<PAGE>
- --------------------------------------------------------------------------------
Table of Contents
Letter to Shareholders..................................................... 1
MassMutual Prime Fund
Portfolio Manager Report................................................ 3
Portfolio of Investments................................................ 4
Financial Statements.................................................... 6
MassMutual Short-Term Bond Fund
Portfolio Manager Report................................................ 9
Portfolio of Investments................................................ 11
Financial Statements.................................................... 13
MassMutual Core Bond Fund
Portfolio Manager Report................................................ 17
Portfolio of Investments................................................ 19
Financial Statements.................................................... 21
MassMutual Balanced Fund
Portfolio Manager Report................................................ 25
Portfolio of Investments................................................ 27
Financial Statements.................................................... 31
MassMutual Value Equity Fund
Portfolio Manager Report................................................ 35
Portfolio of Investments................................................ 37
Financial Statements.................................................... 39
MassMutual Small Cap Value Equity Fund
Portfolio Manager Report................................................ 43
Portfolio of Investments................................................ 45
Financial Statements.................................................... 47
MassMutual International Equity Fund
Portfolio Manager Report................................................ 51
Portfolio of Investments................................................ 53
Financial Statements.................................................... 55
Notes to Financial Statements.............................................. 59
Report of Independent Accountants/1/....................................... 67
/1/ The Report of Independent Accountants extends to the respective Portfolios
of Investments and Financial Statements for each Fund, and the combined
Notes to Financial Statements as listed above.
<PAGE>
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MassMutual Institutional Funds - Letter to Shareholders
- --------------------------------------------------------------------------------
January 31, 1996
To Our
Shareholders An Economic Soft Landing Is Achieved in U.S.
The past year saw the continuation of a very good
economic environment for investors in both stocks and
bonds. The U.S. economic growth rate as measured by
Gross Domestic Product continued to slow throughout the
[PHOTO OF year from its heated level of 4.1% in 1994 to roughly
STUART H. REESE 2.5% in 1995. The Federal Reserve (the Fed), which had
APPEARS HERE] been raising rates during 1994 in an attempt to slow
growth somewhat, was able to change course and even move
Stuart H. Reese rates lower. Because the economy is cyclical, the Fed
wanted growth to slow to a more moderate, sustainable
"Backed by low level--a "soft landing" from 1994's rapid pace--to
interest rates and prolong the positive part of the current cycle.
a strong bond market,
U.S. stocks reached As demand for goods slowed from 1994 levels, businesses
all-time highs in began bringing down their inventories, which had started
1995." the year at high levels. This in turn slowed order- and
production-driven demand from the manufacturing sector,
exerting further downward pressure on the growth rate,
supporting the cause for interest rate cuts, and helping
to keep inflation at bay.
Foreign Growth Remains Slow
Growth was also slow in the major foreign economies. In
Japan, though it appears that a turnaround from a four-
year recession has begun, difficulties in the banking
sector caused growth to remain subdued. In Europe, hopes
for an economic recovery were not met, in part due to
weak export activity resulting from strong currencies,
and in part as a result of European interest rate cuts
that came later than expected.
Stock and Bond Markets React
While the Federal Reserve actually increased rates as
late as February 1995, the domestic bond market had
begun to rally as early as November 1994 on the belief
that growth would slow enough to indicate a change in
monetary policy. The market was correct. The Fed's
February rate increase of 1/2 point was followed during
the year by two cuts of 1/4 point each in July and
December. Rates on Treasuries fell significantly during
this period, which drove dramatic price appreciation for
Treasuries. The prices in most other bond sectors
followed suit, with 1995 playing out to be one of the
strongest bull markets for bonds in history.
Backed by low interest rates and a strong bond market,
U.S. stocks reached all-time highs in 1995. The Dow
Jones Industrial Average made new highs almost daily,
hitting a peak of 5,216 and closing the year at 5,117,
and the S&P 500 rose 37.58%. In addition to support from
the bond market, stocks reacted to continued positive
earnings surprises, merger and consolidation activity,
an improving export picture and growing productivity and
efficiency throughout corporate America. Though stock
markets in economies such as Switzerland and Sweden
actually outperformed the U.S., the Morgan Stanley EAFE,
an index of European, Australian and Far East markets
was up only 11.21%. Positive, but nothing near the
stellar performance of domestic stocks.
Outlook for Economy, Markets Remains Positive
The forecast for the U.S. economy and markets appears
favorable, though both should be somewhat more moderate
than they were during the past year. Economic growth
will probably slow further because while employment and
personal income--two obviously important components of
demand--are steady, they are not strong enough to fuel
increases in demand-driven growth.
Even in the face of a slower economy, sales and earnings
remained strong through the end of 1995. The U.S. had
its biggest productivity gain on record in 1995 and
exports grew, aided in the early part of the year by a
weak dollar, which in turn created improvements in
trade. Going into 1996, we expect to see exports remain
strong, as U.S. businesses recognize that future growth
will come in part from operating in a global market.
This opinion is supported by the heavy outlays we've
seen for business equipment, which should further
enhance competitiveness, productivity and export
activity for the coming year.
1
<PAGE>
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MassMutual Institutional Funds - Letter to Shareholders (Continued)
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The Case for Value Investing
Because of uncertainty about the slowing in the economy
throughout 1995, growth investing, or buying stocks of
companies whose earnings growth rates can surpass that
of the economy, took the lead last year. By the same
token it was growth, rather than income, that led to the
dramatic appreciation of 1995's bond market. With both
markets currently at high levels in terms of price, we
believe we will see a return of superior performance
from value investing strategies. Value investing relies
on capturing appreciation by "buying well" and seeking
out fundamental values, rather than buying above-average
growth. Value investors like the MassMutual
Institutional Funds work to buy stocks and bonds that
are either temporarily out-of-favor with the markets, or
that offer opportunities that have not yet been
recognized by the investment community at large.
With stocks and bonds at highs and a domestic economy
that is likely to continue to slow, we expect both the
stocks and bond markets to return to more "normal"
activity in terms of returns and volatility. In this
type of environment, value investing should continue to
offer solid long-term results. Since security selection
should be very important in the coming year, your
portfolio managers will continue to rely upon hands-on
research and careful analysis in an effort to find the
best opportunities for investors.
/s/ Stuart H. Reese
Stuart H. Reese
President
MassMutual Institutional Funds
<PAGE>
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MassMutual Prime Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment The objectives and policies of the Fund are to:
objective and policies
for the MassMutual . maximize current income, consistent with liquidity
Prime Fund? and preservation of capital
. invest in a diversified portfolio of money market
instruments
. invest in high quality debt instruments with
remaining maturity not to exceed 397 days
Note: This is not a money market fund.
How has the Fund The Fund has performed well, remaining on target with
performed over the its goal of providing principal preservation and a
year? competitive level of current income by investing in
highly liquid short-term debt instruments. While
longer-term interest rates continued to decline over the
majority of the year, rates for the extremely short-term
securities we focus on--which influence the amount of
income the Fund can provide--remained favorable, even
exceeding rates on longer-term issues at certain times
during the year.
What strategic moves Over the course of the year, we made one major change.
have you made within Both in the early part of 1995 when it was anticipated
the portfolio? and then later when it actually happened, we lengthened
the average maturity of the Fund's portfolio on the
likelihood of the Federal Reserve's interest rate cuts.
By lengthening our maturity, we hoped to make use of
available higher current income levels for as long as
possible, expecting that debt issued after a rate cut
would offer lower income levels. This strategy benefited
the Fund by allowing us to maintain our income stream
while the market adjusted to the Fed's actions.
What features of the Though it shares many of their characteristics, Prime
market are you Fund is not a money market fund. As a result, it has
currently focusing on? more investment flexibility, and can pay slightly higher
income. At this time, the Fund is focused on what is
known as Tier 2 commercial paper. Commercial paper--
which is one of the major classes of money market
securities--is very short-term debt issued by banks or
corporations which, in addition to paying interest, is
usually sold at a discount. It is typically a very safe
investment, issued by high quality firms and often
backed by a line of credit. Tier 2 paper pays slightly
higher income than Tier 1, which is one of the factors
that allows Prime Fund an income advantage over money
market funds. But along with that comes a margin of
slightly higher risk, requiring us to research potential
credit opportunities carefully to maintain the
portfolio's relative safety.
What is your outlook The Fed eased, or lowered rates, twice in 1995 and may
for the Fund? do so again in the first few months of 1996 depending on
the forecast for the economy. If it appears that the
economy has slowed too far, or if budget discussions are
finalized, another decline is a distinct possibility.
However, we believe that any further declines will not
be significant. In this environment, we are continuing
to extend maturities in an effort to make the most of
the current rates while maintaining an emphasis on
principal stability. Our outlook for the Fund remains
optimistic, though our performance as always will be
tied to any changes in the Federal Reserve's monetary
policy.
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Prime Fund
Classes 1-4 and 91-day Treasury Bills
<TABLE>
<CAPTION>
- -----------------------------------------------------------
MassMutual Prime Fund
Total Return Since Inception
10/31/94 - 12/31/95 One Year
<S> <C> <C>
Class 1 5.59% 4.58%
Class 2 6.37% 5.16%
Class 3 6.80% 5.53%
Class 4 7.11% 5.78%
- -----------------------------------------------------------
91-Day Treasury Bills 6.72% 5.54%
- -----------------------------------------------------------
</TABLE>
Past performance is not predictive of future results. The
investment return and principal value of shares of the Fund
will fluctuate with market conditions so that shares of the
Fund, when redeemed, may be worth more or less that their
original cost. Investors should note that the Fund is a
professionally managed mutual fund, while 91-day Treasury
Bills are unmanaged and do not incur expenses.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
10/3/94 12/94 2/95 4/95 6/95 8/95 10/95 12/95
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class 1 10,000 10,096 10,172 10,248 10,330 10,407 10,483 10,559
Class 2 10,000 10,115 10,200 10,286 10,337 10,464 10,551 10,637
Class 3 10,000 10,121 10,211 10,303 10,401 10,495 10,587 10,680
Class 4 10,000 10,126 10,220 10,316 10,419 10,516 10,613 10,711
T-Bills 10,000 10,112 10,205 10,297 10,385 10,494 10,587 10,672
</TABLE>
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3
<PAGE>
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MassMutual Prime Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 100.0%
Commercial Paper
Aristar, Inc.
5.800% 1/25/1996 $4,100,000 $4,084,147
Burlington Northern
Railroad Inc.
5.850% 1/19/1996 8,240,000 8,215,898
Calcot Ltd.
5.950% 1/04/1996 4,045,000 4,042,994
Carter Holt Harvey
Limited
6.000% 1/18/1996 650,000 648,158
Carter Holt Harvey
Limited
6.050% 1/29/1996 5,075,000 5,051,119
Caterpillar Financial
Services Corp.
5.650% 2/15/1996 4,545,000 4,512,901
CBI Industries, Inc.
5.900% 1/18/1996 5,200,000 5,185,512
Comdisco, Inc.
5.980% 2/14/1996 5,735,000 5,693,084
Comdisco, Inc.
6.000% 1/23/1996 2,600,000 2,590,467
ConAgra, Inc.
5.920% 2/01/1996 4,580,000 4,556,652
ConAgra, Inc.
5.950% 1/22/1996 5,500,000 5,480,910
Cox Enterprises, Inc.
5.910% 1/30/1996 5,585,000 5,558,411
Cox Enterprises, Inc.
5.970% 1/26/1996 4,525,000 4,506,240
CSX Corporation
5.800% 1/05/1996 3,935,000 3,932,464
Dana Credit
Corporation
5.870% 3/15/1996 6,350,000 6,274,989
Dana Credit
Corporation
5.880% 3/11/1996 3,690,000 3,648,770
The Dial Corp.
5.600% 3/28/1996 1,790,000 1,765,112
The Dial Corp.
5.800% 3/08/1996 5,000,000 4,946,507
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
Dominion Resources,
Inc.
5.800% 2/23/1996 $9,000,000 $8,923,150
Federal Signal Corp.
5.770% 3/18/1996 4,735,000 4,676,771
Federal Signal Corp.
5.780% 3/18/1996 4,380,000 4,326,139
Ford Motor Credit
Company
5.350% 7/22/1996 5,000,000 4,837,771
GTE Corporation
5.600% 3/05/1996 4,360,000 4,315,395
GTE Corporation
5.860% 2/09/1996 5,295,000 5,261,386
Hercules Incorporated
5.350% 6/19/1996 3,710,000 3,609,181
Illinois Power
Company
5.930% 2/07/1996 3,120,000 3,100,984
Illinois Power
Company
6.000% 1/31/1996 4,000,000 3,980,000
Kerr-McGee Credit
Corporation
5.950% 2/16/1996 6,530,000 6,480,354
Loral Corporation
5.750% 2/29/1996 2,495,000 2,471,488
Loral Corporation
5.970% 1/11/1996 2,675,000 2,670,564
Loral Corporation
6.020% 1/10/1996 3,000,000 2,995,486
MAPCO Inc.
6.000% 1/16/1996 5,115,000 5,102,213
MAPCO Inc.
6.000% 1/17/1996 4,930,000 4,916,854
Monsanto Company
5.650% 2/13/1996 7,800,000 7,747,361
NYNEX Corp.
5.780% 1/19/1996 5,600,000 5,583,816
ORIX Credit Alliance,
Inc.
5.640% 3/19/1996 3,665,000 3,619,318
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
ORIX Credit Alliance,
Inc.
6.020% 1/31/1996 $5,875,000 $5,845,527
PS Colorado Credit
Corporation
5.930% 2/02/1996 7,000,000 6,963,102
Pennsylvania Power &
Light Company
6.050% 1/09/1996 2,110,000 2,107,163
Pennsylvania Power &
Light Company
6.050% 1/10/1996 1,770,000 1,767,323
The Quaker Oats
Company
5.870% 2/07/1996 3,970,000 3,946,049
The Quaker Oats
Company
5.870% 2/12/1996 6,225,000 6,182,367
Rite Aid Corporation
5.950% 1/08/1996 3,730,000 3,725,685
SUPERVALU, Inc.
6.000% 1/24/1996 7,355,000 7,326,806
SUPERVALU, Inc.
6.020% 2/06/1996 2,770,000 2,753,325
Textron Financial
Corporation
6.000% 1/17/1996 3,340,000 3,331,093
Textron Inc.
5.950% 2/08/1996 6,355,000 6,315,087
Tyson Foods, Inc.
5.870% 1/12/1996 4,990,000 4,981,050
Tyson Foods, Inc.
5.930% 1/12/1996 3,080,000 3,074,419
Tyson Foods, Inc.
5.940% 1/11/1996 2,085,000 2,081,560
Union Camp
Corporation
5.350% 7/01/1996 900,000 873,818
Union Oil Company of
California
5.900% 2/08/1996 5,225,000 5,192,460
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
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MassMutual Prime Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
Union Oil Company of
California
5.950% 2/01/1996 $1,375,000 $ 1,367,955
Union Oil Company of
California
6.000% 1/05/1996 2,080,000 2,078,613
Union Pacific
Corporation
5.750% 2/28/1996 2,030,000 2,011,194
Union Pacific
Corporation
5.950% 2/06/1996 7,800,000 7,753,590
VF Corporation
5.850% 2/05/1996 5,755,000 5,722,269
VF Corporation
5.850% 2/09/1996 3,570,000 3,547,375
------------
TOTAL SHORT-TERM
INVESTMENTS 254,260,396
------------
(Cost $254,279,931)+
TOTAL INVESTMENTS -- 100.0% 254,260,396
Other Assets/
(Liabilities) - (0.0%) (6,289)
------------
NET ASSETS -- 100.0% $254,254,107
============
</TABLE>
Notes to Portfolio of Investments
+Aggregate cost for Federal tax purposes (Note 7)
The remainder of this page intentionally left blank.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Prime Fund - Financial Statements
- --------------------------------------------------------------------------------
Statement of
Assets and
Liabilities
<TABLE>
<CAPTION>
December 31, 1995
-----------------
<S> <C>
Assets:
Short-term investments, at value (cost $254,279,931) (Note 2)... $ 254,260,396
Cash............................................................ 3,036
Receivables from:
Fund shares sold............................................ 1,041,257
Investment manager (Note 3)................................. 6,286
--------------
Total assets............................................ 255,310,975
--------------
Liabilities:
Payables for:
Fund shares redeemed........................................ 933,616
Directors' fees and expenses (Note 3)....................... 2,286
Affiliates (Note 3):
Investment management fees.............................. 96,415
Administration fees..................................... 17,500
Service and distribution fees........................... 214
Accrued expenses and other liabilities.......................... 6,837
--------------
Total liabilities....................................... 1,056,868
--------------
Net assets...................................................... $ 254,254,107
==============
Net assets consist of:
Paid-in capital................................................. $ 254,142,772
Undistributed net investment income............................. 132,953
Accumulated net realized loss on investments.................... (2,083)
Net unrealized depreciation on investments...................... (19,535)
--------------
$ 254,254,107
==============
Net assets:
Class 1......................................................... $ 105,448
==============
Class 2......................................................... $ 106,126
==============
Class 3......................................................... $ 106,382
==============
Class 4......................................................... $ 253,936,151
==============
Shares outstanding:
Class 1......................................................... 698.107
==============
Class 2......................................................... 701.708
==============
Class 3......................................................... 703.035
==============
Class 4......................................................... 1,681,065.147
==============
Net asset value, offering price and
redemption price per share:
Class 1......................................................... $ 151.05
==============
Class 2......................................................... $ 151.24
==============
Class 3......................................................... $ 151.32
==============
Class 4......................................................... $ 151.06
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Prime Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of
Operations
<TABLE>
<CAPTION>
Year ended
December 31, 1995
-----------------
<S> <C>
Investment income:
Interest.................................................. $ 13,997,433
--------------
Expenses (Note 1):
Investment management fees (Note 3)....................... 1,027,586
Custody fees.............................................. 17,987
Audit and legal fees...................................... 7,081
Directors' fees (Note 3).................................. 11,020
Fees waived by the investment manager (Note 3)............ (70,814)
--------------
992,860
Administration fees (Note 3):
Class 1................................................... 580
Class 2................................................... 531
Class 3................................................... 326
Class 4................................................... 185,171
Distribution and service fees (Note 3):
Class 1................................................... 670
Class 2................................................... 155
--------------
Net expenses.......................................... 1,180,293
--------------
Net investment income................................. 12,817,140
--------------
Realized and unrealized gain (loss):
Net realized loss on investment transactions.............. (1,781)
Net change in unrealized appreciation (depreciation)
on investments........................................ (15,459)
--------------
Net realized and unrealized loss.................. (17,240)
--------------
Net increase in net assets resulting from operations...... $ 12,799,900
==============
</TABLE>
Statements of
Changes in Net
<TABLE>
<CAPTION>
Year ended Period ended
Assets December 31, 1995 December 31, 1994*
----------------- ------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income........................................... $ 12,817,140 $ 1,796,493
Net realized loss on investment transactions.................... (1,781) (302)
Net change in unrealized appreciation (depreciation)
on investments.............................................. (15,459) (4,076)
------------ ------------
Net increase in net assets resulting from operations.... 12,799,900 1,792,115
------------ ------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1......................................................... (4,178) (702)
Class 2......................................................... (4,746) (778)
Class 3......................................................... (5,095) (801)
Class 4......................................................... (12,693,331) (1,771,049)
------------ ------------
Total distributions from net investment income.......... (12,707,350) (1,773,330)
------------ ------------
Net fund share transactions (Note 5):
Class 1......................................................... 4,178 93,702
Class 2......................................................... 4,746 93,778
Class 3......................................................... 5,095 99,801
Class 4......................................................... 83,297,102 41,117,035
------------ ------------
Increase in net assets from net fund share transactions..... 83,311,121 41,404,316
------------ ------------
Total increase in net assets.................................... 83,403,671 41,423,101
Net assets:
Beginning of period (Note 1).................................... 170,850,436 129,427,335
------------ ------------
End of period (including undistributed net investment income
of $132,953 and $23,163, respectively)...................... $254,254,107 $170,850,436
============ ============
</TABLE>
* For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Prime Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 1 Class 2
----------- -----------
Year ended Period ended Year ended Period ended
12/31/95 12/31/94@** 12/31/95 12/31/94@**
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period (Note 8) $ 150.39 $ 150.00 $ 150.56 $ 150.00
----------- ----------- ----------- ------------
Income (loss) from investment operations:
Net investment income 6.90*** 1.02 7.78*** 1.16
Net realized and unrealized gain (loss) on investments (0.01) 0.42 (0.02) 0.57
----------- ----------- ----------- ------------
Total income (loss) from investment operations 6.89 1.44 7.76 1.73
----------- ----------- ----------- ------------
Less distributions to shareholders:
From net investment income (6.23) (1.05) (7.08) (1.17)
----------- ----------- ----------- ------------
Net asset value, end of period $ 151.05 $ 150.39 $ 151.24 $ 150.56
=========== =========== =========== ============
Total Return 4.58% 0.96% 5.16% 1.15%
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 105 $ 101 $ 106 $ 101
Net expenses to average daily net assets 1.65%# 1.65%#* 1.10%# 1.10%#*
Net investment income to average daily net assets 4.48% 4.07%* 5.03% 4.62%*
#Computed after giving effect to the reduction in
management fee by MassMutual. Without this reduction of
fees by the investment manager, the ratio of expenses
to average daily net assets would have been: 1.68% 1.69%* 1.13% 1.14%*
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Class 3 Class 4
----------- -----------
Year ended Period ended Year ended Period ended
12/31/95 12/31/94@** 12/31/95 12/31/94@**
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 150.61 $ 150.00 $ 150.36 $ 150.00
----------- ----------- ---------- ------------
Income (loss) from investment operations:
Net investment income 8.33*** 1.21 8.70*** 1.55
Net realized and unrealized gain (loss) on investments (0.01) 0.61 (0.02) 0.34
----------- ----------- ---------- ------------
Total income (loss) from investment operations 8.32 1.82 8.68 1.89
----------- ----------- ---------- ------------
Less distributions to shareholders:
From net investment income (7.61) (1.21) (7.98) (1.53)
----------- ----------- ---------- ------------
Net asset value, end of period $ 151.32 $ 150.61 $ 151.06 $ 150.36
=========== =========== ========== ============
Total Return 5.53% 1.21% 5.78%+ 1.26%+
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 106 $ 101 $ 253,936 $ 170,548
Net expenses to average daily net assets 0.75%# 0.75%#* 0.5160%# 0.5160%#*
Net investment income to average daily net assets 5.38% 4.99%* 5.61% 5.01%*
#Computed after giving effect to the reduction in
management fee by MassMutual. Without this reduction of
fees by the investment manager, the ratio of expenses
to average daily net assets would have been: 0.78% 0.79%* 0.5468% 0.5605%*
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
@All per share amounts for the period have been restated to reflect a 1-for-15
reverse stock split effective December 16, 1994.
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
***Per share amount calculated on the average shares method, which more
appropriately presents the per share data for the period since the use of the
undistributed income method does not accord with the results of operations.
+Employee retirement benefit plans that invest plan assets in the Separate
Investment Accounts (SIAs) may be subject to certain charges as set forth in
their respective Plan Documents. Total return figures would be lower for the
periods presented if they reflected these charges.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Portfolio Manager Report;
- --------------------------------------------------------------------------------
What are the invest- The objectives and policies of the Fund are to:
ment objective and
policies for the . achieve high total rate of return from current income
MassMutual Short-Term while minimizing fluctuations in capital values
Bond Fund?
. invest primarily in a diversified portfolio of short-
term, investment-grade, fixed-income securities
. manage duration to seek the best yield, while
maintaining duration below three years to reduce
volatility
. diversify investments among market sectors on the
basis of relative value
How has the Fund per- The Fund's performance was very strong, both on an
formed over the year? absolute and historical basis. Throughout the year, the
Fund benefited from the continuation of a bond market
rally that began late in 1994, on expectations that the
Federal Reserve would ease monetary policy, and
accelerated when the Federal Reserve began cutting
interest rates in July 1995. Lower current rates make
existing bonds more attractive to investors and
benefited prices in nearly all sectors. Also within this
environment the yield curve, the difference in yield
available from bonds of different maturities, flattened.
What effect did the The shape of the yield curve is a very important
flattening of the determinant of our portfolio's positioning. When the
yield curve have on yield curve flattens, investors are not being fully
the portfolio? compensated for longer-term lending to bond issuers. So
in a flat curve environment, we typically shorten our
duration, since there is limited added value to be
gained from extending duration. To achieve a shortening,
we sold all of our position in Treasuries, reducing them
from approximately 50% of the portfolio at the beginning
of 1995 to 0% by year-end. Treasuries had appreciated
during the year so by selling, we took advantage of the
flattening yield curve and repositioned the portfolio to
reflect our desired shorter duration--0.73 years at
year-end down, from 2.76 in December 1994.
What other strategic In addition to income, our investment strategy is driven
moves did you make in by a search for relative value in the bond market. As we
the portfolio? did in Treasuries, we sold positions to take profits in
corporate bonds. Corporate bonds performed well
regardless of any pressures a slowing economy could have
potentially imposed on the companies that issued them.
We reduced our position in corporates by approximately
7% and invested the proceeds into short-maturity
commercial paper which, due to the shape of the yield
curve, had been offering yields that were--and still
are--very attractive on a relative basis.
What areas of the Because the Fund's strategy was designed to limit
market are you volatility, we're continuing our policy of shortening
currently targeting? average duration, or exposure to changes in interest
rates. As we sell securities to reflect our new target
duration, we've continued to invest in money market
securities. Our holdings in this area have increased
from 10.1% to 65.5% over the past year.
What is your outlook We believe the Fund will continue to perform well in the
for the Fund? coming environment. The market outlook for bonds remains
positive in light of low inflation and a healthy
economy. As we move through 1996, we will use the
direction of the yield curve as a guide to positioning
our portfolio, both in terms of sector allocation and
duration decisions. We expect that in the coming year,
the Fund will continue to meet its objectives of
providing a competitive total return with minimal
fluctuation in principal.
9
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Portfolio Manager Report (Continued);
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Short-Term
Bond Fund Classes 1-4 and the Lehman Brothers
1-3 Year Government Bond Index
<TABLE>
<CAPTION>
- --------------------------------------------------------
MassMutual Short-Term Bond Fund
<S> <C> <C>
Total Return Since Inception
10/3/94 - 12/31/95 One Year
Class 1 10.35% 10.54%
Class 2 11.01% 11.11%
Class 3 11.60% 11.46%
Class 4 11.92% 11.77%
- --------------------------------------------------------
Lehman Brothers 1-3 Year 10.84% 10.84%
Government Bond Index
- --------------------------------------------------------
</TABLE>
Past performance is not predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost, Investors should note that the Fund is a professionally managed
mutual fund, while the Lehman Brothers 1-3 Year Government Bond Index is
unmanaged and does not incur expenses.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
Lehman
Date Class 1 Class 2 Class 3 Class 4 1-3 Yr.
- ---- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
10/3/94 10,000 10,000 10,000 10,000 10,000
12/94 9,983 9,991 10,013 10,013 10,000
2/95 10,296 10,314 10,335 10,338 10,275
4/95 10,427 10,455 10,487 10,501 10,425
6/95 10,730 10,769 10,801 10,816 10,659
8/95 10,811 10,859 10,901 10,918 10,767
10/95 10,922 10,981 11,033 11,060 10,910
12/95 11,035 11,101 11,160 11,192 11,084
</TABLE>
[PIE CHART APPEARS HERE]
Quality Structure (12/31/95)
MassMutual Short-Term Bond Fund
<TABLE>
<CAPTION>
U.S. Governments
Cash Equivalents
Aaa/AAA Baa/BBB A/A
- ------- ------- ---
<S> <C> <C>
90.8% 3.7% 5.5%
</TABLE>
[PIE CHART APPEARS HERE]
Duration Diversification (12/31/95)
Mass Mutual Short-Term Bond Fund
<TABLE>
<CAPTION>
Average Duration = 0.7 years
Less
than
1 year 1-3 years 3-5 years
- -------- --------- ---------
<S> <C> <C>
77.6% 15.0% 7.4%
</TABLE>
10
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Market Value
--------- ------------
<S> <C> <C>
BONDS & NOTES -- 34.0%
ASSET BACKED SECURITIES -- 6.9 %
Ford Credit 1994-B
Grantor Trust
7.300% 10/15/1999 $ 639,407 $ 651,594
Ford Credit Auto
Loan Master Trust,
Series 1992-1
6.875% 1/15/1999 1,500,000 1,520,625
Ford Motor Credit
Company
9.350% 6/10/1997 1,000,000 1,051,100
GMAC 1992-E
Grantor Trust
4.750% 8/15/1997 186,566 185,749
Honda Auto
Receivables 1992-A
Grantor Trust
4.900% 6/15/1998 195,325 194,653
Midlantic Auto
Grantor Trust 1992-1
4.300% 9/15/1997 109,228 109,193
Nissan Auto
Receivables 1994-A
Grantor Trust
6.450% 9/15/1999 1,289,224 1,300,092
Railcar Trust
No. 1992-1
7.750% 6/01/2004 1,286,535 1,387,039
World Omni 1994-A
Automobile Lease
Securitization Trust
6.450% 9/25/2000 2,131,553 2,145,110
------------
TOTAL ASSET BACKED
SECURITIES 8,545,155
------------
(Cost $8,394,449)
<CAPTION>
Principal
Amount Market Value
--------- ------------
<S> <C> <C>
CORPORATE DEBT -- 8.3%
American Brands, Inc.
8.570% 2/15/1996 $ 1,000,000 $ 1,002,850
Analog Devices, Inc.
6.625% 3/01/2000 1,000,000 1,012,980
Bell Atlantic Financial
Services, Inc.
6.610% 2/07/2000 2,000,000 2,064,640
General Motors
Acceptance
Corporation
8.000% 10/01/1996 1,500,000 1,523,040
NYNEX Capital
Funding Company
7.450% 5/01/1997 1,000,000 1,024,650
Polaroid Corporation
7.250% 1/15/1997 1,500,000 1,519,935
W.R. Grace & Co.
7.250% 7/15/1997 2,000,000 2,047,660
------------
TOTAL CORPORATE DEBT 10,195,755
------------
(Cost $9,869,083)
U.S. GOVERNMENT
AGENCY OBLIGATIONS -- 18.8%
Federal Home Loan Mortgage Corporation
(FHLMC) -- 0.7%
Pass-Through Securities
FHLMC
4.500% 10/01/1996 5,160 5,092
FHLMC
4.750% 9/01/1996-
9/01/2006 819,978 797,184
------------
802,276
------------
<CAPTION>
Principal
Amount Market Value
--------- ------------
<S> <C> <C>
Federal National Mortgage Association
(FNMA) -- 4.1%
Collateralized Mortgage Obligations -- 2.3%
FNMA Series 1992
158 Class B
6.100% 8/25/2007 $ 454,296 $ 452,874
FNMA Series 1992-86
Class C
7.000% 6/25/2003 343,322 344,823
FNMA Series 1993-
175 Class PL
5.000% 10/25/2002 2,000,000 1,980,000
------------
2,777,697
------------
Pass-Through Securities -- 1.8%
FNMA
8.000% 5/01/2013 1,145,752 1,195,878
FNMA
9.000% 10/01/2009 1,064,367 1,131,901
------------
2,327,779
------------
5,105,476
------------
Government National Mortgage Association
(GNMA) -- 1.8%
Pass-Through Securities
GNMA
8.000% 5/15/2001 -
11/15/2007 2,137,987 2,265,303
------------
U.S. Government Guaranteed Notes -- 12.2%
1991-A Jacksonville,
FL
8.400% 8/01/1997 1,150,000 1,201,026
1991-A St. Louis, MO
8.400% 8/01/1997 3,350,000 3,498,640
1994-A Baxter
Springs, KS
6.310% 8/01/2001 500,000 511,220
1994-A Detroit, MI
6.310% 8/01/2001 450,000 460,098
1994-A Jacksonville,
FL
6.310% 8/01/2001 1,485,000 1,518,323
</TABLE>
(Continued)
The accompanying notes are in integral part of the financial statements.
11
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Market Value
--------- ------------
<S> <C> <C>
1994-A Los Angeles
County, CA
6.310% 8/01/2001 $ 225,000 $ 230,049
1994-A Tacoma, WA
6.310% 8/01/2001 195,000 199,376
1994-A Trenton, NJ
6.310% 8/01/2001 145,000 148,254
U.S. Dept. of Housing
and Urban
Development, Series
1995-A
7.710% 8/01/1996 4,000,000 4,049,120
U.S. Dept. of Housing
and Urban
Development, Series
1995-A
8.080% 8/01/1998 3,000,000 3,180,000
------------
14,996,106
------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 23,169,161
------------
(Cost $22,242,126)
TOTAL BONDS & NOTES 41,910,071
------------
(Cost $40,505,658)
<CAPTION>
Principal
Amount Market Value
--------- ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 65.5%
Commercial Paper
Aristar, Inc.
5.730% 2/06/1996 $ 4,735,000 $ 4,707,868
Bausch & Lomb, Inc.
5.900% 2/16/1996 2,155,000 2,138,754
Comdisco, Inc.
6.000% 2/20/1996 4,000,000 3,966,667
ConAgra, Inc.
5.820% 1/16/1996 133,000 132,677
ConAgra, Inc.
5.920% 2/02/1996 4,590,000 4,565,846
Consolidated Natural
Gas Company
5.670% 2/14/1996 6,010,000 5,968,351
Cox Enterprises, Inc.
5.930% 1/23/1996 4,400,000 4,384,055
Dana Credit
Corporation
5.950% 2/12/1996 4,395,000 4,364,491
The Dial Corp.
5.600% 3/28/1996 4,220,000 4,161,324
The Dial Corp.
5.650% 3/11/1996 1,375,000 1,359,619
Ford Motor Credit
Company
5.957% 1/04/1996 840,000 840,556
General Motors
Acceptance
Corporation
5.822% 1/18/1996 175,000 175,170
Kerr-McGee Credit
Corporation
5.900% 2/16/1996 3,455,000 3,428,953
Loral Corporation
6.020% 1/04/1996 3,775,000 3,773,106
<CAPTION>
Principal
Amount Market Value
--------- ------------
<S> <C> <C>
MAPCO Inc.
6.000% 1/10/1996 $ 4,000,000 $ 3,994,000
NYNEX Corp.
5.550% 3/19/1996 3,280,000 3,239,100
ORIX Credit Alliance,
Inc.
6.020% 2/01/1996 3,545,000 3,526,623
Pennsylvania Power &
Light Company
6.050% 1/16/1996 4,655,000 4,643,266
SUPERVALU, Inc.
6.020% 2/09/1996 4,265,000 4,237,185
Texas Utilities
Electric Co.
5.950% 1/02/1996 1,975,000 1,974,673
Textron Inc.
5.970% 2/29/1996 3,530,000 3,496,778
Tyson Foods, Inc.
5.990% 1/18/1996 3,500,000 3,490,100
Union Pacific
Corporation
5.950% 1/26/1996 4,340,000 4,322,068
VF Corporation
5.980% 1/30/1996 3,790,000 3,771,744
------------
TOTAL SHORT-TERM
INVESTMENTS 80,662,974
------------
(Cost $80,664,956)
TOTAL INVESTMENTS -- 99.5% 122,573,045
(Cost $121,170,614)+
Other Assets/
(Liabilities) - 0.5% 665,829
------------
NET ASSETS -- 100.0% $123,238,874
------------
</TABLE>
Notes to Portfolio of Investments
+Aggregate cost for Federal tax purposes (Note 7)
The accompanying notes are in integral part of the financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements
- --------------------------------------------------------------------------------
Statement of
Assets and
Liabilities
<TABLE>
<CAPTION>
December 31, 1995
-----------------
<S> <C>
Assets:
Investments, at value (cost $40,505,658) (Note 2)................ $ 41,910,071
Short-term investments, at value (cost $80,664,956) (Note 2)..... 80,662,974
---------------
Total Investments............................................. 122,573,045
Cash............................................................. 137
Receivables from:
Fund shares sold.............................................. 20,778
Interest...................................................... 801,791
Investment manager (Note 3)................................... 155
---------------
Total assets............................................... 123,395,906
---------------
Liabilities:
Payables for:
Fund shares redeemed.......................................... 94,719
Directors' fees and expenses (Note 3)......................... 2,286
Affiliates (Note 3):
Investment management fees................................. 46,511
Administration fees........................................ 8,189
Service and distribution fees.............................. 224
Accrued expenses and other liabilities........................... 5,103
---------------
Total liabilities.......................................... 157,032
---------------
Net assets....................................................... $ 123,238,874
===============
Net assets consist of:
Paid-in capital.................................................. $ 121,696,116
Undistributed net investment income.............................. 68,862
Accumulated net realized gain on investments..................... 71,465
Net unrealized appreciation on investments....................... 1,402,431
---------------
$ 123,238,874
===============
Net assets:
Class 1.......................................................... $ 110,989
===============
Class 2.......................................................... $ 111,702
===============
Class 3.......................................................... $ 112,027
===============
Class 4.......................................................... $ 122,904,156
===============
Shares outstanding:
Class 1.......................................................... 10,896
===============
Class 2.......................................................... 10,960
===============
Class 3.......................................................... 10,974
===============
Class 4.......................................................... 12,113,356
===============
Net asset value, offering price and
redemption price per share:
Class 1.......................................................... $ 10.19
===============
Class 2.......................................................... $ 10.19
===============
Class 3.......................................................... $ 10.21
===============
Class 4.......................................................... $ 10.15
===============
</TABLE>
The accompanying notes are in integral part of the financial statements.
13
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of Operations
<TABLE>
<CAPTION>
Year ended
December 31, 1995
-----------------
<S> <C>
Investment income:
Interest........................................................... $ 8,035,983
---------------
Expenses (Note 1):
Investment management fees (Note 3)................................ 528,655
Custody fees....................................................... 14,065
Audit and legal fees............................................... 3,578
Directors' fees (Note 3)........................................... 11,048
Fees waived by the investment manager (Note 3)..................... (39,446
---------------
517,900
Administration fees (Note 3):
Class 1......................................................... 595
Class 2......................................................... 543
Class 3......................................................... 332
Class 4......................................................... 91,617
Distribution and service fees (Note 3):
Class 1......................................................... 694
Class 2......................................................... 161
---------------
Net expenses................................................. 611,842
---------------
Net investment income........................................ 7,424,141
---------------
Realized and unrealized gain (loss):
Net realized gain on investment transactions....................... 2,489,218
Net change in unrealized appreciation (depreciation) on investments 2,855,699
---------------
Net realized and unrealized gain............................. 5,344,917
---------------
Net increase in net assets resulting from operations............... $ 12,769,058
===============
</TABLE>
The accompanying notes are in integral part of the financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of
Changes in Net
Assets
<TABLE>
<CAPTION>
Year ended Period ended
December 31, 1995 December 31, 1994*
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income........................................... $ 7,424,141 $ 1,748,894
Net realized gain (loss) on investment transactions............. 2,489,218 (137,968)
Net change in unrealized appreciation (depreciation)
on investments............................................... 2,855,699 (1,453,268)
----------------- -----------------
Net increase in net assets resulting from operations............ 12,769,058 157,658
----------------- -----------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1......................................................... (5,481) (939)
Class 2......................................................... (6,066) (1,015)
Class 3......................................................... (6,421) (1,030)
Class 4......................................................... (7,354,246) (1,745,218)
----------------- -----------------
Total distributions from net investment income............... (7,372,214) (1,748,202)
----------------- -----------------
From net realized gains:
Class 1......................................................... (2,049) --
Class 2......................................................... (2,050) --
Class 3......................................................... (2,046) --
Class 4......................................................... (2,256,969) --
----------------- -----------------
Total distributions from net realized gains.................. (2,263,114) --
----------------- -----------------
In excess of net realized gains:
Class 1......................................................... -- (1)
Class 2......................................................... -- (1)
Class 3......................................................... -- (1)
Class 4......................................................... -- (425)
----------------- -----------------
Total distributions in excess of net realized gains.......... -- (428)
----------------- -----------------
Net fund share transactions (Note 5):
Class 1......................................................... 7,530 93,940
Class 2......................................................... 8,116 94,016
Class 3......................................................... 8,467 100,030
Class 4......................................................... 12,933,618 (85,213)
----------------- -----------------
Increase in net assets from net fund share transactions...... 12,957,731 202,773
----------------- -----------------
Total increase (decrease) in net assets......................... 16,091,461 (1,388,199)
----------------- -----------------
Net assets:
Beginning of period (Note 1).................................... 107,147,413 108,535,612
----------------- -----------------
End of period (including undistributed net investment income
of $68,862 and $692, respectively)........................... $ 123,238,874 $ 107,147,413
================= =================
</TABLE>
* For the period from October 3, 1994 (commencement of operations) through
December 31, 1994
The accompanying notes are in integral part of the financial statements.
15
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 1 Class 2
------- -------
Year ended Period ended Year ended Period ended
12/31/95 12/31/94** 12/31/95 12/31/94**
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............................. $ 9.89 $ 10.00 $ 9.89 $ 10.00
---------- ------------ ---------- ------------
Income (loss) from investment operations:
Net investment income......................................... 0.55 0.09 0.61 0.10
Net realized and unrealized gain (loss) on investments........ 0.49 (0.11) 0.49 (0.11)
---------- ------------ ---------- ------------
Total income (loss) from investment operations................ 1.04 (0.02) 1.10 (0.01)
---------- ------------ ---------- ------------
Less distributions to shareholders:
From net investment income.................................... (0.54) (0.09) (0.60) (0.10)
From net realized gains....................................... (0.20) -- (0.20) --
In excess of net realized gains***............................ -- -- -- --
---------- ------------ ---------- ------------
Total distributions........................................ (0.74) (0.09) (0.80) (0.10)
---------- ------------ ---------- ------------
Net asset value, end of period................................... $ 10.19 $ 9.89 $ 10.19 $ 9.89
========== ============ ========== ============
Total Return..................................................... 10.54% (0.17)% 11.11% (0.09)%
Ratios / Supplemental Data:
Net assets, end of period (000's)............................. $ 111 $ 100 $ 112 $ 101
Net expenses to average daily net assets...................... 1.65%# 1.65%#* 1.10%# 1.10%#*
Net investment income to average daily net assets............. 5.20% 5.45%* 5.75% 5.99%*
Portfolio turnover rate....................................... 114% 15% 114% 15%
#Computed after giving effect to the reduction in
management fee by MassMutual. Without this reduction of
fees by the investment manager, the ratio of expenses
to average daily net assets would have been:................. 1.68% 1.70%* 1.13% 1.15%*
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Class 3 Class 4
------- -------
Year ended Period ended Year ended Period ended
12/31/95 12/31/94** 12/31/95 12/31/94**
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............................. $ 9.91 $ 10.00 $ 9.85 $ 10.00
---------- ------------ ---------- ------------
Income (loss) from investment operations:
Net investment income......................................... 0.64 0.10 0.66 0.16
Net realized and unrealized gain (loss) on investments........ 0.49 (0.09) 0.50 (0.15)
---------- ------------ ---------- ------------
Total income (loss) from investment operations............. 1.13 0.01 1.16 0.01
---------- ------------ ---------- ------------
Less distributions to shareholders:
From net investment income.................................... (0.63) (0.10) (0.66) (0.16)
From net realized gains....................................... (0.20) -- (0.20) --
In excess of net realized gains***............................ -- -- -- --
---------- ------------ ---------- ------------
Total distributions........................................ (0.83) (0.10) (0.86) (0.16)
---------- ------------ ---------- ------------
Net asset value, end of period................................... $ 10.21 $ 9.91 $ 10.15 $ 9.85
========== ============ ========== ============
Total Return..................................................... 11.46% 0.13% 11.77%+ 0.13%+
Ratios / Supplemental Data:
Net assets, end of period (000's)............................. $ 112 $ 100 $122,904 $ 106,846
Net expenses to average daily net assets...................... 0.75%# 0.75%#* 0.5190%# 0.5190%#*
Net investment income to average daily net assets............. 6.10% 6.36%* 6.32% 6.37%*
Portfolio turnover rate....................................... 114% 15% 114% 15%
#Computed after giving effect to the reduction in
management fee by MassMutual. Without this reduction of
fees by the investment manager, the ratio of expenses
to average daily net assets would have been:................. 0.78% 0.80%* 0.5524% 0.5654%*
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
***The distribution in excess of net realized gains amounted to $0.00004 per
share for the period ended December 31, 1994.
+Employee retirement benefit plans that invest plan assets in the Separate
Investment Accounts (SIAs) may be subject to certain charges as set forth in
their respective Plan Documents. Total return figures would be lower for the
periods presented if they reflected these charges.
The accompanying notes are in integral part of the financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the The objectives and policies of the Fund are to:
investment objective
and policies for the . achieve high total rate of return over the long term
Mass Mutual Core consistent with prudent investment risk and the
Bond Fund? preservation of capital
. invest primarily in investment-grade, fixed-income
securities
. maintain duration in a targeted range from four to
seven years to reduce volatility
. diversify investments by industry sector, maturity,
issuer class, and quality sectors to reduce risk of
capital erosion
How has the Fund The Fund's performance has been excellent. It compares
performed over the favorably to its market indices and has been outstanding
year? on an absolute and historical basis. The past year has
been an extremely strong period for the bond market in
general, with bonds from almost every sector the Fund
invests in benefiting from decreasing interest rates and
the price appreciation that accompanies rate declines.
What strategic In response to declines in interest rates, our duration
decisions have you increased somewhat over the year. A longer duration will
made within the help us to take advantage of any potential benefits from
portfolio as a further changes in the rate structure. Due in part to
result of lower lower rates, new supply in the market--particularly in
rates? corporate bonds--tended to be longer term. So increasing
our duration has allowed us to continue to track the
duration of the Lehman Government/Corporate Bond Index,
which is our benchmark. The portfolio's average duration
increased over the year from 4.90 years to 5.51 years.
What other strategic During the year, the Fund grew from $194 million to $254
moves have you made million in size. While this was due in part to asset
within the portfolio? appreciation and in part to new investments, it required
a great deal of trading activity to become fully
invested. Over the year, we sold some of our Treasuries
as the market improved and increased our percentage
allocation in corporate bonds from 21.0% to 30.6%.
Corporates also performed well over the year due to
strong fundamentals and demand factors. Additionally, we
increased our holdings of mortgage-backed securities.
Though mortgages are typically sensitive to prepayment
risk, our well-seasoned, well-structured holdings
remained strong throughout the year's declines in rates.
What areas of the As we believe the corporate market still offers strong
market are you potential, though within a slowing economy, we're
currently targeting? employing extensive credit research before investing in
corporate issues. We also continue to increase our
exposure to the mortgage-backed sector of the market,
especially in adjustable rate mortgages, where we're
finding particularly attractive pricing. Pricing remains
an important part of our investment strategy. We
continue to buy bonds across sectors wherever we believe
we've found appreciation potential through mispriced
issues. In terms of credit, while the Fund remains a
high quality portfolio, our sales of Treasuries--the
highest-rated securities we invest in--had the effect of
reducing the average rating of the portfolio slightly.
What is your outlook This has been a dramatic year for the bond market and
for the fund? the Fund. While current low inflation and slow to
moderate economic growth lead us to believe there is
still room for appreciation in the market, it would be
very difficult to imagine repeating 1995's performance.
Our outlook is for the extension of a positive market
environment, where income will again be an important
component of total return. Within this outlook, we
expect the Fund to continue to provide the potential for
high total return consistent with reasonable risk by
maintaining a diversified portfolio of high-quality
bonds.
17
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Core Bond
Fund Classes 1-4 and the Lehman Brothers
Government/Corporate Bond Index
<TABLE>
<CAPTION>
- --------------------------------------------------------
MassMutual Short-Term Bond Fund
Total Return Since Inception
10/3/94 - 12/31/95 One Year
<S> <C> <C>
Class 1 17.81% 17.81%
Class 2 18.60% 18.51%
Class 3 18.98% 18.87%
Class 4 19.40% 19.15%
- --------------------------------------------------------
Lehman Brothers 19.68% 19.24%
Government/Corporate Bond Index
- --------------------------------------------------------
</TABLE>
Past performance is not predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund, while the Lehman Brothers Government/Corporate Bond Index is
unmanaged and does not incur expenses.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
Lehman Bros.
Date Class 1 Class 2 Class 3 Class 4 Gov't/Corp
- ---- ------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
10/3/94 10,000 10,000 10,000 10,000 10,000
12/94 10,000 10,008 10,009 10,020 10,037
2/95 10,404 10,421 10,433 10,447 10,467
4/95 10,585 10,614 10,635 10,651 10,683
6/95 11,121 11,170 11,192 11,212 11,221
8/95 11,191 11,240 11,272 11,303 11,320
10/95 11,455 11,514 11,556 11,589 11,603
12/95 11,781 11,860 11,898 11,940 11,968
</TABLE>
<TABLE>
<CAPTION>
Quality Structure (12/31/95)
MassMutual Core Bond Fund
Aaa/AAA Baa/BBB A/A Aa/AA Below Baa/BBB
- ------- ------- --- ----- -------------
<S> <C> <C> <C> <C>
69.7% 17.7% 10.4% 1.4% 0.8%
</TABLE>
[GRAPH APPEARS HERE]
Duration Diversification (12/31/95)
Mass Mutual Core Bond Fund
<TABLE>
<CAPTION>
Average Duration = 5.5 years
Less More
than than
1 year 1-3 years 3-5 years 5-7 years 7-10 years 10 years
- -------- --------- --------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
14.8% 14.4% 14.6% 23.4% 11.2% 21.6%
</TABLE>
18
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1995
<TABLE>
<CAPTION>
Principal
Amount Market Value
--------- ------------
<S> <C> <C>
BONDS & NOTES - 83.2%
ASSET BACKED SECURITIES - 7.4%
Daimler-Benz Vehicle
Trust 1994-A
5.950% 12/15/2000 $ 660,968 $ 662,059
Daimler-Benz Auto
Grantor Trust 1995-A
5.850% 5/15/2002 4,325,429 4,341,650
Ford Credit 1994-B
Grantor Trust
7.300% 10/15/1999 959,110 977,390
Ford Credit Auto
Loan Master Trust,
Series 1992-1
6.875% 1/15/1999 2,000,000 2,027,500
GMAC 1992-E
Grantor Trust
4.750% 8/15/1997 321,666 320,257
Honda Auto
Receivables 1992-A
Grantor Trust
4.900% 6/15/1998 195,325 194,653
Nissan Auto
Receivables 1994-A
Grantor Trust
6.450% 9/15/1999 2,578,447 2,600,184
Railcar Trust No.
1992-1
7.750% 6/01/2004 1,500,958 1,618,212
World Omni 1994-A
Automobile Lease
Securitization Trust
6.450% 9/25/2000 2,984,175 3,003,154
World Omni 1995-A
Automobile Lease
Securitization Trust
6.050% 11/25/2001 3,000,000 3,026,250
------------
TOTAL ASSET BACKED
SECURITIES 18,771,309
------------
(Cost $18,530,394)
CORPORATE DEBT -- 30.6%
American Airlines, Inc. @
9.780% 11/26/2011 2,000,000 2,364,400
AMR Corporation @
9.000% 8/01/2012 2,000,000 2,255,540
Analog Devices, Inc. @
6.625% 3/01/2000 1,500,000 1,519,470
Ashland Oil, Inc.
8.950% 1/17/1996 1,000,000 1,001,110
<CAPTION>
Principal
Amount Market Value
--------- ------------
<S> <C> <C>
Associates Corporation
of North America @
7.875% 9/30/2001 $ 1,500,000 $1,636,695
Bell Atlantic Financial
Services, Inc.
6.610% 2/04/2000 1,750,000 1,806,525
Capital Cities/ABC,
Inc.
8.875% 12/15/2000 875,000 988,488
Chrysler Corporation
10.400% 8/01/1999 1,500,000 1,597,830
Columbia Gas System
Inc.
6.610% 11/28/2002 3,000,000 3,054,330
Commercial Credit
Company @
7.750% 3/01/2005 3,000,000 3,333,180
Corning Glass Works,
Inc. @
8.875% 3/15/2016 1,000,000 1,207,380
English China Clays
Delaware Inc. @
7.375% 10/01/2002 1,000,000 1,059,300
Equifax Inc.
6.500% 6/15/2003 1,000,000 1,019,160
ERAC USA Finance
Company 144A
7.875% 3/15/1998 2,000,000 2,102,500
Foster Wheeler
Corporation
6.750% 11/15/2005 2,000,000 2,061,620
General Electric
Capital Corporation
8.750% 5/21/2007 1,500,000 1,809,585
General Telephone
Company of Florida
7.500% 8/01/2002 1,000,000 1,014,140
The Goldman Sachs
Group, L.P. 144A
6.200% 2/15/2001 2,500,000 2,505,450
Harrahs Operating Inc.
8.750% 3/15/2000 1,100,000 1,113,750
Hercules Incorporated @
6.625% 6/01/2003 2,000,000 2,055,180
IMCERA Group Inc. @
6.000% 10/15/2003 1,000,000 962,390
ITT Destinations, Inc.
7.375% 11/15/2015 3,500,000 3,538,360
Leucadia National
Corporation
7.750% 8/15/2013 2,500,000 2,587,975
<CAPTION>
Principal
Amount Market Value
--------- ------------
<S> <C> <C>
McDonnell Douglas
Corporation @
9.250% 4/01/2002 $ 1,500,000 $1,746,600
Newmont Mining
Corporation @
8.625% 4/01/2002 2,000,000 2,209,980
News America
Holdings, Incorporated
9.250% 2/01/2013 2,000,000 2,355,680
North Finance
(Bermuda) Limited
144A
7.000% 9/15/2005 2,000,000 2,040,000
Penske Truck Leasing
Co., L.P.
7.750% 5/15/1999 1,500,000 1,566,540
Ralston Purina Co.
7.750% 10/01/2015 2,000,000 2,148,160
Rolls-Royce Capital
Inc.
7.125% 7/29/2003 2,000,000 2,086,520
Service Corporation
International
7.000% 6/01/2015 4,000,000 4,456,920
Tele-Communications,
Inc.
5.280% 8/20/1996 1,575,000 1,568,716
Tenaga Nasional
Berhad 144A
7.875% 6/15/2004 1,750,000 1,922,988
Thomas & Betts
Corporation @
8.250% 1/15/2004 2,500,000 2,741,725
Time Warner, Inc.
7.750% 6/15/2005 3,000,000 3,123,090
United Air Lines, Inc.
10.110% 2/19/2006 953,721 1,081,996
Valassis
Communications, Inc.
9.550% 12/01/2003 2,000,000 2,039,240
Westinghouse Electric
Corporation
8.375% 6/15/2002 2,000,000 2,062,800
W.R. Grace & Co.
7.250% 7/15/1997 2,000,000 2,047,660
------------
TOTAL CORPORATE DEBT 77,792,973
------------
(Cost $72,411,759)
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Market Value
--------- ------------
<S> <C> <C>
U.S. GOVERNMENT
AGENCY OBLIGATIONS -- 17.5%
Federal Home Loan Mortgage Corporation (FHLMC) -- 3.3%
Collateralized Mortgage Obligations -- 3.1%
FHLMC Series 1080
Class D
7.000% 7/15/2020 $ 3,000,000 $ 3,048,750
FHLMC Series 1322
Class G
7.500% 2/15/2007 2,000,000 2,088,740
FHLMC Series 1460
Class H
7.000% 5/15/2007 2,000,000 2,072,500
FHLMC Series 1490
Class PJ
6.000% 5/15/2007 600,000 599,250
------------
7,809,240
------------
Pass-Through Securities -- 0.2%
FHLMC
9.000% 3/01/2017 464,918 493,920
------------
8,303,160
------------
Federal National Mortgage
Association (FNMA) -- 2.9%
Collateralized Mortgage Obligations -- 2.6%
FNMA Series 1992-86
Class C
7.000% 6/25/2003 686,644 689,645
FNMA Series 1993-175
Class PL
5.000% 10/25/2002 2,000,000 1,980,000
FNMA Series 1993-191
Class PD
5.400% 3/25/2004 1,500,000 1,486,395
FNMA Series 1993-221
Class D
6.000% 12/25/2008 2,500,000 2,474,200
------------
6,630,240
------------
Pass-Through Securities -- 0.3%
FNMA
8.000% 5/01/2013 763,835 797,252
------------
7,427,492
------------
Government National Mortgage Association (GNMA) -- 9.7%
Collateralized Mortgage Obligations -- 0.8%
JHM Acceptance
Corporation Series E
Class 5
8.960% 4/01/2019 1,790,105 1,913,175
------------
<CAPTION>
Principal
Amount Market Value
--------- ------------
<S> <C> <C>
Pass-Through Securities -- 8.9%
GNMA
6.000% 7/20/2025 -
12/20/2025 $ 11,791,752 $11,923,129
GNMA
8.000% 10/15/2006 -
3/15/2008 9,335,069 9,890,972
GNMA
9.000% 12/15/2004 -
10/15/2009 736,178 796,912
------------
22,611,013
------------
24,524,188
------------
U.S. Government Guaranteed Notes -- 1.6%
1994-A Baxter
Springs, KS
5.930% 8/01/1999 700,000 706,125
1994-A Erie, PA
5.930% 8/01/1999 1,590,000 1,603,913
1994-A Los Angeles
County, CA
5.930% 8/01/1999 190,000 191,663
1994-A Montgomery
County, PA
5.930% 8/01/1999 150,000 151,313
1994-A Pohatcong
Township, NJ
5.930% 8/01/1999 255,000 257,231
1994-A Rochester, NY
5.930% 8/01/1999 135,000 136,181
1994-A Sacramento,
CA
5.930% 8/01/1999 60,000 60,525
1994-A Santa Ana,
CA
5.930% 8/01/1999 920,000 928,050
------------
4,035,001
------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 44,289,841
------------
(Cost $42,268,976)
U.S. TREASURY OBLIGATIONS -- 27.7%
U.S. Treasury Bonds -- 18.1%
U.S. Treasury Bond
7.250% 5/15/2016 2,000,000 2,283,740
U.S. Treasury Bond
8.875% 8/15/2017 32,575,000 43,629,978
------------
45,913,718
------------
U.S. Treasury Note -- 9.0%
U.S. Treasury Note
7.250% 5/15/2004 20,700,000 22,977,000
------------
<CAPTION>
Principal
Amount Market Value
--------- ------------
<S> <C> <C>
U.S. Treasury Strip -- 0.6%
U.S. Treasury Strip -- Principal Only
0.000% 2/15/2015 $ 4,750,000 $ 1,469,888
------------
TOTAL U.S. TREASURY
OBLIGATIONS 70,360,606
------------
(Cost $67,233,226)
TOTAL BONDS & NOTES 211,214,729
------------
(Cost $200,444,355)
SHORT-TERM INVESTMENTS -- 15.5%
Commercial Paper
Comdisco, Inc.
5.850% 1/16/1996 2,880,000 2,872,980
CSX Corporation
5.750% 1/03/1996 9,135,000 9,132,082
Illinois Power
Company
5.900% 2/02/1996 8,700,000 8,654,373
MAPCO, Inc.
6.020% 1/19/1996 3,220,000 3,210,308
ORIX Credit Alliance,
Inc.
6.000% 1/04/1996 1,150,000 1,149,425
Texas Utilities
Electric Co.
6.300% 1/02/1996 3,320,000 3,319,419
Textron Financial
Corporation
6.100% 1/22/1996 2,915,000 2,904,628
Union Oil Company of
California
6.000% 2/01/1996 8,265,000 8,222,297
------------
TOTAL SHORT-TERM
INVESTMENTS 39,465,512
------------
(At Amortized Cost)
TOTAL INVESTMENTS -- 98.7% 250,680,241
(Cost $239,909,867)+
Other Assets/
(Liabilities) - 1.3% 3,270,585
------------
NET ASSETS -- 100.0% $253,950,826
------------
</TABLE>
Notes to Portfolio of Investments
+Aggregate cost for Federal tax purposes (Note 7) 144A: Securities exempt from
registration under rule 144A of the Securities Act of 1933. The Securities may
be resold in transactions exempt from registration, normally to qualified
institutional buyers.
@All or a portion of this security is segregated to cover forward purchase
commitments (Note 2).
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Financial Statements
- --------------------------------------------------------------------------------
Statement of
Assets and
Liabilities
<TABLE>
<CAPTION>
December 31, 1995
-----------------
<S> <C>
Assets:
Investments, at value (cost $200,444,355) (Note 2)........... $211,214,729
Short-term investments, at amortized cost (Note 2)........... 39,465,512
-----------------
Total Investments......................................... 250,680,241
Cash......................................................... 10,602
Receivables from:
Settlement of investments purchased on a
forward commitment basis (Note 2)...................... 394,831
Fund shares sold.......................................... 198,753
Interest.................................................. 3,013,947
Investment manager (Note 3)............................... 7,034
-----------------
Total assets........................................... 254,305,408
-----------------
Liabilities:
Payables for:
Fund shares redeemed...................................... 230,776
Directors' fees and expenses (Note 3)..................... 2,286
Affiliates (Note 3):
Investment management fees............................. 93,825
Administration fees.................................... 17,692
Service and distribution fees.......................... 320
Accrued expenses and other liabilities....................... 9,683
-----------------
Total liabilities...................................... 354,582
-----------------
Net assets................................................... $253,950,826
=================
Net assets consist of:
Paid-in capital.............................................. $240,725,806
Undistributed net investment income.......................... 114,829
Accumulated net realized gain on investments................. 1,944,986
Net unrealized appreciation on investments
and forward commitments................................... 11,165,205
-----------------
$253,950,826
=================
Net assets:
Class 1...................................................... $ 170,927
=================
Class 2...................................................... $ 119,720
=================
Class 3...................................................... $ 120,100
=================
Class 4...................................................... $253,540,079
=================
Shares outstanding:
Class 1...................................................... 15,844
=================
Class 2...................................................... 11,069
=================
Class 3...................................................... 11,095
=================
Class 4...................................................... 23,578,010
=================
Net asset value, offering price and
redemption price per share:
Class 1...................................................... $ 10.79
=================
Class 2...................................................... $ 10.82
=================
Class 3...................................................... $ 10.82
=================
Class 4...................................................... $ 10.75
=================
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of
Operations
<TABLE>
<CAPTION>
Year ended
December 31, 1995
-----------------
<S> <C>
Investment income:
Interest....................................................... $15,156,170
-----------------
Expenses (Note 1):
Investment management fees (Note 3)............................ 964,830
Custody fees................................................... 28,360
Audit and legal fees........................................... 6,861
Directors' fees (Note 3)....................................... 10,423
Fees waived by the investment manager (Note 3)................. (91,069)
-----------------
919,405
Administration fees (Note 3):
Class 1..................................................... 762
Class 2..................................................... 575
Class 3..................................................... 357
Class 4..................................................... 180,231
Distribution and service fees (Note 3):
Class 1..................................................... 870
Class 2..................................................... 166
-----------------
Net expenses............................................. 1,102,366
-----------------
Net investment income.................................... 14,053,804
-----------------
Realized and unrealized gain (loss):
Net realized gain on investments and forward commitments....... 9,143,745
Net change in unrealized appreciation (depreciation) on
investments and forward commitments......................... 14,064,619
-----------------
Net realized and unrealized gain......................... 23,208,364
-----------------
Net increase in net assets resulting from operations........... $37,262,168
=================
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statements of
Changes in Net
Assets
<TABLE>
<CAPTION>
Year ended Period ended
December 31, 1995 December 31, 1994*
----------------- ------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income........................................... $ 14,053,804 $ 3,530,055
Net realized gain (loss) on investment transactions
and forward commitments...................................... 9,143,745 (173,558)
Net change in unrealized appreciation (depreciation) on
investments and forward commitments.......................... 14,064,619 (2,899,414)
----------------- ------------------
Net increase in net assets resulting from operations......... 37,262,168 457,083
----------------- ------------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1......................................................... (7,975) (1,011)
Class 2......................................................... (5,956) (1,087)
Class 3......................................................... (6,329) (1,099)
Class 4......................................................... (13,924,661) (3,505,824)
----------------- ------------------
Total distributions from net investment income............... (13,944,921) (3,509,021)
----------------- ------------------
From net realized gains:
Class 1......................................................... (4,784) --
Class 2......................................................... (3,332) --
Class 3......................................................... (3,329) --
Class 4......................................................... (7,028,844) --
----------------- ------------------
Total distributions from net realized gains.................. (7,040,289) --
----------------- ------------------
Net fund share transactions (Note 5):
Class 1......................................................... 61,915 94,011
Class 2......................................................... 9,288 94,087
Class 3......................................................... 9,658 100,099
Class 4......................................................... 43,139,641 (9,954,871)
----------------- ------------------
Increase (decrease) in net assets from net
fund share transactions...................................... 43,220,502 (9,666,674)
----------------- ------------------
Total increase (decrease) in net assets......................... 59,497,460 (12,718,612)
Net assets:
Beginning of period (Note 1).................................... 194,453,366 207,171,978
----------------- ------------------
End of period (including undistributed net investment income
of $114,829 and $13,385, respectively)....................... $253,950,826 $194,453,366
================= ==================
</TABLE>
* For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 1 Class 2
------- -------
Year ended Period ended Year ended Period ended
12/31/95 12/31/94** 12/31/95 12/31/94**
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............................ $ 9.90 $ 10.00 $ 9.90 $ 10.00
---------- ------------ ---------- ------------
Income (loss) from investment operations:
Net investment income........................................ 0.50 0.10 0.64 0.11
Net realized and unrealized gain (loss) on investments....... 1.26 (0.10) 1.19 (0.10)
---------- ------------ ---------- ------------
Total income (loss) from investment operations............ 1.76 -- 1.83 0.01
---------- ------------ ---------- ------------
Less distributions to shareholders:
From net investment income................................... (0.54) (0.10) (0.58) (0.11)
From net realized gains...................................... (0.33) -- (0.33) --
---------- ------------ ---------- ------------
Total distributions....................................... (0.87) (0.10) (0.91) (0.11)
---------- ------------ ---------- ------------
Net asset value, end of period.................................. $ 10.79 $ 9.90 $ 10.82 $ 9.90
========== ============ ========== ============
Total Return.................................................... 17.81% 0.00% 18.51% 0.08%
Ratios / Supplemental Data:
Net assets, end of period (000's)............................ $ 171 $ 101 $ 120 $ 101
Net expenses to average daily net assets..................... 1.65%# 1.65%#* 1.10%# 1.10%#*
Net investment income to average daily net assets............ 5.39% 5.91%* 5.97% 6.46%*
Portfolio turnover rate...................................... 104% 7% 104% 7%
#Computed after giving effect to the reduction in
management fee by MassMutual. Without this reduction of
fees by the investment manager, the ratio of expenses
to average daily net assets would have been:................ 1.69% 1.71%* 1.14% 1.16%*
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Class 3 Class 4
------- -------
Year ended Period ended Year ended Period ended
12/31/95 12/31/94** 12/31/95 12/31/94**
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............................ $ 9.90 $ 10.00 $ 9.84 $ 10.00
---------- ------------ ---------- ------------
Income (loss) from investment operations:
Net investment income........................................ 0.68 0.11 0.72*** 0.18
Net realized and unrealized gain (loss) on investments....... 1.19 (0.10) 1.17 (0.16)
---------- ------------ ---------- ------------
Total income (loss) from investment operations............ 1.87 0.01 1.89 0.02
---------- ------------ ---------- ------------
Less distributions to shareholders:
From net investment income................................... (0.62) (0.11) (0.65) (0.18)
From net realized gains...................................... (0.33) -- (0.33) --
---------- ------------ ---------- ------------
Total distributions....................................... (0.95) (0.11) (0.98) (0.18)
---------- ------------ ---------- ------------
Net asset value, end of period.................................. $ 10.82 $ 9.90 $ 10.75 $ 9.84
========== ============ ========== ============
Total Return.................................................... 18.87% 0.09% 19.15%+ 0.20%+
Ratios / Supplemental Data:
Net assets, end of period (000's)............................ $ 120 $ 101 $ 253,540 $ 194,150
Net expenses to average daily net assets..................... 0.75%# 0.75%#* 0.5130%# 0.5130%#*
Net investment income to average daily net assets............ 6.32% 6.83%* 6.56% 6.86%*
Portfolio turnover rate...................................... 104% 7% 104% 7%
#Computed after giving effect to the reduction in
management fee by MassMutual. Without this reduction of
fees by the investment manager, the ratio of expenses
to average daily net assets would have been:................ 0.79% 0.81%* 0.5553% 0.5672%*
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
***Per share amount has been calculated using the average shares method, which
more appropriately presents the per share data for the period since the use
of the undistributed income method does not accord with the results of
operations.
+Employee retirement benefit plans that invest plan assets in the Separate
Investment Accounts (SIAs) may be subject to certain charges as set forth in
their respective Plan Documents. Total return figures would be lower for the
periods presented if they reflected these charges.
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the The objectives and policies of the Fund are to:
investment objective
and policies for the . achieve high total rate of return over the long term
MassMutual Balanced consistent with the preservation of capital
Fund?
. invest in equity securities, fixed-income securities
and money market instruments
. manage the allocation of investments in three sectors
within the following ranges:
10%-45% Prime Sector
10%-25% Core Bond Sector
45%-65% Value Equity Sector
How has the Fund On an absolute basis, the Fund has performed quite well,
performed over the backed by the dramatic appreciation declining interest
year? rates sparked in both the stock and bond markets.
Because of the Fund's focus on preservation of capital,
however, it did not perform as well as some of its more
aggressive peers over this unusual time period. Though
it will tend to lag in strong bull markets, we believe
our strategy is prudent for long-term investors and that
it will outperform its peers over time.
Did your allocation As stock prices climbed higher over the year, and
between stocks, bonds dividend yields fell, we trended our equity position
and cash change over down somewhat. Our stock holdings will normally fall
the year? within a range of 45% to 65% of the portfolio. In the
beginning of the year, we were 50% invested in stocks.
By the end of 1995, they represented approximately 49%.
Our core bond holdings at the end of 1995 represented
12% of the portfolio, down from 16%. In bonds, a
flattening yield curve also indicated a shortening in
the average life of our portfolio. When the yield curve
is flatter, investors are typically not well-compensated
for extending into longer-maturity bonds. While this
excluded us from some of the appreciation in the bond
market, our bond portfolio performed well. Our
allocation decisions stem from a policy consistent with
preservation of capital. The remainder of the portfolio,
approximately 39% up from 34% a year ago, is invested in
short-term securities.
What strategic moves Though our performance was held back somewhat by the
did you make within fact that the value stocks we invest in were
the portfolio? outperformed by growth issues, we benefited from the
strong relative performance of large cap stocks over the
year. During the year, we increased our exposure to
consumer non-durables, one of the best performing
sectors of the market. Our purchases here were in
businesses typically insulated from slowing economic
growth, and benefited the portfolio considerably. We
also increased our holdings in the very strong financial
services area. Our higher exposure to financial
services, both in banking and insurance, was another
plus for the Fund. In terms of bond holdings, we sold
some of our Treasuries as the market improved and
increased our percentage allocation in corporate bonds.
Corporates performed well over the year due to strong
fundamentals and demand factors. Additionally, we
increased our holdings of mortgage-backed securities.
Though mortgages are typically sensitive to prepayment
risk, our well-seasoned, well-structured holdings
remained strong throughout the year's declines in rates.
What is your outlook An environment of low inflation, favorable interest
for the Fund? rates and slow to moderate economic growth suggests the
continuation of decent markets for both stocks and
bonds. While results should remain positive, we expect
to see a return to more normal periods for both markets.
In stocks, we are positioning the Fund for greater
volatility and selectivity in the coming year; in bonds,
we expect income to again become the most consistent
component of total return. We believe the Balanced
Fund's conservative strategy should position it to
perform well during what we believe will be a more
typical market environment.
25
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Balanced
Fund Classes 1-4 and the Lipper Balanced Fund
Index
<TABLE>
<CAPTION>
- --------------------------------------------------------
MassMutual Short-Term Bond Fund
Total Return Since Inception
10/3/94 - 12/31/95 One Year
<S> <C> <C>
Class 1 19.92% 19.92%
Class 2 20.70% 20.50%
Class 3 21.32% 20.96%
Class 4 21.64% 21.31%
- --------------------------------------------------------
Lipper Balanced 23.09% 24.59%
Fund Index
- --------------------------------------------------------
</TABLE>
Past performance is not predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund, while the Lipper Balanced Fund Index is unmanaged and does not
incur expenses.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
Lipper
Date Class 1 Class 2 Class 3 Class 4 Index
- ---- ------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
10/3/94 10,000 10,000 10,000 10,000 10,000
12/94 10,000 10,017 10,028 10,029 9,880
2/95 10,411 10,429 10,452 10,451 10,288
4/95 10,703 10,731 10,764 10,775 10,659
6/95 11,086 11,124 11,158 11,179 11,206
8/95 11,327 11,376 11,419 11,432 11,490
10/95 11,509 11,578 11,621 11,645 11,779
12/95 11,992 12,070 12,132 12,164 12,309
</TABLE>
<TABLE>
<CAPTION>
MassMutual Balanced Fund
Asset Allocation (12/31/95)
Common Short-Term
Stocks Issues Bonds
- ------ ---------- -----
<S> <C> <C>
49% 39% 12%
</TABLE>
MassMutual Balanced Fund
Largest Stock Holdings (12/31/95)
- ---------------------------------
Bristol-Myers Squibb Company
Pfizer Incorporated
General Electric Company
Hewlett-Packard Company
AT&T Corporation
Amoco Corporation
SAFECO Corporation
AMP, Inc.
Minnesota Mining & Manufacturing Company
Mobil Company
26
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1995
<TABLE>
<CAPTION>
Number of
Shares Market Value
--------- ------------
<S> <C> <C>
EQUITIES - 49.3%
Aerospace & Defense -- 1.2%
The Boeing Company 42,000 $3,291,750
TRW, Inc. 30,100 2,332,750
------------
5,624,500
------------
Agribusiness -- 0.8%
Archer-Daniels-Midland
Company 70,053 1,260,954
Pioneer Hi-Bred
International, Inc. 45,500 2,530,938
------------
3,791,892
------------
Apparel, Textiles & Shoes -- 0.5%
VF Corporation 44,500 2,347,375
------------
Automotive & Parts -- 2.3%
Ford Motor Company 89,000 2,581,000
Genuine Parts
Company 88,000 3,608,000
Goodyear Tire &
Rubber Company 91,700 4,160,888
------------
10,349,888
------------
Banking, Savings & Loans -- 3.4%
The Bank of New
York Company,
Incorporated 85,000 4,143,750
Comerica, Incorporated 88,000 3,531,000
CoreStates Financial
Corporation 81,500 3,086,813
Norwest Corporation 57,000 1,881,000
Wachovia Corporation 60,100 2,749,575
------------
15,392,138
------------
Beverages -- 1.1%
Brown-Forman
Corporation (Class B) 66,000 2,409,000
Pepsico, Incorporated 43,500 2,430,563
------------
4,839,563
------------
Chemicals -- 1.9%
Eastman Chemical
Company 50,025 3,132,816
E. I. du Pont de
Nemours and Company 31,500 2,201,063
The Lubrizol
Corporation 48,000 1,338,000
Nalco Chemical
Company 64,000 1,928,000
------------
8,599,879
------------
Communications -- 1.2%
AT & T Corporation 82,000 5,309,500
------------
<CAPTION>
Number of
Shares Market Value
--------- ------------
<S> <C> <C>
Computers & Office Equipment -- 3.4%
Hewlett-Packard
Company 76,000 $6,365,000
International Business
Machines Corporation 23,000 2,110,250
Pitney Bowes, Inc. 80,500 3,783,500
Xerox Corporation 24,000 3,288,000
------------
15,546,750
------------
Containers -- 0.5%
Temple-Inland, Inc. 52,500 2,316,563
------------
Cosmetics & Personal Care -- 0.7%
Kimberly-Clark
Corporation 37,900 3,136,225
------------
Electric Utilities -- 1.0%
Niagara Mohawk
Power Corporation 90,000 866,250
NIPSCO Industries,
Inc. 40,000 1,530,000
SCANA Corporation 70,000 2,003,750
------------
4,400,000
------------
Electrical Equipment & Electronics -- 4.1%
AMP, Inc. 115,000 4,413,125
General Electric
Company 92,000 6,624,000
General Signal
Corporation 53,000 1,715,875
Honeywell Inc. 54,000 2,625,750
Hubbell, Incorporated
(Class B) 48,011 3,156,750
------------
18,535,500
------------
Energy -- 4.4%
Amoco Corporation 72,500 5,210,938
Atlantic Richfield
Company 33,000 3,654,750
Chevron Corporation 70,500 3,701,250
Kerr-McGee
Corporation 48,500 3,079,750
Mobil Corporation 38,500 4,312,000
Union Pacific
Resources Group, Inc. 12,200 309,575
------------
20,268,263
------------
Financial Services -- 0.7%
American Express
Company 76,500 3,165,188
------------
Foods -- 0.9%
CPC International, Inc. 61,000 4,186,125
------------
<CAPTION>
Number of
Shares Market Value
--------- ------------
<S> <C> <C>
Forest Products & Paper -- 1.3%
Westvaco Corporation 66,600 $1,848,150
Weyerhaeuser Company 90,400 3,909,793
------------
5,757,943
------------
Hardware & Tools -- 0.7%
The Stanley Works 62,400 3,213,600
------------
Healthcare -- 5.2%
Becton, Dickinson and
Company 53,600 4,020,000
Bristol-Myers Squibb
Company 99,000 8,501,625
Pfizer, Incorporated 119,000 7,497,000
Schering-Plough Corp. 69,800 3,821,550
------------
23,840,175
------------
Household Products -- 0.5%
The Clorox Company 32,500 2,327,813
------------
Industrial Distribution -- 0.7%
W.W. Grainger, Inc. 46,200 3,060,750
------------
Industrial Transportation -- 0.8%
Norfolk Southern
Corporation 46,000 3,651,250
Roadway Services, Inc. 500 24,438
------------
3,675,688
------------
Insurance -- 2.6%
Allstate Corporation 36,544 1,502,872
Jefferson-Pilot
Corporation 39,750 1,848,375
MBIA, Inc. 29,500 2,212,500
SAFECO Corporation 146,000 5,037,000
Unitrin, Inc. 27,500 1,320,000
------------
11,920,747
------------
Machinery & Components -- 0.9%
Dover Corporation 62,000 2,286,250
Parker-Hannifin
Corporation 55,000 1,883,750
------------
4,170,000
------------
Metals & Mining -- 0.1%
Reynolds Metals
Company 12,000 679,500
------------
Miscellaneous -- 1.4%
Harsco Corporation 34,500 2,005,313
Minnesota Mining &
Manufacturing
Company 66,500 4,405,625
------------
6,410,938
------------
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
--------- ------------
<S> <C> <C>
Photography -- 0.6%
Eastman Kodak
Company 43,000 $ 2,881,000
------------
Publishing & Printing -- 2.3%
The Dun &
Bradstreet Corporation 61,000 3,949,750
McGraw-Hill
Companies, Inc. 44,500 3,877,063
R.R. Donnelley & Sons
Company 72,500 2,854,688
------------
10,681,501
------------
Retail -- 1.2%
J.C. Penney Company,
Inc. 18,000 857,250
The May Department
Stores Company 70,500 2,978,625
Sears Roebuck and
Company 47,000 1,833,000
------------
5,668,875
------------
Retail - Grocery -- 0.7%
Albertson's, Inc. 92,700 3,047,513
------------
Telephone Utilities -- 1.4%
Ameritech Corporation 37,000 2,183,000
Frontier Corporation 80,500 2,415,000
Southern New England
Telecommunications
Corporation 47,000 1,868,250
------------
6,466,250
------------
Tobacco -- 0.8%
American Brands, Inc. 83,500 3,726,188
------------
TOTAL EQUITIES 225,337,830
------------
(Cost $177,038,015)
<CAPTION>
Principal
Amount Market Value
--------- ------------
<S> <C> <C>
BONDS & NOTES -- 12.3%
ASSET BACKED SECURITIES -- 1.2%
Daimler-Benz Vehicle
Trust 1994-A
5.950% 12/15/2000 $ 440,645 441,372
Daimler-Benz Auto
Grantor Trust 1995-A
5.850% 5/15/2002 1,922,413 1,929,622
Ford Credit 1994-B
Grantor Trust
7.300% 10/15/1999 639,407 651,594
GMAC 1992-E
Grantor Trust
4.750% 8/15/1997 64,333 64,051
Honda Auto
Receivables 1992-A
Grantor Trust
4.900% 6/15/1998 97,662 97,326
<CAPTION>
Principal
Amount Market Value
--------- ------------
<S> <C> <C>
Nissan Auto
Receivables 1994-A
Grantor Trust
6.450% 9/15/1999 $ 902,457 $ 910,064
Railcar Trust No.
1992-1
7.750% 6/01/2004 428,845 462,346
World Omni 1994-A
Automobile Lease
Securitization Trust
6.450% 9/25/2000 852,621 858,044
------------
TOTAL ASSET BACKED
SECURITIES 5,414,419
------------
(Cost $5,347,658)
CORPORATE DEBT -- 3.9%
American Airlines, Inc. @
9.780% 11/26/2011 1,000,000 1,182,200
American Brands, Inc.
8.570% 2/15/1996 500,000 501,425
AMR Corporation @
9.000% 8/01/2012 500,000 563,885
Analog Devices, Inc.
6.625% 3/01/2000 500,000 506,490
Bell Atlantic Financial
Services, Inc. @
6.610% 2/04/2000 1,000,000 1,032,300
Cardinal Distribution,
Inc.
8.000% 3/01/1997 500,000 512,890
Delta Air Lines, Inc.
8.540% 1/02/2007 454,388 492,443
English China Clays
Delaware Inc. @
7.375% 10/01/2002 500,000 529,650
ERAC USA Finance
Company 144A
7.875% 3/15/1998 1,000,000 1,051,250
The Goldman Sachs
Group, L.P. 144A
6.200% 2/15/2001 1,000,000 1,002,180
GTE Corporation
9.100% 6/01/2003 500,000 581,355
Leucadia National
Corporation
7.750% 8/15/2013 1,000,000 1,035,190
McDonnell Douglas
Corporation @
9.250% 4/01/2002 500,000 582,200
Newmont Mining
Corporation @
8.625% 4/01/2002 1,000,000 1,104,990
North Finance
(Bermuda) Limited
144A
7.000% 9/15/2005 1,000,000 1,020,000
Polaroid Corporation
7.250% 1/15/1997 1,000,000 1,013,290
<CAPTION>
Principal
Amount Market Value
--------- ------------
<S> <C> <C>
Rolls-Royce Capital
Inc.
7.125% 7/29/2003 $1,000,000 $1,043,260
Service Corporation
International
7.000% 6/01/2015 1,000,000 1,114,230
Tenaga Nasional
Berhad 144A
7.875% 6/15/2004 750,000 824,138
Thomas & Betts
Corporation
8.250% 1/15/2004 500,000 548,345
Time Warner, Inc.
7.750% 6/15/2005 1,000,000 1,041,030
United States Leasing
International, Inc.
8.750% 5/01/1996 500,000 504,805
------------
TOTAL CORPORATE DEBT 17,787,546
------------
(Cost $16,214,629)
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 3.7%
Federal Home Loan Mortgage Corporation (FHLMC) -- 0.3%
Collateralized Mortgage Obligations -- 0.2%
FHLMC Series 1322
Class G
7.500% 2/15/2007 1,000,000 1,044,370
------------
Pass-Through Securities -- 0.1%
FHLMC
9.000% 3/01/2017 232,504 247,008
------------
1,291,378
------------
Federal National Mortgage Association
(FNMA) -- 0.6%
Collateralized Mortgage Obligations -- 0.4%
FNMA Series 1993-191
Class PD
5.400% 3/25/2004 1,000,000 990,930
FNMA Series 1993-221
Class D
6.000% 12/25/2008 1,000,000 989,680
------------
1,980,610
------------
Pass-Through Securities -- 0.2%
FNMA
8.000% 5/01/2013 763,835 797,252
------------
2,777,862
------------
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Market Value
--------- ------------
<S> <C> <C>
Government National Mortgage Association (GNMA) -- 1.4%
Pass-Through Securities
GNMA
6.000% 7/20/2025 -
10/15/2006 $ 2,474,196 $2,502,724
GNMA
7.500% 10/15/2006 -
7/15/2007 1,519,911 1,590,101
GNMA
8.000% 11/15/2004 -
7/15/2008 1,274,505 1,350,401
GNMA
9.000% 12/15/2008 -
5/15/2009 754,941 817,224
------------
6,260,450
------------
U.S. Government Guaranteed Notes -- 1.4%
1991-A Fairfax
County, VA
8.740% 8/01/2001 200,000 226,942
1991-A Jefferson
Park, CA
8.740% 8/01/2001 1,740,000 1,974,395
1991-A Monroe
County, NY
8.740% 8/01/2001 500,000 567,355
1991-A Rochester, NY
8.740% 8/01/2001 60,000 68,083
1994-A Ocean Shores,
WA
5.040% 8/01/1996 100,000 99,750
1994-A Sacramento
City, CA
5.040% 8/01/1996 190,000 189,525
1994-A Virginia Beach,
VA
5.040% 8/01/1996 210,000 209,475
U.S. Dept. of Housing
and Urban
Development, Series
1995-A @
8.240% 8/01/2002 3,000,000 3,383,250
------------
6,718,775
------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 17,048,465
------------
(Cost $15,952,135)
U.S. TREASURY OBLIGATIONS -- 3.5%
U.S. Treasury Bonds -- 1.7%
U.S. Treasury Bond
7.125% 2/15/2023 3,200,000 3,659,008
U.S. Treasury Bond
7.500% 11/15/2016 3,500,000 4,103,750
------------
7,762,758
------------
<CAPTION>
Principal
Amount Market Value
--------- ------------
<S> <C> <C>
U.S. Treasury Notes -- 1.8%
U.S. Treasury Note
6.250% 5/31/2000 $ 4,000,000 $4,134,360
U.S. Treasury Note
7.500% 11/15/2001 3,750,000 4,130,288
------------
8,264,648
------------
TOTAL U.S. TREASURY
OBLIGATIONS 16,027,406
------------
(Cost $14,226,882)
TOTAL BONDS & NOTES 56,277,836
------------
(Cost $51,741,304)
SHORT-TERM INVESTMENTS -- 38.1%
Commercial Paper
Aristar, Inc.
5.600% 2/14/1996 4,820,000 4,787,010
Bausch & Lomb, Inc.
5.900% 2/16/1996 6,910,000 6,857,906
Carter Holt Harvey
Limited
6.000% 1/19/1996 5,850,000 5,832,450
Comdisco, Inc.
5.970% 2/15/1996 3,730,000 3,702,165
Comdisco, Inc.
6.000% 1/22/1996 6,555,000 6,532,058
Comdisco, Inc.
6.000% 1/26/1996 3,800,000 3,784,167
ConAgra, Inc.
5.770% 2/13/1996 2,550,000 2,532,426
ConAgra, Inc.
5.920% 2/07/1996 6,040,000 6,003,250
ConAgra, Inc.
5.930% 2/01/1996 4,695,000 4,671,025
Cox Enterprises, Inc.
5.900% 2/08/1996 4,300,000 4,273,220
Cox Enterprises, Inc.
5.910% 2/05/1996 5,700,000 5,667,249
Cox Enterprises, Inc.
5.950% 1/30/1996 4,000,000 3,980,828
CSX Corporation
5.750% 1/03/1996 2,580,000 2,579,176
Dana Credit
Corporation
5.820% 3/21/1996 4,035,000 3,983,457
Dana Credit
Corporation
5.900% 3/29/1996 1,790,000 1,764,855
Dean Witter, Discover
& Co.
5.700% 2/02/1996 5,070,000 5,044,312
Dominion Resources,
Inc.
6.010% 1/23/1996 4,800,000 4,782,371
GTE Corporation
5.600% 3/05/1996 4,500,000 4,453,963
<CAPTION>
Principal
Amount Market Value
--------- ------------
<S> <C> <C>
GTE Corporation
5.860% 2/06/1996 $ 2,550,000 $2,535,057
Illinois Power
Company
6.000% 1/08/1996 4,745,000 4,739,464
Kerr-McGee Credit
Corporation
5.680% 2/12/1996 3,710,000 3,685,415
Loral Corporation
6.020% 1/04/1996 5,295,000 5,292,344
MAPCO Inc.
6.000% 1/17/1996 4,025,000 4,014,267
MCI Communications
Corporation
5.530% 2/21/1996 3,745,000 3,715,661
Nestle Capital
Corporation
5.820% 1/02/1996 3,560,000 3,559,424
ORIX Credit Alliance,
Inc.
6.000% 2/09/1996 3,325,000 3,303,388
ORIX Credit Alliance,
Inc.
6.000% 2/23/1996 4,385,000 4,346,266
ORIX Credit Alliance,
Inc.
6.100% 1/03/1996 4,570,000 4,568,451
Pennsylvania Power &
Light Company
6.070% 1/09/1996 1,245,000 1,243,321
Rite Aid Corporation
5.950% 1/24/1996 1,875,000 1,867,873
Rite Aid Corporation
6.000% 1/29/1996 6,025,000 5,996,884
Textron Inc.
6.000% 2/22/1996 2,195,000 2,175,977
Tyson Foods, Inc.
5.940% 1/11/1996 4,885,000 4,876,940
Tyson Foods, Inc.
5.970% 1/10/1996 6,870,000 6,859,747
Tyson Foods, Inc.
5.990% 1/09/1996 1,225,000 1,223,370
Union Oil Company of
California
5.990% 1/18/1996 4,415,000 4,402,512
Union Oil Company of
California
6.010% 1/05/1996 3,995,000 3,992,332
Union Pacific
Corporation
5.950% 1/12/1996 4,790,000 4,781,291
Union Pacific
Corporation
6.000% 1/25/1996 4,000,000 3,984,000
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Market Value
--------- ------------
<S> <C> <C>
UOP
6.000% 1/16/1996 $6,625,000 $ 6,608,434
UOP
6.000% 1/31/1996 5,085,000 5,059,575
------------
TOTAL SHORT-TERM
INVESTMENTS 174,063,881
------------
(Cost $174,063,804)
TOTAL INVESTMENTS -- 99.7% 455,679,547
(Cost $402,843,123)+
Other Assets/
(Liabilities) - 0.3% 1,507,984
------------
NET ASSETS -- 100.0% $457,187,531
------------
</TABLE>
Notes to Portfolio of Investments
+Aggregate cost for Federal tax purposes (Note 7)
144A: Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
@ All or a portion of this security is segregated to cover forward purchase
commitments. (Note 2).
The remainder of this page intentionally left blank.
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Financial Statements
- --------------------------------------------------------------------------------
Statement of
Assets and
Liabilities
<TABLE>
<CAPTION>
December 31, 1995
-----------------
<S> <C>
Assets:
Investments, at value (cost $228,779,319) (Note 2)............... $ 281,615,666
Short-term investments, at value (cost $174,063,804) (Note 2).... 174,063,881
----------------
Total Investments............................................. 455,679,547
----------------
Cash............................................................. 2,308
Receivables from:
Investments sold.............................................. 301,823
Settlement of investments purchased on a
forward commitment basis (Note 2).......................... 147,679
Fund shares sold.............................................. 513,588
Interest and dividends........................................ 1,306,409
Investment manager (Note 3)................................... 13,780
----------------
Total assets............................................... 457,965,134
----------------
Liabilities:
Payables for:
Investments purchased......................................... 31,267
Fund shares redeemed.......................................... 521,456
Directors' fees and expenses (Note 3)......................... 2,286
Affiliates (Note 3):
Investment management fees................................. 172,576
Administration fees........................................ 32,812
Service and distribution fees.............................. 323
Accrued expenses and other liabilities........................... 16,883
----------------
Total liabilities.......................................... 777,603
----------------
Net assets....................................................... $ 457,187,531
================
Net assets consist of:
Paid-in capital.................................................. $ 403,146,532
Undistributed net investment income.............................. 179,574
Accumulated net realized gain on investments..................... 877,322
Net unrealized appreciation on investments
and forward commitments....................................... 52,984,103
----------------
$ 457,187,531
================
Net assets:
Class 1.......................................................... $ 173,043
================
Class 2.......................................................... $ 120,668
================
Class 3.......................................................... $ 120,960
================
Class 4.......................................................... $ 456,772,860
================
Shares outstanding:
Class 1.......................................................... 15,043
================
Class 2.......................................................... 10,464
================
Class 3.......................................................... 10,473
================
Class 4.......................................................... 39,690,301
================
Net asset value, offering price and
redemption price per share:
Class 1.......................................................... $ 11.50
================
Class 2.......................................................... $ 11.53
================
Class 3.......................................................... $ 11.55
================
Class 4.......................................................... $ 11.51
================
</TABLE>
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of
Operations
<TABLE>
<CAPTION>
Year ended
December 31, 1995
-----------------
<S> <C>
Investment income:
Interest........................................................ $ 12,886,762
Dividends (net of withholding tax of $1,498).................... 5,889,916
-----------------
Total investment income....................................... 18,776,678
-----------------
Expenses (Note 1):
Investment management fees (Note 3)............................. 1,801,770
Custody fees.................................................... 50,164
Audit and legal fees............................................ 12,619
Directors' fees (Note 3)........................................ 9,576
Fees waived by the investment manager (Note 3).................. (165,250)
-----------------
1,708,879
Administration fees (Note 3):
Class 1....................................................... 766
Class 2....................................................... 576
Class 3....................................................... 358
Class 4....................................................... 340,832
Distribution and service fees (Note 3):
Class 1....................................................... 872
Class 2....................................................... 166
-----------------
Net expenses............................................... 2,052,449
-----------------
Net investment income...................................... 16,724,229
-----------------
Realized and unrealized gain (loss):
Net realized gain on investments and forward commitments...... 4,359,989
Net change in unrealized appreciation (depreciation) on
investments and forward commitments.......................... 55,498,858
-----------------
Net realized and unrealized gain........................... 59,858,847
-----------------
Net increase in net assets resulting from operations.......... $ 76,583,076
=================
</TABLE>
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statements of
Changes in Net
Assets
<TABLE>
<CAPTION>
Year ended Period ended
December 31, 1995 December 31, 1994*
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income........................................... $ 16,724,229 $ 3,765,419
Net realized gain (loss) on investment transactions
and forward commitments...................................... 4,359,989 (247,059)
Net change in unrealized appreciation (depreciation) on
investments and forward commitments.......................... 55,498,858 (2,514,755)
----------------- -----------------
Net increase in net assets resulting from operations......... 76,583,076 1,003,605
----------------- -----------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1......................................................... (4,846) (584)
Class 2......................................................... (3,751) (659)
Class 3......................................................... (4,120) (685)
Class 4......................................................... (16,528,781) (3,726,473)
----------------- -----------------
Total distributions from net investment income............... (16,541,498) (3,728,401)
----------------- -----------------
From net realized gains:
Class 1......................................................... (1,239) --
Class 2......................................................... (859) --
Class 3......................................................... (857) --
Class 4......................................................... (3,230,318) --
----------------- -----------------
Total distributions from net realized gains.................. (3,233,273) --
----------------- -----------------
In excess of net realized gains:
Class 1......................................................... -- (12)
Class 2......................................................... -- (12)
Class 3......................................................... -- (12)
Class 4......................................................... -- (42,474)
----------------- -----------------
Total distributions in excess of net realized gains.......... -- (42,510)
----------------- -----------------
Net fund share transactions (Note 5):
Class 1......................................................... 55,401 93,596
Class 2......................................................... 4,610 93,671
Class 3......................................................... 4,977 99,697
Class 4......................................................... 50,326,522 8,613,794
----------------- -----------------
Increase in net assets from net fund share transactions...... 50,391,510 8,900,758
----------------- -----------------
Total increase in net assets.................................... 107,199,815 6,133,452
----------------- -----------------
Net assets:
Beginning of period (Note 1).................................... 349,987,716 343,854,264
----------------- -----------------
End of period (including undistributed net investment income
of $179,574 and $30,533, respectively)....................... $ 457,187,531 $ 349,987,716
================= =================
</TABLE>
* For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 1 Class 2
------- -------
Year ended Period ended Year ended Period ended
12/31/95 12/31/94** 12/31/95 12/31/94**
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............................ $ 9.94 $ 10.00 $ 9.95 $ 10.00
---------- ------------ ---------- ------------
Income (loss) from investment operations:
Net investment income........................................ 0.28 0.06 0.39 0.06
Net realized and unrealized gain (loss) on investments....... 1.70 (0.06) 1.65 (0.04)
---------- ------------ ---------- ------------
Total income (loss) from investment operations............ 1.98 -- 2.04 0.02
---------- ------------ ---------- ------------
Less distributions to shareholders:
From net investment income................................... (0.33) (0.06) (0.37) (0.07)
From net realized gains...................................... (0.09) -- (0.09) --
In excess of net realized gains ***.......................... -- -- -- --
---------- ------------ ---------- ------------
Total distributions....................................... (0.42) (0.06) (0.46) (0.07)
---------- ------------ ---------- ------------
Net asset value, end of period.................................. $ 11.50 $ 9.94 $ 11.53 $ 9.95
========== ============ ========== ============
Total Return.................................................... 19.92% 0.00% 20.50% 0.17%
Ratios / Supplemental Data:
Net assets, end of period (000's)............................ $ 173 $ 100 $ 121 $ 100
Net expenses to average daily net assets..................... 1.65%# 1.65%#* 1.10%# 1.10%#*
Net investment income to average daily net assets............ 3.03% 3.39%* 3.60% 3.94%*
Portfolio turnover rate...................................... 23% 2% 23% 2%
#Computed after giving effect to the reduction in
management fee by MassMutual. Without this reduction of
fees by the investment manager, the ratio of expenses
to average daily net assets would have been:................ 1.69% 1.71%* 1.14% 1.16%*
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Class 3 Class 4
------- -------
Year ended Period ended Year ended Period ended
12/31/95 12/31/94** 12/31/95 12/31/94**
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............................ $ 9.96 $ 10.00 $ 9.92 $ 10.00
---------- ------------ ---------- ------------
Income (loss) from investment operations:
Net investment income........................................ 0.43 0.07 0.44 0.11
Net realized and unrealized gain (loss) on investments....... 1.66 (0.04) 1.68 (0.08)
---------- ------------ ---------- ------------
Total income (loss) from investment operations............ 2.09 0.03 2.12 0.03
---------- ------------ ---------- ------------
Less distributions to shareholders:
From net investment income................................... (0.41) (0.07) (0.44) (0.11)
From net realized gains...................................... (0.09) -- (0.09) --
In excess of net realized gains ***.......................... -- -- -- --
---------- ------------ ---------- ------------
Total distributions....................................... (0.50) (0.07) (0.53) (0.11)
---------- ------------ ---------- ------------
Net asset value, end of period.................................. $ 11.55 $ 9.96 $ 11.51 $ 9.92
========== ============ ========== ============
Total Return.................................................... 20.96% 0.28% 21.31%+ 0.29%+
Ratios / Supplemental Data:
Net assets, end of period (000's)............................ $ 121 $ 100 $ 456,773 $ 349,688
Net expenses to average daily net assets..................... 0.75%# 0.75%#* 0.5120%# 0.5120%#*
Net investment income to average daily net assets............ 3.94% 4.32%* 4.18% 4.29%*
Portfolio turnover rate...................................... 23% 2% 23% 2%
#Computed after giving effect to the reduction in
management fee by MassMutual. Without this reduction of
fees by the investment manager, the ratio of expenses
to average daily net assets would have been:................ 0.79% 0.81%* 0.5514% 0.5650%*
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
***The distribution in excess of net realized gains amounted to $0.00121 per
share for the period ended December 31, 1994.
+Employee retirement benefit plans that invest plan assets in the Separate
Investment Accounts (SIAs) may be subject to certain charges as set forth in
their respective Plan Documents. Total return figures would be lower for the
periods presented if they reflected these charges.
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the invest- The objectives and policies of the Fund are to:
ment objective and
policies for the . achieve long-term growth of capital and income
MassMutual Value
Equity Fund? . invest primarily in a diversified portfolio of equity
securities of larger, well established companies
(market capitalization over $2.0 billion)
. utilize a value-oriented, risk-averse strategy in
making investment decisions
. utilize fundamental analysis to identify companies
which
-- are of superior investment quality
-- offer above-average dividend growth
-- are reasonably valued
How has the Fund The Fund has performed very well, with 1995 returns at
performed over the nearly three times the long-term average for stocks.
year? Typically, our value-oriented style has not outperformed
the broad market indices in years where absolute gains
have been as robust as in 1995. Over the long term,
however, our value strategy--focusing on dividend-paying
companies with strong balance sheets while their stocks
are selling at what we consider low prices--has been
very successful.
How did large company Large company stocks were the place to be this year.
stocks perform in Benefiting from improved productivity, falling interest
1995? rates and, through August, a weak dollar, large
companies were able to turn in earnings at levels more
typical of small company growth stocks, which drove
their prices up. The market's focus on large cap stocks
benefited the Fund.
What strategic moves Though we make investments based on researching
have you made within individual companies rather than their industry sectors,
the portfolio? the biggest move we made over the year was increasing
our exposure to consumer non-durables, one of the best
performing sectors for the year. Our purchases here--in
Albertson's, a major grocery concern and several
consumer goods companies such as American Brands, Inc.,
and Kimberly-Clark Corporation--were in businesses
typically insulated from slowing economic growth, and
benefited the portfolio considerably. We also increased
our holdings in the very strong financial services area,
buying the stock of MBIA, Inc., a municipal bond insurer
and SAFECO Corporation, a large property and casualty
insurance firm. Our higher exposure to financial
services was another plus for the Fund--in fact, looking
back, we would have liked to have owned more. Over the
year, the size of the Fund has grown, and so has the
weighted average market capitalization. This was a third
benefit during a period of large cap leadership.
What segments of the Our buying has currently shifted from consumer non-
market are you durables to more cyclical companies. Because this area
currently targeting? suffered price declines over the year as the market
favored sectors with more stable earnings, we've been
able to buy stocks at what we consider compelling
values. We are buying and looking to buy companies that
can benefit from lower basic materials costs and thus
improve their profit margins regardless of the slower
economy.
What is your outlook After the past year, it's become more difficult to find
for the Fund? reasonably-priced stocks, but with inflation and long-
term interest rates low, our outlook remains favorable.
We believe the coming year's market will be positive,
but that it will perform more like its historical
average than it did in 1995. We expect to see more
typical levels of volatility than last year's market.
During the past year, the broad market advanced
significantly. Going forward, we believe stock selection
will again become more important. That could benefit the
Fund in that strong stock selection is one of the major
advantages of a research-driven value strategy like
ours.
35
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Value Equity Fund Classes 1-4 and the
Standard & Poor's 500 Composite Index
<TABLE>
<CAPTION>
- ------------------------------------------------------
MassMutual Value Equity Fund
Total Return Since Inception
10/3/94 - 12/31/95 One Year
<S> <C> <C>
Class 1 29.59% 30.10%
Class 2 30.52% 30.80%
Class 3 31.06% 31.30%
Class 4 31.41% 31.54%
- ------------------------------------------------------
Standard & Poor's 500 37.55% 37.58%
Composite Index
- ------------------------------------------------------
</TABLE>
Past performance is not predictive of future results. The investment return
and principal value of shares of the Fund will fluctuate with market conditions
so that shares of the Fund, when redeemed, may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund, while the Standard & Poor's 500 Composite Index is unmanaged and
does not incur expenses.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
Class 1 Class 2 Class 3 Class 4 S&P 500
<S> <S> <C> <C> <C> <C>
10/3/94 10,000 10,000 10,000 10,000 10,000
12/94 9,961 9,978 9,982 9,990 9,998
02/95 10,553 10,581 10,594 10,605 10,658
04/95 11,005 11,043 11,057 11,078 11,295
06/95 11,507 11,566 11,590 11,613 12,021
08/95 11,898 11,967 12,002 12,026 12,449
10/95 12,160 12,230 12,274 12,309 12,928
12/95 12,959 13,052 13,106 13,141 13,755
- --------------------------------------------------------------------------------
</TABLE>
MassMutual Value Equity Fund
Largest Stock Holdings (12/31/95)
Bristol Myers Squibb Company
Pfizer Incorporated
General Electric Company
Hewlett Packard Company
AT&T Corporation
Amoco Corporation
SAFECO Corporation
Minnesota Mining & Manufacturing Company
AMF, Inc.
Mobil Corporation
36
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1995
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
EQUITIES - 89.9%
Aerospace & Defense -- 2.3%
The Boeing Company 365,000 $ 28,606,875
TRW, Inc. 257,100 19,925,250
--------------
48,532,125
--------------
Agribusiness -- 1.5%
Archer-Daniels-Midland
Company 599,981 10,799,658
Pioneer Hi-Bred
International, Inc. 385,000 21,415,625
--------------
32,215,283
--------------
Apparel, Textiles & Shoes -- 0.9%
VF Corporation 365,000 19,253,750
--------------
Automotive & Parts -- 4.1%
Ford Motor Company 775,000 22,475,000
Genuine Parts
Company 735,000 30,135,000
Goodyear Tire &
Rubber Company 750,000 34,031,250
--------------
86,641,250
--------------
Banking, Savings & Loans -- 6.1%
The Bank of New
York Company,
Incorporated 720,000 35,100,000
Comerica, Incorporated 735,000 29,491,875
CoreStates Financial
Corporation 700,000 26,512,500
Norwest Corporation 485,000 16,005,000
Wachovia Corporation 494,000 22,600,500
--------------
129,709,875
--------------
Beverages -- 2.0%
Brown-Forman
Corporation (Class B) 575,000 20,987,500
Pepsico, Incorporated 370,000 20,673,750
--------------
41,661,250
--------------
Chemicals -- 3.9%
Eastman Chemical
Company 399,975 25,048,434
E. I. du Pont de
Nemours and Company 275,000 19,215,625
The Lubrizol
Corporation 400,000 11,150,000
Nalco Chemical
Company 545,000 16,418,125
Rohm & Haas
Company 175,000 11,265,625
--------------
83,097,809
--------------
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
Communications -- 2.1%
AT & T Corporation 700,000 $ 45,325,000
--------------
Computers & Office Equipment -- 6.2%
Hewlett-Packard
Company 635,000 53,181,250
International Business
Machines Corporation 200,000 18,350,000
Pitney Bowes, Inc. 700,000 32,900,000
Xerox Corporation 200,000 27,400,000
--------------
131,831,250
--------------
Containers -- 0.9%
Temple-Inland, Inc. 445,000 19,635,625
--------------
Cosmetics & Personal Care -- 1.3%
Kimberly-Clark
Corporation 333,100 27,564,025
--------------
Electric Utilities -- 1.8%
Niagara Mohawk
Power Corporation 785,000 7,555,625
NIPSCO Industries,
Inc. 330,000 12,622,500
SCANA Corporation 625,000 17,890,625
--------------
38,068,750
--------------
Electrical Equipment & Electronics -- 7.3%
AMP, Inc. 975,000 37,415,625
General Electric
Company 775,000 55,800,000
General Signal
Corporation 450,000 14,568,750
Honeywell Inc. 450,000 21,881,250
Hubbell, Incorporated
(Class B) 400,036 26,302,347
--------------
155,967,972
--------------
Energy -- 8.1%
Amoco Corporation 615,000 44,203,125
Atlantic Richfield
Company 285,000 31,563,750
Chevron Corporation 600,000 31,500,000
Kerr-McGee
Corporation 412,900 26,219,150
Mobil Corporation 329,000 36,848,000
Union Pacific
Resources Group, Inc. 103,900 2,636,463
--------------
172,970,488
--------------
Financial Services -- 1.3%
American Express
Company 665,000 27,514,375
--------------
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
Foods -- 1.5%
CPC International, Inc. 462,500 $ 31,739,063
--------------
Forest Products & Paper -- 2.3%
Westvaco Corporation 556,900 15,453,975
Weyerhaeuser Company 775,000 33,518,750
--------------
48,972,725
--------------
Hardware & Tools -- 1.3%
The Stanley Works 520,200 26,790,300
--------------
Healthcare -- 9.4%
Becton, Dickinson and
Company 462,000 34,650,000
Bristol-Myers Squibb
Company 825,000 70,846,875
Pfizer, Incorporated 1,000,000 63,000,000
Schering-Plough Corp. 565,600 30,966,600
--------------
199,463,475
--------------
Household Products -- 0.9%
The Clorox Company 270,000 19,338,750
--------------
Industrial Distribution -- 1.2%
W.W. Grainger, Inc. 394,300 26,122,375
--------------
Industrial Transportation -- 1.5%
Norfolk Southern
Corporation 400,000 31,750,000
--------------
Insurance -- 4.8%
Allstate Corporation 305,921 12,581,001
Jefferson-Pilot
Corporation 345,000 16,042,500
MBIA, Inc. 250,000 18,750,000
SAFECO Corporation 1,240,000 42,780,000
Unitrin, Inc. 234,950 11,277,600
--------------
101,431,101
--------------
Machinery & Components -- 1.6%
Dover Corporation 540,000 19,912,500
Parker-Hannifin
Corporation 400,000 13,700,000
--------------
33,612,500
--------------
Miscellaneous -- 2.6%
Harsco Corporation 300,000 17,437,500
Minnesota Mining &
Manufacturing
Company 565,000 37,431,250
--------------
54,868,750
--------------
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
Photography -- 1.2%
Eastman Kodak
Company 375,000 $ 25,125,000
--------------
Publishing & Printing -- 4.2%
The Dun &
Bradstreet Corporation 510,000 33,022,500
McGraw-Hill
Companies, Inc. 370,000 32,236,250
R.R. Donnelley & Sons
Company 630,000 24,806,250
--------------
90,065,000
--------------
Retail -- 2.3%
J.C. Penney Company,
Inc. 150,000 7,143,750
The May Department
Stores Company 600,000 25,350,000
Sears Roebuck and
Company 400,000 15,600,000
--------------
48,093,750
--------------
Retail - Grocery -- 1.2%
Albertson's, Inc. 773,800 25,438,675
--------------
Telephone Utilities -- 2.6%
Ameritech Corporation 320,000 18,880,000
Frontier Corporation 700,000 21,000,000
Southern New England
Telecommunications
Corporation 400,000 15,900,000
--------------
55,780,000
--------------
Tobacco -- 1.5%
American Brands, Inc. 735,000 32,799,375
--------------
TOTAL EQUITIES 1,911,379,666
--------------
(Cost $1,495,977,668)
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 10.0%
Commercial Paper
Bell Atlantic Funding
Corporation
5.670% 2/20/1996 $ 4,575,000 $ 4,538,972
Carter Holt Harvey
Limited
6.000% 1/23/1996 4,595,000 4,578,151
Carter Holt Harvey
Limited
6.000% 2/02/1996 4,175,000 4,152,733
Carter Holt Harvey
Limited
6.000% 2/05/1996 4,945,000 4,916,154
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
Comdisco, Inc.
5.950% 2/12/1996 $ 4,560,000 $ 4,528,346
Comdisco, Inc.
6.000% 1/29/1996 5,000,000 4,976,667
Comdisco, Inc.
6.030% 1/11/1996 4,835,000 4,826,901
ConAgra, Inc.
5.930% 2/01/1996 3,045,000 3,029,451
ConAgra, Inc.
6.070% 1/02/1996 4,995,000 4,994,158
Cox Enterprises, Inc.
6.040% 1/03/1996 4,930,000 4,928,346
Dana Credit
Corporation
5.820% 3/21/1996 5,625,000 5,553,147
Dana Credit
Corporation
5.870% 3/15/1996 6,695,000 6,615,913
Dana Credit
Corporation
5.880% 3/11/1996 6,310,000 6,239,496
Dana Credit
Corporation
6.000% 2/23/1996 4,925,000 4,881,496
Dean Witter Discover
& Co.
5.700% 2/06/1996 6,200,000 6,164,660
The Dial Corp.
5.600% 3/28/1996 5,000,000 4,930,479
The Dial Corp.
5.700% 3/05/1996 9,350,000 9,254,396
GTE Corporation
5.600% 3/04/1996 4,310,000 4,266,595
Kerr-McGee Credit
Corporation
6.000% 1/08/1996 3,500,000 3,495,917
Loral Corporation
5.850% 2/16/1996 7,950,000 7,890,574
Loral Corporation
6.000% 1/09/1996 4,835,000 4,828,553
Loral Corporation
6.020% 1/04/1996 4,665,000 4,662,660
MAPCO Inc.
6.000% 1/10/1996 5,000,000 4,992,500
ORIX Credit Alliance,
Inc.
6.000% 2/09/1996 3,180,000 3,159,330
ORIX Credit Alliance,
Inc.
6.030% 2/14/1996 5,000,000 4,963,150
ORIX Credit Alliance,
Inc.
6.070% 1/17/1996 4,780,000 4,767,105
Public Service
Company of Colorado
5.820% 3/22/1996 5,000,000 4,935,332
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
The Quaker Oats
Company
5.870% 2/07/1996 $ 6,225,000 $ 6,187,444
Rite Aid Corporation
5.950% 2/26/1996 7,875,000 7,802,112
Rite Aid Corporation
5.980% 1/16/1996 3,320,000 3,311,728
Textron Inc.
5.930% 2/15/1996 1,400,000 1,389,622
Textron Inc.
5.950% 2/13/1996 6,090,000 6,046,719
Tyson Foods, Inc.
5.980% 1/25/1996 4,000,000 3,984,053
Tyson Foods, Inc.
5.990% 1/18/1996 4,000,000 3,988,686
Tyson Foods, Inc.
6.000% 1/22/1996 5,555,000 5,535,557
Tyson Foods, Inc.
6.000% 2/08/1996 4,000,000 3,974,667
Union Oil Company of
California
5.990% 1/19/1996 3,120,000 3,110,655
Union Oil Company of
California
6.030% 1/05/1996 7,040,000 7,035,283
Union Pacific
Corporation
5.950% 1/26/1996 5,125,000 5,103,824
Union Pacific
Corporation
5.950% 1/30/1996 2,500,000 2,488,017
Union Pacific
Corporation
6.000% 1/24/1996 5,595,000 5,573,553
UOP
6.000% 1/12/1996 5,220,000 5,210,430
UOP
6.000% 1/31/1996 3,850,000 3,830,750
--------------
TOTAL SHORT-TERM
INVESTMENTS 211,644,282
--------------
(Cost $211,643,120)
TOTAL INVESTMENTS -- 99.9% 2,123,023,948
(Cost $1,707,620,788)+
Other Assets/
(Liabilities) - 0.1% 2,614,194
--------------
NET ASSETS -- 100.0% $2,125,638,142
--------------
</TABLE>
Notes to Portfolio of Investments
+Aggregate cost for Federal tax purposes (Note 7)
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Financial Statements
- --------------------------------------------------------------------------------
Statement of
Assets and
Liabilities
<TABLE>
<CAPTION>
December 31, 1995
-----------------
<S> <C>
Assets:
Investments, at value (cost $1,495,977,668) (Note 2)....................................... $1,911,379,666
Short-term investments, at value (cost $211,643,120) (Note 2).............................. 211,644,282
--------------
Total Investments...................................................................... 2,123,023,948
Cash....................................................................................... 1,519
Receivables from:
Investments sold.......................................................................... 3,309,985
Fund shares sold.......................................................................... 2,052,768
Interest and dividends.................................................................... 4,248,182
Investment manager (Note 3)............................................................... 70,696
--------------
Total assets........................................................................... 2,132,707,098
--------------
Liabilities:
Payables for:
Investments purchased..................................................................... 3,858,263
Fund shares redeemed...................................................................... 2,178,195
Directors' fees and expenses (Note 3)..................................................... 2,337
Affiliates (Note 3):
Investment management fees............................................................... 804,401
Administration fees...................................................................... 161,902
Service and distribution fees............................................................ 255
Accrued expenses and other liabilities..................................................... 63,603
--------------
Total liabilities........................................................................ 7,068,956
--------------
Net assets................................................................................. $2,125,638,142
==============
Net assets consist of:
Paid-in capital............................................................................ $1,704,804,394
Undistributed net investment income........................................................ 626,868
Accumulated net realized gain on investments............................................... 4,803,720
Net unrealized appreciation on investments................................................. 415,403,160
--------------
$2,125,638,142
==============
Net assets:
Class 1.................................................................................... $ 129,258
==============
Class 2.................................................................................... $ 130,088
==============
Class 3.................................................................................... $ 130,391
==============
Class 4.................................................................................... $2,125,248,405
==============
Shares outstanding:
Class 1.................................................................................... 10,237
==============
Class 2.................................................................................... 10,284
==============
Class 3.................................................................................... 10,301
==============
Class 4.................................................................................... 168,233,242
==============
Net asset value, offering price and
redemption price per share:
Class 1.................................................................................... $ 12.63
==============
Class 2.................................................................................... $ 12.65
==============
Class 3.................................................................................... $ 12.66
==============
Class 4.................................................................................... $ 12.63
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of
Operations
<TABLE>
<CAPTION> Year ended
December 31, 1995
-----------------
<S> <C>
Investment income:
Dividends (net of withholding tax of $12,406)............................................. $ 49,814,144
Interest.................................................................................. 9,604,139
--------------
Total investment income................................................................. 59,418,283
--------------
Expenses (Note 1):
Investment management fees (Note 3)....................................................... 8,289,231
Custody fees.............................................................................. 170,392
Audit and legal fees...................................................................... 57,871
Directors' fees (Note 3).................................................................. 1,896
Fees waived by the investment manager (Note 3)............................................ (852,771)
--------------
7,666,619
Administration fees (Note 3):
Class 1................................................................................. 666
Class 2................................................................................. 611
Class 3................................................................................. 384
Class 4................................................................................. 1,666,744
Distribution and service fees (Note 3):
Class 1................................................................................. 745
Class 2................................................................................. 172
--------------
Net expenses.......................................................................... 9,335,941
--------------
Net investment income................................................................. 50,082,342
--------------
Realized and unrealized gain (loss):
Net realized gain on investment transactions.............................................. 21,371,652
Net change in unrealized appreciation (depreciation)
on investments.......................................................................... 429,724,511
--------------
Net realized and unrealized gain...................................................... 451,096,163
--------------
Net increase in net assets resulting from operations...................................... $ 501,178,505
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statements of
Changes in Net
Assets
<TABLE>
<CAPTION>
Year ended Period ended
December 31, 1995 December 31, 1994*
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income......................................... $ 50,082,342 $ 12,737,444
Net realized gain (loss) on investment transactions........... 21,371,652 (391,727)
Net change in unrealized appreciation (depreciation)
on investments............................................... 429,724,511 (14,321,351)
-------------- --------------
Net increase (decrease) in net assets resulting
from operations............................................. 501,178,505 (1,975,634)
-------------- --------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1....................................................... (1,761) (402)
Class 2....................................................... (2,382) (476)
Class 3....................................................... (2,774) (508)
Class 4....................................................... (49,597,273) (12,587,342)
-------------- --------------
Total distributions from net investment income.............. (49,604,190) (12,588,728)
-------------- --------------
From net realized gains:
Class 1....................................................... (990) --
Class 2....................................................... (990) --
Class 3....................................................... (988) --
Class 4....................................................... (16,056,271) --
-------------- --------------
Total distributions from net realized gains................. (16,059,239) --
-------------- --------------
In excess of net realized gains:
Class 1....................................................... -- (7)
Class 2....................................................... -- (7)
Class 3....................................................... -- (7)
Class 4....................................................... -- (116,945)
-------------- --------------
Total distributions in excess of net realized gains......... -- (116,966)
-------------- --------------
Net fund share transactions (Note 5):
Class 1....................................................... 2,751 93,409
Class 2....................................................... 3,372 93,483
Class 3....................................................... 3,763 99,515
Class 4....................................................... 126,252,551 (9,700,269)
-------------- --------------
Increase (decrease) in net assets from net
fund share transactions.................................... 126,262,437 (9,413,862)
-------------- --------------
Total increase (decrease) in net assets....................... 561,777,513 (24,095,190)
Net assets:
Beginning of period (Note 1).................................. 1,563,860,629 1,587,955,819
-------------- --------------
End of period (including undistributed net investment income
of $626,868 and $148,716, respectively)..................... $2,125,638,142 $1,563,860,629
============== ==============
</TABLE>
* For the period from October 3, 1994 (commencement of
operations) through December 31, 1994.
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 1 Class 2
Year ended Period ended Year ended Period ended
12/31/95 12/31/94** 12/31/95 12/31/94**
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.92 $ 10.00 $ 9.93 $ 10.00
---------- ------------ ---------- ------------
Income (loss) from investment operations:
Net investment income 0.18 0.04 0.24 0.05
Net realized and unrealized gain (loss) on investments 2.81 (0.08) 2.82 (0.07)
---------- ------------ ---------- ------------
Total income (loss) from investment operations 2.99 (0.04) 3.06 (0.02)
---------- ------------ ---------- ------------
Less distributions to shareholders:
From net investment income (0.18) (0.04) (0.24) (0.05)
From net realized gains (0.10) -- (0.10) --
In excess of net realized gains*** -- -- -- --
---------- ------------ ---------- ------------
Total distributions (0.28) (0.04) (0.34) (0.05)
---------- ------------ ---------- ------------
Net asset value, end of period $ 12.63 $ 9.92 $ 12.65 $9.93
========== ============ ========== ============
Total Return 30.10% (0.39)% 30.80% (0.22)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 129 $ 99 $ 130 $ 99
Net expenses to average daily net assets 1.65%# 1.65%#* 1.10%# 1.10%#*
Net investment income to average daily net assets 1.58% 2.31%* 2.13% 2.86%*
Portfolio turnover rate 16% 3% 16% 3%
#Computed after giving effect to the reduction in
management fee by MassMutual. Without this reduction of
fees by the investment manager, the ratio of expenses
to average daily net assets would have been: 1.70% 1.71%* 1.15% 1.16%*
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Class 3 Class 4
Year ended Period ended Year ended Period ended
12/31/95 12/31/94** 12/31/95 12/31/94**
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.93 $ 10.00 $ 9.91 $ 10.00
---------- ------------ ---------- ------------
Income (loss) from investment operations:
Net investment income 0.28 0.05 0.31 0.08
Net realized and unrealized gain (loss) on investments 2.83 (0.07) 2.82 (0.09)
---------- ------------ ---------- ------------
Total income (loss) from investment operations 3.11 (0.02) 3.13 (0.01)
---------- ------------ ---------- ------------
Less distributions to shareholders:
From net investment income (0.28) (0.05) (0.31) (0.08)
From net realized gains (0.10) -- (0.10) --
In excess of net realized gains*** -- -- -- --
---------- ------------ ---------- ------------
Total distributions (0.38) (0.05) (0.41) (0.08)
---------- ------------ ---------- ------------
Net asset value, end of period $ 12.66 $ 9.93 $ 12.63 $ 9.91
========== ============ ========== ============
Total Return 31.30% (0.18)% 31.54%+ (0.10)%+
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 130 $ 99 $2,125,248 $1,563,563
Net expenses to average daily net assets 0.75%# 0.75%#* 0.5067%# 0.5067%#*
Net investment income to average daily net assets 2.48% 3.23%* 2.72% 3.20%*
Portfolio turnover rate 16% 3% 16% 3%
#Computed after giving effect to the reduction in
management fee by MassMutual. Without this reduction of
fees by the investment manager, the ratio of expenses
to average daily net assets would have been: 0.80% 0.81%* 0.5528% 0.5681%*
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
***The distribution in excess of net realized gains amounted to $0.00074 per
share for the period ended December 31, 1994.
+Employee retirement benefit plans that invest plan assets in the Separate
Investment Accounts (SIAs) may be subject to certain charges as set forth in
their respective Plan Documents. Total return figures would be lower for the
periods presented if they reflected these charges.
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Portfolio Manager Report;
- --------------------------------------------------------------------------------
What are the investment The objectives and policies of the Fund are to:
objectives and policies
for the MassMutual . achieve long-term growth of capital and income
Small Cap Value Equity
Fund? . invest primarily in a diversified portfolio of equity
securities of smaller companies (market capitalization
less than $750 million)
. utilize a value-oriented, risk-averse strategy in
making investment decisions
. utilize fundamental analysis to identify companies
which
-- are of high investment quality or possess a unique
product, market position or operating
characteristic,
-- offer above-average level of profitability or
superior growth potential and
-- are reasonably valued
How has the Fund On an absolute basis, the Fund performed well, though it
performed over the was a year during which the types of stocks we invest in
past year? were somewhat out-of-favor with the market. As a value
investor, our focus is on companies whose stocks are
selling for less than we think they're worth--a strategy
that has been a prudent approach to managing risk and
capturing appreciation and income potential over time.
Partially due to the slowing of the economy, this year's
market was driven instead by growth stocks, or companies
whose earnings are growing faster than the economic
growth rate.
How did small cap Small cap stocks are the sector of the market investors
stocks fare during typically turn to for above-average returns as, though
the year? they entail more risk, they have performed better than
larger company stocks over the course of market history.
Because of this year's extremely strong market--one in
which the Dow Jones Industrial Average rose from 3,834
to 5,117--investors in large cap stocks were rewarded at
levels usually reserved for smaller company investing.
Since 1995's market made it unnecessary to take on
additional risk to capture strong gains, large cap
stocks led their smaller counterparts throughout the
year.
What staegic moves 1995's market can be divided into two halves. Through
have you made in the July, technology stocks were the undeniable leaders.
portfolio? They became more volatile in the second half, when
financial services stocks began to perform well. While
technology stocks rarely pay dividends and so don't
usually meet our value guidelines, approximately 25% of
our portfolio was invested in financial services. Due to
merger and consolidation activity, many bank stocks were
driven higher. Insurance companies also performed well
for us in light of favorable interest rates and
relatively low casualty losses.
Beyond these themes, our purchases have been diverse. As
a bottom-up manager, we look for opportunities to buy
dividend-paying companies with strong balance sheets
across industry sectors. Though it's hard to buy stocks
at value prices during a strong market advance, we were
able to find opportunities in Atlantic Southeast
Airlines, Inc., an efficient small airline, Dallas
Semiconductor Corp., an industrial semiconductor
supplier, and Hudson Foods Inc., a poultry processor
with lucrative exposure to Pacific Rim countries, to
name a few.
Is there a segment of We think the prospects for financial services remains
the market you're strong, but as always, we'll continue to emphasize
currently targeting? individual companies' strengths rather than expectations
for industry groups going forward.
What is your outlook Assuming we continue to have relatively low interest
for the Fund? rates, we think the market should continue to perform
well, though with a more usual level of up and down
volatility than we saw in 1995. After this year's
market, we believe investors looking for reasonable
valuations should return to smaller company value stocks
for their appreciation potential. A renewed focus on
these stocks would benefit the Fund.
43
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity-Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investment in MassMutual Small Cap
Value Equity Fund Classes 1-4 and the Frank Russell
2000 Index
- ----------------------------------------------------------
MassMutual Small Cap Value Equity Fund
Total Return
<TABLE>
<CAPTION>
Since Inception
10/3/94-12/31/95 One Year
<S> <C> <C>
Class 1 15.15% 18.58%
Class 2 16.01% 19.25%
Class 3 16.42% 19.62%
Class 4 16.81% 20.01%
- ----------------------------------------------------------
Frank Russell 2000 Index 26.04% 28.44%
- ----------------------------------------------------------
</TABLE>
Past performance is not predictive of future
results. The investment return and principal value of
shares of the Fund will fluctuate with market
conditions so that shares of the Fund, when redemed,
may be worth more or less than their original cost.
Investors should note that the Fund is a professionally
managed mutual fund, while the Frank Russell 2000
Index is unmanaged and does not incur expenses.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
Class 1 Class 2 Class 3 Class 4 Russell 2000
<S> <C> <C> <C> <C> <C>
10/3/94 10,000 10,000 10,000 10,000 10,000
12/94 9,710 9,727 9,732 9,933 9,813
2/95 9,870 9,898 9,912 9,924 10,093
4/95 10,151 10,189 10,203 10,215 10,494
6/95 10,422 10,470 10,495 10,507 11,228
8/95 11,093 11,162 11,187 11,220 12,121
10/95 10,934 11,002 11,047 11,070 11,787
12/95 11,515 11,601 11,642 11,681 12,604
</TABLE>
- ----------------------------------------------------------
MassMutual
Small Cap Value Equity Fund
Largest Stock Holding (12/31/95)
- ----------------------------------------------------------
Greenfield Industries, Inc.
National Re Corporation
Capital RE Corp.
ADVO, Inc.
Graco Incorporated
Arbor Drugs, Inc.
True North Communications, Inc.
CCB Financial Corporation
The Olsten Corporation
ALLIED Group, Incorporated
- ----------------------------------------------------------
44
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity--Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1995
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
EQUITIES - 92.5%
Advertising -- 2.7%
ADVO, Inc. 392,300 $ 10,199,800
------------
Agribusiness -- 1.3%
Dekalb Genetics
Corporation 110,100 4,968,263
------------
Air Transportation -- 1.7%
Atlantic Southeast
Airlines, Inc. 297,800 6,402,700
------------
Apparel, Textiles & Shoes -- 2.3%
Kellwood Company 186,100 3,791,788
Unitog Company 206,500 4,981,813
------------
8,773,601
============
Appliances, Furnishings -- 0.3%
JUNO Lighting,
Incorporated 63,600 1,017,600
============
Automotive & Parts -- 3.2%
Amcast Industrial
Corporation 172,100 3,140,825
Excel Industries, Inc. 238,600 3,340,400
Myers Industries, Inc. 342,454 5,607,679
------------
12,088,904
============
Banking, Savings & Loans -- 6.1%
Astoria Financial
Corporation 102,600 4,681,125
CCB Financial
Corporation 157,100 8,719,050
Keystone Financial,
Inc. 124,500 3,735,000
One Valley Bancorp of
West Virginia, Inc. 85,800 2,681,250
United Carolina
Bancshares
Corporation 101,900 3,439,125
------------
23,255,550
============
Building Materials & Construction -- 0.5%
Apogee Enterprises,
Inc. 114,100 1,939,700
------------
Chemicals -- 2.8%
Lawter International,
Inc. 268,033 $ 3,115,884
Lilly Industries, Inc.
(Class A) 258,575 3,296,831
OM Group, Inc. 125,400 4,153,875
------------
10,566,590
============
Communications -- 2.3%
True North
Communications, Inc. 483,500 8,944,750
------------
Containers -- 3.4%
Chesapeake
Corporation 3,900 115,538
Rock-Tenn Company
(Class A) 355,900 5,783,375
Zero Corporation 402,300 7,140,825
------------
13,039,738
============
Electrical Equipment & Electronics -- 6.2%
Belden, Inc. 293,700 7,562,775
Dallas Semiconductor
Corporation 130,800 2,714,100
Teleflex, Incorporated 128,100 5,252,100
Wyle Laboratories 227,200 7,980,400
X-Rite, Inc. 15,200 214,700
------------
23,724,075
============
Energy -- 2.6%
Natural Gas
Clearinghouse
Corporation 165,595 1,469,656
Production Operators
Corporation 156,100 5,151,300
The Wiser Oil
Company 270,000 3,240,000
------------
9,860,956
============
Foods -- 1.9%
Hudson Foods, Inc. 286,100 4,935,225
Midwest Grain
Products, Inc. 167,100 2,339,400
------------
7,274,625
============
Forest Products & Paper-- 3.0%
Mosinee Paper
Corporation 136,600 $ 3,517,450
Wausau Paper Mills
Company 286,220 7,799,495
------------
11,316,945
============
Gas Distribution -- 2.0%
WICOR, Inc. 237,300 7,652,925
============
Healthcare -- 4.1%
ADAC Laboratories 312,300 3,786,638
Beckman Instruments,
Inc. 113,800 4,025,675
Life Technologies, Inc. 85,000 2,316,250
The West Company,
Incorporated 233,600 5,489,600
------------
15,618,163
============
Household Products -- 0.7%
Oil-Dri Corporation of
America (Class A) 169,350 2,646,094
============
Industrial Transportation -- 3.1%
Arnold Industries, Inc. 438,300 7,615,463
The Greenbrier
Companies, Inc. 351,600 4,263,150
------------
11,878,613
============
Insurance -- 14.2%
ALLIED Group,
Incorporated 230,900 8,312,400
Capital RE Corp. 334,500 10,285,875
Executive Risk, Inc. 266,300 7,722,700
E. W. Blanch Holdings,
Inc. 278,100 6,500,588
Frontier Insurance
Group, Inc. 63,100 2,019,200
National Re
Corporation 281,400 10,693,200
Orion Capital
Corporation 190,637 8,268,880
------------
53,802,843
============
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
45
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity -- Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
Leasing Companies -- 2.1%
Rollins Truck Leasing
Company 715,750 $ 7,962,719
------------
Machinery & Components -- 9.7%
DT Industries, Inc. 244,200 3,296,700
The Gorman-Rupp
Company 128,725 1,995,238
Graco, Incorporated 304,600 9,290,300
Greenfield Industries,
Inc. 358,200 11,193,750
Hardinge, Inc. 164,500 4,277,000
Regal-Beloit
Corporation 297,750 6,476,063
------------
36,529,051
============
Metals & Mining -- 1.2%
Reliance Steel &
Aluminum Company 222,500 4,616,875
------------
Miscellaneous -- 2.0%
Trimas Corporation 407,100 7,684,013
------------
Miscellaneous - Producer -- 0.7%
Federal Signal Corp. 108,509 2,807,670
------------
Office Products -- 0.9%
American Business
Products, Inc. 125,400 3,573,895
------------
Other Services -- 4.5%
Analysts International
Corporation 170,100 5,103,000
Landauer, Inc. 173,900 3,782,325
The Olsten
Corporation 211,650 8,360,175
------------
17,245,500
============
Publishing & Printing -- 4.6%
Banta Corporation 101,100 4,448,400
Houghton Mifflin
Company 184,000 7,912,000
McClatchy
Newspapers, Inc. 227,200 5,197,200
------------
17,557,600
============
Retail -- 2.4%
Arbor Drugs, Inc. 435,000 9,135,000
------------
TOTAL EQUITIES 352,084,758
(Cost $303,826,285) ============
<CAPTION>
Principal
Amounts Market Value
------- ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 8.4%
Commercial Paper
Comdisco, Inc.
5.850% 1/18/1996 $2,160,000 $ 2,154,033
ConAgra, Inc.
6.060% 1/16/1996 2,240,000 2,234,344
ConAgra, Inc.
6.170% 1/10/1996 1,750,000 1,747,301
General Motors
Acceptance
Corporation
5.811% 1/03/1996 305,000 305,492
General Motors
Acceptance
Corporation
5.871% 1/05/1996 475,000 476,394
General Motors
Acceptance
Corporation
6.000% 1/02/1996 3,640,000 3,639,393
MAPCO Inc.
6.200% 1/19/1996 2,835,000 2,826,212
ORIX Credit Alliance,
Inc.
6.000% 1/04/1996 2,770,000 2,768,615
Philip Morris Capital
Corporation
5.930% 1/03/1996 1,825,000 1,824,399
Sonat Inc.
6.030% 1/23/1996 4,200,000 4,184,523
SUPERVALU, Inc.
5.950% 1/05/1996 2,725,000 2,723,198
Textron Financial
Corporation
6.020% 1/17/1996 2,175,000 2,169,181
Textron Financial
Corporation
6.040% 1/22/1996 5,125,000 5,106,943
------------
TOTAL SHORT-TERM
INVESTMENTS 32,160,028
(At Amortized Cost) ============
TOTAL INVESTMENTS -- 100.9% 384,244,786
(Cost $335,986,313)+
Other Assets/
(Liabilities) - (0.9%) (3,437,257)
------------
NET ASSETS -- 100.0% $380,807,529
============
</TABLE>
Notes to Portfolio of Investments
+Aggregate cost for Federal tax purposes (Note 7)
The accompanying notes are an integral part of the financial statements.
46
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Financial Statements
- --------------------------------------------------------------------------------
Statement of
Assets and
Liabilities
<TABLE>
<CAPTION>
December 31, 1995
-----------------
<S> <C>
Assets:
Investments, at value (cost $303,826,285) (Note 2)......... $ 352,084,758
Short-term investments, at amortized cost (Note 2)......... 32,160,028
--------------
Total Investments........................................ 384,244,786
Cash....................................................... 1,875
Receivables from:
Investments sold......................................... 1,121,877
Fund shares sold......................................... 375,519
Interest and dividends................................... 569,995
Investment manager (Note 3).............................. 10,906
--------------
Total assets........................................... 386,324,958
--------------
Liabilities:
Payables for:
Investments purchased.................................... 4,245,252
Fund shares redeemed..................................... 1,052,731
Directors' fees and expenses (Note 3).................... 2,286
Affiliates (Note 3):
Investment management fees............................. 176,135
Administration fees.................................... 27,743
Service and distribution fees.......................... 320
Accrued expenses and other liabilities..................... 12,962
--------------
Total liabilities........................................ 5,517,429
--------------
Net assets................................................. $ 380,807,529
==============
Net assets consist of:
Paid-in capital............................................ $ 332,482,866
Undistributed net investment income........................ 99,330
Accumulated net realized loss on investments............... (33,140)
Net unrealized appreciation on investments................. 48,258,473
--------------
$ 380,807,529
==============
Net assets:
Class 1.................................................... $ 172,045
==============
Class 2.................................................... $ 118,339
==============
Class 3.................................................... $ 118,797
==============
Class 4.................................................... $ 380,398,348
==============
Shares outstanding:
Class 1.................................................... 15,094
==============
Class 2.................................................... 10,347
==============
Class 3.................................................... 10,382
==============
Class 4.................................................... 33,253,093
==============
Net asset value, offering price and
redemption price per share:
Class 1.................................................... $ 11.40
==============
Class 2.................................................... $ 11.44
==============
Class 3.................................................... $ 11.44
==============
Class 4.................................................... $ 11.44
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
47
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of
Operations
<TABLE>
<CAPTION>
Year ended
December 31, 1995
-----------------
<S> <C>
Investment income:
Dividends.................................................. $ 6,092,926
Interest................................................... 2,286,334
--------------
Total investment income.................................... 8,379,260
--------------
Expenses (Note 1):
Investment management fees (Note 3)........................ 1,928,743
Custody fees............................................... 46,738
Audit and legal fees....................................... 10,754
Directors' fees (Note 3)................................... 9,667
Fees waived by the investment manager (Note 3)............. (155,450)
--------------
1,840,452
Administration fees (Note 3):
Class 1.................................................. 756
Class 2.................................................. 564
Class 3.................................................. 351
Class 4.................................................. 301,987
Distribution and service fees (Note 3):
Class 1.................................................. 858
Class 2.................................................. 162
--------------
Net expenses........................................... 2,145,130
--------------
Net investment income.................................. 6,234,130
--------------
Realized and unrealized gain (loss):
Net realized gain on investment transactions............... 776,790
Net change in unrealized appreciation (depreciation) on
investments.............................................. 57,391,484
--------------
Net realized and unrealized gain....................... 58,168,274
--------------
Net increase in net assets resulting from operations....... $ 64,402,404
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
48
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statements of
Changes in Net
Assets
<TABLE>
<CAPTION>
Year ended Period ended
December 31, 1995 December 31, 1994*
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income............................................ $ 6,234,130 $ 1,404,497
Net realized gain (loss) on investment transactions.............. 776,790 (809,930)
Net change in unrealized appreciation (depreciation)
on investments.................................................. 57,391,484 (9,133,011)
------------ ------------
Net increase (decrease) in net assets resulting
from operations............................................... 64,402,404 (8,538,444)
------------ ------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1.......................................................... (1,356) (207)
Class 2.......................................................... (1,300) (280)
Class 3.......................................................... (1,672) (323)
Class 4.......................................................... (6,159,231) (1,374,928)
------------ ------------
Total distributions from net investment income.................. (6,163,559) (1,375,738)
------------ ------------
Net fund share transactions (Note 5):
Class 1.......................................................... 51,075 93,207
Class 2.......................................................... 1,300 93,280
Class 3.......................................................... 1,672 99,323
Class 4.......................................................... 11,428,353 1,158,959
------------ ------------
Increase in net assets from net fund share transactions......... 11,482,400 1,444,769
------------ ------------
Total increase (decrease) in net assets.......................... 69,721,245 (8,469,413)
Net assets:
Beginning of period (Note 1)..................................... 311,086,284 319,555,697
------------ ------------
End of period (including undistributed net investment income
of $99,330 and $28,759, respectively)........................... $380,807,529 $311,086,284
============ ============
</TABLE>
* For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
The accompanying notes are an integral part of the financial statements.
49
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 1 Class 2
--------- ---------
Year ended Period ended Year ended Period ended
12/31/95 12/31/94** 12/31/95 12/31/94**
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.69 $ 10.00 $ 9.70 $ 10.00
---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income 0.06 0.02 0.13 0.03
Net realized and unrealized gain (loss) on investments 1.74 (0.31) 1.74 (0.30)
---------- ---------- ---------- ----------
Total income (loss) from investment operations 1.80 (0.29) 1.87 (0.27)
---------- ---------- ---------- ----------
Less distributions to shareholders:
From net investment income (0.09) (0.02) (0.13) (0.03)
---------- ---------- ---------- ----------
Net asset value, end of period $ 11.40 $ 9.69 $ 11.44 $ 9.70
========== ========== ========== ==========
Total Return 18.58% (2.89)% 19.25% (2.72)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 172 $ 99 $ 118 $ 99
Net expenses to average daily net assets 1.75%# 1.75%#* 1.20%# 1.20%#*
Net investment income to average daily net assets 0.63% 1.14%* 1.19% 1.69%*
Portfolio turnover rate 28% 4% 28% 4%
#Computed after giving effect to the reduction in
management fee by MassMutual. Without this reduction of
fees by the investment manager, the ratio of expenses
to average daily net assets would have been: 1.79% 1.81%* 1.24% 1.26%*
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
Class 3 Class 4
--------- ---------
Year ended Period ended Year ended Period ended
12/31/95 12/31/94** 12/31/95 12/31/94**
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.70 $ 10.00 $ 9.69 $ 10.00
---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income 0.16 0.03 0.19 0.04
Net realized and unrealized gain (loss) on investments 1.74 (0.30) 1.75 (0.31)
---------- ---------- ---------- ----------
Total income (loss) from investment operations 1.90 (0.27) 1.94 (0.27)
---------- ---------- ---------- ----------
Less distributions to shareholders:
From net investment income (0.16) (0.03) (0.19) (0.04)
---------- ---------- ---------- ----------
Net asset value, end of period $ 11.44 $ 9.70 $ 11.44 $ 9.69
========== ========== ========== ==========
Total Return 19.62% (2.68)% 20.01%+ (2.66)%+
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 119 $ 99 $380,398 $310,789
Net expenses to average daily net assets 0.85%# 0.85%#* 0.6110%# 0.6110%#*
Net investment income to average daily net assets 1.54% 2.09%* 1.78% 1.78%*
Portfolio turnover rate 28% 4% 28% 4%
#Computed after giving effect to the reduction in
management fee by MassMutual. Without this reduction of
fees by the investment manager, the ratio of expenses
to average daily net assets would have been: 0.89% 0.91%* 0.6553% 0.6681%*
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
+Employee retirement benefit plans that invest plan assets in the Separate
Investment Accounts (SIAs) may be subject to certain charges as set forth in
their respective Plan Documents. Total return figures would be lower for the
periods presented if they reflected these charges.
The accompanying notes are an integral part of the financial statements.
50
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment The objectives and policies of the Fund are to:
objectives and policies
for the MassMutual . achieve high total rate of return over the long term
International Equity
Fund? . invest in a diversified portfolio of foreign and
domestic equity securities
. utilize dominant themes to guide investment decisions
(economic, political and social influences that are
expected to dictate long-term growth trends)
Note: foreign investments entail special investment
risks including differences in foreign accounting and
legal standards, foreign taxation, and fluctuations of
currency exchange rates.
How has the Fund Against an exceptionally strong U.S. market,
performed over the international markets as a group--even while some
year? outperformed the U.S.--paled by comparison. Though the
mature U.S. market is rarely among the world's
top-performing markets, it was in 1995. The S&P 500, a
broad measure of domestic stocks, was up 37.58% while
the MSCI EAFE, which is an index of foreign market
stocks, was up 11.21% for the year. The Fund performed
reasonably well within this environment, though its
performance tended to lag some of its market indices due
to the Fund's heavier weightings in Europe and Latin
America, which were poorly performing markets in 1995.
What strategic moves The Fund remains highly diversified, both by sector and
have you made within by region. We invest across eight global themes that we
the portfolio? believe offer long-term opportunity. A company's ability
to fit into one of these target areas, plus its
fundamental strengths and the strength of its country's
economy help us to determine its relative value.
In terms of theme, we've added to our capital market
holdings over the year, through emerging market banks--
in places like South America, Turkey and the Far East,
and life insurance and money management companies in
Europe. In corporate restructurings, we've added to
selected companies that have been shedding assets and
returning to profitable core businesses. Our investments
in efficiency-enhancing technology which, at 19% of the
portfolio, is one of our largest themes, has been
two-pronged. Just over half of our holdings have been in
areas considered high tech--software, semiconductor and
electronics companies--with the remainder having been in
heavier industries, for example machinery that is used
to increase industry productivity. As a lower-volatility
way to invest in emerging consumer markets, which at 20%
is our largest emphasis, we've focused primarily on
European-based companies whose earnings growth comes
from the emerging markets. In healthcare, which is a
global business we feel offers strong growth potential
in the long-term, we own selected pharmaceuticals,
medical equipment and hospital owning companies. We own
electric and gas utilities in Argentina and Korea as
well as selected U.K. and Japanese equipment
manufacturers as part of our infrastructure theme. In
natural resources, we're focused on oil and energy
services companies we feel offer potential after a
15-year tightening. And finally, our communications
investments have surrounded cellular communications
firms with emerging markets exposure as well as media
and broadcast companies in a position to increase their
market shares either globally or regionally.
What Segments of the We'd like to continue to maintain a reasonable balance
market are you between our investment themes, looking for opportunities
currently focusing on? to buy what we consider the best companies within them
without paying too much. Regionally, our move into Japan
has been the biggest recent change. Though the Japanese
market performed poorly in 1995, we expect growth to
improve due to a decline in the value of the yen and the
central bank's actions to control deflation. Another
area that performed poorly in 1995 that we're currently
focusing on is Latin America. There we're adding to our
holdings in the higher-quality markets such as Brazil,
Argentina and Peru.
What is your outlook Our outlook is strongly positive. Companies in
for the Fund? international markets, with economic growth rates often
two-to-three times the rate of growth in the U.S., have
tremendous opportunities to grow earnings, which is what
drives the stock markets. And though foreign investing
entails special risks including differences in
accounting and legal standards, foreign taxation and
currency exchange rate fluctuations, we believe it also
offers opportunities for diversification and growth
potential that are not available within the U.S.
51
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual International
Equity Fund Classes 1-4 and the Morgan Stanley Capital
International Index for Europe, Australia and the Far East
(MSCI EAFE)
- ----------------------------------------------------------
MassMutual International Equity Fund
<TABLE>
<CAPTION>
Total Return Since Inception One Year
10/3/94-12/31/95
<S> <C> <C>
Class 1 -3.84% 3.96%
Class 2 -3.21% 4.52%
Class 3 -2.87% 4.78%
Class 4 -2.44% 5.13%
- ----------------------------------------------------------
MSCI EAFE Index 10.08% 11.21%
- ----------------------------------------------------------
</TABLE>
Past performance is not predictive of future
results. The investment return and principal value of
shares of the Fund will fluctuate with market
conditions so that shares of the Fund, when redeemed,
may be worth more or less than their original cost.
Investors should note that the Fund is a professionally
managed mutual fund, while the MSCI EAFE is
unmanaged and does not incur expenses.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
Class 1 Class 2 Class 3 Class 4 MSC 1
<S> <C> <C> <C> <C> <C>
10/3/94 10,000 10,000 10,000 10,000 10,000
12/94 9,250 9,260 9,270 9,280 9,898
2/95 9,050 9,070 9,080 9,090 9,490
4/95 9,260 9,290 9,300 9,320 10,460
6/95 9,420 9,460 9,480 9,510 10,155
8/95 9,700 9,750 9,770 9,810 10,376
10/95 9,437 9,507 9,527 9,567 10,294
12/95 9,616 9,679 9,713 9,756 11,008
</TABLE>
MassMutual International Equity Fund
Largest Country Weightings (12/31/95)
% of fund
Japan 31.51%
France 9.89%
Germany 7.86%
Switzerland 7.67%
United Kingdom 6.74%
Sweden 5.43%
The Netherlands 4.17%
Argentina 3.42%
Australia 3.02%
Norway 2.62%
52
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1995
<TABLE>
<CAPTION>
Number of
Shares Market Value
--------- ------------
<S> <C> <C>
EQUITIES - 100.0%
Automobiles -- 3.6%
Ciadea S. A @. 255,350 $ 1,328,075
Mahindra & Mahindra
Ltd., GDR 140,711 832,322
Mitsubishi Motors
Corp. 300,000 2,445,900
Volkswagen AG 10,000 3,360,636
-----------
7,966,933
-----------
Banking -- 5.0%
ABN Amro Holding
N.V. 25,000 1,140,058
Banco Bradesco SA,
Preference 149,995,000 1,304,957
Banco Frances del Rio
de la Plata S.A., ADR 115,000 3,090,625
Banco Wiese,
Sponsored ADR 137,631 860,194
Bil GT Gruppe AG @ 2,500 1,477,425
HSBC Holdings PLC 126,506 1,914,289
Skandinaviska Enskilda
Banken Group 150,000 1,244,865
-----------
11,032,413
-----------
Broadcasting -- 0.1%
Grupo Televisa S.A.,
Sponsored ADR 7,500 168,750
-----------
Commercial Services -- 1.7%
BIS SA @ 51,896 3,852,100
-----------
Computers & Office Equipment -- 2.0%
Baan Company, N. V. @ 20,000 905,000
CSK Corp. 50,000 1,565,655
Ines Corp. @ 60,000 1,099,350
Misys PLC @ 100,000 884,980
-----------
4,454,985
-----------
Conglomerates -- 0.6%
Cie Generale Des
Eaux 10,000 999,718
Commercial del Plata
SA @ 141,000 373,721
-----------
1,373,439
-----------
<CAPTION>
Number of
Shares Market Value
--------- ------------
<S> <C> <C>
Defense Contractors -- 0.9%
Mitsubishi Heavy
Industries, Ltd. ADR 250,000 $ 1,994,625
-----------
Drugs -- 7.5%
Altana AG 1,500 875,093
Astra AB Free, Series
A 75,000 2,998,995
Biocompatibles
International PLC @ 175,000 1,282,435
Sankyo Co. Ltd. 175,000 3,935,943
Sanofi SA 52,998 3,401,793
Takeda Chemical
Industries Ltd. 250,000 4,120,125
-----------
16,614,384
-----------
Electric Utilities -- 1.4%
Capex SA, GDR 76,000 1,102,000
Korea Electric Power
Corporation 50,000 1,985,235
-----------
3,087,235
-----------
Electrical Equipment & Electronics -- 14.5%
Austria Mikro
Systeme International
AG 10,800 1,753,478
Keyence Corporation @ 15,000 1,730,460
LEM Holdings SA 6,892 2,437,789
Matsushita Electric
Industrial Company
Ltd. 175,000 2,850,155
Murata Mfg Company
Ltd. 100,000 3,683,890
Omron Corp. 115,000 2,653,372
Rohm Company 40,000 2,260,748
SGS-Thomson
Microelectronics N.V. @ 83,800 3,372,950
Siliconware Precision
Industries Company,
GDR @ 75,000 1,245,000
Uniden Corporation 200,000 3,354,280
Ushio, Inc. 150,000 1,788,615
Yamatake-Honeywell 70,000 1,085,777
Yokogawa Electric
Corp. 400,000 3,784,680
-----------
32,001,194
-----------
<CAPTION>
Number of
Shares Market Value
--------- ------------
<S> <C> <C>
Entertainment -- 4.1%
Filmes Lusomundo SA 52,300 $ 560,159
Nintendo Co. Ltd. 97,100 7,389,456
Television Broadcasts
Ltd. 300,000 1,068,930
----------
9,018,545
----------
Financial Services -- 4.0%
Internationale
Nederlanden Groep NV @ 35,000 2,340,625
Nomura Securities
Company Ltd. 250,000 5,453,125
Turkiye Granti
Bankasi AS 112,000 937,955
----------
8,731,705
----------
Food & Beverage -- 9.9%
Allied Domecq PLC 300,800 2,451,851
Cadbury Schweppes
PLC 250,000 2,063,000
Grand Metropolitan
PLC @ 150,000 1,079,445
Groupe Danone 13,000 2,147,891
Hellenic Bottling Co.,
S.A. 28,240 925,128
LVMH Moet Hennessy
Louis Vuitton 17,000 3,545,738
Nestle SA 2,500 2,772,345
Nutricia Vereenigde
Bedrijven N. V. @ 15,000 1,214,606
PT Indofood Sukses
Makmur 287,500 1,383,163
Remy Cointreau 80,000 2,551,944
Sermsuk Public
Company Ltd. @ 50,000 940,875
Universal Robina
Corporation 1,500,000 743,400
----------
21,819,386
----------
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
53
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
--------- ------------
<S> <C> <C>
Forest Products & Paper -- 1.5%
Aracruz Celulose S.
A., ADR 125,000 $ 968,750
Herlitz International
Trading AG 3,000 1,079,456
Herlitz International
Trading AG (New) @ 600 199,123
Rottneros Bruks AB
Free 1,000,000 1,056,200
-----------
3,303,529
-----------
Healthcare -- 2.3%
Ciba-Geigy AG @ 4,500 3,969,494
Rhoen-Klinikum AG,
Non-Voting Preference 11,520 1,006,095
-----------
4,975,589
-----------
Household Products -- 2.5%
Kao Corporation @ 180,000 2,233,602
Philips Electronics NV 60,000 2,170,944
Srithai Superware Co.
Ltd. 175,000 1,167,163
-----------
5,571,709
-----------
Industrial Services -- 2.3%
IHC Caland N. V. 70,000 2,358,090
JGC Corp. 250,000 2,641,725
-----------
4,999,815
-----------
Insurance -- 5.7%
Mapfre Vida Seguros 15,000 890,235
Marschollek,
Lautenschlaeger und
Partner AG 4,000 2,766,761
Reinsurance Australia
Corp. Ltd. 2,050,000 4,544,229
Schweiz-
Ruckversicherungs-G 2,000 2,332,593
Skandia Forsakrings
AB 80,000 2,166,824
-----------
12,700,642
-----------
Machinery & Components -- 5.7%
Bucher Holding AG, B
Shares 1,750 1,003,780
Gildemeister AG @ 20,000 1,816,560
Mori Seiki Co. Ltd. 100,000 2,258,800
Powerscreen
International PLC 649,900 3,909,993
Traub AG @ 16,000 1,453,248
Valmet Corp., Cl. A 90,000 2,259,315
-----------
12,701,696
-----------
<CAPTION>
Number of
Shares Market Value
--------- ------------
<S> <C> <C>
Manufacturing -- 0.9%
Bobst, Bearers AG @ 1,250 $ 1,955,416
-----------
Medical Products -- 0.7%
Elekta Instrument AB
Free, Series B 40,000 1,605,500
-----------
Metals & Mining -- 1.3%
Hoganas AB Cl. B 100,000 2,927,320
-----------
Office Products -- 0.8%
Canon USA, Inc. 100,000 1,812,860
-----------
Oil & Gas -- 4.2%
Awilco AS, B Shares 151,250 1,400,484
Cie Fen de Geophysiqe @ 20,000 658,434
Coflexip SA,
Sponsored ADR 70,000 1,321,250
Expro International
Group PLC 250,000 1,024,700
Smedvig AS 100,000 2,026,000
Transocean AS @ 137,000 2,374,457
Transportadora de Gas
del Sur SA 29,400 378,525
-----------
9,183,850
-----------
Publishing & Printing -- 1.5%
News Corp. Ltd., ADR 100,000 2,137,500
Wattachak Company,
Ltd. 750,000 1,190,925
-----------
3,328,425
-----------
Real Estate -- 1.3%
Irsa Inversiones Y
Represent 514,404 1,296,503
National Mutual
Property & Trust 1,816,000 1,644,025
-----------
2,940,528
-----------
Retail -- 3.0%
Giordano International
Ltd. 1,000,000 853,600
Moebel Walther AG,
Preference 40,000 1,313,512
Prodega AG 800 1,008,125
VBH - Vereinigter
Baubeschlag Handel
AG 12,500 3,493,384
-----------
6,668,621
-----------
Retail - Grocery -- 3.4%
FamilyMart Co. @ 55,000 2,484,686
Ito-Yokado Co. Ltd. 40,000 2,466,268
Jusco Co. 100,000 2,607,810
-----------
7,558,764
-----------
<CAPTION>
Number of
Shares Market Value
--------- ------------
<S> <C> <C>
Telecommunications -- 5.7%
Amper SA @ 80,000 $ 946,288
CPT Telefonica del
Peru S. A. 1,600,000 3,438,240
DDI Corporation 250 1,938,892
Korea Mobile
Telecommunications
Corporation 2,000 2,256,856
Millicom International
Cellular SA @ 37,500 1,143,750
Petersburg Long
Distance, Inc. @ 109,000 517,750
Technology Resources
Industries Berhad @ 400,000 1,181,600
Tele Danmark A/S @ 20,000 1,093,506
-----------
12,516,882
-----------
Textiles -- 0.4%
Gucci Group NV @ 25,000 971,875
-----------
Tobacco -- 1.0%
B. A. T. Industries
PLC @ 250,000 2,202,750
-----------
Transportation -- 0.5%
Lisnave-Estaleiros
Navais de Lisbona SA @ 355,000 998,083
-----------
TOTAL EQUITIES 221,039,548
(Cost $210,698,378) -----------
RIGHTS -- 0.0%
Banking
Banco Bradesco SA,
Preference @ 3,507,185 6,491
-----------
TOTAL RIGHTS 6,491
-----------
TOTAL INVESTMENTS -- 100.0% 221,046,039
(Cost $210,698,378)+
Other Assets/
(Liabilities) - (0.0%) (22,451)
-----------
NET ASSETS -- 100.0% $221,023,588
------------
</TABLE>
Notes to Portfolio of Investments
@Non-income producing security
+Aggregate cost for Federal tax purposes (Note 7)
ADR: American Depository Receipt
GDR: Global Depository Receipt
GDS: Global Depository Shares
The accompanying notes are an integral part of the financial statements.
54
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund -- Financial Statements
- --------------------------------------------------------------------------------
Statements of
Assets and
Liabilities
<TABLE>
<CAPTION>
December 31, 1995
-----------------
<S> <C>
Assets:
Investments, at value (cost $210,698,378) (Note 2)....................................... $ 221,046,039
Cash..................................................................................... 434,723
Foreign currency, at value (cost $549,255)............................................... 552,385
Receivables from:
Open forward foreign currency contracts (Note 2)....................................... 1,017,857
Fund shares sold....................................................................... 552,981
Interest and dividends................................................................. 50,580
Foreign taxes withheld................................................................. 117,555
Investment manager (Note 3)............................................................ 5,050
-----------------
Total assets......................................................................... 223,777,170
-----------------
Liabilities:
Payables for:
Investments purchased.................................................................. 2,412,871
Fund shares redeemed................................................................... 134,556
Directors' fees and expenses (Note 3).................................................. 2,286
Affiliates (Note 3):
Investment management fees........................................................... 154,168
Administration fees.................................................................. 17,740
Service and distribution fees........................................................ 218
Accrued expenses and other liabilities................................................... 31,743
-----------------
Total liabilities.................................................................... 2,753,582
-----------------
Net assets............................................................................... $ 221,023,588
=================
Net assets consist of:
Paid-in capital.......................................................................... $ 226,930,254
Distributions in excess of net investment income......................................... (215,389)
Accumulated net realized loss on investments and
foreign currency translations.......................................................... (17,063,339)
Net unrealized appreciation on investments, forward foreign currency
contracts, foreign currency and other assets and liabilities........................... 11,372,062
-----------------
$ 221,023,588
=================
Net assets:
Class 1.................................................................................. $ 111,643
=================
Class 2.................................................................................. $ 96,769
=================
Class 3.................................................................................. $ 96,908
=================
Class 4.................................................................................. $ 220,718,268
=================
Shares outstanding:
Class 1.................................................................................. 11,708
=================
Class 2.................................................................................. 10,120
=================
Class 3.................................................................................. 10,129
=================
Class 4.................................................................................. 23,044,249
=================
Net asset value, offering price and
redemption price per share:
Class 1.................................................................................. $ 9.54
=================
Class 2.................................................................................. $ 9.56
=================
Class 3.................................................................................. $ 9.57
=================
Class 4.................................................................................. $ 9.58
=================
</TABLE>
The accompanying notes are an integral part of the financial statements.
55
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund -- Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of
Operations
<TABLE>
<CAPTION>
Year ended
December 31, 1995
-----------------
<S> <C>
Investment income:
Dividends (net of withholding tax of $318,018)........................................... $ 2,634,137
Interest................................................................................. 640,847
----------------
Total investment income................................................................ 3,274,984
----------------
Expenses (Note 1):
Investment management fees (Note 3)...................................................... 1,580,088
Custody fees............................................................................. 256,098
Audit and legal fees..................................................................... 5,771
Directors' fees (Note 3)................................................................. 10,779
Fees waived by the investment manager (Note 3)........................................... (170,788)
----------------
1,681,948
Administration fees (Note 3):
Class 1................................................................................ 604
Class 2................................................................................ 515
Class 3................................................................................ 421
Class 4................................................................................ 180,405
Distribution and service fees (Note 3):
Class 1................................................................................ 660
Class 2................................................................................ 142
----------------
Net expenses......................................................................... 1,864,695
----------------
Net investment income................................................................ 1,410,289
----------------
Realized and unrealized gain (loss) from investments
and foreign currency:
Net realized gain (loss) on:
Investment transactions................................................................ (13,880,300)
Foreign currency transactions.......................................................... 2,200,060
----------------
Net realized loss.................................................................... (11,680,240)
Net change in unrealized appreciation (depreciation) on:
Investments............................................................................ 18,910,059
Translation of assets and liabilities in foreign currencies............................ 1,029,057
----------------
Net unrealized gain.................................................................. 19,939,116
----------------
Net realized and unrealized gain from investments and foreign currency............... 8,258,876
----------------
Net increase in net assets resulting from operations..................................... $ 9,669,165
================
</TABLE>
The accompanying notes are an integral part of the financial statements.
56
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund -- Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of
Changes in Net
Assets
<TABLE>
<CAPTION>
Year ended Period ended
December 31, 1995 December 31, 1994*
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income............................................................... $ 1,410,289 $ 15,124
Net realized loss on investment and
foreign currency transactions..................................................... (11,680,240) (3,065,246)
Net change in unrealized appreciation (depreciation)
on investments and translation of assets and liabilities
in foreign currencies............................................................. 19,939,116 (8,567,054)
---------------- -----------------
Net increase (decrease) in net assets resulting
from operations................................................................. 9,669,165 (11,617,176)
---------------- -----------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1............................................................................. -- --
Class 2............................................................................. (195) --
Class 3............................................................................. (467) --
Class 4............................................................................. (1,565,611) --
---------------- -----------------
Total distributions from net investment income.................................... (1,566,273) --
---------------- -----------------
In excess of net investment income:
Class 1............................................................................. (830) --
Class 2............................................................................. (952) --
Class 3............................................................................. (947) --
Class 4............................................................................. (2,389,653) --
---------------- -----------------
Total distributions in excess of net investment income............................ (2,392,382) --
---------------- -----------------
Net fund share transactions (Note 5):
Class 1............................................................................. 16,103 93,000
Class 2............................................................................. 1,191 93,000
Class 3............................................................................. 1,430 99,000
Class 4............................................................................. 64,817,475 9,865,319
---------------- -----------------
Increase in net assets from net fund share transactions........................... 64,836,199 10,150,319
---------------- -----------------
Total increase (decrease) in net assets............................................. 70,546,709 (1,466,857)
Net assets:
Beginning of period (Note 1)........................................................ 150,476,879 151,943,736
---------------- -----------------
End of period (including distributions in excess of net
investment income of $215,389 and undistributed
net investment income of $15,124, respectively)................................... $ 221,023,588 $ 150,476,879
================ =================
</TABLE>
* For the period from October 3, 1994 (commencement of operations)
through December 31, 1994.
The accompanying notes are an integral part of the financial statement.
57
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 1 Class 2
------- -------
Year ended Period ended Year ended Period ended
12/31/95 12/31/94** 12/31/95 12/31/94**
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $9.25 $10.00 $ 9.26 $10.00
---------- ---------- ---------- ------------
Income (loss) from investment operations:
Net investment income (0.03) (0.02) 0.02 (0.01)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 0.40 (0.73) 0.40 (0.73)
---------- ---------- ---------- ----------
Total income (loss) from investment operations 0.37 (0.75) 0.42 (0.74)
---------- ---------- ---------- ----------
Less distributions to shareholders:
From net investment income -- -- (0.02) --
In excess of net investment income (0.08) -- (0.10) --
---------- ---------- ---------- ----------
Total distributions (0.08) -- (0.12) --
---------- ---------- ---------- ----------
Net asset value, end of period $9.54 $9.25 $9.56 $9.26
========== ========== ========== ===========
Total Return 3.96% (7.50)% 4.52% (7.40)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $112 $93 $97 $93
Net expenses to average daily net assets 2.15%# 2.15%#* 1.60%# 1.60%#*
Net investment income to average daily net assets (0.40)% (1.10)%* 0.19% (0.55)%*
Portfolio turnover rate 121% 18% 121% 18%
#Computed after giving effect to the reduction in
management fee by MassMutual. Without this reduction of
fees by the investment manager, the ratio of expenses
to average daily net assets would have been: 2.24% 2.24%* 1.69% 1.69%*
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Class 3 Class 4
------- -------
Year ended Period ended Year ended Period ended
12/31/95 12/31/94** 12/31/95 12/31/94**
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $9.27 $10.00 $9.28 $10.00
-------- ---------- ------- ----------
Income (loss) from investment operations:
Net investment income 0.04 (0.00) 0.07 0.00
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 0.40 (0.73) 0.41 (0.72)
-------- ---------- ------- ----------
Total income (loss) from investment operations 0.44 (0.73) 0.48 (0.72)
-------- ---------- ------- ----------
Less distributions to shareholders:
From net investment income (0.05) -- (0.07) --
In excess of net investment income (0.09) -- (0.11) --
-------- ---------- -------- ----------
Total distributions (0.14) -- (0.18) --
-------- ---------- ------- ----------
Net asset value, end of period $9.57 $9.27 $9.58 $9.28
======== ========== ======= ==========
Total Return 4.78% (7.30)% 5.13%+ (7.20)%+
Ratios / Supplemental Data:
Net assets, end of period (000's) $97 $93 $220,718 $150,199
Net expenses to average daily net assets 1.35%# 1.35%#* 1.0020%# 1.0020%#*
Net investment income to average daily net assets 0.45% (0.30)%* 0.76% 0.04%*
Portfolio turnover rate 121% 18% 121% 18%
#Computed after giving effect to the reduction in
management fee by MassMutual. Without this reduction of
fees by the investment manager, the ratio of expenses
to average daily net assets would have been: 1.44% 1.44%* 1.0920% 1.0877%*
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
+Employee retirement benefit plans that invest plan assets in the Separate
Investment Accounts (SIAs) may be subject to certain charges as set forth in
their respective Plan Documents. Total return figures would be lower for the
periods presented if they reflected these charges.
The accompanying notes are an integral part of the financial statements.
58
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. The Trust MassMutual Institutional Funds (the "Trust") is
registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end, diversified
management investment company. The Trust is organized
under the laws of the Commonwealth of Massachusetts as a
Massachusetts business trust pursuant to an Agreement
and Declaration of Trust dated May 28, 1993, as amended.
The Trust consists of seven separate series of shares
(each individually referred to as a "Fund" or
collectively as the "Funds"), each having four classes
of shares: Class 1, Class 2, Class 3 and Class 4. Class
1, Class 2 and Class 3 shares of each Fund are offered
primarily to employer-sponsored defined contribution
plans that satisfy the qualification requirements of
Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). Class 4 shares of each Fund are
available only to separate investment accounts ("SIAs")
of Massachusetts Mutual Life Insurance Company
("MassMutual") in which corporate qualified plans
including defined contribution plans and defined benefit
plans are permitted to invest pursuant to the issuance
of group annuity contracts. The Funds are MassMutual
Prime Fund ("Prime Fund"), MassMutual Short-Term Bond
Fund ("Short-Term Bond Fund"), MassMutual Core Bond Fund
("Core Bond Fund"), MassMutual Balanced Fund ("Balanced
Fund"), MassMutual Value Equity Fund ("Value Equity
Fund"), MassMutual Small Cap Value Equity Fund ("Small
Cap Value Equity Fund"), and MassMutual International
Equity Fund ("International Equity Fund").
The Trust commenced operations on October 3, 1994, prior
to which its only activity was the receipt of a $107,000
investment from MassMutual and a $2,848,337,441 transfer
of Class 4 shares of the Funds in exchange for the
assets of certain MassMutual separate accounts and the
assumption of any liabilities attributable to those
assets. Accordingly, beginning net assets as of October
3, 1994 (commencement of operations) reflect these
amounts. This exchange was nontaxable, whereby the
carryover basis and holding period of the assets
exchanged was the same immediately after the exchange.
On November 2, 1994 MassMutual invested an additional
$1,995,000 in Classes 1, 2 and 3 of the Funds.
2. Significant The following is a summary of significant accounting
Accounting policies followed consistently by each Fund in the
Policies preparation of the financial statements in conformity
with generally accepted accounting principles. The
preparation of the financial statements in accordance
with generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial
statements. Actual results could differ from those
estimates.
Investment Equity securities are valued on the basis of valuations
Valuation furnished by a pricing service, authorized by the Board
of Trustees, which provides the last reported sale price
for securities listed on a national securities exchange
or on the NASDAQ national market system, or in the case
of over-the-counter securities not so listed, the last
reported bid price. Debt securities (other than short-
term obligations with a remaining maturity of sixty days
or less) are valued on the basis of valuations furnished
by a pricing service, authorized by the Board of
Trustees, which determines valuations taking into
account appropriate factors such as institutional-size
trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading
characteristics and other market data. Money market
obligations with a remaining maturity of sixty days or
less are valued at either amortized cost or at original
cost plus accrued interest, whichever approximates
current market value. All other securities and other
assets, including debt securities for which the prices
supplied by a pricing agent are deemed by MassMutual not
to be representative of market values, and including
restricted securities and securities for which no market
quotation is available, are valued at fair value in
accordance with procedures approved by and determined in
good faith by the Trustees although the actual
calculation may be done by others.
Portfolio securities traded on more than one United
States ("U.S.") national securities exchange or foreign
securities exchange are valued at the last price on the
business day as of which such value is being determined
at the close of the exchange representing the principal
market for such securities. All assets and liabilities
expressed in foreign currencies will be converted into
U.S. dollars at the mean between the buying and selling
rates of such currencies against U.S. dollars last
quoted by any major bank. If such quotations are not
available, the rate of exchange will be determined in
accordance with policies established by the Trustees.
59
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
Accounting for Investment transactions are accounted for on the trade
Investments date. Realized gains and losses on sales of investments
and unrealized appreciation and depreciation of
investments are computed on the specific identification
cost method. Interest income, adjusted for amortization
of discounts and premiums on investments, is earned from
the settlement date and is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend
date.
Federal Income Tax It is each Fund's intent to comply with the provisions
of subchapter M of the Code applicable to a regulated
investment company. Under such provisions, the Funds
will not be subject to federal income taxes on their
ordinary income and net realized capital gain to the
extent they are distributed or deemed to have been
distributed to their shareholders. Therefore, no Federal
income tax provision is required.
Dividends and Dividends from net investment income and distributions
Distributions to of any net realized capital gains of each Fund are
Shareholders declared and paid annually and at other times as may be
required to satisfy tax or regulatory requirements.
Distributions to shareholders are recorded on the ex-
dividend date. Income and capital gain distributions are
determined in accordance with income tax regulations
which may differ from generally accepted accounting
principles. These differences are primarily due to
investments in forward contracts, passive foreign
investment companies, the deferral of wash sale losses,
and paydowns on certain mortgage-backed securities. As a
result, net investment income (loss) and net realized
gain (loss) on investment transactions for a reporting
period may differ significantly from distributions
during such period. Accordingly, the Funds may
periodically make reclassifications among certain of
their capital accounts without impacting the net asset
value of the Funds.
Foreign Currency The books and records of the Funds are maintained in
Translation U.S. dollars. The market values of foreign currencies,
foreign securities and other assets and liabilities
denominated in foreign currencies are translated into
U.S. dollars at the mean of the buying and selling rates
of such currencies against the U.S. dollar at the end of
each business day. Purchases and sales of foreign
securities and income and expense items are translated
at the rates of exchange prevailing on the respective
dates of such transactions. The Funds do not isolate
that portion of the results of operations arising from
changes in the exchange rates from that portion arising
from changes in the market prices of securities.
Net realized foreign currency gains and losses resulting
from changes in exchange rates include foreign currency
gains and losses between trade date and settlement date
on investment securities transactions, foreign currency
transactions and the difference between the amounts of
dividends recorded on the books of the Funds and the
amount actually received.
Forward Foreign Each Fund may enter into forward foreign currency
Currency Contracts contracts in order to convert foreign denominated
securities or obligations to U.S. dollar denominated
investments. The International Equity Fund may engage in
such transactions to manage the value of portfolio
holdings against future movements in certain foreign
currency exchange rates. A forward foreign currency
contract is an agreement between two parties to buy and
sell a currency at a set price on a future date. The
market value of a forward currency contract fluctuates
with changes in forward foreign currency exchange rates.
Forward foreign currency contracts are marked to market
daily and the change in their value is recorded by the
Funds as an unrealized gain or loss. When a forward
foreign currency contract is extinguished, through
delivery or offset by entering into another forward
foreign currency contract, the Funds record a realized
gain or loss equal to the difference between the value
of the contract at the time it was opened and the value
of the contract at the time it was extinguished or
offset.
Forward foreign currency contracts involve a risk of
loss from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated
movements in foreign currency values and interest rates.
60
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
The notional or contractual amounts of these instruments
represent the investments the Funds have in particular
classes of financial instruments and do not necessarily
represent the amounts potentially subject to risk. The
measurement of the risk associated with these
instruments is meaningful only when all related and
offsetting transactions are considered. A summary of
obligations for the International Equity Fund under
these financial instruments at December 31, 1995 is as
follows:
<TABLE>
<CAPTION>
In
Contracts Exchange Unrealized
Settlement to Units of for U.S. Contracts at Appreciation
Date Deliver/Receive Currency Dollars Value (Depreciation)
---------- --------------- -------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
BUYS
1/02/96 Greek Drachma 12,008,264 $ 50,876 $ 50,759 $ (117)
1/03/96 Greek Drachma 32,050,046 135,776 135,477 (299)
1/04/96 Japanese Yen 46,818,212 457,209 453,877 (3,332)
1/05/96 Japanese Yen 123,021,296 1,194,034 1,192,625 (1,409)
----------
(5,157)
SELLS
1/16/96 Japanese Yen 4,007,200,000 39,870,653 38,847,639 1,023,014
----------
$1,017,857
==========
</TABLE>
Forward Each Fund may purchase or sell securities on a "when
Commitments issued" or delayed delivery or on a forward commitment
basis. The Funds use forward commitments to manage
interest rate exposure or as a temporary substitute for
purchasing or selling particular debt securities.
Forward commitments are not used for purposes of
trading. Delivery and payment for securities purchased
on a forward commitment basis can take place a month or
more after the date of the transaction. The Funds
instruct the custodian to segregate assets in a separate
account with a current market value at least equal to
the amount of its forward purchase commitments. The
price of the underlying security and the date when the
securities will be delivered and paid for are fixed at
the time the transaction is negotiated. The value of the
forward commitment is determined by management using a
commonly accepted pricing model and fluctuates based
upon changes in the value of the underlying security and
market repurchase rates. Such rates equate the
counterparty's cost to purchase and finance the
underlying security to the earnings received on the
security and forward delivery proceeds. The Funds record
on a daily basis the unrealized
appreciation/depreciation based upon changes in the
value of the forward commitment. When a forward
commitment contract is closed, the Funds record a
realized gain or loss equal to the difference between
the value of the contract at the time it was opened and
the value of the contract at the time it was
extinguished. Forward commitments involve a risk of loss
if the value of the security to be purchased declines
prior to the settlement date. The Funds could also be
exposed to loss if they cannot close out their forward
commitments because of an illiquid secondary market, or
the inability of counterparties to perform. The Funds
monitor exposure to ensure counterparties are
creditworthy and concentration of exposure is minimized.
A summary of open obligations under these forward
commitments at December 31, 1995, is as follows:
<TABLE>
<CAPTION>
Forward Expiration Aggregate
Commitment of Face Value Market Unrealized
Contracts to Buy Contracts of Contracts Cost Value Appreciation
---------------- --------- ------------ ---- ----- ------------
<S> <C> <C> <C> <C> <C>
Core Bond Fund
U.S. Treasury Note
6.500% 8/15/2005 February 1996 $13,750,000 $14,239,844 $14,634,675 $394,831
Balanced Fund
U.S. Treasury Note
6.500% 8/15/2005 February 1996 5,600,000 5,812,625 5,960,304 147,679
</TABLE>
61
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
Allocation of In maintaining the records for the Funds, the income and
Operating Activity expense accounts are allocated to each class of shares.
Investment income, unrealized and realized gains or
losses are prorated among the classes of shares based on
the relative net assets of each. Expenses are allocated
to each class of shares depending on the nature of the
expenditures. Administration and distribution and
service fees, which are directly attributable to a class
of shares, are charged to that class' operations.
Expenses of the Fund not directly attributable to the
operations of any class of shares or Fund are prorated
among the Funds and classes to which the expense relates
based on the relative net assets of each. Total expenses
per class are currently limited to a percentage of
average daily net assets, as discussed in Note 3.
3. Management
Fees and Other
Transactions
With Affiliates
Investment Under an agreement between the Trust and MassMutual,
Management Fees MassMutual is responsible for providing investment
management of each Fund. In return for this service,
MassMutual receives advisory fees monthly based upon
each Fund's average daily net assets at the following
annual rates:
<TABLE>
<S> <C>
Prime Fund .45%
Short-Term Bond Fund .45%
Core Bond Fund .45%
Balanced Fund .45%
Value Equity Fund .45%
Small Cap Value Equity Fund .55%
International Equity Fund .85%
</TABLE>
MassMutual has entered into investment sub-advisory
agreements with two subsidiaries: Concert Capital
Management, Inc. ("Concert Capital") and HarbourView
Asset Management Corporation ("HarbourView"). These
agreements provide that (1) Concert Capital will manage
the investment and reinvestment of the assets of the
Value Equity Fund, the Small Cap Value Equity Fund and
the Value Equity sector of the Balanced Fund, and (2)
HarbourView will manage the investment and reinvestment
of the assets of the International Equity Fund.
MassMutual pays Concert Capital a fee equal to an annual
rate of .13% of the average daily net asset value of the
Value Equity Fund and the Value Equity sector of the
Balanced Fund and .25% of the average daily net asset
value of the Small Cap Value Equity Fund. MassMutual
pays HarbourView a fee equal to an annual rate of .50%
of the average daily net asset value of the
International Equity Fund.
Administration Fees Under separate administrative and shareholder services
agreements between each Fund and MassMutual, MassMutual
provides certain administrative and shareholder services
and bears some class specific administrative expenses.
In return for these services, MassMutual receives an
administrative services fee monthly based upon the
average daily net assets of the applicable class of
shares of the Fund at the following annual rates:
<TABLE>
<CAPTION>
Class 1 Class 2 Class 3 Class 4
------- ------- ------- -------
<S> <C> <C> <C> <C>
Prime Fund .5628% .5128% .3152% .0812%
Short-Term Bond Fund .5568% .5068% .3092% .0782%
Core Bond Fund .5688% .5188% .3212% .0842%
Balanced Fund .5708% .5208% .3232% .0852%
Value Equity Fund .5814% .5314% .3338% .0905%
Small Cap Value Equity Fund .5728% .5228% .3252% .0862%
International Equity Fund .5948% .5448% .4448% .0972%
</TABLE>
62
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
Distribution and Oppenheimer Funds Distributor, Inc. ("Oppenheimer") acts
Service Fees as distributor to each Fund. MML Investor Services, Inc.
("MMLISI") serves as sub-distributor to each Fund.
Oppenheimer and MMLISI are subsidiaries of MassMutual.
Oppenheimer is paid a distribution fee with respect to
Class 1 and Class 2 at the annual rate of .40% and .15%,
respectively, of the value of average daily net assets
attributable to those classes of shares of which a
portion is subsequently allocated to MMLISI. The Funds
do not pay any fees directly to MMLISI. MassMutual is
also paid a fee for shareholder services with respect to
Class 1 shares of the Funds at the annual rate of .25%
of the value of the average daily net assets of the
respective class of each Fund. These fees are authorized
pursuant to separate service and distribution plans for
each of the classes of shares adopted by the Funds
pursuant to Rule 12b-1 under the Investment Company Act
and are used by Oppenheimer to cover expenses primarily
intended to result in the sale of those shares of the
Funds.
Expense Limitations MassMutual has voluntarily agreed to waive a portion of
its management fee to the extent that the aggregate
annual operating expenses incurred during the year
exceed the following percentages of the average daily
net assets:
<TABLE>
<CAPTION>
Class 1 Class 2 Class 3 Class 4
------- ------- ------- -------
<S> <C> <C> <C> <C>
Prime Fund 1.65% 1.10% .75% .5160%
Short-Term Bond Fund 1.65% 1.10% .75% .5190%
Core Bond Fund 1.65% 1.10% .75% .5130%
Balanced Fund 1.65% 1.10% .75% .5120%
Value Equity Fund 1.65% 1.10% .75% .5067%
Small Cap Value Equity Fund 1.75% 1.20% .85% .6110%
International Equity Fund 2.15% 1.60% 1.35% 1.002%
</TABLE>
MassMutual's management fee for the year ended December
31, 1995 was $16,120,903, of which $1,545,588 was
reimbursed to the Funds.
Other Certain officers and directors of the Funds are also
officers of MassMutual. The compensation of unaffiliated
directors of the Funds is borne by the Funds.
At December 31, 1995, MassMutual or separate investment
accounts thereof owned all of the outstanding shares of
the Trust except 4,818, 4,620, 4,777, and 1,624 shares
of the Core Bond Fund, Balanced Fund, Small Cap Value
Equity Fund, and International Equity Fund,
respectively.
4. Purchases And Cost of purchases and proceeds from sales of investment
Sales Of securities (excluding short-term investments) for the
Investments year ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Long-term U.S.
Government Other Long-term
Securities Securities
-------------- ---------------
<S> <C> <C> <C>
Purchases Short-Term Bond Fund $ 71,135,219 $ 12,260,217
Core Bond Fund 125,513,851 66,690,296
Balanced Fund 12,772,828 44,986,409
Value Equity Fund -- 293,276,444
Small Cap Value Equity Fund -- 86,777,430
International Equity Fund -- 294,912,043
Sales Short-Term Bond Fund $127,890,766 $ 13,571,866
Core Bond Fund 143,529,176 35,754,558
Balanced Fund 21,872,738 46,166,634
Value Equity Fund -- 271,140,722
Small Cap Value Equity Fund -- 91,904,478
International Equity Fund -- 213,930,084
</TABLE>
63
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
5. Capital Share The Funds are authorized to issue an unlimited number of
Transactions shares, with no par value, in one or more of four
classes of shares: Class 1, Class 2, Class 3 and Class
4. Class 1 and Class 2 shares of each Fund are subject
to distribution and service fees. Class 3 shares are not
subject to any distribution or service fees. SIA
Investors purchase Class 4 shares directly from the
Funds and pay no distribution or service fees. Changes
in shares outstanding for each Fund are as follows:
<TABLE>
<CAPTION>
Class 1 Class 2
Year ended Year ended Year ended Period ended
December 31, 1995 December 31, 1994*@ December 31, 1995 December 31, 1994*@
Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Prime Fund
Sold -- -- 618 $93,000 -- -- 618 $93,000
Issued as reinvestment
of dividends 28 4,178 5 702 32 4,746 5 778
Redeemed -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Net increase 28 $ 4,178 623 $93,702 32 $4,746 623 $93,778
======= ======= ======= ======= ======= ======= ======= =======
Short-Term Bond Fund
Sold -- -- 9,347 93,000 -- -- 9,347 93,000
Issued as reinvestment
of dividends 740 7,530 95 940 796 8,116 103 1,016
Redeemed -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Net increase 740 $ 7,530 9,442 $93,940 796 $8,116 9,450 $94,016
======= ======= ======= ======= ======= ======= ======= =======
Core Bond Fund
Sold 4,457 49,156 9,385 93,000 -- -- 9,384 93,000
Issued as reinvestment
of dividends 1,186 12,759 102 1,011 861 9,288 110 1,087
Redeemed -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Net increase 5,643 $61,915 9,487 $94,011 861 $9,288 9,494 $94,087
======= ======= ======= ======= ======= ======= ======= =======
Balanced Fund
Sold 4,480 49,577 9,281 93,000 -- -- 9,281 93,000
Issued as reinvestment
of dividends 530 6,084 60 596 401 4,610 67 671
Redeemed (23) (260) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Net increase 4,987 $55,401 9,341 $93,596 401 $4,610 9,348 $93,671
======= ======= ======= ======= ======= ======= ======= =======
Value Equity Fund
Sold -- -- 9,263 93,000 -- -- 9,254 93,000
Issued as reinvestment
of dividends 219 2,751 41 409 267 3,372 49 483
Redeemed -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Net increase 219 $ 2,751 9,304 $93,409 267 $3,372 9,303 $93,483
======= ======= ======= ======= ======= ======= ======= =======
Small Cap Value Equity Fund
Sold 4,740 49,719 9,499 93,000 -- -- 9,490 93,000
Issued as reinvestment
of dividends 119 1,356 22 207 114 1,300 29 280
Redeemed -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Net increase 4,859 $51,075 9,521 $93,207 114 $1,300 9,519 $93,280
======= ======= ======= ======= ======= ======= ======= =======
International Equity Fund
Sold 1,610 15,218 9,291 93,000 -- -- 9,281 93,000
Issued as reinvestment
of dividends 93 885 -- -- 124 1,191 -- --
Redeemed -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Net increase 1,703 $16,103 9,291 $93,000 124 $1,191 9,281 $93,000
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
* For classes 1, 2, and 3, the shares and amounts sold represent additional
investments in each class by MassMutual on November 2, 1994 (Note 1).
@ For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
64
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class 3 Class 4
Year ended Year ended Year ended Period ended
December 31, 1995 December 31, 1994*@ December 31, 1995 December 31, 1994*@
Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Prime Fund
Sold -- -- 657 $ 99,000 1,826,450 281,187,060 590,772 $ 89,267,420
Issued as reinvestment
of dividends 34 5,095 5 801 84,068 12,693,332 11,782 1,771,049
Redeemed -- -- -- -- (1,363,706) (210,583,290) (331,048) (49,921,434)
------ ------ ------ -------- ----------- ------------- ---------- ------------
Net increase 34 $5,095 662 $ 99,801 546,812 $ 83,297,102 271,506 $ 41,117,035
====== ====== ====== ======== =========== ============= ========== ============
Short-Term Bond Fund
Sold -- -- 9,940 99,000 5,136,925 53,696,509 1,581,709 15,789,811
Issued as reinvestment
of dividends 830 8,467 104 1,030 947,825 9,611,215 177,223 1,745,646
Redeemed -- -- -- -- (4,819,336) (50,374,106) (1,763,023) (17,620,670)
------ ------ ------ -------- ----------- ------------- ---------- ------------
Net increase (decrease) 830 $8,467 10,044 $100,030 1,265,414 $ 12,933,618 (4,091) ($85,213)
====== ====== ====== ======== =========== ============= ========== ============
Core Bond Fund
Sold -- -- 9,990 99,000 8,241,236 89,191,723 1,429,879 14,243,691
Issued as reinvestment
of dividends 894 9,658 111 1,099 1,952,750 20,953,505 355,921 3,505,824
Redeemed -- -- -- -- (6,340,632) (67,005,587) (2,776,813) (27,704,386)
------ ------ ------ -------- ----------- ------------- ---------- ------------
Net increase (decrease) 894 $9,658 10,101 $100,099 3,853,354 $ 43,139,641 (991,013) ($9,954,871)
====== ====== ====== ======== =========== ============= ========== ============
Balanced Fund
Sold -- -- 9,870 99,000 17,612,664 191,493,187 3,162,746 31,546,867
Issued as reinvestment
of dividends 433 4,977 70 697 1,722,693 19,759,099 379,170 3,768,947
Redeemed -- -- -- -- (14,889,389) (160,925,764) (2,681,481) (26,702,020)
------ ------ ------ -------- ----------- ------------- ---------- ------------
Net increase 433 $4,977 9,940 $ 99,697 4,445,968 $ 50,326,522 860,435 $ 8,613,794
====== ====== ====== ======== =========== ============= ========== ============
Value Equity Fund
Sold -- -- 9,851 99,000 39,224,457 451,052,424 7,240,501 71,969,177
Issued as reinvestment
of dividends 299 3,763 52 515 5,223,526 65,653,544 1,278,097 12,704,287
Redeemed -- -- -- -- (34,020,780) (390,453,417) (9,506,612) (94,373,733)
------ ------ ------ -------- ----------- ------------- ---------- ------------
Net increase (decrease) 299 $3,763 9,903 $ 99,515 10,427,203 $ 126,252,551 (988,014) $9,700,269)
====== ====== ====== ======== =========== ============= ========== ============
Small Cap Value Equity Fund
Sold -- -- 10,102 99,000 9,765,741 102,623,894 2,455,853 23,734,280
Issued as reinvestment
of dividends 146 1,672 34 323 539,817 6,159,231 144,274 1,374,928
Redeemed -- -- -- -- (9,110,662) (97,354,772) (2,495,971) (23,950,249)
------ ------ ------ -------- ----------- ------------- ---------- ------------
Net increase 146 $1,672 10,136 $ 99,323 1,194,896 $ 11,428,353 104,156 $ 1,158,959
====== ====== ====== ======== =========== ============= ========== ============
International Equity Fund
Sold -- -- 9,880 99,000 11,931,440 112,672,627 2,742,144 26,394,386
Issued as reinvestment
of dividends 149 1,430 -- -- 412,266 3,955,148 -- --
Redeemed -- -- -- -- (5,487,562) (51,810,300) (1,746,884) (16,529,067)
------ ------ ------ -------- ----------- ------------- ---------- ------------
Net increase 149 $1,430 9,880 $ 99,000 6,856,144 $ 64,817,475 995,260 $ 9,865,319
====== ====== ====== ======== =========== ============= ========== ============
</TABLE>
*For classes 1, 2, and 3, the shares and amounts sold represent additional
investments in each class by MassMutual on November 2, 1994 (Note 1).
@For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
65
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
6. Foreign The International Equity Fund invests substantially all
Securities of its assets in foreign securities. The other Funds may
also invest in foreign securities, subject to certain
percentage restrictions. Investing in securities of
foreign companies and foreign governments involves
special risks and considerations not typically
associated with investing in securities of U.S.
companies and the U.S. Government. These risks include
revaluation of currencies and future adverse political
and economic developments. Moreover, securities of many
foreign companies and foreign governments and their
markets may be less liquid and their prices more
volatile than those of securities of comparable U.S.
companies and the U.S. Government.
7. Federal Income At December 31, 1995, the cost of securities and the
Tax Information unrealized appreciation (depreciation) in the value of
investments owned by the Funds, as computed on a Federal
income tax basis, are as follows:
<TABLE>
<CAPTION>
Federal Tax Basis Tax Basis Net Unrealized
Income Tax Unrealized Unrealized Appreciation
Cost Appreciation Depreciation (Depreciation)
-------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Prime Fund $ 254,279,931 $ 4,933 $ (24,468) $ (19,535)
Short-Term Bond Fund 121,170,614 1,428,200 (25,769) 1,402,431
Core Bond Fund 239,909,867 11,334,755 (169,550) 11,165,205
Balanced Fund 402,843,123 54,343,933 (1,359,830) 52,984,103
Value Equity Fund 1,707,620,788 426,363,507 (10,960,347) 415,403,160
Small Cap Value Equity Fund 335,997,760 60,290,137 (12,043,111) 48,247,026
International Equity Fund 210,702,505 21,095,510 (10,751,976) 10,343,534
</TABLE>
At December 31, 1995, the following Funds have
available, for Federal income tax purposes, unused
capital losses:
<TABLE>
<CAPTION>
Amount Expiration Date
----------- -----------------
<S> <C> <C>
Prime Fund $ 2,009 December 31, 2003
Small Cap Value Equity Fund 21,693 December 31, 2003
International Equity Fund 602,013 December 31, 2002
14,566,259 December 31, 2003
</TABLE>
The dividend percentages in the table below multiplied
by the amount of ordinary dividend distributions
reported to shareholders on Form 1099-DIV provides the
amount of qualifying dividends received. Under Federal
tax law, the amounts reportable as qualifying dividends
are eligible for the dividends received deduction in the
year received as provided by Section 243 of the Internal
Revenue Code.
Balanced Fund 33.40%
Small Cap Value Equity Fund 96.58%
Value Equity Fund 98.58%
Certain Funds have designated the following amounts as
long-term capital gain dividends for the year ended
December 31, 1995.
Short-Term Bond Fund $ 201,391
Core Bond Fund 3,162,876
Balanced Fund 2,543,764
Value Equity Fund 16,059,244
Shareholders are advised to consult their tax advisor
concerning the tax treatment of dividends and
distributions from the applicable Fund.
8. Reverse Stock The Trustees of the Trust authorized on November 4, 1994
Split that the issued and outstanding shares of beneficial
interest of the Prime Fund undergo a 1-for-15 reverse
split, which was accomplished at the close of business
on December 16, 1994. Share and per share amounts in the
accompanying financial statements of the Prime Fund,
including information contained in the financial
highlights, have been restated to reflect a retroactive
application of this reverse stock split.
66
<PAGE>
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Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of the
MassMutual Institutional Funds:
We have audited the accompanying statements of assets
and liabilities of the MassMutual Institutional Funds,
comprising, respectively, the Prime, Short-Term Bond,
Core Bond, Balanced, Value Equity, Small Cap Value
Equity and International Equity Funds, (the "Funds"),
including the portfolios of investments, as of December
31, 1995, and the related statements of operations for
the year then ended and changes in net assets and
financial highlights for the year ended December 31,
1995 and for the period from October 3, 1994
(commencement of operations) through December 31, 1994.
These financial statements and financial highlights are
the responsibility of the Funds' management. Our
responsibility is to express an opinion on these
financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements 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, 1995, 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 each of the
respective funds constituting the MassMutual
Institutional Funds as of December 31, 1994, the results
of their operations for the year then ended and the
changes in their net assets and their financial
highlights for the year ended December 31,1995 and for
the period from October 3, 1994 (commencement of
operations) through December 31, 1994, in conformity
with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Springfield, Massachusetts
February 9, 1996
67
<PAGE>
This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus or private placement
memorandum, if applicable, containing more complete information including fees,
risks, and expenses. If used as sales material, this report must be accompanied
by a Performance Update for the most recently completed calendar quarter. The
figures in this report reflect past results. The investment return and principal
value of shares will fluctuate with market conditions so that shares, when
redeemed, may be worth more or less than their original cost. All investments
are subject to certain risks. For example, stocks are sensitive to price changes
and bonds are affected by interest rate fluctuations. Investors should make
investment decisions based on an investment strategy that takes into
consideration investment goals, the length of time money can stay invested, and
risk tolerance. Portfolio changes should not be considered recommendations for
action by individual investors.
