<PAGE>
Registration No. 33-83798
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
Post-Effective Amendment No. 3
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Post-Effective Amendment No. /3/
Massachusetts Mutual Variable Annuity Separate Account 3
--------------------------------------------------------
(Exact Name of Registrant)
Massachusetts Mutual Life Insurance Company
-------------------------------------------
(Name of Depositor)
1295 State Street, Springfield, Massachusetts 01111
----------------------------------------------------
(Address of Depositor's Principal Executive Offices)
(413) 788-8411
Thomas F. English
-------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: Continuous.
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b) of Rule 485.
---
X on May 1, 1997 pursuant to paragraph (b) of Rule 485.
---
60 days after filing pursuant to paragraph (a) of Rule 485.
---
on (date) pursuant to paragraph (a) of Rule 485.
---
STATEMENT PURSUANT TO RULE 24f-2
The Registrant has registered an indefinite number or amount of its variable
annuity contracts under the Securities Act of 1933 pursuant to Rule 24f-2 under
the Investment Company Act of 1940. The Rule 24f-2 Notice for Registrant's
fiscal year ended December 31, 1996 was filed on or about February 28, 1997.
1
<PAGE>
CROSS REFERENCE TO ITEMS
REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 Item Caption in Prospectus
- -------- ---------------------
<S> <C>
1................................................. Cover Page
2................................................. Glossary
3................................................. Table of Fees & Expenses
4................................................. To be filed by Amendment
5................................................. MassMutual, Oppenheimer,
the Separate Account and the Trusts
6................................................. Contract Charges;
Distribution
7................................................. Miscellaneous Provisions;
An Explanation of the
Contracts; Reservation of
Rights; Contract Owner's
Voting Rights
8................................................. The Annuity (Pay-Out)
Period
9................................................. The Death Benefit
10................................................ The Accumulation (Pay-In)
Period; Distribution
11................................................ Right to Return Contract;
Redemption Privilege
12................................................ Federal Tax Status
13................................................ None
14................................................ Additional Information
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Caption in Statement of
-----------------------
Additional Information
----------------------
<S> <C>
15.............................................. Cover Page
16.............................................. Table of Contents
17.............................................. General Information
18.............................................. Service Arrangements and Distribution
19.............................................. Performance Measures
20.............................................. Contract Value Calculations
21.............................................. Report of Independent
Accountants and
Financial Statements
</TABLE>
3
<PAGE>
MassMutual and Affiliated Companies Service Center
ALLIANCE-ONE Services, L.P.
301 West 11th Street
Kansas City, MO 64105
(800) 258-4511
or
P. O. Box 419607
Kansas City, MO 64141-1007
PROSPECTUS
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
OPPENHEIMERFUNDS LIFETRUST VARIABLE ANNUITY CONTRACT
MASSACHUSETTS MUTUAL VARIABLE ANNUITY SEPARATE ACCOUNT 3
May 1, 1997
This prospectus (the "Prospectus") describes a flexible purchase payment
individual variable annuity contract (the "Contract") issued by Massachusetts
Mutual Life Insurance Company ("MassMutual"). The Contract provides for the
accumulation of contract values prior to maturity and for the distribution of
annuity benefits thereafter.
Purchase payments may be allocated among the thirteen Divisions of Massachusetts
Mutual Variable Annuity Separate Account 3 (the "Separate Account"), and, in the
majority of states, a Fixed Account with a Market Value Adjustment feature (the
"Fixed Account" or the "Market Value Adjustment Account"). Purchase payments
allocated to a Division of the Separate Account will be invested in a
corresponding fund (a "Fund") of either MML Series Investment Fund (the "MML
Trust") or Oppenheimer Variable Account Funds (the "Oppenheimer Trust" -
collectively MML Trust and Oppenheimer Trust are referred to as the "Trusts").
The Trusts are both open-end, management investment companies suitable for use
with variable annuity contracts. The Prospectus for MML Trust, which is attached
to this Prospectus, describes the investment objectives and risks of investing
in the four available MML Funds: MML Equity Fund; MML Money Market Fund; MML
Managed Bond Fund; and MML Blend Fund. Similarly, the Prospectus for the
Oppenheimer Trust describes the investment objectives and risks of investing in
the nine available Oppenheimer Funds: Oppenheimer Money Fund; Oppenheimer High
Income Fund; Oppenheimer Bond Fund; Oppenheimer Capital Appreciation Fund;
Oppenheimer Growth Fund; Oppenheimer Multiple Strategies Fund; Oppenheimer
Global Securities Fund; Oppenheimer Strategic Bond Fund; and Oppenheimer Growth
& Income Fund.
Annuity benefits can be either fixed or variable amounts or a combination of
both. The Contract value prior to maturity, except for amounts allocated to the
Fixed Account, and the amount of any variable annuity payments thereafter will
vary with the investment performance of the Funds which You have selected.
MassMutual serves as depositor for the Separate Account.
This Prospectus sets forth the information that a prospective investor ought to
know before investing. Certain additional information about the Contract is
contained in a Statement of Additional Information dated May 1, 1997 which has
been filed with the Securities and Exchange Commission and is incorporated
herein by reference. The Statement of Additional Information is available upon
written or oral request and without charge from the Service Center.
THIS PROSPECTUS MUST BE ACCOMPANIED BY OR PRECEDED BY THE PROSPECTUSES OF BOTH
THE OPPENHEIMER VARIABLE ACCOUNT FUNDS AND THE MML SERIES FUND, WHICH ARE
ATTACHED HERETO. ADDITIONALLY, IN STATES WHERE THE FIXED ACCOUNT IS OFFERED,
THIS PROSPECTUS MUST ALSO BE ACCOMPANIED BY A PROSPECTUS FOR THE FIXED ACCOUNT.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
All Contracts are serviced through MassMutual's Service Center. MassMutual's
Home Office is located in Springfield, Massachusetts. MassMutual's Principal
Administrative Office is located at 1295 State Street Springfield, Massachusetts
01111-0001.
<PAGE>
Contents
<TABLE>
Page
<S> <C>
Glossary................................................................ 3
Summary................................................................. 4
Table of Fees and Expenses.............................................. 5
Condensed Financial Information......................................... 7
MassMutual, OppenheimerFunds, Inc.,
The Separate Account and The Trusts................................. 8
Massachusetts Mutual Life Insurance Company............................ 8
OppenheimerFunds, Inc.................................................. 8
The Separate Account................................................... 8
The Trusts............................................................. 8
Investments and Objectives of the Available Funds...................... 9
An Explanation of the Contract.......................................... 10
General-Uses of the Contract........................................... 10
The Accumulation (Pay-In) Period
How Contracts May Be Purchased........................................ 10
Initial Purchase...................................................... 10
Subsequent Purchases.................................................. 10
Wire Transfer......................................................... 10
Electronic Data Transmission of Application Information............... 10
Allocation of Purchase Payments....................................... 10
General Transfer Rules................................................ 11
Telephone Transfers................................................... 11
Automatic Transfers................................................... 11
Right to Return Contracts............................................. 12
The Death Benefit..................................................... 12
Redemption Privileges................................................. 12
Automatic Partial Redemptions......................................... 13
Tax Sheltered Annuity Redemption Restrictions......................... 13
The Annuity (Pay-Out) Period
Annuity Benefits...................................................... 13
Payment Options....................................................... 13
Fixed Income Option.................................................. 14
Variable Monthly Income Option....................................... 14
Fixed-Time Payment Option............................................ 14
Life Income Payments................................................. 14
Joint-and-Survivor Life Income Payments.............................. 14
Joint-and-Survivor Life Income Payments (Two-Thirds to the Survivor). 14
Payments After Death of Annuitant.................................... 14
Special Limitations.................................................. 14
Charges and Deductions.................................................. 15
Asset Charge........................................................... 15
Administrative Charge.................................................. 15
Contingent Deferred Sales Charge....................................... 15
Premium Taxes.......................................................... 16
Fund Expenses.......................................................... 16
The Fixed Account and the Market Value Adjustment Feature............... 16
Market Value Adjustment................................................ 16
Distribution............................................................ 17
Miscellaneous Provisions................................................ 17
Termination of Liability............................................... 17
Adjustment of Units and Unit Values.................................... 17
Periodic Statements.................................................... 17
Contract Owner's Voting Rights......................................... 17
Reservation of Rights.................................................. 18
Federal Tax Status...................................................... 18
Introduction........................................................... 18
Tax Status of MassMutual............................................... 18
Taxation of Contracts in General........................................ 18
Penalty Taxes.......................................................... 19
Annuity Distribution Rules of Section 72(s)............................ 19
Tax Withholding........................................................ 19
Tax Reporting.......................................................... 19
Taxation of Qualified Plans, TSAs and IRAs............................. 19
Performance Measures.................................................... 20
Standardized Average Annual Total Return............................... 20
Additional Performance Measures........................................ 20
Additional Information.................................................. 21
</TABLE>
2
<PAGE>
Glossary
As used in this Prospectus, the following terms mean:
Accumulated Amount: For each amount credited to a Segment of the Fixed Account
the Accumulated Amount on any date is the amount credited to the Segment
accumulated to that date at the Guaranteed Rate for that amount.
Accumulated Value: The value of a Contract on or prior to the Maturity Date
equal to the Variable Value plus the Fixed Value.
Accumulation Period: The period prior to the Maturity Date, during the lifetime
of the Annuitant and Contract Owner.
Accumulation Unit: A unit of measurement used in determining the value of
amounts credited to a Contract in a Division of the Separate Account on or prior
to the Maturity Date.
Annuitant: The person on whose life the Contract is issued.
Annuity Unit: A unit of measurement used in determining the amount of each
Variable Monthly Income payment.
Application: The document executed by a Contract Owner evidencing his or her
desire to purchase a Contract.
Beneficiary: The person(s) or entity(ies) designated by the Contract Owner to
receive a death benefit under the Contract, if any, upon the death of the
Contract Owner or the Annuitant.
Cash Redemption Value: The value of a Contract which a Contract Owner will
receive if the Contract is redeemed, equal to Accumulated Value less
Administrative Charges, Sales Charges, premium taxes, and a Market Value
Adjustment, if any such charges are applicable.
Contract Date: The Date used to determine the Annuitant's age at the
commencement of the Contract and to determine the start of the first Contract
Year.
Contract Owner(s): The owner (and in some instances the owners) of a Contract.
Contract Owners may include the Annuitant, another individual, an employer, a
trust, or any entity specified in an employee benefit plan. If the Contract is
issued under Section 403(b), Section 408(b) or Section 408(k) of the Internal
Revenue Code, the Contract Owner must be the Annuitant.
Contract Year: A period of 12 months starting on the Contract Date and on each
anniversary of the Contract Date.
Division(s): A sub-account of the Separate Account, the assets of which consist
of shares of a specified Fund of either the MML Trust or the Oppenheimer Trust.
Expiration Date: The Date on which the Guarantee Period for an Accumulated
Amount ends.
Fixed Account: In certain states, the Contract offers a Fixed Account which pays
interest at a Guaranteed Rate on amounts credited to a particular Segment. If
such amounts are withdrawn prior to the end of the Guarantee Period, a Market
Value Adjustment will be made. Assets attributable to the Fixed Account are not
included in assets which are allocated to the Divisions of the Separate Account.
Fixed Income: A benefit providing for periodic payments of a fixed dollar amount
throughout the annuity period. The benefit does not vary with, or reflect the
investment performance of, any Division of the Separate Account.
Fixed Value: On any date, the Fixed Value of the Contract is the sum of the
Accumulated Amounts credited to all Segments of the Fixed Account.
Funds: The thirteen separate series of shares of Oppenheimer Variable Account
Funds and MML Series Investment Fund, both of which are open-end, diversified
management investment companies, registered with the Securities and Exchange
Commission, in which the Divisions of the Separate Account invest.
Guarantee Period: The period for which interest accrues at the Guaranteed Rate
on an amount credited to a Segment. Guarantee Periods range in whole-year
periods from one to ten years.
Guaranteed Rate: The effective annual interest rate MassMutual uses to accrue
interest on an amount credited to a Segment as of a certain date. Guarantee
Rates are level for the entire Guarantee Period and are fixed at the time an
amount is credited to the Segment.
Market Value Adjustment ("MVA"): An adjustment made to the amount that the
Contract Owner will receive if money is taken from an Accumulated Amount prior
to the Expiration Date of its Guarantee Period.
Maturity Date: The date designated by the Contract Owner as of which Variable
Monthly Income payments (or, if elected, Fixed Income payments or a payment in
one sum) will begin. This date may be no later than the Annuitant's 90th
birthday (unless an earlier date is required by law.)
Maturity Value: The Cash Redemption Value of a Contract at Maturity.
Non-Qualified Contract: A Contract not used in connection with a retirement plan
receiving favorable federal income tax treatment under Sections 401, 403(b), or
408 of the Internal Revenue Code.
Purchase Payment: An amount paid to MassMutual by, or on behalf of, the
Annuitant.
Qualified Contract: A Contract used in connection with a retirement plan
receiving favorable federal income tax treatment under Sections 401, 403(b), or
408 of the Internal Revenue Code.
Segment: All Guarantee Periods of a given length constitute a Segment. Segments
for all Guarantee Periods may not be available at one time.
Service Center: The office at which the administration of the Contract occurs.
Valuation Date: A valuation date is any date on which the net asset value of the
shares of the Funds is determined. Generally, this will be any date on which the
New York Stock Exchange (or its successor) is open for trading.
3
<PAGE>
Valuation Period: The period of time from the end of one Valuation Date to the
end of the next Valuation Date.
Valuation Time: The time of the close of the New York Stock Exchange (currently
4:00 p.m. New York time) on a Valuation Date. All actions to be performed on a
Valuation Date will be performed as of the Valuation Time.
Variable Monthly Income: A benefit providing for monthly payments that vary
with, and reflect the investment performance of, one or more Divisions of the
Separate Account.
Variable Value: On any date, the Variable Value of a Contract is the sum of the
values of the Accumulation Units credited to each Division of the Separate
Account. The value in each Division is equal to the Accumulation Unit Value
multiplied by the number of units in that Division You own.
You or Your refers to the Contract Owner.
Summary
THE NATURE OF THE CONTRACT
The product described in this Prospectus is a flexible premium variable annuity
contract. (See - The Accumulation (Pay-In) Period). It is designed to allow a
Contract Owner to accumulate values over time for uses such as retirement
planning.
Generally, the Contract is purchased by completing an application and submitting
it for approval together with an initial premium payment to MassMutual through
Your registered representative. The minimum initial premium is $2,000.
PURCHASING THE CONTRACT
Contracts may be purchased by both Qualified Plans and by individuals or
entities not qualifying for favorable tax treatment under the Internal Revenue
Code. The Contracts are also available for certain Tax Sheltered Annuities and
Individual Retirement Annuities.
INVESTMENTS UNDER THE
CONTRACT
The Contract offers 13 separate investment Divisions to which a Contract Owner
may allocate money. The Divisions offered represent a wide range of investment
strategies, including money market, bond, blend, global securities, equity, and
high-income (junk bond) funds, among others. Additionally, a Fixed Account with
a Market Value Adjustment feature is available in the majority of states. For
more information concerning available investments please review the Separate
Account and the Fixed Account discussion of this prospectus.
INQUIRIES CONCERNING THE
CONTRACT
If You have questions about the Contract, please either consult Your registered
representative or contact a customer service representative at the Service
Center.
TRANSFERS
Currently, during the Accumulation Period You may make up to 14 transfers per
Contract Year among the Divisions without incurring a charge. MassMutual
reserves the right to charge a fee of $20 for transfers in excess of 4 transfers
per Contract Year. In the annuity pay-out period, You may make transfers once
every three months. Additionally, subject to certain limitations, You may make
transfers to and from amounts held in the Fixed Account. (See - General Transfer
Rules.)
REDEMPTION RIGHTS
You may redeem all or part of the Contract's Accumulated Value at any time prior
to the Maturity Date. All redemptions may be subject to a Sales Charge.
Redemptions from the Fixed Account may be subject to a Market Value Adjustment.
Please note that redemptions may result in the imposition of penalty taxes. (See
- - Contingent Deferred Sales Charge and Penalty Taxes.)
DEATH BENEFIT PRIOR TO MATURITY
If the Annuitant dies before the death of the Owner and before the Maturity
Date, the Death Benefit will depend on the Annuitant's Age at the time that the
Contract was issued. The beneficiary named in the Contract will receive the
greater of: (a) the total of all purchase payments made to the Contract less all
partial redemptions accumulated at 5% to Annuitant's 75th birthday and 0%
thereafter, but not more than two times the difference between all purchase
payments and all redemptions; or (b) the Accumulated Value of the Contract less
any applicable Administrative Charge (and any Sales Charge, if the Annuitant's
age on the Contract Date exceeds 75).
If the Contract Owner dies prior to the Maturity Date, the named beneficiary
will receive the Cash Redemption Value of the Contract.
Please note that in some states, the Death Benefit described above may not be
available. For more information concerning the available death benefits see The
Death Benefit.
TAX TREATMENT
Under current law, during the accumulation phase of the Contract, the Contract's
Accumulated Value is not taxed. If redemptions are made from the Contract prior
to age 59 1/2, a ten percent (10%) federal income tax penalty will apply to
the income portion of the withdrawal. In certain instances, the tax penalty will
not apply. Please review Taxation of Contracts in General, for a more detailed
description of the tax rules applicable to the Contract. Partial or full
redemption of a Contract may require MassMutual to withhold 20% of the amount
redeemed, as more fully described in the Taxation of Qualified Plans, TSAs and
IRAs.
RIGHT TO RETURN CONTRACT
The Contract entitles the purchaser to a 10-day revocation right more fully
described under Right to Return Contracts.
4
<PAGE>
CHARGES UNDER THE CONTRACT
MassMutual assesses certain charges for the administration and the mortality
and expense risks associated with the Contract. MassMutual also assesses a
contingent deferred sales charge (the "Sales Charge") if all or some of the
value is redeemed prior to the expiration of a seven-year period following the
date of each purchase payment.
Each Contract Year, MassMutual permits You to redeem, without a Sales Charge,
up to 10% of the Contract's premiums that would otherwise be assessed a Sales
Charge. For more information concerning this feature, please consult Contingent
Deferred Sales Charge.
ASSET CHARGE
MassMutual currently imposes a charge of 1.40% on an annual basis against the
assets held in the Separate Account. (MassMutual reserves the right to increase
this fee to 1.50% see - Asset Charge.)
ADMINISTRATIVE CHARGE
An administrative charge, currently $30 (maximum $50) will be assessed
annually on each Contract. This charge will be waived for Contracts which have
an Accumulated Value of at least $50,000.
PREMIUM TAXES
Additionally, a deduction is made for premium taxes for purchase payments made
into Contracts in certain jurisdictions where such tax applies. Currently, the
applicable premium tax will be deducted at the time of redemption, death,
maturity, or annuitization. (See - Premium Taxes.)
Table of Fees and Expenses
Contract Owner Transaction Expenses
Sales Load Imposed on Purchases..................None
Deferred sales load as a Percentage of Purchase Payments when withdrawn:
==============================================================================
Full Years since payment 0 1 2 3 4 5 6 7 or more
- ------------------------------------------------------------------------------
Percentage 7% 6% 5% 4% 3% 2% 1% 0%
==============================================================================
Transfer Fee..................................None for first 14 transfers during
the Accumulation Period ($20
thereafter)**
Annual Administrative Charge*.................$30**
Separate Account Annual Expenses
(as a percentage of average account values)...1.40%**
Mortality and Expense Risk Fee... 1.15%
Administrative Fee............... 0.15%
Death Benefit Fee................ 0.10%
Portfolio Annual Charges and Expenses (as a percentage of Fund average net
assets)***
<TABLE>
<CAPTION>
Management Other Total Portfolio
Fees Expenses Annual Expenses
<S> <C> <C> <C>
MML Equity Fund 0.38% 0.00% 0.38%
MML Money Market Fund 0.49% 0.03% 0.52%
MML Managed Bond Fund 0.48% 0.03% 0.51%
MML Blend Fund 0.37% 0.00% 0.37%
Oppenheimer Money Fund 0.45% 0.04% 0.49%
Oppenheimer High Income Fund 0.75% 0.06% 0.81%
Oppenheimer Bond Fund 0.74% 0.04% 0.78%
Oppenheimer Capital Appreciation Fund 0.72% 0.03% 0.75%
Oppenheimer Multiple Strategies Fund 0.73% 0.04% 0.77%
Oppenheimer Growth Fund 0.75% 0.06% 0.81%
Oppenheimer Global Securities Fund 0.73% 0.08% 0.81%
Oppenheimer Strategic Bond Fund 0.75% 0.10% 0.85%
Oppenheimer Growth & Income Fund 0.75% 0.25% 1.00%
</TABLE>
*The Administrative Charge will be waived if the Accumulated Value is at least
$50,000 when the Administrative Charge would be deducted.
**These fees and charges are shown on a current basis. MassMutual reserves the
right to raise such charges up to $50, and 1.50% respectively. For more
information please see - Charges and Deductions.
***The expenses listed are for the year ended December 31, 1996.
5
<PAGE>
EXAMPLE:
You would pay the following cumulative expenses on a $1,000 investment
assuming a 5% annual return on assets:
If Your Contract is redeemed at the end of the year:
<TABLE>
<CAPTION>
Year 1 3 5 10
<S> <C> <C> <C> <C>
MML Equity Fund $ 82 $ 104 $ 129 $ 221
MML Money Market Fund 83 109 136 236
MML Managed Bond Fund 84 108 136 235
MML Blend Fund 82 104 129 220
Oppenheimer Money Fund 83 108 135 233
Oppenheimer High Income Fund 87 117 151 266
Oppenheimer Bond Fund 86 117 150 263
Oppenheimer Capital Appreciation Fund 86 116 148 260
Oppenheimer Multiple Strategies Fund 86 116 149 262
Oppenheimer Growth Fund 87 117 151 266
Oppenheimer Global Securities Fund 87 117 151 266
Oppenheimer Strategic Bond Fund 87 119 153 270
Oppenheimer Growth & Income Fund 88 123 161 285
<CAPTION>
If Your Contract is not redeemed at the end of the year:
Year 1 3 5 10
<S> <C> <C> <C> <C>
MML Equity Fund 19 59 102 221
MML Money Market Fund 21 64 109 236
MML Managed Bond Fund 21 63 109 235
MML Blend Fund 19 59 102 220
Oppenheimer Money Fund 20 63 108 233
Oppenheimer High Income Fund 24 72 124 266
Oppenheimer Bond Fund 23 72 123 263
Oppenheimer Capital Appreciation Fund 23 71 121 260
Oppenheimer Multiple Strategies Fund 23 71 122 262
Oppenheimer Growth Fund 24 72 124 266
Oppenheimer Global Securities Fund 24 74 126 270
Oppenheimer Strategic Bond Fund 24 74 126 270
Oppenheimer Growth & Income Fund 25 78 134 285
</TABLE>
The purpose of the table set forth above is to assist You in understanding the
various costs and expenses that Contract Owners bear directly or indirectly. The
table is based on estimated amounts for the most recent fiscal year and reflects
the expenses of the Separate Account and the Trusts, adjusted to reflect changes
in management fee rates and a voluntary expense limitation. The table does not
reflect the deduction of premium taxes.
For the purpose of calculating the expenses in the above examples, we have
converted the $30 annual administrative charge to a 0.11% annual asset charge
based on an average contract size of $27,500.
Converted in this way, this annual charge (on a percentage basis) would be
higher for smaller contracts and lower for larger contracts. No annual
Administrative Charge is assessed on contracts with accumulated values of
$50,000 or more.
The above examples should not be considered representative of past or future
expenses; actual expenses may be more or less than those shown.
6
<PAGE>
Condensed Financial Information
Massachusetts Mutual Variable Annuity Separate Account 3
Accumulation Unit Values (Audited)
<TABLE>
<CAPTION>
December 31, December 31, *December 31,
1996 1995 1994
<S> <C> <C> <C>
MML Equity Division $1.53 $1.29 $1.00
MML Money Market Division $1.08 $1.05 $1.00
MML Managed Bond Division $1.21 $1.18 $1.01
MML Blend Division $1.37 $1.22 $1.00
Oppenheimer Money Division $1.09 $1.05 $1.00
Oppenheimer High Income Division $1.31 $1.15 $ .97
Oppenheimer Bond Division $1.18 $1.15 $ .99
Oppenheimer Capital Appreciation Division $1.55 $1.31 $1.00
Oppenheimer Multiple Strategies Division $1.34 $1.18 $ .99
Oppenheimer Growth Division $1.64 $1.32 $ .98
Oppenheimer Global Securities Division $1.10 $ .95 $ .94
Oppenheimer Strategic Bond Division $1.24 $1.12 $ .98
Oppenheimer Growth & Income Division** $1.63 $1.24 N/A
</TABLE>
*Public offering commenced on November 14, 1994. All accumulation unit
values were $1.00 on November 14, 1994.
**Public offering commenced July 3, 1995.
Massachusetts Mutual Variable Annuity Separate Account 3
Number of Accumulation Units Outstanding (Audited)
<TABLE>
<CAPTION>
December 31, December 31, *December 31,
1996 1995 1994
<S> <C> <C> <C>
MML Equity Division 2,495,560 542,624 5,129
MML Money Market Division 3,836,345 1,694,677 5,124
MML Managed Bond Division 1,246,028 495,106 5,124
MML Blend Division 1,947,038 524,702 5,127
Oppenheimer Money Division 3,752,549 2,455,934 5,098
Oppenheimer High Income Division 7,373,483 2,120,456 5,099
Oppenheimer Bond Division 2,024,349 648,667 5,097
Oppenheimer Capital
Appreciation Division 9,689,946 1,975,551 5,101
Oppenheimer Multiple
Strategies Division 8,309,575 3,911,239 5,100
Oppenheimer Growth Division 12,630,598 2,770,419 5,505
Oppenheimer Global
Securities Division 10,658,741 2,634,152 5,502
Oppenheimer Strategic
Bond Division 15,659,377 4,395,241 5,000
Oppenheimer Growth &
Income Division** 14,516,671 1,681,775 N/A
</TABLE>
*Public offering commenced on November 14, 1994.
**Public offering commenced July 3, 1995.
Financial Statements
For financial statements and other information concerning the financial
condition of Massachusetts Mutual Variable Annuity Separate Account 3 and of
MassMutual, see the Statement of Additional Information.
7
<PAGE>
Massachusetts Mutual Life Insurance
Company, OppenheimerFunds, Inc.,
The Separate Account and
The Trusts
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
Massachusetts Mutual Life Insurance Company ("MassMutual") is a mutual life
insurance company chartered in 1851 under the laws of Massachusetts. Its Home
Office is located in Springfield, Massachusetts. MassMutual is licensed to
transact life, accident, and health insurance business in all fifty states of
the United States, the District of Columbia, Puerto Rico and certain provinces
of Canada. It also has approval to write variable annuity business in all
states.
On February 29, 1996, the merger of Connecticut Mutual Life Insurance Company
("Connecticut Mutual") with and into MassMutual was completed. The separate
existence of Connecticut Mutual has ceased. MassMutual continues its corporate
existence under its current name. The merger does not affect any provisions of,
or rights or obligations under, policies or contracts previously issued by
MassMutual. MassMutual has estimated statutory assets in excess of $55 billion,
and estimated total assets under management in excess of $130 billion.
OPPENHEIMERFUNDS, INC.
OppenheimerFunds, Inc. (``OFI'') is a corporation organized under the laws of
the state of Colorado. It has operated as an investment adviser since April 30,
1959. It (including a subsidiary) currently advises U.S. investment companies
with assets aggregating over $62 billion as of December 31, 1995, and having
more than 3 million shareholder accounts. OFI is owned by Oppenheimer
Acquisition Corp., a holding company owned in part by senior management of OFI,
and ultimately controlled by MassMutual.
THE SEPARATE ACCOUNT
Massachusetts Mutual Variable Annuity Separate Account 3 (the "Separate
Account") was established on January 12, 1994. It is a separate account of
MassMutual registered with the Securities and Exchange Commission as a unit
investment trust. The Separate Account meets the definition of a Separate
Account under Rule 0-1(e) under the Investment Company Act of 1940.
The Separate Account is divided into Divisions. Each Division invests in
corresponding shares of either MML Series Investment Trust ("MML Trust") or
Oppenheimer Variable Account Funds ("Oppenheimer Trust"). The value of both
Accumulation Units and Annuity Units in each Division reflects the investment
results of its underlying Funds. Please note that MassMutual reserves the right
to add, or substitute Divisions, create new separate accounts, in some cases
restrict Funds, and to invest in shares of other series of the Trusts or of
other registered, open-end investment companies. See -Reservation of
Rights.
Although MassMutual owns the assets of the Separate Account, assets of the
Separate Account equal to the reserves and other Contract liabilities which
depend on the investment performance of the Separate Account and are not
chargeable with liabilities arising out of any other business MassMutual may
conduct. The income and capital gains and losses, realized or unrealized, of
each Division of the Separate Account are credited to or charged against such
Division without regard to the income and capital gains and losses of the other
Divisions or other accounts of MassMutual. This state law provision has been
supported in several recent decisions in states reviewing this issue. All
obligations arising under a Contract, however, are general corporate obligations
of MassMutual.
THE TRUSTS
Each of the Trusts described below has separate assets and liabilities and a
separate net asset value per share. An investor's interest in a Separate Account
is limited to the Fund(s) in which shares are held. Since market risks are
inherent in all securities to varying degrees, assurance cannot be given that
the investment objective of any of the Funds will be met.
Financial Statements for the Oppenheimer Trust and for the MML Trust are
contained in their respective Statements of Additional Information.
Additional information concerning the investment objectives and policies of the
Funds can be found in the current prospectuses for the Trusts which are attached
to this prospectus and should be read carefully before making any decision
concerning allocation of premium payments.
Oppenheimer Trust
Oppenheimer Trust is a no-load, open-end management investment company organized
as a Massachusetts business trust in 1984. It consists of nine separate Funds -
Oppenheimer Money Fund, Oppenheimer Bond Fund and Oppenheimer Growth Fund, all
organized in 1984; Oppenheimer High Income Fund, Oppenheimer Capital
Appreciation Fund, and Oppenheimer Multiple Strategies Fund, all organized in
1986; Oppenheimer Global Securities Fund, organized in 1990; Oppenheimer
Strategic Bond Fund, organized in 1993; and Oppenheimer Growth & Income Fund,
organized in 1995. OFI serves as the investment adviser to Oppenheimer Trust.
OFI is registered as an investment adviser under the Investment Advisers Act of
1940.
MML Trust
MML Trust is a diversified, open-end management investment company having four
series of shares (the "MML Funds"), each of which has different investment
objectives designed to meet different investment needs. These Funds include: MML
Equity Fund organized in 1971; MML Money Market Fund and MML Managed Bond Fund
organized in 1981; and MML Blend Fund organized in 1983. Concert Capital
Management, Inc. ("Concert") served as the investment sub-advisor to MML Equity
Fund and the Equity Sector of the MML Blend Fund from 1993 - 1996. Concert
merged with and into David L. Babson & Company, Inc. ("Babson") effective
December 31, 1996. Both Concert and Babson are wholly-owned subsidiaries of
Babson Acquisition Corporation, which is a controlled subsidiary of
MassMutual.
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Thus, effective January 1, 1997, Babson serves as the investment sub-advisor to
MML Equity Fund and the Equity Sector of the MML Blend Fund. Both MassMutual and
Babson are registered as investment advisers under the Investment Advisers Act
of 1940.
INVESTMENTS AND OBJECTIVES OF
THE AVAILABLE FUNDS:
MML Equity Fund
The assets of the MML Equity Fund are invested primarily in common stocks and
other equity-type securities. The primary investment objective of the MML Equity
Fund is to achieve a superior total rate of return over an extended period of
time from both capital appreciation and current income. A secondary investment
objective is the preservation of capital when business and economic conditions
indicate that investing for defensive purposes is appropriate.
MML Money Market Fund
The assets of the MML Money Market Fund are invested in short-term debt
instruments, including but not limited to commercial paper, certificates of
deposit, bankers' acceptances, and obligations issued, sponsored, or guaranteed
by the United States government or its agencies or instrumentalities. The
investment objectives of the MML Money Market Fund are to achieve high current
income, preservation of capital, and liquidity.
MML Managed Bond Fund
The assets of the MML Managed Bond Fund are invested primarily in publicly
issued, readily marketable, fixed income securities of such maturities as
MassMutual, as investment manager, deems appropriate from time to time in light
of market conditions and prospects. The investment objective of the MML Managed
Bond Fund is to achieve as high a total rate of return on an annual basis as is
considered consistent with the preservation of capital values.
MML Blend Fund
The assets of the MML Blend Fund are invested in a portfolio of common stocks
and other equity-type securities, bonds and other debt securities with
maturities generally exceeding one year, and money market instruments and other
debt securities with maturities generally not exceeding one year. The investment
objective of the MML Blend Fund is to achieve as high a level of total rate of
return over an extended period of time as is considered consistent with prudent
investment risk and the preservation-of-capital values.
Oppenheimer Money Fund
Oppenheimer Money Fund seeks the maximum current income from investments in
"money market" securities consistent with low capital risk and maintenance of
liquidity. Its shares are neither insured nor guaranteed by the U.S. Government,
and there is no assurance that this Fund will be able to maintain a stable net
asset value of $1.00 per share.
Oppenheimer High Income Fund
Oppenheimer High Income Fund seeks a high level of current income from
investment in high yield, high-risk, fixed-income securities, including unrated
securities or securities in the lower rating categories. These securities may be
considered to be speculative. Please consult the Oppenheimer Trust Prospectus
for a more complete discussion of the risks and investment objectives associated
with this Fund.
Oppenheimer Bond Fund
Oppenheimer Bond Fund primarily seeks a high level of current income from
investment in high yield fixed-income securities rated "Baa" or better by
Moody's or "BBB" or better by Standard & Poor's. Secondarily, the Fund seeks
capital growth when consistent with its primary objective.
Oppenheimer Capital Appreciation Fund
Oppenheimer Capital Appreciation Fund seeks to achieve capital appreciation by
investing in "growth-type" companies.
Oppenheimer Growth Fund
Oppenheimer Growth Fund seeks to achieve capital appreciation by investing in
securities of well-known established companies.
Oppenheimer Multiple Strategies Fund
Oppenheimer Multiple Strategies Fund seeks a total investment return (which
includes current income and capital appreciation in the value of its shares)
from investments in common stocks and other equity securities, bonds and other
debt securities, and "money market" securities.
Oppenheimer Global Securities Fund
Oppenheimer Global Securities Fund seeks long-term capital appreciation by
investing a substantial portion of assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special situations which are
considered to have appreciation possibilities. Current income is not an
objective. This Fund's investments may be considered to be speculative.
Oppenheimer Strategic Bond Fund
Oppenheimer Strategic Bond Fund seeks a high level of current income
principally derived from interest on debt securities and seeks to enhance such
income by writing covered call options on debt securities. The Fund invests
principally in: (i) foreign government and corporate debt securities; (ii) U.S.
Government securities; and (iii) lower-rated high yield, high-risk debt
securities. This Fund's investments may be considered to be speculative. Please
consult the Oppenheimer Trust Prospectus for a more complete discussion of the
risks and investment objectives associated with this Fund. All dividends and
capital gains distributions paid by the Funds' shares are automatically
reinvested in additional shares at their net asset value determined on the
distribution date.
Oppenheimer Growth & Income Fund
Oppenheimer Growth & Income Fund seeks a high total return (which includes
growth in the value of its shares as well as current income) from equity and
debt securities. From time to time this Fund may focus on small to medium
capitalization common stocks, bonds and convertible securities.
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An Explanation of the Contract
The principal provisions of the Contract are described below. If You desire
additional information, You should refer to the Contract and to the Statement of
Additional Information. For a complete understanding of Your rights, You should
also review any applicable employee benefit plan documents.
GENERAL-USES OF THE CONTRACT
The Contract described herein is an individual variable annuity contract
issued by MassMutual. Purchase payments are flexible. The Contract may be
purchased by individuals or entities for use in arrangements not receiving
favorable tax treatment under the Internal Revenue Code.
The Contract is also available for use in the following retirement plans which
qualify (with necessary endorsement as appropriate) for special federal tax
treatment under the Internal Revenue Code of 1986, as amended (the "Code"): (1)
pension and profit-sharing plans qualified under Section 401(a) or 403(a) of the
Code ("Qualified Plans"), which may also constitute participant-directed
individual account plans under Section 404(c) of ERISA; (2) annuity purchase
plans adopted by public school systems and certain tax-exempt organizations
pursuant to Section 403(b) of the Code ("Tax Sheltered Annuities" or "TSAs");
and (3) Individual Retirement Annuities established in accordance with Section
408 of the Code ("IRAs"), including those established by employer contributions
under a Simplified Employee Pension Plan arrangement. At MassMutual's request,
the Internal Revenue Service has issued to MassMutual favorable opinion letters
approving specific versions of the Contract. IRA Contract Owners with these
Contracts will receive a copy of the favorable opinion letter. The Internal
Revenue Service approval is a determination only as to the form of the Contract
for use as an IRA and does not represent a determination of the merits of the
Contract as an IRA. Under tax-qualified retirement plans except TSAs and IRAs,
participants may not be the Contract Owners and, therefore, may have no Contract
Owners' rights.
Unless restricted by endorsement or the terms of the Contract, the Contract
Owner has all rights in the Contract prior to the Maturity Date, including the
right to make a partial or full redemption of the Contract, to designate and
change the beneficiaries who will receive the proceeds at the death of the
Annuitant or Contract Owner before the Maturity Date, to transfer amounts among
the Divisions of the Separate Account (and to and from the Fixed Account, if
available) and to designate a payment option to begin on the Maturity Date.
Prior to issue, a Contract will be endorsed to preclude the Contract Owner from
assigning the Contract as collateral. Although both Owner and the Joint Owner
must authorize any change made to the Contract, either the Owner or Joint Owner
may exercise certain Contract rights with the consent, satisfactory to us, of
the other.
The Contract Owner may, subject to certain limitations, be the Annuitant or
another individual or entity.
The Accumulation (Pay-In) Period
HOW CONTRACTS MAY BE
PURCHASED
The minimum initial purchase payment is $2,000. After making Your initial
payment, You may make as many or as few subsequent purchase payments of at least
$100 as You desire. The Contract permits MassMutual to establish a maximum on
total purchase payments that may be made under the Contract. This maximum is
$1,000,000 without prior Home Office approval.
INITIAL PURCHASE
You may place Your initial purchase payment, together with a completed
Application, with Your registered representative.
SUBSEQUENT PURCHASES
You may make subsequent purchase payments by mailing Your check, clearly
indicating Your name and Contract Number, to the Service Center.
WIRE TRANSFER
You may make purchase payments by wire transfer. For instructions concerning
how to make a wire transfer, please contact the Service Center.
ELECTRONIC DATA TRANSMISSION OF
APPLICATION INFORMATION
MassMutual may accept, by agreement with a limited number of broker-dealers,
electronic data transmissions of Application information, along with wire
transmittals of initial purchase payments from the broker-dealers to the Service
Center for purchase of the Contract. Please contact the Service Center to
receive more information about electronic data transmission of Application
information.
ALLOCATION OF PURCHASE
PAYMENTS
You may direct that Your purchase payments (after deducting any applicable
premium taxes) be allocated among the Divisions of the Separate Account.
Additionally, where available, and subject to minimum allocations of $1,000,
purchase payments may be allocated to Segments of the Fixed Account. Initial
purchase payment allocations to either a Division of the Separate Account or to
a Segment will be effective as of the Valuation Date within two business days of
the date an initial purchase payment is received in good order at the Service
Center provided that Your Contract application is complete. If an initial
purchase payment is not applied within five business days after receipt (due
to
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incomplete or ambiguous application information, for example), the payment
amount will be refunded unless specific consent to retain the payment for a
longer period is obtained from the prospective purchaser. Purchase payments
allocated to a Division will be applied to purchase Accumulation Units in that
Division at its Accumulation Unit value on the Valuation Date. These
Accumulation Units will be used in determining the value of amounts held in a
Division of a Separate Account credited to a Contract on or prior to the
Maturity Date. The value of the Accumulation Units in each Division will vary
with and will reflect the investment performance of that Division (which in turn
will reflect the investment performance and expenses of the Fund in which the
assets of that Division are invested), less any applicable taxes and the
applicable Asset Charge. A more detailed description of how the value of an
Accumulation Unit is calculated is contained in the Statement of Additional
Information.
MassMutual will credit to your Contract subsequent purchase payments as of the
day received in good order, provided that the payment is received prior to that
day's Valuation Time. If received after that day's Valuation Time or on a day
that is not a Valuation Day (e.g., a day when the New York Stock Exchange is
closed), MassMutual will credit the payment to your account as of the next
Valuation Date.
GENERAL TRANSFER RULES
Prior to 30 days before the Maturity Date, the Contract Owner may make
transfers among Divisions of the Separate Account (and if available among
Segments of the Fixed Account) without the imposition of a transfer fee. If more
than four transfers have been made in a Contract Year, MassMutual reserves the
right to deduct a transfer fee of $20. Currently 14 transfers may be made per
Contract Year without charge. (Transfers made by Dollar Cost Averaging do not
count against the 14 transfer limit.)
If a Variable Monthly Income is in effect, transfers among the Divisions of
the Separate Account are limited to one transfer every three months.
All transfers, whether occurring before or after the Maturity Date are subject
to the following:
(a.) The minimum amount which may be transferred is the lesser of: (1) $500;
or (2) the Accumulated Value in the Division or the Accumulated Amount in
a Segment.
(b.) Transfers will be effected as of the Valuation Date which is on or next
follows the date Your request is received in good order at the Service
Center. Transfer requests may be made by telephone (during the
Accumulation Period), facsimile, or by written direction. Please note
that no transfers may be made within thirty days before Maturity Date.
(c.) Transfer requests must clearly specify the amount to be transferred from
each Division or Segment (if the Fixed Account is available) and the
Division or Segment to which amounts are to be transferred. Unless
otherwise specified, transfers from a Segment of the Fixed Account will
be taken on a first-in, first-out basis. Transfer requests made during
the Annuity pay-out period must specify the percentage to be transferred
among the Divisions of the Separate Account.
(d.) Transfers to a Segment of the Fixed Account may not be less than $1,000.
If the Segment elected is not available, the transfer will not be
processed.
(e.) Transfers made from the Fixed Account are subject to a Market Value
Adjustment ("MVA") unless the transfer is being taken from an Accumulated
Amount within thirty days prior to its Expiration Date. The MVA will be
applied as of the effective date of the transfer.
(f.) Transfer fees will be deducted from the Division or Segment from which
the transfer has been made, unless the balance remaining in such Division
or Segment is insufficient to cover the applicable transfer fee. If this
is the case, the transfer fee will be deducted from the amount being
transferred.
(g.) We reserve the right to limit the number and frequency of transfers made
during a Contract Year.
(h.) After a payout option has been invoked, transfers may not be made between
a Fixed Income and a Variable Monthly Income option.
TELEPHONE TRANSFERS
Contract Owners, subject to the limitations described below, may make transfers
among either Divisions or the Fixed Account (if available) during the
Accumulation Period by telephoning a transfer request to the Service Center at
its toll free telephone number. This feature will be made automatically
available to Contract Owners unless MassMutual receives different instructions.
Through use of this toll free number, Contract Owners may also obtain
information concerning the Contract including Accumulated Values. This service
is not available to Contracts owned by Custodians or Trustees of Qualified
Plans, or Contracts held by Guardians. Normal transfer provisions apply.
MassMutual will not be liable for complying with any telephone instructions it
reasonably believes to be genuine, nor for any loss, damage, cost or expense in
acting on telephone instructions. MassMutual will employ reasonable procedures
to ensure the legitimacy of telephone transfer requests. Such procedures may
include, among others, requiring forms of personal identification prior to
acting upon telephone instructions, providing written confirmation of such
transactions to the Contract, and/or tape recording of telephone transfer
request instructions received from a Contract Owner. If we fail to follow such
procedures, we may be liable for losses due to unauthorized or fraudulent
instructions.
AUTOMATIC TRANSFERS
MassMutual offers You two automatic transfer options described below. They are
available any time before the Maturity Date. The automatic transfer options are
not available for use with the Fixed Account. Only one of the automatic
transfer options may be in effect at a time. Both options are subject to the
transfer rules discussed above. Although no
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charge is currently imposed for this service, MassMutual reserves the right to
impose a fee in the future.
Dollar Cost Averaging
Dollar Cost Averaging is a feature whereby a Contract amount is periodically
transferred from one Division of the Separate Account to one or more other
designated Divisions of the Separate Account. Once the feature is elected, these
transfers occur automatically at the frequency elected - monthly, quarterly,
semiannually, or annually.
Dollar Cost Averaging provides a mechanism designed to minimize the negative
effects of short-term market fluctuations. Over a period of time, an investor
may, at least theoretically, be able to purchase more units than he or she would
have been able to purchase had all monies been invested on a single Valuation
Date when the value of the units was high.
Dollar Cost Averaging may be available at any time, provided that the Division
from which the automatic transfers will be made has a value of at least $6,000.
The minimum amount any Division may receive is $100. All Divisions are available
for use with this feature.
Asset Reallocation
You may elect the Asset Reallocation option as a means of maintaining a constant
allocation of Accumulated Value among the Divisions in which You have allocated
Your monies. If You elect this option, we will make automatic transfers among
selected Divisions on a quarterly, semiannual, or annual basis as You instruct
us. A minimum Accumulated Value of $20,000 is required in order to elect this
option. Allocations will be made on a basis consistent with the allocation
selected for new purchase payments.
RIGHT TO RETURN CONTRACTS
You may return Your Contract to MassMutual (at its Service Center) at any time
within 10 days after the Contract has been delivered to you (unless a longer
period is required by applicable state law). If You exercise this right and Your
Contract is not an IRA, then You will receive the Accumulated Value of the
Contract plus any premium tax deductions, except where state law requires us to
return the amount of purchase payment(s) made less the net amount of partial
redemptions. If You exercise this right and Your Contract is an IRA, You will
not receive less than the amount of purchase payment(s) made less the net amount
of partial redemptions. For this purpose, the Accumulated Value of the Contract
will be determined as of the Valuation Time on the date on which the Contract is
received at MassMutual's Service Center or at the next Valuation Time after
receipt if the Contract is received on other than a Valuation Date.
THE DEATH BENEFIT
A death benefit is paid upon the death of either the Contract Owner (for jointly
owned Contracts, upon the first death of the two Owners) or Annuitant. If a
Contract Owner and Annuitant are the same, the Death Benefit paid will be the
Annuitant Death Benefit.
Contract Owner Death Benefit
If the Contract Owner, who is not the Annuitant, dies prior to the Maturity
Date, the named beneficiary will receive the Cash Redemption Value of the
Contract.
Annuitant Death Benefit
Historically, variable annuities have guaranteed a return of premiums less
withdrawals as a minimum standard death benefit. This Contract offers one of two
enhancements, depending on Your contract state.
If the Annuitant dies before the Maturity Date, the beneficiary named in the
Contract will receive the greater of: (a) the total of all purchase payments
made to the Contract less all partial redemptions accumulated at 5% to
Annuitant's 75th birthday and 0% thereafter, but not more than two times the
difference between all purchase payments and all redemptions; or (b) the
Accumulated Value of the Contract less any applicable Administrative Charge (and
any Sales Charge, if the Annuitant's age on the Contract Date exceeds 75).
In certain states, the death benefit described above may not be available for
Annuitant's whose issue age is less than 76. In those instances, the death
benefit during the first three years will be equal to the greater of: (a.) the
total of all purchase payments made to the Contract less all partial
redemptions; or (b.) the Accumulated Value of the Contract less any applicable
Administrative Charge. During any subsequent three Contract Year period, the
death benefit will be the greater of: (a.) the death benefit on the last day of
the previous three Contract Year period plus any purchase payments made less all
partial redemptions since then; or (b.) the Accumulated Value of the Contract
less any applicable Administrative Charge.
In any case, the amount of Death Benefit received will be reduced by the amount
of any applicable premium tax.
The Death Benefit is determined as of the Valuation Date which is on or next
follows the date on which due proof of death is received at the Service Center.
The death benefit will be paid within seven days of receipt of due proof of
death and all other requirements. With MassMutual's consent, the death benefit
may be applied under one or more of the payment options provided for in the
Contract (see - Payment Options). If a Payment Option is not selected, the death
benefit will be paid in one sum.
A beneficiary who is the surviving spouse of the Contract Owner of a Contract
issued as an IRA may elect to treat the Contract as if he or she were the
Contract Owner.
REDEMPTION PRIVILEGES
Subject to the special rules regarding TSAs, discussed below, You may redeem all
or part of the Accumulated Value of a Contract on or prior to its Maturity Date
if the Annuitant is alive. The amount of any partial redemption, however, must
be at least $100, and requests for a partial redemption which would reduce the
Accumulated Value of the Contract to less than $1,000 plus outstanding premium
taxes will be treated as a request for a full redemption. You may incur a Sales
Charge upon redemption. (See -CHARGES AND DEDUCTIONS.) Any partial redemption
will be paid in one
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sum. If the entire Contract is redeemed, the cash redemption value may be paid
in one sum or applied under one or more of the payment options. You must
designate the Division(s) (or the Segment of the Fixed Account, if available)
from which any partial redemption is to be made. Unless otherwise specified,
partial redemptions from a Segment of the Fixed Account will be taken on a
first-in, first-out basis. A partial redemption from a Division will reduce the
number of Accumulation Units in that Division by an amount equal to the sum of
the redemption payment plus any Sales Charge, divided by the Accumulation Unit
Value.
The Accumulation Unit value on redemption is determined as of the Valuation Time
on the date on which the written request for redemption is received in good
order at the Service Center or, if that date is not a Valuation Date, on the
next Valuation Date after receipt.
Redemption payments from a Separate Account will be made within seven days, or a
shorter period if required by law, after written request in good order is
received at MassMutual's Service Center. The right of redemption may be
suspended or payments postponed whenever: (1) the New York Stock Exchange is
closed, except for holidays and weekends; (2) the Securities and Exchange
Commission has determined that trading on the New York Stock Exchange is
restricted; (3) the Securities and Exchange Commission permits suspension or
postponement and so orders; or (4) an emergency exists, as defined by the
Securities and Exchange Commission, so that valuation of the assets of each
Separate Account or disposal of securities held by it is not reasonably
practicable.
In addition, a purchase payment amount is not available to satisfy a redemption
request until the check, or other instrument by which the purchase payment was
made, has been honored.
Redemptions of amounts from the Fixed Account may be delayed for up to six
months from the date the request is received by us at our Service Center. If
payment is delayed 30 days or more, we will add interest at an annual rate of
not less than 3%.
Amounts withdrawn may be includable in the gross income of the Contract Owner in
the year in which the withdrawal occurs. Additionally, a 10% tax penalty may be
applicable (as described more fully in the Penalty Taxes section).
Redemption payments may be subject to federal income tax and elective and/or
mandatory tax withholding. (See - FEDERAL TAX STATUS.)
AUTOMATIC PARTIAL REDEMPTIONS
An Automatic Partial Redemption program permitting Contract Owners to elect to
receive automatic partial redemptions on a periodic basis is available on a
limited basis. All applicable limitations concerning redemptions apply to this
program. Additionally, automatic partial redemptions may be subject to penalty
taxes.
This program is available only during the Accumulation Period of the Contract.
Although no charge is imposed for processing automatic partial redemptions
currently, MassMutual reserves the right to impose a fee for this program in the
future.
TAX SHELTERED ANNUITY
REDEMPTION RESTRICTIONS
The redemption of Internal Revenue Code Section 403(b) annuities (Tax Sheltered
Annuities, "TSAs") may be restricted. Specifically, salary reduction
contributions after 1988 and post-1988 earnings on all salary reduction
contributions may not be distributed to the Annuitant until age 59 1/2, death,
disability, or separation from service with the TSA employer. Such salary
reduction contributions may be withdrawn, however, for "hardship".
The Annuity (Pay-Out) Period
ANNUITY BENEFITS
You may elect to change the Maturity Date of Your Contract. The Maturity Date
may not be later than the Contract anniversary nearest the Annuitant's 90th
birthday (or at an earlier date if required by applicable state law). In
general, in order to avoid adverse tax consequences, distributions, either by a
partial redemption or by maturing the Contract, from a Contract issued as an IRA
or as a TSA or under a qualified plan should begin for the calendar year in
which the Annuitant reaches age 70 1/2 and should be made each year thereafter
in an amount no less than the Accumulated Value of the Contract at the end of
the previous year divided by the applicable life expectancy (see Taxation of
Qualified Plans, TSAs and IRAs, for additional information). You may elect to
defer the Maturity Date to any permissible date after the previously specified
Maturity Date, provided that a written notice within 90 days before the Maturity
Date then in effect is received by MassMutual at the Service Center. You also
may elect to advance the Maturity Date to a date prior to the specified Maturity
Date or prior to any new Maturity Date You may have selected, provided that
written notice is received at MassMutual's Service Center at least 30 days
before the Maturity Date elected. (For additional rules regarding TSAs, see -Tax
Sheltered Annuity Redemption Restrictions.)
When Your Contract approaches its Maturity Date You may choose to receive either
Fixed Income payments, (referred to as the "Fixed Income Option" in Your
Contract), Variable Monthly Income payments (referred to as the "Variable Income
Option" in Your Contract), or a combination of the two. You also may elect to
receive the Maturity Value in one sum. If You have made no election within
thirty days prior to the Maturity Date, the Contract will automatically pay a
Variable Monthly Income under a life income option with payments guaranteed for
10 years.
PAYMENT OPTIONS
You may elect either a Fixed or a Variable Monthly Income payment option by
submitting a written request in a form satisfactory to MassMutual. MassMutual
must receive this request at the Service Center 30 days prior to the Maturity
Date of the Contract. For a description of payment options from which You (or in
some cases a Beneficiary) may choose, You should refer to the Contracts.
Generally, once selected, You may not change Your payment option.
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Income payments may be received under several different payment options. If the
value of a Contract applied to any payment option is less than $2,000 or
produces an initial Income payment of less than $20, MassMutual may discharge
its obligation by paying the value applied, less any applicable Sales Charge, in
one sum to the person entitled to receive the first annuity payment.
Upon Your request, MassMutual will endorse a Contract to eliminate or restrict
any payment option in order that the plan pursuant to which the Contract is
issued remains qualified under the Internal Revenue Code, provided such
endorsement is not otherwise contrary to law. MassMutual may make available
payment options in addition to those set forth in the Contract.
You may transfer amounts among the Divisions if the Variable Monthly Income
option is selected subject to transfer restrictions described in General
Transfer Rules.
Fixed Income Option
If You select a Fixed Income, each payment will be for a fixed dollar amount and
will not vary with or reflect the investment performance of the Separate
Account. For further information regarding the Fixed Income and the payment
options thereunder, You should refer to Your Contract.
Variable Monthly Income Option
If You select a Variable Monthly Income, amounts held in the Fixed Account that
are to be used to provide Variable Monthly Income payments will be credited to
the MML Money Market Division of the Separate Account unless the Contract Owner
instructs MassMutual otherwise. Each annuity payment will be based upon the
value of the Annuity Units credited to Your Contract.
You may transfer among the Divisions no more frequently than once every 3 months
under this option. (See - General Transfer Rules for transfer guidelines.)
The number of Annuity Units in each Division to be credited to Your Contract is
based on the value of the Accumulation Units in that Division and the applicable
Purchase Rate. The Purchase Rate will differ according to the payment option You
have elected and takes into account the age, year of birth and sex of the
Annuitant. The value of the Annuity Units will vary with, and reflect the
investment performance of, each Division to which Annuity Units are credited
based on an Assumed Investment Rate of 4% per year. This Rate is a fulcrum rate
around which Variable Monthly Income payments will vary. An actual net rate of
return for a Division for the month greater than the Assumed Investment Rate
will increase Variable Monthly Income payments attributable to that Division. An
actual net rate of return for a Division for the month less than the Assumed
Investment Rate will decrease Variable Monthly Income payments attributable to
that Division.
For a more detailed description of how the value of an Annuity Unit and the
amount of Variable Monthly Income payments are calculated, see the Statement of
Additional Information.
Fixed-Time Payment Option
If You elect this option, Variable Monthly Income payments will be made for any
period selected, up to 30 years. If provided in the payment option election, You
may withdraw the full amount, subject to any applicable Sales Charge of the then
present value of the remaining unpaid Variable Monthly Income payments. (See -
CHARGES AND DEDUCTIONS.) The present value will be calculated using an assumed
investment rate of 4% per year unless a lower rate is required by state law. A
mortality risk charge continues to be assessed against Contract values under
this option. (See - CHARGES AND DEDUCTIONS.)
Life Income Payments
If You elect this option, Variable Monthly Income payments will be made during
the lifetime of the Annuitant, either: (1) without any guaranteed number of
payments; or (2) with a guaranteed number of payments for 5 or 10 years. Of
these two alternatives, alternative (1) offers the maximum level of monthly
payments since there is no guarantee of a higher number of payments and no
provision for payments to the beneficiary upon the death of the Annuitant. Since
there is no such guarantee, however, it would be possible to receive only one
annuity payment if the Annuitant died prior to the due date of the second
annuity payment, two if he or she died before the third annuity payment date,
etc.
Joint-and-Survivor Life Income Payments
If You elect this option, Variable Monthly Income payments will be made during
the joint lifetime of the two Annuitants and thereafter during the lifetime of
the survivor, either: (1) without a guaranteed number of payments; or (2) with a
guaranteed number of payments for 10 years from the date the payments begin.
Joint-and-Survivor Life Income Payments
(Two-Thirds to the Survivor)
If You elect this option, Variable Monthly Income payments will be made during
the joint lifetime of the two annuitants, and thereafter at two-thirds the prior
rate during the lifetime of the survivor, in both cases without a guaranteed
number of payments.
Payments After Death of Annuitant
Generally, if a payment option with a guaranteed number of payments is elected,
and the Annuitant(s) should die before the guaranteed number of payments have
been completed, MassMutual will continue making the guaranteed payments to the
designated beneficiary.
Special Limitations
Where the Contract is issued pursuant to a TSA, or as an IRA, there are special
limitations on the types of payment options which You may elect.
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Charges and Deductions
The Separate Account does not bear any expenses other than the charges stated
below.
1. ASSET CHARGE
MassMutual receives a daily-computed charge against the assets of the
Separate Account (the "Asset Charge") for: (1) assuming the risks that (a)
its estimates of longevity will turn out to be inadequate, and (b) the
Administrative Charge may be insufficient to cover the administrative
expenses associated with the Contract; (2) other administrative expenses;
and (3) the Death Benefit. The Asset Charge is currently equal to 1.40% on
an annual basis of the net asset value of the Separate Account assets
attributable to the Contracts.
The mortality and expense risk part of this charge will be computed daily at
an annual rate, currently equal to 1.15% of the net asset value of the
Separate Account assets attributable to the Contracts (0.30% is for assuming
mortality risks and 0.85% is for assuming expense risks). MassMutual
reserves the right to raise this rate up to 1.25%.
The administrative expense part of this Charge will be computed daily at an
annual rate of 0.15%.
The third component of the Asset Charge is 0.10% assessed to reimburse
MassMutual for the cost of providing the enhanced Death Benefit under the
Contract. (For more information concerning the enhanced Death Benefit, see -
Annuitant Death Benefit.)
2. ADMINISTRATIVE CHARGE
In addition to that portion of the Asset Charge assigned to administrative
expenses, each year on the Contract anniversary date a charge is imposed
against each Contract to reimburse MassMutual for administrative expenses
incurred by MassMutual during the previous year relating to the issuance and
maintenance of the Contract (the"Administrative Charge"). The Administrative
Charge is also imposed on death, maturity, or full redemption. The
Administrative Charge is currently $30 per year. MassMutual reserves the
right to increase the Administrative Charge up to $50 per year. This charge
is not designed to produce a profit and is subject to statutory limitations.
If a Contract's Accumulated Value is $50,000 or more when the Administrative
Charge would be deducted, the Administrative Charge will be waived. This
charge will be deducted on a pro rata basis from each Division of the
Separate Account and then pro-rata from Segments of the Fixed Account.
Deductions from Segments will be made on a first-in, first-out basis.
3. CONTINGENT DEFERRED SALES CHARGE
Sales charges are not deducted at the time a purchase payment is made.
Instead, to reimburse MassMutual for sales expenses including commissions,
sales literature and related costs, a Contingent Deferred Sales Charge (the
"Sales Charge") may be imposed upon a full or partial redemption, upon
maturity, and upon certain death benefits.
Sales charges are based on the purchase payments made and the time that has
passed since we received them. The part of the sales charge related to each
purchase payment is a level percentage of that payment during each year
since it was paid. For each successive year, the percentage decreases until
it becomes zero. Sales charge percentages for each purchase payment are
shown in the table below.
Sales Charge Percentages
<TABLE>
<CAPTION>
================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Full Years since payment 0 1 2 3 4 5 6 7 or more
- --------------------------------------------------------------------------------
Percentage 7% 6% 5% 4% 3% 2% 1% 0%
================================================================================
</TABLE>
Example: You make a $1,000 purchase payment on May 10, 1991. The sales charge
related to this purchase payment is:
$70 from May 10, 1991, through May 9, 1992;
$60 from May 10, 1992, through May 9, 1993;
:
$10 from May 10, 1997, through May 9, 1998;
and $0 thereafter.
Subject to the limits stated below, the Sales Charge at any time is based
solely on the purchase payments assumed to be redeemed at that time. In
determining the Sales Charge, we assume that purchase payments are redeemed
in the order in which they are paid. Any amounts in excess of purchase
payments are assumed to be redeemed last.
Each Contract Year, You may redeem the following amounts without incurring a
Sales Charge:
(1) all unredeemed purchase payments that are at least seven years old;
and
(2) 10% of the purchase payments that are less than seven years old.
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No Sales Charge will be imposed upon a death benefit payable upon the
Annuitant's death if the Contract was issued to an Annuitant less than 76
years old. Also a Sales Charge will not be assessed upon a full redemption
or maturity of the Contract if all proceeds of the Contract are:
(1) applied under a variable lifetime payment option or variable fixed-
time payment option (with payment for 10 years or more) in the
Contract; or
(2) applied under a fixed or combination fixed-variable lifetime payment
option or fixed-time payment option (with payments for 10 years or
more) in the Contract and the Annuitant is age 59 1/2 or older.
The Sales Charge may also be eliminated when an agent of MassMutual sells a
Contract to specified members of his or her family.
To the extent sales expenses are not covered by the sales charge, they will
be recovered from MassMutual's surplus, which may include proceeds derived
from the asset charge described above.
Any available waiver of a Sales Charge will be applied on a non-
discriminatory basis.
4. PREMIUM TAXES
Several states (and certain municipalities) levy premium taxes on annuities.
Currently, no premium tax will be deducted when purchase payments are
received; any applicable premium tax will be deducted at the time of
redemption, death, maturity or annuitization. MassMutual reserves the right
to deduct premium taxes at the time when a purchase payment is made. Premium
tax rates on annuities currently range up to 3.5%.
FUND EXPENSES
The Accumulated Value of the Separate Account reflects the value of shares held
in the Oppenheimer Trust and the MML Trust. Each Trust charges certain
investment advisery fees and other expenses against the value of each Fund. For
a complete description of the expenses and deductions for each Trust, please
review the accompanying prospectuses for each Trust.
The Fixed Account and the
Market Value Adjustment
Feature
The following summarizes certain features of the Fixed Account which is
available as part of the Contract in the majority of states during the
Accumulation Period. Please review the Prospectus for the Fixed Account before
making any allocations to it. The Fixed Account offers different Segments which
provide the option of earning interest at one or more Guaranteed Rates on all or
a portion of Your Accumulated Value. As of the date of this prospectus, we offer
Segments with Guarantee Periods of 1, 3, 5, and 7 years.
You may allocate purchase payments or transfer all or a portion of Your
Accumulated Value to one or more Segments of the Fixed Account. Amounts credited
to a Segment of the Fixed Account will earn interest at the Guaranteed Rate
applicable on the date the amounts are credited. The applicable Guarantee Rate
does not change during the Guarantee Period. You may have multiple amounts
credited to a single Segment or multiple Segments. We may change the Segments
available for allocations of purchase payments, transfers and renewals at any
time. The Guaranteed Rate for any Segment may never be less than 3%. Please note
that the if You allocate sums to the Fixed Account, You will bear the investment
risk that such amounts will increase or decrease in value.
The end of a Guarantee Period for a specific amount credited to a Segment is
called its Expiration Date. At that time, the Guarantee Period normally "renews"
and we begin crediting interest for a new Guarantee Period lasting the same
amount of time as the one just ended. The Accumulated Amount then earns interest
at the new Guaranteed Rate applicable at the time of renewal. You may also
choose different Segments from among those we are then offering, or You may
transfer all or a portion of the Accumulated Amount to the Separate Account.
To the extent permitted by law, we reserve the right at any time to offer
Segments with Guarantee Periods that differ from those available when Your
Contract was issued. We also reserve the right, at any time, to stop accepting
new amounts credited, transferred, or renewed for a particular Segment.
Between 75 and 45 days before the end of the Expiration Date for an
Accumulation Amount, we will inform You of the Guaranteed Rates being offered
and Segments available as of the date of such notice. The Guaranteed Rates on
the date of a renewal may be more or less than the rates quoted in such
notice.
If Your Accumulated Amount's Segment is no longer available for new amounts
credited, or You choose a different Segment that is no longer available, we will
try to reach You so that You may make another choice.
If a choice is not made at this point, the Segment with the next shortest
Guarantee Period available will be used and if not available, the Segment with
the next longest Period will be used.
MARKET VALUE ADJUSTMENT
Any withdrawal of Your Accumulated Amount will be subject to a Market Value
Adjustment ("MVA") unless the effective date of the withdrawal is within 30 days
prior to the end of a Guarantee Period. For this purpose, redemptions,
transfers, death benefits based on a Contract Owner's death, and maturity
amounts are treated as withdrawals. The MVA is an adjustment that will be
applied to the amount being withdrawn which is subject to the MVA, after the
deduction of any applicable Administrative Charge and before the deduction of
any applicable Sales Charge. The MVA can be positive or negative. The amount
being withdrawn after application of the MVA can therefore be greater than or
less than the amount withdrawn before application of the MVA.
The MVA will reflect the relationship between the Current Rate (as defined
below) for the Accumulated Amount being withdrawn and the Guaranteed Rate. It
also reflects the time remaining in the applicable Guarantee Period. Generally,
if the Guaranteed Rate is lower than the applicable Current Rate, then the
application of the MVA will result in a lower payment upon withdrawal.
Similarly, if the Guaranteed Rate is higher
16
<PAGE>
than the applicable Current Rate, the application of the MVA will result in a
higher payment upon withdrawal.
The Market Value Adjustment which is applied to the amount being withdrawn is
determined by using the following formula:
[ n ]
[ ----- ]
[ 365 ]
MVA = Amount x [ (1 + i) - 1 ]
[ ------- ]
[ (1 + j) ]
where,
Amount is the amount being withdrawn from a given accumulated amount less any
applicable administrative charges.
i, is the Guaranteed Rate being credited to the Accumulated Amount subject to
the MVA.
j, the "Current Rate," is the Guaranteed Rate, available as of the effective
date of the application of the MVA, for current allocations to the Segment with
a Guarantee Period equal to the time remaining to the Expiration Date for the
amount being withdrawn rounded to the next higher number of complete years.
n, is the number of days remaining in the Guarantee Period of the amount
subject to the MVA.
In the determination of "j," if MassMutual currently does not offer the
applicable Segment, we will determine "j" above using a method as described in
the Statement of Additional Information.
Distribution
Effective May 1, 1996, MML Distributors, LLC ("MML Distributors"), 1414 Main
Street, Springfield, MA 01144-1013, became the principal underwriter of the
Contracts pursuant to an Underwriting and Servicing Agreement to which MML
Distributors, MassMutual and the Separate Account are parties. Prior to May 1,
1996, MML Investors Services, Inc. ("MMLISI"), also located at 1414 Main Street,
Springfield, MA 01144-1013, served as the principal underwriter of the
Contracts. Effective May 1, 1996, MMLISI serves as the co-underwriter of the
Contracts. Both MML Distributors and MMLISI are registered with the Securities
and Exchange Commission (the "SEC") as broker-dealers under the Securities
Exchange Act of 1934 and are members of the National Association of Securities
Dealers, Inc. (the "NASD"). The maximum commission a broker-dealer will
receive is 6.25%
MML Distributors may enter into selling agreements with other broker-dealers
which are registered with the SEC and are members of the NASD ("selling
brokers"). Contracts are sold through agents who are licensed by state insurance
officials to sell the Contracts. These agents are also registered
representatives of selling brokers or of MMLISI.
From time to time, OFDI may enter into special arrangements with broker-
dealers which may provide for the payment of higher compensation to such broker-
dealers in connection with the sale of Contracts. Prospective purchasers of the
Contracts will be informed of such arrangements prior to the completion of the
sale of the Contracts.
Additionally, Oppenheimer Funds Distributor, Inc. ("OFDI"), a subsidiary of OFI,
and MML Distributors have entered into an agreement pursuant to which OFDI has
agreed to promote sales of the product through wholesale distribution
arrangements with such broker-dealers. Registered representatives of the
particular broker-dealer, who are also properly licensed to sell MassMutual
products, may make such sales.
MML Distributors does business under different variations of its name;
including the name MML Distributors, L.L.C. in the states of Illinois, Michigan,
Oklahoma, South Dakota and Washington; and the name MML Distributors, Limited
Liability Company in the states of Maine, Ohio and West Virginia.
Miscellaneous Provisions
TERMINATION OF LIABILITY
MassMutual's liability under a Contract terminates on the death of the Contract
Owner or Annuitant(s) and on the completion of any guaranteed payments. There is
no liability for any proportionate monthly annuity payment from the date of the
last payment to the date of death.
ADJUSTMENT OF UNITS AND UNIT
VALUES
MassMutual reserves the right in its sole discretion to split or consolidate
the number of Accumulation Units or Annuity Units for any Division of the
Separate Account and correspondingly decrease or increase the Accumulation or
Annuity Unit values for any such Division whenever it deems such action to be
desirable. Any such adjustment will have no adverse effect on rights under the
Contracts.
PERIODIC STATEMENTS
While the Contract is in force prior to the Maturity Date and before the death
of the Annuitant, MassMutual will furnish to the Contract Owner at least
semiannually a status report showing the number of Accumulation Units credited
to each Division of the Separate Account, the corresponding Accumulation Unit
values, the value of amounts in the Fixed Account (if available) and the
Accumulated Value of the Contract.
CONTRACT OWNER'S VOTING RIGHTS
As long as the Separate Account continues to operate as a unit investment
trust under the Investment Company Act of 1940, the Contract Owner during the
lifetime of the Annuitant, or the beneficiary after the Annuitant's death, will
be entitled to give instructions as to how the shares of the Funds held in the
Separate Account (or other securities held in lieu of such shares) deemed
attributable to the Contract should be voted at meetings of shareholders of the
Funds or the Trusts. Those persons entitled to give voting instructions will be
determined as of the record date for the meeting.
The number of Fund shares held in the Separate Account deemed attributable to
a Contract prior to its Maturity Date and during the lifetime of the Annuitant
will be determined on the basis of the value of Accumulation Units credited to
the Contract in the corresponding Division of the Separate Account as of the
record date. After the Maturity Date or after the death of the Annuitant, the
number of Fund shares deemed attributable to the Contract will be based on the
liability for
17
<PAGE>
future Variable Monthly Annuity payments under the Contract as of the record
date and thus the voting rights will decrease as payments are made.
Contract Owners or beneficiaries will receive proxy material and a form with
which voting instructions may be given. Fund shares held by the Separate Account
as to which no effective instructions have been received or which are
attributable to assets transferred from MassMutual's general account will be
voted for or against any proposition in the same proportion as the shares as to
which instructions have been received.
In situations where the Annuitant is not the Contract Owner, the Annuitant
will have the right to instruct the Contract Owner with respect to the votes
attributable to any vested interest the Contract Owner has in the Contract.
MassMutual's obligation in this instance will be to make available to the
Contract Owner copies of the proxy material for distribution to the Annuitant.
Votes representing interests as to which the Contract Owner is not instructed
may, in turn, be voted by the Contract Owner in his discretion.
RESERVATION OF RIGHTS
MassMutual may, at any time, make any change in a Contract to the extent that
such change is required in order to make the Contract conform with any law or
regulation issued by any governmental agency to which MassMutual is subject. If
shares of any Fund should not be available, or, if in the judgment of
MassMutual, investment in shares of a Fund is no longer appropriate in view of
the purposes of a Division of the Separate Account, shares of other series of
the Trusts or of other registered, open-end investment companies may be
substituted for such Fund shares. Payments received after a date specified by
MassMutual may be applied to the purchase of shares of another Trust series or
investment company in lieu of shares of that Fund. Additionally, if in the
judgment of MassMutual, investment in shares of a Fund is no longer appropriate,
MassMutual reserves the right to withdraw availability of a Division of the
Separate Account for further amounts being credited. In any event, approval of
the SEC must be obtained. MassMutual reserves the right to change the name of a
Separate Account or to add Divisions to the Separate Account for the purpose of
investing in additional investment vehicles. Additionally, we reserve the right
to terminate the Contract: (a) if no purchase payment has been received for at
least two consecutive years measured from the date we received the last purchase
payment; and (b) if the Accumulated Value less any deduction we would make for
premium taxes, the Cash Redemption Value and the unredeemed premium payments are
all less than $2,000. Before exercising this right, we will provide You with
written notice of our decision.
Federal Tax Status
INTRODUCTION
The ultimate effect of federal income taxes on the value of the Contract, on
annuity payments, and on the economic benefit to the Contract Owner, Annuitant
or Beneficiary depends on a variety of factors including the type of retirement
plan for which the Contract is purchased and the tax and employment status of
the individual concerned. The discussion contained herein is general in nature
and is not intended as tax advice. Each person concerned should consult a
competent tax adviser for complete information and advice. No attempt is made to
consider any applicable state or other local tax laws. Moreover, the discussion
herein is based upon MassMutual's understanding of current federal income tax
laws as they are currently interpreted. No representation is made regarding the
likelihood of continuation of those current federal income tax laws or of the
current interpretations by the Internal Revenue Service ("IRS").
TAX STATUS OF MASSMUTUAL
Under existing federal law, no taxes are payable by MassMutual on investment
income and realized capital gains of the Separate Account credited to the
Contracts. Accordingly, MassMutual does not intend to make any charge to the
Separate Accounts to provide for company income taxes. MassMutual may, however,
make such a charge in the future if an unanticipated construction of current law
or a change in law results in a company tax liability attributable to the
Separate Account.
MassMutual may incur state and local taxes (in addition to premium taxes) in
several states. At present, these taxes are not significant. If they increase,
however, charges for such taxes attributable to the Separate Account may be
made.
Taxation of Contracts in General
Under Section 817(h) of the Internal Revenue Code (the "Code") a Contract
(other than one used in a tax-qualified retirement plan) will not be treated as
an annuity contract and will be taxed on the annual increase in earnings if, as
of the end of any quarter, the Funds, or the Fund on which the Contract is based
are not adequately diversified in accordance with regulations prescribed by the
Treasury Department. It is anticipated that the Trusts will comply with the
Code's diversification requirements.
Subject to certain annuity distribution rules (see - Annuity Distribution
Rules of Section 72(s)), annuity payments under the Contracts are taxable under
Section 72 of the Code. For contributions made after February 28, 1986, a
Contract Owner that is not a natural person will be taxed on the annual increase
in the earnings of a Contract unless the Contract Owner holds the Contract as
agent for a natural person. Otherwise, increases in the value of a Contract are
not subject to tax until actually or constructively received.
Amounts received prior to the Maturity Date from Contracts not under tax
qualified arrangements (see - Taxation of Qualified Plans TSAs and IRAs, for a
discussion of Contracts used in the qualified plan market) are subject to tax to
the extent of any earnings or gains in the Contract; amounts received which are
in excess of such earnings or gains are considered a return of capital.
Similarly, amounts borrowed upon the Contract will be treated as amounts
received under the Contract and will be taxable to the same extent.If an
individual Contract Owner transfers ownership, for other than full and adequate
consideration, the Contract Owner will be taxed on the transfer as though he or
she had taken a full redemption of the Contract. For Contracts entered into
after October 21, 1988, all annuity contracts issued by the same insurer and its
affiliates to the same Contract Owner within the same calendar year must be
aggregated in determining the amount of gain realized on a withdrawal from any
one.
18
<PAGE>
If the Contract is obtained in a tax-free exchange of contracts under Section
1035 of the Code, different tax rules may apply. If a distribution prior to the
Maturity Date of a contract obtained in such an exchange is entirely
attributable to investments in the surrendered contract prior to August 14,
1982, the distribution will first be considered a return of capital to the
extent of those investments and only the amounts received in excess of those
investments will be regarded as taxable earnings or gains.
PENALTY TAXES
In addition to the foregoing tax consequences, certain distributions under the
Contract will be subject to a penalty tax under Code Section 72(q) (for non-tax
qualified Contracts) or 72(t) (for Contracts in tax qualified plans see -
Taxation of Qualified Plans, TSAs and IRAs) of 10% of the amount of the
distribution that is includable in gross income. However, the following
distributions from non-tax qualified Contracts currently are not subject to the
penalty tax: (1) withdrawals made after the Contract Owner is 59 1/2 years old;
(2) payments made to a beneficiary (or to the estate of the Contract Owner) on
or after the death of the Contract Owner; (3) payments attributable to a
Contract Owner becoming disabled; or (4) substantially equal periodic payments
made (at least annually) for the lifetime (or life expectancy) of the Contract
Owner or for the joint lifetimes (or joint life expectancies) of the Contract
Owner and the beneficiary.
When monthly annuity payments commence, they are taxable as ordinary income in
the year of receipt to the extent that they exceed that portion of the
"Investment in the Contract" allocable to that year. The Investment in the
Contract will equal the gross amount of purchase payments made under the
Contract less any amount that was previously received under the Contract but was
not included in gross income. The Investment in the Contract would also be
increased by any amount that was previously included in gross income under the
Contract but was not received. This amount, divided by the anticipated number of
monthly annuity payments, gives the "excludable amount," which is the portion of
each annuity payment considered to be a return of capital and, therefore, not
taxable. Under this exclusion ratio, the total amount excluded from payments
actually received is limited to the Investment in the Contract. The rules for
determining the excludable amount are contained in Section 72 of the Code and
regulations thereunder and require adjustment when the payment option elected
provides a feature such as a guaranteed number of payments.
ANNUITY DISTRIBUTION RULES OF
SECTION 72(S)
Annuity distribution requirements are imposed under Section 72(s) of the Code.
MassMutual understands that these requirements do not apply to Contracts issued
to or under Qualified Plans.
Under Section 72(s), a Contract will not be treated as an annuity subject to
Section 72 of the Code, unless it provides for certain required distributions
from and after the date of death of the Contract Owner. The Contracts will be
endorsed before issue to provide that annuity payments be made only in
accordance with these distribution requirements, as applicable.
TAX WITHHOLDING
Certain tax withholding is imposed on payments that are made under the
Contracts (for Contracts in tax qualified plans, see - Taxation of Qualified
Plans, TSAs and IRAs). Withheld amounts do not constitute an additional tax, but
are fully creditable on the individual tax return of each payee who is affected
by tax withholding. Furthermore, no payments will be subject to the withholding
if (1) it is reasonable to believe that the payments are not includable in gross
income, or (2) the payee elects not to have withholding apply. The payee may
make such an election either by filing an election form with MassMutual or, in
the case of redemptions, by following procedures that MassMutual has established
to afford payees an opportunity to elect out of withholding. These forms and
procedures will be provided to payees by MassMutual upon a request for
payment.
Unless the Payee elects not to have withholding apply (for Contracts in tax
qualified plans see - Taxation of Qualified Plans, TSAs and IRAs), MassMutual is
required to withhold, for federal income tax purposes, 10% of the taxable
portion of any redemption payment or non-periodic distribution under the
Contracts. Periodic annuity payments under the Contracts are subject to
withholding at the payee's wage base rate. If the payee of these annuity
payments does not file an appropriate withholding certificate (obtainable from
any local IRS office) with MassMutual, it will be presumed that the payee is
married claiming three exemptions.
TAX REPORTING
MassMutual is required to report all taxable payments and distributions to the
IRS and to the payees. Payees will receive reports of taxable payments and
distributions by January 31 of the year following the year of payment.
TAXATION OF QUALIFIED PLANS,
TSAS AND IRAS
The tax rules applicable to participants in retirement plans that qualify for
special federal income tax treatment ("Qualified Plans") vary according to the
type of plan and its terms and conditions.
Increases in the value of a Contract are not subject to tax until received by
the employee or his beneficiary. Monthly annuity payments under Qualified Plans
are taxed as described above (see -TAXATION OF CONTRACTS IN GENERAL), except
that the "investment in the Contract" under a Qualified Plan is normally the
gross amount of purchase payment made by the employee under the Contract or made
by the employer on the employee's behalf and included in the employee's taxable
income when made.
If the Annuitant receives a distribution that qualifies as a "lump sum
distribution" under the Code, he or she may be eligible for special "5-year
averaging" treatment of the funds received (or "10-year averaging" treatment if
he or she was age 50 or older on January 1, 1986). TSAs and IRAs are not
eligible for the special treatment under the "lump sum distribution" rules.
Effective for calendar years beginning January 1, 2000, five year averaging of
lump-sum distributions will no longer be available.
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Certain TSA contributions may not be distributed to the Annuitant until age
59 1/2, death, disability, separation of service or hardship. (See - Redemption
Privileges.) Distributions from Qualified Plans, IRAs and TSAs may be subject to
a 10% penalty tax on amounts withdrawn before age 59 1/2. However, the following
distributions from Qualified Plans (and TSAs and IRAs except as otherwise noted)
are not subject to the penalty: (1) payments made to a beneficiary (or the
estate of an Annuitant) on or after the death of the Annuitant; (2) payments
attributable to an Annuitant becoming disabled; (3) substantially equal periodic
payments made (at least annually) for the lifetime (or life expectancy) of the
Annuitant or for the joint lifetimes (or joint life expectancies) of the
Annuitant and the beneficiary (for Qualified Plans and TSAs, payments can only
begin after the employee separates from service); (4) payment for certain
medical expenses; (5) payment after age 55 and separation from service (not
applicable to IRAs); (6) payments to an alternate payee pursuant to a qualified
domestic relations order under Code Section 414(p) (not applicable to IRAs).
Excess retirement accumulations may be subject to a 15% penalty tax. Excess
distributions may be subject to a 15% excise tax (this provision is suspended
for 1997, 1998 and 1999); and (7) effective for calendar years beginning January
1, 1997, withdrawals from IRAs by certain unemployed persons for payment of
health insurance premiums.
IRAs are subject to limitations on the amount that may be contributed. The
deductibility of contributions by individuals or their spouses who are active
participants in an employer-maintained pension or profit-sharing plan may be
reduced based on the individual's adjusted gross income. In addition, certain
distributions from Qualified Plans and TSAs may be placed into an IRA on a tax-
deferred basis.
In general, tax law requires that minimum distributions be made from Qualified
Plans by 5% owners, and IRAs beginning at age 70 1/2 and from all others in
Qualified Plans and TSAs at the later of age 70 1/2 or when the employee
retires. To avoid penalty taxes of 50 percent or more, required distributions,
including distributions which should have been distributed in prior years,
should not be rolled over to IRAs.
Distributions from Qualified Plans and TSAs are subject to mandatory federal
income tax withholding. MassMutual is required to withhold 20% when a payment
from a Qualified Plan or TSA is an "eligible rollover distribution" and such
payment is not directly rolled over to another Qualified Plan, TSA or IRA. In
general, an "eligible rollover distribution" is any taxable distribution other
than: (1) payments for the life (or life expectancy) of the Annuitant, or for
joint life (or joint life expectancies) of the Annuitant and the beneficiary;
(2) payments made over a period of ten years or more; and (3) required minimum
distributions (see above). Plan administrators should be able to tell Annuitants
what other payments are not "eligible rollover distributions".
Taxable distributions that are not "eligible rollover distributions" are subject
to the withholding rules for annuities (see - Tax Withholding.)
Performance Measures
MassMutual may show the performance under the Contracts in the following
ways:
STANDARDIZED AVERAGE ANNUAL
TOTAL RETURN
Except for Divisions of the Separate Account which have been in existence for
less than one year, MassMutual will show the Standardized Average Annual Total
Return for a Division of the Separate Account which, as prescribed by the rules
of the SEC, is the effective annual compounded rate of return that would have
produced the cash redemption value over the stated period had the performance
remained constant throughout. The Standardized Average Annual Total Return
assumes a single $1000 payment made at the beginning of the period and full
redemption at the end of the period. It reflects a deduction for the Sales
Charge, the annual administrative charge and all other Fund, Separate Account,
and Contract level charges except premium taxes, if any. The annual
Administrative Charge will be apportioned among the Divisions of the Separate
Account based upon the percentages of Contracts investing in each of the
Divisions.
For Divisions of the Separate Account which have been in existence for less
than one year, MassMutual will show the aggregate total return as permitted by
the SEC. The aggregate total return assumes a single one thousand dollar
payment made at the beginning of the period and full redemption at the end of
the period. It reflects the change in unit value and a reduction of the
contingent deferred sales charge.
ADDITIONAL PERFORMANCE
MEASURES
The performance figures discussed below may be calculated on the basis of the
historical performance of the Funds, and may assume that the Contracts were in
existence prior to the Inception Date (which they were not). Beginning the date
that the product became available for sale to the public, actual Accumulation
Unit Values will be used for the calculations. Such Accumulation Unit Values
will be accompanied by the Standardized Average Annual Total Return described
above.
The difference between the first set of additional performance measures,
PERCENTAGE CHANGE and ANNUALIZED RETURNS on Accumulation Unit Values, and the
second set, the NON-STANDARDIZED ANNUAL and AVERAGE ANNUAL TOTAL RETURNS, is
that the second set is based on specified premium patterns and includes the
deduction of the annual Administrative Charge, whereas the first set does not.
Additional details are described below.
Accumulation Unit Values: Percentage Change
and Annualized Returns
MassMutual will show the PERCENTAGE CHANGE in the value of an Accumulation
Unit for a Division of the Separate Account with respect to one or more periods.
The ANNUALIZED RETURN, or average annual change in Accumulation Unit Values, may
also be shown with respect to one or more periods. For a one year period, the
Percentage Change and the Annualized Return are effective annual rates of return
and are equal. For periods greater than one year, the Annualized Return is the
effective annual compounded rate of return for the periods stated. Since the
value of an Accumulation Unit reflects the Separate Account and Trust expenses
(see -
20
<PAGE>
Table of Fees and Expenses), the Percentage Change and Annualized Returns also
reflect these expenses. These percentages, however, do not reflect the annual
Administrative Charge and the Sales Charge or premium taxes (if any), which if
included would reduce the percentages reported. For periods of less than one
year, the percentage change in accumulation unit value may be shown.
The NON-STANDARDIZED ANNUAL TOTAL RETURN and the NON-STANDARDIZED AVERAGE
ANNUAL TOTAL RETURN reflect a deduction for the annual Administrative Charge as
well as reflecting deductions for the Separate Account expenses and the expenses
of the Trusts. They are based on specified premium patterns which produce the
resulting Accumulated Values. They do not include Sales Charges or premium taxes
(if any), which would reduce the percentages reported.
The NON-STANDARDIZED ANNUAL TOTAL RETURN for a Division is the effective
annual rate of return that would have produced the ending Accumulated Value, as
of the stated one-year period.
The NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN for a Division is the
effective annual compounded rate of return that would have produced the ending
Accumulated Value over the stated period had the performance remained constant
throughout.
Note: The NON-STANDARDIZED ANNUAL TOTAL RETURN will be less than the NON-
STANDARDIZED ANNUALIZED RETURN on Accumulation Unit values for the same period
due to the effect of the annual Administrative Charge. Additionally, the
magnitude of this difference will depend on the size of the Accumulated Value
from which the Annual Administrative Charge is deducted.
YIELD AND EFFECTIVE YIELD. MassMutual may also show yield and effective yield
figures for the Money Market and Money Fund Divisions of the Separate Account.
"Yield" refers to the income generated by an investment in the Money Market and
Money Fund Divisions over a seven-day period, which is then "annualized". That
is, the amount of income generated by the investment during that week is assumed
to be generated each week over a 52-week period and is shown as a percentage of
the investment. The "effective yield" is calculated similarly but, when
annualized, the income earned by an investment in these divisions is assumed to
be re-invested. Therefore the effective yield will be slightly higher than the
yield because of the compounding effect of this assumed reinvestment. These
figures will reflect a deduction for Fund, Separate Account, and certain
Contract level charges, and the Annual Administrative Charge assuming such
Contract remains in force. The Administrative Charge is based on a hypothetical
contract where such charge is applicable. These figures do not reflect the Sales
Charge or premium taxes, (if any), which if included would reduce the yields
reported.
The performance measures discussed above reflect results of the Funds and are
not intended to indicate or predict future performance. For more detailed
information, see the Statement of Additional Information.
Performance information for the Separate Account Divisions may be: (a)
compared to other variable annuity separate accounts or other investment
products surveyed by Lipper Analytical Services, Inc. a nationally recognized
independent reporting service or similar services that rank mutual funds and
other investment companies by overall performance, investment objectives and
assets; (b) tracked by other ratings services, companies, publications or
persons who rank separate accounts or other investment products on overall
performance or other criteria; and (c) included in data bases that produce
reports and illustrations by organizations such as CDA Weisenberger. Performance
figures will be calculated in accordance with standardized methods established
by each reporting service.
Additional Information
For further information about the Contracts, You may obtain a Statement of
Additional Information prepared by MassMutual.
The Table of Contents of this Statement is as follows:
1. General Information and History
2. Service Arrangements and Distribution
3. Contract Value Calculations and Annuity Payments
4. Performance Measures
5. Reports of Independent Accountants and FinancialStatements.
Section 5 of the Statement of Additional Information contains financial
statements for MassMutual.
21
<PAGE>
This Prospectus sets forth the information about Separate Account 3 that a
prospective investor ought to know before investing. Certain additional
information about the Separate Account is contained in a Statement of Additional
Information dated May 1, 1997 which has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The Table of
Contents for the Statement of Additional Information appears on page 21 of this
Prospectus. To obtain a copy, return this request form to the address shown
below or telephone 1-800-258-4511.
To: MassMutual and Affiliated Companies Service Center
Continuum Administrative Services Corporation
301 West 11th Street
Kansas City, MO 64105
Please send me a Statement of Additional Information for LifeTrust.
Name
-----------------------------------------------------------------
Address
-----------------------------------------------------------------
-----------------------------------------------------------------
City State Zip
--------------------------------- --------------- ---------
Telephone
---------------------------------------------------------------
<PAGE>
Oppenheimer Life Trust Variable Annuity
------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
(DEPOSITOR)
MASSACHUSETTS MUTUAL VARIABLE ANNUITY SEPARATE ACCOUNT 3
(REGISTRANT)
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the prospectus of Massachusetts Mutual Variable Annuity
Separate Account 3 dated May 1, 1997 (the "Prospectus"). The Prospectus may be
obtained from the Massachusetts Mutual Life Insurance ("MassMutual") Service
Center, c/o ALLIANCE-ONE Services, L.P., 301 West 11th Street, Kansas City, MO
(800) 258-4511.
May 1, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
General Information and History............................................2
Service Arrangements and Distribution......................................5
Contract Value Calculations
For Amounts Allocated to an Investment
Division of a Separate Account.............................................6
Performance Measures......................................................10
Reports of Independent
Accountants and Financial
Statements.......................................................Final Pages
</TABLE>
7
<PAGE>
GENERAL INFORMATION AND HISTORY
MassMutual
----------
Massachusetts Mutual Life Insurance Company ("MassMutual") 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's Home Office is located in Springfield, Massachusetts. The Service
Center for Contracts is located at ALLIANCE-ONE Services, L.P., Kansas City,
Missouri.
OppenheimerFunds, Inc.
----------------------
OppenheimerFunds, Inc. ("OFI") is a corporation organized under the laws of the
state of Colorado. It has operated as an investment adviser since April 30,
1959. It (including a subsidiary) currently advises U.S. investment companies
with assets aggregating over $62 billion as of December 31, 1995, and having
over 3 million shareholder accounts. OFI is owned by Oppenheimer Acquisition
Corp., a holding company owned in part by senior management of OFI, and
ultimately controlled by MassMutual.
The Separate Account
--------------------
Massachusetts Mutual Variable Annuity Separate Account 3 (the "Separate
Account") was established as a separate investment account of MassMutual on
January 14, 1994, in accordance with the provisions of Section 132G of Chapter
175 of Massachusetts General Laws. 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 MassMutual. Under
Massachusetts law, however, both MassMutual and the Separate Account are subject
to regulation by the Division of Insurance of the Commonwealth of Massachusetts.
The Separate Account is divided into thirteen Divisions. Four of the Divisions
(MML Equity, MML Managed Bond, MML Blend, and MML Money Market) invest in
corresponding shares of MML Series Investment Fund ("MML Trust"). The remaining
nine Divisions (Oppenheimer Money, Oppenheimer High Income, Oppenheimer Bond,
Oppenheimer Capital Appreciation, Oppenheimer Growth, Oppenheimer Multiple
Strategies, Oppenheimer Global Securities, Oppenheimer Strategic Bond, and
Oppenheimer Growth & Income) invest in corresponding shares of Oppenheimer
Variable Account Funds (the "Oppenheimer Trust" and collectively with MML Trust,
the "Trusts"). MassMutual reserves the right to add additional divisions or
separate accounts. The value of both Accumulation Units (see "The Accumulation
(Pay-In) Period" section in the prospectus) and Annuity Units (see "The Annuity
(Pay Out) Period" section in the prospectus) in each Division reflects the
investment results of its underlying Fund.
Although the assets of the Separate Account are assets of MassMutual, 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 MassMutual
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 MassMutual. All obligations arising under
MassMutual Variable Annuity Contracts (the "Contracts"), however, are general
corporate obligations of MassMutual.
8
<PAGE>
The Trusts
----------
1. The MML Trust
-------------
The MML Trust is a no-load, open-end, diversified management investment company
consisting of four separate series of shares--MML Equity Fund, MML Money Market
Fund, MML Managed Bond Fund, and MML Blend Fund (the "MML Funds") each of which
has its own investment objectives and policies. MassMutual organized the MML
Trust for the purpose of providing vehicles for the investment of assets held in
various separate investment accounts, including the Separate Account,
established by MassMutual or its life insurance company subsidiaries. A
statement of additional information concerning the MML Trust is available upon
request from the Service Center.
2. The Oppenheimer Trust
---------------------
The Oppenheimer Trust is an open-end, diversified management investment company
consisting of the following funds: Oppenheimer Global Securities Fund,
Oppenheimer High Income Fund, Oppenheimer Money Fund, Oppenheimer Strategic Bond
Fund, Oppenheimer Capital Appreciation Fund, Oppenheimer Multiple Strategies
Fund, Oppenheimer Bond Fund, Oppenheimer Growth Fund, and Oppenheimer Growth &
Income Fund. Each of these funds is available to Contract Owners. The
Oppenheimer Trust was organized for the purpose of providing funds to variable
life and annuity contracts, and exemptive relief permitting such sales has been
obtained from the Securities and Exchange Commission ("SEC"). Shares of the
Trusts are not available to the public. A statement of additional information
concerning the Oppenheimer Trust is available upon request from the Service
Center.
3. General Information Concerning the Trusts
-----------------------------------------
A Separate Account purchases and redeems shares of specified funds at their net
asset value without the imposition of any sales or redemption charge.
Distributions made on the shares of each Fund held by a Division of a Separate
Account are immediately reinvested in shares of a corresponding Fund at net
asset value, which shares are added to the assets of the appropriate Division of
the Separate Account. MassMutual serves as investment manager of each of the MML
Funds pursuant to separate investment management agreements executed by
MassMutual and each of the MML Funds. Concert Capital Management, Inc.
("Concert") served as the investment sub-advisor to MML Equity Fund and the
Equity Sector of the MML Blend Fund from 1993-1996. Concert merged with and into
David L. Babson & Company, Inc. ("Babson") effective December 31, 1996. Both
Concert and Babson are wholly-owned subsidiaries of Babson Acquisition
Corporation, which is a controlled subsidiary of MassMutual. Thus, effective
January 1, 1997, Babson serves as the investment sub-advisor to MML Equity Fund
and the Equity Sector of the MML Blend Fund. Both MassMutual and Babson are
registered as investment advisers under the Investment Advisers Act of 1940.
OFI serves as investment adviser to the Funds of the Oppenheimer Trust. OFI is
registered as an investment adviser under the Investment Advisers Act of 1940.
The Prospectus and Statement of Additional Information for both the MML Trust
and the Oppenheimer Trust contain a description of their respective Funds, their
investment objectives, policies and restrictions, their expenses, the risks
attendant therein, and aspects of their operation.
Possible Conflicts
------------------
1. MML Trust
---------
Assets of Massachusetts Mutual Variable Life Separate Accounts I and II and MML
Bay State Variable Life Separate Account I are invested in the MML Funds.
Because Massachusetts Variable Annuity Separate Account 1, 2, and 3 and MML Bay
State Variable Annuity Separate Account 1 are also invested in the MML Funds, it
is possible that material conflicts could arise between owners of the Contracts
and owners of variable life insurance policies funded by the separate accounts
listed above. Possible conflicts could arise if: (i) state insurance
9
<PAGE>
regulators should disapprove of or require changes in investment policies,
investment advisers or principal underwriters, or if MassMutual should be
permitted to act contrary to actions approved by holders of the variable life
insurance policies under rules of the SEC; (ii) adverse tax treatment of the
Contracts or other variable contracts would result from using the same Funds;
(iii) different investment strategies would be more suitable for the Contracts
than for other variable contracts; or (iv) state insurance laws or regulations
or other applicable laws would prohibit the funding of variable annuity separate
accounts and variable life separate accounts by the same MML Funds. The Board of
Trustees of the MML Trust will follow monitoring procedures which have been
developed to determine whether material conflicts have arisen. Such Board will
have a majority of Trustees who are not interested persons of the MML Trust, and
determinations whether or not a material conflict exists will be made by a
majority of such disinterested Trustees. If a material irreconcilable conflict
exists, MassMutual will take such action at their own expense as may be required
to cause Massachusetts Mutual Variable Life Separate Accounts I and II, MML Bay
State Variable Life Separate Account I to be invested solely in shares of mutual
funds which offer their shares exclusively to variable life insurance separate
accounts unless, in certain cases, the holders of both the variable life
insurance policies and the variable annuity contracts vote not to effect such
segregation.
2. Oppenheimer Trust
-----------------
The Oppenheimer Trust was established for use as an investment vehicle by
variable contract separate accounts such as the Separate Accounts. Accordingly,
it is possible that a material irreconcilable conflict may develop between the
interests of Contract Owners and other separate accounts investing in the
Oppenheimer Trust. The Board of Trustees of the Oppenheimer Trust (the "Board")
will monitor the Oppenheimer Funds for the existence of any such conflicts. If
it is determined that a conflict exists, the Board will notify MassMutual and
appropriate action will be taken to eliminate such irreconcilable conflict. Such
steps may include: (1) withdrawing the assets allocable to some or all of the
separate accounts from the particular Oppenheimer Fund and reinvesting such
assets in a different investment medium, including (but not limited to) another
Oppenheimer Fund; (2) submitting the question to whether such segregation should
be implemented to a vote of all affected Contract Owners; and (3) establishing a
new registered management investment company or managed separate account.
Assignment of Contract
----------------------
MassMutual 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 MassMutual receives at its Service Center a true copy thereof.
MassMutual assumes no responsibility for the validity of any assignment.
While the Contracts are generally assignable, all non-tax qualified Contracts
must carry a non-transferability endorsement which precludes their assignment.
For qualified Contracts, the following exceptions and provisions should be
noted:
(1) No person entitled to receive annuity payments under a Contract or part
or all of the Contract's value will be permitted to commute, anticipate,
encumber, alienate or assign such amounts, except upon the written authority of
the Contract Owner given during the Annuitant's lifetime and received in good
order by MassMutual at its Service Center. To the extent permitted by law, no
Contract nor any proceeds or interest payable thereunder will be subject to the
Annuitant's or any other person's debts, contracts or engagements, nor to any
levy or attachment for payment thereof;
(2) If an assignment of a Contract is in effect on the maturity date,
MassMutual 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, MassMutual 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;
-----------------
10
<PAGE>
(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 MassMutual, except to a former spouse of the Annuitant in accordance
with the terms of a divorce decree or other written instrument incident to a
divorce.
Assignments may be subject to federal income tax.
RESTRICTIONS ON REDEMPTION
Redemptions of TSAs may be restricted as required by Section 403(b)(11) of the
Internal Revenue Code (see, "Tax- Sheltered Annuity Redemption Restrictions" in
the prospectus for details). In restricting any such redemption, MassMutual
relies on the relief from sections 22(e), 27(c) and 27(d) of the Investment
Company Act of 1940 granted in American Council of Life Insurance [1988 Transfer
Binder] Fed. Sec. L. Rep (CCH) 78,904 (November 22, 1988) (the "No Action
Letter"). In relying on such relief, MassMutual hereby represents that it
complies with the provisions of paragraphs (1) - (4) as set forth in the No
Action Letter.
SERVICE ARRANGEMENTS AND DISTRIBUTION
Independent Accountants
-----------------------
The financial statements of the Separate Account and the statutory financial
statements of MassMutual included in this Statement of Additional Information
have been included herein in reliance on the reports of Coopers & Lybrand
L.L.P., Springfield, Massachusetts 01101, independent accountants, given on the
authority of that firm as experts in accounting and auditing. The report
includes explanatory paragraphs relating to the use of statutory accounting
practices rather than generally accepted accounting principles.
Distribution and Administration
-------------------------------
Effective May 1, 1996, MML Distributors, LLC ("MML Distributors"), a
wholly-owned subsidiary of MassMutual, became the principal underwriter for the
contract pursuant to an Underwriting and Servicing Agreement among MassMutual,
MML Distributors and the Separate Account. Prior to May 1, 1996, MML Investors
Services, Inc. ("MMLISI"), also a wholly-owned subsidiary of MassMutual, served
as principal underwriter for the Separate Account. Effective May 1, 1996, MMLISI
serves as co-underwriter for the Separate Account.
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
MassMutual 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
11
<PAGE>
1996 was $5,000. Compensation paid to MML Distributors in 1996 was $18,423.
Commissions will be paid through MMLISI and MML Distributors to agents and
selling brokers for selling the Contracts. During 1996, 1995 and 1994, such
payments amounted to $10,362,608, $2,899,557 and $2,061 respectively.
An Administration Agreement entered among MassMutual, MML Bay State Life
Insurance Company and ALLIANCE-ONE Services, L.P. ("ALLIANCE-ONE") provides
that ALLIANCE-ONE will agree to provide: all services required for the
administration of those Contracts which depend in whole or in part on the
investment performance of the Separate Account. Additionally, pursuant to such
Agreement, ALLIANCE-ONE will keep such other records as may be mandated by state
and federal laws and regulations. ALLIANCE-ONE will operate MassMutual's Service
Center and will respond to Contract Owner inquiries concerning the status of
their Contracts.
The Agreement may be terminated by the parties without the payment of any
penalty upon 180 days written notice. The agreements immediately terminate in
the event of their assignment (as that term is defined under the Investment
Company Act of 1940). The agreements may be amended at any time by the mutual
consent of the parties. Contract Owners will not receive notice with respect to
changes in the agreements.
The offering of the Contracts is continuous.
Purchase of Securities Being Offered
------------------------------------
Interests in the Separate Account are sold to Contract Owners as accumulation
units. Charges associated with such securities are discussed in the Charges and
-----------
Deductions Section of the prospectus for the Contract. The Contract does not
- ----------
offer any special purchase plan or exchange program not discussed in the
prospectus. (For a discussion of instances when sales charges will be waived,
see Contingent Deferred Sales Charges Section of the prospectus.)
---------------------------------
CONTRACT VALUE CALCULATIONS FOR AMOUNTS ALLOCATED TO AN
INVESTMENT DIVISION OF A SEPARATE ACCOUNT
The Accumulation (Pay-In) Period
--------------------------------
Valuation Date, Valuation Time and Valuation Period
---------------------------------------------------
Each day on which the net asset value of the shares of any of the Funds is
determined is a "Valuation Date." The value of shares of the Funds held in the
Separate Account is determined as of the "Valuation Time," which is the time of
the close of trading on the New York Stock Exchange (currently 4:00 p.m. New
York time) on a Valuation Date. A "Valuation Period" is the period, consisting
of one or more days, from one Valuation Time to the next succeeding Valuation
Time.
Accumulation Unit Value
-----------------------
The value of an Accumulation Unit (the "Accumulation Unit Value") for each
Division of the Separate Account will vary from Valuation Date to Valuation
Date. The initial Accumulation Unit Value for each Division was set at
$1.000000. The Accumulation Unit Value for each Division on any date thereafter
is equal to the product of the "Net Investment Factor" for that Division (as
defined below) for the Valuation Period which includes such date and the
Accumulation Unit Value for that Division on the preceding Valuation Date.
Purchase of Accumulation Units in a Division
--------------------------------------------
of a Separate Account
---------------------
You may allocate purchase payments among the investment Divisions of the
Separate Account and to the Fixed Account, where available. At the end of each
Valuation Period MassMutual 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
12
<PAGE>
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 in the mail or by wire transfer at the Service Center. If
the date of receipt is not a Valuation Date, or if the purchase payment is
received after the Valuation Time or other than by mail or wire transfer, the
value of the Accumulation Units purchased will be determined within two days of
the next Valuation Time following the date the payment is received. If an
initial purchase payment is not applied within five business days after receipt
(due to incomplete or ambiguous Application information, for example) the
payment amount will be refunded unless specific consent to retain the payment
for a longer period is obtained from the prospective purchaser. For subsequent
purchase payments, the Valuation Date will be the date which is on or next
follows the date of receipt.
Amounts allocated to a Fixed Account will earn interest at a Guaranteed Rate for
the Guarantee Period. If, however, a Contract Owner redeems amounts held in the
Fixed Account, or transfers such sums before the Expiration Date of the selected
Accumulated Amount, such sums will be subject to a Market Value Adjustment
("MVA"). The application of the MVA may operate to provide a yield which is less
than the return generated pursuant to the Guarantee Rate. If an applicable
Segment is not available, then the formula used to calculate the Guaranteed Rate
available as of the effective date of the application of the MVA (referred to as
"j" in the formula described in the Market Value Adjustment section of the
-----------------------
prospectus) will be determined by interpolation or extrapolation of the
Guaranteed Rates for the Segments then available. (Please consult the prospectus
for the Fixed Account for more information).
Net Investment Factor
---------------------
The Net Investment Factor for each Division for any Valuation Period is equal to
the sum of the Gross Investment Rate for that Division (as defined below) for
the Valuation Period and 1.000000, decreased by the applicable Asset Charge. The
Net Investment Factor may be greater than or less than 1.000000.
Gross Investment Rate
---------------------
The Gross Investment Rate for each Division of the Separate Account is equal to
the net earnings of that Division during the Valuation Period, divided by the
value of the net assets of that Division at the beginning of the Valuation
Period. The net earnings of the Division is equal to the accrued investment
income and capital gains and losses (realized and unrealized) of that Division
and an adjustment for taxes paid or provided for. The Gross Investment Rate will
be determined in accordance with generally accepted accounting principles and
applicable laws, rules and regulations. The Gross Investment Rate may be
positive or negative.
The policy of the Separate Account is to take dividends and capital gain
distributions on shares of the Funds held by the Separate Account in additional
shares and not in cash.
See the General Formulas section below for the general formulas which may be
----------------
used to compute the value of an Accumulation Unit for any Division of the
Separate Account, and for an explanation of how a hypothetical illustration
using such formulas may be developed.
The Annuity (Pay-Out) Period
----------------------------
When your Contract approaches its maturity date, you may choose to have the
Maturity Value of the Contract provide you at maturity with either Fixed Income
payments (referred to as the "Fixed Income Option" in your
13
<PAGE>
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 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
MassMutual 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
14
<PAGE>
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. On the inception date of the
Contract, 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
----------------
<TABLE>
<CAPTION>
General Formulas to Determine Accumulation Unit Value and
---------------------------------------------------------
Annuity Unit Value for any Division of the Separate Account
-----------------------------------------------------------
<S> <C>
Gross Investment = Net Earnings during Valuation Period
Rate ------------------------------------
Value of Net Assets at beginning of Valuation Period
Net Investment = Gross Investment Rate + 1.000000 -
Factor Asset Charge
Accumulation = Accumulation Unit Value on Preceding
Unit Value Valuation Date X Net Investment Factor
Annuity Unit Value = Annuity Unit Value on Preceding
Valuation Date X Net Investment Factor
--------------------------------------
1.000000 + rate of interest for number of days in
current Valuation Period at Assumed Investment Rate
</TABLE>
Illustration of Computation of Accumulation
-------------------------------------------
and Annuity Unit Value Using Hypothetical Example
-------------------------------------------------
The above computations may be illustrated by the following hypothetical example:
Assume that the net earnings of the Division for the Valuation Period were
$11,760; that the value of net assets at the beginning of the Valuation Period
was $30,000,000; that the Asset Charge was .000038 per day; that the values of
an Accumulation Unit and an Annuity Unit in the Division of the Separate Account
on the preceding Valuation Date were $1.135000 and $1.067000, respectively, that
the corresponding Assumed Investment Rate was 4% and that the Valuation Period
was one day.
The Gross Investment Rate for the Valuation Period would be .000392 ($11,760
divided by $30,000,000). The Net Investment Factor would be 1.000354 (.000392
plus 1.000000 minus .000038). The new Accumulation Unit Value would be $1.1354
($1.135000 x 1.000354). At an effective annual rate of 4%, the rate of interest
for one day is .000107, and the new Annuity Unit Value would be $1.0673
($1.067000 x 1.000354 divided by 1.000107).
15
<PAGE>
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 Accumulation
Monthly Annuity Unit Value on Payment Calculation Date for
Payment First Variable Monthly Annuity Payment X
Purchase Rate
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
Variable Monthly Value on the Applicable Payment
Annuity 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.
PERFORMANCE MEASURES
MassMutual may show the performance for the Divisions of the Separate Account in
the following ways:
Standardized Average Annual Total Return
----------------------------------------
MassMutual will show the "SEC Average Annual Total Return," formulated as
prescribed by the rules of the SEC, for each Division of the Separate Account
except for any Division which has been in existence for less than one year. The
Standardized Average Annual Total Return is the effective annual compounded rate
of return that would have produced the cash redemption value over the stated
period had the performance remained constant throughout. The calculation assumes
a single $1,000 payment made at the beginning of the period and full redemption
at the end of the period. It reflects a deduction for the contingent deferred
sales charge, the annual administrative charge and all other Fund, Separate
Account and Contract level charges except premium taxes, if any. The annual
administrative charge will be apportioned among the Divisions of the Separate
Account based upon the percentages of in force Contracts investing in each of
the Divisions. For any Division which has been in existence for less than one
year, MassMutual will show the aggregate total return from the inception of the
Division within the Separate Account to the end of the period. This aggregate
total return will reflect the change in unit value and a deduction for the
contingent deferred sales charge. The Company may choose to Standardized Average
Annual Total Returns based on inception of the underlying Fund.
16
<PAGE>
The following table shows the Total Return for the Divisions of the Separate
Account for the period ending December 31, 1996.
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years Since Inception
------ ------- -------- ---------------
<S> <C> <C> <C> <C>
MML Equity 13.07% 12.79% 11.98% (date shown)
MML Managed Bond -3.63 5.45 6.79
MML Blend 6.91 9.69 10.28
Opp Global Securities 10.12 10.24 N/A 2.08% (11/12/90)
Opp Capital Appreciation 12.65 14.49 14.59
Opp Growth 17.60 14.00 12.39
Opp Multiple Strategies 8.19 9.60 N/A 12.79 (2/2/87)
Opp High Income 8.05 12.89 12.16
Opp Bond -2.13 5.82 7.23
Opp Strategic Bond 4.84 N/A N/A 8.25 (5/3/93)
Opp Growth Income 25.15 N/A N/A 35.27 (7/3/95)
</TABLE>
Additional Performance Measures
-------------------------------
The performance figures discussed below may be calculated on the basis of the
historical performance of the Funds, and may assume the Contracts were in
existence prior to their inception date, (which they were not). Beginning the
date the Contracts became available, actual Accumulation Unit values are used
for the calculations. These returns may be based on specified premium patterns
which produce the resulting Accumulated Values. They reflect a deduction for the
Separate Account expenses, MML Trust expenses, Oppenheimer Trust expenses, and
the annual Administrative Charge. They do not include contingent deferred sales
charges or premium taxes (if any), which if included would reduce the
percentages reported.
The difference between the first set of additional performance measures,
ANNUALIZED RETURNS on Accumulation Unit Values, and the second set, the
NON-STANDARDIZED ANNUAL and AVERAGE ANNUAL TOTAL RETURNS, is that the second set
includes the deduction of the annual Administrative Charge, whereas the first
set does not.
ACCUMULATION UNIT VALUES
ANNUALIZED RETURNS
The ANNUALIZED RETURN, or average annual change in Accumulation Unit values, may
be shown with respect to one or more periods. For one year, the Annualized
Return is the effective annual rate of return. For periods greater than one
year, the Annualized Return will be the effective annual compounded rate of
return for the periods stated. Since the value of an Accumulation Unit reflects
the expenses of the Separate Account and Trusts (See Table of Fees and Expenses
of the Prospectus), the Annualized Returns also reflect these expenses. These
percentages, however, do not reflect contingent deferred sales charge or premium
---
taxes (if any), which if included would reduce the percentages that MassMutual
reports.
17
<PAGE>
Annualized Accumulation Unit Value Return
For Periods Ending 12/31/96
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years Since Inception
------ ------- ------- -------- ---------------
<S> <C> <C> <C> <C> <C>
MML Equity 18.62% 16.36% 13.14% 12.08% (date shown)
MML Managed Bond 1.83 4.33 5.79 6.84
MML Blend 12.40 11.37 10.01 10.34
Opp Global Securities 15.94 2.81 10.83 N/A 9.11% (11/12/90)
Opp Capital Appreciation 18.53 12.19 15.08 14.89
Opp Growth 23.51 18.36 14.64 12.74
Opp Multiple Strategies 13.92 9.66 10.14 N/A 10.05 (2/2/87)
Opp High Income 13.69 8.83 13.30 12.32
Opp Bond 3.35 4.87 6.19 7.30
Opp Strategic Bond 10.54 6.06 N/A N/A 5.87 (5/3/93)
Opp Growth Income 30.73 N/A N/A N/A 38.35 (7/3/95)
</TABLE>
The NON-STANDARDIZED ANNUAL TOTAL RETURN and the NON-STANDARDIZED AVERAGE ANNUAL
TOTAL RETURN reflect a deduction for the Annual Administrative Charge as well as
reflecting deductions for the Separate Account expenses and the expenses of the
Trusts. They are based on specified premium patterns which produce the resulting
Accumulated Values. They do not include Sales Charges or premium taxes (if any),
which would reduce the percentages reported.
The NON-STANDARDIZED ANNUAL TOTAL RETURN for a Division of the Separate Account
is the effective annual rate of return that would have produced the ending
Accumulated Value of the stated one-year period had the division been in
existence.
The NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN for a Division of the Separate
Account is the effective annual compounded rate of return that would have
produced the ending Accumulated Value over the stated period had the performance
remained constant throughout.
Note: The NON-STANDARDIZED ANNUAL TOTAL RETURN will be less than the
NON-STANDARDIZED ANNUALIZED RETURN on Accumulation Unit values for the same
period due to the effect of the annual Administrative Charge. Additionally, the
magnitude of this difference will depend on the size of the Accumulated Value
from which the annual Administrative Charge is deducted.
The performance figures discussed above reflect historical results of the Funds
and are not intended to indicate or to predict future performance.
Performance information for the Separate Account Divisions may be: (a) compared
to other variable annuity separate accounts or other investment products
surveyed by Lipper Analytical Services, Inc. a nationally recognized independent
reporting service or a similar services that rank mutual funds and other
investment companies by overall performance, investment objectives and assets;
(b) tracked by other ratings services, companies, publications or persons who
rank separate accounts or other investment products on overall performance or
other criteria; and (c) included in data bases that can be used to produce
reports and illustrations by organizations such as CDA Wiesenberger. Performance
figures will be calculated in accordance with standardized methods established
by each reporting service.
YIELD AND EFFECTIVE YIELD
MassMutual may show yield and effective yield figures for the Money Market and
Money Fund Divisions of the Separate Account. "Yield" refers to the income
generated by an investment in either money market Division over a seven-day
period, which is then "annualized." That is, the amount of income generated by
the investment during that week is assumed to be generated each week over a
52-week period and is shown as a percentage of the
18
<PAGE>
investment. The "effective" yield is calculated similarly but, when annualized,
the income earned by an investment in a money market division is assumed to be
re-invested. Therefore the effective yield will be slightly higher than the
yield because of the compounding effect of this assumed reinvestment. These
figures will reflect a deduction for Fund, Separate Account, and certain
Contract level charges and the Annual Administrative Charge assuming such
contract remains in force. The Administrative Charge is based on a hypothetical
contract where such charge is applicable. These figures do not reflect the Sales
charge or premium taxes (if any), which if included would reduce the yields.
The following tables show the 7-day Yield and Effective Yield for the Money
Market Divisions of the Separate Accounts for the periods ended December 31,
1996:
<TABLE>
<CAPTION>
MML Oppenheimer
Money Market Money Market
<S> <C> <C>
Yield 3.54% 2.94%
Effective Yield 3.61 2.98
After administrative fee deduction (0.11%)
Yield 3.43% 2.83%
Effective Yield 3.50 2.87
</TABLE>
19
<PAGE>
LIFETRUST HYPOTHETICAL PROJECTIONS
<TABLE>
<CAPTION>
OPPENHEIMER GLOBAL SECURITIES
-----------------------------
$10,000 purchase payment made December 31, 1990
Values prior to current Non-Standardized
-------------------------------------
year's purchase payment One Average
----------------------- Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/91 $10,000 $10,165 1.65% 1.65%
12/31/92 $10,000 $9,281 -8.69% -3.66%
12/31/93 $10,000 $15,558 67.64% 15.87%
12/31/94 $10,000 $14,434 -7.23% 9.61%
12/31/95 $10,000 $14,524 0.62% 7.75%
12/31/96 $10,000 $16,809 15.73% 9.04%
<CAPTION>
OPPENHEIMER CAPITAL APPRECIATION
--------------------------------
$10,000 purchase payment made December 31, 1986
Values prior to current Non-Standardized
-------------------------------------
year's purchase payment One Average
----------------------- Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/87 $10,000 $11,244 12.44% 12.44%
12/31/88 $10,000 $12,545 11.57% 12.01%
12/31/89 $10,000 $15,751 25.56% 16.35%
12/31/90 $10,000 $12,890 -18.17% 6.55%
12/31/91 $10,000 $19,636 52.34% 14.45%
12/31/92 $10,000 $22,319 13.66% 14.32%
12/31/93 $10,000 $27,992 25.42% 15.84%
12/31/94 $10,000 $25,478 -8.98% 12.40%
12/31/95 $10,000 $33,282 30.63% 14.29%
12/31/96 $10,000 $39,418 18.44% 14.70%
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
OPPENHEIMER GROWTH
------------------
$10,000 purchase payment made December 31, 1986
Values prior to current Non-Standardized
-------------------------------------
year's purchase payment One Average
----------------------- Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/87 $10,000 $10,158 1.58% 1.58%
12/31/88 $10,000 $12,200 20.10% 10.45%
12/31/89 $10,000 $14,838 21.62% 14.06%
12/31/90 $10,000 $13,400 -9.69% 7.59%
12/31/91 $10,000 $16,558 23.57% 10.61%
12/31/92 $10,000 $18,670 12.76% 10.97%
12/31/93 $10,000 $19,715 5.60% 10.18%
12/31/94 $10,000 $19,600 -0.59% 8.78%
12/31/95 $10,000 $26,396 34.68% 11.39%
12/31/96 $10,000 $32,572 23.40% 12.53%
<CAPTION>
OPPENHEIMER MULTIPLE STRATEGIES
-------------------------------
$10,000 purchase payment made December 31, 1987
Values prior to current Non-Standardized
-------------------------------------
year's purchase payment One Average
----------------------- Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/88 $10,000 $12,015 20.15% 20.15%
12/31/89 $10,000 $13,685 13.90% 16.98%
12/31/90 $10,000 $13,208 -3.49% 9.72%
12/31/91 $10,000 $15,270 15.62% 11.16%
12/31/92 $10,000 $16,383 7.29% 10.38%
12/31/93 $10,000 $18,702 14.15% 11.00%
12/31/94 $10,000 $18,053 -3.47% 8.81%
12/31/95 $10,000 $21,582 19.55% 10.09%
12/31/96 $10,000 $24,556 13.78% 10.50%
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
OPPENHEIMER HIGH INCOME
-----------------------
$10,000 purchase payment made December 31, 1986
Values prior to current Non-Standardized
-------------------------------------
year's purchase payment One Average
----------------------- Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/87 $10,000 $10,627 6.27% 6.27%
12/31/88 $10,000 $12,082 13.69% 9.92%
12/31/89 $10,000 $12,461 3.14% 7.61%
12/31/90 $10,000 $12,829 2.95% 6.43%
12/31/91 $10,000 $16,911 31.82% 11.08%
12/31/92 $10,000 $19,634 16.10% 11.90%
12/31/93 $10,000 $24,430 24.43% 13.61%
12/31/94 $10,000 $23,295 -4.65% 11.15%
12/31/95 $10,000 $27,630 18.61% 11.95%
12/31/96 $10,000 $31,381 13.58% 12.12%
<CAPTION>
OPPENHEIMER BOND
----------------
$10,000 purchase payment made December 31, 1986
Values prior to current Non-Standardized
-------------------------------------
year's purchase payment One Average
----------------------- Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/87 $10,000 $10,080 0.80% 0.80%
12/31/88 $10,000 $10,801 7.16% 3.93%
12/31/89 $10,000 $12,040 11.47% 6.38%
12/31/90 $10,000 $12,783 6.17% 6.33%
12/31/91 $10,000 $14,797 15.76% 8.15%
12/31/92 $10,000 $15,510 4.82% 7.59%
12/31/93 $10,000 $17,259 11.28% 8.11%
12/31/94 $10,000 $16,659 -3.48% 6.59%
12/31/95 $10,000 $19,196 15.23% 7.51%
12/31/96 $10,000 $19,810 3.20% 7.07%
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
OPPENHEIMER STRATEGIC BOND
--------------------------
$10,000 purchase payment made December 31, 1993
Values prior to current Non-Standardized
-------------------------------------
year's purchase payment One Average
----------------------- Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/94 $10,000 $9,458 -5.42% -5.42%
12/31/95 $10,000 $10,730 13.44% 3.58%
12/31/96 $10,000 $11,831 10.26% 5.77%
<CAPTION>
OPPENHEIMER GROWTH AND INCOME
-----------------------------
$10,000 purchase payment made December 31, 1995
Values prior to current Non-Standardized
------------------------------------
year's purchase payment One Average
----------------------- Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/96 $10,000 $13,043 30.43% 30.43%
MML BLEND
---------
$10,000 purchase payment made December 31, 1986
Values prior to current Non-Standardized
------------------------------------
year's purchase payment One Average
----------------------- Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/87 $10,000 $10,136 1.36% 1.36%
12/31/88 $10,000 $11,305 11.53% 6.32%
12/31/89 $10,000 $13,343 18.03% 10.09%
12/31/90 $10,000 $13,440 0.73% 7.67%
12/31/91 $10,000 $16,405 22.06% 10.41%
12/31/92 $10,000 $17,661 7.66% 9.94%
12/31/93 $10,000 $19,074 8.00% 9.66%
12/31/94 $10,000 $19,245 0.90% 8.53%
12/31/95 $10,000 $23,375 21.46% 9.89%
12/31/96 $10,000 $26,243 12.27% 10.13%
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
MML BOND
--------
$10,000 purchase payment made December 31, 1986
Values prior to current Non-Standardized
-------------------------------------
year's purchase payment One Average
----------------------- Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/87 $10,000 $10,087 0.87% 0.87%
12/31/88 $10,000 $10,626 5.34% 3.08%
12/31/89 $10,000 $11,793 10.98% 5.65%
12/31/90 $10,000 $12,573 6.61% 5.89%
12/31/91 $10,000 $14,434 14.80% 7.62%
12/31/92 $10,000 $15,243 5.61% 7.28%
12/31/93 $10,000 $16,776 10.06% 7.67%
12/31/94 $10,000 $15,891 -5.28% 5.96%
12/31/95 $10,000 $18,645 17.33% 7.17%
12/31/96 $10,000 $18,957 1.67% 6.60%
<CAPTION>
MML EQUITY
----------
$10,000 purchase payment made December 31, 1986
Values prior to current Non-Standardized
-------------------------------------
year's purchase payment One Average
----------------------- Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/87 $10,000 $9,923 -0.77% -0.77%
12/31/88 $10,000 $11,388 14.76% 6.71%
12/31/89 $10,000 $13,787 21.07% 11.30%
12/31/90 $10,000 $13,495 -2.12% 7.78%
12/31/91 $10,000 $16,680 23.59% 10.77%
12/31/92 $10,000 $18,141 8.76% 10.44%
12/31/93 $10,000 $19,561 7.83% 10.06%
12/31/94 $10,000 $20,051 2.51% 9.09%
12/31/95 $10,000 $25,912 29.23% 11.16%
12/31/96 $10,000 $30,706 18.50% 11.87%
</TABLE>
24
<PAGE>
Report Of Independent Accountants
To the Contract Owners of Massachusetts Mutual Variable Annuity Separate Account
3 and the Board of Directors of Massachusetts Mutual Life Insurance Company
We have audited the accompanying statements of assets and liabilities of the
Massachusetts Mutual Variable Annuity Separate Account 3 (comprising,
respectively, MML Equity Division, MML Money Market Division, MML Managed Bond
Division, MML Blend Division, Oppenheimer Money Division, Oppenheimer High
Income Division, Oppenheimer Bond Division, Oppenheimer Capital Appreciation
Division, Oppenheimer Growth Division, Oppenheimer Multiple Strategies Division,
Oppenheimer Global Securities Division, Oppenheimer Strategic Bond Division and
Oppenheimer Growth & Income Division - the "Divisions") as of December 31, 1996,
and the related statements of operations and statements of changes in net assets
for the periods indicated thereon. These financial statements are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
verification of investments owned as of December 31, 1996, by examination of the
records of MML Series Investment Fund and by confirmation with Oppenheimer
Variable Account Funds. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
Divisions constituting Massachusetts Mutual Variable Annuity Separate Account 3
as of December 31, 1996, the results of their operations and the changes in
their net assets for the periods indicated thereon, in conformity with generally
accepted accounting principles.
Also, in our opinion, based on these audits and our previous audits, made in
accordance with generally accepted auditing standards, of the financial
statements of Massachusetts Mutual Variable Annuity Separate Account 3 for each
respective period, indicated thereon, and upon which we expressed an unqualified
opinion, the financial information under the caption "Condensed Financial
Information" for each date appearing in the Prospectus, is fairly stated in all
material respects in relation to the financial statements from which it has been
derived.
Coopers & Lybrand L.L.P.
Springfield, Massachusetts
February 4, 1997
1
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 3
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
Equity Market Bond Blend Money Income Bond
Division Division Division Division Division Division Division
---------- ---------- ---------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments
Number of shares (Note 2)........ 121,939 4,145,208 122,839 117,059 4,207,219 867,807 206,068
---------- ---------- ---------- --------- ---------- ---------- -----------
Identified cost (Note 3B)........ $3,420,963 $4,145,208 $1,499,251 $2,512,430 $4,207,219 $9,447,870 $ 2,363,372
========== ========== ========== ========== ========== ========== ===========
Value (Note 3A).................. $3,632,108 $4,145,208 $1,480,003 $2,572,172 $4,207,219 $9,658,691 $ 2,396,576
Dividends receivable.............. 169,164 17,246 23,517 87,860 9,816 - -
Receivable from Massachusetts
Mutual Life Insurance Company.... 14,878 - - - 15,142 -
---------- ---------- ---------- --------- ---------- ---------- -----------
Total assets.................... 3,816,150 4,162,454 1,503,520 2,660,032 4,217,035 9,673,833 2,396,576
LIABILITIES
Payable to Massachusetts Mutual
Life Insurance Company........... - 4,758 48 162 142,270 - 95
---------- ---------- ---------- --------- ---------- ---------- -----------
NET ASSETS........................ $3,816,150 $4,157,696 $1,503,472 $2,659,870 $4,074,765 $9,673,833 $ 2,396,481
========== ========== ========== ========== ========== ========== ===========
Net assets consists of:
Accumulation units - value........ $3,816,150 $4,157,696 $1,503,472 $2,659,870 $4,074,765 $9,673,833 $ 2,396,481
========== ========== ========== ========== ========== ========== ===========
Accumulation units (Note 7)
Contractowners.................. 2,490,560 3,831,345 1,241,028 1,942,038 3,747,549 7,368,483 2,019,349
Massachusetts Mutual
Life Insurance Company......... 5,000 5,000 5,000 5,000 5,000 5,000 5,000
---------- ---------- ---------- --------- ---------- ---------- -----------
Total units................... 2,495,560 3,836,345 1,246,028 1,947,038 3,752,549 7,373,483 2,024,349
========== ========== ========== ========== ========== ========== ===========
NET ASSET VALUE PER
ACCUMULATION UNIT
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
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Multiple Global Strategic Oppenheimer
Appreciation Growth Strategies Securities Bond Growth & Income
Division Division Division Division Division Division
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments
Number of shares (Note 2)......... 388,541 756,502 716,944 665,779 3,800,447 1,436,219
----------- ----------- ----------- ----------- ----------- -----------
Identified cost (Note 3B)......... $14,367,743 $18,754,513 $10,576,544 $10,736,611 $18,891,024 $21,749,739
=========== =========== =========== =========== =========== ===========
Value (Note 3A)................... $15,032,640 $20,607,124 $11,205,830 $11,737,682 $19,344,277 $23,510,912
Dividends receivable............... - - - - - -
Receivable from Massachusetts
Mutual Life Insurance Company..... - 61,548 - - - 101,891
----------- ----------- ----------- ----------- ----------- -----------
Total assets..................... 15,032,640 20,668,672 11,205,830 11,737,682 19,344,277 23,612,803
LIABILITIES
Payable to Massachusetts Mutual
Life Insurance Company............ 1,907 - 37,196 21,945 734 -
----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS......................... $15,030,733 $20,668,672 $11,168,634 $11,715,737 $19,343,543 $23,612,803
=========== =========== =========== =========== =========== ===========
Net assets consists of:
Accumulation units - value......... $15,030,733 $20,668,672 $11,168,634 $11,715,737 $19,343,543 $23,612,803
=========== =========== =========== =========== =========== ===========
Accumulation units (Note 7)
Contractowners................... 9,684,946 12,625,598 8,304,575 10,653,741 15,654,377 14,511,671
Massachusetts Mutual
Life Insurance Company.......... 5,000 5,000 5,000 5,000 5,000 5,000
----------- ----------- ----------- ----------- ----------- -----------
Total units.................... 9,689,946 12,630,598 8,309,575 10,658,741 15,659,377 14,516,671
=========== =========== =========== =========== =========== ===========
NET ASSET VALUE PER
ACCUMULATION UNIT
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>
See Notes to Financial Statements.
1
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 3
STATEMENT OF OPERATIONS
For The Year Ended December 31, 1996
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
Equity Market Bond Blend Money Income Bond
Division Division Division Division Division Division Division
---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income
Dividends (Note 3B)................ $ 169,188 $ 150,782 $ 80,382 $ 125,330 $ 138,383 $ 589,884 $ 106,945
Expenses
Mortality and expense
risk fee (Note 4)................. 28,289 42,916 16,317 18,788 38,430 79,364 26,928
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net investment income (loss)
(Note 3C)......................... 140,899 107,866 64,065 106,542 99,953 510,520 80,017
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net realized and unrealized gain
(loss) on investments
Net realized gain on investments
(Notes 3B, 3C and 6).............. 43,794 - 10,816 23,015 - 40,542 16,906
Change in net unrealized
appreciation/depreciation of
investments....................... 184,186 - (35,066) 49,512 - 196,512 20,296
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net gain (loss) on investments..... 227,980 - (24,250) 72,527 - 237,054 37,202
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net increase in net assets
resulting from operations......... $ 368,879 $ 107,866 $ 39,815 $ 179,069 $ 99,953 $ 747,574 $ 117,219
========== ========== ========== ========== ========== ========== ===========
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Multiple Global Strategic Oppenheimer
Appreciation Growth Strategies Securities Bond Growth & Income
Division Division Division Division Division Division
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income
Dividends (Note 3B)................ $ 226,078 $ 499,454 $ 541,404 $ - $ 999,676 $ 165,736
Expenses
Mortality and expense
risk fee (Note 4)................. 107,647 156,324 107,052 91,362 158,983 154,648
---------- ---------- ---------- ---------- ---------- -----------
Net investment income (loss)
(Note 3C)......................... 118,431 343,130 434,352 (91,362) 840,693 11,088
---------- ---------- ---------- ---------- ---------- -----------
Net realized and unrealized gain
(loss) on investments
Net realized gain on investments
(Notes 3B, 3C and 6).............. 193,591 304,402 25,435 31,269 33,224 1,103,346
Change in net unrealized
appreciation/depreciation of
investments....................... 442,491 1,632,993 559,298 1,047,309 371,733 1,513,108
---------- ---------- ---------- ---------- ---------- -----------
Net gain (loss) on investments..... 636,082 1,937,395 584,733 1,078,578 404,957 2,616,454
---------- ---------- ---------- ---------- ---------- -----------
Net increase in net assets
resulting from operations......... $ 754,513 $2,280,525 $1,019,085 $ 987,216 $1,245,650 $ 2,627,542
========== ========== ========== ========== ========== ===========
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 3
STATEMENT OF CHANGES IN NET ASSETS
For The Year Ended December 31, 1996
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
Equity Market Bond Blend Money Income Bond
Division Division Division Division Division Division Division
---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss)...... $ 140,899 $ 107,866 $ 64,065 $ 106,542 $ 99,953 $ 510,520 $ 80,017
Net realized gain
on investments................... 43,794 - 10,816 23,015 - 40,542 16,906
Change in net unrealized
appreciation/depreciation
of investments................... 184,186 - (35,066) 49,512 - 196,512 20,296
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net increase in net assets
resulting from operations........ 368,879 107,866 39,815 179,069 99,953 747,574 117,219
---------- ---------- ---------- ---------- ---------- ---------- -----------
Capital transactions: (Note 7)
Net contract payments (Note 5).... 2,555,306 5,393,266 1,030,584 1,831,880 3,634,212 6,024,668 1,362,876
Withdrawal of funds............... (16,047) (298,788) (1,625) (11,927) (354,202) (178,972) (59,652)
Reimbursement (payment)
of accumulation
unit value fluctuation............ 1,097 (119) (158) (161) 220 (1,674) (1,428)
Withdrawal due to administrative
and contingent deferred sales
charges (Note 5)................. (376) (647) (99) (341) (499) (723) (197)
Divisional transfers.............. 207,759 (2,816,845) (151,700) 23,605 (1,876,439) 635,897 234,679
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net increase in net assets
resulting from capital
transactions..................... 2,747,739 2,276,867 877,002 1,843,056 1,403,292 6,479,196 1,536,278
---------- ---------- ---------- ---------- ---------- ---------- -----------
Total increase..................... 3,116,618 2,384,733 916,817 2,022,125 1,503,245 7,226,770 1,653,497
NET ASSETS, at beginning
of the year....................... 699,532 1,772,963 586,655 637,745 2,571,520 2,447,063 742,984
---------- ---------- ---------- ---------- ---------- ---------- -----------
NET ASSETS, at end
of the year....................... $3,816,150 $4,157,696 $1,503,472 $2,659,870 $4,074,765 $9,673,833 $ 2,396,481
========== ========== ========== ========== ========== ========== ===========
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Multiple Global Strategic Oppenheimer
Appreciation Growth Strategies Securities Bond Growth & Income
Division Division Division Division Division Division
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss)...... $ 118,431 $ 343,130 $ 434,352 $ (91,362) $ 840,693 $ 11,088
Net realized gain
on investments................... 193,591 304,402 25,435 31,269 33,224 1,103,346
Change in net unrealized
appreciation/depreciation
of investments................... 442,491 1,632,993 559,298 1,047,309 371,733 1,513,108
---------- ---------- ---------- ---------- ---------- -----------
Net increase in net assets
resulting from operations........ 754,513 2,280,525 1,019,085 987,216 1,245,650 2,627,542
---------- ---------- ---------- ---------- ---------- -----------
Capital transactions: (Note 7)
Net contract payments (Note 5).... 11,489,303 14,481,999 4,968,283 8,050,627 12,744,725 18,214,144
Withdrawal of funds............... (144,619) (291,440) (183,715) (130,114) (405,621) (285,744)
Reimbursement (payment)
of accumulation
unit value fluctuation............ (7,722) (804) (1,116) (5,982) 489 26,692
Withdrawal due to administrative
and contingent deferred sales
charges (Note 5)................. (1,655) (2,242) (1,092) (1,077) (1,417) (1,097)
Divisional transfers.............. 355,482 530,087 752,658 317,751 848,290 938,776
---------- ---------- ---------- ---------- ---------- -----------
Net increase in net assets
resulting from capital
transactions..................... 11,690,789 14,717,600 5,535,018 8,231,205 13,186,466 18,892,771
---------- ---------- ---------- ---------- ---------- -----------
Total increase..................... 12,445,302 16,998,125 6,554,103 9,218,421 14,432,116 21,520,313
NET ASSETS, at beginning
of the year....................... 2,585,431 3,670,547 4,614,531 2,497,316 4,911,427 2,092,490
---------- ---------- ---------- ---------- ---------- -----------
NET ASSETS, at end
of the year....................... $15,030,733 $20,668,672 $11,168,634 $11,715,737 $19,343,543 $23,612,803
=========== =========== =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 3
STATEMENT OF CHANGES IN NET ASSETS
For The Year Ended December 31, 1995
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
Equity Market Bond Blend Money Income Bond
Division Division Division Division Division Division Division
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss)...... $ 22,234 $ 16,655 $ 15,449 $ 21,322 $ 66,086 $ 106,174 $ 15,933
Net realized gain
on investments................... 5,755 - 608 8,025 - 2,457 891
Change in net unrealized
appreciation/depreciation
of investments................... 27,162 - 15,857 10,381 - 14,550 13,035
---------- ---------- ---------- --------- --------- ---------- ----------
Net increase (decrease) in net
assets resulting from operations. 55,151 16,655 31,914 39,728 66,086 123,181 29,859
---------- ---------- ---------- --------- --------- ---------- ----------
Capital transactions: (Note 7)
Net contract payments (Note 5).... 630,304 2,145,397 218,912 305,175 3,818,145 2,313,073 646,806
Transfer from Massachusetts
Mutual Life Insurance Company.... - - - - - - -
Withdrawal of funds............... (665) (410) - (4,473) (61,450) (5,171) (2,500)
Reimbursement (payment) of
accumulation unit value
fluctuation...................... 1,318 129 330 (82) 115 688 (16)
Withdrawal due to administrative
and contingent deferred sales
charges (Note 5)................. (2) - - - - - -
Divisional transfers.............. 8,315 (393,956) 330,333 292,273 (1,256,498) 10,336 63,776
---------- ---------- ---------- --------- --------- ---------- ----------
Net increase in net assets
resulting from capital
transactions..................... 639,270 1,751,160 549,575 592,893 2,500,312 2,318,926 708,066
---------- ---------- ---------- --------- --------- ---------- ----------
Total increase..................... 694,421 1,767,815 581,489 632,621 2,566,398 2,442,107 737,925
NET ASSETS, at beginning
of the period/year................ 5,111 5,148 5,166 5,124 5,122 4,956 5,059
---------- ---------- ---------- --------- --------- ---------- ----------
NET ASSETS, at end
of the year....................... $ 699,532 $1,772,963 $ 586,655 $ 637,745 $2,571,520 $2,447,063 $ 742,984
========== ========== ========== ========== ========== ========== ===========
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Multiple Global Strategic *Oppenheimer
Appreciation Growth Strategies Securities Bond Growth & Income
Division Division Division Division Division Division
----------- ----------- ----------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss)....... $ (11,933) $ (16,221) $ 54,581 $ (12,147) $ 137,661 $ (3,330)
Net realized gain
on investments.................... 54,553 49,866 25,446 22,914 11,287 9,555
Change in net unrealized
appreciation/depreciation
of investments.................... 222,389 219,700 70,124 (45,921) 81,708 248,065
---------- ---------- ---------- ---------- ---------- -----------
Net increase (decrease) in net
assets resulting from operations.. 265,009 253,345 150,151 (35,154) 230,656 254,290
---------- ---------- ---------- ---------- ---------- -----------
Capital transactions: (Note 7)
Net contract payments (Note 5)..... 2,053,494 3,430,028 4,178,837 2,449,565 4,679,812 1,591,201
Transfer from Massachusetts
Mutual Life Insurance Company..... - - - - - 5,000
Withdrawal of funds................ (2,859) (3,267) (3,954) (4,634) (85,153) (2,850)
Reimbursement (payment) of
accumulation unit value
fluctuation....................... (3,814) 605 (3,308) (3,105) 1,533 5,385
Withdrawal due to administrative
and contingent deferred sales
charges (Note 5).................. (10) (9) (40) (50) - (8)
Divisional transfers............... 268,505 (15,564) 287,819 85,521 79,668 239,472
---------- ---------- ---------- ---------- ---------- -----------
Net increase in net assets
resulting from capital
transactions...................... 2,315,316 3,411,793 4,459,354 2,527,297 4,675,860 1,838,200
---------- ---------- ---------- ---------- ---------- -----------
Total increase...................... 2,580,325 3,665,138 4,609,505 2,492,143 4,906,516 2,092,490
NET ASSETS, at beginning
of the period/year................. 5,106 5,409 5,026 5,173 4,911 -
---------- ---------- ---------- ---------- ---------- -----------
NET ASSETS, at end
of the year........................ $2,585,431 $3,670,547 $4,614,531 $2,497,316 $4,911,427 $ 2,092,490
========== ========== ========== ========== ========== ===========
*For the Period July 3, 1995 (Date of Commencement of Operations) through December 31, 1995
See Notes to Financial Statements.
4
</TABLE>
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 3
Notes To Financial Statements
1. HISTORY
Massachusetts Mutual Variable Annuity Separate Account 3 ("Separate
Account 3") is a separate investment account established on January 12,
1994 by Massachusetts Mutual Life Insurance Company ("MassMutual").
Separate Account 3 operates as a registered unit investment trust pursuant
to the Investment Company Act of 1940 and the rules promulgated
thereunder.
On November 15, 1994, MassMutual paid $60,000 to provide the initial
capital for Separate Account 3's twelve initial divisions: 14,099 shares
were purchased in the two management investment companies described in
Note 2.
On July 5, 1995, MassMutual paid $5,000 to establish Separate Account 3's
thirteenth division: 500 shares were purchased in the Growth & Income
Division of the Oppenheimer Variable Account Fund described in Note 2.
2. INVESTMENT OF THE SEPARATE ACCOUNT 3 ASSETS
Separate Account 3 maintains thirteen divisions. Each division invests in
corresponding shares of either MML Series Investment Trust ("MML Trust")
or Oppenheimer Variable Account Funds ("Oppenheimer Trust").
MML Equity Fund, MML Money Market Fund, MML Managed Bond Fund and MML
Blend Fund are the four series of shares of the MML Trust. The MML Trust
is a no-load, registered, open-end, diversified management investment
company for which MassMutual serves as investment manager. Concert Capital
Management, Inc. ("Concert") served as the investment sub-advisor to MML
Equity Fund and the Equity Sector of the MML Blend Fund from 1993-1996.
Concert merged with and into David L. Babson & Company, Inc. ("Babson")
effective December 31, 1996. At such time, both Concert and Babson were
wholly owned subsidiaries of Babson Acquisition Corporation, which is a
controlled subsidiary of MassMutual. Thus, effective January 1, 1997,
Babson serves as the investment sub-advisor to MML Equity Fund and the
Equity Sector of the MML Blend Fund. MassMutual paid Concert a quarterly
fee equal to an annual rate of .13% of the average daily net asset value
of MML Equity Fund and the Equity Sector of MML Blend Fund.
Oppenheimer Money Fund, Oppenheimer High Income Fund, Oppenheimer Bond
Fund, Oppenheimer Capital Appreciation Fund, Oppenheimer Growth Fund,
Oppenheimer Multiple Strategies Fund, Oppenheimer Global Securities Fund,
Oppenheimer Strategic Bond Fund and Oppenheimer Growth & Income Fund (the
"Oppenheimer Funds") are the nine separate funds of the Oppenheimer Trust.
The Oppenheimer Trust is a registered, open-end, diversified management
investment company, for which OppenheimerFunds, Inc. ("OFI"), a
controlled subsidiary of MassMutual, serves as investment advisor. (Prior
to January 5, 1996, OFI was known as Oppenheimer Management Corporation.)
In addition to the thirteen divisions of Separate Account 3, 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 MassMutual'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 3 in preparation of the financial
statements in conformity with generally accepted accounting principles.
A. Investment Valuation
The investments in 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.
5
<PAGE>
Notes To Financial Statements (Continued)
C. Federal Income Taxes
Operations of Separate Account 3 form a part of the total operations of
MassMutual, and Separate Account 3 is not taxed separately. MassMutual is
taxed as a life insurance company under the provisions of the 1986
Internal Revenue Code, as amended. Separate Account 3 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 3's investment performance. Accordingly,
no provision for federal income tax has been made. MassMutual may,
however, make such a charge in the future if an unanticipated change of
current law results in a company tax liability attributable to Separate
Account 3.
D. Annuity Reserves
Annuity reserves are developed by using accepted actuarial methods and are
computed using the 1983 Annuity Table a, with Projection Scale G. Since
all contracts are in the accumulation phase, Separate Account 3 has not
recorded any annuity reserves at December 31, 1996.
E. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
4. CHARGES
An asset charge is computed against the net asset value of Separate
Account 3'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 the charge is made daily at an annual
rate which is currently equal to l.15%, and will not exceed 1.25% of the
Net Asset Value. The administrative expense part of the asset 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 Net Asset Value assessed to reimburse
MassMutual for the cost of providing the enhanced death benefit under the
Contract. MassMutual also charges for administrative costs and may impose
a contingent deferred sales charge and a premium tax charge upon
redemption, maturity or annuitization.
5. CHARGES/DEDUCTIONS FOR ADMINISTRATIVE CHARGES, CONTINGENT DEFERRED
SALES CHARGES AND PREMIUM TAXES
<TABLE>
<CAPTION>
Administrative
Charges and
Contingent
For the Year Ended Contract Deferred
December 31, 1996 Payments Sales Charges
----------------- -------- -------------
<S> <C> <C>
MML Equity Division................................... $ 2,555,306 $ 376
MML Money Market Division............................. 5,393,266 647
MML Managed Bond Division............................. 1,030,584 99
MML Blend Division.................................... 1,831,880 341
Oppenheimer Money Division............................ 3,634,212 499
Oppenheimer High Income Division...................... 6,024,668 723
Oppenheimer Bond Division............................. 1,362,876 197
Oppenheimer Capital Appreciation Division............. 11,489,303 1,655
Oppenheimer Growth Division........................... 14,481,999 2,242
Oppenheimer Multiple Strategies Division.............. 4,968,283 1,092
Oppenheimer Global Securities Division................ 8,050,627 1,077
Oppenheimer Strategic Bond Division................... 12,744,725 1,417
Oppenheimer Growth & Income Division.................. 18,214,144 1,097
</TABLE>
6
<PAGE>
Notes To Financial Statements (Continued)
6. PURCHASES AND SALES OF INVESTMENTS
<TABLE>
<CAPTION>
For the Year Ended Cost of Proceeds
December 31, 1996 Purchases from Sales
----------------- --------- ----------
<S> <C> <C>
MML Equity Fund...................................... $ 2,995,564 $ 265,454
MML Money Market Fund................................ 6,007,167 3,611,129
MML Managed Bond Fund................................ 1,322,713 396,232
MML Blend Fund....................................... 2,282,995 402,832
Oppenheimer Money Fund............................... 11,458,095 9,377,373
Oppenheimer High Income Fund......................... 7,953,174 969,767
Oppenheimer Bond Fund................................ 4,513,720 2,897,400
Oppenheimer Capital Appreciation Fund................ 12,863,453 1,042,010
Oppenheimer Growth Fund.............................. 17,417,854 2,394,793
Oppenheimer Multiple Strategies Fund................. 6,548,329 511,921
Oppenheimer Global Securities Fund................... 9,370,985 1,203,375
Oppenheimer Strategic Bond Fund...................... 14,891,235 863,815
Oppenheimer Growth & Income Fund..................... 24,622,308 5,802,313
</TABLE>
7. DISTRIBUTION AGREEMENT
Effective May 1, 1996, MML Distributors, LLC ("MML Distributors"), a
wholly-owned subsidiary of MassMutual, serves as principal underwriter of
the contracts pursuant to an underwriting and servicing agreement among
MML Distributors, MassMutual and Separate Account 3. MML Distributors is
registered with the Securities and Exchange Commission (the "SEC") as a
broker-dealer under the Securities Exchange Act of 1934 and is a member of
the National Association of Securities Dealers, Inc. (the "NASD"). MML
Distributors may enter into selling agreements with other broker-dealers
who are registered with the SEC and are members of the NASD in order to
sell the contracts.
Prior to May 1, 1996, MML Investors Services, Inc. ("MMLISI") a
wholly-owned subsidiary of MassMutual, served as principal underwriter of
the contracts. Effective May 1, 1996, MMLISI serves as co-underwriter of
the policies pursuant to underwriting and servicing agreements among
MMLISI, MassMutual and Separate Account 3, MMLISI is registered with the
SEC as a broker-dealer under the Securities Exchange Act of 1934 and is a
member of the NASD. Registered representatives of MMLISI sell the
contracts as authorized variable life insurance agents under applicable
state insurance laws.
Under the sales agreement among MMLISI, MassMutual and Separate Account 3,
agents receive commissions and service fees from MMLISI for selling and
servicing the contracts. MassMutual reimburses MMLISI for such
compensation and for other expenses incurred in marketing and selling the
contracts.
7
<PAGE>
Notes To Financial Statements (Continued)
8. NET INCREASE (DECREASE) IN ACCUMULATION UNITS
<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, 1996 Division Division Division Division Division Division Division
----------------- --------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Units purchased............ 1,813,898 5,071,211 878,712 1,417,972 3,385,677 4,881,608 1,187,235
Units withdrawn and
transferred to Guaranteed
Principal Account......... (11,671) (281,018) (1,451) (9,200) (330,421) (143,834) (52,135)
Units transferred
between divisions......... 150,709 (2,648,525) (126,339) 13,564 (1,758,641) 515,253 240,582
---------- ----------- --------- ---------- ---------- ---------- ----------
Net Increase............... 1,952,936 2,141,668 750,922 1,422,336 1,296,615 5,253,027 1,375,682
Units, at beginning of the
year..................... 542,624 1,694,677 495,106 524,702 2,455,934 2,120,456 648,667
---------- ----------- --------- ---------- ---------- ---------- ----------
Units, at end of the year.. 2,495,560 3,836,345 1,246,028 1,947,038 3,752,549 7,373,483 2,024,349
========== =========== ========= ========== ========== ========== ==========
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Multiple Global Strategic Oppenheimer
For the Year Ended Appreciation Growth Strategies Securities Bond Growth & Income
December 31, 1996 Division Division Division Division Division Division
----------------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Units purchased............ 7,614,089 9,742,037 3,932,233 7,884,862 10,874,695 12,504,727
Units withdrawn and
transferred to Guaranteed
Principal Account......... (97,170) (195,083) (146,977) (128,318) (348,279) (191,839)
Units transferred
between divisions......... 197,476 313,225 613,080 268,045 737,720 522,008
---------- ---------- ---------- ---------- ----------- -----------
Net Increase............... 7,714,395 9,860,179 4,398,336 8,024,589 11,264,136 12,834,896
Units, at beginning of the
year..................... 1,975,551 2,770,419 3,911,239 2,634,152 4,395,241 1,681,775
---------- ---------- ---------- ---------- ----------- -----------
Units, at end of the year.. 9,689,946 12,630,598 8,309,575 10,658,741 15,659,377 14,516,671
========== ========== ========== ========== =========== ===========
<CAPTION>
For the Year Ended December 31, 1995
and *For the Period July 3, 1995 MML MML Oppenheimer
(Date of Commencement of MML Money Managed MML Oppenheimer High Oppenheimer
Operations) Equity Market Bond Blend Money Income Bond
Through December 31, 1995 Division Division Division Division Division Division Division
------------------------- --------- ----------- --------- --------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Units transferred from
MassMutual for
initial capital........... - - - - - - -
Units purchased............ 531,137 2,069,098 195,120 266,091 3,733,194 2,110,662 587,913
Units withdrawn and
transferred to Guaranteed
Principal Account......... (552) (399) - (3,737) (59,428) (4,687) (2,258)
Units transferred
between divisions......... 6,910 (379,146) 294,862 257,221 (1,222,930) 9,382 57,915
--------- ---------- --------- -------- ---------- ---------- --------
Net Increase............... 537,495 1,689,553 489,982 519,575 2,450,836 2,115,357 643,570
Units, at beginning of the
period/year.............. 5,129 5,124 5,124 5,127 5,098 5,099 5,097
--------- ---------- --------- -------- ---------- ---------- --------
Units, at end of the year.. 542,624 1,694,677 495,106 524,702 2,455,934 2,120,456 648,667
========= ========== ========= ======== ========== ========== ========
<CAPTION>
For the Year Ended December 31, 1995
and *For the Period July 3, 1995 Oppenheimer Oppenheimer Oppenheimer Oppenheimer
(Date of Commencement of Capital Oppenheimer Multiple Global Strategic *Oppenheimer
Operations) Appreciation Growth Strategies Securities Bond Growth & Income
Through December 31, 1995 Division Division Division Division Division Division
------------------------- ----------- ---------- ---------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Units transferred from
MassMutual for
initial capital........... - - - - - 5,000
Units purchased............ 1,738,329 2,774,690 3,654,332 2,543,717 4,395,634 1,460,313
Units withdrawn and
transferred to Guaranteed
Principal Account......... (2,321) (2,540) (3,464) (4,897) (80,091) (2,541)
Units transferred
between divisions......... 234,442 (7,236) 255,271 89,830 74,698 219,003
---------- ---------- ---------- ---------- ---------- ----------
Net Increase............... 1,970,450 2,764,914 3,906,139 2,628,650 4,390,241 1,681,775
Units, at beginning of the
period/year.............. 5,101 5,505 5,100 5,502 5,000 -
---------- ---------- ---------- ---------- ---------- ----------
Units, at end of the year.. 1,975,551 2,770,419 3,911,239 2,634,152 4,395,241 1,681,775
========== ========== ========== ========== ========== ==========
</TABLE>
8
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
STATUTORY FINANCIAL STATEMENTS
as of December 31, 1996 and 1995
and for the years ended December 31, 1996, 1995 and 1994
1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Policyholders of
Massachusetts Mutual Life Insurance Company
We have audited the accompanying statutory statement of financial position of
Massachusetts Mutual Life Insurance Company as of December 31, 1996 and 1995,
and the related statutory statements of income, changes in policyholders'
contingency reserves, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of Connecticut Mutual Life Insurance Company for the year ended
December 31, 1995 or for each of the two years in the period ended December 31,
1995, which, after restatement for the 1996 pooling of interests, reflect 25% of
assets as of December 31, 1995, 26% and 26% of revenue, and 22% and 6% of net
gain from operations for the years ended December 31, 1995 and 1994,
respectively. Those statements were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to the amounts
included for Connecticut Mutual Life Insurance Company, is based solely on the
report of other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company prepared these
financial statements using statutory accounting practices of the National
Association of Insurance Commissioners and the accounting practices prescribed
or permitted by the Division of Insurance of the Commonwealth of Massachusetts
and, prior to 1996, the Department of Insurance of the State of Connecticut,
which practices differ from generally accepted accounting principles. The
effects on the financial statements of the variances between the statutory basis
of accounting and generally accepted accounting principles, although not
determinable at this time, are presumed to be material.
In our report dated February 5, 1996, we expressed our opinion that the 1995 and
1994 financial statements, prepared using statutory accounting practices,
presented fairly, in all material respects, the financial position of the
Massachusetts Mutual Life Insurance Company as of December 31, 1995, and the
results of its operations and its cash flows for each of the two years in the
period ended December 31, 1995 in conformity with generally accepted accounting
principles ("GAAP"). As described in Note 1 to the financial statements,
financial statements of mutual life insurance enterprises issued or reissued
after 1996, and prepared in accordance with statutory accounting principles, are
no longer considered to be presentations in conformity with GAAP. Accordingly,
our present opinion on the 1995 and 1994 statutory financial statements as
presented herein is different from that expressed in our previous report.
In our opinion, because of the effects of the matter discussed in the third
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Massachusetts Mutual Life Insurance Company at December 31, 1996 and 1995,
and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1996.
In our opinion, based upon our audits and the report of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Massachusetts Mutual Life Insurance Company at
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, on the
statutory basis of accounting described in Note 1.
Coopers & Lybrand L.L.P
Independent Accountants
Springfield, Massachusetts
February 7, 1997
2
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31,
1996 1995
---------- -------
(In Millions)
<S> <C> <C>
Assets:
Bonds $25,255.0 $23,625.1
Common stocks 336.6 416.1
Mortgage loans 3,897.1 3,908.2
Real estate 1,840.9 1,652.6
Other investments 1,425.6 1,489.9
Policy loans 4,752.3 4,518.4
Cash and short-term investments 1,075.4 2,342.8
Investment and insurance amounts receivable 1,102.4 1,059.3
Separate account assets 13,563.5 11,309.5
Other assets 97.9 174.6
--------- ---------
$53,346.7 $50,496.5
========= =========
</TABLE>
See notes to statutory financial statements.
3
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF FINANCIAL POSITION, continued
<TABLE>
<CAPTION>
December 31,
1996 1995
-------- --------
(In Millions)
<S> <C> <C>
Liabilities:
Policyholders' reserves and funds $33,341.5 $32,893.1
Policyholders' dividends 885.3 832.6
Policy claims and other benefits 373.8 395.5
Federal income taxes 440.7 338.5
Asset valuation reserve 689.2 566.8
Investment reserves 208.4 188.4
Separate account reserves and liabilities 13,563.1 11,309.6
Amounts due on investments purchased and
other liabilities 1,206.1 1,371.1
---------- ----------
50,708.1 47,895.6
Policyholders' contingency reserves 2,638.6 2,600.9
---------- ----------
$53,346.7 $50,496.5
========== ==========
</TABLE>
See notes to statutory financial statements.
4
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF INCOME
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
--------- --------- ---------
(In Millions)
<S> <C> <C> <C>
Income:
Premium income $6,328.6 $5,727.7 $6,177.2
Net investment and other income 2,861.1 2,898.4 2,803.1
-------- -------- --------
9,189.7 8,626.1 8,980.3
-------- -------- --------
Benefits and expenses:
Policy benefits and payments 6,048.2 5,152.2 5,449.6
Addition to policyholders' reserves and funds 854.7 1,205.4 1,263.2
Commissions and operating expenses 763.5 833.7 959.3
State taxes, licenses and fees 96.4 89.4 105.6
Merger restructuring costs 66.1 44.0 -
-------- -------- --------
7,828.9 7,324.7 7,777.7
-------- -------- --------
Net gain before federal income taxes and dividends 1,360.8 1,301.4 1,202.6
Federal income taxes 276.7 206.2 139.7
-------- -------- --------
Net gain from operations before dividends 1,084.1 1,095.2 1,062.9
Dividends to policyholders 859.9 819.0 824.7
-------- -------- --------
Net gain from operations 224.2 276.2 238.2
Net realized capital gain (loss) 40.3 (85.8) (164.3)
-------- -------- --------
Net income $ 264.5 $ 190.4 $ 73.9
======== ======== ========
</TABLE>
See notes to statutory financial statements.
5
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF CHANGES
IN POLICYHOLDERS' CONTINGENCY RESERVES
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
-------- -------- --------
(In Millions)
<S> <C> <C> <C>
Policyholders' contingency reserves, beginning of year $2,600.9 $2,569.1 $2,470.2
-------- -------- --------
Increases (decreases) due to:
Net income 264.5 190.4 73.9
Net unrealized capital gain (loss) (1.7) 88.7 29.5
Merger restructuring costs, net of tax - (45.4) -
Surplus notes - - 100.0
Change in asset valuation and investment reserves (142.4) (75.6) (38.2)
Change in valuation bases of policyholders' reserves (72.2) (108.2) (51.1)
Change in accounting for mortgage backed securities - 44.5
Change in non-admitted assets and other (10.5) (18.1) (59.7)
-------- -------- --------
37.7 31.8 98.9
-------- -------- --------
Policyholders' contingency reserves, end of year $2,638.6 $2,600.9 $2,569.1
======== ======== ========
</TABLE>
See notes to statutory financial statements.
6
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
---------- ---------- ----------
(In Millions)
<S> <C> <C> <C>
Operating activities:
Net income $ 264.5 $ 190.4 $ 73.9
Addition to policyholders' reserves and funds,
net of transfers to separate accounts 426.7 575.8 546.9
Net realized capital (gain) loss (40.3) 85.8 164.3
Other changes (232.8) (25.2) 124.2
---------- ---------- ----------
Net cash provided by operating activities 418.1 826.8 909.3
---------- ---------- ----------
Investing activities:
Purchases of investments and loans (10,171.5) (10,364.2) (8,351.6)
Sales or maturities of investments and receipts
from repayment of loans 8,539.3 9,671.1 7,468.7
---------- ---------- ----------
Net cash used in investing activities (1,632.2) (693.1) (882.9)
---------- ---------- ----------
Financing activities:
Issuance of surplus notes - - 100.0
Repayments of long-term debt (53.3) (46.4) (125.0)
---------- ---------- ----------
Net cash used by financing activities (53.3) (46.4) (25.0)
---------- ---------- ----------
Increase (decrease) in cash and short-term investments (1,267.4) 87.3 1.4
Cash and short-term investments, beginning of year 2,342.8 2,255.5 2,254.1
---------- ---------- ----------
Cash and short-term investments, end of year $ 1,075.4 $ 2,342.8 $ 2,255.5
---------- ---------- ----------
</TABLE>
See notes to statutory financial statements.
7
<PAGE>
NOTES TO STATUTORY FINANCIAL STATEMENTS
Massachusetts Mutual Life Insurance Company ("the Company") is a mutual life
insurance company and as such has no shareholders. The Company's primary
business is individual life insurance, annuity and disability income products
distributed primarily through career agents. The Company also provides a wide
range of pension products and services, as well as investment services to
individuals, corporations and institutions in all 50 states and the District of
Columbia.
On March 1, 1996, the operations of the former Connecticut Mutual Life Insurance
Company (" Connecticut Mutual") were merged into the Company. This merger was
accounted for under the pooling of interests method of accounting. For the
purposes of this presentation, these financial statements reflect historical
amounts giving retroactive effect as if the merger had occurred on January 1,
1994 in conformity with the practices of the National Association of Insurance
Commissioners and the accounting practices prescribed or permitted by the
Division of Insurance of the Commonwealth of Massachusetts and, prior to the
merger, the Department of Insurance of the State of Connecticut. In 1996,
merger-related expenses totaling $66.1 million were recorded in the Statutory
Statement of Income. In 1995, merger-related expenses incurred by Massachusetts
Mutual (the Company prior to the merger) of $44.0 million, were recorded in the
statutory statement of income and the expenses incurred by Connecticut Mutual of
$45.4 million, net of tax, were recorded as a component of changes in
policyholders' contingency reserves, as permitted by each company's regulatory
authority. On the merger date, policyholder reserves attributable to disability
income contracts were strengthened by $75.0 million, investment reserves for
real estate were increased by $49.8 million and net prepaid pension assets were
increased by $10.4 million. The separate results of each company prior to the
merger for the year ended December 31, 1995, are as follows: (a) income was
$6,443.8 million for Massachusetts Mutual and $2,182.3 million for Connecticut
Mutual; (b) net income was $160.7 million for Massachusetts Mutual and $29.6
million for Connecticut Mutual and (c) policyholders' contingency reserves
increased by $143.7 million for Massachusetts Mutual and decreased by $112.0
million for Connecticut Mutual.
On March 31, 1996, the Company sold MassMutual Holding Company Two, Inc., a
wholly-owned subsidiary, and its subsidiaries, including Mirus Life Insurance
Company (formerly the MML Pension Insurance Company; currently doing business as
"UniCARE"), which comprised the Company's group life and health business, to
WellPoint Health Networks, Inc. The Company received total consideration of
$402.2 million ($340.0 million in cash and $62.2 million in notes receivable)
and recognized a before tax gain of $187.9 million. The Company, pursuant to a
1994 reinsurance agreement, cedes its group life, accident and health business
to UniCARE. The Company's investment in MassMutual Holding Company Two, Inc.
amounted to $187.8 million at December 31, 1995; its gain from operations
reflected a $41 million dividend in 1995. Additionally, this investment
produced an unrealized gain of $13.9 million in 1995 and an unrealized loss of
$12.6 million in 1994.
1. Summary of Accounting Practices
The accompanying statutory financial statements, except as to form, have been
prepared in conformity with the practices of the National Association of
Insurance Commissioners and the accounting practices prescribed or permitted
by the Division of Insurance of the Commonwealth of Massachusetts and, prior
to the merger, The Department of Insurance of the State of Connecticut
("statutory accounting practices"), which practices were also considered to
be in conformity with generally accepted accounting principles ("GAAP"). In
1993, the Financial Accounting Standards Board ("FASB") issued interpretation
No. 40 ("Fin. 40"), "Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises", which clarified
that mutual life insurance companies issuing financial statements described
as prepared in conformity with GAAP after 1995 are required to apply all
applicable GAAP pronouncements in preparing those financial statements. In
January 1995, the FASB issued Statement No. 120 ("SFAS 120"), Accounting and
Reporting by Mutual Life Insurance Enterprises and by Insurance Enterprises
for Certain Long-Duration Participating Contracts," which among other things,
extended the applicability of certain FASB statements to mutual life
insurance companies and deferred the effective date of Fin. 40 to financial
8
<PAGE>
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
statements issued or reissued after 1996. As required by generally accepted
auditing standards, the opinion expressed by our independent accountants on
the 1995 and 1994 financial statements is different from that expressed in
their previous report.
The accompanying statutory financial statements are different in some
respects from GAAP financial statements. The more significant differences
are as follows: (a) acquisition costs, such as commissions and other costs
in connection with acquiring new business, are charged to current operations
as incurred, whereas GAAP would require these expenses to be capitalized and
recognized over the life of the policies; (b) policy reserves are based upon
statutory mortality and interest requirements without consideration of
withdrawals, whereas GAAP reserves would be based upon reasonably
conservative estimates of mortality, morbidity, interest and withdrawals; (c)
bonds are generally carried at amortized cost whereas GAAP would value bonds
at fair value and (d) deferred income taxes are not provided for book-tax
timing differences whereas GAAP would record deferred income taxes.
Management has not yet completed GAAP financial statements, but believes that
policyholders' contingency reserves based upon GAAP will be higher than
policyholders' contingency reserves based upon statutory accounting
practices.
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
as well as disclosures of contingent assets and liabilities at the date of
the financial statements. Management must also make estimates and
assumptions that affect the amounts of revenues and expenses during the
reporting period. Future events, including changes in the levels of
mortality, morbidity, interest rates and asset valuations, could cause actual
results to differ from the estimates used in these financial statements.
The following is a description of the Company's current principal accounting
policies and practices.
a. Investments
Bonds and stocks are valued in accordance with rules established by the
National Association of Insurance Commissioners. Generally, bonds are
valued at amortized cost, preferred stocks in good standing at cost, and
common stocks, except for unconsolidated subsidiaries, at fair value.
As promulgated by the National Association of Insurance Commissioners,
the Company adopted the retrospective method of accounting for
amortization of premium and discount on mortgage backed securities as of
December 31, 1994. Prepayment assumptions for mortgage backed securities
were obtained from a prepayment model, which factors in mortgage type,
seasoning, coupon, current interest rate and the economic environment.
The effect of this change, $44.5 million as of December 31, 1994, was
recorded as an increase to policyholders' contingency reserves on the
Statutory Statement of Financial Position and had no material effect on
1996 or 1995 net income. Through December 31, 1994, premium and discount
on bonds were amortized into investment income over the stated lives of
the securities.
Mortgage loans are valued at principal less unamortized discount. Real
estate is valued at cost less accumulated depreciation, impairments and
mortgage encumbrances. Encumbrances totaled $27.3 million in 1996 and
$3.0 million in 1995. Depreciation on investment real estate is
calculated using the straight-line and constant yield methods.
Policy loans are carried at the outstanding loan balance less amounts
unsecured by the cash surrender value of the policy.
Short-term investments are stated at amortized cost, which approximates
fair value.
9
<PAGE>
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
Investments in unconsolidated subsidiaries, joint ventures and other forms
of partnerships are included in other investments on the Statutory
Statement of Financial Position and are accounted for using the equity
method.
In compliance with regulatory requirements, the Company maintains an Asset
Valuation Reserve and an Interest Maintenance Reserve. The Asset Valuation
Reserve and other investment reserves, as prescribed and permitted by the
Division of Insurance, stabilize the policyholders' contingency reserves
against fluctuations in the value of stocks, as well as declines in the
value of bonds, mortgage loans and real estate investments.
The Interest Maintenance Reserve captures after-tax realized capital gains
and losses which result from changes in the overall level of interest rates
for all types of fixed income investments, as well as other financial
instruments, including financial futures, U.S. Treasury purchase
commitments, options, interest rate swaps, interest rate caps and interest
rate floors. These interest rate related gains and losses are amortized
into income using the grouped method over the remaining life of the
investment sold or over the remaining life of the underlying asset. Net
realized after tax capital gains of $77.1 million in 1996, $130.7 million
in 1995, and net realized after tax capital losses of $152.6 million in
1994 were charged to the Interest Maintenance Reserve. Amortization of the
Interest Maintenance Reserve into net investment income amounted to $26.9
million in 1996, $5.0 million in 1995, and $45.8 million in 1994. In 1994,
the Interest Maintenance Reserve resulted in a net loss deferral. In
accordance with the practices of the National Association of Insurance
Commissioners, the 1994 balance was recorded as a reduction of
policyholders' contingency reserves.
Realized capital gains and losses, less taxes, not includable in the
Interest Maintenance Reserve, are recognized in net income. Realized
capital gains and losses are determined using the specific identification
method. Unrealized capital gains and losses are included in policyholders'
contingency reserves.
b. Separate Accounts
Separate account assets and liabilities represent segregated funds
administered and invested by the Company for the benefit of pension,
variable annuity and variable life insurance contract holders. Assets
consist principally of marketable securities reported at fair value.
Premiums, benefits and expenses of the separate accounts are reported in
the Statutory Statement of Income. The Company receives administrative and
investment advisory fees from these accounts.
c. Non-admitted Assets
Assets designated as "non-admitted" (principally certain fixed assets,
receivables and Interest Maintenance Reserve, when in a net loss deferral
position) are excluded from the Statutory Statement of Financial Position
by an adjustment to policyholders' contingency reserves.
d. Policyholders' Reserves and Funds
Policyholders' reserves for life contracts are developed using accepted
actuarial methods computed principally on the net level premium and the
Commissioners' Reserve Valuation Method bases using the American Experience
and the 1941, 1958 and 1980 Commissioners' Standard Ordinary mortality
tables with assumed interest rates ranging from 2.5 to 6.0 percent.
Reserves for individual annuities, guaranteed investment contracts and
deposit administration and immediate participation guarantee funds are
based on accepted actuarial methods principally at interest rates ranging
from 2.25 to 11.25 percent. Reserves for policies and contracts considered
investment contracts have a carrying value of $9,073.8 million (fair value
of $9,324.6 million as determined by discounted cash flow projections).
Accident and health policy reserves are generally calculated using the
10
<PAGE>
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
two-year preliminary term, net level premium and fixed net premium
methods and various morbidity tables.
During 1996, 1995 and 1994, the Company changed its valuation basis for
certain disability income contracts. The effects of these changes, $75.0
million in 1996, $108.2 million in 1995, and $51.1 million in 1994 were
recorded as decreases to policyholders' contingency reserves.
e. Premium and Related Expense Recognition
Life insurance premium revenue is recognized annually on the anniversary
date of the policy. Annuity premium is recognized when received. Accident
and health premiums are recognized as revenue when due. Commissions and
other costs related to issuance of new policies, maintenance and
settlement costs are charged to current operations.
f. Policyholders' Dividends
The Board of Directors annually approves dividends to be paid in the
following year. These dividends are allocated to reflect the relative
contribution of each group of policies to policyholders' contingency
reserves and consider investment and mortality experience, expenses and
federal income tax charges.
g. Cash and Short-term Investments
For purposes of the Statutory Statement of Cash Flows, the Company
considers all highly liquid investments purchased with a maturity of
twelve months or less to be short-term investments.
2. Policyholders' Contingency Reserves
Policyholders' contingency reserves represent surplus of the Company as
reported to regulatory authorities and are intended to protect policyholders
against possible adverse experience.
a. Surplus Notes
The Company issued surplus notes of $100.0 million at 7 1/2 percent
and $250.0 million at 7 5/8 percent in 1994 and 1993, respectively. These
notes are unsecured and subordinate to all present and future
indebtedness of the Company, policy claims and prior claims against the
Company as provided by the Massachusetts General Laws. Issuance was
approved by the Commissioner of Insurance of the Commonwealth of
Massachusetts ("the Commissioner").
All payments of interest and principal are subject to the prior approval
of the Commissioner. Sinking fund payments are due as follows: $62.5
million in 2021, $87.5 million in 2022, $150.0 million in 2023 and $50.0
million in 2024.
Interest on the notes issued in 1994 is scheduled to be paid on March 1
and September 1 of each year, beginning on September 1, 1994, to holders
of record on the preceding February 15 or August 15, respectively.
Interest on the notes issued in 1993 is scheduled to be paid on May 15 and
November 15 of each year, beginning on May 15, 1994, to holders of record
on the preceding May 1 or November 1, respectively. In accordance with
regulations of the National Association of Insurance Commissioners,
interest expense is not recorded until approval for payment is received
from the Commissioner. Interest of $26.6 million was approved and paid in
1996 and 1995, and interest of $22.8 million was approved and paid in
1994.
11
<PAGE>
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
The proceeds of the notes, less a $32.2 million reserve in 1996 and a $35
million reserve in 1995 and 1994 for contingencies associated with the
issuance of the notes, are recorded as a component of the Company's
policyholders' contingency reserves as approved by the Commissioner. These
reserves, as permitted by the Division of Insurance, are included in
investment reserves on the Statutory Statement of Financial Position.
3. Employee Benefit Plans
The Company's employee benefit plans include plans in place for the employees
of Massachusetts Mutual and Connecticut Mutual prior to the merger. These
plans, which were managed separately, reflect different assumptions for 1995.
Employees previously covered by the Connecticut Mutual pension plans will
continue coverage under these plans. All other employees, including
employees hired after the merger date, will be covered by the Massachusetts
Mutual benefit plans.
a. Pension
The Company has two non-contributory defined benefit plans covering
substantially all of its employees. One plan includes employees previously
employed by Connecticut Mutual; the other includes all other eligible
employees. Benefits are based on the employees' years of service,
compensation during the last five years of employment and estimated social
security retirement benefits. The Company accounts for these plans
following Financial Accounting Standards Board Statement No. 87,
Employers' Accounting for Pensions. Accordingly, as permitted by the
Massachusetts Division of Insurance, the Company has recognized a pension
asset of $97.2 million and $37.7 million in 1996 and 1995, respectively.
In 1995, a pension asset of $70.9 million associated with the Connecticut
Mutual plan was non-admitted in the financial statements, in accordance
with Connecticut insurance regulations. On the merger date, the accounting
for Connecticut Mutual pension plans was conformed to the Massachusetts
Mutual policy of recording pension plan assets and liabilities, resulting
in a $10.4 million increase in policyholders' contingency reserves.
Company policy is to fund pension costs in accordance with the
requirements of the Employee Retirement Income Security Act of 1974 and,
based on such requirements, no funding was required for the years ended
December 31, 1996 and 1995. The assets of the plans are invested in the
Company's general account and separate accounts.
The benefit status of the defined benefit plans as of December 31 is as
follows:
<TABLE>
<CAPTION>
1996 1995
-------- ------
<S> <C> <C>
(In Millions)
Accumulated benefit obligation $ 611.5 $537.5
Vested benefit obligation 606.5 525.7
Projected benefit obligation 665.5 622.5
Plan assets at fair value 1,021.7 941.3
</TABLE>
The following assumptions were used in determining the actuarial present
value of both the accumulated and projected benefit obligation.
<TABLE>
<CAPTION>
MassMutual Connecticut Mutual
Plan Plan
----------- -----------
<S> <C> <C>
Discount rate - 1996 7.75% 7.75%
Discount rate - 1995 7.50 7.75
Increase in future compensation levels 5.00 5.00
Long-term rate of return on assets 10.00 9.00
</TABLE>
12
<PAGE>
As a result of the sale of Mirus Life Insurance Company, there was a
significant reduction in plan participants which resulted in recognition of
a pension plan curtailment gain of $15.3 million in 1996.
The Company also has defined contribution plans for employees and agents.
The expense credited to operations for all pension plans is $32.7 million
in 1996, $10.9 million in 1995 and $5.0 million in 1994.
b. Life and Health
Certain life and health insurance benefits are provided to retired
employees and agents through group insurance contracts. Substantially all
of the Company's employees may become eligible for these benefits if they
reach retirement age while working for the Company. In 1993, the Company
adopted the National Association of Insurance Commissioners' accounting
standard for postretirement life and health benefit costs, requiring these
benefits to be accounted for using the accrual method for employees and
agents eligible to retire and current retirees.
The following rates were used in determining the accumulated postretirement
benefit liability.
<TABLE>
<CAPTION>
MassMutual Connecticut Mutual
Plan Plan
----------- -----------
<S> <C> <C>
Discount rate - 1996 7.75% 7.75%
Discount rate - 1995 7.50 8.50
Assumed increases in medical cost
rates in the first year 7.25 11.00
declining to 5.25 6.00
within 5 years 5 years
</TABLE>
The initial transition obligation of $137.9 million is being amortized over
twenty years through 2012. At December 31, 1996 and 1995, the net unfunded
accumulated benefit obligation was $124.1 million and $109.2 million,
respectively, for employees and agents eligible to retire or currently
retired and $33.8 million and $42.7 million, respectively, for participants
not eligible to retire. A Retired Lives Reserve Trust was funded to pay
life insurance premiums for certain retired employees. Trust assets
available for benefits were $23.0 million in 1996.
As a result of the sale of Mirus Life Insurance Company, there was a
significant reduction in plan participants which resulted in recognition of
a life and health plan curtailment loss of $13.9 million in 1996.
The expense for 1996, 1995 and 1994 was $17.6 million, $22.9 million, and
$19.8 million, respectively. A one percent increase in the annual assumed
increase in medical cost rates would increase the 1996 accumulated
postretirement benefit liability and benefit expense by $9.9 million and
$1.5 million, respectively.
4. Related Party Transactions
Pursuant to two 1994 reinsurance agreements with Mirus Life Insurance Company
(Mirus) whereby the Company assumed all of the single premium immediate
annuity business written by Mirus and ceded all of its group life, accident
and health business to Mirus. A gain from operations of this business was
reflected in 1995 as a $41 million dividend received from Mirus, which was
recorded as net investment income on the Statutory Statement of Income. As
previously discussed, on March 31, 1996, the Company sold MassMutual
13
<PAGE>
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
Holding Company Two, Inc. a wholly-owned subsidiary, and its subsidiaries,
including Mirus Life Insurance Company to WellPoint Health Networks, Inc.
The Company has a modified coinsurance quota-share reinsurance agreement with
a wholly-owned subsidiary, C.M. Life Insurance Company, whereby the Company
assumes 50% of the premiums on certain universal life policies issued by C.M.
Life in 1985 and 75% of the premiums with issue dates on or after January 1,
1986. The Company pays a stipulated expense allowance, death and surrender
benefits, and a modified coinsurance adjustment. Reserves for payment of
future benefits are retained by C.M. Life.
5. Federal Income Taxes
Provision for federal income taxes is based upon the Company's best estimate
of its tax liability. No deferred tax effect is recognized for temporary
differences that may exist between financial reporting and taxable income.
Accordingly, the reporting of equity tax, using the most current information,
and other miscellaneous temporary differences, such as reserves, acquisition
costs and restructuring costs, resulted in an effective tax rate which is
other than the statutory tax rate.
The Internal Revenue Service has completed examining the Company's income tax
returns through the year 1992 for Massachusetts Mutual and 1991 for
Connecticut Mutual, and is currently examining Connecticut Mutual for the
years 1992 through 1995. The Company believes any adjustments resulting from
such examinations will not materially affect its financial statements.
Components of the formula authorized by the Internal Revenue Service for
determining deductible policyholder dividends have not been finalized for
1996 and 1995. The Company records the estimated effects of anticipated
revisions in the Statutory Statement of Income.
The Company plans to file its 1996 federal income tax return on a
consolidated basis with its life and non-life affiliates. The Company and
its life and non-life affiliates are subject to a written tax allocation
agreement which allocates tax liability in a manner permitted under Treasury
regulations. Generally, the agreement provides that loss members shall be
compensated for the use of their losses and credits by other members.
The Company made federal tax payments of $330.7 million in 1996, $147.3
million in 1995 and has a credit of $9.9 million in 1994. At December 31,
1996 and 1995, the Company established a liability for federal income taxes
of $440.7 million and $338.6 million, respectively.
6. Investments
The Company maintains a diversified investment portfolio. Investment
policies limit concentration in any asset class, geographic region, industry
group, economic characteristic, investment quality or individual investment.
In the normal course of business, the Company enters into commitments to
purchase privately placed bonds and to issue mortgage loans.
14
<PAGE>
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
a. Bonds
The carrying value and estimated fair value of bonds are as follows:
<TABLE>
<CAPTION>
December 31, 1996
---------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
(In Millions)
U. S. Treasury Securities $ 8,042.6 $ 344.0 $ 56.3 $ 8,330.3
and Obligations of U. S.
Government Corporations
and Agencies
Debt Securities issued by 95.2 10.2 .5 104.9
Foreign Governments
Mortgage-backed securities 3,969.7 125.5 43.3 4,051.9
State and local governments 173.2 13.1 2.1 184.2
Industrial securities 11,675.2 528.0 133.3 12,069.9
Utilities 975.0 87.0 18.5 1,043.5
Affiliates 324.1 4.3 3.5 324.9
--------- -------- ------ ---------
TOTAL $25,255.0 $1,112.1 $257.5 $26,109.6
========= ======== ====== =========
<CAPTION>
December 31, 1995
-----------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
---------- ---------- ---------- ----------
(In Millions)
<S> <C> <C> <C> <C>
U. S. Treasury Securities $ 9,391.5 $ 837.0 $ 43.3 $10,185.2
and Obligations of U. S.
Government Corporations
and Agencies
Debt Securities issued by
Foreign Governments 261.9 27.9 0.1 289.7
Mortgage-backed securities 3,265.4 176.3 9.4 3,432.3
State and local governments 106.0 15.2 0.1 121.1
Industrial securities 9,030.7 762.8 57.8 9,735.7
Utilities 1,417.6 152.4 2.9 1,567.1
Affiliates 152.0 4.4 1.2 155.2
--------- -------- ------ ---------
TOTAL $23,625.1 $1,976.0 $114.8 $25,486.3
========= ======== ====== =========
</TABLE>
15
<PAGE>
The carrying value and estimated fair value of bonds at December 31, 1996
by contractual maturity are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Carrying Fair
Value Value
--------- ---------
(In Millions)
<S> <C> <C>
Due in one year or less $ 680.0 $ 684.8
Due after one year through five years 5,128.8 5,219.7
Due after five years through ten years 6,879.6 7,112.6
Due after ten years 5,195.4 5,496.1
--------- ---------
17,883.8 18,513.2
Mortgage-backed securities, including securities
guaranteed by the U.S. Government 7,371.2 7,596.4
--------- ---------
TOTAL $25,255.0 $26,109.6
========= =========
</TABLE>
Proceeds from sales of investments in bonds were $6,390.7 during 1996,
$8,068.8 million during 1995 and $5,624.1 million during 1994. Gross
capital gains of $188.8 million in 1996, $255.5 million in 1995 and $100.3
million in 1994 and gross capital losses of $79.9 million in 1996, $67.1
million in 1995 and $195.8 million in 1994 were realized on those sales, a
portion of which were included in the Interest Maintenance Reserve. The
estimated fair value of non-publicly traded bonds is determined by the
Company using a pricing matrix.
b. Stocks
Preferred stocks in good standing had fair values of $150.8 million in 1996
and $87.9 million in 1995, using a pricing matrix for non-publicly traded
stocks and quoted market prices for publicly traded stocks. Common stocks,
except for unconsolidated subsidiaries, had a cost of $249.2 million in
1996 and $350.5 million in 1995.
c. Mortgages
The fair value of mortgage loans, as determined from a pricing matrix for
performing loans and the estimated underlying real estate value for non-
performing loans, approximated carrying value less valuation reserves held.
d. Other
The carrying value of investments which were non-income producing for the
preceding twelve months was $23.1 million and $113.9 million at December
31, 1996 and 1995, respectively. The Company had restructured loans with
book values of $383.5 million, and $415.0 million at December 31, 1996 and
1995, respectively. The loans typically have been modified to defer a
portion of the contracted interest payments to future periods. Interest
deferred to future periods totaled $2.2 million in 1996, $2.5 million in
1995 and $2.2 million in 1994. The Company made voluntary contributions to
the Asset Valuation Reserve of $6.8 million and $52.7 million in 1996 and
1994, respectively. No additional voluntary contribution to the Asset
Valuation Reserve was made in 1995.
It is not practicable to determine the fair value of policy loans as they
do not have a stated maturity.
16
<PAGE>
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
7. Portfolio Risk Management
The Company manages its investment risks primarily to reduce interest rate
and duration imbalances determined in asset/liability analyses. The fair
values of instruments described below, which are not recorded in the
financial statements, are based upon market prices or prices obtained from
brokers. The Company does not hold or issue financial instruments for
trading purposes.
The notional amounts described do not represent amounts exchanged by the
parties and, thus, are not a measure of the exposure of the Company. The
amounts exchanged are calculated on the basis of the notional amounts and the
other terms of the instruments, which relate to interest rates, exchange
rates, security prices or financial or other indexes.
The Company enters into financial futures contracts for the purpose of
managing interest rate exposure. Margin requirements are met with the
deposit of securities. Futures contracts are generally settled with
offsetting transactions. Gains and losses on financial futures contracts are
recorded when the contract is closed and amortized through the Interest
Maintenance Reserve over the remaining life of the underlying asset. As of
December 31, 1996, the Company did not have any open financial futures
contracts.
The Company utilizes interest rate swap agreements, options, and purchased
caps and floors to reduce interest rate exposures arising from mismatches
between assets and liabilities and to modify portfolio profiles to manage
other risks identified. Under interest rate swaps, the Company agrees to
an exchange, at specified intervals, between streams of variable rate and
fixed rate interest payments calculated by reference to an agreed-upon
notional principal amount. Net amounts receivable and payable are accrued
as adjustments to interest income and included in investment and insurance
amounts receivable on the Statutory Statement of Financial Position. Gains
and losses realized on the termination of contracts are amortized through the
Interest Maintenance Reserve over the remaining life of the associated
contract. At December 31, 1996 and 1995, the Company had swaps with notional
amounts of $2,239.5 million and $1,819.8 million, respectively. The fair
values of these instruments were $20.7 million at December 31, 1996 and $9.2
million at December 31, 1995.
Options grant the purchaser the right to buy or sell a security or enter into
a derivative transaction at a stated price within a stated period. The
Company's option contracts have terms of up to fifteen years. The amounts
paid for options purchased are included in other investments on the Statutory
Statement of Financial Position. Gains and losses on these contracts are
recorded at the expiration or termination date and are amortized through the
Interest Maintenance Reserve over the remaining life of the underlying asset.
At December 31, 1996 and 1995, the Company had option contracts with notional
amounts of $1,928.4 million and $1,819.8 million, respectively. The
Company's credit risk exposure was limited to the unamortized costs of $18.1
million and $21.7 million, which had fair values of $19.2 million and $63.5
million at December 31, 1996 and 1995, respectively.
Interest rate cap agreements grant the purchaser the right to receive the
excess of a referenced interest rate over a given rate. Interest rate floor
agreements grant the purchaser the right to receive the excess of a given
rate over a referenced interest rate. Amounts paid for interest rate caps
and floors are amortized into interest income over the life of the asset on a
straight-line basis. Unamortized costs are included in other investments on
the Statutory Statement of Financial Position. Amounts receivable and
payable are accrued as adjustments to interest income and included in the
Statutory Statement of Financial Position as investment and insurance amounts
receivable. Gains and losses on these contracts, including any unamortized
cost, are recognized upon termination and are amortized through the Interest
Maintenance Reserve over the remaining life of the associated cap or floor
agreement. At December 31, 1996 and 1995, the company had agreements with
notional amounts of $3,859.6 million and $3,366.3 million, respectively. The
Company's credit risk
17
<PAGE>
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
exposure on these agreements is limited to the unamortized costs of $22.0
million and $14.0 million at December 31, 1996 and 1995, respectively. The
fair values of these instruments were $15.2 million and $30.8 million at
December 31, 1996 and 1995, respectively.
The Company utilizes asset swap agreements to reduce exposures, such as
currency risk and prepayment risk, built into certain assets acquired.
Cross-currency interest rate swaps allow investment in foreign currencies,
increasing access to additional investment opportunities, while limiting
foreign exchange risk. Notional amounts relating to asset and currency swaps
totaled $364.7 million and $333.7 million at December 31, 1996 and 1995,
respectively. The fair values of these instruments were an unrecognized gain
of $7.8 million at December 31, 1996 and $12.2 million at December 31, 1995.
The Company enters into forward U.S. Treasury commitments for the purpose of
managing interest rate exposure. The Company generally does not take
delivery on forward commitments. These commitments are instead settled with
offsetting transactions. Gains and losses on forward commitments are
recorded when the commitment is closed and amortized through the Interest
Maintenance Reserve over the remaining life of the asset. At December 31,
1996 and 1995, the Company had U. S. Treasury purchase commitments which will
settle during the following year with contractual amounts of $1,639.4 million
and $292.4 million and fair values of $1,627.4 million and $298.8 million,
respectively.
The Company is exposed to credit-related losses in the event of
nonperformance by counterparties to financial instruments. This exposure is
limited to contracts with a positive fair value. The amounts at risk in a
net gain position were $53.9 million and $86.9 million at December 31, 1996
and 1995, respectively. The Company monitors exposure to ensure
counterparties are credit worthy and concentration of exposure is minimized.
Additionally, contingent collateral positions have been obtained with
counterparties when considered prudent.
8. Reinsurance
The Company cedes all of its group life and health business to UniCARE and
has other reinsurance agreements with other insurance companies in the normal
course of business. Premiums, benefits to policyholders and provisions for
future benefits are stated net of reinsurance. The Company remains liable to
the insured for the payment of benefits if the reinsurer cannot meet its
obligations under the reinsurance agreements. Premiums ceded were $793.5
million in 1996, $904.1 million in 1995 and $151.4 million in 1994.
9. Liquidity
The withdrawal characteristics of the policyholders' reserves and funds,
including separate accounts, and the invested assets which support them at
December 31, 1996 are illustrated below:
<TABLE>
<CAPTION>
(In Millions)
<S> <C> <C>
Total policyholders' reserves and funds and
separate account liabilities $ 47,148
Not subject to discretionary withdrawal (6,010)
Policy loans (4,752)
--------
Subject to discretionary withdrawal $ 36,386
--------
Total invested assets, including separate
investment accounts $ 52,146
Policy loans and other invested assets (13,458)
--------
Readily marketable investments $ 38,688
--------
</TABLE>
18
<PAGE>
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
10. Business Risks and Contingencies
The Company is subject to insurance guaranty fund laws in the states in which
it does business. These laws assess insurance companies amounts to be used to
pay benefits to policyholders and claimants of insolvent insurance companies.
Many states allow these assessments to be credited against future premium
taxes. The Company believes such assessments in excess of amounts accrued will
not materially affect its financial position, results of operations or
liquidity. In 1996 and 1995, the Company elected not to admit $15.3 million and
$17.6 million, respectively, of guaranty fund premium tax offset receivables
relating to prior assessments.
The Company is involved in litigation arising out of the normal course of its
business. Management intends to defend these actions vigorously. While the
outcome of litigation cannot be foreseen with certainty, it is the opinion of
management, after consultation with legal counsel, that the ultimate resolution
of these matters will not materially affect its financial position, results of
operations or liquidity.
11. Reclassifications
Certain 1995 and 1994 amounts have been reclassified to conform with the
current year presentation.
12. Subsidiaries and Affiliated Companies
Summary of ownership and relationship of the Company and its subsidiaries and
affiliated companies as of December 31, 1996 is illustrated below. The Company
provides management or advisory services to these companies. Subsidiaries are
wholly-owned, except as noted.
19
<PAGE>
NOTES TO STATUTARY FINANCIAL STATEMENTS, Continued
Parent
- ------
Massachusetts Mutual Life Insurance Company
Subsidiaries of Massachusetts Mutual Life Insurance Company
- -----------------------------------------------------------
C.M. Assurance Company
C.M. Benefit Insurance Company
C.M. Life Insurance Company
MassMutual Holding Company
MassMutual Holding Company Two, Inc. (Sold in March 1996)
MassMutual of Ireland, Limited
MML Bay State Life Insurance Company
MML Distributors, LLC
Subsidiaries of MassMutual Holding Company
------------------------------------------
GR Phelps, Inc.
MassMutual Holding Trust I
MassMutual Holding Trust II
MassMutual Holding MSC, Inc.
MassMutual International, Inc.
MassMutual Reinsurance Bermuda (Sold in December 1996)
MML Investor Services, Inc.
State House One (Liquidated in December 1996)
Subsidiaries of MassMutual Holding Trust I
------------------------------------------
Antares Leveraged Capital Corporation
Charter Oak Capital Management, Inc.
Cornerstone Real Estate Advisors, Inc.
DLB Acquisition Corporation
Oppenheimer Acquisition Corporation - 86.15%
Subsidiaries of MassMutual Holding Trust II
-------------------------------------------
CM Advantage, Inc.
CM International, Inc.
CM Property Management, Inc.
High Yield Management, Inc.
MMHC Investments, Inc.
MML Realty Management
Urban Properties, Inc.
Westheimer 335 Suites, Inc.
Subsidiaries of MassMutual International
----------------------------------------
Compensa de Seguros de Vida S.A. - 33.5%
MassLife Seguros de Vida (Argentina) S. A.
MassMutual International (Bermuda) Ltd.
Mass Seguros de Vida (Chile) S. A. - 33.5%
MassMutual International (Luxemburg) S. A.
MassMutual Holding MSC, Incorporated
------------------------------------
MassMutual/Carlson CBO N. V. - 50%
MassMutual Corporate Value Limited - 46%
20
<PAGE>
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
Affiliates of Massachusetts Mutual Life Insurance Company
- ---------------------------------------------------------
MML Series Investment Fund
MassMutual Institutional Funds
Oppenheimer Value Stock Fund
21
<PAGE>
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
22
<PAGE>
PART C
OTHER INFORMATION
27
<PAGE>
Part C
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
Financial Statements Included in Part A
---------------------------------------
Condensed Financial Information
Financial Statements Included in Part B
---------------------------------------
The Registrant
--------------
Report of Independent Accountants
Statement of Assets and Liabilities as of December 31, 1996
Statement of Operations for the year ended December 31, 1996
Statement of Changes in Net Assets for the years ended
December 31, 1996 and 1995 Notes to Financial Statements
Notes to Financial Statements
The Depositor
-------------
Report of Independent Accountants
Statutory Statement of Financial Position as of December 31,
1996 and 1995
Statutory Statement of Income for the years
ended December 31, 1996, 1995 and 1994
Statutory Statement of
Changes in Policyholders' Contingency Reserves for the years
ended 1996, 1995 and 1994
Statutory Statement of Cash Flows
for the years ended December 31, 1996, 1995 and 1994
Notes to Statutory Financial Statements
(b) Exhibits:
Exhibit 1 Copy of Resolution of the Executive Committee
of the Board of Directors of Massachusetts
Mutual Life Insurance Company, authorizing the
establishment of the Registrant under the
Investment Company Act of 1940, incorporated by
reference to Exhibit 1 of Registrant's
Registration Statement under the Securities Act
of 1933, File No. 33-83798.
Exhibit 2 None
Exhibit 3 (i) Copy of Distribution Agreement between the
Registrant and MML Distributors, LLC.*
(ii) Copy of Co-Underwriting Agreement between
the Registrant and MML Investors Services Inc.*
(ii) None
Exhibit 4 (i) Copy of the form of Flexible Purchase
Payment Multi-Fund Variable Annuity Contract
under the Securities Act of 1933, incorporated
by reference
28
<PAGE>
to Exhibit 1 of Registrant's Registration
Statement under the Securities Act of 1933,
File No.
33-83798.
Exhibit 5 The form of Application used with the Flexible
Purchase Payment Multi- Fund Variable Annuity
Contract under the Securities Act of 1933,
incorporated by reference to Exhibit 1 of
Registrant's Registration Statement under the
Securities Act of 1933, File No. 33-83798.
Exhibit 6 (i) Copy of the Articles of Incorporation of
Massachusetts Mutual Life Insurance Company.
(ii) By-laws of Massachusetts Mutual Life
Insurance Company, incorporated by reference to
Exhibit 1 of Registrant's Registration
Statement under the Securities Act of 1933,
File No. 33-83798.
Exhibit 7 None
Exhibit 8 None
Exhibit 9 Opinion of and Consent of Counsel.*
Exhibit 10 (i) Written consent of Coopers & Lybrand
L.L.P., independent accountants.
(ii) Powers of Attorney
Exhibit 11 None
Exhibit 12 None
Exhibit 13 Schedule of Computation of Performance*
Exhibit 14 Financial Data Schedule
*Incorporated by reference to Post-Effective Amendment No. 2 to the registration
statement on Form N-4 for the Massachusetts Mutual Variable Annuity Separate
Account 3 (File No. 33-83798) as filed with the Securities and Exchange
Commission and effective May 1, 1996.
Item 25. Directors and Executive Officers of MassMutual
----------------------------------------------
The directors and executive vice presidents of MassMutual, their positions and
their other business affiliations and business experience for the past five
years are listed below.
29
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Name and Position Principal Occupation(s ) During Past Five Years
- ---------------------------------------------------------------------------------------------------------------------------------
Roger G. Ackerman, Director Chairman and Chief Executive Officer, Corning, Inc., since 1996, President
and Chief Operating Officer 1990-1996.
- ---------------------------------------------------------------------------------------------------------------------------------
James R. Birle, Director President and Founder, Resolute Partners, LLC, since 1994; General Partner,
Blackstone Group, 1988-1994.
- ---------------------------------------------------------------------------------------------------------------------------------
Frank C. Carlucci, III, Director Chairman, The Carlyle Group, Inc., since 1989.
- ---------------------------------------------------------------------------------------------------------------------------------
Gene Chao, Director Chairman, President and CEO, Computer Projections, Inc. since 1991.
- ---------------------------------------------------------------------------------------------------------------------------------
Patricia Diaz Dennis, Director Senior Vice President and Assistant General Counsel, SBC Communications
Inc. since 1995; Special Counsel, Sullivan & Cromwell, 1993-1995; Assistant
Secretary of State for Human Rights and Humanitarian Affairs, U.S.
Department of State, 1992-1993.
- ---------------------------------------------------------------------------------------------------------------------------------
Anthony Downs, Director Senior Fellow, The Brookings Institution, since 1977.
- ---------------------------------------------------------------------------------------------------------------------------------
James L. Dunlap, Director President and Chief Operating Officer, United Meridian Corporation, since
1996; Senior Vice President, Texaco, Inc. 1987-1996.
- ---------------------------------------------------------------------------------------------------------------------------------
William B. Ellis, Director Senior Fellow, Yale University School of Forestry and Environmental
Studies, since 1995; Chairman and Chief Executive Officer, Northeast
Utilities, 1983-1995.
- ---------------------------------------------------------------------------------------------------------------------------------
Robert M. Furek, Director President and Chief Executive Officer, Heublein, Inc., 1987-1996.
- ---------------------------------------------------------------------------------------------------------------------------------
Charles K. Gifford, Director Chief Executive Officer, First National Bank of Boston and The Bank of
Boston Corporation, since 1996, Chairman, President and CEO 1995-1996,
President and CEO 1989-1995.
- ---------------------------------------------------------------------------------------------------------------------------------
William N. Griggs, Director Managing Director, Griggs & Santow, Inc., since 1983.
- ---------------------------------------------------------------------------------------------------------------------------------
George B. Harvey, Director Chairman, President and CEO, Pitney Bowes, 1983-1996.
- ---------------------------------------------------------------------------------------------------------------------------------
Barbara B. Hauptfuhrer, Director Director of various corporations, since 1972.
- ---------------------------------------------------------------------------------------------------------------------------------
Sheldon B. Lubar, Director Chairman, Lubar & Co. Incorporated, since 1977.
- ---------------------------------------------------------------------------------------------------------------------------------
William B. Marx, Jr., Director Senior Executive Vice President, Lucent Technologies 1996-1996; Executive
Vice President and CEO Multimedia Products Group, AT&T, 1994-1996; Executive
Vice President and CEO, Network Systems Group, 1993-1994; Group Executive
and President, AT&T Network Systems, 1989-1993.
- ---------------------------------------------------------------------------------------------------------------------------------
John F. Maypole, Director Managing Partner, Peach State Real Estate Holding Company, since 1984.
- ---------------------------------------------------------------------------------------------------------------------------------
Donald F. McCullough, Director Retired Chairman and Chief Executive Officer, Collins & Aikman Corp.,
since 1988.
- ---------------------------------------------------------------------------------------------------------------------------------
John J. Pajak, Director, President and President and Chief Operating Officer, MassMutual, since 1996, Vice
Chief Operating Officer Chairman and Chief Administrative Officer, 1996-1996, Executive Vice
President, 1987-1996.
- ---------------------------------------------------------------------------------------------------------------------------------
Thomas B. Wheeler, Director, Chairman Chairman and Chief Executive Officer, MassMutual, since 1996, President
and Chief Executive Officer and Chief Executive Officer, 1988-1996.
- ---------------------------------------------------------------------------------------------------------------------------------
Alfred M. Zeien, Director Chairman and Chief Executive Officer, The Gillette Company, since 1991.
- ---------------------------------------------------------------------------------------------------------------------------------
Executive Vice Presidents:
- ---------------------------------------------------------------------------------------------------------------------------------
Lawrence V. Burkett, Jr. Executive Vice President and General Counsel, MassMutual, since 1993,
Senior Vice President and Deputy General Counsel 1992-1993.
- ---------------------------------------------------------------------------------------------------------------------------------
John B. Davies Executive Vice President, MassMutual, since 1994; Associate Executive Vice
President 1994-1994; General Agent, 1982-1993.
- ---------------------------------------------------------------------------------------------------------------------------------
Daniel J. Fitzgerald Executive Vice President, Corporate Financial Operations, MassMutual, since
1994, Senior Vice President, 1991-1994.
- ---------------------------------------------------------------------------------------------------------------------------------
John M. Naughton Executive Vice President, MassMutual, 1984-1997.
- ---------------------------------------------------------------------------------------------------------------------------------
John V. Murphy Executive Vice President, MassMutual, since 1997, Executive Vice President
and Chief Operating Officer, David L. Babson & Co., Inc., 1995-1997; Chief
Operating Officer, Concert Capital Management, Inc., 1993-1995; Senior
Vice President and Chief Financial Officer, Liberty Financial Companies,
1977-1993.
- ---------------------------------------------------------------------------------------------------------------------------------
Gary E. Wendlandt Executive Vice President and Chief Investment Officer, MassMutual, since 1993,
Executive Vice President, 1992-1993, Senior Vice President, 1983-1992.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
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
MassMutual.
The Registrant may also be deemed to be under common control with
other separate accounts established by MassMutual and its life
insurance subsidiaries, C.M. Life Insurance Company and MML Bay
State Life Insurance Company, which are registered as unit
investment trusts under the Investment Company Act of 1940.
LIST OF SUBSIDIARIES AND AFFILIATES
1. MassMutual Holding Company, a Delaware corporation, all the stock of which
is owned by MassMutual.
2. MML Series Investment Fund, a registered open-end investment company
organized as a Massachusetts business trust, all of the shares of which are
owned by separate accounts of MassMutual and companies controlled by
MassMutual.
3. MassMutual Institutional Funds, a registered open-end investment company
organized as a Massachusetts business trust, all of the shares are owned by
MassMutual.
4. MML Bay State Life Insurance Company, a Missouri corporation, all the stock
of which is owned by MassMutual.
5. MassMutual of Ireland, Ltd., incorporated in the Republic of Ireland, to
operate a group life and health claim office for MassMutual, all of the
stock of which is owned by MassMutual.
6. CM Assurance Company, a Connecticut life, accident, disability and health
insurer, all the stock of which is owned by MassMutual.
7. CM Benefit Insurance Company, a Connecticut life, accident, disability and
health insurer, all the stock of which is owned by MassMutual.
8. C.M. Life Insurance Company, a Connecticut life, accident, disability and
health insurer, all the stock of which is owned by MassMutual.
9. MML Distributors, LLC, formerly known as Connecticut Mutual Financial
Services, LLC, a registered broker-dealer incorporated as a limited
liability company in Connecticut. MassMutual has a 99% ownership interest
and G.R. Phelps & Co. has a 1% ownership interest.
10. Panorama Series Fund, Inc., a registered open-end investment company
organized as a Maryland corporation. Shares of the fund are sold only to
MassMutual and its affiliates.
11. MassMutual Holding Trust I, a Massachusetts business trust, which acts as a
holding company for certain MassMutual subsidiaries and affiliates, all of
the stock of which is owned by MassMutual Holding Company.
12. MassMutual Holding Trust II, a Massachusetts business trust, which acts as
a holding company for certain MassMutual subsidiaries and affiliates, all
of the stock of which is owned by MassMutual Holding Company.
31
<PAGE>
13. MassMutual Holding MSC, Inc., a Massachusetts corporation, which acts as a
holding company for certain MassMutual subsidiaries and affiliates, all of
the stock of which is owned by MassMutual Holding Company.
14. MML Investors Services, Inc., registered broker-dealer incorporated in
Massachusetts, all the stock of which is owned by MassMutual Holding
Company.
15. G.R. Phelps & Company, Inc., Connecticut corporation which formerly
operated as a securities broker- dealer, all the stock of which is owned by
MassMutual Holding Company.
16. MassMutual International, Inc., a Delaware corporation that acts as a
holding company of and provides services to international insurance
companies, all of the stock of which is owned by MassMutual Holding
Company.
17. MassLife Seguros de Vida S.A. (Argentina), a life insurance company
incorporated in Argentina. MassMutual International Inc. owns 99.99% of the
outstanding capital stock of MassLife Seguros de Vida S.A.
18. Cornerstone Real Estate Advisers, Inc., a Massachusetts equity real estate
advisory corporation, all the stock of which is owned by MassMutual Holding
Trust I.
19. DLB Acquisition Corporation ("DLB") is a Delaware corporation, which serves
as a holding company for certain investment advisory subsidiaries of
MassMutual. MassMutual Holding Trust I owns 83.7% of the outstanding
capital stock of DLB.
20. Oppenheimer Acquisition Corporation ("OAC") is a Delaware corporation,
which serves as a holding company for OppenheimerFunds, Inc. MassMutual
Holding Trust I owns 86% of the capital stock of OAC
21. Antares Leveraged Capital Corp., a Delaware corporation that operates as a
finance company, all of the stock of which is owned by MassMutual Holding
Trust I.
22. Charter Oak Capital Management, Inc., a Delaware corporation that operates
as an investment manager. MassMutual Holding Trust I owns 80% of the
capital stock of Charter Oak.
23. MML Realty Management Corporation, a property manager incorporated in
Massachusetts, all the stock of which is owned by MassMutual Holding Trust
II.
24. Westheimer 335 Suites, Inc., was incorporated in Delaware to serve as a
general partner of the Westheimer 335 Suites Limited Partnership.
MassMutual Holding Trust II owns all the stock of Westheimer 335 Suites,
Inc.
25. CM Advantage, Inc., a Connecticut corporation that acts as a general
partner in real estate limited partnerships. MassMutual Holding Trust II
owns all of the outstanding stock.
26. CM International, Inc., a Delaware corporation that holds a mortgage pool
and issues collateralized bond obligations. MassMutual Holding Trust II
owns all the outstanding stock of CM International, Inc.
27. CM Property Management, Inc., a Connecticut real estate holding company,
all the stock of which is owned by MassMutual Holding Trust II.
28. Urban Properties, Inc., a Delaware real estate holding and development
company, all the stock of which is owned by MassMutual Holding Trust II.
32
<PAGE>
29. MMHC Investment, Inc., a Delaware corporation which is a passive investor
in MassMutual High Yield Partners LLC. MassMutual Holding Trust II owns all
the outstanding stock of MMHC Investment, Inc.
30. HYP Management, Inc., a Delaware corporation which is the LLC Manager for
MassMutual High Yield Partners LLC and owns 1.28% of the LLC units of such
entity. MassMutual Holding Trust II owns all the outstanding stock of HYP
Management, Inc.
31. MassMutual Corporate Value Limited, a Cayman Islands corporation that owns
approximately 90% of MassMutual Corporate Value Partners Limited.
MassMutual Holding MSC, Inc. owns 46.19% of the outstanding capital stock
of MassMutual Corporate Value Limited.
32. MassMutual International (Bermuda) Ltd., a Bermuda life insurance company,
all of the stock of which is owned by MassMutual International Inc.
33. MassMutual Internacional (Chile) S.A. a Chilean corporation, which operates
as a holding company. MassMutual International Inc. owns 99% of the
outstanding shares and MassMutual Holding Company owns the remaining 1% of
the shares.
34. MassMutual International (Luxembourg) S.A. a Luxembourg corporation, which
operates as an insurance company. MassMutual International Inc. owns 99% of
the outstanding shares and MassMutual Holding Company owns the remaining 1%
of the shares.
35. Mass Seguros de Vida S.A., a life insurance company incorporated in Chile.
MassMutual Holding Company owns 33.5% of the outstanding capital stock of
Mass Seguros de Vida S.A.
36. MML Insurance Agency, Inc., a licensed insurance broker incorporated in
Massachusetts, all of the stock of which is owned by MML Investors
Services, Inc.
37. MML Securities Corporation, a Massachusetts securities corporation, all of
the stock of which is owned by MML Investors Services, Inc.
38. OppenheimerFunds, Inc., a registered investment adviser incorporated in
Colorado, all of the stock of which is owned by Oppenheimer Acquisition
Corporation
39. David L. Babson and Company, Incorporated, a registered investment adviser
incorporated in Massachusetts, all of the stock of which is owned by DLB
Acquisition Corporation.
40. Cornerstone Office Management, LLC, a Delaware limited liability company
that is 50% owned by Cornerstone Real Estate Advisers, Inc. and 50% owned
by MML Realty Management Corporation.
41. Westheimer 335 Suites Limited Partnership, a Texas limited partnership of
which Westheimer 335 Suites, Inc. is the general partner.
42. MassMutual High Yield Partners LLC, a Delaware limited liability company,
that operates as a high yield bond fund. MassMutual holds 5.28%, MMHC
Investment Inc. holds 35.99%, and HYP Management, Inc. hold 1.28% for a
total of 42.55% of the ownership interest in this company.
43. MassMutual Corporate Value Partners Limited, a Cayman Islands corporation
that operates as a high yield bond fund. MassMutual Corporate Value Limited
holds an approximately 90% ownership interest in this company.
33
<PAGE>
44. First Israel Mezzanine Investors, Ltd., an Israeli corporation which
operates as managing general partner of First Israel Mezzanine Investors
Fund, LP. MassMutual holds a 33% ownership interest in First Israel
Mezzanine Investors, Ltd.
45. First Israel Mezzanine Investors Fund, LP, a Delaware limited partnership,
of which MassMutual holds a 37.5% ownership interest.
46. MBD Mezzanine Investments, LLC, a Delaware limited liability company, which
operates as the participating general partner of First Israel Mezzanine
Investors Fund, LP. MassMutual holds a 33% ownership interest in MBD
Mezzanine Investments, LLC.
47. Diversified Insurance Services Agency of America, Inc. (Alabama), a
licensed insurance broker incorporated in Alabama. MML Insurance Agency,
Inc. owns all the shares of outstanding stock.
48. Diversified Insurance Services Agency of America, Inc. (Hawaii), a licensed
insurance broker incorporated in Hawaii. MML Insurance Agency, Inc. owns
all the shares of outstanding stock.
49. MML Insurance Agency of Nevada, Inc., a Nevada corporation that operates as
an insurance broker, all of the stock of which is owned by MML Insurance
Agency, Inc.
50. MML Insurance Agency of Ohio, Inc., a subsidiary of MML Insurance Agency,
Inc., is incorporated in the state of Ohio that operates as an insurance
broker. The outstanding capital stock is controlled by MML Insurance
Agency, Inc. by means of a voting trust.
51. MML Insurance Agency of Texas, Inc., a subsidiary of MML Insurance Agency,
Inc., is incorporated in the state of Texas that operates as an insurance
broker. The outstanding capital stock is controlled by MML Insurance
Agency, Inc. by means of a voting trust.
52. MML Insurance Agency of Mississippi, P.C., a Mississippi professional
corporation that operates as an insurance broker, all of the stock of which
is owned by MML Insurance Agency, Inc.
53. Origen Inversiones S.A., a Chilean corporation which operates as a holding
company. MassMutual Internacional (Chile) S.A. holds a 33.5% ownership
interest in this corporation.
54. Babson Securities Corporation, a registered broker-dealer incorporated in
Massachusetts, all of the stock of which is owned by David L. Babson and
Company, Incorporated.
55. Potomac Babson Incorporated, a Massachusetts corporation, is a registered
investment adviser. David L. Babson and Company Incorporated owns 60% of
the outstanding shares of Potomac Babson Incorporated.
56. Babson-Stewart-Ivory International, a Massachusetts general partnership,
which operates as a registered investment adviser. David L. Babson and
Company Incorporated holds a 50% ownership interest in the partnership.
57. Oppenheimer Value Stock Fund ("OVSF) is a series of Oppenheimer Integrity
Funds, a Massachusetts business trust. OVSF is a registered open-end
investment company of which MassMutual owns 40% of the outstanding shares
of beneficial interest.
58. Oppenheimer Series Fund I Inc., a Maryland corporation and a registered
open-end investment company of which MassMutual and its affiliates own
approximately 27% of the outstanding shares of beneficial interest.
34
<PAGE>
59. Centennial Asset Management Corporation, a Delaware corporation that serves
as the investment adviser and general distributor of the Centennial Funds.
OppenheimerFunds, Inc. owns all the stock of Centennial Asset Management
Corporation.
60. HarbourView Asset Management Corporation, a registered investment adviser
incorporated in New York, all the stock of which is owned by
OppenheimerFunds, Inc.
61. Main Street Advisers, Inc., a Delaware corporation, all the stock of which
is owned by OppenheimerFunds, Inc.
62. OppenheimerFunds Distributor, Inc., a registered broker-dealer incorporated
in New York, all the stock of which is owned by OppenheimerFunds, Inc.
63. Oppenheimer Partnership Holdings, Inc., a Delaware holding company, all the
stock of which is owned by OppenheimerFunds, Inc.
64. Shareholder Financial Services, Inc., a transfer agent incorporated in
Colorado, all the stock of which is owned by OppenheimerFunds, Inc.
65. Shareholder Services, Inc., a transfer agent incorporated in Colorado, all
the stock of which is owned by OppenheimerFunds, Inc.
66. MultiSource Service, Inc., a Colorado corporation that operates as a
clearing broker, all of the stock of which is owned by OppenheimerFunds,
Inc.
67. Centennial Capital Corporation, a former sponsor of unit investment trust
incorporated in Delaware, all the stock of which is owned by Centennial
Asset Management Corporation.
68. Compensa Compania Seguros De Vida, a Chilean insurance company. Origen
Inversiones S.A. owns 99% of the outstanding shares of this company
69. Cornerstone Suburban Office Investors, LP, a Delaware limited partnership,
which operates as a real estate operating company. Cornerstone Office
Management, LLC holds a 1% general partnership interest in this fund and
MassMutual holds a 99% limited partnership interest.
70. 505 Waterford Park Limited Partnership, a Delaware limited partnership,
which holds title to an office building in Minneapolis, Minnesota. MML
Realty Management Corporation holds a 1% general partnership interest in
this partnership and MassMutual holds a 99% limited partnership interest.
71. The DLB Fund Group, an open-end management investment company, of which
MassMutual owns at least 25% of each series.
MassMutual is the investment adviser the following investment companies, and as
such may be deemed to control them.
1. MassMutual Corporate Investors, a registered closed-end Massachusetts
business trust.
2. MassMutual Participation Investors, a registered closed-end Massachusetts
business trust.
3. MML Series Investment Fund, a registered open-end Massachusetts business
trust, all of the shares are owned by separate accounts of MassMutual and
companies controlled by MassMutual.
35
<PAGE>
4. MassMutual Institutional Funds, a registered open-end Massachusetts
business trust, all of the shares are owned by MassMutual.
5. MassMutual/Carlson CBO N.V., a Netherlands Antilles corporation that issued
Collateralized Bond Obligations on or about May 1, 1991, which is owned
equally by MassMutual interests (MassMutual and MassMutual Holding MSC,
Inc.) and Carlson Investment Management Co.
6. MassMutual Corporate Value Partners, Limited, an off-shore unregistered
investment company.
7. MassMutual High Yield Partners LLC, a high yield bond fund organized as
Delaware limited liability company.
Item 27. Number of Contract Owners
-------------------------
As of February 20, 1997, there were 2,658 Separate Account
contracts are in force.
Item 28. Indemnification
---------------
MassMutual 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 MassMutual pursuant to the foregoing
provisions, or otherwise, MassMutual 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 MassMutual of expenses incurred or
paid by a director, officer or controlling person of MassMutual
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, MassMutual will,
unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
Item 29. Principal Underwriters
----------------------
(a) MML Distributors, LLC, a wholly owned subsidiary of MassMutual
acts as principal underwriter for registered separate accounts of
MassMutual, C.M. Life and MML Bay State.
36
<PAGE>
(b)(1) MML Distributors, LLC is the principal underwriter of the
Contracts. The following people are officers and directors of the
principal underwriter.
OFFICERS AND MEMBER REPRESENTATIVES
MML DISTRIBUTORS, LLC
<TABLE>
<CAPTION>
Name and Position
with Principal Underwriter Principal Business Address
- -------------------------- --------------------------
<S> <C>
Kenneth M. Rickson One Monarch Place
Member Representative 1414 Main Street
G.R. Phelps & Co., Inc. Springfield, MA 01144-1013
Margaret Sperry 1295 State Street
Member Representative Springfield, MA 01111-0001
Massachusetts Mutual
Life Insurance Co.
Kenneth M. Rickson One Monarch Place
President 1414 Main Street
Springfield, MA 01144-1013
Ronald E. Thomson One Monarch Place
Vice President 1414 Main Street
Springfield, MA 01144-1013
Michael L. Kerley One Monarch Place
Vice President 1414 Main Street
Chief Legal Officer Springfield, MA 01144-1013
Assistant Secretary
John O'Connor One Monarch Place
Vice President 1414 Main Street
Springfield, MA 01144-1013
Robert S. Rosenthal One Monarch Place
Compliance Officer 1414 Main Street
Springfield, MA 01144-1013
James T. Birchall One Monarch Place
Treasurer 1414 Main Street
Springfield, MA 01144-1013
Bruce C. Frisbie 1295 State Street
Assistant Treasurer Springfield, MA 01111-0001
Raymond W. Anderson 140 Garden Street
Assistant Treasurer Hartford, CT 01654
Ann F. Lomeli 1295 State Street
Secretary Springfield, MA 01111-0001
</TABLE>
(b)(2) MML Investors Services, Inc. is the co-underwriter of the Contracts. The
following people are the officers and directors of the co-underwriter.
37
<PAGE>
MML INVESTORS SERVICES, INC.
OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
Name and Position
with Co-Underwriter Principal Business Address
- ------------------- --------------------------
<S> <C>
Kenneth M. Rickson One Monarch Place
President and Chief 1414 Main Street
Operating Officer Springfield, MA 01144-1013
Michael L. Kerley One Monarch Place
Second Vice President 1414 Main Street
Chief Legal Officer Springfield, MA 01144-1013
Assistant Secretary
Ronald E. Thomson One Monarch Place
Treasurer and Second 1414 Main Street
Vice President Springfield, MA 01144-1013
Thomas J. Finnegan, Jr. 1295 State Street
Secretary/Clerk Springfield, MA 01111
Marilyn A. Sponzo One Monarch Place
Assistant Secretary 1414 Main Street
Springfield, MA 01144-1013
John E. Forrest One Monarch Place
Second Vice President 1414 Main Street
National Sales Director Springfield, MA 01144-1013
Eileen D. Leo One Monarch Place
Assistant Treasurer 1414 Main Street
Springfield, MA 01103-1013
William Bartol One Monarch Place
Compliance Officer 1414 Main Street
Springfield, MA 01144-1013
Robert S. Rosenthal One Monarch Place
Compliance Officer 1414 Main Street
Springfield, MA 01144-1013
Trudy A. Fearon one Monarch Place
Sr. Registered Options 1414 Main Street
Principal Springfield, MA 01144-1013
Dennis L. Reyhons 1295 State Street
Regional Supervisor/South Springfield, MA 01111
Nicholas J. Orphan 245 Peach Tree Center Ave.
Regional Supervisor/South Suite 2330
Atlanta, GA 30303
</TABLE>
38
<PAGE>
MML INVESTORS SERVICES, INC. Page 2
OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
Name and Position
with Co-Underwriter Principal Business Address
- ------------------- --------------------------
<S> <C>
William L. Tindall 1295 State Street
Chief Pension Management Springfield, MA 01111
Field Force Supervisor
Robert W. Kumming 1295 State Street
Regional Pension Management Springfield, MA 01111
Supervisor (East/Central)
Peter J. Zummo 1295 State Street
Regional Pension Management Springfield, MA 01111
Supervisor (South/West)
Bruce Lukowiak 6263 North Scottsdale Rd.
Regional Supervisor/West Suite 222
Scottsdale, AZ 85250
Robert Burke One Lincoln Centre
Regional Supervisor/Central Suite 1490
Oak Brook Terrace, IL
60181-4271
Lawrence V. Burkett 1295 State Street
Chairman of the Board Springfield, MA 01111
of Directors
Peter Cuozzo, CLU, ChFC 1295 State Street
Director Springfield, MA 01111
John B. Davies 1295 State Street
Director Springfield, MA 01111
Daniel J. Fitzgerald 1295 State Street
Director Springfield, MA 01111
Maureen R. Ford 140 Garden Street
Director Hartford, CT 01654
Gary T. Huffman 1295 State Street
Director Springfield, MA 01111
Isadore Jermyn, FIA, ASA 1295 State Street
Director Springfield, MA 01111
Susan Alfano 1295 State Street
Director Springfield, MA 01111
Anne Melissa Dowling 140 Garden Street
Director Hartford, CT 01654
</TABLE>
(c) See the section captioned "Service Arrangements and Distribution"
in the Statement of Additional Information.
39
<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 a full service agreement between itself and ALLIANCE-ONE
Services, L.P., 301 West Eleventh Street, Kansas City, Missouri
64105.
Item 31. Management Related Services
---------------------------
None
Item 32. Undertakings
------------
(a) Registrant undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure
that the audited financial statements in the Registration
Statement are never more than 16 months old for so long as
payments under the variable annuity contracts may be accepted.
(b) Registrant undertakes to include either: (1) as part of any
application to purchase a contract offered by the prospectus, a
space that an applicant can check to request a Statement of
Additional Information; or (2) a post card or similar written
communication affixed to or included in the prospectus that the
applicant can remove to send for a Statement of Additional
Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made
available under this Form promptly upon written or oral request.
(d) Registrant affirms that the Separate Account meets the definition
of a separate account under the Investment Company Act of 1940.
(e) Massachusetts Mutual 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 Massachusetts Mutual Life
Insurance Company
40
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
caused this Post-Effective Amendment No. 3 to Registration Statement No.
33-83798 to be signed on its behalf by the undersigned thereunto duly
authorized, all in the city of Springfield and the Commonwealth of
Massachusetts, on the 21st day of April, 1997.
MASSACHUSETTS MUTUAL VARIABLE ANNUITY SEPARATE ACCOUNT 3
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
(Depositor)
By: /s/ Thomas B. Wheeler*
-------------------------------------
Thomas B. Wheeler, Chief Executive Officer
Massachusetts Mutual Life Insurance Company
/s/ Richard M. Howe On April 21, 1997, as Attorney-in-Fact pursuant to
- ------------------- powers of attorney filed herewith.
*Richard M. Howe
As required by the Securities Act of 1933, this Post-Effective Amendment
No. 3 to Registration Statement No. 33-83798 has been signed by the following
persons in the capacities and on the duties indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ------ ----
<S> <C> <C>
/s/ Thomas B. Wheeler* Chief Executive Officer and April 21, 1997
- --------------------------- Chairman of the Board
Thomas B. Wheeler
/s/ John J. Pajak* President, Chief Operating Officer April 21, 1997
- --------------------------- and Director
John J. Pajak
/s/ Daniel J. Fitzgerald* Executive Vice President, April 21, 1997
- --------------------------- Chief Financial Officer &
Daniel J. Fitzgerald Chief Accounting Officer
/s/ Roger G. Ackerman* Director April 21, 1997
- ---------------------------
Roger G. Ackerman
/s/ James R. Birle* Director April 21, 1997
- ---------------------------
James R. Birle
/s/ Frank C. Carlucci, III* Director April 21, 1997
- ---------------------------
Frank C. Carlucci, III
/s/ Gene Chao* Director April 21, 1997
- ---------------------------
Gene Chao, Ph.D
/s/ Patricia Diaz Dennis* Director April 21, 1997
- ---------------------------
Patricia Diaz Dennis
</TABLE>
41
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Anthony Downs* Director April 21, 1997
- ---------------------------
Anthony Downs
/s/ James L. Dunlap* Director April 21, 1997
- ---------------------------
James L. Dunlap
/s/ William B. Ellis* Director April 21, 1997
- ---------------------------
William B. Ellis, Ph.D.
/s/ Robert M. Furek* Director April 21, 1997
- ---------------------------
Robert M. Furek
/s/ Charles K. Gifford* Director April 21, 1997
- ---------------------------
Charles K. Gifford
/s/ William N. Griggs* Director April 21, 1997
- ---------------------------
William N. Griggs
/s/ George B. Harvey* Director April 21, 1997
- ---------------------------
George B. Harvey
/s/ Barbara B. Hauptfuhrer* Director April 21, 1997
- ---------------------------
Barbara B. Hauptfuhrer
/s/ Sheldon B. Lubar* Director April 21, 1997
- ---------------------------
Sheldon B. Lubar
/s/ William B. Marx, Jr.* Director April 21, 1997
- ---------------------------
William B. Marx, Jr.
/s/ John F. Maypole* Director April 21, 1997
- ---------------------------
John F. Maypole
/s/ Donald F. McCullough* Director April 21, 1997
- ---------------------------
Donald F. McCullough
/s/ Alfred M. Zeien* Director April 21, 1997
- ---------------------------
Alfred M. Zeien
/s/ Richard M. Howe On April 21, 1997, as Attorney-in-Fact pursuant to
- --------------------------- powers of attorney filed herewith.
*Richard M. Howe
</TABLE>
42
<PAGE>
EXHIBIT LIST
Exhibit 10 (i) Written consent of Coopers & Lybrand L.L.P., independent
accountants.
(ii) Powers of Attorney
Exhibit 14 Financial Data Schedule
43
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Massachusetts Mutual Life Insurance Company
We consent to the inclusion in Post-Effective Amendment No. 3 to the
Registration Statement of Massachusetts Mutual Variable Annuity Separate Account
3 on Form N-4 (Registration No. 33-83798), of our report, which includes
explanatory paragraphs relating to the use of statutory accounting practices,
which practices are no longer considered to be in accordance with generally
accepted accounting principles, and the change in our opinion for prior years,
dated February 7, 1997, on our audits of the statutory financial statements of
Massachusetts Mutual Life Insurance Company, and of our reports dated February
4, 1997, on audits of Massachusetts Mutual Variable Annuity Separate Account 3.
We also consent to the reference to our Firm under the caption "Independent
Accountants" in the Statement of Additional Information.
Coopers & Lybrand, L.L.P.
Springfield, Massachusetts
April 25, 1997
45
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, John J. Pajak, President and Chief Operating Officer of
Massachusetts Mutual Life Insurance Company("MassMutual"), does hereby
constitute and appoint Lawrence V. Burkett, Jr., Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as President and Chief Operating Officer of MassMutual that said attorneys and
agents may deem necessary or advisable to enable MassMutual to comply with the
Securities Act of 1933, as amended (the "1933 Act"), the Investment Company Act
of 1940, as amended (the "1940 Act"), and any rules, regulations, orders or
other requirements of the Securities and Exchange Commission (the "Commission")
thereunder. This power of attorney applies to the registration, under the 1933
Act and the 1940 Act, of shares of beneficial interest of MassMutual separate
investment accounts (the "MassMutual Separate Accounts"). This power of attorney
authorizes such attorneys and agents to sign the Undersigned's name on his
behalf as President and Chief Operating Officer of MassMutual to the
Registration Statements and to any instruments or documents filed or to be filed
with the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such statements,
documents or instruments of any MassMutual Separate Account, including but not
limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
CML/OFFITBANK Separate Account
46
<PAGE>
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 February,
1997.
/s/ John J. Pajak
- ------------------------- -----------------------------
John J. Pajak Witness
President and Chief Operating Officer
47
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 122,672,487
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