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Registration No. 33-89798
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Post-Effective Amendment No. 2
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: Massachusetts Mutual Variable Life Separate Account I
B. Name of Depositor: Massachusetts Mutual 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.
X
- ------ on May 1, 1997 pursuant to paragraph (b) of Rule 485.
- ------ 60 days after filing pursuant to paragraph (a) of Rule 485.
- ------ on (date) pursuant to paragraph (a) of Rule 485.
- --------------------
STATEMENT PURSUANT TO RULE 24F-2
The Registrant has registered an indefinite number or amount of its variable
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, 1996 was filed on February 28, 1997.
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CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
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Item No. of
Form N-8B-2 Caption
- ----------- -------
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1 Cover Page; Glossary; The Separate Account
2 Cover Page; MassMutual and the Separate Account
3 Investment Advisors and the Portfolio Managers
4 Sales and Other Agreements
5 MassMutual and the Separate Account
6 MassMutual 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 MassMutual and the Separate Account
12 MassMutual and the Separate Account; Sales and Other Agreements
13 MassMutual and the Separate Account; Charges and Deductions
14 Summary of the Policy; MassMutual and the Separate Account;
Detailed Information About the Policy; The Investment Advisors and
Portfolio Managers; MassMutual 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; MassMutual and the Separate Account;
Detailed Information About the Policy
17 Summary of the Policy; Account Value and Cash Surrender Value;
Withdrawal Fee
18 MassMutual and the Separate Account
19 Service Agreement; Records and Reports
</TABLE>
2
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CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
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Item No. of
Form N-8B-2 Caption
- ----------- -------
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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; Error of Age
or Sex; Assignment; Beneficiary; Limits on Our Right; MassMutual
and the Separate Account
25 Detailed Information About the Policy
26 Not Applicable
27 Detailed Information About the Policy
28 Directors and Executive Officers of MassMutual
29 MassMutual 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
</TABLE>
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CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
<TABLE>
<CAPTION>
Item No. of
Form N-8B-2 Caption
- ----------- -------
<S> <C>
41 Sales and Other Agreements
42 Not Applicable
43 Sales and Other Agreements
44 MassMutual and the Separate Account; Charges for Federal Taxes;
45 Not Applicable
46 MassMutual and the Separate Account
47 MassMutual and the Separate Account
48 MassMutual and the Separate Account
49 Not Applicable
50 MassMutual and the Separate Account
51 Cover Page; Detailed Information About the Policy
52 MassMutual 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
</TABLE>
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FLEXIBLE PREMIUM VARIABLE WHOLE LIFE INSURANCE POLICIES*
ISSUED BY
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
This Prospectus describes a flexible premium variable whole life insurance
policy (the "Policy") offered by Massachusetts Mutual Life Insurance Company
("MassMutual"). 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 Massachusetts Mutual 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 Capital Appreciation 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 MassMutual's Home 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, 1997.
*Title may vary in some jurisdictions
<PAGE>
Table Of Contents
<TABLE>
<S> <C>
Definition Of Terms............................................................. 5
I. SUMMARY OF THE POLICY...................................................... 7
The Policy................................................................. 7
The Separate Account and the Guaranteed Principal Account.................. 7
Availability of the Policy................................................. 7
The Death Benefit.......................................................... 7
Flexibility to Adjust the Amount of Death Benefit.......................... 7
Premium Features........................................................... 8
Transfers.................................................................. 8
Charges and Deductions..................................................... 8
- Deductions from Premiums............................................... 8
- Monthly Charges........................................................ 8
- Surrender Charge....................................................... 8
- Administrative Surrender Charge...................................... 8
- Sales Load Surrender Charge.......................................... 8
- Mortality and Expense Risk Charge...................................... 9
- Other Charges.......................................................... 9
Policy Loan Privilege...................................................... 9
Surrender of the Policy.................................................... 9
Withdrawal of Cash Surrender Value......................................... 9
II. INFORMATION ABOUT MASSMUTUAL AND THE SEPARATE ACCOUNT...................... 9
MassMutual................................................................. 9
OppenheimerFunds, Inc...................................................... 9
The Separate Account.......................................................10
MML Trust and Oppenheimer Trust............................................10
- MML Equity Fund........................................................11
- MML Money Market Fund..................................................11
- MML Managed Bond Fund..................................................11
- MML Blend Fund.........................................................11
- Oppenheimer Capital Appreciation Fund..................................11
- Oppenheimer Global Securities Fund.....................................11
- Oppenheimer Growth Fund................................................11
- Oppenheimer Strategic Bond Fund........................................11
The Investment Advisers and Portfolio Managers.............................11
- Rates of Return........................................................12
- Tables I through III...................................................13
- Table IV...............................................................14
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........................................18
- 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.................................................19
- Premium Limitations....................................................20
- Allocation of Net Premium Payments.....................................20
Transfers..................................................................20
</TABLE>
2
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<TABLE>
<S> <C>
Dollar Cost Averaging.......................................................20
Policy Lapse and Reinstatement.............................................20
- Policy Lapse...........................................................20
- Reinstatement Option...................................................20
Charges and Deductions.....................................................21
Deductions from Premiums...................................................21
- Sales Charge...........................................................21
- Premium Tax Charge.....................................................21
Monthly Charges............................................................21
- Administrative Charge..................................................21
- Mortality Charge.......................................................21
- Rider Charge...........................................................21
Daily Charges Against the Separate Account.................................21
- Mortality and Expense Risk Charge......................................21
- 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.................22
Other Charges..............................................................22
- Withdrawal Fee.........................................................22
- Charge for Increase in Selected Face Amount............................22
- Charge for Change from Option 1 to Option 2............................22
Account Value and Cash Surrender Value.....................................23
- Account Value..........................................................23
- Investment Return......................................................23
- Cash Surrender Value...................................................23
- Withdrawals............................................................23
Policy Loan Privilege......................................................23
- General................................................................23
- Source of Loan.........................................................23
- Interest Charged.......................................................23
- Repayment..............................................................23
- Interest on Loaned Value...............................................24
- Effect of Loan.........................................................24
Free Look Provision........................................................24
The Guaranteed Principal Account...........................................24
Federal Income Tax Considerations..........................................24
- MassMutual's Tax Status................................................25
- Policy Proceeds, Premiums and Loans....................................25
- Modified Endowment Contracts...........................................26
- Qualified Plans........................................................26
- Diversification Standards..............................................26
Your Voting Rights.........................................................27
Reservation of Rights......................................................27
Additional Provisions of the Policy........................................27
- Additional Benefits You Can Get by Rider...............................27
- Disability Benefit Rider.............................................27
- Accidental Death Benefit Rider.......................................27
- Insurability Protection Rider........................................27
- Death Benefit Guarantee Rider........................................27
- Accelerated Death Benefit Rider......................................28
- Right to Exchange Insured Endorsement................................28
Exchange Privilege.........................................................28
Beneficiary................................................................28
Assignment.................................................................28
Limits on Our Right to Challenge the Policy................................28
Error of Age or Sex........................................................28
Suicide....................................................................28
When We Pay Proceeds.......................................................28
</TABLE>
3
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<TABLE>
<S> <C>
Payment Options............................................................29
- Fixed Account Payment Option...........................................29
- Fixed Time Payment Option..............................................29
- Interest on Payment Option.............................................29
- Lifetime Payment Option................................................29
- Joint Lifetime Payment Option..........................................29
- Joint Lifetime Payment Option with Reduced Payments....................29
- Withdrawal Rights Under Payment Option.................................29
Records and Reports........................................................29
Sales and Other Agreements.................................................29
Commission Schedule........................................................30
Bonding Arrangement........................................................30
Directors and Executive Vice Presidents of MassMutual......................30
Legal Proceedings..........................................................31
Experts....................................................................31
Financial Statements.......................................................31
Appendix A
Illustrations of Death Benefits,
Cash Surrender Values, Account Values
and Accumulated Premiums.................................................57
</TABLE>
4
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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.
Home Office: The Home Office of MassMutual which is located at 1295 State
Street, Springfield, Massachusetts 01111-0001.
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
MassMutual 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 MassMutual
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.
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 "Massachusetts Mutual
Variable Life Separate Account I" established by MassMutual under the laws of
Massachusetts 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.
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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 MassMutual.
You or Yours: Refers to the Policyowner.
6
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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 Capital Appreciation
MML Money Market Fund Fund
MML Managed Bond Fund Oppenheimer Growth Fund
MML Blend Fund Oppenheimer Global Securities Fund
Oppenheimer Strategic Bond 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, MassMutual
will require satisfactory evidence of insurability, which may include a medical
examination.
The Death Benefit
While the Policy remains in force, MassMutual 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.
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 MassMutual. 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. (MassMutual currently does not
charge the $75 fee for this change, but it reserves the right to do so.) The
Policyowner
7
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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
MassMutual 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 increase.
Premium Features
MassMutual 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, MassMutual 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 Home 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 MassMutual for taxes imposed by
various states and local jurisdictions on MassMutual'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 4.0%. 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. MassMutual does
not expect to make a profit from this charge. MassMutual currently intends to
waive both charges after Policy Year 20; however, MassMutual reserves the right
not to waive the charge(s), or to reimpose such charge(s) after initially
waiving such charges. During 1996, the aggregate amount of such deductions from
premiums was $120,327 for sales charges and $120,327 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 1996, the aggregate amount of such charges was $98,946.
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 MassMutual'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 1996, the aggregate mortality charges
were $932,194.
Surrender Charges. During the first 15 Policy Years and during the first 15
years following any increase in the Selected Face Amount, MassMutual 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 Charges. 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 MassMutual 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.
8
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Example of Surrender Charge Bands per $1,000
<TABLE>
<CAPTION>
Age 25 Age 40 Age 55
<S> <C> <C>
$6.26 $9.91 $28.49
</TABLE>
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. MassMutual 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. MassMutual 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 1996 was $16,074.
Other Charges. If the Policyowner requests and MassMutual 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.
(MassMutual 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 MassMutual
for processing associated with the withdrawal. MassMutual 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,
MassMutual 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
MASSMUTUAL AND THE
SEPARATE ACCOUNT
MassMutual
MassMutual, a mutual life insurance company, was chartered in Massachusetts in
1851. MassMutual's Home Office is located in Springfield, Massachusetts. It is
authorized to transact life, health, and accident business in all fifty states,
District of Columbia, Puerto Rico, and certain provinces of Canada.
On February 29, 1996, the merger of Connecticut Mutual Life Insurance Company
("Connecticut Mutual") with and into MassMutual was completed. The separate
existence of Connecticut Mutual has ceased. MassMutual continues its corporate
existence under its current name. As of December 31, 1996, MassMutual had
estimated statutory assets in excess of $55 billion, and estimated total assets
under management in excess of $130 billion.
OppenheimerFunds, Inc.
OppenheimerFunds, Inc. ("OFI") is an investment adviser organized under the laws
of Colorado as a corporation; it was initially organized in 1959. It (including
a subsidiary) advises U.S. investment companies with assets aggregating over $62
billion as of December 31, 1996, and with more than 3 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.
9
<PAGE>
The Separate Account
The Separate Account was established on July 13, 1988, as a separate investment
account of MassMutual by MassMutual's Board of Directors in accordance with the
provisions of Chapter 132G of Chapter 175 of the Massachusetts General Laws. 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 MassMutual. Under
Massachusetts law, however, both MassMutual and the Separate Account are subject
to regulation by the Division of Insurance of the Commonwealth of Massachusetts.
The Separate Account meets the definition of a "Separate Account" under the
federal securities laws.
MassMutual 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
MassMutual. 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 MassMutual. MassMutual 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 MassMutual. MassMutual 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. MassMutual 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 MassMutual 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 MassMutual 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
will take such action at its 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
interest 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.
MassMutual 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
MassMutual, on behalf of the Separate Account, elects otherwise. Shares of the
MML Trust and the Oppenheimer Trust will be redeemed by MassMutual 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
10
<PAGE>
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 Capital Appreciation Fund
Oppenheimer Capital Appreciation Fund seeks capital appreciation. The type of
securities in which this Fund invests will be primarily common stocks, as well
as securities having the investment characteristics of common stocks, such as
convertible preferred stock and convertible bonds. In seeking this objective the
Fund will emphasize investment in securities of "growth-type" companies. Such
companies are believed to have relatively favorable long-term prospects for an
increased demand for the particular companies, products or services.
Oppenheimer Global Securities Fund
Oppenheimer Global Securities Fund seeks long-term capital appreciation through
investing a substantial portion of its invested assets in securities of foreign
issuers, growth-type companies and special investment opportunities, such as
anticipated acquisitions, mergers or other unusual developments, which are
considered by OFI, in its capacity as investment manager of the Funds, to have
appreciation possibilities. The type of securities in which this Fund invests
will be primarily common stocks, as well as securities having the investment
characteristics of common stocks, such as convertible preferred stock,
convertible bonds and American Depository Receipts. Current income is not an
investment objective of the Oppenheimer Global Securities Fund.
Oppenheimer Growth Fund
Oppenheimer Growth Fund seeks to achieve capital appreciation by investing in
securities of well-known established companies (such securities generally have a
history of earnings and dividends, and are issued by seasoned companies, namely
those having an operating history of at least five years, including
predecessors). The type of securities in which this Fund invests will be
primarily common stocks, as well as securities having the investment
characteristics of common stocks, such as convertible preferred stock and
convertible bonds.
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 invests principally
in: (i) foreign government and corporate debt securities; (ii) U.S. Government
securities; and (iii) lower-rated, high-risk high-yield debt securities. This
Fund's investments may be considered to be speculative.
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.
11
<PAGE>
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 1996, MassMutual earned the following investment management fee from each
of the following funds:
<TABLE>
<S> <C>
MML Equity Fund $5,787,673
MML Money Market Fund $ 612,946
MML Managed Bond Fund $ 820,434
MML Blend Fund $7,525,674
</TABLE>
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 Capital Appreciation
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 1996, OFI earned the following investment management fee from each of the
following funds:
<TABLE>
<S> <C>
Oppenheimer Capital Appreciation Fund $3,382,840
Oppenheimer Growth Fund $1,139,255
Oppenheimer Global Securities Fund $3,395,740
Oppenheimer Strategic Bond Fund $ 618,338
</TABLE>
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 located 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, 1996, 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
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 registered representative or from
MassMutual at its Home Office.
12
<PAGE>
TABLE I -- MML FUNDS
EFFECTIVE ANNUAL RATES OF RETURN
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Fund 20 Years 15 Years 10 Years 5 Years 1 Year
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Equity 14.72% 16.01% 13.78% 14.71% 20.25%
- -------------------------------------------------------------------------------
Money Market -- 6.83 5.76 4.13 5.01
- -------------------------------------------------------------------------------
Managed Bond -- 10.54 8.34 7.27 3.25
- -------------------------------------------------------------------------------
Blend -- 13.13* 11.89 11.55 13.95
- -------------------------------------------------------------------------------
</TABLE>
*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
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Fund Since Inception 5 Years 1 Year
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Oppenheimer Capital Appreciation 15.66%* 16.68% 20.16%
- ------------------------------------------------------------------------------------------------
Oppenheimer Global Securities 10.65* 12.38 17.80
- ------------------------------------------------------------------------------------------------
Oppenheimer Growth 14.52* 16.24 25.20
- ------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond 7.35* -- 12.07
- ------------------------------------------------------------------------------------------------
</TABLE>
*The Oppenheimer Capital Appreciation Fund commenced operations on August 15,
1986. The Oppenheimer Global Securities Fund commenced operations on November
12, 1990. The Oppenheimer Strategic Bond Fund and the Oppenheimer Growth Fund
commenced operations on May 3, 1993 and April 3, 1985, respectively.
TABLE III
MML FUNDS
ANNUALIZED ONE YEAR TOTAL RETURNS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
For the MML Equity MML Money MML Managed MML Blend
Year Ended Fund Market Fund Bond Fund Fund
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 20.25% 5.01% 3.25% 13.95%
1995 31.13% 5.58% 19.14% 23.28%
1994 4.10% 2.75% (3.76)% 2.48%
1993 9.52% 2.75% 1.81% 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)%* -- -- --
- ----------------------------------------------------------------------------------------------------------
</TABLE>
*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.
13
<PAGE>
TABLE IV
OPPENHEIMER TRUST FUNDS
ANNUALIZED ONE YEAR TOTAL RETURNS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Oppenheimer
Oppenheimer Capital Oppenheimer
For the Oppenheimer Strategic Appreciation Global
Year Ended Growth Fund Bond Fund Fund Securities
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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%* -- -- --
- --------------------------------------------------------------------------------------------------
</TABLE>
*The figures shown are from inception of the Oppenheimer Funds. The Capital
Appreciation Fund commenced operations on August 15, 1986. The Global Securities
Fund commenced operations on November 12, 1990. The Strategic Bond Fund and the
Growth Fund commenced operations on May 3, 1993 and April 3, 1985, respectively.
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 Expense
Using Current Schedule of Charges Charges and Current Fund Level Charges
- ---------------------------------------------------------------------------------------------------------------------------------
Cash Cash
Calendar Year Total Annual Surrender Death Surrender Death
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
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
TABLE VI
MML MONEY MARKET FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Using Guaranteed Mortality and Expense
Using Current Schedule of Charges Charges and Current Fund Level Charges
- ---------------------------------------------------------------------------------------------------------------------------------
Cash Cash
Calendar Year Total Annual Surrender Death Surrender Death
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
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TABLE VII
MML BLEND FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Using Guaranteed Mortality and Expense
Using Current Schedule of Charges Charges and Current Fund Level Charges
- ---------------------------------------------------------------------------------------------------------------------------------
Cash Cash
Calendar Year Total Annual Surrender Death Surrender Death
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 8,088 100,000 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 20,370 100,000 18,474 100,000
1996 15,600 23,834 100,000 21,517 100,000
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
TABLE VIII
MML MANAGED BOND FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Using Guaranteed Mortality and Expense
Using Current Schedule of Charges Charges and Current Fund Level Charges
- ---------------------------------------------------------------------------------------------------------------------------------
Cash Cash
Calendar Year Total Annual Surrender Death Surrender Death
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
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TABLE IX
OPPENHEIMER GROWTH FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Using Guaranteed Mortality and Expense
Using Current Schedule of Charges Charges and Current Fund Level Charges
- ---------------------------------------------------------------------------------------------------------------------------------
Cash Cash
Calendar Year Total Annual Surrender Death Surrender Death
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
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
TABLE X
OPPENHEIMER CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Using Guaranteed Mortality and Expense
Using Current Schedule of Charges Charges and Current Fund Level Charges
- ---------------------------------------------------------------------------------------------------------------------------------
Cash Cash
Calendar Year Total Annual Surrender Death Surrender Death
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
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TABLE XI
OPPENHEIMER GLOBAL SECURITIES FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Using Guaranteed Mortality and Expense
Using Current Schedule of Charges Charges and Current Fund Level Charges
- ---------------------------------------------------------------------------------------------------------------------------------
Cash Cash
Calendar Year Total Annual Surrender Death Surrender Death
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
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TABLE XII
OPPENHEIMER STRATEGIC BOND FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Using Guaranteed Mortality and Expense
Using Current Schedule of Charges Charges and Current Fund Level Charges
- ---------------------------------------------------------------------------------------------------------------------------------
Cash Cash
Calendar Year Total Annual Surrender Death Surrender Death
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
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
17
<PAGE>
III. DETAILED INFORMATION
ABOUT THE POLICY
Availability Of Policy
Individuals wishing to purchase a Policy must send a completed application to
MassMutual's Home 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, MassMutual 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;
MassMutual 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 MassMutual on request.
Death Benefit
As long as the Policy remains in force, MassMutual will, upon due proof of the
Insured's death, pay the Death Benefit of the Policy to the named Beneficiary.
Although MassMutual 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 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 (only 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
18
<PAGE>
change from Option 1 to Option 2, however, will require evidence of insurability
satisfactory to MassMutual. In addition, a charge of $75 will be deducted from
the Account Value on the effective date of the change. (MassMutual currently
does not charge the $75 fee for this change, but it reserves the right to do
so.) 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. 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 MassMutual 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 MassMutual. Any
request for an increase or decrease must be submitted in writing to MassMutual's
Home Office. It will become effective on the Monthly Calculation Date on or
which next follows MassMutual's acceptance of the request.
Increases in Selected Face Amount. For an increase in the Selected Face Amount,
MassMutual 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 MassMutual 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, MassMutual 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, 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. MassMutual 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 MassMutual's Home 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.
19
<PAGE>
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
MassMutual's Home 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 without charge at any time by
providing written notice to MassMutual's Home 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 MassMutual 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
MassMutual 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 on next or following the date we
receive a written request in good order at our Home Office. There are no
charges for transfers.
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 MassMutual 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.
MassMutual 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 the 28th day. In
order to process a Dollar Cost Averaging transfer, MassMutual 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, MassMutual 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
20
<PAGE>
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 MassMutual;
(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 MassMutual
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
MassMutual 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 MassMutual 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 MassMutual for the expenses relating to the
distribution of the Policy, including commissions, advertising, and the printing
of the prospectuses and sales literature. MassMutual currently intends to waive
this charge after Policy Year 20; however, MassMutual 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 MassMutual for taxes imposed by various states and
local jurisdictions on MassMutual'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. MassMutual does not expect to make a profit from this charge.
MassMutual currently intends to waive this charge after Policy Year 20; however,
MassMutual reserves the right not to waive the charge, or to reimpose it once it
has been waived.
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 MassMutual 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. MassMutual reserves the right to change
this charge in the future, but guarantees it will never exceed $9 per month.
Mortality Charge. 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 MassMutual'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. MassMutual
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. MassMutual 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.
MassMutual 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
21
<PAGE>
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 MassMutual 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. MassMutual 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 MassMutual 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 MassMutual 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 MassMutual 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 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
<TABLE>
<CAPTION>
Age 25 Age 40 Age 55
<S> <C> <C>
$6.26 $9.91 $28.49
</TABLE>
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. MassMutual 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. MassMutual 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. (MassMutual currently does not charge the $75 fee for this
change, but it reserves the right to do so.) The charge is designed to reimburse
MassMutual for the underwriting and administrative costs associated with the
change. This fee is guaranteed not to increase for the duration of the Policy.
MassMutual does not expect to make a profit on this charge.
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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 MassMutual's Home 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 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) of the
Separate Account from which the Withdrawal is to be made. The Withdrawal amount
attributable to a Division or the GPA may not exceed the non-loaned Account
Value of the Division or GPA. If Death Benefit Option 1 is in effect, MassMutual
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 MassMutual 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 MassMutual to delay payment for
the protection of our Policyowners.
Whenever total Policy Debt (which includes accrued interest) exceeds the Account
Value less Surrender Charges, MassMutual 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. MassMutual 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
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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 MassMutual, equal to the greater of 3% and
Policy loan rate less not more than 2%. (The current rate is .90%.)
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 MassMutual 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 MassMutual 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.
The Policyowner should mail or deliver the Policy and Policy delivery receipt
either to MassMutual's Home 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 MassMutual'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 MassMutual 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 MassMutual, which consists of all assets owned by MassMutual other
than those in the Separate Account and other separate accounts of MassMutual.
Subject to applicable law, MassMutual 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. MassMutual 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 a
MassMutual 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 MassMutual 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 MassMutual'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. MassMutual reserves the right
to make changes in the Policy to assure that it continues to qualify as life
insurance for tax purposes.
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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.
MassMutual's Tax Status. MassMutual 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 MassMutual and its operations form a part
of MassMutual.
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 MassMutual 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.
MassMutual'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.
Due to MassMutual's current tax status, no charge is made to the Separate
Account for MassMutual's federal income taxes that may be attributable to the
Separate Account. Periodically, MassMutual reviews the question of a charge to
the Separate Account for MassMutual's federal income taxes. A charge may be made
for any federal income taxes incurred by MassMutual 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 MassMutual's federal income
taxes attributable to that account.
Under current laws, MassMutual 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, MassMutual
reserves the right to charge the Separate Account for such taxes, if any,
attributable to the Separate Account.
Policy Proceeds, Premiums and Loans. MassMutual 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 excludable 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. MassMutual 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.
MassMutual 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.
MassMutual cannot make any guarantee regarding the future tax treatment of any
Policy. For complete information on
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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 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 distributions: (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 concern-
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ing 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, MassMutual reserves the right to modify the
Policy, as necessary, to prevent the Policyowner from being considered the owner
of the assets of the Separate Account.
MassMutual 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.
MassMutual also reserves the right to change the name of the Separate Account.
We have reserved all rights to the name MassMutual 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, MassMutual 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 MassMutual 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 MassMutual 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
Home 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 MassMutual, however, We must receive a signed copy
of it at our Home 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.
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 Home 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.
28
<PAGE>
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 Home Office.
We can delay payment of the entire 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. Each year within 30 days after the Policy Anniversary,
MassMutual 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.
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, MassMutual and
the Separate Account are parities. 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"). MassMutual 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.
When an application for a Policy is completed, it is submitted to MassMutual.
MassMutual performs suitability and insurance underwriting and determines
whether to accept or reject the application for the Policy and the Insured's
risk classifica-
29
<PAGE>
tion. If the Application is not accepted, MassMutual 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 1996 totaled
$4,653. Commissions will be paid through MMLISI and MML Distributors to agents
and selling brokers for selling the Policy. During 1996 such payments amounted
to $2,349,699.
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.
Commission Schedule
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 10, 6.5% of basic premium and 2% for amounts
paid above basic premium, and 2% for basic premium and amounts above basic
premium for Policy Years 11 and after.
Basic premium is an amount established by MassMutual for the purposes of
determining commissions payable on a Policy.
Agents under financing agreements with a general agent of MassMutual may be
compensated differently. Agents who meet certain productivity and persistency
standards in selling MassMutual policies are eligible for additional
compensation.
General agents and brokers receive commissions based on different schedules and
rules.
Bonding Arrangement
An insurance company blanket bond is maintained providing $25,000,000 coverage
for officers and employees of MassMutual (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 Vice
Presidents Of MassMutual
Directors:
Roger G. Ackerman, Director
Chairman and Chief Executive Officer, Corning, Inc., since 1996, President
and Chief Operating Officer 1990-1996, One Riverfront Plaza - HQE 2, Corning
NY 14831.
James R. Birle, Director
President and Founder, Resolute Partners, LLC, since
1994, 2 Greenwich Plaza - Suite 100, Greenwich CT 06830,; General Partner,
Blackstone Group, 1988-1994.
Frank C. Carlucci, III, Director
Chairman, The Carlyle Group, Inc., since 1989, 1001 Pennsylvania Avenue,
N.W. - Suite 220S, Washington DC 20004.
Gene Q. Chao, Director
Chairman, President and CEO, Computer Projections, Inc., since 1991,
733 SW Vista Avenue, Portland OR 97205-1203.
Patricia Diaz Dennis, Director
Senior Vice President and Assistant General Counsel, SBC Communications Inc.
since 1995, 175 East Houston, Room 4-A-70, San Antonio TX 87205; Special
Counsel, Sullivan & Cromwell, 1993-1995; Assistant Secretary of State for
Human Rights and Humanitarian Affairs, U.S. Department of State, 1992-1993.
Anthony Downs, Director
Senior Fellow, The Brookings Institution, since 1977, 1775 Massachusetts
Ave., N.W., Washington DC 20036-2188.
James L. Dunlap, Director
President and Chief Operating Officer, United Meridian Corporation,
since 1996, 1201 Louisiana - Suite 1400, Houston TX 77002-5603;
Senior Vice President, Texaco, Inc. 1987-1996.
William B. Ellis, Director
Senior Fellow, Yale University School of Forestry and Environmental Studies,
since 1995, 31 Pound Foolish Lane, Glastonbury, CT 06033; Chairman and Chief
Executive Officer, Northeast Utilities, 1983-1995.
Robert M. Furek, Director
President and Chief Executive Officer, Heublein, Inc., 1987-1996, 100 Pearl
Street - 14th Floor, Hartford CT 06103-4506.
Charles K. Gifford, Director
Chief Executive Officer, First National Bank of Boston and The Bank of
Boston Corporation, since 1996, Chairman, President and CEO 1995-1996,
President and CEO 1989-1995, 100 Federal Street, Boston MA 02110.
William N. Griggs, Director
Managing Director, Griggs & Santow, Inc., since 1983, 75 Wall Street - 20th
Floor, New York NY 10005.
George B. Harvey, Director
Chairman, President and CEO, Pitney Bowes, 1983-1996, 663 Ponus Ridge, New
Canaan CT 06840.
30
<PAGE>
Barbara B. Hauptfuhrer, Director
Director of various corporations, since 1972, 1700 Old Welsh Road,
Huntington Valley PA 19006.
Sheldon B. Lubar, Director
Chairman, Lubar & Co. Incorporated, since 1977, 777 East Wisconsin Avenue -
Suite 3380, Milwaukee WI 53202.
William B. Marx, Jr., Director
Senior Executive Vice President, Lucent Technologies 1996-1996, 600 Mountain
Avenue - Room 6A-502, Murray Hill NJ 07974; Executive Vice President and CEO
Multimedia Products Group, AT&T, 1994-1996; Executive Vice President and
CEO, Network Systems Group, 1993-1994; Group Executive and President, AT&T
Network Systems, 1989-1993.
John F. Maypole, Director
Managing Partner, Peach State Real Estate Holding Company, since 1984, PO
Box 1223, Toccoa GA 30577.
Donald F. McCullough, Director
Retired Chairman and Chief Executive Officer, Collins & Aikman Corp., since
1988, 210 Madison Avenue, New York NY 10016.
John J. Pajak, Director, President and Chief Operating Officer
President and Chief Operating Officer, MassMutual, since 1996, Vice Chairman
and Chief Administrative Officer, 1996-1996, Executive Vice President,
1987-1996, 1295 State Street, Springfield MA 01111.
Thomas B. Wheeler, Director, Chairman and Chief Executive Officer
Chairman and Chief Executive Officer, MassMutual, since 1996, President and
Chief Executive Officer, 1988-1996, 1295 State Street, Springfield MA 01111.
Alfred M. Zeien, Director
Chairman and Chief Executive Officer, The Gillette Company, since 1991,
Prudential Tower, Boston MA 02199.
Executive Vice Presidents
Lawrence V. Burkett, Jr.
Executive Vice President and General Counsel, MassMutual, since 1993, Senior
Vice President and Deputy General Counsel 1992-1993, 1295 State Street,
Springfield MA 01111.
John B. Davies
Executive Vice President, MassMutual, since 1994; Associate Executive Vice
President 1994-1994; General Agent, 1982-1993, 1295 State Street,
Springfield MA 01111.
Daniel J. Fitzgerald
Executive Vice President, Corporate Financial Operations, MassMutual, since
1994, Senior Vice President, 1991-1994, 1295 State Street, Springfield MA
01111.
John V. Murphy
Executive Vice President, MassMutual, since 1997, Executive Vice President
and Chief Operating Officer, David L. Babson & Co., Inc., 1995-1997; Chief
Operating Officer, Concert Capital Management, Inc., 1993-1995, 1295 State
Street, Springfield MA 01111; Senior Vice President and Chief Financial
Officer, Liberty Financial Companies, 1977-1993.
Gary E. Wendlandt
Executive Vice President and Chief Investment Officer, MassMutual, since
1993, Executive Vice President, 1992-1993, Senior Vice President, 1983-1992,
1295 State Street, Springfield MA 01111.
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 and the financial statements of MassMutual included in this Prospectus
have been included herein in reliance on the reports of Coopers & Lybrand
L.L.P., Springfield, Massachusetts 01101, independent accountants, given on the
authority of that firm as experts in accounting and auditing.
Coopers & Lybrand's report includes explanatory paragraphs relating to the use
of statutory accounting practices rather than generally accepted accounting
principles.
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 MassMutual and the Variable Life Select segment of
the Separate Account included herein should be considered only as bearing upon
the ability of MassMutual to meet its obligations under the Policy.
31
<PAGE>
Report Of Independent Accountants
To the Board of Directors and Policyowners of
Massachusetts Mutual Life Insurance Company
We have audited the statements of assets and liabilities of the MML Equity
Division, MML Money Market Division, MML Managed Bond Division, 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 Massachusetts Mutual Variable
Life Separate Account I as of December 31, 1996, and the related statements of
operations and statements of changes in net assets for the periods indicated
thereon. These financial statements are the responsibility of the Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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, 1996 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
audit provides 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 Massachusetts Mutual Variable Life
Separate Account I as of December 31, 1996, the results of their operations and
the changes in their net assets for the periods indicated thereon, in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Springfield, Massachusetts
February 4, 1997
32
<PAGE>
Massachusetts Mutual Variable Life Separate Account I - Variable Life Select
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION>
MML MML
MML Money Managed MML
Equity Market Bond Blend
Division Division Division Division
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
ASSETS
Investments
Number of shares (Note 2) .............. 112,574 149,145 5,614 30,537
============ =========== =========== ===========
Identified cost (Note 3B) .............. $ 3,195,593 $ 149,145 $ 67,973 $ 656,182
============ =========== =========== ===========
Value (Note 3A) ........................ $ 3,353,176 $ 149,145 $ 67,634 $ 670,998
Receivable from Massachusetts Mutual
Life Insurance Company .................. 39,961 -- -- --
Dividends receivable ..................... 156,173 604 1,075 22,920
------------ ----------- ----------- -----------
Total assets ....................... 3,549,310 149,749 68,709 693,918
============ =========== =========== ===========
LIABILITIES
Payable to Massachusetts Mutual
Life Insurance Company .................. -- 1,325 103 1,150
------------ ----------- ----------- -----------
NET ASSETS ............................... $ 3,549,310 $ 148,424 $ 68,606 $ 692,768
============ =========== =========== ===========
Net Assets:
For variable life insurance policies ..... $ 3,542,666 $ 143,089 $ 63,094 $ 686,620
Retained in Variable Life Separate
Account I by Massachusetts Mutual Life
Insurance Company ...................... 6,644 5,335 5,512 6,148
------------ ----------- ----------- -----------
Net assets ............................... $ 3,549,310 $ 148,424 $ 68,606 $ 692,768
============ =========== =========== ===========
Accumulation units (Note 8)
Number of units:
Policyowners .......................... 2,666,086 134,098 57,229 558,443
Massachusetts Mutual Life
Insurance Company .................... 5,000 5,000 5,000 5,000
------------ ----------- ----------- -----------
Total units ........................... 2,671,086 139,098 62,229 563,443
============ =========== =========== ===========
NET ASSET VALUE PER
ACCUMULATION UNIT
December 31, 1996 ...................... $ 1.33 $ 1.07 $ 1.10 $ 1.23
December 31, 1995 ...................... 1.11 1.02 1.07 1.08
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Global Strategic
Appreciation Growth Securities Bond
Division Division Division Division
-------- -------- -------- --------
<S> <C> <C> <C> <C>
ASSETS
Investments
Number of shares (Note 2) .............. 17,157 11,636 20,768 27,647
============ =========== =========== ===========
Identified cost (Note 3B) .............. $ 653,689 $ 290,056 $ 342,287 $ 140,108
============ =========== =========== ===========
Value (Note 3A) ........................ $ 663,808 $ 316,964 $ 366,139 $ 140,724
Receivable from Massachusetts Mutual
Life Insurance Company .................. -- -- -- 4,843
Dividends receivable ..................... -- -- -- --
------------ ----------- ----------- -----------
Total assets ....................... 663,808 316,964 366,139 145,567
LIABILITIES
Payable to Massachusetts Mutual
Life Insurance Company .................. 5,665 2,345 2,376 --
------------ ----------- ----------- -----------
NET ASSETS ............................... $ 658,143 $ 314,619 $ 363,763 $ 145,567
============ =========== =========== ===========
Net Assets:
For variable life insurance policies ..... $ 651,306 $ 307,725 $ 358,062 $ 139,640
Retained in Variable Life Separate
Account I by Massachusetts Mutual Life
Insurance Company ....................... 6,837 6,894 5,701 5,927
------------ ----------- ----------- -----------
Net assets ............................... $ 658,143 $ 314,619 $ 363,763 $ 145,567
============ =========== =========== ===========
Accumulation units (Note 8)
Number of units:
Policyowners .......................... 476,366 223,202 314,008 117,816
Massachusetts Mutual Life
Insurance Company .................... 5,000 5,000 5,000 5,000
------------ ----------- ----------- -----------
Total units ........................... 481,366 228,202 319,008 122,816
============ =========== =========== ===========
NET ASSET VALUE PER
ACCUMULATION UNIT
December 31, 1996 ...................... $ 1.37 $ 1.38 $ 1.14 $ 1.19
December 31, 1995 ...................... 1.14 1.11 .98 1.06
</TABLE>
See Notes to Financial Statements.
33
<PAGE>
Massachusetts Mutual Variable Life Separate Account I - Variable Life Select
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
MML MML
MML Money Managed MML
Equity Market Bond Blend
Division Divsion Division Division
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Investment income
Dividends (Note 3B) .......................................... $156,193 $ 3,870 $ 2,418 $33,041
Expenses
Mortality and expense risk fee (Note 4) ...................... 9,958 432 168 1,899
-------- ------- -------- --------
Net investment income (loss) (Note 3C) ....................... 146,235 3,438 2,250 31,142
-------- ------- -------- --------
Net realized and unrealized gain (loss)
on investments
Net realized gain (loss) on investments
(Notes 3B, 3C and 6) ....................................... 40,916 -- (80) 3,410
Change in net unrealized appreciation/
depreciation of investments ................................ 163,071 -- (545) 15,061
-------- ------- -------- --------
Net gain (loss) on investments ............................... 203,987 -- (625) 18,471
-------- ------- -------- --------
Net increase in net assets
resulting from operations .................................. $350,222 $ 3,438 $ 1,625 $ 49,613
======== ======= ======== ========
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Global Strategic
Appreciatiion Growth Securities Bond
Division Division Division Division
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Investment income
Dividends (Note 3B) .......................................... $ 6,381 $ 3,642 $ -- $ 4,352
Expenses
Mortality and expense risk fee (Note 4) ...................... 1,637 799 928 253
-------- -------- -------- --------
Net investment income (loss) (Note 3C) ....................... 4,744 2,843 (928) 4,099
-------- -------- -------- --------
Net realized and unrealized gain (loss)
on investments
Net realized gain (loss) on investments
(Notes 3B, 3C and 6) ......................................... 9,654 2,730 3,404 1,466
Change in net unrealized appreciation/
depreciation of investments .................................. 8,104 26,225 23,841 481
-------- -------- -------- --------
Net gain (loss) on investments ............................... 17,758 28,955 27,245 1,947
-------- -------- -------- --------
Net increase in net assets
resulting from operations ................................... $ 22,502 $ 31,798 $ 26,317 $ 6,046
======== ======== ======== ========
</TABLE>
See Notes to Financial Statements.
34
<PAGE>
Massachusetts Mutual 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
MML Money Managed MML
Equity Market Bond Blend
Division Division Division Division
----------- --------- -------- --------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss) ............. $ 146,235 $ 3,438 $ 2,250 $ 31,142
Net realized gain (loss) on investments .. 40,916 -- (80) 3,410
Change in net unrealized appreciation/
depreciation of investments ............ 163,071 -- (545) 15,061
----------- --------- -------- --------
Net increase in net assets
resulting from operations ............... 350,222 3,438 1,625 49,613
----------- --------- -------- --------
Capital transactions: (Note 7)
Transfer of net premium (Note 5) ......... 3,316,200 246,298 68,621 718,687
Transfer of surrender values ............. (2,305) -- -- --
Transfer due to death benefits ........... -- -- -- --
Transfer due to policy loans ............. (452) -- -- --
Transfer due to reimbursement (payment) of
accumulation unit value fluctuation ..... 8,312 (215) 16 854
Withdrawal due to charges for administrative
and insurance costs ..................... (689,853) (17,881) (9,606) (104,422)
Divisional transfers ..................... 13,596 (155,027) 77 (5,207)
----------- --------- -------- --------
Net increase in net assets resulting
from capital transactions ............... 2,645,498 73,175 59,108 609,912
----------- --------- -------- --------
Total increase .............................. 2,995,720 76,613 60,733 659,525
NET ASSETS, at beginning of the year ........ 553,590 71,811 7,873 33,243
----------- --------- -------- --------
NET ASSETS, at end of the year .............. $ 3,549,310 $ 148,424 $ 68,606 $692,768
=========== ========= ======== ========
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Global Strategic
Appreciation Growth Securities Bond
Division Division Division Division
----------- --------- -------- --------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss) ............. $ 4,744 $ 2,843 $ (928) $ 4,099
Net realized gain (loss) on investments .. 9,654 2,730 3,404 1,466
Change in net unrealized appreciation/
depreciation of investments ............. 8,104 26,225 23,841 481
----------- --------- -------- --------
Net increase in net assets
resulting from operations ............... 22,502 31,798 26,317 6,046
----------- --------- -------- --------
Capital transactions: (Note 7)
Transfer of net premium (Note 5) ......... 658,125 289,119 329,866 142,631
Transfer of surrender values ............. -- -- -- --
Transfer due to death benefits ........... (286) (283) -- --
Transfer due to policy loans ............. (265) (92) (87) --
Transfer due to reimbursement (payment) of
accumulation unit value fluctuation ..... (1,005) 1,082 931 (10)
Withdrawal due to charges for administrative
and insurance costs ..................... (126,432) (53,582) (51,365) (14,248)
Divisional transfers ..................... 73,585 29,896 38,442 4,638
----------- --------- -------- --------
Net increase in net assets resulting
from capital transactions ............... 603,722 266,140 317,787 133,011
----------- --------- -------- --------
Total increase .............................. 626,224 297,938 344,104 139,057
NET ASSETS, at beginning of the year ........ 31,919 16,681 19,659 6,510
----------- --------- -------- --------
NET ASSETS, at end of the year .............. $ 658,143 $ 314,619 $363,763 $145,567
=========== ========= ======== ========
</TABLE>
See Notes to Financial Statements.
35
<PAGE>
Massachusetts Mutual Variable Life Separate Account I - Variable Life Select
STATEMENT OF CHANGES IN NET ASSETS
For the Period July 24, 1995 (Date of Commencement of Operations)
Through December 31, 1995
<TABLE>
<CAPTION>
MML MML
MML Money Managed MML
Equity Market Bond Blend
Division Division Division Division
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss) ............. $ 20,242 $ 235 $ 192 $ 1,141
Net realized gain (loss) on investments .. 7,057 -- 9 350
Change in net unrealized appreciation/
depreciation of investments ............. (5,488) -- 206 (244)
--------- -------- -------- --------
Net increase (decrease) in net assets
resulting from operations ............... 21,811 235 407 1,247
--------- -------- -------- --------
Capital transactions: (Note 7)
Transfer of net premium (Note 5) ......... 575,136 72,441 2,871 30,926
Transfer from Massachusetts Mutual
Life Insurance Company .................. 5,000 5,000 5,000 5,000
Transfer due to reimbursement (payment) of
accumulation unit value fluctuation ..... 4,084 7 21 (106)
Withdrawal due to charges for
administrative and insurance costs ...... (50,734) (5,872) (439) (4,424)
Divisional transfers ..................... (1,707) -- 13 600
--------- -------- -------- --------
Net increase in net assets resulting
from capital transactions ............... 531,779 71,576 7,466 31,996
--------- -------- -------- --------
Total increase ............................. 553,590 71,811 7,873 33,243
NET ASSETS, at beginning of the period ..... -- -- -- --
--------- -------- -------- --------
NET ASSETS, at end of the year ............. $ 553,590 $ 71,811 $ 7,873 $ 33,243
========= ======== ======== ========
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Global Strategic
Appreciation Growth Securities Bond
Division Division Division Division
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss) ............. $ (31) $ (20) $ (23) $ 201
Net realized gain (loss) on investments .. 149 107 (47) 5
Change in net unrealized appreciation/
depreciation of investments ............. 2,015 683 11 135
--------- -------- -------- --------
Net increase (decrease) in net assets
resulting from operations ............... 2,133 770 (59) 341
--------- -------- -------- --------
Capital transactions: (Note 7)
Transfer of net premium (Note 5) ......... 29,600 12,994 18,636 1,521
Transfer from Massachusetts Mutual
Life Insurance Company .................. 5,000 5,000 5,000 5,000
Transfer due to reimbursement (payment) of
accumulation unit value fluctuation ..... (45) (50) (98) 1
Withdrawal due to charges for
administrative and insurance costs ...... (5,710) (2,186) (3,820) (353)
Divisional transfers ..................... 941 153 -- --
--------- -------- -------- --------
Net increase in net assets resulting
from capital transactions ............... 29,786 15,911 19,718 6,169
--------- -------- -------- --------
Total increase ............................. 31,919 16,681 19,659 6,510
NET ASSETS, at beginning of the period ..... -- -- -- --
--------- -------- -------- --------
NET ASSETS, at end of the year ............. $ 31,919 $ 16,681 $ 19,659 $ 6,510
========= ======== ======== ========
</TABLE>
See Notes to Financial Statements.
36
<PAGE>
Massachusetts Mutual Variable Life Separate Account I - Variable Life Select
Notes To Financial Statements
1. HISTORY
Massachusetts Mutual Variable Life Separate Account I ("Separate Account
I") is a separate investment account established on July 13, 1988 by
Massachusetts Mutual Life Insurance Company ("MassMutual") in accordance
with the provisions of Section 132G of Chapter 175 of the Massachusetts
General Laws.
MassMutual maintains four segments within Separate Account I. The initial
segment ("Variable Life Plus Segment") is used exclusively for
MassMutual's flexible premium variable whole life insurance policy.
On March 30, 1990, MassMutual established a second segment ("Large Case
Variable Life Plus Segment") within Separate Account I to be used
exclusively for MassMutual's flexible premium variable whole life
insurance policy with table of selected face amounts.
On July 5, 1995, MassMutual established a third segment ("Strategic
Variable Life Segment") within Separate Account I to be used exclusively
for MassMutual's flexible premium variable whole life insurance policy
with table of selected face amounts.
On July 24, 1995, MassMutual established a fourth segment ("Variable Life
Select Segment") within Separate Account I to be used exclusively for
MassMutual'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. MassMutual 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 the four series of MML Series Investment Fund (the "MML
Trust"). The MML Trust is a no-load, registered, open-end, diversified
management investment company for which MassMutual acts 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 &
Company, Inc. ("Babson") effective December 31, 1996. At such time, both
Concert and Babson were 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-advisor to
MML Equity Fund and the Equity Sector of the MML Blend Fund. MassMutual
paid Concert a quarterly fee equal to an annual rate of .13% of the
average daily net asset value of MML Equity Fund and the Equity Sector of
MML Blend Fund.
Oppenheimer Capital Appreciation Fund, Oppenheimer Growth Fund,
Oppenheimer Global Securities Fund and Oppenheimer Strategic Bond Fund are
part of the Oppenheimer Variable Account Funds (the "Oppenheimer Trust").
The Oppenheimer Trust is a registered, open-end, diversified management
investment company for which OppenheimerFunds, Inc. ("OFI"), a controlled
subsidiary of MassMutual, serves as investment advisor (prior to January
5, 1996, OFI was known as Oppenheimer 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 MassMutual's general account. Because of exemptive and
exclusionary provisions, interests in the Guaranteed Principal Account,
which is part of MassMutual's general account, are not registered under
the Securities Act of 1933 and the general account is not registered as an
investment company under the Investment Company Act of 1940.
3. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
consistently by the Variable Life Select Segment in preparation of the
financial statements in conformity with generally accepted accounting
principles.
37
<PAGE>
Notes To Financial Statements (Continued)
A. Investment Valuation
The investments in the MML Trust and the Oppenheimer Trust are each stated
at market value which is the net asset value of each of the respective
underlying funds.
B. Accounting for Investments
Investment transactions are accounted for on trade date and identified
cost is the basis followed in determining the cost of investments sold for
financial statement purposes. Dividend income is recorded on the
ex-dividend date.
C. Federal Income Taxes
MassMutual 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 MassMutual'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, MassMutual does not intend to make
any charge to the Variable Life Select Segment's divisions to provide for
company income taxes. MassMutual may, however, make such a charge in the
future if an unanticipated change of current law results in a company tax
liability attributable to the 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 MassMutual, thereby decreasing both the assets and
the reserves 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 MassMutual,
which will not be less than 3%, 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
MassMutual 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.
MassMutual 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.
MassMutual also makes certain charges for the cost of insurance and
administrative costs.
38
<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, MassMutual and Separate Account I. MML Distributors is
registered with the Securities and Exchange Commission (the "SEC") as a
broker-dealer under the Securities Exchange Act of 1934 and is a member of
the National Association of Securities Dealers, Inc. (the "NASD"). MML
Distributors may enter into selling agreements with other broker-dealers
who are registered with the SEC and are members of the NASD in order to
sell the 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, MassMutual 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, MassMutual 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.
39
<PAGE>
Notes To Financial Statements (Continued)
6. PURCHASE AND SALES OF INVESTMENTS
<TABLE>
<CAPTION>
MML MML
MML Money Managed MML
For the Year Ended Equity Market Bond Blend
December 31, 1996 Division Division Division Division
----------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Cost of purchases ................. $3,051,990 $298,483 $69,590 $686,333
Proceeds from sales ............... 448,704 221,088 9,218 69,585
Average monthly value of securities 1,792,635 81,565 30,294 340,307
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Global Strategic
Appreciation Growth Securities Bond
Division Division Division Division
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
Cost of purchases ................. $688,246 $312,714 $364,862 $170,261
Proceeds from sales ............... 74,572 41,837 46,095 37,994
Average monthly value of securities 302,885 165,670 149,283 47,042
</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 Year Ended
December 31, 1996 and MML MML
*For the Period July 24, 1995 MML Money Managed MML
(Date of Commencement of Operations) Equity Market Bond Blend
Through December 31, 1995 Division Division Division Division
------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
December 31, 1996................... 19.34% 4.21% 5.38% 14.54%
*December 31, 1995.................. 13.40% 1.39% 7.01% 8.28%
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Global Strategic
Appreciation Growth Securities Bond
Division Division Division Division
-------- -------- -------- --------
<S> <C> <C> <C> <C>
December 31, 1996 7.57% 19.21% 17.61% 12.77%
*December 31, 1995 15.56% 8.92% (.60)% 6.25%
</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.
8. NET INCREASE IN ACCUMULATION UNITS
<TABLE>
<CAPTION>
MML MML
MML Money Managed MML
For the Year Ended Equity Market Bond Blend
December 31, 1996 Division Division Division Division
----------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Units purchased ................... 2,720,236 235,913 63,768 625,447
Units withdrawn ................... (559,027) (17,141) (8,944) (88,472)
Units transferred between divisions 11,584 (149,978) 72 (4,176)
--------- -------- ------- -------
Net increase ...................... 2,172,793 68,794 54,896 532,799
Units, at beginning of the year ... 498,293 70,304 7,333 30,644
--------- -------- ------- -------
Units, at end of the year ......... 2,671,086 139,098 62,229 563,443
========= ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Global Strategic
Appreciation Growth Securities Bond
Division Division Division Division
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Units purchased ................... 489,465 228,658 311,299 124,948
Units withdrawn ................... (93,488) (40,328) (48,945) (12,500)
Units transferred between divisions 57,489 24,805 36,500 4,246
------- -------- ------- -------
Net increase ...................... 453,466 213,135 298,854 116,694
Units, at beginning of the year ... 27,900 15,067 20,154 6,122
------- -------- ------- -------
Units, at end of the year ......... 481,366 228,202 319,008 122,816
======= ======== ======= =======
</TABLE>
40
<PAGE>
Notes To Financial Statements (Continued)
<TABLE>
<CAPTION>
MML MML
For the Period July 24, 1995 MML Money Managed MML
(Date of Commencement of Operations) Equity Market Bond Blend
Through December 31, 1995 Division Division Division Division
- ------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Units transferred from MassMutual
for initial capital ................. 5,000 5,000 5,000 5,000
Units purchased ...................... 541,875 71,065 2,740 29,293
Units withdrawn ...................... (47,051) (5,761) (419) (4,190)
Units transferred between divisions... (1,531) -- 12 541
------- ------- ------ --------
Net increase ......................... 498,293 70,304 7,333 30,644
Units, at beginning of the period .... -- -- -- --
------- ------- ------ --------
Units, at end of the year ............ 498,293 70,304 7,333 30,644
======= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Global Strategic
Appreciation Growth Securities Bond
Division Division Division Division
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Units transferred from MassMutual
for initial capital ............... 5,000 5,000 5,000 5,000
Units purchased .................... 27,280 11,921 18,971 1,462
Units withdrawn .................... (5,226) (1,997) (3,817) (340)
Units transferred between divisions. 846 143 -- --
------ ------ ------ -----
Net increase ....................... 27,900 15,067 20,154 6,122
Units, at beginning of the period .. -- -- -- --
------ ------ ------ -----
Units, at end of the year .......... 27,900 15,067 20,154 6,122
====== ====== ====== =====
</TABLE>
9. CONSOLIDATED MASSACHUSETTS MUTUAL VARIABLE LIFE SEPARATE ACCOUNT I
As discussed in Note 1, the financial statements only represent activity of
MassMutual's Variable Life Select Segment. The combined net assets as of
December 31, 1996 for the Separate Account I, which includes the Variable
Life Plus, Large Case Variable Life Plus, Strategic Variable Life and
Variable Life Select Segments, are as follows:
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High
Equity Market Bond Blend Money Income
Division Division Division Division Division Division
----------- ---------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total assets .............. $30,116,869 $1,981,154 $12,312,246 $8,919,296 $5,380 $3,064,566
Total liabilities ......... 132 1,346 234 15,515 4 29
----------- ---------- ----------- ---------- ------- ----------
Net assets ................ $30,116,737 $1,979,808 $12,312,012 $8,903,781 $5,376 $3,064,537
=========== ========== =========== ========== ======= ==========
Net assets:
For variable life insurance
policies ................. $30,035,948 $1,930,850 $12,256,804 $8,833,433 $ -- $3,051,700
Retained in Variable Life
Separate Account 1by
Massachusetts Mutual Life
Insurance Company ........ 80,789 48,958 55,208 70,348 5,376 12,837
----------- ---------- ----------- ----------- ------- ---------
Net assets ................ $30,116,737 $1,979,808 $12,312,012 $8,903,781 $5,376 $3,064,537
=========== ========== =========== =========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer Dreyfus
Oppenheimer Capital Oppenheimer Multiple Global Strategic Oppenheimer Equity
Bond Appreciation Growth Strategies Securities Bond Growth & Income Index
Division Division Division Division Division Division Division Division
---------- ------------ ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total assets .............. $5,520 $5,385,758 $1,082,755 $6,139 $2,886,458 $151,526 $8,264 $21,104,051
Total liabilities ......... -- 5,714 2,351 -- 2,403 -- -- 232
------ ---------- ---------- ------- ---------- -------- ------- -----------
Net assets ................ $5,520 $5,380,044 $1,080,404 $6,139 $2,884,055 $151,526 $8,264 $21,103,819
====== ========== ========== ======= ========== ======== ======= ===========
Net assets:
For variable life insurance
policies .................. $ -- $5,358,777 $1,066,459 $ -- $2,866,928 $139,640 $ -- $21,098,092
Retained in Variable Life
Separate Account 1by
Massachusetts Mutual Life
Insurance Company ........ 5,520 21,267 13,945 6,139 17,127 11,886 8,264 5,727
------ ---------- ---------- ------- ---------- -------- ------- -----------
Net assets ................ $5,520 $5,380,044 $1,080,404 $6,139 $2,884,055 $151,526 $8,264 $21,103,819
====== ========== ========== ======= ========== ======== ======= ===========
</TABLE>
Offered through MML Investors Services, Inc., Springfield, Massachusetts
<PAGE>
Report Of Independent Accountants
To the Board of Directors and Policyholders of
Massachusetts Mutual Life Insurance Company
We have audited the accompanying statutory statement of financial position of
Massachusetts Mutual Life Insurance Company as of December 31, 1996 and 1995,
and the related statutory statements of income, changes in policyholders'
contingency reserves, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of Connecticut Mutual Life Insurance Company for the year ended
December 31, 1995 or for each of the two years in the period ended December 31,
1995, which, after restatement for the 1996 pooling of interests, reflect 25% of
assets as of December 31, 1995, 26% and 26% of revenue, and 22% and 6% of net
gain from operations for the years ended December 31, 1995 and 1994,
respectively. Those statements were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to the amounts
included for Connecticut Mutual Life Insurance Company, is based solely on the
report of other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company prepared these
financial statements using statutory accounting practices of the National
Association of Insurance Commissioners and the accounting practices prescribed
or permitted by the Division of Insurance of the Commonwealth of Massachusetts
and, prior to 1996, the Department of Insurance of the State of Connecticut,
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
determinable at this time, are presumed to be material.
In our report dated February 5, 1996, we expressed our opinion that the 1995 and
1994 financial statements, prepared using statutory accounting practices,
presented fairly, in all material respects, the financial position of the
Massachusetts Mutual Life Insurance Company as of December 31, 1995, and the
results of its operations and its cash flows for each of the two years in the
period ended December 31, 1995 in conformity with generally accepted accounting
principles ("GAAP"). As described in Note 1 to the financial statements,
financial statements of mutual life insurance enterprises issued or reissued
after 1996, and prepared in accordance with statutory accounting principles, are
no longer considered to be presentations in conformity with GAAP. Accordingly,
our present opinion on the 1995 and 1994 statutory financial statements as
presented herein is different from that expressed in our previous report.
In our opinion, because of the effects of the matter discussed in the third
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Massachusetts Mutual Life Insurance Company at December 31, 1996 and 1995,
and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1996.
In our opinion, based upon our audits and the report of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Massachusetts Mutual Life Insurance Company at
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, on the
statutory basis of accounting described in Note 1.
Springfield, Massachusetts Coopers & Lybrand, L.L.P.
February 7, 1997
42
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31,
1996 1995
------- -------
(In Millions)
<S> <C> <C>
Assets:
Bonds................................................ $25,255.0 $23,625.1
Common stocks........................................ 336.6 416.1
Mortgage loans....................................... 3,897.1 3,908.2
Real estate.......................................... 1,840.9 1,652.6
Other investments.................................... 1,425.6 1,489.9
Policy loans......................................... 4,752.3 4,518.4
Cash and short-term investments...................... 1,075.4 2,342.8
Investment and insurance amounts receivable.......... 1,102.4 1,059.3
Separate account assets.............................. 13,563.5 11,309.5
Other assets......................................... 97.9 174.6
--------- ---------
$53,346.7 $50,496.5
========= =========
Liabilities:
Policyholders' reserves and funds.................... $33,341.5 $32,893.1
Policyholders' dividends............................. 885.3 832.6
Policy claims and other benefits..................... 373.8 395.5
Federal income taxes................................. 440.7 338.5
Asset valuation reserve.............................. 689.2 566.8
Investment reserves.................................. 208.4 188.4
Separate account reserves and liabilities............ 13,563.1 11,309.6
Amounts due on investments purchased and
other liabilities.................................. 1,206.1 1,371.1
--------- ---------
50,708.1 47,895.6
Policyholders' contingency reserves.................. 2,638.6 2,600.9
--------- ---------
$53,346.7 $50,496.5
========= =========
</TABLE>
See notes to statutory financial statements.
43
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENT OF INCOME
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
------ ------ ------
(In Millions)
<S> <C> <C> <C>
Income:
Premium income............................................ $ 6,328.6 $ 5,727.7 $ 6,177.2
Net investment and other income............................ 2,861.1 2,898.4 2,803.1
--------- --------- ---------
9,189.7 8,626.1 8,980.3
--------- --------- ---------
Benefits and expenses:
Policy benefits and payments............................... 6,048.2 5,152.2 5,449.6
Addition to policyholders' reserves and funds.............. 854.7 1,205.4 1,263.2
Commissions and operating expenses......................... 763.5 833.7 959.3
State taxes, licenses and fees............................. 96.4 89.4 105.6
Merger restructuring costs................................. 66.1 44.0 --
========= ========= =========
7,828.9 7,324.7 7,777.7
========= ========= =========
Net gain before federal income taxes and dividends......... 1,360.8 1,301.4 1,202.6
Federal income taxes....................................... 276.7 206.2 139.7
========= ========= =========
Net gain from operations before dividends.................. 1,084.1 1,095.2 1,062.9
Dividends to policyholders................................. 859.9 819.0 824.7
--------- --------- ---------
Net gain from operations................................... 224.2 276.2 238.2
Net realized capital gain (loss)........................... 40.3 (85.8) (164.3)
--------- --------- ---------
Net income................................................. $ 264.5 $ 190.4 $ 73.9
========= ========= =========
</TABLE>
See notes to statutory financial statements.
44
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENT OF CHANGES
IN POLICYHOLDERS' CONTINGENCY RESERVES
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
------ ------ ------
(In Millions)
<S> <C> <C> <C>
Policyholders' contingency reserves, beginning of year......... $ 2,600.9 $ 2,569.1 $ 2,470.2
---------- ---------- ----------
Increases (decreases) due to:
Net income................................................... 264.5 190.4 73.9
Net unrealized capital gain (loss)........................... (1.7) 88.7 29.5
Merger restructuring costs, net of tax....................... -- (45.4) --
Surplus notes................................................ -- -- 100.0
Change in asset valuation and investment reserves............ (142.4) (75.6) (38.2)
Change in valuation bases of policyholders' reserves......... (72.2) (108.2) (51.1)
Change in accounting for mortgage backed securities.......... -- -- 44.5
Change in non-admitted assets and other...................... (10.5) (18.1) (59.7)
----------- ---------- ----------
37.7 31.8 98.9
----------- ---------- ----------
Policyholders' contingency reserves, end of year............... $ 2,638.6 $ 2,600.9 $ 2,569.1
=========== ========== ==========
</TABLE>
See notes to statutory financial statements.
45
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
------ ------ ------
(In Millions)
<S> <C> <C> <C>
Operating activities:
Net income...................................................... $ 264.5 $ 190.4 $ 73.9
Addition to policyholders' reserves and funds,
net of transfers to separate accounts......................... 426.7 575.8 546.9
Net realized capital (gain) loss................................ (40.3) 85.8 164.3
Other changes................................................... (232.8) (25.2) 124.2
--------- --------- --------
Net cash provided by operating activities....................... 418.1 826.8 909.3
--------- --------- --------
Investing activities:
Purchases of investments and loans.............................. (10,171.5) (10,364.2) (8,351.6)
Sales or maturities of investments and receipts
from repayment of loans...................................... 8,539.3 9,671.1 7,468.7
---------- --------- ---------
Net cash used in investing activities........................... (1,632.2) (693.1) (882.9)
---------- --------- ---------
Financing activities:
Issuance of surplus notes....................................... -- -- 100.0
Repayments of long-term debt.................................... (53.3) (46.4) (125.0)
---------- --------- ---------
Net cash used by financing activities........................... (53.3) (46.4) (25.0)
---------- --------- ---------
Increase (decrease) in cash and short-term investments.......... (1,267.4) 87.3 1.4
Cash and short-term investments, beginning of year.............. 2,342.8 2,255.5 2,254.1
---------- --------- ---------
Cash and short-term investments, end of year.................... $ 1,075.4 $ 2,342.8 $2,255.5
========== ========= =========
</TABLE>
See notes to statutory financial statements.
46
<PAGE>
Notes To Statutory Financial Statements
Massachusetts Mutual Life Insurance Company ("the Company") is a mutual life
insurance company and as such has no shareholders. The Company's primary
business is individual life insurance, annuity and disability income products
distributed primarily through career agents. The Company also provides a wide
range of pension products and services, as well as investment services to
individuals, corporations and institutions in all 50 states and the District of
Columbia.
On March 1, 1996, the operations of the former Connecticut Mutual Life Insurance
Company (" Connecticut Mutual") were merged into the Company. This merger was
accounted for under the pooling of interests method of accounting. For the
purposes of this presentation, these financial statements reflect historical
amounts giving retroactive effect as if the merger had occurred on January 1,
1994 in conformity with the practices of the National Association of Insurance
Commissioners and the accounting practices prescribed or permitted by the
Division of Insurance of the Commonwealth of Massachusetts and, prior to the
merger, the Department of Insurance of the State of Connecticut. In 1996,
merger-related expenses totaling $66.1 million were recorded in the Statutory
Statement of Income. In 1995, merger-related expenses incurred by Massachusetts
Mutual (the Company prior to the merger) of $44.0 million, were recorded in the
statutory statement of income and the expenses incurred by Connecticut Mutual of
$45.4 million, net of tax, were recorded as a component of changes in
policyholders' contingency reserves, as permitted by each company's regulatory
authority. On the merger date, policyholder reserves attributable to disability
income contracts were strengthened by $75.0 million, investment reserves for
real estate were increased by $49.8 million and net prepaid pension assets were
increased by $10.4 million. The separate results of each company prior to the
merger for the year ended December 31, 1995, are as follows: (a) income was
$6,443.8 million for Massachusetts Mutual and $2,182.3 million for Connecticut
Mutual; (b) net income was $160.7 million for Massachusetts Mutual and $29.6
million for Connecticut Mutual and (c) policyholders' contingency reserves
increased by $143.7 million for Massachusetts Mutual and decreased by $112.0
million for Connecticut Mutual.
On March 31, 1996, the Company sold MassMutual Holding Company Two, Inc., a
wholly-owned subsidiary, and its subsidiaries, including Mirus Life Insurance
Company (formerly the MML Pension Insurance Company; currently doing business as
"UniCARE"), which comprised the Company's group life and health business, to
WellPoint Health Networks, Inc. The Company received total consideration of
$402.2 million ($340.0 million in cash and $62.2 million in notes receivable)
and recognized a before tax gain of $187.9 million. The Company, pursuant to a
1994 reinsurance agreement, cedes its group life, accident and health business
to UniCARE. The Company's investment in MassMutual Holding Company Two, Inc.
amounted to $187.8 million at December 31, 1995; its gain from operations
reflected a $41 million dividend in 1995. Additionally, this investment produced
an unrealized gain of $13.9 million in 1995 and an unrealized loss of $12.6
million in 1994.
1. SUMMARY OF ACCOUNTING PRACTICES
The accompanying statutory financial statements, except as to form, have been
prepared in conformity with the practices of the National Association of
Insurance Commissioners and the accounting practices prescribed or permitted by
the Division of Insurance of the Commonwealth of Massachusetts and, prior to the
merger, The Department of Insurance of the State of Connecticut ("statutory
accounting practices"), which practices were also considered to be in conformity
with generally accepted accounting principles ("GAAP"). In 1993, the Financial
Accounting Standards Board ("FASB") issued Interpretation No. 40 ("Fin. 40"),
"Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises", which clarified that mutual life insurance
companies issuing financial statements described as prepared in conformity with
GAAP after 1995 are required to apply all applicable GAAP pronouncements in
preparing those financial statements. In January 1995, the FASB issued Statement
No. 120 ("SFAS 120"), Accounting and Reporting by Mutual Life Insurance
Enterprises and by Insurance Enterprises for Certain Long-Duration Participating
Contracts," which among other things, extended the applicability of certain FASB
statements to mutual life insurance companies and deferred the effective date of
Fin. 40 to financial statements issued or reissued after 1996. As required by
generally accepted auditing standards, the opinion expressed by our independent
accountants on the 1995 and 1994 financial statements is different from that
expressed in their previous report.
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 in connection with
acquiring new business, are charged to current operations as incurred, whereas
GAAP would require these expenses to be capitalized and recognized over the life
of the policies; (b) policy reserves are based upon statutory mortality and
interest requirements without consideration of withdrawals, whereas GAAP
reserves would be based upon reasonably conservative estimates of mortality,
morbidity, interest and withdrawals; (c) bonds are generally carried at
amortized cost whereas GAAP would value bonds at fair value and (d) deferred
income taxes are not provided for book-tax timing differences whereas GAAP would
record deferred income taxes. Management has not yet completed GAAP financial
statements, but believes that policyholders' contingency reserves based upon
GAAP will be higher than policyholders' contingency reserves based upon
statutory accounting practices.
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, as
well as disclosures of contingent assets and liabilities at the date of the
financial statements. Management must also make estimates and assumptions that
affect the amounts of revenues and expenses during the reporting period. Future
events, including changes in the levels of mortality, morbidity, interest rates
and asset valuations, could cause actual results to differ from the estimates
used in these financial statements.
47
<PAGE>
Notes To Statutory Financial Statements (Continued)
The following is a description of the Company's current principal accounting
policies and practices.
A. Investments
Bonds and stocks are valued in accordance with rules established by the National
Association of Insurance Commissioners. Generally, bonds are valued at amortized
cost, preferred stocks in good standing at cost, and common stocks, except for
unconsolidated subsidiaries, at fair value.
As promulgated by the National Association of Insurance Commissioners, the
Company adopted the retrospective method of accounting for amortization of
premium and discount on mortgage backed securities as of December 31, 1994.
Prepayment assumptions for mortgage backed securities were obtained from a
prepayment model, which factors in mortgage type, seasoning, coupon, current
interest rate and the economic environment. The effect of this change, $44.5
million as of December 31, 1994, was recorded as an increase to policyholders'
contingency reserves on the Statutory Statement of Financial Position and had no
material effect on 1996 or 1995 net income. Through December 31, 1994, premium
and discount on bonds were amortized into investment income over the stated
lives of the securities.
Mortgage loans are valued at principal less unamortized discount. Real estate is
valued at cost less accumulated depreciation, impairments and mortgage
encumbrances. Encumbrances totaled $27.3 million in 1996 and $3.0 million in
1995. Depreciation on investment real estate is calculated using the
straight-line and constant yield methods.
Policy loans are carried at the outstanding loan balance less amounts unsecured
by the cash surrender value of the policy.
Short-term investments are stated at amortized cost, which approximates fair
value.
Investments in unconsolidated subsidiaries, joint ventures and other forms of
partnerships are included in other investments on the Statutory Statement of
Financial Position and are accounted for using the equity method.
In compliance with regulatory requirements, the Company maintains an Asset
Valuation Reserve and an Interest Maintenance Reserve. The Asset Valuation
Reserve and other investment reserves, as prescribed and permitted by the
Division of Insurance, stabilize the policyholders' contingency reserves against
fluctuations in the value of stocks, as well as declines in the value of bonds,
mortgage loans and real estate investments.
The Interest Maintenance Reserve captures after-tax realized capital gains and
losses which result from changes in the overall level of interest rates for all
types of fixed income investments, as well as other financial instruments,
including financial futures, U.S. Treasury purchase commitments, options,
interest rate swaps, interest rate caps and interest rate floors. These interest
rate related gains and losses are amortized into income using the grouped method
over the remaining life of the investment sold or over the remaining life of the
underlying asset. Net realized after tax capital gains of $77.1 million in 1996,
$130.7 million in 1995, and net realized after tax capital losses of $152.6
million in 1994 were charged to the Interest Maintenance Reserve. Amortization
of the Interest Maintenance Reserve into net investment income amounted to $26.9
million in 1996, $5.0 million in 1995, and $45.8 million in 1994. In 1994, the
Interest Maintenance Reserve resulted in a net loss deferral. In accordance with
the practices of the National Association of Insurance Commissioners, the 1994
balance was recorded as a reduction of policyholders' contingency reserves.
Realized capital gains and losses, less taxes, not includable in the Interest
Maintenance Reserve, are recognized in net income. Realized capital gains and
losses are determined using the specific identification method. Unrealized
capital gains and losses are included in policyholders' contingency reserves.
B. Separate Accounts
Separate account assets and liabilities represent segregated funds administered
and invested by the Company for the benefit of pension, variable annuity and
variable life insurance contract holders. Assets consist principally of
marketable securities reported at fair value. Premiums, benefits and expenses of
the separate accounts are reported in the Statutory Statement of Income. The
Company receives administrative and investment advisory fees from these
accounts.
C. Non-admitted Assets
Assets designated as "non-admitted" (principally certain fixed assets,
receivables and Interest Maintenance Reserve, when in a net loss deferral
position) are excluded from the Statutory Statement of Financial Position by an
adjustment to policyholders' contingency reserves.
48
<PAGE>
Notes To Statutory Financial Statements (Continued)
D. Policyholders' Reserves and Funds
Policyholders' reserves for life contracts are developed using accepted
actuarial methods computed principally on the net level premium and the
Commissioners' Reserve Valuation Method bases using the American Experience and
the 1941, 1958 and 1980 Commissioners' Standard Ordinary mortality tables with
assumed interest rates ranging from 2.5 to 6.0 percent.
Reserves for individual annuities, guaranteed investment contracts and deposit
administration and immediate participation guarantee funds are based on accepted
actuarial methods principally at interest rates ranging from 2.25 to 11.25
percent. Reserves for policies and contracts considered investment contracts
have a carrying value of $9,073.8 million (fair value of $9,324.6 million as
determined by discounted cash flow projections). Accident and health policy
reserves are generally calculated using the two-year preliminary term, net level
premium and fixed net premium methods and various morbidity tables.
During 1996, 1995 and 1994, the Company changed its valuation basis for certain
disability income contracts. The effects of these changes, $75.0 million in
1996, $108.2 million in 1995, and $51.1 million in 1994 were recorded as
decreases to policyholders' contingency reserves.
E. Premium and Related Expense Recognition
Life insurance premium revenue is recognized annually on the anniversary date of
the policy. Annuity premium is recognized when received. Accident and health
premiums are recognized as revenue when due. Commissions and other costs related
to issuance of new policies, maintenance and settlement costs are charged to
current operations.
F. Policyholders' Dividends
The Board of Directors annually approves dividends to be paid in the following
year. These dividends are allocated to reflect the relative contribution of each
group of policies to policyholders' contingency reserves and consider investment
and mortality experience, expenses and federal income tax charges.
G. Cash and Short-term Investments
For purposes of the Statutory Statement of Cash Flows, the Company considers all
highly liquid investments purchased with a maturity of twelve months or less to
be short-term investments.
2. POLICYHOLDERS' CONTINGENCY RESERVES
Policyholders' contingency reserves represent surplus of the Company as reported
to regulatory authorities and are intended to protect policyholders against
possible adverse experience.
A. Surplus Notes
The Company issued surplus notes of $100.0 million at 7 1/2 percent and $250.0
million at 7 5/8 percent in 1994 and 1993, respectively. These notes are
unsecured and subordinate to all present and future indebtedness of the Company,
policy claims and prior claims against the Company as provided by the
Massachusetts General Laws. Issuance was approved by the Commissioner of
Insurance of the Commonwealth of Massachusetts ("the Commissioner").
All payments of interest and principal are subject to the prior approval of the
Commissioner. Sinking fund payments are due as follows: $62.5 million in 2021,
$87.5 million in 2022, $150.0 million in 2023 and $50.0 million in 2024.
Interest on the notes issued in 1994 is scheduled to be paid on March 1 and
September 1 of each year, beginning on September 1, 1994, to holders of record
on the preceding February 15 or August 15, respectively. Interest on the notes
issued in 1993 is scheduled to be paid on May 15 and November 15 of each year,
beginning on May 15, 1994, to holders of record on the preceding May 1 or
November 1, respectively. In accordance with regulations of the National
Association of Insurance Commissioners, interest expense is not recorded until
approval for payment is received from the Commissioner. Interest of $26.6
million was approved and paid in 1996 and 1995, and interest of $22.8 million
was approved and paid in 1994.
The proceeds of the notes, less a $32.2 million reserve in 1996 and a $35
million reserve in 1995 and 1994 for contingencies associated with the issuance
of the notes, are recorded as a component of the Company's policyholders'
contingency reserves as approved by the Commissioner. These reserves, as
permitted by the Division of Insurance, are included in investment reserves on
the Statutory Statement of Financial Position.
49
<PAGE>
Notes To Statutory Financial Statements (Continued)
3. EMPLOYEE BENEFIT PLANS
The Company's employee benefit plans include plans in place for the employees of
Massachusetts Mutual and Connecticut Mutual prior to the merger. These plans,
which were managed separately, reflect different assumptions for 1995. Employees
previously covered by the Connecticut Mutual pension plans will continue
coverage under these plans. All other employees, including employees hired after
the merger date, will be covered by the Massachusetts Mutual benefit plans.
A. Pension
The Company has two non-contributory defined benefit plans covering
substantially all of its employees. One plan includes employees previously
employed by Connecticut Mutual; the other includes all other eligible employees.
Benefits are based on the employees' years of service, compensation during the
last five years of employment and estimated social security retirement benefits.
The Company accounts for these plans following Financial Accounting Standards
Board Statement No. 87, Employers' Accounting for Pensions. Accordingly, as
permitted by the Massachusetts Division of Insurance, the Company has recognized
a pension asset of $97.2 million and $37.7 million in 1996 and 1995,
respectively. In 1995, a pension asset of $70.9 million associated with the
Connecticut Mutual plan was non-admitted in the financial statements, in
accordance with Connecticut insurance regulations. On the merger date, the
accounting for Connecticut Mutual pension plans was conformed to the
Massachusetts Mutual policy of recording pension plan assets and liabilities,
resulting in a $10.4 million increase in policyholders' contingency reserves.
Company policy is to fund pension costs in accordance with the requirements of
the Employee Retirement Income Security Act of 1974 and, based on such
requirements, no funding was required for the years ended December 31, 1996 and
1995. The assets of the plans are invested in the Company's general account and
separate accounts.
The benefit status of the defined benefit plans as of December 31 is as follows:
<TABLE>
<CAPTION>
1996 1995
-------- ------
(In Millions)
<S> <C> <C>
Accumulated benefit obligation $ 611.5 $ 537.5
Vested benefit obligation 606.5 525.7
Projected benefit obligation 665.5 622.5
Plan assets at fair value 1,021.7 941.3
</TABLE>
The following assumptions were used in determining the actuarial present value
of both the accumulated and projected benefit obligation.
<TABLE>
<CAPTION>
MassMutual Connecticut Mutual
Plan Plan
---------- ------------------
<S> <C> <C>
Discount rate - 1996 7.75% 7.75%
Discount rate - 1995 7.50 7.75
Increase in future compensation levels 5.00 5.00
Long-term rate of return on assets 10.00 9.00
</TABLE>
As a result of the sale of Mirus Life Insurance Company, there was a significant
reduction in plan participants which resulted in recognition of a pension plan
curtailment gain of $15.3 million in 1996.
The Company also has defined contribution plans for employees and agents. The
expense credited to operations for all pension plans is $32.7 million in 1996,
$10.9 million in 1995 and $5.0 million in 1994.
B. Life and Health
Certain life and health insurance benefits are provided to retired employees and
agents through group insurance contracts. Substantially all of the Company's
employees may become eligible for these benefits if they reach retirement age
while working for the Company. In 1993, the Company adopted the National
Association of Insurance Commissioners' accounting standard for postretirement
life and health benefit costs, requiring these benefits to be accounted for
using the accrual method for employees and agents eligible to retire and current
retirees.
50
<PAGE>
Notes To Statutory Financial Statements (Continued)
The following rates were used in determining the accumulated postretirement
benefit liability.
<TABLE>
<CAPTION>
MassMutual Connecticut Mutual
Plan Plan
---------- ------------------
<S> <C> <C>
Discount rate - 1996 7.75% 7.75%
Discount rate - 1995 7.50 8.50
Assumed increases in medical cost
rates in the first year 7.25 11.00
declining to 5.25 6.00
within 5 years 5 years
</TABLE>
The initial transition obligation of $137.9 million is being amortized over
twenty years through 2012. At December 31, 1996 and 1995, the net unfunded
accumulated benefit obligation was $124.1 million and $109.2 million,
respectively, for employees and agents eligible to retire or currently retired
and $33.8 million and $42.7 million, respectively, for participants not eligible
to retire. A Retired Lives Reserve Trust was funded to pay life insurance
premiums for certain retired employees. Trust assets available for benefits were
$23.0 million in 1996.
As a result of the sale of Mirus Life Insurance Company, there was a significant
reduction in plan participants which resulted in recognition of a life and
health plan curtailment loss of $13.9 million in 1996.
The expense for 1996, 1995 and 1994 was $17.6 million, $22.9 million, and $19.8
million, respectively. A one percent increase in the annual assumed increase in
medical cost rates would increase the 1996 accumulated postretirement benefit
liability and benefit expense by $9.9 million and $1.5 million, respectively.
4. RELATED PARTY TRANSACTIONS
Pursuant to two 1994 reinsurance agreements with Mirus Life Insurance Company
(Mirus) whereby the Company assumed all of the single premium immediate annuity
business written by Mirus and ceded all of its group life, accident and health
business to Mirus. A gain from operations of this business was reflected in 1995
as a $41 million dividend received from Mirus, which was recorded as net
investment income on the Statutory Statement of Income. As previously discussed,
on March 31, 1996, the Company sold MassMutual Holding Company Two, Inc. a
wholly-owned subsidiary, and its subsidiaries, including Mirus Life Insurance
Company to WellPoint Health Networks, Inc.
The Company has a modified coinsurance quota-share reinsurance agreement with a
wholly-owned subsidiary, C.M. Life Insurance Company, whereby the Company
assumes 50% of the premiums on certain universal life policies issued by C.M.
Life in 1985 and 75% of the premiums with issue dates on or after January 1,
1986. The Company pays a stipulated expense allowance, death and surrender
benefits, and a modified coinsurance adjustment. Reserves for payment of future
benefits are retained by C.M. Life.
5. FEDERAL INCOME TAXES
Provision for federal income taxes is based upon the Company's best estimate of
its tax liability. No deferred tax effect is recognized for temporary
differences that may exist between financial reporting and taxable income.
Accordingly, the reporting of equity tax, using the most current information,
and other miscellaneous temporary differences, such as reserves, acquisition
costs and restructuring costs, resulted in an effective tax rate which is other
than the statutory tax rate.
The Internal Revenue Service has completed examining the Company's income tax
returns through the year 1992 for Massachusetts Mutual and 1991 for Connecticut
Mutual, and is currently examining Connecticut Mutual for the years 1992 through
1995. The Company believes any adjustments resulting from such examinations will
not materially affect its financial statements.
Components of the formula authorized by the Internal Revenue Service for
determining deductible policyholder dividends have not been finalized for 1996
and 1995. The Company records the estimated effects of anticipated revisions in
the Statutory Statement of Income.
The Company plans to file its 1996 federal income tax return on a consolidated
basis with its life and non-life affiliates. The Company and its life and
non-life affiliates are subject to a written tax allocation agreement which
allocates tax liability in a manner permitted under Treasury regulations.
Generally, the agreement provides that loss members shall be compensated for the
use of their losses and credits by other members.
The Company made federal tax payments of $330.7 million in 1996, $147.3 million
in 1995 and has a credit of $9.9 million in 1994. At December 31, 1996 and 1995,
the Company established a liability for federal income taxes of $440.7 million
and $338.6 million, respectively.
51
<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. In the
normal course of business, the Company enters into commitments to purchase
privately placed bonds and to issue mortgage loans.
A. Bonds
The carrying value and estimated fair value of bonds are as follows:
<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 $ 8,042.6 $ 344.0 $ 56.3 $ 8,330.3
Debt Securities issued by Foreign Governments 95.2 10.2 0.5 104.9
Mortgage-backed securities 3,969.7 125.5 43.3 4,051.9
State and local governments 173.2 13.1 2.1 184.2
Industrial securities 11,675.2 528.0 133.3 12,069.9
Utilities 975.0 87.0 18.5 1,043.5
Affiliates 324.1 4.3 3.5 324.9
--------- ---------- --------- ---------
TOTAL $25,255.0 $ 1,112.1 $ 257.5 $26,109.6
========= ========== ========= =========
<CAPTION>
December 31, 1995
---------------------------
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 $ 9,391.5 $ 837.0 $ 43.3 $10,185.2
Debt Securities issued by Foreign Governments 261.9 27.9 0.1 289.7
Mortgage-backed securities 3,265.4 176.3 9.4 3,432.3
State and local governments 106.0 15.2 0.1 121.1
Industrial securities 9,030.7 762.8 57.8 9,735.7
Utilities 1,417.6 152.4 2.9 1,567.1
Affiliates 152.0 4.4 1.2 155.2
--------- ---------- --------- ---------
TOTAL $23,625.1 $ 1,976.0 $ 114.8 $25,486.3
========= ========== ========= =========
</TABLE>
The carrying value and estimated fair value of bonds at December 31, 1996 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 $680.0 $684.8
Due after one year through five years 5,128.8 5,219.7
Due after five years through ten years 6,879.6 7,112.6
Due after ten years 5,195.4 5,496.1
--------- ---------
17,883.8 18,513.2
Mortgage-backed securities, including securities guaranteed
by the U.S. Government 7,371.2 7,596.4
--------- ---------
TOTAL $25,255.0 $26,109.6
========= =========
</TABLE>
52
<PAGE>
Notes To Statutory Financial Statements (Continued)
Proceeds from sales of investments in bonds were $6,390.7 during 1996, $8,068.8
million during 1995 and $5,624.1 million during 1994. Gross capital gains of
$188.8 million in 1996, $255.5 million in 1995 and $100.3 million in 1994 and
gross capital losses of $79.9 million in 1996, $67.1 million in 1995 and $195.8
million in 1994 were realized on those sales, a portion of which were included
in the Interest Maintenance Reserve. The estimated fair value of non-publicly
traded bonds is determined by the Company using a pricing matrix.
B. Stocks
Preferred stocks in good standing had fair values of $150.8 million in 1996 and
$87.9 million in 1995, using a pricing matrix for non-publicly traded stocks and
quoted market prices for publicly traded stocks. Common stocks, except for
unconsolidated subsidiaries, had a cost of $249.2 million in 1996 and $350.5
million in 1995.
C. Mortgages
The fair value of mortgage loans, as determined from a pricing matrix for
performing loans and the estimated underlying real estate value for
non-performing loans, approximated carrying value less valuation reserves held.
D. Other
The carrying value of investments which were non-income producing for the
preceding twelve months was $23.1 million and $113.9 million at December 31,
1996 and 1995, respectively. The Company had restructured loans with book values
of $383.5 million, and $415.0 million at December 31, 1996 and 1995,
respectively. The loans typically have been modified to defer a portion of the
contracted interest payments to future periods. Interest deferred to future
periods totaled $2.2 million in 1996, $2.5 million in 1995 and $2.2 million in
1994. The Company made voluntary contributions to the Asset Valuation Reserve of
$6.8 million and $52.7 million in 1996 and 1994, respectively. No additional
voluntary contribution to the Asset Valuation Reserve was made in 1995.
It is not practicable to determine the fair value of policy loans as they do not
have a stated maturity.
7. PORTFOLIO RISK MANAGEMENT
The Company manages its investment risks primarily to reduce interest rate and
duration imbalances determined in asset/liability analyses. The fair values of
instruments described below, which are not recorded in the financial statements,
are based upon market prices or prices obtained from brokers. The Company does
not hold or issue financial instruments for trading purposes.
The notional amounts described do not represent amounts exchanged by the parties
and, thus, are not a measure of the exposure of the Company. The amounts
exchanged are calculated on the basis of the notional amounts and the other
terms of the instruments, which relate to interest rates, exchange rates,
security prices or financial or other indexes.
The Company enters into financial futures contracts for the purpose of managing
interest rate exposure. Margin requirements are met with the deposit of
securities. Futures contracts are generally settled with offsetting
transactions. Gains and losses on financial futures contracts are recorded when
the contract is closed and amortized through the Interest Maintenance Reserve
over the remaining life of the underlying asset. As of December 31, 1996, the
Company did not have any open financial futures contracts.
The Company utilizes interest rate swap agreements, options, and purchased caps
and floors to reduce interest rate exposures arising from mismatches between
assets and liabilities and to modify portfolio profiles to manage other risks
identified. Under interest rate swaps, the Company agrees to an exchange, at
specified intervals, between streams of variable rate and fixed rate interest
payments calculated by reference to an agreed-upon notional principal amount.
Net amounts receivable and payable are accrued as adjustments to interest income
and included in investment and insurance amounts receivable on the Statutory
Statement of Financial Position. Gains and losses realized on the termination of
contracts are amortized through the Interest Maintenance Reserve over the
remaining life of the associated contract. At December 31, 1996 and 1995, the
Company had swaps with notional amounts of $2,239.5 million and $1,819.8
million, respectively. The fair values of these instruments were $20.7 million
at December 31, 1996 and $9.2 million at December 31, 1995.
Options grant the purchaser the right to buy or sell a security or enter into a
derivative transaction at a stated price within a stated period. The Company's
option contracts have terms of up to fifteen years. The amounts paid for options
purchased are included in other investments on the Statutory Statement of
Financial Position. Gains and losses on these contracts are recorded at the
expiration or termination date and are amortized through the Interest
Maintenance Reserve over the remaining life of the underlying asset. At December
31, 1996 and 1995, the Company had option contracts with notional amounts of
$1,928.4 million and $1,819.8 million, respectively. The Company's credit risk
exposure was limited to the unamortized costs of $18.1 million and $21.7
million, which had fair values of $19.2 million and $63.5 million at
December 31, 1996 and 1995, respectively.
53
<PAGE>
Notes To Statutory Financial Statements (Continued)
Interest rate cap agreements grant the purchaser the right to receive the excess
of a referenced interest rate over a given rate. Interest rate floor agreements
grant the purchaser the right to receive the excess of a given rate over a
referenced interest rate. Amounts paid for interest rate caps and floors are
amortized into interest income over the life of the asset on a straight-line
basis. Unamortized costs are included in other investments on the Statutory
Statement of Financial Position. Amounts receivable and payable are accrued as
adjustments to interest income and included in the Statutory Statement of
Financial Position as investment and insurance amounts receivable. Gains and
losses on these contracts, including any unamortized cost, are recognized upon
termination and are amortized through the Interest Maintenance Reserve over the
remaining life of the associated cap or floor agreement. At December 31, 1996
and 1995, the company had agreements with notional amounts of $3,859.6 million
and $3,366.3 million, respectively. The Company's credit risk exposure on these
agreements is limited to the unamortized costs of $22.0 million and $14.0
million at December 31, 1996 and 1995, respectively. The fair values of these
instruments were $15.2 million and $30.8 million at December 31, 1996 and 1995,
respectively.
The Company utilizes asset swap agreements to reduce exposures, such as currency
risk and prepayment risk, built into certain assets acquired. Cross-currency
interest rate swaps allow investment in foreign currencies, increasing access to
additional investment opportunities, while limiting foreign exchange risk.
Notional amounts relating to asset and currency swaps totaled $364.7 million and
$333.7 million at December 31, 1996 and 1995, respectively. The fair values of
these instruments were an unrecognized gain of $7.8 million at December 31, 1996
and $12.2 million at December 31, 1995.
The Company enters into forward U.S. Treasury commitments for the purpose of
managing interest rate exposure. The Company generally does not take delivery on
forward commitments. These commitments are instead settled with offsetting
transactions. Gains and losses on forward commitments are recorded when the
commitment is closed and amortized through the Interest Maintenance Reserve over
the remaining life of the asset. At December 31, 1996 and 1995, the Company had
U. S. Treasury purchase commitments which will settle during the following year
with contractual amounts of $1,639.4 million and $292.4 million and fair values
of $1,627.4 million and $298.8 million, respectively.
The Company is exposed to credit-related losses in the event of nonperformance
by counterparties to financial instruments. This exposure is limited to
contracts with a positive fair value. The amounts at risk in a net gain position
were $53.9 million and $86.9 million at December 31, 1996 and 1995,
respectively. The Company monitors exposure to ensure counterparties are credit
worthy and concentration of exposure is minimized. Additionally, contingent
collateral positions have been obtained with counterparties when considered
prudent.
8. REINSURANCE
The Company cedes all of its group life and health business to UniCARE and has
other reinsurance agreements with other insurance companies in the normal course
of business. Premiums, benefits to policyholders and provisions for future
benefits are stated net of reinsurance. The Company remains liable to the
insured for the payment of benefits if the reinsurer cannot meet its obligations
under the reinsurance agreements. Premiums ceded were $793.5 million in 1996,
$904.1 million in 1995 and $151.4 million in 1994.
9. LIQUIDITY
The withdrawal characteristics of the policyholders' reserves and funds,
including separate accounts, and the invested assets which support them at
December 31, 1996 are illustrated below:
<TABLE>
<CAPTION>
(In Millions)
<S> <C> <C>
Total policyholders' reserves and funds and separate account liabilities $47,148
Not subject to discretionary withdrawal (6,010)
Policy loans (4,752)
-------
Subject to discretionary withdrawal $36,386
-------
Total invested assets, including separate investment accounts $52,146
Policy loans and other invested assets (13,458)
-------
Readily marketable investments $38,688
-------
</TABLE>
54
<PAGE>
Notes To Statutory Financial Statements (Continued)
10. BUSINESS RISKS AND CONTINGENCIES
The Company is subject to insurance guaranty fund laws in the states in which it
does business. These laws assess insurance companies amounts to be used to pay
benefits to policyholders and claimants of insolvent insurance companies. Many
states allow these assessments to be credited against future premium taxes. The
Company believes such assessments in excess of amounts accrued will not
materially affect its financial position, results of operations or liquidity. In
1996 and 1995, the Company elected not to admit $15.3 million and $17.6 million,
respectively, of guaranty fund premium tax offset receivables relating to prior
assessments.
The Company is involved in litigation arising out of the normal course of its
business. Management intends to defend these actions vigorously. While the
outcome of litigation cannot be foreseen with certainty, it is the opinion of
management, after consultation with legal counsel, that the ultimate resolution
of these matters will not materially affect its financial position, results of
operations or liquidity.
11. RECLASSIFICATIONS
Certain 1995 and 1994 amounts have been reclassified to conform with the current
year presentation.
12. SUBSIDIARIES AND AFFILIATED COMPANIES
Summary of ownership and relationship of the Company and its subsidiaries and
affiliated companies as of December 31, 1996 is illustrated below. The Company
provides management or advisory services to these companies. Subsidiaries are
wholly-owned, except as noted.
Parent
------
Massachusetts Mutual Life Insurance Company
Subsidiaries of Massachusetts Mutual Life Insurance Company
-----------------------------------------------------------
C.M. Assurance Company
C.M. Benefit Insurance Company
C.M. Life Insurance Company
MassMutual Holding Company
MassMutual Holding Company Two, Inc. (Sold in March 1996)
MassMutual of Ireland, Limited
MML Bay State Life Insurance Company
MML Distributors, LLC
Subsidiaries of MassMutual Holding Company
------------------------------------------
GR Phelps, Inc.
MassMutual Holding Trust I
MassMutual Holding Trust II
MassMutual Holding MSC, Inc.
MassMutual International, Inc.
MassMutual Reinsurance Bermuda (Sold in December 1996)
MML Investor Services, Inc.
State House One (Liquidated in December 1996)
Subsidiaries of MassMutual Holding Trust I
------------------------------------------
Antares Leveraged Capital Corporation
Charter Oak Capital Management, Inc.
Cornerstone Real Estate Advisors, Inc.
DLB Acquisition Corporation
Oppenheimer Acquisition Corporation - 86.15%
55
<PAGE>
Notes To Statutory Financial Statements (Continued)
Subsidiaries of MassMutual Holding Trust II
-------------------------------------------
CM Advantage, Inc.
CM International, Inc.
CM Property Management, Inc.
High Yield Management, Inc.
MMHC Investments, Inc.
MML Realty Management
Urban Properties, Inc.
Westheimer 335 Suites, Inc.
Subsidiaries of MassMutual International
----------------------------------------
Compensa de Seguros de Vida S.A. - 33.5%
MassLife Seguros de Vida (Argentina) S. A.
MassMutual International (Bermuda) Ltd.
Mass Seguros de Vida (Chile) S. A. - 33.5%
MassMutual International (Luxemburg) S. A.
MassMutual Holding MSC, Incorporated
------------------------------------
MassMutual/Carlson CBO N. V. - 50%
MassMutual Corporate Value Limited - 46%
Affiliates of Massachusetts Mutual Life Insurance Company
---------------------------------------------------------
MML Series Investment Fund
MassMutual Institutional Funds
Oppenheimer Value Stock Fund
56
<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 58 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 a current schedules of mortality and expense
charges and current fund level expenses.
2. The illustration on page 59 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 60 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 61 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 62 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 63 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 64 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 65 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 nonqualified
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 .62% 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 -1.162%, 4.768% and 10.699%
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, 1998.
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.
57
<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 $ 271
2 2,583 100,000 100,000 100,000 997 1,176 1,363
3 3,972 100,000 100,000 100,000 1,851 2,208 2,594
4 5,431 100,000 100,000 100,000 2,709 3,303 2,973
5 6,982 100,000 100,000 100,000 3,548 4,442 5,491
6 8,570 100,000 100,000 100,000 4,458 5,717 7,254
7 10,259 100,000 100,000 100,000 5,355 7,046 9,194
8 12,032 100,000 100,000 100,000 6,230 8,421 11,320
9 13,893 100,000 100,000 100,000 7,082 9,844 13,653
10 15,848 100,000 100,000 100,000 7,911 11,318 16,216
15 27,189 100,000 100,000 100,000 11,541 19,317 33,314
20 41,663 100,000 100,000 143,694 14,316 28,882 60,887
25 60,136 100,000 100,000 215,213 16,599 40,887 105,497
30 83,713 100,000 100,000 314,620 17,295 55,399 175,765
35 113,804 100,000 114,995 450,683 15,507 72,782 285,242
40 152,208 100,000 132,704 649,139 9,529 92,800 453,943
45 201,222 0 151,279 931,571 0 115,480 711,123
50 263,778 0 172,991 1,350,276 0 140,643 1,097,785
<CAPTION>
End Of Account Value Assuming Hypothetical Gross
Policy Year Annual Investment Return of
----------- -----------------------------------------
0% 6% 12%
----- ------ ------
<S> <C> <C> <C>
1 $ 915 $ 976 $ 1,037
2 1,811 1,990 2,177
3 2,688 3,045 3,431
4 3,546 4,140 4,810
5 4,385 5,279 6,327
6 5,204 6,462 7,999
7 6,001 7,691 9,839
8 6,776 8,966 11,865
9 7,528 10,289 14,098
10 8,257 11,663 16,561
15 11,549 19,380 33,323
</TABLE>
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 MASSMUTUAL OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
58
<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 2,583 100,000 100,000 100,000 890 1,063 1,242
3 3,972 100,000 100,000 100,000 1,688 2,028 2,397
4 5,431 100,000 100,000 100,000 2,487 3,050 3,686
5 6,982 100,000 100,000 100,000 3,261 4,106 5,097
6 8,570 100,000 100,000 100,000 4,104 5,287 6,734
7 10,259 100,000 100,000 100,000 4,928 6,511 8,525
8 12,032 100,000 100,000 100,000 5,726 7,770 10,478
9 13,893 100,000 100,000 100,000 6,496 9,064 12,609
10 15,848 100,000 100,000 100,000 7,239 10,394 14,936
15 27,189 100,000 100,000 100,000 10,308 17,430 30,135
20 41,663 100,000 100,000 127,136 12,029 25,028 53,871
25 60,136 100,000 100,000 183,884 12,103 33,284 90,139
30 83,713 100,000 100,000 258,251 9,498 41,890 144,274
35 113,804 100,000 100,000 352,320 1,899 50,175 222,987
40 152,208 0 100,000 477,942 0 57,105 334,225
45 201,222 0 100,000 636,143 0 60,189 485,605
50 263,778 0 100,000 843,816 0 52,907 686,029
<CAPTION>
End Of Account Value Assuming Hypothetical Gross
Policy Year Annual Investment Return of
----------- -----------------------------------------
0% 6% 12%
------ ------ -------
1 $ 862 $ 921 $ 981
2 1,704 1,877 2,056
3 2,525 2,865 3,234
4 3,324 3,887 4,523
5 4,098 4,943 5,934
6 4,849 6,033 7,479
7 5,573 7,156 9,170
8 6,271 8,315 11,023
9 6,941 9,509 13,054
10 7,584 10,740 15,281
15 10,317 17,439 30,144
</TABLE>
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 MASSMUTUAL OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
59
<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 $ 100,974 $ 101,036 $ 147 $ 208 $ 270
2 2,583 101,806 101,985 102,171 992 1,171 1,357
3 3,972 102,678 103,033 103,418 1,842 2,196 2,581
4 5,431 103,530 104,121 104,787 2,693 3,284 3,950
5 6,982 104,359 105,247 106,289 3,522 4,410 5,452
6 8,570 105,167 106,416 107,939 4,422 5,670 7,194
7 10,259 105,951 107,624 109,750 5,306 6,979 9,105
8 12,032 106,710 108,874 111,738 6,165 8,329 11,193
9 13,893 107,443 110,166 113,921 6,998 9,721 13,476
10 15,848 108,150 111,501 116,318 7,804 11,156 15,973
15 27,189 111,276 118,876 132,391 11,267 18,867 32,383
20 41,663 113,775 127,658 158,496 13,775 27,658 58,496
25 60,136 115,631 138,198 206,631 15,631 38,198 101,290
30 83,713 115,559 149,411 302,647 15,559 49,411 169,077
35 113,804 112,566 160,207 434,066 12,566 60,207 274,725
40 152,208 105,122 168,528 625,790 5,122 68,528 437,615
45 201,222 0 170,731 898,853 0 70,731 686,148
50 263,778 0 160,491 1,304,186 0 60,491 1,060,314
<CAPTION>
End Of Account Value Assuming Hypothetical Gross
Policy Year Annual Investment Return of
----------- -----------------------------------------
0% 6% 12%
------- ------- -------
<S> <C> <C> <C>
1 $ 913 $ 974 $ 1,036
2 1,806 1,985 2,171
3 2,678 3,033 3,418
4 3,530 4,121 4,787
5 4,359 5,247 6,289
6 5,167 6,416 7,939
7 5,951 7,624 9,750
8 6,710 8,874 11,738
9 7,443 10,166 13,921
10 8,150 11,501 16,318
15 11,276 18,876 32,391
</TABLE>
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 MASSMUTUAL OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
60
<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 $ 100,919 $ 100,979 $ 94 $ 153 $ 213
2 2,583 101,700 101,871 102,050 885 1,057 1,236
3 3,972 102,515 102,854 103,221 1,678 2,017 2,384
4 5,431 103,307 103,867 104,499 2,470 3,030 3,662
5 6,982 104,073 104,911 105,895 3,236 4,074 5,058
6 8,570 104,812 105,985 107,418 4,067 5,240 6,673
7 10,259 105,523 107,089 109,080 4,877 6,443 8,435
8 12,032 106,205 108,222 110,894 5,659 7,677 10,349
9 13,893 106,855 109,384 112,874 6,410 8,939 12,428
10 15,848 107,476 110,575 115,035 7,130 10,230 14,690
15 27,189 110,033 116,917 129,180 10,025 16,908 29,172
20 41,663 111,424 123,661 151,007 11,424 23,661 51,007
25 60,136 110,947 130,001 184,347 10,947 30,001 84,347
30 83,713 107,545 134,477 241,466 7,545 34,477 134,897
35 113,804 0 134,132 330,217 0 34,132 208,998
40 152,208 0 123,814 448,796 0 23,814 313,844
45 201,222 0 0 598,420 0 0 456,809
50 263,778 0 0 795,434 0 0 646,694
<CAPTION>
End Of Account Value Assuming Hypothetical Gross
Policy Year Annual Investment Return of
----------- -----------------------------------------
0% 6% 12%
------ ------- --------
<S> <C> <C> <C>
1 $ 860 $ 919 $ 979
2 1,700 1,871 2,050
3 2,515 2,854 3,221
4 3,307 3,867 4,499
5 4,073 4,911 5,895
6 4,812 5,985 7,418
7 5,523 7,089 9,080
8 6,205 8,222 10,894
9 6,855 9,384 12,874
10 7,476 10,575 15,035
15 10,033 16,917 29,180
</TABLE>
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 MASSMUTUAL OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
61
<PAGE>
FLEXIBLE PREMIUM VARIABLE WHOLE LIFE INSURANCE POLICY
Female, Issue Age 35, Nonsmoker
$100,000 Selected Face Amount,
Death Benefit Option I
$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 1,942 2,302 2,693
4 5,431 100,000 100,000 100,000 2,811 3,412 4,089
5 6,982 100,000 100,000 100,000 3,659 4,563 5,624
6 8,570 100,000 100,000 100,000 4,576 5,850 7,404
7 10,259 100,000 100,000 100,000 5,485 7,195 9,367
8 12,032 100,000 100,000 100,000 6,376 8,591 11,524
9 13,893 100,000 100,000 100,000 7,248 10,042 13,895
10 15,848 100,000 100,000 100,000 8,102 11,549 16,504
15 27,189 100,000 100,000 105,777 11,950 19,894 34,005
20 41,663 100,000 100,000 166,371 15,252 30,099 62,311
25 60,136 100,000 100,000 249,524 18,342 43,197 108,488
30 83,713 100,000 117,911 363,081 20,560 59,252 182,453
35 113,804 100,000 136,782 522,891 21,634 78,610 300,512
40 152,208 100,000 155,627 746,056 20,844 101,717 487,618
45 201,222 100,000 177,308 1,074,824 16,077 128,484 778,858
50 263,778 100,000 199,987 1,542,976 2,595 158,720 1,224,584
<CAPTION>
End Of Account Value Assuming Hypothetical Gross
Policy Year Annual Investment Return of
----------- -----------------------------------------
0% 6% 12%
------ ------ -------
<S> <C> <C> <C>
1 $ 930 $ 991 $ 1,053
2 1,839 2,020 2,209
3 2,729 3,089 3,479
4 3,598 4,199 4,876
5 4,445 5,350 6,411
6 5,271 6,545 8,099
7 6,080 7,789 9,962
8 6,871 9,086 12,019
9 7,643 10,437 14,290
10 8,397 11,844 16,799
15 11,957 19,901 34,012
</TABLE>
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 MASSMUTUAL OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
62
<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 $ 270
2 2,583 100,000 100,000 100,000 965 1,140 1,322
3 3,972 100,000 100,000 100,000 1,800 2,146 2,520
4 5,431 100,000 100,000 100,000 2,618 3,192 3,839
5 6,982 100,000 100,000 100,000 3,411 4,272 5,281
6 8,570 100,000 100,000 100,000 4,272 5,479 6,953
7 10,259 100,000 100,000 100,000 5,114 6,729 8,782
8 12,032 100,000 100,000 100,000 5,930 8,016 10,777
9 13,893 100,000 100,000 100,000 6,721 9,341 12,956
10 15,848 100,000 100,000 100,000 7,486 10,707 15,339
15 27,189 100,000 100,000 100,000 10,705 17,988 30,956
20 41,663 100,000 100,000 147,573 12,850 26,185 55,271
25 60,136 100,000 100,000 213,279 13,979 35,763 92,730
30 83,713 100,000 100,000 298,714 13,739 47,051 150,107
35 113,804 100,000 104,511 410,408 10,780 60,064 235,867
40 152,208 100,000 113,846 554,087 3,009 74,409 362,149
45 201,222 0 122,450 744,232 0 88,732 539,299
50 263,778 0 128,859 983,473 0 102,269 780,534
</TABLE>
<TABLE>
<CAPTION>
End Of Account Value Assuming Hypothetical Gross
Policy Year Annual Investment Return of
----------- -----------------------------------------
0% 6% 12%
--------- --------- ---------
<S> <C> <C> <C>
1 $ 883 $ 944 $ 1,004
2 1,746 1,921 2,103
3 2,587 2,932 3,307
4 3,404 3,978 4,625
5 4,198 5,058 6,068
6 4,967 6,174 7,648
7 5,709 7,324 9,477
8 6,425 8,511 11,272
9 7,116 9,736 13,351
10 7,781 11,002 15,634
15 10,712 17,995 30,963
</TABLE>
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 MASSMUTUAL OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
63
<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 $ 101,051 $ 195 $ 256 $ 318
2 2,583 101,835 102,015 102,204 1,053 1,234 1,422
3 3,972 102,720 103,079 103,468 1,933 2,292 2,681
4 5,431 103,582 104,180 104,854 2,796 3,394 4,067
5 6,982 104,421 105,320 106,374 3,635 4,534 5,588
6 8,570 105,237 106,500 108,042 4,542 5,805 7,347
7 10,259 106,033 107,726 109,878 5,438 7,131 9,283
8 12,032 106,808 108,999 111,899 6,313 8,504 11,404
9 13,893 107,563 110,321 114,123 7,168 9,926 13,728
10 15,848 108,297 111,693 116,572 8,002 11,398 16,277
15 27,189 111,719 119,463 133,203 11,712 19,455 33,196
20 41,663 114,821 129,123 162,009 14,821 29,123 60,678
25 60,136 117,618 141,191 243,440 17,618 41,191 105,843
30 83,713 119,322 155,350 354,622 19,322 55,350 178,202
35 113,804 119,568 171,660 511,068 19,568 71,660 293,717
40 152,208 117,476 189,593 729,566 17,476 89,593 476,841
45 201,222 110,730 206,790 1,051,595 10,730 106,790 762,025
50 263,778 0 218,296 1,510,601 0 118,296 1,198,890
</TABLE>
<TABLE>
<CAPTION>
End Of Account Value Assuming Hypothetical Gross
Policy Year Annual Investment Return of
----------- -----------------------------------------
0% 6% 12%
----- ------ -------
<S> <C> <C> <C>
1 $ 928 $ 990 $ 1,051
2 1,835 2,015 2,204
3 2,720 3,079 3,468
4 3,582 4,180 4,854
5 4,421 5,320 6,374
6 5,237 6,500 8,042
7 6,033 7,726 9,878
8 6,808 8,999 11,899
9 7,563 10,321 14,123
10 8,297 11,693 16,572
15 11,719 19,463 33,203
</TABLE>
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 MASSMUTUAL OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
64
<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
Assuming Hypothetical Gross Assuming Hypothetical Gross
Premiums Annual Investment Return of Annual Investment Return of
End Of Accumulated --------------------------- ---------------------------
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 $ 208 $ 269
2 2,583 101,742 101,916 102,098 960 1,135 1,316
3 3,972 102,578 102,922 103,295 1,791 2,136 2,509
4 5,431 103,389 103,960 104,604 2,603 3,174 3,817
5 6,982 104,175 105,030 106,032 3,388 4,243 5,246
6 8,570 104,933 106,131 107,592 4,238 5,436 6,897
7 10,259 105,663 107,262 109,294 5,068 6,667 8,699
8 12,032 106,363 108,424 111,153 5,868 7,929 10,658
9 13,893 107,036 109,620 113,184 6,641 9,225 12,789
10 15,848 107,680 110,849 115,406 7,385 10,554 15,111
15 27,189 110,453 117,519 130,086 10,446 17,512 30,078
20 41,663 112,314 124,979 153,135 12,314 24,979 53,135
25 60,136 113,000 133,033 205,301 13,000 33,033 89,261
30 83,713 112,111 141,285 288,081 12,111 41,285 144,764
35 113,804 108,229 148,010 396,301 8,229 48,010 227,759
40 152,208 0 150,656 535,572 0 50,656 350,047
45 201,222 0 141,900 720,099 0 41,900 521,811
50 263,778 0 110,010 952,866 0 10,010 756,243
</TABLE>
<TABLE>
<CAPTION>
End Of Account Value Assuming Hypothetical Gross
Policy Year Annual Investment Return of
----------- -----------------------------------------
0% 6% 12%
------ ------ ------
<S> <C> <C> <C>
1 $ 882 $ 942 $ 1,002
2 1,742 1,916 2,098
3 2,578 2,922 3,295
4 3,389 3,960 4,604
5 4,175 5,030 6,032
6 4,933 6,131 7,592
7 5,663 7,262 9,294
8 6,363 8,424 11,153
9 7,036 9,620 13,184
10 7,680 10,849 15,406
15 10,453 17,519 30,086
</TABLE>
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 MASSMUTUAL OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
65
<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 (the "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
Article V of the Bylaws of MassMutual provide for indemnification of directors
and officers as follows:
Article V. Subject to limitations of law, the Company shall indemnify:
(a) each director, officer or employee;
(b) any individual who serves at the request of the Company as
Secretary, a director, board member, committee member, officer
or employee of any organization or any separate investment
account; or
(c) any individual who serves in any capacity with respect to any
employee benefit plan; from and against all loss, liability and
expense imposed upon or incurred by such person in connection
with any action, claim or proceeding of any nature whatsoever,
in which such person may be involved or with which he or she may
be threatened, by reason of any alleged act, omission or
otherwise while serving in any such capacity.
Indemnification shall be provided although the person no longer serves
in such capacity and shall include protection for the person's heirs
and legal representatives. Indemnities hereunder shall include, but not
be limited to, all costs and reasonable counsel fees, fines, penalties,
judgments or awards of any kind, and the amount of reasonable
settlements, whether or not payable to the Company or to any of the
other entities described in the preceding paragraph, or to the
policyholders or security holders thereof.
Notwithstanding the foregoing, no indemnification shall be
provided with respect to:
(1) any matter as to which the person shall have been
adjudicated in any proceeding not to have acted in
good faith in the reasonable belief that his or her
action was in the best interests of the Company or,
to the extent that such matter relates to service
with respect to any employee benefit plan, in the
best interests of the participants or beneficiaries
of such employee benefit plan;
(2) any liability to any entity which is registered as
an investment company under the Federal 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; and
(3) any action, claim or proceeding voluntarily
initiated by any person seeking indemnification,
unless such action, claim or proceeding had been
authorized by the Board of Directors or unless such
person's indemnification is awarded by vote of the
Board of Directors.
<PAGE>
In any matter disposed of by settlement or in the
event of an adjudication which in the opinion of
the General Counsel or his delegate does not make a
sufficient determination of conduct which could
preclude or permit indemnification in accordance
with the preceding paragraphs (1), (2) and (3), the
person shall be entitled to indemnification unless,
as determined by the majority of the disinterested
directors or in the opinion of counsel (who may be
an officer of the Company or outside counsel
employed by the Company), such person's conduct was
such as precludes indemnification under any of such
paragraphs.
The Company may at its option indemnify for
expenses incurred in connection with any action or
proceeding in advance of its final disposition,
upon receipt of a satisfactory undertaking for
repayment if it be subsequently determined that the
person thus indemnified is not entitled to
indemnification under this Article V.
Insofar as indemnification for liability arising
under the Securities Act of 1933 (the "Act") may be
permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been
advised that in the opinion of the Commission such
indemnification is against public policy as
expressed in the Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other
than the payment by the registrant of expenses
incurred or paid by a director, officer or
controlling person of the registrant 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, the registrant 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 Act 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
Massachusetts Mutual 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 Massachusetts Mutual Life Insurance Company.
<PAGE>
CONTENTS OF POST-EFFECTIVE Amendment No. 2
This Post-Effective Amendment is comprised of the following documents:
The Facing Sheet.
The Prospectus consisting of 65 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. Craig Waddington, FSA, MAAA.
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
MassMutual establishing the Separate
Account.*
(a) Resolution of the Board of
Directors authorizing
issuance of Policy.*
(2) Not applicable.
(3) Form of Distribution Agreements:
(a) (1) Form of Distribution
Servicing Agreement
between MML
Distributors, LLC and
MassMutual.**
(a) (2) Form of Co-
Underwriting Agreement
between MML Investors
Services, Inc. and
MassMutual.**
(b) Not applicable.
(c) Not applicable.
(4) Not applicable.
(5) Form of Flexible Premium Variable
Whole Life Insurance Policy.*
*Incorporated by reference to Registration Statement No. 33-89798 filed with the
Commission on February 28, 1995. **Incorporated by reference to post-effective
Amendment No. 1 to this Registration Statement filed with the Commission on May
1, 1996.
<PAGE>
(6) (a) Certificate of Incorporation of MassMutual.*
(b) By-Laws of MassMutual.*
(7) Not applicable.
(8) Not applicable.
(9) Not applicable.
(10) Application for a Flexible Premium Variable Whole Life
insurance policy.*
(11) Memorandum describing MassMutual issuance, transfer,
and redemption procedures for the Policy.*
99.2 Opinion and Consent of Counsel as to the legality of the
securities being registered.***
3. No financial statement will be omitted from the Prospectus
pursuant to Instruction 1(b) or (c) of Part I.
4. Not applicable.
99.C.1 Consent of Coopers & Lybrand L.L.P.***
99.C.6 Opinion and consent of Craig Waddington, FSA, MAAA, as to
actuarial matters pertaining to the securities being
registered.***
99.5 Powers of Attorney***
27. Financial Data Schedule***
*Incorporated by reference to Registration Statement No. 33-89798 filed with the
Commission on February 28, 1995.
**Incorporated by reference to post-effective Amendment No. 1 to this
Registration Statement filed with the Commission on May 1, 1996.
***Filed herewith.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
caused this Post-Effective Amendment No. 2 to Registration Statement No.
33-89798 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, 1997.
MASSACHUSETTS MUTUAL VARIABLE LIFE SEPARATE ACCOUNT I
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
(Depositor)
By: /s/ Thomas B. Wheeler*
---------------------------------------
Thomas B. Wheeler, Chief Executive Officer
Massachusetts Mutual Life Insurance Company
/s/ Richard M. Howe On April 21, 1997, as Attorney-in-Fact pursuant to
- -------------------- powers of attorney filed herewith.
*Richard M. Howe
As required by the Securities Act of 1933, this Post-Effective Amendment No. 2
to Registration Statement No. 33-89798 has been signed by the following persons
in the capacities and on the duties indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Thomas B. Wheeler* Chief Executive Officer and April 21, 1997
- ------------------------------ Chairman of the Board
Thomas B. Wheeler
/s/ John J. Pajak* President, Chief Operating Officer April 21, 1997
- ------------------------------ and Director
John J. Pajak
/s/ Daniel J. Fitzgerald* Executive Vice President, April 21, 1997
- ------------------------------ Chief Financial Officer &
Daniel J. Fitzgerald Chief Accounting Officer
/s/ Roger G. Ackerman* Director April 21, 1997
- ------------------------------
Roger G. Ackerman
/s/ James R. Birle* Director April 21, 1997
- ------------------------------
James R. Birle
/s/ Frank C. Carlucci, III* Director April 21, 1997
- ------------------------------
Frank C. Carlucci, III
/s/ Gene Chao* Director April 21, 1997
- ------------------------------
Gene Chao, Ph.D.
/s/ Patricia Diaz Dennis* Director April 21, 1997
- ------------------------------
Patricia Diaz Dennis
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Anthony Downs* Director April 21, 1997
- ------------------------------
Anthony Downs
/s/ James L. Dunlap* Director April 21, 1997
- ------------------------------
James L. Dunlap
/s/ William B. Ellis* Director April 21, 1997
- ------------------------------
William B. Ellis, Ph.D.
/s/ Robert M. Furek* Director April 21, 1997
- ------------------------------
Robert M. Furek
/s/ Charles K. Gifford* Director April 21, 1997
- ------------------------------
Charles K. Gifford
/s/ William N. Griggs* Director April 21, 1997
- ------------------------------
William N. Griggs
/s/ George B. Harvey* Director April 21, 1997
- ------------------------------
George B. Harvey
/s/ Barbara B. Hauptfuhrer* Director April 21, 1997
- ------------------------------
Barbara B. Hauptfuhrer
/s/ Sheldon B. Lubar* Director April 21, 1997
- ------------------------------
Sheldon B. Lubar
/s/ William B. Marx, Jr.* Director April 21, 1997
- ------------------------------
William B. Marx, Jr.
/s/ John F. Maypole* Director April 21, 1997
- ------------------------------
John F. Maypole
/s/ Donald F. McCullough* Director April 21, 1997
- ------------------------------
Donald F. McCullough
/s/ Alfred M. Zeien* Director April 21, 1997
- ------------------------------
Alfred M. Zeien
/s/ Richard M. Howe On April 21, 1997, as Attorney-in-Fact pursuant to
- ------------------------------ powers of attorney filed herewith.
*Richard M. Howe
</TABLE>
<PAGE>
REPRESENTATION BY REGISTRANT'S COUNSEL
--------------------------------------
As Counsel to the Registrant, I, James M. Rodolakis, have reviewed this
Post-Effective Amendment No. 2 to Registration Statement No. 33-89798 and I
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/ James M. Rodolakis
----------------------
James M. Rodolakis
Counsel
<PAGE>
EXHIBIT LIST
99.2 Opinion and Consent of James M. Rodolakis
99.C.1 Consent of Coopers & Lybrand, L.L.P.
99.C.6 Opinion and Consent of Craig Waddington
99.5 Powers of Attorney
27 Financial Data Schedule
<PAGE>
EXHIBIT 99.2
April 21, 1997
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
RE: Post-Effective Amendment No. 2 to Registration Statement
No. 33-89798 filed on Form S-6
Ladies and Gentlemen:
This opinion is furnished in connection with the filing of Post-Effective
Amendment No. 2 to Registration Statement No. 33-89798 under the Securities Act
of 1933 for Massachusetts Mutual Life Insurance Company's ("MassMutual")
Flexible Premium Variable Whole Life Insurance Policies (the "Policies").
Massachusetts Mutual Variable Life Separate Account I issues the Policies.
As Counsel for MassMutual, I provide legal advice to MassMutual in connection
with the operation of its variable products. In such role I am familiar with the
Post-Effective Amendment for the 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. MassMutual is a valid and subsisting corporation, organized and operated
under the laws of the Commonwealth of Massachusetts and is subject to
regulation by the Massachusetts Commissioner of Insurance.
2. Massachusetts Mutual Variable Life Separate Account I is a separate
account validly established and maintained by MassMutual in accordance
with Massachusetts law.
3. All of the prescribed corporate procedures for the issuance of the
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/ James M. Rodolakis
James M. Rodolakis
Counsel
<PAGE>
EXHIBIT 99.C.1
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Massachusetts Mutual Life Insurance Company
We consent to the inclusion in Post-Effective Amendment No. 2 to the
Registration Statement of Massachusetts Mutual Variable Life Separate Account I
(Variable Life Select segment) on Form N-8B-2 (Registration No. 33-89798) of our
report, which includes explanatory paragraphs relating to the use of statutory
accounting practices, which practices are no longer considered to be in
accordance with generally accepted accounting principles, and the change in our
opinion for prior years, dated February 7, 1997 on our audits of the statutory
financial statements of Massachusetts Mutual Life Insurance Company, and of our
reports dated February 4, 1997 on our audits of Massachusetts Mutual Variable
Life Separate Account I (Variable Life Select segment). We also consent to the
reference to our Firm under the caption "Experts."
Coopers & Lybrand L.L.P.
Springfield, Massachusetts
April 25, 1997
<PAGE>
EXHIBIT 99.C.6
April 1, 1997
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Ladies and Gentlemen:
This opinion is furnished in connection with Post-Effective Amendment No. 2 to
Registration Statement No. 33-89798 for Massachusetts Mutual 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. 2 to Registration Statement No. 33-89798, 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
<PAGE>
EXHIBIT 99.5
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, John J. Pajak, President and Chief Operating Officer of
Massachusetts Mutual Life Insurance Company("MassMutual"), does hereby
constitute and appoint Lawrence V. Burkett, Jr., Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as President and Chief Operating Officer of MassMutual that said attorneys and
agents may deem necessary or advisable to enable MassMutual to comply with the
Securities Act of 1933, as amended (the "1933 Act"), the Investment Company Act
of 1940, as amended (the "1940 Act"), and any rules, regulations, orders or
other requirements of the Securities and Exchange Commission (the "Commission")
thereunder. This power of attorney applies to the registration, under the 1933
Act and the 1940 Act, of shares of beneficial interest of MassMutual separate
investment accounts (the "MassMutual Separate Accounts"). This power of attorney
authorizes such attorneys and agents to sign the Undersigned's name on his
behalf as President and Chief Operating Officer of MassMutual to the
Registration Statements and to any instruments or documents filed or to be filed
with the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such statements,
documents or instruments of any MassMutual Separate Account, including but not
limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
CML/OFFITBANK Separate Account
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 17th day of February,
1997.
/s/ John J. Pajak
- ------------------------------ ---------------------------
John J. Pajak Witness
President and Chief Operating Officer
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