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Registration No. 33-87904
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 3 TO FORM S-6
FOR REGISTRATION UNDER THE SECURITIES
ACT OF 1933 OF SECURITIES OF
UNIT INVESTMENT TRUSTS REGISTERED
ON FORM N-8B-2
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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:
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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 May 1, 1997 pursuant to paragraph (a) of Rule 485.
*STATEMENT PURSUANT TO RULE 24F-2
Pursuant to Rule 24f-2 of the Investment Company Act of 1940, the Registrant
registered an indefinite amount of securities being offered. The Rule 24f-2
Notice for the 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; What is MassMutual; The Separate Account
3 Investment of the Separate Account
4 Sales and Other Agreements
5 The Separate Account
6 The Separate Account
7 Not Applicable
8 Not Applicable
9 Legal Proceedings
10 Cover Page; Basic Questions and Answers
About Us and Our Policy; Death Benefits Under the Policy;
Free Look Provision; Account Value and Surrender Value;
Policy Loan Privilege; The Separate Account; Charges
Under the Policy; Sales and Other Agreements; When We Pay
Proceeds; Payment Options; Our Rights; Your Voting
Rights; Basic Questions and Answers About Us and Our
Policy
11 The Separate Account
12 The Separate Account; Sales and Other Agreements
13 The Separate Account; Charges Under the Policy
14 Basic Questions and Answers About Us and Our
Policy; The Separate Account; Sales and Other
Agreements
15 Basic Questions and Answers About Us and Our
Policy; General Provisions of the Policy
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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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16 The Separate Account; Investment Return
17 The Separate Account Value and Cash Surrender
Value; Withdrawal Rights and Payment Options
18 The Separate Account
19 Records and Reports
20 Not Applicable
21 What is the loan privilege and how does a
loan affect the Policy's Death Benefit and
Cash Surrender Value; Policy Loan
22 Not Applicable
23 Bonding Arrangement
24 Limits on Our Right to Challenge the Policy;
Suicide; Misstatement of Age or Sex;
Assignment; Beneficiary; Our Rights; The
Separate Account
25 Basic Questions and Answers About Us and Our
Policy
26 Not Applicable
27 Basic Questions and Answers About Us and Our
Policy
28 Directors and Executive Officers of MassMutual
29 Basic Questions and Answers About Us and Our
Policy
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
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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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34 Not Applicable
35 Basic Questions and Answers About Us and Our
Policy
36 Not Applicable
37 Not Applicable
38 Sales and Other Agreements
39 Sales and Other Agreements
40 Sales and Other Agreements
41 Sales and Other Agreements
42 Not Applicable
43 Sales and Other Agreements
44 The Separate Account; Investment Return
Charges for Federal Income Tax; General
Provisions of the Policy
45 Not Applicable
46 The Separate Account; Investment Return
47 The Separate Account
48 The Separate Account; Investment Return
49 Not Applicable
50 The Account
51 Cover Page; Basic Questions and Answers
About Us and Our Policy
52 The Separate Accounts; Our Rights
53 Federal Income Tax Considerations
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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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54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Financial Statements
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MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
Flexible Premium Variable Whole Life Insurance
This Prospectus describes a flexible premium variable whole life insurance
policy being offered by Massachusetts Mutual Life Insurance Company
("MassMutual"). The Policy provides lifetime insurance protection and has
flexibility with respect to premium payments, the amount of which payments is
based upon the table of Selected Face Amounts chosen in the Application.
Policyowners have several investment alternatives. An individual Policyowner may
allocate the premium for his or her Policy among a Guaranteed Principal Account
("GPA") and the seventeen Separate Account divisions of a designated segment of
Massachusetts Mutual Variable Life Separate Account I (the "Separate Account")
after certain deductions have been made. (For details see Deductions From
Premiums on page 10.) At any one time, only eight divisions are available to a
Policyowner. The Separate Account divisions consist of five divisions (the "MML
Divisions") which invest in MML Series Investment Fund, nine divisions, (the
"Oppenheimer Divisions"), which invest in nine funds of Oppenheimer Variable
Account Funds, and three divisions, (the "Panorama LifeSpan Divisions"), which
invest in the Panorama LifeSpan Portfolios of the Panorama Series Fund, Inc.
(The Panorama LifeSpan Divisions and the MML Equity Index Division are subject
to state availability.)
The Death Benefit may, and Cash Surrender Value of a Policy most likely will,
vary up or down depending on the investment performance of the divisions of the
Separate Account (the "Divisions"). While there is no guaranteed minimum Cash
Surrender Value for a Policy invested in the Separate Account, a Policy's Death
Benefit will never be less than its Selected Face Amount. This amount can
increase, decrease, or remain level each year based upon the Selected Face
Amount and Death Benefit Option chosen by the Policyowner, subject to certain
rules established by MassMutual. Furthermore, the Policy will not lapse provided
there is sufficient Account Value available to pay applicable monthly charges.
(For details see Account Value Charges on page 11.)
The Divisions have distinct investment portfolios. The MML Equity Division
invests in shares of MML Equity Fund, which invests primarily in common stocks
and other equity securities. The MML Equity Index Division invests in shares of
MML Equity Index Fund, which seeks to provide investment results that correspond
to the price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock Price
Index (the "S&P 500 Index"). The MML Blend Division invests in shares of MML
Blend Fund, which invests in a portfolio that may include common stocks and
other equity-type securities, bonds and other debt securities with maturities
generally exceeding one year, and money market instruments and other debt
securities with maturities generally not exceeding one year. The MML Managed
Bond Division invests in shares of MML Managed Bond Fund, which invests
primarily in publicly issued, readily marketable, fixed-income securities. The
MML Money Market Division invests in shares of MML Money Market Fund, which
invests primarily in short-term debt instruments. The Oppenheimer Global
Securities Division invests in shares of Oppenheimer Global Securities Fund
which invests primarily in securities of foreign issuers, growth type companies,
cyclical industries and other securities which are believed will appreciate in
value. The Oppenheimer Capital Appreciation Division invests in shares of
Oppenheimer Capital Appreciation Fund which invests primarily in securities of
growth-type companies. The Oppenheimer Growth Division invests in shares of
Oppenheimer Growth Fund which invests primarily in securities of well-known
companies. The Oppenheimer Growth & Income Division invests in shares of
Oppenheimer Growth & Income Fund which invests primarily in equity and debt
securities. The Oppenheimer Multiple Strategies Division invests in shares of
Oppenheimer Multiple Strategies Fund which invests primarily in common stocks
and other equity securities, bonds, other debt securities and "money market"
securities. The Oppenheimer High Income Division invests in shares of
Oppenheimer High Income Fund which invests primarily in lower-rated, high yield,
high risk income securities. The Oppenheimer Strategic Bond Division invests in
shares of Oppenheimer Strategic Bond Fund which invests primarily in: (i)
foreign government and corporate debt securities; (ii) U.S. government
securities; and (iii) lower-rated high yield, high-risk debt securities. The
Oppenheimer Bond Division invests in shares of Oppenheimer Bond Fund which
invests primarily in high yield fixed-income securities. The Oppenheimer Money
Division invests in shares of Oppenheimer Money Fund which invests primarily in
"money market" securities consistent with low capital risk and maintenance of
liquidity. The Panorama LifeSpan Capital Appreciation Division invests in shares
of the Panorama LifeSpan Capital Appreciation Portfolio, which invests primarily
in equity securities. The Panorama LifeSpan Balanced Division invests in shares
of Panorama LifeSpan Balanced Portfolio, which invests in equity securities and
fixed income securities with a slightly stronger focus on equity securities. The
Panorama LifeSpan Diversified Income Division invests in Panorama LifeSpan
Diversified Income Portfolio, which invests in fixed income securities.
(Collectively, these seventeen funds are referred to as the "Funds.") The shares
of the underlying Funds purchased by the Divisions are held by MassMutual as
custodian of the Separate Account. (For details regarding the charges against
the Separate Account, see Separate Account Charges on page 11.)
All Policies are serviced through MassMutual's Home Office which is located in
Springfield, Massachusetts. The mailing address is Massachusetts Mutual Life
Insurance Company, Springfield, Massachusetts 01111. The telephone number is
(413) 788-8411.
May 1, 1997
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
<PAGE>
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 OF MML SERIES
INVESTMENT FUND, THE OPPENHEIMER VARIABLE ACCOUNT FUNDS, PANORAMA SERIES FUND,
INC. AND MML EQUITY INDEX FUND.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FURTHER REFERENCE.
THE PURPOSE OF THE POLICY WE ARE OFFERING IS TO PROVIDE INSURANCE PROTECTION FOR
A POLICY'S BENEFICIARY. WE DO NOT CLAIM THAT THE POLICY IS IN ANY WAY SIMILAR TO
OR COMPARABLE TO 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 whole
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.
2
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Table Of Contents
Page
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Definitions Of Terms................................................................................... 5
Basic Questions And Answers About Us And Our Policy.................................................... 7
What is MassMutual?................................................................................. 7
What variable life insurance policy are We offering?................................................ 7
Availability........................................................................................ 7
Underwriting........................................................................................ 7
What is the Account Value of the Policy?............................................................ 7
What are the Divisions of the Separate Account?..................................................... 7
What is the Guaranteed Principal Account ("GPA")?................................................. 8
Is the level of the Death Benefit guaranteed?....................................................... 8
Is the Death Benefit subject to income taxes?....................................................... 8
Does the Policy have a Cash Surrender Value?........................................................ 8
What is a modified endowment contract?.............................................................. 8
Can this Policy become a modified endowment contract?............................................... 9
What about Premiums?................................................................................ 9
When are Initial Premiums allocated to the Guaranteed Principal Account or the Separate Account?.... 9
How can the Net Premium and the Account Value of the Policy be allocated among the
Guaranteed Principal Account and the Separate Account Divisions?................................... 9
How long will the Policy remain in force?........................................................... 9
Are there charges against the Policy?............................................................... 9
What is the loan privilege and how does a loan affect the Policy's Death Benefit and Cash
Surrender Value?................................................................................... 10
Are dividends paid on the Policy?................................................................... 10
Do I have a right to cancel?........................................................................ 10
Charges Under The Policy............................................................................... 10
Deductions from Premiums............................................................................ 10
Sales Load......................................................................................... 10
State Premium Tax Charge........................................................................... 11
Deferred Acquisition Cost ("DAC") Tax Charge...................................................... 11
Account Value Charges............................................................................... 11
Administrative Charge.............................................................................. 11
Charge for Cost of Insurance Protection............................................................ 11
Underwriting Charge................................................................................ 11
Separate Account Charges............................................................................ 11
Charges for Mortality and Expense Risks............................................................ 11
Charges for Federal Income Taxes................................................................... 12
The Separate Account 12
Investment of the Separate Account.................................................................. 12
Rates of Return..................................................................................... 17
General Provisions Of The Policy....................................................................... 21
Premiums............................................................................................ 21
Planned Policy Premiums............................................................................. 21
Minimum Initial Policy Premium...................................................................... 21
Minimum Case Premium................................................................................ 21
Initial Case Premium Paid........................................................................... 21
Minimum and Maximum Premium Payments................................................................ 21
Termination......................................................................................... 22
Grace Period........................................................................................ 22
Death Benefit Under The Policy ........................................................................ 22
Account Value And Cash Surrender Value................................................................. 22
Account Value....................................................................................... 22
Automated Account Value Transfer.................................................................... 23
Investment Return................................................................................... 23
Cash Surrender Value................................................................................ 23
Withdrawals......................................................................................... 23
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3
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Policy Loan Privilege.................................................................................. 24
Source of Loan...................................................................................... 24
If Loans Exceed the Policy Account Value............................................................ 24
Interest............................................................................................ 24
Repayment........................................................................................... 24
Interest on Loaned Value............................................................................ 24
Effect of Loan...................................................................................... 24
Free Look Provision.................................................................................... 24
Exchange Privilege..................................................................................... 25
Your Voting Rights..................................................................................... 25
Our Rights............................................................................................. 25
Directors And Executive Vice Presidents Of MassMutual.................................................. 25
The Guaranteed Principal Account....................................................................... 26
Federal Income Tax Considerations...................................................................... 27
MassMutual - Tax Status............................................................................. 27
Policy Proceeds, Premiums, and Loans................................................................ 27
Modified Endowment Contracts........................................................................ 28
Diversification Standards........................................................................... 28
Additional Provisions Of The Policy.................................................................... 29
Paid-up Policy Date................................................................................. 29
Reinstatement Option................................................................................ 29
Payment Options..................................................................................... 29
Fixed Amount Payment Option......................................................................... 29
Fixed Time Payment Option........................................................................... 29
Interest Payment Option............................................................................. 29
Lifetime Payment Option............................................................................. 29
Joint Lifetime Payment Option....................................................................... 29
Joint Lifetime Payment Option with Reduced Payments................................................. 29
Withdrawal Rights under Payment Options............................................................. 30
Beneficiary......................................................................................... 30
Changing the Owner or Beneficiary................................................................... 30
Right to Substitute Insured......................................................................... 30
Assignment.......................................................................................... 30
Dividends........................................................................................... 30
Limits on Our Right to Challenge the Policy......................................................... 30
Misstatement of Age or Sex.......................................................................... 30
Suicide............................................................................................. 31
When We Pay Proceeds................................................................................ 31
Records And Reports.................................................................................... 31
Sales And Other Agreements............................................................................. 31
Commissions Schedule................................................................................ 31
Bonding Arrangement................................................................................. 31
Legal Proceedings...................................................................................... 32
Experts................................................................................................ 32
Financial Statements................................................................................... 32
Appendix A............................................................................................. 58
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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.
Automated Account Value Transfer: The automated transfer process which allows a
Policyowner to specify, subject to applicable transfer rules, a specific dollar
amount or a whole-number percentage of a Division's Account Value to be
transferred monthly from that Division to any other Division(s) and/or the
Guaranteed Principal Account.
Beneficiary: The person or persons that the Policyowner specifies to receive
insurance proceeds after the Insured dies.
Case: A group of Policies sold to individuals with a common employment or other
non-insurance motivated relationship. All Policies in a Case are aggregated for
purposes of determining the Policy Date or Issue Date, underwriting requirements
and sales load percentages.
Cash Surrender Value: The amount payable to a Policyowner upon Surrender of the
Policy. It is equal to the Account Value less any Policy Debt.
Death Benefit: The amount payable to the named Beneficiary when the Insured
dies. A choice of Death Benefits is available under the Policy (referred to as
"Option 1" and "Option 2"). The Death Benefit equals the greater of the Selected
Face Amount (plus the Account Value, under Option 2), or the Minimum Face Amount
in effect on the date of death, less Policy Debt, plus unearned or minus unpaid
monthly deductions.
Divisions: The subaccounts of the Separate Account, each of which invests in
shares of either the MML Series Investment Fund, the Oppenheimer Variable
Account Funds or the Panorama Series Fund, Inc.
Fixed Account Values: Account Values which are allocated to the GPA.
Free Look Period: The period during which a Policyowner may return the Policy.
It must be within 10 days of receipt of the Policy, or within 10 days after the
Policyowner receives the notice of a right to withdraw, or within 45 days after
the date of Part I of the Application, whichever is latest (unless a different
period is mandated under applicable state law). Until the expiration of the Free
Look Period, amounts will be held in the MML Money Market Division.
Guaranteed Principal Account ( "GPA"): A fixed account to which a Policyowner
may allocate Net Premium or Account Value, which guarantees both the principal
and a minimum interest rate.
Home Office: The Home Office of MassMutual is located at 1295 State Street in
Springfield, Massachusetts.
Initial Case Premium Paid: The total dollar amount paid for all Policies in a
Case before the Case is installed on the administrative system.
Insured: Person whose life this Policy insures.
Issue Date: The date shown on the Schedule Page. It is the start date of the
suicide and contestability periods. It is also the date from which the Policy is
in force if the first premium has been paid.
Minimum Face Amount: An amount equal to Account Value times the Minimum Face
Amount percentage. This percentage depends upon the Insured's age, sex and
smoking classification.
Monthly Calculation Date: The date on which the monthly deductions under the
Policy are deducted from the Account Value. The first Monthly Calculation Date
will be the Policy Date, and subsequent monthly deductions will be on the same
date of each succeeding calendar month.
Net Premium: Premium paid less sales expense and premium tax charges.
Paid-up Policy Date: The Policy Anniversary Date nearest the Insured's 100th
birthday.
Policy: The Flexible Premium Variable Life Insurance Policy With Table Of
Selected Face Amounts offered by MassMutual that is described in this
Prospectus.
Policy Anniversary: The anniversary of the Policy Date.
Policy Date: The date shown on the Schedule Page of the Policy used as the
starting point for determining Policy Anniversary Dates, Policy Years and
Monthly Calculation Dates.
Policy Debt: The amount of obligation from a Policyowner to MassMutual from
outstanding loans made to the Policyowner under the Policy. This amount includes
any loan interest accrued to date.
Policy Year: The twelve month period commencing with the Policy Date, and each
successive twelve month period thereafter.
Policyowner: The corporation, partnership, trust, individual, or other entity
who owns the Policy.
Premium: The total dollar amount paid for the Policy.
Premium Tax: The amount of premium tax, if any, charged by a state or other
governmental authority.
Register Date: The date the Company allocates the initial premium less certain
deductions to the Separate Account. It is the Valuation Date which is on, or
next follows the later of the date on which We receive a completed Part I of the
Application for this Policy at our Home Office or the date We receive the first
premium payment for the Policy at our Home Office.
Selected Face Amount: The amount of insurance coverage chosen by the
Policyowner.
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 under the Investment
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Company Act of 1940, as amended. The Separate Account will be used to receive
and invest premiums for this Policy and for other variable life insurance
policies MassMutual issues, and for each such policy there will be a designated
segment of the Separate Account.
Surrender: A surrender by the Policyowner of all rights under the Policy in
exchange for the entire Cash Surrender Value under the Policy.
Valuation Date: Any date on which the net asset value of the shares of the Funds
is determined. Generally, this will be any date on which the New York Stock
Exchange (or its successor) is open for trading.
Valuation Period: The period of time from the end of one Valuation Date to the
end of the next Valuation Date.
Valuation Time: The time the New York Stock Exchange (or its successor) closes
on a Valuation Date (currently 4:00 p.m. New York time). All actions which are
to be performed on a Valuation Date will be performed as of the Valuation Time.
Variable Account Values: Account Values which are allocated to any of the
Divisions.
We or Us: Refers to MassMutual.
Withdrawal: A withdrawal of Account Value by the Policyowner.
You or Yours: Refers to the Policyowner.
6
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Basic Questions And Answers About Us And Our Policy
What is MassMutual? MassMutual is a mutual life insurance company chartered in
1851 under the laws of Massachusetts. Its Home Office is located in Springfield,
Massachusetts. MassMutual is licensed to transact life, accident and health
business in all fifty states of the United States, the District of Columbia,
Puerto Rico and certain provinces of Canada. As of December 31, 1996, MassMutual
had total contingency reserves in excess of $2.6 billion and consolidated assets
of $55.8 billion.
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.
What variable life insurance policy are We offering? In this Prospectus We are
offering a Flexible Premium Variable Whole Life Insurance Policy With Table Of
Selected Face Amounts (the "Policy"). We issue this Policy to provide for a
Death Benefit and Cash Surrender Value, as well as loan privileges and flexible
premiums. It is called "flexible" because the Policyowner may select the timing
and amount of premium payments. It is called "variable" because, unlike the
fixed benefits of a traditional whole life policy, the Death Benefit may, and
Cash Surrender Value most likely will, vary to the extent that the Account Value
under the Policy is allocated to the Division(s). Certain provisions of the
Policy as described herein may be somewhat different in any particular state
because of specific state requirements.
The Policy is a legal contract between the Policyowner and MassMutual. The
entire contract consists of the application to the Policy (the "Application"),
the Policy and any amendments or riders added thereto.
Availability. The Policy is available on a "Case" or, state law permitting, on
an individual basis. "Case basis" means that the Insureds share a common
employment or other institutional relationship and that all Policies in the Case
are aggregated for purposes of determining Issue Dates, Policy Dates,
underwriting requirements and sales load percentages. If an individual Insured
owns the Policy, he or she may exercise all rights and privileges under the
Policy through their Employer or other sponsoring entity acting as Case
administrator. After termination of the employment or other relationship, an
individual who owns the Policy may exercise such rights and privileges directly
with MassMutual.
The minimum Selected Face Amount is $25,000 per life for ages 20 through 85 (age
nearest birthday). The minimum Case premium is $250,000 of first year annualized
premium. The Insured may not be younger than age 20 nor older than age 85 as of
the Policy Date for Policies issued on a regular underwriting basis. For
Policies underwritten on a guaranteed issue underwriting basis or on a
simplified issue underwriting basis, the Insured may not be younger than age 20
nor older than age 65 as of the Policy Date. Before issuing any Policy We will
require satisfactory evidence of insurability, except under a guaranteed issue
underwriting approach if the Insured is not older than age 65 as of the Policy
Date.
Underwriting. The Policies within a Case are underwritten on the same basis,
i.e., a regular underwriting, simplified issue underwriting, or guaranteed issue
underwriting approach is used for all Policies in a Case. Availability of a
regular underwriting approach is subject to state approval. Mortality charges
vary depending on the type of underwriting used.
What is the Account Value of the Policy? The Account Value is determined by the
amount and frequency of premium payments, the investment experience of the
Divisions chosen by the Policyowner (the Variable Account Value), the interest
earned on Account Value allocated to the GPA (the Fixed Account Value), and any
Withdrawals or charges imposed in connection with the Policy. The Policyowner
bears the investment risk of any depreciation in value of the underlying assets
of the Divisions but also may benefit from any appreciation in value. For
details see Account Value on page 22.
What are the Divisions of the Separate Account? The Separate Account has
seventeen Divisions - the MML Equity Division, the MML Equity Index Division,
the MML Blend Division, the MML Managed Bond Division, the MML Money Market
Division, the Oppenheimer Global Securities Division, the Oppenheimer Capital
Appreciation Division, the Oppenheimer Growth Division, the Oppenheimer Growth &
Income Division, the Oppenheimer Multiple Strategies Division, the Oppenheimer
High Income Division, the Oppenheimer Strategic Bond Division, the Oppenheimer
Bond Division, the Oppenheimer Money Division, the Panorama LifeSpan Capital
Appreciation Division, the Panorama LifeSpan Balanced Division and the Panorama
LifeSpan Diversified Income Division. (The Panorama LifeSpan Divisions and the
MML Equity Index Division are subject to state availability.) Each Division
invests only in shares of a single investment company or a single series of an
investment company. The Divisions are intended to provide money to pay benefits
under the Policy but do not guarantee a minimum interest rate or guarantee
against asset depreciation. For details see The Separate Account on page 12.
The MML Equity Division invests in shares of MML Equity Fund. The MML Equity
Index Division invests in shares of MML Equity Index Fund. The MML Blend
Division invests in shares of MML Blend Fund. The MML Managed Bond Division
invests in shares of MML Managed Bond Fund. The MML Money Market Division
invests in shares of MML Money Market Fund. Oppenheimer Global Securities,
Capital Appreciation, Growth, Growth & Income, Multiple Strategies, High Income,
Strategic Bond, Bond and Money Divisions invest in shares of Oppenheimer Global
Securities Fund, Oppenheimer Capital Appreciation Fund, Oppenheimer Growth Fund,
Oppenheimer Growth & Income Fund, Oppenheimer Multiple Strategies Fund,
Oppenheimer High Income Fund, Oppenheimer Strategic Bond Fund, Oppenheimer Bond
Fund and Oppenheimer Money Fund,
7
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respectively. The Panorama LifeSpan Capital Appreciation, Balanced and
Diversified Income Divisions invest in shares of Panorama LifeSpan Capital
Appreciation, Balanced and Diversified Income Portfolios, respectively.
MML Equity Fund, MML Equity Index Fund, MML Blend Fund, MML Managed Bond Fund
and MML Money Market Fund (the "MML Funds") are separate series of shares of MML
Series Investment Fund (the "MML Trust"), a no-load, open-end management
investment company. MassMutual acts as investment manager to each of the MML
Funds. Concert Capital Management, Inc. ("Concert") served as the investment
sub-adviser to the 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, 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-adviser to MML Equity Fund and the Equity Sector of
the MML Blend Fund.
MassMutual has also entered into an investment sub-advisory agreement with
Mellon Equity Associates ("Mellon Equity") to serve as the investment
sub-adviser to the MML Equity Index Fund. MassMutual, Babson and Mellon Equity
are registered as investment advisers under the Investment Advisers Act of 1940.
OppenheimerFunds, Inc. ("OFI") supervises the investment operations of the
Oppenheimer Variable Account Funds (the "Oppenheimer Trust"), and the Panorama
Series Fund, Inc., ("Panorama Fund"), determines the composition of each
respective portfolio, and furnishes advice and recommendations with respect to
the investments, investment policies and purchase and sale of securities,
pursuant to an investment advisory agreement with each Oppenheimer Fund and
Panorama Portfolio. Oppenheimer Global Securities Fund, Oppenheimer Capital
Appreciation Fund, Oppenheimer Growth Fund, Oppenheimer Growth & Income Fund,
Oppenheimer Multiple Strategies Fund, Oppenheimer High Income Fund, Oppenheimer
Strategic Bond Fund, Oppenheimer Bond Fund, and Oppenheimer Money Fund (the
"Oppenheimer Funds") are part of the Oppenheimer Trust. Panorama LifeSpan
Capital Appreciation Portfolio, Panorama LifeSpan Balanced Portfolio and
Panorama LifeSpan Diversified Income Portfolio (the "Panorama LifeSpan
Portfolios") are part of the Panorama Fund. Both the Oppenheimer Trust and the
Panorama Fund are open-end, diversified, management investment companies, which
are available to act as the investment vehicle for separate accounts for
variable insurance policies offered by insurance companies. OFI is registered as
an investment adviser under the Investment Advisers Act of 1940. The Manager,
OppenheimerFunds, Inc., has engaged three sub-advisers: Babson-Stewart Ivory
International ("Babson-Stewart"), BEA Associates ("BEA") and Pilgrim Baxter &
Associates ("Pilgrim Baxter") to provide day-to-day portfolio management for
certain components of the Panorama LifeSpan Portfolios.
What is the Guaranteed Principal Account ("GPA")? As an alternative to the
Separate Account, the Policyowner may allocate Net Premium or transfer Account
Value to the GPA. Amounts so allocated or transferred become part of
MassMutual's general account assets. The Policyowner is not entitled to share in
the investment experience of those assets. Rather, MassMutual guarantees a rate
of return on the allocated amount equal to 3%. Although MassMutual is not
obligated to credit interest at a rate higher than this minimum, it may declare
a higher rate applicable for such periods as it deems appropriate. For details
see The Guaranteed Principal Account on page 26.
Is the level of the Death Benefit guaranteed? There are two Death Benefit
options. The Death Benefit equals the greater of the Policy's Selected Face
Amount for the Policy Year of death (plus the Account Value on the date of death
if Death Benefit Option 2 is elected) or the Minimum Face Amount in effect on
the date of death of the Insured. Death Benefit proceeds under either Option
will be reduced by any outstanding Policy Debt, plus or minus unearned or unpaid
monthly deductions. So long as the Policy remains in force, the Death Benefit
You have selected will be available. For details see Death Benefit Under The
Policy on page 22.
Is the Death Benefit subject to income taxes? A Death Benefit paid under our
Policies is usually fully excludable from the gross income of the Beneficiary
for federal income tax purposes.
For details see Federal Income Tax Considerations - Policy Proceeds, Premiums
and Loans on page 27.
Does the Policy have a Cash Surrender Value? The Policyowner may surrender the
Policy at any time and receive its Account Value less any Policy Debt. There is
no surrender charge. Withdrawals are allowed subject to certain restrictions and
are subject to a withdrawal charge of 2.0% of the Account Value not to exceed
$25.00 deducted from each Withdrawal. For details see Withdrawals. The Cash
Surrender Value of a Policy fluctuates with the investment performance of the
Divisions in which the Policy has Account Value, and with the interest rate on
the amount held in the GPA. It may increase or decrease daily.
For federal income tax purposes, the Policyowner usually is not taxed on
increases in the Cash Surrender Value until the Policy is surrendered. In
connection with certain Withdrawals of Account Value and loans on the Policy,
however, the Policyowner may be taxed on all or a part of the amount
distributed.
For details see Cash Surrender Value on page 23; Federal Income Tax
Considerations - Policy Proceeds, Premiums and Loans on page 27.
What is a modified endowment contract? A modified endowment contract (as defined
by the Internal Revenue Code) is a life insurance policy under which the
premiums paid during the first seven contract years exceed the cumulative
premiums
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payable under a policy providing for guaranteed benefits upon the payment of
seven level annual premiums. Certain changes to a life insurance policy can
subject it to retesting for a new seven-year period. During an insured's
lifetime, distributions from a modified endowment contract, including collateral
assignments, loans, and withdrawals, are taxable to the extent of any income in
the contract and may also incur a penalty tax if the Policyowner is not 59 1/2.
For details see Modified Endowment Contracts on page 28.
Can this Policy become a modified endowment contract? Since this Policy permits
flexible premium payments, it may become a modified endowment contract. The
Company has the systems capacity to test a Policy at issue to determine whether
it will be classified as a modified endowment contract ("MEC"). This test
examines the Policy for MEC status at the time of issue. The Company has further
safeguards in place to monitor whether a Policy may become a modified endowment
contract after issue.
For details see Federal Income Tax Considerations - Modified Endowment Contracts
on page 28.
What about Premiums? There are five concepts which are important to the
discussion of premiums for this Policy: the minimum initial Policy premium; the
minimum annual planned Policy premium; the planned Policy premium; the minimum
Case premium; and the Initial Case Premium Paid.
A minimum initial Policy premium is payable either at the time You submit Your
Application or at some time prior to the delivery of the Policy. The minimum
annual planned Policy premium is a level amount used in determining the sales
load percentage breakpoint and varies by initial Selected Face Amount, issue
age, and sex. The planned Policy premium is elected on the Application and
becomes the basis for the Policy's premium billing. The amount of planned Policy
premiums originally selected in the Application may be changed at any time upon
written request.
The minimum Case premium is $250,000 of first year annualized premium for all
Policies in a Case. The Initial Case Premium Paid is the amount of premium for
all Policies in a Case on deposit with MassMutual at the time the Policies are
installed on the administration system. The Initial Case Premium Paid determines
sales load percentages for all Policies in that Case.
For details see General Provisions Of The Policy - Premiums on page 21.
When are Initial Premiums allocated to the Guaranteed Principal Account or the
Separate Account? The initial Net Premium (i.e., premium paid less the
deductions described in Deductions From Premiums) will be allocated to the MML
Money Market Division, which invests in the MML Money Market Fund (see Free Look
Provision on page 24). At the end of the Free Look Period, the Account Value
will be allocated to the GPA and/or Divisions according to the Policyowner's
instructions in the Application and subject to MassMutual's allocation rules.
How can the Net Premium and the Account Value of the Policy be allocated among
the Guaranteed Principal Account and the Divisions? When You apply for a Policy
You choose the percentages of Your premiums to be allocated to the Divisions
(maximum of eight at one time) and the GPA. A Policyowner may choose any
whole-number percentages as long as the total is 100%. The allocation of future
Net Premiums may be changed at any time without charge.
The Account Value of the Policy may be transferred between the GPA and/or the
Divisions by written request. Account Value may be transferred by dollar amount
or by whole-number percentage, subject to restrictions. Only eight Divisions are
available to a Policyowner at any one time. To allocate Net Premiums or to
transfer Account Value to a ninth Division, the Policyowner must transfer 100%
of the Account Value from one or more of the eight Divisions to which
allocations are currently made. For details, see The Separate Account. Automated
Account Value Transfer is also available. For details, see Automated Account
Value Transfer. For details see Account Value on page 22.
How long will the Policy remain in force? The Policy does not automatically
terminate for failure to pay planned Policy premiums. Payment of these amounts
does not guarantee the Policy will remain in force. The Policy terminates only
when the Account Value less any Policy Debt is insufficient to pay the monthly
deduction, and a grace period expires without sufficient payment. For details
see Termination on page 20 and Grace Period on page 22.
Are there charges against the Policy? Certain charges are made against the
Policy. Before allocation of any premium to the Account Value, a percentage of
each premium paid is deducted for expenses related to the sale and distribution
of the Policies. These charges are called sales loads and the percentages vary
depending on the total Initial Case Premium Paid for all Policies in the Case
before installation on the administration system. There are two additional
deductions from gross premiums: (i) for state premium taxes; and (ii) for
Deferred Acquisition Cost ("DAC") tax expense. Each premium, net of these
charges, is allocated to the GPA or the Divisions and becomes a part of the
Account Value. For details see Deductions From Premium on page 10.
Certain monthly charges are deducted directly from the Policy's Account Value on
each Monthly Calculation Date. These monthly deductions are equal to the sum of
a mortality charge, an administrative charge, and an underwriting charge. The
underwriting charge is only applicable for Policies issued under a regular
underwriting approach.
Some deductions are made on a daily basis against the assets of the Divisions. A
daily charge calculated at a current annual rate of .30% of the value of the
assets of each Division is
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charged for mortality and expense risks. In no event will this rate exceed .60%.
Similarly, tax assessments are calculated daily. Currently, We are not making
any charges for income taxes, but We may make charges in the future against the
Divisions for federal income taxes attributable to them.
Withdrawals of Account Value are permitted subject to certain restrictions. A
charge equal to the lesser of $25 or 2.0% of the amount withdrawn is imposed for
each Withdrawal.
For details see Charges Under The Policy on page 10 and Federal Income Tax
Considerations on page 27.
What is the loan privilege and how does a loan affect the Policy's Death Benefit
and Cash Surrender Value? While the Policy is in force, a loan may be made on
the Policy, in a maximum amount equal to the Account Value on the date the loan
is to be made reduced by: (i) any outstanding Policy Debt; (ii) interest on the
loan being made and on any outstanding Policy Debt to the next Policy
Anniversary Date; and (iii) an amount equal to the most recent monthly charge
for the Policy multiplied by the number of Monthly Calculation Dates from the
date the loan is made, up to and including the next Policy Anniversary Date.
(The maximum loan amount may be different if required by state law.)
For details see Policy Loan Privilege on page 24.
Are dividends paid on the Policy? The Policy is participating, therefore, it may
share in any dividends that MassMutual pays. Dividends are based on the Policy's
contribution to any divisible surplus of MassMutual. Any dividends will be
payable on the Policy Anniversary Date. MassMutual does not expect that any
dividends will be paid under the Policies. For details see Dividends on page 30.
Do I have a right to cancel? Under the Free Look Provision, the Policyowner has
a limited right to return the Policy and receive a refund. This right expires on
the latest of the following:
. Ten days after You receive the Policy; or
. Ten days after You receive a Notice of Withdrawal Right; or
. 45 days after Part 1 of the Policy Application was signed.
The Policy may be returned to our Home Office, to any of our agency offices, or
to the agent who sold You the Policy. For details see Free Look Provision on
page 24.
Charges Under The Policy
Certain charges are deducted to compensate MassMutual for providing the
insurance benefits under the Policy, for administering the Policy, for assuming
certain risks, and for incurring certain expenses in distributing the Policy.
DEDUCTIONS FROM PREMIUMS
Prior to the allocation of the premium payment to the GPA or the selected
Divisions, a deduction as a percentage of premium is made for the sales load,
state premium taxes, and the DAC tax charge. The sales load percentage varies
depending on the total Initial Case Premium Paid for all Policies in the Case.
Sales Load. Effective January 1, 1997 (subject to state availability), the sales
load component of the premium deduction is based on the total Initial Case
Premium Paid for all Policies under a Case before installation on the
administration system. For Policies issued under a Case with an Initial Case
Premium Paid of less than $3,500,000, the sales load percentages will decrease
after the fifth Policy Year. For Policies issued under a Case with an Initial
Case Premium Paid of $3,500,000 or more, the sales load will not change after
the fifth Policy Year. Please note for Policies issued under a Case with an
Initial Case Premium Paid of less than $3,500,000, the premiums are tracked on
an annual cumulative basis for each Policy, and the year 1 through 5 sales load
percentages will be higher on premium payments made below the specified minimum
annual planned Policy premium.
<TABLE>
<CAPTION>
Sales Load
<S> <C> <C>
Initial Case Premium Paid Years 1-5 Years 6+
Less than $3,500,000
Less than or equal to the
Minimum Planned Policy
Premium 18.00% 6.00%
Greater than the Minimum
Planned Policy Premium 6.00% 6.00%
Greater than or equal to
$3,500,000 but less than
$7,000,000 5.50% 5.50%
Greater than or equal to
$7,000,000 but less than
$10,000,000 3.25% 3.25%
Greater than or equal to
$10,000,000 .75% .75%
</TABLE>
For Policies issued under a Case installed on the administration system prior to
January 1, 1997, the following sales load provision applies. For Policies issued
under a Case with an Initial Case Premium Paid of less than $1,000,000, the
sales load percentages will decrease after the fifth Policy Year. For Policies
issued under a Case with an Initial Case Premium Paid of $1,000,000 or more, the
sales load will not change after the fifth Policy Year. Please note for Policies
issued under a Case with an Initial Case Premium Paid of less than $1,000,000,
the premiums are tracked on an annual cumulative basis for each policy, and the
year 1 through 5 sales load percentages will be higher on premium payments made
below the specified minimum annual planned Policy premium.
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<TABLE>
<CAPTION>
Sales Load
<S> <C> <C>
Initial Case Premium Paid Years 1-5 Years 6+
Less than $1,000,000
Less than or equal to the
Minimum Planned Policy
Premium 18.00% 6.00%
Greater than the Minimum
Planned Policy Premium 6.00% 6.00%
Greater than or equal to
$1,000,000 but less than
$2,500,000 7.00% 7.00%
Greater than or equal to
$2,500,000 but less than
$5,000,000 5.50% 5.50%
Greater than or equal to
$5,000,000 but less than
$10,000,000 4.00% 4.00%
Greater than or equal to
$10,000,000 3.25% 3.25%
</TABLE>
The amount of the sales load in a Policy Year is not necessarily related to our
actual sales expenses for that particular year. To the extent that sales
expenses are not covered by the sales load, they will be recovered from
MassMutual surplus, including any amounts derived from the mortality and expense
risk charge or the cost of insurance charge. For a discussion of the commissions
paid under the Policy, see Sales And Other Agreements - Commission Schedule.
During 1996, the aggregate amount of sales load deductions was $611,325.
State Premium Tax Charge. Various states apply premium taxes at various rates.
We currently deduct a percentage equal to the applicable state rate of each
premium to cover premium taxes assessed against MassMutual by the various
states. The applicable state rate will be either the Massachusetts rate or a
higher rate. The current state premium tax charge ranges from 2.0% to 4.0% of
each premium. This charge may increase or decrease to reflect either any change
in the tax or changes of residence. The Policyowner should notify MassMutual of
any change of residence. Any change in this charge would be effective
immediately. During 1996, the aggregate state premium tax charge was $143,879.
Deferred Acquisition Cost ("DAC") Tax Charge. We deduct 1.0% of each premium to
cover a federal premium tax assessed against MassMutual. This charge is
reasonable in relation to MassMutual's federal income tax burden, under Internal
Revenue Code Section 848, resulting from the receipt of premiums. During 1996,
the aggregate DAC tax charge was $64,472.
ACCOUNT VALUE CHARGES
On each Monthly Calculation Date, a monthly administrative charge, a cost of
insurance charge (also referred to as the Mortality Charge in the Policy) and an
underwriting charge (if applicable) are deducted from the Variable Account Value
and Fixed Account Value in proportion to the non-loaned Account Value in the
Separate Account and the GPA.
Administrative Charge. A monthly charge is deducted to compensate MassMutual for
costs incurred in providing certain administrative services including premium
collection, recordkeeping, processing claims, and communicating with
Policyowners. Currently, the charge is $5.25 per month, or $63 annually, for
each Policy. While this charge may increase or decrease, the maximum monthly
administrative charge is $9 per month. (The maximum charge may be different if
required by state law.) Such charges will not exceed the actual cost for such
services. During 1996, the aggregate amount of deductions for administrative
charges was $4,846.
Charge for Cost of Insurance Protection. A charge for the cost of insurance
protection is deducted on each Monthly Calculation Date and is based on the
Insured's sex, attained age, the Policy Year in which the deduction is made, the
smoker and rating class of the Policy, and the type of underwriting used for the
Case. The charge varies monthly because it is determined by multiplying the
applicable cost of insurance rates by the amount at risk each Policy month. The
maximum monthly cost of insurance charge for each $1,000 of insurance for which
a charge applies is shown in the Table of Maximum Monthly Mortality Charges in
the Policy. MassMutual may charge less than these maximum charges. Any change in
these charges will apply to all Policies in the same class. During 1996, the
aggregate amount of deductions for cost of insurance protection was $104,522.
Underwriting Charge. A monthly underwriting charge is deducted from Policies
that are issued under a regular underwriting basis. The charge is based on the
amount of insurance underwritten before the Case is installed on the
administration system. This charge is fixed for a set number of Policy Years and
is shown in the Other Information section of the Policy's Schedule Page. During
1996, the aggregate amount of deductions for the underwriting charge was
$23,523.
SEPARATE ACCOUNT CHARGES
Charges for Mortality and Expense Risks. We charge the Divisions for the
mortality and expense risks We assume. We deduct a daily charge at a current
effective annual rate of 0.30% of the value of each Division's assets that come
from the Policy. While this charge may increase or decrease, the maximum charge
is 0.60% annually. The aggregate amount of such charges, which are paid
quarterly, against the Separate Account divisions in 1996 was $6,306.
The mortality risk We assume is that the group of lives insured under our
Policies may, on average, live for shorter periods of time than We estimated.
The expense risk We assume is that our costs of issuing and administering
Policies may be more than We estimated.
If all the money We collect 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
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<PAGE>
insufficient, We will provide for all Death Benefits and expenses.
Charges for Federal Income Taxes. We do not currently make any charge against
the Divisions for federal income taxes attributable to them. We may make such a
charge eventually, however, in order to provide for the future federal income
tax liability of the Divisions. For more information on charges for federal
income taxes, see Federal Income Tax Considerations - MassMutual - Tax Status.
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 Section 132G of Chapter 175 of the Massachusetts General Laws. The
Separate Account is registered under the Investment Company Act of 1940, as
amended, as a unit investment trust. Registration does not involve supervision
of the management or investment practices or policies 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. Designated segments of the Separate Account
will be used to receive and invest premiums for other variable life insurance
policies issued by MassMutual. Such a segment has been established for the
Policies.
Although the assets of the Separate Account are assets of MassMutual, that
portion of the Separate Account assets equal to the reserves and other
liabilities of the Separate Account attributable to the Policies may not be used
to satisfy any obligations that may arise out of any other business We may
conduct. They may, however, become subject to liabilities arising from other
variable life insurance policies which the Separate Account funds. In addition,
We may from time to time, at our discretion, transfer to our general account
those assets which exceed the reserves and other liabilities of the Separate
Account. Such transfers will not adversely affect the Separate Account.
Income, realized gains or losses, and unrealized gains or losses from each
Division are credited to or charged against that Division without regard to any
of our other income, gains, or losses.
MassMutual may accumulate in the Separate Account the charge for expense and
mortality risks, monthly charges assessed against the Policy and investment
results applicable to those assets that are in excess of net assets supporting
the Policies.
MassMutual has the right to establish additional divisions of the Separate
Account from time-to-time. Amounts credited to any additional divisions
established would be invested in shares of other Funds. For any divisions, we
have the right to substitute new Funds.
Investment of the Separate Account. The designated segment of the Separate
Account has seventeen Divisions attributable to the Policy (subject to state
availability). Each Division invests in shares of either MML Trust, Oppenheimer
Trust or Panorama Fund. The Divisions of the Separate Account are:
. The MML Equity Division - Amounts credited to this Division are invested in
shares of MML Equity Fund, or its successor.
. The MML Equity Index Division - Amounts credited to this Division are
invested in shares of MML Equity Index Fund, or its successor.
. The MML Blend Division - Amounts credited to this Division are invested in
shares of MML Blend Fund, or its successor.
. The MML Managed Bond Division - Amounts credited to this Division are
invested in shares of MML Managed Bond Fund, or its successor.
. The MML Money Market Division - Amounts credited to this Division are
invested in shares of MML Money Market Fund, or its successor.
. The Oppenheimer Global Securities Division - Amounts credited to this
Division are invested in shares of Oppenheimer Global Securities Fund, or
its successor.
. The Oppenheimer Capital Appreciation Division - Amounts credited to this
Division are invested in shares of Oppenheimer Capital Appreciation Fund, or
its successor.
. The Oppenheimer Growth Division - Amounts credited to this Division are
invested in shares of Oppenheimer Growth Fund, or its successor.
. The Oppenheimer Growth & Income Division - Amounts credited to this Division
are invested in shares of Oppenheimer Growth & Income Fund, or its
successor.
. The Oppenheimer Multiple Strategies Division - Amounts credited to this
Division are invested in shares of Oppenheimer Multiple Strategies Fund, or
its successor.
. The Oppenheimer High Income Division - Amounts credited to this Division are
invested in shares of Oppenheimer High Income Fund, or its successor.
. The Oppenheimer Strategic Bond Division - Amounts credited to this Division
are invested in shares of Oppenheimer Strategic Bond Fund, or its successor.
. The Oppenheimer Bond Division - Amounts credited to this Division are
invested in shares of Oppenheimer Bond Fund, or its successor.
. The Oppenheimer Money Division - Amounts credited to this Division are
invested in shares of Oppenheimer Money Fund, or its successor.
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<PAGE>
. The Panorama LifeSpan Capital Appreciation Division - Amounts credited to
this Division are invested in shares of the Panorama LifeSpan Capital
Appreciation Portfolio, or its successor.
. The Panorama LifeSpan Balanced Division - Amounts credited to this Division
are invested in shares of the Panorama LifeSpan Balanced Portfolio, or its
successor.
. The Panorama LifeSpan Diversified Income Division - Amounts credited to this
Division are invested in shares of the Panorama LifeSpan Diversified Income
Portfolio, or its successor.
The shares of the underlying Fund purchased by each Division will be held by
MassMutual as custodian of the Separate Account.
A Policyowner may allocate Account Value to no more than eight Divisions at any
one time. To allocate Net Premium or to transfer Account Value to a ninth
Division which does not have Account Value allocated to it, a Policyowner must
transfer 100% of the Account Value from one or more of the eight "active"
Divisions to which allocations are currently made.
The MML Trust is a no-load, open-end management investment company registered
under the 1940 Act. The Oppenheimer Trust and the Panorama Fund are open-end,
diversified management investment companies registered under the 1940 Act. The
MML Trust consists of the five MML Funds described above, each of which has its
own investment objectives and policies. Similarly, the Oppenheimer Trust
consists of nine Oppenheimer Funds, each of which has its own investment
objectives and policies. The Panorama Fund consists of seven Panorama
Portfolios, each of which has its own objectives and policies, three of which
are offered under the Policy. MassMutual established the MML Trust for the
purpose of providing vehicles for the investment of assets held in various
separate investment accounts, including the Separate Account, established by
MassMutual or by life insurance companies which are subsidiaries of MassMutual.
OFI established The Oppenheimer Trust and the Panorama Fund were established for
the purpose of providing investment vehicles for investment only by variable
life insurance contracts and variable annuities contracts. Shares of the MML
Funds, Oppenheimer Funds and Panorama Portfolios are not offered to the general
public, but solely to separate investment accounts established by MassMutual and
other life insurance company separate account subsidiaries of MassMutual.
The primary investment objective of MML Equity Fund is to achieve a superior
total rate of return over an extended period of time from both capital
appreciation and current income. A secondary investment objective is the
preservation of capital when business and economic conditions indicate that
investing for defensive purposes is appropriate. The assets of this Fund are
normally expected to be invested primarily in common stocks and other
equity-type securities.
The investment objective of the MML Equity Index Fund is to provide investment
results that correspond to the price and yield performance of the publicly
traded common stocks in the aggregate, as represented by the Standard & Poor's
500 Composite Stock Price Index. ("Standard & Poor's 500" and "S&P 500(R)" are
trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use.
The Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's or
The McGraw-Hill Companies., Inc.)
The investment objective of MML Blend Fund is to achieve as high a level of
total rate of return over an extended period of time as is considered consistent
with prudent investment risk and the preservation of capital values. This Fund
may invest in a portfolio that may include common stocks and other equity-type
securities, bonds and other debt securities with maturities generally exceeding
one year, and money market instruments and other debt securities with maturities
generally not exceeding one year.
The investment objective of MML Managed Bond Fund is to achieve as high a total
rate of return on an annual basis as is considered consistent with the
preservation of capital values. The assets of this Fund will be invested
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.
The investment objectives of MML Money Market Fund are to achieve high current
income, the preservation of capital, and liquidity. These objectives are of
equal importance. The assets of this Fund will be invested 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.
The investment objective of the Oppenheimer Global Securities Fund is to seek
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 (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.
The investment objective of the Oppenheimer Capital Appreciation Fund is 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 investments
in securities of "growth-type" companies. Such companies are believed to have
relatively favorable long-term prospects for an increased demand for the
particular company's products or services.
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<PAGE>
The investment objective of the Oppenheimer Growth Fund is to seek to achieve
capital appreciation by investing in securities of well-known established
companies (companies which have a history of earnings and dividends). 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.
The investment objective of the Oppenheimer Growth & Income Fund is to seek a
high total return (which includes growth in the value of its shares as well as
current income) from equity and debt securities. From time to time this Fund may
focus on small to medium capitalization common stocks, bonds and convertible
securities.
The investment objective of the Oppenheimer Multiple Strategies Fund is to seek
a total investment return (which includes current income and capital
appreciation in the value of its shares) from investments in common stocks and
other equity securities, bonds and other debt securities, and "money market"
securities.
The investment objective of the Oppenheimer High Income Fund is to earn a high
level of current income by investing primarily in a diversified portfolio of
high yield, fixed-income securities, including long-term debt obligations and
preferred stock issues believed by OFI, in its capacity as investment manager of
the Fund, not to involve undue risk. This Fund's investment policy is to assume
certain risks (described more fully in the attached prospectus for the
Oppenheimer Trust) in seeking high yield, which is ordinarily associated with
high risk securities, commonly known as "junk bonds," in the lower rating
categories of the established securities ratings services, and unrated
securities.
The investment objective of the Oppenheimer Strategic Bond Fund is to seek a
high level of current income principally derived from interest income from
investments in U.S. government securities, high yield fixed-income securities,
and foreign fixed-income securities and to seek to enhance such income by
writing covered call options on debt securities.
The investment objective of the Oppenheimer Bond Fund is to seek a high level of
current income from investment in high yield fixed-income securities rated "Baa"
or better by Moody's or "BBB" or better by Standard & Poor's. Secondarily, the
Fund seeks capital growth when consistent with its primary objective.
The investment objective of the Oppenheimer Money Fund is to maximize current
income from investments in "money market" securities consistent with low capital
risk and maintenance of liquidity.
The investment objective of the Panorama LifeSpan Capital Appreciation Portfolio
is to seek long-term capital appreciation through a strategically allocated
portfolio consisting primarily of equity securities.
The investment objective of the Panorama LifeSpan Balanced Portfolio is to seek
capital appreciation and income through a strategically allocated portfolio of
equity securities and fixed income securities with a slightly stronger focus on
equity securities.
The investment objective of the Panorama LifeSpan Diversified Income Portfolio
is to attempt to provide long-term protection for cautious investors, seeking
high current income with opportunities for capital appreciation by focusing on
fixed income securities.
The Separate Account purchases and redeems shares of the Funds at their net
asset value which is determined at the time of the receipt of the purchase order
or redemption request without the imposition of any sales or redemption charge.
Citibank, N.A., with its home office located at 111 Wall Street, New York, NY
10005, acts as custodian for each of the MML Funds, other than the MML Equity
Index Fund. Boston Safe Deposit and Trust Company, an indirect subsidiary of
Mellon Bank Corporation, is located at One Boston Place, Boston, Massachusetts
02108, and serves as the custodian of the MML Equity Index Fund. The Bank of New
York, with its home office located at One Wall Street, New York, NY 10015, acts
as custodian for each of the Oppenheimer Funds. State Street Bank & Trust Co.,
225 Franklin Street, Boston, MA 02110, acts as custodian for each of the
Panorama LifeSpan Portfolios.
MassMutual serves as investment manager of each of the MML Funds pursuant to
Investment Management Agreements, four of which provide for the MML Equity Fund,
MML Blend Fund, MML Managed Bond Fund and MML Money Market Fund to pay
MassMutual a quarterly fee at the annual rate of .50% of the first $100,000,000
of the MML Fund's average daily net asset value, .45% of the next $200,000,000,
.40% of the next $200,000,000 and .35% of any excess over $500,000,000.
MassMutual has entered into sub-advisory agreements with David L. Babson &
Company, Inc. ("Babson") whereby Babson manages the investment of the assets of
the MML Equity Fund and the Equity Sector of MML Blend Fund. Pursuant to the
sub-advisory agreements, MassMutual pays Babson (1) a quarterly investment
management fee equal to an annual rate of 0.13% of the average daily net asset
value of MML Equity Fund as of the close of each business day and (2) a
quarterly investment management fee equal to an annual rate of 0.13% of the
average daily net asset value of the Equity Sector of MML Blend Fund as of the
close of each business day.
MassMutual serves as investment manager of the MML Equity Index Fund pursuant to
an investment manager agreement which provides for the Fund to pay MassMutual a
quarterly fee at the rate of 0.40% of the first $100 million of net assets, of
the MML Equity Index Fund, 0.38% of the next $150 million of net assets and
0.36% of net assets over $250 million. MassMutual has entered into a
sub-advisory agreement with Mellon Equity whereby Mellon Equity manages the
14
<PAGE>
investment and reinvestment of the assets of the MML Equity Index Fund as
sub-adviser of the Fund. For providing its services under the sub-advisory
agreement with MassMutual, Mellon Equity will receive a monthly fee, computed
daily at an annual rate based on the collective daily net asset value of the MML
Equity Index Fund. The annual fee paid to Mellon Equity is as follows: 0.09% for
the first $100 million of net assets, 0.07% of the next $150 million of net
assets, and 0.05% of net assets over $250 million.
The monthly management fee payable to OFI in its capacity as investment adviser
to the Panorama LifeSpan Portfolios is based on the average daily net asset
value of each Panorama Portfolio. The annual management fees paid to OFI are as
follows: (i) for Panorama LifeSpan Diversified Income Portfolio: 0.750% of the
Portfolios average annual net asset value up to $250 million and 0.65%
thereafter; (ii) for Panorama LifeSpan Balanced Portfolio: 0.850% of the
Portfolio average annual net asset value up to $250 million and 0.75%
thereafter; and (iii) for Panorama LifeSpan Capital Appreciation Portfolio:
0.850% of the Portfolio average annual net asset value up to $250 million and
0.75% thereafter. OFI's management agreement with the Panorama Fund allows OFI
to enter into sub-adviser agreements with other investment advisers under which
the sub-adviser may manage the investments of one or more of the underlying
Portfolios of the Panorama Fund. OFI has entered into investment sub-advisory
agreements with three sub-advisers to assist in the selection of portfolio
investments for the Panorama Fund's LifeSpan Diversified Income Portfolio,
LifeSpan Balanced Portfolio, and LifeSpan Capital Appreciation Portfolio.
Babson-Stewart Ivory International ("Babson-Stewart") located in Cambridge,
Massachusetts is the sub-adviser to the international stock components of the
LifeSpan Balanced Portfolio and the LifeSpan Capital Appreciation Portfolio.
Babson-Stewart is a partnership formed in 1987 between David L. Babson &
Company, Inc., an indirect wholly-owned subsidiary of MassMutual, and Stewart
Ivory & Company, Ltd., located in Edinburgh, Scotland. For providing its
services under the sub-advisory agreement with OFI, Babson-Stewart will receive
a monthly fee from OFI, computed daily at an annual rate based on the average
daily net asset value of the portion of the LifeSpan Capital Appreciation
Portfolio and LifeSpan Balanced Portfolio allocated to the international equity
component. The annual fee paid to Babson-Stewart is as follows: 0.75% for the
first $10 million of net assets, 0.625% of the next $15 million of net assets,
0.50% of the next $25 million of net assets, and 0.375% of net assets over $50
million. For purposes of determining the break-points in the sub-advisory fee,
the assets of the LifeSpan Capital Appreciation Portfolio and the LifeSpan
Balanced Portfolio are not aggregated.
BEA Associates ("BEA") located in New York, New York is the sub-adviser to the
high yield bond component of the LifeSpan Diversified Income Portfolio, LifeSpan
Balanced Portfolio, and LifeSpan Capital Appreciation Portfolio. For providing
its services under the sub-advisory agreement with OFI, BEA will receive a
monthly fee from OFI, computed daily at an annual rate based on the collective
average daily net asset value of the portion of the LifeSpan Diversified Income,
LifeSpan Capital Appreciation, and LifeSpan Balanced Portfolios allocated to the
high yield bond component. The annual fee paid to BEA is as follows: 0.45% for
the first $25 million of collective net assets, 0.40% of the next $25 million of
collective net assets, 0.35% of the next $50 million of collective net assets,
and 0.25% of collective net assets over $100 million. For purposes of
calculating the fee payable to BEA, the collective net asset values of the
portion of the LifeSpan Portfolios allocated to the high yield bond component
are aggregated with that portion of the net asset value of the assets of
Oppenheimer Series Fund, Inc. managed by BEA.
Pilgrim, Baxter & Associates ("Pilgrim Baxter") is the sub-adviser to the small
cap component of the LifeSpan Balanced Portfolio and the LifeSpan Capital
Appreciation Portfolio. For providing its services under the sub-advisory
agreement with OFI, Pilgrim Baxter will receive a monthly fee from OFI, computed
daily at an annual rate based on the collective average daily net asset value of
the portion of the LifeSpan Balanced Portfolios and LifeSpan Capital
Appreciation Portfolio allocated to the small cap component. The annual fee paid
to Pilgrim Baxter is 0.60% of collective net assets. For purposes of calculating
the fee payable to Pilgrim Baxter, the collective net asset values of the
portion of the LifeSpan Portfolios allocated to the small cap component are
aggregated with that portion of the net asset value of the assets of Oppenheimer
Series Fund, Inc. managed by Pilgrim Baxter.
The monthly management fee payable to OFI in its capacity as investment adviser
to the Oppenheimer Funds is computed separately on the net assets of each Fund
as of the close of business each day. The management fee rates are as follows:
(i) for Money Fund: 0.450% of the first $500 million of net assets, 0.425% of
the next $500 million, 0.400% of the next $500 million, and 0.375% of net assets
over $1.5 billion; (ii) for Capital Appreciation Fund, Growth Fund, Growth &
Income Fund, Multiple Strategies Fund, and Global Securities Fund: 0.75% of the
first $200 million of net assets, 0.72% of the next $200 million, 0.69% of the
next $200 million, 0.66% of the next $200 million, and 0.60% of net assets over
$800 million; and (iii) for High Income Fund, Bond Fund, and Strategic Bond
Fund: 0.75% of the first $200 million of net assets, 0.72% of the next $200
million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60%
of the next $200 million, and 0.50% of net assets over $1 billion.
15
<PAGE>
MML Series Investment Fund Annual Expenses for 1996
(as a percentage of the average net assets of a Fund)
<TABLE>
<CAPTION>
Total Fund
----------
Management Fees Other Expenses (1) Operating Expenses
--------------- ------------------ ------------------
<S> <C> <C> <C>
MML Equity Fund 0.381% 0.004% 0.385%
MML Equity Index Fund 0.0% (2) 0.0% (2) 0.0% (2)
MML Blend Fund 0.373% 0.003% 0.376%
MML Managed Bond Fund 0.479% 0.027% 0.506%
MML Money Market Fund 0.490% 0.033% 0.523%
</TABLE>
(1) MassMutual has agreed to bear the expenses of each of the MML Funds (other
than the management fee, interest, taxes, brokerage commissions and
extraordinary expenses) in excess of 0.11% of average daily net asset value of
the MML Funds through April 30, 1998. During 1996, no expenses were required to
be reimbursed pursuant to this undertaking. In addition, MassMutual does not
expect that it will be required to reimburse any expenses due to this
undertaking in 1997.
(2) The MML Equity Index Fund had no operating expenses in 1996 since it had not
yet commenced operations.
Oppenheimer Variable Account Funds Annual Expenses for 1996
(as a percentage of the average net assets of a Fund)
<TABLE>
<CAPTION>
Total Fund
----------
Management Fees Other Expenses Operating Expenses
--------------- -------------- ------------------
<S> <C> <C> <C>
Oppenheimer Global Securities Fund 0.73% 0.08% 0.81%
Oppenheimer Capital Appreciation Fund 0.72% 0.03% 0.75%
Oppenheimer Growth Fund 0.75% 0.04% (1) 0.79% (1)
Oppenheimer Growth & Income Fund 0.75% 0.25% 1.00%
Oppenheimer Multiple Strategies Fund 0.73% 0.04% 0.77%
Oppenheimer High Income Fund 0.75% 0.06% 0.81%
Oppenheimer Strategic Bond Fund 0.75% 0.10% 0.85%
Oppenheimer Bond Fund 0.74% 0.04% 0.78%
Oppenheimer Money Fund 0.45% 0.04% 0.49%
</TABLE>
(1) In 1996, OFI, on a voluntary one-time basis, agreed to reimburse the
Oppenheimer Growth Fund an amount equal to 0.02% of average daily net asset
value due to non-recurring expenses incurred in connection with the Jefferson
Pilot Appreciation Fund, Inc. acquisition. Absent this reimbursement, the Other
Expenses for this Fund would have been 0.06% and the Total Operating Expenses
would have been 0.81%. OFI does not anticipate making any expense reimbursements
to this Fund in 1977.
Panorama Series Fund, Inc. Annual Expenses for 1996 - (LifeSpan Portfolios)
(as a percentage of the average net assets of a Portfolio)
<TABLE>
<CAPTION>
Total Fund
----------
Management Fees Other Expenses Operating Expenses
--------------- -------------- ------------------
<S> <C> <C> <C>
Panorama LifeSpan Diversified Income Portfolio 0.75% 0.32% 1.07%
Panorama LifeSpan Balanced Portfolio 0.85% 0.32% 1.17%
Panorama LifeSpan Capital Appreciation Portfolio 0.85% 0.45% 1.30%
</TABLE>
16
<PAGE>
During 1996, MassMutual earned investment management fees of $5,787,673 from MML
Equity Fund, $7,525,674 from MML Blend Fund, $820,434 from MML Managed Bond Fund
and $612,946 from MML Money Market Fund. During this same period, Mellon Equity
did not earn any fees because the MML Equity Index had not yet commenced
operations. During 1996, Babson earned investment management fees from
MassMutual of $1,982,566 for providing sub-advisory services to the MML Equity
Fund and $1,450,325 for providing sub-advisory services to the Equity Sector of
the MML Blend Fund.
During 1996, OFI earned investment management fees of $3,395,740 from the
Oppenheimer Global Securities Fund, $3,382,840 from the Oppenheimer Capital
Appreciation Fund, $1,139,255 from the Oppenheimer Growth Fund, $160,819 from
the Oppenheimer Growth & Income Fund, $3,132,569 from the Oppenheimer Multiple
Strategies Fund, $1,177,754 from the Oppenheimer High Income Fund, $618,338 from
the Oppenheimer Strategic Bond Fund, $2,188,350 from the Oppenheimer Bond Fund,
and $445,899 from the Oppenheimer Money Fund.
During 1996, OFI earned investment management fees of $171,569 from the Panorama
LifeSpan Diversified Income Portfolio, $355,893 from the Panorama LifeSpan
Balanced Portfolio, and $281,564 from the Panorama LifeSpan Capital Appreciation
Portfolio.
Additional and more detailed information concerning the MML Funds, the
Oppenheimer Funds and the Panorama Portfolios, including information about the
other expenses of such Funds, may be found in the accompanying Prospectuses for
the MML Trust, the Oppenheimer Trust and the Panorama Fund.
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 also serves as the collateral co-manager for MassMutual Carlson CBO,
N.V.
OFI, located at Two World Trade Center, New York, NY 10048-0203, has operated as
an investment adviser since April 30, 1959. It and its affiliates currently
advise U.S. investment companies with assets aggregating over $62 billion as of
December 31, 1996, and having more than 3 million shareholder accounts. OFI is
owned by Oppenheimer Acquisition Corp., a holding company owned in part by
senior management of OFI, and ultimately controlled by MassMutual.
The assets of certain variable annuity separate accounts for which MassMutual or
an affiliate is the depositor are invested in shares of the MML Funds. Because
these separate accounts are invested in the same underlying MML Funds it is
possible that material conflicts could arise between owners of the Policies 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 MML 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 MML Funds. The Board of Trustees of the MML 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 MML 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 and Panorama Fund were established for use as investment
vehicles by variable contract separate accounts such as the Separate Account.
Accordingly, it is possible that a material irreconcilable conflict may develop
between the interests of Policyowners and other separate accounts investing in
the Oppenheimer Trust and Panorama Fund. The Board of Trustees of the
Oppenheimer Trust (the "Trustees") and the Board of Directors of Panorama Fund
(the "Directors") will monitor the Oppenheimer Funds and Panorama Portfolios for
the existence of any such conflicts. If it is determined that a conflict exists,
the Boards 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 or Panorama Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another Oppenheimer
Fund or Panorama Portfolio; (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.
Rates of Return. Tables 1 and 3 show the Effective Annual Rates of Return and
One Year Total Returns, respectively, of the Funds based on the actual
investment performance (after deduction of investment management fees and direct
operation expenses).
Table 1 shows figures for periods ended December 31, 1996, for the Funds; Table
3 shows December 31 annualized figures for the Funds. These rates of return do
not reflect the mortality and expense risk charges assessed against the Separate
Account. Also, they do not reflect deduction from premiums or administrative,
cost of insurance, and underwriting charges assessed against the Account Value
of
17
<PAGE>
the Policies. See Charges Under The Policy - Deductions From Premiums and
Account Value Charges. Therefore, these rates are not illustrative of how actual
investment performance will affect the benefits under the Policy (see, however,
Account Value And Cash Surrender Value - Investment Return). The rates of return
shown are not necessarily indicative of future performance. They may be
considered in assessing the competence and performance of the Funds' investment
advisers.
Table 2 illustrates the performance information pertaining to a hypothetical
Policy. These figures do reflect the deduction of mortality and expense risk
charges, deductions from premiums, and Account Value charges.
TABLE 1
EFFECTIVE ANNUAL RATES OF RETURN
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
Since 20 15 10 5 3 1
Fund Inception Years Years Years Years Years Year
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MML Equity 14.22% 14.72% 16.01% 13.78% 14.71% 17.97% 20.25%
MML Blend 13.13% ---- ---- 11.89% 11.55% 12.90% 13.95%
MML Managed Bond 10.40% ---- 10.54% 8.34% 7.27% 5.79% 3.25%
MML Money Market 6.84% ---- 6.83% 5.76% 4.13% 4.82% 5.01%
Oppenheimer Global Securities 10.65% ---- ---- ---- 12.38% 4.25% 17.80%
Oppenheimer Capital Appreciation 15.66% ---- ---- 16.50% 16.68% 13.74% 20.22%
Oppenheimer Growth 14.52% ---- ---- 14.32% 16.24% 19.99% 25.20%
Oppenheimer Growth & Income 40.54% ---- ---- ---- ---- ---- 32.51%
Oppenheimer Multiple Strategies 11.52% ---- ---- ---- 11.67% 11.18% 15.50%
Oppenheimer High Income 13.46% ---- ---- 13.89% 14.88% 10.34% 15.26%
Oppenheimer Strategic Bond 7.35% ---- ---- ---- ---- 7.54% 12.07%
Oppenheimer Bond 9.94% ---- ---- 8.81% 7.68% 6.33% 4.80%
Oppenheimer Money 5.98% ---- ---- 5.92% 4.42% 5.00% 5.13%
Panorama LifeSpan Capital Appreciation 18.80% ---- ---- ---- ---- ---- 17.97%
Panorama LifeSpan Balanced 14.85% ---- ---- ---- ---- ---- 13.38%
Panorama LifeSpan Diversified Income 9.61% ---- ---- ---- ---- ---- 6.93%
</TABLE>
18
<PAGE>
TABLE 2
POLICY PERFORMANCE
AS OF DECEMBER 31, 1996
This table illustrates the performance information of a hypothetical Policy's
Account Value* assuming the following:
. The Policy was in force for the period illustrated;
. Current Fund Investment Management Fees and Direct Operation Expenses,
Separate Account Mortality and Expense Risk Charge, Sales Load, State Premium
Tax Charge of 2%, DAC Tax Charge, Administrative Charge, Charge for Cost of
Insurance Protection, and Underwriting Charge**;
. 100% allocation to the respective Fund for each period illustrated;
. The Insured is a male, issue age 50, nonsmoker;
. An annual premium of $30,000 for 15 years;
. A Selected Face Amount of $825,000;
. Initial Case Premium Paid $1,000,000;
. Full Underwriting and Death Benefit Option 1.
<TABLE>
<CAPTION>
1 5 10 Since
Fund Year Years Years Inception
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MML Equity -6.57% 7.95% 10.94% 13.07%
MML Blend -11.59% 3.89% 8.43% 9.41%
MML Managed Bond -20.17% -1.64% 4.27% 6.61%
MML Money Market -18.65% -4.29% 0.96% 3.11%
Oppenheimer Global Securities -8.72% 3.65% 4.95% -2.57%
Oppenheimer Capital Appreciation -6.41% 8.31% 13.09% 12.47%
Oppenheimer Growth -2.57% 9.82% 11.57% 11.42%
Oppenheimer Growth & Income 3.27% ----- ----- 9.41%
Oppenheimer Multiple Strategies -10.35% 3.77% ----- 7.27%
Oppenheimer High Income -10.53% 5.28% 10.64% 10.35%
Oppenheimer Strategic Bond -13.09% ----- ----- -2.49%
Oppenheimer Bond -18.92% -1.13% 4.75% 5.62%
Oppenheimer Money*** -18.57% -4.07% 1.16% 1.16%
Panorama LifeSpan Capital Appreciation 6.57% 8.95% 11.92% 8.43%
Panorama LifeSpan Balanced 22.34% 8.45% 12.22% 6.67%
Panorama LifeSpan Diversified Income 11.43% 9.87% 8.43% 22.34%
</TABLE>
* The performance information is based on the Policy's Account Value since
there are no surrender charges and we assume no Policy Debt.
** Historical investment results and current charges are used to determine
values; if guaranteed charges were used the results would be lower.
*** Although the Oppenheimer Money Fund commenced operations on 4/3/85, the
information necessary to calculate the performance information is available
only for the year 1987 and subsequent periods.
19
<PAGE>
TABLE 3
ONE YEAR TOTAL RETURNS
<TABLE>
<CAPTION>
For the year ended 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MML
Equity Fund 20.25% 31.13% 4.10% 9.52% 10.48% 25.56% (0.51)% 23.04% 16.68% 2.10% 20.15% 30.54%
MML
Blend Fund 13.95% 23.28% 2.48% 9.70% 9.36% 24.00% 2.37% 19.96% 13.40% 3.12% 18.30% 24.88%
MML
Managed Bond Fund 3.25% 19.14% (3.76)% 11.81% 7.31% 16.66% 8.38% 12.83% 7.13% 2.60% 14.46% 19.94%
MML
Money Market Fund 5.01% 5.58% 3.84% 2.75% 3.48% 6.01% 8.12% 9.16% 7.39% 6.49% 6.60% 8.03%
Oppenheimer
Global Securities Fund 17.80% 2.24% (5.72)% 70.32% (7.11)% 3.39% 0.40%* ---- ---- ---- ---- ----
Oppenheimer
Capital Appreciation Fund 20.16% 32.52% (7.59)% 27.32% 15.42% 54.72% (16.82)% 27.57% 13.41% 14.34% (1.65)%* ----
Oppenheimer
Growth Fund 25.20% 36.65% 0.97% 7.25% 14.53% 25.54% (8.21)% 23.59% 22.09% 3.32% 17.76% 9.50%*
Oppenheimer
Growth & Income Fund 32.51% 23.52%* ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Oppenheimer
Multiple Strategies Fund 15.50% 21.36% (1.95)% 15.95% 8.99% 17.48% (1.91)% 15.76% 22.15% 3.97%* ---- ----
Oppenheimer
High Income Fund 15.26% 20.37% (3.18)% 26.34% 17.92% 33.91% 4.65% 4.84% 15.58% 8.07% 4.73%* ----
Oppenheimer
Strategic Bond Fund 12.07% 15.33% (3.78)% 4.25%* ---- ---- ---- ---- ---- ---- ---- ----
Oppenheimer
Bond Fund 4.80% 17.00% (1.94)% 13.04% 6.50% 17.63% 7.92% 13.32% 8.97% 2.52% 10.12% 18.82%*
Oppenheimer
Money Fund 5.13% 5.62% 4.20% 3.12% 3.76% 5.97% 7.80% 8.82% 7.31% 6.33% 5.68% 7.25%*
Panorama
LifeSpan Capital
Appreciation Fund 17.97% 6.65%* ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Panorama
LifeSpan Balanced Fund 13.38% 6.08%* ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Panorama
LifeSpan Diversified
Income Fund 6.93% 5.69%* ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
</TABLE>
* The figures shown are from inception of the Funds and one year total
returns. The MML Money Market and MML Managed Bond Funds commenced
operations on December 16, 1981. The MML Blend Fund commenced operations on
February 3, 1984. The MML Equity Fund commenced operations on September
15, 1971 (performance information prior to 1974 is not available). The
Oppenheimer Money Fund, Oppenheimer Bond Fund and Oppenheimer Growth Fund
commenced operations on April 3, 1985. The Oppenheimer High Income Fund
commenced operations on April 30, 1986. The Oppenheimer Capital Appreciation
Fund commenced operations on August 15, 1986. The Oppenheimer Multiple
Strategies Fund commenced operations on February 9, 1987. The Oppenheimer
Global Securities Fund commenced operations on November 12, 1990. The
Oppenheimer Strategic Bond Fund commenced operations on May 3, 1993.
Oppenheimer Growth & Income Fund commenced operations on July 5, 1995.
Performance information for the MML Equity Index Fund is not provided
because it commenced operations on May 1, 1997. The Panorama Portfolios
commenced operations on September 1, 1995.
20
<PAGE>
TABLE 3
ONE YEAR TOTAL RETURNS (Continued)
<TABLE>
<CAPTION>
For the year ended 1984 1983 1982 1981 1980 1979 1978 1977 1976 1975 1974
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MML
Equity Fund 5.40% 22.85% 25.67% 6.67% 27.62% 19.54% 3.71% (0.52)% 24.77% 32.85% (17.61)%*
MML
Blend Fund 8.24%* ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
MML
Managed Bond Fund 11.69% 7.26% 22.79%* ---- ---- ---- ---- ---- ---- ---- ----
MML
Money Market Fund 10.39% 8.97% 11.12%* ---- ---- ---- ---- ---- ---- ---- ----
</TABLE>
- --------------------------------------------------------------------------------
General Provisions Of
The Policy
This section of the Prospectus describes the general provisions of the Policy,
and is subject to the terms of the Policy. A Policyowner may review a copy of
the Policy upon request.
Premiums. The Policyowner selects a premium payment schedule in the Application
and is not bound by an inflexible premium schedule. Five premium concepts are
very important under the Policy: the minimum annual planned Policy premium,
planned Policy premium, minimum initial Policy premium, minimum Case premium,
and Initial Case Premium Paid.
Planned Policy Premiums. The minimum annual planned Policy premium is determined
by the initial Selected Face Amount, issue age and sex classification of the
Policy. For a Policy in a Case with an Initial Case Premium Paid of less than
$3,500,000, the sales load percentage is greater in each of the first ten Policy
Years up to the minimum annual planned Policy premium.
Planned Policy premiums are elected in the Application and may be changed at any
time. Planned Policy premiums are the basis for the Policy's premium billing.
The planned Policy premium may be subject to minimum and maximum amounts
depending on the Selected Face Amount of the Policy, the Insured's age, sex and
smoking class and the amount of the initial premium paid.
There is no penalty if the planned Policy 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 Policy
premiums are paid, the Policy terminates when the Account
Value becomes insufficient to pay certain monthly charges and a grace period
expires without sufficient payment. For details see Termination.
The following table shows the minimum annual planned Policy premium (also
referred to as the "Cut-Off" premium) at certain ages for a Policy with a
Selected Face Amount of $100,000 in all years, under Death Benefit Option 1.
(See Death Benefits Under The Policy.)
MINIMUM ANNUAL PLANNED POLICY PREMIUM
LEVEL $100,000 SELECTED FACE AMOUNT
(DEATH BENEFIT OPTION 1)
<TABLE>
<CAPTION>
Issue Age
-------------------------------------------------
Class Age 25 Age 40 Age 55
----- ------ ------ ------
<S> <C> <C> <C>
MALE SMOKER $792 $1,590 $3,486
FEMALE SMOKER $640 $1,259 $2,516
UNISEX SMOKER $762 $1,521 $3,294
MALE NONSMOKER $666 $1,269 $2,705
FEMALE NONSMOKER $578 $1,082 $2,185
UNISEX NONSMOKER $648 $1,231 $2,593
MALE UNISMOKER $734 $1,403 $2,945
FEMALE UNISMOKER $603 $1,128 $2,245
UNISEX UNISMOKER $708 $1,345 $2,789
</TABLE>
Minimum Initial Policy Premium. A minimum initial Policy premium must be paid
along with an Application or at any time prior to the delivery of the Policy.
The amount of the minimum initial Policy premium is the amount which, after the
deductions for sales load, state premium tax, and DAC tax charge (see Deductions
From Premiums), is sufficient (disregarding investment performance) to pay
twelve times the first monthly deduction (see Account Value Charges).
Thereafter, subject to the minimum and maximum premium limitations described
below, a Policyowner may make unscheduled premium payments at any time and in
any amount.
Minimum Case Premium. The minimum Case premium is $250,000 of first year
annualized premium for all Policies in a Case.
Initial Case Premium Paid. The Initial Case Premium Paid is the amount of
premium for all Policies in a Case on deposit with MassMutual before the Case is
installed on the administrative system. The Initial Case Premium Paid determines
sales load percentages for all Policies in that Case.
Minimum and Maximum Premium Payments. While the Policy is in force, premiums may
be paid at any time before the death of the Insured subject to certain
restrictions. The minimum premium payment is $100.00. We have the right to
refund a premium paid in any year if it will increase the net amount at risk
under the Policy.
21
<PAGE>
Premium payments should be sent to our Home Office or to the address indicated
for payment on the notice.
Termination. This Policy does not terminate for failure to pay premiums since
payments, other than the initial premium, are not specifically required. Rather,
if on a Monthly Calculation Date, the Account Value less any Policy Debt is
insufficient to cover the total monthly deduction, the Policy enters a 61-day
grace period.
Grace Period. We allow 61 days to pay any premium necessary to cover the overdue
monthly deduction. A Policyowner will receive a notice from Us which sets forth
this amount. During the grace period, the Policy remains in force. If the
payment is not made by the later of the 61 days or 30 days after We have mailed
the written notice, the Policy terminates without value.
Death Benefit Under The Policy
The Death Benefit is the amount payable to the named Beneficiary(ies) when the
Insured dies. Upon receiving due proof of death, We pay the Beneficiary the
Death Benefit amount determined as of the date the Insured dies. All or part of
the benefit can be paid in cash or applied under one or more of our payment
options as described under Additional Provisions Of The Policy - Payment
Options.
In the Application, the applicant may select a Selected Face Amount for each
Policy Year. Under Death Benefit Option 1, the Death Benefit is the greater of
the Selected Face Amount in effect on the date of death or the Minimum Face
Amount in effect on the date of death, with possible additions or deductions.
Under Death Benefit Option 2, the Death Benefit is the greater of the sum of the
Selected Face Amount in effect on the date of death plus the Account value on
the date of death, or the Minimum Face Amount in effect on the date of death,
with possible additions or deductions. The Minimum Face Amount is equal to
Account Value times the Minimum Face Amount percentage. The percentages depend
upon the Insured's age, sex and smoking classification. The percentages are set
forth in the Table Of Minimum Face Amount Percentages in the Policy. Added to
the greater of the Selected Face Amount or Minimum Face Amount is that part of
any monthly deduction applicable for the period beyond the date of death. Any
Policy Debt outstanding on the date of death and any monthly charges unpaid as
of the date of death are deducted from the Death Benefit. If the Insured dies
after the first Policy Year, We will also include a pro-rata share of any
dividend allocated to the Policy for the year death occurs. We pay interest on
the Death Benefit from the date of death to the date the Death Benefit is paid
or a payment option becomes effective. The interest rate equals the rate
determined under the Interest Payment Option as described in Additional
Provisions Of The Policy - Payment Options.
The Selected Face Amount may be increased six months after issue or a previous
increase upon request by the Policyowner, subject to receipt by MassMutual of
adequate evidence of insurability. Additionally, any increase in the Selected
Face Amount will be effective on the Monthly Calculation Date which is on, or
next follows, the later of: (i) the date 15 days after a written request for
such change has been received and approved by us; or (ii) the requested
effective date of the change. Any increase must be for at least $5,000. Under
Death Benefit Option 1, the Death Benefit is unaffected by investment experience
unless the Death Benefit is based on the Minimum Face Amount. Under Option 2,
the Death Benefit may be increased or decreased by investment experience. (No
increase will be allowed after the Policy Anniversary Date nearest the Insured's
85th birthday.)
Example: The following example shows how the Death Benefit may vary as a result
of investment performance and Death Benefit Option in effect on the date of
death.
<TABLE>
<CAPTION>
Policy A Policy B
-------- --------
<S> <C> <C>
(a) Selected Face Amount: $100,000 $100,000
(b) Account Value on
Date of Death: $ 40,000 $ 50,000
(c) Minimum Face Amount
Percentage on
Date of Death: 240% 240%
(d) Minimum Face
Amount (b x c): $ 96,000 $120,000
Death Benefit if
Option #1 in effect
(greater of a and d): $100,000 $120,000
Death Benefit if
Option #2 in effect
(greater of (i) a + b
and (ii) d): $140,000 $150,000
</TABLE>
(Examples assume no additions to or deductions from the Selected Face Amount or
Minimum Face Amount are applicable.)
Account Value And Cash Surrender Value
Account Value. The Account Value of the Policy is equal to the Variable Account
Value plus the Fixed Account Value. 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 to the MML
Money Market Division until the later of: (1) the expiration of the Free Look
Period, or (2) receipt by MassMutual of notice that the Owner has received the
Policy. Subject to the allocation rules described in the Policy, the Account
Value is then allocated among the Divisions and the GPA in accordance with the
Policyowner's instructions in the Application, subject to applicable
restrictions.
Transactions with respect to the Account Value are effected by the purchase and
sale of accumulation units. Purchases and sales are made at the unit value as of
the Valuation Time on the Valuation Date if the premium or transaction request
for such purchase or sale is received by Us before the Valuation Time.
Otherwise, purchases and sales will be made as of the next fol-
22
<PAGE>
lowing Valuation Date or a later date requested by the Policyowner. Unit values
are determined on each Valuation Date.
All or part of the Account Value may be transferred among Divisions by written
request. Transfers between Divisions may be by dollar amount or by whole-number
percentage. There is no limit on the number of transfers a Policyowner may make.
MassMutual currently does not intend to charge a fee for transfers, however,
MassMutual reserves the right to charge a fee not to exceed $10 per transfer if
there are more than six transfers in a Policy Year to compensate MassMutual for
the cost of processing transfers. Policyowners, however, may transfer all funds
in the Separate Account to the GPA at any time regardless of the number of
transfers previously made.
Transfers from the GPA to the Separate Account may be made only once during each
Policy Year. Each such transfer may not exceed 25% of the Account Value in the
GPA (excluding Policy Debt) at the time of the transfer. However, if in each of
the previous three policy years, 25% of the account value in the GPA has been
transferred and there have been no premium payments or transfers (except as a
result of a policy loan) to the GPA, 100% of the account value in the GPA
(excluding policy loans) may be transferred to the Separate Account. The Account
Value in the GPA equal to any Policy Debt cannot be transferred to the Separate
Account. All transfers made on one Valuation Date are considered one transfer.
Automated Account Value Transfer. Automated Account Value Transfer permits the
Policyowner to specify transfers of a specific dollar amount or a whole-number
percentage of a Division's Account Value to be transferred monthly from that
Division to any combination of Divisions and the GPA. A number of transfer
options are available. Automated Account Value Transfer transfers are not
available from more than one Division or from the GPA. This process is
considered one transfer per Policy Year.
The main objective of Automated Account Value Transfer is to shield the
Policyowner's investment from short term price fluctuations. Theoretically, a
lower than average cost per unit may or may not 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.
Automated Account Value Transfer can be started, changed or canceled at any
time. Transfers will only be made on a monthly basis on the Monthly Calculation
Date. The effective date of the first automated transfer will be the first
Monthly Calculation Date after the request is received by the Home Office. If
the request is received before the end of the Free Look Period, the effective
date of the first automated transfer will be coincident with the end of this
Period.
Transfers will occur automatically. The Policyowner will specify the specific
dollar amounts or whole-number percentages to be transferred and the Division
from which the transfers will be made, the Division(s) and/or GPA to which the
automated transfer is to be made and the length of time during which transfers
will continue.
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. No more
automated transfers will be processed.
Investment Return. The investment return of a Policy is based on:
. The Account Value held in each Division for that Policy;
. The investment experience of each Division as measured by its actual net
rate of return; and
. The interest rate credited on Account Values held in the GPA.
The investment experience of a Division reflects increases or 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 against the assets of
the Division. This 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 surrendered for its Cash Surrender Value
at any time while the Insured is living. Unless a later effective date is
selected, surrender is effective on the date We receive the Policy and a written
request in proper form at our Home Office. The Policy and a written request for
surrender are deemed received on the date on which they are received by mail at
MassMutual's Home Office. If, however, the date on which they are received is
not a Valuation Date, or if they are received other than through the mail after
a Valuation Time, they are deemed received on the next Valuation Date. The Cash
Surrender Value is the Account Value less any outstanding Policy Debt.
Withdrawals. Subject to certain conditions, after the Policy has been in force
for six months a Policyowner can make a Withdrawal from the Policy on any
Monthly Calculation Date by sending a written request to our Home Office. The
minimum amount of a Withdrawal is $100 (before deducting the withdrawal charge);
the maximum amount is the Cash Surrender Value less an amount equal to the
following, whichever is applicable: if the Withdrawal is made before the Policy
Anniversary Date nearest the Insured's 65th birthday, twelve multiplied by the
most recent Account Value Charges for the Policy; if on or after such Date,
sixty multiplied by the most recent Account Value Charges. The amount of the
Withdrawal is deducted from the Policy's Account Value at the end of the
Valuation Period applicable to the Monthly Calculation Date on which the
Withdrawal is made. The Policyowner must specify the GPA or the Division(s) 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 that Division
or GPA. A charge of 2.0% of the Withdrawal, not to exceed $25.00, is deducted
from each Withdrawal. The withdrawal charge is assessed for each Withdrawal and
is intended to compensate MassMutual for the cost of processing the Withdrawals.
MassMutual does not anticipate making a profit from this charge. The Account
Value will automatically be reduced by the amount of the Withdrawal. The
Selected Face Amount of the Policy will be reduced as needed to prevent an
increase in the amount at risk, unless satisfactory evidence of insurability is
provided to MassMutual. Withdrawals may have tax consequences. For
23
<PAGE>
details see FEDERAL INCOME TAX CONSIDERATIONS - Policy Proceeds, Premiums and
Loans.
Policy Loan Privilege
The Policy provides a loan privilege. Loans can be made on the Policy at any
time while the Insured is living. The maximum loan is an amount equal to the
Account Value at the time of the loan less any outstanding Policy Debt before
the new loan, interest on the loan being made and on any outstanding Policy Debt
to the next Policy Anniversary Date and an amount equal to the most recent
monthly charge for the Policy multiplied by the number of Monthly Calculation
Dates remaining up to including the next Policy Anniversary Date. The Policy
must be properly assigned as collateral for the loan. (The maximum loan amount
may be different if required by state law.)
Source of Loan. The loan amount requested is taken from the Divisions and the
GPA in proportion to the non-loaned Account Value of each on the date of the
loan. Shares taken from the Divisions are liquidated and the resulting dollar
amounts are transferred to 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 the New
York Stock Exchange (or its successor) is closed except for normal weekend and
holiday closings, or trading is restricted, or the Securities and Exchange
Commission (or its successor) determines that an emergency exists, or the
Securities and Exchange Commission (or its successor) permits Us to delay
payment for the protection of our policy owners.
If Loans Exceed the Policy Account Value. Policy Debt (which includes accrued
interest) must not equal or exceed the Account Value under the Policy. If this
limit is reached, We may terminate the Policy. To terminate for this reason We
will notify the Policyowner in writing. This notice states the amount necessary
to bring the Policy Debt back within the limit. If We do not receive a payment
within 31 days after the date We mailed the notice, the Policy terminates
without value at the end of those 31 days.
Termination of a policy under these circumstances could cause the Policyowner to
recognize gross income in the amount of any excess of the Policy Debt over the
sum of the Policyowner's previously unrecovered premium payments.
Interest. On the Application, the Policyowner may select a loan interest rate of
6% per year or, where permitted, an adjustable loan rate. When an adjustable
rate is selected, MassMutual sets the rate each year that will apply for the
next Policy Year. The maximum rate is based on the monthly average of the
composite yield on seasoned corporate bonds as published by Moody's Investors
Service 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 5%, 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. The inclusion of unpaid interest to
outstanding Policy Debt may result in tax consequences upon surrender or lapse
of the Policy. For details see FEDERAL INCOME TAX CONSIDERATIONS - Policy
Proceeds, Premiums and Loans.
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 repayment results in the
transfer of values equal to the repayment from the loaned portion of the GPA to
the non-loaned portion of the GPA and the applicable Division(s). The transfer
is made in proportion to the non-loaned value in each Division at the time of
repayment. If the loan is not repaid, We deduct the amount due from any amount
payable from a full surrender or upon the death of the Insured.
Interest on Loaned Value. The amount equal to any outstanding Policy loans is
held in the GPA and is credited with interest at a rate which is the greater of
3% and the Policy loan rate less a MassMutual declared charge (maximum 0.75%)
for expenses and taxes.
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.
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. If the Policy is surrendered
with outstanding Policy Debt, tax consequences may result. For details see
FEDERAL INCOME TAX CONSIDERATIONS - Policy Proceeds, Premiums and Loans.
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 the Policyowner
receives a written notice of withdrawal right or within 45 days after signing
Part 1 of the Application, whichever is latest. The Policyowner should mail or
deliver the Policy and Policy delivery receipt either to MassMutual or to the
agent who sold the Policy or to one of our agency offices. If the Policy is
cancelled in this fashion, a refund will be made to the Policyowner. The refund
equals the Account Value (or all premiums paid where required by state law),
reduced by any amounts borrowed or withdrawn. During the Free Look Period, the
initial Net Premium will
24
<PAGE>
be allocated to the MML Money Market Division, which invests in the MML Money
Market Fund.
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 when We receive a
written request, signed by the Policyowner.
Your Voting Rights
As long as the Separate Account continues to operate as a unit investment trust
under the Investment Company Act of 1940, as amended, 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, if any, by $100.
Fractional votes are counted.
Policyowners receive proxy material and a form with which such instructions may
be given. If required by law or regulation, MassMutual will vote shares of the
Funds held by the Separate Account as to which no effective instructions have
been received in the same proportion as the shares as to which instructions have
been received. Otherwise, MassMutual reserves the right to vote such shares in
its own discretion.
Our 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 segments of the Separate Account;
. Create new Separate Accounts;
. Combine any two or more Separate Accounts;
. Make available additional Divisions 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, as amended, or in any other form permitted
by law; and
. Deregister the Separate Account under the Investment Company Act of 1940, as
amended, 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 and Massachusetts Mutual 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.
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,
25
<PAGE>
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.
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.
The Guaranteed Principal Account
Because of the 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, as amended. 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.
A Policyowner may allocate or transfer all or part of the Net Premium to the
GPA, and such amounts shall become part of MassMutual's general account assets.
The allocation or
26
<PAGE>
transfer of amounts to the GPA does not entitle a Policyowner to share in the
investment experience of those assets. Instead, MassMutual guarantees that those
amounts allocated to the GPA which are in excess of any Policy loans will accrue
interest daily at a minimum effective annual rate equal to 3%. For amounts equal
to any Policy loans, the guaranteed rate is the greater of: (a) 3%; and (b) the
Policy loan rate less a MassMutual declared charge for expenses and taxes. This
charge cannot exceed 0.75%. Although MassMutual is not obligated to credit
interest at a rate higher than this minimum, it may declare a higher rate
applicable for such periods as it deems appropriate. Upon request, MassMutual
will inform Policyowners of the then applicable rate. Since MassMutual takes
into account the need to provide for its expenses and guarantees, the crediting
rate declared by MassMutual shall be net of charges it imposes against the
earnings of the GPA.
Federal Income Tax Considerations
The ultimate effect of federal income taxes on values under this Policy and upon
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 Policies, 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. For complete information on federal and state tax
considerations, a qualified tax adviser should be consulted. No attempt is made
to consider any applicable state or other tax laws.
MassMutual - 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 Values. The
investment income and realized capital gains are automatically applied to
increase book reserves associated with the Policies. 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 Policies. The reserve items taken into account at the close
of the taxable year for purposes of determining net increases or net decreases
must be adjusted for tax purposes by subtracting any amount attributable to
appreciation in the value of assets or by adding any amount attributable to
depreciation. MassMutual's basis in the assets underlying the Separate Account's
Policies will be adjusted for appreciation or depreciation, to the extent the
reserves are adjusted. Thus, corporate level 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 state laws, MassMutual may incur state and local taxes (in
addition to premium taxes). At present, these taxes are not significant. If
there is a material change in 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 Withdrawal is made.
Upon a full surrender of a Policy for its Cash Surrender Value the Policyowner
may recognize ordinary income for federal tax purposes. Ordinary income is
computed to be the amount by which the Account Value, unreduced by any
outstanding Policy Debt (which may include unpaid interest), 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 part of the amount distributed. 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. 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 as yet unrecovered premium contributions. MassMutual suggests that
a Policyowner consult with his or her 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 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. Under the
27
<PAGE>
"personal" interest limitation provisions of the Code, interest on Policy loans
used for personal purposes, which otherwise meet the requirements of Code
Section 264, will no longer be tax deductible. 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 a tax advisor for further
guidance.
If the Policy is owned by a business or corporation, the Code 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
inside build-up of 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 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.
For complete information on the impact of changes with respect to the Policy and
federal and state tax considerations, a qualified tax advisor should be
consulted.
MassMutual makes no guarantee regarding the future tax treatment of any Policy.
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 tax 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 contract 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 or dividends with respect to such premiums.
Since the Policy provides for flexible premium payments, We will carefully
monitor the Policy to determine 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 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, particularly where a Policy
is owned by other than an individual Insured, a qualified tax advisor should be
consulted.
Once a Policy fails the 7-pay test, loans, collateral assignments, 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 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 and
distributions from any one such Policy are taxable to the extent of the income
accumulated in all the contracts required to be aggregated.
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 Trust'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 the Trust as an asset
of the Separate Account.
28
<PAGE>
All securities of the same issuer are treated as a single investment. Each
Government agency or instrumentality, however, is treated as a separate issuer.
With respect to variable life insurance contracts, the general diversification
requirements are modified if any of the assets of the Separate Account are
direct obligations of the United States Treasury. In this case, there is no
limit on the investment that may be made in United States Treasury Securities,
and for purposes of determining whether assets other than United States Treasury
Securities are adequately diversified, the generally applicable percentage
limitations are increased based on the value of the Separate Account's
investment in United States Treasury Securities. Notwithstanding this
modification of the general diversification requirements, the Funds of the
Trusts will be structured to comply with the general diversification standards
because they serve as an investment vehicle for certain variable annuity
contracts which must comply with the general standards.
In connection with the issuance of the temporary regulations prior to the Final
Regulations, the Treasury announced that such temporary regulations did not
provide guidance concerning the extent to which Policyowners may direct their
investments to particular divisions of a separate account. Regulations in this
regard were not issued in connection with the Final Regulations, however. It is
not clear, at this time, what future regulations might provide. It is possible
that if future regulations are issued, the Policy may need to be modified to
comply with such regulations. For these reasons, 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.
Additional Provisions Of The Policy
Paid-up Policy Date. The Paid-up Policy Date is the Policy Anniversary Date
nearest the Insured's 100th birthday. On this Date and at all times thereafter,
the Selected Face Amount will equal the Account Value, and the Death Benefit
Option will be Death Benefit Option 1. As of this Date, the charge for cost of
insurance will be equal to $0 and premium payments will no longer be accepted.
The Policy does not lapse after the Paid-up Policy Date. The payment of planned
Policy premiums does not guarantee that the Policy will continue in force to the
Paid-up Policy Date.
Reinstatement Option. For a period of five (5) years after termination, a
Policyowner can request that We reinstate the Policy during the Insured's
lifetime. We will not reinstate the Policy if it has been returned for its Cash
Surrender Value. Note that a termination or reinstatement may cause the Policy
to become a modified endowment contract.
Before We will reinstate the Policy, We must receive the following:
. A premium payment equal to the amount necessary to produce an Account Value
equal to 3 times the total monthly deduction for the Policy on the Monthly
Calculation Date on or next following the date of reinstatement;
. Evidence of insurability satisfactory to us; and
. Where necessary, a signed acknowledgement that the Policy has become a
modified endowment contract.
If We do reinstate the Policy, the Selected Face Amounts for the reinstated
Policy will be the same as it would have been if the Policy had not terminated.
Payment Options. All or part of the Death Benefit or Cash Surrender Value may be
taken in cash or as a series of level payments. Proceeds applied will no longer
be affected by the investment experience of the Divisions or the GPA.
To receive payments, the proceeds to be applied must be at least $2,000. If the
payments under any option are less than $20 each, We reserve the right to make
payments at less frequent intervals. Payment options are as described below.
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
3% 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 interest rate We credit to the unpaid
balance. This interest rate will not be less than 3% per year.
Interest Payment Option. We hold amounts applied under this option and pay
interest on the unpaid balance of at least 3% 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; or
. 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 is 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
. Payment 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 payments.
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
29
<PAGE>
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 may be withdrawn or applied under
any other option. Payments which are based on a named person's life may not be
withdrawn.
Beneficiary. A Beneficiary is any person named on our records to receive
insurance proceeds after the Insured dies. A Policyowner names the Beneficiary
when he or she or it applies 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 premium payments.
. Change the premium payment plan.
. Reinstate the Policy after termination.
If no Beneficiary is living when the Insured dies, unless provided otherwise,
the Death Benefit is paid to the Owner or, if deceased, the Owner's estate.
Changing the Owner or Beneficiary. The Owner or any Beneficiary may be changed
during the Insured's lifetime by writing to our Home Office. The change takes
effect as of the date of the request, even if the Insured dies before We receive
it. Each change is subject to any payment We made or other action by MassMutual
prior to receipt of the request.
Right to Substitute Insured. Upon written Application to MassMutual, the Policy
may be transferred to the life of a substitute Insured. The transfer becomes
effective upon the transfer date, which is the Policy Anniversary on or next
following, the latter of the date We approve the Application for transfer; and
the date any required cost associated with the transfer is paid, subject to the
following conditions (the "Transfer Date"):
. This Policy must be in force on the Transfer Date.
. A written Application for the transfer and payment of any required cost to
transfer must be approved by Us at our Home Office.
. Evidence of insurability of the substitute Insured, satisfactory to us, is
required.
. The substitute Insured must not have been under 20 years of age on the
birthday nearest the Policy Date of this Policy.
. The substitute Insured must not be over 65 years of age on the birthday
nearest the Transfer Date.
. The Owner of this Policy after it has been transferred must have an
insurable interest in the life of the substitute Insured.
The Selected Face Amount for the substitute Insured will be determined as for a
new Insured. The Account Value immediately after transfer will be equal to: (i)
the Account Value immediately before the transfer, plus (ii) any Net Premium
necessary to make the cash surrender value, immediately before the monthly
charges are deducted on the Transfer Date, at least 12 times the monthly
charges, minus (iii) any amount which must be refunded (so that the amount at
risk is not greater than the Selected Face Amount), minus (iv) the monthly
charges on the Transfer Date. Future charges against the Policy will be based on
the life of the substitute Insured.
The costs to transfer are an administrative fee of $75, plus any premium
necessary to effect the transfer, plus any excess Policy Debt not repaid prior
to transfer. Excess Policy Debt is the amount by which Policy Debt exceeds the
maximum loan available after transfer. Any such excess must be repaid on or
before the Transfer Date.
The incontestability and suicide periods begin to run anew from the Transfer
Date. Any assignments existing on the Transfer Date will continue to apply.
The Internal Revenue Service has ruled that a substitution of Insureds is an
exchange of contracts which does not qualify for the tax deferral available
under Code Section 1035. Therefore upon a substitution of Insureds, the
Policyowner must include in current gross income all the previously unrecognized
gain in the Policy.
Assignment. The Policy may be assigned as collateral for a loan or other
obligation, subject to any outstanding Policy Debt. For any assignment to be
binding on us, We must receive a signed copy of it at our Home Office. We are
not responsible for the validity of any assignment.
Any amounts due to an assignee of the Policy which is assigned will be paid in
one sum.
Dividends. Each year MassMutual determines the divisible surplus, or the money
available to pay dividends. Each Policy may receive a dividend based upon its
contribution to this divisible surplus. MassMutual does not expect that any
dividends will be paid under the Policies.
Any dividend will be payable on the Policy Anniversary Date.
If the Insured dies after the first Policy Year, the Death Benefit includes a
pro-rata share of any dividend allocated to the Policy for the year death
occurs.
Limits on Our Right to Challenge the Policy. We must bring any legal action to
contest the validity of a Policy within two years from its Issue Date or an
increase in the Selected Face Amount. After that We cannot contest its validity,
except for failure to pay premiums.
Misstatement of Age or Sex. If the Insured's date of birth or sex as given in
the Application is not correct, an adjustment will be made. If the adjustment is
made when the Insured dies, the Death Benefit will reflect the amount
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<PAGE>
provided by the most recent mortality charge according to the correct age and
sex. If the adjustment is made before the Insured dies, then future monthly
deductions will be based on the correct age and sex.
Suicide. If the Insured commits suicide within two years (or different period if
required by state law) from the Issue Date or an increase in the Selected Face
Amount and while the Policy is in force, We pay a limited Death Benefit in one
sum to the Beneficiary. The limited Death Benefit is the amount of premiums paid
for the Policy, less any Policy Debt or amounts withdrawn.
When We Pay Proceeds. If the Policy has not terminated, payment of the Cash
Surrender Value, loan proceeds or the Death Benefit are made normally within 7
days after We receive any required documents at our Home Office. 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 (or its successor) is closed, except for normal weekend
or holiday closings, or trading is restricted; or
. the Securities and Exchange Commission (or its successor) determines that an
emergency exists; or
. the Securities and Exchange Commission (or its successor) permits Us to
delay payment for the protection of our policy owners.
We may delay paying any Cash Surrender Value or loan proceeds based on the GPA
for up to 6 months from the date the request was received at our Home Office. We
can delay payment of the entire Death Benefit if payment is contested. We
investigate all death claims arising within the two-year contestable period.
Upon receiving the information from a completed investigation, We generally make
a determination within five days as to whether the claim should be authorized
for payment. Payments are made promptly after authorization. If payment is
delayed for 10 working days or more from the effective date of surrender or
Withdrawal, we add interest at the same rate as is paid under the Interest
Payment Option for the same period of time.
Records And Reports
MassMutual maintains all records and accounts relating to the Separate Account
and the GPA. Each year within 30 days after the Policy Anniversary, We will mail
to the Policyowner 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 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 parties. Also located at 1414 Main Street, Springfield,
MA 01144-1013, MML Investors Services, Inc. ("MMLISI") serves as the co-
underwriter of the Policies. 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"). We sell the Policies through agents who are licensed by state
insurance officials to sell the Policies. These agents are also registered
representatives of selling brokers or of MMLISI.
When an application for one of the Policies is completed, it is submitted to us.
The selling broker or co-underwriter perform suitability review and, in some
cases, we perform insurance underwriting. We determine whether to accept or
reject the application for the Policy and the Insured's risk classification. If
the application is not accepted, we will refund any premium that has been paid.
Both MML Distributors and MMLISI receive compensation for their activities as
underwriters of the policies of the Separate Account. Compensation paid to
MMLISI in 1996 was $19,800. Compensation paid to MML Distributors in 1996 was
$10,000. Commissions are paid through MMLISI and MML Distributors to agents and
selling brokers for selling the Policies. During 1996 such payments amounted to
$422,677.
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.
Commissions Schedule. Agents or selling brokers receive commissions as a
percentage of the premium paid under the Policies. The commission percentage on
these Policies is based on the Initial Case Premium Paid for all Policies in a
Case. It is not affected by subsequent changes under the Case. The maximum
commission percentage paid under the Policies is 18% of premiums.
Agents may receive commissions at lower rates on Policies sold to replace
existing insurance issued by MassMutual or any of its subsidiaries.
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 coverage for MassMutual's
31
<PAGE>
general agents and agents (also subject to a $350,000 deductible).
Legal Proceedings
We are currently not involved in any material legal proceedings that adversely
impact the Policy.
Experts
The financial statements of the Strategic Variable Life 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 on the statutory financial statements of MassMutual
includes explanatory paragraphs relating to the use of statutory accounting
practices rather than generally accepted accounting principles.
Actuarial matters in this Prospectus have been examined by C. Dale Games, FSA,
MAAA, Vice President, for MassMutual. His 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 Strategic Variable Life 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.
32
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Report Of Independent Accountants
To the Contract Owners of MassMutual Variable Life Separate Account 1
and the Board of Directors of Massachusetts Mutual Life Insurance Company
We have audited the accompanying statements of assets and liabilities of the MML
Equity Division, MML Money Market Division, MML Managed Bond Division, MML Blend
Division, Oppenheimer Money Division, Oppenheimer High Income Division,
Oppenheimer Bond Division, Oppenheimer Capital Appreciation Division,
Oppenheimer Growth Division, Oppenheimer Multiple Strategies Division,
Oppenheimer Global Securities Division, Oppenheimer Strategic Bond Division and
Oppenheimer Growth & Income Division of the Strategic Variable Life 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 Separate 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 Money Division, Oppenheimer High Income Division, Oppenheimer Bond
Division, Oppenheimer Capital Appreciation Division, Oppenheimer Growth
Division, Oppenheimer Multiple Strategies Division, Oppenheimer Global
Securities Division, Oppenheimer Strategic Bond Division and Oppenheimer Growth
& Income Division of the Strategic Variable Life 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
34
<PAGE>
Massachusetts Mutual Variable Life Separate Account I - Strategic Variable Life
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
Equity Market Bond Blend Money Income Bond
Division Division Division Division Division Division Division
---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments
Number of shares (Note 2)....... 30,858 729,612 43,043 13,342 5,370 113,761 475
========== ========== ========== ========== ========== ========== ===========
Identified cost (Note 3B)....... $ 883,733 $ 729,612 $ 516,213 $ 284,840 $ 5,370 $1,271,845 $ 5,476
========== ========== ========== ========== ========== ========== ===========
Value (Note 3A)................. $ 919,138 $ 729,612 $ 518,592 $ 293,171 $ 5,370 $1,266,155 $ 5,520
Dividends receivable............. 42,809 1,985 8,241 10,015 9 -- --
---------- ---------- ---------- ---------- ---------- ---------- -----------
Total assets.................. 961,947 731,597 526,833 303,186 5,379 1,266,155 5,520
LIABILITIES
Payable to Massachusetts Mutual
Life Insurance Company.......... 8 8 4 3 4 10 --
---------- ---------- ---------- ---------- ---------- ---------- -----------
NET ASSETS....................... $ 961,939 $ 731,589 $ 526,829 $ 303,183 $ 5,375 $1,266,145 $ 5,520
========== ========== ========== ========== ========== ========== ===========
Net Assets:
For variable life insurance
policies........................ $ 955,203 $ 726,221 $ 521,359 $ 296,983 $ -- $1,259,940 $ --
Retained in Variable Life
Separate Account I by
Massachusetts Mutual Life
Insurance Company............... 6,736 5,368 5,470 6,200 5,375 6,205 5,520
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net assets.................... $ 961,939 $ 731,589 $ 526,829 $ 303,183 $ 5,375 $1,266,145 $ 5,520
========== ========== ========== =========== ========== ========== ===========
Accumulation units (Note 8)
Policyowners.................... 709,055 676,464 476,626 239,493 -- 1,015,400 --
Massachusetts Mutual Life
Insurance Company.............. 5,000 5,000 5,000 5,000 5,000 5,000 5,000
---------- ---------- ---------- ---------- ---------- ---------- -----------
Total units................... 714,055 681,464 481,626 244,493 5,000 1,020,400 5,000
========== ========== ========== ========== ========== ========== ===========
NET ASSET VALUE PER
ACCUMULATION UNIT
December 31, 1996............... $1.35 $1.07 $1.09 $1.24 $1.08 $1.24 $1.10
December 31, 1995............... $1.12 $1.03 $1.06 $1.09 $1.03 $1.08 $1.06
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Multiple Global Strategic Oppenheimer
Appreciation Growth Strategies Securities Bond Growth & Income
Division Division Division Division Division Division
------------ ----------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments
Number of shares (Note 2)....... 24,977 28,113 393 14,700 1,171 505
============ =========== =========== =========== =========== ===============
Identified cost (Note 3B)....... $ 956,280 $ 738,357 $ 5,496 $ 237,750 $ 5,603 $ 5,080
============ =========== =========== =========== =========== ===============
Value (Note 3A)................. $ 966,378 $ 765,791 $ 6,139 $ 259,155 $ 5,959 $ 8,264
Dividends receivable............. -- -- -- -- -- --
------------ ----------- ----------- ----------- ----------- ---------------
Total assets.................. 966,378 765,791 6,139 259,155 5,959 8,264
LIABILITIES
Payable to Massachusetts Mutual
Life Insurance Company.......... 8 6 -- 2 -- --
------------ ----------- ----------- ----------- ----------- ---------------
NET ASSETS....................... $ 966,370 $ 765,785 $ 6,139 $ 259,153 $ 5,959 $ 8,264
============ =========== =========== =========== =========== ===============
Net Assets:
For variable life insurance
policies........................ $ 959,332 $ 758,734 $ -- $ 253,270 $ -- $ --
Retained in Variable Life
Separate Account I by
Massachusetts Mutual Life
Insurance Company............... 7,038 7,051 6,139 5,883 5,959 8,264
------------ ----------- ----------- ----------- ----------- ---------------
Net assets.................... $ 966,370 $ 765,785 $ 6,139 $ 259,153 $ 5,959 $ 8,264
============ =========== =========== =========== =========== ===============
Accumulation units (Note 8)
Policyowners................... 681,585 538,020 -- 215,297 -- --
Massachusetts Mutual Life
Insurance Company.............. 5,000 5,000 5,000 5,000 5,000 5,000
------------ ----------- ----------- ----------- ----------- ---------------
Total units................... 686,585 543,020 5,000 220,297 5,000 5,000
============ =========== =========== =========== =========== ===============
NET ASSET VALUE PER
ACCUMULATION UNIT
December 31, 1996............... $1.41 $1.41 $1.23 $1.18 $1.19 $1.65
December 31, 1995............... $1.17 $1.13 $1.07 $1.00 $1.07 $1.25
</TABLE>
See Notes to Financial Statements.
35
<PAGE>
Massachusetts Mutual Variable Life Separate Account I - Strategic Variable Life
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
Equity Market Bond Blend Money Income Bond
Division Division Division Division Division Division Division
---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income
Dividends (Note 3B)............... $ 42,809 $ 35,721 $ 16,577 $ 12,896 $ 263 $ 31,311 $ 342
Expenses
Mortality and expense risk fee
(Note 4).......................... 875 2,187 560 329 15 795 16
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net investment income (loss)
(Note 3C)......................... 41,934 33,534 16,017 12,567 248 30,516 326
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net realized and unrealized
gain (loss) on investments
Net realized gain (loss) on
investments (Note 3B, 3C & 6)..... (2,827) -- (112) 313 -- 18,837 --
Change in net unrealized
appreciation/depreciation
of investments.................... 34,986 -- 2,301 8,127 -- (5,803) (88)
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net gain (loss) on investments..... 32,159 -- 2,189 8,440 -- 13,034 (88)
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net increase (decrease) in net assets
resulting from operations......... $ 74,093 $ 33,534 $ 18,206 $ 21,007 $ 248 $ 43,550 $ 238
========== ========== ========== ========== ========== ========== ===========
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Multiple Global Strategic Oppenheimer
Appreciation Growth Strategies Securities Bond Growth & Income
Division Division Division Division Division Division
---------- ---------- --------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Investment income
Dividends (Note 3B)............... $ 374 $ 460 $ 409 $ -- $ 436 $ 94
Expenses
Mortality and expense risk fee
(Note 4).......................... 721 494 18 255 17 22
---------- ---------- --------- ---------- ---------- -------------
Net investment income (loss)
(Note 3C)......................... (347) (34) 391 (255) 419 72
---------- ---------- --------- ---------- ---------- -------------
Net realized and unrealized
gain (loss) on investments
Net realized gain (loss) on
investments (Note 3B, 3C & 6)..... (10,070) (3,859) 1 257 1 7
Change in net unrealized
appreciation/depreciation
of investments.................... 9,218 26,779 416 21,378 206 1,930
---------- ---------- --------- ---------- ---------- -------------
Net gain (loss) on investments..... (852) 22,920 417 21,635 207 1,937
---------- ---------- --------- ---------- ---------- -------------
Net increase (decrease) in net assets
resulting from operations......... $ (1,199) $ 22,886 $ 808 $ 21,380 $ 626 $ 2,009
========== ========== ========= ========== ========== =============
</TABLE>
See Notes to Financial Statements.
36
<PAGE>
Massachusetts Mutual Variable Life Separate Account I - Strategic Variable Life
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
Equity Market Bond Blend Money Income Bond
Division Division Division Division Division Division Division
---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss)....... $ 41,934 $ 33,534 $ 16,017 $ 12,567 $ 248 $ 30,516 $ 326
Net realized gain (loss)
on investments.................... (2,827) -- (112) 313 -- 18,837 --
Change in net unrealized
appreciation/depreciation
of investments.................... 34,986 -- 2,301 8,127 -- (5,803) (88)
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net increase (decrease) in net assets
resulting from operations......... 74,093 33,534 18,206 21,007 248 43,550 238
---------- ---------- ---------- ---------- ---------- ---------- -----------
Capital transactions: (Note 8)
Net contract payments (Note 5)..... 4,154 5,620,114 1,941 -- -- -- --
Reimbursement (payment) of
Accumulation unit value
fluctuation....................... 362 6,520 (118) 1,199 -- 1,702 --
Withdrawal due to administrative
and insurance costs............... (13,823) (92,404) (9,099) (2,663) -- (4,525) --
Divisional transfers............... 891,536 (4,841,301) 510,586 278,183 -- 1,220,019 --
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net increase in net assets resulting
from capital transactions......... 882,229 692,929 503,310 276,719 -- 1,217,196 --
---------- ---------- ---------- ---------- ---------- ---------- -----------
Total increase...................... 956,322 726,463 521,516 297,726 248 1,260,746 238
NET ASSETS, at beginning
of the year........................ 5,617 5,126 5,313 5,457 5,127 5,399 5,282
---------- ---------- ---------- ---------- ---------- ---------- -----------
NET ASSETS, at end
of the year........................ $ 961,939 $ 731,589 $ 526,829 $ 303,183 $ 5,375 $1,266,145 $ 5,520
========== ========== ========== ========== ========== ========== ===========
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Multiple Global Strategic Oppenheimer
Appreciation Growth Strategies Securities Bond Growth & Income
Division Division Division Division Division Division
------------ ----------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss)....... $ (347) $ (34) $ 390 $ (255) $ 419 $ 72
Net realized gain (loss)
on investments.................... (10,070) (3,859) 1 257 1 7
Change in net unrealized
appreciation/depreciation
of investments.................... 9,218 26,779 416 21,378 206 1,930
------------ ----------- ----------- ----------- ----------- ---------------
Net increase (decrease) in net assets
resulting from operations......... (1,199) 22,886 808 21,380 626 2,009
------------ ----------- ----------- ----------- ----------- ---------------
Capital transactions: (Note 8)
Net contract payments (Note 5)..... 552 553 -- -- -- --
Reimbursement (payment) of
Accumulation unit value
fluctuation....................... (253) (268) -- 519 -- 1
Withdrawal due to administrative
and insurance costs............... (5,150) (3,218) -- (2,010) -- --
Divisional transfers............... 966,547 740,185 -- 234,245 -- --
------------ ----------- ----------- ----------- ----------- ---------------
Net increase in net assets resulting
from capital transactions......... 961,696 737,252 -- 232,754 -- 1
------------ ----------- ----------- ----------- ----------- ---------------
Total increase...................... 960,497 760,138 808 254,134 626 2,010
NET ASSETS, at beginning
of the year........................ 5,873 5,647 5,331 5,019 5,333 6,254
------------ ----------- ----------- ----------- ----------- ---------------
NET ASSETS, at end
of the year........................ $ 966,370 $ 765,785 $ 6,139 $ 259,153 $ 5,959 $ 8,264
============ =========== =========== =========== =========== ===============
</TABLE>
See Notes to Financial Statements.
37
<PAGE>
Massachusetts Mutual Variable Life Separate Account I - Strategic Variable Life
STATEMENT OF CHANGES IN NET ASSETS
For the Period July 5, 1995 (Date Of Commencement Of Operations) Through
December 31, 1995
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
Equity Market Bond Blend Money Income Bond
Division Division Division Division Division Division Division
---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss)...... $ 197 $ 126 $ 234 $ 255 $ 127 $ 286 $ 150
Net realized gain on investments.. 1 -- -- -- -- -- --
Change in net unrealized
appreciation of investments....... 419 -- 79 203 -- 114 132
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations......... 617 126 313 458 127 400 282
---------- ---------- ---------- ---------- ---------- ---------- ----------
Capital transactions: (Note 8)
Transfer of seed money............ 5,000 5,000 5,000 5,000 5,000 5,000 5,000
Payment of accumulation unit
value fluctuation................ -- -- -- (1) -- (1) --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from capital
transactions...................... 5,000 5,000 5,000 4,999 5,000 4,999 5,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total increase..................... 5,617 5,126 5,313 5,457 5,127 5,399 5,282
NET ASSETS, at beginning
of the year....................... -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS, at end
of the year....................... $ 5,617 $ 5,126 $ 5,313 $ 5,457 $ 5,127 $ 5,399 $ 5,282
========== ========== ========== ========== ========== ========== ===========
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Multiple Global Strategic Oppenheimer
Appreciation Growth Strategies Securities Bond Growth & Income
Division Division Division Division Division Division
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss)...... $ (8) $ (8) $ 104 $ (7) $ 183 $ --
Net realized gain on investments.. -- -- -- -- -- 1
Change in net unrealized
appreciation of investments....... 881 655 227 26 150 1,254
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations......... 873 647 331 19 333 1,255
---------- ---------- ---------- ---------- ---------- ----------
Capital transactions: (Note 8)
Transfer of seed money............ 5,000 5,000 5,000 5,000 5,000 5,000
Payment of accumulation unit
value fluctuation................ -- -- -- -- -- (1)
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from capital
transactions...................... 5,000 5,000 5,000 5,000 5,000 4,999
---------- ---------- ---------- ---------- ---------- ----------
Total increase..................... 5,873 5,647 5,331 5,019 5,333 6,254
NET ASSETS, at beginning
of the year....................... -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS, at end
of the year....................... $ 5,873 $ 5,647 $ 5,331 $ 5,019 $ 5,333 $ 6,254
========== ========== ========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements.
38
<PAGE>
Massachusetts Mutual Variable Life Separate Account I - Strategic Variable Life
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, known
as Variable Life Plus.
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, known as Large Case
Variable Life Plus.
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, known as Strategic Variable Life.
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, known
as Variable Life Select.
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 $65,000 to Strategic Variable Life Segment on
July 5, 1995 to provide initial capital: 14,439 shares were purchased in
the two management investment companies described in Note 2 supporting the
thirteen divisions of Strategic Variable Life Segment.
2. INVESTMENT OF STRATEGIC VARIABLE LIFE SEGMENT'S ASSETS
Strategic Variable Life Segment maintains thirteen divisions. Each
division invests in corresponding shares of either MML Series Investment
Trust ("MML Trust") or Oppenheimer Variable Account Funds ("Oppenheimer
Trust").
MML Equity Fund, MML Money Market Fund, MML Managed Bond Fund and MML
Blend Fund are the four series of 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-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. 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-adviser 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 Money Fund, Oppenheimer High Income Fund, Oppenheimer Bond
Fund, Oppenheimer Capital Appreciation Fund, Oppenheimer Growth Fund,
Oppenheimer Multiple Strategies Fund, Oppenheimer Global Fund, Oppenheimer
Strategic Bond Fund and Oppenheimer Growth & Income Fund are the nine
separate funds of the Oppenheimer Trust. The Oppenheimer Trust is a
registered, open-end, diversified management investment company, for which
OppenheimerFunds, Inc. ("OFI"), a controlled subsidiary of MassMutual,
serves as investment adviser to the Oppenheimer Trust, (prior to January
5, 1996, OFI was known as Oppenheimer Management Corporation).
In addition to the thirteen divisions of Strategic Variable Life 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 Strategic Variable Life Segment in preparation of the
financial statements in conformity with generally accepted accounting
principles.
39
<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. Strategic
Variable Life Segment is part of MassMutual's total operation and is not
taxed separately. Strategic Variable Life 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 Strategic Variable Life Segment
credited to the policies. Accordingly, MassMutual does not intend to make
any charge to Strategic Variable Life Segment 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 Strategic Variable Life Segment.
D. Policy Loan
When a policy loan is made, Strategic Variable Life Segment transfers the
amount of the loan to MassMutual, thereby decreasing both the assets and
the reserves of Strategic Variable Life 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 at the time of application. All loan
repayments are allocated to the Guaranteed Principal Account.
The policyowner earns interest at a rate which is the greater of 3% or the
policy loan rate less a MassMutual declared charge (maximum .75%) for
expenses and taxes.
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 Strategic Variable Life Segment divisions for the
mortality and expense risks it assumes. The charge is made daily at a
current effective annual rate of 0.30% of the value of each division's net
assets.
MassMutual makes certain deductions from the annual premium before amounts
are allocated to Strategic Variable Life 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 Strategic Variable Life Segment.
MassMutual also makes certain charges for the cost of insurance and
administrative costs.
40
<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.
Pursuant to the underwriting and servicing agreements, commissions or
other fees due to registered representatives for selling and servicing the
policies are paid by MassMutual on behalf of MML Distributors or MMLISI.
MML Distributors and MMLISI also receive compensation for their activities
as underwriters of the policies.
41
<PAGE>
Notes To Financial Statements (Continued)
6. PURCHASES AND SALES OF INVESTMENTS
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
For the Year Ended Equity Market Bond Blend Money Income Bond
December 31, 1996 Division Division Division Division Division Division Division
----------------- ----------- ----------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Cost of purchases........... $1,093,274 $7,731,043 $529,729 $282,420 $ 267 $2,309,448 $ 341
Proceeds from sales......... 211,707 7,006,534 18,558 2,990 11 1,061,725 16
Average monthly value of
securities................. 311,129 620,872 198,912 116,316 5,243 309,257 5,322
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Multiple Global Strategic Oppenheimer
For the Year Ended Appreciation Growth Strategies Securities Bond Growth & Income
December 31, 1996 Division Division Division Division Division Division
----------------- ------------ ----------- ----------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Cost of purchases........... $ 1,134,569 $ 919,014 $ 408 $234,764 $ 436 $ 94
Proceeds from sales......... 173,213 181,791 18 2,263 17 22
Average monthly value of
securities................. 256,559 175,808 5,700 91,818 5,599 7,261
</TABLE>
7. NET INVESTMENT RETURN
The following table shows the net investment return for each division in
Strategic Variable Life Segment:
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
Equity Market Bond Blend Money Income Bond
Division Division Division Division Division Division Division
---------- ---------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1996........... 23.57% 5.38% 9.13% 17.94% 4.72% 14.08% 4.45%
*For the Period July 5, 1995
(Date of Commencement of
Operations) Through
December 31, 1995......... 11.59% 2.48% 6.10% 8.75% 2.50% 7.60% 5.51%
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Multiple Global Strategic Oppenheimer
Appreciation Growth Strategies Securities Bond Growth & Income
Division Division Division Division Division Division
------------- ----------- ----------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1996........... (.47)% 13.02% 14.16% 23.29% 11.18% 27.68%
*For the Period July 5, 1995
(Date of Commencement of
Operations) Through
December 31, 1995.......... 15.67% 11.88% 6.35% .37% 6.45% 22.36%
</TABLE>
The net investment return for each division of the Strategic Variable Life
Account 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 5, 1995 through December 31,
1995 are not annualized.
42
<PAGE>
Notes To Financial Statements (Continued)
8. NET INCREASE (DECREASE) IN ACCUMULATION UNITS
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
For the Year Ended Equity Market Bond Blend Money Income Bond
December 31, 1996 Division Division Division Division Division Division Division
----------------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Units purchased..................... 4,137 9,528,707 2,292 -- -- 1,229 --
Units withdrawn and transferred
to Guaranteed Principal
Account............................ (11,556) (4,286,412) (8,896) (2,232) -- (4,950) --
Units transferred between
divisions.......................... 716,474 (4,565,831) 483,230 241,725 -- 1,019,121 --
-------- --------- --------- --------- --------- --------- ---------
Net Increase........................ 709,055 676,464 476,626 239,493 -- 1,015,400 --
Units, at beginning of the
year............................... 5,000 5,000 5,000 5,000 5,000 5,000 5,000
-------- --------- --------- --------- --------- --------- ---------
Units, at end of the year........... 714,055 681,464 481,626 244,493 5,000 1,020,400 5,000
======== ========= ========= ========= ========= ========= =========
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Multiple Global Strategic Oppenheimer
For the Year Ended Appreciation Growth Strategies Securities Bond Growth & Income
December 31, 1996 Division Division Division Division Division Division
----------------- ------------ -------- ---------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Units purchased...................... 551,136 432 -- -- -- --
Units withdrawn and transferred
to Guaranteed Principal
Account............................. (3,731) (2,334) -- (1,798) -- --
Units transferred between
divisions........................... 134,180 539,922 -- 217,095 -- --
--------- ---------- ---------- --------- --------- --------
Net Increase......................... 681,585 538,020 -- 215,297 -- --
Units, at beginning of the
year................................ 5,000 5,000 5,000 5,000 5,000 5,000
--------- ---------- ---------- --------- --------- --------
Units, at end of the year............ 686,585 543,020 5,000 220,297 5,000 5,000
========= ========== ========= ========= ========= ========
<CAPTION>
MML MML Oppenheimer
For the Period July 5, 1995 MML Money Managed MML Oppenheimer High Oppenheimer
(Date of Commencement of Operations) Equity Market Bond Blend Money Income Bond
Through December 31, 1996 Division Division Division Division Division Division Division
------------------------- -------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Units purchased...................... 5,000 5,000 5,000 5,000 5,000 5,000 5,000
Units, at beginning of the
period.............................. -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Units, at end of the year............ 5,000 5,000 5,000 5,000 5,000 5,000 5,000
====== ====== ====== ====== ====== ====== ======
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
For the Period July 5, 1995 Capital Oppenheimer Multiple Global Strategic Oppenheimer
(Date of Commencement of Operations) Appreciation Growth Strategies Securities Bond Growth & Income
Through December 31, 1996 Division Division Division Division Division Division
------------------------- ------------ ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Units purchased...................... 5,000 5,000 5,000 5,000 5,000 5,000
Units, at beginning of the
period.............................. -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Units, at end of the year............ 5,000 5,000 5,000 5,000 5,000 5,000
====== ====== ====== ====== ====== ======
</TABLE>
9. CONSOLIDATED MASSACHUSETTS MUTUAL VARIABLE LIFE SEPARATE ACCOUNT I
As discussed in Note 1, the financial statements only represent activity
of MassMutual's Strategic Variable Life Segment. The combined net assets
as of December 31, 1996 for Separate Account I, which includes the
Variable Life Plus, the 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 Oppenheimer
Equity Market Bond Blend Money Income Bond
Division Division Division Division Division Division Division
----------- ---------- ----------- ----------- ---------- ----------- ----------
<S> <C> <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 $ 5,520
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 $ 5,520
=========== ========== =========== =========== ========== =========== ==========
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 I by
Massachusetts Mutual Life
Insurance Company.......... 80,789 48,958 55,208 70,348 5,376 12,837 5,520
----------- ---------- ----------- ----------- ---------- ----------- ----------
Net Assets.................. $30,116,737 $1,979,808 $12,312,012 $ 8,903,781 $ 5,376 $ 3,064,537 $ 5,520
=========== ========== =========== =========== ========== =========== ==========
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Multiple Global Strategic Oppenheimer Dreyfus
Appreciation Growth Strategies Securities Bond Growth & Income Index
Division Division Division Division Division Division Division
----------- ---------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Assets................ $ 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.................. $ 5,380,044 $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 I by
Massachusetts Mutual Life
Insurance Company.......... 21,267 13,945 6,139 17,127 11,886 8,264 5,727
----------- ---------- ----------- ----------- ----------- ---------- -----------
Net Assets.................. $ 5,380,044 $1,080,404 $ 6,139 $ 2,884,055 $ 151,526 $ 8,264 $21,103,819
=========== ========== =========== =========== =========== ========== ===========
</TABLE>
43
<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
44
<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.
45
<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.
46
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENT OF CHANGES
IN POLICYHOLDERS' CONTINGENCY RESERVES
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
------ ------- -------
<S> <C> <C> <C>
(In Millions)
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.
47
<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.
48
<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.
49
<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.
50
<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.
51
<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.
52
<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.
53
<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
--------- ----------
(In Millions)
<S> <C> <C>
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>
54
<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.
55
<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>
56
<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%
57
<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
58
<PAGE>
Appendix A
Illustrations of Death Benefits (Option 1), Cash Surrender Values and
Accumulated Premiums
The following tables illustrate the way in which a Policy operates. They show
how the Death Benefit Option 1 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 premiums of $1,200 for a male, female and
unisex nonsmoker age 35 and an Initial Case Premium Paid of $1,000,000. Separate
tables are shown for the current simplified issue and guaranteed schedule of
charges. These tables will assist in the 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 59 is for a Policy issued to a male nonsmoker age
35 for a Selected Face Amount of $100,000. The premium payment is $1,200
using a current simplified issue schedule of charges.
2. The illustration on page 60 is for a Policy issued to a male nonsmoker age
35 for a Selected Face Amount of $100,000. The premium payment is $1,200
using a guaranteed schedule of charges.
3. The illustration on page 61 is for a Policy issued to a female nonsmoker
age 35 for a Selected Face Amount of $100,000. The premium payment is
$1,200 using a current simplified issue schedule of charges.
4. The illustration on page 62 is for a Policy issued to a female nonsmoker
age 35 for a Selected Face Amount of $100,000. The premium payment is
$1,200 using a guaranteed schedule of charges.
5. The illustration on page 63 is for a Policy issued to a unisex nonsmoker
age 35 for a Selected Face Amount of $100,000. The premium payment is
$1,200 using a current simplified issue schedule of charges.
6. The illustration on page 64 is for a Policy issued to a unisex nonsmoker
age 35 for a Selected Face Amount of $100,000. The premium payment is
$1,200 using a guaranteed schedule of charges.
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, if the rates of return for all the Funds
averaged 0%, 6% or 12% but varied above or below that average for particular
Funds.
The death benefits and cash surrender values shown in illustrations 1, 3 and 5
reflect the following current charges:
1. Administrative Charge, equal to a monthly $5.25 per Policy charge for
nonqualified policies.
2. Cost of Insurance Charge, based on the current simplified issue rates being
charged by the Company.
3. Mortality and Expense Risk Charge, which is equal to .30% on an annual
basis, of the net asset value of the Fund shares held by the Separate
Account.
4. MML Trust, Oppenheimer Trust and Panorama Fund level expenses of .77% on an
annual basis, of the net asset value of the MML Trust, Oppenheimer Trust,
and Panorama Fund shares held by the Separate Account.
The death benefits and cash surrender values shown in illustrations 2, 4 and 6
reflect these guaranteed maximum charges:
1. Administrative Charge, equal to $9.00 per month.
2. Cost of Insurance Charge, based on the 1980 CSO Mortality Table.
3. Mortality and Expense Risk Charge, which is equal to .60% on an annual
basis, of the net asset value of the Fund shares held by the Separate
Account.
4. MML Trust, Oppenheimer Trust and Panorama Fund level expenses of .77% on an
annual basis, of the net asset value of the MML Trust, Oppenheimer Trust,
and Panorama Fund shares held by the Separate Account. (This unweighted
average reflects current Fund level expenses.)
Cash surrender values shown in the tables reflect the deduction of the
applicable sales loads and premium taxes for a Case with an Initial Case Premium
Paid of $1,000,000. Taking into account the 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 net annual rate of return on a current basis would
be -1.064%, 4.872%, and 10.809%, respectively, and on a guaranteed basis would
be -1.35%, 4.560%, and 10.478%, respectively.
MassMutual has agreed to bear expenses of the MML Trust (other than the
management fee, interest, taxes, brokerage commissions and extraordinary
expenses) in excess of .11% of average daily net asset value of the MML Funds
through April 30, 1998. During 1996, no expenses were required to be reimbursed
pursuant to this undertaking. In addition, MassMutual does not expect that it
will be required to reimburse any expenses due to this undertaking in 1997.
Currently no charge is made against the Separate Account for federal income
taxes but MassMutual 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 tables are based on the assumptions that the Policyowner has requested a
level Selected Face Amount, that no Policy loans, or additional premium payments
have been made, and no transaction charges have been incurred, and that the
entire Account Value under the Policy is allocated to the Funds.
The second column of each table shows the amounts which would accumulate if an
amount equal to the annual premium were invested to earn interest after taxes,
of 5% per year, compounded annually.
59
<PAGE>
FLEXIBLE PREMIUM VARIABLE WHOLE LIFE INSURANCE POLICY WITH TABLE OF SELECTED
FACE AMOUNTS
Male Issue Age 35, Nonsmoker
$100,000 Selected Face Amount All Years
$1,200 Annual Premium and $1,000,000 Initial Case Premium Paid
Using Current Simplified Issue Schedule Of Charges
<TABLE>
<CAPTION>
Death Benefit (Option 1) 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 $ 816 $ 868 $ 921
2 2,583 100,000 100,000 100,000 1,622 1,778 1,940
3 3,972 100,000 100,000 100,000 2,416 2,728 3,065
4 5,431 100,000 100,000 100,000 3,199 3,722 4,310
5 6,963 100,000 100,000 100,000 3,969 4,760 5,686
6 8,571 100,000 100,000 100,000 4,870 5,996 7,366
7 10,260 100,000 100,000 100,000 5,752 7,283 9,219
8 12,033 100,000 100,000 100,000 6,614 8,623 11,262
9 13,895 100,000 100,000 100,000 7,455 10,017 13,517
10 15,850 100,000 100,000 100,000 8,278 11,470 16,008
15 27,192 100,000 100,000 100,000 12,039 19,653 32,954
20 41,668 100,000 100,000 143,383 15,097 29,586 60,756
25 60,142 100,000 100,000 215,273 17,228 41,664 105,526
30 (Age 65) 83,720 100,000 101,020 316,599 17,966 56,436 176,871
35 113,812 100,000 117,330 457,403 16,533 74,259 289,496
40 152,219 100,000 136,016 665,841 11,484 95,116 465,623
45 201,237 0 155,289 961,859 0 118,541 734,244
50 263,797 0 176,259 1,389,578 0 143,300 1,129,738
</TABLE>
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 TRUSTS 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 WITH TABLE OF SELECTED
FACE AMOUNTS
Male, Issue Age 35, Nonsmoker
$100,000 Selected Face Amount All Years
$1,200 Annual Premium and $1,000,000 Initial Case Premium Paid
Using Guaranteed Schedule Of Charges
<TABLE>
<CAPTION>
Death Benefit (Option 1) 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 $100,000 $100,000 $ 100,000 $ 662 $ 709 $ 757
2 2,583 100,000 100,000 100,000 1,308 1,444 1,586
3 3,972 100,000 100,000 100,000 1,936 2,202 2,492
4 5,431 100,000 100,000 100,000 2,544 2,985 3,483
5 6,963 100,000 100,000 100,000 3,133 3,791 4,565
6 8,571 100,000 100,000 100,000 3,842 4,772 5,909
7 10,260 100,000 100,000 100,000 4,527 5,783 7,378
8 12,033 100,000 100,000 100,000 5,186 6,825 8,989
9 13,895 100,000 100,000 100,000 5,820 7,898 10,753
10 15,850 100,000 100,000 100,000 6,426 9,003 12,687
15 27,192 100,000 100,000 100,000 8,992 14,999 25,589
20 41,668 100,000 100,000 109,440 10,547 21,718 46,373
25 60,142 100,000 100,000 160,581 10,447 28,840 78,716
30 (Age 65) 83,720 100,000 100,000 228,051 7,607 35,848 127,403
35 113,812 0 100,000 314,135 0 41,595 198,819
40 152,219 0 100,000 429,994 0 43,833 300,695
45 201,237 0 100,000 577,439 0 36,254 440,793
50 263,797 0 0 773,030 0 0 628,479
</TABLE>
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 TRUSTS 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 WITH TABLE OF SELECTED
FACE AMOUNTS
Female, Issue Age 35, Nonsmoker
$100,000 Selected Face Amount All Years
$1,200 Annual Premium and $1,000,000 Initial Case Premium Paid
Using Current Simplified Issue Schedule Of Charges
<TABLE>
<CAPTION>
Death Benefit (Option 1) 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 $ 860 $ 915 $ 969
2 2,583 100,000 100,000 100,000 1,709 1,872 2,041
3 3,972 100,000 100,000 100,000 2,544 2,870 3,223
4 5,431 100,000 100,000 100,000 3,366 3,913 4,529
5 6,963 100,000 100,000 100,000 4,173 5,001 5,971
6 8,571 100,000 100,000 100,000 5,084 6,262 7,695
7 10,260 100,000 100,000 100,000 5,978 7,577 9,598
8 12,033 100,000 100,000 100,000 6,854 8,947 11,700
9 13,895 100,000 100,000 100,000 7,713 10,378 14,022
10 15,850 100,000 100,000 100,000 8,556 11,871 16,589
15 27,192 100,000 100,000 106,111 12,477 20,350 34,119
20 41,668 100,000 100,000 167,960 15,925 30,885 62,906
25 60,142 100,000 101,181 252,182 18,768 43,992 109,644
30 (Age 65) 83,720 100,000 119,715 368,584 20,843 60,158 185,218
35 113,812 100,000 138,942 534,264 21,911 79,852 307,048
40 152,219 100,000 158,562 768,446 21,337 103,635 502,252
45 201,237 100,000 180,925 1,113,393 16,449 131,105 806,807
50 263,797 100,000 203,039 1,595,864 385 161,142 1,266,559
</TABLE>
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 TRUSTS 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 WITH TABLE OF SELECTED
FACE AMOUNTS
Female, Issue Age 35, Nonsmoker
$100,000 Selected Face Amount All Years
$1,200 Annual Premium and $1,000,000 Initial Case Premium Paid
Using Guaranteed Schedule Of Charges
<TABLE>
<CAPTION>
Death Benefit (Option 1) 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 $ 708 $ 757 $ 807
2 2,583 100,000 100,000 100,000 1,398 1,541 1,690
3 3,972 100,000 100,000 100,000 2,069 2,351 2,656
4 5,431 100,000 100,000 100,000 2,721 3,187 3,713
5 6,963 100,000 100,000 100,000 3,351 4,049 4,868
6 8,571 100,000 100,000 100,000 4,078 5,063 6,265
7 10,260 100,000 100,000 100,000 4,780 6,108 7,794
8 12,033 100,000 100,000 100,000 5,457 7,186 9,469
9 13,895 100,000 100,000 100,000 6,109 8,299 11,307
10 15,850 100,000 100,000 100,000 6,738 9,449 13,327
15 27,192 100,000 100,000 100,000 9,501 15,797 26,904
20 41,668 100,000 100,000 130,241 11,488 23,209 48,779
25 60,142 100,000 100,000 190,544 12,469 31,821 82,845
30 (Age 65) 83,720 100,000 100,000 269,521 12,064 41,866 135,438
35 113,812 100,000 100,000 373,569 8,873 53,199 214,695
40 152,219 100,000 101,335 508,564 718 66,232 332,395
45 201,237 0 110,193 688,762 0 79,850 499,103
50 263,797 0 117,135 918,009 0 92,964 728,579
</TABLE>
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 TRUSTS 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
WITH TABLE OF SELECTED FACE AMOUNTS
Unisex (85% Male), Issue Age 35, Nonsmoker
$100,000 Selected Face Amount All Years
$1,200 Annual Premium and $1,000,000 Initial Case Premium Paid
Using Current Simplified Issue Schedule Of Charges
<TABLE>
<CAPTION>
Death Benefit (Option 1) 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 $100,000 $100,000 $ 100,000 $ 820 $ 872 $ 925
2 2,583 100,000 100,000 100,000 1,629 1,786 1,948
3 3,972 100,000 100,000 100,000 2,427 2,740 3,079
4 5,431 100,000 100,000 100,000 3,213 3,738 4,328
5 6,963 100,000 100,000 100,000 3,986 4,780 5,709
6 8,571 100,000 100,000 100,000 4,888 6,018 7,393
7 10,260 100,000 100,000 100,000 5,772 7,309 9,252
8 12,033 100,000 100,000 100,000 6,637 8,653 11,302
9 13,895 100,000 100,000 100,000 7,481 10,051 13,564
10 15,850 100,000 100,000 100,000 8,307 11,509 16,062
15 27,192 100,000 100,000 100,000 12,092 19,730 33,075
20 41,668 100,000 100,000 147,559 15,210 29,747 60,975
25 60,142 100,000 100,000 221,362 17,449 41,972 105,915
30 (Age 65) 83,720 100,000 103,694 323,261 18,392 56,975 177,616
35 113,812 100,000 120,730 468,480 17,351 74,988 290,981
40 152,219 100,000 139,337 679,302 13,026 96,095 468,484
45 201,237 100,000 159,301 983,109 1,056 119,775 739,180
50 263,797 0 179,503 1,410,495 0 144,761 1,137,496
</TABLE>
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 TRUSTS 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
WITH TABLE OF SELECTED FACE AMOUNTS
Unisex (85% Male), Issue Age 35, Nonsmoker
$100,000 Selected Face Amount All Years
$1,200 Annual Premium and $1,000,000 Initial Case Premium Paid
Using Guaranteed Schedule Of Charges
<TABLE>
<CAPTION>
Death Benefit (Option 1) 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 $ 668 $ 715 $ 763
2 2,583 100,000 100,000 100,000 1,318 1,455 1,598
3 3,972 100,000 100,000 100,000 1,952 2,220 2,511
4 5,431 100,000 100,000 100,000 2,565 3,008 3,509
5 6,963 100,000 100,000 100,000 3,157 3,820 4,600
6 8,571 100,000 100,000 100,000 3,871 4,807 5,950
7 10,260 100,000 100,000 100,000 4,558 5,823 7,428
8 12,033 100,000 100,000 100,000 5,223 6,872 9,049
9 13,895 100,000 100,000 100,000 5,860 7,952 10,824
10 15,850 100,000 100,000 100,000 6,472 9,065 12,772
15 27,192 100,000 100,000 100,000 9,077 15,123 25,780
20 41,668 100,000 100,000 113,142 10,722 21,974 46,753
25 60,142 100,000 100,000 165,849 10,844 29,389 79,354
30 (Age 65) 83,720 100,000 100,000 234,130 8,520 37,022 128,643
35 113,812 100,000 100,000 324,048 1,606 43,994 201,272
40 152,219 0 100,000 443,055 0 48,845 305,555
45 201,237 0 100,000 598,084 0 47,522 449,687
50 263,797 0 100,000 798,376 0 28,312 643,851
</TABLE>
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 TRUSTS 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 By-laws 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
a 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
employee benefit plans;
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.
<PAGE>
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.
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
<PAGE>
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 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. 3
This Post-Effective Amendment is comprised of the following documents:
The Facing Sheet.
Cross-reference to items required by Form N-8B-2.
The Prospectus consisting of 65 pages.
The Undertaking to File Reports.
The undertaking pursuant to Rule 484 under the Securities Act of 1933.
Representation under Section 26(e)(2)(A) of the Investment Company Act of 1940.
The Signatures.
Written Consents of the Following Persons:
1. Coopers & Lybrand L.L.P., independent accountants;
2. Counsel opining as to the legality of securities being
registered.
3. Opinion opining as to actuarial matters contained in the
Post-Effective Amendment by C. Dale Games, Vice President.
The following Exhibits:
1. 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.*
(2) Not applicable.
(3) Form of Distribution Contracts:
(a)(1) Form of Distribution Servicing Agreement between MML
Distributors, LLC, and MassMutual.***
(a)(2) Co-Underwriting Agreement between MML
Investors Services, Inc. and MassMutual.***
(a)(3) Broker-Dealer Selling Agreement.***
(b) Not applicable.
(c) Not applicable.
(4) Not applicable.
(5) Form of Flexible Premium Variable Whole Life Insurance
Policy.*
<PAGE>
(6) (a) Certificate of Incorporation of MassMutual.*
(b) By-Laws of MassMutual.*
(7) Not applicable.
(8) Not applicable.
(9) Not applicable.
(9) Not applicable.
(10) Application for a Flexible Premium Variable Whole
Life Insurance Policy.*
(11) Memorandum describing MassMutual's issuance, transfer,
and redemption procedures for the Policy.*
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.
5. Opinion and consent of C. Dale Games opining as to actuarial
matters pertaining to the securities being registered.****
6. Consent of Coopers & Lybrand, L.L.P.****
7. Powers of Attorney.***
27. Financial Data Schedule.****
*Incorporated by reference to Registration Statement 33-87904 filed with the
Commission on December 23, 1994.
**Incorporated by reference to Post-Effective Amendment Number 1 to
Registration Statement 33-87904 filed with the Commission on April 30, 1996.
***Incorporated by reference to Post-Effective Amendment Number 2 to
Registration Statement 33-87904 filed with the Commission on February 28, 1997.
****Filed herewith
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Massachusetts Mutual Variable Life Separate Account I , certifies that it
meets all of the requirements for effectiveness of this Post-Effective Amend-
ment No. 3 pursuant to rule 485(b) under the Securities Act of 1933, and has
caused this Post-Effective Amendment No. 3 to Registration Statement No. 33-
87904 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 28th 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
-------------------
*Richard M. Howe - On April 28, 1997, as Attorney-in-Fact pursuant to powers
of attorney previously filed.
As required by the Securities Act of 1933, this Post-Effective Amendment No.
3 to Registration Statement No. 33-87904 has been signed
by the following persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Thomas B. Wheeler* Chief Executive Officer and April 28, 1997
- --------------------- Chairman of the Board
Thomas B. Wheeler
/s/ John J. Pajak* President and Chief Operating April 28, 1997
- ----------------- Officer
John J. Pajak
/s/ Daniel J. Fitzgerald* Chief Financial Officer & Chief April 28, 1997
- ------------------------ Accounting Officer
Daniel J. Fitzgerald
/s/ Roger G. Ackerman* Director April 28, 1997
- ---------------------
Roger G. Ackerman
/s/ James R. Birle* Director April 28, 1997
- ------------------
James R. Birle
/s/ Frank C. Carlucci, III* Director April 28, 1997
- --------------------------
Frank C. Carlucci, III
/s/ Gene Chao* Director April 28, 1997
- -------------
Gene Chao
/s/ Patricia Diaz Dennis* Director April 28, 1997
- ------------------------
Patricia Diaz Dennis
/s/ Anthony Downs* Director April 28, 1997
- -----------------
Anthony Downs
<PAGE>
/s/ James L. Dunlap* Director April 28, 1997
- -------------------
James L. Dunlap
/s/ William B. Ellis* Director April 28, 1997
- --------------------
William B. Ellis
/s/ Robert M. Furek* Director April 28, 1997
- -------------------
Robert M. Furek
/s/ Charles K. Gifford* Director April 28, 1997
- ----------------------
Charles K. Gifford
/s/ William N. Griggs* Director April 28, 1997
- ---------------------
William N. Griggs
/s/ George B. Harvey* Director April 28, 1997
- --------------------
George B. Harvey
/s/ Barbara B. Hauptfuhrer* Director April 28, 1997
- --------------------------
Barbara B. Hauptfuhrer
/s/ Sheldon B. Lubar* Director April 28, 1997
- --------------------
Sheldon B. Lubar
/s/ William B. Marx, Jr.* Director April 28, 1997
- ------------------------
William B. Marx, Jr.
/s/ John F. Maypole* Director April 28, 1997
- -------------------
John F. Maypole
/s/ Donald F. McCullough* Director April 28, 1997
- ------------------------
Donald F. McCullough
/s/ Alfred M. Zeien* Director April 28, 1997
- -------------------
Alfred M. Zeien
/s/ Richard M. Howe
-------------------
*Richard M. Howe - On April 28, 1997, as Attorney-in-Fact pursuant to powers
of attorney previously filed.
<PAGE>
REPRESENTATION BY REGISTRANT'S COUNSEL
As counsel to the Registrant, I, James M. Rodolakis, have reviewed this Post-
Effective Amendment No. 3 to Registration Statement No. 33-87904 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
Massachusetts Mutual Life Insurance Company
<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 C. Dale Games
27 Financial Data Schedule
<PAGE>
EXHIBIT 99.2
Opinion and Consent of James M. Rodolakis
[LETTERHEAD OF MASSMUTUAL]
April 28, 1997
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
RE: Post-Effective Amendment No. 3 to Registration Statement No. 33-87904 filed
on Form S-6
Ladies and Gentlemen:
This opinion is furnished in connection with the filing of Post-Effective
Amendment No. 3 to Registration Statement No. 33-87904 under the Securities Act
of 1933 for Massachusetts Mutual Life Insurance Company's ("MassMutual")
Flexible Premium Variable Whole Life Insurance Policy With Tables of Selected
Face Amounts (the "Policy"). Massachusetts Mutual Variable Life Separate
Account I issues the Policy.
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 Policy. 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 Policy
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 Coopers & Lybrand, L.L.P.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Massachusetts Mutual Life Insurance Company
We consent to the inclusion in Post-Effective Amendment No. 3 to the
Registration Statement of Massachusetts Mutual Variable Life Separate Account 1
(Strategic Variable Life Segment) on Form N-8B-2 (Registration No. 33-87904), 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 1 - (Strategic Variable Life 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
Opinion and Consent of C. Dale Games
[LETTERHEAD OF MASSMUTUAL]
March 28, 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. 3 to
Registration Statement No. 33-87904 for Massachusetts Mutual Life Insurance
Company's Flexible Premium Variable Whole Life Insurance Policies with Table of
Selected Face Amounts (the "Policies") under the Securities Act of 1933. The
prospectus included in the post-effective amendment describes the Policies. I am
familiar with the forms of the Policies and the prospectus.
In my opinion, the illustrations of benefits under the Policies included in the
section entitled "Illustrations" in Appendix A of the prospectus, based on the
assumptions stated in the illustrations, are consistent with the provisions of
the respective forms of the Policies. The age selected in the illustrations is
representative of the manner in which the Policies operate.
I hereby consent to the use of this opinion as an exhibit to Post-Effective
Amendment No. 3 to Registration Statement No. 33-87904, and to the reference of
my name under the heading "Experts" in the prospectus.
Sincerely,
/s/ C. Dale Games
- -----------------
C. Dale Games, FSA, MAAA
Vice President
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