<PAGE>
A Message To Our Contract Owners:
We are pleased to forward this combined Annual Report of the segment of
Massachusetts Mutual Variable Annuity Separate Account 1 ("Separate Account 1")
pertaining to Flex Extra (Qualified) (the "Segment"), four Funds of the MML
Series Investment Fund, and three Funds of the Oppenheimer Variable Account
Funds available to owners of Flex Extra contracts. These reports are for the
year ended December 31, 1998.
The Annual Report for the Segment begins on page 3. The Segment has net assets
of $4,675,452,010 as of December 31, 1998. Net asset values per accumulation
unit for the MML Equity, MML Money Market, MML Managed Bond and MML Blend,
Oppenheimer Capital Appreciation, Oppenheimer Global Securities and Oppenheimer
Strategic Bond Divisions as of December 31, 1998 are shown in detail in the
table on page 3.
The Annual Report for the MML Series Investment Fund begins on page 12. This
report contains a detailed description of the financial results of the MML
Equity Fund, MML Money Market Fund, MML Managed Bond Fund and MML Blend Fund for
the year ended December 31, 1998.
The Annual Report for the Oppenheimer Variable Account funds begins on page 50.
This report contains a detailed description of the financial results of the
Oppenheimer Aggressive Growth Fund, Oppenheimer Global Securities Fund and
Oppenheimer Strategic Bond Fund for the year ended December 31, 1998.
We appreciate the interest and confidence you have shown in Separate Account 1.
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
/s/ Robert J. O'Connell
-------------------------------------
Robert J. O'Connell
President and Chief Executive Officer
February 8, 1999
1
<PAGE>
Table of Contents
Massachusetts Mutual Variable Annuity Separate Account 1 -
Flex Extra (Qualified)
Statement of Assets and Liabilities as of December 31, 1998 .......... 3
Statement of Operations For the Year Ended December 31, 1998 ......... 4
Statement of Changes in Net Assets For the Years Ended
December 31, 1998 and 1997 ......................................... 5-6
Notes to Financial Statements ........................................ 7-10
Report of Independent Accountants .................................... 11
MML Series Investment Fund
To Our Shareholders .................................................. 12-18
Statement of Assets and Liabilities as of December 31, 1998 .......... 19
Statement of Operations For the Year Ended December 31, 1998 ......... 20
Statement of Changes in Net Assets For the Years Ended
December 31, 1998 and 1997 ......................................... 21
Financial Highlights ................................................. 22-25
Schedule of Investments as of December 31, 1998
MML Equity Fund ................................................... 26-28
MML Money Market Fund ............................................. 29-30
MML Managed Bond Fund ............................................. 31-35
MML Blend Fund .................................................... 36-44
Notes to Financial Statements ........................................ 45-48
Report of Independent Accountants .................................... 49
Oppenheimer Variable Account Funds
Oppenheimer Fund Managers' Messages .................................. 50-55
Oppenheimer Aggressive Growth Fund
Statement of Assets and Liabilities as of December 31, 1998 ....... 56
Statement of Operations For the Year Ended December 31, 1998 ...... 57
Statement of Changes in Net Assets For the Years Ended
December 31, 1998 and 1997 ...................................... 58
Oppenheimer Global Securities Fund
Statement of Assets and Liabilities as of December 31, 1998 ....... 59
Statement of Operations For the Years Ended December 31, 1998 ..... 60
Statement of Changes in Net Assets For the Years Ended
December 31, 1998 and 1997 ...................................... 61
Oppenheimer Strategic Bond Fund
Statement of Assets and Liabilities as of December 31, 1998 ....... 62
Statement of Operations For the Year Ended December 31, 1998 ...... 63
Statement of Changes in Net Assets For the Years Ended
December 31, 1998 and 1997 ...................................... 64
Financial Highlights ................................................. 65-67
Statement of Investments as of December 31, 1998
Oppenheimer Aggressive Growth Fund ................................ 68-70
Oppenheimer Global Securities Fund ................................ 71-76
Oppenheimer Strategic Bond Fund ................................... 77-101
Notes to Financial Statements ........................................ 102-113
Reports of Independent Auditors ...................................... 114-116
2
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account I - Flex Extra
(Qualified)
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<CAPTION>
MML MML
MML Money Managed MML
Equity Market Bond Blend
Division Division Division Division
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS
Investments
Number of shares (Note 2) 44,071,313 84,146,588 10,786,408 72,674,225
============== ============== ============== ==============
Identified cost (Note 6) $1,119,039,922 $ 84,146,588 $ 133,083,328 $1,411,915,729
============== ============== ============== ==============
Value (Note 3A) $1,727,495,987 $ 84,146,588 $ 135,869,684 $1,822,899,582
Dividends receivable 87,487,516 335,297 2,460,738 114,193,766
Receivable from Massachusetts
Mutual Life Insurance Company - 466,284 - -
Other assets 5,711 19 290 7,124
-------------- -------------- -------------- --------------
Total assets 1,814,989,214 84,948,188 138,330,712 1,937,100,472
LIABILITIES
Annuitant mortality fluctuation reserve
(Note 3D) 25,929 376 2,724 58,554
Payable to Massachusetts Mutual
Life Insurance Company 9,189,716 - 438,729 7,929,255
-------------- -------------- -------------- --------------
Total liabilities 9,215,645 376 441,453 7,987,809
-------------- -------------- -------------- --------------
NET ASSETS $1,805,773,569 $ 84,947,812 $ 137,889,259 $1,929,112,663
============== ============== ============== ==============
Net Assets:
Accumulation units value $1,804,909,278 $ 84,935,285 $ 137,798,457 $1,927,160,857
Annuity reserves (Note 3E) 864,291 12,527 90,802 1,951,806
-------------- -------------- -------------- --------------
Net assets $1,805,773,569 $ 84,947,812 $ 137,889,259 $1,929,112,663
============== ============== ============== ==============
Accumulation units (Note 8)
Contractowners 425,596,117 51,773,022 59,569,603 569,209,258
Massachusetts Mutual Life
Insurance Company - - - -
-------------- -------------- -------------- --------------
Total units 425,596,117 51,773,022 59,569,603 569,209,258
============== ============== ============== ==============
NET ASSET VALUE PER
ACCUMULATION UNIT
December 31, 1998 $ 4.24 $ 1.64 $ 2.31 $ 3.39
December 31, 1997 3.70 1.58 2.17 3.02
December 31, 1996 2.91 1.52 2.00 2.53
December 31, 1995 2.45 1.47 1.96 2.25
December 31, 1994 1.89 1.41 1.67 1.85
<CAPTION>
*Oppenheimer Oppenheimer Oppenheimer
Capital Global Strategic
Appreciation Securities Bond
Division Division Division
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Investments
Number of shares (Note 2) 8,604,259 11,550,695 15,658,216
============ ============ ============
Identified cost (Note 6) $321,132,978 $209,004,597 $ 79,250,481
============ ============ ============
Value (Note 3A) $385,728,931 $254,923,841 $ 80,170,064
Dividends receivable - - -
Receivable from Massachusetts
Mutual Life Insurance Company - - -
Other assets 335 332 263
------------ ------------ ------------
Total assets 385,729,266 254,924,173 80,170,327
LIABILITIES
Annuitant mortality fluctuation reserve
(Note 3D) 1,999 893 710
Payable to Massachusetts Mutual
Life Insurance Company 1,726,182 1,134,597 230,678
------------ ------------ ------------
Total liabilities 1,728,181 1,135,490 231,388
------------ ------------ ------------
NET ASSETS $384,001,085 $253,788,683 $ 79,938,939
============ ============ ============
Net Assets:
Accumulation units value $383,934,442 $253,758,932 $ 79,915,278
Annuity reserves (Note 3E) 66,643 29,751 23,661
------------ ------------ ------------
Net assets $384,001,085 $253,788,683 $ 79,938,939
============ ============ ============
Accumulation units (Note 8)
Contractowners 200,858,119 176,565,468 59,356,175
Massachusetts Mutual Life
Insurance Company 5,000 5,000 5,000
------------ ------------ ------------
Total units 200,863,119 176,570,468 59,361,175
============ ============ ============
NET ASSET VALUE PER
ACCUMULATION UNIT
December 31, 1998 $ 1.91 $ 1.44 $ 1.35
December 31, 1997 1.72 1.28 1.33
December 31, 1996 1.56 1.05 1.23
December 31, 1995 1.32 0.91 1.12
December 31, 1994 1.01 0.90 0.98
</TABLE>
* This division invests in the Oppenheimer Aggressive Growth Fund. Prior to
May 1, 1998, the Oppenheimer Aggressive Growth Fund was called the
Oppenheimer Capital Appreciation Fund.
See Notes to Finanical Statements.
3
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account I - Flex Extra
(Qualified)
STATEMENT OF OPERATIONS
For The Year Ended December 31, 1998
<TABLE>
<CAPTION>
MML MML *Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Global Strategic
Equity Market Bond Blend Appreciation Securities Bond
Division Division Division Division Division Division Division
<S> <C> <C> <C> <C> <C> <C> <C>
------------ ---------- ---------- ------------ ----------- ----------- ----------
Investment income
Dividends (Note 3B) $ 87,502,482 $3,710,406 $8,040,025 $161,059,949 $ 9,010,634 $21,281,303 $2,003,867
Expenses
Mortality and expense risk fees and
administrative expenses (Note 4) 21,669,572 956,232 1,604,337 23,769,878 4,389,033 2,968,477 974,049
------------ ---------- ---------- ------------ ----------- ----------- ----------
Net investment income (Note 3C) 65,832,910 2,754,174 6,435,688 137,290,071 4,621,601 18,312,826 1,029,818
------------ ---------- ---------- ------------ ----------- ----------- ----------
Net realized and unrealized
gain (loss) on investments
Net realized gain on investments
(Notes 3B, 3C and 7) 40,715,247 - 175,578 40,453,309 3,796,453 2,316,249 585,727
Change in net unrealized appreciation/
depreciation of investments 120,868,915 - 1,355,721 31,568,535 27,334,115 5,708,659 (647,713)
------------ ---------- ---------- ------------ ----------- ----------- ----------
Net gain (loss) on investments 161,584,162 - 1,531,299 72,021,844 31,130,568 8,024,908 (61,986)
------------ ---------- ---------- ------------ ----------- ----------- ----------
Net increase in net assets
resulting from operations $227,417,072 $2,754,174 $7,966,987 $209,311,915 $35,752,169 $26,337,734 $ 967,832
============ ========== ========== ============ =========== =========== ==========
</TABLE>
* This division invests in the Oppenheimer Aggressive Growth Fund. Prior to
May 1, 1998, the Oppenheimer Aggressive Growth Fund was called the
Oppenheimer Capital Appreciation Fund .
See Notes to Finanical Statements.
4
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account I - Flex Extra
(Qualified)
STATEMENT OF CHANGES IN NET ASSETS
For The Year Ended December 31, 1998
<TABLE>
<CAPTION>
MML MML *Oppenheimer
MML Money Managed MML Capital
Equity Market Bond Blend Appreciation
Division Division Division Division Division
-------------- ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets Operations:
Net investment income $ 65,832,910 $ 2,754,174 $ 6,435,688 $ 137,290,071 $ 4,621,601
Net realized gain on investments 40,715,247 - 175,578 40,453,309 3,796,453
Change in net unrealized appreciation/
depreciation of investments 120,868,915 - 1,355,721 31,568,535 27,334,115
-------------- ------------ ------------ -------------- ------------
Net increase in net assets resulting from operations 227,417,072 2,754,174 7,966,987 209,311,915 35,752,169
-------------- ------------ ------------ -------------- ------------
Capital transactions: (Note 8)
Net contract payments (Note 6) 234,334,365 42,984,690 25,793,792 226,272,450 78,684,856
Transfer to Guaranteed Principal Account (8,680,723) (2,534,720) (626,871) (10,542,006) (1,459,346)
Withdrawal of funds (188,939,283) (15,932,582) (15,269,421) (216,569,542) (34,226,369)
Reimbursement (payment) of accumulation
unit value fluctuation (338,003) 3,327 (171,552) (558,141) (81,958)
Net charge (credit) to annuitant mortality
fluctuation reserve (Note 3D) 36,577 99 2,739 (3,721) 5,939
Annuity benefit payments (137,922) (1,329) (12,651) (200,531) (7,154)
Withdrawals due to administrative and
contingent deferred sales charges (Note 6) (3,928,657) (230,496) (778,593) (4,707,537) (764,333)
Divisional transfers 15,051,030 (11,732,070) 8,131,600 (9,727,276) 80,515
-------------- ------------ ------------ -------------- ------------
Net increase (decrease) in net assets
resulting from capital transactions 47,397,384 12,556,919 17,069,043 (16,036,304) 42,232,150
-------------- ------------ ------------ -------------- ------------
Total increase 274,814,456 15,311,093 25,036,030 193,275,611 77,984,319
NET ASSETS, at beginning of the year 1,530,959,113 69,636,719 112,853,229 1,735,837,052 306,016,766
-------------- ------------ ------------ -------------- ------------
NET ASSETS, at end of the year $1,805,773,569 $ 84,947,812 $137,889,259 $1,929,112,663 $384,001,085
============== ============ ============ ============== ============
<CAPTION>
Oppenheimer Oppenheimer
Global Strategic
Securities Bond
Division Division
------------ -----------
<S> <C> <C>
Increase (decrease) in net assets Operations:
Net investment income $ 18,312,826 $ 1,029,818
Net realized gain on investments 2,316,249 585,727
Change in net unrealized appreciation/
depreciation of investments 5,708,659 (647,713)
------------ -----------
Net increase in net assets resulting from operations 26,337,734 967,832
------------ -----------
Capital transactions: (Note 8)
Net contract payments (Note 6) 49,990,108 24,010,666
Transfer to Guaranteed Principal Account (1,195,538) (566,275)
Withdrawal of funds (22,863,954) (7,045,668)
Reimbursement (payment) of accumulation
unit value fluctuation (34,093) (7,199)
Net charge (credit) to annuitant mortality
fluctuation reserve (Note 3D) (796) 1,944
Annuity benefit payments (2,900) (3,404)
Withdrawals due to administrative and
contingent deferred sales charges (Note 6) (395,028) (102,820)
Divisional transfers 1,576,742 (3,380,541)
------------ -----------
Net increase (decrease) in net assets
resulting from capital transactions 27,074,541 12,906,703
------------ -----------
Total increase 53,412,275 13,874,535
NET ASSETS, at beginning of the year 200,376,408 66,064,404
------------ -----------
NET ASSETS, at end of the year $253,788,683 $79,938,939
============ ===========
</TABLE>
* This division invests in the Oppenheimer Aggressive Growth Fund. Prior to
May 1, 1998, the Oppenheimer Aggressive Growth Fund was called the Oppenheimer
Capital Appreciation Fund.
See Notes to Financial Statements.
5
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account I - Flex Extra
(Qualified)
STATEMENT OF CHANGES IN NET ASSETS
For The Year Ended December 31, 1997
<TABLE>
<CAPTION>
MML MML
MML Money Managed MML
Equity Market Bond Blend
Division Division Division Division
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets Operations:
Net investment income (loss) $ 97,491,773 $ 2,791,537 $ 5,564,010 $ 142,065,242
Net realized gain on investments 12,495,460 - 8,195 24,142,272
Change in net unrealized appreciation/depreciation
of investments 199,325,594 - 3,169,238 114,765,896
--------------- --------------- --------------- ---------------
Net increase in net assets resulting from operations 309,312,827 2,791,537 8,741,443 280,973,410
--------------- --------------- --------------- ---------------
Capital transactions: (Note 8)
Net contract payments (Note 6) 220,631,779 40,836,523 17,525,135 207,397,147
Transfer to Guaranteed Principal Account (6,025,604) (2,473,788) (630,184) (5,168,376)
Withdrawal of funds (110,143,524) (10,374,826) (9,127,017) (158,292,213)
Reimbursement (payment) of accumultation
unit value fluctuation 618,242 (81,658) (27,032) 404,089
Net charge (credit) to annuitant mortality
fluctuation reserve (Note 3D) (5,639) 142 14,949 (228,565)
Annuity benefit payments (47,741) (1,141) (7,638) (145,635)
Withdrawals due to administrative and
contingent deferred sales charges (Note 6) (3,163,446) (169,648) (714,396) (4,417,293)
Divisional transfers 30,579,317 (38,923,394) (7,589,809) (17,850,818)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets
resulting from capital transactions 132,443,384 (11,187,790) (555,992) 21,698,336
--------------- --------------- --------------- ---------------
Total increase (decrease) 441,756,211 (8,396,253) 8,185,451 302,671,746
NET ASSETS, at beginning of the year 1,089,202,902 78,032,972 104,667,778 1,433,165,306
--------------- --------------- --------------- ---------------
NET ASSETS, at end of the year $ 1,530,959,113 $ 69,636,719 $ 112,853,229 $ 1,735,837,052
=============== =============== =============== ===============
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer
Capital Global Strategic
Appreciation Securities Bond
Division Division Division
------------- ------------- -------------
<S> <C> <C> <C>
Increase (decrease) in net assets Operations:
Net investment income (loss) $ 7,290,775 $ (503,351) $ 3,526,023
Net realized gain on investments 4,123,760 1,178,693 228,380
Change in net unrealized appreciation/depreciation
of investments 15,365,603 27,069,966 103,191
------------- ------------- -------------
Net increase in net assets resulting from operations 26,780,138 27,745,308 3,857,594
------------- ------------- -------------
Capital transactions: (Note 8)
Net contract payments (Note 6) 85,295,016 52,890,477 25,868,183
Transfer to Guaranteed Principal Account (708,095) (386,663) (355,058)
Withdrawal of funds (16,117,822) (10,726,014) (3,266,354)
Reimbursement (payment) of accumultation
unit value fluctuation 103,934 685,959 (7,779)
Net charge (credit) to annuitant mortality
fluctuation reserve (Note 3D) 535 210 (3,801)
Annuity benefit payments (3,061) 299 441
Withdrawals due to administrative and
contingent deferred sales charges (Note 6) (493,582) (221,028) (51,547)
Divisional transfers 14,315,971 16,992,696 2,476,036
------------- ------------- -------------
Net increase (decrease) in net assets
resulting from capital transactions 82,392,896 59,235,936 24,660,121
------------- ------------- -------------
Total increase (decrease) 109,173,034 86,981,244 28,517,715
NET ASSETS, at beginning of the year 196,843,732 113,395,164 37,546,689
------------- ------------- -------------
NET ASSETS, at end of the year $ 306,016,766 $ 200,376,408 $ 66,064,404
============= ============= =============
</TABLE>
See Notes to Finanical Statements.
6
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 1 - Flex Extra
(Qualified)
Notes To Financial Statements
1. HISTORY
Massachusetts Mutual Variable Annuity Separate Account 1 ("Separate Account
1") is a separate investment account established on April 8, 1981 by
Massachusetts Mutual Life Insurance Company ("MassMutual"). Separate Account
1 operates as a registered unit investment trust pursuant to the Investment
Company Act of 1940 and the rules promulgated thereunder.
MassMutual maintains three segments within Separate Account 1. The segments
are Variable Annuity Fund 4, Flex-Annuity IV (Qualified) and Flex Extra
(Qualified.) These notes and the financial statements presented herein, with
the exception of Note 9, describe and consist only of the Flex Extra
(Qualified) segment (the "Segment").
On September 13, 1994, MassMutual paid $15,000 to provide the initial
capital for the Segment's three most recently established divisions: 1,516
shares were purchased in the management investment company described in Note
2 supporting the three Oppenheimer divisions of the Segment.
2. INVESTMENT OF THE SEGMENT'S ASSETS
The Flex Extra (Qualified) Segment maintains seven divisions. The MML Equity
Division invests in shares of MML Equity Fund, the MML Money Market Division
invests in shares of MML Money Market Fund, the MML Managed Bond Division
invests in shares of MML Managed Bond Fund, the MML Blend Division invests
in shares of MML Blend Fund, the Oppenheimer Capital Appreciation Division
invests in shares of Oppenheimer Aggressive Growth Fund, the Oppenheimer
Global Securities Division invests in shares of Oppenheimer Global
Securities Fund and the Oppenheimer Strategic Bond Division invests in
shares of Oppenheimer Strategic Bond Fund.
MML Equity Fund, MML Money Market Fund, MML Managed Bond Fund and MML Blend
Fund are four of the six separate series of shares of MML Series Investment
Fund (the "MML Trust"). The MML Trust is a no-load, open-end, management
investment company registered under the Investment Company Act of 1940.
MassMutual serves as investment manager of the MML Trust. David L. Babson &
Company, Inc. ("Babson") a controlled subsidiary of MassMutual, serves as
the investment sub-adviser to MML Equity Fund and the Equity Sector of the
MML Blend Fund.
Oppenheimer Aggressive Growth Fund, Oppenheimer Global Securities Fund and
Oppenheimer Strategic Bond Fund are part of the Oppenheimer Variable Account
Funds (the "Oppenheimer Trust"). The Oppenheimer Trust is a diversified,
open-end management investment company registered under the Investment
Company Act of 1940, for which OppenheimerFunds, Inc. ("OFI"), a controlled
subsidiary of MassMutual, serves as investment manager.
In addition to the seven divisions of the Segment, a Contract Owner may also
allocate funds to the Guaranteed Principal Account, which is part of
MassMutual's general account. Because of exemptive and exclusionary
provisions, interests in the Guaranteed Principal Account, which is part of
MassMutual's general account, are not registered under the Securities Act of
1933. Also, the general account is not registered as an investment company
under the Investment Company Act of 1940.
3. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
consistently by the Segment in preparation of the financial statements in
conformity with generally accepted accounting principles.
7
<PAGE>
Notes To Financial Statements (Continued)
A. Investment Valuation
Investments in MML Trust and Oppenheimer Trust are each stated at market
value which is the net asset value of each of the respective underlying
funds.
B. Accounting for Investments
Investment transactions are accounted for on trade date and identified cost
is the basis followed in determining the cost of investments sold for
financial statement purposes. Dividend income is recorded on the ex-dividend
date.
C. Federal Income Taxes
Operations of the Segment form a part of the total operations of MassMutual,
and the Segment is not taxed separately. MassMutual is taxed as a life
insurance company under the provisions of the 1986 Internal Revenue Code, as
amended. The Segment will not be taxed as a "regulated investment company"
under Subchapter M of the Internal Revenue Code. Under existing federal law,
no taxes are payable on investment income and realized capital gains
attributable to contracts which depend on the Segment's investment
performance (the "Contracts"). Accordingly, no provision for federal income
tax has been made. MassMutual may, however, make such a charge in the future
if an unanticipated change of current law results in a company tax liability
attributable to the Segment.
D. Annuitant Mortality Fluctuation Reserve
The Segment maintains a reserve as required by regulatory authorities to
provide for mortality losses incurred. The reserve is increased quarterly
for mortality gains and its proportionate share of any increases in value.
The reserve is charged quarterly for mortality losses and its proportionate
share of any decreases in value. Transfers to or from MassMutual are then
made quarterly to adjust the Segment. Net transfers from MassMutual to the
Segment totaled $218,271 and $314,296 for the years ended December 31, 1998
and 1997. The reserve is subject to a maximum of 3% of the Segment's annuity
reserves. Any mortality losses in excess of this reserve will be assumed by
MassMutual. The reserve is not available to owners of Contracts except to
the extent necessary to cover mortality losses under the Contracts.
E. Annuity Reserves
Annuity reserves are developed by using accepted actuarial methods and are
computed using the 1971 Individual Annuity Mortality Table, as modified.
F. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
4. CHARGES FOR MORTALITY AND EXPENSE RISKS AND ADMINISTRATIVE EXPENSES
Daily charges are made which are currently equivalent on an annual basis to
1.30% of the net asset value of the Segment (the "Net Asset Value"). The
mortality and expense risk part of this charge is made daily at an annual
rate which is currently equal to 1.15%, and will not exceed 1.25% of the Net
Asset Value. The administrative expense part of this charge is made daily at
an annual rate of 0.15% of the Net Asset Value.
8
<PAGE>
Notes To Financial Statements (Continued)
5. Distribution Agreement
MML Distributors, LLC ("MML Distributors"), a wholly-owned subsidiary of
MassMutual, serves as the principal underwriter of the contracts pursuant
to an underwriting and servicing agreement among MML Distributors,
MassMutual and Separate Account I. MML Distributors is registered with the
Securities and Exchange Commission (the "SEC") as a broker-dealer under the
Securities Exchange Act of 1934 and is a member of the National Association
of Securities Dealers, Inc. (the "NASD"). MML Distributors may enter into
selling agreements with other broker-dealers who are registered with the
SEC and are members of the NASD in order to sell the contracts.
MML Investors Services, Inc. ("MMLISI"), a wholly-owned subsidiary of
MassMutual, serves as co-underwriter of the contracts pursuant to
underwriting and servicing agreements among MMLISI, MassMutual and Separate
Account 1. MMLISI is registered with the SEC as a broker-dealer under the
Securities Exchange Act of 1934 and is a member of the NASD. Registered
representatives of MMLISI sell the contracts as authorized variable life
insurance agents under applicable state insurance laws.
Pursuant to the underwriting and servicing agreements, commissions or other
fees due to registered representatives for selling and servicing the
contracts are paid by MassMutual on behalf of MML Distributors or MMLISI.
MML Distributors and MMLISI also receive compensation for their activities
as underwriters of the contracts.
6. CHARGES/DEDUCTIONS FOR ADMINISTRATIVE CHARGES, CONTINGENT DEFERRED SALES
CHARGES AND PREMIUM TAXES
<TABLE>
<CAPTION>
MML MML Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Global Strategic
For The Year Ended Equity Market Bond Blend Appreciation Securities Bond
December 31, 1998 Division Division Division Division Division Division Division
- ----------------------------- ------------ ----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross contract
payments $234,397,808 $42,996,327 $25,800,775 $226,333,711 $ 78,706,159 $ 50,003,642 $ 24,017,166
Less deduction for
premium taxes 63,443 11,637 6,983 61,261 21,303 13,534 6,500
------------ ----------- ----------- ------------ ------------ ------------ ------------
Net contract payments $234,334,365 $42,984,690 $25,793,792 $226,272,450 $ 78,684,856 $ 49,990,108 $ 24,010,666
============ =========== =========== ============ ============ ============ ============
Administrative and contingent
deferred sales charges $ 3,928,657 $ 230,496 $ 778,593 $ 4,707,537 $ 764,333 $ 395,028 $ 102,820
============ =========== =========== ============ ============ ============ ============
<CAPTION>
MML MML Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Global Strategic
For The Year Ended Equity Market Bond Blend Appreciation Securities Bond
December 31, 1997 Division Division Division Division Division Division Division
- ----------------------------- ------------ ----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross contract
payments $220,705,230 $40,850,118 $17,530,970 $207,466,192 $ 85,323,412 $ 52,908,085 $ 25,876,795
Less deduction for
premium taxes 73,451 13,595 5,834 69,045 28,396 17,608 8,612
------------ ----------- ----------- ------------ ------------ ------------ ------------
Net contract payments $220,631,779 $40,836,523 $17,525,136 $207,397,147 $ 85,295,016 $ 52,890,477 $ 25,868,183
============ =========== =========== ============ ============ ============ ============
Administrative and contingent
deferred sales charges $ 3,163,446 $ 169,648 $ 714,396 $ 4,417,293 $ 493,582 $ 221,028 $ 51,547
============ =========== =========== ============ ============ ============ ============
</TABLE>
7. PURCHASES AND SALES OF INVESTMENTS
<TABLE>
<CAPTION>
MML MML Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Global Strategic
For The Year Ended Equity Market Bond Blend Appreciation Securities Bond
December 31, 1998 Division Division Division Division Division Division Division
- ----------------------------- ------------ ----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cost of purchases $219,563,529 $ 67,060,113 $31,632,462 $232,603,112 $ 58,415,868 $ 55,651,970 $ 21,505,631
Proceeds from sales 74,617,115 51,975,605 8,686,015 101,190,195 10,704,100 9,718,250 7,530,413
</TABLE>
9
<PAGE>
Notes To Financial Statement (Continued)
8. NET INCREASE (DECREASE) IN ACCUMULATION UNITS
<TABLE>
<CAPTION>
MML MML Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Global Strategic
For The Year Ended Equity Market Bond Blend Appreciation Securities Bond
December 31, 1998 Division Division Division Division Division Division Division
- ----------------------------- ------------ ----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Units purchased 59,734,461 26,754,409 11,399,352 71,075,656 44,410,224 37,130,101 17,833,894
Units withdrawn and
transferred to
Guaranteed Principal Account (51,636,826) (11,662,859) (7,400,382) (72,902,856) (20,774,729) (18,331,820) (5,759,178)
Units transferred between
divisions 3,612,016 (7,379,349) 3,535,629 (3,097,482) (359,270) 710,523 (2,540,000)
Units transferred to annuity
reserves (48,546) - - (78,931) (17,205) (6,958) -
------------ ----------- ----------- ------------ ------------ ------------ ------------
Net increase (decrease) 11,661,105 7,712,201 7,534,599 (5,003,613) 23,259,020 19,501,846 9,534,716
Units, at beginning of
the year 413,935,012 44,060,821 52,035,004 574,212,871 177,604,099 157,068,622 49,826,459
------------ ----------- ----------- ------------ ------------ ------------ ------------
Units, at end of the period 425,596,117 51,773,022 59,569,603 569,209,258 200,863,119 176,570,468 59,361,175
=========== ========== =========== ============ ============ ============ ============
<CAPTION>
MML MML Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Global Strategic
For The Year Ended Equity Market Bond Blend Appreciation Securities Bond
December 31, 1998 Division Division Division Division Division Division Division
- ----------------------------- ------------ ----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Units purchased 66,867,037 26,589,800 8,539,512 75,090,722 53,068,628 44,442,770 20,330,179
Units withdrawn and
transferred to
Guaranteed Principal
Account (36,091,954) (8,646,887) (5,122,869) (60,240,402) (10,630,862) (9,432,090) (2,867,197)
Units transferred between
divisions 9,184,319 (25,151,983) (3,762,518) (6,512,498) 9,198,583 14,374,660 1,981,363
Units transferred to annuity
reserves (107,936) (1,199) (22,665) (425,149) (21,543) (19,321) (22,968)
------------ ----------- ----------- ------------ ------------ ------------ ------------
Net increase (decrease) 39,851,466 (7,210,269) (368,540) 7,912,673 51,614,806 49,366,019 19,421,377
Units, at beginning of
the year 374,083,546 51,271,090 52,403,544 566,300,198 125,989,293 107,702,603 30,405,082
------------ ----------- ----------- ------------ ------------ ------------ ------------
Units, at end of the
period 413,935,012 44,060,821 52,035,004 574,212,871 177,604,099 157,068,622 49,826,459
============ =========== =========== ============ ============ ============ ============
</TABLE>
9. CONSOLIDATED MASSACHUSETTS MUTUAL VARIABLE ANNUITY SEPARATE ACCOUNT 1
As discussed in Note 1, the financial statements only represent activity of
the Flex Extra (Qualified) segment of the Massachusetts Mutual Variable
Annuity Separate Account 1. The combined net assets as of December 31, 1998
for the Massachusetts Mutual Variable Annuity Separate Account 1, which
includes the segments pertaining to the Variable Annuity Fund 4,
Flex-Annuity IV (Qualified) and Flex Extra (Qualified) are as follows:
<TABLE>
<CAPTION>
MML MML Oppenheimer Oppenheimer
MML Money Managed MML Capital Global
Equity Market Bond Blend Appreciation Securities
Division Division Division Division Division Division
-------------- ------------ ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Total assets $1,960,599,721 $96,147,133 $150,710,305 $2,188,485,498 $ 385,729,266 $ 254,924,173
Total liabilities 9,803,903 20,633 530,032 9,071,364 1,728,181 1,135,490
-------------- ------------ ------------ -------------- ------------- -------------
Net assets $1,950,795,818 $96,126,500 $150,180,273 $2,179,414,134 $ 384,001,085 $ 253,788,683
============== ============ ============ ============== ============= =============
Net assets consist of:
Accumulation units--Value $1,949,334,602 $96,038,348 $150,046,125 $2,176,973,482 $ 383,934,442 $ 253,758,932
Annuity reserves 1,461,216 88,152 134,148 2,440,652 66,643 29,751
-------------- ------------ ------------ -------------- ------------- -------------
Net assets $1,950,795,818 $96,126,500 $150,180,273 $2,179,414,134 $ 384,001,085 $ 253,788,683
============== ============ ============ ============== ============= =============
<CAPTION>
*Oppenheimer
Strategic
Bond
Division
------------
<S> <C>
Total assets $ 80,170,327
Total liabilities 231,388
------------
Net assets $ 79,938,939
============
Net assets consist of:
Accumulation units--Value $ 79,915,278
Annuity reserves 23,661
------------
Net assets $ 79,938,939
============
</TABLE>
*Offered on the Flex Extra Contracts only.
10
<PAGE>
Report Of Independent Accountants
To the Contract Owners of Massachusetts Mutual Variable Annuity Separate
Account 1 and the Board of Directors of Massachusetts Mutual Life Insurance
Company
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of each of the divisions of the
Flex Extra (Qualified) segment of Massachusetts Mutual Variable Annuity Separate
Account 1 (hereafter referred to as "the Account") at December 31, 1998, the
results of each of their operations for the year then ended and the changes in
each of their net assets for each of the two years in the period then ended, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Account's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of investments owned at
December 31, 1998 by correspondence with the investment companies, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Springfield, Massachusetts
February 25, 1999
11
<PAGE>
MML SERIES INVESTMENT FUND
TO OUR SHAREHOLDERS
ANOTHER YEAR OF EXPANSION IN THE U.S.
1998 marked the eighth consecutive year of economic expansion in the United
States, once again confounding those who were looking for the economy to falter.
Real growth of gross domestic product for the year is likely to be somewhere
around 3.75%, a shade under 1997's 3.9%. While economic growth continued,
inflation remained virtually dormant, with the Consumer Price Index rising about
1.7%. Producer prices, which often lead changes in consumer prices, actually
declined in 1998. Interest rates fell for most of the year, ending December at
near-record low levels. Contributing to the easing of interest rates was the
fact that the U.S. government had a $70 billion surplus in fiscal year 1998
after several decades of deficits. Another surplus is forecast for the current
fiscal year.
Consumption and fixed investment both contributed strongly to the expansion in
1998. Thanks to solid income growth and another banner year for large
capitalization stocks, consumers were able to maintain spending at high levels
all year. Fixed investment benefited from steady increases in residential
construction and producers' durable equipment mainly computers and other
business equipment. Investment in technology contributed not only to growth but
also to gains in productivity.
The only broad-based drag on economic growth was the trade deficit, which grew
by close to $100 billion in 1998. The deficit was exacerbated by strong domestic
growth, which spurred imports, and by serious financial problems abroad, which
dampened foreign demand for U.S. goods and services and therefore limited U.S.
exports.
OVERSEAS: SOME PROGRESS, SOME NEW CHALLENGES
In Asia, where severe financial problems first came to a head in 1997, there was
some progress. The stock markets of Thailand and South Korea rebounded
noticeably in 1998, indicating that investors are beginning to overcome their
generalized fear of Southeast Asian markets and instead are making investment
decisions on a nation-specific basis. This is a key prerequisite for meaningful
recovery in the region.
In Japan, political leaders finally adopted an aggressive plan to stimulate the
economy and reform the country's ailing banking system. Policy is now moving in
the proper direction, but it will be a long road back to economic health for
Japan.
One key concern continues to be the extent to which the problems in Asia will
spread to other emerging markets, and eventually to the U.S. This concern gained
renewed force in August, when Russia announced a substantial devaluation of its
currency, the ruble, and defaulted on much of its foreign debt. South America,
particularly Brazil, also gave investors cause for concern in 1998.
EQUITIES TAKE A HIT BUT FINISH STRONG
U.S. equities were uniformly strong during the first three months of the year,
as concerns about Asia receded into the background and investors focused on
strong economic growth. In April, a two-tiered market emerged, with large-
capitalization technology and other growth issues leading the S&P 500 Index and
the Dow Jones Industrial Average higher through mid-July. The Russell 2000
Index, however, trended lower throughout the second quarter, indicating that
many small-capitalization stocks were not participating in the rally. Indeed,
even the S&P 500's gains, at its high water mark in July, were largely due to
its twenty largest components. The rally, therefore, was quite narrow.
In the third quarter, amid Russia's financial difficulties and renewed concerns
about Asia, stocks turned south, giving up all they had gained earlier in the
year and then some in many cases. A flight to quality ensued in which investors
shunned stocks in general. Especially hard hit were small-capitalization issues,
technology stocks, and other sectors perceived to have more than average risk.
With the financial markets reeling, the Federal Reserve Board stepped in,
lowering interest rates three times in three months. Stocks responded with a
vigorous fourth-quarter rally, again concentrated primarily in growth stocks.
The Dow Jones Industrial Average, S&P 500 Index, NASDAQ Composite Index and
Russell 2000 Index ended 1998 with returns of 18.17%, 28.58%, 39.63% and 2.55%,
respectively. The disparity in performance between the different market segments
is especially evident in the latter two indices.
BONDS RIDE THE ROLLER COASTER, TOO
Bonds were by no means immune to the third quarter's volatility. Up to that
point, interest rates, which began the year at low levels, had trended
irregularly lower, as the yield curve gradually flattened. Although first-half
credit spreads widened in January and June, new issuance remained at relatively
healthy levels due to the low absolute level of interest rates.
2
<PAGE>
In August, trouble began brewing in the credit markets when Russia's devaluation
and default caused a number of hedge funds to liquidate some large credit
positions. Panic ensued, and spreads widened dramatically, especially between
corporate issues and Treasuries, as investors sold corporate securities and fled
to the safety of Treasury securities.
As happened with equities, the credit markets recovered somewhat when the
Federal Reserve Board lowered interest rates. Spreads narrowed considerably by
year-end, although not nearly to their levels before the crisis.
LOOKING AHEAD TO 1999
The central economic event of 1999 is likely to be a mild slowdown in the U.S.
economy. The lower rate of expansion in non-farm payrolls in the second half of
1998, together with the associated easing of personal income growth, makes it
unlikely that consumers will be able to keep spending at 1998's brisk rate.
Softness in corporate earnings, a symptom of reduced consumer spending, may be
evident. Federal Reserve Board policy, which was extremely accommodating in
response to the 1998 crisis in the financial markets, has returned to a neutral
stance and will likely remain so until circumstances clearly mandate a change.
Inflation may rise a little but should remain unthreatening. In this
environment, MassMutual should continue to serve shareholders well with its
focus on thorough research and identifying value in the financial markets.
/s/ Stuart H. Reese
Stuart H. Reese
President
MML Series Investment Fund
January 29, 1999
3
<PAGE>
MML EQUITY FUND
HOW DID THE FUND PERFORM OVER THE PAST YEAR?
The Fund performed reasonably well, given the backdrop of 1998's volatile
markets. For the 12 months ended December 31, 1998, the Fund had a net return of
16.20%*. The Fund's return trailed the 28.58% return of the S&P 500 Index, a
market capitalization-weighted, unmanaged index of 500 common stocks, while
surpassing the 14% gain of the average diversified equity fund monitored by
Lipper Analytical Services. The S&P 500's gains in 1998 were driven primarily by
the 20 largest companies in that Index, many of which the fund cannot invest in
either because their stock prices exceed our value parameters or they pay no
dividends.
WHAT WAS THE INVESTMENT ENVIRONMENT IN 1998?
It was a tumultuous year, to be sure. After superlative gains in the previous
three years, it looked as though the stock market would be hard-pressed to
perform well again in 1998. Against those odds, however, popular averages such
as the Dow Jones Industrial Average and the S&P 500 Index surged ahead through
mid-July, gaining in excess of 20%. At that point, however, many multinational
companies began to report lower earnings or to scale back their earnings
forecasts due to the Asian financial crisis. The most negative news during the
period, though, came from Russia, which substantially devalued its currency and
defaulted on much of its foreign debt. Worldwide equity markets responded by
plunging in August, as the S&P 500 relinquished all of the ground it gained
earlier in the year.
In September, October and November, the Federal Reserve Board (Fed) moved
aggressively to cut short-term interest rates, which helped to get the markets
back on track. The October easing had a particularly beneficial effect because
it was a surprise move that occurred between meetings of the Fed's Open Market
Committee, the group that decides the fate of short-term interest rates. As a
result, stocks came roaring back in the fourth quarter, with the S&P 500 gaining
21.3% in that quarter alone. However, the lion's share of the gains was once
again concentrated in the Index's larger growth stocks. More than 200 stocks in
the S&P 500 - about 40% posted price declines during 1998, and operating
earnings for the Index as a whole are likely to be flat or slightly down for the
year.
HOW WAS THE FUND'S STRATEGY EMPLOYED DURING THE YEAR?
Shortly after mid-year, we reduced some of the industrial exposure in the
portfolio, selling positions in specialty chemical companies, Lubrizol and Nalco
Chemical. With the economy appearing to be slowing down, we felt that the
earnings of these companies would suffer significantly in the short term. After
stocks retreated in the third quarter, most stocks were far more attractive on a
value basis. Our buying was selective and included Burlington Resources, Conoco
(which was spun off from Dupont), Newell Corp, and American Home Products.
WHICH STOCKS DID WELL FOR THE FUND, AND WHICH WERE DISAPPOINTING?
Schering Plough, part of a strong health care sector, was our top performer for
the year, with a gain of 78%. Although we took profits on some of this position
when the stock reached what we considered to be relatively high valuation
levels, it is still one of the Fund's top-ten holdings. Bristol Myers-Squibb and
Becton Dickinson were two other health care holdings that turned in strong
performances for the year. IBM was part of a strong technology group, gaining
77%. General Electric, another top-ten holding, also helped the Fund's
performance. Although one of the largest companies in the world, GE is also one
of the best managed and has actually accelerated its earnings growth rate in the
past five years, a rarity for a company of GE's size. McGraw-Hill and Pitney
Bowes were two other top-ten holdings that finished the year with good gains.
Many of our laggards this year were energy stocks that were hurt by weak oil and
gas prices. Kerr-McGee, Unocal, and USX-Marathon Group all exemplified this
trend. Minnesota Mining & Manufacturing, a diversified manufacturing company,
was hurt by its Asian exposure.
WHAT IS YOUR OUTLOOK?
Looking ahead to 1999, we have some concerns. The market is unlikely to deliver
yet another year of above-20% gains. With the U.S. economy apparently slowing,
corporations may not be able to deliver the kind of earnings growth that Wall
Street wants to see. Furthermore, as mentioned previously, the S&P 500's
exceptional performance has been concentrated in relatively few large-
capitalization growth stocks. In order for the market's advance to have staying
power, it must expand to include more than a select few issues. Such an
expansion should likely benefit the Fund, which sticks to moderately valued
securities that could be attractive to investors who become disenchanted with
those highly valued issues that have been market leaders for the past several
years.
On the positive side, inflation remains low and interest rates are favorable.
The Federal Reserve Board has shown its determination to keep the economy from
falling into recession, and 1998's three interest rate cuts may be followed by
more if economic growth shows signs of faltering. In a slower-growth environment
such as we seem to be entering, the Fund's emphasis on value should enable it to
continue to deliver competitive returns for shareholders.
4
<PAGE>
* The return reflects changes in the net asset value per share without the
deduction of any insurance product charges. The inclusion of these charges would
have reduced the performance shown here. Past performance is no indication of
future results.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
STANDARD & POORS
FUND 500 INDEX
<S> <C>
1/1/89 10000 10000
1989 12304 13166
1990 12241 12757
1991 15370 16645
1992 16980 17913
1993 18597 19717
1994 19359 19875
1995 25386 27482
1996 30527 33795
1997 39255 45072
1998 45614 57954
</TABLE>
MML BLEND FUND
HOW DID THE FUND PERFORM OVER THE PAST YEAR?
For the twelve months ended December 31, 1998, the Fund had a net return of
13.56%*, trailing the 15.1% gain recorded by the Lipper Balanced Fund Index, an
unmanaged index of stocks and bonds. Large-capitalization growth stocks once
again garnered the lion's share of the gains compared to the value-oriented
stocks in which the Fund's equity portfolio invests. This hurt performance
relative to the Index. Volatility increased substantially during the third
quarter, and the Fund's fixed-income holdings helped cushion the declines in
equities that occurred during that period.
CAN YOU EXPLAIN THE FUND'S ALLOCATIONS AMONG THE THREE ASSET CLASSES DURING THE
YEAR?
The target allocation for stocks decreased from 61% to 59% at the end of the
year. The allocation for bonds was increased from 19% at the beginning of 1998
to 23% at the end of the year, while the percentage of money market securities
was decreased from 20% to 18% over the same period. In response to widening
spreads between U.S. Treasury securities and other credit instruments in the
third quarter, we felt that the Fund might be able to take advantage of some
compelling values in the bond market.
WHAT WAS THE INVESTMENT ENVIRONMENT IN 1998?
It was a tumultuous year. Popular averages such as the Dow Jones Industrial
Average and the S&P 500 Index surged ahead through mid-July, gaining in excess
of 20%. At that point, however, concerns over the earnings of multinational
companies began to surface due to the Asian financial crisis. The most negative
news during the period, though, came from Russia, which substantially devalued
its currency and defaulted on some of its debt. The S&P 500 Index relinquishing
all of the ground it gained earlier in the year. In the fixed-income markets,
there was a flight to quality, with U.S. Treasuries rallying sharply and spreads
widening dramatically.
In September, October and November, the Federal Reserve Board (Fed) cut short-
term interest rates. This helped fuel a resurgency in stocks which came roaring
back in the fourth quarter, with the S&P 500 gaining 21.3%. The Fed's actions
also helped the fixed-income markets recover to some degree. Spreads between
Treasuries and corporate securities narrowed in November and December, although
not nearly to their pre-August levels.
CAN YOU COMMENT ON SPECIFIC STOCK HOLDINGS AND EXPLAIN CHANGES MADE DURING THE
YEAR.
The Fund had extensive health care holdings, and these generally performed well.
Pharmaceutical giant Schering-Plough, was a star performer, as were two other
health care holdings Bristol Myers-Squibb and Becton Dickinson. Other stocks
that helped performance included IBM, GE, McGraw-Hill and Pitney Bowes.
One of our weaker sectors in 1998 was energy, where stocks were hurt by weak oil
and gas prices. Examples of this trend were Kerr-McGee, and Unocal. Minnesota
Mining & Manufacturing, a diversified manufacturer of industrial, commercial and
health care products, was hurt by its Asian exposure.
In the second half of the year, we sold positions in specialty chemical
companies such as Lubrizol and Nalco Chemical. We felt that the earnings of
these companies would suffer significantly in the short term if economic growth
continued to slow. After stocks retreated in the third quarter, we bought
selectively, initiating or increasing positions in Burlington Resources, Conoco
(which was spun off from Dupont), Newell Corp, Pharmacia & Upjohn and American
Home Products.
5
<PAGE>
HOW WAS THE BOND PORTFOLIO POSITIONED, AND WHAT IMPACT DID THIS HAVE ON THE
FUND?
The largest sector allocation for the bond portfolio was corporate securities.
The Fund's assets grew dramatically during 1998, and much of this new money went
into BBB-rated corporate securities, especially in the second half, when spreads
reached their widest levels. Widening spreads hurt the issues already in the
Fund's portfolio but enabled us to add new purchases at very favorable spread
levels.
The other large sector allocation for the bond portfolio, and the best
performing sector for the year, was Treasuries. We increased Treasury holdings
as interest rates gradually worked lower in the first half. During the huge
rally in Treasuries in the second half of the year, we took some profits,
reducing Treasury holdings by the end of December. The bulk of the proceeds was
reinvested in corporate securities with attractive spreads.
WHAT IS YOUR OUTLOOK?
In 1999, a slowing economy and sluggish growth in corporate profits may limit
gains in stocks for much of the year. One factor that could counteract these
trends is further easing of interest rates by the Federal Reserve Board.
Moreover, the kind of stocks that meet the Fund's value criteria are less
vulnerable to serious damage from unfavorable earnings surprises than the
market-leading growth stocks, whose rich valuations leave little room for
disappointing news. On the fixed income side, we continue to carry an
approximately 60% weighting in spread product versus about 44% for our benchmark
bond index, a reflection of our expectation that spreads will narrow during
1999. Overall, the Fund is well positioned for a slowing but still-growing
economy such as we are likely to find in 1999.
* The return reflects changes in the net asset value per share without the
deduction of any insurance product charges. The inclusion of these charges would
have reduced the performance shown here. Past performance is no indication of
future results.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
LIPPER STANDARD LEHMAN
BALANCED & POORS BROTHERS GOV'T/
FUND FUND INDEX 500 INDEX CORP. INDEX
<S> <C> <C> <C>
1/1/89 10000 10000 10000 10000
1989 11996 11970 13168 11423
1990 12280 12049 12757 12368
1991 15228 15161 16645 14368
1992 16654 16280 17913 15452
1993 18269 18162 19717 17157
1994 18721 17710 19975 16654
1995 23079 22065 27482 19740
1996 26299 24936 33795 20312
1997 31793 29695 45072 22293
1998 36104 34133 57954 24404
</TABLE>
MML MANAGED BOND FUND
HOW DID THE FUND PERFORM OVER THE PAST YEAR?
For the 12 months ended December 31, 1998, the Fund had a net return of 8.14%*.
The Fund's return lagged the 9.47% gain recorded by the Lehman Brothers
Government/Corporate Bond Index. Relative to the Index, a larger percentage of
the Fund's assets were invested in securities that offered a risk premium to
U.S. Treasuries. This heavier allocation to corporate securities and mortgage
backed instruments hurt the Fund's performance versus the Index.
WHAT WAS THE MARKET ENVIRONMENT DURING THE PERIOD?
Overall, interest rates declined in 1998, with the steepest declines coming in
the Treasury markets. This phenomenon was particularly evident in the second
half of the year, when both stock and bond markets were extremely volatile and a
flight to quality caused investors to favor U.S. Treasuries over other
securities. Several factors were at work to create this environment. For one
thing, the Asian financial crisis began to manifest itself in the form of lower
earnings and earnings forecasts for many U.S. corporations. There were also
concerns that the round of currency devaluations in Asia would spread to Brazil
and other South American countries. A particularly negative development occurred
in August, when Russia announced a substantial devaluation of its currency, the
ruble, and defaulted some of its debt. Finally, a prominent U.S. hedge fund
nearly failed and was forced to liquidate some massive positions, causing
dislocations in the credit markets.
In response to these events, world stock markets plunged, Treasuries of all
maturities rallied sharply, and spreads between Treasuries and other credit
instruments, particularly corporate securities, widened, as investors shunned
risk and sought safety. The 30-year Treasury bond, for example, briefly edged
below 5%, a level not seen in over 30 years.
6
<PAGE>
However, the Federal Reserve Board responded quickly to the crisis, reducing
short-term interest rates in September, October, and November. These
interventions helped the markets recover to some degree toward the end of the
year. Spreads between Treasuries and corporate securities narrowed some in
November and December.
HOW WAS THE FUND POSITIONED DURING THE PERIOD?
The Fund's assets grew during 1998, from $205 million at the end of 1997 to $254
million twelve months later. Most of this growth occurred during the second half
of the year and most of this new money was invested in corporate securities and
mortgage backed instruments. Corporate purchases during the last six months of
the year were focused along the yield curve when spreads reached their widest
levels. Companies were added to the portfolio based upon our bottom-up analysis
of the credit and were weighed against the available alternatives. Transactions
during the second half included purchases of issues rated either A or BBB. The
issues purchased included: IMC Global, Anheuser Busch, Conagra, Heller
Financial, Occidental Petroleum, CSX Corp., and J. Seagram & Sons.
We reduced our allocation to the mortgage backed sector from 20.0% to 12.2%
during the first nine months of the year. Adjustable rate mortgage securities
were sold during the summer months as interest rates were drifting lower. These
securities had performed well and our analysis indicated that they were becoming
overvalued. Following the blow-up in spreads in the third quarter, we gradually
increased our allocation to the mortgage backed sector. We invested $9.0 million
in AAA rated commercial mortgage backed securities. This sector had widened
significantly and the underlying collateral suggested that this paper was
undervalued at the time. We also added to our holdings current coupon thirty-
year mortgage pass-through instruments. Pass-through spreads had widened to the
cheaper end of their historical ranges creating an attractive buying opportunity
for the fund.
WHAT IS YOUR OUTLOOK FOR 1999?
In 1998, we saw spreads on corporate securities that haven't occurred since the
1990 recession. At this point, the U.S. economy has slowed to some degree, but
there appears to be no recession on the horizon yet. Furthermore, we have a
Federal Reserve Board that has shown its determination to lower interest rates
in an attempt to fight off a recession in the United States. This scenario
implies heavier supply of new issues as corporate treasurers attempt to seek
lower financing costs, but credit deterioration might also be expected. If no
recession materializes, the spreads on the Fund's corporate securities should do
well in the coming year. Indeed, the mix of a moderately growing economy,
minimal inflation, and stable interest rates at near-record low levels should be
supportive of fixed income investments generally.
* The return reflects changes in the net asset value per share without the
deduction of any insurance product charges. The inclusion of these charges would
have reduced the performance shown here. Past performance is no indication of
future results.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
LEHMAN BROTHERS
FUND GOVERNMENT/CORPORATE INDEX
<S> <C>
1/1/89 10000 10000
1989 11283 11423
1990 12227 12368
1991 14284 14363
1992 15307 15452
1993 17114 17157
1994 16471 16554
1995 19624 19740
1996 20261 20312
1997 22269 22293
1998 24082 24404
</TABLE>
MML MONEY MARKET FUND
HOW DID THE FUND PERFORM DURING 1998?
The Fund returned 5.16%* for the 12 months ended December 31, 1998, slightly
ahead of the 4.86% return recorded by the money market funds average monitored
by Lipper Analytical Services. Although interest rates in the United States
declined during the period, the Fund's continued strong emphasis on credit
selection of Tier 1 securities - that is, rated in the highest rating category
of at least two nationally recognized statistical rating organization - enabled
it to outperform the Lipper average.
WHAT WAS THE MARKET ENVIRONMENT DURING THE PERIOD?
The first half of 1998 was relatively placid, as the U.S. economy continued to
grow moderately in spite of the slowing effects expected by many investors as a
result of the Asian financial crisis. Inflation remained in check, and interest
rates were stable and near record lows. At the short end of the fixed-income
market, Treasury Bill rates fell slightly, while Tier 1 issues rose a bit, with
spreads between Treasuries and 30-day Tier 1 commercial paper widening from 50
to 74 basis points at the end of June.
7
<PAGE>
In the third quarter, world financial markets became extremely volatile. For one
thing, corporate earnings began to show more evidence of susceptibility to the
slowdown in Asia. There was also increased concern about the Brazilian banking
system. However, the "straw that broke the camel's back" was Russia, which
unexpectedly devalued its currency and defaulted on some of its debt. Finally,
the near-failure of a prominent hedge fund added to investors' crisis mentality.
This confluence of events precipitated a worldwide flight to quality that drove
30-day Treasury Bills down to an average yield of 3.56% in October from 4.75% in
August, while the spread between Treasuries and 30-day Tier 1 commercial paper
ballooned to 158 basis points, reflecting the increased premium investors were
demanding to accept the added risk of Tier 1 investments.
The markets settled down to some degree in the fourth quarter, primarily in
response to three cuts in short-term interest rates by the Federal Reserve Board
(Fed) in September, October, and November. The October easing had a particularly
beneficial effect because it was a surprise move that occurred between meetings
of the Fed's Open Market Committee, the group that decides the fate of short-
term interest rates.
HOW DID YOU POSITION THE FUND'S PORTFOLIO THROUGHOUT THIS TURMOIL?
The portfolio was invested in Tier I investments throughout 1998. This sector,
despite its inherent high quality, nonetheless widened versus comparable
Treasury Bills. This widening was a direct result of credit concern precipitated
by worldwide financial and economic problems experienced during 1998. Despite
this volatility the U.S. economy remains in overall sound condition. As in
previous years, the average duration of its holdings was in line with the
IBC/Donohue Universe, an index that we use as a benchmark for that purpose.
WHAT IS YOUR OUTLOOK FOR 1999?
1999 should be an interesting year. The U.S. economy has continued to surprise
investors with its resilience gross domestic product grew at the rate of 3.7%
estimated for 1998 compared to 3.8% for 1997 and the Federal Reserve Board
proved that it will move aggressively to lower interest rates if economic growth
appears threatened. As of the end of 1998, the Fed was in a holding pattern as
it sought to evaluate the effects of its three interventions in the second half
of 1998. Meanwhile, Japanese interest rates are rising, and we will have to see
if that prompts some repatriation of investment assets to Japan, which would
tend to boost U.S. interest rates. Another wild card is the Euro - the common
currency of the European Monetary Union - which debuted on January 1, 1999. Some
experts have speculated that the Euro might rival the U.S. dollar as a reserve
currency, and that a significant amount of funds might flow from U.S. dollar-
denominated assets into Euro-denominated assets. There is also the Y2K (Year
2000) problem, which could limit the supply of commercial paper towards the end
of the year. We remain confident, however, that regardless of the challenges
that arise during 1999, our credit expertise will enable the Fund to offer
shareholders competitive returns.
* The return reflects changes in the net asset value per share without the
deduction of any insurance product charges. The inclusion of these charges would
have reduced the performance shown here. Past performance is no indication of
future results.
MONEY MARKET FUND
Average Annual Total Return for the periods ended December 31, 1998
--------------------------------------------------------------------
---------------------------
-------------------- AVERAGE ANNUAL TOTAL RETURN -------------------
---------------------------
Money Market 1 Year 5 Year 10 Year
---------------------------
-------------------- 5.16% 4.95% 5.41% -------------------
---------------------------
---------------------------
-------------------- AVERAGE ANNUAL TOTAL RETURN -------------------
---------------------------
Lipper Taxable Money
Market Fund Average 1 Year 5 Year 10 Year
---------------------------
-------------------- 4.86% 4.78% 5.22% -------------------
---------------------------
Past performance is not predictive of future performance
--------------------------------------------------------------------
The Lipper Money Market Average is an Index comprised of all the Funds
within the money market investment objective.
8
<PAGE>
MML SERIES INVESTMENT FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MML MML
MML MONEY MANAGED MML
EQUITY MARKET BOND BLEND
FUND FUND FUND FUND
---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Investments at value (See Schedule of Investments)
(Notes 2A, 2B and 5)
Equities (Identified cost: $1,762,028,515;
$946,470,658; respectively) $ 2,956,278,484 $ - $ - $ 1,771,923,501
Bonds (Identified cost: $227,587,529;
$652,206,715 respectively) - - 236,700,368 676,854,320
Short Term Investments (Identified cost: $129,170,943;
$ 179,325,017; $ 20,544,715; $ 541,867,659 respectively) 129,096,673 179,325,017 20,545,620 541,828,333
---------------- ---------------- ---------------- ---------------
TOTAL INVESTMENTS 3,085,375,157 179,325,017 257,245,988 2,990,606,154
---------------- ---------------- ---------------- ---------------
Cash 116 9,662 1,857 1,552
Receivable for investment securities sold 16,799,768 3,395,000 3,470,860 12,061,517
Interest and dividends receivable 4,282,404 - 2,731,084 11,493,688
Subscriptions receivable 323,427 710,599 3,300 1,182,234
Prepaid trustees' fees 395 725 725 1,054
---------------- ---------------- ---------------- ---------------
TOTAL ASSETS 3,106,781,267 183,441,003 263,453,814 3,015,346,199
---------------- ---------------- ---------------- ---------------
LIABILITIES
Payable for investment securities purchased 16,898,542 4,077,493 4,164,455 21,472,744
Redemptions payable 289,050 31,807 307,781 274,118
Dividends payable (Note 2C) 148,797,870 707,472 4,602,166 176,323,440
Investment management fee payable (Note 4) 2,570,570 181,237 267,852 2,583,055
Accrued liabilities 117,771 9,237 2,880 3,932
---------------- ---------------- ---------------- ---------------
TOTAL LIABILITIES 168,673,803 5,007,246 9,345,134 200,657,289
---------------- ---------------- ---------------- ---------------
NET ASSETS $ 2,938,107,464 $ 178,433,757 $ 254,108,680 $ 2,814,688,910
================ ================ ================ ===============
NET ASSETS CONSIST OF:
Series shares, (par value $.01 per share) (Note 6) $ 749,560 $ 1,784,338 $ 201,732 $ 1,122,143
Additional paid-in capital 1,742,862,631 176,647,329 244,673,174 1,963,229,471
Undistributed net investment income (Note 2C) 7,107 14,087 120,030 82,185
Undistributed net realized gain(loss) on
investments and forward commitments (Notes 2D and 3) 312,467 (11,997) - 193,989
Net unrealized appreciation on investments
(Note 2A) 1,194,175,699 - 9,113,744 850,061,122
--------------- ---------------- ---------------- ---------------
NET ASSETS $ 2,938,107,464 $ 178,433,757 $ 254,108,680 $ 2,814,688,910
=============== ================ ================ ===============
Outstanding series shares 74,956,036 178,433,757 20,173,153 112,214,264
=============== ================ ================ ===============
Net asset value per share $ 39.20 $ 1.00 $ 12.60 $ 25.08
=============== ================ ================ ===============
</TABLE>
See Notes to Financial Statements
9
<PAGE>
MML SERIES INVESTMENT FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MML MML
MML MONEY MANAGED MML
EQUITY MARKET BOND BLEND
FUND FUND FUND FUND
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Investment income (Note 2B)
Dividends $ 57,978,788 $ - $ - $ 35,442,402
Interest 6,576,537 8,412,554 14,982,005 70,820,208
---------------- --------------- --------------- ----------------
TOTAL INCOME 64,555,325 8,412,554 14,982,005 106,262,610
---------------- --------------- --------------- ----------------
EXPENSES
Investment management fee (Note 4) 10,216,960 693,453 1,034,821 10,258,337
Trustees' fees 29,832 27,236 27,398 26,935
Audit fees 32,605 22,316 28,707 37,193
Other expenses 648 - 1,824 2,616
---------------- --------------- --------------- ----------------
TOTAL EXPENSES 10,280,045 743,005 1,092,750 10,325,081
---------------- --------------- --------------- ----------------
Net investment income (Note 2C) 54,275,280 7,669,549 13,889,255 95,937,529
---------------- --------------- --------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FORWARD COMMITMENTS
Net realized gain (loss) on:
Investments (Notes 2A, 2B , 2C and 5) 94,862,149 (96) 1,139,377 152,811,311
Forward commitments (Notes 2D and 5) - - 17,790 -
---------------- --------------- --------------- ----------------
NET REALIZED GAIN (LOSS) 94,862,149 (96) 1,157,167 152,811,311
---------------- --------------- --------------- ----------------
Change in net unrealized appreciation on:
Investments (Note 2A) 271,601,536 - 2,666,019 109,417,834
---------------- --------------- --------------- ----------------
TOTAL CHANGE IN NET UNREALIZED APPRECIATION 271,601,536 - 2,666,019 109,417,834
---------------- --------------- --------------- ----------------
Net gain (loss) 366,463,685 (96) 3,823,186 262,229,145
---------------- --------------- --------------- ----------------
Net increase in net assets resulting
from operations $ 420,738,965 $ 7,669,453 $17,712,441 $ 358,166,674
================ =============== =============== ================
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
MML SERIES INVESTMENT FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998
----------------------------------------------------------------------------
MML MML
MML Money Managed MML
Equity Market Bond Blend
Fund Fund Fund Fund
--------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 54,275,280 $ 7,669,549 $ 13,889,255 $ 95,937,529
Net realized gain (loss)
on investments and
forward commitments 94,862,149 (96) 1,157,167 152,811,311
Net change in unrealized
appreciation on
investments 271,601,536 - 2,666,019 109,417,834
--------------- ------------- -------------- ---------------
NET INCREASE IN NET ASSETS
resulting from operations 420,738,965 7,669,453 17,712,441 358,166,674
Distributions to shareholders
FROM: (NOTE 2C)
Net investment income (54,285,000) (7,669,453) (13,769,225) (95,855,344)
Net realized gains (94,537,870) - (1,157,166) (152,423,440)
--------------- ------------- -------------- ---------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO
SHAREHOLDERS (148,822,870) (7,669,453) (14,926,391) (248,278,784)
NET INCREASE (DECREASE) IN
CAPITAL SHARE
TRANSACTIONS (NOTE 6) 302,750,092 37,268,372 46,006,732 232,973,529
--------------- ------------- -------------- ---------------
TOTAL INCREASE (DECREASE) 574,666,187 37,268,372 48,792,782 342,861,419
NET ASSETS, AT BEGINNING
OF YEAR 2,363,441,277 141,165,385 205,315,898 2,471,827,491
=============== ============= ============== ===============
NET ASSETS, at end
OF YEAR $ 2,938,107,464 $ 178,433,757 $ 254,108,680 $ 2,814,688,910
=============== ============= ============== ===============
Undistributed net investment
income (loss) included in
net assets at end of year $ 7,107 $ 14,087 $ 120,030 $ 82,185
=============== ============= ============== ===============
<CAPTION>
1997
--------------------------------------------------------------------
MML MML
MML Money Managed MML
Equity Market Bond Blend
Fund Fund Fund Fund
--------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 47,302,304 $ 7,354,327 $ 12,589,365 $ 85,269,939
Net realized gain (loss)
on investments and
forward commitments 143,291,447 (4,291) 1,090,224 162,884,955
Net change in unrealized
appreciation on
investments 347,666,835 - 4,682,106 209,070,059
--------------- --------------- ------------- -------------
NET INCREASE IN NET ASSETS
resulting from operations 538,260,586 7,350,036 18,361,695 457,224,953
Distributions to shareholders
FROM: (NOTE 2C)
Net investment income (47,301,234) (7,350,036) (12,621,479) (85,322,771)
Net realized gains (143,291,448) - - (162,679,164)
--------------- --------------- ------------- -------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO
SHAREHOLDERS (190,592,682) (7,350,036) (12,621,479) (248,001,935)
NET INCREASE (DECREASE) IN
CAPITAL SHARE
TRANSACTIONS (NOTE 6) 313,775,004 (4,065,657) 18,003,397 168,614,233
--------------- --------------- ------------- -------------
TOTAL INCREASE (DECREASE) 661,442,908 (4,065,657) 23,743,613 377,837,251
NET ASSETS, AT BEGINNING
OF YEAR 1,701,998,369 145,231,042 181,572,285 2,093,990,240
=============== =============== ============= =============
NET ASSETS, at end
OF YEAR $ 2,363,441,277 $ 141,165,385 205,315,898 2,471,827,491
=============== =============== ============= =============
Undistributed net investment
income (loss) included in net
assets at end of year $ 16,996 $ 13,560 $ (96,215) $ (53,700)
=============== =============== ============= =============
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
MML SERIES INVESTMENT FUND
FINANCIAL HIGHLIGHTS
Selected per share data for each series share outstanding throughout each year
ended December 31:
MML EQUITY FUND
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of year $ 35.443 $ 29.786 $ 25.924 $ 20.520 $ 20.510 $ 19.862 $ 18.735 $ 15.659 $ 16.764 $ 14.929
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.724 0.709 0.703 0.634 0.594 0.524 0.543 0.563 0.636 0.694
Net realized and unrealized
gain (loss) on investments 5.016 7.806 4.547 5.754 0.248 1.365 1.420 3.440 (0.722) 2.746
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Total from investment operations 5.740 8.515 5.250 6.388 0.842 1.889 1.963 4.003 (0.086) 3.440
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.724) (0.709) (0.703) (0.634) (0.594) (0.524) (0.543) (0.562) (0.665) (0.711)
Distribution from net realized gains (1.261) (2.149) (0.685) (0.350) (0.238) (0.717) (0.288) (0.365) (0.354) (0.894)
Distribution in excess of net
realized gains - - - - - - (0.005) - - -
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Total distributions (1.985) (2.858) (1.388) (0.984) (0.832) (1.241) (0.836) (0.927) (1.019) (1.605)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Net asset value:
End of year $ 39.198 $ 35.443 $ 29.786 $ 25.924 $ 20.520 $ 20.510 $ 19.862 $ 18.735 $ 15.659 $ 16.764
======= ======== ======== ======== ======== ======== ======== ======== ======== =======
Total return 16.20% 28.59% 20.25% 31.13% 4.10% 9.52% 10.48% 25.56% (0.51%) 23.04%
Net assets (in millions):
End of year $2,938.11 $2,363.44 $1,701.99 $1,248.90 $ 820.78 $ 663.09 $ 490.62 $ 355.04 $ 235.45 $ 226.41
Ratio of expenses to average
net assets 0.37% 0.35% 0.38% 0.41% 0.43% 0.44% 0.46% 0.48% 0.49% 0.50%
Ratio of net investment income
to average net assets 1.95% 2.03% 2.65% 2.89% 3.04% 3.23% 3.09% 3.43% 4.09% 4.30%
Portfolio turnover rate 14.03% 15.30% 11.42% 11.72% 9.99% 11.28% 9.07% 9.37% 13.50% 15.71%
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
MML SERIES INVESTMENT FUND
FINANCIAL HIGHLIGHTS (Continued)
MML MONEY MARKET FUND
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.500 0.051 0.049 0.054 0.038 0.027 0.034 0.059 0.078 0.088
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment operations 0.500 0.051 0.049 0.054 0.038 0.027 0.034 0.059 0.078 0.088
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.500) (0.051) (0.049) (0.054) (0.038) (0.027) (0.034) (0.059) (0.078) (0.088)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total distributions (0.500) (0.051) (0.049) (0.054) (0.038) (0.027) (0.034) (0.059) (0.078) (0.088)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value:
End of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Total return 5.16% 5.18% 5.01% 5.58% 3.84% 2.75% 3.48% 6.01% 8.12% 9.16%
Net assets (in millions):
End of year $178.43 $141.17 $145.23 $108.92 $ 91.79 $ 73.66 $ 84.56 $ 94.41 $114.59 $ 70.16
Ratio of expenses to average
net assets 0.49% 0.52% 0.52% 0.54% 0.55% 0.54% 0.53% 0.52% 0.54% 0.54%
Ratio of net investment income
to average net assets 5.05% 5.07% 4.92% 5.43% 3.81% 2.71% 3.42% 5.91% 7.80% 8.79%
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
MML SERIES INVESTMENT FUND
FINANCIAL HIGHLIGHTS (Continued)
MML MANAGED BOND FUND
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of year $ 12.410 $ 12.048 $ 12.448 $ 11.141 $ 12.405 $ 12.041 $ 12.219 $ 11.318 $ 11.354 $ 10.919
--------- --------- --------- -------- --------- --------- -------- --------- --------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.756 0.801 0.776 0.782 0.792 0.785 0.870 0.903 0.943 0.918
Net realized and unrealized
gain (loss) on investments
and forward commitments 0.236 0.356 (0.401) 1.307 (1.264) 0.618 0.001 0.916 (0.036) 0.454
--------- --------- --------- -------- --------- --------- -------- --------- --------- --------
Total from investment operations 0.992 1.157 0.375 2.089 (0.472) 1.403 0.871 1.819 0.907 1.372
--------- --------- --------- -------- --------- --------- -------- --------- --------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.749) (0.795) (0.775) (0.782) (0.792) (0.784) (0.869) (0.902) (0.943) (0.918)
Distribution from net realized gains (0.057) -- -- -- -- (0.255) (0.158) (0.016) -- (0.019)
Distribution in excess of net
realized gains -- -- -- -- -- -- (0.022) -- -- --
--------- --------- --------- -------- --------- --------- -------- --------- --------- --------
Total distributions (0.806) (0.795) (0.775) (0.782) (0.792) (1.039) (1.049) (0.918) (0.943) (0.937)
--------- --------- --------- -------- --------- --------- -------- --------- --------- --------
Net asset value:
End of year $ 12.596 $ 12.410 $ 12.048 $ 12.448 $ 11.141 $ 12.405 $ 12.041 $ 12.219 $ 11.318 $ 11.354
========= ========= ========= ======== ========= ========= ======== ========= ========= ========
Total return 8.14% 9.91% 3.25% 19.14% (3.76%) 11.81% 7.31% 16.66% 8.38% 12.83%
Net assets (in millions):
End of year $ 254.11 $ 205.32 $ 181.57 $ 158.70 $ 121.21 $ 129.11 $ 88.15 $ 66.98 $ 43.07 $ 40.03
Ratio of expenses to average
net assets 0.48% 0.47% 0.51% 0.52% 0.52% 0.54% 0.56% 0.57% 0.57% 0.59%
Ratio of net investment income
to average net assets 6.07% 6.06% 6.54% 6.63% 6.69% 6.37% 7.28% 7.96% 8.40% 8.35%
Portfolio turnover rate 41.18% 41.99% 46.12% 70.00% 32.77% 58.81% 39.51% 61.85% 69.93% 64.77%
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
MML SERIES INVESTMENT FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
MML BLEND FUND
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of year $ 24.080 $ 21.973 $ 20.519 $ 17.672 $ 18.305 $ 17.846 $ 17.307 $ 14.839 $ 15.428 $ 13.876
-------- --------- --------- -------- --------- --------- -------- --------- --------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.417 0.843 0.824 0.811 0.707 0.655 0.707 0.736 0.792 0.823
Net realized and unrealized
gain (loss) on investments
and forward commitments 2.360 3.692 1.990 3.246 (0.271) 1.057 0.880 2.771 (0.445) 1.921
-------- --------- --------- -------- --------- --------- -------- --------- --------- --------
Total from investment operations 2.777 4.535 2.814 4.057 0.436 1.712 1.587 3.507 0.347 2.744
-------- --------- --------- -------- --------- --------- -------- --------- --------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.416) (0.843) (0.824) (0.811) (0.707) (0.655) (0.707) (0.736) (0.811) (0.835)
Distribution from net realized gains (1.358) (1.585) (0.536) (0.399) (0.359) (0.598) (0.326) (0.303) (0.125) (0.357)
Distribution in excess of net
realized gains -- -- -- -- (0.003) -- (0.015) -- -- --
-------- --------- --------- -------- --------- --------- -------- --------- --------- --------
Total distributions (1.774) (2.428) (1.360) (1.210) (1.069) (1.253) (1.048) (1.039) (0.936) (1.192)
-------- --------- --------- -------- --------- --------- -------- --------- --------- --------
Net asset value:
End of year $ 25.083 $ 24.080 $ 21.973 $ 20.519 $ 17.672 $ 18.305 $ 17.846 $ 17.307 $ 14.839 $ 15.428
======== ========= ========= ======== ========= ========= ======== ========= ========= ========
Total return 13.56% 20.89% 13.95% 23.28% 2.48% 9.70% 9.36% 24.00% 2.37% 19.96%
Net assets (in millions):
End of year $2,814.69 $2,471.83 $2,093.99$1,823.14 $1,444.26 $1,296.54$1,013.28 $797.04 $574.15 $524.29
Ratio of expenses to average
net assets 0.37% 0.38% 0.38% 0.38% 0.39% 0.40% 0.41% 0.42% 0.44% 0.45%
Ratio of net investment income
to average net assets 3.43% 3.56% 3.87% 4.19% 3.93% 3.60% 4.07% 4.54% 5.37% 5.57%
Portfolio turnover rate 28.64% 21.20% 19.10% 30.78% 26.59% 20.20% 25.43% 26.92% 24.55% 22.39%
</TABLE>
Total return information shown in the Financial Highlights tables does not
reflect expenses that apply at the separate account level or to related
Insurance products. Inclusion of these changes would reduce the total return
figures for all periods shown.
See Notes to Financial Statements,
15
<PAGE>
MML EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
NUMBER MARKET
OF VALUE
SHARES (NOTE 2A)
----------- ------------
EQUITIES - 100.62%
AEROSPACE & DEFENSE - 3.27%
Raytheon Co. (Class A) 345,000 $ 17,832,188
Raytheon Co. (Class B) 560,000 29,820,000
TRW, Inc. 861,100 48,383,056
----------- ------------
1,766,100 96,035,244
----------- ------------
AGRIBUSINESS - 0.98%
Archer-Daniels-Midland Co. 1,668,182 28,671,878
----------- ------------
APPAREL, TEXTILES, SHOES - 1.24%
V F Corp. 780,000 36,562,500
----------- ------------
AUTOMOTIVE & PARTS - 3.49%
Ford Motor Co. 500,000 29,343,750
Genuine Parts Co. 1,100,250 36,789,610
Goodyear Tire & Rubber Co. 720,000 36,315,000
----------- ------------
2,320,250 102,448,360
----------- ------------
BANKING, SAVINGS & LOANS - 6.91%
The Bank of New York Co., Inc. 1,320,000 53,130,000
Comerica, Inc. 485,250 33,087,984
First Union Corp. 493,776 30,027,753
Pacific Century Financial Corp. 977,900 23,836,312
Wachovia Corp. 363,200 31,757,300
Wells Fargo Co. 782,000 31,231,125
----------- ------------
4,422,126 203,070,474
----------- ------------
BEVERAGES - 1.19%
Brown-Forman Corp. (Class B) 463,000 35,043,313
----------- ------------
CHEMICALS - 3.63%
Air Products and Chemicals 600,000 24,000,000
Bemis Corp. 625,300 23,722,319
Engelhard Corp. 1,325,000 25,837,500
Rohm & Haas 1,095,000 32,986,875
----------- ------------
3,645,300 106,546,694
----------- ------------
COMMUNICATIONS - 2.09%
GTE Corp. 946,800 61,542,000
----------- ------------
COMPUTERS & OFFICE EQUIPMENT - 10.18%
Electronic Data Systems 800,400 40,220,100
Hewlett-Packard Co. 940,000 64,213,750
International Business Machines Corp. 440,000 81,290,000
Pitney Bowes, Inc. 904,000 59,720,500
Xerox Corp. 455,000 53,690,000
----------- ------------
3,539,400 299,134,350
----------- ------------
CONTAINERS - 1.62%
Crown Cork & Seal 906,800 27,940,775
Temple-Inland, Inc. 330,000 19,573,125
----------- ------------
1,236,800 47,513,900
----------- ------------
COSMETICS & PERSONAL CARE - 1.99%
Kimberly-Clark Corp. 1,075,000 58,587,500
----------- ------------
ELECTRIC UTILITIES - 2.43%
Dominion Resources, Inc. 840,000 39,270,000
SCANA Corp. 382,600 12,338,850
Teco Energy, Inc. 704,700 19,863,731
----------- ------------
1,927,300 71,472,581
----------- ------------
ELECTRICAL EQUIPMENT & ELECTRONICS - 6.02%
AMP, Inc. 872,061 45,401,676
General Electric Co. 762,000 77,771,625
Honeywell, Inc. 332,600 25,048,938
Hubbell, Inc. (Class B) 757,144 28,771,472
----------- ------------
2,723,805 176,993,711
----------- ------------
ENERGY - 8.06%
BP Amoco plc * 701,370 62,860,304
Burlington Resources, Inc 522,500 18,712,031
Conoco, Inc * 618,900 12,919,537
Eni, SPA - ADR 464,300 31,456,325
Kerr-McGee Corp. 326,000 12,469,500
Mobil Corp. 550,000 47,918,750
Unocal Corp. 931,000 27,173,563
Usec, Inc. 1,670,000 23,171,250
----------- ------------
5,784,070 236,681,260
----------- ------------
16
<PAGE>
MML EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
NUMBER MARKET
OF VALUE
SHARES (NOTE 2A)
------------ -------------
EQUITIES (Continued)
FINANCIAL SERVICES - 2.44% 324,800 $ 33,210,800
American Express Co. 492,900 38,446,200
American General Corp. ------------ -------------
817,700 71,657,000
------------ -------------
FOODS - 3.86%
Bestfoods 493,000 26,252,250
ConAgra, Inc. 1,781,000 56,101,500
General Mills, Inc. 400,000 31,100,000
------------ -------------
2,674,000 113,453,750
------------ -------------
FOREST PRODUCTS & PAPER - 1.55% 773,055 20,727,537
Westvaco Corp. 490,600 24,928,612
Weyerhaeuser Co. ------------ -------------
1,263,655 45,656,149
------------ -------------
HEALTHCARE - 9.57%
Becton, Dickinson and Co. 1,388,600 59,275,863
Bristol-Myers Squibb Co. 760,000 101,697,500
Pharmacia & Upjohn, Inc. 870,000 49,263,750
Schering-Plough Corp. 1,286,000 71,051,500
------------ -------------
4,304,600 281,288,613
------------ -------------
INDUSTRIAL DISTRIBUTION - 0.87%
W.W. Grainger, Inc. 612,000 25,474,500
------------ -------------
INDUSTRIAL TRANSPORTATION - 2.40%
Burlington Northern Sante Fe 1,038,600 35,052,750
Norfolk Southern Corp. 1,120,100 35,493,169
------------ -------------
2,158,700 70,545,919
------------ -------------
INSURANCE - 5.46%
Cigna Corp. 203,400 15,725,362
Jefferson-Pilot Corp. 355,500 26,662,500
Marsh & McLennan Co's., Inc. 841,500 49,175,156
MBIA, Inc. 536,000 35,141,500
SAFECO Corp. 782,500 33,598,594
------------ -------------
2,718,900 160,303,112
------------ -------------
MACHINERY & COMPONENTS - 1.50%
Dover Corp. 650,000 23,806,250
Parker-Hannifin Corp. 618,075 20,241,956
------------ -------------
1,268,075 44,048,206
------------ -------------
METALS & MINING - 0.57%
USX-Marathon Group 555,200 16,725,400
------------ -------------
MISCELLANEOUS - 1.80%
Armstrong World Industries 440,000 26,537,500
Minnesota Mining &
Manufacturing Co. 369,500 26,280,688
------------ --------------
809,500 52,818,188
------------ --------------
PHARMACUTICALS - 1.44%
American Home Products Corp. 750,000 42,234,375
------------ --------------
PUBLISHING & PRINTING - 2.63%
Donnelley R R & Sons 600,000 26,287,500
McGraw-Hill Companies, Inc. 500,000 50,937,500
------------ --------------
1,100,000 77,225,000
------------ --------------
RETAIL - 2.86%
The May Department Stores Co. 543,000 32,783,625
Newell Co. 499,400 20,600,250
Sears Roebuck and Co. 719,300 30,570,250
------------ --------------
1,761,700 83,954,125
------------ --------------
RETAIL - GROCERY - 4.51%
Albertson's, Inc. 1,273,500 81,106,031
American Stores Co. 1,388,200 51,276,638
------------ --------------
2,661,700 132,382,669
------------ --------------
TELEPHONE UTILITIES - 3.90%
Ameritech Corp. 914,000 57,924,750
Frontier Corp. 1,096,200 37,270,800
Pinnacle West Capital 459,800 19,484,025
------------ --------------
2,470,000 114,679,575
------------ --------------
TOBACCO - 2.16%
Fortune Brands, Inc 795,200 25,148,200
UST, Inc. 1,100,500 38,379,938
------------ --------------
1,895,700 63,528,138
------------ --------------
TOTAL EQUITIES 2,956,278,484
(COST $1,762,028,515) --------------
17
<PAGE>
MML EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
NUMBER MARKET
OF VALUE
SHARES (NOTE 2A)
------------ -------------
SHORT-TERM INVESTMENTS - 4.39%
COMMERCIAL PAPER - 3.86%
Caterpillar Financial Services Corp.
5.12% 1/28/99 $ 3,108,000 $ 3,096,065
Caterpillar Financial Services Corp.
5.13% 2/26/99 5,000,000 4,955,345
Caterpillar Financial Services Corp.
5.20% 2/3/99 3,350,000 3,331,420
Walt Disney Co.
4.89% 4/14/99 4,000,000 3,939,911
Walt Disney Co.
4.88% 5/26/99 5,000,000 4,894,555
E I DuPont De Nemours & Co.
4.87% 5/26/99 7,900,000 7,733,398
E I DuPont De Nemours & Co.
4.87% 5/5/99 3,900,000 3,829,583
Emerson Electric
5.08% 2/12/99 6,000,000 5,959,810
Fortune Brands
5.66% 1/12/99 10,000,000 9,982,709
General Electric Capital Corp.
4.95% 5/14/99 4,200,000 4,118,707
Heinz HJ Co.
5.24% 1/19/99 10,000,000 9,973,790
Kellogg Co.
5.26% 1/8/99 11,000,000 10,988,745
Lucent Technologies, Inc.
5.27% 1/29/99 11,000,000 10,954,978
Pepsico, Inc.
5.12% 1/0/00 3,001,000 2,993,321
Proctor & Gamble Co.
5.07% 2/11/99 11,000,000 10,923,291
Shell Oil Co.
4.85% 1/4/99 15,624,000 15,617,490
------------ -------------
TOTAL COMMERCIAL PAPER
(COST $113,356,940) 114,083,000 113,293,118
------------ -------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 0.53%
Federal National Mortgage Association
5.01% 3/26/99 16,000,000 15,803,555
------------ -------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (COST $15,814,003) 16,000,000 15,803,555
------------ --------------
TOTAL SHORT-TERM INVESTMENTS
(COST $129,170,943) (A) 130,083,000 129,096,673
============ ==============
TOTAL INVESTMENTS -
(COST $1,891,199,458) (A) 105.01% 3,085,375,157
====== ==============
(a) Federal Income Tax Information: At
December 31, 1998 the net unrealized
appreciation on investments based on
cost of $1,891,199,458 for federal
income tax is as follows:
Aggregate gross unrealized appreciation
for all investments in which there is
an excess of market value over tax cost 1,237,420,296
Aggregate gross unrealized depreciation
for all investments in which there is
an excess of tax cost over market value (43,244,597)
--------------
NET UNREALIZED APPRECIATION 1,194,175,699
==============
* Non-income producing security.
See Notes to Financial Statements.
18
<PAGE>
MML MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
--------- ---------
SHORT-TERM INVESTMENTS - 100.50%
Commercial Paper - 87.42%
Aristar, Inc.
5.63% 2/4/99 $ 3,280,000 $ 3,262,652
Avco Financial Services, Inc.
5.09% 3/23/99 6,840,000 6,762,092
BellSouth Telecommunications, Inc.
5.00% 2/11/99 6,660,000 6,622,378
Campbell Soup Co.
5.51% 1/8/99 1,200,000 1,198,733
Campbell Soup Co.
5.00% 3/3/99 4,500,000 4,462,256
Cargill, Inc.
5.27% 2/12/99 6,420,000 6,380,977
Carolina Power & Light Co.
4.76% 4/19/99 4,765,000 4,697,814
Caterpillar Financial Services Corp.
5.33% 1/4/99 2,675,000 2,673,823
Caterpillar Financial Services Corp.
5.55% 2/1/99 1,135,000 1,129,654
Caterpillar Financial Services Corp.
4.78% 4/20/99 2,370,000 2,336,130
Central Illinois Light Co.
5.57% 1/28/99 450,000 448,127
Central Illinois Light Co.
5.30% 2/25/99 2,300,000 2,281,482
Clorox Co.
5.11% 2/19/99 1,650,000 1,638,591
Coca Cola Co.
5.04% 1/15/99 1,420,000 1,417,239
Coca Cola Co.
4.93% 1/22/99 1,680,000 1,675,198
Consolidated Natural Gas Co.
5.14% 2/2/99 440,000 437,998
Countrywide Home Loans, Inc.
5.23% 1/19/99 2,365,000 2,358,851
Countrywide Home Loans, Inc.
5.36% 2/5/99 4,640,000 4,616,001
Dayton Power & Light Co.
5.23% 1/19/99 2,130,000 2,124,462
Dayton Power & Light Co.
5.06% 3/8/99 4,600,000 4,557,580
Walt Disney Co.
5.02% 2/18/99 2,100,000 2,086,084
Walt Disney Co.
5.11% 2/22/99 3,200,000 3,176,565
Finova Capital Corp.
5.35% 3/26/99 5,550,000 5,481,365
Finova Capital Corp.
5.33% 3/31/99 1,180,000 1,164,685
Florida Power Corp.
5.27% 1/12/99 4,300,000 4,293,102
Ford Motor Credit Co.
5.15% 2/19/99 1,340,000 1,330,662
Ford Motor Credit Co.
4.88% 6/18/99 3,575,000 3,494,586
Fortune Brands, Inc.
5.12% 1/21/99 2,735,000 2,727,251
GTE Funding, Inc.
5.19% 2/1/99 3,795,000 3,778,105
General Electric Capital Corp.
5.54% 2/18/99 350,000 347,457
General Electric Capital Corp.
4.96% 5/20/99 365,000 358,094
General Electric Co.
4.80% 3/24/99 1,365,000 1,350,231
General Electric Co.
5.04% 3/31/99 240,000 237,033
General Electric Co.
4.94% 6/25/99 1,100,000 1,073,906
General Mills, Inc.
5.27% 1/5/99 1,680,000 1,679,020
General Motors Acceptance Corp.
5.42% 1/15/99 1,560,000 1,556,742
General Motors Acceptance Corp.
5.20% 1/27/99 3,500,000 3,486,957
Georgia Power Co.
5.18% 2/22/99 2,095,000 2,079,416
Goldman Sachs & Co.
5.23% 2/23/99 2,865,000 2,843,151
Goldman Sachs & Co.
5.20% 2/24/99 3,035,000 3,011,555
Goldman Sachs & Co.
5.16% 3/19/99 1,300,000 1,285,819
19
<PAGE>
MML BLEND FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
-------------- ----------------
SHORT-TERM INVESTMENTS (Continued)
Commercial Paper (Continued)
Heinz HJ Co.
5.22% 1/14/99 $ 3,970,000 $ 3,962,545
Lucent Technologies, Inc.
4.93% 1/11/99 4,525,000 4,518,841
Minnesota Mining & Manufacturing Co.
5.09% 1/21/99 2,600,000 2,592,706
Monsanto Co.
5.29% 3/5/99 1,500,000 1,486,219
Motorola, Inc.
4.99% 4/1/99 3,850,000 3,802,356
Pepsico, Inc.
5.05% 1/13/99 5,575,000 5,565,653
Portland General Electric Co.
5.15% 1/15/99 2,400,000 2,395,212
Potomac Electric Power Co.
5.46% 1/25/99 6,075,000 6,052,928
Shell Oil Co.
4.85% 2/10/99 4,100,000 4,078,042
SmithKline Beecham Corp.
5.27% 1/14/99 3,370,000 3,363,611
South Carolina Electric Co.
5.44% 1/29/99 6,700,000 6,671,756
Wisconsin Gas Co.
5.08% 3/18/99 2,300,000 2,275,478
Xerox Corp.
5.08% 1/12/99 1,300,000 1,297,994
-------------- ----------------
TOTAL COMMERCIAL PAPER
(COST $155,987,165) 157,015,000 155,987,165
-------------- ----------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 13.08%
Federal Farm Credit Banks
4.76% 8/5/99 $ 3,400,000 $ 3,304,339
Federal Farm Credit Banks
4.78% 12/20/99 795,000 758,585
Federal Home Loan Bank
4.72% 6/23/99 4,000,000 3,910,209
Federal Home Loan Mortgage Corp.
4.94% 4/9/99 6,255,000 6,171,246
Federal National Mortgage Assoc.
5.26% 1/27/99 5,500,000 5,478,973
Federal National Mortgage Assoc.
4.56% 6/30/99 3,800,000 3,714,500
-------------- ----------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (COST $23,337,852) 23,750,000 23,337,852
-------------- ----------------
TOTAL SHORT-TERM INVESTMENTS
(COST $179,325,017) (a) $ 180,765,000 179,325,017
============== ----------------
TOTAL INVESTMENTS
(COST $179,325,017) (a) 100.50% $ 179,325,017
========= ================
(a) Federal Income Tax Information: The aggregate cost for investments for the
MML Money Market Fund as of December 31, 1998 is the same for financial
reporting and federal income tax purposes.
December 31, 1998 seven-day average yield for the portfolio: 4.79%
See Notes to Financial Statements.
20
<PAGE>
MML MANAGED BOND FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
------------ -------------
BONDS AND NOTES - 93.14%
ASSET BACKED SECURITIES - 6.55%
AUTO RECEIVABLES
California Infrastructure PG&E-1,
1997-1, Class A6
6.320% 9/25/05 $ 250,000 $ 257,083
California Infrastructure SDG&E-1,
1997-1, Class A5
6.190% 9/25/05 250,000 259,720
California Infrastructure SCE-1,
1997-1, Class A5
6.280% 9/25/05 300,000 312,726
Capita Equipment Receivables Trust,
1996-1, Class A4
6.280% 6/15/00 2,000,000 2,010,280
Case Equipment Loan Trust, 1998,
Class A4
5.830% 2/15/05 1,500,000 1,517,130
Chase Manhattan Auto Owner Trust,
1998-A, Class A4
5.800% 12/16/02 1,500,000 1,515,885
Chase Manhattan RV Owner Trust,
1997-A, Class A7
6.140% 10/16/06 2,000,000 2,008,580
Jet Equipment Trust, 1995-A
8.235% 11/1/12 1,847,795 2,041,998
Metlife Capital Equipment Loan Trust,
1997-A, Class A
6.850% 5/20/08 1,000,000 1,044,675
Premier Auto Trust, 1998-4, Class A3
5.690% 6/8/02 1,500,000 1,512,840
Premier Auto Trust, 1998-5, Class A3
5.070% 7/8/02 1,000,000 996,080
Railcar Trust No. 1992-1
7.750% 6/1/04 1,287,860 1,370,257
Toyota Auto Lease Trust, 1998-B,
Class A1
5.350% 7/25/02 1,500,000 1,500,000
World Omni 1996-A Automobile Lease
Securitization Trust, Class A1
6.300% 6/25/02 286,728 287,086
------------ -------------
TOTAL ASSET BACKED SECURITIES
(COST $16,422,779) 16,222,383 16,634,340
------------ -------------
CORPORATE DEBT - 48.80%
AirTouch Communications, Inc.
7.500% 7/15/06 1,500,000 1,652,865
Alcan Aluminum Ltd.
6.250% 11/1/08 800,000 808,696
American General Finance Corp.
5.750% 11/1/03 1,000,000 1,002,700
America West Airlines 1996-1, Class A
6.850% 7/2/09 1,699,231 1,761,032
American Airlines, Inc.
9.780% 11/26/11 1,854,025 2,184,320
AMR Corp.
9.000% 8/1/12 1,000,000 1,178,190
Analog Devices, Inc.
6.625% 3/1/00 1,000,000 1,011,590
Anheuser-Busch Companies, Inc.
5.375% 9/15/08 1,500,000 1,497,915
Archer - Daniels Midland
6.750% 12/15/27 750,000 801,135
Associates Corp. of North America
7.875% 9/30/01 2,000,000 2,122,200
Associates Corp. of North America
5.750% 11/1/03 750,000 755,356
Atlantic Richfield Co.
7.770% 2/13/02 3,000,000 3,188,700
Barrick Gold Corp.
7.500% 5/01/07 2,000,000 2,146,660
Bell Atlantic Financial Services, Inc.
6.610% 2/4/00 2,000,000 2,027,560
BHP Finance (USA) Limited
6.420% 3/1/26 2,000,000 1,988,100
Boston Scientific Corp.
6.625% 3/15/05 1,500,000 1,455,375
Carlisle Companies, Inc.
7.250% 1/15/07 1,500,000 1,545,885
Celulosa Arauco Constitution
6.950% 9/15/05 1,000,000 888,000
Champion International Corp.
6.400% 2/15/26 1,500,000 1,540,605
CIT Group Holdings
5.625% 10/15/03 1,000,000 999,590
CITGO Petroleum Corp.
7.875% 5/15/06 750,000 735,533
21
<PAGE>
MML MANAGED BOND FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
------------ -------------
BONDS AND NOTES (Continued)
CORPORATE DEBT (Continued)
CSX Corp.
7.050% 5/1/02 $ 1,000,000 $ 1,037,690
CSX Corp.
7.250% 5/1/27 2,000,000 2,132,640
Columbia Gas System, Inc.
6.610% 11/28/02 2,000,000 2,064,800
Comcast Cablevision-PH
8.375% 5/1/07 1,250,000 1,450,263
Commercial Credit Co.
7.750% 3/1/05 3,000,000 3,318,600
ConAgra, Inc.
7.000% 10/1/28 1,250,000 1,283,425
Continental Airlines, Inc. Series 1996-B
7.820% 10/15/13 1,431,175 1,545,784
Continental Airlines, Inc. Series 1996-2B
8.560% 7/2/14 948,919 1,109,049
Corning Glass Works, Inc.
8.875% 3/15/16 500,000 588,825
Dana Corp.
6.500% 3/15/08 750,000 770,805
Dover Corp.
6.250% 6/01/08 750,000 785,235
Dover Corp.
6.650% 6/01/28 750,000 775,448
Dow Capital
7.125% 1/15/03 4,000,000 4,166,240
Emerson Electric Co.
5.500% 9/15/08 700,000 707,987
Equifax, Inc.
6.500% 6/15/03 1,250,000 1,287,062
ERAC USA Finance Co. 144A
6.750% 5/15/07 2,000,000 2,018,860
FBG Finance Ltd. 144A
7.875% 6/01/16 1,250,000 1,445,712
First Brands Corp.
7.250% 3/01/07 500,000 533,160
Fletcher Challenge Ltd.
6.750% 3/24/05 500,000 479,730
Fletcher Challenge Ltd.
7.750% 6/20/06 1,500,000 1,512,825
Foster Wheeler Corp.
6.750% 11/15/05 2,000,000 1,872,040
General American Transportation Corp.
6.750% 3/1/06 2,000,000 2,047,880
General Electric Capital Corp.
8.750% 5/21/07 1,000,000 1,220,740
General Electric Capital Corp.
6.500% 11/01/06 250,000 266,520
General Mills
8.900% 6/15/06 1,000,000 1,198,740
Heller Financial, Inc.
6.250% 3/1/01 1,000,000 1,010,720
Hershey Foods Co.
7.200% 8/15/27 1,500,000 1,716,930
Hilton Hotels Corp.
7.000% 7/15/04 450,000 451,075
Household Finance Corp.
6.500% 11/15/08 1,000,000 1,040,520
I C I Wilmington
7.050% 9/15/07 750,000 768,330
IMC Global, Inc.
6.625% 10/15/01 1,000,000 991,660
IMCERA Group, Inc.
6.000% 10/15/03 2,000,000 1,936,760
Interpool, Inc
7.350% 8/01/07 500,000 476,105
Lasmo USA, Inc.
6.750% 12/15/07 2,000,000 1,923,256
Leucadia National Corp.
7.750% 8/15/13 2,000,000 1,975,360
Lockheed Martin Corp.
7.700% 6/15/08 1,500,000 1,695,765
Mapco, Inc.
7.250% 3/01/09 1,500,000 1,580,250
Millipore Corp.
7.500% 4/01/07 1,000,000 1,023,800
Mobil Corp.
8.625% 8/15/21 2,000,000 2,632,180
Newmont Mining Corp.
8.625% 4/1/02 2,000,000 2,103,700
News America Holdings, Inc.
9.250% 2/1/13 2,000,000 2,477,460
Norfolk Southern Corp.
7.050% 5/01/37 2,500,000 2,704,575
Occidental Petroleum Corp.
7.375% 11/15/08 2,500,000 2,549,725
Penske Truck Leasing Comp., L.P.
7.750% 5/15/99 1,250,000 1,261,338
22
<PAGE>
MML MANAGED BOND FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
----------- -----------
BONDS AND NOTES (Continued)
CORPORATE DEBT (Continued)
Polaroid Corp.
8.000% 3/15/99 $ 1,000,000 $ 1,004,170
Ralston Purina Co.
7.750% 10/1/15 3,000,000 3,300,180
Raytheon Co.
6.750% 8/15/07 500,000 529,355
Raytheon Co.
6.150% 11/1/08 1,000,000 1,019,603
Rolls-Royce Capital, Inc.
7.125% 7/29/03 1,500,000 1,564,200
Ryder System, Inc.
6.600% 11/15/05 750,000 752,918
Safeway Stores, Inc.
6.050% 11/15/03 250,000 251,715
Scholastic Corp.
7.000% 12/15/03 1,500,000 1,561,035
Schwab (Charles) Corp.
6.250% 1/23/03 2,000,000 1,983,680
The Seagram Co. Ltd.
7.500% 12/15/18 1,800,000 1,801,836
Sears Roebuck Acceptance Corp.
6.750% 9/15/05 1,500,000 1,574,865
Sprint Capital Corp.
6.125% 11/15/08 750,000 766,373
Sprint Capital Corp.
6.875% 11/15/28 750,000 779,475
Textron, Inc.
9.550% 3/19/01 1,000,000 1,088,740
Thomas & Betts Corp.
8.250% 1/15/04 1,500,000 1,628,775
Time Warner, Inc.
6.100% 12/30/01 500,000 508,055
Travelers Funding Ltd.
6.300% 2/18/14 1,400,000 1,346,380
United Air Lines, Inc.
10.110% 2/19/06 394,180 445,057
U S Airways, Inc.
7.500% 10/15/09 928,904 926,294
Valero Energy Corp.
6.750% 12/15/02 1,000,000 1,009,400
W P P Finance
6.625% 7/15/05 900,000 913,037
Worldcom, Inc.
7.750% 4/01/07 1,000,000 1,129,650
Worldcom, Inc.
9.375% 1/15/04 871,000 902,417
----------- -----------
TOTAL CORPORATE DEBT
(COST $119,346,215) 117,927,434 124,018,786
----------- -----------
NON-U S GOVERNMENT AGENCY
OBLIGATIONS - 3.61%
PASS-THRU SECURITIES - 3.61%
Asset Securitization Corp Commercial
Mortgage, 1995-MD-IV
7.100% 8/13/07 2,378,545 2,531,556
Chase Commercial Mortgage Sec, Inc.,
1998-2, Class A2
6.025% 08/18/07 1,243,328 1,258,086
C S First Boston Mortgage Corp,
1998-C2, Class A2
5.960% 12/15/07 995,205 1,006,341
Merrill Lynch Mortgage Inv. ctf, 1998,
Class A1
6.310% 11/15/26 1,659,308 1,695,713
Morgan Stanley Capital I, Inc., 1998-HF2,
Class A1
6.010% 11/15/30 397,748 413,641
Nationlink Funding Corp., 1998-2
Class A1
6.001% 11/20/07 746,085 753,933
Textron Financial Corp., 1998-A,
Class A2
5.890% 01/15/05 1,500,000 1,515,937
----------- -----------
TOTAL NON-U S GOVERNMENT AGENCY
OBLIGATIONS (COST $9,062,747) 8,920,219 9,175,207
----------- -----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 13.24%
FEDERAL HOME LOAN MORTGAGE
CORPORATION (FHLMC) - 2.43%
COLLATERALIZED MORTGAGE OBLIGATIONS - 1.51%
FHLMC Series 1322 Class G
7.500% 2/15/07 1,786,943 1,813,175
FHLMC Series 1460 Class H
7.000% 5/15/07 2,000,000 2,027,500
----------- -----------
3,786,943 3,840,675
23
<PAGE>
MML MANAGED BOND FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
----------- -----------
BONDS AND NOTES (Continued)
PASS-THROUGH SECURITIES - 0.92%
FHLMC
6.420% 12/1/05 $ 2,127,334 $ 2,227,723
FHLMC
9.000% 3/1/17 105,980 112,797
----------- -----------
2,233,314 2,340,520
----------- -----------
6,020,257 6,181,195
----------- -----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA) - 5.22%
COLLATERALIZED MORTGAGE OBLIGATIONS - 4.25%
FNMA Series 1993-221 Class D
6.000% 12/25/08 1,000,000 1,008,430
FNMA Series 1993-134 Class GA
6.500% 2/25/07 2,000,000 2,030,000
FNMA Series 1996-54 Class C
6.000% 9/25/08 4,000,000 4,042,480
FNMA Series 1993-186 Class G
6.250% 3/25/08 3,700,000 3,724,272
----------- -----------
10,700,000 10,805,182
PASS-THROUGH SECURITIES - 0.97%
FNMA
6.000% 11/1/28 2,001,202 1,974,926
FNMA
9.000% 5/1/09 452,893 478,459
----------- -----------
2,454,095 2,453,385
----------- -----------
13,154,095 13,258,567
----------- -----------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA) - 5.59%
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.23%
JHM Acceptance Corp.,
Series E, Class 5
8.960% 4/1/19 590,734 604,391
----------- -----------
PASS-THROUGH SECURITIES - 5.36%
GNMA
8.000% 12/15/03 - 1/15/09 5,639,559 5,901,234
GNMA
7.500% 3/15/17 - 7/15/17 3,581,171 3,726,746
GNMA
7.000% 9/15/23 - 11/15/23 1,656,825 1,695,645
GNMA - ARMS
6.000% 11/20/27 - 12/20/27 820,214 825,595
GNMA - ARMS
6.625% 8/20/25 - 8/20/27 758,161 764,325
GNMA - ARMS
7.000% 11/20/25 690,208 694,736
----------- -----------
13,146,138 13,608,281
----------- -----------
13,736,872 14,212,672
----------- -----------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (COST $32,858,940) 32,911,224 33,652,434
----------- -----------
U.S. TREASURY OBLIGATIONS - 20.94%
U.S.TREASURY BONDS AND NOTES - 12.06%
U.S. Treasury Bond
7.500% 11/15/16 8,200,000 10,185,957
U.S. Treasury Bond
7.125% 2/15/23 4,400,000 5,422,298
U.S. Treasury Note
7.500% 5/15/02 9,500,000 10,314,910
U.S. Treasury Note
5.750% 9/30/99 3,000,000 3,023,910
U.S. Treasury Note
5.625% 11/30/99 1,700,000 1,714,875
U.S.TREASURY STRIPS - 8.88%
U.S. Treasury Strip*
0.000% 5/15/16 58,750,000 22,557,651
----------- -----------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $49,896,848) 85,550,000 53,219,601
----------- -----------
TOTAL BONDS AND NOTES
(COST $227,587,529) 252,611,041 236,700,368
----------- -----------
SHORT-TERM INVESTMENTS - 8.09%
COMMERCIAL PAPER
Appalachian Power Co.
6.661% 1/6/99 3,990,000 3,986,312
Conagra, Inc.
6.137% 2/9/99 3,960,000 3,934,926
Crown Cork & Seal Co., Inc.
5.305% 1/7/99 3,160,000 3,157,209
Crown Cork & Seal Co., Inc.
6.039% 1/12/99 990,000 988,176
Ford Motor Credit Co.
5.508% 1/8/99 1,840,000 1,838,031
Indiana Michigan Power Co.
6.265% 1/5/99 3,515,000 3,512,597
24
<PAGE>
MML MANAGED BOND FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
------------ -------------
SHORT-TERM INVESTMENTS (Continued)
COMMERCIAL PAPER (Continued)
McKesson Corp.
6.258% 1/4/99 $ 3,130,000 $ 3,128,369
------------ -------------
TOTAL SHORT-TERM INVESTMENTS
(COST $20,544,715) $ 20,585,000 20,545,620
============ =============
TOTAL INVESTMENTS
(COST $248,132,244) (A) 101.23% $ 257,245,988
====== =============
(a) Federal Income Tax Information: At
December 31, 1998 the net unrealized
appreciation on investments based on
cost of $248,132,243 for federal
income tax purposes purposes is
as follows:
Aggregate gross unrealized appreciation
for all investments and forward
commitments in which there is an excess
of market value over tax cost $ 10,061,922
Aggregate gross unrealized depreciation for
all investments and forward commitments in
which there is an excess of tax cost over
market value (948,178)
-------------
NET UNREALIZED APPRECIATION $ 9,113,744
-------------
* Non-income producing security.
See Notes to Financial Statements.
25
<PAGE>
MML BLEND FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
NUMBER MARKET VALUE
OF AMOUNT
SHARES (NOTE 2A)
-------------- ----------------
EQUITIES - 62.95%
AEROSPACE & DEFENSE - 2.04%
Raytheon Co. (Class A) 137,700 $ 7,117,369
Raytheon Co. (Class B) 420,000 22,365,000
TRW, Inc. 496,600 27,902,711
-------------- ----------------
1,054,300 57,385,080
-------------- ----------------
AGRIBUSINESS - 0.52%
Archer-Daniels-Midland Co. 838,510 14,411,891
-------------- ----------------
APPAREL, TEXTILES, SHOES - 0.68%
V F Corp. 405,000 19,007,813
-------------- ----------------
AUTOMOTIVE & PARTS - 2.27%
Ford Motor Co. 282,300 16,567,481
Genuine Parts Co. 664,900 22,232,594
Goodyear Tire & Rubber Co. 499,100 25,173,356
-------------- ----------------
1,446,300 63,973,431
-------------- ----------------
BANKING, SAVINGS & LOAN - 4.34%
The Bank of New York Co., Inc. 920,200 37,038,050
Comerica, Inc. 370,500 25,263,469
Pacific Century Financial Corp. 690,600 16,833,375
Wachovia Corp. 260,000 22,733,750
Wells Fargo Co. 508,300 20,300,231
-------------- ----------------
2,749,600 122,168,875
-------------- ----------------
BEVERAGES - 1.03%
Brown-Forman Corp. (Class B) 382,500 28,950,469
-------------- ----------------
CHEMICALS - 2.64%
Air Products and Chemicals 429,700 17,188,000
Bemis Corp. 407,600 15,463,325
Engelhard Corp. 897,200 17,495,400
Rohm & Haas 799,300 24,078,913
-------------- ----------------
2,533,800 74,225,638
-------------- ----------------
COMMUNICATIONS - 1.14%
GTE Corp. 494,400 32,136,000
COMPUTERS & OFFICE EQUIPMENT - 6.20%
Electronic Data Systems 341,400 $ 17,155,350
Hewlett-Packard Co. 529,600 36,178,300
International Business
Machines Corp. 271,100 50,085,725
Pitney Bowes, Inc. 585,900 38,706,019
Xerox Corp. 275,000 32,450,000
-------------- ----------------
2,003,000 174,575,394
-------------- ----------------
CONTAINERS - 0.69%
Crown Cork & Seal 354,500 10,923,031
Temple-Inland, Inc. 140,600 8,339,338
-------------- ----------------
495,100 19,262,369
-------------- ----------------
COSMETICS & PERSONAL CARE - 1.19%
Kimberly-Clark Corp. 615,900 33,566,550
-------------- ----------------
ELECTRIC UTILITIES - 1.49%
Dominion Resources, Inc. 388,000 18,139,000
SCANA Corp. 268,300 8,652,675
Teco Energy, Inc. 541,300 15,257,894
-------------- ----------------
1,197,600 42,049,569
-------------- ----------------
ELECTRICAL EQUIPMENT & ELECTRONICS - 4.06%
AMP, Inc. 492,875 25,660,305
General Electric Co. 531,600 54,256,425
Honeywell, Inc. 236,100 17,781,281
Hubbell, Inc. (Class B) 434,480 16,510,241
-------------- ----------------
1,695,055 114,208,252
-------------- ----------------
ENERGY - 5.25%
BP Amoco plc * 426,182 38,196,530
Burlington Resources, Inc. 375,500 13,447,594
Conoco, Inc. * 359,400 7,502,475
ENI, SPA - ADR 280,100 18,976,775
Kerr-Mcgee Corp. 184,300 7,049,475
Mobil Corp. 366,700 31,948,737
Unocal Corp. 584,900 17,071,768
Usec, Inc. 970,000 13,458,750
-------------- ----------------
3,547,082 147,652,104
-------------- ----------------
26
<PAGE>
SCHEDULE OF INVESTMENTS(Continued)
DECEMBER 31, 1998
NUMBER MARKET VALUE
OF AMOUNT
SHARES (NOTE 2A)
----------- --------------
EQUITIES (Continued)
FINANCIAL SERVICES - 1.53%
American Express Co. 182,400 $ 18,650,400
American General Corp. 314,300 24,515,400
----------- --------------
496,700 43,165,800
----------- --------------
FOODS - 2.34%
Bestfoods 318,200 16,944,150
ConAgra, Inc. 976,400 30,756,600
General Mills, Inc 234,700 18,247,925
----------- --------------
1,529,300 65,948,675
----------- --------------
FOREST PRODUCTS & PAPER - 0.98%
Westvaco Corp. 276,412 7,411,297
Weyerhaeuser Co. 399,200 20,284,350
----------- --------------
675,612 27,695,647
HEALTH CARE - 6.16%
Becton, Dickinson and Co. 907,700 38,755,981
Bristol-Myers Squibb Co. 529,600 70,867,100
Pharmacia & Upjohn, Inc. 415,200 23,510,700
Schering Plough Corp. 729,400 40,299,350
----------- --------------
2,581,900 173,433,131
----------- --------------
INDUSTRIAL DISTRIBUTION - 0.62%
W.W. Grainger, Inc. 421,000 17,524,125
----------- --------------
INDUSTRIAL TRANSPORTATION - 1.62%
Burlington Northern Santa Fe 667,000 22,511,250
Norfolk Southern Corp. 730,200 23,138,213
----------- --------------
1,397,200 45,649,463
----------- --------------
INSURANCE - 3.79%
Cigna Corp. 127,700 9,872,806
Jefferson-Pilot Corp. 264,300 19,822,500
Marsh & McLennan Co's., Inc 458,300 26,781,906
MBIA Inc. 356,000 23,340,250
SAFECO Corp. 628,600 26,990,513
----------- --------------
1,834,900 106,807,975
----------- --------------
MACHINERY & COMPONENTS - 0.75%
Dover Corp. 579,100 21,209,538
----------- --------------
METALS & MINING - 0.42%
USX- Marathon Group 387,300 11,667,412
----------- --------------
MISCELLANEOUS - 1.17%
Armstrong World Industries 266,700 $ 16,085,344
Minnesota Mining &
Manufacturing Co. 238,100 16,934,862
----------- --------------
504,800 33,020,206
----------- --------------
PHARMACEUTICALS - 0.91%
American Home Products Corp. 453,100 25,515,194
----------- --------------
PUBLISHING & PRINTING - 1.45%
McGraw-Hill Companies, Inc. 400,600 40,811,125
----------- --------------
RETAIL - 1.72%
The May Department Stores Co. 312,300 18,855,112
Newell Co. 285,600 11,781,000
Sears Roebuck & Co. 417,400 17,739,500
----------- --------------
1,015,300 48,375,612
----------- --------------
RETAIL-GROCERY - 2.15%
Albertson's, Inc. 484,200 30,837,487
American Stores Co. 805,400 29,749,463
----------- --------------
1,289,600 60,586,950
----------- --------------
TELEPHONE UTILITIES - 2.54%
Ameritech Corp. 524,800 33,259,200
Frontier Corp. 684,800 23,283,200
Pinnacle West Capital 349,800 14,822,775
----------- --------------
1,559,400 71,365,175
----------- --------------
TOBACCO - 1.26%
Fortune Brands, Inc. 474,900 15,018,713
UST, Inc 589,400 20,555,325
----------- --------------
1,064,300 35,574,038
----------- --------------
TOTAL EQUITIES
(COST $946,470,658) 1,771,923,501
--------------
27
<PAGE>
MML BLEND FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
----------- ------------
BONDS AND NOTES - 24.05%
ASSET BACKED SECURITIES - 1.45%
AUTO RECEIVABLES
California Infrastructure PG&E-1,
1997-1, Class A6
6.320% 09/25/05 $ 600,000 $ 616,998
California Infrastructure SDG&E-1,
1997-1, Class A5
6.190% 09/25/05 500,000 519,440
California Infrastructure SCE-1,
1997-1, Class A5
6.280% 09/25/05 650,000 677,573
Capital Equipment Receivables Trust,
1996-1, Class A4
6.280% 06/15/00 4,000,000 4,020,560
Case Equipment Loan Trust, 1998,
Class A4
5.830% 02/15/05 3,500,000 3,539,970
Caterpillar Financial Asset Trust,
1997-B, Class A3
6.160% 09/25/03 3,100,000 3,121,049
Chase Manhattan Auto Grantor Trust,
1996-B, Class A
6.140% 10/16/06 4,500,000 4,519,305
Chase Manhattan Auto Owner Trust,
1998-A, Class A4
5.800% 12/16/02 3,750,000 3,789,713
Ford Credit Auto Owner Trust, 1996-B
1996-B, Class A4
6.300% 01/15/01 6,000,000 6,041,220
Metlife Capital Equipment Loan Trust
Series 1997-A, Class A
6.850% 05/20/08 2,500,000 2,611,688
Premier Auto Trust Series, 1998-4,
Class A3
5.690% 06/08/02 4,000,000 4,034,240
Premier Auto Trust Series, 1998-5,
Class A3
5.070% 07/08/02 2,000,000 1,992,160
Railcar Trust No., 1992-1
7.750% 06/01/04 1,165,513 1,240,083
Toyota Auto Lease Trust Series,
1998-B, Class A1
5.350% 07/25/02 3,500,000 3,500,000
World Omni 1996-A Automobile Lease
Securitization Trust, Class A1
6.300% 06/25/02 633,819 634,611
----------- ------------
TOTAL ASSET BACKED SECURITIES
(COST $39,873,360) 40,399,332 40,858,610
----------- ------------
CORPORATE DEBT - 9.89%
Airtouch Communications, Inc.
7.500% 07/15/06 4,000,000 4,407,640
Alcan Aluminum Ltd.
6.250% 11/01/08 2,500,000 2,527,175
American Airlines, Inc.
9.780% 11/26/11 4,635,063 5,460,799
American General Finance Corp.
5.750% 11/01/03 2,000,000 2,005,400
American West Airlines, 1996-1, Class A
6.850% 07/02/09 4,126,713 4,276,802
AMR Corp.
9.000% 08/01/12 2,000,000 2,356,380
Analog Devices, Inc.
6.625% 03/01/00 1,500,000 1,517,385
Anheuser-Busch Companies, Inc.
5.375% 09/15/08 4,000,000 3,994,440
Archer-Daniels Midland
6.750% 12/15/27 1,650,000 1,762,497
Associates Corp. of North America
6.750% 08/01/01 4,000,000 4,125,080
Associates Corp. of North America
6.500% 08/15/02 2,000,000 2,064,360
Associates Corp. of North America
5.750% 11/01/03 2,000,000 2,014,286
Barrick Gold Corp.
7.500% 05/01/07 4,250,000 4,561,653
Bell Atlantic Financial Services, Inc
6.610% 02/04/00 1,000,000 1,013,780
BHP Finance (USA) Limited
6.420% 03/01/26 4,500,000 4,473,225
Boston Scientific Corp.
6.625% 03/15/05 3,800,000 3,686,950
C I T Group Holdings
6.375% 10/01/02 4,000,000 4,114,960
C I T Group Holdings
5.625% 10/15/03 2,500,000 2,498,975
28
<PAGE>
MML BLEND FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
----------- ------------
BONDS AND NOTES (Continued)
CORPORATE DEBT (Continued)
CSX Corp.
7.050% 05/01/02 $ 2,000,000 $ 2,075,380
CSX Corp.
7.250% 05/01/27 4,500,000 4,798,400
Cable & Wireless Communications
6.750% 12/01/08 5,750,000 5,822,979
Carlisle Companies, Inc
7.250% 01/15/07 2,760,000 2,844,428
Celulosa Arauco Constitucion
6.950% 09/15/05 2,500,000 2,220,000
Champion International Corp.
6.400% 02/15/26 3,500,000 3,594,745
CITGO Petroleum Corp.
7.875% 05/15/06 1,000,000 980,710
Columbia Gas System, Inc
6.610% 11/28/02 3,000,000 3,097,200
Comcast Cablevision-PH
8.375% 05/01/07 2,500,000 2,900,525
Commercial Credit Co.
7.750% 03/01/05 2,500,000 2,765,500
ConAgra, Inc.
7.000% 10/01/28 3,000,000 3,080,220
Continental Airlines, Inc. Series 1996-B
7.820% 10/15/13 1,908,224 2,061,045
Continental Airlines, Inc. Series 1996-2B
8.560% 07/02/14 1,660,608 1,940,835
Corning Glass Works, Inc.
8.875% 03/15/16 500,000 588,525
Dana Corp.
6.500% 03/15/08 1,750,000 1,798,545
Delta Air Lines, Inc.
8.540% 01/02/07 4,027,752 4,409,341
Dover Corp.
6.250% 06/01/08 2,000,000 2,093,960
Dover Corp.
6.650% 06/01/28 2,000,000 2,067,860
Emerson Electric Co.
5.500% 09/15/08 2,000,000 2,022,822
ERAC USA Finance Co. 144A
6.750% 05/15/07 6,000,000 6,056,580
FBG Finance Ltd, 144A
7.875% 06/01/16 4,000,000 4,626,280
Fletcher Challenge Ltd.
6.750% 03/24/05 2,000,000 1,918,920
Fletcher Challenge Ltd.
7.750% 06/20/06 2,000,000 2,017,100
Ford Motor Corp.
8.450% 07/15/06 1,500,000 1,516,560
Foster Wheeler Corp.
6.750% 11/15/05 2,000,000 1,872,040
GTE Corp.
9.100% 06/01/03 575,000 657,012
General American Transportation Corp.
6.750% 03/01/06 3,000,000 3,071,820
General Electric Capital Corp.
8.750% 05/21/07 1,500,000 1,831,110
General Electric Capital Corp.
6.500% 11/01/06 1,250,000 1,332,600
General Mills
8.900% 06/15/06 2,250,000 2,697,165
General Motors Corp.
9.125% 07/15/01 1,500,000 1,630,740
Goldman Sachs Group, L.P. 144A
6.200% 02/15/01 4,000,000 4,060,720
Halliburton Co.
5.625% 12/01/08 1,500,000 1,516,464
Heller Financial, Inc.
6.250% 03/01/01 2,500,000 2,526,800
Hershey Foods Co.
7.200% 08/15/97 5,300,000 6,066,846
Hilton Hotels Corp.
7.000% 07/15/04 800,000 801,912
Household Finance Corp.
6.500% 11/15/08 2,500,000 2,601,300
I C I Wilmington
7.050% 09/15/07 2,500,000 2,561,100
IMC Global, Inc.
6.625% 10/15/01 2,500,000 2,479,150
Interpool, Inc
7.350% 08/01/07 2,000,000 1,904,418
Leucadia National Corp.
7.750% 08/15/13 3,000,000 2,963,040
Lasmo USA, Inc.
6.750% 12/15/07 6,000,000 5,769,768
Lockheed Martin Corp.
7.700% 06/15/08 4,000,000 4,522,040
29
<PAGE>
MML BLEND FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
------------ -------------
BONDS AND NOTES (Continued)
CORPORATE DEBT (Continued)
Mapco, Inc.
7.250% 03/01/09 $ 3,750,000 $ 3,950,625
Midway Airlines
8.140% 01/02/13 2,500,000 2,532,275
Millipore Corp.
7.500% 04/01/07 4,250,000 4,351,150
Mobil Corp.
8.625% 08/18/21 4,500,000 5,922,405
Newmont Mining Corp.
8.625% 04/01/02 5,000,000 5,259,250
News America Holdings, Inc.
9.250% 02/01/13 4,000,000 4,954,920
Norfolk Southern Corp.
7.050% 05/01/37 6,000,000 6,490,980
North Finance (Bermuda) Ltd. 144A
7.000% 09/15/05 4,000,000 4,195,640
Occidental Petroleum Corp.
7.375% 11/15/08 6,000,000 6,119,340
Ralston Purina Co.
7.750% 10/01/15 2,000,000 2,200,120
Raytheon Co.
6.750% 08/15/07 2,700,000 2,858,517
Raytheon Co.
6.150% 11/01/08 3,000,000 3,058,809
Rolls-Royce Capital Inc.
7.1250% 07/29/03 2,000,000 2,085,600
Ryder System, Inc.
6.6000% 11/15/05 3,500,000 3,513,615
Safeway Stores, Inc.
6.0500% 11/15/03 1,000,000 1,006,860
Scholastic Corp.
7.000% 12/15/03 3,000,000 3,122,070
Schwab (Charles) Corp.
6.250% 01/23/03 2,500,000 2,479,600
Scripps (EW) Co.
6.625% 10/15/07 5,000,000 5,193,050
The Seagram Co. Ltd.
7.500% 12/15/18 4,500,000 4,504,590
Sprint Capital Corp.
6.125% 11/15/08 2,000,000 2,043,660
Sprint Capital Corp.
6.875% 11/15/28 2,000,000 2,078,600
TCI Communications, Inc.
7.550% 09/02/03 3,000,000 3,232,290
Thomas & Betts Corp.
8.250% 01/15/04 1,000,000 1,085,850
Time Warner, Inc.
7.750% 06/15/05 3,000,000 3,318,120
Time Warner, Inc.
6.100% 12/30/01 4,750,000 4,826,523
Travelers Funding Ltd.
6.300% 02/15/14 3,400,000 3,269,780
U S Airways, Inc.
7.500% 10/15/09 928,904 926,294
Valero Energy Corp.
6.750% 12/12/02 2,000,000 2,018,800
Worldcom, Inc.
7.750% 04/01/07 2,500,000 2,824,125
Worldcom, Inc.
9.375% 01/15/04 1,525,000 1,580,007
W P P Finance
6.625% 07/15/05 2,250,000 2,282,594
------------ -------------
TOTAL CORPORATE DEBT
(COST $267,329,685) 265,047,264 278,312,351
------------ -------------
NON-U S GOVERNMENT AGENCY
OBLIGATIONS - 0.80%
PASS-THRU SECURITIES
Asset Securitization Corp.
Commercial Mortgage 1995-MD-IV
7.100% 8/13/07 6,184,216 6,582,047
Chase Commercial Mortgage Sec, Inc.,
1998-2, Class A2
6.025% 08/18/07 2,486,656 2,516,173
C S First Boston Mortgage Corp.,
1998-C2, Class A2
5.960% 12/15/07 2,985,615 3,019,024
Merrill Lynch Mortgage Inv. Ctf
1998, Class A1
6.310% 11/15/26 4,266,792 4,360,405
Morgan Stanley Capital I, Inc.,
1998-HF2, Class A1
6.010% 11/15/30 894,933 930,692
30
<PAGE>
MML BLEND FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
------------ -------------
BONDS AND NOTES (Continued)
NON-U S GOVERNMENT AGENCY
OBLIGATIONS (Continued)
PASS-THRU SECURITIES (Continued)
Nationlink Funding Corp.,
1998-2, Class A1
6.001% 11/20/07 $ 1,492,170 $ 1,507,868
Textron Financial Corp.,
1998-A, Class A2
5.890% 01/15/05 3,500,000 3,537,188
------------ -------------
TOTAL NON-U S GOVERNMENT AGENCY
OBLIGATIONS (COST $22,176,023) 21,810,382 22,453,397
------------ -------------
U S GOVERNMENT AGENCY OBLIGATIONS - 3.28%
FEDERAL HOME LOAN MORTGAGE
CORPORATION (FHLMC) - 0.63%
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.41%
FHLMC Series 1322 Class G
7.500% 02/15/07 5,000,000 4,532,938
FHLMC Series 1460 Class H
7.000% 05/15/07 1,789,000 1,813,578
FHLMC Series 1490 Class PG
6.300% 05/15/07 5,000,000 5,040,600
------------ -------------
11,789,000 11,387,116
PASS-THROUGH SECURITIES - 0.22%
FHLMC
6.420% 12/01/05 5,492,390 5,751,576
FHLMC
9.000% 03/01/17 317,940 338,390
------------ -------------
5,810,330 6,089,966
------------ -------------
17,599,330 17,477,082
------------ -------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA) - 1.48%
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.86%
FNMA Series 1993-107 Class E
6.500% 06/25/08 5,000,000 5,109,350
FNMA Series 1993-71 Class PG
6.250% 07/25/07 8,000,000 8,050,000
FNMA Series 1993-175 Class PU
6.350% 09/25/08 7,015,000 7,131,168
FNMA Series 1996-54 Class C
6.000% 09/25/08 4,000,000 4,042,480
------------ -------------
24,015,000 24,332,998
PASS-THROUGH SECURITIES - 0.62%
FNMA
8.000% 05/01/13 1,141,441 1,158,425
FNMA
6.500% 02/25/07 5,000,000 5,075,000
FNMA
6.250% 03/25/08 5,000,000 5,032,800
FNMA
6.000% 11/01/28 6,048,043 5,968,632
------------ -------------
17,189,484 17,234,857
------------ -------------
41,204,484 41,567,855
------------ -------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA) - 0.97%
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.04%
J H M Acceptance Corp.,
Series E, Class 5
8.960% 04/01/19 1,181,467 1,208,783
------------ -------------
PASS-THROUGH SECURITIES - 0.93%
GNMA
6.500% 10/15/28 5,533,045 5,588,375
GNMA
7.000% 4/5/23-11/15/23 4,204,913 4,303,434
GNMA
7.500% 9/15/16-10/15/17 2,937,849 3,057,272
GNMA
8.000% 1/15/07 -5/15/08 8,354,578 8,705,291
GNMA
9.000% 8/15/08 -9/15/09 1,381,872 1,484,821
GNMA-ARMS
5.500% 10/20/27-12/20/27 1,542,616 1,552,736
GNMA-ARMS
6.000% 8/20/25-8/20/27 1,610,971 1,624,068
------------ -------------
25,565,844 26,315,997
------------ -------------
26,747,311 27,524,780
------------ -------------
U.S. GOVERNMENT GUARANTEED NOTES - 0.20%
1991-A Caguas
8.740% 08/01/01 280,000 303,537
1991-A Cncl. Bluffs, IA
8.740% 08/01/01 155,000 168,029
1991-A Fairfax Cnty, VA
8.740% 8/1/01 85,000 92,145
31
<PAGE>
MML BLEND FUND
SCHEDULE OF INVESTMENTS(Continued)
DECEMBER 31, 1998
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
------------- -------------
BONDS AND NOTES (Continued)
U.S. GOVERNMENT GUARANTEED NOTES (Continued)
1991-A Fajardo, PR
8.740% 08/01/01 $ 210,000 $ 227,653
1991-A Gasden, AL
8.740% 08/01/01 100,000 108,406
1991-A Lorain, OH
8.740% 08/01/01 30,000 32,522
1991-A Mayaguez, PR
8.740% 08/01/01 150,000 162,609
1991-A Rochester, NY
8.650% 08/01/00 4,295,000 4,517,825
--------------- -------------
5,305,000 5,612,726
--------------- -------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (COST $90,093,244) 90,856,125 92,182,443
--------------- -------------
U.S. TREASURY OBLIGATIONS - 8.64%
U.S. TREASURY BONDS & NOTES - 8.36%
U.S. Treasury Bonds
7.500% 11/15/16 38,250,000 47,513,768
U.S. Treasury Bonds
8.750% 05/15/17 41,100,000 57,173,799
U.S. Treasury Notes
6.375% 05/15/00 5,000,000 5,110,950
U.S. Treasury Notes
7.500% 05/15/02 1,000,000 1,085,780
U.S. Treasury Notes
7.750% 01/31/00 9,900,000 10,214,028
U.S. Treasury Notes
7.500% 02/15/05 5,700,000 6,526,500
U.S. Treasury Notes
7.125% 02/29/00 11,500,000 11,809,005
U.S. Treasury Notes
6.500% 08/15/05 58,300,000 64,075,198
U.S. Treasury Notes
6.375% 05/15/99 5,000,000 5,031,250
U.S. Treasury Notes
6.875% 05/15/06 20,550,000 23,234,241
U.S. Treasury Notes
6.500% 05/31/01 1,150,000 1,197,978
U.S. Treasury Notes
6.500% 10/15/06 2,000,000 2,218,440
--------------- -------------
199,450,000 235,190,937
--------------- -------------
BONDS AND NOTES (Continued)
U.S. TREASURY STRIPS - 0.28%
U.S. Treasury Strips *
0.000% 02/15/99 $ 2,150,000 $ 2,138,497
U.S. Treasury Strips *
0.000% 02/15/10 2,500,000 1,420,700
U.S. Treasury Strips *
0.000% 08/15/15 2,000,000 804,140
U.S. Treasury Strips *
0.000% 02/15/17 9,500,000 3,493,245
--------------- -------------
16,150,000 7,856,582
--------------- -------------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $232,734,403) 215,600,000 243,047,519
--------------- -------------
TOTAL BONDS AND NOTES
(COST $652,206,715) 633,713,103 676,854,320
=============== =============
SHORT-TERM INVESTMENTS - 19.25%
COMMERCIAL PAPER
Aristar, Inc.
5.710% 02/10/99 9,475,000 9,411,964
Aristar, Inc.
5.710% 02/01/99 5,525,000 5,497,869
Aristar, Inc.
5.730% 02/02/99 10,000,000 9,947,770
Case Credit Corp.
6.050% 02/22/99 2,140,000 2,122,253
Case Credit Corp.
6.050% 02/25/99 12,525,000 12,409,334
Case Credit Corp.
5.960% 03/19/99 10,000,000 9,887,333
Case Credit Corp.
5.960% 03/23/99 15,463,000 15,279,850
Comdisco, Inc.
6.980% 01/11/99 6,515,000 6,504,157
Comdisco, Inc.
6.040% 01/20/99 11,685,000 11,646,072
Comdisco, Inc.
5.640% 03/12/99 8,690,000 8,600,879
Comdisco, Inc.
5.750% 03/22/99 10,000,000 9,883,000
Conagra, Inc.
6.040% 01/06/99 10,000,000 9,991,595
32
<PAGE>
MML BLEND FUND
SCHEDULE OF INVESTMENTS (Continued)
DECEMBER 31, 1998
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
--------- ---------
SHORT-TERM INVESTMENTS (Continued)
COMMERCIAL PAPER (Continued)
Crown Cork & Seal Co., Inc.
5.700% 01/27/99 $ 11,285,000 $ 11,234,684
Crown Cork & Seal Co., Inc.
5.700% 02/24/99 12,190,000 12,081,252
Crown Cork & Seal Co., Inc.
5.820% 02/01/99 2,675,000 2,661,605
Crown Cork & Seal Co., Inc.
6.120% 03/31/99 11,555,000 11,404,785
Duke Power Co.
5.310% 01/08/99 6,025,000 6,018,778
Duke Power Co.
5.220% 02/08/99 12,000,000 11,934,038
Enron Corp.
5.530% 02/12/99 10,280,000 10,211,142
Finova Capital Corp.
5.580% 01/13/99 10,000,000 9,981,222
Finova Capital Corp.
5.170% 02/04/99 10,115,000 10,055,632
Finova Capital Corp.
5.320% 02/09/99 9,230,000 9,171,557
Finova Capital Corp.
5.350% 03/26/99 10,000,000 9,877,222
GTE Funding, Inc.
5.210% 02/17/99 10,900,000 10,826,037
Georgia Power Co., DTC
5.180% 02/22/99 11,695,000 11,598,012
Goldman Sachs & Co.
5.100% 03/17/99 10,790,000 10,671,550
Goldman Sachs & Co.
4.940% 04/23/99 21,495,000 21,167,321
Indiana Michigan Power Co.
6.210% 01/05/99 1,810,000 1,808,763
Orix Credit Alliance, Inc.
5.890% 01/26/99 8,395,000 8,360,323
Orix Credit Alliance, Inc.
6.160% 01/04/99 15,790,000 15,781,876
Orix Credit Alliance, Inc.
6.150% 02/26/99 12,510,000 12,398,273
Orix Credit Alliance, Inc.
5.390% 04/15/99 9,655,000 9,508,566
Pennsylvania Power & Lights
5.940% 02/19/99 6,045,000 5,997,335
Praxair, Inc.
5.790% 01/21/99 13,255,000 13,206,452
Praxair, Inc.
5.480% 02/23/99 10,000,000 9,913,928
Public Service Co. of Colorado
6.020% 01/05/99 8,615,000 8,609,230
Public Service Co. of Colorado
5.770% 02/05/99 3,260,000 3,241,749
Public Service Electric & Gas Co.
5.660% 01/19/99 10,000,000 9,970,000
Public Service Electric & Gas Co.
5.730% 02/11/99 10,445,000 10,372,161
Public Service Electric & Gas Co.
5.650% 02/01/99 4,260,000 4,239,269
Public Service Electric & Gas Co.
5.860% 02/03/99 12,750,000 12,679,285
Raytheon Co.
5.700% 02/05/99 4,045,000 4,021,892
Rite Aid Corp.
6.080% 01/14/99 16,420,000 16,376,521
Rite Aid Corp.
5.720% 01/29/99 12,000,000 11,946,150
Ryder System, Inc.
5.690% 01/19/99 5,500,000 5,483,500
Sonat, Inc.
5.440% 01/12/99 10,000,000 9,980,560
Sonat, Inc.
5.390% 01/28/99 9,360,000 9,315,200
Sonat, Inc.
6.070% 01/07/99 9,955,000 9,944,908
Sonat, Inc.
6.040% 01/08/99 8,625,000 8,614,850
Sonat, Inc.
5.530% 02/18/99 7,860,000 7,796,829
Textron, Inc.
5.640% 01/22/99 16,025,000 15,969,396
Textron Financial Corp.
6.140% 01/15/99 11,790,000 11,760,830
Tyson Foods, Inc.
5.590% 01/25/99 10,835,000 10,789,880
Union Camp Corp.
5.410% 01/14/99 3,825,000 3,814,871
33
<PAGE>
MML BLEND FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2A)
----------- ---------------
SHORT-TERM INVESTMENTS (Continued)
COMMERCIAL PAPER (Continued)
Union Camp Corp.
5.270% 02/16/99 $ 13,576,000 $ 13,475,506
Wisconsin Gas Co.
5.080% 03/18/99 6,445,000 6,373,317
------------ ---------------
AMOUNT RT-TERM INVESTMENTS
(COST $541,867,659) 545,304,000 541,828,333
============ ===============
TOTAL INVESTMENTS
(COST 2,140,545,032) 106.25% $ 2,990,606,154
====== ===============
(a) Federal Income Tax Information: At
December 31, 1998 the net unrealized
appreciation on investments based on
cost of $2,140,545,032 for federal
income tax purposes is as follows:
Aggregate gross unrealized appreciation
for all investments and forward
commitments in which there is an excess
of market value over tax cost $ 871,728,578
Aggregate gross unrealized depreciation
for all investments and forward
commitments in which there is an excess
of tax cost over market value (21,667,456)
---------------
NET UNREALIZED APPRECIATION $ 850,061,122
===============
* Non-income producing security.
See Notes to Financial Statements.
34
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. HISTORY
MML Series Investment Fund (the "MML Trust") is registered under the
Investment Company Act of 1940 as a no-load, registered open-end, diversified
management investment company. MML Equity Fund, MML Money Market Fund, MML
Managed Bond Fund and MML Blend Fund (the "Funds") are the four series of
shares of the MML Trust. The MML Trust is organized under the laws of the
Commonwealth of Massachusetts pursuant to an Agreement and Declaration of
Trust.
The MML Trust was established by Massachusetts Mutual Life Insurance Company
("MassMutual") for the purpose of providing vehicles for the investment of
assets of various separate investment accounts established by MassMutual and
by life insurance companies which are subsidiaries of MassMutual. Shares of
the MML Trust are not offered to the general public.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
consistently by each Fund in the preparation of the financial statements in
conformity with generally accepted accounting principles.
A. INVESTMENT VALUATION
Equity securities are valued on the basis of valuations furnished by a
pricing service, authorized by the Board of Trustees, which provides the last
reported sale price for securities listed on a national securities exchange,
or on the NASDAQ national market system. If securities are unlisted, or there
is no reported sale price, the bid price of the prior trade date will be
used. Long-term bonds are valued on the basis of valuations furnished by a
pricing service, authorized by the Board of Trustees, which determines
valuations taking into account appropriate factors such as institutional-
size, trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics and other market data.
For MML Equity Fund, MML Managed Bond Fund, and MML Blend Fund, short-term
securities with more than sixty days to maturity from the date of purchase
are valued at market and short-term securities having a maturity from the
date of purchase of sixty days or less are valued at amortized cost. MML
Money Market Fund's portfolio securities are valued at amortized cost in
accordance with a rule of the Securities and Exchange Commission pursuant to
which MML Money Market Fund must adhere to certain conditions. It is the
intention of MML Money Market Fund to maintain a per share net asset value of
$1.00.
B. ACCOUNTING FOR INVESTMENTS
Investment transactions are accounted for on trade date. Dividend income is
recorded on the ex-dividend date. Interest income is recorded on the accrual
basis. Premiums and discounts on short-term securities are amortized in
determining interest income.
The cost basis of long-term bonds is not adjusted for amortization of premium
or accrual of discount since MML Managed Bond Fund and MML Blend Fund do not
generally intend to hold such investments until maturity; however, the MML
Trust has elected to accrue for financial reporting purposes, certain
discounts which are required to be accrued for federal income tax purposes.
Realized gains and losses on investment transactions and unrealized
appreciation and depreciation of investments are reported for financial
statement and federal income tax purposes on the identified cost method.
C. FEDERAL INCOME TAX
The MML Trust has established a policy for each of the Funds to comply with
the provisions of the Internal Revenue Code applicable to regulated
investment companies. As a result, the Funds will not be subject to federal
income tax on any net investment income and any net capital gains to the
extent they are distributed or are deemed to have been distributed to
shareholders. Distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to the deferral of wash sale losses, and
paydowns on certain mortgage-backed securities. As a result, net investment
income (loss) and net realized gain (loss) on investment transactions for a
reporting period may differ significantly from distributions during such
period. Accordingly, the Funds may periodically make reclassifications among
certain of their capital accounts without impacting the net asset value of
the Funds.
Pursuant to section 852 of the Internal Revenue Code, the MML Equity Fund,
MML Managed Bond Fund and MML Blend Fund designated $93,227,079, $430,440 and
$141,110,488; respectively, as capital gain dividends for the year ended
December 31, 1998.
35
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
D. FORWARD COMMITMENTS
Each Fund may purchase or sell securities on a "when issued" or delayed
delivery or on a forward commitment basis. The Funds use forward commitments
to manage interest rate exposure or as a temporary substitute for purchasing
or selling particular debt securities. Forward commitments are not used for
purposes of trading. Settlement for securities purchased on a forward
commitment basis can take place a month or more after the date of the
transaction. The Fund generally does not take delivery on these forward
commitments, but such commitments are instead settled with offsetting
transactions. When a forward commitment contract is closed, the Funds record
a realized gain or loss. Forward commitments involve a risk of loss if the
value of the security to be purchased declines prior to the settlement date.
The Funds could also be exposed to loss if they can not close out their
forward commitments because of an illiquid secondary market, or the inability
of counterparties to perform. The Fund monitors exposure to ensure
counterparties are credit worthy and concentration of exposure is minimized.
The Funds instruct the custodian to segregate liquid high quality assets in a
separate account with a current market value at least equal to the amount of
its forward purchase commitments. The price of the underlying security and
the date when the securities will be delivered and paid for are fixed at the
time the transaction is negotiated. The value of the forward commitment is
determined by management using a commonly accepted pricing model and
fluctuates based upon changes in the value of the underlying security and
market repo rates. Such rates equate the counterparty's cost to purchase and
finance the underlying security to the earnings received on the security and
forward delivery proceeds. The Funds record on a daily basis the unrealized
appreciation/depreciation based upon changes in the value of the forward
commitment. At December 31, 1998, the fund had no open forward commitments.
E. ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. CAPITAL LOSS CARRYFORWARD
The accumulated net realized loss on investments for the MML Money Market
Fund results in a capital loss carryforward of $11,997 which is available for
federal income tax purposes to offset future capital gains. Of the total
carryforward, $1,204 expires December 31, 2000, $201 expires December 31,
2001, $5,364 expires December 31, 2002, $841 expires December 31, 2003,
$4,291 expires December 31, 2005 and $96 expires December 31, 2006.
4. INVESTMENT MANAGEMENT FEE
MassMutual provides all investment advisory, management and administrative
services needed by the Funds. For acting as such, MassMutual receives a
quarterly fee from each Fund at the annual rate of .50% of the first
$100,000,000 of the average daily net asset value of each Fund, .45% of the
next $200,000,000, .40% of the next $200,000,000, and .35% of any excess over
$500,000,000.
MassMutual has entered into an investment sub-advisory agreement with David
L. Babson and Company, Inc. ("Babson"), a wholly-owned subsidiary of DLB
Acquisition Corporation which is a controlled subsidiary of MassMutual. The
agreement provides that Babson manage the assets of MML Equity Fund and the
assets of the Equity Sector of MML Blend Fund. MassMutual pays Babson a
quarterly fee equal to an annual rate of .13% of the average daily net asset
value of MML Equity Fund and the Equity Sector of MML Blend Fund.
MassMutual has agreed, at least through April 30, 2000, to bear the expenses
of the Funds to the extent that the aggregate expenses (excluding each Fund's
management fee, interest, taxes, brokerage commissions and extraordinary
expenses) incurred during each Fund's fiscal year exceed .11% of the average
daily net asset value of each Fund for such year. For the period ended
December 31, 1998, MassMutual was not required to reimburse the Funds for any
expenses.
36
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. PURCHASES AND SALES OF INVESTMENTS AND FORWARD COMMITMENTS
<TABLE>
<CAPTION>
PROCEEDS
For the Year Ended ACQUISITION FROM SALES
December 31, 1998 COST AND MATURITIES
- ------------------ ----------------- -----------------
<S> <C> <C>
Investments
- -----------
MML EQUITY FUND
Equities $ 532,329,014 $ 375,620,947
Short-term investments 3,415,135,119 3,419,754,586
MML MONEY MARKET FUND
Short-term investments 784,174,293 755,231,689
MML MANAGED BOND FUND
Bonds and notes 45,558,302 33,056,996
U.S. Government investments - long-term 81,901,811 55,917,843
Short-term investments 816,526,581 808,544,864
MML BLEND FUND
Equities 258,939,173 364,338,576
Bonds and notes 151,825,174 49,564,280
U.S. Government investments - long-term 293,335,268 230,088,323
Short-term investments 2,736,323,588 2,763,614,285
<CAPTION>
COST
Forward Commitments OF CONTRACTS
- -------------------- -----------------
<S> <C>
MML MANAGED BOND FUND
U.S. Treasury and GNMA Forward Commitment Contracts:
Contracts opened $ 4,783,171
Contracts closed 4,783,171
Outstanding at December 31, 1998 -
</TABLE>
37
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. NET INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
MML MML
MML Money Managed MML
For the Year Ended Equity Market Bond Blend
December 31, 1998 Fund Fund Fund Fund
- ------------------ ---------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Shares
Reinvestment of dividends 5,377,343 7,577,176 1,080,294 10,548,232
Sales of shares 7,903,059 188,771,360 4,363,667 6,180,424
Redemptions of shares (5,006,969) (159,080,164) (1,816,564) (7,166,826)
---------------- ----------------- ----------------- -----------------
Net Increase 8,273,433 37,268,372 3,627,397 9,561,830
---------------- ----------------- ----------------- -----------------
Amount
Reinvestment of dividends $ 190,592,681 $ 7,577,176 $ 13,625,461 $ 257,252,297
Sales of shares 300,269,513 188,771,360 55,354,210 155,904,892
Redemptions of shares (188,112,102) (159,080,164) (22,972,939) (180,183,660)
---------------- ----------------- ----------------- -----------------
Net Increase $ 302,750,092 $ 37,268,372 $ 46,006,732 $ 232,973,529
---------------- ----------------- ----------------- -----------------
<CAPTION>
MML MML
MML Money Managed MML
For the Year Ended Equity Market Bond Blend
December 31, 1997 Fund Fund Fund Fund
- ----------------- ---------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Shares
Reinvestment of dividends 2,662,123 7,322,166 1,010,861 5,871,667
Sales of shares 9,271,802 149,151,177 2,489,815 6,389,317
Redemptions of shares (2,391,566) (160,539,000) (2,025,214) (4,905,462)
---------------- ----------------- ----------------- -----------------
Net Increase (decrease) 9,542,359 (4,065,657) 1,475,462 7,355,522
---------------- ----------------- ----------------- -----------------
Amount
Reinvestment of dividends $ 79,295,107 $ 7,322,166 $ 12,205,431 $ 134,231,230
Sales of shares 316,494,460 149,151,177 30,449,264 152,709,148
Redemptions of shares (82,014,563) (160,539,000) (24,651,298) (118,326,146)
---------------- ----------------- ----------------- -----------------
Net Increase (decrease) $ 313,775,004 $ (4,065,657) $ 18,003,397 $ 168,614,232
---------------- ----------------- ----------------- -----------------
</TABLE>
38
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
MML SERIES INVESTMENT FUND
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial positions of
the MML Equity Fund, the MML Money Market Fund, the MML Managed Bond Fund and
the MML Blend Fund which are components of the MML Series Investment Fund
(hereafter referred to collectively as the "MML Trust") at December 31, 1998,
the results of each of their operations for the year then ended, the changes in
each of their net assets for each of the two years in the period then ended and
each of their financial highlights for each of the ten years in the period then
ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the MML Trust's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodian and the application of
alternative auditing procedures where securities purchased had not been settled,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Springfield, Massachusetts
February 25, 1999
39
