As Filed with the Securities and Exchange Commission on January 28, 1999
Registration No. 333-65887
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-6
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
A. Exact name of Trust: Massachusetts Mutual Variable Life Separate Account I
B. Name of Depositor: Massachusetts Mutual Life Insurance Company
C. Complete address of 1295 State Street
Depositor's principal Springfield, MA 01111
executive offices:
D. Name and address of Ann Lomeli
Agent for Service Corporate Secretary
of Process: 1295 State Street
Springfield, MA 01111
It is proposed that this filing will become effective (check appropriate box)
_________ immediately upon filing pursuant to paragraph (b) of Rule
485.
_________ on __________pursuant to paragraph (b) of Rule 485.
_________ 60 days after filing pursuant to paragraph (a)(1) of Rule
485
_________ on __________pursuant to paragraph (a)(1) of Rule 485.
_________ this post effective amendment designates a new effective
date for a previously filed post effective amendment.
E. Title of Securities being registered: Flexible Premium Variable Adjustable
Life Insurance Policies
F. Approximate date of proposed public offering: As soon as practicable after
the effective date of this
Registration Statement.
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
Item No. of
Form N-8B-2 Caption
- ----------- -------
1 Cover Page; The Separate Account
2 Cover Page; The Separate Account
3 Investments of the Separate Account
4 Sales and Other Agreements
5 The Separate Account
6 The Separate Account
7 Not Applicable
8 Not Applicable
9 Legal Proceedings
10 Cover Page; Withdrawals; Termination; Premiums; Death Benefits
Under the Policy; Free Look Provision; Account Value; Policy Loan
Privilege; The Separate Account; Charges Under the Policy; Sales
and Other Agreements; When We Pay Proceeds; Payment Options; Our
Rights; Your Voting Rights; General Provisions of the Policy
11 The Separate Account
12 The Separate Account; Sales and Other Agreements
13 The Separate Account; Charges Under the Policy
14 Premiums; The Separate Account; Sales and Other Agreements
15 Premiums; The Separate Account
16 The Separate Account; Investment Return
17 Account Value; The Separate Account; Cash Surrender Value;
Withdrawals; Payment Options
18 The Separate Account
2
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
Item No. of
Form N-8B-2 Caption
- ----------- -------
20 Not Applicable
21 Policy Loan Privilege
22 Not Applicable
23 Bonding Arrangement
24 Limits on Our Right to Challenge the Policy;
Suicide Exclusion; Misstatement of Age or Gender;
Assignment; Beneficiary; Our Rights; The Separate Account
25 Cover Page
26 Not Applicable
27 Cover Page; The Separate Account
28 Directors of MassMutual
29 Not Applicable
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Cover Page
36 Not Applicable
37 Not Applicable
38 Sales and Other Agreements
39 Sales and Other Agreements
3
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
Item No. of
Form N-8B-2 Caption
- ----------- -------
40 Sales and Other Agreements
41 Sales and Other Agreements
42 Not Applicable
43 Sales and Other Agreements
44 The Separate Account; Investment Return; Charges for
Federal Income Tax; Account Value
45 Not Applicable
46 The Separate Account; Investment Return; Cash Surrender
Value
47 The Separate Account
48 The Separate Account
49 Not Applicable
50 The Separate Account
51 Cover Page; Underwriting; Availability; Beneficiary;
Reinstatement; Premiums
52 The Separate Account; Our Rights
53 Federal Income Tax Considerations
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Financial Statements
4
Massachusetts Mutual Life Insurance Company
Flexible Premium Variable Adjustable Life Insurance
This prospectus describes a flexible premium variable adjustable life insurance
policy offered by Massachusetts Mutual Life Insurance Company ("MassMutual").
The policy provides lifetime insurance protection for as long as it remains in
force.
You, the policyowner, may allocate the net premium for Your policy among several
investment options. These investment options include a Guaranteed Principal
Account ("GPA") and thirty Separate Account Divisions of a segment of
Massachusetts Mutual Variable Life Separate Account I. Each of the Separate
Account Divisions invests in a corresponding Fund. The Separate Account
Divisions invest in the following Funds:
MML Series Investment Fund Oppenheimer Variable Account Funds
MML Small Cap Value Equity Fund Oppenheimer Global Securities Fund
MML Equity Fund Oppenheimer Small Cap Growth Fund
MML Equity Index Fund Oppenheimer Aggressive Growth Fund
MML Blend Fund Oppenheimer Growth Fund
MML Managed Bond Fund Oppenheimer Growth & Income Fund
Oppenheimer Multiple Strategies Fund
Panorama Series Fund, Inc. Oppenheimer High Income Fund
Panorama International Equity Portfolio Oppenheimer Strategic Bond Fund
Panorama Growth Portfolio Oppenheimer Bond Fund
Panorama Total Return Portfolio Oppenheimer Money Fund
MFS(R) Variable Insurance Trust(SM) Goldman Sachs Variable Insurance Trust
MFS(R) New Discovery Series Goldman Sachs International Equity Fund
MFS(R) Emerging Growth Series Goldman Sachs Capital Growth Fund
MFS(R) Research Series Goldman Sachs Mid Cap Equity Fund
Goldman Sachs CORE U.S. Equity Fund
Goldman Sachs Growth and Income Fund
T. Rowe Price Equity Series, Inc. T. Rowe Price Fixed Income Series, Inc
T. Rowe Price New America Growth Portfolio T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
Fidelity Investments Variable Insurance Products Fund II
Contrafund Portfolio
The policy is "flexible" because You may select the timing and amount of premium
payments. The policy is "adjustable" because You may choose to increase or
decrease the death benefit and change the death benefit option under the policy.
The policy is "variable" because the death benefit may, and cash surrender value
will, vary.
MassMutual is a mutual life insurance company established in 1851 under the laws
of Massachusetts. We are 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. As of December 31, 1997,
We had total assets under management of $152 billion and unconsolidated
statutory assets of $57.6 billion. The mailing address for the Home Office is
Massachusetts Mutual Life Insurance Company, Springfield, Massachusetts
01111-0001. The telephone number is (413) 788-8411.
February 8, 1999
----------------
The Securities and Exchange Commission has not approved or disapproved these
securities, or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The information in this prospectus is not complete and may be amended. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective.
This prospectus is not an offer to sell nor is it seeking an offer to buy these
securities in any state where the offer or sale is not permitted. This
prospectus is valid only when accompanied by the prospectuses of the Funds.
You should read and retain this prospectus.
Replacing existing insurance with the policy described in this prospectus may
not be to your advantage.
The policy is not available in all jurisdictions. This prospectus is not an
offering in any jurisdiction where the policy is not available. MassMutual has
not authorized any person to make any representations about the policy other
than those contained in this prospectus.
2
Table Of Contents Page
----
PART I - General Provisions of the Policy....................................5
Availability............................................................5
Underwriting............................................................5
Charges Under the Policy................................................6
Deductions from Premiums..........................................7
Sales Load....................................................7
State Premium Tax Charge......................................7
Deferred Acquisition Cost ("DAC") Tax Charge..................7
Account Value Charges.............................................7
Administrative Charge.........................................7
Cost of Insurance Charge......................................7
Face Amount Charge............................................7
Rider Charge..................................................7
Separate Account Charges..........................................7
Mortality and Expense Risk Charge.............................7
Charges for Federal Income Taxes..............................8
Fund Charges......................................................8
Other Charges.....................................................9
Withdrawal Charges............................................9
Loan Interest Rate Expense Charge.............................9
Substitute Insured Charge.....................................9
The Separate Account....................................................9
Investments of the Separate Account..............................9
MML Series Investment Fund.....................................10
Oppenheimer Variable Account Funds.............................11
Panorama Series Fund, Inc......................................12
Goldman Sachs Variable Insurance Trust.........................13
MFS(R) Variable Insurance Trust(SM)............................13
T. Rowe Price Equity Series, Inc...............................14
T. Rowe Price Fixed Income Series, Inc.........................14
Fidelity Investments Variable Insurance Products Fund II.......14
Fund Monitoring................................................15
The Guaranteed Principal Account........................................15
Premiums................................................................15
Minimum Case Premium..............................................15
Minimum Net First Policy Premium..................................15
Planned Annual Premiums...........................................15
Annual Cutoff Policy Premium......................................16
Minimum and Maximum Premium Payments..............................16
Net Premium Allocation............................................16
Termination.............................................................16
Grace Period......................................................17
Safety Test.......................................................17
Safety Test Grace Period.......................................17
Death Benefit Under the Policy..........................................17
Minimum Face Amount...............................................17
Death Benefit Options.............................................17
Changes in Selected Face Amount...................................18
Account Value...........................................................18
Investment Return.................................................19
Cash Surrender Value..............................................19
3
Transfers.........................................................19
Automated Account Value Transfer...............................20
Automated Account Re-Balancing.................................20
Withdrawals.......................................................20
Policy Loan Privilege...................................................21
Source of Loan....................................................21
If Loans Exceed the Policy Account Value..........................21
Interest..........................................................21
Repayment.........................................................21
Interest Credited on Loaned Value.................................22
Effect of Loan....................................................22
PART II - Additional Provisions of the Policy................................22
Paid-up Policy Date.....................................................22
Reinstatement...........................................................22
Payment Options.........................................................22
Fixed Amount Payment Option.......................................22
Fixed Time Payment Option.........................................22
Lifetime Payment Option...........................................22
Interest Payment Option...........................................23
Joint Lifetime Payment Option.....................................23
Joint Lifetime Payment Option with Reduced Payments...............23
Withdrawal Rights under Payment Options...........................23
Beneficiary.............................................................23
Changing the Policyowner or Beneficiary.................................23
Right to Substitute Insured.............................................23
Assignment..............................................................24
Dividends...............................................................23
Limits on Our Right to Challenge the Policy.............................23
Misstatement of Age or Gender...........................................24
Suicide Exclusion.......................................................24
When We Pay Proceeds....................................................24
Free Look Provision.....................................................24
Additional Benefits By Rider............................................25
Supplemental Monthly Term Insurance Rider.........................25
Waiver of Monthly Charges Rider...................................25
PART III - Other Important
Information..................................................................26
Federal Income Tax Considerations.......................................26
Your Voting Rights......................................................27
Our Rights..............................................................28
Records and Reports.....................................................28
Sales and Other Agreements..............................................28
Commissions.............................................................29
Bonding Arrangement.....................................................29
Year 2000...............................................................29
Legal Proceedings.......................................................29
Experts.................................................................29
Financial Statements....................................................29
Appendix A - Glossary........................................................A-1
Appendix B - Rates of Return.................................................B-1
Appendix C - Hypothetical Illustrations......................................C-1
Appendix D - Directors of Massachusetts Mutual Life Insurance
Company.......................................................D-1
Appendix E - Minimum Face Amount Percentages.................................E-1
Appendix F - Financial Statements............................................FF
4
Part I - General Provisions Of the Policy
This section of the prospectus describes the general provisions of the policy
and is subject to the terms of the policy. You may review a copy of the policy
upon request.
In the event of a conflict between the terms within this prospectus and the
terms of the policy, the policy terms will control.
Certain provisions of the policy as described in this prospectus may differ in a
particular state because of specific state requirements.
We define the following terms in Appendix A:
Case, Insured, Issue Date, Monthly Calculation Date, Net Premium, Policy
Anniversary, Policy Date, Policy Year, Policyowner, Valuation Date,
Valuation Period and Valuation Time.
Throughout the prospectus, MassMutual is referred to as We, Us or Our, and the
policyowner is referred to as You or Your.
Availability.
The policy is available on a case basis. We may define a case as one person. All
policies within a case are aggregated for purposes of determining policy dates,
loan rates and underwriting requirements. If an individual owns the policy as
part of an employer sponsored program, he or she may exercise all rights and
privileges under the policy through their employer or other sponsoring entity
acting as case administrator. After termination of the employment or other
relationship, the individual may exercise such rights and privileges directly
with MassMutual.
The minimum total selected face amount is $50,000 per policy. At the time of
issue, the insured must be age 20 through age 85 as of his/her birthday nearest
the policy date.
Underwriting.
We currently offer three different underwriting programs:
1. full underwriting;
2. simplified issue underwriting; and
3. guaranteed issue underwriting.
The cost of insurance charges vary depending on the type of underwriting We use.
5
Charges Under The Policy.
We deduct certain charges for providing the insurance benefits under Your
policy, for administering Your policy, for assuming certain risks and for
incurring certain expenses in distributing Your policy. A summary of these
charges is as follows, and a more detailed description follows this chart:
- -----------------------------------------------------------------------------------------------------------------------------------
Charges Current Rate Guaranteed Rate
- -----------------------------------------------------------------------------------------------------------------------------------
Deductions from Sales Load Charge Policy years 1 - 7: 10% of premiums up to Policy years 1 - 7: 10% of premiums up to
Premium annual cutoff policy premium annual cutoff policy premium
Policy years 8+: 2.5% of premiums up to Policy years 8+: 2.5% of premiums up to
annual cutoff policy premium annual cutoff policy premium
All policy years: 1% of premiums in excess All policy years: 1% of premiums in excess
of the annual cutoff policy premium of the annual cutoff policy premium
- -----------------------------------------------------------------------------------------------------------------------------------
State Premium Tax 0% to 4% of each premium, depending on This charge will always equal the
Charge Your state's applicable rate applicable state rate
- -----------------------------------------------------------------------------------------------------------------------------------
Deferred 1% of each premium This charge will always represent the
Acquisition Cost federal acquisition deferred cost tax
Tax Charge
- -----------------------------------------------------------------------------------------------------------------------------------
Account Value Administrative $5.25 per month ($63.00 annually) $9.00 per month ($108.00 annually)
Charges Charge
- -----------------------------------------------------------------------------------------------------------------------------------
Cost of Insurance A per thousand rate multiplied by the The maximum monthly cost of insurance
Charge amount at risk each month. This charge charge for each $1,000 of insurance is
varies by the insured's gender, issue shown in the Table of Maximum Monthly
age and tobacco classification; the policy Mortality Charges in Your policy
year We make the deduction; the rating class
of Your policy and the underwriting
classification of the case
- -----------------------------------------------------------------------------------------------------------------------------------
Face Amount Charge Issue Age 20-24 Issue Age 20-24
(for fully Policy years 1-20: $0.00167 per month Policy years 1-20: $0.00167 per month
underwritten of a specified amount of a specified amount
policies) Policy years 21+: 0 Policy years 21+: 0
Issue Age 25-34 Issue Age 25-34
Policy years 1-15: $0.00250 per month Policy years 1-15: $0.00250 per month
of a specified amount of a specified amount
Policy years 16+: 0 Policy years 16+: 0
Issue Age 35-39 Issue Age 35-39
Policy years 1-15: $0.00292 per month Policy years 1-15: $0.00292 per month
of a specified amount of a specified amount
Policy years 16+: 0 Policy years 16+: 0
Issue Age 40-44 Issue Age 40-44
Policy years 1-15: $0.00333 per month Policy years 1-15: $0.00333 per month
of a specified amount of a specified amount
Policy years 16+: 0 Policy years 16+: 0
Issue Age 45-49 Issue Age 45-49
Policy years 1-15: $0.00375 per month Policy years 1-15: $0.00375 per month
of a specified amount of a specified amount
Policy years 16+: 0 Policy years 16+: 0
Issue Age 50-85 Issue Age 50-85
Policy years 1-4: $0.01667 per month of Policy years 1-4: $0.01667 per month
a specified amount of a specified amount
Policy years 5+: 0 Policy years 5+: 0
- -----------------------------------------------------------------------------------------------------------------------------------
Separate Account Mortality and Policy years 1 through 15: 0.60% annually of Any policy year: 1.0%
Charges Expense Risks each Separate Account Division's assets
Charge Policy years 16-30; 0.40% annually of each
Separate Account Division's assets
Policy years 31+: 0.30% annually of each
Separate Account Division's assets
- -----------------------------------------------------------------------------------------------------------------------------------
6
- -----------------------------------------------------------------------------------------------------------------------------------
Fund Charges SEE FUND CHARGE TABLE SEE FUND CHARGE TABLE
- -----------------------------------------------------------------------------------------------------------------------------------
Other Charges Withdrawal Charge 2.0% of the withdrawn amount, but not greater 2.0% of the withdrawn amount, but not
than $25.00 greater $25.00
- -----------------------------------------------------------------------------------------------------------------------------------
Substitute $75.00 $75.00
Insured Charge
- -----------------------------------------------------------------------------------------------------------------------------------
Loan Interest Policy years 1-15: 0.75% 3%
Crediting Rate Policy years 16-30: 0.55%
Charge Policy years 31+: 0.45%
- -----------------------------------------------------------------------------------------------------------------------------------
Deductions from Premiums.
Prior to applying Your premium to the GPA or the selected Separate Account
Divisions, We deduct a sales load, state premium tax and a deferred acquisition
cost tax charge from Your premium.
Sales Load.
We deduct a sales load from Your premium for the expenses related to the sales
and distribution of the policies. We will refund a portion of the sales load to
You, as part of the cash surrender value, if You surrender Your policy within
the first two policy years.
State Premium Tax Charge.
States assess premium taxes at various rates. We currently deduct the applicable
state rate from each premium to cover premium taxes assessed against MassMutual
by the states. The state rate will be either the Massachusetts rate or the
applicable state rate.
We may increase or decrease this charge if there is any change in the tax or
change of residence. You should notify MassMutual of any residence change. Any
change in this charge will be effective immediately.
Deferred Acquisition Cost ("DAC") Tax Charge.
This charge is related to MassMutual's federal income tax burden, under Internal
Revenue Code Section 848.
Account Value Charges.
On each monthly calculation date, We deduct from Your account value the
following charges:
1. An administrative charge;
2. A cost of insurance charge;
3. A face amount charge (if applicable); and
4. Any rider charge (if applicable).
We deduct these charges from Your account value in proportion to the non-loaned
account value in the Separate Account and the GPA.
1. Administrative Charge.
We deduct a monthly charge for costs We incur for providing certain
administrative services. These services include premium billing and collection,
record keeping, processing claims, and communicating with policyowners.
2. Cost of Insurance Charge.
(We refer to this charge as the "Mortality Charge" in Your policy.)
We deduct a cost of insurance charge on each monthly calculation date.
This charge is based on the:
. Insured's gender;
. Insured's issue age;
. Insured's tobacco use classification;
. Policy year in which We make the deduction;
. Rating class of the policy; and
. Underwriting classification of the case.
This charge may vary monthly because it is determined by multiplying the
applicable cost of insurance rates by the amount at risk each policy month. We
will apply any change in this charge to all policies in the same class.
3. Face Amount Charge.
We currently deduct a monthly face amount charge from policies that are issued
under a full underwriting basis. We use this charge to reimburse Us for the
costs associated with performing full underwriting on potential policyowners. We
base this charge on the greater of the initial selected face amount or the first
premium multiplied by the applicable minimum face amount percentage found in
Appendix E of this prospectus. The charge will not be based on an amount greater
than $10 million. This charge is fixed for a set number of policy years.
4. Rider Charge.
We will deduct applicable monthly rider charges for any additional benefits We
provide to You by rider.
Separate Account Charges
Mortality and Expense Risk Charge.
(We refer to this charge as the "Net Investment Factor Asset Charge" in Your
policy.)
We charge the Separate Account Divisions for the mortality and expense risks We
assume. This charge varies by policy year, and We deduct it from the value of
each Division's assets attributable to the policies.
The mortality risk We assume is that the group of lives
7
insured under Our policies may, on average, live for shorter periods of time
than We estimated. The expense risk We assume is that Our costs of issuing and
administering policies may be more than We estimated.
If all the money We collect from this charge is not needed to cover death
benefits and expenses, it will be Our gain. We will use this gain for any
purpose, including payment of sales commissions. If the money We collect is
insufficient, We will still provide for all death benefits and expenses.
Charges for Federal Income Taxes.
We do not currently charge the Separate Account Divisions for federal income
taxes attributable to them. However, We reserve the right to eventually charge
the Separate Account Divisions to provide for future federal income tax
liability of the Separate Account Divisions.
Fund Charges.
The value of the Separate Account Divisions' assets will reflect investment
management fees and other expenses of the Funds. The following table shows the
Funds' total fund operating expenses expressed as a percentage of average net
assets for the year ended December 31, 1997:
Total
Fund
Expenses
After
Expense
Management Other Reimbur-
Fund / Portfolio Name Fees Expenses sements
- ----------------------------------------------------------------------
MML Small Cap Value Equity(1)(2) 0.65% 0.11% 0.76%
MML Equity(1) 0.35% 0.00% 0.35%
MML Equity Index(6) 0.26% 0.11% 0.37%
MML Blend(1) 0.38% 0.00% 0.38%
MML Managed Bond(1) 0.44% 0.03% 0.47%
Oppenheimer Global Securities 0.70% 0.06% 0.76%
Oppenheimer Small Cap Growth(3) 0.75% 0.08% 0.83%
Oppenheimer Aggressive Growth 0.71% 0.02% 0.73%
Oppenheimer Growth 0.73% 0.02% 0.75%
Oppenheimer Growth & Income 0.75% 0.08% 0.83%
Oppenheimer Multiple Strategies 0.72% 0.03% 0.75%
Oppenheimer High Income 0.75% 0.07% 0.82%
Oppenheimer Strategic Bond 0.75% 0.08% 0.83%
Oppenheimer Bond 0.73% 0.05% 0.78%
Oppenheimer Money 0.45% 0.03% 0.48%
Panorama International Equity 1.00% 0.12% 1.12%
Panorama Growth 0.53% 0.01% 0.54%
Panorama Total Return 0.54% 0.01% 0.55%
Goldman Sachs Capital Growth(5) 0.75% 0.15% 0.90%
Goldman Sachs Mid Cap Equity(5) 0.80% 0.15% 0.95%
Goldman Sachs CORE U.S. Equity(5) 0.70% 0.10% 0.80%
Goldman Sachs Growth and Income(5) 0.75% 0.15% 0.90%
Goldman Sachs International Equity(5) 1.00% 0.25% 1.25%
MFS(R) New Discovery(4) 0.90% 0.25% 1.15%
MFS(R) Emerging Growth 0.75% 0.12% 0.87%
MFS(R) Research Series 0.75% 0.13% 0.88%
T. Rowe Price New America Growth 0.85% -- 0.85%
T. Rowe Price Mid-Cap Growth 0.85% -- 0.85%
T. Rowe Price Limited-Term Bond 0.70% -- 0.70%
Fidelity VIP Fund II Contrafund(7) 0.60% 0.21% 0.81%
(1) MassMutual has agreed to bear the expenses of these Funds (other than the
management fee, interest, taxes, brokerage commissions and extraordinary
expenses) in excess of 0.11% of the average daily net asset value of these Funds
through April 30, 1999. MassMutual does not expect that it will be required to
reimburse any expenses of the MML Equity Fund, MML Blend Fund or MML Managed
Bond Fund due to this undertaking in 1998. MassMutual estimates that these
expenses will be 0.39% of the MML Small Cap Value Equity Fund in 1998.
(2) The MML Small Cap Value Equity Fund had no operating expenses in 1997 since
it had not yet commenced operations. These figures represent MassMutual's
estimate of the Total Fund Expenses for this Fund in 1998.
(3) The Oppenheimer Small Cap Growth Fund had no operating expenses in 1997
since it had not yet commenced operations. These figures represent the adviser's
estimate of the Total Fund Expenses for this Fund in 1998.
(4) The MFS(R) New Discovery Series had no operating expenses in 1997 since it
had not yet commenced operations. These figures represent an estimate of the
Total Fund Expenses for this Series in 1998. The adviser agreed to bear expenses
for the MFS(R) New Discovery Series, subject to reimbursement by this Series,
for the current fiscal year, such that this Series' Other Expenses shall not
exceed the 0.25%. The expense shown includes this reimbursement. If not
included, the Other Expenses are estimated to be 0.47%, increasing the Total
Fund Expenses to 1.37%.
(5) The Goldman Sachs Variable Insurance Trust had no operating expenses in 1997
since it had not yet commenced operations. These figures represent an estimate
of the Total Fund Expenses for 1998. The investment advisers to the Goldman
Sachs Capital Growth, Goldman Sachs Mid Cap Equity, Goldman Sachs CORE U.S.
Equity, Goldman Sachs Growth and Income and Goldman Sachs International Equity
Funds, each series of the Goldman Sachs VIT Trust, have voluntarily agreed to
reduce or limit certain "Other Expenses" of such Funds (excluding management
fees, taxes, interest and brokerage fees and litigation, indemnification and
other extraordinary expenses) to the extent such expenses exceed 0.15%, 0.15%,
0.10%, 0.15% and 0.25% per annum of such Funds' average daily net assets,
respectively. The expenses shown include this reimbursement. If not included,
the Other Expenses for 1998 are estimated to be 4.49%, 5.34%, 2.29%, 2.67% and
1.97% for the Goldman Sachs Capital Growth, Goldman Sachs Mid Cap Equity,
Goldman Sachs CORE U.S. Equity, Goldman Sachs Growth and Income and Goldman
Sachs International Equity Funds, respectively.
(6) MassMutual agreed to bear the expenses of the MML Equity Index Fund (other
than the management fee, interest, taxes, brokerage commissions and
extraordinary expenses) in excess of 0.11% of the average daily net asset value
of the Fund in 1997. If not included, the Other Expenses would have been 0.16%,
increasing the Total Fund Expenses to 0.42%. MassMutual's obligation to bear
these expenses for
8
the MML Equity Index Fund terminated May 1, 1998.
(7) A portion of the brokerage commission that the Fidelity VIP Fund II
Contrafund pays is used to reduce its expenses. Additionally, this Portfolio has
entered into arrangements with its custodian whereby credits realized as a
result of uninvested cash balances are used to reduce custodian expenses.
Including these reductions, the Total Fund Expenses for this Portfolio would
have decreased to 0.78%.
Other Charges.
Withdrawal Charges.
We deduct a charge from each withdrawal.
Loan Interest Rate Expense Charge.
We deduct a charge from the loan interest rate. This charge reimburses us for
expenses We incur for administering Your loan. The charge varies by policy year.
Substitute Insured Charge.
We charge an administrative fee if You transfer the policy to the life of a
substitute insured.
The Separate Account.
Our Board of Directors established the Separate Account on July 13, 1988 in
accordance with the provisions of Section 132G of Chapter 175 of the
Massachusetts General Laws. The Separate Account is registered as a unit
investment trust under the Investment Company Act of 1940, as amended. The
Securities and Exchange Commission does not supervise MassMutual's or the
Separate Account's management or investment practices. Under Massachusetts law,
however, the Division of Insurance of the Commonwealth of Massachusetts
regulates both Us and the Separate Account.
We establish designated segments of the Separate Account to receive and invest
premiums for other MassMutual variable life insurance policies. We have
established a segment for the policies.
Although the Separate Account assets are assets of MassMutual, We cannot use
those Separate Account assets equal to the reserves and other liabilities of the
Separate Account attributable to the policies to satisfy any obligations that
may arise out of any other business We conduct. The Separate Account assets may,
however, be subject to liabilities arising from other variable life insurance
policies funded by the Separate Account. We may at Our discretion transfer those
assets which exceed the reserves and other liabilities of the Separate Account
to Our general account. Such transfers will not adversely affect the Separate
Account.
We credit or charge the Separate Account Divisions with the Divisions' income
and realized or unrealized gains or losses without regard to any of MassMutual's
other income, gains, or losses.
MassMutual may accumulate in the Separate Account the mortality and expense
risks charge, account value charges and investment results applicable to those
assets that are in excess of net assets supporting the policies.
MassMutual has the right to establish additional divisions of the Separate
Account. We will invest amounts credited to any additional divisions in shares
of other Funds. We have the right to substitute new Funds for any Separate
Account Divisions. If We do this, We will obtain prior approval from all of the
necessary regulatory authorities. We will also give You notice of Our intent to
do this.
Investments of the Separate Account.
We have established a segment within the Separate Account to receive and invest
premium payments for the policies. We have established thirty Divisions within
the policies' designated segment of the Separate Account. Each Separate Account
Division invests in a corresponding Fund as follows:
- -----------------------------------------------------------------
Division Fund
- -----------------------------------------------------------------
MML Small Cap Value Equity MML Small Cap Value Equity
Division Fund
- -----------------------------------------------------------------
MML Equity Division MML Equity Fund
- -----------------------------------------------------------------
MML Equity Index Division MML Equity Index Fund
- -----------------------------------------------------------------
MML Blend Division MML Blend Fund
- -----------------------------------------------------------------
MML Managed Bond Division MML Managed Bond Fund
- -----------------------------------------------------------------
Oppenheimer Global Securities Oppenheimer Global
Division Securities Fund
- -----------------------------------------------------------------
Oppenheimer Small Cap Growth Oppenheimer Small Cap Growth
Division Fund
- -----------------------------------------------------------------
Oppenheimer Aggressive Growth Oppenheimer Aggressive
Division Growth Fund
- -----------------------------------------------------------------
Oppenheimer Growth Division Oppenheimer Growth Fund
- -----------------------------------------------------------------
Oppenheimer Growth & Income Oppenheimer Growth & Income
Division Fund
- -----------------------------------------------------------------
Oppenheimer Multiple Oppenheimer Multiple
Strategies Division Strategies Fund
- -----------------------------------------------------------------
Oppenheimer High Income Oppenheimer High Income Fund
Division
- -----------------------------------------------------------------
Oppenheimer Strategic Bond Oppenheimer Strategic Bond
Division Fund
- -----------------------------------------------------------------
Oppenheimer Bond Division Oppenheimer Bond Fund
- -----------------------------------------------------------------
Oppenheimer Money Division Oppenheimer Money Fund
- -----------------------------------------------------------------
Panorama International Panorama International
- -----------------------------------------------------------------
9
- -----------------------------------------------------------------
Equity Division Equity Portfolio
- -----------------------------------------------------------------
Panorama Growth Division Panorama Growth Portfolio
- -----------------------------------------------------------------
Panorama Total Return Division Panorama Total Return
Portfolio
- -----------------------------------------------------------------
MFS(R) New Discovery Division MFS(R) New Discovery Series
- -----------------------------------------------------------------
MFS(R) Emerging Growth Division MFS(R) Emerging Growth Series
- -----------------------------------------------------------------
MFS(R) Research Division MFS(R) Research Series
- -----------------------------------------------------------------
Goldman Sachs International Goldman Sachs International
Equity Division Equity Fund
- -----------------------------------------------------------------
Goldman Sachs Capital Growth Goldman Sachs Capital Growth
Division Fund
- -----------------------------------------------------------------
Goldman Sachs Mid Cap Equity Goldman Sachs Mid Cap Equity
Division Fund
- -----------------------------------------------------------------
Goldman Sachs CORE U.S. Equity Goldman Sachs CORE U.S.
Division Equity Fund
- -----------------------------------------------------------------
Goldman Sachs Growth and Goldman Sachs Growth and
Income Division Income Fund
- -----------------------------------------------------------------
T. Rowe Price New America T. Rowe Price New America
Growth Division Growth Portfolio
- -----------------------------------------------------------------
T. Rowe Price Mid-Cap Growth T. Rowe Price Mid-Cap Growth
Division Portfolio
- -----------------------------------------------------------------
T. Rowe Price Limited-Term T. Rowe Price Limited-Term
Bond Division Bond Portfolio
- -----------------------------------------------------------------
Fidelity VIP Fund II Fidelity VIP Fund II
Contrafund Division Contrafund Portfolio
- -----------------------------------------------------------------
As custodian for the Separate Account, MassMutual holds the shares of the
underlying Funds purchased by the Separate Account Divisions. The Separate
Account purchases and redeems shares of the Funds at their net asset value. The
net asset value is determined at the time of receipt of the purchase order or
redemption request.
Some of the Funds available to You are similar to mutual funds offered in the
retail marketplace. These Funds generally have the same investment objectives,
policies and portfolio managers as the retail mutual funds and usually were
formed after the retail mutual funds. While these Funds generally have identical
investment objectives, policies and portfolio managers, they are separate and
distinct from the retail mutual funds. In fact, performance of these Funds may
be dramatically different from the performance of the retail mutual funds. This
is due to differences in the funds' sizes, dates shares of stocks are purchased
and sold, cash flows and expenses. You should remember that retail mutual fund
performance is not the performance of the Funds that are available to You in
this policy and is not an indication of future performance of such Funds.
There is no assurance that the Funds will achieve stated objectives. The Fund
prospectuses contain more detailed information about the Funds. Current copies
of the Fund prospectuses are attached to this prospectus. You should read the
information contained in the Funds' prospectuses before making allocations to
any Division of the Separate Account.
MML Series Investment Fund
The MML Series Investment Fund (the "MML Trust") is a no-load, open-end
management investment company. The MML Small Cap Value Equity Fund, MML Equity
Fund, MML Equity Index Fund, MML Blend Fund and MML Managed Bond Fund
(collectively, the "MML Funds") are separate series of shares of the MML Trust.
MassMutual acts as investment manager to each of the MML Funds. David L. Babson
and Company, Inc. ("Babson") serves as the investment sub-adviser to the MML
Equity Fund, the MML Small Cap Value Equity Fund and the Equity Sector of the
MML Blend Fund. Babson is a wholly-owned subsidiary of DLB Acquisition
Corporation, a controlled subsidiary of MassMutual.
MassMutual has also entered into an agreement with Mellon Equity Associates
("Mellon Equity") to serve as the investment sub-adviser to the MML Equity Index
Fund. MassMutual, Babson and Mellon Equity are registered as investment advisers
under the Investment Advisers Act of 1940.
MassMutual is also the investment adviser to MassMutual Corporate Investors and
MassMutual Participation Investors, closed-end investment companies, certain
wholly-owned subsidiaries of MassMutual, and various employee benefit plans.
MassMutual also serves as the investment adviser to MassMutual Corporate Value
Partners, Limited; MassMutual High Yield Partners, II, LLC; MassMutual/Darby CBO
LLC; Somers CDO, Limited; and MassMutual Institutional Funds.
Citibank N.A. acts as custodian for the MML Trust, other than the MML Equity
Index Fund. Its home office is located at 111 Wall Street, New York, NY, 10005.
Boston Safe Deposit and Trust Company serves as the custodian of the MML Equity
Index Fund. It is an indirect subsidiary of Mellon Bank Corporation and is
located at One Boston Place, Boston, Massachusetts 02108.
10
MML Small Cap Value Equity Fund
The investment objective of MML Small Cap Value Equity Fund is to achieve
long-term growth of capital and income by investing primarily in a diversified
portfolio of equity securities of smaller companies. The Fund invests primarily
in common stocks, securities convertible into common stocks and other equity
securities (such as warrants and stock rights) which are issued by companies
with a market capitalization, at the time of purchase, of $750 million or less
and which are listed on a national securities exchange or traded in the
over-the-counter market.
MML Equity Fund
The primary investment objective of 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. The assets of this Fund are
normally expected to be invested primarily in common stocks and other
equity-type securities.
MML Equity Index Fund
The investment objective of the MML Equity Index Fund is to provide investment
results that correspond to the price and yield performance of the publicly
traded common stocks in the aggregate, as represented by the Standard & Poor's
500 Composite Stock Price Index. ("Standard & Poor's 500" and "S&P 500(R)" are
trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use.
The Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's or
The McGraw-Hill Companies, Inc.)
MML Blend Fund
The investment objective of 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. This Fund invests
in a portfolio that may include 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.
MML Managed Bond Fund
The investment objective of 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. The assets of this Fund will be invested primarily in
investment grade, publicly traded, fixed income securities of such maturities as
MassMutual deems appropriate from time to time in light of market conditions and
prospects.
Oppenheimer Variable Account Funds
The Oppenheimer Variable Account Funds (the "Oppenheimer Funds") is an open-end,
diversified, management investment company. Oppenheimer Funds acts as the
investment vehicle for separate accounts for variable insurance policies offered
by insurance companies. Oppenheimer Global Securities Fund, Oppenheimer Small
Cap Growth Fund, Oppenheimer Aggressive Growth Fund, Oppenheimer Growth Fund,
Oppenheimer Growth & Income Fund, Oppenheimer Multiple Strategies Fund,
Oppenheimer High Income Fund, Oppenheimer Strategic Bond Fund, Oppenheimer Bond
Fund and Oppenheimer Money Fund are part of the Oppenheimer Funds.
OppenheimerFunds, Inc. ("OFI") supervises the investment operations of the
Oppenheimer Funds. OFI also determines the composition of each respective
portfolio and advises and recommends investment policies and the purchase and
sale of securities, pursuant to an investment advisory agreement with each
Oppenheimer Fund.
OFI is located at Two World Trade Center, New York, NY 10048-0203 and has
operated as an investment adviser since April 30, 1959. Oppenheimer Acquisition
Corp., a holding company owned in part by senior management of OFI, and
ultimately controlled by MassMutual, owns OFI. OFI is registered as an
investment adviser under the Investment Advisers Act of 1940.
Bank of New York acts as custodian for the Oppenheimer Funds. Its home office is
located at One Wall Street, New York, NY 10015.
Oppenheimer Global Securities Fund
The investment objective of Oppenheimer Global Securities Fund is to seek
long-term capital appreciation through investing a substantial portion of its
invested assets in securities of foreign issuers, growth-type companies,
cyclical companies and special investment opportunities (anticipated
acquisitions, mergers or other unusual developments) which are considered by
OFI, in its capacity as investment manager of the Funds, to have appreciation
possibilities but which may be considered to be speculative. The type of
securities in which this Fund invests will be primarily common stocks, as well
as securities having the investment characteristics of common stocks, such as
convertible preferred stock,
11
convertible bonds and American Depository Receipts. Current income is not an
investment objective of Oppenheimer Global Securities Fund.
Oppenheimer Small Cap Growth Fund
The investment objective of Oppenheimer Small Cap Growth Fund is 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.
Oppenheimer Aggressive Growth Fund
The investment objective of Oppenheimer Aggressive Growth Fund is capital
appreciation. In seeking this objective the Fund will emphasize investments in
securities of "growth-type" companies. Such companies are believed to have
relatively favorable long-term prospects for an increased demand for the
particular company's products or services.
Oppenheimer Growth Fund
The investment objective of Oppenheimer Growth Fund is to seek to achieve
capital appreciation by investing in securities of well-known established
companies (companies which have a history of earnings and dividends). Current
income is a secondary consideration in the selection of the Growth Fund's
portfolio securities.
Oppenheimer Growth & Income Fund
The investment objective of Oppenheimer Growth & Income Fund is to seek 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 Multiple Strategies Fund
The investment objective of Oppenheimer Multiple Strategies Fund is to seek 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 High Income Fund
The investment objective of Oppenheimer High Income Fund is to earn a high level
of current income by investing primarily in a diversified portfolio of high
yield, fixed-income securities, including long-term debt obligations and
preferred stock issues believed by OFI, in its capacity as investment manager of
the Fund, not to involve undue risk. This Fund's investment policy is to assume
certain risks (described more fully in the attached prospectus for the
Oppenheimer Funds) in seeking high yield, which is ordinarily associated with
high risk securities, commonly known as "junk bonds," in the lower rating
categories of the established securities ratings services, and unrated
securities.
Oppenheimer Strategic Bond Fund
The investment objective of Oppenheimer Strategic Bond Fund is to seek a high
level of current income principally derived from interest income from
investments in U.S. government securities, lower rated high yield fixed-income
securities, and foreign fixed-income securities and to seek to enhance such
income by writing covered call options on debt securities.
Oppenheimer Bond Fund
The investment objective of Oppenheimer Bond Fund is to seek 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 Money Fund
The investment objective of the Oppenheimer Money Fund is to maximize current
income from investments in "money market" securities consistent with low capital
risk and maintenance of liquidity.
Panorama Series Fund, Inc.
The Panorama Series Fund, Inc., ("Panorama Fund") is an open-end, diversified,
management investment company. The Panorama Fund acts as the investment vehicle
for separate accounts for variable insurance policies offered by insurance
companies. The Panorama International Equity Portfolio, Panorama Growth
Portfolio and Panorama Total Return Portfolio are series of the Panorama Fund.
OFI supervises the investment operations of the Panorama Fund. OFI also
determines the composition of each Panorama Portfolio, and advises and
recommends investment policies and purchase and sale of securities, under an
investment advisory agreement with each Panorama Portfolio.
Babson-Stewart Ivory International, located in Cambridge, MA, is the sub-adviser
to the Panorama International Equity Portfolio. Babson-Stewart Ivory
International is a partnership formed in 1987 between Babson and Stewart Ivory &
Company, Ltd.
Bank of New York acts as custodian for the Panorama
12
Fund. Its home office is located at One Wall Street, New York, NY 10015.
Panorama International Equity Portfolio
The investment objective of the Panorama International Equity Portfolio is to
achieve long-term growth of capital by investing primarily in equity securities
(such as common stocks) of issuers trading for the most part in non-U.S.
markets.
Panorama Growth Portfolio
The investment objective of Panorama Growth Portfolio is to achieve long-term
growth of capital by investing primarily in common stocks with low
price-earnings ratios and better than anticipated earnings. Realization of
current income is a secondary consideration.
Panorama Total Return Portfolio
The investment objective of Panorama Total Return Portfolio is to maximize total
investment return (including both capital appreciation and income) principally
by allocating its assets among stocks, corporate bonds, U.S. Government
securities and money market instruments according to changing market conditions.
Goldman Sachs Variable Insurance Trust
The Goldman Sachs Variable Insurance Trust ("Goldman Sachs VIT Trust") is an
open-end, management investment company, organized in Delaware in September,
1997. The Goldman Sachs International Equity Fund, Goldman Sachs Capital Growth
Fund, Goldman Sachs Mid Cap Equity Fund, Goldman Sachs CORE U.S. Equity Fund and
Goldman Sachs Growth and Income Fund are each a separate series of shares of the
Goldman Sachs VIT Trust.
Goldman Sachs Asset Management ("GSAM") is a separate operating division of
Goldman Sachs & Co. It serves as investment adviser to the Goldman Sachs Growth
and Income, Goldman Sachs CORE U.S. Equity, Goldman Sachs Capital Growth and
Goldman Sachs Mid Cap Equity Funds. GSAM is located at One New York Plaza, New
York, NY 10004.
Goldman Sachs Asset Management International ("GSAMI") is an affiliate of
Goldman Sachs & Co. GSAMI serves as investment adviser to the Goldman Sachs
International Equity Fund. GSAMI is located at 133 Peterborough Court, London,
England, EC4A 2BB.
The custodian for each fund of the Goldman Sachs VIT Trust is State Street Bank
and Trust Company. It is located at 1776 Heritage Drive, North Quincy, MA 02110.
Goldman Sachs International Equity Fund
Goldman Sachs International Equity Fund seeks long-term capital appreciation
through investments in equity securities of companies that are organized outside
of the United States or whose securities are principally traded outside of the
United States.
Goldman Sachs Capital Growth Fund
Goldman Sachs Capital Growth Fund seeks long-term growth of capital through
diversified investments in equity securities of companies that are considered to
have long-term capital appreciation potential.
Goldman Sachs Mid Cap Equity Fund
Goldman Sachs Mid Cap Equity Fund seeks long-term capital appreciation primarily
through investments in equity securities of companies with public stock market
capitalizations within the range of market capitalization of companies
constituting the Russell Midcap Index at the time of investment, currently
between $400 million and $16 billion.
Goldman Sachs CORE U.S. Equity Fund
Goldman Sachs CORE U.S. Equity Fund seeks long-term growth of capital and
dividend income through a broadly diversified portfolio of large cap and blue
chip equity securities representing all major sectors of the U.S. economy.
Goldman Sachs Growth and Income Fund
Goldman Sachs Growth and Income Fund seeks long-term growth of capital and
growth of income through investments in equity securities that are considered to
have favorable prospects for capital appreciation and/or dividend paying
ability.
MFS(R) Variable Insurance Trust(SM)
The MFS(R) Variable Insurance Trust(SM)("MFS Trust") is an open-end management
investment company, organized as a Massachusetts business trust in 1994. The
MFS(R) New Discovery Series, MFS(R) Emerging Growth Series and MFS(R) Research
Series (collectively referred to as "MFS Series") are each a separate series of
shares of the MFS Trust.
Massachusetts Financial Services Company ("MFS Co.") advises the MFS Series. MFS
Co. is a Delaware corporation and is located at 500 Bolyston Street, Boston, MA
02116.
State Street Bank and Trust Company is the custodian of the MFS Series. It is
located at 225 Franklin Street, Boston, MA 02110.
13
MFS(R) New Discovery Series
The investment objective of the MFS(R) New Discovery Series is to seek capital
appreciation. This objective is met by investing, under normal market
conditions, at least 65% of its total assets in companies that are believed to
offer superior prospects for growth. Such securities may either be listed on the
securities exchanges or traded in the over-the-counter markets and may be U.S.
or foreign companies.
MFS(R) Emerging Growth Series
The investment objective of the MFS(R) Emerging Growth Series is to provide
long-term growth of capital through investing primarily in common stocks of
companies which are early in their life cycle, but which have the potential to
become major enterprises (emerging growth companies).
MFS(R) Research Series
The investment objective for the MFS(R) Research Series is to provide long-term
growth of capital and future income. In seeking this objective, the Fund invests
a substantial portion of its assets in equity securities of companies believed
to possess better than average prospects for long-term growth. A smaller
proportion of the Fund's assets may be invested in bonds, short-term
obligations, preferred stocks or common stocks whose principal characteristic is
income production rather than growth.
T. Rowe Price Equity Series, Inc.
T. Rowe Price Equity Series, Inc. is a diversified, open-end investment company
incorporated in Maryland in 1994. The T. Rowe Price Mid-Cap Growth Portfolio and
T. Rowe Price New America Growth Portfolio are each a separate series of shares
of T. Rowe Price Equity Series, Inc.
T. Rowe Price Associates, Inc. ("T. Rowe Price") was founded in 1937 and is the
investment adviser to each of the Portfolios. Its business address is 100 East
Pratt Street, Baltimore, MD 21202.
State Street Bank and Trust Company and The Chase Manhattan Bank, N.A., London
are the custodians for the T. Rowe Price Mid-Cap Growth Portfolio and T. Rowe
Price New America Growth Portfolio. The custodians' main offices are located at
225 Franklin Street, Boston, MA 02110 and Woolgate House, Coleman Street,
London, EC2P 2HD, England, respectively.
T. Rowe Price Mid-Cap Growth Portfolio
The investment objective of T. Rowe Price Mid-Cap Growth Portfolio is to provide
long-term capital appreciation by investing primarily in common stocks of medium
sized (mid-cap) growth companies. The Portfolio focuses on companies with
superior earnings growth potential that are no longer considered new or emerging
but may still be in the dynamic phase of their life cycles.
T. Rowe Price New America Growth Portfolio
The investment objective of T. Rowe Price New America Growth Portfolio is to
provide long-term capital growth. This objective is met by investing in the
stocks of service companies, regardless of size, which are expected to show
superior earnings growth and are above-average performers in their fields. The
Portfolio may also invest up to 25% of total assets in nonservice-related growth
companies.
T. Rowe Price Fixed Income Series, Inc.
T. Rowe Price Fixed Income Series, Inc. is a diversified, open-end investment
company and incorporated in Maryland in 1994. The T. Rowe Price Limited-Term
Bond Portfolio is one of the series of shares of T. Rowe Price Fixed Income
Series, Inc. T. Rowe Price advises the T. Rowe Price Limited-Term Bond
Portfolio. State Street Bank and Trust Company and The Chase Manhattan Bank,
N.A., London are the custodians for the T. Rowe Price Limited-Term Bond
Portfolio.
T. Rowe Price Limited-Term Bond Portfolio
The investment objective of T. Rowe Price Limited-Term Bond Portfolio is a high
level of income consistent with moderate fluctuation in principal value. The
Portfolio invests primarily in investment-grade, corporate bonds with average
effective maturity ranging between one and five years. Up to 10% of the
Portfolio's assets can be invested in below investment grade securities,
commonly referred to a "junk bonds," including those with the lowest ratings, in
an effort to enhance yield.
Fidelity Investments Variable Insurance Products Fund II
Fidelity Investments Variable Insurance Products Fund II ("Fidelity VIP Fund
II") is an open-end management investment company, organized as a Massachusetts
business trust in 1988. The Fidelity VIP Fund II Contrafund Portfolio is a
diversified fund of Fidelity VIP Fund II.
Fidelity Management & Research Company ("FMR") is the investment adviser to the
Fidelity VIP Fund II Contrafund Portfolio. FMR is the management arm of Fidelity
Investments. Fidelity Investment has its
14
principal business address at 82 Devonshire Street, Boston, MA.
Fidelity Management & Research (U.K.) Inc. in London, England, and Fidelity
Management & Research (Far East) Inc., in Tokyo, Japan, assist FMR with foreign
investments. They each serve as sub-advisers for the Fidelity VIP Fund II
Contrafund Portfolio. The custodian for the VIP Fund II Contrafund Portfolio is
Brown Brothers Harriman & Co., located at 40 Water Street, Boston, MA.
Fidelity VIP Fund II Contrafund Portfolio
Fidelity VIP Fund II Contrafund Portfolio seeks long-term capital appreciation
by investing in the securities of companies whose value is not fully recognized
by the public.
Fund Monitoring.
The MML Trust, Oppenheimer Funds, Panorama Fund, Goldman Sachs VIT Trust, MFS
Trust, T. Rowe Price Equity Series, Inc., T. Rowe Price Fixed Income Series,
Inc. and Fidelity VIP Fund II were established to provide investment vehicles
for variable life insurance contracts and variable annuities contracts. Shares
of the MML Trust and Panorama Fund are not offered to the general public. They
are offered solely to MassMutual separate investment accounts and other life
insurance company separate accounts of MassMutual subsidiaries. Shares of the
Oppenheimer Funds, Goldman Sachs VIT Trust, MFS Trust, T. Rowe Price Equity
Series, Inc., T. Rowe Price Fixed Income Series, Inc. and Fidelity VIP Fund II
are also not offered to the general public. They are offered to insurance
company separate accounts affiliated and unaffiliated with MassMutual which fund
variable annuity, variable life insurance contracts and qualified plans.
Shares of the Funds may be sold to and held by separate accounts which fund
variable annuity and variable life insurance contracts. As a result, certain
conflicts of interests between variable annuity owners, variable life insurance
policyowners and program investors may occur. Each Board of Trustees/Directors
will monitor their respective Fund(s) for any material irreconcilable conflict
of interest. Each will determine the appropriate action, if any, which should be
taken if a material irreconcilable conflict arises between the holders of
variable annuity contracts and variable life policies.
The Guaranteed Principal Account (GPA).
In addition to the Separate Account, You may allocate net premium or transfer
account value to the GPA. Amounts You allocate or transfer to the GPA become
part of MassMutual's general account assets. You do not share in the investment
experience of those assets. Rather, We guarantee a 3% rate of return on Your
allocated amount. For amounts transferred to the GPA due to a policy loan, the
guaranteed rate is the greater of: (a) 3%; and (b) the policy loan rate less 3%.
We are not obligated to credit interest at a rate higher than this minimum. We
may, however, declare in advance a higher rate applicable for such periods.
Because of exemptive and exclusionary provisions, MassMutual has not registered
interests in Our general account under the Securities Act of 1933. We also have
not registered the general account as an investment company under the Investment
Company Act of 1940, as amended. Therefore, neither the general account nor any
interests therein are subject to these Acts, and the Securities and Exchange
Commission has not reviewed the general account disclosures. These disclosures
may, however, be subject to certain provisions of the federal securities laws
relating to the accuracy and completeness of statements made in prospectuses.
Premiums.
There are four premium concepts under the policy:
1. Minimum Case Premium.
2. Minimum Net First Policy Premium.
3. Planned Annual Premium.
4. Annual Cutoff Policy Premium.
1. Minimum Case Premium.
The minimum premium that we require for a case is $250,000 of first year
annualized premium.
2. Minimum Net First Policy Premium.
You must pay the minimum net first policy premium and submit the application and
all other required forms in good order to Our Home Office before We will issue
Your policy. The minimum net first policy premium is twelve times an amount
equal to the first account value charges.
3. Planned Annual Premium.
You may elect in the application to pay an annual premium for Your policy. We
call this premium Your planned annual premium. Your election of a planned annual
premium forms the basis for the premium bills We send You. You may change the
amount of Your planned annual premium at any time.
The amount of your planned annual premium will
15
depend on:
. The selected face amount of the policy;
. The insured's age;
. The insured's gender;
. The insured's tobacco use classification; and
. The amount of the first premium paid.
There is no penalty if You do not pay the planned annual premium. Your payment
of this amount does not guarantee coverage for any period of time. Even if You
pay planned annual premiums, the policy terminates if the account value becomes
insufficient to pay account value charges and the grace period expires without
sufficient payment, unless Your policy meets the safety test.
4. Annual Cutoff Policy Premium.
The annual cutoff premium for Your policy establishes a threshold for Your
policy's sales loads. If You pay premiums that are below the annual cutoff
policy premium, a higher sales load will result than if You pay premiums that
exceed the annual cutoff policy premium.
We set the annual cutoff policy premium on the date We issue Your policy. The
amount of the annual cutoff policy premium depends on:
. The initial selected face amount of the policy;
. The insured's age;
. The insured's gender; and
. The insured's tobacco use classification
The following table shows the annual cutoff policy premium at certain ages for a
policy with a selected face amount of $100,000 in all years, under death benefit
option 1.
ANNUAL CUTOFF POLICY PREMIUM
LEVEL $100,000 SELECTED FACE AMOUNT
(DEATH BENEFIT OPTION 1)
Issue Age
---------------------------
Class Age Age Age
----- --- --- ---
25 40 55
-- -- --
Male Tobacco $3,247 $5,315 $8,496
Female Tobacco $2,666 $4,395 $6,955
Unisex Tobacco $3,132 $5,131 $8,175
Male Non-Tobacco $2,639 $4,363 $7,183
Female Non-Tobacco $2,342 $3,883 $6,325
Unisex Non-Tobacco $2,580 $4,267 $7,009
Male UniTobacco $2,867 $4,705 $7,593
Female UniTobacco $2,431 $4,016 $6,450
Unisex UniTobacco $2,780 $4,567 $7,359
Minimum and Maximum Premium Payments.
While Your policy is in force, You may pay premiums at any time before the death
of the insured subject to certain restrictions. The minimum premium payment is
$100.00. If You choose the Guideline Premium Test, the maximum premium will be
stated on the Schedule Page of Your policy.
Regardless of whether You choose the Guideline Premium Test or the Cash Value
Accumulation Test, We have the right to refund a premium paid in any year if it
will increase the net amount at risk under the policy. Premium payments should
be sent to Our Home Office or to the address indicated for payment on the
premium reminder notice.
Net Premium Allocation.
You choose the percentages of Your net premiums to be allocated to the Separate
Account Divisions and/or the GPA. You may choose any whole-number percentages as
long as the total is 100%. You may allocate net premium payments to a maximum of
eight Separate Account Divisions and the GPA at any time. You may also change
Your allocation of future net premiums at any time without charge. To allocate
net premiums or to transfer account value to a ninth Separate Account Division,
You must transfer 100% of the account value from one or more of Your eight
selected Separate Account Divisions.
During Your free look period, we will apply Your first net premium to the
Oppenheimer Money Division, provided the premium equals or exceeds the minimum
net first policy premium. At the later of the end of the free look period or the
date We receive proper notice that You received Your policy, We will apply Your
account value to the GPA and/or Separate Account Divisions according to Your
instructions and subject to Our current allocation rules.
Termination.
We will not terminate Your policy for failure to pay premiums. Instead, We will
terminate Your policy if on a monthly calculation date:
. the account value less any policy debt is
16
insufficient to cover the total monthly deduction, and
. Your policy does not meet the safety test.
Your policy will then enter a 61-day grace period.
Grace Period.
We allow You 61 days to pay any premium necessary to cover an overdue monthly
deduction. You will receive a notice from Us which states the overdue amount and
premium due. During the 61-day grace period, the policy remains in force. Your
policy will terminate without value if We do not receive the premium due by the
later of 61 days or 31 days after We have mailed the written notice.
Safety Test.
The safety test is a lapse protection feature. If met, this test allows Your
policy to stay in force for a period of time even if there is insufficient
account value to cover the account value charges. You can never elect death
benefit option 2 or 3, and the insured cannot be in a substandard rating class
for the safety test to apply.
Your policy meets the safety test on any given monthly calculation date if:
. the sum of premiums paid; less
. any amounts withdrawn; less
. any rider charges, if applicable;
equals or exceeds the sum of monthly safety test premiums on that monthly
calculation date and all prior monthly calculation dates during the safety test
period.
If Your policy debt exceeds account value, Your policy will fail the safety
test.
The safety test only applies from the start of the policy date through the
safety test's expiration date. The safety test's expiration date is the later of
the policy anniversary nearest the insured's 70th birthday, or the tenth policy
anniversary.
Safety Test Grace Period.
If Your policy does not meet the safety test on any given monthly calculation
date, we will mail You, and any assignee indicated on Our records, a written
notice. This notice states the premium amount You need to pay to prevent
termination of the safety test. The safety test will expire 31 days after we
mail this written notice, unless You send in the required premium payment. Once
the safety test terminates, You cannot reinstate it.
Death Benefit Under the Policy.
The death benefit is the amount We pay to the designated beneficiary(ies) when
the insured dies. Upon receiving proof of death, We pay the beneficiary the
death benefit amount determined as of the date the insured dies. The beneficiary
may direct Us to pay all or part of the benefit in cash or to apply it under one
or more of Our payment options.
Minimum Face Amount.
To qualify as life insurance under federal tax laws currently in effect, the
policy has a minimum face amount. The minimum face amount is determined using
one of two allowable definitions of life insurance: (1) the Cash Value
Accumulation Test or (2) the Guideline Premium Test. You choose which test to
use on the application prior to the issuance of Your policy. Once You choose the
way We determine Your minimum face amount, You cannot change it after Your
policy is issued.
The Cash Value Accumulation Test determines the minimum face amount by
multiplying the account value plus the refund of sales load, if applicable, by
the minimum face amount percentage. The percentages depend upon the insured's
age, gender and tobacco use classification.
Under the Guideline Premium Test, the minimum face amount is also equal to an
applicable percentage of the account value plus the refund of sales load, if
applicable, but the percentage varies only by age of insured.
Death Benefit Options.
In the application, You choose a selected face amount and death benefit option.
We offer three death benefit options:
1. Death Benefit Option 1:
----------------------
the death benefit is the greater of the selected face amount in effect
on the date of death or the minimum face amount in effect on the date
of death.
2. Death Benefit Option 2:
----------------------
the death benefit is the greater of (a) the sum of the selected face
amount in effect on the date of death plus the account value on the
date of death or (b) the minimum face amount in effect on the date of
death.
3. Death Benefit Option 3:
----------------------
the death benefit is the greater of (a) the selected face amount in
effect on the date of death, plus the sum of all premiums paid, less
withdrawals; or (b) the selected face amount in
17
effect on the date of death; or (c) the minimum face amount in effect on
the date of death.
If the insured dies while the policy is in force, we will pay the death benefit
based on the option in effect on the date of death, with the following
adjustments:
. We add the part of any account value charges that apply for the period
beyond the date of death; and
. We deduct any policy debt outstanding on the date of death; and
. We deduct any account value charges unpaid as of the date of death.
If the insured dies after the first policy year, We will also include a pro-rata
share of any dividend allocated to the policy for the year death occurs.
Under death benefit options 1 and 3, the death benefit amount is unaffected by
Your policy's investment experience unless the death benefit is based on the
minimum face amount. Under death benefit option 2, the death benefit amount may
increase or decrease by investment experience.
We pay interest on the death benefit from the date of death to the date the
death benefit is paid or a payment option becomes effective. The interest rate
equals the rate determined under the interest payment option.
Example: The following example shows how the death benefit may vary as a result
of investment performance and death benefit option in effect on the date of
death.
Policy A Policy B
-------- --------
(a) Selected face amount: $100,000 $100,000
(b) Account value on
date of death, plus refund
of sales load, if applicable $40,000 $50,000
(c) Sum of premiums less
withdrawals $30,000 $40,000
(d) Minimum face amount
percentage on date of death: 240% 240%
(e) Minimum face amount
(b x d): $96,000 $120,000
Death benefit if
death benefit option 1
is in effect
[greater of (a) or (e)]: $100,000 $120,000
Death benefit if
death benefit option 2
is in effect [greater of
(a + b) or (e)]: $140,000 $150,000
Death benefit if
death benefit option 3
is in effect [greater of
(a + c) or (a) or (e)]: $130,000 $140,000
The examples assume no additions to or deductions from the selected face amount
or minimum face amount are applicable.
Changes In Selected Face Amount.
You may increase the selected face amount by written request six months after
policy issue or six months after a previous increase. We may request adequate
evidence of insurability for an increase. We will not allow an increase in the
selected face amount after the policy anniversary date nearest the insured's
85th birthday. Additionally, any increase in the selected face amount will be
effective on the monthly calculation date which is on, or next follows, the
later of:
. 15 days after We have received and approved Your written request for
such change; or
. the requested effective date of the change.
Any increase must be for at least $10,000.
You may also decrease Your policy's selected face amount. We allow a decrease in
the selected face amount only once per policy year. The selected face amount
after a decrease must be at least $50,000. Any requested decrease in the
selected face amount will be effective on the monthly calculation date which is
on, or next follows the later of:
. 15 days after We receive and approve Your written request for such
change; or
. the requested effective date of the change.
Account Value.
The account value of Your policy is the value in the Separate Account Divisions
plus the value in the GPA. Initially, this value equals the net amount of the
first premium You paid under the policy. We apply this amount to the Oppenheimer
Money Division until the later of: (1) the expiration of the free look period or
(2) the date We receive proper notice that You have received Your policy. The
account value is then allocated among the Separate Account Divisions and/or the
GPA according to Your instructions, subject to applicable restrictions.
The purchase and sale of accumulation units will
18
affect Your account value in the Separate Account Divisions. We purchase and
sell units at the unit value as of the valuation time on the valuation date if
We receive Your transaction request before the valuation time. Otherwise, We
will purchase and sell units to complete Your request at the unit value as of
the valuation time on the next following valuation date, or a later date if You
request. We determine unit values on each valuation date.
Investment Return.
The investment return of a policy is based on:
. The account value held in each Separate Account Division for that policy;
. The investment experience of each Separate Account Division as measured
by its actual net rate of return; and
. The interest rate credited on account value held in the GPA.
The investment experience of a Separate Account Division reflects:
. increases or decreases in the net asset value of the shares of the
underlying Fund;
. any dividend or capital gains distributions declared by the Fund; and
. any charges against the assets of the Separate Account Division.
We determine the investment experience each day on each valuation date. The
actual net rate of return for a Separate Account Division measures the
investment experience from the end of one valuation date to the end of the next
valuation date.
Cash Surrender Value.
You may surrender Your policy for its cash surrender value at any time while
the insured is living. The cash surrender value is:
. Account value; less
. Any outstanding policy debt; plus
. The refund of sales load, if applicable.
There is no surrender charge.
If You surrender Your policy within the first two policy years, We will refund a
portion of the sales load, as part of the cash surrender value. If you surrender
Your policy in the first policy year, We will reimburse 65% of the sales load
collected for that year. If You surrender Your policy in the second policy year,
We will reimburse 30% of the sales load collected in the first policy year.
Your surrender is effective on the date We receive the policy and a fully
completed written request at Our Home Office, unless You select a later
effective date. If, however, We receive Your surrender request on a date that is
not a valuation date or after a valuation time, then Your surrender will be
effective on the next valuation date.
Transfers.
You may transfer all or part of the account value among the policy's Separate
Account Divisions and the GPA by written request. In Your transfer request, You
must indicate the dollar amount or the whole-number percentage You wish to
transfer. There is no limit on the number of transfers You may make from the
Separate Account Divisions.
You may maintain account value in a maximum of eight Separate Account Divisions
and the GPA at any one time. If You want to transfer net premium or transfer
account value to a ninth Division, You must transfer 100% of the account value
from one or more of the eight active Separate Account Divisions.
You may transfer all account value in the Separate Account to the GPA at any
time without incurring a fee. The transfer will take effect when We receive Your
signed, written request.
We will consider all transfers made on one valuation date to be one transfer.
We currently do not charge a fee for transfers. We, however, reserve the right
to charge a fee for transfers if there are more than six transfers in a policy
year. This fee will not exceed $10 per transfer.
You may only transfer account value from the GPA to the Separate Account once
per policy year. This transfer must occur within the 31-day period following
your policy anniversary date. This transfer may not exceed 25% of Your account
value in the GPA at the time of Your transfer. For purposes of this transfer
restriction, Your account value in the GPA does not include policy debt.
However, You may transfer 100% of Your account value in the GPA to the Separate
Account if:
. You have transferred 25% of Your account value in the GPA in each
of the previous three policy years, and
. You have not allocated premium payments or made transfers to the GPA
19
during any of the previous three policy years, except as a result of a
policy loan.
You cannot transfer GPA account value equal to any policy debt.
Automated Account Value Transfer.
Automated account value transfer allows You to make monthly transfers of account
value in a Separate Account Division to any combination of Separate Account
Divisions and the GPA. You must specify the amount You wish to transfer as a
dollar amount or a whole-number percentage. Automated account value transfers
are not available from more than one Separate Account Division or from the GPA.
We consider this process as one transfer per policy year.
You can elect, change or cancel automated account value transfer on any
valuation date, provided We receive a fully completed written request. We will
only make transfers on the monthly calculation date. The effective date of the
first automated transfer will be the first monthly calculation date after We
receive Your request at Our Home Office. If We receive Your request before the
end of the free look period, Your first automated transfer will occur at the end
of this period.
Transfers will occur automatically. However, You must specify:
. the Separate Account Division We are to transfer from; and
. the Separate Account Division(s) and/or GPA We are to transfer to; and
. the length of time during which transfers will continue.
If Your transfer amount is greater than Your account value in the Separate
Account Division We are transferring from, then We will transfer Your remaining
value in that Division in the same proportion as Your previously transferred
amounts. We will not process any more automated transfers thereafter.
Automated Account Re-Balancing.
Automated account re-balancing permits You to maintain a specified whole-number
percentage of Your account value in any combination of the Separate Account
Divisions and the GPA. We must receive a fully completed written request in
order to begin Your automated account re-balancing program. Then, We will make
transfers on a quarterly basis to and from the Separate Account Divisions and
the GPA to re-adjust Your account value to Your specified percentage.
This program allows You to maintain a specific fund allocation. Quarterly
re-balancing is based on Your policy year. We will re-balance Your account value
only on a monthly calculation date. We consider automated account re-balancing
as one transfer per policy year.
You can elect or cancel automated account re-balancing on any valuation date,
provided We receive a fully completed written request. You may only change
allocation percentages once each policy year. In addition, You may only reduce
Your allocation to the GPA by up to 25% once each policy year.
The effective date of the first automated re-balancing will be the first monthly
calculation date after We receive Your request at the Home Office. If We receive
the request before the end of the free look period, Your first re-balancing will
occur at the end of the free look period. The automated account re-balancing
program is not subject to the restrictions on transfers from the GPA to the
Separate Account.
You may participate in either the automated account value transfer program or
the automated account re-balancing program at one time.
Withdrawals.
After Your policy has been in force for six months, You can withdraw value from
Your policy on any monthly calculation date. You must send written request to
Our Home Office.
. Minimum withdrawal amount: $100 (before deducting the withdrawal charge).
-------------------------
. Maximum withdrawal amount: account value, less policy debt, less an
-------------------------
amount equal to twelve multiplied by the most recent account value
charges for Your policy.
We deduct the withdrawal amount from Your account value as of the valuation time
on the applicable monthly calculation date. You must specify the GPA or the
Separate Account Division(s) from which the withdrawal is to be made. If You do
not specify otherwise, We will withdraw the amount in proportion from Your
values in the Separate Account Divisions and the GPA. The withdrawal amount may
not exceed the non-loaned account value of a Separate Account Division or GPA.
We deduct a charge of 2.0% of the amount You withdraw. This charge will not
exceed $25.00. We will reduce Your account value by the amount of the
20
withdrawal. If necessary, We will reduce Your policy's selected face amount to
prevent an increase in the amount at risk, unless You provide Us with
satisfactory evidence of insurability. Withdrawals may have tax consequences.
Policy Loan Privilege.
You can take a loan on Your policy at any time while the insured is living. The
maximum loan is:
. Your account value at the time of the loan; less
. any outstanding policy debt before the new loan; less
. interest on the loan being made and on any outstanding policy debt to
the next policy anniversary date; less
. an amount equal to the most recent account value charge for the policy
multiplied by the number of monthly calculation dates remaining, up to
and including, the next policy anniversary date.
You must properly assign Your policy to Us as collateral for the loan.
Source of Loan.
We deduct Your requested loan amount from the Separate Account Divisions and the
GPA in proportion to the non-loaned account value of each on the date of the
loan request. We liquidate shares taken from the Separate Account Divisions and
transfer the resulting dollar amounts to the GPA. These dollar amounts become
part of the loaned portion of the GPA. You may not borrow from the loaned
portion of the GPA.
We may delay any loan from the non-loaned portion of the GPA for up to six
months. We may also delay any loan from the Separate Account if:
. the New York Stock Exchange is closed, except for normal weekend and
holiday closings, or
. trading is restricted, or
. the Securities and Exchange Commission determines that an emergency
exists, or
. the Securities and Exchange Commission permits Us to delay payment.
If Loans Exceed the Policy Account Value.
Policy debt is Your outstanding loan balance, including accrued interest. Policy
debt must not exceed Your account value. If this limit is reached, We may
terminate the policy, even if Your policy meets the safety test. If We terminate
Your policy for this reason, We will notify You, and any assignee shown on our
records, in writing. This notice states the amount necessary to bring the policy
debt back within the limit. If We do not receive a payment within 31 days after
the date We mailed the notice, the policy terminates without value at the end of
those 31 days. Termination of a policy under these circumstances could cause You
to recognize gross income.
Interest.
On the Application, You may select a loan interest rate of 6% per year or, where
permitted, an adjustable loan rate. All policies within a case must have the
same fixed or adjustable loan rate. We set the adjustable loan rate each year
that will apply for the next policy year. The maximum rate is based on the
monthly average of the composite yield on seasoned corporate bonds as published
by Moody's Investors Service. If Moody's is no longer published, We will use a
substantially similar average. The maximum rate is the greater of:
. the published monthly average for the calendar month ending two months
before the policy year begins; or
. 5%.
We will increase the rate if the maximum limit is at least 1/2% higher than the
rate in effect for the previous year. We will decrease the rate if the maximum
limit is at least 1/2% lower than the rate in effect for the previous year.
Interest accrues daily, becoming part of the policy debt. Interest is due on
each policy anniversary. If You do not pay interest when due, We will add the
interest to the loan, and it will bear interest at the same rate. We treat any
interest capitalized on a policy anniversary the same as a new loan. We will
deduct this capitalized interest from the Separate Account Divisions and the GPA
in proportion to the non-loaned account value in each.
Repayment.
You may repay all or part of any policy debt at any time while Your policy is in
force. Upon repayment, We will transfer values equal to the repayment from the
loaned portion of the GPA to the non-loaned portion of the GPA and the
applicable Separate Account Division(s). We will transfer the repayment in
proportion to the non-loaned value in each Separate Account Division and/or the
GPA at the time of
21
repayment. If You do not repay the loan, We deduct the loan amount due from the
surrender value or death benefit.
Interest Credited on Loaned Value.
The amount equal to any outstanding policy loans is held in the GPA. This amount
is credited with interest at a rate which is the greater of 3.0% or Your policy
loan rate, less a MassMutual declared charge guaranteed not to exceed 3.0%. The
current charge varies by policy year as follows:
. Policy years 1 through 15: 0.75%.
. Policy years 16 through 30: 0.55%.
. Policy years 31 and thereafter: 0.45%.
Effect of Loan.
Your policy loan reduces the death benefit and cash surrender value under the
policy by the amount of the loan. Your repayment of the loan increases the death
benefit and cash surrender value by the amount of the repayment.
As long as a loan is outstanding, a portion of Your policy's account value equal
to the loan is held in the GPA. The Separate Account's investment performance
does not affect this amount. Tax consequences may result if You have policy debt
when you surrender Your policy.
Part II - Additional Provisions of the Policy.
Paid-up Policy Date.
The paid-up policy date is the policy anniversary nearest the insured's 100th
birthday. On this date, Your selected face amount automatically changes to equal
the account value multiplied by a factor guaranteed to be no less than 1. As of
this date and thereafter, the death benefit option will be death benefit option
1, the charge for cost of insurance will be $0 and We will no longer accept
premium payments. We will continue to deduct any other account value charges.
The policy does not lapse after the paid-up policy date. Your payment of planned
annual premiums does not guarantee that the policy will continue in force to the
paid-up policy date.
Reinstatement.
For a period of five (5) years after termination, You can request that We
reinstate the policy during the insured's lifetime. We will not reinstate the
policy if it has been surrendered for its cash surrender value. A termination
and/or reinstatement may cause the policy to become a modified endowment
contract.
Before We reinstate the policy, We must receive the following:
. A premium payment that will produce an account value equal to 3 times
the total account value charges for the policy on the monthly
calculation date on or next following the date of reinstatement;
. Evidence of insurability satisfactory to us; and
. Where necessary, a signed acknowledgement that the policy has become a
modified endowment contract.
If We do reinstate the policy, Your policy's selected face amount for the
reinstated policy will be the same as if the policy had not terminated. The
safety test will not apply to policies that We reinstate.
Payment Options.
Upon full surrender or the insured's death, We will pay the entire cash
surrender value or all or part of the death benefit in cash or as a series of
level payments under a payment option. Your payments will no longer be affected
by the investment experience of the Separate Account Divisions or the GPA.
To receive payments under any of the following options, the proceeds must be at
least $2,000. If the payments under any option are less than $20 each, We
reserve the right to make payments at less frequent intervals. Your payment
option choices are:
A. Fixed Amount Payment Option. We make a monthly payment for an agreed fixed
---------------------------
amount. The amount of each payment may not be less than $10 for each
$1,000 applied. We credit interest of at least 3% per year each month on
the unpaid balance and add the interest to this balance. Payments continue
until the amount We hold runs out.
B. Fixed Time Payment Option. We make equal monthly payments for any period
-------------------------
selected, up to 30 years. The amount of each payment depends on:
. the total amount applied;
. the period selected;
. and the monthly payment rates We are using when the first payment is
due.
C. Lifetime Payment Option. We make equal monthly payments on the life of a
-----------------------
named person. Three variations are available:
22
. Payments for life only;
. Payments guaranteed for five, ten or twenty years or the death
of the named person, whichever is later; or
. Payments guaranteed for the amount applied or the death of the
named person, whichever is later.
D. Interest Payment Option. We hold amounts applied under this option. We
-----------------------
will pay interest monthly of at least 3% per year on the unpaid balance.
E. Joint Lifetime Payment Option. We make equal monthly payments based on the
-----------------------------
lives of two named persons. While both named persons are living, we make
one payment per month. When one of the named persons dies, the same
payment continues for the lifetime of the other named person. We offer two
variations:
. Payments guaranteed for 10 years or when both named persons die,
whichever is later; and
. Payments for two lives only. We do not guarantee a specific
number of payments. We stop payments when both named persons die.
F. Joint Lifetime Payment Option with Reduced Payments. We make monthly
---------------------------------------------------
payments based on the lives of two named persons. While both named persons
are living, we make one payment each month. When one dies, we reduce
payments by one-third and continue for the lifetime of the other named
person. We stop payments when both named persons die.
Withdrawal Rights under Payment Options.
If provided in the payment option election, You may withdraw all or part of the
unpaid balance or apply it under any other option.
Beneficiary.
A beneficiary is any person You name on Our records to receive insurance
proceeds after the insured dies. You name the beneficiary in the policy
application. 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.
You may name any beneficiary as an irrevocable beneficiary. We need the consent
of an irrevocable beneficiary if You wish to change that beneficiary. We also
need the consent of any irrevocable beneficiary if You wish to exercise any
policy right except the right to:
. Exercise dividend rights.
. Reinstate the policy after termination.
If no beneficiary is living when the insured dies, we will pay the death benefit
to the policyowner unless instructed otherwise. If the policyowner is deceased,
then We will pay the death benefit to the policyowner's estate.
Changing the Policyowner or Beneficiary.
You may change the policyowner or any beneficiary during the insured's lifetime
by writing to Our Home Office. The change takes effect as of the date of the
request, even if the insured dies before We receive it. Different rules apply if
You named an irrevocable beneficiary.
Right to Substitute Insured.
You may transfer the policy to the life of a substitute insured subject to
certain restrictions. You must request this transfer in writing. The
substitution of an insured may affect the policy's selected face amount and
account value. Future charges against the policy will be based on the life of
the substitute insured.
The costs to transfer are:
. an administrative fee of $75, plus
. any premium necessary to effect the transfer, plus
. any excess policy debt You have not repaid prior to transfer.
Excess policy debt is the amount by which policy debt exceeds the maximum loan
available after transfer. You must pay any such excess on or before the transfer
date.
The incontestability and suicide exclusion periods, as they apply to the
substitute insured, run from the transfer date. Any assignments will continue to
apply.
The Internal Revenue Service has ruled that a substitution of insureds is an
exchange of contracts which does not qualify for the tax deferral available
under Code Section 1035. Therefore, You must include in current gross income all
the previously unrecognized gain in the policy upon a substitution of insureds.
23
Assignment.
You may assign Your policy as collateral for a loan or other obligation, subject
to any outstanding policy debt. For any assignment to be binding on us, We must
receive a signed assignment in proper form at Our Home Office. We are not
responsible for the validity of any assignment.
Dividends.
Each year We determine the money available to pay dividends. We then determine
if We will pay any dividend under the policy. We will pay any dividend on Your
policy anniversary. If the insured dies after the first policy year, We will
include as part of the death benefit a pro rata share of any allocated dividend
for the year death occurs. We do not expect to pay any dividends under the
policies.
Limits on Our Right to Challenge the Policy.
We reserve the right to contest the validity of a policy within two years from
its issue date, reinstatement or an increase in the selected face amount. After
that two-year period, We cannot contest its validity, except for failure to pay
premiums.
Misstatement of Age or Gender.
We will make an adjustment if the insured's date of birth or gender in the
application is not correct. If the adjustment is made when the insured dies, We
will adjust the death benefit by the most recent cost of insurance charge
according to the correct age and gender. If We make the adjustment before the
insured dies, We will base future monthly deductions on the correct age and
gender.
Suicide Exclusion.
If the insured commits suicide whether sane or insane within two years from the
issue date, We will pay a limited death benefit in one sum to the beneficiary.
The limited death benefit is the amount of premiums paid for the policy, less
any policy debt or amounts withdrawn.
If the insured commits suicide whether sane or insane within two years from an
increase in the selected face amount and while the policy is in force, We will
pay a limited benefit to the beneficiary. The limited death benefit is the cost
of insurance charges associated with the selected face amount increase.
If the insured commits suicide whether sane or insane within two years after the
policy is reinstated and while the policy is in force, We will pay a limited
death benefit to the beneficiary. The limited death benefit is the amount of
premium You paid to reinstate the policy and any premiums You paid thereafter,
less any policy debt or amounts You withdrew.
When We Pay Proceeds.
If the policy has not terminated, We will normally pay the cash surrender value,
loan proceeds or the death benefit within 7 days after We receive all required
documents in proper form at Our Home Office. We can delay payment of the cash
surrender value, any withdrawal from the Separate Account, Separate Account loan
proceeds or the death benefit during any period that:
. It is not reasonably practicable for Us to determine the amount because
the New York Stock Exchange is closed, except for normal weekend or
holiday closings, or trading is restricted; or
. The Securities and Exchange Commission determines that an emergency
exists; or
. The Securities and Exchange Commission permits Us to delay payment for
the protection of our policyowners.
We may delay payment of any cash surrender value or loan proceeds from the GPA
for up to 6 months from the date the We receive the request at Our Home Office.
We can delay payment of the entire death benefit if payment is contested. We
investigate all death claims arising within the two-year contestable period.
When the investigation is complete, We generally determine within five days
whether the claim should be paid and make payments promptly. If We delay payment
for 10 working days or more from the effective date of surrender or withdrawal,
We will add interest at the same rate as is paid under the interest payment
option at that time.
Free Look Provision.
You may cancel Your policy within 10 days after You receive it. You must mail or
deliver the policy either:
. to Our Home Office; or
. to the agent who sold You the policy; or
. to one of Our agency offices.
If You cancel the policy, We will pay a refund to You. The refund equals:
(a) any premium paid for the policy; plus
(b) interest credited to the policy under the GPA; plus or minus
24
(c) an amount that reflects the investment experience of the Separate
Account Divisions to the date We receive Your returned policy; minus
(d) any amounts You borrowed or withdrew.
During the free look period, We will apply premium payments to the Oppenheimer
Money Division.
Additional Benefits By Rider.
At Your request, the policy can include additional benefits. We approve these
benefits based on Our standards and limits for issuing insurance and classifying
risks. Any additional benefit We provide by rider is subject to the terms of
both the rider and the policy. We deduct the cost of any rider from Your account
value. Subject to state availability, the following riders are available.
Supplemental Monthly Term Insurance Rider.
The Supplemental Monthly Term Insurance Rider ("Term Rider") provides You with
the option to purchase monthly term insurance on the life of the insured. The
Term Rider selected face amount supplements the selected face amount of Your
policy. You can only elect the Term Rider in the policy's application. The
safety test will not apply to the Term Rider.
If You elect the Term Rider, Your policy's selected face amount, plus the Term
Rider's selected face amount must equal at least $50,000. However, Your policy's
selected face amount must be at least $5,000.
If You elect the Term Rider, the policy may have a lower annual cutoff policy
premium. As a result, You may pay a lower overall sales load when compared to a
policy with the same total selected face amount but without the Term Rider.
You may increase the Term Rider selected face amount upon satisfactory written
notice to Us. We will require satisfactory evidence of insurability for Your
requested increase. You may also decrease the Term Rider selected face amount
upon written notice in a form satisfactory to Us.
If You request an increase or decrease or policy withdrawal, You must specify
whether we should apply any resulting increase or decrease to the policy's
selected face amount or the Term Rider selected face amount. If you do not
specify, We will apply any resulting increase or decrease in proportion to the
policy's selected face amount and the Term Rider selected face amount.
The Term Rider will terminate:
1. If We receive satisfactory written notice to cancel from You. Such
cancellation will apply to all monthly calculation dates beginning on
or after the date We receive the cancellation notice; or
2. If Your account value is insufficient to cover Your account value
charges, regardless of whether Your policy meets the safety test; or
3. Thirty days after an unpaid premium when there is insufficient value to
cover the Term Rider's monthly charges; or
4. Upon the later of (a)Your policy anniversary nearest the insured's 70th
birthday, or (b) upon the tenth policy anniversary; or
5. Upon termination of Your policy for any reason.
If termination occurs for the reason stated in No. 4, the policy's selected face
amount automatically increases by the amount of the Term Rider's selected face
amount. If the Term Rider terminates for any reason, it can never be reinstated.
Waiver of Monthly Charges Rider.
This rider allows Us to waive the account value charges of Your policy for at
least two years if:
. the insured becomes totally disabled before the policy anniversary nearest
the insured's 65th birthday; and
. such total disability continues for 6 months.
The Waiver of Monthly Charges Rider will terminate when any of the following
occurs:
. The insured is no longer disabled; or
. You do not give Us the required satisfactory proof of continued
disability; or
. The insured fails or refuses to have a required examination; or
. The day before the policy anniversary after the insured's 65th birthday,
or, if later, the date two years from the date the total disability began.
25
Part III - Other Important Information.
Federal Income Tax Considerations.
The following discussion presents a general description of the federal income
tax consequences of the policy, in accordance with Our understanding of current
federal income tax laws. It is not an exhaustive study of all tax issues that
might arise under the policy. This discussion is not intended as tax advice. We
make no representation as to the likelihood of continuation of current federal
income tax laws and Treasury Regulations or of the current interpretations of
the Internal Revenue Service. We reserve the right to make changes in the policy
to ensure it qualifies as life insurance for tax purposes. We do not address
state or other applicable tax laws in this discussion. We make no guarantee
regarding the future tax treatment of any policy.
For complete consideration of federal and state tax consequences, You should
consult a qualified tax adviser prior to purchasing the policy.
Under current state laws, We may incur state and local taxes (in addition to
premium taxes). At present, these taxes are not significant. If there is a
material change in state or local tax laws, We reserve the right to charge the
Separate Account for such taxes if attributable to the Separate Account.
Policy Proceeds, Premiums and Loans.
We believe the policy meets the statutory definition of life insurance under
Internal Revenue Code ("Code") Section 7702 and thus receives the same tax
treatment as that given to fixed benefit life insurance. As a result, the
policy's death benefit is generally excludable from the gross income of the
beneficiary under Section 101(a)(1) of the Code. An exception to this general
rule is where a policy has been transferred for value. In that case, only the
portion of the death benefit equal to premiums paid for the policy may be
excluded from gross income.
Upon Your full surrender of a policy for its cash surrender value, You may
recognize ordinary income for federal tax purposes. Ordinary income is the
amount by which:
. account value, including
. outstanding policy debt (which may include unpaid interest), exceeds
. premiums paid but not previously recovered.
Decreases in selected face amount and withdrawals may be taxable depending on
the circumstances. Code Section 7702(f)(7) states that if a reduction of future
benefits occurs during the first 15 years after a policy is issued and if there
is a cash distribution associated with that reduction, You may be taxed on all
or part of the amount distributed. After 15 years, such cash distributions are
not subject to federal income tax, except to the extent they exceed the total
amount of premiums paid but not previously recovered. Generally, if a taxable
event does not otherwise exist, a withdrawal is taxable only if it exceeds Your
yet unrecovered premium contributions. We suggest that You consult Your tax
adviser prior to decreasing Your selected face amount or taking a withdrawal.
If You change the policyowner or the insured or exchange or assign Your policy,
tax consequences may occur. We also believe that under current law any policy
loan will be treated as policy debt. Therefore, no part of any loan under a
policy will constitute income to You. Under the "personal" interest limitation
provisions of the Code, interest on policy loans used for personal purposes,
which otherwise meet the requirements of Code Section 264, will no longer be tax
deductible. Other rules may apply to allow all or part of the interest expense
as a deduction if the loan proceeds are used for "trade or business" or
"investment" purposes. We suggest You consult Your tax adviser for further
guidance on the deductibility for tax purposes of the interest on policy loans.
If a business or corporation owns the policy, the Code may impose additional
restrictions. The interest deduction available for loans against a
business-owned policy is limited. For those corporations subject to the
alternative minimum tax, there may be an indirect tax upon the inside build-up
of gain. The corporate alternative minimum tax could also apply to a portion of
the amount by which death benefits received exceed the policy's cash value at
date of death.
Federal, state and local estate, inheritance, and other tax consequences of
ownership or receipt of policy proceeds depend on the circumstances of each
policyowner or beneficiary.
For complete information on the impact of changes to Your policy and federal and
state tax considerations, You should consult a qualified tax adviser.
Modified Endowment Contracts.
If Your policy becomes a modified endowment
26
contract, loans, collateral assignments, and other amounts distributed are
taxable to the extent of any accumulated income in the policy. In general, the
amount subject to tax is the excess of the account value (both loaned and
unloaned) over the previously unrecovered premiums paid. Any death benefits We
pay under a modified endowment contract, however, are not taxed any differently
from death benefits payable under other life insurance contracts.
A policy is a modified endowment contract if it satisfies the definition of life
insurance in the Code, but fails the additional "7-pay test." A policy fails
this test if the accumulated amount paid under the policy at any time during the
first seven policy years exceeds the total premiums that would have been payable
under a policy providing for guaranteed benefits upon the payment of seven level
annual premiums. Regardless, a policy which would otherwise satisfy the 7-pay
test will still be taxed as a modified endowment contract if it is received in
exchange for a modified endowment contract.
Certain changes will require Us to re-test a policy to determine whether it has
become a modified endowment contract. For example, a reduction in death benefits
during the first seven contract years will cause Us to re-test the policy as if
it had originally been issued with the reduced death benefit. If the premiums
actually paid into a policy exceed the limits under the 7-pay test for a policy
with the reduced death benefit, the policy will become a modified endowment
contract. This change is effective retroactively to the contract year in which
the actual premiums paid exceed the new 7-pay limits.
In addition, a "material change" occurring at any time while the policy is in
force will require Us to re-test the policy to determine whether it continues to
meet the 7-pay test. A material change starts a new 7-pay test period. The term
"material change" includes many increases in death benefits.
Since the policy provides for flexible premium payments, We will carefully
monitor the policy to determine whether increases in death benefits or
additional premium payments cause either the start of a new 7-pay test period or
the taxation of distributions and loans. All additional premium payments will be
considered.
If any amount is taxable as a distribution of income under a modified endowment
contract, it will also be subject to a 10% penalty tax. Limited exceptions from
the additional penalty tax are available for individual policyowners. These
exceptions include:
. distributions made on or after the date the taxpayer attains age 59 1/2;
or
. distributions attributable to the taxpayer's becoming disabled; or
. distributions that are part of a series of substantially equal periodic
payments (made not less frequently than annually) made for the life or
life expectancy of the taxpayer.
Once a policy fails the 7-pay test, loans, collateral assignments, and
distributions occurring in the year of failure and thereafter become subject to
the rules for modified endowment contracts. In addition, any distribution or
loan made within two years prior to failing the 7-pay test is considered to have
been made in anticipation of the failure and may result in tax consequences.
For purposes of determining the amount of income received from a modified
endowment contract, the law requires the aggregation of all modified endowment
contracts issued to the same policyowner by an insurer and its affiliates within
the same calendar year. Therefore, loans and distributions from any one such
policy are taxable to the extent of the income accumulated in all the contracts
required to be aggregated.
You should consult a qualified tax adviser for complete information on modified
endowment contract status, especially in the case of a corporate-owned policy.
Diversification Standards.
To comply with final regulations under Code Section 817(h) ("Final
Regulations"), each Fund is required to diversify its investments. All
securities of the same issuer are treated as a single investment. Each
government agency or instrumentality, however, is treated as a separate issuer.
We intend to comply with the Final Regulations to ensure the policy continues to
qualify as life insurance for federal income tax purposes. If future regulations
are issued regarding whether a policyowner may direct investments to a
particular division of a separate account, We reserve the right to modify the
policy as necessary to prevent the policyowner from being considered the owner
of the assets of the Separate Account.
Your Voting Rights.
As long as the Separate Account continues to operate as a unit investment trust
under the Investment
27
Company Act of 1940, as amended, You have voting rights. You are entitled to
instruct Us how to vote the Funds' shares held in the Separate Account that are
attributable to Your policy at shareholder meetings. We determine who has voting
rights as of the record date for the meeting.
We determine the number of Fund shares held in the Separate Account attributable
to Your policy by dividing Your account value in each Division, if any, by $100.
We count fractional votes.
In order to exercise Your voting rights, We will send You proxy material and an
instruction form. If We have not received effective voting instructions, We will
vote Fund shares held by the Separate Account in the same proportion as the
shares for which We received instructions, if required by law. Otherwise, We
reserve the right to vote such shares at Our own discretion.
Our Rights.
We reserve the right to take certain actions in connection with Our operations
and the operations of the Separate Account. We will act in accordance with
applicable laws. If required by law or regulation, We will seek Your approval.
Specifically, We reserve the right to:
. Create new segments of the Separate Account for any new variable life
insurance products We create in the future;
. Create new Separate Accounts;
. Combine any two or more Separate Accounts;
. Make available additional Separate Account Divisions investing in
additional investment companies;
. Eliminate one or more Separate Account Divisions;
. Substitute or merge two or more Separate Account Divisions or Separate
Accounts;
. Invest the assets of the Separate Account in securities other than
shares of the Funds as a substitute for such shares already purchased
or as the securities to be purchased in the future;
. Operate the Separate Account as a management investment company under
the Investment Company Act of 1940, as amended, or in any other form
permitted by law;
. De-register the Separate Account under the Investment Company Act of
1940, as amended, if registration is no longer required; and
. Change the name of the Separate Account.
We reserve all rights to the name MassMutual and Massachusetts Mutual Life
Insurance Company or any part of it. We may allow the Separate Account and other
entities to use Our name or part of it, but We may also withdraw this right.
Records And Reports.
We maintain all Separate Account and GPA records and accounts. Each year within
30 days after Your policy anniversary, We will mail to You a report showing:
. Your account value at the beginning of the previous policy year;
. all premiums paid during the previous policy year;
. all additions to and deductions from Your account value during the
policy year; and
. the account value, death benefit, cash surrender value and policy debt
as of Your last policy anniversary.
We will include any additional information required by any applicable law or
regulation in this report.
Sales And Other Agreements.
MML Distributors, LLC ("MML Distributors") a wholly-owned subsidiary of
MassMutual, is the principal underwriter of the policy. MML Investors Services,
Inc. ("MMLISI"), a wholly-owned subsidiary of MassMutual, serves as the co-
underwriter of the policies. Both MML Distributors and MMLISI are located at
1414 Main Street, Springfield, MA 01144-1013. Each underwriter is registered
with the Securities and Exchange Commission ("SEC") as a broker-dealer under the
Securities Exchange Act of 1934. Each is also a member of the National
Association of Securities Dealers, Inc. ("NASD").
MML Distributors may enter into selling agreements with other registered SEC
broker-dealers who are also members of the NASD. These are selling brokers.
We also sell the policies through state insurance licensed agents. These agents
are also registered representatives of selling brokers or of MMLISI.
When We receive a completed application, the selling
28
broker or co-underwriter performs suitability review. In some cases, We perform
insurance underwriting. If We accept the application, we determine the insured's
risk classification. If We do not accept the application, We will refund any
premium paid.
Both MML Distributors and MMLISI receive compensation for their activities as
underwriters of the policies. We pay commissions through MMLISI and MML
Distributors to agents and selling brokers.
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.
Commissions.
We pay agents or selling brokers commissions as a percentage of premiums paid
under the policies. The commission percentage is based on the annual cutoff
policy premium. The maximum commission percentage We will pay under the policies
is 13% of premiums.
Agents or selling brokers may also receive asset-based compensation. The maximum
asset based compensation is 0.2% of the account value of the Separate Account
Divisions.
Agents may receive commissions at lower rates on policies sold to replace
existing insurance issued by MassMutual or any of its subsidiaries.
Bonding Arrangement.
We maintain an insurance company blanket bond which provides $50,000,000
coverage for MassMutual officers and employees and general agents and agents.
The blanket bond is subject to a $350,000 deductible.
Year 2000.
Like other businesses and governments around the world, MassMutual could be
adversely affected if the computer systems used by the company and those with
which it does business do not properly recognize the year 2000. This is commonly
known as the "Year 2000 issue."
In 1996, MassMutual began an enterprise-wide process of identifying, evaluating
and implementing changes to computer systems and applications software to
address the Year 2000 issue on its own behalf and on behalf of certain
subsidiaries. MassMutual is addressing the Year 2000 issue internally with
modifications to existing programs and conversions to new programs. MassMutual
is also seeking assurances from vendors, customers, service providers,
governments and others with which MassMutual conducts business, to determine
their year 2000 readiness.
The costs are currently being expensed, and when measured against net gain from
operations before dividends, are not material to MassMutual.
Legal Proceedings.
We are currently not involved in any material legal proceedings that adversely
impact the policy.
Experts.
We have included the financial statements of MassMutual in this prospectus in
reliance on the reports of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of that firm as experts in accounting and auditing.
PricewaterhouseCoopers LLP's report on the statutory financial statements of
MassMutual includes explanatory paragraphs relating to the use of statutory
accounting practices rather than generally accepted accounting principles.
John M. Valencia, Assistant Vice President for MassMutual, has examined the
illustrations in Appendix C of this prospectus. We filed his opinion on the
illustrations as an exhibit to the registration statement filed with the SEC.
Financial Statements.
You should consider the financial statements of MassMutual included in Appendix
F of this prospectus only as bearing upon the ability of MassMutual to meet its
obligations under the policy.
29
Appendix A - Glossary
Case:
A group of policies sold to individuals with a common employment or other
non-insurance motivated relationship.
Insured:
Person whose life the policy insures.
Issue Date:
The date the policy is in force. It is also the start date of the suicide
exclusion and contestability periods.
Monthly Calculation Date:
The date the account value charges are due. The first monthly calculation date
is the policy date. Subsequent monthly calculation dates are on the same date of
each calendar month thereafter.
Net Premium:
Premium paid less sales load, premium tax charges and federal deferred
acquisition cost tax charges.
Policy Anniversary:
The anniversary of the policy date.
Policy Date:
The date used as the starting point for determining policy anniversary dates,
policy years and monthly calculation dates.
Policy Year:
The twelve month period beginning with the policy date, and each successive
twelve month period thereafter.
Policyowner:
The corporation, partnership, trust, individual, or other entity who owns the
policy, as shown on Our records.
Valuation Date:
A date on which the price of the Funds is determined. Generally, this will be
any date on which the New York Stock Exchange is open for trading.
Valuation Period:
The period from the end of one valuation date to the end of the next valuation
date.
Valuation Time:
The time the New York Stock Exchange closes on a valuation date (currently 4:00
p.m. New York time). All required actions will be performed as of the valuation
time.
30
Appendix B - Rates of Return
Table 1 shows the Effective Annual Rates of Return of the Funds based on the
actual investment performance of the Funds, after deductions of investment
management fees and other operating expenses. This Table is based on December
31, 1997 figures. The Effective Annual Rates of Return do not reflect the
deduction of mortality and expense risk charges, premium deductions,
administrative charge, cost of insurance charges or face amount charges.
Table 2 shows the Effective Annual Rates of Return of the Separate Account
Divisions. These returns are based on the actual underlying Fund performance and
the deduction of the current mortality and expense risk charge of 0.60%. The
Effective Annual Rates of Return do not reflect premium deductions,
administrative charge, cost of insurance charges or face amount charges. This
table is based on December 31, 1997 figures. It assumes the Separate Account
Divisions have been in operation for the same periods as the underlying Funds in
which they invest. Also, it reflects the total of the income generated by the
Funds, net of investment management fees and other operating expenses, plus
realized or unrealized capital gains and losses.
Table 3 shows the One Year Total Returns of the Funds based on actual investment
performance. It reflects the deduction of investment management fees and other
operating expenses. This table is based on December 31, 1997 annualized figures.
These rates of return do not reflect the deduction of mortality and expense risk
charges, premium deductions, administrative charge, cost of insurance charges or
face amount charges.
Since Tables 1, 2 and 3 do not reflect deductions from premiums or
administrative, cost of insurance, and face amount charges, the rates do not
illustrate how actual investment performance will affect the benefits under the
policy. If these charges were included, the returns would be lower.
The rates of return shown do not indicate future performance. You may consider
these rates of returns when assessing Funds' investment advisers and
sub-advisers competence and performance.
31
TABLE 1
EFFECTIVE ANNUAL RATES OF RETURN/1/
AS OF DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
1 3 5 10 15 20 Since
Fund (Inception Date) Year Years Years Years Years Years Inception
- ------------------------------------------------------------------------------------------------------------------------------------
MML Equity (9/15/71)/2/ 28.59% 26.57% 18.25% 16.44% 16.19% 16.20% 14.78%
MML Equity Index (5/1/97)/3/ -- -- -- -- -- -- 21.93%
MML Blend (2/3/84) 20.89% 19.29% 13.81% 13.68% -- -- 13.67%
MML Managed Bond (12/16/81) 9.91% 10.58% 7.79% 9.08% 9.73% -- 10.37%
Oppenheimer Global Securities
(11/12/90) 22.42% 13.82% 18.81% -- -- -- 12.26%
Oppenheimer Aggressive Growth
(8/15/86) 11.67% 21.17% 15.92% 16.23% -- -- 15.31%
Oppenheimer Growth (4/3/85) 26.68% 29.42% 18.61% 16.67% -- -- 15.43%
Oppenheimer Growth & Income (7/5/95) 32.48% -- -- -- -- -- 37.24%
Oppenheimer Multiple Strategies
(2/9/87) 17.22% 18.00% 13.31% 12.74% -- -- 12.04%
Oppenheimer High Income (4/30/86) 12.21% 15.90% 13.75% 14.32% -- -- 13.35%
Oppenheimer Strategic Bond (5/3/93) 8.71% 12.00% -- -- -- -- 7.64%
Oppenheimer Bond (4/3/85) 9.25% 10.23% 8.23% 9.50% -- -- 9.89%
Oppenheimer Money (4/3/85)/4/ 5.31% 5.35% 4.70% 5.79% -- -- 5.94%
Panorama International Equity
(5/13/92) 8.11% 10.53% 10.78% -- -- -- 8.66%
Panorama Growth (1/21/82) 26.37% 27.52% 20.12% 18.66% 17.31% -- 18.31%
Panorama Total Return (9/30/82) 18.81% 17.72% 13.21% 13.80% 13.72% -- 14.05%
MFS(R) Emerging Growth (7/24/95) 21.90% -- -- -- -- -- 23.53%
MFS(R) Research (7/26/95) 20.26% -- -- -- -- -- 22.13%
T. Rowe Price New America Growth
(3/31/94) 21.12% 30.01% -- -- -- -- 23.66%
T. Rowe Price E.S. Mid-Cap Growth
(12/31/96) 18.80% -- -- -- -- -- 18.80%
T. Rowe Price Limited-Term Bond
(5/13/94) 6.74% 6.59% -- -- -- -- 6.16%
Fidelity VIP Fund II Contrafund
(1/3/95) 24.14% -- -- -- -- -- 28.16%
1. The Average Annual Rate of Return (Total Return) is calculated by
determining, over a stated period of time, the average annual compounded
rate of return that an investment in the Fund earned over that period,
assuming reinvestment of all distributions.
2. Although the MML Equity Fund commenced operations in 1971, the information
necessary to calculate Average Annual Rates of Return is available only
for the year 1974 and subsequent periods.
3. This is the return for the period May 1, 1997 to December 31, 1997.
4. An investment in money market funds is neither insured nor guaranteed by
the U.S. Government, and such a fund's net asset value is not guaranteed
to remain stable at $1.00 per share. Although the Oppenheimer Money Fund
commenced operations on April 3, 1985, the information necessary to
calculate the performance information is available only for the year 1987
and subsequent periods.
Performance of MML Small Cap Value Equity Fund, Oppenheimer Small Cap Growth
Fund, Goldman Sachs International Equity Fund, Goldman Sachs Capital Growth
Fund, Goldman Sachs Mid Cap Equity Fund, Goldman Sachs CORE U.S. Equity Fund and
Goldman Sachs Growth and Income Fund, each a series of the Goldman Sachs VIT
Trust, and the MFS(R) New Discovery Series is unavailable since these Funds had
not commenced operations as of December 31, 1997.
32
TABLE 2
EFFECTIVE ANNUAL RATES OF RETURN/1/ OF EACH DIVISION OF THE SEPARATE ACCOUNT
AS OF DECEMBER 31, 1997
- -------------------------------------------------------------------------------------------------------------------------------
1 5 10 Since
Division (Inception Date) Year Years Years Inception
- -------------------------------------------------------------------------------------------------------------------------------
MML Equity (9/15/71)/4/ 27.99% 17.65% 15.84% 14.18%
MML Equity Index (5/1/97)/2/ ---- ---- ---- 21.33%
MML Blend (2/3/84) 20.29% 13.21% 13.08% 13.07%
MML Managed Bond (12/16/81) 9.31% 7.19% 8.48% 9.77%
Oppenheimer Global Securities (11/12/90) 21.82% 18.21% ---- 11.66%
Oppenheimer Aggressive Growth (8/15/86) 11.07% 15.32% 15.63% 14.71%
Oppenheimer Growth (4/3/85) 26.08% 18.01% 16.07% 14.83%
Oppenheimer Growth & Income (7/5/95) 31.88% ---- ---- 36.64%
Oppenheimer Multiple Strategies (2/9/87) 16.62% 12.71% 12.14% 11.44%
Oppenheimer High Income (4/30/86) 11.61% 13.15% 13.72% 12.75%
Oppenheimer Strategic Bond (5/3/93) 8.11% ---- ---- 7.04%
Oppenheimer Bond (4/3/85) 8.65% 7.63% 8.90% 9.29%
Oppenheimer Money (4/3/85)/3/ 4.71% 4.10% 5.19% 5.34%
Panorama International Equity (5/13/92) 7.51% 10.18% -- 8.06%
Panorama Growth (1/21/82) 25.77% 19.52% 18.06% 17.71%
Panorama Total Return (9/30/82) 18.21% 12.61% 13.20% 13.45%
MFS(R) Emerging Growth (7/24/95) 21.30% ---- ---- 22.93%
MFS(R) Research (7/26/95) 19.66% ---- ---- 21.53%
T. Rowe Price New America Growth (3/31/94) 20.52% ---- ---- 23.06%
T. Rowe Price Mid-Cap Growth (12/31/96) 18.20% ---- ---- 18.20%
T. Rowe Price Limited-Term Bond (5/13/94) 6.14% ---- ---- 5.56%
Fidelity VIP Fund II Contrafund (1/3/95) 23.54% ---- ---- 27.56%
1. Performance information assumes current mortality and expense risk charges
of .60%. If guaranteed mortality and expense risk charges were used, the
performance results would be lower.
2. This is the return for the period May 1, 1997 to December 31, 1997.
3. Although the Oppenheimer Money Fund commenced operations on April 3, 1985,
the information necessary to calculate the Oppenheimer Money Division
performance information is available only for the year 1987 and subsequent
periods.
4. Although the MML Equity Fund commenced operations in 1971, the information
necessary to calculate Average Annual Rates of Return is available only for
the year 1974 and subsequent periods.
Performance of MML Small Cap Value Equity Division, Oppenheimer Small Cap Growth
Division, Goldman Sachs International Equity Division, Goldman Sachs Capital
Growth Division, Goldman Sachs Mid Cap Equity Division, Goldman Sachs CORE U.S.
Equity Division and Goldman Sachs Growth and Income Division, each a series of
the Goldman Sachs VIT Trust, and the MFS(R) New Discovery Division is
unavailable since these Divisions had not commenced operations as of December
31, 1997.
33
TABLE 3
ONE YEAR TOTAL RETURNS/1/
- -------------------------------------------------------------------------------------------------------------------------
For the year ended 1997 1996 1995 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------------
MML Equity (9/15/71)/2/ 28.59% 20.25% 31.13% 4.10% 9.52% 10.48% 25.56% (0.51)%
MML Equity Index (5/1/97)/3/ 21.93% -- -- -- -- -- -- --
MML Blend (2/3/84) 20.89% 13.95% 23.28% 2.48% 9.70% 9.36% 24.00% 2.37%
MML Mgd. Bond (12/16/81) 9.91% 3.25% 19.14% (3.76)% 11.81% 7.31% 16.66% 8.38%
Opp. Global Securities(11/12/90) 22.42% 17.80% 2.24% (5.72)% 70.32% (7.11)% 3.39% 0.40%
Opp. Aggressive Growth (8/15/86) 11.67% 20.16% 32.52% (7.59)% 27.32% 15.42% 54.72% (16.82)%
Opp. Growth (4/3/85) 26.68% 25.20% 36.65% 0.97% 7.25% 14.53% 25.54% (8.21)%
Opp. Growth & Income (7/5/95) 32.48% 32.51% 23.52% -- -- -- -- --
Opp. Multi. Strategies (2/9/87) 17.22% 15.50% 21.36% (1.95)% 15.95% 8.99% 17.48% (1.91)%
Opp. High Income (4/30/86) 12.21% 15.26% 20.37% (3.18)% 26.34% 17.92% 33.91% 4.65%
Opp. Strategic Bond (5/3/93) 8.71% 12.07% 15.33% (3.78)% 4.25% -- -- --
Opp. Bond (4/3/85) 9.25% 4.80% 17.00% (1.94)% 13.04% 6.50% 17.63% 7.92%
Opp. Money (4/3/85) 5.31% 5.13% 5.62% (4.20)% 3.12% 3.76% 5.97% 7.80%
Panorama International Equity (5/13/92) 8.11% 13.26% 10.30% 1.44% 21.80% (4.32)% -- --
Panorama Growth (1/21/82) 26.37% 18.87% 38.06% (0.51)% 21.22% 12.36% 37.53% (7.90)%
Panorama Total Return (9/30/82) 18.81% 10.14% 24.66% (1.97)% 16.28% 10.21% 28.79% 0.50%
MFS(R) Emerging Growth (7/24/95) 21.90% 17.02% -- -- -- -- -- --
MFS(R) Research (7/26/95) 20.26% 22.33% -- -- -- -- -- --
T. Rowe Price New America Growth
(3/31/94) 21.12% 20.09% 51.10% 1.00% -- -- -- --
T. Rowe Price Mid-Cap Growth (12/31/96) 18.80% -- -- -- -- -- -- --
T. Rowe Price Limited-Term Bond (5/13/94) 6.74% 3.26% 9.88% 2.62% -- -- -- --
Fidelity VIP Fund II Contrafund (1/3/95) 24.14% 21.22% 39.72% -- -- -- -- --
1. The figures shown are one year total returns from inception of the Funds.
These figures do not reflect the mortality and expense risk charges
assessed against the Separate Account, deductions from premiums or
administrative, cost of insurance and underwriting charges assessed against
the account value of the Policies. If these charges were included, the
total return figures would be lower. They may be considered in assessing
the competence and performance of each of the Funds' investment advisers.
2. The figures for the MML Equity Fund from 1974 through 1981 are as follows:
1974: (17.61)%; 1975: 32.85%; 1976: 24.77%; 1977: (0.52)%; 1978: 3.71%;
1979: 19.54% 1980: 27.62%; 1981: 6.67%.
3. This is the return for the period May 1, 1997 to December 31, 1997.
Performance of MML Small Cap Value Equity Fund, Oppenheimer Small Cap Growth
Fund, Goldman Sachs International Equity Fund, Goldman Sachs Capital Growth
Fund, Goldman Sachs Mid Cap Equity Fund, Goldman Sachs CORE U.S. Equity Fund and
Goldman Sachs Growth and Income Fund, each a series of the Goldman Sachs VIT
Trust, and the MFS(R) New Discovery Series is unavailable since these Funds had
not commenced operations as of December 31, 1997.
34
TABLE 3 (Continued)
ONE YEAR TOTAL RETURNS/1/ (Continued)
- ----------------------------------------------------------------------------------------------------------------------------------
For the year ended 1989 1988 1987 1986 1985 1984 1983 1982
- ----------------------------------------------------------------------------------------------------------------------------------
MML Equity (9/15/71)/2/ 23.04% 16.68% 2.10% 20.15% 30.54% 5.40% 22.85% 25.67%
MML Equity Index (5/1/97)/3/ -- -- -- -- -- -- -- --
MML Blend (2/3/84) 19.96% 13.40% 3.12% 18.30% 24.88% 8.24% -- --
MML Mgd. Bond (12/16/81) 12.83% 7.13% 2.60% 14.46% 19.94% 11.69% 7.26% 22.79%
Opp. Global Securities(11/12/90) -- -- -- -- -- -- -- --
Opp. Aggressive Growth (8/15/86) 27.57% 13.41% 14.34% (1.65)% -- -- -- --
Opp. Growth (4/3/85) 23.59% 22.09% 3.32% 17.76% 9.50% -- -- --
Opp. Growth & Income (7/5/95) -- -- -- -- -- -- -- --
Opp. Multi. Strategies (2/9/87) 15.76% 22.15% 3.97% -- -- -- -- --
Opp. High Income (4/30/86) 4.84% 15.58% 8.07% 4.73% -- -- -- --
Opp. Strategic Bond (5/3/93) -- -- -- -- -- -- -- --
Opp. Bond (4/3/85) 13.32% 8.97% 2.52% 10.12% 18.82% -- -- --
Opp. Money (4/3/85) 8.82% 7.31% 6.33% 5.68% 7.25% -- -- --
Panorama International Equity (5/13/92) -- -- -- -- -- -- -- --
Panorama Growth (1/21/82) 35.81% 14.46% 0.25% 11.58% 27.31% 4.89% 32.72% 33.00%
Panorama Total Return (9/30/82) 22.98% 11.64% 4.26% 12.58% 25.43% 6.68% 20.20% 8.10%
MFS(R) Emerging Growth (7/24/95) -- -- -- -- -- -- -- --
MFS(R) Research (7/26/95) -- -- -- -- -- -- -- --
T. Rowe Price New America Growth
(3/31/94) -- -- -- -- -- -- -- --
T. Rowe Price Mid-Cap Growth (12/31/96) -- -- -- -- -- -- -- --
T. Rowe Price Limited-Term Bond (5/13/94) -- -- -- -- -- -- -- --
Fidelity VIP Fund II Contrafund (1/3/95) -- -- -- -- -- -- -- --
1. The figures shown are one year total returns from inception of the Funds.
These figures do not reflect the mortality and expense risk charges
assessed against the Separate Account, deductions from premiums or
administrative, cost of insurance and underwriting charges assessed against
the account value of the Policies. If these charges were included, the
total return figures would be lower. They may be considered in assessing
the competence and performance of each of the Funds' investment advisers.
2. The figures for the MML Equity Fund from 1974 through 1981 are as follows:
1974: (17.61)%; 1975: 32.85%; 1976: 24.77%; 1977: (0.52)%; 1978: 3.71%;
1979: 19.54% 1980: 27.62%; 1981: 6.67%.
3. This is the return for the period May 1, 1997 to December 31, 1997.
Performance of MML Small Cap Value Equity Fund, Oppenheimer Small Cap Growth
Fund, Goldman Sachs International Equity Fund, Goldman Sachs Capital Growth
Fund, Goldman Sachs Mid Cap Equity Fund, Goldman Sachs CORE U.S. Equity Fund and
Goldman Sachs Growth and Income Fund, each a series of the Goldman Sachs VIT
Trust, and the MFS(R) New Discovery Series is unavailable since these Funds had
not commenced operations as of December 31, 1997.
35
Appendix C
Illustrations of Death Benefits (Option 1, 2 & 3), Cash Surrender Values and
Accumulated Premiums
The following tables illustrate the way in which a policy operates. They show
how the death benefit under options 1, 2 & 3 and the cash surrender value could
vary over an extended period of time, assuming the Funds experience hypothetical
gross rates of investment return (i.e. investment income and capital gains and
losses, realized or unrealized) equivalent to constant gross annual rates of 0%,
6% and 12%. The tables are based on a hypothetical policy issued under the
following conditions: the insured is age 45, unisex, unismoke, $60,000 of
Selected Face Amount for the base policy in all years plus $40,000 of Term Face
Amount in all years, seven annual premiums of $5,350, and $250,000 of initial
case premium paid. We show tables for the current policy charges for policies
issued on a guaranteed issue basis and we show separate tables for guaranteed
policy charges. These tables will assist in the comparison of death benefits and
cash surrender values for the policy with those of other variable life policies
which may be issued by Us or other companies.
1. The illustration on page C-3 is for a policy using death benefit option 1 and
the current schedule of charges for policies issued on a guaranteed issue basis.
2. The illustration on page C-4 is for a policy using death benefit option 1 and
the guaranteed schedule of charges.
3. The illustration on page C-5 is for a policy using death benefit option 2 and
the current schedule of charges for policies issued on a guaranteed issue basis.
4. The illustration on page C-6 is for a policy using death benefit option 2 and
the guaranteed schedule of charges.
5. The illustration on page C-7 is for a policy using death benefit option 3 and
the current schedule of charges for policies issued on a guaranteed issue basis.
6. The illustration on page C-8 is for a policy using death benefit option 3 and
the guaranteed schedule of charges.
The death benefits and cash surrender values for a policy would be different
from the amount shown if the rates of return averaged 0%, 6% and 12% over a
period of years but varied above and below that average in individual policy
years. They would also differ if any policy loan were made during the period of
time illustrated. They would also be different depending upon the allocation of
investment value to each division, if the rates of return for all the Funds
averaged 0%, 6% or 12% but varied above or below that average for particular
Funds.
The death benefits and cash surrender values shown in illustrations 1, 3, and 5
reflect the following current charges:
1. Administrative charge, equal to a monthly $5.25 per Policy.
2. Cost of insurance charges, based on the current charges for policies issued
on a guaranteed issue basis by Us.
3. Mortality and expense risk charge for policy years 1-15, which is equal to
0.60% on an annual basis, of the net asset value of the Fund shares held by the
Separate Account. Mortality and expense risk charge for policy year 16-30, which
is equal to 0.40% on an annual basis, of the net asset value of the Fund shares
held by the Separate Account. Mortality and expense risk charge for policy years
31 +, which is equal to 0.30% on an annual basis, of the net asset value of the
Fund shares held by the Separate Account.
4. Fund level expenses of 0.77% on an annual basis, of the net asset value of
the MML Trust, Oppenheimer Funds, Panorama Fund, Goldman Sachs VIT Trust, MFS
Trust, T. Rowe Price Equity Series, Inc., T. Rowe Price Fixed Income Series,
Inc., and Fidelity VIP Fund II shares held by the Separate Account.
The death benefits and cash surrender values shown in illustrations 2, 4, and 6
reflect these guaranteed maximum charges:
1. Administrative charge, equal to a monthly $9.00 per Policy.
2. Cost of insurance charges based on 100% of the 1980 CSO mortality table.
3. Mortality and expense risk charge equal to 1.00% on an annual basis, of the
net asset value of the Fund shares held by the Separate Account.
C-1
4. Fund level expenses of 0.77% on an annual basis, of the net asset value of
the MML Trust, Oppenheimer Funds, Panorama Fund, Goldman Sachs VIT Trust, MFS
Trust, T. Rowe Price Equity Series, Inc., T. Rowe Price Fixed Income Series,
Inc., and Fidelity VIP Fund II shares held by the Separate Account. (this
unweighted average reflects current Fund level expenses).
Cash surrender values shown in the tables reflect the deduction of the
applicable sales loads, premium taxes, and DAC taxes for the policy illustrated.
Currently, We do not assess a charge against the Separate Account for federal
income taxes but We reserve the right to charge the Separate Account for federal
income taxes attributable to the Separate Account if such taxes are imposed in
the future.
The tables are based on the assumption that the Owner has requested a level
selected face amount, that not policy loans, or additional premium payments have
been made, and no transaction charges have been incurred, and that the entire
account value under the policy is allocated to the Separate Account.
The second column of each table shows the amounts which would accumulate if an
amount equal to the annual premium were invested to earn interest after taxes,
of 5% per year, compounded annually.
C-2
FLEXIBLE PREMIUM VARIABLE ADJUSTABLE LIFE INSURANCE POLICY
WITH TABLE OF SELECTED FACE AMOUNTS
Unisex, Issue Age 45, Uni Tobacco
$60,000 Selected Face Amount All Years
$40,000 Term Face Amount
$3,225 Cutoff Premium
Seven Annual Premium Payments of $5,350 and $250,000 Initial Case Premium Paid
Using Current Schedule of Charges for Guaranteed Issue
Death Benefit (Option 1) Cash Surrender Value
--------------------------------------------- ---------------------------------------------
Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Annual Investment Return of Annual Investment Return of
Policy Premiums --------------------------------------------- ---------------------------------------------
Year Per Year 0% 6% 12% 0% 6% 12%
- ---------------- -------------- ------------- ------------- ------------- ------------- ------------- -------------
1 $ 5,350 $100,000 $100,000 $100,000 $ 4,852 $ 5,134 $ 5,416
2 5,350 100,000 100,000 100,000 9,147 9,994 10,875
3 5,350 100,000 100,000 100,000 13,406 15,108 16,948
4 5,350 100,000 100,000 100,000 17,716 20,573 23,785
5 5,350 100,000 100,000 100,000 21,975 26,299 31,356
6 5,350 100,000 100,000 103,321 26,185 32,300 39,739
7 5,350 100,000 100,000 123,893 30,345 38,588 48,970
8 0 100,000 100,000 131,809 29,661 40,096 53,799
9 0 100,000 100,000 140,693 28,976 41,670 59,115
10 0 100,000 100,487 150,713 28,289 43,314 64,963
15 0 100,000 106,127 210,218 24,644 52,538 104,068
20 0 100,000 114,059 298,435 20,414 64,078 167,660
25 0 100,000 123,593 427,142 14,613 77,732 268,643
30 (Age 65) 0 100,000 134,952 615,912 5,905 93,716 427,717
35 0 148,336 893,780 112,376 677,106
40 0 163,539 1,300,546 132,958 1,057,354
45 0 181,545 1,905,031 155,167 1,628,232
50 0 199,037 2,755,293 179,312 2,482,246
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND CASH
SURRENDER VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE
RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE
OR BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY WOULD ALSO BE DIFFERENT,
DEPENDING ON THE ALLOCATION OF INVESTMENT VALUE TO EACH DIVISION OF THE SEPARATE
ACCOUNT, IF THE RATES OF RETURN OVER ALL DIVISIONS AVERAGED 0%, 6% OR 12% BUT
VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL DIVISIONS. THEY WOULD ALSO
DIFFER IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN BE
MADE BY MASSMUTUAL OR THE TRUSTS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
FLEXIBLE PREMIUM VARIABLE ADJUSTABLE LIFE INSURANCE POLICY
WITH TABLE OF SELECTED FACE AMOUNTS
Unisex, Issue Age 45, Uni Tobacco
$60,000 Selected Face Amount All Years
$40,000 Term Face Amount
$3,225 Cutoff Premium
Seven Annual Premium Payments of $5,350 and $250,000 Initial Case Premium Paid
Using Guaranteed Schedule of Charges (fund level charges are reflected on a
current basis)
Death Benefit (Option 1) Cash Surrender Value
--------------------------------------------- ---------------------------------------------
Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Annual Investment Return of Annual Investment Return of
Policy Premiums --------------------------------------------- ---------------------------------------------
Year Per Year 0% 6% 12% 0% 6% 12%
- ---------------- -------------- ------------- ------------- ------------- ------------- ------------- -------------
1 $ 5,350 $100,000 $100,000 $100,000 $ 4,363 $ 4,629 $ 4,896
2 5,350 100,000 100,000 100,000 8,292 9,082 9,904
3 5,350 100,000 100,000 100,000 12,151 13,728 15,435
4 5,350 100,000 100,000 100,000 16,029 18,666 21,636
5 5,350 100,000 100,000 100,000 19,821 23,801 28,463
6 5,350 100,000 100,000 100,000 23,530 29,145 35,990
7 5,350 100,000 100,000 111,910 27,155 34,710 44,233
8 0 100,000 100,000 117,364 25,890 35,415 47,904
9 0 100,000 100,000 123,427 24,570 36,099 51,860
10 0 100,000 100,000 130,187 23,187 36,755 56,115
15 0 100,000 100,000 167,144 15,039 39,457 82,744
20 0 100,000 100,000 214,638 3,540 40,391 120,583
25 0 0 100,000 274,647 0 37,079 172,734
30 (Age 65) 0 0 100,000 349,486 0 23,798 242,698
35 0 0 437,878 0 331,726
40 0 0 543,344 0 441,743
45 0 0 664,896 0 568,287
50 0 0 791,670 0 713,216
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND CASH
SURRENDER VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE
RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE
OR BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY WOULD ALSO BE DIFFERENT,
DEPENDING ON THE ALLOCATION OF INVESTMENT VALUE TO EACH DIVISION OF THE SEPARATE
ACCOUNT, IF THE RATES OF RETURN OVER ALL DIVISIONS AVERAGED 0%, 6% OR 12% BUT
VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL DIVISIONS. THEY WOULD ALSO
DIFFER IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN BE
MADE BY MASSMUTUAL OR THE TRUSTS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
FLEXIBLE PREMIUM VARIABLE ADJUSTABLE LIFE INSURANCE POLICY
WITH TABLE OF SELECTED FACE AMOUNTS
Unisex, Issue Age 45, Uni Tobacco
$60,000 Selected Face Amount All Years
$40,000 Term Face Amount
$3,225 Cutoff Premium
Seven Annual Premium Payments of $5,350 and $250,000 Initial Case Premium Paid
Using Current Schedule of Charges for Guaranteed Issue
Death Benefit (Option 2) Cash Surrender Value
--------------------------------------------- ---------------------------------------------
Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Annual Investment Return of Annual Investment Return of
Policy Premiums --------------------------------------------- ---------------------------------------------
Year Per Year 0% 6% 12% 0% 6% 12%
- ---------------- -------------- ------------- ------------- ------------- ------------- ------------- -------------
1 $ 5,350 $104,624 $104,905 $105,187 $ 4,847 $ 5,129 $ 5,411
2 5,350 109,015 109,859 110,737 9,118 9,962 10,841
3 5,350 113,341 115,033 116,864 13,341 15,033 16,864
4 5,350 117,602 120,438 123,626 17,602 20,438 23,626
5 5,350 121,801 126,083 131,091 21,801 26,083 31,091
6 5,350 125,937 131,981 139,332 25,937 31,981 39,332
7 5,350 130,011 138,141 148,432 30,011 38,141 48,432
8 0 129,242 139,507 153,123 29,242 39,507 53,123
9 0 128,472 140,924 158,293 28,472 40,924 58,293
10 0 127,699 142,392 163,991 27,699 42,392 63,991
15 0 123,566 150,331 206,592 23,566 50,331 102,273
20 0 118,665 159,436 293,275 18,665 59,436 164,761
25 0 112,044 168,635 419,745 12,044 68,635 263,991
30 (Age 65) 0 102,614 176,592 605,237 2,614 76,592 420,303
35 0 180,128 878,280 80,128 665,363
40 0 172,452 1,277,982 72,452 1,039,010
45 0 143,494 1,871,972 43,494 1,599,976
50 0 2,707,471 2,439,163
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND CASH
SURRENDER VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE
RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE
OR BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY WOULD ALSO BE DIFFERENT,
DEPENDING ON THE ALLOCATION OF INVESTMENT VALUE TO EACH DIVISION OF THE SEPARATE
ACCOUNT, IF THE RATES OF RETURN OVER ALL DIVISIONS AVERAGED 0%, 6% OR 12% BUT
VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL DIVISIONS. THEY WOULD ALSO
DIFFER IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN BE
MADE BY MASSMUTUAL OR THE TRUSTS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
FLEXIBLE PREMIUM VARIABLE ADJUSTABLE LIFE INSURANCE POLICY
WITH TABLE OF SELECTED FACE AMOUNTS
Unisex, Issue Age 45, Uni Tobacco
$60,000 Selected Face Amount All Years
$40,000 Term Face Amount
$3,225 Cutoff Premium
Seven Annual Premium Payments of $5,350 and $250,000 Initial Case Premium Paid
Using Guaranteed Schedule of Charges (fund level charges are reflected on a
current basis)
Death Benefit (Option 2) Cash Surrender Value
--------------------------------------------- ---------------------------------------------
Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Annual Investment Return of Annual Investment Return of
Policy Premiums --------------------------------------------- ---------------------------------------------
Year Per Year 0% 6% 12% 0% 6% 12%
- ---------------- -------------- ------------- ------------- ------------- ------------- ------------- -------------
1 $ 5,350 $104,115 $104,380 $104,645 $ 4,339 $ 4,604 $ 4,869
2 5,350 108,115 108,897 109,711 8,218 9,000 9,814
3 5,350 111,999 113,554 115,237 11,999 13,554 15,237
4 5,350 115,767 118,355 121,267 15,767 18,355 21,267
5 5,350 119,416 123,299 127,844 19,416 23,299 27,844
6 5,350 122,941 128,387 135,020 22,941 28,387 35,020
7 5,350 126,338 133,617 142,845 26,338 33,617 42,845
8 0 124,840 133,940 146,045 24,840 33,940 46,045
9 0 123,282 134,188 149,475 23,282 34,188 49,475
10 0 121,655 134,347 153,146 21,655 34,347 53,146
15 0 112,302 133,426 175,817 12,302 33,426 75,817
20 0 100,041 128,060 207,569 41 28,060 107,569
25 0 0 114,345 250,670 0 14,345 150,670
30 (Age 65) 0 0 0 307,309 0 0 207,309
35 0 0 376,162 0 276,162
40 0 0 453,207 0 353,207
45 0 0 520,161 0 420,161
50 0 542,634 442,634
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND CASH
SURRENDER VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE
RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE
OR BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY WOULD ALSO BE DIFFERENT,
DEPENDING ON THE ALLOCATION OF INVESTMENT VALUE TO EACH DIVISION OF THE SEPARATE
ACCOUNT, IF THE RATES OF RETURN OVER ALL DIVISIONS AVERAGED 0%, 6% OR 12% BUT
VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL DIVISIONS. THEY WOULD ALSO
DIFFER IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN BE
MADE BY MASSMUTUAL OR THE TRUSTS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
FLEXIBLE PREMIUM VARIABLE ADJUSTABLE LIFE INSURANCE POLICY
WITH TABLE OF SELECTED FACE AMOUNTS
Unisex, Issue Age 45, Uni Tobacco
$60,000 Selected Face Amount All Years
$40,000 Term Face Amount
$3,225 Cutoff Premium
Seven Annual Premium Payments of $5,350 and $250,000 Initial Case Premium Paid
Using Current Schedule of Charges for Guaranteed Issue
Death Benefit (Option 3) Cash Surrender Value
--------------------------------------------- ---------------------------------------------
Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Annual Investment Return of Annual Investment Return of
Policy Premiums --------------------------------------------- ---------------------------------------------
Year Per Year 0% 6% 12% 0% 6% 12%
- ---------------- -------------- ------------- ------------- ------------- ------------- ------------- -------------
1 $ 5,350 $105,350 $105,350 $105,350 $ 4,846 $ 5,128 $ 5,410
2 5,350 110,700 110,700 110,700 9,113 9,959 10,839
3 5,350 116,050 116,050 116,050 13,330 15,027 16,862
4 5,350 121,400 121,400 121,400 17,582 20,428 23,628
5 5,350 126,750 126,750 126,750 21,768 26,069 31,102
6 5,350 132,100 132,100 132,100 25,887 31,964 39,361
7 5,350 137,450 137,450 137,450 29,941 38,123 48,489
8 0 137,450 137,450 137,450 29,150 39,493 53,228
9 0 137,450 137,450 139,156 28,354 40,917 58,469
10 0 137,450 137,450 149,063 27,552 42,398 64,251
15 0 137,450 137,450 207,908 23,186 50,546 102,925
20 0 137,450 137,450 295,148 17,751 60,382 165,814
25 0 137,450 137,450 422,430 9,940 71,551 265,679
30 (Age 65) 0 137,450 609,111 84,194 422,994
35 0 137,450 883,905 98,831 669,625
40 0 142,892 1,286,171 116,172 1,045,667
45 0 158,575 1,883,970 135,534 1,610,231
50 0 173,805 2,724,827 156,581 2,454,799
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND CASH
SURRENDER VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE
RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE
OR BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY WOULD ALSO BE DIFFERENT,
DEPENDING ON THE ALLOCATION OF INVESTMENT VALUE TO EACH DIVISION OF THE SEPARATE
ACCOUNT, IF THE RATES OF RETURN OVER ALL DIVISIONS AVERAGED 0%, 6% OR 12% BUT
VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL DIVISIONS. THEY WOULD ALSO
DIFFER IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN BE
MADE BY MASSMUTUAL OR THE TRUSTS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
FLEXIBLE PREMIUM VARIABLE ADJUSTABLE LIFE INSURANCE POLICY
WITH TABLE OF SELECTED FACE AMOUNTS
Unisex, Issue Age 45, Uni Tobacco
$60,000 Selected Face Amount All Years
$40,000 Term Face Amount
$3225 Cutoff Premium
Seven Annual Premium Payments of $5350 and $250,000 Initial Case Premium Paid
Using Guaranteed Schedule of Charges (fund level charges are reflected on a
current basis)
Death Benefit (Option 3) Cash Surrender Value
--------------------------------------------- ---------------------------------------------
Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Annual Investment Return of Annual Investment Return of
Policy Premiums --------------------------------------------- ---------------------------------------------
Year Per Year 0% 6% 12% 0% 6% 12%
- ---------------- -------------- ------------- ------------- ------------- ------------- ------------- -------------
1 $ 5,350 $105,350 $105,350 $105,350 $ 4,334 $ 4,600 $ 4,865
2 5,350 110,700 110,700 110,700 8,201 8,986 9,803
3 5,350 116,050 116,050 116,050 11,960 13,523 15,217
4 5,350 121,400 121,400 121,400 15,694 18,302 21,239
5 5,350 126,750 126,750 126,750 19,294 23,216 27,814
6 5,350 132,100 132,100 132,100 22,754 28,269 35,000
7 5,350 137,450 137,450 137,450 26,064 33,458 42,857
8 0 137,450 137,450 137,450 24,458 33,737 46,125
9 0 137,450 137,450 137,450 22,766 33,938 49,673
10 0 137,450 137,450 137,450 20,975 34,046 53,529
15 0 137,450 137,450 158,638 10,140 32,752 78,534
20 0 0 137,450 203,656 0 26,325 114,413
25 0 0 137,450 260,542 0 8,542 163,863
30 (Age 65) 0 0 331,489 0 230,200
35 0 0 415,286 0 314,611
40 0 0 515,271 0 418,920
45 0 0 630,505 0 538,894
50 0 0 750,688 0 676,295
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND CASH
SURRENDER VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE
RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE
OR BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY WOULD ALSO BE DIFFERENT,
DEPENDING ON THE ALLOCATION OF INVESTMENT VALUE TO EACH DIVISION OF THE SEPARATE
ACCOUNT, IF THE RATES OF RETURN OVER ALL DIVISIONS AVERAGED 0%, 6% OR 12% BUT
VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL DIVISIONS. THEY WOULD ALSO
DIFFER IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN BE
MADE BY MASSMUTUAL OR THE TRUSTS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
Appendix D - Directors of Massachusetts Mutual Life
Insurance Company
Principal Occupation(s) During Past Five Years
Roger G. Ackerman, Director
Chairman and Chief Executive Officer, since 1996, President and Chief Operating
Officer, 1990-1996, Corning, Inc., One Riverfront Plaza, HQE 2, Corning, NY
14831.
James R. Birle, Director
Chairman, since 1997, and Founder, since 1994, President, 1994-1997, Resolute
Partners, LLC; General Partner, Blackstone Group, 1988-1994, 2 Soundview Drive,
Greenwich CT 06836.
Gene Chao, Director
Chairman, President and CEO, since 1991, Computer Projections, Inc., 733 SW
Vista Avenue, Portland, OR 97205.
Patricia Diaz Dennis, Director
Senior Vice President and Assistant General Counsel, since 1995, SBC
Communications Inc.; Special Counsel, 1993-1995, Sullivan & Cromwell; Assistant
Secretary of State for Human Rights and Humanitarian Affairs, 1992-1993, U.S.
Department of State, 175 East Houston, Room 4-A-70, San Antonio, TX 78205
Anthony Downs, Director
Senior Fellow, since 1977, The Brookings Institution, 1775 Massachusetts Ave.,
N.W., Washington DC 20036-2188.
James L. Dunlap, Director
Vice Chairman, since 1998, Ocean Energy, Inc.; President and Chief Operating
Officer, 1996-1998, United Meridian Corporation; Senior Vice President,
1987-1996, Texaco, Inc., 1201 Louisiana, Suite 1400, Houston, TX 77002-5603.
William B. Ellis, Director
Senior Fellow, since 1995, Yale University School of Forestry and Environmental
Studies; Chairman of the Board and Chief Executive Officer, 1993-1995, Northeast
Utilities, 31 Pound Foolish Lane, Glastonbury, CT 06033.
Robert M. Furek, Director
Partner, since 1997, Resolute Partners LLC; Chairman, since 1997, State Board of
Trustees for the Hartford School System; President and Chief Executive Officer,
1987-1996, Heublein, Inc., 1 State Street, Suite 2310, Hartford, CT 06103.
Charles K. Gifford, Director
Chairman and Chief Executive Officer, since 1996, and President 1989-1996,
BankBoston, N.A.; Chairman, since 1998, and Chief Executive Officer, since 1995,
BankBoston Corporation, 100 Federal Street, Boston, MA 02110.
William N. Griggs, Director
Managing Director, since 1983, Griggs & Santow, Inc., 75 Wall Street, 20th
Floor, New York, NY 10005.
George B. Harvey, Director
Chairman, President and CEO, 1983-1996, Pitney Bowes, One Landmark Square, Suite
1905, 19th Floor, Stamford, CT 06901.
Barbara B. Hauptfuhrer, Director
Director of various corporations, since 1972, 1700 Old Welsh Road, Huntington
Valley, PA 19006.
Sheldon B. Lubar, Director
Chairman, since 1977, Lubar & Co. Incorporated, 700 North Water Street, Suite
1200, Milwaukee, WI 53202.
William B. Marx, Jr., Director
Senior Executive Vice President, 1996, Lucent Technologies; Executive Vice
President and CEO, 1994-1996, AT&T Multimedia Products Group; Executive Vice
President and CEO, 1993-1994, AT&T Network Systems Group; Group Executive and
President, 1989-1993, AT&T Network Systems Group, 5 Peacock Lane, Village of
Golf, FL 33436-5299.
John F. Maypole, Director
Managing Partner, since 1984, Peach State Real Estate Holding Company, 55 Sandy
Hook Road - North, Sarasota, FL 34242.
Robert J. O'Connell, Director, President and Chief Executive Officer
President and Chief Executive Officer, since 1999, MassMutual; Senior Vice
President, 1991-1998, American International Group, Inc.; President and Chief
Executive Officer, 1991-1998, AIG Life Companies, 1295 State Street,
Springfield, MA 01111.
Thomas B. Wheeler, Director and Chairman of the Board
Chairman of the Board, since 1996, Chairman of the Board and Chief Executive
Officer, 1996-1998, President and Chief Executive Officer, 1988-1996,
MassMutual, 1295 State Street, Springfield, MA 01111.
Alfred M. Zeien, Director
Chairman and Chief Executive Officer, since 1991, The Gillette Company,
Prudential Tower, Boston, MA 02199.
Executive Vice Presidents
Lawrence V. Burkett, Jr.
Executive Vice President and General Counsel, since 1993, Senior Vice President
and Deputy General Counsel, 1992-1993, MassMutual, 1295 State Street,
Springfield, MA 01111.
Peter J. Daboul
Executive Vice President and Chief Information Officer, since 1997, Senior Vice
President 1990-1997, MassMutual, 1295 State Street, Springfield, MA 01111.
John B. Davies
Executive Vice President, since 1994, Associate Executive Vice President, 1994,
General Agent, 1982-1993, MassMutual, 1295 State Street, Springfield, MA 01111.
Daniel J. Fitzgerald
Executive Vice President, since 1994, Corporate Financial Operations, 1994-1997,
Senior Vice President, 1991-1994, MassMutual, 1295 State Street, Springfield, MA
01111.
James E. Miller
Executive Vice President, since 1997 and 1987-1996, MassMutual; Senior Vice
President, 1996-1997, UniCare Life & Health, 1295 State Street, Springfield, MA
01111.
John V. Murphy
Executive Vice President, since 1997, MassMutual; Executive Vice President and
Chief Operating Officer, 1995-1997, David L. Babson & Co., Inc.; Chief Operating
Officer, 1993-1995, Concert Capital Management, Inc., Senior Vice President and
Chief Financial Officer, 1977-1993, Liberty Financial Companies, 1295 State
Street, Springfield, MA 01111.
Gary E. Wendlandt
Executive Vice President and Chief Investment Officer, since 1993, Executive
Vice President, 1992-1993, MassMutual, 1295 State Street, Springfield, MA 01111.
Joseph M. Zubretsky
Executive Vice President and Chief Financial Officer, since 1997, MassMutual;
Chief Financial Officer, 1996, HealthSource; Partner, 1990-1996, Coopers &
Lybrand, 1295 State Street, Springfield, MA 01111.
Appendix E Minimum Face Amount Percentages
- --------------------------------------------------------------------------------------------
Guideline
Cash Value Accumulation Test: Premium
Test:
Male Male Female Female Unisex Unisex
Attained * Non- Male Uni- * Non- Female Uni- * Non- Unisex Uni- All Rate
Age Tobacco Tobacco Tobacco Tobacco Tobacco Tobacco Tobacco Tobacco Tobacco Classes
20 710 576 653 808 711 779 727 598 674 250
21 689 559 634 783 688 754 706 581 654 250
22 669 543 615 758 666 730 685 564 635 250
23 649 528 597 733 645 706 664 547 616 250
24 629 512 580 710 624 684 644 531 598 250
25 610 497 562 687 604 662 624 515 579 250
26 591 482 545 664 584 640 604 499 561 250
27 572 467 528 643 565 619 585 483 544 250
28 554 452 511 622 547 599 566 468 526 250
29 536 438 494 601 529 580 548 453 509 250
30 518 424 479 581 512 561 530 438 493 250
31 501 410 463 562 495 542 512 424 477 250
32 485 397 448 544 479 525 495 411 461 250
33 469 384 433 526 463 507 479 397 446 250
34 453 371 419 508 448 491 463 385 432 250
35 438 360 406 491 434 475 448 372 418 250
36 424 348 392 475 420 459 433 360 404 250
37 410 337 380 459 406 444 419 349 391 250
38 396 326 367 444 393 430 405 338 378 250
39 383 316 356 430 381 416 391 327 366 250
40 370 306 344 416 369 403 379 317 355 250
41 358 296 333 402 357 390 366 307 343 243
42 347 287 323 389 346 378 354 297 333 236
43 335 279 313 377 336 366 343 288 322 229
44 324 270 303 365 326 355 332 280 312 222
45 314 262 294 353 316 344 321 272 303 215
46 304 255 285 342 307 333 311 264 294 209
47 294 247 277 332 298 323 301 256 285 203
48 285 240 268 321 289 313 292 249 276 197
49 276 234 260 311 281 304 283 242 268 191
50 268 227 253 302 273 295 274 235 260 185
51 259 221 245 292 266 286 265 229 253 178
52 251 215 238 284 258 278 257 223 245 171
53 244 209 232 275 251 270 249 217 238 164
54 236 204 225 267 244 262 242 211 232 157
55 229 199 219 259 238 254 235 206 225 150
56 223 194 213 251 231 247 228 200 219 146
57 216 189 207 244 225 240 221 196 213 142
58 210 185 202 237 219 233 215 191 208 138
59 204 180 197 230 214 227 209 186 202 134
60 199 176 192 223 208 221 203 182 197 130
61 193 172 187 217 203 214 198 178 192 128
62 188 168 182 210 197 208 192 174 187 126
63 183 165 178 204 192 203 187 170 183 124
64 179 161 174 199 187 197 182 166 178 122
65 174 158 170 193 183 192 178 163 174 120
66 170 155 166 188 178 187 173 160 170 119
67 166 152 162 183 174 182 169 157 166 118
68 162 149 159 178 170 177 165 154 162 117
69 158 147 155 174 166 173 161 151 159 116
70 155 144 152 169 162 169 158 148 156 115
71 152 142 149 165 159 164 154 146 152 113
72 148 140 146 161 155 160 151 143 149 111
73 145 137 144 157 152 156 148 141 146 109
74 143 135 141 153 149 153 145 139 144 107
75 140 133 139 150 146 149 142 137 141 105
76 138 132 136 147 143 146 140 135 139 105
77 135 130 134 143 140 143 137 133 136 105
78 133 128 132 141 138 140 135 131 134 105
79 131 127 130 138 135 138 133 129 132 105
80 129 126 129 135 133 135 131 128 130 105
81 127 124 127 133 131 133 129 126 128 105
82 126 123 125 130 129 130 127 125 127 105
83 124 122 124 128 127 128 125 123 125 105
84 123 121 122 126 125 126 124 122 123 105
85 121 120 121 124 123 124 122 121 122 105
86 120 119 120 123 122 123 121 120 121 105
87 119 118 119 121 120 121 119 119 119 105
88 118 117 118 119 119 119 118 118 118 105
89 117 116 116 118 118 118 117 117 117 105
90 116 115 116 117 117 117 116 116 116 105
91 115 114 115 115 115 115 115 115 115 104
92 114 113 114 114 114 114 114 114 114 103
93 112 112 112 113 113 113 113 113 113 102
94 111 111 111 112 112 112 111 111 111 101
95 110 110 110 110 110 110 110 110 110 100
96 109 109 109 109 109 109 109 109 109 100
97 107 107 107 107 107 107 107 107 107 100
98 106 106 106 106 106 106 106 106 106 100
99 104 104 104 104 104 104 104 104 104 100
* The Non-Tobacco rates apply to both Preferred Non-Tobacco and Standard
Non-Tobacco Policies
Appendix F - Financial Statements
---------------------------------
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
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.
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.
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF INCOME
Years ended December 31,
1997 1996 1995
---- ---- ----
(In Millions)
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
======== ======== ========
See notes to statutory financial statements.
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF CHANGES
IN POLICYHOLDERS' CONTINGENCY RESERVES
Years ended December 31,
1997 1996 1995
---- ---- ----
(In Millions)
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
======== ======== ========
See notes to statutory financial statements.
Massachusetts Mutual Life Insurance Company
STATUTORY STATEMENTS OF CASH FLOWS
Years ended December 31,
1997 1996 1995
---- ---- ----
(In Millions)
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
========= ========= =========
See Notes to Statutory Financial Statements.
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.
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.
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.
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.
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.
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
========= ======== ====== =========
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.
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.
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.
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.
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
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF FINANCIAL POSITION
(Unaudited)
September 30, December 31,
1998 1997
---------- ----------
(In Millions)
Assets:
Bonds $24,069.7 $23,890.3
Common stocks 295.4 354.7
Mortgage loans 5,172.2 4,863.7
Real estate 1,808.6 1,697.7
Other investments 2,162.5 1,963.8
Policy loans 5,168.4 4,950.4
Cash and short-term investments 2,084.9 1,941.2
--------- ---------
40,761.7 39,661.8
Investment and insurance amounts receivable 990.9 1,064.9
Other assets 100.3 104.8
--------- ---------
41,852.9 40,831.5
Separate account assets 17,354.3 16,803.1
--------- ---------
$59,207.2 $57,634.6
========= =========
See notes to statutory financial statements.
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF FINANCIAL POSITION, continued
(Unaudited)
September 30, December 31,
1998 1997
---------- ----------
(In Millions)
Liabilities:
Policyholders' reserves and funds $34,740.6 $33,783.2
Policyholders' dividends 981.5 954.1
Policy claims and other benefits 351.1 353.4
Federal income taxes 634.3 436.5
Asset valuation reserve 884.8 840.6
Investment reserves 113.1 132.8
Amounts due on investments purchased and
other liabilities 968.5 1,457.9
--------- ---------
38,673.9 37,958.5
Separate account reserves and liabilities 17,352.9 16,802.8
--------- ---------
56,026.8 54,761.3
Policyholders' contingency reserves 3,180.4 2,873.3
--------- ---------
$59,207.2 $57,634.6
========= =========
See notes to statutory financial statements.
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF INCOME
(Unaudited)
For the Period Ending
September 30,
1998 1997
---- ----
(In Millions)
Income:
Premium income $ 5,720.7 $ 5,012.4
Net investment income 2,230.4 2,124.9
Fees and other income 29.4 26.4
---------- ----------
7,980.5 7,163.7
---------- ----------
Benefits and expenses:
Policy benefits and payments 4,645.3 4,760.9
Addition to policyholders' reserves and funds 1,509.8 702.5
Operating expenses 337.1 307.1
Commissions 214.0 223.4
State taxes, licenses and fees 67.2 56.4
---------- ----------
6,773.4 6,050.3
---------- ----------
Net gain before federal income taxes and dividends 1,207.1 1,113.4
Federal income taxes 164.4 204.9
---------- ----------
Net gain from operations before dividends 1,042.7 908.5
Dividends to policyholders 685.5 636.0
---------- ----------
Net gain from operations 357.2 272.5
Net realized capital gain (loss) 40.4 (13.5)
---------- ----------
Net income $ 397.6 $ 259.0
========== ==========
See notes to statutory financial statements.
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF CHANGES
IN POLICYHOLDERS' CONTINGENCY RESERVES
(Unaudited)
For the Period Ending
September 30,
1998 1997
---- ----
(In Millions)
Policyholders' contingency reserves, beginning
of year $ 2,873.3 $ 2,638.7
Increases (decreases) due to:
Net income 397.6 259.0
Net unrealized capital gain (loss) (66.1) 164.1
Change in asset valuation reserves (24.2) (123.6)
Other changes (0.2) (1.3)
--------- ---------
Policyholders' contingency reserves, end of period $ 3,180.4 $ 2,936.9
========= =========
See notes to statutory financial statements.
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
SCHEDULE OF TOTAL ADJUSTED CAPITAL
(Unaudited)
September 30, December 31,
1998 1997
---- ----
(In Millions)
Policyholders' contingency reserves $3,180.4 $2,873.3
Asset valuation reserve 901.8 863.4
One-half of apportioned dividend liability 485.6 472.1
-------- --------
Total capital $4,567.8 $4,208.8
======== ========
See notes to statutory financial statements.
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF CASH FLOWS
(Unaudited)
For the Periods Ending,
September 30,
1998 1997
-------- --------
(In Millions)
Operating activities:
Net income $ 397.6 $ 259.0
Addition to policyholders' reserves and funds,
net of transfers to separate accounts 955.1 189.6
Net realized capital (gain) loss (40.4) (13.5)
Other changes (329.0) (184.6)
--------- ---------
Net cash provided by operating activities 983.3 250.5
--------- ---------
Investing activities:
Purchases of investments and loans (13,752.4) (11,909.7)
Sales or maturities of investments and receipts
from repayment of loans 12,912.8 11,393.3
--------- ---------
Net cash provided by (used in) investing activities (839.6) (516.4)
--------- ---------
Increase (decrease) in cash and short-term investments 143.7 (265.9)
Cash and short-term investments, beginning of year 1,941.2 1,075.4
--------- ---------
Cash and short-term investments, end of period $ 2,084.9 $ 809.5
========= =========
See notes to statutory financial statements.
NOTES TO STATUTORY FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The accompanying interim financial statements of Massachusetts Mutual
Life Insurance Company (the "Company") have been prepared on the basis
of accounting practices prescribed or permitted by the Division of
Insurance of the Commonwealth of Massachusetts and in conformity with
the practices of the National Association of Insurance Commissioners
which are currently considered generally accepted accounting principles
for mutual life insurance companies and their life insurance
subsidiaries. In April, 1993, the Financial Accounting Standards Board,
which has no role in establishing regulatory accounting practices,
issued Interpretation 40, Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises, regarding the
applicability of generally accepted accounting principles to mutual life
insurance companies. This interpretation requires mutual life insurance
companies to modify their financial statements to continue to be in
accordance with generally accepted accounting principles, effective for
1996 financial statements. The manner in which policy reserves, new
business acquisition costs, asset valuation and the related tax effects
are determined and recorded will change. Management has not determined
the impact of such changes on the Company's Statement of Operations but
believes implementation of these pronouncements will cause Stockholders'
Equity to increase. The Company is in the process of reviewing if it
will adopt the above pronouncements.
The accompanying statutory financial statements are different in some
respects from GAAP financial statements. The more significant
differences are as follows: (a) acquisition costs, such as commissions
and other costs in connection with acquiring new business, are charged
to current operations as incurred, whereas under GAAP these expenses
would be capitalized and recognized over the life of the policies; (b)
policy reserves are based upon statutory mortality and interest
requirements without consideration of withdrawals, whereas GAAP reserves
would be based upon reasonably conservative estimates of mortality,
morbidity, interest and withdrawals; (c) bonds are generally carried at
amortized cost whereas GAAP would value bonds at fair value and (d)
deferred income taxes are not provided for book-tax timing differences
whereas GAAP would record deferred income taxes.
The accompanying interim financial statements reflect, in the opinion of
the Company's management, all adjustments (consisting of normal,
recurring accruals) necessary for a fair presentation of the interim
financial position and results of operations. Such statements should be
read in conjunction with the annual financial statements.
2. Asset Valuation Reserve
In compliance with regulatory requirements, the Company maintains the
Asset Valuation Reserve. The balances as of September 30, 1998 and 1997,
reflect the year-to-date activity and a pro rata share of the annual
contribution or amortization, respectively. 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. These other investment reserves for both periods are
established each quarter based on the Company's best estimate at those
dates and realized losses are taken after a complete analysis is
performed during the fourth quarter.
3. Policyholders' Dividends
In October, the Board of Directors annually approve dividends to be paid
in the following year. The dividend liability recorded as of September
30, 1998 and December 31, 1997 is based on the dividend scales approved
for those years in October 1997, and reflects the dividends to be
credited for the subsequent twelve months. In the fourth quarter of each
year, the dividend liability is adjusted to reflect the dividend scale
approved in October of that year.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission (the "Commission") such supplementary and
periodic information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Article V of the By-laws of MassMutual provide for indemnification of directors
and officers as follows:
Article V. Subject to limitations of law, the Company shall indemnify:
a) each director, officer or employee;
b) any individual who serves at the request of the Company as a
Secretary, a director, board member, committee member, officer
or employee of any organization or any separate investment
account, or;
c) any individual who serves in any capacity with respect to
employee benefit plans;
from and against all loss, liability and expense imposed upon or
incurred by such person in connection with any action, claim or
proceeding of any nature whatsoever, in which such person may be
involved or with which he or she may be threatened, by reason of
any alleged act, omission or otherwise while serving in any such
capacity.
Indemnification shall be provided although the person no longer
serves in such capacity and shall include protection for the
person's heirs and legal representatives. Indemnities hereunder
shall include, but not be limited to, all costs and reasonable
counsel fees, fines, penalties, judgments or awards of any kind,
and the amount of reasonable settlements, whether or not payable to
the Company or to any of the other entities described in the
preceding paragraph, or to the policyholders or security holders
thereof.
Notwithstanding the foregoing, no indemnification shall be provided with respect
to:
(1) any matter as to which the person shall have been adjudicated in
any proceeding not to have acted in good faith in the reasonable belief
that his or her action was in the best interests of the Company or, to
the extent that such matter relates to service with respect to any
employee benefit plan, in the best interests of the participants or
beneficiaries of such employee benefit plan;
(2) any liability to any entity which is registered as an investment
company under the Federal 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; and
3
(3) any action, claim or proceeding voluntarily initiated by any person
seeking indemnification, unless such action, claim or proceeding had
been authorized by the Board of Directors or unless such person's
indemnification is awarded by vote of the Board of Directors.
In any matter disposed of by settlement or in the event of an adjudication which
in the opinion of the General Counsel or his delegate does not make a sufficient
determination of conduct which could preclude or permit indemnification in
accordance with the preceding paragraphs (1), (2), and (3), the person shall be
entitled to indemnification unless, as determined by the majority of the
disinterested directors or in the opinion of counsel (who may be an officer of
the Company or outside counsel employed by the Company), such person's conduct
was such as precludes indemnification under any of such paragraphs.
The Company may at its option indemnify for expenses incurred in connection with
any action or proceeding in advance of its final disposition, upon receipt of a
satisfactory undertaking for repayment if it be subsequently determined that the
person thus indemnified is not entitled to indemnification under this Article V.
Insofar as indemnification for liability arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant 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, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
REPRESENTATION UNDER SECTION 26(e)(2)(A)
OF THE INVESTMENT COMPANY ACT OF 1940
Massachusetts Mutual Life Insurance Company hereby represents that fees and
charges deducted under the flexible premium variable adjustable life insurance
policies 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.
4
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement is comprised of the following documents:
The Facing Sheet.
Cross-reference to items required by Form N-8B-2.
The Prospectus consisting of 73 pages.
The Undertaking to File Reports.
The undertaking pursuant to Rule 484 under the Securities Act of 1933.
Representation under Section 26(e)(2)(A) of the Investment Company Act of 1940.
The Signatures.
Written Consents of the Following Persons:
1. PricewaterhouseCoopers LLP, independent accountants.
2. Counsel opining as to the legality of securities being
registered.
3. Opinion opining as to actuarial matters contained in the
Registration Statement by John M. Valencia, Assistant Vice
President.
The following Exhibits:
1. The following Exhibits correspond to those required by Paragraph A of
the instructions as to Exhibits in Form N-8B-2:
A. (1) (a) Resolution of Board of Directors of MassMutual
establishing the Separate Account/(3)/
(b) Resolution of Board of Directors of MassMutual
establishing the SL10 segment of Massachusetts Mutual
Variable Life Separate Account 1/(1)/
(2) Not applicable.
(3) Form of Distribution Agreements:
(a)(1) Form of Distribution Servicing Agreement between
MML Distributors, LLC, and MassMutual./(2)/
(a)(2) Co-Underwriting Agreement between MML
Investors Services, Inc. and MassMutual./(2)/
(a)(3) Variable Products Dealer Agreement./(1)/
(b) Not applicable.
(c) Not applicable.
(4) Not applicable.
5
(5) Form of Flexible Premium Variable Adjustable Life Insurance
Policy./(1)/
(6) (a) Certificate of Incorporation of MassMutual./(3)/
(b) By-Laws of MassMutual./(3)/
(7) Not applicable.
(8) (a) Participation Agreement with Oppenheimer Variable
Account Funds./(1)/
(b) Form of Participation Agreement with Panorama Series
Fund, Inc./(3)/
(c) Participation Agreement with T. Rowe Price Equity
Series, Inc./(1)/
(d) Participation Agreement with MFS Variable Insurance
Trust./(1)/
(e) Form of Participation Agreement with Goldman Sachs
Variable Insurance Trust./(1)/
(f) Participation Agreement with Fidelity Variable
Insurance Products Fund II./(1)/
(9) Not applicable.
(10) Form of Application for Flexible Premium Variable Adjustable
Life Insurance Policy./(1)/
(11) Memorandum describing MassMutual's issuance, transfer, and
redemption procedures for the Policy./(1)/
2. Opinion and Consent of Counsel as to the legality of the
securities being registered./(1)/
3. No financial statement will be omitted from the Prospectus
pursuant to Instruction 1(b) or (c) of Part I.
4. Not applicable.
5. Opinion and consent of John M. Valencia opining as to the
illustrations pertaining to the securities being registered./(5)/
6. Consent of PricewaterhouseCoopers LLP./(5)/
7. (i) Powers of Attorney./(3)/
(ii) Power of Attorney for Roger G. Ackerman./(4)/
(iii) Power of Attorney for Robert J. O'Connell and Thomas B.
Wheeler/(5)/
/(1)/ Incorporated by Reference to Registration Statement File No. 333-65887,
filed on October 20, 1998.
/(2)/ Incorporated by reference to Post-Effective Amendment Number 2 to
Registration Statement 33-87904 filed on February 28, 1997.
/(3)/ Incorporated by reference to Registration Statement File Number 333-22557,
filed on February 28, 1997.
/(4)/ Incorporated by reference to Registration Statement File Number 333-45039,
filed on June 4, 1998.
/(5/) Filed herewith
6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Massachusetts Mutual Variable Life Separate Account I, has caused this
Pre-Effective Amendment No.1 to Registration Statement No. 333-65887 to be
signed on its behalf by the undersigned thereunto duly authorized, all in the
city of Springfield and the Commonwealth of Massachusetts, on the 22nd day of
January, 1999.
MASSACHUSETTS MUTUAL VARIABLE LIFE SEPARATE ACCOUNT I
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
(Depositor)
By: /s/ Robert J. O'Connell*
------------------------
Robert J. O'Connell, President and Chief Executive Officer
Massachusetts Mutual Life Insurance Company
/s/ Richard M. Howe On January 22, 1999, as Attorney-in-Fact pursuant to
- ------------------- powers of attorney.
*Richard M. Howe
As required by the Securities Act of 1933, this Pre-Effective Amendment No.
1 to Registration Statement No. 333-65887 has been signed by the following
persons in the capacities and on the duties indicated.
Signature Title Date
--------- ----- ----
/s/ Robert J. O'Connell* President and Chief Executive Officer January 22, 1999
- ------------------------
Robert J. O'Connell
/s/ Joseph M. Zubretsky* Executive Vice President, January 22, 1999
- ------------------------ Chief Financial Officer &
Joseph M. Zubretsky Chief Accounting Officer
/s/ Roger G. Ackerman* Director January 22, 1999
- ----------------------
Roger G. Ackerman
/s/ James R. Birle* Director January 22, 1999
- -------------------
James R. Birle
/s/ Gene Chao* Director January 22, 1999
- --------------
Gene Chao, Ph.D.
/s/ Patricia Diaz Dennis* Director January 22, 1999
- -------------------------
Patricia Diaz Dennis
/s/ Anthony Downs* Director January 22, 1999
- ------------------
Anthony Downs
7
/s/ James L. Dunlap* Director January 22, 1999
- --------------------
James L. Dunlap
/s/ William B. Ellis* Director January 22, 1999
- ---------------------
William B. Ellis, Ph.D.
/s/ Robert M. Furek* Director January 22, 1999
- --------------------
Robert M. Furek
/s/ Charles K. Gifford* Director January 22, 1999
- -----------------------
Charles K. Gifford
/s/ William N. Griggs* Director January 22, 1999
- ----------------------
William N. Griggs
/s/ George B. Harvey* Director January 22, 1999
- ---------------------
George B. Harvey
/s/ Barbara B. Hauptfuhrer* Director January 22, 1999
- ---------------------------
Barbara B. Hauptfuhrer
/s/ Sheldon B. Lubar* Director January 22, 1999
- ---------------------
Sheldon B. Lubar
/s/ William B. Marx, Jr.* Director January 22, 1999
- -------------------------
William B. Marx, Jr.
/s/ John F. Maypole* Director January 22, 1999
- --------------------
John F. Maypole
/s/ Thomas B. Wheeler* Director January 22, 1999
- ----------------------
Thomas B. Wheeler
/s/ Alfred M. Zeien* Director January 22, 1999
- --------------------
Alfred M. Zeien
/s/ Richard M. Howe On January 22, 1999, as Attorney-in-Fact pursuant to
- ------------------- powers of attorney.
*Richard M. Howe
8
EXHIBIT LIST
4. Opinion and Consent of John M. Valencia
6. Consent of PricewaterhouseCoopers LLP
7(iii) Powers of Attorney for Robert J. O'Connell and Thomas B. Wheeler
9