails this test if the accumulated amount paid under the
contract at any time during the first seven contract years exceeds the total
premiums that would have been payable under a policy providing for guaranteed
benefits upon the payment of
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seven level annual premiums. A Policy which would otherwise satisfy the 7-pay
test will still be taxed as a modified endowment contract if it is received in
exchange for a modified endowment contract.
Certain changes will require a Policy to be retested to determine whether it has
become a modified endowment contract. For example, a reduction in death benefits
during the first seven contract years will cause the Policy to be retested as if
it had originally been issued with the reduced death benefit. If the premiums
actually paid into the Policy exceed the limits under the 7-pay test for a
policy with the reduced death benefit, the Policy will become a modified
endowment contract. This change is effective retroactively to the Policy Year in
which the actual premiums paid exceed the new 7-pay limits.
In addition, a "material change" occurring at any time while the Policy is in
force will require the Policy to be retested to determine whether it continues
to meet the 7-pay test. A material change starts a new 7-pay test period. The
term "material change" includes many increases in death benefits. A material
change does not include an increase in death benefits which is attributable to
the payment of premiums necessary to fund the lowest level of death benefits
payable during the first seven contract years, or which is attributable to the
crediting of interest with respect to such premiums.
Since the Policy provides for flexible premium payments, the Company has
instituted procedures to monitor whether increases in death benefits or
additional premium payments cause either the start of a new seven-year test
period or the taxation of distributions and loans. All additional premium
payments will have to be considered.
If any amount is taxable as a distribution of income under a modified endowment
contract, it will also be subject to a 10% penalty tax. Limited exceptions from
the additional penalty tax are available for individual Policyowners. The
penalty tax will not apply to distribution: (i) that are made on or after the
date the taxpayer attains age 59 1/2; or (ii) that are attributable to the
taxpayer's becoming disabled; or (iii) that are part of a series of
substantially equal periodic payments (made not less frequently than annually)
made for the life or life expectancy of the taxpayer. For complete information
with respect to modified endowment contract status, a qualified tax adviser
should be consulted.
Once a Policy fails the 7-pay test, loans and distributions occurring in the
year of failure and thereafter become subject to the rules for modified
endowment contracts. In addition, a recapture provision applies to loans and
distributions received in anticipation of failing the 7-pay test. Any
distribution or loan made within two years prior to failing the 7-pay test is
considered to have been made in anticipation of the failure.
Under certain circumstances, a loan, collateral assignment, or other
distribution under a modified endowment contract may be taxable even though it
exceeds the amount of income accumulated in the Policy. For purposes of
determining the amount of income received from a modified endowment contract,
the law requires the aggregation of all modified endowment contracts issued to
the same Policyowner by an insurer and its affiliates within the same calendar
year. Therefore, loans, collateral assignments, and distributions from any one
such Policy are taxable to the extent of the income accumulated in all the
Policies required to be aggregated.
Qualified Plans. The Policy may be used in conjunction with certain
tax-qualified employee benefit plans. Since the rules governing such use are
complex, a purchaser should not use the Policy in conjunction with any such
qualified plan until he has consulted a competent tax adviser. The Policy may
not be used in conjunction with an Individual Retirement Account (IRA).
Diversification Standards. To comply with final regulations under Code Section
817(h) ("Final Regulations"), each Fund of the Trusts is required to diversify
its investments. The Final Regulations generally require that on the last day of
each quarter of a calendar year no more than 55% of the value of a Fund's assets
is represented by any one investment, no more than 70% is represented by any two
investments, no more than 80% is represented by any three investments, and no
more than 90% is represented by any four investments. A "look-through" rule
applies to treat a pro-rata portion of each asset of a Fund as an asset of the
Separate Account. All securities of the same issuer are treated as a single
investment. However, each government agency or instrumentality is treated as a
separate issuer.
With respect to variable life insurance contracts, the general diversification
requirements are modified if any of the assets of the Separate Account are
direct obligations of the United States Treasury. In this case, there is no
limit on the investment that may be made in United States Treasury securities,
and for purposes of determining whether assets other than United States Treasury
securities are adequately diversified, the generally applicable percentage
limitations are increased based on the value of the Separate Account's
investment in United States Treasury securities. Notwithstanding this
modification of the general diversification requirements, the Funds of the
Trusts will be structured to comply with the general diversification standards
because they serve as an investment vehicle for certain variable annuity
contracts which must comply with the general standards.
In connection with the issuance of the temporary regulations prior to the Final
Regulations, the Treasury announced that such temporary regulations did not
provide guidance concerning the extent to which Policyowners may direct their
investments to particular Divisions of a separate account. Regulations in this
regard were not issued in connection with the Final Regulations, however. It is
not clear, at this time, what future regulations might provide. It is possible
that, if future regulations are issued, the Policy may need to be modified to
comply with such regulations. For these reasons, MML Bay State reserves the
right to
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modify the Policy, as necessary, to prevent the Policyowner from being
considered the owner of the assets of the Separate Account.
MML Bay State intends to comply with the Final Regulations to assure that the
Policy continues to qualify as life insurance for federal income tax purposes.
Your Voting Rights
As long as the Separate Account continues to operate as a unit investment trust
under the Investment Company Act of 1940, the Policyowner is entitled to give
instructions as to how shares of the Funds held in the Separate Account (or
other securities held in lieu of such shares) deemed attributable to the Policy
shall be voted at meetings of shareholders of the Funds or the Trusts. Those
persons entitled to give voting instructions are determined as of the record
date for the meeting.
The number of shares of the Funds held in the Separate Account deemed
attributable to the Policy during the lifetime of the Insured are determined by
dividing the Policy's Account Value held in each Division of the Separate
Account, if any, by $100. Fractional votes are counted.
Policyowners receive proxy material and a form with which such instructions may
be given. Shares of the Funds held by the Separate Account as to which no
effective instructions have been received are voted for or against any
proposition in the same proportion as the shares as to which instructions have
been received.
Reservation Of Rights
We reserve the right to take certain actions in connection with our operations
and the operations of the Separate Account. These actions will be taken in
accordance with applicable laws (including obtaining any required approval of
the Securities and Exchange Commission). If necessary, we will seek approval by
Policyowners.
Specifically, we reserve the right to:
. Create new Divisions of the Separate Account;
. Create new Separate Accounts;
. Combine any two or more Separate Accounts;
. Make available additional Divisions of the Separate Account investing in
additional investment companies;
. Invest the assets of the Separate Account in securities other than shares of
the Funds as a substitute for such shares already purchased or as the securities
to be purchased in the future;
. Operate the Separate Account as a management investment company under
the Investment Company Act of 1940 or in any other form permitted by law; and
. De-register the Separate Account under the Investment Company Act of 1940 in
the event such registration is no longer required.
MML Bay State also reserves the right to change the name of the Separate
Account.
We have reserved all rights to the name MML Bay State Life Insurance Company or
any part of it. We may allow the Separate Account and other entities to use our
name or part of it, but we may also withdraw this right.
Additional Provisions Of The Policy
Additional Benefits You Can Get by Rider
The Policy can include additional benefits that we approve based on our
standards and limits for issuing insurance and classifying risks. An additional
benefit is provided by rider and is subject to the terms of both the rider and
the Policy. The cost of any rider is deducted as part of the Monthly Charges.
Subject to state availability, the following riders are available.
Disability Benefit Rider. This rider provides that, in the event of the
Insured's total disability that begins before Attained Age 65 and continues for
at least six months, MML Bay State will apply a premium payment to the Policy on
each Monthly Calculation Date while the Insured remains totally disabled (but
not after Attained Age 70 if the disability occurred after Attained Age 60).
At the time of application, a Specified Monthly Amount is selected by the
Policyowner. In the event of the Insured's total disability, the amount of the
premium payment applied on each Monthly Calculation Date will be the greater of:
(a) the Specified Monthly Amount; or (b) the Monthly Charge (increased by the
current Premium Expense Charge) on that Monthly Calculation Date.
Accidental Death Benefit Rider. This rider provides for an addition to the Death
Benefit in the event the Insured's death was caused by accidental bodily injury
occurring within six months before the Insured's death. No benefit is provided
under this rider if the Insured dies before his or her first birthday or after
Attained Age 70.
Insurability Protection Rider. This rider allows the Policyowner to increase the
Selected Face Amount of the Policy for a specified amount on specified dates,
without evidence of insurability.
Death Benefit Guarantee Rider. Until Attained Age 70 or 40 years from the Policy
Date, whichever is sooner, the Policy will not terminate when the Account Value
is insufficient to cover the Monthly Charge on a Monthly Calculation Date if (a)
exceeds (b) where:
(a) is the sum of all premiums paid, minus any withdrawals, and minus any Policy
Debt; and
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(b) is the sum of Minimum Monthly Premiums, for this rider since the Policy
Date.
Minimum Monthly Premiums may be paid on other than a monthly basis as long as
the sum of premiums paid is at least equal to the total required Minimum Monthly
Premiums on each Monthly Calculation Date. The Minimum Monthly Policy Premium
may change if the Policy's Selected Face Amount is increased or decreased or if
riders are added, changed, or terminated. The new Minimum Monthly Premium will
apply from the effective date of the change.
If, on a Monthly Calculation Date, the Policy premium requirement has not been
met, the Policyowner will be given an additional 61 days to pay a premium
sufficient to maintain the death benefit guarantee. The required payment will be
equal to (a) the smallest amount needed to meet the Policy premium requirement
as of that date, plus (b) two times the Minimum Monthly Premium for that date.
If the required payment is not received within this period, the rider will
terminate and the death benefit guarantee will be lost. Once the rider is
terminated, it cannot be reinstated.
Accelerated Death Benefit Rider. This rider advances the Policyowner a portion
of the Death Benefit when MML Bay State receives proof, satisfactory to Us, the
insured is terminally ill and is not expected to live more than 12 months. In
return for the advanced payment, a lien is established against the Policy, equal
to the amount of the Death Benefit accelerated under the Policy. Interest is not
charged on the Lien.
Right to Exchange Insured Endorsement. Upon request, the Policy may include a
Right to Exchange Insured Endorsement. Under this endorsement, the Policy may be
exchanged for a new Policy on the life of a new Insured, subject to certain
conditions and satisfactory evidence of insurability.
Exchange Privilege
The Policyowner may transfer the entire Account Value held in the Separate
Account to the GPA at any time. The transfer will take effect following receipt
by MML Bay State of a written request.
Beneficiary
A Beneficiary is any person named on our records to receive insurance proceeds
after the Insured dies. The Policyowner names the Beneficiary in the application
for the Policy. 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.
Any Beneficiary may be named an irrevocable Beneficiary. An irrevocable
Beneficiary is one whose consent is needed to change that Beneficiary. The
consent of any irrevocable Beneficiary is needed to exercise any Policy right
except the right to:
Change the frequency of Planned Premiums;
Change the premium payment plan; and
Reinstate the Policy after termination.
The Beneficiary may be changed during the Insured's lifetime by writing to our
Principal Administrative Office. Generally, the change will take effect as of
the date of the request. If no Beneficiary is living when the Insured dies,
unless provided otherwise the Death Benefit is paid to the Policyowner or, if
deceased, to the Policyowner's estate.
Assignment
The Policy may be assigned as collateral for a loan or other obligation. For any
assignment to be binding on MML Bay State, however, We must receive a signed
copy of it at our Principal Administrative Office. We are not responsible for
the validity of any assignment.
Limits on Our Right to Challenge the Policy
Except for any increases in Selected Face Amount, we must bring any legal action
to contest the validity of a Policy within two years from its Issue Date. After
that We cannot contest its validity, except for failure to pay premiums. For any
increase in the Selected Face Amount, We must bring legal action to contest that
increase within two years after the effective date of the increase or within two
years after the Issue Date of the Insurability Protection Rider, if the increase
is provided by that rider.
Error of Age or Sex
If the Insured's age or sex is misstated in the Policy application, the Death
Benefit payable under the Policy will be adjusted based on what the Policy would
provide according to the most recent Monthly Charge for the correct date of
birth and correct sex.
Suicide
Suicide within two years of the Policy Date is not covered by the Policy. If the
Insured dies by suicide, while sane or insane, within two years from the Issue
Date (or less where required by law), the amount payable to the Beneficiary will
be limited to premiums paid, less any withdrawals and Policy Debt. If the
Insured, while sane or insane, dies by suicide within two years after the
effective date of any increase in the Selected Face Amount, the death benefit
for that increase will be limited to the amount of the Monthly Charges for that
increase.
29
<PAGE>
When We Pay Proceeds
If the Policy has not terminated, payment of the Cash Surrender Value, loan
proceeds, or the Death Benefit are made within 7 days after we receive all
required documents in a form satisfactory to Us at our Principal Administrative
Office. But we can delay payment of the Cash Surrender Value or any withdrawal
from the Separate Account, loan proceeds attributable to the Separate Account,
or the Death Benefit during any period that: it is not reasonably practicable to
determine the amount because the New York Stock Exchange is closed (other than
customary week-end and holiday closings), trading is restricted by the SEC, or
the SEC declares that an emergency exists; or the SEC, by order, permits Us to
delay payment in order to protect our policyowners.
In addition, a premium payment is not available to satisfy a surrender request
until the check, or other instrument by which the premium payment was made, has
been honored.
We may delay paying any Cash Surrender Value, any withdrawal, or any loan
proceeds based on the GPA for up to 6 months from the date the request is
received at our Principal Administrative Office.
We can delay payment of the entire Death Benefit if payment is contested. We
investigate all death claims arising within the two-year contestable period.
Upon receiving the information from a completed investigation, we generally make
a determination within five days as to whether the claim should be authorized
for payment. Payments are made promptly after authorization.
If payment of a Cash Surrender or withdrawal is delayed for 30 days or more, we
add interest to the date of payment at the same rate as is paid under the
interest payment option. Interest is paid on the Death Benefit from the date of
death to the date of payment.
Payment Options
The Policy proceeds can be paid in cash, or if elected, all or part of these
proceeds can be placed under one or more of the following payment options. The
minimum amount that can be applied under a payment option is $2,000. If the
periodic payment under any option is less than $20, we reserve the right to make
payments at less-frequent intervals. None of these benefits depends on the
performance of the Separate Account or the GPA. For additional information
concerning these options, see the Policy. The following payment options are
currently available.
Fixed Amount Payment Option. Each monthly payment is for an agreed fixed amount
not less than $10 for each $1,000 applied under the option. Interest of at least
2.5% per year is credited each month on the unpaid balance and added to it.
Payments continue until the amount We hold runs out.
Fixed Time Payment Option. Equal monthly payments are 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 rate We credit interest to the unpaid
balance. This interest rate will not be less than 2.5% per year.
Interest Payment Option. We hold amounts under this option and pay interest on
the unpaid balance of at least 2.5% per year.
Lifetime Payment Option. Equal monthly payments are based on the life of a named
person. Payments continue for the lifetime of that person. Three variations are
available:
. Payments for life only;
. Payments guaranteed for five, ten or twenty years; and
. Payments guaranteed for the amount applied.
Joint Lifetime Payment Option. Equal monthly payments are based on the lives of
two named persons. While both named persons are living, one payment will be made
each month. When one of the named persons dies, the same payment continues for
the lifetime of the other. Two variations are available:
. Payments guaranteed for 10 years; and
. Payments for two lives only. No specific number of payments is guaranteed.
Under this option there may be one payment if the two named persons die prior to
the second payment.
Joint Lifetime Payment Option with Reduced Payments. Monthly payments are based
on the lives of two named persons. While both named persons are living, one
payment will be made each month. When one dies, payments are reduced by
one-third and will continue for the lifetime of the other.
Withdrawal Rights Under Payment Options. If provided in the payment option
election, all or part of the unpaid balance under the Fixed Amount or Interest
payment option may be withdrawn or applied under any other option. Payments
which are based on a named person's life may not be withdrawn.
Records And Reports
All records and accounts relating to the Separate Account and the GPA are
maintained by MassMutual or MML Bay State. Each year within 30 days after the
Policy Anniversary, MML Bay State will mail you a report showing the Account
Value at the beginning of the previous Policy Year, all premiums paid since that
time, all additions to and deductions from the Account Value during the year,
and the Account Value, Death Benefit, Cash Surrender Value and Policy Debt as of
the latest Policy Anniversary. This report contains any additional information
required by any applicable law or regulation.
30
<PAGE>
Sales And Other Agreements
MML Distributors, LLC ("MML Distributors"), 1414 Main Street, Springfield, MA
01144-1013, is the principal underwriter of the Policy pursuant to an
Underwriting and Servicing Agreement to which MML Distributors, MML Bay State
and the Separate Account are parties. MML Investors Services, Inc. ("MMLISI"),
also located at 1414 Main Street, Springfield, MA 01144-1013, serves as the
co-underwriter of the Policy Both MML Distributors and MMLISI are registered
with the Securities and Exchange Commission (the "SEC") as broker-dealers under
the Securities Exchange Act of 1934 and are members of the National Association
of Securities Dealers, Inc. (the "NASD").
MML Distributors may enter into selling agreements with other broker-dealers
which are registered with the SEC and are members of the NASD ("selling
brokers"). MML Bay State sells the Policy through agents who are licensed by
state insurance officials to sell the Policy. These agents are also registered
representatives of selling brokers or of MMLISI. The Policy is offered in all
states where MML Bay State is authorized to sell variable life insurance.
The Company also may contract with independent third party broker-dealers who
may act as wholesalers by assisting the company in finding Broker-dealers to
offer and sell the Policies. These parties also may provide training, marketing
and other sales related functions for the Company and other broker-dealers and
may provide certain administrative services to the Company in connection with
the Policies. The Company may pay such parties compensation based on premium
payments for the Policies purchased through broker-dealers selected by the
wholesaler. In addition, some sales personnel may receive various types of
non-cash compensation as special sales incentives, including trips and
educational and/ or business seminars.
When an application for the Policy is completed, it is submitted to MML Bay
State. Under a service agreement between MML Bay State and MassMutual (described
below under Service Agreement), MassMutual performs suitability and insurance
underwriting and determines whether to accept or reject the application for the
Policy and the Insured's risk classification. If the application is not
accepted, MML Bay State will refund any premium that has been paid.
Pursuant to the Underwriting and Servicing Agreement, both MML Distributors and
MMLISI will receive compensation for their activities as underwriters of the
Policy. Compensation paid to MML Distributors and MMLISI during 1997 totaled
$210,000. Commissions will be paid through MMLISI and MML Distributors to agents
and selling brokers for selling the Policy. During 1997 such payments amounted
to $23,602,341.
MML Distributors does business under different variations of its name; including
the name MML Distributors, L.L.C. in the states of Illinois, Michigan, Oklahoma,
South Dakota and Washington; and the name MML Distributors, Limited Liability
Company in the states of Maine, Ohio and West Virginia.
Compensation
Writing agents will receive commissions based on a commission schedule and
rules. Some commissions are paid as a percentage of the premium payable in each
Policy Year. The maximum commission percentages are as follows:
For Policy Year 1, 50% for basic premium and 2% for amount paid above basic
premium; for Policy Years 2 through 5, 6% of basic premium and 2% for amounts
paid above basic premium; for Policy Years 6 and 7, 5% of basic premium and 2%
for amounts paid above basic premium; for Policy Years 8 through 10, 4% of basic
premium and 2% for amounts above basic premium, and 2% for basic premium and
amounts above basic premium for Policy Years 11 through 20. Thereafter, no
premium-based commissions are paid.
Basic premium is an amount established by MML Bay State for the purposes of
determining commissions payable on a Policy.
For Policy Years 2 through 20, writing agents will also receive a commission of
0.15% of the average monthly Account Value in each Policy Year. The 0.15%
percentage drops to 0.05% for Policy Years 21 and later.
Agents under financing agreements with a general agent of MassMutual may be
compensated differently. Agents who meet certain productivity and persistency
standards in selling MML Bay State and MassMutual policies are eligible for
additional compensation. General Agents and district managers who are registered
representatives of MMLISI also may receive commission overrides, allowances and
other compensation.
While the compensation payable to broker-dealers for sales of Policies may vary
with the sales agreement and level of production, they generally are expected to
be comparable to the aggregate compensation paid to Company agents and general
agents.
Bonding Arrangement
An insurance company blanket bond is maintained providing $50,000,000 coverage
for officers and employees of MassMutual and MML Bay State (subject to a
$350,000 deductible) and $25,000,000 for MassMutual's general agents and agents
(also subject to a $350,000 deductible).
Directors and Executive Officers of MML Bay State
The directors and executive vice presidents of MML Bay State, their positions
and their other business affiliations and business experience for the past five
years are listed on the following page.
31
<PAGE>
MML BAY STATE LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
NAME AND POSITION PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Paul D. Adomato, Director and Senior Director, since 1987, and Senior Vice President-Operations, since 1996, MML Bay
Vice President-Operations State; Senior Vice President, since 1986, Mass Mutual
140 Garden Street
Hartford, CT 06154
- ---------------------------------------------------------------------------------------------------------------------------------
Lawrence V. Burkett, Jr., Director, Director, President and Chief Executive Officer, since 1996, MML Bay State;
President and Chief Executive Officer Executive Vice President and General Counsel, since 1993, Senior Vice President and
1295 State Street Deputy General Counsel, 1992-1993, MassMutual
Springfield, MA 01111
- ---------------------------------------------------------------------------------------------------------------------------------
John B. Davies, Director Director, MML Bay State, since 1996; Executive Vice President, since 1994,
1295 State Street Associate Executive Vice President, 1994-1994, General Agent, 1982-1993,
Springfield, MA 01111 MassMutual
- ---------------------------------------------------------------------------------------------------------------------------------
Anne Melissa Dowling, Director and Director and Senior Vice President-Large Corporate Marketing, MML Bay State, since
Senior Vice President-Large Corporate 1996; Senior Vice President, MassMutual, since 1996; Chief Investment Officer,
Marketing Connecticut Mutual Life Insurance Company, 1994-1996; Senior Vice President-
140 Garden Street International, Travelers Insurance Co., 1987-1993
Hartford, CT 06154
- ---------------------------------------------------------------------------------------------------------------------------------
Maureen R. Ford, Director and Senior Director and Senior Vice President-Annuity Marketing, MML Bay State, since 1996;
Vice President-Annuity Marketing Senior Vice President, MassMutual, since 1996; Marketing Officer, Connecticut
140 Garden Street Mutual Life Insurance Company, 1989-1996
Hartford, CT 06154
- ---------------------------------------------------------------------------------------------------------------------------------
Isadore Jermyn, Director and Senior Vice Director, since 1990, and Senior Vice President and Actuary, since 1996, MML Bay
President and Actuary State; Senior Vice President and Actuary, since 1995, Vice President and Actuary,
1295 State Street 1980-1995, MassMutual
Springfield, MA 01111
- ---------------------------------------------------------------------------------------------------------------------------------
Stuart H. Reese, Director and Senior Vice Director, since 1994, and Senior Vice President-Investments, since 1996, MML Bay
President-Investments State; Senior Vice President, MassMutual, since 1993; Investment Manager, Aetna
1295 State Street Life and Casualty and Affiliates, 1979-1993
Springfield, MA 01111
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OFFICERS (other than those who are also Directors):
- ---------------------------------------------------------------------------------------------------------------------------------
Edward M. Kline Treasurer, MML Bay State, since 1997; Vice President, since 1989, Treasurer, since
1295 State Street 1997, MassMutual
Springfield, MA 01111
- ---------------------------------------------------------------------------------------------------------------------------------
Ann F. Lomeli Vice President, since 1997, and Secretary, since 1998, MML Bay State; Vice
1295 State Street President, Secretary and Associate General Counsel, since 1998, Associate Secretary,
Springfield, MA 01111 1996-1998, MassMutual; Corporate Secretary and Counsel, Connecticut Mutual Life
Insurance Company, 1988-1996
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
Legal Proceedings
We are not currently involved in any legal proceedings which would have a
material impact on the Policy.
Experts
The financial statements of the Variable Life Select segment of the Separate
Account included in this Prospectus have been included herein in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
The audited statements of statutory financial position of MML Bay State as of
December 31, 1997 and 1996 and the related statements of income, changes in
capital stock and surplus and cash flows for each of the years in the three year
period ended December 31, 1997 included in this Prospectus have been so included
in reliance on the report of Coopers & Lybrand L.L.P, independent accountants,
given on the authority of that firm as experts in accounting and auditing.
Actuarial matters in the Prospectus have been examined by Craig Waddington, FSA,
MAAA. An opinion on actuarial matters is filed as an exhibit to the registration
statements we filed with the SEC.
Financial Statements
The financial statements of MML Bay State and the Variable Life Select segment
of the Separate Account included herein should be considered only as bearing
upon the ability of MML Bay State to meet its obligations under
the Policy.
33
<PAGE>
Report Of Independent Accountants
To the Board of Directors and Policyowners of
MML Bay State 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, MML Blend
Division, Oppenheimer Capital Appreciation Division, Oppenheimer Growth
Division, Oppenheimer Global Securities Division, and Oppenheimer Strategic Bond
Division of the Variable Life Select segment of MML Bay State Variable Life
Separate Account I as of December 31, 1997, and the related statements of
operations for the year then ended, and 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 and by confirmation with Oppenheimer
Variable Account Funds. 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, MML Blend Division,
Oppenheimer Capital Appreciation Division, Oppenheimer Growth Division,
Oppenheimer Global Securities Division, and Oppenheimer Strategic Bond Division
of the Variable Life Select segment of MML Bay State Variable Life Separate
Account I as of December 31, 1997, the results of their operations for the year
then ended, and the changes in their net assets for each of the two years in the
period then ended, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Springfield, Massachusetts
February 3, 1998
F-1
<PAGE>
MML Bay State Variable Life Separate Account I -- Variable Life Select
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Capital Oppenheimer
Equity Market Bond Blend Appreciation Growth
Division Division Division Division Division Division
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments
Number of shares (Note 2) 2,176,157 3,154,109 202,776 844,830 518,814 480,312
=========== =========== =========== =========== =========== ===========
Identified cost (Note 3B) $68,789,071 $ 3,154,109 $ 2,478,068 $19,474,523 $19,752,578 $13,570,237
=========== =========== =========== =========== =========== ===========
Value (Note 3A) $77,129,843 $ 3,154,109 $ 2,516,238 $20,343,161 $21,250,607 $15,581,317
Receivable from MML Bay State
Life Insurance Company -- -- 85,497 -- -- --
Dividends receivable 6,219,091 14,459 40,458 1,524,996 -- --
----------- ----------- ----------- ----------- ----------- -----------
Total assets 83,348,934 3,168,568 2,642,193 21,868,157 21,250,607 15,581,317
LIABILITIES
Payable to MML Bay State
Life Insurance Company 474,271 74,160 -- 102,205 72,606 101,795
----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS $82,874,663 $ 3,094,408 $ 2,642,193 $21,765,952 $21,178,001 $15,479,522
=========== =========== =========== =========== =========== ===========
Net Assets:
For variable life insurance policies $82,866,128 $ 3,088,825 $ 2,636,164 $21,758,559 $21,170,402 $15,470,828
Retained in Variable Life
Separate Account I by
MML Bay State
Life Insurance Company 8,535 5,583 6,029 7,393 7,599 8,694
----------- ----------- ----------- ----------- ----------- -----------
Net assets $82,874,663 $ 3,094,408 $ 2,642,193 $21,765,952 $21,178,001 $15,479,522
=========== =========== =========== =========== =========== ===========
Accumulation units (Note 8)
Policyowners 48,753,500 2,767,152 2,187,229 14,715,948 13,935,093 8,905,032
MML Bay State Life
Insurance Company 5,000 5,000 5,000 5,000 5,000 5,000
----------- ----------- ----------- ----------- ----------- -----------
Total units: 48,758,500 2,772,152 2,192,229 14,720,948 13,940,093 8,910,032
=========== =========== =========== =========== =========== ===========
NET ASSET VALUE PER
ACCUMULATION UNIT
December 31, 1997 $ 1.70 $ 1.12 $ 1.21 $ 1.48 $ 1.52 $ 1.74
December 31, 1996 1.33 1.07 1.10 1.23 1.37 1.38
December 31, 1995 1.11 1.02 1.07 1.08 1.14 1.11
<CAPTION>
Oppenheimer Oppenheimer
Global Strategic
Securities Bond
Division Division
----------- -----------
<S> <C> <C>
ASSETS
Investments
Number of shares (Note 2) 593,192 463,093
=========== ===========
Identified cost (Note 3B) $11,094,079 $ 2,370,445
=========== ===========
Value (Note 3A) $12,676,506 $ 2,371,037
Receivable from MML Bay State
Life Insurance Company -- --
Dividends receivable -- --
----------- -----------
Total assets 12,676,506 2,371,037
LIABILITIES
Payable to MML Bay State
Life Insurance Company 59,768 6,374
----------- -----------
NET ASSETS $12,616,738 $ 2,364,663
=========== ===========
Net Assets:
For variable life insurance policies $12,609,774 $ 2,358,254
Retained in Variable Life
Separate Account I by
MML Bay State
Life Insurance Company 6,964 6,409
----------- -----------
Net assets $12,616,738 $ 2,364,663
=========== ===========
Accumulation units (Note 8)
Policyowners 9,060,392 1,840,242
MML Bay State Life
Insurance Company 5,000 5,000
----------- -----------
Total units: 9,065,392 1,845,242
=========== ===========
NET ASSET VALUE PER
ACCUMULATION UNIT
December 31, 1997 $ 1.39 $ 1.28
December 31, 1996 1.14 1.19
December 31, 1995 0.98 1.06
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE>
MML Bay State Variable Life Separate Account I -- Variable Life Select
STATEMENT OF OPERATIONS
For The Year Ended December 31, 1997
<TABLE>
<CAPTION>
MML MML Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Oppenheimer Global Strategic
Equity Market Bond Blend Appreciation Growth Securities Bond
Division Division Division Division Division Division Division Division
----------- --------- --------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income
Dividends (Note 3B) $ 6,219,627 $ 135,287 $ 113,431 $ 1,915,204 $ 491,026 $ 394,270 $ 67,545 $ 129,902
Expenses
Mortality and expense risk fees
(Note 4) 303,936 14,680 8,498 83,619 78,822 54,338 44,704 8,844
----------- --------- --------- ----------- ----------- ----------- ----------- ---------
Net investment income
(Note 3C) 5,915,691 120,607 104,933 1,831,585 412,204 339,932 22,841 121,058
----------- --------- --------- ----------- ----------- ----------- ----------- ---------
Net realized and unrealized
gain (loss) on investments
Net realized gain on investments
(Notes 3B, 3C and 6) 314,328 -- 11,096 192,644 65,632 43,880 56,528 17,308
Change in net unrealized
appreciation/depreciation
of investments 6,705,777 -- 32,580 698,006 1,178,095 1,602,645 1,253,546 (8,420)
----------- --------- --------- ----------- ----------- ----------- ----------- ---------
Net gain on investments 7,020,105 -- 43,676 890,650 1,243,727 1,646,525 1,310,074 8,888
----------- --------- --------- ----------- ----------- ----------- ----------- ---------
Net increase in net assets
resulting from operations $12,935,796 $ 120,607 $ 148,609 $ 2,722,235 $ 1,655,931 $ 1,986,457 $ 1,332,915 $ 129,946
=========== ========= ========= =========== =========== =========== =========== =========
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
MML Bay State Variable Life Separate Account I -- Variable Life Select
STATEMENT OF CHANGES IN NET ASSETS
For The Year Ended December 31, 1997
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Capital Oppenheimer
Equity Market Bond Blend Appreciation Growth
Division Division Division Division Division Division
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss) $ 5,915,691 $ 120,607 $ 104,933 $ 1,831,585 $ 412,204 $ 339,932
Net realized gain on investments 314,328 -- 11,096 192,644 65,632 43,880
Change in net unrealized
appreciation/depreciation
of investments 6,705,777 -- 32,580 698,006 1,178,095 1,602,645
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations 12,935,796 120,607 148,609 2,722,235 1,655,931 1,986,457
------------ ------------ ------------ ------------ ------------ ------------
Capital transactions: (Note 8)
Transfer of net premium 49,505,889 4,018,818 1,801,060 11,831,312 15,089,936 10,073,360
Transfer of surrender values (514,100) (854) (27,128) (72,260) (161,819) (96,345)
Transfer due to death benefits (16,424) (610) (46) (1,153) (2,315) (2,263)
Transfer due to policy loans (513,864) (6,886) (25,901) (84,855) (111,653) (64,268)
Transfer due to reimbursement
(payment) of accumulation
unit value fluctuation 4,922 (1,823) (664) (11,460) 19,347 10,717
Withdrawal due to charges for
administrative and insurance
costs (10,799,025) (380,100) (253,141) (2,560,362) (3,133,404) (1,919,598)
Divisional transfers 539,311 (2,733,498) 17,689 385,192 726,006 798,005
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from capital transactions 38,206,709 895,047 1,511,869 9,486,414 12,426,098 8,799,608
------------ ------------ ------------ ------------ ------------ ------------
Total increase 51,142,505 1,015,654 1,660,478 12,208,649 14,082,029 10,786,065
NET ASSETS, at beginning
of the year 31,732,158 2,078,754 981,715 9,557,303 7,095,972 4,693,457
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS, at end
of the year $ 82,874,663 $ 3,094,408 $ 2,642,193 $ 21,765,952 $ 21,178,001 $ 15,479,522
============ ============ ============ ============ ============ ============
<CAPTION>
Oppenheimer Oppenheimer
Global Strategic
Securities Bond
Division Division
------------ ------------
<S> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss) $ 22,841 $ 121,058
Net realized gain on investments 56,528 17,308
Change in net unrealized
appreciation/depreciation
of investments 1,253,546 (8,420)
------------ ------------
Net increase in net assets
resulting from operations 1,332,915 129,946
------------ ------------
Capital transactions: (Note 8)
Transfer of net premium 8,331,016 1,982,971
Transfer of surrender values (127,179) (4,980)
Transfer due to death benefits (1,759) --
Transfer due to policy loans (81,088) (19,273)
Transfer due to reimbursement
(payment) of accumulation
unit value fluctuation 60,217 309
Withdrawal due to charges for
administrative and insurance
costs (1,667,520) (233,452)
Divisional transfers 779,628 (512,333)
------------ ------------
Net increase in net assets resulting
from capital transactions 7,293,315 1,213,242
------------ ------------
Total increase 8,626,230 1,343,188
NET ASSETS, at beginning
of the year 3,990,508 1,021,475
------------ ------------
NET ASSETS, at end
of the year $ 12,616,738 $ 2,364,663
============ ============
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
MML Bay State Variable Life Separate Account I -- Variable Life Select
STATEMENT OF CHANGES IN NET ASSETS
For The Year Ended December 31, 1996
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Capital Oppenheimer
Equity Market Bond Blend Appreciation Growth
Division Division Division Division Division Division
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss) $ 1,338,046 $ 48,452 $ 37,859 $ 417,002 $ 70,764 $ 60,918
Net realized gain (loss)
on investments 38,361 -- (5,115) 16,801 13,931 9,715
Change in net unrealized
appreciation/depreciation
of investments 1,655,378 -- 5,128 175,645 284,426 395,992
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations 3,031,785 48,452 37,872 609,448 369,121 466,625
------------ ------------ ------------ ------------ ------------ ------------
Capital transactions: (Note 8)
Transfer of net premium 29,910,433 2,644,110 973,885 8,924,889 7,016,705 4,377,763
Transfer of surrender values (99,769) (26,686) (74,239) (7,461) (4,953)
Transfer due to death benefits (8,937) (981) (1,994) (973) (244)
Transfer due to policy loans (13,345) (6,322) (1,328) (1,344)
Transfer due to reimbursement
(payment) of accumulation
unit value fluctuation 9,677 (221) 132 21,221 3,582 5,113
Withdrawal due to charges for
administrative and insurance
costs (4,966,530) (234,736) (142,715) (1,271,356) (1,129,387) (636,020)
Divisional transfers 437,378 (945,250) 45,289 175,619 212,004 63,427
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from capital transactions 25,268,907 1,463,903 848,924 7,767,818 6,093,142 3,803,742
------------ ------------ ------------ ------------ ------------ ------------
Total increase 28,300,692 1,512,355 886,796 8,377,266 6,462,263 4,270,367
NET ASSETS, at beginning
of the year 3,431,466 566,399 94,919 1,180,037 633,709 423,090
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS, at end
of the year $ 31,732,158 $ 2,078,754 $ 981,715 $ 9,557,303 $ 7,095,972 $ 4,693,457
============ ============ ============ ============ ============ ============
<CAPTION>
Oppenheimer Oppenheimer
Global Strategic
Securities Bond
Division Division
------------ ------------
<S> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss) $ (10,479) $ 43,170
Net realized gain (loss)
on investments 3,188 1,575
Change in net unrealized
appreciation/depreciation
of investments 327,944 8,504
------------ ------------
Net increase in net assets
resulting from operations 320,653 53,249
------------ ------------
Capital transactions: (Note 8)
Transfer of net premium 3,782,940 1,053,635
Transfer of surrender values (4,781) (1,588)
Transfer due to death benefits (837) (230)
Transfer due to policy loans (2,948) --
Transfer due to reimbursement
(payment) of accumulation
unit value fluctuation 5,187 121
Withdrawal due to charges for
administrative and insurance
costs (635,695) (120,419)
Divisional transfers 88,724 (77,191)
------------ ------------
Net increase in net assets resulting
from capital transactions 3,232,590 854,328
------------ ------------
Total increase 3,553,243 907,577
NET ASSETS, at beginning
of the year 437,265 113,898
------------ ------------
NET ASSETS, at end
of the year $ 3,990,508 $ 1,021,475
============ ============
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
MML Bay State Variable Life Separate Account I - Variable Life Select
Notes To Financial Statements
1. HISTORY
MML Bay State Variable Life Separate Account I ("Separate Account I") is a
separate investment account established on June 9, 1982 by MML Bay State
Life Insurance Company ("MML Bay State") in accordance with the provisions
of Chapter 376 of the Missouri statutes. On June 30, 1997, MML Bay State
redomesticated from the state of Missouri to the state of Connecticut. MML
Bay State is a wholly-owned subsidiary of Massachusetts Mutual Life
Insurance Company ("MassMutual").
MML Bay State maintains three segments within Separate Account I. The
initial segment ("Variable Life Segment") is used exclusively for MML Bay
State's limited payment variable whole life insurance policy.
On August 4, 1988, MML Bay State established a second segment ("Variable
Life Plus Segment") within Separate Account I to be used exclusively for MML
Bay State's flexible premium variable whole life insurance policy.
On July 24, 1995, MML Bay State established a third segment ("Variable Life
Select Segment") within Separate Account I to be used exclusively for MML
Bay State's flexible premium variable whole life insurance policy.
The Separate Account I operates as a registered unit investment trust
pursuant to the Investment Company Act of 1940 and the rules promulgated
thereunder. MML Bay State paid $40,000 to the Variable Life Select Segment
on July 24, 1995 to provide initial capital: 7,656 shares were purchased in
the two management investment companies described in Note 2 supporting the
eight divisions of the Variable Life Select Segment.
2. INVESTMENT OF THE VARIABLE LIFE SELECT SEGMENT'S ASSETS
The Variable Life Select Segment maintains eight 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. The Oppenheimer Capital Appreciation
Division invests in shares of Oppenheimer Capital Appreciation Fund, the
Oppenheimer Growth Division invests in shares of Oppenheimer Growth Fund,
the Oppenheimer Global Securities Division invests in shares of Oppenheimer
Global Securities Fund and the Oppenheimer Strategic Bond Division invests
in shares of Oppenheimer Strategic Bond Fund.
MML Equity Fund, MML Money Market Fund, MML Managed Bond Fund and MML Blend
Fund are four series of the MML Series Investment Fund (the "MML Trust").
The MML Trust registered, is a no-load, open-end, management investment
company for which MassMutual serves as investment manager. Concert Capital
Management, Inc. ("Concert") served as the investment sub-advisor 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-advisor to MML Equity Fund and the Equity
Sector of the MML Blend Fund.
Oppenheimer Capital Appreciation Fund, Oppenheimer Growth Fund, Oppenheimer
Global Securities Fund and Oppenheimer Strategic Bond Fund are components of
the Oppenheimer Variable Account Funds (the "Oppenheimer Trust"). The
Oppenheimer Trust is a registered, open-end, diversified management
investment company for which OppenheimerFunds, Inc. ("OFI"), a controlled
subsidiary of MassMutual, serves as investment advisor (prior to January 5,
1996, OFI was known as Oppenheimer Management Corporation).
In addition to the eight divisions of the Variable Life Select Segment, a
policyowner may also allocate funds to the Guaranteed Principal Account,
which is part of MML Bay State's general account. Because of exemptive and
exclusionary provisions, interests in the Guaranteed Principal Account, are
not registered under the Securities Act of 1933 and the general account is
not registered as an investment company under the Investment Company Act of
1940.
F-6
<PAGE>
Notes To Financial Statements (Continued)
3. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
consistently by the Variable Life Select Segment in preparation of the
financial statements in conformity with generally accepted accounting
principles.
A. Investment Valuation
Investments in the MML Trust and the Oppenheimer Trust are each stated at
market value which is the net asset value per share of each of the
respective underlying funds.
B. Accounting for Investments
Investment transactions are accounted for on trade date and identified cost
is the basis followed in determining the cost of investments sold for
financial statement purposes. Dividend income is recorded on the ex-dividend
date.
C. Federal Income Taxes
MML Bay State is taxed under federal law as a life insurance company under
the provisions of the 1986 Internal Revenue Code, as amended. The Variable
Life Select Segment is part of MML Bay State's total operation and is not
taxed separately. The Variable Life Select 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 of the Variable Life Select Segment credited to
the policies. Accordingly, MML Bay State does not intend to make any charge
to the Variable Life Select Segment's divisions to provide for company
income taxes. MML Bay State 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 Variable Life Select Segment.
D. Policy Loan
When a policy loan is made, the Variable Life Select Segment transfers the
amount of the loan to MML Bay State, thereby decreasing both the investments
and net assets of the Variable Life Select Segment by an equal amount. The
interest rate charged on any loan is 6% per year or the policyowner may
select an adjustable loan rate, in all jurisdictions except Arkansas, at the
time of application. All loan repayments are allocated to the Guaranteed
Principal Account.
The policyowner earns interest at an annual rate determined by MML Bay
State, which will not be less than 4%, on any loaned amount.
E. 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
MML Bay State charges the Variable Life Select Segment divisions for the
mortality and expense risks it assumes. The charge is made daily at an
effective annual rate of 0.55% of the value of each division's net assets.
MML Bay State makes certain deductions from the annual premium before
amounts are allocated to the Variable Life Select Segment and the Guaranteed
Principal Account. The deductions are for sales charges and state premium
taxes. No additional deductions are taken when money is transferred from the
Guaranteed Principal Account to the Variable Life Select Segment. MML Bay
State also makes certain charges for the cost of insurance and
administrative costs.
F-7
<PAGE>
Notes To Financial Statements (Continued)
5. SALES AGREEMENTS
Effective May 1, 1996, MML Distributors, LLC ("MML Distributors"), a
wholly-owned subsidiary of MassMutual, serves as principal underwriter of
the policies pursuant to an underwriting and servicing agreement among MML
Distributors, MML Bay State and Separate Account I. MML Distributors is
registered with the Securities and Exchange Commission (the "SEC") as a
broker-dealer under the Securities Exchange Act of 1934 and is a member of
the National Association of Securities Dealers, Inc. (the "NASD"). MML
Distributors may enter into selling agreements with other broker-dealers
who are registered with the SEC and are members of the NASD in order to
sell the policies.
Prior to May 1, 1996, MML Investors Services, Inc. ("MMLISI") a
wholly-owned subsidiary of MassMutual, served as principal underwriter of
the policies. Effective May 1, 1996, MMLISI serves as co-underwriter of the
policies pursuant to underwriting and servicing agreements among MMLISI,
MML Bay State and Separate Account I, MMLISI is registered with the SEC as
a broker-dealer under the Securities Exchange Act of 1934 and is a member
of the NASD. Registered representatives of MMLISI sell the policies as
authorized variable life insurance agents under applicable state insurance
laws.
Under the sales agreement among MMLISI, MML Bay State and Separate Account
I, agents receive commissions and service fees from MMLISI for selling and
servicing the policies. MassMutual reimburses MMLISI for such compensation
and for other expenses incurred in marketing and selling the policies.
6. PURCHASES AND SALES OF INVESTMENTS
<TABLE>
<CAPTION>
MML MML Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Oppenheimer Global Strategic
For The Year Ended Equity Market Bond Blend Appreciation Growth Securities Bond
December 31, 1997 Division Division Division Division Division Division Division Division
----------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cost of purchases $40,811,045 $ 4,109,626 $ 1,862,320 $11,557,272 $13,126,429 $ 9,361,143 $ 7,576,516 $ 1,936,268
Proceeds from sales 1,261,951 3,137,419 358,571 1,372,932 351,830 188,028 234,218 598,780
Average monthly value
of securities 54,566,751 2,656,741 1,553,740 15,043,691 14,120,434 9,806,870 8,164,850 1,609,774
</TABLE>
7. NET INVESTMENT RETURN
The following table shows the net investment return for each division in
the Variable Life Select Segment:
<TABLE>
<CAPTION>
For the Years Ended
December 31, 1997
and 1996 and *For the Period MML MML Oppenheimer Oppenheimer Oppenheimer
July 24, 1995 MML Money Managed MML Capital Oppenheimer Global Strategic
(Commencement of Operations) Equity Market Bond Blend Appreciation Growth Securities Bond
Through December 31, 1995 Division Division Division Division Division Division Division Division
------------------------- ---------- ---------- ---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1997 23.55% 4.57% 9.52% 18.01% 11.64% 20.71% 16.50% 8.10%
December 31, 1996 19.56% 4.33% 7.36% 13.81% 11.34% 21.89% 16.86% 11.35%
*December 31, 1995 9.84% 1.81% 7.03% 8.19% 16.64% 6.83% 0.38% 7.28%
</TABLE>
The net investment return for each division of the Variable Life Select
Segment is computed using the net increase in net assets resulting from
operations as compared to the average monthly net assets. The net
investment return figures shown above do not reflect expenses related to
insurance products. Inclusion of such expenses would reduce the net
investment return figures for all periods shown.
Note: The amounts shown for the period July 24, 1995 through December 31,
1995 are not annualized.
F-8
<PAGE>
Notes To Financial Statements (Continued)
8. NET INCREASE (DECREASE) IN ACCUMULATION UNITS
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Capital Oppenheimer
For the Year Ended Equity Market Bond Blend Appreciation Growth
December 31, 1997 Division Division Division Division Division Division
----------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Units purchased 32,276,942 3,718,700 1,565,039 8,661,278 10,584,447 6,299,507
Units withdrawn (7,717,199) (413,452) (283,020) (1,998,142) (2,355,503) (1,285,847)
Units transferred between divisions 318,250 (2,481,233) 19,743 284,644 521,155 492,069
----------- ----------- ----------- ----------- ----------- -----------
Net increase 24,877,993 824,015 1,301,762 6,947,780 8,750,099 5,505,729
Units, at beginning of the year 23,880,507 1,948,137 890,467 7,773,168 5,189,994 3,404,303
----------- ----------- ----------- ----------- ----------- -----------
Units, at end of the year 48,758,500 2,772,152 2,192,229 14,720,948 13,940,093 8,910,032
=========== =========== =========== =========== =========== ===========
<CAPTION>
Oppenheimer Oppenheimer
Global Strategic
For the Year Ended Securities Bond
December 31, 1997 Division Division
----------------- ----------- -----------
<S> <C> <C>
Units purchased 6,398,083 1,613,459
Units withdrawn (1,435,337) (208,376)
Units transferred between divisions 603,103 (421,667)
----------- -----------
Net increase 5,565,849 983,416
Units, at beginning of the year 3,499,543 861,826
----------- -----------
Units, at end of the year 9,065,392 1,845,242
=========== ===========
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Capital Oppenheimer
For the Year Ended Equity Market Bond Blend Appreciation Growth
December 31, 1996 Division Division Division Division Division Division
----------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Units purchased 24,547,089 2,522,550 916,330 7,676,118 5,328,925 3,469,793
Units withdrawn (4,108,686) (253,952) (157,673) (1,137,726) (851,432) (500,556)
Units transferred between divisions 353,401 (874,974) 43,398 147,032 158,585 52,912
----------- ----------- ----------- ----------- ----------- -----------
Net increase 20,791,804 1,393,624 802,055 6,685,424 4,636,078 3,022,149
Units, at beginning of the year 3,088,703 554,513 88,412 1,087,744 553,916 382,154
----------- ----------- ----------- ----------- ----------- -----------
Units, at end of the year 23,880,507 1,948,137 890,467 7,773,168 5,189,994 3,404,303
=========== =========== =========== =========== =========== ===========
<CAPTION>
Oppenheimer Oppenheimer
Global Strategic
For the Year Ended Securities Bond
December 31, 1996 Division Division
----------------- ----------- -----------
<S> <C> <C>
Units purchased 3,561,525 910,499
Units withdrawn (597,901) (81,759)
Units transferred between divisions 87,638 (74,031)
----------- -----------
Net increase 3,051,262 754,709
Units, at beginning of the year 448,281 107,117
----------- -----------
Units, at end of the year 3,499,543 861,826
=========== ===========
</TABLE>
9. CONSOLIDATED MML BAY STATE VARIABLE LIFE SEPARATE ACCOUNT I
As discussed in Note 1, the financial statements only represent activity of
the MML Bay State's Variable Life Select Segment. The combined net assets
as of December 31, 1997 for the Separate Account I, which includes the
Variable Life, Variable Life Plus and Variable Life Select Segments, are as
follows:
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Capital Oppenheimer
Equity Market Bond Blend Appreciation Growth
Division Division Division Division Division Division
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Total assets $262,418,182 $ 5,596,013 $ 8,002,808 $ 97,150,658 $ 21,250,607 $ 15,581,317
Total liabilities 816,281 87,088 11,878 408,037 72,606 101,795
------------ ------------ ------------ ------------ ------------ ------------
Net assets $261,601,901 $ 5,508,925 $ 7,990,930 $ 96,742,621 $ 21,178,001 $ 15,479,522
============ ============ ============ ============ ============ ============
Net assets:
For variable life insurance
policies $259,884,304 $ 5,301,355 $ 7,889,341 $ 95,613,924 $ 21,170,402 $ 15,470,828
Retained in Variable Life
Separate Account I by
MML Bay State Life
Insurance Company 1,717,597 207,570 101,589 1,128,697 7,599 8,694
------------ ------------ ------------ ------------ ------------ ------------
Net assets $261,601,901 $ 5,508,925 $ 7,990,930 $ 96,742,621 $ 21,178,001 $ 15,479,522
============ ============ ============ ============ ============ ============
<CAPTION>
Oppenheimer Oppenheimer
Global Strategic
Securities Bond
Division Division
------------ ------------
<S> <C> <C>
Total assets $ 12,676,506 $ 2,371,037
Total liabilities 59,768 6,374
------------ ------------
Net assets $ 12,616,738 $ 2,364,663
============ ============
Net assets:
For variable life insurance
policies $ 12,609,774 $ 2,358,254
Retained in Variable Life
Separate Account I by
MML Bay State Life
Insurance Company 6,964 6,409
------------ ------------
Net assets $ 12,616,738 $ 2,364,663
============ ============
</TABLE>
F-9
<PAGE>
Report Of Independent Accountants
To the Board of Directors and Policyholders of
MML Bay State Life Insurance Company
We have audited the accompanying statutory statements of financial position of
MML Bay State Life Insurance Company as of December 31, 1997 and 1996, and the
related statutory statements of income, changes in capital stock and surplus,
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 conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described 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 Department of Insurance of the State of Connecticut, and prior to June 30,
1997, the Department of Insurance of the State of Missouri (collectively
"statutory accounting principles"), 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 MML Bay State 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, the financial statements referred to above present fairly, in
all material respects, the financial position of MML Bay State 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
20
<PAGE>
MML Bay State Life Insurance Company
STATUTORY STATEMENTS OF FINANCIAL POSITION
December 31,
1997 1996
---- ----
(In Millions)
Assets:
Bonds ........................................... $ 38.5 $ 44.9
Policy loans .................................... 16.1 10.0
Cash and short-term investments ................. 3.5 7.0
-------- -------
58.1 61.9
Investment and insurance amounts
receivable ..................................... 2.0 2.3
Transfer due from separate account .............. 75.8 50.2
Receivable from parent .......................... -- 1.1
Federal income tax receivable ................... -- 1.1
-------- -------
135.9 116.6
Separate account assets ......................... 1,400.1 706.7
-------- -------
$1,536.0 $ 823.3
======== =======
See notes to statutory financial statements.
21
<PAGE>
MML Bay State Life Insurance Company
STATUTORY STATEMENTS OF FINANCIAL POSITION, Continued
<TABLE>
<CAPTION>
December 31,
1997 1996
---- ----
($ In Millions Except for Par Value
and Share Amounts)
<S> <C> <C>
Liabilities:
Policyholders' reserves and funds............................... $ 36.2 $ 26.5
Policyholders' claims and other benefits........................ 1.9 1.1
Payable to parent............................................... 21.7 --
Federal income tax payable...................................... 3.9 --
Accrued expenses and taxes...................................... 3.0 6.9
Asset valuation reserve......................................... 0.1 0.2
Other liabilities............................................... 5.0 7.3
-------- ------
71.8 42.0
Separate account reserves and liabilities....................... 1,396.7 703.7
-------- ------
1,468.5 745.7
-------- ------
Capital stock and surplus:
Common stock, $200 par value
25,000 shares authorized
12,501 shares issued and outstanding............................ 2.5 2.5
Paid-in capital and contributed surplus......................... 71.7 71.7
Surplus......................................................... (6.7) 3.4
-------- ------
67.5 77.6
-------- ------
$1,536.0 $823.3
======== ======
</TABLE>
See notes to statutory financial statements.
22
<PAGE>
MML Bay State Life Insurance Company
STATUTORY STATEMENTS OF INCOME
Years Ended December 31,
1997 1996 1995
---- ---- ----
(In Millions)
Revenue:
Premium income ................................ $606.6 $441.2 $ 92.7
Net investment and other income ............... 10.7 8.4 4.3
Expense allowance on reinsurance ceded ........ -- -- 0.5
------ ------ ------
617.3 449.6 97.5
------ ------ ------
Benefits and expenses:
Policy benefits and payments .................. 34.3 11.0 5.7
Addition to policyholders' reserves, funds
and separate accounts ........................ 489.0 363.5 67.0
Operating expenses ............................ 38.3 24.0 11.2
Commissions ................................... 35.4 28.1 15.1
State taxes, licenses and fees ................ 11.2 9.1 2.5
------ ------ ------
608.2 435.7 101.5
Net gain (loss) from operations
before federal income taxes .................. 9.1 13.9 (4.0)
Federal income taxes .......................... 15.9 11.8 0.6
------ ------ ------
Net gain (loss) from operations ............... (6.8) 2.1 (4.6)
Net realized capital loss ..................... (0.1) (0.1) --
------ ------ ------
Net income (loss) ............................. $ (6.9) $ 2.0 $ (4.6)
====== ====== ======
See notes to statutory financial statements.
23
<PAGE>
MML Bay State Life Insurance Company
STATUTORY STATEMENTS OF CHANGES IN CAPITAL STOCK AND SURPLUS
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
---- ---- ----
(In Millions)
<S> <C> <C> <C>
Capital stock and surplus, beginning of year............... $ 77.6 $ 50.3 $ 55.9
------ ------ ------
Increases (decrease) due to:
Net income (loss)......................................... (6.9) 2.0 (4.6)
Change in asset valuation reserve......................... 0.1 (0.1) --
Change in separate account surplus........................ -- -- 0.3
Capital contribution...................................... -- 25.5 --
Change in reserving methodology........................... -- -- (1.3)
Change in non-admitted assets and other................... (3.3) (0.1) --
------ ------ ------
(10.1) 27.3 (5.6)
------ ------ ------
Capital stock and surplus, end of year..................... $ 67.5 $ 77.6 $ 50.3
====== ====== ======
</TABLE>
See notes to statutory financial statements.
24
<PAGE>
MML Bay State Life Insurance Company
STATUTORY STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
---- ---- ----
(In Millions)
<S> <C> <C> <C>
Operating activities:
Net income (loss) .................................... $(6.9) $ 2.0 $(4.6)
Additions to policyholders' reserves and funds,
net of transfers to separate accounts .............. 10.5 7.0 8.6
Net realized capital loss ............................ 0.1 0.1 -
Change in receivable from
separate accounts .................................... (25.6) (21.2) (7.9)
Change in receivable (payable) to parent ............. 22.8 (0.2) (1.2)
Change in federal taxes receivable (payable) ......... 5.0 (1.0) (1.0)
Other changes ........................................ (9.7) 1.5 (2.6)
----- ----- -----
Net cash used in operating activities ................ (3.8) (11.8) (8.7)
----- ----- -----
Investing activities:
Purchases of investments and loans ................... (20.1) (35.9) (28.4)
Sales and maturities of investments and receipts
from repayments of loans ........................... 20.4 28.7 36.6
----- ----- -----
Net cash provided by (used in) investing activities .. 0.3 (7.2) 8.2
----- ----- -----
Financing activities:
Capital and Surplus contribution ..................... - 25.5 -
----- ----- -----
Net cash provided by financing activities ............ - 25.5 -
----- ----- -----
Increase (decrease) in cash and short-term investments (3.5) 6.5 (0.5)
Cash and short-term investments, beginning of year ... 7.0 0.5 1.0
----- ----- -----
Cash and short-term investments, end of year ......... $ 3.5 $ 7.0 $ 0.5
===== ===== =====
</TABLE>
25
<PAGE>
Notes To Statutory Financial Statements
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
MML Bay State Life Insurance Company ("the Company") is a wholly-owned
subsidiary of Massachusetts Mutual Life Insurance Company ("MassMutual"). The
Company is primarily engaged in the sale of flexible and limited premium
variable whole life insurance and variable annuities distributed through career
agents. On March 1, 1996, the operations of Connecticut Mutual Life Insurance
Company were merged into MassMutual.
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 Department of Insurance of the State of
Connecticut, and prior to June 30, 1997, the Department of Insurance of the
State of Missouri. On June 30, 1997, the Company redomesticated from the state
of Missouri to the state of Connecticut which did not have any effect on the
accounting practices being followed.
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
under GAAP these expenses would 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 requires 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 life products and
variable annuities 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 to codify statutory
accounting principles ("Codification") 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.
The preparation of statutory 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 statutory 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 the statutory financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a description of the Company's principal accounting policies
and practices.
A. Investments
Bonds are valued in accordance with rules established by the National
Association of Insurance Commissioners. Generally, bonds are valued at amortized
cost.
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.
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 surplus against declines in the
value of bonds.
26
<PAGE>
Notes To Statutory Financial Statements (Continued)
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 and amortizes these capital gains and losses
into income using the grouped method over the remaining life of the investment
sold or over the life of the underlying asset. Net realized after tax capital
losses of $0.1 million in 1997 and 1996 and net realized after tax capital gains
of $0.3 million in 1995 were charged to the Interest Maintenance Reserve.
Amortization of the Interest Maintenance Reserve into net investment income
amounted to $0.1 million in 1997, 1996 and 1995. The Interest Maintenance
Reserve is included in other liabilities on the statutory Statement of Financial
Position.
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 surplus.
B. Separate Accounts
Separate account assets and liabilities represent segregated funds administered
and invested by the Company for the benefit of variable annuity and variable
life insurance policyholders. Assets, consisting of holdings in an open-end
series investment fund affiliated with MassMutual, bonds, common stocks, and
short-term investments, are reported at fair value. The transfer due from
separate account represents the policyholders' account values in excess of
statutory benefit reserves. Premiums, benefits and expenses of the separate
accounts are reported in the Statutory Statement of Income. The Company receives
compensation for providing administrative services to the separate account and
for assuming mortality and expense risks in connection with the policies. The
Company had $3.4 million and $3.0 million of its assets invested in the separate
account as of December 31, 1997 and 1996, respectively.
Net transfers to separate accounts of $479.4 million, $356.1 million, and $59.8
million in 1997, 1996 and 1995, respectively, are included in the addition to
policyholders' reserves, funds and separate accounts.
C. Policyholders' Reserves
Policyholders' reserves for life contracts were developed using accepted
actuarial methods computed principally on the net level premium method and the
Commissioners' Reserve Valuation Method using the 1958 and 1980 Commissioners'
Standard Ordinary mortality tables with assumed interest rates ranging from 3.5
to 5.5 percent. Reserves for individual annuities are based on accepted
actuarial methods, principally at interest rates ranging from 5.5 to 6.0
percent.
During 1994, actuarial guidelines requiring additional reserves for immediate
payment of claims became effective. While the Company's aggregate reserves were
sufficient, the reserves for certain products were not recorded. The effect of
correctly recording these reserves was $1.3 million at December 31, 1994 and was
recorded as an adjustment to surplus during 1995.
D. Premium and Related Expense Recognition
Premium revenue is recognized annually on the anniversary date of the policy.
Annuity premium is recognized when received. Commissions and other costs related
to issuance of new policies, maintenance and settlement costs, are charged to
current operations when incurred.
E. Cash and Short-Term Investments
For purposes of the Statutory Statement of Cash Flows, the Company considers all
highly liquid short-term investments purchased with a maturity of twelve months
or less to be cash and short-term investments.
27
<PAGE>
Notes To Statutory Financial Statements (Continued)
3. CAPITAL STOCK AND SURPLUS
The Board of Directors of MassMutual has authorized the contribution of funds to
the Company sufficient to meet the capital requirements of all states in which
the Company is licensed to do business. Substantially all of the statutory
capital stock and surplus is subject to dividend restrictions relating to
various state regulations which limit the payment of dividends without prior
approval. Under these regulations, $7.5 million of capital stock and surplus is
available for distribution to the shareholder in 1998 without prior regulatory
approval.
4. RELATED PARTY TRANSACTIONS
MassMutual and the Company have an agreement whereby MassMutual, for a fee, will
furnish the Company, as required, operating facilities, human resources,
computer software development and managerial services. Fees incurred under the
terms of the agreement were $26.8 million, $16.4 million and $6.6 million in
1997, 1996 and 1995, respectively.
The Company had reinsurance agreements with MassMutual in which MassMutual
assumed specific plans of insurance on a coinsurance basis and on a yearly
renewal term basis. The coinsurance agreement was terminated in 1995. A
termination fee of $6.2 million was recorded as an expense and paid to
MassMutual for the right to retain future fees and charges on the reinsurance
business. Premium income and policy benefits and payments are stated net of
reinsurance. Premium income of $5.1 million, $3.8 million and $29.6 million was
ceded to MassMutual in 1997, 1996 and 1995, respectively. Death benefits of $5.5
million, $3.1 million and $1.8 million were ceded to MassMutual in 1997, 1996
and 1995, respectively.
The Company entered into a stop-loss agreement with MassMutual on January 1,
1997, with maximum coverage at $25.0 million, under which the Company cedes
claims which, in aggregate exceed 18% of the covered volume for any year. For
1997, this limit was $15.4 million and it was not exceeded. The Company paid
approximately $1.0 million in premiums under the agreement in 1997.
During 1996, MassMutual contributed additional paid in capital of $25.0 million
cash to the Company and purchased an additional 2,500 shares of common stock for
$0.5 million.
5. FEDERAL INCOME TAXES
The provision for federal income taxes is based upon the Company's best estimate
of its tax liability. No deferred tax effect is recognized for temporary
differences that may exist between financial reporting and taxable income.
Accordingly, the reporting of miscellaneous temporary differences, such as
reserves and acquisition costs, resulted in effective tax rates which differ
from the statutory tax rate.
The Company plans to file its 1997 federal income tax return on a consolidated
basis with its parent, MassMutual and MassMutual's other eligible life and
non-life affiliates. The Company and its eligible life and non-life affiliates
are subject to a written tax allocation agreement which allocates the group's
tax liability for payment purposes. Generally, the agreement provides that loss
members shall be compensated for the use of their losses and credits by other
members.
The Internal Revenue Service has completed examining MassMutual's income tax
returns through the year 1992 and is currently examining the Company for the
years 1993 and 1994. The Company believes any adjustments resulting from such
examinations will not materially affect its statutory financial statements.
The Company made federal tax payments of $10.9 million in 1997, $12.8 million in
1996 and $1.9 million in 1995.
28
<PAGE>
Notes To Statutory Financial Statements (Continued)
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.
A. Bonds
The carrying value and estimated fair value of bonds are as follows:
<TABLE>
<CAPTION>
December 31, 1997
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
----- ----- ------ -----
(In Millions)
<S> <C> <C> <C> <C>
U. S. Treasury securities
and obligations of U. S.
government corporations
and agencies $7.6 $0.1 $ -- $7.7
Mortgage-backed securities 6.5 0.1 -- 6.6
Corporate debt securities 23.9 0.4 -- 24.3
Utilities 0.5 -- -- 0.5
----- ----- ----- -----
TOTAL $38.5 $ 0.6 $ -- $39.1
===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
----- ----- ------ -----
(In Millions)
<S> <C> <C> <C> <C>
U. S. Treasury securities
and obligations of U. S.
government corporations
and agencies $ 7.8 $0.1 $0.1 $ 7.8
Mortgage-backed securities 8.3 -- 0.1 8.2
Corporate debt securities 28.8 0.3 0.1 29.0
----- ---- ----- -----
TOTAL $44.9 $0.4 $ 0.3 $45.0
===== ==== ===== =====
</TABLE>
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.
<TABLE>
<CAPTION>
Estimated
Carrying Fair
Value Value
----- -----
<S> <C> <C>
(In Millions)
Due in one year or less $ 0.1 $ 0.1
Due after one year through five years 18.9 19.2
Due after five years through ten years 7.5 7.7
Due after ten years 2.0 2.0
----- -----
28.5 29.0
Mortgage-backed securities, including
securities guaranteed by the
U.S. government 10.0 10.1
----- -----
TOTAL $38.5 $39.1
===== =====
</TABLE>
29
<PAGE>
Notes To Statutory Financial Statements (Continued)
Proceeds from sales and maturities of investments in bonds were $20.4 million
during 1997, $28.7 million during 1996 and $36.6 million during 1995. Gross
capital gains of $0.1 million in 1997, $0.1 million in 1996 and $0.5 million in
1995 and gross capital losses of $0.1 million in 1997, $0.1 million in 1996, and
$0.1 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. Other
It is not practicable to determine the fair value of policy loans which do not
have a stated maturity.
7. 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:
<TABLE>
<CAPTION>
(In Millions)
<S> <C> <C>
Total policyholders' reserves and funds and
separate account liabilities $1,432.9
Not subject to discretionary withdrawal (0.4)
Policy loans (16.1)
--------
Subject to discretionary withdrawal $1,416.4
========
Total invested assets, including separate
investment accounts $1,458.2
Policy loans and other invested assets (16.1)
--------
Marketable investments $1,442.1
========
</TABLE>
8. BUSINESS RISKS AND CONTINGENCIES
Approximately 49% of the Company's premium revenue in 1997 was derived from
three customers and approximately 52% of the Company's premium revenue in 1996,
was derived from two customers.
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 premiums. The
Company believes such assessments in excess of amounts accrued will not
materially affect its financial position, results of operations or liquidity. In
1997, the Company elected not to admit $0.1 million of guaranty fund premium tax
offset receivables relating to prior assessments.
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.
9. RECLASSIFICATIONS
Certain 1996 and 1995 amounts have been reclassified to conform with the current
year presentation.
30
<PAGE>
Notes To Statutory Financial Statements (Continued)
AFFILIATED COMPANIES
The relationship of the Company, its parent and affiliated companies as of
December 31, 1997 is illustrated below. Subsidiaries are wholly-owned by the
parent, 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 Investors 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.
Subsidiaries of MassMutual International
- ----------------------------------------
MassLife Seguros de Vida (Argentina) S. A.
MassMutual International (Bermuda) Ltd.
Mass Seguros de Vida (Chile) S. A.
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
31
<PAGE>
Appendix A
Illustration of Death Benefits, Cash Surrender Values and Accumulated Premiums
The following tables illustrate the way in which a Policy operates. They show
how the Death Benefit and Cash Surrender Value could vary over an extended
period of time, assuming the Funds experience hypothetical gross rates of
investment return (i.e., investment income and capital gains and losses,
realized or unrealized), equivalent to constant gross annual rates of 0%, 6%,
and 12%. The tables are based on annual premium of $1,200 for a nonsmoker male
and female age 35 both issued standard based on full underwriting. Separate
tables are shown for the current and guaranteed schedule of charges. These
tables will assist in comparison of Death Benefits and Cash Surrender Values for
the Policy with those under other variable life policies which may be issued by
MassMutual or other companies.
1. The illustration on page A1 is for a Policy issued to a male non- smoker
age 35 for a Selected Face Amount of $100,000 using Death Benefit Option 1.
The premium payment is $1,200 using a current schedules of mortality and
expense charges and current fund level expenses.
2. The illustration on page A2 is for a Policy issued to a male nonsmoker age 35
for a Selected Face Amount of $100,000 using Death Benefit Option 1. The
premium payment is $1,200 using guaranteed schedules of mortality and expense
charges and current fund level expenses.
3. The illustration on page A3 is for a Policy issued to a male nonsmoker age 35
for a Selected Face Amount of $100,000 using Death Benefit Option 2. The
premium payment is $1,200 using a current schedules of mortality and
expense charges and current fund level expenses.
4. The illustration on page A4 is for a Policy issued to a male nonsmoker age 35
for a Selected Face Amount of $100,000 using Death Benefit Option 2. The
premium payment is $1,200 using guaranteed schedules of mortality and expense
charges and current fund level expenses.
5. The illustration on page A5 is for a Policy issued to a female nonsmoker age
35 for a Selected Face Amount of $100,000 using Death Benefit Option 1. The
premium payment is $1,200 using a current schedules of mortality and expense
charges and current fund level expenses.
6. The illustration on page A6 is for a Policy issued to a female nonsmoker age
35 for a Selected Face Amount of $100,000 using Death Benefit Option 1. The
premium payment is $1,200 using guaranteed schedules of mortality and expense
charges and current fund level expenses.
7. The illustration on page A7 is for a Policy issued to a female nonsmoker age
35 for a Selected Face Amount of $100,000 using Death Benefit Option 2. The
premium payment is $1,200 using a current schedules of mortality and expense
charges and current fund level expenses.
8. The illustration on page A8 is for a Policy issued to a female nonsmoker age
35 for a Selected Face Amount of $100,000 using Death Benefit Option 2. The
premium payment is $1,200 using guaranteed schedules of mortality and expense
charges and current fund level expenses.
The Death Benefits and Cash Surrender Values for a Policy would be different
from the amount shown if the rates of return averaged 0%, 6%, and 12% over a
period of years but varied above and below that average in individual Policy
Years. They would also differ if any Policy loan were made during the period of
time illustrated. They would also be different depending upon the allocation of
investment value to each Division. They would also be different depending upon
the allocation of investment value to each Division, if the rates of return for
all the Funds averaged 0%, 6%, and 12 % but varied above or below that average
for particular Funds.
The Death Benefits and Cash Surrender Values should, in illustrations 1, 3, 5
and 7, reflect the following current charges:
1. Administrative Charges equal to $6.00 per Policy charge for non-qualified
policies.
2. Cost of Insurance Charge, based on the current rates being charged by the
Company for standard, fully underwritten risks.
3. Mortality and Expense Risk Charge, which is equal to .55% on an annual basis,
of the net asset value of the Fund shares held by the Separate Account.
4. Fund level expenses of .60% on an annual basis, of the net assets value of
the Fund shares held by the Separate Account. These fund level expenses
represent the unweighted average of all fund expenses.
The Death Benefits and Cash Surrender Values show in illustrations 2, 4, 6 and 8
reflect the following guaranteed maximum charges as well as the current fund
level expenses:
1. Administrative Charges equal to $9.00 per Policy.
2. Cost of Insurance Charge based on 1980 CSO Mortality Table.
3. Mortality and Expense Risk Charge, which is equal to .90% on an
annual basis, of the net asset value of the Fund shares held by the
Separate Account.
Cash Surrender Values shown in the tables reflect the deduction of the
applicable Administrative Surrender Charge (during the first 15 Policy Years)
and the applicable Sales Load Surrender Charge (also during the first 15 Policy
Years.) Taking into account the current Mortality and Expense Risk Charge and
the Fund level expenses, the effect is that for gross annual rates of return of
0%, 6%, and 12%, the actual rate of return would be -1.142%, 4.789% and 10.721%
respectively.
MassMutual has agreed to bear the expenses of the Funds (other than the
management fee, interest taxes, brokerage commissions and extraordinary
expenses) in excess of .11% of average daily net assets value of each MML Fund
through April 30, 1999.
Currently no charge is made against the Separate Account for federal income
taxes but the Company reserves the right to charge the Separate Account for
federal income taxes attributable to the Separate Account if such taxes are
imposed in the future.
The second column of each table shows the amount which would accumulate if an
amount equal to the annual premium were invested to earn interest after taxes of
5% per year, compounded annually.
The tables are based on the assumptions that the Policyowner has not requested
an increase or decrease in the Selected Face Amount, that no Policy loans have
been made, and no transaction charges have been incurred, and that the entire
Account Value under the Policy is allocated to the Funds.
A
<PAGE>
FLEXIBLE PREMIUM VARIABLE WHOLE LIFE INSURANCE POLICY
Male, Issue Age 35, Nonsmoker
$100,000 Selected Face Amount,
Death Benefit Option 1
$1,200 Annual Premium
Using Current Schedule of Charges
<TABLE>
<CAPTION>
Death Benefit Cash Surrender Value
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End Of Accumulated Annual Investment Return of Annual Investment Return of
Policy at 5% Interest --------------------------- ---------------------------
Year Per Year 0% 6% 12% 0% 6% 12%
---- -------- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,260 $ 100,000 $ 100,000 $ 100,000 $ 149 $ 210 $ 272
2 2,583 100,000 100,000 100,000 997 1,177 1,364
3 3,972 100,000 100,000 100,000 1,852 2,209 2,595
4 5,431 100,000 100,000 100,000 2,711 3,306 2,976
5 6,982 100,000 100,000 100,000 3,550 4,445 5,495
6 8,570 100,000 100,000 100,000 4,462 5,722 7,260
7 10,259 100,000 100,000 100,000 5,360 7,052 9,203
8 12,032 100,000 100,000 100,000 6,237 8,429 11,332
9 13,893 100,000 100,000 100,000 7,090 9,855 13,670
10 15,848 100,000 100,000 100,000 7,921 11,332 16,237
15 27,189 100,000 100,000 100,000 11,561 19,408 33,383
20 41,663 100,000 100,000 144,095 14,348 28,957 61,057
25 60,136 100,000 100,000 215,982 16,646 41,025 105,874
30 83,713 100,000 100,000 316,008 17,359 55,637 176,541
35 113,804 100,000 115,564 453,068 15,590 73,142 286,752
40 152,208 100,000 133,446 653,169 9,632 93,319 456,762
45 201,222 0 152,226 938,232 0 116,202 716,208
50 263,778 0 174,199 1,361,228 0 141,625 1,106,690
</TABLE>
End Of Account Value Assuming Hypothetical Gross
Policy Year Annual Investment Return of
----------- ---------------------------
0% 6% 12%
-- -- ---
1 $ 915 $ 976 $ 1,038
2 1,811 1,991 2,178
3 2,689 3,046 3,432
4 3,548 4,143 4,813
5 4,387 5,282 6,332
6 5,207 6,467 8,005
7 6,006 7,698 9,848
8 6,782 8,975 11,878
9 7,536 10,301 14,115
10 8,266 11,677 16,583
15 11,569 19,416 33,391
For years following Policy Year 15, Account Value equals Cash Surrender Value
assuming no increase in Selected Face Amount.
- --------------------------------------------------------------------------------
It is emphasized that the hypothetical investment rates of return shown above
and elsewhere in this prospectus are illustrative only and should not be deemed
a representation of past or future investment rates of return. Actual rates of
return may be more or less than those shown. The death benefits and cash
surrender values for a policy would be different from the amounts shown if the
rates of return averaged 0%, 6% and 12% over a period of years, but varied above
or below that average in individual policy years. They would also be different,
depending on the allocation of investment value to each division of the separate
account, if the rates of return over all divisions averaged 0%, 6% or 12% but
varied above or below that average for individual divisions. They would also
differ if any policy loan were made during the period. No representations can be
made by MML Bay State or the trust that these hypothetical rates of return can
be achieved for any one year or sustained over any period of time.
A1
<PAGE>
FLEXIBLE PREMIUM VARIABLE WHOLE LIFE INSURANCE POLICY
Male, Issue Age 35, Nonsmoker
$100,000 Selected Face Amount,
Death Benefit Option 1
$1,200 Annual Premium
Using Guaranteed Schedules of Mortality and Expense Charges as well as Current
Fund Level Expenses
<TABLE>
<CAPTION>
Death Benefit Cash Surrender Value
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End Of Accumulated Annual Investment Return of Annual Investment Return of
Policy at 5% Interest --------------------------- ---------------------------
Year Per Year 0% 6% 12% 0% 6% 12%
---- -------- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,260 $100,000 $100,000 $100,000 $ 96 $ 155 $ 215
2 2,583 100,000 100,000 100,000 891 1,063 1,243
3 3,972 100,000 100,000 100,000 1,689 2,029 2,398
4 5,431 100,000 100,000 100,000 2,488 3,052 3,688
5 6,982 100,000 100,000 100,000 3,264 4,109 5,101
6 8,570 100,000 100,000 100,000 4,107 5,292 6,740
7 10,259 100,000 100,000 100,000 4,932 6,517 8,533
8 12,032 100,000 100,000 100,000 5,732 7,778 10,490
9 13,893 100,000 100,000 100,000 6,503 9,074 12,624
10 15,848 100,000 100,000 100,000 7,248 10,408 14,956
15 27,189 100,000 100,000 100,000 10,326 17,463 30,198
20 41,663 100,000 100,000 127,498 12,058 25,095 54,025
25 60,136 100,000 100,000 184,548 12,144 33,406 90,465
30 83,713 100,000 100,000 259,396 9,550 42,098 144,914
35 113,804 100,000 100,000 354,186 1,962 50,525 224,168
40 152,208 0 100,000 480,902 0 57,716 336,295
45 201,222 0 100,000 640,669 0 61,374 489,060
50 263,778 0 100,000 850,613 0 55,694 691,555
</TABLE>
End Of Account Value Assuming Hypothetical Gross
Policy Year Annual Investment Return of
----------- ---------------------------
0% 6% 12%
-- -- ---
1 $ 862 $ 921 $ 981
2 1,705 1,877 2,057
3 2,526 2,866 3,235
4 3,325 3,889 4,525
5 4,101 4,946 5,938
6 4,852 6,037 7,485
7 5,578 7,163 9,179
8 6,277 8,324 11,035
9 6,949 9,520 13,070
10 7,593 10,753 15,302
15 10,335 17,472 30,207
For policy years following Policy Year 15, Account Value equals Cash Surrender
Value assuming no increase in Selected Face Amount.
- --------------------------------------------------------------------------------
It is emphasized that the hypothetical investment rates of return shown above
and elsewhere in this prospectus are illustrative only and should not be deemed
a representation of past or future investment rates of return. Actual rates of
return may be more or less than those shown. The death benefits and cash
surrender values for a policy would be different from the amounts shown if the
rates of return averaged 0%, 6% and 12% over a period of years, but varied above
or below that average in individual policy years. They would also be different,
depending on the allocation of investment value to each division of the separate
account, if the rates of return over all divisions averaged 0%, 6% or 12% but
varied above or below that average for individual divisions. They would also
differ if any policy loan were made during the period. No representations can be
made by MML Bay State or the trust that these hypothetical rates of return can
be achieved for any one year or sustained over any period of time.
A2
<PAGE>
FLEXIBLE PREMIUM VARIABLE WHOLE LIFE INSURANCE POLICY
Male, Issue Age 35, Nonsmoker
$100,000 Selected Face Amount,
Death Benefit Option 2
$1,200 Annual Premium
Using Current Schedule Of Charges
<TABLE>
<CAPTION>
Death Benefit Cash Surrender Value
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End Of Accumulated Annual Investment Return of Annual Investment Return of
Policy at 5% Interest --------------------------- ---------------------------
Year Per Year 0% 6% 12% 0% 6% 12%
---- -------- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,260 $ 100,913 $ 100,975 $ 101,036 $ 147 $ 209 $ 270
2 2,583 101,807 101,986 102,172 993 1,172 1,358
3 3,972 102,680 103,035 103,420 1,843 2,198 2,583
4 5,431 103,532 104,123 104,789 2,695 3,286 3,952
5 6,982 104,362 105,251 106,293 3,525 4,414 5,456
6 8,570 105,171 106,421 107,946 4,426 5,675 7,200
7 10,259 105,956 107,631 109,759 5,311 6,986 9,114
8 12,032 106,716 108,883 111,751 6,171 8,338 11,205
9 13,893 107,451 110,177 113,938 7,005 9,732 13,492
10 15,848 108,159 111,515 116,340 7,814 11,170 15,995
15 27,189 111,295 118,911 132,458 11,286 18,903 32,450
20 41,663 113,806 127,730 158,665 13,806 27,730 58,665
25 60,136 115,675 138,326 207,407 15,675 38,326 101,670
30 83,713 115,616 149,623 304,033 15,616 49,623 169,851
35 113,804 112,635 160,537 436,431 12,635 60,537 276,222
40 152,208 105,196 169,018 629,770 5,196 69,018 440,398
45 201,222 0 171,430 905,413 0 71,430 691,155
50 263,778 0 161,451 1,314,952 0 61,451 1,069,067
</TABLE>
End Of Account Value Assuming Hypothetical Gross
Policy Year Annual Investment Return of
----------- ---------------------------
0% 6% 12%
-- -- ---
1 $ 913 $ 975 $ 1,036
2 1,807 1,986 2,172
3 2,680 3,035 3,420
4 3,532 4,123 4,789
5 4,362 5,251 6,293
6 5,171 6,421 7,946
7 5,956 7,631 9,759
8 6,716 8,883 11,751
9 7,451 10,177 13,938
10 8,159 11,515 16,340
15 11,295 18,911 32,458
For Policy Years following Policy Year 15, Account Value equals Cash Surrender
Value assuming no increase in Selected Face Amount.
- --------------------------------------------------------------------------------
It is emphasized that the hypothetical investment rates of return shown above
and elsewhere in this prospectus are illustrative only and should not be deemed
a representation of past or future investment rates of return. Actual rates of
return may be more or less than those shown. The death benefits and cash
surrender values for a policy would be different from the amounts shown if the
rates of return averaged 0%, 6% and 12% over a period of years, but varied above
or below that average in individual policy years. They would also be different,
depending on the allocation of investment value to each division of the separate
account, if the rates of return over all divisions averaged 0%, 6% or 12% but
varied above or below that average for individual divisions. They would also
differ if any policy loan were made during the period. No representations can be
made by MML Bay State or the trust that these hypothetical rates of return can
be achieved for any one year or sustained over any period of time.
A-3
<PAGE>
FLEXIBLE PREMIUM VARIABLE WHOLE LIFE INSURANCE POLICY
Male, Issue Age 35, Nonsmoker
$100,000 Selected Face Amount,
Death Benefit Option 2
$1,200 Annual Premium
Using Guaranteed Schedules Of Mortality and Expense Charges as well as Current
Fund Level Expenses
<TABLE>
<CAPTION>
Death Benefit Cash Surrender Value
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End Of Accumulated Annual Investment Return of Annual Investment Return of
Policy at 5% Interest --------------------------- ---------------------------
Year Per Year 0% 6% 12% 0% 6% 12%
---- -------- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,260 $100,860 $100,920 $100,979 $ 94 $ 154 $ 213
2 2,583 101,700 101,872 102,051 886 1,058 1,237
3 3,972 102,516 102,855 103,222 1,679 2,018 2,385
4 5,431 103,309 103,869 104,502 2,472 3,032 3,665
5 6,982 104,075 104,914 105,899 3,238 4,077 5,062
6 8,570 104,816 105,990 107,424 4,070 5,245 6,679
7 10,259 105,527 107,095 109,088 4,882 6,450 8,443
8 12,032 106,210 108,230 110,906 5,665 7,685 10,360
9 13,893 106,863 109,394 112,889 6,417 8,949 12,444
10 15,848 107,484 110,589 115,055 7,139 10,243 14,710
15 27,189 110,050 116,949 129,241 10,042 16,940 29,233
20 41,663 111,451 123,724 151,157 11,451 23,724 51,157
25 60,136 110,984 130,110 184,677 10,984 30,110 84,677
30 83,713 107,589 134,649 242,661 7,589 34,649 135,565
35 113,804 0 134,385 332,127 0 34,385 210,207
40 152,208 0 124,163 451,788 0 24,163 315,935
45 201,222 0 0 602,953 0 0 460,270
50 263,778 0 0 802,201 0 0 652,196
</TABLE>
End Of Account Value Assuming Hypothetical Gross
Policy Year Annual Investment Return of
----------- ---------------------------
0% 6% 12%
-- -- ---
1 $ 860 $ 920 $ 979
2 1,700 1,872 2,051
3 2,516 2,855 3,222
4 3,309 3,869 4,502
5 4,075 4,914 5,899
6 4,816 5,990 7,424
7 5,527 7,095 9,088
8 6,210 8,230 10,906
9 6,863 9,394 12,889
10 7,484 10,589 15,055
15 10,050 16,949 29,241
For Policy Years following Policy Year 15, Account Value equals Cash Surrender
Value assuming no increase in Selected Face Amount.
- --------------------------------------------------------------------------------
It is emphasized that the hypothetical investment rates of return shown above
and elsewhere in this prospectus are illustrative only and should not be deemed
a representation of past or future investment rates of return. Actual rates of
return may be more or less than those shown. The death benefits and cash
surrender values for a policy would be different from the amounts shown if the
rates of return averaged 0%, 6% and 12% over a period of years, but varied above
or below that average in individual policy years. They would also be different,
depending on the allocation of investment value to each division of the separate
account, if the rates of return over all divisions averaged 0%, 6% or 12% but
varied above or below that average for individual divisions. They would also
differ if any policy loan were made during the period. No representations can be
made by MML Bay State or the trust that these hypothetical rates of return can
be achieved for any one year or sustained over any period of time.
A4
<PAGE>
FLEXIBLE PREMIUM VARIABLE WHOLE LIFE INSURANCE POLICY
Female, Issue Age 35, Nonsmoker
$100,000 Selected Face Amount,
Death Benefit Option 1
$1,200 Annual Premium
Using Current Schedule Of Charges
<TABLE>
<CAPTION>
Death Benefit Cash Surrender Value
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End Of Accumulated Annual Investment Return of Annual Investment Return of
Policy at 5% Interest --------------------------- ---------------------------
Year Per Year 0% 6% 12% 0% 6% 12%
---- -------- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,260 $ 100,000 $ 100,000 $ 100,000 $ 196 $ 258 $ 320
2 2,583 100,000 100,000 100,000 1,058 1,239 1,428
3 3,972 100,000 100,000 100,000 1,943 2,304 2,694
4 5,431 100,000 100,000 100,000 2,813 3,414 4,092
5 6,982 100,000 100,000 100,000 3,661 4,567 5,628
6 8,570 100,000 100,000 100,000 4,580 5,855 7,411
7 10,259 100,000 100,000 100,000 5,490 7,201 9,377
8 12,032 100,000 100,000 100,000 6,382 8,600 11,537
9 13,893 100,000 100,000 100,000 7,256 10,053 13,912
10 15,848 100,000 100,000 100,000 8,112 11,564 16,527
15 27,189 100,000 100,000 105,993 11,970 19,931 34,074
20 41,663 100,000 100,000 166,831 15,285 31,175 62,484
25 60,136 100,000 100,000 250,410 18,391 43,337 108,874
30 83,713 100,000 118,367 364,677 20,627 59,481 183,255
35 113,804 100,000 137,402 525,653 21,723 78,967 302,100
40 152,208 100,000 156,440 750,685 20,955 102,249 490,644
45 201,222 100,000 178,365 1,082,511 16,215 129,250 784,428
50 263,778 100,000 201,331 1,555,500 2,767 159,786 1,234,524
</TABLE>
End Of Account Value Assuming Hypothetical Gross
Policy Year Annual Investment Return of
----------- ---------------------------
0% 6% 12%
-- -- ---
1 $ 930 $ 992 $ 1,053
2 1,840 2,021 2,210
3 2,730 3,090 3,481
4 3,600 4,201 4,879
5 4,448 5,353 6,415
6 5,275 6,550 8,105
7 6,085 7,796 9,972
8 6,877 9,095 12,032
9 7,651 10,448 14,307
10 8,407 11,859 16,821
15 11,977 19,938 34,081
For Policy Years following Policy Year 15, Account Value equals Cash Surrender
Value assuming no increase in Selected Face Amount.
- --------------------------------------------------------------------------------
It is emphasized that the hypothetical investment rates of return shown above
and elsewhere in this prospectus are illustrative only and should not be deemed
a representation of past or future investment rates of return. Actual rates of
return may be more or less than those shown. The death benefits and cash
surrender values for a policy would be different from the amounts shown if the
rates of return averaged 0%, 6% and 12% over a period of years, but varied above
or below that average in individual policy years. They would also be different,
depending on the allocation of investment value to each division of the separate
account, if the rates of return over all divisions averaged 0%, 6% or 12% but
varied above or below that average for individual divisions. They would also
differ if any policy loan were made during the period. No representations can be
made by MML Bay State or the trust that these hypothetical rates of return can
be achieved for any one year or sustained over any period of time.
A5
<PAGE>
FLEXIBLE PREMIUM VARIABLE WHOLE LIFE INSURANCE POLICY
Female, Issue Age 35, Nonsmoker
$100,000 Selected Face Amount,
Death Benefit Option 1
$1,200 Annual Premium
Using Guaranteed Schedules Of Mortality and Expense Charges as well as Current
Fund Level Charges
<TABLE>
<CAPTION>
Death Benefit Cash Surrender Value
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End Of Accumulated Annual Investment Return of Annual Investment Return of
Policy at 5% Interest --------------------------- ---------------------------
Year Per Year 0% 6% 12% 0% 6% 12%
---- -------- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,260 $100,000 $100,000 $100,000 $ 150 $ 210 $ 271
2 2,583 100,000 100,000 100,000 965 1,140 1,323
3 3,972 100,000 100,000 100,000 1,801 2,147 2,522
4 5,431 100,000 100,000 100,000 2,620 3,194 3,841
5 6,982 100,000 100,000 100,000 3,414 4,275 5,285
6 8,570 100,000 100,000 100,000 4,276 5,484 6,959
7 10,259 100,000 100,000 100,000 5,119 6,735 8,791
8 12,032 100,000 100,000 100,000 5,936 8,024 10,789
9 13,893 100,000 100,000 100,000 6,728 9,352 12,972
10 15,848 100,000 100,000 100,000 7,495 10,720 15,360
15 27,189 100,000 100,000 100,000 10,723 18,022 31,020
20 41,663 100,000 100,000 147,983 12,880 26,253 55,424
25 60,136 100,000 100,000 214,037 14,021 35,887 93,060
30 83,713 100,000 100,000 300,023 13,795 47,261 150,765
35 113,804 100,000 105,078 412,564 10,849 60,389 237,106
40 152,208 100,000 114,528 557,499 3,091 74,855 364,379
45 201,222 0 123,259 749,507 0 89,318 543,121
50 263,778 0 129,781 991,376 0 103,001 786,806
</TABLE>
End Of Account Value Assuming Hypothetical Gross
Policy Year Annual Investment Return of
----------- ---------------------------
0% 6% 12%
-- -- ---
1 $ 884 $ 944 $ 1,004
2 1,747 1,922 2,104
3 2,588 2,934 3,309
4 3,406 3,980 4,628
5 4,201 5,062 6,072
6 4,971 6,179 7,654
7 5,714 7,330 9,386
8 6,431 8,519 11,284
9 7,123 9,747 13,367
10 7,790 11,015 15,655
15 10,730 18,029 31,027
For Policy Years following Policy Year 15, Account Value equals Cash Surrender
Value assuming no increase in Selected Face Amount.
- --------------------------------------------------------------------------------
It is emphasized that the hypothetical investment rates of return shown above
and elsewhere in this prospectus are illustrative only and should not be deemed
a representation of past or future investment rates of return. Actual rates of
return may be more or less than those shown. The death benefits and cash
surrender values for a policy would be different from the amounts shown if the
rates of return averaged 0%, 6% and 12% over a period of years, but varied above
or below that average in individual policy years. They would also be different,
depending on the allocation of investment value to each division of the separate
account, if the rates of return over all divisions averaged 0%, 6% or 12% but
varied above or below that average for individual divisions. They would also
differ if any policy loan were made during the period. No representations can be
made by MML Bay State or the trust that these hypothetical rates of return can
be achieved for any one year or sustained over any period of time.
A6
<PAGE>
FLEXIBLE PREMIUM VARIABLE WHOLE LIFE INSURANCE POLICY
Female, Issue Age 35, Nonsmoker
$100,000 Selected Face Amount,
Death Benefit Option 2
$1,200 Annual Premium
Using Current Schedule Of Charges
<TABLE>
<CAPTION>
Death Benefit Cash Surrender Value
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End Of Accumulated Annual Investment Return of Annual Investment Return of
Policy at 5% Interest --------------------------- ---------------------------
Year Per Year 0% 6% 12% 0% 6% 12%
---- -------- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,260 $ 100,928 $ 100,990 $ 101,052 $ 195 $ 256 $ 318
2 2,583 101,835 102,016 102,204 1,054 1,235 1,423
3 3,972 102,721 103,080 103,469 1,934 2,293 2,683
4 5,431 103,584 104,183 104,857 2,798 3,396 4,070
5 6,982 104,424 105,324 106,378 3,638 4,537 5,592
6 8,570 105,240 106,505 108,048 4,545 5,810 7,353
7 10,259 106,038 107,733 109,887 5,443 7,138 9,292
8 12,032 106,814 109,008 111,911 6,319 8,513 11,416
9 13,893 107,571 110,332 114,139 7,176 9,937 13,744
10 15,848 108,306 111,707 116,594 8,011 11,412 16,299
15 27,189 111,738 119,499 133,271 11,731 19,492 33,264
20 41,663 114,853 129,196 162,468 14,853 29,196 60,849
25 60,136 117,664 141,324 244,319 17,664 41,324 106,226
30 83,713 119,384 155,573 356,199 19,384 55,573 178,995
35 113,804 119,647 172,013 513,793 19,647 72,013 295,283
40 152,208 117,569 190,130 734,127 17,569 90,130 479,822
45 201,222 110,832 207,580 1,059,162 10,832 107,580 767,508
50 263,778 0 219,424 1,522,927 0 119,424 1,208,672
</TABLE>
End Of Account Value Assuming Hypothetical Gross
Policy Year Annual Investment Return of
----------- ---------------------------
0% 6% 12%
-- -- ---
1 $ 928 $ 990 $ 1,052
2 1,835 2,016 2,204
3 2,721 3,080 3,469
4 3,584 4,183 4,857
5 4,424 5,324 6,378
6 5,240 6,505 8,048
7 6,038 7,733 9,887
8 6,814 9,008 11,911
9 7,571 10,332 14,139
10 8,306 11,707 16,594
15 11,738 19,499 33,271
For Policy Years following Policy Year 15, Account Value equals Cash Surrender
Value assuming no increase in Selected Face Amount.
- --------------------------------------------------------------------------------
It is emphasized that the hypothetical investment rates of return shown above
and elsewhere in this prospectus are illustrative only and should not be deemed
a representation of past or future investment rates of return. Actual rates of
return may be more or less than those shown. The death benefits and cash
surrender values for a policy would be different from the amounts shown if the
rates of return averaged 0%, 6% and 12% over a period of years, but varied above
or below that average in individual policy years. They would also be different,
depending on the allocation of investment value to each division of the separate
account, if the rates of return over all divisions averaged 0%, 6% or 12% but
varied above or below that average for individual divisions. They would also
differ if any policy loan were made during the period. No representations can be
made by MML Bay State or the trust that these hypothetical rates of return can
be achieved for any one year or sustained over any period of time.
A7
<PAGE>
FLEXIBLE PREMIUM VARIABLE WHOLE LIFE INSURANCE POLICY
Female, Issue Age 35, Nonsmoker
$100,000 Selected Face Amount,
Death Benefit Option 2
$1,200 Annual Premium
Using Guaranteed Schedules Of Mortality and Expense Charges as well as Current
Fund Level Expenses
<TABLE>
<CAPTION>
Death Benefit Cash Surrender Value
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End Of Accumulated Annual Investment Return of Annual Investment Return of
Policy at 5% Interest --------------------------- ---------------------------
Year Per Year 0% 6% 12% 0% 6% 12%
---- -------- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,260 $100,882 $100,942 $101,002 $ 149 $ 209 $ 269
2 2,583 101,742 101,917 102,099 961 1,135 1,317
3 3,972 102,579 102,923 103,297 1,792 2,137 2,510
4 5,431 103,391 103,962 104,606 2,605 3,176 3,820
5 6,982 104,177 105,033 106,036 3,391 4,246 5,250
6 8,570 104,937 106,135 107,598 4,242 5,440 6,903
7 10,259 105,668 107,268 109,303 5,073 6,673 8,708
8 12,032 106,369 108,433 111,164 5,874 7,938 10,669
9 13,893 107,043 109,630 113,199 6,648 9,235 12,804
10 15,848 107,689 110,863 115,426 7,394 10,568 15,131
15 27,189 110,471 117,552 130,147 10,464 17,545 30,140
20 41,663 112,342 125,044 153,289 12,342 25,044 53,289
25 60,136 113,039 133,147 206,065 13,039 33,147 89,594
30 83,713 112,160 141,469 289,388 12,160 41,469 145,421
35 113,804 108,285 148,288 398,441 8,285 48,288 228,989
40 152,208 0 151,059 538,945 0 51,059 352,252
45 201,222 0 142,453 725,301 0 42,453 525,581
50 263,778 0 110,731 960,650 0 10,731 762,421
</TABLE>
End Of Account Value Assuming Hypothetical Gross
Policy Year Annual Investment Return of
----------- ---------------------------
0% 6% 12%
-- -- ---
1 $ 882 $ 942 $ 1,002
2 1,742 1,917 2,099
3 2,579 2,923 3,297
4 3,391 3,962 4,606
5 4,177 5,033 6,036
6 4,937 6,135 7,598
7 5,668 7,268 9,303
8 6,369 8,433 11,164
9 7,043 9,630 13,199
10 7,689 10,863 15,426
15 10,471 17,552 30,147
For Policy Years following Policy Year 15, Account Value equals Cash Surrender
Value assuming no increase in Selected Face Amount.
- --------------------------------------------------------------------------------
It is emphasized that the hypothetical investment rates of return shown above
and elsewhere in this prospectus are illustrative only and should not be deemed
a representation of past or future investment rates of return. Actual rates of
return may be more or less than those shown. The death benefits and cash
surrender values for a policy would be different from the amounts shown if the
rates of return averaged 0%, 6% and 12% over a period of years, but varied above
or below that average in individual policy years. They would also be different,
depending on the allocation of investment value to each division of the separate
account, if the rates of return over all divisions averaged 0%, 6% or 12% but
varied above or below that average for individual divisions. They would also
differ if any policy loan were made during the period. No representations can be
made by MML Bay State or the trust that these hypothetical rates of return can
be achieved for any one year or sustained over any period of time.
A8
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
RULE 484 UNDERTAKING
The Bylaws of MML Bay State provide for indemnification of directors and
officers as follows:
MML Bay State 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 MML Bay
State pursuant to the foregoing provisions, or otherwise, MML Bay State 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 MML Bay
State of expenses incurred or paid by a director, officer or controlling person
of MML Bay State 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, MML Bay State 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.
REPRESENTATION UNDER SECTION 26(e)(2)(A) OF
THE INVESTMENT COMPANY ACT OF 1940
MML Bay State Life Insurance Company hereby represents that the fees and charges
deducted under the flexible premium variable whole life insurance policies
described in this Registration Statement in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by MML Bay State Life Insurance Company.
<PAGE>
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 3
This Post-Effective Amendment is comprised of the following documents:
The Facing Sheet.
The Prospectus consisting of 63 pages.
The Undertaking to File Reports.
The Signatures.
Written Consents of the Following Persons:
1. Coopers & Lybrand L.L.P., independent accountants.
2. Counsel opining as to the legality of securities being registered.
3. Opinion opining as to actuarial matters contained in the registration
statement by Craig Waddington, Vice President & Actuary.
The following Exhibits:
99. The following Exhibits correspond to those required by Paragraph A of
the instructions as to Exhibits in Form N-8B-2:
A. 1. Resolution of Board of Directors of MML Bay State
establishing the Separate Account./1/
2. Not applicable.
3. Form of Distribution Agreements:
a.1. Form of Distribution Servicing Agreement between MML
Distributors, LLC and MML Bay State./2/
a.2. Form of Co-Underwriting Agreement between MML
Investors Services, Inc. and MML Bay State./2/
b. Not applicable.
c. Not applicable.
4. Not applicable.
5. Form of Flexible Premium Variable Whole Life Insurance
Policy.
<PAGE>
6. a. Certificate of Incorporation of MML Bay State./1/
b. By-Laws of MML Bay State./1/
7. Not applicable.
8. Participation Agreement between Oppenheimer Variable Account
Funds (OVAF) and MML Bay State./3/
9. Not applicable.
10. Form of Application for a Flexible Premium Variable Whole Life
insurance policy./4/
11. Memorandum describing MML Bay State's issuance, transfer, and
redemption procedures for the Policy./5/
B. Opinion and Consent of Counsel as to the legality of the securities
being registered.
C. Consent of Coopers & Lybrand L.L.P.
D. No financial statement will be omitted from the Prospectus pursuant
to Instruction 1(b) or (c) of Part I.
E. Not applicable.
F. Opinion and consent of Craig Waddington as to actuarial matters
pertaining to the securities being registered.
G. Powers of Attorney./6/
/1/ Incorporated by reference to post-effective Amendment No. 10 to Registration
Statement File No. 33-19605 as an exhibit filed with the Commission effective
May 1, 1998.
/2/ Incorporated by reference to post-effective Amendment No. 1 to this
Registration Statement filed with the Commission on May 1, 1996.
/3/ Incorporated by reference to Registration Statement File No. 333-22557 as an
exhibit filed with the Commission on February 28, 1997.
/4/ Incorporated by reference to Initial Registration Statement File No. 333-
49457 as an exhibit filed with the Commission on April 6, 1998.
/5/ Incorporated by reference to post-effective Amendment No. 3 to Registration
Statement No. 33-89798 as an exhibit filed with the Commission effective May 1,
1998.
/6/ Incorporated by reference to post-effective Amendment No. 4 to Registration
Statement No. 33-79750 as an exhibit filed with the Commission effective May 1,
1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
caused this Post-Effective Amendment No. 3 to Registration Statement No.
33-82060 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 21st day of April, 1998.
MML BAY STATE VARIABLE LIFE SEPARATE ACCOUNT I
MML BAY STATE LIFE INSURANCE COMPANY
(Depositor)
By: /s/ Lawrence V. Burkett, Jr.*
------------------------------------------------------------
Lawrence V. Burkett, Jr., President and Chief Executive Officer
MML Bay State Life Insurance Company
/s/ Richard M. Howe On April 21, 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. 3
to Registration Statement No. 33-82060 has been signed by the following persons
in the capacities and on the duties indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Lawrence V. Burkett, Jr* Director, President and Chief April 3, 1998
- ---------------------------- Executive Officer
Lawrence V. Burkett, Jr.
/s/ Edward M. Kline* Treasurer (Principal Financial Officer) April 3, 1998
- --------------------
Edward M. Kline
/s/ John Miller, Jr* Second Vice President and Comptroller April 3, 1998
- -------------------- (Principal Accounting Officer)
John Miller, Jr
/s/ Paul D. Adornato* Director April 3, 1998
- ---------------------
Paul D. Adornato
/s/ John B. Davies* Director April 3, 1998
- -------------------
John B. Davies
/s/ Anne Melissa Dowling* Director April 3, 1998
- -------------------------
Anne Melissa Dowling
/s/ Maureen R. Ford* Director April 3, 1998
- --------------------
Maureen R. Ford
/s/ Isadore Jermyn* Director April 3, 1998
- -------------------
Isadore Jermyn
/s/ Stuart H. Reese* Director April 3, 1998
- --------------------
Stuart H. Reese
/s/ Richard M. Howe On April 3, 1998, as Attorney-in-Fact
- ------------------- pursuant to powers of attorney.
* Richard M. Howe
</TABLE>
<PAGE>
REPRESENTATION BY REGISTRANT'S COUNSEL
--------------------------------------
As counsel to the Registrant, I, Richard M. Howe, have reviewed this
Post-Effective Amendment No. 3 to Registration Statement No. 33-82060, 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/ Richard M. Howe
-------------------
Richard M. Howe
Second Vice President & Assoc. General Counsel
Massachusetts Mutual Life Insurance Company
<PAGE>
EXHIBIT LIST
99.A.5 Form of Flexible Premium Variable Whole Life Insurance Policy.
99.B. Opinion and Consent of Richard M. Howe
99.C. Consent of Coopers & Lybrand, L.L.P.
99.F. Opinion and Consent of Craig Waddington
<PAGE>
Exhibit 99.A.5
[LETTERHEAD OF MML BAY STATE LIFE INSURANCE COMPANY APPEARS HERE]
Flexible Premium
Variable Whole Life Insurance Policy
- --------------------------------------------------------------------------------
Policy Number
Insured
Selected Face Amount
- --------------------------------------------------------------------------------
Dear Policy Owner:
READ YOUR POLICY CAREFULLY. We have used examples to explain some of its
provisions. These examples do not reflect the actual amounts or status of this
policy. As you read through the policy, remember the words "we," "us," and "our"
refer to MML Bay State Life Insurance Company.
We will, subject to the terms of this policy, pay the death benefit to the
Beneficiary when due proof of the Insured's death is received at our Principal
Administrative Office. The terms of this policy are contained on this and the
following pages.
For service or information on this policy, contact the agent who sold the
policy, any of our agency offices, or our Principal Administrative Office.
YOU HAVE A RIGHT TO RETURN THIS POLICY. If you decide not to keep this policy,
return it within 10 days after you receive it, or within 10 days after you
receive the notice of right to withdraw, or within 45 days after the date of the
Part 1 of the application for this policy, whichever is latest. It may be
returned by delivering or mailing it to our Principal Administrative Office, to
any of our agency offices, or to the agent who sold the policy. Then, the policy
will be as though it had never been issued. We will promptly refund (a) any
premium paid for this policy, plus (b) interest credited to this policy under
the Guaranteed Principal Account, plus or minus (c) an amount that reflects the
investment experience of the investment divisions of the Separate Account under
this policy to the date the policy is received by us, minus (d) any amounts
withdrawn and any policy debt.
Signed for MML Bay State Life Insurance Company.
Sincerely yours,
/s/ Isadore Jermeyn /s/ Thomas J. Finnegan, Jr.
President Secretary
This Policy provides that: Insurance is payable when the Insured dies.
Within specified limits, flexible premiums may be
paid during the Insured's lifetime.
No dividends will be paid.
The amount of death benefit and the duration of insurance coverage may be fixed
or variable as described in Parts 3 and 5.
The variable account value of the policy may increase or decrease in accordance
with the experience of the Separate Account. There are no minimum guarantees as
to the variable account value.
The fixed account value of the policy earns interest at a rate not less than the
minimum described in the Interest On Fixed Account Value provision.
B960-9400
<PAGE>
Policy Summary
This Summary briefly describes some of the major policy 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.
This is a variable whole life insurance policy. We will pay a death benefit if
the Insured dies while the policy is in force. "In force" means that the
insurance has not terminated. "Variable" means that all values that depend on
the investment performance of the Separate Account shown on the Schedule Page
are not guaranteed as to dollar amount.
Premiums for this policy are flexible. After the first premium has been paid,
there is no requirement that any specific amount of premium be paid on any date.
Instead, within the limits stated in the policy, any amount may be paid on any
date before the death of the Insured.
Premiums are applied to increase the value of this policy. Monthly charges are
deducted from the value of this policy each month. If the monthly charges for a
month exceed the value, the policy will terminate at the end of 61 days. There
is, however, a right to reinstate the policy.
Other rights are available while the Insured is living. These include the rights
to:
. Assign this policy;
. Change the Owner or any Beneficiary;
. Surrender this policy;
. Make withdrawals;
. Make loans;
. Change the Selected Face Amount;
. Change the Death Benefit Option;
. Allocate net premiums among the Guaranteed Principal Account and the
divisions of the Separate Account; and
. Transfer values between the Guaranteed Principal Account and the
divisions of the Separate Account.
This policy also includes a number of Payment Options. These provide alternate
ways to pay the death benefit or the amount payable upon surrender of the
policy.
B960-9400
<PAGE>
THE SCHEDULE PAGE
This page shows specific information about this policy and is referred to
throughout the policy.
POLICY NUMBER 0 000 000
INSURED JOHN A. DOE
SELECTED FACE AMOUNT $ 100,000
Issue Date Jan 01 1995
Policy Date Jan 01 1995
Insured's Age on Policy Date 35 Male
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
BASIC POLICY INFORMATION
- ------------------------
Selected Minimum Death
Plan Face Amount Face Amount Benefit Option
- ---- ----------- ----------- --------------
<S> <C> <C> <C>
Flexible Premium $100,000 See Minimum Face 1 (See Part 5)
Variable Whole Amount provision
Life
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PREMIUM INFORMATION As of Jan 01 1995
- -------------------
First Premium $ 1,200.00
Planned Annual Premium $1,200.00
Planned Premium on other frequencies is as follows:
Semiannual Quarterly Monthly
---------- --------- -------
$600.00 $300.00 $100.00
The maximum limit for premiums in any Policy Year is the greatest of: $1,310.00;
the amount of premiums paid in the preceding Policy Year; and the highest amount
that would not increase the amount of insurance that requires a charge.
For each Policy Year, Net Premium will not be less than 96.0% of premium paid in
that Policy Year.
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT INFORMATION (See The Separate Account provision in Part 3)
- ----------------------------
The Separate Account referred to in this policy is MML Bay State Variable Life
Separate Account 1.
Policy No. 0 000 000
- -1-
B960-9400
<PAGE>
The divisions of the Separate Account are:
MML Equity Oppenheimer Capital Appreciation
MML Money Market Oppenheimer Growth
MML Managed Bond Oppenheimer Global Securities
MML Blend Oppenheimer Strategic Bond
The types of investments and the objectives for each division are given in the
Prospectus.
- --------------------------------------------------------------------------------
LIMITATIONS ON TRANSFERS
Transfers may only be in whole-number percentages or dollar-and-cent amounts.
Transfers of values from the Guaranteed Principal Account to the Separate
Account are limited to one each Policy Year. Any transfer from the Guaranteed
Principal Account cannot be more than 25% of the fixed account value of this
policy on the date the transfer is made.
We reserve the right to limit transfers such that no transfers may be made for
at least 90 days after the preceding transfer. Any such limitation would not
apply to a transfer of all funds in the Separate Account to the Guaranteed
Principal Account and to automated transfers in connection with any program the
Company has in place.
- --------------------------------------------------------------------------------
OTHER INFORMATION
Owner and Beneficiary - See application attached to this policy.
Loan Interest Rate - See application attached to this policy.
BASIS OF COMPUTATION - The Minimum Annual Interest Rate For The Guaranteed
Principal Account is 3%. 'The Mortality Table is shown in the Table(s) Of
Maximum Monthly Mortality Charges.
Policy No. 0 000 000
- -1- continued
B960-9400
<PAGE>
TABLE OF MAXIMUM MONTHLY CHARGES
These Maximum Monthly Mortality charges are for each $1,000 of insurance that
requires a charge. These charges apply to the original selected face amount of
$100, 000, issued on Jan 01 1995.
<TABLE>
<CAPTION>
POLICY YEAR MAXIMUM MONTHLY POLICY YEAR MAXIMUM MONTHLY
BEGINNING MORTALITY CHARGE BEGINNING MORTALITY CHARGE
- --------- ---------------- --------- ----------------
<S> <C> <C> <C>
Jan 01 1995 0.14096 Jan 01 2030 2.94130
Jan 01 1996 0.14764 Jan 01 2031 3.31274
Jan 01 1997 0.15683 Jan 01 2032 3.63093
Jan 01 1998 0.16685 Jan 01 2033 4.05839
Jan 01 1999 0.17854 Jan 01 2034 4.54126
Jan 01 2000 0.19107 Jan 01 2035 5.06274
Jan 01 2001 0.20611 Jan 01 2036 5.62182
Jan 01 2002 0.22115 Jan 01 2037 6.21387
Jan 01 2003 0.23870 Jan 01 2038 6.83324
Jan 01 2004 0.25626 Jan 01 2039 7.49616
Jan 01 2005 0.27717 Jan 01 2040 8.22966
Jan 01 2006 0.29975 Jan 01 2041 9.05445
Jan 01 2007 0.32401 Jan 01 2042 9.99708
Jan 01 2008 0.34996 Jan 01 2043 11.07332
Jan 01 2009 0.37927 Jan 01 2044 12.26712
Jan 01 2010 0.41026 Jan 01 2045 13.55591
Jan 01 2011 0.44713 Jan 01 2046 14.91787
Jan 01 2012 0.48989 Jan 01 2047 16.34412
Jan 01 2013 0.53771 Jan 01 2048 17.80841
Jan 01 2014 0.59311 Jan 01 2049 19.33267
Jan 01 2015 0.65444 Jan 01 2050 20.94168
Jan 01 2016 0.72255 Jan 01 2051 22.66794
Jan 01 2017 0.79493 Jan 01 2052 24.57677
Jan 01 2018 0.87327 Jan 01 2053 26.76407
Jan 01 2019 0.96182 Jan 01 2054 29.63735
Jan 01 2020 1.06061 Jan 01 2055 33.93112
Jan 01 2021 1.17052 Jan 01 2056 41.27938
Jan 01 2022 1.29585 Jan 01 2057 56.04155
Jan 01 2023 1.43921 Jan 01 2058 AND LATER 83.33333
Jan 01 2024 1.60155
Jan 01 2025 1.78129
Jan 01 2026 1.97513
Jan 01 2027 2.18574
Jan 01 2028 2.41241
Jan 01 2029 2.66044
</TABLE>
Nonsmoker Class.
Commissioner's 1980 CSO Standard Ordinary Mortality Table -Male
POLICY NO. 0 000 000
- -2-
B960-9400
<PAGE>
TABLE OF MINIMUM FACE AMOUNT PERCENTAGES
The minimum face amount on any date is a percentage of the account value on that
date. The percentages that apply are shown below.
<TABLE>
<CAPTION>
POLICY YEAR MINIMUM FACE POLICY YEAR MINIMUM FACE
BEGINNING AMOUNT PERCENTAGE BEGINNING AMOUNT PERCENTAGE
--------- ----------------- --------- -----------------
<S> <C> <C> <C>
Jan 01 1995 438% Jan 01 2030 155%
Jan 01 1996 424% Jan 01 2031 152%
Jan 01 1997 410% Jan 01 2032 148%
Jan 01 1998 396% Jan 01 2033 145%
Jan 01 1999 383% Jan 01 2034 143%
Jan 01 2000 370%. Jan 01 2035 140%
Jan 01 2001 358% Jan 01 2036 138%
Jan 01 2002 347% Jan 01 2037 135%
Jan 01 2003 335% Jan 01 2038 133%
Jan 01 2004 324% Jan 01 2039 131%
Jan 01 2005 314% Jan 01 2040 129%
Jan 01 2006 304% Jan 01 2041 127%
Jan 01 2007 294% Jan 01 2042 126%
Jan 01 2008 285% Jan 01 2043 124%
Jan 01 2009 276% Jan 01 2044 123%
Jan 01 2010 268% Jan 01 2045 121%
Jan 01 2011 259% Jan 01 2046 120%
Jan 01 2012 251% Jan 01 2047 119%
Jan 01 2013 244% Jan 01 2048 118%
Jan 01 2014 236% Jan 01 2049 117%
Jan 01 2015 229% Jan 01 2050 116%
Jan 01 2016 223% Jan 01 2051 115%
Jan 01 2017 216% Jan 01 2052 114%
Jan 01 2018 210%. Jan 01 2053 112%
Jan 01 2019 204% Jan 01 2054 111%
Jan 01 2020 199% Jan 01 2055 110%
Jan 01 2021 193% Jan 01 2056 109%
Jan 01 2022 188% Jan 01 2057 107%
Jan 01 2023 183% Jan 01 2058 106%
Jan 01 2024 179% Jan 01 2059 104%
Jan 01 2025 174% Jan 01 2060 and later 100%
Jan 01 2026 170%
Jan 01 2027 166%
Jan 01 2028 162%
Jan 01 2029 158%
</TABLE>
Nonsmoker Class.
POLICY NO. 0 000 000
- -3-
B960-9400
<PAGE>
TABLE OF SURRENDER CHARGES
The following charges apply to the original Selected Face Amount of $100, 000
issued on Jan 1, 1995.
The charges are the sum of A and (B multiplied by C).
Date A ( B x C )
---- - - ---
Jan 01 1995 $500.00 B 1
Jan 01 1996 500.00 B 1
Jan 01 1997 500.00 B 1
Jan 01 1998 500.00 B 1
Jan 01 1999 500.00 B 1
Jan 01 2000 400.00 B 1
Jan 01 2001 300.00 B 1
Jan 01 2002 200.00 B 1
Jan 01 2003 100.00 B 1
Jan 01 2004 0 B 1
Jan 01 2005 0 B 1
Jan 01 2006 0 B .90
Jan 01 2007 0 B .75
Jan 01 2008 0 B .55
Jan 01 2009 0 B .30
Jan 01 2010 0 B 0
Factors A and C grade uniformly each month between the dates shown.
Factor B equals:
26% of total premiums paid from 0 through $1,012.00; plus 4% of total
premiums paid from $1,012.01 through $3,036.00.
Policy No. 0 000 000
- -4-
B960-9400
<PAGE>
Part 1. The Basics Of This Policy
In this Part we discuss some insurance concepts that are necessary to
understand this policy.
The Parties Involved - Owner, Insured, Beneficiary, Irrevocable Beneficiary
The Owner is the person who owns this policy, as shown on our records. The
Insured is the person whose life this policy insures.
The Insured may be the Owner of this policy, or someone else may be the
Owner.
Example:
You buy a policy that insures your own life and name yourself as Owner. In
this case, you are both the Insured and Owner. If you buy a policy that
insures your son and name yourself as Owner, then the Insured and Owner are
different people.
A Beneficiary is any person named on our records to receive insurance
proceeds after the Insured 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 Insured
dies, she receives the death benefit. But if Debbie is dead and Anne and
Scott are alive when the Insured dies, Anne and Scott receive the 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 certain
other rights.
Dates - Policy Date, Policy Anniversary Date, Policy Year, Issue Date,
Monthly Calculation Date, Valuation Date, Valuation Period, Valuation Time,
Register Date
The Policy Date is shown on the Schedule Page. It is the starting point for
determining Policy Anniversary Dates and Policy Years. The first Policy
Anniversary Date is one year after the Policy Date. The period from the
Policy Date to the first Policy Anniversary Date, or from one Policy
Anniversary Date to the next, is called a Policy Year.
Example:The Policy Date is June 10, 19X6. The first Policy Anniversary Date
is June 10, 19X7. The period from June 10, 19X6, through June 9, 19X7, is a
Policy Year.
The Issue Date is also shown on the Schedule Page. The Issue Date is used to
determine the start of the suicide and contestability periods. We discuss
contestability below. See Part 5 for a discussion of the suicide exclusion.
The Monthly Calculation Date is the monthly date on which we deduct monthly
charges for this policy. The first Monthly Calculation Date is the Policy
Date. Subsequent Monthly Calculation Dates are the same day of each month
thereafter.
A Valuation Date is any date on which the New York Stock Exchange (or its
successor) is open for trading. A Valuation Period is the period of time
from the end of one Valuation Date to the end of the next Valuation Date. A
Valuation Time is the time the New York Stock Exchange (or its successor)
closes on a Valuation Date. All actions that are to be performed on a
Valuation Date will be performed as of the Valuation Time.
The Register Date is the date on which the first net premium payment for
this policy is allocated to the Separate Account or the Guaranteed Principal
Account. It is the Valuation Date that is on, or next follows, the latest
of:
. The Policy Date;
. The date on which we receive a completed Part
1 of the application for this policy at our
Principal Administrative Office; and
B960-9400
<PAGE>
-6-
. The date on which we receive the first premium
for this policy at our Principal
Administrative Office.
Policy A Legal Contract This policy is a legal contract between the Owner and
us. The entire contract consists of the application
and the policy, which includes any riders the policy
has. We have issued this policy in return for the
application and the payment of the first premium. Any
changes or waiver of its terms must be in writing and
signed by our Secretary or an Assistant Secretary to
be effective.
Policy Is Not This policy is "not participating," which means that
Participating no dividends are payable on this policy.
Representations And We rely on all statements made by or for the Insured
Contestability in the application(s). Legally, those statements are
considered to be representations and not warranties.
We can bring legal action to contest the validity of
this policy, or any increase in the Selected Face
Amount, or any change in the Death Benefit Option
applied for after the Issue Date, for any material
misrepresentation of a fact. To do so, however, the
misrepresentation must have been made in the
application or in a supplemental application to
increase the Selected Face Amount or change the Death
Benefit Option, and a copy of the application must
have been attached to this policy when issued or made
a part of the policy when the increase or change
became effective.
Except for any increases in the Selected Face Amount
and any change in Death Benefit Option 1 to Death
Benefit Option 2 applied for after the Issue Date, we
cannot, in the absence of fraud, contest the validity
of this policy after it has been in force during the
lifetime of the Insured for two years from its Issue
Date. For any increase in the Selected Face Amount, we
cannot, in the absence of fraud, contest the validity
of that increase:
. After it has been in effect for two years
during the lifetime of the Insured, if the
increase is not provided by any insurability
protection type rider this policy has; and
. After the policy has been in force during the
lifetime of the Insured for two years after
the Issue Date of any insurability protection
type rider this policy has, if the increase is
provided by that rider.
For any change in Death Benefit Option 1 to Death
Benefit Option 2, we cannot, in the absence of fraud,
contest the validity of that change after it has been
in effect for two years during the lifetime of the
Insured.
Misstatement Of Age Or If the Insured's sex or date of birth as given in the
Sex application is not correct, an adjustment will be
made. If the adjustment is made when the Insured dies,
the death benefit will reflect the amount provided by
the most recent monthly charge according to the
correct age and sex. If the adjustment is made before
the Insured dies, then future monthly charges will be
based on the correct age and sex.
Currency All payments made to us and by us will be in the
lawful currency of the United States of America. All
monetary amounts shown in this policy are in U.S.
dollars.
Meaning Of In Force "In force" means that the insurance provided by this
policy has not terminated. This policy will be in
force from its Issue Date or, if later, the date the
first premium is paid.
Principal Administrative Our Principal Administrative Office is in Springfield,
Office Massachusetts. The address is MML Bay State Life
Insurance Company, Springfield, Massachusetts
01111-0001.
B960-9400
<PAGE>
Part 2. Premium Payments
Premiums are the payments that may be paid to us to
increase the account value of this policy.
The First Premium The first premium for this policy is shown on the
Schedule Page. This premium is due on the Policy Date.
This policy will not be in force until the first
premium has been paid.
Planned Premiums The planned annual premium for this policy is shown on
the Schedule Page. Planned premiums on other
frequencies are also shown on that page. The frequency
of planned premiums for this policy is as elected in
the application. This frequency may be changed by
giving us advance written notice.
We also provide a pre-authorized payment plan. This
plan, and any other alternate premium plans we
provide, are covered by the rules and rates we set.
The payment of planned premiums on the frequency
elected does not guarantee that this policy will
continue in force.
Premium Flexibility After the first premium has been paid, there is no
And Premium Notices requirement that any amount of premium be paid on any
date. Subject to the Right To Refund Premiums
provision in this Part, while this policy is in force
any amount of premium may be paid at any time before
the death of the Insured. However, each premium paid
must be at least $10 or, if greater, the amount needed
to prevent termination, as discussed in the Grace
Period And Termination provision in Part 3.
We will send premium notices for the planned premium
according to the amount and frequency in effect. We
will stop sending notices for the planned premium if
no premium has been paid for 18 consecutive months.
However, if a premium is paid after that time, we will
send notices for the planned premium again.
We will also send notice of any premium needed to
prevent termination of this policy.
Premium notices will be sent only while this policy is
in force.
Where To Pay All premiums are payable to us at our Principal
Premiums Administrative Office or at the place shown for
payment on the premium notice. Upon request, a receipt
signed by our Secretary or an Assistant Secretary will
be given for any premium payment.
Right To Refund We have the right to promptly refund any amount of
Premiums premium paid if application of that premium to the
account value would increase the amount of insurance
that requires a charge. This right is limited to
premiums paid in a Policy Year that exceed the maximum
limit shown on the Schedule Page.
Net Premium A net premium is a premium we receive for this policy
less the charges we deduct at that time. Net premium,
expressed as a percentage of a premium we receive, is
shown on the Schedule Page.
Allocation Of Net Each net premium we receive will be allocated among
Premiums the Guaranteed Principal Account and the divisions of
the Separate Account, according to the net premium
allocation then in effect. We will allocate the first
net premium payment as of the Register Date.
The net premium allocation is specified in the
application for this policy. This allocation will
remain in effect until changed by any later election
satisfactory to us and received at our Principal
Administrative Office. The amount of each net premium
we receive for this policy for allocation to a
division of the Separate Account will be applied to
purchase accumulation units for this policy in that
division. See the Purchase And Sale Of Accumulation
Units provision in Part 3.
B960-9400 -7-
<PAGE>
-8-
Part 3. Accounts, Values, And Charges
This policy provides that certain values (referred to
as the variable account values) are based on the
investment performance of the Separate Account and are
not guaranteed as to dollar amount. This policy also
provides that other values (referred to as the fixed
account values) are based on the interest credited to
the Guaranteed Principal Account. The account value of
this policy is the variable account value plus the
fixed account value. This Part gives information about
the Separate Account, the Guaranteed Principal
Account, and the values and monthly charges connected
with them.
The Separate Account And The Guaranteed Principal
Account
The Separate Account The Separate Account shown on the Schedule Page is a
separate investment account we have established under
Missouri law. It is also subject to the laws of the
state in which this policy was delivered.
The Separate Account has a number of divisions. Each
division invests in shares of an investment Fund. The
divisions are shown on the Schedule Page.
The values of the assets in the divisions are variable
and are not guaranteed. They depend on the investment
results of the Separate Account shown on the Schedule
Page.
We own the assets of the Separate Account. Those
assets will only be used to support variable life
insurance policies. That portion of the assets equal
to the reserves and other liabilities of the Separate
Account will not be charged with liabilities that
arise from any other business we may conduct. However,
we may transfer to our general account any assets
exceeding the reserves and other liabilities of the
Separate Account. The income and the realized and
unrealized capital gains and losses from each division
of the Separate Account are credited to or charged
against that division without regard to any of our
other income, capital gains, or capital losses. The
assets of the Separate Account are protected from the
claims of our creditors.
Changes In The Separate We have the right to establish additional divisions of
Account the Separate Account from time to time. Amounts
credited to any additional divisions established would
be invested in shares of other Funds. For any
division, we have the right to substitute new Funds.
Subject to applicable provisions of federal securities
laws, we have the right to change the investment
policy of any division of the Separate Account with
the approval of the Missouri Insurance Commissioner.
If required, evidence of the approval of a material
change by the Missouri Insurance Commissioner will be
filed with the insurance supervisory official of the
state where this policy was delivered. We will notify
the Owner if the Missouri Insurance Commissioner
approves any material change.
We have the right to operate the Separate Account as a
unit investment trust under the Investment Company Act
of 1940 or in any other form permitted by law.
Accumulation Units Accumulation units are used to measure the variable
account value of this policy. The value of a unit is
determined as of the Valuation Time on each Valuation
Date for valuation of the Separate Account. 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. The value of accumulation units is
discussed further in Part 7.
Purchase And Sale Of Amounts are credited to and taken from divisions of
Accumulation Units the Separate Account by purchasing and selling
accumulation units. Accumulation units will be
purchased and sold at the unit value as of the
Valuation Time on the Valuation Date of purchase or
sale. The number of units purchased or sold will be
the amount of money for purchase or sale divided by
that unit value.
B960-9400
<PAGE>
Example: The amount applied is $550. The date of
purchase is June 10, 19X6. The accumulation
unit value on that date is $10. The number
of units purchased would be 55 ($550 divided
by $10 = 55). If, instead, the unit value
was $11, then the amount applied would
purchase 50 units ($550 divided by $11 =
50).
If we receive premium or a written request that causes
us to purchase or sell accumulation units, and we
receive that premium or request before the Valuation
Time on a Valuation Date, accumulation units will be
purchased or sold as of that Valuation Date.
Otherwise, accumulation units will be purchased or
sold as of the next following Valuation Date.
At the Owner's request, we will purchase or sell
accumulation units as of a later Valuation Date.
In no case will accumulation units be purchased or
sold before the Register Date.
The Guaranteed The Guaranteed Principal Account is part of our
Principal Account general account. It has no connection with, and does
not depend on, the investment performance of the
Separate Account. We have a right to establish
additional guaranteed accounts from time to time.
Values Of This Policy
Account Value Of Policy The account value of this policy on any date is the
variable account value of this policy plus the fixed
account value of this policy, both determined as of
that date.
Variable Account Value The variable account value of this policy reflects:
Of Policy
. The net premiums for this policy allocated to
the Separate Account;
. Any amounts for this policy transferred into
the Separate Account from the Guaranteed
Principal Account;
. Any amounts transferred or withdrawn from the
Separate Account for this policy;
. Any monthly charges for this policy deducted
from the Separate Account; and
. The net investment experience of the Separate
Account.
Net premiums, transfers, withdrawals, and monthly
deductions are all reflected in the variable account
value through the purchase or sale of accumulation
units. The net investment experience is reflected in
the value of the accumulation units. Net premiums are
discussed in Part 2, and monthly deductions are
discussed in this Part. Transfers and withdrawals are
discussed in Part 4.
The value of the accumulation units credited to this
policy 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 variable account value of this policy on any date
is the total of the values of the accumulation units
credited to this policy in each division of the
Separate Account.
Fixed Account Value Of The fixed account value of this policy is the
Policy accumulation at interest of:
. The net premiums for this policy allocated to
the Guaranteed Principal Account; plus
. Any amounts for this policy transferred into
the Guaranteed Principal Account from the
Separate Account; less
. Any amounts for this policy transferred or
withdrawn from the Guaranteed Principal
Account; and less
. Any monthly charges for this policy deducted
from the Guaranteed Principal Account.
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Interest On Fixed The fixed account value of this policy earns interest
Account Value at an effective annual rate defined below. Interest is
credited daily to and including the date the fixed
account value is determined.
For any fixed account value equal to the amount of any
policy loan, the interest rate we use will be the
daily equivalent of the greater of:
. The annual loan interest rate in effect on the
previous Monthly Calculation Date less not
more than 2%; and
. The minimum annual interest rate for the
Guaranteed Principal Account shown in the
Basis Of Computation section on the Schedule
Page.
For any fixed account value in excess of the amount of
any policy loan, the interest rate we use will be the
daily equivalent of the greater of:
. The minimum annual interest rate for the
Guaranteed Principal Account; and
. An alternate annual rate established by us.
Monthly Policy Charges
Monthly Charges Charges will be deducted monthly from the account
value of this policy. The charges are due on each
Monthly Calculation Date.
Monthly charges for this policy will be taken from the
divisions of the Separate Account and from the
Guaranteed Principal Account in proportion to the
values of this policy in each of those divisions and
in the Guaranteed Principal Account (excluding
outstanding policy loans). Deductions will be made,
and values will be determined, on the Valuation Date
that is on, or next follows, the latest of:
. The Register Date;
. The date the deduction is due; and
. The date we receive the amount of premium
needed to prevent termination, as discussed
in the Grace Period And Termination
provision in this Part.
We assess three types of monthly charges: an
administrative charge, a mortality charge, and a rider
charge; each is discussed below.
Administrative Charge The amount of the monthly administrative charge will
be determined by us. However, it will not be greater
than $9.00 per month.
Mortality Charge The maximum monthly mortality charges for each $1,000
of insurance that requires a charge are shown in the
Table(s) Of Maximum Monthly Mortality Charges. Maximum
charges for each amount of the Selected Face Amount
issued in a distinct underwriting classification will
be shown in a separate table. If there is more than
one table, the table that applies to the most recent
increase will be used up to the amount to which that
table applies. If the amount of insurance that
requires a charge is increased due to the Minimum Face
Amount (see Part 5), the table that applies to the
most recent increase will also be used for such
increase. For any insurance in excess of the amount
applicable to the most recent table, the next most
recent table(s), up to the amount of each table, will
be used.
We have the right to charge less than the maximum
charges shown in the table(s). Any change in these
charges will apply to all individuals who are in the
same class as the Insured. These charges may differ
depending on whether or not this policy is in a
tax-qualified pension or profit sharing plan.
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The amount of insurance that requires a charge is
determined as follows. This computation is made as of
the date the charge is due. All amounts are computed
as of that date.
(a) We compute the account value of this policy after
all additions and deductions other than the
deduction of the monthly charges.
(b) We determine the amount of benefit under the Death
Benefit Option in effect (as discussed in the
Death Benefit Options provision in Part 5). The
Minimum Face Amount used here is based on the
account value computed in (a) above.
(c) We divide the amount of benefit determined in (b)
above by 1 plus the monthly equivalent (expressed
as a decimal fraction) of the minimum annual
interest rate for the Guaranteed Principal Account
shown in the Basis Of Computation section on the
Schedule Page.
(d) We subtract the account value, as computed in (a)
above, from the amount determined in (c) above.
The result is the amount of insurance that
requires a charge.
Rider Charge The monthly charges for any rider are shown in a table
of charges for that rider.
Grace Period And If the account value less any policy debt is not
Termination enough to cover the monthly charges due on a Monthly
Calculation Date, we allow a grace period for payment
of the amount of premium (not less than $10) needed to
increase the account value so that the monthly
deduction can be made. This grace period begins on the
date the deduction is due. It ends 61 days after that
date or, if later, 30 days after we have mailed a
written notice to the Owner at the last known address
shown on our records. This notice will state the
amount needed to increase the account value to cover
the charges.
During the grace period, the policy will continue in
force. The policy will terminate if we do not receive
payment of the required amount by the end of the grace
period.
Part 4. Life Benefits
A life insurance policy provides a death benefit if
the Insured dies while the policy is in force. Rights
and benefits are also available before the Insured
dies. These "Life Benefits" are discussed in this
Part.
Policy Ownership
Rights Of Owner While the Insured is living, the Owner may exercise
all rights given by this policy or allowed by us.
These rights include assigning this policy, changing
Beneficiaries, changing ownership, enjoying all policy
benefits, and exercising all policy options.
The consent of any Irrevocable Beneficiary is needed
to exercise any policy right except the rights to:
. Change the frequency of planned premiums;
. Change the premium payment plan; and
. Reinstate this policy after termination.
Assigning This Policy This policy may be assigned. But for any assignment to
be binding on us, we must receive a signed copy of it
at our Principal Administrative Office. We will not be
responsible for the validity of any assignment.
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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. An
assignment is subject to any policy debt. See the
Borrowing On This Policy section in this Part for a
discussion of policy debt.
Changing The Owner The Owner or any Beneficiary may be changed while the
Or Beneficiary Insured 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
Principal Administrative Office. The change will take
effect as of the date the request is signed, even if
the Insured dies before we receive it. Each change
will be subject to any payment we made or other action
we took before receiving the request.
Transfers Of Values Transfers of values are subject to the limitations
stated on the Schedule Page. Subject to those
limitations, transfers of values may be made upon
direction, satisfactory to us, received at our
Principal Administrative Office. These transfers are:
. Transfers of values between divisions of the
Separate Account. These transfers will be made
by selling all or part of the accumulation
units in a division and applying the value of
the sold units to purchase units in any other
division.
. Transfers of values from one or more divisions
of the Separate Account to the Guaranteed
Principal Account. These transfers will be
made by selling all or part of the
accumulation units in a division and applying
the value of the sold units to the Guaranteed
Principal Account.
. Transfers of values from the Guaranteed
Principal Account to one or more divisions of
the Separate Account. These transfers will be
made by applying all or part of the value in
the Guaranteed Principal Account (excluding
any outstanding policy loans) to purchase
accumulation units in one or more divisions of
the Separate Account.
Transfers will be made as of the Valuation Date
specified in the Purchase And Sale Of Accumulation
Units provision in Part 3. All transfers made on one
Valuation Date will be considered one transfer.
Surrendering This Policy And Making Withdrawals
Right To Surrender This policy may be surrendered for its cash surrender
value at any time while the Insured is living.
Surrender will be effective on the date we receive
this policy and a written surrender request,
satisfactory to us, at our Principal Administrative
Office. A later effective date may be elected in the
surrender request.
Cash Surrender Value The cash surrender value is equal to the account value
less any surrender charges that apply and less any
policy debt. The surrender charge for this policy is
the sum of the surrender charges for the original
Selected Face Amount and all increases in Selected
Face Amount. These charges are shown in the Table(s)
Of Surrender Charges. There are separate tables of
surrender charges for any increase(s) in the Selected
Face Amount.
Making Withdrawals After the first Policy Year, withdrawals may be made
at any time while the Insured is living. The request
for a withdrawal must be written and satisfactory to
us. It must state the Account (or Accounts) from which
the withdrawal will be made. For any withdrawal from
the Separate Account, the request must also state the
division (or divisions) from which the withdrawal will
be made.
The amount of a withdrawal includes the withdrawal
charge that applies, as described below. A withdrawal
from the Guaranteed Principal Account will be made by
reducing the value in that Account to provide the
amount of the withdrawal. A withdrawal from a division
of the Separate Account will be made by selling a
sufficient number of accumulation units to provide the
amount of the withdrawal.
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The Selected Face Amount will be reduced by the amount
of withdrawal if:
. Death Benefit Option 1 as described in the
Death Benefit Options provision in Part 5 is
in effect; and
. We have not received evidence of insurability
satisfactory to us.
If the Selected Face Amount is reduced due to a
withdrawal, we will send an amended Schedule Page
reflecting the change. We will also send any amended
Tables pages that may be required. However, the
surrender charges for this policy will not be reduced
as a result of this reduction in the Selected Face
Amount. We have the right to require that the policy
be sent to us so that the changes can be made.
Withdrawals will be subject to the limits set forth
below.
. The minimum amount of a withdrawal (including
the withdrawal charge) is $100.
. A withdrawal charge of 2% of the withdrawal,
but not more than $25, will be deducted from
the total amount of the withdrawal on any
date. The charges shown in the Table Of
Surrender Charges do not apply to any
withdrawal.
. The maximum amount of a withdrawal (including
the withdrawal charge) on any date is 75% of
the cash surrender value of this policy on
that date.
Example: Death Benefit Option 1 is in effect and you
make a withdrawal without furnishing us
satisfactory evidence of insurability. Prior
to your withdrawal, your policy has a
Selected Face Amount of $50,000 and an
account value of $20,000. If you make a
withdrawal of $5,000, the account value will
be reduced to $15,000 and the Selected Face
Amount will be reduced to $45,000. Of the
$5,000 withdrawn, $25 is the withdrawal
charge and $4,975 is paid to you.
We reserve the right to prohibit withdrawals that
would cause the Selected Face Amount to be reduced to
an amount less than $25,000.
How We Pay Any withdrawal made will be paid in one sum. However,
if the entire policy is surrendered, the cash
surrender value may be paid in one sum, or it may be
applied under any payment option elected. See Part 6.
We may delay paying any surrender or withdrawal value
from the Guaranteed Principal Account for up to six
months from the date the request is received at our
Principal Administrative Office.
We may delay paying any surrender or withdrawal value
from the Separate Account during any period that:
. The New York Stock Exchange (or its successor)
is closed, except for normal weekend or
holiday closings, or trading is restricted; or
. The Securities and Exchange Commission (or its
successor) determines that a state of
emergency exists; or
. The Securities and Exchange Commission (or its
successor) permits us to delay payment for the
protection of our policy owners.
If payment is delayed for 30 days or more, interest
will be added. The amount of interest will be the same
as would be paid for the same period of time under
Option D of the payment options. See Part 6 for a
description of Option D.
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Borrowing On This Policy
Right To Make Loans After the first Policy Year, loans can be made on this
policy at any time while the Insured is living.
However, the policy must be properly assigned to us
before the loan is made. No other collateral is
needed. We refer to all outstanding loans plus accrued
interest as "policy debt."
Effect Of Loan A loan is attributed to each division of the Separate
Account and to the Guaranteed Principal Account in
proportion to the values of this policy in each of
those divisions and in the Guaranteed Principal
Account (excluding any outstanding policy loans) at
the time of the loan. The amount of the loan
attributed to each division of the Separate Account
will be transferred to the Guaranteed Principal
Account. Any such transfer is made by selling
accumulation units in the division and applying the
value of those units to the Guaranteed Principal
Account on the date the loan is made. Any interest
added to the loan will be treated as a new loan under
this provision.
The amount equal to any outstanding policy loans will
be held in the Guaranteed Principal Account, and will
earn interest as described in the Interest On Fixed
Account Value provision in Part 3.
Maximum Loan The maximum amount that can be borrowed on any date is
Available determined as follows.
(1) We subtract from the account value any surrender
charges that would apply if the policy were
surrendered on that date.
(2) We calculate 90% of the amount determined in (1)
above.
(3) We subtract any policy debt from the amount
determined in (2) above. The result is the maximum
amount that can be borrowed.
Interest On Loans Interest is not due in advance. This interest accrues
(builds up) each day and becomes part of the policy
debt as it accrues.
Interest is due on each Policy Anniversary Date. If
interest is not paid when due, it will be added to the
loan and will bear interest at the rate payable on the
loan.
Example: You have a loan of $1,000. The interest due
on the Policy Anniversary Date is $60. If it
is not paid on that date, we will add it to
the existing loan. The loan will then be
$1,060 and interest will be charged on this
amount from then on.
The type of interest rate on any loan is elected at
the time of application for this policy and cannot be
changed. The two types of interest rates available
are:
(1) A fixed loan rate of 6% per year; and
(2) An adjustable loan rate. Such rate is an annual
rate set by us. This rate may change from year to
year. Each year we will set the rate that will
apply for the next Policy Year.
Each year there is a maximum limit on the interest
rate we can set. That limit is based on a
Published Monthly Average. That Average will be:
B960-9400
<PAGE>
. The Monthly Average Corporates yield shown in
Moody's Corporate Bond Yield Averages, as
published by Moody's Investors Service, Inc.,
or any successor to that service; or
. If that Monthly Average is no longer
published, a substantially similar average,
established by regulation issued by the
insurance supervisory official of the state
where this policy was delivered.
The maximum limit is the published Monthly Average
for the calendar month ending two months before the
Policy Year begins, or the interest rate used in
computing the policy value for that year plus 1%,
whichever is higher.
Example: A Policy Year begins on June 10, 19X6. The
calendar month ending two months before
that date is March. The loan interest rate
for the Policy Year beginning June 10,
19X6, will not be greater than the
Published Monthly Average for March, 19X6.
However, if the rate (plus 1%) used to
compute the policy value for that Policy
Year is higher than the Average, then the
policy value rate (plus 1%) will be the
maximum loan interest rate for that Policy
Year.
If the maximum limit for a Policy Year is at least
1/2% higher than the rate in effect for the
previous year, we may increase the rate to no more
than that limit.
If the maximum limit for a Policy Year is at least
1/2% lower than the rate in effect for the previous
year, we must decrease the rate to not more than
that limit.
Policy Debt Limit Policy debt (which includes accrued interest) may not
equal or exceed the account value less any surrender
charges that apply. If this limit is reached, we can
terminate this policy. To terminate for this reason,
we must mail written notice to the Owner and any
assignee shown on our records at their last known
addresses. This notice will state an amount that will
bring the policy debt back within the limit. If we do
not receive payment within 31 days after the date we
mailed the notice, the account value will be reduced
by any surrender charges that apply and this policy
will terminate at the end of those 31 days.
Repayment Of Policy All or part of any policy debt may be repaid at any
Debt time while the Insured is living. However, policy debt
can only be repaid while this policy is in force.
Any repayment of policy debt will first be allocated
to the Guaranteed Principal Account up to the amount
of the policy loan that was attributed to the
Guaranteed Principal Account. Any repayment in excess
of that amount will be allocated among the Guaranteed
Principal Account and the divisions of the Separate
Account according to the net premium allocation then
in effect.
Other Borrowing Rules We may delay the granting of any loan attributable to
the Guaranteed Principal Account for up to six months.
We may delay the granting of any loan attributable to
the Separate Account during any period that:
. The New York Stock Exchange (or its successor)
is closed, except for normal weekend or
holiday closings, or trading is restricted; or
. The Securities and Exchange Commission (or its
successor) determines that a state of
emergency exists; or
. The Securities and Exchange Commission (or its
successor) permits us to delay payment for the
protection of our policy owners.
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Reinstating This Policy
When Reinstatement After this policy has terminated, it may be
Can Be Made reinstated - that is, put back in force. However, the
policy cannot be reinstated if it has been surrendered
for its cash surrender value. Reinstatement must be
made within 5 years after the date of termination and
during the Insured's lifetime.
Requirements To Evidence of insurability satisfactory to us is
Reinstate required to reinstate. A premium is also required as a
cost to reinstate. That premium must be no less than
the amount necessary to produce an account value equal
to three times the monthly charges due on the Monthly
Calculation Date that is on, or next follows, the date
of reinstatement.
Right To Change The Selected Face Amount
Increases In The While this policy is in force, the Selected Face
Selected Face Amount Amount may be increased upon written application.
Except for any increase elected under an insurability
protection type of rider, evidence of insurability,
satisfactory to us, is required for each increase. Any
increase must be for at least $15,000, unless we adopt
rules that establish a lower minimum. When evidence of
insurability is required for an increase, a charge of
$75 is deducted from the account value of this policy
as of the effective date of the increase; this charge
is deducted from each division of the Separate Account
and the Guaranteed Principal Account in proportion to
the values of this policy in each of those divisions
and in the Guaranteed Principal Account (excluding any
outstanding policy loans) on that date.
Any increase elected under any insurability protection
type of rider will be effective as directed in that
rider. Any other increase in the Selected Face Amount
will be effective on the Monthly Calculation Date that
is on, or next follows, the date we approve the
application.
Mortality charges for each increase elected are
determined and deducted from the account value of this
policy in accordance with the Monthly Charges
provision. These charges will be deducted from the
account value beginning on the effective date of the
increase. Additional surrender charges will apply for
each increase elected.
The Owner has a "right to return" any increase in
Selected Face Amount as set forth for a new policy on
the cover of this policy. However, this right applies
only to the increase and to any premiums paid on or
after the date of the application for that increase.
No increase in the Selected Face Amount can be elected
after the Policy Anniversary Date nearest the
Insured's 80th birthday.
Decreases In The After the first Policy Year, the Selected Face Amount
Selected Face Amount may be decreased by the Owner's written request.
However, the decrease must not reduce the amount of
death benefit provided by the Death Benefit Option in
effect on the date of the decrease to an amount less
than $50,000.
Any decrease is effective on the Monthly Calculation
Date on or next following the date we receive the
written request. If a decrease follows one or more
increases, the decrease is taken from the most recent
increase(s).
Any surrender charge due upon a decrease in the
Selected Face Amount is deducted from the account
value on the effective date of the decrease. The
charge is deducted from each division of the Separate
Account and the Guaranteed Principal Account in
proportion to the values of this policy in each of
those divisions and in the Guaranteed Principal
Account (excluding any outstanding policy loans) on
that date.
Evidence Of Changes If the Selected Face Amount is changed, we will send
an amended Schedule Page reflecting that change. We
will also send any revised or additional Tables pages
that may be required. If the Selected Face Amount is
increased, we will also send a copy of the application
for the increase. However, we have the right to
require that the policy be sent to us so that the
change can be made.
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Reports To Owner
Annual Report Each year within 30 days after the Policy Anniversary
Date, we will mail a report to the Owner. There will
be no charge for this report. This report will show
the account value at the beginning of the previous
Policy Year and all premiums paid since that time. It
will also show the additions to, and deductions from,
the account value during that Year, and the account
value, death benefit, cash surrender value, and policy
debt as of the current Policy Anniversary Date.
This report will also include any additional
information required by applicable law or regulation.
Illustrative Report In addition to the periodic reports, we will, upon
request, send an illustrative report of projected
values to the Owner. We will not charge a fee for
providing an illustrative report on an annual basis.
However, if the Owner requests illustrative reports
more frequently, we may charge a reasonable fee, but
only for those additional reports.
Part 5. The Death Benefit
The death benefit is the amount of money we will pay
when we receive due proof at our Principal
Administrative Office that the Insured died while the
policy was in force. We discuss the death benefit in
this Part.
Amount Of Death Benefit If the Insured dies while this policy is in force, the
death benefit will be the amount of benefit provided
by the Death Benefit Option in effect on the date of
death, reduced by any policy debt outstanding on the
date of death and any unpaid monthly charges to the
date of death.
Death Benefit Options Two Death Benefit Options, described below, are
available under this policy. The Death Benefit Option
in effect for this policy is shown on the Schedule
Page. The Minimum Face Amount is discussed in the next
provision.
Death Benefit Option 1 - Under this Option, the amount
of benefit is the greater of:
. The Selected Face Amount in effect on the date
of death; and
. Minimum Face Amount in effect on the date of
death.
Death Benefit Option 2 - Under this Option, the amount
of benefit is the greater of:
. The Selected Face Amount in effect on the date
of death plus the account value on the date of
death; and
. The Minimum Face Amount in effect on the date
of death.
Minimum Face Amount In order to qualify as life insurance under the
federal tax laws in effect on the Issue Date, this
policy has a Minimum Face Amount. The Minimum Face
Amount on any date is a percentage of the account
value on that date. The percentage for each Policy
Year is shown in the Table Of Minimum Face Amount
Percentages in this policy.
Example: The Minimum Face Amount is determined on June
10, 19X6. The account value on that date is
$50,000. The last Policy Anniversary Date was
May 2, 19X6. If the applicable Minimum Face
Amount Percentage for the Policy Year
beginning May 2, 19X6, is 260%, then the
Minimum Face Amount is 260% of $50,000, or
$130,000.
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Changes In The Death After the first Policy Year, the Death Benefit Option
Benefit Option may be changed upon written request. A change in the
Death Benefit Option will be effective on the Monthly
Calculation Date that is on or next follows the date
we approve the change. For a change from Death Benefit
Option 1 to Death Benefit Option 2, the Selected Face
Amount will be decreased by the amount of the account
value on the effective date of the change. For a
change from Death Benefit Option 2 to Death Benefit
Option 1, the Selected Face Amount will be increased
by the amount of the account value on the effective
date of the change. No change in Death Benefit Option
will be allowed if the Selected Face Amount after the
change would be less than $50,000 or any lower limit
published in our manuals or bulletins.
Any change from Death Benefit Option 1 to Death
Benefit Option 2 requires a written application and
evidence of insurability satisfactory to us. In
addition, a charge of $75.00 will be deducted from the
account value on the effective date of the change.
This charge will be taken from the divisions of the
Separate Account and from the Guaranteed Principal
Account in proportion to the values in each of those
divisions and in the Guaranteed Principal Account
(excluding outstanding policy loans) on that date. No
change from Death Benefit Option 1 to Death Benefit
Option 2 will be permitted after the Policy
Anniversary Date nearest the Insured's 80th birthday.
When We Pay The death benefit will be paid within seven days after
the date we receive due proof of the Insured's death,
and any other requirements necessary for us to make
payment, at our Principal Administrative Office.
However, we may delay payment of the death benefit
during any period that:
. The New York Stock Exchange (or its successor)
is closed, except for normal weekend or holiday
closings, or trading is restricted; or
. The Securities and Exchange Commission (or its
successor) determines that a state of emergency
exists; or
. The Securities and Exchange Commission (or its
successor) permits us to delay payment for the
protection of our policy owners.
Interest On Death If the death benefit is paid in one sum, we will add
Benefit interest from the date of death to the date of
payment. 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 for a description
of Option D.
If the death benefit is applied under a payment
option, interest will be paid from the date of death
to the effective date of that option. It will be paid
in one sum to the Beneficiary living on that effective
date. The amount of interest will be the same as would
be paid under Option D for that period of time.
Suicide Exclusion Except for any increases in the Selected Face Amount,
we will pay a limited death benefit if the Insured
commits suicide, while sane or insane, within two
years from the Issue Date and while this policy is in
force. The limited death benefit will be the amount of
premiums paid for this policy, less any amounts
withdrawn and any policy debt.
For any increase in the Selected Face Amount, we will
pay a limited death benefit if the Insured commits
suicide, while sane or insane, within two years after
the effective date of the increase and while it is in
force. The limited death benefit will be the monthly
deductions made for that increase. However, if the
limited death benefit as described in the preceding
paragraph is payable, there will be no death benefit
for the increase.
Any limited death benefit will be paid in one sum to
the Beneficiary.
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Part 6. Payment Options
These are Optional Methods Of Settlement. They provide
alternate ways in which payment can be made.
Availability Of Options All or part of the death benefit or cash surrender
value may be applied under any payment option. If this
policy 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 for any
one person is less than $2,000, we may pay that amount
in one sum instead. If the payments under any option
come to less than $20 each, we have the right to make
payments at less frequent intervals.
Description Of Options Our payment options are described below. Any other
payment option agreed to by us may be elected. The
payment options are described in terms of monthly
payments. Annual, semiannual, or quarterly payments
may be requested instead. The amount of these payments
will be determined in a way that is consistent with
monthly payments and will be quoted on request.
If the Schedule Page shows that this policy was issued
on a unisex rate basis, the female rates shown in the
Option C, E, and F Tables apply in all cases. The male
rates in those tables do not apply to unisex rate
policies.
Option A Fixed Amount Payment 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 2.5% per year. Payments continue
until the amount we hold runs out. The last
payment will be for the balance only.
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<PAGE>
- 20 -
Option B Fixed Time Payment 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.
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Option B Table
Minimum Monthly Payment Rates For Each $1,000 Applied
Monthly Monthly
Years Payment Years Payment
1 $84.28 16 $6.30
2 42.66 17 6.00
3 28.79 18 5.73
4 21.86 19 5.49
5 17.70 20 5.27
6 14.93 21 5.08
7 12.95 22 4.90
8 11.47 23 4.74
9 10.32 24 4.60
10 9.39 25 4.46
11 8.64 26 4.34
12 8.02 27 4.22
13 7.49 28 4.12
14 7.03 29 4.02
15 6.64 30 3.93
For quarterly payment, multiply by 2.994. For semiannual
payment, multiply by 5.969. For annual payment, multiply
by 11.865.
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B960-9400
<PAGE>
Option C Lifetime Payment Option. Equal monthly payments are based on the
life of a named person. Payments will continue for the lifetime 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.
(3) Payments guaranteed for 5, 10 or 20 years. Payments stop
at the end of the selected guaranteed period or when the named
person dies, whichever is later.
The Option C Table shows the minimum 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.
------------------------------------------------------------------
Option C Table
Minimum Monthly Payment Rates For Each $1,000 Applied
Payments Payments Guaranteed For
Age* For Life Amount 5 10 20
Male Female Only Applied Years Years Years
35 40 $3.01 $2.95 $3.00 $2.99 $2.97
40 45 3.18 3.11 3.17 3.16 3.14
45 50 3.40 3.30 3.39 3.38 3.34
50 55 3.67 3.53 3.66 3.65 3.58
55 60 4.03 3.82 4.02 3.99 3.86
60 65 4.49 4.18 4.47 4.42 4.18
65 70 5.13 4.63 5.10 4.99 4.51
70 75 6.01 5.21 5.93 5.69 4.82
75 80 7.21 5.94 7.03 6.51 5.06
80 85 8.87 6.89 8.44 7.39 5.20
85 11.18 8.09 10.19 8.21 5.26
*Age on birthday nearest 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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B960-9400 - 21 -
<PAGE>
- 22 -
Option D Interest Payment 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 be not less than the
equivalent of 2.5%% per year.
Option E Joint Lifetime Payment Option. Equal monthly payments are based on
the lives of two named persons. While both are living, one payment
will be made each month. When one dies, the same payment will
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 named 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 Option E Table shows the minimum 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.
-------------------------------------------------------------
Option E Table
Minimum Monthly Payment Rates For Each $1,000 Applied
Payments For Two Lives Only
M50 M55 M60 M65 M70 M75
Age* F55 F60 F65 F70 F75 F80
M F
50 55 $3.25 $3.35 $3.45 $3.52 $3.57 $3.61
55 60 3.35 3.50 3.64 3.75 3.84 3.91
60 65 3.45 3.64 3.83 4.00 4.15 4.27
65 70 3.52 3.75 4.00 4.26 4.50 4.70
70 75 3.57 3.84 4.15 4.50 4.85 5.17
75 80 3.61 3.91 4.27 4.70 5.17 5.65
80 85 3.63 3.95 4.36 4.86 5.45 6.10
Payments Guaranteed For 10 Years
M50 M55 M60 M65 M70 M75
Age* F55 F60 F65 F70 F75 F80
M F
50 55 $3.24 $3.34 $3.44 $3.51 $3.56 $3.60
55 60 3.34 3.49 3.63 3.74 3.83 3.90
60 65 3.44 3.63 3.82 3.99 4.14 4.26
65 70 3.51 3.74 3.99 4.25 4.48 4.67
70 75 3.56 3.83 4.14 4.48 4.82 5.12
75 80 3.60 3.90 4.26 4.67 5.12 5.56
80 85 3.62 3.94 4.33 4.82 5.36 5.94
* 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.
-------------------------------------------------------------
B960-9400
<PAGE>
Option F Joint Lifetime Payment Option With Reduced Payments. Monthly
payments are based on the lives of two named persons. Payments will
continue while both are living. When one dies, payments are reduced
by one-third and will continue for the lifetime of the other.
Payments stop when both persons have died.
The Option F Table shows the minimum 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.
---------------------------------------------------------------
Option F Table
Minimum Monthly Payment Rates For Each $1,000 Applied
M50 M55 M60 M65 M70 M75
Age* F55 F60 F65 F70 F75 F80
M F
50 55 $3.51 $3.66 $3.82 $3.99 $4.17 $4.35
55 60 3.66 3.83 4.02 4.22 4.44 4.66
60 65 3.82 4.02 4.24 4.49 4.76 5.04
65 70 3.99 4.22 4.49 4.80 5.14 5.49
70 75 4.17 4.44 4.76 5.14 5.57 6.02
75 80 4.35 4.66 5.04 5.49 6.02 6.60
80 85 4.54 4.88 5.31 5.84 6.48 7.22
* 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.
---------------------------------------------------------------
Electing A To elect any option, we require that a written request, satisfactory
Payment to us, be received at our Principal Administrative Office. The Owner
Option may elect an option during the Insured's lifetime. If the death
benefit is payable in one sum when the Insured dies, the Beneficiary
may elect an option with our consent.
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 Insured, the Insured's spouse, any child of the
Insured, or any other person agreed to by us.
Effective The effective date of an option is the date the amount is applied
Date And under that option. For a death benefit, this is the date that due
Payment proof of the Insured's death is received at our Principal
Dates Administrative Office. For the cash surrender value, it is the
effective date of surrender.
The first payment is due on the effective date, except 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 of $100 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.
B960-9400 - 23 -
<PAGE>
- 24 -
Withdrawals And If provided in the payment option election, all or part of the
Changes unpaid balance under Options A or D may be withdrawn or
applied under any other option.
If the cash surrender value is applied under Option A or D, we
may delay payment of any withdrawal for up to six months.
Interest at the rate in effect for Option D during this period
will be paid on the amount withdrawn.
Income To the extent permitted by law, each option payment and any
Protection 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 Insured dies. This consent must be
received at our Principal Administrative Office.
Part 7. Notes On Our Computations
This Part covers some technical points about this policy.
Net Investment For each division of the Separate Account, the Net Investment
Factor 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 not more than .00002455 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 principles and
applicable laws, rules and regulations. This determination
shall be conclusive upon the Owner, the Insured, any
Beneficiary, any assignee, and any other person under this
policy.
Accumulation The value of an accumulation unit in each division was set at
Unit Value $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 that includes that date and the accumulation unit value
on the preceding Valuation Date.
Adjustments Of We have the right to split or consolidate the number of
Units And Values accumulation units credited to the policy, 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 policy, or on the Owner, Insured, any
Beneficiary, any assignee or other person, or on us.
Basis Of The Basis Of Computation is the mortality table and interest
Computation rate we use to determine:
. The minimum cash surrender values;
. The maximum monthly mortality charges;
. The minimum annual interest earned on the fixed
account value of the policy; and
. The minimum payments under Payment Options C, E, and
F.
B960-9400
<PAGE>
The mortality table for the minimum cash surrender values and
for the maximum monthly mortality charges is shown in each
Table Of Maximum Monthly Mortality Charges. The minimum annual
rate used to credit interest on the fixed account value of the
policy is shown on the Schedule Page. The mortality table
specified applies to amounts in a standard underwriting
classification. Appropriate modifications are made to this
table for any amount that is not in a standard underwriting
classification.
In computing the minimum payments under Payment Options C, E,
and F, we use mortality rates from the 1983 Table "a" with
Projection G for 30 years and with female rates set back five
years. The interest used is at an annual rate of 2.5%.
Method Of When required by the state where this policy was delivered, we
Computing Values filed a detailed statement of the method we use to compute the
policy benefits and values. These benefits and values are not
less than those required by the laws of that state.
B960-9400 - 25 -
<PAGE>
WHERE TO FIND IT
Page No.
The Schedule Page ....................................................... 1
Table Of Maximum Monthly Mortality Charges .............................. 2
Table Of Minimum Face Amount Percentages ................................ 3
Table Of Surrender Charges .............................................. 4
Part 1. - The Basics Of This Policy .......................................... 5
The Parties Involved - Owner, Insured,
Beneficiary, Irrevocable Beneficiary ................................. 5
Dates - Policy Date, Policy Anniversary Date,
Policy Year, Issue Date, Monthly
Calculation Date, Valuation Date, Valuation
Period, Valuation Time, Register Date ................................ 5
Policy A Legal Contract ................................................. 6
Policy Is Not Participating ............................................. 6
Representations And Contestability ...................................... 6
Misstatement Of Age Or Sex .............................................. 6
Currency ................................................................ 6
Meaning Of In Force ..................................................... 6
Principal Administrative Office ......................................... 6
Part 2. - Premium Payments ................................................... 7
The First Premium ....................................................... 7
Planned Premiums ........................................................ 7
Premium Flexibility And Premium Notices ................................. 7
Where To Pay Premiums ................................................... 7
Right To Refund Premiums ................................................ 7
Net Premium ............................................................. 7
Allocation Of Net Premiums .............................................. 7
Part 3. - Accounts, Values, and Charges ...................................... 8
The Separate Account And The Guaranteed Principal Account ................. 8
The Separate Account .................................................... 8
Changes In The Separate Account ......................................... 8
Accumulation Units ...................................................... 8
Purchase And Sale Of Accumulation Units ................................. 8
The Guaranteed Principal Account ........................................ 9
Values Of This Policy ..................................................... 9
Account Value Of Policy ................................................. 9
Variable Account Value Of Policy ........................................ 9
Fixed Account Value Of Policy ........................................... 9
Interest On Fixed Account Value ........................................ 10
Monthly Policy Charges ................................................... 10
Monthly Charges ........................................................ 10
Administrative Charge .................................................. 10
Mortality Charge ....................................................... 10
Rider Charge ........................................................... 11
Grace Period And Termination ........................................... 11
Part 4. - Life Benefits ..................................................... 11
Policy Ownership ......................................................... 11
Rights Of Owner ........................................................ 11
Assigning This Policy .................................................. 11
Changing The Owner Or Beneficiary ...................................... 12
Transfers Of Values .................................................... 12
Surrendering This Policy And Making Withdrawals .......................... 12
Right To Surrender ..................................................... 12
Cash Surrender Value ................................................... 12
Making Withdrawals ..................................................... 12
How We Pay ............................................................. 13
Borrowing On This Policy ................................................. 14
Right To Make Loans .................................................... 14
Effect Of Loan ......................................................... 14
Maximum Loan Available ................................................. 14
Interest On Loans ...................................................... 14
Policy Debt Limit ...................................................... 15
Repayment Of Policy Debt ............................................... 15
Other Borrowing Rules .................................................. 15
Reinstating This Policy .................................................. 16
When Reinstatement Can Be Made ......................................... 16
Requirements To Reinstate .............................................. 16
Right To Change The Selected Face Amount ................................. 16
Increases In The Selected Face Amount .................................. 16
Decreases In The Selected Face Amount .................................. 16
Evidence Of Changes .................................................... 16
Reports To Owner ......................................................... 17
Annual Report .......................................................... 17
Illustrative Report .................................................... 17
Part 5. - The Death Benefit ................................................. 17
Amount Of Death Benefit ................................................ 17
Death Benefit Options .................................................. 17
Minimum Face Amount .................................................... 17
Changes In The Death Benefit Option .................................... 18
When We Pay ............................................................ 18
Interest On Death Benefit .............................................. 18
Suicide Exclusion ...................................................... 18
Part 6. - Payment Options ................................................... 19
Availability Of Options ................................................ 19
Minimum Amounts ........................................................ 19
Description Of Options ................................................. 19
Electing A Payment Option .............................................. 23
Effective Date And Payment Dates ....................................... 23
Withdrawals And Changes ................................................ 24
Income Protection ...................................................... 24
Part 7. - Notes On Our Computations ......................................... 24
Net Investment Factor .................................................. 24
Accumulation Unit Value ................................................ 24
Adjustments Of Units And Values ........................................ 24
Basis Of Computation ................................................... 24
Method Of Computing Values ............................................. 25
Any riders and endorsements, and a copy of the application for the policy,
follow page 25.
B960-9400
<PAGE>
[LETTERHEAD OF MML BAY STATE LIFE INSURANCE COMPANY APPEARS HERE]
Flexible Premium
Variable Whole Life Insurance Policy
This Policy provides that:
Insurance is payable when the Insured dies.
Within specified limits, flexible premiums may be paid during the Insured's
lifetime. No dividends will be paid.
B960-9400
<PAGE>
Exhibit 99.B
[MASSMUTUAL LETTERHEAD APPEARS HERE]
April 21, 1998
MML Bay State Life Insurance Company
1295 State Street
Springfield, MA 01111
RE: Post-Effective Amendment No. 3 to Registration Statement No. 33-82060
filed on Form S-6
Ladies and Gentlemen:
This opinion is furnished in connection with the filing of Post-Effective
Amendment No. 3 to Registration Statement No. 33-82060 under the Securities Act
of 1933 for MML Bay State Life Insurance Company's ("MML Bay State") Flexible
Premium Variable Whole Life Insurance Policies (the "Policies"). MML Bay State
Variable Life Separate Account I issues the Policies.
As counsel for MML Bay State, I provide legal advice to MML Bay State in
connection with the operation of its variable products. In such role I am
familiar with the registration statement for the Policies. 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. MML Bay State is a valid and subsisting corporation, organized and operated
under the laws of the State of Missouri and is subject to regulation by the
Connecticut Commissioner of Insurance.
2. MML Bay State Variable Life Separate Account I is a separate account
validly established and maintained by MML Bay State in accordance with
Connecticut law.
3. All of the prescribed corporate procedures for the issuance of the Policies
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/ Richard M. Howe
Richard M. Howe
Second Vice President & Assoc. General Counsel
Massachusetts Mutual Life Insurance Company
<PAGE>
Exhibit 99.E
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
MML Bay State Life Insurance Company
We consent to the inclusion in this Post-Effective Amendment No. 3 to the
Registration Statement of MML Bay State Variable Life Separate Account I
(Variable Life Select segment) on Form S-6 (Registration No. 33-82060), of our
report dated February 3, 1998 on our audits of MML Bay State Variable Life
Separate Account I (Variable Life Select segment), and of our report dated
February 6, 1998 on our audits of the statutory financial statements of MML Bay
State 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 "Experts."
Coopers & Lybrand L.L.P.
Springfield, Massachusetts
April 24, 1998
<PAGE>
Exhibit 99.F
[MASSMUTUAL LETTERHEAD APPEARS HERE]
April 21, 1998
MML Bay State Life Insurance Company
1295 State Street
Springfield, MA 01111
Ladies and Gentlemen:
This opinion is furnished in connection with Post-Effective Amendment No. 3 to
Registration Statement No. 33-82060 for MML Bay State Life Insurance Company's
Flexible Premium Variable Whole Life Insurance Policies (the "Policies") under
the Securities Act of 1933. The prospectus included in the post-effective
amendment describes the Policies. I am familiar with the forms of the Policies
and the prospectus.
In my opinion, the illustrations of benefits under the Policies included in the
section entitled "Illustrations" in Appendix A of the prospectus, based on the
assumptions stated in the illustrations, are consistent with the provisions of
the respective forms of the Policies. The age selected in the illustrations is
representative of the manner in which the Policies operate.
I hereby consent to the use of this opinion as an exhibit to Post-Effective
Amendment No. 3 to Registration Statement No. 33-82060, and to the reference of
my name under the heading "Experts" in the prospectus.
Sincerely,
/s/ Craig Waddington
Craig Waddington, FSA, MAAA
Vice President and Actuary
