<PAGE>
Registration No. 33-76920
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
Post-Effective Amendment No. 3
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 3 /_/
MML Bay State Variable Annuity Separate Account 1
-------------------------------------------------
(Exact Name of Registrant)
MML Bay State Life Insurance Company
------------------------------------
(Name of Depositor)
1295 State Street, Springfield, Massachusetts 01111
----------------------------------------------------
(Address of Depositor's Principal Executive Offices)
(413) 788-8411
Thomas F. English
--------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: Continuous.
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b) of Rule 485.
- ----
X on May 1, 1997 pursuant to paragraph (b) of Rule 485.
- ----
60 days after filing pursuant to paragraph (a) of Rule 485.
- ----
on (date) pursuant to paragraph (a) of Rule 485.
- ----
STATEMENT PURSUANT TO RULE 24f-2
The Registrant has registered an indefinite number or amount of its variable
annuity contracts under the Securities Act of 1933 pursuant to Rule 24f-2 under
the Investment Company Act of 1940. The Rule 24f-2 Notice for Registrant's
Fiscal Year ended December 31, 1996 was filed on or about February 28, 1997.
1
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CROSS REFERENCE TO ITEMS
REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 Item Caption in Prospectus
- -------- ---------------------
<S> <C>
1 ......................................................................Cover Page
2 ......................................................................Glossry
3 ......................................................................Table of Fees and Expenses
4 ......................................................................Not Applicable
5 ......................................................................MML Bay State, MassMutual,
the Separate Account, MML Trust and the
Oppenheimer Trust
6 ......................................................................Charges and Deductions;
Distribution
7 ......................................................................Miscellaneous Provisions;
An Explanation of the Contracts; Reservation of
Rights; Contract Owner's Voting Rights
8 ......................................................................The Annuity (Pay-Out
Period)
9 ......................................................................The Death Benefit
10 .....................................................................The Accumulation (Pay-In)
Period; Distribution
11 .....................................................................Right to Return Contract;
Redemption Privileges
12 .....................................................................Federal Tax Status
13 .....................................................................Not Applicable
14 .....................................................................Additional Information
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Caption in Statement of
N-4 Item Additional Information
- -------- ----------------------
<S> <C>
15.....................................................................Cover Page
16.....................................................................Table of Contents
17.....................................................................General Information and
History
18.....................................................................Service Arrangements and
Distribution
19.....................................................................Performance Measures
20.....................................................................Contract Value Calculations
21.....................................................................Reports of Independent
Accountants and Financial Statements
22.....................................................................Financial Statement and
Exhibits
</TABLE>
3
<PAGE>
MassMutual and Affiliated Companies Service Center
ALLIANCE-ONE Services, L.P.
301 West 11th Street
Kansas City, MO 64105
(800) 258-4511
or
P. O. Box 419607
Kansas City, MO 64141-1007
PROSPECTUS
MML BAY STATE LIFE INSURANCE COMPANY
OPPENHEIMERFUNDS LIFETRUST VARIABLE ANNUITY CONTRACT
MML BAY STATE VARIABLE ANNUITY SEPARATE ACCOUNT 1
May 1, 1997
This prospectus (the "Prospectus") describes a flexible purchase payment
individual variable annuity contract (the "Contract") issued by MML Bay State
Life Insurance Company ("MML Bay State"). The Contract provides for the
accumulation of contract values prior to maturity and for the distribution of
annuity benefits thereafter.
Purchase payments may be allocated among the thirteen Divisions of MML Bay State
Variable Annuity Separate Account 1 (the "Separate Account"), and, in the
majority of states, a Fixed Account with a Market Value Adjustment feature (the
"Fixed Account"). Purchase payments allocated to a Division of the Separate
Account will be invested in a corresponding fund (a "Fund") of either MML Series
Investment Fund (the "MML Trust") or Oppenheimer Variable Account Funds (the
"Oppenheimer Trust" -collectively MML Trust and Oppenheimer Trust are referred
to as the "Trusts"). The Trusts are both open-end, management investment
companies suitable for use with variable annuity contracts. The Prospectus for
MML Trust, which is attached to this Prospectus, describes the investment
objectives and risks of investing in the four available MML Funds: MML Equity
Fund; MML Money Market Fund; MML Managed Bond Fund; and MML Blend Fund.
Similarly, the Prospectus for the Oppenheimer Trust describes the investment
objectives and risks of investing in the nine available Oppenheimer Funds:
Oppenheimer Money Fund; Oppenheimer High Income Fund; Oppenheimer Bond Fund;
Oppenheimer Capital Appreciation Fund; Oppenheimer Growth Fund; Oppenheimer
Multiple Strategies Fund; Oppenheimer Global Securities Fund; Oppenheimer
Strategic Bond Fund; and Oppenheimer Growth & Income Fund.
Annuity benefits can be either fixed or variable amounts or a combination of
both. The Contract value prior to maturity, except for amounts allocated to the
Fixed Account, and the amount of any variable annuity payments thereafter will
vary with the investment performance of the Funds which You have selected. MML
Bay State serves as depositor for the Separate Account.
This Prospectus sets forth the information that a prospective investor ought to
know before investing. Certain additional information about the Contract is
contained in a Statement of Additional Information dated May 1, 1997, which has
been filed with the Securities and Exchange Commission and is incorporated
herein by reference. The Statement of Additional Information is available upon
written or oral request and without charge from the Service Center.
THIS PROSPECTUS MUST BE ACCOMPANIED BY OR PRECEDED BY THE PROSPECTUSES OF BOTH
THE OPPENHEIMER VARIABLE ACCOUNT FUNDS AND THE MML SERIES FUND, WHICH ARE
ATTACHED HERETO. ADDITIONALLY, IN STATES WHERE THE FIXED ACCOUNT IS OFFERED,
THIS PROSPECTUS MUST ALSO BE ACCOMPANIED BY A PROSPECTUS FOR THE FIXED ACCOUNT.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
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.
All Contracts are serviced through MML Bay State's Service Center. MML Bay
State's Home Office is located in Jefferson City, Missouri. MML Bay State's
Principal Administrative Office is located at 1295 State Street Springfield,
Massachusetts 01111-0001.
<PAGE>
<TABLE>
<CAPTION>
Contents Page
<S> <C>
Glossary.................................................................... 3
Summary..................................................................... 4
Table of Fees and Expenses.................................................. 5
Condensed Financial Information............................................. 7
MML Bay State Life Insurance Company, OppenheimerFunds, Inc., MassMutual,
The Separate Account, and The Trusts....................................... 8
MML Bay State Life Insurance Company....................................... 8
OppenheimerFunds, Inc...................................................... 8
Massachusetts Mutual Life Insurance Company................................ 8
The Separate Account....................................................... 8
The Trusts................................................................. 8
Investments and Objectives of the Available Funds.......................... 9
An Explanation of the Contract.............................................. 10
General-Uses of the Contract............................................... 10
The Accumulation (Pay-In) Period........................................... 10
How Contracts May Be Purchased............................................. 10
Initial Purchase........................................................... 10
Subsequent Purchases....................................................... 10
Wire Transfer.............................................................. 10
Electronic Data Transmission of Application Information.................... 10
Allocation of Purchase Payments............................................ 11
General Transfer Rules..................................................... 11
Telephone Transfers........................................................ 11
Automatic Transfers........................................................ 12
Right to Return Contracts.................................................. 12
The Death Benefit.......................................................... 12
Redemption Privileges...................................................... 13
Automatic Partial Redemptions.............................................. 13
Tax Sheltered Annuity Redemption Restrictions.............................. 13
The Annuity (Pay-Out) Period............................................... 13
Annuity Benefits........................................................... 13
Payment Options............................................................ 14
Fixed Income Option........................................................ 14
Variable Monthly Income Option............................................. 14
Fixed-Time Payment Option.................................................. 14
Life Income Payments....................................................... 14
Joint-and-Survivor Life Income Payments.................................... 14
Joint-and-Survivor Life Income Payments (Two-Thirds to the Survivor)....... 14
Payments After Death of Annuitant.......................................... 14
Special Limitations........................................................ 15
Charges and Deductions...................................................... 15
Asset Charge............................................................... 15
Administrative Charge...................................................... 15
Contingent Deferred Sales Charge........................................... 15
Premium Taxes.............................................................. 16
Fund Expenses.............................................................. 16
The Fixed Account and the Market Value Adjustment Feature................... 16
Market Value Adjustment.................................................... 16
Distribution................................................................ 17
Miscellaneous Provisions.................................................... 17
Termination of Liability................................................... 17
Adjustment of Units and Unit Values........................................ 17
Periodic Statements........................................................ 17
Contract Owner's Voting Rights.............................................. 17
Reservation of Rights....................................................... 18
Federal Tax Status.......................................................... 18
Introduction............................................................... 18
Tax Status of MML Bay State................................................ 18
Taxation of Contracts in General............................................ 18
Penalty Taxes.............................................................. 19
Annuity Distribution Rules of Section 72(s)................................ 19
Tax Withholding............................................................ 19
Tax Reporting.............................................................. 19
Taxation of Qualified Plans, TSAs and IRAs................................. 19
Performance Measures........................................................ 20
Standardized Average Annual Total Return................................... 20
Additional Performance Measures............................................ 20
Additional Information...................................................... 21
</TABLE>
2
<PAGE>
Glossary
As used in this Prospectus, the following terms mean:
Accumulated Amount: For each amount credited to a Segment of the Fixed Account
the Accumulated Amount on any date is the amount credited to the Segment
accumulated to that date at the Guaranteed Rate for that amount.
Accumulated Value: The value of a Contract on or prior to the Maturity Date
equal to the Variable Value plus the Fixed Value.
Accumulation Period: The period prior to the Maturity Date, during the lifetime
of the Annuitant and Contract Owner.
Accumulation Unit: A unit of measurement used in determining the value of
amounts credited to a Contract in a Division of the Separate Account on or prior
to the Maturity Date.
Annuitant: The person on whose life the Contract is issued.
Annuity Unit: A unit of measurement used in determining the amount of each
Variable Monthly Income payment.
Application: The document executed by a Contract Owner evidencing his or her
desire to purchase a Contract.
Beneficiary: The person(s) or entity(ies) designated by the Contract Owner to
receive a death benefit under the Contract, if any, upon the death of the
Contract Owner or the Annuitant.
Cash Redemption Value: The value of a Contract which a Contract Owner will
receive if the Contract is redeemed, equal to Accumulated Value less
Administrative Charges, Sales Charges, premium taxes, and a Market Value
Adjustment, if any such charges are applicable.
Contract Date: The Date used to determine the Annuitant's age at the
commencement of the Contract and to determine the start of the first Contract
Year.
Contract Owner(s): The owner (and in some instances the owners) of a Contract.
Contract Owners may include the Annuitant, another individual, an employer, a
trust, or any entity specified in an employee benefit plan. If the Contract is
issued under Section 403(b), Section 408(b) or Section 408(k) of the Internal
Revenue Code, the Contract Owner must be the Annuitant.
Contract Year: A period of 12 months starting on the Contract Date and on each
anniversary of the Contract Date.
Division(s): A sub-account of the Separate Account, the assets of which consist
of shares of a specified Fund of either the MML Trust or the Oppenheimer Trust.
Expiration Date: The Date on which the Guarantee Period for an Accumulated
Amount ends.
Fixed Account: In certain states, the Contract offers a Fixed Account which pays
interest at a Guaranteed Rate on amounts credited to a particular Segment. If
such amounts are withdrawn prior to the end of the Guarantee Period, a Market
Value Adjustment will be made. Assets attributable to the Fixed Account are not
included in assets which are allocated to the Divisions of the Separate Account.
Fixed Income: A benefit providing for periodic payments of a fixed dollar amount
throughout the annuity period. The benefit does not vary with, or reflect the
investment performance of, any Division of the Separate Account.
Fixed Value: On any date, the Fixed Value of the Contract is the sum of the
Accumulated Amounts credited to all Segments of the Fixed Account.
Funds: The thirteen separate series of shares of Oppenheimer Variable Account
Funds and MML Series Investment Fund, both of which are open-end, diversified
management investment companies, registered with the Securities and Exchange
Commission, in which the Divisions of the Separate Account invest.
Guarantee Period: The period for which interest accrues at the Guaranteed Rate
on an amount credited to a Segment. Guarantee Periods range in whole-year
periods from one to ten years.
Guaranteed Rate: The effective annual interest rate MML Bay State uses to accrue
interest on an amount credited to a Segment as of a certain date. Guarantee
Rates are level for the entire Guarantee Period and are fixed at the time an
amount is credited to the Segment.
Market Value Adjustment ("MVA"): An adjustment made to the amount that the
Contract Owner will receive if money is taken from an Accumulated Amount prior
to the Expiration Date of its Guarantee Period.
Maturity Date: The date designated by the Contract Owner as of which Variable
Monthly Income payments (or, if elected, Fixed Income payments or a payment in
one sum) will begin. This date may be no later than the Annuitant's 90th
birthday (unless an earlier date is required by law.)
Maturity Value: The Cash Redemption Value of a Contract at Maturity.
Non-Qualified Contract: A Contract not used in connection with a retirement plan
receiving favorable federal income tax treatment under Sections 401, 403(b), or
408 of the Internal Revenue Code.
Purchase Payment: An amount paid to MML Bay State by, or on behalf of, the
Annuitant.
Qualified Contract: A Contract used in connection with a retirement plan
receiving favorable federal income tax treatment under Sections 401, 403(b), or
408 of the Internal Revenue Code.
Segment: All Guarantee Periods of a given length constitute a Segment. Segments
for all Guarantee Periods may not be available at one time.
Service Center: The office at which the administration of the Contract occurs.
Valuation Date: A valuation date is any date on which the net asset value of the
shares of the Funds is determined. Generally, this will be any date on which the
New York Stock Exchange (or its successor) is open for trading.
3
<PAGE>
Valuation Period: The period of time from the end of one Valuation Date to the
end of the next Valuation Date.
Valuation Time: The time of the close of the New York Stock Exchange (currently
4:00 p.m. New York time) on a Valuation Date. All actions to be performed on a
Valuation Date will be performed as of the Valuation Time.
Variable Monthly Income: A benefit providing for monthly payments that vary
with, and reflect the investment performance of, one or more Divisions of the
Separate Account.
Variable Value: On any date, the Variable Value of a Contract is the sum of the
values of the Accumulation Units credited to each Division of the Separate
Account. The value in each Division is equal to the Accumulation Unit Value
multiplied by the number of units in that Division You own.
You or Your refers to the Contract Owner.
Summary
The Nature of the Contract
The product described in this Prospectus is a flexible premium variable annuity
contract. (See - The Accumulation (Pay-In) Period). It is designed to allow a
Contract Owner to accumulate values over time for uses such as retirement
planning.
Generally, the Contract is purchased by completing an application and submitting
it for approval together with an initial premium payment to MML Bay State
through Your registered representative. The minimum initial premium is $2,000.
Purchasing the Contract
Contracts may be purchased by both Qualified Plans and by individuals or
entities not qualifying for favorable tax treatment under the Internal Revenue
Code. The Contracts are also available for certain Tax Sheltered Annuities and
Individual Retirement Annuities.
Investments Under the Contract
The Contract offers 13, separate investment Divisions to which a Contract Owner
may allocate money. The Divisions offered represent a wide range of investment
strategies, including money market, bond, blend, global securities, equity, and
high-income (junk bond) funds, among others. Additionally, a Fixed Account with
a Market Value Adjustment feature is available in the majority of states. For
more information concerning available investments please review the Separate
Account and the Fixed Account discussion of this prospectus.
Inquiries Concerning the Contract
If You have questions about the Contract, please either consult Your registered
representative or contact a customer service representative at the Service
Center.
Transfers
Currently, during the Accumulation Period You may make up to 14 transfers per
Contract Year among the Divisions without incurring a charge. MML Bay State
reserves the right to charge a fee of $20 for transfers in excess of 4 transfers
per Contract Year. In the annuity pay-out period, You may make transfers once
every three months. Additionally, subject to certain limitations, You may make
transfers to and from amounts held in the Fixed Account. (See - General Transfer
Rules)
Redemption Rights
You may redeem all or part of the Contract's Accumulated Value at any time prior
to the Maturity Date. All redemptions may be subject to a Sales Charge.
Redemptions from the Fixed Account may be subject to a Market Value Adjustment.
Please note that redemptions may result in the imposition of penalty taxes. (See
- - Contingent Deferred Sales Charge and Penalty Taxes.)
Death Benefit Prior to Maturity
If the Annuitant dies before the death of the Owner and before the Maturity
Date, the Death Benefit will depend on the Annuitant's Age at the time that the
Contract was issued. The beneficiary named in the Contract will receive the
greater of: (a) the total of all purchase payments made to the Contract less all
partial redemptions accumulated at 5% to Annuitant's 75th birthday and 0%
thereafter, but not more than two times the difference between all purchase
payments and all redemptions; or (b) the Accumulated Value of the Contract less
any applicable Administrative Charge (and any Sales Charge, if the Annuitant's
age on the Contract Date exceeds 75).
If the Contract Owner dies prior to the Maturity Date, the named beneficiary
will receive the Cash Redemption Value of the Contract.
Please note that in some states, the Death Benefit described above may not be
available. For more information concerning the available death benefits see The
Death Benefit
Tax Treatment
Under current law, during the accumulation phase of the Contract, the Contract's
Accumulated Value is not taxed. If redemptions are made from the Contract prior
to age 59 1/2, a ten percent (10%) federal income tax penalty will apply to
the income portion of the withdrawal. In certain instances, the tax penalty will
not apply. Please review Taxation of Contracts in General, for a more detailed
description of the tax rules applicable to the Contract. Partial or full
redemption of a Contract may require MML Bay State to withhold 20% of the amount
redeemed, as more fully described in the Taxation of Qualified Plans, TSAs and
IRAs.
Right to Return Contract
The Contract entitles the purchaser to a 10-day revocation right more fully
described under Right to Return Contracts.
Charges Under the Contract
MML Bay State assesses certain charges for the administration and the
mortality and expense risks associated with the Contract. MML Bay State also
assesses a contingent deferred sales charge (the "Sales Charge") if all or some
of the value is redeemed prior to the expiration of a seven-year period
following the date of each purchase payment.
4
<PAGE>
Each Contract Year, MML Bay State permits You to redeem, without a Sales
Charge, up to 10% of the Contract's premiums that would otherwise be assessed a
Sales Charge. For more information concerning this feature, please consult
Contingent Deferred Sales Charge.
Asset Charge
MML Bay State currently imposes a charge of 1.40% on an annual basis against
the assets held in the Separate Account. (MML Bay State reserves the right to
increase this fee to 1.50% see - Asset Charge).
Administrative Charge
An administrative charge, currently $30 (maximum $50) will be assessed
annually on each Contract. This charge will be waived for Contracts which have
an Accumulated Value of at least $50,000.
Premium Taxes
Additionally, a deduction is made for premium taxes for purchase payments made
into Contracts in certain jurisdictions where such tax applies. Currently, the
applicable premium tax will be deducted at the time of redemption, death,
maturity, or annuitization. (See - Premium Taxes.)
Table of Fees and Expenses
Contract Owner Transaction Expenses
Sales Load Imposed on Purchases............................None
Deferred sales load as a Percentage of Purchase Payments when withdrawn:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
================================================================================
Full Years since payment 0 1 2 3 4 5 6 7 or more
- --------------------------------------------------------------------------------
Percentage 7% 6% 5% 4% 3% 2% 1% 0%
================================================================================
</TABLE>
Transfer Fee......................... None for first 14 transfers during
the Accumulation Period ($20 thereafter)**
Annual Administrative Charge*........ $30**
Separate Account Annual Expenses.....
(as a percentage of average account
values).............................. 1.40%**
Mortality and Expense Risk Fee........ 1.15%
Administrative Fee.................... 0.15%
Death Benefit Fee..................... 0.10%
Portfolio Annual Charges and Expenses (as a percentage of Fund average net
assets)***
<TABLE>
<CAPTION>
Management Other Total Portfolio
Fees Expenses Annual Expenses
<S> <C> <C> <C>
MML Equity Fund 0.38% 0.00% 0.38%
MML Money Market Fund 0.49% 0.03% 0.52%
MML Managed Bond Fund 0.48% 0.03% 0.51%
MML Blend Fund 0.37% 0.00% 0.37%
Oppenheimer Money Fund 0.45% 0.04% 0.49%
Oppenheimer High Income Fund 0.75% 0.06% 0.81%
Oppenheimer Bond Fund 0.74% 0.04% 0.78%
Oppenheimer Capital
Appreciation Fund 0.72% 0.03% 0.75%
Oppenheimer Multiple
Strategies Fund 0.73% 0.04% 0.77%
Oppenheimer Growth Fund 0.75% 0.06% 0.81%
Oppenheimer Global
Securities Fund 0.73% 0.08% 0.81%
Oppenheimer Strategic
Bond Fund 0.75% 0.10% 0.85%
Oppenheimer Growth & Income
Fund 0.75% 0.25% 1.00%
</TABLE>
*The Administrative Charge will be waived if the Accumulated Value is at least
$50,000 when the Administrative Charge would be deducted.
**These fees and charges are shown on a current basis. MML Bay State reserves
the right to raise the Administrative & Separate Account charges up to $50, and
1.50% respectively. For more information please see - Charges and Deductions.
***The expenses listed are for the year ended December 31, 1996.
5
<PAGE>
EXAMPLE:
You would pay the following cumulative expenses on a $1,000 investment assuming
a 5% annual return on assets:
If Your Contract is redeemed at the end of the year:
<TABLE>
<CAPTION>
Year 1 3 5 10
<S> <C> <C> <C> <C>
MML Equity Fund $ 82 $ 104 $ 129 $ 221
MML Money Market Fund 83 109 136 236
MML Managed Bond Fund 84 108 136 235
MML Blend Fund 82 104 129 220
Oppenheimer Money Fund 83 108 135 233
Oppenheimer High Income Fund 87 117 151 266
Oppenheimer Bond Fund 86 117 150 263
Oppenheimer Capital
Appreciation Fund 86 116 148 260
Oppenheimer Multiple
Strategies Fund 86 116 149 262
Oppenheimer Growth Fund 87 117 151 266
Oppenheimer Global
Securities Fund 87 117 151 266
Oppenheimer Strategic
Bond Fund 87 119 153 270
Oppenheimer Growth & Income
Fund 88 123 161 285
</TABLE>
If Your Contract is not redeemed at the end of the year:
<TABLE>
<CAPTION>
Year 1 3 5 10
<S> <C> <C> <C> <C>
MML Equity Fund 19 59 102 221
MML Money Market Fund 21 64 109 236
MML Managed Bond Fund 21 63 109 235
MML Blend Fund 19 59 102 220
Oppenheimer Money Fund 20 63 108 233
Oppenheimer High Income Fund 24 72 124 266
Oppenheimer Bond Fund 23 72 123 263
Oppenheimer Capital
Appreciation Fund 23 71 121 260
Oppenheimer Multiple
Strategies Fund 23 71 122 262
Oppenheimer Growth Fund 24 72 124 266
Oppenheimer Global
Securities Fund 24 74 126 270
Oppenheimer Strategic Bond
Fund 24 74 126 270
Oppenheimer Growth & Income
Fund 25 78 134 285
</TABLE>
The purpose of the table set forth above is to assist You in understanding the
various costs and expenses that Contract Owners bear directly or indirectly. The
table is based on estimated amounts for the most recent fiscal year and reflects
the expenses of the Separate Account and the Trusts, adjusted to reflect changes
in management fee rates and a voluntary expense limitation. The table does not
reflect the deduction of premium taxes.
For the purpose of calculating the expenses in the above examples, we have
converted the $30 annual administrative charge to a 0.11% annual asset charge
based on an average contract size of $27,500.
Converted in this way, this annual charge (on a percentage basis) would be
higher for smaller contracts and lower for larger contracts. No annual
Administrative Charge is assessed on contracts with accumulated values of
$50,000 or more.
The above examples should not be considered representative of past or future
expenses; actual expenses may be more or less than those shown.
6
<PAGE>
Condensed Financial Information
MML Bay State Variable Annuity Separate Account 1
Accumulation Unit Values (Audited)
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995 *December 31, 1994
<S> <C> <C> <C>
MML Equity Division $1.53 $1.29 $1.00
MML Money Market Division $1.08 $1.05 $1.00
MML Managed Bond Division $1.21 $1.18 $1.01
MML Blend Division $1.37 $1.22 $1.00
Oppenheimer Money Division $1.09 $1.05 $1.00
Oppenheimer High Income
Division $1.31 $1.15 $ .97
Oppenheimer Bond Division $1.18 $1.15 $ .99
Oppenheimer Capital
Appreciation Division $1.55 $1.31 $1.00
Oppenheimer Multiple
Strategies Division $1.34 $1.18 $ .99
Oppenheimer Growth
Division $1.64 $1.32 $ .98
Oppenheimer Global
Securities Division $1.10 $ .95 $ .94
Oppenheimer Strategic
Bond Division $1.24 $1.12 $ .98
Oppenheimer Growth & Income
Division** $1.63 $1.24 N/A
</TABLE>
*Public offering commenced on November 14, 1994. All accumulation unit
values were $1.00 on November 14, 1994.
**Public offering commenced July 3, 1995.
MML Bay State Variable Annuity Separate Account 1
Number of Accumulation Units Outstanding (Audited)
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995 *December 31, 1994
<S> <C> <C> <C>
MML Equity Division 2,189,149 685,964 5,000
MML Money Market
Division 4,267,075 839,793 16,949
MML Managed Bond
Division 695,485 328,514 5,000
MML Blend Division 3,019,173 778,529 5,000
Oppenheimer Money
Division 2,607,468 1,023,398 5,000
Oppenheimer High Income
Division 5,999,147 1,518,022 6,184
Oppenheimer Bond
Division 1,827,553 883,171 5,000
Oppenheimer Capital
Appreciation Division 9,019,648 2,254,545 12,000
Oppenheimer Multiple
Strategies Division 7,090,472 2,190,174 7,339
Oppenheimer Growth
Division 10,747,444 2,762,984 5,000
Oppenheimer Global
Securities Division 10,727,219 2,698,363 12,367
Oppenheimer Strategic
Bond Division 11,657,438 3,491,031 7,314
Oppenheimer Growth
& Income Division** 14,369,051 1,507,840 N/A
</TABLE>
*Public offering commenced on November 14, 1994.
**Public offering commenced July 3, 1995.
Financial Statements
For financial statements and other information concerning the financial
condition of MML Bay State Variable Annuity Separate Account 1 and of MML Bay
State, see the Statement of Additional Information.
7
<PAGE>
MML Bay State Life Insurance Company, OppenheimerFunds, Inc., Massachusetts
Mutual Life Insurance Company, The Separate Account, and The Trusts
MML Bay State Life Insurance Company
MML Bay State Life Insurance Company ("MML Bay State") is a life insurance
company and a wholly-owned subsidiary of Massachusetts Mutual Life Insurance
Company ("MassMutual"). Organized in 1894 under the laws of the state of
Missouri, MML Bay State (formerly known as Western Life Insurance Company of
America) was purchased in 1981 by MassMutual. Its name was changed in March
1982. MML Bay State currently is licensed to sell variable life insurance in all
states except New York. MML Bay State plans to obtain variable annuity authority
in all states except New York, and, as of February 12, 1996, it had obtained
such authority in 44 states and the District of Columbia. The Contract is
available only in states where this approval process has been completed. MML Bay
State's Home Office is located in Jefferson City, Missouri.
MassMutual currently plans to redomesticate MML Bay State from the State of
Missouri to the State of Connecticut. MassMutual believes that the proposed
redomestication will not adversely affect policyowners. The Company will notify
Contract Owners that the redomestication has occurred by sending Contract Owners
an endorsement to their Contract reflecting the redomestication.
OppenheimerFunds, Inc.
OppenheimerFunds, Inc. ("OFI") is a corporation organized under the laws of the
state of Colorado. It has operated as an investment adviser since April 30,
1959. It (including a subsidiary) currently advises U.S. investment companies
with assets aggregating over $62 billion as of December 31, 1996, and having
more than 3 million shareholder accounts. OFI is owned by Oppenheimer
Acquisition Corp., a holding company owned in part by senior management of OFI,
and ultimately controlled by MassMutual.
MassMutual
MassMutual is a mutual life insurance company chartered in 1851 under the laws
of Massachusetts. Its Home Office is located in Springfield, Massachusetts.
MassMutual is licensed to transact life, accident, and health insurance business
in all fifty states of the United States and certain provinces of Canada. It
also has approval to write variable annuity business in all states.
On February 29, 1996, the merger of Connecticut Mutual Life Insurance Company
("Connecticut Mutual") with and into MassMutual was completed. The separate
existence of Connecticut Mutual has ceased. MassMutual continues its corporate
existence under its current name. The merger does not affect any provisions of,
or rights or obligations under, policies or contracts previously issued by
MassMutual. MassMutual has estimated statutory assets in excess of $55 billion,
and estimated total assets under management in excess of $130 billion.
The Separate Account
MML Bay State Variable Annuity Separate Account 1 (the "Separate Account") was
established on January 14, 1994. It is a separate account of MML Bay State
registered with the Securities and Exchange Commission as a unit investment
trust. The Separate Account meets the definition of a Separate Account under
Rule 0-1(e) under the Investment Company Act of 1940.
The Separate Account is divided into Divisions. Each Division invests in
corresponding shares of either MML Series Investment Trust ("MML Trust") or
Oppenheimer Variable Account Funds ("Oppenheimer Trust"). The value of both
Accumulation Units and Annuity Units in each Division reflects the investment
results of its underlying Funds. Please note that MML Bay State reserves the
right to add, or substitute Divisions, create new separate accounts, in some
cases restrict Funds, and to invest in shares of other series of the Trusts or
of other registered, open-end investment companies. See -Reservation of Rights.
Although MML Bay State owns the assets of the Separate Account, assets of the
Separate Account equal to the reserves and other Contract liabilities which
depend on the investment performance of the Separate Account and are not
chargeable with liabilities arising out of any other business MML Bay State may
conduct. The income and capital gains and losses, realized or unrealized, of
each Division of the Separate Account are credited to or charged against such
Division without regard to the income and capital gains and losses of the other
Divisions or other accounts of MML Bay State. This state law provision has been
supported in several recent decisions in states reviewing this issue. All
obligations arising under a Contract, however, are general corporate obligations
of MML Bay State.
The Trusts
Each of the Trusts described below has separate assets and liabilities and a
separate net asset value per share. An investor's interest in a Separate Account
is limited to the Fund(s) in which shares are held. Since market risks are
inherent in all securities to varying degrees, assurance cannot be given that
the investment objective of any of the Funds will be met.
Financial Statements for the Oppenheimer Trust and for the MML Trust are
contained in their respective Statements of Additional Information.
Additional information concerning the investment objectives and policies of the
Funds can be found in the current prospectuses for the Trusts which are attached
to this prospectus and should be read carefully before making any decision
concerning allocation of premium payments.
Oppenheimer Trust
Oppenheimer Trust is a diversified, open-end management investment company
organized as a Massachusetts business trust in 1984. It consists of nine
separate Funds - Oppenheimer Money Fund, Oppenheimer Bond Fund and Oppenheimer
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Growth Fund, all organized in 1984; Oppenheimer High Income Fund, Oppenheimer
Capital Appreciation Fund, and Oppenheimer Multiple Strategies Fund, all
organized in 1986; Oppenheimer Global Securities Fund, organized in 1990;
Oppenheimer Strategic Bond Fund, organized in 1993; and Oppenheimer Growth &
Income Fund, organized in 1995. OFI serves as the investment adviser to
Oppenheimer Trust. OFI is registered as investment adviser under the Investment
Advisers Act of 1940.
MML Trust
MML Trust is a no-load, open-end management investment company having four
series of shares (the "MML Funds"), each of which has different investment
objectives designed to meet different investment needs. These Funds include: MML
Equity Fund organized in 1971; MML Money Market Fund and MML Managed Bond Fund
organized in 1981; and MML Blend Fund organized in 1983. MassMutual serves as
the investment adviser to MML Trust. Concert Capital Management, Inc.
("Concert") served as the investment sub-advisor to MML Equity Fund and the
Equity Sector of the MML Blend Fund from 1993 - 1996. Concert merged with and
into David L. Babson & Company, Inc. ("Babson") effective December 31, 1996.
Both Concert and Babson are wholly-owned subsidiaries of Babson Acquisition
Corporation, which is a controlled subsidiary of MassMutual. Thus, effective
January 1, 1997, Babson serves as the investment sub-advisor to MML Equity Fund
and the Equity Sector of the MML Blend Fund. Both MassMutual and Babson are
registered as investment advisers under the Investment Advisers Act of 1940.
Investments and Objectives of the Available Funds:
MML Equity Fund
The assets of the MML Equity Fund are invested primarily in common stocks and
other equity-type securities. The primary investment objective of the MML Equity
Fund is to achieve a superior total rate of return over an extended period of
time from both capital appreciation and current income. A secondary investment
objective is the preservation of capital when business and economic conditions
indicate that investing for defensive purposes is appropriate.
MML Money Market Fund
The assets of the MML Money Market Fund are invested in short-term debt
instruments, including but not limited to commercial paper, certificates of
deposit, bankers' acceptances, and obligations issued, sponsored, or guaranteed
by the United States government or its agencies or instrumentalities. The
investment objectives of the MML Money Market Fund are to achieve high current
income, preservation of capital, and liquidity.
MML Managed Bond Fund
The assets of the MML Managed Bond Fund are invested primarily in publicly
issued, readily marketable, fixed income securities of such maturities as
MassMutual, as investment manager, deems appropriate from time to time in light
of market conditions and prospects. The investment objective of the MML Managed
Bond Fund is to achieve as high a total rate of return on an annual basis as is
considered consistent with the preservation of capital values.
MML Blend Fund
The assets of the MML Blend Fund are invested in a portfolio of common stocks
and other equity-type securities, bonds and other debt securities with
maturities generally exceeding one year, and money market instruments and other
debt securities with maturities generally not exceeding one year. The investment
objective of the MML Blend Fund is to achieve as high a level of total rate of
return over an extended period of time as is considered consistent with prudent
investment risk and the preservation-of-capital values.
Oppenheimer Money Fund
Oppenheimer Money Fund seeks the maximum current income from investments in
"money market" securities consistent with low capital risk and maintenance of
liquidity. Its shares are neither insured nor guaranteed by the U.S. Government,
and there is no assurance that this Fund will be able to maintain a stable net
asset value of $1.00 per share.
Oppenheimer High Income Fund
Oppenheimer High Income Fund seeks a high level of current income from
investment in high yield, high-risk, fixed-income securities, including unrated
securities or securities in the lower rating categories. These securities may be
considered to be speculative. Please consult the Oppenheimer Trust prospectus
for a more complete discussion of the risks and investment objectives associated
with this Fund.
Oppenheimer Bond Fund
Oppenheimer Bond Fund primarily seeks a high level of current income from
investment in high yield fixed-income securities rated "Baa" or better by
Moody's or "BBB" or better by Standard & Poor's. Secondarily, the Fund seeks
capital growth when consistent with its primary objective.
Oppenheimer Capital Appreciation Fund
Oppenheimer Capital Appreciation Fund seeks to achieve capital appreciation by
investing in "growth-type" companies.
Oppenheimer Growth Fund
Oppenheimer Growth Fund seeks to achieve capital appreciation by investing in
securities of well-known established companies.
Oppenheimer Multiple Strategies Fund
Oppenheimer Multiple Strategies Fund seeks a total investment return (which
includes current income and capital appreciation in the value of its shares)
from investments in common stocks and other equity securities, bonds and other
debt securities, and "money market" securities.
Oppenheimer Global Securities Fund
Oppenheimer Global Securities Fund seeks long-term capital appreciation by
investing a substantial portion of assets in securities of foreign issuers,
"growth-type" companies,
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cyclical industries and special situations which are considered to have
appreciation possibilities. Current income is not an objective. This Fund's
investments may be considered to be speculative.
Oppenheimer Strategic Bond Fund
Oppenheimer Strategic Bond Fund seeks a high level of current income
principally derived from interest on debt securities and seeks to enhance such
income by writing covered call options on debt securities. The Fund invests
principally in: (i) foreign government and corporate debt securities; (ii) U.S.
Government securities; and (iii) lower-rated high yield, high-risk debt
securities. This Fund's investments may be considered to be speculative. Please
consult the Oppenheimer Trust prospectus for a more complete discussion of the
risks and investment objectives associated with this Fund.
All dividends and capital gains distributions paid by the Funds' shares are
automatically reinvested in additional shares at their net asset value
determined on the distribution date.
Oppenheimer Growth & Income Fund
Oppenheimer Growth & Income Fund seeks a high total return (which includes
growth in the value of its shares as well as current income) from equity and
debt securities. From time to time this Fund may focus on small to medium
capitalization common stocks, bonds and convertible securities.
An Explanation of the Contract
The principal provisions of the Contract are described below. If You desire
additional information, You should refer to the Contract and to the Statement of
Additional Information. For a complete understanding of Your rights, You should
also review any applicable employee benefit plan documents.
General-Uses of the Contract
The Contract described herein is an individual variable annuity contract
issued by MML Bay State. Purchase payments are flexible. The Contract may be
purchased by individuals or entities for use in arrangements not receiving
favorable tax treatment under the Internal Revenue Code.
The Contract is also available for use in the following retirement plans which
qualify (with necessary endorsement as appropriate) for special federal tax
treatment under the Internal Revenue Code of 1986, as amended (the "Code"): (1)
pension and profit-sharing plans qualified under Section 401(a) or 403(a) of the
Code ("Qualified Plans"), which may also constitute participant-directed
individual account plans under Section 404(c) of ERISA; (2) annuity purchase
plans adopted by public school systems and certain tax-exempt organizations
pursuant to Section 403(b) of the Code ("Tax Sheltered Annuities" or "TSAs");
and (3) Individual Retirement Annuities established in accordance with Section
408 of the Code ("IRAs"), including those established by employer contributions
under a Simplified Employee Pension Plan arrangement. At MML Bay State's
request, the Internal Revenue Service has issued to MML Bay State favorable
opinion letters approving specific versions of the Contract. IRA Contract Owners
with these Contracts will receive a copy of the favorable opinion letter. The
Internal Revenue Service approval is a determination only as to the form of the
Contract for use as an IRA and does not represent a determination of the merits
of the Contract as an IRA. Under tax-qualified retirement plans except TSAs and
IRAs, participants may not be the Contract Owners and, therefore, may have no
Contract Owners' rights.
Unless restricted by endorsement or the terms of the Contract, the Contract
Owner has all rights in the Contract prior to the Maturity Date, including the
right to make a partial or full redemption of the Contract, to designate and
change the beneficiaries who will receive the proceeds at the death of the
Annuitant or Contract Owner before the Maturity Date, to transfer amounts among
the Divisions of the Separate Account (and to and from the Fixed Account, if
available) and to designate a payment option to begin on the Maturity Date.
Prior to issue, a Contract will be endorsed to preclude the Contract Owner from
assigning the Contract as collateral. Although both Owner and the Joint Owner
must authorize any change made to the Contract, either the Owner or Joint Owner
may exercise certain Contract rights with the consent, satisfactory to us, of
the other.
The Contract Owner may, subject to certain limitations, be the Annuitant or
another individual or entity.
The Accumulation (Pay-In) Period
How Contracts May Be Purchased
The minimum initial purchase payment is $2,000. After making Your initial
payment, You may make as many or as few subsequent purchase payments of at least
$100 as You desire. The Contract permits MML Bay State to establish a maximum on
total purchase payments that may be made under the Contract. This maximum is
$1,000,000 without prior Home Office approval.
Initial Purchase
You may place Your initial purchase payment, together with a completed
Application, with Your registered representative.
Subsequent Purchases
You may make subsequent purchase payments by mailing Your check, clearly
indicating Your name and Contract Number, to the Service Center.
Wire Transfer
You may make purchase payments by wire transfer. For instructions concerning
how to make a wire transfer, please contact the Service Center.
ELECTRONIC DATA TRANSMISSION OF APPLICATION INFORMATION
MML Bay State may accept, by agreement with a limited number of broker-
dealers, electronic data transmission of Application information, along with
wire transmittals of initial purchase payments from the broker-dealers to the
Service Center for purchase of the Contract. Please contact the Service
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Center to receive more information about electronic data transmission of
Application information.
Allocation of Purchase Payments
You may direct that Your purchase payments (after deducting any applicable
premium taxes) be allocated among the Divisions of the Separate Account.
Additionally, where available, and subject to minimum allocations of $1,000,
purchase payments may be allocated to Segments of the Fixed Account. Initial
purchase payment allocations to either a Division of the Separate Account or to
a Segment will be effective as of the Valuation Date within two business days of
the date an initial purchase payment is received in good order at the Service
Center provided that Your Contract application is complete. If an initial
purchase payment is not applied within five business days after receipt (due to
incomplete or ambiguous application information, for example), the payment
amount will be refunded unless specific consent to retain the payment for a
longer period is obtained from the prospective purchaser. Purchase payments
allocated to a Division will be applied to purchase Accumulation Units in that
Division at its Accumulation Unit value on the Valuation Date. These
Accumulation Units will be used in determining the value of amounts held in a
Division of a Separate Account credited to a Contract on or prior to the
Maturity Date. The value of the Accumulation Units in each Division will vary
with and will reflect the investment performance of that Division (which in turn
will reflect the investment performance and expenses of the Fund in which the
assets of that Division are invested), less any applicable taxes and the
applicable Asset Charge. A more detailed description of how the value of an
Accumulation Unit is calculated is contained in the Statement of Additional
Information.
MML Bay State will credit to your Contract subsequent purchase payments as of
the day received in good order, provided that the payment is received prior to
that day's Valuation Time. If received after that day's Valuation Time or on a
day that is not a Valuation Day (e.g., a day when the New York Stock Exchange is
closed), MML Bay State will credit the payment to your account as of the next
Valuation Date.
General Transfer Rules
Prior to 30 days before the Maturity Date, the Contract Owner may make
transfers among Divisions of the Separate Account (and if available among
Segments of the Fixed Account) without the imposition of a transfer fee. If more
than four transfers have been made in a Contract Year, MML Bay State reserves
the right to deduct a transfer fee of $20. Currently 14 transfers may be made
per Contract Year without charge. (Transfers made by Dollar Cost Averaging do
not count against the 14 transfer limit.)
If a Variable Monthly Income is in effect, transfers among the Divisions of
the Separate Account are limited to one transfer every three months.
All transfers, whether occurring before or after the Maturity Date are subject
to the following:
(a.) The minimum amount which may be transferred is the lesser of: (1) $500; or
(2) the Accumulated Value in the Division or the Accumulated Amount in a
Segment.
(b.) Transfers will be effected as of the Valuation Date which is on or next
follows the date Your request is received in good order at the Service
Center. Transfer requests may be made by telephone (during the Accumulation
Period), facsimile, or by written direction. Please note that no transfers
may be made within thirty days before Maturity Date.
(c.) Transfer requests must clearly specify the amount to be transferred from
each Division or Segment (if the Fixed Account is available) and the
Division or Segment to which amounts are to be transferred. Unless
otherwise specified, transfers from a Segment of the Fixed Account will be
taken on a first-in, first-out basis. Transfer requests made during the
Annuity pay-out period must specify the percentage to be transferred among
the Divisions of the Separate Account.
(d.) Transfers to a Segment of the Fixed Account may not be less than
$1,000. If the Segment elected is not available, the transfer will not be
processed.
(e.) Transfers made from the Fixed Account are subject to a Market Value
Adjustment ("MVA") unless the transfer is being taken from an Accumulated
Amount within thirty days prior to its Expiration Date. The MVA will be
applied as of the effective date of the transfer.
(f.) Transfer fees will be deducted from the Division or Segment from which the
transfer has been made, unless the balance remaining in such Division or
Segment is insufficient to cover the applicable transfer fee. If this is
the case, the transfer fee will be deducted from the amount being
transferred.
(g.) We reserve the right to limit the number and frequency of transfers
made during a Contract Year.
(h.) After a payout option has been invoked, transfers may not be made
between a Fixed Income and a Variable Monthly Income option.
Telephone Transfers
Contract Owners, subject to the limitations described below, may make transfers
among either Divisions or the Fixed Account (if available) during the
Accumulation Period by telephoning a transfer request to the Service Center at
its toll free telephone number. This feature will be made automatically
available to Contract Owners unless MML Bay State receives different
instructions. Through use of this toll free number, Contract Owners may also
obtain information concerning the Contract including Accumulated Values. This
service is not available to Contracts owned by Custodians or Trustees of
Qualified Plans, or Contracts held by Guardians. Normal transfer provisions
apply.
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MML Bay State will not be liable for complying with any telephone instructions
it reasonably believes to be genuine, nor for any loss, damage, cost or expense
in acting on telephone instructions. MML Bay State will employ reasonable
procedures to ensure the legitimacy of telephone transfer requests. Such
procedures may include, among others, requiring forms of personal identification
prior to acting upon telephone instructions, providing written confirmation of
such transactions to the Contract, and/or tape recording of telephone transfer
request instructions received from a Contract Owner. If we fail to follow such
procedures, we may be liable for losses due to unauthorized or fraudulent
instructions.
Automatic Transfers
MML Bay State offers You two automatic transfer options described below. They
are available any time before the Maturity Date. The automatic transfer options
are not available for use with the Fixed Account. Only one of the automatic
transfer options may be in effect at a time. Both options are subject to the
transfer rules discussed above. Although no charge is currently imposed for this
service, MML Bay State reserves the right to impose a fee in the future.
Dollar Cost Averaging
Dollar Cost Averaging is a feature whereby a Contract amount is periodically
transferred from one Division of the Separate Account to one or more other
designated Divisions of the Separate Account. Once the feature is elected, these
transfers occur automatically at the frequency elected - monthly, quarterly,
semiannually, or annually.
Dollar Cost Averaging provides a mechanism designed to minimize the negative
effects of short-term market fluctuations. Over a period of time, an investor
may, at least theoretically, be able to purchase more units than he or she would
have been able to purchase had all monies been invested on a single Valuation
Date when the value of the units was high.
Dollar Cost Averaging may be available at any time, provided that the Division
from which the automatic transfers will be made has a value of at least $6,000.
The minimum amount any Division may receive is $100. All Divisions are available
for use with this feature.
Asset Reallocation
You may elect the Asset Reallocation option as a means of maintaining a
constant allocation of Accumulated Value among the Divisions in which You have
allocated Your monies. If You elect this option, we will make automatic
transfers among selected Divisions on a quarterly, semiannual, or annual basis
as You instruct us. A minimum Accumulated Value of $20,000 is required in order
to elect this option. Allocations will be made on a basis consistent with the
allocation selected for new purchase payments.
Right to Return Contracts
You may return Your Contract to MML Bay State (at its Service Center) at any
time within 10 days after the Contract has been delivered to you (unless a
longer period is required by applicable state law). If You exercise this right
and Your Contract is not an IRA, then You will receive the Accumulated Value of
the Contract plus any premium tax deductions, except where state law requires us
to return the amount of purchase payment(s) made less the net amount of partial
redemptions. If You exercise this right and Your Contract is an IRA, You will
not receive less than the amount of purchase payment(s) made less the net amount
of partial redemptions. For this purpose, the Accumulated Value of the Contract
will be determined as of the Valuation Time on the date on which the Contract is
received at MML Bay State's Service Center or at the next Valuation Time after
receipt if the Contract is received on other than a Valuation Date.
The Death Benefit
A death benefit is paid upon the death of either the Contract Owner (for
jointly owned Contracts, upon the first death of the two Owners) or Annuitant.
If a Contract Owner and Annuitant are the same, the Death Benefit paid will be
the Annuitant Death Benefit.
Contract Owner Death Benefit
If a Contract Owner, who is not the annuitant, dies prior to the Maturity
Date, the named beneficiary will receive the Cash Redemption Value of the
Contract.
Annuitant Death Benefit
Historically, variable annuities have guaranteed a return of premiums less
withdrawals as a minimum standard death benefit. This Contract offers one of two
enhancements, depending on Your contract state.
If the Annuitant dies before the Maturity Date, the beneficiary named in the
Contract will receive the greater of: (a) the total of all purchase payments
made to the Contract less all partial redemptions accumulated at 5% to
Annuitant's 75th birthday and 0% thereafter, but not more than two times the
difference between all purchase payments and all redemptions; or (b) the
Accumulated Value of the Contract less any applicable Administrative Charge (and
any Sales Charge, if the Annuitant's age on the Contract Date exceeds 75).
In certain states, the death benefit described above may not be available for
Annuitant's whose issue age is less than 76. In those instances, the death
benefit during the first three years will be equal to the greater of: (a.) the
total of all purchase payments made to the Contract less all partial
redemptions; or (b.) the Accumulated Value of the Contract less any applicable
Administrative Charge. During any subsequent three Contract Year period, the
death benefit will be the greater of: (a.) the death benefit on the last day of
the previous three Contract Year period plus any purchase payments made less all
partial redemptions since then; or (b.) the Accumulated Value of the Contract
less any applicable Administrative Charge.
In any case, the amount of Death Benefit received will be reduced by the
amount of any applicable premium tax.
The Death Benefit is determined as of the Valuation Date which is on or next
follows the date on which due proof of death is received at the Service Center.
The death benefit will be paid within seven days of receipt of due proof of
death and all other requirements. With MML Bay State's consent, the death
benefit may be applied under one or more of the payment options provided for in
the Contract (see - Payment
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Options). If a Payment Option is not selected, the death benefit will be paid in
one sum.
A beneficiary who is the surviving spouse of the Contract Owner of a Contract
issued as an IRA may elect to treat the Contract as if he or she were the
Contract Owner.
Redemption Privileges
Subject to the special rules regarding TSAs, discussed below, You may redeem
all or part of the Accumulated Value of a Contract on or prior to its Maturity
Date if the Annuitant is alive. The amount of any partial redemption, however,
must be at least $100, and requests for a partial redemption which would reduce
the Accumulated Value of the Contract to less than $1,000 plus outstanding
premium taxes will be treated as a request for a full redemption. You may incur
a Sales Charge upon redemption. (See -CHARGES AND DEDUCTIONS.) Any partial
redemption will be paid in one sum. If the entire Contract is redeemed, the cash
redemption value may be paid in one sum or applied under one or more of the
payment options. You must designate the Division(s) (or the Segment of the Fixed
Account, if available) from which any partial redemption is to be made. Unless
otherwise specified, partial redemptions from a Segment of the Fixed Account
will be taken on a first-in, first-out basis. A partial redemption from a
Division will reduce the number of Accumulation Units in that Division by an
amount equal to the sum of the redemption payment plus any Sales Charge, divided
by the Accumulation Unit Value.
The Accumulation Unit value on redemption is determined as of the Valuation
Time on the date on which the written request for redemption is received in good
order at the Service Center or, if that date is not a Valuation Date, on the
next Valuation Date after receipt.
Redemption payments from a Separate Account will be made within seven days (or
a shorter period if required by law) after written request in good order is
received at MML Bay State's Service Center. The right of redemption may be
suspended or payments postponed whenever: (1) the New York Stock Exchange is
closed, except for holidays and weekends; (2) the Securities and Exchange
Commission has determined that trading on the New York Stock Exchange is
restricted; (3) the Securities and Exchange Commission permits suspension or
postponement and so orders; or (4) an emergency exists, as defined by the
Securities and Exchange Commission, so that valuation of the assets of each
Separate Account or disposal of securities held by it is not reasonably
practicable.
In addition, a purchase payment amount is not available to satisfy a
redemption request until the check, or other instrument by which the purchase
payment was made, has been honored.
Redemptions of amounts from the Fixed Account may be delayed for up to six
months from the date the request is received by us at our Service Center. If
payment is delayed 30 days or more, we will add interest at an annual rate of
not less than 3%.
Amounts withdrawn may be includable in the gross income of the Contract Owner
in the year in which the withdrawal occurs. Additionally, a 10% tax penalty may
be applicable (as described more fully in the Penalty Taxes section).
Redemption payments may be subject to federal income tax and elective and/or
mandatory tax withholding. (See - FEDERAL TAX STATUS).
Automatic Partial Redemptions
An Automatic Partial Redemption program permitting Contract Owners to elect to
receive automatic partial redemptions on a periodic basis is available on a
limited basis. All applicable limitations concerning redemptions apply to this
program. Additionally, automatic partial redemptions may be subject to penalty
taxes.
This program is available only during the Accumulation Period of the Contract.
Although no charge is imposed for processing automatic partial redemptions
currently, MML Bay State reserves the right to impose a fee for this program in
the future.
Tax Sheltered Annuity Redemption Restrictions
The redemption of Internal Revenue Code Section 403(b) annuities (Tax
Sheltered Annuities, "TSAs") may be restricted. Specifically, salary reduction
contributions after 1988 and post-1988 earnings on all salary reduction
contributions may not be distributed to the Annuitant until age 59 1/2, death,
disability, or separation from service with the TSA employer. Such salary
reduction contributions may be withdrawn, however, for "hardship".
The Annuity (Pay-Out) Period
Annuity Benefits
You may elect to change the Maturity Date of Your Contract. The Maturity Date
may not be later than the Contract anniversary nearest the Annuitant's 90th
birthday (or at an earlier date if required by applicable state law). In
general, in order to avoid adverse tax consequences, distributions, either by a
partial redemption or by maturing the Contract, from a Contract issued as an IRA
or as a TSA or under a qualified plan should begin for the calendar year in
which the Annuitant reaches age 70 1/2 and should be made each year thereafter
in an amount no less than the Accumulated Value of the Contract at the end of
the previous year divided by the applicable life expectancy (see Taxation of
Qualified Plans, TSAs and IRAs, for additional information). You may elect to
defer the Maturity Date to any permissible date after the previously specified
Maturity Date, provided that a written notice within 90 days before the Maturity
Date then in effect is received by MML Bay State at the Service Center. You also
may elect to advance the Maturity Date to a date prior to the specified Maturity
Date or prior to any new Maturity Date You may have selected, provided that
written notice is received at MML Bay State's Service Center at least 30 days
before the Maturity Date elected. For additional rules regarding TSAs. (See -Tax
Sheltered Annuity Redemption Restrictions.)
When Your Contract approaches its Maturity Date You may choose to receive
either Fixed Income payments, (referred to as the "Fixed Income Option" in Your
Contract), Variable
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Monthly Income payments (referred to as the "Variable Income Option" in Your
Contract), or a combination of the two. You also may elect to receive the
Maturity Value in one sum. If You have made no election within thirty days prior
to the Maturity Date, the Contract will automatically pay a Variable Monthly
Income under a life income option with payments guaranteed for 10 years.
Payment Options
You may elect either a Fixed or a Variable Monthly Income payment option by
submitting a written request in a form satisfactory to MML Bay State. MML Bay
State must receive this request at the Service Center 30 days prior to the
Maturity Date of the Contract. For a description of payment options from which
You (or in some cases a Beneficiary) may choose, You should refer to the
Contracts. Generally, once selected, You may not change Your payment option.
Income payments may be received under several different payment options. If
the value of a Contract applied to any payment option is less than $2,000 or
produces an initial Income payment of less than $20, MML Bay State may discharge
its obligation by paying the value applied, less any applicable Sales Charge, in
one sum to the person entitled to receive the first annuity payment.
Upon Your request, MML Bay State will endorse a Contract to eliminate or
restrict any payment option in order that the plan pursuant to which the
Contract is issued remains qualified under the Internal Revenue Code, provided
such endorsement is not otherwise contrary to law. MML Bay State may make
available payment options in addition to those set forth in the Contract.
You may transfer amounts among the Divisions if the Variable Monthly Income
option is selected subject to transfer restrictions described in General
Transfer Rules.
Fixed Income Option
If You select a Fixed Income, each payment will be for a fixed dollar amount
and will not vary with or reflect the investment performance of the Separate
Account. For further information regarding the Fixed Income and the payment
options thereunder, You should refer to Your Contract.
Variable Monthly Income Option
If You select a Variable Monthly Income, amounts held in the Fixed Account
that are to be used to provide Variable Monthly Income payments will be credited
to the MML Money Market Division of the Separate Account unless the Contract
Owner instructs MML Bay State otherwise. Each annuity payment will be based upon
the value of the Annuity Units credited to Your Contract.
You may transfer among the Divisions no more frequently than once every 3
months under this option. (See - General Transfer Rules for transfer
guidelines.)
The number of Annuity Units in each Division to be credited to Your Contract
is based on the value of the Accumulation Units in that Division and the
applicable Purchase Rate. The Purchase Rate will differ according to the payment
option You have elected and takes into account the age, year of birth and sex of
the Annuitant. The value of the Annuity Units will vary with, and reflect the
investment performance of, each Division to which Annuity Units are credited
based on an Assumed Investment Rate of 4% per year. This Rate is a fulcrum rate
around which Variable Monthly Income payments will vary. An actual net rate of
return for a Division for the month greater than the Assumed Investment Rate
will increase Variable Monthly Income payments attributable to that Division. An
actual net rate of return for a Division for the month less than the Assumed
Investment Rate will decrease Variable Monthly Income payments attributable to
that Division.
For a more detailed description of how the value of an Annuity Unit and the
amount of Variable Monthly Income payments are calculated, see the Statement of
Additional Information.
Fixed-Time Payment Option
If You elect this option, Variable Monthly Income payments will be made for
any period selected, up to 30 years. If provided in the payment option election,
You may withdraw the full amount, subject to any applicable Sales Charge of the
then present value of the remaining unpaid Variable Monthly Income payments.
(See - CHARGES AND DEDUCTIONS.) The present value will be calculated using an
assumed investment rate of 4% per year unless a lower rate is required by state
law. A mortality risk charge continues to be assessed against Contract values
under this option. (See - CHARGES AND DEDUCTIONS.)
Life Income Payments
If You elect this option, Variable Monthly Income payments will be made during
the lifetime of the Annuitant, either: (1) without any guaranteed number of
payments; or (2) with a guaranteed number of payments for 5 or 10 years. Of
these two alternatives, alternative (1) offers the maximum level of monthly
payments since there is no guarantee of a higher number of payments and no
provision for payments to the beneficiary upon the death of the Annuitant. Since
there is no such guarantee, however, it would be possible to receive only one
annuity payment if the Annuitant died prior to the due date of the second
annuity payment, two if he or she died before the third annuity payment date,
etc.
Joint-and-Survivor Life Income Payments
If You elect this option, Variable Monthly Income payments will be made during
the joint lifetime of the two Annuitants and thereafter during the lifetime of
the survivor, either: (1) without a guaranteed number of payments; or (2) with a
guaranteed number of payments for 10 years from the date the payments begin.
Joint-and-Survivor Life Income Payments (Two-Thirds to the Survivor)
If You elect this option, Variable Monthly Income payments will be made during
the joint lifetime of the two annuitants, and thereafter at two-thirds the prior
rate during the lifetime of the survivor, in both cases without a guaranteed
number of payments.
Payments After Death of Annuitant
Generally, if a payment option with a guaranteed number of payments is
elected, and the Annuitant(s) should die before the guaranteed number of
payments have been completed,
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MML Bay State will continue making the guaranteed payments to the designated
beneficiary.
Special Limitations
Where the Contract is issued pursuant to a TSA, or as an IRA, there are
special limitations on the types of payment options which You may elect.
Charges and Deductions
The Separate Account does not bear any expenses other than the charges stated
below.
1. Asset Charge
MML Bay State receives a daily-computed charge against the assets of the
Separate Account (the "Asset Charge") for: (1) assuming the risks that (a)
its estimates of longevity will turn out to be inadequate, and (b) the
Administrative Charge may be insufficient to cover the administrative
expenses associated with the Contract; (2) other administrative expenses; and
(3) the Death Benefit. The Asset Charge is currently equal to 1.40% on an
annual basis of the net asset value of the Separate Account assets
attributable to the Contracts.
The mortality and expense risk part of this charge will be computed daily at
an annual rate, currently equal to 1.15% of the net asset value of the
Separate Account assets attributable to the Contracts (0.30% is for assuming
mortality risks and 0.85% is for assuming expense risks). MMLBay State
reserves the right to raise this rate up to 1.25%.
The administrative expense part of this Charge will be computed daily at an
annual rate of 0.15%.
The third component of the Asset Charge is 0.10% assessed to reimburse MML
Bay State for the cost of providing the enhanced Death Benefit under the
Contract. For more information concerning the enhanced Death Benefit. (See -
Annuitant Death Benefit.)
2. Administrative Charge
In addition to that portion of the Asset Charge assigned to administrative
expenses, each year on the Contract anniversary date a charge is imposed
against each Contract to reimburse MML Bay State for administrative expenses
incurred by MML Bay State during the previous year relating to the issuance
and maintenance of the Contract (the "Administrative Charge"). The
Administrative Charge is also imposed on death, maturity, or full redemption.
The Administrative Charge is currently $30 per year. MML Bay State reserves
the right to increase the Administrative Charge up to $50 per year. This
charge is not designed to produce a profit and is subject to statutory
limitations.
If a Contract's Accumulated Value is $50,000 or more when the Administrative
Charge would be deducted, the Administrative Charge will be waived. This
charge will be deducted on a pro rata basis from each Division of the
Separate Account and then pro-rata from Segments of the Fixed Account.
Deductions from Segments will be made on a first-in, first-out basis.
3. Contingent Deferred Sales Charge
Sales charges are not deducted at the time a purchase payment is made.
Instead, to reimburse MML Bay State for sales expenses including commissions,
sales literature and related costs, a Contingent Deferred Sales Charge (the
"Sales Charge") may be imposed upon a full or partial redemption, upon
maturity, and upon certain death benefits.
Sales charges are based on the purchase payments made and the time that has
passed since we received them. The part of the sales charge related to each
purchase payment is a level percentage of that payment during each year since
it was paid. For each successive year, the percentage decreases until it
becomes zero. Sales charge percentages for each purchase payment are shown in
the table below.
Sales Charge Percentages
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Full Years since payment 0 1 2 3 4 5 6 7 or more
- --------------------------------------------------------------------------------
Percentage 7% 6% 5% 4% 3% 2% 1% 0%
- --------------------------------------------------------------------------------
</TABLE>
Example: You make a $1,000 purchase payment on May 10, 1991. The sales charge
related to this purchase payment is:
$70 from May 10, 1991, through May 9, 1992;
$60 from May 10, 1992, through May 9, 1993;
:
$10 from May 10, 1997, through May 9, 1998;
and $0 thereafter.
Subject to the limits stated below, the Sales Charge at any time is based solely
on the purchase payments assumed to be redeemed at that time. In determining the
Sales Charge, we assume that purchase payments are redeemed in the order in
which they are paid. Any amounts in excess of purchase payments are assumed to
be redeemed last.
Each Contract Year, You may redeem the following amounts without incurring a
Sales Charge:
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(1) all unredeemed purchase payments that are at least seven years old;
and
(2) 10% of the purchase payments that are less than seven years old.
No Sales Charge will be imposed upon a death benefit payable upon the
Annuitant's death if the Contract was issued to an Annuitant less than 76
years old. Also a Sales Charge will not be assessed upon a full redemption or
maturity of the Contract if all proceeds of the Contract are:
(1) applied under a variable lifetime payment option or variable fixed-time
payment option (with payment for 10 years or more) in the Contract; or
(2) applied under a fixed or combination fixed-variable lifetime payment
option or fixed-time payment option (with payments for 10 years or more)
in the Contract and the Annuitant is age 59 1/2 or older.
The Sales Charge may also be eliminated when an agent of MML Bay State sells
a Contract to specified members of his or her family.
To the extent sales expenses are not covered by the sales charge, they will
be recovered from MML Bay State's surplus, which may include proceeds derived
from the asset charge described above.
Any available waiver of a Sales Charge will be applied on a non-
discriminatory basis.
4. Premium Taxes
Several states (and certain municipalities) levy premium taxes on annuities.
Currently, no premium tax will be deducted when purchase payments are
received; any applicable premium tax will be deducted at the time of
redemption, death, maturity or annuitization. MML Bay State reserves the
right to deduct premium taxes at the time when a purchase payment is made.
Premium tax rates on annuities currently range up to 3.5%.
FUND EXPENSES
The Accumulated Value of the Separate Account reflects the value of shares
held in the Oppenheimer Trust and the MML Trust. Each Trust charges certain
investment advisery fees and other expenses against the value of each Fund. For
a complete description of the expenses and deductions for each Trust, please
review the accompanying prospectuses for each Trust.
The Fixed Account and the Market Value Adjustment Feature
The following summarizes certain features of the Fixed Account which is
available as part of the Contract in the majority of states during the
Accumulation Period. Please review the Prospectus for the Fixed Account before
making any allocations to it. The Fixed Account offers different Segments which
provide the option of earning interest at one or more Guaranteed Rates on all or
a portion of Your Accumulated Value. As of the date of this prospectus, we offer
Segments with Guarantee Periods of 1, 3, 5, and 7 years.
You may allocate purchase payments or transfer all or a portion of Your
Accumulated Value to one or more Segments of the Fixed Account. Amounts credited
to a Segment of the Fixed Account will earn interest at the Guaranteed Rate
applicable on the date the amounts are credited. The applicable Guarantee Rate
does not change during the Guarantee Period. You may have multiple amounts
credited to a single Segment or multiple Segments. We may change the Segments
available for allocations of purchase payments, transfers and renewals at any
time. The Guaranteed Rate for any Segment may never be less than 3%. Please note
that if You allocate sums to the Fixed Account, You will bear the investment
risk that such amounts will increase or decrease in value.
The end of a Guarantee Period for a specific amount credited to a Segment is
called its Expiration Date. At that time, the Guarantee Period normally "renews"
and we begin crediting interest for a new Guarantee Period lasting the same
amount of time as the one just ended. The Accumulated Amount then earns interest
at the new Guaranteed Rate applicable at the time of renewal. You may also
choose different Segments from among those we are then offering, or You may
transfer all or a portion of the Accumulated Amount to the Separate Account.
To the extent permitted by law, we reserve the right at any time to offer
Segments with Guarantee Periods that differ from those available when Your
Contract was issued. We also reserve the right, at any time, to stop accepting
new amounts credited, transferred, or renewed for a particular Segment.
Between 75 and 45 days before the end of the Expiration Date for an
Accumulation Amount, we will inform You of the Guaranteed Rates being offered
and Segments available as of the date of such notice. The Guaranteed Rates on
the date of a renewal may be more or less than the rates quoted in such
notice.
If Your Accumulated Amount's Segment is no longer available for new amounts
credited, or You choose a different Segment that is no longer available, we will
try to reach You so that You may make another choice.
If a choice is not made at this point, the Segment with the next shortest
Guarantee Period available will be used and if not available, the Segment with
the next longest Period will be used.
Market Value Adjustment
Any withdrawal of Your Accumulated Amount will be subject to a Market Value
Adjustment ("MVA") unless the effective date of the withdrawal is within 30 days
prior to the end of a Guarantee Period. For this purpose, redemptions,
transfers, death benefits based on a Contract Owner's death, and maturity
amounts are treated as withdrawals. The MVA is an adjustment that will be
applied to the amount being withdrawn which is subject to the MVA, after the
deduction of any applicable Administrative Charge and before the deduction of
any applicable Sales Charge. The MVA can be positive or negative. The amount
being withdrawn after application of the MVA can therefore be greater than or
less than the amount withdrawn before application of the MVA.
The MVA will reflect the relationship between the Current Rate (as defined
below) for the Accumulated Amount being
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withdrawn and the Guaranteed Rate. It also reflects the time remaining in the
applicable Guarantee Period. Generally, if the Guaranteed Rate is lower than the
applicable Current Rate, then the application of the MVA will result in a lower
payment upon withdrawal. Similarly, if the Guaranteed Rate is higher than the
applicable Current Rate, the application of the MVA will result in a higher
payment upon withdrawal.
The Market Value Adjustment which is applied to the amount being withdrawn is
determined by using the following formula:
n
[(1 + i) --- ]
MVA = Amount X [------ 365 - 1 ]
[(1 + j) ]
where,
Amount is the amount being withdrawn from a given accumulated amount less any
applicable administrative charges.
i, is the Guaranteed Rate being credited to the Accumulated Amount subject to
the MVA.
j, the "Current Rate," is the Guaranteed Rate, available as of the effective
date of the application of the MVA, for current allocations to the Segment with
a Guarantee Period equal to the time remaining to the Expiration Date for the
amount being withdrawn rounded to the next higher number of complete years.
n, is the number of days remaining in the Guarantee Period of the amount
subject to the MVA.
In the determination of "j," if MML Bay State currently does not offer the
applicable Segment, we will determine "j" above using a method as described in
the Statement of Additional Information.
Distribution
Effective May 1, 1996, MML Distributors, LLC ("MML Distributors"), 1414 Main
Street, Springfield, MA 01144-1013, became the principal underwriter of the
Contracts pursuant to an Underwriting and Servicing Agreement to which MML
Distributors, MML Bay State and the Separate Account are parties. Prior to May
1, 1996, MML Investors Services, Inc. ("MMLISI"), also located at 1414 Main
Street, Springfield, MA 01144-1013, served as the principal underwriter of the
Contracts. Effective May 1, 1996, MMLISI serves as the co-underwriter of the
Contracts. Both MML Distributors and MMLISI are registered with the Securities
and Exchange Commission (the "SEC") as broker-dealers under the Securities
Exchange Act of 1934 and are members of the National Association of Securities
Dealers, Inc. (the "NASD"). The maximum commission a broker-dealer will receive
is 6.25%.
MML Distributors may enter into selling agreements with other broker-dealers
which are registered with the SEC and are members of the NASD ("selling
brokers"). Contracts are sold through agents who are licensed by state insurance
officials to sell the Contracts. These agents are also registered
representatives of selling brokers or of MMLISI.
Additionally, Oppenheimer Funds Distributor, Inc. ("OFDI"), a subsidiary of
OFI, and MML Distributors have entered into an agreement pursuant to which OFDI
has agreed to promote sales of the product through wholesale distribution
arrangements with such broker-dealers. Registered representatives of the
particular broker-dealer, who are also properly licensed to sell MassMutual
products, may make such sales.
MML Distributors does business under different variations of its name;
including the name MML Distributors, L.L.C. in the states of Illinois, Michigan,
Oklahoma, South Dakota and Washington; and the name MML Distributors, Limited
Liability Company in the states of Maine, Ohio and West Virginia.
From time to time, OFDI may enter into special arrangements with broker-
dealers which may provide for the payment of higher compensation to such broker-
dealers in connection with the sale of Contracts. Prospective purchasers of the
Contracts will be informed of such arrangements prior to the completion of the
sale of the Contracts.
Miscellaneous Provisions
Termination of Liability
MML Bay State's liability under a Contract terminates on the death of the
Contract Owner or Annuitant(s) and on the completion of any guaranteed payments.
There is no liability for any proportionate monthly annuity payment from the
date of the last payment to the date of death.
Adjustment of Units and Unit Values
MML Bay State reserves the right in its sole discretion to split or
consolidate the number of Accumulation Units or Annuity Units for any Division
of the Separate Account and correspondingly decrease or increase the
Accumulation or Annuity Unit values for any such Division whenever it deems such
action to be desirable. Any such adjustment will have no adverse effect on
rights under the Contracts.
Periodic Statements
While the Contract is in force prior to the Maturity Date and before the death
of the Annuitant, MML Bay State will furnish to the Contract Owner at least
semiannually a status report showing the number of Accumulation Units credited
to each Division of the Separate Account, the corresponding Accumulation Unit
values, the value of amounts in the FixedAccount (if available) and the
Accumulated Value of the Contract.
CONTRACT OWNER'S VOTING RIGHTS
As long as the Separate Account continues to operate as a unit investment
trust under the Investment Company Act of 1940, the Contract Owner during the
lifetime of the Annuitant, or the beneficiary after the Annuitant's death, will
be entitled to give instructions as to how the shares of the Funds held in the
Separate Account (or other securities held in lieu of such shares) deemed
attributable to the Contract should be voted at meetings of shareholders of the
Funds or the Trusts. Those persons entitled to give voting instructions will be
determined as of the record date for the meeting.
The number of Fund shares held in the Separate Account deemed attributable to
a Contract prior to its Maturity Date
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and during the lifetime of the Annuitant will be determined on the basis of the
value of Accumulation Units credited to the Contract in the corresponding
Division of the Separate Account as of the record date. After the Maturity Date
or after the death of the Annuitant, the number of Fund shares deemed
attributable to the Contract will be based on the liability for future Variable
Monthly Annuity payments under the Contract as of the record date and thus the
voting rights will decrease as payments are made.
Contract Owners or beneficiaries will receive proxy material and a form with
which voting instructions may be given. Fund shares held by the Separate Account
as to which no effective instructions have been received or which are
attributable to assets transferred from MML Bay State's general account will be
voted for or against any proposition in the same proportion as the shares as to
which instructions have been received.
In situations where the Annuitant is not the Contract Owner, the Annuitant
will have the right to instruct the Contract Owner with respect to the votes
attributable to any vested interest the Contract Owner has in the Contract. MML
Bay State's obligation in this instance will be to make available to the
Contract Owner copies of the proxy material for distribution to the Annuitant.
Votes representing interests as to which the Contract Owner is not instructed
may, in turn, be voted by the Contract Owner in his discretion.
RESERVATION OF RIGHTS
MML Bay State may, at any time, make any change in a Contract to the extent
that such change is required in order to make the Contract conform with any law
or regulation issued by any governmental agency to which MML Bay State is
subject. If shares of any Fund should not be available, or, if in the judgment
of MML Bay State, investment in shares of a Fund is no longer appropriate in
view of the purposes of a Division of the Separate Account, shares of other
series of the Trusts or of other registered, open-end investment companies may
be substituted for such Fund shares. Payments received after a date specified by
MML Bay State may be applied to the purchase of shares of another Trust series
or investment company in lieu of shares of that Fund. Additionally, if in the
judgment of MML Bay State, investment in shares of a Fund is no longer
appropriate, MML Bay State reserves the right to withdraw availability of a
Division of the Separate Account for further amounts being credited. In any
event, approval of the SEC must be obtained. MML Bay State reserves the right to
change the name of a Separate Account or to add Divisions to the Separate
Account for the purpose of investing in additional investment vehicles.
Additionally, we reserve the right to terminate the Contract: (a) if no purchase
payment has been received for at least two consecutive years measured from the
date we received the last purchase payment; and (b) if the Accumulated Value
less any deduction we would make for premium taxes, the Cash Redemption Value
and the unredeemed premium payments are all less than $2,000. Before exercising
this right, we will provide You with written notice of our decision.
Federal Tax Status
Introduction
The ultimate effect of federal income taxes on the value of the Contract, on
annuity payments, and on the economic benefit to the Contract Owner, Annuitant
or beneficiary depends on a variety of factors including the type of retirement
plan for which the Contract is purchased and the tax and employment status of
the individual concerned. The discussion contained herein is general in nature
and is not intended as tax advice. Each person concerned should consult a
competent tax adviser for complete information and advice. No attempt is made to
consider any applicable state or other local tax laws. Moreover, the discussion
herein is based upon MML Bay State's understanding of current federal income tax
laws as they are currently interpreted. No representation is made regarding the
likelihood of continuation of those current federal income tax laws or of the
current interpretations by the Internal Revenue Service ("IRS").
Tax Status of MML Bay State
Under existing federal law, no taxes are payable by MML Bay State on
investment income and realized capital gains of the Separate Account credited to
the Contracts. Accordingly, MML Bay State does not intend to make any charge to
the Separate Accounts to provide for company income taxes. MML Bay State may,
however, make such a charge in the future if an unanticipated construction of
current law or a change in law results in a company tax liability attributable
to the Separate Account.
MML Bay State may incur state and local taxes (in addition to premium taxes)
in several states. At present, these taxes are not significant. If they
increase, however, charges for such taxes attributable to the Separate Account
may be made.
Taxation of Contracts in General
Under Section 817(h) of the Internal Revenue Code (the "Code") a Contract
(other than one used in a tax-qualified retirement plan) will not be treated as
an annuity contract and will be taxed on the annual increase in earnings if, as
of the end of any quarter, the Funds, or the Fund on which the Contract is based
are not adequately diversified in accordance with regulations prescribed by the
Treasury Department. It is anticipated that the Trusts will comply with the
Code's diversification requirements.
Subject to certain annuity distribution rules (see - Annuity Distribution
Rules of Section 72(s)), annuity payments under the Contracts are taxable under
Section 72 of the Code. For contributions made after February 28, 1986, a
Contract Owner that is not a natural person will be taxed on the annual increase
in the earnings of a Contract unless the Contract Owner holds the Contract as
agent for a natural person. Otherwise, increases
18
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in the value of a Contract are not subject to tax until actually or
constructively received.
Amounts received prior to the Maturity Date from Contracts not under tax
qualified arrangements (see - Taxation of Qualified Plans TSAs and IRAs, for a
discussion of Contracts used in the qualified plan market) are subject to tax to
the extent of any earnings or gains in the Contract; amounts received which are
in excess of such earnings or gains are considered a return of capital.
Similarly, amounts borrowed upon the Contract will be treated as amounts
received under the Contract and will be taxable to the same extent. If an
individual Contract Owner transfers ownership, for other than full and adequate
consideration, the Contract Owner will be taxed on the transfer as though he or
she had taken a full redemption of the Contract. For Contracts entered into
after October 21, 1988, all annuity contracts issued by the same insurer and its
affiliates to the same Contract Owner within the same calendar year must be
aggregated in determining the amount of gain realized on a withdrawal from any
one.
If the Contract is obtained in a tax-free exchange of contracts under Section
1035 of the Code, different tax rules may apply. If a distribution prior to the
Maturity Date of a contract obtained in such an exchange is entirely
attributable to investments in the surrendered contract prior to August 14,
1982, the distribution will first be considered a return of capital to the
extent of those investments and only the amounts received in excess of those
investments will be regarded as taxable earnings or gains.
Penalty Taxes
In addition to the foregoing tax consequences, certain distributions under the
Contract will be subject to a penalty tax under Code Section 72(q) (for non-tax
qualified Contracts) or 72(t) (for Contracts in tax qualified plans see -
Taxation of Qualified Plans, TSAs and IRAs) of 10% of the amount of the
distribution that is includable in gross income. However, the following
distributions from non-tax qualified Contracts currently are not subject to the
penalty tax: (1) withdrawals made after the Contract Owner is 59 1/2 years old;
(2) payments made to a beneficiary (or to the estate of the Contract Owner) on
or after the death of the Contract Owner; (3) payments attributable to a
Contract Owner becoming disabled; or (4) substantially equal periodic payments
made (at least annually) for the lifetime (or life expectancy) of the Contract
Owner or for the joint lifetimes (or joint life expectancies) of the Contract
Owner and the beneficiary.
When monthly annuity payments commence, they are taxable as ordinary income in
the year of receipt to the extent that they exceed that portion of the
"Investment in the Contract" allocable to that year. The Investment in the
Contract will equal the gross amount of purchase payments made under the
Contract less any amount that was previously received under the Contract but was
not included in gross income. The Investment in the Contract would also be
increased by any amount that was previously included in gross income under the
Contract but was not received. This amount, divided by the anticipated number of
monthly annuity payments, gives the "excludable amount," which is the portion of
each annuity payment considered to be a return of capital and, therefore, not
taxable. Under this exclusion ratio,the total amount excluded from payments
actually received is limited to the Investment in the Contract. The rules for
determining the excludable amount are contained in Section 72 of the Code and
regulations thereunder and require adjustment when the payment option elected
provides a feature such as a guaranteed number of payments.
Annuity Distribution Rules of Section 72(s)
Annuity distribution requirements are imposed under Section 72(s) of the Code.
MML Bay State understands that these requirements do not apply to Contracts
issued to or under Qualified Plans.
Under Section 72(s), a Contract will not be treated as an annuity subject to
Section 72 of the Code, unless it provides for certain required distributions
from and after the date of death of the Contract Owner. The Contracts will be
endorsed before issue to provide that annuity payments be made only in
accordance with these distribution requirements, as applicable.
Tax Withholding
Certain tax withholding is imposed on payments that are made under the
Contracts (for Contracts in tax qualified plans, see - Taxation of Qualified
Plans, TSAs and IRAs). Withheld amounts do not constitute an additional tax, but
are fully creditable on the individual tax return of each payee who is affected
by tax withholding. Furthermore, no payments will be subject to the withholding
if (1) it is reasonable to believe that the payments are not includable in gross
income, or (2) the payee elects not to have withholding apply. The payee may
make such an election either by filing an election form with MML Bay State or,
in the case of redemptions, by following procedures that MML Bay State has
established to afford payees an opportunity to elect out of withholding. These
forms and procedures will be provided to payees by MML Bay State upon a request
for payment.
Unless the Payee elects not to have withholding apply (for Contracts in tax
qualified plans see - Taxation of Qualified Plans, TSAs and IRAs), MML Bay State
is required to withhold, for federal income tax purposes, 10% of the taxable
portion of any redemption payment or non-periodic distribution under the
Contracts. Periodic annuity payments under the Contracts are subject to
withholding at the payee's wage base rate. If the payee of these annuity
payments does not file an appropriate withholding certificate (obtainable from
any local IRS office) with MML Bay State, it will be presumed that the payee is
married claiming three exemptions.
Tax Reporting
MML Bay State is required to report all taxable payments and distributions to
the IRS and to the payees. Payees will receive reports of taxable payments and
distributions by January 31 of the year following the year of payment.
Taxation of Qualified Plans, TSAs and IRAs
The tax rules applicable to participants in retirement plans that qualify for
special federal income tax treatment ("Qualified Plans") vary according to the
type of plan and its terms and conditions.
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Increases in the value of a Contract are not subject to tax until received by
the employee or his beneficiary. Monthly annuity payments under Qualified Plans
are taxed as described above (see -TAXATION OF CONTRACTS IN GENERAL, except that
the "investment in the Contract" under a Qualified Plan is normally the gross
amount of purchase payment made by the employee under the Contract or made by
the employer on the employee's behalf and included in the employee's taxable
income when made.
If the Annuitant receives a distribution that qualifies as a "lump sum
distribution" under the Code, he or she may be eligible for special "5-year
averaging" treatment of the funds received (or "10-year averaging" treatment if
he or she was age 50 or older on January 1, 1986). TSAs and IRAs are not
eligible for the special treatment under the "lump sum distribution" rules.
Effective for calendar years beginning January 1, 2000, five year averaging of
lump-sum distributions will no longer be available.
Certain TSA contributions may not be distributed to the Annuitant until age
59 1/2, death, disability, separation of service or hardship. (See - Redemption
Privileges.) Distributions from Qualified Plans, IRAs and TSAs may be subject to
a 10% penalty tax on amounts withdrawn before age 59 1/2. However, the following
distributions from Qualified Plans (and TSAs and IRAs except as otherwise noted)
are not subject to the penalty: (1) payments made to a beneficiary (or the
estate of an Annuitant) on or after the death of the Annuitant; (2) payments
attributable to an Annuitant becoming disabled; (3) substantially equal periodic
payments made (at least annually) for the lifetime (or life expectancy) of the
Annuitant or for the joint lifetimes (or joint life expectancies) of the
Annuitant and the beneficiary (for Qualified Plans and TSAs, payments can only
begin after the employee separates from service); (4) payment for certain
medical expenses; (5) payment after age 55 and separation from service (not
applicable to IRAs); (6) payments to an alternate payee pursuant to a qualified
domestic relations order under Code Section 414(p) (not applicable to IRAs).
Excess retirement accumulations may be subject to a 15% penalty tax. Excess
distributions may be subject to a 15% excise tax (this provision is suspended
for 1997, 1998 and 1999); and (7) effective for calendar years beginning January
1, 1997, withdrawals from IRAs by certain unemployed persons for payment of
health insurance premiums.
IRAs are subject to limitations on the amount that may be contributed. The
deductibility of contributions by individuals or their spouses who are active
participants in an employer-maintained pension or profit-sharing plan may be
reduced based on the individual's adjusted gross income. In addition, certain
distributions from Qualified Plans and TSAs may be placed into an IRA on a tax-
deferred basis.
In general, tax law requires that minimum distributions be made from Qualified
Plans by 5% owners, and IRAs beginning at age 70 1/2, and from all others in
Qualified Plans and TSAs at the later of age 70 1/2 or when the employee
retires. To avoid penalty taxes of 50 percent or more, required distributions,
including distributions which should have been distributed in prior years,
should not be rolled over to IRAs.
Distributions from Qualified Plans and TSAs are subject to mandatory federal
income tax withholding. MML Bay State is required to withhold 20% when a payment
from a Qualified Plan or TSA is an "eligible rollover distribution" and such
payment is not directly rolled over to another Qualified Plan, TSA or IRA. In
general, an "eligible rollover distribution" is any taxable distribution other
than: (1) payments for the life (or life expectancy) of the Annuitant, or for
joint life (or joint life expectancies) of the Annuitant and the beneficiary;
(2) payments made over a period of ten years or more; and (3) required minimum
distributions (see above). Plan administrators should be able to tell Annuitants
what other payments are not "eligible rollover distributions".
Taxable distributions that are not "eligible rollover distributions" are
subject to the withholding rules for annuities (See - Tax Withholding.)
Performance Measures
MML Bay State may show the performance under the Contracts in the following
ways:
Standardized Average Annual Total Return
Except for Divisions of the Separate Account which have been in existence for
less than one year, MML Bay State will show the Standardized Average Annual
Total Return for a Division of the Separate Account which, as prescribed by the
rules of the SEC, is the effective annual compounded rate of return that would
have produced the cash redemption value over the stated period had the
performance remained constant throughout. The Standardized Average Annual Total
Return assumes a single $1000 payment made at the beginning of the period and
full redemption at the end of the period. It reflects a deduction for the Sales
Charge, the annual administrative charge and all other Fund, Separate Account,
and Contract level charges except premium taxes, if any. The annual
Administrative Charge will be apportioned among the Divisions of the Separate
Account based upon the percentages of Contracts investing in each of the
Divisions.
For Divisions of the Separate Account which have been in existence for less
than one year, MassMutual will show the aggregate total return as permitted by
the SEC. The aggregate total return assumes a single one thousand dollar payment
made at the beginning of the period and full redemption at the end of the
period. It reflects the change in unit value and a deduction of the contingent
deferred sales charge.
Additional Performance Measures
The performance figures discussed below may be calculated on the basis of the
historical performance of the Funds, and may assume that the Contracts were in
existence prior to the Inception Date (which they were not). Beginning the date
that the product became available to for sale to the public, actual Accumulation
Unit Values will be used for the calculations. Such Accumulation Unit Values
will be accompanied by the Standardized Average Annual Total Return described
above.
The difference between the first set of additional performance measures,
PERCENTAGE CHANGE and ANNUALIZED RETURNS on Accumulation Unit Values, and the
second set, the NON-STANDARDIZED ANNUAL and AVERAGE ANNUAL TOTAL RETURNS, is
that the second set is based on specified premium patterns and includes the
deduction of
20
<PAGE>
the annual Administrative Charge, whereas the first set does not. Additional
details are described below.
ACCUMULATION UNIT VALUES: PERCENTAGE CHANGE AND ANNUALIZED RETURNS
MML Bay State will show the PERCENTAGE CHANGE in the value of an Accumulation
Unit for a Division of the Separate Account with respect to one or more periods.
The ANNUALIZED RETURN, or average annual change in Accumulation Unit Values, may
also be shown with respect to one or more periods. For a one year period, the
Percentage Change and the Annualized Return are effective annual rates of return
and are equal. For periods greater than one year, the Annualized Return is the
effective annual compounded rate of return for the periods stated. Since the
value of an Accumulation Unit reflects the Separate Account and Trust expenses
(see Table of Fees and Expenses), the Percentage Change and Annualized Returns
also reflect these expenses. These percentages, however, do not reflect the
annual Administrative Charge and the Sales Charge or premium taxes (if any),
which if included would reduce the percentages reported. For periods of less
than one year, the percentage change in accumulation unit value may be shown.
The NON-STANDARDIZED ANNUAL TOTAL RETURN and the NON-STANDARDIZED AVERAGE
ANNUAL TOTAL RETURN reflect a deduction for the annual Administrative Charge as
well as reflecting deductions for the Separate Account expenses and the expenses
of the Trusts. They are based on specified premium patterns which produce the
resulting Accumulated Values. They do not include Sales Charges or premium taxes
(if any), which would reduce the percentages reported.
The NON-STANDARDIZED ANNUAL TOTAL RETURN for a Division is the effective
annual rate of return that would have produced the ending Accumulated Value, as
of the stated one-year period.
The NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN for a Division is the
effective annual compounded rate of return that would have produced the ending
Accumulated Value over the stated period had the performance remained constant
throughout.
Note: The NON-STANDARDIZED ANNUAL TOTAL RETURN will be less than the NON-
STANDARDIZED ANNUALIZED RETURN on Accumulation Unit values for the same period
due to the effect of the annual Administrative Charge. Additionally, the
magnitude of this difference will depend on the size of the Accumulated Value
from which the Annual Administrative Charge is deducted.
YIELD AND EFFECTIVE YIELD. MML Bay State may also show yield and effective
yield figures for the Money Market and Money Fund Divisions of the Separate
Account. "Yield" refers to the income generated by an investment in the Money
Market and Money Fund Divisions over a seven-day period, which is then
"annualized". That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in these
divisions is assumed to be re-invested. Therefore the effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment. These figures will reflect a deduction for Fund, Separate Account,
and certain Contract level charges, and the Annual Administrative Charge
assuming such Contract remains in force. The Administrative Charge is based on a
hypothetical contract where such charge is applicable. These figures do not
reflect the Sales Charge or premium taxes, (if any), which if included would
reduce the yields reported.
The performance measures discussed above reflect results of the Funds and are
not intended to indicate or predict future performance. For more detailed
information, see the Statement of Additional Information.
Performance information for the Separate Account Divisions may be: (a)
compared to other variable annuity separate accounts or other investment
products surveyed by Lipper Analytical Services, Inc. a nationally recognized
independent reporting service or similar services that rank mutual funds and
other investment companies by overall performance, investment objectives and
assets; (b) tracked by other ratings services, companies, publications or
persons who rank separate accounts or other investment products on overall
performance or other criteria; and (c) included in data bases that produce
reports and illustrations by organizations such as CDA Weisenberger. Performance
figures will be calculated in accordance with standardized methods established
by each reporting service.
Additional Information
For further information about the Contracts, You may obtain a Statement of
Additional Information prepared by MML Bay State.
The Table of Contents of this Statement is as follows:
1. General Information and History
2. Service Arrangements and Distribution
3. Contract Value Calculations and Annuity Payments
4. Performance Measures
5. Reports of Independent Accountants and Financial Statements.
Section 5 of the Statement of Additional Information contains financial
statements for MML Bay State.
21
<PAGE>
This Prospectus sets forth the information about Separate Account 1 that a
prospective investor ought to know before investing. Certain additional
information about the Separate Accounts is contained in a Statement of
Additional Information dated May 1, 1997 which has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. The
Table of Contents for the Statement of Additional Information appears on page 21
of this Prospectus. To obtain a copy, return this request form to the address
shown below or telephone 1-800-258-4511.
................................................................................
To: MassMutual and Affiliated Companies Service Center
Continuum Administrative Services Corporation
301 West 11th Street
Kansas City, MO 64105
Please send me a Statement of Additional Information for LifeTrust.
Name
----------------------------------------------------------------
Address
----------------------------------------------------------------
----------------------------------------------------------------
City State Zip
--------------------- ------------------- ------------
Telephone
----------------------------------------------------------------
22
<PAGE>
OppenheimerFunds LifeTrust Variable Annuity
---------------------------
MML BAY STATE LIFE INSURANCE COMPANY
(DEPOSITOR)
MML BAY STATE VARIABLE ANNUITY SEPARATE ACCOUNT 1
(REGISTRANT)
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the prospectus of MML Bay State Variable Annuity Separate
Account 1 dated May 1, 1997 (the "Prospectus"). The Prospectus may be obtained
from the MML Bay State Service Center, c/o ALLIANCE-ONE Services, L.P., 301 West
11th Street, Kansas City, MO (800) 258-4511
May 1, 1997
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
General Information and History..............................................................................2
Service Arrangements and Distribution........................................................................5
Contract Value Calculations For
Amounts Allocated to an Investment
Division of a Separate Account...............................................................................7
Performance Measures........................................................................................11
Reports of Independent
Accountants and Financial
Statements.........................................................................................Final Pages
</TABLE>
7
<PAGE>
GENERAL INFORMATION AND HISTORY
MML Bay State
-------------
MML Bay State Life Insurance Company ("MML Bay State") is a corporation
established under the laws of Missouri. Formerly known as Western Life Insurance
Company of America, its name was changed to MML Bay State following the purchase
by Massachusetts Mutual Life Insurance Company ("MassMutual") of all of the
Company's issued and outstanding stock. MML Bay State is licensed to transact a
life, accident and health insurance business in all states except New York. As
of February 28, 1997, MML Bay State has obtained approval to write variable
annuity business in 44 states and the District of Columbia, and currently plans
to seek such authority in all states except for New York.
MML Bay State's Home Office is located in Jefferson City, Missouri. The Service
Center for Contracts is located at ALLIANCE-ONE Services, L.P., Kansas City, MO.
MassMutual currently plans to redomesticate MML Bay State from the State of
Missouri to the State of Connecticut. MassMutual believes that the proposed
redomestication will not adversely effect policy owners.
OppenheimerFunds, Inc.
----------------------
OppenheimerFunds, Inc. ("OFI") is a corporation organized under the laws of the
state of Colorado. It has operated as an investment adviser since April 30,
1959. It (including a subsidiary) currently advises U.S. investment companies
with assets aggregating over $62 billion as of December 31, 1996, and having
over 3 million shareholder accounts. OFI is owned by Oppenheimer Acquisition
Corp., a holding company owned in part by senior management of OFI, and
ultimately controlled by MassMutual.
The Separate Account
--------------------
MML Bay State Variable Annuity Separate Account 1 (the "Separate Account") was
established as a separate investment account of MML Bay State on January 14,
1994, in accordance with the provisions of Chapter 309.376 of Missouri Statutes.
The Separate Account is registered as a unit investment trust under the
Investment Company Act of 1940. A unit investment trust is a type of investment
company which invests its assets in the shares of one or more management
investment companies rather than directly in its own portfolio of investment
securities. Registration under the Investment Company Act of 1940 does not
involve supervision of the management or investment practices or policies of the
Separate Account or of MML Bay State. Under Missouri law, however, both MML Bay
State and the Separate Account are subject to regulation by the Insurance
Department of the State of Missouri.
The Separate Account is divided into thirteen Divisions. Four of the Divisions
(MML Equity, MML Managed Bond, MML Blend, and MML Money Market) invest in
corresponding shares of MML Series Investment Fund ("MML Trust"). The remaining
nine Divisions (Oppenheimer Money, Oppenheimer High Income, Oppenheimer Bond,
Oppenheimer Capital Appreciation, Oppenheimer Growth, Oppenheimer Multiple
Strategies, Oppenheimer Global Securities, Oppenheimer Strategic Bond, and
Oppenheimer Growth & Income) invest in corresponding shares of Oppenheimer
Variable Account Funds (the "Oppenheimer Trust" and collectively with MML Trust,
the "Trusts"). MML Bay State reserves the right to add additional divisions or
separate accounts. The value of both Accumulation Units (see "The Accumulation
---
(Pay-In) Period" section in the prospectus) and Annuity Units (see "The Annuity
---
(Pay Out) Period" section in the prospectus) in each Division reflects the
investment results of its underlying Fund.
Although the assets of the Separate Account are assets of MML Bay State, assets
of the Separate Account equal to the reserves and other annuity contract
liabilities which depend on the investment performance of the Separate Account
are not chargeable with liabilities arising out of any other business MML Bay
State may conduct. The
8
<PAGE>
income and capital gains and losses, realized or unrealized, of each Division of
a Separate Account are credited to or charged against such Division without
regard to the income and capital gains and losses of the other Divisions or
other accounts of MML Bay State. All obligations arising under MML Bay State
Variable Annuity Contracts (the "Contracts"), however, are general corporate
obligations of MML Bay State.
The Trusts
----------
1. The MML Trust
-------------
The MML Trust is a no-load, open-end management investment company consisting of
five separate series of shares. The Separate Account invests in MML Equity Fund,
MML Money Market Fund, MML Managed Bond Fund, and MML Blend Fund (the "MML
Funds") each of which has its own investment objectives and policies. MassMutual
organized the MML Trust for the purpose of providing vehicles for the investment
of assets held in various separate investment accounts, including the Separate
Account, established by MassMutual or its life insurance company subsidiaries
such as MML Bay State. A statement of additional information concerning the MML
Trust is available upon request from the Service Center.
2. The Oppenheimer Trust
---------------------
The Oppenheimer Trust is an open-end, diversified management investment company
consisting of the following funds: Oppenheimer Global Securities Fund,
Oppenheimer High Income Fund, Oppenheimer Money Fund, Oppenheimer Strategic Bond
Fund, Oppenheimer Capital Appreciation Fund, Oppenheimer Multiple Strategies
Fund, Oppenheimer Bond Fund, Oppenheimer Growth Fund, and Oppenheimer Growth &
Income Fund. Each of these funds is available to Contract Owners. The
Oppenheimer Trust was organized for the purpose of providing funds to variable
life and annuity contracts, and exemptive relief permitting such sales has been
obtained from the Securities and Exchange Commission ("SEC"). Shares of the
Trusts are not available to the public. A statement of additional information
concerning the Oppenheimer Trust is available upon request from the Service
Center.
3. General Information Concerning the Trusts
-----------------------------------------
A Separate Account purchases and redeems shares of specified funds at their net
asset value without the imposition of any sales or redemption charge.
Distributions made on the shares of each Fund held by a Division of a Separate
Account are immediately reinvested in shares of a corresponding Fund at net
asset value, which shares are added to the assets of the appropriate Division of
the Separate Account. MassMutual serves as investment manager of each of the MML
Funds pursuant to separate investment management agreements executed by
MassMutual and each of the MML Funds. Concert Capital Management, Inc.
("Concert") served as the investment sub-advisor to MML Equity Fund and the
Equity Sector of the MML Blend Fund from 1993-1996. Concert merged with and into
David L. Babson & Company, Inc. ("Babson") effective December 31, 1996. Both
Concert and Babson are wholly-owned subsidiaries of Babson Acquisition
Corporation, which is a controlled subsidiary of MassMutual. Thus, effective
January 1, 1997, Babson serves as the investment sub-advisor to MML Equity Fund
and the Equity Sector of the MML Blend Fund. Both MassMutual and Babson are
registered as investment advisers under the Investment Advisers Act of 1940.
OFI serves as investment adviser to the Funds of the Oppenheimer Trust. OFI is
registered as an investment adviser under the Investment Advisers Act of 1940.
The Prospectus and Statement of Additional Information for both the MML Trust
and the Oppenheimer Trust contain a description of their respective Funds, their
investment objectives, policies and restrictions, their expenses, the risks
attendant therein, and aspects of their operation.
9
<PAGE>
Possible Conflicts
------------------
1. MML Trust
---------
Assets of Massachusetts Mutual Variable Life Separate Accounts I and II and MML
Bay State Variable Life Separate Account I are invested in the MML Funds.
Because Massachusetts Mutual Variable Annuity Separate Account 1, 2, and 3 and
MML Bay State Variable Annuity Separate Account 1 are also invested in the MML
Funds, it is possible that material conflicts could arise between owners of the
Contracts and owners of variable life insurance policies funded by the separate
accounts listed above. Possible conflicts could arise if: (i) state insurance
regulators should disapprove of or require changes in investment policies,
investment advisers or principal underwriters, or if MassMutual or MML Bay State
should be permitted to act contrary to actions approved by holders of the
variable life insurance policies under rules of the SEC; (ii) adverse tax
treatment of the Contracts or other variable contracts would result from using
the same Funds; (iii) different investment strategies would be more suitable for
the Contracts than for other variable contracts; or (iv) state insurance laws or
regulations or other applicable laws would prohibit the funding of variable
annuity separate accounts and variable life separate accounts by the same MML
Funds. The Board of Trustees of the MML Trust will follow monitoring procedures
which have been developed to determine whether material conflicts have arisen.
Such Board will have a majority of Trustees who are not interested persons of
the MML Trust, and determinations whether or not a material conflict exists will
be made by a majority of such disinterested Trustees. If a material
irreconcilable conflict exists, MML Bay State and MassMutual will take such
action at their own expense as may be required to cause Massachusetts Mutual
Variable Life Separate Accounts I and II and MML Bay State Variable Life
Separate Account I to be invested solely in shares of mutual funds which offer
their shares exclusively to variable life insurance separate accounts unless, in
certain cases, the holders of both the variable life insurance policies and the
variable annuity contracts vote not to effect such segregation.
2. Oppenheimer Trust
-----------------
The Oppenheimer Trust was established for use as an investment vehicle by
variable contract separate accounts such as the Separate Accounts. Accordingly,
it is possible that a material irreconcilable conflict may develop between the
interests of Contract Owners and other separate accounts investing in the
Oppenheimer Trust. The Board of Trustees of the Oppenheimer Trust (the "Board")
will monitor the Oppenheimer Funds for the existence of any such conflicts. If
it is determined that a conflict exists, the Board will notify MML Bay State and
appropriate action will be taken to eliminate such irreconcilable conflict. Such
steps may include: (1) withdrawing the assets allocable to some or all of the
separate accounts from the particular Oppenheimer Fund and reinvesting such
assets in a different investment medium, including (but not limited to) another
Oppenheimer Fund; (2) submitting the question to whether such segregation should
be implemented to a vote of all affected Contract Owners; and (3) establishing a
new registered management investment company or managed separate account.
Assignment of Contract
----------------------
MML Bay State will not be charged with notice of any assignment of a Contract or
of the interest of any beneficiary or of any other person unless the assignment
is in writing and MML Bay State receives at its Service Center a true copy
thereof. MML Bay State assumes no responsibility for the validity of any
assignment.
While the Contracts are generally assignable, all non-tax qualified Contracts
must carry a non-transferability endorsement which precludes their assignment.
For qualified Contracts, the following exceptions and provisions should be
noted:
(1) No person entitled to receive annuity payments under a Contract or
part or all of the Contract's value will be permitted to commute, anticipate,
encumber, alienate or assign such amounts, except upon the written authority of
the Contract Owner given during the Annuitant's lifetime and received in good
order by MML Bay
10
<PAGE>
State at its Service Center. To the extent permitted by law, no Contract nor any
proceeds or interest payable thereunder will be subject to the Annuitant's or
any other person's debts, contracts or engagements, nor to any levy or
attachment for payment thereof;
(2) If an assignment of a Contract is in effect on the maturity date,
MML Bay State reserves the right to pay to the assignee in one sum the amount of
the Contract's maturity value to which he is entitled, and to pay any balance of
such value in one sum to the Contract Owner, regardless of any payment options
which the Contract Owner may have elected. Moreover, if an assignment of a
Contract is in effect at the death of the Annuitant or Owner prior to the
maturity date, MML Bay State will pay to the assignee in one sum, to the extent
that he or she is entitled, the death benefit available under the Contract.
Please consult The Death Benefit section of the prospectus for more information;
-----------------
(3) Contracts used in connection with annuity purchase plans adopted by
public school systems and certain tax-exempt organizations pursuant to Section
403(b) of the Code ("tax-sheltered annuities" or "TSAs") must be endorsed to
provide that they are non-transferable; and
(4) Contracts issued under a plan for an Individual Retirement Annuity
pursuant to Section 408 of the Code must be endorsed to provide that they are
non-transferable. Such Contracts may not be sold, assigned, discounted, or
pledged as collateral for a loan or as security for the performance of an
obligation or for any other purpose by the Annuitant to any person or party
other than MML Bay State, except to a former spouse of the Annuitant in
accordance with the terms of a divorce decree or other written instrument
incident to a divorce.
Assignments may be subject to federal income tax.
RESTRICTIONS ON REDEMPTION
Redemptions of TSAs may be restricted as required by Section 403(b) (11) of the
Internal Revenue Code (see, "Tax-Sheltered Annuity Redemption Restrictions" in
the prospectus for details). In restricting any such redemption, MassMutual
relies on the relief from sections 22(e), 27(c) and 27(d) of the Investment
Company Act of 1940 granted in American Council of Life Insurance [1988 Transfer
Binder] Fed. Sec. L. Rep (CCH) 78,904 (November 22, 1988) (the "No Action
Letter"). In relying on such relief, MassMutual hereby represents that it
complies with the provisions of paragraphs (1) - (4) as set forth in the No
Action Letter.
SERVICE ARRANGEMENTS AND DISTRIBUTION
Independent Accountants
-----------------------
The financial statements of the Separate Account and the statutory financial
statements of MML Bay State included in this Statement of Additional Information
have been included herein in reliance on the reports of Coopers & Lybrand
L.L.P., Springfield, Massachusetts 01101, independent accountants, given on the
authority of that firm as experts in accounting and auditing. Coopers &
Lybrand's report includes explanatory paragraphs relating to the use of
statutory accounting practices rather than generally accepted accounting
principles.
Distribution and Administration
-------------------------------
Effective May 1, 1996, MML Distributors, LLC ("MML Distributors"), a
wholly-owned subsidiary of MassMutual, became the principal underwriter for the
contract pursuant to an Underwriting and Servicing Agreement among MML Bay
State, MML Distributors and the Separate Account. Prior to May 1, 1996, MML
Investors Services, Inc. ("MMLISI"), also a wholly-owned subsidiary of
MassMutual, served as principal underwriter for the Separate Account. Effective
May 1, 1996, MMLISI serves as co-underwriter for the Separate Account.
11
<PAGE>
MML Distributors may enter into selling agreements with other broker-dealers
which are registered with the SEC as broker-dealers under the Securities
Exchange Act of 1934 and are members of the National Association of Securities
Dealers, Inc. ("selling brokers"). The Contract is sold through agents who are
licensed by state insurance department officials to sell the Contract. These
agents are also registered representatives of selling brokers or MMLISI. The
Contract will be offered on a continuous basis in certain states where MML Bay
State has the authority to write variable annuity business and the Contract has
been approved.
Pursuant to the Underwriting and Servicing Agreement, both MML Distributors and
MMLISI will receive compensation for their activities as underwriters for each
Separate Account. Compensation paid to MMLISI in 1996 was $15,000. Compensation
paid to MML Distributors in 1996 was $17,217. Commissions will be paid through
MMLISI and MML Distributors to agents and selling brokers for selling the
Contracts. During 1996, 1995 and 1994, such payments amounted to $10,362,608,
$2,899,557 and $2,061 respectively.
An Administration Agreement among MassMutual, MML Bay State, ALLIANCE-ONE
Services, L.P. ("ALLIANCE-ONE") and the Separate Account has been entered into
pursuant to which ALLIANCE-ONE has agreed to provide: all services required for
the administration of those Contracts which depend in whole or in part on the
investment performance of the Separate Account. Additionally, pursuant to such
Agreement, ALLIANCE-ONE will keep such other records as may be mandated by state
and federal laws and regulations. ALLIANCE-ONE will operate MML Bay State's
Service Center and will respond to Contract Owner inquiries concerning the
status of their Contracts.
The Agreement may be terminated by the parties without the payment of any
penalty upon 180 days written notice. The agreements immediately terminate in
the event of their assignment (as that term is defined under the Investment
Company Act of 1940). The agreements may be amended at any time by the mutual
consent of the parties. Contract Owners will not receive notice with respect to
changes in the agreements.
The offering of the Contracts is continuous.
Purchase of Securities Being Offered
------------------------------------
Interests in the Separate Account are sold to Contract Owners as accumulation
units. Charges associated with such securities are discussed in the Charges and
-----------
Deductions Section of the prospectus for the Contract. The Contract does not
- ----------
offer any special purchase plan or exchange program not discussed in the
prospectus. (For a discussion of instances when sales charges will be waived,
see Contingent Deferred Sales Charges Section of the prospectus.)
---------------------------------
12
<PAGE>
CONTRACT VALUE CALCULATIONS FOR AMOUNTS ALLOCATED TO AN
INVESTMENT DIVISION OF A SEPARATE ACCOUNT
The Accumulation (Pay-In) Period
--------------------------------
Valuation Date, Valuation Time and Valuation Period
---------------------------------------------------
Each day on which the net asset value of the shares of any of the Funds is
determined is a "Valuation Date." The value of shares of the Funds held in the
Separate Account is determined as of the "Valuation Time," which is the time of
the close of trading on the New York Stock Exchange (currently 4:00 p.m. New
York time) on a Valuation Date. A "Valuation Period" is the period, consisting
of one or more days, from one Valuation Time to the next succeeding Valuation
Time.
Accumulation Unit Value
-----------------------
The value of an Accumulation Unit (the "Accumulation Unit Value") for each
Division of the Separate Account will vary from Valuation Date to Valuation
Date. The initial Accumulation Unit Value for each Division was set at
$1.000000. The Accumulation Unit Value for each Division on any date thereafter
is equal to the product of the "Net Investment Factor" for that Division (as
defined below) for the Valuation Period which includes such date and the
Accumulation Unit Value for that Division on the preceding Valuation Date.
Purchase of Accumulation Units in a Division
--------------------------------------------
of a Separate Account
---------------------
You may allocate purchase payments among the investment Divisions of the
Separate Account and to the Fixed Account, where available. At the end of each
Valuation Period MML Bay State will apply your purchase payment (after deducting
any applicable premium taxes) to each Separate Account Division that you have
allocated in order to purchase Accumulation Units of the designated Division(s).
These Accumulation Units will be used in determining the value of amounts in the
Separate Account credited to the Contract on or prior to the maturity date and
the amount of variable annuity benefits at maturity. The value of the
Accumulation Units in each Division will vary with and will reflect the
investment performance and expenses of that Division (which in turn will reflect
the investment performance of the corresponding Fund in which the assets of the
Division are invested), any applicable taxes and the applicable Asset Charge.
The Accumulation Unit Value is determined as of the Valuation Time. Provided
that the Contract application is complete, Accumulation Units are purchased at
their Accumulation Unit Value within two days of the date a purchase payment is
received in good order at the Service Center. If the date of receipt is not a
Valuation Date, or if the purchase payment is received after the Valuation Time
or other than by mail or wire transfer, the value of the Accumulation Units
purchased will be determined within two days of the next Valuation Time
following the date the payment is received. If an initial purchase payment is
not applied within five business days after receipt (due to incomplete or
ambiguous Application information, for example) the payment amount will be
refunded unless specific consent to retain the payment for a longer period is
obtained from the prospective purchaser. For subsequent purchase payments, the
Valuation Date will be the date which is on or next follows the date of receipt.
Amounts allocated to a Fixed Account will earn interest at a Guaranteed Rate for
the Guarantee Period. If, however, a Contract Owner redeems amounts held in the
Fixed Account, or transfers such sums before the Expiration Date of the selected
Accumulated Amount, such sums will be subject to a Market Value Adjustment
("MVA"). The application of the MVA may operate to provide a yield which is less
than the return generated pursuant to the Guarantee Rate. If an applicable
Segment is not available, then the formula used to calculate the Guaranteed Rate
available as of the effective date of the application of the MVA (referred to as
"j" in the formula described in the Market Value Adjustment section of the
-----------------------
prospectus) will be determined by interpolation or extrapolation of the
Guaranteed Rates for the Segments then available. (Please consult the prospectus
for the Fixed Account for more information).
13
<PAGE>
Net Investment Factor
---------------------
The Net Investment Factor for each Division for any Valuation Period is equal to
the sum of the Gross Investment Rate for that Division (as defined below) for
the Valuation Period and 1.000000, decreased by the applicable Asset Charge.
The Net Investment Factor may be greater than or less than 1.000000.
Gross Investment Rate
---------------------
The Gross Investment Rate for each Division of the Separate Account is equal to
the net earnings of that Division during the Valuation Period, divided by the
value of the net assets of that Division at the beginning of the Valuation
Period. The net earnings of the Division is equal to the accrued investment
income and capital gains and losses (realized and unrealized) of that Division
and an adjustment for taxes paid or provided for. The Gross Investment Rate will
be determined in accordance with generally accepted accounting principles and
applicable laws, rules and regulations. The Gross Investment Rate may be
positive or negative.
The policy of the Separate Account is to take dividends and capital gain
distributions on shares of the Funds held by the Separate Account in additional
shares and not in cash.
See the General Formulas section below for the general formulas which may be
----------------
used to compute the value of an Accumulation Unit for any Division of the
Separate Account, and for an explanation of how a hypothetical illustration
using such formulas may be developed.
The Annuity (Pay-Out) Period
----------------------------
When your Contract approaches its maturity date, you may choose to have the
Maturity Value of the Contract provide you at maturity with either Fixed Income
payments (referred to as the "Fixed Income Option" in your Contract), Variable
Monthly Income payments [referred to as the "Variable Monthly Income Option" in
your Contract], or a combination of the two. You also may elect to receive the
Maturity Value in one lump sum. Fixed or Variable Monthly Income payments may be
received under several different payment options. If you have made no election
within 30 days prior to the maturity date, the Contract will provide you with
the automatic payment of a Variable Monthly Income under a life income option
with payments guaranteed for 10 years.
Fixed Income
------------
If you select a Fixed Income, then each annuity payment will be for a
fixed-dollar amount and will not vary with or reflect the investment performance
of the Separate Account or its Divisions. For further information regarding the
type of annuity benefit and the payment options available thereunder, you should
refer to your Contract.
Variable Monthly Income
-----------------------
If you select a Variable Monthly Income, then each annuity payment will be based
upon the value of the Annuity Units. This value will vary with and reflect the
investment performance of each Division to which Annuity Units are credited. The
number of Annuity Units will not vary, but will remain fixed during the annuity
period unless a Contract Owner makes transfers to another Division or a joint
and survivor Payment Option with reduced survivor income (as described in the
Prospectus). Variable Monthly Income payments will be made by withdrawal of
assets from the Separate Account.
Annuity Units and Monthly Payments
----------------------------------
The number of Annuity Units in each Division to be credited to a Contract is
determined in the following manner. First, the value of amounts attributable to
a Contract for each Division of the Separate Account is determined by
multiplying the number of Accumulation Units credited to a Division on the
maturity date of the Contract by the Accumulation Unit Value of that Division on
the Payment Calculation Date for the first Variable Monthly Income
14
<PAGE>
payment. Such value is then multiplied by the "purchase rate" (as defined below)
to determine the amount of the first Variable Monthly Income payment
attributable to each Division. Finally, the amount of the first Variable Monthly
Income payment attributable to each Division is divided by the Annuity Unit
Value for that Division on the Payment Calculation Date for such payment to
determine the number of Annuity Units for that Division.
The dollar amount of each Variable Monthly Income payment (other than the first
payment under a Contract) is equal to the sum of the products obtained by
multiplying the number of Annuity Units in each Division credited to the
Contract by their value (the "Annuity Unit Value") on the Payment Calculation
Date.
Purchase Rate
-------------
The purchase rate for each Division is the amount of Variable Monthly Annuity
payment purchased by each $1,000 applied to that Division. The purchase rates
which will be applied will be those specified in the Contract or those in use by
MML Bay State when the first Variable Monthly Income payment is due, whichever
provides the higher income. The purchase rate will differ according to the
payment option elected. Such rate takes into account the age and year of birth
of the Annuitant or Annuitants. The sex of the Annuitant or Annuitants will also
be considered unless the Contract is issued on a unisex basis, including cases
issued in connection with an employer-sponsored plan covered by the United
States Supreme Court case of Arizona Governing Committee v. Norris.
Assumed Investment Rates
------------------------
The Assumed Investment Rate for each Separate Account Division will be 4% per
annum unless a lower rate is required by state law. The Assumed Investment Rate
will affect the amount by which Variable Monthly Income payments will vary from
month to month. If the actual net investment performance for a Division for the
period between the date any Variable Monthly Income payment is determined and
the date the next Variable Monthly Income payment is determined is equivalent on
an annual basis to an investment return at the Assumed Investment Rate, then the
amount of the next payment attributable to that Division will be equal to the
amount of the last payment. If such net investment performance for a Division is
equivalent to an investment return greater than the Assumed Investment rate, the
next payment attributable to that Division will be larger than the last; if such
net investment performance for a Division is equivalent to a return smaller than
the Assumed Investment Rate, then the next payment attributable to that Division
will be smaller than the last.
Annuity Unit Value
------------------
The Annuity Unit Value for a Division depends on the Assumed Investment Rate and
on the Net Investment Factor for that Division. In 1994, the initial Annuity
Unit Value for each Division was set at $1.000000. An Annuity Unit Value for a
Division on any date thereafter is equal to the Net Investment Factor for the
Valuation Period which includes such date divided by the sum of 1.000000 plus
the rate of interest for the number of days in such Valuation Period at an
effective annual rate equal to the Assumed Investment Rate, and multiplied by
the Annuity Unit Value for the Division on the preceding Valuation Date.
15
<PAGE>
General Formulas
----------------
General Formulas to Determine Accumulation Unit Value and
---------------------------------------------------------
Annuity Unit Value for any Division of the Separate Account
-----------------------------------------------------------
<TABLE>
<S> <C>
Gross Investment = Net Earnings during Valuation Period
Rate ------------------------------------
Value of Net Assets at beginning of
Valuation Period
Net Investment = Gross Investment Rate + 1.000000 -
Factor Asset Charge
Accumulation = Accumulation Unit Value on Preceding
Unit Value Valuation Date X Net Investment Factor
Annuity Unit Value on Preceding Valuation
Date X Net Investment Factor
----------------------------
Annuity Unit = 1.000000 + rate of interest for days in
Value current Valuation Period at Assumed
Investment Rate
</TABLE>
Illustration of Computation of Accumulation
-------------------------------------------
and Annuity Unit Value Using Hypothetical Example
-------------------------------------------------
The above computations may be illustrated by the following hypothetical example:
Assume that the net earnings of the Division for the Valuation Period were
$11,760; that the value of net assets at the beginning of the Valuation Period
was $30,000,000; that the Asset Charge was .000038 per day; that the values of
an Accumulation Unit and an Annuity Unit in the Division of the Separate Account
on the preceding Valuation Date were $1.135000 and $1.067000, respectively, that
the corresponding Assumed Investment Rate was 4% and that the Valuation Period
was one day.
The Gross Investment Rate for the Valuation Period would be .000392 ($11,760
divided by $30,000,000). The Net Investment Factor would be 1.000354 (.000392
plus 1.000000 minus .000038). The new Accumulation Unit Value would be $1.1354
($1.135000 x 1.000354). At an effective annual rate of 4%, the rate of interest
for one day is .000107, and the new Annuity Unit Value would be $1.0673
($1.067000 x 1.000354 divided by 1.000107).
General Formulas to Determine Variable Monthly Income
-----------------------------------------------------
Payments and Number of Annuity Units for any Division of the
------------------------------------------------------------
Separate Account
----------------
<TABLE>
<S> <C>
First Variable = Accumulation Units Applied X
Monthly Income Accumulation Unit Value on Payment Calculation
Payment Date for First Variable Monthly Annuity Payment
Number of Annuity = First Variable Monthly Annuity Payment
Units --------------------------------------
Annuity Unit Value on Payment Calculation Date
for First Variable Monthly Income Payment
Amount of Subsequent = Number of Annuity Units X Annuity Unit
Value Variable Value on the Applicable Payment
Income Payments Calculation Date
</TABLE>
16
<PAGE>
Illustration of Computation of Variable Monthly Income
------------------------------------------------------
Payments for a Contract Using Hypothetical Example
--------------------------------------------------
The above computations may be illustrated by the following hypothetical example:
Assume that 35,000 Accumulation Units in a Division of the Separate Account were
to be applied; that the purchase rate for the Assumed Investment Rate and
payment option elected was $5.65 per $1,000; that the Accumulation Unit Value of
such Division on the Payment Calculation Date for the first Variable Monthly
Income payment was $1.350000; and that the Annuity Unit Value of such Division
on the Payment Calculation Date for the first Variable Monthly Income was
$1.200000 and for the second Variable Monthly Income payment was $1.20050.
The first Variable Monthly Income payment would be $266.96 (35,000 X 1.350000 X
.005650). The number of Annuity Units of such Division credited would be 222.467
($266.96 divided by $1.200000). The amount of the second Variable Monthly Income
payment would be $267.07 (222.467 X $1.200500). If the Contract has Annuity
Units credited in more than one Division of a Separate Account, the above
computation would be made for each Division and the Variable Monthly Income
Payment would be equal to the sum thereof.
PERFORMANCE MEASURES
MML Bay State may show the performance for the Divisions of the Separate Account
in the following ways:
Standardized Average Annual Total Return
----------------------------------------
MML Bay State will show the "SEC Average Annual Total Return," formulated as
prescribed by the rules of the SEC, for each Division of the Separate Account
except any Division which has been in existence for less than one year. The
Standardized Average Annual Total Return is the effective annual compounded rate
of return that would have produced the cash redemption value over the stated
period had the performance remained constant throughout. The calculation assumes
a single $1,000 payment made at the beginning of the period and full redemption
at the end of the period. It reflects a deduction for the contingent deferred
sales charge, the annual Administrative Charge and all other Fund, Separate
Account and Contract level charges except premium taxes, if any. The annual
administrative charge will be apportioned among the Divisions of the Separate
Account based upon the percentages of in force Contracts investing in each of
the Divisions. For any Division which has been in existence for less than one
year, MML Bay State will show the aggregate total return as permitted by the
SEC. This aggregate total return will reflect the change in unit value and a
deduction for the contingent deferred sales charge. The Company may choose to
show Standardized Average Annual Total Returns based on inception of the
underlying Fund.
The following table shows the aggregate total return for the Divisions of the
Separate Account for the period ending December 31, 1996.
<TABLE>
<CAPTION>
Since Inception
1 Year 5 Years 10 Years (date shown)
------ ------- -------- -----------
<S> <C> <C> <C> <C>
MML Equity 13.07% 12.79% 11.98%
MML Managed Bond -3.63 5.45 6.79
MML Blend 6.91 9.69 10.28
Oppenheimer Global Securities 10.12 10.24 N/A 2.08% 11/12/90
Oppenheimer Capital Appreciation 12.65 14.49 14.59
Oppenheimer Growth 17.60 14.00 12.39
Oppenheimer Multiple Strategies 8.19 9.60 N/A 12.79 2/2/87
Oppenheimer High Income 8.05 12.89 12.16
Oppenheimer Bond -2.13 5.82 7.23
Oppenheimer Strategic Bond 4.84 N/A N/A 8.25 5/3/93
Oppenheimer Growth and Income 25.15 N/A N/A 35.27 7/3/95
</TABLE>
17
<PAGE>
Additional Performance Measures
-------------------------------
The performance figures discussed below, may be calculated on the basis of the
historical performance of the Funds, and may assume the Contracts were in
existence prior to their inception date, (which they were not). Beginning the
date the Contracts became available, actual Accumulation Unit values are used
for the calculations. These returns may be based on specified premium patterns
which produce the resulting Accumulated Values. They reflect a deduction for the
Separate Account expenses, MML Trust expenses, Oppenheimer Trust expenses, and
the annual Administrative Charge. They do not include contingent deferred sales
charges or premium taxes (if any), which if included would reduce the
percentages reported.
The difference between the first set of additional performance measures,
ANNUALIZED RETURNS on Accumulation Unit Values, and the second set, the
NON-STANDARDIZED ANNUAL and AVERAGE ANNUAL TOTAL RETURNS, is that the second set
includes the deduction of the annual Administrative Charge, whereas the first
set does not.
ACCUMULATION UNIT VALUES
ANNUALIZED RETURNS
The ANNUALIZED RETURN, or average annual change in Accumulation Unit values, may
be shown with respect to one or more periods. For one year, the Annualized
Return is the effective annual rate of return. For periods greater than one
year, the Annualized Return will be the effective annual compounded rate of
return for the periods stated. Since the value of an Accumulation Unit reflects
the expenses of the Separate Account and Trust (See Table of Fees and Expenses
of the Prospectus), the Annualized Returns also reflect these expenses. These
percentages, however, do not reflect contingent deferred sales charge or premium
taxes (if any), which if included would reduce the percentages that MML Bay
State reports.
Annualized Accumulation Unit Value Return
For Period Ending 12/31/96
<TABLE>
<CAPTION>
Since Inception
1 Year 3 Years 5 Years 10 Years (date shown)
------ ------- ------- -------- ------------
<S> <C> <C> <C> <C> <C>
MML Equity 18.62% 16.36% 13.14% 12.08%
MML Managed Bond 1.83 4.33 5.79 6.84
MML Blend 12.40 11.37 10.01 10.34
Oppenheimer Global Securities 15.94 2.81 10.83 N/A 9.11% 11/12/90
Oppenheimer Capital Appreciation 18.53 12.19 15.08 14.89
Oppenheimer Growth 23.51 18.36 14.64 12.74
Oppenheimer Multiple Strategies 13.92 9.66 10.14 N/A 10.05 2/2/87
Oppenheimer High Income 13.69 8.83 13.30 12.32
Oppenheimer Bond 3.35 4.87 6.19 7.30
Oppenheimer Strategic Bond 10.54 6.06 N/A N/A 5.87 5/3/93
Oppenheimer Growth and Income 30.73 N/A N/A N/A 38.35 7/3/95
</TABLE>
The NON-STANDARDIZED ANNUAL TOTAL RETURN and the NON-STANDARDIZED AVERAGE ANNUAL
TOTAL RETURN reflect a deduction for the Annual Administrative Charge as well as
reflecting deductions for the Separate Account expenses and the expenses of the
Trusts. They are based on specified premium patterns which produce the resulting
Accumulated Values. They do not include Sales Charges or premium taxes (if any),
which would reduce the percentages reported.
The NON-STANDARDIZED ANNUAL TOTAL RETURN for a Division of the Separate Account
is the effective annual rate of return that would have produced the ending
Accumulated Value of the stated one-year period had the division been in
existence.
18
<PAGE>
The NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN for a Division of the Separate
Account is the effective annual compounded rate of return that would have
produced the ending Accumulated Value over the stated period had the performance
remained constant throughout.
Note: The NON-STANDARDIZED ANNUAL TOTAL RETURN will be less than the
NON-STANDARDIZED ANNUALIZED RETURN on Accumulation Unit values for the same
period due to the effect of the annual Administrative Charge. Additionally, the
magnitude of this difference will depend on the size of the Accumulated Value
from which the annual Administrative Charge is deducted.
The performance figures discussed above reflect historical results of the Funds
and are not intended to indicate or to predict future performance.
Performance information for the Separate Account Divisions may be: (a) compared
to other variable annuity separate accounts or other investment products
surveyed by Lipper Analytical Services, Inc. a nationally recognized independent
reporting service or similar services that rank mutual funds and other
investment companies by overall performance, investment objectives and assets;
(b) tracked by other ratings services, companies, publications or persons who
rank separate accounts or other investment products on overall performance or
other criteria; and (c) included in data bases that can be used to produce
reports and illustrations by organizations such as CDA Wiesenberger. Performance
figures will be calculated in accordance with standardized methods established
by each reporting service.
YIELD AND EFFECTIVE YIELD
MML Bay State may show yield and effective yield figures for the Money Market
and Money Fund Divisions of the Separate Account. "Yield" refers to the income
generated by an investment in either money market Division over a seven-day
period, which is then "annualized." That is, the amount of income generated by
the investment during that week is assumed to be generated each week over a
52-week period and is shown as a percentage of the investment. The "effective"
yield is calculated similarly but, when annualized, the income earned by an
investment in a money market division is assumed to be re-invested. Therefore
the effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
These figures will reflect a deduction for Fund, Separate Account, and certain
Contract level charges and the Annual Administrative Charge assuming such
contract remains in force. The Administrative Charge is based on a hypothetical
contract where such charge is applicable. These figures do not reflect the Sales
charge or premium taxes (if any), which if included would reduce the yields.
The following tables show the 7-day Yield and Effective Yield for the Money
Market Divisions of the Separate Accounts for the periods ended December 31,
1996:
<TABLE>
<CAPTION>
MML Oppenheimer
Money Market Money Market
<S> <C> <C>
Yield 2.53% 2.94%
Effective Yield 2.57 2.98
After administrative fee deduction (0.11%)
Yield 2.42% 2.83%
Effective Yield 2.46 2.87
</TABLE>
19
<PAGE>
LIFETRUST HYPOTHETICAL PROJECTIONS
OPPENHEIMER GLOBAL SECURITIES
-----------------------------
$10,000 purchase payment made December 31, 1990
<TABLE>
Values prior to current Non-Standardized
year's purchase payment --------------------------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/91 $10,000 $10,165 1.65% 1.65%
12/31/92 $10,000 $9,281 -8.69% -3.66%
12/31/93 $10,000 $15,558 67.64% 15.87%
12/31/94 $10,000 $14,434 -7.23% 9.61%
12/31/95 $10,000 $14,524 0.62% 7.75%
12/31/96 $10,000 $16,809 15.73% 9.04%
</TABLE>
OPPENHEIMER CAPITAL APPRECIATION
$10,000 purchase payment made December 31, 1986
<TABLE>
<CAPTION>
Values prior to current Non-Standardized
year's purchase payment --------------------------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/87 $10,000 $11,244 12.44% 12.44%
12/31/88 $10,000 $12,545 11.57% 12.01%
12/31/89 $10,000 $15,751 25.56% 16.35%
12/31/90 $10,000 $12,890 -18.17% 6.55%
12/31/91 $10,000 $19,636 52.34% 14.45%
12/31/92 $10,000 $22,319 13.66% 14.32%
12/31/93 $10,000 $27,992 25.42% 15.84%
12/31/94 $10,000 $25,478 -8.98% 12.40%
12/31/95 $10,000 $33,282 30.63% 14.29%
12/31/96 $10,000 $39,418 18.44% 14.70%
</TABLE>
20
<PAGE>
OPPENHEIMER GROWTH
------------------
$10,000 purchase payment made December 31, 1986
<TABLE>
<CAPTION>
Values prior to current Non-Standardized
year's purchase payment --------------------------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/87 $10,000 $10,158 1.58% 1.58%
12/31/88 $10,000 $12,200 20.10% 10.45%
12/31/89 $10,000 $14,838 21.62% 14.06%
12/31/90 $10,000 $13,400 -9.69% 7.59%
12/31/91 $10,000 $16,558 23.57% 10.61%
12/31/92 $10,000 $18,670 12.76% 10.97%
12/31/93 $10,000 $19,715 5.60% 10.18%
12/31/94 $10,000 $19,600 -0.59% 8.78%
12/31/95 $10,000 $26,396 34.68% 11.39%
12/31/96 $10,000 $32,572 23.40% 12.53%
</TABLE>
OPPENHEIMER MULTIPLE STRATEGIES
-------------------------------
$10,000 purchase payment made December 31, 1987
<TABLE>
<CAPTION>
Values prior to current Non-Standardized
year's purchase payment --------------------------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/88 $10,000 $12,015 20.15% 20.15%
12/31/89 $10,000 $13,685 13.90% 16.98%
12/31/90 $10,000 $13,208 -3.49% 9.72%
12/31/91 $10,000 $15,270 15.62% 11.16%
12/31/92 $10,000 $16,383 7.29% 10.38%
12/31/93 $10,000 $18,702 14.15% 11.00%
12/31/94 $10,000 $18,053 -3.47% 8.81%
12/31/95 $10,000 $21,582 19.55% 10.09%
12/31/96 $10,000 $24,556 13.78% 10.50%
</TABLE>
21
<PAGE>
OPPENHEIMER HIGH INCOME
-----------------------
$10,000 purchase payment made December 31, 1986
<TABLE>
<CAPTION>
Values prior to current Non-Standardized
year's purchase payment --------------------------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/87 $10,000 $10,627 6.27% 6.27%
12/31/88 $10,000 $12,082 13.69% 9.92%
12/31/89 $10,000 $12,461 3.14% 7.61%
12/31/90 $10,000 $12,829 2.95% 6.43%
12/31/91 $10,000 $16,911 31.82% 11.08%
12/31/92 $10,000 $19,634 16.10% 11.90%
12/31/93 $10,000 $24,430 24.43% 13.61%
12/31/94 $10,000 $23,295 -4.65% 11.15%
12/31/95 $10,000 $27,630 18.61% 11.95%
12/31/96 $10,000 $31,381 13.58% 12.12%
</TABLE>
OPPENHEIMER BOND
----------------
$10,000 purchase payment made December 31, 1986
<TABLE>
<CAPTION>
Values prior to current Non-Standardized
year's purchase payment --------------------------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/87 $10,000 $10,080 0.80% 0.80%
12/31/88 $10,000 $10,801 7.16% 3.93%
12/31/89 $10,000 $12,040 11.47% 6.38%
12/31/90 $10,000 $12,783 6.17% 6.33%
12/31/91 $10,000 $14,797 15.76% 8.15%
12/31/92 $10,000 $15,510 4.82% 7.59%
12/31/93 $10,000 $17,259 11.28% 8.11%
12/31/94 $10,000 $16,659 -3.48% 6.59%
12/31/95 $10,000 $19,196 15.23% 7.51%
12/31/96 $10,000 $19,810 3.20% 7.07%
</TABLE>
22
<PAGE>
OPPENHEIMER STRATEGIC BOND
--------------------------
$10,000 purchase payment made December 31, 1993
<TABLE>
<CAPTION>
Values prior to current Non-Standardized
year's purchase payment -------------------------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/94 $10,000 $9,458 -5.42% -5.42%
12/31/95 $10,000 $10,730 13.44% 3.58%
12/31/96 $10,000 $11,831 10.26% 5.77%
</TABLE>
OPPENHEIMER GROWTH AND INCOME
-----------------------------
$10,000 purchase payment made December 31, 1995
<TABLE>
<CAPTION>
Values prior to current Non-Standardized
year's purchase payment -------------------------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/96 $10,000 $13,043 30.43% 30.43%
</TABLE>
MML BLEND
---------
$10,000 purchase payment made December 31, 1986
<TABLE>
<CAPTION>
Values prior to current Non-Standardized
year's purchase payment --------------------------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/87 $10,000 $10,136 1.36% 1.36%
12/31/88 $10,000 $11,305 11.53% 6.32%
12/31/89 $10,000 $13,343 18.03% 10.09%
12/31/90 $10,000 $13,440 0.73% 7.67%
12/31/91 $10,000 $16,405 22.06% 10.41%
12/31/92 $10,000 $17,661 7.66% 9.94%
12/31/93 $10,000 $19,074 8.00% 9.66%
12/31/94 $10,000 $19,245 0.90% 8.53%
12/31/95 $10,000 $23,375 21.46% 9.89%
12/31/96 $10,000 $26,243 12.27% 10.13%
</TABLE>
23
<PAGE>
MML BOND
--------
$10,000 purchase payment made December 31, 1986
<TABLE>
<CAPTION>
Values prior to current Non-Standardized
year's purchase payment --------------------------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/87 $10,000 $10,087 0.87% 0.87%
12/31/88 $10,000 $10,626 5.34% 3.08%
12/31/89 $10,000 $11,793 10.98% 5.65%
12/31/90 $10,000 $12,573 6.61% 5.89%
12/31/91 $10,000 $14,434 14.80% 7.62%
12/31/92 $10,000 $15,243 5.61% 7.28%
12/31/93 $10,000 $16,776 10.06% 7.67%
12/31/94 $10,000 $15,891 -5.28% 5.96%
12/31/95 $10,000 $18,645 17.33% 7.17%
12/31/96 $10,000 $18,957 1.67% 6.60%
</TABLE>
MML EQUITY
----------
$10,000 purchase payment made December 31, 1986
<TABLE>
<CAPTION>
Values prior to current Non-Standardized
year's purchase payment --------------------------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/87 $10,000 $9,923 -0.77% -0.77%
12/31/88 $10,000 $11,388 14.76% 6.71%
12/31/89 $10,000 $13,787 21.07% 11.30%
12/31/90 $10,000 $13,495 -2.12% 7.78%
12/31/91 $10,000 $16,680 23.59% 10.77%
12/31/92 $10,000 $18,141 8.76% 10.44%
12/31/93 $10,000 $19,561 7.83% 10.06%
12/31/94 $10,000 $20,051 2.51% 9.09%
12/31/95 $10,000 $25,912 29.23% 11.16%
12/31/96 $10,000 $30,706 18.50% 11.87%
</TABLE>
24
<PAGE>
Report Of Independent Accountants
To the Contract Owners of MML Bay State Variable Annuity Separate Account 1
and the Board of Directors of MML Bay State Life Insurance Company
We have audited the accompanying statements of assets and liabilities of MML Bay
State Variable Annuity Separate Account 1 (comprising, respectively, the MML
Equity Division, MML Money Market Division, MML Managed Bond Division, MML Blend
Division, Oppenheimer Money Division, Oppenheimer High Income Division,
Oppenheimer Bond Division, Oppenheimer Capital Appreciation Division,
Oppenheimer Growth Division, Oppenheimer Multiple Strategies Division,
Oppenheimer Global Securities Division, Oppenheimer Strategic Bond Division and
Oppenheimer Growth & Income Division - the "Divisions") as of December 31, 1996,
and the related statements of operations and statements of changes in net assets
for the periods indicated thereon. These financial statements are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements based on our 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. Our procedures included
verification of investments owned as of December 31, 1996, by examination of the
records of MML Series Investment Fund and by confirmation with Oppenheimer
Variable Account Funds. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
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 each of the respective
Divisions constituting MML Bay State Variable Annuity Separate Account 1 as of
December 31, 1996, the results of their operations and the changes in their net
assets for the periods indicated thereon, in conformity with generally accepted
accounting principles.
Also, in our opinion, based upon these audits and our previous audits, made in
accordance with generally accepted auditing standards, of the financial
statements of MML Bay State Variable Annuity Separate Account 1 for each
respective period indicated thereon, and upon which we expressed an unqualified
opinion, the financial information under the caption "Condensed Financial
Information" for each date appearing in the Prospectus, is fairly stated in all
material respects in relation to the financial statements for which it has been
derived.
Coopers & Lybrand L.L.P.
Springfield, Massachusetts
February 4, 1997
25
<PAGE>
MML Bay State Variable Annuity Separate Account 1
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High
Equity Market Bond Blend Money Income
Division Division Division Division Division Division
--------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments
Number of shares (Note 2)..... 107,251 4,605,292 68,563 185,010 2,826,792 707,049
========== ========== ========== ========== ========== ==========
Identified cost (Note 3B)..... $2,959,248 $4,605,292 $ 828,611 $3,959,996 $2,826,792 $7,703,857
========== ========== ========== ========== ========== ==========
Value (Note 3A)............... $3,194,601 $4,605,292 $ 826,076 $4,065,294 $2,826,792 $7,869,454
Dividends receivable........... 148,788 19,386 13,126 138,862 4,646 -
Receivable from MML Bay State
Life Insurance Company........ 4,205 - - - - 1,283
---------- ---------- ---------- ---------- ---------- ----------
Total assets.................. 3,347,594 4,624,678 839,202 4,204,156 2,831,438 7,870,737
LIABILITIES
Payable to MML Bay State
Life Insurance Company........ - 172 23 1,591 77 -
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS..................... $3,347,594 $4,624,506 $ 839,179 $4,202,565 $2,831,361 $7,870,737
========== ========== ========== ========== ========== ==========
Net assets:
Accumulation units - value..... $3,347,594 $4,624,506 $ 839,179 $4,124,526 $2,831,361 $7,870,737
Annuity reserves (Note 3E)..... - - - 78,039 - -
---------- ---------- ---------- ---------- ---------- ----------
Net assets................... $3,347,594 $4,624,506 $ 839,179 $4,202,565 $2,831,361 $7,870,737
========== ========== ========== ========== ========== ==========
Accumulation units:
Policyowners.................. 2,184,149 4,262,075 690,485 3,014,173 2,602,468 5,994,147
MML Baystate
Insurance Company........... 5,000 5,000 5,000 5,000 5,000 5,000
---------- ---------- ---------- ---------- ---------- ----------
Total units................ 2,189,149 4,267,075 695,485 3,019,173 2,607,468 5,999,147
========== ========== ========== ========== ========== ==========
NET ASSET VALUE PER
ACCUMULATION UNIT
December 31, 1996............. $1.53 $1.08 $1.21 $1.37 $1.09 $1.31
December 31, 1995............. 1.29 1.05 1.18 1.22 1.05 1.15
December 31, 1994............. 1.00 1.00 1.01 1.00 1.00 0.97
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Oppenheimer Capital Oppenheimer Multiple Global Strategic Oppenheimer
Bond Appreciation Growth Strategies Securities Bond Growth & Income
Division Division Division Division Division Division Division
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments
Number of shares (Note 2)..... 185,859 361,266 644,531 608,915 668,639 2,828,597 1,430,248
=========== =========== =========== =========== =========== =========== ===========
Identified cost (Note 3B)..... $ 2,152,160 $13,129,501 $15,627,101 $ 9,028,945 $10,698,634 $14,105,197 $20,647,456
=========== =========== =========== =========== =========== =========== ===========
Value (Note 3A)............... $ 2,161,546 $13,977,391 $17,557,027 $ 9,517,342 $11,788,104 $14,397,559 $23,413,161
Dividends receivable........... - - - - - - -
Receivable from MML Bay State
Life Insurance Company........ 1,962 13,598 30,058 12,735 2,901 2,512 -
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total assets.................. 2,163,508 13,990,989 17,587,085 9,530,077 11,791,005 14,400,071 23,413,161
LIABILITIES
Payable to MML Bay State
Life Insurance Company........ - - - - - - 40,477
----------- ----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS..................... $ 2,163,508 $ 13,990,989 $ 17,587,085 $ 9,530,077 $11,791,005 $14,400,071 $23,372,684
=========== =========== =========== =========== =========== =========== ===========
Net assets:
Accumulation units - value..... $ 2,163,508 $ 13,990,989 $ 17,587,085 $ 9,530,077 $11,791,005 $14,400,071 $23,372,684
Annuity reserves (Note 3E)..... - - - - - -
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net assets................... $ 2,163,508 $ 13,990,989 $ 17,587,085 $ 9,530,077 $11,791,005 $14,400,071 $23,372,684
=========== =========== =========== =========== =========== =========== ===========
Accumulation units:
Policyowners.................. 1,822,553 9,014,648 10,742,444 7,085,472 10,722,219 11,652,438 14,364,051
MML Baystate
Insurance Company........... 5,000 5,000 5,000 5,000 5,000 5,000 5,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total units................ 1,827,553 9,019,648 10,747,444 7,090,472 10,727,219 11,657,438 14,369,051
=========== =========== =========== =========== =========== =========== ===========
NET ASSET VALUE PER
ACCUMULATION UNIT
December 31, 1996............. $1.18 $1.55 $1.64 $1.34 $1.10 $1.24 $1.63
December 31, 1995............. 1.15 1.31 1.32 1.18 0.95 1.12 1.24
December 31, 1994............. 0.99 1.00 0.98 0.99 0.94 0.98 -
</TABLE>
See Notes to Financial Statements.
26
<PAGE>
MML Bay State Variable Annuity Separate Account 1
STATEMENT OF OPERATIONS
For The Year Ended December 31, 1996
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
Equity Market Bond Blend Money Income Bond
Division Division Division Division Division Division Division
---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income
Dividends (Note 3B).............. $ 148,809 $ 175,567 $ 41,444 $ 204,623 $ 115,857 $ 441,362 $ 107,350
Expenses
Mortality and expense
risk fee (Note 4)............... 26,268 50,004 8,383 32,701 32,422 58,467 22,317
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net investment income (loss)
(Note 3C)....................... 122,541 125,563 33,061 171,922 83,435 382,895 85,033
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net realized and unrealized
gain (loss) on investments
Net realized gain on investments
(Note 3B, 3C & 6)............... 24,883 1,219 28,935 - 16,438 26
Change in net unrealized
appreciation/depreciation
of investments.................. 201,468 - (12,049) 90,749 - 158,340 (10,824)
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net gain (loss) on investments... 226,351 - (10,830) 119,684 - 174,778 (10,798)
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net increase in net assets
resulting from operations....... $ 348,892 $ 125,563 $ 22,231 $ 291,606 $ 83,435 $ 557,673 $ 74,235
========== ========== ========== ========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Multiple Global Strategic Oppenheimer
Appreciation Growth Strategies Securities Bond Growth & Income
Division Division Division Division Division Division
---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income
Dividends (Note 3B).............. $ 248,374 $ 410,614 $ 401,762 $ - $ 663,227 $ 154,898
Expenses
Mortality and expense
risk fee (Note 4)............... 109,755 133,140 80,944 89,755 104,016 144,334
---------- ---------- --------- ---------- ---------- ----------
Net investment income (loss)
(Note 3C)....................... 138,619 277,474 320,818 (89,755) 559,211 10,564
---------- ---------- --------- ---------- ---------- ----------
Net realized and unrealized
gain (loss) on investments
Net realized gain on investments
(Note 3B, 3C & 6)............... 193,950 107,630 70,115 16,810 48,947 81,648
Change in net unrealized
appreciation/depreciation
of investments.................. 507,147 1,620,100 401,871 1,086,169 198,175 2,565,253
---------- ---------- --------- ---------- ---------- ----------
Net gain (loss) on investments... 701,097 1,727,730 471,986 1,102,979 247,122 2,646,901
---------- ---------- --------- ---------- ---------- ----------
Net increase in net assets
resulting from operations....... $ 839,716 $2,005,204 $ 792,804 $1,013,224 $ 806,333 $2,657,465
========== ========== ========= ========== ========== ==========
</TABLE>
See Notes to Financial Statements.
27
<PAGE>
MML Bay State Variable Annuity Separate Account 1
STATEMENT OF CHANGES IN NET ASSETS
For The Year Ended December 31, 1996
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
Equity Market Bond Blend Money Income Bond
Division Division Division Division Division Division Division
---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss)...... $ 122,541 $ 125,563 $ 33,061 $ 171,922 $ 83,435 $ 382,895 $ 85,033
Net realized gain
on investments................... 24,883 - 1,219 28,935 - 16,438 26
Change in net unrealized
appreciation/depreciation
of investments.................... 201,468 - (12,049) 90,749 - 158,340 (10,824)
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net increase in net assets
resulting from operations......... 348,892 125,563 22,231 291,606 83,435 557,673 74,235
---------- ---------- ---------- ---------- ---------- ---------- -----------
Capital transactions: (Note 7)
Net contract payments (Note 5).... 2,051,802 7,761,071 584,793 2,734,274 4,201,125 5,305,226 1,233,622
Withdrawal of funds............... (72,864) (543,726) (42,688) (46,736) (401,858) (128,759) (48,000)
Transfer to Guarantee Principal
Account.......................... - (50,000) - - - - -
Net credit to annuitant mortality
fluctuating reserve (Note 3D).... - - - (1,408) - - -
Reimbursement (payment)
of accumulation unit
value fluctuation................ 285 (6,800) 74 19,597 1,082 2,385 (1,086)
Annuity benefit payments.......... - - - (4,566) - - -
Withdrawal due to administrative
and contingent deferred sales
charges (Note 5).................. (1,104) (291) (85) (839) (246) (678) (344)
Divisional transfers.............. 136,263 (3,539,899) (114,404) 264,378 (2,123,741) 383,051 (106,504)
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net increase in net assets
resulting from capital
transactions..................... 2,114,382 3,620,355 427,690 2,964,700 1,676,362 5,561,225 1,077,688
---------- ---------- ---------- ---------- ---------- ---------- -----------
Total increase..................... 2,463,274 3,745,918 449,921 3,256,306 1,759,797 6,118,898 1,151,923
NET ASSETS, at beginning
of the year....................... 884,320 878,588 389,258 946,259 1,071,564 1,751,839 1,011,585
---------- ---------- ---------- ---------- ---------- ---------- -----------
NET ASSETS, at end
of the year....................... $3,347,594 $4,624,506 $ 839,179 $4,202,565 $2,831,361 $7,870,737 $ 2,163,508
========== ========== ========== ========== ========== ========== ===========
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Multiple Global Strategic Oppenheimer
Appreciation Growth Strategies Securities Bond Growth & Income
Division Division Division Division Division Division
----------- ----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss)...... $ 138,619 $ 277,474 $ 320,818 $ (89,755) $ 559,211 $ 10,564
Net realized gain
on investments................... 193,950 107,630 70,115 16,810 48,947 81,648
Change in net unrealized
appreciation/depreciation
of investments.................... 507,147 1,620,100 401,871 1,086,169 198,175 2,565,253
----------- ----------- ---------- ---------- ----------- -----------
Net increase in net assets
resulting from operations......... 839,716 2,005,204 792,804 1,013,224 806,333 2,657,465
----------- ----------- ---------- ---------- ----------- -----------
Capital transactions: (Note 7)
Net contract payments (Note 5).... 9,816,038 11,066,978 6,235,443 7,457,151 9,825,830 16,871,959
Withdrawal of funds............... (171,212) (184,482) (160,550) (163,767) (304,862) (375,156)
Transfer to Guarantee Principal
Account.......................... - - - - - -
Net credit to annuitant mortality
fluctuating reserve (Note 3D).... - - - - - -
Reimbursement (payment)
of accumulation unit
value fluctuation................ 3,512 (596) 2,993 1,917 1,470 14,037
Annuity benefit payments.......... - - - - - -
Withdrawal due to administrative
and contingent deferred sales
charges (Note 5).................. (2,430) (2,437) (1,211) (1,980) (1,172) (1,703)
Divisional transfers.............. 554,811 1,041,722 76,602 926,269 171,447 2,330,005
----------- ----------- ---------- ---------- ----------- -----------
Net increase in net assets
resulting from capital
transactions..................... 10,200,719 11,921,185 6,153,277 8,219,590 9,692,713 18,839,142
----------- ----------- ---------- ----------- ----------- -----------
Total increase..................... 11,040,435 13,926,389 6,946,081 9,232,814 10,499,046 21,496,607
NET ASSETS, at beginning
of the year....................... 2,950,554 3,660,696 2,583,996 2,558,191 3,901,025 1,876,077
----------- ----------- ---------- ----------- ----------- -----------
NET ASSETS, at end
of the year....................... $13,990,989 $17,587,085 $9,530,077 $11,791,005 $14,400,071 $23,372,684
=========== =========== ========== =========== =========== ===========
See Notes to Financial Statements.
</TABLE>
28
<PAGE>
MML Bay State Variable Annuity Separate Account 1
STATEMENT OF CHANGES IN NET ASSETS
For The Year Ended December 31, 1995
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
Equity Market Bond Blend Money Income Bond
Division Division Division Division Division Division Division
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss)...... $ 27,489 $ 18,786 $ 9,856 $ 31,035 $ 37,615 $ 85,669 $ 24,219
Net realized gain (loss)
on investments................... 17,013 - 1,100 6,690 - 11,461 4,702
Change in net unrealized
appreciation of investments....... 34,089 - 9,552 14,697 - 7,489 20,333
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net increase (decrease) in net
assets resulting from
operations........................ 78,591 18,786 20,508 52,422 37,615 104,619 49,254
---------- ---------- ---------- ---------- ---------- ---------- -----------
Capital transactions: (Note 7)
Net contract payments (Note 5).... 608,861 2,267,770 267,005 837,480 2,040,439 1,453,537 858,539
Transfer from MML Bay State
Life Insurance Company........... - - - - - - -
Withdrawal of funds............... (5,289) - - (1,994) (46,651) (17,675) (2,796)
Reimbursement of accumulation
unit value fluctuation........... 1,136 176 202 383 379 662 189
Withdrawal due to administrative
and contingent deferred sales
charges (Note 5).................. - - - - - (3) (4)
Divisional transfers.............. 196,039 (1,425,173) 96,502 52,971 (965,242) 204,688 101,441
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net increase in net assets
resulting from capital
transactions..................... 800,747 842,773 363,709 888,840 1,028,925 1,641,209 957,369
---------- ---------- ---------- ---------- ---------- ---------- -----------
Total increase.................... 879,338 861,559 384,217 941,262 1,066,540 1,745,828 1,006,623
NET ASSETS, at beginning
of the year....................... 4,982 17,029 5,041 4,997 5,024 6,011 4,962
---------- ---------- ---------- ---------- ---------- ---------- -----------
NET ASSETS, at end
of the year....................... $ 884,320 $ 878,588 $ 389,258 $ 946,259 $1,071,564 $1,751,839 $ 1,011,585
========== ========== ========== ========== ========== ========== ===========
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Multiple Global Strategic *Oppenheimer
Appreciation Growth Strategies Securities Bond Growth & Income
Division Division Division Division Division Division
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss)....... $ (14,068) $ (16,044) $ 51,498 $ (9,340) $ 135,350 $ (2,904)
Net realized gain (loss)
on investments.................... 14,588 34,194 7,403 (1,429) 9,991 9,875
Change in net unrealized
appreciation of investments........ 340,611 309,903 86,644 3,554 94,392 200,453
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net
assets resulting from
operations......................... 341,131 328,053 145,545 (7,215) 239,733 207,424
---------- ---------- ---------- ---------- ---------- ----------
Capital transactions: (Note 7)
Net contract payments (Note 5)..... 2,310,277 2,984,873 2,112,398 2,350,570 3,577,773 1,267,067
Transfer from MML Bay State
Life Insurance Company............ - - - - - 5,000
Withdrawal of funds................ (4,680) (77,753) (15,460) (9,883) (16,021) (3,270)
Reimbursement of accumulation
unit value fluctuation............ 3,038 3,538 1,752 1,591 2,443 1,015
Withdrawal due to administrative
and contingent deferred sales
charges (Note 5)................... (25) (20) (19) (54) (25) -
Divisional transfers............... 288,802 417,092 332,547 211,554 89,938 398,841
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from capital
transactions...................... 2,597,412 3,327,730 2,431,218 2,553,778 3,654,108 1,668,653
---------- ---------- ---------- ---------- ---------- ----------
Total increase..................... 2,938,543 3,655,783 2,576,763 2,546,563 3,893,841 1,876,077
NET ASSETS, at beginning
of the year........................ 12,011 4,913 7,233 11,628 7,184 -
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS, at end
of the year........................ $2,950,554 $3,660,696 $2,583,996 $2,558,191 $3,901,025 $1,876,077
========== ========== ========== ========== ========== ==========
*For the Period July 3, 1995 (Date of Commencement of Operations) through
December 31, 1995
See Notes to Financial Statements.
</TABLE>
29
<PAGE>
MML Bay State Variable Annuity Separate Account I
Notes To Financial Statements
1. HISTORY
MML Bay State Variable Annuity Separate Account 1 ("Separate Account 1") is
a separate investment account established on January 14, 1994 by MML Bay
State Life Insurance Company ("MML Bay State"). MML Bay Sate is a wholly-
owned subsidiary of Massachusetts Mutual Life Insurance Company
("MassMutual") Separate Account 1 operates as a registered unit investment
trust pursuant to the Investment Company Act of 1940 and the rules
promulgated thereunder.
On November 15, 1994, MML Bay State paid $60,000 to provide the initial
capital for Separate Account 1's twelve initial divisions: 14,099 shares
were purchased in the two management investment companies described in
Note 2.
On July 5, 1995, MML Bay State paid $5,000 to establish Separate Account 1's
thirteenth division: 500 shares were purchased in the Growth & Income
Division of the Oppenheimer Variable Account Fund described in Note 2.
2. INVESTMENT OF THE SEPARATE ACCOUNT 1 ASSETS
Separate Account maintains thirteen divisions. Each division invests in
corresponding shares of either MML Series Investment Trust ("MML Trust") or
Oppenheimer Variable Account Funds ("Oppenheimer Trust").
MML Equity Fund, MML Money Market Fund, MML Managed Bond Fund and MML Blend
Fund are the four series of shares of MML Trust. The MML Trust is a no-load,
registered, open-end, diversified management investment company for which
MassMutual serves as investment manager. Concert Capital Management, Inc.
("Concert") served as the investment sub-advisor to MML Equity Fund and the
Equity Sector of the MML Blend Fund from 1993-1996. Concert merged with and
into David L. Babson & Company, Inc. ("Babson") effective December 31, 1996.
At such time, both Concert and Babson were wholly-owned subsidiaries of
Babson Acquisition Corporation, which is a controlled subsidiary of
MassMutual. Thus, effective January 1, 1997, Babson serves as the investment
sub-advisor to MML Equity Fund and the Equity Sector of the MML Blend Fund.
MassMutual paid Concert a quarterly fee equal to an annual rate of .13% of
the average daily net asset value of MML Equity fund and the Equity Sector
of MML Blend fund.
Oppenheimer Money fund, Oppenheimer High Income Fund, Oppenheimer Bond Fund,
Oppenheimer Capital Appreciation Fund, Oppenheimer Growth Fund, Oppenheimer
Multiple Strategies Fund, Oppenheimer Global Securities Fund, Oppenheimer
Strategic Bond Fund and Oppenheimer Growth & Income Fund (the "Oppenheimer
Funds") are the nine separate funds of the Oppenheimer Trust. The
Oppenheimer Trust is a registered, open-end, diversified management
investment company for which Oppenheimer Funds, Inc. ("OFI"), a controlled
subsidiary of MassMutual, serves as investment advisor (Prior to January 5,
1996, OFI was known as Oppenheimer Management Corporation.)
In addition to the thirteen divisions of Separate Account 1, a
contractowner, in certain states, any also allocate funds to the Fixed
Account. Proceeds from the Fixed Account will be deposited in a non-utilized
segment of MML Bay State's general account organized as a separate account
for accounting purposes. The interests in the Fixed Account are registered
under the Securities Act of 1933.
3. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
consistently by Separate Account 1 in preparation of the financial
statements in conformity with generally accepted accounting principles.
A. Investment Valuation
The investments in the MML Trust and the Oppenheimer Trust are each stated
at market value which is the net asset value of each of the respective
underlying funds.
B. Accounting for Investments
Investment transactions are accounted for on trade date and identified cost
is the basis followed in determining the cost of investments sold for
financial statement purposes. Dividend income is recorded on the ex-dividend
date.
30
<PAGE>
Notes To Financial Statements (Continued)
C. Federal Income Taxes
Operations of Separate Account 1 form a part of the total operations of MML
Bay State, and Separate Account 1 is not taxed separately. MML Bay State is
taxed as a life insurance company under the provisions of the 1986 Internal
Revenue Code, as amended. Separate Account 1 will not be taxed as a
"regulated investment company" under Subchapter M of the Internal Revenue
Code. Under existing federal law, no taxes are payable on investment income
and realized capital gains attributable to Contracts which depend on
Separate Account 1's investment performance. Accordingly, no provision for
federal income tax has been made. MML Bay State may, however, make such a
charge in the future if an unanticipated change of current law results in a
company tax liability attributable to Separate Account 1.
D. Annuity Reserve
Annuity reserves are developed by using accepted actuarial methods and are
computed using the 1983 Annuity Table a, with Projection Scale G. Separate
Account 1 has an annuity reserve of $78,039 at December 31, 1996.
E. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
4. CHARGES
An asset charge is computed against the net asset value of Separate Account
1's assets ("Net Asset Value"). The asset charge is currently equivalent on
an annual basis to 1.40% of the Net Asset Value. The mortality and expense
risk part of this charge is made daily at an annual rate which is currently
equal to 1.15%, and will not exceed 1.25% of the Net Asset Value. The
administrative expense part of the charge is made daily at an annual rate of
0.15%. The third component of the asset charge is a charge of 0.10% of the
Net Asset Value assessed to reimburse MML Bay State for the cost of
providing the enhanced death benefit under the contract. MML Bay State also
charges for administrative costs and may impose a contingent deferred sales
charge and a premium tax charge upon redemption, maturity or annuitization.
5. CHARGES/DEDUCTIONS FOR ADMINISTRATIVE CHARGES, CONTINGENT DEFERRED SALES
CHARGES AND PREMIUM TAXES
<TABLE>
<CAPTION>
Administrative
Charges and
Net Contingent
For the Year Ended Contract Deferred
December 31, 1996 Payments Sales Charges
----------------- -------- -------------
<S> <C> <C>
MML Equity Division ............................. $2,051,802 $ 1,104
MML Money Market Division ....................... 7,761,071 291
MML Managed Bond Division ....................... 584,793 85
MML Blend Division .............................. 2,734,274 839
Oppenheimer Money Division ...................... 4,201,125 246
Oppenheimer High Income Division ................ 5,305,226 678
Oppenheimer Bond Division ....................... 1,233,622 344
Oppenheimer Capital Appreciation Division ....... 9,816,038 2,430
Oppenheimer Growth Division ..................... 11,066,978 2,437
Oppenheimer Multiple Strategies Division ........ 6,235,443 1,211
Oppenheimer Global Securities Division .......... 7,457,151 1,980
Oppenheimer Strategic Bond Division ............. 9,825,830 1,172
Oppenheimer Growth & Income Division ............ 16,871,959 1,703
</TABLE>
31
<PAGE>
Notes To Financial Statements (Continued)
6. PURCHASES AND SALES OF INVESTMENTS
<TABLE>
<CAPTION>
For the Year Ended Cost of Proceeds
December 31, 1996 Purchases from Sales
- ----------------- --------- ----------
<S> <C> <C>
MML Equity Fund...................................................................... $ 2,247,928 $ 131,755
MML Money Market Fund................................................................ 8,182,507 4,448,696
MML Managed Bond Fund................................................................ 654,925 201,382
MML Blend Fund....................................................................... 3,330,283 273,827
Oppenheimer Money Fund............................................................... 5,158,736 3,400,948
Oppenheimer High Income Fund......................................................... 6,308,703 366,050
Oppenheimer Bond Fund................................................................ 1,458,545 297,888
Oppenheimer Capital Appreciation Fund................................................ 10,950,510 624,965
Oppenheimer Growth Fund.............................................................. 12,571,933 403,619
Oppenheimer Multiple Strategies Fund................................................. 7,074,598 613,499
Oppenheimer Global Securities Fund................................................... 8,296,784 170,004
Oppenheimer Strategic Bond Fund...................................................... 11,013,153 764,119
Oppenheimer Growth & Income Fund..................................................... 19,166,523 276,529
</TABLE>
7. DISTRIBUTION AGREEMENTS
Effective May 1, 1996, MML Distributors, LLC ("MML Distributors"), a wholly-
owned subsidiary of MassMutual, serves as principal underwriter of the
contracts pursuant to an underwriting and servicing agreement among MML
Distributors, MML Bay State and Separate Account I. MML Distributors is
registered with the Securities and Exchange Commission (the "SEC") as a
broker-dealer under the Securities Exchange Act of 1934 and is a member of
the National Association of Securities Dealers, Inc. (the "NASD"). MML
Distributors may enter into selling agreements with other broker-dealers who
are registered with the SEC and are members of the NASD in order to sell the
contracts.
Prior to May 1, 1996, MML Investors Services, Inc. ("MMLISI") a wholly-owned
subsidiary of MassMutual, served as principal underwriter of the contracts.
Effective May 1, 1996, MMLISI serves as co-underwriter of the policies
pursuant to underwriting and servicing agreements among MMLISI, MML. Bay
State and Separate Account I, MMLISI is registered with the SEC as a broker-
dealer under the Securities Exchange Act of 1934 and is a member of the
NASD. Registered representatives of MMLISI sell the contracts as authorized
variable life insurance agents under applicable state insurance laws.
Under the sales agreement among MMLISI, MML Bay State and Separate Account
I, agents receive commissions and service fees from MMLISI for selling and
servicing the contracts. MassMutual reimburses MMLISI for such compensation
and for other expenses incurred in marketing and selling the contracts.
32
<PAGE>
Notes To Financial Statements (Continued)
8. NET INCREASE IN ACCUMULATION UNITS
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High
For the Year Ended Equity Market Bond Blend Money Income
December 31, 1996 Division Division Division Division Division Division
----------------- --------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Units purchased.............. 1,461,034 7,294,392 500,734 2,117,619 3,944,962 4,280,811
Units withdrawn.............. (52,677) (323,218) (36,522) (98,203) (375,650) (104,329)
Units transferred
between divisions........... 94,828 (3,543,892) (97,241) 221,228 (1,985,242) 304,643
---------- ---------- ---------- ---------- ---------- ----------
Net increase................. 1,503,185 3,427,282 366,971 2,240,644 1,584,070 4,481,125
Units, at beginning
of the year................. 685,964 839,793 328,514 778,529 1,023,398 1,518,022
---------- ---------- ---------- ---------- ---------- ----------
Units, at end
of the year................. 2,189,149 4,267,075 695,485 3,019,173 2,607,468 5,999,147
========== ========== ========== ========== ========== ==========
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Oppenheimer Capital Oppenheimer Multiple Global Strategic Oppenheimer
For the Year Ended Bond Appreciation Growth Strategies Securities Bond Growth & Income
December 31, 1996 Division Division Division Division Division Division Division
----------------- ---------- --------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Units purchased.............. 1,079,622 6,503,667 7,405,286 4,962,131 7,288,669 8,294,285 11,527,094
Units withdrawn.............. (42,025) (115,648) (123,940) (128,058) (162,104) (260,608) (243,755)
Units transferred
between divisions........... (93,215) 377,084 703,114 66,225 902,291 132,730 1,577,872
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase................. 944,382 6,765,103 7,984,460 4,900,298 8,028,856 8,166,407 12,861,211
Units, at beginning
of the year................. 883,171 2,254,545 2,762,984 2,190,174 2,698,363 3,491,031 1,507,840
---------- ---------- ---------- ---------- ---------- ---------- ----------
Units, at end
of the year................. 1,827,553 9,019,648 10,747,444 7,090,472 10,727,219 11,657,438 14,369,051
========== ========= ========== ========== ========== ========== ==========
<CAPTION>
For the Year Ended December 31, 1995 MML MML Oppenheimer
and *For the Period July 3, 1995 MML Money Managed MML Oppenheimer High Oppenheimer
(Date of Commencement of Operations) Equity Market Bond Blend Money Income Bond
Through December 31, 1995 Division Division Division Division Division Division Division
------------------------- -------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Units transferred from MML Bay
State for initial capital... - - - - - - -
Units purchased.............. 520,950 2,202,247 238,058 727,509 1,998,497 1,342,772 787,070
Units withdrawn.............. (4,446) - - (1,793) (45,282) (16,193) (2,570)
Units transferred
between divisions........... 164,460 (1,379,403) 85,456 47,813 (934,817) 185,259 93,671
-------- ---------- ---------- ---------- --------- --------- ----------
Net increase................. 680,964 822,844 323,514 773,529 1,018,398 1,511,838 878,171
Units, at beginning
of the year................. 5,000 16,949 5,000 5,000 5,000 6,184 5,000
-------- ---------- ---------- ---------- --------- --------- ----------
Units, at end
of the year................. 685,964 839,793 328,514 778,529 1,023,398 1,518,022 883,171
======== ========== ========== ========== ========= ========= ==========
<CAPTION>
For the Year Ended December 31, 1995 Oppenheimer Oppenheimer Oppenheimer Oppenheimer
and *For the Period July 3, 1995 Capital Oppenheimer Multiple Global Strategic *Oppenheimer
(Date of Commencement of Operations) Appreciation Growth Strategies Securities Bond Growth & Income
Through December 31, 1995 Division Division Division Division Division Division
------------------------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Units transferred from MML Bay
State for initial capital.. - - - - - 5,000
Units purchased............. 2,005,234 2,476,030 1,897,779 2,476,370 3,424,590 1,126,147
Units withdrawn............. (4,047) (60,937) (13,901) (10,524) (14,833) (2,890)
Units transferred
between divisions.......... 241,358 342,891 298,957 220,150 73,960 379,583
--------- --------- --------- --------- --------- ---------
Net increase................ 2,242,545 2,757,984 2,182,835 2,685,996 3,483,717 1,507,840
Units, at beginning
of the year................ 12,000 5,000 7,339 12,367 7,314 -
--------- --------- --------- --------- --------- ---------
Units, at end
of the year................ 2,254,545 2,762,984 2,190,174 2,698,363 3,491,031 1,507,840
========= ========= ========= ========= ========= =========
</TABLE>
33
<PAGE>
MML BAY STATE LIFE INSURANCE COMPANY
------
STATUTORY FINANCIAL STATEMENTS
as of December 31, 1996 and 1995 and
for the years ended December 31, 1996, 1995 and 1994
34
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
MML Bay State Life Insurance Company
We have audited the accompanying statutory statement of financial position of
MML Bay State Life Insurance Company as of December 31, 1996 and 1995, and the
related statutory statements of income, changes in shareholder's equity, and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We 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.
As described in Note 2 to the financial statements, the Company prepared these
financial statements using statutory accounting practices of the National
Association of Insurance Commissioners and the accounting practices prescribed
or permitted by the Department of Insurance of the State of Missouri, which
practices differ from generally accepted accounting principles. The effects on
the financial statements of the variances between the statutory basis of
accounting and generally accepted accounting principles, although not
determinable at this time, are presumed to be material.
In our report dated February 23, 1996, we expressed our opinion that the 1995
and 1994 financial statements, prepared using statutory accounting practices,
presented fairly, in all material respects, the financial position of the MML
Bay State Life Insurance Company as of December 31, 1995, and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles
("GAAP"). As described in Note 2 to the financial statements, financial
statements of stock life insurance subsidiaries of mutual life insurance
enterprises issued or reissued after 1996, and prepared in accordance with
statutory accounting principles, are no longer considered to be presentations in
conformity with GAAP. Accordingly, our present opinion on the 1995 and 1994
statutory financial statements as presented herein is different from that
expressed in our previous report.
In our opinion, because of the effects of the matter discussed in the third
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of MML Bay State Life Insurance Company at December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of MML Bay State Life Insurance
Company at December 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996, on
the statutory basis of accounting described in Note 2.
Springfield, Massachusetts
February 7, 1997
35
<PAGE>
MML BAY STATE LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
<S> <C> <C>
(In Thousands)
Assets:
Bonds $ 44,929.6 $ 41,260.6
Policy loans 9,988.3 6,444.9
Cash and short-term investments 7,013.9 490.5
Investment and insurance amounts receivable 2,277.8 1,268.0
Transfer due from separate account 50,186.8 29,015.6
Federal income tax receivable 1,139.4 215.5
Other assets 4,034.9 109.8
Separate account assets 706,668.9 265,188.5
----------- -----------
$826,239.6 $ 343,993.4
========== ===========
Liabilities:
Policyholders' reserves and funds $ 26,533.5 $ 19,095.9
Policy claims and other benefits 1,074.1 1,507.6
Payable to parent 2,929.9 3,165.2
Accrued insurance expenses and taxes 6,905.3 4,693.5
Asset valuation reserve 228.8 153.8
Other liabilities 7,235.6 2,200.7
Separate account reserves and liabilities 703,670.1 262,833.9
---------- -----------
748,577.3 293,650.6
---------- -----------
Shareholder's equity:
Common stock, $200 par value
25,000 shares authorized
12,501 shares issued and outstanding 2,500.2 2,000.2
Paid-in capital and contributed surplus 71,736.9 46,736.9
Surplus 3,425.2 1,605.7
---------- -----------
77,662.3 50,342.8
---------- -----------
$826,239.6 $ 343,993.4
========== ===========
</TABLE>
See notes to statutory financial statements.
36
<PAGE>
MML BAY STATE LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
(In Thousands)
Income:
Premium income $441,212.1 $92,732.8 $54,481.4
Net investment and other income 8,430.6 4,305.8 3,531.8
Expense allowance on reinsurance ceded 0.0 526.5 132.4
---------- --------- ---------
449,642.7 97,565.1 58,145.6
---------- --------- ---------
Benefits and expenses:
Policy benefits and payments 11,035.0 5,691.0 2,939.9
Addition to policyholders' reserves, funds
and separate accounts 363,526.2 66,974.4 30,422.1
Operating expenses 24,032.2 11,222.9 11,960.6
Commissions 28,133.3 15,072.4 10,747.5
State taxes, licenses and fees 9,051.1 2,546.8 1,405.1
---------- --------- ---------
435,777.8 101,507.5 57,475.2
---------- --------- ---------
Net gain (loss) from operations
before federal income taxes 13,864.9 (3,942.4) 670.4
Federal income taxes (benefit) 11,829.0 632.8 (934.8)
---------- --------- ---------
Net gain (loss) from operations 2,035.9 (4,575.2) 1,605.2
Net realized capital loss (58.1) (42.8) (24.4)
---------- --------- ---------
Net income (loss) $ 1,977.8 $(4,618.0) $ 1,580.8
========== ========= =========
</TABLE>
See notes to statutory financial statements.
37
<PAGE>
MML BAY STATE LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
(In Thousands)
Shareholder's equity, beginning of year $50,342.8 $55,963.0 $33,396.9
--------- --------- ---------
Increases (decrease) due to:
Net income (loss) 1,977.8 (4,618.0) 1,580.8
Additions to asset valuation reserve (75.0) (47.0) (43.3)
Change in separate account surplus 35.0 344.2 108.6
Surplus contribution 25,500.0 0.0 25,000.0
Prior year adjustment 0.0 (1,299.4) (4,101.5)
Change in accounting for mortgage backed
securities 0.0 0.0 21.5
Change in non-admitted assets and other (118.3) 0.0 0.0
--------- --------- ---------
27,319.5 (5,620.2) 22,566.1
--------- --------- ---------
Shareholder's equity, end of year $77,662.3 $50,342.8 $55,963.0
========= ========= =========
</TABLE>
See notes to statutory financial statements.
38
<PAGE>
MML BAY STATE LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
(In Thousands)
Operating activities:
Net income (loss) $ 1,977.8 $ (4,618.0) $ 1,580.8
Additions to policyholders' reserves, funds,
and net of transfers to separate accounts 7,004.1 8,610.8 2,064.6
Net realized capital loss 58.1 42.8 24.4
Change in receivable from separate accounts (21,171.1) (7,907.6) (6,456.2)
Change in receivable (payable) to parent (235.4) (1,203.0) 5,145.0
Change in federal taxes receivable (payable) (923.9) (1,018.7) (910.3)
Other changes 1,536.8 (2,543.9) (1,178.9)
---------- ----------- ----------
Net cash provided by (used in) operating activities (11,753.6) (8,637.6) 269.4
---------- ----------- ----------
Investing activities:
Purchases of investments and loans (35,959.1) (28,440.1) (43,275.8)
Sales or maturities of investments and receipts
from repayments of loans 28,736.1 36,618.2 18,455.4
---------- ----------- ----------
Net cash provided by (used in) investing activities (7,223.0) 8,178.1 (24,820.4)
---------- ----------- ----------
Financing activities:
Capital and Surplus contribution 25,500.0 0.0 25,000.0
---------- ----------- ----------
Net cash provided by financing activities 25,500.0 0.0 25,000.0
---------- ----------- ----------
Increase (decrease) in cash and short-term investments 6,523.4 (459.5) 449.0
Cash and short-term investments, beginning of year 490.5 950.0 501.0
---------- ----------- ----------
Cash and short-term investments, end of year $ 7,013.9 $ 490.5 $ 950.0
========== =========== ==========
</TABLE>
See notes to statutory financial statements.
39
<PAGE>
NOTES TO STATUTORY FINANCIAL STATEMENTS
1. Operations
MML Bay State Life Insurance Company ("the Company") is a wholly-owned
subsidiary of Massachusetts Mutual Life Insurance Company ("MassMutual").
The Company's insurance operation consists primarily of flexible and limited
premium variable whole life insurance and variable annuities distributed
through career agents. On March 1, 1996, the operations of Connecticut
Mutual Life Insurance Company were merged into MassMutual.
2. Summary of Accounting Practices
The accompanying statutory financial statements, except as to form, have
been prepared in conformity with the practices of the National Association
of Insurance Commissioners and the accounting practices prescribed or
permitted by the State of Missouri ("statutory accounting practices"), which
practices were also considered to be in conformity with generally accepted
accounting principles ("GAAP"). In 1993, the Financial Accounting Standards
Board ("FASB") issued Interpretations No. 40 ("Fin. 40"), "Applicability of
Generally Accepted Accounting Principles to Mutual Life Insurance and Other
Enterprises", which clarified that mutual life insurance companies issuing
financial statements described as prepared in conformity with GAAP after
1995 are required to apply all applicable GAAP pronouncements in preparing
those financial statements. In January 1995, the FASB issued Statement No.
120 ("SFAS 120"), Accounting and Reporting by Mutual Life Insurance
Enterprises and by Insurance Enterprises for Certain Long-Duration
Participating Contracts," which among other things, extended the
applicability of certain FASB statements to mutual life insurance companies
and deferred the effective date of Fin. 40 to financial statements issued or
reissued after 1996. As required by generally accepted auditing standards,
the opinion expressed by our independent accountants on the 1995 and 1994
financial statements is different from that expressed in their previous
report.
The accompanying statutory financial statements are different in some
respects from GAAP financial statements. The more significant differences
are as follows: (a) acquisition costs, such as commissions and other costs
in connection with acquiring new business, are charged to current operations
as incurred, whereas under GAAP these expenses would be capitalized and
recognized over the life of the policies; (b) policy reserves are based upon
statutory mortality and interest requirements without consideration of
withdrawals, whereas GAAP reserves would be based upon reasonably
conservative estimates of mortality, morbidity, interest and withdrawals;
(c) bonds are generally carried at amortized cost whereas GAAP would value
bonds at fair value and (d) deferred income taxes are not provided for
book-tax timing differences whereas GAAP would record deferred income taxes.
The preparation of statutory financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities, as well as disclosures of contingent assets and
liabilities, at the date of the statutory financial statements. Management
must also make estimates and assumptions that affect the amounts of revenues
and expenses during the reporting period. Future events, including changes
in the levels of mortality, morbidity, interest rates and asset valuations,
could cause actual results to differ from the estimates used in the
statutory financial statements.
The following is a description of the Company's current principal accounting
policies and practices.
40
<PAGE>
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
a. Investments
Bonds are valued in accordance with rules established by the National
Association of Insurance Commissioners. Generally, bonds are valued at
amortized cost.
As promulgated by the National Association of Insurance Commissioners,
the Company adopted the retrospective method of accounting for
amortization of premium and discount on mortgage backed securities as of
December 31, 1994. This method considers prepayment assumptions for
mortgage backed securities, which were obtained from a prepayment model,
that factors in mortgage type, seasoning, coupon, current interest rate
and the economic environment. The effect of this change, $21.5 thousand,
was recorded as of December 31, 1994 as an increase to shareholders'
equity on the Statutory Statement of Financial Position and had no
material effect for 1996 and 1995 net income. Through December 31, 1994,
premium and discount on bonds were amortized into investment income over
the stated lives of the securities.
Policy loans are carried at the outstanding loan balance less amounts
unsecured by the cash surrender value of the policy.
Short-term investments are stated at amortized cost, which approximates
fair value.
In compliance with regulatory requirements, the Company maintains an
Asset Valuation Reserve and an Interest Maintenance Reserve. The Asset
Valuation Reserve and other investment reserves as prescribed by the
regulatory authorities, stabilize the shareholders' equity against
declines in the value of bonds. The Interest Maintenance Reserve
captures after-tax realized capital gains and losses which result from
changes in the overall level of interest rates for all types of fixed
income investments and amortizes these capital gains and losses into
income using the grouped method over the remaining life of the
investment sold or over the remaining life of the underlying asset. Net
realized after tax capital losses of $33.7 thousand in 1996 and net
realized after tax capital gains of $250.2 thousand in 1995 and net
realized after tax capital losses of $7.0 thousand in 1994 were charged
to the Interest Maintenance Reserve. Amortization of the Interest
Maintenance Reserve into net investment income amounted to $85.8
thousand in 1996, $42.1 thousand in 1995 and $86.9 thousand in 1994. The
Interest Maintenance Reserve is included in other liabilities on the
statutory Statement of Financial Position.
Realized capital gains and losses, less taxes, not includable in the
Interest Maintenance Reserve, are recognized in net income. Realized
capital gains and losses are determined using the specific
identification method. Unrealized capital gains and losses are included
in shareholders' equity.
b. Separate Accounts
Separate account assets and liabilities represent segregated funds
administered and invested by the Company for the benefit of variable
life insurance policyholders. Assets, consisting of holdings in an
open-end series investment fund affiliated with MassMutual, bonds,
common stocks, and short-term investments, are reported at fair value.
Transfer due from separate account represents the separate account
assets in excess of statutory benefit reserves. Premiums, benefits and
expenses of the separate accounts are reported on the Statutory
Statement of Income. The Company receives compensation for providing
administrative services to the separate account and for assuming
mortality and expense risks in connection with the policies. The Company
had $2,998.8 thousand and $2,354.6 thousand of its assets invested in
the separate account as of December 31, 1996 and 1995, respectively.
The net transfers to separate accounts of $356,088.6 thousand, $59,792.6
thousand and $28,141.7 thousand in 1996, 1995 and 1994, respectively,
are included in addition to policyholders' reserves, funds and separate
accounts.
41
<PAGE>
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
c. Policyholders' Reserves
Policyholders' reserves for life contracts were developed using accepted
actuarial methods computed principally on the net level premium method
and the Commissioners' Reserve Valuation Method using the 1958 and 1980
Commissioners' Standard Ordinary mortality tables with assumed interest
rates ranging from 3.5 to 5.5 percent. Reserves for individual annuities
are based on accepted actuarial methods, principally at interest rates
ranging from 5.5 to 6.0 percent.
During 1994, actuarial guidelines requiring additional reserves for
immediate payment of claims became effective. While the Company's
aggregate reserves were sufficient, the reserves for certain products
were not recorded. The effect of correctly recording these reserves was
$1,299.4 thousand at December 31, 1994 and was recorded as an adjustment
to shareholders' equity during 1995.
d. Premium and Related Expense Recognition
Premium revenue is recognized annually on the anniversary date of the
policy. Commissions and other costs related to issuance of new policies,
maintenance and settlement costs, are charged to current operations.
e. Cash and Short-Term Investments
For purposes of the Statutory Statement of Cash Flows, the Company
considers all highly liquid short-term investments purchased with a
maturity of twelve months or less to be cash and short-term investments.
3 Stockholder's Equity
The Board of Directors of MassMutual has authorized the contribution of
funds to the Company sufficient to meet the capital requirements of all
states in which the Company 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. Under these regulations, $3,425.2 thousand of
stockholder's equity is available for distribution to shareholders in 1997
without prior regulatory approval.
4. Related Party Transactions
Investment and administrative services are provided to the Company pursuant
to a management services agreement with MassMutual. Service fees are accrued
based upon estimated costs and are billed the following period, when actual
costs are available. Fees incurred under the terms of this agreement were
$16,429.2 thousand, $6,588.1 thousand and $7,762.9 thousand in 1996, 1995
and 1994, respectively.
The Company had reinsurance agreements with MassMutual in which MassMutual
assumed specific plans of insurance on a coinsurance basis and on a yearly
renewal term basis. The coinsurance agreement was terminated in 1995. A
termination fee of $6,200.0 thousand was recorded as an expense and paid to
MassMutual for the rights to retain future fees and charges on the
reinsurance business. While the agreement was in effect, the Company ceded
premiums amounting to $29,597.0 thousand and $26,115.1 thousand in 1995 and
1994, respectively. Additionally, the Company ceded administrative and
insurance charges of $4,310.3 thousand in 1995 and $4,208.3 thousand in 1994
for policies issued in those years. The Company received $4,836.8 thousand
and $8,434.7 thousand and 1995 and 1994, respectively, as commissions and an
expense allowance. Reserves on all business ceded amounted to $8,027.9
thousand in 1995, immediately preceding the termination, which reduced
policyholders' reserves and funds. The Company's separate accounts retained
the assets applicable to variable life reserves of the policies reinsured
under the agreement with MassMutual. Premium income and the expense
allowance on reinsurance ceded differ from annual statement presentation.
A provision in the Company's coinsurance agreement with MassMutual required
surrender charge offsets to be included in the ceding provisions of the
reinsurance contract with MassMutual. This surrender charge offset, inherent
in the reserve calculations of the separate account liabilities, is
considered funds which would be due to the general account of MassMutual if
the life policies were surrendered. During 1993, this provision was
42
<PAGE>
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
incorrectly excluded from amounts recorded for the contract. The effect of
correctly recording this provision was $4,101.5 thousand at December 31,
1993 and was recorded as an adjustment to shareholders' equity during 1994.
The effects of this adjustment in 1994 were included in the expense
allowance on reinsurance ceded and all related tax benefits were recorded in
1995 and 1994 on the Statutory Statement of Income in accordance with the
accounting practices of the National Association of Insurance Commissioners.
During 1996 and 1994, MassMutual contributed additional paid in capital of
$25,000.0 thousand cash to the Company.
5. Federal Income Taxes
The provision for federal income taxes is based upon the Company's best
estimate of its tax liability. No deferred tax effect is recognized for
temporary differences that may exist between financial reporting and taxable
income. Accordingly, the federal tax provision, using the most current
information available, and adjusting for miscellaneous temporary
differences, primarily reserves and acquisition costs, resulted in an
effective tax rate which is other than the statutory tax rate.
The Internal Revenue Service is currently examining the Company's income tax
returns through the year 1992. Federal income tax returns for the years
1995, 1994 and 1993 are open to examination by the Internal Revenue Service.
The Company believes any adjustments resulting from such examinations will
not materially affect its statutory financial statements.
The Company plans to file its 1996 federal income tax return on a
consolidated basis with MassMutual and MassMutual's other life and non-life
affiliates. The Company and its life and non-life affiliates are subject to
a written tax allocation agreement which allocates tax liability in a manner
permitted under Treasury regulations. Generally, the agreement provides that
loss members shall be compensated for the use of their losses and credits by
other members.
The Company made federal tax payments of $12,811.7 thousand and $1,892.0
thousand in 1996 and 1995, respectively. No federal tax payments were made
during 1994.
6. Investments
The Company maintains a diversified investment portfolio. Investment
policies limit concentration in any asset class, geographic region, industry
group, economic characteristic, investment quality or individual investment.
a. Bonds
The carrying value and estimated fair value of bonds are as follows:
<TABLE>
<CAPTION>
December 31, 1996
-----------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
-------- ----------- ---------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
U. S. Treasury Securities $ 7,767.8 $ 79.5 $ 41.1 $ 7,806.2
and Obligations of U. S.
Government Corporations
and Agencies
Mortgage-backed securities 8,265.9 42.1 64.6 8,243.4
Industrial securities 28,895.9 293.6 146.1 29,043.4
--------- ------ ------ ---------
TOTAL $44,929.6 $415.2 $251.8 $45,093.0
========= ====== ====== =========
</TABLE>
43
<PAGE>
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
<TABLE>
<CAPTION>
December 31, 1995
-----------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
--------- ---------- ----------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
U. S. Treasury Securities $ 7,929.3 $107.8 $ 1.0 $ 8,036.1
and Obligations of U. S.
Government Corporations
and Agencies
Mortgage-backed securities 11,979.4 114.9 35.9 12,058.4
Industrial securities 21,351.9 684.2 1.7 22,034.4
--------- ------ ------ ---------
TOTAL $41,260.6 $906.9 $38.6 $42,128.9
========= ====== ===== =========
</TABLE>
The carrying value and estimated fair value of bonds at December 31,
1996 by contractual maturity are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without prepayment
penalties.
<TABLE>
<CAPTION>
Estimated
Carrying Fair
Value Value
---------- ----------
(In Thousands)
<S> <C> <C>
Due in one year or less $ 6,383.8 $ 6,423.7
Due after one year through five years 13,043.8 13,203.9
Due after five years through ten years 12,929.9 12,865.2
Due after ten years 1,510.1 1,503.1
---------- ----------
33,867.6 33,995.9
Mortgage-backed securities, including
securities guaranteed by the
U.S. Government 11,062.0 11,097.1
--------- ---------
TOTAL $44,929.6 $45,093.0
========= =========
</TABLE>
Proceeds from sales and maturities of investments in bonds were
$28,736.1 thousand during 1996, $36,584.5 thousand during 1995 and
$17,742.4 thousand during 1994. Gross capital gains of $33.2 thousand
in 1996, $535.0 thousand in 1995 and $44.5 thousand in 1994 and gross
capital losses of $65.2 thousand in 1996, $87.0 thousand in 1995 and
$52.3 thousand in 1994 were realized on those sales, a portion of
which were included in the Interest Maintenance Reserve. The estimated
fair value of non-publicly traded bonds is determined by the Company
using a pricing matrix.
b. Other
It is not practicable to determine the fair value of policy loans
which do not have a stated maturity.
44
<PAGE>
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
7. Liquidity
The withdrawal characteristics of the policyholders' reserves and funds,
including separate accounts, and the invested assets which support them at
December 31, 1996 are illustrated below:
<TABLE>
(In Thousands)
<S> <C> <C>
Total policyholders' reserves and funds and
separate account liabilities $730,203.6
Not subject to discretionary withdrawal (143.3)
Policy loans (9,988.3)
----------
Subject to discretionary withdrawal $720,072.0
----------
Total invested assets, including separate
investment accounts $768,600.7
Policy loans and other invested assets (9,988.3)
Readily marketable investments $758,612.4
----------
</TABLE>
8. Business Risks and Contingencies
Approximately 52% of the Company's premium revenue is derived from two
customers.
The Company is subject to insurance guaranty fund laws in the states in which
it does business. These laws assess insurance companies amounts to be used to
pay benefits to policyholders and claimants of insolvent insurance companies.
Many states allow these assessments to be credited against future premiums. The
Company believes such assessments in excess of amounts accrued will not
materially affect its financial position, results of operations or liquidity. In
1996, the Company elected not to admit $83.3 thousand of guaranty fund premium
tax offset receivables relating to prior assessments.
The Company is involved in litigation arising out of the normal course of its
business. Management intends to defend these actions vigorously. While the
outcome of litigation cannot be foreseen with certainty, it is the opinion of
management, after consultation with legal counsel, that the ultimate resolution
of these matters will not materially affect its financial position, results of
operations or liquidity.
9. Affiliated Companies
The relationship of the Company, its parent and affiliated companies as of
December 31, 1996 is illustrated below. Subsidiaries are wholly-owned by the
parent, except as noted.
Parent
------
Massachusetts Mutual Life Insurance Company
Subsidiaries of Massachusetts Mutual Life Insurance Company
-----------------------------------------------------------
C.M. Assurance Company
C.M. Benefit Insurance Company
C.M. Life Insurance Company
MassMutual Holding Company
MassMutual Holding Company Two, Inc. (Sold in March 1996)
MassMutual of Ireland, Limited
MML Bay State Life Insurance Company
MML Distributors, LLC
45
<PAGE>
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
Subsidiaries of MassMutual Holding Company
------------------------------------------
GR Phelps, Inc.
MassMutual Holding Trust I MassMutual Holding Trust II MassMutual Holding
MSC, Inc. MassMutual International, Inc.
MassMutual Reinsurance Bermuda (Sold in December 1996)
MML Investors Services, Inc.
State House One (Liquidated in December 1996)
Subsidiaries of MassMutual Holding Trust I
------------------------------------------
Antares Leveraged Capital Corporation
Charter Oak Capital Management, Inc.
Cornerstone Real Estate Advisors, Inc.
DLB Acquisition Corporation
Oppenheimer Acquisition Corporation - 86.15%
Subsidiaries of MassMutual Holding Trust II
-------------------------------------------
CM Advantage, Inc.
CM International, Inc.
CM Property Management, Inc.
High Yield Management, Inc.
MMHC Investments, Inc.
MML Realty Management
Urban Properties, Inc.
Westheimer 335 Suites, Inc.
Subsidiaries of MassMutual International
----------------------------------------
MassLife Seguros de Vida (Argentina) S. A.
MassMutual International (Bermuda) Ltd.
Mass Seguros de Vida (Chile) S. A.
MassMutual International (Luxemburg) S. A.
MassMutual Holding MSC, Incorporated
------------------------------------
MassMutual/Carlson CBO N. V. - 50%
MassMutual Corporate Value Limited - 46%
Affiliates of Massachusetts Mutual Life Insurance Company
---------------------------------------------------------
MML Series Investment Fund
MassMutual Institutional Funds
Oppenheimer Value Stock Fund
46
<PAGE>
PART C
OTHER INFORMATION
1
<PAGE>
Part C
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
Financial Statements Included in Part A
---------------------------------------
Condensed Financial Information
Financial Statements Included in Part B
---------------------------------------
The Registrant
--------------
Report of Independent Accountants
Statement of Assets and Liabilities as of December 31,
1996 Statement of Operations for the year ended
December 31, 1996 Statement of Changes in Net Assets
for the years ended December 31, 1996 and 1995
Notes to Financial Statements
The Depositor
-------------
Report of Independent Accountants
Statutory Statement of Financial Position as of
December 31, 1996 and 1995 Statutory Statement of
Income for the years ended December 31, 1996, 1995 and
1994 Statutory Statement of Changes in Shareholders
Equity for the years ended December 31, 1996, 1995 and
1994
Statutory Statement of the Cash flows for the years ended
December 31, 1996, 1995 and 1994 Notes to Statutory Financial
Statements
(b) Exhibits:
Exhibit 1 - Copy of Resolution of the Executive
Committee of the Board of Directors of MML
Bay State Life Insurance Company
authorizing the establishment of the
Registrant.*
Exhibit 2 - None
Exhibit 3 - (i) Copy of Distribution Agreement between
the Registrant and MML Distributors, LLC.**
(ii) Copy of Co-Underwriting Agreement
between the Registrant and MML Investors
Services, Inc.**
(iii) None
Exhibit 4 - Copy of the form of Life Trust Variable
Annuity Contract.*
Exhibit 5 - The form of Application to be used with the
Life Trust Variable Annuity Contract
described in Exhibit 4 above.*
2
<PAGE>
Exhibit 6 - (i) Copy of the Articles of
Incorporation of MML Bay State Life
Insurance Company.*
(ii) By-laws of MML Bay State Life
Insurance Company.*
Exhibit 7 - None
Exhibit 8 - None
Exhibit 9 - Opinion of and Consent of Counsel.*
Exhibit 10 - (i) Written consent of Coopers &
Lybrand L.L.P., independent
accountants.
(ii) Powers of Attorney
Exhibit 11 - None
Exhibit 12 - None
Exhibit 13 - Schedule of Computation of
Performance**
Exhibit 14 - Financial Data Schedule
* Incorporated by reference pursuant to Rule 411 of the Securities Act,
previously filed as part of Registration Statement No. 33-76920 filed on March
25, 1994.
** Incorporated by reference to Post-Effective Amendment No. 2 to the
registration statement on Form N-4 for the MML Bay State Variable Annuity
Separate Account 1 (File No. 33-76920) as filed with the Securities and Exchange
Commission and effective May 1, 1996.
Item 25. Directors and Executive Officers of MML Bay State
-------------------------------------------------
The directors and executive vice presidents of MML Bay State, their
positions and their other business affiliations and business experience
for the past five years are as follows:
MML BAY STATE INSURANCE COMPANY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NAME AND POSITION PRINCIPAL OCCUPATION(S ) DURING PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Paul D. Adornato, Director and Senior Director (since 1987) and Senior Vice President-Operations, MML
Vice President-Operations Bay State, since 1996; Senior Vice President, MassMutual, since 1986
- ------------------------------------------------------------------------------------------------------------------------------------
Lawrence V. Burkett, Jr., Director, Director, President and Chief Executive Officer, MML Bay State,
President and Chief Executive Officer since 1996; Executive Vice President and General Counsel,
MassMutual, since 1993; Senior Vice President and Deputy General
Counsel, 1992-1993
- ------------------------------------------------------------------------------------------------------------------------------------
John B. Davies, Director Director, MML Bay State, since 1996; Executive Vice President,
MassMutual, since 1994;
Associate Executive Vice
President, 1994- 1994;
General Agent, 1982-1993
- ------------------------------------------------------------------------------------------------------------------------------------
Anne Melissa Dowling, Director and Director and Senior Vice President-Large Corporate Marketing, MML
Senior Vice President-Large Corporate Bay State, since 1996; Senior Vice President, MassMutual, since 1996;
Marketing Chief Investment Officer, Connecticut Mutual Life Insurance
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Company, 1994-1996; Senior Vice President-International, Travelers
Insurance Co., 1987-1993
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas J. Finnegan, Jr., Director and Director, since 1997, and Secretary, MML Bay State, since 1990; Vice
Secretary President, Secretary and Associate General Counsel, MassMutual,
since 1984
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel J. Fitzgerald, Director Director, MML Bay State, since 1994; Executive Vice President,
Corporate Financial Operations, MassMutual, since 1994; Senior Vice
President, 1991-1994
- ------------------------------------------------------------------------------------------------------------------------------------
Maureen R. Ford, Director and Senior Director and Senior Vice President-Annuity Marketing, MML Bay
Vice President-Annuity Marketing State, since 1996; Senior Vice President, MassMutual, since 1996;
Marketing Officer, Connecticut Mutual Life Insurance Company,
1989-1996
- ------------------------------------------------------------------------------------------------------------------------------------
Isadore Jermyn, Director and Senior Vice Director (since 1990) and Senior Vice President and Actuary, MML
President and Actuary Bay State, since 1996; Senior Vice President and Actuary,
MassMutual, since 1995; Vice President and Actuary, 1980-1995
- ------------------------------------------------------------------------------------------------------------------------------------
Stuart H. Reese, Director and Senior Director (since 1994) and Senior Vice President-Investments, MML
Vice President-Investments Bay State, since 1996; Senior Vice President, MassMutual, since 1993;
Investment Manager, Aetna Life and Casualty and Affiliates, 1979-
1993
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OFFICERS (other than those who are also Directors):
- ------------------------------------------------------------------------------------------------------------------------------------
Ann Iseley Treasurer, MML Bay State, since 1996; Vice President and Treasurer,
MassMutual, since 1996; Chief Financial and Operations Officer,
Connecticut Mutual Financial Services, 1994-1996; Controller, The
Mack Company, 1993-1994; Vice President-Finance, Mutual of New
York, 1988-1993
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the
------------------------------------------------------
Depositor or Registrant
-----------------------
The assets of the Registrant, under state law, are assets of
MML Bay State.
The Registrant may also be deemed to be under common control
with other separate accounts established by MassMutual and its
life insurance subsidiaries, C.M. Life Insurance Company and
MML Bay State Life Insurance Company, which are registered as
unit investment trusts under the Investment Company Act of
1940.
LIST OF SUBSIDIARIES AND AFFILIATES
1. MassMutual Holding Company, a Delaware corporation, all the stock of
which is owned by MassMutual.
2. MML Series Investment Fund, a registered open-end investment company
organized as a Massachusetts business trust, all of the shares of which
are owned by separate accounts of MassMutual and companies controlled
by MassMutual.
3. MassMutual Institutional Funds, a registered open-end investment
company organized as a Massachusetts business trust, all of the shares
are owned by MassMutual.
4. MML Bay State Life Insurance Company, a Missouri corporation, all the
stock of which is owned by MassMutual.
5. MassMutual of Ireland, Ltd., incorporated in the Republic of Ireland,
to operate a group life and health claim office for MassMutual, all of
the stock of which is owned by MassMutual.
4
<PAGE>
6. CM Assurance Company, a Connecticut life, accident, disability and
health insurer, all the stock of which is owned by MassMutual.
7. CM Benefit Insurance Company, a Connecticut life, accident, disability
and health insurer, all the stock of which is owned by MassMutual.
8. C.M. Life Insurance Company, a Connecticut life, accident, disability
and health insurer, all the stock of which is owned by MassMutual.
9. MML Distributors, LLC, formerly known as Connecticut Mutual Financial
Services, LLC, a registered broker-dealer incorporated as a limited
liability company in Connecticut. MassMutual has a 99% ownership
interest and G.R. Phelps & Co. has a 1% ownership interest.
10. Panorama Series Fund, Inc., a registered open-end investment company
organized as a Maryland corporation. Shares of the fund are sold only
to MassMutual and its affiliates.
11. MassMutual Holding Trust I, a Massachusetts business trust, which acts
as a holding company for certain MassMutual subsidiaries and
affiliates, all of the stock of which is owned by MassMutual Holding
Company.
12. MassMutual Holding Trust II, a Massachusetts business trust, which acts
as a holding company for certain MassMutual subsidiaries and
affiliates, all of the stock of which is owned by MassMutual Holding
Company.
13. MassMutual Holding MSC, Inc., a Massachusetts corporation, which acts
as a holding company for certain MassMutual subsidiaries and
affiliates, all of the stock of which is owned by MassMutual Holding
Company.
14. MML Investors Services, Inc., registered broker-dealer incorporated in
Massachusetts, all the stock of which is owned by MassMutual Holding
Company.
15. G.R. Phelps & Company, Inc., Connecticut corporation which formerly
operated as a securities broker-dealer, all the stock of which is owned
by MassMutual Holding Company.
16. MassMutual International, Inc., a Delaware corporation that acts as a
holding company of and provides services to international insurance
companies, all of the stock of which is owned by MassMutual Holding
Company.
17. MassLife Seguros de Vida S.A. (Argentina), a life insurance company
incorporated in Argentina. MassMutual International Inc. owns 99.99% of
the outstanding capital stock of MassLife Seguros de Vida S.A.
18. Cornerstone Real Estate Advisers, Inc., a Massachusetts equity real
estate advisory corporation, all the stock of which is owned by
MassMutual Holding Trust I.
19. DLB Acquisition Corporation ("DLB") is a Delaware corporation, which
serves as a holding company for certain investment advisory
subsidiaries of MassMutual. MassMutual Holding Trust I owns 83.7% of
the outstanding capital stock of DLB.
20. Oppenheimer Acquisition Corporation ("OAC") is a Delaware corporation,
which serves as a holding company for OppenheimerFunds, Inc. MassMutual
Holding Trust I owns 86% of the capital stock of OAC
5
<PAGE>
21. Antares Leveraged Capital Corp., a Delaware corporation that operates
as a finance company, all of the stock of which is owned by MassMutual
Holding Trust I.
22. Charter Oak Capital Management, Inc., a Delaware corporation that
operates as an investment manager. MassMutual Holding Trust I owns 80%
of the capital stock of Charter Oak.
23. MML Realty Management Corporation, a property manager incorporated in
Massachusetts, all the stock of which is owned by MassMutual Holding
Trust II.
24. Westheimer 335 Suites, Inc., was incorporated in Delaware to serve as a
general partner of the Westheimer 335 Suites Limited Partnership.
MassMutual Holding Trust II owns all the stock of Westheimer 335
Suites, Inc.
25. CM Advantage, Inc., a Connecticut corporation that acts as a general
partner in real estate limited partnerships. MassMutual Holding Trust
II owns all of the outstanding stock.
26. CM International, Inc., a Delaware corporation that holds a mortgage
pool and issues collateralized bond obligations. MassMutual Holding
Trust II owns all the outstanding stock of CM International, Inc.
27. CM Property Management, Inc., a Connecticut real estate holding
company, all the stock of which is owned by MassMutual Holding Trust
II.
28. Urban Properties, Inc., a Delaware real estate holding and development
company, all the stock of which is owned by MassMutual Holding Trust
II.
29. MMHC Investment, Inc., a Delaware corporation which is a passive
investor in MassMutual High Yield Partners LLC. MassMutual Holding
Trust II owns all the outstanding stock of MMHC Investment, Inc.
30. HYP Management, Inc., a Delaware corporation which is the LLC Manager
for MassMutual High Yield Partners LLC and owns 1.28% of the LLC units
of such entity. MassMutual Holding Trust II owns all the outstanding
stock of HYP Management, Inc.
31. MassMutual Corporate Value Limited, a Cayman Islands corporation that
owns approximately 90% of MassMutual Corporate Value Partners Limited.
MassMutual Holding MSC, Inc. owns 46.19% of the outstanding capital
stock of MassMutual Corporate Value Limited.
32. MassMutual International (Bermuda) Ltd., a Bermuda life insurance
company, all of the stock of which is owned by MassMutual International
Inc.
33. MassMutual Internacional (Chile) S.A. a Chilean corporation, which
operates as a holding company. MassMutual International Inc. owns 99%
of the outstanding shares and MassMutual Holding Company owns the
remaining 1% of the shares.
34. MassMutual International (Luxembourg) S.A. a Luxembourg corporation,
which operates as an insurance company. MassMutual International Inc.
owns 99% of the outstanding shares and MassMutual Holding Company owns
the remaining 1% of the shares.
35. Mass Seguros de Vida S.A., a life insurance company incorporated in
Chile. MassMutual Holding Company owns 33.5% of the outstanding capital
stock of Mass Seguros de Vida S.A.
6
<PAGE>
36. MML Insurance Agency, Inc., a licensed insurance broker incorporated in
Massachusetts, all of the stock of which is owned by MML Investors
Services, Inc.
37. MML Securities Corporation, a Massachusetts securities corporation, all
of the stock of which is owned by MML Investors Services, Inc.
38. OppenheimerFunds, Inc., a registered investment adviser incorporated in
Colorado, all of the stock of which is owned by Oppenheimer Acquisition
Corporation
39. David L. Babson and Company, Incorporated, a registered investment
adviser incorporated in Massachusetts, all of the stock of which is
owned by DLB Acquisition Corporation.
40 Cornerstone Office Management, LLC, a Delaware limited liability
company that is 50% owned by Cornerstone Real Estate Advisers, Inc. and
50% owned by MML Realty Management Corporation.
41. Westheimer 335 Suites Limited Partnership, a Texas limited partnership
of which Westheimer 335 Suites, Inc. is the general partner.
42. MassMutual High Yield Partners LLC, a Delaware limited liability
company, that operates as a high yield bond fund. MassMutual holds
5.28%, MMHC Investment Inc. holds 35.99%, and HYP Management, Inc. hold
1.28% for a total of 42.55% of the ownership interest in this company.
43 MassMutual Corporate Value Partners Limited, a Cayman Islands
corporation that operates as a high yield bond fund. MassMutual
Corporate Value Limited holds an approximately 90% ownership interest
in this company.
44. First Israel Mezzanine Investors, Ltd., an Israeli corporation which
operates as managing general partner of First Israel Mezzanine
Investors Fund, LP. MassMutual holds a 33% ownership interest in First
Israel Mezzanine Investors, Ltd.
45. First Israel Mezzanine Investors Fund, LP, a Delaware limited
partnership, of which MassMutual holds a 37.5% ownership interest.
46. MBD Mezzanine Investments, LLC, a Delaware limited liability company,
which operates as the participating general partner of First Israel
Mezzanine Investors Fund, LP. MassMutual holds a 33% ownership interest
in MBD Mezzanine Investments, LLC.
47. Diversified Insurance Services Agency of America, Inc. (Alabama), a
licensed insurance broker incorporated in Alabama. MML Insurance
Agency, Inc. owns all the shares of outstanding stock.
48. Diversified Insurance Services Agency of America, Inc. (Hawaii), a
licensed insurance broker incorporated in Hawaii. MML Insurance Agency,
Inc. owns all the shares of outstanding stock.
49. MML Insurance Agency of Nevada, Inc., a Nevada corporation that
operates as an insurance broker, all of the stock of which is owned by
MML Insurance Agency, Inc.
50. MML Insurance Agency of Ohio, Inc., a subsidiary of MML Insurance
Agency, Inc., is incorporated in the state of Ohio that operates as an
insurance broker. The outstanding capital stock is controlled by MML
Insurance Agency, Inc. by means of a voting trust.
7
<PAGE>
51. MML Insurance Agency of Texas, Inc., a subsidiary of MML Insurance
Agency, Inc., is incorporated in the state of Texas that operates as an
insurance broker. The outstanding capital stock is controlled by MML
Insurance Agency, Inc. by means of a voting trust.
52. MML Insurance Agency of Mississippi, P.C., a Mississippi professional
corporation that operates as an insurance broker, all of the stock of
which is owned by MML Insurance Agency, Inc.
53. Origen Inversiones S.A., a Chilean corporation which operates as a
holding company. MassMutual Internacional (Chile) S.A. holds a 33.5%
ownership interest in this corporation.
54. Babson Securities Corporation, a registered broker-dealer incorporated
in Massachusetts, all of the stock of which is owned by David L. Babson
and Company, Incorporated.
55. Potomac Babson Incorporated, a Massachusetts corporation, is a
registered investment adviser. David L. Babson and Company Incorporated
owns 60% of the outstanding shares of Potomac Babson Incorporated.
56. Babson-Stewart-Ivory International, a Massachusetts general
partnership, which operates as a registered investment adviser. David
L. Babson and Company Incorporated holds a 50% ownership interest in
the partnership.
57. Oppenheimer Value Stock Fund ("OVSF) is a series of Oppenheimer
Integrity Funds, a Massachusetts business trust. OVSF is a registered
open-end investment company of which MassMutual owns 40% of the
outstanding shares of beneficial interest.
58. Oppenheimer Series Fund I Inc., a Maryland corporation and a registered
open-end investment company of which MassMutual and its affiliates own
approximately 27% of the outstanding shares of beneficial interest.
59. Centennial Asset Management Corporation, a Delaware corporation that
serves as the investment adviser and general distributor of the
Centennial Funds. OppenheimerFunds, Inc. owns all the stock of
Centennial Asset Management Corporation.
60. HarbourView Asset Management Corporation, a registered investment
adviser incorporated in New York, all the stock of which is owned by
OppenheimerFunds, Inc.
61. Main Street Advisers, Inc., a Delaware corporation, all the stock of
which is owned by OppenheimerFunds, Inc.
62. OppenheimerFunds Distributor, Inc., a registered broker-dealer
incorporated in New York, all the stock of which is owned by
OppenheimerFunds, Inc.
63. Oppenheimer Partnership Holdings, Inc., a Delaware holding company, all
the stock of which is owned by OppenheimerFunds, Inc.
64. Shareholder Financial Services, Inc., a transfer agent incorporated in
Colorado, all the stock of which is owned by OppenheimerFunds, Inc.
65. Shareholder Services, Inc., a transfer agent incorporated in Colorado,
all the stock of which is owned by OppenheimerFunds, Inc.
66. MultiSource Service, Inc., a Colorado corporation that operates as a
clearing broker, all of the stock of which is owned by
OppenheimerFunds, Inc.
8
<PAGE>
67. Centennial Capital Corporation, a former sponsor of unit investment
trust incorporated in Delaware, all the stock of which is owned by
Centennial Asset Management Corporation.
68. Compensa Compania Seguros De Vida, a Chilean insurance company. Origen
Inversiones S.A. owns 99% of the outstanding shares of this company
69. Cornerstone Suburban Office Investors, LP, a Delaware limited
partnership, which operates as a real estate operating company.
Cornerstone Office Management, LLC holds a 1% general partnership
interest in this fund and MassMutual holds a 99% limited partnership
interest.
70. 505 Waterford Park Limited Partnership, a Delaware limited partnership,
which holds title to an office building in Minneapolis, Minnesota. MML
Realty Management Corporation holds a 1% general partnership interest
in this partnership and MassMutual holds a 99% limited partnership
interest.
71. The DLB Fund Group, an open-end management investment company, of which
MassMutual owns at least 25% of each series.
MassMutual is the investment adviser the following investment companies, and as
such may be deemed to control them.
1. MassMutual Corporate Investors, a registered closed-end Massachusetts
business trust.
2. MassMutual Participation Investors, a registered closed-end
Massachusetts business trust.
3. MML Series Investment Fund, a registered open-end Massachusetts
business trust, all of the shares are owned by separate accounts of
MassMutual and companies controlled by MassMutual.
4. MassMutual Institutional Funds, a registered open-end Massachusetts
business trust, all of the shares are owned by MassMutual.
5. MassMutual/Carlson CBO N.V., a Netherlands Antilles corporation that
issued Collateralized Bond Obligations on or about May 1, 1991, which
is owned equally by MassMutual interests (MassMutual and
MassMutual Holding MSC, Inc.) and Carlson Investment Management Co.
6. MassMutual Corporate Value Partners, Limited, an off-shore unregistered
investment company.
7. MassMutual High Yield Partners LLC, a high yield bond fund organized as
Delaware limited liability company.
Item 27. Number of Contract Owners
-------------------------
As of February 20, 1997 there were, 2,585 Separate Account contracts
were in force.
Item 28. Indemnification
---------------
MML Bay State directors and officers are indemnified under its by-laws.
No indemnification is provided with respect to any liability to any
entity which is registered as an investment company under the
Investment Company Act of 1940 or to the security holders thereof,
where the basis for such liability is willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of office.
9
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of MML Bay State pursuant to the foregoing provisions, or
otherwise, MML Bay State has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act of 1933, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by MML Bay State of
expenses incurred or paid by a director, officer or controlling person
of MML Bay State in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, MML Bay State will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed
by the final adjudication of such issue.
Item 29. Principal Underwriters
----------------------
(a) MML Distributors, LLC, a wholly-owned subsidiary of MassMutual, acts as
principal underwriter for registered separate accounts of MassMutual,
C.M. Life and MML Bay State.
(b)(1) MML Distributors, LLC is the principal underwriter of the Contracts.
The following people are officers and directors of the principal underwriter.
OFFICERS AND MEMBER REPRESENTATIVES
MML DISTRIBUTORS, LLC
<TABLE>
<CAPTION>
Name and Position
with Principal Underwriter Principal Business Address
- -------------------------- --------------------------
<S> <C>
Kenneth M. Rickson One Monarch Place
Member Representative 1414 Main Street
G.R. Phelps & Co., Inc. Springfield, MA 01144-1013
Margaret Sperry 1295 State Street
Member Representative Springfield, MA 01111-0001
Massachusetts Mutual
Life Insurance Co.
Kenneth M. Rickson One Monarch Place
President 1414 Main Street
Springfield, MA 01144-1013
Ronald E. Thomson One Monarch Place
Vice President 1414 Main Street
Springfield, MA 01144-1013
Michael L. Kerley One Monarch Place
Vice President 1414 Main Street
Chief Legal Officer Springfield, MA 01144-1013
Assistant Secretary
John O'Connor One Monarch Place
Vice President 1414 Main Street
Springfield, MA 01144-1013
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Robert S. Rosenthal One Monarch Place
Compliance Officer 1414 Main Street
Springfield, MA 01144-1013
James T. Birchall One Monarch Place
Treasurer 1414 Main Street
Springfield, MA 01144-1013
Bruce C. Frisbie 1295 State Street
Assistant Treasurer Springfield, MA 01111-0001
Raymond W. Anderson 140 Garden Street
Assistant Treasurer Hartford, CT 01654
Ann F. Lomeli 1295 State Street
Secretary Springfield, MA 01111-0001
</TABLE>
(b)(2) MML Investors Services, Inc. is the co-underwriter of the
Contracts. The following people are the officers and directors of the
co-underwriter.
MML INVESTORS SERVICES, INC.
OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
Name and Position
with Co-Underwriter Principal Business Address
- ------------------- --------------------------
<S> <C>
Kenneth M. Rickson One Monarch Place
President and Chief 1414 Main Street
Operating Officer Springfield, MA 01144-1013
Michael L. Kerley One Monarch Place
Second Vice President 1414 Main Street
Chief Legal Officer Springfield, MA 01144-1013
Assistant Secretary
Ronald E. Thomson One Monarch Place
Treasurer and Second 1414 Main Street
Vice President Springfield, MA 01144-1013
Thomas J. Finnegan, Jr. 1295 State Street
Secretary/Clerk Springfield, MA 01111
Marilyn A. Sponzo One Monarch Place
Assistant Secretary 1414 Main Street
Springfield, MA 01144-1013
John E. Forrest One Monarch Place
Second Vice President 1414 Main Street
National Sales Director Springfield, MA 01144-1013
Eileen D. Leo One Monarch Place
Assistant Treasurer 1414 Main Street
Springfield, MA 01103-1013
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
William Bartol One Monarch Place
Compliance Officer 1414 Main Street
Springfield, MA 01144-1013
Robert S. Rosenthal One Monarch Place
Compliance Officer 1414 Main Street
Springfield, MA 01144-1013
Trudy A. Fearon One Monarch Place
Sr. Registered Options Principal 1414 Main Street
Springfield, MA 01144-1013
Dennis L. Reyhons 1295 State Street
Regional Supervisor/South Springfield, MA 01111
Nicholas J. Orphan 245 Peach Tree Center Ave.
Regional Supervisor/South Suite 2330
Atlanta, GA 30303
William L. Tindall 1295 State Street
Chief Pension Management Springfield, MA 01111
Field Force Supervisor
Robert W. Kumming 1295 State Street
Regional Pension Management Springfield, MA 01111
Supervisor (East/Central)
Peter J. Zummo 1295 State Street
Regional Pension Management Springfield, MA 01111
Supervisor (South/West)
Bruce Lukowiak 6263 North Scottsdale Rd.
Regional Supervisor/West Suite 222
Scottsdale, AZ 85250
Robert Burke One Lincoln Centre
Regional Supervisor/Central Suite 1490
Oak Brook Terrace, IL
60181-4271
Lawrence V. Burkett 1295 State Street
Chairman of the Board Springfield, MA 01111
of Directors
Peter Cuozzo, CLU, ChFC 1295 State Street
Director Springfield, MA 01111
John B. Davies 1295 State Street
Director Springfield, MA 01111
Daniel J. Fitzgerald 1295 State Street
Director Springfield, MA 01111
Maureen R. Ford 140 Garden Street
Director Hartford, CT 01654
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
Gary T. Huffman 1295 State Street
Director Springfield, MA 01111
Isadore Jermyn, FIA, ASA 1295 State Street
Director Springfield, MA 01111
Susan Alfano 1295 State Street
Director Springfield, MA 01111
Anne Melissa Dowling 140 Garden Street
Director Hartford, CT 01654
</TABLE>
(c) See the section captioned "Service Arrangements and
Distribution" in the Statement of Additional Information.
-----------------------------------
Item 30. Location of Accounts and Records
--------------------------------
All accounts, books, or other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules
promulgated thereunder are maintained by the Registrant through a full
service agreement between itself and ALLIANCE-ONE Services, L.P.
("ALLIANCE-ONE") and such records will be maintained at ALLIANCE-ONE,
301 West Eleventh Street, Kansas City, Missouri 64105.
Item 31. Management Related Services
---------------------------
None
Item 32. Undertakings
------------
(a) Registrant undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the
audited financial statements in the Registration Statement are never
more than 16 months old for so long as payments under the variable
annuity contracts may be accepted.
(b) Registrant undertakes to include either: (1) as part of any application
to purchase a contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional Information;
or (2) a post card or similar written communication affixed to or
included in the prospectus that the applicant can remove to send for a
Statement of Additional Information;
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available
under this Form promptly upon written or oral request.
(d) Registrant asserts that the Separate Account meets the definition of a
separate account under the Investment Company Act of 1940.
(e) MML Bay State Life Insurance Company hereby represents that the fees
and charges deducted under the flexible purchase payment individual
variable annuity contracts described in this Registration Statement in
the aggregate, are reasonable in relation to the services rendered, the
expenses expected to be incurred, and the risks assumed by MML Bay
State Life Insurance Company.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
caused this Post-Effective Amendment No. 3 to Registration Statement No.
33-76920 to be signed on its behalf by the undersigned thereunto duly
authorized, all in the city of Springfield and the Commonwealth of
Massachusetts, on the 21st day of April, 1997.
MML BAY STATE VARIABLE ANNUITY SEPARATE ACCOUNT 1
MML BAY STATE LIFE INSURANCE COMPANY
(Depositor)
By: /s/ Lawrence V. Burkett, Jr.*
---------------------------------------------------
Lawrence V. Burkett, Jr., President and Chief Executive Officer
MML Bay State Life Insurance Company
/s/ Richard M. Howe On April 21, 1997, as Attorney-in-Fact pursuant to
- ---------------------
*Richard M. Howe powers of attorney filed herewith.
As required by the Securities Act of 1933, this Post-Effective
Amendment No. 3 to Registration Statement No. 33-76920 has been signed by the
following persons in the capacities and on the duties indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Lawrence V. Burkett, Jr.* President, Chief Executive April 21, 1997
- -------------------------------
Lawrence V. Burkett, Jr. and Director
/s/ Ann Iseley* Treasurer (Principal Financial April 21, 1997
- ------------------------------
Ann Iseley Officer)
/s/ John Miller, Jr.* Second Vice President and Comptroller April 21, 1997
- -------------------------------
John Miller, Jr. (Principal Accounting Officer)
/s/ Paul D. Adornato* Director April 21, 1997
- -------------------------------
Paul D. Adornato
/s/ John B. Davies* Director April 21, 1997
- -------------------------------
John B. Davies
/s/ Anne Melissa Dowling* Director April 21, 1997
- -------------------------------
Anne Melissa Dowling
/s/ Daniel F. Fitzgerald* Director April 21, 1997
- -------------------------------
Daniel F. Fitzgerald
</TABLE>
14
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Maureen R. Ford* Director April 21, 1997
- -------------------------
Maureen R. Ford
/s/ Isadore Jermyn* Director April 21, 1997
- -------------------------
Isadore Jermyn
/s/ Stuart H. Reese* Director April 21, 1997
- -------------------------
Stuart H. Reese
</TABLE>
/s/ Richard M. Howe On April 21, 1997, as Attorney-in-Fact pursuant to
- -------------------------
*Richard M. Howe powers of attorney filed herewith.
15
<PAGE>
EXHIBIT LIST
Exhibit 10 (i) Written consent of Coopers & Lybrand L.L.P., independent
accountants.
(ii) Powers of Attorney
Exhibit 14 Financial Data Schedule
54
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
MML Bay State Life Insurance Company
We consent to the inclusion in Post-Effective Amendment No. 3 to the
Registration Statement of MML Bay State Variable Annuity Separate Account 1 on
Form N-4 (Registration No. 33-76920) of our report, which includes explanatory
paragraphs relating to the use of statutory accounting practices, which
practices are no longer considered to be in accordance with generally accepted
accounting principles, and the change in our opinion for prior years, dated
February 7, 1997 on our audits of the statutory financial statements of MML Bay
State Life Insurance Company, and our report dated February 4, 1997 on our
audits of MML Bay State Variable Annuity Separate Account 1. We also consent to
the reference to our Firm under the caption "Independent Accountants" in the
Statement of Additional Information.
Springfield, Massachusetts
April 25, 1997
56
<PAGE>
POWER OF ATTORNEY
MML BAY STATE SEPARATE INVESTMENT ACCOUNTS
------------------------------------------
The Undersigned, Lawrence V. Burkett, Jr., President, Chief Executive Officer
and a member of the Board of Directors of MML Bay State Life Insurance Company
("MML Bay State"), does hereby constitute and appoint Thomas F. English, Richard
M. Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as President, Chief Executive Officer and a member of the Board of Directors of
MML Bay State that said attorneys and agents may deem necessary or advisable to
enable MML Bay State to comply with the Securities Act of 1933, as amended (the
"1933 Act"), the Investment Company Act of 1940, as amended (the "1940 Act"),
and any rules, regulations, orders or other requirements of the Securities and
Exchange Commission (the "Commission") thereunder. This power of attorney
applies to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MML Bay State separate investment accounts (the "MML Bay
State Separate Accounts"). This power of attorney authorizes such attorneys and
agents to sign the Undersigned's name on his behalf as President, Chief
Executive Officer and a member of the Board of Directors of MML Bay State to the
Registration Statements and to any instruments or documents filed or to be filed
with the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such statements,
documents or instruments of any MML Bay State Separate Account, including but
not limited to those listed below.
MML Bay State Variable Annuity Separate Account 1
MML Bay State Variable Life Separate Account I
MML Bay State Variable Life Separate Account II
MML Bay State Variable Life Separate Account III
MML Bay State Variable Life Separate Account IV
MML Bay State Variable Life Separate Account V
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 26th day of February,
1997.
/s/ Lawrence V. Burkett, Jr.
- ------------------------------- -----------------------------------
Lawrence V. Burkett, Jr. Witness
President, Chief Executive Officer
and Member, Board of Directors
57
<PAGE>
POWER OF ATTORNEY
MML BAY STATE SEPARATE INVESTMENT ACCOUNTS
The Undersigned, John B. Davies, a member of the Board of Directors of MML Bay
State Life Insurance Company ("MML Bay State"), does hereby constitute and
appoint Lawrence V. Burkett, Jr., Thomas F. English, Richard M. Howe, and
Michael Berenson, and each of them individually, as his true and lawful
attorneys and agents.
The attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as a member of the Board of Directors of MML Bay State that said attorneys and
agents may deem necessary or advisable to enable MML Bay State to comply with
the Securities Act of 1933, as amended (the "1933 Act"), the Investment Company
Act of 1940, as amended (the "1940 Act"), and any rules, regulations, orders or
other requirements of the Securities and Exchange Commission (the "Commission")
thereunder. This power of attorney applies to the registration, under the 1933
Act and the 1940 Act, of shares of beneficial interest of MML Bay State separate
investment accounts (the "MML Bay State Separate Accounts"). This power of
attorney authorizes such attorneys and agents to sign the Undersigned's name on
his behalf as a member of the Board of Directors of MML Bay State to the
Registration Statements and to any instruments or documents filed or to be filed
with the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such statements,
documents or instruments of any MML Bay State Separate Account, including but
not limited to those listed below.
MML Bay State Variable Annuity Separate Account 1
MML Bay State Variable Life Separate Account I
MML Bay State Variable Life Separate Account II
MML Bay State Variable Life Separate Account III
MML Bay State Variable Life Separate Account IV
MML Bay State Variable Life Separate Account V
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 25th day of February,
1997.
/s/ John B. Davies
- ---------------------------- ----------------------------
John B. Davies Witness
Member, Board of Directors
58
<PAGE>
POWER OF ATTORNEY
MML BAY STATE SEPARATE INVESTMENT ACCOUNTS
------------------------------------------
The Undersigned, Maureen R. Ford, a member of the Board of Directors of MML Bay
State Life Insurance Company ("MML Bay State"), does hereby constitute and
appoint Lawrence V. Burkett, Jr., Thomas F. English, Richard M. Howe, and
Michael Berenson, and each of them individually, as her true and lawful
attorneys and agents.
The attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as a member of the Board of Directors of MML Bay State that said attorneys and
agents may deem necessary or advisable to enable MML Bay State to comply with
the Securities Act of 1933, as amended (the "1933 Act"), the Investment Company
Act of 1940, as amended (the "1940 Act"), and any rules, regulations, orders or
other requirements of the Securities and Exchange Commission (the "Commission")
thereunder. This power of attorney applies to the registration, under the 1933
Act and the 1940 Act, of shares of beneficial interest of MML Bay State separate
investment accounts (the "MML Bay State Separate Accounts"). This power of
attorney authorizes such attorneys and agents to sign the Undersigned's name on
her behalf as a member of the Board of Directors of MML Bay State to the
Registration Statements and to any instruments or documents filed or to be filed
with the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such statements,
documents or instruments of any MML Bay State Separate Account, including but
not limited to those listed below.
MML Bay State Variable Annuity Separate Account 1
MML Bay State Variable Life Separate Account I
MML Bay State Variable Life Separate Account II
MML Bay State Variable Life Separate Account III
MML Bay State Variable Life Separate Account IV
MML Bay State Variable Life Separate Account V
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set her hand this 28th day of February,
1997.
/s/ Maureen R. Ford
- ---------------------------- -------------------------------
Maureen R. Ford Witness
Member, Board of Directors
59
<PAGE>
POWER OF ATTORNEY
MML BAY STATE SEPARATE INVESTMENT ACCOUNTS
------------------------------------------
The Undersigned, Anne Melissa Dowling, a member of the Board of Directors of MML
Bay State Life Insurance Company ("MML Bay State"), does hereby constitute and
appoint Lawrence V. Burkett, Jr., Thomas F. English, Richard M. Howe, and
Michael Berenson, and each of them individually, as her true and lawful
attorneys and agents.
The attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as a member of the Board of Directors of MML Bay State that said attorneys and
agents may deem necessary or advisable to enable MML Bay State to comply with
the Securities Act of 1933, as amended (the "1933 Act"), the Investment Company
Act of 1940, as amended (the "1940 Act"), and any rules, regulations, orders or
other requirements of the Securities and Exchange Commission (the "Commission")
thereunder. This power of attorney applies to the registration, under the 1933
Act and the 1940 Act, of shares of beneficial interest of MML Bay State separate
investment accounts (the "MML Bay State Separate Accounts"). This power of
attorney authorizes such attorneys and agents to sign the Undersigned's name on
her behalf as a member of the Board of Directors of MML Bay State to the
Registration Statements and to any instruments or documents filed or to be filed
with the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such statements,
documents or instruments of any MML Bay State Separate Account, including but
not limited to those listed below.
MML Bay State Variable Annuity Separate Account 1
MML Bay State Variable Life Separate Account I
MML Bay State Variable Life Separate Account II
MML Bay State Variable Life Separate Account III
MML Bay State Variable Life Separate Account IV
MML Bay State Variable Life Separate Account V
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set her hand this 6th day of March, 1997.
/s/ Anne Melissa Dowling
- ----------------------------- ------------------------------
Anne Melissa Dowling Witness
Member, Board of Directors
60
<PAGE>
POWER OF ATTORNEY
MML BAY STATE SEPARATE INVESTMENT ACCOUNTS
------------------------------------------
The Undersigned, Isadore Jermyn, Chairman of the Board of Directors of MML Bay
State Life Insurance Company ("MML Bay State"), does hereby constitute and
appoint Lawrence V. Burkett, Jr., Thomas F. English, Richard M. Howe, and
Michael Berenson, and each of them individually, as his true and lawful
attorneys and agents.
The attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as Chairman of the Board of Directors of MML Bay State that said attorneys and
agents may deem necessary or advisable to enable MML Bay State to comply with
the Securities Act of 1933, as amended (the "1933 Act"), the Investment Company
Act of 1940, as amended (the "1940 Act"), and any rules, regulations, orders or
other requirements of the Securities and Exchange Commission (the "Commission")
thereunder. This power of attorney applies to the registration, under the 1933
Act and the 1940 Act, of shares of beneficial interest of MML Bay State separate
investment accounts (the "MML Bay State Separate Accounts"). This power of
attorney authorizes such attorneys and agents to sign the Undersigned's name on
his behalf as Chairman of the Board of Directors of MML Bay State to the
Registration Statements and to any instruments or documents filed or to be filed
with the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such statements,
documents or instruments of any MML Bay State Separate Account, including but
not limited to those listed below.
MML Bay State Variable Annuity Separate Account 1
MML Bay State Variable Life Separate Account I
MML Bay State Variable Life Separate Account II
MML Bay State Variable Life Separate Account III
MML Bay State Variable Life Separate Account IV
MML Bay State Variable Life Separate Account V
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 25th day of February,
1997.
/s/ Isadore Jermyn
- ------------------------------------- ------------------------------
Isadore Jermyn Witness
Chairman of the Board of Directors
61
<PAGE>
POWER OF ATTORNEY
MML BAY STATE SEPARATE INVESTMENT ACCOUNTS
------------------------------------------
The Undersigned, John Miller, Jr., Second Vice President and Comptroller of MML
Bay State Life Insurance Company ("MML Bay State"), does hereby constitute and
appoint Lawrence V. Burkett, Jr., Thomas F. English, Richard M. Howe, and
Michael Berenson, and each of them individually, as his true and lawful
attorneys and agents.
The attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as Second Vice President and Comptroller of MML Bay State that said attorneys
and agents may deem necessary or advisable to enable MML Bay State to comply
with the Securities Act of 1933, as amended (the "1933 Act"), the Investment
Company Act of 1940, as amended (the "1940 Act"), and any rules, regulations,
orders or other requirements of the Securities and Exchange Commission (the
"Commission") thereunder. This power of attorney applies to the registration,
under the 1933 Act and the 1940 Act, of shares of beneficial interest of MML Bay
State separate investment accounts (the "MML Bay State Separate Accounts"). This
power of attorney authorizes such attorneys and agents to sign the Undersigned's
name on his behalf as Second Vice President and Comptroller of MML Bay State to
the Registration Statements and to any instruments or documents filed or to be
filed with the Commission under the 1933 Act and the 1940 Act in connection with
such Registration Statements, including any and all amendments to such
statements, documents or instruments of any MML Bay State Separate Account,
including but not limited to those listed below.
MML Bay State Variable Annuity Separate Account 1
MML Bay State Variable Life Separate Account I
MML Bay State Variable Life Separate Account II
MML Bay State Variable Life Separate Account III
MML Bay State Variable Life Separate Account IV
MML Bay State Variable Life Separate Account V
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 26th day of February,
1997.
/s/ John Miller, Jr.
- ----------------------- ------------------------------
John Miller, Jr. Witness
Second Vice President
and Comptroller
62
<PAGE>
POWER OF ATTORNEY
MML BAY STATE SEPARATE INVESTMENT ACCOUNTS
------------------------------------------
The Undersigned, Thomas J. Finnegan, Jr., a member of the Board of Directors of
MML Bay State Life Insurance Company ("MML Bay State"), does hereby constitute
and appoint Lawrence V. Burkett, Jr., Thomas F. English, Richard M. Howe, and
Michael Berenson, and each of them individually, as his true and lawful
attorneys and agents.
The attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as a member of the Board of Directors of MML Bay State that said attorneys and
agents may deem necessary or advisable to enable MML Bay State to comply with
the Securities Act of 1933, as amended (the "1933 Act"), the Investment Company
Act of 1940, as amended (the "1940 Act"), and any rules, regulations, orders or
other requirements of the Securities and Exchange Commission (the "Commission")
thereunder. This power of attorney applies to the registration, under the 1933
Act and the 1940 Act, of shares of beneficial interest of MML Bay State separate
investment accounts (the "MML Bay State Separate Accounts"). This power of
attorney authorizes such attorneys and agents to sign the Undersigned's name on
his behalf as a member of the Board of Directors of MML Bay State to the
Registration Statements and to any instruments or documents filed or to be filed
with the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such statements,
documents or instruments of any MML Bay State Separate Account, including but
not limited to those listed below.
MML Bay State Variable Annuity Separate Account 1
MML Bay State Variable Life Separate Account I
MML Bay State Variable Life Separate Account II
MML Bay State Variable Life Separate Account III
MML Bay State Variable Life Separate Account IV
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 18th day of March,
1997.
/s/ Thomas J. Finnegan, Jr.
- ----------------------------- -------------------------
Thomas J. Finnegan, Jr. Witness
Member, Board of Directors
63
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 108,272,790
<INVESTMENTS-AT-VALUE> 116,199,639
<RECEIVABLES> 394,062
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 116,593,701
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 42,340
<TOTAL-LIABILITIES> 42,340
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 116,551,361
<DIVIDEND-INCOME> 3,113,887
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 892,506
<NET-INVESTMENT-INCOME> 2,221,381
<REALIZED-GAINS-CURRENT> 590,601
<APPREC-INCREASE-CURRENT> 6,806,399
<NET-CHANGE-FROM-OPS> 9,618,381
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
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<NET-CHANGE-IN-ASSETS> 92,087,409
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<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 63,770,605
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
