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PROSPECTUS Filed Pursuant to
Rule 497(c)
Dated May 1, 1997
MML EQUITY INDEX FUND
1295 State Street
Springfield, Massachusetts
(413) 788-8411
MML Series Investment Fund ("MML Trust") is a no-load, open-end, management
investment company having five separate series of shares, each of which has
different investment objectives and is designed to meet different investment
needs. This Prospectus relates only to one of the series, MML Equity Index Fund
(the "Fund").
MML Equity Index Fund - The Fund is a non-diversified series of MML Trust. The
Fund's investment objective is to provide investment results that correspond to
the price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock Price
Index (the "Index"). As such, the Fund will invest in common stocks that
comprise the Index. While the Fund intends to invest in every stock of the
Index, there may be circumstances when the fund is not invested in every such
stock. The Fund is also permitted to invest in Standard & Poor's Depositary
Receipts ("SPDRs"). See "Appendix - Investment Techniques". In anticipation of
taking a market position, the Fund is also permitted to purchase and sell stock
index futures. The Fund is neither sponsored by nor affiliated with Standard &
Poor's, a division of The McGraw-Hill Companies, Inc.
For further information about the Fund's investment objective and policies, see
"MML EQUITY INDEX FUND" on page 3. There is no assurance that the investment
objective of the Fund will be realized.
This Prospectus sets forth concisely the information about MML Trust and the
Fund that a prospective investor ought to know before investing. Certain
additional information about MML Trust and the Fund is contained in a Statement
of Additional Information dated May 1, 1997, which has been filed with the
Securities and Exchange Commission and is incorporated by reference. This
additional information is available upon request and without charge. To obtain
such information, please contact the Secretary, MML Series Investment Fund, 1295
State Street, Springfield, Massachusetts 01111.
This Prospectus may only be used to offer or sell shares of the Fund described
in this Prospectus. This Prospectus should be retained for future reference for
information about MML Trust and the Fund.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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Table of Contents
Page
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General Information................................................ 3
MML Equity Index Fund.............................................. 3
Investment Considerations and Risks................................ 4
Fundamental Investment Restrictions................................ 5
The Advisers....................................................... 5
Capital Shares..................................................... 6
Net Asset Value.................................................... 7
Sale and Redemption of Shares...................................... 7
Tax Status......................................................... 7
Dividends and Capital Gains Distributions.......................... 7
Investment Performance............................................. 7
Management of MML Trust............................................ 8
Appendix........................................................... A-1
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I. General Information
MML Equity Index Fund (the "Fund") is one of five separate series of shares of
MML Series Investment Fund ("MML Trust"), a no-load, open-end, management
investment company. The Fund is a non-diversified series of MML Trust. MML Trust
was organized as a business trust under the laws of The Commonwealth of
Massachusetts pursuant to an Agreement and Declaration of Trust dated December
19, 1984, as amended from time to time (the "Declaration of Trust"). MML Trust
was established by Massachusetts Mutual Life Insurance Company ("MassMutual")
for the purpose of providing a vehicle for the investment of assets of various
separate investment accounts established by MassMutual and its life insurance
company subsidiaries, including MML Bay State Life Insurance Company. Shares of
the Fund are offered solely to separate investment accounts established by
MassMutual and its life insurance company subsidiaries.
MassMutual is responsible for providing all investment advisory, management, and
administrative services needed by the Fund pursuant to an investment management
agreement with MML Trust, on behalf of the Fund. MassMutual has entered into an
investment sub-advisory agreement with Mellon Equity Associates ("Mellon
Equity"), which provides that Mellon Equity will serve as the Fund's investment
sub-adviser, providing day-to-day management of the Fund's investments. Both
MassMutual and Mellon Equity are registered with the Securities and Exchange
Commission as investment advisers under the Investment Advisers Act of 1940, as
amended. (MassMutual and Mellon Equity are referred to hereafter collectively as
the "Advisers".) For further information, see "The Advisers" on page 5.
II. MML Equity Index Fund
Investment Objective
The Fund's investment objective is to provide investment results that correspond
to the price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock Price
Index/1/ (the "Index").
This investment objective of the Fund is a fundamental policy and may not be
changed without the vote of a majority of the Fund's outstanding voting shares
(as used in this Prospectus, a majority of the outstanding voting shares of the
Fund means the lesser of (1) 67% of the Fund's outstanding shares present at a
meeting of the shareholders if more than 50% of the outstanding shares are
present in person or by proxy, or (2) more than 50% of the Fund's outstanding
shares). As explained below, there is no assurance that the investment objective
of the Fund will be realized.
Management Policies
The Fund attempts to duplicate the investment results of the Index, which is
composed of 500 selected common stocks, most of which are listed on the New York
Stock Exchange. Standard & Poor's ("S&P") has an Index Committee which is
responsible for the overall management of the Index. The Index Committee looks
at a company's market value, industry group classification, capitalization,
trading activity, financial and operating condition before making a decision to
include it in the Index. New companies are added to the Index only when there is
a vacancy. Companies are removed from the Index for four major reasons: merger
with (or acquisition by) another company, financial operating failure, lack of
representation of leading American industries, or restructuring. The Fund
attempts to be fully invested at all times in the stocks that comprise the
Index, Standard and Poor's Depositary Receipts ("SPDRs") and stock index futures
as described below and, in any event, in the normal course of management, at
least 80% of the Fund's net assets will be so invested. Furthermore, while the
Fund does intend to invest in every stock included in the Index, there may be
circumstances, such as during the Fund's early stages when it may have
relatively small assets, when the Fund is not invested in every such stock.
Inclusion of a stock in the Index in no way implies an opinion by S&P as to its
attractiveness as an investment. The Fund uses the Index as the standard
performance comparison because it represents approximately 70% of the total
market value of all United States common stocks and is well known to investors.
An investment in the Fund involves risks similar to those of investing in common
stocks.
The weightings of stocks in the Index are based on each stock's relative total
market capitalization; that is, its market price per share times the number of
shares outstanding. Because of this weighting, as of November 30, 1996,
approximately 47.4% of the Index was composed of the 50 largest companies.
Mellon Equity generally selects stocks for the Fund's portfolio in the order of
their weightings in the Index beginning with the heaviest weighted stocks. With
respect to the Fund's assets invested in the stocks in the Index, the percentage
of such assets invested in each stock is approximately the same as the
percentage it represents in the Index.
No attempt is made to manage the portfolio in the traditional sense using
economic, financial and market analysis. The Fund is managed using a computer
program to determine which stocks are to be purchased or sold to replicate the
Index to the extent feasible. From time to time, administrative adjustments may
be made in the Fund's portfolio because of changes in the composition of the
Index, but such changes should be infrequent.
The Fund believes that the indexing approach described above is an effective
method of substantially duplicating Index performance. It is a reasonable
expectation that there will be a close correlation between the Fund's
performance and that of the Index in both rising and falling markets. The Fund
will
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/1/ "Standard & Poor's", "S&P", "Standard & Poor's 500", "S&P 500" and "500" are
trademarks of The McGraw-Hill Companies and have been licensed for use by the
Fund. The Fund is not sponsored, endorsed, sold or promoted by Standard &
Poor's, a division of the McGraw-Hill Companies ("S&P"), or The McGraw-Hill
Companies, Inc. S&P makes no representation regarding the advisability of
investing in the Fund.
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attempt to achieve a correlation between the performance of its portfolio and
that of the Index of at least 0.95, without taking into account expenses. A
correlation of 1.00 would indicate perfect correlation, which would be achieved
when the Fund's net asset value, including the value of its dividends and
capital gains distributions, increases or decreases in exact proportion to
changes in the Index. The Fund's ability to correlate its performance with the
Index, however, may be affected by, among other things, changes in securities
markets, the manner in which the Index is calculated by S&P and the timing of
purchases and redemptions of Fund shares. In the future, MML Trust's Board,
subject to the approval of shareholders of the Fund, may select another index if
such a standard of comparison is deemed to be more representative of the
performance of common stocks.
The Fund's ability to duplicate the performance of the Index also depends to
some extent on the size of the Fund's portfolio and the size of cash flows into
and out of the Fund. Investment changes to accommodate these cash flows are made
to maintain the similarity of the Fund's portfolio to the Index to the maximum
practicable extent.
From time to time to increase its income, the Fund may lend securities from its
portfolio. See "Appendix - Investment Techniques". When the Fund has cash
reserves, the Fund may invest in money market instruments consisting of U.S.
Government securities, time deposits, certificates of deposit, bankers'
acceptances, high-grade commercial paper, and repurchase agreements. See the
Statement of Additional Information for a description of these instruments.
The Fund may invest in SPDRs, an investment intended to provide investment
results that generally correspond to the price and yield performance of the
Index, when, in the opinion of Mellon Equity, available cash balances would not
otherwise allow the Fund to invest such cash balances in a manner which
adequately corresponds to the Index. SPDRs represent an interest in the
portfolio of S&P 500 stocks held by a unit investment trust, and SPDR holders
are entitled to receive dividends which accrue to stocks held by the unit
investment trust, less trust expenses. The Fund also may purchase stock index
futures in anticipation of taking a market position when, in the opinion of
Mellon Equity, available cash balances do not permit an economically efficient
trade in the cash market. The Fund also may sell stock index futures to
terminate existing positions it may have as a result of its purchases of stock
index futures. Investments in stock index futures typically require greater
available cash balances than do investments in SPDRs. See also "Investment
Considerations and Risks" and "Appendix - Investment Techniques" below, and
"Investment Objective and Management Policies" in the Statement of Additional
Information.
The Fund is not sponsored, endorsed, sold or promoted by S&P. S&P makes no
representation or warranty, express or implied, to the shareholders of the Fund
or any member of the public regarding the advisability of investing in
securities generally or in the Fund particularly or the ability of the Index to
track general stock market performance. S&P's only relationship to the Fund is
the licensing of certain trademarks and trade names of S&P and of the Index,
which is determined, composed and calculated by S&P without regard to the Fund.
S&P has no obligation to take the needs of the Fund or the shareholders of the
Fund into consideration in determining, composing or calculating the Index. S&P
is not responsible for and has not participated in the determination of the
prices and amount of the Fund or the timing of the issuance or sale of the Fund
or in the determination or calculation of the equation by which the Fund is to
be converted into cash. S&P has no obligation or liability in connection with
the administration, marketing or trading of the Fund.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500 INDEX
OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS,
OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED,
AS TO RESULTS TO BE OBTAINED BY THE FUND, SHAREHOLDERS OF THE FUND, OR ANY OTHER
PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN.
S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY
OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
III. Investment Considerations and Risks
General - The Fund's net asset value per share should be expected to fluctuate.
Investors should consider the Fund as a part of an overall investment program
and should invest only if they are willing to undertake the risks involved. See
"Investment Objective and Management Policies -- Management Policies" in the
Statement of Additional Information for a further discussion of certain risks.
Equity Securities - Equity securities fluctuate in value, often based on factors
unrelated to the value of the issuer of the securities, and such fluctuations
can be pronounced. Changes in the value of the Fund's investments will result in
changes in the value of its shares and thus the Fund's total return to
investors.
Foreign Securities - Since the stocks of some foreign issuers are included in
the Index, the Fund's portfolio may contain securities of such foreign issuers
which may subject the Fund to additional investment risks with respect to those
securities that are different in some respects from those incurred by a fund
which invests only in securities of domestic issuers. Such risks include
possible adverse political and economic developments, seizure or nationalization
of foreign deposits or adoption of governmental restrictions which might
adversely affect the value of the securities of a foreign issuer to investors
located outside the country of the issuer, whether from currency blockage or
otherwise.
Use of Derivatives - The Fund may invest, to a limited extent, in derivatives
("Derivatives"). These are financial instruments
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which derive their performance, at least in part, from the performance of an
underlying asset or index. The Derivatives the Fund may use include stock index
futures. While Derivatives can be used effectively in furtherance of the Fund's
investment objective, under certain market conditions, they can increase the
volatility of the Fund's net asset value, can decrease the liquidity of the
Fund's portfolio and make more difficult the accurate pricing of the Fund's
portfolio. See "Appendix -Investment Techniques - Use of Derivatives" and
"Investment Objective and Management Policies - Management Policies -
Derivatives" in the Statement of Additional Information.
Non-Diversified Status - The classification of the Fund as "non-diversified"
means that the proportion of the Fund's assets that may be invested in the
securities of a single issuer is not limited by the Investment Company Act of
1940, as amended (the "1940 Act"). A "diversified" investment company is
required by the 1940 Act generally, with respect to 75% of its total assets, to
invest not more than 5% of such assets in the securities of a single issuer.
Since a relatively high percentage of the Fund's assets may be invested in the
securities of a limited number of issuers, some of which may be within the same
economic sector, the Fund's portfolio may be more sensitive to the changes in
market value of a single issuer or industry. However, to meet Federal tax
requirements, at the close of each quarter the Fund may not have more than 25%
of its total assets invested in any one issuer and, with respect to 50% of total
assets, not more than 5% of its total assets invested in any one issuer.
These limitations do not apply to U.S. Government securities.
IV. Fundamental Investment Restrictions
For a description of fundamental investment restrictions that apply to the Fund,
which may not be changed without a vote of a majority of the outstanding shares
of the Fund, reference should be made to the Statement of Additional
Information.
V. The Advisers
MassMutual
MassMutual serves as investment manager of the Fund pursuant to an investment
management agreement executed by MassMutual and MML Trust, on behalf of the Fund
(the "Investment Management Agreement"). MassMutual is a registered investment
adviser and is a mutual life insurance company organized in 1851 under the laws
of The Commonwealth of Massachusetts. MassMutual is licensed to transact a life
insurance business in all states of the United States, the District of Columbia,
Puerto Rico and certain Provinces of Canada. At December 31, 1996, MassMutual,
together with its subsidiaries, had total assets of approximately $55.7 billion
and in excess of $130.8 billion in assets under management.
Under the Investment Management Agreement, MassMutual is authorized to engage in
portfolio transactions on behalf of the Fund, subject to such general or
specific instructions as may be given by the Board of Trustees of MML Trust. The
Investment Management Agreement provides that MassMutual will perform all
administrative functions relating to the Fund and will bear all expenses of the
Fund except: (1) taxes and corporate fees payable to government agencies; (2)
brokerage commissions and other capital items payable in connection with the
purchase or sale of Fund investments; (3) interest on account of any borrowings
by the Fund; (4) fees and expenses of Trustees of MML Trust who are not
interested persons, as defined in the 1940 Act, of the Advisers or MML Trust;
(5) fees and expenses of MML Trust's Advisory Board Members; (6) fees of the
Fund's independent certified public accountants; and (7) any required trademark
licensing fees.
For providing the services described above, MassMutual is paid a quarterly fee
at the annual rate of .40% of the first $100,000,000 of the average daily net
asset value of the Fund; .38% of the next $150,000,000 and .36% of any net
assets thereafter. MassMutual has agreed to bear expenses of the Fund (other
than the management fee, interest, taxes, any required trademark licensing fees,
custodial fees (which will be paid by Mellon Equity as described below),
brokerage commissions and extraordinary expenses) in excess of .11% of average
daily net asset value through April 30, 1998. The imposition of the Fund's
management fee, as well as other operating expenses, will have the effect of
reducing shareholders' return and will affect the ability of the Fund to track
the Index exactly.
The Investment Management Agreement between MassMutual and the Fund
automatically terminates: (1) unless its continuance is specifically approved at
least annually by the affirmative vote of a majority of the Board of Trustees of
MML Trust, which affirmative vote shall include a majority of the members of the
Board who are not interested persons (as defined in the 1940 Act) of the
Advisers or of MML Trust, or (2) upon its assignment. Under the terms of the
Investment Management Agreement, the Fund recognizes MassMutual's control of the
initials "MML" and the Fund agrees that its right to use these initials is
non-exclusive and can be terminated by MassMutual at any time. Under the
agreement, MassMutual's liability regarding its investment management
obligations and duties is limited to situations involving its willful
misfeasance, bad faith, gross negligence or reckless disregard of such
obligations and duties.
MassMutual also acts as the transfer agent and the dividend paying agent. First
Data Investors Services Group, Inc. provides fund accounting services for the
Fund.
Mellon Equity
Pursuant to an investment sub-advisory agreement (the "Sub-Advisory Agreement")
with MassMutual, Mellon Equity, located at 500 Grant Street, Pittsburgh,
Pennsylvania 15258, serves as the Fund's investment sub-adviser, providing
day-to-day management of the Fund's investments. Mellon Equity, a registered
investment adviser formed in 1987, became a Pennsylvania Business Trust as of
December 31, 1991 and is an indirect wholly-owned subsidiary of Mellon Bank
Corporation. As of December 31, 1996, Mellon Equity and its employees managed
approximately $11 billion and served as the investment adviser or sub-adviser of
9 other investment companies.
Mellon Bank Corporation is a publicly owned multibank holding company
incorporated under Pennsylvania law in 1971 and registered under the Federal
Bank Holding Company Act
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of 1956, as amended. Mellon Bank Corporation provides a comprehensive range of
financial products and services in domestic and selected international markets.
Through its subsidiaries, Mellon Bank Corporation managed more than $226 billion
in assets as of September 30, 1996, including approximately $65 billion in
proprietary mutual fund assets.
The Sub-Advisory Agreement provides that MassMutual will pay Mellon Equity a
monthly fee equal at an annual rate of .09% of the first $100,000,000 of the
average daily net asset value of the Fund; .07% of the next $150,000,000; and
.05% on any assets thereafter. Pursuant to the Sub-Advisory Agreement, Mellon
Equity has agreed that so long as it is the sole investment sub-adviser to the
Fund, that Mellon Equity shall pay the fees for the custody services for the
Fund, which will be provided by Boston Safe Deposit and Trust Company (which is
an indirect subsidiary of Mellon Bank Corporation).
The Sub-Advisory Agreement between MassMutual and Mellon Equity automatically
terminates: (1) unless its continuance is specifically approved at least
annually by the affirmative vote of a majority of the Board of Trustees of MML
Trust, which affirmative vote shall include a majority of the members of the
Board who are not interested persons (as defined in the 1940 Act) of the
Advisers or of MML Trust; (2) upon its assignment; or (3) upon the termination
of the Investment Management Agreement. Under the terms of the Sub-Advisory
Agreement, Mellon Equity's liability regarding its investment management
obligations and duties is limited to situations involving its willful
misfeasance, bad faith, gross negligence or reckless disregard of such
obligations and duties.
The Sub-Advisory Agreement acknowledges that when purchase or sale of securities
of the same issuer is suitable for the Fund and one or more other investment
companies or accounts managed by Mellon Equity which attempt to track an equity
index, such purchases or sales may and normally will be combined, to the extent
practicable, and will be allocated as nearly as practicable on a pro rata basis
in proportion to the amounts to be purchased or sold for each. In determining
the amounts to be purchased or sold, the main factors to be considered will be
the investment objectives of the respective portfolios, the relative size of
portfolio holdings of the same or comparable security, availability of cash for
investment by the various portfolios and the size of their respective investment
commitments. Mellon Equity believes that the ability of the Fund to participate
in larger volume transactions will, in most cases, produce better execution for
the Fund. In some cases, however, this procedure could have a detrimental effect
on the price and amount of a security available to the Fund or the price at
which a security may be sold. It is the opinion of MML Trust's management that
such execution advantage and the desirability of retaining Mellon Equity as
index manager of the Fund outweigh the disadvantages, if any, which might result
from this procedure.
In allocating brokerage transactions for the Fund, Mellon Equity seeks to obtain
the best execution of orders at the most favorable net price. Subject to this
determination, Mellon Equity may consider, among other things, the sale of
shares of the Fund as a factor in the selection of broker-dealers to execute
portfolio transactions for the Fund. Mellon Equity will not consider the
provision of brokerage or research services (as such term is defined in Section
28(e) of the Securities Exchange Act of 1934, as amended) in allocating
brokerage transactions for the Fund. See "Portfolio Transactions" in the
Statement of Additional Information.
VI. Capital Shares
MML Trust is a "series" company which is authorized to issue an unlimited number
of shares in separate series of the same class. To date, shares of five separate
series have been authorized, one of which constitutes the interests in the Fund.
Under MML Trust's Declaration of Trust, however, the Board of Trustees is
authorized to create new series without the necessity of a vote of shareholders
of MML Trust. Each share of a particular series represents an equal
proportionate interest in that series with each other share of the same series,
none having priority or preference over another. Each series shall be preferred
over all other series in respect of the assets allocated to that series. Each
share of a particular series is entitled to a pro rata share of any
distributions declared by that series and, in the event of liquidation, a pro
rata share of the net assets of that series remaining after satisfaction of
outstanding liabilities. When issued, shares are fully paid and nonassessable
and have no preemptive, conversion or subscription rights.
MML Trust is not required to hold annual meetings of shareholders. Special
meetings may be called for purposes such as electing Trustees, voting on
management agreements, and with respect to such additional matters relating to
MML Trust as may be required by MML Trust's Declaration of Trust and the 1940
Act. Shareholders holding 10% of the shares of MML Trust may call a meeting to
be held to consider removal of Trustees. On any matter submitted to
shareholders, shares of each series entitle their holder to one vote per share
(with proportionate voting for fractional shares), irrespective of the relative
net asset values of the series' shares. On any matters submitted to a vote of
shareholders, all shares of MML Trust then entitled to vote shall be voted by
individual series, except that (i) when required by the 1940 Act, shares shall
be voted in the aggregate and not by individual series, and (ii) when the
Trustees have determined that any matter affects only the interests of one or
more series, then only shareholders of such series shall be entitled to vote
thereon. Shareholder inquiries should be made by contacting the Secretary, MML
Series Investment Fund, 1295 State Street, Springfield, Massachusetts 01111.
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of MML Trust. However, MML Trust's
Declaration of Trust disclaims liability of the shareholders, Trustees of MML
Trust, or officers of MML Trust for acts or obligations of MML Trust, which are
binding only on the assets and property of MML Trust, and requires that notice
of such disclaimer be given in each agreement, obligation, or instrument entered
into or executed by MML Trust or Trustees of MML Trust. MML Trust's Declaration
of Trust provides for indemnification out of MML Trust property for all loss and
expense of any shareholder held personally liable for the obligations of MML
Trust. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is considered remote since it
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is limited to circumstances in which the disclaimer is inoperative and MML Trust
itself would be unable to meet its obligations.
VII. Net Asset Value
The net asset value of the Fund's shares is determined once daily as of the
normal close of trading on the New York Stock Exchange (presently 4:00 p.m.) on
each day on which the Exchange is open for trading.
Generally, the Fund values portfolio securities on the basis of market value.
For example, equity securities, including those traded on national securities
exchanges, the NASDAQ national market system, or over-the-counter securities not
so listed, are valued by one or more pricing services, as authorized by the
Board of Trustees of MML Trust. Normally, the values are based upon the last
reported sale price of the security. Debt obligations with less than one year
but more than sixty days to maturity are valued on the basis of their market
value. Debt obligations having a maturity of sixty days or less are generally
valued at amortized cost when the Board of Trustees of MML Trust believes that
amortized cost approximates market value. Futures contracts are valued based on
market prices unless such prices do not reflect the fair value of the contract,
in which case they will be valued by or under the direction of the Board of
Trustees of MML Trust. In all other cases, assets will be valued at fair value
as determined in good faith by the Board of Trustees, although the actual
calculations may be made by persons acting pursuant to the direction of the
Board.
VIII. Sale and Redemption of Shares
The shares of the Fund are sold at their net asset value as next computed after
receipt of the purchase order, without the addition of any selling commission or
"sales load."
The Fund redeems its shares at their net asset value as next computed after
receipt of the request for redemption. The redemption price for shares of the
Fund may be more or less than the shareholder's cost. No fee is charged on
redemption.
Redemption payments will be made within seven days after receipt of the written
request therefor by MML Trust, except that the right of redemption may be
suspended or payments postponed when permitted by applicable law and
regulations.
IX. Tax Status
It is the policy of the Fund to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies. As a result, the Fund
will not be subject to federal income tax on any net income or any capital gains
to the extent they are distributed or are deemed to have been distributed to
shareholders.
Regulations issued under Internal Revenue Code Section 817(h) require the Fund
to be adequately diversified in order for a variable life insurance contract
funded by the Fund to receive favorable tax treatment as a life insurance
contract. Among other requirements, the regulations limit the Fund's investment
in a single issuer to 55% of its assets; while this requirement applies to U.S.
Government securities, each government agency or instrumentality is treated for
this purpose as a separate issuer. The Fund intends to comply with these
diversification requirements. For further information, see the Statement of
Additional Information.
Tax consequences to investors in the separate investment accounts which are
invested in the Fund are described in the prospectuses for such accounts.
X. Dividends and Capital Gains Distributions
The Fund intends to declare capital gain and ordinary income dividends and to
distribute such dividends in a manner designed to avoid a 4% excise tax on
undistributed regulated investment company income imposed by the Tax Reform Act
of 1986. Distributions, if any, are declared and paid annually. Distributions
may be taken either in cash or in additional shares of the Fund at net asset
value on the day after the record date for the distribution, at the option of
the shareholder.
XI. Investment Performance
The Fund may from time to time advertise certain investment performance figures.
These figures are based on historical returns and are not intended to indicate
future performance.
The Fund may advertise its total return and its holding period return for
various periods of time. Total return is calculated by determining, over a
period of time which will be stated in the advertisement, the average annual
compounded rate of return that an investment in the Fund earned over that
period, assuming reinvestment of all distributions. Holding period return refers
to the percentage change in the value of an investment in the Fund over a period
of time (which period will be stated in the advertisement), assuming
reinvestment of all distributions. Total return differs from holding period
return principally in that total return is an average annual figure while
holding period return is an aggregate figure for the entire period. This
performance information for the Fund may also be compared to the Index.
These investment performance figures may be of limited use for comparative
purposes because they do not reflect charges imposed by the separate investment
accounts invested in the Fund which, if included, would decrease the performance
figures. For more information about calculation of the investment performance of
the Fund, see the Statement of Additional Information.
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XII. Management of MML Trust
The affairs of MML Trust are generally supervised by its Board of Trustees and
officers. As stated previously, MassMutual acts as investment manager of the
Fund and Mellon Equity is the sub-adviser to the Fund. In those capacities
MassMutual and Mellon Equity are part of the management of MML Trust. For more
information concerning the management of MML Trust, reference should be made to
the Statement of Additional Information.
The name MML Series Investment Fund is the designation of Trustees of MML Trust
under an Agreement and Declaration of Trust dated December 19, 1984, as amended
from time to time. The obligations of such Trust are not personally binding
upon, nor shall resort be had to the property of, any Trustees of MML Trust,
shareholders, officers, employees or agents of such Trust, but MML Trust's
property only shall be bound.
8
<PAGE>
Appendix
Investment Techniques
Borrowing Money - The Fund is permitted to borrow money only for temporary or
emergency purposes, in an amount up to 5% of the value of its total assets
(including the amount borrowed) valued at the lesser of cost or market, less
liabilities (not including the amount borrowed) at the time the borrowing is
made.
Use of Derivatives - The Fund may invest in the types of Derivatives enumerated
under "Description of the Fund - Investment Considerations and Risks - Use of
Derivatives." These instruments and certain related risks are described more
specifically under "Investment Objective and Management Policies - Management
Policies - Derivatives" in the Statement of Additional Information.
Although the Fund will not be a commodity pool, Derivatives subject the Fund to
the rules of the Commodity Futures Trading Commission which limit the extent to
which the Fund can invest in certain derivatives. The Fund may invest in stock
index futures contracts for hedging purposes without limit. However, the Fund
may not invest in such contracts for other purposes if the sum of the amount of
initial margin deposits, other than for bona fide hedging purposes, exceeds 5%
of the liquidation value of the Fund's assets, after taking into account
unrealized gains and unrealized losses on such contracts.
Standard & Poor's Depositary Receipts ("SPDRs") - The Fund may invest in SPDRs
when, in the opinion of Mellon Equity, available cash balances would not
otherwise allow the Fund to invest such cash balances in a manner which
adequately corresponds to the Index. Investments in SPDRs typically require less
available cash balances than do investments in stock index futures.
SPDRs represent an interest in the portfolio of S&P 500 stocks held by a unit
investment trust. SPDRs trade on the American Stock Exchange and may be bought
and sold like common stock at any time during the trading day. An investment in
SPDRs is intended to provide investment results that generally correspond to the
price and yield performance of the Index.
Lending Portfolio Securities - The Fund may lend securities from its portfolio
to brokers, dealers and other financial institutions desiring to borrow
securities to complete certain transactions. The Fund continues to be entitled
to payments in amounts equal to the interest, dividends or other distributions
payable on the loaned securities which affords the Fund an opportunity to earn
interest on the amount of the loan and income on the loaned securities'
collateral. Loans of portfolio securities may not exceed 10% of the value of the
Fund's total assets, and the Fund will receive collateral consisting of cash,
U.S. Government securities or irrevocable letters of credit which will be
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. Such loans are terminable by the Fund at
any time upon specified notice. The Fund might experience risk of loss if the
institution with which it has engaged in a portfolio loan transaction breaches
its agreement with the Fund.
A-1
<PAGE>
MML EQUITY INDEX FUND
1295 State Street
Springfield, Massachusetts 01111
-----------------------------
INVESTMENT MANAGER
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
1295 State Street
Springfield, Massachusetts 01111
INVESTMENT SUB-ADVISER
MELLON EQUITY ASSOCIATES
500 Grant Street
Suite 3700
Pittsburgh, Pennsylvania 15258
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND LLP
2300 BayBank Tower
Springfield, Massachusetts 01101
CUSTODIAN
BOSTON SAFE DEPOSIT AND
TRUST COMPANY
One Boston Place
Boston, Massachusetts 02108
-----------------------------
For Use With:
. MML Bay State Variable Life Separate Account I
. MassMutual Variable Life Separate Account I
This Prospectus does not constitute an offering in any jurisdiction in which
such offering may not lawfully be made. No person is authorized to make any
representations in connection with this offering other than those contained in
this Prospectus.
<PAGE>
Rule 485(a)(2)
Registration No. 2-39334
File No. 811-2224
MML EQUITY INDEX FUND
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUS OF MML EQUITY INDEX FUND DATED MAY 1, 1997
(THE "PROSPECTUS"), A SERIES OF MML SERIES INVESTMENT FUND. THE PROSPECTUS MAY
BE OBTAINED WITHOUT CHARGE FROM THE SECRETARY, MML SERIES INVESTMENT FUND, 1295
STATE STREET, SPRINGFIELD, MASSACHUSETTS 01111.
DATED MAY 1, 1997
<PAGE>
TABLE OF CONTENTS
GENERAL INFORMATION............................................................3
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES...................................3
INVESTMENT RESTRICTIONS........................................................7
MANAGEMENT OF MML TRUST........................................................8
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES...........................16
INVESTMENT MANAGEMENT AND OTHER SERVICES......................................16
PORTFOLIO TRANSACTIONS........................................................17
CAPITAL SHARES................................................................19
PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED..................19
TAX STATUS....................................................................20
CERTAIN TAX AND ACCOUNTING INFORMATION........................................22
INVESTMENT PERFORMANCE........................................................22
INDEPENDENT AUDITORS..........................................................23
COUNSEL .....................................................................23
APPENDIX ..............................................................A-1 - A-2
<PAGE>
I. GENERAL INFORMATION
MML Equity Index Fund (the "Fund") is one of five separate series of shares of
MML Series Investment Fund ("MML Trust"). MML Trust is a no-load, open-end,
management investment company that was established by Massachusetts Mutual Life
Insurance Company ("MassMutual") for the purpose of providing a vehicle for the
investment of assets of various separate investment accounts established by
MassMutual and life insurance company subsidiaries of MassMutual.
Shares of MML Trust are not offered to the general public but solely to separate
investment accounts established by MassMutual and its life insurance company
subsidiaries, including MML Bay State Life Insurance Company ("MML Bay State").
MML Trust was formed as a voluntary association of the type known as a "business
trust" organized under the laws of The Commonwealth of Massachusetts pursuant to
an Agreement and Declaration of Trust dated December 19, 1984, as amended from
time to time (the "Declaration of Trust").
MassMutual is responsible for providing all investment advisory, management, and
administrative services needed by the Fund pursuant to an investment management
agreement. MassMutual has entered into an investment sub-advisory agreement with
Mellon Equity Associates ("Mellon Equity"), which provides that Mellon Equity
will serve as the Fund's investment sub-adviser, providing day-to-day management
of the Fund's investments. Both MassMutual and Mellon Equity are registered with
the Securities and Exchange Commission (the "SEC") as investment advisers under
the Investment Advisers Act of 1940, as amended (MassMutual and Mellon Equity
are referred to hereinafter collectively as the "Advisers").
II. INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction with the
discussion of the Fund's investment objective, techniques and policies described
in the Prospectus. The fundamental investment objective and investment
restrictions of the Fund (as described in the Prospectus and below) may not be
changed without a vote of a majority of the Fund's outstanding shares. A
"majority of the outstanding shares" of the Fund means the lesser of (1) 67% of
the Fund's outstanding shares present at a meeting of the shareholders if more
than 50% of the outstanding shares are present in person or by proxy or (2) more
than 50% of the Fund's outstanding shares. All other investment policies and
techniques of the Fund may be changed by the Board of Trustees of MML Trust
without a vote of shareholders. For example, such other policies and techniques
include investment in new types of hedging programs which may be devised in the
future, or which are presently in disuse but may become more prominent in the
future, and minor changes in investment policies which may be made in response
to changes in regulatory requirements which are reflected in the present
policies of the Fund. The Fund's investment objective is to provide investment
results that correspond to the price and yield performance of publicly traded
common stocks in the aggregate, as represented by the Standard & Poor's 500
Composite Stock Price Index (the "Index"). There is no assurance that the
investment objective of the Fund will be realized.
-3-
<PAGE>
In managing its portfolios of investments, the Fund may purchase various
securities, investment related instruments and make use of various investment
techniques, including those described below.
Other Portfolio Securities
Money Market Instruments. The Fund may invest, in the circumstances described
- -------------------------
under "MML Equity Index Fund-Management Policies" in the Fund's Prospectus, in
the following types of money market instruments.
U.S. Government Securities -- Securities issued or guaranteed by the
--------------------------
U.S. Government or its agencies or instrumentalities include U.S. Treasury
securities that differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies and
instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the Treasury; others
by discretionary authority of the U.S. Government to purchase certain
obligations from the agency or instrumentality; and others only by the credit of
the agency or instrumentality. These securities bear fixed, floating or variable
rates of interest. While the U.S. Government provides financial support for such
U.S. Government-sponsored agencies and instrumentalities, no assurance can be
given that it will always do so since it is not so obligated by law.
Repurchase Agreements -- In a repurchase agreement, the Fund buys, and
---------------------
the seller agrees to repurchase, a security at a mutually agreed upon time and
price (usually within seven days). The repurchase agreement thereby determines
the yield during the purchaser's holding period, while the seller's obligation
to repurchase is secured by the value of the underlying security. The Fund's
custodian or sub-custodian will have custody of, and will hold in a segregated
account, securities acquired by the Fund under a repurchase agreement.
Repurchase agreements are considered by the staff of the SEC to be loans by the
Fund. In an attempt to reduce the risk of incurring a loss on a repurchase
agreement, the Fund will enter into repurchase agreements only with domestic
banks with total assets in excess of one billion dollars or primary government
securities dealers reporting to the Federal Reserve Bank of New York, with
respect to securities of the type in which the Fund may invest, and will require
that additional securities be deposited with it if the value of the securities
purchased should decrease below resale price. However, if the Seller defaults,
the Fund may realize a loss on the sale of the underlying security. In addition,
if the seller should be involved in bankruptcy or insolvency proceedings, the
Fund may incur delay and costs in selling the underlying security or may suffer
a loss of principal and interest if the Fund is treated as an unsecured creditor
and required to return the underlying securities to the seller's estate.
Bank Obligations -- The Fund may purchase certificates of deposit, time
----------------
deposits, bankers' acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. With respect to such securities
issued by foreign subsidiaries or foreign branches of domestic banks and
-4-
<PAGE>
domestic and foreign branches of foreign banks, the Fund may be subject to
additional investment risks that are different in some respects from those
incurred by a fund which invests only in debt obligations of U.S. domestic
issuers.
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven days)
at a stated interest rate.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of the bank and the drawer to pay the face amount of the
instruments upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
Commercial Paper -- Commercial paper consists of short-term, unsecured
----------------
promissory notes issued to finance short-term credit needs. The commercial paper
purchased by the Fund will consist only of direct obligations which, at the time
of their purchase, are (a) rated at least Prime-1 by Moody's Investors Service,
Inc. ("Moody's") or A-1 by Standard & Poor's Ratings Group ("S&P"), a division
of The McGraw-Hill Companies, Inc., (b) issued by companies having an
outstanding unsecured debt issue currently rated at least Aa by Moody's or at
least AA- by S&P, or (c) if unrated, determined by Mellon Equity to be of
comparable quality to those rated obligations which may be purchased by the
Fund.
Management Policies
Lending Portfolio Securities. In connection with its securities lending
- -----------------------------
transactions, the Fund may return to the borrower or a third party which is
unaffiliated with the Fund, and which is acting as a "placing broker," a part of
the interest earned from the investment of cash collateral received for
securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned: (1)
the Fund must receive at least 100% cash collateral from the borrower; (2) the
borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the Fund must be able
to terminate the loan at any time; (4) the Fund must receive reasonable interest
on the loan, as well as any dividends, interest or other distributions payable
on the loaned securities, and any increase in market value; (5) the Fund may pay
only reasonable custodian fees in connection with the loan; and (6) while voting
rights on the loaned securities may pass to the borrower, the Fund's Board must
terminate the loan and regain the right to vote the securities if a material
event adversely affecting the investment occurs.
Derivatives. The Fund may invest in Derivatives (as defined in the Prospectus)
- ------------
in anticipation of taking a market position when, in the opinion of Mellon
Equity, available cash
-5-
<PAGE>
balances do not permit an economically efficient trade in the cash market.
Derivatives may provide a cheaper, quicker or more specifically focused way for
the Fund to invest than "traditional" securities would.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and the
portfolio as a whole. Derivatives permit the Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed.
Derivatives may entail investment exposures that are greater than their
cost would suggest, meaning that a small investment in Derivatives could have a
large potential impact on the Fund's performance.
Investments in Derivatives may lower the Fund's return or result in a
loss. The Fund also could experience losses if its Derivatives were poorly
correlated with its other investments, or if the Fund were unable to liquidate
its position because of an illiquid secondary market. The market for many
Derivatives is, or suddenly can become, illiquid. Changes in liquidity may
result in significant, rapid and unpredictable changes in the prices for
Derivatives.
Stock Index Futures. A stock index future obligates the Fund to pay or receive
- --------------------
an amount of cash equal to a fixed dollar amount specified in the futures
contract multiplied by the difference between the settlement price of the
contract on the contract's last trading day and the value of the index based on
the stock prices of the securities that comprise it at the opening of trading in
such securities on the next business day. The Fund purchases and sells futures
contracts on the stock index for which it can obtain the best price with
consideration also given to liquidity.
Using futures in anticipation of market transactions involves certain
risks. Although the Fund intends to purchase or sell futures contracts only if
there is an active market for such contracts, no assurance can be given that a
liquid market will exist for any particular contract at any particular time. In
addition, the price of stock index futures may not correlate perfectly with the
movement in the stock index due to certain market distortions. First, all
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
would distort the normal relationship between the index and futures markets.
Secondly, from the point of view of speculators, the deposit requirements in the
futures market are less onerous than margin requirements in the securities
market. Therefore, increased participation by speculators in the futures market
also may cause temporary price distortions. Because of the possibility of price
distortions in the futures market and the imperfect correlation between
movements in the stock index and movements in the price of stock index futures,
the use of stock index futures may not result in a successful hedging
transaction.
-6-
<PAGE>
In connection with its futures transactions, the Fund may be required
to establish and maintain at its custodian bank or a registered futures
commission merchant a segregated account consisting of cash or high quality
money market instruments in an amount equal to the market value of the
underlying commodity less any amount deposited as margin.
Standard & Poor's Depositary Receipts ("SPDRs"). The Fund may invest in SPDRs
- ------------------------------------------------
when, in the opinion of Mellon Equity, available cash balances would not
otherwise allow the Fund to invest such cash balances in a manner which
adequately corresponds to the Index. Investments in SPDRs typically require less
available cash balances than do investments in stock index futures.
SPDRs represent an interest in the portfolio of S&P 500 stocks held by
a unit investment trust. SPDRs trade on the American Stock Exchange and may be
bought and sold like common stock at any time during the trading day. An
investment in SPDRs is intended to provide investment results that generally
correspond to the price and yield performance of the Index.
III. INVESTMENT RESTRICTIONS
The following is a description of certain restrictions on investments of the
Fund which may not be changed without a vote of a majority of the outstanding
shares of the Fund.
The Fund will not:
1. Purchase securities on margin, except for such short-term credits as
are necessary for the clearance of transactions, and except that the
Fund may deposit and maintain funds with its custodian or brokers as
margin in connection with its use of financial futures contracts;
2. Purchase commodities or commodity contracts, except to the extent
that the Fund may enter into futures contracts, as described in the
Prospectus and this Statement of Additional Information;
3. Borrow money or pledge, mortgage or hypothecate its assets, except
as described in the Fund's Prospectus and the Statement of Additional
Information and in connection with entering into futures contracts.
Collateral arrangements with respect to initial or variation margin for
futures contracts will not be deemed to be pledges of the Fund's
assets.
4. Act as an underwriter of securities of other issuers or purchase
securities subject to restrictions on disposition under the Securities
Act of 1933, as amended (so-called "restricted securities"). The Fund
may not enter into repurchase agreements providing for settlement in
more than seven days or purchase securities which are not readily
marketable, if, in the aggregate more than 10% of the value of the
Fund's net assets would be so invested. The Fund will not enter into
time deposits maturing in more
-7-
<PAGE>
than seven days and time deposits maturing from two business through
seven calendar days will not exceed 10% of the Fund's total assets.
5. Write, purchase or sell puts, calls or combinations thereof;
6. Make loans to any officer, Trustee or employee of the Trust or to
any officer, director or employee of MassMutual, or to MassMutual;
7. Purchase or sell real estate or interests in real estate, although
the Fund may purchase and sell marketable securities secured by, or of
companies investing or dealing in, real estate;
8. Purchase securities of investment companies except as permitted
under the Investment Company Act of 1940, as amended (the "1940 Act").
9. Invest more than 25% of its assets in investments in any particular
industry or industries (including banking), except to the extent the
Index also is so concentrated.
10. Make loans, except through the acquisition of bonds, debentures,
notes, commercial paper, bankers= acceptances or other evidences of
indebtedness in which the Fund is authorized to invest. However, the
Fund may lend portfolio securities with respect to not more than 10% of
the total assets of the Fund taken at current value.
11. Issue senior securities, except to evidence borrowings permitted by
investment restriction (3) described above.
In addition to the investment restrictions adopted as fundamental
policies set forth above, the Fund operates with certain non-fundamental
policies which may be changed by vote of a majority of the Board members at any
time. The Fund may not sell securities short, but reserves the right to sell
securities short against the box. If a percentage restriction is adhered to at
the time of investment, a later change in percentage resulting from a change in
values or assets will not constitute a violation of such restriction.
IV. MANAGEMENT OF MML TRUST
MML Trust has a Board of Trustees, a majority of whom are not "Interested
Persons" as defined in the 1940 Act. The Board of Trustees has established an
Advisory Board that has advisory functions only as to investments made by MML
Trust. Trustees of MML Trust, members of the Advisory Board, and principal
officers of MML Trust are listed below together with information on their age,
address, positions with MML Trust, principal occupations during the past five
years and other principal business affiliations.
-8-
<PAGE>
Gary E. Wendlandt* Chariman and Trustee of MML Trust
1295 State Street
Springfield, MA 01111
Age: 46
Chief Investment Officer (since 1993) and Executive Vice President,
MassMutual; Chairman and Chief Executive Officer, MassMutual
Institutional Funds; Chairman (since 1995), President (1983-1995) and
Trustee, MassMutual Corporate Investors; Chairman (since 1995),
President (1988-1995) and Trustee, MassMutual Participation Investors;
Chairman (since 1996), Antares Leveraged Capital Corp. (finance
company); Chairman, HYP Management, Inc. (managing member of MassMutual
High Yield Partners LLC) and MMHC Investment, Inc. (investor in
MassMutual High Yield Partners LLC); Advisory Board Member (since
1996), MassMutual High Yield Partners LLC (high yield bond fund);
President and Director (since 1995), DLB Acquisition Corporation
(holding company for investment advisers); President and Chief
Executive Officer (1994-1996), Director (1992-1996), Concert Capital
Management, Inc. (former indirect investment advisory subsidiary of
MassMutual Holding Company); Director, Oppenheimer Acquisition
Corporation (investment advisory holding company); Supervisory
Director, MassMutual/Carlson CBO N.V. Inc. (collateralized bond fund);
Director (since 1994), MassMutual Corporate Value Partners Limited
(investor in debt and equity securities) and MassMutual Corporate Value
Limited (parent of MassMutual Corporate Value Partners Limited);
Chairman (since 1994) and Director (since 1993), MML Realty Management
Corporation; Chairman (since 1994), Chief Executive Officer (1994-
1996), Cornerstone Real Estate Advisers, Inc. (wholly-owned real estate
investment adviser subsidiary of MassMutual Holding Trust); Director,
Merrill Lynch Derivative Products, Inc.; Chairman (1994-1995) and
Director (1993-1995), MML Real Estate Corporation.
Ronald J. Abdow Trustee of MML Trust
1400 Elm Street
West Springfield, MA 01089
Age: 65
President, Abdow Corporation (operator of restaurants); General
Partner, Grove Investment Group (apartment building syndicator);
Trustee, Abdow G&R Trust and Abdow G&R Co. (owners and operators of
restaurant properties); Partner, Abdow Partnership, Abdow Auburn
Associates, and Abdow Hazard Associates (owners and operators of
restaurant properties); Trustee (since 1994), MassMutual Institutional
Funds (open-end investment company).
- -----------------------
* Trustee who is an "interested person" of MML Trust within the definition set
forth in Section 2(a)(19) of the 1940 Act.
-9-
<PAGE>
Mary E. Boland Trustee of MML Trust
67 Market Street
Springfield, MA 01102
Age: 57
Attorney at Law, Egan, Flanagan and Cohen, P.C. (law firm),
Springfield, MA; Director (since 1995), Trustee (until 1995), SIS Bank
(formerly, Springfield Institution for Savings); Trustee (since 1994),
MassMutual Institutional Funds (open-end investment company).
Richard G. Dooley* Vice Chairman and Trustee of MML Trust
1295 State Street
Springfield, MA 01111
Age: 67
Consultant (since 1993), Executive Vice President and Chief Investment
Officer (1978- 1993), MassMutual; Director (since 1996), Investment
Technology Group, Inc.; Director, The Advest Group, Inc. (financial
services holding company), Hartford Steam Boiler Inspection and
Insurance Co., New England Education Loan Marketing Corporation;
Director, Kimco Realty Corp. (shopping center ownership and
management); Director (since 1993), Jefferies Group, Inc. (financial
services holding company); Director and Vice President, Oppenheimer
Acquisition Corporation (investment advisory holding company); Vice
Chairman (since 1995), Chairman (1982-1995), MassMutual Corporate
Investors, and Vice Chairman (since 1995), Chairman (1988-1995),
MassMutual Participation Investors (closed-end investment companies);
Director (1992-1995), Chairman (1982-1992) Concert Capital Management,
Inc. (former indirect investment advisory subsidiary of MassMutual);
Director (1993-1995), Luxonen S.A. (Swedish investment fund);
Supervisory Director (1991-1995), MassMutual/Carlson CBO N.V. Inc.
(collateralized bond fund); Director (1984-1993), MML Real Estate
Corporation (real estate management subsidiary of MassMutual Holding
Company) and MML Realty Management Corporation (subsidiary of
MassMutual Holding Company to manage real estate projects); Trustee
(since 1996), MassMutual Institutional Funds (open-end investment
company).
- --------------------------
* Trustee who is an "interested person" of MML Trust within the definition set
forth in Section 2(a)(19) of the 1940 Act.
-10-
<PAGE>
F. William Marshall, Jr. Trustee of MML Trust
1441 Main Street
Springfield, MA 01102
Age: 55
President, Chief Executive Officer and Director (since 1993), SIS Bank
(formerly, Springfield Institution for Savings); Chairman and Chief
Executive Officer (1990-1993), Bank of Ireland First Holdings, Inc. and
First New Hampshire Banks; Trustee (since 1996), MassMutual
Institutional Funds (open-end investment company).
Charles J. McCarthy Trustee of MML Trust
181 Eton Road
Longmeadow, MA 01106
Age: 73
Proprietor, Synectics Financial Company (venture capital activities,
business consulting and investments); Trustee (since 1994), MassMutual
Institutional Funds (open-end investment company).
John H. Southworth Trustee of MML Trust
195 Eton Road
Longmeadow, MA 01106
Age: 69
Chairman (since 1993) and President (1984-1992), Southworth Company
(manufacturer of paper and calendars); Director (since 1995), Trustee
(until 1995), SIS Bank (formerly, Springfield Institution for Savings);
Trustee (since 1994), MassMutual Institutional Funds (open-end
investment company).
Richard H. Ayers Advisory Board Member
1000 Stanley Drive
New Britain, CT 06053
Age: 54
Adviser to Chairman (since 1997), Chairman and Chief Executive Officer
(1989-1996) and Director (since 1985), The Stanley Works (manufacturer
of tools, hardware and specialty hardware and specialty hardware
products); Director (since 1986), Southern New England
Telecommunications Corp.; Director, (since 1988) Perkin-Elmer Corp.;
Trustee (since 1996), MassMutual Institutional Funds (open-end
investment company).
-11-
<PAGE>
David E. A. Carson Advisory Board Member
850 Main Street
Bridgeport, CT 06604
Age: 62
President and Chief Executive Office, People=s Bank; Director, United
Illuminating Co.; Trustee, American Skandia Trust (open-end investment
company); Trustee (since 1996), MassMutual Institutional Funds
(open-end investment company).
Richard W. Greene Advisory Board Member
University Of Rochester
Rochester, NY 14627
Age: 61
Executive Vice President and Treasurer (since 1986), University of
Rochester (private university); Trustee (since 1996), MassMutual
Institutional Funds (open-end investment company).
Beverly C. L. Hamilton Advisory Board Member
515 South Flower Street
Los Angeles, CA 90071
Age: 50
President, ARCO Investment Management Co.; Vice President, Atlantic
Richfield Company; Director (since 1992), Connecticut Natural Gas;
Director, Emerging Markets Growth Fund (closed-end investment company);
Trustee (since 1996), MassMutual Institutional Funds (open-end
investment company).
Stuart H. Reese President of MML Trust
1295 State Street
Springfield, MA 01111
Age: 41
Executive Director (since 1997), Senior Vice President (1993-1997),
MassMutual; President (since 1995), Executive Vice President
(1993-1995), MassMutual Corporate Investors and MassMutual
Participation Investors (closed-end investment companies); Director
(since 1996), Antares Leveraged Capital Corp. (finance company) and
Charter Oak Capital Management, Inc. (investment adviser); President
and Director (since 1996), HYP Management Inc. (managing member of
MassMutual High Yield Partners LLC), and MMHC Investment Inc. (investor
in MassMutual High Yield Partners LLC);
President (since 1995), MassMutual Institutional Funds (open-end
investment company); Director (since 1994), MassMutual Corporate Value
Partners Limited (investor in debt and equity securities) and
MassMutual Corporate Value Limited (parent of MassMutual Corporate
Value Partners Limited); Supervisory Director (since 1994),
MassMutual/Carlson CBO N.V. Inc. (collateralized bond fund);
-12-
<PAGE>
Director (1994-1996), Pace Industries (aluminum die caster); Vice
President and Managing Director (1990- 1992), Capital Markets Group of
Aetna Life & Casualty Company; Chairman and President (1990-1993),
Aetna Financial Services, Inc.
Mary E. Wilson Senior Vice President of MML Trust
1295 State Street
Springfield, MA 01111
Age: 43
Senior Managing Director (since 1996), Vice President and Managing
Director (1991-1996), MassMutual; Senior Vice President (since 1996),
HYP Management, Inc. (managing member of MassMutual High Yield Partners
LLC) and MMHC Investment, Inc. (investor in MassMutual High Yield
Partners LLC); Vice President, MassMutual Participation Investors; Vice
President (since 1992), MassMutual Corporate Investors; Vice President
(1991-1995) Oppenheimer Investment Grade Bond Fund.
Hamline C. Wilson Vice President and Chief Financial
1295 State Street Officer of MML Trust
Springfield, MA 01111
Age: 59
Senior Managing Director (since 1996), Vice President and Managing
Director (1989- 1996), MassMutual; Vice President and Chief Financial
Officer (since 1994), MassMutual Institutional Funds (open-end
investment company); Vice President and Chief Financial Officer (since
1988), MassMutual Corporate Investors and MassMutual Participation
Investors (closed-end investment companies); Investment Officer (since
1992), Vice President (1983-1992), Concert Capital Management, Inc.
Stephen L. Kuhn Vice President and Secretary
1295 State Street of MML Trust
Springfield, MA 01111
Age: 50
Vice President and Associate General Counsel, MassMutual; Vice
President and Secretary, MassMutual Institutional Funds, MassMutual
Participation Investors and MassMutual Corporate Investors; President,
MassMutual/Carlson CBO N.V. Inc. (collateralized bond fund); Assistant
Secretary (since 1996), Antares Leveraged Capital Corp.; Chief Legal
Officer and Assistant Secretary (since 1995), DLB Acquisition
Corporation (holding company for investment advisers); Assistant Clerk
(1994-1996), Chief Legal Officer (1993-1996), and Clerk (1992-1994),
Concert Capital Management, Inc.
-13-
<PAGE>
Nancy S. Muise Vice President of MML Trust
1295 State Street
Springfield, MA 01111
Age: 47
Second Vice President, MassMutual.
Raymond B. Woolson Treasurer of MML Trust
1295 State Street
Springfield, MA 01111
Age: 38
Senior Managing Director (since 1996), Second Vice President
(1992-1996), Director/Fund Account Administration (1989-1992),
MassMutual; Treasurer, MassMutual Corporate Investors, MassMutual
Participation Investors and MassMutual Institutional Funds; Vice
President and Chief Financial Officer (since 1996), HYP Management,
Inc. (managing member of MassMutual High Yield Partners LLC) and MMHC
Investment Inc. (investor in Mass Mutual High Yield Partners LLC).
Mark Ackerman Comptroller of MML Trust
1295 State Street
Springfield, Ma 01111
Age: 31
Investment Director (since 1994), Associate Director (1990-1994),
MassMutual; Associate Treasurer (since 1995), MassMutual Participation
Investors and MassMutual Corporate Investors; Associate Treasurer
(since 1995), MassMutual Institutional Funds (open-end investment
company).
The Trustees and officers of MML Trust named above, as a group, own less than
one percent of the shares of both the Trust and the Fund.
MML Trust's Declaration of Trust provides that MML Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with MML
Trust, except if it is determined in the manner specified in the Declaration of
Trust that they have not acted in good faith in the reasonable belief that their
actions were in the best interests of MML Trust or that such indemnification
would relieve any Trustee or officer of any liability to MML Trust or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his or her duties.
The following table discloses actual compensation paid to non-interested
Trustees of MML Trust and members of its Advisory Board during the 1996 fiscal
year. MML Trust paid no compensation to any of its officers. MML Trust has no
pension or retirement plan, but does have a deferred compensation plan. One
Trustee elected in 1994 to receive these benefits over a three year period,
beginning in 1994 when he became 67 years old. All of the non-
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<PAGE>
interested Trustees and the members of the Advisory Board also serve as
Trustees of one other investment company managed by MassMutual.
Compensation Table
For the Fiscal Year Completed December 31, 1996
<TABLE>
<CAPTION>
===============================================================================================================================
Total
Deferred Compen-
Compensation Estimated sation
Aggregate Plan Benefits Annual from
Compen- Accrued as Benefits MML
sation from Part of MML Upon Trust and
Name/Position MML Trust Trust Retire- Fund
Expenses ment Complex
===============================================================================================================================
<S> <C> <C> <C> <C>
Ronald J. Abdow, Trustee $16,000 N/A N/A $32,000
- -------------------------------------------------------------------------------------------------------------------------------
Mary E. Boland, Trustee $16,000* N/A N/A $32,000*
- -------------------------------------------------------------------------------------------------------------------------------
William F. Marshall, Trustee $11,333 N/A N/A $23,333
- -------------------------------------------------------------------------------------------------------------------------------
Charles J. McCarthy,
Trustee $17,000 N/A N/A $34,000
- -------------------------------------------------------------------------------------------------------------------------------
John H. Southworth, Trustee $17,000 $2,310 $39,345 $73,246
- -------------------------------------------------------------------------------------------------------------------------------
Richard H. Ayers, $4,000 N/A N/A $6,000
Advisory Board Member
- -------------------------------------------------------------------------------------------------------------------------------
David E.A. Carson, $4,000 N/A N/A $6,000
Advisory Board Member
- -------------------------------------------------------------------------------------------------------------------------------
Richard W. Greene, $4,000 N/A N/A $6,000
Advisory Board Member
- -------------------------------------------------------------------------------------------------------------------------------
Beverly C. L. Hamilton, $4,000 N/A N/A $6,000
Advisory Board Member
===============================================================================================================================
</TABLE>
- ----------------
*$8,000 of this amount was paid by MassMutual.
-15-
<PAGE>
V. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Upon the consummation of the offering contemplated hereby, MassMutual and MML
Bay State will be the owners of record of all of the outstanding shares of the
Fund and could be deemed to control the Fund. However, certain owners of
variable life insurance contracts that depend upon the investment performance of
the Fund will have the right to instruct MassMutual and MML Bay State as to how
shares of the Fund deemed attributable to their contracts shall be voted.
MassMutual and MML Bay State are required to vote shares attributable to such
contracts but for which no instructions were received, in proportion to those
votes for which instructions were received. MassMutual's address is 1295 State
Street, Springfield, Massachusetts 01111. MML Bay State's address is 1295 State
Street, Springfield, Massachusetts 01111.
VI. INVESTMENT MANAGEMENT AND OTHER SERVICES
MassMutual serves as investment manager of the Fund pursuant to an investment
management agreement between MassMutual and MML Trust on behalf of the Fund (the
"Investment Management Agreement"). Under the Investment Management Agreement,
MassMutual is authorized to engage in portfolio transactions on behalf of the
Fund, subject to such general or specific instructions as may be given by the
Board of Trustees of MML Trust. The Investment Management Agreement also
provides that MassMutual will perform all administrative functions relating to
the Fund and will bear all expenses of the Fund except: (1) taxes and corporate
fees payable to government agencies; (2) brokerage commissions and other capital
items payable in connection with the purchase or sale of the Fund's investments;
(3) interest on account of any borrowings by the Fund; (4) fees and expenses of
Trustees of MML Trust who are not interested persons, as defined in the
Investment Company Act of 1940, as amended (the A1940 Act@), of the Advisers or
MML Trust; (5) fees and expenses of the MML Trust's Advisory Board Members; (6)
fees of the Fund's independent certified public accountants; and (7) any
required trademark licensing fees. Under the Investment Management Agreement,
the Fund pays MassMutual a quarterly fee based on the average daily net assets
of the Fund at the annual rate of .40% of the first $100,000,000 of average
daily net asset value of the Fund; .38% of the next $150,000,000 and .36% of any
net assets thereafter.
The Investment Management Agreement with the Fund may be terminated by the Board
of Trustees of MML Trust, or by vote of a majority of the outstanding shares of
the Fund, or by MassMutual. Such termination requires 60 days' written notice to
be given and may be effected without the payment of any penalty. In addition,
such agreement automatically terminates: (1) unless its continuance is
specifically approved at least annually by the affirmative vote of a majority of
the Board of Trustees of MML Trust, which affirmative vote shall include a
majority of the members of the Board who are not interested persons (as defined
in the 1940 Act) of the Advisers or of MML Trust, or (2) upon its assignment.
-16-
<PAGE>
The Investment Management Agreement also provides that its continuance will be
submitted to the shareholders of the Fund in the event the use of the initials
"MML" is withdrawn from the Fund by MassMutual.
As permitted by the Investment Management Agreement, MassMutual has entered into
an investment sub-advisory agreement with Mellon Equity (the "Sub-Advisory
Agreement") whereby Mellon Equity agreed to serve as the Fund's investment
sub-adviser, providing day-to-day management of the Fund's investments.
MassMutual is ultimately responsible for providing investment advice to the Fund
and will continue to provide administrative and non-investment advisory services
to the Fund. For the investment advisory services Mellon Equity provides with
respect to the Fund, MassMutual pays Mellon Equity a monthly fee equal to an
annual rate of .09% of the first $100,000,000 of the average daily net asset
value of the Fund; .07% of the next $150,000,000 and .05% on net any assets
thereafter. The Sub-Advisory Agreement will terminate automatically upon its
assignment or upon the termination of the Investment Management Agreement by
Mellon Equity upon 90 days' written notice or by the Fund or MassMutual upon 60
days' written notice or by liquidation of the Fund.
As of December 31, 1991 Mellon Equity Associates became a Pennsylvania Business
Trust. Mellon Bank N.A. holds a 99% beneficial interest in Mellon Equity and
provides accounting services, record keeping and marketing services to Mellon
Equity. MMIP, Inc. holds a 1% beneficial interest in Mellon Equity. Mellon
Equity is also an indirect wholly-owned subsidiary of Mellon Bank Corporation.
Boston Safe Deposit and Trust Company, an indirect subsidiary of Mellon Bank
Corporation, acts as Custodian to the Fund. Boston Safe Deposit and Trust
Company is located at One Boston Place, Boston, Massachusetts 02108. Under its
Custody Agreement with the Fund, Boston Safe Deposit and Trust Company holds the
Fund's portfolio securities and keeps all necessary accounts and records.
Pursuant to the Sub-Advisory Agreement, the Custodian=s fees for its services to
the Fund will be paid by Mellon Equity. In order to secure payment by the
Custodian of overdrafts, the Fund has granted the Custodian a continuing
security interest in and a right of set off against assets in the Fund's account
with the Custodian.
First Data Investor Services Group, Inc., located at 4400 Computer Drive,
Westborough, Massachusetts 01581 will provide fund accounting services for the
Fund.
VII. PORTFOLIO TRANSACTIONS
The Fund has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. The Fund's Investment
Management Agreement with MassMutual provides that MassMutual will follow such
practices in placing portfolio transactions for the Fund as may from time to
time be set forth in its Prospectus or specified by the Board of Trustees of MML
Trust. Consistent with this agreement, the present policy
-17-
<PAGE>
of the Fund and the Advisers is that the Advisers, in placing brokerage
transactions for the Fund, are to seek best execution by responsible brokerage
firms at reasonably competitive commission rates. Mellon Equity will not
consider the provision of brokerage research services (as such term is defined
in Section 28(e) of the Securities Exchange Act of 1934, as amended) in
allocating brokerage transactions for the Fund.
By virtue of the Sub-Advisory Agreement, Mellon Equity is subject to the same
rights, obligations and procedures that apply to MassMutual pursuant to its
Investment Management Agreement with the Fund. Mellon Equity assumes general
supervision over placing orders on behalf of the Fund for the purchase or sale
of portfolio securities. Allocation of brokerage transactions, including their
frequency, is made in the best judgment of Mellon Equity. The primary
consideration is to obtain executions at the most favorable and reasonable
commission rates in relation to the benefits received. Mellon Equity attempts to
achieve these results by choosing brokers to execute transactions based on (1)
their professional capabilities (including use of capital, clearance, and
settlement procedures, and participation in underwritings and corporate finance
issues), (2) the value and quality of their services, and (3) the comparative
brokerage commission rates which they offer.
Portfolio turnover will result from changes in the composition of the Index and
from purchases and redemptions of Fund shares and the reinvestment of Fund
dividends. Portfolio turnover may vary from year to year, as well as within a
year. High turnover rates are likely to result in comparatively greater
brokerage expenses. The overall reasonableness of brokerage commissions paid is
evaluated by Mellon Equity based upon its knowledge of available information as
to the general level of commissions paid by other institutional investors for
comparable services. The allocation of orders among brokers and the commission
rates paid are reviewed periodically by the Board of Trustees of MML Trust.
Purchases and sales of equity securities on a securities exchange are effected
through brokers who charge a negotiated commission for their services. Orders
may be directed to any broker, to the extent and in the manner permitted by
applicable law. In the over-the-counter market, securities are generally traded
on a "net" basis with dealers acting as principal for their own accounts without
a stated commission, although the price of the security usually includes a
profit to the dealer. In underwritten offerings, securities are purchased at a
fixed price that includes an amount of compensation to the underwriter,
generally referred to as the underwriter's concession or discount.
Except in the case of equity securities purchased by the Fund, purchases and
sales of securities usually will be principal transactions. Portfolio securities
normally will be purchased from or sold to dealers serving as market makers for
the securities at a net price. The Fund may purchase securities directly from
the issuer. Generally, money market securities are traded on a net basis and do
not involve brokerage commissions. The cost of the Fund's investment portfolio
securities transactions will consist primarily of dealer spreads and
underwriting commissions.
-18-
<PAGE>
Purchase and sale orders of the securities held by the Fund may be combined with
those of other investment companies and accounts which attempt to track an
equity index that Mellon Equity manages, and for which it has brokerage
placement authority, in the interest of seeking the best overall terms. When
Mellon Equity determines that a particular security should be bought or sold for
the Fund and other accounts managed by Mellon Equity, Mellon Equity undertakes
to allocate those transactions among the participants equitably.
Under the 1940 Act, persons affiliated with the Fund such as MassMutual, Mellon
Equity and, in some cases, their affiliates are prohibited from dealing with the
Fund as a principal in the purchase and sale of securities unless an exemptive
order allowing such transactions is obtained from the SEC or an exemption is
otherwise available.
IX. CAPITAL SHARES
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for obligations of MML Trust. However, MML Trust's
Declaration of Trust disclaims liability of the shareholders, Trustees, or
officers of MML Trust for acts or obligations of MML Trust, which are binding
only on the assets and property of MML Trust, and requires that notice of such
disclaimer be given in each agreement, obligation, or instrument entered into or
executed by MML Trust or the Trustees of MML Trust. The Declaration of Trust
provides for indemnification out of MML Trust property for all loss and expense
of any shareholder held personally liable for the obligations of MML Trust.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which MML Trust itself
would be unable to meet its obligations. Management believes that in view of the
above the risk of personal liability to shareholders is remote.
X. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
MML Trust is a no-load mutual fund. Fund shares are sold at their net asset
value as next computed after receipt of the purchase order, without the addition
of any selling commission or "sales load." The Fund redeems its shares at their
net asset value as next computed after receipt of the request for redemption.
The redemption price may be paid in cash or wholly or partly in kind if MML
Trust's Board of Trustees determine that such payment is advisable in the
interest of the remaining shareholders. In making such payment wholly or partly
in kind, the Fund will, as far as may be practicable, deliver securities or
property which approximate the diversification of its entire assets at the time.
No fee is charged on redemption. The redemption price may be more or less than
the shareholder's cost. Redemption payments will be paid within seven days after
receipt of the written request therefor by the Fund, except that the right of
redemption may be suspended or payments postponed when permitted by applicable
law and regulations.
-19-
<PAGE>
The net asset value of the Fund's shares is determined once daily as of the
close of the New York Stock Exchange on each day on which the Exchange is open
for trading (currently 4:00 p.m. for normal trading). The New York Stock
Exchange is not open for trading on New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day and on occasion is closed early or entirely due to weather or
other conditions. The net asset value of the Fund share is the total net asset
value of the Fund divided by the number of its shares outstanding. The total net
asset value of the Fund is determined by computing the value of the total assets
of the Fund and deducting total liabilities, including accrued liabilities.
The manner of determining the value of the total assets of the Fund is briefly
discussed below. 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 which are listed on a
national securities exchange, on the NASDAQ national market system, or which are
unlisted. If there is no reported sale price, the bid price of the prior trade
date will be used. Debt obligations with less than one year but more than sixty
days to maturity are valued on the basis of their market value, and debt
obligations having a maturity of sixty days or less are generally valued at
amortized cost when the Board of Trustees of MML Trust believes that amortized
cost approximates market value. In all other cases, assets (including restricted
securities) are valued at their fair value as determined in good faith by the
Board of Trustees of MML Trust, although the actual calculations may be made by
persons acting pursuant to the direction of the Board.
Futures contracts are valued based on the market price for the futures contract,
unless such price does not reflect the fair value of the contract, in which case
it will be valued by or under the direction of the Board of Trustees of MML
Trust.
XI. TAX STATUS
It is the policy of the Fund to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies. As a result, the Fund
will not be subject to federal income tax on any distributed net income or
capital gains. To meet these requirements, the Fund must, among other things,
(a) derive at least 90% of its gross income from dividends, interest, payments
with respect to certain securities loans, gains from the sale or other
disposition of stock, securities or foreign currencies, or other income
(including but not limited to gains from options, futures or forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies; (b) derive less than 30% of its gross income from the sale or the
other disposition of securities and certain other assets held less than three
months; (c) diversify its holdings so that, at the close of each quarter of its
taxable year, (i) at least 50% of the value of its total assets consists of
cash, cash items, U.S. government securities, securities of other regulated
investment companies, and other securities limited generally with respect to any
one issuer to a value not greater than 5% of the total assets of the Fund and to
not more than 10% of the outstanding voting securities of
-20-
<PAGE>
such issuer, and (ii) not more than 25% of the value of its assets is invested
in the securities of any issuer (other than U.S. government securities or
securities of other regulated investment companies); and (d) distribute in or
with respect to each taxable year at least 90% of its dividend, interest and
certain other income (including, in general, net short-term capital gains) for
such year.
The Treasury Department has issued Regulations under Internal Revenue Code
Section 817(h) that pertain to diversification requirements for variable life
insurance contracts. A variable contract based upon a separate account will not
receive favorable tax treatment as a life insurance contract unless the separate
account and underlying regulated investment company investments are adequately
diversified. In determining whether a separate account is adequately
diversified, in certain circumstances the separate account can look through to
the assets of the regulated investment company in which it has invested.
The Regulations require the Fund's assets to be diversified so that no single
investment represents more than 55% of the value of the Fund's total assets, no
two investments represent more than 70% of the Fund's total assets, no three
investments represent more than 80% of the Fund's total assets and no four
investments represent more than 90% of the Fund's total assets. A "safe harbor"
is available to a separate account if it meets the diversification tests
applicable to registered investment companies and not more than 55% of its
assets constitute cash, cash items, government securities and securities of
other registered investment companies.
The applicable Regulations treat all securities of the same issuer as a single
investment. In the case of "government securities", each government agency or
instrumentality shall be treated as a separate issuer for the purpose of the
diversification test (although not for the purpose of the "safe harbor" test
described above). MML Trust intends to comply with these diversification
requirements.
The Fund intends to declare capital gain and ordinary income dividends by the
end of each calendar year and to distribute such dividends no later than January
31 of the following year to the extent necessary to avoid the 4% excise tax on
undistributed regulated investment company income enacted by the Tax Reform Act
of 1986. The 4% excise applies to the excess of the required distribution for
the calendar year over the amount treated as distributed for that year. The
required distribution equals 98% of the Fund's ordinary income for the calendar
year plus 98% of its capital gain net income for the one year period ending
October 31 (or December 31, if the Fund so elects) and any shortfall of income
or gains from the prior year not previously so distributed.
-21-
<PAGE>
XII. CERTAIN TAX AND ACCOUNTING INFORMATION
As previously indicated, it is the policy of the Fund to meet the requirements
of the Internal Revenue Code to qualify as a regulated investment company under
the federal tax law. One of these requirements is that less than 30% of its
gross income can be derived from gains from the sale or other disposition of
certain assets (including securities) held for or considered under Internal
Revenue Code rules to have been held for less than three months. Accordingly,
the Fund will be restricted in selling newly acquired positions, engaging in
certain option writing activities and certain hedging activities.
Special rules (including mark-to-market, straddle and wash sale rules) exist for
determining the timing of recognition of income or loss, the character of such
income or loss, and the holding periods of certain of the Fund's assets in the
case of certain transactions involving futures contracts, forward contracts and
options. MML Trust will endeavor to make any available elections pertaining to
such transactions in a manner believed to be in the best interest of MML Trust.
XIII. INVESTMENT PERFORMANCE
The Fund may advertise its total return and its holding period return. Total
return quotations will be based upon a stated period and will be computed by
finding the average annual compounded rate of return over the stated period that
would equate an initial amount invested to the ending redeemable value of the
investment (assuming reinvestment of all distributions), according to the
following formula:
P(1 + T)/n/ = ERV Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value at the end of the
stated period of a hypothetical $1,000 payment
made at the beginning of the stated period.
Holding period return will be based upon a stated period and will be computed by
dividing the ending redeemable value of a hypothetical initial payment by the
value of the initial investment (assuming reinvestment of all distributions).
Each investment performance figure will be carried to the nearest hundredth of
one percent. These investment performance figures do not reflect charges imposed
by the separate investment accounts invested in the Fund which, if included,
would decrease the performance figures.
-22-
<PAGE>
XIV. INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P. is the Fund's independent accountant, providing audit
and tax return preparation services and assistance and consultation in
connection with review of various SEC filings.
XV. COUNSEL
Ropes & Gray, One International Place, Boston, Massachusetts 02110, as counsel
for the Trust, has rendered its opinion as to certain legal matters regarding
the due authorization and valid issuance of the shares being sold pursuant to
the Fund's Prospectus.
The name MML Series Investment Fund is the designation of Trustees under an
Agreement and Declaration of Trust dated December 19, 1984, as amended from time
to time. The obligations of such Trust are not personally binding upon, nor
shall resort be had to the property of, any of the Trustees, shareholders,
officers, employees or agents of such Trust, but MML Trust's property only shall
be bound.
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<PAGE>
APPENDIX
SECURITIES RATINGS
This is a description of Standard & Poor's Ratings Group ("S&P") and Moody's
Investors Service, Inc. ("Moody's") commercial paper and bond ratings:
I. Commercial Paper Ratings:
S&P Commercial Paper Ratings--are graded into four categories, ranging from 'A'
for the highest quality obligations to 'D' for the lowest. 'A' Issues assigned
the highest rating are regarded as having the greatest capacity for timely
payment. Issues in this category are delineated with the numbers 1, 2, and 3 to
indicate the relative degree of safety. The A-1 category is described as
follows:
"A-1": This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus (+)
sign designation.
Moody's Commercial Paper Ratings--employs three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated issuers.
The highest designation is as follows:
Prime-1: Issuers rated Prime-1 (or related supporting institutions)
have a superior ability for repayment of senior short-term debt
obligations. Prime-1 repayment ability will often be evidenced by
many of the following characteristics:
. Leading market positions in well-established industries.
. High rates of return on funds employed.
. Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
. Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
. Well established access to a range of financial markets and
assured sources of alternate liquidity.
II. Bond Ratings
S&P describes its two highest ratings for corporate debt as follows:
A: AAA--Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely
strong.
A-1
<PAGE>
AA--Debt rated AA has a very strong capacity to pay interest
and repay principal and differs from the higher rated issues
only in small degree.
The ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.
Moody's describes its two highest corporate bond ratings as follows:
Aaa--Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks
appear somewhat larger than the Aaa securities.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
A-2
