<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
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............................... 10
Portfolio of Investments............................... 12
Financial Statements................................... 14
MassMutual Core Bond Fund
Portfolio Manager Report............................... 19
Portfolio of Investments............................... 21
Financial Statements................................... 24
MassMutual Balanced Fund
Portfolio Manager Report............................... 29
Portfolio of Investments............................... 31
Financial Statements................................... 35
MassMutual Value Equity Fund
Portfolio Manager Report............................... 40
Portfolio of Investments............................... 42
Financial Statements................................... 45
MassMutual Small Cap Value Equity Fund
Portfolio Manager Report............................... 50
Portfolio of Investments............................... 52
Financial Statements................................... 54
MassMutual International Equity Fund
Portfolio Manager Report............................... 59
Portfolio of Investments............................... 61
Financial Statements................................... 64
Notes to Financial Statements............................. 69
</TABLE>
<PAGE>
MassMutual Institutional Funds - Letter to Shareholders
July 31, 1996
To Our
Shareholders
[PHOTO OF STUART H. REESE APPEARS HERE]
"Both the stock and
bond markets have been
decidedly more volatile
during 1996, and we
expect that to continue."
Low Interest Rates Defined Markets Through Year-End '95
To put the first six months of 1996 in perspective, it's helpful to look back
for a moment. Throughout 1995, concern over how quickly the domestic economic
growth rate was slowing prompted the Federal Reserve (the Fed) to cut interest
rates. The Fed reduced rates in an effort to prolong the period of expansion at
a slower, but more sustainable rate, thus staving off the possibility of a
recession.
Lower interest rates strongly benefited both the stock and bond markets during
1995. Stocks did well because lower rates both increased corporate
profitability and encouraged consumer spending, especially on goods that had to
be financed. Bonds reacted favorably to declining rates because as new bonds
are issued at lower current rates, investors are willing to pay more for the
higher income of existing bonds.
Interest Rates Change Direction On Reports Of Faster Growth in '96
In contrast to last year, when slowing growth was a concern, economic data in
early 1996 suggested that growth had again picked up. While growth in and of
itself is good, at this point in the economic cycle it could create inflationary
pressures, causing prices of goods and services to increase and consequently
investments to lose their relative value.
Beginning with reports of an increase in non-farm payroll for the month of
February, which was especially surprising considering the difficult winter most
of the country suffered, rapid economic growth became a concern. This fact
started the investment community discussing not when the Fed might cut rates
further, but rather how far rates might be increased in order to preempt an
inflationary GDP growth rate.
The Stock Market, While Still Positive, Becomes Volatile
Reacting to both increasing interest rates and persistent concerns over whether
reports of faster growth were accurate, the domestic stock market became
volatile over the first half. Investors alternately focused on the types of
companies that should be able to grow faster than the overall economy, and on
stocks of companies that would benefit from the increased consumer demand that
seemed to be reflected by improving economic statistics.
Smaller company stocks and stocks in traditional growth sectors of the market
performed well at various times, as did cyclical stocks - those of companies
whose prospects are tied to the strength of the economy.
The Bond Market Is Less Resilient
As interest rates climbed over the past six months, the bullish bond market of
1995 dissipated. Bonds with the most exposure to interest rate changes fared
most poorly. Long-term Treasuries reported negative price performance for the
period, and the yield curve steepened dramatically.
Bonds with shorter maturities, and bonds that are influenced by other factors
than interest rates - such as corporate bonds, which were buoyed somewhat by
continued corporate profitability - performed somewhat better.
Foreign Markets Offer Opportunity
After lagging during last year's tremendous domestic markets, the case for
foreign stock and bond investments has become more compelling. In stocks,
prices have generally not reached the highs of 1995's market, driven by the
domestic market. In addition, the growth rates of many foreign economies have
surpassed the U.S. economic growth rate. On the bond side, many foreign issues
currently offer both higher income and appreciation potential than do bonds in
the U.S. market, making a strong case for portfolio diversification.
(Continued)
1
<PAGE>
MassMutual Institutional Funds - Letter to Shareholders (Continued)
Value Investing During Volatile Markets
Both the stock and bond markets have been decidedly more volatile
during 1996, and we expect that to continue. Price fluctuations have
received a great deal of attention in the financial press, and caused
some discomfort for investors in both markets. However, it is during
times of market volatility that value investors like us have an
advantage. When prices are moving steadily higher, value strategies
tend to underperform because they rely heavily on buying securities
when they're selling at discounted prices. In a market with price
fluctuations, astute value investors have the opportunity to purchase
securities they think will perform well at temporarily reduced prices
and then profit as the securities return to favor in the market.
An Optimistic Outlook Regardless of Market Uncertainty
Regardless of the volatility in the U.S. markets in recent months, we
think there are compelling reasons to believe the economy is in good
shape. The economy grew at a real rate of more than three percent
during the first half of 1996, which is well above what had been
forecasted. So even with a potentially slower second half, growth will
have continued at an impressive rate. And though threats of inflation
are a large factor in the markets' volatility, the core rate of
inflation, minus increases in the food and energy sectors, is still
quite low at approximately 2.7 percent.
The current debate in the markets concerns how the Federal Reserve
will react to this data, and consequently whether rates will be
increased. We expect that if the Fed does move to tighten money
supply, its move will not be a large one. In any event, we intend to
focus more on inherent strengths and long-term value. It is in an
environment like this that we'd expect our portfolio strategies to
perform well.
/s/ Stuart H. Reese
Stuart H. Reese
President
MassMutual Institutional Funds
2
MassMutual Prime Fund - Portfolio Manager Report
What are the investment The objective and policies of the Fund are to:
objective and policies * maximize current income, consistent with
for the MassMutual liquidity and preservation of capital
Prime Fund? * 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 We're very pleased with the Fund's performance
performed over the past for the period. While we continued to offer
six months? investors a safe and highly liquid income
vehicle, we also benefited from yields that were
higher this year than last as a result of
increases in interest rates.
How was the Fund During 1995, when interest rates were declining,
positioned in this we had lengthened the average maturity of our
market and why? portfolio in an effort to take advantage of
higher rates. In contrast, during the first half
of this year, we kept average maturity shorter,
replacing shorter-term securities with new issues
more often, and on favorable terms as the yield
curve steepened. The Fund also benefited from
having the majority of holdings, nearly 88
percent, invested in Tier 2 commercial paper over
the past six months. Tier 2 commercial paper
involves slightly more risk than higher-quality
Tier 1 commercial paper, but it also offers more
competitive yields.
What changes are As our assets have grown by approximately 10
currently being made to percent over the past six months, we're working
the portfolio? to remain well-diversified among issuers and
securities. Because Prime Fund is not a money
market fund, we have a greater degree of
investment flexibility than pure money funds.
This helps us both in terms of the types of
securities we can diversify among and in the
amount of income we can provide.
At this time, most of the newly issued securities
in our market are extremely short in maturity.
We're looking for ways to extend our average
maturity slightly - its June 30th length was 44
days - but longer-maturity issues are currently
in short supply. As always, we're evaluating and
researching all of our investment opportunities
in an effort to capture the most income we can in
this environment, without taking on unnecessary
risk.
What is the outlook for We believe the outlook remains favorable. U.S.
the Fund? economic growth appears to be strong. That fact
has given rise to the possibility of a tightening
of the money supply, or an increase in interest
rates, in an effort to counteract any upward move
in inflation. If the Federal Reserve should
increase rates later in the year, extremely
short-term income vehicles like this Fund are
one of the few types of investments that would
benefit.Since the income we pay relates directly
to prevailing interest rates, a higher rate
environment would allow us to pay a higher yield
without taking on additional risk.
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Prime Fund
Classes 1-4 and 91-day Treasury Bills
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Mass Mutual Prime Fund
Total Return Year to Date One Year Average Annual
1/1/96-6/30/96 7/1/95-6/30/96 10/3/94-6/30/96
<S> <C> <C> <C>
Class 1 1.97% 4.23% 4.34%
Class 2 2.25% 4.81% 4.95%
Class 3 2.42% 5.17% 5.29%
Class 4 2.54% 5.41% 5.53%
- -------------------------------------------------------------------------------
91-Day 2.44% 5.27% --
Treasury Bills
</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 91-day Treasury Bills are unmanaged and do not incur
expenses.
- -------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Class 1 Class 2 Class 3 Class 4 T-Bills
<S> <C> <C> <C> <C> <C>
10/3/94 $10,000 $10,000 $10,000 $10,000 $10,000
12/94 10,096 10,115 10,121 10,126 10,112
3/95 10,213 10,245 10,260 10,271 10,237
6/95 10,330 10,337 10,401 10,419 10,384
9/95 10,444 10,505 10,539 10,563 10,524
12/95 10,559 10,639 10,680 10,711 10,671
3/96 10,670 10,763 10,817 10,853 10,797
6/96 10,767 10,876 10,939 10,982 10,932
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE>
Mass Mutual Prime Fund - Porotfolio Of Investments
<TABLE>
<CAPTION>
Portfolio of Investments
June 30,1996 (Unaudited)
Principal
Amount Market Value
----------- ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 100.3%
Commercial Paper -- 91.5%
Airtouch
Communications, Inc.
5.480% 7/15/1996 $10,000,000 9,978,689
Aristar, Inc.
5.330% 7/17/1996 7,215,000 7,197,908
Boston Edison
Company
5.550% 8/21/1996 5,925,000 5,878,415
Burlington Northern
Santa Fe Corporation
5.550% 9/16/1996 8,885,000 8,778,163
Carter Holt Harvey
Limited
5.500% 9/04/1996 3,315,000 3,281,340
Carter Holt Harvey
Limited
5.550% 7/17/1996 550,000 548,643
Carter Holt Harvey
Limited
5.550% 9/12/1996 5,645,000 5,580,647
Central and South
West Corporation
5.470% 7/11/1996 1,295,000 1,293,032
Central and South
West Corporation
5.500% 7/09/1996 7,030,000 7,021,408
Cincinnati Bell Inc.
5.150% 8/20/1996 3,145,000 3,122,505
Comdisco, Inc.
5.470% 7/26/1996 4,910,000 4,891,349
Comdisco, Inc.
5.480% 7/19/1996 1,635,000 1,630,520
Comdisco, Inc.
5.490% 8/13/1996 4,500,000 4,470,491
ConAgra, Inc.
5.400% 8/26/1996 9,100,000 9,023,560
ConAgra, Inc.
5.600% 10/25/1996 1,630,000 1,600,481
Cox Enterprises, Inc.
5.450% 7/29/1996 4,200,000 4,182,197
Principal
Amount Market Value
----------- ------------
Cox Enterprises, Inc.
5.520% 8/05/1996 $ 7,190,000 7,151,414
Crown Cork & Seal
Company, Inc.
5.470% 7/23/1996 5,135,000 5,117,835
Crown Cork & Seal
Company, Inc.
5.480% 7/23/1996 2,560,000 2,551,427
Dana Credit
Corporation
5.500% 7/02/1996 2,500,000 2,499,618
Dana Credit
Corporation
5.500% 7/11/1996 165,000 164,748
Dana Credit
Corporation
5.500% 7/24/1996 2,185,000 2,177,322
Dana Credit
Corporation
5.500% 8/06/1996 2,736,000 2,720,952
Federal Signal
Corporation
5.470% 7/31/1996 5,975,000 5,947,764
Federal Signal
Corporation
5.500% 9/03/1996 5,700,000 5,643,013
Ford Motor Credit
Company
5.350% 7/22/1996 5,000,000 4,984,397
Illinois Power
Company
5.550% 8/14/1996 4,750,000 4,717,779
Illinois Power
Company
5.600% 8/21/1996 4,285,000 4,251,006
ITT Corporation
5.580% 9/24/1996 4,800,000 4,736,296
Kerr-McGee Credit
Corporation
5.500% 7/10/1996 11,500,000 11,484,187
Lockheed Martin
Corporation
5.450% 7/30/1996 2,700,000 2,688,146
Principal
Amount Market Value
----------- ------------
Mattel, Inc.
5.480% 8/01/1996 $ 5,115,000 5,090,863
Mattel, Inc.
5.480% 8/08/1996 4,440,000 4,414,317
Olin Corporation
5.450% 7/02/1996 6,985,000 6,983,942
ORIX Credit Alliance,
Inc.
5.500% 9/20/1996 6,100,000 6,022,825
ORIX Credit Alliance,
Inc.
5.630% 10/18/1996 4,760,000 4,679,006
Praxair, Inc.
5.440% 10/21/1996 5,700,000 5,600,282
Praxair, Inc.
5.480% 10/22/1996 5,450,000 5,353,817
Public Service
Electric and Gas
Company
5.440% 7/11/1996 5,195,000 5,187,150
Public Service
Electric and Gas
Company
5.450% 7/12/1996 4,465,000 4,457,564
Public Service
Electric and Gas
Company
5.470% 7/08/1996 1,180,000 1,178,745
Ryder System Inc.
5.430% 8/15/1996 5,000,000 4,966,063
Service Corporation
International
5.480% 7/25/1996 7,000,000 6,974,427
Textron Financial
Corporation
5.500% 8/12/1996 9,100,000 9,041,608
Tyson Foods, Inc.
5.450% 8/07/1996 7,465,000 7,423,186
Tyson Foods, Inc.
5.460% 8/23/1996 3,365,000 3,337,949
Union Camp
Corporation
5.350% 7/01/1996 900,000 900,000
(Continued)
</TABLE>
4 The accompanying notes are an intrgral part of the finncial statements.
<PAGE>
MassMutual Prime Fund - Portfolio of Investments (Continued)
<TABLE>
<CAPTION>
Principal
Amount Market Value
--------------- ------------
<S> <C> <C>
Union Pacific
Corporation
5.550% 7/26/1996 $ 4,730,000 4,711,770
Union Pacific
Corporation
5.570% 8/02/1996 355,000 353,242
UOP
5.550% 7/16/1996 3,500,000 3,491,906
UOP
5.600% 7/24/1996 3,875,000 3,861,136
VF Corporation
5.470% 8/09/1996 5,980,000 5,944,564
VF Corporation
5.475% 8/16/1996 3,865,000 3,837,961
-------------
249,127,575
U. S. Government -- 8.8%
U. S. Treasury Bill
4.785% 8/22/1996 8,550,000 8,491,935
U. S. Treasury Bill
4.855% 8/22/1996 5,590,000 5,552,070
U. S. Treasury Bill
4.895% 7/18/1996 5,360,000 5,351,627
U. S. Treasury Bill
4.900% 9/19/1996 4,440,000 4,391,907
-------------
23,787,539
-------------
TOTAL SHORT-TERM
INVESTMENTS 272,915,114
-------------
(Cost $272,920,522)+
TOTAL INVESTMENTS -- 100.3% 272,915,114
Other Assets/
(Liabilities) - (0.3%) (739,310)
==============
NET ASSETS -- 100.0% $ 272,175,804
==============
</TABLE>
Notes to Portfolio Of Investment
+Aggregate cost for Federal tax purposes (Note 7)
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>
June 30, 1996
(Unaudited)
---------------
<S> <C>
Assets:
Short-term investments, at value (cost $272,920,522)........ $ 272,915,114
(Note 2)
Cash........................................................ 4,513
Receivables from:
Fund shares sold........................................... 340,378
Investment manager (Note 3)................................ 7,976
--------------
Total assets............................................. 273,267,981
==============
Liabilities:
Payables for:
Fund shares redeemed........................................ 959,474
Directors' fees and expenses (Note 3)....................... 2,011
Affiliates (Note 3):
Investment management fees................................. 104,061
Administration fees........................................ 18,879
Service and distribution fees.............................. 218
Accrued expenses and other liabilities....................... 7,534
--------------
Total liabilities.......................................... 1,092,177
--------------
Net assets................................................... $ 272,175,804
==============
Net assets consist of:
Paid-in capital.............................................. $ 265,302,652
Undistributed net investment income.......................... 6,882.396
Accumulated net realized loss on investments................. (3,386)
Net unrealized depreciation on investments................... (5,408)
--------------
$ 272,175,804
==============
Net assets:
Class 1..................................................... $ 107,555
==============
Class 2..................................................... $ 108,540
==============
Class 3..................................................... $ 108,988
==============
Class 4..................................................... $ 271,850,721
==============
Shares outstanding:
Class 1..................................................... 698.107
==============
Class 2..................................................... 701.708
==============
Class 3..................................................... 703.035
==============
Class 4..................................................... 1,754,610.155
==============
Net asset value, offering price and
redemption price per share:
Class 1..................................................... $ 154.07
==============
Class 2..................................................... $ 154.68
==============
Class 3..................................................... $ 155.02
==============
Class 4..................................................... $ 154.94
==============
</TABLE>
6 The accompanying notes are an integral part of the financial statements.
<PAGE>
MassMutual Prime Fund - Financial Statements (Continued)
Statement Of
Operations
<TABLE>
<CAPTION>
Six months ended
June 30, 1996
(Unaudited)
---------------
<S> <C>
Investment income:
Interest.................................................................................... $ 7,436,760
----------------
Expenses (Note 1):
Investment management fees (Note 3)......................................................... 598,502
Custody fees................................................................................ 13,193
Audit and legal fees........................................................................ 4,202
Directors' fees (Note 3).................................................................... 5,154
Fees waived by the investment manager (Note 3).............................................. (42,766)
----------------
578,285
Administration fees (Note 3):
Class 1.................................................................................... 298
Class 2.................................................................................... 274
Class 3.................................................................................... 169
Class 4.................................................................................... 107,867
Distribution and service fees (Note 3):
Class 1.................................................................................... 344
Class 2.................................................................................... 80
----------------
Net expenses.............................................................................. 687,317
----------------
Net investment income..................................................................... 6,749,443
----------------
Realized and unrealized gain (loss):
Net realized loss on investment transactions................................................ (1,753)
Net change in unrealized appreciation (depreciation)
on investments............................................................................. 14,127
----------------
Net realized and unrealized gain......................................................... 12,374
----------------
Net increase in net assets resulting from operations........................................ $ 6,761,817
================
</TABLE>
<TABLE>
<CAPTION>
Statements of
Changes in Net
Assets
Six months ended
June 30, 1996 Year ended
(Unaudited) December 31, 1995
----------------- -------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income ................................................ $ 6,749,443 $ 12,817,140
Net realized loss on investment transactions ......................... (1,753) (1,781)
Net change in unrealized appreciation (depreciation)
on investments ...................................................... 14,127 (15,459)
------------ ---------------
Net increase in net assets resulting from operations ................ 6,761,817 12,799,900
------------ ---------------
Distributions to shareholders (Note 2):
From net investment
Class 1 .............................................................. -- (4,178)
Class 2 .............................................................. -- (4,746)
Class 3 .............................................................. -- (5,095)
Class 4 .............................................................. -- (12,693,331)
------------ ---------------
Total distributions from net investment income ...................... -- (12,707,350)
------------ ---------------
Net fund share transactions (Note 5):
Class 1 .............................................................. -- 4,178
Class 2 .............................................................. -- 4,746
Class 3 .............................................................. -- 5,095
Class 4 .............................................................. 11,159,880 83,297,102
------------ ---------------
Increase in net assets from net fund share transactions ............ 11,159,880 83,311,121
------------ ---------------
Total increase in net assets.......................................... 17,921,697 83,403,671
Net assets:
Beginning of period .................................................. 254,254,107 170,850,436
------------ ---------------
End of period (including undistributed net investment income
of $6,882,396 and $132,953, respectively) ........................... 272,175,804 $ 254,254,107
============ ===============
</TABLE>
7 The accompanying notes are an integral part of the financial statements.
<PAGE>
MassMutual Prime Fund Financial Statements (Continued)
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 1
-------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94 **
---------- --------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 151.05 $ 150.39 $ 150.00
---------- --------- ---------
Income (loss) from investment operations:
Net investment income 2.99 6.90 *** 1.02
Net realized and unrealized gain (loss) on
investments 0.03 (0.01) 0.42
---------- --------- ---------
Total income (loss) from investment operations 3.02 6.89 1.44
---------- --------- ---------
Less distributions to shareholders:
From net investment income -- (6.23) (1.05)
---------- --------- ---------
Net asset value, end of period $ 154.07 $ 151.05 $ 150.39
========== ========= =========
Total Return 1.97% 4.58% 0.96%
Ratios/Supplemental Data:
Net assets, end of period (000's) $108 $105 $101
Net expenses to average daily net assets# 1.65%* 1.65% 1.65%*
Net investment income to average daily net assets 3.94%* 4.48% 4.07%*
#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%* 1.68% 1.69%*
Class 2
-------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94 **
----------- ------------ -----------
Net asset value, beginning of period $ 151.24 $ 150.56 $ 150.00
------------ ------------ -----------
Income (loss) from investment operations:
Net investment income 3.42 7.78 *** 1.16
Net realized and unrealized gain
(loss) on investments 0.02 (0.02) 0.57
----------- --------- ---------
Total income (loss) from investment operations 3.44 7.76 1.73
=========== =========== =========
Less distributions to shareholders:
From net investment income -- (7.08) (1.17)
----------- --------- ---------
Net asset value, end of period $ 154.68 $ 151.24 $ 150.56
=========== =========== =========
Total Return 2.25% 5.16% 1.15%
Ratios/Supplemental Data:
Net assets, end of period (000's) $109 $106 $101
Net expenses to average daily net assets# 1.10%* 1.10% 1.10%*
Net investment income to average daily net assets 4.49%* 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: 1.13%* 1.13% 1.14%*
</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.
The accompanying notes are an integral part of the financial statements
8
<PAGE>
MassMutual Prime Fund - Financial Statements (Continued)
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 3
-------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94 **
---------- --------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 151.32 $ 150.61 $ 150.00
---------- --------- ---------
Income (loss) from investment operations:
Net investment income 3.69 8.33 *** 1.21
Net realized and unrealized gain (loss) on
investments 0.01 (0.01) 0.61
----------- --------- ---------
Total income (loss) from investment operations 3.70 8.32 1.82
----------- --------- ---------
Less distributions to shareholders:
From net investment income -- (7.61) (1.21)
----------- --------- ---------
Net asset value, end of period $ 155.02 $ 151.32 $ 150.61
=========== =========== =========
Total Return 2.42% 5.53% 1.21%
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 109 $ 106 $ 101
Net expenses to average daily net assets# 0.75%* 0.75% 0.75%*
Net investment income to average daily net assets 4.84%* 5.38% 4.99%*
#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%* 0.78% 0.79%*
Class 4
-------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94 **
----------- ---------- ------------
Net asset value, beginning of period $ 151.06 $ 150.36 $ 150.00
------------ ------------ -----------
Income (loss) from investment operations:
Net investment income 3.84 8.70 *** 1.55
Net realized and unrealized gain
(loss) on investments 0.04 (0.02) 0.34
----------- --------- ---------
Total income (loss) from investment operations 3.88 8.68 1.89
----------- ----------- ---------
Less distributions to shareholders:
From net investment income -- (7.98) (1.53)
----------- --------- ---------
Net asset value, end of period $ 154.94 $ 151.06 $ 150.36
=========== =========== =========
Total Return@ 2.54% 5.78% 1.26%
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 271,8519 $ 253,936 $ 170,548
Net expenses to average daily net assets# 0.5160%* 0.5160% 0.5160%*
Net investment income to average daily net assets 5.08%* 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: 0.5481%* 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 statement 9
<PAGE>
MassMutual Short-Term Bond Fund - Portfolio Manager Report
What are the investment The objective and policies of the Fund are to:
objective and policies
for the MassMutual * achieve high total rate of return from current
Short-Term Bond income while minimizing fluctuations in capital
Fund? values
* 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 The Fund performed well. Our low-volatility
performed over the past investment strategy allowed us to report a
six months? positive return for a period during which rising
interest rates caused many longer-term and riskier
bond investments to suffer price declines.
What effect did rising The rise in interest rates and consequent
interest rates have on steepening of the yield curve we saw over the past
the portfolio? six months were most pronounced in bonds with
maturities between 3 months and 10 years. The
shape of the yield curve, a tool we use to
position our portfolio, steepened resulting in our
lengthening the portfolio duration. We moved
closer to the maximum duration of 3 years in an
effort to capture the more attractive yields
available in that range.
What investment With rising interest rates causing a steepening in
decisions were made to the yield curve, so that the additional yield
take advantage of the available from owning longer-maturity bonds had
changes in the bond increased over the period, we altered our
market? investment allocation in several ways. As of year-
end 1995, when the yield curve was relatively
flat, we had sold all of our Treasuries in favor
of shorter-term money market securities. We
reversed that position this period, reducing our
money market holdings to 28.1 percent, and
increasing our Treasuries to 34.2 percent to take
advantage of the significantly better yields they
offered.
In addition, we added to our holdings of mortgage-
backed securities over the period. By focusing on
mortgage securities that were either "well-
seasoned" or had built-in call protection, we were
able both to increase yields and lock in income.
What areas of the Our investment strategy is built around capturing
current market seems to the most yield available from the market without
offer the most value? taking on a high degree of risk. As such, we
always emphasize higher credit quality bonds in
the short-to-intermediate maturity range.
At this time, we believe there are still yield
advantages to be gained from investing in
mortgage-backed securities. In addition, we
expect that corporate bonds will continue to
perform well. Corporate profitability endured
though the economy slowed at the end of 1995, and
should continue now that it appears that growth
has again picked up.
What is the outlook for As we move through the remainder of the year, we
the Fund? expect the Fund to continue to meet its objective
of providing competitive income with limited risk
to capital. Because the economy seems to have
gained resilience at a time when many expected it
to slow, we believe there is a good chance that
interest rates could be increased somewhat. When
rates rise, as they did over the past six months
even without action by the Federal Reserve, it
tends to hurt bond prices. Should rates increase
further, however, our short duration should limit
our exposure to interest rate risk and benefit the
Fund.
10
<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
Total Return Year to Date One Year Average Annual
1/1/96-6/30/96 7/1/95-6/30/96 10/3/94-6/30/96
<S> <C> <C> <C> <C>
Class 1 1.18% 4.05% 6.54% $11,380 Class 4
Class 2 1.47% 4.60% 7.08% $11,346 Class 3
Class 3 1.67% 5.05% 7.53% $11,264 Class 2
Class 4 1.67% 5.21% 7.71% $11,244 Lehman
- ------------------------------------------------------------------------- 1-3 Yr.
Lehman Brothers 1.42% 5.46% - $11,165 Class 1
1-3 Year
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.
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
[GRAPH OF GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION APPEARS HERE]
<TABLE>
<CAPTION>
Class 1 Class 2 Class 3 Class 4 Lehman 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 10,002
3/95 10,337 10,355 10,386 10,389 10,334
6/95 10,730 10,769 10,801 10,816 10,661
9/95 10,852 10,911 10,953 10,979 10,820
12/95 11,035 11,101 11,160 11,192 11,086
3/96 11,090 11,177 11,247 11,281 11,127
6/96 11,165 11,264 11,346 11,380 11,244
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
Quality Structure (6/30/96)
MassMutual Short-Term Bond Fund
[PIE-CHART OF QUALITY STRUCTURE MASSMUTUAL SHORT-TERM BOND FUND APPEARS HERE]
<TABLE>
<CAPTION>
U.S Governments Cash Equivalents
<S> <C>
Aaa/AAA 90.7%
Baa/BBB 5.1
A/A 4.2
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
Duration Diversification (6/30/96)
MassMutual Short-Term Bond Fund
Average Duration = 2.72 years
[PIE-CHART OF DURATION DIVERSIFICATION MASSMUTUAL SHORT-TERM BOND FUND
APPEARS HERE]
<TABLE>
<S> <C>
Less-than 1 year 44.2%
3-5 years 34.6
5-7 years 13.6
1-3 years 7.6
</TABLE>
- -------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments
June 30, 1996 (Unaudited)
Principal
Amount Market Value
------ ------------
<TABLE>
<CAPTION>
BONDS & NOTES - 70.7%
ASSET BACKED SECURITIES -- 5.1%
<S> <C> <C>
Ford Credit 1994-B
Grantor Trust
7.300% 10/15/1999 $ 488,805 $ 494,148
Ford Credit Auto
Loan Master Trust,
Series 1992-1
6.875% 1/15/1999 1,500,000 1,507,500
Honda Auto
Receivables 1992-A
Grantor Trust
4.900% 6/15/1998 101,318 100,938
Nissan Auto
Receivables 1994-A
Grantor Trust
6.450% 9/15/1999 915,787 918,076
Railcar Trust No.
1992-1
7.750% 6/01/2004 1,231,605 1,274,711
World Omni 1996-A
Automobile Lease
Securitization Trust
6.300% 6/25/2002 2,500,000 2,498,400
------------
TOTAL ASSET BACKED
SECURITIES 6,793,773
------------
(Cost $6,780,922)
CORPORATE DEBT -- 9.2%
Analog Devices, Inc.
6.625% 3/01/2000 1,000,000 977,010
Bell Atlantic Financial
Services, Inc.
6.610% 2/07/2000 2,000,000 1,995,000
Ford Motor Credit
Company
9.350% 6/10/1997 1,000,000 1,028,600
General American
Transportation
Corporation
6.750% 3/01/2006 1,000,000 951,080
General Motors
Acceptance
Corporation
8.000% 10/01/1996 1,500,000 1,507,740
NYNEX Capital
Funding Company
7.450% 5/01/1997 1,000,000 1,010,690
Polaroid Corporation
7.250% 1/15/1997 1,500,000 1,507,455
W.R. Grace & Co.
7.250% 7/15/1997 2,000,000 2,019,940
W.R. Grace & Co.
8.000% 8/15/2004 1,240,000 1,291,584
------------
TOTAL CORPORATE DEBT 12,289,099
------------
(Cost $12,190,986)
U.S. GOVERNMENT
AGENCY OBLIGATIONS -- 22.2%
Federal Home Loan Mortgage Corporation (FHLMC) -- 3.4%
Collateralized Mortgage Obligations -- 2.9%
FHLMC Series 1693
Class G
6.000% 7/15/2007 2,000,000 1,913,740
FHLMC Series 1704
Class PE
6.000% 7/15/2007 2,000,000 1,956,240
------------
3,869,980
------------
Pass-Through Securities -- 0.5%
FHLMC
4.750% 2/01/1997 -
9/01/2006 649,694 616,389
------------
4,486,369
------------
Federal National Mortgage Association
(FNMA) -- 4.9%
Collateralized Mortgage Obligations -- 3.4%
FNMA Series 1992-86
Class C
7.000% 6/25/2003 177,595 177,428
FNMA Series 1993-175
Class PL
5.000% 10/25/2002 2,000,000 1,978,120
FNMA Series 1993-71
Class PG
6.250% 7/25/2007 2,500,000 2,425,775
------------
4,581,323
------------
Pass-Through Securities -- 1.5%
FNMA
8.000% 5/01/2013 984,468 1,009,562
FNMA
9.000% 10/01/2009 943,133 991,723
------------
2,001,285
------------
6,582,608
------------
Government National Mortgage Association (GNMA) --
1.5%
Pass-Through Securities
GNMA
8.000% 5/15/2001 -
11/15/2007 1,980,264 2,031,018
------------
U.S. Government Guaranteed Notes -- 12.4%
1991-A Jacksonville,
FL
8.400% 8/01/1997 1,150,000 1,175,875
1991-A St. Louis, MO
8.400% 8/01/1997 3,350,000 3,425,375
1994-A Baxter
Springs, KS
6.310% 8/01/2001 500,000 488,515
1994-A Detroit, MI
6.310% 8/01/2001 450,000 439,664
1994-A Jacksonville,
FL
6.310% 8/01/2001 1,485,000 1,450,890
1994-A Los Angeles
County, CA
6.310% 8/01/2001 225,000 219,832
1994-A Tacoma, WA
6.310% 8/01/2001 195,000 190,521
1994-A Trenton, NJ
6.310% 8/01/2001 144,999 141,667
U.S. Dept. of Housing
and Urban
Development, Series
1995-A
7.710% 8/01/1996 4,000,000 4,005,440
(Continued)
</TABLE>
The accompanying notes are an integral part of the financial statements
12
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Market Value
------ ------------
<TABLE>
<CAPTION>
<S> <C> <C>
U.S. Dept. of Housing
and Urban
Development, Series
1995-A
8.080% 8/01/1998 $ 3,000,000 $ 3,097,500
U.S. Dept. of Housing
and Urban
Development, Series
1996-A
6.440% 8/01/1999 2,000,000 1,997,500
------------
16,632,779
------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 29,732,774
(Cost $29,310,300) ------------
U.S. TREASURY OBLIGATIONS --
34.2%
U.S. Treasury Notes
U.S. Treasury Note
6.375% 8/15/2002 30,300,000 30,058,509
U.S. Treasury Note
7.250% 5/15/2004 15,200,000 15,748,568
TOTAL U.S. TREASURY
OBLIGATIONS 45,807,077
(Cost $46,368,507) ------------
TOTAL BONDS & NOTES 94,622,723
(Cost $94,650,715) ------------
SHORT-TERM INVESTMENTS -- 28.1%
Commercial Paper
Central and South
West Corporation
5.470% 7/19/1996 4,950,000 4,936,462
ConAgra, Inc.
5.550% 8/07/1996 5,800,000 5,766,916
Cox Enterprises, Inc.
5.490% 8/05/1996 4,900,000 4,873,846
Eastman Chemical
Company
5.520% 7/08/1996 203,000 202,782
Illinois Power
Company
5.470% 7/25/1996 5,050,000 5,031,584
Public Service
Electric and Gas
Company
5.460% 7/11/1996 2,925,000 2,920,564
Ryder System Inc.
5.630% 7/31/1996 2,695,000 2,682,356
Sundstrand
Corporation
5.500% 7/23/1996 3,150,000 3,139,413
Texas Utilities
Electric Company
5.520% 7/15/1996 5,325,000 5,313,569
UOP
5.550% 7/09/1996 2,860,000 2,856,473
------------
TOTAL SHORT-TERM
INVESTMENTS 37,723,965
(At Amortized Cost) ------------
TOTAL INVESTMENTS -- 98.8% 132,346,688
(Cost $132,374,680)+
Other Assets/
(Liabilities) - 1.2% 1,556,294
------------
NET ASSETS -- 100.0% $133,902,982
------------
Notes to Portfolio of Investments
</TABLE>
+ Aggregate cost for Federal tax purposes (Note 7)
The accompanying notes are an integral part of the financial statements
13
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements
- --------------------------------------------------------------------------------
Statement of
Assets and
Liabilities
June 30, 1996
(Unaudited)
-------------
Assets:
Investments, at value (cost $94,650,715) (Note 2)........ $ 94,622,723
Short-term investments, at amortized cost (Note 2)....... 37,723,965
-------------
Total Investments....................................... 132,346,688
Cash..................................................... 4,892
Receivables from:
Fund shares sold........................................ 13,376
Interest................................................ 1,721,025
Investment manager (Note 3)............................. 3,352
-------------
Total assets........................................... 134,089,333
-------------
Liabilities:
Payables for:
Fund shares redeemed.................................... 119,217
Directors' fees and expenses (Note 3)................... 2,011
Affiliates (Note 3):
Investment management fees............................. 48,363
Administration fees.................................... 8,509
Service and distribution fees.......................... 227
Accrued expenses and other liabilities................. 8,024
-------------
Total liabilities..................................... 186,351
-------------
Net assets............................................. $ 133,902,982
=============
Net assets consist of:
Paid-in capital.......................................... $ 130,097,644
Undistributed net investment income...................... 3,735,716
Accumulated net realized gain on investments............. 97,614
Net unrealized depreciation on investments............... (27,992)
-------------
$ 133,902,982
=============
Net assets:
Class 1.................................................. $ 112,357
=============
Class 2.................................................. $ 113,385
=============
Class 3.................................................. $ 113,909
=============
Class 4.................................................. $ 133,563,331
=============
Shares outstanding:
Class 1.................................................. 10,896
=============
Class 2.................................................. 10,960
=============
Class 3.................................................. 10,974
=============
Class 4.................................................. 12,932,033
=============
Net asset value, offering price and
redemption price per share:
Class 1.................................................. $ 10.31
=============
Class 2.................................................. $ 10.35
=============
Class 3.................................................. $ 10.38
=============
Class 4.................................................. $ 10.33
=============
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of
Operations
<TABLE>
<CAPTION>
Six months ended
June 30, 1996
(Unaudited)
-------------
<S> <C>
Investment income:
Interest.................................................. $ 3,996,878
-------------
Expenses (Note 1):
Investment management fees (Note 3)....................... 285,214
Custody fees.............................................. 10,225
Audit and legal fees...................................... 2,043
Directors' fees (Note 3).................................. 5,154
Fees waived by the investment manager (Note 3)............ (23,253)
-------------
279,383
Administration fees (Note 3):
Class 1................................................... 309
Class 2................................................... 283
Class 3................................................... 173
Class 4................................................... 49,433
Distribution and service fees (Note 3):
Class 1................................................... 359
Class 2................................................... 84
-------------
Net expenses............................................. 330,024
-------------
Net investment income.................................... 3,666,854
-------------
Realized and unrealized gain (loss):
Net realized gain on investment transactions.............. 26,149
Net change in unrealized appreciation (depreciation)
on investments........................................... (1,430,423)
-------------
Net realized and unrealized loss........................ (1,404,274)
-------------
Net increase in net assets resulting from operations...... $ 2,262,580
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statements of
Changes in Net
Assets
<TABLE>
<CAPTION>
Six months ended
June 30, 1996 Year ended
(Unaudited) December 31, 1995
------------- ---------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income........................ $ 3,666,854 $ 7,424,141
Net realized gain on investment
transactions................................ 26,149 2,489,218
Net change in unrealized appreciation
(depreciation) on investments............... (1,430,423) 2,855,699
------------- ---------------
Net increase in net assets resulting
from operations............................. 2,262,580 12,769,058
------------- ---------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1...................................... -- (5,481)
Class 2...................................... -- (6,066)
Class 3...................................... -- (6,421)
Class 4...................................... -- (7,354,246)
------------- ---------------
Total distributions from net investment
income..................................... -- (7,372,214)
------------- ---------------
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)
------------- ---------------
Net fund share transactions (Note 5):
Class 1...................................... -- 7,530
Class 2...................................... -- 8,116
Class 3...................................... -- 8,467
Class 4...................................... 8,401,528 12,933,618
------------- ---------------
Increase in net assets from
net fund share transactions................ 8,401,528 12,957,731
------------- ---------------
Total increase in net assets................. 10,664,108 16,091,461
------------- ---------------
Net assets:
Beginning of period.......................... 123,238,874 107,147,413
------------- ---------------
End of period (including undistributed
net investment income of $3,735,716
and $68,862, respectively).................. $ 133,902,982 $ 123,238,874
============= ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 1
-----------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.19 $ 9.89 $ 10.00
---------- ---------- ----------
Income (loss) from investment operations:
Net investment income 0.24 0.55 0.09
Net realized and unrealized gain (loss)
on investments (0.12) 0.49 (0.11)
---------- ---------- ----------
Less distributions to shareholders:
From net investment income -- (0.54) (0.09)
From net realized gains -- (0.20) --
---------- ---------- ----------
Total distributions -- (0.74) (0.09)
---------- ---------- ----------
Net asset value, end of period $ 10.31 $ 10.19 $ 9.89
========== ========== ==========
Total Return 1.18% 10.54% (0.17)%
Ratios/Supplemental Data:
Net assets, end of period (000's) $112 $111 $100
Net expenses to average daily net
assets# 1.65%* 1.65% 1.65%*
Net investment income to average
daily net assets 4.66%* 5.20% 5.45%*
Portfolio turnover rate 14% 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%* 1.68% 1.70%*
<CAPTION>
Class 2
-----------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.19 $ 9.89 $ 10.00
---------- ---------- ----------
Income (loss) from investment operations:
Net investment income 0.27 0.61 0.10
Net realized and unrealized gain (loss)
on investments (0.11) 0.49 (0.11)
---------- ---------- ----------
Total income (loss) from investment
operations 0.16 1.10 (0.01)
---------- ---------- ----------
Less distributions to shareholders:
From net investment income -- (0.60) (0.10)
From net realized gains -- (0.20) --
---------- ---------- ----------
Total distributions -- (0.80) (0.10)
---------- ---------- ----------
Net asset value, end of period $ 10.35 $ 10.19 $ 9.89
========== ========== ==========
Total Return 1.47% 11.11% (0.09)%
Ratios/Supplemental Data:
Net assets, end of period (000's) $113 $112 $101
Net expenses to average daily net
assets# 1.10%* 1.10% 1.10%*
Net investment income to average
daily net assets 5.21%* 5.75% 5.99%*
Portfolio turnover rate 14% 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: 1.13%* 1.13% 1.15%*
</TABLE>
*Annualized
**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.
17
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 3
-----------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.21 $ 9.91 $ 10.00
---------- ---------- ----------
Income (loss) from investment operations:
Net investment income 0.28 0.64 0.10
Net realized and unrealized gain (loss)
on investments (0.11) 0.49 (0.09)
---------- ---------- ----------
Total income (loss) from investment
operations 0.17 1.13 0.01
---------- ---------- ----------
Less distributions to shareholders:
From net investment income -- (0.63) (0.10)
From net realized gains -- (0.20) --
---------- ---------- ----------
Total distributions -- (0.83) (0.10)
---------- ---------- ----------
Net asset value, end of period $ 10.38 $ 10.21 $ 9.91
========== ========== ==========
Total Return 1.67% 11.46% 0.13%
Ratios / Supplemental Data:
Net assets, end of period (000's) $114 $112 $100
Net expenses to average daily net assets# 0.75%* 0.75% 0.75%*
Net investment income to average daily
net assets 5.55%* 6.10% 6.36%*
Portfolio turnover rate 14% 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%* 0.78% 0.80%*
<CAPTION>
Class 4
-----------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.15 $ 9.85 $ 10.00
---------- ---------- ----------
Income (loss) from investment operations:
Net investment income 0.28 0.66 0.16
Net realized and unrealized gain (loss)
on investments (0.10) 0.50 (0.15)
---------- ---------- ----------
Total income (loss) from investment
operations 0.18 1.16 0.01
---------- ---------- ----------
Less distributions to shareholders:
From net investment income -- (0.66) (0.16)
From net realized gains -- (0.20) --
---------- ---------- ----------
Total distributions -- (0.86) (0.16)
---------- ---------- ----------
Net asset value, end of period $ 10.33 $ 10.15 $ 9.85
========== ========== ==========
Total Return@ 1.67% 11.77% 0.13%
Ratios / Supplemental Data:
Net assets, end of period (000's) $133,563 $122,904 $106,846
Net expenses to average daily net
assets# 0.5190%* 0.5190% 0.5190%*
Net investment income to average daily
net assets 5.79%* 6.32% 6.37%*
Portfolio turnover rate 14% 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: 0.5555%* 0.5524% 0.5654%*
</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.
18
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment objective and policies for the MassMutual Core Bond
Fund?
The objective and policies of the Fund are to:
. achieve high total rate of return over the long term consistent with prudent
investment risk and the 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 performed over the past six months?
While the general bond market has been weak this year as a result of increasing
interest rates, the Fund's performance has been relatively favorable. Due to
portfolio allocation decisions, before expenses the Fund finished the six months
ended June 30th slightly ahead of the Lehman Government/Corporate Index.
What effect did this year's rise in interest rates have on the market?
Bond prices, especially in longer-term maturities, were hurt as interest rates
edged up. Treasuries, which had rallied most on last year's rate declines,
suffered most in the first half of this year. In addition, the yield curve
significantly steepened so that in contrast to last year's market, moving
farther out in maturity made a large positive difference in the amount of yield
available in the Treasury market.
How was the portfolio positioned in light of these changes?
As always, the portfolio was well-diversified, with a focus on providing a high
rate of total return without taking on undue risk to principal. One of the
moves we made was to increase our allocation to mortgage-backed securities over
the period. Mortgages tend to pay higher income than Treasuries, and because
interest rates had risen, the prepayment risk associated with them in last
year's market had declined. Our focus was on well-seasoned and call-protected
securities, where we felt the income we were buying was fairly reliable. We
also purchased a non-U.S. Government agency mortgage over the period, which
offers the portfolio significant yield benefits.
Additionally, we were consistent in our allocation to corporate bonds over the
period, and they performed well regardless of increasing rates. Corporate
America weathered the economic slowdown at the end of 1995 well, and now that
growth appears to have picked up somewhat, these bonds remain in demand.
How will the portfolio be positioned going forward?
At this time we're looking for areas of the market where we can add value to the
portfolio. We're holding on to the corporate bonds we own and selectively adding
to our allocation there. In this economic environment, however, we are
conducting a tremendous amount of research into individual corporate credits
before buying. Beyond corporate bonds, we're still building our position in
well-structured mortgage securities. In the Treasury market, we're considering
making investments into the three year maturity range, where the yield curve is
exceptionally steep. We would also consider adding to longer bonds if the yield
differential between 10 and 30 year bonds were to increase further. We don't
make bets on the direction of interest rates, so the decisions we're making now
reflect our beliefs about what sectors of the market offer the best potential
value relative to the rest of the market.
What is the outlook for the Fund?
The outlook is optimistic. This is a Fund that was designed to perform well in
many markets through its diversification over various categories of bonds, its
neutral duration strategy, and its total return focus. While current economic
data suggests the likelihood of the Federal Reserve's increasing interest rates
later this year, we expect our portfolio positioning to help us to continue to
be able to provide a competitive rate of return without undue risk to principal.
19
<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
- ---------------------------------------------------------------------
MassMutual Core-Bond Fund
Total Return Year to Date One Year Average Annual
1/1/96-6/30/96 7/1/95-6/30/96 10/3/94-6/30/96
Class 1 -2.60% 3.18% 8.23%
Class 2 -2.40% 3.62% 8.77%
Class 3 -2.13% 4.05% 9.15%
Class 4 -2.05% 4.31% 9.42%
- ---------------------------------------------------------------------
Lehman Brothers - 1.88% 4.66% --
Government/Corporate
Bond Index
- ---------------------------------------------------------------------
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.
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
[LINE GRAPH APPEARS HERE]
Class 1 Class 2 Class 3 Class 4 Lehman Bros. Gov't/Corp.
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
3/95 10,465 10,483 10,494 10,519 10,537
6/95 11,121 11,170 11,192 11,212 11,220
9/95 11,284 11,343 11,384 11,416 11,435
12/95 11,781 11,860 11,894 11,940 11,968
3/96 11,464 11,564 11,612 11,662 11,688
6/96 11,475 11,575 11,645 11,695 11,743
$11,743 Lehman Bros./Gov't Corp.
$11,695 Class 4
$11,645 Class 3
$11,575 Class 2
$11,475 Class 1
- --------------------------------------------------------------------------------
- -------------------------------------
Quality Structure (6/30/96)
MassMutual Core Bond Fund
U.S. Governments Cash Equivalents
[PIE CHART APPEARS HERE]
Aaa/AAA 73.4%
Baa/BBB 16.2%
A/A 8.8%
Below Baa/BBB 0.9%
Aa/AA 0.7%
- -------------------------------------
- -------------------------------------
Duration Diversification (6/30/96)
MassMutual Core Bond Fund
Average Duration = 5.2 years
[PIE CHART APPEARS HERE]
1-3 years 31.3%
5-7 years 21%
3-5 years 20.1%
7-10 years 13.4%
greater than 10 years 12.2%
less than 1 year 2%
- -------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Market Value
---------- ------------
<S> <C> <C>
BONDS & NOTES - 94.4%
ASSET BACKED SECURITIES--5.0%
Daimler-Benz Auto
Grantor Trust 1995-A
5.850% 5/15/2002 $3,362,839 $ 3,349,152
Daimler-Benz Vehicle
Trust 1994-A
5.950% 12/15/2000 399,810 399,658
Ford Credit 1994-B
Grantor Trust
7.300% 10/15/1999 733,208 741,222
Ford Credit Auto
Loan Master Trust,
Series 1992-1
6.875% 1/15/1999 2,000,000 2,010,000
Honda Auto
Receivables 1992-A
Grantor Trust
4.900% 6/15/1998 101,318 100,938
Nissan Auto
Receivables 1994-A
Grantor Trust
6.450% 9/15/1999 1,831,574 1,836,153
Railcar Trust No.
1992-1
7.750% 6/01/2004 1,436,873 1,487,163
World Omni 1995-A
Automobile Lease
Securitization Trust
6.050% 11/25/2001 3,000,000 2,983,110
World Omni 1996-A
Automobile Lease
Securitization Trust
6.300% 6/25/2002 2,650,000 2,648,304
------------
TOTAL ASSET BACKED
SECURITIES 15,555,700
------------
(Cost $15,554,319)
CORPORATE DEBT--29.5%
American Airlines, Inc. .
9.780% 11/26/2011 2,000,000 2,231,240
AMR Corporation .
9.000% 8/01/2012 2,000,000 2,162,400
Analog Devices, Inc. .
6.625% 3/01/2000 1,500,000 1,465,515
Associates Corporation
of North America .
7.875% 9/30/2001 1,500,000 1,560,645
Bell Atlantic Financial
Services, Inc.
6.610% 2/04/2000 1,750,000 1,745,695
Capital Cities/ABC,Inc.
8.875% 12/15/2000 875,000 942,043
Champion International
Corporation
6.400% 2/15/2026 2,500,000 2,310,800
The Charles Schwab
Corporation
6.250% 1/23/2003 2,500,000 2,362,500
Chrysler Corporation
10.400% 8/01/1999 1,500,000 1,564,365
CITGO Petroleum Corp.
7.875% 5/15/2006 1,000,000 991,710
Columbia Gas System Inc.
6.610% 11/28/2002 3,000,000 2,923,470
Commercial Credit Co. .
7.750% 3/01/2005 3,000,000 3,081,630
Continental Airlines,
Inc. 1996-B 144A
7.820% 4/15/2015 2,000,000 1,953,660
Continental Airlines,
Inc. 2B 144A
8.560% 7/02/2014 1,750,000 1,848,158
Corning Glass Works,
Inc. .
8.875% 3/15/2016 1,000,000 1,091,070
English China Clays
Delaware Inc. .
7.375% 10/01/2002 1,000,000 1,001,750
Equifax Inc.
6.500% 6/15/2003 1,000,000 956,000
ERAC USA Finance
Company 144A
6.950% 1/15/2006 1,500,000 1,397,475
FBG Finance Ltd. 144A
7.875% 6/01/2016 3,000,000 2,989,710
Fletcher Challenge Ltd.
7.750% 6/20/2006 2,000,000 2,028,160
Foster Wheeler
Corporation
6.750% 11/15/2005 2,000,000 1,904,240
General American
Transportation
Corporation
6.750% 3/01/2006 3,000,000 2,853,240
General Electric
Capital Corporation
8.750% 5/21/2007 1,500,000 1,670,745
General Telephone
Company of Florida
7.500% 8/01/2002 1,000,000 1,001,350
The Goldman Sachs
Group, L.P. 144A
6.200% 2/15/2001 2,500,000 2,393,125
Harrahs Operating Inc.
8.750% 3/15/2000 1,100,000 1,105,500
Hercules Incorporated .
6.625% 6/01/2003 2,000,000 1,942,140
IMCERA Group Inc. .
6.000% 10/15/2003 1,000,000 902,910
ITT Destinations, Inc.
7.375% 11/15/2015 3,500,000 3,290,525
Leucadia National
Corporation
7.750% 8/15/2013 2,500,000 2,357,150
McDonnell Douglas
Corporation .
9.250% 4/01/2002 1,500,000 1,650,330
Newmont Mining Corp. .
8.625% 4/01/2002 2,000,000 2,092,540
North Finance (Bermuda) Limited
144A 7.000% 9/15/2005 2,000,000 1,920,000
Penske Truck Leasing
Co., L.P.
7.750% 5/15/1999 1,500,000 1,544,025
Ralston Purina Co.
7.750% 10/01/2015 2,000,000 1,976,820
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
MassMutual Core Bond Fund - Portfolio of Investments (Continued)
<TABLE>
<CAPTION>
Principal
Amount Market Value
----------- ------------
<S> <C> <C>
Rolls-Royce Capital
Inc.
7.125% 7/29/2003 $ 2,000,000 $ 1,961,240
Service Corporation
International
7.000% 6/01/2015 4,000,000 3,996,880
TCI Communications,
Inc.
8.650% 9/15/2004 900,000 917,325
Tele-Communications,
Inc.
5.280% 8/20/1996 1,575,000 1,573,220
Tele-Communications,
Inc.
9.800% 2/01/2012 1,115,000 1,204,735
Thomas & Betts
Corporation
8.250% 1/15/2004 2,500,000 2,560,825
Time Warner, Inc.
7.750% 6/15/2005 3,000,000 2,928,660
United Air Lines, Inc.
10.110% 2/19/2006 939,710 1,022,705
US Air, Inc. 144A
7.500% 4/15/2008 1,500,000 1,454,040
Valassis
Communications, Inc.
9.550% 12/01/2003 2,000,000 2,028,020
Westinghouse Electric
Corporation
8.375% 6/15/2002 1,000,000 995,810
W.R. Grace & Co.
7.250% 7/15/1997 2,000,000 2,019,940
W.R. Grace & Co.
8.000% 8/15/2004 3,000,000 3,124,800
------------
TOTAL CORPORATE DEBT 91,000,836
------------
(Cost $90,396,642)
NON - U.S. GOVERNMENT
AGENCY OBLIGATIONS -- 1.3%
Collateralized Mortgage
Obligation
Prudential Home
Mortgage Securities
1993-26 Class A6
6.750% 7/25/2008 4,000,000 3,940,000
------------
(Cost $3,955,000)
U.S. GOVERNMENT
AGENCY OBLIGATIONS -- 22.4%
Federal Home Loan Mortgage
Corporation (FHLMC) -- 5.3%
Collateralized Mortgage
Obligations -- 5.1%
FHLMC Series 1080
Class D
7.000% 7/15/2020 3,000,000 3,014,040
FHLMC Series 1322
Class G
7.500% 2/15/2007 2,000,000 2,039,360
FHLMC Series 1460
Class H
7.000% 5/15/2007 $ 2,000,000 1,996,240
FHLMC Series 1490
Class PJ
6.000% 5/15/2007 600,000 579,000
FHLMC Series 1612
Class PD
5.750% 5/15/2006 5,000,000 4,867,150
FHLMC Series 1625
Class EA
5.750% 3/15/2007 3,500,000 3,399,375
------------
15,895,165
------------
Pass-Through Securities -- 0.2%
FHLMC
9.000% 3/01/2017 419,936 441,063
------------
16,336,228
------------
Federal National Mortgage
Association (FNMA) -- 5.1%
Collateralized Mortgage
Obligations -- 4.9%
FNMA Series 1989-20
Class A
6.750% 4/25/2018 4,329,347 4,066,815
FNMA Series 1992-86
Class C
7.000% 6/25/2003 355,190 354,856
FNMA Series 1993-134
Class GA
6.500% 2/25/2007 5,000,000 4,890,600
FNMA Series 1993-175
Class PL
5.000% 10/25/2002 2,000,000 1,978,120
FNMA Series 1993-191
Class PD
5.400% 3/25/2004 1,500,000 1,469,520
FNMA Series 1993-221
Class D
6.000% 12/25/2008 2,500,000 2,335,150
------------
15,095,061
------------
Pass-Through Securities -- 0.2%
FNMA
8.000% 5/01/2013 656,312 673,041
------------
15,768,102
------------
Government National Mortgage
Association (GNMA) -- 10.1%
Collateralized Mortgage
Obligation -- 0.6%
JHM Acceptance
Corporation Series E
Class 5
8.960% 4/01/2019 1,690,483 1,744,359
------------
Pass-Through Securities -- 9.5%
GNMA
6.000% 7/20/2025 -
12/20/2025 11,461,092 11,545,458
GNMA
7.500% 1/15/2017 -
6/15/2017 7,491,476 7,443,756
GNMA
8.000% 4/15/2001 -
3/15/2008 9,536,493 9,780,908
GNMA
9.000% 12/15/2004 -
10/15/2009 549,169 582,118
------------
29,352,240
------------
31,096,599
------------
U.S. Government Guaranteed
Notes -- 1.9%
1994-A Baxter
Springs, KS
5.930% 8/01/1999 700,000 686,000
1994-A Erie, PA
5.930% 8/01/1999 1,590,000 1,558,200
1994-A Los Angeles
County, CA
5.930% 8/01/1999 190,000 186,200
1994-A Montgomery
County, PA
5.930% 8/01/1999 150,000 147,000
1994-A Pohatcong
Township, NJ
5.930% 8/01/1999 255,000 249,900
1994-A Rochester, NY
5.930% 8/01/1999 135,000 132,300
1994-A Sacramento,
CA
5.930% 8/01/1999 60,000 58,800
1994-A Santa Ana,
CA
5.930% 8/01/1999 920,000 901,600
U.S. Dept. of Housing
and Urban
Development, Series
1996-A
6.670% 8/01/2001 2,000,000 1,997,500
------------
5,917,500
------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 69,118,429
------------
(Cost $68,364,226)
U.S. TREASURY OBLIGATIONS -- 36.2%
U.S. Treasury Bond -- 11.3%
U.S. Treasury Bond
8.875% 8/15/2017 29,000,000 34,817,980
------------
</TABLE>
(Continued)
22 The accompanying notes are an integral part of the financial statements.
<PAGE>
MassMutual Core Bond Fund - Portfolio of Investments (Continued)
<TABLE>
<CAPTION>
Principal
Amount Market Value
--------- ------------
<S> <C> <C>
U.S. Treasury Notes -- 24.1%
U.S. Treasury Note
5.875% 4/30/1998 $15,800,000 $ 15,738,222
U.S. Treasury Note
6.375% 5/15/1999 23,500,000 23,551,465
U.S. Treasury Note
7.250% 5/15/2004 16,500,000 17,095,485
U.S. Treasury Note
8.875% 11/15/1998 17,000,000 17,974,780
-------------
74,359,952
-------------
U.S. Treasury Strip -- 0.8%
U.S. Treasury Strip -- Principal Only
0.000% 2/15/2015 9,250,000 2,479,833
-------------
TOTAL U.S. TREASURY
OBLIGATIONS 111,657,765
-------------
(Cost $113,703,464)
TOTAL BONDS & NOTES 291,272,730
-------------
(Cost $291,973,651)
SHORT-TERM INVESTMENTS -- 6.1%
Commercial Paper
Carter Holt Harvey
Limited
5.600% 7/08/1996 6,425,000 6,418,004
Kerr-McGee Credit
Corporation
5.500% 7/09/1996 4,355,000 4,349,677
Rite Aid Corporation
5.670% 7/01/1996 5,325,000 5,325,000
Ryder System Inc.
5.570% 7/01/1996 2,815,000 2,815,000
-------------
TOTAL SHORT-TERM
INVESTMENTS 18,907,681
-------------
(At Amortized Cost)
TOTAL INVESTMENTS -- 100.5% 310,180,411
(Cost $310,881,332)+
Other Assets/
(Liabilities) - (0.5%) (1,405,654)
-------------
NET ASSETS -- 100.0% $308,774,757
-------------
</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 remainder of this page intentionally left blank.
The accompanying notes are in integral part of the financial statements. 23
<PAGE>
MassMutual Core Bond Fund - Financial Statements
Statement of Asset and Liabilities
<TABLE>
<CAPTION>
June 30, 1996
(Unaudited)
---------------
<S> <C>
Assets:
Investments, at value (cost $291,973,651) (Note 2)........... $ 291,272,730
Short-term investments, at amortized cost (Note 2)........... 18,907,681
---------------
Total Investments.......................................... 310,180,411
Cash......................................................... 2,847
Receivables from:
Investments sold........................................... 59,216
Settlement of investments purchased on a
forward commitment basis (Note 2)........................ 95,021
Fund shares sold........................................... 97,019
Interest................................................... 4,017,435
Investment manager (Note 3)................................ 10,447
---------------
Total assets............................................. 314,462,396
---------------
Liabilities:
Payables for:
Investments purchased...................................... 5,225,204
Fund shares redeemed....................................... 316,282
Directors' fees and expenses (Note 3)...................... 2,011
Affiliates (Note 3):
Investment management fees............................... 112,266
Administration fees...................................... 21,117
Service and distribution fees............................ 241
Accrued expenses and other liabilities..................... 10,518
---------------
Total liabilities........................................ 5,687,639
---------------
Net assets................................................. $ 308,774,757
===============
Net assets consist of:
Paid-in capital............................................ $ 300,524,463
Undistributed net investment income........................ 8,883,226
Accumulated net realized loss on investments............... (27,032)
Net unrealized depreciation on investments
and forward commitments.................................. (605,900)
---------------
$ 308,774,757
===============
Net assets:
Class 1.................................................... $ 120,242
===============
Class 2.................................................... $ 116,980
===============
Class 3.................................................... $ 117,551
===============
Class 4.................................................... $ 308,419,984
===============
Shares outstanding:
Class 1.................................................... 11,438
===============
Class 2.................................................... 11,069
===============
Class 3.................................................... 11,095
===============
Class 4.................................................... 29,270,161
===============
Net asset value, offering price and
redemption price per share:
Class 1.................................................... $ 10.51
===============
Class 2.................................................... $ 10.57
===============
Class 3.................................................... $ 10.59
===============
Class 4.................................................... $ 10.54
===============
</TABLE>
24 The accompanying notes are an integral part of the financial statements.
<PAGE>
MassMutual Core Bond Fund - Financial Statements (Continued)
Statement of Operations
<TABLE>
<CAPTION>
Six months ended
June 30, 1996
(Unaudited)
----------------
<S> <C>
Investment income:
Interest................................................... $ 9,480,616
----------------
Expenses (Note 1):
Investment management fees (Note 3)........................ 623,646
Custody fees............................................... 17,204
Audit and legal fees....................................... 4,275
Directors' fees (Note 3)................................... 5,154
Fees waived by the investment manager (Note 3)............. (56,014)
----------------
594,265
Administration fees (Note 3):
Class 1................................................... 393
Class 2................................................... 302
Class 3................................................... 188
Class 4................................................... 116,535
Distribution and service fees (Note 3):
Class 1................................................... 449
Class 2................................................... 87
----------------
Net expenses............................................ 712,219
----------------
Net investment income................................... 8,768,397
----------------
Realized and unrealized gain (loss):
Net realized loss on investment transactions and forward
commitments............................................... (1,972,018)
Net change in unrealized appreciation (depreciation) on
investments and forward commitments....................... (11,771,105)
----------------
Net realized and unrealized loss........................ (13,743,123)
----------------
Net decrease in net assets resulting from operations....... $ (4,974,726)
================
</TABLE>
The accompanying notes are an integral part of the financial statements. 25
<PAGE>
MassMutual Core Bond Fund - Financial Statements (Continued)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six months ended
June 30, 1996 Year ended
(Unaudited) December 31, 1995
---------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income................................................. $ 8,768,397 $ 14,053,804
Net realized gain (loss) on investment transactions
and forward commitments.............................................. (1,972,018) 9,143,745
Net change in unrealized appreciation (depreciation) on
investments and forward commitments.................................. (11,771,105) 14,064,619
--------------- -----------------
Net increase (decrease) in net assets resulting
from operations...................................................... (4,974,726) 37,262,168
--------------- -----------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1............................................................... -- (7,975)
Class 2............................................................... -- (5,956)
Class 3............................................................... -- (6,329)
Class 4............................................................... -- (13,924,661)
--------------- -----------------
Total distributions from net investment income....................... -- (13,944,921)
--------------- -----------------
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............................................................... (46,631) 61,915
Class 2............................................................... -- 9,288
Class 3............................................................... -- 9,658
Class 4............................................................... 59,845,288 43,139,641
--------------- -----------------
Increase in net assets from net fund share transactions.............. 59,798,657 43,220,502
--------------- -----------------
Total increase in net assets.......................................... 54,823,931 59,497,460
Net assets:
Beginning of period................................................... 253,950,826 194,453,366
--------------- -----------------
End of period (including undistributed net investment income
of $8,883,226 and $114,829, respectively)............................ $ 308,774,757 $ 253,950,826
=============== =================
</TABLE>
26 The accompanying notes are an integral part of the financial statements.
<PAGE>
MassMutual Core Bond Fund - Financial Statements (Continued)
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 1
---------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
----------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.79 $ 9.90 $ 10.00
----------- ---------- ----------
Income (loss) from investment operations:
Net investment income 0.29 0.50 0.10
Net realized and unrealized gain (loss) on investments (0.57) 1.26 (0.10)
----------- ---------- ----------
Total income (loss) from investment operations (0.28) 1.76 --
----------- ---------- ----------
Less distributions to shareholders:
From net investment income -- (0.54) (0.10)
From net realized gains -- (0.33) --
----------- ---------- ----------
Total distributions -- (0.87) (0.10)
----------- ---------- ----------
Net asset value, end of period $ 10.51 $ 10.79 $ 9.90
=========== ========== ==========
Total Return (2.60)% 17.81% 0.00%
Ratios/Supplemental Data:
Net assets, end of period (000's) $120 $171 $101
Net expenses to average daily net assets# 1.65%* 1.65% 1.65%*
Net investment income to average daily net assets 5.13%* 5.39% 5.91%*
Portfolio turnover rate 40% 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%* 1.69% 1.71%*
</TABLE>
<TABLE>
<CAPTION>
Class 2
---------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
----------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.82 $ 9.90 $ 10.00
----------- ---------- ----------
Income (loss) from investment operations:
Net investment income 0.30 0.64 0.11
Net realized and unrealized gain (loss) on investments (0.55) 1.19 (0.10)
----------- ---------- ----------
Total income (loss) from investment operations (0.25) 1.83 0.01
----------- ---------- ----------
Less distributions to shareholders:
From net investment income -- (0.58) (0.11)
From net realized gains -- (0.33) --
----------- ---------- ----------
Total distributions -- (0.91) (0.11)
----------- ---------- ----------
Net asset value, end of period $ 10.57 $ 10.82 $ 9.90
=========== ========== ==========
Total Return (2.40)% 18.51% 0.08%
Ratios/Supplemental Data:
Net assets, end of period (000's) $117 $120 $101
Net expenses to average daily net assets# 1.10%* 1.10% 1.10%*
Net investment income to average daily net assets 5.72%* 5.97% 6.46%*
Portfolio turnover rate 40% 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: 1.14%* 1.14% 1.16%*
</TABLE>
*Annualized
**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. 27
<PAGE>
MassMutual Core Bond Fund - Financial Statements (Continued)
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 3
---------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
----------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.82 $ 9.90 $ 10.00
----------- ---------- ----------
Income (loss) from investment operations:
Net investment income 0.32 0.68 0.11
Net realized and unrealized gain (loss) on investments (0.55) 1.19 (0.10)
----------- ---------- ----------
Total income (loss) from investment operations (0.23) 1.87 0.01
----------- ---------- ----------
Less distributions to shareholders:
From net investment income -- (0.62) (0.11)
From net realized gains -- (0.33) --
----------- ---------- ----------
Total distributions -- (0.95) (0.11)
----------- ---------- ----------
Net asset value, end of period $ 10.59 $ 10.82 $ 9.90
=========== ========== ==========
Total Return (2.13)% 18.87% 0.09%
Ratios/Supplemental Data:
Net assets, end of period (000's) $118 $120 $101
Net expenses to average daily net assets# 0.75%* 0.75% 0.75%*
Net investment income to average daily net assets 6.07%* 6.32% 6.83%*
Portfolio turnover rate 40% 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%* 0.79% 0.81%*
<CAPTION>
Class 4
---------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
----------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.75 $ 9.84 $ 10.00
----------- ---------- ----------
Income (loss) from investment operations:
Net investment income 0.30 0.72*** 0.18
Net realized and unrealized gain (loss) on investments (0.51) 1.17 (0.16)
----------- ---------- ----------
Total income (loss) from investment operations (0.21) 1.89 0.02
----------- ---------- ----------
Less distributions to shareholders:
From net investment income -- (0.65) (0.18)
From net realized gains -- (0.33) --
----------- ---------- ----------
Total distributions -- (0.98) (0.18)
----------- ---------- ----------
Net asset value, end of period $ 10.54 $ 10.75 $ 9.84
=========== ========== ==========
Total Return@ (2.05)% 19.15% 0.20%
Ratios/Supplemental Data:
Net assets, end of period (000's) $308,420 $253,540 $194,150
Net expenses to average daily net assets# 0.5130%* 0.5130% 0.5130%*
Net investment income to average daily net assets 6.33%* 6.56% 6.86%*
Portfolio turnover rate 40% 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: 0.5532%* 0.5553% 0.5672%*
</TABLE>
*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.
28 The accompanying notes are an integral part of the financial statements.
<PAGE>
MassMutual Balanced Fund - Portfolio Manager Report
What are the investment The objective and policies of the Fund are to:
objective and policies
for the MassMutual .achieve high total rate of return over the long term
Balanced Fund? consistent with the preservation of capital
.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 The Fund has performed well, benefiting from the
performed over the past strength in the stock market and from having avoided
six months? some of the difficulties of the fixed income market.
While our performance has lagged that of pure equity
investments over the period, we believe our portfolio
diversification will be a plus, allowing us exposure
to the growth potential of stocks, but tempering any
dramatic price swings.
How did the allocation While remaining underweighted in both stocks and
between stocks, bonds bonds, we did slightly increase our allocation to
and cash change over these segments over the last six months, and
this period? consequently reduced our cash position. Though both
markets have been volatile, we believe they offer
significant reward potential over the long term. As of
June 30th, our equity holdings represented 50 percent
of the portfolio, and our bond position was 17
percent. The remaining 33 percent was invested in
money market securities.
What investment Because of reports of faster than expected economic
decisions benefited the growth in the first half, cyclical (or economically-
portfolio over the sensitive) stocks performed very well. As value
period? investors, we had purchased a number of cyclical names
at the end of 1995, when fears about the economy's
weakness made cyclicals one of the few real values
within a strong bull market. This positioning paid off
during the first half of 1996.
On the fixed income side, we benefited from having
increased our allocation to mortgage-backed securities
over the period. Mortgages tend to pay higher income
than Treasuries, and because interest rates had risen,
the prepayment risk associated with them in last
year's market had declined. Additionally, our
allocation to strong performing corporate bonds helped
us over the period.
Where are the greatest On the equity side, we've been working to reduce our
potential values in the total number of portfolio holdings, anticipating
markets? continued selectivity in the market. We are both
eliminating smaller holdings that we believe don't
merit being brought up to full position size, and
adding to those we feel confident are positioned for
growth, but that are still selling for reasonable
prices.
In bonds, we're looking for areas of the market where
we can add value to the portfolio. We're holding on to
the corporate bonds we own while selectively adding to
our holdings. In this economic environment, however,
we are conducting a tremendous amount of research into
individual corporate credits before buying. Beyond
corporate bonds, we're still building our position in
well-structured mortgage securities.
What is the outlook for The outlook is positive. With the increased volatility
the Fund? we've seen in both the stock and bond markets
recently, we believe the potential benefits of a
relatively conservative balanced strategy like ours
are compelling. With exposure to stocks, bonds and
money market securities, we're positioned to capture
appreciation and income, but with potentially less
price volatility than an investment in either stocks
or bonds.
29
<PAGE>
Mass Mutual 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
- -------------------------------------------------------------------------------
MassMutual Balanced Fund
<TABLE>
<CAPTION>
Total Return Year to Date One Year Average Annual
1/1/96 - 6/30/96 7/1/95 - 6/30/96 10/3/94 - 6/30/96
<S> <C> <C> <C>
Class 1 4.61% 13.16% 13.92%
Class 2 4.86% 13.77% 14.50%
Class 3 5.02% 14.19% 14.94%
Class 4 5.13% 14.38% 15.18%
- -------------------------------------------------------------------------------
Lipper Balanced 4.50% 14.79% --
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.
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
[LINE GRAPH APPEARS HERE]
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
3/95 10,523 10,551 10,574 10,583 10,472
6/95 11,086 11,124 11,158 11,179 11,203
9/95 11,509 11,558 11,611 11,635 11,807
12/95 11,992 12,070 12,132 12,164 12,306
3/96 12,325 12,416 12,489 12,534 12,586
6/96 12,544 12,656 12,741 12,788 12,860
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Mass Mutual Balanced Fund
Asset Allocation
On 6/30/96
[CIRCLE GRAPH APPEARS HERE]
Common Stocks - 50%
Bonds - 17%
Short-term Issues - 33%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Mass Mutual Balanced Fund
Largest Stock Holdings (6/30/96)
Bristol-Myers Squibb Company
General Electric Company
Hewlett-Packard Company
Amoco Corporation
Pfizer Incorporated
SAFECO Corporation
AT&T Corporation
Xerox Corporation
Minnesota Mining &
Manufacturing Company
AMP Incorporated
- --------------------------------------------------------------------------------
30
<PAGE>
MassMutual Balanced Fund - Portfolio of Investments
Portfolio of Investments
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number of
Shares Market Value
--------- ------------
<S> <C> <C>
EQUITIES -- 49.6%
Aerospace & Defense -- 1.3%
Boeing Company 42,000 $ 3,659,250
TRW, Inc. 31,500 2,831,063
------------
6,490,313
------------
Agribusiness -- 0.5%
Pioneer Hi-Bred
International, Inc. 45,500 2,405,813
------------
Apparel, Textiles & Shoes -- 0.5%
VF Corporation 44,500 2,653,313
------------
Automotive & Parts -- 2.3%
Ford Motor Company 97,300 3,150,088
Genuine Parts
Company 88,000 4,026,000
Goodyear Tire &
Rubber Company 91,700 4,424,525
------------
11,600,613
------------
Banking, Savings & Loans -- 2.9%
The Bank of New
York Company,
Incorporated 85,000 4,356,250
Comerica, Incorporated 58,500 2,610,563
CoreStates Financial
Corp. 81,500 3,137,750
Norwest Corporation 57,000 1,987,875
Wachovia Corp. 60,100 2,629,375
------------
14,721,813
------------
Beverages -- 1.1%
Brown-Forman
Corporation (Class B) 66,600 2,664,000
Pepsico, Inc. 84,000 2,971,500
------------
5,635,500
------------
Chemicals -- 2.2%
Eastman Chemical
Company 38,525 2,345,209
E. I. du Pont de
Nemours and Company 33,000 2,611,125
The Lubrizol
Corporation 48,000 1,458,000
Nalco Chemical
Company 65,700 $ 2,069,550
Rohm & Haas
Company 39,000 2,447,250
------------
10,931,134
------------
Communications -- 1.0%
AT & T Corporation 84,000 5,208,000
------------
Computers & Office Equipment -- 3.6%
Hewlett-Packard
Company 61,000 6,077,125
International Business
Machines Corporation 35,000 3,465,000
Pitney Bowes, Inc. 84,000 4,011,000
Xerox Corporation 90,000 4,815,000
------------
18,368,125
------------
Containers -- 0.6%
Temple-Inland, Inc. 63,000 2,945,250
-------------
Cosmetics & Personal Care -- 0.7%
Kimberly-Clark
Corporation 48,400 3,738,900
------------
Electric Utilities -- 0.7%
NIPSCO Industries,
Inc. 40,000 1,610,000
SCANA Corporation 75,000 2,109,375
------------
3,719,375
------------
Electrical Equipment &
Electronics -- 4.1%
AMP, Incorporated 115,700 4,642,463
General Electric
Company 93,000 8,044,500
General Signal
Corporation 48,900 1,852,088
Honeywell Inc. 54,000 2,943,000
Hubbell, Incorporated
(Class B) 48,011 3,180,755
------------
20,662,806
------------
Energy -- 4.3%
Amoco Corporation 74,000 5,355,750
Atlantic Richfield
Company 20,300 2,405,550
Energy -- 4.3%
Chevron Corporation 70,500 $ 4,159,500
Kerr-McGee
Corporation 43,500 2,648,063
Mobil Corporation 35,000 3,924,375
Unocal Corporation 68,900 2,325,375
USX-Marathon Group 51,200 1,030,400
------------
21,849,013
------------
Financial Services -- 0.7%
American Express
Company 76,500 3,413,813
------------
Foods -- 1.2%
ConAgra, Inc. 39,300 1,783,238
CPC International, Inc. 61,000 4,392,000
------------
6,175,238
------------
Forest Products & Paper -- 1.1%
Westvaco Corporation 61,500 1,837,313
Weyerhaeuser Company 90,400 3,842,000
------------
5,679,313
------------
Hardware & Tools -- 0.7%
The Stanley Works 123,000 3,659,250
------------
Healthcare -- 4.5%
Becton, Dickinson and
Company 51,000 4,092,750
Bristol-Myers Squibb
Company 99,000 8,910,000
Pfizer, Incorporated 74,000 5,281,750
Schering-Plough Corp. 69,800 4,379,950
------------
22,664,450
------------
Household Products -- 0.6%
The Clorox Company 32,500 2,880,313
------------
Industrial Distribution -- 0.7%
W.W. Grainger, Inc. 48,000 3,720,000
------------
Industrial Transportation -- 0.8%
Norfolk Southern
Corporation 48,000 4,068,000
------------
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements. 31
<PAGE>
MassMutual Balanced Fund - Portfolio of Investments (Continued)
<TABLE>
<CAPTION>
Number of
Shares Market Value
---------- ------------
<S> <C> <C>
Insurance -- 3.6%
Allstate Corporation 36,544 $ 1,667,320
Jefferson-Pilot
Corporation 39,750 2,052,094
Marsh & McLennan
Companies, Inc. 42,800 4,130,200
MBIA, Inc. 51,500 4,010,563
SAFECO Corporation 149,000 5,270,875
Unitrin, Inc. 28,500 1,339,500
------------
18,470,552
------------
Machinery & Components -- 1.0%
Dover Corporation 62,000 2,859,750
Parker-Hannifin
Corporation 48,000 2,034,000
------------
4,893,750
------------
Miscellaneous -- 1.4%
Harsco Corporation 34,500 2,320,125
Minnesota Mining &
Manufacturing
Company 68,000 4,692,000
------------
7,012,125
------------
Photography -- 0.7%
Eastman Kodak
Company 45,000 3,498,750
------------
Publishing & Printing -- 1.8%
The Dun &
Bradstreet Corporation 42,000 2,625,000
The McGraw-Hill
Companies, Inc. 89,000 4,071,750
R.R. Donnelley & Sons
Company 75,500 2,633,063
------------
9,329,813
------------
Retail -- 1.1%
The May Department
Stores Company 70,500 3,084,375
Sears Roebuck and Co. 48,000 2,334,000
------------
5,418,375
------------
Retail-Grocery -- 1.0%
Albertson's, Inc. 96,000 3,972,000
American Stores
Company 31,900 1,315,875
------------
5,287,875
------------
Telephone Utilities -- 1.3%
Ameritech Corporation 38,500 2,285,938
Frontier Corporation 80,500 2,465,313
Southern New England
Telecommunications
Corporation 48,000 2,016,000
------------
6,767,251
------------
Tobacco -- 1.6%
American Brands, Inc. 88,500 $ 4,015,688
UST Inc. 117,000 4,007,250
------------
8,022,938
------------
TOTAL EQUITIES 251,891,774
------------
(Cost $188,666,633)
Principal
Amount Market Value
---------- ------------
<S> <C> <C>
BONDS & NOTES -- 17.0%
ASSET BACKED SECURITIES -- 1.0%
Daimler-Benz Auto
Grantor Trust 1995-A
5.850% 5/15/2002 $1,494,595 $ 1,488,512
Daimler-Benz Vehicle
Trust 1994-A
5.950% 12/15/2000 266,540 266,438
Ford Credit 1994-B
Grantor Trust
7.300% 10/15/1999 488,805 494,148
Honda Auto
Receivables 1992-A
Grantor Trust
4.900% 6/15/1998 50,659 50,469
Nissan Auto
Receivables 1994-A
Grantor Trust
6.450% 9/15/1999 641,051 642,653
Railcar Trust No.
1992-1
7.750% 6/01/2004 410,535 424,904
World Omni 1996-A
Automobile Lease
Securitization Trust
6.300% 6/25/2002 1,500,000 1,499,040
------------
TOTAL ASSET BACKED
SECURITIES 4,866,164
------------
(Cost $4,862,226)
CORPORATE DEBT -- 4.4%
American Airlines, Inc.*
9.780% 11/26/2011 1,000,000 1,115,620
AMR Corporation*
9.000% 8/01/2012 500,000 540,600
Analog Devices, Inc.
6.625% 3/01/2000 500,000 488,505
Bell Atlantic Financial
Services, Inc.*
6.610% 2/04/2000 1,000,000 997,540
Cardinal Distribution,
Inc.
8.000% 3/01/1997 500,000 505,945
Champion International
Corporation
6.400% 2/15/2026 1,000,000 924,320
The Charles Schwab
Corporation
6.250% 1/23/2003 1,000,000 945,000
CITGO Petroleum
Corp.
7.875% 5/15/2006 $ 250,000 $ 247,928
Continental Airlines,
Inc. 1996-B 144A
7.820% 4/15/2015 500,000 488,415
Continental Airlines,
Inc. 2B 144A
8.560% 7/02/2014 500,000 528,045
Delta Air Lines, Inc.
8.540% 1/02/2007 437,643 454,379
English China Clays
Delaware Inc.*
7.375% 10/01/2002 500,000 500,875
ERAC USA Finance
Company 144A
6.950% 1/15/2006 500,000 465,825
FBG Finance Ltd.
144A
7.875% 6/01/2016 1,000,000 996,570
Fletcher Challenge Ltd.
7.750% 6/20/2006 500,000 507,040
General American
Transportation
Corporation
6.750% 3/01/2006 1,000,000 951,080
The Goldman Sachs
Group, L.P. 144A
6.200% 2/15/2001 1,000,000 957,250
GTE Corporation
9.100% 6/01/2003 500,000 552,435
Leucadia National
Corporation
7.750% 8/15/2013 1,000,000 942,860
McDonnell Douglas
Corporation*
9.250% 4/01/2002 500,000 550,110
Newmont Mining Corp.*
8.625% 4/01/2002 1,000,000 1,046,270
North Finance
(Bermuda) Limited
144A
7.000% 9/15/2005 1,000,000 960,000
Polaroid Corporation
7.250% 1/15/1997 1,000,000 1,004,970
Rolls-Royce Capital
Inc.
7.125% 7/29/2003 1,000,000 980,620
Service Corporation
International
7.000% 6/01/2015 1,000,000 999,220
TCI Communications,
Inc.
8.650% 9/15/2004 355,000 361,834
Tele-Communications,
Inc.
9.800% 2/01/2012 450,000 486,216
</TABLE>
(Continued)
32 The accompanying notes are an integral part of the financial statements.
<PAGE>
MassMutual Balanced Fund - Portfolio of Investments (Continued)
<TABLE>
<CAPTION>
Principal
Amount Market Value
----------- ------------
<S> <C> <C>
Thomas & Betts
Corporation
8.250% 1/15/2004 $ 500,000 512,165
Time Warner, Inc.
7.750% 6/15/2005 1,000,000 976,220
US Air, Inc. 144A
7.500% 4/15/2008 500,000 484,680
W.R. Grace & Co.
8.000% 8/15/2004 1,000,000 1,041,600
-----------
TOTAL CORPORATE DEBT 22,514,137
-----------
(Cost $22,125,273)
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 4.7%
Federal Home Loan Mortgage Corporation
(FHLMC) -- 1.0%
Collateralized Mortgage Obligations -- 1.0%
FHLMC Series 1322
Class G
7.500% 2/15/2007 1,000,000 1,019,680
FHLMC Series 1625
Class D
5.250% 7/15/2004 3,100,000 3,030,250
FHLMC Series 1625
Class EA
5.750% 3/15/2007 1,000,000 971,250
-----------
5,021,180
-----------
Pass-Through Securities -- 0.0%
FHLMC
9.000% 3/01/2017 209,968 220,531
-----------
5,241,711
-----------
Federal National Mortgage Association
(FNMA) -- 0.7%
Collateralized Mortgage Obligations -- 0.6%
FNMA Series 1993-134
Class GA
6.500% 2/25/2007 1,000,000 978,120
FNMA Series 1993-191
Class PD
5.400% 3/25/2004 1,000,000 979,680
FNMA Series 1993-221
Class D
6.000% 12/25/2008
1,000,000 934,060
-----------
2,891,860
-----------
Pass-Through Securities -- 0.1%
FNMA
8.000% 5/01/2013 656,312 673,041
-----------
3,564,901
-----------
Government National Mortgage Association
(GNMA) -- 1.7%
Pass-Through Securities
GNMA
6.000% 7/20/2025 -
12/20/2025 $ 2,393,817 2,415,637
GNMA
7.500% 10/15/2006 -
6/15/2017 3,234,149 3,235,571
GNMA
8.000% 11/15/2004 -
7/15/2008 2,082,793 2,136,178
GNMA
9.000% 12/15/2008 -
5/15/2009 648,082 686,966
-----------
8,474,352
-----------
U.S. Government Guaranteed Notes -- 1.3%
1991-A Fairfax
County, VA
8.740% 8/01/2001 200,000 215,374
1991-A Jefferson
Park, CA
8.740% 8/01/2001 1,740,000 1,873,754
1991-A Monroe
County, NY
8.740% 8/01/2001 500,000 538,435
1991-A Rochester, NY
8.740% 8/01/2001 60,000 64,612
1994-A Ocean Shores,
WA
5.040% 8/01/1996 100,000 100,000
1994-A Sacramento
City, CA
5.040% 8/01/1996 190,000 190,000
1994-A Virginia Beach,
VA
5.040% 8/01/1996 210,000 210,000
U.S. Dept. of Housing
and Urban
Development, Series
1995-A*
8.240% 8/01/2002 3,000,000 3,226,350
-----------
6,418,525
-----------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 23,699,489
===========
(Cost $23,235,050)
U.S. TREASURY OBLIGATIONS -- 6.9%
U.S. Treasury Bond -- 2.8%
U.S. Treasury Bond
8.750% 5/15/2017 11,750,000 13,940,318
-----------
U.S. Treasury Notes -- 4.1%
U.S. Treasury Note
6.125% 3/31/1998 8,500,000 8,506,630
U.S. Treasury Note
6.250% 5/31/2000 6,500,000 6,458,335
U.S. Treasury Note
6.375% 5/15/1999 $ 4,500,000 4,509,855
U.S. Treasury Note
7.250% 5/15/2004 1,500,000 1,554,135
-----------
21,028,955
-----------
TOTAL U.S. TREASURY
OBLIGATIONS 34,969,273
-----------
(Cost $35,179,782)
TOTAL BONDS & NOTES 86,049,063
-----------
(Cost $85,402,331)
SHORT-TERM INVESTMENTS -- 33.3%
Commercial Paper
Airtouch
Communications, Inc.
5.440% 8/21/1996 4,715,000 4,678,663
Airtouch
Communications, Inc.
5.500% 7/01/1996 4,265,000 4,265,000
Burlington Northern
Santa Fe Corporation
5.470% 8/05/1996 3,290,000 3,272,504
Carter Holt Harvey
Limited
5.470% 7/10/1996 3,600,000 3,595,077
Carter Holt Harvey
Limited
5.500% 7/31/1996 2,350,000 2,339,229
Central and South
West Corporation
5.600% 8/16/1996 5,115,000 5,078,399
Central and South
West Corporation
5.600% 8/19/1996 3,380,000 3,354,237
Cincinnati Bell Inc.
5.150% 8/20/1996 3,925,000 3,896,925
Comdisco, Inc.
5.470% 7/19/1996 3,900,000 3,889,333
Comdisco, Inc.
5.480% 7/17/1996 8,695,000 8,673,823
ConAgra, Inc.
5.550% 8/07/1996 6,250,000 6,214,349
ConAgra, Inc.
5.570% 8/27/1996 4,690,000 4,648,638
ConAgra, Inc.
5.570% 8/30/1996 5,310,000 5,260,248
Cox Enterprises, Inc.
5.450% 7/15/1996 3,025,000 3,018,589
Cox Enterprises, Inc.
5.530% 8/09/1996 3,790,000 3,767,295
Cox Enterprises, Inc.
5.550% 8/23/1996 3,035,000 3,010,202
Cox Enterprises, Inc.
5.560% 8/15/1996 4,460,000 4,429,003
Crown Cork & Seal
Company, Inc.
5.450% 7/17/1996 5,525,000 5,511,617
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements. 33
<PAGE>
MassMutual Balanced Fund - Portfolio of Investments (Continued)
<TABLE>
<CAPTION>
Principal
Amount Market Value
---------- -------------
<S> <C> <C>
Crown Cork & Seal
Company, Inc.
5.470% 7/25/1996 $4,270,000 $ 4,254,429
Crown Cork & Seal
Company, Inc.
5.480% 7/23/1996 4,280,000 4,265,667
Dana Credit
Corporation
5.500% 7/11/1996 4,095,000 4,088,744
Dana Credit
Corporation
5.550% 8/06/1996 3,610,000 3,589,964
Dana Credit
Corporation
5.550% 8/12/1996 2,870,000 2,851,417
Eastman Chemical
Company
5.550% 7/24/1996 5,450,000 5,430,675
Illinois Power
Company
5.520% 7/30/1996 4,585,000 4,564,612
Lockheed Martin
Corporation
5.500% 7/12/1996 2,470,000 2,465,849
Lockheed Martin
Corporation
5.550% 8/01/1996 3,140,000 3,124,993
MCI Communications
Corporation
5.300% 7/01/1996 5,555,000 5,555,000
ORIX Credit Alliance,
Inc.
5.520% 7/02/1996 3,640,000 3,639,442
ORIX Credit Alliance,
Inc.
5.530% 7/03/1996 3,270,000 3,268,995
Praxair, Inc.
5.480% 7/22/1996 4,000,000 3,987,213
Praxair, Inc.
5.550% 8/26/1996 4,650,000 4,609,855
Public Service
Electric and Gas
Company
5.450% 7/16/1996 6,130,000 6,116,080
Public Service
Electric and Gas
Company
5.520% 8/02/1996 5,065,000 5,040,148
Service Corporation
International
5.500% 7/29/1996 3,530,000 3,514,900
Textron Financial
Corporation
5.450% 7/24/1996 825,000 822,128
Textron Financial
Corporation
5.520% 7/08/1996 1,830,000 1,828,036
Textron Inc.
5.580% 8/08/1996 $4,150,000 $ 4,125,557
Tyson Foods, Inc.
5.470% 7/26/1996 4,330,000 4,313,552
Union Oil Company of
California
5.450% 7/18/1996 3,825,000 3,815,156
Union Oil Company of
California
5.500% 7/09/1996 3,655,000 3,650,533
UOP
5.500% 7/08/1996 1,195,000 1,193,720
-------------
TOTAL SHORT-TERM
INVESTMENTS 169,019,796
-------------
(Cost $169,020,253)
TOTAL INVESTMENTS -- 99.9% 506,960,633
(Cost $443,089,217)+
Other Assets/
(Liabilities) - 0.1% 500,200
-------------
NET ASSETS -- 100.0% $507,460,833
=============
</TABLE>
Notes to Portfolio of Investments
+Aggregate cost for Federal tax purposes (Note 7)
144A: Securities exempt from registration under 144A: 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).
34 The accompanying notes are an integral part of the financial statements.
<PAGE>
MassMutual Balanced Fund - Financial Statements
<TABLE>
<CAPTION>
June 30, 1996
(Unaudited)
---------------
<S> <C>
Statement of
Assets and Assets:
Liabilities Investments, at value (cost $274,068,964) (Note 2)............ $ 337,940,837
Short-term investments, at value (cost $169,020,253) (Note 2). 169,019,796
---------------
Total Investments............................................ 506,960,633
Cash........................................................... 8,961
Receivables from:
Investments sold............................................. 759,042
Settlement of investments purchased on a
forward commitment basis (Note 2)........................... 1,419
Fund shares sold.............................................. 679,608
Interest and dividends........................................ 1,621,806
Investment manager (Note 3)................................... 16,807
---------------
Total assets................................................ 510,048,276
===============
Liabilities:
Payables for:
Investments purchased........................................ 1,573,773
Fund shares redeemed......................................... 772,818
Directors' fees and expenses (Note 3)........................ 2,011
Affiliates (Note 3):
Investment management fees................................. 186,480
Administration fees........................................ 35,427
Service and distribution fees.............................. 261
Accrued expenses and other liabilities....................... 16,673
---------------
Total liabilities.......................................... 2,587,443
---------------
Net assets................................................... $ 507,460,833
===============
Net assets consist of:
Paid-in capital.............................................. $ 429,036,468
Undistributed net investment income.......................... 9,468,853
Accumulated net realized gain on investments................. 5,082,677
Net unrealized appreciation on investments
and forward commitments.................................... 63,872,835
---------------
$ 507,460,833
===============
Net assets:
Class 1........................................................ $ 128,795
===============
Class 2........................................................ $ 126,539
===============
Class 3........................................................ $ 127,063
===============
Class 4........................................................ $ 507,078,436
===============
Shares outstanding:
Class 1........................................................ 10,706
===============
Class 2........................................................ 10,464
===============
Class 3........................................................ 10,473
===============
Class 4........................................................ 41,890,565
===============
Net asset value, offering price and
redemption price per share:
Class 1........................................................ $ 12.03
===============
Class 2........................................................ $ 12.09
===============
Class 3........................................................ $ 12.13
===============
Class 4........................................................ $ 12.10
===============
</TABLE>
The accompanying notes are an integral part of the financial statements. 35
<PAGE>
MassMutual Balanced Fund - Financial Statements (Continued)
<TABLE>
<CAPTION>
Six months ended
June 30, 1996
(Unaudited)
-------------
Statement of
Operations
<S> <C> <C>
Investment income:
Interest............................................................. $ 7,347,336
Dividends............................................................ 3,188,419
-------------
Total investment income............................................ 10,535,755
-------------
Expenses (Note 1):
Investment management fees (Note 3).................................. 1,094,353
Custody fees......................................................... 26,398
Audit and legal fees................................................. 7,543
Directors' fees (Note 3)............................................. 5,154
Fees waived by the investment manager................................ (95,514)
-------------
1,037,934
Administration fees (Note 3):
Class 1............................................................... 420
Class 2............................................................... 322
Class 3............................................................... 200
Class 4............................................................... 207,029
Distribution and service fees (Note 3):
Class 1............................................................... 478
Class 2............................................................... 93
-------------
Net expenses........................................................ 1,246,476
-------------
Net investment income............................................... 9,289,279
-------------
Realized and unrealized gain (loss):
Net realized gain on investment transactions and forward commitments.. 4,205,355
Net change in unrealized appreciation (depreciation) on
investments and forward commitments................................. 10,888,732
-------------
Net realized and unrealized gain.................................. 15,094,087
-------------
Net increase in net assets resulting from operations................... $ 24,383,366
=============
</TABLE>
36 The accompanying notes are an integral part of the financial statements.
<PAGE>
MassMutual Balanced Fund - Financial Statements (Continued)
<TABLE>
<CAPTION>
Six months ended
June 30, 1996 Year ended
(Unaudited) December 31, 1995
----------------- ----------------
Statements of
Changes in Net
Assets
<S> <C> <C>
Increase(Decrease) in Net Assets:
Operations:
Net investment income...................... $ 9,289,279 $ 16,724,229
Net realized gain on investment
transactions and forward commitments....... 4,205,355 4,359,989
Net change in unrealized appreciation
(depreciation) on
investments and forward commitments....... 10,888,732 55,498,858
------------ ------------
Net increase in net assets resulting
from operations........................... 24,383,366 76,583,076
------------ ------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1.................................... -- (4,846)
Class 2.................................... -- (3,751)
Class 3.................................... -- (4,120)
Class 4.................................... -- (16,528,781)
------------ ------------
Total distributions from net
investment income......................... -- (16,541,498)
------------ ------------
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)
------------ ------------
Net fund share transactions (Note 5):
Class 1.................................... (51,086) 55,401
Class 2.................................... -- 4,610
Class 3.................................... -- 4,977
Class 4.................................... 25,941,022 50,326,522
------------ ------------
Increase in net assets from net fund
share transactions........................ 25,889,936 50,391,510
------------ ------------
Total increase in net assets............... 50,273,302 107,199,815
Net assets:
Beginning of period........................ 457,187,531 349,987,716
------------ ------------
End of period (including
undistributed net investment income
of $9,468,853 and $179,574,
respectively)............................. $507,460,833 $457,187,531
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements. 37
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 1
----------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
----------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.50 $ 9.94 $ 10.00
----------- ---------- ----------
Income (loss) from investment operations:
Net investment income 0.16 0.28 0.06
Net realized and unrealized gain
(loss) on investments 0.37 1.70 (0.06)
----------- ---------- ----------
Total income (loss) from
investment operations 0.53 1.98 --
----------- ---------- ----------
Less distributions to shareholders:
From net investment income -- (0.33) (0.06)
From net realized gains -- (0.09) --
----------- ---------- ----------
Total distributions -- (0.42) (0.06)
----------- ---------- ----------
Net asset value, end of period $ 12.03 $ 11.50 $ 9.94
=========== ========== ==========
Total Return 4.61% 19.92% 0.00%
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 129 $ 173 $ 100
Net expenses to average daily net
assets# 1.65%* 1.65% 1.65%*
Net investment income to average
daily net assets 2.70%* 3.03% 3.39%*
Portfolio turnover rate 12% 23% 2%
Average broker commission rate $ .0597 N/A N/A
#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% 1.71%*
<CAPTION>
Class 2
----------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
----------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.53 $ 9.95 $ 10.00
----------- ---------- ----------
Income (loss) from investment
operations:
Net investment income 0.19 0.39 0.06
Net realized and unrealized gain
(loss) on investments 0.37 1.65 (0.04)
----------- ---------- ----------
Total income (loss) from
investment operations 0.56 2.04 0.02
----------- ---------- ----------
Less distributions to shareholders:
From net investment income -- (0.37) (0.07)
From net realized gains -- (0.09) --
----------- ---------- ----------
Total distributions -- (0.46) (0.07)
----------- ---------- ----------
Net asset value, end of period $ 12.09 $ 11.53 $ 9.95
=========== ========== ==========
Total Return 4.86% 20.50% 0.17%
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 127 $ 121 $ 100
Net expenses to average daily net
assets 1.10%* 1.10% 1.10%*
Net investment income to average
daily net assets 3.23%* 3.60% 3.94%*
Portfolio turnover rate 12% 23% 2%
Average broker commission rate $ .0597 N/A N/A
#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: 1.14%* 1.14% 1.16%*
</TABLE>
*Annualized
**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.
38
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 3
----------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.55 $ 9.96 $ 10.00
---------- ---------- ----------
Income (loss) from investment
operations:
Net investment income 0.21 0.43 0.07
Net realized and unrealized gain
(loss) on investments 0.37 1.66 (0.04)
---------- ---------- ----------
Total income (loss) from
investment operations 0.58 2.09 0.03
---------- ---------- ----------
Less distributions to shareholders:
From net investment income -- (0.41) (0.07)
From net realized gains -- (0.09) --
---------- ---------- ----------
Total distributions -- (0.50) (0.07)
---------- ---------- ----------
Net asset value, end of period $ 12.13 $ 11.55 $ 9.96
========== ========== ==========
Total Return 5.02% 20.96 % 0.28%
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 127 $ 121 $ 100
Net expenses to average daily net
assets# 0.75%* 0.75 % 0.75%*
Net investment income to average
daily net assets 3.58%* 3.94 % 4.32%*
Portfolio turnover rate 12% 23 % 2%
Average broker commission rate $ .0597 N/A N/A
#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%* 0.79 % 0.81%*
<CAPTION>
Class 4
----------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.51 $ 9.92 $ 10.00
---------- ---------- ----------
Income (loss) from investment
operations:
Net investment income 0.22 0.44 0.11
Net realized and unrealized gain
(loss) on investments 0.37 1.68 (0.08)
---------- ---------- ----------
Total income (loss) from
investment operations 0.59 2.12 0.03
---------- ---------- ----------
Less distributions to shareholders:
From net investment income -- (0.44) (0.11)
From net realized gains -- (0.09) --
---------- ---------- ----------
Total distributions -- (0.53) (0.11)
---------- ---------- ----------
Net asset value, end of period $ 12.10 $ 11.51 $ 9.92
========== ========== ==========
Total Return@ 5.13% 21.31% 0.29%
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 507,078 $ 456,773 $ 349,688
Net expenses to average daily net
assets 0.5120%* 0.5120% 0.5120%*
Net investment income to average
daily net assets 3.82%* 4.18% 4.29%*
Portfolio turnover rate 12% 23% 2%
Average broker commission rate $ .0597 N/A N/A
#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: 0.5504%* 0.5514% 0.5650%*
</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. 39
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment The objective and policies of the Fund are to:
objective and policies
for the MassMutual .achieve long-term growth of capital and income
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 high investment quality
-offer above-average dividend growth
-are attractively valued
How has the Fund The Fund's performance has been very good, though
performed over the past it has slightly lagged broad market indices for the
six months? period. In the sixth year of an economic growth
cycle, investors tended to focus more on
traditional high growth sectors of the market
rather than the lower-risk area where we invest.
Still, due to good stock selection, our performance
was sound in an absolute sense and it built a solid
foundation for full year results.
Has the fact that market Not greatly. One place where investors reached for
leadership moved away higher returns in the first half of 1996 was
from large stocks smaller company stocks, in contrast to last year,
impacted the portfolio? when large company stocks were runaway leaders.
Still, solid companies with recognized competitive
strengths and sustainable earnings have remained in
favor regardless of their size. Ours is a portfolio
of very high quality companies, and we have not
been disadvantaged by the shift in market interest
towards smaller companies.
What types of Because of reports of faster than expected economic
companies performed growth in the first half, cyclical (or
best during the period? economically-sensitive) stocks performed very well.
As value investors, we had purchased a number of
cyclical names at the end of 1995, when fears about
the economy's weakness made cyclicals one of the
few real values within strong bull market. This
positioning paid off during the first half of 1996.
Some of our best performers included machinery
manufacturers Parker-Hannifin Corporation, Dover
Corporation and Harsco Corporation, electrical
equipment firms such as General Electric Company,
Honeywell Inc. and General Signal Corporation, and
retailers including The May Department Stores
Company, Sears Roebuck and Co., Albertson's, Inc.
and American Stores Company.
How is the portfolio Recently, we've been working to reduce our total
currently positioned? number of portfolio holdings, anticipating
continued selectivity in the market. We are both
eliminating smaller holdings that we believe don't
merit being brought to full position size, and
adding to those we feel confident are positioned
for growth, but that are still selling for
reasonable prices. For example, we've recently
increased our insurance holdings, adding strong
companies like Marsh & McLennan Companies, Inc.,
where we see good cash flows being generated, a
healthy dividend and strong prospects for future
dividend growth.
What is the outlook for We believe the Fund will continue to do well,
the portfolio? especially in light of increased market volatility.
While volatility can be uncomfortable for the
market watchers, it is precisely this type of
environment that creates opportunity for value
investors. Price fluctuations both allow us to buy
stocks we want to own at temporarily reduced prices
and to sell stocks when they reach our target sell
price. Our value-oriented investment approach is
one that has been very successful over time, and we
expect it to help us continue to provide superior
returns going forward.
40
<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.
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund
Total Return
<TABLE>
<CAPTION>
Year to Date One Year Average Annual
1/1/96-6/30/96 7/1/95-6/30/96 10/3/94-6/30/96
<S> <C> <C> <C>
Class 1 8.00% 21.62% 21.32%
Class 2 8.30% 22.21% 22.01%
Class 3 8.45% 22.64% 22.40%
Class 4 8.63% 22.93% 22.71%
- --------------------------------------------------------------------------------
Standard & Poor's 10.09% 26.00% --
500 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 incure expenses.
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Class 1 Class 2 Class 3 Class 4 S&P 500 INDEX
------- ------- ------- ------- -------
<S> <C> <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
3/95 10,724 10,762 10,776 10,787 10,972
6/95 11,507 11,566 11,590 11,613 12,019
9/95 12,231 12,311 12,345 12,380 12,974
12/95 12,959 13,052 13,106 13,141 13,756
3/96 13,626 13,743 13,810 13,859 14,495
6/96 13,995 14,135 14,213 14,276 15,144
</TABLE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund
Largest Stock Holdings (6/30/96)
Bristol-Myers Squibb Company
General Electric Company
Hewlett-Packard Company
Amoco Corporation
SAFECO Corporation
Pfizer Incorporated
AT&T Corporation
AMP Incorporated
Minnesota Mining & Manufacturing Company
Xerox Corporation
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments
June 30, 1996 (Unaudited)
Number of
Shares Market Value
------ ------------
EQUITIES - 92.3%
Aerospace & Defense--2.4%
Boeing Company 365,000 $ 31,800,625
TRW, Inc. 260,000 23,367,500
-------------
55,168,125
-------------
Agribusiness--0.9%
Pioneer Hi-Bred International, Inc. 385,000 20,356,875
-------------
Apparel, Textiles & Shoes--1.0%
VF Corporation 365,000 21,763,125
-------------
Automotive & Parts--4.4%
Ford Motor Company 945,300 30,604,088
Genuine Parts Company 735,000 33,626,250
Goodyear Tire & Rubber Company 750,000 36,187,500
-------------
100,417,838
-------------
Banking, Savings & Loans--5.4%
The Bank of New York Company,
Incorporated 720,000 36,900,000
Comerica, Incorporated 490,000 21,866,250
CoreStates Financial Corp. 700,000 26,950,000
Norwest Corporation 485,000 16,914,375
Wachovia Corp. 494,000 21,612,500
-------------
124,243,125
-------------
Beverages--2.1%
Brown-Forman Corporation (Class B) 575,000 23,000,000
Pepsico, Inc. 700,000 24,762,500
-------------
47,762,500
-------------
Chemicals--4.0%
Eastman Chemical Company 319,975 19,478,478
E.I. du Pont de Nemours and Company 275,000 21,759,375
The Lubrizol Corporation 400,000 12,150,000
Nalco Chemical Company 546,800 17,224,200
Rohm & Haas Company 315,000 19,766,250
-------------
90,378,303
-------------
Communications--1.9%
AT&T Corporation 700,000 43,400,000
-------------
Computers & Office Equipment--6.7%
Hewlett-Packard Company 510,000 50,808,750
International Business Machines
Corporation 291,000 28,809,000
Pitney Bowes, Inc. 700,000 33,424,998
Xerox Corporation 723,000 38,680,500
-------------
151,723,248
-------------
Containers--1.1%
Temple-Inland, Inc. 525,000 24,543,750
-------------
Cosmetics & Personal Care--1.4%
Kimberly-Clark Corporation 403,000 31,131,750
-------------
Electric Utilities--1.4%
Niagara Mohawk Power Corporation 500 3,875
NIPSCO Industries, Inc. 330,000 13,282,500
SCANA Corporation 625,000 17,578,125
-------------
30,864,500
-------------
Electrical Equipment & Electronics--7.6%
AMP, Incorporated 975,000 39,121,875
General Electric Company 775,000 67,037,500
General Signal Corporation 415,000 15,718,125
Honeywell Inc. 450,000 24,525,000
Hubbell, Incorporated (Class B) 400,036 26,502,365
-------------
172,904,865
-------------
Energy--8.0%
Amoco Corporation 615,000 44,510,625
Atlantic Richfield Company 168,000 19,908,000
Chevron Corporation 600,000 35,400,000
Kerr-McGee Corporation 360,000 21,915,000
Mobil Corporation 290,000 32,516,250
Unocal Corporation 574,900 19,402,875
USX-Marathon Group 427,100 8,595,388
-------------
182,248,138
-------------
Financial Services--1.3%
American Express Company 665,000 29,675,625
-------------
Foods--2.1%
ConAgra, Inc. 326,900 14,833,088
CPC International, Inc. 426,500 33,300,000
-------------
48,133,088
-------------
Forest Products & Paper--2.1%
Westvaco Corporation 520,000 15,535,000
Weyerhaeuser Company 775,000 32,937,500
-------------
48,472,500
-------------
Hardware & Tools--1.3%
The Stanley Works 1,030,000 30,642,500
-------------
(Continued)
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Number of
Shares Market Value
------ ------------
Healthcare--8.1%
Becton, Dickinson and Company 425,000 $ 34,106,250
Bristol-Myers Squibb Company 825,000 74,250,000
Pfizer, Incorporated 610,000 43,538,750
Schering-Plough Corp. 565,600 35,491,400
-------------
187,386,400
Household Products--1.0%
The Clorox Company 270,000 23,928,750
-------------
Industrial Distribution--1.4%
W.W. Grainger, Inc. 400,000 31,000,000
-------------
Industrial Transportation--1.5%
Norfolk Southern Corporation 400,000 33,900,000
-------------
Insurance--6.8%
Allstate Corporation 305,921 13,957,646
Jefferson-Pilot Corporation 345,000 17,810,625
Marsh & McLennan Companies, Inc. 355,000 34,257,500
MBIA, Inc. 435,000 33,857,625
SAFECO Corporation 1,240,000 43,865,000
Unitrin, Inc. 234,950 11,042,650
-------------
154,809,046
-------------
Machinery & Components--1.8%
Dover Corporation 540,000 24,907,500
Parker-Hannifin Corporation 400,000 16,950,000
-------------
41,857,500
-------------
Miscellaneous--2.65
Harsco Corporation 300,000 20,175,000
Minnesota Mining & Manufacturing Company 565,000 38,985,000
-------------
59,160,000
-------------
Photography--1.3%
Eastman Kodak Company 375,000 29,156,250
-------------
Publishing & Printing--3.4%
The Dun & Bradstreet Corporation 350,000 21,875,000
The McGraw Hill Companies, Inc. 740,000 33,855,000
R.R. Donnelley & Sons Company 630,000 21,971,250
-------------
77,701,250
-------------
Retail--2.0%
The May Department Stores Company 600,000 26,250,000
Sears Roebuck and Co. 400,000 19,450,000
-------------
45,700,000
-------------
Retail-Grocery--1.9%
Albertson's, Inc. 800,000 33,100,000
American Stores Company 262,300 10,819,875
-------------
43,919,875
-------------
Telephone Utilities--2.5%
Ameritech Corporation 320,000 19,000,000
Frontier Corporation 700,000 21,437,500
Southern New England Telecommunications
Corporation 400,000 16,800,000
-------------
57,237,500
-------------
Tobacco--2.9%
American Brands, Inc. 735,000 33,350,625
UST Inc. 983,000 33,667,750
-------------
67,018,375
-------------
TOTAL EQUITIES 2,106,604,801
(Cost $ 1,566,892,716) -------------
Principal
Amount Market Value
--------- ------------
[S] [C] [C]
SHORT-TERM INVESTMENTS--7.4%
Commercial Paper
Airtouch Communications, Inc.
5.440% 8/21/1996 $5,000,000 $ 4,961,467
Airtouch Communications, Inc.
5.470% 8/02/1996 3,980,000 3,960,648
Baltimore Gas and Electric Company
5.250% 7/11/1996 2,870,000 2,865,814
Burlington Northern Santa Fe Corporation
5.450% 7/25/1996 5,820,000 5,798,854
Burlington Northern Santa Fe Corporation
5.550% 9/10/1996 4,770,000 4,717,111
Carter Holt Harvey Limited
5.480% 7/15/1996 2,345,000 2,340,004
Carter Holt Harvey Limited
5.500% 7/01/1996 3,820,000 3,820,000
Central and South West Corporation
5.450% 7/08/1996 6,370,000 6,363,250
Central and South West Corporation
5.500% 7/09/1996 4,000,000 3,995,111
Central and South West Corporation
5.550% 8/05/1996 5,070,000 5,042,643
Cincinnati Bell Inc.
5.150% 8/20/1996 3,390,000 3,365,752
Comdisco, Inc.
5.450% 7/30/1996 1,620,000 1,612,888
Comdisco, Inc.
5.490% 8/13/1996 2,190,000 2,175,639
Comdisco, Inc.
5.550% 8/06/1996 6,100,000 6,066,145
Comdisco, Inc.
5.550% 8/15/1996 3,400,000 3,376,413
ConAgra, Inc.
5.550% 8/29/1996 2,590,000 2,566,135
Cox Enterprises, Inc.
5.490% 8/09/1996 4,000,000 3,976,210
Cox Enterprises, Inc.
5.530% 8/08/1996 3,955,000 3,931,914
Cox Enterprises, Inc.
5.550% 8/23/1996 5,295,000 5,251,735
(Continued)
43
The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund -- Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
Crown Cork & Seal
Company, Inc.
5.470% 7/10/1996 $4,285,000 $ 4,279,140
Crown Cork & Seal
Company, Inc.
5.500% 7/08/1996 1,060,000 1,058,866
Crown Cork & Seal
Company, Inc.
5.500% 8/01/1996 4,750,000 4,727,503
Dana Credit
Corporation
5.500% 7/12/1996 3,310,000 3,304,437
Dana Credit
Corporation
5.550% 8/30/1996 6,940,000 6,874,968
Federal Signal
Corporation
5.500% 9/03/1996 5,665,000 5,608,362
Illinois Power
Company
5.500% 7/23/1996 3,060,000 3,049,715
ORIX Credit Alliance,
Inc.
5.510% 7/16/1996 2,125,000 2,120,121
ORIX Credit Alliance,
Inc.
5.520% 7/02/1996 3,580,000 3,579,451
ORIX Credit Alliance,
Inc.
5.520% 7/03/1996 1,900,000 1,899,417
ORIX Credit Alliance,
Inc.
5.630% 10/18/1996 6,000,000 5,897,907
Praxair, Inc.
5.450% 7/31/1996 6,000,000 5,972,750
Praxair, Inc.
5.480% 7/22/1996 3,850,000 3,837,693
Praxair, Inc.
5.550% 9/16/1996 3,765,000 3,719,728
Service Corporation
International
5.500% 7/29/1996 4,265,000 4,246,755
Sundstrand
Corporation
5.470% 7/18/1996 5,015,000 5,002,046
<CAPTION>
Principal
Shares Market Value
------ ------------
<S> <C> <C>
Textron Financial
Corporation
5.450% 7/24/1996 7,185,000 7,159,982
Textron Financial
Corporation
5.470% 7/19/1996 6,000,000 5,983,590
Textron Financial
Corporation
5.500% 8/12/1996 3,740,000 3,716,002
Tyson Foods, Inc.
5.470% 7/26/1996 3,580,000 3,566,401
Union Oil Company
of California
5.450% 7/17/1996 6,000,000 5,985,467
-------------
TOTAL SHORT-TERM
INVESTMENTS 167,778,034
-------------
(Cost $167,781,495)
TOTAL INVESTMENTS--99.7% 2,274,382,835
(Cost $1,734,674,211)+
Other Assets/
(Liabilities) - 0.3% 6,865,649
-------------
NET ASSETS -- 100.0% $2,281,248,484
-------------
</TABLE>
Notes to Portfolio of Investments
+Aggregate cost for Federal tax purposes (Note 7)
44 The accompanying notes are an integral part of the financial statements.
<PAGE>
Mass Mutual Value Equity Fund - Financial Statements
Statement of Asset and Liabilities
<TABLE>
<CAPTION>
June 30, 1996
(Unaudited)
-----------------
<S> <C>
Assets:
Investments at value (cost $1,566,892,716)(Note 2)............................. $ 2,106,604,801
Short-term investments, at value (cost $167,781,495)(Note 2)................... 167,778,034
------------------
Total Investments............................................................ 2,274,382,835
Cash........................................................................... 65,462
Receivables from:
Investments sold............................................................. 5,467,728
Fund shares sold............................................................. 1,366,824
Interest and dividends....................................................... 3,978,664
Investment manager (Note 3).................................................. 90,300
------------------
Total assets............................................................... 2,285,351,813
------------------
Liabilities:
Payables for:
Investments purchased........................................................ 55,908
Fund shares redeemed......................................................... 2,957,922
Directors' fees and expenses (Note 3)........................................ 2,011
Affiliates (Note 3):
Investment management fees................................................. 851,866
Administration fees........................................................ 171,455
Service and distribution fees.............................................. 281
Accrued expenses and other liabilities......................................... 63,886
------------------
Total liabilities.......................................................... 4,103,329
------------------
Net assets..................................................................... $ 2,281,248,484
==================
Net assets consist of:
Paid-in capital................................................................ $ 1,676,467,676
Undistributed net investment income............................................ 27,643,607
Accumulated net realized gain on investments................................... 37,428,577
Net unrealized appreciation on investments..................................... 539,708,624
------------------
$ 2,281,248,484
==================
Net assets:
Class 1........................................................................ $ 139,609
==================
Class 2........................................................................ $ 140,886
==================
Class 3........................................................................ $ 141,457
==================
Class 4........................................................................ $ 2,280,826,532
==================
Shares outstanding:
Class 1........................................................................ 10,237
==================
Class 2........................................................................ 10,284
==================
Class 3........................................................................ 10,301
==================
Class 4........................................................................ 166,228,937
==================
Net asset value, offering price and redemption price per share:
Class 1........................................................................ $ 13.64
==================
Class 2........................................................................ $ 13.70
==================
Class 3........................................................................ $ 13.73
==================
Class 4........................................................................ $ 13.72
==================
</TABLE>
The accompanying notes are an integral part of the financial statements. 45
<PAGE>
MassMutual Value Equity Fund - Financial Statements (Continued)
Statement of Operations
<TABLE>
<CAPTION>
Six months ended
June 30, 1996
(Unaudited)
-----------------
<S> <C>
Investment income:
Dividends........................................................................ $ 26,691,649
Interest......................................................................... 6,004,344
-----------------
Total investment income........................................................ 32,695,993
-----------------
Expenses (Note 1):
Investment management fees (Note 3).............................................. 5,042,553
Custody fees..................................................................... 97,991
Audit and legal fees............................................................. 34,109
Directors' fees (Note 3)......................................................... 5,154
Fees waived by the investment manager (Note 3)................................... (516,006)
-----------------
4,663,801
Administration fees (Note 3):
Class 1........................................................................ 393
Class 2........................................................................ 362
Class 3........................................................................ 228
Class 4........................................................................ 1,013,929
Distribution and service fees (Note 3):
Class 1........................................................................ 439
Class 2........................................................................ 102
-----------------
Net expenses................................................................. 5,679,254
-----------------
Net investment income........................................................ 27,016,739
-----------------
Realized and unrealized gain (loss):
Net realized gain on investment transactions..................................... 32,624,857
Net change in unrealized appreciation (depreciation)
on investments................................................................. 124,305,464
-----------------
Net realized and unrealized gain.............................................. 156,930,321
-----------------
Net increase in net assets resulting from operations............................. $ 183,947,060
=================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
- -------------------------------------------------------------------------------
MassMutual Value Equity Fund - Financial Statements (Continued)
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six months ended
June 30, 1996 Year ended
(Unaudited) December 31, 1995
--------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income...................................... $ 27,016,739 $ 50,082,342
Net realized gain on investment transactions............... 32,624,857 21,371,652
Net change in unrealized appreciation (depreciation)
on investments........................................... 124,305,464 429,724,511
---------------- ----------------
Net increase in net assets resulting from operations..... 183,947,060 501,178,505
---------------- ----------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1.................................................... --- (1,761)
Class 2.................................................... --- (2,382)
Class 3.................................................... --- (2,774)
Class 4.................................................... --- (49,597,273)
---------------- ----------------
Total distributions from net realized gains.............. --- (49,604,190)
---------------- ----------------
From net realized gains:
Class 1.................................................... --- (990)
Class 2.................................................... --- (990)
Class 3.................................................... --- (998)
Class 4.................................................... (16,056,271)
---------------- ----------------
Total distributions from net realized gains.............. --- (16,059,239)
---------------- ----------------
Net fund share transactions (Note 5):
Class 1.................................................... --- 2,751
Class 2.................................................... --- 3,372
Class 3.................................................... --- 3,763
Class 4.................................................... (28,336,718) 126,252,551
---------------- ----------------
Increase (decrease) in net assets from net fund
share transactions..................................... (28,336,718) 126,262,437
---------------- ----------------
Total increase in net assets............................. 155,610,342 561,777,513
Net assets:
Beginning of period........................................ 2,125,638,142 1,563,860,629
---------------- ----------------
End of period (including undistributed net investment income
of $27,643,607 and $626,868, respectively)............... $ 2,281,248,484 $ 2,125,638,142
================ ================
</TABLE>
The accompanying notes are an integral part of the financial statements. 47
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 1
Six months ended ----------
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
----------- --------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 12.63 $ 9.92 $ 10.00
----------- --------- ----------
Income (loss) from investment operations:
Net investment income 0.08 0.18 0.04
Net realized and unrealized gain (loss) on investments 0.93 2.81 (0.08)
----------- --------- ----------
Total income (loss) from investment operations 1.01 2.99 (0.04)
----------- --------- ----------
Less distribution to shareholders:
From net investment income -- (0.18) (0.04)
From net realized gains -- (0.10) --
----------- --------- ----------
Total distributions -- (0.28) (0.04)
----------- --------- ----------
Net asset value, end of period $ 13.64 $ 12.63 $ 9.92
=========== ========= ==========
Total Return 8.00% 30.10% (0.39)%
Ratios/Supplemental Data:
Net assets, end of period (000's) $140 $129 $99
Net expenses to average daily net assets# 1.65%* 1.65% 1.65%*
Net investment income to average daily net assets 1.27%* 1.58% 2.31%*
Portfolio turnover rate 6% 16% 3%
Average broker commission rate $ .0597 N/A N/A
#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%* 1.70% 1.71%*
<CAPTION>
Class 2
Six months ended ----------
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
----------- --------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 12.65 $ 9.93 $ 10.00
----------- --------- ----------
Income (loss) from investment operations:
Net investment income 0.12 0.24 0.05
Net realized and unrealized gain (loss) on investments 0.93 2.82 (0.07)
----------- --------- ----------
Total income (loss) from investment operations 1.05 3.06 (0.02)
----------- --------- ----------
Less distributions to shareholders:
From net investment income -- (0.24) (0.05)
From net realized gains -- (0.10) --
----------- --------- ----------
Total distributions -- (0.34) (0.05)
----------- --------- ----------
Net asset value, end of period $ 13.70 $ 12.65 $ 9.93
=========== ========= ==========
Total Return 8.30% 30.80% (0.22)%
Ratios/Supplemental Data:
Net assets, end of period (000's) $141 $130 $99
Net expenses to average daily net assets# 1.10%* 1.10% 1.10%*
Net investment income to average daily net assets 1.82%* 2.13% 2.86%*
Portfolio turnover rate 6% 16% 3%
Average broker commission rate $ .0597 N/A N/A
#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: 1.14%* 1.15% 1.16%*
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
48 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 3
-----------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 12.66 $ 9.93 $ 10.00
----------- ----------- -----------
Income (loss) from investment operations:
Net investment income 0.14 0.28 0.05
Net realized and unrealized gain (loss) on investments 0.93 2.83 (0.07)
----------- ----------- -----------
Total income (loss) from investment operations 1.07 3.11 (0.02)
----------- ----------- -----------
Less distributions to shareholders:
From Net investment income -- (0.28) (0.05)
From net realized gains -- (0.10) --
----------- ----------- -----------
Total distributions -- (0.38) (0.05)
----------- ----------- -----------
Net asset value, end of period $ 13.73 $ 12.66 $ 9.93
=========== =========== ===========
Total Return 8.45% 31.30% $ (0.18)%
Ratios/Supplemental Data:
Net assets, end of period (000's) $141 $130 $99
Net expenses to average daily net assets# 0.75%* 0.75% 0.75%*
Net investment income to average daily net assets 2.17%* 2.48% 3.23%*
Portfolio turnover rate 6% 16% 3%
Average broker commission rate $ .0597 N/A N/A
#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%* 0.80% 0.81%*
<CAPTION>
Class 4
----------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 12.63 $ 9.91 $ 10.00
----------- ----------- -----------
Income (loss) from investment operations:
Net investment income 0.16 0.31 0.08
Net realized and unrealized gain (loss) on investments 0.93 2.82 (0.09)
----------- ----------- -----------
Total income (loss) from investment operations 1.09 3.13 (0.01)
----------- ----------- -----------
Less distributions to shareholders:
From net investment income -- (0.31) (0.08)
From net realized gains -- (0.10) --
----------- ----------- -----------
Total distributions -- (0.41) (0.08)
----------- ----------- -----------
Net asset value, end of period $ 13.72 $ 12.63 $ 9.91
=========== =========== ===========
Total Return@ 8.63% 31.54% $ (0.10)%
Ratios/Supplemental Data:
Net assets, end of period (000's) $2,280,827 $2,125,248 $1,563,563
Net expenses to average daily net assets# 0.5067%* 0.5067% 0.5067%*
Net investment income to average daily net assets 2.41%* 2.72% 3.20%*
Portfolio turnover rate 6% 16% 3%
Average broker commission rate $ .0597 N/A N/A
#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: 0.5526%* 0.5528% 0.5681%*
</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. 49
<PAGE>
- --------------------------------------------------------------------------------
Mass Mutual Small Cap Value Equity - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment The objective and policies of the Fund are to:
objective and policies
for the Mass Mutual . achieve long-term growth of capital and income
Small Cap Value Equity
Fund? . invest primarily in a diversified portoflio 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
-arc 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 attractively valued
How has the Fund The Fund has done well. Because of our
performed over the past disciplined value strategy and focus on
six months? dividend-paying smaller stocks, we've been able
to capture most of the upside potential of this
year's market, but with below-average risk. Our
stock selection was a benefit over the period
as was the fact that, as interest rates rose,
investor attention moved from larger to smaller
stocks.
Why did small cap stocks The unusual length of the current economic
perform so well over the growth phase had investors concerned about a
period? slowdown and how it might affect corporate
profitability. As a result, they began to shift
their money away from the large multinational
companies that led the market last year--
companies whose fortunes are partially tied to a
favorable economic and interest rate climate--to
smaller companies with the potential to grow
faster than the overall economy. This was a
benefit to the portfolio. However, even among
small cap issues, there's been a great deal of
market volatility. Many of the industry groups
that saw major advances earlier in the first
half have given back much of their gains more
recently, so it's been important to have owned
the right companies over the period.
What were the highlights Our portfolio did not change greatly over the
of purchases and performance period, since our research leads us to buy high
for the period? quality companies we think are positioned to do
well over longer time periods. Companies that
performed best for us the first half included
selected manufacturing companies such as
Reliance Steel & Aluminum Company, and Apogee
Enterprises, Inc., as well as financial stocks
like Executive Risk, Inc., and ALLIED Group,
Incorporated.
What areas of the market The market is going through a bit of a
currently seem to offer the transition now, which is causing a degree of
best long-term value? discomfort in the short term, but also creating
opportunity for long-term investors. After last
year's broad bull market and this year's focus
on smaller stocks, many price multiples had
risen to new highs. The increased volatility
we've seen in recent months, however, has
allowed value investors like us to purchase the
stocks of strong companies at temporarily
reduced prices. We're looking at stocks in areas
like technology, where companies that had done
well in recent months, but then suffered in
June, are now selling at attractive prices.
We're also evaluating utility companies. Changes
in the way the generation and delivery of
electricity is regulated is creating interesting
investment opportunities. In addition, electric
utilities did not fully participate in the
market's strong first half, so they continue to
sell at what we'd consider good values.
What is the outlook for We think the outlook is favorable. While the
the Fund? economy may slow somewhat during the second
half of the year, we believe that it continues
to be far from recessionary. In fact, we believe
there's a chance the growth rate may pleasantly
surprise investors. It should remain stronger
than forecasted for the remainder of the year,
which could help the stock market.
Looking ahead to the second half of 1996, we
expect near-term uncertainty will cause the
market to continue to experience heightened
volatility versus last year. A volatile market
can be uncomfortable, but it is an environment
in which we should be able to do well. When last
year's strong bull market drove prices to new
highs, it became difficult to find the stocks
our strategy relies on at prices we were willing
to pay. With this year's greater price
fluctuation, we should see both the opportunity
to buy well-positioned companies at temporarily
discounted prices and conversely, to take
profits on its upswings.
50
<PAGE>
MassMutual Small Cap Value Equity - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Small Cap
Value Equity Fund Classes 1-4 and the Frank Russell
2000 Index
<TABLE>
<CAPTION>
- ----------------------------------------------------------
MassMutual Small Cap Value Equity Fund
Total Return
Year to Date One Year Average Annual
1/1/96-6/30/96 7/1/95-6/30/96 10/3/94-6/30/96
<S> <C> <C> <C> [LINE GRAPH OF
GROWTH OF A
Class 1 8.86% 20.28% 13.87% $10,000 INVESTMENT
Class 2 9.18% 20.97% 14.55% APPEARS HERE]
Class 3 9.35% 21.31% 14.89%
Class 4 9.53% 21.76% 15.22%
- ----------------------------------------------------------
Frank Russell 10.36% 23.89% --
2000 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 Frank Russel, 2000
Index is unmanaged and does not incur expenses.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTIOIN
[LINE GRAPH APPEARS HERE]
Class 1 Class 2 Class 3 Class 4 Russell 2000
----- ----- ----- ----- -----
10/3/94 10,000 10,000 10,000 10,000 10,000
12/94 9,711 9,728 9,732 9,933 9,813
3/95 10,001 10,029 10,043 10,065 10,266
6/95 10,422 10,470 10,495 10,507 11,229
9/95 11,345 11,404 11,439 11,472 12,338
12/95 11,515 11,601 11,642 11,681 12,605
3/96 11,940 12,047 12,100 12,151 13,249
6/96 12,535 12,665 12,731 12,794 13,912
- --------------------------------
MassMutual
Small Cap Value Equity Fund
Largest Stock Holdings (6/30/96)
- --------------------------------
Capital RE Corp
True North Communications, Inc.
Executive Risk, Inc.
Arbor Drugs, Inc.
ALLIED Group, Incorporated
Greenfield Industries, Inc.
Orion Capital Corporation
Trimas Corporation
The Olsten Corporation
Houghton Mifflin Company
- --------------------------------
51
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Portfolio of Investments
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Portfolio of Investments
June 30, 1996 (Unaudited)
Number of
Shares Market Value
------ ------------
<S> <C> <C>
EQUITIES - 88.8%
Air Transportation -- 2.0%
Atlantic Southeast
Airlines, Inc. 297,800 $ 8,412,850
------------
Apparel, Textiles & Shoes -- 2.2%
Kellwood Company 186,100 3,419,588
Unitog Company 206,500 5,833,625
------------
9,253,213
------------
Automotive & Parts -- 5.2%
Amcast Industrial
Corporation 172,100 3,485,025
Excel Industries, Inc. 355,100 4,438,750
Myers Industries, Inc. 321,154 5,981,488
Titan Wheel International, Inc. 503,700 8,059,200
------------
21,964,463
------------
Banking, Savings & Loans -- 7.5%
Astoria Financial Corporation 293,000 7,947,625
CCB Financial Corporation 157,100 8,051,375
First Colorado Bancorp, Inc. 229,300 3,038,225
Keystone Financial, Inc. 124,500 4,170,750
One Valley Bancorp of
West Virginia, Inc. 147,000 5,071,500
Security Capital Corporation 19,100 1,136,450
United Carolina
Bancshares Corporation 101,750 2,263,938
------------
31,679,863
------------
Building Materials & Construction -- 0.9%
Apogee Enterprises, Inc. 114,100 3,907,925
------------
Chemicals -- 1.2%
OM Group, Inc. 125,400 4,921,950
------------
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
Communications -- 2.5%
True North
Communications, Inc. 483,500 $ 10,757,871
------------
Containers -- 1.7%
Rock-Tenn Company
(Class A) 355,900 7,029,025
------------
Electrical Equipment & Electronics -- 7.0%
Belden, Inc. 293,700 8,811,000
Dallas Semiconductor
Corporation 412,300 7,472,938
Teleflex, Incorporated 128,100 6,116,775
Wyle Laboratories 227,200 7,526,000
------------
29,926,713
------------
Energy -- 2.0%
NGC Corporation 165,595 2,483,925
Production Operators Corp. 156,100 5,268,375
TNP Enterprises, Inc. 27,600 783,150
------------
8,535,450
------------
Foods -- 0.5%
Midwest Grain Products, Inc. 167,100 2,172,300
------------
Forest Products & Paper -- 2.8%
Mosinee Paper Corporation 182,133 4,872,058
Wausau Paper Mills Company 357,775 7,066,056
------------
11,938,114
------------
Gas Distribution -- 2.1%
WICOR, Inc. 237,300 8,958,075
------------
Healthcare -- 1.6%
Beckman Instruments, Inc. 113,800 4,324,400
Life Technologies, Inc. 85,000 2,677,500
------------
7,001,900
------------
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
Industrial Transportation -- 2.9%
Arnold Industries, Inc. 511,500 7,288,875
The Greenbrier
Companies, Inc. 351,600 4,878,450
------------
12,167,325
------------
Insurance -- 13.6%
ALLIED Group, Incorporated 230,900 10,044,150
Capital RE Corp. 334,500 12,292,875
Executive Risk, Inc. 266,300 10,185,975
E. W. Blanch Holdings, Inc. 91,200 1,812,600
Frontier Insurance
Group, Inc. 157,080 5,419,260
National Re Corporation 223,500 8,437,125
Orion Capital Corporation 190,637 9,722,487
------------
57,914,472
------------
Leasing Companies -- 1.7%
Rollins Truck Leasing Company 715,750 7,425,906
------------
Machinery & Components -- 10.5%
Columbus McKinnon Corporation 133,400 2,084,375
DT Industries, Inc. 244,200 4,456,650
The Gorman-Rupp Company 257,825 3,416,181
Goulds Pumps, Incorporated 47,600 1,219,750
Graco, Incorporated 427,000 8,646,750
Greenfield Industries, Inc. 297,500 9,817,500
Hardinge, Inc. 164,500 5,222,875
Regal-Beloit Corporation 297,750 5,880,563
Roper Industries, Inc. 75,600 3,685,500
------------
44,430,144
------------
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
52
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
Metals & Mining -- 2.7%
The Commerce Group, Inc. 141,800 $ 2,960,075
Reliance Steel &
Aluminum Company 229,600 8,380,400
------------
11,340,475
------------
Miscellaneous -- 2.2%
Trimas Corporation 407,100 9,515,963
------------
Miscellaneous - Producer -- 0.6%
Federal Signal Corporation 108,509 2,549,962
------------
Miscellaneous Distributor Wholesale -- 1.1%
Hughes Supply, Inc. 130,200 4,524,450
------------
Office Products -- 1.0%
American Business Products, Inc. 191,600 4,191,250
------------
Other Services -- 4.7%
Analysts International
Corporation 170,100 7,144,200
Landauer, Inc. 173,900 3,673,638
The Olsten Corporation 317,475 9,325,828
------------
20,143,666
------------
Publishing & Printing -- 6.2%
Banta Corporation 151,650 3,829,163
Harte Hanks Communications, Inc. 153,100 4,248,525
Houghton Mifflin Company 184,000 9,154,000
McClatchy Newspapers, Inc. 327,400 9,044,425
------------
26,276,113
------------
Retail -- 2.4%
Arbor Drugs, Inc. 487,600 10,178,650
------------
TOTAL EQUITIES 377,118,088
------------
(Cost $302,105,233)
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 11.6%
Commercial Paper
Bausch & Lomb, Inc.
5.600% 7/24/1996 $ 5,985,000 $ 5,963,587
Central and South
West Corporation
5.470% 7/16/1996 3,170,000 3,162,775
Central and South
West Corporation
5.470% 7/19/1996 4,700,000 4,687,146
Comdisco, Inc.
5.450% 7/08/1996 4,320,000 4,315,422
Crown Cork & Seal Company, Inc.
5.500% 7/15/1996 3,835,000 3,826,797
DTE Energy Company
5.500% 7/03/1996 4,070,000 4,068,756
Public Service
Electric and Gas Company
5.470% 7/09/1996 2,940,000 2,936,426
Public Service Electric
and Gas Company
5.490% 7/22/1996 4,075,000 4,061,950
Rayonier Inc.
5.500% 7/02/1996 1,885,000 1,884,712
Rayonier Inc.
5.560% 7/23/1996 2,585,000 2,576,217
Sonat Inc.
5.550% 7/10/1996 2,950,000 2,945,907
Texas Utilities
Electric Company
5.520% 7/18/1996 3,045,000 3,037,063
Textron Financial Corporation
5.470% 7/01/1996 3,395,000 3,395,000
Tyson Foods, Inc.
5.460% 7/12/1996 2,375,000 2,371,037
------------
TOTAL SHORT-TERM
INVESTMENTS 49,232,795
------------
(At Amortized Cost)
TOTAL INVESTMENTS -- 100.4% 426,350,883
(Cost $351,338,028)+
Other Assets/(Liabilities) - (0.4%) (1,594,656)
------------
NET ASSETS -- 100.0% $424,756,227
============
</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.
53
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Financial Statements
- --------------------------------------------------------------------------------
Statement of
Assets and
Liabilities
<TABLE>
<CAPTION>
June 30, 1996
(Unaudited)
--------------
<S> <C>
Assets:
Investments, at value (cost $302,105,233) (Note 2).................................... $ 377,118,088
Short-term investments, at amortized cost (Note 2).................................... 49,232,795
--------------
Total Investments................................................................... 426,350,883
Cash.................................................................................. 4,555
Receivables from:
Fund shares sold.................................................................... 502,825
Interest and dividends.............................................................. 521,439
Investment manager (Note 3)......................................................... 15,042
--------------
Total assets...................................................................... 427,394,744
==============
Liabilities:
Payables for:
Investments purchased............................................................... 713,616
Fund shares redeemed................................................................ 1,683,201
Directors' fees and expenses (Note 3)............................................... 2,011
Affiliates (Note 3):
Investment management fees........................................................ 194,244
Administration fees............................................................... 30,582
Service and distribution fees..................................................... 280
Accrued expenses and other liabilities................................................ 14,583
--------------
Total liabilities................................................................. 2,638,517
--------------
Net assets............................................................................ $ 424,756,227
==============
Net assets consist of:
Paid-in capital....................................................................... $ 339,620,073
Undistributed net investment income...................................................... 7,071,958
Accumulated net realized gain on investments............................................. 3,051,341
Net unrealized appreciation on investments............................................... 75,012,855
--------------
$ 424,756,227
==============
Net assets:
Class 1............................................................................... $ 172,737
==============
Class 2............................................................................... $ 129,209
==============
Class 3............................................................................... $ 129,930
==============
Class 4............................................................................... $ 424,324,351
==============
Shares outstanding:
Class 1............................................................................... 13,919
==============
Class 2............................................................................... 10,347
==============
Class 3............................................................................... 10,382
==============
Class 4............................................................................... 33,875,016
==============
Net asset value, offering price and
redemption price per share:
Class 1............................................................................... $ 12.41
==============
Class 2............................................................................... $ 12.49
==============
Class 3............................................................................... $ 12.51
==============
Class 4............................................................................... $ 12.53
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
54
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of
Operations
<TABLE>
<CAPTION>
Six months ended
June 30, 1996
(Unaudited)
----------------
<S> <C>
Investment income:
Dividends....................................................... $ 7,013,918
Interest........................................................ 1,182,646
---------------
Total investment income....................................... 8,196,564
---------------
Expenses (Note 1):
Investment management fees (Note 3)............................. 1,100,514
Custody fees.................................................... 24,770
Audit and legal fees............................................ 6,341
Directors' fees (Note 3)........................................ 5,154
Fees waived by the investment manager (Note 3).................. (86,689)
---------------
1,050,090
Administration fees (Note 3):
Class 1....................................................... 433
Class 2....................................................... 320
Class 3....................................................... 200
Class 4....................................................... 172,310
Distribution and service fees (Note 3):
Class 1....................................................... 491
Class 2....................................................... 92
---------------
Net expenses................................................ 1,223,936
---------------
Net investment income....................................... 6,972,628
---------------
Realized and unrealized gain (loss):
Net realized gain on investment transactions.................... 3,084,481
Net change in unrealized appreciation (depreciation)
on investments.................................................. 26,754,382
---------------
Net realized and unrealized gain.............................. 29,838,863
---------------
Net increase in net assets resulting from operations............ $ 36,811,491
===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
55
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of
Changes in Net
Assets
<TABLE>
<CAPTION>
Six months ended
June 30, 1996 Year ended
(Unaudited) December 31, 1995
---------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income.................................................. $ 6,972,628 $ 6,234,130
Net realized gain on investment transactions........................... 3,084,481 776,790
Net change in unrealized appreciation (depreciation)
on investments....................................................... 26,754,382 57,391,484
---------------- ----------------
Net increase in net assets resulting from operations................. 36,811,491 64,402,404
---------------- ----------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1................................................................ -- (1,356)
Class 2................................................................ -- (1,300)
Class 3................................................................ -- (1,672)
Class 4................................................................ -- (6,159,231)
---------------- ----------------
Total distributions from net investment income....................... -- (6,163,559)
---------------- ----------------
Net fund share transactions (Note 5):
Class 1................................................................ (10,390) 51,075
Class 2................................................................ -- 1,300
Class 3................................................................ -- 1,672
Class 4................................................................ 7,147,597 11,428,353
---------------- ----------------
Increase in net assets from net fund share transactions.............. 7,137,207 11,482,400
---------------- ----------------
Total increase in net assets........................................... 43,948,698 69,721,245
Net assets:
Beginning of period.................................................... 380,807,529 311,086,284
---------------- ----------------
End of period (including undistributed net investment income
of $7,071,958 and $99,330, respectively)............................. $ 424,756,227 $ 380,807,529
================ ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
56
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 1
------------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
----------- ---------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.40 $ 9.69 $ 10.00
----------- ---------- ------------
Income (loss) from investment operations:
Net investment income 0.15 0.06 0.02
Net realized and unrealized gain (loss) on investments 0.86 1.74 (0.31)
----------- ---------- ------------
Total income (loss) from investment operations 1.01 1.80 (0.29)
----------- ---------- ------------
Less distributions to shareholders:
From net investment income -- (0.09) (0.02)
----------- ---------- ------------
Net asset value, end of period $ 12.41 $ 11.40 $ 9.69
=========== ========== ============
Total Return 8.86% 18.58% (2.89)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $173 $172 $99
Net expenses to average daily net assets# 1.75%* 1.75% 1.75%*
Net investment income to average daily net assets 2.81%* 0.63% 1.14%*
Portfolio turnover rate 15% 28% 4%
Average broker commission rate $ .0587 N/A N/A
#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%* 1.79% 1.81%*
<CAPTION>
Class 2
------------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
----------- ---------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.44 $ 9.70 $ 10.00
----------- ---------- ------------
Income (loss) from investment operations:
Net investment income 0.17 0.13 0.03
Net realized and unrealized gain (loss) on investments 0.88 1.74 (0.30)
----------- ---------- ------------
Total income (loss) from investment operations 1.05 1.87 (0.27)
----------- ---------- ------------
Less distributions to shareholders:
From net investment income -- (0.13) (0.03)
----------- ---------- ------------
Net asset value, end of period $ 12.49 $ 11.44 $ 9.70
=========== =========== ============
Total Return 9.18% 19.25% (2.72)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 129 $ 118 $ 99
Net expenses to average daily net assets# 1.20%* 1.20% 1.20%*
Net investment income to average daily net assets 2.90%* 1.19% 1.69%*
Portfolio turnover rate 15% 28% 4%
Average broker commission rate $ .0587 N/A N/A
#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: 1.24%* 1.24% 1.26%*
</TABLE>
*Annualized
**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.
57
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 3
------------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
----------- ---------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.44 $ 9.70 $ 10.00
----------- ---------- ------------
Income (loss) from investment operations:
Net investment income 0.19 0.16 0.03
Net realized and unrealized gain (loss) on investments 0.88 1.74 (0.30)
----------- ---------- ------------
Total income (loss) from investment operations 1.07 1.90 (0.27)
----------- ---------- ------------
Less distributions to shareholders:
From net investment income -- (0.16) (0.03)
Net asset value, end of period $ 12.51 $ 11.44 $ 9.70
=========== ========== =============
Total Return 9.35% 19.62% (2.68)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 130 $ 119 $ 99
Net expenses to average daily net assets# 0.85%* 0.85% 0.85%*
Net investment income to average daily net assets 3.25%* 1.54% 2.09%*
Portfolio turnover rate 15% 28% 4%
Average broker commission rate $ .0587 N/A N/A
#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%* 0.89% 0.91%*
<CAPTION>
Class 4
------------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
----------- ---------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.44 $ 9.69 $ 10.00
----------- ---------- ------------
Income (loss) from investment operations:
Net investment income 0.21 0.19 0.04
Net realized and unrealized gain (loss) on investments 0.88 1.75 (0.31)
----------- ---------- ------------
Total income (loss) from investment operations 1.09 1.94 (0.27)
----------- ---------- ------------
Less distributions to shareholders:
From net investment income -- (0.19) (0.04)
Net asset value, end of period $ 12.53 $ 11.44 $ 9.69
=========== ========== ============
Total Return@ 9.53% 20.01% (2.66)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 424,324 $ 380,398 $ 310,789
Net expenses to average daily net assets# 0.6110%* 0.6110% 0.6110%*
Net investment income to average daily net assets 3.49%* 1.78% 1.78%*
Portfolio turnover rate 15% 28% 4%
Average broker commission rate $ .0587 N/A N/A
#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: 0.6544%* 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.
58
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment The objective and policies of the Fund are to:
objective and policies
for the MassMutual . achieve high total rate of return over the long
International Equity term
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)
How has the Fund The Fund has performed very well. We owned
performed over the companies across both the developed and emerging
period? sectors of the international arena, and
participated in their gains as demand for their
products and services increased with global
economic expansion.
How did international International markets continued to lag the U.S.
markets' performance markets. As of June 30, the Morgan Stanley EAFE, a
compare to the domestic broad index of international markets was up 4.5%,
market's performance? while the U.S. Standard & Poor's 500 was up 10.1%.
Where was the portfolio Rather than basing our investment decisions
invested over the primarily on our macroeconomic outlook for various
period? regional economies, we invest according to themes.
We've identified eight major themes we think will
define global economic growth in the coming years,
and look for well-positioned, well-managed
companies within them.
Our largest concentrations over the past six months
were stocks of companies in our capital market
development theme - or companies providing
financial services to individuals, institutions or
governments in high growth areas, companies
positioned to meet the demands of emerging consumer
markets, and telecommunications equipment and
service firms.
In capital market development, we owned well-
capitalized, well-run banks in the emerging
markets, such as Banco Frances del Rio de la Plata
SA in Argentina, Banco Bradesco SA Preference in
Brazil and Turkiye Garanti Bankasi in Turkey. In
addition, we owned companies positioned to benefit
from the need for individual retirement savings
planning in Europe. We were pleased with
Marschollek, Lautenschlaeger und Partner AG, a
German insurance company; Skandia Forsakrings AB, a
Swedish insurance firm; and Bil GT Gruppe AG, a
money manager based in Lichtenstein .
We had large exposure to emerging consumer markets
as a play on both the rapid rise of disposable
income in the developing world and changes in
consumer patterns in the developed world. Our
strong performers for this sector included luxury
goods marketers such as Gucci Group NV, Bulgari and
Remy Cointreau as well as well-established,
expanding brand name consumer products companies
such as Wella AG, a major German haircare products
firm.
In telecommunications, our focus has been on both
telephone services and broadcasting. In telephones,
our best performers were regional firms with good
profitability due to limited competition. These
included Portugal Telecom SA and Telefonica de
Espana. We also did well with Telecom Italia
Mobile, Milicom International Cellular SA, and
Korea Mobile Telecommunications Corporation, three
cellular services firms. In the broadcast and
leisure area, we owned Pathe of France, Lusomundo
of Portugal, both fast growing media conglomerates.
These companies did well over the past six months
and we believe they are well-positioned for
continued growth.
What areas of the Going forward, we are considering adding to our
market currently seem holdings in the healthcare theme, particularly in
to offer the greatest pharmaceutical and medical equipment firms. This is
potential? a high growth area, and one in which companies are
focused on creating value for shareholders. Because
the healthcare sector lagged the market year-to-
date, it's also an area where we consider stocks to
be fairly priced. In addition, we continue to look
for companies that have been restructuring, and so
should be more efficient and profitable in the
future.
59
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
What is the outlook for We believe the outlook is good. Almost worldwide, we
the Fund? see a trend toward accelerating economic growth. In
some of the emerging markets, it's happening quickly,
but it's also occurring in Japan, which alone
represents 22 percent of the world market, and in
developed Europe.
Because of our thematic approach to investing, this is
a very growth-oriented Fund. It's also somewhat risk-
averse, being well-diversified both by industry and by
region. We are confident these factors will help the
portfolio continue to perform very well in the future.
- --------------------------------------------------------------------------------
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
Total Return Year to Date One Year Average Annual
1/1/96-6/30/96 7/1/95-6/30/96 10/3/94-6/30/96
Class 1 9.33% 11.61% 2.92%
Class 2 9.73% 12.27% 3.52%
Class 3 9.82% 12.52% 3.78%
Class 4 10.02% 12.87% 4.16%
- --------------------------------------------------------------------------------
MSCI EAFE 4.52% 13.29% --
Index
- --------------------------------------------------------------------------------
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 Funds is a professionally managed
mutual fund, while the MSCI EAFE is unmanaged and does not incur expenses.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
<TABLE>
<CAPTION>
Class 1 Class 2 Class 3 Class 4 MSCI EAFE
<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
3/95 9,120 9,140 9,150 9,170 10,082
6/95 9,420 9,460 9,480 9,510 10,155
9/95 9,878 9,938 9,958 9,998 10,579
12/95 9,616 9,679 9,713 9,756 11,007
3/96 9,929 10,013 10,058 10,103 11,324
6/96 10,513 10,620 10,667 10,734 11,504
</TABLE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund
Largest Country Weightings (6/30/96)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of fund
<S> <C>
Japan 22.47%
Germany 11.22%
United Kingdom 9.80%
France 9.26%
The Netherlands 6.38%
Switzerland 5.38%
Hong Kong 3.47%
Australia 3.38%
Norway 3.08%
Argentina 2.63%
</TABLE>
- --------------------------------------------------------------------------------
60
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
EQUITIES - 98.9%
Automobiles -- 2.5%
Ciadea SA* 255,350 $ 1,777,184
Mahindra & Mahindra
Ltd., GDR* 140,682 1,512,338
Orbital Engine
Corporation Ltd.* 127,300 105,201
Volkswagen AG 10,000 3,721,735
------------
7,116,458
------------
Banking -- 5.2%
Banco Bradesco SA,
Preference 230,260,952 1,865,114
Banco Frances del Rio
de la Plata SA, ADR* 50,000 1,437,500
Banco Wiese,
Sponsored ADR 1 7
Bil GT Gruppe AG 2,500 1,218,400
Development Bank of
Singapore Limited 200,000 2,493,900
HSBC Holdings PLC 206,506 3,121,379
PT Bank Dagang
Nasional 684,000 573,055
Skandinaviska Enskilda
Banken Group 150,000 1,198,095
Standard Chartered
BankPLC* 142,500 1,421,480
Turkiye Garanti
Bankasi, ADR 252,000 1,717,531
------------
15,046,461
------------
Computer Hardware -- 0.8%
Canon, Inc. 100,000 2,078,740
PT Multipolar
Corporation 233,000 210,213
------------
2,288,953
------------
Computer Software -- 7.0%
Dassault Systems SA* 130,000 2,979,840
Ines Corp.* 60,000 1,121,424
Misys PLC 350,872 4,236,078
Nintendo Co. Ltd. 156,700 11,658,041
------------
19,995,383
------------
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
Conglomerates -- 0.6%
First Philippine
Holdings Corp., B
Shares 700,000 $ 1,709,960
------------
Diversified Financial -- 6.0%
ABN Amro Holding
NV 101,630 5,453,679
ING Groep NV 137,500 4,100,085
IRSA Inversiones y
Representaciones, SA 514,404 1,725,671
Nomura Securities
Company Ltd. 250,000 4,877,750
Societe Generale de
Paris 10,000 1,099,437
------------
17,256,622
------------
Drugs -- 6.2%
Altana AG 6,000 4,663,174
Astra AB Free, Series A 35,000 1,545,481
Biocompatibles
International PLC* 379,167 2,604,005
Biocompatibles NT* 54,167 39,137
Glaxo Wellcome PLC,
Sponsored ADR 250,000 3,367,850
Sanofi SA 35,000 2,622,914
South African
Druggists Ltd. 100,000 877,520
Takeda Chemical
Industries Ltd. 125,000 2,210,938
------------
17,931,019
------------
Electric Utilities -- 0.4%
Capex SA, GDR 76,000 1,254,000
------------
Electrical Equipment & Electronics -- 9.7%
Keyence Corporation 20,000 2,716,956
LEM Holdings SA* 6,892 2,015,331
Matsushita Electric
Industrial Company Ltd. 175,000 3,254,878
Omron Corp. 115,000 2,442,980
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
Rohm Company 40,000 $ 2,640,372
Samsung Electronics 15,000 1,259,285
SGS-Thomson
Microelectronics NV* 58,800 2,109,450
Uniden Corporation 200,000 4,102,780
Ushio, Inc. 150,000 1,832,565
Yamatake-Honeywell
Co., Ltd. 70,000 1,270,038
Yokogawa Electric
Corp. 400,000 4,011,600
------------
27,656,235
------------
Energy Services & Producers -- 1.4%
Compagnie Generale de
Geophysique SA* 25,000 1,485,988
Transocean AS* 100,000 2,593,770
------------
4,079,758
------------
Financial Services -- 1.4%
Compagnie Bancaire
SA 35,000 3,943,209
------------
Food & Beverage -- 4.7%
Allied Domecq PLC 300,800 2,117,241
Cadbury Schweppes
PLC 5,424 42,855
Hellenic Bottling Co.,
SA 70,000 2,323,181
Nestle SA 2,500 2,854,253
Remy Cointreau 80,000 2,346,496
Sermsuk Public
Company Ltd. 50,000 1,535,480
South African
Breweries Limited 65,000 1,906,307
Universal Robina
Corporation 499,700 266,990
------------
13,392,803
------------
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
61
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
Gold -- 0.7%
Anglo American
Corporation of South
Africa Ltd., ADR 15,000 948,750
Free State
Consolidated Gold
Mines Limited, ADR 130,000 1,202,500
------------
2,151,250
------------
Healthcare -- 1.7%
Ciba-Geigy AG 4,000 4,873,601
------------
Homebuilders -- 1.0%
Sumitomo Forestry
Co. 185,000 2,749,322
------------
Hotel/Gaming -- 0.1%
Lusomundo, SGPS,
SA * 52,300 324,087
------------
Household Products -- 0.4%
Srithai Superware Co.
Ltd. 175,000 1,219,523
------------
Industrial Services -- 6.4%
BIS SA * 15,000 1,567,572
Boskalis Westminster 287,290 5,133,240
Cordiant PLC * 2,000,000 3,418,200
IHC Caland NV 70,000 3,444,686
PT Citra Marga
Nusaphala Persada 1,060,000 1,616,808
VBH - Vereinigter
Baubeschlag Handel AG 12,500 3,284,850
------------
18,465,356
------------
Insurance -- 5.7%
AGF (Assurances
Generales de France) 43,800 1,186,016
Marschollek,
Lautenschlaeger und
Partner AG * 4,000 4,204,608
National Mutual Asia
Ltd. 1,816,000 1,595,174
Ockham Holdings PLC 1,000,000 1,382,882
Reinsurance Australia
Corp. Ltd. 2,050,000 5,969,600
Skandia Forsakrings
AB 80,000 2,115,896
------------
16,454,176
------------
Manufacturing -- 6.3%
Bucher Holding AG, B
Shares 1,750 1,363,210
Chargeurs 25,000 6,983,644
Commercial del Plata
SA * 408,500 1,268,107
Mitsubishi Heavy
Industries, Ltd. 250,000 2,172,175
Powerscreen
International PLC 649,900 $ 4,604,736
SMH AG (Registered) * 7,000 1,093,364
Traub AG * 8,700 560,132
------------
18,045,368
------------
Medical Products -- 0.3%
Elekta Instrument AB
Free, Series B 25,000 949,440
------------
Metals & Mining -- 2.8%
Boehler-Uddeholm AG 12,000 929,770
Boehler-Uddeholm AG
144A 24,000 1,859,545
Cambior, Inc. 100,000 1,337,500
Compania de Minas
Buenaventura SA,
Sponsored ADR * 40,000 795,000
Gencor Ltd.,
Unsponsored ADR 250,000 923,700
Hoganas AB Cl. B 40,000 1,398,540
Minorco SA,
Sponsored ADR 35,000 831,250
------------
8,075,305
------------
Non-Durable Household Goods -- 2.4%
Wella AG 2,000 1,147,070
Wella AG Preference 10,000 5,843,749
------------
6,990,819
------------
Office Equipment -- 0.6%
Herlitz Trading AG 5,000 1,642,425
------------
Oil & Gas -- 3.4%
Awilco AS, B Shares 151,250 1,594,841
Belle Corporation * 5,000,000 1,202,000
British Petroleum
Company PLC, ADR 150,000 1,316,835
Expro International
Group PLC 250,000 1,359,575
Hong Kong and China
Gas Company Ltd. 720,000 1,148,760
PTT Exploration and
Production 50,000 732,305
Smedvig AS 100,000 2,316,690
------------
9,671,006
------------
Publishing & Printing -- 1.2%
News Corp. Ltd., ADR 150,000 3,525,000
------------
Real Estate -- 0.9%
Sun Hung Kai
Properties Ltd. 250,000 2,527,275
------------
Retail -- 1.7%
Autobacs Seven Co.
Limited * 50,000 4,832,170
------------
Retail-Grocery -- 0.1%
Prodega AG 1,080 $ 302,003
------------
Shipping -- 0.2%
Lisnave-Estaleiros
Navais de Lisbona SA * 355,000 702,297
------------
Specialty Retail -- 5.0%
Adidas AG 60,000 4,996,254
FamilyMart Co. 60,500 2,691,790
Giordano International
Ltd. 1,500,000 1,453,350
Jusco Co. 100,000 3,273,110
Moebel Walther AG,
Preference 40,000 1,813,236
------------
14,227,740
------------
Telecommunications -- 6.1%
Amper SA * 80,000 1,042,032
CPT Telefonica del
Peru SA, CI. B * 1,600,000 3,250,400
Korea Mobile
Telecommunications
Corporation 4,300 5,322,587
Millicom International
Cellular SA * 37,500 1,785,938
Petersburg Long
Distance, Inc. * 109,000 892,438
Portugal Telecom SA * 86,000 2,246,389
Telecom Italia Mobile
SpA 1,299,900 2,904,237
------------
17,444,021
------------
Telephone Utilities -- 1.4%
Telecomunicacoes
Brasileiras S/A-
Telebras 18,500 1,288,063
Telefonica de Espana
ADS 150,000 2,761,065
------------
4,049,128
------------
Textiles -- 2.0%
Bulgari SpA 225,000 3,595,995
Gucci Group NV * 35,000 2,257,500
------------
5,853,495
------------
Tobacco -- 1.2%
B. A. T. Industries
PLC 250,000 1,946,125
Compagnie Financiere
Richemont AG 1,000 1,581,923
------------
3,528,048
------------
</TABLE>
(Continued)
62 The accompanying notes are an integral part of the financial statements.
<PAGE>
MassMutual International Equity Fund - Portfolio of Investments (Continued)
<TABLE>
<CAPTION>
Number of
Shares Market Value
------------ ------------
<S> <C> <C>
Transportation -- 1.4%
East Japan Railway
Co. 750 $ 3,931,839
------------
TOTAL EQUITIES 284,205,555
------------
(Cost $257,446,135)
WARRANTS -- 0.0%
Oil & Gas -- 0.0%
Hong Kong and China
Gas Company Ltd *. 72,000 2,744
(Cost $0)
RIGHTS -- 0.0%
Computer Hardware -- 0.0%
PT Multipolar
Corporation * 233,000 -
-------------
(Cost $0)
<CAPTION>
Principal
Amount Market Value
------------- -------------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 3.1%
Commercial Paper
Associates Corporation
of North America
5.600% 7/01/1996 $2,900,000 $ 2,900,000
Sheffield Receivables
Corp.
5.350% 7/02/1996 6,000,000 5,999,108
-------------
TOTAL SHORT-TERM
INVESTMENTS 8,899,108
-------------
(At Amortized Cost)
TOTAL INVESTMENTS -- 102.0% 293,107,407
(Cost $266,345,243)+
Other Assets/
(Liabilities) - (2.0%) (5,877,026)
-------------
NET ASSETS -- 100.0% $ 287,230,381
=============
Notes to Portfolio of Investments
</TABLE>
*Non-income producing security
+Aggregate cost for Federal tax purposes (Note 7)
ADR: American Depository Receipt
GDR: Global Depository Receipt
ADS: American Depository Shares
144A: Securities exempt from registration under
rule 144A of the Securities Act of 1933. The Secu-
rities may be resold in transactions exempt from
registration, normally to qualified institutional
buyers.
The remainder of this page intentionally left blank.
The accompanying notes are an integral part of the financial statements.
63
<PAGE>
MassMutual International Equity Fund - Financial Statements (Continued)
<TABLE>
<CAPTION>
Statement of June 30, 1996
Assets and (Unaudited)
Liabilities -----------------
<S> <C>
Assets:
Investments, at value (cost $257,446,135) (Note 2)......... $ 284,208,299
Short-term investments, at amortized cost (Note 2)......... 8,899,108
-----------------
Total Investments......................................... 293,107,407
Cash....................................................... 38,977
Foreign currency, at value (cost $4,224,526)............... 4,236,295
Receivables from:
Investments sold.......................................... 2,390,348
Open forward foreign currency contracts (Note 2).......... 619,684
Fund shares sold.......................................... 352,785
Interest and dividends.................................... 821,685
Foreign taxes withheld.................................... 299,392
Investment manager (Note 3)............................... 14,876
-----------------
Total assets............................................. 301,881,449
-----------------
Liabilities:
Payables for:
Investments purchased..................................... 12,778,201
Fund shares redeemed...................................... 1,617,230
Directors' fees and expenses (Note 3)..................... 2,011
Affiliates (Note 3):
Investment management fees............................... 197,303
Administration fees...................................... 22,712
Service and distribution fees............................ 231
Accrued expenses and other liabilities.................... 33,380
-----------------
Total liabilities........................................ 14,651,068
-----------------
Net assets................................................ $ 287,230,381
=================
Net assets consist of:
Paid-in capital........................................... $ 269,293,151
Undistributed net investment income....................... 1,155,017
Accumulated net realized loss on investments and
foreign currency translations............................ (10,604,109)
Net unrealized appreciation on investments, forward
foreign currency contracts, foreign currency and other
assets and liabilities................................... 27,386,322
-----------------
$ 287,230,381
=================
Net assets:
Class 1................................................... $ 148,769
=================
Class 2................................................... $ 106,126
=================
Class 3................................................... $ 106,408
=================
Class 4................................................... $ 286,869,078
=================
Shares outstanding:
Class 1................................................... 14,264
=================
Class 2................................................... 10,120
=================
Class 3................................................... 10,129
=================
Class 4................................................... 27,230,156
=================
Net asset value, offering price and
redemption price per share:
Class 1................................................... $ 10.43
=================
Class 2................................................... $ 10.49
=================
Class 3................................................... $ 10.51
=================
Class 4................................................... $ 10.53
=================
</TABLE>
64 The accompanying notes are an integral part of the financial statements.
<PAGE>
MassMutual International Equity Fund - Financial Statements (Continued)
<TABLE>
<CAPTION>
Statement of Six months ended
Operations June 30, 1996
(Unaudited)
-----------------
<S> <C>
Investment income:
Dividends (net of withholding tax of $282,149)........... $ 2,454,074
Interest................................................. 172,248
-----------------
Total investment income.................................. 2,626,322
-----------------
Expenses (Note 1):
Investment management fees (Note 3)...................... 1,064,419
Custody fees............................................. 122,588
Audit and legal fees..................................... 3,702
Directors' fees (Note 3)................................. 5,154
Fees waived by the investment manager (Note 3)........... (62,820)
-----------------
1,133,043
Administration fees (Note 3):
Class 1................................................. 338
Class 2................................................. 275
Class 3................................................. 225
Class 4................................................. 121,590
Distribution and service fees (Note 3):
Class 1................................................. 369
Class 2................................................. 76
-----------------
Net expenses........................................... 1,255,916
-----------------
Net investment income.................................. 1,370,406
-----------------
Realized and unrealized gain (loss) from investments
and foreign currency:
Net realized gain (loss) on:
Investment transactions................................. 3,189,134
Foreign currency transactions........................... 3,270,096
-----------------
Net realized gain...................................... 6,459,230
Net change in unrealized appreciation (depreciation) on:
Investments............................................. 16,414,503
Translation of assets and liabilities in foreign
currencies............................................. (400,243)
----------------
Net unrealized gain................................... 16,014,260
----------------
Net realized and unrealized gain from investments
and foreign currency................................. 22,473,490
----------------
Net increase in net assets resulting from operations.. $ 23,843,896
================
</TABLE>
The accompanying notes are an integral part of the financial statements. 65
<PAGE>
MassMutual International Equity Fund - Financial Statements (Continued)
<TABLE>
<CAPTION>
Statements of Six months ended
Changes in Net June 30, 1996 Year ended
Assets (Unaudited) December 31, 1995
---------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income..................... $ 1,370,406 $ 1,410,289
Net realized gain (loss) on investment
transactions............................. 6,459,230 (11,680,240)
Net change in unrealized appreciation
(depreciation) on investments and
translation of assets and liabilities in
foreign currencies....................... 16,014,260 19,939,116
---------------- -----------------
Net increase in net assets resulting from
operations............................... 23,843,896 9,669,165
---------------- -----------------
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................................... 28,205 16,103
Class 2................................... -- 1,191
Class 3................................... -- 1,430
Class 4................................... 42,334,692 64,817,475
---------------- -----------------
Increase in net assets from net fund
share transactions...................... 42,362,897 64,836,199
---------------- -----------------
Total increase in net assets.............. 66,206,793 70,546,709
Net assets:
Beginning of period....................... 221,023,588 150,476,879
---------------- -----------------
End of period (including undistributed net
investment income of $1,155,017 and
distributions in excess of net investment
income of $215,389, respectively)........ $ 287,230,381 $ 221,023,588
================ =================
</TABLE>
66 The accompanying notes are an integral part of the financial statements.
<PAGE>
MassMutual International Equity Fund - Financial Statements (Continued)
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 1
-------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
---------- ----------- -------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.54 $ 9.25 $ 10.00
---------- ------------ ------------
Income (loss) from investment operations:
Net investment income 0.00 (0.03) (0.02)
Net realized and unrealized gain (loss) on investments
and foreign currency 0.89 0.40 (0.73)
---------- ------------ ------------
Total income (loss) from investment operations 0.89 0.37 (0.75)
---------- ------------ ------------
Less distributions to shareholders:
From net investment income -- -- --
In excess of net investment income -- (0.08) --
---------- ------------ ------------
Total distributions -- (0.08) --
---------- ------------ ------------
Net asset value, end of period $ 10.43 $ 9.54 $ 9.25
========== ============ ============
Total Return 9.33% 3.96% (7.50)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 149 $ 112 $ 93
Net expenses to average daily net assets# 2.15%* 2.15% 2.15%*
Net investment income to average daily net assets (0.14)% * (0.40)% (1.10)% *
Portfolio turnover rate 38% 121% 18%
Average broker commission rate $ .0278 N/A N/A
#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: 2.20%* 2.24% 2.24%*
<CAPTION>
Class 2
-------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
---------- ------------ -------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.56 $ 9.26 $ 10.00
---------- ------------ ------------
Income (loss) from investment operations:
Net investment income 0.02 0.02 (0.01)
Net realized and unrealized gain (loss) on investments
and foreign currency 0.91 0.40 (0.73)
---------- ------------ ------------
Total income (loss) from investment operations 0.93 0.42 (0.74)
---------- ------------ ------------
Less distributions to shareholders:
From net investment income -- (0.02) --
In excess of net investment income -- (0.10) --
---------- ------------ ------------
Total distributions -- (0.12) --
---------- ------------ ------------
Net asset value, end of period $ 10.49 $ 9.56 $ 9.26
========== ============ ============
Total Return 9.73% 4.52% (7.40)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 106 $ 97 $ 93
Net expenses to average daily net assets# 1.60%* 1.60% 1.60%*
Net investment income to average daily net assets 0.45%* 0.19% (0.55)%*
Portfolio turnover rate 38% 121% 18%
Average broker commission rate $ .0278 N/A N/A
#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: 1.65%* 1.69% 1.69%*
</TABLE>
*Annualized
**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.
67
<PAGE>
MassMutual International Equity Fund - Financial Statements (Continued)
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 3
-------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
---------- ----------- -------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.57 $ 9.27 $ 10.00
---------- ----------- -------------
Income (loss) from investment operations:
Net investment income 0.04 0.04 (0.00)
Net realized and unrealized gain (loss) on investments
and foreign currency 0.90 0.40 (0.73)
---------- ----------- -------------
Total income (loss) from investment operations 0.94 0.44 (0.73)
---------- ----------- -------------
Less distributions to shareholders:
From net investment income -- (0.05) --
In excess of net investment income -- (0.09) --
---------- ----------- -------------
Total distributions -- (0.14) --
---------- ----------- -------------
Net asset value, end of period $ 10.51 $ 9.57 $ 9.27
========== =========== =============
Total Return 9.82% 4.78% (7.30)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 106 $ 97 $ 93
Net expenses to average daily net assets# 1.35%* 1.35% 1.35%*
Net investment income to average daily net assets 0.70%* 0.45% (0.30)%*
Portfolio turnover rate 38% 121% 18%
Average broker commission rate $ .0278 N/A N/A
#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: 1.40%* 1.44% 1.44%*
<CAPTION>
Class 4
-------
Six months ended
6/30/96 Year ended Period ended
(Unaudited) 12/31/95 12/31/94**
---------- ----------- -------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.58 $ 9.28 $ 10.00
---------- ----------- -------------
Income (loss) from investment operations:
Net investment income 0.05 0.07 0.00
Net realized and unrealized gain (loss) on investments
and foreign currency 0.90 0.41 (0.72)
---------- ----------- -------------
Total income (loss) from investment operations 0.95 0.48 (0.72)
---------- ----------- -------------
Less distributions to shareholders:
From net investment income -- (0.07) --
In excess of net investment income -- (0.11) --
---------- ----------- -------------
Total distributions -- (0.18) --
---------- ----------- -------------
Net asset value, end of period $ 10.53 $ 9.58 $ 9.28
========== =========== =============
Total Return@ 10.02% 5.13% (7.20)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 286,869 $ 220,718 $ 150,199
Net expenses to average daily net assets# 1.0020%* 1.0020% 1.0020%*
Net investment income to average daily net assets 1.10%* 0.76% 0.04%*
Portfolio turnover rate 38% 121% 18%
Average broker commission rate $ .0278 N/A N/A
#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: 1.0517%* 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.
68
<PAGE>
Notes to Financial Statements (Unaudited)
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.
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 policies
Accounting followed consistently by each Fund in the preparation of the
Policies 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 national
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.
69
<PAGE>
Notes to Financial Statements (Continued)
Accounting for Investment transactions are accounted for on the trade date.
Investments 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 It is each Fund's intent to continue to comply with the
Tax 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 of any
Distributions to net realized capital gains of each Fund are declared and paid
Shareholders 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 U.S.
Translation 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 contracts
Currency in order to convert foreign denominated securities or
Contracts 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.
70
<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 offset-financial instruments at June 30, 1996
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)
---------- ----------------- -------- -------- ------------- --------------
<C> <S> <C> <C> <C> <C>
BUYS
7/02/96 Australian Dollar 45,625 $ 36,135 $ 35,907 $ (228)
7/03/96 Australian Dollar 56,002 44,155 44,073 (82)
7/01/96 German Deutsche
Mark 2,357,070 1,548,463 1,548,564 101
7/03/96 Indonesian Rupiah 529,964,325 227,844 227,704 (140)
7/03/96 Philippine Peso 2,138,243 81,925 81,615 (310)
7/01/96 Portuguese Escudo 79,772,226 509,238 509,092 (146)
7/02/96 Portuguese Escudo 28,216,098 180,467 180,070 (397)
7/05/96 Swiss Franc 1,526,277 1,221,022 1,219,461 (1,561)
7/01/96 Thai Baht 948,500 37,431 37,344 (87)
--------------
(2,850)
SELLS
7/02/96 German Deutsche
Mark 128,613 84,436 84,497 (61)
7/22/96 Japanese Yen 4,007,200,000 37,232,639 36,610,044 622,595
--------------
622,534
--------------
$ 619,684
==============
</TABLE>
Forward Each Fund may purchase or sell securities on a "when issued"
Commitments 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 June 30, 1996,
is as follows:
<TABLE>
<CAPTION>
Forward Expiration Aggregate
Commitment of Face Value Market Unrealized
Contracts Contracts of Contracts Cost Value Appreciation
--------- --------- ------------ ---- ----- ------------
<S> <C> <C> <C> <C> <C>
CORE BONDS FUND
U.S. Treasury Note
6.875% 5/15/2006 November 1996 $18,500,000 $18,473,984 $18,569,005 $95,021
BALANCED FUND
U.S. Treasury Note
6.875% 5/15/2006 November 1996 5,600,000 5,619,469 5,620,888 1,419
</TABLE>
71
<PAGE>
Notes to Financial Statements (Continued)
Allocation of In maintaining the records for the Funds, the
Operating Activity income and 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
Management Fees MassMutual, 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:
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%
MassMutual has entered into investment sub-advisory
agreements with two subsidiaries: Concert Capital
Management, Inc. ("Concert Capital") and
HarbourView Asset Management Corporation ("Harbour-
View"). 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>
<S> <C> <C> <C> <C>
Class 1 Class 2 Class 3 Class 4
----------- ----------- ---------- -----------
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>
72
<PAGE>
Notes to Financial Statements (Continued)
Distribution and OppenheimerFunds Distributor, Inc. (Oppenheimer") acts
Service Fees as distributor to each Fund, MML Investor Services,
Inc. ("MMLISI") serves as sub-distributor to each
Fund. MassMutual has a controlling interest in
OppenheimerFunds and MMLISI is a wholly owned
subsidiary 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>
<S> <C> <C> <C> <C>
Class 1 Class 2 Class 3 Class 4
----------- ----------- ----------- -----------
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 six months ended
June 30, 1996 was $9,809,201, of which $883,062 was
reimbursed to the Funds.
Other Certain officers and directors of the Fund's are also
officers of massmutual. the compensation of
unaffiliated directors of the Funds is borne by the
Funds.
At June 30, 1996, MassMutual or separate investment
accounts thereof owned all of the outstanding shares
of the Trust except 416,411, 3,606, and 4,183 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
Sales Of investment securities (excluding short-term
Investments investments) for the six months ended June 30, 1996
were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Long-term U.S.
Government Other Long-term
Securities Securities
--------------- -----------------
Purchases Short-Term Bond Fund $ 49,957,501 $ 13,115,361
Core Bond Fund 124,308,567 63,768,191
Balanced Fund 36,364,062 43,267,213
Value Equity Fund -- 168,877,260
Small Cap Value Equity Fund -- 53,006,335
International Equity Fund -- 140,161,407
Sales Short-Term Bond Fund $ 3,623,594 $ 5,344,277
Core Bond Fund 77,578,152 18,729,327
Balanced Fund 16,021,328 22,546,303
Value Equity Fund -- 128,403,454
Small Cap Value Equity Fund -- 57,812,809
International Equity Fund -- 95,634,593
</TABLE>
73
<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
Six months ended Year ended Six months ended Year ended
June 30, 1996 December 31, 1995 June 30, 1996 December 31, 1995
Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Prime Fund
Sold -- -- -- -- -- -- -- --
Issued as reinvestment
of dividends -- -- 28 4,178 -- -- 32 4,746
Redeemed -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net increase -- -- 28 4,178 -- -- 32 4,746
======== ======== ======== ======== ======== ======== ======== ========
Short-Term Bond Fund
Sold -- -- -- -- -- -- -- --
Issued as reinvestment
of dividends -- -- 740 7,530 -- -- 796 8,116
Redeemed -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net increase -- -- 740 $ 7,530 -- -- 796 $ 8,116
======== ======== ======== ======== ======== ======== ======== ========
Core Bond Fund
Sold 389 4,100 4,457 49,156 -- -- -- --
Issued as reinvestment
of dividends -- -- 1,186 12,759 -- -- 861 9,288
Redeemed (4,795) (50,731) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease) (4,406) ($46,631) 5,643 $ 61,915 -- -- 861 $ 9,288
======== ======== ======== ======== ======== ======== ======== ========
Balanced Fund
Sold 906 10,664 4,480 49,577 -- -- -- --
Issued as reinvestment
of dividends -- -- 530 6,084 -- -- 401 4,610
Redeemed (5,243) (61,750) (23) (260) -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease) (4,337) ($51,086) 4,987 $ 55,401 -- -- 401 $ 4,610
======== ======== ======== ======== ======== ======== ======== ========
Value Equity Fund
Sold -- -- -- -- -- -- -- --
Issued as reinvestment
of dividends -- -- 219 2,751 -- -- 267 3,372
Redeemed -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net increase -- -- 219 $ 2,751 -- -- 267 $ 3,372
======== ======== ======== ======== ======== ======== ======== ========
Small Cap Value Equity Fund
Sold 4,347 53,784 4,740 49,719 -- -- -- --
Issued as reinvestment
of dividends -- -- 119 1,356 -- -- 114 1,300
Redeemed (5,522) (64,174) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease) (1,175) ($10,390) 4,859 $ 51,075 -- -- 114 $ 1,300
======== ======== ======== ======== ======== ======== ======== ========
International Equity Fund
Sold 5,370 55,024 1,610 15,218 -- -- -- --
Issued as reinvestment
of dividends -- -- 93 885 -- -- 124 1,191
Redeemed (2,814) (26,819) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net increase 2,556 $ 28,205 1,703 $ 16,103 -- -- 124 $ 1,191
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
74
<PAGE>
- -------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class 3 Class 4
Six months ended Year ended Six months ended Year ended
June 30, 1996 December 31, 1995 June 30, 1996 December 31, 1995
Shares Amount Shares Amount Shares Amount Shares Amount
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Prime Fund
Sold -- -- -- -- 1,405,346 $215,828,407 1,826,450 $281,187,060
Issued as reinvestment
of dividends -- -- 34 5,095 -- -- 84,068 12,693,332
Redeemed -- -- -- -- (1,331,801)(204,668,527) (1,363,706)(210,583,290)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase 34 $ 5,095 73,545 $11,159,880 546,812 $83,297,102
=========== =========== =========== =========== =========== =========== =========== ===========
Short-Term Bond Fund
Sold -- -- -- -- 3,577,832 36,587,823 5,136,925 53,696,509
Issued as reinvestment
of dividends -- -- 830 8,467 -- -- 947,825 9,611,215
Redeemed -- -- -- -- (2,759,155) (28,186,295) (4,819,336) (50,374,106)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase 830 $ 8,467 818,677 $ 8,401,528 1,265,414 $12,933,618
=========== =========== =========== =========== =========== =========== =========== ===========
Core Bond Fund
Sold -- -- -- -- 9,060,480 95,247,604 8,241,236 89,191,723
Issued as reinvestment
of dividends -- -- 894 9,658 -- -- 1,952,750 20,953,505
Redeemed -- -- -- -- (3,368,329) (35,402,316) (6,340,632) (67,005,587)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase 894 $ 9,658 5,692,151 $59,845,288 3,853,354 $43,139,641
=========== =========== =========== =========== =========== =========== =========== ===========
Balanced Fund
Sold -- -- -- -- 8,726,225 103,411,477 17,612,664 191,493,187
Issued as reinvestment
of dividends -- -- 433 4,977 -- -- 1,722,693 19,759,099
Redeemed -- -- -- -- (6,525,961) (77,470,455) (14,889,389)(160,925,764)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase 433 $ 4,977 2,200,264 $25,941,022 4,445,968 $50,326,522
=========== =========== =========== =========== =========== =========== =========== ===========
Value Equity Fund
Sold -- -- -- -- 23,143,496 308,328,279 39,224,457 451,052,424
Issued as reinvestment
of dividends -- -- 299 3,763 -- -- 5,223,526 65,653,544
Redeemed -- -- -- -- (25,147,801)(336,664,997) (34,020,780)(390,453,417)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 299 $ 3,763 (2,004,305) $28,336,718 10,427,203 $126,252,551
=========== =========== =========== =========== =========== =========== =========== ===========
Small Cap Value Equity Fund Sold
Sold -- -- -- -- 5,455,096 65,342,001 9,765,741 102,623,894
Issued as reinvestment
of dividends -- -- 146 1,672 -- -- 539,817 $6,159,231
Redeemed -- -- -- -- (4,833,173) (58,194,404) (9,110,662) (97,354,772)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase 146 $ 1,672 621,923 $ 7,147,597 1,194,896 $11,428,353
=========== =========== =========== =========== =========== =========== =========== ===========
International Equity Fund
Sold -- -- -- -- 7,537,078 75,875,424 11,931,440 112,672,627
Issued as reinvestment
of dividends -- -- 149 1,430 -- -- 412,266 3,955,148
Redeemed -- -- -- -- (3,351,171) (33,540,732) (5,487,562) (51,810,300)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase 149 $ 1,430 4,185,907 $42,334,692 6,856,144 $64,817,475
=========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
75
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
6. Foreign The International Equity Fund invests substantially all of
Securities 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 June 30, 1996, the cost of securities and the unrealized
Tax Information 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 $ 272,920,522 $ 6,719 $ (12,127) $ (5,408)
Short-Term Bond Fund 132,374,680 707,531 (735,523) (27,992)
Core Bond Fund 310,881,332 3,922,965 (4,528,865) (605,900)
Balanced Fund 443,089,217 65,355,194 (1,482,359) 63,872,835
Value Equity Fund 1,734,674,211 544,567,678 (4,859,054) 539,708,624
Small Cap Value Equity Fund 351,338,028 84,523,669 (9,510,814) 75,012,855
International Equity Fund 266,345,243 36,599,373 (9,837,209) 26,762,164
</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>
76
<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.
