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December 1, 1996
PANORAMA PLUS
Supplement dated December 1, 1996
to the Prospectus dated May 1, 1996
THE INFORMATION IN THE ATTACHED SUPPLEMENTAL PROSPECTUS SUPERSEDES ANY
CONFLICTING INFORMATION CONTAINED IN THE PANORAMA PLUS PROSPECTUS DISTRIBUTED TO
YOU ON OR ABOUT MAY 1, 1996. THIS SUPPLEMENTAL INFORMATION IS EFFECTIVE AS OF
DECEMBER 1, 1996.
December 1, 1996
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THE PANORAMA PLUS ANNUITY
Issued by
C.M. LIFE INSURANCE COMPANY
140 Garden Street, Hartford, CT 06154
This Prospectus describes the Panorama Plus Annuity (the "Contract"), a group
and individual flexible premium deferred annuity offered by C.M. Life Insurance
Company ("C.M. Life"). The Contract is designed to aid in long-term financial
planning, and provides for the accumulation of capital by individuals on a
tax-deferred basis for retirement or other long-term purposes. The Contract may
be purchased with a minimum initial Purchase Payment of $500. From time to time,
this minimum initial Purchase Payment may be reduced. The Contract Owner
generally may make additional Purchase Payments of at least $50 each at any time
before the Annuity Income Date. Additional limitations on Purchase Payments
apply.
The Contract Owner may allocate Purchase Payments to one or more Sub-Accounts of
the Panorama Plus Separate Account (the "Separate Account"), in which Contract
Balances accumulate on a variable basis, or to the General Account, in which
Contract Balances accumulate on a fixed basis, subject to an Interest Rate
Factor Adjustment, or to a combination of these Investment Accounts. The
Separate Account currently has six (6) different Sub-Accounts (the
"Sub-Accounts"). Assets of each Sub-Account are invested in a corresponding
investment portfolio ("Portfolio") of an underlying mutual fund ("Fund")
available for use with variable annuity and variable life insurance products.
Currently, the Portfolios available under the Contract are: the Oppenheimer
Money Fund ("Money Portfolio") and the Oppenheimer Bond Fund ("Bond Portfolio")
of the Oppenheimer Variable Account Funds ("OVAF") and the Government Securities
Portfolio, the Total Return Portfolio, the Growth Portfolio, and the
International Equity Portfolio of the Panorama Series Fund, Inc. ("Panorama
Fund"). Each Portfolio is described in a separate prospectus for each Fund that
accompanies this Prospectus.
The Contract Balance allocated to the Separate Account will vary in accordance
with the investment performance of the Portfolio selected by the Contract Owner.
Therefore, the Contract Owner bears the entire investment risk for all amounts
allocated to the Separate Account. The Contract Owner may also bear investment
risk with respect to Surrenders (and the election of payments of Annuity Income)
from the General Account. There is no guaranteed or minimum Surrender Value for
either the Separate Account or the General Account; the Surrender Value could be
less than the Purchase Payments invested in the Contract.
The Contracts provide for monthly annuity payments to be made by C.M. Life on a
fixed or a variable basis for the life of the Annuitant, or for some other
period, beginning on the Annuity Income Date selected by the Contract Owner.
Prior to the Annuity Income Date, the Contract Owner may transfer amounts among
the Investment Accounts, that is, between the General Account and Sub-Accounts
of the Separate Account. After the Annuity Income Date, some transfers are
permitted among the Sub-Accounts. Some prohibitions and restrictions apply,
especially on transfers out of and into the General Account and on transfers
after the Annuity Income Date. The Contract Owner can also elect to surrender
all or a portion of the Contract Balance in exchange for a cash payment from
C.M. Life. Surrenders, however, may be taxable, subject to a Surrender Charge,
an Interest Rate Factor Adjustment, a Contract Maintenance Fee, and a tax
penalty. Payment of Surrenders from the General Account may be delayed.
This Prospectus sets forth your rights under the Contract, and information
regarding the Separate Account and the General Account that investors should
know before investing. A Statement of Additional Information, dated May 1, 1996,
has been filed with the Securities and Exchange Commission ("SEC"), and is
available without charge, upon written request, or by calling the Annuity
Service Center. The Table of Contents of the Statement of Additional Information
may be found on page 38 of this Prospectus. The Statement of Additional
Information, as supplemented from time to time, is incorporated herein by
reference.
THIS PROSPECTUS MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS FOR EACH
PORTFOLIO OF EACH FUND.
THE CONTRACTS DESCRIBED IN THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY.
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.
The date of this Prospectus is May 1, 1996.
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<TABLE>
<CAPTION>
Table Of Contents
<S> <C>
Page
DEFINITIONS ................................................................ 6
SUMMARY .................................................................... 8
PANORAMA PLUS SEPARATE ACCOUNT OF C.M. LIFE INSURANCE COMPANY .............. 12
C.M. LIFE INSURANCE COMPANY ................................................ 12
THE PANORAMA PLUS ANNUITY CONTRACT.......................................... 13
Contract Application and Issuance of Contracts........................... 13
Electronic Data Transmission of Application Information............. 13
Purchase Payments........................................................ 14
Initial Purchase Payment............................................ 14
Additional Purchase Payments........................................ 14
Allocation of Purchase Payment...................................... 14
Payment Not Honored by Bank......................................... 14
Contract Balance......................................................... 14
The Separate Account Balance........................................ 14
The General Account Balance......................................... 14
Minimum Contract Balance............................................ 15
PANORAMA PLUS INVESTMENT ACCOUNTS........................................... 15
The Separate Account..................................................... 15
The General Account...................................................... 16
Transfers................................................................ 17
Dollar Cost Averaging.................................................... 18
DISTRIBUTIONS UNDER THE CONTRACT............................................ 19
Surrenders............................................................... 19
Systematic Withdrawals................................................... 19
Annuity Income Payments.................................................. 20
Annuity Income Date................................................. 20
Election of Annuity Option.......................................... 20
Premium Tax......................................................... 20
Annuity Options.......................................................... 20
Terminal Illness Benefit................................................. 21
Death Benefit............................................................ 22
Death of Contract Owner............................................. 22
Death of Contract Owner/Annuitant................................... 22
Death of Annuitant.................................................. 23
Death Benefit Options............................................... 23
Death of Annuitant On or After Annuity Income Date.................. 23
Beneficiary......................................................... 23
IRS Required Distribution................................................ 23
Restrictions Under the Texas Optional Retirement Program................. 23
Restrictions Under Section 403(b) Plans.................................. 24
CHARGES AND DEDUCTIONS...................................................... 24
Surrender Charge......................................................... 24
Interest Rate Factor Adjustment.......................................... 25
Mortality and Expense Risk Charge........................................ 25
Administrative Charges................................................... 25
Contract Maintenance Fee............................................ 26
Administrative Expense Charge....................................... 26
Premium Taxes............................................................ 26
Federal, State and Local Taxes........................................... 26
Other Expenses Including Investment Advisory Fees........................ 26
</TABLE>
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<TABLE>
<S> <C>
DISTRIBUTOR OF THE CONTRACTS................................................ 26
GENERAL PROVISIONS.......................................................... 26
Assignment of the Contract............................................... 26
Contract Changes by C.M. Life............................................ 26
Contract Termination..................................................... 27
Incontestability......................................................... 27
Misstatement of Age or Sex............................................... 27
Nonparticipating......................................................... 27
NonBusiness Days......................................................... 27
Regulatory Requirements.................................................. 27
Right to Examine Contract................................................ 27
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................................... 27
Taxation of Annuities.................................................... 27
In General.......................................................... 27
Surrenders.......................................................... 28
Annuity Income Payments............................................. 28
Penalty Tax......................................................... 28
Transfers, Assignments, or Exchanges of the Policy.................. 28
Multiple Contracts.................................................. 28
Withholding......................................................... 28
Possible Changes in Taxation........................................ 29
Other Tax Consequences.............................................. 29
Qualified Plans.......................................................... 29
Qualified Pension and Profit Sharing Plans.......................... 29
Individual Retirement Annuities and Individual Retirement Accounts.. 29
Tax-Sheltered Annuities............................................. 29
Section 457 Deferred Compensation ("Section 457") Plans............. 30
Restrictions under Qualified Contracts.............................. 30
General.................................................................. 30
ADDITIONAL INFORMATION ABOUT C.M. LIFE...................................... 30
The Business of C.M. Life................................................ 30
Selected Financial Data.................................................. 31
Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................. 31
Liquidity and Capital Resources.......................................... 32
Segment Information...................................................... 32
Reserves................................................................. 32
Investments.............................................................. 32
Fixed Maturities......................................................... 32
Equity Securities........................................................ 33
Mortgage Loans On Real Estate............................................ 33
Policy Loans............................................................. 33
Competition.............................................................. 33
Transactions with Connecticut Mutual..................................... 33
Regulation............................................................... 33
New Accounting Pronouncements............................................ 33
Financial Statements and Supplementary Data.............................. 34
C.M. Life's Directors and Executive Officers............................. 34
Compensation of C.M. Life's Directors and Executive Officers............. 34
ADDITIONAL INFORMATION ABOUT THE SEPARATE ACCOUNT........................... 35
Addition, Deletion or Substitution of Investments........................ 35
Performance Data......................................................... 35
Voting Rights............................................................ 36
REGULATION.................................................................. 36
LEGAL PROCEEDINGS........................................................... 37
</TABLE>
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<TABLE>
<S> <C>
AVAILABLE INFORMATION....................................................... 37
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS....................... 38
FINANCIAL STATEMENTS........................................................ 39
APPENDIX I - SURRENDER CHARGE CALCULATION................................... 54
APPENDIX II - INTEREST RATE FACTOR ADJUSTMENT CALCULATION................... 55
APPENDIX III - EXAMPLES..................................................... 58
APPENDIX IV - INDIVIDUAL RETIREMENT ANNUITY DISCLOSURE...................... 59
</TABLE>
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Please Read This Prospectus Carefully
And Retain It For Future Reference.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESPERSON OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
------------------------------------
Annuity Service Center
140 Garden Street
Mail Station 305
Hartford, CT 06154
1-800-234-5606
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Definitions
Accumulation Period: The period from the Contract Issue Date through the day
preceding the Annuity Income Date.
Accumulation Unit: A unit of measure used to determine the value of the
Separate Account Balance during the Accumulation Period.
Annuitant: The person upon whose life the Annuity Income payments are to be
made. On or after the Annuity Income Date, the Annuitant shall also include any
Joint Annuitant selected in accordance with Annuity Income Options.
Annuity Income Date: The date on which the Annuity Income payments begin. The
earliest Annuity Income Date that may be elected is the fifth anniversary of the
Contract Issue Date. The latest Annuity Income Date that may be elected is the
Annuitant's 85th birthday.
Annuity Income: The payments that will begin on the Annuity Income Date. The
amount of Annuity Income payments will be based on the Contract Balance and the
age(s) and sex(es) of the Annuitant (and Joint Annuitant, if Annuity Option C or
D is elected), as well as on the Annuity Option selected.
Annuity Options: Options available for payment of Annuity Income.
Annuity Period: The period which begins on the Annuity Income Date and ends
with the last Annuity Income payment.
Annuity Service Center: Notices, Written Requests, and Purchase Payments under
the Contract must be sent to the Annuity Service Center, the address of which is
140 Garden Street, Mail Station 305, Hartford, CT 06123, telephone number
1-800-234-5606. All sums payable by C.M. Life under the Contract are payable
only at the Annuity Service Center.
Annuity Unit: A unit of measure used to determine the amount of each Variable
Annuity Income payment.
Application: The document signed by the Contract Owner that evidences the
Contract Owner's application for the Contract.
Beneficiary: The person(s) designated to receive the Death Benefit provided
under the Contract.
Code: The Internal Revenue Code of 1986, as amended.
Contingent Annuitant: The person designated to receive all of the benefits
otherwise due the Annuitant if the Annuitant dies before the Annuity Income
Date, provided such person is less than 85 years of age on the Annuitant's date
of death.
Contract Balance(s): The sum of the General Account Balance and the Separate
Account Balance.
Contract: The Panorama Plus individual flexible premium deferred annuity
contract, or the individual certificate issued under a Panorama Plus group
flexible premium deferred annuity contract, that is described in this
Prospectus.
Contract Issue Date: The date on which the Contract becomes effective.
Contract Owner: The person or entity entitled to the ownership rights stated in
the Contract.
Contract Year: The first Contract Year is the annual period which begins on the
Contract Issue Date. Subsequent Contract Years begin on each anniversary of the
Contract Issue Date.
Five-Year Period: Any of the successive five-year periods which begin on the
date of the initial Purchase Payment to the General Account.
Fixed Annuity: An annuity with payments that do not vary as to dollar amount.
Funds: The Separate Account invests in shares of various investment Portfolios
of two mutual funds ("Funds"): the Panorama Series Fund, Inc. ("Panorama Fund")
and the Oppenheimer Variable Account Funds ("OVAF"). Both Funds are diversified,
open-end management investment companies. The following six (6) Portfolios are
available under the Contract: the Oppenheimer Money Fund ("Money Portfolio") and
the Oppenheimer Bond Fund ("Bond Portfolio") of OVAF, and the Government
Securities Portfolio, the Total Return Portfolio, the Growth Portfolio, and the
International Equity Portfolio of the Panorama Fund. Each Portfolio is managed
for investment purposes as if it were a separate investment company issuing its
own shares.
General Account: The portion of the Contract, if any, which is credited with a
specified interest rate, and which is held as part of the general assets of C.M.
Life and not as part of the Separate Account.
General Account Balance: The value of the General Account during the
Accumulation Period.
Guaranteed Interest Rate: The effective annual interest rate which C.M. Life
will credit on the General Account Balance. The Guaranteed Interest Rate will be
reset quarterly in the sole discretion of C.M. Life, and will never be less than
3%. Although this minimum interest rate is guaranteed, there is no guaranteed
Surrender Value.
Investment Accounts: The General Account and Separate Account available for
Purchase Payments under the Contract.
Net Purchase Payment: A Purchase Payment less any Premium Tax.
Premium Tax: A tax imposed by certain states when a Purchase Payment is made,
when Annuity Income begins, or when the Contract is Surrendered.
Purchase Payment: A deposit made to the Contract.
Revision Date: The date of any revised Contract schedule. A revised Contract
schedule bearing the latest Revision Date will supersede all previous Contract
schedules.
Separate Account: C.M. Life's Panorama Plus Separate Account, which consists of
assets set aside by C.M. Life, the
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investment performance of which is kept separate from that of the general assets
and all other separate account assets of C.M. Life.
Separate Account Balance: The value of the Separate Account during the
Accumulation Period.
Sub-Account: Separate Account assets are divided into Sub-Accounts which are
listed in the Contract Schedule. Assets of each Sub-Account will be invested in
shares of a corresponding Portfolio or Fund. C.M. Life reserves the right to
eliminate or add Sub-Accounts and to change investment companies, or to
substitute other investments for Fund shares, in accordance with the applicable
provisions of the Investment Company Act of 1940, as amended.
Surrender: An election in the form of a Written Request by the Contract Owner
made prior to the Annuity Income Date and before a Death Benefit has become
payable, to withdraw all or a portion of the Contract Balance in exchange for a
cash payment.
Surrender Value: The proceeds payable upon a Surrender of the Contract, equal
to the Contract Balance (a) minus any applicable Surrender Charge, (b) minus the
Contract Maintenance Fee, (c) minus any applicable Premium Tax, and (d) plus or
minus any applicable interest Rate Factor Adjustment. There is no guaranteed or
minimum Surrender Value.
Treasury Index Rates: The annual interest rates payable on U.S. Treasury
securities with l-year, 2-year, 3-year, and 5-year maturities, published weekly
by the Federal Reserve. Index Rates for intermediate periods shall be
interpolated from the applicable interest rates.
Valuation Date: Every day on which C.M. Life and the New York Stock Exchange
("NYSE") are open for business, except any day on which trading on the NYSE is
restricted, or on which an emergency exists, as determined by the Securities and
Exchange Commission ("SEC"), or respective governing bodies of the NYSE so that
valuation or disposal of securities is not practicable.
Valuation Period: The period of time beginning on the day following any
Valuation Date and ending on the next Valuation Date. A Valuation Period may be
more than one day.
Variable Annuity: An annuity with payments which vary as to dollar amount in
relation to the investment performance of specified Sub-Accounts of the Separate
Account.
Window Period: The last thirty (30) days of each Five-Year Period. During a
Window Period, part or all of the General Account Balance may be transferred to
any Sub-Account of the Separate Account or surrendered without incurring a
Surrender Charge or an Interest Rate Factor Adjustment. Also, part or all of the
Separate Account Balance may be surrendered without incurring a Surrender Charge
during the Window Period.
Written Request: A request in writing, in a form satisfactory to C.M. Life,
which is received by the Annuity Service Center.
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The Panorama Plus Annuity
Summary
The Contract
The Panorama Plus Annuity is an individual and group flexible premium deferred
annuity which can be purchased on a non-tax-qualified basis ("Non-qualified
Contract") or with the proceeds from certain plans qualifying for favorable
federal income tax treatment ("Qualified Contract"). The Contract Owner
allocates Purchase Payments among two Investment Accounts of C.M. Life: the
Panorama Plus Separate Account (the "Separate Account") and the General Account.
Purchase Payments
A Contract may be purchased with a minimum initial Purchase Payment of at least
$500. From time to time, this minimum initial Purchase Payment may be changed.
The Contract Owner may make additional Purchase Payments of at least $50 each at
any time before the Annuity Income Date. Subsequent Purchase Payments allocated
to the General Account are limited in amount, based in part on prior Purchase
Payment allocations to that Account. (See "Purchase Payments," page 14).
The Panorama Plus Investment Accounts
On the Contract Issue Date, the initial Net Purchase Payment is allocated among
the Investment Accounts (that is, among the General Account and/or the
Sub-Accounts of the Separate Account) in accordance with the allocation
percentages specified by the Contract Owner in the Application. Allocation
changes for subsequent Purchase Payments may be made by sending a Written
Request to the Annuity Service Center. Allocation changes will be effective when
the Annuity Service Center receives a Written Request.
The Separate Account. The Separate Account, a separate account of C.M. Life,
invests in shares of various investment Portfolios of two mutual funds
("Funds"): the Panorama Series Fund, Inc. ("the Panorama Fund") and the
Oppenheimer Variable Account Funds ("OVAF"). In addition to the Money Fund and
the Bond Fund of OVAF, four (4) Portfolios of the Panorama Fund are currently
available under the Contract: the Government Securities Portfolio, the Total
Return Portfolio, the Growth Portfolio, and the International Equity Portfolio.
Each of the six Sub-Accounts of the Separate Account invests solely in a
corresponding Portfolio or Fund. Because the Separate Account Balance will
increase or decrease depending on the investment experience of the selected Sub-
Accounts, the Contract Owner bears the entire investment risk with respect to
Purchase Payments allocated to, and amounts transferred to, the Separate
Account. (See "The Separate Account," page 15).
The General Account. The General Account provides for fixed accumulations and a
specified interest rate on Purchase Payments allocated to, and amounts
transferred to, the General Account. The interest rate will be reset
periodically, currently quarterly, at the sole discretion of C.M. Life. The
General Account Balance may be subject to an Interest Rate Factor Adjustment
upon Surrender and on the Annuity Income Date. (See "Interest Rate Adjustment
Factor," page 25). The Interest Rate Factor Adjustment does not apply to
Contracts issued to Pennsylvania residents. Because of this adjustment and for
other reasons, the amount payable upon Surrender, or applied to Annuity Income
payments, may be more or less than the General Account Balance at that time, and
more or less than the total Purchase Payments allocated to and amounts
transferred to the General Account. Thus, the Contract Owner bears certain
investment risk with respect to the General Account Balance. (See "The General
Account," page 16).
Transfers
The Contract Owner may transfer amounts from one Investment Account or
Sub-Account to another Investment Account or Sub-Account, with certain
limitations, during the Accumulation Period (i.e., prior to the Annuity Income
Date). The Beneficiary may exercise this right if a Death Benefit has become
payable. The minimum transfer amount is $100. In addition, the total of all
transfers to or from the General Account during any Contract Year is limited to
the greater of (a) 30% of the General Account Balance as of the end of the
immediately preceding Contract Year, or (b) $25,000. Additional limitations
apply to transfers to or from the General Account and the Money Sub-Account.
(See "Transfers," page 17).
During the Annuity Period (i.e., after the Annuity Income Date), a portion of
the Separate Account Balance may be transferred from one Sub-Account to any
other Sub-Account once during any Contract Year. Transfers to or from the
General Account are not permitted during the Annuity Period. (See "Transfers,"
page 17).
Dollar Cost Averaging
There are three Dollar Cost Averaging options available to the Contract Owner.
First, the Contract Owner may elect to transfer fixed dollar amounts at regular
intervals from one Sub-Account to another Sub-Account, and to change the fixed
dollar amount and the Sub-Accounts selected. As a second option, the Contract
Owner may elect to transfer fixed dollar amounts from the General Account to
Sub-Accounts (other than the Money Market Sub-Account). Total transfers from the
General Account are limited in the Contract Year of the initial Purchase Payment
to the greater of: (i) 30% of the initial Purchase Payment; or (ii) $25,000. In
subsequent Contract Years, total transfers from the General Account are limited
to the greater of: (i) 30% of the General Account Balance as of the end of the
immediately preceding Contract Year; or (ii) $25,000. The timing of the election
of this option is restricted. As a third option, the Contract Owner may elect to
transfer the credited interest of the General Account at specified intervals to
one or more of the Sub-Accounts (other than the Money Market Sub-Account). A
General Account Balance of at least $5,000 must be available at the time of each
transfer. Only one Dollar Cost Averaging option may be in effect at any one
time.
There currently is no charge for Dollar Cost Averaging. However, the Company
reserves the right to charge for Dollar Cost Averaging in the future. The
Contract Owner may not simultaneously participate in both Dollar Cost Averaging
and Systematic Withdrawals. Changes in the Dollar Cost Averaging option may only
be made by Written Request from the Contract Owner to terminate the existing
Dollar Cost Averaging option,
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accompanied by a Written Request identifying the new Dollar Cost Averaging
option selected. For more details on "Dollar Cost Averaging," see page 18.
Surrenders
The Contract Owner may elect to Surrender all or a portion ($100 minimum per
partial surrender) of the Contract Balance in exchange for a cash payment from
C.M. Life at any time during the Accumulation Period and prior to payment of the
Death Benefit. Following any partial Surrender, the Contract Balance must be at
least $250. Partial Surrenders may be withdrawn from both the General Account
Balance and the Separate Account Balance. Partial and full Surrenders are
subject to any applicable Surrender Charge, Interest Rate Factor Adjustment, and
Contract Maintenance Fee. There is currently no limit on the frequency or timing
of Surrenders. (See "Surrenders," page 19.) Please note, federal income taxes
and a tax penalty may be applicable. (See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES," page 27.)
There is no guaranteed or minimum Surrender Value, so regardless of the extent
to which Purchase Payments are allocated to the Separate Account or to the
General Account, the proceeds of a full Surrender (that is, the Surrender Value)
could be less than the total Purchase Payments.
Systematic Withdrawals
Upon Written Request, the Contract Owner may elect Systematic Withdrawals ($100
minimum per withdrawal) to begin on or after the first anniversary of the
Contract Issue Date during the Accumulation Period. There is currently no charge
for Systematic Withdrawals. However, the Company reserves the right to charge
for Systematic Withdrawals in the future. The Contract Owner may not
simultaneously participate in both Systematic Withdrawals and Dollar Cost
Averaging.
Systematic Withdrawals changes may only be made by Written Request from the
Contract Owner to terminate the existing Systematic Withdrawals program
accompanied by a Written Request identifying the new Systematic Withdrawals
election. (See page 19.)
Systematic Withdrawals may result in tax liabilities. See "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES," page 27.
Terminal Illness Benefit
In the event that a Contract Owner becomes terminally ill during the
Accumulation Period and prior to age 75, the Contract Owner may elect, unless
prohibited by law, by submission of a Written Request, a Terminal Illness
Benefit equal to the greater of (a) the Purchase Payments less any prior
withdrawals and charges; or (b) the Contract Balance. (See "Terminal Illness
Benefit," page 21.)
Death Benefit
In the event that the Contract Owner or Annuitant dies prior to the Annuity
Income Date, a Death Benefit is payable upon receipt of satisfactory proof of
death of the Contract Owner or the Annuitant, an election of the Death Benefit
Option and return of the Contract. The Death Benefit will at least equal the
Contract Balance at the time of payment. No Surrender Charge, Interest Rate
Factor Adjustment, or Contract Maintenance Fee is imposed upon amounts received
as a Death Benefit. (If the Annuitant dies before the Contract Owner and there
is a Contingent Annuitant who is less than 85 years of age on the Annuitant's
date of death, and such Contract Owner is a natural person, no Death Benefit is
payable, and the Contract continues in force, with the Contingent Annuitant
becoming the Annuitant.) (See "Death Benefit," page 22.)
Charges and Deductions
Surrender Charge. To help defray sales expenses a 5% Surrender Charge will be
deducted from the Contract Balance in the event of any partial or full Surrender
during the first five (5) Contract Years. However, beginning in the second
Contract Year, a Free Surrender Amount, equal to 10% of the Contract Balance as
of the end of the immediately preceding Contract Year, will be exempt from any
Surrender Charge (and any Interest Rate Factor Adjustment see below). In
addition, no Surrender Charge or Interest Rate Factor Adjustment is imposed on
partial or full Surrenders during the Window Period, which is the last thirty
(30) days of each Five-Year Period. C.M. LIFE GUARANTEES THAT THE AGGREGATE
SURRENDER CHARGE WILL NEVER EXCEED 8.5% OF THE TOTAL PURCHASE PAYMENTS MADE
UNDER THE CONTRACT. (See "Surrender Charge," page 24.)
Interest Rate Factor Adjustment. An Interest Rate Factor Adjustment may be
applied in the event of any partial or full Surrender of the General Account
Balance during the Accumulation Period, and on the Annuity Income Date (if the
General Account Balance is applied to a Variable Annuity Option). The Interest
Rate Factor Adjustment does not apply to amounts invested in the Separate
Account or to Contracts issued to Pennsylvania residents.
The Interest Rate Factor Adjustment may be positive or negative. It is based on
interest rates payable on U.S. Treasury securities. In general, if rates on U.S.
Treasury securities are higher when you Surrender than when you made the
applicable Purchase Payments (or up to .30% lower), a negative Interest Rate
Factor Adjustment may be applied, and on a full Surrender of your General
Account Balance, you could receive an amount lower than the amount of Purchase
Payments made (even for Purchase Payments allocated to the General Account).
However, if rates on U.S. Treasury securities are more than .30% lower when you
Surrender than when you made the applicable Purchase Payments, a positive
Interest Rate Factor Adjustment may be applied, and on a full Surrender of your
General Account Balance, you could receive an amount higher than the amount of
Purchase Payments made, plus interest. (For partial Surrenders of the General
Account Balance, the Interest Rate Factor Adjustment will be added to or
subtracted from the remaining General Account Balance.) No Interest Rate Factor
Adjustment will be applied during the Window Period; in addition, no Interest
Rate Factor Adjustment will be applied to the General Account Free Surrender
Amount. (See "Interest Rate Factor Adjustment," page 25.)
Separate Account Charges. C.M. Life deducts a daily charge equal to a
percentage of the net assets in the Separate Account for the mortality and
expense risks assumed by C.M.
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Life under the Contracts. The effective annual rate of this charge currently is
1.07%. It may increase but it will not exceed an effective annual rate of 1.25%
of the average daily value of the Separate Account's net assets. (See "Mortality
and Expense Risk Charge," page 25.)
C.M. Life also deducts a daily Administrative Expense Charge from the net assets
of each of the Sub-Accounts of the Separate Account to partially cover expenses
incurred by C.M. Life in connection with the administration of the Separate
Account and the Contract. This charge is currently at an effective annual rate
of 0.07% and it may increase, but the annual charges for mortality and expense
risks and administrative expenses are guaranteed not to exceed an effective
annual rate of 1.50% of the daily value of the Separate Account's net assets.
(See "Administrative Expense Charge," page 26.)
Contract Charges. There is also an annual Contract Maintenance Fee imposed each
year for Contract maintenance and related administrative expenses. This charge
is currently $30 per Contract. It will be calculated as a pro rata portion of
the balance of each Sub-Account and the General Account, and deducted from the
Contract Balance on the last day of each Contract Year during the Accumulation
Period, and upon Full Surrender of the Contract. For Contracts issued to
Pennsylvania residents, the Fee will be calculated as a pro rata portion of the
balance of each Sub-Account. The Contract Maintenance Fee may increase but it
will not exceed $60 per Contract Year. (See "Contract Maintenance Fee," page
26.)
Taxes. C.M. Life may incur Premium Taxes relating to the Contracts. Depending
upon applicable state law, C.M. Life will deduct any Premium Taxes related to a
particular Contract from Purchase Payments, from the Contract Balance upon
Surrender, or on the Annuity Income Date. (See "Premium Taxes," page 26.) No
charges are currently made against the Sub-Accounts for federal, state, or local
taxes other than Premium Taxes. However, C.M. Life may deduct charges for such
taxes in the future. (See "Federal, State and Local Taxes," page 26.)
Charges Against the Funds. The value of the net assets of the Sub-Accounts of
the Separate Account will reflect the investment advisory fee and other expenses
incurred by the Portfolios of the Funds.
Expense Data. The charges and deductions explained above are summarized in the
following table. This tabular information regarding expenses assumes that the
entire Contract Balance is in the Separate Account.
<TABLE>
<CAPTION>
Money Government Total International
Market/2/ Securities Income/3/ Return Growth Equity
--------- ---------- --------- ------ ------ -------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner Transaction Expenses/1/
Sales Load On Purchase Payments..................... 0 0 0 0 0 0
Maximum Surrender
(as a % of Contract Balance Surrendered)/4/...... 5% 5% 5% 5% 5% 5%
-----------------------------------------------------------------------------
Annual Contract Maintenance Fee..................... $30 Per Contract
Transfer Fee Currently No Fee
-----------------------------------------------------------------------------
Separate Account Annual Expenses
(as a percentage of Account value)
Mortality and Expense Risk Charge................... 1.07% 1.07% 1.07% 1.07% 1.07% 1.07%
----- ----- ----- ----- ----- -----
Administrative Expense Charge....................... 0.07% 0.07% 0.07% 0.07% 0.07% 0.07%
----- ----- ----- ----- ----- -----
Total Separate Account Annual Expenses.............. 1.14% 1.14% 1.14% 1.14% 1.14% 1.14%
===== ===== ===== ===== ===== =====
Portfolio Annual Expenses/5/
(as a percentage of average net assets)
Management Fees..................................... 0.45% 0.554% 0.75% 0.553% 0.613% 0.98%
----- ------ ----- ----- ----- -----
Other Expenses...................................... 0.06% 0.156% 0.05% 0.037% 0.047% 0.28%
----- ------ ----- ----- ----- -----
Total Portfolio Annual Expenses..................... 0.51% 0.71% 0.80% 0.59% 0.66% 1.26%
===== ===== ===== ===== ===== =====
</TABLE>
/1/ In addition to the Contract Owner transaction expenses reflected in the
table, an Interest Rate Factor Adjustment is applied to the amount of
General Account Balance under the Contract subject to full or partial
Surrender during the Accumulation Period, and on the Annuity Income Date
(if the General Account Balance is applied to a Variable Annuity Option),
unless the amount surrendered is a Free Surrender Amount, or the Surrender
is made during a Window Period (the Adjustment does not apply to Contracts
issued to Pennsylvania residents). The Interest Rate Factor Adjustment may
increase or decrease the General Account Balance Surrender proceeds.
/2/ Prior to December 1, 1996, the Money Market Sub-Account was invested in the
Money Market Portfolio of the Panorama Fund. The management fee, other
expenses and total portfolio annual expenses for the Money Market Portfolio
for the fiscal year ended December 31, 1995 were 0.50%, 0.07% and .0.57%,
respectively. On December 1, 1996, after receiving an order from the SEC
approving the transaction C.M. Life redeemed the shares of the Money Market
Portfolio of the Panorama Fund and purchased shares of the Money Fund of
OVAF with the proceeds.
10
<PAGE>
/3/ Prior to December 1, 1996, the Income Sub-Account of the Separate Account
was invested in the Income Portfolio of the Panorama Fund. The management
fee, other expenses and total portfolio annual expenses for the fiscal year
ended December 31, 1995 for the Income Portfolio were 0.59%, 0.06%, and
0.65%, respectively. On December 1, 1996, after receiving an order from the
SEC approving the transaction, C.M. Life redeemed the shares of the Income
Portfolio of the Panorama Fund and purchased shares of the Bond Portfolio
of OVAF with the proceeds.
/4/ The Surrender Charge is not applicable after the fifth anniversary of the
Contract Issue Date.
/5/ The Portfolio expenses are actual expenses for each Portfolio for the
fiscal year ended December 31, 1995.
Examples
The Contract Owner would pay the following expenses on a $1,000 investment,
assuming a 5% annual return on assets (and assuming the entire Contract Balance
is allocated to the Separate Account).
1. If the Contract is surrendered at the end of the applicable time period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Sub-Account.................. $69.84 $106.03 $ 97.03 $210.49
Government Securities Sub-Account......... $71.84 $112.08 $107.75 $232.48
Income Sub-Account........................ $72.73 $114.80 $112.55 $242.24
Total Return Sub-Account.................. $70.64 $108.46 $101.33 $219.34
Growth Sub-Account........................ $71.34 $110.57 $105.08 $227.03
International Equity Sub-Account.......... $77.32 $128.60 $136.78 $290.72
</TABLE>
2. If the Contract is not surrendered or annuitized:
<TABLE>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Sub-Account.................. $18.21 $56.39 $ 97.03 $210.49
Government Securities Sub-Account......... $20.31 $62.75 $107.75 $232.48
Income Sub-Account........................ $21.25 $65.61 $112.55 $242.24
Total Return Sub-Account.................. $19.05 $58.94 $101.33 $219.34
Growth Sub-Account........................ $19.78 $61.16 $105.08 $227.03
International Equity Sub-Account........... $26.08 $80.12 $136.78 $290.72
</TABLE>
The above table and examples are intended to assist the Contract Owner in
understanding the costs and expenses that will be borne, directly or indirectly,
by Purchase Payments allocated to the Separate Account. The table and examples
reflect the charges and expenses anticipated for the Separate Account and
reflect the actual expenses for each Portfolio for the 1995 fiscal year. For a
more complete description of the various charges and expenses described in the
table and examples, see "Charges and Deductions," page 24, and the prospectus
for each Fund. In addition to the expenses listed above, Premium Taxes may be
applicable.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
11
<PAGE>
Panorama Plus Separate Account Of
C.M. Life Insurance Company
Condensed Financial Information
The audited financial statements for the year ended December 31, 1995 and the
period from inception (May 13, 1992) to December 31, 1995 are included in the
Statement of Additional Information, which is incorporated by reference in this
Prospectus.
<TABLE>
<CAPTION>
ACCUMULATION UNIT VALUES
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1992(a) 1992 1993 1994 1995
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Sub-Account
Money Market $1.000000 $1.012022 $1.027456 $1.054570 $1.100599
Government Securities $1.000000 $1.061901 $1.158653 $1.095471 $1.281804
Income $1.000000 $1.060916 $1.174260 $1.114759 $1.306525
Total Return $1.000000 $1.058946 $1.217379 $1.186187 $1.460595
Growth $1.000000 $1.064372 $1.276534 $1.258146 $1.711382
International Equity $1.000000 $0.950887 $1.146031 $1.145014 $1.251930
Accumulation Units Outstanding
Money Market 681,553 33,136,932 13,603,045 16,949,501
Government Securities 2,152,739 8,444,505 11,994,574 13,726,057
Income 2,564,029 12,281,025 16,488,930 20,617,764
Total Return 12,316,597 71,182,538 147,324,713 194,679,349
Growth 2,798,378 19,370,204 49,636,052 83,371,008
International Equity 742,623 5,578,969 22,419,639 31,322,974
</TABLE>
(a) Commencement of operations for the Sub-Accounts occurred on May 13, 1992.
Right to Return the Contract
No Surrender Charge will be applied if the Contract Owner returns the Contract
to the Annuity Service Center for cancellation during the first fifteen (15)
calendar days following the Contract Issue Date (or a longer period, if required
by law). Upon return of the Contract during this period, C.M. Life will refund
the Separate Account Balance and any Purchase Payments made to the General
Account. If required by state law, C.M. Life will refund all Purchase Payments
received upon cancellation of the Contract.
Federal Income Tax Consequences of Investment in the Contract
With respect to Contract Owners who are natural persons, there should be no
federal income tax on increases in the Contract Balance (if any) until a
distribution under the Contract occurs (e.g., a Surrender or Annuity Income
payment) or is deemed to occur (e.g., a pledge or assignment of a Contract).
Generally, a portion of any distribution or deemed distribution will be taxable
as ordinary income. The taxable portion of certain distributions will be subject
to withholding unless the recipient elects otherwise. In addition, a penalty tax
may apply to certain distributions or deemed distributions under the Contract.
(See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES," page 27.)
Inquiries and Written Notices and Requests
Any questions about procedures or the Contract, or any Written Request required
to be directed to C.M. Life, should be sent to Annuity Service Center, 140
Garden Street, Mail Station 305, Hartford, CT 06154. Telephone requests and
inquiries may be made by calling 1-800-234-5606. All inquiries and Written
Requests should include the Contract number, the Contract Owner's name and the
Annuitant's name.
Variations in Contract Provisions
Certain provisions of the Contracts may vary from the descriptions in this
Prospectus in order to comply with different state laws. Any such variations
will be included in the Contract itself or in riders or endorsements.
Note: The foregoing summary is qualified in its entirety by the detailed
information in the remainder of this Prospectus, in the Statement of Additional
Information, in the prospectus for each Fund, and in the Contract, all of which
should be referred to for more detailed information. This Prospectus generally
describes only the Contract, the Separate Account and the General Account. A
separate prospectus attached hereto describes each Fund.
C.M. Life Insurance Company
C.M. Life, 140 Garden Street, Hartford, Connecticut 06154, is a stock life
insurance company. It was chartered by a special Act of the Connecticut General
Assembly on April 25, 1980. It is principally engaged in the sale of life
insurance and annuities, and is licensed in all states except New York. C.M.
Life
12
<PAGE>
is a wholly-owned subsidiary of Massachusetts Mutual Life Insurance Company
("MassMutual"). MassMutual is a mutual life insurance company specially
chartered by the Commonwealth of Massachusetts on May 14, 1851. It is currently
licensed to transact life (including variable life), accident, and health
insurance business in all states, the District of Columbia and certain provinces
of Canada. As of March 1, 1996, MassMutual had total assets of $50 billion.
Prior to February 29, 1996, C.M. Life was a wholly-owned subsidiary of
Connecticut Mutual Life Insurance Company ("Connecticut Mutual"). On February
29, 1996, Connecticut Mutual merged with and into MassMutual. Connecticut Mutual
was a mutual life insurance company originally chartered by a special act of the
Connecticut General Assembly in 1846. Upon the merger, Connecticut Mutual's
existence ceased and MassMutual became the surviving company under the name
Massachusetts Mutual Life Insurance Company. In approving the merger, the boards
of directors of MassMutual and Connecticut Mutual determined that the merger
would result in a combined company that would be stronger and more efficient and
therefore more competitive than either MassMutual or Connecticut Mutual alone.
On January 26, 1996, 95.76% of the policyholders of MassMutual and 95.75% of the
insured of MassMutual, each voting as a separate class, voted to approve the
merger. On January 27, 1996, 94.0% of the policyholders of Connecticut Mutual
and 94.27% of the members of Connecticut Mutual, each voting as a separate
class, voted to approved the merger. In addition, the Connecticut Insurance
Department and the Massachusetts Division of Insurance approved the merger.
The merger did not affect any provisions of, or rights or obligations under, the
Contracts issued by C.M. Life.
For more information about C.M. Life, see "ADDITIONAL INFORMATION ABOUT C.M.
LIFE," page 30.
The Panorama Plus Annuity Contract
The Panorama Plus Annuity Contract is an individual and group Flexible Premium
Deferred Annuity Contract. In certain states the Contract is only available as a
group contract. In these states, a Certificate (also referred to herein as a
"Contract"), which summarizes the provisions of the group contract under which
the Certificate is issued, is issued to individuals. The rights and benefits
under the Contract are summarized below. However, the description of the
Contract contained in this Prospectus is qualified in its entirety by the
Contract itself, a copy of which is available upon request from C.M. Life. The
Contract may be purchased on a non-tax-qualified basis ("Non-qualified
Contract"). The Contract may also be purchased and used in connection with
retirement plans or individual retirement accounts that qualify for favorable
federal income tax treatment ("Qualified Contract").
Group contracts may be issued to any employer, entity, or other group acceptable
to C.M. Life. An eligible member of a group to which a group contract has been
issued may become a participant by completing an Application and forwarding an
initial Purchase Payment to C.M. Life. The rights and benefits of a participant
under a group contract are summarized in a certificate issued to the
participant. Provisions of the group contract are controlling. All rights and
benefits may be exercised by the participant without the consent of the group
contract owner. Unless otherwise stated, the rights and benefits of an owner of
an Individual Panorama Plus Annuity and an owner of a certificate under a group
Panorama Plus Annuity are the same. Accordingly, as used herein, the term
"Contract" means either an individual annuity or a certificate under a group
annuity, depending on the state where it is issued.
There is no guaranteed or minimum Surrender Value under the Contract, so the
amount received on Surrender could be less than the amount of Purchase Payments.
Contract Application and Issuance of Contracts
Before it will issue a Contract, C.M. Life must receive a completed Application
and an initial Purchase Payment of at least $500. From time to time, this
initial Purchase Payment may be reduced. C.M. Life reserves the right to reject
any Application or Purchase Payment.
If the Application is properly completed and can be accepted in the form
received, any initial Net Purchase Payment will be credited to the Contract
Balance within two (2) business days after the later of receipt of the
Application or receipt of the initial Purchase Payment at the Annuity Service
Center. (The Net Purchase Payment is the total Purchase Payment less any
applicable Premium Tax.) If the initial Net Purchase Payment allocated to the
Separate Account cannot be credited because the Application or other issuing
requirements are incomplete, the applicant will be contacted within five (5)
business days and given an explanation for the delay, and the initial Purchase
Payment will be returned at that time unless the applicant consents to C.M.
Life's retaining the initial Purchase Payment and crediting it as soon as the
necessary requirements are fulfilled.
The date on which the initial Net Purchase Payment is credited to the Contract
Balance is the Contract Issue Date. The Contract Issue Date is the date used to
determine Contract Years and Contract anniversaries.
The Contract Owner may return the Contract for cancellation during the first
fifteen (15) calendar days following the Contract Issue Date (or a longer
period, if required by law). Upon return of the Contract, C.M. Life will refund
the Separate Account Balance (as of the date the returned Contract and
cancellation request are received in good order at the Annuity Service Center)
and any Purchase Payments allocated to the General Account. For Contracts issued
in the States of North Carolina, South Carolina or Washington, C.M. Life will
refund all Purchase Payments received upon cancellation of the Contract during
this period.
Electronic Data Transmission of Application Information. C.M. Life will accept,
by agreement with certain broker-dealers, electronic data transmissions of
Application information, along with wire transmittals of initial Purchase
Payments, from these broker-dealers to the Annuity Service Center for purchase
of the Contract. Please contact the Annuity Service
13
<PAGE>
Center to receive more information about electronic data transmission of
Application information.
Purchase Payments
All Purchase Payment checks or drafts should be made payable to C.M. Life
Insurance Company and sent to the Annuity Service Center.
Initial Purchase Payment. The minimum initial Purchase Payment that C.M. Life
currently will accept under a Contract is $500. C.M. Life reserves the right to
increase or decrease this amount for Contracts issued after some future date.
The initial Purchase Payment is the only Purchase Payment required to be paid
under a Contract. However, this initial Purchase Payment may be waived in the
case of certain salary reduction/employer contribution arrangements or Automatic
Investment Plans, in which case the minimum contribution will be $40 per month
per participant.
Additional Purchase Payments. Before a Death Benefit has become payable and
prior to the Annuity Income Date, the Contract Owner may make additional
Purchase Payments at any time, and in any frequency. The minimum additional
Purchase Payment is $50. If the Annuitant is age 76 or older as of the Contract
Issue Date, cumulative Purchase Payments under the Contract may not exceed
$500,000. If the Annuitant is younger than age 76 as of the Contract Issue Date,
cumulative Purchase Payments may not exceed $1,000,000 without the prior consent
of C.M. Life.
Allocation of Purchase Payments. The Contract Owner must allocate Purchase
Payments to one or more of the Sub-Accounts or to the General Account, or some
combination thereof. The Contract Owner must specify the initial allocation in
the Application. This allocation will be used for additional Purchase Payments
unless the Contract Owner requests a change of allocation. If the Contract Owner
fails to specify how Purchase Payments are to be allocated, the Purchase
Payment(s) cannot be accepted. Additional Purchase Payments allocated to the
Separate Account will be credited to the Contract and added to the Contract
Balance as of the Valuation Period when they are received. Purchase Payments
allocated to the General Account will be credited with interest from the day
after deposit.
After the first Contract Year, the Purchase Payments allocated to the General
Account during any Contract Year may not exceed the greater of: (i) 125% of the
average annual Purchase Payments allocated to the General Account during the
last five (5) full Contract Years (or all years, if less than five (5)); or (ii)
$25,000. This restriction does not apply during the Window Period.
The Contract Owner may change the allocation instructions for future Purchase
Payments by sending a Written Request, signed by such Contract Owner, to the
Annuity Service Center. The allocation change will apply to Purchase Payments
received with the Written Request and after the Valuation Period in which the
Written Request is received.
Payment Not Honored by Bank. Any payment due under the Contract which is
derived, all or in part, from any amount paid to C.M. Life by check or draft may
be postponed until such time as C.M. Life determines that such check or draft
has been honored.
Contract Balance
On the Contract Issue Date, the accepted Contract Balance equals the initial Net
Purchase Payment. Thereafter, the Contract Balance equals the sum of the
Separate Account Balance and the General Account Balance. The Contract Balance
will increase by (1) any additional Purchase Payments accepted by C.M. Life, and
(2) any increases in the Contract Balance due to investment results of the
selected Investment Account or Sub-Account. The Contract Balance will decrease
by (1) any Surrenders, including applicable charges, (2) any decreases in the
Contract Balance due to investment results of the selected Sub-Accounts, and (3)
charges imposed by C.M. Life. The Interest Rate Factor Adjustment imposed upon
partial Surrenders may also increase or decrease the remaining Contract Balance.
The Contract Balance is expected to change from Valuation Period to Valuation
Period, reflecting the investment experience of the selected Sub-Account(s), as
well as deductions for charges. A Valuation Period is the period between
successive Valuation Dates. It begins at the close of business on each Valuation
Date and ends at the close of business on the next succeeding Valuation Date.
Holidays are generally not Valuation Dates.
The Separate Account Balance. When a Net Purchase Payment is allocated to, or an
amount is transferred to, a Sub-Account of the Separate Account, it is credited
to the Contract in the form of Accumulation Units. Each Sub-Account of the
Separate Account has a distinct Accumulation Unit value. The number of
Accumulation Units credited is determined by dividing the Net Purchase Payment,
or amount transferred, by the dollar value of one Accumulation Unit of the
Sub-Account as of the end of the Valuation Period during which the allocation is
made. When amounts are transferred out of, or Surrendered from, a Sub-Account,
Accumulation Units are cancelled or redeemed in a similar manner.
For each Sub-Account, the Accumulation Unit value for a given Valuation Period
is based on the net asset value of a share of the corresponding Portfolio or
Fund. Therefore, the Accumulation Units will fluctuate in value from day to day
based on the investment experience of the corresponding Portfolio, and the
Separate Account Balance will decrease or increase to reflect the investment
performance of the corresponding Portfolio. The Separate Account Balance also
reflects expenses borne by the Portfolio(s) and the deduction of certain
charges. The determination of Sub-Account Accumulation Unit values is described
in detail in the Statement of Additional Information.
The General Account Balance. When a Net Purchase Payment is allocated or an
amount is transferred to the General Account, it is credited to the General
Account Balance. In addition, interest at a specified interest rate is credited
to the General Account Balance. When amounts are transferred out of, or
Surrendered from, the General Account, the General Account Balance is reduced
accordingly. Unlike the Separate Account, there are no Accumulation Units in the
General Account. (See "The General Account," page 16.)
14
<PAGE>
Minimum Contract Balance. A minimum Contract Balance of $250 must be maintained
during the Accumulation Period. If the Contract Owner fails to maintain the
minimum Contract Balance, then C.M. Life may, upon sixty (60) days notice,
terminate the Contract, and return the Contract Balance, minus any applicable
fees or charges, to the Contract Owner. If the Contract Owner makes sufficient
Purchase Payments to restore the Contract Balance to the minimum Contract
Balance within sixty (60) days of the date of notice, the Contract will continue
in force.
Panorama Plus Investment Accounts
Purchase Payments paid under a Contract may be allocated to one or more of the
six Sub-Accounts of the Separate Account, to the General Account, or to a
combination of these Investment Accounts. There is no guaranteed or minimum
Surrender Value for any Purchase Payments, or with respect to amounts allocated
to any Investment Account.
The Separate Account
Panorama Plus Separate Account. The Panorama Plus Separate Account of C.M. Life
Insurance Company (the "Separate Account") was established as a separate account
under the laws of the State of Connecticut, on September 25, 1991. The Separate
Account will receive and invest the Net Purchase Payments under the Contracts
that are allocated to it as well as amounts transferred to it in shares of two
mutual funds ("Funds"): the Panorama Series Fund, Inc. (the "Panorama Fund")
(formerly known as Connecticut Mutual Financial Services Series Fund I, Inc.)
and the Oppenheimer Variable Account Funds ("OVAF").
The Separate Account currently is divided into six (6) Sub-Accounts. Additional
Sub-Accounts may be established in the future at the discretion of C.M. Life.
Each Sub-Account invests exclusively in shares of a corresponding Portfolio of
the Funds. Prior to December 1, 1996, the Money Market Sub-Account and the
Income Sub-Account were invested in shares of the corresponding Portfolios of
the Panorama Fund. On December 1, 1996, after receiving an order from the SEC
approving the transaction, C.M. Life redeemed the shares of the Money Market
Portfolio held by the Money Market Sub-Account and purchased shares of the OVAF
Money Fund with the proceeds. On that date, C.M. Life also redeemed shares of
the Income Portfolio held by the Income Sub-Account and purchased shares of the
OVAF Bond Fund with the proceeds. The portfolio substitutions and sub-account
consolidation took place at net asset value with no change in the amount of any
Contract Owner's death benefit or dollar value of his or her investment in the
Separate Account. C.M. Life and its affiliates did not receive any compensation
or remuneration as a result of this transaction.
Under Connecticut law, the assets of the Separate Account are owned by C.M.
Life, but they are held separately from the other assets of C.M. Life, and are
not chargeable with liabilities incurred in any other business operation of C.M.
Life (except to the extent that assets in the Separate Account exceed the
reserves and other liabilities of the Separate Account). Income, gains, and
losses incurred on the assets in the Sub-Accounts of the Separate Account,
whether or not realized, are credited to or charged against that Sub-Account,
without regard to other income, gains or losses of any other Investment Account
or Sub-Account of C.M. Life. Therefore, the investment performance of any
Sub-Account is entirely independent of the investment performance of C.M. Life's
general account assets or any other separate account maintained by C.M. Life.
The Contract Owner bears the entire investment risk with respect to the Contract
Balance allocated to the Separate Account, and the Separate Account Balance will
be more or less than the total of the Net Purchase Payments allocated to, and
transfers into, the Separate Account.
The Separate Account is registered with the Securities and Exchange Commission
(the "SEC") under the Investment Company Act of 1940, as amended, (the "1940
Act") as a unit investment trust. It meets the definition of a "separate
account" under the federal securities laws. However, the SEC does not supervise
the management or the investment practices or policies of the Separate Account
or of C.M. Life.
The Funds. The Separate Account will invest exclusively in shares of the
Panorama Fund and OVAF ("Funds"), each of which is a series-type mutual fund
registered with the SEC under the "1940 Act" as an open-end, diversified
management investment company. In addition to the Money Fund and Bond Fund of
OVAF, four (4) Portfolios of the Panorama Fund are currently available under the
Contract: the Government Securities Portfolio, the Total Return Portfolio, the
Growth Portfolio, and the International Equity Portfolio. The assets of each
investment option are held separately from the assets of the other investment
options, and each investment option has its own distinct investment objective
and policies. Each investment option operates as a separate investment fund, and
the income or losses of one Portfolio have no effect on the investment
performance of any other investment option.
15
<PAGE>
The investment objective of each of the available investment options is stated
as follows:
Money Seeks the maximum current income from investments in "money
Fund market" securities consistent with low capital risk and the
maintenance of liquidity. There can be no assurance that the
Money Portfolio will maintain a stable net asset value per share
of $1, and the Money Portfolio is not insured or guaranteed by
the U.S. Government.
Government To seek a high level of current income with a high degree of
Securities safety of principal, by investing primarily in securities that
Portfolio are issued by or guaranteed as to principal and interest by the
U.S. Government, its agencies, authorities or instrumentalities
and in obligations that are fully collateralized or otherwise
fully backed by U.S. Government Securities.
Bond Seeks a high level of current income from investments in
Fund high yield, fixed-income securities rated "Baa" or better by
Moody's or "BBB" or better by Standard & Poor's. As a secondary
investment objective, the Bond Fund seeks capital growth when
consistent with its primary objective.
Total Return Seeks to maximize the total investment return (including capital
Portfolio appreciation and income) by allocating its assets among stocks,
corporate bonds, securities issued by the U.S. Government and
its instrumentalities, and money market instruments according to
changing market conditions.
Growth Seeks long-term growth of capital by investing primarily in
Portfolio common stocks with low price-earnings ratios and better than
anticipated earnings. Realization of income is a secondary
consideration.
International Seeks to provide long-term growth of capital by investing, under
Equity normal market conditions, at least 90% of its assets in equity
Portfolio securities (such as common stocks) of companies whose primary
stock market is outside the U.S.
OppenheimerFunds, Inc. ("OFI"), an investment adviser registered with the SEC
under the Investment Advisers Act of 1940, as amended, ("Investment Advisers
Act") is the investment adviser to the Funds. OFI has operated as an investment
adviser since 1959 and, including a subsidiary, manages investment companies
with more than $50 billion in assets and nearly 3 million shareholder accounts.
OFI is owned by Oppenheimer Acquisition Corp., a holding company that is owned
in part by senior officers of OFI and controlled by MassMutual. The address of
OFI is Two World Trade Center, New York, NY 10048-0203.
Babson-Stewart Ivory International ("Babson-Stewart") provides sub-advisory
services to the International Equity Portfolio pursuant to a sub-advisory
agreement between Babson-Stewart and OFI. Babson-Stewart is located at One
Memorial Drive, Cambridge, MA 02142, and is a partnership formed in 1987 between
David L. Babson & Co., Inc., a subsidiary of MassMutual, and Stewart Ivory &
Co., Ltd., located in Edinburgh, Scotland.
THERE IS NO ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS STATED OBJECTIVE. More
detailed information, including a description of each Portfolio's investment
objective and policies and a description of risks involved in investing in each
of the Portfolios and of each Portfolio's fees and expenses is contained in the
prospectus for the Funds, a current copy of which is attached to this
Prospectus. Information contained in the prospectuses for the Funds should be
read carefully before making allocations to a Sub-Account of the Separate
Account.
The General Account
The General Account is made up of all of the assets of C.M. Life other than
those allocated to any separate account. Purchase Payments will be allocated to
the General Account to the extent elected by the Contract Owner at the time of
the initial Purchase Payment or as subsequently elected. In addition, all or
part of the Separate Account Balance may be transferred to the General Account
as described under "Transfers." Assets supporting amounts allocated to the
General Account become part of C.M. Life's general account assets and are
available to fund the claims of all classes of customers, policy owners and
other creditors of C.M. Life. Interests under the Contract relating to the
General Account are registered under the Securities Act of 1933, as amended,
("1933 Act") but the General Account is not registered under the 1940 Act.
Contract Balances in the General Account will not share in the investment
performance of the General Account or any portion thereof. Instead, C.M. Life
will pay a specified rate of interest on such balance. The interest rate
credited to General Account Balances will vary at the sole discretion of C.M.
Life. The Contract Owner should check with his or her agent or the Annuity
Service Center for current availability. However, C.M. Life will credit interest
at an effective annual rate of not less than 3% per year, compounded annually,
to amounts allocated to the General Account under the Contract. C.M. Life is not
obligated to credit any interest in excess of 3%. There is no specific formula
for the determination of the interest rate. Some of the factors that C.M. Life
may consider in determining the interest rate are: general economic trends;
rates of return currently available and anticipated on C.M. Life's investments;
expected investment yields; regulatory and tax requirements; and competitive
factors. C.M. Life may, with
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respect to investments and average terms of investments, use dedication (cash
flow matching), and/or duration matching, or other methods to minimize C.M.
Life's risk in volatile interest rate environments of not achieving the rates it
is crediting. ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE GENERAL ACCOUNT
IN EXCESS OF 3% PER YEAR WILL BE DETERMINED AT THE SOLE DISCRETION OF C.M. LIFE.
THE CONTRACT OWNER ASSUMES THE RISK THAT INTEREST CREDITED ON AMOUNTS ALLOCATED
TO THE GENERAL ACCOUNT MAY NOT EXCEED 3% PER YEAR. C.M. Life resets this rate
periodically. It currently resets the rate quarterly, but in the future the rate
may be reset more or less frequently. The Contract Owner also assumes the risk
that the Surrender Value of amounts allocated to the General Account will be
less than the General Account Balance, and less than the Net Purchase Payments
allocated to the General Account.
C.M. Life is aware of no statutory limitations on the maximum amount of interest
it may credit, and the Board of Directors has set no limitations. However,
inherent in C.M. Life's exercise of discretion in this regard is the equitable
allocation of distributable earnings and surplus among its various policyholders
and Contract Owners and to its sole stockholder.
Surrenders of General Account Balances may be subject to an Interest Rate Factor
Adjustment (as well as a Surrender Charge), so Surrender proceeds may be less
than Purchase Payments. The Interest Rate Factor Adjustment may also apply to
any General Account Balance applied to Variable Annuity Income payments. The
Adjustment does not apply to Contracts issued to Pennsylvania residents. For
more information, see "Surrender Charge," page 24, and "Interest Rate Factor
Adjustment," page 25.
C.M. Life will invest the assets of the General Account in those assets chosen
by C.M. Life and allowed by applicable state laws regarding the nature and
quality of investments that may be made by life insurance companies, and the
percentage of their assets that may be committed to any particular type of
investment. In general, these laws permit investments, within specified limits
and subject to certain qualifications, in federal, state and municipal
obligations, corporate bonds, preferred and common stocks, real estate
mortgages, real estate and certain other investments.
C.M. Life intends to invest assets of the General Account primarily in debt
instruments as follows: (1) securities issued by the United States Government or
its agencies or instrumentalities, which issues may or may not be guaranteed by
the United States Government; (2) debt securities which have an investment
grade, at the time of purchase, within the four highest grades assigned by
Moody's Investors Services, Inc. ("Moody's") (Aaa, Aa, A or Baa), Standard &
Poor's Corporation ("Standard & Poor's) (AAA, AA, A or BBB) or any other
nationally recognized rating service; and (3) other debt instruments, including,
but not limited to, issues of or guaranteed by banks or bank holding companies
and corporations, which obligations, although not rated by Moody's or Standard &
Poor's, are deemed by C.M. Life's management to have an investment quality
comparable to securities which may be purchased as stated above. General Account
assess may also be invested in: (4) other evidences of indebtedness secured by
mortgages or deeds of trust representing liens upon real estate; and (5) private
placements (i.e., securities not registered with the SEC, and for which there
may not be a liquid market). Notwithstanding the foregoing, C.M. Life may also
invest a portion of the General Account assets in (6) below investment grade
debt instruments. Instruments rated "Baa" and/or "BBB" or lower normally involve
a higher risk of default and are less liquid than higher rated instruments. If
the rating of an investment grade debt security held by C.M. Life is
subsequently downgraded to below investment grade, the decision to retain or
dispose of the security will be made based upon an individual evaluation of the
circumstances surrounding the downgrading, and the prospects for continued
deterioration, stabilization and/or improvement. C.M. Life is not obligated to
invest amounts allocated to the General Account according to any particular
strategy, except as may be required by applicable state insurance laws.
Investments not indicated herein may also be made.
C.M. Life may utilize a "segregated account" within its general asset account in
connection with the General Account Contract Balances. Nevertheless, Contract
Owners who allocate amounts to the General Account do not share in the
investment performance of that segregated account or any other portion of the
assets of C.M. Life. Accordingly, in contrast to the Panorama Plus Separate
Account discussed above, there are no "units" or calculation of "unit values" to
measure the investment performance of the General Account. (This type of
segregated account is sometimes referred to as a "non-unitized separate
account.")
Transfers
The Contract Owner may transfer Contract Balance amounts to or from the General
Account and/or any Sub-Account of the Separate Account, within certain limits,
as described below. Although no fee is currently imposed on transfers, C.M. Life
reserves the right to charge such a fee in the future, and to otherwise restrict
the transfer privilege in any way, or to eliminate it entirely.
During the Accumulation Period, the Contract Owner (or the Beneficiary, if a
Death Benefit has become payable) may transfer Contract Balance amounts,
subject to the following provisions.
. The Contract Owner signs and submits a Written Request for a transfer
which is received by the Annuity Service Center.
. The minimum transfer amount is $100.
. The total amount of all transfers to or from the General Account during
each Contract Year is limited to the greater of: (i) 30% of the General
Account Balance as of the end of the immediately preceding Contract Year;
or (ii) $25,000.
. Transfers between the General Account and the Money Sub-Account (together,
the "Competing Accounts") are only permitted during a Window Period. In
addition, for a period of ninety (90) days following a transfer out of one
Competing Account, no transfers (i.e., from any Account) may be made into
the other Competing Account.
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. Similarly, for a period of ninety (90) days following a transfer into
either Competing Account, no transfers (i.e., to any Account) may be made
out of the other Competing Account.
During the Annuity Period, the Contract Owner (who may or may not be the
Annuitant) may transfer Separate Account Balance amounts, subject to the
following provisions.
. The Contract Owner signs and submits a Written Request for a transfer
which is received by the Annuity Service Center.
. Transfers to or from the General Account are not permitted during the
Annuity Period.
. Transfers during the Annuity Period may be made only once during any
Contract Year.
. Transfers between Sub-Accounts during the Annuity Period will be processed
based on the formula outlined in the Statement of Additional Information.
Contract Owners may elect to make transfers by telephone. To do so, the Contract
Owner must submit a completed Written Request electing the telephone transfer
privilege. Telephone requests must be received at the Annuity Service Center no
later than 3:30 Eastern Standard Time to assure same day pricing. Telephone
requests will not be accepted after that time. C.M. Life will use reasonable
procedures to confirm that instructions communicated by telephone are genuine.
If it does not, C.M. Life may be liable for any losses due to unauthorized or
fraudulent instructions. C.M. Life may tape record all telephone instructions.
C.M. Life will not be liable for any loss, liability, cost or expense incurred
by the Contract Owner for acting in accordance with such telephone instructions
believed to be genuine. The telephone transfer privilege may be discontinued by
C.M. Life at any time.
Dollar Cost Averaging
To the extent provided below, amounts from Sub-Accounts and the General Account
may be transferred at regular intervals. This election is called "Dollar Cost
Averaging."
Upon Written Request, a Contract Owner may elect Dollar Cost Averaging ("DCA")
to begin at any time during the Accumulation Period, except as otherwise
provided in DCA Option 2 - Fixed Dollar Amount Transfers described below. There
is currently no charge for DCA. However, the Company reserves the right to
charge for DCA in the future. The Contract Owner may not simultaneously
participate in both DCA and Systematic Withdrawals. (See "Systematic
Withdrawals" at page 19.)
DCA will begin when a properly completed Written Request from the Contract Owner
is received by the Company at least five (5) business days prior to the transfer
start date selected by the Contract Owner. If the DCA start date is less than
five (5) days after the date the Written Request is received by the Company, the
Company may defer the DCA start date for one (1) month. If no start date has
been selected, the Company will automatically start DCA within five (5) business
days after the Written Request is received.
If DCA is elected, the Contract Owner may direct the transfer of amounts at
regular intervals under one of the following options:
DCA OPTION 1 FROM THE SUB-ACCOUNTS - This option provides for the transfer of
fixed dollar amounts at regular intervals from any one Sub-Account to one or
more other Sub-Account(s), as elected by the Contract Owner. Transfers must
be at least $100 per transferee Sub-Account. Transfers to the General Account
are not permitted.
DCA OPTIONS 2 & 3 FROM THE GENERAL ACCOUNT - These options provide for the
transfer of amounts at regular intervals from the General Account to one or
more of the Sub-Accounts (other than the Money Market Sub-Account). Except
during the Window Period, additional transfers from the General Account are
not permitted while a DCA option 2 or 3 is in effect. DCA Options 2 and 3 are
described below.
DCA OPTION 2 - FIXED DOLLAR AMOUNT TRANSFERS - This option provides for the
transfer of fixed dollar amounts at regular intervals from the General
Account to one or more of the Sub-Accounts (other than the Money Market Sub-
Account). Transfers must be for at least $100 per transferee Sub-Account.
Total transfers from the General Account are limited in the Contract Year of
the initial Purchase Payment to the greater of: (i) 30% of the initial
Purchase Payment; or (ii) $25,000. In subsequent Contract Years total
transfers from the General Account are limited to the greater of: (i) 30% of
the General Account Balance as of the end of the immediately preceding
Contract Year; or (ii) $25,000. Election into this option may only be made
during the Accumulation Period as follows: at the time of the initial
Purchase Payment into the General Account; or, in subsequent years, on the
Contract Year anniversary, provided that the Company receives the Written
Request for this election at least five (5) business days in advance of such
anniversary.
DCA OPTION 3 - INTEREST-ONLY TRANSFERS - This option provides for the
transfer of the credited interest of the General Account at regular intervals
to one or more of the Sub-Accounts (other than the Money Market Sub-Account).
The transferred amount is comprised of the credited interest for the selected
interval (e.g., monthly, quarterly). The $100 minimum transfer amount does
not apply to this option. To participate in this option, there is a $5,000
minimum General Account Balance required at the time of each transfer.
Changes in the terms of any option elected (such as amount transferred or Sub-
Account designation) may be made by Written Request to terminate the existing
DCA, along with a Written Request providing new DCA elections.
DCA will terminate when any of the following occurs:
(1) the number of designated transfers has been completed;
(2) the value of the General Account or Sub-Account is insufficient to
complete the next transfer;
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(3) a Written Request from the Contract Owner is received at least five (5)
business days prior to the next transfer date;
(4) for Option 3, where the General Account balance falls below $5,000;
(5) the Annuity Income Date arrives; or
(6) the Contract is terminated.
Except as otherwise provided, Dollar Cost Averaging is subject to the transfer
provisions of the Contract. (See "Transfers" page 17.) Dollar Cost Averaging is
not currently available in all states.
Distributions Under The Contract
Surrenders
The Contract Owner may surrender all or a portion of the Contract Balance in
exchange for a cash payment from C.M. Life. The proceeds payable upon a full
Surrender are the Contract Balance less any applicable Surrender Charge,
Contract Maintenance Fee, any applicable premium taxes, and plus or minus any
applicable Interest Rate Factor Adjustment. The net proceeds payable upon full
Surrender are the "Surrender Value." There is no minimum or guaranteed Surrender
Value. The proceeds payable upon a partial Surrender are the Surrender amount
requested; any applicable Surrender Charge is subtracted from, and any
applicable Interest Rate Factor Adjustment is added to, or subtracted from, the
remaining Contract Balance. There is no Surrender Charge or Interest Rate Factor
Adjustment on Surrenders during a Window Period. Any Surrender Charge or
Contract Maintenance Fee imposed on Surrender will be allocated among the
General Account and the Sub-Accounts in the same manner (pro rata) as the
Contract Balance subject to Surrender is allocated among the General Account and
the Sub-Accounts. For Contracts issued to Pennsylvania residents, the Contract
Maintenance Fee will be allocated pro rata among the Sub-Accounts. Any
applicable Interest Rate Factor Adjustment imposed on a Surrender will be
imposed only on the amount of General Account Balance subject to Surrender. For
partial Surrenders, the Contract Owner must specify the Investment Account or
Sub-Account from which surrendered amounts should be taken.
The minimum amount that can be withdrawn from any Sub-Account or the General
Account is $100. In addition, following any partial Surrender, the remaining
Contract Balance must be at least $250. If the processing of a partial Surrender
request would result in a remaining Contract Balance of less than $250, C.M.
Life will treat the partial Surrender request as a full Surrender of the
Contract, and the Surrender Value will be paid. Following payment of the
Surrender Value, the Contract will be canceled.
The Contract Owner may request the Contract Balance at any time during the life
of the Annuitant and Contract Owner and prior to the Annuity Income Date, by
sending a Written Request to the Annuity Service Center. Surrenders are
permitted any time during the Accumulation Period. (See "Annuity Options," page
20.)
C.M. Life will process all partial Surrender and full Surrender requests within
seven (7) calendar days (unless a shorter period is required under applicable
law) following receipt by the Annuity Service Center of the Contract Owner's
Written Request, except in the following situations for the following Accounts.
General Account - C.M. Life reserves the right to defer payment of any Surrender
from the General Account for up to six (6) months.
Separate Account - C.M. Life reserves the right to defer the payment of any
Surrender from the Separate Account as permitted by the 1940 Act. Such delay may
occur because: (i) the New York Stock Exchange is closed for trading; (ii) the
SEC determines that a state of emergency exists; or (iii) an order or
pronouncement of the SEC permits a delay for the protection of Contract Owners.
In addition, a Purchase Payment amount is not available to satisfy a Written
Request for Surrender until the check, or other instrument by which such
Purchase Payment was made, has been honored.
Beginning in the second Contract Year, the Contract Owner is entitled to an
annual Free Surrender Amount, which is exempt from a Surrender Charge and from
any Interest Rate Factor Adjustment. The Free Surrender Amount equals 10% of the
Contract Balance as of the end of the immediately preceding Contract Year, and
is allocated among the General Account and Sub-Accounts in the same proportion
as the partial Surrender or full Surrender requested. The Free Surrender amount
may be taken in multiple installments in each Contract Year. Any amount subject
to Surrender in excess of the Free Surrender Amount is subject to the Surrender
Charge and the Interest Rate Factor Adjustment, as applicable. (See "Interest
Rate Factor Adjustment," page 25 and "Surrender Charge," page 24.) Any unused
Free Surrender Amount cannot be accumulated and carried from one year to the
next. (Surrenders may result in tax liabilities. See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES," page 27.)
Since the Contract Owner assumes the entire investment risk with respect to
Purchase Payments and transfers allocated to the Separate Account, and certain
risks with respect to amounts allocated to the General Account, and because
Surrenders are subject to a Surrender Charge, an Interest Rate Factor
Adjustment, a Contract Maintenance Fee, and possibly Premium Taxes, the total
amount paid upon full Surrender may be more or less than the total Purchase
Payments made (taking any prior partial Surrenders into account). Following a
Surrender of the total Contract Balance, or at any time the Contract Balance is
zero, all rights of the Contract Owner and Annuitant will terminate.
Systematic Withdrawals
Upon Written Request, a Contract Owner may elect Systematic Withdrawals ($100
minimum per withdrawal) to begin on or after the first anniversary of the
Contract Issue Date during the Accumulation Period. There is currently no charge
for Systematic Withdrawals. However, the Company reserves the right to charge
for Systematic Withdrawals in the future. The Contract Owner may not
simultaneously participate in both Systematic Withdrawals and Dollar Cost
Averaging.
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If Systematic Withdrawals are elected, the Contract Owner may withdraw fixed
dollar amounts at regular intervals from the Contract Balance.
Systematic Withdrawals will begin when a properly completed Written Request from
the Contract Owner is received by the Company, at least five (5) business days
prior to the Systematic Withdrawals start date selected by the Contract Own. If
the Systematic Withdrawals start date is less than five (5) days after the date
the Written Request is received by the Company, the Company may defer the
Systematic Withdrawals start date for one (1) month. If no start date has been
selected, the Company will automatically start Systematic Withdrawals within
five (5) business days after the Written Request is received.
Changes in Systematic Withdrawals may only be made by Written Request from the
Contract Owner to terminate the existing Systematic Withdrawals election along
with a Written Request designating a new Systematic Withdrawals election.
Systematic Withdrawals will terminate when any of the following occurs:
(1) the number of designated Systematic Withdrawals has been completed;
(2) the value of the General Account or Sub-Account is insufficient to
complete the next withdrawal;
(3) Written Request from the Contract Owner is received at least five (5)
business days prior to the next withdrawal date;
(4) the Annuity Income Date arrives; or
(5) the Contract is terminated.
Withdrawals in excess of the Free Surrender Amount may be subject to any
applicable Surrender Charge and Interest Rate Factor Adjustment. (See
"Surrenders," page 19.)
Further, withdrawals may result in tax liabilities. See "CERTAIN FEDERAL INCOME
TAX CONSEQUENCES," page 27.
The Systematic Withdrawals plan is not currently available in all states.
Annuity Income Payments
C.M. Life will pay an Annuity Income beginning on the Annuity Income Date,
provided no Death Benefit has become payable, and the Contract Owner has
selected an available Annuity Option and payment schedule by Written Request.
The Annuity Option and frequency of Annuity Income payments may not be changed
after Annuity Income payments begin. Unless the Contract Owner specifies
otherwise, the payee of the Annuity Income is the applicable Annuitant. After
the death of the Annuitant, any remaining payments will be made to the
Beneficiary. The dollar amount and frequency of the payments will depend on
numerous factors, such as the Contract Balance, the type of Annuity and Annuity
Option elected, possibly age and sex, and any applicable Interest Rate Factor
Adjustment.
Annual Income Date. Initially, the Annuity Income Date is selected by the
Contract Owner at the time the Application is completed. The Annuity Income Date
may be changed from time to time by the Contract Owner by Written Request to
C.M. Life, provided that notice of each change is received by C.M. Life at its
Annuity Service Center at least thirty (30) days prior to the then-current
Annuity Income Date. Except as otherwise permitted by C.M. Life, an Annuity
Income Date must be a date which is no earlier than the fifth anniversary of the
Contract Issue Date. The latest Annuity Income Date which may be elected is the
Annuitant's 90th birthday (unless a longer period is required under applicable
state law).
Election of Annuity Option. The Contract Owner will choose an Annuity Option in
the Application. During the lifetime of the Annuitant and Contract Owner and
prior to the Annuity Income Date, the Contract Owner may change the election,
but a Written Request specifying a change of election must be received by C.M.
Life at its Annuity Service Center at least thirty (30) days prior to the
Annuity Income Date. If no election is made at least thirty (30) days prior to
the Annuity Income Date, Annuity Income will be paid under Option B, life income
with 120 monthly payments guaranteed. (See "Annuity Options," page 20.)
If the Annuitant or Contract Owner dies prior to the Annuity Income Date, the
Beneficiary may receive a Death Benefit. (See "Death Benefit," page 22.)
Premium Tax. C.M. Life may be required by state law to pay a Premium Tax on the
amount applied to an Annuity Option (or upon Surrender). If so, C.M. Life will
deduct the Premium Tax before applying (or paying) the proceeds.
Annuity Options
The Contract provides six (6) Annuity Options which are described below. Five
(5) of these are offered as either a Fixed Annuity or a Variable Annuity (Option
E is only available as a Fixed Annuity). Contract Owners may elect a Fixed
Annuity, a Variable Annuity, or a combination of both. If the Contract Owner
elects a combination, he must specify what part of the Contract Balance is to be
applied to the Fixed and Variable Options. Unless specified otherwise, the
General Account Balance will be used to provide a Fixed Annuity, and the
Separate Account Balance will be used to provide a Variable Annuity. (If the
General Account Balance is used to provide Variable Annuity Income payments,
then the Interest Rate Factor Adjustment will be applied at that time.) Variable
Annuity income payments will be based on the Sub-Account(s) selected by the
Contract Owner, or on the allocation of the Separate Account Balance among the
Sub-Accounts.
If the amount of the Annuity Income will depend on the age or sex of the
Annuitant, C.M. Life reserves the right to ask for satisfactory proof of the
Annuitant's (and Joint Annuitant's) age and sex. C.M. Life may delay Annuity
Income payments until satisfactory proof is received.
On the Annuity Income Date, the sum of: (i) the General Account Balance
(adjusted by the Interest Rate Factor Adjustment to the extent that the General
Account Balance is applied to a Variable Annuity Option); and (ii) the Separate
Account Balance; minus (iii) any Premium Tax, will be applied to provide for
Annuity Income payments under the selected Annuity Option.
A Fixed Annuity provides for Annuity Income payments which will remain constant
pursuant to the terms of the Annuity
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Option elected. The effect of choosing a Fixed Annuity is that the amount of
each payment will be set on the Annuity Income Date and will not change. If a
Fixed Annuity is selected, the Separate Account Balance used to provide the
Fixed Annuity will be transferred to the general assets of C.M. Life, and the
Annuity Income payments will be fixed in amount by the Fixed Annuity provisions
selected, and, for some options, the age and sex (if consideration of sex is
allowed) of the Annuitant. The Fixed Annuity payment amounts are determined by
applying the Annuity Purchase Rate specified in the Contract to the portion of
the Contract Balance allocated to the Fixed Annuity Option selected by the
Contract Owner.
A Variable Annuity provides for payments that fluctuate or vary in dollar
amount, based on the investment performance of a Separate Account Sub-Account.
The Variable Annuity purchase rate tables in the Contract reflect an assumed
interest rate of 4%, so if the actual net investment performance of the Sub-
Account is less than this rate, then the dollar amount of the actual Annuity
Income payments will decrease. If the actual net investment performance of the
Sub-Account is higher than this rate, then the dollar amount of the actual
Annuity Income payments will increase. If the net investment performance exactly
equals the 4% rate, then the dollar amount of the actual Annuity Income payments
will remain constant.
Annuity Units and Payments. The dollar amount of each Variable Annuity
payment depends on the number of "Annuity Units" credited to that Annuity
Option and the value of those units. The number of Annuity Units is
determined as follows.
1. The number of Annuity Units credited in each Sub-Account will be
determined by dividing the product of the portion of the Contract Balance
to be applied to the Sub-Account and the Annuity Purchase Rate specified
in the Contract by the value of one Annuity Unit in that Sub-Account on
the Annuity Income Date.
2. The amount of each Annuity Income payment equals the product of the
Annuitant's number of Annuity Units and the Annuity Unit Values on the
payment date. The amount of each payment may vary from prior Annuity
Income payments.
Annuity Unit Value. The value of an Annuity Unit in a Sub-Account on any
Valuation Date is determined as follows.
1. The Net Investment Factor for the Valuation Period (for the appropriate
Annuity Income payment frequency) just ended is multiplied by the value of
the Annuity Unit for the Sub-Account on the preceding Valuation Date.
2. The result in (1) is then divided by an interest factor. The interest
factor equals 1.00 plus the interest rate for the number of days since the
preceding Valuation Date. Interest is based on an effective annual rate of
4%. This compensates for the interest assumption built into the Annuity
Purchase Rates.
The Contract Owner may choose to receive Annuity Income payments under any one
of the Annuity Options described below. The Company may consent to other plans
of payment before the Annuity Income Date.
Note Carefully: Under Annuity Options A and C, it would be possible for only
one (1) Annuity Income payment to be made if the Annuitant were to die before
the due date of the second annuity payment; only two (2) Annuity Income payments
if the Annuitant were to die before the due date of the third annuity payment;
and so forth.
The following Annuity Options are available.
Annuity Option A -- Life Income -- Periodic payments will be made as long as
the Annuitant lives.
Annuity Option B -- Life Income with Period Certain -- Periodic payments will
be made for a guaranteed period, or as long as the Annuitant lives, whichever
is longer. The guaranteed period, which is selected by the Contract Owner,
may be five (5), ten (10), or twenty (20) years.
Annuity Option C -- Joint and Last Survivor Payments -- Periodic payments
will be made during the joint lifetime of two (2) Annuitants, continuing in
the same amount during the lifetime of the surviving Annuitant.
Annuity Option D -- Joint and 2/3 Survivor Annuity -- Periodic payments will
be made during the joint lifetime of two (2) Annuitants. Payments will
continue during the lifetime of the surviving Annuitant, and will be computed
on the basis of two-thirds of the annuity payment (or units) in effect during
the joint lifetime.
Annuity Option E -- Period Certain -- (Available as a Fixed Annuity only)
Periodic payments will be made for a specified period. The specified period
must be at least five (5) years and cannot be more than thirty (30) years.
Annuity Option F -- Special Income Settlement Agreement -- C.M. Life will pay
the proceeds in accordance with terms agreed upon in writing by the Contract
Owner and C.M. Life. This option may be elected only at the Annuity Income
Date.
* * * * *
Annuity Income Payments. Except as otherwise agreed to by the Contract Owner and
C.M. Life, Annuity Income payments will be payable monthly. The minimum amount
that may be applied under any Annuity Option, and the minimum periodic Annuity
Income payment allowed, are the most recently published minimums designated by
C.M. Life for this purpose. A portion or the entire amount of the Annuity
Payments may be taxable as ordinary income. If, at the time the Annuity Payments
begin, C.M. Life has not received a proper written election not to have federal
income taxes withheld, C.M. Life must by law withhold such taxes from the
taxable portion of such annuity payments and remit that amount to the federal
government. (See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES," page 27.)
Terminal Illness Benefit
In the event that a Contract Owner becomes terminally ill during the
Accumulation Period and prior to age 75, the Contract
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Owner may elect, unless prohibited by law, by submission of a Written Request, a
Terminal Illness.
Benefit equal to the greater of:
(a) the Purchase Payments less any prior withdrawals and charges; or
(b) the Contract Balance.
The Company will require proof that the Contract Owner is terminally ill and not
expected to live more than twelve (12) months. This proof will include, but is
not limited to, certification by a licensed medical practitioner performing
within the scope of his/her license. The licensed medical practitioner must not
be the Contract Owner, Annuitant or the Contingent Annuitant, or the parent,
spouse or child of the Contract Owner, Annuitant or Contingent Annuitant.
Payment of the Terminal Illness Benefit is determined on the date the Company
receives the Written Request. No Contract Maintenance Fee for the current year,
Surrender Charge or Interest Rate Factor Adjustment shall apply with respect to
any Terminal Illness Benefit. Payment of the Terminal Illness Benefit will be in
full settlement of the Company's liability under the Contract. The Terminal
Illness Benefit is not available for Contracts issued in Kansas, Mississippi,
Texas, or Pennsylvania.
Death Benefit
If the Annuitant or Contract Owner dies prior to the Annuity Income Date, a
Death Benefit will be paid to the Beneficiary upon receipt at the Annuity
Service Center of proof of death. If, however, the Annuitant dies before such
Contract Owner and there is a Contingent Annuitant who is less than 85 years of
age on the Annuitant's date of death (and such Contract Owner is a natural
person), then no Death Benefit is payable, and the Contract will continue in
force, with the Contingent Annuitant as the Annuitant. For purposes of the Death
Benefit, the Annuitant is the Annuitant named in the Application.
The Death Benefit is payable upon receipt of proof of death, as well as proof
that the death occurred during the Accumulation Period. Upon receipt of this
proof and an election of a Death Benefit Option, and return of the Contract, the
Death Benefit generally will be payable after C.M. Life has sufficient
information to make the payment(s).
Payments under a Death Benefit Option are determined at the time of payment,
and, if the deceased Annuitant or Contract Owner was a natural person less than
age 75 at death, are based on the greater of (a) the Contract Balance or (b) the
Purchase Payments less any prior withdrawals and charges. Otherwise, the
payments are based on the Contract Balance at the time of payment. No Surrender
Charge, Interest Rate Factor Adjustment, or Contract Maintenance Fee shall apply
with respect to any Death Benefit Option.
Payment of the Death Benefit will be in full settlement of the Company's
liability under this Contract.
The available Death Benefit Options depend on whether the Contract Owner and
Annuitant are the same person.
Death of Contract Owner. If the Contract Owner is not the Annuitant, and the
Contract Owner dies before the Annuitant and prior to the Annuity Income Date,
one of the following provisions will apply.
1. If the Contract Owner's spouse is the Beneficiary and survives the
Contract Owner, the spouse may select only Death Benefit Option A, B, or C
within one (1) year after the Contract Owners death. (See page 23).
If the surviving spouse does not make a selection within one (1) year
after the Contract Owner's death, the surviving spouse will become the
Contract Owner.
2. If the Beneficiary is a natural person other than the Contract Owner's
spouse, the Beneficiary may select only Death Benefit Option B or C within
one (1) year after the Contract Owner's death. (See page 23).
If no selection is made within one (1) year after the Contract Owner's
death, the Death Benefit will be paid to the Beneficiary in a single sum
at that time.
3. If the Beneficiary is not a natural person, it may select only Death
Benefit Option B or D within one (1) year after the Contract Owner's
death.
4. If no Beneficiary survives the Contract Owner, the Annuitant shall be
deemed to be the Beneficiary and provision 1 or 2 above shall apply.
If no selection is made within one (1) year after the Contract Owner's
death, the Death Benefit will be paid in a single sum at that time.
Death of Contract Owner/Annuitant. If the Contract Owner and Annuitant are the
same person, and the Contract Owner/Annuitant dies before the Annuity Income
Date, one of the following provisions applies.
1. If the Contract Owner/Annuitant's spouse is the Beneficiary, the surviving
spouse may only select Death Benefit Option B, C, or G within (1) one year
after the Contract Owner/Annuitant's death. (See page 23.)
If no selection is made within one (1) year after the Contract
Owner/Annuitant's death, the surviving spouse will become the Contract
Owner and Annuitant of the Contract.
2. If the Beneficiary is a natural person other than the Contract
Owner/Annuitant's spouse, the Beneficiary may select only Death Benefit
Option B or C within (1) one year of the Contract Owner/Annuitant's death.
If no selection is made within one (1) year after the Contract
Owner/Annuitant's death, the Death Benefit will be paid in a single sum at
that time.
3. If the Beneficiary is not a natural person, it may select only Death
Benefit Option B or D within one (1) year after the Contract
Owner/Annuitant's death. See below.
4. If no Beneficiary survives the Contract Owner/Annuitant, the Death Benefit
will be paid in a single sum
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to the Contract Owner/Annuitant's estate within five (5) years of the date
of death.
If no selection is made within one (1) year after the Contract
Owner/Annuitant's death, the Death Benefit will be paid in a single sum at
that time.
Death of Annuitant. If the Contract Owner and Annuitant are not the same person,
and the Annuitant dies before the Contract Owner and prior to the Annuity Income
Date, and there is no Contingent Annuitant younger than age 85 (or if the
Contract Owner is not a natural person), one of the following provisions
applies.
1. The Beneficiary, if a natural person, may only select Death Benefit Option
E or F within one (1) year after the Annuitant's death. (See below.)
If no selection is made within one (1) year after the Annuitant's death,
the Death Benefit will be paid in a single sum to the Beneficiary at that
time.
2. If the Beneficiary is not a natural person, it may only select Death
Benefit Option D or E within one (1) year after the Annuitant's death.
(See below).
If no selection is made within one (1) year after the Annuitant's death, the
Death Benefit will be paid in a single sum at that time.
3. If no Beneficiary survives the Annuitant, the Contract Owner shall be
deemed the Beneficiary and provision 1 or 2 immediately above shall apply.
Death Benefit Options. Life expectancy for purposes of these Death Benefit
Options will be determined from the tables in the Regulations, under Section 72
of the Code. The following Death Benefit Options are available:
Death Benefit Option A - To become the Contract Owner;
Death Benefit Option B - To receive the Death Benefit as a single sum within
one (1) year after the Contract Owner's death;
Death Benefit Option C - To receive the Death Benefit under any Annuity
Option offered in the Contract, provided the entire Death Benefit is
distributed:
1. Within five (5) years of the date of death; or
2. Over a period not extending beyond the life expectancy of the
Beneficiary; or
3. Over the life of the Beneficiary.
If the Death Benefit is to be paid under provision (2) or (3), the first
installment payment must be made within one (1) year after the Contract Owner's
death.
Death Benefit Option D - To receive the Death Benefit under any Annuity
Option offered in the Contract, provided the entire Death Benefit is
distributed within five (5) years of the date of death;
Death Benefit Option E - To receive the Death Benefit as a single sum within
one (1) year after the Annuitant's death;
Death Benefit Option F - To receive the Death Benefit under any Annuity
Option offered in the Contract, provided the Death Benefit is distributed:
1. Over a period not extending beyond the life expectancy of the
Beneficiary; or
2. Over the life of the Beneficiary.
The first installment payment must be made within one (1) year after the
Annuitant's death.
Death Benefit Option G - To become the Contract Owner and Annuitant of the
Contract, just as if the Beneficiary had always been the Contract Owner and
Annuitant.
Death of Annuitant On or After Annuity Income Date. The Death Benefit payable if
the Annuitant dies on or after the Annuity Income Date, if any, depends on the
Annuity Option in effect on the date of death of the Annuitant. Any remaining
payments will be distributed at least as rapidly as under the method of
distribution being used as of the date of the Annuitant's death. If a
Beneficiary dies while receiving such benefits, the balance of the benefits, if
any, will be paid in a single sum to the estate of the Beneficiary. If no
Beneficiary survives the Annuitant, the benefits, if any, will be paid in a
single sum to the estate of the last Annuitant to die.
Beneficiary. One or more Beneficiaries may be designated to receive benefits
concurrently, contingently or successively upon the death of the Contract Owner
and/or the Annuitant. The Beneficiary designation in the Application will remain
in effect until changed. The Contract Owner may, upon Written Request, change
the designated Beneficiary before a Death Benefit has become payable. The
Beneficiary's consent to such change is not required unless the Beneficiary was
irrevocably designated or consent is required by law. (If an irrevocable
Beneficiary dies, the Contract Owner may then designate a new Beneficiary.) The
change will take effect as of the date the Contract Owner signs the Written
Request. However, the change is subject to any payments made or actions taken by
C.M. Life before receipt of the Written Request. On or after receipt of proof of
death at the Annuity Service Center, the Beneficiary shall have the exclusive
right to (i) appoint a contingent Beneficiary to succeed to the interest of the
Beneficiary in the event of the Beneficiary's death; and (ii) make transfers
under the Contract. (See "Transfers," page 17.)
IRS Required Distribution
Federal tax law requires that if the Contract Owner dies before the Annuity
Income Date, then the entire value of the Contract must generally be distributed
within five (5) years of the date of death of the Contract Owner. Special rules
may apply to the spouse of the deceased Contract Owner. (See "Federal Tax
Matters," page B11 of the Statement of Additional Information, for a detailed
description of these rules.)
Restrictions Under the Texas Optional Retirement Program
Section 36.105 of the Texas Educational Code permits participants in the Texas
Optional Retirement Program ("ORP") to withdraw their interests in a variable
annuity contract issued under the ORP only upon: (1) termination of employment
in
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the Texas public institutions of higher education; (2) retirement; or (3) death.
Accordingly, a participant in the ORP (or the participant's estate if the
participant has died) will be required to obtain a certificate of termination
from the employer, or a certificate of death, before the Contract can be
surrendered.
Restrictions Under Section 403(b) Plans
Section 403(b) of the Code provides for tax-deferred retirement savings plans
for employees of certain non-profit and educational organizations. In accordance
with the requirements of Section 403(b), any Contract used for a 403(b) plan
will prohibit distributions of elective contributions, and earnings on elective
contributions, except upon death of the employee, attainment of age 591/2,
separation from service, disability, or financial hardship. In addition, income
attributable to elective contributions may not be distributed in the case of
hardship.
Charges And Deductions
C.M. Life will make certain charges and deductions under the Contract in order
to compensate it for incurring expenses in distributing the Contract, bearing
mortality and expense risks under the Contract, and administering the Investment
Accounts and the Contract. Charges may also be made for Premium Taxes, and other
federal, state or local taxes. Charges and expenses are also deducted from the
assets of the Portfolios.
Surrender Charge
C.M. Life will incur expenses relating to the sale of Contracts, including
commissions to registered representatives and other promotional expenses. In
connection with a full Surrender or partial Surrender during the first five (5)
Contract Years, C.M. Life may deduct from the Contract Balance a Surrender
Charge equal to 5% of any Contract Balance surrendered in order to help cover
distribution expenses. The Surrender Charge will be deducted as of the date of
the receipt at the Annuity Service Center of the Written Request for the
Surrender. Any Surrender Charge assessed will be allocated among the General
Account and the Sub-Accounts in the same manner (pro rata) as the Contract
Balance subject to Surrender is allocated among the General Account and the Sub-
Accounts. The Surrender Charge will not be applied under the following
circumstances:
1. Cancellation of the Contract during the 15-day examination period;
2. Full Surrender of the Contract on the Annuity Income Date;
3. Partial Surrenders or full Surrenders during the Window Period or after
the first five (5) Contract Years, (the Window Period is the last thirty
(30) days of each Five-Year Period under the Contract);
4. Upon payment of the Death Benefit;
5. On any Free Surrender Amount. Beginning in the second Contract Year, the
Contract Owner is entitled to an annual Free Surrender Amount, which is
exempt from a Surrender Charge and any applicable Interest Rate Factor
Adjustment. See "Interest Rate Factor Adjustment" below. The Free
Surrender Amount will be allocated among the General Account and/or Sub-
Accounts in the same proportions as the partial Surrender or full
Surrender amount. The Free Surrender Amount equals 10% of the Contract
Balance as of the end of the immediately preceding Contract Year. Contract
Owners may elect to receive 10% of the Contract Balance in multiple
installments each contract year. Any amount redeemed during the year in
excess of this 10% amount will be subject to a Surrender Charge (and any
applicable Interest Rate Factor Adjustment); and
6. Partial Surrenders or full Surrenders of Contracts issued in exchange for
Variable Annuity Contracts issued by Connecticut Mutual through its
Panorama Separate Account which are beyond any applicable Surrender Charge
period.
More information about how the Surrender Charge is calculated for partial
Surrenders and full Surrenders is contained in Appendices I and III attached
hereto.
In the case of a partial Surrender, the Surrender Charge will be deducted from
the Contract Balance remaining after payment of the requested Surrender amount,
or from the amount paid if sufficient balances do not remain in the Sub-Account
or General Account to which the Surrender is allocated.
Until April 30, 1997, no sales charges will be imposed upon redemption of a
Contract where the proceeds of such redemption are applied to the purchase of a
new MassMutual group annuity contract. This waiver does not eliminate applicable
charges under the particular group contract, and upon surrender of the group
contract, charges may apply.
No sales charge will be imposed upon redemption of "excess contributions,"
including "excess aggregate contributions," made to a Contract purchased and
used in connection with plans qualifying for favorable tax treatment ("Qualified
Contract"), including certain Qualified Pension and Profit Sharing Plans,
Individual Retirement Accounts and Tax-Sheltered Annuities. (See "Certain
Federal Income Tax Consequences - Qualified Plans", page 29). The terms of such
plans may permit the refund of contributions made in excess of certain
limitations specified in the Code and applicable regulations. In the event of a
refund of excess contributions, no sales charge will be imposed upon the amount
refunded. For purposes of the Contract, "excess contributions" and "excess
aggregate contributions" will be defined as provided in U.S. Treasury
Regulations.
C.M. Life anticipates that the Surrender Charge will not generate sufficient
funds to pay the cost of distributing the Contracts. If this charge is
insufficient to cover distribution expenses, the deficiency will be met from
C.M. Life's general funds, which will include amounts derived from the charge
for mortality and expense risks.
C.M. LIFE GUARANTEES THAT THE AGGREGATE SURRENDER CHARGE WILL NEVER EXCEED 8.5%
OF THE TOTAL PURCHASE PAYMENTS MADE UNDER THE CONTRACT.
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Interest Rate Factor Adjustment
An Interest Rate Factor Adjustment will be applied in the event of any partial
Surrender or full Surrender of the General Account Balance during the
Accumulation Period, and on the Annuity Income Date (to the extent, if any, that
the General Account Balance is applied to a Variable Annuity Option), but not
during a Window Period. The Interest Rate Factor Adjustment is not applicable to
the Separate Account or to Contracts issued to Pennsylvania residents.
The Interest Rate Factor Adjustment is based on interest rates payable on U.S.
Treasury securities. In general, if rates on U.S. Treasury securities are higher
(or up to .30% lower) when you Surrender than when you made the applicable
Purchase Payments, a negative Interest Rate Factor Adjustment will be applied,
and in the event of a full Surrender, you could receive an amount lower than the
General Account Balance at the time of surrender and even lower than the amount
of Purchase Payments made. If rates on U.S. Treasury securities are more than
.30% lower when you Surrender than when you made the applicable Purchase
Payments, a positive Interest Rate Factor Adjustment will be applied, and in the
event of a full Surrender, you could receive an amount higher than the General
Account Balance. No Interest Rate Factor Adjustment will be applied during a
Window Period; in addition, no Interest Rate Factor Adjustment will be applied
to the General Account Free Surrender Amount. (For partial Surrenders of General
Account Balance, the Interest Rate Factor Adjustment will be added to or
subtracted from the remaining General Account Balance.) (See "Surrender Charge,"
page 24.)
The Interest Rate Factor Adjustment will reflect the relationship between: (i)
the weighted average of U.S. Treasury Index Rates corresponding to Purchase
Payments and Transfers into the General Account during the current Five-Year
Period (as adjusted for partial Surrenders or Transfers out of the General
Account); (ii) the U.S. Treasury Index Rate which would be applicable during the
time remaining in the current Five-Year Period on the date of the surrender; and
(iii) the time remaining in the current Five-Year Period. The Interest Rate
Factor Adjustment formula includes a set percentage factor (.30%) designed to
compensate C.M. Life for certain expenses and losses that might be incurred as a
direct or indirect result or consequence of Surrenders. In general, if the
weighted average of U.S. Treasury Index Rates corresponding to Purchase Payments
and Transfers during the current Five-Year Period is lower than the U.S.
Treasury Index Rate which would be applicable during the time remaining in the
current Five-Year Period (or exceeds such rate by less than .30%), then the
application of the Interest Rate Factor Adjustment will result in a lower
payment upon Surrender. Therefore, in order for there to be a positive Interest
Rate Factor Adjustment, the U.S. Treasury Index Rate must have decreased
sufficiently to offset this percentage factor; otherwise, the Interest Rate
Factor Adjustment will be negative.
In the event of a partial Surrender, there is no Interest Rate Factor Adjustment
if the General Account Free Surrender Amount exceeds the General Account portion
of such partial Surrender.
There is no limit on the Interest Rate Factor Adjustment (except as required by
state law with respect to a negative Interest Rate Factor Adjustment and as
disclosed in Contracts issued in Oregon and Washington with respect to a
positive Interest Rate Factor Adjustment). Additional information regarding the
Interest Rate Factor Adjustment is included in Appendices II and III.
Mortality and Expense Risk Charge
C.M. Life imposes a daily charge as compensation for bearing certain mortality
and expense risks in connection with the Contracts. This charge currently is
1.07% annually (equal to a daily rate of 0.002932%). It may increase, but it
will not exceed an effective annual rate of 1.25% of the average daily value of
net assets in the Separate Account. (The approximate portion of this charge
estimated to be attributable to mortality risks is 0.42%; the approximate
portion of this charge estimated to be attributable to expense risks is 0.65%.)
The Mortality and Expense Risk Charge is reflected in the Accumulation Unit
value or Annuity Unit value for the Contract for each Sub-Account.
Contract Balances and Annuity Income payments are not affected by changes in
actual mortality experience nor by actual expenses incurred by C.M. Life. The
mortality risks assumed by C.M. Life arise from its contractual obligations to
make Annuity Income payments (determined in accordance with the annuity tables
and other provisions contained in the Contract), and to pay Death Benefits prior
to the Annuity Income Date. Thus, Contract Owners are assured that neither the
Annuitant's own longevity, nor an unanticipated improvement in general life
expectancy, will adversely affect the Annuity Income payments that the Annuitant
will receive under the Contract.
C.M. Life also bears substantial risk in connection with the Death Benefit.
During the Accumulation Period C.M. Life will, if the deceased Annuitant or
Contract Owner was a natural person less than age 75 at death, pay a Death
Benefit equal to the greater of (a) the Contract Balance, or (b) the Purchase
Payments less any prior partial surrenders and charges. Otherwise, the Death
Benefit is based on the Contract Balance. The Death Benefit is paid without
imposition of a Surrender Charge or the Interest Rate Factor Adjustment.
The expense risk assumed by C.M. Life is the risk that C.M. Life's actual
expenses in administering the Contract and the Separate Account will exceed the
amount recovered through Administrative Charges.
If the Mortality and Expense Risk Charge is insufficient to cover C.M. Life's
actual costs, C.M. Life will bear the loss. Conversely, if the charge is more
than sufficient to cover costs, the excess will be profit to C.M. Life. C.M.
Life expects a profit from this charge. To the extent that the Surrender Charge
is insufficient to cover the actual cost of Contract distribution, the
deficiency will be met from C.M. Life's general corporate assets, which may
include amounts derived from the Mortality and Expense Risk Charge.
Administrative Charges
In order to cover the costs of administering the Contracts and the Separate
Account, C.M. Life deducts a Contract Maintenance Fee from the Contract Balance
of each Contract, and also deducts a daily Administrative Expense Charge from
the assets of each Sub-Account of the Separate Account.
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Contract Maintenance Fee. A Contract Maintenance Fee is deducted from the
Contract Balance of each Contract on the last day of each Contract Year during
the Accumulation Period, and upon full Surrender of the Contract. The charge is
not deducted after the Annuity Income Date. This Contract Maintenance Fee
currently is $30 per Contract per Contract Year. It may be increased, but will
not exceed $60. C.M. Life does not anticipate realizing any profit from this
charge. The Contract Maintenance Fee will be deducted pro rata from the Sub-
Accounts in the Separate Account and the General Account, in the same proportion
that the amount of Contract Balance in each Sub-Account and the General Account
bears to the total Contract Balance. For Contracts issued to Pennsylvania
residents, the Fee will be calculated as a pro rata portion of the balance of
each Sub-Account.
Administrative Expense Charge. C.M. Life also deducts a daily Administrative
Expense Charge from the assets of each Sub-Account of the Separate Account. This
charge is currently at an effective annual rate of 0.07% (equal to a daily rate
of 0.000192%). C.M. Life does not anticipate realizing any profit from this
charge. The Administrative Expense Charge may be increased in the future, but
the combined total of the Administrative Expense Charge and the Mortality and
Expense Risk Charge will never exceed an effective annual rate of 1.50% of the
average daily value of net assets in the Separate Account.
Premium Taxes
C.M. Life may pay Premium Taxes in connection with Purchase Payments under the
Contracts. Depending upon applicable state law, C.M. Life will deduct the
Premium Taxes paid with respect to a particular Contract from the Purchase
Payments, from the Contract Balance on the Annuity Income Date (thus reducing
the Contract Balance), or upon the full Surrender of a Contract. Premium Taxes
currently range from 0% to 4.28% of Purchase Payments.
Federal, State and Local Taxes
No charges are currently made for federal, state, or local taxes other than
Premium Taxes. However, C.M. Life reserves the right to deduct charges in the
future for such taxes, or other economic burden resulting from the application
of any tax laws that C.M. Life determines to be attributable to the Contracts.
Other Expenses Including Investment Advisory Fees
Each Portfolio of the Funds is responsible for all of its expenses. In addition,
charges will be made against each Portfolio of the Funds for investment advisory
services provided to the Funds or the Portfolio. The net assets of each
Portfolio of the Funds will reflect deductions in connection with investment
advisory fees and other expenses.
For more information concerning investment advisory fees and other charges
against the Portfolios, see the prospectuses for the Funds, a current copy of
which accompanies this Prospectus.
Distributor Of The Contracts
Effective May 1, 1996, MML Distributors, LLC ("MML Distributors") (formerly
known as Connecticut Mutual Financial Services, LLC), 1414 Main Street,
Springfield, MA 01144-1013, an affiliate of C.M. Life, is the principal
underwriter of the Contracts pursuant to an Underwriting and Servicing Agreement
to which MML Distributors and C.M. Life on behalf of the Separate Account are
parties. Since March 1, 1996, MML Investors Services, Inc. ("MMLISI"), also
located at 1414 Main Street, Springfield, MA 01144-1013, has served as the co-
underwriter of the Contracts. Both MML Distributors and MMLISI are registered
with the Securities and Exchange Commission ("SEC") as broker-dealers under the
Securities Exchange Act of 1934 and are members of the National Association of
Securities Dealers, Inc. ("NASD").
MML Distributors may enter into selling agreements with respect to the Contracts
with other broker-dealers that are registered with the SEC and are members of
the NASD ("selling brokers"). Contracts are sold through agents who are licensed
under applicable insurance law to sell the Contracts. These agents are also
registered representatives of selling brokers or of MMLISI.
MML Distributors does business as MML Distributors, L.L.C. in the states of
Illinois, Michigan, Oklahoma, South Dakota and Washington, and as MML
Distributors, Limited Liability Company in the states of Maine, Ohio and West
Virginia.
Commissions of up to 6.0% of Purchase Payments are paid on Contract sales.
General Provisions
Assignment of the Contract
A Written Request specifying the terms of an assignment of the Contract must be
provided to the Annuity Service Center. Until the Written Request is received at
the Annuity Service Center, C.M. Life will not be required to take notice of, or
be responsible for, any transfer of interest in the Contract by assignment,
agreement, or otherwise.
C.M. Life will not be responsible for the validity of tax consequences of any
assignment. Any assignment made after the Death Benefit has become payable will
be valid only with C.M. Life's consent.
If the Contract is assigned, the Contract Owner's rights may only be exercised
with the consent of the assignee of record.
Contract Changes by C.M. Life
C.M. Life reserves the right to amend the Contract to meet the requirements of
any applicable federal or state laws or regulations, or to make other changes
permitted by the Contract. C.M. Life will notify the Contract Owner in writing
of any such amendments.
Any changes to the Contract by C.M. Life must be signed by an authorized officer
of C.M. Life. Agents of C.M. Life have no authority to alter or modify any of
the terms, condi-
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tions, agreements of the Contract, or to waive any of its provisions.
Contract Termination
The Contract will terminate upon the occurrence of any of the following events:
1. The date of the last Annuity Income payment;
2. The date payment is made of the Contract Balance;
3. The date of the last Death Benefit payment to the last Beneficiary;
4. The date the Contract is returned under the "Right to Examine Contract"
provision, see page ; or
5. Failure to maintain the required Minimum Contract Balance.
Incontestability
The Contract is incontestable.
Misstatement of Age or Sex
If the Annuitant's age or sex has been incorrectly stated, the Annuity Income
payable will be that which the Contract Balance, reduced by any applicable
Premium Tax, would have purchased at the correct age and sex. After correction,
the Annuitant will receive the sum of any underpayments made by C.M. Life within
thirty (30) calendar days. The amounts of any overpayments made by C.M. Life
will be charged against the payment(s) following the correction.
Nonparticipating
The Contract is nonparticipating and will not share in any surplus earnings of
C.M. Life. No dividends are payable on the Contract.
Non-Business Days
If the due date for any activity required by the Contract falls on a nonbusiness
day for C.M. Life, performance will be rendered on the first business day
following the due date.
Regulatory Requirements
All interest guarantees, surrender benefits, and amounts payable at death will
not be less than the minimum benefits approved under the laws and regulations of
the state in which the Contract is delivered.
C.M. Life will administer the Contract in accordance with the U.S. tax laws and
regulations in order to retain its status as an annuity contract.
Right to Examine Contract
No Surrender Charge will be applied if the Contract Owner returns the Contract
for cancellation during the first fifteen (15) calendar days following the
Contract Issue Date (or a longer period, if required by law). In addition, no
Interest Rate Factor Adjustment, or Contract Maintenance Fee or premium tax will
be applied upon such a cancellation. C.M. Life will refund the Separate Account
Balance and/or any Purchase Payments made to the General Account upon return of
the Contract. If required by state law, C.M. Life will refund any Purchase
Payment regardless of whether they were allocated to one or more Sub-Account or
to the General Account.
Certain Federal Income Tax Consequences
The following discussion is a general description of federal tax considerations
relating to the Contract and is not intended as tax advice. This discussion is
not intended to address the tax consequences resulting from all of the
situations in which a person may be entitled to or may receive a distribution
under the Contract. Any person concerned about these tax implications should
consult a competent tax advisor before initiating any transaction. This
discussion is based upon C.M. Life's understanding of the present Federal income
tax laws as they are currently interpreted by the Internal Revenue Service. No
representation is made as to the likelihood of the continuation of the present
Federal income tax laws, or of the current interpretation by the Internal
Revenue Service. Moreover, no attempt has been made to consider any applicable
state or other tax laws.
The Contract may be purchased on a non-tax-qualified basis ("Non-qualified
Contract"), or purchased and used in connection with plans qualifying for
favorable tax treatment ("Qualified Contract"). Qualified Contracts are designed
for use by individuals whose premium payments are comprised solely of proceeds
from and/or contributions under retirement plans which are intended to qualify
as plans entitled to special income tax treatment under Sections 401(a), 403(b),
408, or 457 of the Internal Revenue Code of 1986, as amended (the "Code"). The
ultimate effect of federal income taxes on the amounts held under a Contract,
Annuity Income payments, the economic benefit to the Contract Owner, the
Annuitant, or the Beneficiary depends on the type of retirement plan, on the tax
and employment status of the individual concerned, and on the employer's tax
status. In addition, certain requirements must be satisfied in purchasing a
Qualified Contract with proceeds from a tax-qualified plan and receiving
distributions from a Qualified Contract in order to continue receiving favorable
tax treatment. Therefore, purchasers of Qualified Contracts should seek
competent legal and tax advice regarding the suitability of the Contract for
their situation, the applicable requirements, and the tax treatment of the
rights and benefits of the Contract. The following discussion assumes that a
Qualified Contract is purchased with proceeds from and/or contributions under
retirement plans that qualify for the intended special federal income tax
treatment.
The following discussion is based on the assumption that the Contract qualifies
as an annuity contract for federal income tax purposes. The Statement of
Additional Information discusses the requirements for qualifying as an annuity.
Taxation of Annuities
In General. Section 72 of the Code governs taxation of annuities in general.
C.M. Life believes that the Contract Owner who is a natural person generally is
not taxed on
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increases in the value of a Contract until distribution occurs by withdrawing
all or part of the Contract Balance (e.g., Surrenders or Annuity Income payments
under the Annuity Option elected). For this purpose, the assignment, pledge, or
agreement to assign or pledge any portion of the Contract Balance (and in the
case of a Qualified Contract, any portion of an interest in the qualified plan)
generally will be treated as a distribution. The taxable portion of a
distribution (in the form of a single sum payment or an annuity) is taxable as
ordinary income.
The Contract Owner of any annuity contract that is not a natural person
generally must include in income any increase in the excess of the Contract's
Contract Balance over the "investment in the contract" (discussed below) during
the taxable year. There are some exceptions to this rule, and a prospective
Contract Owner that is not a natural person may wish to discuss these with a
competent tax adviser.
The following discussion generally applies to a Contract owned by a natural
person.
Surrenders. In the case of a Surrender under a Qualified Contract, under section
72(e) of the Code, a ratable portion of the amount received is taxable,
generally based on the ratio of the "investment in the contract" to the
individual's total accrued benefit for balance under the retirement plan. The
"investment in the contract" generally equals the amount of any premium payments
paid by or on behalf of any individual for a Qualified Contract. (The investment
in the Contract does not include amounts contributed by or on behalf of an
individual by an employer.). For a Contract issued in connection with Qualified
Plans, the "investment in the contract" can be zero. Special tax rules may be
available for certain distributions from a Qualified Contract.
With respect to Non-qualified Contracts, partial Surrenders are generally
treated as taxable income to the extent that the Contract Balance immediately
before the Surrender exceeds the "investment in the contract" at that time. The
Contract Balance immediately before a partial Surrender may have to be increased
by any positive Interest Rate Factor Adjustment which results from such a
Surrender. There is, however, no definitive guidance on the proper tax treatment
of Interest Rate Factor Adjustments, and the Contract Owner should contact a
competent tax adviser with respect to the potential tax consequences of an
Interest Rate Factor Adjustment. Full Surrenders are treated as taxable income
to the extent that the amount received exceeds the "investment in the contract."
Annuity Income Payments. Although tax consequences may vary depending on the
annuity option elected under the Contract, under Code section 72(b), gross
income generally does not include that part of any amount received as an annuity
under an annuity contract that bears the same ratio to such amount as the
"investment in the contract" bears to the expected return at the Annuity Income
Date. In this respect (prior to recovery of the investment in the contract),
there is generally no tax on the amount of each payment which represents the
same ratio that the "investment in the contract" bears to the total expected
value of the annuity payments for the term of the payments. However, the
remainder of each income payment is taxable. In all cases, after the "investment
in the contract" is recovered, the full amount of any additional annuity
payments is taxable.
Penalty Tax. In the case of a distribution pursuant to a Non-qualified Contract,
there may be imposed a federal penalty tax equal to 10% of the amount treated as
taxable income. In general, however, there is no penalty tax on distributions:
(1) made on or after the date on which the Contract Owner attains age 59 1/2;
(2) made as a result of death or disability of the Contract Owner; (3) received
in substantially equal periodic payments as a life annuity, or a joint and
survivor annuity, for the lives or life expectancies of the Contract Owner and a
"designated beneficiary"; (4) from a Qualified Plan where other rules apply; (5)
allocable to investment in the Contract before August 14, 1982; (6) under a
qualified funding asset (as defined in Code section 130(d)); (7) under an
immediate annuity (as defined in Code section 72(u)(4)); or (8) which are
purchased by an employer on termination of certain types of Qualified Plans, and
which are held by the employer until the employee separates from service. Other
similar tax penalties may apply to certain distributions under a Qualified
Contract.
Transfers, Assignments, or Exchanges of the Policy. A transfer of ownership of a
Contract, the designation of the Annuitant or other Beneficiary who is not also
the Contract Owner, the designation of certain annuity dates, or the exchange of
a Contract, may result in certain tax consequences to the Contract Owner that
are not discussed here. The Contract Owner contemplating any such transfer,
assignment, designation, or exchange of a Contract, should contact a competent
tax adviser with respect to the potential tax effects of such a transaction.
Multiple Contracts. All Non-qualified Annuity Contracts that are issued by C.M.
Life (or its affiliates) to the same Contract Owner during any calendar year are
required by law to be are treated as one Annuity Contract for purposes of
determining the amount includable in gross income under section 72(e) of the
Code. In addition, the Treasury Department has specific authority to issue
regulations that prevent the avoidance of section 72(e) through the serial
purchase of annuity contracts or otherwise. Congress has also indicated that the
Treasury Department may have authority to treat the combination purchase of an
immediate annuity contract and separate deferred annuity contract as a single
annuity contract under its general authority to prescribe rules as may be
necessary to enforce the income tax laws.
Withholding. The Unemployment Compensation Amendment Act of 1992 made
significant changes under the Code for the treatment of distributions of
Qualified Plans and Section 403(b) annuities. The Act amended Section 402 of the
Code and expanded the types of distributions that can be rolled over tax-free to
an Individual Retirement Account, another Qualified Plan, or a Section 403(b)
annuity.
Under the law, all taxable distributions from Qualified Plans and Section 403(b)
annuities are eligible for rollover except
1) annuities paid over life or life expectancy;
2) installments for periods spanning ten (10) years or more; and
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3) required minimum distributions under Section 401(a)(9).
The Act also amended Section 3405 to impose mandatory 20% income tax withholding
on any eligible rollover distribution that an employee receives personally and
does not elect to have paid in a direct rollover. The law is effective for
payments made after December 31, 1992. Payments that are not eligible for
rollover remain subject to the existing pension annuity distribution rules,
which are subject to withholding at the rate of 10% for lump sum distributions.
Recipients of these types of distributions are generally provided with an
opportunity to elect not to have tax withheld from the distributions.
Possible Changes In Taxation. In past years, legislation has been proposed that
would have adversely modified the federal taxation of certain annuities. For
example, one such proposal would have changed the tax treatment of nonqualified
annuities that did not have "substantial life contingencies" by taxing income as
it is credited to the annuity. Although as of the date of this prospectus
Congress is not actively considering any legislation regarding the taxation of
annuities, there is always the possibility that the tax treatment of annuities
could change by legislation or other means (such as IRS regulations, revenue
rulings, judicial decisions, etc.). Moreover, it is also possible that any
change could be retroactive (that is, effective prior to the date of the
change).
Other Tax Consequences. As noted above, the foregoing discussion of the federal
income tax consequences under the Contract is not exhaustive, and special rules
are provided with respect to other tax situations not discussed in this
Prospectus. Further, the federal income tax consequences discussed herein
reflect C.M. Life's understanding of current law and the law may change. Federal
estate, and state and local estate, inheritance, and other tax consequences of
ownership, or receipt of distributions under the Contract, depend on the
individual circumstances of each Contract Owner or recipient of the
distribution. A competent tax adviser should be consulted for further
information.
Qualified Plans
The Contract is designed for use with several types of Qualified Plans. The tax
rules applicable to Contract Owners in Qualified Plans, including restrictions
on contributions and benefits, taxation of distributions, and any tax penalties,
vary according to the type of plan and the terms and conditions of the plan
itself. Various tax penalties may apply to contributions in excess of specified
limits, aggregate distributions in excess of $155,000 annually, adjusted from
time to time, distributions that do not satisfy specified requirements, and
certain other transactions with respect to Qualified Plans. Therefore, no
attempt is made to provide more than general information about the use of the
Contract with the various types of Qualified Plans. Contract Owners, Annuitants
and Beneficiaries are cautioned that the rights of any person to any benefits
under Qualified Plans may be subject to the terms and conditions of the plans
themselves, regardless of the terms and conditions of the Contract. Some
retirement plans are subject to distribution and other requirements that are not
incorporated in the administration of the Contracts. Contract Owners are
responsible for determining that contributions, distributions and other
transactions with respect to the Contracts satisfy applicable law. Purchasers of
Contracts for use with any retirement plan should consult their legal counsel
and tax adviser regarding the suitability of the Contract. Following are brief
descriptions of the various types of Qualified Plans in connection with which
C.M. Life will issue the Contract. Contracts for all types of Qualified Plans
may not be available in all states. When issued in connection with a Qualified
Plan, the Contract will generally be subject to endorsement.
Qualified Pension and Profit Sharing Plans. Section 401(a) of the Code permits
corporate employers to establish various types of retirement plans for
employees. Such retirement plans may permit the purchase of the Contract in
order to provide benefits under the plans. Adverse tax consequences to the plan,
to the participant or to both may result if this Contract is assigned or
transferred to any individual as a means to provide benefit payments.
The Self-Employed Individuals' Tax Retirement Act of 1962, as amended, commonly
referred to as "H.R. 10," permits self-employed individuals to establish
Qualified Plans for themselves and their employees. Purchasers of a Contract for
use with such plans should seek competent advice regarding the suitability of
the proposed plan documents and the Contract to their specific needs.
Individual Retirement Annuities and Individual Retirement Accounts. Section 408
of the Code permits eligible individuals to contribute to an individual
retirement program known as an Individual Retirement Annuity, or Individual
Retirement Account (each hereinafter referred to as "IRA"). Individual
Retirement Annuities are subject to limitations on the amount that may be
contributed and deducted and the time when distributions may commence. Also,
distributions from certain other types of Qualified Plans may be "rolled over"
on a tax-deferred basis into an IRA. The sale of a Contract for use with an IRA
may be subject to special disclosure requirements of the Internal Revenue
Service. Purchasers of the Contract for use with IRAs will be provided with
supplemental information required by the Internal Revenue Service or other
appropriate agency. Such purchasers will have the right to revoke their purchase
within seven (7) days of the earlier of the establishment of the IRA, or their
purchase. Purchasers should seek competent advice as to the suitability of the
Contract for use with IRAs. Additional information regarding IRAs is provided in
Appendix IV, beginning on page 59.
Tax-Sheltered Annuities. Section 403(b) of the Code permits public school
employees, and employees of certain types of religious, charitable, educational,
and scientific organizations, specified in Section 501(c)(3) of the Code, to
purchase annuity contracts and, subject to certain limitations, exclude the
amount of premiums from gross income for tax purposes. However, these payments
may be subject to FICA (Social Security) taxes. These annuity contracts are
commonly referred to as "Tax-Sheltered Annuities." Subject to certain
exceptions, withdrawals under Tax-Sheltered Annuities which are attributable to
contributions made pursuant to salary reduction agreements are prohibited unless
made after the Contract Owner attains age 59 1/2, upon the Contract Owner's
separation from service, upon the Contract Owner's death or disability, or for
an amount not greater than the total of such contributions in the case of
hardship.
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Section 457 Deferred Compensation ("Section 457") Plans. Under Section 457 of
the Code, employees of (and independent contractors who perform services for)
certain state and local governmental units, or certain tax-exempt employers, may
participate in a Section 457 plan of their employer, allowing them to defer part
of their salary or other compensation. The amount deferred, and any income on
such amount, will not be taxable until paid or otherwise made available to the
employee. Depending on the terms of the particular plan, the employer may be
entitled to draw on deferred amounts for purposes unrelated to its section 457
plan obligations. In general, all amounts received under a section 457 plan are
taxable.
The maximum amount that can be deferred under a Section 457 plan in any tax year
is ordinarily onethird of the employee's includable compensation, up to $7,500.
Includable compensation means earnings for services rendered to the employer
which is includable in the employee's gross income, but excluding any
contributions under the Section 457 plan, or a Tax-Sheltered Annuity. During the
last three (3) years before an individual attains normal retirement age,
additional "catch-up" deferrals are permitted.
The deferred amounts will be used by the employer to purchase the Contract. The
Contract will be issued to the employer, and all Contract Balances will be
subject to the claims of the employer's creditors. The employee has no rights or
vested interest in the Contract, and is only entitled to payment in accordance
with the Section 457 plan provisions. Present federal income tax law does not
allow tax-free transfers or rollovers for amounts accumulated in a Section 457
plan, except for transfers to other Section 457 plans in certain limited cases.
Restrictions Under Qualified Contracts. Other restrictions with respect to the
election, commencement, or distribution of benefits may apply under Qualified
Contracts or under the terms of the plans in respect of which Qualified
Contracts are issued.
General
At the time the initial Purchase Payment is paid, a prospective purchaser must
specify whether he or she is purchasing a Non-qualified Contract or a Qualified
Contract. If the initial Purchase Payment is derived from an exchange or
surrender of another annuity contract, C.M. Life may require that the
prospective purchaser provide information with regard to the federal income tax
status of the previous annuity contract. C.M. Life will require that persons
purchase separate Contracts if they desire to invest monies qualifying for
different annuity tax treatment under the Code. Each such separate Contract
would require the minimum initial Purchase Payment stated above. Additional
Purchase Payments under a Contract must qualify for the same federal income tax
treatment as the initial Purchase Payment under the Contract. C.M. Life will not
accept an additional Purchase Payment under a Contract if the federal income tax
treatment of such Purchase Payment would be different from that of the initial
Purchase Payment.
Additional Information About C.M. Life
The Business of C.M. Life
C.M. Life, 140 Garden Street, Hartford, Connecticut, 06154, is a stock life
insurance company. It was chartered by a Special Act of the Connecticut General
Assembly on April 25, 1980. It is principally engaged in the sale of life
insurance and annuities, and is licensed to sell insurance in all states except
New York. As of December 31, 1995, C.M. Life is licensed to sell annuities in a
majority of states and is seeking to be licensed in all states except New York.
As of December 31, 1995, C.M. Life was a wholly-owned subsidiary of Connecticut
Mutual Life Insurance Company ("Connecticut Mutual"), the sixth oldest life
insurance company in the United States, and the first life insurance company
formed in Connecticut. Connecticut Mutual was chartered by a Special Act of the
Connecticut General Assembly on 1846 and has continuously engaged in the
insurance business since that time.
On September 8, 1995, the Board of Directors of Connecticut Mutual approved the
merger of Connecticut Mutual and Massachusetts Mutual Life Insurance Company
("MassMutual"). Thereafter, a definitive agreement was signed by both companies.
On January 27, 1996. Connecticut Mutual and insurance subsidiary policyholders
and other insureds and annuitants approved the merger. The merger was reviewed
by the insurance regulatory authorities in Massachusetts and Connecticut, and
approved. The merger was effective February 29, 1996.
MassMutual is a mutual life insurance company specially chartered by the
Commonwealth of Massachusetts on May 14, 1851. It is currently licensed to
transact life (including variable life), and accident and health insurance
business in all states, the District of Columbia and certain provinces of
Canada.
The surviving company is the fifth largest mutual life insurance company, and
the eighth largest life insurance company, in the United States, in each case
based on the combined statutory total assets of MassMutual and Connecticut
Mutual at December 31, 1994.
Further references to Connecticut Mutual contained herein should be read to
refer to MassMutual.
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Selected Financial Data
The following selected financial data for the Company should be read in
conjunction with the financial statements and notes thereto included in this
Prospectus and the related Management's Discussion and Analysis of Financial
Condition and Results of Operations.
C.M. Life Insurance Company
Selected Financial Data
For the Years Ended December 31,
($ In Thousands)
<TABLE>
<CAPTION>
Reserves: 1995 1994 1993 1992 1991
- --------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Premiums, annuity considerations and other income............ $ 135,949 $ 112,222 $108,460 $117,805 $125,763
Less: reinsurance ceded.................................... (50,732) (54,032) (56,905) (60,830) (15,846)
---------- ---------- -------- -------- --------
Net premiums, annuity considerations and other income........ 85,217 58,190 51,555 56,975 109,917
Net investment income and realized gains and losses.......... 67,675 57,354 57,919 56,286 53,187
---------- ---------- -------- -------- --------
Total Revenue.............................................. 152,892 115,544 109,474 113,261 163,104
Benefits, Losses and Expenses:
Benefits, claims and settlement expenses..................... 132,067 101,243 98,700 111,843 129,797
Other operating expenses..................................... 50,837 28,829 28,440 35,369 47,199
Less: reinsurance benefits and expenses ceded.............. (52,538) (45,804) (50,001) (54,537) (25,156)
---------- ---------- -------- -------- --------
Total Benefits, Losses and Expenses........................ 130,366 84,268 77,139 92,675 151,840
---------- ---------- -------- -------- --------
Income Before Federal Income Tax Expense..................... 22,526 31,276 32,335 20,586 11,264
Federal Income Tax Expense................................... 8,776 13,488 11,241 9,055 6,429
---------- ---------- -------- -------- --------
Net Income................................................... $ 13,750 $ 17,788 $ 21,094 $ 11,531 $ 4,835
========== ========== ======== ======== ========
Total Assets................................................. $1,533,748 $1,208,291 $970,010 $768,333 $664,755
========== ========== ======== ======== ========
</TABLE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations (dollar amounts in thousands) 1995 Compared with 1994
For the year ended December 31, 1995, C.M. Life had net income of $13,750, as
compared with net income of $17,788 in 1994. The decrease in net income of
$4,038 is attributable to increased benefit, claims and settlement expenses and
increased acquisition and insurance expenses which exceeded the increase in net
premiums and net investment income.
Premiums before reinsurance ceded increased $23,040 to $134,278 in 1995 from
$111,238 in 1994. Premiums for CM Windows, a single premium deferred annuity,
increased $9,412 to $18,894 in 1995 from $9,482 in 1994. The increase is
attributable to higher interest rates and increased promotional efforts, which
increased demand for single premium deferred annuity products. Premiums for life
insurance products increased $13,628 to $115,384 in 1995 from $101,756 in 1994
due to higher sales of universal life policies, primarily the Enterprise Plus
product, as well as by increased renewal premiums.
Reinsurance premiums ceded decreased by $3,300 in 1995. The decrease is
attributable to the decrease in reinsured business as well as increased
retention limits. The Enterprise Plus Universal Life product is not included in
the C.M. Life/Connecticut Mutual reinsurance treaty.
Net investment income increased by $8,928 over 1994. This increase is
attributable to increased invested assets and policy loans.
Net realized capital losses were $1,140 in 1995 as compared to net realized
capital losses of $2,533 in 1994. This loss is due to realized net losses of
$1,962, with $822 being transferred to the IMR (Interest Maintenance Reserve) in
1995 as compared to realized net losses of $7,332 in 1994, with $4,799 being
transferred to the IMR.
Benefits, claims and settlement expenses, before reinsurance benefit
reimbursements, increased by $30,824 from 1994. Surrender benefits before
reinsurance increased by $2,443, to $33,494 in 1995 from $31,051 in 1994 and
reserves ceded increased $6,173. Contributing to the increase was an increase in
death claims of $12,853, increased change in reserves of $8,300, increased
reserves ceded of $6,173 and increased surrenders and other benefits of $3,498.
Acquisition expenses increased $21,190 over 1994. This increase is attributable
to increased sales, especially of the new Enterprise Plus Universal Life
product.
Income tax expense decreased by $4,712 over 1994. This decrease is attributable
to lower taxable income in 1995 versus 1994. Taxable income was $27,726, $38,660
and $33,080 in 1995, 1994 and 1993, respectively. C.M. Life's Federal income tax
expense is based on income which is currently taxable. The differences between
pre-tax book income and taxable
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income are primarily for lower tax basis reserves for future policy benefits and
other book/tax differences associated with gross investment income.
Results of Operations (dollar amounts in thousands)
1994 Compared with 1993
For the year ended December 31, 1994, C.M. Life had net income of $17,788, as
compared with net income of $21,094 in 1993. The decrease in net income of
$3,306 is attributable to increased benefit, claims and settlement expenses as
well as an increase in net realized capital losses and increased federal tax
expense, partially offset by increased net premiums, net investment income and
decreased reinsurance ceded and acquisition and insurance expenses.
Premiums before reinsurance ceded increased $3,141 to $111,238 in 1994 from
$108,097 in 1993. Premiums for CM Windows, a single premium deferred annuity,
increased $7,343 to $9,482 in 1994 from $2,139 in 1993. The increase is
attributable to higher interest rates, which increased demand for single premium
deferred annuity products. Premiums for life insurance products decreased $4,202
to $101,756 in 1994 from $105,958 in 1993 due to lower sales of new universal
life policies and Executive Benefit Life policies offset by higher term policy
sales.
Reinsurance premiums ceded decreased by $2,873 in 1994. The decrease is
attributable to the decrease in reinsured business as well as increased
retention limits.
Net investment income increased by $2,427 over 1993; this increase is
attributable to increased invested assets.
Net realized capital losses were $2,533 in 1994 as compared to a net realized
gain of $459 in 1993. This loss is due to realized net losses of $7,332, with
$4,799 being transferred to the IMR in 1994 as compared to realized net gains of
$4,906 in 1993, with $4,447 of those being transferred to the IMR. The $7,332
loss included realized losses of $2,093 related to the bulk sale of a number of
mortgages during 1994 and losses of $2,158 resulted from the sale of two real
estate properties. There were no real estate sales in 1993.
Benefits, claims and settlement expenses, before reinsurance benefit
reimbursements increased by $2,543 from 1993. Surrender benefits before
reinsurance increased by $2,116, to $31,051 in 1994 from $28,935 in 1993 and
reserves ceded increased $4,928. This increase was partially offset by decreased
death claims of $3,217 and decreased change in reserves of $1,580.
Income tax expense increased by $2,247 over 1993. This increase is attributable
to higher taxable income in 1994 versus 1993. Taxable income was $38,660,
$33,080 and $27,414 in 1994, 1993 and 1992, respectively. C.M. Life's Federal
income tax expense is based on income which is currently taxable. The
differences between pre-tax book income and taxable income are primarily lower
tax basis reserves for future policy benefits and other book/tax differences
associated with gross investment income.
Liquidity and Capital Resources
C.M. Life's operations have historically provided substantial cash flow. The
majority of the Company's cash is invested in investment-grade securities to
provide ample protection for policyholders. The liabilities of the Company are
predominantly long-term in nature and, therefore, the Company invests in long-
term fixed maturity investments such as bonds.
C.M. Life's liquidity requirements were met by funds provided from operations
and investment activity. The primary uses of funds were to purchase investments
and to pay commissions, insurance operating expenses and policy benefits.
There is not expected to be any material change to C.M. Life's liquidity as a
result of the merger of Connecticut Mutual and MassMutual.
Segment Information
During 1995, 1994 and 1993, C.M. Life's operations consisted of one business
segment which was principally the sale of universal life insurance and annuity
products. C.M. Life is not dependent upon any single customer and no single
customer accounted for more than 10% of revenues in 1995, 1994 or 1993.
Reserves
In accordance with the life insurance laws and regulations under which C.M. Life
operates, it is obligated to carry on its books, as liabilities, actuarially
determined reserves to meet its obligations on outstanding contracts. Reserves
are based on mortality tables in general use in the United States and are
computed to equal amounts that, with additions from premiums to be received, and
with interest on such reserves computed annually at certain assumed rates, will
be sufficient to meet C.M. Life's policy obligations at their maturities or in
the event of an insured's death. In the accompanying financial statements, these
reserves are determined in accordance with statutory regulations which is a
generally accepted accounting principle for wholly-owned stock life insurance
subsidiaries of mutual life insurance companies.
Investments
At December 31, 1995, the composition of C.M. Life's $976,511 of invested assets
was 75.5% fixed maturities, 7.4% equity securities, 2.7% mortgage loans, 12.9%
policy loans, and 1.5% cash and cash equivalents.
Fixed Maturities
C.M. Life invests in fixed maturities with the objective of balancing reasonable
returns with liquidity, interest rate and credit risks. As a result, C.M. Life's
fixed maturity portfolio consists primarily of government securities and high-
quality marketable corporate securities. At December 31, 1995, the fixed
maturity securities portfolio consisted of $675,850 of investment grade bonds,
which represented 91.8% of the fixed maturity portfolio. Below investment grade
bonds (those rated below "Baa") were $60,249, which represented 8.2% of the
fixed maturity portfolio. Ratings are obtained from external rating agencies,
and if not externally rated, are rated by C.M. Life internally using similar
methods. The interest rates avail-
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able on below-investment-grade securities are generally significantly higher
than available on other corporate debt securities. Also the risk of loss due to
default by the borrower is significantly greater with respect to such below
investment-grade securities for any of a number of reasons including: those
securities are unsecured or subordinated to other creditors of the issuer, or
are issued by companies that usually have high levels of indebtedness. C.M. Life
attempts to minimize the exposure to any one issuer and by closely monitoring
the credit worthiness of such issuers.
C.M. Life's fixed maturity securities portfolio included $150,694 and $167,641
of mortgage-backed securities at December 31, 1995 and 1994, respectively. The
mortgage-backed securities are subject to risks associated with variable
prepayments of the underlying mortgages. Prepayments of the underlying mortgages
cause those securities to have different actual maturities than scheduled at the
time of purchase. The Company limits its investment risk by purchasing fixed
maturities either guaranteed by U.S. government-sponsored entities or securities
supported in the securitization structure by junior securities enabling the
assets to achieve investment grade status.
Equity Securities
In 1995, C.M. Life invested in common stock with the objective of securing long-
term asset appreciation.
Mortgage Loans On Real Estate
C.M. Life is not currently originating any mortgages. At December 31, 1995 and
1994, C.M. Life's mortgage loans were $26,705 and $42,038, respectively.
Mortgage loans, as a percentage of invested assets, have decreased to 2.7% as of
December 31, 1995, from 4.8% as of December 31, 1994.
Management closely monitors the ongoing performance of the mortgage loan
portfolio. Loans are reviewed individually to determine if other than temporary
impairments exist. For nonperforming loans, reserves are established considering
the value of the underlying collateral. Mortgage loans in the amount of $2,774,
or 10.4% of the mortgage loan portfolio, were delinquent 90 days or more as of
December 31, 1995. This compares with $2,774, or 6.6% of the mortgage loan
portfolio at December 31, 1994.
Restructured loans are loans whose terms such as interest rate, amortization, or
maturity have been modified and are currently performing pursuant to such
modified terms. C.M. Life restructures loans to protect its investment and only
when it is anticipated that the borrower will be able to meet the modified
terms. As of December 31, 1995 and 1994, $17,128 and $24,034 of mortgage loans
have been restructured.
Policy Loans
As of December 31, 1995 and 1994, C.M. Life's policy loans were $126,014 and
$109,720, respectively. Policy loans, as a percentage of invested assets, have
increased from 12.5% in 1994 to 12.9% in 1995. Variable interest rate policy
loans were 98.6% and 98.5% of total policy loans at December 31, 1995 and 1994,
respectively. For loans with variable interest rates, the rates are adjusted
annually based upon changes in a corporate bond index.
Competition
C.M. Life is engaged in a business that is highly competitive because of the
large number of stock and mutual life insurance companies and other entities
marketing insurance products comparable to those of C.M. Life.
MassMutual is the eighth largest life insurance company in the country with over
$52 billion in life insurance assets and $103 billion in total assets. Best's
Insurance Reports, Life-Health Edition, upgraded C.M. Life's rating on March 4,
1996 to the highest possible rating of A++ as a result of the merger.
MassMutual's ratings were the highest possible from A.M. Best (A++), Duff &
Phelps (AAA) and Standard & Poor's (AAA), and the second-highest rating from
Moody's Investors Service (Aa1). In management's view, independent ratings are
significant factors in the competitiveness of insurance companies.
Transactions with Connecticut Mutual
Connecticut Mutual allocates certain expenses to C.M. Life for providing
operating facilities, human resources, computer software development and
managerial services. Total expenses allocated to C.M. Life were approximately
$34,008, $16,412, and $18,831 in 1995, 1994 and 1993, respectively. The increase
is attributable to increased sales for C.M. Life and decreased sales for the
parent, Connecticut Mutual, resulting in a larger portion of certain expenses
being allocated to C.M. Life. In the future, the parent company (MassMutual)
will continue to allocate certain expenses to C.M. Life.
Regulation
Currently, the Federal government does not directly regulate the business of
insurance. However, Federal legislative, regulatory and judicial decisions and
initiatives often have significant effects on C.M. Life's business. Types of
changes that are most likely to affect C.M. Life's business include changes to:
(a) the taxation of life insurance companies; (b) the tax treatment of insurance
products; (c) the securities laws, particularly as they relate to insurance and
annuity products; (d) the "business of insurance" exemption from any of the
provisions of the antitrust laws; and (e) declining barriers which prevent most
banks from selling or underwriting insurance. C.M. Life could also be affected
by federal initiatives that have impact on the ownership of or investment in
United States companies by foreign companies or investors.
New Accounting Pronouncements
The Financial Accounting Standards Board (FASB) has issued an interpretation
declaring that financial statements of mutual life insurance companies, and
their wholly-owned subsidiaries, which are prepared on the basis of statutory
accounting principles, will no longer be considered to be in conformity with
Generally Accepted Accounting Principles (GAAP). This interpretation applies to
financial statements issued for fiscal years beginning after December 15, 1995.
Certain accounting principles for mutual life insurance companies, which will be
required to be in compliance with GAAP, were also issued by the FASB and the
American Institute of Certified Public Accountants in January 1995. The
financial statement impact of adopting these accounting principles has not been
deter-
33
<PAGE>
mined by the Company. The effect of initially adopting the FASB interpretation
will be reported retroactively through restatement of all previously issued
financial statements presented for comparative purposes for fiscal years
beginning after December 15, 1992.
Financial Statements and Supplementary Data
Financial statements, in the form required by Regulation SX, are set forth in
this Prospectus. The Registrant is not required to file supplementary financial
data specified by Item 302 of Regulation SK.
C.M. Life's Directors and Executive Officers
<TABLE>
<CAPTION>
Position with C.M. Life;
Name (Age at 5/01/96) Year Commenced Other Positions During the Past Five (5) Years
- ---------------------
<S> <C> <C>
David E. Sams, Jr. (53) Director and President, July 1993 President and Chief Financial Officer of MassMutual since
(Principal Executive Officer) March 1, 1996; President and Chief Executive Officer of
Connecticut Mutual from July 1993 until February 29,
1996; previously President and Chief Executive Officer of
Capital Holding Corp. (now Providian Corporation) Agency
Group; and Chairman, Commonwealth Life Insurance Company;
Director, Compdent Dental Benefit Plans.
J. Brinke Marcuccilli (41) Director, June 1995; Chief Financial Chief Executive Officer of MML Investors Services, Inc.
Officer August 1994 since March 1, 1996; Chief Financial Officer, Connecticut
Mutual from May 1994 until February 29, 1996; Vice
President/Chief Financial Officer of Providian
Corporation, Agency Group from January 1983 until May
1994.
John A. Hubbard (42) Actuary, May 1987 Actuary, Connecticut Mutual from December 1991 until
February 29, 1996; Associate Actuary, Connecticut Mutual,
March 1990 until December 1991.
Ann F. Lomeli (40) Secretary, December 1988 Vice President, Associate Corporate Secretary and
Associate General Counsel of MassMutual since March 1,
1996; Corporate Secretary and Counsel of Connecticut
Mutual from December 1988 until February 29, 1996.
Emelia M. Bruno (47) Controller, August 1994 Corporate Comptroller of MassMutual since March 1, 1996;
Controller of Connecticut Mutual from May 1994 until
February 29, 1996, and Assistant Vice President of
Connecticut Mutual from 1988 until February 29, 1996.
Scott C. Peters (38) Treasurer, February 1994 Vice President and Treasurer from February 1994 until
February 29, 1996; Associate Treasurer from August 1992
until February 1994; Assistant Vice President and
Director of Treasury Operations from September 1990 until
August 1992.
</TABLE>
Effective June 9, 1995, Donald H. Pond, Jr., Director of C.M. Life since
February 1990, Vice President and Chief Operating Officer of C.M. Life since
August 1988, and Executive Vice President of Connecticut Mutual since November
1988, resigned from his positions at Connecticut Mutual and C.M. Life.
Effective May 1995, Rodney O. Martin, Director of C.M. Life since May 1994, and
Vice President and Chief Agency Officer of Connecticut Mutual since March 1990,
resigned from his positions at Connecticut Mutual and C.M. Life
Effective September 1, 1995, David J. Beed, Vice President of C.M. Life since
March 1991 and Senior Vice President of Connecticut Mutual for Strategic
Planning and Total Quality since June 1992, resigned from his positions at
Connecticut Mutual and C.M. Life.
Effective September 1995, Donald A. Skokan, Actuary for C.M. Life since February
1991 and Actuary for Connecticut Mutual since December 1989, resigned from his
positions at Connecticut Mutual and C.M. Life.
Effective May 17, 1995, John D. Loewenberg was elected Executive Vice President
of C.M. Life, and a Director on June 9, 1995. He resigned from both of those
positions on March 5, 1996.
Compensation of C.M. Life's Directors and Executive Officers
Until February 29, 1996, the officers and directors of C.M. Life were employees
of Connecticut Mutual, and performed their duties for C.M. Life as part of their
employment with Connect-
34
<PAGE>
icut Mutual. As of March 1, 1996, C.M. Life became a wholly-owned subsidiary of
MassMutual. Many of the directors and officers of C.M. Life also serve as
directors and officers of other companies that are also wholly-owned by
MassMutual. Although applicable expense allocation agreements between and among
MassMutual and its subsidiaries (such as C.M. Life) do not specifically allocate
to the subsidiaries portions of the salaries paid by MassMutual, the amount of
compensation received by any one director or officer of C.M. Life from
MassMutual for services performed for C.M. Life would not exceed $100,000. The
directors of C.M. Life do not receive fees (or expenses) for serving as
directors of C.M. Life, or for attending directors' meetings. None of the
officers or directors of C.M. Life owns shares of capital stock of C.M. Life,
which is wholly-owned by MassMutual. The officers and directors of C.M. Life,
individually and as a group, hold (by virtue of their ownership of insurance
policies issued by MassMutual) interests in MassMutual of less than one (1)
percent.
Additional Information About The Separate Account
Addition, Deletion or Substitution of Investments
C.M. Life cannot and does not guarantee that any of the Sub-Accounts of the
Separate Account, or Portfolios of the Funds, will always be available for
Purchase Payments, allocations, or transfers. C.M. Life retains the right to
make changes in the Separate Account and its investments.
C.M. Life reserves the right to eliminate the shares of any Portfolio held by a
Sub-Account, and to substitute shares of another Portfolio of the Funds, or of
another registered open-end management investment company, for the shares of any
Portfolio, if the shares of the Portfolio are no longer available for
investment, or if, in C.M. Life's judgment, investment in any Portfolio would be
inappropriate in view of the purposes of the Separate Account. To the extent
required by the 1940 Act, substitutions of shares attributable to the Contract
Owner's interest in a Sub-Account will not be made without prior notice to the
Contract Owner and the prior approval of the SEC. Nothing contained herein shall
prevent the Separate Account from purchasing other securities for other series
or classes of variable annuity policies, or from effecting an exchange between
series or classes of variable annuity policies on the basis of requests made by
Contract Owners.
New Sub-Accounts may be established when, at the sole discretion of C.M. Life,
marketing, tax, investment or other conditions warrant. Any new Sub-Accounts may
be made available to existing Contract Owners on a basis to be determined by
C.M. Life. Each additional Sub-Account will purchase shares in a Portfolio of
the Funds, or in another mutual fund or investment vehicle. C.M. Life may also
eliminate one or more Sub-Accounts if, at its sole discretion, marketing, tax,
investment or other conditions warrant such change. In the event any Sub-Account
is eliminated, C.M. Life will notify Contract Owners and request a reallocation
of the amounts invested in the eliminated Sub-Account.
In the event of any such substitution or change, C.M. Life may, by appropriate
endorsement, make such changes in the Contracts as may be necessary or
appropriate to reflect such substitution or change. Furthermore, if deemed to be
in the best interests of persons having voting rights under the Contracts, the
Separate Account may be (i) operated as a management company under the 1940 Act
or any other form permitted by law, (ii) deregistered under the 1940 Act in the
event such registration is no longer required, or (iii) combined with one or
more other separate accounts. To the extent permitted by applicable law, C.M.
Life also may transfer the assets of the Separate Account associated with the
Contracts to another account or accounts.
Performance Data
From time to time the yield of the Money Market Sub-Account may be advertised.
In addition, total returns for all of the Sub-Accounts may be advertised. These
figures will be based on historical performance for the Portfolios and are not
intended to and do not indicate future performance.
The yield of the Money Market Sub-Account refers to the annualized income
generated by an investment in that Sub-Account over a specified seven-day
period. The yield is "annualized" by assuming that the income generated for that
seven-day period is generated each seven-day period over a 52-week period, and
is shown as a percentage of that investment. The effective yield is calculated
similarly, but, when annualized, the income earned by an investment in that Sub-
Account is assumed to be reinvested. The effective yield will be slightly higher
than the yield because of the compounding effect of this assumed reinvestment.
Total returns for the Money Market Sub-Account, the Income Sub-Account, the
Total Return Sub-Account, the Growth Sub-Account, and the International Equity
Sub-Account, may be calculated pursuant to a standardized formula or in
non-standardized manners. The standardized total return of the Sub-Accounts
refers to return quotations assuming an investment has been held in the Sub-
Account for various periods of time including, but not limited to, one (1) year,
five (5) years, and ten (10) years (if the Sub-Account has been in operation for
those periods), and a period measured from the date the Sub-Account commenced
operations. The total return quotations will represent the average annual
compounded rates of return that would equate an initial investment of $1,000 to
the redemption value of that investment as of the last day of each of the
periods for which total return quotations are provided. Accordingly, the total
return quotations will reflect not only income but also changes in principal
value (that is, changes in the accumulation unit values), whereas the yield
figures will only reflect income. In addition, the standardized total return
quotations will reflect the Surrender Charge imposed on Surrenders, but the
standardized yield figures will not.
In addition, the Separate Account may from time to time also disclose total
return in nonstandard formats and cumulative total return for the Sub-Accounts.
The nonstandard average annual total return and cumulative total return would
not reflect the Surrender Charge, which if reflected would lower the performance
figures for periods of less than five (5) years.
The Funds may from time to time also disclose standard total returns and
nonstandard total returns for the Sub-Accounts based on or covering periods of
time other than those indicated above. All nonstandard performance data will
only be dis-
35
<PAGE>
closed if the standard total return is also disclosed. For additional
information regarding the calculation of performance data, please refer to the
Statement of Additional Information.
Also from time to time, in advertisements, sales literature, or in reports to
Contract Owners, the Separate Account may compare the performance of the
Sub-Accounts to that of other variable accounts or investment vehicles with
similar investment objectives, or to relevant indices published by recognized
mutual fund or variable annuity statistical rating services, or publications of
general variable annuity statistical rating services, or publications of general
interest, such as Forbes or Money magazines. For example, a Sub-Account's
performance might be compared to that of other accounts or investments with a
similar investment objective as compiled by Lipper Analytical Services, Inc.,
VARDs, Morningstar, Inc., or by others. In addition, a Sub-Account's performance
might be compared to that of recognized stock market indicators, including, but
not limited to, the Standard & Poor's 500 Stock Index (which is a group of
unmanaged securities widely regarded by investors as representative of the stock
market in general), and the Dow Jones Industrial Average (which is a
price-weighted average of 30 large, well-known industrial stocks that are
generally the leaders in their industry). Performance comparisons should not be
considered representative of the future performance of a Sub-Account.
Performance data may also be calculated for shorter or longer base periods. The
Separate Account may use various base periods as may be deemed necessary or
appropriate to provide investors with the most informative performance data
information, depending on the then-current market conditions.
The Company may also disclose yields, standard total returns, and nonstandard
total returns for the Portfolios of the Fund, including such disclosure for
periods prior to the date the Sub-accounts commenced operations.
Performance will vary from time to time and historical results will not be
representative of future performance. Performance information may not provide a
basis for comparison with other investments or other investment companies using
a different method of calculating performance. Current yield is not fixed and
varies with changes in investment income and accumulation unit values. The Money
Market Sub-Account's yield will be affected if it experiences a net inflow of
new money which is invested at interest rates different from those being earned
on its then-current investments. An investor's principal in a Sub-Account and a
Sub-Account's return are not guaranteed and will fluctuate according to market
conditions. And, as noted above, advertised performance data figures will be
historical figures for a Contract during the Accumulation Period.
The Separate Account may also from time to time, in advertisements, sales
literature or in reports to shareholders, discuss the Separate Account's fees
and compare those fees to industry averages and to other variable accounts. The
Separate Account may also discuss the total amount of money invested in variable
annuities.
Voting Rights
There are no voting rights associated with the General Account Balance.
With respect to the Separate Account Balance, C.M. Life will be the
"shareholder" of the Funds, and as such, C.M. Life will have certain voting
rights. However, to the extent required by law, C.M. Life will vote the Funds
shares held by the Separate Account at regular and special shareholder meetings
of the Funds in accordance with instructions received from persons having voting
interests in the Portfolios. If, however, the 1940 Act or any regulation
thereunder should be amended, or if the present interpretation thereof should
change, and as a result C.M. Life determines that it is permitted to vote the
Funds' shares in its own right, it may elect to do so.
Before the Annuity Income Date, the Contract Owner holds the voting interest in
the selected Portfolios. The number of votes that the Contract Owner has the
right to instruct will be calculated separately for each Sub-Account. The number
of votes that the Contract Owner has the right to instruct for a particular
Sub-Account will be determined by dividing his or her Contract Balance in the
Sub-Account by the net asset value per share of the corresponding Portfolio in
which the Sub-Account invests. Fractional shares will be counted.
After the Annuity Income Date, the person receiving Annuity Payments has the
voting interest, and the number of votes decreases as Annuity Payments are made
and as the reserves for the Contract decrease. The person's number of votes will
be determined by dividing the reserve for the Contract allocated to the
applicable Sub-Account by the net asset value per share of the corresponding
Portfolio of the Funds. Fractional shares will be counted.
The number of votes that the Contract Owner, or person receiving income
payments, has the right to instruct will be determined as of the date
established by the Funds for determining shareholders eligible to vote at the
meeting of the Funds. C.M. Life will solicit voting instructions by sending
Contract Owners, or other persons entitled to vote, written requests for
instructions prior to that meeting, in accordance with procedures established by
the Funds. Portfolio shares for which no timely instructions are received may be
voted in proportion to the voting instructions that are received with respect to
all Contracts participating in the same Sub-Account. Shares held by C.M. Life or
its affiliates, in which Contract Owners or other persons entitled to vote have
no beneficial interest, may be voted by the shareholder thereof (C.M. Life or
its affiliates) at its sole discretion.
Each person having a voting interest in a Sub-Account will receive proxy
material, reports, and other materials relating to the appropriate Portfolio.
It should be noted that the Funds are not required to, and do not intend to,
hold annual or other regular meetings of shareholders.
Regulation
C.M. Life is organized as a Connecticut stock life insurance company, and is
subject to Connecticut law governing insurance companies. C.M. Life is regulated
and supervised by the Connecticut Commissioner of Insurance. By March 1 of each
year, C.M. Life must prepare and file an annual statement, in a form prescribed
by the Connecticut Insurance Department, which covers C.M. Life's operations for
the preceding calendar
36
<PAGE>
year, and must prepare and file a statement of financial condition as of
December 31 of such year. The Commissioner and his or her agents have the right
at all times to review or examine C.M. Life's books and assets. A full
examination of C.M. Life's operations will be conducted periodically according
to the rules end practices of the National Association of Insurance
Commissioners ("NAIC"). C.M. Life is also subject to the insurance laws of the
states in which it is authorized to do business, to various federal and state
securities laws and regulations, and to regulatory agencies which administer
those laws and regulations.
C.M. Life can be assessed up to prescribed limits for policyholder losses
incurred by insolvent insurers under the insurance guaranty fund laws of most
states. C.M. Life cannot predict or estimate the amount any such future
assessments it may have to pay. However, the insurance guaranty laws of most
states provide for deferring payment, or exempting a company from paying such an
assessment, if it would threaten such insurer's financial strength.
Several states, including Connecticut, also regulate insurers and their
affiliates, such as C.M. Life and its affiliates, under insurance holding
company laws and regulations. Under such laws, inter-company transactions such
as dividend payments to parent companies and transfers of assets, may be subject
to prior notice and approval, depending on factors such as the size of the
transaction in relation to the financial position of the companies.
Currently, the Federal government does not directly regulate the business of
insurance. However, federal legislative, regulatory and judicial decisions and
initiatives often have significant effects on C.M. Life's business. Types of
changes that are most likely to affect C.M. Life's business include changes to:
(a) the taxation of life insurance companies; (b) the tax treatment of insurance
products; (c) the securities laws, particularly as they relate to insurance and
annuity products; (d) the "business of insurance" exemption from many of the
provisions of the antitrust laws; and (e) the barriers preventing most banks
from selling or underwriting insurance. C.M. Life could also be affected by
federal initiatives that have impact on the ownership of or investment in United
States companies by foreign companies or investors. C.M. Life alone, and not the
federal Government, or any of its agencies or instrumentalities, backs the
guarantees associated with the Contracts.
Legal Proceedings
C.M. Life is not involved in any litigation that is of material importance in
relation to its General Account assets. In addition, there are no legal
proceedings to which the Separate Account is a party.
Available Information
C.M. Life is subject to the informational requirements of the Securities
Exchange Act of 1934, and, in accordance therewith, files reports and other
information with the SEC. Such reports and other information can be inspected
and copied at the public reference facilities of the SEC, at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549. Copies of such materials also can be
obtained from the Public Reference Section of the Commission, at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
C.M. Life has filed registration statements (the "Registration Statements") with
the SEC under the Securities Act of 1933 relating to the Contracts offered by
this Prospectus. This Prospectus has been filed as part of the Registration
Statements, and does not contain all of the information set forth in the
Registration Statements. Reference is hereby made to such Registration
Statements for further information relating to C.M. Life and the Contracts. The
Registration Statements may be inspected and copied, and copies can be obtained
at prescribed rates in the manner set forth in the preceding paragraph.
37
<PAGE>
Statement Of Additional Information Table Of Contents
A Statement of Additional Information is available (at no cost) which contains
more details concerning the subjects discussed in this Prospectus. The following
is the Table of Contents for that Statement.
<TABLE>
<CAPTION>
Table Of Contents
Page
<S> <C>
MORE INFORMATION ABOUT THE CONTRACT...................................... B-3
Determination of Sub-Account Accumulation Unit Values.................. B-3
Annuity Period Transfer Formulas....................................... B-5
RECORDS, REPORTS AND SERVICES............................................ B-7
PERFORMANCE DATA AND CALCULATIONS........................................ B-7
Money Market Sub-Account Yield......................................... B-7
Sub-Account Total Return Calculations: Standardized.................... B-9
Other Performance Data: Non-Standardized............................... B-10
Other Performance Data: Synthetic...................................... B-10
Other Information...................................................... B-11
HISTORIC PERFORMANCE DATA................................................ B-13
General Limitations.................................................... B-13
Sub-Account Performance Data........................................... B-13
Money Market Sub-Account Yield......................................... B-14
Synthetic Sub-Account Performance Data................................. B-15
FEDERAL TAX MATTERS...................................................... B-15
Taxation of C.M. Life.................................................. B-16
Tax Status of the Contracts............................................ B-17
OTHER INFORMATION........................................................ B-19
FINANCIAL STATEMENTS OF PANORAMA PLUS SEPARATE ACCOUNT................... B-20
</TABLE>
38
<PAGE>
Financial Statements
The financial statements for C.M. Life and the related report of independent
public accountants are contained in this Prospectus. The Statement of Additional
Information contains financial statements for the Separate Account. Arthur
Andersen LLP, Hartford, Connecticut 06103, serves as independent auditors for
the Separate Account.
The financial statements included (incorporated by reference) in this Prospectus
and elsewhere in this Registration Statement have been audited by Arthur
Andersen LLP, as indicated in their reports with respect thereto, and are
included here in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
39
<PAGE>
Report Of Independent Public Accountants
To C.M. Life Insurance Company:
We have audited the accompanying balance sheets of C.M. Life Insurance Company
(a Connecticut corporation and a wholly-owned subsidiary of Connecticut Mutual
Life Insurance Company) as of December 31, 1995 and 1994, and the related
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
and the schedules referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of C.M. Life Insurance Company as
of December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedules I and VI are presented for
purposes of complying with the Securities and Exchange Commission's rules and
are not part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly state in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
Arthur Andersen LLP
Hartford, Connecticut
February 15, 1996
(Except with respect to the matter discussed in Note 13,
as to which the date is March 4, 1996.)
40
<PAGE>
Index To Financial Statements And Schedules
<TABLE>
<S> <C>
C.M. Life Insurance Company
Balance Sheets
As of December 31, 1995 and 1994......................................... 58
C.M. Life Insurance Company
Statements of Operations
For the Years Ended December 31, 1995, 1994 and 1993..................... 59
C.M. Life Insurance Company
Statements of Stockholder's Equity
For the Years Ended December 31, 1995, 1994 and 1993..................... 60
C.M. Life Insurance Company
Statements of Cash Flows
For the Years Ended December 31, 1995, 1994 and 1993..................... 61
C.M. Life Insurance Company
Notes to Financial Statements
December 31, 1995, 1994 and 1993......................................... 62
</TABLE>
41
<PAGE>
C.M. Life Insurance Company
Balance Sheets
As of December 31, 1995 and 1994
($ In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
ASSETS:
Investments:
Fixed maturities at cost (fair value: $767,888
in 1995 and $684,213 in 1994)............................................................. $ 736,099 $ 717,291
Preferred stock at cost (fair value: $210 in 1995
and $2,065 in 1994)....................................................................... 263 1,815
Common stock at market value (cost: $64,225 in 1995).......................................... 72,361 --
Mortgage loans on real estate net realizable value............................................... 26,705 42,038
Real estate at cost.............................................................................. -- 1,897
Policy loans at outstanding balance.............................................................. 126,014 109,720
Cash and cash equivalents........................................................................ 15,069 3,025
---------- ----------
Total investments......................................................................... 976,511 875,786
Accrued investment income........................................................................ 14,781 14,023
Premiums due and deferred........................................................................ 6,831 5,330
Amounts due from reinsurers...................................................................... 902 1,162
Other assets..................................................................................... 3,291 2,318
Assets of Separate Account....................................................................... 531,432 309,672
---------- ----------
TOTAL ASSETS.............................................................................. $1,533,748 $1,208,291
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY:
LIABILITIES:
Future policy benefits........................................................................... $ 813,188 $ 751,808
Policy claims and benefits currently payable..................................................... 2,026 1,722
Indebtedness to related parties.................................................................. 12,624 6,965
Federal income tax payable....................................................................... 2,820 2,446
Asset valuation reserve.......................................................................... 15,868 6,640
Other liabilities................................................................................ 10,622 7,906
Other deposits................................................................................... 54,269 31,690
Transfers due from Separate Account.............................................................. (22,300) (14,445)
Liabilities of Separate Account.................................................................. 531,432 309,672
---------- ----------
TOTAL LIABILITIES......................................................................... $1,420,549 $1,104,454
========== ==========
COMMITMENTS AND CONTINGENCIES - SEE NOTE 12
STOCKHOLDER'S EQUITY:
Common stock, $200 par value - 50,000 shares authorized, 12,500 shares
issued and outstanding........................................................................ 2,500 2,500
Additional paid-in capital....................................................................... 43,759 43,759
Retained earnings................................................................................ 66,940 57,578
---------- ----------
TOTAL STOCKHOLDER'S EQUITY................................................................ 113,199 103,837
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY................................................ $1,533,748 $1,208,291
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
42
<PAGE>
C.M. Life Insurance Company
For the Years Ended December 31, 1995, 1994 and 1993
Statements of Operations
($ In Thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
REVENUES:
<S> <C> <C> <C>
Premiums and annuity considerations ......................................... $134,278 $111,238 $108,097
Less: reinsurance ceded ..................................................... (50,732) (54,032) (56,905)
-------- -------- --------
Net premiums and annuity considerations ................................. 83,546 57,206 51,192
Net investment income ....................................................... 68,815 59,887 57,460
Net realized capital (losses) gains on investments .......................... (1,140) (2,533) 459
Other income ................................................................ 1,671 984 363
-------- -------- --------
TOTAL REVENUES .......................................................... 152,892 115,544 109,474
-------- -------- --------
BENEFITS, LOSSES AND EXPENSES:
Benefits, claims and settlement expenses .................................... 132,067 101,243 98,700
Acquisition and insurance expenses .......................................... 45,820 24,630 25,436
Other expenses .............................................................. 5,017 4,199 3,004
Less: reinsurance benefits and expenses ceded ............................... (52,538) (45,804) (50,001)
-------- -------- --------
TOTAL BENEFITS, LOSSES AND EXPENSES ..................................... 130,366 84,268 77,139
-------- -------- --------
INCOME BEFORE FEDERAL INCOME TAX EXPENSE ................................ 22,526 31,276 32,335
FEDERAL INCOME TAX EXPENSE ....................................................... 8,776 13,488 11,241
-------- -------- --------
NET INCOME .............................................................. $ 13,750 $ 17,788 $ 21,094
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
43
<PAGE>
C.M. Life Insurance Company
Statements of Stockholder's Equity
For the Years Ended December 31, 1995, 1994 and 1993
($ In Thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Common Stock ............................................................ $ 2,500 $ 2,500 $ 2,500
Additional Paid-in Capital .............................................. 43,759 43,759 43,759
-------- -------- -------
Retained Earnings
Balance, beginning of year .............................................. 57,578 41,639 21,163
Net income .............................................................. 13,750 17,788 21,094
Change in asset valuation reserve ....................................... (9,228) (106) (1,313)
Change in nonadmitted assets ............................................ (1,157) (1,761) 675
Net unrealized capital gain ............................................. 5,997 18 84
Other ................................................................... -- -- (64)
-------- -------- -------
Balance, end of year ................................................ 66,940 57,578 41,639
-------- -------- -------
TOTAL STOCKHOLDER'S EQUITY ................................................... $113,199 $103,837 $87,898
======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
44
<PAGE>
C.M. Life Insurance Company
Statements of Cash Flows
For the Years Ended December 31, 1995, 1994 and 1993
($ In Thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH PROVIDED:
Premiums and annuity considerations, net of reinsurance .............................. $ 82,207 $ 56,346 $ 49,530
Other deposits ....................................................................... 177,301 193,970 129,030
Net investment income ................................................................ 69,306 60,886 58,728
Commission and expense allowance and reserve adjustment
on reinsurance ceded ............................................................. 13,904 22,484 29,576
Other ................................................................................ 9,196 -- 2,106
--------- --------- ---------
351,914 333,686 268,970
--------- --------- ---------
Benefits and interest to policyholders and beneficiaries, net of
reinsurance ...................................................................... (58,415) (43,808) (28,973)
Acquisition and insurance expenses, net of reinsurance ............................... (49,690) (25,934) (28,619)
Transfers to Separate Account ........................................................ (135,757) (168,913) (114,917)
Federal income taxes paid ............................................................ (8,445) (10,076) (11,579)
Other payments, net .................................................................. (17,838) (15,132) (17,903)
--------- --------- ---------
(270,145) (263,863) (201,991)
--------- --------- ---------
Net cash provided by operations ...................................................... 81,769 69,823 66,979
Proceeds from the disposition of:
Fixed maturities ................................................................. 382,105 224,884 334,801
Equity securities ................................................................ 11,191 -- 2,629
Mortgage loans on real estate .................................................... 12,725 24,154 10,833
Other cash provided .................................................................. -- -- 855
--------- --------- ---------
Total cash provided ........................................................... 487,790 318,861 416,097
--------- --------- ---------
CASH APPLIED:
Purchases of fixed maturities ........................................................ 401,658 320,272 408,017
Purchases of equity securities ....................................................... 72,911 -- 296
Other applications ................................................................... 1,177 1,153 3,974
--------- --------- ---------
Total cash applied ............................................................ 475,746 321,425 412,287
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents ................................. 12,044 (2,564) 3,810
CASH AND CASH EQUIVALENTS:
Beginning of year .................................................................... 3,025 5,589 1,779
--------- --------- ---------
End of year ...................................................................... $ 15,069 $ 3,025 $ 5,589
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
45
<PAGE>
C.M. Life Insurance Company
Notes to Financial Statements
December 31, 1995, 1994 and 1993
($ In Thousands)
1. Organization:
C.M. Life Insurance Company (C.M. Life) is a wholly-owned stock life insurance
subsidiary of Connecticut Mutual Life Insurance Company (Connecticut Mutual).
C.M. Life is primarily engaged in the sale of individual life insurance and
annuity products. C.M. Life is licensed to transact business in all states
except New York.
2. Summary of Significant Accounting Policies:
C.M. Life's financial statements have been prepared in conformity with
accounting practices and procedures of the National Association of Insurance
Commissioners (NAIC) as prescribed or permitted by the Insurance Department of
the State of Connecticut, which are considered to be generally accepted
accounting principles (GAAP) for wholly-owned stock life insurance subsidiaries
of mutual life insurance companies. (see Note 2.h.).
The principal accounting practices currently followed by C.M. Life are as
follows:
a. Assets - Assets are stated at amounts reported to state regulatory
authorities. Certain assets, such as prepaid agent commissions and
other prepaid expenses, are excluded from the balance sheet and
amounted to $3,839 and $2,684 as of December 31, 1995 and 1994.
b. Investments - Investments are valued in accordance with procedures
prescribed by the NAIC. Fixed maturities eligible for amortization are
reported at amortized cost. Eligible preferred stocks are reported at
cost and common stocks are reported at market value. Mortgage loans on
real estate are reported at the unpaid principal balance unless
delinquent, at which time they are reported at the lower of the unpaid
principal balance or fair value. Investments in real estate which have
been identified for possible sale within the next twelve months are
reported at the lower of cost, less accumulated depreciation or market
value. The Company calculates depreciation for its real estate
investments using principally the straight line method. Policy loans
are reported at the aggregate amount of the unpaid balances.
The Company maintains an Interest Maintenance Reserve (IMR), prescribed
by the NAIC, for all fixed income investments and defers all interest
rate related losses, net of taxes, as they occur. The deferral is
subsequently amortized to net investment income over the period
remaining to maturity of the assets sold. All other realized gains and
losses are reported in the Statements of Operations upon sale.
Unrealized capital gains and losses are reported as additions to or
reductions from retained earnings.
The Asset Valuation Reserve (AVR), prescribed by the NAIC, provides a
general reserve for possible decline in the value of bonds, stocks,
mortgage loans, real estate and other invested assets. The reserve is
computed based on prescribed factors, each designed to address specific
asset risks. Changes in the AVR are charged or credited directly to
retained earnings. The AVR increased by $9,228 and $106 in 1995 and
1994, respectively.
There were no investments which exceeded 10% of total stockholder's equity as of
December 31, 1995 and 1994.
Loans overdue more than 12 months were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Defaults on mortgages: (nonincome producing for
12 months) ............................................ $2,774 $2,774
</TABLE>
c. Disclosure of the Fair Value of Financial Instruments - Fair value is
defined as "the amount at which the instrument could be exchanged in a
current transaction between willing parties, other than in a forced or
liquidation sale." See Note 8.
d. Reserves for Payment of Future Benefits: Reserves for payment of future
benefits on life insurance, developed using accepted actuarial methods,
are established and maintained primarily on the Commissioners' Reserve
Valuation Method utilizing the 1980 Commissioners' Standard Ordinary
Mortality Table with interest rates of 4%-4 1/2%. Reserves for single
premium deferred annuities are calculated based on the Commissioners'
Annuity Reserve Valuation Method utilizing the change in fund method
and assuming interest on changes in funds of 8.0%, 7.0% and 7.5% in
1995, 1994 and 1993, respectively. Additional reserves are maintained
for contracts where the cash surrender value exceeds the actuarially
determined reserve.
e. Separate Accounts: Separate accounts include the assets and liabilities
of certain annuity contracts that must be segregated from C.M. Life's
general assets under the terms of the contracts. The assets consist
primarily of marketable securities reported at market value. Reserves
for these annuity contracts have been established using assumed
interest rates and valuation methods that will provide reserves at
least as great as those required by law and contract provisions.
Transfers due from Separate Account, a contra-liability, represents
Separate Account liabilities in excess of Separate Account reserves.
46
<PAGE>
f. Premiums and Insurance Operating Expenses: Premiums are reported as
income when due. Commissions and other costs relating to the
solicitation, underwriting and issuance of new contracts are reported
as acquisition and insurance expenses in the year incurred.
g. Cash Equivalents: For purposes of the Statements of Cash Flows, C.M.
Life considers all highly liquid shortterm investments with a maturity
of twelve months or less from the date of purchase to be cash
equivalents. The carrying amounts reported approximate those assets'
fair value.
h. New Accounting Pronouncements: The Financial Accounting Standards Board
(FASB) has issued an interpretation stating that financial statements
of mutual life insurance companies, and their wholly-owned
subsidiaries, which are prepared on the basis of statutory accounting
principles, will no longer be considered to be in conformity with GAAP.
This interpretation applies to financial statements issued for fiscal
years beginning after December 15, 1995. Certain accounting principles
for mutual life insurance companies, which will be required to be in
compliance with GAAP, were also issued by the FASB and the American
Institute of Certified Public Accountants in January 1995. The
financial statement impact of adopting these accounting principles has
not been determined by the Company. The effect of initially adopting
the FASB interpretation shall be reported retroactively through
restatement of all previously issued financial statements presented for
comparative purposes for fiscal years beginning after December 15,
1992.
i. Reclassifications: The 1994 and 1993 financial statements and Notes to
Financial Statements reflect certain reclassifications to conform with
the 1995 presentation.
j. Certain Risks and Uncertainties: The preparation of these 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, both at the date of
the financial statements. Management must also make estimates and
assumptions that affect amounts of revenues and expenses for the
reporting period. Actual results could differ from these estimates.
Future events, which could impact the estimates used in these financial
statements, include changes in the levels of mortality and interest rates.
3. Federal Income Taxes:
C.M. Life is included in Connecticut Mutual's consolidated Federal income tax
return and, in accordance with a written tax-sharing agreement, makes a
provision for payment to Connecticut Mutual based on its income included in
Connecticut Mutual's consolidated taxable income. This provision is based on
income which is currently taxable.
4. Stockholder's Equity:
The Board of Directors of Connecticut Mutual has authorized the contribution of
funds to C.M. Life sufficient to meet the capital requirements of all states in
which C.M. Life is licensed to do business. Substantially all of the statutory
stockholder's equity is subject to dividend restrictions relating to various
state regulations which limit the payment of dividends without prior approval.
5. Reinsurance:
C.M. Life reinsures (cedes) a portion of its life insurance business to
Connecticut Mutual and other insurers, in order to reduce insurance risk. C.M.
Life's retention limit per individual insured is $4 million; the portion of the
risk exceeding the retention limit is reinsured with other insurers.
The reinsurance contract with Connecticut Mutual is a modified coinsurance
quota-share treaty. Under the treaty C.M. Life cedes 50% of the premiums on
universal life policies issued in 1985 and 75% of the premiums with issue dates
on or after January 1, 1986. In return Connecticut Mutual pays C.M. Life a
stipulated expense allowance, death and surrender benefits, and a modified
coinsurance adjustment. Reserves for payment of future benefits for the ceded
policies are retained by C.M. Life.
C.M. Life also has a stoploss agreement with Connecticut Mutual under which C.M.
Life cedes claims which, in aggregate, exceed $24,245 in 1995, $18,348 in 1994,
and $16,431 in 1993. In 1995, 1994, and 1993, the limit was not exceeded. The
agreement was amended and renewed in 1994 for a duration of three years. The
amended maximum coverage is $25,000. C.M. Life paid approximately $602, $435,
and $446 in premiums under the agreement in 1995, 1994 and 1993, respectively.
C.M. Life is contingently liable with respect to ceded reinsurance in the event
any reinsurer is unable to fulfill its contractual obligations.
6. Investments:
Fixed Maturities:
The carrying value and estimated fair value of investments in fixed maturities
as of December 31, 1995 and 1994 are as follows:
47
<PAGE>
<TABLE>
<CAPTION>
Gross Gross
Carrying Unrealized Unrealized Estimated
1995 Value Gains Losses Fair Value
- ---- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Government ....................................................... $ 24,102 $ 1,764 $ 2 $ 25,864
Special Revenue and Special Assessment Obligations and
all Non-guaranteed Obligations of Government Agencies,
Authorities, and Subdivisions .................................... 3,715 -- 6 3,709
Foreign Government, Province & Municipal .............................. 11,186 483 295 11,374
Public Utility ........................................................ 45,150 2,303 16 47,437
Mortgage Backed Obligations ........................................... 150,694 7,144 347 157,491
Industrial and Miscellaneous .......................................... 501,252 21,472 711 522,013
--------- ---------- -------- ---------
Total Fixed Maturities ................................................ $736,099 $33,166 $ 1,377 $767,888
========= ========== ======== =========
<CAPTION>
Gross Gross
Carrying Unrealized Unrealized Estimated
1994 Value Gains Losses Fair Value
- ---- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Government ....................................................... $ 62,501 $ -- $ 1,874 $ 60,627
Special Revenue and Special Assessment Obligations and
all Non-guaranteed Obligations of Government Agencies,
Authorities, and Subdivisions .................................... 4,373 -- 375 3,998
Foreign Government, Province & Municipal .............................. 16,175 117 904 15,388
Public Utility ........................................................ 38,773 227 1,605 37,395
Mortgage Backed Obligations ........................................... 167,641 533 12,184 155,990
Industrial and Miscellaneous .......................................... 427,828 967 17,980 410,815
--------- ---------- -------- ---------
Total Fixed Maturities ................................................ $717,291 $ 1,844 $34,922 $684,213
========= ========== ======== =========
</TABLE>
The carrying value and estimated fair value of C.M. Life's fixed maturities at
December 31, 1995, by contractual maturity, are shown below. Actual maturities
may differ from contractual maturities because borrowers may have the right to
prepay obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
Carrying Estimated
Value Fair Value
-------- ----------
<S> <C> <C>
Due in one year or less .............................. $ 17,729 $ 17,781
Due after one year through five years ................ 306,539 313,886
Due after five years through ten years ............... 225,283 240,231
Due after ten years .................................. 35,854 38,499
Mortgage-backed securities ........................... 150,694 157,491
-------- ---------
Total ........................................... $736,099 $767,888
======== =========
</TABLE>
Proceeds from sales of fixed maturities were $380,567, $224,884, and $334,801
for 1995, 1994 and 1993, respectively. Gross gains of $3,598, $1,358, and $5,931
and gross losses of $4,658, $4,439, and $1,016 were realized on those sales for
1995, 1994 and 1993, respectively.
Mortgage Loans on Real Estate:
The following table provides a breakdown of the carrying value of mortgage loans
on real estate by geographical location:
<TABLE>
<CAPTION>
1995 1994
United States ---- ----
<S> <C> <C>
Northeast ........................................ $15,241 $22,111
South Atlantic ................................... 8,187 13,090
South Central .................................... -- 3,462
West ............................................. 3,277 3,375
------- -------
Total ........................................ $26,705 $42,038
======= =======
</TABLE>
48
<PAGE>
Outstanding mortgages whose terms have been modified aggregated $17,128 and
$24,034 which represents 64.1% and 57.2% of the total portfolio as of December
31, 1995 and 1994, respectively. Income recognized during 1995, 1994 and 1993 on
these restructured loans was $1,317, $1,379 and $1,495, respectively. Income
that would have been recognized during 1995, 1994 and 1993 on these loans, if
such loans had been current in accordance with their original terms and had been
outstanding throughout the year, was $1,799, $2,296 and $2,568, respectively.
Commitments to loan additional funds to mortgage loan borrowers, on loans whose
terms have been modified, are not significant.
Loans either overdue more than three months or in the process of foreclosure
were $2,774 at December 31, 1995 and 1994. Additionally, C.M. Life had
properties which it acquired in satisfaction of debt of $1,897 at December 31,
1994.
7. Derivatives:
C.M. Life makes only limited use of derivative instruments (as defined in
Statement of Financial Accounting Standards No. 119 "Disclosure About Derivative
Financial Instruments and Fair Value of Financial Instruments") which include
swaps, options and futures, to hedge equity exposure and to hedge reinvestment
of proceeds from major anticipated transactions. Derivatives are not used for
trading purposes. C.M. Life held one swap investment totaling $12,000 notional
amount as of December 31, 1995.
During 1995 options (protective puts) were utilized to hedge equity exposures
and were accounted for on a mark to market basis. The net 1995 realized losses
from this activity were $140. The notional amount of such options totaled
$35,900 as of December 31, 1995.
During 1994 interest rate futures were acquired to hedge the reinvestment of
anticipated proceeds from a bulk mortgage sale. The actual gain of $95 was
amortized over the expected term of the assets acquired with the mortgage sale
proceeds. No interest rate futures were held as of December 31, 1995 and 1994.
8. Fair Value Disclosure of
Other Financial Instruments:
The Company has identified certain assets and liabilities as financial
instruments that require fair value disclosure. Fair value is defined as the
amount at which the instrument could be exchanged in a current transaction
between willing parties other than in a forced liquidation sale. If quoted
market prices are not available, the values are estimated using discounted cash
flow analysis or other valuation techniques. These various techniques are
significantly affected by the assumptions used, including the discount rate and
estimates of future cash flows. The following methods and assumptions were used
to estimate the fair value of each class of these instruments for which it is
practicable to estimate the value.
The estimated fair value for the public bonds is based on the quoted market
price from various external bond pricing services. Private bonds are assigned an
internal quality rating which parallels independent rating agency criteria and
is consistent with NAIC ratings. The fair value of these bonds is estimated by
discounting the expected future cash flows using a current discount rate based
on the quality rating and maturity of the specific instruments.
The estimated fair value for the equity securities is based on quoted market
prices from national securities exchanges and over-the-counter markets.
The fair value for performing mortgages is determined by discounting the
expected future cash flows using the current interest rates at which similar
loans would be made to borrowers with similar credit ratings and remaining
maturities. Non-performing mortgages are valued based on a discounted cash flow
analysis on the underlying collateral using the current market rate for similar
collateral.
Policy loans are issued with either fixed or variable interest rates, depending
upon the terms of the policies. For those loans with fixed interest rates, the
interest rates range from 5% to 8%. Since policy loans do not have defined
maturities, management believes it is impractical to estimate the fair value of
fixed rate policy loans. For loans with variable interest rates, the rates are
adjusted annually based upon changes in a corporate bond index and are stated at
fair value.
Separate Account assets and liabilities are valued at market.
A portion of annuity reserves, which represent contracts in their accumulation
phase, are considered to be financial instruments. The Company determines fair
value to be equal to the cash surrender value of these contracts (including
market value adjustments, if any), which represents the amount payable to
policyholders on demand.
Since supplementary contracts may be perceived as deposit liabilities with
defined maturities, the Company has determined fair value based on the
discounted value of amounts payable at maturity of the contract. Discount rates
used to determine fair value range from 6.5% to 7.9%. All other deposit
liabilities are not considered to have defined maturities. The Company has
determined fair value for these contracts to be equal to the cash surrender
value, which is that amount which is payable to policyholders on demand.
The estimated fair values for assets and liabilities, which the Company has
identified as investment contracts and borrowed funds, are as follows:
49
<PAGE>
<TABLE>
<CAPTION>
1995 1994
------------------------ ------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
-------- ---------- -------- ----------
ASSETS
<S> <C> <C> <C> <C>
Bonds ............................................................. $736,099 $767,888 $717,291 $684,213
Common and Preferred Stock ........................................ 72,624 72,571 1,815 2,065
Mortgages ......................................................... 26,705 26,783 42,038 40,241
Policy Loans ...................................................... 126,014 126,014 109,720 109,720
Cash and Cash Equivalents ......................................... 15,069 15,069 3,025 3,025
Assets of Separate Account ........................................ 531,432 531,432 309,672 309,672
LIABILITIES
Future Policy Benefits
Annuity Reserves - Accumulation Phase ........................ 49,078 49,683 30,239 28,868
Other Deposits .................................................... 54,269 54,918 31,690 29,484
Other Liabilities
Funds Deposited Under Income Settlements -
Supplementary Contracts Without Life
Contingencies ...................................... 215 208 270 260
Liabilities of Separate ........................................... 531,432 531,432 309,672 309,672
</TABLE>
9. Related Party Transactions:
Connecticut Mutual allocates certain expenses to C.M. Life for providing
operating facilities, human resources, computer software development and
managerial services. Total expenses allocated to C.M. Life were approximately
$34,008, $16,412 and $18,831 in 1995, 1994 and 1993, respectively.
10. Net Investment Income:
Net Investment Income is comprised of the following:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Fixed maturities .......................................................................... $54,625 $47,658 $43,983
Mortgage loans on real estate ............................................................. 2,709 4,383 5,813
Policy loans .............................................................................. 9,905 7,925 7,448
Amortization of IMR ....................................................................... (60) 309 251
Other ..................................................................................... 3,091 1,449 1,844
------- ------- -------
Total investment income ............................................................ 70,270 61,724 59,339
Less: Applicable investment expenses ...................................................... 1,455 1,837 1,879
------- ------- -------
Net investment income ..................................................................... $68,815 $59,887 $57,460
======= ======= =======
</TABLE>
Net investment income and realized gains and losses applicable to the Separate
Account are not included in C.M. Life's net investment income and realized gains
and losses reported in the Statements of Operations.
50
<PAGE>
11. Realized and Unrealized Gains and Losses:
The cost of investments sold is determined by the specific identification
method. Realized gains and losses and the change in the difference between
market value and cost for fixed maturities and equity securities are summarized
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Realized Gains and Losses:
Fixed Maturities:
Realized gains .................................................................... $ 3,598 $ 1,358 $ 5,931
Realized losses ................................................................... (4,658) (4,439) (1,016)
-------- -------- --------
(1,060) (3,081) 4,915
-------- -------- --------
Equity Securities and Options:
Realized gains .................................................................... 1,518 -- 4
Realized losses ................................................................... (758) -- --
-------- -------- --------
760 -- 4
-------- -------- --------
Real Estate:
Realized gains .................................................................... -- -- --
Realized losses ................................................................... (310) (2,158) --
-------- -------- --------
(310) (2,158) --
-------- -------- --------
Mortgage Loans:
Realized gains .................................................................... 52 -- --
Realized losses ................................................................... (1,404) (2,093) (13)
-------- -------- --------
(1,352) (2,093) (13)
-------- -------- --------
(Gains)/Losses Transferred to IMR .................................................... 822 4,799 (4,447)
-------- -------- --------
Net Realized Capital Gains/(Losses) .................................................. $ (1,140) $ (2,533) $ 459
======== ======== =======
Unrealized Gains and Losses:
Fixed Maturities:
Net unrealized gains (losses), end of year ........................................ $ 31,789 $(33,077) $20,870
Net unrealized gains, beginning of year ........................................... (33,077) 20,870 16,497
-------- -------- -------
Change in unrealized gains or losses on fixed maturities .......................... $ 64,866 $(53,947) $ 4,373
======== ======== =======
</TABLE>
The change in unrealized gains and (losses) for equity securities were $7,422,
$(30), and $50 as of December 31, 1995, 1994 and 1993, respectively.
12. Contingencies:
C.M. Life is involved in regulatory proceedings and various litigation in the
ordinary course of business. In the opinion of management, the ultimate
resolution of such proceedings and litigation will not result in fines or
judgements which, in the aggregate, would materially affect C.M. Life's
financial position.
13. Merger of Connecticut Mutual:
On September 8, 1995, the Board of Directors of Connecticut Mutual approved the
merger of Connecticut Mutual and Massachusetts Mutual Life Insurance Company.
Thereafter, a definitive agreement was signed by both companies. On January 27,
1996, Connecticut Mutual and insurance subsidiary policyholders' and other
insureds and annuitants approved the merger. The merger was reviewed by the
insurance regulatory authorities in Massachusetts and Connecticut, and approved.
The merger was effective March 1, 1996.
51
<PAGE>
SCHEDULE I
C.M. Life Insurance Company
Summary of Investments Other Than Investments in Related Parties
As of December 31, 1995
($ In Thousands)
<TABLE>
<CAPTION>
Cost or Fair Value Balance Sheet
Type of Investment Other Basis (see note) Amount
- ------------------ ----------- ----------- -------------
<S> <C> <C> <C>
Fixed Maturities:
U.S. Government .......................................................... $ 24,102 $ 25,864 $ 24,102
Special Revenue and Special Assessment Obligations and
all Non-guaranteed Obligations of Government Agencies
Authorities, and Subdivisions ......................................... 3,715 3,709 3,715
Foreign Government, Province and Municipal ............................... 11,186 11,374 11,186
Public Utility ........................................................... 45,150 47,437 45,150
Mortgage Backed Obligations .............................................. 150,694 157,491 150,694
Industrial and Miscellaneous ............................................. 501,252 522,013 501,252
-------- -------- --------
Total Fixed Maturities ................................................ 736,099 767,888 736,099
-------- -------- --------
Equity Securities:
Non-redeemable Preferred Stocks .......................................... 263 210 263
Common Stocks ............................................................ 64,225 72,361 72,361
-------- -------- --------
Total Equity Securities ............................................... 64,488 72,571 72,624
-------- -------- --------
Total Fixed Maturities and Equity Securities .......................... 800,587 840,459 808,723
-------- -------- --------
Other Investments:
Mortgage Loans on Real Estate ............................................ 33,611 26,783 26,705
Real Estate .............................................................. -- (see note) --
Policy Loans ............................................................. 126,014 (see note) 126,014
Cash and Cash Equivalents ................................................ 15,069 15,069 15,069
-------- --------
Total Other Investments ............................................... 174,694 167,788
-------- --------
Total Investments ..................................................... $975,281 $976,511
======== ========
</TABLE>
Note: Fair values for equity securities and fixed maturities approximate those
quotations published by applicable stock exchanges or are received from
other reliable sources. Fair values for real estate are not readily
available. Approximately 98% of policy loans are comprised of variable
interest rate loans whose carrying value approximate fair value.
52
<PAGE>
SCHEDULE VI
C.M. Life Insurance Company
Reinsurance
For the Years Ended December 31, 1995, 1994 and 1993
($ In Thousands)
<TABLE>
<CAPTION>
Ceded To
Gross Other
Amount Companies Net Amount
------ --------- ----------
<S> <C> <C> <C>
DECEMBER 31, 1995
Life insurance in force ............................................. $19,132,954 $7,323,441 $11,809,513
=========== ========== ===========
Premiums: Life Insurance ............................................ $ 134,278 $ 50,732 $ 83,546
=========== ========== ===========
DECEMBER 31, 1994
Life insurance in force ............................................. $15,800,300 $7,310,290 $ 8,490,010
=========== ========== ===========
Premiums: Life Insurance ............................................ $ 111,238 $ 54,032 $ 57,206
=========== ========== ===========
DECEMBER 31, 1993
Life insurance in force ............................................. $14,521,452 $7,382,223 $ 7,139,229
=========== ========== ===========
Premiums: Life insurance ............................................ $ 108,097 $ 56,905 $ 51,192
=========== ========== ===========
</TABLE>
53
<PAGE>
Appendix I
Surrender Charge Calculation
A Surrender Charge is deducted from the Contract Balance upon partial or full
Surrender of the Contract, unless certain conditions apply. (See "Surrender
Charge," page 32.)
The partial surrender charge formula is calculated as follows:
(PS - FREE) X 5%(95%) = PSC, but not less than zero.
The full surrender charge formula is calculated as follows:
(FS - FREE) X 5% = FSC.
Where:
(PS) is the Partial Surrender Amount.
(FS) is the Full Surrender Amount.
(FREE) is the Free Surrender Amount.
(PSC) is the Partial Surrender Charge Amount.
(FSC) is the Full Surrender Charge Amount.
Example
Assume a Separate Account Balance of $50,000 at the beginning of the second
Contract Year.
1) If there is a Full Surrender at the beginning of the second Contract
Year:
Surrender Charge =
($50,000 - $5,000) X .05 = $2,250.00.
Thus, the Surrender proceeds would be = $50,000
- $30 - $2,250.00 = $47,720.00
Note: The contract maintenance fee ($30) applies to full surrenders.
2) If there is a Partial Surrender of $10,000 at the beginning of the second
Contract Year:
Surrender Charge =
($10,000 - $5000) X .05/.95 = $263.16.
Thus, the Separate Account Balance would be
reduced by $10,000 + $263.16 = $10,263.16.
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Appendix II
Interest Rate Factor Adjustment Calculation
The amount of General Account Balance partially or fully Surrendered during the
Accumulation Period, and the total General Account Balance on the Annuity Income
Date (if and to the extent that the General Account Balance is applied to a
Variable Annuity Option), will be subject to an Interest Rate Factor Adjustment.
The Interest Rate Factor Adjustment is based on interest rates payable on U.S.
Treasury securities. In general, if rates on U.S. Treasury securities are higher
when you Surrender than when you made the applicable Purchase Payments, a
negative Interest Rate Factor Adjustment will generally be applied to the amount
Surrendered, and you could receive an amount lower than the amount of Purchase
Payments made. If rates on U.S. Treasury securities are lower when you Surrender
than when you made the applicable Purchase Payments, a positive Interest Rate
Factor Adjustment will generally be applied to the amount Surrendered, and you
could receive an amount higher than the amount of Purchase Payments made. No
Interest Rate Factor Adjustment will be applied during the Window Period. In
addition, no Interest Rate Factor Adjustment will be applied to the General
Account Free Surrender Amount or to Contracts issued to Pennsylvania residents.
The Interest Rate Factor Adjustment will reflect the relationship between (i)
the weighted average of U.S. Treasury Index Rates corresponding to Purchase
Payments and Transfers into the General Account during the current Five-Year
Period (as adjusted for partial Surrenders or Transfers out of the General
Account), (ii) the U.S. Treasury Index Rate which would be applicable during the
time remaining in the current Five-Year Period on the date of the Surrender, and
(iii) the time remaining in the current Five-Year Period. In general, if the
weighted average of U.S. Treasury Index Rates corresponding to Purchase Payments
and Transfers during the current Five-Year Period is lower than the U.S.
Treasury Index Rate which would be applicable during the time remaining in the
current Five-Year Period, then the application of the Interest Rate Factor
Adjustment will result in a lower payment upon Surrender.
The partial surrender Interest Rate Factor Adjustment Formula is:
(1 - 1/IRF) X (GAPS - GAF + GAPSC) = IRFA.
In the event of a Partial Surrender, there is no Interest Rate Factor Adjustment
if the General Account Free Surrender Amount exceeds the General Account portion
of such Partial Surrender.
The full surrender Interest Rate Factor Adjustment Formula is:
(IRF - 1) X (GAFS - GAF) = IRFA.
Where:
(GAPS) is the General Account Partial Surrender Amount.
(GAFS) is the General Account Full Surrender Amount.
(GAF) is the General Account Free Surrender Amount.
(GAPSC) is the General Account portion of the Partial Surrender Charge
Amount determined as follows:
GAPSC = (GAPS - GAF) X 5%/95%,
but not less than zero.
(IRF) is the Interest Rate Factor.
(IRFA) is the Interest Rate Factor Adjustment.
The Interest Rate Factor is determined by the following formula:
(1 + Ta)/(N/12)/
------------------------------- = IRF
(1.003 + Tb)/(N/12)/
Where:
(Ta) is the weighted average of the U.S. Treasury Index Rates which
correspond to the Purchase Payments and/or Transfers allocated to the
General Account during the current Five-Year Period. The U.S. Treasury
Index Rate corresponding to each such allocation is determined by the
number of full years and fractions thereof (but not less than one (1)
year) remaining from the date of the allocation until the end of the
current Five-Year Period. For purposes of determining the average of
these rates, each U.S. Treasury Index Rate is weighted by the amount of
the corresponding allocation (as adjusted to reflect any partial
Surrenders and/or transfers from the General Account subsequent to such
allocation). The General Account Balance at the beginning of any Five-
Year Period will be treated as a new allocation for purposes of this
calculation.
Each allocation made prior to a Partial Surrender and/or transfer from
the General Account (other than the current Surrender) shall be
adjusted by multiplying such allocation by the following fraction:
1 - PS/GAB
Where:
(PS) is the amount of the Partial Surrender and/or transfer from the
General Account made subsequent to the allocation,
(GAB) is the beginning General Account Balance on the date of such Partial
Surrender and/or transfer from the General Account,
A separate adjustment shall be calculated for each prior Partial
Surrender and/or transfer from the General Account.
(Tb) is the U.S. Treasury Index Rate with a maturity equal to the number
of full years and fractions thereof (but not less than one (1) year)
remaining in the current Five-Year Period on the date of the Partial
or Full Surrender,
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(N) is the number of whole months remaining in the current Five-Year
Period as of the date of the Partial or Full Surrender (rounded
down),
1.003 builds into the formula a factor representing direct and indirect
costs to C.M. Life associated with liquidating General Account assets
in order to satisfy Surrender requests or to begin making Annuity
Income payments (to the extent the General Account Balance is applied
to purchase a Variable Annuity). This adjustment of .30% has been
added to the denominator of the formula because it is anticipated
that a substantial portion (more than half) of applicable General
Account portfolio assets will be in relatively illiquid private
placement securities. Thus, in addition to direct transaction costs,
if such securities must be sold (e.g., because of Surrenders), the
market price may be lower because they are not registered securities.
Accordingly, even if interest rates decline, there will not be a
positive adjustment until this factor is overcome, and then any
adjustment will be lower than otherwise, to compensate for this
factor. Similarly, if interest rates rise, any negative adjustment
will be greater than otherwise, to compensate for this factor. If
interest rates stay the same, this factor will result in a small but
negative Interest Rate Factor Adjustment.
(IRF) is the Interest Rate Factor.
Examples. The following examples illustrate the calculation of the Interest Rate
Factor and the Interest Rate Factor Adjustment.
In the following examples, the Interest Rate Factor Adjustment formula is
applied so as to produce only positive numbers, which are then added to, or
subtracted from, the Surrender proceeds (for Full General Account Balance
Surrenders) or the remaining General Account Balance (for Partial General
Account Balance Surrenders). For example, if the Interest Rate Factor is .7,
then the Interest Rate Factor Adjustment calculation illustrated below will show
1.7, rather than .71, to result in a positive number.
For examples 1 and 2, assume no change in interest rates.
1) Assume a $50,000 General Account Balance at the beginning of the second
Five-Year Period, and a Full Surrender at that time.
Also, assume the U.S. Treasury Index Rate at that time is 7%.
(1.07)/(5)/
THEN: IRF = ----------------- = .9861
(1.073)
Interest Rate Factor Adjustment
[deducted from proceeds] =
(1 - .9861) X ($50,000 - $5,000) = $625.50.
2) Assume a $50,000 General Account Balance at the beginning of the tenth
Contract Year with a Full Surrender at that time.
Also, assume the U.S. Treasury Index Rate remains at 7% for all
maturities:
1.07
THEN: IRF = ----------- = .9972
1.073
Interest Rate Factor Adjustment
[deducted from proceeds] =
(1 - .9972) X ($50,000 - $5,000) = $126.00.
For examples 3 and 4, assume a General Account Balance of $50,000 at the
beginning of the seventh Contract Year.
3) Assume a Full Surrender at the beginning of the seventh Contract Year:
a) Assume that the beginning U.S. Treasury Index Rate was 7%, and the
current U.S. Treasury Index Rate is 5.40%.
(This is a decrease in rates of 1.60%). Then the IRF = 1.05.
Interest Rate Factor Adjustment =
(1.05 - 1) X ($50,000 - $5,000) = $2,250.
Thus, the actual amount of Surrender proceeds paid = $50,000 +
$2,250 -$30 = $52,220.
b) Assume that the beginning U.S. Treasury Index Rate was 7%, and the
current U.S. Treasury Index Rate is 8.08%.
(This is an increase in rates of 1.08%). Then the IRF = .95.
Interest Rate Factor Adjustment =
(1 - .95) X ($50,000 - $5,000) = $2,250.
Thus, the actual amount of Surrender proceeds paid = $50,000 -
$2,250 - $30 = $47,720.
Note: The contract maintenance fee ($30) applies to full surrenders.
4) Assume a partial Surrender of $10,000 at the beginning of the
seventh Contract Year:
a) Assume that the beginning U.S. Treasury Index Rate was 7%, and
the current U.S. Treasury Index Rate is 5.40%.
(This is a decrease in rates of 1.60%). Then the IRF = 1.05.
Interest Rate Factor Adjustment =
{ 1 }
{ 1 - ------ } X ($10,000 - $5,000) = $238.10.
{ 1.05 }
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Thus, the General Account Balance would be reduced by $10,000
$238.10 = $9,761.90.
b) Assume that the beginning U.S. Treasury Index Rate was 7%, and the
current U.S. Treasury Index Rate is 8.08%.
(This is an increase in rates of 1.08%). Then the IRF = .95.
Interest Rate Factor Adjustment =
{ 1 }
{ 1 - ------ } X ($10,000 - $5,000) = $263.16.
{ .95 }
Thus, the General Account Balance would be reduced by $10,000 -
$236.16 = $10,263.16.
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Appendix III
Examples
The following examples illustrate the impact of the Interest Rate Factor
Adjustment together with the Surrender Charge (See Appendix I.) on Surrender
proceeds. For examples 1 and 2, assume a General Account Balance of $50,000 at
the beginning of the second Contract Year.
1) Assume a Full Surrender at the beginning of the second Contract Year.
a) Assume that the beginning U.S. Treasury Index Rate was 7%, and the
current U.S. Treasury Index Rate is 4.18%.
(This is a decrease in rates of 2.82%). Then the IRF = 1.10.
Surrender Charge =
($50,000 - $5,000) X .05 = $2,250.00.
Interest Rate Factor Adjustment =
(1.10 - 1) X ($50,000 - $5,000) = $4,500.00.
Thus, the actual amount of Surrender proceeds paid = $50,000 -$2,250
+ $4,500 - $30 = $52,220.00.
b) Assume that the beginning U.S. Treasury Index Rate was 7%, and the
current U.S. Treasury Index Rate is 9.56%.
(This is an increase in rates of 2.56%). Then the IRF = .9.
Surrender Charge =
($50,000 - $5,000) X .05 = $2,250.00.
Interest Rate Factor Adjustment =
(1 - .9) X ($50,000 - $5,000) = $4,500.00.
Thus, the actual amount of Surrender proceeds paid = $50,000 -
$2,250 - $4,500 - $30 = $43,220.00.
Note: The contract maintenance fee ($30) applies to full surrenders.
2) Assume a partial Surrender of $10,000 at the beginning of the second
Contract Year.
a) Assume that the beginning U.S. Treasury Index Rate was 7%, and the
current U.S. Treasury Index Rate is 4.18%.
(This is a decrease in rates of 2.82%.) Then the IRF = 1.10.
Surrender Charge =
($10,000 - $5,000) X .05/.95 = $263.16.
Interest Rate Factor Adjustment =
{ 1 }
{ 1 - ------ } X ($10,000 - $5,000) = $478.47.
{ 1.10 }
Thus, the General Account Balance will be reduced by $10,000 +
$263.16 -$478.47 = $9,784.69.
b) Assume that the beginning U.S. Treasury Index Rate was 7%, and the
current U.S. Treasury Index Rate is 9.56%.
(This is an increase in rates of 2.56%.) Then the IRF = .9.
Surrender Charge =
($10,000 - $5,000) X .05/.95 = $263.16.
Interest Rate Factor Adjustment =
(1 - 1.9) X ($10,000 - $5,000 + $263.16) = $584.80.
Thus, the General Account Balance will be reduced by $10,000 +
$263.16 + $584.80 = $10,847.96.
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Appendix IV
Individual Retirement Annuity Disclosure
This statement is designed to assist you in understanding the requirements of
federal tax law which apply to your Individual Retirement Annuity ("IRA"),
Spousal IRA or your Simplified Employee Pension IRA ("SEPIRA") for employer
contributions. If you should desire further information regarding your IRA, it
may be obtained either from your MML Investors Services, Inc. ("MMLISI")
representative, from any district office of the Internal Revenue Service, or
from a competent tax adviser. The growth in the value of the annuity is neither
guaranteed nor projected.
Seven-Day Review Period
You have seven (7) days after you sign your application to review this statement
and the Prospectus without obligation. If you notify MMLISI or your
representative, either orally or in writing, within this seven-day period that
you do not wish to keep your Contract, your entire Purchase Payment will be
refunded to you.
Registered Representative:
Address: c/o MML Investors Services, Inc.
1414 Main Street
Springfield, Massachusetts 011441013
Telephone: (413) 7378400
Eligibility Requirements
All persons with earned compensation are eligible for IRAs. Additionally, if you
have a spouse who has earned no compensation (and you file a joint tax return),
you may establish an IRA on behalf of your spouse. Of course, if you have a
working spouse who has earned compensation, that spouse may establish his or her
own IRA. Lastly, a divorced or legally separated spouse may treat taxable
alimony or separate maintenance payments as compensation for purposes of
establishing an IRA.
The Annuity as an IRA
When this Annuity is issued as an IRA, the Contract is amended to provide that
the Contract is both nontransferable and nonforfeitable.
Contributions and Deductions
As a result of significant changes made by the Tax Reform Act of 1986,
contributions to your IRA are limited at two levels. First, there are limits on
the amount of contributions which may be deducted for income tax purposes.
Second, there is a limit with respect to the amount of nondeductible
contributions which can be made. In addition, The Small Business Job Protection
Act of 1996 may also affect contributions and withdrawals from your IRA.
If neither you nor your spouse (if you file a joint return) is an active
participant in an employer-maintained retirement plan, then you are eligible to
make deductible contributions to an IRA equal to the lesser of 100% of
compensation or $2,000 (effective for tax years beginning 1/1/97, $4,000 in the
case of a Spousal IRA). (See page 60.)
However, if you or your spouse (if you file a joint return) is an active
participant in an employer-maintained retirement plan, your deduction limit for
contributions to an IRA is reduced. Specifically, individuals with adjusted
gross income over $35,000, married taxpayers filing jointly with adjusted gross
income over $50,000, and a married taxpayer filing separately with adjusted
gross income over $10,000, are no longer allowed any IRA deductions if they
participate in an employer-maintained retirement plan. In the case of a married
couple filing jointly, the restrictions apply where either spouse so
participates. For single individuals with adjusted gross income between $25,000
and $35,000, married taxpayers filing jointly with adjusted gross income between
$40,000 and $50,000, and a married taxpayer filing separately with adjusted
gross income between $0 and $10,000, the IRA deduction will be phased out
ratably as income rises above the threshold limits.
Nevertheless, you may still make designated nondeductible IRA contributions to
the extent of the excess of (1) the lesser of $2,000 (effective for tax years
beginning 1/1/97, $4,000 in the case of a Spousal IRA), or 100% of compensation
annually, over (2) the applicable IRA deduction limit. You may also choose to
make a contribution nondeductible even if you could have deducted part or all of
the contribution. Interest or other earnings on your IRA contribution, whether
from deductible or nondeductible contributions, will not be taxed until
distributed to you.
For purposes of the above discussion, you are an "active participant" in an
employer-maintained retirement plan, if you are covered by such plan, even if
you are not yet vested in your retirement benefit. However, an individual who is
a participant in only an eligible state deferred compensation plan, as defined
in Internal Revenue Code section 457(b), is not considered to be an "active
participant."
In order to qualify for a particular tax year, IRA contributions must be made
during such tax year, or by the deadline for filing your income tax return for
that year (not including extensions). For calendar year taxpayers the deadline
is generally April 15.
If you make contributions in excess of the combined deductible and nondeductible
limits, you may be liable for a nondeductible excise tax of 6% of the amount of
the excess. You may withdraw an excess contribution together with the net income
attributable to the excess, on or before the due date (including extensions of
time) for filing your federal income tax return, and the excess amount will be
treated as if you never contributed it, regardless of the size of the
contribution. The accompanying distribution of the net income, however, is
includable in income for the year in which the excess contribution is made.
Excess amounts which are not withdrawn by this method are subject to the 6%
excise tax in the year of contribution, and are carried over and taxed each year
until the year the excess is reduced.
No contribution may be made by you to your IRA during or after the tax year in
which you attain age 701/2.
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Spousal IRAs
If your spouse has no compensation for the year and you file a joint return, you
may set up and make contributions to an IRA for your spouse, as well as for
yourself. Subject to the active participant rules discussed above, the maximum
amount that you can deduct for contributions to both IRAs is the lesser of
$2,250, or 100% of compensation. You may not contribute, however, more than
$2,000 to either IRA for any year. Effective for tax years beginning 1/1/97, the
joint limit has been increased to $4,000.
SEP-IRAs
Under a SEP-IRA agreement, your employer may contribute 15% of your
compensation, up to $30,000 each year to your IRA. The contribution and interest
earned is excludable from your income until such time as it is distributed to
you.
You must withdraw any excess contribution made to your SEP-IRA by your employer
before the date for filing your return. If you do not, you are liable for the 6%
excise tax discussed above. SEP-IRAs are also generally subject to the other
requirements applicable to IRAs.
Rollover Contributions and Transfers
You are permitted to withdraw any portion of the value of your IRA and reinvest
it in another IRA account, but not more frequently than once in any twelve-month
period. Such withdrawals may also be made from other IRAs and contributed to
this contract. The amount of the withdrawal reinvested in another IRA within
sixty (60) days after the date it is received is called a "rollover
contribution" and is not subject to tax. Of course, you will not be allowed a
tax deduction for the amount of any rollover contribution. You may not roll over
IRA distributions required because you have reached age 701/2, or an IRA you
inherited as a beneficiary (unless you are the surviving spouse).
A similar type of rollover contribution can be made with the proceeds of an
eligible rollover distribution or a lump-sum distribution from a qualified
retirement plan. Such a distribution must also be invested in the IRA within
sixty (60) days of receipt. A lump sum distribution is one made from a Qualified
Plan (1) because of your death; (2) because you reached age 591/2; (3) because
you left your job (unless you are self-employed); or (4) because you become
permanently disabled (but only if you are self-employed). To be considered a
lump sum, the distribution must also be made entirely in a single tax year, and
must represent the entire value of your account in the retirement plan (and in
all plans of a similar type sponsored by the same employer). Properly made, such
a distribution will not be taxable until you receive payments from the IRA
created with it.
Eligible rollover distributions are generally all taxable distributions from
Qualified Plans and Section 403(b) annuities except for: (1) amounts paid over
your life or life expectancy; or (2) installments for periods spanning ten (10)
years or more; and (3) required minimum distributions.
Also, if you receive a distribution upon a plan termination, you may make a
rollover contribution to an IRA.
In addition to rollover contributions, you may have the assets of one IRA
directly transferred (without any distribution to you) to another IRA. Direct
IRA to IRA transfers are not subject to the one-year waiting period applicable
to IRA rollover contributions.
Withdrawals
In general, IRA withdrawals are taxable in full. If you have made both
deductible and nondeductible IRA contributions, the part of the withdrawal that
is from nondeductible contributions (not including interest) is excludable from
income. The amount excludable from income for the tax year is the portion of the
amount withdrawn that has the same ratio to the amount withdrawn as your total
nondeductible IRA contributions (of all your IRAs) have to the total balance of
all your IRAs, including rollover IRAs. The remaining portion of the amount
withdrawn for the tax year is includible in income. For purposes of this
calculation, all your IRAs are treated as one (1) contract, and all withdrawals
you make during a tax year are treated as one (1) distribution, and the value of
the contract (after adding back distributions made during the year), income on
the contract and investment in the contract are computed at the end of the year.
The special tax rules for lump sum distributions from pension plans do not apply
to IRAs.
Premature Distributions
Premature distributions are amounts you withdraw from your IRA before you are
age 591/2. Premature distributions which are not rolled over are subject to a
penalty tax equal to 10% of the amount of the distribution includible in gross
income in the tax year, unless you are totally disabled, or receive the
distributions in substantially equal payments (at least annually) for your life
or life expectancy, or the joint lives or life expectancies of you and your
beneficiary, or unless the distributions are made to your beneficiary upon your
death.
Effective for calendar years beginning January 1, 1997, withdrawals from IRAs
for payment of certain medical expenses, and withdrawals by certain unemployed
persons for payment of health insurance premiums, are not subject to the 10%
penalty tax under Section 72(t).
The penalty tax is also applicable to income taxable distributions deemed to
have been made upon disqualification of your IRA as a result of a prohibited
transaction (including, in general, the sale or assignment of your interest in
your IRA to anyone), or as a result of borrowing on your IRA, or using your IRA
as security for a loan.
Inadequate Distribution or
Underdistribution - 50% Tax
Your IRA is intended to provide retirement benefits over your lifetime. Thus,
federal law requires that you either (1) receive a lump sum distribution from
your IRA not later than April 1st of the year after the year in which you attain
age 701/2 or (2) start to receive periodic payments by that date. If you elect
to receive periodic payments, those payments must be sufficient to pay out the
entire value of your IRA during your life or life expectancy or over the life or
life expectancies of you
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and your beneficiary. If the payments are not sufficient to meet these annual
requirements, an excise tax of 50% will be imposed on the amount of any
underpayment.
Excess Distributions - 15% Tax
Certain persons, particularly those who participate in more than one (1)
tax-qualified retirement plan, may be subject to an excise tax of 15% on certain
excess aggregate distributions from those plans. In general, excess
distributions are taxable distributions from all tax-qualified plans in excess
of a specified annual limit for payments made in the form of an annuity
(generally, $155,000 for 1996, adjusted from time to time), or five (5) times
the annual limit for lump sum distributions.
Effective for calendar years 1997, 1998 and 1999, the 15% excise tax on excess
distributions has been suspended. That 15% tax will be reinstated for calendar
years beginning January 1, 2000.
Death Benefits
If you should die before receiving any benefits from your IRA, your beneficiary
must elect to either (1) receive the balance of your account in a lump sum
within five (5) years of your death, or (2) have the balance applied to purchase
an immediate annuity payable over the life or life expectancy of the
beneficiary. Such annuity must commence within one (1) year of your death. If
your spouse is your beneficiary, however, distributions are not required to be
distributed until the date you would have attained age 70 1/2, and if your
spouse dies before any distribution to him or her commences, your spouse is
treated as the owner of your IRA for purposes of any required distributions.
If you should die after benefits have commenced to you, the remaining portion of
your account must be distributed to your beneficiary as rapidly as under the
method of distribution in effect on the date of your death.
If you engage in certain prohibited transactions with your IRA, the IRA will
lose its exemption from taxation. Depending on the type of prohibited
transaction, you must include in income all or a portion of the fair market
value of the IRA account. Examples of prohibited transactions are: (1) any
borrowing from the account; (2) use of the account as security for a loan;
(3) receipt by you or certain family members of unreasonable compensation for
managing the IRA.
Prototype Status
C.M. Life anticipates requesting an opinion letter from the Internal Revenue
Service stating that your prototype IRA qualifies as a prototype IRA. An opinion
letter would only be a determination as to the form of the IRA, and would not
represent a determination as to its merits.
Reporting to the IRS
If you make a designated nondeductible contribution to an IRA for a taxable
year, or receive a distribution from an IRA during a taxable year, you are
required to provide such information as the IRS may prescribe on your tax return
for the taxable year and, to the extent required, for succeeding taxable years.
The information that may be required includes, but is not limited to: (1) the
amount of designated nondeductible contributions for the taxable year; (2) the
total amount of designated nondeductible contributions for all preceding taxable
years that have not previously been withdrawn; (3) the total balance of all your
IRAs as of the close of the calendar year with or within which the taxable year
ends; and (4) the amount of distributions from your IRAs during the taxable
year. If the required information is not shown on your return, all IRA
contributions are presumed to have been deductible. Therefore, they will be
taxable upon withdrawal from the IRA, unless it can be shown, with satisfactory
evidence, that the contributions were nondeductible when they were made.
Whenever you are liable for one of the penalty taxes discussed above (6% for
excess contributions, 10% for premature distributions, 50% for underpayments, or
15% for excess distributions), you must file Form 5329 with the Internal Revenue
Service. The form is to be attached to your income tax return (Form 1040) for
the tax year in which the penalty applies.
Financial Disclosure
The charges which may be made against a contribution to your IRA include the
Mortality and Expense Risk Charge, and other fees for the Investment Accounts
set forth in the Prospectus. The charges which may be made against a withdrawal
are also described in the Prospectus, and you should read the Prospectus
carefully and retain it for your future reference. Growth in the value of your
IRA is neither projected nor guaranteed. Capital gains in excess of net realized
short-term capital losses of a Portfolio are declared and paid annually in
additional full and fractional shares.
61
