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Pre-Effective Amendment No. 1 to
Registration Statement No. 333-49475
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-6
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 OF SECURITIES OF
UNIT INVESTMENT TRUSTS REGISTERED
ON FORM N-8B-2
A. Exact name of Trust: Massachusetts Mutual Variable Life Separate
Account I
B. Name of Depositor: Massachusetts Mutual Life Insurance Company
C. Complete address of 1295 State Street
Depositor's principal Springfield, MA 01111
executive offices:
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as possible after the
effective date of this Registration Statement.
Pursuant to Rule 24-F-2 of the Investment Company Act of 1940, the Registrant
hereby declares that an indefinite amount of its securities is being registered
under the Securities Act of 1933.
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until Registrant shall file a
further amendment which specifically states that this Registration Statement
shall become effective in accordance with Section 8(a) of the Securities Act of
1933 or until this Registration Statement shall become effective on such date as
the Commission, acting pursuant to said section, may determine.
____________________________
STATEMENT PURSUANT TO RULE 24F-2
The Registrant registers an indefinite number or amount of its variable life
insurance contracts under the Securities Act of 1933 pursuant to Rule 24F-2
under the Investment Company Act of 1940. The Rule 24F-2 notice for Registrant's
fiscal year ending December 31, 1997 was filed on March 20, 1998.
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CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
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Item No. of
Form N-8B-2 Caption
- ----------- -------
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1 Cover Page; Definition of Terms; The Separate Account
2 Cover Page; MassMutual and the Separate Account
3 Cover Page; MassMutual and the Separate Account
4 Sales and Other Agreements
5 MassMutual and the Separate Account
6 MassMutual and the Separate Account
7 Not Applicable
8 Appendix F. Financial Statement
9 Legal Proceedings
10 Cover Page; Introduction; Detailed Information about the Policy; Transfers; Surrender Charges;
Withdrawals; Death Benefit; Voting Rights; Free Look Provision
11 MassMutual and the Separate Account
12 MassMutual and the Separate Account; Sales and Other Agreements
13 MassMutual and the Separate Account; Charges and Deductions
14 Introduction; MassMutual and the Separate Account; Detailed Information About the Policy; The
Investment Advisors and Portfolio Managers; MassMutual and the Separate Account; Surrender
Charges; Other Charges; Sales and Other Agreements
15 Introduction; Detailed Information About the Policy; Exhibit 99(11)
16 Introduction; MassMutual and the Separate Account
17 Introduction; Account Value and Net Surrender Value; Withdrawal Fee; Exhibit 99(11)
18 MassMutual and the Separate Account
19 Records and Reports
20 Not Applicable
21 Introduction; Policy Loan Privilege
22 Assignment
23 Bonding Arrangement
24 Detailed Information About the Policy; MassMutual and the Separate Account
25 MassMutual and the Separate Account
26 MassMutual; The Investment Advisers
27 Detailed Information About the Policy; MassMutual and the Separate Account
28 Appendix C; Directors and Executive Officers of MassMutual
29 MassMutual and the Separate Account
30 Not Applicable
</TABLE>
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CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
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Item No. of
Form N-8B-2 Caption
- ----------- -------
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31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Detailed Information about the Policy; Sales and Other Agreements
36 Not Applicable
37 Not Applicable
38 Sales and Other Agreements
39 Sales and Other Agreements
40 Sales and Other Agreements
41 Sales and Other Agreements
42 Not Applicable
43 Sales and Other Agreements
44 Detailed Information About the Policy; MassMutual and the Separate Account; Charges for Federal
Taxes;
45 Not Applicable
46 Account Values; MassMutual and the Separate Account
47 MassMutual and the Separate Account
48 MassMutual and the Separate Account
49 Detailed Information About the Policy
50 MassMutual and the Separate Account
51 Cover Page; Detailed Information About the Policy; Additional Information
52 MassMutual and the Separate Account; Reservation of Rights
53 Federal Income Tax Considerations
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Appendix F
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FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICIES*
ISSUED BY MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
This Prospectus describes a flexible premium adjustable variable life insurance
policy (the "Policy") offered by Massachusetts Mutual Life Insurance Company
("MassMutual"). The Policy, for as long as it remains in force, provides
lifetime insurance protection on the Insured named in the Policy, and pays a
Death Benefit at the death of the Insured. The minimum Initial Face Amount
which may be purchased is $50,000 currently. The Policy is designed to provide
flexibility of premium payments and Death Benefits by permitting the Owner,
subject to certain restrictions, to vary the frequency and amount of premium
payments and to increase or decrease the Death Benefit payable under the Policy.
This flexibility allows an Owner to provide for changing insurance needs under a
single insurance policy. A Policy also may be surrendered for its Net Surrender
Value.
The Owner may allocate Net Premiums and Account Value among the divisions (the
"Divisions") of the designated segment of MassMutual Variable Life Separate
Account I (the "Separate Account") and a Guaranteed Principal Account (the
"GPA"). The assets of each Division will be used to purchase, at net asset
value, shares of a designated investment fund. Currently, the available funds
include six funds of the MML Series Investment Fund (the "MML Trust"), four
funds of the Oppenheimer Variable Account Funds (the "Oppenheimer Trust"), one
fund of the Variable Insurance Products Fund II (VIP II managed by Fidelity
Management & Research Company), one fund of the T. Rowe Price Equity Series,
Inc., and one fund of the American Century Variable Portfolios, Inc. The
individual funds are as follow.
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<CAPTION>
MML TRUST OPPENHEIMER TRUST VARIABLE INSURANCE PRODUCTS FUND II
- --------- --------------------------------- -----------------------------------
<S> <C> <C>
MML Equity Fund Oppenheimer Aggressive Growth Fund VIP II Contrafund Portfolio
MML Money Market Fund Oppenheimer Global Securities Fund
MML Managed Bond Fund Oppenheimer Growth Fund T. ROWE PRICE EQUITY SERIES, INC.
---------------------------------
MML Blend Fund Oppenheimer Strategic Bond Fund T. Rowe Price Mid-Cap Growth Portfolio
MML Equity Index Fund
MML Small Cap Value AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
Equity Fund ------------------------------------------
American Century VP Income & Growth
</TABLE>
The Owner bears the investment risk of any Account Value allocated to the
Separate Account. The Death Benefit may, and the Net Surrender Value will, vary
depending on the investment performance of the Divisions. While there is no
guaranteed minimum Net Surrender Value for funds invested in the Separate
Account, as long as a Policy is in force the Policy's Death Benefit will never
be less than the Face Amount less any Policy Debt and any unpaid premiums.
Furthermore, the Policy will not terminate if the Policy Value is sufficient to
pay the Monthly Charges or if the Safety Test has been met during a Guarantee
Period.
All Policies are serviced through MassMutual's Administrative Office, located at
1295 State Street, Springfield, Massachusetts 01111-0001. The telephone number
is (413) 788-8411.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE. THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE
PROSPECTUSES FOR THE INDIVIDUAL INVESTMENT FUNDS.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FURTHER REFERENCE.
THE PURPOSE OF THE POLICY WE ARE OFFERING IS TO PROVIDE INSURANCE PROTECTION.
WE DO NOT CLAIM THE POLICY IS IN ANY WAY SIMILAR TO OR COMPARABLE WITH A MUTUAL
FUND'S SYSTEMATIC INVESTMENT PLAN. REPLACING EXISTING INSURANCE WITH THE POLICY
DESCRIBED IN THIS PROSPECTUS MAY NOT BE TO YOUR ADVANTAGE.
JUNE 25, 1998
This Prospectus does not constitute an offer or solicitation to acquire any
interest or participation in the flexible premium adjustable variable life
insurance policies offered by this Prospectus in any jurisdiction to anyone to
whom it is unlawful to make such an offer or solicitation in such jurisdiction.
*Title may vary in some jurisdictions.
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TABLE OF CONTENTS
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I. INTRODUCTION 3
II. DETAILED DESCRIPTION OF THE POLICY
Availability of Policy 4
Death Benefit 4
Premiums 5
Transfers 7
Policy Termination and Reinstatement 7
Charges and Deductions 8
Deductions from Premiums 8
Monthly Charges Against the Account Value 9
Daily Charges Against the Separate Account 9
Surrender Charges 9
Other Charges 10
Account Value and Net Surrender Value 10
Policy Loan Privilege 10
Free Look Provision 11
The Guaranteed Principal Account 11
When We Pay Proceeds 12
Federal Income Tax Considerations 12
Your Voting Rights 14
Reservation of Rights 15
Additional Benefits You Can Get by Rider 15
Payment Options 15
Beneficiary 16
Assignment 16
Limits on Our Right to Challenge the Policy 17
Error of Age or Sex 17
Suicide 17
Sales and Other Agreements 17
Compensation 17
Bonding Arrangement 18
Legal Proceedings 18
Experts 18
III. ADDITIONAL INFORMATION
MassMutual 18
Records and Reports 19
The Separate Account 19
MML Trust and Oppenheimer Trust 19
Variable Insurance Products Fund II 20
T. Rowe Price Equity Series, Inc. 20
American Century Variable Portfolios 20
The Investment Advisers 22
APPENDIX A
Definition of Terms 23
APPENDIX B
Examples of Death Benefit Option Changes 25
APPENDIX C
Rates of Return 26
APPENDIX D
Illustration of Death Benefits, Net Surrender Values, and Accumulated Premiums 30
APPENDIX E
Directors of MassMutual 43
Executive Vice Presidents 44
APPENDIX F
Financial Statements 46
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I. INTRODUCTION
NOTE: PLEASE REFER TO APPENDIX A, GLOSSARY FOR DEFINITIONS OF THE TERMS
CONTAINED IN THIS PROSPECTUS.
You should consult Your Policy for further understanding of its term and
conditions and for any state-specific provisions and variances that may apply to
Your Policy.
The Policy is a life insurance contract providing a Death Benefit, an Account
Value, surrender rights, policy loan privileges, and other features
traditionally associated with life insurance. The Policy is a "flexible
premium" policy because there is no fixed schedule of premium payments.
Although the Owner may establish a schedule of premium payments ("Planned
Premium Payments"), failure to make a Planned Premium Payment will not
necessarily cause a Policy to terminate nor will making the Planned Premium
payments guarantee a Policy will remain in force. The flexibility of premium
payment timing and amount allows an Owner to match premium payments to income
flows or other financial decisions.
The Policy is "adjustable" because the Owner may choose to increase or decrease
the Death Benefit and to change the Death Benefit Option under the Policy. The
Policy is "variable" because the Death Benefit may, and the Net Surrender Value
will, vary in relation to the investment experience of the Divisions of the
Separate Account to which an Owner has allocated Net Premiums. Additionally,
the GPA's crediting interest rate may be adjusted periodically, although it will
not drop below 3%.
The following diagram summarizes the elements of this Policy, and how the Policy
works.
HOW THE POLICY WORKS
PREMIUM PAYMENT
A Premium Expense Charge is deducted from
each Premium Payment (graphic arrow to
"Net Premium")
NET PREMIUM
Net Premium and Account Value are
allocated among the Divisions of the
Separate Account and the
GPA (graphic arrow to "Account Value")
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<CAPTION>
--------------------------------------------
INVESTMENT EARNINGS ACCOUNT VALUE ACCOUNT VALUE CHARGES
<S> <C> <C>
Investment earnings of the Divisions of Monthly deductions for administrative,
the Separate Account less fund Insurance, and rider expenses are
investment management fees and separate The Account Value is allocated among the deducted each month
account fees are credited/ debited daily available investment options.
(graphic arrow to "Account Value
Interest is credited on values in the Charges", "Owner Access to Account
Guaranteed Principal Account Value", "Death Benefit" and "Policy OWNER ACCESS TO ACCOUNT VALUE
Surrender")
(graphic arrow to "Account Value") You may access Account Values through
loans and withdrawals
--------------------------------------------
DEATH BENEFIT POLICY SURRENDER
A choice of 3 Death Benefit Options is In the first 14 years of coverage, if
available. The Option chosen may be coverage is surrendered, a surrender
changed at a later date charge will be deducted from the
surrender proceeds
</TABLE>
3
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II. DETAILED DESCRIPTION OF THE POLICY
AVAILABILITY OF THE POLICY
Individuals wishing to purchase a Policy must send a completed application to
MassMutual's Administrative Office. Under our current rules, which can be
changed at our sole discretion, the minimum Initial Face Amount of a Policy is
$50,000. The Policy can be issued to an Insured between the ages of 18 and 85
inclusive. Before issuing a Policy, MassMutual will require satisfactory
evidence of insurability, which usually will include a medical examination.
The Policy is available to individuals who are purchasing a Policy in connection
with employee benefit plans that qualify for tax benefits under the Internal
Revenue Code (the "qualified market") and to other individuals (the
"nonqualified market").
UNISEX Policies issued in states requiring "unisex" policies (currently only
Montana) provide policy values that do not vary by the sex of the Insured. In
addition, Policies issued in conjunction with employee benefit plans provide
policy values that do not vary by sex. Thus, references in the Prospectus to
sex-distinct policy values are not applicable to Policies issued in Montana or
issued in conjunction with employee benefit plans. Illustrations showing the
effect of these unisex rates on premiums, Net Surrender Values and Death
Benefits are available from MassMutual on request.
DEATH BENEFIT
As long as the Policy remains in force, MassMutual will, upon due proof of the
death of the Insured, pay the Death Benefit of the Policy to the named
Beneficiary. Although MassMutual normally will pay the Death Benefit within
seven days of receiving satisfactory proof of the Insured's death, the Company
may delay payments under certain circumstances. All or part of the Death
Benefit can be paid in cash or under one or more of the payment options set
forth in the Policy.
MINIMUM DEATH BENEFIT. In order to qualify as life insurance pursuant to I.R.C.
Section 7702, the Policy has a Minimum Death Benefit. The Minimum Death Benefit
is determined using one of two allowable Death Benefit Compliance Tests. The
applicable Test is chosen at the time of application and cannot be changed after
the Policy is issued. Under one of the tests, the Cash Value Test, the Minimum
Death Benefit is equal to an applicable percentage of the Account Value. The
applicable percentage depends on the sex (male, female, unisex), tobacco
classification, and Attained Age of the Insured. Under the other test, the
Guideline Premium Test, the Minimum Death Benefit also is equal to an applicable
percentage of the Account Value, but the percentage varies only by the Attained
Age of the Insured. The applicable percentages are set forth in the Policy.
The choice of the Guideline Premium Test or the Cash Value Test will depend on
how You intend to pay premiums. In general, if You intend to pay premiums in
early policy years only, the Cash Value Test may be more appropriate. If You
intend to pay level premiums over a long period of years, the Guideline Premium
Test may be more appropriate. It is important You see policy illustrations of
both approaches to determine how the policy works under each approach, and which
is best for You.
DEATH BENEFIT OPTIONS. The Death Benefit is the amount of the benefit provided
under the Death Benefit Option in effect on the date of death, less any
outstanding Policy Debt and less any unpaid premium needed to avoid policy
termination under the grace period provision. (See POLICY TERMINATION AND
REINSTATEMENT). The Owner may choose one of three Death Benefit Options: Option
1 (a level amount option) or Options 2 or 3 (variable amount options). The Death
Benefit Option is chosen in the application and subsequently may be changed
subject to certain restrictions described in CHANGES IN THE DEATH BENEFIT
OPTION.
Options 1, 2 and 3 provide the following benefits.
OPTION 1 - Under Option 1, the benefit provided is the greater of: (a) the Face
Amount on the date of death; and (b) the Minimum Death Benefit on the date of
death.
OPTION 2 - Under Option 2, the benefit provided is the greater of: (a) the Face
Amount plus the Account Value on the date of death; and (b) the Minimum Death
Benefit on the date of death.
OPTION 3 - Under Option 3, the benefit provided is the greater of: (a) the Face
Amount plus the premiums paid less any premiums refunded (See PREMIUM
LIMITATIONS) under the Policy to the date of death; and (b) the Minimum Death
Benefit on the date of death.
The following examples illustrate how changes in the Account Value and the
amount of premiums paid may affect the Death Benefits under Options 1, 2, and 3.
EXAMPLE I
Under Option 1, the Death Benefit will remain at the Face Amount, in this
example $1,000,000, unless the Minimum Death Benefit exceeds the Face Amount.
Assume the Owner has selected Option 1 with a Face Amount of $1,000,000. The
Account Value is $50,000. The Death Benefit in this case is $1,000,000. The
Minimum Death Benefit is $219,000. If the Account Value increases
4
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to $80,000, the Minimum Death Benefit increases to $350,400, but the Death
Benefit remains at $1,000,000. If the Account Value decreases to $30,000, the
Minimum Death Benefit decreases to $131,400 and the Death Benefit still remains
at $1,000,000.
EXAMPLE II
Under Option 2, the Death Benefit will be the Face Amount plus the Account Value
unless the Minimum Death Benefit exceeds the sum of the Face Amount plus the
Account Value.
Assume the Owner has selected Option 2 with a Face Amount of $1,000,000. The
Account Value is $50,000, and the Minimum Death Benefit is $219,000. The Death
Benefit in this case is $1,050,000 (Face Amount plus Account Value). If the
Account Value increases to $80,000, the Minimum Death Benefit will increase to
$350,400, and the Death Benefit will increase to $1,080,000. If the Account
Value decreases to $30,000, the Minimum Death Benefit will decrease to $131,400,
and the Death Benefit will decrease to $1,030,000.
EXAMPLE III
Under Option 3, the Death Benefit will be the Face Amount plus the premiums paid
under the Policy, less any premium refunds, unless the Minimum Death Benefit
exceeds the sum of the Face Amount plus the premiums paid.
Assume the Owner has selected Option 3 with a Face Amount of $1,000,000. The
Account Value is $50,000, the Minimum Death Benefit is $219,000 and premiums
paid under the Policy to-date total $40,000. The Death Benefit in this case is
$1,040,000. If an additional $30,000 of premium is paid into the Policy and the
Account Value increases to $80,000, the Minimum Death Benefit will increase to
$350,400, and the Death Benefit will increase to $1,070,000.
CHANGES IN DEATH BENEFIT OPTION. After the first Policy Year, the Owner may
change the Death Benefit Option. Any changes of Death Benefit Option may require
a written application and satisfactory evidence of insurability. The effective
date of any change will be the Monthly Charge Date that is on or precedes the
date MassMutual approves the change. A change in the Death Benefit Option will
not in and of itself result in an immediate change in the amount of a Policy's
Death Benefit. The Policy Face Amount will be increased or decreased to give the
same Death Benefit under the new Death Benefit Option.
A change in Death Benefit Option will not be allowed if it would result in a
Face Amount of less than $50,000 after the change, or if the insured is older
than Attained Age 85.
An increase or decrease in Face Amount resulting from a change in the Death
Benefit Option will affect the Monthly Charges, as they depend in part on the
Face Amount. The charge for certain additional benefits also may be affected.
The Surrender Charge, however, will not be affected by an increase or decrease
in Face Amount resulting from a change in the Death Benefit Option.
For examples of Death Benefit Option changes and their impacts on the contract,
see APPENDIX B.
CHANGES IN FACE AMOUNT. The Owner may request an increase or decrease in the
Face Amount subject to certain requirements. Any request for an increase or
decrease must be submitted in writing to MassMutual's Administrative Office. It
will become effective on the Monthly Charge Date that is on or precedes
MassMutual's acceptance of the request.
INCREASES IN FACE AMOUNT. For an increase in the Face Amount, MassMutual
requires a written application and satisfactory evidence of insurability. An
increase may not be less than $15,000, and no increase will be permitted after
the Insured reaches Attained Age 85.
An increase in Face Amount will affect the Monthly Charges. The Face Amount
Charge and the Insurance Charges will increase.
DECREASES IN FACE AMOUNT. Decreases in coverage are allowed after the first
Policy Year or one year after a Face Amount increase by written request. A
decrease will not be permitted if the Face Amount would fall below $50,000.
A decrease may result in the deduction of Surrender Charges from the Account
Value. (For a discussion of the Surrender Charges associated with a decrease,
see SURRENDER CHARGES.) Any Surrender Charges applicable to a decrease will be
deducted from the Division(s) of the Separate Account and from the GPA in
proportion to the non-loaned values in each.
A decrease will reduce the Face Amount in the following order: (a) the Face
Amount provided by the most recent increase; (b) the Face Amounts provided by
the next most recent increases successively; and finally (c) the Initial Face
Amount. As a result, a decrease in Face Amount will affect the Monthly Charges
deducted from the Account Value.
A decrease may result in the Policy becoming a "modified endowment contract".
(See POLICY PROCEEDS, PREMIUMS AND LOANS.)
PREMIUMS
Subject to certain limitations, the Owner has flexibility in determining the
frequency and amount of premium payments.
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PREMIUM FLEXIBILITY. Unlike traditional insurance policies, this Policy frees
the Owner from required premium payments and a rigid premium schedule. Instead,
MassMutual requires an Owner to pay only a minimum initial premium at the time
of application or at any time before delivery of the Policy. After the first
premium has been paid, subject to certain limitations, premiums may be paid in
any amount and at any interval.
The minimum initial premium depends on the planned frequency of premium
payments, and the Issue Age, sex, and rating class of the Insured, as well as
the initial Death Benefit Option and Initial Face Amount of the Policy.
PLANNED ANNUAL PREMIUM. When applying for a Policy, the Owner will select a
planned annual premium and payment frequency (annual, semiannual, quarterly, or
monthly check service). The planned premium at the payment frequency chosen is
shown on the schedule page of the Policy. MassMutual will send premium notices
for the planned premium according to the amount and frequency selected. The
Owner may change the amount and frequency of planned premiums at any time by
sending written notice to MassMutual's Administrative Office.
An Owner may elect to pay premiums by means of a pre-authorized check procedure.
Under this procedure, premium payments are deducted automatically on a monthly
basis from a designated bank account. An Owner does not receive a "bill" for
these payments.
There is no penalty if the planned premium is not paid, nor does payment of this
amount guarantee coverage for any period of time. Instead, the duration of the
Policy depends on maintaining a sufficient Policy Value, or meeting the Safety
Test. (See POLICY TERMINATION section.) The Policy Value is equal to the
Account Value less any outstanding Policy Debt during the first three Policy
Years. It is equal to the Net Surrender Value in years four and later. Even if
planned premiums are paid, if the Safety Test is not met, the Policy terminates
when the Policy Value becomes insufficient to pay the Monthly Charges and the
grace period expires without sufficient payment.
PREMIUM LIMITATIONS. After the first premium is paid, the minimum premium
payment is $20. If the Cash Value Test has been chosen as the Death Benefit
Compliance Test, the maximum premium that may be paid in any Policy Year without
evidence of insurability is the greatest of (a) the premium that will not
increase the net amount at risk under the Policy; (b) twice the Policy's Target
Premium plus $100; and (c) the annual premium paid in the preceding Policy year.
If the Guideline Premium Test has been chosen, the maximum premium is equal to
the lesser of the maximum premium as determined above and the Guideline Premium
Test premium limitation. We have the right to refund any premium amount that
exceeds these limitations. Premium payments should be sent either to
MassMutual's Administrative Office or to the address indicated on the billing
notice.
ALLOCATION OF NET PREMIUM PAYMENTS. The Net Premium equals the premium paid
less the Premium Expense Charge. (See DEDUCTIONS FROM PREMIUMS.) At the time
of Application, the Owner indicates how Net Premiums are to be allocated among
the Divisions of the Separate Account and the GPA. The allocation percentages
must be in whole numbers and the sum of the allocation percentages must equal
100%.
The allocation percentages may be changed without charge at any time by
providing written notice to MassMutual's Administrative Office. The maximum
number of different Divisions that may be used during the life of the Policy is
16.
Any Initial Net Premium remitted with an application will be deposited and earn
interest at the rate set by MassMutual from the date We receive the premium in
good order, or from the Policy Date if later, to the date the Policy is issued.
Once the Policy has been issued, the Net Premium plus interest earnings, less
any Monthly Charges will be allocated either in accordance with the allocation
percentages in the Application, or to the Money Market Division of the Separate
Account on the next business day following the Issue Date. If under the Free
Look Provision, the Owner receives (i) any premium paid for this Policy plus
(ii) interest credited to this Policy under the Guaranteed Principal Account,
plus or minus (iii) an amount reflecting the investment experience of the
investment divisions of the Separate Account under this Policy to the date the
Policy is received by us, minus (iv) any amounts withdrawn and any Policy Debt,
this amount will be allocated to the GPA and the Divisions of the Separate
Account based on the allocation percentages in the Application. If under the
Free Look Provision, the Owner receives the total of all premiums paid for the
Policy, reduced by any amounts borrowed or withdrawn, this amount will be
allocated to the Money Market Division of the Separate Account.
If the Initial Net Premium plus interest earnings, less any Monthly Charges is
allocated to the Money Market Division of the Separate Account, Subsequent Net
Premiums received during the Free Look Period also will be allocated to the
Money Market Division of the Separate Account at the price next determined after
receipt in good order at our Administrative Office, or at the address indicated
on the billing notice. At the end of the Free Look Period, the Money Market
account balance will be transferred to the GPA and the Separate Accounts in
accordance with the allocation percentages in the Application.
If the Initial Net Premium plus interest earnings, less any Monthly Charges is
allocated in accordance with the allocation percentages in the Application,
Subsequent Net Premiums will be deposited on the Valuation Date We receive the
Subsequent Net Premiums in good order at our
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Administrative Office, or at the address indicated on the billing notice.
Transfers from one Division to another will be credited on the Valuation Date
the Transfer Request is received in good order.
TRANSFERS
By written request, the Owner may transfer all or part of the Account Value of a
Division of the Separate Account to any other Division or to the GPA. Although
MassMutual currently imposes no limitation on the right of the Owner to make
transfers, We reserve the right to limit transfers to no more than one every 90
days in connection with compliance with Section 404(c) of ERISA. Any limitation
would not apply to a transfer of all funds in the Separate Account to the GPA or
to automated transfers made in connection with any program MassMutual has in
place.
Transfers of values from the GPA to the Separate Account are limited to one each
Policy Year. Any transfer from the GPA cannot exceed 25% of the Fixed Account
Value (less any Policy Debt) at the time of the transfer. If 25% of the Fixed
Account Value has been transferred from the GPA each year for three consecutive
Policy Years, and no value has been transferred into the GPA, nor premiums
allocated to the GPA, during this time, the remainder of the Fixed Account Value
(less any Policy Debt) may be transferred, in one transaction, out of the GPA in
the succeeding Policy Year.
Any transfer is effective on the Valuation Date at the price next determined
after receipt of the request in good order at our Administrative Office. There
are no charges for transfers.
POLICY TERMINATION AND REINSTATEMENT
POLICY TERMINATION. This Policy will not terminate for failure to pay premiums
since premium payments, other than the Initial Premium Payment, are not
specifically required. Rather, if in the first three Policy Years the Account
Value less any Policy Debt is not enough to cover the Monthly Charges on a
Monthly Charge Date, or if in subsequent Policy Years the Net Surrender Value is
not enough to cover the Monthly Charges on a Monthly Charge Date, the Policy
will enter a 61-day grace period unless the Safety Test has been met.
At the beginning of the grace period, MassMutual will mail a notice to the
Owner's last known address stating the amount of premium needed to cover the
shortfall. During the grace period, the Policy remains in force. If the
required premium is not paid within 61 days after the Monthly Charge Date (or,
if later, within 30 days after We mail the written notice), the Policy
terminates without value.
If the Account Value less Policy Debt in the first three Policy Years or the Net
Surrender Value in subsequent years is insufficient to pay the Monthly Charges
on a particular Monthly Charge Date and the Safety Test (as described below) has
been met on that date, the Monthly Charges for that Date will be reduced to an
amount equal to the Account Value less any Policy Debt.
The Safety Test is not available for New York contracts. The Safety Test can be
met only during the Guarantee Period. The Guarantee Period is five years. The
Guarantee Period has a Guarantee premium associated with it. This premium
varies depending on the issue age, sex, and issue classification of the Insured
and the Death Benefit Option in effect. The Guarantee premium for Your Policy
is shown in the Policy. On any day during the Guarantee Period, the Safety Test
is met if the premiums paid less amounts withdrawn accumulated with interest to
that day, equal or exceed the Guarantee premium accumulated with interest to
that date. The effective annual rate of interest used to accumulate these
amounts is 3%. Consult Your Policy for the Guarantee Period available to
You.
REINSTATEMENT. For a period of five years after a Policy terminates, the Owner
can request that We reinstate the Policy provided the Insured has not died since
the Policy termination. However, the Policy cannot be reinstated if it has been
surrendered for its Net Surrender Value. Please note a termination or
reinstatement may cause the Policy to become a modified endowment contract. (See
MODIFIED ENDOWMENT CONTRACTS.)
Before We will reinstate the Policy, We must receive the following:
(a) Evidence of insurability satisfactory to MassMutual;
(b) A premium payment sufficient to keep the policy in force for three months
following reinstatement;
(c) Where applicable, a signed acknowledgement the Policy has become a modified
endowment contract.
If We reinstate the Policy, the Face Amount for the reinstated Policy will be
the same as it would have been if the Policy had not terminated. The premium
payment will be allocated based on the allocation requested at the time of
reinstatement effective on the Monthly Charge Date on which the Policy is
reinstated. The Account Value at the time of reinstatement will be the net
amount of the premium paid at the time of reinstatement, less any Monthly
Charges taken at that time.
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate MassMutual
for: (a) providing the insurance benefits under the Policy (including any
riders); (b) administering the Policy; (c) assuming certain risks in
7
<PAGE>
connection with the Policy (including any riders); and (d) expenses incurred in
selling and distributing the Policy. Additionally, certain expenses are deducted
from the underlying funds. For more information about these expenses, see the
individual fund prospectuses. A summary of the product and separate account
charges is as follows.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
CURRENT RATE GUARANTEED RATE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Premium Expense Charge All Coverage Years: 5% of premium up to All Coverage Years: 7.5% of premium up to
Expense Premium; 3% of premium over Expense Expense Premium; 5% of premium over Expense
Premium Premium
- -------------------------------------------------------------------------------------------------------------------------------
Administrative Charge All Policy Years: $6 per month per policy All Policy Years: $12 per month per policy
- -------------------------------------------------------------------------------------------------------------------------------
Face Amount Charge Coverage Years 1-5: a per $1,000 of Face Coverage Years 1-5: a per $1,000 of Face
Amount monthly charge that varies based on Amount monthly charge that varies based on
the issue age, gender, and risk the issue age, gender, and risk
classification of the Insured. classification of the Insured.
Coverage Years 6+: $0 Coverage Years 6+: $0
- -------------------------------------------------------------------------------------------------------------------------------
Insurance Charges A per thousand rate multiplied by the For standard risks, the guaranteed cost of
amount at risk each month. The rate varies insurance rates are based on 1980
by the sex, issue age, and risk Commissioners Standard Ordinary (CSO)
classification of the Insured, and the Year Mortality Tables.
of Coverage.
- -------------------------------------------------------------------------------------------------------------------------------
Mortality and Expense Risk Charge All Policy Years: 0.55% on an annual basis All Policy Years: 0.90% on an annual basis
of daily net asset value of the Separate of daily net asset value of the Separate
Account Account
- -------------------------------------------------------------------------------------------------------------------------------
Loan Rate Expense Charge Policy Years 1-15: 0.90% of loaned amount All Policy Years: 2.0% of loaned amount
Policy Years 16+: 0.50% of loaned amount
- -------------------------------------------------------------------------------------------------------------------------------
Withdrawal Fee $25 $25
- -------------------------------------------------------------------------------------------------------------------------------
Surrender Charges First Coverage Year: 140% of the Target First Coverage Year: 140% of the Target
Premium, not to exceed $50 per thousand of Premium, not to exceed $50 per thousand of
Face Amount. Face Amount.
Coverage Years 2-14: the prior year Coverage Years 2-14: the prior year
Surrender Charge reduced by 1/14th of the Surrender Charge reduced by 1/14th of the
first year Surrender Charge first year Surrender Charge
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
DEDUCTIONS FROM PREMIUMS
A Premium Expense Charge is deducted from each premium payment made prior to the
allocation of the payment to the Divisions of the Separate Account and the GPA.
The Premium Expense Charge distinguishes between premium payments up to the
Expense Premium, and premium payments over the Expense Premium. The Expense
Premium is based on the issue age, sex, and risk classification of the Insured.
Premiums are allocated to the Initial Face Amount and any subsequent increases
based on the ratio of the Expense Premium for each segment to the total of the
Expense Premiums for all segments.
8
<PAGE>
MONTHLY CHARGES AGAINST THE ACCOUNT VALUE
Charges will be deducted from the Account Value on each Monthly Charge Date. The
Monthly Charges consist of: (a) an Administrative Charge; (b) a Face Amount
Charge; (c) an Insurance Charge; and (d) a rider charge for any additional
benefits provided by rider. The Monthly Charges will be deducted from the
Division(s) of the Separate Account and the GPA in proportion to the non-loaned
values of the Policy in the Division(s) and the GPA.
ADMINISTRATIVE CHARGE AND FACE AMOUNT CHARGE. The monthly Administrative Charge
and Face Amount Charge reimburse MassMutual for expenses incurred in issuing and
administering the Policy, and for such activities as processing claims,
maintaining records and communicating with Owners.
INSURANCE CHARGES. The monthly Insurance Charge for a Policy is equal to the
"amount at risk" under the Policy, multiplied by the monthly Insurance Charge
rate for that Policy month. The amount at risk is determined on the first day
of each Policy month and is the amount by which the Death Benefit (discounted at
the monthly equivalent of 3% per year) exceeds the Account Value.
Insurance rates will be based on the sex, Issue Age, and risk class of the
Insured, and the Year of Coverage. MassMutual currently places Insureds into the
following three standard rate classes: Select-Preferred Nontobacco, Preferred
Nontobacco, and Preferred Tobacco; as well as substandard rate classes involving
higher mortality risks. In an otherwise identical Policy, the monthly insurance
rate is higher for tobacco users than for those who do not use tobacco and
higher for Preferred Nontobacco Insureds than for Select-Preferred Nontobacco
Insureds.
RIDER CHARGE. The monthly rider charge will include charges for any additional
benefits provided by rider.
DAILY CHARGES AGAINST THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE. MassMutual assesses a daily charge against
the net asset value of the Separate Account for mortality and expense risks.
This charge is not deducted from the assets in the GPA.
The mortality risk We assume is that the group of lives insured under our
Policies may, on average, live for shorter periods of time than We estimated.
The expense risk We assume is that our costs of issuing and administering
Policies may be more than We estimated.
If not all the money MassMutual collects from this charge is 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.
INVESTMENT MANAGEMENT FEE AND OTHER EXPENSES. Because the Divisions of the
Separate Account purchase shares of MML Trust, Oppenheimer Trust, (Fidelity)
Variable Insurance Products Fund II, T. Rowe Price Equity Series, Inc., or
American Century Variable Portfolios, Inc., the value of Accumulation Units of
the Divisions will reflect the investment management fee and other expenses
incurred by these entities. The following were the total fund operating expenses
expressed as a percentage of average net assets for the year ended December 31,
1997 for the Funds.
<TABLE>
<CAPTION>
Total
Fund
Management Other Operating
Fund Name Fees Expenses Expenses
- ---------------- ------------------------------------
<S> <C> <C> <C>
MML Equity 0.35% 0.00% 0.35%
MML Money Market 0.48% 0.04% 0.52%
MML Managed Bond 0.44% 0.03% 0.46%
MML Blend 0.37% 0.00% 0.37%
MML Equity Index* 0.26% 0.11% 0.37%
Oppenheimer Growth 0.73% 0.02% 0.75%
Oppenheimer Aggressive Growth 0.71% 0.02% 0.73%
Oppenheimer Global Securities 0.70% 0.06% 0.76%
Oppenheimer Strategic Bond 0.75% 0.08% 0.83%
VIP II Contrafund Portfolio 0.60% 0.11% 0.71%
T. Rowe Price Mid-Cap Growth
Portfolio 0.85% 0.00% 0.85%
American Century VP Income &
Growth 0.70% 0.00% 0.70%
</TABLE>
*If there had been no reimbursement of Other Expenses to the Fund, the Other
Expenses would have been 0.17%, increasing Total Fund Operating Expenses to
0.43%.
MML Small Cap Value Equity had not been established as of December 31, 1997. The
management fees, other expenses and total fund operating expenses for the 1998
calendar year are estimated to be 0.65%, 0.11% and 0.76%, respectively.
9
<PAGE>
SURRENDER CHARGES
During the first 14 Years of Coverage under the Initial Face Amount and during
the first 14 Years of Coverage under any increase in Face Amount, MassMutual
will impose a Surrender Charge against the Account Value if the Owner surrenders
the Policy or decreases the Face Amount under the Policy. The Surrender Charge
in the first Year of Coverage is 140% of the Target Premium not to exceed $50
per thousand of Face Amount. The Target Premium is used to determine the maximum
premium limitation, Surrender Charges and agent commissions. The Target Premium
is based on the issue age, gender, and risk classification of the Insured. The
Surrender Charge is decreased by 1/14th of the first year Surrender Charge in
each of the next thirteen years of coverage, and is zero in the fifteenth year.
Surrender Charges are calculated separately for the Initial Face Amount and for
each increase in the Face Amount.
SURRENDER CHARGE UPON DECREASE IN SELECTED FACE AMOUNT. Elected decreases in
Face Amount--that is, decreases resulting from other than a Withdrawal or a
change in the Death Benefit Option-- result in canceling all or a part of
previously issued Face Amount segments. A partial Surrender Charge is assessed
and deducted from the Account Value. The partial Surrender Charge is equal to
the Surrender Charge associated with each canceled Face Amount segment. If the
partial Surrender Charge for a decreased or canceled Face Amount segment would
be greater than the Account Value of the Policy, the partial Surrender Charge
for that decrease is set equal to the Account Value on the date of the
surrender.
The Surrender Charge after the decrease equals the Surrender Charge prior to the
decrease less the partial Surrender Charge taken.
OTHER CHARGES
WITHDRAWAL FEE. For each Withdrawal, a charge of $25 will be deducted from the
amount withdrawn. This fee is guaranteed not to increase for the duration of
the Policy.
LOAN INTEREST RATE EXPENSE CHARGE. This charge reimburses MassMutual for
expenses incurred in administering loans.
SPECIAL CIRCUMSTANCES
MassMutual may vary the charges and other terms of Flexible Premium Adjustable
Variable Life Policies where special circumstances result in sales or
administrative expenses or mortality risks that are different than those
normally associated with these Policies. These variations will be made only in
accordance with uniform rules We establish.
ACCOUNT VALUE AND NET SURRENDER VALUE
ACCOUNT VALUE. The Account Value of the Policy is the sum of all Net Premium
payments adjusted by periodic charges and credits and by Withdrawals. Following
the Free Look Period, this amount is allocated among the Separate Account
Divisions and the GPA according to the net premium allocation requested at the
time of Application. (See ALLOCATION OF NET PREMIUM PAYMENTS section for more
details.)
INVESTMENT RETURN. The investment return of a Policy is based on:
(a) The Account Value held for the Policy in each Division of the Separate
Account;
(b) The investment experience of each Division as measured by its actual net
rate of return; and
(c) The interest credited on Account Values held in the GPA.
The investment experience of a Division reflects increases and decreases in the
net asset value of the shares of the underlying Fund, any dividend or capital
gains distributions declared by the Fund, and any charges assessed against
assets of the Division. The investment experience is determined each day 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 net investment
experience from the end of one Valuation Date to the end of the next Valuation
Date.
NET SURRENDER VALUE. The Policy may be fully surrendered for its Net Surrender
Value at any time while the Insured is living. The Net Surrender Value is equal
to the Account Value less any applicable Surrender Charges and less any Policy
Debt as of the date the Company receives the request to surrender in good order.
The surrender will be processed within seven days.
An Owner may surrender the Policy by sending a written request together with the
Policy to MassMutual's Administrative Office. The proceeds will be determined
as of the end of the Valuation Date on which the request for surrender is
received in good order.
WITHDRAWALS. After the first Policy Year, the Owner may, subject to certain
restrictions, withdraw up to 75% of the Net Surrender Value. For each
Withdrawal, a fee of $25 is deducted from the amount withdrawn. The minimum
amount of a Withdrawal is $100 (before deducting the Withdrawal fee). We
reserve the right to prohibit
10
<PAGE>
Withdrawals that would result in a reduction of the Face Amount to less than
$50,000.
The Owner must state in the Withdrawal Request the account and/or Divisions from
which the withdrawal will be made. The amount can be stated as a dollar amount
or a percentage. The withdrawal will be effective on the date We receive the
written request in good order and will be processed within seven days. The
Withdrawal amount attributable to a Division of the Separate Account or to the
GPA may not exceed the non-loaned Account Value of the Division or GPA. If
Death Benefit Option 1 or 3 is in effect, MassMutual will reduce the Face Amount
by the amount of the Withdrawal unless satisfactory evidence of insurability is
provided. A Surrender Charge is not assessed for a Withdrawal.
POLICY LOAN PRIVILEGE
GENERAL. After the first Policy Year, the Owner may obtain a loan from the
Policy as long as the Account Value exceeds the total of any Surrender Charges.
The Policy must be assigned to MassMutual as collateral for the loan. The
maximum amount that can be borrowed at any time is 90% of the Policy's Account
Value less any Surrender Charge. This is reduced by any outstanding Policy
Debt, which includes accrued interest.
SOURCE OF LOAN. The Policy loan amount requested is taken from the Divisions of
the Separate Account and the GPA in proportion to the Account Value of each
Division and the GPA (excluding any outstanding loans) on the date of the loan.
Loaned amounts are taken from the Divisions by liquidating units and the
resulting dollar amounts are transferred to the loaned portion of the GPA. We
may delay the granting of any loan taken from the GPA for up to six months. We
also may delay the granting of any loan from the Divisions of the Separate
Account during any period that: (i) the New York Stock Exchange is closed (other
than customary weekend and holiday closings); (ii) trading is restricted; (iii)
the SEC determines a state of emergency exists; or (iv) the Securities and
Exchange Commission permits MassMutual to delay payment for the protection of
our Owners.
Whenever total Policy Debt (which includes accrued interest) equals or exceeds
the Account Value less Surrender Charges, MassMutual will send a notice to the
Owner. This notice will state the amount necessary to bring the Policy Debt
back within the limit. If We do not receive payment of that amount plus a
premium payment sufficient to keep the policy in force for three months, within
31 days after the date We mailed the notice, and if Policy Debt exceeds the
Account Value less any Surrender Charges at the end of those 31 days, the Policy
terminates without value.
LOAN INTEREST CHARGED. At the time of Application, the Owner may select a loan
interest rate of 5% or (in all jurisdictions except Arkansas) an adjustable loan
rate. Each year MassMutual will set the adjustable rate that will apply for the
next Policy Year. The maximum loan rate is based on the Monthly Average
Corporate yield on seasoned corporate bonds as published by Moody's Investors
Service, Inc., or, if it is no longer published, a substantially similar
average. The maximum rate is the published monthly average for the calendar
month ending two months before the Policy Year begins, or 4%, whichever is
higher. If the maximum limit is not at least 1/2% higher than the rate in
effect for the previous year, We will not increase the rate. If the maximum
limit is at least 1/2% lower than the rate in effect for the previous year, We
will decrease the rate.
Interest on Policy loans accrues daily and becomes part of the Policy Debt as it
accrues. It is due on each Policy Anniversary. If not paid when due, the
interest will be added to the loan and, as part of the loan, will bear interest
at the same rate. Any interest capitalized on a Policy Anniversary will be
treated the same as a new loan and will be taken from the Divisions and the GPA
in proportion to the non-loaned Account Value in each.
REPAYMENT. All or part of any Policy Debt may be repaid at any time while the
Insured is living and while the Policy is in force. Any loan repayment made
within 30 days of the Policy Anniversary date pays policy loan interest due.
Any other loan repayment first will be allocated to the GPA until the Owner has
repaid all loan amounts that originated from the GPA. Additional loan repayments
will be allocated according to the premium allocation factors in effect. Loan
repayments must be clearly identified as such; otherwise they will be considered
premium payments.
Any outstanding Policy Debt will be deducted from the proceeds payable at death
or the surrender of the Policy.
INTEREST ON LOANED VALUE. Any loaned amount is held in the GPA and earns
interest at a rate determined by MassMutual, equal to the greater of 3% and the
Policy loan rate less the Loan Interest Rate Expense Charge. This Charge is 2%
on a guaranteed basis and 0.90% in Policy Years one through 15 and 0.50% in
Policy Years 16 and later on a current basis.
EFFECT OF LOAN. A Policy loan affects the Policy since the Death Benefit and
Net Surrender Value under a Policy are reduced by the amount of the loan.
Repayment of the loan increases the Death Benefit and Net Surrender Value under
the Policy by the amount of the repayment. Taking a Policy loan could have tax
consequences. (See POLICY PROCEEDS, PREMIUMS AND LOANS.)
As long as a loan is outstanding, a portion of the Policy Account Value equal to
the loan is held in the GPA. This amount is not affected by the Separate
Account investment performance. The Account Value may be impacted since
11
<PAGE>
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 Division(s) of the Separate Account from which the
loan was taken.
FREE LOOK PROVISION
The Owner may cancel the Policy within 10 days. (This period may be longer in
some states.)
The Owner should mail or deliver the Policy and Policy delivery receipt either
to MassMutual's Administrative Office or to the agent who sold the Policy or to
one of our agency offices. If the Policy is canceled in this fashion, a refund
will be made to the Owner. The refund may be equal to the sum of: (i) any
premium paid for this Policy; plus (ii) interest credited to this Policy under
the Guaranteed Principal Account; plus or minus (iii) an amount reflecting the
investment experience of the investment divisions of the Separate Account under
this Policy to the date the Policy is received by us; minus (iv) any amounts
withdrawn and any Policy Debt. Or, the refund may be equal to the total of all
premiums paid for the Policy, reduced by any amounts borrowed or withdrawn.
Check Your contract to determine which refund is applicable under Your Policy.
THE GUARANTEED PRINCIPAL ACCOUNT
An Owner may allocate some or all of the Net Premiums and transfer some or all
of the Account Value in the Divisions of the Separate Account, to the Guaranteed
Principal Account ("GPA"). Because of exemptive and exclusionary provisions,
interests in MassMutual's General Account (which include interests in the
Guaranteed Principal Account) are not registered under the Securities Act of
1933 and the General Account is not registered as an investment company under
the Investment Company Act of 1940. Accordingly, neither the General Account
nor any interests therein are subject to the provisions of these Acts, and
MassMutual has been advised that the staff of the Securities and Exchange
Commission has not reviewed the disclosures in the Prospectus relating to the
General Account. Disclosures regarding the General Account may, however, be
subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of statements made in
prospectuses.
Amounts allocated to the Guaranteed Principal Account become part of the General
Account of MassMutual, which consists of all assets owned by MassMutual other
than those in the Separate Account and other separate accounts of MassMutual.
Subject to applicable law, MassMutual has sole discretion over the investment of
the assets of its General Account.
MassMutual guarantees those amounts allocated to the GPA in excess of any Policy
Debt (which includes accrued interest) will accrue interest daily at an
effective annual rate at least equal to 3%. For amounts in the GPA equal to any
Policy Debt, the guaranteed minimum interest rate is an effective annual rate of
3% or, if greater, the Policy loan rate less the Loan Interest Rate Expense
Charge. This charge will not be greater than 2% per year. Such interest will be
paid regardless of the actual investment experience of the GPA. Although
MassMutual is not obligated to credit interest at a rate higher than the
guaranteed minimum, it may declare a higher rate applicable for such periods as
it deems appropriate.
WHEN WE PAY PROCEEDS
If the Policy has not terminated, payment of the Net Surrender Value is made
within seven days, and payment of loan proceeds, partial Withdrawals or the
Death Benefit are made within seven days after We receive all required documents
in a form satisfactory to us at our Administrative Office. But We can delay
payment of the Net Surrender Value or any Withdrawal from the Separate Account
or any loan proceeds attributable to the Separate Account during any period
when: (i) it is not reasonably practical to determine the amount because the New
York Stock Exchange is closed (other than customary week-end and holiday
closings); or (ii) trading is restricted by the SEC; or (iii) the SEC declares
an emergency exists; or (iv) the SEC, by order, permits us to delay payment in
order to protect our Owners.
We may delay paying any Net Surrender Value, any Withdrawal, or any loan
proceeds based on the GPA for up to six months from the date the request is
received at our Administrative Office.
We can delay payment of the entire Death Benefit if payment is contested. We
investigate all death claims arising within the two-year contestable period. We
may investigate death claims arising beyond the two-year contestable period.
Upon receiving the information from a completed investigation, We generally make
a determination within five days as to whether the claim should be authorized
for payment. Payments are made promptly after authorization.
If payment of a Net Surrender or Withdrawal is delayed for 30 days or more, We
add interest to the date of payment at the same rate it is paid under the
interest payment option. Interest is paid on the Death Benefit from the date of
death to the date of payment.
12
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
POLICY PROCEEDS, PREMIUMS AND LOANS MassMutual believes the Policy meets the
statutory definition of life insurance under Code Section 7702 and hence
receives the same tax treatment as that accorded to fixed benefit life
insurance. Thus, the Death Benefit under the Policy is generally excludible
from the gross income of the Beneficiary under Section 101(a)(1) of the Code.
As an exception to this general rule, where a Policy has been transferred for
value, only the portion of the Death Benefit that is equal to the total
consideration paid for the Policy may be excluded from gross income. The Owner
is not deemed to be in constructive receipt of the cash values, including
increments thereon, under the Policy until a full surrender or partial
Withdrawal is made (unless the Policy is a "modified endowment contract," as
discussed below).
Decreases in 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 Owner may be
taxed on all or a part of the amount distributed. Where the provisions of Code
Section 7702(f) do not cause a taxable event, a Withdrawal is taxable only to
the extent it exceeds the Owner's unrecovered premiums. After 15 years, such
cash distributions are not subject to federal income tax, except to the extent
they exceed the total amount of premiums paid but not previously recovered.
MassMutual suggests You consult with your tax adviser in advance of a proposed
decrease in Face Amount or Withdrawal as to the portion, if any, which would be
subject to federal income tax.
A change of the Owner 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 an Owner, and that no part of any loan
under a Policy will constitute income to the Owner unless the Policy has become
a "modified endowment contract." If the Policy is a modified endowment contract
under Code Section 7702A, loans will be fully taxable to the extent of any
income in the Policy and could be subject to an additional 10 percent tax. In
general, income in the Policy is defined as the excess of the Account Value
(both loaned and unloaned) over previously unrecovered premiums paid. See the
discussion on modified endowment contracts below. Under the "personal" interest
limitation provisions of the Tax Reform Act of 1986, interest on Policy loans
used for personal purposes, which otherwise meet the requirements of Code
Section 264, will no longer be tax-deductible. However, other rules may apply
to allow all or part of the interest expense as a deduction if the loan proceeds
are used for "trade or business" or "investment" purposes. See your tax adviser
for further guidance.
If the Policy is owned by a business or corporation, the 1986 Act may impose
additional restrictions. The Act limits the interest deduction available for
loans against a business-owned Policy. It imposes an indirect tax on the gain
in corporate-owned life insurance policies by way of the corporate alternative
minimum tax for those corporations subject to the alternative minimum tax. The
corporate alternative minimum tax also could apply to a portion of the amount by
which Death Benefits received exceed the Policy's date-of-death Net Surrender
Value.
Federal estate and gift and state and local estate and other tax consequences of
ownership or receipt of Policy proceeds depend on the circumstances of each
Owner or Beneficiary.
MassMutual cannot make any guarantee regarding the future tax treatment of any
Policy. For complete information on the impact of changes with respect to the
Policy and federal and state tax considerations, a qualified tax adviser should
be consulted.
The ultimate effect of federal income taxes on values under this Policy and on
the economic benefit to the Owner or Beneficiary depends on MassMutual's tax
status and on the tax status of the individual concerned. The discussion
contained herein is general in nature and is not an exhaustive discussion of all
tax questions that might arise under the Policy, and is not intended as tax
advice. Moreover, no representation is made as to the likelihood of
continuation of current federal income tax laws and Treasury Regulations or of
the current interpretations of the Internal Revenue Service. MassMutual
reserves the right to make changes in the Policy to assure that it continues to
qualify as life insurance for tax purposes. For complete information on federal
and state tax law considerations, You should consult a qualified tax adviser.
No attempt is made herein to consider any applicable state or other tax laws.
CHARGES FOR FEDERAL TAXES. MassMutual currently does not make any charge
against the Separate Account for federal income taxes. We may make such a
charge eventually in order to provide for the future federal income tax
liability of the Separate Account.
Upon a full surrender of a Policy for its Net Surrender Value, the Owner may
recognize ordinary income for federal income tax purposes. Ordinary income is
computed to be the amount by which the Account Value, unreduced by any
outstanding Policy Debt but less any Surrender Charges assessed, exceeds the
premiums paid but not previously recovered and any other consideration paid for
the Policy.
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 that may be
13
<PAGE>
subject to taxation is the excess of the Account Value (both loaned and
unloaned) over the previously unrecovered premiums paid. Death benefits paid
under a modified endowment contract, however, are not taxed any differently than
death benefits payable under other life insurance contracts.
A Policy is a modified endowment contract if it satisfies the definition of life
insurance 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 guaranteed benefits upon the payment
of seven level annual premiums. Also, a Policy that would otherwise satisfy the
7-pay test will 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 originally had 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 classification change is effective retroactively to
the Policy Year in which the actual premiums paid exceed the new 7-pay limits.
In addition, a "material change" occurring at any time while the Policy is in
force will require the Policy to be re-tested 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 benefit attributable to the payment
of premiums necessary to fund the lowest level of death benefit payable during
the first seven contract years, or which is attributable to the crediting of
interest with respect to such premiums.
Since the Policy provides for flexible premium payments, the Company has
instituted procedures to monitor whether increases in death benefits or
additional premium payments cause either the start of a new seven-year test
period or the taxation of distributions and loans.
If any amount is taxable as a distribution of income under a modified endowment
contract, it also will be subject to a 10% penalty tax. Limited exceptions from
the additional penalty tax are available for individual Owners. The penalty tax
will not apply to distributions: (i) made on or after the date the taxpayer
attains age 59 1/2; or (ii) attributable to the taxpayer becoming disabled; or
(iii) made as part of a series of substantially equal periodic payments (made at
least annually) made for the life or life expectancy of the taxpayer. For
complete information about modified endowment contract status, a qualified tax
adviser should be consulted.
Once a Policy fails the 7-pay test, loans and distributions occurring in the
year of failure and thereafter become subject to the rules for modified
endowment contracts. In addition, a recapture provision applies to loans and
distributions received in anticipation of failing the 7-pay test. Any
distribution or loan made within two years prior to failing the 7-pay test is
considered to have been made in anticipation of the failure.
Under certain circumstances, a loan, collateral assignment, or other
distribution under a modified endowment contract may be taxable even though it
exceeds the amount of income accumulated in the Policy. For purposes of
determining the amount of income received from a modified endowment contract,
the law requires the aggregation of all modified endowment contracts issued to
the same Owner by an insurer and its affiliates within the same calendar year.
Therefore, loans, collateral assignments, and distributions from any one such
Policy are taxable to the extent of the income accumulated in all the Policies
required to be aggregated.
QUALIFIED PLANS. The Policy may be used in conjunction with certain tax-
qualified employee benefit plans. Since the rules governing such use are
complex, a purchaser should not use the Policy in conjunction with any such
qualified plan until a competent tax adviser has been consulted. The Policy may
not be used in conjunction with an Individual Retirement Account (IRA).
DIVERSIFICATION STANDARDS. To comply with final regulations under Code Section
817(h) ("Final Regulations"), each Fund of the Trusts is required to diversify
its investments. The Final Regulations generally require that on the last day
of each quarter of a calendar year no more than 55% of the value of a Fund's
assets is represented by any one investment, no more than 70% is represented by
any two investments, no more than 80% is represented by any three investments,
and no more than 90% is represented by any four investments. A "look-through"
rule applies to treat a pro rata portion of each asset of a Fund as an asset of
the Separate Account. All securities of the same issuer are treated as a single
investment. However, each government agency or instrumentality is treated as a
separate issuer.
With respect to variable life insurance contracts, the general diversification
requirements are modified if any of the assets of the Separate Account are
direct obligations of the United States Treasury. In this case, there is no
limit on the investment that may be made in United States Treasury securities,
and for purposes of determining whether assets other than United States Treasury
securities are adequately diversified, the generally applicable percentage
limitations are increased based on the value of the Separate Account's
investment in United States Treasury securities.
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<PAGE>
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 that 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 Owners 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,
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 Owner from being considered the
owner of the assets of the Separate Account.
MassMutual intends to comply with the Final Regulations to assure the Policy
continues to qualify as life insurance for federal income tax purposes.
YOUR VOTING RIGHTS
As long as the Separate Account continues to operate as a unit investment trust
under the Investment Company Act of 1940, the Owner is entitled to give
MassMutual 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 of 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 is determined by
dividing the Policy's Account Value held in each Division of the Separate
Account, if any, by $100. Fractional votes are counted.
Owners receive proxy material and a form on which Owner instructions may be
given. Shares of the Funds held by the Separate Account for which no effective
Owner instructions have been received are voted for or against any proposition
in the same proportion as the shares for which instructions have been received.
RESERVATION OF RIGHTS
We reserve the right to take certain actions in connection with our operations
and the operations of the Separate Account. These actions will be taken in
accordance with applicable laws (including obtaining any required approval of
the Securities and Exchange Commission). If necessary, We will seek approval by
Owners.
Specifically, We reserve the right to:
. Create new Divisions of the Separate Account;
. Create new Separate Accounts;
. Combine any two or more Separate Accounts;
. Make available additional Divisions of the Separate Account investing in
additional investment companies;
. Invest the assets of the Separate Account in securities other than shares of
the Funds as a substitute for such shares already purchased or as the
securities to be purchased in the future;
. Operate the Separate Account as a management investment company under the
Investment Company Act of 1940 or in any other form permitted by law;
. De-register the Separate Account under the Investment Company Act of 1940 in
the event such registration is no longer required;
. Substitute one or more Funds for other funds with similar investment
objectives; and
. Delete Funds.
MassMutual also reserves the right to change the name of the Separate Account.
We have reserved all rights to the name MassMutual Life Insurance Company or any
part of it. We may allow the Separate Account and other entities to use our
name or part of it, but We also may withdraw this right.
ADDITIONAL BENEFITS YOU CAN GET BY RIDER
At the Owner's request, the Policy can include additional benefits We approve
based on our standards and limits for issuing insurance and classifying risks.
An additional benefit is provided by rider and is subject to the terms of both
the rider and the Policy. The cost of any rider is deducted as part of the
Monthly Charges. Subject to state availability, the following riders are
available.
SUBSTITUTE OF INSURED RIDER. This rider allows the Owner to substitute a new
insured in place of the current Insured under the Policy. A substitute of
Insured is allowed if the Policy is in force, the Owner has an insurable
interest in the life of the substitute insured, the substitute insured is age 80
or younger on the date of substitution, and the age of the substitute insured on
the Policy Date is within the issue age range allowed for this Policy on the
Policy Date.
An application and evidence of insurability satisfactory to us is required for
the substitute insured.
15
<PAGE>
All monthly charges after the substitution of insured will be based on the life
and risk class of the substitute insured.
The rider terminates on the current Insured's Attained Age 75, at the time of
the exercise of the rider, if this Policy is changed to a different policy under
which this rider is not available, or if this Policy terminates.
This rider is attached automatically at issue. There is no charge for the
rider.
OTHER INSURED RIDER. This rider provides level term insurance on the life of the
base policy Insured or another insured. The coverage for the insured under the
rider is convertible for a limited amount of time.
While the other insured is living and prior to the other insured's attained age
70, the rider may be fully or partially converted to a flexible premium
adjustable variable life policy offered at the time of conversion. The cost for
the new policy will be based on the other insured's attained age at the time of
conversion. No evidence of insurability is required to convert the rider
coverage.
There is a monthly charge for this rider. It is a rate per $1,000 of rider face
amount for the other Insured.
GUARANTEED INSURABILITY RIDER. This rider provides the right to increase the
face amount of this Policy without evidence of insurability on certain option
dates as defined in the rider.
The rider terminates after the last option date as defined in the rider, if the
face amount of this Policy is decreased for any reason, if this Policy is
changed to another policy under which this rider is not available, or if the
Policy terminates.
There is a monthly charge for this rider. It is a rate per $1,000 of rider
option amount.
DISABILITY BENEFIT RIDER. This rider provides a disability benefit if the
Insured becomes totally disabled as defined in the rider. The rider provides
the following monthly benefits if the Insured becomes totally disabled.
. We will credit an amount to the Account Value equal to the specified benefit
amount shown on the policy specification page for this rider. This amount
will be treated as a Net Premium.
. We will waive the monthly charges due for this Policy.
The benefits will be provided after the Insured has been totally disabled for
four months and all conditions of the rider have been met.
The benefits under the rider end once the Insured is no longer totally disabled,
satisfactory proof of continued disability is not provided to us as required, or
the day before the Insured's Attained Age 65, unless total disability began
before the Insured's Attained Age 60 in which case the waiver of monthly charges
benefit will continue beyond Attained Age 65 while the Insured remains disabled.
There is a monthly charge for this rider based on both the specified benefit
amount and the waiver of monthly charges. The charge varies by the Attained Age
of the Insured and the benefit provided.
WAIVER OF MONTHLY CHARGES RIDER. Under this rider, We will waive the monthly
charges due for the Policy if the Insured becomes totally disabled as defined in
the rider.
The benefit will be provided once the Insured has been totally disabled for four
months and all the provisions of the rider have been met. The benefits will end
when the Insured is no longer totally disabled, satisfactory proof of continued
total disability is not given to us as required, or the day before the Insured's
Attained Age 65 if the disability began when the Insured was Attained Age 60 or
older.
There is a monthly charge for this rider. It is a rate based on the Insured's
Attained Age and multiplied by the sum of the Policy monthly charges for the
month, excluding the rider charge for this rider.
PAYMENT OPTIONS
The Policy proceeds (the Death Benefit or the Net Surrender Value) can be paid
in cash, or if elected, all or part of these proceeds can be placed under one or
more of the following payment options. The minimum amount that can be applied
under a payment option is $2,000. If the periodic payment under any option is
less than $20, We reserve the right to make payments at less-frequent intervals.
None of these benefits depends on the performance of the Separate Account or the
GPA. For additional information concerning these options, see the Policy. The
following payment options are currently available.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------
Installments for a Specified Period Equal monthly payments will be made
for any period selected, up to 30
years. The amount of each payment
depends on the total amount applied,
the period selected,
- ------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------
and the monthly income rates We are
using when the first payment is due.
- ------------------------------------------------------------------------------
Life Income Equal monthly payments will be based
on the life of a named person.
Payments will continue for the
lifetime of that person. Income with
or without a minimum payment period
may be elected.
- ------------------------------------------------------------------------------
Interest We will hold any amount applied under
this option. Interest on the amount
will be paid at an effective annual
rate determined by us. This rate
will not be less than 3%.
- ------------------------------------------------------------------------------
Installments of Specified Amount Each payment will be made for an
agreed fixed amount. The total
amount paid during the first year
must be at least 6% of the total
amount applied. Interest will be
credited each month on the unpaid
balance and added to it. This
interest will be an effective annual
rate determined by us, but not less
than 3%. Payments continue until the
balance We hold is reduced to an
amount less than the agreed fixed
amount. The last payment will be for
the balance only.
- ------------------------------------------------------------------------------
Life Income with Payments Guaranteed Equal monthly payments will be based
for Amount Applied on the life of a named person.
Payments will be made until the total
amount paid equals the amount
applied, and as long thereafter as
the named person lives.
- ------------------------------------------------------------------------------
Joint Lifetime Income with Reduced Monthly payments will be based on the
Payments to Survivor lives of two named persons. Payments
at the initial level will continue
while both are living, or for 10
years if longer. When one dies (but
not before the 10 years has elapsed),
payments are reduced by one-third and
will continue at that level for the
lifetime of the other. After the 10
years has elapsed, payments stop when
both named persons have died.
- ------------------------------------------------------------------------------
</TABLE>
WITHDRAWAL RIGHTS UNDER PAYMENT OPTIONS. If provided in the payment option
election, all or part of the unpaid balance under the Fixed Amount or Interest
Payment Option may be withdrawn or applied under any other option. No part of
the payments under the Fixed Time Payment Option or payments that are based on a
named person's life may be withdrawn.
BENEFICIARY
A Beneficiary is any person named on our records to receive insurance proceeds
at the Insured's death. The Beneficiary is named in the application for the
Policy. There may be different classes of beneficiaries, such as primary and
secondary. These classes set the order of payment. There may be more than one
Beneficiary in a class.
Any Beneficiary may be named an Irrevocable Beneficiary. An Irrevocable
Beneficiary is one whose consent is needed to change that Beneficiary. The
consent of any Irrevocable Beneficiary is needed to exercise any Policy right
except the rights to change the frequency of Planned Premiums and Reinstate the
Policy after termination.
The Owner may change the Beneficiary during the Insured's lifetime by writing to
our Administrative Office. Generally, the change will take effect as of the
date of the request. If no Beneficiary is living at the time of the Insured's
death, unless provided otherwise, the Death Benefit is paid to the Owner or, if
deceased, to the Owner's estate.
ASSIGNMENT
The Policy may be assigned as collateral for a loan or other obligation. For
any assignment to be binding on MassMutual, however, We must receive a signed
copy of it at our Administrative Office. We are not responsible for the
validity of any assignment.
LIMITS ON OUR RIGHT TO CHALLENGE THE POLICY
Except for any policy change or reinstatement requiring evidence of
insurability, We cannot contest the validity of the policy with respect to any
material misrepresentation in the application regarding the insurability of the
Insured once the policy has been in force for two years after the Issue
Date.
For any policy change or reinstatement requiring evidence of insurability, We
cannot contest the validity of the change or reinstatement with respect to the
Insured after the change has been in effect for two years.
ERROR OF AGE OR SEX
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<PAGE>
If the Insured's age or sex is misstated in the Policy application, the Death
Benefit payable under the Policy will be adjusted based on what the Policy would
provide based on the most recent Monthly Charge for the correct date of birth
and correct sex.
SUICIDE
Suicide within two years of the Policy Date is not covered by the Policy. If
the Insured dies by suicide, while sane or insane, within two years from the
Issue Date or Reinstatement Date, the Policy will terminate. We will refund the
amount of all premiums paid, less any Withdrawals and Policy Debt. If the
Insured, while sane or insane, dies by suicide within two years after the
effective date of any increase in the Face Amount, the increase will terminate
and We will refund the Monthly Charges for that increase. However, if a refund
was payable as the result of suicide during the first two years following the
Issue Date or the Reinstatement Date of the Policy, there is no additional
refund for any Face Amount increase.
SALES AND OTHER AGREEMENTS
MML Distributors, LLC ("MML Distributors"), 1414 Main Street, Springfield, MA
01144-1013, is the principal underwriter of the Policy pursuant to an
Underwriting and Servicing Agreement to which MML Distributors, MassMutual and
the Separate Account are parties. MML Investors Services, Inc. ("MMLISI"), also
located at 1414 Main Street, Springfield, MA 01144-1013, serves as the co-
underwriter of the Policy. Both MML Distributors and MMLISI are registered with
the Securities and Exchange Commission (the "SEC") as broker-dealers under the
Securities Exchange Act of 1934 and are members of the National Association of
Securities Dealers, Inc. (the "NASD").
MML Distributors may enter into selling agreements with other broker-dealers
that are registered with the SEC and are members of the NASD ("selling
brokers"). MassMutual sells the Policy through agents who are licensed by state
insurance officials to sell the Policy. These agents also are registered
representatives of selling brokers or of MMLISI. The Policy is offered in all
states where MassMutual is authorized to sell variable life insurance.
The Company also may contract with independent third party broker-dealers who
may act as wholesalers by assisting the Company in finding broker-dealers to
offer and sell the Policies. These parties also may provide training, marketing
and other sales related functions for the Company and other broker-dealers and
may provide certain administrative services to the Company in connection with
the Policies. The Company may pay such parties compensation based on premium
payments for the Policies purchased through broker-dealers selected by the
wholesaler. In addition, some sales personnel may receive various types of non-
cash compensation as special sales incentives, including trips and educational
and/or business seminars.
When an application for the Policy is completed, it is submitted to MassMutual.
MassMutual performs suitability and insurance underwriting and determines
whether to accept or reject the application for the Policy and the Insured's
risk classification. If the application is not accepted, MassMutual will refund
any premium paid.
Pursuant to the Underwriting and Servicing Agreement, both MML Distributors and
MMLISI will receive compensation for their activities as underwriters of the
Policy.
MML Distributors does business under different variations of its name; including
the name MML Distributors, L.L.C. in the states of Illinois, Michigan, Oklahoma,
South Dakota and Washington; and the name MML Distributors, Limited Liability
Company in the states of Maine, Ohio and West Virginia.
COMPENSATION
Writing agents will receive commissions based on a commission schedule and
rules. Some commissions are paid as a percentage of the premium paid in each
Policy Year. These commissions distinguish between premiums up to the Target
Premium and premiums paid in excess of the Target Premium. The Target Premium
is based on the issue age, gender, and risk classification of the Insured.
Commissions also are paid as a percentage of the average monthly Account Value
in each Policy Year. The maximum commission percentages are as follow.
PREMIUM-BASED COMMISSIONS
<TABLE>
<S> <C>
COVERAGE YEAR 1 50% of premium paid up to the
Target Premium
3% of premium paid over the Target
Premium
COVERAGE YEARS 2-5 5% of premium paid up to the
Target Premium
3% of premium paid over the Target
Premium
COVERAGE YEARS 6-10 3% of all premium paid
COVERAGE YEARS 11 AND 1% of all premium paid
BEYOND
- ------------------------------------------------------------
</TABLE>
18
<PAGE>
ASSET-BASED COMMISSIONS
<TABLE>
- -------------------------------------------------------------
<S> <C>
POLICY YEARS 2 AND 0.15% of the average monthly
BEYOND Account Value in each Policy Year
- -------------------------------------------------------------
</TABLE>
Agents under financing agreements with a general agent of MassMutual may be
compensated differently. Agents who meet certain productivity and persistency
standards in selling MassMutual policies are eligible for additional
compensation. General agents and district managers who are registered
representatives of MMLISI also may receive commission overrides, allowances and
other compensation.
While the compensation payable to broker-dealers for sales of Policies may vary
with the sales agreement and level of production, they generally are expected to
be comparable to the aggregate compensation paid to Company agents and general
agents.
BONDING ARRANGEMENT
An insurance company blanket bond is maintained providing $50,000,000 coverage
for officers and employees of MassMutual and C.M. Life (subject to a $350,000
deductible) and $50,000,000 for MassMutual's general agents and agents (also
subject to a $350,000 deductible).
LEGAL PROCEEDINGS
We are not currently involved in any legal proceedings that would have a
material impact on the Policy.
EXPERTS
The audited 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 the Prospectus have been examined by Craig Waddington, FSA,
MAAA. An opinion on actuarial matters is filed as an exhibit to the
registration statements We filed with the SEC.
III. ADDITIONAL INFORMATION
MASSMUTUAL
MassMutual is a mutual life insurance company chartered in 1851 under the laws
of Massachusetts. Its Home Office is located in Springfield, Massachusetts.
MassMutual is licensed to transact life, accident, and health business in all
fifty states of the United States, the District of Columbia, Puerto Rico, and
certain provinces of Canada. As of December 31, 1997, MassMutual had total
assets under management of $152.5 billion and unconsolidated MassMutual assets
in excess of $57.5 billion.
MASSMUTUAL'S TAX STATUS. MassMutual is taxed as a life insurance company under
Subchapter L of the Internal Revenue Code of 1986 (the "Code"). The Segment and
the Separate Account are not separate entities from MassMutual and its
operations form a part of MassMutual.
Investment income and realized capital gains on the assets of the Segment are
reinvested and taken into account in determining Account Value. The investment
income and realized capital gains are applied automatically to increase book
reserves associated with the Policy. Under existing federal income tax law, the
Segment's investment income, including net capital gains, is not taxed to
MassMutual to the extent it is applied to increase reserves associated with the
Policy. The reserve items taken into account at the close of the taxable year
for purposes of determining net increases and net decreases must be adjusted for
tax purposes by subtracting any amount attributable to appreciation in the value
of assets and by adding any amount attributable to depreciation. MassMutual's
basis in the Policy's share of the assets underlying the Segment will be
adjusted for appreciation or depreciation, to the extent the reserves are
adjusted. Thus, corporate-level capital gains and losses, and the tax effect
thereof, are eliminated.
Due to MassMutual's current tax status, no charge is made to the Segment for
MassMutual's federal income taxes that may be attributable to the Segment.
Periodically, MassMutual reviews the question of a charge to the Segment for
MassMutual's federal income taxes. A charge may be made for any federal income
taxes incurred by MassMutual and attributable to the Segment. Depending on the
method of calculating interest on Policy values allocated to the Guaranteed
Principal Account (see preceding section), a charge may be imposed for the
Policy's share of MassMutual's federal income taxes attributable to that
account.
Under current laws, MassMutual may incur state or local taxes (in addition to
premium taxes) in several states. At present, these taxes are not significant.
If there is a material change in applicable state or local tax laws, MassMutual
19
<PAGE>
reserves the right to charge the Separate Account for taxes, if any,
attributable to the Separate Account.
RECORDS AND REPORTS
All records and accounts relating to the Separate Account and the GPA are
maintained by MassMutual. Each year within the 30 days following the Policy
Anniversary, MassMutual will mail You a report showing the Account Value at the
beginning of the previous Policy Year, all premiums paid since that time, all
additions to and deductions from the Account Value during the year, and the
Account Value, Death Benefit, Net Surrender Value and Policy Debt as of the last
Policy Anniversary. This report contains any additional information required by
any applicable law or regulation.
THE SEPARATE ACCOUNT
The Separate Account was established on February 2, 1995, as a separate
investment account of MassMutual by MassMutual's Board of Directors in
accordance with the laws of the State of Massachusetts. The Separate Account is
registered with the Securities and Exchange Commission as a unit investment
trust pursuant to the provisions of the Investment Company Act of 1940, and
meets the definition of a "separate account" in that statute. Registration does
not involve supervision of the management or investment practices of either the
Separate Account or of MassMutual. A separate segment for the Policies (the
"Segment") was established on November 12, 1997 and has since been divided into
13 Divisions. Each Division invests in a corresponding series of shares of a
designated Fund of MML Trust, Oppenheimer Trust, Variable Insurance Products
Fund II (managed by Fidelity Management & Research Company), T. Rowe Price
Equity Series, Inc., or American Century Variable Portfolios, Inc. MassMutual
may establish additional divisions within the Separate Account in the future,
which may invest in other investment funds, including those of MML Trust,
Oppenheimer Trust, (Fidelity) Variable Insurance Products Fund II, T. Rowe Price
Equity Series, Inc., or American Century Variable Portfolios, Inc., or in any
other investment fund MassMutual deems to be appropriate.
MassMutual owns the assets in the Separate Account and is required to maintain
sufficient assets in the Separate Account to meet anticipated obligations of the
Policies funded by the Separate Account. The income, gains, or losses, realized
or unrealized, of the Separate Account are credited to or charged against the
assets held in the Separate Account without regard to the other income, gains,
or losses of MassMutual. Assets in the Separate Account attributable to the
reserves and other liabilities under the Policies are not chargeable with
liabilities arising from any other business conducted by MassMutual. MassMutual
may transfer to its General Account; however, any assets that exceed anticipated
obligations of the Separate Account. All obligations arising under the Policy
are general corporate obligations of MassMutual. MassMutual may accumulate in
the Separate Account proceeds from various Policy charges and investment results
applicable to those assets.
Some of the Funds offered are substantially identical to or are "clones" of
mutual funds offered in the retail marketplace. These "clone" funds have the
same investment objectives, policies, and portfolio managers as the retail funds
and usually were formed after the retail funds. While the clone funds generally
have identical investment objectives, policies and portfolio managers, they are
separate and distinct from the retail funds. In fact, the performance of the
clone funds may be dramatically different from the performance of the retail
funds due to differences in the funds' sizes, dates shares of stock are
purchased and sold, cash flows and expenses. Thus, while the performance of the
retail funds may be informative, You should remember such performance is not the
performance of the funds that support the Policy and is not an indication of
future performance of such funds.
MML TRUST AND OPPENHEIMER TRUST
The MML Trust is a no-load, open-end, management investment company registered
under the Investment Company Act of 1940. The Oppenheimer Trust is an open-end,
diversified, management investment company registered under the Investment
Company Act of 1940.
Both the MML Trust and the Oppenheimer Trust provide an investment vehicle for
the separate investment accounts of variable life and variable annuity contracts
offered by companies such as MassMutual. Shares of the MML Trust and the
Oppenheimer Trust are not offered to the general public.
The assets of certain variable annuity separate accounts for which MassMutual or
an affiliate is the depositor are invested in shares of the MML Trust's and
Oppenheimer Trust's Funds. Because these separate accounts are invested in the
same underlying Funds, it is possible material irreconcilable conflicts could
arise between Policy Owners and owners of the variable annuity contracts.
Possible conflicts could arise if: (i) state insurance regulators should
disapprove or require changes in investment policies, investment advisers or
principal underwriters or if MassMutual should be permitted to act contrary to
actions approved by holders of the Policies under rules of the Securities and
Exchange Commission; (ii) adverse tax treatment of the Policies or the variable
annuity contracts would result from utilizing the same underlying funds; (iii)
different investment strategies would be more suitable for the variable annuity
contracts than for the Policies; or (iv) state insurance laws or regulations or
other applicable laws
20
<PAGE>
would prohibit the funding of both the Separate Account and other investment
accounts by the same Funds. The Board of Trustees of each Trust will follow
monitoring procedures that have been developed to determine whether material
conflicts have arisen. If it is determined a conflict exists, the Trustees will
notify MassMutual and OppenheimerFunds and appropriate action will be taken to
eliminate such irreconcilable conflicts.
MassMutual purchases the shares of each Fund for the corresponding Division at
net asset value. All dividends and capital gain distributions received from a
Fund are automatically reinvested in that Fund at net asset value, unless
MassMutual, on behalf of the Separate Account, elects otherwise. Shares of the
MML Trust and the Oppenheimer Trust will be redeemed by MassMutual at their net
asset values to the extent necessary to make payments under the Policies.
VARIABLE INSURANCE PRODUCTS FUND II
Variable Insurance Products Fund II ("Fidelity VIP II"), managed by Fidelity
Management & Research Company ("FMR"), is an open-end, diversified management
investment company organized as a Massachusetts business trust on March 21, 1988
and is registered with the SEC under the 1940 Act. One of its investment
portfolios, the VIP II Contrafund Portfolio, is available under this Policy.
T. ROWE PRICE EQUITY SERIES, INC.
The T. Rowe Price Equity Series, Inc. (the "Corporation") was incorporated in
Maryland in 1994, and is a diversified, open-end investment company, or mutual
fund. Currently, the corporation consists of four series, each representing a
separate class of shares having different objectives and investment policies.
One of the series, the Mid-Cap Growth Portfolio, is available under this Policy.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
American Century Variable Portfolios, Inc. is part of American Century
Investments, a family of funds that includes nearly 70 no-load mutual funds
covering a variety of investment opportunities. American Century Variable
Portfolios, Inc. offers its shares only to insurance companies to fund the
benefits of variable annuity or variable life insurance contracts. One of the
funds, VP Income and Growth, is offered under this Policy.
Following is a chart illustrating the risk profiles of the investment options
available under this Policy, and a summary of the investment objectives of each
fund. Please note there can be no assurance any fund will achieve its
objectives. More detailed information concerning these investment objectives is
contained in the accompanying prospectuses, including information on the risks
associated with the investments, the investment techniques of each of the funds,
and the deduction of expenses applicable to each of the funds.
INVESTMENT PREFERENCE CHART
- --------------------------------------------------------------------------------
Oppenheimer Global Securities Fund
VIP II Contrafund Portfolio
Oppenheimer Aggressive Growth Fund
MML Small Cap Value Equity Fund
T. Rowe Price Mid-Cap Growth Portfolio
Oppenheimer Growth Fund
MML Equity Index Fund
American Century VP Income & Growth
MML Equity Fund
MML Blend Fund
Oppenheimer Strategic Bond Fund
MML Managed Bond Fund
MML Money Market Fund
Guaranteed Principal Account
- --------------------------------------------------------------------------------
CONSERVATIVE LESS CONSERVATIVE MODERATE AGGRESSIVE MORE AGGRESSIVE
CONSERVATIVE: Investment goal is preservation of principal, while incurring
little or no risk.
21
<PAGE>
LESS CONSERVATIVE: Investment goal is primarily preservation of principal, with
some desire for growth.
MODERATE: Investment goal is growth, while seeking some preservation of
principal.
AGGRESSIVE: Investment goal is growth, with more tolerance for risk.
MORE AGGRESSIVE: Investment goal is significant growth over the long-term, with
short-term fluctuations in value expected.
MML MONEY MARKET FUND
MML Money Market Fund seeks to achieve high current income, while preserving
capital, and liquidity. This Fund invests in short-term debt instruments,
including but not limited to commercial paper, certificates of deposit, bankers'
acceptances, and obligations of the United States government, its agencies and
instrumentalities. An investment in the Money Market Fund is neither insured nor
guaranteed by the U.S. Government and its net asset value is not guaranteed to
remain stable at $1.00 per share.
MML MANAGED BOND FUND
MML Managed Bond Fund seeks to achieve as high a total rate of return on an
annual basis as is considered consistent with the preservation of capital. This
Fund invests primarily in investment grade, publicly-traded, readily marketable,
fixed income securities of such maturities as MassMutual deems appropriate from
time to time in light of market conditions and prospects.
OPPENHEIMER STRATEGIC BOND FUND
Oppenheimer Strategic Bond Fund seeks a high level of current income principally
derived from interest on debt securities; and seeks to enhance such income by
writing covered call options on debt securities. The Fund intends to invest
principally in: (i) foreign government and corporate debt securities; (ii) U.S.
Government securities; and (iii) lower-rated, high-yield domestic debt
securities, commonly known as "junk bonds", which are subject to a greater risk
of loss of principal and nonpayment of interest than higher-rated securities.
Capital appreciation is not an objective.
MML BLEND FUND
MML Blend Fund seeks to achieve as high a level of total rate of return over an
extended period of time as is considered consistent with prudent investment risk
and the preservation of capital. This Fund invests in a portfolio of common
stocks and other equity-type securities, bonds and other debt securities with
maturities generally exceeding one year, and money market instruments and other
debt securities with maturities generally not exceeding one year.
MML EQUITY FUND
MML Equity Fund seeks to achieve a superior total rate of return over an
extended period of time from both capital appreciation and current income. A
secondary objective is the preservation of capital when business and economic
conditions indicate investing for defensive purposes is appropriate. The assets
of this Fund are expected to be invested primarily in equity-type securities.
AMERICAN CENTURY VP INCOME & GROWTH
American Century VP Income & Growth seeks long-term growth of capital as well as
current income. The Fund pursues a total return and dividend yield that exceed
those of the S&P 500 by investing in stocks of companies with strong dividend
growth potential.
MML EQUITY INDEX FUND
MML Equity Index Fund seeks 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" 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.)
OPPENHEIMER GROWTH FUND
Oppenheimer Growth Fund seeks to achieve capital appreciation by investing in
securities of well-known established companies.
T. ROWE PRICE MID-CAP GROWTH PORTFOLIO
The Mid-Cap Growth Portfolio seeks to provide long-term capital appreciation by
investing primarily in common stocks of medium-sized (mid-cap) growth companies.
The Fund focuses on companies with higher earnings growth potential that are no
longer considered new or emerging, but may still be in the dynamic phase of
their life cycles.
MML SMALL CAP VALUE EQUITY FUND
This Fund seeks to earn a high rate of return over an extended period. The Fund
invests primarily in stocks of smaller capitalization companies with some unique
product, market position, or operating characteristic which, in the portfolio
manager's opinion distinguishes them and will result in above-average returns.
OPPENHEIMER AGGRESSIVE GROWTH FUND
Oppenheimer Aggressive Growth Fund seeks to achieve capital appreciation by
investing in "growth-type" companies. Prior to May 1, 1998, this Fund was named
Oppenheimer Capital Appreciation Fund.
VIP II CONTRAFUND PORTFOLIO
This Fund seeks capital appreciation by investing in the securities of companies
whose value FMR believes is not fully recognized by the public. This Fund may
be appropriate for policyowners who are willing to ride out
22
<PAGE>
stock market fluctuations in pursuit of potentially high long-term returns. The
Fund is designed for those who are looking for an investment approach that
follows a contrarian philosophy.
OPPENHEIMER GLOBAL SECURITIES FUND
Oppenheimer Global Securities Fund seeks long-term capital appreciation by
investing a substantial portion of its assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special situations which are
considered to have appreciation possibilities, but which may be considered to be
speculative.
THE INVESTMENT ADVISERS
MassMutual serves as investment manager of each of the MML Funds pursuant to
investment management agreements. Concert Capital Management, Inc. ("Concert")
served as the investment sub-adviser to MML Equity Fund and the Equity Sector of
the MML Blend Fund from 19931996. Concert merged with and into David L. Babson
& Company, Inc. ("Babson") effective December 31, 1996. Both Concert and Babson
are wholly-owned subsidiaries of Babson Acquisition Corporation, which is a
controlled subsidiary of MassMutual. Effective January 1, 1997, Babson became
the investment sub-adviser to MML Equity Fund and the Equity Sector of the MML
Blend Fund. Babson also is the sub-advisor to the MML Small Cap Value Equity
Fund. Both MassMutual and Babson are registered investment advisers under the
Investment Advisers Act of 1940.
MassMutual entered into a sub-advisory agreement with Mellon Equity whereby
Mellon Equity manages the investment and reinvestment of the assets of the MML
Equity Index Fund.
OppenheimerFunds, Inc. ("OFI") is an investment adviser organized under the laws
of Colorado as a corporation; it was originally organized in 1959. Oppenheimer
and its affilates currently advise U.S. investment companies with assets
aggregating over $75 billion as of December 31, 1997, and more than 3.5 million
shareholder accounts. OFI is owned by Oppenheimer Acquisition Corporation, a
holding company owned in part by senior management of OFI and ultimately
controlled by MassMutual. OFI serves as investment adviser to the Oppenheimer
Trust. OFI is registered as an investment adviser under the Investment Advisers
Act of 1940. OFI serves as Investment Adviser to the Oppenheimer Funds.
Citibank N.A., with its home office located at 111 Wall Street, New York, NY,
10005, acts as custodian for the MML Trust. Bank of New York, with its home
office at One Wall Street, New York, NY 10015, acts as custodian for the
Oppenheimer Trust.
MassMutual is also the investment adviser to MassMutual Corporate Investors and
MassMutual Participation Investors, closed-end investment companies, certain
wholly-owned subsidiaries of MassMutual, and various employee benefit plans.
MassMutual is the investment sub-adviser to Oppenheimer Investment Grade Bond
Fund and Oppenheimer Value Stock Fund, open-end management investment companies.
Fidelity Management & Research Company ("FMR") is the investment adviser to the
VIP II Contrafund Portfolio. FMR is the management arm of Fidelity
Investments(R) which was established in 1946. Fidelity Investments(R) has its
principal business address at 82 Devonshire Street, Boston, Massachusetts. FMR
handles the VIP II Contrafund business affairs and, with the assistance of
affiliates, chooses the Fund's investments. Fidelity Management & Research
(U.K.) Inc, in London, England, and Fidelity Management & Research ("Far East")
Inc., serve as sub-advisers for the VIP II Contrafund Portfolio.
T. Rowe Price Associates, Inc ("T. Rowe Price") is the investment adviser to the
T. Rowe Price Mid-Cap Growth Portfolio. T. Rowe Price was founded in 1937. The
T. Rowe Price Equity Series, Inc. (the "Corporation") was incorporated in
Maryland in 1994, and is a diversified, open-end investment company. The
Corporation is governed by a Board of Directors that meets regularly to review
the Fund's investments, performance, expenses, and other business affairs. The
policy of the Corporation is that a majority of Board members will be
independent of T. Rowe Price.
American Century Investment Management, Inc. is the investment adviser to the
American Century VP Income & Growth Fund. Under the laws of the state of
Maryland, the Board of Directors is responsible for managing the business and
affairs of the Fund. Acting pursuant to an investment management agreement
entered into with the Fund, American Century Investment Management, Inc. serves
as the manager of the Fund. Its principal place of business is American Century
Tower, 4500 Main Street, Kansas City, Missouri. The manager has been providing
investment advisory services to investment companies and institutional investors
since it was founded in 1958.
23
<PAGE>
APPENDIX A
DEFINITION OF TERMS
ACCOUNT VALUE: The sum of the Variable Account Value and the Fixed Account Value
of the Policy.
ADMINISTRATIVE OFFICE: MassMutual's Administrative Office is located at 1295
State Street, Springfield, Massachusetts 01111-0001.
ATTAINED AGE: The Issue Age of the Insured plus the number of completed Policy
Years.
BENEFICIARY(IES): The person or persons specified by the Owner to receive some
or all of the Death Benefit at the Insured's death.
DEATH BENEFIT: The amount paid following receipt of due proof of death of the
Insured. The amount is equal to the benefit provided by the Death Benefit
Option in effect on the date of death less any Policy Debt outstanding and any
unpaid premium.
DEATH BENEFIT OPTION: The Policy offers three Death Benefit Options for
determination of the amount of the Death Benefit. The Death Benefit Option is
elected at the time of application and, subject to certain requirements, may be
changed at a later date.
EXPENSE PREMIUM: The level of premium payment used to determine the Premium
Expense Charges. The Expense Premium is based on the Issue Age, sex, and risk
classification of the Insured in effect at the time of any premium payment.
FIXED ACCOUNT VALUE: The current Account Value that is allocated to the
Guaranteed Principal Account.
FREE LOOK PERIOD: The Period during which an Owner may return the Policy for
cancellation and refund.
GUARANTEED PRINCIPAL ACCOUNT ("GPA"): Part of our General Account, the GPA is a
fixed account to and from which the Owner may make allocations and transfers.
INITIAL FACE AMOUNT: The amount of insurance coverage issued under the Policy.
Subject to certain limitations, the Owner may change the Face Amount after
issue.
INITIAL NET PREMIUM: The premium received before or at delivery of the Policy,
reduced by the Premium Expense Charge.
INSURED: The person whose life this Policy insures.
ISSUE AGE: The age of the Insured at his or her birthday nearest the Policy
Date.
ISSUE DATE: The date on which the suicide and contestability periods begin.
MINIMUM DEATH BENEFIT: The Death Benefit determined in accordance with the
applicable Death Benefit Compliance Test. The applicable Test is either the
Cash Value Test or the Guideline Premium Test, as chosen at the time of
application.
MONTHLY CHARGE DATE: The monthly date on which the Monthly Charges for the
Policy are deducted from the Account Value. The first Monthly Charge Date is
the Policy Date, and subsequent Monthly Charge Dates are on the same day of each
succeeding calendar month.
MONTHLY CHARGES: The charges assessed against the Policy Account Value on each
Monthly Charge Date.
NET PREMIUM: The premium payment less the Premium Expense Charge We deduct.
NET SURRENDER VALUE: The amount payable to an Owner upon surrender of the
Policy. It is equal to the Account Value less any surrender charges that apply
and less any Policy Debt.
OWNER: The person or entity that owns the Policy.
POLICY: The flexible premium adjustable variable life insurance policy offered
by MassMutual and described in this Prospectus.
POLICY ANNIVERSARY DATE: An anniversary of the Policy Date.
POLICY DATE: The date shown on the Policy that is the starting point for
determining Policy Anniversary Dates, Policy Years, and Monthly Charge Dates.
POLICY DEBT: All outstanding Policy loans plus accrued loan interest.
POLICY VALUE: The Account Value less any outstanding Policy Debt during the
first three Policy Years. It is equal to the Net Surrender Value in years four
and later.
POLICY YEAR: A twelve-month period commencing with the Policy Date or a Policy
Anniversary Date.
SAFETY TEST: On any day during the Guarantee Period as shown on the Policy
Specifications page of Your Policy, the Safety Test is met if the result of
premiums paid less amounts withdrawn, accumulated with interest to that day,
equals or exceeds the Guarantee Period premium requirement as shown on the
Policy Specification page of Your Policy accumulated with interest to that date.
SEPARATE ACCOUNT: The Policies' designated segment of the "MassMutual Variable
Life Separate Account I" established by MassMutual under the laws of
Massachusetts and registered as a unit investment trust with the Securities and
24
<PAGE>
Exchange Commission pursuant to the Investment Company Act of 1940, as amended
("1940 Act"). The Separate Account is used to receive and invest Net Premiums
for this Policy.
SUBSEQUENT NET PREMIUM: Any premium received after the Policy is delivered,
reduced by the Premium Expense Charge.
TARGET PREMIUM: The level of premium payments used to determine commission
payments and surrender charges. The Target Premium is based on the Issue Age,
sex, and risk classification of the Insured.
VALUATION DATE: A date on which the net asset value of the shares of each
Division of the Separate Account 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, consisting of one or more days, from one Valuation
Date to the next succeeding Valuation Date.
VALUATION TIME: The time of the close of the New York Stock Exchange (currently
4:00 p.m. Eastern Time) on a Valuation Date. All actions to be performed on a
Valuation Date will be performed as of the Valuation Time.
VARIABLE ACCOUNT VALUE: The total of the values of the Accumulation Units
credited to the Policy in each Division of the Separate Account multiplied by
the Owner's number of units in that Division.
WE: Refers to MassMutual.
YEAR OF COVERAGE: For the Initial Face Amount, each Policy Year is a Year of
Coverage. For any increase in the Face Amount, each Year of Coverage is
measured from the effective date of the increase.
YOU: Refers to the Owner.
25
<PAGE>
APPENDIX B
EXAMPLES OF DEATH BENEFIT OPTION CHANGES
EXAMPLE I - CHANGE FROM OPTION 2 TO OPTION 1
For a change from Option 2 to Option 1, the Face Amount is increased by the
amount of the Account Value on the effective date of the change. For example,
if the Policy has a Face Amount of $500,000 and an Account Value of $25,000, the
Death Benefit under Option 2 is equal to the Face Amount plus the Account Value,
or $525,000. If the Owner changes from Option 2 to Option 1, the Death Benefit
under Option 1 is equal to the Policy Face Amount. Since the Death Benefit
under a Policy does not change as the result of a Death Benefit Option change,
the Face Amount will be increased from $500,000 under Option 2 to $525,000 under
Option 1.
EXAMPLE II - CHANGE FROM OPTION 3 TO OPTION 1
For a change from Option 3 to Option 1, the Face Amount is increased by the
amount of the premiums paid to the effective date of the change. For example,
if a Policy has a Face Amount of $500,000, and premium payments of $12,000 have
been made to-date, the Policy Death Benefit under Option 3 is equal to the Face
Amount plus the premiums paid, or $512,000. If the Owner changes from Option 3
to Option 1, the Death Benefit under Option 1 is equal to the Policy Face
Amount. Since the Death Benefit under a Policy does not change as the result of
a Death Benefit Option change, the Face Amount will be increased from $500,000
under Option 3 to $512,000 under Option 1.
EXAMPLE III- CHANGE FROM OPTION 1 TO OPTION 2
For a change from Option 1 to Option 2, the Face Amount will be decreased by the
amount of the Account Value on the effective date of the change. For example,
if the Policy has a Face Amount of $700,000 and an Account Value of $25,000,
under Option 1 the Death Benefit is equal to the Face Amount, or $700,000. If
the Owner changes from Option 1 to Option 2, the Death Benefit under Option 2 is
equal to the Face Amount plus the Account Value. Since the Death Benefit does
not change as the result of a Death Benefit Option change, the Face Amount will
be decreased by $25,000 to $675,000, and the Death Benefit under Option 2 after
the change will remain $700,000.
EXAMPLE IV - CHANGE FROM OPTION 1 TO OPTION 3
For a change from Option 1 to Option 3, the Face Amount will be decreased by the
amount of the premiums paid to the effective date of the change. For example,
if the Policy has a Face Amount of $700,000 and premiums paid to-date are
$30,000, the Death Benefit under Option 1 is equal to the Face Amount, or
$700,000. If the Owner changes from Option 1 to Option 3, the Death Benefit
under Option 3 is equal to the Face Amount plus the premiums paid to-date.
Since the Death Benefit under a Policy does not change as the result of a Death
Benefit Option change, the Face Amount will be decreased from $700,000 under
Option 1 to $670,000 under Option 3.
EXAMPLE V - CHANGE FROM OPTION 2 TO OPTION 3, OR FROM OPTION 3 TO OPTION 2
For a change from Option 2 to Option 3 or from Option 3 to Option 2, the Face
Amount is changed (increased or decreased) by the difference between the Account
Value and the premiums paid less any premium refunds. For example, if the
Policy has a Face Amount of $1,000,000, and an Account Value of $70,000, and
premiums paid of $25,000, the Death Benefit under Option 2 is equal to the
Account Value plus the Face Amount, or $1,070,000. If the Owner changes from
Option 2 to Option 3, the Death Benefit under Option 3 is equal to the Face
Amount plus the premiums paid less any premium refunds. Since the Death Benefit
under a Policy does not immediately change as the result of a Death Benefit
Option change, the Face Amount will be increased by the difference between the
Account Value and the premiums paid, or $45,000, to $1,045,000 under Option 3,
maintaining a Death Benefit of $1,070,000.
A similar type of change would be made for a change from Option 3 to Option 2.
26
<PAGE>
APPENDIX C
RATES OF RETURN
From time to time, the Company may report different types of historical
performance for the Divisions of the Separate Account available under the
Policy. The Company may report the average annual total returns of the funds
over various time periods. Such returns will reflect an annual reduction for
investment management fees and fund expenses, but not deductions at the Separate
Account or Policy level for Mortality and Expense Risk Charges and Policy
expenses, which, if included, would reduce performance.
At the request of an applicant, the Company will accompany the returns of the
funds with at least one of the following: (i) returns, for the same periods as
shown for the funds, which include deduction under the Separate Account for the
Mortality and Expense Risk Charge in addition to the deductions of investment
management fees and fund expenses, but does not include other charges under the
Policy; or (ii) an illustration of Account Values and Net Surrender Values as of
the performance reporting date for a hypothetical Insured of given age, gender,
risk classification, premium level and Initial Face Amount. The illustration
will be based either on actual historic fund performance or on a hypothetical
investment return between 0% and 12% as requested by the applicant. The Net
Surrender Value figures will assume all fund charges, the Mortality and Expense
Risk Charge, and all other Policy charges are deducted. The Account Value
figures will assume all charges except the Surrender Charge are deducted.
We also may distribute sales literature comparing the percentage change in the
net asset values of the funds or in the Accumulation Unit Values for any of the
Divisions of the Separate Account to established market indices, such as the
Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average. We also
may make comparisons to the percentage change in values of other mutual funds
with investment objectives similar to those of the Divisions of the Separate
Account being compared.
Tables 1 and 2 show the Effective Annual Rates of Return and One Year Total
Returns, respectively, of the funds based on the actual investment performance
(after deduction of investment management fees and direct operating expenses)
underlying each Division of the Separate Account. Table 1 shows figures for
periods ended December 31, 1997, while Table 2 shows December 31 one year total
returns for each year shown. These rates do not reflect the Mortality and
Expense Risk Charges assessed against the Separate Account. Tables 1 and 2 do
not reflect deductions from premiums or Monthly Charges assessed against the
Account Value of the Policy, nor do they reflect the Policy's Surrender Charges.
(For a discussion of these charges, please see CHARGES AND DEDUCTIONS.)
Therefore, these rates are not illustrative of how actual investment performance
will affect the benefits under the Policy (see, however, ILLUSTRATION OF DEATH
BENEFITS, NET SURRENDER VALUES, AND ACCUMULATED PREMIUMS, APPENDIX D). The rates
of return shown are not necessarily indicative of future performance. These
rates of return may be considered, however, in assessing the competence and
performance of the investment advisers.
27
<PAGE>
TABLE 1
EFFECTIVE ANNUAL RATES OF RETURN
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
SINCE
FUND INCEPTION 15 YEARS 10 YEARS 5 YEARS 1 YEAR
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
MML Equity 14.78% 16.19% 16.44% 18.25% 28.59%
MML Blend 13.67% --- 13.68% 13.81% 20.89%
MML Managed Bond 10.37% 9.73% 9.08% 7.79% 9.91%
MML Money Market 6.73% 6.44% 5.63% 4.47% 5.18%
MML Equity Index 21.93% --- --- --- ---
Oppenheimer Global Securities 12.26% --- --- 18.81% 22.42%
Oppenheimer Aggressive Growth 15.31% --- 16.23% 15.92% 11.67%
Oppenheimer Growth 15.43% --- 16.67% 18.61% 26.68%
Oppenheimer Strategic Bond 7.64% --- --- --- 8.71%
VIP II Contrafund Portfolio 28.11% --- --- --- 24.41%
Mid-Cap Growth Portfolio 18.80% --- --- --- 18.80%
VP Income & Growth* 7.8% --- --- --- 7.8%*
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The figures show in this Table do not reflect any charges at the Separate
Account or the Policy level.
Dates of inception:
MML Equity Fund - 9/15/71 MML Blend Fund - 2/3/84
Managed Bond Fund - 12/16/81 MML Small Cap Value Equity
Fund - 6/1/98
MML Money Market Fund - 11/12/90 MML Equity Index Fund - 4/30/97
Oppenheimer Global Securities Fund - 11/12/90 Oppenheimer Aggressive Growth
Fund - 8/15/86
Oppenheimer Growth Fund - 4/3/85 Oppenheimer Strategic Bond
Fund - 5/3/93
VIP II Contrafund Portfolio- 1/3/95 Mid-Cap Growth Portfolio
- 12/31/96
VP Income & Growth - 10/30/97
*Return shown is since inception. For the performance history of a substantially
similar fund, the American Century Income & Growth Fund, turn to the section in
the attached American Century Variable Portfolios prospectus entitled
"INVESTMENT PERFORMANCE OF SIMILAR FUND."
28
<PAGE>
TABLE 2
ONE YEAR TOTAL RETURNS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
YEAR MML MONEY MML EQUITY OPPENHEIMER
ENDED MML EQUITY MARKET MML BOND MML BLEND INDEX FUND GROWTH
<S> <C> <C> <C> <C> <C> <C>
1997 28.59% 5.18% 9.91% 20.89% 21.93%* 26.68%
1996 20.25% 5.01% 3.25% 13.95% --- 25.20%
1995 31.13% 5.58% 19.14% 23.28% --- 36.65%
1994 4.10% 3.84% (3.76%) 2.48% --- 0.98%
1993 9.52% 2.75% 11.81% 9.70% --- 7.25%
1992 10.48% 3.48% 7.31% 9.36% --- 14.53%
1991 25.56% 6.01% 16.66% 24.00% --- 25.54%
1990 (0.51%) 8.12% 8.38% 2.37% --- (8.21%)
1989 23.04% 9.16% 12.83% 19.96% --- 23.59%
1988 16.68% 7.39% 7.13% 13.40% --- 22.09%
1987 2.10% 6.49% 2.60% 3.12% --- 3.32%
1986 20.15% 6.60% 14.46% 18.30% --- 17.76%
1985 30.54% 8.03% 19.94% 24.88% --- 9.50%*
1984 5.40% 10.39% 11.69% 8.24%* --- ---
1983 22.85% 8.97% 7.26% --- --- ---
1982 25.67% 11.12%* 22.79%* --- --- ---
1981 6.67% --- --- --- --- ---
1980 27.62% --- --- --- --- ---
1979 19.54% --- --- --- --- ---
1978 3.71% --- --- --- --- ---
1977 (0.52%) --- --- --- --- ---
1976 24.77% --- --- --- --- ---
1975 32.85% --- --- --- --- ---
1974 (17.61%)* --- --- --- --- ---
---------------------------------------------------------------------------------------------------------------
</TABLE>
The figures show in this Table do not reflect any charges at the Separate
Account or the Policy level.
*since inception.
Dates of inception:
MML Equity Fund - 9/15/71 MML Blend Fund 2/3/84
Managed Bond Fund - 12/16/81 MML Small Cap Value Equity Fund
- 6/1/98
MML Money Market Fund - 11/12/90 MML Equity Index Fund - 4/30/97
Oppenheimer Global Securities Fund - 11/12/90 Oppenheimer Aggressive Growth
Fund - 8/15/86
Oppenheimer Growth Fund - 4/3/85 Oppenheimer Strategic Bond Fund
- 5/3/93
VIP II Contrafund Portfolio- 1/3/95 Mid-Cap Growth Portfolio -
12/31/96
VP Income & Growth - 10/30/97
29
<PAGE>
TABLE 2 (CONTINUED)
ONE YEAR TOTAL RETURNS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
OPPENHEIMER OPPENHEIMER VIP II MID-CAP
YEAR OPPENHEIMER AGGRESSIVE GLOBAL CONTRAFUND GROWTH VP INCOME &
ENDED STRATEGIC BOND GROWTH SECURITIES PORTFOLIO PORTFOLIO GROWTH#
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997 8.71% 11.67% 22.42% 24.14% 18.80%* 7.8%*
1996 12.07% 20.16% 17.80% 21.22% --- ---
1995 15.33% 32.52% 2.24% 39.72%* --- ---
1994 (5.85%) (7.50%) (5.72%) --- --- ---
1993 4.25%* 27.32% 70.32% --- --- ---
1992 --- 15.42% (7.11%) --- --- ---
1991 --- 54.72% 3.39% --- --- ---
1990 --- (16.32%) 0.40%* --- --- ---
1989 --- 27.39% --- --- --- ---
1988 --- 13.41% --- --- --- ---
1987 --- 14.34% --- --- --- ---
1986 --- (1.65%)* --- --- --- ---
1985 --- --- --- --- --- ---
1984 --- --- --- --- --- ---
1983 --- --- --- --- --- ---
1982 --- --- --- --- --- ---
1981 --- --- --- --- --- ---
1980 --- --- --- --- --- ---
1979 --- --- --- --- --- ---
1978 --- --- --- --- --- ---
1977 --- --- --- --- --- ---
1976 --- --- --- --- --- ---
1975 --- --- --- --- --- ---
1974 --- --- --- --- --- ---
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The figures show in this Table do not reflect any charges at the Separate
Account or the Policy level.
*since inception.
Dates of inception:
MML Equity Fund - 9/15/71 MML Blend Fund - 2/3/84
Managed Bond Fund - 12/16/81 MML Small Cap Value Equity
Fund - 6/1/98
MML Money Market Fund - 11/12/90 MML Equity Index Fund - 4/30/97
Oppenheimer Global Securities Fund - 11/12/90 Oppenheimer Aggressive Growth
Fund - 8/15/86
Oppenheimer Growth Fund - 4/3/85 Oppenheimer Strategic Bond
Fund - 5/3/93
VIP II Contrafund Portfolio- 1/3/95 Mid-Cap Growth Portfolio -
12/31/96
VP Income & Growth - 10/30/97
# For the performance history of a substantially similar fund, the American
Century Income & Growth Fund, turn to the Section in the attached American
Century Variable Portfolios prospectus entitled "INVESTMENT PERFORMANCE OF
SIMILAR FUND."
30
<PAGE>
APPENDIX D
ILLUSTRATION OF DEATH BENEFITS, NET SURRENDER VALUES, AND ACCUMULATED PREMIUMS
The following tables illustrate the way in which a Policy operates. They show
how the Death Benefit and Net Surrender Value could vary over an extended period
of time assuming the funds experience hypothetical gross rates of investment
return (i.e., investment income and capital gains and losses, realized or
unrealized), equivalent to constant gross annual rates of 0%, 6%, and 12%. The
tables are based on annual premium payments of $5,000 for a Select-Preferred
Male age 35. Select-Preferred is MassMutual's best risk classification. Separate
tables are shown for the current and guaranteed schedules of charges. These
tables will assist in the comparison of Death Benefits and Net Surrender Values
for the Policy with those of other variable life policies.
The Death Benefits and Net 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 and below that average in individual Policy Years.
They also would differ if any Policy loan were made during the period of time
illustrated. They also would be different depending on the allocation of
investment value to each Division. They would be different depending on the
allocation of investment value to each Division if the rates of return for all
funds averaged 0%, 6%, and 12% but varied above or below that average for
particular funds.
The Death Benefits and Net Surrender Values shown in Tables 1, 2, 3, 7, 8, and 9
reflect the following current charges:
. Administrative Charges of $6 per month per Policy.
. Face Amount Charge equal to a per $1,000 of Face Amount monthly charge that
varies by the issue age of the Insured in Coverage Years 1-5.
. Insurance Charges based on the current rates being charged by the Company
for Select-Preferred, fully underwritten risks.
. Mortality and Expense Risk Charges of 0.55% on an annual basis of the daily
net asset value of the Separate Account in all Policy Years.
. Fund level expenses of 0.63% on an annual basis of the net asset value of
the Separate Account. These expenses represent the unweighted average of
all fund expenses.
The Death Benefits and Net Surrender Values shown in Tables 4, 5, 6, 10, 11, and
12 reflect the following guaranteed maximum charges as well as the current fund
level expenses.
. Administrative Charges equal to $12 per month.
. Face Amount Charge equal to a per $1,000 of Face Amount monthly charge that
varies by the issue age of the Insured in Coverage Years 1-5.
. Insurance Charges based on the 1980 CSO Mortality Table.
. Mortality and Expense Risk Charges equal to 0.90% on an annual basis of the
daily net asset value of the Separate Account in all years.
Net Surrender Values shown in the Tables reflect the deduction of Surrender
Charges in the first 14 Coverage Years. The Surrender Charge in the first year
is 140% of the Target Premium not to exceed $50 per $1,000 of Face Amount. In
each of Coverage Years two through 14, the Surrender Charge is equal to the
Surrender Charge in the prior year reduced by 1/14th of the Surrender Charge in
the first year.
Taking the current Mortality and Expense Risk Charge and the fund level expenses
into account, the gross rates of 0%, 6%, and 12% are -0.90%, 5.05%, and 11.00%
respectively on a net basis.
31
<PAGE>
TABLE 1
<TABLE>
<CAPTION>
FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICY
Male Issue Age 35, Select-Preferred $1,200 Annual Premium
Death Benefit Option 1 $100,000 Initial Face Amount
Current Schedule of Charges Guideline Premium Test
Death Benefit Assuming Net Surrender Value Assuming
Hypothetical Gross Annual Hypothetical Gross Annual
Investment Return Of: Investment Return Of:
- -----------------------------------------------------------------------------------------------------------------
Premiums
End Of Accumulated
Policy at 5% Interest
Year Per Year 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,250 $100,000 $100,000 $ 100,000 $ 0 $ 0 $ 0
2 $ 10,763 $100,000 $100,000 $ 100,000 $ 609 $ 776 $ 950
3 $ 16,551 $100,000 $100,000 $ 100,000 $ 1,474 $ 1,802 $ 2,159
4 $ 22,628 $100,000 $100,000 $ 100,000 $ 2,329 $ 2,874 $ 3,489
5 $ 29,010 $100,000 $100,000 $ 100,000 $ 3,176 $ 3,994 $ 4,954
6 $ 35,710 $100,000 $100,000 $ 100,000 $ 4,147 $ 5,301 $ 6,710
7 $ 42,746 $100,000 $100,000 $ 100,000 $ 5,098 $ 6,657 $ 8,635
8 $ 50,133 $100,000 $100,000 $ 100,000 $ 6,028 $ 8,063 $ 10,750
9 $ 57,889 $100,000 $100,000 $ 100,000 $ 6,949 $ 9,535 $ 13,084
10 $ 66,034 $100,000 $100,000 $ 100,000 $ 7,851 $ 11,064 $ 15,653
15 $ 113,287 $100,000 $100,000 $ 100,000 $12,169 $ 19,783 $ 33,113
20 $ 173,596 $100,000 $100,000 $ 100,000 $15,798 $ 30,270 $ 61,610
25 $ 250,567 $100,000 $100,000 $ 145,948 $18,800 $ 43,228 $ 108,916
30 $ 348,804 $100,000 $100,000 $ 228,038 $20,871 $ 59,258 $ 186,917
35 $ 474,182 $100,000 $100,000 $ 365,739 $21,641 $ 79,442 $ 315,292
40 $ 634,199 $100,000 $112,854 $ 563,919 $20,449 $105,471 $ 527,027
45 $ 838,426 $100,000 $145,335 $ 921,610 $16,088 $138,414 $ 877,724
50 $1,099,077 $100,000 $188,193 $1,525,441 $ 6,157 $179,231 $1,452,801
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Account Value Assuming Hypothetical Gross
Annual Investment Return Of:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
End of
Policy Year 0% 6% 12%
-----------------------------------------------------------------
<S> <C> <C> <C>
1 $ 817 $ 875 $ 933
2 $ 1,626 $ 1,792 $ 1,966
3 $ 2,414 $ 2,742 $ 3,099
4 $ 3,193 $ 3,738 $ 4,353
5 $ 3,952 $ 4,770 $ 5,730
6 $ 4,847 $ 6,001 $ 7,409
7 $ 5,721 $ 7,280 $ 9,258
8 $ 6,575 $ 8,610 $11,296
9 $ 7,419 $10,005 $13,554
10 $ 8,244 $11,458 $16,046
15 $12,169 $19,783 $33,113
-------------------------------------------------------------------
</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 the Company or the trust that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
32
<PAGE>
TABLE 2
<TABLE>
<CAPTION>
FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICY
Male Issue Age 35, Select-Preferred $1,200 Annual Premium
Death Benefit Option 2 $100,000 Initial Face Amount
Current Schedule of Charges Guideline Premium Test
Death Benefit Assuming Net Surrender Value Assuming
Hypothetical Gross Annual Hypothetical Gross Annual
Investment Return Of: Investment Return Of:
- -----------------------------------------------------------------------------------------------------------------
Premiums
End Of Accumulated
Policy at 5% Interest
Year Per Year 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,250 $100,817 $100,874 $ 100,932 $ 0 $ 0 $ 0
2 $ 10,763 $101,624 $101,790 $ 101,964 $ 607 $ 774 $ 947
3 $ 16,551 $102,409 $102,737 $ 103,093 $ 1,469 $ 1,797 $ 2,153
4 $ 22,628 $103,185 $103,729 $ 104,342 $ 2,322 $ 2,865 $ 3,479
5 $ 29,010 $103,940 $104,755 $ 105,712 $ 3,164 $ 3,979 $ 4,936
6 $ 35,710 $104,829 $105,978 $ 107,380 $ 4,130 $ 5,278 $ 6,681
7 $ 42,746 $105,696 $107,246 $ 109,214 $ 5,073 $ 6,623 $ 8,591
8 $ 50,133 $106,540 $108,563 $ 111,231 $ 5,994 $ 8,016 $ 10,684
9 $ 57,889 $107,375 $109,941 $ 113,462 $ 6,905 $ 9,471 $ 12,992
10 $ 66,034 $108,187 $111,373 $ 115,920 $ 7,794 $ 10,980 $ 15,526
15 $ 113,287 $112,026 $119,523 $ 132,638 $12,026 $ 19,523 $ 32,638
20 $ 173,596 $115,524 $129,663 $ 160,238 $15,524 $ 29,663 $ 60,238
25 $ 250,567 $118,272 $141,822 $ 205,347 $18,272 $ 41,822 $ 105,347
30 $ 348,804 $119,860 $156,000 $ 278,911 $19,860 $ 56,000 $ 178,911
35 $ 474,182 $119,798 $172,083 $ 398,979 $19,798 $ 72,083 $ 298,979
40 $ 634,199 $117,299 $189,551 $ 595,099 $17,299 $ 89,551 $ 495,099
45 $ 838,426 $111,168 $207,237 $ 915,772 $11,168 $107,237 $ 815,772
50 $1,099,077 $ 0 $222,883 $1,440,707 $ 0 $122,883 $1,340,707
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Account Value Assuming Hypothetical Gross
Annual Investment Return Of:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
End of
Policy Year 0% 6% 12%
-----------------------------------------------------------------
<S> <C> <C> <C>
1 $ 817 $ 874 $ 932
2 $ 1,624 $ 1,790 $ 1,964
3 $ 2,409 $ 2,737 $ 3,093
4 $ 3,185 $ 3,729 $ 4,342
5 $ 3,940 $ 4,755 $ 5,712
6 $ 4,829 $ 5,978 $ 7,380
7 $ 5,696 $ 7,246 $ 9,214
8 $ 6,540 $ 8,563 $11,231
9 $ 7,375 $ 9,941 $13,462
10 $ 8,187 $11,373 $15,920
15 $12,026 $19,523 $32,638
-----------------------------------------------------------------
</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 the Company or the trust that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
33
<PAGE>
TABLE 3
<TABLE>
<S> <C>
FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICY
Male Issue Age 35, Select-Preferred $1,200 Annual Premium
Death Benefit Option 3 $100,000 Initial Face Amount
Current Schedule of Charges Guideline Premium Test
</TABLE>
<TABLE>
<CAPTION>
Death Benefit Assuming Net Surrender Value Assuming
Hypothetical Gross Annual Hypothetical Gross Annual
Investment Return Of: Investment Return Of:
- -----------------------------------------------------------------------------------------------------------------
Premiums
End Of Accumulated
Policy at 5% Interest
Year Per Year 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,250 $101,200 $101,200 $ 101,200 $ 0 $ 0 $ 0
2 $ 10,763 $102,400 $102,400 $ 102,400 $ 606 $ 773 $ 947
3 $ 16,551 $103,600 $103,600 $ 103,600 $ 1,467 $ 1,795 $ 2,151
4 $ 22,628 $104,800 $104,800 $ 104,800 $ 2,319 $ 2,862 $ 3,476
5 $ 29,010 $106,000 $106,000 $ 106,000 $ 3,159 $ 3,975 $ 4,933
6 $ 35,710 $107,200 $107,200 $ 107,200 $ 4,122 $ 5,272 $ 6,677
7 $ 42,746 $108,400 $108,400 $ 108,400 $ 5,062 $ 6,615 $ 8,588
8 $ 50,133 $109,600 $109,600 $ 109,600 $ 5,978 $ 8,006 $ 10,682
9 $ 57,889 $110,800 $110,800 $ 110,800 $ 6,885 $ 9,459 $ 12,993
10 $ 66,034 $112,000 $112,000 $ 112,000 $ 7,768 $ 10,965 $ 15,532
15 $ 113,287 $118,000 $118,000 $ 118,000 $11,959 $ 19,506 $ 32,737
20 $ 173,596 $124,000 $124,000 $ 124,000 $15,391 $ 29,677 $ 60,705
25 $ 250,567 $130,000 $130,000 $ 143,612 $17,989 $ 41,987 $ 107,173
30 $ 348,804 $136,000 $136,000 $ 224,532 $19,229 $ 56,672 $ 184,042
35 $ 474,182 $142,000 $142,000 $ 360,245 $18,377 $ 74,150 $ 310,556
40 $ 634,199 $148,000 $148,000 $ 555,566 $14,081 $ 95,096 $ 519,221
45 $ 838,426 $154,000 $154,000 $ 908,072 $ 3,806 $120,919 $ 864,831
50 $1,099,077 $160,000 $162,681 $1,503,146 $ 0 $154,935 $1,431,568
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Account Value Assuming Hypothetical Gross
Annual Investment Return Of:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
End of
Policy Year 0% 6% 12%
-----------------------------------------------------------------
<S> <C> <C> <C>
1 $ 816 $ 874 $ 932
2 $ 1,623 $ 1,789 $ 1,963
3 $ 2,407 $ 2,735 $ 3,091
4 $ 3,182 $ 3,726 $ 4,340
5 $ 3,935 $ 4,751 $ 5,709
6 $ 4,821 $ 5,972 $ 7,377
7 $ 5,685 $ 7,238 $ 9,211
8 $ 6,525 $ 8,552 $11,228
9 $ 7,355 $ 9,929 $13,463
10 $ 8,162 $11,358 $15,925
15 $11,959 $19,506 $32,737
-----------------------------------------------------------------
</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 the Company or the trust that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
34
<PAGE>
TABLE 4
<TABLE>
<S> <C>
FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICY
Male Issue Age 35, Select-Preferred $1,200 Annual Premium
Death Benefit Option 1 $100,000 Initial Face Amount
Guaranteed Schedules of Mortality and Expense Charges Guideline Premium Test
and Current Fund Level Charges
</TABLE>
<TABLE>
<CAPTION>
Death Benefit Assuming Net Surrender Value Assuming
Hypothetical Gross Annual Hypothetical Gross Annual
Investment Return Of: Investment Return Of:
- -----------------------------------------------------------------------------------------------------------------
Premiums
End Of Accumulated
Policy at 5% Interest
Year Per Year 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,250 $100,000 $100,000 $ 100,000 $ 0 $ 0 $ 0
2 $ 10,763 $100,000 $100,000 $ 100,000 $ 233 $ 374 $ 523
3 $ 16,551 $100,000 $100,000 $ 100,000 $ 907 $ 1,180 $ 1,477
4 $ 22,628 $100,000 $100,000 $ 100,000 $ 1,563 $ 2,009 $ 2,515
5 $ 29,010 $100,000 $100,000 $ 100,000 $ 2,213 $ 2,875 $ 3,657
6 $ 35,710 $100,000 $100,000 $ 100,000 $ 2,991 $ 3,917 $ 5,056
7 $ 42,746 $100,000 $100,000 $ 100,000 $ 3,739 $ 4,984 $ 6,575
8 $ 50,133 $100,000 $100,000 $ 100,000 $ 4,469 $ 6,089 $ 8,241
9 $ 57,889 $100,000 $100,000 $ 100,000 $ 5,171 $ 7,223 $ 10,058
10 $ 66,034 $100,000 $100,000 $ 100,000 $ 5,845 $ 8,388 $ 12,044
15 $ 113,287 $100,000 $100,000 $ 100,000 $ 8,792 $14,732 $ 25,262
20 $ 173,596 $100,000 $100,000 $ 100,000 $10,349 $21,450 $ 46,120
25 $ 250,567 $100,000 $100,000 $ 108,362 $10,274 $28,652 $ 80,867
30 $ 348,804 $100,000 $100,000 $ 168,581 $ 7,476 $35,858 $ 138,181
35 $ 474,182 $100,000 $100,000 $ 267,674 $ 0 $42,029 $ 230,753
40 $ 634,199 $100,000 $100,000 $ 407,834 $ 0 $45,234 $ 381,153
45 $ 838,426 $100,000 $100,000 $ 660,011 $ 0 $40,307 $ 628,582
50 $1,099,077 $100,000 $100,000 $1,073,301 $ 0 $11,914 $1,022,192
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Account Value Assuming Hypothetical Gross
Annual Investment Return Of:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
End of
Policy Year 0% 6% 12%
-----------------------------------------------------------------
<S> <C> <C> <C>
1 $ 634 $ 685 $ 736
2 $1,249 $ 1,391 $ 1,539
3 $1,847 $ 2,120 $ 2,417
4 $2,427 $ 2,873 $ 3,379
5 $2,989 $ 3,651 $ 4,433
6 $3,690 $ 4,617 $ 5,755
7 $4,362 $ 5,607 $ 7,198
8 $5,016 $ 6,636 $ 8,787
9 $5,641 $ 7,693 $10,528
10 $6,238 $ 8,782 $12,438
15 $8,792 $14,732 $25,262
-----------------------------------------------------------------
</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 the Company or the trust that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
35
<PAGE>
TABLE 5
<TABLE>
<CAPTION>
FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICY
Male Issue Age 35, Select-Preferred $1,200 Annual Premium
Death Benefit Option 2 $100,000 Initial Face Amount
Guaranteed Schedules of Mortality and Expense Charges Guideline Premium Test
and Current Fund Level Charges
Death Benefit Assuming Net Surrender Value Assuming
Hypothetical Gross Annual Hypothetical Gross Annual
Investment Return Of: Investment Return Of:
- -----------------------------------------------------------------------------------------------------------------
Premiums
End Of Accumulated
Policy at 5% Interest
Year Per Year 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,250 $100,632 $100,683 $100,734 $ 0 $ 0 $ 0
2 $ 10,763 $101,245 $101,387 $101,534 $ 229 $ 370 $ 518
3 $ 16,551 $101,839 $102,111 $102,407 $ 899 $ 1,171 $ 1,467
4 $ 22,628 $102,414 $102,857 $103,360 $1,550 $ 1,994 $ 2,497
5 $ 29,010 $102,970 $103,627 $104,402 $2,194 $ 2,851 $ 3,626
6 $ 35,710 $103,662 $104,580 $105,708 $2,963 $ 3,881 $ 5,009
7 $ 42,746 $104,323 $105,555 $107,128 $3,700 $ 4,932 $ 6,505
8 $ 50,133 $104,964 $106,563 $108,686 $4,417 $ 6,017 $ 8,140
9 $ 57,889 $105,573 $107,595 $110,385 $5,103 $ 7,125 $ 9,915
10 $ 66,034 $106,151 $108,650 $112,241 $5,758 $ 8,257 $ 11,847
15 $ 113,287 $108,555 $114,300 $124,467 $8,555 $14,300 $ 24,467
20 $ 173,596 $109,831 $120,287 $143,465 $9,831 $20,287 $ 43,465
25 $ 250,567 $109,276 $125,820 $172,693 $9,276 $25,820 $ 72,693
30 $ 348,804 $105,809 $129,420 $217,355 $5,809 $29,420 $117,355
35 $ 474,182 $ 0 $128,147 $284,849 $ 0 $28,147 $184,849
40 $ 634,199 $ 0 $116,977 $386,014 $ 0 $16,977 $286,014
45 $ 838,426 $ 0 $ 0 $535,811 $ 0 $ 0 $435,811
50 $1,099,077 $ 0 $ 0 $758,278 $ 0 $ 0 $658,278
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Account Value Assuming Hypothetical Gross
Annual Investment Return Of:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
End of
Policy Year 0% 6% 12%
-----------------------------------------------------------------
<S> <C> <C> <C>
1 $ 632 $ 683 $ 734
2 $1,245 $ 1,387 $ 1,534
3 $1,839 $ 2,111 $ 2,407
4 $2,414 $ 2,857 $ 3,360
5 $2,970 $ 3,627 $ 4,402
6 $3,662 $ 4,580 $ 5,708
7 $4,323 $ 5,555 $ 7,128
8 $4,964 $ 6,563 $ 8,686
9 $5,573 $ 7,595 $10,385
10 $6,151 $ 8,650 $12,241
15 $8,555 $14,300 $24,467
-----------------------------------------------------------------
</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 the Company or the trust that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
36
<PAGE>
TABLE 6
<TABLE>
<CAPTION>
FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICY
Male Issue Age 35, Select-Preferred $1,200 Annual Premium
Death Benefit Option 3 $100,000 Initial Face Amount
Guaranteed Schedule of Mortality and Expense Charges Guideline Premium Test
and Current Fund Level Charges
Death Benefit Assuming Net Surrender Value Assuming
Hypothetical Gross Annual Hypothetical Gross Annual
Investment Return Of: Investment Return Of:
- -----------------------------------------------------------------------------------------------------------------
Premiums
End Of Accumulated
Policy at 5% Interest
Year Per Year 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,250 $101,200 $101,200 $101,200 $ 0 $ 0 $ 0
2 $ 10,763 $102,400 $102,400 $102,400 $ 226 $ 368 $ 516
3 $ 16,551 $103,600 $103,600 $103,600 $ 894 $ 1,166 $ 1,462
4 $ 22,628 $104,800 $104,800 $104,800 $1,540 $ 1,985 $ 2,488
5 $ 29,010 $106,000 $106,000 $106,000 $2,178 $ 2,836 $ 3,613
6 $ 35,710 $107,200 $107,200 $107,200 $2,940 $ 3,859 $ 4,990
7 $ 42,746 $108,400 $108,400 $108,400 $3,667 $ 4,902 $ 6,480
8 $ 50,133 $109,600 $109,600 $109,600 $4,373 $ 5,977 $ 8,109
9 $ 57,889 $110,800 $110,800 $110,800 $5,045 $ 7,073 $ 9,879
10 $ 66,034 $112,000 $112,000 $112,000 $5,683 $ 8,192 $ 11,805
15 $ 113,287 $118,000 $118,000 $118,000 $8,333 $14,134 $ 24,463
20 $ 173,596 $124,000 $124,000 $124,000 $9,265 $19,943 $ 43,919
25 $ 250,567 $130,000 $130,000 $130,000 $7,879 $25,144 $ 75,340
30 $ 348,804 $136,000 $136,000 $156,215 $2,369 $28,020 $128,045
35 $ 474,182 $142,000 $142,000 $248,599 $ 0 $24,610 $214,309
40 $ 634,199 $148,000 $148,000 $379,273 $ 0 $ 5,672 $354,460
45 $ 838,426 $154,000 $154,000 $614,277 $ 0 $ 0 $585,025
50 $1,099,077 $160,000 $160,000 $999,409 $ 0 $ 0 $951,818
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Account Value Assuming Hypothetical Gross
Annual Investment Return Of:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
End of
Policy Year 0% 6% 12%
-----------------------------------------------------------------
<S> <C> <C> <C>
1 $ 632 $ 683 $ 734
2 $1,243 $ 1,384 $ 1,532
3 $1,834 $ 2,106 $ 2,402
4 $2,404 $ 2,848 $ 3,352
5 $2,954 $ 3,612 $ 4,389
6 $3,639 $ 4,559 $ 5,689
7 $4,290 $ 5,525 $ 7,103
8 $4,919 $ 6,523 $ 8,655
9 $5,515 $ 7,543 $10,349
10 $6,076 $ 8,585 $12,199
15 $8,333 $14,134 $24,463
-----------------------------------------------------------------
</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 the Company or the trust that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
37
<PAGE>
TABLE 7
<TABLE>
<CAPTION>
FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICY
Male Issue Age 35, Select-Preferred $1,200 Annual Premium
Death Benefit Option 1 $100,000 Initial Face Amount
Current Schedule of Charges Cash Value Test
Death Benefit Assuming Net Surrender Value Assuming
Hypothetical Gross Annual Hypothetical Gross Annual
Investment Return Of: Investment Return Of:
- -----------------------------------------------------------------------------------------------------------------
Premiums
End Of Accumulated
Policy at 5% Interest
Year Per Year 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,250 $100,000 $100,000 $ 100,000 $ 0 $ 0 $ 0
2 $ 10,763 $100,000 $100,000 $ 100,000 $ 609 $ 776 $ 950
3 $ 16,551 $100,000 $100,000 $ 100,000 $ 1,474 $ 1,802 $ 2,159
4 $ 22,628 $100,000 $100,000 $ 100,000 $ 2,329 $ 2,874 $ 3,489
5 $ 29,010 $100,000 $100,000 $ 100,000 $ 3,176 $ 3,994 $ 4,954
6 $ 35,710 $100,000 $100,000 $ 100,000 $ 4,147 $ 5,301 $ 6,710
7 $ 42,746 $100,000 $100,000 $ 100,000 $ 5,098 $ 6,657 $ 8,635
8 $ 50,133 $100,000 $100,000 $ 100,000 $ 6,028 $ 8,063 $ 10,750
9 $ 57,889 $100,000 $100,000 $ 100,000 $ 6,949 $ 9,535 $ 13,084
10 $ 66,034 $100,000 $100,000 $ 100,000 $ 7,851 $ 11,064 $ 15,653
15 $ 113,287 $100,000 $100,000 $ 100,000 $12,169 $ 19,783 $ 33,113
20 $ 173,596 $100,000 $100,000 $ 100,000 $15,798 $ 30,270 $ 61,610
25 $ 250,567 $100,000 $100,000 $ 145,948 $18,800 $ 43,228 $ 108,916
30 $ 348,804 $100,000 $100,000 $ 228,038 $20,871 $ 59,258 $ 186,917
35 $ 474,182 $100,000 $100,000 $ 365,739 $21,641 $ 79,442 $ 315,292
40 $ 634,199 $100,000 $112,854 $ 563,919 $20,449 $105,471 $ 527,027
45 $ 838,426 $100,000 $145,335 $ 921,610 $16,088 $138,414 $ 877,724
50 $1,099,077 $100,000 $188,193 $1,525,441 $ 6,157 $179,231 $1,452,801
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Account Value Assuming Hypothetical Gross
Annual Investment Return Of:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
End of
Policy Year 0% 6% 12%
-----------------------------------------------------------------
<S> <C> <C> <C>
1 $ 817 $ 875 $ 933
2 $ 1,626 $ 1,792 $ 1,966
3 $ 2,414 $ 2,742 $ 3,099
4 $ 3,193 $ 3,738 $ 4,353
5 $ 3,952 $ 4,770 $ 5,730
6 $ 4,847 $ 6,001 $ 7,409
7 $ 5,721 $ 7,280 $ 9,258
8 $ 6,575 $ 8,610 $11,296
9 $ 7,419 $10,005 $13,554
10 $ 8,244 $11,458 $16,046
15 $12,169 $19,783 $33,113
-----------------------------------------------------------------
</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 the Company or the trust that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
38
<PAGE>
TABLE 8
<TABLE>
<CAPTION>
FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICY
Male Issue Age 35, Select-Preferred $1,200 Annual Premium
Death Benefit Option 2 $100,000 Initial Face Amount
Current Schedule of Charges Cash Value Test
Death Benefit Assuming Net Surrender Value Assuming
Hypothetical Gross Annual Hypothetical Gross Annual
Investment Return Of: Investment Return Of:
- -----------------------------------------------------------------------------------------------------------------
Premiums
End Of Accumulated
Policy at 5% Interest
Year Per Year 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,250 $100,817 $100,874 $ 100,932 $ 0 $ 0 $ 0
2 $ 10,763 $101,624 $101,790 $ 101,964 $ 607 $ 774 $ 947
3 $ 16,551 $102,409 $102,737 $ 103,093 $ 1,469 $ 1,797 $ 2,153
4 $ 22,628 $103,185 $103,729 $ 104,342 $ 2,322 $ 2,865 $ 3,479
5 $ 29,010 $103,940 $104,755 $ 105,712 $ 3,164 $ 3,979 $ 4,936
6 $ 35,710 $104,829 $105,978 $ 107,380 $ 4,130 $ 5,278 $ 6,681
7 $ 42,746 $105,696 $107,246 $ 109,214 $ 5,073 $ 6,623 $ 8,591
8 $ 50,133 $106,540 $108,563 $ 111,231 $ 5,994 $ 8,016 $ 10,684
9 $ 57,889 $107,375 $109,941 $ 113,462 $ 6,905 $ 9,471 $ 12,992
10 $ 66,034 $108,187 $111,373 $ 115,920 $ 7,794 $ 10,980 $ 15,526
15 $ 113,287 $112,026 $119,523 $ 132,638 $12,026 $ 19,523 $ 32,638
20 $ 173,596 $115,524 $129,663 $ 160,238 $15,524 $ 29,663 $ 60,238
25 $ 250,567 $118,272 $141,822 $ 205,347 $18,272 $ 41,822 $ 105,347
30 $ 348,804 $119,860 $156,000 $ 278,911 $19,860 $ 56,000 $ 178,911
35 $ 474,182 $119,798 $172,083 $ 398,979 $19,798 $ 72,083 $ 298,979
40 $ 634,199 $117,299 $189,551 $ 595,099 $17,299 $ 89,551 $ 495,099
45 $ 838,426 $111,168 $207,237 $ 915,772 $11,168 $107,237 $ 815,772
50 $1,099,077 $ 0 $222,883 $1,440,707 $ 0 $122,883 $1,340,707
- ---------------------------------------------------------------------------------------------------
</TABLE>
Account Value Assuming Hypothetical Gross
Annual Investment Return Of:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
End of
Policy Year 0% 6% 12%
-----------------------------------------------------------------
<S> <C> <C> <C>
1 $ 817 $ 874 $ 932
2 $ 1,624 $ 1,790 $ 1,964
3 $ 2,409 $ 2,737 $ 3,093
4 $ 3,185 $ 3,729 $ 4,342
5 $ 3,940 $ 4,755 $ 5,712
6 $ 4,829 $ 5,978 $ 7,380
7 $ 5,696 $ 7,246 $ 9,214
8 $ 6,540 $ 8,563 $11,231
9 $ 7,375 $ 9,941 $13,462
10 $ 8,187 $11,373 $15,920
15 $12,026 $19,523 $32,638
-----------------------------------------------------------------
</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 the Company or the trust that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
39
<PAGE>
TABLE 9
<TABLE>
<CAPTION>
FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICY
Male Issue Age 35, Select-Preferred $1,200 Annual Premium
Death Benefit Option 3 $100,000 Initial Face Amount
Current Schedule of Charges Cash Value Test
Death Benefit Assuming Net Surrender Value Assuming
Hypothetical Gross Annual Hypothetical Gross Annual
Investment Return Of: Investment Return Of:
- -----------------------------------------------------------------------------------------------------------------
Premiums
End Of Accumulated
Policy at 5% Interest
Year Per Year 0% 6% 12% 0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,250 $101,200 $101,200 $ 101,200 $ 0 $ 0 $ 0
2 $ 10,763 $102,400 $102,400 $ 102,400 $ 606 $ 773 $ 947
3 $ 16,551 $103,600 $103,600 $ 103,600 $ 1,467 $ 1,795 $ 2,151
4 $ 22,628 $104,800 $104,800 $ 104,800 $ 2,319 $ 2,862 $ 3,476
5 $ 29,010 $106,000 $106,000 $ 106,000 $ 3,159 $ 3,975 $ 4,933
6 $ 35,710 $107,200 $107,200 $ 107,200 $ 4,122 $ 5,272 $ 6,677
7 $ 42,746 $108,400 $108,400 $ 108,400 $ 5,062 $ 6,615 $ 8,588
8 $ 50,133 $109,600 $109,600 $ 109,600 $ 5,978 $ 8,006 $ 10,682
9 $ 57,889 $110,800 $110,800 $ 110,800 $ 6,885 $ 9,459 $ 12,993
10 $ 66,034 $112,000 $112,000 $ 112,000 $ 7,768 $ 10,965 $ 15,532
15 $ 113,287 $118,000 $118,000 $ 118,000 $11,959 $ 19,506 $ 32,737
20 $ 173,596 $124,000 $124,000 $ 124,000 $15,391 $ 29,677 $ 60,705
25 $ 250,567 $130,000 $130,000 $ 143,612 $17,989 $ 41,987 $ 107,173
30 $ 348,804 $136,000 $136,000 $ 224,532 $19,229 $ 56,672 $ 184,042
35 $ 474,182 $142,000 $142,000 $ 360,245 $18,377 $ 74,150 $ 310,556
40 $ 634,199 $148,000 $148,000 $ 555,566 $14,081 $ 95,096 $ 519,221
45 $ 838,426 $154,000 $154,000 $ 908,072 $ 3,806 $120,919 $ 864,831
50 $1,099,077 $160,000 $162,681 $1,503,146 $ 0 $154,935 $1,431,568
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Account Value Assuming Hypothetical Gross
Annual Investment Return Of:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
End of
Policy Year 0% 6% 12%
-----------------------------------------------------------------
<S> <C> <C> <C>
1 $ 816 $ 874 $ 932
2 $ 1,623 $ 1,789 $ 1,963
3 $ 2,407 $ 2,735 $ 3,091
4 $ 3,182 $ 3,726 $ 4,340
5 $ 3,935 $ 4,751 $ 5,709
6 $ 4,821 $ 5,972 $ 7,377
7 $ 5,685 $ 7,238 $ 9,211
8 $ 6,525 $ 8,552 $11,228
9 $ 7,355 $ 9,929 $13,463
10 $ 8,162 $11,358 $15,925
15 $11,959 $19,506 $32,737
-----------------------------------------------------------------
</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 the Company or the trust that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
40
<PAGE>
TABLE 10
<TABLE>
<S> <C>
FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICY
Male Issue Age 35, Select-Preferred $1,200 Annual Premium
Death Benefit Option 1 $100,000 Initial Face Amount
Guaranteed Schedules of Mortality and Expense Charges Cash Value Test
and Current Fund Level Charges
</TABLE>
<TABLE>
<CAPTION>
Death Benefit Assuming Net Surrender Value Assuming
Hypothetical Gross Annual Hypothetical Gross Annual
Investment Return Of: Investment Return Of:
- ---------------------------------------------------------------------------------------------------------------
Premiums
End Of Accumulated at
Policy 5% Interest
Year Per Year 0% 6% 12% 0% 6% 12%
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,250 $100,000 $100,000 $ 100,000 $ 0 $ 0 $ 0
2 $ 10,763 $100,000 $100,000 $ 100,000 $ 233 $ 374 $ 523
3 $ 16,551 $100,000 $100,000 $ 100,000 $ 907 $ 1,180 $ 1,477
4 $ 22,628 $100,000 $100,000 $ 100,000 $ 1,563 $ 2,009 $ 2,515
5 $ 29,010 $100,000 $100,000 $ 100,000 $ 2,213 $ 2,875 $ 3,657
6 $ 35,710 $100,000 $100,000 $ 100,000 $ 2,991 $ 3,917 $ 5,056
7 $ 42,746 $100,000 $100,000 $ 100,000 $ 3,739 $ 4,984 $ 6,575
8 $ 50,133 $100,000 $100,000 $ 100,000 $ 4,469 $ 6,089 $ 8,241
9 $ 57,889 $100,000 $100,000 $ 100,000 $ 5,171 $ 7,223 $ 10,058
10 $ 66,034 $100,000 $100,000 $ 100,000 $ 5,845 $ 8,388 $ 12,044
15 $ 113,287 $100,000 $100,000 $ 100,000 $ 8,792 $14,732 $ 25,262
20 $ 173,596 $100,000 $100,000 $ 100,000 $10,349 $21,450 $ 46,120
25 $ 250,567 $100,000 $100,000 $ 108,362 $10,274 $28,652 $ 80,867
30 $ 348,804 $100,000 $100,000 $ 168,581 $ 7,476 $35,858 $ 138,181
35 $ 474,182 $100,000 $100,000 $ 267,674 $ 0 $42,029 $ 230,753
40 $ 634,199 $100,000 $100,000 $ 407,834 $ 0 $45,234 $ 381,153
45 $ 838,426 $100,000 $100,000 $ 660,011 $ 0 $40,307 $ 628,582
50 $1,099,077 $100,000 $100,000 $1,073,301 $ 0 $11,914 $1,022,192
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Account Value Assuming Hypothetical Gross
Annual Investment Return Of:
<TABLE>
<CAPTION>
----------------------------------------------------------------
End of
Policy Year 0% 6% 12%
----------------------------------------------------------------
<S> <C> <C> <C>
1 $ 634 $ 685 $ 736
2 $1,249 $ 1,391 $ 1,539
3 $1,847 $ 2,120 $ 2,417
4 $2,427 $ 2,873 $ 3,379
5 $2,989 $ 3,651 $ 4,433
6 $3,690 $ 4,617 $ 5,755
7 $4,362 $ 5,607 $ 7,198
8 $5,016 $ 6,636 $ 8,787
9 $5,641 $ 7,693 $10,528
10 $6,238 $ 8,782 $12,438
15 $8,792 $14,732 $25,262
----------------------------------------------------------------
</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 the Company or the trust that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
41
<PAGE>
TABLE 11
<TABLE>
<S> <C>
FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICY
Male Issue Age 35, Select-Preferred $1,200 Annual Premium
Death Benefit Option 2 $100,000 Initial Face Amount
Guaranteed Schedules of Mortality and Expense Charges Cash Value Test
and Current Fund Level Charges
</TABLE>
<TABLE>
<CAPTION>
Death Benefit Assuming Net Surrender Value Assuming
Hypothetical Gross Annual Hypothetical Gross Annual
Investment Return Of: Investment Return Of:
- ------------------------------------------------------------------------------------------------
Premiums
End of Accumulated at
Policy 5% Interest
Year Per Year 0% 6% 12% 0% 6% 12%
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,250 $100,632 $100,683 $100,734 $ 0 $ 0 $ 0
2 $ 10,763 $101,245 $101,387 $101,534 $ 229 $ 370 $ 518
3 $ 16,551 $101,839 $102,111 $102,407 $ 899 $ 1,171 $ 1,467
4 $ 22,628 $102,414 $102,857 $103,360 $1,550 $ 1,994 $ 2,497
5 $ 29,010 $102,970 $103,627 $104,402 $2,194 $ 2,851 $ 3,626
6 $ 35,710 $103,662 $104,580 $105,708 $2,963 $ 3,881 $ 5,009
7 $ 42,746 $104,323 $105,555 $107,128 $3,700 $ 4,932 $ 6,505
8 $ 50,133 $104,964 $106,563 $108,686 $4,417 $ 6,017 $ 8,140
9 $ 57,889 $105,573 $107,595 $110,385 $5,103 $ 7,125 $ 9,915
10 $ 66,034 $106,151 $108,650 $112,241 $5,758 $ 8,257 $ 11,847
15 $ 113,287 $108,555 $114,300 $124,467 $8,555 $14,300 $ 24,467
20 $ 173,596 $109,831 $120,287 $143,465 $9,831 $20,287 $ 43,465
25 $ 250,567 $109,276 $125,820 $172,693 $9,276 $25,820 $ 72,693
30 $ 348,804 $105,809 $129,420 $217,355 $5,809 $29,420 $117,355
35 $ 474,182 $ 0 $128,147 $284,849 $ 0 $28,147 $184,849
40 $ 634,199 $ 0 $116,977 $386,014 $ 0 $16,977 $286,014
45 $ 838,426 $ 0 $ 0 $535,811 $ 0 $ 0 $435,811
50 $1,099,077 $ 0 $ 0 $758,278 $ 0 $ 0 $658,278
- ------------------------------------------------------------------------------------------------
</TABLE>
Account Value Assuming Hypothetical Gross
Annual Investment Return Of:
<TABLE>
<CAPTION>
-------------------------------------------------------------------
End of
Policy Year 0% 6% 12%
-------------------------------------------------------------------
<S> <C> <C> <C>
1 $ 632 $ 683 $ 734
2 $1,245 $ 1,387 $ 1,534
3 $1,839 $ 2,111 $ 2,407
4 $2,414 $ 2,857 $ 3,360
5 $2,970 $ 3,627 $ 4,402
6 $3,662 $ 4,580 $ 5,708
7 $4,323 $ 5,555 $ 7,128
8 $4,964 $ 6,563 $ 8,686
9 $5,573 $ 7,595 $10,385
10 $6,151 $ 8,650 $12,241
15 $8,555 $14,300 $24,467
-------------------------------------------------------------------
</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 the Company or the trust that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
42
<PAGE>
TABLE 12
<TABLE>
<S> <C>
FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICY
Male Issue Age 35, Select-Preferred $1,200 Annual Premium
Death Benefit Option 3 $100,000 Initial Face Amount
Guaranteed Schedules of Mortality and Expense Charges Cash Value Test
and Current Fund Level Charges
</TABLE>
<TABLE>
<CAPTION>
Death Benefit Assuming Net Surrender Value Assuming
Hypothetical Gross Annual Hypothetical Gross Annual
Investment Return Of: Investment Return Of:
- ------------------------------------------------------------------------------------------------
Premiums
End of Accumulated
Policy at 5% Interest
Year Per Year 0% 6% 12% 0% 6% 12%
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,250 $101,200 $101,200 $101,200 $ 0 $ 0 $ 0
2 $ 10,763 $102,400 $102,400 $102,400 $ 226 $ 368 $ 516
3 $ 16,551 $103,600 $103,600 $103,600 $ 894 $ 1,166 $ 1,462
4 $ 22,628 $104,800 $104,800 $104,800 $1,540 $ 1,985 $ 2,488
5 $ 29,010 $106,000 $106,000 $106,000 $2,178 $ 2,836 $ 3,613
6 $ 35,710 $107,200 $107,200 $107,200 $2,940 $ 3,859 $ 4,990
7 $ 42,746 $108,400 $108,400 $108,400 $3,667 $ 4,902 $ 6,480
8 $ 50,133 $109,600 $109,600 $109,600 $4,373 $ 5,977 $ 8,109
9 $ 57,889 $110,800 $110,800 $110,800 $5,045 $ 7,073 $ 9,879
10 $ 66,034 $112,000 $112,000 $112,000 $5,683 $ 8,192 $ 11,805
15 $ 113,287 $118,000 $118,000 $118,000 $8,333 $14,134 $ 24,463
20 $ 173,596 $124,000 $124,000 $124,000 $9,265 $19,943 $ 43,919
25 $ 250,567 $130,000 $130,000 $130,000 $7,879 $25,144 $ 75,340
30 $ 348,804 $136,000 $136,000 $156,215 $2,369 $28,020 $128,045
35 $ 474,182 $142,000 $142,000 $248,599 $ 0 $24,610 $214,309
40 $ 634,199 $148,000 $148,000 $379,273 $ 0 $ 5,672 $354,460
45 $ 838,426 $154,000 $154,000 $614,277 $ 0 $ 0 $585,025
50 $1,099,077 $160,000 $160,000 $999,409 $ 0 $ 0 $951,818
- ------------------------------------------------------------------------------------------------
</TABLE>
Account Value Assuming Hypothetical Gross
Annual Investment Return Of:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
End of
Policy Year 0% 6% 12%
--------------------------------------------------------------------------
<S> <C> <C> <C>
1 $ 632 $ 683 $ 734
2 $1,243 $ 1,384 $ 1,532
3 $1,834 $ 2,106 $ 2,402
4 $2,404 $ 2,848 $ 3,352
5 $2,954 $ 3,612 $ 4,389
6 $3,639 $ 4,559 $ 5,689
7 $4,290 $ 5,525 $ 7,103
8 $4,919 $ 6,523 $ 8,655
9 $5,515 $ 7,543 $10,349
10 $6,076 $ 8,585 $12,199
15 $8,333 $14,134 $24,463
--------------------------------------------------------------------------
</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 the Company or the trust that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
43
<PAGE>
APPENDIX E
DIRECTORS OF MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
ROGER G. ACKERMAN, DIRECTOR
Chairman and Chief Executive Officer, since 1996, President and Chief Operating
Officer, 1990-1996, Corning, Inc., One Riverfront Plaza, HQE 2, Corning, NY
14831.
JAMES R. BIRLE, DIRECTOR
Chairman, since 1997, and Founder, since 1994, President, 1994-1997, Resolute
Partners, LLC; General Partner, Blackstone Group, 1988-1994, 2 Soundview Drive,
Greenwich CT 06836.
GENE CHAO, DIRECTOR
Chairman, President and CEO, Computer Projections, Inc., since 1991, 733 SW
Vista Avenue, Portland, OR 97205-1203.
PATRICIA DIAZ DENNIS, DIRECTOR
Senior Vice President and Assistant General Counsel, SBC Communications Inc.,
since 1995; Special Counsel, Sullivan & Cromwell, 1993-1995; Assistant Secretary
of State for Human Rights and Humanitarian Affairs, U.S. Department of State,
1992-1993, 175 East Houston, Room 4-A-70, San Antonio, TX 78205.
ANTHONY DOWNS, DIRECTOR
Senior Fellow, The Brookings Institution, since 1977, 1775 Massachusetts Ave.,
N.W., Washington DC 20036-2188.
JAMES L. DUNLAP, DIRECTOR
President and Chief Operating Officer, United Meridian Corporation, since 1996;
Senior Vice President, Texaco, Inc. 1987-1996, 1201 Louisiana, Suite 1400,
Houston, TX 77002-5603.
WILLIAM B. ELLIS, DIRECTOR
Senior Fellow, Yale University School of Forestry and Environmental Studies,
since 1995; Chairman and Chief Executive Officer, Northeast Utilities, 1983-
1995, 31 Pound Foolish Lane, Glastonbury, CT 06033.
ROBERT M. FUREK, DIRECTOR
Chairman, State Board of Trustees for the Hartford School System, since 1997;
President and Chief Executive Officer, Heublein, Inc., 1987-1996, 1 State
Street, Suite 2310, Hartford, CT 06103.
CHARLES K. GIFFORD, DIRECTOR
Chairman and Chief Executive Officer since 1995, and President 1989-1995,
BankBoston, N.A. and Chairman, since 1998, and Chief Executive Officer, since
1985, BankBoston Corporation, 100 Federal Street, Boston, MA 02110.
WILLIAM N. GRIGGS, DIRECTOR
Managing Director, Griggs & Santow, Inc., since 1983, 75 Wall Street, 20th
Floor, New York, NY 10005.
GEORGE B. HARVEY, DIRECTOR
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, Huntington
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
44
<PAGE>
Retired Senior Executive Vice President, Lucent Technologies, since 1996;
Executive Vice President and CEO Multimedia Products Group, AT&T, 1994-1996;
Executive Vice President and CEO, Network Systems Group, 1993-1994; Group
Executive and President, AT&T Network Systems, 1989-1993. 5 Peacock Lane,
Village of Golf, FL 33436-5299.
JOHN F. MAYPOLE, DIRECTOR
Managing Partner, Peach State Real Estate Holding Company, since 1984, 55 Sandy
Hook Road - North, Sarasota, FL 34242.
JOHN J. PAJAK, DIRECTOR, PRESIDENT AND CHIEF OPERATING OFFICER
President and Chief Operating Officer, since 1996; Vice Chairman and Chief
Administrative Officer, 1996; Executive Vice President, 1987-1996, MassMutual,
1295 State Street, Springfield, MA 01111.
THOMAS B. WHEELER, DIRECTOR, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Chairman and Chief Executive Officer, since 1996; President and Chief Executive
Officer, 1988-1996, MassMutual, 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 President
and Deputy General Counsel, 1992-1993, MassMutual, 1295 State Street,
Springfield, MA 01111.
PETER J. DABOUL
Executive Vice President and Chief Information Officer, since 1997, Senior Vice
President 1990-1997, MassMutual, 1295 State Street, Springfield, MA 01111.
JOHN B. DAVIES
Executive Vice President, since 1994; Associate Executive Vice President, 1994,
General Agent, 1982-1993, MassMutual, 1295 State Street, Springfield, MA 01111.
DANIEL J. FITZGERALD
Executive Vice President, since 1994, Corporate Financial Operations, 1994-1997;
Senior Vice President, 1991-1994, MassMutual, 1295 State Street, Springfield, MA
01111.
JAMES E. MILLER
Executive Vice President since 1997 and 1987-1996, MassMutual, Senior Vice
President, UniCare Life and Health Insurance Company, 1996-1997, 1295 State
Street, Springfield, MA 01111.
JOHN V. MURPHY
Executive Vice President, MassMutual, since 1997; Executive Vice President and
Chief Operating Officer, David L. Babson & Co., Inc., 1995-1997; Chief Operating
Officer, Concert Capital Management, Inc., 1993-1995, Senior Vice President and
Chief Financial Officer, Liberty Financial Companies, 1977-1993, 1295 State
Street, Springfield, MA 01111.
GARY E. WENDLANDT
Executive Vice President and Chief Investment Officer, since 1993; Executive
Vice President, 1992-1993; MassMutual, 1295 State Street, Springfield, MA 01111.
JOSEPH M. ZUBRETSKY
Executive Vice President and Chief Financial Officer, since 1997, MassMutual,
Chief Financial Officer, 1996, HealthSource, Coopers & Lybrand, 1990-1996, 1295
State Street, Springfield, MA 01111.
45
<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>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF FINANCIAL POSITION
(Unaudited)
March 31, December 31,
1998 1997
---------- ----------
(In Millions)
Assets:
Bonds $24,417.1 $23,890.3
Common stocks 349.3 354.7
Mortgage loans 4,967.1 4,863.7
Real estate 1,749.9 1,697.7
Other investments 2,166.4 1,963.8
Policy loans 5,003.8 4,950.4
Cash and short-term investments 1,847.3 1,941.2
--------- ---------
Total invested assets 40,500.9 39,661.8
Investment and insurance amounts receivable 1,043.6 1,064.9
Other assets 109.6 104.8
--------- ---------
41,654.1 40,831.5
Separate account assets 18,467.1 16,803.1
--------- ---------
$60,121.2 $57,634.6
========= =========
See notes to statutory financial statements.
1
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF FINANCIAL POSITION, continued
(Unaudited)
March 31, December 31,
1998 1997
---------- ----------
(In Millions)
Liabilities:
Policyholders' reserves and funds $33,858.6 $33,783.2
Policyholders' dividends 960.0 954.1
Policyholders' claims and other benefits 363.2 353.4
Federal income taxes 577.0 436.5
Asset valuation reserve 890.6 840.6
Investment reserves 135.6 132.8
Amounts due on investments purchased and
other liabilities 1,866.6 1,457.9
--------- ---------
38,651.6 37,958.5
Separate account reserves and liabilities 18,466.5 16,802.8
--------- ---------
57,118.1 54,761.3
Policyholders' contingency reserves 3,003.1 2,873.3
--------- ---------
$60,121.2 $57,634.6
========= =========
See notes to statutory financial statements.
2
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF INCOME
(Unaudited)
March 31, March 31,
1998 1997
---- ----
(In Millions)
Revenue:
Premium income $ 1,769.3 $ 1,625.2
Net investment 730.9 701.8
Fees and other income 6.1 8.6
--------- ---------
2,506.3 2,335.6
--------- ---------
Benefits and expenses:
Policy benefits and payments 1,630.9 1,584.0
Addition to policyholders' reserves and funds 287.1 187.0
Commissions 68.0 84.8
Operating expenses 105.1 80.1
State taxes, licenses and fees 30.4 19.0
--------- ---------
2,121.5 1,954.9
--------- ---------
Net gain before federal income taxes and dividends 384.8 380.7
Federal income taxes 49.7 85.0
--------- ---------
Net gain from operations before dividends 335.1 295.7
Dividends to policyholders 226.0 212.3
--------- ---------
Net gain from operations 109.1 83.4
Net realized capital gain (loss) 1.5 (16.9)
--------- ---------
Net income $ 110.6 $ 66.5
========= =========
See notes to statutory financial statements.
3
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF CHANGES
IN POLICYHOLDERS' CONTINGENCY RESERVES
(Unaudited)
Three months ended
March 31,
1998 1997
---- ----
(In Millions)
Policyholders' contingency reserves, beginning
of year $2,873.3 $2,638.6
-------- --------
Increases (decreases) due to:
Net income 110.6 66.5
Net unrealized capital gain 75.8 2.2
Change in asset valuation and investment reserves (52.8) (10.3)
Change in prior year policyholders' reserves 0.5 0.4
Change in non-admitted assets and other (4.3) (6.0)
-------- --------
Policyholders' contingency reserves, end of period $3,003.1 $2,691.4
======== ========
See notes to statutory financial statements.
4
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
STATUTORY STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
For the Periods Ending
March 31,
1998 1997
-------- --------
(In Millions)
Operating activities:
<S> <C> <C>
Net income $ 110.6 $ 66.5
Addition to policyholders' reserves and funds,
net of transfers to separate accounts 85.2 34.1
Net realized capital (gain) loss (1.5) 16.9
Change in federal income taxes payable 140.5 4.9
Other changes 30.8 (10.4)
---------- ----------
Net cash provided by operating activities 365.6 112.0
---------- ----------
Investing activities:
Purchases of investments and loans (4,380.7) (4,062.9)
Sales or maturities of investments and receipts
from repayment of loans 3,921.2 4,069.5
---------- ----------
Net cash provided by (used in) investing activities (459.5) 6.6
---------- ----------
Increase (decrease) in cash and short-term investments (93.9) 118.6
Cash and short-term investments, beginning of year 1,941.2 1,075.4
---------- ----------
Cash and short-term investments, end of year $ 1,847.3 $ 1,194.0
========== ==========
</TABLE>
See notes to statutory financial statements.
5
<PAGE>
NOTES TO STATUTORY FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying interim statutory financial statements of Massachusetts
Mutual Life Insurance Company (the "Company"), except as to form, have been
prepared in conformity with the 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 ("Division of Insurance").
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 requires
they be valued at fair value; (d) deferred income taxes are not provided for
book-tax timing differences as would be required by GAAP; and (e) payments
received for universal 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 accompanying interim financial statements reflect, in the opinion of the
Company's management, all adjustments (consisting of normal, recurring
accruals) necessary for a fair presentation of the interim financial position
and results of operations. Such statements should be read in conjunction with
the annual financial statements.
2. Asset Valuation Reserve
In compliance with regulatory requirements, the Company maintains the Asset
Valuation Reserve. The balance as of March 31, 1998 reflects the year-to-date
activity and a pro rata share of the annual contribution or amortization. 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. These other investment reserves for both periods are
established each quarter based on the Company's best estimate at those dates
and realized losses are taken after a complete analysis is performed during
the fourth quarter.
3. Policyholders' Dividends
In October, the Board of Directors annually approve dividends to be paid in
the following year. The dividend liability recorded as of March 31, 1998 and
December 31, 1997 is based on the dividend scales approved for those periods
in October 1997 and reflects the dividends to be credited for the subsequent
twelve months. In the fourth quarter of each year, the dividend liability is
adjusted to reflect the dividend scale approved in October of that year.
4. New Accounting Pronouncements
The NAIC is currently engaged in an extensive project to codify statutory
accounting ("Codification") 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 been approved by the NAIC,
but must be adopted by the Division of Insurance before the Company must
comply with its provisions, includes seventy two Statements of Statutory
Accounting Principles ("SSAPs"). At this time, it is uncertain when or if the
Division of Insurance will adopt Codification, however, if adopted the
effective date is expected to be no earlier than January 1, 1999. Management
is currently reviewing the impact of Codification.
6
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission (the "Commission") such supplementary and
periodic information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Article V of the Bylaws of MassMutual provide for indemnification of directors
and officers as follows:
Article V. Subject to limitations of law, the Company shall indemnify:
(a) each director, officer or employee;
(b) any individual who serves at the request of the Company as Secretary, a
director, board member, committee member, officer or employee of any
organization or any separate investment account; or
(c) any individual who serves in any capacity with respect to any employee
benefit plan; from and against all loss, liability and expense imposed
upon or incurred by such person in connection with any action, claim or
proceeding of any nature whatsoever, in which such person may be
involved or with which he or she may be threatened, by reason of any
alleged act, omission or otherwise while serving in any such capacity.
Indemnification shall be provided although the person no longer serves in
such capacity and shall include protection for the person's heirs and legal
representatives. Indemnities hereunder shall include, but not be limited
to, all costs and reasonable counsel fees, fines, penalties, judgments or
awards of any kind, and the amount of reasonable settlements, whether or
not payable to the Company or to any of the other entities described in the
preceding paragraph, or to the policyholders or security holders thereof.
Notwithstanding the foregoing, no indemnification shall be provided
with respect to:
(1) any matter as to which the person shall have been adjudicated in
any proceeding not to have acted in good faith in the reasonable
belief that his or her action was in the best interests of the
Company or, to the extent that such matter relates to service
with respect to any employee benefit plan, in the best interests
of the participants or beneficiaries of such employee benefit
plan;
(2) any liability to any entity which is registered as an investment
company under the Federal Investment Company Act of 1940 or to
the security holders thereof, where the basis for such liability
is willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of office; and
(3) any action, claim or proceeding voluntarily initiated by any
person seeking indemnification, unless such action, claim or
proceeding had been authorized by the Board of Directors or
unless such person's indemnification is awarded by vote of the
Board of Directors.
<PAGE>
In any matter disposed of by settlement or in the event of an
adjudication which in the opinion of the General Counsel or his
delegate does not make a sufficient determination of conduct
which could preclude or permit indemnification in accordance
with the preceding paragraphs (1), (2) and (3), the person shall
be entitled to indemnification unless, as determined by the
majority of the disinterested directors or in the opinion of
counsel (who may be an officer of the Company or outside counsel
employed by the Company), such person's conduct was such as
precludes indemnification under any of such paragraphs.
The Company may at its option indemnify for expenses incurred in
connection with any action or proceeding in advance of its final
disposition, upon receipt of a satisfactory undertaking for
repayment if it be subsequently determined that the person thus
indemnified is not entitled to indemnification under this
Article V.
Insofar as indemnification for liability arising under the
Securities Act of 1933 (the "Act") may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
REPRESENTATION UNDER SECTION 26(e)(2)(A) OF
THE INVESTMENT COMPANY ACT OF 1940
Massachusetts Mutual Life Insurance Company hereby represents that the fees and
charges deducted under the flexible premium variable whole life insurance
policies described in this Registration Statement in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by Massachusetts Mutual Life Insurance Company.
<PAGE>
CONTENTS OF FILING
This Registration Statement is comprised of the following documents:
The Facing Sheet.
Cross-Reference to items required by Form N-8B-2.
The Prospectus consisting of 66 pages.
The Undertaking to File Reports.
The Undertaking pursuant to Rule 484 under the Securities Act of
1933.
Representation under Section 26(e)(2)(a) of the Investment Company
Act of 1940.
The Signatures.
Written Consents of the Following Persons:
1. Coopers & Lybrand, L.L.P., independent
accountants;
2. Counsel opining as to the legality of securities being
registered;
3. Opinion and consent of Craig Waddington, FSA, MAAA, opining
as to actuarial matters contained in the Registration
Statement.
The following Exhibits:
99. The following Exhibits correspond to those required by Paragraph
A of the instructions as to Exhibits in Form N-8B-2:
A. 1. Form of Certificate of the Resolution of the Board of
Directors establishing the VUL segment of the Separate
Account./1/
2. Not Applicable.
3. Form of Distribution Agreements:
a. Form of Distribution Servicing Agreement between MML
Distributors, LLC and MassMutual./2/
b. Form of Co-Underwriting Agreement between MML Investors
Services, Inc. and MassMutual./2/
4. Not Applicable.
5. Form of Flexible Premium Adjustable Variable Life
Policy./1/
<PAGE>
6. a. Certificate of Incorporation of MassMutual./3/
b. By-Laws of MassMutual./3/
7. Not Applicable.
8. Form of Participation Agreement.
a. Oppenheimer Variable Account Fund/4/
b. Variable Insurance Products Fund II/4/
c. T. Rowe Price Equity Series, Inc./4/
d. American Century Variable Portfolios, Inc./4/
9. Not Applicable.
10. Form of Application for a Flexible Premium Adjustable
Variable Life insurance policy./1/
11. Memorandum describing MassMutual issuance, transfer, and
redemption procedures for the Policy.
99.B. Opinion and Consent of Counsel as to the legality of the
securities being registered.
99.C. No financial statement will be omitted from the Prospectus
pursuant to Instruction 1(b) or (c) of Part I.
99.D. Not Applicable.
99.E. Consent of Coopers & Lybrand L.L.P.
99.F. Opinion and consent of Craig Waddington, FSA, MAAA, as to
actuarial matters pertaining to the securities being registered.
99.G. Powers of Attorney/3/
27 Not Applicable
/1/ Incorporated by reference to the Initial Registration Statement No. 333-
49475 as an exhibit filed with the Commission effective April 6, 1998.
/2/ Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement No. 33-89798 as an exhibit filed with the Commission effective
May 1, 1996.
/3/ Incorporated by reference to Initial Registration Statement of the Separate
Account as an exhibit filed with the Commission on February 28, 1997.
(Registration No. 333-22557).
/4/ Incorporated by reference to Pre-Effective Amendment No. 2 to SVUL
Registration Statement No. 333-41657 as an exhibit filed with the
Commission on May 26, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
caused this initial Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, all in the city of Springfield and the
Commonwealth of Massachusetts, on the 24th day of June, 1998.
MASSACHUSETTS MUTUAL VARIABLE LIFE SEPARATE ACCOUNT I
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
(Depositor)
By: /s/ Thomas B. Wheeler*
--------------------------------------
Thomas B. Wheeler, Chief Executive Officer
Massachusetts Mutual Life Insurance Company
/s/ Richard M. Howe On June 24, 1998, as Attorney-in-Fact pursuant to
- --------------------
*Richard M. Howe powers of attorney incorporated by reference.
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the duties indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Thomas B. Wheeler* Chief Executive Officer and June 24, 1998
- -----------------------------
Thomas B. Wheeler Chairman of the Board
/s/ John J. Pajak* President, Chief Operating Officer June 24, 1998
- -----------------------------
John J. Pajak and Director
/s/ Joseph M. Zubretsky* Executive Vice President, June 24, 1998
- -----------------------------
Joseph M. Zubretsky Chief Financial Officer &
Chief Accounting Officer
/s/ Roger G. Ackerman* Director June 24, 1998
- -----------------------------
Roger G. Ackerman
/s/ James R. Birle* Director June 24, 1998
- -----------------------------
James R. Birle
/s/ Gene Chao* Director June 24, 1998
- -----------------------------
Gene Chao, Ph.D.
/s/ Patricia Diaz Dennis* Director June 24, 1998
- -----------------------------
Patricia Diaz Dennis
/s/ Anthony Downs* Director June 24, 1998
- -----------------------------
Anthony Downs
/s/ James L. Dunlap* Director June 24, 1998
- -----------------------------
James L. Dunlap
/s/ William B. Ellis* Director June 24, 1998
- -----------------------------
William B. Ellis, Ph.D.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Robert M. Furek* Director June 24, 1998
- -----------------------------
Robert M. Furek
/s/ Charles K. Gifford* Director June 24, 1998
- -----------------------------
Charles K. Gifford
/s/ William N. Griggs* Director June 24, 1998
- -----------------------------
William N. Griggs
/s/ George B. Harvey* Director June 24, 1998
- -----------------------------
George B. Harvey
/s/ Barbara B. Hauptfuhrer* Director June 24, 1998
- -----------------------------
Barbara B. Hauptfuhrer
/s/ Sheldon B. Lubar* Director June 24, 1998
- -----------------------------
Sheldon B. Lubar
/s/ William B. Marx, Jr.* Director June 24, 1998
- -----------------------------
William B. Marx, Jr.
/s/ John F. Maypole* Director June 24, 1998
- -----------------------------
John F. Maypole
/s/ Alfred M. Zeien* Director June 24, 1998
- -----------------------------
Alfred M. Zeien
/s/ Richard M. Howe* On June 24, 1998, as Attorney-in-Fact pursuant to
- -----------------------------
*Richard M. Howe powers of attorney.
</TABLE>
<PAGE>
EXHIBIT LIST
99.A.11. Memorandum describing MassMutual issuance, transfer, and redemption
procedures for the Policy.
99.B. Opinion and Consent of Counsel as to the legality of the securities
being registered.
99.E. Consent of Coopers & Lybrand L.L.P.
99.F. Opinion and consent of Craig Waddington, FSA, MAAA, as to actuarial
matters pertaining to the securities being registered.
<PAGE>
EXHIBIT 99.A.11
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY &
C.M. LIFE INSURANCE COMPANY
PURCHASE, REDEMPTION AND TRANSFER PROCEDURES AND METHOD
OF COMPUTING ADJUSTMENTS ON PAYMENTS AND ACCOUNT VALUE FOR VUL.
---------------------------------------------------------------
This document sets forth, as required by Rule 6e-3 (T) (b) (12) (ii) adopted
pursuant to the Investment Company Act of 1940, as amended, the administrative
procedures that will be followed by Massachusetts Mutual Life Insurance Company
("MassMutual") and C.M. Life Insurance Company ("CML") (collectively and
individually MassMutual and CML are referred to as the "Company") in connection
with the issuance of the Variable Universal Life Policy described in this
Registration Statement ("VUL" or the "Policy"), the transfer of assets held
thereunder, and the redemption by Policyowners of their interests in the Policy.
Set forth below is a summary of the principal Policy provisions and
administrative procedures which might be deemed to constitute, either directly
or indirectly, purchase, transfer or redemption transactions. The summary shows
that, because of the insurance nature of the Policy, the procedures involved
necessarily differ in certain significant respects from the purchase procedures
for mutual funds and other contractual plans.
A. AVAILABILITY AND UNDERWRITING--Upon receipt of a completed application, the
Company will follow certain insurance underwriting (i.e., evaluation of risks)
procedures designed to determine whether the applicant is insurable. This
process may involve verification procedures, such as medical examinations, and
may require that further information be provided by the proposed insured before
an underwriting determination can be made. The rating classifications assigned
will impact the mortality and risk charges assessed against a Policy. The
minimum Face Amount is $50,000.
B. DEATH BENEFIT--VUL insures a single life and pays a death benefit upon the
death of the insured. As long as the Policy remains in force, the Company will
pay a Death Benefit to the named Beneficiary(ies) in accordance with the
designated settlement option, generally within seven days after the Company
receives due proof of death of the insured and verifies the validity of the
claim. Payment of Death Benefits may, however, be postponed under certain
circumstances. Additionally, during the first two Policy Years, during the
first two years after an increase in Selected Face Amount, and in any other
circumstances in which the Company may have a basis for contesting the claim,
there can be a delay beyond the seven day period. All or part of the Death
Benefit can be paid in cash or under one or more of the payment options set
forth in the Policy.
We will investigate most death claims arising within the two-year contestable
period. Upon receiving the information from a completed investigation, we will
generally make a determination within five days as to whether the claim should
be paid. Payments will be made promptly thereafter. The amount of the death
benefit is determined as of the date of the insured's death. The Company pays
interest from the date of the insured's death at the Option D rate or, if
greater, at a state mandated rate.
VUL provides a choice of three death benefit options:
1. Under Death Benefit Option 1 ("DBO 1") the death benefit is the greater
of: (a) The Face Amount ("FA") in effect on the date of the insured's
death; and (b) The Minimum Death Benefit in effect on the date of the
insured's death.
2. Under Death Benefit 2 ("DBO 2"), the death benefit is the greater of: (a)
The FA in effect on the date of the insured's death plus the account
value on that date; and (b) The Minimum Death Benefit in effect on the
date of the insured's death.
3. Under Death Benefit Option 3 ("DBO 3"), the death benefit is the greater
of: (a) The FA in effect on the date of the insured's death plus the sum
of all premiums paid (and not refunded) to that date; and (b) The Minimum
Death Benefit in effect on the date of the insured's death.
<PAGE>
THE MINIMUM DEATH BENEFIT--is equal to the account value multiplied by the Death
Benefit Factor for the insured's attained age. The Death Benefit Factor depends
on the IRC 7702 test chosen at issue by the Owner (Cash Value or Guideline
Premium test).
ADJUSTED DEATH BENEFIT--The Death Benefit, as determined earlier, is adjusted as
follows: (a) We deduct any policy debt outstanding on the date of the insured's
death (including any accrued loan interest); (b) We deduct any unpaid premium
amount needed to avoid termination during the policy grace period to the date of
the insured's death.
OVER AGE 99 OF THE INSURED--The policy provides coverage for as long as it
remains in force. The policy does not provide for an endowment in any year
except where a state requires a maturity date. While the policy is in force, we
will maintain all policy features (i.e. we will accept premium payments, take
monthly deductions, honor all policy provisions, etc.). All rates applicable at
attained age 99 will apply for attained ages 99+.
INTEREST ON DEATH BENEFIT--We will add interest from the date of the insured's
death to the date of payment. The amount of interest will be computed using an
effective annual rate not less than 3% or, if greater, the annual rate required
by law. We currently use 3%.
CHANGES IN DBO--After the first policy year, the Owner may change the death
benefit option of his/her policy, upon written request, while the insured is
living and the insured is younger than attained age 85. A DBO change will be
effective on the Monthly Charge Date ("MCD") which is on, or precedes, the date
we approve the change, unless a later date is requested. A change in the DBO
may follow one or more increases in the FA of the policy. In this case, the
change will increase (decrease) the most recent increase(s) if the FA increases
(decreases). No change in DBO will be allowed if the FA after the change would
be less than $50,000. If the DBO is changed, we will send the Owner any revised
or additional Policy Specifications for attachment to the policy.
C. INCREASES IN FACE AMOUNTS ("FA")
1. While the insured is living, the FA may be increased by written request.
Any increases in FA is subject to the following conditions: (a) Submission of
a written application for increase; (b) Satisfactory evidence of insurability
must be provided for the insured; (c) No increase may be made after the Policy
Anniversary Date nearest the insured's 85th birthday; (d) The minimum amount
of any increase is $15,000.
2. A FA increase is effective on the MCD that is on, or precedes, the date we
approve the application. A FA increase is accomplished by issuing an
additional insurance coverage segment. Each such segment has distinct issue
ages, risk classes, target premiums, monthly charges, premium expense charges,
surrender charges and commissions. The insuring ages for the increase segment
are determined as of the policy anniversary on or just preceding the MCD on
which the increase becomes effective. It is possible for risk classes of
prior segments to change in order to match the risk class of the new segment.
This will happen only if the underwriter indicates that it should. The
general rule is that if the new segment has a risk class worse than prior
segments, then the prior segments will not change. Conversely, if the new
segment has a risk class better than prior segments, then the prior segments
will change. The monthly charges that apply to each elected FA increase are
the FA charge and the insurance charge. The administrative charge applies
once to the policy as a whole. The premium expense charge also applies to
each elected FA increase. The charges associated with the increase will be
deducted from the account value beginning on the effective date of the
increase.
3. Premium payments received once an increase becomes effective will be
allocated to each segment of the FA. The premium allocation will be made on a
pro rata basis using the expense premium for each segment. If the net
surrender value is insufficient to continue the changed policy in force for
three months at the new monthly charges, we may require a payment sufficient
to increase the net surrender value to such amount. The contestable and
suicide periods begin again on the date of the FA increase for the increase in
FA. If the FA is changed, we will send the Owner any revised or additional
Policy Specifications for attachment to the policy.
<PAGE>
D. DECREASES IN FA
1. After the first policy year, the FA may be decreased by the Owner's
written request while the insured is living. No decrease is permitted within
one year following the effective date of any increase. Any decrease will be
effective on the MCD that is on, or precedes, the date we receive the
written request. The FA remaining after any decrease (both elected and non-
elected) must be at least $50,000.
2. Elected decreases in FA (i.e., decreases resulting from other than a
withdrawal or a change in the DBO) are taken on a last-in-first-out basis.
In other words, the decrease is taken from the most recent increase. For a
discussion of surrender charges as to elected decreases in FA, see H(3)
herein. Any canceled segments remain active in the administrative system
with a zero FA.
3. Non-elected decreases in FA (i.e., decreases resulting from a withdrawal
or a change in the DBO) are accompanied by canceling previously issued
segments on a last-in-first-out basis. No surrender charge is assessed when
the FA is reduced as the result of a non-elected decrease. If the FA is
changed, we will send the Owner any revised or additional Policy
Specifications for attachment to the policy.
E. DEATH BY SUICIDE--If the insured commits suicide within 2 years after the
issue date of the policy and while the policy is in force, the policy will
terminate. In this case, we will refund the amount of premiums paid for the
policy, less any amounts withdrawn and less any policy debt. If the insured
commits suicide within 2 years after the policy is reinstated and while the
policy is in force, the policy will terminate. In this case, we will refund any
amount paid to reinstate the policy and any premiums paid thereafter, less any
amounts withdrawn and less any policy debt. If the insured commits suicide
within 2 years after the effective date of any increase in the FA, the increase
will terminate. In this case, we will refund the monthly charges made for that
increase. However, if a refund as described in either of the two preceding
paragraphs is payable, there will be no additional refund for the increase.
F. CONTESTABILITY--The Company cannot contest the Policy with respect to any
material misrepresentation in the application regarding the insurability of the
insured , once the policy has been in force during the lifetime of the insured
for 2 years after its issue date; or with respect to any material
misrepresentation in the application regarding the insurability of the insured
once the policy has been in force during the lifetime of the insured for 2 years
after its issue date. For any policy change requiring evidence of insurability,
we cannot contest the validity of the change with respect to the insured after
the change has been in effect for 2 years during the lifetime of that insured.
If evidence of insurability is required to reinstate the policy, our right to
contest the validity of the policy begins again on the date of reinstatement.
For the insured living on that date, we cannot contest once the reinstated
policy has been in force during the lifetime of the insured for 2 years after
that reinstatement date. If the date of birth or gender of the insured as given
in the application is not correct, the FA will be adjusted. The administrative
system will initially handle misstatements as follows. If the misstatement is
discovered after the insured's death, the adjustment will reflect the amount
provided by the most recent monthly insurance charges using the correct age and
gender. If the misstatement is found before the insured's death, the policy
will be reissued to reflect the correct age and gender. This reissue leads to
gains and losses if any units of a SA need to be sold. The Company reserves the
right to not reissue the policy.
G. PREMIUM PAYMENTS
1. GENERAL--Premium payments are flexible as to both timing and amount. Any
amount of premium may be paid at any time while the insured is living,
subject to the minimums and maximums stated below. If the premium payment
effective date is prior to the issue date of the policy, then the premium
payment is considered "cash with app" and it is placed in a general account
fixed fund. Interest is credited as of the date the premium payment is
received at the Administrative Office designated by the Company. Deductions
will come out of this fund if a MCD occurs before the premium is moved out
of the fund. Money remains in this fund until one day after the Register
Date.
<PAGE>
The amount refunded under the policy's "free-look" provision will vary by
contract state. The refund will generally be: (a) any premium (either gross
or net) paid for the policy, plus (b) interest credited to the policy under
the GPA, plus or minus (c) an amount that reflects the investment experience
of the investment divisions of the SA under the policy to the date the policy
is received by us. Each premium payment, less a premium expense charge, is
added to the account value and allocated to the investment funds as elected in
the application. The allocation of premiums must be specified as whole
percentages. After the policy is issued and during the free look period in a
state that requires the return of gross premiums paid, the premium will be
placed in a money market account for the number of free look days plus an
additional six days, then transferred to the GPA and divisions of the SA as
elected in the application. Deductions are taken from the money market
account if a MCD occurs before the money is moved out of the fund.
2. INITIAL PREMIUMS--Except as noted above, initial net premiums are allocated
to the GPA and the Divisions as of the Register Date plus one, provided such
funds and application are in good order and are received on a given business
day by the time the New York Stock Exchange closes, normally 4:00 PM EST. If
receipt is after such time, the allocation will occur on the next business day
following the Register Date. "Good order" requires that Part 1 of the
Application is completed, a suitability review and approval has occurred, all
licensing issues are resolved, all owner and insured information is furnished,
and all signatures are obtained. Subsequent premium payments received in good
order on a given business day by the time the New York Stock Exchange closes,
normally 4:00 PM EST, will be processed on a "same day" basis. If receipt,
however, is after such time, the subsequent premium payment will be credited
on the next business day. Allocation instructions can be changed
prospectively, but allocations must be in whole percentage points.
3. PLANNED PREMIUMS--The planned premium is the premium the Owner plans to
pay. It is chosen by the Owner at issue. The frequency of planned premiums
for the policy is as elected in the application. The frequency and amount of
the planned premium may be changed by written request. The Owner does not
have to pay the planned premium. Timely payment of the planned premium does
not guarantee that the policy will stay in force until the insured has died.
4. MAXIMUM PREMIUM PAYMENTS IN ANY POLICY YEAR--For the Cash Value Test, the
maximum premium which may be paid during any policy year is the greatest of:
(1) The largest premium which will not increase the insurance risk; (2) $100
plus 2 times the annual target premium; and (3). The amount of premiums paid
in the preceding policy year. For the Guideline Premium Test, the maximum
premium which may be paid during any policy year is the lesser of the maximum
premium calculated for the Cash Value Test and the guideline premium
limitation for the Guideline Premium Test.
5. MINIMUM PREMIUM PAYMENTS IN ANY POLICY YEAR--The initial premium paid must
be at least $20 or, if greater, the amount needed to prevent termination
before the next billing date. Each premium paid must be at least $20 or, if
greater, the amount needed to prevent termination. Refer to section on Lapse
Logic for termination rules.
6. SECONDARY GUARANTEE PREMIUMS--The policy offers a safety test in the form
of two no-lapse guarantees. Each has a corresponding Guarantee Period and
Guarantee Premium. The two Guarantee Periods are: (1) The earlier of 20
years or to age 90 of the insured, and (2) To age 100 of the insured. The
First Guaranteed Premium will be table driven, utilizing a joint equal age.
The Second Guaranteed Premium will be equal to the Guideline Level Premium.
The Guaranteed Premiums will vary by issue age, gender, underwriting class and
death benefit option.
7. BILLING--The billed premium is equal to the planned premium. Premium
notices will be sent for the planned premium based on the amount and frequency
in effect. The frequency or amount of the planned premium may be changed by
written request. We will stop sending notices for the planned premium upon
receipt of the Owner's written request to do so. Available premium
frequencies and billing types are: (1) Regular - Annual, Semiannual, and
Quarterly; (2) Triple M - Monthly Check Service; and (3) Pension, Plan C and
Invoice -
<PAGE>
Annual, Semiannual, Quarterly and Monthly. If payment of the planned premium
exceeds the maximum premium limit, the planned premium (and, hence, the
billed premium) for the policy will be changed to the maximum premium.
Government Allotment and Federal Employee payment plans are not available.
Money-purchase is also not available. There is no frequency loading, i.e.,
the modal planned premium is the annual amount divided by the frequency
factor (i.e., 2 for semiannual, 4 for quarterly, or 12 for monthly).
8. TARGET PREMIUMS--Each policy has an annual target premium. At any time, a
policy's target is equal to the sum of the target for each insurance
coverage segment in force on that date. For each segment, the target is the
segment's FA (in thousands) multiplied by the unit target at the issue age
for that segment. The target premium will be table driven, utilizing a joint
equal age. The target premium will vary by issue age, gender, underwriting
class and death benefit option. Unisex targets equal the male targets.
H. CHARGES
1. MONTHLY CHARGES--The policy is assessed monthly charges based on current
rates. These may be changed periodically to reflect expectations for future
mortality, investment, persistency and expense results; however, the current
rates may not exceed the maximum guaranteed rates. Monthly charges will be
deducted from the account value on each MCD. Monthly charges will be taken
from the divisions of the SA and from the GPA in proportion to the values of
the policy in each of those divisions and in the GPA (excluding any
outstanding loans). Deductions will be made and values will be determined on
the Valuation Date that is on, or next follows, the latest of: (i) The
Register Date; (ii) The date the charges are due; and (iii) The date we
receive the amount of premium needed to prevent termination. VUL has four
types of monthly charges:
a. Administrative Charge--An Administrative Charge of $6 per policy will
-------------------------
be deducted monthly from the account value on each MCD in all policy
years. The Maximum Monthly Administrative Charge is $12 per policy.
b. Face Amount Charge - The Face Amount Charge is the FA multiplied by a
----------------------
rate per $1,000. The charge resulting from the year 1-5 rate of $0.09-
$0.17 per $1,000 will be deducted monthly from the account value on each
MCD during the first through fifth policy years. The charge resulting
from the year 6+ rate of $0.00 per $1,000 will be deducted monthly from
the account value on each MCD after the sixth policy year. The Maximum
Monthly Face Amount Charge will be the same as the current monthly Face
Amount Charge. If the FA has been increased, the Face Amount Charge for
each month will be the sum of the charges determined separately for each
segment of the FA.
c. Insurance Charge--The Insurance Charge is the monthly insurance
--------------------
charge rate per $1,000 of insurance risk multiplied by the insurance risk.
There is a separate monthly insurance charge rate per $1,000 of insurance
risk for each FA segment. The insurance risk is computed as of the date
the charge is due. If the insurance risk is increased due to the minimum
death benefit, the table that applies to the most recent increase
requiring evidence of insurability will be used for such increase.
d. Rider Charge - The monthly rider charge is the sum of the monthly
----------------
charges for any riders in effect on the MCD.
2. PREMIUM EXPENSE CHARGE--The policy is assessed a premium expense charge
based on current rates. These may be changed periodically to reflect
expectations for future mortality, investment, persistency and expense
results; however, the current rates may not exceed the maximum guaranteed
rates. The expense premium will be table driven. The expense premium will
vary by issue age, gender and underwriting class.
The current and maximum premium expense charges are as follows:
Current Maximum
------- -------
Up to expense premium 5% 7.5%
Above expense premium 3% 5%
<PAGE>
3. SURRENDER CHARGES--A surrender charge is imposed if the policy is
surrendered at any time before the 15th policy year. The first year
surrender charge will equal 140% of the standard annual target premium not
to exceed a flat dollar amount (varying by age and class and somewhat lower
than 50 per thousand). The surrender charge will grade down by 10% of the
first year surrender charge per year over 14 years.
There will be a surrender charge calculated for each FA segment. Each FA
segment will have its own fourteen year surrender charge, the first year of
which is based on the standard annual target premium for the attained age at
the time the additional FA segment is added.
Elected decreases in FA (i.e. decreases resulting from other than a
withdrawal or a change in the DBO) result in canceling previously issued
segments. This is last-in-first-out processing. Under such a decrease, a
partial surrender charge is assessed and deducted from the account value. It
is equal to the surrender charge as of the date of the decrease for that
portion of any segment which is canceled under the decrease. Whenever a
partial surrender charge is assessed, the ongoing surrender charges for each
segment which is canceled (in full or in part) are reduced in proportion to
the amount of the reduction in FA for that segment. No surrender charge is
assessed when the FA is reduced as the result of a withdrawal or a change in
the DBO. If the partial surrender charge for a decrease is greater than the
account value of the policy, then the partial surrender charge for that
decrease is equal to the account value on the date of the surrender. The
surrender charge after the decrease equals the surrender charge prior to the
decrease, less the partial surrender charge taken. If the full surrender
charge cannot be taken from one segment, it will be taken from prior
segments. Any segment that "goes away" as a result of a FA decrease remains
active with zero units and the surrender charge remains active on that
segment. The surrender charge on such a segment will only be recovered in
the event of a full surrender.
I. SEPARATE ACCOUNTS (SA) DIVISIONS--The cumulative limit on the number of
distinct SA divisions to which net premiums are allocated and transfers are made
is currently 16, with plans to increase this number in coming years. Accounting
for the allocation of the account value within the divisions of the SA is done
by holding units within each, much the same as under our variable annuities.
All charges and credits to that part of the account value which is allocated to
a division of the SA are made by selling or purchasing units in that division at
the current unit value.
J. POLICY VALUES/INVESTMENT FUNDS--
1. ACCOUNT VALUE--The account value is the sum of all premium payments
adjusted by periodic charges and credits and partial withdrawals. The policy
value is equal to the account value less any surrender charge. The policy's
net surrender value is equal to the policy value less any policy debt. The
policy's account value will be allocated among the various investment funds
available. Investment performance from each of the divisions of the SA is
reflected through the value of the units held in each division. Each unit
within a division has the same value. Unit values will be the same
regardless of which company issues the policy (CM Life or MassMutual). Unit
values are determined on each valuation date based on the investment
performance of the underlying funds, such as MML Series Investment Fund or
the Oppenheimer Variable Account Funds. Valuation Date is any date on which
the New York Stock Exchange is open for trading. The unit values will
reflect a mortality and expense risk charge (M&E). On an annual basis, the
"current" M&E is 0.55% for all policy years. It is guaranteed not to exceed
0.90%. The amount of any account value allocated to any division of the SA
is not guaranteed. This means the amount of this portion of the account
value may increase or decrease by any amount depending upon the investment
performance of the underlying investment fund.
2. ACCOUNT VALUATION--A policy's account value is equal to: (a) the sum of
all premiums paid less the premium expense charge; (b) less the monthly
charges, which consist of an administrative charge, a face amount charge, an
insurance charge and a rider charge; (c) less any withdrawals (including any
withdrawal fees); (d) less surrender charges assessed under an elected
decrease in FA; (e) plus any interest earned on the account value held in
the GPA; (f) plus or minus investment experience on the account value held
in the divisions of the SA. The items in the list above are not in
processing order. They appear here so one can see what additions and
deductions apply to the account value. The account value is allocated
between the GPA and each division of the
<PAGE>
SA and the value within each fund is maintained separately. The account
value for the policy is the sum of its account value held in the GPA (fixed
account value) and its account value held in each division of the SA
(variable account value).
3. GPA VALUE--The fixed account value is accounted for in dollars and
cents. Its value at any time is the sum of all charges and credits plus
earned interest. The decrease in the GPA resulting from a withdrawal is
equal to the dollar amount withdrawn from the GPA as specified in the
withdrawal request.
4. THE VARIABLE ACCOUNT VALUE--Each division of the SA is accounted for
through holding units within each division. Charges and credits are
accomplished by increasing (purchasing) or decreasing (selling) the number
of units of each division held under the policy. Investment experience on
the variable account value is reflected through the change in the value of
each unit. Therefore, the policy's variable account value in any division is
the total number of units for that division held under the policy multiplied
by the value of each unit on the date of the valuation.
K. GUARANTEED PRINCIPAL ACCOUNT (GPA)--Amounts allocated to this fund will be
invested within the Company's General Account. For MassMutual policies, these
funds will be part of the non-traditional segment of the MassMutual General
Account. For CM Life policies, these funds will be part of CM Life's General
Account. Amounts allocated to the GPA will be accounted for in dollars and
cents. Interest is earned and credited on a daily basis on the portion of the
account value which is allocated to the GPA, including any loaned values. The
portion of the account value equal to the loan balance earns interest at the
policy loan rate less a company declared charge for expenses and taxes
(currently 0.9% in the first 15 policy years and 0.5% thereafter, and guaranteed
not to exceed 2%), or, if greater, 3% per annum. The account value allocated to
the GPA in excess of any loan balance earns interest at a company declared rate.
This rate is guaranteed to be not less than 3% per annum. The declared rate will
be the portfolio earnings rate of the GPA less a spread. The declared rate will
reflect our expectations for future investment results, profits and expenses.
The rate will be declared monthly in advance. Once declared for a calendar
month, it cannot be changed.
L. CHANGES IN CURRENT RATES--Current rates are expected to be revised
periodically at the discretion of the company as follows:
1. REVISED CHARGES--Insurance Charge Rates, monthly Policy Loan Expense
Charge (PLEC), Premium Expense Charge (PEC), Face Amount Charge (FAC), and
Monthly Administrative Charge (MAC) are (1) Revised annually; (2) Approved
and announced on or about November 1, and (3) Effective from the MCD on or
next following January 1 for all new issues and all in force policies.
2. ADJUSTABLE POLICY LOAN RATES--The same as ALR rate for Whole Life.
3. INTEREST--is (1) Revised monthly; (2) Approved and announced 1 to 2
weeks prior to the beginning of each calendar month; and, (3) Effective from
the first day of a month through the last day of that month or until the
date of an earlier special revision.
4. SA UNIT VALUES--Are valued on each valuation date for each division.
Changes described above will affect only "current" rates, not guaranteed rates.
We reserve the right to change any non-guaranteed rate more frequently than
indicated above, but such changes are not anticipated.
M. TRANSFERS--The transfer of account value between or among investment funds
is allowed without charge subject to the following restrictions: (1) Transfer
requests must be in writing, and (2) Only one transfer will be permitted from
the GPA in each policy year. Each such transfer may not exceed 25% of the
account value, less any policy debt, in the GPA at the time of transfer. There
is an extra contractual exception to this rule. We will allow a 100% transfer
from the GPA following three consecutive years of 25% transfers from the GPA,
provided no value has been
<PAGE>
transferred into the GPA and no premiums have been allocated to the GPA during
this period. The following types of transfers can be made: (1) Transfers of
values between the divisions of the SA. These transfers will be made by selling
all or part of the accumulation units in a division and applying the value of
the sold units to purchase units in any other division; (2) Transfers of values
from one or more divisions of the SA to the GPA. These transfers will be made by
selling all or part of the accumulation units in a division and applying the
value of the sold units to the GPA; (3) Transfers of values from the GPA to one
or more divisions of the SA. These transfers will be made by applying all or
part of the value in the GPA (excluding any outstanding policy loans) to
purchase accumulation units in one or more divisions of the SA. There is
currently no limit to the number of transfers in a policy year other than from
the GPA; however, we will reserve the right to limit transfers to not more than
one every 90 days, with one exception. There are no restrictions on a transfer
of all funds in the SA to the GPA. There is no minimum transfer amount nor
minimum value which must be maintained within an investment fund except as noted
earlier. Transfers must be in whole-number percentages or in dollar-and-cent
amounts. Transfers will be made as of the Valuation Date, provided the request
is received in good order. All transfers made on the Valuation Date will be
considered one transfer. Transfer requests received in good order for transfers
between divisions generally will be done on a "same day" basis.
N. WITHDRAWALS & SURRENDERS--After the first policy year, partial withdrawals
may be made by written request at any time the policy is in force and the
insured is living. The request for a withdrawal must state the account(s) from
which the withdrawal will be made. From any withdrawal from the SA, the request
must also state the division(s) from which the withdrawal will be made. A
withdrawal will be effective on the date we receive the written request in good
order. On the effective date of the withdrawal, the non-loaned account value is
reduced by the amount of the withdrawal. The withdrawal amount includes the
withdrawal fee. The maximum withdrawal fee is $25. There is no plan at this
time to charge less than the maximum. The withdrawal from the GPA will be made
by reducing the non-loaned account value in that account to provide the amount
of the withdrawal. A withdrawal from a division of the SA will be made by
selling a sufficient number of accumulation units to provide the amount of the
withdrawal. There is no surrender charge levied when a partial withdrawal is
taken. Full surrenders will generally be processed within seven days of receipt
of the written request in good order, and partial withdrawals within seven days
of receipt in good order of the written request./1/
The FA will be decreased by the amount of the withdrawal if: (a) DBO 1 or DBO 3
is in effect. FA decreases of this type are considered as "non-elected" and do
not cancel or reduce previously issued coverage segments for purposes of ongoing
targets or surrender charges, and (b) We have not received evidence of
insurability satisfactory to us. Under DBO 2, there is no reduction in the FA.
If a decrease follows one or more FA increases, the decrease is taken from the
most recent increase(s). The last-in-first-out rule applies. Withdrawals will
be subject to the following limits: (1) The minimum amount of a withdrawal
(including the withdrawal fee) is $100; (2) The maximum amount of a withdrawal
on any date is 75% of the net surrender value on that date; (3) The FA after a
withdrawal must not be less than $500,000; and (4) The withdrawal from each fund
cannot exceed the non-loaned account value allocated to that fund as of the date
of the withdrawal. If the FA is reduced due to a withdrawal, we will send the
Owner any revised or additional Policy Specifications for attachment to the
policy.
O. POLICY LOANS--After the first policy year, while the insured is living,
loans can be made at any time. The maximum amount which can be borrowed on any
date is: (1) 90% of the policy value (i.e., account value less surrender
charge), less (2) any outstanding policy debt (including accrued policy loan
interest). Loan repayments will be credited on the date we receive them.
__________________
/1/ Payment from the Separate Account may be postponed whenever: (i) the New
York Stock Exchange is closed for other than for customary week-end and holiday
closings, or trading on the New York Stock Exchange is restricted as determined
by the SEC; (ii) the SEC by order permits postponement for the protection of
Policyowners; or (iii) an emergency exists, as determined by the SEC, as a
result of which disposal of securities is not reasonably practicable or it is
not reasonably practicable to determine the value of the Separate Account's net
assets. Payments from the portion of the Account Value held in the GPA may be
postponed for up to six months. Payments under the Policy of any amount paid to
the Company by check may be postponed until such time as the check has cleared
the Policyowner's bank.
<PAGE>
1. All or part of any policy debt may be repaid at any time while the policy
is in force and the insured is living. Loan repayments will be credited on
the date we receive them. In the event that there are several loans against
a policy, the oldest loan is repaid first. A loan is attributed to each
division of the SA and to the GPA in proportion to the values of the policy
in each of those divisions and in the GPA (excluding any outstanding policy
loans) at the time of the loan. Any loan repayment received by us within 30
days of the policy anniversary date will be used first to pay off any loan
interest due and then applied to principal. Any loan repayment received by
us on a date other than within 30 days of the policy anniversary date will
be allocated first to the GPA until the Owner has repaid any loan amounts,
excluding loan interest (both outstanding and previously capitalized), that
originated from the GPA. In other words, only the original principal
borrowed from the GPA will be paid back to the GPA first. Any additional
loan repayments, including loan interest, will be allocated to the GPA and
the divisions of the SA according to the premium allocation factors then in
effect.
2. Loan repayments must be clearly identified as such; otherwise, they will
be considered premium payments. The amount equal to any outstanding policy
loans will be held in the GPA and will earn interest as described herein.
The above amounts are determined as of the effective date of the new loan.
Policy loan interest is charged in arrears at a rate determined by the
policy loan rate provision, which may be either (1) the variable policy loan
rate, or (2) the 5% fixed loan rate. The choice of loan rate provision will
be elective at the time of application, except in those states requiring the
fixed rate provision. Once elected, this choice cannot be changed. The
variable loan rate is an annual rate set by the company. This rate may
change from year to year. Each year we will set the rate that will apply for
the next policy year. The rate will apply to all policy debt under the
policy. Each year there is a maximum limit on the variable loan interest
rate we can set. That limit is based on a published monthly average. That
average will be the Monthly Average Corporate yield shown in Moody's
Corporate Bond Yield Averages, as published by Moody's Investors Service,
Inc. The maximum limit is the published Monthly Average for the calendar
month ending 2 months before the month in which the policy year begins or,
if higher, the minimum annual interest rate for the GPA plus 1%.
3. If the maximum limit for a policy year is at least 1/2% higher than the
loan interest rate in effect for the previous year, we may increase the rate
to a rate not higher than that limit. If the maximum limit for a policy year
is at least 1/2% lower than the loan interest rate in effect for the
previous year, we must decrease the rate to a rate not exceeding that limit.
Any policy loan, either elected or for capitalizing loan interest,
automatically will result in a transfer of part of the account value from
the divisions of the SA to the GPA. The amount transferred from each
division of the SA will be in proportion to the non-loaned value in each of
the funds as of the effective date of the loan. Any such transfer is made by
selling accumulation units in the division of the SA and applying the value
of those units to the GPA on the date the loan is made. Any interest added
to the loan will be treated as a new loan. However, no part of this new loan
will be treated as a loan from the GPA when it comes time to repaying the
loans taken against the GPA before loans taken against the SA. VUL does not
provide automatic premium loans.
P. RIDERS--The following riders will be available: Waiver of Monthly Charges;
Disability Benefit; Cost of Living Adjustment; Guaranteed Insurability;
Substitute of Insured; Other Insured; and Living Benefits Rider.
Q. LAPSE LOGIC--Policy debt (which includes accrued interest) may not equal or
exceed the policy value. If this limit is reached, the policy will terminate
after the following happens: (1) We mail written notice to the Owner. This
notice will state the amount needed to bring the policy debt back within the
limit; (2) If we do not receive payment within 31 days after the date we mail
the notice, the account value will be reduced by any surrender charges that
apply and this policy will terminate without value at the end of those 31 days.
During the first 10 policy years, if the account value less any outstanding debt
is not enough to cover the monthly charges due on a MCD and the safety test is
not met on that date, the policy may terminate without value. After the first
10 policy years, if the net surrender value is not enough to cover the monthly
charges due on a MCD and the safety test is not met on that date, the policy may
terminate without value. However, we allow a grace period for payment of the
amount of premium (not less than $20) needed to avoid termination. During the
first 10 policy years, if the account value cannot cover the monthly charges due
on a MCD but the safety test is met on that date, then the monthly charges for
that date will be
<PAGE>
reduced to an amount equal to the account value less any policy debt. After the
first 10 policy years, if the net surrender value cannot cover the monthly
charges due on a MCD but the safety test is met on that date, the monthly
charges for that date will be reduced to an amount equal to the account value
less any policy debt.
Safety Test: The safety test can be met only during the First and Second
- ------------
Guarantee Periods. Each Guarantee Period is paired with a Guarantee Premium.
The First Guarantee Period is the earlier of 20 years or to age 90 of the
insured. The Second Guarantee Period is to age 100 of the insured. The
Guarantee Periods may be different in Texas, New York, New Jersey and
Massachusetts. These states may only have one Guarantee Period and the
Guarantee Period(s) may be of different length. For any day during the First
Guarantee Period, the safety test is met if the result of premiums paid less
amounts withdrawn, accumulated with interest to that day, equals or exceeds the
result of payments of the First Guarantee Premium accumulated with interest from
the policy date to that day. For any day after the First Guarantee Period but
during the Second Guarantee Period, the safety test is met if the result of
premiums paid less amounts withdrawn, accumulated with interest to that day,
equals or exceeds the result of payments of the Second Guarantee Premium
accumulated with interest from the policy date to that day. In the safety test,
interest is accumulated at an effective annual rate equal to the minimum annual
interest rate for the GPA. Also, we assume in this test that Guarantee Premiums
are paid on each MCD.
R. REINSTATEMENT--A policy may be reinstated within five years as long as the
policy was not surrendered for its net surrender value and the insured has died
since the policy terminated.. Reinstatement requires a written application,
evidence of insurability on the insured and payment of an amount of premium
necessary to keep the policy in force for 3 months from the date of
reinstatement. This amount will be quoted upon request. Reinstatement will not
be allowed if an insured has died since the date of termination. The policy
will be reinstated on the MCD on or next following the date we approve the
application. Upon reinstatement, the cost is applied as a premium and the
premium expense charge is deducted. The following changes apply to the policy
upon reinstatement.
1. Monthly deductions begin as of the MCD on or next following the
effective date of reinstatement.
2. Surrender charges are the same as those had the policy not terminated.
However, if the surrender charge was taken when the policy terminated, the
applicable surrender charges will not be reinstated.
3. Any account value or policy debt as of the date of termination is not
reinstated, i.e., there is no loan and the account value is based solely on
the payment of the cost of reinstatement.
4. The PSO will be reinstated. However, the EPR will not be reinstated.
5. The contestability and suicide periods begin again on the date of
reinstatement.
S. DIVIDENDS--The CM Life policy is non-participating. The MassMutual policy is
participating, but no dividends will be payable.
<PAGE>
EXHIBIT 99.B.
[MASSMUTUAL LETTERHEAD]
June 24, 1998
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
RE: Pre-Effective Amendment No. 1 to Registration Statement No. 333-49475
---------------------------------------------------------------------
filed on Form S-6
Ladies and Gentlemen:
This opinion is furnished in connection with the filing of Registration
Statement 333-49475 under the Securities Act of 1933 for Massachusetts Mutual
Life Insurance Company's ("MassMutual") Flexible Premium Adjustable Variable
Life Insurance Policies (the "Policies"). Massachusetts Mutual Variable Life
Separate Account I issues the Policies.
As 2nd Vice President & Associate General Counsel of Massachusetts Mutual Life
Insurance Company, I provide legal advice in connection with the operation of
its variable products. In such role I am familiar with the filing for the
Policies. In so acting, I have made such examination of the law and examined
such records and documents as in my judgment are necessary or appropriate to
enable me to render the opinion expressed below. I am of the following opinion:
1. MassMutual is a valid and subsisting corporation, organized and operated
under the laws of the state of Massachusetts and is subject to regulation by
the Massachusetts Commissioner of Insurance.
2. Massachusetts Mutual Variable Life Separate Account I is a separate account
validly established and maintained by MassMutual in accordance with
Massachusetts law.
3. All of the prescribed corporate procedures for the issuance of the Policies
have been followed, and all applicable state laws have been complied with.
I hereby consent to the use of this opinion as an exhibit to this filing.
Very truly yours,
/s/ Richard M. Howe
- ------------------------
Richard M. Howe
2nd Vice President & Associate General Counsel
Massachusetts Mutual Life Insurance Company
<PAGE>
EXHIBIT 99.E.
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Massachusetts Mutual Life Insurance Company
We consent to the inclusion in this Pre-Effective Amendment No. 1 to the
Registration Statement of Massachusetts Mutual Variable Life Separate Account I
(Variable Universal Life segment) on Form S-6 (Registration No. 333-49475) of
our report dated February 6, 1998 on our audits of the statutory financial
statements of Massachusetts Mutual Life Insurance Company, which includes
explanatory paragraphs relating to the use of statutory accounting practices,
which differ from generally accepted accounting principles. We also consent to
the reference to our Firm under the caption "Experts".
Coopers & Lybrand L.L.P.
Springfield, Massachusetts
June 25, 1998
<PAGE>
EXHIBIT 99.F.
[MASSMUTUAL LETTERHEAD]
June 24, 1998
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
RE: Pre-Effective Amendment No. 1 to Registration Statement No. 333-49475
---------------------------------------------------------------------
Ladies and Gentlemen:
This opinion is furnished in connection with Registration Statement No. 333-
49475 for MassMutual's Flexible Premium Adjustable Variable Life Insurance
Policies (the "Policies") under the Securities Act of 1933. The prospectus
included in the filing describes the Policies. I am familiar with the forms of
the Policies and the prospectus.
In my opinion, the illustrations of benefits under the Policies included in the
section entitled "Illustrations" in Appendix A of the prospectus, based on the
assumptions stated in the illustrations, are consistent with the provisions of
the respective forms of the Policies. The age selected in the illustrations is
representative of the manner in which the Policies operate.
I hereby consent to the use of this opinion as an exhibit to Registration
Statement filing and to the reference of my name under the heading "Experts" in
the prospectus.
Sincerely,
/s/ Craig Waddington
- -------------------------
Craig Waddington, FSA, MAAA
Vice President and Actuary
