<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. 5
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 5
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, 1999 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.
If appropriate, check the following box:
|_| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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, 1998 was filed on or about March 22, 1999.
1
<PAGE>
CROSS REFERENCE TO ITEMS
REQUIRED BY FORM N-4
N-4 Item Caption in Prospectus
- -------- ---------------------
1 ......................Cover Page
2 ......................Index of Special Terms
3 ......................Table of Fees and Expenses
4 ......................Condensed Financial Information;
Performance
5 ......................The Company; Investment Choices
6 ......................Expenses; Distributors
7 ......................Ownership; Purchasing a Contract; Voting Rights;
Reservation of Rights; Contract Value; Cover Page
8 ......................The Income Phase
9 ......................Death Benefit
10 .....................The Accumulation Phase; Distributors
11 .....................Highlights; Withdrawals
12 .....................Taxes
13 .....................Legal Proceedings
14 .....................Additional Information
2
<PAGE>
Caption in Statement of
Additional Information
----------------------
15 ...........................Cover Page
16 ...........................Table of Contents
17 ...........................General Information
18 ...........................Distribution; Experts
19 ...........................Purchase of Securities Being Offered
20 ...........................Performance Measures; Distribution
21 ...........................Performance Measures
22 ...........................Contract Value Calculations
23 ...........................Financial Statements
3
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
4
<PAGE>
MML Bay State Life Insurance Company
MML Bay State Variable Annuity
Separate Account 1
LifeTrust Variable Annuity
This prospectus describes the LifeTrust individual flexible purchase payment
variable annuity contract offered by MML Bay State Life Insurance Company. The
contract provides for accumulation of contract value and annuity payments on a
fixed and variable basis.
You, the contract owner, have a number of investment choices in this contract.
These investment choices include fourteen funds which are offered through our
separate account, MML Bay State Variable Annuity Separate Account 1. In most
states, we also offer a fixed account with a market value adjustment.
MML Series Investment Fund
o MML Equity Fund
o MML Money Market Fund
o MML Managed Bond Fund
o MML Blend Fund
Oppenheimer Variable Account Funds
o Oppenheimer Money Fund/VA
o Oppenheimer High Income Fund/VA
o Oppenheimer Bond Fund/VA
o Oppenheimer Aggressive Growth Fund/VA
o Oppenheimer Multiple Strategies Fund/VA
o Oppenheimer Capital Appreciation Fund/VA
o Oppenheimer Global Securities Fund/VA
o Oppenheimer Strategic Bond Fund/VA
o Oppenheimer Main Street Growth & Income Fund/VA
o Oppenheimer Small Cap Growth Fund/VA
Please read this prospectus before investing. You should keep it for future
reference. It contains important information about the LifeTrust contract.
To learn more about the LifeTrust contract, you can obtain a copy of the
Statement of Additional Information (SAI) dated May 1, 1999. We filed the SAI
with the Securities and Exchange Commission (SEC) and it is legally a part of
this prospectus. The SEC maintains a Web site (http://www.sec.gov) that contains
the SAI, material incorporated by reference and other information regarding
companies that file electronically with the SEC. The Table of Contents of the
SAI is on page 30 of this prospectus. For a free copy of the SAI, or for general
inquiries, call our Annuity Service Center at (800) 366-8226 or write to:
Annuity Service Center, H564, P.O. Box 9067, Springfield, Massachusetts
01102-9067.
The contracts:
o are not bank deposits.
o are not federally insured.
o are not endorsed by any bank or governmental agency.
o are not guaranteed and may be subject to loss of principal.
- --------------------------------------------------------------------------------
The SEC has not approved these contracts or determined that this prospectus is
accurate or complete. Any representation that it has is a criminal offense.
- --------------------------------------------------------------------------------
May 1, 1999.
1
<PAGE>
Table Of Contents
Highlights 4
Table Of Fees And Expenses 5
The Company 9
The LifeTrust Variable Annuity
Contracts - General Overview 9
Ownership Of A Contract 10
Owner 10
Joint Owner 10
Annuitant 10
Beneficiary 10
Purchasing A Contract 11
Purchase Payments 11
Allocation Of Purchase Payments 11
Investment Choices 12
The Separate Account 12
The Funds 12
The Fixed Account With Market Value Adjustment 14
Contract Value 15
Accumulation Units 15
Transfers 15
Automatic Transfers 16
Dollar Cost Averaging Program 16
Asset Reallocation Program 17
Withdrawals 17
Automatic Partial Withdrawals 18
Expenses 19
Insurance Charges 19
Mortality and Expense Risk Charge 19
Administrative Expense Charge 19
Death Benefit Charge 19
Administrative Charge 19
Contingent Deferred Sales Charge 20
Free Withdrawals 20
Market Value Adjustment 20
Premium Taxes 21
Transfer Fee 21
Income Taxes 21
Fund Expenses 21
The Income Phase 22
Fixed Income Payments 22
Variable Income Payments 22
Annuity Unit Value 23
Annuity Options 23
Death Benefit 25
Contract Owner Death Benefit 25
Annuitant Death Benefit 25
Taxes 26
Annuity Contracts In General 26
Qualified And Non-Qualified Contracts 26
Withdrawals - Non-Qualified Contracts 26
Withdrawals - Qualified Contracts 27
Withdrawals - Tax Sheltered Annuities 27
Other Information 28
Performance 28
Standardized Total Returns 28
Nonstandard Total Returns 28
Total Returns 28
Average Annual Total Returns 28
Yield and Effective Yield 28
Year 2000 28
Distributors 29
Electronic Transmission Of Application Information 29
Assignment 29
Voting Rights 29
Reservation Of Rights 29
Suspension Of Payments Or Transfers 30
Legal Proceedings 30
Financial Statements 30
Additional Information 30
Appendix A -
Condensed Financial Information A-1
2
<PAGE>
Index Of Special Terms
We have tried to make this prospectus as readable and understandable for you as
possible. By the very nature of the contract, however, certain technical words
or terms are unavoidable. We have identified the following as some of these
words or terms. The page that is indicated here is where we believe you will
find the best explanation for the word or term.
Page
Accumulation Phase 9
Accumulation Unit 15
Annuitant 10
Annuity Options 23
Annuity Payments 22
Annuity Service Center Cover Page
Annuity Unit Value 23
Contract Year 25
Free Withdrawal 20
Income Phase 9
Maturity Date 22
Non-Qualified 26
Purchase Payment 11
Qualified 26
Separate Account 12
Tax Deferral 9
3
<PAGE>
Highlights
This prospectus describes the general provisions of the LifeTrust contract. You
may review a copy of the contract upon request.
Free Look
You have a right to examine your contract. If you change your mind about owning
your contract, you can cancel it within 10 days after receiving it. However,
this time period may vary by state. When you cancel the contract within this
time period, we will not assess a contingent deferred sales charge. You will
receive back your contract value as of the business day we receive your contract
and written request at our Annuity Service Center, plus any amount we deducted
from your purchase payment(s). If your state requires it, or if you purchase
this contract as an IRA, we will return the greater of your purchase payments
less any withdrawals you took, or your contract value, plus any amount we
deducted from your purchase payment(s).
Contingent Deferred Sales Charge
We do not deduct a sales charge when we receive a purchase payment from you.
However, we may assess a contingent deferred sales charge if you withdraw all of
or any part of the contract value, if you elect to begin receiving annuity
payments under the contract, and if we pay certain death benefits. The amount of
the contingent deferred sales charge depends on the amount of your purchase
payments and the length of time since you made them. The contingent deferred
sales charge ranges from 7% to 0%.
Federal Income Tax Penalty
If you withdraw any of the contract value from your non-qualified contract, a
10% federal income tax penalty may be applied to the amount of the withdrawal
that is includible in your gross income for tax purposes. Some withdrawals may
be exempt from the penalty tax. They include any amounts:
o paid on or after you reach age 59 1/2 ;
o paid to your beneficiary after you die;
o paid if you become totally disabled as the term is defined in the Internal
Revenue Code;
o paid in a series of substantially equal payments made annually or more
frequently for life or a period not exceeding life expectancy;
o paid under immediate annuity; or
o that come from purchase payments made prior to August 14, 1982.
The Internal Revenue Code (the Code) treats any withdrawal as first coming from
earnings and then from your purchase payments. Separate tax penalties and
restrictions apply to withdrawals under qualified contracts. Please refer to the
Taxes section of this prospectus for more information.
4
<PAGE>
Table Of Fees And Expenses
Contract Owner Transaction Expenses
Transfer Fee:
During the accumulation phase: None for the first 14 transfers in a
contract year. We charge $20 for each
transfer thereafter.
During the income phase: We allow transfers only if a variable
monthly income option is in We limit
transfers to once effect. every three
months. We do not charge for these
transfers.
Sales Load on Purchases: 0%
Contingent Deferred Sales Charge
(as a percentage of purchase payments when withdrawn)
- --------------------------------------------------------------------------------
Full years since payment 0 1 2 3 4 5 6 7 or more
- --------------------------------------------------------------------------------
Percentage 7% 6% 5% 4% 3% 2% 1% 0%
- --------------------------------------------------------------------------------
Annual Administrative Charge: $30
Separate Account Annual Expenses
(as a percentage of the average account
value)
Mortality and Expense Risk Charge: 1.15%
Administrative Charge: 0.15%
Death Benefit Charge: 0.10%
-----
Total Separate Account Annual Expenses: 1.40%
5
<PAGE>
Annual Fund Expenses
(as a percentage of average net assets as of December 31, 1998)
Total Portfolio
Management Other Annual
Fees Expenses Expenses
- --------------------------------------------------------------------------------
MML Equity Fund* 0.37% 0.00% 0.37%
- --------------------------------------------------------------------------------
MML Money Market Fund* 0.46% 0.03% 0.49%
- --------------------------------------------------------------------------------
MML Managed Bond Fund* 0.45% 0.03% 0.48%
- --------------------------------------------------------------------------------
MML Blend Fund* 0.37% 0.00% 0.37%
- --------------------------------------------------------------------------------
Oppenheimer Money Fund/VA 0.45% 0.05% 0.50%
- --------------------------------------------------------------------------------
Oppenheimer High Income Fund/VA 0.74% 0.04% 0.78%
- --------------------------------------------------------------------------------
Oppenheimer Bond Fund/VA 0.72% 0.02% 0.74%
- --------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Fund/VA 0.69% 0.02% 0.71%
- --------------------------------------------------------------------------------
Oppenheimer Multiple Strategies Fund/VA 0.72% 0.04% 0.76%
- --------------------------------------------------------------------------------
Oppenheimer Capital Appreciation Fund/VA** 0.72% 0.03% 0.75%
- --------------------------------------------------------------------------------
Oppenheimer Global Securities Fund/VA 0.68% 0.06% 0.74%
- --------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund/VA 0.74% 0.06% 0.80%
- --------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income
Fund/VA *** 0.74% 0.05% 0.79%
- --------------------------------------------------------------------------------
Oppenheimer Small Cap Growth Fund/VA 0.75% 0.12% 0.87%
*We have agreed to bear the expenses of these Funds (other than the management
fee, interest, taxes, brokerage commissions and extraordinary expenses) in
excess of 0.11% of the average daily net asset value of these Funds through
April 30, 2000. We do not expect that we will be required to reimburse any
expenses of these Funds due to these undertakings in 1999.
**Prior to May 1, 1999, this Fund was called Oppenheimer Growth Fund.
***Prior to May 1, 1999, this Fund was called Oppenheimer Growth & Income Fund.
6
<PAGE>
Examples
The following examples are designed to help you understand the expenses in the
contracts. The examples show the cumulative expenses you would pay assuming you
invested $1,000 in a contract and allocated all of it to a fund that earned 5%
each year. All the expenses shown in the table of fees and expenses, including
the annual fund expenses, are assumed to apply.
This first example assumes that you withdrew all of your money at the end of
years 1, 3, 5 or 10.
Year 1 3 5 10
- --------------------------------------------------------------------------------
MML Equity Division $ 82 $103 $127 $217
- --------------------------------------------------------------------------------
MML Money Market Division 83 107 133 230
- --------------------------------------------------------------------------------
MML Managed Bond Division 83 107 133 229
- --------------------------------------------------------------------------------
MML Blend Division 82 103 127 218
- --------------------------------------------------------------------------------
Oppenheimer Money Division 83 107 134 231
- --------------------------------------------------------------------------------
Oppenheimer High Income Division 86 116 148 260
- --------------------------------------------------------------------------------
Oppenheimer Bond Division 86 115 146 256
- --------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Division* 85 114 145 253
- --------------------------------------------------------------------------------
Oppenheimer Multiple Strategies Division 86 115 147 258
- --------------------------------------------------------------------------------
Oppenheimer Growth Division** 86 115 147 257
- --------------------------------------------------------------------------------
Oppenheimer Global Securities Division 86 115 146 256
- --------------------------------------------------------------------------------
Oppenheimer Strategic Bond Division 86 116 149 262
- --------------------------------------------------------------------------------
Oppenheimer Growth & Income Division*** 86 116 149 261
- --------------------------------------------------------------------------------
Oppenheimer Small Cap Growth Division 87 119 153 269
7
<PAGE>
This second example assumes that you did not withdraw all of your contract value
at the end of years 1, 3, 5 or 10.
Year 1 3 5 10
- --------------------------------------------------------------------------------
MML Equity Division $ 19 $ 58 $100 $217
- --------------------------------------------------------------------------------
MML Money Market Division 20 62 106 230
- --------------------------------------------------------------------------------
MML Managed Bond Division 20 62 106 229
- --------------------------------------------------------------------------------
MML Blend Division 19 58 100 218
- --------------------------------------------------------------------------------
Oppenheimer Money Division 20 62 107 231
- --------------------------------------------------------------------------------
Oppenheimer High Income Division 23 71 121 260
- --------------------------------------------------------------------------------
Oppenheimer Bond Division 23 70 119 256
- --------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Division* 22 69 118 253
- --------------------------------------------------------------------------------
Oppenheimer Multiple Strategies Division 23 70 120 258
- --------------------------------------------------------------------------------
Oppenheimer Growth Division** 23 70 120 257
- --------------------------------------------------------------------------------
Oppenheimer Global Securities Division 23 70 119 256
- --------------------------------------------------------------------------------
Oppenheimer Strategic Bond Division 23 71 122 262
- --------------------------------------------------------------------------------
Oppenheimer Growth & Income Division*** 23 71 122 261
- --------------------------------------------------------------------------------
Oppenheimer Small Cap Growth Division 24 74 126 269
*Prior to May 1, 1998, this Division was known as the Oppenheimer Capital
Appreciation Division.
**Effective May 1, 1999, this Division invests in the Oppenheimer Capital
Appreciation Fund/VA.
***Effective May 1, 1999, this Division invests in the Oppenheimer Main Street
Growth & Income Fund/VA.
The purpose of the Table of Fees and Expenses is to assist you in understanding
the various costs and expenses that you will incur. The table reflects expenses
of the separate account and the funds.
The examples reflect the $30 annual administrative charge as an annual charge of
0.09%. This charge is based on an anticipated average contract value of $35,000.
The examples do not reflect any premium taxes. However, premium taxes may apply.
The examples should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
There is an accumulation unit value history contained in Appendix A - Condensed
Financial Information.
8
<PAGE>
The 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). MML Bay State was organized in 1894 under the laws of the state of
Missouri and was formerly known as Western Life Insurance Company of America.
MassMutual purchased the company in 1981 and changed its name in March 1982. On
June 30, 1997 MML Bay State was redomesticated from the State of Missouri to the
State of Connecticut. MML Bay State's home office is located in Hartford,
Connecticut.
MML Bay State currently is licensed to sell variable life insurance in all
states except New York. We plan to obtain variable annuity authority in all
states except New York, and, as of March 1, 1999, have obtained this authority
in 44 states and the District of Columbia. The contract is available only in
states where we have completed the approval process.
MassMutual is a mutual life insurance company chartered in 1851 under the laws
of Massachusetts. It is currently licensed to transact life, accident, and
health insurance business in all states, the District of Columbia, Puerto Rico
and certain provinces of Canada. MassMutual had consolidated statutory assets in
excess of $67 billion and estimated total assets under management of $176.8
billion as of December 31, 1998.
The LifeTrust Variable Annuity Contracts
General Overview
LifeTrust is a contract between you, the owner and us, MML Bay State. The
contract is intended for retirement savings or other long-term investment
purposes. In exchange for your purchase payment, we agree to pay you an income
when you choose to receive it. You select the income period beginning on a date
you designate that is in the future. The LifeTrust contract, like all deferred
annuity contracts, has two phases - the accumulation phase and the income phase.
Your contract is in the accumulation phase until you decide to begin receiving
annuity payments that begin on the maturity date. During the accumulation phase
we provide a death benefit. Once you begin receiving annuity payments, your
contract enters the income phase.
You are not taxed on contract earnings until you take money from your contract.
This is known as tax deferral.
The contract is a called variable annuity because you can choose to allocate
your purchase payment(s) among various investment choices. Your choices include
fourteen funds and in most states, a fixed account with a market value
adjustment. The amount of money you are able to accumulate in your contract
during the accumulation phase depends on the investment performance of the funds
you select as well as the interest we credit on your value in the fixed account.
At the beginning of the income phase, you can choose to receive annuity payments
on a variable basis, fixed basis or a combination of both. If you choose
variable payments, the amount of the annuity payments will fluctuate depending
on the investment performance of the funds you select for the income phase. If
you elect to receive payments on a fixed basis, the payments you receive will
remain level.
9
<PAGE>
Ownership Of A Contract
Owner
The owner is named at time of application. The owner of a non-qualified contract
can be an individual or a non-natural person. For contracts issued under section
403(b), section 408(b) or section 408(k) of the Code, the owner must be the
annuitant. Under tax-qualified retirement plans, except Tax Sheltered Annuities
and Individual Retirement Annuities, participants may not be contract owners.
Therefore, participants have no contract owner rights.
As the owner of the contract, you exercise all rights under the contract. The
owner names the beneficiary. Subject to any requirements of the Code applicable
to your contract, you may change the owner of the contract at any time prior to
the maturity date by written request. Changing the owner may result in tax
consequences.
Joint Owner
The contract can be owned by joint owners. If there are joint owners, we will
require the signatures of both joint owners for all transactions.
Annuitant
The annuitant is the person on whose life we issue the contract. Generally, we
will not issue a contract if the annuitant is age 85 1/2 or older as of the date
we proposed to issue the contract.
Beneficiary
The beneficiary is the person(s) or entity you name to receive any death
benefit. You name the beneficiary at the time of application. Unless an
irrevocable beneficiary has been named, you can change the beneficiary at any
time before the annuitant dies. If an irrevocable beneficiary is named, this
beneficiary must consent to the exercise of any contract rights.
You can name different classes of beneficiaries, such as primary or secondary.
These classes set the order of payment. There may be more than one beneficiary
in a class.
When the annuitant and owner are the same person and his/her spouse is the
beneficiary of the contract, the beneficiary may continue the contract in
his/her own name as annuitant and owner upon the death of the annuitant/owner.
10
<PAGE>
Purchasing A Contract
Purchase Payments
o Minimum initial purchase payment - $2,000
o Maximum total purchase payments - $1,000,000, without our prior approval.
You can make additional purchase payments of at least $100. In most states, you
may allocate purchase payments to the fixed account. The minimum amount that you
may allocate to the fixed account is $1,000.
You may make your initial purchase payment, along with your completed
application, by giving them to your agent or broker. You can make additional
purchase payments by mailing your check that clearly indicates your name and
contract number to our Annuity Service Center.
You may also make purchase payments by wire transfer. Instruct your bank to wire
transfer funds to:
Chase Manhattan Bank, New York, New York
ABA #021000021
MassMutual Account # 323065430
Ref: LifeTrust MMB Contract #
Name: (Your Name)
We have the right to reject any application or purchase payment.
Allocation Of Purchase Payments
When you purchase your contract, you elect how we will apply your purchase
payment(s) among the investment choices. If you make additional purchase
payments, we will apply them in the same way as your first purchase payment,
unless you tell us otherwise.
Once we receive your purchase payment and the necessary information at our
Annuity Service Center, we will apply your first purchase payment within 2
business days. If you do not give us all the information we need, we will
contact you to get it. If for some reason we are unable to complete the issue
process within 5 business days, we will either send back your money or get your
permission to keep it until we get all of the necessary information.
If you add more money to your contract by making additional purchase payments,
we will credit these amounts to your contract on the business day we receive
them at our Annuity Service Center. Our business day closes when the New York
Stock Exchange closes, usually 4:00 p.m. Eastern time. If we receive your
purchase payment at the Annuity Service Center on a non-business day or after
the business day closes, we will credit the amount to your contract effective
the next business day.
11
<PAGE>
Investment Choices
The Separate Account
We established MML Bay State Variable Annuity Separate Account 1 (separate
account) to hold the assets that underlie the contracts. We established the
separate account on January 14, 1994. We registered the separate account with
the Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940.
We own the assets of the separate account. However, those separate account
assets equal to the reserves and other contract liabilities are not chargeable
with liabilities arising out of any other business we may conduct. All the
income, gains and losses (realized or unrealized) resulting from these assets
are credited to, or charged against, the contracts and not against any other
contracts we may issue.
We have divided the separate account into 14 divisions. Each of these divisions
invests in a fund. You bear the complete investment risk for purchase payments
that you allocate to a fund.
The Funds
The contract offers 14 funds that are listed below. We may add additional funds
in the future.
MML Series Investment Fund ("MML Trust")
MML Trust is a no-load, open-end investment company having eight series of
shares each of which has a different investment objective designed to meet
different investment needs. Four of the series are available to you. MassMutual
serves as the investment adviser to the MML Trust. MassMutual has entered into a
subadvisory agreement with David L. Babson and Company, Inc. ("Babson"), a
controlled subsidiary of MassMutual. Babson manages the investment of the assets
of the MML Equity Fund and the equity sector of the MML Blend Fund.
MML Equity Fund. The MML Equity Fund seeks to achieve a superior rate of return
over time from both capital appreciation and current income and to preserve
capital by investing in equity securities.
MML Money Market Fund. The MML Money Market Fund seeks to maximize current
income, to preserve capital and to maintain liquidity by investing in money
market instruments.
MML Managed Bond Fund. The MML Managed Bond Fund seeks a high rate of return,
consistent with capital preservation, by investing primarily in investment
grade, publicly-traded, fixed income securities.
MML Blend Fund. The MML Blend Fund seeks a high total rate of return over time,
consistent with prudent investment risk and capital preservation, by investing
in equity, fixed income and money market securities.
Oppenheimer Variable Account Funds ("Oppenheimer Funds")
Oppenheimer Variable Account Funds is an investment company consisting of 10
separate series of shares known as funds. The Oppenheimer Funds are advised by
OppenheimerFunds, Inc. (OFI). OFI is owned by Oppenheimer Acquisition
Corporation, a holding company owned by senior management of OFI and controlled
by MassMutual. OFI was organized in 1959 and advises U.S. investment companies
with assets aggregating over $95 billion as of December 31, 1998, and with more
than 4 million shareholder accounts.
12
<PAGE>
Oppenheimer Money Fund/VA. The Oppenheimer Money Fund/VA seeks maximum current
income from investments in money market securities that is consistent with low
capital risk and maintenance of liquidity. The fund invests in short-term, high
quality "money market" securities.
Oppenheimer High Income Fund/VA. The Oppenheimer High Income Fund/VA seeks a
high level of current income. The Fund invests in unrated securities or high
risk securities in the lower rating categories, commonly known as "junk bonds,"
which are subject to a greater risk of loss of principal and nonpayment of
interest than higher-rated securities.
Oppenheimer Bond Fund/VA. The Oppenheimer Bond Fund/VA seeks a high level of
current income. The Fund seeks capital growth when consistent with its primary
objective. This Fund will, under normal market conditions, invest at least 65%
of its total assets in investment grade debt securities
Oppenheimer Aggressive Growth Fund/VA*. The Oppenheimer Aggressive Growth
Fund/VA seeks long-term capital appreciation by investing in "growth-type"
companies.
*Prior to May 1, 1998, this Fund was called Oppenheimer Capital Appreciation
Fund.
Oppenheimer Capital Appreciation Fund/VA*. The Oppenheimer Capital Appreciation
Fund/VA seeks long-term capital appreciation by investing in securities of
well-known established companies. It invests mainly in equity securities.
*Prior to May 1, 1999, this Fund was called Oppenheimer Growth Fund.
Oppenheimer Multiple Strategies Fund/VA. The Oppenheimer Multiple Strategies
Fund/VA seeks a total 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/VA. The Oppenheimer Global Securities Fund/VA
seeks long-term capital appreciation by investing a substantial portion of
assets in securities of foreign issuers, "growth-type" companies, cyclical
industries and special situations which are considered to have appreciation
possibilities. It invests in equity securities of U.S. and foreign issuers.
Oppenheimer Strategic Bond Fund/VA. The Oppenheimer Strategic Bond Fund/VA 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 in three market sectors: debt securities of
foreign government and companies, U.S. Government securities, and lower-rated
high yield securities of U.S. companies.
Oppenheimer Main Street Growth & Income Fund/VA*. The Oppenheimer Main Street
Growth & Income Fund/VA seeks total return (which includes growth in the value
of its shares as well as current income) from equity and debt securities.
*Prior to May 1, 1999, this Fund was called Oppenheimer Growth & Income Fund.
Oppenheimer Small Cap Growth Fund/VA. Oppenheimer Small Cap Growth Fund/VA seeks
capital appreciation. Current income is not an objective. In seeking its
objective, the Fund emphasizes investments in securities of "growth-type"
companies with market capitalization less than $1 billion, including common
stocks, preferred stocks, convertible securities, rights, warrants and options,
in proportions which may vary from time-to-time.
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.
There is no assurance that the funds will achieve their stated objective. The
fund prospectuses contain more detailed information about the funds. Current
copies of the fund prospectuses are attached to this prospectus. You should read
the information contained in the funds' prospectuses carefully before investing.
13
<PAGE>
The Fixed Account With Market Value Adjustment
In most states, you may allocate purchase payments or transfer part of your
contract value to our fixed account during the accumulation phase of your
contract. The minimum purchase payment or transfer amount we permit to the fixed
account is $1,000.
We divide the fixed account into segments. Each segment guarantees that we will
credit your value in that segment with a specific rate of interest for a
specific guaranteed period. As of May 1, 1999, we offer segments with guarantee
periods of 1, 3, 5 and 7 years.
Amounts you allocate or transfer to a segment of the fixed account earn interest
at the guaranteed rate applicable to the segment on the date we credit the
amounts to the segment. The interest rate we credit remains constant during the
guarantee period. You may allocate multiple amounts to a single segment or to
multiple segments. We may change the segments we make available for allocations
of purchase payments, transfers and renewals at any time.
You do not participate in the investment performance of the assets in the fixed
account. Instead, we credit your contract with interest at a specified rate that
we declare in advance. We guarantee the interest rate for each segment will be
at least 3% per year. We may also credit a higher rate of interest at our
discretion.
Any part of your contract value that is removed from a fixed account segment may
be subject to a market value adjustment. Any withdrawal from the fixed account
may also be subject to a contingent deferred sales charge. We explain the market
value adjustment later in this prospectus and in the attached prospectus for the
fixed account. We also provide more information regarding the fixed account in
the attached prospectus for the fixed account. Please review the prospectus for
the fixed account before you allocate any value to the fixed account.
14
<PAGE>
Contract Value
Your contract value is the sum of your value in the separate account and the
fixed account.
Your value in the separate account will vary depending on the investment
performance of the funds you choose. In order to keep track of your contract
value, we use a unit of measure called an accumulation unit. During the income
phase of your contract we call the unit an annuity unit.
Accumulation Units
Every business day we determine the value of an accumulation unit for each of
the funds. Changes in the accumulation unit value reflect the investment
performance of the funds as well as the deductions we make for our separate
account charges.
The value of an accumulation unit may go up or down from business day to
business day. The Statement of Additional Information contains more information
on the calculation of contract value.
When you make a purchase payment, we credit your contract with accumulation
units. We determine the number of accumulation units to credit by dividing the
amount of the purchase payment allocated to a fund by the value of the
accumulation unit for that fund. When you make a withdrawal, we deduct from your
contract accumulation units representing the withdrawal.
We calculate the value of an accumulation unit for each fund after the New York
Stock Exchange closes each business day. Any change in the accumulation unit
value will be reflected in your contract value.
Example:
On Monday we receive an additional purchase payment of $5,000 from you. You have
told us you want this to go to the Oppenheimer Bond Fund/VA. When the New York
Stock Exchange closes on that Monday, we determine that the value of an
accumulation unit for the Oppenheimer Bond Fund/VA is $13.90. We then divide
$5,000 by $13.90 and credit your contract on Monday night with 359.71
accumulation units for the Oppenheimer Bond Fund/VA.
Transfers
Prior to 30 days before your contract enters the income phase, you can transfer
all or part of your contract value among the funds and, if available, the fixed
account. You may not make transfers within the 30-day period before the maturity
date. Transfers out of the fixed account may be subject to a market value
adjustment.
If you make more than 4 transfers in a contract year, we reserve the right to
charge a $20 transfer fee. Currently, we do not impose a fee as long as you do
not make more than 14 transfers a contract year.
During the income phase of the contract, we limit transfers among the funds to
once every three months if the annuitant is receiving variable monthly payments.
We do not permit transfers if the annuitant is receiving fixed income payments.
You can make transfers by telephone. This service is automatically made
available to contract owners, unless we receive specific instructions that you
do not want this service. If you want to use our automatic voice response
system, you must submit a written request to obtain a personal identification
number (PIN). We will use reasonable procedures to confirm that instructions
given to us by telephone are genuine. We may be liable for any losses due to
unauthorized or fraudulent instructions, if we fail to use such procedures. We
may tape record all telephone instructions. We currently do not offer the
telephone transfer service to contracts owned by trustees.
The following rules apply to transfers during both the accumulation and income
phases:
(1) The minimum amount you may transfer is the lesser of:
o $500, or
15
<PAGE>
o your total contract value in a fund or fixed account segment.
(2) The minimum amount you may transfer to a fixed account segment is $1,000.
We will not process a transfer to a fixed account segment if the segment
you elected is not available.
(3) Any amount you transfer from the fixed account is subject to a market
value adjustment, unless the transfer is made within 30 days of the end
for the guarantee period for the segment. We will apply the market value
adjustment as of the date of the transfer.
(4) We deduct any transfer fee from the fund or fixed account segment from
which you request the transfer. If the balance remaining in the fund or
fixed account segment is not sufficient to cover the fee, we will deduct
the fee from the amount you are transferring.
(5) You must clearly indicate the amount you wish to transfer from a fund or
fixed account segment. Also, you must clearly indicate the funds or fixed
account segment to which the transfer will be made. Unless you specify
otherwise, we will transfer amounts from a fixed account segment on a
first-in, first-out basis. If you request a transfer during the income
phase, you must clearly indicate the percentage you wish to transfer among
the funds.
(6) We reserve the right to limit the number and frequency of transfers you
may make during a contract year.
(7) Once annuity payments begin, we do not allow transfers between a fixed
income and a variable monthly income option.
Your transfer is effective on the business day we receive your request at our
Annuity Service Center. Our business day closes when the New York Stock Exchange
closes, usually 4:00 p.m. Eastern time. If we receive your transfer request at
our Annuity Service Center on a non-business day or after our business day
closes, your transfer request will be effective on the next business day.
Automatic Transfers
We currently offer the following two automatic transfer programs:
o Dollar Cost Averaging Program
o Asset Reallocation Program
These programs are only available during the accumulation phase. You may
participate in only one of the automatic transfer programs at a time. We
currently do not charge you for participating in these programs, but we reserve
the right to do so in the future. You may not allocate values in the fixed
account to any automatic transfer program.
Dollar Cost Averaging Program
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount from a selected fund to any of the other funds. By allocating amounts on
a regular schedule as opposed to allocating the total amount at one particular
time, you may be less susceptible to the impact of market fluctuations.
Dollar Cost Averaging does not assure a profit and does not protect you against
loss in declining markets. Since Dollar Cost Averaging involves continuous
investment in securities regardless of fluctuating price levels of such
securities, you should consider your financial ability to continue the Dollar
Cost Averaging Program through periods of fluctuating price levels.
The minimum amount you may transfer to any fund is $100. You must have a minimum
balance of at least $6,000 in the originating fund in order to participate in
the Dollar Cost Averaging Program. The transfers we make in your contract as
part of the dollar cost averaging program do not count in the number of
transfers we permit without a transfer fee.
The minimum duration of participation in any Dollar Cost Averaging program is
currently 12 months or until there is no money left in the originating fund.
Dollar Cost Averaging transfers can be made monthly, quarterly,
16
<PAGE>
semiannually or annually. We will make Dollar Cost Averaging transfers on the
15th of the month. You may change your transfer options at any time.
Your Dollar Cost Averaging program will terminate:
o if you withdraw your total contract value;
o upon your death or the annuitant's death;
o if we make the last transfer you selected;
o if you begin the income phase of your contract; or
o if we receive your written request to terminate the program at least 5
business days prior to the next scheduled transfer date.
We have the right to modify, terminate or suspend the Dollar Cost Averaging
Program.
Asset Reallocation Program
The asset reallocation program allows you to periodically adjust the percentage
of contract value you allocated to selected funds. We will automatically
transfer money between your selected funds to maintain your desired allocation.
With the asset reallocation program, you can maintain a balanced and diversified
approach to investing, as decreases in one fund can be offset by gains in
another.
You can choose to have the transfers occur quarterly, semi-annually, or
annually. We require that you have a minimum contract value of $20,000 to elect
this option. We will reallocate your contract value based on the allocation
selection you have in effect for any new purchase payments.
Your Asset Reallocation program will terminate:
o if you withdraw your total contract value;
o upon your death or the annuitant's death;
o if we make the last transfer you selected;
o if you begin the income phase of your contract; or
o if we receive your written request to terminate the program at least 5
business days prior to the next scheduled transfer date.
Withdrawals
During the accumulation phase and if the annuitant is alive, you may make either
partial or total withdrawals of your contract value. Your withdrawal is
effective on the business day we receive your written request at our Annuity
Service Center. If we receive your request at our Annuity Service Center on a
non-business day or after our business day closes, your withdrawal request will
be effective on the next business day. We will pay any withdrawal amount within
7 days of our receipt of your fully completed written request at our Annuity
Service Center unless we are required to suspend or postpone withdrawal
payments.
If you make a partial withdrawal, you must tell us from which funds or fixed
account segment you want the withdrawal taken. If you request a withdrawal from
a fixed account segment, and do not specify otherwise, we will take the
withdrawal on a first-in, first-out basis.
You must withdraw at least $100. If your request for a partial withdrawal will
reduce your contract value to less than $1,000, we will treat the request as a
full withdrawal of your contract value.
Any withdrawal from a fund is subject to a contingent deferred sales charge. We
will pay any partial withdrawal in one sum. If you request a full withdrawal of
your contract value, you may ask us to make the payment in one sum or apply the
amount to one or more payment options.
When you make a total withdrawal you will receive the value of your contract:
o less any applicable contingent deferred sales charge;
o less any applicable premium tax;
o less an administrative charge;
o less any purchase payments we credited to your contract that have not
cleared the bank, until they clear the bank.
We also apply a market value adjustment to amounts you withdraw from the fixed
account, unless you withdraw during the 30-days before the end of the guaranteed
period.
17
<PAGE>
Automatic Partial Withdrawals.
This program provides for an automatic monthly, quarterly, semi-annual or annual
payment of at least $100. To initiate this program, your contract value must be
at least $10,000. Currently, we do not charge you to participate in this
program, but we reserve the right to charge a fee in the future. This program is
only available during the accumulation phase.
You must elect this program in writing. Once we accept the request, the program
will go into effect as of the date of the first regularly scheduled partial
withdrawal. You can make changes to your program by sending us a written
request. You may elect to have your automatic withdrawal amounts transferred
electronically to your bank account.
Your automatic withdrawal program ends:
o if you withdraw your total contract value;
o upon your death or the annuitant's death;
o if we process the last withdrawal you selected;
o if you begin the income phase of your contract; or
o if we receive your written request to terminate the program at least 5
business days prior to the next scheduled transfer date.
If you participate in this program, you may be subject to contingent deferred
sales charges and market value adjustments.
- --------------------------------------------------------------------------------
Income taxes, tax penalties and certain restrictions may apply to any withdrawal
you make.
- --------------------------------------------------------------------------------
18
<PAGE>
Expenses
There are charges and other expenses associated with the contracts that reduce
the return on your investment in the contract. These charges and expenses are:
Insurance Charges
Each business day we deduct our insurance charges from the assets of the
separate account. We do this as part of our calculation of the value of the
accumulation units and the annuity units.
The insurance charge has three parts:
o the mortality and expense risk charge,
o the administrative expense charge, and
o the death benefit charge.
The total insurance charges currently are 1.40%. We have the right to increase
these charges to a total of 1.50%.
Mortality and Expense Risk Charge. This charge is equal, on an annual basis, to
1.15% of the daily value of the assets invested in each fund, after fund
expenses are deducted. We can increase this charge, but the charge will never
exceed 1.25%. This charge is for:
o the mortality risk associated with the insurance benefits we provide,
including our obligation to make annuity payments after the maturity date
regardless of how long all annuitants live, the death benefits, and the
guarantee of rates used to determine your annuity payments during the
income phase; and
o the expense risk that the current administrative expense charge and
administrative charge will be insufficient to cover the actual cost of
administering the contracts.
If the mortality and expense risk charge is not sufficient to cover the actual
costs, we will bear the loss. However, we do expect to profit from this charge.
Administrative Expense Charge. This charge is equal, on an annual basis, to
0.15% of the daily value of the assets invested in each fund, after expenses are
deducted. We assess this charge, together with the administrative charge, to
reimburse us for all the expenses associated with the administration of the
contract and the separate account. Some of these expenses are: preparation of
the contract, confirmations, annual reports and statements, maintenance of
contract records, personnel costs, legal and accounting fees, filing fees, and
computer and systems costs.
Death Benefit Charge. This charge is equal, on an annual basis, to 0.10% of the
daily value of the assets invested in each fund, after expenses are deducted. We
assess this charge to reimburse us for the cost of providing the enhanced death
benefit.
Administrative Charge
Starting in the second contract year, we impose a charge against each contract
to reimburse us for expenses relating to the issuance and maintenance of the
contract. We deduct this charge on the first day of the contract year. We also
assess this charge on death, maturity, or full withdrawal.
The administrative charge is currently $30. We may increase this charge, but it
will not exceed $50. We will not deduct this charge if the value of your
contract is $50,000 or more, when we are to make the deduction.
We deduct this charge on a pro rata basis from each fund, then pro rata from the
fixed account segments. Any deductions we make from the fixed account segments,
will be on a first-in, first-out basis.
We have designed the administrative expense charge and the administrative charge
so that we do not profit from these charges.
19
<PAGE>
Contingent Deferred Sales Charge
We do not deduct a sales charge when we receive a purchase payment. However, we
may assess a contingent deferred sales charge on the amount you withdraw that
exceeds the free withdrawal amount. We may also apply the charge when your
contract enters the income phase or when we pay certain death benefits. We use
this charge to cover certain expenses related to the sale of the contract.
The amount of the contingent deferred sales charge depends on the amount of the
purchase payments and the length of time since you made the purchase payments.
The contingent deferred sales charge is assessed as follows:
Full Years
Since Payment Percentage
- --------------------------------------------------------------------------------
0 7%
- --------------------------------------------------------------------------------
1 6%
- --------------------------------------------------------------------------------
2 5%
- --------------------------------------------------------------------------------
3 4%
- --------------------------------------------------------------------------------
4 3%
- --------------------------------------------------------------------------------
5 2%
- --------------------------------------------------------------------------------
6 1%
- --------------------------------------------------------------------------------
7 or more 0%
After your purchase payment has been in the contract for 7 years, there is no
contingent deferred sales charge when you withdraw the purchase payment. Each
purchase payment has its own 7-year sales charge period. We take withdrawals
first from purchase payments, then from earnings. For purposes of the contingent
deferred sales charge, we treat withdrawals as coming from the oldest purchase
payments first.
We do not assess a contingent deferred sales charge against a death benefit
payable upon the annuitant's death if the annuitant was younger than age 75 1/2
when we issued the contract. Also, we do not assess a contingent deferred sales
charge on a full withdrawal or when the contract enters the income phase if you
apply the entire contract value:
o under a variable lifetime payment option or variable fixed-time payment
option within the contract (with payments for 10 years or more); or
o under a fixed or combination fixed and variable lifetime payment option,
or fixed- time payment option within the contract (with payments for 10
years or more), and the annuitant is age 59 1/2 or older.
We may also eliminate the sales charge when a company agent sells a contract to
specific members of his or her family.
Free Withdrawals
Each contract year you may withdraw the following without incurring a contingent
deferred sales charge:
o All unredeemed purchase payments that have been in the contract for 7 full
years; and
o 10% of purchase payments that are less than 7 years old.
Market Value Adjustment
We will apply a market value adjustment (MVA) to the following amounts withdrawn
from a fixed account segment, unless those amounts are withdrawn within 30 days
prior to the end of the fixed account segment's guarantee period:
o full or partial withdrawals;
o transfers;
o a death benefit based on a contract owner's death; and
o amounts applied to an annuity payment when your contract enters the income
phase.
We apply the MVA to the amount withdrawn:
o after the deduction of any applicable administrative charge, and
o before the deduction of any applicable contingent deferred sales charge.
The MVA reflects the relationship between the current interest rate and the
guaranteed interest rate. It also reflects the time remaining in the guarantee
period. Generally, if the guaranteed
20
<PAGE>
interest rate is lower than the applicable current interest rate, the MVA will
usually result in a lower payment on withdrawal. Similarly, if the guaranteed
interest rate is higher than the applicable current interest rate, the MVA will
result in a higher payment on withdrawal. Therefore, the MVA can be positive or
negative.
Further information about the market value adjustment can be found in the
attached prospectus for the fixed account and the Statement of Additional
Information.
Premium Taxes
Some states and other governmental entities charge premium taxes or similar
taxes. We are responsible for the payment of these taxes and will make a
deduction from the value of your contract for them. Currently, we deduct any
applicable premium tax when you make a full withdrawal, when we pay a death
benefit or when your contract enters the income phase. We reserve the right to
deduct any premium tax when you make a purchase payment. Premium taxes generally
range from 0% to 3.5%, depending on the state.
Transfer Fee
If you make more than 4 transfers in a contract year during the accumulation
phase, we reserve the right to charge a $20 fee. Currently, we do not impose a
fee as long as you do not make more than 14 transfers in a contract year.
If you request a dollar amount, we will deduct any transfer fee from the amount
transferred. If you request to transfer a percentage of your value in an
investment choice, we will deduct any transfer fee from the amount remaining in
the investment choice. If you transfer the entire amount in an investment
choice, we will deduct the transfer fee from the amount you transfer.
During the income phase, if you are receiving variable monthly payments, you may
transfer among the funds once every three months. We do not impose a fee on
these transfers.
Income Taxes
We will deduct from the contract any income taxes which we incur because of the
operation of the separate account. At the present time, we are not making any
such deductions. We will deduct any withholding taxes required by law.
Fund Expenses
There are deductions from and expenses paid out of the assets of the various
funds, which are described in the attached fund prospectuses. We may enter into
certain arrangements under which we are reimbursed by the funds' advisors,
distributors and/or affiliates for the administrative services that we provide.
21
<PAGE>
The Income Phase
If you want to receive regular income from your annuity, you can choose to
receive fixed and/or variable annuity payments under one of several annuity
options. If you do not wish a regular income, you may elect to receive your
contract value, minus any charges, in one sum. If you do not choose a payment
option within 30 days of the maturity date, we will assume that you selected a
variable monthly annuity under a life income option with payments guaranteed for
10 years.
You can choose the month and year in which those payments begin. We call that
date the maturity date.
You can defer the maturity date to any date we permit by giving us written
notice. We must receive this notice at our Annuity Service Center at least 90
days before the maturity date currently in effect. Your maturity date may not be
later than the contract anniversary nearest the annuitant's 90th birthday, or
earlier if required by state law.
You may also request an earlier maturity date by giving us written notice. We
must receive this notice at our Annuity Service Center at least 30 days before
the earlier maturity date desired.
At the maturity date, you have the same fund choices that you had during the
accumulation phase. If you do not tell us otherwise, we will base your annuity
payments on the investment allocations that are in place on the maturity date.
We make annuity payments based on the age and sex of the annuitant under all
options except the fixed-time payment option. We may require proof of age and
sex before annuity payments begin.
If your contract value is less than $2,000 on the maturity date, or if the
annuity option you elect produces an initial monthly payment of less than $20,
we reserve the right to pay you a lump sum rather than a series of annuity
payments.
In order to avoid adverse tax consequences, you should begin to take
distributions at least equal to the minimum amount required by the IRS, no later
than the required beginning date. If your contract is an IRA, that date should
be the year you reach age 70 1/2 . For qualified plans and TSAs, that date is
the later of your retirement or when you reach age 70 1/2 .
Fixed Income Payments
If you elect a fixed income option, the payment amount will not vary. The
payment amount will depend upon the following 7 things:
o the value of your contract on the maturity date;
o the deduction of premium taxes, if applicable;
o the deduction of the administrative charge;
o the annuity option you select;
o the age and sex of the annuitant (and joint annuitant if a joint payment
option is elected);
o the deduction of a contingent deferred sales charge, if applicable; and
o the application of a market value adjustment, if applicable.
Variable Income Payments
If you elect a variable monthly income option, over time the payment amount will
vary with the investment performance of the funds. The first payment amount will
depend on the following 8 things:
o the value of your contract on the maturity date;
o the deduction of premium taxes, if applicable;
o the deduction of the administrative charge;
o the deduction of a contingent deferred sales charge, if applicable;
o the annuity option you select;
22
<PAGE>
o the age and sex of the annuitant (and joint annuitant if a joint payment
option is elected);
o the assumed investment rate (AIR) of 4%; and
o the application of a market value adjustment, if applicable.
Future variable payments will depend on the performance of the funds you
selected. If the actual performance exceeds the 4% assumed investment rate plus
the deductions for expenses, your annuity payments will increase. Similarly, if
the actual rate is less than 4% plus the amount of the deductions, your annuity
payments will decrease.
If you elect a variable monthly income option, we will credit any portion of
your contract value in the fixed account to the MML Money Market Fund unless you
instruct us otherwise. You may transfer among the funds no more frequently than
once every 3 months.
Annuity Unit Value
In order to keep track of the value of your variable annuity payment, we use a
unit of measure called an annuity unit. We calculate the number of your annuity
units at the beginning of the income phase. During the income phase, the number
of annuity units will not change. However, the value of your annuity units will
change to reflect the investment performance of the funds you selected.
For a more detailed description of how the value of an annuity unit and the
amount of the variable monthly income payments are calculated, see the Statement
of Additional Information.
Annuity Options
The following annuity options are available. After annuity payments begin, you
cannot change the annuity option or the frequency of annuity payments. In
addition, during the income phase we do not allow withdrawals, except as
explained under the fixed time payment option.
Level Income Payment Option. We will make level monthly payments. The amount of
each payment may not be less than $10 for each $1,000 applied. Each month we
will credit interest on the unpaid balance. We will determine the interest rate
but it will not be less than 2 1/2 % per year. Payments will continue until the
amount we hold runs out. This option is not available as a variable monthly
income option.
Fixed Time Payment Option. We will make fixed and/or variable monthly income
payments for any period selected, up to 30 years. You may elect to withdraw the
full amount, subject to any applicable contingent deferred sales charge, of the
present value of the remaining unpaid variable monthly income payments. We will
calculate the present value of variable payments using an assumed investment
rate of 4% per year unless state law requires a lower rate.
Lifetime Payment Option. We make fixed and/or variable monthly income payments
based on the life of the annuitant. If you elect this option, we will make
income payments:
o without any guaranteed number of payments;
o with payments guaranteed for 5, 10 or 20 years; or
o with payments guaranteed for the amount applied (fixed payments only).
Joint and Survivor Life Payment Option. We make fixed and/or variable monthly
payments during the lifetime of 2 annuitants. When one dies, we will continue
making these payments as if both annuitants were alive. We will stop payments
once both annuitants have died. If you elect this option, we will make income
payments either:
o without any guaranteed number of payments; or
o with payments guaranteed for 10 years.
23
<PAGE>
Joint-and Survivor Life Payment Option (Two-Thirds to the Survivor). We make
fixed and/or variable monthly income payments during the lifetime of 2
annuitants. When one dies, we will make reduced payments during the lifetime of
the survivor. The reduced payments will be two-thirds of what they would have
been if both annuitants were alive. We will stop payments once both annuitants
have died.
Interest Payment Option. We will hold any amount applied under this option. We
will pay interest on the unpaid balance each month at a rate we determine. The
rate will not be less than 2 1/2 % per year. This option is not available as a
variable monthly income option.
Payments After Death of an Annuitant
Generally, if a payment option with a guaranteed number of payments is elected,
and the annuitant(s) die before we have completed the guaranteed number of
payments, we will continue making the guaranteed payments to the designated
beneficiary.
Limitation on Payment Options
If you purchase a contract as a TSA or an IRA, the Internal Revenue Code imposes
restrictions on the types of payment options that you may elect.
24
<PAGE>
Death Benefit
We pay a death benefit when either the annuitant or the contract owner dies. If
the contract is owned by joint owners, we make the payment upon the first death
of the two owners. If the owner and the annuitant are the same, we pay the
annuitant death benefit.
Contract Owner Death Benefit
If a contract owner, who is not the annuitant, dies while the contract is in the
accumulation phase, we pay the cash redemption value of the contract to the
beneficiary. The cash redemption value is the contract value, minus any
applicable:
o administrative charge,
o contingent deferred sales charge,
o premium tax, and
o market value adjustment.
Annuitant Death Benefit
If the annuitant dies while the contract is in the accumulation phase, the
beneficiary will receive
the greater of:
o the contract value, less any applicable administrative charge, and any
contingent deferred sales charge if the annuitant's age at the time we
issued the contract was over 75 1/2 , or
o all purchase payments, less any withdrawals, accumulated at 5% until the
annuitant's 75th birthday, and 0% thereafter. This amount cannot exceed
two times the total of all purchase payments, less withdrawals.
In certain states, this death benefit is not available if the annuitant's age
when we issued the contract was 75 1/2 or younger. In these instances, the death
benefit during the first 3 contract years is the greater of:
o the contract value, less any applicable administrative charge, or
o all purchase payments, less any withdrawals.
During any subsequent 3 contract year period, the death benefit will be the
greater of:
o the death benefit on the last day of the previous 3 contract year period,
plus any purchase payments made, less withdrawals since then, or
o the contract value, less any applicable administrative charge.
For Example: Your first contract year is the 12-month period starting on the
date we issued your contract. If you are in your 5th contract year, the last day
of the previous 3 contract year period is the last day of your 3rd contract
year.
We will reduce any death benefit amount by any applicable premium tax. We
determine the death benefit amount as of the business day we receive due proof
of death and all other required forms at our Annuity Service Center. We will pay
the death benefit within 7 days of our receipt of proof of death and all other
requirements at our Annuity Service Center. With our consent, the beneficiary
may have the death benefit paid under one of the available payment options. If
the beneficiary does not elect a payment option, we will pay the death benefit
in one sum.
25
<PAGE>
Taxes
NOTE: We have prepared the following information on taxes as a general
discussion of the subject. It is not intended as tax advice to any individual.
You should consult your own tax adviser about your own circumstances. We have
included in the Statement of Additional Information an additional discussion
regarding taxes.
Annuity Contracts In General
Annuity contracts are a means of setting aside money for future needs - usually
retirement. Congress recognized how important saving for retirement was and
provided special rules in the Internal Revenue Code (Code) for annuities.
Simply stated, these rules provide that you will not be taxed on the earnings on
the money held in your annuity contract until you take the money out. This is
referred to as tax deferral. There are different rules as to how you are taxed
depending on how you take the money out and the type of contract qualified or
non-qualified.
You, as the owner of a non-qualified annuity, will generally not be taxed on
increases in the value of your contract until a distribution occurs -either as a
withdrawal or as annuity payments. When you make a withdrawal, you are taxed on
the amount of the withdrawal that is earnings. For annuity payments, different
rules apply. A portion of each annuity payment is treated as a partial return of
your purchase payments and is not taxed. The remaining portion of the annuity
payment is treated as ordinary income. How the annuity payment is divided
between taxable and non-taxable portions depends upon the period over which the
annuity payments are expected to be made. Annuity payments received after you
have recovered all of your purchase payments are fully includible in income.
When a non-qualified contract is owned by a non-natural person (e.g.,
corporation or certain other entities other than a trust holding the contract as
an agent for a natural person), the contract will generally not be treated as an
annuity for tax purposes.
Qualified And Non-Qualified Contracts
If you purchase the contract as an individual and not under any pension plan,
specially sponsored program or an individual retirement annuity, your contract
is referred to as a non-qualified contract.
If you purchase the contract under a pension plan, specially sponsored program,
or an individual retirement annuity, your contract is referred to as a qualified
contract. Examples of qualified plans are: deductible and non-deductible
Individual Retirement Annuities (IRAs) and pension and profit-sharing plans,
which include 401(k) plans, H.R. 10 Plans, TSAs, etc.
Withdrawals - Non-Qualified Contracts
If you make a withdrawal from your contract, the Code treats that withdrawal as
first coming from earnings and then from your purchase payments. Such withdrawn
earnings are includible in income.
The Code also provides that any amount received under an annuity contract that
is included in income may be subject to a penalty. The amount of the penalty is
equal to 10% of the amount that is includible in income. Some withdrawals will
be exempt from the penalty. They include any amounts:
(1) paid on or after you reach age 59 1/2 ;
(2) paid to your beneficiary after you die;
(3) paid if you become totally disabled (as that term is defined in the Code);
(4) paid in a series of substantially equal payments made annually (or more
frequently) for life or a period not exceeding life expectancy;
(5) paid under an immediate annuity; or
(6) which come from purchase payments made prior to August 14, 1982.
26
<PAGE>
Withdrawals - Qualified Contracts
If you have no cost basis for your interest in a qualified contract, the full
amount of any distribution is taxable to you as ordinary income. If you do have
a cost basis for your interest, a portion of the distribution is taxable,
generally based on the ratio of your cost basis to your total contract value.
Special tax rules may be available for certain distributions from a qualified
contract.
Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion of
any distribution from qualified retirement plans, including contracts issued and
qualified under Code Sections 401 (Pension and Profit-Sharing Plans), 408
(Individual Retirement Annuities - IRAs), and 408A (Roth IRAs). Exceptions from
the penalty tax are as follows:
o distributions made on or after you reach age 59 1/2 ;
o distributions made after your death or disability (as defined in Code
Section 72(m)(7);
o after separation from service, distributions that are part of
substantially equal periodic payments made not less frequently than
annually for your life (or life expectancy) or the joint lives (or joint
life expectancies) of you and your designated beneficiary (in applying
this exception to distributions from IRAs, a separation from service is
not required);
o distributions made after separation of service if you have reached age 55
(not applicable to distributions from IRAs);
o distributions made to you up to the amount allowable as a deduction to you
under Code Section 213 for amounts you paid during the taxable year for
medical care;
o distributions made to an alternate payee pursuant to a qualified domestic
relations order (not applicable to distributions from IRAs);
o distributions from an IRA for the purchase of medical insurance (as
described in Code Section 213(d)(1)(D)) for you and your spouse and
dependents if you received unemployment compensation for at least 12 weeks
and have not been re-employed for at least 60 days);
o distributions from an IRA to the extent they do not exceed your qualified
higher education expenses (as defined in Code Section 72(t)(7) for the
taxable year; and
o distributions from an IRA which are qualified first-time home buyer
distributions (as defined in Code Section 72(t)(8)).
Generally, distributions from a qualified plan must begin no later than April
1st of the calendar year following the later of (a) the year in which you attain
age 70 1/2 or (b) the calendar year in which you retire. The date set forth in
(b) does not apply to an IRA. Required distributions do not apply to a Roth IRA
during your lifetime. Required distributions must be over a period not exceeding
your life expectancy or the joint lives or joint life expectancies of you and
your designated beneficiary. If required minimum distributions are not made, a
50% penalty tax is imposed on the amount that should have been distributed.
Withdrawals - Tax-Sheltered Annuities
The Code limits the withdrawal of purchase payments made by owners through
salary reductions from certain Tax-Sheltered Annuities. Withdrawals of salary
reduction amounts and their earnings can only be made when an owner:
o reaches age 59 1/2 ;
o leaves his/her job;
o dies;
o becomes disabled, as that term is defined in the Code; or
o in the case of hardship.
In the case of hardship, the owner can only withdraw the purchase payments and
not any earnings.
Any contract value as of December 31, 1988, is not subject to these
restrictions. Additionally, return of "excess contributions" or amounts paid to
a spouse as a result of a qualified domestic relations order are not subject to
these restrictions.
27
<PAGE>
Other Information
Performance
We may advertise certain performance-related information. This information
reflects historical performance and is not intended to indicate or predict the
future performance.
Standardized Total Returns. We will show standardized average annual total
returns for separate account divisions that have been in existence for more than
one year. These returns assume you made a single $1,000 payment at the beginning
of the period and withdrew the entire amount at the end of the period. The
return reflects a deduction for the contingent deferred sales charge, the
administrative charge and all other separate account and contact level charges,
except premium taxes, if any.
If a division has been in existence for less than one year, we will show the
aggregate total return. This assumes you made a single $1,000 payment at the
beginning of the period and withdrew the entire amount at the end of the period.
The return reflects the change in unit value and a deduction of the contingent
deferred sales charge.
Nonstandard Total Returns. We will also show total returns based on historical
performance of the divisions and underlying funds. We may assume the contacts
were in existence prior to their inception date, November 14, 1994, which they
were not. Total return percentages included all fund level and separate account
level charges. They do not include a contingent deferred sales charge,
administrative charge, or premium taxes, if any. If these charges were included,
returns would be less than those shown.
Total Returns compare the value of an accumulation unit at the beginning of a
period with the value of an accumulation unit at the end of the period.
Average Annual Total Returns measure this performance over a period of time
greater than one year. Average annual total returns compare values over a given
period of time and express the percentage as an average annual rate.
Yield and Effective Yield. We may also show yield and effective yield for the
MML Money Market Fund and Oppenheimer Money Fund/VA over a seven-day period,
which we will then "annualize". This means that when we calculate yield, we
assume that the amount of money the investment earns for the week is earned each
week over a 52-week period. We show this as a percentage of the investment. We
calculate the "effective yield" similarly, but when we annualize the amount, we
assume the income earned is reinvested. Therefore the effective yield is
slightly higher than the yield because of the compounding effect.
Related Performance. Some of the funds available to you may be similar to mutual
funds offered in the retail marketplace. These funds generally have the same
investment objectives, policies and portfolio managers as the retail mutual
funds and usually were formed after the retail mutual funds. While these funds
generally have identical investment objectives, policies and portfolio managers,
they are separate and distinct from retail mutual funds. In fact, performance of
these funds may be dramatically different from the performance of the retail
mutual funds. This is due to differences in the funds' sizes, dates shares of
stocks are purchased and sold, cash flows and expenses. You should remember that
retail mutual fund performance is not the performance of the funds available in
this contract and is not an indication of future performance of these funds.
Year 2000
Like other businesses and governments around the world, we could be adversely
affected if the computer systems used by us and those with which we do business
do not properly recognize the year 2000. This is commonly known as the "Year
2000 issue".
In 1996, our parent company, MassMutual, began an enterprise-wide process of
identifying,
28
<PAGE>
evaluating and implementing changes to computer systems and applications
software to address the Year 2000 issue on behalf of certain subsidiaries,
including us. MassMutual is addressing the Year 2000 issue internally with
modifications to existing programs and conversions to new programs. MassMutual
is also seeking assurances from vendors, customers, service providers,
governments and others with which we and MassMutual conduct business, to
determine their year 2000 readiness.
MassMutual has allocated a portion of the costs related to the Year 2000 issue
to us. The costs are currently being expensed, and when measured against net
gain from operations, are not material to us.
Distributors
MML Distributors, LLC (MML Distributors) serves as principal underwriter for the
contracts. MML Investors Service, Inc. (MMLISI) serves as co-underwriter for the
contracts. Their purpose as underwriters is to distribute the contracts.
MML Distributors and MMLISI are wholly-owned subsidiaries of MassMutual. Both
are located at 1414 Main Street, Springfield, Massachusetts 01144-1013.
We will pay commissions to broker-dealers who sell the contracts. We pay
commissions based on a percentage of purchase payments or a combination
percentage of purchase payments and contract value. Currently, we pay an amount
up to 6.25% of purchase payments. We may pay a commission of up to .25% of
contract values each contract year.
From time to time, MML Distributors may enter into special arrangements with
broker-dealers that may result in higher commission payments to these
broker-dealers for the sale of the contracts.
Electronic Transmission Of Application Information
Upon agreement with a limited number of broker-dealers, we will accept
electronic data transmissions of application information. Our Annuity Service
Center will accept this information at the time the initial purchase payment is
transmitted by wire. Please contact your representative for more information.
Assignment
Before we issue a contract, we will endorse the contract to prevent you from
assigning the contract as collateral.
Voting Rights
We are the legal owner of the fund shares. However, when a fund solicits proxies
in conjunction with a vote of shareholders, it is required to obtain from you
and other owners, instructions as to how to vote those shares. When we receive
those instructions, we will vote all of the shares, for which we have not
received voting instructions, in proportion to those instructions. This will
also include any shares that we own on our own behalf. If we determine that we
are no longer required to comply with the above, we will vote the shares in our
own right.
During the accumulation phase of your contract and while the annuitant is
living, we determine the number of shares you may vote by dividing your contract
value in each fund, if any, by $100. Fractional shares are counted. During the
income phase or after the annuitant dies, we determine the number of shares you
may vote based on our liability for future variable monthly annuity payments.
Reservation Of Rights
We reserve the right to:
o Substitute another fund for one of the funds you have selected.
o Add separate account divisions.
o Eliminate the availability of a separate account division to receive
future purchase payments.
o Split or consolidate, in our sole discretion, the number of accumulation
units or annuity units for any separate account division and
correspondingly decrease or increase the accumulation or annuity unit
values for any division.
29
<PAGE>
o Change the name of the separate account.
o Terminate the contract if:
(a) We have not received a purchase payment for the last 2 consecutive
years from the date we received your last purchase payment, and
(b) Each of the following amounts is less than $2,000 on the date we
send you notice of our election to terminate your contract:
(1) your contract value minus any amount we would deduct for premium
taxes on withdrawal;
(2) the cash redemption value of your contract; and
(3) the sum of all purchase payments made into your contract less
any partial withdrawals.
If we exercise any of these rights, we will obtain prior approval from the
Securities and Exchange Commission when necessary. We will also give you notice
of our intent to exercise any of these rights.
Suspension Of Payments Or Transfers
We may be required to suspend or postpone payments for withdrawals or transfers
from the funds for any period when:
o the New York Stock Exchange is closed (other than customary weekend and
holiday closings) or trading on the New York Stock Exchange is restricted;
or
o an emergency exists as a result of which disposal of shares of the funds
is not reasonably practicable or we cannot reasonably value the shares of
the fund;
o during any other period when the Securities and Exchange Commission, by
order, so permits for your protection.
We have reserved the right to defer payment for a withdrawal from the fixed
account for the period permitted by law but not for more than six months. If we
delay payment for 30 days or more, we will add interest at an annual rate that
will not be less than 3%.
Legal Proceedings
We are currently not involved in any legal proceedings that might adversely
impact the contracts.
Financial Statements
We have included our financial statements and those of the Separate Account in
the Statement of Additional Information.
Additional Information
For further information about the contract, you may obtain a Statement of
Additional Information. You can call the telephone number indicated on the cover
page or you can write to us. For you convenience we have included a form for
that purpose.
The Table of Contents of this statement is as follows:
1. General Information
2. Assignment of Contract
3. Restrictions on Redemptions
4. Distribution
5. Purchase of Securities Being Offered
6. Contract Value Calculations
7. Performance Measures
8. Federal Tax Matters
9. Experts
10. Financial Statements
30
<PAGE>
To: MML Bay State Life Insurance Company
Annuity Service Center, H564
P.O. Box 9067
Springfield, Massachusetts 01102-9067
Please send me a Statement of Additional Information for MML Bay State's
LifeTrust.
Name ___________________________________________________
Address ___________________________________________________
___________________________________________________
City ____________________ State __________ Zip _________
Telephone ___________________________________________________
31
<PAGE>
Appendix A
Condensed Financial Information
The following schedule includes accumulation unit values for the periods
indicated. We have extracted this data from the separate account's audited
financial statements. You should read this information in conjunction with the
separate accounts' audited financial statements and related notes which are
included in the Statement of Additional Information.
Accumulation Unit Values
<TABLE>
<CAPTION>
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1995 *Dec. 31 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MML Equity Division $2.22 $1.94 $1.53 $1.29 $1.00
- ----------------------------------------------------------------------------------------------------------------------------------
MML Money Market Division $1.17 $1.12 $1.08 $1.05 $1.00
- ----------------------------------------------------------------------------------------------------------------------------------
MML Managed Bond Division $1.40 $1.31 $1.21 $1.18 $1.01
- ----------------------------------------------------------------------------------------------------------------------------------
MML Blend Division $1.83 $1.63 $1.37 $1.22 $1.00
- ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Money Division $1.17 $1.13 $1.09 $1.05 $1.00
- ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer High Income Division $1.44 $1.45 $1.31 $1.15 $ .97
- ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Bond Division $1.34 $1.28 $1.18 $1.15 $ .99
- ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Division**** $1.89 $1.71 $1.55 $1.31 $1.00
- ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Multiple Strategies Division $1.64 $1.55 $1.34 $1.18 $ .99
- ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Growth Division***** $2.50 $2.05 $1.64 $1.32 $ .98
- ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Division $1.50 $1.33 $1.10 $ .95 $ .94
- ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Division $1.34 $1.32 $1.24 $1.12 $ .98
- ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Growth & Income Division** $2.20 $2.13 $1.63 $1.24 N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Small Cap Growth Division*** $ .95 N/A N/A N/A N/A
</TABLE>
* Public offering of the contract commenced on November 14, 1994. All
accumulation unit values were $1.00 on November 14, 1994.
** Public offering commenced July 3, 1995. Effective May 1, 1999, this
Division invests in the Oppenheimer Main Street Growth & Income Fund/VA.
*** Public offering commenced May 1, 1998.
**** Prior to May 1, 1998, this Division was known as the Oppenheimer Capital
Appreciation Division.
***** Effective May 1, 1999, this Division invests in the Oppenheimer Capital
Appreciation Fund/VA.
A-1
<PAGE>
Number of Accumulation Units Outstanding
<TABLE>
<CAPTION>
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1995 *Dec. 31 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MML Equity Division 9,438,044 5,969,226 2,189,149 685,964 5,000
- -----------------------------------------------------------------------------------------------------------------------
MML Money Market Division 7,211,004 6,629,848 4,267,075 839,793 16,949
- -----------------------------------------------------------------------------------------------------------------------
MML Managed Bond Division 2,089,420 1,204,982 695,485 328,514 4,000
- -----------------------------------------------------------------------------------------------------------------------
MML Blend Division 13,300,264 7,786,187 3,019,173 778,529 5,000
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Money Division 3,947,306 2,749,962 2,607,468 1,023,398 5,000
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer High Income Division 19,951,336 15,061,803 5,999,147 1,518,022 6,184
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Bond Division 6,279,363 3,187,094 1,827,553 883,171 5,000
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Aggressive Growth Division**** 20,831,543 17,599,666 9,019,648 2,254,545 12,000
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Multiple Strategies Division 16,844,783 13,303,149 7,090,472 2,190,174 7,339
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Growth Division***** 27,906,939 22,451,343 10,747,444 2,762,984 5,000
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Division 25,419,795 22,032,928 10,727,219 2,698,363 12,367
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Division 25,860,507 22,629,278 11,657,438 3,491,031 7,314
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Growth & Income Division** 42,558,961 34,277,066 14,369,051 1,507,840 N/A
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Small Cap Growth Division*** 270,188 N/A N/A N/A N/A
</TABLE>
* Public offering of the contract commenced on November 14, 1994.
** Public offering commenced July 3, 1995. Effective May 1, 1999, this
Division invests in the Oppenheimer Main Street Growth & Income Fund/VA.
*** Public offering commenced May 1, 1998.
**** Prior to May 1, 1998, this Division was known as the Oppenheimer Capital
Appreciation Division.
***** Effective May 1, 1999, this Division invests in the Oppenheimer Capital
Appreciation Fund/VA.
A-2
<PAGE>
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
1
<PAGE>
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, 1999 (the "Prospectus"). The Prospectus may be obtained
by written or oral (1-800-366-8226) request from our Annuity Service Center.
May 1, 1999
TABLE OF CONTENTS
General Information ...........................................................2
Assignment of Contract ........................................................2
Restrictions on Redemption ....................................................3
Distribution ..................................................................3
Purchase of Securities Being Offered ..........................................4
Contract Value Calculations For Amounts Allocated to an Investment
Division of a Separate Account ................................................4
Performance Measures ..........................................................8
Federal Tax Matters ..........................................................14
Experts ......................................................................19
Financial Statements ................................................Final Pages
1
<PAGE>
GENERAL INFORMATION
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. 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.
On June 30, 1997 MML Bay State was re-domesticated from the State of Missouri to
the State of Connecticut. MML Bay State's Home Office is located in Hartford,
Connecticut.
MassMutual
Massachusetts Mutual Life Insurance Company ("MassMutual" or "the Company") is a
mutual life insurance company chartered in 1851 under the laws of the
Commonwealth of Massachusetts. Its home office is located in Springfield,
Massachusetts. MassMutual is licensed to transact a life, accident and health
insurance business in all fifty states the District of Columbia, Puerto Rico and
certain provinces of Canada. MassMutual had consolidated statutory assets in
excess of $67 billion, and estimated total assets under management of $176.8
billion as of December 31, 1998. MassMutual's Home Office is located in
Springfield, Massachusetts.
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. As a result of MML Bay State's
re-domestication to Connecticut on June 30, 1997, both MML Bay State and the
Separate Account are subject to regulation by the Insurance Department of the
State of Connecticut.
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 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.
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 Annuity 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
2
<PAGE>
the contract owner given during the annuitant's lifetime and
received in good order by MML Bay State at its Annuity 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, "Withdrawals-Tax-Sheltered Annuities" 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.
DISTRIBUTION
MML Distributors, LLC ("MML Distributors"), a wholly-owned subsidiary of
MassMutual, is the principal underwriter for the contract pursuant to an
Underwriting and Servicing Agreement among MML Bay State, MML Distributors and
the Separate Account. MML Investors Services, Inc. ("MMLISI"), also a
wholly-owned subsidiary of MassMutual, serves as co-underwriter for the
contract.
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 1998 was $27,225. Compensation
paid to MML Distributors in 1998 was $41,525. Commissions will be paid through
MMLISI and MML Distributors to agents and selling brokers for selling the
contracts. During 1998, 1997 and 1996, such payments amounted to $6,513,378,
$8,762,111 and $10,362,608, respectively.
The offering of the contracts is continuous.
3
<PAGE>
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 Expenses
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.)
CONTRACT VALUE CALCULATIONS FOR AMOUNTS ALLOCATED TO AN
INVESTMENT DIVISION OF A SEPARATE ACCOUNT
The Accumulation Phase
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 Annuity 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 of the selected
fixed account segment, 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 fixed
account 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 fixed account prospectus)
will be
4
<PAGE>
determined by interpolation or extrapolation of the guaranteed rates for the
fixed account segments then available. (Please consult the prospectus for the
Fixed Account for more information).
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 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 Income Phase
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 payment. Such
value is then
5
<PAGE>
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.
General Formulas
General Formulas to Determine Accumulation Unit Value and
Annuity Unit Value for any Division of the Separate Account
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
6
<PAGE>
Date X Net Investment Factor
----------------------------
Annuity Unit = 1.000000 + rate of interest for days in
Value current Valuation Period at Assumed
Investment Rate
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
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
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.
7
<PAGE>
PERFORMANCE MEASURES
MML Bay State may advertise certain performance-related information. This
information reflects historical performance and is not intended to indicate or
predict future performance.
Standardized Average Annual Total Return
MML Bay State will show standardized average annual total returns for each
Separate Account Division that has been in existence for more than one year.
These returns assume you made a single $1,000 payment at the beginning of the
period and withdrew the entire amount at the end of the period. The return
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
percentage of in-force contracts investing in each of the Divisions.
If a Separate Account Division has been in existence for less than one year, MML
Bay State will show the aggregate total return. This assumes you made a single
$1,000 payment at the beginning of the period and withdrew the entire amount at
the end of the period. The return reflects the change in unit value and a
deduction of the contingent deferred sales charge.
The following tables show the standardized average annual total return for the
Divisions for the period ended December 31, 1998.
1 Year Since Inception
------ ---------------
MML Equity Division 9.02% 20.84%
MML Managed Bond Division 1.22 7.86
MML Blend Division 6.48 15.15
Oppenheimer Global Securities Division 6.77 9.35
Oppenheimer Aggressive Growth Division * 5.03 15.95
Oppenheimer Growth Division** 16.41 24.11
Oppenheimer Multiple Strategies Division -0.41 12.00
Oppenheimer High Income Division -6.69 8.46
Oppenheimer Bond Division -0.13 6.83
Oppenheimer Strategic Bond Division -4.16 6.65
Oppenheimer Growth & Income Division*** -2.63 24.26
Oppenheimer Small Cap Growth Division -- -11.19****
* Prior to May 1, 1998, this Division was called the Oppenheimer Capital
Appreciation Division.
** Effective May 1, 1999, this Division invests in the Oppenheimer Capital
Appreciation Fund/VA.
*** Effective May 1, 1999, this Division invests in the Oppenheimer Main Street
Growth & Income Fund/VA.
**** This return is an aggregate total return for the period 5/1/98 to 12/31/98.
It reflects the change in unit value and a deduction for the contingent deferred
sales charge.
Non-Standard Total Returns
MML Bay State will also show total returns based on historical performance of
the Divisions and underlying funds. MML Bay State may assume the contracts were
in existence prior to their inception date (November 14, 1994), which they were
not. Total return percentages include all fund level and separate account level
charges. They do not include a contingent deferred sales charge, the annual
administrative charge or premium taxes, if any. If these charges were included,
returns would be less than those shown.
Total Returns compare the value of an accumulation unit at the beginning of a
period with the value of an accumulation unit at the end of the period.
8
<PAGE>
Average Annual Total Returns measure this performance over a period of time
greater than one year. Average annual total returns compare values over a given
period of time and express the percentage as an average annual rate.
The performance figures discussed below, are calculated on the basis of the
historical performance of the funds, and may assume the contracts were in
existence prior to their inception date (November 14, 1994) which they were not.
Beginning on the contract inception date (November 14, 1994), actual
accumulation unit values are used to calculate the returns. Beginning on July 3,
1995, for the Oppenheimer Growth & Income and May 1, 1998, for the Oppenheimer
Small Cap Growth Funds, actual accumulation unit values are used to calculate
the returns.
Average Annual Total Returns
For Periods Ending December 31, 1998
Since
1 Year 3 Years 5 Years 10 Years Inception
------ ------- ------- -------- ---------
MML Equity 14.61% 19.93% 18.03% 14.79%
MML Managed Bond 6.65 5.60 5.60 7.68
MML Blend 12.00 14.51 13.04 12.14
Opp Global Securities 12.56 16.64 8.17 N/A 10.94%
Opp Aggressive Growth * 10.85 13.12 11.52 14.52
Opp Growth ** 22.33 23.60 20.45 15.25
Opp Multiple Strategies 5.19 11.49 9.91 9.69
Opp High Income -1.07 7.58 7.13 11.16
Opp Bond 5.33 5.47 5.54 7.77
Opp Strategic Bond 1.48 6.35 5.36 N/A 5.32
Opp Growth & Income *** 3.28 20.85 N/A N/A 25.22
Opp Small Cap N/A N/A N/A N/A -4.89
* Prior to May 1, 1998, this was called the Oppenheimer Capital Appreciation
Fund.
** Effective May 1, 1999, this Fund is called the Oppenheimer Capital
Appreciation Fund/VA.
*** Effective May 1, 1999, this Fund is called the Oppenheimer Main Street
Growth & Income Fund/VA.
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, a nationally recognized independent
reporting service or similar service that rank mutual funds and other investment
companies by overall performance, investment objectives and assets; (b) compared
to indices; (c) tracked by other ratings services, companies, publications or
persons who rank separate accounts or other investment products on overall
performance or other criteria; and (d) 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.
MML Bay State may also show yield and effective yield for the MML Money Market
Division and the Oppenheimer Money Division over a seven-day period, which MML
Bay State then "annualizes". This means that when MML Bay State calculates
yield, it assumes that the amount of money the investment earns for the week is
earned each week over a 52-week period. MML Bay State shows this as a percentage
of the investment. MML Bay State calculates the "effective yield" similarly but
when it annualizes the amount, MML Bay State assumes the income earned is
re-invested. Therefore, the effective yield is slightly higher than the yield
because of the compounding effect.
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
contingent deferred sales charge or premium taxes (if any), which if included
would reduce the yields.
9
<PAGE>
The 7-day yield and effective yield for the MML Money Market Division and the
Oppenheimer Money Division for the period ended December 31, 1998 are as
follows:
MML Oppenheimer
Money Market Division Money Division
Before the Annual Administrative Charge deduction
- -------------------------------------------------
Yield 3.39% 1.35%
Effective Yield 3.44 1.36
After the Annual Administrative Charge deduction
- ------------------------------------------------
(0.09%)
Yield 3.30% 1.26%
Effective Yield 3.36 1.27
LifeTrust Hypothetical Projections
OPPENHEIMER GLOBAL SECURITIES
-----------------------------
$10,000 purchase payment made November 12, 1990
Non-Standard
-------------
Accumulated Calendar Year
Date Payment Value Total Return
- -----------------------------------------------------
11/12/90 $10,000 $10,000
12/31/90 $10,021 0.21%
12/31/91 $10,185 1.64%
12/31/92 $ 9,300 -8.70%
12/31/93 $15,586 67.59%
12/31/94 $14,460 -7.22%
12/31/95 $14,550 0.62%
12/31/96 $16,839 15.73%
12/31/97 $20,353 20.87%
12/31/98 $22,877 12.40%
OPPENHEIMER AGGRESSIVE GROWTH
-----------------------------
$10,000 purchase payment made December 31, 1988
Non-Standard
-------------
Accumulated Calendar Year
Date Payment Value Total Return
- -----------------------------------------------------
12/31/88 $10,000 $10,000
12/31/89 $12,550 25.50%
12/31/90 $10,263 -18.22%
12/31/91 $15,629 52.28%
12/31/92 $17,758 13.63%
12/31/93 $22,266 25.38%
12/31/94 $20,261 -9.01%
12/31/95 $26,460 30.60%
12/31/96 $31,332 18.41%
12/31/97 $34,490 10.08%
12/31/98 $38,201 10.76%
10
<PAGE>
OPPENHEIMER GROWTH
------------------
$10,000 purchase payment made December 31, 1988
Non-Standard
-------------
Accumulated Calendar Year
Date Payment Value Total Return
- -----------------------------------------------------
12/31/88 $10,000
12/31/89 $12,157 21.57%
12/31/90 $10,973 -9.74%
12/31/91 $13,554 23.52%
12/31/92 $15,278 12.72%
12/31/93 $16,128 5.56%
12/31/94 $16,028 -0.62%
12/31/95 $21,580 34.64%
12/31/96 $26,623 23.37%
12/31/97 $33,246 24.88%
12/31/98 $40,640 22.24%
OPPENHEIMER MULTIPLE STRATEGIES
-------------------------------
$10,000 purchase payment made December 31, 1988
Non-Standard
-------------
Accumulated Calendar Year
Date Payment Value Total Return
- -----------------------------------------------------
12/31/88 $10,000 $10,000
12/31/89 $11,385 13.85%
12/31/90 $10,983 -3.53%
12/31/91 $12,693 15.57%
12/31/92 $13,612 7.25%
12/31/93 $15,534 14.12%
12/31/94 $14,990 -3.50%
12/31/95 $17,915 19.51%
12/31/96 $20,379 13.75%
12/31/97 $23,538 15.50%
12/31/98 $24,730 5.07%
OPPENHEIMER HIGH INCOME
-----------------------
$10,000 purchase payment made December 31, 1988
Non-Standard
-------------
Accumulated Calendar Year
Date Payment Value Total Return
- -----------------------------------------------------
12/31/88 $10,000 $10,000
12/31/89 $10,309 3.09%
12/31/90 $10,608 2.90%
12/31/91 $13,978 31.77%
12/31/92 $16,224 16.07%
12/31/93 $20,182 24.39%
12/31/94 $19,238 -4.67%
12/31/95 $22,813 18.58%
12/31/96 $25,906 13.56%
12/31/97 $28,647 10.58%
12/31/98 $28,310 -1.18%
11
<PAGE>
OPPENHEIMER BOND
----------------
$10,000 purchase payment made December 31, 1988
Non-Standard
-------------
Accumulated Calendar Year
Date Payment Value Total Return
- -----------------------------------------------------
12/31/88 $10,000 $10,000
12/31/89 $11,145 11.45%
12/31/90 $11,830 6.15%
12/31/91 $13,692 15.74%
12/31/92 $14,349 4.80%
12/31/93 $15,965 11.26%
12/31/94 $15,408 -3.49%
12/31/95 $17,751 15.21%
12/31/96 $18,317 3.19%
12/31/97 $19,711 7.61%
12/31/98 $20,733 5.18%
OPPENHEIMER STRATEGIC BOND
--------------------------
$10,000 purchase payment made May 3, 1993
Non-Standard
-------------
Accumulated Calendar Year
Date Payment Value Total Return
- -----------------------------------------------------
5/3/93 $10,000 $10,000
12/31/93 $10,329 3.29%
12/31/94 $ 9,771 -5.40%
12/31/95 $11,083 13.43%
12/31/96 $12,220 10.25%
12/31/97 $13,072 6.97%
12/31/98 $13,235 1.25%
OPPENHEIMER GROWTH AND INCOME
-----------------------------
$10,000 purchase payment made July 3, 1995
Non-Standard
-------------
Accumulated Calendar Year
Date Payment Value Total Return
- -----------------------------------------------------
7/3/95 $10,000 $10,000
12/31/95 $12,442 24.42%
12/31/96 $16,231 30.45%
12/31/97 $21,187 30.53%
12/31/98 $21,853 3.14%
MML BLEND
---------
$10,000 purchase payment made December 31, 1988
Non-Standard
-------------
Accumulated Calendar Year
Date Payment Value Total Return
- -----------------------------------------------------
12/31/88 $10,000 $10,000
12/31/89 $11,800 18.00%
12/31/90 $11,882 0.70%
12/31/91 $14,499 22.03%
12/31/92 $15,606 7.63%
12/31/93 $16,851 7.98%
12/31/94 $16,999 0.88%
12
<PAGE>
12/31/95 $20,644 21.44%
12/31/96 $23,173 12.25%
12/31/97 $27,610 19.15%
12/31/98 $30,894 11.89%
MML MANAGED BOND
----------------
$10,000 purchase payment made December 31, 1988
Non-Standard
-------------
Accumulated Calendar Year
Date Payment Value Total Return
- -----------------------------------------------------
12/31/88 $10,000 $10,000
12/31/89 $11,096 10.96%
12/31/90 $11,828 6.60%
12/31/91 $13,577 14.78%
12/31/92 $14,337 5.60%
12/31/93 $15,777 10.05%
12/31/94 $14,942 -5.29%
12/31/95 $17,531 17.32%
12/31/96 $17,822 1.66%
12/31/97 $19,294 8.26%
12/31/98 $20,547 6.49%
MML EQUITY
----------
$10,000 purchase payment made December 31, 1988
Non-Standard
-------------
Accumulated Calendar Year
Date Payment Value Total Return
- -----------------------------------------------------
12/31/88 $10,000 $10,000
12/31/89 $12,103 21.03%
12/31/90 $11,844 -2.15%
12/31/91 $14,634 23.56%
12/31/92 $15,913 8.74%
12/31/93 $17,155 7.80%
12/31/94 $17,581 2.49%
12/31/95 $22,716 29.21%
12/31/96 $26,916 18.49%
12/31/97 $34,121 26.77%
12/31/98 $39,075 14.52%
OPPENHEIMER SMALL CAP GROWTH
----------------------------
$10,000 purchase payment made May 1, 1998
Non-Standard
-------------
Accumulated Calendar Year
Date Payment Value Total Return
- -----------------------------------------------------
5/1/98 $10,000 $10,000
12/31/98 $ 9,511 -4.89%
The performance figures discussed above reflect historical results of the Funds
and are not intended to indicate or to predict future performance.
13
<PAGE>
FEDERAL TAX MATTERS
General
Note: The following description is based upon the MML Bay State's understanding
of current federal income tax law applicable to annuities in general. MML Bay
State cannot predict the probability that any changes in such laws will be made.
Purchasers are cautioned to seek competent tax advice regarding the possibility
of such changes. MML Bay State does not guarantee the tax status of the
contracts. Purchasers bear the complete risk that the contracts may not be
treated as "annuity contracts" under federal income tax laws. It should be
further understood that the following discussion is not exhaustive and that
special rules not described herein may be applicable in certain situations.
Moreover, no attempt has been made to consider any applicable state or other tax
laws.
Section 72 of the Code governs taxation of annuities in general. An owner is
generally not taxed on increases in the value of a contract until distribution
occurs, either in the form of a lump sum payment or as annuity payments under
the annuity option selected. For a lump sum payment received as a total
withdrawal (total surrender), the recipient is taxed on the portion of the
payment that exceeds the cost basis of the contract. For non-qualified
contracts, this cost basis is generally the purchase payments, while for
qualified contracts there may be no cost basis. The taxable portion of the lump
sum payment is taxed at ordinary income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion amount
is includible in taxable income. The exclusion amount for payments based on a
fixed annuity option is determined by multiplying the payment by the ratio that
the cost basis of the contract (adjusted for any period or refund feature) bears
to the expected return under the contract. The exclusion amount for payments
based on a variable annuity option is determined by dividing the cost basis of
the contract (adjusted for any period certain or refund guarantee) by the number
of years over which the annuity is expected to be paid. Payments received after
the investment in the contract has been recovered (i.e. when the total of the
excludable amount equals the investment in the contract) are fully taxable. The
taxable portion is taxed at ordinary income tax rates. For certain types of
qualified plans there may be no cost basis in the contract within the meaning of
Section 72 of the Code. Owners, annuitants and beneficiaries under the contracts
should seek competent financial advice about the tax consequences of any
distributions.
MML Bay State is taxed as a life insurance company under the Code. For federal
income tax purposes, the Separate Account is not a separate entity from MML Bay
State, and its operations form a part of MML Bay State.
Diversification
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the
contract as an annuity contract would result in the imposition of federal income
tax to the Owner with respect to earnings allocable to the contract prior to the
receipt of payments under the contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the contract meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. Government securities and securities of other regulated investment
companies.
On March 2, 1989, the Treasury Department issued Regulations (Treas.
Reg.1.817-5), which established diversification requirements for the investment
portfolios underlying variable contracts such as the contract. The regulations
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described above.
Under the regulations, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
14
<PAGE>
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
MML Bay State intends that all investment portfolios underlying the contracts
will be managed in such a manner as to comply with these diversification
requirements.
The Treasury Department has indicated that the diversification regulations do
not provide guidance regarding the circumstances in which owner control of the
investments of the separate account will cause the owner to be treated as the
owner of the assets of the separate account, thereby resulting in the loss of
favorable tax treatment for the contract. At this time it cannot be determined
whether additional guidance will be provided and what standards may be contained
in such guidance.
The amount of owner control which may be exercised under the contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the owner's ability to transfer among
investment choices or the number and type of investment choices available, would
cause the owner to be considered as the owner of the assets of the separate
account resulting in the imposition of federal income tax to the owner with
respect to earnings allocable to the contract prior to receipt of payments under
the contract.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the owner being
retroactively determined to be the owner of the assets of the separate account.
Due to the uncertainty in this area, MML Bay State reserves the right to modify
the contract in an attempt to maintain favorable tax treatment.
Multiple Contracts
The Code provides that multiple non-qualified annuity contracts which are issued
within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
combination of contracts. Owners should consult a tax adviser prior to
purchasing more than one non-qualified annuity contract in any calendar year.
Contracts Owned by Other than Natural Persons
Under Section 72(u) of the Code, the investment earnings on premiums for the
contracts will be taxed currently to the owner if the owner is a non-natural
person, e.g., a corporation or certain other entities. Such contracts generally
will not be treated as annuities for federal income tax purposes. However, this
treatment is not applied to a contract held by a trust or other entity as an
agent for a natural person nor to contracts held by qualified plans. Purchasers
should consult their own tax counsel or other tax adviser before purchasing a
contract to be owned by a non-natural person.
Tax Treatment of Assignments
An assignment or pledge of a contract may be a taxable event. Owners should
therefore consult competent tax advisers should they wish to assign or pledge
their contracts.
Income Tax Withholding
All distributions or the portion thereof which is includible in the gross income
of the owner are subject to federal income tax withholding. Generally, amounts
are withheld from periodic payments at the same rate as wages and at the rate of
10% from non-periodic payments. However, the owner, in most cases, may elect not
to have taxes withheld or to have withholding done at a different rate.
15
<PAGE>
Effective January 1, 1993, certain distributions from retirement plans qualified
under Section 401 of the Code, which are not directly rolled over to another
eligible retirement plan or individual retirement account or individual
retirement annuity, are subject to a mandatory 20% withholding for federal
income tax. The 20% withholding requirement generally does not apply to: a) a
series of substantially equal payments made at least annually for the life or
life expectancy of the participant or joint and last survivor expectancy of the
participant and a designated beneficiary or for a specified period of 10 years
or more; or b) distributions which are required minimum distributions; or c) the
portion of the distributions not includible in gross income (i.e., returns of
after-tax contributions). The 20% withholding requirement also does not apply to
hardship distributions from a 401(k) plan made after December 31, 1998.
Participants should consult their own tax counsel or other tax adviser regarding
withholding requirements.
Tax Treatment of Withdrawals - Non-Qualified Contracts
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the contract value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includible in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any premature distribution. However, the penalty is not imposed on amounts
received: (a) after the taxpayer reaches age 59 1/2; (b) after the death of the
owner; (c) if the taxpayer is totally disabled (for this purpose disability is
as defined in Section 72(m)(7) of the Code); (d) in a series of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the taxpayer or for the joint lives (or joint life
expectancies) of the taxpayer and his or her beneficiary; (e) under an immediate
annuity; or (f) which are allocable to purchase payments made prior to August
14, 1982.
With respect to (d) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% tax penalty), but for the exception, plus interest for the tax
years in which the exception was used.
The above information does not apply to qualified contracts. However, separate
tax withdrawal penalties and restrictions may apply to such qualified contracts.
(See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
Qualified Plans
The contracts offered herein are designed to be suitable for use under various
types of qualified plans. Taxation of participants in each qualified plan varies
with the type of plan and terms and conditions of each specific plan. Owners,
annuitants and beneficiaries are cautioned that benefits under a qualified plan
may be subject to the terms and conditions of the plan regardless of the terms
and conditions of the contracts issued pursuant to the plan. Some retirement
plans are subject to distribution and other requirements that are not
incorporated into the MML Bay State's administrative procedures. Owners,
participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the
contracts comply with applicable law. Following are general descriptions of the
types of qualified plans with which the contracts may be used. Such descriptions
are not exhaustive and are for general informational purposes only. The tax
rules regarding qualified plans are very complex and will have differing
applications depending on individual facts and circumstances. Each purchaser
should obtain competent tax advice prior to purchasing a contract issued under a
qualified plan.
Contracts issued pursuant to qualified plans include special provisions
restricting contract provisions that may otherwise be available as described
herein. Generally, contracts issued pursuant to qualified plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from qualified contracts. (See "Tax
Treatment of Withdrawals - Qualified Contracts" below.)
On July 6, 1983, the Supreme Court decided in Arizona Governing Committee v.
Norris that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The contracts sold by MML Bay State in connection
with qualified plans will utilize annuity tables which do not differentiate on
the basis of sex. Such annuity tables will also be available for use in
connection with certain non-qualified deferred compensation plans.
16
<PAGE>
a. Tax Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax sheltered annuities" by
public schools and certain charitable, educational and scientific organizations
described in Section 501(c)(3) of the Code. These qualifying employers may make
contributions to the contracts for the benefit of their employees. Such
contributions are not includible in the gross income of the employees until the
employees receive distributions from the contracts. The amount of contributions
to the tax sheltered annuity is limited to certain maximums imposed by the Code.
Furthermore, the Code sets forth additional restrictions governing such items as
transferability, distributions, nondiscrimination and withdrawals. (See "Tax
Treatment of Withdrawals - Qualified Contracts" and "Tax Sheltered Annuities -
Withdrawal Limitations" below.) Employee loans are not allowable under the
contracts. Any employee should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
b. H.R. 10 Plans
Section 401 of the Code permits self-employed individuals to establish qualified
plans for themselves and their employees, commonly referred to as "H.R. 10" or
"Keogh" plans. Contributions made to the plan for the benefit of the employees
will not be included in the gross income of the employees until distributed from
the Plan. The tax consequences to participants may vary depending upon the
particular plan design. However, the Code places limitations and restrictions on
all plans including on such items as: amount of allowable contributions; form,
manner and timing of distributions; transferability of benefits; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders. (See "Tax Treatment of Withdrawals -Qualified Contracts" below.)
Purchasers of contracts for use with an H.R. 10 Plan should obtain competent tax
advice as to the tax treatment and suitability of such an investment.
c. Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to an
IRA which will be deductible from the individual's gross income. These IRAs are
subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Withdrawals Qualified Contracts" below.)
Under certain conditions, distributions from other IRAs and other Qualified
Plans may be rolled over or transferred on a tax-deferred basis into an IRA.
Sales of contracts for use with IRAs are subject to special requirements imposed
by the Code, including the requirement that certain informational disclosure be
given to persons desiring to establish an IRA. Purchasers of contracts to be
qualified as Individual Retirement Annuities should obtain competent tax advice
as to the tax treatment and suitability of such an investment.
Roth IRAs
Section 408A of the Code provides that beginning in 1998, individuals may
purchase a new type of non-deductible IRA, known as a Roth IRA. Purchase
payments for a Roth IRA are limited to a maximum of $2,000 per year. Lower
maximum limitations apply to individuals with adjusted gross incomes between
$95,000 and $110,000 in the case of single taxpayers, between $150,000 and
$160,000 in the case of married taxpayers filing joint returns, and between $0
and $10,000 in the case of married taxpayers filing separately. An overall
$2,000 annual limitation continues to apply to all of a taxpayer's IRA
contributions, including Roth IRA and non-Roth IRAs.
Qualified distributions from Roth IRAs are free from federal income tax. A
qualified distribution requires that an individual has held the Roth IRA for at
least five years and, in addition, that the distribution is made either after
the individual reaches age 59 1/2, on the individual's death or disability, or
as a qualified first-time home purchase, subject to a $10,000 lifetime maximum,
for the individual, a spouse, child, grandchild, or ancestor. Any distribution
which is not a qualified distribution is taxable to the extent of earnings in
the distribution. Distributions are treated as made from contributions first and
therefore no distributions are taxable until distributions exceed the amount of
contributions to the Roth IRA. The 10% penalty tax and the regular IRA
exceptions to the 10% penalty tax apply to taxable distributions from a Roth
IRA.
17
<PAGE>
Amounts may be rolled over from one Roth IRA to another Roth IRA. Furthermore,
an individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or a
previously deductible IRA contribution. However, for rollovers in 1998, the
individual may pay that tax ratably over the four taxable year period beginning
with tax year 1998.
Purchasers of contracts to be qualified as a Roth IRA should obtain competent
tax advice as to the tax treatment and suitability of such an investment.
d. Corporate Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit corporate employers to establish
various types of retirement plans for employees. These retirement plans may
permit the purchase of the contracts to provide benefits under the plan.
Contributions to the plan for the benefit of employees will not be includible in
the gross income of the employees until distributed from the plan. The tax
consequences to participants may vary depending upon the particular plan design.
However, the Code places limitations and restrictions on all Plans including on
such items as: amount of allowable contributions; form, manner and timing of
distributions; transferability of benefits; vesting and nonforfeitability of
interests; nondiscrimination in eligibility and participation; and the tax
treatment of distributions, withdrawals and surrenders. (See "Tax Treatment of
Withdrawals Qualified Contracts" below.) Purchasers of contracts for use with
Corporate Pension or Profit Sharing Plans should obtain competent tax advice as
to the tax treatment and suitability of such an investment.
Tax Treatment of Withdrawals - Qualified Contracts
In the case of a withdrawal under a qualified contract, a ratable portion of the
amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement plan.
Special tax rules may be available for certain distributions from a qualified
contract. Section 72(t) of the Code imposes a 10% penalty tax on the taxable
portion of any distribution from qualified retirement plans, including contracts
issued and qualified under Code Sections 401 (H.R. 10 and Corporate Pension and
Profit-Sharing Plans), 403(b) (Tax-Sheltered Annuities), and 408 (Individual
Retirement Annuities) and 408A (Roth IRAs). To the extent amounts are not
includible in gross income because they have been rolled over to an IRA or to
another eligible qualified plan, no tax penalty will be imposed. The tax penalty
will not apply to the following distributions: (a) if distribution is made on or
after the date on which the owner or annuitant (as applicable) reaches age 59
1/2; (b) distributions following the death or disability of the owner or
annuitant (as applicable) (for this purpose disability is as defined in Section
72(m) (7) of the Code); (c) after separation from service, distributions that
are part of substantially equal periodic payments made not less frequently than
annually for the life (or life expectancy) of the owner or annuitant (as
applicable) or the joint lives (or joint life expectancies) of such owner or
annuitant (as applicable) and his or her designated beneficiary; (d)
distributions to an owner or annuitant (as applicable) who has separated from
service after he has attained age 55; (e) distributions made to the owner or
annuitant (as applicable) to the extent such distributions do not exceed the
amount allowable as a deduction under Code Section 213 to the owner or annuitant
(as applicable) for amounts paid during the taxable year for medical care; (f)
distributions made to an alternate payee pursuant to a qualified domestic
relations order; (g) distributions from an Individual Retirement Annuity for the
purchase of medical insurance (as described in Section 213(d)(1)(D) of the Code)
for the owner or annuitant (as applicable) and his or her spouse and dependents
if the owner or annuitant (as applicable) has received unemployment compensation
for at least 12 weeks (this exception will no longer apply after the owner or
annuitant (as applicable) has been re-employed for at least 60 days); (h)
distributions from an Individual Retirement Annuity made to the owner or
annuitant (as applicable) to the extent such distributions do not exceed the
qualified higher education expenses (as defined in Section 72(t)(7) of the Code)
of the owner or annuitant (as applicable) for the taxable year; and (i)
distributions from an Individual Retirement Annuity made to the owner or
annuitant (as applicable) which are qualified first-time home buyer
distributions (as defined in Section 72(t)(8)of the Code.) The exceptions stated
in (d) and (f) above do not apply in the case of an Individual Retirement
Annuity. The exception stated in (c) above applies to an Individual Retirement
Annuity without the requirement that there be a separation from service.
With respect to (c) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is
18
<PAGE>
increased by an amount equal to the tax which would have been imposed (the 10%
penalty tax) but for the exception, plus interest for the tax years in which the
exception was used.
Generally, distributions from a qualified plan must begin no later than April
1st of the calendar year following the later of (a) the year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an Individual Retirement
Annuity. Required distributions do not apply to a Roth IRA during the lifetime
of the owner. Required distributions must be over a period not exceeding the
life expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.
Tax Sheltered Annuities - Withdrawal Limitations
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the owner: (1) attains age 59 1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the contract owner's
value which represents contributions made by the owner and does not include any
investment results. The limitations on withdrawals became effective on January
1, 1989 and apply only to salary reduction contributions made after December 31,
1988, to income attributable to such contributions and to income attributable to
amounts held as of December 31, 1988. The limitations on withdrawals do not
affect transfers between tax sheltered annuity plans. Contract owners should
consult their own tax counsel or other tax adviser regarding any distributions.
Section 457 Deferred Compensation ("Section 457") Plans
Employees of (and independent contractors who perform services for) certain
state and local governmental units, or certain tax-exempt employers, may
participate in a Section 457 plan of the employer, allowing them to defer part
of their salary or other compensation. The amount deferred, and accrued income
thereon, will not be taxable until it is paid or otherwise made available to the
employee.
The maximum amount that can be deferred under a Section 457 plan in any tax year
is generally one-third of the employee's includible compensation, up to $8,000
(in 1998). Includible compensation means earnings for services rendered to the
employer which are includible in the employee's gross income, excluding the
contributions under the Section 457 plan or a Tax-Sheltered Annuity. Certain
catch-up deferrals are permitted during the last three (3) years before an
employee attains normal retirement age. The contract purchased is issued to the
employer, and the employee has no rights or vested interest in the contract. All
contract value must be held for the exclusive benefit of the employee, and
payments can only be made in accordance with Section 457 plan provisions.
Presently, tax-free transfers of assets in a section 457 plan can only be made
to another section 457 plan in certain limited cases.
Purchasers of contracts for use with Section 457 plans should obtain competent
tax advice as to the tax treatment and suitability of such an investment.
EXPERTS
MML Bay State has included the financial statements of MML Bay State and MML Bay
State Variable Annuity Separate Account 1 - LifeTrust in this Statement of
Additional Information in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
PricewaterhouseCoopers LLP's report on the statutory financial statements of MML
Bay State includes explanatory paragraphs relating to the use of statutory
accounting practices rather than generally accepted accounting principles.
PricewaterhouseCoopers LLP is located in Springfield, Massachusetts 01101.
19
<PAGE>
Report Of Independent Accountants
To the Contract Owners of MML Bay State Variable Annuity Separate Account I and
the Board of Directors of MML Bay State Life Insurance Company
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of each of the divisions of the
MML Bay State Variable Annuity Separate Account I - Life Trust (hereafter
referred to as "the Account") at December 31, 1998, the results of each of their
operations for the year then ended and the changes in each of their net assets
for each of the two years in the period then ended, in conformity with generally
accepted accounting principles. 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 of these financial statements in accordance with generally accepted
auditing standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of investments owned at December 31, 1998 by
correspondence with the investment companies, provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Springfield, Massachusetts
February 25, 1999
F-1
<PAGE>
MML Bay State Variable Annuity Separate Account 1 - LifeTrust
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
Equity Market Bond Blend Money Income Bond
Division Division Division Division Division Division Division
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments
Number of shares (Note 2) 512,818 8,177,393 228,005 919,544 4,395,522 2,612,699 686,992
=========== =========== =========== =========== =========== =========== ===========
Identified cost (Note 3B) $18,197,741 $ 8,177,393 $ 2,852,472 $22,428,312 $ 4,395,522 $29,688,735 $ 8,215,347
=========== =========== =========== =========== =========== =========== ===========
Value (Note 3A) $20,101,312 $ 8,177,393 $ 2,872,039 $23,065,062 $ 4,395,522 $28,791,940 $ 8,463,739
Dividends receivable 1,018,013 32,353 52,016 1,444,888 8,030 -- --
Receivable from MML Bay State
Life Insurance Company -- 199,302 -- -- 216,686 -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total assets 21,119,325 8,409,048 2,924,055 24,509,950 4,620,238 28,791,940 8,463,739
LIABILITIES
Annuitant mortality fluctuation
reserve (Note 3D) -- -- -- 4,327 -- 2,011 --
Payable to MML Bay State
Life Insurance Company 132,046 -- 8,719 87,752 -- 57,861 24,738
----------- ----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS $20,987,279 $ 8,409,048 $ 2,915,336 $24,417,871 $ 4,620,238 $28,732,068 $ 8,439,001
=========== =========== =========== =========== =========== =========== ===========
Net Assets:
Accumulation units - value $20,987,279 $ 8,409,048 $ 2,915,336 $24,273,625 $ 4,620,238 $28,665,044 $ 8,439,001
Annuity reserves (Note 3D) -- -- -- 144,246 -- 67,024 --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net assets $20,987,279 $ 8,409,048 $ 2,915,336 $24,417,871 $ 4,620,238 $28,732,068 $ 8,439,001
=========== =========== =========== =========== =========== =========== ===========
Accumulation units (Note 8)
Contractowners 9,433,044 7,206,004 2,084,420 13,295,264 3,942,306 19,946,336 6,274,363
MML Baystate Life
Insurance Company 5,000 5,000 5,000 5,000 5,000 5,000 5,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total units 9,438,044 7,211,004 2,089,420 13,300,264 3,947,306 19,951,336 6,279,363
=========== =========== =========== =========== =========== =========== ===========
NET ASSET VALUE PER
ACCUMULATION UNIT
December 31, 1998 $ 2.22 $ 1.17 $ 1.40 $ 1.83 $ 1.17 $ 1.44 $ 1.34
December 31, 1997 1.94 1.12 1.31 1.63 1.13 1.45 1.28
December 31, 1996 1.53 1.08 1.21 1.37 1.09 1.31 1.18
December 31, 1995 1.29 1.05 1.18 1.22 1.05 1.15 1.15
December 31, 1994 1.00 1.00 1.01 1.00 1.00 0.97 0.99
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE>
MML Bay State Variable Annuity Separate Account 1 - LifeTrust
STATEMENT OF ASSETS AND LIABILITIES (Continued)
December 31, 1998
<TABLE>
<CAPTION>
*Oppenheimer Oppenheimer Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Aggressive Oppenheimer Multiple Global Strategic Growth & Small
Growth Growth Strategies Securities Bond Income Cap Growth
Division Division Division Division Division Division Division
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments
Number of shares (Note 2) 885,200 1,914,867 1,626,479 1,735,359 6,814,497 4,589,390 26,639
=========== =========== =========== =========== =========== =========== ===========
Identified cost (Note 3B) $34,647,346 $56,522,107 $26,225,884 $33,382,692 $34,800,648 $83,957,211 $ 226,493
=========== =========== =========== =========== =========== =========== ===========
Value (Note 3A) $39,683,524 $70,218,165 $27,731,463 $38,299,379 $34,890,227 $93,990,715 $ 255,734
Dividends receivable -- -- -- -- -- -- --
Receivable from MML Bay State
Life Insurance Company -- -- -- -- -- -- 1,244
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total assets 39,683,524 70,218,165 27,731,463 38,299,379 34,890,227 93,990,715 256,978
LIABILITIES
Annuitant mortality fluctuation
reserve (Note 3D) 1,663 2,175 2,205 2,306 -- 2,076 --
Payable to MML Bay State
Life Insurance Company 163,810 319,823 113,292 150,942 129,678 452,372 --
----------- ----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS $39,518,051 $69,896,167 $27,615,966 $38,146,131 $34,760,549 $93,536,267 $ 256,978
=========== =========== =========== =========== =========== =========== ===========
Net Assets:
Accumulation units - value $39,462,609 $69,823,663 $27,542,470 $38,069,271 $34,760,549 $93,467,069 $ 256,978
Annuity reserves (Note 3D) 55,442 72,504 73,496 76,860 -- 69,198 --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net assets $39,518,051 $69,896,167 $27,615,966 $38,146,131 $34,760,549 $93,536,267 $ 256,978
=========== =========== =========== =========== =========== =========== ===========
Accumulation units (Note 8)
Contractowners 20,826,543 27,901,939 16,839,783 25,414,795 25,855,507 42,553,961 265,188
MML Baystate Life
Insurance Company 5,000 5,000 5,000 5,000 5,000 5,000 5,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total units 20,831,543 27,906,939 16,844,783 25,419,795 25,860,507 42,558,961 270,188
=========== =========== =========== =========== =========== =========== ===========
NET ASSET VALUE PER
ACCUMULATION UNIT
December 31, 1998 $ 1.89 $ 2.50 $ 1.64 $ 1.50 $ 1.34 $ 2.20 $ 0.95
December 31, 1997 1.71 2.05 1.55 1.33 1.32 2.13 --
December 31, 1996 1.55 1.64 1.34 1.10 1.24 1.63 --
December 31, 1995 1.31 1.32 1.18 0.95 1.12 1.24 --
December 31, 1994 1.00 0.98 0.99 0.94 0.98 -- --
</TABLE>
*This division invests in the Oppenheimer Aggressive Growth Fund. Prior to May
1, 1998, the Oppenheimer Aggressive Growth Fund was called the Oppenheimer
Capital Appreciation Fund. The Oppenheimer Aggressive Growth Division was known
as the Oppenheimer Capital Appreciation Division.
See Notes to Financial Statements.
F-3
<PAGE>
MML Bay State Variable Annuity Separate Account 1 - LifeTrust
STATEMENT OF OPERATIONS
For The Year Ended December 31, 1998
<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) $ 1,018,145 $ 392,739 $ 156,190 $ 1,938,003 $ 173,289 $ 1,250,519 $ 148,873
Expenses
Mortality and expense risk fees
(Note 4) 231,046 109,125 31,621 265,648 47,318 381,369 80,440
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net investment income (loss)
(Note 3C) 787,099 283,614 124,569 1,672,355 125,971 869,150 68,433
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net realized and unrealized
gain (loss) on investments
Net realized gain (loss) on
investments (Notes 3B , 3C & 7) 530,055 -- 27,461 222,824 -- 92,725 40,215
Change in net unrealized
appreciation/depreciation
of investments 956,700 -- (12,234) 233,701 -- (1,402,201) 167,158
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net gain (loss) on investments 1,486,755 -- 15,227 456,525 -- (1,309,476) 207,373
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net
assets resulting from
operations $ 2,273,854 $ 283,614 $ 139,796 $ 2,128,880 $ 125,971 $ (440,326) $ 275,806
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
MML Bay State Variable Annuity Separate Account 1 - LifeTrust
STATEMENT OF OPERATIONS (Continued)
For The Year Ended December 31, 1998
<TABLE>
<CAPTION>
*Oppenheimer Oppenheimer Oppenheimer Oppenheimer Oppenheimer **Oppenheimer
Aggressive Oppenheimer Multiple Global Strategic Growth & Small
Growth Growth Strategies Securities Bond Income Cap Growth
Division Division Division Division Division Division Division
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income
Dividends (Note 3B) $ 911,033 $ 4,846,550 $ 1,446,189 $ 3,202,056 $ 924,026 $ 4,269,970 $ --
Expenses
Mortality and expense risk fees
(Note 4) 485,519 795,918 344,909 479,370 470,652 1,189,031 627
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net investment income (loss)
(Note 3C) 425,514 4,050,632 1,101,280 2,722,686 453,374 3,080,939 (627)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net realized and unrealized
gain (loss) on investments
Net realized gain (loss) on
investments (Notes 3B, 3C & 7) 378,167 1,206,550 278,473 699,594 121,303 2,407,780 (5,877)
Change in net unrealized
appreciation/depreciation
of investments 2,619,800 6,645,579 (222,934) 460,767 (148,383) (3,723,194) 29,241
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net gain (loss) on investments 2,997,967 7,852,129 55,539 1,160,361 (27,080) (1,315,414) 23,364
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net
assets resulting from
operations $ 3,423,481 $11,902,761 $ 1,156,819 $ 3,883,047 $ 426,294 $ 1,765,525 $ 22,737
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
*This division invests in the Oppenheimer Aggressive Growth Fund. Prior to May
1, 1998, the Oppenheimer Aggressive Growth Fund was called the Oppenheimer
Capital Appreciation Fund. The Oppenheimer Aggressive Growth Division was known
as the Oppenheimer Capital Appreciation Division.
**For the Period May 1, 1998 (Commencement of Operations) Through December 31,
1998.
See Notes to Financial Statements.
F-5
<PAGE>
MML Bay State Variable Annuity Separate Account 1 - LifeTrust
STATEMENT OF CHANGES IN NET ASSETS
For The Year Ended December 31, 1998
<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) $ 787,099 $ 283,614 $ 124,569 $ 1,672,355 $ 125,971 $ 869,150 $ 68,433
Net realized gain (loss)
on investments 530,055 -- 27,461 222,824 -- 92,725 40,215
Change in net unrealized
appreciation/depreciation
of investments 956,700 -- (12,234) 233,701 -- (1,402,201) 167,158
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net
assets resulting from operations 2,273,854 283,614 139,796 2,128,880 125,971 (440,326) 275,806
----------- ----------- ----------- ----------- ----------- ----------- -----------
Capital transactions: (Note 8)
Net contract payments (Note 6) 7,008,812 4,284,941 885,671 9,674,195 2,919,516 8,135,844 2,699,433
Withdrawal of funds (931,136) (899,332) (100,194) (1,031,123) (796,545) (1,468,505) (340,457)
Transfer due to reimbursement
(payment) of accumulation
unit value fluctuation (11,066) (1,766) (2,875) (7,720) (7,451) 9,471 (1,569)
Net credit to annuitant mortality
reserve (Note 3D) -- -- -- (9,738) -- 43,955 --
Transfer of seed money -- -- -- -- -- -- --
Annuity benefit payments -- -- -- (428) -- (142) --
Withdrawal due to administrative
and contingent deferred sales
charges (Note 6) (5,957) (1,404) (431) (4,880) (561) (6,519) (1,210)
Divisional transfers 1,071,006 (2,711,129) 416,874 835,019 (721,483) 583,458 1,740,614
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets
resulting from capital
transactions 7,131,659 671,310 1,199,045 9,455,325 1,393,476 7,297,562 4,096,811
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total increase 9,405,513 954,924 1,338,841 11,584,205 1,519,447 6,857,236 4,372,617
NET ASSETS, at beginning
of the period/year 11,581,766 7,454,124 1,576,495 12,833,666 3,100,791 21,874,832 4,066,384
----------- ----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS, at end
of the year $20,987,279 $ 8,409,048 $ 2,915,336 $24,417,871 $ 4,620,238 $28,732,068 $ 8,439,001
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE>
MML Bay State Variable Annuity Separate Account 1 - LifeTrust
STATEMENT OF CHANGES IN NET ASSETS (Continued)
For The Year Ended December 31, 1998
<TABLE>
<CAPTION>
*Oppenheimer Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Aggressive Oppenheimer Multiple Global Strategic Growth
Growth Growth Strategies Securities Bond & Income
Division Division Division Division Division Division
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss) $ 425,514 $ 4,050,632 $ 1,101,280 $ 2,722,686 $ 453,374 $ 3,080,939
Net realized gain (loss)
on investments 378,167 1,206,550 278,473 699,594 121,303 2,407,780
Change in net unrealized
appreciation/depreciation
of investments 2,619,800 6,645,579 (222,934) 460,767 (148,383) (3,723,194)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations 3,423,481 11,902,761 1,156,819 3,883,047 426,294 1,765,525
------------ ------------ ------------ ------------ ------------ ------------
Capital transactions: (Note 8)
Net contract payments (Note 6) 8,198,322 13,722,728 7,427,896 6,860,323 9,557,607 24,768,220
Withdrawal of funds (1,951,791) (3,233,605) (2,030,529) (2,115,654) (1,813,741) (5,941,732)
Transfer due to reimbursement
(payment) of accumulation
unit value fluctuation (15,896) (50,916) (4,547) 7,368 (9,077) 10,541
Net credit to annuitant mortality
reserve (Note 3D) 15,374 14,016 10,092 8,477 -- 4,284
Transfer of seed money -- -- -- -- -- --
Annuity benefit payments (151) (333) (296) (317) -- (278)
Withdrawal due to administrative
and contingent deferred sales
charges (Note 6) (13,636) (19,380) (6,217) (11,493) (7,427) (27,736)
Divisional transfers (215,428) 1,640,602 385,079 198,665 (3,367,260) 68,736
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets
resulting from capital transactions 6,016,794 12,073,112 5,781,478 4,947,369 4,360,102 18,882,035
------------ ------------ ------------ ------------ ------------ ------------
Total increase 9,440,275 23,975,873 6,938,297 8,830,416 4,786,396 20,647,560
NET ASSETS, at beginning
of the period/year 30,077,776 45,920,294 20,677,669 29,315,715 29,974,153 72,888,707
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS, at end
of the year $ 39,518,051 $ 69,896,167 $ 27,615,966 $ 38,146,131 $ 34,760,549 $ 93,536,267
============ ============ ============ ============ ============ ============
</TABLE>
**Oppenheimer
Small
Cap Growth
Division
Increase (decrease) in net assets
Operations:
Net investment income (loss) $ (627)
Net realized gain (loss)
on investments (5,877)
Change in net unrealized
appreciation/depreciation
of investments 29,241
------------
Net increase (decrease) in net assets
resulting from operations 22,737
------------
Capital transactions: (Note 8)
Net contract payments (Note 6) 159,178
Withdrawal of funds --
Transfer due to reimbursement
(payment) of accumulation
unit value fluctuation (2,342)
Net credit to annuitant mortality
reserve (Note 3D) --
Transfer of seed money 5,000
Annuity benefit payments --
Withdrawal due to administrative
and contingent deferred sales
charges (Note 6) (9)
Divisional transfers 72,414
------------
Net increase in net assets
resulting from capital transactions 234,241
------------
Total increase 256,978
NET ASSETS, at beginning
of the period/year --
------------
NET ASSETS, at end
of the year $ 256,978
============
*This division invests in the Oppenheimer Aggressive Growth Fund. Prior to May
1, 1998, the Oppenheimer Aggressive Growth Fund was called the Oppenheimer
Capital Appreciation Fund. The Oppenheimer Aggressive Growth Division was known
as the Oppenheimer Capital Appreciation Division.
**For the Period May 1, 1998 (Commencement of Operations) Through December 31,
1998.
See Notes to Financial Statements.
F-7
<PAGE>
MML Bay State Variable Annuity Separate Account 1 - LifeTrust
STATEMENT OF CHANGES IN NET ASSETS
For The Year Ended December 31, 1997
<TABLE>
<CAPTION>
MML MML
MML Money Managed MML Oppenheimer
Equity Market Bond Blend Money
Division Division Division Division Division
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss) $ 768,946 $ 231,484 $ 62,249 $ 983,437 $ 105,875
Net realized gain
on investments 102,500 -- 3,168 80,242 --
Change in net unrealized
appreciation/depreciation
of investments 711,517 -- 34,336 297,751 --
------------ ------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations 1,582,963 231,484 99,753 1,361,430 105,875
------------ ------------ ------------ ------------ ------------
Capital transactions: (Note 8)
Net contract payments (Note 6) 6,113,398 11,413,190 776,434 7,153,996 3,429,574
Withdrawal of funds (323,918) (811,840) (141,411) (368,148) (619,525)
Transfer due to reimbursement
(payment) of accumulation
unit value fluctuation 4,647 (1,837) (1,381) (1,513) 4,334
Annuity benefit payments -- -- -- (8,930) --
Withdrawal due to administrative
and contingent deferred sales
charges (Note 6) (2,700) (870) (183) (1,689) (516)
Divisional transfers 859,782 (8,000,509) 4,104 495,955 (2,650,312)
------------ ------------ ------------ ------------ ------------
Net increase in net assets
resulting from capital transactions 6,651,209 2,598,134 637,563 7,269,671 163,555
------------ ------------ ------------ ------------ ------------
Total increase 8,234,172 2,829,618 737,316 8,631,101 269,430
NET ASSETS, at beginning
of the year 3,347,594 4,624,506 839,179 4,202,565 2,831,361
------------ ------------ ------------ ------------ ------------
NET ASSETS, at end
of the year $ 11,581,766 $ 7,454,124 $ 1,576,495 $ 12,833,666 $ 3,100,791
============ ============ ============ ============ ============
<CAPTION>
Oppenheimer Oppenheimer
High Oppenheimer Capital Oppenheimer
Income Bond Appreciation Growth
Division Division Division Division
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss) $ 1,032,968 $ 155,325 $ 541,089 $ 911,335
Net realized gain
on investments 149,141 6,998 208,327 198,417
Change in net unrealized
appreciation/depreciation
of investments 339,808 71,849 1,568,488 5,120,553
------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations 1,521,917 234,172 2,317,904 6,230,305
------------ ------------ ------------ ------------
Capital transactions: (Note 8)
Net contract payments (Note 6) 12,807,172 1,667,467 13,229,306 20,992,170
Withdrawal of funds (753,904) (138,563) (959,590) (1,447,724)
Transfer due to reimbursement
(payment) of accumulation
unit value fluctuation (3,797) 531 1,853 (12,651)
Annuity benefit payments -- -- -- --
Withdrawal due to administrative
and contingent deferred sales
charges (Note 6) (2,477) (488) (7,680) (8,373)
Divisional transfers 435,184 139,757 1,504,994 2,579,482
------------ ------------ ------------ ------------
Net increase in net assets
resulting from capital transactions 12,482,178 1,668,704 13,768,883 22,102,904
------------ ------------ ------------ ------------
Total increase 14,004,095 1,902,876 16,086,787 28,333,209
NET ASSETS, at beginning
of the year 7,870,737 2,163,508 13,990,989 17,587,085
------------ ------------ ------------ ------------
NET ASSETS, at end
of the year $ 21,874,832 $ 4,066,384 $ 30,077,776 $ 45,920,294
============ ============ ============ ============
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Multiple Global Strategic Growth
Strategies Securities Bond & Income
Division Division Division Division
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss) $ 792,858 ($ 111,623) $ 1,477,845 $ 1,236,788
Net realized gain
on investments 87,376 156,148 157,979 637,514
Change in net unrealized
appreciation/depreciation
of investments 1,240,117 3,366,448 (54,401) 10,990,992
------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations 2,120,351 3,410,973 1,581,423 12,865,294
------------ ------------ ------------ ------------
Capital transactions: (Note 8)
Net contract payments (Note 6) 8,945,950 12,783,493 18,214,245 34,316,241
Withdrawal of funds (764,332) (715,569) (1,220,184) (2,355,462)
Transfer due to reimbursement
(payment) of accumulation
unit value fluctuation 1,365 (5,858) 4,220 (28,445)
Annuity benefit payments -- -- -- --
Withdrawal due to administrative
and contingent deferred sales
charges (Note 6) (2,911) (5,488) (3,510) (11,896)
Divisional transfers 847,169 2,057,159 (3,002,112) 4,730,291
------------ ------------ ------------ ------------
Net increase in net assets
resulting from capital transactions 9,027,241 14,113,737 13,992,659 36,650,729
------------ ------------ ------------ ------------
Total increase 11,147,592 17,524,710 15,574,082 49,516,023
NET ASSETS, at beginning
of the year 9,530,077 11,791,005 14,400,071 23,372,684
------------ ------------ ------------ ------------
NET ASSETS, at end
of the year $ 20,677,669 $ 29,315,715 $ 29,974,153 $ 72,888,707
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
F-8
<PAGE>
MML Bay State Variable Annuity Separate Account 1 - LifeTrust
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 State is a
wholly-owned subsidiary of Massachusetts Mutual Life Insurance Company
("MassMutual"). Separate Account 1 is used exclusively for MML Bay State's
flexible purchase payment individual variable annuity contract, known as
Life Trust.
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.
Separate Account 1 operates as a registered unit investment trust pursuant
to the Investment Company Act of 1940.
2. INVESTMENT OF THE SEPARATE ACCOUNT 1 ASSETS
Separate Account 1 maintains fourteen divisions. Each division invests in
corresponding shares of either the MML Series Investment Fund ("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 four of the six separate series of shares of the MML Trust.
The MML Trust is a no-load, open-end, management investment company
registered under the Investment Company Act of 1940. MassMutual serves as
investment manager of the MML Trust. Effective January 1, 1997, David L.
Babson & Company, Inc. ("Babson") a controlled subsidiary of MassMutual,
serves as the investment sub-advisor to MML Equity Fund and the Equity
Sector of the MML Blend Fund.
Oppenheimer Money Fund, Oppenheimer High Income Fund, Oppenheimer Bond
Fund, Oppenheimer Aggressive Growth Fund, Oppenheimer Growth Fund,
Oppenheimer Multiple Strategies Fund, Oppenheimer Global Securities Fund,
Oppenheimer Strategic Bond Fund, Oppenheimer Growth & Income Fund and
Oppenheimer Small Cap Growth Fund are the ten separate Funds of the
Oppenheimer Trust. The Oppenheimer Trust is a open-end, diversified,
management investment company registered under the Investment Company Act
of 1940, for which OppenheimerFunds, Inc. ("OFI"), a controlled subsidiary
of MassMutual, serves as investment manager.
In addition to the fourteen divisions of the Separate Account 1, a
contractowner, in certain states, may also allocate funds to the Fixed
Account. Proceeds from the Fixed Account will be deposited in a
non-unitized 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
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.
F-9
<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 $558,770 at December 31, 1998.
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.l5%. 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. DISTRIBUTION AGREEMENTS
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.
MML Investors Services, Inc. ("MMLISI") a wholly-owned subsidiary of
MassMutual, serves as co-underwriter of the contracts 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.
Pursuant to the underwriting and servicing agreements, commissions or
other fees due to registered representatives for selling and servicing the
contracts are paid by MML Bay State on behalf of MML Distributors or
MMLISI. MML Distributors and MMLISI also receive compensation for their
activities as underwriters of the contracts.
F-10
<PAGE>
Notes To Financial Statements (Continued)
6. CHARGES/DEDUCTIONS FOR ADMINISTRATIVE CHARGES AND CONTINGENT DEFERRED
SALES CHARGES
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
For The Year Ended Equity Market Bond Blend Money Income Bond
December 31, 1998 Division Division Division Division Division Division Division
- ------------------ -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net contract payments $7,008,812 $4,284,941 $ 885,671 $9,674,195 $2,919,516 $8,135,844 $2,699,433
Administrative charges and
contingent deferred sales
charges $ 5,957 $ 1,404 $ 431 $ 4,880 $ 561 $ 6,519 $ 1,210
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer Oppenheimer **Oppenheimer
Aggressive Oppenheimer Multiple Global Strategic Growth Small
For The Year Ended Growth Growth Strategies Securities Bond & Income Cap Growth
December 31, 1998 (Continued) Division Division Division Division Division Division Division
- ----------------------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net contract payments $ 8,198,322 $13,722,728 $ 7,427,896 $ 6,860,323 $ 9,557,607 $24,768,220 $ 159,178
Administrative charges and
contingent deferred sales
charges $ 13,636 $ 19,380 $ 6,217 $ 11,493 $ 7,427 $ 27,736 $ 9
</TABLE>
** For the Period May 1, 1998 (Commencement of Operations) Through December 31,
1998.
7. PURCHASES AND SALES OF INVESTMENTS
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
For The Year Ended Equity Market Bond Blend Money Income Bond
December 31, 1998 Division Division Division Division Division Division Division
- ------------------ -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Cost of purchases $ 9,796,134 $11,855,743 $ 1,874,787 $11,962,644 $ 7,582,645 $12,439,089 $ 5,357,794
Proceeds from sales $ 1,927,128 $11,027,675 $ 574,445 $ 1,282,632 $ 6,231,598 $ 4,240,711 $ 1,180,855
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer Oppenheimer **Oppenheimer
Aggressive Oppenheimer Multiple Global Strategic Growth Small
For The Year Ended Growth Growth Strategies Securities Bond & Income Cap Growth
December 31, 1998 (Continued) Division Division Division Division Division Division Division
- ----------------------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Cost of purchases $ 8,817,880 $20,324,400 $ 9,099,143 $10,597,030 $ 8,615,508 $29,761,816 $ 277,296
Proceeds from sales $ 2,310,333 $ 3,980,769 $ 2,058,496 $ 2,823,000 $ 3,770,006 $ 7,369,141 $ 44,926
</TABLE>
F-11
<PAGE>
Notes To Financial Statements (Continued)
8. NET INCREASE IN UNITS ACCUMULATION
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
For The Year Ended Equity Market Bond Blend Money Income Bond
December 31, 1998 Division Division Division Division Division Division Division
- ------------------ -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Units purchased 3,403,218 3,747,723 652,486 5,624,388 2,528,273 5,505,415 2,048,776
Units withdrawn (452,305) (780,513) (73,872) (596,824) (698,521) (1,033,239) (262,072)
Units transferred between
divisions 517,905 (2,386,054) 305,824 486,513 (632,408) 417,357 1,305,565
--------- --------- --------- ---------- --------- ---------- ---------
Net increase 3,468,818 581,156 884,438 5,514,077 1,197,344 4,889,533 3,092,269
--------- --------- --------- ---------- --------- ---------- ---------
Units, at beginning of the
period/year 5,969,226 6,629,848 1,204,982 7,786,187 2,749,962 15,061,803 3,187,094
--------- --------- --------- ---------- --------- ---------- ---------
Units, at end of the year 9,438,044 7,211,004 2,089,420 13,300,264 3,947,306 19,951,336 6,279,363
========= ========= ========= ========== ========= ========== =========
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer Oppenheimer **Oppenheimer
Aggressive Oppenheimer Multiple Global Strategic Growth Small
For The Year Ended Growth Growth Strategies Securities Bond & Income Cap Growth
December 31, 1998 (Continued) Division Division Division Division Division Division Division
- ----------------------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Units purchased 4,575,632 6,239,140 4,616,518 4,860,138 7,088,506 11,127,691 191,778
Units withdrawn (1,122,263) (1,476,545) (1,312,421) (1,554,002) (1,358,381) (2,766,003) (10)
Units transferred between divisions (221,492) 693,001 237,537 80,731 (2,498,896) (79,793) 78,420
---------- ---------- ---------- ---------- ---------- ---------- -------
Net increase 3,231,877 5,455,596 3,541,634 3,386,867 3,231,229 8,281,895 270,188
Units, at beginning of the
period/year 17,599,666 22,451,343 13,303,149 22,032,928 22,629,278 34,277,066 --
---------- ---------- ---------- ---------- ---------- ---------- -------
Units, at end of the year 20,831,543 27,906,939 16,844,783 25,419,795 25,860,507 42,558,961 270,188
========== ========== ========== ========== ========== ========== =======
</TABLE>
** For the Period May 1, 1998 (Commencement of Operations) Through December 31,
1998.
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
For The Year Ended Equity Market Bond Blend Money Income Bond
December 31, 1997 Division Division Division Division Division Division Division
- ------------------ -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Units purchased 3,467,292 10,329,352 618,079 4,714,258 3,098,840 9,286,744 1,356,300
Units withdrawn (180,788) (716,173) (113,631) (280,778) (560,472) (546,863) (113,276)
Units transferred between divisions 493,573 (7,250,406) 5,049 333,534 (2,395,874) 322,775 116,517
--------- --------- --------- --------- --------- ---------- ---------
Net increase 3,780,077 2,362,773 509,497 4,767,014 142,494 9,062,656 1,359,541
Units, at beginning of the year 2,189,149 4,267,075 695,485 3,019,173 2,607,468 5,999,147 1,827,553
--------- --------- --------- --------- --------- ---------- ---------
Units, at end of the year 5,969,226 6,629,848 1,204,982 7,786,187 2,749,962 15,061,803 3,187,094
========= ========= ========= ========= ========= ========== =========
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Multiple Global Strategic Growth
For The Year Ended Appreciation Growth Strategies Securities Bond & Income
December 31, 1997 (Continued) Division Division Division Division Division Division
- ----------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Units purchased 8,254,380 11,136,936 6,159,829 10,228,334 14,276,473 18,517,065
Units withdrawn (582,906) (754,954) (523,199) (568,049) (954,044) (1,197,294)
Units transferred between divisions 908,544 1,321,917 576,047 1,645,424 (2,350,589) 2,588,244
---------- ---------- ---------- ---------- ---------- ----------
Net increase 8,580,018 11,703,899 6,212,677 11,305,709 10,971,840 19,908,015
Units, at beginning of the year 9,019,648 10,747,444 7,090,472 10,727,219 11,657,438 14,369,051
---------- ---------- ---------- ---------- ---------- ----------
Units, at end of the year 17,599,666 22,451,343 13,303,149 22,032,928 22,629,278 34,277,066
========== ========== ========== ========== ========== ==========
</TABLE>
F-12
<PAGE>
Report Of Independent Accountants
To the Board of Directors and Policyholders of
MML Bay State Life Insurance Company
We have audited the accompanying statutory statements of financial position of
MML Bay State Life Insurance Company as of December 31, 1998 and 1997, and the
related statutory statements of income and changes in shareholder's equity, and
of cash flows for each of the three years in the period ended December 31, 1998.
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 1, these financial statements were prepared in conformity
with accounting practices prescribed or permitted by the Department of Insurance
of the State of Connecticut, and prior to June 30, 1997, 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 reasonably determinable, are presumed to be
material.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements audited by us do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of MML Bay State Life Insurance Company as of December 31, 1998 and 1997, or the
results of its operations or its cash flows for each of the three years in the
period ended December 31, 1998.
In our opinion, the financial statements audited by us present fairly, in all
material respects, the financial position of MML Bay State Life Insurance
Company as of December 31, 1998 and 1997, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1998, on the basis of accounting described in Note 1.
PricewaterhouseCoopers LLP
Springfield, Massachusetts
February 25, 1999
FF-1
<PAGE>
MML Bay State Life Insurance Company
<TABLE>
<CAPTION>
STATUTORY STATEMENTS OF FINANCIAL POSITION
December 31,
1998 1997
------ ------
(In Millions)
Assets:
<S> <C> <C>
Bonds $ 28.6 $ 38.5
Policy loans 24.1 16.1
Cash and short-term investments 17.2 3.5
--------- --------
69.9 58.1
Investment and insurance amounts
receivable 1.7 2.0
Transfer due from separate accounts 103.0 75.8
Federal income tax receivable 4.2 -
-------- --------
178.8 135.9
Separate account assets 2,031.7 1,400.1
-------- --------
$2,210.5 $1,536.0
======== ========
</TABLE>
See notes to statutory financial statements.
FF-2
<PAGE>
MML Bay State Life Insurance Company
STATUTORY STATEMENTS OF FINANCIAL POSITION, Continued
<TABLE>
<CAPTION>
December 31,
1998 1997
---- ----
($ In Millions Except for Par Value)
Liabilities:
<S> <C> <C>
Policyholders' reserves and funds $ 47.3 $ 36.2
Policyholders' claims and other benefits 2.9 1.9
Payable to parent 10.8 21.7
Federal income tax 3.9
Other liabilities 7.9 8.1
-------- --------
68.9 71.8
Separate account liabilities 2,027.7 1,396.7
-------- --------
2,096.6 1,468.5
-------- --------
Shareholder's equity:
Common stock, $200 par value
25,000 shares authorized
12,501 shares issued and outstanding 2.5 2.5
Paid-in capital and contributed surplus 121.7 71.7
Surplus (10.3) (6.7)
--------- ---------
113.9 67.5
-------- --------
$2,210.5 $1,536.0
======== ========
</TABLE>
See notes to statutory financial statements.
FF-3
<PAGE>
MML Bay State Life Insurance Company
STATUTORY STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
------ ------ ------
(In Millions)
Revenue:
<S> <C> <C> <C>
Premium income $573.0 $606.6 $441.2
Net investment income 4.9 3.9 4.2
Fees and other income 78.8 61.7 42.4
------ ------ ------
656.7 672.2 487.8
----- ----- -----
Benefits and expenses:
Policyholders' benefits and payments 53.0 34.3 11.0
Addition to policyholders' reserves and funds 494.9 543.9 401.7
Operating expenses 47.8 38.3 24.0
Commissions 42.1 35.4 28.1
State taxes, licenses and fees 12.9 11.2 9.1
------ ------ ------
650.7 663.1 473.9
------ ------ ------
Net gain from operations
before federal income taxes 6.0 9.1 13.9
Federal income taxes 11.9 15.9 11.8
------ ------ ------
Net gain (loss) from operations (5.9) (6.8) 2.1
Net realized capital loss (0.2) (0.1) (0.1)
------ ------ ------
Net income (loss) $ (6.1) $ (6.9) $ 2.0
====== ====== ======
</TABLE>
See notes to statutory financial statements.
FF-4
<PAGE>
MML Bay State Life Insurance Company
STATUTORY STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
------ ------ ------
(In Millions)
<S> <C> <C> <C>
Shareholder's equity, beginning of year $ 67.5 $ 77.6 $ 50.3
------- ------ ------
Increases (decrease) due to:
Net income (loss) (6.1) (6.9) 2.0
Capital contribution 50.0 - 25.5
Other 2.5 (3.2) (0.2)
------- ------ ------
46.4 (10.1) 27.3
------- ------ ------
Shareholder's equity, end of year $ 113.9 $ 67.5 $ 77.6
======== ====== ======
</TABLE>
See notes to statutory financial statements.
FF-5
<PAGE>
MML Bay State Life Insurance Company
STATUTORY STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
------ ------ ------
(In Millions)
Operating activities:
<S> <C> <C> <C>
Net income (loss) $ (6.1) $ (6.9) $ 2.0
Addition to policyholders' reserves and funds,
net of transfers to separate accounts 12.1 10.5 7.0
Net realized capital loss 0.2 0.1 0.1
Change in receivable from separate accounts (27.2) (25.6) (21.2)
Change in (payable) receivable to parent (10.9) 22.8 (0.2)
Change in federal taxes (payable) receivable (8.1) 5.0 (1.0)
Other changes 1.8 (9.7) 1.5
------- ------ --------
Net cash used in operating activities (38.2) (3.8) (11.8)
------- ------ --------
Investing activities:
Loans and purchases of investments (15.5) (20.1) (35.9)
Sales and maturities of investments and receipts
from repayments of loans 17.4 20.4 28.7
------- ------ --------
Net cash provided by (used in) investing activities 1.9 0.3 (7.2)
------- ------ --------
Financing activities:
Capital and surplus contribution 50.0 - 25.5
------- ------ --------
Net cash provided by financing activities 50.0 - 25.5
------- ------ --------
Increase (decrease) in cash and short-term investments 13.7 (3.5) 6.5
Cash and short-term investments, beginning of year 3.5 7.0 0.5
------- ------ --------
Cash and short-term investments, end of year $ 17.2 $ 3.5 $ 7.0
======= ====== ========
</TABLE>
See notes to statutory financial statements.
FF-6
<PAGE>
Notes To Statutory Financial Statements
MML Bay State Life Insurance Company (the "Company") is a wholly-owned stock
life subsidiary of Massachusetts Mutual Life Insurance Company
("MassMutual"). The Company is primarily engaged in the sale of flexible and
limited premium variable whole life insurance and variable annuities
distributed through career agents and brokers. The Company is licensed to
sell life insurance and annuities in the District of Columbia and 49 states
(excluding New York).
1. SUMMARY OF ACCOUNTING PRACTICES
The accompanying statutory financial statements have been prepared in
conformity with the statutory accounting practices of the National
Association of Insurance Commissioners ("NAIC") and the accounting practices
prescribed or permitted by the Department of Insurance of the State of
Connecticut, and prior to June 30, 1997, the Department of Insurance of the
State of Missouri. On June 30, 1997, the Company redomesticated from the
state of Missouri to the state of Connecticut which did not have any effect
on the accounting practices being followed. These statutory financial
statements are different in some respects from financial statements prepared
in accordance with generally accepted accounting principles ("GAAP"). The
more significant differences are as follows: (a) acquisition costs, such as
commissions and other costs directly related to acquiring new business, are
charged to current operations as incurred, whereas 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
generally requires they be reported at fair value; (d) deferred income taxes
are not provided for book-tax timing differences as would be required by
GAAP; and (e) payments received for universal life products and variable
annuities are reported as premium revenue, whereas under GAAP, these payments
would be recorded as deposits to policyholders' account balances.
In March 1998, the NAIC adopted the Codification of Statutory Accounting
Principles ("Codification"). Codification provides a comprehensive guide of
statutory accounting principles for use by insurers in all states and is
expected to become effective no later than January 1, 2001. The effect of
adopting Codification shall be reported as an adjustment to surplus on the
effective date. The Company is currently reviewing the impact of
Codification; however, since the Department of Insurance of the State of
Connecticut has not approved Codification, the ultimate impact cannot be
determined at this time.
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 these statutory financial
statements.
Certain 1997 and 1996 amounts have been reclassified to conform with the
current year presentation.
The following is a description of the Company's principal accounting policies
and practices.
A. Investments
Bonds are valued in accordance with rules established by the NAIC. Generally,
bonds are valued at amortized cost.
Policy loans are carried at the outstanding loan balance less amounts
unsecured by the cash surrender value of the policy.
FF-7
<PAGE>
Notes To Statutory Financial Statements (Continued)
Short-term investments are stated at amortized cost, which approximates fair
value.
In compliance with regulatory requirements, the Company maintains an Asset
Valuation Reserve ("AVR") and an Interest Maintenance Reserve ("IMR"). The
AVR and other investment reserves stabilize surplus against declines in the
value of bonds. The IMR 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 life of the underlying asset. Net realized after
tax capital losses of $0.1 million in 1998, 1997 and 1996 were charged to the
IMR. Amortization of the IMR into net investment income amounted to $0.1
million in 1998, 1997 and 1996. The IMR is included in other liabilities on
the Statutory Statement of Financial Position.
Realized capital gains and losses, less taxes, not includable in the IMR, 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 surplus.
B. Separate Accounts
Separate account assets and liabilities represent segregated funds
administered and invested by the Company for the benefit of variable annuity
and variable life insurance policyholders. Assets, consisting of holdings in
an open-ended series investment fund affiliated with MassMutual, bonds,
common stocks, and short-term investments, are reported at fair value. The
transfer due from separate accounts represent the policyholders' account
values in excess of statutory benefit reserves. Premiums, benefits and
expenses of the separate accounts are reported in 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 $4.0 million and $3.4
million of its assets invested in the separate account as of December 31,
1998 and 1997, respectively.
Net transfers to separate accounts of $481.2 million, $479.4 million, and
$356.1 million in 1998, 1997 and 1996, respectively, are included in the
addition to policyholders' reserves and funds.
C. Policyholders' Reserves
Policyholders' reserves for life insurance 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 3.0 to 5.5 percent. Reserves for individual annuities are
based on accepted actuarial methods, principally at interest rates ranging
from 5.28 to 6.0 percent.
The Company made certain changes in the valuation of policyholders' reserves
which increased surplus by $2.6 million in 1998 and decreased surplus by $3.0
million in 1997.
D. Premium and Related Expense Recognition
Life insurance premium revenue is recognized annually on the anniversary date
of the policy. Annuity premium is recognized when received. Commissions and
other costs related to issuance of new policies, maintenance and settlement
costs, are charged to current operations when incurred.
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 short-term investments.
FF-8
<PAGE>
Notes To Statutory Financial Statements (Continued)
2. SHAREHOLDER'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 shareholder's equity is subject to dividend restrictions relating
to various state regulations, which limit the payment of dividends to the
shareholder without prior approval. Under these regulations, $6.7 million of
shareholder's equity is available for distribution to the shareholder in 1999
without prior regulatory approval.
During 1998, MassMutual contributed additional paid-in capital of $50.0
million to the Company. Additionally, in 1996, MassMutual contributed
additional paid-in capital of $25.0 million to the Company and purchased an
additional 2,500 shares of common stock for $0.5 million.
3. RELATED PARTY TRANSACTIONS
MassMutual and the Company have an agreement whereby MassMutual, for a fee,
furnishes the Company, as required, operating facilities, human resources,
computer software development and managerial services. Also, investment and
administrative services are provided to the Company pursuant to a management
services agreement with MassMutual. Fees incurred under the terms of these
agreements were $47.8 million, $26.8 million and $16.4 million in 1998, 1997
and 1996, respectively.
The Company has reinsurance agreements with MassMutual in which MassMutual
assumed specific plans of insurance on a yearly renewal term basis. Premium
income and policy benefits and payments are stated net of reinsurance.
Premium income of $4.7 million, $5.1 million and $3.8 million was ceded to
MassMutual in 1998, 1997 and 1996, respectively. Policyholder benefits of
$2.2 million, $5.5 million and $3.1 million were ceded to MassMutual in 1998,
1997 and 1996, respectively.
The Company entered into a stop-loss agreement with MassMutual on January 1,
1997 under which the Company cedes claims, which, in aggregate exceed 18% of
the covered volume for any year, with maximum coverage of $25.0 million above
the aggregate limit. For 1998 and 1997, the aggregate limit was $37.0 million
and $15.4 million, respectively and it was not exceeded in any of the years.
The Company paid approximately $0.9 million and $1.0 million in premiums to
MassMutual under the agreement in 1998 and 1997, respectively.
4. FEDERAL INCOME TAXES
The provision for federal income taxes is based upon the Company's estimate
of its tax liability. No deferred tax effect is recognized for temporary
differences that may exist between financial reporting and taxable income.
Accordingly, the reporting of miscellaneous temporary differences, such as
reserves and acquisition costs, resulted in effective tax rates which differ
from the statutory tax rate.
The Company plans to file its 1998 federal income tax return on a
consolidated basis with its parent, MassMutual and MassMutual's other
eligible life and non-life affiliates. MassMutual and its eligible life
affiliates and its non-life affiliates are subject to a written tax
allocation agreement which allocates the group's tax liability for payment
purposes. Generally, the agreement provides that affiliates shall be
compensated for the use of their losses and credits by other affiliates.
The Internal Revenue Service has completed examining MassMutual's
consolidated income tax returns through the year 1992 and is currently
examining the years 1993 and 1994. The Company believes any adjustments
resulting from such examinations will not materially affect its statutory
financial statements.
Federal tax payments were $20.2 million in 1998, $10.9 million in 1997 and
$12.8 million in 1996.
FF-9
<PAGE>
Notes To Statutory Financial Statements (Continued)
5. INVESTMENTS
The Company maintains a diversified investment portfolio. Investment
policies limit concentration in an 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, 1998
-----------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
--------- ---------- ----------- ----------
(In Millions)
<S> <C> <C> <C> <C>
U. S. Treasury securities $ 5.6 $0.1 $ - $ 5.7
and obligations of U. S.
government corporations
and agencies
Mortgage-backed securities 4.6 0.1 - 4.7
Corporate debt securities 17.9 0.6 0.1 18.4
Utilities 0.5 - - 0.5
----- ---- ---- -----
TOTAL $28.6 $0.8 $0.1 $29.3
===== ==== ==== =====
December 31, 1997
-----------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
--------- ---------- ----------- ----------
(In Millions)
U. S. Treasury securities $ 7.6 $0.1 $ - $ 7.7
and obligations of U. S.
government corporations
and agencies
Mortgage-backed securities 6.5 0.1 - 6.6
Corporate debt securities 23.9 0.4 - 24.3
Utilities 0.5 - - 0.5
----- ---- ---- -----
TOTAL $38.5 $0.6 $ - $39.1
===== ==== ==== =====
</TABLE>
FF- 10
<PAGE>
Notes To Statutory Financial Statements (Continued)
The carrying value and estimated fair value of bonds at December 31, 1998
by contractual maturity are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Carrying Fair
Value Value
--------- ---------
(In Millions)
<S> <C> <C>
Due in one year or less $ 1.8 $ 1.8
Due after one year through five years 13.6 13.9
Due after five years through ten years 6.4 6.6
Due after ten years 1.5 1.5
----- -----
23.3 23.8
Mortgage-backed securities, including
securities guaranteed by the
U.S. Government 5.3 5.5
----- -----
TOTAL $28.6 $29.3
===== =====
</TABLE>
Proceeds from sales and maturities of investments in bonds were $17.4
million during 1998, $20.4 million during 1997 and $28.7 million during
1996. Gross capital gains of $0.1 million in 1998, 1997 and 1996 and gross
capital losses of $0.1 million in 1998, 1997, and 1996 were realized on
those sales, portions of which were included in the IMR. The estimated fair
value of non-publicly traded bonds is determined by the Company using a
pricing matrix and quoted market prices for publicly traded bonds.
B. Other
Policy loans are recorded at cost as it is not practicable to determine the
fair value since they do not have a stated maturity.
6. BUSINESS RISKS AND CONTINGENCIES
Approximately 45% and 49% of the Company's premium revenue in 1998 and
1997, respectively, was derived from three customers and approximately 52%
of the Company's premium revenue in 1996 was 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 premium taxes. The Company believes such assessments in excess of
amounts accrued will not materially affect its financial position, results
of operations or liquidity.
The Company is involved in litigation arising in and out of the normal
course of its business. Management intends to defend these actions
vigorously. While the outcome of litigation cannot be foreseen with
certainty, it is the opinion of management, after consultation with legal
counsel, that the ultimate resolution of these matters will not materially
affect its financial position, results of operations or liquidity.
7. AFFILIATED COMPANIES
The relationship of the Company, its parent and affiliated companies as of
December 31, 1998 is illustrated below. Subsidiaries are wholly-owned by
the parent, except as noted.
FF-11
<PAGE>
Notes To Statutory Financial Statements (Continued)
Parent
------
Massachusetts Mutual Life Insurance Company
Subsidiaries of Massachusetts Mutual Life Insurance Company
-----------------------------------------------------------
CM Assurance Company
CM Benefit Insurance Company
C.M. Life Insurance Company
MassMutual Holding Company
MassMutual of Ireland, Limited
MML Bay State Life Insurance Company
MML Distributors, LLC
MassMutual Mortgage Finance, LLC
Subsidiaries of MassMutual Holding Company
------------------------------------------
GR Phelps & Co., Inc.
MassMutual Holding Trust I
MassMutual Holding Trust II
MassMutual Holding MSC, Inc.
MassMutual International, Inc.
MML Investor Services, Inc.
Subsidiaries of MassMutual Holding Trust I
------------------------------------------
Antares Capital Corporation - 99.4%
Charter Oak Capital Management, Inc. - 80.0%
Cornerstone Real Estate Advisors, Inc.
DLB Acquisition Corporation - 85.8%
Oppenheimer Acquisition Corporation - 89.36%
Subsidiaries of MassMutual Holding Trust II
-------------------------------------------
CM Advantage, Inc.
CM International, Inc.
CM Property Management, Inc.
HYP Management, Inc.
MMHC Investments, Inc.
MML Realty Management
Urban Properties, Inc.
MassMutual Benefits Management, Inc.
Subsidiaries of MassMutual International, Inc.
----------------------------------------------
Compensa de Seguros de Vida S.A. - 33.5%
MassLife Seguros de Vida (Argentina) S. A.
MassMutual International (Bermuda) Ltd.
Mass Seguros de Vida (Chile) S. A. - 33.5%
MassMutual International (Luxembourg) S. A.
MassMutual Holding MSC, Inc.
----------------------------
MassMutual Corporate Value Limited - 40.93%
9048 - 5434 Quebec, Inc.
1279342 Ontario Limited
Affiliates of Massachusetts Mutual Life Insurance Company
---------------------------------------------------------
MML Series Investment Fund
MassMutual Institutional Funds
Oppenheimer Value Stock Fund
FF-12
<PAGE>
Part C
OTHER INFORMATION
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, 1998
Statement of Operations for the year ended December 31, 1998
Statement of Changes in Net Assets for the years ended
December 31, 1998 and 1997
Notes to Financial Statements
The Depositor
Report of Independent Accountants
Statutory Statements of Financial Position as of
December 31, 1998 and 1997
Statutory Statements of Income for the years ended December 31,
1998, 1997 and 1996
Statutory Statements of Changes in Shareholder's Equity for the
years ended December 31, 1998, 1997 and 1996
Statutory Statements of Cash Flows for the years ended December
31, 1998, 1997 and 1996
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 establishing the Separate Account.6
Exhibit 2 None
Exhibit 3 (i) Copy of Distribution Agreement between the
Registrant and MML Distributors, LLC.1
(ii) Copy of Co-Underwriting Agreement between the
Registrant and MML Investors Services, Inc.1
(iii) None
Exhibit 4 Form of Life Trust Variable Annuity Contract.6
Exhibit 5 Form of Application to be used with the Life Trust
Variable Annuity Contract described in Exhibit 4
above.6
3
<PAGE>
Exhibit 6 (i) Copy of the Articles of Incorporation of MML Bay
State Life Insurance Company.5
(ii) Copy of the By-Laws of MML Bay State Life Insurance
Company.5
Exhibit 7 None
Exhibit 8 (a) Form of Participation Agreement between
Massachusetts Mutual Life Insurance Company, MML Bay
State Life Insurance Company, C.M. Life Insurance
Company, Oppenheimer Funds, Inc. and Oppenheimer
Variable Account Funds.4
(b) Form of Participation Agreement between
Massachusetts Mutual Life Insurance Company, MML Bay
State Life Insurance Company, C.M. Life Insurance
Company, Oppenheimer Funds, Inc. and Panorama Series
Fund, Inc.4
Exhibit 9 Opinion of and Consent of Counsel.*
Exhibit 10 (i) Consent of Independent Accountants,
PricewaterhouseCoopers LLP.*
(ii) Powers of Attorney2
(iii) Power of Attorney for Robert J. O'Connell*
Exhibit 11 None
Exhibit 12 None
Exhibit 13 Schedule of Computation of Performance3
Exhibit 14 None
1 Incorporated by reference to Post-Effective Amendment No. 2 to Registration
Statement No. 33-79620, filed on Form N-4 with the Securities and Exchange
Commission and effective May 1, 1996.
2 Incorporated by reference to Post-Effective Amendment No. 5 to Registration
Statement No. 33-79750, filed on Form S-2 with the Securities and Exchange
Commission on March 26, 1999.
3 Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement No. 33-76920 on Form N-4, filed with the Securities and Exchange
Commission and effective May 1, 1997.
4 Incorporated by reference to Registration Statement (File No. 333-2257), filed
with the Securities and Exchange Commission on February 28, 1997.
5 Incorporated by reference to Post Effective Amendment No. 10 to Registration
Statement (File No. 33-19605), filed with the Securities and Exchange Commission
and effective May 1, 1998.
6 Incorporated by reference to Post-Effective Amendment No. 4 to Registration
Statement No. 33-76920 filed and effective May 1, 1998.
* Filed herewith.
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:
4
<PAGE>
MML BAY STATE LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name, Position, Business Address Principal Occupation(s ) During Past Five Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Lawrence V. Burkett, Jr., Director MML Bay State
President and Chief Executive Officer Director, President and Chief Executive Officer (since 1996)
1295 State Street MassMutual
Springfield, MA 01111 Executive Vice President and General Counsel (since 1993)
Senior Vice President and Deputy General Counsel (1992-1993)
- ------------------------------------------------------------------------------------------------------------------------------------
John B. Davies, Director MML Bay State
1295 State Street Director (since 1996)
Springfield, MA 01111 MassMutual
Executive Vice President (since 1994)
Senior Vice President (1994-1994)
General Agent (1982-1993)
- ------------------------------------------------------------------------------------------------------------------------------------
Isadore Jermyn, Director and Senior MML Bay State
Vice President and Actuary Director (since 1990)
1295 State Street Senior Vice President and Actuary (since 1996)
Springfield, MA 01111 MassMutual
Senior Vice President and Actuary (since 1999 and 1995-1998)
Senior Vice President and Chief Actuary (1998-1999)
Vice President and Actuary (1980-1995)
- ------------------------------------------------------------------------------------------------------------------------------------
James E. Miller, Director and Senior MML Bay State
Vice President-Life Operations Director and Senior Vice President-Life Operations (since 1998)
140 Garden Street MassMutual
Hartford, CT 06154 Executive Vice President (since 1997 and 1987-1996)
UniCare Life & Health
Senior Vice President (1996-1997)
- ------------------------------------------------------------------------------------------------------------------------------------
Robert J. O'Connell, Director, MML Bay State
1295 State Street (Director (since 1999)
Springfield, MA 01111 MassMutual
President and Chief Executive Officer (since 1999)
American International Group, Inc.
Senior Vice President (1991-1998)
AIG Life Companies
President and Chief Executive Officer (1991-1998)
- ------------------------------------------------------------------------------------------------------------------------------------
Stuart H. Reese, Director and Senior MML Bay State
Vice President-Investments Director (since 1994) and Senior Vice President-Investments (since
1295 State Street 1996)
Springfield, MA 01111 MassMutual
Senior Vice Presidnet (since 1993)
Aetna Life and Casualty and Affiliates
Investment Manager (1979-1993)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OFFICERS (other than those who are also directors)
- ------------------------------------------------------------------------------------------------------------------------------------
Anne Melissa Dowling, Senior Vice MML Bay State
President-Large Corporate Marketing Senior Vice President-Large Corporate Marketing (since 1996);
140 Garden Street Director (1996-1998)
Hartford, CT 06154 MassMutual
Senior Vice President (since 1996)
Connecticut Mutual Life Insurance Company
Chief Investment Officer (1994-1996)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Travelers Insurance Co.
Senior Vice President-international (1987-1993)
- ------------------------------------------------------------------------------------------------------------------------------------
Edward M. Kline, Treasurer MML Bay State
1295 State Street Treasurer (since 1997)
Springfield, MA 01111 MassMutual
Vice President (since 1989) and Treasurer (since 1997)
- ------------------------------------------------------------------------------------------------------------------------------------
Ann F. Lorneli, Secretary MML Bay State
1295 State Street Vice President (since 1997) and Secretary (since 1998)
Springfield, MA 01111 MassMutual
Vice President, Secretary and Deputy General Counsel (since 1999)
Vice Presdient, Secretary and Associate General Counsel (1998-1999)
Vice Presdient, Associate Secretary and Associate General Counsel
(1996-1998)
Connecticut Mutual Life Insurance Company
Corporate Secretary and Counsel (1998-1996)
- ------------------------------------------------------------------------------------------------------------------------------------
</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.
The following entities are, or may be, controlled by MassMutual
through the direct or indirect ownership of such entities' stock.
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
CORPORATE ORGANIZATION
A. DIRECT SUBSIDIARIES OF MASSMUTUAL
MassMutual is the sole owner of each subsidiary unless otherwise
indicated.
1. CM Assurance Company, a Connecticut corporation which operates as a life
and health insurance company. This subsidiary is inactive.
2. CM Benefit Insurance Company, a Connecticut corporation which operates as
a life and health insurance company. This subsidiary is inactive.
3. C.M. Life Insurance Company, a Connecticut corporation which operates as a
life and health insurance company.
4. MML Bay State Life Insurance Company, a Connecticut corporation which
operates as a life and health insurance company.
5. MML Distributors, LLC, a Connecticut limited liability company which
operates as a securities broker-dealer. (MassMutual - 99%; G.R. Phelps &
Co., Inc. - 1%)
6
<PAGE>
6. MassMutual of Ireland, Limited, a corporation organized in the Republic of
Ireland which formerly operated to provide claims service to holders of
MassMutual group life and accident and health insurance contracts. This
subsidiary is inactive and will be dissolved in the near future.
7. MassMutual Holding Company, a Delaware corporation which operates as a
holding company for certain MassMutual entities.
8. MassMutual Mortgage Finance, LLC, a Delaware limited liability company
which makes, acquires, holds and sells mortgage loans.
B. MASSMUTUAL HOLDING COMPANY GROUP
MassMutual Holding Company is the sole owner of each subsidiary or
affiliate unless otherwise indicated.
1. G.R. Phelps & Co, Inc., a Connecticut corporation which formerly operated
as a securities broker-dealer. This subsidiary is inactive and expected to
be dissolved.
2. MML Investors Services, Inc., a Massachusetts corporation which operates
as a securities broker-dealer. (MassMutual Holding Company - 86%; G.R.
Phelps & Co., Inc. - 14%)
3. MassMutual Holding MSC, Inc., a Massachusetts corporation which operates
as a holding company for MassMutual positions in investment entities
organized outside of the United States. This subsidiary qualifies as a
"Massachusetts Security Corporation" under Chapter 63 of the Massachusetts
General Laws.
4. MassMutual Holding Trust I, a Massachusetts business trust which operates
as a holding company for separately-staffed MassMutual investment
subsidiaries.
5. MassMutual Holding Trust II, a Massachusetts business trust which operates
as a holding company for non-staffed MassMutual investment subsidiaries.
6. MassMutual International, Inc., a Delaware corporation which operates as a
holding company for those entities constituting MassMutual's international
insurance operations.
C. MML INVESTORS SERVICES, INC. GROUP
Set forth below are the direct and indirect subsidiaries of MML Investors
Services, Inc. The parent is the sole owner of each subsidiary unless
otherwise indicated.
Direct Subsidiaries of MML Investors Services, Inc.
1. MML Insurance Agency, Inc., a Massachusetts corporation which operates as
an insurance broker.
2. MML Securities Corporation, a Massachusetts corporation which operates as
a "Massachusetts Security Corporation" under Section 63 of the
Massachusetts General Laws.
Direct Subsidiaries of MML Insurance Agency, Inc.
1. DISA Insurance Services of America, Inc., an Alabama corporation which
operates as an insurance broker.
2. Diversified Insurance Services of America, Inc., a Hawaii corporation
which operates as an insurance broker.
7
<PAGE>
3. MML Insurance Agency of Mississippi, P.C., a Mississippi corporation which
operates as an insurance broker.
4. MML Insurance Agency of Nevada, Inc., a Nevada corporation which operates
as an insurance broker.
5. MML Insurance Agency of Ohio, Inc. an Ohio corporation which operates as
an insurance broker. (Controlled by MML Insurance Agency, Inc. through a
voting trust agreement.)
6. MML Insurance Agency of Texas, Inc., a Texas corporation which operates as
an insurance broker. (Controlled by MML Insurance Agency, Inc. through an
irrevocable proxy arrangement.)
D. MASSMUTUAL HOLDING MSC, INC. GROUP
MassMutual Holding MSC, Inc. is the sole owner of each subsidiary or
affiliate unless otherwise indicated.
1. MassMutual Corporate Value Limited, a Cayman Islands corporation which
holds a 90% ownership interest in MassMutual Corporate Value Partners
Limited, another Cayman Islands corporation operating as a high-yield bond
fund. (MassMutual Holding MSC, Inc. - 46%)
2. 9048-5434 Quebec, Inc., a Canadian corporation which operates as the owner
of Hotel du Parc in Montreal, Quebec, Canada.
3. 1279342 Ontario Limited, a Canadian corporation which operates as the
owner of Deerhurst Resort in Huntsville, Ontario, Canada.
E. MASSMUTUAL HOLDING TRUST I GROUP
Set forth below are the direct and indirect subsidiaries and affiliates of
MassMutual Holding Trust I. The parent is the sole owner of each
subsidiary unless otherwise indicated.
Direct Subsidiaries of MassMutual Holding Trust I
1. Antares Capital Corporation, a Delaware corporation which operates as a
finance company. (MassMutual Holding Trust I - 99%)
2. Charter Oak Capital Management, Inc., a Delaware corporation which
operates as a manager of institutional investment portfolios. (MassMutual
Holding Trust I - 80%)
3. Cornerstone Real Estate Advisers, Inc., a Massachusetts corporation which
operates as an investment adviser.
4. DLB Acquisition Corporation, a Delaware corporation which operates as a
holding company for the David L. Babson companies (MassMutual Holding
Trust I - 85%).
5. Oppenheimer Acquisition Corp., a Delaware corporation which operates as a
holding company for the Oppenheimer companies (MassMutual Holding Trust I
- 89%).
Direct Subsidiary of DLB Acquisition Corporation
David L. Babson and Company Incorporated, a Massachusetts corporation which
operates as an investment adviser.
8
<PAGE>
Direct Affiliates of David L. Babson and Company Incorporated
1. Babson Securities Corporation, a Massachusetts corporation which operates
as a securities broker-dealer.
2. Babson-Stewart Ivory International, a Massachusetts general partnership
which operates as an investment adviser. (David L. Babson and Company
Incorporated - 50%).
3. Potomac Babson Incorporated, a Massachusetts corporation which operates as
an investment adviser (David L. Babson and Company Incorporated - 60%).
Direct Subsidiary of Oppenheimer Acquisition Corp.
OppenheimerFunds, Inc., a Colorado corporation which operates as the investment
adviser to the Oppenheimer Funds.
Direct Subsidiaries of OppenheimerFunds, Inc.
1. Centennial Asset Management Corporation, a Delaware corporation which
operates as investment adviser and general distributor of the Centennial
Funds.
2. HarbourView Asset Management Corporation, a New York corporation which
operates as an investment adviser.
3. OppenheimerFunds Distributor, Inc., a New York corporation which operates
as a securities broker-dealer.
4. Oppenheimer Partnership Holdings, Inc., a Delaware corporation which
operates as a holding company.
5. Oppenheimer Real Asset Management, Inc., a Delaware corporation which is
the sub-adviser to a mutual fund investing in the commodities markets.
6. Shareholder Financial Services, Inc., a Colorado corporation which
operates as a transfer agent for mutual funds.
7. Shareholder Services, Inc., a Colorado corporation which operates as a
transfer agent for various Oppenheimer and MassMutual funds.
Direct Subsidiary of Centennial Asset Management Corporation
Centennial Capital Corporation, a Delaware corporation which formerly sponsored
a unit investment trust.
Direct Affiliate of Cornerstone Real Estate Advisers, Inc.
Cornerstone Office Management, LLC, a Delaware limited liability company which
serves as the general partner of Cornerstone Suburban Office, L.P. (Cornerstone
Real Estate Advisers, Inc. - 50%; MML Realty Management Corporation - 50%).
F. MASSMUTUAL HOLDING TRUST II GROUP
MassMutual Holding Trust II is the sole owner of each subsidiary.
1. CM Advantage, Inc., a Connecticut corporation which serves as a general
partner of real estate limited partnerships. The subsidiary is largely
inactive and will be dissolved in the near future.
9
<PAGE>
2. CM International, a Delaware corporation which is the issuer of
collateralized mortgage obligation securities.
3. CM Property Management, Inc., a Connecticut corporation which serves as
the general partner of Westheimer 335 Suites Limited Partnership. The
partnership holds a ground lease with respect to hotel property in
Houston, Texas.
4. HYP Management, Inc., a Delaware corporation which operates as the "LLC
Manager" of MassMutual High Yield Partners II LLC, a high yield bond fund.
5. MassMutual Benefits Management, Inc., a Delaware corporation which
supports MassMutual with benefit plan administration and planning
services.
6. MMHC Investment, Inc., a Delaware corporation which is a passive investor
in MassMutual/Darby CBO IM, Inc., MassMutual/Darby CBO LLC, MassMutual
High Yield Partners II LLC, and other MassMutual investments.
7. MML Realty Management Corporation, a Massachusetts corporation which
formerly operated as a manager of properties owned by MassMutual.
8. Urban Properties, Inc., a Delaware corporation which serves as a general
partner of real estate limited partnerships and as a real estate holding
company.
Direct Affiliate of MMHC Investment, Inc.
MassMutual/Darby CBO IM Inc., a Delaware corporation which operates as the "LLC
Manager" of MassMutual/Darby CBO LLC, a collateralized bond obligation fund.
(MMHC Investment, Inc. - 50%)
Direct Affiliate of MML Realty Management Corporation
Cornerstone Office Management, LLC, a Delaware limited liability company which
serves as the general partner of Cornerstone Suburban Office, L.P. (MML Realty
Management Corporation - 50%; Cornerstone Real Estate Advisers, Inc. - 50%).
G. MASSMUTUAL INTERNATIONAL, INC. GROUP
Set forth below are the direct or indirect subsidiaries and affiliates of
MassMutual International, Inc. The parent is the sole owner of each
subsidiary or affiliate unless otherwise indicated.
Direct Affiliates of MassMutual International, Inc.
1. MassMutual Internacional (Argentina) S.A., a corporation organized in the
Argentine Republic which operates as a holding company. (MassMutual
International, Inc. - 99%; MassMutual Holding Company - 1%)
2. MassMutual Internacional (Chile) S.A., a corporation organized in the
Republic of Chile which operates as a holding company. (MassMutual
International, Inc. - 99%; MassMutual Holding Company - 1%)
3. MassMutual International (Bermuda) Ltd., a corporation organized in
Bermuda which operates as a life insurance company.
10
<PAGE>
4. MassMutual International (Luxembourg) S.A., a corporation organized in the
Grand Duchy of Luxembourg which operates as a life insurance company.
(MassMutual International, Inc. - 99%; MassMutual Holding Company - 1%)
5. MassLife Seguros de Vida, S.A., a corporation organized in the Argentine
Republic which operates as a life insurance company. (MassMutual
International, Inc. - 99.9%)
Direct Subsidiaries of MassMutual Internacional (Argentina) S.A.
MassMutual Services S.A., a corporation organized in the Argentine Republic
which operates as a service company. (MassMutual Internacional (Argentina) S.A.
- - 99%; MassMutual International, Inc. - 1%)
Direct Affiliate of MassMutual Internacional (Chile) S.A.
1. Mass Seguros de Vida S.A., a corporation organized in the Republic of
Chile which operates as a life insurance company. (MassMutual
Internacional (Chile) S.A. - 33.5%)
2. Origen Inversiones S.A., a corporation organized in the Republic of Chile
which operates as a holding company. (MassMutual Internacional (Chile)
S.A. - 33.5%)
Direct Subsidiary of Origen Inversiones S.A.
Compania de Seguros Vida Corp S.A., corporation organized in the Republic of
Chile which operates as an insurance company. (Origen Inversiones S.A. - 99%)
H. REGISTERED INVESTMENT COMPANY AFFILIATES
Each of the following entities is a registered investment company
sponsored by MassMutual or one of its affiliates.
1. DLB Fund Group, a Massachusetts business trust which operates as an
open-end investment company advised by David L. Babson and Company
Incorporated. MassMutual owns at least 25% of each series of shares issued
by the fund.
2. MML Series Investment Fund, a Massachusetts business trust which operates
as an open-end investment company. All shares issued by the trust are
owned by MassMutual and certain of its affiliates.
3. MassMutual Corporate Investors, a Massachusetts business trust which
operates as a closed-end investment company. MassMutual serves as
investment adviser to the trust.
4. MassMutual Institutional Funds, a Massachusetts business trust which
operates as an open-end investment company. All shares issued by the trust
are owned by MassMutual.
5. MassMutual Participation Investors, a Massachusetts business trust which
operates as a closed-end investment company. MassMutual serves as
investment adviser to the trust.
6. Oppenheimer Series Fund, Inc., a Maryland corporation which operates as an
open-end investment company. MassMutual and affiliates own a majority of
certain series of shares issued by the fund.
7. Panorama Series Fund, Inc., a Maryland corporation which operates as an
open-end investment company. All shares issued by the fund are owned by
MassMutual and certain affiliates.
Item 27. Number of Contract Owners
11
<PAGE>
As of March 4, 1999, there were 7,583 Separate Account contracts 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.
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 controlled 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 for the
contracts. The following people are officers and member
representatives of the principal underwritier.
OFFICERS AND MEMBER REPRESENTATIVES
MML DISTRIBUTORS, LLC
Kenneth M. Rickson Member Representative One Monarch Place
G.R. Phelps & Co., Inc. 1414 Main Street
Springfield, MA 01144-1013
Margaret Sperry Member Representative 1295 State Street
Massachusetts Mutual Springfield, MA 01111-0001
Life Insurance Co.
Kenneth M. Rickson Chief Executive Officer, One Monarch Place
President, and Main OSJ 1414 Main Street
Supervisor Springfield, MA 01144-1013
John E. Forrest Vice President One Monarch Place
1414 Main Street
Springfield, MA 01144-1013
Michael L. Kerley Vice President One Monarch Place
Assistant Secretary 1414 Main Street
Springfield, MA 01144-1013
12
<PAGE>
Ronald E. Thomson Vice President One Monarch Place
1414 Main Street
Springfield, MA 01144-1013
James T. Bagley Treasurer 1295 State Street
Springfield, MA 01111
Bruce C. Frisbie Assistant Treasurer 1295 State Street
Springfield, MA 01111-0001
Raymond W. Anderson Assistant Treasurer 140 Garden Street
Hartford, CT 06154
Ann F. Lomeli Secretary 1295 State Street
Springfield, MA 01111-0001
Marilyn A. Sponzo Chief Legal Officer One Monarch Place
Assistant Secretary 1414 Main Street
Springfield, MA 01144-1013
Robert Rosenthal Compliance Officer One Monarch Place
1414 Main Street
Springfield, MA 01144-1013
Melissa Thompson Registration Manager One Monarch Place
1414 Main Street
Springfield, MA 01144-1013
Ruth B. Howe Director of Continuing One Monarch Place
Education 1414 Main Street
Springfield, MA 01144-1013
Peter D. Cuozzo Variable Life Supervisor and 140 Garden Street
Hartford OSJ Supervisor Hartford, CT 06154
Anne Melissa Dowling Large Corporate Markets 140 Garden Street
Supervisor Hartford, CT 06154
(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>
OFFICER BUSINESS ADDRESS
- ------- ----------------
<S> <C>
Kenneth M. Rickson One Monarch Place
President 1414 Main Street
Springfield, MA 01144-1013
Michael L. Kerley One Monarch Place
Vice President, Chief Legal Officer, 1414 Main Street
Chief Compliance Officer, Assistant Secretary Springfield, MA 01144-1013
Ronald E. Thomson One Monarch Place
Vice President, Treasurer 1414 Main Street
Springfield, MA 01144-1013
Ann F. Lomeli 1295 State Street
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
Secretary/Clerk Springfield, MA 01111
John E. Forrest One Monarch Place
Vice President 1414 Main Street
National Sales Director Springfield, MA 01144-1013
Marilyn A. Sponzo One Monarch Place
Assistant Secretary 1414 Main Street
Springfield, MA 01144-1013
James Furlong One Monarch Place
Chief Operations Officer 1414 Main Street
Springfield, MA 01144-1013
James T. Bagley One Monarch Place
Controller 1414 Main Street
Springfield, MA 01144-1013
David Deonarine One Monarch Place
Sr. Registered Options Principal 1414 Main Street
Compliance Registered Options Principal Springfield, MA 01144-1013
Nicholas J. Orphan 245 Peach Tree Center Ave., Suite 2330
Regional Supervisor (South) Atlanta, GA 30303
Robert W. Kumming 1295 State Street
Retirement Services Regional Springfield, MA 01111
Supervisor (East/Central)
Peter J. Zummo 1295 State Street
Retirement Services Regional Supervisor(South/West) Springfield, MA 01111
Bruce Lukowiak 6263 North Scottsdale Rd., Suite 222
Regional Supervisor (West) Scottsdale, AZ 85250
Gary L. Greenfield 1 Lincoln Center, Suite 1490
Regional Supervisor (Central) Oakbrook Terrace, IL 60181
Burvin E. Pugh, Jr. 1295 State Street
Chief Agency Field Force Supervisor Springfield, MA 01111
John P. McCloskey 1295 State Street
Regional Supervisor (East) Springfield, MA 01144
Robert J. O'Connell 1295 State Street
Chairman of the Board of Directors Springfield, MA 01144
Susan Alfano 1295 State Street
Director Springfield, MA 01111
Lawrence V. Burkett, Jr. 1295 State Street
Director Springfield, MA 01111
John B. Davies 1295 State Street
Director Springfield, MA 01111
Anne Melissa Dowling 140 Garden Street
Director Hartford, CT 01654
Gary T. Huffman 1295 State Street
Director Springfield, MA 01111
Douglas J. Jangraw 140 Garden Street
Director Hartford, CT 01654
Burvin E. Pugh, Jr. 1295 State Street
Director Springfield, MA 01111
</TABLE>
(c) See the section captioned "Distribution" in the Statement of Additional
Information.
14
<PAGE>
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 MML
Bay State, 140 Garden Street, Hartford CT 06154. Effective July 1,
1998 all records for the Registrant are maintained at this address.
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.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant, MML
Bay State Variable Annuity Separate Account 1, certifies that it meets all of
the requirement for effectiveness of this Post-Effective Amendment No. 5
pursuant to Rule 485(b) under the Securities Act of 1933 and has caused this
Post-Effective Amendment No. 5 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 22nd day of
April, 1999.
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., Director, President and Chief Executive Officer
MML Bay State Life Insurance Company
/s/ Richard M. Howe On April 22, 1999, as Attorney-in-Fact pursuant to
- ------------------- powers of attorney.
*Richard M. Howe
As required by the Securities Act of 1933, this Post-Effective Amendment
No. 5 to Registration Statement No. 33-76920 has been signed by the following
persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Lawrence V. Burkett, Jr.* Director, President and Chief April 22, 1999
- ----------------------------- Executive Officer
Lawrence V. Burkett, Jr.,
/s/ Edward M. Kline* Vice President and Treasurer April 22, 1999
- --------------------------- (Principal Financial Officer)
Edward M. Kline
/s/ John M. Miller, Jr.* Vice President and Comptroller April 22, 1999
- --------------------------- (Principal Accounting Officer)
John M. Miller, Jr.
/s/ John B. Davies* Director April 22, 1999
- ---------------------------
John B. Davies
/s/ Stuart H. Reese* Director April 22, 1999
- ---------------------------
Stuart H. Reese
/s/ Isadore Jermyn* Director April 22, 1999
- ---------------------------
Isadore Jermyn
/s/ James Miller* Director April 22, 1999
- ---------------------------
James Miller
/s/ Robert J. O'Connell* Director April 22, 1999
- ---------------------------
Robert J. O'Connell
/s/ Richard M. Howe On April 22, 1999, as Attorney-in-Fact pursuant
- --------------------------- to powers of attorney.
*Richard M. Howe
16
<PAGE>
REPRESENTATION BY REGISTRANT'S COUNSEL
As counsel to the Registrant, I, James M. Rodolakis, have reviewed this
Post-Effective Amendment No. 5 to Registration Statement No. 33-76920, and
represent, pursuant to the requirement of paragraph (e) of Rule 485 under the
Securities Act of 1933, that this Amendment does not contain disclosures which
would render it ineligible to become effective pursuant to paragraph (b) of said
Rule 485.
/s/James M. Rodolakis
- ---------------------
James M. Rodolakis
Counsel
MML State Life Insurance Company
18
<PAGE>
EXHIBIT LIST
Exhibit 9 Opinion of and Consent of Counsel.
Exhibit 10(i) Consent of Independent Accountants, PricewaterhouseCoopers LLP.
(iii) Power of Attorney for Robert J. O'Connell.
19
<PAGE>
Exhibit 9
April, 1999
MML Bay State Life Insurance Company
1295 State Street
Springfield, MA 01111
Re: Post-Effective Amendment No. 5 to Registration Statement
No. 33-76920 filed on Form N-4
Ladies and Gentlemen:
This opinion is furnished in connection with the filing of Post-Effective
Amendment No. 5 to Registration Statement No. 33-76920 on Form N-4 under the
Securities Act of 1933 for MML Bay State Life Insurance Company's ("MML Bay
State") flexible premium variable annuity contract (the "Contract"). MML Bay
State Variable Annuity Separate Account 1 issues the Contract.
As an attorney for MML Bay State, I provide legal advice to MML Bay State in
connection with the operation of its variable products. In such role I am
familiar with the Post-Effective Amendment for the Contract. In so acting, I
have made such examination of the law and examined such records and documents as
in my judgment are necessary or appropriate to enable me to render the opinion
expressed below. I am of the following opinion:
1. MML Bay State is a valid and subsisting corporation, operated under the laws
of the state of Connecticut and is subject to regulation by the Connecticut
Commissioner of Insurance.
2. MML Bay State Variable Annuity Separate Account 1 is a separate account
validly maintained by MML Bay State in accordance with Connecticut law.
3. All of the prescribed corporate procedures for the issuance of the Contract
have been followed, and all applicable state laws have been complied with.
I hereby consent to the use of this opinion as an exhibit to this Post-Effective
Amendment.
Very truly yours,
/s/ James M. Rodolakis
- ----------------------
James M. Rodolakis
Counsel
20
<PAGE>
Exhibit 10(i)
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
MML Bay State Life Insurance Company
We consent to the inclusion in this Post-Effective Amendment No. 5 to the
Registration Statement of MML Bay State Variable Annuity Separate Account 1 -
LifeTrust on Form N-4 (Registration No. 33-76920), of our report dated February
25, 1999, on our audits of the MML Bay State Variable Annuity Separate Account 1
- - LifeTrust, and of our report dated February 25, 1999, on our audits of the
statutory financial statements of MML Bay State Life Insurance Company, which
includes explanatory paragraphs relating to the use of statutory accounting
practices, which differ from generally accepted accounting principles. We also
consent to the reference to our Firm under the caption "Experts" in the
Statement of Additional Information.
PricewaterhouseCoopers LLP
Springfield, Massachusetts
April 27, 1999
21
<PAGE>
Exhibit 10(iii)
POWER OF ATTORNEY: FEDERAL SECURITIES LAWS
The Undersigned, Robert J. O'Connell, 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, Stephen R. Bosworth, and Michael
Berenson, and each of them individually, as his true and lawful attorneys and
agents.
Such attorneys and agents shall have full power of substitution and authority 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 Securities Exchange Act
of 1934, as amended, the Investment Company Act of 1940, as amended,
(collectively, the "Acts") and any rules, regulations, orders or other
requirements of the Securities and Exchange Commission (the "Commission")
thereunder. 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 any and all registration statements and/or amendments thereto,
reports, instruments or documents filed or to be to be filed with the Commission
under the Acts. Without limiting the scope of this Power of Attorney, it shall
apply to filings by or on behalf of MML Bay State separate investment accounts
currently in existence or established in the future, 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 17th day of March, 1999
/s/ Robert J. O'Connell Ann F. Lomeli
- ------------------------------ ----------------------
Robert J. O'Connell Witness
Member, Board of Directors
22
