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STRATEGIC VARIABLE LIFE(R)
Supplement dated December 11, 1998
to the Prospectus dated May 1, 1998
The information contained in this Supplement supersedes any conflicting
information contained in the May 1, 1998 Strategic Variable Life(R) prospectus.
Please place this Prospectus Supplement with the current Fund prospectuses and
retain it for future reference.
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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 twenty-eight 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.) At any one time, only eight divisions are available to a
Policyowner. Subject to state availability, the Separate Account divisions
invest in the following Funds:
<TABLE>
<S> <C>
MML Series Investment Fund Oppenheimer Variable Account Funds
MML Money Market Fund Oppenheimer Global Securities Fund
MML Equity Fund Oppenheimer Small Cap Growth Fund
MML Equity Index Fund Oppenheimer Aggressive Growth Fund
MML Blend Fund Oppenheimer Growth Fund
MML Managed Bond Fund Oppenheimer Growth & Income Fund
Oppenheimer Multiple Strategies Fund
Panorama Series Fund, Inc. Oppenheimer High Income Fund
Panorama International Equity Portfolio Oppenheimer Strategic Bond Fund
Panorama LifeSpan Balanced Portfolio Oppenheimer Bond Fund
Panorama LifeSpan Diversified Income Portfolio Oppenheimer Money Fund
Panorama LifeSpan Capital Appreciation Portfolio
MFS(R) Variable Insurance Trust/SM/ Goldman Sachs Variable Insurance Trust
MFS(R) New Discovery Series Goldman Sachs Capital Growth Fund
MFS(R) Emerging Growth Series Goldman Sachs Mid Cap Equity Fund
MFS(R) Research Series Goldman Sachs CORE U.S. Equity Fund
Goldman Sachs Growth and Income Fund
T. Rowe Price Equity Series, Inc.
T. Rowe Price New America Growth Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
</TABLE>
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.)
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, 1998, as Supplemented on December 11, 1998
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE PROSPECTUSES OF THE FUNDS.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FURTHER REFERENCE.
THE PURPOSE OF THE POLICY WE ARE OFFERING IS TO PROVIDE INSURANCE PROTECTION FOR
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.
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<TABLE>
<CAPTION>
Table Of Contents Page
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<S> <C>
Definitions Of Terms........................................................................................... 6
Basic Questions And Answers About Us And Our Policy............................................................ 8
What is MassMutual?......................................................................................... 8
What variable life insurance policy are We offering?........................................................ 8
Availability................................................................................................ 8
Underwriting................................................................................................ 8
What is the Account Value of the Policy?.................................................................... 8
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?...................................................................... 9
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.................................................................................... 12
Charges for Mortality and Expense Risks.................................................................... 12
Charges for Federal Income Taxes........................................................................... 12
Charges for Investment Advisory Services................................................................... 12
The Separate Account........................................................................................... 13
Investment of the Separate Account.......................................................................... 13
Rates of Return............................................................................................. 18
General Provisions Of The Policy............................................................................... 23
Premiums.................................................................................................... 23
Planned Policy Premiums..................................................................................... 23
Minimum Initial Policy Premium.............................................................................. 23
Minimum Case Premium........................................................................................ 23
Initial Case Premium Paid................................................................................... 23
Minimum and Maximum Premium Payments........................................................................ 23
Termination................................................................................................. 23
Grace Period................................................................................................ 24
Death Benefit Under The Policy................................................................................. 24
</TABLE>
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Page
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Account Value And Cash Surrender Value............................. 24
Account Value................................................... 24
Automated Account Value Transfer................................ 25
Investment Return............................................... 25
Cash Surrender Value............................................ 25
Withdrawals..................................................... 25
Policy Loan Privilege.............................................. 26
Source of Loan.................................................. 26
If Loans Exceed the Policy Account Value........................ 26
Interest........................................................ 26
Repayment....................................................... 26
Interest on Loaned Value........................................ 26
Effect of Loan.................................................. 26
Free Look Provision................................................ 26
Your Voting Rights................................................. 27
Our Rights......................................................... 27
Directors And Executive Vice Presidents Of MassMutual.............. 28
The Guaranteed Principal Account................................... 30
Federal Income Tax Considerations.................................. 30
MassMutual - Tax Status......................................... 30
Policy Proceeds, Premiums, and Loans............................ 30
Modified Endowment Contracts.................................... 31
Diversification Standards....................................... 32
Additional Provisions Of The Policy................................ 32
Paid-up Policy Date............................................. 32
Reinstatement Option............................................ 32
Payment Options................................................. 32
Fixed Amount Payment Option..................................... 33
Fixed Time Payment Option....................................... 33
Interest Payment Option......................................... 33
Lifetime Payment Option......................................... 33
Joint Lifetime Payment Option................................... 33
Joint Lifetime Payment Option with Reduced Payments............. 33
Withdrawal Rights under Payment Options......................... 33
Beneficiary..................................................... 33
Changing the Owner or Beneficiary............................... 33
Right to Substitute Insured..................................... 33
Assignment...................................................... 34
Dividends....................................................... 34
Limits on Our Right to Challenge the Policy..................... 34
Misstatement of Age or Sex...................................... 34
Suicide......................................................... 34
When We Pay Proceeds............................................ 34
Records And Reports................................................ 34
Sales And Other Agreements......................................... 34
Commissions Schedule............................................ 35
Bonding Arrangement............................................. 35
Legal Proceedings.................................................. 35
Experts............................................................ 35
Financial Statements............................................... 35
Appendix A......................................................... A-1
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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 ("MML Trust"), the Oppenheimer
Variable Account Funds ("Oppenheimer Trust"), the Panorama Series Fund, Inc.
("Panorama Fund"), and subject to state availability, the MFS(R) Variable
Insurance TrustSM ("MFS Trust"), the Goldman Sachs Variable Insurance Trust
("Goldman Sachs VIT Trust"), or the T. Rowe Price Equity Series, 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.
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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
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.
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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
insurance business in all fifty states of the United States, the District of
Columbia, Puerto Rico and certain provinces of Canada. As of December 31, 1997,
MassMutual had total contingency reserves in excess of $2.8 billion and
unconsolidated assets of $57.6 billion.
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.
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.
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.
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.
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
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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; Federal Income Tax Considerations - Policy
Proceeds, Premiums and Loans.
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 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.
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.
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.
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). 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
plus the GPA 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.
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 and Grace Period.
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
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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.
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 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 and Federal Income Tax Considerations.
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.
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.
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.
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.
Sales Load
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%
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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.
Sales Load
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%
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 1997, the aggregate amount of sales load deductions was $1,480,364.
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 1997, the aggregate state premium tax charge was $284,225.
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 1997,
the aggregate DAC tax charge was $139,702.
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 1997, the aggregate amount of deductions for administrative
charges was $20,469.
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 1997, the
aggregate amount of deductions for cost of insurance protection was $399,631.
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
1997, the aggregate amount of deductions for the underwriting charge was
$54,419.
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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 1997 was $36,178.
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 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.
Charges for Investment Advisory Services.
The value of the Separate Account Divisions' assets will reflect investment
management fees and other expenses of the Funds. The following table shows the
Funds' total fund operating expenses expressed as a percentage of average net
assets for the year ended December 31, 1997:
Total
Fund
Management Other Operating
Fund / Portfolio Name Fees Expenses Expenses
- --------------------------------------------------------------------------------
MML Money Market(1) 0.48% 0.04% 0.52%
MML Equity(1) 0.35% 0.00% 0.35%
MML Equity Index(5) 0.26% 0.11% 0.37%
MML Blend(1) 0.38% 0.00% 0.38%
MML Managed Bond(1) 0.44% 0.03% 0.47%
Oppenheimer Global Securities 0.70% 0.06% 0.76%
Oppenheimer Small Cap Growth(2) 0.75% 0.08% 0.83%
Oppenheimer Aggressive Growth 0.71% 0.02% 0.73%
Oppenheimer Growth 0.73% 0.02% 0.75%
Oppenheimer Growth & Income 0.75% 0.08% 0.83%
Oppenheimer Multiple Strategies 0.72% 0.03% 0.75%
Oppenheimer High Income 0.75% 0.07% 0.82%
Oppenheimer Strategic Bond 0.75% 0.08% 0.83%
Oppenheimer Bond 0.73% 0.05% 0.78%
Oppenheimer Money 0.45% 0.03% 0.48%
Panorama International Equity 1.00% 0.12% 1.12%
Panorama LifeSpan Cap Appreciation 0.85% 0.14% 0.99%
Panorama LifeSpan Div Income 0.75% 0.09% 0.84%
Panorama LifeSpan Balanced 0.85% 0.12% 0.97%
Goldman Sachs Capital Growth(4) 0.75% 0.15% 0.90%
Goldman Sachs Mid Cap Equity(4) 0.80% 0.15% 0.95%
Goldman Sachs CORE U.S. Equity(4) 0.70% 0.10% 0.80%
Goldman Sachs Growth and Income(4) 0.75% 0.15% 0.90%
MFS(R) New Discovery(3) 0.90% 0.25% 1.15%
MFS(R) Emerging Growth 0.75% 0.12% 0.87%
MFS(R) Research Series 0.75% 0.13% 0.88%
T. Rowe Price New America Growth 0.85% -- 0.85%
T. Rowe Price Mid-Cap Growth 0.85% -- 0.85%
(1) MassMutual has agreed to bear the expenses of these Funds (other than the
management fee, interest, taxes, brokerage commissions and extraordinary
expenses) in excess of 0.11% of the average daily net asset value of these Funds
through April 30, 1999. MassMutual does not expect that it will be required to
reimburse any expenses of the MML Equity Fund, MML Blend Fund, MML Managed Bond
Fund, or MML Money Market Fund due to this undertaking in 1998.
(2) The Oppenheimer Small Cap Growth Fund had no operating expenses in 1997
since it had not yet commenced operations. These figures represent the adviser's
estimate of the Total Fund Operating Expenses for this Fund in 1998.
(3) The MFS(R) New Discovery Series had no operating expenses in 1997 since it
had not yet commenced operations. These figures represent an estimate of the
Total Fund Operating Expenses for this Series in 1998. The adviser agreed to
bear expenses for the MFS(R) New Discovery Series, subject to reimbursement by
this Series, for the current fiscal year, such that this Series' Other Expenses
shall not exceed the 0.25%. The expense shown includes this reimbursement. If
not included, the Other Expenses are estimated to be 0.47%, increasing the Total
Fund Operating Expenses to 1.37%.
(4) The Goldman Sachs Variable Insurance Trust had no operating expenses in 1997
since it had not yet commenced operations. These figures represent an estimate
of the Total Fund Operating Expenses for 1998. The investment advisers to the
Goldman Sachs Capital Growth, Goldman Sachs Mid Cap Equity, Goldman Sachs CORE
U.S. Equity, and Goldman Sachs Growth and Income Funds have voluntarily agreed
to reduce or limit certain "Other Expenses" of such Funds (excluding management
fees, taxes, interest and brokerage fees and litigation, indemnification and
other extraordinary expenses) to the extent such expenses exceed 0.15%, 0.15%,
0.10%, and 0.15% per annum of such Funds' average daily net assets,
respectively. The expenses shown include this reimbursement. If not included,
the Other Expenses for 1998 are estimated to be 4.49%, 5.34%, 2.29%, and 2.67%
for the Goldman Sachs Capital Growth, Goldman Sachs Mid Cap Equity, Goldman
Sachs CORE U.S. Equity, and Goldman Sachs Growth and Income Funds, respectively.
(5) MassMutual agreed to bear the expenses of the MML Equity Index Fund (other
than the management fee, interest, taxes, brokerage commissions and
extraordinary expenses) in excess of 0.11% of the average daily net asset value
of the Fund in 1997. The expenses shown include this reimbursement. If not
included, the Other Expenses would have been 0.16%, increasing the Total Fund
Operating Expenses to 0.43%. MassMutual's obligation to bear these expenses for
the MML Equity Index Fund terminated on May 1, 1998.
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During 1997, MassMutual earned investment management fees of $8,082,863 from MML
Equity Fund, $8,933,947 from MML Blend Fund, $913,026 from MML Managed Bond
Fund, $703,344 from MML Money Market Fund and $61,760 from MML Equity Index
Fund. During this same period, Mellon Equity earned investment management fees
of $13,959 from MML Equity Index Fund. During 1997, Babson earned investment
management fees from MassMutual of $1,905,294 for providing sub-advisory
services to the MML Equity Fund and $2,835,066 for providing sub-advisory
services to the Equity Sector of the MML Blend Fund.
During 1997, OFI earned investment management fees of $5,615,606 from the
Oppenheimer Global Securities Fund, $5,324,309 from the Oppenheimer Aggressive
Growth Fund (Prior to May 1, 1998, this Fund was named Oppenheimer Capital
Appreciation Fund.), $2,859,202 from the Oppenheimer Growth Fund, $709,577 from
the Oppenheimer Growth & Income Fund, $4,068,887 from the Oppenheimer Multiple
Strategies Fund, $1,667,490 from the Oppenheimer High Income Fund, $1,197,613
from the Oppenheimer Strategic Bond Fund, $3,281,556 from the Oppenheimer Bond
Fund and $601,698 from the Oppenheimer Money Fund.
During 1997, OFI earned investment management fees of $213,594 from the Panorama
LifeSpan Diversified Income Portfolio, $504,390 from the Panorama LifeSpan
Balanced Portfolio and $437,070 from the Panorama LifeSpan Capital Appreciation
Portfolio. During 1997, BEA earned investment management fees of $160,466,
Pilgrim Baxter earned investment management fees of $251,753 and Babson-Stewart
earned investment management fees of $666,697 for providing day-to-day portfolio
management for certain components of the Panorama LifeSpan Portfolios.
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 twenty-eight Divisions attributable to the Policy. Each Division
invests in shares of either MML Trust, Oppenheimer Trust, Panorama Fund, and
subject to state availability, Goldman Sachs VIT Trust, MFS Trust or T. Rowe
Price Equity Series, Inc. 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 Aggressive Growth Fund , or
its successor. (Prior to May 1, 1998, this Fund was named Oppenheimer
Capital Appreciation Fund.)
. The Oppenheimer Growth Division - Amounts credited to this Division are
invested in shares of Oppenheimer Growth Fund, or its successor.
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<PAGE>
. 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.
. The Oppenheimer Small Cap Growth Division - Amounts credited to this
Division are invested in shares of Oppenheimer Small Cap Growth Fund, or
its successor.
. The Panorama International Equity Division - Amounts credited to this
Division are invested in shares of the Panorama International Equity
Portfolio, or its successor.
. 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 Goldman Sachs Capital Growth Division - Amounts credited to this
Division are invested in shares of the Goldman Sachs Capital Growth Fund,
or its successor.
. The Goldman Sachs Mid Cap Equity Division - Amounts credited to this
Division are invested in shares of the Goldman Sachs Mid Cap Equity Fund,
or its successor.
. The Goldman Sachs CORE U.S. Equity Division - Amounts credited to this
Division are invested in shares of the Goldman Sachs CORE U.S. Equity Fund,
or its successor.
. The Goldman Sachs Growth and Income Division - Amounts credited to this
Division are invested in shares of the Goldman Sachs Growth and Income
Fund, or its successor.
. The MFS(R) New Discovery Division - Amounts credited to this Division are
invested in shares of the MFS(R) New Discovery Series, or its successor.
. The MFS(R) Emerging Growth Division - Amounts credited to this Division are
invested in shares of the MFS(R) Emerging Growth Series, or its successor.
. The MFS(R) Research Division - Amounts credited to this Division are
invested in shares of the MFS(R) Research Series, or its successor.
. The T. Rowe Price Mid-Cap Growth Division - Amounts credited to this
Division are invested in shares of the T. Rowe Price Mid-Cap Growth
Portfolio, or its successor.
. The T. Rowe Price New America Growth Division - Amounts credited to this
Division are invested in shares of the T. Rowe Price New America Growth
Portfolio, or its successor.
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.
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.
Some of the Funds available to You are similar to mutual funds offered in the
retail marketplace. These Funds generally have the same investment objectives,
policies and portfolio managers as the retail mutual funds and usually were
formed after the retail mutual funds. While these Funds generally have identical
investment objectives, policies and portfolio managers, they are separate and
distinct from the retail mutual funds. In fact, performance of these Funds may
be dramatically different from the performance of the retail mutual funds. This
is due to differences in the Funds' sizes, dates shares of stocks are purchased
and sold, cash flows and expenses. You should remember that retail mutual fund
performance is not the performance of the Funds that are available to You in
this policy and is not an indication of future performance of such Funds.
There is no assurance that the Funds will achieve there stated objectives. The
Fund prospectuses contain more detailed information about the Funds. Current
copies of the Fund prospectuses are attached to this prospectus. You should read
the information contained in the Fund prospectuses before making allocations to
any Division of the Separate Account.
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MML Series Investment Fund
The MML Series Investment Fund ("MML Trust") is a no-load, open-end management
investment company registered under the Investment Company Act of 1940. MML
Equity Fund, MML Equity Index Fund, MML Blend Fund, MML Managed Bond Fund and
MML Money Market Fund (collectively, the "MML Funds") are separate series of
shares of the MML Trust. MassMutual acts as investment manager to each of the
MML Funds. David L. Babson and Company, Inc. ("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.
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 investment adviser to MassMutual Corporate Value
Partners, Limited; MassMutual High Yield Partners, II, LLC; and MassMutual
Institutional Funds. MassMutual serves as collateral co-manger for MassMutual
Carlson CBO, N.V.
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.
MML Equity Fund
The primary investment objective of the 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.
MML Equity Index Fund
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.)
MML Blend Fund
The investment objective of the 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. 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.
MML Managed Bond Fund
The investment objective of the 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. The assets of this Fund will be invested primarily in
investment grade, publicly traded, fixed income securities of such maturities as
MassMutual deems appropriate from time to time in light of market conditions and
prospects.
MML Money Market Fund
The investment objectives of the 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.
Oppenheimer Variable Account Funds
Oppenheimer Variable Account Funds ("Oppenheimer Trust") is an open-end,
diversified, management investment company registered under the Investment
Company Act of 1940. Oppenheimer Global Securities Fund, Oppenheimer Aggressive
Growth Fund (Prior to May 1, 1998, this Fund was named 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, Oppenheimer Money Fund, and
Oppenheimer Small Cap Growth Fund (collectively, the "Oppenheimer Funds") are
part of the Oppenheimer Trust.
OppenheimerFunds, Inc. ("OFI") supervises the investment operations of the
Oppenheimer Trust and 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.
OFI, located at Two World Trade Center, New York, NY 10048-0203, has operated as
an investment adviser since 1959. It and its affiliates currently advise U.S.
investment companies with assets aggregating over $85 billion as of September
30, 1998, and having more than 4 million shareholder accounts. OFI is owned by
Oppenheimer
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Acquisition Corp., a holding company owned in part by senior management of OFI,
and ultimately controlled by MassMutual. OFI is registered as an investment
adviser under the Investment Advisers Act of 1940.
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.
Oppenheimer Global Securities Fund
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,
cyclical 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 but which may be considered to be speculative. The type of
securities in which this Fund invests will be primarily common stocks, as well
as securities having the investment characteristics of common stocks, such as
convertible preferred stock, convertible bonds and American Depository Receipts.
Current income is not an investment objective of the Oppenheimer Global
Securities Fund.
Oppenheimer Aggressive Growth Fund
The investment objective of the Oppenheimer Aggressive Growth Fund is capital
appreciation. (Prior to May 1, 1998, this Fund was named Capital Appreciation
Fund.) 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.
Oppenheimer Growth Fund
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). Current
income is a secondary consideration in the selection of the Growth Fund's
portfolio securities.
Oppenheimer Growth & Income Fund
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.
Oppenheimer Multiple Strategies Fund
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.
Oppenheimer High Income Fund
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.
Oppenheimer Strategic Bond Fund
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, lower rated 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.
Oppenheimer Bond Fund
The investment objective of the Oppenheimer Bond Fund is to seek a high level of
current income by investing primarily in debt securities. Secondarily, the Fund
seeks capital growth when consistent with its primary objective.
Oppenheimer Money Fund
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.
Oppenheimer Small Cap Growth Fund*
The investment objective of the Oppenheimer Small Cap Growth Fund is capital
appreciation. Current income is not an objective. In seeking its objective, the
Fund emphasizes investments in securities of "growth-type" companies with market
capitalization less than $1 billion, including common stocks, preferred stocks,
convertible securities, rights, warrants and options, in proportions which may
vary from time to time.
*Subject to state availability.
Panorama Series Fund, Inc.
Panorama Series Fund, Inc. ("Panorama Fund") is an open-end, diversified
management investment company registered under the Investment Company Act of
1940. Panorama LifeSpan Capital Appreciation Portfolio, Panorama LifeSpan
Balanced Portfolio, Panorama LifeSpan Diversified Income Portfolio
(collectively, the "Panorama LifeSpan
16
<PAGE>
Portfolios"), and Panorama International Equity Portfolio are part of the
Panorama Fund
OFI supervises the investment operations of the Panorama Fund and 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 Panorama Portfolio.
OFI 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.
Bank of New York, 90 Washington Street, New York, NY 10206, acts as custodian
for each of the Panorama Portfolios.
Panorama LifeSpan Capital Appreciation Portfolio
The investment objective of the Panorama LifeSpan Capital Appreciation Portfolio
is to seek long-term capital appreciation by investing in a strategically
allocated portfolio consisting primarily of stocks.
Panorama LifeSpan Balanced Portfolio
The investment objective of the Panorama LifeSpan Balanced Portfolio is to seek
a blend of capital appreciation and income by investing in a strategically
allocated portfolio of stocks and bonds with a slightly stronger focus on
stocks.
Panorama LifeSpan Diversified Income Portfolio
The investment objective of the Panorama LifeSpan Diversified Income Portfolio
is to seek high current income with opportunities for capital appreciation by
investing in a strategically allocated portfolio consisting primarily of bonds.
Panorama International Equity Portfolio*
The investment objective of the Panorama International Equity Portfolio is to
achieve long-term growth of capital by investing primarily in equity securities
(such as common stocks) of non-U.S. issuers trading for the most part in
non-U.S. markets.
*Subject to state availability.
Goldman Sachs Variable Insurance Trust
The Goldman Sachs Variable Insurance Trust ("Goldman Sachs VIT Trust") is an
open-end, management investment company, organized in Delaware in September,
1997. The Goldman Sachs Capital Growth Fund, Goldman Sachs Mid Cap Equity Fund,
Goldman Sachs CORE U.S. Equity Fund, and Goldman Sachs Growth and Income Fund
are each a separate series of shares of the Goldman Sachs VIT Trust.
Goldman Sachs Asset Management ("GSAM") is a separate operating division of
Goldman Sachs & Co. It serves as investment adviser to the Goldman Sachs Growth
and Income, Goldman Sachs CORE U.S. Equity, Goldman Sachs Capital Growth and
Goldman Sachs Mid Cap Equity Funds. GSAM is located at One New York Plaza, New
York, New York, 10004.
The custodian for each fund of the Goldman Sachs VIT Trust is State Street Bank
and Trust Company. It is located at 1776 Heritage Drive, North Quincy,
Massachusetts, 02110.
Goldman Sachs Capital Growth Fund*
The Goldman Sachs Capital Growth Fund seeks long-term growth of capital through
diversified investments in equity securities of companies that are considered to
have long-term capital appreciation potential.
*Subject to state availability.
Goldman Sachs Mid Cap Equity Fund*
The Goldman Sachs Mid Cap Equity Fund seeks long-term capital appreciation
primarily through investments in equity securities of companies with public
stock market capitalizations within the range of market capitalization of
companies constituting the Russell Midcap Index at the time of investment,
currently between $400 million and $16 billion.
*Subject to state availability.
Goldman Sachs CORE U.S. Equity Fund*
The Goldman Sachs CORE U.S. Equity Fund seeks long-term growth of capital and
dividend income through a broadly diversified portfolio of large cap and blue
chip equity securities representing all major sectors of the U.S. economy.
*Subject to state availability.
Goldman Sachs Growth and Income Fund*
The Goldman Sachs Growth and Income Fund seeks long-term growth of capital and
growth of income through investments in equity securities that are considered to
have favorable prospects for capital appreciation and/or dividend paying
ability.
*Subject to state availability.
MFS(R) Variable Insurance Trust(SM)
The MFS(R) Variable Insurance Trust(SM)("MFS Trust") is an open-end management
investment company, organized as a Massachusetts business trust in 1994. The
MFS(R) New Discovery Series, MFS(R) Emerging Growth Series and MFS(R) Research
Series (collectively referred to as "MFS Series") are each a separate series of
shares of the MFS Trust.
17
<PAGE>
Massachusetts Financial Services Company ("MFS Co."), advises the MFS Series.
MFS Co. is a Delaware corporation and is located at 500 Boylston Street, Boston,
Massachusetts 02116.
State Street Bank and Trust Company is the custodian of the MFS Series. It is
located at 225 Franklin Street, Boston, Massachusetts 02110.
MFS(R) New Discovery*
The investment objective of the MFS(R) New Discovery Series is to seek capital
appreciation. This objective is met by investing, under normal market
conditions, at least 65% of its total assets in companies that are believed to
offer superior prospects for growth. Such securities may either be listed on the
securities exchanges or traded in the over-the-counter markets and may be U.S.
or foreign companies.
*Subject to state availability.
MFS(R) Emerging Growth Series*
The investment objective of the MFS(R) Emerging Growth Series is to provide
long-term growth of capital through investing primarily in common stocks of
companies which are early in their life cycle, but which have the potential to
become major enterprises (emerging growth companies).
*Subject to state availability.
MFS(R) Research Series*
The investment objective for the MFS(R) Research Series is to provide long-term
growth of capital and future income. In seeking this objective, the Fund invests
a substantial portion of its assets in equity securities of companies believed
to possess better than average prospects for long-term growth. A smaller
proportion of the Fund's assets may be invested in bonds, short-term
obligations, preferred stocks or common stocks whose principal characteristic is
income production rather than growth.
*Subject to state availability.
T. Rowe Price Equity Series, Inc.
T. Rowe Price Equity Series, Inc. is a diversified, open-end investment company
incorporated in Maryland in 1994. The T. Rowe Price Mid-Cap Growth Portfolio and
T. Rowe Price New America Growth Portfolio are each a separate series of shares
of T. Rowe Price Equity Series, Inc.
T. Rowe Price Associates, Inc. ("T. Rowe Price") was founded in 1937 and is the
investment adviser to each of the Portfolios. Its business address is 100 East
Pratt Street, Baltimore, Maryland 21202.
State Street Bank and Trust Company and The Chase Manhattan Bank, N.A., London
are the custodians for the T. Rowe Price Mid-Cap Growth Portfolio and T. Rowe
Price New America Growth Portfolio. The custodians' main offices are located at
225 Franklin Street, Boston, Massachusetts 02110 and Woolgate House, Coleman
Street, London, EC2P 2HD, England, respectively.
T. Rowe Price Mid-Cap Growth Portfolio*
The investment objective of the T. Rowe Price Mid-Cap Growth Portfolio is to
provide long-term capital appreciation by investing primarily in common stocks
of medium sized (mid-cap) growth companies, which are defined as companies with
market capitalizations within a range of $300 million and $5 billion. The
Portfolio focuses on companies with superior earnings growth potential that are
no longer considered new or emerging but may still be in the dynamic phase of
their life cycles.
*Subject to state availability.
T. Rowe Price New America Growth Portfolio*
The investment objective of the T. Rowe Price New America Growth Portfolio is to
provide long-term capital growth. This objective is met by investing in the
stocks of service companies, regardless of size, which are expected to show
superior earnings growth and are above-average performers in their fields. The
Portfolio may also invest up to 25% of total assets in nonservice-related growth
companies.
*Subject to state availability.
The Oppenheimer Trust, Panorama Fund, MML Trust, Goldman Sachs VIT Trust, MFS
Trust, and T. Rowe Price Equity Series, Inc. were established to provide
investment vehicles for variable life insurance contracts and variable annuities
contracts. Shares of the MML Trust and Panorama Fund are not offered to the
general public. They are offered solely to MassMutual separate investment
accounts and other life insurance company separate accounts of MassMutual
subsidiaries. Shares of the Oppenheimer Trust, Goldman Sachs VIT Trust, MFS
Trust, and T. Rowe Price Equity Series, Inc. are also not offered to the general
public. They are offered to insurance company separate accounts affiliated and
unaffiliated with MassMutual which fund variable annuity, variable life
insurance contracts and qualified plans.
Shares of the Funds may be sold to and held by separate accounts which fund
variable annuity and variable life insurance contracts. As a result, certain
conflicts of interests between variable annuity owners, variable life insurance
Policyowners and program investors may occur. Each Board of Trustees/Directors
will monitor their respective Fund(s) for any material irreconcilable conflict
of interest. Each will determine the appropriate action, if any, which should be
taken if a material irreconcilable conflict arises between the holders of
variable annuity contracts and variable life policies.
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 other
operating expenses). Table 2 shows the Effective Annual Rates of Return of the
Divisions of the Separate Account based on the actual underlying Fund
18
<PAGE>
performance and the deduction of the current mortality and expense risk charges.
Table 1 shows figures for periods ended December 31, 1997, for the Funds. These
rates of return do not reflect the mortality and expense risk charges assessed
against the Separate Account.
Table 2 shows figures for periods ended December 31, 1997 and assumes that the
Divisions have been in operation for the same periods as the underlying Fund in
which they invest. It reflects the total of the income generated by the Fund net
of investment management fees and other operating expenses, plus capital gains
and losses, realized or unrealized, and net of the current mortality and expense
risk charge.
Tables 1, 2 and 3 do not reflect deductions from premiums or administrative,
cost of insurance, and underwriting charges assessed against the Account Value
of 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). If these charges
were included, the total return figures would be lower. 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 and sub-advisers.
19
<PAGE>
TABLE 1
EFFECTIVE ANNUAL RATES OF RETURN/1/
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
1 3 5 10 15 20 Since
Fund (Inception Date) Year Years Years Years Years Years Inception
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MML Equity (9/15/71)/2/ 28.59% 26.57% 18.25% 16.44% 16.19% 16.20% 14.78%
MML Equity Index (5/1/97)/3/ ---- ---- ---- ---- ---- ---- 21.93%
MML Blend (2/3/84) 20.89% 19.29% 13.81% 13.68% ---- ---- 13.67%
MML Managed Bond (12/16/81) 9.91% 10.58% 7.79% 9.08% 9.73% ---- 10.37%
MML Money Market (12/16/81)/4/ 5.18% 5.27% 4.47% 5.63% 6.44% ---- 6.73%
Oppenheimer Global Securities (11/12/90) 22.42% 13.82% 18.81% ---- ---- ---- 12.26%
Oppenheimer Aggressive Growth (8/15/86)/5/ 11.67% 21.17% 15.92% 16.23% ---- ---- 15.31%
Oppenheimer Growth (4/3/85) 26.68% 29.42% 18.61% 16.67% ---- ---- 15.43%
Oppenheimer Growth & Income (7/5/95) 32.48% ---- ---- ---- ---- ---- 37.24%
Oppenheimer Multiple Strategies (2/9/87) 17.22% 18.00% 13.31% 12.74% ---- ---- 12.04%
Oppenheimer High Income (4/30/86) 12.21% 15.90% 13.75% 14.32% ---- ---- 13.35%
Oppenheimer Strategic Bond (5/3/93) 8.71% 12.00% ---- ---- ---- ---- 7.64%
Oppenheimer Bond (4/3/85) 9.25% 10.23% 8.23% 9.50% ---- ---- 9.89%
Oppenheimer Money (4/3/85)/4/,/6/ 5.31% 5.35% 4.70% 5.79% ---- ---- 5.94%
Panorama International Equity (5/13/92) 8.11% 10.53% 10.78% ---- ---- ---- 8.66%
Panorama LifeSpan Capital Appreciation
(9/1/95) 12.53% ---- ---- ---- ---- ---- 16.07%
Panorama LifeSpan Balanced (9/1/95) 12.20% ---- ---- ---- ---- ---- 13.71%
Panorama LifeSpan Diversified Income
(9/1/95) 12.51% ---- ---- ---- ---- ---- 10.84%
MFS(R)Emerging Growth 7/24/95) 21.90% ---- ---- ---- ---- ---- 23.53%
MFS(R)Research (7/26/95) 20.26% ---- ---- ---- ---- ---- 22.13%
T. Rowe Price New America Growth (3/31/94) 21.12% 30.01% ---- ---- ---- ---- 23.66%
T. Rowe Price Mid-Cap Growth (12/31/96) 18.80% ---- ---- ---- ---- ---- 18.80%
</TABLE>
1. The Average Annual Rate of Return (Total Return) is calculated by
determining, over a stated period time, the average annual compounded rate
of return that an investment in the Fund earned over that period, assuming
reinvestment of all distributions.
2. Although the MML Equity Fund commenced operations in 1971, the
information necessary to calculate Average Annual Rates of Return is
available only for the year 1974 and subsequent periods.
3. This is the return for the period May 1, 1997 to December 31, 1997.
4. An investment in money market funds is neither insured nor guaranteed by
the U.S. Government and such a fund's net asset value is not guaranteed to
remain stable at $1.00 per share.
5. Prior to May 1, 1998, this Fund was known as the Oppenheimer Capital
Appreciation Fund.
6. Although the Oppenheimer Money Fund commenced operations on April 3,
1985, the information necessary to calculate performance information is
available only for the year 1987 and thereafter.
Performance of Oppenheimer Small Cap Growth Fund, Goldman Sachs Capital Growth
Fund, Goldman Sachs Mid Cap Equity Fund, Goldman Sachs CORE U.S. Equity Fund,
Goldman Sachs Growth and Income Fund, and MFS(R) New Discovery Series is
unavailable since these Funds had not commenced operations as of December 31,
1997.
20
<PAGE>
TABLE 2
EFFECTIVE ANNUAL RATES OF RETURN/1/ OF EACH DIVISION OF THE SEPARATE ACCOUNT
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
1 5 10 Since
Division (Inception Date) Year Years Years Inception
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MML Equity (9/15/71)/5/ 28.29% 17.95% 16.14% 14.48%
MML Equity Index (5/1/97)/2/ ---- ---- ---- 21.63%
MML Blend (2/3/84) 20.59% 13.51% 13.38% 13.37%
MML Managed Bond (12/16/81) 9.61% 7.49% 8.78% 10.07%
MML Money Market (12/16/81) 4.88% 4.17% 5.33% 6.43%
Oppenheimer Global Securities (11/12/90) 22.12% 18.51% ---- 11.96%
Oppenheimer Capital Appreciation (8/15/86)/4/ 11.37% 15.62% 15.93% 15.01%
Oppenheimer Growth (4/3/85) 26.38% 18.31% 16.37% 15.13%
Oppenheimer Growth & Income (7/5/95) 32.18% ---- ---- 36.94%
Oppenheimer Multiple Strategies (2/9/87) 16.92% 13.01% 12.44% 11.74%
Oppenheimer High Income (4/30/86) 11.91% 13.45% 14.02% 13.05%
Oppenheimer Strategic Bond (5/3/93) 8.41% ---- ---- 7.34%
Oppenheimer Bond (4/3/85) 8.95% 7.93% 9.20% 9.59%
Oppenheimer Money (4/3/85)/3/ 5.01% 4.40% 5.49% 5.64%
Panorama International Equity (5/13/92) 7.81% 10.48% ---- 8.36%
Panorama LifeSpan Capital Appreciation (9/1/95) 12.23% ---- ---- 15.77%
Panorama LifeSpan Balanced (9/1/95) 11.90% ---- ---- 13.41%
Panorama LifeSpan Diversified Income (9/1/95) 12.21% ---- ---- 10.54%
MFS(R)Emerging Growth (7/24/95) 21.60% ---- ---- 23.23%
MFS(R)Research (7/26/95) 19.96% ---- ---- 21.83%
T. Rowe Price New America Growth (3/31/94) 20.82% ---- ---- 23.36%
T. Rowe Price Mid-Cap Growth (12/31/96) 18.50% ---- ---- 18.50%
</TABLE>
1. Performance information assumes current mortality and expense risk
charges of .30%. If guaranteed mortality and risk expense charges were
used, the performance results would be lower.
2. This is the return for the period May 1, 1997 to December 31, 1997.
3. Although the Oppenheimer Money Fund commenced operations on April 3,
1985, the information necessary to calculate the performance information is
available only for the year 1987 and thereafter.
4. This Division invests in the Oppenheimer Aggressive Growth Fund. Prior
to May 1, 1998, the Oppenheimer Aggressive Growth Fund was called the
Oppenheimer Capital Appreciation Fund.
5. Although the MML Equity Fund commenced operations in 1971, the
information necessary to calculate Average Annual Rates of Return is
available only for the year 1974 and subsequent periods.
Performance of Oppenheimer Small Cap Growth Division, Goldman Sachs Capital
Growth Division, Goldman Sachs Mid Cap Equity Division, Goldman Sachs CORE U.S.
Equity Division, Goldman Sachs Growth and Income Division, and MFS(R) New
Discovery Division is unavailable since these Divisions had not commenced
operations as of December 31, 1997.
21
<PAGE>
Table 3
ONE YEAR TOTAL RETURNS/1/
<TABLE>
<CAPTION>
For the year ended 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MML Equity
(9/15/71)/2/ 28.59% 20.25% 31.13% 4.10% 9.52% 10.48% 25.56% (0.51)% 23.04% 16.68% 2.10% 20.15%
MML Equity Index
(5/1/97)/3/ 21.93% ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
MML Blend
(2/3/84) 20.89% 13.95% 23.28% 2.48% 9.70% 9.36% 24.00% 2.37% 19.96% 13.40% 3.12% 18.30%
MML Mgd. Bond
(12/16/81) 9.91% 3.25% 19.14% (3.76)% 11.81% 7.31% 16.66% 8.38% 12.83% 7.13% 2.60% 14.46%
MML Money Mrkt.
(12/16/81) 5.18% 5.01% 5.58% 3.84% 2.75% 3.48% 6.01% 8.12% 9.16% 7.39% 6.49% 6.60%
Opp. Global
Secur. (11/12/90) 22.42% 17.80% 2.24% (5.72)% 70.32% (7.11)% 3.39% 0.40% ---- ---- ---- ----
Opp. Agg. Growth
(8/15/86)/4/ 11.67% 20.16% 32.52% (7.59)% 27.32% 15.42% 54.72% (16.82)% 27.57% 13.41% 14.34% (1.65)%
Opp. Growth
(4/3/85) 26.68% 25.20% 36.65% 0.97% 7.25% 14.53% 25.54% (8.21)% 23.59% 22.09% 3.32% 17.76%
Opp. Grth. &
Inc. (7/5/95) 32.48% 32.51% 23.52% ---- ---- ---- ---- ---- ---- ---- ---- ----
Opp. Multi.
Strat. (2/9/87) 17.22% 15.50% 21.36% (1.95)% 15.95% 8.99% 17.48% (1.91)% 15.76% 22.15% 3.97% ----
Opp. High Inc.
(4/30/86) 12.21% 15.26% 20.37% (3.18)% 26.34% 17.92% 33.91% 4.65% 4.84% 15.58% 8.07% 4.73%
Opp. Strat. Bond
(5/3/93) 8.71% 12.07% 15.33% (3.78)% 4.25% ---- ---- ---- ---- ---- ---- ----
Opp. Bond
(4/3/85) 9.25% 4.80% 17.00% (1.94)% 13.04% 6.50% 17.63% 7.92% 13.32% 8.97% 2.52% 10.12%
Opp. Money
(4/3/85) 5.31% 5.13% 5.62% (4.20)% 3.12% 3.76% 5.97% 7.80% 8.82% 7.31% 6.33% 5.68%
Panorama Intl.
Equity (5/13/92) 8.11% 13.26% 10.30% 1.44% 21.80% (4.32)% ---- ---- ---- ---- ---- ----
LifeSpan Cap.
Appr. (9/1/95) 12.53% 17.97% 6.65% ---- ---- ---- ---- ---- ---- ---- ---- ----
LifeSpan Bal.
(9/1/95) 12.20% 13.38% 6.08% ---- ---- ---- ---- ---- ---- ---- ---- ----
LifeSpan Div.
Inc. (9/1/95) 12.51% 6.93% 5.69% ---- ---- ---- ---- ---- ---- ---- ---- ----
MFS(R)Emerging
Growth (7/24/95) 21.90% 17.02% ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
MFS(R)Research
(7/26/95) 20.26% 22.33% ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
T. Rowe Price
New America
Growth (3/31/94) 21.12% 20.09% 51.10% 1.00% ---- ---- ---- ---- ---- ---- ---- ----
T. Rowe Price
Mid-Cap Growth
(12/31/96) 18.80% ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
</TABLE>
Table 3
ONE YEAR TOTAL RETURNS/1/
For the year ended 1985 1984 1983 1982
- -------------------------------------------------------------------
MML Equity
(9/15/71)/2/ 30.54% 5.40% 22.85% 25.67%
MML Equity Index
(5/1/97)/3/ ---- ---- ---- ----
MML Blend
(2/3/84) 24.88% 8.24% ---- ----
MML Mgd. Bond
(12/16/81) 19.94% 11.69% 7.26% 22.79%
MML Money Mrkt.
(12/16/81) 8.03% 10.39% 8.97% 11.12%
Opp. Global
Secur. (11/12/90) ---- ---- ---- ----
Opp. Agg. Growth
(8/15/86)/4/ ---- ---- ---- ----
Opp. Growth
(4/3/85) 9.50% ---- ---- ----
Opp. Grth. &
Inc. (7/5/95) ---- ---- ---- ----
Opp. Multi.
Strat. (2/9/87) ---- ---- ---- ----
Opp. High Inc.
(4/30/86) ---- ---- ---- ----
Opp. Strat. Bond
(5/3/93) ---- ---- ---- ----
Opp. Bond
(4/3/85) 18.82% ---- ---- ----
Opp. Money
(4/3/85) 7.25% ---- ---- ----
Panorama Intl.
Equity (5/13/92) ---- ---- ---- ----
LifeSpan Cap.
Appr. (9/1/95) ---- ---- ---- ----
LifeSpan Bal.
(9/1/95) ---- ---- ---- ----
LifeSpan Div.
Inc. (9/1/95) ---- ---- ---- ----
MFS(R)Emerging
Growth (7/24/95) ---- ---- ---- ----
MFS(R)Research
(7/26/95) ---- ---- ---- ----
T. Rowe Price
New America
Growth (3/31/94) ---- ---- ---- ----
T. Rowe Price
Mid-Cap Growth
(12/31/96) ---- ---- ---- ----
1. The figures shown are one year total returns from the inception of the
Funds. These figures do not reflect the mortality and expense risk
charges assessed against the Separate Account, deductions from
premiums or administrative, cost of insurance and underwriting charges
assessed against the Account Value of the Policies. If these charges
were included, the total return figures would be lower. The rates of
return shown are not necessarily indicative of future performance.
They may be considered in assessing the competence and performance of
each of the Funds' investment advisers.
2. The figures for the MML Equity Fund from 1974 through 1981 are as
follows: 1974: (17.61)%; 1975: 32.85%; 1976: 24.77%; 1977: (0.52)%;
1978: 3.71%; 1979: 19.54% 1980: 27.62%; 1981: 6.67%.
3. This is the return for the period May 1, 1997 to December 31, 1997.
4. Prior to May 1, 1998, this Fund was known as the Oppenheimer Capital
Appreciation Fund.
Performance of Oppenheimer Small Cap Growth Fund, Goldman Sachs Capital Growth
Fund, Goldman Sachs Mid Cap Equity Fund, Goldman Sachs CORE U.S. Equity Fund,
Goldman Sachs Growth and Income Fund, and MFS(R) New Discovery Series is
unavailable since these Funds had not commenced operations as of December 31,
1997.
22
<PAGE>
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)
Issue Age
------------------------------------------
Class Age 25 Age 40 Age 55
----- ------ ------ ------
MALE SMOKER $792 $1,150 $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
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. 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.
23
<PAGE>
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.
Policy A Policy B
-------- --------
(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
(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 following 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 and the GPA
by written request. Transfers between
24
<PAGE>
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
25
<PAGE>
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 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 Policyowners.
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.
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<PAGE>
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 be allocated to the MML Money Market Division, which
invests in the MML Money Market Fund.
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;
. Eliminate one or more Divisions;
. Substitute or merge two or more Divisions or Separate Accounts;
. 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.
27
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Name and Position Principal Occupation(s) During Past Five Years
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Roger G. Ackerman, Director Chairman and Chief Executive Officer, since 1996, President and Chief
One Riverfront Plaza, HQE 2 Operating Officer, 1990-1996, Corning, Inc.
Corning, NY 14831
- ---------------------------------------------------------------------------------------------------------------------------------
James R. Birle, Director Chairman, since 1997, and Founder, since 1994, President, 1994-1997,
2 Soundview Drive Resolute Partners, LLC; General Partner, Blackstone Group, 1988-1994
Greenwich, CT 06836
- ---------------------------------------------------------------------------------------------------------------------------------
Gene Chao, Director Chairman, President and CEO, Computer Projections, Inc., since 1991
733 SW Vista Avenue
Portland, OR 97205
- ---------------------------------------------------------------------------------------------------------------------------------
Patricia Diaz Dennis, Director Senior Vice President and Assistant General Counsel, SBC Communications
175 East Houston, Room 4-A-70 Inc., since 1995; Special Counsel, Sullivan & Cromwell, 1993-1995; Assistant
San Antonio, TX 78205 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
1201 Louisiana, Suite 1400 1996; Senior Vice President, Texaco, Inc. 1987-1996
Houston, TX 77002-5603
- ---------------------------------------------------------------------------------------------------------------------------------
William B. Ellis, Director Senior Fellow, Yale University School of Forestry and Environmental Studies,
31 Pound Foolish Lane since 1995; Chairman and Chief Executive Officer, Northeast Utilities, 1983-1995
Glastonbury, CT 06033
- ---------------------------------------------------------------------------------------------------------------------------------
Robert M. Furek, Director Chairman, State Board of Trustees for the Hartford School System, since 1997;
1 State Street, Suite 2310 President and Chief Executive Officer, Heublein, Inc., 1987-1996
Hartford, CT 06103
- ---------------------------------------------------------------------------------------------------------------------------------
Charles K. Gifford, Director Chairman and Chief Executive Officer, since 1995, and President, 1989-1995,
100 Federal Street BankBoston, N.A. and Chairman, since 1998, and Chief Executive Officer,
Boston, MA 02110 since 1985, BankBoston Corporation
- ---------------------------------------------------------------------------------------------------------------------------------
William N. Griggs, Director Managing Director, Griggs & Santow, Inc., since 1983
75 Wall Street, 20th Floor
New York, NY 10005
- ---------------------------------------------------------------------------------------------------------------------------------
George B. Harvey, Director Retired Chairman, President and CEO, Pitney Bowes, since 1996
One Landmark Square
Suite 1905, 19th Floor
Stamford, CT 06901
- ---------------------------------------------------------------------------------------------------------------------------------
Barbara B. Hauptfuhrer, Director Director of various corporations, since 1972
1700 Old Welsh Road
Huntingdon Valley, PA 19006
- ---------------------------------------------------------------------------------------------------------------------------------
Sheldon B. Lubar, Director Chairman, Lubar & Co. Incorporated, since 1977
700 North Water Street, Suite 1200
Milwaukee, WI 53202
- ---------------------------------------------------------------------------------------------------------------------------------
William B. Marx, Jr., Director Retired Senior Executive Vice President, Lucent Technologies, since 1996;
5 Peacock Lane Executive Vice President and CEO Multimedia Products Group, AT&T, 1994-
Village of Golf, FL 33436-5299 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
55 Sandy Hook Road - North
Sarasota, FL 34242
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
John J. Pajak, Director, President and President and Chief Operating Officer, since 1996, Vice Chairman and Chief
Chief Operating Officer Administrative Officer, 1996-1996, Executive Vice President, 1987-1996,
1295 State Street MassMutual
Springfield, MA 01111
- ---------------------------------------------------------------------------------------------------------------------------------
Thomas B. Wheeler, Director, Chairman and Chief Executive Officer, since 1996, President and Chief
Chairman and Chief Executive Executive Officer, 1988-1996, MassMutual
Officer
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, since 1993, Senior Vice
1295 State Street President and Deputy General Counsel, 1992-1993, MassMutual
Springfield, MA 01111
- ----------------------------------------------------------------------------------------------------------------------------------
Peter J. Daboul Executive Vice President and Chief Information Officer, since 1997, Senior
1295 State Street Vice President, 1990-1997, MassMutual
Springfield, MA 01111
- ----------------------------------------------------------------------------------------------------------------------------------
John B. Davies Executive Vice President, since 1994, Associate Executive Vice President,
1295 State Street 1994-1994, General Agent, 1982-1993, MassMutual
Springfield, MA 01111
- ----------------------------------------------------------------------------------------------------------------------------------
Daniel J. Fitzgerald Executive Vice President, since 1994, Corporate Financial Operations, 1994-
1295 State Street 1997, Senior Vice President, 1991-1994
Springfield, MA 01111
- ----------------------------------------------------------------------------------------------------------------------------------
James E. Miller Executive Vice President, since 1997 and 1987-1996, MassMutual; Senior
1295 State Street Vice President, UniCare Life and Health Insurance Company, 1996-1997
Springfield, MA 01111
- ----------------------------------------------------------------------------------------------------------------------------------
John V. Murphy Executive Vice President, since 1997, MassMutual; Executive Vice President
1295 State Street and Chief Operating Officer, David L. Babson & Co., Inc., 1995-1997; Chief
Springfield, MA 01111 Operating Officer, Concert Capital Management, Inc., 1993-1995; Senior Vice
President and Chief Financial Officer, Liberty Financial Companies, 1977-1993
- ----------------------------------------------------------------------------------------------------------------------------------
Gary E. Wendlandt Executive Vice President and Chief Investment Officer, since 1993, Executive
1295 State Street Vice President, 1992-1993, MassMutual
Springfield, MA 01111
- ----------------------------------------------------------------------------------------------------------------------------------
Joseph M. Zubretsky Executive Vice President and Chief Financial Officer, since 1997,
1295 State Street MassMutual; Chief Financial Officer, 1996, HealthSource; Coopers &
Springfield, MA 01111 Lybrand, 1990-1996
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
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
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,
30
<PAGE>
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
"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 adviser 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 adviser 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
31
<PAGE>
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 adviser 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. 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.
32
<PAGE>
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 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:
. Exercise dividend rights; and
. 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
33
<PAGE>
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 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 in proper form 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.
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<PAGE>
Sales And Other Agreements
MML Distributors, LLC ("MML Distributors"), 1414 Main Street, Springfield, MA
01144-1013, a wholly-owned subsidiary of MassMutual, 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"), a wholly-owned subsidiary of MassMutual, 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 1997 was $19,800. Compensation paid to MML Distributors in 1997 was
$10,000. Commissions are paid through MMLISI and MML Distributors to agents and
selling brokers for selling the Policies. During 1997 such payments amounted to
$1,316,943.
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
$50,000,000 coverage for MassMutual officers, employees, general agents, and
agents. The blanket bond is 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(R) 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., 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 John M. Valencia,
Assistant 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(R)
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.
35
<PAGE>
Report Of Independent Accountants
To the Board of Directors and Policyowners of
Massachusetts Mutual Life Insurance Company
We have audited the accompanying statements of assets and liabilities of the MML
Equity Division, MML Equity Index 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, Oppenheimer Growth & Income Division, Panorama LifeSpan
Diversified Income Division, Panorama LifeSpan Balanced Division and Panorama
LifeSpan Capital Appreciation Division of the Strategic Variable Life Segment of
Massachusetts Mutual Variable Life Separate Account I as of December 31, 1997,
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 audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
verification of investments owned as of December 31, 1997, by examination of the
records of MML Series Investment Fund and by confirmation with Oppenheimer
Variable Account Funds and Panorama Series Fund, Inc. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the MML Equity Division, MML
Equity Index 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,
Oppenheimer Growth & Income Division Panorama LifeSpan Diversified Income
Division, Panorama LifeSpan Balanced Division and Panorama LifeSpan Capital
Appreciation Division of the Strategic Variable Life Segment of Massachusetts
Mutual Variable Life Separate Account I as of December 31, 1997, 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 3, 1998
35
<PAGE>
Massachusetts Mutual Variable Life Separate Account I -- Strategic Variable Life
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<CAPTION>
MML MML MML
MML Equity Money Managed MML Oppenheimer
Equity Index Market Bond Blend Money
Division Division Division Division Division Division
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments
Number of shares (Note 2) 97,934 1,951 1,318,214 103,198 50,243 82,323
============ ============ ============ ============ ============ ============
Identified cost (Note 3B) $ 3,153,305 $ 22,615 $1,318,214 $1,239,388 $1,169,448 $ 82,323
============ ============ ============ ============ ============ ============
Value (Note 3A) $ 3,471,097 $ 23,566 $1,318,214 $1,280,585 $1,209,827 $ 82,323
Dividends receivable 279,879 220 9,325 20,590 90,693 147
------------ ------------ ------------ ------------ ------------ ------------
Total assets 3,750,976 23,786 1,327,539 1,301,175 1,300,520 82,470
LIABILITIES
Payable to Massachusetts Mutual
Life Insurance Company 2,360 7 1,247 977 756 62
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS: $ 3,748,616 $ 23,779 $1,326,292 $1,300,198 $1,299,764 $ 82,408
============ ============ ============ ============ ============ ============
Net Assets:
For variable life insurance policies $ 3,739,982 $ 17,670 $1,320,662 $1,294,203 $1,292,290 $ 76,766
Retained in Variable Life
Separate Account I by
Massachusetts Mutual Life
Insurance Company 8,634 6,109 5,630 5,995 7,474 5,642
------------ ------------ ------------ ------------ ------------ ------------
Net assets $ 3,748,616 $ 23,779 $1,326,292 $1,300,198 $1,299,764 $ 82,408
============ ============ ============ ============ ============ ============
Accumulation units (Note 8)
Policyowners 2,165,179 14,462 1,173,038 1,079,621 864,504 68,028
Massachusetts Mutual Life
Insurance Company 5,000 5,000 5,000 5,000 5,000 5,000
------------ ------------ ------------ ------------ ------------ ------------
Total units 2,170,179 19,462 1,178,038 1,084,621 869,504 73,028
============ ============ ============ ============ ============ ============
NET ASSET VALUE PER
ACCUMULATION UNIT
December 31, 1997 $ 1.73 $ 1.22 $ 1.13 $ 1.20 $ 1.49 $ 1.13
December 31, 1996 1.35 -- 1.07 1.09 1.24 1.08
December 31, 1995 1.12 -- 1.03 1.06 1.09 1.03
<CAPTION>
Oppenheimer Oppenheimer
High Oppenheimer Capital
Income Bond Appreciation
Division Division Division
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Investments
Number of shares (Note 2) 175,599 11,852 60,728
============ ============ ============
Identified cost (Note 3B) $2,017,710 $ 140,287 $ 2,412,648
============ ============ ============
Value (Note 3A) $2,022,898 $ 141,157 $2,487,423
Dividends receivable -- -- --
------------ ------------ ------------
Total assets 2,022,898 141,157 2,487,423
LIABILITIES
Payable to Massachusetts Mutual
Life Insurance Company 932 89 1,841
------------ ------------ ------------
NET ASSETS: $2,021,966 $ 141,068 $2,485,582
============ ============ ============
Net Assets:
For variable life insurance policies $2,015,024 $ 135,056 $2,477,741
Retained in Variable Life
Separate Account I by
Massachusetts Mutual Life
Insurance Company 6,942 6,012 7,841
------------ ------------ ------------
Net assets $2,021,966 $ 141,068 $2,485,582
============ ============ ============
Accumulation units (Note 8)
Policyowners 1,451,429 112,325 1,580,341
Massachusetts Mutual Life
Insurance Company 5,000 5,000 5,000
------------ ------------ ------------
Total units 1,456,429 117,325 1,585,341
============ ============ ============
NET ASSET VALUE PER
ACCUMULATION UNIT
December 31, 1997 $ 1.39 $ 1.20 1.55
December 31, 1996 1.24 1.10 1.41
December 31, 1995 1.08 1.06 1.17
</TABLE>
See Notes to Financial Statements.
36
<PAGE>
Massachusetts Mutual Variable Life Separate Account I -- Strategic Variable Life
STATEMENT OF ASSETS AND LIABILITIES (Continued)
December 31, 1997
<TABLE>
<CAPTION>
Panorama
Oppenheimer Oppenheimer Oppenheimer Oppenheimer LifeSpan
Oppenheimer Multiple Global Strategic Growth & Diversified
Growth Strategies Securities Bond Income Income
Division Division Division Division Division Division
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments
Number of shares (Note 2) 115,383 24,504 58,195 14,271 37,530 4,668
============ ============ ============ ============ ============ ============
Identified cost (Note 3B) $3,511,675 $ 400,113 $1,169,837 $ 72,944 $ 716,108 $ 4,994
============ ============ ============ ============ ============ ============
Value (Note 3A) $3,743,026 $ 416,805 $1,243,618 $ 73,069 $ 772,377 $ 5,508
Dividends receivable -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Total assets 3,743,026 416,805 1,243,618 73,069 772,377 5,508
LIABILITIES
Payable to Massachusetts Mutual
Life Insurance Company 2,119 205 668 49 348 4
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS: $3,740,907 $ 416,600 $1,242,950 $ 73,020 $ 772,029 $ 5,504
============ ============ ============ ============ ============ ============
Net Assets:
For variable life insurance policies $3,732,000 $ 409,425 $1,235,753 $ 66,561 $ 761,112 $ 5,504
Retained in Variable Life
Separate Account I by
Massachusetts Mutual Life
Insurance Company 8,907 7,175 7,197 6,459 10,917 --
------------ ------------ ------------ ------------ ------------ ------------
Net assets $3,740,907 $ 416,600 $1,242,950 $ 73,020 $ 772,029 $ 5,504
============ ============ ============ ============ ============ ============
Accumulation units (Note 8)
Policyowners 2,095,021 285,292 858,534 51,528 348,638 --
Massachusetts Mutual Life
Insurance Company 5,000 5,000 5,000 5,000 5,000 5,000
------------ ------------ ------------ ------------ ------------ ------------
Total units 2,100,021 290,292 863,534 56,528 353,638 5,000
============ ============ ============ ============ ============ ============
NET ASSET VALUE PER
ACCUMULATION UNIT
December 31, 1997 $ 1.78 $ 1.44 $ 1.44 $ 1.29 $ 2.18 $ 1.10
December 31, 1996 1.41 1.23 1.18 1.19 1.65 --
December 31, 1995 1.13 1.07 1.00 1.07 1.25 --
<CAPTION>
Panorama
Panorama LifeSpan
LifeSpan Capital
Balanced Appreciation
Division Division
------------ ------------
<S> <C> <C>
ASSETS
Investments
Number of shares (Note 2) 4,459 4,305
============ ============
Identified cost (Note 3B) $ 4,994 $ 4,994
============ ============
Value (Note 3A) $ 5,707 $ 5,812
Dividends receivable -- --
------------ ------------
Total assets 5,707 5,812
LIABILITIES
Payable to Massachusetts Mutual
Life Insurance Company 4 4
------------ ------------
NET ASSETS: $ 5,703 $ 5,808
============ ============
Net Assets:
For variable life insurance policies $ 5,703 $ 5,808
Retained in Variable Life
Separate Account I by
Massachusetts Mutual Life
Insurance Company -- --
------------ ------------
Net assets $ 5,703 $ 5,808
============ ============
Accumulation units (Note 8)
Policyowners -- --
Massachusetts Mutual Life
Insurance Company 5,000 5,000
------------ ------------
Total units 5,000 5,000
============ ============
NET ASSET VALUE PER
ACCUMULATION UNIT
December 31, 1997 $ 1.14 $ 1.16
December 31, 1996 -- --
December 31, 1995 -- --
</TABLE>
See Notes to Financial Statements.
37
<PAGE>
Massachusetts Mutual Variable Life Separate Account I -- Strategic Variable Life
STATEMENT OF OPERATIONS
For The Year Ended December 31, 1997
<TABLE>
<CAPTION>
*MML MML MML
MML Equity Money Managed MML Oppenheimer
Equity Index Market Bond Blend Money
Division Division Division Division Division Division
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income
Dividends (Note 3B) $ 279,904 $ 220 $ 57,819 $ 79,019 $ 111,288 $ 1,668
Expenses
Mortality and expense risk fees
(Note 4) 7,260 14 3,433 3,589 2,413 96
------------ ------------ ------------ ------------ ------------ ------------
Net investment Income
(loss) (Note 3C) 272,644 206 54,386 75,430 108,875 1,572
------------ ------------ ------------ ------------ ------------ ------------
Net realized and unrealized
gain (loss) on investments
Net realized gain on
investments (Notes 3B, 3C & 6) 21,883 1 - 868 2,275 -
Change in net unrealized
appreciation/depreciation
of investments 282,387 951 - 38,817 32,048 -
------------ ------------ ------------ ------------ ------------ ------------
Net gain (loss) on investments 304,270 952 - 39,685 34,323 -
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations $ 576,914 $ 1,158 $ 54,386 $ 115,115 $ 143,198 $ 1,572
============ ============ ============ ============ ============ ============
<CAPTION>
Oppenheimer Oppenheimer
High Oppenheimer Capital
Income Bond Appreciation
Division Division Division
------------ ------------ ------------
<S> <C> <C> <C>
Investment income
Dividends (Note 3B) $ 128,097 $ 3,293 $ 66,210
Expenses
Mortality and expense risk fees
(Note 4) 4,039 128 5,297
------------ ------------ ------------
Net investment Income
(loss) (Note 3C) 124,058 3,165 60,913
------------ ------------ ------------
Net realized and unrealized
gain (loss) on investments
Net realized gain on
investments (Notes 3B, 3C & 6) 45,671 49 43,440
Change in net unrealized
appreciation/depreciation
of investments 10,877 826 64,677
------------ ------------ ------------
Net gain (loss) on investments 56,548 875 108,117
------------ ------------ ------------
Net increase in net assets
resulting from operations $ 180,606 $ 4,040 $ 169,030
============ ============ ============
</TABLE>
*For the period May 1, 1997 (Commencement of Operations) through December 31,
1997
See Notes to Financial Statements.
38
<PAGE>
Massachusetts Mutual Variable Life Separate Account I -- Strategic Variable Life
STATEMENT OF OPERATIONS (Continued)
For The Year Ended December 31, 1997
<TABLE>
<CAPTION>
*Panorama *Panorama
Oppenheimer Oppenheimer Oppenheimer Oppenheimer LifeSpan *Panorama LIfeSpan
Oppenheimer Multiple Global Strategic Growth & Diversified LifeSpan Capital
Growth Strategies Securities Bond Income Income Balanced Appreciation
Division DIvision Division Division Division Division Division Division
----------- ----------- ----------- ----------- ----------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income
Dividends (Note 3B) $ 90,462 $ 16,765 $ 8,496 $ 3,204 $ 9,871 $ -- $ - $ -
Expenses
Mortality and expense risk fees
(Note 4) 6,020 660 2,340 106 750 10 11 12
--------- --------- -------- -------- -------- -------- --------- --------
Net investment income
(loss) (Note 3C) 84,442 16,105 6,156 3,098 9,121 (10) (11) (12)
--------- --------- -------- -------- -------- -------- --------- --------
Net realized and unrealized
gain (loss) on investments
Net realized gain on
investments (Notes 3B, 3C & 6) 113,022 1,030 88,098 106 3,753 1 1 1
Change in net unrealized
appreciation/depreciation
of investments 203,917 16,050 52,377 (231) 53,086 513 713 819
--------- --------- -------- -------- -------- -------- --------- --------
Net gain (loss) on investments 316,939 17,080 140,475 (125) 56,839 514 714 820
--------- --------- -------- -------- -------- -------- --------- --------
Net increase in net assets
resulting from operations $401,381 $ 33,185 $146,631 $ 2,973 $ 65,960 $ 504 $ 703 $ 808
========= ========= ======== ======== ======== ======== ========= ========
</TABLE>
* For the period May 1, 1997 (Commencement of Operations) through December
31, 1997
See Notes to Financial Statements.
39
<PAGE>
Massachusetts Mutual Variable Life Separate Account I -- Strategic Variable Life
STATEMENT OF CHANGES IN NET ASSETS
For The Year Ended December 31, 1997
<TABLE>
<CAPTION>
*MML MML MML
MML Equity Money Managed MML Oppenheimer
Equity Index Market Bond Blend Money
Division Division Division Division Division Division
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations;
Net investment income (loss) $ 272,644 $ 206 $ 54,386 $ 75,430 $ 108,875 $ 1,572
Net realizod gain on investments 21,883 1 -- 868 2,275 --
Change in net unrealized appreciation/
depreciation of investments 282,387 951 -- 38,817 32,048 --
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets
resulting from operations 576,914 1,158 54,386 115,115 143,198 1,572
----------- ----------- ----------- ----------- ----------- -----------
Capital transactions; (Note 8)
Net contract payments 885,334 -- 7,536,342 528,095 281,565 --
Withdrawal of funds (20,829) -- (504,924) (9,303) -- --
Transfer of death benefits -- -- -- -- -- --
Transfer due to reimbursement
(payment) of acoumulation unit
value fluctuation 10,001 (4) 5,648 110 2,377 (1)
Transfer of seed money -- 5,000 -- -- -- --
Withdrawal due to charges for
administrative and insurance costs (93,015) -- (140,059) (34,521) (15,017) (982)
Divisional transfers 1,428,272 17,625 (6,356,690) 173,873 584,458 76,444
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets resulting
from capital transactions 2,209,763 22,621 540,317 658,254 853,383 75,461
----------- ----------- ----------- ----------- ----------- -----------
Total increase 2,786,677 23,779 594,703 773,369 996,581 77,033
NET ASSETS, at beginning
of the period/year 961,939 -- 731,589 526,829 303,183 5,375
----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS, at end
of the year $ 3,748,616 $ 23,779 $ 1,326,292 $ 1,300,198 $ 1,299,764 $ 82,408
=========== =========== =========== =========== =========== ===========
<CAPTION>
Oppenheimer Oppenheimer
High Oppenheimer Capital
Income Bond Appreciation
Division Division Division
----------- ----------- -----------
<S> <C> <C> <C>
Increase (decrease) in net assets
Operations;
Net investment income (loss) $ 124,058 $ 3,165 $ 60,913
Net realizod gain on investments 45,671 49 43,440
Change in net unrealized appreciation/
depreciation of investments 10,877 826 64,677
----------- ----------- -----------
Net increase in net assets
resulting from operations 180,606 4,040 169,030
----------- ----------- -----------
Capital transactions; (Note 8)
Net contract payments 208,375 389 841,616
Withdrawal of funds (10,527) -- --
Transfer of death benefits -- -- (34,315)
Transfer due to reimbursement
(payment) of acoumulation unit
value fluctuation 1,001 (1) (20,320)
Transfer of seed money -- -- --
Withdrawal due to charges for
administrative and insurance costs (26,651) (2,194) (41,860)
Divisional transfers 403,017 133,314 605,061
----------- ----------- -----------
Net increase in net assets resulting
from capital transactions 575,215 131,508 1,350,182
----------- ----------- -----------
Total increase 755,821 135,548 1,519,212
NET ASSETS, at beginning
of the period/year 1,266,145 5,520 966,370
----------- ----------- -----------
NET ASSETS, at end
of the year $ 2,021,966 $ 141,068 $ 2,485,582
=========== =========== ===========
</TABLE>
*For the period May 1, 1997 (Commencement of Operations) through December 31,
1997
See Notes to Financial Statements.
40
<PAGE>
Massachusetts Mutual Variable Life Separate Account I -- Strategic Variable
Life
STATEMENT OF CHANGES IN NET ASSETS (Continued)
For The Year Ended December 31, 1997
<TABLE>
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Oppenheimer Multiple Global Strategic Growth &
Growth Strategies Securities Bond Income
Division Division Division Division Division
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations;
Net investmnent income (loss) $ 84,442 $ 16,105 $ 6,156 $ 3,098 $ 9,121
Net realized gain on investments 113,022 1,030 88,098 106 3,753
Change in net unrealized appreciation/
depreciation of investments 203,917 16,050 52,377 (231) 53,086
----------- ----------- ----------- ----------- -----------
Net increase in net assets
resulting from operations 401,381 33,185 146,631 2,973 65,960
----------- ----------- ----------- ----------- -----------
Capital transactions; (Note 8)
Net contract payments 1,154,703 142,740 357,799 13,326 79,290
Wthdrawal of funds -- -- -- -- --
Transfer of death benefits (35,742) -- -- -- --
Transfer due to reimbursement
(payment) of accumulation unit
value fluctuation 257 86 10,173 78 (291)
Transfer of seed money -- -- -- -- --
Wthdrawal due to charges for
administrative and insurance costs (66,528) (10,284) (19,665) (1,444) (9,046)
Divisional transfers 1,521,051 244,734 488,859 52,128 627,852
----------- ----------- ----------- ----------- -----------
Net increase in net assets resulting
from capital transactions 2,573,741 377,276 837,166 64,088 697,805
----------- ----------- ----------- ----------- -----------
Total increase 2,975,122 410,461 983,797 67,061 763,765
NET ASSETS, at beginning
of the period/year 765,785 6,139 259,153 5,959 8,264
----------- ----------- ----------- ----------- -----------
NET ASSETS, at end
of the year $ 3,740,907 $ 416,600 $ 1,242,950 $ 73,020 $ 772,029
=========== =========== =========== =========== ===========
<CAPTION>
*Panorama *Panorama
LifeSpan *Panorama LifeSpan
Diversified LifeSpan Capital
Income Balanced Appreciation
Division Division Division
----------- ----------- -----------
<S> <C> <C> <C>
Increase (decrease) in net assets
Operations;
Net investmnent income (loss) $ (10) $ (11) $ (12)
Net realized gain on investments 1 1 1
Change in net unrealized appreciation/
depreciation of investments 513 713 819
----------- ----------- -----------
Net increase in net assets
resulting from operations 504 703 808
----------- ----------- -----------
Capital transactions; (Note 8)
Net contract payments -- -- --
Wthdrawal of funds -- -- --
Transfer of death benefits -- -- --
Transfer due to reimbursement
(payment) of accumulation unit
value fluctuation -- -- --
Transfer of seed money 5,000 5,000 5,000
Wthdrawal due to charges for
administrative and insurance costs -- -- --
Divisional transfers -- -- --
----------- ----------- -----------
Net increase in net assets resulting
from capital transactions 5,000 5,000 5,000
----------- ----------- -----------
Total increase 5,504 5,703 5,808
NET ASSETS, at beginning
of the period/year -- -- --
----------- ----------- -----------
NET ASSETS, at end
of the year 5,504 $ 5,703 $ 5,808
=========== =========== ===========
</TABLE>
*For the period May 1,1997 (Commencement of Operations) through December 31,1997
See Notes to Financial Statements.
41
<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
Equity Market Bond Blend Money Income
Division Division Division Division Division Division
----------- ----------- ----------- ----------- ------------ -----------
<S> <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
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)
----------- ----------- ----------- ----------- ------------ -----------
Net increase (decrease) in net assets
resulting from operations 74,093 33,534 18,206 21,007 248 43,550
----------- ----------- ----------- ----------- ------------ -----------
Capital transactions: (Note 8)
Transfer of net premium 4,154 5,620,114 1,941 -- -- --
Transfer due to reimbursement
(payment) of accumulation
unit value fluctuation 362 6,520 (118) 1,199 -- 1,702
Withdrawal due to charges for
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
NET ASSETS, at beginning
of the year 5,617 5,126 5,313 5,457 5,127 5,399
----------- ----------- ----------- ----------- ------------ -----------
NET ASSETS, at end
of the year $ 961,939 $ 731,589 $ 526,829 $ 303,183 $ 5,375 $ 1,266,145
=========== =========== =========== =========== ============ ===========
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer
Oppenheimer Capital Oppenheimer Multiple Global
Bond Appreciation Growth Strategies Securities
Division Division Division Division Division
----------- ------------ ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss) $ 326 $ (347) $ (34) $ 391 $ (255)
Net realized gain (loss)
on investments - (10,070) (3,859) 1 257
Change in net unrealized
appreciation/depreciation
of investments (88) 9,218 26,779 416 21,378
----------- ------------ ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations 238 (1,199) 22,886 808 21,380
----------- ------------ ----------- ----------- ----------
Capital transactions: (Note 8)
Transfer of net premium -- 552 553 -- --
Transfer due to reimbursement
(payment) of accumulation
unit value fluctuation -- (253) (268) -- 519
Withdrawal due to charges for
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
----------- ------------ ----------- ----------- ----------
Total increase 238 960,497 760,138 808 254,134
NET ASSETS, at beginning
of the year 5,282 5,873 5,647 5,331 5,019
----------- ------------ ----------- ----------- ----------
NET ASSETS, at end
of the year $ 5,520 $ 966,370 $ 765,785 $ 6,139 $ 259,153
=========== ============ =========== =========== ==========
<CAPTION>
Oppenheimer Oppenheimer
Strategic Growth &
Bond Income
Division Division
----------- -----------
<S> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss) $ 419 $ 72
Net realized gain (loss)
on investments 1 7
Change in net unrealized
appreciation/depreciation
of investments 206 1,930
----------- -----------
Net increase (decrease) in net assets
resulting from operations 626 2,009
----------- -----------
Capital transactions: (Note 8)
Transfer of net premium -- --
Transfer due to reimbursement
(payment) of accumulation
unit value fluctuation -- 1
Withdrawal due to charges for
administrative and insurance
costs -- --
Divisional transfers -- --
----------- -----------
Net increase in net assets
resulting from capital transactions -- 1
----------- -----------
Total increase 626 2,010
ASSETS, at beginning
of the year 5,333 6,254
----------- -----------
NET ASSETS, at end
of the year $ 5,959 $ 8,264
=========== ===========
</TABLE>
42
<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 six 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.
On February 11, 1997, MassMutual established a fifth segment ("GVUL
Segment") within Separate Account I to be used exclusively for MassMutual's
group variable universal life insurance product known as Strategic GVUL.
On November 12, 1997, MassMutual established a sixth segment ("SVUL
Segment") within Separate Account I to be used exclusively for MassMutual's
survivorship variable universal life insurance product known as SVUL.
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 the Strategic Variable Life Segment
on July 5, 1995 to provide initial capital: 14,439 shares were purchased in
two management investment companies (MML Series Investment Fund and
Oppenheimer Variable Account Funds) described in Note 2 supporting the
thirteen divisions of Strategic Variable Life Segment.
On May 1, 1997, MassMutual paid $20,000 to provide initial capital for four
new divisions of the Strategic Variable Life Segment: 13,950 shares were
purchased in the MML Equity Index Division, of the MML Series Investment
Fund and three divisions in the Panorama Series Fund, Inc. described in
Note 2.
2. INVESTMENT OF STRATEGIC VARIABLE LIFE SEGMENT'S ASSETS
Strategic Variable Life Segment maintains seventeen divisions. Each division
invests in corresponding shares of the five series of MML Series Investment
Fund ("MML Trust"), nine funds of the Oppenheimer Variable Account Funds
("Oppenheimer Trust"), and the three Panorama LifeSpan Portfolios of the
Panorama Series Fund, Inc. ("Panorama Fund"). At any one time, only eight
divisions are available to a policyowner.
MML Equity Fund, MML Equity Index Fund, MML Money Market Fund, MML Managed
Bond Fund and MML Blend Fund are the five series of the MML Trust. The MML
Trust is a registered, no-load, open-end, management investment company for
which MassMutual serves as investment manager. Concert Capital Management,
Inc. ("Concert") served as the investment sub-advisor to MML Equity Fund and
the Equity Sector of the MML Blend Fund from 1993-1996. Concert merged with
and into David L. Babson and Company, Inc. ("Babson") effective December 31,
1996. At such time, both Concert and Babson were wholly-owned subsidiaries
of DLB Acquisition Corporation, which is a controlled subsidiary of
MassMutual. Thus, effective January 1, 1997, Babson serves as the investment
sub-advisor to MML Equity Fund and the Equity Sector of the MML Blend Fund.
MassMutual has entered into a sub-advisory agreement with Mellon Equity
Associates ("Mellon Equity") whereby Mellon Equity serves as the sub-advisor
to the MML Equity Index Fund.
43
<PAGE>
Notes To Financial Statements (Continued)
The Oppenheimer Trust is a registered, open-end, diversified management
investment company with nine of its funds currently available to the
Strategic Variable Life policyowners: Oppenheimer Money Fund, Oppenheimer
High Income Fund, Oppenheimer Bond Fund, Oppenheimer Capital Appreciation
Fund, Oppenheimer Growth Fund, Oppenheimer Multiple Strategies Fund,
Oppenheimer Global Securities Fund, Oppenheimer Strategic Bond Fund and
Oppenheimer Growth & Income Fund.
The Panorama Fund is a registered, open-end, diversified management
investment company with three of its portfolios currently available to the
Strategic Variable Life policyowners: Panorama LifeSpan Diversified Income
Portfolio, Panorama LifeSpan Balanced Portfolio and Panorama LifeSpan
Capital Appreciation Portfolio.
OppenheimerFunds, Inc. ("OFI"), a controlled subsidiary of MassMutual,
serves as investment adviser to the Oppenheimer Trust and Panorama Fund,
(prior to January 5, 1996, OFI was known as Oppenheimer Management
Corporation). OFI has entered into investment sub-advisory agreements with
three sub-advisors to assist in the selection of portfolio investments for
the Panorama Fund's three LifeSpan Portfolios. Babson-Stewart Ivory
International ("Babson-Stewart") is the sub-advisor to international stock
components of the LifeSpan Balanced Portfolio and the LifeSpan Capital
Appreciation Portfolio. BEA Associates ("BEA") is the sub-advisor to the
high yield bond component of the LifeSpan Diversified Income Portfolio,
LifeSpan Balanced Portfolio, and LifeSpan Capital Appreciation Portfolio.
Pilgrim, Baxter & Associates ("Pilgrim Baxter") is the sub-advisor to the
small cap component of the LifeSpan Balanced Portfolio and the LifeSpan
Capital Appreciation Portfolio.
In addition to the seventeen 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, 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.
A. Investment Valuation
Investments in the MML Trust, the Oppenheimer Trust and the Panorama Fund
are each stated at market value which is the net asset value per share of
each of the respective underlying funds.
B. Accounting for Investments
Investment transactions are accounted for on trade date and identified cost
is the basis followed in determining the cost of investments sold for
financial statement purposes. Dividend income is recorded on the ex-dividend
date.
C. Federal Income Taxes
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.
44
<PAGE>
Notes To Financial Statements (Continued)
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 investments
and net assets 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, state premium taxes
and Deferred Acquisition Cost ("DAC") tax charge of 1.0% of each premium. 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.
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.
45
<PAGE>
Notes To Financial Statements (Continued)
6. PURCHASES AND SALES OF INVESTMENTS
<TABLE>
<CAPTION>
Average
For The Year Ended Cost of Proceeds monthly value
December 31, 1997 Purchases from Sales of securities
----------------- ------------- ------------- -------------
<S> <C> <C> <C>
MML Equity Division $ 2,359,616 $ 111,926 $ 2,368,791
MML Equity Index Division 22,621 7 7,979
MML Money Market Division 12,057,504 11,468,901 1,040,699
MML Managed Bond Division 768,600 46,293 1,163,267
MML Blend Division 898,847 16,514 782,728
Oppenheimer Money Division 77,977 1,023 34,943
Oppenheimer High Income Division 3,166,996 2,466,802 1,383,476
Oppenheimer Bond Division 136,995 2,233 46,465
Oppenheimer Capital Appreciation Division 1,934,641 521,712 1,746,339
Oppenheimer Growth Division 3,392,228 731,932 2,014,442
Oppenheimer Multiple Strategies Division 402,749 9,162 223,899
Oppenheimer Global Securities Division 1,293,071 449,083 810,083
Oppenheimer Strategic Bond Division 68,736 1,501 36,814
Oppenheimer Growth & Income Division 715,209 7,935 267,267
Panorama LifeSpan Diversified Income Division 5,000 6 5,302
Panorama LifeSpan Balanced Division 5,000 7 5,648
Panorama LifeSpan Capital Appreciation Division 5,000 7 5,652
</TABLE>
46
<PAGE>
Notes To Financial Statements (Continued)
7. NET INVESTMENT RETURN
The following table shows the net investment return for each division in
Strategic Variable Life Segment:
<TABLE>
<CAPTION>
MML MML MML Oppenheimer Oppenheimer
MML Equity Money Managed MML Oppenheimer High Oppenheimer Capital
Equity Index Market Bond Blend Money Income Bond Appreciation
Division Division Division Division Division Division Division Division Division
-------- -------- -------- -------- -------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended
December 31, 1997 24.12% 5.21% 9.88% 17.93% 4.50% 13.06% 8.89% 9.69%
*For the Period May 1, 1997
(Commencement of Operations)
Through December 31, 1997 14.48%
For the Year Ended
December 31, 1996 23.57% 5.38% 9.13% 17.94% 4.72% 14.08% 4.45% (0.47%)
*For the Period July 5,1995
(Commencement of Operations)
Through December 31, 1995 11.59% 2.48% 6.10% 8.75% 2.50% 7.60% 5.51% 15.67%
</TABLE>
<TABLE>
<CAPTION>
Panorama Panorama
Oppenheimer Oppenheimer Oppenheimer Oppenheimer LifeSpan Panorama LifeSpan
Oppenheimer Multiple Global Strategic Growth & Diversified LifeSpan Capital
Growth Strategies Securities Bond Income Income Balanced Appreciation
Division Division Division Division Division Division Division Division
----------- ----------- ----------- ----------- ----------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended
December 31, 1997 19.94% 14.83% 18.14% 8.08% 24.69%
*For the Period May 1, 1997
(Commencement of Operations)
Through December 31, 1997 9.51% 12.46% 14.29%
For the Year Ended
December 31, 1996 13.02% 14.16% 23.29% 11.18% 27.68%
*For the Period July 5, 1995
(Commencement of Operations)
Through December 31, 1995 11.88% 6.35% 0.37% 6.45% 22.36%
</TABLE>
The net investment return for each division of the Strategic Variable Life
Segment is computed using the net increase in net assets resulting from
operations as compared to the average monthly net assets. The net investment
return figures shown above do not reflect expenses related to insurance
products. Inclusion of such expenses would reduce the net investment return
figures for all periods shown.
*Note: The amounts shown for the period July 5, 1995 through December 31, 1995
and May 1, 1997 through December 31, 1997 are not annualized.
47
<PAGE>
Notes To Financial Statements (Continued)
8. NET INCREASE (DECREASE) IN ACCUMULATION UNITS
<TABLE>
<CAPTION>
For the Year Ended December 31, 1997 *MML MML MML Oppenheimer Oppenheimer
and *For the period May 1,1997 MML Equity Money Managed MML Oppenheimer High Oppenheimer Capital
(Commencement of Operations) Equity Index Market Bond Blend Money Income Bond Appreciation
Through December 31, 1997 DivIsion Division Division Division Division Division Division Division Division
- ------------------------- ---------- -------- ----------- ---------- -------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units purchased 622,668 5,000 11,393,760 492,286 233,372 440 165,960 339 567,491
Units withdrawn and transferred
to Guaranteed Principal Account (88,305) -- (4,664,563) (45,589) (16,312) (1,320) (31,447) (1,883) (64,955)
Units transferred between
divisions 921,761 14,462 (6,232,623) 156,298 407,951 68,908 301,516 113,869 396,220
--------- -------- ---------- --------- -------- -------- --------- --------- -----------
Net Increase 1,456,124 19,462 496,574 602,995 625,011 68,028 436,029 112,325 898,756
Units, at beginning of the
period/year 714,055 -- 681,464 481,626 244,493 5,000 1,020,400 5,000 686,585
--------- -------- ---------- --------- -------- -------- --------- --------- -----------
Units at end of the year 2,170,179 19,462 1,178,038 1,084,621 869,504 73,028 1,456,429 117,325 1,585,341
========= ======== ========== ========= ======== ======== ========= ========= ===========
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended December 31,1997 *Panorama *Panorama
and *For the period May 1,1997 Oppenheimer Oppenheimer Oppenheimer Oppenheimer LifeSpan* Panorama LifeSpan
(Commencement of Operations) Oppenheimer Multiple Global Strategic Growth & Diversified LifeSpan Capital
Through December 31, 1997 Growth Strategies Securities Bond Income Income Balanced Appreciation
(continued) Division Division Division Division Division Division Division Division
- ----------- ---------- ----------- ----------- ----------- ---------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Units purchased 1,033,968 106,878 295,383 11,217 40,265 -- -- --
Units withdrawn and transferred
to Guaranteed Principal Account (442,780) (13,672) (25,115) (1,938) (6,606) -- -- --
Units transferred between divisions 965,813 192,086 372,969 42,249 314,979 5,000 5,000 5,000
---------- ----------- ----------- ----------- ----------- ---------- -------- ------------
Net Increase 1,557,001 285,292 643,237 51,528 348,638 5,000 5,000 5,000
Units, at beginning of the
period/year 543,020 5,000 220,297 5,000 5,000 -- -- --
---------- ----------- ----------- ----------- ----------- ---------- -------- ------------
Units, at end of the year 2,100,021 290,292 863,534 56,528 353,638 5,000 5,000 5,000
========== =========== =========== =========== =========== ========== ======== ============
</TABLE>
<TABLE>
<CAPTION>
MML MML Oppenheimer Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer Capital Oppenheimer
For the Year Ended Equity Market Bond Blend Money Income Bond Appreciation Growth
December 31, 1996 Division Division Division Division Division Division Division Division Division
- ----------------- -------- ----------- -------- -------- ----------- ----------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units purchased 4,137 9,528,707 2,292 -- -- 1,229 -- 551,136 432
Units withdrawn and
transferred to Guaranteed
Principal Account (11,556) (4,286,412) (8,896) (2,232) -- (4,950) -- (3,731) (2,334)
Units transferred between
divisions 716,474 (4,565,831) 483,230 241,725 -- 1,019,121 -- 134,180 539,922
-------- ----------- -------- -------- ----------- ----------- --------- ------------ -----------
Net Increase 709,055 676,464 476,626 239,493 -- 1,015,400 -- 681,585 538,020
Units, at beginning of the year 5,000 5,000 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 5,000 686,585 543,020
======== =========== ======== ======== =========== =========== ========= ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Multiple Global Strategic Growth &
For the Year Ended Strategies Securities Bond Income
December 31, 1996( continued) Division Division Division Division
- ----------------------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Units purchased - - - -
Units withdrawn and
transferred to Guaranteed
Principal Account - (1,798) - -
Units transferred between
divisions - 217,095 - -
---------- ----------- ----------- -----------
Net Increase - 215,297 - -
Units, at beginning of the year 5,000 5,000 5,000 5,000
---------- ----------- ----------- -----------
Units, at end of the year 5,000 220,297 5,000 5,000
========== =========== =========== ===========
</TABLE>
48
<PAGE>
Notes To Financial Statements (Continued)
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, Strategic
Group Variable Life and Variable Life Select Segments are as follows:
<TABLE>
<CAPTION>
MML MML MML
MML Equity Money Managed MML Oppenheimer
Equity Index Market Bond Blend Money
Division Division Division Division Division Division
-------------- --------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Total assets $ 47,535,472 $ 24,804 $ 4,783,018 $ 19,916,629 $ 13,024,523 $ 83,483
Total liabilities 80,176 9 7,225 17,985 23,892 64
-------------- --------------- -------------- -------------- -------------- --------------
Net assets $ 47,455,296 $ 24,795 $ 4,775,793 $ 19,898,644 $ 13,000,631 $ 83,419
============== =============== ============== ============== ============== ==============
Net assets:
For variable life
insurance policies 47,351,808 17,670 4,724,501 19,838,205 12,915,916 76,766
Retained in Variable Life
Separate Account I by
Massachusetts Mutual Life
Insurance Company 103,488 7,125 51,292 60,439 84,715 6,653
-------------- --------------- -------------- -------------- -------------- --------------
Net assets $ 47,455,296 $ 24,795 $ 4,775,793 $ 19,898,644 $ 13,000,631 $ 83,419
============== =============== ============== ============== ============== ==============
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer
High Oppenheimer Capital Oppenheimer Multiple
Income Bond Appreciation Growth Strategies
Division Division Division Division Division
-------------- --------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Total assets $ 3,203,079 $ 142,182 $ 9,010,163 $ 5,093,866 $ 417,797
Total liabilities 2,031 91 17,407 24,158 207
-------------- --------------- -------------- -------------- --------------
Net assets $ 3,201,048 $ 142,091 $ 8,992,756 $ 5,069,708 $ 417,590
============== =============== ============== ============== ==============
Net assets:
For variable life
insurance policies 3,185,681 135,056 8,968,173 5,051,141 409,425
Retained in Variable Life
Separate Account I by
Massachusetts Mutual Life
Insurance Company 15,367 7,035 24,583 18,567 8,165
-------------- --------------- -------------- -------------- --------------
Net assets $ 3,201,048 $ 142,091 $ 8,992,756 $ 5,069,708 $ 417,590
============== =============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Panorama
Global Strategic Growth & Panorama Panorama International
Securities Bond Income Total Return Growth Equity
Division Division Division Division Division Division
-------------- --------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Total assets $ 5,356,495 $ 355,712 $ 773,396 $ 1,000 $ 986 $ 958
Total liabilities 10,408 1,323 350 2 2 2
-------------- --------------- -------------- -------------- -------------- --------------
Net assets $ 5,346,087 $ 354,389 $ 773,046 $ 998 $ 984 $ 956
============== =============== ============== ============== ============== ==============
Net assets:
For variable life
insurance policies 5,324,187 340,514 761,112 - - -
Retained in Variable Life
Separate Account I by
Massachusetts Mutual Life
Insurance Company 21,900 13,875 11,934 998 984 956
-------------- --------------- -------------- -------------- -------------- --------------
Net assets $ 5,346,087 $ 354,389 $ 773,046 $ 998 $ 984 $ 956
============== =============== ============== ============== ============== ==============
<CAPTION>
Panorama Panorama
Life Span Panorama Life Span Dreyfus
Diversified Life Span Capital Stock
Income Balanced Appreciation Index
Division Division Division Division
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Total assets $ 6,534 $ 6,684 $ 6,783 $ 34,164,819
Total liabilities 6 6 6 35,667
-------------- --------------- -------------- --------------
Net assets $ 6,528 6,678 6,777 34,129,152
-------------- --------------- -------------- --------------
Net assets:
For variable life insurance
policies - - - 34,121,562
Retained in Variable Life
Separate Account I by
Massachusetts Mutual Life
Insurance Company 6,528 6,678 6,777 7,590
-------------- --------------- -------------- --------------
Net assets $ 6,528 $ 6,678 $ 6,777 $ 34,129,152
============== =============== ============== ==============
</TABLE>
49
<PAGE>
Report Of Independent Accountants
To the Board of Directors and Policyholders of
Massachusetts Mutual Life Insurance Company
We have audited the accompanying statutory statements of financial position of
Massachusetts Mutual Life Insurance Company as of December 31, 1997 and 1996,
and the related statutory statements of income, changes in policyholders'
contingency reserves, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the statutory
financial statements of Connecticut Mutual Life Insurance Company ("Connecticut
Mutual") for the year ended December 31, 1995, which statements reflect total
revenue and net gain from operations constituting 26% and 22% of the related
Company totals after restatement for the merger of the two companies. Those
statements were audited by other auditors whose report has been furnished to us,
and our opinion, insofar as it relates to the amounts included for Connecticut
Mutual, is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
As described more fully in Note 1, these financial statements were prepared in
conformity with statutory accounting practices of the National Association of
Insurance Commissioners and the accounting practices prescribed or permitted by
the Division of Insurance of the Commonwealth of Massachusetts and, for the
pre-merger balances of Connecticut Mutual, the Department of Insurance of the
State of Connecticut (collectively "statutory accounting practices"), which
practices differ from generally accepted accounting principles. The effects on
the financial statements of the variances between the statutory basis of
accounting and generally accepted accounting principles, although not reasonably
determinable at this time, are presumed to be material.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Massachusetts Mutual Life Insurance Company at December 31, 1997 and 1996, or
the results of its operations or its cash flows for each of the three years in
the period ended December 31, 1997.
In our opinion, based upon our audits and the report of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Massachusetts Mutual Life Insurance Company at
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997, on the
statutory basis of accounting described in Note 1.
Coopers & Lybrand L.L.P.
Springfield, Massachusetts
February 6, 1998
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF FINANCIAL POSITION
December 31,
1997 1996
---- ----
(In Millions)
Assets:
Bonds............................................. $23,890.3 $24,299.3
Common stocks..................................... 354.7 336.6
Mortgage loans.................................... 4,863.7 4,852.8
Real estate....................................... 1,697.7 1,840.9
Other investments................................. 1,963.8 1,425.6
Policy loans...................................... 4,950.4 4,752.3
Cash and short-term investments................... 1,941.2 1,075.4
--------- ---------
39,661.8 38,582.9
Investment and insurance amounts receivable....... 1,064.9 1,102.4
Other assets...................................... 104.8 97.9
--------- ---------
40,831.5 39,783.2
Separate account assets........................... 16,803.1 13,563.5
--------- ---------
$57,634.6 $53,346.7
========= =========
See notes to statutory financial statements.
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF FINANCIAL POSITION, Continued
December 31,
1997 1996
---- ----
(In Millions)
Liabilities:
Policyholders' reserves and funds................. $33,783.2 $33,341.5
Policyholders' dividends.......................... 954.1 885.3
Policyholders' claims and other benefits.......... 353.4 373.8
Federal income taxes.............................. 436.5 440.7
Asset valuation reserve........................... 840.6 689.2
Investment reserves............................... 132.8 208.4
Amounts due on investments puchased and
other liabilities................................ 1,457.9 1,206.1
--------- ---------
37,958.5 37,145.0
Separate account reserves and liabilities......... 16,802.8 13,563.1
--------- ---------
54,761.3 50,708.1
Policyholders' contingency reserves............... 2,873.3 2,638.6
--------- ---------
$57,634.6 $53,346.7
========= =========
See notes to statutory financial statements.
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years ended December 31,
1997 1996 1995
---- ---- ----
(In Millions)
<S> <C> <C> <C>
Revenue:
Premium income............................................ $6,764.8 $6,328.6 $5,727.7
Net investment and other income........................... 2,904.4 2,861.1 2,898.4
-------- -------- --------
9,669.2 9,189.7 8,626.1
-------- -------- --------
Benefits and expenses:
Policy benefits and payments.............................. 6,597.3 6,048.2 5,152.2
Addition to policyholder's reserves and funds............. 720.8 854.7 1,205.4
Commissions and operating expenses........................ 766.1 763.5 833.7
State taxes, licenses and fees............................ 81.5 96.4 89.4
Merger restructuring costs................................ - 66.1 44.0
-------- -------- --------
8,165.7 7,828.9 7,324.7
-------- -------- --------
Net gain before federal income taxes and dividends........ 1,503.5 1,360.8 1,301.4
Federal income taxes...................................... 284.4 276.7 206.2
-------- -------- --------
Net gain from operations before dividends................. 1,219.1 1,084.1 1,095.2
Dividends to policyholders................................ 919.5 859.9 819.0
-------- -------- --------
Net gain from operations.................................. 299.6 224.2 276.2
Net realized capital gain (loss).......................... (42.5) 40.3 (85.8)
-------- -------- --------
Net income................................................ $ 257.1 $ 264.5 $ 190.4
======== ======== ========
</TABLE>
See notes to statutory financial statements.
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF CHANGES
IN POLICYHOLDERS' CONTINGENCY RESERVES
<TABLE>
<CAPTION>
Years ended December 31,
1997 1996 1995
---- ---- ----
(In Millions)
<S> <C> <C> <C>
Policyholder's contingency reserves, beginning of year.... $2,638.6 $2,600.9 $2,569.1
-------- -------- --------
Increases (decreases) due to:
Net income............................................... 257.1 264.5 190.4
Net unrealized capital gain (loss)....................... 119.1 (1.7) 88.7
Merger restructuring costs, net of fax................... - - (45.4)
Change in asset valuation and investment reserves........ (76.0) (142.4) (75.6)
Change in prior year policyholders' reserves............. (55.4) (72.2) (108.2)
Change in non-admitted assets and other.................. (10.1) (10.5) (18.1)
-------- -------- --------
234.7 37.7 31.8
-------- -------- --------
Policyholders' contingency reserves, end of year.......... $2,873.3 $2,638.6 $2,600.9
======== ======== ========
</TABLE>
See notes to statutory financial statements.
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
1997 1996 1995
---- ---- ----
(In Millions)
<S> <C> <C> <C>
Operating acitivites:
Net income............................................... $ 257.1 $ 264.5 $ 190.4
Addition to policyholders' reserves and funds,
net of transfers to separate accounts................... 421.3 426.7 575.8
Net realized capital (gain) loss......................... 42.5 (40.3) 85.8
Other changes............................................ (58.1) (232.8) (25.2)
--------- --------- ---------
Net cash provided by operating activities................ 662.8 418.1 826.8
--------- --------- ---------
Investing activities:
Purchases of investments and loans....................... (12,292.7) (10,171.5) (10,364.2)
Sales or maturities of investments and receipts
from repayment of loans................................. 12,545.7 8,539.3 9,671.1
--------- --------- ---------
Net cash provided by (used in) investing activities...... 253.0 (1,632.2) (693.1)
--------- --------- ---------
Financing activities:
Repayments of long-term debt............................. (50.0) (53.3) (46.4)
--------- --------- ---------
Net cash used by financing activities.................... (50.0) (53.3) (46.4)
--------- --------- ---------
Increase (decrease) in cash and short-term investments... 865.8 (1,267.4) 87.3
Cash and short-term investments, beginning of year....... 1,075.4 2,342.8 2,255.5
--------- --------- ---------
Cash and short-term investments, end of year............. $ 1,941.2 $ 1,075.4 $ 2,342.8
========= ========= =========
</TABLE>
See Notes to Statutory Financial Statements.
<PAGE>
Notes To Statutory Financial Statements
Massachusetts Mutual Life Insurance Company ("the Company") is a mutual life
insurance company and as such has no shareholders. The Company's primary
business is individual life insurance, annuity and disability income products
distributed primarily through career agents. The Company also provides a wide
range of pension products and services, as well as investment services to
individuals, corporations and institutions in all 50 states and the District of
Columbia.
On March 1, 1996, the operations of the former Connecticut Mutual Life Insurance
Company ("Connecticut Mutual") were merged into the Company. This merger was
accounted for under the pooling of interests method of accounting. For the
purposes of this presentation, these financial statements reflect historical
amounts giving retroactive effect as if the merger had occurred on January 1,
1995 in conformity with the practices of the National Association of Insurance
Commissioners and the accounting practices prescribed or permitted by the
Division of Insurance of the Commonwealth of Massachusetts. In 1996,
merger-related expenses totaling $66.1 million were recorded in the Statutory
Statement of Income. In 1995, merger-related expenses incurred by Massachusetts
Mutual (the Company prior to the merger) of $44.0 million, were recorded in the
Statutory Statement of Income and the expenses incurred by Connecticut Mutual of
$45.4 million, net of tax, were recorded as a component of changes in
policyholders' contingency reserves, as permitted by each company's regulatory
authority. On the merger date, policyholders' reserves attributable to
disability income contracts were strengthened by $75.0 million, investment
reserves for real estate were increased by $49.8 million and net prepaid pension
assets were increased by $10.4 million with all adjustments reflected as a
change to policyholders' contingency reserves. The separate results of each
company prior to the merger for the year ended December 31, 1995, were as
follows: (a) revenue was $6,443.8 million for Massachusetts Mutual and $2,182.3
million for Connecticut Mutual; (b) net income was $160.7 million for
Massachusetts Mutual and $29.6 million for Connecticut Mutual and (c)
policyholders' contingency reserves increased by $143.7 million for
Massachusetts Mutual and decreased by $112.0 million for Connecticut Mutual.
On March 31, 1996, the Company sold MassMutual Holding Company Two, Inc., a
wholly-owned subsidiary, and its subsidiaries, including Mirus Life Insurance
Company (formerly the MML Pension Insurance Company; currently doing business as
"UniCARE"), which comprised the Company's group life and health business, to
WellPoint Health Networks, Inc. The Company received total consideration of
$402.2 million ($340.0 million in cash and $62.2 million in notes receivable)
and recognized a before tax gain of $187.9 million. The Company, pursuant to a
1994 reinsurance agreement, cedes its group life, accident and health business
to UniCARE. The Company's investment in MassMutual Holding Company Two, Inc.
amounted to $187.8 million at December 31, 1995; its gain from operations
included a $41.0 million dividend received from MIRUS in 1995. Additionally,
this investment produced an unrealized gain of $13.9 million in 1995.
1. SUMMARY OF ACCOUNTING PRACTICES
The accompanying statutory financial statements, except as to form, have been
prepared in conformity with the statutory accounting practices of the National
Association of Insurance Commissioners ("NAIC") and the accounting practices
prescribed or permitted by the Division of Insurance of the Commonwealth of
Massachusetts and, for the pre-merger balances of Connecticut Mutual, the
Department of Insurance of the State of Connecticut (collectively "statutory
accounting practices"), which practices were at one time also considered to be
in conformity with generally accepted accounting principles ("GAAP").
The accompanying statutory financial statements are different in some respects
from GAAP financial statements. The more significant differences are as follows:
(a) acquisition costs, such as commissions and other costs directly related to
acquiring new business, are charged to current operations as incurred, whereas
GAAP would require these expenses to be capitalized and recognized over the life
of the policies; (b) policy reserves are based upon statutory mortality and
interest requirements without consideration of withdrawals, whereas GAAP
reserves would be based upon reasonably conservative estimates of mortality,
morbidity, interest and withdrawals; (c) bonds are generally carried at
amortized cost whereas GAAP generally requests they be valued at fair value; (d)
deferred income taxes are not provided for book-tax timing differences as would
be required by GAAP, and (e) payments received for universal and variable life
products, variable annuities and investment related products are reported as
premium revenue, whereas under GAAP, these payments would be recorded as
deposits to policyholders' account balances.
The NAIC is currently engaged in an extensive project ("Codification") to codify
statutory accounting principles with a goal of providing a comprehensive guide
of statutory accounting principles for use by insurers in all states. This
comprehensive guide, which has not been approved by the NAIC or any state
insurance department, includes seventy-two Statements of Statutory Accounting
Principles ("SSAPs") and is expected to be effective no earlier than January 1,
1999. The effect of adopting these SSAPs shall be reported as an adjustment to
surplus on the effective date. Management is currently reviewing the impact of
Codification. However, since the SSAPs have not been finalized, the ultimate
impact cannot be determined at this time.
<PAGE>
Notes To Statutory Financial Statements (Continued)
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, as
well as disclosures of contingent assets and liabilities at the date of the
financial statements. Management must also make estimates and assumptions that
affect the amounts of revenues and expenses during the reporting period. Future
events, including changes in the levels of mortality, morbidity, interest rates
and asset valuations, could cause actual results to differ from the estimates
used in these financial statements.
The following is a description of the Company's principal accounting policies
and practices.
A. Investments
Bonds and stocks are valued in accordance with rules established by the National
Association of Insurance Commissioners. Generally, bonds are valued at amortized
cost, preferred stocks in good standing at cost, and common stocks, except for
unconsolidated subsidiaries, at fair value.
Mortgage loans are valued at unpaid principal less unamortized discount. Real
estate is valued at cost less accumulated depreciation, impairment allowances
and mortgage encumbrances. Encumbrances totaled $14.2 million in 1997 and $27.3
million in 1996. Depreciation on investment real estate is calculated using the
straight-line and constant yield methods.
Policy loans are carried at the outstanding loan balance less amounts unsecured
by the cash surrender value of the policy.
Short-term investments are stated at amortized cost, which approximates fair
value.
Investments in unconsolidated subsidiaries and affiliates, joint ventures and
other forms of partnerships are included in other investments on the Statutory
Statement of Financial Position and are accounted for using the equity method.
In compliance with regulatory requirements, the Company maintains an Asset
Valuation Reserve and an Interest Maintenance Reserve. The Asset Valuation
Reserve and other investment reserves stabilize the policyholders' contingency
reserves against fluctuations in the value of stocks, as well as declines in the
value of bonds, mortgage loans and real estate investments.
The Interest Maintenance Reserve captures after-tax realized capital gains and
losses which result from changes in the overall level of interest rates for all
types of fixed income investments, as well as other financial instruments,
including financial futures, U.S. Treasury purchase commitments, options,
interest rate swaps, interest rate caps and interest rate floors. These interest
rate related gains and losses are amortized into income using the grouped method
over the remaining life of the investment sold or over the remaining life of the
underlying asset. Net realized after tax capital gains of $95.4 million in 1997,
$73.1 million in 1996, and net realized after tax capital losses of $130.7
million in 1995 were charged to the Interest Maintenance Reserve. Amortization
of the Interest Maintenance Reserve into net investment income amounted to $31.0
million in 1997, $26.9 million in 1996, and $5.0 million in 1995.
Realized capital gains and losses, less taxes, not includable in the Interest
Maintenance Reserve, are recognized in net income. Realized capital gains and
losses are determined using the specific identification method. Unrealized
capital gains and losses are included in policyholders' contingency reserves.
B. Separate Accounts
Separate account assets and liabilities represent segregated funds administered
and invested by the Company for the benefit of pension, variable annuity and
variable life insurance contract holders. Assets consist principally of
marketable securities reported at fair value. Premiums, benefits and expenses of
the separate accounts are reported in the Statutory Statement of Income. The
Company receives administrative and investment advisory fees from these
accounts.
C. Non-admitted Assets
Assets designated as "non-admitted" (principally certain fixed assets,
receivables and Interest Maintenance Reserve, when in a net loss deferral
position) are excluded from the Statutory Statement of Financial Position by an
adjustment to policyholders' contingency reserves.
<PAGE>
Notes To Statutory Financial Statements (Continued)
D. Policyholders' Reserves and Funds
Policyholders' reserves for life contracts are developed using accepted
actuarial methods computed principally on the net level premium and the
Commissioners' Reserve Valuation Method bases using the American Experience and
the 1941, 1958 and 1980 Commissioners' Standard Ordinary mortality tables with
assumed interest rates ranging from 2.5 to 6.0 percent.
Reserves for individual annuities, guaranteed investment contracts and deposit
administration and immediate participation guarantee funds are based on accepted
actuarial methods principally at interest rates ranging from 2.25 to 11.25
percent. Reserves for policies and contracts considered investment contracts
have a carrying value of $8,077.9 million and $9,073.8 million at December 31,
1997 and 1996, respectively (fair value of $8,250.0 million and $9,324.6 million
at December 31, 1997 and 1996, respectively as determined by discounted cash
flow projections). Accident and health policy reserves are generally calculated
using the two-year preliminary term, net level premium and fixed net premium
methods and various morbidity tables.
The Company made certain changes in the valuation of policyholders' reserves of
$55.4 million in 1997 and $72.2 million in 1996. The effects of these changes
were recorded as a decrease to policyholders' contingency reserves.
E. Premium and Related Expense Recognition
Life insurance premium revenue is recognized annually on the anniversary date of
the policy. Annuity premium is recognized when received. Accident and health
premiums are recognized as revenue when due. Commissions and other costs related
to issuance of new policies, maintenance and settlement costs are charged to
current operations when incurred.
F. Policyholders' Dividends
The Board of Directors annually approves dividends to be paid in the following
year. These dividends are allocated to reflect the relative contribution of each
group of policies to policyholders' contingency reserves and consider investment
and mortality experience, expenses and federal income tax charges. The liability
for policyholders' dividends is equal to the estimated amount of dividends to be
paid in the following calendar year.
G. Cash and Short-term Investments
For purposes of the Statutory Statement of Cash Flows, the Company considers all
highly liquid investments purchased with a maturity of twelve months or less to
be cash and short-term investments.
2. POLICYHOLDERS' CONTINGENCY RESERVES
Policyholders' contingency reserves represent surplus of the Company as reported
to regulatory authorities and are intended to protect policyholders against
possible adverse experience.
The Company issued surplus notes of $100.0 million at 7 1/2 percent and $250.0
million at 7 5/8 percent in 1994 and 1993, respectively. These notes are
unsecured and subordinate to all present and future indebtedness of the Company,
policy claims and prior claims against the Company as provided by the
Massachusetts General Laws. Issuance was approved by the Commissioner of
Insurance of the Commonwealth of Massachusetts ("the Commissioner").
All payments of interest and principal are subject to the prior approval of the
Commissioner. Sinking fund payments are due as follows: $62.5 million in 2021,
$87.5 million in 2022, $150.0 million in 2023 and $50.0 million in 2024.
Interest on the notes issued in 1994 is scheduled to be paid on March 1 and
September 1 of each year, to holders of record on the preceding February 15 or
August 15, respectively. Interest on the notes issued in 1993 is scheduled to be
paid on May 15 and November 15 of each year, to holders of record on the
preceding May 1 or November 1, respectively. Interest expense is not recorded
until approval for payment is received from the Commissioner. Interest of $26.6
million was approved and paid in 1997, 1996 and 1995.
<PAGE>
Notes To Statutory Financial Statements (Continued)
The proceeds of the notes, less a $28.3 million reserve in 1997, and a $32.2
million reserve in 1996 for contingencies associated with the issuance of the
notes, are recorded as a component of the Company's policyholders' contingency
reserves as approved by the Commissioner. These reserves, as permitted by the
Division of Insurance, are included in investment reserves on the Statutory
Statement of Financial Position.
3. EMPLOYEE BENEFIT PLANS
The Company's employee benefit plans include plans in place for the employees of
Massachusetts Mutual and Connecticut Mutual prior to the merger. Employees
previously covered by the Connecticut Mutual pension plans will continue
coverage under these plans. All other employees, including employees hired after
the merger date, will be covered by the Massachusetts Mutual benefit plans.
A. Pension
The Company has two non-contributory defined benefit plans covering
substantially all of its employees. One plan includes employees previously
employed by Connecticut Mutual; the other includes all other eligible employees.
Benefits are based on the employees' years of service, compensation during the
last five years of employment and estimated social security retirement benefits.
The Company accounts for these plans following Financial Accounting Standards
Board Statement No. 87, "Employers' Accounting for Pensions." Accordingly, as
permitted by the Massachusetts Division of Insurance, the Company has recognized
a pension asset of $157.4 million and $97.2 million at December 31, 1997 and
1996, respectively. On the merger date, the accounting for Connecticut Mutual
pension plans was conformed to the Company's policy of recording pension plan
assets and liabilities, resulting in a $10.4 million increase in policyholders'
contingency reserves. Company policy is to fund pension costs in accordance with
the requirements of the Employee Retirement Income Security Act of 1974 and,
based on such requirements, no funding was required for the years ended December
31, 1997, 1996 and 1995. The assets of the plans are invested in the Company's
general account and separate accounts.
The benefit status of the defined benefit plans as of December 31 is as follows:
1997 1996
---- ----
(In Millions)
Accumulated benefit obligation $ 663.1 $ 611.5
Vested benefit obligation 653.8 606.5
Projected benefit obligation 713.9 665.5
Plan assets at fair value 1,154.2 1,201.7
The following assumptions were used in determining the actuarial present value
of both the accumulated and projected benefit obligations.
MassMutual Connecticut Mutual
Plan Plan
---- ----
Discount rate - 1997 7.25% 7.25%
Discount rate - 1996 7.75 7.75
Increase in future compensation levels 4.00 5.00
Long-term rate of return on assets 10.00 9.00
In 1997, there was a significant reduction in plan participants in the
Connecticut Mutual Plan which resulted in recognition of a pension plan
curtailment gain of $10.7 million.
As a result of the sale of Mirus Life Insurance Company, there was a significant
reduction in plan participants which resulted in recognition of a pension plan
curtailment gain of $15.3 million in 1996.
The Company also has defined contribution plans for employees and agents. The
expense credited to operations for all pension plans is $38.9 million in 1997,
$32.7 million in 1996 and $10.9 million in 1995.
<PAGE>
Notes To Statutory Financial Statements (Continued)
B. Life and Health
Certain life and health insurance benefits are provided to retired employees and
agents through group insurance contracts. Substantially all of the Company's
employees may become eligible for these benefits if they reach retirement age
while working for the Company. The Company adopted the National Association of
Insurance Commissioners' accounting standard for post-retirement life and health
benefit costs, requiring these benefits to be accounted for using the accrual
method for employees and agents eligible to retire and current retirees.
The following assumptions were used in determining the accumulated
postretirement benefit liability.
MassMutual Connecticut Mutual
Plan Plan
---- ----
Discount - 1997 7.25% 7.25%
Discount - 1996 7.75 7.75
Assumed increases in medical cost
rates in the first year 6.25 - 6.75 9.50
declining to 4.75 5.00
within 5 years 5 years
The initial transition obligation of $137.9 million is being amortized over
twenty years through 2012. At December 31, 1997 and 1996, the net unfunded
accumulated benefit obligation was $124.2 million and $124.1 million,
respectively, for employees and agents eligible to retire or currently retired
and $34.7 million and $33.8 million, respectively, for participants not eligible
to retire. A Retired Lives Reserve Trust was funded to pay life insurance
premiums for certain retired employees. Trust assets available for benefits were
$21.7 million and $23.0 million at December 31, 1997 and 1996, respectively.
As a result of the sale of Mirus Life Insurance Company, there was a significant
reduction in plan participants which resulted in recognition of a life and
health plan curtailment loss of $13.9 million in 1996.
The expense for 1997, 1996 and 1995 was $16.5 million, $17.6 million, and $22.9
million, respectively. A one percent increase in the annual assumed increase in
medical cost rates would increase the 1997 accumulated postretirement benefit
liability and benefit expense by $10.9 million and $1.4 million, respectively.
4. RELATED PARTY TRANSACTIONS
Pursuant to two 1994 reinsurance agreements with Mirus Life Insurance Company
(Mirus) whereby the Company assumed all of the single premium immediate annuity
business written by Mirus and ceded all of its group life, accident and health
business to Mirus. A gain from operations of this business was reflected in 1995
as a $41.0 million dividend received from Mirus, which was recorded as net
investment income on the Statutory Statement of Income. As previously discussed,
on March 31, 1996, the Company sold MassMutual Holding Company Two, Inc. a
wholly-owned subsidiary, and its subsidiaries, including Mirus Life Insurance
Company to WellPoint Health Networks, Inc.
The Company has a modified coinsurance quota-share reinsurance agreement with a
wholly-owned subsidiary, C.M. Life Insurance Company, whereby the Company
assumes 75% of the premiums on certain universal life policies issued by C.M.
Life. The Company pays a stipulated expense allowance, death and surrender
benefits, and a modified coinsurance adjustment. Reserves for payment of future
benefits are retained by C.M. Life.
5. FEDERAL INCOME TAXES
Provision for federal income taxes is based upon the Company's best estimate of
its current tax liability. No deferred tax effect is recognized for temporary
differences that may exist between financial reporting and taxable income.
Accordingly, the reporting of equity tax (essentially a reduction in the
deduction for policyholder dividends) and miscellaneous temporary differences,
such as reserves, acquisition costs and restructuring costs, resulted in
effective tax rates which differ from the statutory tax rate.
The Internal Revenue Service has completed examining the Company's income tax
returns through the year 1992 for Massachusetts Mutual and 1991 for Connecticut
Mutual, and is currently examining Massachusetts Mutual for the years 1993 and
1994, and Connecticut Mutual for the years 1992 through 1995. The Company
believes any adjustments resulting from such examinations will not materially
affect its financial statements.
<PAGE>
Notes to Statutory Financial Statements (Continued)
Components of the formula authorized by the Internal Revenue Service for
determining deductible policyholder dividends have not been finalized for 1997
or 1996. The Company records the estimated effects of anticipated revisions in
the Statutory Statement of Income.
The Company plans to file its 1997 federal income tax return on a consolidated
basis with its life and non-life affiliates with the exception of C.M. Life
Insurance Company. The Company and its eligible life and non-life affiliates
are subject to a written tax allocation agreement, which allocates the group's
consolidated tax liability for payment purposes. Generally, the agreement
provides that members with losses shall be compensated for the use of their
losses and credits by other members.
The Company made federal tax payments of $353.4 million in 1997, $330.7 million
in 1996 and $147.3 million in 1995.
6. INVESTMENTS
The Company maintains a diversified investment portfolio. Investment policies
limit concentration in any asset class, geographic region, industry group,
economic characteristic, investment quality or individual investment. In the
normal course of business, the Company enters into commitments to purchase
privately placed bonds and to issue mortgage loans.
A. Bonds
The carrying value and estimated fair value of bonds are as follows:
December 31, 1997
-----------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
----- ----- ------ -----
(In Millions)
U.S. Treasury securities $ 6,241.0 $ 470.5 $10.3 $ 6,701.2
and obligations of U.S.
government corporations
and agencies
Debt securities issued by
foreign governments 83.5 4.4 3.0 84.9
Mortgage-backed securities 3,390.8 187.9 9.0 3,569.7
State and local governments 361.9 23.9 .6 385.2
Corporate debt securities 12,148.9 765.2 46.9 12,867.2
Utilities 871.8 100.1 2.2 969.7
Affiliates 792.4 2.8 1.0 794.2
--------- -------- ----- ---------
TOTAL $23,890.3 $1,554.8 $73.0 $25,372.1
========= ======== ===== =========
December 31, 1996
-----------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
----- ----- ------ -----
(In Millions)
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies $ 8,042.6 $ 344.0 $ 56.3 $ 8,330.3
Debt securities issued by 95.2 10.2 .5 104.9
foreign governments
Mortgage-backed securities 3,014.0 119.0 43.3 3,089.6
State and local governments 173.2 13.1 2.1 184.2
Corporate debt securities 11,675.2 528.0 133.3 12,069.9
Utilities 975.0 87.0 18.5 1,043.5
Affiliates 324.1 4.3 3.5 324.9
--------- -------- ------ ---------
TOTAL $24,299.3 $1,105.6 $257.5 $25,147.3
========= ======== ====== =========
<PAGE>
Notes To Statutory Financial Statements (Continued)
The carrying value and estimated fair value of bonds at December 31, 1997 by
contractual maturity are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without prepayment penalties.
Estimated
Carrying Fair
Value Value
----- -----
(In Millions)
Due in one year or less $ 519.7 $ 523.0
Due after one year through five years 3,972.1 4,104.6
Due after five years through ten years 7,423.3 7,838.1
Due after ten years 5,254.9 5,888.1
--------- ---------
17,170.0 18,353.8
Mortgage-backed securities, including
securities guaranteed by the U.S.
Government 6,720.3 7,018.3
--------- ---------
TOTAL $23,890.3 $25,372.1
========= =========
Proceeds from sales of investments in bonds were $11,427.8 million during 1997,
$6,390.7 million during 1996 and $8,068.8 million during 1995. Gross capital
gains of $200.7 million in 1997, $188.8 million in 1996 and $255.5 million in
1995 and gross capital losses of $68.8 million in 1997, $255.5 million in 1996
and $67.1 million in 1995 were realized on those sales, portions of which were
included in the Interest Maintenance Reserve. The estimated fair value of
non-publicly traded bonds is determined by the Company using a pricing matrix.
B. Stocks
Preferred stocks in good standing had fair values of $145.5 million in 1997 and
$150.8 million in 1996, using a pricing matrix for non-publicly traded stocks
and quoted market prices for publicly traded stocks. Common stocks, except for
unconsolidated subsidiaries, had a cost of $250.3 million in 1997 and $249.2
million in 1996.
C. Mortgages
The fair value of mortgage loans, as determined from a pricing matrix for
performing loans and the estimated underlying real estate value for
non-performing loans, approximated carrying value.
The Company had restructured loans with book values of $202.3 million, and
$383.5 million at December 31, 1997 and 1996, respectively. These loans
typically have been modified to defer a portion of the contracted interest
payments to future periods. Interest deferred to future periods totaled $5.1
million in 1997, $2.2 million in 1996 and $2.5 million in 1995.
D. Other
The carrying value of investments which were non-income producing for the
preceding twelve months was $5.7 million and $23.1 million at December 31, 1997
and 1996, respectively. The Company made voluntary contributions to the Asset
Valuation Reserve of $6.8 million 1996. No additional voluntary contribution to
the Asset Valuation Reserve was made in 1997.
It is not practicable to determine the fair value of policy loans as they do not
have a stated maturity.
7. PORTFOLIO RISK MANAGEMENT
The Company manages its investment risks, primarily to reduce interest rate and
duration imbalances determined in asset/liability analyses. The fair values of
these instruments, described below, which are not recorded in the financial
statements, are based upon market prices or prices obtained from brokers. The
Company does not hold or issue these financial instruments for trading purposes.
<PAGE>
Notes To Statutory Financial Statements (Continued)
The notional amounts described do not represent amounts exchanged by the parties
and, thus, are not a measure of the exposure of the Company. The amounts
exchanged are calculated on the basis of the notional amounts and the other
terms of the instruments, which relate to interest rates, exchange rates,
security prices or financial or other indexes.
The Company enters into financial futures contracts for the purpose of managing
interest rate exposure. Margin requirements are met with the deposit of
securities. Futures contracts are generally settled with offsetting
transactions. Gains and losses on financial futures contracts are recorded when
the contract is closed and amortized through the Interest Maintenance Reserve
over the remaining life of the underlying asset. As of December 31, 1997 and
1996, the Company did not have any open financial futures contracts.
The Company utilizes interest rate swap agreements, options, and purchased caps
and floors to reduce interest rate exposures arising from mismatches between
assets and liabilities and to modify portfolio profiles to manage other risks
identified. Under interest rate swaps, the Company agrees to an exchange, at
specified intervals, between streams of variable rate and fixed rate interest
payments calculated by reference to an agreed-upon notional principal amount.
Net amounts receivable and payable are accrued as adjustments to interest income
and included in investment and insurance amounts receivable on the Statutory
Statement of Financial Position. Gains and losses realized on the termination of
contracts are amortized through the Interest Maintenance Reserve over the
remaining life of the associated contract. At December 31, 1997 and 1996, the
Company had swaps with notional amounts of $3,220.2 million and $2,090.3
million, respectively. The fair values of these instruments were $20.9 million
at December 31, 1997 and $14.8 million at December 31, 1996.
Options grant the purchaser the right to buy or sell a security or enter into a
derivative transaction at a stated price within a stated period. The Company's
option contracts have terms of up to fifteen years. The amounts paid for options
purchased are included in other investments on the Statutory Statement of
Financial Position. Gains and losses on these contracts are recorded at the
expiration or termination date and are amortized through the Interest
Maintenance Reserve over the remaining life of the option contract. At December
31, 1997 and 1996, the Company had option contracts with notional amounts of
$5,388.2 million and $1,928.4 million, respectively. The Company's credit risk
exposure was limited to the unamortized costs of $59.0 million and $18.1
million, which had fair values of $99.6 million and $19.2 million at December
31, 1997 and 1996, respectively.
Interest rate cap agreements grant the purchaser the right to receive the excess
of a referenced interest rate over a given rate calculated by reference to an
agreed upon notional amount. Interest rate floor agreements grant the purchaser
the right to receive the excess of a given rate over a referenced interest rate
calculated by reference to an agreed upon notional amount. Amounts paid for
interest rate caps and floors are amortized into interest income over the life
of the asset on a straight-line basis. Unamortized costs are included in other
investments on the Statutory Statement of Financial Position. Amounts receivable
and payable are accrued as adjustments to interest income and included in the
Statutory Statement of Financial Position as investment and insurance amounts
receivable. Gains and losses on these contracts, including any unamortized cost,
are recognized upon termination and are amortized through the Interest
Maintenance Reserve over the remaining life of the associated cap or floor
agreement. At December 31, 1997 and 1996, the company had agreements with
notional amounts of $3,348.6 million and $3,859.6 million, respectively. The
Company's credit risk exposure on these agreements is limited to the unamortized
costs of $18.2 million and $22.0 million at December 31, 1997 and 1996,
respectively. The fair values of these instruments were $23.4 million and $15.2
million at December 31, 1997 and 1996, respectively.
The Company utilizes asset swap agreements to reduce exposures, such as currency
risk and prepayment risk, built into certain assets acquired. Cross-currency
interest rate swaps allow investment in foreign currencies, increasing access to
additional investment opportunities, while limiting foreign exchange risk. The
net cash flows from asset and currency swaps are recognized as adjustments to
the underlying assets' interest income. Gains and losses realized on the
termination of these contracts adjusts the bases of the underlying asset.
Notional amounts relating to asset and currency swaps totaled $225.6 million and
$364.7 million at December 31, 1997 and 1996, respectively. The fair values of
these instruments were an unrecognized loss of $1.7 million at December 31, 1997
and an unrecognized gain of $7.8 million at December 31, 1996.
<PAGE>
Notes To Statutory Financial Statements (Continued)
Equity swap agreements are utilized to hedge exposure to market risk on public
and private equity positions held in the Company's investment portfolio. Under
equity swaps, the Company agrees to an exchange, at points in time specified in
each contract, between streams of variable or fixed rate interest payments and
the change in an underlying index, equity or basket of equities. The change in
the underlying item is calculated by reference to the level of such item
specified in the agreement. Net amounts receivable and payable are accrued as
adjustments to interest income and included in investment and insurance amounts
receivable on the Statutory Statement of Financial Position. Changes in the
value of these contracts are recorded as realized gains and losses in the
Statutory Statement of Income when contracts are closed. At December 31, 1997
and 1996, the Company had equity swap contracts with notional amounts of $160.0
million and $149.2 million, respectively. The fair values of these instruments
were an unrealized loss of $5.1 million at December 31, 1997 and an unrealized
gain of $11.9 million at December 31, 1996.
The Company enters into forward U.S. Treasury commitments for the purpose of
managing interest rate exposure. The Company generally does not take delivery on
forward commitments. These commitments are instead settled with offsetting
transactions. Gains and losses on forward commitments are recorded when the
commitment is closed and amortized through the Interest Maintenance Reserve over
the remaining life of the asset. At December 31, 1997 and 1996, the Company had
U. S. Treasury purchase commitments which will settle during the following year
with contractual amounts of $1,100.7 million and $1,639.4 million with fair
values of $1,117.6 million and $1,627.4 million, respectively including net
unrealized gains of $16.9 million at December 31, 1997 and net unrealized losses
of $12.0 million at December 31, 1996.
The Company is exposed to credit-related losses in the event of nonperformance
by counterparties to derivative financial instruments. This exposure is limited
to contracts with a positive fair value. The amounts at risk in a net gain
position were $146.7 million and $53.9 million at December 31, 1997 and 1996,
respectively. The Company monitors exposure to ensure counterparties are credit
worthy and concentration of exposure is minimized. Additionally, contingent
collateral positions have been obtained with counterparties when considered
prudent.
8. REINSURANCE
The Company cedes all of its group life and health business to UniCARE and has
other reinsurance agreements with other insurance companies in the normal course
of business. Premiums, benefits to policyholders and provisions for future
benefits are stated net of reinsurance. The Company remains liable to the
insured for the payment of benefits if the reinsurer cannot meet its obligations
under the reinsurance agreements. Premiums ceded were $294.6 million in 1997,
$793.5 million in 1996 and $904.1 million in 1995.
9. LIQUIDITY
The withdrawal characteristics of the policyholders' reserves and funds,
including separate accounts, and the invested assets which support them at
December 31, 1997 are illustrated below:
(In Millions)
Total policyholders' reserves and funds and
separate account liabilities $50,804.2
Not subject to discretionary withdrawal (5,283.7)
Policy loans (4,950.4)
---------
Subject to discretionary withdrawal $40,570.1
=========
Total invested assets, including separate $56,464.7
Policy loans and other invested assets (14,823.3)
---------
Marketable investments $41,641.4
=========
10. BUSINESS RISKS AND CONTINGENCIES
The Company is subject to insurance guaranty fund laws in the states in which it
does business. These laws assess insurance companies amounts to be used to pay
benefits to policyholders and claimants of insolvent insurance companies. Many
states allow these assessments to be credited against future premium taxes. The
Company believes such assessments in excess of amounts accrued will not
materially affect its financial position, results of operations or liquidity. In
1997 and 1996, the Company elected not to admit $21.4 million and $15.3 million,
respectively, of guaranty fund premium tax offset receivables relating to prior
assessments.
<PAGE>
Notes To Statutory Financial Statements (Continued)
The Company is involved in litigation arising in and out of the normal course of
its business. Management intends to defend these actions vigorously. While the
outcome of litigation cannot be foreseen with certainty, it is the opinion of
management, after consultation with legal counsel, that the ultimate resolution
of these matters will not materially affect its financial position, results of
operations or liquidity.
11. RECLASSIFICATIONS
Certain 1996 and 1995 amounts have been reclassified to conform with the current
year presentation.
12. SUBSIDIARIES AND AFFILIATED COMPANIES
A summary of ownership and relationship of the Company and its subsidiaries and
affiliated companies as of December 31, 1997 is illustrated below. The Company
provides management or advisory services to these companies. Subsidiaries are
wholly-owned, except as noted.
Parent
- ------
Massachusetts Mutual Life Insurance Company
Subsidiaries of Massachusetts Mutual Life Insurance Company
- -----------------------------------------------------------
C.M. Assurance Company
C.M. Benefit Insurance Company
C.M. Life Insurance Company
MassMutual Holding Company
MassMutual Holding Company Two, Inc. (Sold in March 1996)
MassMutual of Ireland, Limited
MML Bay State Life Insurance Company
MML Distributors, LLC
Subsidiaries of MassMutual Holding Company
------------------------------------------
GR Phelps, Inc.
MassMutual Holding Trust I
MassMutual Holding Trust II
MassMutual Holding MSC, Inc.
MassMutual International, Inc.
MassMutual Reinsurance Bermuda (Sold in December 1996)
MML Investor Services, Inc.
State House One (Liquidated in December 1996)
Subsidiaries of MassMutual Holding Trust I
------------------------------------------
Antares Leveraged Capital Corporation -- 98.5%
Charter Oak Capital Management, Inc. -- 80.0%
Cornerstone Real Estate Advisors, Inc.
DLB Acquisition Corporation -- 84.8%
Oppenheimer Acquisition Corporation -- 88.55%
Subsidiaries of MassMutual Holding Trust II
-------------------------------------------
CM Advantage, Inc. -- (Liquidated in December 1997)
CM International, Inc.
CM Property Management, Inc. -- (Liquidated in December 1997)
High Yield Management, Inc.
MMHC Investments, Inc.
MML Realty Management
Urban Properties, Inc.
Westheimer 335 Suites, Inc.
<PAGE>
Notes To Statutory Financial Statements (Continued)
Subsidiaries of MassMutual International
----------------------------------------
Compensa de Seguros de Vida S.A. -- 33.5%
MassLife Seguros de Vida (Argentina) S. A.
MassMutual International (Bermuda) Ltd.
Mass Seguros de Vida (Chile) S. A. -- 33.5%
MassMutual International (Luxemburg) S. A.
MassMutual Holding MSC, Incorporated
MassMutual/Carlson CBO N. V. -- 100%
MassMutual Corporate Value Limited -- 46%
9048 -- 5434 Quebec, Inc.
Affiliates of Massachusetts Mutual Life Insurance Company
- ---------------------------------------------------------
MML Series Investment Fund
MassMutual Institutional Funds
Oppenheimer Value Stock Fund
<PAGE>
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 A-2 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 A-3 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 A-4 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 A-5 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 A-6 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 A-7 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, Panorama Fund, Goldman Sachs VIT Trust, MFS
Trust, and T. Rowe Price Equity Series, Inc. level expenses of .78% on an
annual basis, of the net asset value of the MML Trust, Oppenheimer Trust,
Panorama Fund, Goldman Sachs VIT Trust, MFS Trust, and T. Rowe Price Equity
Series, Inc. 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, Panorama Fund, Goldman Sachs VIT Trust, MFS
Trust, and T. Rowe Price Equity Series, Inc. level expenses of .78% on an
annual basis, of the net asset value of the MML Trust, Oppenheimer Trust,
Panorama Fund, Goldman Sachs VIT Trust, MFS Trust, and T. Rowe Price Equity
Series, Inc. 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 -1.074%, 4.862%, and 10.798%, respectively, and on a guaranteed basis would
be -1.369%, 4.549%, and 10.467%, respectively.
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
A-1
<PAGE>
would accumulate if an amount equal to the annual premium were invested to earn
interest after taxes, of 5% per year, compounded annually.
A-2
<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 -------------------------------------------- ----------------------------------------------
Accumulated Assuming Hypothetical Gross Assuming Hypothetical Gross
End of At 5% Annual Investment Return of Annual Investment Return of
Policy 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 $ 947 $ 1,007 $ 1,067
2 2,583 100,000 100,000 100,000 1,882 2,061 2,248
3 3,972 100,000 100,000 100,000 2,803 3,164 3,553
4 5,431 100,000 100,000 100,000 3,713 4,317 4,997
5 6,963 100,000 100,000 100,000 4,608 5,523 6,593
6 8,571 100,000 100,000 100,000 5,490 6,783 8,358
7 10,260 100,000 100,000 100,000 6,354 8,096 10,305
8 12,033 100,000 100,000 100,000 7,197 9,463 12,453
9 13,895 100,000 100,000 100,000 8,021 10,886 14,823
10 15,850 100,000 100,000 100,000 8,825 12,368 17,441
15 27,192 100,000 100,000 100,000 12,498 20,724 35,271
20 41,668 100,000 100,000 152,084 15,474 30,881 64,442
25 60,142 100,000 100,000 227,199 17,526 43,259 111,372
30 (Age 65) 83,720 100,000 104,576 333,144 18,192 58,422 186,114
35 113,812 100,000 120,975 480,374 16,692 76,566 304,034
40 152,219 100,000 139,825 698,329 11,583 97,780 488,342
45 201,237 0 159,266 1,007,755 0 121,577 769,279
50 263,797 0 180,431 1,454,674 0 146,692 1,182,662
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTNT 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.
A-3
<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 (fund level charges are reflected on a
current basis)
<TABLE>
<CAPTION>
Death Benefit (Option 1) Cash Surrender Value
Premiums ------------------------------------------------ ----------------------------------------------
Accumulated Assuming Hypothetical Gross Assuming Hypothetical Gross
End of At 5% Annual Investment Return of Annual Investment Return of
Policy 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 $ 792 $ 847 $ 903
2 2,583 100,000 100,000 100,000 1,567 1,727 1,893
3 3,972 100,000 100,000 100,000 2,322 2,637 2,978
4 5,431 100,000 100,000 100,000 3,056 3,578 4,166
5 6,963 100,000 100,000 100,000 3,769 4,550 5,468
6 8,571 100,000 100,000 100,000 4,459 5,554 6,894
7 10,260 100,000 100,000 100,000 5,124 6,590 8,456
8 12,033 100,000 100,000 100,000 5,765 7,657 10,168
9 13,895 100,000 100,000 100,000 6,379 8,757 12,044
10 15,850 100,000 100,000 100,000 6,967 9,891 14,104
15 27,192 100,000 100,000 100,000 9,444 16,052 27,871
20 41,668 100,000 100,000 118,096 10,918 22,993 50,041
25 60,142 100,000 100,000 171,989 10,745 30,424 84,308
30 (Age 65) 83,720 100,000 100,000 243,176 7,843 37,896 135,852
35 113,812 0 100,000 334,016 0 44,415 211,403
40 152,219 0 100,000 456,305 0 48,119 319,094
45 201,237 0 100,000 611,875 0 43,913 467,080
50 263,797 0 100,000 818,186 0 15,716 665,192
</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.
A-4
<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 --------------------------------------------- --------------------------------------------
Accumulated Assuming Hypothetical Gross Assuming Hypothetical Gross
End of At 5% Annual Investment Return of Annual Investment Return of
Policy 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 $ 967 $ 1,028 $ 1,088
2 2,583 100,000 100,000 100,000 1,920 2,102 2,292
3 3,972 100,000 100,000 100,000 2,859 3,225 3,620
4 5,431 100,000 100,000 100,000 3,784 4,398 5,088
5 6,963 100,000 100,000 100,000 4,693 5,622 6,709
6 8,571 100,000 100,000 100,000 5,586 6,900 8,499
7 10,260 100,000 100,000 100,000 6,463 8,233 10,476
8 12,033 100,000 100,000 100,000 7,322 9,623 12,659
9 13,895 100,000 100,000 100,000 8,163 11,073 15,071
10 15,850 100,000 100,000 100,000 8,989 12,587 17,738
15 27,192 100,000 100,000 111,785 12,827 21,186 35,944
20 41,668 100,000 100,000 175,640 16,194 31,873 65,783
25 60,142 100,000 103,888 262,664 18,959 45,169 114,202
30 (Age 65) 83,720 100,000 122,414 382,979 20,960 61,515 192,452
35 113,812 100,000 141,661 554,243 21,955 81,414 318,531
40 152,219 100,000 161,311 796,270 21,310 105,432 520,438
45 201,237 100,000 183,745 1,152,682 16,347 133,149 835,277
50 263,797 100,000 205,912 1,650,959 191 163,422 1,310,285
</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.
A-5
<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 (fund level charges are reflected on a
current basis)
<TABLE>
<CAPTION>
Death Benefit (Option 1) Cash Surrender Value
Premiums ------------------------------------------ ---------------------------------------------
Accumulated Assuming Hypothetical Gross Assuming Hypothetical Gross
End of At 5% Annual Investment Return of Annual Investment Return of
Policy 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 $ 814 $ 870 $ 926
2 2,583 100,000 100,000 100,000 1,609 1,771 1,940
3 3,972 100,000 100,000 100,000 2,383 2,704 3,052
4 5,431 100,000 100,000 100,000 3,137 3,669 4,269
5 6,963 100,000 100,000 100,000 3,869 4,667 5,603
6 8,571 100,000 100,000 100,000 4,578 5,697 7,064
7 10,260 100,000 100,000 100,000 5,261 6,759 8,664
8 12,033 100,000 100,000 100,000 5,920 7,855 10,419
9 13,895 100,000 100,000 100,000 6,555 8,986 12,345
10 15,850 100,000 100,000 100,000 7,166 10,156 14,462
15 27,192 100,000 100,000 100,000 9,845 16,619 28,708
20 41,668 100,000 100,000 137,700 11,754 24,179 51,573
25 60,142 100,000 100,000 200,321 12,660 32,990 87,096
30 (Age 65) 83,720 100,000 100,000 282,392 12,186 43,309 141,905
35 113,812 100,000 100,000 390,545 8,931 55,056 224,451
40 152,219 100,000 104,942 530,850 713 68,589 346,961
45 201,237 0 113,708 718,102 0 82,397 520,364
50 263,797 0 120,520 956,214 0 95,651 758,900
</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.
A-6
<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
Premiums -------------------------------------------- ----------------------------------------------
Accumulated Assuming Hypothetical Gross Assuming Hypothetical Gross
End of At 5% Annual Investment Return of Annual Investment Return of
Policy 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 $ 950 $ 1,010 $ 1,070
2 2,583 100,000 100,000 100,000 1,888 2,067 2,255
3 3,972 100,000 100,000 100,000 2,812 3,173 3,563
4 5,431 100,000 100,000 100,000 3,724 4,329 5,011
5 6,963 100,000 100,000 100,000 4,621 5,538 6,611
6 8,571 100,000 100,000 100,000 5,505 6,801 8,379
7 10,260 100,000 100,000 100,000 6,370 8,117 10,331
8 12,033 100,000 100,000 100,000 7,216 9,487 12,484
9 13,895 100,000 100,000 100,000 8,042 10,914 14,860
10 15,850 100,000 100,000 100,000 8,850 12,401 17,485
15 27,192 100,000 100,000 100,107 12,548 20,793 35,374
20 41,668 100,000 100,000 156,394 15,582 31,031 64,626
25 60,142 100,000 100,000 233,461 17,743 43,549 111,704
30 (Age 65) 83,720 100,000 107,210 339,929 18,613 58,907 186,774
35 113,812 100,000 124,342 491,691 17,504 77,231 305,398
40 152,219 100,000 143,091 711,998 13,116 98,684 491,033
45 201,237 100,000 163,224 1,029,379 1,089 122,725 773,969
50 263,797 0 183,584 1,475,662 0 148,051 1,190,050
</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.
A-7
<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 (fund level charges are reflected on a
current basis)
<TABLE>
<CAPTION>
Death Benefit (Option 1) Cash Surrender Value
Premiums -------------------------------------------- --------------------------------------------
Accumulated Assuming Hypothetical Gross Assuming Hypothetical Gross
End of At 5% Annual Investment Return of Annual Investment Return of
Policy 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 $ 797 $ 852 $ 908
2 2,583 100,000 100,000 100,000 1,576 1,736 1,903
3 3,972 100,000 100,000 100,000 2,335 2,651 2,994
4 5,431 100,000 100,000 100,000 3,073 3,597 4,188
5 6,963 100,000 100,000 100,000 3,789 4,575 5,496
6 8,571 100,000 100,000 100,000 4,483 5,584 6,929
7 10,260 100,000 100,000 100,000 5,152 6,624 8,498
8 12,033 100,000 100,000 100,000 5,797 7,698 10,220
9 13,895 100,000 100,000 100,000 6,416 8,805 12,107
10 15,850 100,000 100,000 100,000 7,009 9,946 14,179
15 27,192 100,000 100,000 100,000 9,526 16,168 28,043
20 41,668 100,000 100,000 121,895 11,088 23,236 50,370
25 60,142 100,000 100,000 177,378 11,137 30,952 84,870
30 (Age 65) 83,720 100,000 100,000 249,326 8,749 39,029 136,993
35 113,812 100,000 100,000 344,119 1,782 46,726 213,739
40 152,219 0 100,000 469,589 0 52,912 323,855
45 201,237 0 100,000 632,995 0 54,552 475,936
50 263,797 0 100,000 844,026 0 43,516 680,666
</TABLE>
IT IS EMPHASIZEDT 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.
A-8
