<PAGE>
MML Equity Index Fund
To Our Shareholders
More Positive News From The U.S.
As we begin 1998, the U.S. economy appears to be embarking on its eighth
consecutive year of expansion. By almost any measure, 1997 was a solidly good
year. Consumption was up, consumer confidence reached a 28-year high,
unemployment hit a 24-year low, gains were made in personal income and corporate
profits, housing starts and new and existing housing sales were up, and the
Federal budget deficit was reduced to a point where 1998 may even see a small
surplus.
All of this happened against a backdrop of declining price pressures fueling
debate over the relevance of the Phillips Curve, which is the historical model
suggesting that economic growth will eventually breed inflation. Inflation
measured by the Consumer Price Index remained below two percent, down from 1996
levels, and both the Producer Price Index and commodities prices dropped.
Without inflationary pressures, the Federal Reserve, which had raised interest
rates by 25 basis points in March, did not take action again for the remainder
of the year, and rates consequently declined.
Against Uncertainty From Overseas
Working counter to the forces supporting the domestic economy over the past year
was the financial breakdown in the Pacific Rim. After years of overinvestment,
weak infrastructure and poor economic policy, high-flying markets including
South Korea, Thailand and Indonesia suffered tremendous losses during the second
half of 1997.
The problems these economies face are deep and far-reaching, and recognition of
this fact has caused turmoil in markets throughout the world. Japan, which has
fiscal problems of its own, is a close trading partner to much of the rest of
Southeast Asia and will be impacted by weakness there. The U.S. has seen effects
of the Asian crisis on a number of levels. The uncertainty created by the Asian
crisis added volatility to an already nervous stock market, precipitating a one
day drop in the Dow Jones Industrial Average of over 500 points in late October.
A flight to quality in the currency markets bolstered the U.S. dollar, making
American exports expensive in overseas markets and potentially increasing the
trade deficit. Domestic firms that rely on sales to Asian markets may see
profits come under pressure as orders decline, and competitive price pressures
from Asian exporters may impact the ability for companies to raise prices on a
global basis.
Strength Overcame Volatility in Stocks
Even though the U.S. stock market increased in volatility, it turned in
impressive results for the year. As of December 31, 1997, the S&P 500 was up
33.37%, the Dow Jones Industrial Average increased 24.93 %, the NASDAQ was up
21.63% and the Russell 2000 earned 22.36%.
Because of the uncertainty inherent in a market that's enjoyed such a tremendous
three-year advance, plus the concerns that arose from the Asian markets'
problems, it was large cap growth stocks that benefited most during the year.
These companies, which are well-represented in indices like the S&P 500, were
part of a `flight to quality' that the market experienced over the course of the
year. They are companies that are large enough to endure competitive pressures,
and due to their large capitalization, their stocks are very liquid.
A Profitable Year For Bonds
The bond market also advanced during 1997. After the Federal Reserve's March
tightening, rates began to decline, and bonds rallied as a result. During the
second half of the year, investors moved into bonds as a safe haven from stock
market volatility. Rates declined and the yield curve flattened.
Toward the end of the year, bonds paying higher yields than Treasuries seemed to
offer the best opportunities. For the first time in quite a while, there was
some risk premium available in moving lower in quality.
Strategic Positioning For The Future
We expect the positive economic factors that determined 1997's market to
outweigh Asian concerns as 1998 continues. While the situation in the Far East
is dominating current market psychology, the International Monetary Fund is
assembling both the personnel and the financing necessary to begin restoring
investor confidence and economic stability to the region. If that takes hold,
domestic factors should begin to take precedence again. All things considered,
we expect another year of economic growth, but at less vigorous levels than what
we've seen recently.
/s/ Stuart H. Reese
Stuart H. Reese
President
MML Equity Index Fund
January 30, 1998
1
<PAGE>
MML Equity Index Fund Portfolio Review(*)
For the eight-month period ended December 31, 1997, since inception of the Fund,
the portfolio realized a total return of 21.39 percent, while the Standard &
Poor's 500 Stock Index had a total return of 22.56 percent. The portfolio is
designed to replicate the large capitalization United States equity market as it
is represented by the S & P 500 Index for the same period. Large capitalization
equities had a very strong year in 1997, outperforming both small and mid
capitalization stocks. In 1997, some of the best performing groups in the S & P
500 were trucking, savings and loan, brokerage and investment banking companies.
As a portfolio that mirrors the holdings of an existing stock index, we will
continue to make the appropriate changes in accordance with the portfolio's
investment objective.
(*) 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.
2
<PAGE>
MML Equity Index Fund
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<S> <C>
ASSETS
Investments at value (See Schedule of Investments) (Notes 2A, 2B, and 4)
Equities (Identified cost: $20,277,732)......................................... $ 24,449,294
Short-term investments (Identified cost: $28,284)............................... 28,284
------------
Total investments.............................................................. 24,477,578
Interest and dividends receivable................................................ 34,053
Receivable for investment securities sold........................................ 6,831
------------
Total assets................................................................... 24,518,462
------------
LIABILITIES
Accrued dividends payable........................................................ 226,089
Payable for investment securities purchased...................................... 4,327
Investment management fee payable (Note 3)....................................... 61,760
Accrued trustees' fees........................................................... 4,523
Accrued audit fees............................................................... 20,000
------------
Total liabilities.............................................................. 316,699
------------
NET ASSETS....................................................................... $ 24,201,763
============
Net assets consist of:
Series shares (par value $.01 per share; an unlimited number authorized) (Note 5) $ 20,026
Additional paid-in capital....................................................... 20,009,993
Undistributed net investment income (Notes 2C and 2D)............................ 235
Undistributed net realized loss on investments................................... (53)
Net unrealized appreciation on investments (Note 2A)............................. 4,171,562
------------
NET ASSETS....................................................................... $ 24,201,763
============
Outstanding series shares........................................................ 2,002,675
============
Net asset value per share........................................................ $ 12.08
============
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
MML Equity Index Fund
STATEMENT OF OPERATIONS
For the Period From May 1, 1997 (Commencement of Operations) through December
31, 1997
<TABLE>
<S> <C>
Investment income (Note 2B)
Dividends (Net of foreign withholding tax of $312) $ 272,010
Interest 12,011
-------------
Total income 284,021
-------------
Expenses
Investment management fee (Note 3) 61,760
Audit fees 20,000
Trustees' fees 17,661
Other 2
-------------
Total expenses 99,423
-------------
Net investment income (Notes 2C and 2D) 184,598
-------------
Net realized and unrealized gain on investments (Notes 2A, 2B, 2C and 2D)
Net realized gain on investments (Notes 2B, 2C, and 20) 41,673
-------------
Net unrealized appreciation on investments (Note 2A) 4,171,562
-------------
Net gain 4,213,235
-------------
Net increase in net assets resulting from operations $ 4,397,833
=============
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
MML Equity Index Fund
STATEMENT OF CHANGES IN NET ASSETS
For the Period From May 1, 1997 (Commencement of Operations) through December
31, 1997
<TABLE>
<S> <C>
Increase in net assets
Operations:
Net investment income................................................................ $ 184,598
Net realized gain on investments..................................................... 41,673
Net unrealized appreciation on investments........................................... 4,171,562
-----------
Net increase in net assets resulting from operations................................. 4,397,833
Distributions to shareholders from: (Note 2C)
Net investment income.............................................................. (184,363)
Net realized gains on investments.................................................. (41,726)
Net increase in capital share transactions (Note 5)................................. 20,030,019
-----------
Total increase.................................................................... 24,201,763
NET ASSETS, at beginning of period................................................... 0
-----------
NET ASSETS, at end of year........................................................... $24,201,763
===========
Undistributed net investment income included in net assets at the end of the year.... $ 235
===========
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
MML Equity Index Fund
FINANCIAL HIGHLIGHTS
For the Period From May 1, 1997 (Commencement of Operations) through
December 31, 1997
Selected per share data for a series shares outstanding throughout the period.
<TABLE>
<S> <C>
Net asset value:
Beginning of period...................................... $ 10.000
---------
Income from investment operations:
Net investment income...................................... 0.092
Net realized and unrealized gain on investments............ 2.101
---------
Total from investment operations........................... 2.193
---------
Less Distributions:
Dividends from net investment income....................... (0.092)
Distributions from net realized gains...................... (0.021)
---------
Total Distributions........................................ (0.113)
---------
Net asset value:
End of period............................................ $ 12.080
=========
Total return............................................... 21.39%*
Net assets (in millions):
End of year.............................................. $ 24,202
Ratio of operating expenses to average net assets.......... 0.43%**
Ratio of net investment income to average net assets....... 0.80%**
Portfolio turnover rate.................................... 2%
Average commission rate paid............................... $ 0.0309
</TABLE>
* Total return information shown in the Financial Highlights tables does not
reflect expenses that apply at the separate account level or to related
insurance products. Inclusion of these charges would reduce the total return
figures for the period shown. Percentage represents results for the year and
are not annualized.
** Percentages represent results for the year and are not annualized.
See Notes to Financial Statements.
6
<PAGE>
MML Equity Index Fund
SCHEDULE OF INVESTMENTS
December 31, 1997
Number Market
of Value
Shares (Note 2A)
------ ---------
EQUITIES - 101.02%
Advertising - 0.20%
Interpublic Group of Companies, Inc. ............ 450 $ 22,416
Omnicom Group Inc. .............................. 600 25,425
---------- ----------
1,050 47,841
---------- ----------
Aerospace - 1.77%
AlliedSignal Inc. ............................... 1,800 70,088
Boeing Company................................... 3,310 161,983
General Dynamics Corporation..................... 200 17,287
Lockheed Martin Corporation...................... 600 59,100
Northrop Grumman Corporation..................... 200 23,000
Textron, Inc. ................................... 600 37,500
United Technologies Corporation.................. 800 58,250
---------- ----------
7,510 427,208
---------- ----------
Airlines - .41%
AMR Corporation*................................. 300 38,550
Delta Air Lines, Inc. ........................... 200 23,800
Southwest Airlines Company....................... 750 18,469
USAirways Group, Inc.*........................... 300 18,750
---------- ----------
1,550 99,569
---------- ----------
Apparel, Textiles, Shoes - .30%
Fruit of the Loom Inc.*.......................... 300 7,687
Liz Claiborne Inc. ............................... 200 8,362
NIKE, Inc., Class B.............................. 900 35,325
Reebok International, Inc.*...................... 100 2,881
VF Corporation................................... 400 18,400
---------- ----------
1,900 72,655
---------- ----------
Automobiles - 1.72%
Chyster Corporation.............................. 2,200 77,413
Ford Motor Company............................... 3,800 185,013
General Motors Corporation....................... 2,400 145,500
Navistar International Corporation*.............. 300 7,444
---------- ----------
8,700 415,370
---------- ----------
Automobile Parts & Equipment - .41%
AutoZone, Inc.*.................................. 400 11,600
Cummins Engine, Inc. ............................ 100 5,906
Dana Corporation................................. 300 14,250
Echlin Inc. ..................................... 200 7,238
Genuine Parts Company............................ 600 20,362
Johnson Controls Inc. ........................... 300 14,325
Pep Boys-Manny, Moe & Jack....................... 200 4,775
TRW Inc. ........................................ 400 21,350
---------- ----------
2,500 99,806
---------- ----------
Banks - 9.27%
Banc One Corporation............................. 1,900 103,194
Bank of New York Inc. ........................... 1,300 75,156
BankAmerica Corporation.......................... 2,200 160,600
BankBoston Corporation........................... 500 46,969
Bankers Trust, New York Corporation.............. 200 22,488
Barnett Banks Inc. .............................. 600 43,125
BB&T Corporation................................. 400 25,625
Chase Manhattan Corporation...................... 1,400 153,300
Citicorp......................................... 1,500 189,656
Comerica Inc. ................................... 300 27,075
CoreStates Financial Corporation................. 800 64,050
Fifth Third Bancorporation....................... 450 36,788
First Chicago Corporation........................ 1,000 83,500
First Union Corporation.......................... 2,000 102,500
Fleet Financial Group Inc. ...................... 800 59,950
Huntington Bancshares............................ 600 21,600
KeyCorp (New).................................... 700 49,569
MBNA Corporation................................. 1,650 45,066
Mellon Bank Corporation.......................... 1,000 60,625
Morgan Stanley, Dean Witter,
Discover & Company............................. 1,825 107,903
Morgan (J.P.) & Company, Inc. ................... 600 67,725
National City Corporation........................ 700 46,025
NationsBank Corporation.......................... 2,500 152,031
Norwest Corporation.............................. 2,200 84,975
PNC Bank Corporation............................. 1,000 57,062
Republic New York Corporation.................... 200 22,837
State Street Corporation......................... 500 29,094
SunTrust Banks Inc. ............................. 800 57,100
U.S. Bancorp..................................... 877 98,169
Wachovia Corporation............................. 600 48,675
Wells Fargo & Company............................ 300 101,831
---------- ----------
31,402 2,244,263
---------- ----------
Broadcasting - .10%
Clear Channel Communications* ................... 200 15,888
Meredith Corporation ............................ 200 7,137
---------- ----------
400 23,025
---------- ----------
Building Materials - .77%
Centex Corporation............................... 100 6,294
Crane Company.................................... 200 8,675
Fleetwood Enterprises............................ 100 4,244
Home Depot Inc. ................................. 2,250 131,766
Kaufman & Broad Home Corporation................. 100 2,244
Masco Corporation................................ 500 25,437
Pall Corporation................................. 400 8,275
---------- ----------
3,650 186,935
---------- ----------
Business Equipment and Supplies - 1.99%
Avery Dennison Corporation....................... 400 17,900
Ikon Office Solutions............................ 400 11,250
International Business Machines Corporation...... 3,200 334,600
Pitney Bowes Inc. ............................... 500 44,969
Xerox Corporation................................ 1,000 73,812
---------- ----------
5,500 462,531
---------- ----------
Business Services - .48%
Cedant Corporation*.............................. 2,261 77,730
Deluxe Corporation............................... 200 6,913
Federal Express Corporation*..................... 400 24,425
Harland (John H.) Company........................ 100 2,094
Moore Corporation Ltd............................ 300 4,537
---------- ----------
3,261 115,699
---------- ----------
Chemicals and Plastics - 3.17%
Air Products & Chemicals Inc. ................... 400 32,900
Dow Chemical Company............................. 800 81,200
duPont (E.I.) deNemours & Company................ 3,600 216,225
Eastman Chemical Company......................... 200 11,913
Ecolab Inc. ..................................... 200 11,088
Engelhard Corporation............................ 500 8,668
FMC Corporation*................................. 100 6,731
Grace (W.R.) & Company........................... 200 16,087
Great Lakes Chemical Corporation................. 200 8,975
Hercules, Inc. .................................. 300 15,019
7
<PAGE>
MML Equity Index Fund
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1997
Number Market
of Value
Shares (Note 2A)
------ ----------
EQUITIES (Continued)
Chemicals and Plastics (Continued)
Kerr-McGee Corporation ........................... 200 $ 12,662
Mallinckrodt Group Inc. .......................... 300 11,400
Minnesota Mining & Manufacturing Company ......... 1,300 106,681
Monsanto Company ................................. 1,900 79,800
Morton International Inc. ........................ 400 13,750
Nalco Chemical Company ........................... 200 7,912
Praxair Inc ...................................... 500 22,500
Raychem Corporation .............................. 200 8,612
Rockwell International Corporation ............... 700 36,575
Rohm & Haas Company .............................. 200 19,150
Sigma-Aldrich Corporation ........................ 300 11,925
Union Camp Corporation ........................... 200 10,737
Union Carbide Corporation ........................ 400 17,175
---------- ----------
13,300 767,705
---------- ----------
Coal - .22%
CSX Corporation .................................. 700 37,800
Eastern Enterprises .............................. 100 4,500
Fluor Corporation ................................ 300 11,213
---------- ----------
1,100 53,513
---------- ----------
Communication Equipment - 1.35%
Cabletron Systems, Inc.* ......................... 500 7,500
GTE Corporation .................................. 3,000 156,750
Harris Corporation ............................... 200 9,175
Motorola, Inc. ................................... 1,900 108,419
National Semiconductor Corporation* .............. 400 10,375
Scientific-Atlanta Inc. .......................... 200 3,350
Tellabs, Inc.* ................................... 600 31,725
---------- ----------
6,800 327,294
---------- ----------
Computer Hardware, Software or Services - 7.20%
Adobe Systems Inc. ............................... 200 8,250
Advanced Micro Devices Inc.* ..................... 400 7,175
AMP Inc. ......................................... 700 29,400
Apple Computer Inc.* ............................. 400 5,250
Autodesk, Inc. ................................... 200 7,400
Automatic Data Processing Inc. ................... 900 55,238
Bay Networks, Inc.* .............................. 600 15,338
Ceridian Corporation* ............................ 200 9,163
CISCO Systems Inc. ............................... 3,150 175,613
Compaq Computer Corporation ...................... 2,410 136,014
Computer Associates International Inc. ........... 1,650 87,244
Computer Sciences Corporation* ................... 200 16,513
Data General Corporation* ........................ 100 1,744
Dell Computer Corporation ........................ 1,200 100,800
Digital Equipment Corporation* ................... 500 18,500
Honeywell, Inc. .................................. 400 27,400
Intel Corporation ................................ 5,200 365,300
Microsoft Corporation* ........................... 3,900 504,075
Novell Inc.* ..................................... 1,100 8,250
Oracle Systems Corporation ....................... 3,300 73,631
Parametric Technology Corporation* ............... 400 18,950
Seagate Technologies Inc.* ....................... 800 15,400
Sun Microsystems Inc.* ........................... 1,200 47,850
Unisys Corporation* .............................. 500 6,937
---------- ----------
29,610 1,741,435
---------- ----------
Computer - Semiconductors - .33%
Applied Materials* ............................... 1,200 36,150
EMC Corporation .................................. 1,600 43,900
---------- ----------
2,800 80,050
---------- ----------
Consumer Non-Durables - 3.65%
Corning Inc. ...................................... 700 25,988
General Electric Corporation ...................... 10,600 777,775
Grainger (W.W.), Inc. ............................. 200 19,437
Lowe's Companies Inc. ............................. 600 28,612
Newell Company .................................... 500 21,250
Whitman Corporation ............................... 400 10,425
---------- ----------
13,000 883,487
---------- ----------
Consumer Services - .21%
Block (H & R) Inc. ................................ 300 13,444
Manor Care Inc. ................................... 200 7,000
Service Corporation International ................. 800 29,550
---------- ----------
1,300 49,994
---------- ----------
Consumer Staples - .09%
Pioneer Hi-Bred International Inc. ................ 200 21,450
---------- ----------
Containers -- .18%
Ball Corporation .................................. 100 3,531
Crown Cork & Seal Company Inc. .................... 400 20,050
Owens-Illinois Inc., New* ......................... 500 18,969
---------- ----------
1,000 42,550
---------- ----------
Cosmetics-Toiletry - .15%
Alberto-Culver Company, Class B ................... 200 6,413
Avon Products Inc. ................................ 500 30,688
---------- ----------
700 37,101
---------- ----------
Diversified - 1.62%
Aeroquip-Vickers, Inc. ............................ 100 4,906
CBS Corporation ................................... 2,200 64,763
Cognizant Corporation ............................. 500 22,281
Fortune Brands, Inc. .............................. 500 18,531
Loews Corporation ................................. 300 31,837
Raytheon Company, Class A ......................... 153 7,547
Raytheon Company, Class B ......................... 700 35,350
Tyco International Ltd. ........................... 1,800 81,112
Unilever N.V. ..................................... 2,000 124,875
---------- ----------
8,253 391,202
---------- ----------
Electrical Equipment - 1.32%
Cooper Industries Inc. ............................ 300 14,700
FirstEnergy Corporation* .......................... 800 23,200
Foster Wheeler Corporation ........................ 100 2,706
General Signal Corporation ........................ 100 4,219
Hewlett-Packard Company ........................... 3,300 206,250
Tektronix Inc. .................................... 150 5,953
Texas Instruments Inc. ............................ 1,200 54,000
Thomas & Betts Corporation ........................ 200 9,450
---------- ----------
6,150 320,478
---------- ----------
Electronics - .51%
Eaton Corporation ................................. 200 17,850
EG&G Inc. ......................................... 200 4,163
Emerson Electric Company .......................... 1,400 79,013
KLA-Tenecor Corporation* .......................... 200 7,725
Tandy Corporation ................................. 400 15,425
---------- ----------
2,400 124,176
---------- ----------
Energy and Resources - .21%
Burlington Resources, Inc. ........................ 552 24,737
Dresser Industries Inc. ........................... 600 25,163
---------- ----------
1,152 49,900
---------- ----------
8
<PAGE>
MML Equity Index Fund
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1997
Number Market
of Value
Shares (Note 2A)
------ ---------
EQUITIES (Continued)
Entertainment - 1.80%
Brunswick Corporation........................... 300 $ 9,094
Disney (Walt) Company........................... 2,100 208,031
Harcourt General Corporation.................... 300 16,444
Hasbro Inc. .................................... 400 12,600
ITT Corporation (New)*.......................... 400 33,150
King World Productions, Inc. ................... 100 5,775
Mattel, Inc. ................................... 900 33,525
Time Warner Inc. ............................... 1,900 117,800
---------- ----------
6,400 436,419
---------- ----------
Environmental Control - .02%
Safety-Kleen Corporation........................ 200 5,487
---------- ----------
Financial Services - 3.96%
American Express Company........................ 1,500 133,875
American General Corporation.................... 710 38,384
Beneficial Corporation.......................... 200 16,625
Countrywide Credit Industries................... 400 17,150
Dow Jones & Company Inc. ....................... 300 16,106
Equifax, Inc. .................................. 400 14,175
Federal Home Loan Mortgage Corporation.......... 2,300 96,456
Federal National Mortgage Association........... 3,500 199,719
First Data Corporation.......................... 1,500 43,875
Green Tree Financial Corporation................ 500 13,094
Household International, Inc. .................. 300 38,269
Merrill Lynch & Company Inc. ................... 1,000 72,937
Pulte Corporation............................... 100 4,181
Schwab (Charles) Corporation.................... 1,050 44,034
Temple-Inland Inc. ............................. 200 10,482
Travelers Group Inc. ........................... 3,678 198,152
---------- ----------
17,638 957,494
---------- ----------
Food and Beverages - 7.18%
Albertson's, Inc. .............................. 800 37,900
Anheuser-Busch Companies Inc. .................. 1,600 70,400
Campbell Soup Company........................... 1,500 87,188
Coca-Cola Company............................... 7,900 526,338
ConAgra Inc. ................................... 1,400 45,938
Coors (Adolph) Company, Class B................. 100 3,325
CPC International Inc. ......................... 500 53,875
Heinz (H.J.) Company............................ 1,200 60,975
Hershey Foods Corporation....................... 500 30,969
Kellogg Company................................. 1,400 69,475
PepsiCo Inc. ................................... 4,900 178,544
Philip Morris Companies Inc. ................... 7,800 353,437
Quaker Oats Company............................. 400 21,100
Ralston-Purina Group............................ 300 27,881
Sara Lee Corporation............................ 1,500 84,469
Seagram Company Ltd............................. 1,200 38,775
UST Inc. ....................................... 600 22,162
Wrigley (Wm) Jr. Company........................ 300 23,869
---------- ----------
33,900 1,736,620
---------- ----------
Food Distribution - .83%
Archer-Daniels-Midland Company.................. 1,890 40,989
Costco Companies Inc.*.......................... 700 31,238
General Mills Inc. ............................. 500 35,812
Giant Food, Inc., Class A....................... 200 6,737
Great Atlantic & Pacific Tea Company Inc. ...... 100 2,969
Kroger Company.................................. 800 29,550
Supervalu Inc. ................................. 200 8,375
Sysco Corporation............................... 500 22,781
Winn Dixie Stores Inc. ......................... 500 21,844
---------- ----------
5,390 200,295
---------- ----------
Freight and Shipping - .04%
Caliber Systems Inc. ............................. 200 9,738
---------- ----------
Glass Products - .17%
Owens Corning Fiberglass Corporation................ 200 6,825
PPG Industries Inc. ................................ 600 34,275
---------- ----------
800 41,100
---------- ----------
Health Care Facilities - .44%
Columbia/HCA Healthcare Corporation............... 2,100 62,213
Humana Inc.*...................................... 500 10,375
Tenet Healthcare Corporation*..................... 1,000 33,125
---------- ----------
3,600 105,713
---------- ----------
Health Care Products - 3.80%
Abbott Laboratories............................... 2,400 157,350
Allergan, Inc. ................................... 200 6,713
Bausch & Lomb Inc. ............................... 200 7,925
Becton, Dickinson & Company....................... 400 20,000
Merck & Company Inc. ............................. 3,900 414,375
Pfizer, Inc. ..................................... 4,200 313,162
---------- ----------
11,300 919,525
---------- ----------
Holding Companies - .16%
Providian, LLC.................................... 300 13,556
Public Service Enterprise......................... 800 25,350
---------- ----------
1,100 38,906
---------- ----------
Home Appliances - .43%
Black & Decker Corporation........................ 300 11,719
Illinois Tool Works Inc. ......................... 800 48,100
Maytag Corporation................................ 300 11,194
Snap-On, Inc. .................................... 200 8,725
Stanley Works..................................... 300 14,156
Whirlpool Corporation............................. 200 11,000
---------- ----------
2,100 104,894
---------- ----------
Home Furnishings and Housewares - .78%
American Home Products Corporation................ 2,000 153,000
Armstrong World................................... 100 7,475
Rubbermaid, Inc. ................................. 500 12,500
Springs Industries, Inc. ......................... 200 10,400
Tupperware Corporation............................ 200 5,575
---------- ----------
3,000 188,950
---------- ----------
Hotels and Restaurants - .87%
Darden Restaurants Inc. .......................... 500 6,250
Harrah's Entertainment Corporation*............... 300 5,662
Hilton Hotels Corporation......................... 800 23,800
Marriott International Inc. ...................... 400 27,700
McDonald's Corporation............................ 2,300 109,825
Mirage Resorts, Inc.*............................. 600 13,650
Tricon Global Restaurants Inc.*................... 490 14,241
Wendy's International Inc. ....................... 400 9,625
---------- ----------
5,790 210,753
---------- ----------
Insurance - 4.25%
Aetna Life & Casualty Company..................... 500 35,281
Allstate Corporation.............................. 1,500 136,313
American International Group, Inc. ............... 2,250 244,688
AON Corporation................................... 600 35,175
Chubb Corporation................................. 600 45,375
CIGNA Corporation................................. 300 51,919
Cincinnati Financial Corporation.................. 200 28,150
9
<PAGE>
MML Equity Index Fund
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1997
Number Market
of Value
Shares (Note 2A)
------ ---------
EQUITIES (Continued)
Insurance (Continued)
Conseco, Inc. ...................................... 500 $ 22,719
General Re Corporation.............................. 300 63,600
Hartford Financial Services Group, Inc. ............ 400 37,425
Jefferson-Pilot Corporation......................... 200 15,575
Lincoln National Corporation........................ 400 31,250
Marsh & McLennan Companies, Inc. ................... 600 44,737
MBIA Inc. .......................................... 400 26,725
MGIC Investment Corporation......................... 400 26,600
Progressive Corporation............................. 200 23,975
SAFECO Corporation.................................. 400 19,500
St. Paul Companies Inc. ............................ 200 16,412
SunAmerica.......................................... 600 25,650
Torchmark Corporation............................... 400 16,825
Transamerica Corporation............................ 200 21,300
United Healthcare Corporation....................... 600 29,812
UNUM Corporation.................................... 400 21,750
USF & G Corporation................................. 400 8,825
---------- ----------
12,550 1,029,581
---------- ----------
Machinery and Heavy Equipment - .72%
Caterpillar Inc. ................................... 1,200 58,275
Cincinnati Milacron Inc. ........................... 100 2,594
Deere & Company..................................... 800 46,650
Dover Corporation................................... 800 28,900
Ingersoll-Rand Company.............................. 600 24,300
Parker-Hannifin Corporation......................... 300 13,762
---------- ----------
3,800 174,481
---------- ----------
Manufacturing - 1.05%
Alcan Aluminum Ltd.................................. 700 19,338
Aluminum Company of America......................... 600 42,225
Boston Scientific Corporation*...................... 700 32,113
Briggs & Stratton Corporation....................... 100 4,856
Brown-Forman Corporation, Class B................... 200 11,050
Case Corporation.................................... 300 18,131
LSI Logic Corporation*.............................. 500 9,875
Micron Technology Inc.*............................. 700 18,200
PACCAR Inc. ........................................ 200 10,500
Reynolds Metals Company............................. 200 12,000
Sherwin-Williams Company............................ 600 16,650
Silicon Graphics Inc.*.............................. 600 7,462
Thermo Electron Corporation*........................ 400 17,800
3COM Corporation*................................... 1,000 34,937
---------- ----------
6,800 255,137
---------- ----------
Medical Instruments, Services and Supplies - 1.15%
Bard (C.R.), Inc. .................................. 200 6,263
Baxter International Inc. .......................... 900 45,394
Biomet, Inc. ....................................... 300 7,688
Cardinal Health, Inc. .............................. 300 22,538
Guidant Corporation................................. 600 37,350
HBO & Company....................................... 600 28,800
HEALTHSOUTH Corporation............................. 1,200 33,300
Medtronic, Inc. .................................... 1,400 73,237
Shared Medical Systems Corporation.................. 100 6,600
St. Jude Medical, Inc.*............................. 300 9,150
United States Surgical Corporation.................. 300 8,794
---------- ----------
6,200 279,114
---------- ----------
Metals and Mining - .47%
Allegheny Teledyne, Inc. ........................... 600 $ 15,525
ASARCO Inc. ........................................ 100 2,244
Barrick Gold Corporation............................ 1,100 20,488
Battle Mountain Gold Company........................ 700 4,113
Cyprus Amax Minerals Company........................ 300 4,613
Echo Bay Mines Ltd.*................................ 400 975
Freeport McMoRan Copper & Gold, Class B............. 600 9,450
Homestake Mining Company............................ 500 4,437
Inco Ltd............................................ 600 10,200
Newmont Mining Corporation.......................... 472 13,865
Phelps Dodge Corporation............................ 300 18,675
Placer Dome, Inc. .................................. 700 8,881
---------- ----------
6,372 113,466
---------- ----------
Miscellaneous - .48%
S & P Depositary Receipt............................ 1,200 $ 116,475
---------- ----------
Natural Gas - .47%
Columbia Gas System, Inc. .......................... 200 15,713
Consolidated Natural Gas Company.................... 300 18,150
Enron Corporation................................... 1,100 45,719
NICOR Inc. ......................................... 100 4,219
ONEOK Inc. ......................................... 100 4,037
Pacific Enterprises Inc. ............................ 300 11,287
Sonat, Inc. ........................................ 300 13,725
---------- ----------
2,400 112,850
---------- ----------
News and Publishing - .95%
Gannett Company Inc. ............................... 1,000 61,812
Kimberly-Clark Corporation.......................... 1,800 88,762
Knight-Ridder Inc. ................................. 300 15,600
New York Times Company, Class A..................... 300 19,837
Times Mirror Company (New), Class A................. 300 18,450
Tribune Company..................................... 400 24,900
---------- ----------
4,100 229,361
---------- ----------
Oil - 7.77%
Amerada Hess Corporation............................ 300 16,463
Amoco Corporation................................... 1,600 136,200
Anadarko Petroleum Company.......................... 200 12,138
Apache Corporation.................................. 300 10,519
Ashland, Inc. ...................................... 200 10,738
Atlantic Richfield Company.......................... 1,000 80,125
Baker Hughes Inc. .................................. 500 21,813
Chevron Corporation................................. 2,000 154,000
Coastal Corporation................................. 300 18,581
Exxon Corporation................................... 7,900 483,381
Halliburton Company................................. 800 41,550
McDermott International, Inc. ...................... 200 7,325
Mobil Corporation................................... 2,600 187,687
Occidental Petroleum Corporation.................... 1,100 32,244
Oryx Energy Company*................................ 400 10,200
Pennzoil Company.................................... 100 6,681
Phillips Petroleum Company.......................... 900 43,762
Royal Dutch Petroleum Company....................... 6,800 368,475
Tenneco Inc. ....................................... 500 19,750
Texaco Inc. ........................................ 1,600 87,000
Union Pacific Corporation........................... 800 49,950
Union Pacific Resources Group....................... 800 19,400
Unocal Corporation.................................. 800 31,050
USX-Marathon Group Common (New)..................... 900 30,375
---------- ----------
32,600 1,879,407
---------- ----------
10
<PAGE>
MML Equity Index Fund
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1997
Number Market
of Value
Shares (Note 2A)
------ ------------
EQUITIES (Continued)
Oil Equipment and Services - .65%
Helmerich & Payne, Inc............................ 200 $ 13,575
Schlumberger Ltd.................................. 1,600 128,800
Western Atlas, Inc................................ 200 14,800
---------- ----------
2,000 157,175
---------- ----------
Paper and Forest Products - .74%
Bemis Company Inc................................. 200 8,813
Boise Cascade Corporation ........................ 200 6,050
Champion International Corporation ............... 300 13,594
Fort James Corporation ........................... 600 22,950
Georgia-Pacific Corporation ...................... 300 18,225
Harnischfeger Industries Inc...................... 100 3,531
International Paper Company ...................... 1,000 43,125
Louisiana Pacific Corporation .................... 300 5,700
Mead Corporation ................................. 200 5,600
Potlatch Corporation ............................. 100 4,300
Stone Container Corporation* ..................... 400 4,175
Weyerhaeuser Company ............................. 600 29,437
Willamette Industries Inc......................... 400 12,875
---------- ----------
4,700 178,375
---------- ----------
Personal Items - 3.05%
Colgate-Palmolive Company ........................ 1,000 73,500
Gillette Company ................................. 1,800 180,787
International Flavors & Fragrances, Inc. ......... 300 15,450
Jostens Inc....................................... 200 4,612
Proctor & Gamble Company ......................... 4,400 351,175
Warner-Lambert Company ........................... 900 111,600
---------- ----------
8,600 737,124
---------- ----------
Petroleum Refining - .20%
Rowan Companies* ................................. 300 9,150
Sun Company ...................................... 300 12,619
Williams Companies Inc............................ 1,000 28,375
---------- ----------
1,600 50,144
---------- ----------
Pharmaceuticals - 4.31%
ALZA Corporation ................................. 300 9,544
Bristol-Myers Squibb Company ..................... 3,200 302,800
Johnson & Johnson ................................ 4,300 283,262
Lilly (Eli) & Company ............................ 3,400 236,725
Pharmacia & Upjohn Inc............................ 1,700 62,262
Schering-Plough Corporation ...................... 2,400 149,100
---------- ----------
15,300 1,043,693
---------- ----------
Photographic Equipment and Supplies - .32%
Eastman Kodak Company ............................ 1,100 66,894
Polaroid Corporation ............................. 200 9,737
---------- ----------
1,300 76,631
---------- ----------
Printing and Publishing - .30%
American Greetings Corporation, Class A .......... 200 7,825
Donnelley (RR) & Sons Company .................... 500 18,625
Dun & Bradstreet Corporation ..................... 500 15,469
McGraw-Hill Inc................................... 300 22,200
Westvaco Corporation ............................. 300 9,431
---------- ----------
1,800 73,550
---------- ----------
Railroads - .15%
Norfolk Southern Corporation ..................... 1,200 36,975
---------- ----------
Research and Development - .18%
Amgen Inc......................................... 800 $ 43,300
---------- ----------
Retail - Store - 3.50%
American Stores Company .......................... 800 16,450
Charming Shoppes Inc.* ........................... 400 1,875
Circuit City Stores Inc. - Circuit City Group .... 400 14,225
CVS Corporation .................................. 600 38,438
Dayton Hudson Corporation ........................ 700 47,250
Dillard's Inc., Class A .......................... 400 14,100
Federated Department Store* ...................... 600 25,838
Gap Inc........................................... 1,350 47,841
K mart Corporation* .............................. 1,500 17,344
Limited Inc....................................... 900 22,950
Longs Drug Stores Company ........................ 100 3,212
May Department Stores Company .................... 800 42,150
Mercantile Stores Company ........................ 200 12,175
Nordstrom, Inc.................................... 200 12,075
Penney (J.C.) Company Inc......................... 800 48,250
Rite Aid Corporation ............................. 400 23,475
Russell Corporation .............................. 100 2,656
Sears, Roebuck & Company ......................... 1,300 58,825
TJX Companies, Inc................................ 400 13,750
Toys R Us Inc.* .................................. 1,000 31,437
Walgreen Company ................................. 1,600 50,200
Wal-Mart Stores, Inc.............................. 7,400 291,837
Woolworth Corporation* ........................... 500 10,187
---------- ----------
22,450 846,540
---------- ----------
Savings and Loan Associations - .35%
Ahmanson (H.F.) Company .......................... 400 26,775
Golden West Financial Corporation ................ 100 9,781
Washington Mutual Inc............................. 760 48,497
---------- ----------
1,260 85,053
---------- ----------
Soaps and Detergents - .13%
Clorox Company ................................... 400 31,625
---------- ----------
Steel - .17%
Armco Inc.* ...................................... 400 1,975
Bethlehem Steel Corporation* ..................... 400 3,450
Inland Steel Industries Inc....................... 200 3,425
Nucor Corporation ................................ 300 14,494
Timken Company ................................... 200 6,875
USX-U.S. Steel Group Inc.......................... 200 6,250
Worthington Industries, Inc....................... 300 4,950
---------- ----------
2,000 41,419
---------- ----------
Technology - .71%
Ameritech Corporation ............................ 1,800 144,900
ITT Industries ................................... 400 12,550
Millipore Corporation ............................ 200 6,787
Perkin-Elmer Corporation ......................... 100 7,106
---------- ----------
2,500 171,343
---------- ----------
Telecommunications - 7.55%
AirTouch Communications, Inc.* ................... 1,600 66,500
ALLTEL Corporation ............................... 600 24,638
Andrew Corporation ............................... 300 7,200
AT&T Corporation ................................. 5,200 318,500
Bell Atlantic Corporation ........................ 2,475 225,225
BellSouth Corporation ............................ 3,200 180,200
11
<PAGE>
MML Equity Index Fund
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1997
Number Market
of Value
Shares (Note 2A)
------ ----------
EQUITIES (Continued)
Telecommunications (Continued)
Comcast Corporation, Special Class A
(non-voting) .................................. 1,000 $ 31,563
DSC Communications Corporation* ................ 300 7,200
Frontier Corporation ........................... 600 14,437
Lucent Technologies, Inc. ...................... 2,100 167,737
MCI Communications Corporation ................. 2,200 94,187
Nextlevel Systems* ............................. 500 8,937
Northern Telecommunications Ltd. ............... 800 71,200
SBC Communications ............................. 3,000 219,750
Sprint Corporation ............................. 1,400 82,075
Tele-Communications Inc., Class A .............. 1,700 47,494
US West, Inc. .................................. 1,500 67,687
US West Media, lnc.* ........................... 2,000 57,750
Viacom Inc., Class B* .......................... 1,200 49,725
WorldCom, lnc.* ................................ 2,800 84,700
--------- ----------
34,475 1,826,705
--------- ----------
Tire and Rubber - .21%
Cooper Tire & Rubber Company ................... 300 7,313
Goodrich (B.F.) Company ........................ 300 12,431
Goodyear Tire & Rubber Company ................. 500 31,812
--------- ----------
1,100 51,556
--------- ----------
Transportation - .23%
Burlington Northern Santa Fe ................... 500 48,469
Ryder System, Inc. ............................. 300 9,825
--------- ----------
800 56,294
--------- ----------
Utilities - 2.52%
American Electric Power Company, Inc. .......... 600 30,975
Baltimore Gas & Electric Company ............... 400 13,625
Carolina Power & Light Company ................. 500 21,219
Central & Southwest Corporation ................ 600 16,238
Cinergy Corporation ............................ 500 19,188
Consolidated Edison Company .................... 700 28,700
Dominion Resources, Inc. ....................... 600 25,538
DTE Energy Company ............................. 500 17,344
Duke Energy Company ............................ 1,122 62,131
Edison International ........................... 1,400 38,063
Entergy Corporation ............................ 700 20,956
FPL Group, Inc. ................................ 500 29,594
GPU, Inc. ...................................... 400 16,850
Houston Industries, Inc. ....................... 899 23,992
National Service Industries, Inc. .............. 100 4,956
Niagara Mohawk Power Corporation* .............. 500 5,250
Northern States Power Company .................. 200 11,650
PacifiCorp ..................................... 900 24,581
PECO Energy Company ............................ 700 16,975
Peoples Energy Corporation ..................... 100 3,937
PG & E Corporation ............................. 1,300 39,569
PP & L Resources Inc. .......................... 500 11,969
Southern Company ............................... 2,200 56,925
Texas Utilities Company ........................ 745 30,964
Unicom Corporation ............................. 700 21,525
Union Electric Company ......................... 400 17,300
------------ ------------
17,766 610,014
------------ ------------
Waste Management - .33%
Browning-Ferris Industries, Inc. ............... 700 25,900
Laidlaw Inc., Class B (non-voting) ............. 1,000 13,625
Waste Management, Inc. ......................... 1,500 41,250
------------ ------------
3,200 80,775
------------ ------------
Total Equities
(Cost $20,277,732) ............................. 24,449,294
------------
SHORT-TERM INVESTMENTS - .12%
(Cost $28,284)
Dreyfus Cash Management Fund, Class A .......... 28,284 28,284
------------ ------------
Total Investments
(Cost $20,306,016) (a) ......................... 101.14 24,477,578
Other Assets and Liabilities (Net) .............. (1.14) (275,815)
------------ ------------
100.00% $ 24,201,763
============ ============
(a) Federal Income Tax Information: At December 31, 1997
the net unrealized appreciation on investments
based on cost of $20,306,016 for federal
income tax purposes is as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of
market value over tax cost.................................... $ 4,519,913
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over market value........................................ (348,351)
------------
Net unrealized appreciation................................... $ 4,171,562
============
* Non-income producing security.
See Notes to Financial Statements.
12
<PAGE>
Notes To Financial Statements
1. HISTORY
MML Equity Index Fund ("the Fund") is a non-diversified fund series of MML
Series Investment Fund ("MML Trust"), a no load, open-end, management investment
company registered as such under the Investment Company Act of 1940. MML Trust,
which has five separate series of shares, was organized as a business trust
under the laws of the Commonwealth of Massachusetts pursuant to an Agreement and
Declaration of the Trust.
MML Trust was established by Massachusetts Mutual Life Insurance Company
("MassMutual") for the purposes of providing vehicles for the investment of
assets of various separate investment accounts established by MassMutual and by
the life insurance companies which are subsidiaries of MassMutual. Shares of MML
Trust are not offered to the general public.
Information presented in these financial statements pertains only to the Fund.
Information for the other series of MML Trust are presented under a separate
cover.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in preparation of its financial statements in conformity
with generally accepted accounting principles.
A. Investment Valuation
Generally, the Fund values its Portfolio's securities at market value or, in
the absence of market value with respect to any portfolio security, at fair
value as determined by, or under the direction of, the Board of Trustees of
MML Trust ("the Board"). Portfolio securities are valued on the basis of
valuations furnished by a pricing service, authorized by the Board, which
provides the last reported sale price for securities listed on a national
securities exchange, or on the NASDAQ national market system. If securities
are unlisted or there is no reported sales price, the bid price of the prior
trade date will be used. Short-term debt obligations with less than one
year, but more than sixty days to maturity from the date of purchase are
valued on the basis of their market value. Debt obligations with sixty days
or less to maturity from the date of purchase are generally valued at
amortized cost when the Board believes amortized cost approximates market
value.
B. Accounting For Investments
Investment transactions are accounted for on trade date. Dividend income is
recorded on ex-dividend date. Interest income is recorded on the accrual
basis.
Realized gains and losses on investment transactions and unrealized
appreciation and depreciation of investments are reported for financial
statement and federal income tax purposes on the identified cost method.
C. Dividends and Distributions
Dividends of net investment income and distributions of capital gains are
declared and paid annually or as approved by the Board to avoid the
application of a 4% non-deductible excise tax on certain undistributed
amounts of ordinary income and capital gains. Income distributions and
capital gains distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income, gains
and losses and differing characterizations of distributions made by the
Fund. As a result, net investment income (loss) and net realized gain (loss)
on investment transactions for a reporting period may differ significantly
from distributions during such period. Accordingly, the Fund may
periodically make reclassifications among certain of their capital accounts
without impacting the net asset value of the Fund.
D. Federal Income Tax
The MML Trust has established a policy for the Fund to comply with the
provisions of the Internal Revenue Code of 1986, as amended, applicable to
regulated investment companies. As a result, the Fund will not be subject to
federal income tax on any net investment income and any capital gains to the
extent they are distributed or are deemed to have been distributed to
shareholders.
13
<PAGE>
Notes To Financial Statements (Continued)
E. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. INVESTMENT MANAGEMENT FEE
MassMutual serves as investment adviser to the Fund pursuant to an investment
management agreement (the "Investment Management Agreement"). For acting as
such, MassMutual receives 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 excess over $250,000,000. MassMutual has
agreed to bear expenses of the Fund (other than the management fee, interest,
taxes, any required trademark licensing fees, custodial fees, brokerage
commissions and extraordinary expenses) in excess of .11% of average daily net
asset value of the Fund through April 30, 1998. MassMutual also acts as transfer
agent and dividend paying agent.
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-advisor, providing day-to-day management of
the Fund's investments.
4. PURCHASE AND SALES OF INVESTMENTS
For the Period from May 1, 1997 Proceeds
(Commencement of Operations) Acquisition from Sales
through December 31, 1997 Cost and Maturities
- ------------------------- ------------- --------------
Equities.................................. $ 20,590,785 $ 356,112
Short-term Investments.................... 20,592,434 $ 20,572,987
5. NET INCREASE FROM CAPITAL SHARE TRANSACTIONS
The Trust is authorized to issue an unlimited number of shares of beneficial
interest to the Fund at $0.01 par value. Changes in shares of beneficial
interest are as follows:
For the Period from May 1, 1997
(Commencement of Operations)
through December 31, 1997
- -------------------------
Shares
Sales of shares................................................ 2,002,676
Redemption of shares........................................... (1)
-----------
Net Increase................................................... 2,002,675
===========
Amount
Sales of shares................................................ $20,030,027
Redemption of shares........................................... (8)
-----------
Net Increase................................................... $20,030,019
===========
6. INVESTMENT RISK AND CONSIDERATION
Since the fund is non-diversified and 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 in the same economic sector, the Fund's portfolio may be more
sensitive to changes in market value of a single issuer or industry.
14
<PAGE>
Report Of Independent Accountants
To the Board of Trustees and Shareholders of
MML Series Investment Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments of the MML Equity Index Fund, which is a component
of the MML Series Investment Fund (a Massachusetts business trust), as of
December 31, 1997, and the related statement of operations and statement of
changes in net assets for the period from May 1, 1997 (commencement of
operations) through December 31, 1997, and the financial highlights for the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1997 by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1997, the results of their respective operations and
changes in net assets for the period then ended, and the financial highlights
for the period then ended, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Springfield, Massachusetts
January 30, 1998
15
