<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. 4
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Post-Effective Amendment No. /4/
Massachusetts Mutual Variable Annuity Separate Account 3
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(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, 1998 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, 1997 was filed on or about March 20, 1998.
1
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CROSS REFERENCE TO ITEMS
REQUIRED BY FORM N-4
N-4 Item Caption in Prospectus
- -------- ---------------------
1.............................. Cover Page
2.............................. Glossary
3.............................. Table of Fees & Expenses
4.............................. Not Applicable
5.............................. MassMutual, Oppenheimer,
the Separate Account and the Trusts
6.............................. Contract Charges and Deductions
Distribution
7.............................. Miscellaneous Provisions;
An Explanation of the
Contracts; Reservation of
Rights; Contract Owner's
Voting Rights
8.............................. The Annuity (Pay-Out)
Period
9.............................. The Death Benefit
10............................. The Accumulation (Pay-In)
Period; Distribution
11............................. Right to Return Contract;
Redemption Privilege
12............................. Federal Tax Status
13............................. None
14............................. Additional Information
Caption in Statement of
-----------------------
Additional Information
----------------------
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
2
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PART A
INFORMATION REQUIRED IN A PROSPECTUS
3
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PROSPECTUS
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
OPPENHEIMERFUNDS LIFETRUST VARIABLE ANNUITY CONTRACT
MASSACHUSETTS MUTUAL VARIABLE ANNUITY SEPARATE ACCOUNT 3
May 1, 1998
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 fourteen Divisions (subject to
state availability) 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 MML Trust is a no-load, open-end management investment
company and the Oppenheimer Trust is a diversified open-end investment company.
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 ten available Oppenheimer
Funds: Oppenheimer Money Fund; Oppenheimer High Income Fund; Oppenheimer Bond
Fund; Oppenheimer Aggressive Growth Fund (Prior to May 1, 1998, this Fund was
named Oppenheimer Capital Appreciation Fund); Oppenheimer Growth Fund;
Oppenheimer Multiple Strategies Fund; Oppenheimer Global Securities Fund;
Oppenheimer Strategic Bond Fund; Oppenheimer Growth & Income Fund and subject to
state availability, Oppenheimer Small Cap Growth 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, 1998 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 (call 1-800-258-4511) request and without charge from the
Service Center.
The Securities and Exchange Commission (SEC) maintains a Web site
(http://www.sec.gov) that contains the Statement of Additional Information,
regarding registrants that is filed with the SEC electronically.
THIS PROSPECTUS MUST BE ACCOMPANIED BY OR PRECEDED BY THE PROSPECTUSES OF BOTH
THE OPPENHEIMER VARIABLE ACCOUNT FUNDS AND THE MML SERIES INVESTMENT 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.
1
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<TABLE>
<CAPTION>
Contents Page
----
<S> <C>
Glossary ..................................................................... 4
Summary ...................................................................... 5
Table of Fees and Expenses ................................................... 7
Condensed Financial Information .............................................. 9
MassMutual, OppenheimerFunds, Inc.,
The Separate Account and The Trusts ..................................... 10
Massachusetts Mutual Life Insurance Company ................................ 10
OppenheimerFunds, Inc. ..................................................... 10
The Separate Account ....................................................... 10
The Trusts ................................................................. 10
Investments and Objectives of the Available Funds .......................... 11
An Explanation of the Contract ............................................... 12
General-Uses of the Contract ............................................... 12
The Accumulation (Pay-In) Period
How Contracts May Be Purchased .......................................... 12
Initial Purchase ........................................................ 13
Subsequent Purchases .................................................... 13
Wire Transfer ........................................................... 13
Electronic Data Transmission of Application Information ................. 13
Allocation of Purchase Payments ......................................... 13
General Transfer Rules .................................................. 13
Telephone Transfers ..................................................... 14
Automatic Transfers ..................................................... 14
Right to Return Contracts ............................................... 14
The Death Benefit ....................................................... 14
Redemption Privileges ................................................... 15
Automatic Partial Redemptions ........................................... 16
Tax Sheltered Annuity Redemption Restrictions ........................... 16
The Annuity (Pay-Out) Period
Annuity Benefits ........................................................ 16
Payment Options ......................................................... 16
Fixed Income Option ................................................... 16
Variable Monthly Income Option ........................................ 16
Fixed-Time Payment Option ............................................. 17
Life Income Payments .................................................. 17
Joint-and-Survivor Life Income Payments ............................... 17
Joint-and-Survivor Life Income Payments (Two-Thirds to the Survivor) .. 17
Payments After Death of Annuitant ..................................... 17
Special Limitations ................................................... 17
Charges and Deductions ....................................................... 17
Asset Charge ............................................................... 17
Administrative Charge ...................................................... 17
Contingent Deferred Sales Charge ........................................... 18
Premium Taxes .............................................................. 19
Fund Expenses .............................................................. 19
The Fixed Account and the Market Value Adjustment Feature .................... 19
Market Value Adjustment .................................................... 19
Distribution ................................................................. 20
Miscellaneous Provisions ..................................................... 20
Termination of Liability ................................................... 20
Adjustment of Units and Unit Values ........................................ 20
Periodic Statements ........................................................ 20
Contract Owner's Voting Rights ............................................. 20
Reservation of Rights ...................................................... 21
Federal Tax Status ........................................................... 21
Introduction ............................................................... 21
Tax Status of MassMutual ................................................... 21
Taxation of Contracts in General ............................................. 21
Penalty Taxes .............................................................. 22
Annuity Distribution Rules of Section 72(s) ................................ 22
</TABLE>
2
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<TABLE>
<S> <C>
Spousal Continuance ........................................................ 22
Tax Withholding ............................................................ 22
Tax Reporting .............................................................. 23
Taxation of Qualified Plans, TSAs, and Roth IRAs ........................... 23
Performance Measures ......................................................... 24
Standardized Average Annual Total Return ................................... 24
Additional Performance Measures ............................................ 24
Additional Information ....................................................... 25
</TABLE>
3
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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 fourteen (subject to state availability) separate series of shares of
Oppenheimer Trust and the MML Trust in which the Divisions of the Separate
account invest. The MML Trust is a no-load, open-end, management investment
company and the Oppenheimer Trust is a diversified open-end investment company.
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 consti-
4
<PAGE>
tute 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.
Prior to July 1, 1998, the Service Center for the Contract will be located at
301 West 11(th) St., Kansas City, MO 64105 (800) 258-4511 or P.O. Box 419607,
Kansas City, MO 64141-1007. Effective July 1, 1998, the Service Center will be
relocated. After July 1, 1998, please direct all requests and/or inquiries to:
Annuity Service Center, H564, P.O. Box 9067, Springfield, MA 01102-9067, (800)
258-4511.
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.
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
Subject to state availability, the Contract offers 14 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.
5
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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.
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.)
6
<PAGE>
Table of Fees and Expenses
Contract Owner Transaction Expenses
Sales Load Imposed on Purchases...............None
Deferred sales load as a Percentage of Purchase Payments when withdrawn:
<TABLE>
---------------------------------------------------------------------------------------------
Full Years since payment 0 1 2 3 4 5 6 7 or more
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage 7% 6% 5% 4% 3% 2% 1% 0%
---------------------------------------------------------------------------------------------
</TABLE>
Transfer Fee..................................None for first 14 transfers during
the Accumulation Period ($20
thereafter)
Annual Administrative Charge/1/...............$30/2/
Separate Account Annual Expenses
(as a percentage of average account values)...1.40%/2/
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)/3/
<TABLE>
<CAPTION>
Management Other Total Portfolio
Fees Expenses Annual Expenses
<S> <C> <C> <C>
MML Equity Fund 0.35% 0.00% 0.35%
MML Money Market Fund 0.48% 0.04% 0.52%
MML Managed Bond Fund 0.44% 0.03% 0.47%
MML Blend Fund 0.37% 0.00% 0.37%
Oppenheimer Money Fund 0.44% 0.04% 0.48%
Oppenheimer High Income Fund 0.75% 0.07% 0.82%
Oppenheimer Bond Fund 0.73% 0.05% 0.78%
Oppenheimer Aggressive Growth Fund /4/ 0.71% 0.02% 0.73%
Oppenheimer Multiple Strategies Fund 0.72% 0.03% 0.75%
Oppenheimer Growth Fund 0.73% 0.02% 0.75%
Oppenheimer Global Securities Fund 0.70% 0.06% 0.76%
Oppenheimer Strategic Bond Fund 0.75% 0.08% 0.83%
Oppenheimer Growth & Income Fund 0.75% 0.08% 0.83%
Oppenheimer Small Cap Growth Fund/5/ 0.75% 0.08% 0.83%
</TABLE>
/1/ The Administrative Charge will be waived if the Accumulated Value is at
least $50,000 when the Administrative Charge would be deducted.
/2/ 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.
/3/ The expenses listed are for the year ended December 31, 1997.
/4/ Prior to May 1, 1998, this Fund was known as Oppenheimer Capital
Appreciation Fund.
/5/ The Oppenheimer Small Cap Growth Fund had no operating expenses in 1997
since it had not yet commenced operations. These figures represent OFI's
estimate of the total fund operating expenses for the Oppenheimer Small
Cap Growth Fund in 1998.
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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 $ 81 $ 102 $ 125 $ 213
MML Money Market Fund 83 107 134 231
MML Managed Bond Fund 83 106 131 225
MML Blend Fund 82 103 126 215
Oppenheimer Money Fund 83 106 132 226
Oppenheimer High Income Fund 86 116 149 262
Oppenheimer Bond Fund 86 115 147 257
Oppenheimer Aggressive Growth Fund/1/ 85 114 144 252
Oppenheimer Multiple Strategies Fund 85 114 145 254
Oppenheimer Growth Fund 85 114 145 254
Oppenheimer Global Securities Fund 86 114 146 255
Oppenheimer Strategic Bond Fund 86 117 150 263
Oppenheimer Growth & Income Fund 86 117 150 263
Oppenheimer Small Cap Growth Fund/2/ 86 117 150 263
</TABLE>
If Your Contract is not redeemed at the end of the year:
<TABLE>
<CAPTION>
Year 1 3 5 10
<S> <C> <C> <C> <C>
MML Equity Fund 18 57 98 213
MML Money Market Fund 20 62 107 231
MML Managed Bond Fund 20 61 104 225
MML Blend Fund 19 58 99 215
Oppenheimer Money Fund 20 61 105 226
Oppenheimer High Income Fund 23 71 122 262
Oppenheimer Bond Fund 23 70 120 257
Oppenheimer Aggressive Growth Fund/1/ 22 69 117 252
Oppenheimer Multiple Strategies Fund 22 69 118 254
Oppenheimer Growth Fund 22 69 118 254
Oppenheimer Global Securities Fund 23 69 119 255
Oppenheimer Strategic Bond Fund 23 72 123 263
Oppenheimer Growth & Income Fund 23 72 123 263
Oppenheimer Small Cap Growth Fund/2/ 23 72 123 263
</TABLE>
/1/ Prior to May 1, 1998, this Fund was known as Oppenheimer Capital
Appreciation Fund.
/2/ Subject to state availability.
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 0.06% annual asset charge
based on an average contract size of $50,000.
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.
8
<PAGE>
Condensed Financial Information
Massachusetts Mutual Variable Annuity Separate Account 3
Accumulation Unit Values (Audited)
<TABLE>
<CAPTION>
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1995 *Dec. 31 1994
<S> <C> <C> <C> <C>
MML Equity Division $1.94 $1.53 $1.29 $1.00
MML Money Market Division $1.12 $1.08 $1.05 $1.00
MML Managed Bond Division $1.31 $1.21 $1.18 $1.01
MML Blend Division $1.63 $1.37 $1.22 $1.00
Oppenheimer Money Division $1.13 $1.09 $1.05 $1.00
Oppenheimer High Income Division $1.45 $1.31 $1.15 $ .97
Oppenheimer Bond Division $1.28 $1.18 $1.15 $ .99
Oppenheimer Capital Appreciation Division** $1.71 $1.55 $1.31 $1.00
Oppenheimer Multiple Strategies Division $1.55 $1.34 $1.18 $ .99
Oppenheimer Growth Division $2.05 $1.64 $1.32 $ .98
Oppenheimer Global Securities Division $1.33 $1.10 $ .95 $ .94
Oppenheimer Strategic Bond Division $1.32 $1.24 $1.12 $ .98
Oppenheimer Growth & Income Division *** $2.13 $1.63 $1.24 N/A
</TABLE>
*Public offering of the Contract commenced on November 14, 1994. All
accumulation unit values were $1.00 on November 14, 1994.
**This Division will be known as the Oppenheimer Aggressive Growth Division
once necessary regulatory approvals are obtained.
***Public offering commenced July 3, 1995.
Massachusetts Mutual Variable Annuity Separate Account 3
Number of Accumulation Units Outstanding (Audited)
<TABLE>
<CAPTION>
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1995 *Dec. 31, 1994
<S> <C> <C> <C> <C>
MML Equity Division 7,164,089 2,495,560 542,624 5,129
MML Money Market Division 7,167,967 3,836,345 1,694,677 5,124
MML Managed Bond Division 1,837,632 1,246,028 495,106 5,124
MML Blend Division 5,428,920 1,947,038 524,702 5,127
Oppenheimer Money Division 8,479,773 3,752,549 2,455,934 5,098
Oppenheimer High Income Division 14,390,554 7,373,483 2,120,456 5,099
Oppenheimer Bond Division 3,424,936 2,024,349 648,667 5,097
Oppenheimer Capital Appreciation Division** 19,745,340 9,689,946 1,975,551 5,101
Oppenheimer Multiple Strategies Division 13,996,660 8,309,575 3,911,239 5,100
Oppenheimer Growth Division 25,357,255 12,630,598 2,770,419 5,505
Oppenheimer Global Securities Division 22,781,959 10,658,741 2,634,152 5,502
Oppenheimer Strategic Bond Division 29,035,781 15,659,377 4,395,241 5,000
Oppenheimer Growth & Income Division*** 27,979,778 14,516,671 1,681,775 N/A
</TABLE>
*Public offering of the Contract commenced on November 14, 1994. All
accumulation unit values were $1.00 on November 14, 1994.
**This Division will be known as the Oppenheimer Aggressive Growth Division
once necessary regulatory approvals are obtained.
***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.
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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, the District of Columbia and Puerto Rico.
As of December 31, 1997, MassMutual had estimated unconsolidated statutory
assets in excess of $57 billion, and estimated total assets under management in
excess of $152 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 $75 billion as of December 31, 1997, and having
more than 3.5 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. OFI serves as investment adviser to the
Oppenheimer Trust. OFI is registered as an investment adviser under the
Investment Advisers Act of 1940.
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 the MML Trust or the 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 diversified, open-end investment company organized as a
Massachusetts business trust in 1984. It consists of ten separate Funds -
Oppenheimer Money Fund, Oppenheimer Bond Fund and Oppenheimer Growth Fund, all
organized in 1984; Oppenheimer High Income Fund, Oppenheimer Aggressive Growth
Fund, and Oppenheimer Multiple Strategies Fund, all organized in 1986;
Oppenheimer Global Securities Fund, organized in 1990; Oppenheimer Strategic
Bond Fund, organized in 1993; Oppenheimer Growth & Income Fund, organized in
1995; and Oppenheimer Small Cap Growth Fund organized in 1998. 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 no-load, open-end management investment company having six series
of shares (the "MML Funds"), each of which has different investment objectives
designed to meet different investment needs. The Funds available with this
contract include: MML Equity Fund organized in
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1971; MML Money Market Fund and MML Managed Bond Fund organized in 1981; and MML
Blend Fund organized in 1983. David L. Babson and Company, Inc. ("Babson"), a
subsidiary of MassMutual, serves as the investment subadviser 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 by
investing primarily in debt securities. Secondarily, the Fund seeks capital
growth when consistent with its primary objective.
Oppenheimer Aggressive Growth Fund*
Oppenheimer Aggressive Growth Fund seeks to achieve capital appreciation by
investing in "growth-type" companies.
*Prior to May 1, 1998, the Oppenheimer Aggressive Growth Fund was known as
Oppenheimer Capital Appreciation Fund.
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. Please
consult the Oppenheimer Trust prospectus for a more complete discussion of the
risks and investments objectives associated with this Fund.
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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.
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.
Oppenheimer Small Cap Growth Fund*
Oppenheimer Small Cap Growth Fund seeks capital appreciation. Current income is
not an objective. In seeking its objective, the Fund emphasizes investments in
securities of "growth-type" companies with market capitalization less than $1
billion, including common stocks, preferred stocks, convertible securities,
rights, warrants and options, in proportions which may vary from time to time.
*Subject to state availability
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.
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. MassMutual may also make
this Contract available in the Roth IRA market. The section of this prospectus,
Taxation of Qualified Plans, TSAs, IRAs, and Roth IRAs includes information on
Roth IRAs. 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.
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<PAGE>
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. The Contract Owner must sign the
Application prior to exercising any ownership rights in 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
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.
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(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 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). The Contract must be accompanied by
a written request signed by You that indicates You wish to return the Contract.
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
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<PAGE>
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 Contract years will be equal to the greater of:
the total of all purchase payments made to the Contract less all partial
redemptions; or 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: 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 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 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.)
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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, IRAs, and Roth 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.
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
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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.
Charges and Deductions
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
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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
- --------------------------------------------------------------------------------
Full Years since payment 0 1 2 3 4 5 6 7 or more
- --------------------------------------------------------------------------------
Percentage 7% 6% 5% 4% 3% 2% 1% 0%
- --------------------------------------------------------------------------------
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.
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.
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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%.
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
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is higher than the applicable Current Rate, the application of the MVA will
result in a higher payment upon withdrawal.
The Market Value Adjustment which is applied to the amount being withdrawn is
determined by using the following formula:
/n/
MVA= Amount x ( (1 + i) ----- - 1 )
( (-----) /365/ )
( (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
MML Distributors, LLC ("MML Distributors"), 1414 Main Street, Springfield, MA
01144-1013, is the principal underwriter of the Contracts pursuant to an
Underwriting and Servicing Agreement to which MML Distributors, MassMutual and
the Separate Account are parties. MML Investors Services, Inc. ("MMLISI"), also
located at 1414 Main Street, Springfield, MA 01144-1013 serves as the
co-underwriter of the 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
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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 by dividing the Contract's value held in each Division of the
Separate Account, if any, by $100. Fractional votes are counted. After the
Maturity Date or after the death of the Annuitant, the number of Fund shares
deemed attributable to the Contract will be based on the liability for future
Variable Monthly Annuity payments under the Contract as of the record date and
thus the voting rights will decrease as payments are made.
Contract Owners or beneficiaries will receive proxy material and a form with
which voting instructions may be given. Fund shares held by the Separate Account
as to which no effective instructions have been received or which are
attributable to assets transferred from 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
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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, IRAs and Roth
IRAs for a discussion of Contracts used in the qualified plan market) are
subject to tax to the extent of any earnings or gains in the Contract; amounts
received which are in excess of such earnings or gains are considered a return
of capital. Similarly, amounts borrowed upon the Contract will be treated as
amounts received under the Contract and will be taxable to the same extent. If
an individual Contract Owner transfers ownership, for other than full and
adequate consideration, the Contract Owner will be taxed on the transfer as
though he or she had taken a full redemption of the Contract. For Contracts
entered into after October 21, 1988, all annuity contracts issued by the same
insurer and its affiliates to the same Contract Owner within the same calendar
year must be aggregated in determining the amount of gain realized on a
withdrawal from any one.
If the Contract is obtained in a tax-free exchange of contracts under Section
1035 of the Code, different tax rules may apply. If a distribution prior to the
Maturity Date of a contract obtained in such an exchange is entirely
attributable to investments in the surrendered contract prior to August 14,
1982, the distribution will first be considered a return of capital to the
extent of those investments and only the amounts received in excess of those
investments will be regarded as taxable earnings or gains.
PENALTY TAXES
In addition to the foregoing tax consequences, certain distributions under the
Contract will be subject to a penalty tax under Code Section 72(q) (for non-tax
qualified Contracts) or 72(t) (for Contracts in tax qualified plans see -
Taxation of Qualified Plans, TSAs, IRAs and Roth 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, TSAs, IRAs and Roth IRAs.
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.
SPOUSAL CONTINUANCE
Where the Annuitant and Owner are the same person and his/her spouse is named
the designated beneficiary of the contract then on the death of the
Annuitant/Owner the designated beneficiary may continue the contract in his/her
own name as Annuitant and Owner. The new Annuitant/Owner has all right under the
contract including naming a new beneficiary and making additional purchase
payments.
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,
IRAs and Roth 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.
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Unless the Payee elects not to have withholding apply (for Contracts in tax
qualified plans see - Taxation of Qualified Plans, TSAs, IRAs and Roth IRAs),
MassMutual is required to withhold, for federal income tax purposes, 10% of the
taxable portion of any redemption payment or nonperiodic 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, IRAs AND ROTH 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.
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, TSAs and Roth IRAs 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); (7) effective for calendar years beginning January 1, 1997,
withdrawals from IRAs by certain unemployed persons for payment of health
insurance premiums; (8) effective for calendar years beginning January 1, 1998,
withdrawals from IRAs for the payment of certain qualified higher education
expenses; and (9) effective for calendar years beginning January 1, 1998,
withdrawals from IRAs for certain first-time homebuyer expenses, subject to a
$10,000 lifetime cap. Qualified distributions from Roth IRAs are not subject to
the penalty tax. The exceptions applicable to IRAs also apply to Roth IRAs.
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. No minimum distributions are required from a
Roth IRA.
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.)
Special rules apply in the case of Roth IRAs. Roth IRAs are specially designated
IRAs. Contributions to Roth IRAs are not deductible and are limited based on
modified adjusted gross income. Contrary to regular IRAs, contributions are
permitted after age 70 1/2.
Qualified distributions from Roth IRAs are not included in income. Distributions
that are not qualified distributions are
23
<PAGE>
treated first as a return of investment to the extent of any excess. Roth IRAs
are not subject to required minimum distribution rules.
An individual (other than a married individual filing separately) with an
adjusted gross income of $100,000 or less may roll over distributions within 60
days from a regular IRA to a Roth IRA or may convert a regular IRA into a Roth
IRA. While the rollover would be subject to tax, it would not be subject to the
10% premature distribution penalty tax. If the rollover occurs during 1998, the
income is spread out over four tax years.
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 - 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
24
<PAGE>
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 ob- tain 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 Financial Statements.
Section 5 of the Statement of Additional Information contains financial
statements for MassMutual and the Separate Account.
25
<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, 1998, 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 the last page of
this Prospectus. To obtain a copy, of the Statement of Additional Information
prior to July 1, 1998, return the top request form or telephone 1-800-258-4511.
To obtain a copy of the Statement of Additional Information after July 1, 1998,
return the bottom request form 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 Mass Mutual's Life
Trust.
Name _____________________________________________________________
Address __________________________________________________________
__________________________________________________________
City _________________________ State _______________ Zip _________
Telephone ________________________________________________________
- --------------------------------------------------------------------------------
To: Annuity Service Center, H564
P.O. Box 9067
Springfield, MA 01102-9067
Please send me a Statement of Additional Information for Mass Mutual's Life
Trust.
Name _____________________________________________________________
Address __________________________________________________________
__________________________________________________________
City _________________________ State _______________ Zip _________
Telephone ________________________________________________________
26
<PAGE>
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
5
<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, 1998 (the "Prospectus"). The Prospectus may be
obtained by written or oral (1-800-258-4511) request from the Service
Center.
May 1, 1998
TABLE OF CONTENTS
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
1
<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.
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 $75 billion as of December 31, 1997, and having
over 3.5 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 fourteen Divisions (subject to state
availability). 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 ten Divisions, Oppenheimer Money, Oppenheimer
High Income, Oppenheimer Bond, Oppenheimer Capital Appreciation (This Division
will be known as the Oppenheimer Aggressive Growth Division once necessary
regulatory approvals are obtained.), Oppenheimer Growth, Oppenheimer Multiple
Strategies, Oppenheimer Global Securities, Oppenheimer Strategic Bond,
Oppenheimer Growth & Income and subject to state availability, Oppenheimer Small
Cap Growth, 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.
2
<PAGE>
The Trusts
----------
1. The MML Trust
-------------
The MML Trust is a no-load, open-end management investment company consisting of
six separate series of shares. The Separate Account invests in MML Equity Fund,
MML Money Market Fund, MML Managed Bond Fund, and MML Blend Fund (the "MML
Funds") each of which has its own investment objectives and policies. MassMutual
organized the MML Trust for the purpose of providing vehicles for the investment
of assets held in various separate investment accounts, including the Separate
Account, established by MassMutual or its life insurance company subsidiaries. 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 a diversified open-end investment company consisting of
the following funds: Oppenheimer Global Securities Fund, Oppenheimer High Income
Fund, Oppenheimer Money Fund, Oppenheimer Strategic Bond Fund, Oppenheimer
Aggressive Growth Fund (Prior to May 1, 1998, this Fund was called Oppenheimer
Capital Appreciation Fund.), Oppenheimer Multiple Strategies Fund, Oppenheimer
Bond Fund, Oppenheimer Growth Fund, Oppenheimer Growth & Income and subject to
state availability, Oppenheimer Small Cap Growth 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. David L. Babson and Company, Inc.
("Babson") a subsidiary of MassMutual serves as the investment sub-adviser 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 registered variable life separate investment accounts of MassMutual
and its wholly-owned subsidiary, MML Bay State Life Insurance Company ("MML Bay
State") are invested in the MML Funds. Because registered variable annuity
separate investment accounts of MassMutual and MML Bay State 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 various life separate accounts. Possible conflicts could arise if: (i) state
insurance regulators should disapprove of or require changes in investment
policies, investment advisers or principal underwriters, or if MassMutual should
be permitted to act contrary to actions approved by holders of the variable
life
3
<PAGE>
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 and MML Bay State will take such action at their own expense
as may be required to cause MassMutual's and MML Bay State's variable life
separate accounts 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;
-----------------
(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
<PAGE>
(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. Coopers &
Lybrand's report on the statutory financial statements of MassMutual includes
explanatory paragraphs relating to the use of statutory accounting practices
rather than generally accepted accounting principles.
Distribution and Administration
-------------------------------
MML Distributors, LLC ("MML Distributors"), a wholly-owned subsidiary of
MassMutual, is the principal underwriter for the contract pursuant to an
Underwriting and Servicing Agreement among MassMutual, MML Distributors and the
Separate Account. MML Investors Services, Inc. ("MMLISI"), also a wholly-owned
subsidiary of MassMutual, serves as co-underwriter for the Contract.
MML Distributors may enter into selling agreements with other broker-dealers
which are registered with the SEC as broker-dealers under the Securities
Exchange Act of 1934 and are members of the National Association of Securities
Dealers, Inc. ("selling brokers"). The Contract is sold through agents who are
licensed by state insurance department officials to sell the Contract. These
agents are also registered representatives of selling brokers or MMLISI. The
Contract will be offered on a continuous basis in certain states where
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 1997 was $5,000. Compensation
paid to MML Distributors in 1997 was $58,750. Commissions will be paid through
MMLISI and MML Distributors to agents and selling brokers for selling the
Contracts. During 1997, 1996 and 1995, such payments amounted to $9,141,308,
$10,362,608, and $2,899,557 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 provides: 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 keeps
such other records as may be mandated by state and federal laws and regulations.
ALLIANCE-ONE operates MassMutual's Service Center and
5
<PAGE>
responds to Contract Owner inquiries concerning the status of their Contracts at
301 West 11th St., Kansas City, MO 64105, (800) 258-4511 or P.O. Box 419607,
Kansas City, MO 64141-1007.
However, the Administration Agreement will terminate on June 30, 1998. On July
1, 1998 the Service Center will be relocated and MassMutual will assume
responsibility for all administrative functions. MassMutual will process all
business transactions, maintain all records and respond to Contract Owner
inquiries at the Annuity Service Center, H564, P.O. Box 9067, Springfield, MA
01102-9067, (800) 258-4511.
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 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
6
<PAGE>
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 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.
7
<PAGE>
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 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.
8
<PAGE>
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
----------------
General Formulas to Determine Accumulation Unit Value and
---------------------------------------------------------
Annuity Unit Value for any Division of the Separate Account
-----------------------------------------------------------
Gross Investment = Net Earnings during Valuation Period
Rate ------------------------------------
Value of Net Assets at beginning of Valuation Period
Net Investment = Gross Investment Rate + 1.000000 -
Factor Asset Charge
Accumulation = Accumulation Unit Value on Preceding
Unit Value Valuation Date X Net Investment Factor
Annuity Unit Value = 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
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).
9
<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
which has been in existence for more 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 show Standardized
Average Annual Total Returns based on inception of the underlying Fund.
10
<PAGE>
For Divisions of the Separate Account which have been in existence for less that
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 deduction of the contingent
deferred sales charge.
The following table shows the Total Return for the Divisions of the Separate
Account for the period ending December 31, 1997.
<TABLE>
<CAPTION>
1 Year Since Inception
------ ---------------
<S> <C> <C>
MML Equity 21.34% 22.75%
MML Managed Bond -3.00 7.98
MML Blend 13.79 15.98
Opp Global Securities 15.35 8.30
Opp Capital Appreciation* 4.45 17.62
Opp Growth 19.08 24.59
Opp Multiple Strategies 10.03 14.10
Opp High Income 5.09 11.59
Opp Bond 2.34 7.08
Opp Strategic Bond 1.45 8.10
Opp Growth & Income 24.74 33.75
</TABLE>
*This Division will be known as the Oppenheimer Aggressive Growth Division
once necessary regulatory approvals are obtained.
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.
11
<PAGE>
Annualized Accumulation Unit Value Return
For Periods Ending 12/31/97
<TABLE>
<CAPTION>
Since
1 Year 5 Years 10 Years 3 Years Inception
------ ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
MML Equity 26.88% 16.64% 14.84% 24.87%
MML Managed Bond 8.43 6.31 7.58 9.07
MML Blend 19.28 12.25 12.12 17.70
Opp Global Securities 21.05 17.18 N/A 12.27 10.71%
Opp Capital Appreciation* 10.17 14.33 14.62 19.52
Opp Growth 24.99 16.99 15.07 27.68
Opp Multiple Strategies 15.64 11.76 11.19 16.40
Opp High Income 10.70 12.19 12.74 14.33
Opp Bond 7.78 6.74 7.99 8.73
Opp Strategic Bond 7.23 N/A N/A 10.48 6.16
Opp Growth Income 30.73 N/A N/A N/A 35.25
</TABLE>
* This division will be known as the Oppenheimer Aggressive Growth Division
once necessary regulatory approvals are obtained.
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.
12
<PAGE>
YIELD AND EFFECTIVE YIELD
MassMutual may show yield and effective yield figures for the MML Money Market
and Oppenheimer Money Divisions of the Separate Account. "Yield" refers to the
income generated by an investment in either money market Division over a
seven-day period, which is then "annualized." That is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective" yield is calculated similarly but, when annualized, the income
earned by an investment in a money market division is assumed to be re-invested.
Therefore the effective yield will be slightly higher than the yield because of
the compounding effect of this assumed reinvestment. These figures will reflect
a deduction for Fund, Separate Account, and certain Contract level charges and
the Annual Administrative Charge assuming such contract remains in force. The
Administrative Charge is based on a hypothetical contract where such charge is
applicable. These figures do not reflect the Sales charge or premium taxes (if
any), which if included would reduce the yields.
The following tables show the 7-day Yield and Effective Yield for the MML Money
Market Division and the Oppenheimer Money Division of the Separate Account for
the periods ended December 31, 1997:
<TABLE>
<CAPTION>
MML Oppenheimer
Money Market Money
<S> <C> <C>
Yield 3.82% 3.09%
Effective Yield 3.90 3.14
After administrative fee deduction (0.06%)
Yield 3.76% 3.03%
Effective Yield 3.84 3.08
</TABLE>
13
<PAGE>
LIFETRUST HYPOTHETICAL PROJECTIONS
----------------------------------
OPPENHEIMER GLOBAL SECURITIES
-----------------------------
$10,000 purchase payment made December 31, 1990
<TABLE>
<CAPTION>
Values prior to current Non-Standardized
year's purchase payment ------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/91 $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%
12/31/97 $10,000 $20,317 20.87% 10.66%
</TABLE>
OPPENHEIMER CAPITAL APPRECIATION
--------------------------------
$10,000 purchase payment made December 31, 1987
<TABLE>
<CAPTION>
Values prior to current Non-Standardized
year's purchase payment ---------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/88 $10,000 $11,154 11.54% 11.54%
12/31/89 $10,000 $14,001 25.53% 18.32%
12/31/90 $10,000 $11,454 -18.19% 4.63%
12/31/91 $10,000 $17,445 52.31% 14.93%
12/31/92 $10,000 $19,825 13.65% 14.67%
12/31/93 $10,000 $24,861 25.40% 16.39%
12/31/94 $10,000 $22,625 -8.99% 12.37%
12/31/95 $10,000 $29,552 30.61% 14.50%
12/31/96 $10,000 $34,997 18.42% 14.93%
12/31/97 $10,000 $38,528 10.09% 14.44%
</TABLE>
14
<PAGE>
OPPENHEIMER GROWTH
------------------
$10,000 purchase payment made December 31, 1987
<TABLE>
<CAPTION>
Values prior to current Non-Standardized
year's purchase payment --------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/88 $10,000 $12,010 20.10% 20.10%
12/31/89 $10,000 $14,606 21.62% 20.86%
12/31/90 $10,000 $13,190 -9.70% 9.67%
12/31/91 $10,000 $16,299 23.57% 12.99%
12/31/92 $10,000 $18,377 12.75% 12.94%
12/31/93 $10,000 $19,405 5.59% 11.68%
12/31/94 $10,000 $19,291 -0.59% 9.84%
12/31/95 $10,000 $25,980 34.67% 12.68%
12/31/96 $10,000 $32,058 23.39% 13.82%
12/31/97 $10,000 $40,039 24.90% 14.88%
</TABLE>
OPPENHEIMER MULTIPLE STRATEGIES
-------------------------------
$10,000 purchase payment made December 31, 1987
<TABLE>
<CAPTION>
Values prior to current Non-Standardized
year's purchase payment --------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/88 $10,000 $12,015 20.15% 20.15%
12/31/89 $10,000 $13,685 13.90% 16.98%
12/31/90 $10,000 $13,208 -3.49% 9.72%
12/31/91 $10,000 $15,270 15.62% 11.16%
12/31/92 $10,000 $16,383 7.29% 10.38%
12/31/93 $10,000 $18,702 14.15% 11.00%
12/31/94 $10,000 $18,053 -3.47% 8.81%
12/31/95 $10,000 $21,582 19.55% 10.09%
12/31/96 $10,000 $24,556 13.78% 10.50%
12/31/97 $10,000 $28,368 15.52% 10.99%
</TABLE>
15
<PAGE>
OPPENHEIMER HIGH INCOME
-----------------------
$10,000 purchase payment made December 31, 1987
<TABLE>
<CAPTION>
Values prior to current Non-Standardized
year's purchase payment --------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/88 $10,000 $11,367 13.67% 13.67%
12/31/89 $10,000 $11,722 3.12% 8.27%
12/31/90 $10,000 $12,067 2.94% 6.46%
12/31/91 $10,000 $15,904 31.80% 12.30%
12/31/92 $10,000 $18,464 16.09% 13.05%
12/31/93 $10,000 $22,972 24.42% 14.87%
12/31/94 $10,000 $21,903 -4.66% 11.85%
12/31/95 $10,000 $25,977 18.60% 12.67%
12/31/96 $10,000 $29,502 13.57% 12.77%
12/31/97 $10,000 $32,628 10.60% 12.55%
</TABLE>
OPPENHEIMER BOND
----------------
$10,000 purchase payment made December 31, 1987
<TABLE>
<CAPTION>
Values prior to current Non-Standardized
year's purchase payment --------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/88 $10,000 $10,715 7.15% 7.15%
12/31/89 $10,000 $11,944 11.47% 9.29%
12/31/90 $10,000 $12,681 6.17% 8.24%
12/31/91 $10,000 $14,679 15.76% 10.07%
12/31/92 $10,000 $15,386 4.82% 9.00%
12/31/93 $10,000 $17,120 11.27% 9.37%
12/31/94 $10,000 $16,525 -3.48% 7.44%
12/31/95 $10,000 $19,041 15.22% 8.38%
12/31/96 $10,000 $19,649 3.20% 7.79%
12/31/97 $10,000 $21,148 7.62% 7.78%
</TABLE>
16
<PAGE>
OPPENHEIMER STRATEGIC BOND
--------------------------
$10,000 purchase payment made December 31, 1993
<TABLE>
<CAPTION>
Values prior to current Non-Standardized
year's purchase payment --------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/94 $10,000 $9,458 -5.42% -5.42%
12/31/95 $10,000 $10,730 13.44% 3.58%
12/31/96 $10,000 $11,831 10.26% 5.77%
12/31/97 $10,000 $12,657 6.98% 6.07%
</TABLE>
OPPENHEIMER GROWTH AND INCOME
-----------------------------
$10,000 purchase payment made December 31, 1995
<TABLE>
<CAPTION>
Values prior to current Non-Standardized
year's purchase payment --------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/96 $10,000 $13,043 30.43% 30.43%
12/31/97 $10,000 $17,022 30.50% 30.47%
</TABLE>
17
<PAGE>
MML BLEND
---------
$10,000 purchase payment made December 31, 1987
<TABLE>
<CAPTION>
Values prior to current Non-Standardized
year's purchase payment -------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/88 $10,000 $11,153 11.53% 11.53%
12/31/89 $10,000 $13,163 18.03% 14.73%
12/31/90 $10,000 $13,258 0.72% 9.86%
12/31/91 $10,000 $16,183 22.06% 12.79%
12/31/92 $10,000 $17,421 7.65% 11.74%
12/31/93 $10,000 $18,815 8.00% 11.11%
12/31/94 $10,000 $18,983 0.89% 9.59%
12/31/95 $10,000 $23,057 21.46% 11.01%
12/31/96 $10,000 $25,885 12.27% 11.15%
12/31/97 $10,000 $30,845 19.16% 11.92%
</TABLE>
MML BOND
--------
$10,000 purchase payment made December 31, 1987
<TABLE>
<CAPTION>
Values prior to current Non-Standardized
year's purchase payment --------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/88 $10,000 $10,534 5.34% 5.34%
12/31/89 $10,000 $11,690 10.98% 8.12%
12/31/90 $10,000 $12,463 6.61% 7.62%
12/31/91 $10,000 $14,307 14.80% 9.37%
12/31/92 $10,000 $15,110 5.61% 8.61%
12/31/93 $10,000 $16,629 10.06% 8.85%
12/31/94 $10,000 $15,751 -5.28% 6.71%
12/31/95 $10,000 $18,481 17.33% 7.98%
12/31/96 $10,000 $18,790 1.67% 7.26%
12/31/97 $10,000 $20,344 8.27% 7.36%
</TABLE>
18
<PAGE>
MML EQUITY
----------
$10,000 purchase payment made December 31, 1987
<TABLE>
<CAPTION>
Values prior to current Non-Standardized
year's purchase payment --------------------
----------------------- One Average
Year Annual
Cumulative Accumulated Total Total
Date Payments Value Return Return
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/88 $10,000 $11,476 14.76% 14.76%
12/31/89 $10,000 $13,894 21.07% 17.87%
12/31/90 $10,000 $13,600 -2.11% 10.79%
12/31/91 $10,000 $16,810 23.60% 13.86%
12/31/92 $10,000 $18,283 8.76% 12.83%
12/31/93 $10,000 $19,714 7.83% 11.98%
12/31/94 $10,000 $20,209 2.51% 10.57%
12/31/95 $10,000 $26,115 29.23% 12.75%
12/31/96 $10,000 $30,947 18.50% 13.37%
12/31/97 $10,000 $39,237 26.78% 14.65%
</TABLE>
19
<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, 1997,
and the related statements of operations for the year then ended, and the
statements of changes in net assets for each of the two years in the period the
ended. These financial statements are the responsibility of 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, 1997, 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, 1997, the results of their operations for the year then ended
and the changes in their net assets each of the two years in the period then
ended, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Springfield, Massachusetts
February 3, 1998
F-1
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 3
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<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) 363,909 8,048,210 192,069 342,504 9,565,426 1,820,612 367,969
-------------- ------------- ------------- ------------- ------------- -------------- -------------
Identified cost (Note 3B) $ 11,931,639 $ 8,048,210 $ 2,340,649 $ 7,977,096 $ 9,565,426 $ 20,505,274 $ 4,280,501
============== ============= ============= ============= ============= ============== =============
Value (Note 3A) $ 12,898,075 $ 8,048,210 $ 2,383,375 $ 8,247,356 $ 9,565,426 $ 20,973,447 $ 4,382,509
Dividends receivable 1,039,991 $ 34,820 38,322 618,251 16,838 - -
-------------- ------------- ------------- ------------- ------------- -------------- -------------
Total assets 13,938,066 8,083,030 2,421,697 8,865,607 9,582,264 20,973,447 4,382,509
LIABILITIES
Payable to Massachusetts Mutual
Life Insurance Company 37,970 23,883 17,497 19,296 20,676 73,672 12,665
-------------- ------------- ------------- ------------- ------------- -------------- -------------
NET ASSETS $ 13,900,096 $ 8,059,147 $ 2,404,200 $ 8,846,311 $ 9,561,588 $ 20,899,775 $ 4,369,844
============== ============= ============= ============= ============= ============== =============
Net assets:
Accumulation units--value $ 13,900,096 $ 8,059,147 $ 2,404,200 $ 8,846,311 $ 9,561,588 $ 20,899,775 $ 4,369,844
============== ============= ============= ============= ============= ============== =============
Accumulation units (Note 8)
Contractowners 7,159,089 7,162,967 1,832,632 5,423,920 8,474,773 14,385,554 3,419,936
Massachusetts Mutual Life
Insurance Company 5,000 5,000 5,000 5,000 5,000 5,000 5,000
-------------- ------------- ------------- ------------- ------------- -------------- -------------
Total units 7,164,089 7,167,967 1,837,632 5,428,920 8,479,773 14,390,554 3,424,936
============== ============= ============= ============= ============= ============== =============
NET ASSET VALUE PER
ACCUMULATION UNIT
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1997 $ 1.94 $ 1.12 $ 1.31 $ 1.63 $ 1.13 $ 1.45 $ 1.28
December 31, 1996 1.53 1.08 1.21 1.37 1.09 1.31 1.18
December 31, 1995 1.29 1.05 1.18 1.22 1.05 1.15 1.15
December 31, 1994 1.00 1.00 1.01 1.00 1.00 0.97 0.99
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Multiple Global Strategic Growth &
Appreciation Growth Strategies Securities Bond Income
Division Division Division Division Division Division
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments
Number of shares (Note 2) 826,568 1,603,521 1,283,251 1,423,016 7,535,902 2,898,986
-------------- -------------- -------------- -------------- -------------- --------------
Identified cost (Note 3B) $ 31,696,005 $ 45,118,647 $ 19,936,838 $ 26,493,639 $ 38,097,425 $ 50,351,521
============== ============== ============== ============== ============== =============
Value (Note 3A) $ 33,856,235 $ 52,018,216 $ 21,828,094 $ 30,409,858 $ 38,583,819 $ 59,661,131
Dividends receivable - - - - - -
-------------- -------------- -------------- -------------- -------------- --------------
Total assets 33,856,235 52,018,216 21,828,094 30,409,858 38,583,819 59,661,131
LIABILITIES
Payable to Massachusetts Mutual
Life Insurance Company 111,508 154,389 72,469 97,528 123,779 163,337
-------------- -------------- -------------- -------------- -------------- --------------
NET ASSETS $ 33,744,727 $ 51,863,827 $ 21,755,625 $ 30,312,330 $ 38,460,040 $ 59,497,794
============== ============== ============== ============== ============== ==============
Net assets:
Accumulation units--value $ 33,744,727 $ 51,863,827 $ 21,755,625 $ 30,312,330 $ 38,460,040 $ 59,497,794
============== ============== ============== ============== ============== ==============
Accumulation units (Note 8)
Contractowners 19,740,340 25,352,255 13,991,660 22,776,959 29,030,781 27,974,778
Massachusetts Mutual Life
Insurance Company 5,000 5,000 5,000 5,000 5,000 5,000
-------------- -------------- -------------- -------------- -------------- --------------
Total units 19,745,340 25,357,255 13,996,660 22,781,959 29,035,781 27,979,778
============== ============== ============== ============== ============== ==============
NET ASSET VALUE PER
ACCUMULATION UNIT
<S> <C> <C> <C> <C> <C> <C>
December 31, 1997 $ 1.71 $ 2.05 $ 1.55 $ 1.33 $ 1.32 $ 2.13
December 31, 1996 1.55 1.64 1.34 1.10 1.24 1.63
December 31, 1995 1.31 1.32 1.18 0.95 1.12 1.24
December 31, 1994 1.00 0.98 0.99 0.94 0.98 --
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 3
STATEMENT OF OPERATIONS
For The Year Ended December 31, 1997
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
Equity Market Bond Blend Money Income Bond
Division Division Division Division Division Division Division
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income
Dividends (Note 3B) $ 1,040,061 $ 294,456 $ 123,515 $ 772,715 $ 286,421 $ 1,306,630 $ 217,262
Expenses
Mortality and expense risk fees
(Note 4) 113,580 81,280 25,271 82,001 77,847 219,086 45,195
------------- ------------- ------------- ------------- ------------- ------------- -------------
Net investment income
(loss) (Note 3C) 926,481 213,176 98,244 690,714 208,574 1,087,544 172,067
------------- ------------- ------------- ------------- ------------- ------------- -------------
Net realized and unrealized
gain (loss) on investments
Net realized gain (loss) on
investments (Notes 3B, 3C
and 7) 141,401 - (12,736) 99,891 - 322,255 13,817
Change in net unrealized
appreciation/depreciation
of investments 755,292 - 61,974 210,519 - 257,353 68,804
------------- ------------- ------------- ------------- ------------- ------------- -------------
Net gain on investments 896,693 - 49,238 310,410 - 579,608 82,621
------------- ------------- ------------- ------------- ------------- ------------- -------------
Net increase in net assets
resulting from operations $ 1,823,174 $ 213,176 $ 147,482 $ 1,001,124 $ 208,574 $ 1,667,152 $ 254,688
============= ============= ============= ============= ============= ============= =============
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Multiple Global Strategic Growth &
Appreciation Growth Strategies Securities Bond Income
Division Division Division Division Division Division
------------- ------------ ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Investment income
Dividends (Note 3B) $ 894,378 $ 1,514,490 $ 1,118,151 $ 187,353 $ 2,324,462 $ 1,657,597
Expenses
Mortality and expense risk fees
(Note 4) 344,854 504,956 233,148 304,910 402,784 580,331
------------- ------------ ------------- ------------- ------------- --------------
Net investment income
(loss) (Note 3C) 549,524 1,009,534 885,003 (117,557) 1,921,678 1,077,266
------------- ------------ ------------- ------------- ------------- --------------
Net realized and unrealized
gain (loss) on investments
Net realized gain (loss) on
investments (Notes 3B, 3C and 7) 312,430 996,792 207,097 665,529 140,481 2,350,278
Change in net unrealized
appreciation/depreciation
of investments 1,495,333 5,046,958 1,261,970 2,915,148 33,142 7,548,437
------------- ------------ ------------- ------------- ------------- --------------
Net gain on investments 1,807,763 6,043,750 1,469,067 3,580,677 173,623 9,898,715
------------- ------------ ------------- ------------- ------------- --------------
Net increase in net assets
resulting from operations $ 2,357,287 $ 7,053,284 $ 2,354,070 $ 3,463,120 $ 2,095,301 $ 10,975,981
============= ============ ============= ============= ============= ==============
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 3
STATEMENT OF CHANGES IN NET ASSETS
For The Year Ended December 31, 1997
<TABLE>
<CAPTION>
MML MML
MML Money Managed MML Oppenheimer
Equity Market Bond Blend Money
Division Division Division Division Division
-------------- -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets
Operations:
Net investment income (loss) $ 926,481 $ 213,176 $ 98,244 $ 690,714 $ 208,574
Net realized gain (loss)
on investments 141,401 - (12,736) 99,891 -
Change in net unrealized
appreciation/depreciation
of investments 755,292 - 61,974 210,519 -
-------------- -------------- -------------- ------------- -------------
Net increase in net assets
resulting from operations 1,823,174 213,176 147,482 1,001,124 208,574
-------------- -------------- -------------- ------------- -------------
Capital transactions: (Note 8)
Net contract payments (Note 6) 7,434,297 7,546,061 602,434 5,229,201 2,930,242
Withdrawal of funds (283,367) (293,677) (55,618) (335,383) (1,885,836)
Transfer due to reimbursement
(payment) of accumulation
unit value fluctuation 6,444 (19) (879) 4,121 (1,975)
Withdrawal due to administrative
and contingent deferred sales
charges (Note 6) (1,838) (1,064) (356) (1,393) (1,033)
Divisional transfers 1,105,236 (3,563,026) 207,665 288,771 4,236,851
-------------- -------------- -------------- ------------- -------------
Net increase in net assets
resulting from capital
transactions 8,260,772 3,688,275 753,246 5,185,317 5,278,249
-------------- -------------- -------------- ------------- -------------
Total increase 10,083,946 3,901,451 900,728 6,186,441 5,486,823
NET ASSETS, at beginning
of the year 3,816,150 4,157,696 1,503,472 2,659,870 4,074,765
-------------- -------------- -------------- ------------- -------------
NET ASSETS, at end
of the year $ 13,900,096 $ 8,059,147 $ 2,404,200 $ 8,846,311 $ 9,561,588
============== ============== ============== ============= =============
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer
High Oppenheimer Capital Oppenheimer Multiple
Income Bond Appreciation Growth Strategies
Division Division Division Division Division
-------------- -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets
Operations:
Net investment income (loss) $ 1,087,544 $ 172,067 $ 549,524 $ 1,009,534 $ 885,003
Net realized gain (loss)
on investments 322,255 13,817 312,430 996,792 207,097
Change in net unrealized
appreciation/depreciation
of investments 257,353 68,804 1,495,333 5,046,958 1,261,970
-------------- -------------- -------------- ------------- -------------
Net increase in net assets
resulting from operations 1,667,152 254,688 2,357,287 7,053,284 2,354,070
-------------- -------------- -------------- ------------- -------------
Capital transactions: (Note 8)
Net contract payments (Note 6) 10,613,792 1,841,257 16,147,999 25,496,144 8,960,110
Withdrawal of funds (1,028,205) (82,117) (918,684) (1,308,502) (710,503)
Transfer due to reimbursement
(payment) of accumulation
unit value fluctuation 2,806 951 19,879 20,867 6,659
Withdrawal due to administrative
and contingent deferred sales
charges (Note 6) (2,770) (549) (7,434) (9,948) (3,102)
Divisional transfers (26,833) (40,867) 1,114,947 (56,690) (20,243)
-------------- -------------- -------------- ------------- -------------
Net increase in net assets
resulting from capital
transactions 9,558,790 1,718,675 16,356,707 24,141,871 8,232,921
-------------- -------------- -------------- ------------- -------------
Total increase 11,225,942 1,973,363 18,713,994 31,195,155 10,586,991
NET ASSETS, at beginning
of the year 9,673,833 2,396,481 15,030,733 20,668,672 11,168,634
-------------- -------------- -------------- ------------- -------------
NET ASSETS, at end
of the year $ 20,899,775 $ 4,369,844 $ 33,744,727 $51,863,827 $21,755,625
============== ============== ============== ============= =============
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer
Global Strategic Growth &
Securities Bond Income
Division Division Division
-------------- -------------- --------------
<S> <C> <C> <C>
Increase (decrease) in net
assets
Operations:
Net investment income (loss) $ (117,557) $ 1,921,678 $ 1,077,266
Net realized gain (loss)
on investments 665,529 140,481 2,350,278
Change in net unrealized
appreciation/depreciation
of investments 2,915,148 33,142 7,548,437
-------------- -------------- --------------
Net increase in net assets
resulting from operations 3,463,120 2,095,301 10,975,981
-------------- -------------- --------------
Capital transactions: (Note 8)
Net contract payments (Note 6) 15,827,065 19,538,058 28,589,786
Withdrawal of funds (630,348) (1,508,211) (1,511,174)
Transfer due to reimbursement
(payment) of accumulation
unit value fluctuation 17,897 3,974 14,381
Withdrawal due to administrative
and contingent deferred sales
charges (Note 6) (5,189) (4,085) (10,828)
Divisional transfers (75,952) (1,008,540) (2,173,155)
-------------- -------------- --------------
Net increase in net assets
resulting from capital
transactions 15,133,473 17,021,196 24,909,010
-------------- -------------- --------------
Total increase 18,596,593 19,116,497 35,884,991
NET ASSETS, at beginning
of the year 11,715,737 19,343,543 23,612,803
-------------- -------------- --------------
NET ASSETS, at end
of the year $ 30,312,330 $ 38,460,040 $ 59,497,794
============== ============== ==============
</TABLE>
See Notes to Financial Statements.
F-4
<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 8)
Net contract payments (Note 6) 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)
Transfer due to 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 6) (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 Oppenheimer
Capital Oppenheimer Multiple Global Strategic Growth &
Appreciation Growth Strategies Securities Bond Income
Division Division Division Division Division Division
------------ ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets
Operations:
Net investment income (loss) $ 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 8)
Net contract payments (Note 6) 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)
Transfer due to 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 6) (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.
F-5
<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 four series of shares of the MML Trust. The MML Trust is a
registered, no-load, open-end, management investment company for which
MassMutual serves as investment manager. Concert Capital Management, Inc.
("Concert") served as the investment subadviser to MML Equity Fund and the
Equity Sector of the MML Blend Fund from 1993-1996. Concert merged with and
into David L. Babson and Company, Inc. ("Babson") effective December 31,
1996. At such time, both Concert and Babson were wholly owned subsidiaries
of DLB 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.
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 adviser. (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
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.
F-6
<PAGE>
Notes To Financial Statements (Continued)
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.
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, 1997.
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. 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 contracts
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.
Pursuant to the underwriting and servicing agreements, commissions or other
fees due to registered representatives for selling and servicing the
contracts are paid by MassMutual on behalf of MML Distributors or MMLISI. MML
Distributors and MMLISI also receive compensation for their activities as
underwriters of the contracts.
F-7
<PAGE>
Notes To Financial Statements (Continued)
6. CHARGES/DEDUCTIONS FOR ADMINISTRATIVE CHARGES AND CONTINGENT DEFERRED SALES
CHARGES
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
For The Year Ended Equity Market Bond Blend Money Income Bond
December 31, 1997 Division Division Division Division Division Division Division
- ----------------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Contract payments $ 7,434,297 $ 7,546,061 $ 602,434 $ 5,229,201 $ 2,930,242 $10,613,792 $ 1,841,257
Administrative charges
and contingent deferred
sales charges $ 1,838 $ 1,064 $ 356 $ 1,393 $ 1,033 $ 2,770 $ 549
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer Oppenhemer
Capital Oppenheimer Multiple Global Strategic Growth &
For The Year Ended Appreciation Growth Strategies Securities Bond Income
December 31, 1997 Division Division Division Division Division Division
- ----------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Contract payments $16,147,999 $25,496,144 $ 8,960,110 $15,827,065 $19,538,058 $28,589,786
Administrative charges
and contingent deferred
sales charges $ 7,434 $ 9,948 $ 3,102 $ 5,189 $ 4,085 $ 10,828
</TABLE>
7. PURCHASES AND SALES OF INVESTMENTS
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High Oppenheimer
For The Year Ended Equity Market Bond Blend Money Income Bond
December 31, 1997 Division Division Division Division Division Division Division
- ----------------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Cost of purchases $ 8,922,300 $12,496,844 $ 1,628,294 $ 6,026,216 $27,312,042 $17,140,262 $ 2,433,056
Proceeds from sales $ 553,026 $ 8,593,842 $ 774,160 $ 661,441 $21,953,835 $ 6,405,113 $ 529,744
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Capital Oppenheimer Multiple Global Strategic Growth &
For The Year Ended Appreciation Growth Strategies Securities Bond Income
December 31, 1997 Division Division Division Division Division Division
- ----------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Cost of purchases $19,036,187 $30,562,164 $10,629,690 $17,598,097 $21,360,006 $38,023,522
Proceeds from sales $ 2,020,355 $ 5,194,821 $ 1,476,493 $ 2,506,598 $ 2,294,088 $11,772,017
</TABLE>
F-8
<PAGE>
Notes To Financial Statements (Continued)
8. NET INCREASE (DECREASE) IN ACCUMULATION UNITS
<TABLE>
<CAPTION>
MML MML Oppenheimer
MML Money Managed MML Oppenheimer High
For the Year Ended Equity Market Bond Blend Money Income
December 31, 1997 Division Division Division Division Division Division
----------------- ------------ ------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Units purchased 4,225,907 6,835,089 489,336 3,495,727 2,653,523 7,756,856
Units withdrawn and transferred
to the Fixed Account (162,826) (265,885) (46,019) (219,926) (1,706,236) (746,472)
Units transferred between
divisions 605,448 (3,237,582) 148,287 206,081 3,779,937 6,687
------------ ------------- ------------ ------------ ------------- ------------
Net increase 4,668,529 3,331,622 591,604 3,481,882 4,727,224 7,017,071
Units, at beginning of the year 2,495,560 3,836,345 1,246,028 1,947,038 3,752,549 7,373,483
------------ ------------- ------------ ------------ ------------- ------------
Units, at end of the year 7,164,089 7,167,967 1,837,632 5,428,920 8,479,773 14,390,554
============ ============= ============ ============ ============= ============
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer Oppenheimer Oppenheimer
Oppenheimer Capital Oppenheimer Multiple Global Strategic Growth &
For the Year Ended Bond Appreciation Growth Strategies Securities Bond Income
December 31, 1997 Division Division Division Division Division Division Division
----------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Units purchased 1,501,708 10,042,771 13,444,213 6,157,956 12,542,070 15,331,472 15,339,000
Units withdrawn and transferred
to the Fixed Account (67,752) (568,338) (696,008) (492,269) (505,280) (1,179,296) (792,220)
Units transferred between
divisions (33,369) 580,961 (21,548) 21,398 86,428 (775,772) (1,083,673)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net increase 1,400,587 10,055,394 12,726,657 5,687,085 12,123,218 13,376,404 13,463,107
Units, at beginning of the year 2,204,349 9,689,946 12,630,598 8,309,575 10,658,741 15,659,377 14,516,671
------------ ------------ ------------ ------------ ------------ ------------ ------------
Units, at end of the year 3,424,936 19,745,340 25,357,255 13,996,660 22,781,959 29,035,781 27,979,778
============ ============ ============ ============ ============ ============ ============
<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 the Fixed 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 Oppenheimer
Capital Oppenheimer Multiple Global Strategic Growth &
For the Year Ended Appreciation Growth Strategies Securities Bond 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 the Fixed 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
============= ============ ============ ============ ============ ============
</TABLE>
F-9
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
STATUTORY FINANCIAL STATEMENTS
as of December 31, 1997 and 1996
and for the years ended December 31, 1997, 1996 and 1995
<PAGE>
Report Of Independent Accountants
To the Board of Directors and Policyholders of
Massachusetts Mutual Life Insurance Company
We have audited the accompanying statutory statements of financial position of
Massachusetts Mutual Life Insurance Company as of December 31, 1997 and 1996,
and the related statutory statements of income, changes in policyholders'
contingency reserves, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the statutory
financial statements of Connecticut Mutual Life Insurance Company ("Connecticut
Mutual") for the year ended December 31, 1995, which statements reflect total
revenue and net gain from operations constituting 26% and 22% of the related
Company totals after restatement for the merger of the two companies. Those
statements were audited by other auditors whose report has been furnished to us,
and our opinion, insofar as it relates to the amounts included for Connecticut
Mutual, is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
As described more fully in Note 1, these financial statements were prepared in
conformity with statutory accounting practices of the National Association of
Insurance Commissioners and the accounting practices prescribed or permitted by
the Division of Insurance of the Commonwealth of Massachusetts and, for the
pre-merger balances of Connecticut Mutual, the Department of Insurance of the
State of Connecticut (collectively "statutory accounting practices"), which
practices differ from generally accepted accounting principles. The effects on
the financial statements of the variances between the statutory basis of
accounting and generally accepted accounting principles, although not reasonably
determinable at this time, are presumed to be material.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Massachusetts Mutual Life Insurance Company at December 31, 1997 and 1996, or
the results of its operations or its cash flows for each of the three years in
the period ended December 31, 1997.
In our opinion, based upon our audits and the report of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Massachusetts Mutual Life Insurance Company at
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997, on the
statutory basis of accounting described in Note 1.
Coopers & Lybrand L.L.P.
Springfield, Massachusetts
February 6, 1998
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF FINANCIAL POSITION
December 31,
1997 1996
---- ----
(In Millions)
Assets:
Bonds............................................. $23,890.3 $24,299.3
Common stocks..................................... 354.7 336.6
Mortgage loans.................................... 4,863.7 4,852.8
Real estate....................................... 1,697.7 1,840.9
Other investments................................. 1,963.8 1,425.6
Policy loans...................................... 4,950.4 4,752.3
Cash and short-term investments................... 1,941.2 1,075.4
--------- ---------
39,661.8 38,582.9
Investment and insurance amounts receivable....... 1,064.9 1,102.4
Other assets...................................... 104.8 97.9
--------- ---------
40,831.5 39,783.2
Separate account assets........................... 16,803.1 13,563.5
--------- ---------
$57,634.6 $53,346.7
========= =========
See notes to statutory financial statements.
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF FINANCIAL POSITION, Continued
December 31,
1997 1996
---- ----
(In Millions)
Liabilities:
Policyholders' reserves and funds................. $33,783.2 $33,341.5
Policyholders' dividends.......................... 954.1 885.3
Policyholders' claims and other benefits.......... 353.4 373.8
Federal income taxes.............................. 436.5 440.7
Asset valuation reserve........................... 840.6 689.2
Investment reserves............................... 132.8 208.4
Amounts due on investments puchased and
other liabilities................................ 1,457.9 1,206.1
--------- ---------
37,958.5 37,145.0
Separate account reserves and liabilities......... 16,802.8 13,563.1
--------- ---------
54,761.3 50,708.1
Policyholders' contingency reserves............... 2,873.3 2,638.6
--------- ---------
$57,634.6 $53,346.7
========= =========
See notes to statutory financial statements.
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years ended December 31,
1997 1996 1995
---- ---- ----
(In Millions)
<S> <C> <C> <C>
Revenue:
Premium income............................................ $6,764.8 $6,328.6 $5,727.7
Net investment and other income........................... 2,904.4 2,861.1 2,898.4
-------- -------- --------
9,669.2 9,189.7 8,626.1
-------- -------- --------
Benefits and expenses:
Policy benefits and payments.............................. 6,597.3 6,048.2 5,152.2
Addition to policyholder's reserves and funds............. 720.8 854.7 1,205.4
Commissions and operating expenses........................ 766.1 763.5 833.7
State taxes, licenses and fees............................ 81.5 96.4 89.4
Merger restructuring costs................................ - 66.1 44.0
-------- -------- --------
8,165.7 7,828.9 7,324.7
-------- -------- --------
Net gain before federal income taxes and dividends........ 1,503.5 1,360.8 1,301.4
Federal income taxes...................................... 284.4 276.7 206.2
-------- -------- --------
Net gain from operations before dividends................. 1,219.1 1,084.1 1,095.2
Dividends to policyholders................................ 919.5 859.9 819.0
-------- -------- --------
Net gain from operations.................................. 299.6 224.2 276.2
Net realized capital gain (loss).......................... (42.5) 40.3 (85.8)
-------- -------- --------
Net income................................................ $ 257.1 $ 264.5 $ 190.4
======== ======== ========
</TABLE>
See notes to statutory financial statements.
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF CHANGES
IN POLICYHOLDERS' CONTINGENCY RESERVES
<TABLE>
<CAPTION>
Years ended December 31,
1997 1996 1995
---- ---- ----
(In Millions)
<S> <C> <C> <C>
Policyholder's contingency reserves, beginning of year.... $2,638.6 $2,600.9 $2,569.1
-------- -------- --------
Increases (decreases) due to:
Net income............................................... 257.1 264.5 190.4
Net unrealized capital gain (loss)....................... 119.1 (1.7) 88.7
Merger restructuring costs, net of fax................... - - (45.4)
Change in asset valuation and investment reserves........ (76.0) (142.4) (75.6)
Change in prior year policyholders' reserves............. (55.4) (72.2) (108.2)
Change in non-admitted assets and other.................. (10.1) (10.5) (18.1)
-------- -------- --------
234.7 37.7 31.8
-------- -------- --------
Policyholders' contingency reserves, end of year.......... $2,873.3 $2,638.6 $2,600.9
======== ======== ========
</TABLE>
See notes to statutory financial statements.
<PAGE>
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
1997 1996 1995
---- ---- ----
(In Millions)
<S> <C> <C> <C>
Operating acitivites:
Net income............................................... $ 257.1 $ 264.5 $ 190.4
Addition to policyholders' reserves and funds,
net of transfers to separate accounts................... 421.3 426.7 575.8
Net realized capital (gain) loss......................... 42.5 (40.3) 85.8
Other changes............................................ (58.1) (232.8) (25.2)
--------- --------- ---------
Net cash provided by operating activities................ 662.8 418.1 826.8
--------- --------- ---------
Investing activities:
Purchases of investments and loans....................... (12,292.7) (10,171.5) (10,364.2)
Sales or maturities of investments and receipts
from repayment of loans................................. 12,545.7 8,539.3 9,671.1
--------- --------- ---------
Net cash provided by (used in) investing activities...... 253.0 (1,632.2) (693.1)
--------- --------- ---------
Financing activities:
Repayments of long-term debt............................. (50.0) (53.3) (46.4)
--------- --------- ---------
Net cash used by financing activities.................... (50.0) (53.3) (46.4)
--------- --------- ---------
Increase (decrease) in cash and short-term investments... 865.8 (1,267.4) 87.3
Cash and short-term investments, beginning of year....... 1,075.4 2,342.8 2,255.5
--------- --------- ---------
Cash and short-term investments, end of year............. $ 1,941.2 $ 1,075.4 $ 2,342.8
========= ========= =========
</TABLE>
See Notes to Statutory Financial Statements.
<PAGE>
Notes To Statutory Financial Statements
Massachusetts Mutual Life Insurance Company ("the Company") is a mutual life
insurance company and as such has no shareholders. The Company's primary
business is individual life insurance, annuity and disability income products
distributed primarily through career agents. The Company also provides a wide
range of pension products and services, as well as investment services to
individuals, corporations and institutions in all 50 states and the District of
Columbia.
On March 1, 1996, the operations of the former Connecticut Mutual Life Insurance
Company ("Connecticut Mutual") were merged into the Company. This merger was
accounted for under the pooling of interests method of accounting. For the
purposes of this presentation, these financial statements reflect historical
amounts giving retroactive effect as if the merger had occurred on January 1,
1995 in conformity with the practices of the National Association of Insurance
Commissioners and the accounting practices prescribed or permitted by the
Division of Insurance of the Commonwealth of Massachusetts. In 1996,
merger-related expenses totaling $66.1 million were recorded in the Statutory
Statement of Income. In 1995, merger-related expenses incurred by Massachusetts
Mutual (the Company prior to the merger) of $44.0 million, were recorded in the
Statutory Statement of Income and the expenses incurred by Connecticut Mutual of
$45.4 million, net of tax, were recorded as a component of changes in
policyholders' contingency reserves, as permitted by each company's regulatory
authority. On the merger date, policyholders' reserves attributable to
disability income contracts were strengthened by $75.0 million, investment
reserves for real estate were increased by $49.8 million and net prepaid pension
assets were increased by $10.4 million with all adjustments reflected as a
change to policyholders' contingency reserves. The separate results of each
company prior to the merger for the year ended December 31, 1995, were as
follows: (a) revenue was $6,443.8 million for Massachusetts Mutual and $2,182.3
million for Connecticut Mutual; (b) net income was $160.7 million for
Massachusetts Mutual and $29.6 million for Connecticut Mutual and (c)
policyholders' contingency reserves increased by $143.7 million for
Massachusetts Mutual and decreased by $112.0 million for Connecticut Mutual.
On March 31, 1996, the Company sold MassMutual Holding Company Two, Inc., a
wholly-owned subsidiary, and its subsidiaries, including Mirus Life Insurance
Company (formerly the MML Pension Insurance Company; currently doing business as
"UniCARE"), which comprised the Company's group life and health business, to
WellPoint Health Networks, Inc. The Company received total consideration of
$402.2 million ($340.0 million in cash and $62.2 million in notes receivable)
and recognized a before tax gain of $187.9 million. The Company, pursuant to a
1994 reinsurance agreement, cedes its group life, accident and health business
to UniCARE. The Company's investment in MassMutual Holding Company Two, Inc.
amounted to $187.8 million at December 31, 1995; its gain from operations
included a $41.0 million dividend received from MIRUS in 1995. Additionally,
this investment produced an unrealized gain of $13.9 million in 1995.
1. SUMMARY OF ACCOUNTING PRACTICES
The accompanying statutory financial statements, except as to form, have been
prepared in conformity with the statutory accounting practices of the National
Association of Insurance Commissioners ("NAIC") and the accounting practices
prescribed or permitted by the Division of Insurance of the Commonwealth of
Massachusetts and, for the pre-merger balances of Connecticut Mutual, the
Department of Insurance of the State of Connecticut (collectively "statutory
accounting practices"), which practices were at one time also considered to be
in conformity with generally accepted accounting principles ("GAAP").
The accompanying statutory financial statements are different in some respects
from GAAP financial statements. The more significant differences are as follows:
(a) acquisition costs, such as commissions and other costs directly related to
acquiring new business, are charged to current operations as incurred, whereas
GAAP would require these expenses to be capitalized and recognized over the life
of the policies; (b) policy reserves are based upon statutory mortality and
interest requirements without consideration of withdrawals, whereas GAAP
reserves would be based upon reasonably conservative estimates of mortality,
morbidity, interest and withdrawals; (c) bonds are generally carried at
amortized cost whereas GAAP generally requests they be valued at fair value; (d)
deferred income taxes are not provided for book-tax timing differences as would
be required by GAAP, and (e) payments received for universal and variable life
products, variable annuities and investment related products are reported as
premium revenue, whereas under GAAP, these payments would be recorded as
deposits to policyholders' account balances.
The NAIC is currently engaged in an extensive project ("Codification") to codify
statutory accounting principles with a goal of providing a comprehensive guide
of statutory accounting principles for use by insurers in all states. This
comprehensive guide, which has not been approved by the NAIC or any state
insurance department, includes seventy-two Statements of Statutory Accounting
Principles ("SSAPs") and is expected to be effective no earlier than January 1,
1999. The effect of adopting these SSAPs shall be reported as an adjustment to
surplus on the effective date. Management is currently reviewing the impact of
Codification. However, since the SSAPs have not been finalized, the ultimate
impact cannot be determined at this time.
<PAGE>
Notes To Statutory Financial Statements (Continued)
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, as
well as disclosures of contingent assets and liabilities at the date of the
financial statements. Management must also make estimates and assumptions that
affect the amounts of revenues and expenses during the reporting period. Future
events, including changes in the levels of mortality, morbidity, interest rates
and asset valuations, could cause actual results to differ from the estimates
used in these financial statements.
The following is a description of the Company's principal accounting policies
and practices.
A. Investments
Bonds and stocks are valued in accordance with rules established by the National
Association of Insurance Commissioners. Generally, bonds are valued at amortized
cost, preferred stocks in good standing at cost, and common stocks, except for
unconsolidated subsidiaries, at fair value.
Mortgage loans are valued at unpaid principal less unamortized discount. Real
estate is valued at cost less accumulated depreciation, impairment allowances
and mortgage encumbrances. Encumbrances totaled $14.2 million in 1997 and $27.3
million in 1996. Depreciation on investment real estate is calculated using the
straight-line and constant yield methods.
Policy loans are carried at the outstanding loan balance less amounts unsecured
by the cash surrender value of the policy.
Short-term investments are stated at amortized cost, which approximates fair
value.
Investments in unconsolidated subsidiaries and affiliates, joint ventures and
other forms of partnerships are included in other investments on the Statutory
Statement of Financial Position and are accounted for using the equity method.
In compliance with regulatory requirements, the Company maintains an Asset
Valuation Reserve and an Interest Maintenance Reserve. The Asset Valuation
Reserve and other investment reserves stabilize the policyholders' contingency
reserves against fluctuations in the value of stocks, as well as declines in the
value of bonds, mortgage loans and real estate investments.
The Interest Maintenance Reserve captures after-tax realized capital gains and
losses which result from changes in the overall level of interest rates for all
types of fixed income investments, as well as other financial instruments,
including financial futures, U.S. Treasury purchase commitments, options,
interest rate swaps, interest rate caps and interest rate floors. These interest
rate related gains and losses are amortized into income using the grouped method
over the remaining life of the investment sold or over the remaining life of the
underlying asset. Net realized after tax capital gains of $95.4 million in 1997,
$73.1 million in 1996, and net realized after tax capital losses of $130.7
million in 1995 were charged to the Interest Maintenance Reserve. Amortization
of the Interest Maintenance Reserve into net investment income amounted to $31.0
million in 1997, $26.9 million in 1996, and $5.0 million in 1995.
Realized capital gains and losses, less taxes, not includable in the Interest
Maintenance Reserve, are recognized in net income. Realized capital gains and
losses are determined using the specific identification method. Unrealized
capital gains and losses are included in policyholders' contingency reserves.
B. Separate Accounts
Separate account assets and liabilities represent segregated funds administered
and invested by the Company for the benefit of pension, variable annuity and
variable life insurance contract holders. Assets consist principally of
marketable securities reported at fair value. Premiums, benefits and expenses of
the separate accounts are reported in the Statutory Statement of Income. The
Company receives administrative and investment advisory fees from these
accounts.
C. Non-admitted Assets
Assets designated as "non-admitted" (principally certain fixed assets,
receivables and Interest Maintenance Reserve, when in a net loss deferral
position) are excluded from the Statutory Statement of Financial Position by an
adjustment to policyholders' contingency reserves.
<PAGE>
Notes To Statutory Financial Statements (Continued)
D. Policyholders' Reserves and Funds
Policyholders' reserves for life contracts are developed using accepted
actuarial methods computed principally on the net level premium and the
Commissioners' Reserve Valuation Method bases using the American Experience and
the 1941, 1958 and 1980 Commissioners' Standard Ordinary mortality tables with
assumed interest rates ranging from 2.5 to 6.0 percent.
Reserves for individual annuities, guaranteed investment contracts and deposit
administration and immediate participation guarantee funds are based on accepted
actuarial methods principally at interest rates ranging from 2.25 to 11.25
percent. Reserves for policies and contracts considered investment contracts
have a carrying value of $8,077.9 million and $9,073.8 million at December 31,
1997 and 1996, respectively (fair value of $8,250.0 million and $9,324.6 million
at December 31, 1997 and 1996, respectively as determined by discounted cash
flow projections). Accident and health policy reserves are generally calculated
using the two-year preliminary term, net level premium and fixed net premium
methods and various morbidity tables.
The Company made certain changes in the valuation of policyholders' reserves of
$55.4 million in 1997 and $72.2 million in 1996. The effects of these changes
were recorded as a decrease to policyholders' contingency reserves.
E. Premium and Related Expense Recognition
Life insurance premium revenue is recognized annually on the anniversary date of
the policy. Annuity premium is recognized when received. Accident and health
premiums are recognized as revenue when due. Commissions and other costs related
to issuance of new policies, maintenance and settlement costs are charged to
current operations when incurred.
F. Policyholders' Dividends
The Board of Directors annually approves dividends to be paid in the following
year. These dividends are allocated to reflect the relative contribution of each
group of policies to policyholders' contingency reserves and consider investment
and mortality experience, expenses and federal income tax charges. The liability
for policyholders' dividends is equal to the estimated amount of dividends to be
paid in the following calendar year.
G. Cash and Short-term Investments
For purposes of the Statutory Statement of Cash Flows, the Company considers all
highly liquid investments purchased with a maturity of twelve months or less to
be cash and short-term investments.
2. POLICYHOLDERS' CONTINGENCY RESERVES
Policyholders' contingency reserves represent surplus of the Company as reported
to regulatory authorities and are intended to protect policyholders against
possible adverse experience.
The Company issued surplus notes of $100.0 million at 7 1/2 percent and $250.0
million at 7 5/8 percent in 1994 and 1993, respectively. These notes are
unsecured and subordinate to all present and future indebtedness of the Company,
policy claims and prior claims against the Company as provided by the
Massachusetts General Laws. Issuance was approved by the Commissioner of
Insurance of the Commonwealth of Massachusetts ("the Commissioner").
All payments of interest and principal are subject to the prior approval of the
Commissioner. Sinking fund payments are due as follows: $62.5 million in 2021,
$87.5 million in 2022, $150.0 million in 2023 and $50.0 million in 2024.
Interest on the notes issued in 1994 is scheduled to be paid on March 1 and
September 1 of each year, to holders of record on the preceding February 15 or
August 15, respectively. Interest on the notes issued in 1993 is scheduled to be
paid on May 15 and November 15 of each year, to holders of record on the
preceding May 1 or November 1, respectively. Interest expense is not recorded
until approval for payment is received from the Commissioner. Interest of $26.6
million was approved and paid in 1997, 1996 and 1995.
<PAGE>
Notes To Statutory Financial Statements (Continued)
The proceeds of the notes, less a $28.3 million reserve in 1997, and a $32.2
million reserve in 1996 for contingencies associated with the issuance of the
notes, are recorded as a component of the Company's policyholders' contingency
reserves as approved by the Commissioner. These reserves, as permitted by the
Division of Insurance, are included in investment reserves on the Statutory
Statement of Financial Position.
3. EMPLOYEE BENEFIT PLANS
The Company's employee benefit plans include plans in place for the employees of
Massachusetts Mutual and Connecticut Mutual prior to the merger. Employees
previously covered by the Connecticut Mutual pension plans will continue
coverage under these plans. All other employees, including employees hired after
the merger date, will be covered by the Massachusetts Mutual benefit plans.
A. Pension
The Company has two non-contributory defined benefit plans covering
substantially all of its employees. One plan includes employees previously
employed by Connecticut Mutual; the other includes all other eligible employees.
Benefits are based on the employees' years of service, compensation during the
last five years of employment and estimated social security retirement benefits.
The Company accounts for these plans following Financial Accounting Standards
Board Statement No. 87, "Employers' Accounting for Pensions." Accordingly, as
permitted by the Massachusetts Division of Insurance, the Company has recognized
a pension asset of $157.4 million and $97.2 million at December 31, 1997 and
1996, respectively. On the merger date, the accounting for Connecticut Mutual
pension plans was conformed to the Company's policy of recording pension plan
assets and liabilities, resulting in a $10.4 million increase in policyholders'
contingency reserves. Company policy is to fund pension costs in accordance with
the requirements of the Employee Retirement Income Security Act of 1974 and,
based on such requirements, no funding was required for the years ended December
31, 1997, 1996 and 1995. The assets of the plans are invested in the Company's
general account and separate accounts.
The benefit status of the defined benefit plans as of December 31 is as follows:
1997 1996
---- ----
(In Millions)
Accumulated benefit obligation $ 663.1 $ 611.5
Vested benefit obligation 653.8 606.5
Projected benefit obligation 713.9 665.5
Plan assets at fair value 1,154.2 1,201.7
The following assumptions were used in determining the actuarial present value
of both the accumulated and projected benefit obligations.
MassMutual Connecticut Mutual
Plan Plan
---- ----
Discount rate - 1997 7.25% 7.25%
Discount rate - 1996 7.75 7.75
Increase in future compensation levels 4.00 5.00
Long-term rate of return on assets 10.00 9.00
In 1997, there was a significant reduction in plan participants in the
Connecticut Mutual Plan which resulted in recognition of a pension plan
curtailment gain of $10.7 million.
As a result of the sale of Mirus Life Insurance Company, there was a significant
reduction in plan participants which resulted in recognition of a pension plan
curtailment gain of $15.3 million in 1996.
The Company also has defined contribution plans for employees and agents. The
expense credited to operations for all pension plans is $38.9 million in 1997,
$32.7 million in 1996 and $10.9 million in 1995.
<PAGE>
Notes To Statutory Financial Statements (Continued)
B. Life and Health
Certain life and health insurance benefits are provided to retired employees and
agents through group insurance contracts. Substantially all of the Company's
employees may become eligible for these benefits if they reach retirement age
while working for the Company. The Company adopted the National Association of
Insurance Commissioners' accounting standard for post-retirement life and health
benefit costs, requiring these benefits to be accounted for using the accrual
method for employees and agents eligible to retire and current retirees.
The following assumptions were used in determining the accumulated
postretirement benefit liability.
MassMutual Connecticut Mutual
Plan Plan
---- ----
Discount - 1997 7.25% 7.25%
Discount - 1996 7.75 7.75
Assumed increases in medical cost
rates in the first year 6.25 - 6.75 9.50
declining to 4.75 5.00
within 5 years 5 years
The initial transition obligation of $137.9 million is being amortized over
twenty years through 2012. At December 31, 1997 and 1996, the net unfunded
accumulated benefit obligation was $124.2 million and $124.1 million,
respectively, for employees and agents eligible to retire or currently retired
and $34.7 million and $33.8 million, respectively, for participants not eligible
to retire. A Retired Lives Reserve Trust was funded to pay life insurance
premiums for certain retired employees. Trust assets available for benefits were
$21.7 million and $23.0 million at December 31, 1997 and 1996, respectively.
As a result of the sale of Mirus Life Insurance Company, there was a significant
reduction in plan participants which resulted in recognition of a life and
health plan curtailment loss of $13.9 million in 1996.
The expense for 1997, 1996 and 1995 was $16.5 million, $17.6 million, and $22.9
million, respectively. A one percent increase in the annual assumed increase in
medical cost rates would increase the 1997 accumulated postretirement benefit
liability and benefit expense by $10.9 million and $1.4 million, respectively.
4. RELATED PARTY TRANSACTIONS
Pursuant to two 1994 reinsurance agreements with Mirus Life Insurance Company
(Mirus) whereby the Company assumed all of the single premium immediate annuity
business written by Mirus and ceded all of its group life, accident and health
business to Mirus. A gain from operations of this business was reflected in 1995
as a $41.0 million dividend received from Mirus, which was recorded as net
investment income on the Statutory Statement of Income. As previously discussed,
on March 31, 1996, the Company sold MassMutual Holding Company Two, Inc. a
wholly-owned subsidiary, and its subsidiaries, including Mirus Life Insurance
Company to WellPoint Health Networks, Inc.
The Company has a modified coinsurance quota-share reinsurance agreement with a
wholly-owned subsidiary, C.M. Life Insurance Company, whereby the Company
assumes 75% of the premiums on certain universal life policies issued by C.M.
Life. The Company pays a stipulated expense allowance, death and surrender
benefits, and a modified coinsurance adjustment. Reserves for payment of future
benefits are retained by C.M. Life.
5. FEDERAL INCOME TAXES
Provision for federal income taxes is based upon the Company's best estimate of
its current tax liability. No deferred tax effect is recognized for temporary
differences that may exist between financial reporting and taxable income.
Accordingly, the reporting of equity tax (essentially a reduction in the
deduction for policyholder dividends) and miscellaneous temporary differences,
such as reserves, acquisition costs and restructuring costs, resulted in
effective tax rates which differ from the statutory tax rate.
The Internal Revenue Service has completed examining the Company's income tax
returns through the year 1992 for Massachusetts Mutual and 1991 for Connecticut
Mutual, and is currently examining Massachusetts Mutual for the years 1993 and
1994, and Connecticut Mutual for the years 1992 through 1995. The Company
believes any adjustments resulting from such examinations will not materially
affect its financial statements.
<PAGE>
Notes to Statutory Financial Statements (Continued)
Components of the formula authorized by the Internal Revenue Service for
determining deductible policyholder dividends have not been finalized for 1997
or 1996. The Company records the estimated effects of anticipated revisions in
the Statutory Statement of Income.
The Company plans to file its 1997 federal income tax return on a consolidated
basis with its life and non-life affiliates with the exception of C.M. Life
Insurance Company. The Company and its eligible life and non-life affiliates
are subject to a written tax allocation agreement, which allocates the group's
consolidated tax liability for payment purposes. Generally, the agreement
provides that members with losses shall be compensated for the use of their
losses and credits by other members.
The Company made federal tax payments of $353.4 million in 1997, $330.7 million
in 1996 and $147.3 million in 1995.
6. INVESTMENTS
The Company maintains a diversified investment portfolio. Investment policies
limit concentration in any asset class, geographic region, industry group,
economic characteristic, investment quality or individual investment. In the
normal course of business, the Company enters into commitments to purchase
privately placed bonds and to issue mortgage loans.
A. Bonds
The carrying value and estimated fair value of bonds are as follows:
December 31, 1997
-----------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
----- ----- ------ -----
(In Millions)
U.S. Treasury securities $ 6,241.0 $ 470.5 $10.3 $ 6,701.2
and obligations of U.S.
government corporations
and agencies
Debt securities issued by
foreign governments 83.5 4.4 3.0 84.9
Mortgage-backed securities 3,390.8 187.9 9.0 3,569.7
State and local governments 361.9 23.9 .6 385.2
Corporate debt securities 12,148.9 765.2 46.9 12,867.2
Utilities 871.8 100.1 2.2 969.7
Affiliates 792.4 2.8 1.0 794.2
--------- -------- ----- ---------
TOTAL $23,890.3 $1,554.8 $73.0 $25,372.1
========= ======== ===== =========
December 31, 1996
-----------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
----- ----- ------ -----
(In Millions)
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies $ 8,042.6 $ 344.0 $ 56.3 $ 8,330.3
Debt securities issued by 95.2 10.2 .5 104.9
foreign governments
Mortgage-backed securities 3,014.0 119.0 43.3 3,089.6
State and local governments 173.2 13.1 2.1 184.2
Corporate debt securities 11,675.2 528.0 133.3 12,069.9
Utilities 975.0 87.0 18.5 1,043.5
Affiliates 324.1 4.3 3.5 324.9
--------- -------- ------ ---------
TOTAL $24,299.3 $1,105.6 $257.5 $25,147.3
========= ======== ====== =========
<PAGE>
Notes To Statutory Financial Statements (Continued)
The carrying value and estimated fair value of bonds at December 31, 1997 by
contractual maturity are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without prepayment penalties.
Estimated
Carrying Fair
Value Value
----- -----
(In Millions)
Due in one year or less $ 519.7 $ 523.0
Due after one year through five years 3,972.1 4,104.6
Due after five years through ten years 7,423.3 7,838.1
Due after ten years 5,254.9 5,888.1
--------- ---------
17,170.0 18,353.8
Mortgage-backed securities, including
securities guaranteed by the U.S.
Government 6,720.3 7,018.3
--------- ---------
TOTAL $23,890.3 $25,372.1
========= =========
Proceeds from sales of investments in bonds were $11,427.8 million during 1997,
$6,390.7 million during 1996 and $8,068.8 million during 1995. Gross capital
gains of $200.7 million in 1997, $188.8 million in 1996 and $255.5 million in
1995 and gross capital losses of $68.8 million in 1997, $255.5 million in 1996
and $67.1 million in 1995 were realized on those sales, portions of which were
included in the Interest Maintenance Reserve. The estimated fair value of
non-publicly traded bonds is determined by the Company using a pricing matrix.
B. Stocks
Preferred stocks in good standing had fair values of $145.5 million in 1997 and
$150.8 million in 1996, using a pricing matrix for non-publicly traded stocks
and quoted market prices for publicly traded stocks. Common stocks, except for
unconsolidated subsidiaries, had a cost of $250.3 million in 1997 and $249.2
million in 1996.
C. Mortgages
The fair value of mortgage loans, as determined from a pricing matrix for
performing loans and the estimated underlying real estate value for
non-performing loans, approximated carrying value.
The Company had restructured loans with book values of $202.3 million, and
$383.5 million at December 31, 1997 and 1996, respectively. These loans
typically have been modified to defer a portion of the contracted interest
payments to future periods. Interest deferred to future periods totaled $5.1
million in 1997, $2.2 million in 1996 and $2.5 million in 1995.
D. Other
The carrying value of investments which were non-income producing for the
preceding twelve months was $5.7 million and $23.1 million at December 31, 1997
and 1996, respectively. The Company made voluntary contributions to the Asset
Valuation Reserve of $6.8 million 1996. No additional voluntary contribution to
the Asset Valuation Reserve was made in 1997.
It is not practicable to determine the fair value of policy loans as they do not
have a stated maturity.
7. PORTFOLIO RISK MANAGEMENT
The Company manages its investment risks, primarily to reduce interest rate and
duration imbalances determined in asset/liability analyses. The fair values of
these instruments, described below, which are not recorded in the financial
statements, are based upon market prices or prices obtained from brokers. The
Company does not hold or issue these financial instruments for trading purposes.
<PAGE>
Notes To Statutory Financial Statements (Continued)
The notional amounts described do not represent amounts exchanged by the parties
and, thus, are not a measure of the exposure of the Company. The amounts
exchanged are calculated on the basis of the notional amounts and the other
terms of the instruments, which relate to interest rates, exchange rates,
security prices or financial or other indexes.
The Company enters into financial futures contracts for the purpose of managing
interest rate exposure. Margin requirements are met with the deposit of
securities. Futures contracts are generally settled with offsetting
transactions. Gains and losses on financial futures contracts are recorded when
the contract is closed and amortized through the Interest Maintenance Reserve
over the remaining life of the underlying asset. As of December 31, 1997 and
1996, the Company did not have any open financial futures contracts.
The Company utilizes interest rate swap agreements, options, and purchased caps
and floors to reduce interest rate exposures arising from mismatches between
assets and liabilities and to modify portfolio profiles to manage other risks
identified. Under interest rate swaps, the Company agrees to an exchange, at
specified intervals, between streams of variable rate and fixed rate interest
payments calculated by reference to an agreed-upon notional principal amount.
Net amounts receivable and payable are accrued as adjustments to interest income
and included in investment and insurance amounts receivable on the Statutory
Statement of Financial Position. Gains and losses realized on the termination of
contracts are amortized through the Interest Maintenance Reserve over the
remaining life of the associated contract. At December 31, 1997 and 1996, the
Company had swaps with notional amounts of $3,220.2 million and $2,090.3
million, respectively. The fair values of these instruments were $20.9 million
at December 31, 1997 and $14.8 million at December 31, 1996.
Options grant the purchaser the right to buy or sell a security or enter into a
derivative transaction at a stated price within a stated period. The Company's
option contracts have terms of up to fifteen years. The amounts paid for options
purchased are included in other investments on the Statutory Statement of
Financial Position. Gains and losses on these contracts are recorded at the
expiration or termination date and are amortized through the Interest
Maintenance Reserve over the remaining life of the option contract. At December
31, 1997 and 1996, the Company had option contracts with notional amounts of
$5,388.2 million and $1,928.4 million, respectively. The Company's credit risk
exposure was limited to the unamortized costs of $59.0 million and $18.1
million, which had fair values of $99.6 million and $19.2 million at December
31, 1997 and 1996, respectively.
Interest rate cap agreements grant the purchaser the right to receive the excess
of a referenced interest rate over a given rate calculated by reference to an
agreed upon notional amount. Interest rate floor agreements grant the purchaser
the right to receive the excess of a given rate over a referenced interest rate
calculated by reference to an agreed upon notional amount. Amounts paid for
interest rate caps and floors are amortized into interest income over the life
of the asset on a straight-line basis. Unamortized costs are included in other
investments on the Statutory Statement of Financial Position. Amounts receivable
and payable are accrued as adjustments to interest income and included in the
Statutory Statement of Financial Position as investment and insurance amounts
receivable. Gains and losses on these contracts, including any unamortized cost,
are recognized upon termination and are amortized through the Interest
Maintenance Reserve over the remaining life of the associated cap or floor
agreement. At December 31, 1997 and 1996, the company had agreements with
notional amounts of $3,348.6 million and $3,859.6 million, respectively. The
Company's credit risk exposure on these agreements is limited to the unamortized
costs of $18.2 million and $22.0 million at December 31, 1997 and 1996,
respectively. The fair values of these instruments were $23.4 million and $15.2
million at December 31, 1997 and 1996, respectively.
The Company utilizes asset swap agreements to reduce exposures, such as currency
risk and prepayment risk, built into certain assets acquired. Cross-currency
interest rate swaps allow investment in foreign currencies, increasing access to
additional investment opportunities, while limiting foreign exchange risk. The
net cash flows from asset and currency swaps are recognized as adjustments to
the underlying assets' interest income. Gains and losses realized on the
termination of these contracts adjusts the bases of the underlying asset.
Notional amounts relating to asset and currency swaps totaled $225.6 million and
$364.7 million at December 31, 1997 and 1996, respectively. The fair values of
these instruments were an unrecognized loss of $1.7 million at December 31, 1997
and an unrecognized gain of $7.8 million at December 31, 1996.
<PAGE>
Notes To Statutory Financial Statements (Continued)
Equity swap agreements are utilized to hedge exposure to market risk on public
and private equity positions held in the Company's investment portfolio. Under
equity swaps, the Company agrees to an exchange, at points in time specified in
each contract, between streams of variable or fixed rate interest payments and
the change in an underlying index, equity or basket of equities. The change in
the underlying item is calculated by reference to the level of such item
specified in the agreement. Net amounts receivable and payable are accrued as
adjustments to interest income and included in investment and insurance amounts
receivable on the Statutory Statement of Financial Position. Changes in the
value of these contracts are recorded as realized gains and losses in the
Statutory Statement of Income when contracts are closed. At December 31, 1997
and 1996, the Company had equity swap contracts with notional amounts of $160.0
million and $149.2 million, respectively. The fair values of these instruments
were an unrealized loss of $5.1 million at December 31, 1997 and an unrealized
gain of $11.9 million at December 31, 1996.
The Company enters into forward U.S. Treasury commitments for the purpose of
managing interest rate exposure. The Company generally does not take delivery on
forward commitments. These commitments are instead settled with offsetting
transactions. Gains and losses on forward commitments are recorded when the
commitment is closed and amortized through the Interest Maintenance Reserve over
the remaining life of the asset. At December 31, 1997 and 1996, the Company had
U. S. Treasury purchase commitments which will settle during the following year
with contractual amounts of $1,100.7 million and $1,639.4 million with fair
values of $1,117.6 million and $1,627.4 million, respectively including net
unrealized gains of $16.9 million at December 31, 1997 and net unrealized losses
of $12.0 million at December 31, 1996.
The Company is exposed to credit-related losses in the event of nonperformance
by counterparties to derivative financial instruments. This exposure is limited
to contracts with a positive fair value. The amounts at risk in a net gain
position were $146.7 million and $53.9 million at December 31, 1997 and 1996,
respectively. The Company monitors exposure to ensure counterparties are credit
worthy and concentration of exposure is minimized. Additionally, contingent
collateral positions have been obtained with counterparties when considered
prudent.
8. REINSURANCE
The Company cedes all of its group life and health business to UniCARE and has
other reinsurance agreements with other insurance companies in the normal course
of business. Premiums, benefits to policyholders and provisions for future
benefits are stated net of reinsurance. The Company remains liable to the
insured for the payment of benefits if the reinsurer cannot meet its obligations
under the reinsurance agreements. Premiums ceded were $294.6 million in 1997,
$793.5 million in 1996 and $904.1 million in 1995.
9. LIQUIDITY
The withdrawal characteristics of the policyholders' reserves and funds,
including separate accounts, and the invested assets which support them at
December 31, 1997 are illustrated below:
(In Millions)
Total policyholders' reserves and funds and
separate account liabilities $50,804.2
Not subject to discretionary withdrawal (5,283.7)
Policy loans (4,950.4)
---------
Subject to discretionary withdrawal $40,570.1
=========
Total invested assets, including separate $56,464.7
Policy loans and other invested assets (14,823.3)
---------
Marketable investments $41,641.4
=========
10. BUSINESS RISKS AND CONTINGENCIES
The Company is subject to insurance guaranty fund laws in the states in which it
does business. These laws assess insurance companies amounts to be used to pay
benefits to policyholders and claimants of insolvent insurance companies. Many
states allow these assessments to be credited against future premium taxes. The
Company believes such assessments in excess of amounts accrued will not
materially affect its financial position, results of operations or liquidity. In
1997 and 1996, the Company elected not to admit $21.4 million and $15.3 million,
respectively, of guaranty fund premium tax offset receivables relating to prior
assessments.
<PAGE>
Notes To Statutory Financial Statements (Continued)
The Company is involved in litigation arising in and out of the normal course of
its business. Management intends to defend these actions vigorously. While the
outcome of litigation cannot be foreseen with certainty, it is the opinion of
management, after consultation with legal counsel, that the ultimate resolution
of these matters will not materially affect its financial position, results of
operations or liquidity.
11. RECLASSIFICATIONS
Certain 1996 and 1995 amounts have been reclassified to conform with the current
year presentation.
12. SUBSIDIARIES AND AFFILIATED COMPANIES
A summary of ownership and relationship of the Company and its subsidiaries and
affiliated companies as of December 31, 1997 is illustrated below. The Company
provides management or advisory services to these companies. Subsidiaries are
wholly-owned, except as noted.
Parent
- ------
Massachusetts Mutual Life Insurance Company
Subsidiaries of Massachusetts Mutual Life Insurance Company
- -----------------------------------------------------------
C.M. Assurance Company
C.M. Benefit Insurance Company
C.M. Life Insurance Company
MassMutual Holding Company
MassMutual Holding Company Two, Inc. (Sold in March 1996)
MassMutual of Ireland, Limited
MML Bay State Life Insurance Company
MML Distributors, LLC
Subsidiaries of MassMutual Holding Company
------------------------------------------
GR Phelps, Inc.
MassMutual Holding Trust I
MassMutual Holding Trust II
MassMutual Holding MSC, Inc.
MassMutual International, Inc.
MassMutual Reinsurance Bermuda (Sold in December 1996)
MML Investor Services, Inc.
State House One (Liquidated in December 1996)
Subsidiaries of MassMutual Holding Trust I
------------------------------------------
Antares Leveraged Capital Corporation -- 98.5%
Charter Oak Capital Management, Inc. -- 80.0%
Cornerstone Real Estate Advisors, Inc.
DLB Acquisition Corporation -- 84.8%
Oppenheimer Acquisition Corporation -- 88.55%
Subsidiaries of MassMutual Holding Trust II
-------------------------------------------
CM Advantage, Inc. -- (Liquidated in December 1997)
CM International, Inc.
CM Property Management, Inc. -- (Liquidated in December 1997)
High Yield Management, Inc.
MMHC Investments, Inc.
MML Realty Management
Urban Properties, Inc.
Westheimer 335 Suites, Inc.
<PAGE>
Notes To Statutory Financial Statements (Continued)
Subsidiaries of MassMutual International
----------------------------------------
Compensa de Seguros de Vida S.A. -- 33.5%
MassLife Seguros de Vida (Argentina) S. A.
MassMutual International (Bermuda) Ltd.
Mass Seguros de Vida (Chile) S. A. -- 33.5%
MassMutual International (Luxemburg) S. A.
MassMutual Holding MSC, Incorporated
MassMutual/Carlson CBO N. V. -- 100%
MassMutual Corporate Value Limited -- 46%
9048 -- 5434 Quebec, Inc.
Affiliates of Massachusetts Mutual Life Insurance Company
- ---------------------------------------------------------
MML Series Investment Fund
MassMutual Institutional Funds
Oppenheimer Value Stock Fund
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
Financial Statements Included in Part A
---------------------------------------
Condensed Financial Information
Financial Statements Included in Part B
---------------------------------------
The Registrant
--------------
Report of Independent Accountants
Statement of Assets and Liabilities as of December 31, 1997
Statement of Operations for the year ended December 31, 1997
Statement of Changes in Net Assets for the years ended December
31, 1997 and 1996
Notes to Financial Statements
The Depositor
-------------
Report of Independent Accountants
Statutory Statements of Financial Position as of December 31,
1997 and 1996
Statutory Statements of Income for the years ended December 31,
1997, 1996 and 1995 Statutory
Statements of Changes in Policyholders' Contingency Reserves for
the years ended 1997, 1996 and 1995
Statutory Statement of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
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.***
Exhibit 2 None
Exhibit 3 (i) Copy of Distribution Agreement between
the Registrant and MML Distributors, LLC.*
(ii) Copy of Co-Underwriting Agreement between
the Registrant and MML Investors Services
Inc.*
(iii) None
Exhibit 4 (i) Form of Flexible Purchase Payment Multi-
Fund Variable Annuity Contract.***
23
<PAGE>
Exhibit 5 The form of Application used with the Flexible
Purchase Payment Multi-Fund Variable Annuity
Contract.***
Exhibit 6 (i) Copy of the Articles of Incorporation of
Massachusetts Mutual Life Insurance Company.**
(ii) Copy of the By-Laws of Massachusetts Mutual
Life Insurance Company.**
Exhibit 7 None
Exhibit 8 (a) Copy of the Form of Participation Agreement
between Massachusetts Mutual Life Insurance
Company, MML Bay State Life Insurance Company,
C.M. Life Insurance Company, Oppenheimer Funds,
Inc. and Oppenheimer Variable Account Funds. **
Exhibit 8 (b) Copy of the Form of Participation Agreement
between Massachusetts Mutual Life Insurance
Company, MML Bay State Life Insurance Company,
C.M. Life Insurance Company, Oppenheimer Funds,
Inc. and Panorama Series Fund, Inc. **
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 None
* Incorporated by reference to Post-Effective Amendment No. 2 to Registration
Statement No. 33-83798, filed on Form N-4 with the Securities and Exchange
Commission and effective May 1, 1996.
** Incorporated by reference to Registration Statement File No. 333-22557,
filed on February 28, 1997
*** Filed herewith
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.
24
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Position Principal Occupation(s) During Past Five Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Roger G. Ackerman, Director Chairman and Chief Executive Officer, since 1996, President and Chief Operating
One Riverfront Plaza, HQE 2 Officer, 1990-1996, Corning, Inc.
Corning, NY 14831
- ------------------------------------------------------------------------------------------------------------------------------------
James R. Birle, Director Chairman, since 1997, and Founder, since 1994, President, 1994-1997, Resolute
2 Soundview Drive Partners, LLC; General Partner, Blackstone Group, 1988-1994
Greenwich, CT 06836
- ------------------------------------------------------------------------------------------------------------------------------------
Gene Chao, Director Chairman, President and CEO, Computer Projections, Inc., since 1991
733 SW Vista Avenue
Portland, OR 97205
- ------------------------------------------------------------------------------------------------------------------------------------
Patricia Diaz Dennis, Director Senior Vice President and Assistant General Counsel, SBC Communications Inc., since
175 East Houston, Room 4-A-70 1995; Special Counsel, Sullivan & Cromwell, 1993-1995; Assistant Secretary of State
San Antonio, TX 78205 for Human Rights and Humanitarian Affairs, U.S. Department of State, 1992-1993
- ------------------------------------------------------------------------------------------------------------------------------------
Anthony Downs, Director Senior Fellow, The Brookings Institution, since 1977
1775 Massachusetts Ave., N.W.
Washington, DC 20036-2188
- ------------------------------------------------------------------------------------------------------------------------------------
James L. Dunlap, Director President and Chief Operating Officer, United Meridian Corporation, since 1996;
1201 Louisiana, Suite 1400 Senior Vice President, Texaco, Inc. 1987-1996
Houston, TX 77002-5603
- ------------------------------------------------------------------------------------------------------------------------------------
William B. Ellis, Director Senior Fellow, Yale University School of Forestry and Environmental Studies, since
31 Pound Foolish Lane 1995; Chairman and Chief Executive Officer, Northeast Utilities, 1983-1995
Glastonbury, CT 06033
- ------------------------------------------------------------------------------------------------------------------------------------
Robert M. Furek, Director Chairman, State Board of Trustees for the Hartford School System, since 1997;
1 State Street, Suite 2310 President and Chief Executive Officer, Heublein, Inc., 1987-1996
Hartford, CT 06103
- ------------------------------------------------------------------------------------------------------------------------------------
Charles K. Gifford, Director Chairman and Chief Executive Officer, since 1995, and President, 1989-1995,
100 Federal Street BankBoston, N.A. and Chairman, since 1998, and Chief Executive Officer, since 1985,
Boston, MA 02110 BankBoston Corporation
- ------------------------------------------------------------------------------------------------------------------------------------
William N. Griggs, Director Managing Director, Griggs & Santow, Inc., since 1983
75 Wall Street, 20th Floor
New York, NY 10005
- ------------------------------------------------------------------------------------------------------------------------------------
George B. Harvey, Director Retired Chairman, President and CEO, Pitney Bowes, since 1996
One Landmark Square
Suite 1905, 19th Floor
Stamford, CT 06901
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara B. Hauptfuhrer, Director Director of various corporations, since 1972
1700 Old Welsh Road
Huntingdon Valley, PA 19006
- ------------------------------------------------------------------------------------------------------------------------------------
Sheldon B. Lubar, Director Chairman, Lubar & Co. Incorporated, since 1977
700 North Water Street, Suite 1200
Milwaukee, WI 53202
- ------------------------------------------------------------------------------------------------------------------------------------
William B. Marx, Jr., Director Retired Senior Executive Vice President, Lucent Technologies, since 1996; Executive
5 Peacock Lane Vice President and CEO Multimedia Products Group, AT&T, 1994-1996; Executive
Village of Golf, FL 33436-5299 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
55 Sandy Hook Road - North
Sarasota, FL 34242
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
John J. Pajak, Director, President President and Chief Operating Officer, since 1996, Vice Chairman and Chief
and Chief Operating Officer Administrative Officer, 1996-1996, Executive Vice President, 1987-1996, MassMutual
1295 State Street
Springfield, MA 01111
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas B. Wheeler, Director, Chairman Chairman and Chief Executive Officer, since 1996, President and Chief Executive
and Chief Executive Officer Officer, 1988-1996, MassMutual
1295 State Street
Springfield, MA 01111
- ------------------------------------------------------------------------------------------------------------------------------------
Alfred M. Zeien, Director Chairman and Chief Executive Officer, The Gillette Company, since 1991
Prudential Tower
Boston, MA 02199
- ------------------------------------------------------------------------------------------------------------------------------------
Executive Vice Presidents:
- ------------------------------------------------------------------------------------------------------------------------------------
Lawrence V. Burkett, Jr. Executive Vice President and General Counsel, since 1993, Senior Vice President and
1295 State Street Deputy General Counsel, 1992-1993, MassMutual
Springfield, MA 01111
- ------------------------------------------------------------------------------------------------------------------------------------
Peter J. Daboul Executive Vice President and Chief Information Officer, since 1997, Senior Vice
1295 State Street President, 1990-1997, MassMutual
Springfield, MA 01111
- ------------------------------------------------------------------------------------------------------------------------------------
John B. Davies Executive Vice President, since 1994, Associate Executive Vice President, 1994-1994,
1295 State Street General Agent, 1982-1993, MassMutual
Springfield, MA 01111
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel J. Fitzgerald Executive Vice President, since 1994, Corporate Financial Operations, 1994-1997,
1295 State Street Senior Vice President, 1991-1994
Springfield, MA 01111
- ------------------------------------------------------------------------------------------------------------------------------------
James E. Miller Executive Vice President, since 1997 and 1987-1996, MassMutual; Senior Vice
1295 State Street President, UniCare Life and Health Insurance Company, 1996-1997
Springfield, MA 01111
- ------------------------------------------------------------------------------------------------------------------------------------
John V. Murphy Executive Vice President, since 1997, MassMutual; Executive Vice President and
1295 State Street Chief Operating Officer, David L. Babson & Co., Inc., 1995-1997; Chief Operating
Springfield, MA 01111 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, since 1993, Executive Vice
1295 State Street President, 1992-1993, MassMutual
Springfield, MA 01111
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph M. Zubretsky Executive Vice President and Chief Financial Officer, since 1997, MassMutual; Chief
1295 State Street Financial Officer, 1996, HealthSource; Coopers & Lybrand, 1990-1996
Springfield, MA 01111
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the Depositor or
-------------------------------------------------------------------
Registrant
----------
The assets of the Registrant, under state law, are assets of
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.
26
<PAGE>
LIST OF SUBSIDIARIES AND AFFILIATES
The following entities are, or may be deemed to be, controlled by MassMutual
through the direct or indirect ownership of such entities' stock.
1. CM Assurance Company, a Connecticut life, accident, disability and health
insurer, all the stock of which is owned by MassMutual.
2. CM Benefit Insurance Company, a Connecticut life, accident, disability and
health insurer, all the stock of which is owned by MassMutual.
3. C.M. Life Insurance Company, a Connecticut life, accident, disability and
health insurer, all the stock of which is owned by MassMutual.
4. MML Bay State Life Insurance Company, a Connecticut life and health
insurer, all the stock of which is owned by MassMutual.
5. 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 herein.
6. MassMutual Holding Company, a Delaware holding company, all the stock of
which is owned by MassMutual.
7. MassMutual of Ireland, Limited., 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.
8. 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.
9. MassMutual Institutional Funds, a registered open-end investment company
organized as a Massachusetts business trust, all of the shares are owned by
MassMutual.
10. 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.
11. MML Investors Services, Inc., registered broker-dealer incorporated in
Massachusetts, MassMutual Holding Company owns 86% of the capital stock and
F.R. Phelps & Co., Inc. owns 14% of the capital stock of MML Investors
Services, Inc..
12. MassMutual Holding MSC, Inc., a Massachusetts corporation, which acts as a
holding company for MassMutual positions in investment entities organized
outside the United States. MassMutual Holding Company owns all the
outstanding shares of MassMutual Holding MSC, Inc.
13. MassMutual Holding Trust I, a Massachusetts business trust, which acts as a
holding company for certain MassMutual investment subsidiaries. MassMutual
Holding Company owns all the outstanding shares of MassMutual Holding Trust
I..
14. MassMutual Holding Trust II, a Massachusetts business trust, which acts as
a holding company for certain MassMutual investment subsidiaries.
MassMutual Holding Company owns all the outstanding shares of MassMutual
Holding Trust II.
15. 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.
16. MML Insurance Agency, Inc., a licensed insurance broker incorporated in
Massachusetts, all of the stock of which is owned by MML Investors
Services, Inc.
17. MML Securities Corporation, a "Massachusetts Securities Corporation", all
of the stock of which is owned by MML Investors Services, Inc.
27
<PAGE>
18. DISA 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.
19. 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.
20. MML Insurance Agency of Mississippi, P.C., a Mississippi professional
corporation that operates as an insurance broker, and is controlled by MML
Insurance Agency, Inc.
21. 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.
22. MML Insurance Agency of Ohio, Inc., a subsidiary of MML Insurance Agency,
Inc., is incorporated in the state of Ohio and operates as an insurance
broker. The outstanding capital stock is controlled by MML Insurance
Agency, Inc. through a voting trust agreement.
23. MML Insurance Agency of Texas, Inc., a subsidiary of MML Insurance Agency,
Inc., is incorporated in the state of Texas and operates as an insurance
broker. The outstanding capital stock is controlled by MML Insurance
Agency, Inc. through an irrevocable proxy arrangement.
24. MassMutual/Carlson CBO N.V., a Netherlands Antilles corporation which
operated a collateralized bond obligation fund. MassMutual Holding MSC,
Inc. and Carlson Investment Management Co. each owns 99% of the outstanding
shares.
25. MassMutual Corporate Value Limited, a Cayman Islands corporation that owns
approximately 93% of MassMutual Corporate Value Partners Limited.
MassMutual Holding MSC, Inc. owns 46.19% of the outstanding capital stock
of MassMutual Corporate Value Limited.
26. MassMutual Corporate Value Partners Limited, a Cayman Islands corporation
that operates as a high yield bond fund. MassMutual Corporate Value Limited
holds an approximately 93% ownership interest in this company.
27. 9048-5434 Quebec, Inc., a Quebec corporation, which operates as the owner
of hotel property in Montreal, Quebec, Canada. MassMutual Holdings MSC,
Inc. owns all the shares of 9048-5434 Quebec, Inc.
28. Antares Leveraged Capital Corp., a Delaware corporation that operates as a
finance company. MassMutual Holding Trust I owns approximately 98.7% of the
capital stock of Antares.
29. 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.
30. Cornerstone Real Estate Advisers, Inc., a Massachusetts equity real estate
advisory corporation, all the stock of which is owned by MassMutual Holding
Trust I.
31. DLB Acquisition Corporation ("DLB") is a Delaware corporation, which serves
as a holding company for David L. Babson and Company, Incorporated.
MassMutual Holding Trust I owns 83.7% of the outstanding capital stock of
DLB.
32. 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.
33. David L. Babson and Company, Incorporated, a registered investment adviser
incorporated in Massachusetts, all of the stock of which is owned by DLB.
34. 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.
35. 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.
36. Potomac Babson Incorporated, a Massachusetts corporation, is a registered
investment adviser. David L. Babson and
28
<PAGE>
Company Incorporated owns 60% of the outstanding shares of Potomac Babson
Incorporated.
37. OppenheimerFunds, Inc., a registered investment adviser incorporated in
Colorado, all of the stock of which is owned by Oppenheimer Acquisition
Corporation
38. 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.
39. HarbourView Asset Management Corporation, a registered investment adviser
incorporated in New York, all the stock of which is owned by
OppenheimerFunds, Inc.
40. MultiSource Service, Inc., a Colorado corporation that operates as a
clearing broker, 80% of the stock of which is owned by OppenheimerFunds,
Inc.
41. OppenheimerFunds Distributor, Inc., a registered broker-dealer incorporated
in New York, all the stock of which is owned by OppenheimerFunds, Inc.
42. Oppenheimer Partnership Holdings, Inc., a Delaware holding company, all the
stock of which is owned by OppenheimerFunds, Inc.
43. Oppenheimer Real Asset Management, Inc., a commodity pool operator
incorporated in Delaware, all the stock of which is owned by
OppenheimerFunds, Inc.
44. Shareholder Financial Services, Inc., a transfer agent incorporated in
Colorado, all the stock of which is owned by OppenheimerFunds, Inc.
45. Shareholder Services, Inc., a transfer agent incorporated in Colorado, all
the stock of which is owned by OppenheimerFunds, Inc.
46. Centennial Capital Corporation, a Delaware corporation that formerly
sponsor a unit investment trust. Centennial Asset Management Corporation
owns all the outstanding shares of Centennial Capital Corporation.
47. 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.
48. 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.
49. 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.
50. 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.
51. CM Property Management, Inc., a Connecticut real estate holding company,
all the stock of which is owned by MassMutual Holding Trust II.
52. 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.
53. MMHC Investment, Inc., a Delaware corporation which is a passive investor
in MassMutual/Darby CBO LLC, MassMutual High Yield Partners LLC and other
MassMutual investments. MassMutual Holding Trust II owns all the
outstanding stock of MMHC Investment, Inc.
54. MassMutual High Yield Partners LLC, a Delaware limited liability company,
that operates as a high yield bond fund.
29
<PAGE>
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.
55. MML Realty Management Corporation, a property manager incorporated in
Massachusetts, all the stock of which is owned by MassMutual Holding
Trust II.
56. 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.
57. MassMutual/Darby CBO IM Inc., a Delaware corporation which operates as the
LLC Manager of MassMutual/Darby CBO LLC MMHC Investment, Inc. owns 50% of
the capital stock of this company
58. MassMutual/Darby CBO LLC, a Delaware limited liability company that
operates as a fund investing in high yield debt securities of U.S. and
emerging market issuers. MassMutual holds 1.79%, MMHC Investment holds
44.91% and MassMutual High Yield Partners LLC holds 2.39% of the ownership
interest in this company.
59. Urban Properties, Inc., a Delaware real estate holding and development
company, all the stock of which is owned by MassMutual Holding Trust II.
60. 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.
61. Westheimer 335 Suites Limited Partnership, a Texas limited partnership of
which Westheimer 335 Suites, Inc. is the general partner.
62. MassMutual Internacional (Argentina) S.A., an Argentine corporation, which
operates as a holding company. MassMutual International Inc. owns 99.9% of
the outstanding shares and MassMutual Holding Company owns the remaining
0.1% of the shares.
63. 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 0.1%
of the shares.
64. MassMutual International (Bermuda) Ltd., a Bermuda life insurance company,
all of the stock of which is owned by MassMutual International Inc.
65. MassMutual International (Luxembourg) S.A. a Luxembourg corporation, which
operates as an insurance company. MassMutual International Inc. owns 99.9%
of the outstanding shares and MassMutual Holding Company owns the remaining
0.1% of the shares.
66. MassLife Seguros de Vida S.A., a life insurance company incorporated in
Argentina. MassMutual International Inc. owns 99.9% of the outstanding
capital stock of MassLife Seguros de Vida S.A.
67. MassMutual Services, S.A., an Argentine corporation, which operates as a
service company. MassMutual Internacional (Argentina) S.A. owns 99.9% of
the outstanding shares and MassMutual International, Inc. own 0.1% of the
shares.
68. Mass Seguros de Vida S.A., a life insurance company incorporated in Chile.
MassMutual Internacional (Chile S.A.) owns 33.5% of the outstanding capital
stock of Mass Seguros de Vida S.A.
69. 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.
70. Compania Seguros de Vida Corp, S.A., a Chilean insurance company. Origen
Inversiones S.A. owns 99% of the outstanding shares of this company
71. Oppenheimer Series Fund Inc., a Maryland corporation and a registered open-
end investment company of which MassMutual and its affiliates own a
majority of the outstanding shares issued by the fund.
30
<PAGE>
72. 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.
73. The DLB Fund Group, an open-end management investment company, advised by
David L. Babson and Company Incorporated. MassMutual owns at least 25% of
each series.
MassMutual acts as the investment adviser to each of the following investment
companies and as such may be deemed to control them.
1. 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.
2. MassMutual Corporate Investors, a registered closed-end Massachusetts
business trust.
3. MassMutual Corporate Value Partners, Limited, a Cayman Islands corporation
that operates as a high-yield bond fund. MassMutual Corporate Value Limited
holds an approximately 93% ownership interest in this company.
4. 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.
5. MassMutual Institutional Funds, a registered open-end Massachusetts
business trust, all of the shares are owned by MassMutual.
6. MassMutual Participation Investors, a registered closed-end Massachusetts
business trust.
7. MassMutual/Carlson CBO N.V., a Netherlands Antilles corporation which
operates a collateralized bond obligation fund. MassMutual Holding MSC,
Inc. and Carlson Investment Management Co. each own 50% of the outstanding
shares.
8. MassMutual/Darby CBO, LLC, a Delaware limited liability company that
operates as a fund investing in high yield debt securities of U.S. and
emerging market issuers. MassMutual owns 1.79% , MMHC investment, Inc. owns
44.91% and MassMutual High Yield Partners LLC owns 2.39% of the ownership
interest in this company.
Item 27. Number of Contract Owners
-------------------------
As of March 4, 1998, there were 6,175 Separate Account contracts
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
31
<PAGE>
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final
adjudication of such issue.
Item 29. Principal Underwriters
----------------------
(a) MML Distributors, LLC, a wholly owned subsidiary of MassMutual
acts as principal underwriter for registered separate accounts of
MassMutual, C.M. Life and MML Bay State.
(b)(1) MML Distributors, LLC is the principal underwriter of the
Contracts. The following people are officers and member
representatives of the principal underwriter.
<TABLE>
<CAPTION>
OFFICERS AND MEMBER REPRESENTATIVES
MML DISTRIBUTORS, LLC
<S> <C> <C>
Kenneth M. Rickson Member Representative One Monarch Place
G.R. Phelps & Co., Inc. 1414 Main Street
Springfield, MA 01144-1013
Margaret Sperry Member Representative 1295 State Street
Massachusetts Mutual Springfield, MA 01111-0001
Life Insurance Co.
Kenneth M. Rickson Chief Executive Officer, One Monarch Place
President, and Main OSJ 1414 Main Street
Supervisor Springfield, MA 01144-1013
John E. Forrest Vice President One Monarch Place
1414 Main Street
Springfield, MA 01144-1013
Michael L. Kerley Vice President One Monarch Place
Assistant Secretary 1414 Main Street
Springfield, MA 01144-1013
Ronald E. Thomson Vice President One Monarch Place
1414 Main Street
Springfield, MA 01144-1013
James T. Bagley Treasurer 1295 State Street
Springfield, MA 01111
Bruce C. Frisbie Assistant Treasurer 1295 State Street
Springfield, MA 01111-0001
Raymond W. Anderson Assistant Treasurer 140 Garden Street
Hartford, CT 06154
Ann F. Lomeli Secretary 1295 State Street
Springfield, MA 01111-0001
Eileen D. Leo Assistant Secretary One Monarch Place
1414 Main Street
Springfield, MA 01144-1013
Marilyn A. Sponzo Chief Legal Officer One Monarch Place
1414 Main Street
</TABLE>
32
<PAGE>
<TABLE>
<S> <C> <C>
Springfield, MA 01144-1013
Robert Rosenthal Compliance Officer One Monarch Place
1414 Main Street
Springfield, MA 01144-1013
Melissa Thompson Registration Manager One Monarch Place
1414 Main Street
Springfield, MA 01144-1013
Ruth B. Howe Director of Continuing One Monarch Place
Education 1414 Main Street
Springfield, MA 01144-1013
Peter D. Cuozzo Variable Life Supervisor and 140 Garden Street
Hartford OSJ Supervisor Hartford, CT 06154
Maureen Ford Variable Annuity Supervisor 140 Garden Street
Hartford, CT 06154
Anne Melissa Dowling Large Corporate Markets 140 Garden Street
Supervisor Hartford, CT 06154
</TABLE>
MML INVESTORS SERVICES, INC.
OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
OFFICER BUSINESS ADDRESS
----------------------------------------------------------------------------
<S> <C>
Kenneth M. Rickson One Monarch Place
President 1414 Main Street
Springfield, MA 01144-1013
Michael L. Kerley One Monarch Place
Vice President, Chief Legal Officer, 1414 Main Street
Chief Compliance Officer, Assistant Secretary Springfield, MA 01144-1013
Ronald E. Thomson One Monarch Place
Vice President, Treasurer 1414 Main Street
Springfield, MA 01144-1013
Ann F. Lomeli 1295 State Street
Secretary Springfield, MA 01111
John E. Forrest One Monarch Place
Vice President 1414 Main Street
National Sales Director Springfield, MA 01144-1013
Eileen D. Leo One Monarch Place
Assistant Secretary, 1414 Main Street
Assistant Treasurer Springfield, MA 01144-1013
David Deonarine One Monarch Place
Sr. Registered Options Principal 1414 Main Street
Springfield, MA 01144-1013
Nicholas J. Orphan 245 Peach Tree Center Ave., Suite 2330
Regional Supervisor (South) Atlanta, GA 30303
Robert W. Kumming 1295 State Street
Regional Pension Management Supervisor (East/Central) Springfield, MA 01111
Peter J. Zummo 1295 State Street
</TABLE>
33
<PAGE>
<TABLE>
<S> <C>
Regional Pension Management Supervisor (South/West) Springfield, MA 01111
Bruce Lukowiak 6263 North Scottsdale Rd., Suite 222
Regional Supervisor (West) Scottsdale, AZ 85250
Gary L. Greenfield 1 Lincoln Center, Suite 1490
Regional Supervisor (Central) Oakbrook Terrace, IL 60181
Burvin E. Pugh, Jr. 1295 State Street
Chief Agency Field Force Supervisor Springfield, MA 01111
John P. McCloskey 1295 State Street
Regional Supervisor (East) Springfield, MA 01144
Susan Alfano 1295 State Street
Director Springfield, MA 01111
Lawrence V. Burkett, Jr. 1295 State Street
Chairman of the Board of Directors Springfield, MA 01111
Peter Cuozzo, CLU, ChFC 140 Garden Street
Director Hartford, CT 06154
John B. Davies 1295 State Street
Director Springfield, MA 01111
Anne Melissa Dowling 140 Garden Street
Director Hartford, CT 01654
Maureen R. Ford 140 Garden Street
Director Hartford, CT 01654
Gary T. Huffman 1295 State Street
Director Springfield, MA 01111
Douglas J. Jangraw 140 Garden Street
Director Hartford, CT 01654
</TABLE>
(b)(2) MML Investors Services, Inc. is the co-underwriter of the
Contracts. The following people are officers and directors of the
co-underwriter.
(c) See the section captioned "Service Arrangements and Distribution"
in the Statement of Additional Information.
Item 30. Location of Accounts and Records
--------------------------------
All accounts, books, or other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the
rules promulgated thereunder are maintained by the Registrant
through a full service agreement between itself and ALLIANCE-ONE
Services, L.P., 301 West Eleventh Street, Kansas City, Missouri
64105. However, the agreement will terminate on June 30, 1998.
Effective July 1, 1998, the Service Center for the Registrant
will be relocated. Effective July 1 1998, all accounts, books and
other documents will be maintained at the Annuity Service Center,
H564, P.O. Box 9067, Springfield, MA 01102-9067.
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
34
<PAGE>
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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Massachusetts Mutual Variable Annuity Separate Account 3, certifies that it
meets all of the requirements for effectiveness of this Post-Effective Amendment
No. 4 pursuant to Rule 485(b) under the Securities Act of 1933 and has caused
this Post-Effective Amendment No. 4 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 10th day of
April, 1998.
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 10, 1998, as Attorney-in-Fact pursuant to
- --------------------- powers of attorney.
*Richard M. Howe
As required by the Securities Act of 1933, this Post-Effective Amendment
No. 4 to Registration Statement No. 33-83798 has been signed by the following
persons in the capacities and on the duties indicated.
<TABLE>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Thomas B. Wheeler* Chief Executive Officer and April 10, 1998
- --------------------------- Chairman of the Board
Thomas B. Wheeler
/s/ John J. Pajak* President, Chief Operating Officer April 10, 1998
- --------------------------- and Director
John J. Pajak
</TABLE>
35
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Joseph M. Zubretsky* Executive Vice President, April 10, 1998
- --------------------------- Chief Financial Officer &
Joseph M. Zubretsky Chief Accounting Officer
/s/ Roger G. Ackerman Director --
- ---------------------------
Roger G. Ackerman
/s/ James R. Birle* Director April 10, 1998
- ---------------------------
James R. Birle
/s/ Gene Chao* Director April 10, 1998
- ---------------------------
Gene Chao, Ph.D.
/s/ Patricia Diaz Dennis* Director April 10, 1998
- ---------------------------
Patricia Diaz Dennis
/s/ Anthony Downs* Director April 10, 1998
- ---------------------------
Anthony Downs
/s/ James L. Dunlap* Director April 10, 1998
- ---------------------------
James L. Dunlap
/s/ William B. Ellis* Director April 10, 1998
- ---------------------------
William B. Ellis, Ph.D.
/s/ Robert M. Furek* Director April 10, 1998
- ---------------------------
Robert M. Furek
/s/ Charles K. Gifford* Director April 10, 1998
- ---------------------------
Charles K. Gifford
/s/ William N. Griggs* Director April 10, 1998
- ---------------------------
William N. Griggs
/s/ George B. Harvey* Director April 10, 1998
- ---------------------------
George B. Harvey
/s/ Barbara B. Hauptfuhrer* Director April 10, 1998
- ---------------------------
Barbara B. Hauptfuhrer
/s/ Sheldon B. Lubar* Director April 10, 1998
- ---------------------------
Sheldon B. Lubar
/s/ William B. Marx, Jr.* Director April 10, 1998
- ---------------------------
</TABLE>
36
<PAGE>
<TABLE>
<S> <C> <C>
William B. Marx, Jr.
/s/ John F. Maypole* Director April 10, 1998
- ---------------------------
John F. Maypole
/s/ Alfred M. Zeien* Director April 10, 1998
- ---------------------------
Alfred M. Zeien
/s/ Richard M. Howe On April 10, 1998, as Attorney-in-Fact
- ---------------------------- pursuant to powers of attorney.
*Richard M. Howe
</TABLE>
37
<PAGE>
REPRESENTATION BY REGISTRANT'S COUNSEL
As counsel to the Registrant, I, James M. Rodolakis, have reviewed this
Post-Effective Amendment No. 4 to Registration Statement No. 33-83798, and
represent, pursuant to the requirement of paragraph (e) of Rule 485 under the
Securities Act of 1933, that this Amendment does not contain disclosures which
would render it ineligible to become effective pursuant to paragraph (b) of said
Rule 485.
/s/ James M. Rodolakis
James M. Rodolakis
Counsel
Massachusetts Mutual Life Insurance Company
38
<PAGE>
EXHIBIT LIST
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.
Exhibit 4 Form of Flexible Purchase Payment Multi-Fund Variable Annuity
Contract.
Exhibit 5 Form of Application used with the Flexible Purchase Payment Multi-
Fund Variable Annuity Contract.
Exhibit 9 Opinion of and Consent of Counsel.
Exhibit 10(i) Written consent of Coopers & Lybrand L.L.P., independent
accountants.
<PAGE>
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
January 12, 1994
VOTED:
That, pursuant to Section 132G of Chapter 175 of the Massachusetts
General Laws, the Company establish and maintain a separate investment account,
to be known as "Massachusetts Mutual Variable Annuity Separate Account 3"
("Separate Account 3" or the "Separate Account"), for the purpose of investing
payments received under certain variable annuity contracts issued by the Company
(the "Variable Annuity Contracts'); that the assets of Separate Account 3 be
invested in one or more of the series of either the MML Series Investment Fund
or the Oppenheimer Variable Account Funds, as such funds now or hereafter may be
constituted, and in such other investments as the Company may from time to time
deem appropriate; that the income, if any, and gains or losses, realized or
unrealized, on Separate Account 3 be credited to or charged against the amounts
placed in the Separate Account without regard to the other income, gains or
losses of the Company; that the Variable Annuity Contracts be drafted to provide
that the assets of Separate Account 3 equal to the reserves and other contract
liabilities with respect to the Separate Account shall not be chargeable with
liabilities arising out of any other business the Company may conduct; that all
necessary actions be taken to qualify, and maintain the qualification of,
Separate Account 3 with appropriate governmental agencies or entities having
jurisdiction thereof; and that additional investment divisions be added to
Separate Account 3 from time to time to the extent that the Company deems it to
be appropriate.
VOTED FURTHER:
That, with respect to the Variable Annuity Contracts, the Company
establish and maintain, either in its General Investment Account or in Separate
Account 3, a fixed account having a market value adjustment feature; and that
all necessary actions be taken to qualify, and maintain the qualification of,
said fixed account with appropriate governmental agencies or entities having
jurisdiction thereof.
VOTED FURTHER:
That the Company's General Investment Account be and it hereby is
authorized to provide initial capital to either Separate Account 3 or the fixed
account segment of the General Investment Account, the amount thereof not to
exceed $150,000.
<PAGE>
Exhibit 4
[LOGO OF MASSMUTUAL APPEARS HERE]
Massachusetts Mutual Life Insurance Company
Springfield MA 01111-0001
- -----------------
Deferred Variable Annuity
Contract
With Oppenheimer Variable Account Funds
and MML Series Investment Funds
- --------------------------------------------------------------------------------
Policy Number
Insured
Face Amount
- --------------------------------------------------------------------------------
Dear Contract Owner:
READ YOUR CONTRACT CAREFULLY. We have used examples to explain some of the
provisions. These examples do not reflect the actual amounts or status of this
contract. As you read through the contract, remember the words "we," "us," and
"our" refer to Massachusetts Mutual Life Insurance Company.
We will pay the maturity benefit to the Payee when this contract matures if the
Annuitant and Owner are living at that time. If the Annuitant or Owner dies
before this contract matures, we will pay the death benefit to the Beneficiary
when due proof of the death is received at our Service Center. Either payment is
subject to the terms of this contract, which are contained on this and the
following pages.
For service or information on this contract, contact our Service Center.
YOU HAVE A RIGHT TO RETURN THIS CONTRACT. If you decide not to keep this
contract, return it within ten days after you receive it. It may be returned by
delivering or mailing it to our Service Center. Then, the contract will be as
though it had never been issued. We will promptly refund the accumulated value
of this contract on the date we receive it, plus any deductions made from the
purchase payments.
Signed for Massachusetts Mutual Life Insurance Company at Springfield,
Massachusetts.
Sincerely yours,
/s/ Signature appears here /s/ Signature appears here
President Secretary
This Contract provides that: Flexible purchase payments may be made, while
the Annuitant and Owner are living, to the
date this contract matures.
A death benefit is payable if the Annuitant or
Owner dies before this contract matures.
A monthly life income is payable beginning on
the date this contract matures if the
Annuitant and Owner are living at that time.
This Contract is not participating. It does not provide for the payment of
dividends.
All values and payments based on the investment performance of the Separate
Account shown on the Schedule Page are variable and not guaranteed as to dollar
amount.
<PAGE>
Contract Summary
This Summary briefly describes some of the major contract provisions. Since it
does not go into detail, the actual provisions will control. See those
provisions for full information and any limits that may apply. The "Where To
Find It" on the inside of the back cover shows where these provisions may be
found.
We will pay a maturity benefit if the Annuitant and Owner are living on the
maturity date and the contract is in force at that time. We will pay a death
benefit if the Annuitant or Owner dies before this contract matures and while it
is in force. "In force" means that the contract has not terminated. Since this
is a variable annuity contract, neither of these benefits is guaranteed as to
dollar amount. Instead, all values and benefits that depend on the investment
performance of the Separate Account shown on the Schedule Page are variable and
not guaranteed as to dollar amount.
Purchase payments for this contract are flexible. Therefore, after the first
purchase payment has been paid, there is no requirement that any specific amount
of purchase payment be made on any date. Instead, within the limits stated in
the contract, any amount may be paid on any date before the maturity date while
the Annuitant and Owner are living.
Rights available under this contract include the rights to:
. Assign this contract;
. Change the Owner, the Payee, or any Beneficiary;
. Redeem this contract;
. Make partial redemptions;
. Change the date this contract matures;
. Allocate purchase payments among the divisions of the Separate
Account; and
. Transfer values among the divisions of the Separate Account.
This contract also includes a number of Payment Options. These provide
alternative ways to pay the maturity value, the death benefit, or the amount
payable upon redemption of this contract.
<PAGE>
THE SCHEDULE PAGE
This page shows specific information about this contract and is referred to
throughout the contract.
CONTRACT NUMBER 0 000 000
ANNUITANT John A Doe
AMOUNT Monthly Income Provided By Maturity Value
Issue Date JUL 01 1994
Contract Date JUL 01 1994
Maturity Date JUL 01 2024
Annuitant's age on Contract Date 35 MALE
- --------------------------------------------------------------------------------
BASIC CONTRACT INFORMATION
- --------------------------
Plan
- ----
Deferred Variable Annuity
- --------------------------------------------------------------------------------
SERVICE CENTER INFORMATION
- --------------------------
Mailing Address: Telephone Number: 1-800-NNN-NNNN
-----------------------
-----------------------
NNNNN-NNNN
-----------------------
We will send written notice of any change in the mailing address or telephone
number of the Service Center.
- --------------------------------------------------------------------------------
PURCHASE PAYMENT INFORMATION
- ----------------------------
First Purchase Payment See confirmation notice
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT INFORMATION!!!!!(See The Separate Account provision in Part 3.)
- ---------------------------------
The Separate Account referred to in this contract is Massachusetts Mutual
Variable Annuity Separate Account 1.
The divisions of the Separate Account are:
<TABLE>
<S> <C> <C>
MML Money Market Division Oppenheimer Money Division Oppenheimer Multiple Strategies Division
MML Managed Bond Division Oppenheimer Bond Division Oppenheimer Growth Division
MML Blend Division Oppenheimer Strategic Bond Division Oppenheimer Capital Appreciation Division
MML Equity Division Oppenheimer High Income Division Oppenheimer Global Securities Division
</TABLE>
Each division invests in a corresponding Fund. The investment strategy and
objectives for each Fund are given in the Prospectus.
- --------------------------------------------------------------------------------
OTHER INFORMATION
- -----------------
Owner and Beneficiary - see application attached to this contract.
-1-
<PAGE>
Part 1. The Basics Of This Contract
In this Part, we discuss some basic concepts that are
necessary to understand this contract.
The Parties Involved - The Owner is the person who owns this contract, as
Owner, Joint Owner, shown on our records.
Annuitant, Beneficiary,
Irrevocable Beneficiary, A Joint Owner may be named on this contract. In this
Payee case, the Owner and the Joint Owner will have equal
and undivided interest in this contract. While a Joint
Owner is named under this contract:
. All rights and benefits conditioned on the
Owner living are conditioned on both the
Owner and the Joint Owner living;
. Either the Owner or the Joint Owner may
exercise an Owner right with the consent,
satisfactory to us, of the other;
. All notices, any tax forms, and any other
mailings about this contract will be sent
to the Owner's mailing address; and
. Any benefit payable upon the death of the
Owner will be payable upon the death of the
Owner or the Joint Owner, whomever dies
first.
The Annuitant is the person on whose life this
contract is issued. Payment of the maturity benefit
will be made if that person is living when this
contract matures. The Annuitant may be the Owner of
this contract, or someone else may be the Owner; in
the latter case, payment of the maturity benefit will
be made if both the Annuitant and Owner are living
when this contract matures.
Example: You buy a contract on your own life and name
yourself as Owner. In this case, you are
both the Annuitant and Owner. If you buy a
contract on your spouse's life and name
yourself as Owner, then the Annuitant and
Owner are different people.
A Beneficiary is any person named on our records to
receive death proceeds after the Annuitant or Owner
dies. There may be different classes of Beneficiaries,
such as primary and secondary. These classes set the
order of payment. There may be more than one
Beneficiary in a class.
Example: Debbie is named as primary (first)
Beneficiary. Anne and Scott are named as
Beneficiaries in the secondary class. If
Debbie is alive when the Annuitant dies, she
receives any death benefit. But if Debbie is
dead and Anne and Scott are alive when the
Annuitant dies, Anne and Scott receive any
death benefit.
Any Beneficiary may be named an Irrevocable
Beneficiary. An Irrevocable Beneficiary is one whose
consent is needed to change the named Beneficiary.
Also, this Beneficiary must consent to the exercise of
other contract rights.
The Payee is the person named on our records to
receive the maturity benefit when this contract
matures. The Annuitant is the Payee unless the Owner
names another Payee.
Dates - Contract Date, Two important dates shown on the Schedule Page are the
Contract Anniversary Contract Date and the Issue Date.
Date, Contract Year,
Issue Date, Maturity The Contract Date is the starting point for
Date determining Contract Anniversary Dates and Contract
Years. The first Contract Anniversary Date is one year
after the Contract Date. The period from the Contract
Date to the first Contract Anniversary Date, or from
one Contract Anniversary Date to the next, is called a
Contract Year.
Example: The Contract Date is June 10, 19X1. The
first Contract Anniversary Date is June 10,
19X2. The period from June 10, 19X1, through
June 9, 19X2, is a Contract Year.
The Issue Date is used to determine the start of the
contestability period. We discuss contestability
below.
-2-
<PAGE>
-3-
Another important date shown on the Schedule Page is the
maturity date. This is the date the maturity benefit is
payable unless an earlier or later maturity date is
elected (see Part 4). The maturity benefit will be
payable only if this contract is in force and the
Annuitant and Owner are living on the maturity date.
This Is A Legal This annuity is a legal contract between the Owner and
Contract us. The entire contract consists of the application and
the annuity, which includes any riders. We have issued
this contract in return for the application and the
payment of the first purchase payment. Any change or
waiver of its terms must be in writing and signed by our
Secretary or an Assistant Secretary to be effective.
Trusts And Other We are not responsible for carrying out the terms of any
Agreements trust or other agreement that is not a part of this
contract. Our only responsibility is to perform
according to the terms of this contract.
Representations And We rely on all statements made by or for the Annuitant
Contestability in the application. Legally, these statements are
considered to be representations and not warranties. We
can bring legal action to contest the validity of this
contract for any material misrepresentation of a fact.
To do so, however, the misrepresentation must have been
in the application for this contract and a copy of the
application must have been attached to this contract
when issued.
In the absence of fraud, we cannot contest the validity
of this contract after it has been in force during the
lifetime of the Annuitant for two years from its Issue
Date.
Misstatement Of Age One of the questions in the application concerns the
Or Sex Annuitant's date of birth; another concerns the
Annuitant's sex. If the sex or date of birth given is
not correct, all benefits and amounts payable under this
contract will be what would have been provided if the
correct sex and date of birth had been given.
No life income payments will be made until we have
received satisfactory proof of the Annuitant's sex and
date of birth at our Service Center.
Meaning Of In Force "In force" means that this contract has not terminated.
This contract is in force from its Issue Date or, if
later, the date the first purchase payment is paid.
Subject to the Right To Terminate Contract provision in
Part 2, payment of future purchase payments is not
required to continue this contract in force.
Service Center All service for this contract is provided through our
Service Center. The mailing address and telephone number
of our Service Center are shown on the Schedule Page. We
will send written notice of any change in this
information.
Contract State This contract shall be construed according to the laws
of the state in which it was delivered.
Currency All payments made to us and by us will be in the lawful
currency of the United States of America. All monetary
amounts shown in this contract are in U.S. dollars.
Contract Is Not This contract is "not participating," which means that
Participating no dividends are payable on this contract.
Part 2. Purchase Payments
Purchase payments are the amounts that may be paid to us
under this contract. Purchase payments for this contract
are discussed in this Part.
The First Purchase The first purchase payment for this contract is due on
Payment the Contract Date. This contract will not be in force
until the first purchase payment has been paid to us.
<PAGE>
Purchase Payment After the first purchase payment has been paid and
Flexibility subject to the Right To Terminate Contract provision,
payment of additional purchase payments is not required
to continue the contract in force. Instead, any amount
may be paid at any time before the maturity date while
the Annuitant and Owner are living. However, no purchase
payment can be less than $100 without our consent.
We have the right to set a maximum limit on the total
amount of purchase payments that may be made under this
contract. Any such limit will not be less than $500,000.
Right To Terminate We have the right to terminate this contract if:
Contract
. No purchase payment has been made for at least
two consecutive years measured from the date we
received the last purchase payment; and
. Each of the following amounts is less than $2,000
on the date we send notice of our election to
terminate this contract:
(1) The accumulated value of this contract (see
Part 3) less any premium tax we would deduct
on redemptions;
(2) The cash redemption value (see Part 4); and
(3) The sum of all purchase payments made into
this contract less any partial redemption
amounts.
If we exercise this right, we will mail a written notice
of termination to the Owner at the last known address
shown on our records. This notice will state that the
contract will terminate 30 days after we have mailed the
notice unless we receive a purchase payment that brings
the accumulated value (less any premium tax) to at least
$2,000 before that time.
If we terminate this contract, we will pay to the Owner
the greater of the amounts in items (1) and (2) above.
Where To Pay All purchase payments are payable to us at our Service
Center. Upon request, a receipt signed by our Secretary
or an Assistant Secretary will be given for any purchase
payment made.
Net Purchase Payments A net purchase payment is a purchase payment we receive
less any premium tax we deduct at that time.
Allocation Of Net Each net purchase payment we receive will be allocated
Purchase Payments among the divisions of the Separate Account, as directed
in the application. This allocation will remain in
effect until changed by any later election satisfactory
to us and received at our Service Center.
Part 3. Separate Account, Values, And Charges
This contract provides that the accumulated value is
based on the investment performance of the Separate
Account and is not guaranteed as to dollar amount. This
Part gives information about the Separate Account and
the values and charges connected with it.
The Separate Account The Separate Account shown on the Schedule Page is a
separate investment account we have established under
Massachusetts law. It is subject to the laws of the
state in which this contract was delivered.
The Separate Account has several divisions. Each
division invests in shares of an investment Fund. The
divisions are shown on the Schedule Page.
The values of the assets in the divisions are variable
and are not guaranteed. They depend on the investment
results of the Separate Account shown on the Schedule
Page.
-4-
<PAGE>
-5-
We own the assets of the Separate Account. Those assets
will only be used to support variable annuities. A
portion of the assets equal to the reserves and other
liabilities of the Separate Account will not be charged
with liabilities that arise from any other business we
may conduct. However, we may transfer assets exceeding
the reserves and other liabilities of the Separate
Account to our general account. The income and capital
gains and losses, whether or not realized, from each
division of the Separate Account are credited to or
charged against that division without regard to any of
our other income and capital gains or losses. The assets
of the Separate Account are protected from the claims of
our creditors.
Changes In The We have the right to establish both additional divisions
Separate Account of the Separate Account and additional Separate Accounts
from time to time. Amounts credited to any additional
divisions established would be invested in shares of
other Funds. For any division, we have the right to
substitute new Funds.
Subject to applicable provisions of federal securities
laws, we have the right to change the investment policy
of any division of the Separate Account with the
approval of the Massachusetts Insurance Commissioner. If
required, evidence of the approval of a material change
by the Massachusetts Insurance Commissioner will be
filed with the insurance supervisory official of the
state where this contract is delivered. We will notify
the Owner if the Massachusetts Insurance Commissioner
approves any material change.
We have the right to withdraw availability of any
division of the Separate Account for future amounts
being credited. We will notify the Owner before we
withdraw any division of the Separate Account.
We have the right to operate the Separate Account as a
unit investment trust under the Investment Company Act
of 1940 or in any other form permitted by law.
Accumulation Units Accumulation units are used to measure the variable
And Annuity Units values on or before the maturity date of this contract.
Annuity units are used to determine the amount of each
payment of Variable Monthly Income after those payments
have begun. The value of a unit is determined as of the
valuation time on each valuation date for valuation of
the Separate Account. The value of any unit can vary
from valuation date to valuation date. That value
reflects the investment performance of the division of
the Separate Account applicable to that unit. The value
of accumulation units and annuity units is discussed
further in Part 7.
Valuation Date, A valuation date is any date the New York Stock Exchange
Valuation Time, (or its successor) is open for trading. A valuation
Valuation Period period is the period of time from the end of one
valuation date to the end of the next valuation date.
The valuation time is the time of day the New York Stock
Exchange (or its successor) closes on a valuation date.
All actions to be performed on a valuation date will be
performed as of the valuation time.
Purchase And Sale Of Amounts may be credited to a division of the Separate
Accumulation Units Account through:
. Allocation of net purchase payments to the
division (see Part 2); and
. Transfers of values to the division from other
divisions (see Transfers Of Values provision in
Part 4).
Amounts may be taken from a division through:
. Maturity of the contract (see Part 5);
. Death of the Annuitant or Owner (see Part 5);
. Full or partial redemption (see Part 4);
. Transfers of values from the division to any
other divisions (see Part 4);
. Assessment of an administrative charge from the
division (see Administrative Charge provision
below in this Part); and
. Assessment of a transfer fee from the division
(see Transfer Fee provision below in this Part).
<PAGE>
Amounts are credited to and taken from divisions of the
Separate Account by purchasing and selling accumulation
units. Accumulation units will be purchased and sold at
the unit value as of the valuation time on the valuation
date of purchase or sale. The number of units purchased
or sold will be the amount of money for purchase or sale
divided by that unit value.
Example: The amount applied is $550. The date of
purchase is June 10, 19X4. The accumulation
unit value on that date is $10. The number of
units purchased would be 55 ($550 divided by
$10 = 55). If, instead, the unit value was $11,
then the amount applied would purchase 50 units
($550 divided by $11 = 50).
If a purchase payment, or a request that causes us to
purchase or sell accumulation units, is received by us
before the valuation time on a valuation date,
accumulation units will be purchased or sold as of that
valuation date. Otherwise, accumulation units will be
purchased or sold as of the next following valuation
date.
In no case will accumulation units be purchased or sold
before the Contract Date.
Accumulated Value Of The value of the accumulation units credited to this
Contract contract in a division of the Separate Account is equal
to the accumulation unit value in that division on the
date the value is determined, multiplied by the number
of those units in that division.
The accumulated value of this contract on any date is
the total of the values of the accumulation units
credited to this contract in each division of the
Separate Account.
Administrative Charge An administrative charge will be assessed each year on
the Contract Anniversary Date. An administrative charge
will also be assessed upon full redemption, death, or
maturity. In either case, however, we will not assess
the charge if the accumulated value of the contract at
that time is $50,000 or more.
The amount of the administrative charge will be
determined each year by us. However, it will not exceed
$50, or any lower limit required by law. Any
administrative charge assessed will be taken from all
divisions in the Separate Account on a pro rata basis,
based on the value of the accumulation units credited to
this contract in each division.
The administrative charge discussed in this provision is
in addition to any charge for administrative expenses
contained in the asset charge discussed in the Net
Investment Factor provision in Part 7.
Deductions For Sales Sales charges are not deducted from purchase payments
Charges when received by us. Instead, we may make deductions for
sales charges from amounts payable upon full or partial
redemption of this contract. We may also make deductions
for sales charges from the death benefit in certain
cases. Finally, we may make deductions for sales charges
from the maturity value on the maturity date of this
contract.
In certain situations, however, sales charges will not
apply. Sales charges will not be assessed on the
following amounts of purchase payments:
1. All amounts paid as death benefits due to the
Annuitant's death if the Annuitant's age on the
Contract Date (shown on the Schedule Page) is 75
or less;
2. The full amount if the Annuitant has not reached
age 59 1/2 and all proceeds from maturity or
full redemption of this contract are applied
under any one, or more than one, of the
following payment options:
a. Variable Monthly Income Option B with
payments for 10 years or more; and
b. Variable Monthly Income Options C, E, and
F;
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<PAGE>
3. The full amount if the Annuitant has attained
age 59 1/2 and all proceeds from maturity or
full redemption of this contract are applied
under any one, or more than one, of the
following payment options:
a. Fixed Income or Variable Monthly Income
Option B with payments for 10 years or
more; and
b. Fixed Income or Variable Monthly Income
Options C, E, and F;
4. During any Contract Year:
a. Any amounts not yet redeemed for which the
sales charge percentage (see Amount Of
Sales Charge provision below) is 0%; and
b. 10% of the amounts not yet redeemed for
which the sales charge percentage is 1% or
greater.
Amount Of Sales Charge 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 a 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.
Year Since Year Since
Payment Percentage Payment Percentage
---------- ---------- ----------- ----------
1st 7% 5th 3%
2nd 6 6th 2
3rd 5 7th 1
4th 4 8th and later 0
Example: You make a $1,000 purchase payment on May 10,
19X1. The part of the sales charge related to
this purchase payment is:
$70 from May 10, 19X1 through May 9,
19X2;
$60 from May 10, 19X2 through May 9,
19X3;
:
$10 from May 10, 19X7 through May 9,
19X8; and $0 thereafter.
Subject to the limits stated above in the Deductions For
Sales Charges provision, 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.
Example: You've made two purchase payments of $1,000
each, one on May 10, 19X1, and the other on
July 21, 19X4.
You make your first request for a partial
redemption on August 7, 19X5; it is for $800.
The sales charge is based solely on the first
$1,000 purchase payment, made in 19X1, since it
exceeds the $800 requested. Since August 7,
19X5, is during the 5th year since the purchase
payment was made, the sales charge percentage
is 3%. But a sales charge is assessed only on
$600 (all but 10% of the $2,000 not yet
redeemed). The sales charge is therefore $18
(3% of $600), and you receive $782.
You request a second partial redemption of $800
on September 21, 19X8. The sales charge is
based on the remaining $200 from the first
purchase payment and on $600 from the second.
The percentage for the first purchase payment
is 0% (8th year since payment) and for the
second is 3% (5th year since payment). But a
sales charge is assessed only on $500 (none of
the $200 not yet redeemed having a percentage
of 0% and, on the $600, all but 10% of the
$1,000 not yet redeemed having a percentage of
1% or greater). The sales charge is then $15
(3% of $500), and you receive $785.
-7-
<PAGE>
Part 4. Life Benefits
This variable annuity contract provides a maturity
benefit if the Annuitant and Owner are living on the
maturity date and the contract is in force at that time.
It provides a death benefit if the Annuitant or Owner
dies before the maturity date while the contract is in
force. There are other rights and benefits available
under this contract. These "Life Benefits" are discussed
in this Part.
Contract Ownership
Rights Of Owner While the Annuitant is living, the Owner may exercise
all rights given by this contract or allowed by us.
These rights include assigning this contract, changing
Beneficiaries, changing ownership, enjoying all contract
benefits, and exercising all contract options. The
consent of any Irrevocable Beneficiary is needed to
exercise any contract right.
Assigning This This contract may be assigned. But for any assignment to
Contract be binding on us, we must receive a signed copy of it at
our Service Center. We will not be responsible for the
validity of any assignment.
Once we receive a signed copy, the rights of the Owner
and the interest of any Beneficiary or any other person
will be subject to the assignment.
Changing The Owner,
Payee, Or Beneficiary The Owner, the Payee, or the Beneficiary may be changed
while the Annuitant is living. We do not limit the
number of changes that may be made. To make a change,
the Owner's written request, satisfactory to us, must be
received at our Service Center. The change will take
effect as of the date the request is signed, even if the
Annuitant or Owner dies before we receive it. Each
change will be subject to any payment we made or other
action we took before receiving the request.
Transfers Of Values Transfers of values are subject to the limitations
stated in the Limitations On Transfers provision below.
Subject to those limitations, transfers of values may be
made upon direction, satisfactory to us, received at our
Service Center. These transfers are transfers of values
between divisions of the Separate Account. Before any
proceeds from this contract are applied to a payment
option, these transfers will be made by selling all or
part of the accumulation units in a division and
applying the value of the sold units to purchase units
in any other division. While payments are being made
under a Variable Monthly Income payment option, these
transfers will be made by exchanging all or part of the
annuity units in a division for a number of annuity
units in any other division that give the same amount of
monthly income as of the date of transfer.
An amount transferred from a division of the Separate
Account may be expressed in terms of either a dollar
amount or a whole-number percentage.
Transfers will be as of the valuation date specified in
the Purchase And Sale Of Accumulation Units provision in
Part 3. All transfers made on one date will be
considered one transfer.
Limitations On The smallest amount that can be transferred from a
Transfers division of the Separate Account is $500 or, if less,
the value of the accumulation units or annuity units
credited to this contract in that division.
We reserve the right to limit the number and frequency
of transfers allowed during any Contract Year.
Transfers cannot be made during the 30-day period ending
on the maturity date.
Transfer Fee We reserve the right to assess a transfer fee of $20 for
each transfer of value in a Contract Year in excess of
four transfers.
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<PAGE>
-9-
If we assess a transfer fee, it will be assessed as of
the date of the transfer. Any transfer fee assessed will
be taken from the divisions of the Separate Account from
which the amounts are transferred.
Redeeming This Contract
Right To Redeem This contract may be redeemed for its cash redemption
value, while the Annuitant and Owner are living, at any
time before it matures. Redemption will be effective on
the date we receive this contract and a written
redemption request, satisfactory to us, at our Service
Center. A later effective date may be elected in the
redemption request.
Cash Redemption Value The cash redemption value on any date is the accumulated
value of this contract less any deductions for sales and
administrative charges and less any premium tax we
deduct at that time. The accumulated value of this
contract is described in Part 3.
Partial Redemptions Partial redemptions may be made, while the Annuitant and
Owner are living, at any time before this contract
matures. The request must state the division (or
divisions) from which redemption will be made. Partial
redemptions will be made by selling a sufficient number
of accumulation units to provide the partial redemption
including any sales charge deduction that applies to
that redemption.
Any partial redemption will be subject to the limits set
forth below.
. Any partial redemption must be for at least
$100.
. The accumulated value of the contract
remaining after a partial redemption must be
at least $1,000 plus any premium tax we would
deduct at that time on a full redemption.
When And How We Pay Any partial redemption made will be paid in one sum.
However, if the entire contract is redeemed, the cash
redemption value may be paid in one sum or applied under
any payment option. See Part 6.
We will pay all redemptions within seven days after the
written request for the redemption is received by us at
our Service Center. However, this time period is subject
to any extension permitted under federal laws, rules,
and regulations applying to redemption of variable
annuity contracts.
Right To Change The Maturity Date
Electing An Early Before this contract matures and while it is in force,
Maturity Date the maturity date may be changed to any date that is
earlier than the maturity date then in effect. To elect
an earlier maturity date, we require that the Owner's
written election for the change be received at our
Service Center at least 30 days before the early
maturity date wanted.
Electing A Later Before this contract matures and while it is in force,
Maturity Date the maturity date may be changed to any date that is
later than the maturity date then in effect. However,
that later maturity date must be on or before the
Contract Anniversary Date nearest the Annuitant's 90th
birthday. To elect a later maturity date, the Owner must
send us written election to be received at our Service
Center within 90 days before the maturity date then in
effect. Any rider this contract has will be cancelled
when the change is made.
Other Provisions Regarding Life Benefits
Periodic Statements While this contract is in force before the maturity
date, or the Annuitant's or Owner's death if earlier, we
will send a Status Report to the Owner at least
semiannually. This Report will show:
. The number of accumulation units in each
division of the Separate Account;
. The accumulation unit value in each division
of the Separate Account;
. The accumulated value of this contract;
. The cash redemption value of this contract;
and
. Any other information required by applicable
law.
<PAGE>
All this information will be as of a date not more than
45 days before the date the Status Report is mailed.
We will also give the Owner any other periodic reports,
containing information about this contract, that may be
required by federal or state law.
Receipt Of Information Any directions, requests, or other information received
other than by mail at our Service Center after the time
set for valuation of the Separate Account will be deemed
to have been received the next day.
Part 5. Maturity Benefit And Death Benefit
The maturity benefit is the payment we will make when
this contract matures if the Annuitant and Owner are
living at that time. The death benefit is the amount of
money we will pay when we receive due proof at our
Service Center that the Annuitant, or Owner if the
Annuitant is still living, has died before the contract
matures. These benefits are discussed in this Part.
Maturity Benefit
Maturity Value The maturity value is the cash redemption value of this
contract on the maturity date.
Monthly Life Income When this contract matures, the maturity value will be
applied to provide a monthly life income under Variable
Monthly Income Payment Option C, as described in Part 6.
This income will be based on the life of the Annuitant
and will be paid for the lifetime of the Annuitant. The
first payment is due on the maturity date. Future
payments will be due on the same day of the month as the
maturity date. The final payment will be the last one
due before the Annuitant's death.
There is a guarantee as to the first 120 income
payments. If the Annuitant dies before all these
payments are made, we will continue to make payments
until 120 income payments have been made.
The Owner may change the payment option at any time,
while the Annuitant is living, up to 30 days before the
maturity date.
Alternate Settlements There are other settlements available when this contract
At Maturity matures. That is, the Owner may elect to have the
maturity value either applied under any other payment
option discussed in Part 6 or paid in one sum.
In any case, if an assignment of this contract is in
effect on the maturity date, we have the right to pay
the maturity value in one sum. Any amount due the
assignee will be paid to the assignee. The balance, if
any, will be paid to the Owner.
Restriction On Rights The Annuitant cannot assign, transfer, or place any
restriction on this contract without the Owner's written
consent. No income payment under this contract can be
assigned, transferred, or taken in advance of its due
date, and the right to receive any income payments
cannot be restricted, without the Owner's written
consent. In any case, the Owner's written consent must
be given before the Annuitant dies and must be received
at our Service Center.
Death Benefit
Amount Of Death The amount of the death benefit is determined as of the
Benefit date we receive due proof of death at our Service
Center.
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<PAGE>
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If the death benefit is payable due to the death of the
Annuitant, the amount of the death benefit is the
greater of:
. The accumulated value of this contract less
any deduction for administrative charge
(and any sales charge if the Annuitant's
age on the Contract Date exceeds 75); and
. The accumulation at interest of all
purchase payments made less any partial
redemption amounts, but not more than twice
the sum of purchase payments less partial
redemption amounts. The effective annual
rate of interest used in this accumulation
will be 5% for any period before the
Annuitant's 75th birthday and 0%
thereafter.
In all cases, the amount of death benefit due to the
Annuitant's death is reduced by any premium tax we
deduct at that time.
If the Owner is not the Annuitant and the death benefit
is payable due to the death of the Owner, the amount of
the death benefit will be the cash redemption value of
this contract.
Interest On Maturity Or Death Benefit
Interest Payable If the maturity value is paid in one sum after this
contract matures, we will add interest from the maturity
date to the date of payment. If the death benefit is
paid in one sum, we will add interest from the date
proof of death is received to the date of payment.
If the death benefit is applied under a payment option,
interest will be paid from the valuation date that is on
or next follows the date written notice of death is
received to the effective date of that option. It will
be paid in one sum to the Beneficiary living on the
effective date.
In all cases, the amount of interest payable on the
maturity value or death benefit will be the same as
would be paid under Option D of the payment options for
the applicable period of time. See Part 6 for a
description of Option D.
Part 6. Payment Options
These are Optional Methods of Settlement. They provide
alternate ways in which payment can be made. This
contract provides Fixed Income payment options. It also
provides Variable Monthly Income payment options. These
two types of options are discussed below. Any other
payment option agreed to by us may be elected.
Fixed Income Payment A Fixed Income payment option provides payments that are
Options guaranteed by us under our general account. The amounts
of these payments do not depend on the investment
performance of the Separate Account.
All the payment options described in this Part are
available on a Fixed Income basis. They are described in
terms of monthly payments. However, annual, semiannual,
or quarterly payments may be requested instead. The
amount of these payments will be determined in a way
that is consistent with monthly payments and will be
quoted on request.
Variable Monthly A Variable Monthly Income payment option provides
Income Payment payments that are not guaranteed as to dollar amount.
Options Instead, they are based on the investment performance of
the Separate Account. Payment options B, C, E, and F are
available on a Variable Monthly Income basis. Payment
can only be made monthly. The manner in which the dollar
amounts of Variable Monthly Income payments are computed
is set forth in Part 7.
<PAGE>
Availability Of All or part of the death benefit, the maturity value, or
Payment Options the cash redemption value may be applied under any
payment option. If the contract is assigned, any amount
due to the assignee will be paid in one sum. The
balance, if any, may be applied under any payment
option.
If the Schedule Page shows that this contract was issued
on a unisex rate basis, the female rates shown in the
Option C, E, and F Tables apply in all cases. The male
rates in those Tables do not apply to unisex-rate
contracts.
Minimum Amounts If the amount to be applied under any option is less
than $2,000, we may pay that amount in one sum instead.
If payments under a Fixed Income option amount to less
than $20 each, we have the right to make payments at
less frequent intervals. If the first payment under a
Variable Monthly Income option amounts to less than $20,
we have the right to make a one-sum payment.
Option A Level Income Payment Option (not available as a Variable
Monthly Income option). Monthly payments are level. The
amount of each payment may not be less than $10 for each
$1,000 applied. Interest will be credited each month on
the unpaid balance and added to it. This interest will
be at a rate determined by us, but not less than the
equivalent of 2 1/2%% per year. Payments continue until
the amount we hold runs out. The last payment will be
for the balance only.
Option B Fixed Time Payment Option (available as a Fixed Income
option and as a Variable Monthly Income option). For
either option, monthly payments will be made for any
period selected, up to 30 years. For Fixed Income Option
B, the monthly payments are level. They depend on the
total amount applied, the period selected, and the
monthly payment rates we are using when the first
payment is due. The rate for any payment will not be
less than shown in the Fixed Income Option B Table.
For Variable Monthly Income Option B, the payments are
not guaranteed as to amount and may vary during the
period selected. The Variable Income Option B Table
shows the first monthly payment for each $1,000 applied.
-----------------------------------------------------
Fixed Income Option B Table
Minimum Monthly Payment Rates For Each $1,000 Applied
Monthly Monthly Monthly
Years Payment Years Payment Years Payment
1 $84.28 11 $8.64 21 $5.08
2 42.66 12 8.02 22 4.90
3 28.79 13 7.49 23 4.74
4 21.86 14 7.03 24 4.60
5 17.70 15 6.64 25 4.46
6 14.93 16 6.30 26 4.34
7 12.95 17 6.00 27 4.22
8 11.47 18 5.73 28 4.12
9 10.32 19 5.49 29 4.02
10 9.39 20 5.27 30 3.93
For quarterly payment, multiply by 2.994. For
semiannual payment, multiply by 5.969. For annual
payment, multiply by 11.865.
-----------------------------------------------------
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Variable Monthly Income Option B Table
Monthly Payment Rates For First Payment For Each
$1,000 Applied, Based On 4% Assumed Investment Rate
Monthly Monthly Monthly
Years Payment Years Payment Years Payment
1 $84.84 11 $9.31 21 $5.81
2 43.25 12 8.69 22 5.64
3 29.40 13 8.17 23 5.49
4 22.47 14 7.72 24 5.35
5 18.32 15 7.34 25 5.22
6 15.56 16 7.00 26 5.10
7 13.59 17 6.71 27 5.00
8 12.12 18 6.44 28 4.90
9 10.97 19 6.21 29 4.80
10 10.06 20 6.00 30 4.72
-----------------------------------------------------
Option C Lifetime Payment Option. For Fixed Income Option C, the
monthly payments are level. For Variable Income Option
C, the payments are not guaranteed as to amount and may
vary. For either option, the payments are based on the
life of a named person. Payments will continue for the
life of that person. The three variations are:
(1) Payments for life only (available as a Fixed Income
option and as a Variable Monthly Income option). No
specific number of payments is guaranteed. Payments stop
when the named person dies.
(2) Payments guaranteed for amount applied (not
available as a Variable Monthly Income option). Payments
stop when they equal the amount applied or when the
named person dies, whichever is later. "Amount applied"
means the dollar amount used to provide the income.
(3) Payments guaranteed for 5, 10, or 20 years
(available as a Fixed Income option and as a Variable
Monthly Income option). Payments stop at the end of the
selected guaranteed period or when the named person
dies, whichever is later.
The Fixed Income Option C Table shows the minimum
monthly payment for each $1,000 applied. The Variable
Monthly Income Option C Table shows the minimum amount
of the first monthly payment for each $1,000 applied.
The actual payments will be based on the monthly payment
rates we are using when the first payment is due. They
will not be less than shown in the Table.
<PAGE>
- --------------------------------------------------------------------------------
Fixed Income Option C Table
Minimum Monthly Payment Rates For Each $1,000 Applied
Payments Payments Guaranteed For
Age* For Life Amount 5 10 20
Male Female Only Applied Years Years Years
35 40 $3.01 $2.95 $3.00 $2.99 $2.97
40 45 3.18 3.11 3.17 3.16 3.14
45 50 3.40 3.30 3.39 3.38 3.34
50 55 3.67 3.53 3.66 3.65 3.58
55 60 4.03 3.82 4.02 3.99 3.86
60 65 4.49 4.18 4.47 4.42 4.18
65 70 5.13 4.63 5.10 4.99 4.51
70 75 6.01 5.21 5.93 5.69 4.82
75 80 7.21 5.94 7.03 6.51 5.06
80 85 8.87 6.89 8.44 7.39 5.20
85 11.18 8.09 10.19 8.21 5.26
*Age on birthday nearest due date of the first payment. Monthly payment rates
for ages not shown will be furnished on request. Monthly payment rates for ages
over 85 are the same as those for 85.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Variable Monthly Income Option C Table
Minimum Monthly Payment Rates For First Payment For Each
$1,000 Applied, Based on 4% Interest Rate
Payments Payments Guaranteed For
Adjusted For Life 5 10
Age* Only Years Years
M F M F M F
40 $4.11 $3.90 $4.10 $3.89 $4.09 $3.88
45 4.31 4.05 4.30 4.04 4.28 4.03
50 4.56 4.24 4.55 4.23 4.52 4.21
55 4.87 4.48 4.85 4.47 4.81 4.45
60 5.28 4.80 5.26 4.79 5.19 4.75
65 5.85 5.22 5.81 5.20 5.67 5.15
70 6.61 5.81 6.52 5.77 6.27 5.66
75 7.62 6.61 7.44 6.54 6.96 6.31
80 8.96 7.75 8.60 7.58 7.72 7.10
85 10.77 9.36 10.02 8.96 8.48 7.94
*Age on birthday nearest the due date of the first payment, adjusted according
to the table in the Basis Of Computation provision in Part 7. Monthly payment
rates for adjusted ages not shown will be furnished on request.
- --------------------------------------------------------------------------------
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<PAGE>
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Option D
Interest Payment Option (not available as a Variable Monthly Income option). We
will hold any amount applied under this option. Interest on the unpaid balance
will be paid each month at a rate determined by us. This rate will not be less
than the equivalent of 2 1/2% per year.
Option E
Joint Lifetime Payment Option (available as a Fixed Income option and as a
Variable Monthly Income option). For Fixed Income Option E, the monthly payments
are level. For Variable Income Option E, the payments are not guaranteed as to
amount and may vary. For either option, the payments are based on the lives of
two named persons. While both are living, one payment will be made each month.
When one dies, payments continue for the lifetime of the other. The two
variations are:
(1) Payments for two lives only. No specific number of payments is guaranteed.
Payments stop when both named persons have died.
(2) Payments guaranteed for 10 years. Payments stop at the end of 10 years or
when both named persons have died, whichever is later.
The Fixed Income Option E Table shows the minimum monthly payment for each
$1,000 applied. The Variable Monthly Income Option E Table shows the minimum
amount of the first monthly payment for each $1,000 applied. The actual payments
will be based on the monthly rates we are using when the first payment is due.
They will not be less than shown in the Table.
<PAGE>
- --------------------------------------------------------------------------------
Fixed Income Option E Table
Minimum Monthly Payment Rates For Each $1,000 Applied
Payments For Two Lives Only
M50 M55 M60 M65 M70 M75
Age* F55 F60 F65 F70 F75 F80
M F
50 55 $3.25 $3.35 $3.45 $3.52 $3.57 $3.61
55 60 3.35 3.50 3.64 3.75 3.84 3.91
60 65 3.45 3.64 3.83 4.00 4.15 4.27
65 70 3.52 3.75 4.00 4.26 4.50 4.70
70 75 3.57 3.84 4.15 4.50 4.85 5.17
75 80 3.61 3.91 4.27 4.70 5.17 5.65
80 85 3.63 3.95 4.36 4.86 5.45 6.10
Payments Guaranteed For 10 Years
M50 M55 M60 M65 M70 M75
Age* F55 F60 F65 F70 F75 F80
M F
50 55 $3.24 $3.34 $3.44 $3.51 $3.56 $3.60
55 60 3.34 3.49 3.63 3.74 3.83 3.90
60 65 3.44 3.63 3.82 3.99 4.14 4.26
65 70 3.51 3.74 3.99 4.25 4.48 4.67
70 75 3.56 3.83 4.14 4.48 4.82 5.12
75 80 3.60 3.90 4.26 4.67 5.12 5.56
80 85 3.62 3.94 4.33 4.82 5.36 5.94
* Age on the birthday nearest the due date of the first payment. Monthly payment
rates for ages not shown will be furnished on request.
- --------------------------------------------------------------------------------
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<PAGE>
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- --------------------------------------------------------------------------------
Variable Monthly Income Option E Table
Minimum Monthly Payment Rates For First Payment For Each
$1,000 Applied, Based On 4% Assumed Investment Rate
Payments For Two Lives Only - One Male, One Female
Adjusted
Age* F 50 F 55 F 60 F 65 F 70 F 75 F 80 F 85
M 50 $3.98 $4.08 $4.17 $4.26 $4.34 $4.40 $4.45 $4.48
M 55 4.04 4.16 4.29 4.41 4.53 4.62 4.70 4.76
M 60 4.09 4.24 4.40 4.57 4.73 4.88 5.00 5.10
M 65 4.13 4.30 4.50 4.72 4.94 5.16 5.36 5.52
M 70 4.16 4.36 4.59 4.85 5.15 5.46 5.75 6.01
M 75 4.19 4.40 4.65 4.96 5.33 5.74 6.16 6.55
M 80 4.20 4.42 4.70 5.05 5.48 5.98 6.55 7.12
M 85 4.21 4.44 4.73 5.11 5.59 6.19 6.89 7.66
Payments For Two Lives Only - Both Females
Adjusted
Age* F 50 F 55 F 60 F 65 F 70 F 75 F 80 F 85
F 50 $3.91 $3.98 $4.04 $4.09 $4.14 $4.17 $4.19 $4.21
F 55 3.98 4.07 4.16 4.24 4.31 4.36 4.40 4.43
F 60 4.04 4.16 4.29 4.41 4.51 4.60 4.66 4.71
F 65 4.09 4.24 4.41 4.57 4.73 4.87 4.98 5.07
F 70 4.14 4.31 4.51 4.73 4.96 5.17 5.36 5.51
F 75 4.17 4.36 4.60 4.87 5.17 5.49 5.79 6.05
F 80 4.19 4.40 4.66 4.98 5.36 5.79 6.23 6.65
F 85 4.21 4.43 4.71 5.07 5.51 6.05 6.65 7.27
Payments Guaranteed For 10 Years - One Male, One Female
Adjusted
Age* F 50 F 55 F 60 F 65 F 70 F 75 F 80 F 85
M 50 $3.97 $4.07 $4.16 $4.25 $4.33 $4.39 $4.44 $4.47
M 55 4.03 4.15 4.28 4.40 4.52 4.61 4.69 4.74
M 60 4.08 4.23 4.39 4.56 4.72 4.87 4.99 5.07
M 65 4.12 4.29 4.49 4.71 4.93 5.15 5.33 5.47
M 70 4.15 4.35 4.58 4.84 5.13 5.43 5.70 5.93
M 75 4.18 4.39 4.64 4.95 5.31 5.69 6.08 6.41
M 80 4.19 4.41 4.69 5.03 5.44 5.92 6.42 6.87
M 85 4.20 4.43 4.72 5.08 5.54 6.09 6.69 7.28
Payments Guaranteed For 10 Years - Two Females
Adjusted
Age* F 50 F 55 F 60 F 65 F 70 F 75 F 80 F 85
F 50 $3.90 $3.97 $4.03 $4.08 $4.13 $4.16 $4.18 $4.20
F 55 3.97 4.06 4.15 4.23 4.30 4.35 4.39 4.42
F 60 4.03 4.15 4.28 4.40 4.50 4.59 4.65 4.70
F 65 4.08 4.23 4.40 4.56 4.72 4.86 4.97 5.05
F 70 4.13 4.30 4.50 4.72 4.95 5.16 5.34 5.48
F 75 4.16 4.35 4.59 4.86 5.16 5.46 5.75 5.97
F 80 4.18 4.39 4.65 4.97 5.34 5.75 6.15 6.50
F 85 4.20 4.42 4.70 5.05 5.48 5.97 6.50 7.00
(Continued)
<PAGE>
* Age on birthday nearest the due date of the first payment,
adjusted according to the table in the Basis Of Computation
provision in Part 7. Monthly payment rates for adjusted ages
not shown and for two males will be furnished on request.
----------------------------------------------------------------
Option F Joint Lifetime Payment Option With Reduced Payments (available as a
Fixed Income option and as a Variable Monthly Income option). Monthly
payments are based on the lives of two named persons. Payments will
continue while both are living. When one dies, reduced payments will
continue for the lifetime of the other. These reduced payments will
be two-thirds of what they would have been if both persons had
continued to live. Payments stop when both named persons have died.
The Fixed Income Option F Table shows the minimum monthly payment for
each $1,000 applied. The Variable Monthly Income Option F Table shows
the minimum amount of the first monthly payment for each $1,000
applied. The actual payments will be based on the rates we are using
when the first payment is due. They will not be less than shown in
the Table.
---------------------------------------------------------------
Fixed Income Option F Table
Minimum Monthly Payment Rates For Each $1,000 Applied
Payments For Two Lives Only
M50 M55 M60 M65 M70 M75
Age* F55 F60 F65 F70 F75 F80
M F
50 55 $3.51 $3.66 $3.82 $3.99 $4.17 $4.35
55 60 3.66 3.83 4.02 4.22 4.44 4.66
60 65 3.82 4.02 4.24 4.49 4.76 5.04
65 70 3.99 4.22 4.49 4.80 5.14 5.49
70 75 4.17 4.44 4.76 5.14 5.57 6.02
75 80 4.35 4.66 5.04 5.49 6.02 6.60
80 85 4.54 4.88 5.31 5.84 6.48 7.22
* Age on the birthday nearest the due date of the first
payment. Monthly payment rates for ages not shown will be
furnished on request. Monthly payment rates for ages over
85 are the same as those for 85.
---------------------------------------------------------------
-18-
<PAGE>
-19-
- --------------------------------------------------------------------------------
Variable Monthly Income Option F Table
Minimum Monthly Payment Rates For First Payment For Each
$1,000 Applied, Based On 4% Assumed Investment Rate
Payments For Two Lives Only - One Male, One Female
Adjusted
Age* F 50 F 55 F 60 F 65 F 70 F 75 F 80 F 85
M 50 $4.24 $4.36 $4.49 $4.64 $4.82 $5.01 $5.23 $5.46
M 55 4.35 4.48 4.63 4.81 5.01 5.23 5.48 5.74
M 60 4.47 4.62 4.80 5.00 5.23 5.50 5.79 6.09
M 65 4.62 4.78 4.98 5.22 5.50 5.81 6.16 6.54
M 70 4.78 4.96 5.19 5.47 5.79 6.18 6.61 7.07
M 75 4.94 5.15 5.41 5.72 6.11 6.57 7.10 7.68
M 80 5.12 5.34 5.63 5.99 6.43 6.98 7.63 8.36
M 85 5.29 5.54 5.85 6.25 6.76 7.39 8.17 9.09
Payments For Two Lives Only - Both Females
Adjusted
Age* F 50 F 55 F 60 F 65 F 70 F 75 F 80 F 85
F 50 $4.11 $4.21 $4.33 $4.46 $4.61 $4.78 $4.96 $5.16
F 55 4.21 4.33 4.46 4.61 4.78 4.96 5.17 5.39
F 60 4.33 4.46 4.61 4.78 4.98 5.19 5.43 5.69
F 65 4.46 4.61 4.78 4.98 5.21 5.47 5.76 6.05
F 70 4.61 4.78 4.98 5.21 5.49 5.81 6.15 6.52
F 75 4.78 4.96 5.19 5.47 5.81 6.19 6.62 7.09
F 80 4.96 5.17 5.43 5.76 6.15 6.62 7.17 7.77
F 85 5.16 5.39 5.69 6.05 6.52 7.09 7.77 8.54
* Age on birthday nearest the due date of the first payment, adjusted
according to the table in the Basis Of Computation provision in Part
7. Monthly payment rates for adjusted ages not shown and for two
males will be furnished on request.
- --------------------------------------------------------------------------------
Electing A Payment To elect any option, we require that a written request,
Option satisfactory to us, be received at our Service Center.
The Owner may elect an option during the Annuitant's
lifetime. If the death benefit is payable in one sum
when the Annuitant dies, the Beneficiary may elect an
option with our consent.
Options for any amount payable to an association,
corporation, partnership, or fiduciary are available
with our consent. However, a corporation or partnership
may apply any amount payable to it under Option C, E, or
F if the option payments are based on the life or lives
of the Annuitant, the Annuitant's spouse, any child of
the Annuitant, or any other person agreed to by us.
Effective Date And The effective date of an option is the date the amount
Payment Date is applied under that option. For a death benefit, this
is the date that due proof of the Annuitant's or Owner's
death is received at our Service Center. For a maturity
value, it is the date the contract matures. For the cash
redemption value, it is the effective date of
redemption.
<PAGE>
The first payment is due on the effective date, except
that the first payment under Option D is due one month
later. A later date for the first payment may be
requested in the payment option election. All payment
dates will fall on the same day of the month as the
first one. No payment will become due until a payment
date. No part payment will be made for any period
shorter than the time between payment dates.
Example: Monthly payments are being made to your son on
the 1st of each month. He dies on the 10th. No
part payment is due your son or his estate for
the period between the 1st and the 10th.
Withdrawals And If provided in the payment option election, all or part
Changes of the unpaid balance under Options A and D may be
withdrawn or applied under any other option.
If provided in the payment option election, the commuted
value of the future payments under Variable Monthly
Income Option B may be withdrawn. In this case, the
number of annuity units that Variable Monthly Income
Option B has in each division of the Separate Account
will be commuted at the Assumed Investment Rate. The
commuted units in each division will be multiplied by
the annuity unit value for that division on the date the
commuted value is determined. The commuted value will be
the sum of the values determined for each division less
any deduction for sales charges that applies.
A deduction for sales charges will apply only if:
. No sales charges were deducted when the redemption
or maturity value was applied under Variable
Monthly Income Option B; and
. A deduction for sales charges would be made if this
contract was redeemed or matured in one sum on the
date commutation is made; and
. Commutation is made during the lifetime of the
person receiving the Option B payments.
The amount of the sales charge deduction will be the
same as if this contract was redeemed for an amount
equal to the commuted value (before deduction of the
sales charge) on the date commutation is made.
Income Protection To the extent permitted by law, each option payment and
any withdrawal shall be free from legal process and the
claim of any creditor of the person entitled to them. No
option payment and no amount held under an option can be
taken or assigned in advance of its payment date, unless
the Owner's written consent is given before the
Annuitant dies. This consent must be received at our
Service Center.
Part 7. Notes On Our Computations
This Part covers some technical points about this
contract.
Net Investment Factor For each division of the Separate Account, the Net
Investment Factor for any valuation period is the gross
investment rate for that period plus 1.000000 and minus
an asset charge. This asset charge will be not more than
.0000411 for each day of a valuation period. The Net
Investment Factor may be greater or less than 1.000000.
For each division of the Separate Account, the gross
investment rate for any valuation period is equal to:
. The net earnings of that division during the
valuation period, divided by
. The value of the total assets of that division at
the beginning of the valuation period.
-20-
<PAGE>
-21-
The net earnings of each division are equal to the
accrued investment income and capital gains and
losses (realized and unrealized) of that division
reduced by any amount charged against that
division for taxes paid or reserved for by us. The
gross investment rate will be determined by us in
accordance with generally accepted accounting
principals and applicable laws, rules, and
regulations. This determination shall be
conclusive upon the Owner, the Annuitant, any
Beneficiary, and any assignee and any other person
under this contract.
Accumulation Unit The value of an accumulation unit in each division
Value was set at $1.000000 on the first valuation date
selected by us. The value on any date thereafter
is equal to the product of the Net Investment
Factor for that division for the valuation period
that includes that date and the value of the
corresponding accumulation unit value on the
preceding valuation date.
Annuity Unit Value All annuity unit values in each division were set
at $1.000000 on the first valuation date selected
by us. The value on any date thereafter is equal
to (a) the Net Investment Factor for that division
for the valuation period that includes that date
divided by (b) the sum of 1.000000 and the rate of
interest for the number of days in the valuation
period, computed at an effective annual rate equal
to the Assumed Investment Rate, and multiplied by
(c) the corresponding annuity unit value on the
preceding valuation date.
Assumed Investment The Assumed Investment Rate is the annual interest
Rate rate assumed in determining the first payment
under each of the Variable Monthly Income payment
options. The amount of each subsequent payment
from each division of the Separate Account will
depend on the relationship between the Assumed
Investment Rate and the actual investment
performance of that division. The Assumed
Investment Rate will be 4% per annum. If a 4%
rate would result in a first Variable Monthly
Income payment larger than that permitted under
applicable state law, we will select a lower rate
to comply with that law.
Adjustment Of Units We have the right to split or consolidate the
And Values number of accumulation units or annuity units
credited to the contract, with a corresponding
increase or decrease in the unit values. We may
exercise this right whenever we consider an
adjustment of units to be desirable. However,
strict equity will be preserved in making any
adjustment. No adjustment will have any material
effect on the benefits, provisions, or investment
return of this contract, or on the Owner,
Annuitant, any Beneficiary, any assignee or other
person, or on us.
Payment Calculation Payments under a Variable Monthly Income payment
Date option are calculated on a payment calculation
date. That date is the earliest valuation date
that is not more than 10 days before the due date
of the payment.
Computing Variable The first payment under a Variable Monthly Income
Monthly Income payment option is computed in the following steps:
Payments
(1) For each division, we multiply the
proceeds from the division by the rate we
are using for the payment option as of
the date of the first payment.
(2) For each division, we multiply the result
of step (1) above by the ratio of the
accumulation unit value for the division
on the first payment calculation date
(see Payment Calculation Date provision
above) to the accumulation unit value of
the division on the due date the first
payment is due.
(3) We sum the results of step (2) for all
divisions of the Separate Account; this
is the first payment.
Future payments under a Variable Monthly Income
payment option are measured by annuity units. The
number of annuity units in each division is the
portion of the first payment provided by that
division divided by the annuity unit value for
that division on the first payment calculation
date.
<PAGE>
For payments after the first one, the annuity units in
each division are multiplied by the annuity unit value on
the payment calculation date that applies. The payment to
be made on the payment due date is the sum of the amounts
provided by each division.
Basis Of Computation In computing the minimum payments under Fixed Income
payment options C, E, and F, we use mortality rates from
the 1983 Table a with Projection Scale G for 30 years and
with female rates set back five years.
The Variable Monthly Income Option C, E, and F Tables are
based on mortality rates from the 1983 Table a, with
Projection Scale G, for annuitants born in 1942. For all
other years of birth, the mortality improvement is
determined by adjusting the annuitant's age according to
the following table:
Adjustment to Adjustment to
Year of Birth Actual Age Year of Birth Actual Age
1905-1909 +7 Years 1955-1959 -3 Years
1910-1914 +6 Years 1960-1964 -4 Years
1915-1919 +5 Years 1965-1969 -5 Years
1920-1924 +4 Years 1970-1974 -6 Years
1925-1929 +3 Years 1975-1979 -7 Years
1930-1934 +2 Years 1980-1984 -8 Years
1935-1939 +1 Year 1985-1989 -9 Years
1940-1944 +0 Years 1990-1994 -10 Years
1945-1949 -1 Year 1995-1999 -11 Years
1950-1954 -2 Years 2000-2004 -12 Years
The annual interest rate used is the Assumed Investment
Rate discussed in this Part.
Guarantees All benefits, payments, and values under this contract
that depend on the investment performance of the Separate
Account may increase or decrease, as discussed in this
Part. However, we guarantee that the dollar amounts of
variable benefits will not be adversely affected by
variations of actual expenses from expense charges stated
in this contract. Also, those benefits will not be
adversely affected by variations in actual mortality from
the mortality assumptions stated in this contract.
A part of the assets of the Separate Account is the
reserve for variable benefits and liabilities that depend
on the investment performance of that Account. That part
of the assets shall not be charged with any liabilities
we have that arise from any business we conduct that does
not depend on the performance of that Account.
-22-
<PAGE>
WHERE TO FIND IT
Page No.
The Schedule Page ........................................................1
Part 1. - The Basics Of This Contract ......................................2
The Parties Involved - Owner, Joint Owner, Annuitant,
Beneficiary, Irrevocable Beneficiary, Payee ............................2
Dates - Contract Date, Contract Anniversary Date,
Contract Year, Issue Date, Maturity Date ...............................2
This Is A Legal Contract .................................................3
Trusts And Other Agreements ..............................................3
Representations And Contestability .......................................3
Misstatement Of Age Or Sex ...............................................3
Meaning Of In Force ......................................................3
Service Center ...........................................................3
Contract State ...........................................................3
Currency .................................................................3
Contract Is Not Participating ............................................3
Part 2. - Purchase Payments ................................................3
The First Purchase Payment ...............................................3
Purchase Payment Flexibility .............................................4
Right To Terminate Contract ..............................................4
Where To Pay .............................................................4
Net Purchase Payments ....................................................4
Allocation Of Net Purchase Payments ......................................4
Part 3. - Separate Account, Values, And Charges ............................4
The Separate Account .....................................................4
Changes In The Separate Account ..........................................5
Accumulation Units And Annuity Units .....................................5
Valuation Date, Valuation Time, Valuation Period .........................5
Purchase And Sale Of Accumulation Units ..................................5
Accumulated Value Of Contract ............................................6
Administrative Charge ....................................................6
Deductions For Sales Charges .............................................6
Amount Of Sales Charge ...................................................7
Part 4. - Life Benefits ....................................................8
Contract Ownership ........................................................8
Rights Of Owner ..........................................................8
Assigning This Contract ..................................................8
Changing The Owner, Payee, Or Beneficiary ................................8
Transfers Of Values ......................................................8
Limitations On Transfers .................................................8
Transfer Fee .............................................................8
Redeeming This Contract ....................................................9
Right To Redeem ..........................................................9
Cash Redemption Value ....................................................9
Partial Redemptions ......................................................9
When And How We Pay ......................................................9
Right To Change The Maturity Date ..........................................9
Electing An Early Maturity Date ..........................................9
Electing A Later Maturity Date ...........................................9
Other Provisions Regarding Life Benefits ...................................9
Periodic Statements ......................................................9
Receipt Of Information ..................................................10
Part 5. - Maturity Benefit And Death Benefit ..............................10
Maturity Benefit .........................................................10
Maturity Value ..........................................................10
Monthly Life Income .....................................................10
Alternate Settlements At Maturity .......................................10
Restriction On Rights ...................................................10
Death Benefit ............................................................10
Amount Of Death Benefit .................................................10
Interest On Maturity Or Death Benefit ....................................11
Interest Payable ........................................................11
Part 6. - Payment Options .................................................11
Fixed Income Payment Options ............................................11
Variable Monthly Income Payment Options .................................11
Availability Of Payment Options .........................................12
Minimum Amounts .........................................................12
Electing A Payment Option ...............................................19
Effective Date And Payment Date .........................................19
Withdrawals And Changes .................................................20
Income Protection .......................................................20
Part 7. - Notes On Our Computations .......................................20
Net Investment Factor ...................................................20
Accumulation Unit Value .................................................21
Annuity Unit Value ......................................................21
Assumed Investment Rate .................................................21
Adjustment Of Units And Values ..........................................21
Payment Calculation Date ................................................21
Computing Variable Monthly Income Payments ..............................21
Basis Of Computation ....................................................22
Guarantees ..............................................................22
Any riders and endorsements, and a copy of the application for the contract,
follow Page 22.
<PAGE>
[LETTERHEAD OF MASS MUTUAL APPEARS HERE]
-----------------
Deferred Variable Annuity
Contract
With Oppenheimer Variable Account
Funds and MML Series Investment Funds
This Contract provides that:
Flexible purchase payments may be made, while the Annuitant and Owner are
living, to the date this contract matures.
A death benefit is payable if the Annuitant or Owner dies before this contract
matures.
A monthly life income is payable beginning on the date this contract matures if
the Annuitant and Owner are living at that time.
This Contract is not participating. It does not provide for the payment of
dividends.
Notice Of Annual Meeting
The Owner is hereby notified that, by virtue of this contract he or she is a
member of Massachusetts Mutual Life Insurance Company and is entitled to vote
either in person or by proxy at any and all meetings of said Company. The annual
meetings are held at its Home Office, in Springfield, Massachusetts, on the
second Wednesday in April of each year at 2 o'clock p.m.
<PAGE>
Exhibit 5
INDIVIDUAL DEFERRED VARIABLE
ANNUITY APPLICATION
To Massachusetts Mutual Life Insurance Company
Springfield, Massachusetts 01111-0001
MAIL TO:
Life Trust Service Center
PO Box 419607
Kansas City, MO 64141-1007 Please print or type
- --------------------------------------------------------------------------------
1. Annuitant Name Date of Birth __/___/__ Sex [_] M [_] F
mo day yr
Mailing Address Tel. No. (____)__________ (____)__________
day eve
SS# or Tax ID# _______________________________
- --------------------------------------------------------------------------------
2. Owner Name Date of Birth __/___/__
(if not Annuitant) mo day yr
Mailing Address Te1. No. (____)__________ (____)__________
day eve
SS# or Tax ID# _______________________________
- --------------------------------------------------------------------------------
3. Joint Owner Name Date of Birth __/___/__
(if any) mo day yr
Mailing Address Te1. No. (____)_____________ (____)__________
day eve
SS# or Tax ID# _______________________________
- --------------------------------------------------------------------------------
4. Beneficiary
Relationship to Annuitant
Contingent Beneficiary
Relationship to Annuitant
- --------------------------------------------------------------------------------
5. Plan Type
[_] Non-Qualified [_] SEP IRA
[_] IRA [_] Qual. Ee Benefit Plan (For Indiv. Ee only)
[_] IRA Rollover [_] TSA (403(b) Employee Salary Reduction Only
Complete 11)
[_] Other ___________________________________________________________________
- --------------------------------------------------------------------------------
6. Estimated First Purchase Payment $ __________________________________________
If regular IRA or SEP apply to [_] current year [_] prior year
- --------------------------------------------------------------------------------
7. Purchase Payment Allocation (Whole %; Must total 100%)
__ % MML Money Market __% Opp. Multiple Strategies
__ % MML Managed Bond __% Opp. Growth
__ % MML Blend __% Opp. Capital Appreciation
__ % MML Equity __% Opp. Global Securities
__ % Opp. Money __% ____________________________________
__ % Opp. Bond __% ____________________________________
__ % Opp. Strategic Bond __% ____________________________________
__ % Opp. High Income __% ____________________________________
- --------------------------------------------------------------------------------
8.a) Maturity Date: Contract Anniversary nearest age) __________________________
or date ___________________________________________________________
b) Contract Date (optional):__________________________________________________
- --------------------------------------------------------------------------------
9.a) Is this annuity intended to replace all or part of any other
insurance or annuity? [_] Yes [_] No
(If Sec. 1035 exchange, complete form V4051)
b) Are funds from life insurance with this or any other company
being used to purchase this annuity? [_] Yes [_] No
(If "Yes," explain in 12.)
- --------------------------------------------------------------------------------
10.Telephone Directions Authorization
Owner authorizes Company to follow telephone instructions for transfers and
for changes in net purchase payment allocations, unless Owner refuses
authorization by checking box below. (See reverse side for brief
explanation about telephone authorization.)
[_] Refuse Telephone Directions
- --------------------------------------------------------------------------------
11.The undersigned acknowledges that the contract applied for is being purchased
for the Annuitant under Internal Revenue Code Section 403(b)(1). (For TSA
plan type only)
________________________________________
Signature of Purchaser
- --------------------------------------------------------------------------------
12.Remarks
- --------------------------------------------------------------------------------
Agent Authority: No agent can change the terms of this application or any
contract issued by the Company. No agent can waive any or the Company's rights
or requirements, or extend the time for any payment to the Company.
Owner and Annuitant (if different) Certify: To the best of their knowledge and
belief, all statements in this application are complete and true and were
correctly recorded.
Owner Certifies: (1) I [_] AM [_] AM NOT subject to backup withholding under
Internal Revenue Code Section 3406(a)(l)(C); (2) Correct Social Security or
Taxpayer ID# is given above; (3) Receipt of current prospectus for contract
applied for; (4) Knowledge that variable value of contract may increase or
decrease with experience of Separate Account, without any minimum guarantee of
value; (5) Knowledge that withdrawal of value from contract before age 59 1/2
may result in tax penalty.
Signed at _______________________________ _________________ __________________
City State Date
_____________________________ _____________________________________
Signature of Annuitant Signature of Owner (if not Annuitant)
_____________________________________
Signature of Joint Owner
A5015-9400
<PAGE>
- --------------------------------------------------------------------------------
Registered Representative Use Only
- --------------------------------------------------------------------------------
As Registered Representative, I certify witnessing the signature(s) on the
reverse side of this form and that the answer to the question below is true to
the best of my knowledge and belief.
Does this contract replace any existing annuity or life insurance
contract? [_] Yes [_] No
(If "Yes," submit replacement forms as required.)
<TABLE>
- -----------------------------------------------------------------------------------------------------------
Broker/Dealer Sales
- -----------------------------------------------------------------------------------------------------------
<S> <C>
- ------------------------------------------- --------------------------------------------------------
Signature of Registered Representative Registered Representative No. / Branch No.
- ------------------------------------------- --------------------------------------------------------
Print Name of Registered Representative Broker / Dealer Name
- ------------------------------------------- --------------------------------------------------------
Branch Office Street Address Street Address
- ------------------------------------------- --------------------------------------------------------
Branch Office City, State, ZIP City, State, ZIP
- -----------------------------------------------------------------------------------------------------------
Agency Sales (For MML Representatives Only)
- -----------------------------------------------------------------------------------------------------------
- ------------------------------------------- --------------------------------------------------------
Signature of Agent Agency Number
- ------------------------------------------- --------------------------------------------------------
Agent Ident. No. General Agent
</TABLE>
A5015-9400
- --------------------------------------------------------------------------------
General Information
- --------------------------------------------------------------------------------
Telephone Authorization - Initiating transfers, changing allocations, and
obtaining other information relating to the contract will be automatically
available by telephone unless you instruct the Company differently. We will
follow reasonable procedures to confirm that instructions received by telephone
are genuine. These measures include, among others, requiring forms of personal
identification prior to acting on telephone instructions, providing written
confirmation of such transactions, and/or recording telephone requests. If the
Company fails to take such precautions, it may be liable for losses resulting
from fraudulent requests. While a Joint Owner is named under the contract,
either the Owner or Joint Owner may make telephone requests.
-----------------------------
To the best of your knowledge, during the last six months has any contract on
the life of the Annuitant been, or if the application is approved, is it
contemplated that any contract will subsequently be surrendered or otherwise
terminated, lapsed, or placed on other than a premium-paying basis, rewritten to
release cash values, reduced in amount or term of coverage, assigned as
collateral for a loan, or subjected to borrowing of loan values? [_] Yes [_] No
if"yes," complete the following
This does not include CDs, Mutual Funds, or Individual Retirement Accounts that
are not funded by annuities.
<TABLE>
Company Name Contract Number Group Contract Plan Face Amount
(Y or N) $
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
Have you delivered the appropriate disclosure statement or replacement notice?
[_] Yes [_] No
<PAGE>
EXHIBIT 9 Opinion of and Consent of Counsel
April, 1998
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Re: Post-Effective Amendment No. 4 to Registration Statement
No. 33-83798 filed on Form N-4
Ladies and Gentlemen:
This opinion is furnished in connection with the filing of Post-Effective
Amendment No. 4 to Registration Statement No. 33-83798 on Form N-4 under the
Securities Act of 1933 for Massachusetts Mutual Life Insurance Company's
("MassMutual") flexible premium variable annuity contract (the "Contract").
Massachusetts Mutual Variable Annuity Separate Account 3 issues the Contract.
As Attorney for MassMutual, I provide legal advice to MassMutual in connection
with the operation of its variable products. In such role I am familiar with the
Post-Effective Amendment for the Contract. In so acting, I have made such
examination of the law and examined such records and documents as in my judgment
are necessary or appropriate to enable me to render the opinion expressed below.
I am of the following opinion:
1. MassMutual is a valid and subsisting corporation, organized and operated
under the laws of the Commonwealth of Massachusetts and is subject to regulation
by the Massachusetts Commissioner of Insurance.
2. Massachusetts Mutual Variable Annuity Separate Account 3 is a separate
account validly established and maintained by MassMutual in accordance with
Massachusetts law.
3. All of the prescribed corporate procedures for the issuance of the Contract
have been followed, and all applicable state laws have been complied with.
I hereby consent to the use of this opinion as an exhibit to this Post-Effective
Amendment.
Very truly yours,
/s/ James M. Rodolakis
James M. Rodolakis
Counsel
44
<PAGE>
Exhibit 10(i) CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Massachusetts Mutual Life Insurance Company
We consent to the inclusion in this Post-Effective Amendment No. 4 to the
Registration Statement of Massachusetts Mutual Variable Annuity Separate Account
3 on Form N-4 (Registration No. 33-83798), of our report dated February 3, 1998
on our audits of Massachusetts Mutual Variable Annuity Separate Account 3, and
of our report dated February 6, 1998, on our audits of the statutory financial
statements of Massachusetts Mutual Life Insurance Company, which includes
explanatory paragraphs relating to the use of statutory accounting practices,
which differ from generally accepted accounting principles. We also consent to
the reference to our Firm under the caption "Independent Accountants" in the
Statement of Additional Information.
Coopers & Lybrand, L.L.P.
Springfield, Massachusetts
April 24, 1998
