<PAGE>
<TABLE>
<CAPTION>
Table of Contents
<S> <C>
Letter to Shareholders ................................................ 1
MassMutual Prime Fund
Portfolio Manager Report ........................................... 3
Portfolio of Investments ........................................... 5
Financial Statements ............................................... 7
MassMutual Short-Term Bond Fund
Portfolio Manager Report ........................................... 11
Portfolio of Investments ........................................... 13
Financial Statements ............................................... 15
MassMutual Core Bond Fund
Portfolio Manager Report ........................................... 20
Portfolio of Investments ........................................... 22
Financial Statements ............................................... 25
MassMutual Balanced Fund
Portfolio Manager Report ........................................... 30
Portfolio of Investments ........................................... 32
Financial Statements ............................................... 36
MassMutual Value Equity Fund
Portfolio Manager Report ........................................... 41
Portfolio of Investments ........................................... 43
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 ............................................... 63
Notes to Financial Statements ......................................... 68
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Institutional Funds - Letter to Shareholders
- --------------------------------------------------------------------------------
To Our Shareholders
[PICTURE OF STUART H. REESE APPEARS HERE] July 31, 1997
Stuart H. Reese
" . . . it was predominately the very largest growth companies that were leading
the market."
Economic Strength Continues
Over seven and a half years into the current expansion, and the factors that
have been critical in shaping economic behavior -- a broad-based expansion free
of major excesses, low inflation, a Federal budget deficit that has been
falling, now down to $50-$60 billion, and a Federal Reserve that is sensitive to
potential price pressures but not given to aggressiveness are still in place.
In the first half of 1997, consumption drove economic gains, with solid support
from private investment. Employment continued to grow, as did personal income,
and consumer confidence reached a long-time high. These factors allowed
businesses to build up inventories in the first quarter to meet consumer demand,
which in turn supported consumer behavior.
With Little Concern About Inflation
Even with unemployment as low as it has been, there are few signs on the horizon
that inflation is a concern. During the first half of the year, even while
Chairman Greenspan built a case for raising rates during several appearances
before congressional committees, the Federal Reserve made only one interest rate
move -- a quarter-point tightening on March 25, 1997.
Domestic Stocks Surge
With a steady economy, lean, competitive and profitable corporations and
favorable monetary policy, the stock market soared to new heights. Both the Dow
Jones Industrial Average and the Standard & Poor's 500 set and then surpassed
records during the past six months. When you consider that the U.S. market has
effectively doubled over the past two and a half years, nightly reports of the
market's new records are almost old news.
Even while the major market indices have made news, it's only been recently that
the bullishness has broadened. Particularly during the first quarter, it was
predominately the very largest growth companies that were leading the market.
The `Nifty Fifty' largest U.S. companies' stocks pushed both index performance
and their own prices to new highs. In the second quarter, however, we began to
see investors once again include smaller company stocks and some previously
out-of-favor companies in their focus.
During the first half of this year, international stock markets have also done
well. Major markets in continental Europe, with the exception of the United
Kingdom, have been quite strong, benefiting from corporate belt-tightening and
favorable exchange rates. Japan has rebounded nicely, and Latin American markets
have performed well on rapid growth and political stability. International index
performance has lagged that reported by the domestic market primarily because of
difficulties in emerging Southeast Asian markets over the period.
A Positive Environment for Bonds
The past six months have been positive for the debt markets as well, though
response to economic news has not been nearly as dramatic as stock market
reaction. The first quarter was somewhat difficult for most areas of the bond
market, due to uncertainty about interest rates and then the Federal Reserve's
March tightening. But in the second quarter, after expectations of further
tightening were not realized, rates began to drop and bonds recouped their
losses.
Some areas of the bond market have been very positive, particularly corporate
bonds, with performance that is tied to many of the factors supporting stocks.
Triple B-rated issues have also done well. Triple B bonds tend to have higher
yields than higher-rated bonds, and since income has been the major component of
bond total returns so far this year, they've been very strong. (Continued)
1
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Institutional Funds - Letter to Shareholders (Continued)
- --------------------------------------------------------------------------------
Balancing Risk and Reward in a High Priced Market
At this time, there is nothing in the forecast to shake our view that economic
growth can continue throughout 1997. However, particularly in the case of
large-cap domestic stocks, there is risk associated with any market that's
enjoyed the terrific run ours has over the past several years. MassMutual's
investment philosophy is grounded in the belief that protecting capital against
downturns is just as important over the long term as is participating in the
advances of bull markets.
We look for value when we evaluate both stocks and bonds, seeking to avoid the
risk that follows buying a security that has reached or is nearing a peak high.
As a result, while we take advantage of the opportunities a fast-paced market
provides, we tend to be more cautious than some of our more growth-oriented
peers. Over the market's history, the benefits of this approach have been borne
out, and we expect that to continue in the future.
/s/ Stuart H. Reese
Stuart H. Reese
President
MassMutual Institutional Funds
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Prime Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment objective and policies for the MassMutual Prime Fund?
The objective and policies of the Fund are to:
. maximize current income, consistent with liquidity and preservation of capital
. invest in a diversified portfolio of money market instruments
. invest in high quality debt instruments with remaining maturity not to exceed
397 days
Note: This is not a money market fund.
How did the Fund perform over the past six months?
The Fund continues to perform well, reporting returns that are superior to
Lipper Analytical's average for money market funds. Our advantage comes
primarily from the fact that this is a Fund which invests in securities that
have maturities less than one year and that are considered to be Tier 2
instruments by the Securities Exchange Commission. So, while our first concern
is maintaining principal stability, we have the flexibility to invest in Tier 2
commercial paper. This is an investment category that requires more research
than higher-rated Tier 1 paper, but it also offers significant income
advantages. Because we have the research capabilities in house, we buy Tier 2
regularly and we've benefited.
What have been the most significant events in your market over the past six
months and how was the portfolio positioned for them?
Short-term interest rates are impacted by the changes in the nation's monetary
policy. The Federal Reserve raised interest rates only once during the first six
months of the year. A twenty-five basis point increase in the Federal Funds rate
occurred in March. This rise in rates was prompted by the length of the economic
expansion and the record highs reached by the stock market.
The shorter the average life of a portfolio, the faster its instruments can be
replaced with higher yielding investments. Prior to the Federal Reserve's policy
meeting in March, the Prime Funds average life was shorter than the universe of
our peers. This factor gave the Fund an advantage in quickly replacing maturing
issues with higher yielding investments.
The second major impact on our market during the first half of 1997 was a
default on $500 million of Tier 1 commercial paper issued by Mercury Finance.
Because it was highly rated, all money market funds were permitted to own the
issue, and many did. We never rely solely on rating services' evaluations of
securities when making purchases. We conduct proprietary research into all of
the securities we buy, and monitor them for any changes on a daily basis. Our
own analysis of Mercury kept us from investing in the commercial paper offering,
and that protected us when Mercury defaulted.
Are you making any changes to the portfolio at this time?
Not really. The availability of Tier 2 paper has increased recently, so we have
been buying more of it to take advantage of its superior yields. Other than
that, we're planning to keep the average life of our portfolio closely in line
with that of our benchmark.
What is your outlook for the coming months at this time?
The economy remains strong, with little evidence to suggest inflation is on the
rise. As a result, we believe the Federal Reserve is keeping any movement in
rates on hold for the time being. We've very recently seen rates on short-term
securities drop slightly as the market has begun to share this belief. Until
news on the economic forecast changes significantly, we will continue with our
current strategy -- working to capture the highest yields available without
increasing exposure to risk.
3
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Prime Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Prime Fund Classes 1-4 and 91-day
Treasury Bills
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MassMutual Prime Fund
Total Return Year to Date One Year Average Annual
1/1/97 - 6/30/97 7/1/96 - 6/30/97 10/3/94 - 6/30/97
<S> <C> <C> <C>
Class 1 2.04% 4.13% 4.25%
Class 2 2.31% 4.70% 4.85%
Class 3 2.49% 5.07% 5.20%
Class 4 2.61% 5.32% 5.44%
- --------------------------------------------------------------------------------
91-Day 2.50% 5.09% 5.18%
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 costs. Investors should note that the Fund is a professionally managed
mutual fund, while 91-day Treasury Bills are unmanaged and do not incur
expenses.
[LINE GRAPH APPEARS HERE]
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
<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
6/95 10,330 10,377 10,401 10,419 10,384
12/95 10,559 10,639 10,680 10,711 10,671
6/96 10,767 10,876 10,939 10,982 10,932
12/96 10,987 11,129 11,214 11,272 11,209
6/97 11,211 11,387 11,493 11,565 11,489
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Prime Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1997
<TABLE>
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 99.9%
Commercial Paper -- 99.3%
Aristar, Inc.
5.660% 8/28/1997 $ 4,450,000 $ 4,409,421
Boston Scientific
Corporation
5.800% 7/01/1997 315,000 315,000
Boston Scientific
Corporation
5.820% 9/03/1997 1,045,000 1,034,318
Boston Scientific
Corporation
5.850% 9/03/1997 3,100,000 3,068,311
Boston Scientific
Corporation
5.870% 7/10/1997 1,725,000 1,722,468
Burlington Northern
Santa Fe Corporation
5.800% 8/07/1997 9,830,000 9,771,402
Carter Holt Harvey
Limited
5.810% 9/15/1997 5,500,000 5,433,236
Carter Holt Harvey
Limited
5.810% 9/16/1997 5,200,000 5,136,047
Central and South
West Corporation
5.800% 8/26/1997 7,435,000 7,367,920
Cincinnati Bell Inc.
5.560% 8/18/1997 6,000,000 5,955,520
Comdisco, Inc.
5.820% 7/17/1997 5,330,000 5,316,213
Comdisco, Inc.
5.830% 9/15/1997 1,900,000 1,876,936
Comdisco, Inc.
5.850% 9/19/1997 1,200,000 1,184,667
ConAgra, Inc.
5.750% 8/29/1997 4,535,000 4,492,264
Cox Enterprises, Inc.
5.780% 7/16/1997 5,245,000 5,232,368
Cox Enterprises, Inc.
5.790% 7/11/1997 3,385,000 3,379,556
Crown Cork & Seal
Company Inc.
5.820% 8/08/1997 4,400,000 4,372,969
Crown Cork & Seal
Company Inc.
5.830% 9/29/1997 2,640,000 2,602,050
CSX Corporation
5.750% 7/14/1997 3,695,000 3,687,328
CSX Corporation
5.800% 12/01/1997 6,000,000 5,853,375
Dominion Resources,
Inc.
5.800% 8/27/1997 4,375,000 4,334,823
Dominion Resources,
Inc.
5.840% 7/22/1997 6,300,000 6,278,538
Echlin, Inc.
5.640% 8/01/1997 4,130,000 4,109,942
Finova Capital
Corporation
5.640% 1/29/1998 4,630,000 4,473,224
General Motors
Acceptance
Corporation
5.420% 7/30/1997 3,640,000 3,624,107
General Motors
Acceptance
Corporation
5.700% 12/03/1997 6,800,000 6,631,653
Harris Corporation
5.800% 7/09/1997 5,700,000 5,692,653
Harris Corporation
5.800% 7/21/1997 2,140,000 2,133,105
Illinois Power
Company
5.750% 7/08/1997 815,000 814,089
Illinois Power
Company
5.800% 7/23/1997 5,080,000 5,061,994
Illinois Power
Company
5.820% 8/05/1997 4,715,000 4,688,321
Lockheed Martin
Corporation
5.500% 7/28/1997 4,000,000 3,983,500
Lockheed Martin
Corporation
5.740% 7/31/1997 1,500,000 1,492,825
Lockheed Martin
Corporation
5.780% 7/08/1997 4,965,000 4,959,420
Mead Corporation
5.880% 9/22/1997 8,580,000 8,466,255
ORIX Credit Alliance, Inc.
5.530% 7/24/1997 3,550,000 3,537,458
ORIX Credit Alliance,
Inc.
5.830% 9/19/1997 3,875,000 3,825,486
ORIX Credit Alliance,
Inc.
5.920% 10/31/1997 2,200,000 2,157,131
Praxair, Inc.
5.450% 7/18/1997 3,555,000 3,545,851
Praxair, Inc.
5.790% 7/02/1997 315,000 314,949
Praxair, Inc.
5.790% 11/17/1997 1,150,000 1,124,468
Public Service
Company of Colorado
5.840% 9/24/1997 6,170,000 6,086,234
Public Service
Company of Colorado
5.850% 7/22/1997 1,415,000 1,410,171
Public Service
Electric and Gas
Company
5.820% 7/07/1997 2,750,000 2,747,332
Public Service
Electric and Gas
Company
5.820% 8/04/1997 8,000,000 7,956,027
Rite Aid Corporation
5.750% 7/10/1997 2,900,000 2,895,831
Rite Aid Corporation
5.770% 7/01/1997 2,950,000 2,950,000
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements. 5
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Prime Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
Rite Aid Corporation
5.800% 7/14/1997 $ 1,100,000 $ 1,097,696
Rite Aid Corporation
5.800% 7/25/1997 3,000,000 2,988,400
Textron Financial
Corporation
5.820% 7/03/1997 5,465,000 5,463,233
Textron Financial
Corporation
5.830% 7/07/1997 800,000 799,223
Textron Financial
Corporation
5.850% 7/07/1997 1,035,000 1,033,991
Timken Company
5.800% 7/15/1997 4,000,000 3,990,977
Timken Company
5.850% 9/16/1997 4,550,000 4,494,041
Union Camp Corp.
5.650% 10/17/1997 2,500,000 2,456,875
Union Camp Corp.
5.720% 7/23/1997 3,165,000 3,153,936
Union Pacific
Corporation
5.830% 9/11/1997 4,735,000 4,680,547
Union Pacific
Corporation
5.850% 7/28/1997 3,275,000 3,260,631
Union Pacific
Corporation
5.850% 9/17/1997 2,735,000 2,700,926
UOP
5.830% 8/01/1997 6,000,000 5,969,879
UOP
5.830% 8/06/1997 2,885,000 2,868,180
Whirlpool Financial
Corporation
5.800% 8/12/1997 1,915,000 1,902,042
Whirlpool Financial
Corporation
5.800% 9/04/1997 3,030,000 2,998,543
Whirlpool Financial
Corporation
5.820% 8/22/1997 5,760,000 5,711,578
------------
243,077,454
------------
Discount Note -- 0.6%
Federal Farm Credit
Bank
5.230% 8/19/1997 1,530,000 1,519,109
------------
TOTAL SHORT-TERM
INVESTMENTS 244,596,563
------------
(Cost $244,588,726)+
TOTAL INVESTMENTS -- 99.9% 244,596,563
Other Assets/
(Liabilities) - 0.1% 358,000
------------
NET ASSETS -- 100.0% $244,954,563
============
</TABLE>
Notes to Portfolio of Investments
+Aggregate cost for Federal tax purposes (Note 7)
6 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Prime Fund - Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, 1997
(Unaudited)
--------------
<S> <C>
Statement of Assets and Liabilities
Assets:
Short-term investments, at value (cost $244,588,726) (Note 2)............... $ 244,596,563
Cash........................................................................ 2,640
Receivables from:
Fund shares sold.......................................................... 1,938,518
--------------
Total assets............................................................ 246,537,721
--------------
Liabilities:
Payables for:
Fund shares redeemed...................................................... 1,454,783
Directors' fees and expenses (Note 3)..................................... 5,202
Affiliates (Note 3):
Investment management fees............................................. 98,510
Administration fees.................................................... 17,885
Service and distribution fees.......................................... 223
Accrued expenses and other liabilities...................................... 6,555
--------------
Total liabilities...................................................... 1,583,158
--------------
Net assets.................................................................. $ 244,954,563
==============
Net assets consist of:
Paid-in capital............................................................. $ 238,247,351
Undistributed net investment income......................................... 6,710,299
Accumulated net realized loss on investments................................ (10,924)
Net unrealized appreciation on investments.................................. 7,837
--------------
$ 244,954,563
==============
Net assets:
Class 1.................................................................. $ 111,959
==============
Class 2.................................................................. $ 113,610
==============
Class 3.................................................................. $ 114,477
==============
Class 4.................................................................. $ 244,614,517
==============
Shares outstanding:
Class 1.................................................................. 726.501
==============
Class 2.................................................................. 734.255
==============
Class 3.................................................................. 738.294
==============
Class 4.................................................................. 1,578,770.623
==============
Net asset value, offering price and
redemption price per share:
Class 1.................................................................. $ 154.11
==============
Class 2.................................................................. $ 154.73
==============
Class 3.................................................................. $ 155.06
==============
Class 4.................................................................. $ 154.94
==============
</TABLE>
The accompanying notes are an integral part of the financial statements. 7
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Prime Fund - Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended
June 30, 1997
(Unaudited)
------------
<S> <C>
Statement of Operations
Investment income:
Interest................................................................... $ 7,305,942
------------
Expenses (Note 1):
Investment management fees (Note 3)........................................ 576,162
Custody fees............................................................... 11,181
Audit and legal fees....................................................... 3,281
Directors' fees (Note 3)................................................... 10,410
Fees waived by the investment manager (Note 3)............................. (29,758)
------------
571,276
Administration fees (Note 3):
Class 1.................................................................. 309
Class 2.................................................................. 286
Class 3.................................................................. 177
Class 4.................................................................. 103,830
Distribution and service fees (Note 3):
Class 1.................................................................. 357
Class 2.................................................................. 84
------------
Net expenses........................................................... 676,319
------------
Net investment income.................................................. 6,629,623
------------
Realized and unrealized gain (loss):
Net realized loss on investment transactions............................... (3,773)
Net change in unrealized appreciation (depreciation)
on investments............................................................. 15,925
------------
Net realized and unrealized gain....................................... 12,152
------------
Net increase in net assets resulting from operations..................... $ 6,641,775
============
<CAPTION>
Six months ended
June 30, 1997 Year ended
(Unaudited) December 31, 1996
--------------- -------------
<S> <C> <C>
Statements of Changes in Net Assets
Increase (Decrease) in Net Assets:
Operations:
Net investment income................................... $ 6,629,623 $ 13,029,745
Net realized loss on investment transactions............ (3,773) (5,068)
Net change in unrealized appreciation (depreciation)
on investments......................................... 15,925 11,447
--------------- -------------
Net increase in net assets resulting from operations... 6,641,775 13,036,124
--------------- -------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1................................................. -- (4,288)
Class 2................................................. -- (4,922)
Class 3................................................. -- (5,335)
Class 4................................................. -- (13,067,477)
--------------- -------------
Total distributions from net investment income......... -- (13,082,022)
--------------- -------------
Net fund share transactions (Note 5):
Class 1................................................. -- 4,288
Class 2................................................. -- 4,922
Class 3................................................. -- 5,335
Class 4................................................. (20,748,693) 4,838,727
--------------- -------------
Increase (Decrease) in net assets from net fund
share transactions.................................. (20,748,693) 4,853,272
--------------- -------------
Total increase (decrease) in net assets................. (14,106,918) 4,807,374
Net assets:
Beginning of period..................................... 259,061,481 254,254,107
--------------- -------------
End of period (including undistributed net investment
income of $6,710,299 and $80,676, respectively)........ $ 244,954,563 $ 259,061,481
=============== =============
</TABLE>
8 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
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94+**
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 151.03 $ 151.05 $ 150.39 $ 150.00
------------- ------------- ------------- -------------
Income (loss) from investment operations:
Net investment income 3.06*** 6.09*** 6.90 *** 1.02
Net realized and unrealized gain (loss) on investments 0.02 0.03 (0.01) 0.42
------------- ------------- ------------- -------------
Total income (loss) from investment operations 3.08 6.12 6.89 1.44
------------- ------------- ------------- -------------
Less distributions to shareholders:
From net investment income -- (6.14) (6.23) (1.05)
------------- ------------- ------------- -------------
Net asset value, end of period $ 154.11 $ 151.03 $ 151.05 $ 150.39
============= ============= ============= =============
Total Return 2.04% 4.05% 4.58% 0.96%
Ratios / Supplemental Data:
Net assets, end of period (000's) $112 $110 $105 $101
Net expenses to average daily net assets# 1.66%* 1.65% 1.65% 1.65%*
Net investment income to average daily net assets 4.05%* 3.97% 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% 1.68% 1.69%*
<CAPTION>
Class 2
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94+**
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 151.23 $ 151.24 $ 150.56 $ 150.00
------------- ------------- ------------- -------------
Income (loss) from investment operations:
Net investment income 3.49*** 6.96*** 7.78 *** 1.16
Net realized and unrealized gain (loss) on investments 0.01 0.04 (0.02) 0.57
------------- ------------- ------------- -------------
Total income (loss) from investment operations 3.50 7.00 7.76 1.73
------------- ------------- ------------- -------------
Less distributions to shareholders:
From net investment income -- (7.01) (7.08) (1.17)
------------- ------------- ------------- -------------
Net asset value, end of period $ 154.73 $ 151.23 $ 151.24 $ 150.56
============= ============= ============= =============
Total Return 2.31% 4.63% 5.16% 1.15%
Ratios / Supplemental Data:
Net assets, end of period (000's) $114 $111 $106 $101
Net expenses to average daily net assets# 1.11%* 1.10% 1.10% 1.10%*
Net investment income to average daily net assets 4.60%* 4.52% 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% 1.13% 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. 9
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Prime Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 3
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94+**
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 151.29 $ 151.32 $ 150.61 $ 150.00
------------- ------------- ------------- -------------
Income (loss) from investment operations:
Net investment income 3.76*** 7.51*** 8.33 *** 1.21
Net realized and unrealized gain (loss) on investments 0.01 0.05 (0.01) 0.61
------------- ------------- ------------- -------------
Total income (loss) from investment operations 3.77 7.56 8.32 1.82
------------- ------------- ------------- -------------
Less distributions to shareholders:
From net investment income -- (7.59) (7.61) (1.21)
------------- ------------- ------------- -------------
Net asset value, end of period $ 155.06 $ 151.29 $ 151.32 $ 150.61
============= ============= ============= =============
Total Return 2.49% 5.00% 5.53% 1.21%
Ratios / Supplemental Data:
Net assets, end of period (000's) $114 $112 $106 $101
Net expenses to average daily net assets# 0.76%* 0.75% 0.75% 0.75%*
Net investment income to average daily net assets 4.95%* 4.86% 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% 0.78% 0.79%*
<CAPTION>
Class 4
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94+**
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 151.00 $ 151.06 $ 150.36 $ 150.00
------------- ------------- ------------- -------------
Income (loss) from investment operations:
Net investment income 3.93*** 7.85*** 8.70 *** 1.55
Net realized and unrealized gain (loss) on investments 0.01 0.06 (0.02) 0.34
------------- ------------- ------------- -------------
Total income (loss) from investment operations 3.94 7.91 8.68 1.89
------------- ------------- ------------- -------------
Less distributions to shareholders:
From net investment income -- (7.97) (7.98) (1.53)
------------- ------------- ------------- -------------
Net asset value, end of period $ 154.94 $ 151.00 $ 151.06 $ 150.36
============= ============= ============= =============
Total Return@ 2.61% 5.24% 5.78% 1.26%
Ratios / Supplemental Data:
Net assets, end of period (000's) $244,615 $258,729 $253,936 $170,548
Net expenses to average daily net assets# 0.5274%* 0.5160% 0.5160% 0.5160%*
Net investment income to average daily net assets 5.18%* 5.10% 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: 0.5506%* 0.5509% 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.
10 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment objective and policies for the MassMutual Short-Term
Bond Fund?
The objective and policies of the Fund are to:
. achieve high total rate of return from current income while minimizing
fluctuations in capital 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 did the Fund perform over the past six months?
The Fund has performed well. During a six month period that contained two
distinctly different quarters, our strategy allowed us to outperform the
majority of our peers, and to enjoy a substantial increase in assets under
management.
What was the most significant event in your market over the period and how was
the portfolio positioned for it?
The most significant event was the increase in interest rates that occurred
prior to the Federal Reserve's end of March meeting. We use the shape of the
yield curve -- a graphic illustration of the relative change in yield an
investor receives for incremental moves into longer maturity bonds -- to
determine the average duration of the Fund. During the first half of 1997, the
yield curve was steep enough to suggest the portfolio's duration should be set
at three years, our maximum. This hurt us during the first quarter of the year,
since longer maturity bonds suffer greater price declines when interest rates
increase.
However, the second quarter was almost a mirror image of the first. When rates
began to drop in the second quarter, we benefited strongly.
What investment decisions were most successful over the period?
We added to our holdings of corporate bonds during the first half of the year,
looking for investments that offered income and appreciation potential
advantages over Treasuries. One of our successes in this arena was with
McDonnell Douglas. The yield spread between this issue and comparable Treasuries
narrowed as a planned merger with Boeing was announced. The price of these bonds
appreciated, and they were sold prior to FTC approval as the risk of the merger
had not yet dissipated.
On the negative side, we owned Norfolk Southern, a railroad that is issuing debt
as a result of its merger with Conrail. Prices on the bonds we were holding
declined, but we were able to trade into a much more liquid new issue at
equivalent yield spread levels. We continue to own this issue of Norfolk
Southern, expecting to see the bonds appreciate as the company's financial
picture improves going forward.
Are you making any changes to the portfolio at this time?
Forty-seven percent of the portfolio is currently invested in Treasuries, up
from 44 percent at the beginning of the year. In part, due to the large inflows
of cash the Fund has seen over the past six months. At this time, we're actively
searching for attractive corporate bonds, hoping to make opportune purchases in
that sector. In addition, we've purchased some asset-backed securities,
specifically Chase Auto and Met Life, to help us keep our duration on target.
What is your outlook for the coming months?
Our outlook is favorable. First off, in our opinion, the normal expected
trade-off between strong economic growth or low inflation is not being realized.
While the domestic economy is in the seventh year of its current expansion,
inflation is at a 34-year low. The fact that consumer confidence has reached a
28-year high and that the budget deficit is at a 16-year low support our feeling
that the economy's strength has staying power. In addition, it appears that the
Federal Reserve's open market committee will remain on the sidelines after their
single rate hike in late March.
We believe a healthy economy with no inflationary pressures suggests a favorable
environment for Funds like ours will persist. As we move through the remainder
of the year, we will continue to work to find ways to add value through
opportune trading and yield curve positioning.
11
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Growth of a $10,000 Imvestment
Hypothetical Investments in MassMutual Short-Term Bond Fund Classes 1-4 and the
Lehman Brothers 1-3 Year Government Bond Index
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund
Total Return
<TABLE>
<CAPTION>
Year to Date One Year Average Annual
1/1/97-6/30/97 7/1/96-6/30/97 10/3/94-6/30/97
<S> <C> <C> <C>
Class 1 2.07% 5.27% 6.06%
Class 2 2.36% 5.94% 6.65%
Class 3 2.56% 6.21% 7.03%
Class 4 2.57% 6.50% 7.25%
- --------------------------------------------------------------------------------
Lehman Brothers 2.87% 6.56% 6.78%
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.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
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
6/95 10,730 10,769 10,801 10,816 10,661
12/95 11,035 11,101 11,160 11,192 11,086
6/96 11,165 11,264 11,346 11,380 11,244
12/96 11,516 11,658 11,750 11,816 11,643
6/97 11,753 11,933 12,050 12,119 11,976
</TABLE>
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Quality Structure (6/30/07)
MassMutual Short-Term Bond Fund
<S> <C>
U.S. Governments Cash Equivalents Aaa/AAA 81.0%
Aa/AA 3.1%
A/A 9.3%
Baa/BBB 6.6%
</TABLE>
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Duration Diversification (6/30/97)
MassMutual Short-Term Bond Fund
Average Duration = 2.9 years
<S> <C>
(Less than) 1 year 19.8%
1-3 years 40.6%
3-5 years 19.1%
5-7 years 19.1%
7-10 years 1.4%
</TABLE>
12
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1997
<TABLE>
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
BONDS & NOTES - 83.9%
ASSET BACKED SECURITIES - 6.5%
Capital Equipment
Receivables Trust
1996-1, Class A4
6.280% 6/15/2000 $1,000,000 $ 999,060
Chase Manhattan Auto
Grantor Trust 1996-B,
Class A
6.610% 9/15/2002 1,505,214 1,510,859
Chase Manhattan Auto
Owner Trust 1997-A,
Class A4
6.400% 7/16/2001 1,500,000 1,499,835
Ford Credit 1994-B
Grantor Trust
7.300% 10/15/1999 249,094 251,194
Ford Credit Auto
Owner Trust 1996-B,
Class A-4
6.300% 1/15/2001 2,000,000 1,996,240
Metlife Capital
Equipment Loan Trust
Series 1997-A, Class A
6.850% 5/20/2008 1,000,000 995,070
Nissan Auto
Receivables 1994-A
Grantor Trust, Class A
6.450% 9/15/1999 400,290 400,790
Railcar Trust No.
1992-1
7.750% 6/01/2004 1,142,115 1,184,225
World Omni 1996-A
Automobile Lease
Securitization Trust,
Class A1
6.300% 6/25/2002 2,426,059 2,432,124
-------------
TOTAL ASSET BACKED
SECURITIES 11,269,397
-------------
(Cost $11,284,986)
CORPORATE DEBT -- 18.5%
AirTouch
Communications, Inc.
7.500% 7/15/2006 $1,000,000 $ 1,021,200
America West Airlines
1996-1, Class A
6.850% 7/02/2009 2,000,000 1,947,500
Analog Devices, Inc.
6.625% 3/01/2000 1,000,000 994,310
Associates Corporation
of North America
6.750% 8/01/2001 1,500,000 1,501,860
Bell Atlantic Financial
Services, Inc.
6.610% 2/07/2000 2,000,000 2,004,640
Carlisle Companies
Incorporated
7.250% 1/15/2007 1,000,000 998,110
The CIT Group
Holdings, Inc.
6.250% 3/22/1999 2,200,000 2,204,906
CSC Enterprises 144A
6.500% 11/15/2001 2,000,000 1,982,660
First Brands
Corporation
7.250% 3/01/2007 1,500,000 1,497,720
General American
Transportation
Corporation
6.750% 3/01/2006 1,000,000 967,720
Lockheed Martin
Corporation
7.700% 6/15/2008 1,000,000 1,043,040
Lucent Technologies
Inc.
6.900% 7/15/2001 2,000,000 2,017,640
MAPCO Inc.
7.250% 3/01/2009 1,250,000 1,251,150
Norfolk Southern
Corporation
7.350% 5/15/2007 1,000,000 1,014,840
Orchard Supply
Hardware Stores
Corporation
9.375% 2/15/2002 2,000,000 2,096,380
ORIX Credit Alliance,
Inc. 144A
6.480% 4/20/1999 2,000,000 1,990,400
Rite Aid Corporation
6.700% 12/15/2001 1,000,000 992,410
The US West Capital
Funding, Inc.
6.850% 1/15/2002 1,500,000 1,498,395
Walt Disney Company,
The
6.375% 3/30/2001 1,500,000 1,488,810
W.R. Grace & Co.
8.000% 8/15/2004 3,240,000 3,391,567
-------------
TOTAL CORPORATE DEBT 31,905,258
-------------
(Cost $31,717,048)
U.S. GOVERNMENT
AGENCY OBLIGATIONS -- 13.4%
Federal Home Loan Mortgage Corporation
(FHLMC) -- 2.5%
Collateralized Mortgage Obligations -- 2.2%
FHLMC Series 1693
Class G
6.000% 7/15/2007 2,000,000 1,946,860
FHLMC Series 1704
Class PE
6.000% 7/15/2007 2,000,000 1,974,360
-------------
3,921,220
-------------
Pass-Through Securities -- 0.3%
FHLMC
4.750% 9/01/2006 466,658 446,093
-------------
4,367,313
-------------
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
Federal National Mortgage Association
(FNMA) -- 2.6%
Collateralized Mortgage Obligations -- 1.7%
FNMA Series 1993-
175 Class PL
5.000% 10/25/2002 $ 468,248 $ 466,052
FNMA Series 1993-71
Class PG
6.250% 7/25/2007 2,500,000 2,459,375
-------------
2,925,427
-------------
Pass-Through Securities -- 0.9%
FNMA
8.000% 5/01/2013 693,195 705,520
FNMA
9.000% 10/01/2009 805,661 849,956
-------------
1,555,476
-------------
4,480,903
-------------
Government National Mortgage Association
(GNMA) -- 1.0%
Pass-Through Securities -- 1.0%
GNMA 8.000% 5/15/2001 -
11/15/2007 1,611,297 1,666,886
-------------
U.S. Government Guaranteed Notes -- 7.3%
1991-A Jacksonville,
FL
8.400% 8/01/1997 1,150,000 1,152,507
1991-A St. Louis, MO
8.400% 8/01/1997 3,350,000 3,357,303
1994-A Baxter
Springs, KS
6.310% 8/01/2001 500,000 492,595
1994-A Detroit, MI
6.310% 8/01/2001 450,000 443,336
1994-A Jacksonville,
FL
6.310% 8/01/2001 1,485,000 1,463,007
1994-A Los Angeles
County, CA
6.310% 8/01/2001 225,000 221,668
1994-A Tacoma, WA
6.310% 8/01/2001 195,000 192,112
1994-A Trenton, NJ
6.310% 8/01/2001 145,000 142,853
U.S. Dept. of Housing
and Urban
Development, Series
1995-A
8.080% 8/01/1998 3,000,000 3,063,750
U.S. Dept. of Housing
and Urban
Development, Series
1996-A
6.440% 8/01/1999 2,000,000 2,007,500
-------------
12,536,631
-------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 23,051,733
-------------
(Cost $22,661,354)
U.S. TREASURY OBLIGATIONS -- 45.5%
U.S. Treasury Notes
U.S. Treasury Note
5.750% 8/15/2003 11,800,000 11,394,316
U.S. Treasury Note
7.125% 2/29/2000 27,000,000 27,590,490
U.S. Treasury Note
7.250% 5/15/2004 20,400,000 21,263,736
U.S. Treasury Note
8.875% 2/15/1999 17,500,000 18,260,200
-------------
TOTAL U.S. TREASURY
OBLIGATIONS 78,508,742
-------------
(Cost $78,829,547)
TOTAL BONDS & NOTES 144,735,130
-------------
(Cost $144,492,935)
SHORT-TERM INVESTMENTS -- 11.9%
Commercial Paper
Boston Scientific
Corporation
5.870% 9/03/1997 1,185,000 1,172,634
Carter Holt Harvey
Limited
5.760% 7/03/1997 665,000 664,787
Carter Holt Harvey
Limited
5.770% 7/03/1997 500,000 499,840
Carter Holt Harvey
Limited
5.900% 8/19/1997 2,355,000 2,336,088
Comdisco, Inc.
5.850% 7/30/1997 2,015,000 2,005,504
Crown Cork & Seal
Company Inc.
5.700% 7/01/1997 161,000 161,000
Crown Cork & Seal
Company Inc.
5.780% 7/01/1997 117,000 117,000
Federal Signal Corp.
5.820% 7/21/1997 1,045,000 1,041,621
ORIX Credit Alliance, Inc.
5.830% 7/01/1997 1,050,000 1,050,000
ORIX Credit Alliance, Inc.
5.870% 7/09/1997 2,840,000 2,836,295
ORIX Credit Alliance,
Inc.
5.900% 7/09/1997 114,000 113,851
Pennsylvania Power &
Light Co.
5.750% 7/01/1997 995,000 995,000
Sonat Inc.
5.780% 7/07/1997 1,750,000 1,748,314
Union Pacific
Corporation
5.840% 9/11/1997 1,150,000 1,136,568
Union Pacific
Corporation
5.850% 7/28/1997 3,210,000 3,195,917
Union Pacific
Corporation
5.850% 9/11/1997 1,390,000 1,373,737
-------------
TOTAL SHORT-TERM
INVESTMENTS 20,448,156
-------------
(At Amortized Cost)
TOTAL INVESTMENTS -- 95.8% 165,183,286
(Cost $164,941,091)+
Other Assets/
(Liabilities) - 4.2% 7,239,656
-------------
NET ASSETS-- 100.0% $172,422,942
-------------
</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.
14 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
June 30, 1997
(Unaudited)
---------------
<S> <C>
Assets:
Investments, at value (cost $144,492,935) (Note 2)............... $ 144,735,130
Short-term investments, at amortized cost (Note 2)............... 20,448,156
---------------
Total Investments.............................................. 165,183,286
Cash............................................................. 426
Receivables from:
Fund shares sold............................................... 4,621,175
Interest....................................................... 2,860,601
---------------
Total assets................................................ 172,665,488
---------------
Liabilities:
Payables for:
Fund shares redeemed........................................... 159,130
Directors' fees and expenses (Note 3).......................... 5,318
Affiliates (Note 3):
Investment management fees................................... 60,940
Administration fees.......................................... 10,705
Service and distribution fees................................ 233
Accrued expenses and other liabilities........................... 6,220
---------------
Total liabilities............................................ 242,546
---------------
Net assets....................................................... $ 172,422,942
===============
Net assets consist of:
Paid-in capital.................................................. $ 167,618,985
Undistributed net investment income.............................. 4,939,839
Accumulated net realized loss on investments..................... (378,077)
Net unrealized appreciation on investments....................... 242,195
---------------
$ 172,422,942
===============
Net assets:
Class 1.......................................................... $ 118,259
===============
Class 2.......................................................... $ 120,003
===============
Class 3.......................................................... $ 120,979
===============
Class 4.......................................................... $ 172,063,701
===============
Shares outstanding:
Class 1.......................................................... 11,415
===============
Class 2.......................................................... 11,544
===============
Class 3.......................................................... 11,599
===============
Class 4.......................................................... 16,587,139
===============
Net asset value, offering price and
redemption price per share:
Class 1.......................................................... $ 10.36
===============
Class 2.......................................................... $ 10.40
===============
Class 3.......................................................... $ 10.43
===============
Class 4.......................................................... $ 10.37
===============
</TABLE>
The accompanying notes are an integral part of the financial statements. 15
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of Operations
<TABLE>
<CAPTION>
Six months ended
June 30, 1997
(Unaudited)
------------------
<S> <C>
Investment income:
Interest......................................................... $ 5,330,859
------------------
Expenses (Note 1):
Investment management fees (Note 3).............................. 346,373
Custody fees..................................................... 7,799
Audit and legal fees............................................. 2,032
Directors' fees (Note 3)......................................... 10,526
Fees waived by the investment manager (Note 3)................... (18,246)
------------------
348,484
Administration fees (Note 3):
Class 1........................................................ 322
Class 2........................................................ 297
Class 3........................................................ 182
Class 4........................................................ 60,055
Distribution and service fees (Note 3):
Class 1........................................................ 375
Class 2........................................................ 88
------------------
Net expenses................................................. 409,803
------------------
Net investment income........................................ 4,921,056
Realized and unrealized gain (loss):
Net realized loss on investment transactions..................... (82,877)
Net change in unrealized appreciation (depreciation)
on investments................................................. (775,534)
------------------
Net realized and unrealized loss............................. (858,411)
------------------
Net increase in net assets resulting from operations............. $ 4,062,645
==================
</TABLE>
16 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six months ended
June 30, 1997 Year ended
(Unaudited) December 31, 1996
------------------ -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income.......................................... $ 4,921,056 $ 8,081,821
Net realized loss on investment transactions................... (82,877) (274,845)
Net change in unrealized appreciation (depreciation)
on investments................................................ (775,534) (384,702)
------------------ -----------------
Net increase in net assets resulting from operations.......... 4,062,645 7,422,274
------------------ -----------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1........................................................ -- (5,225)
Class 2........................................................ -- (5,891)
Class 3........................................................ -- (6,321)
Class 4........................................................ -- (8,133,246)
------------------ -----------------
Total distributions from net investment income................ -- (8,150,683)
------------------ -----------------
In excess of net investment income:
Class 1........................................................ -- (1)
Class 2........................................................ -- (1)
Class 3........................................................ -- (1)
Class 4........................................................ -- (1,569)
------------------ -----------------
Total distributions in excess of net investment income........ -- (1,572)
------------------ -----------------
From net realized gains:
Class 1........................................................ -- (59)
Class 2........................................................ -- (59)
Class 3........................................................ -- (59)
Class 4........................................................ -- (71,288)
------------------ -----------------
Total distributions from net realized gains................... -- (71,465)
------------------ -----------------
Net fund share transactions (Note 5):
Class 1........................................................ -- 5,285
Class 2........................................................ -- 5,951
Class 3........................................................ -- 6,381
Class 4........................................................ 22,826,888 23,078,364
------------------ -----------------
Increase in net assets from net fund share transactions....... 22,826,888 23,095,981
------------------ -----------------
Total increase in net assets................................... 26,889,533 22,294,535
Net assets:
Beginning of period............................................ 145,533,409 123,238,874
------------------ -----------------
End of period (including undistributed net investment
income of $4,939,839 and $18,783, respectively................ $ 172,422,942 $ 145,533,409
------------------ -----------------
</TABLE>
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 1
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.15 $ 10.19 $ 9.89 $ 10.00
----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income 0.27*** 0.50 0.55 0.09
Net realized and unrealized gain (loss) on investments (0.06) (0.05) 0.49 (0.11)
----------- ----------- ----------- -----------
Total income (loss) from investment operations 0.21 0.45 1.04 (0.02)
----------- ----------- ----------- -----------
Less distributions to shareholders:
From net investment income -- (0.48) (0.54) (0.09)
From net realized gains -- (0.01) (0.20) --
----------- ----------- ----------- -----------
Total distributions -- (0.49) (0.74) (0.09)
----------- ----------- ----------- -----------
Net asset value, end of period $ 10.36 $ 10.15 $ 10.19 $ 9.89
=========== =========== =========== ===========
Total Return 2.07% 4.35% 10.54% (0.17)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $118 $116 $111 $100
Net expenses to average daily net assets# 1.66%* 1.65% 1.65% 1.65%*
Net investment income to average daily net assets 5.26%* 4.86% 5.20% 5.45%*
Portfolio turnover rate 9% 61% 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% 1.68% 1.70%*
</TABLE>
<TABLE>
<CAPTION>
Class 2
--------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.16 $ 10.19 $ 9.89 $ 10.00
----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income 0.29*** 0.56 0.61 0.10
Net realized and unrealized gain (loss) on investments (0.05) (0.04) 0.49 (0.11)
----------- ----------- ----------- -----------
Total income (loss) from investment operations 0.24 0.52 1.10 (0.01)
----------- ----------- ----------- -----------
Less distributions to shareholders:
From net investment income -- (0.54) (0.60) (0.10)
From net realized gains -- (0.01) (0.20) --
----------- ----------- ----------- -----------
Total distributions -- (0.55) (0.80) (0.10)
----------- ----------- ----------- -----------
Net asset value, end of period $ 10.40 $ 10.16 $ 10.19 $ 9.89
=========== =========== =========== ===========
Total Return 2.36% 5.02% 11.11% (0.09)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $120 $117 $112 $101
Net expenses to average daily net assets# 1.11%* 1.10% 1.10% 1.10%*
Net investment income to average daily net assets 5.81%* 5.41% 5.75% 5.99%*
Portfolio turnover rate 9% 61% 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% 1.13% 1.15%*
</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.
18 The accompanying notes are an integral part of the financial statements.
<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
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.17 $ 10.21 $ 9.91 $ 10.00
---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income 0.31*** 0.60 0.64 0.10
Net realized and unrealized gain (loss) on investments (0.05) (0.05) 0.49 (0.09)
---------- ---------- ---------- ----------
Total income (loss) from investment operations 0.26 0.55 1.13 0.01
---------- ---------- ---------- ----------
Less distributions to shareholders:
From net investment income -- (0.58) (0.63) (0.10)
From net realized gains -- (0.01) (0.20) --
---------- ---------- ---------- ----------
Total distributions -- (0.59) (0.83) (0.10)
---------- ---------- ---------- ----------
Net asset value, end of period $ 10.43 $ 10.17 $ 10.21 $ 9.91
========== ========== ========== ==========
Total Return 2.56% 5.28% 11.46% 0.13%
Ratios / Supplemental Data:
Net assets, end of period (000's) $121 $118 $112 $100
Net expenses to average daily net assets# 0.76%* 0.75% 0.75% 0.75%*
Net investment income to average daily net assets 6.16%* 5.76% 6.10% 6.36%*
Portfolio turnover rate 9% 61% 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: 0.79%* 0.79% 0.78% 0.80%*
</TABLE>
<TABLE>
<CAPTION>
Class 4
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.11 $ 10.15 $ 9.85 $ 10.00
---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income 0.32*** 0.60 0.66 0.16
Net realized and unrealized gain (loss) on investments (0.06) (0.03) 0.50 (0.15)
---------- ---------- ---------- ----------
Total income (loss) from investment operations 0.26 0.57 1.16 0.01
---------- ---------- ---------- ----------
Less distributions to shareholders:
From net investment income -- (0.60) (0.66) (0.16)
From net realized gains -- (0.01) (0.20) --
---------- ---------- ---------- ----------
Total distributions -- (0.61) (0.86) (0.16)
---------- ---------- ---------- ----------
Net asset value, end of period $ 10.37 $ 10.11 $ 10.15 $ 9.85
========== ========== ========== ==========
Total Return@ 2.57% 5.57% 11.77% 0.13%
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 172,064 $ 145,182 $ 122,904 $ 106,846
Net expenses to average daily net assets# 0.5309%* 0.5190% 0.5190% 0.5190%*
Net investment income to average daily net assets 6.39%* 6.00% 6.32% 6.37%*
Portfolio turnover rate 9% 61% 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: 0.5546%* 0.5545% 0.5524% 0.5654%*
</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.
The accompanying notes are an integral part of the financial statements. 19
<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 did the Fund perform over the past six months ?
The Fund has turned in a very solid performance for the first half of 1997,
outpacing its benchmark, the Lehman Government/Corporate index and many of its
peers. We're also pleased to have seen a substantial increase in assets under
management during the first six months of the year.
What was the most significant event in your market during that time ?
Although the market experienced a mild correction as a result of the Federal
Reserve's March interest rate increase, interest rates have remained within a
very tight band. In this environment, where overall price volatility has
decreased, we've performed well by investing in securities that can provide a
yield advantage over Treasuries.
What investment decisions were most successful over the period?
We were very well positioned for the first half of the year, and outperformed
our index and our peers for several reasons. Again, our primary advantage came
from owning securities that offered a generous yield spread over Treasuries. In
a tight trading range market, you can not expect much of a portfolio's total
return to come from price appreciation. That makes any extra income you can
garner a real benefit.
During the first half of 1997, mortgage-backed securities, approximately 20.2
percent of the portfolio, performed very well for us for just that reason.
Mortgage-backed securities have higher yields and also tend to outperform other
fixed income products when interest rates are relatively unchanging. This
characteristic made them an excellent asset class to own during the full period.
Another asset class with spread advantages over Treasuries was corporate bonds.
By June 30, our allocation to corporate bonds was increased from 33.0 percent of
the portfolio at the beginning of the year to 42.1 percent. Due to the strength
of both the economy and the stock market as well as the financial health of
corporate America, we felt confident enough to move some of our assets into the
lower quality areas of the investment grade corporate bond market. Our increased
exposure to corporate bonds in general coupled with a thoroughly researched move
toward higher-yielding bonds provided a significant boost to performance.
Are you making any changes to the portfolio at this time?
We're very comfortable with our sector allocations as they are now, and do not
plan on making any significant changes in the near future. The Fund's assets
have grown by 17 percent so far this year, and as money has come in, we've been
investing it according to our current strategy. We believe the portfolio's
existing positioning, with a focus on the areas of the market that offer
advantageous yields, will continue to benefit us as the year proceeds. In
addition to a consistent sector allocation, we plan to keep our duration --
which represents the portfolio's sensitivity to changes in interest rates --
close to that of the Lehman Brother's Government/Corporate Bond Index.
What is your outlook for the coming months?
In our opinion, the normal trade-off between strong economic growth or low
inflation is not happening. Though the domestic economy is in the seventh year
of its current expansion, there are many reasons to believe its strength will
continue. Inflation is at a 34-year low, consumer confidence has reached a
28-year high, the budget deficit is at a 16-year low, and in the three meetings
of the Federal Reserve's Open Market Committee during the first half of the
year, rates were only increased once. We believe these factors suggest a
continued favorable environment for a Fund like ours, which focuses on the
generation of return from income.
20
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Core Bond
Fund Class 1-4 and the Lehman Brothers
Government Corporate Bond Index
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund
Total Return Year to Date One Year Average Annual
1/1/97-6/30/97 7/1/96-6/30/97 10/3/94-6/30/97
<S> <C> <C> <C>
Class 1 2.29% 6.69% 7.65%
Class 2 2.66% 7.37% 8.24%
Class 3 2.85% 7.73% 8.61%
Class 4 2.87% 7.96% 8.87%
- --------------------------------------------------------------------------------
Lehman Brothers 2.74% 7.75% 8.93%
Government/Corporate
Bond Index
</TABLE>
Past performance is not predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund, while the Lehman Brothers Government/Corporate Bond Index is
unmanaged and does not incur expenses.
[LINE GRAPH APPEARS HERE]
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
<TABLE>
<CAPTION>
Class 1 Class 2 Class 3 Class 4 Lehman Bros. Gov't/Corp.
<S> <C> <C> <C> <C> <C>
10/3/94 10,000 10,000 10,000 10,000 10,000
12/94 10,000 10,008 10,009 10,020 10,037
6/95 11,121 11,170 11,192 11,212 11,220
12/95 11,781 11,860 11,898 11,940 11,968
6/96 11,475 11,575 11,645 11,695 11,743
12/96 11,970 12,105 12,197 12,274 12,315
6/97 12,243 12,427 12,545 12,626 12,653
</TABLE>
[PIE CHART APPEARS HERE]
Quality Structure (6/30/97)
MassMutual Core Bond Fund
<TABLE>
<S> <C>
Below Baa/BBB .8%
Baa/BBB 22.3%
U.S. Governments Cash Equivalents
Aaa/AAA 58.0%
Aa/AA 3.4%
A/A 15.5%
</TABLE>
[PIE CHART APPEARS HERE]
Duration Diversification (6/30/97)
MassMutual Core Bond Fund
Average Duration = 5.0 years
<TABLE>
<S> <C>
greater than 10 years 16.1%
7-10 years 5.1%
5-7 years 28.3%
3-5 years 19.2%
1-3 years 24.7%
less than 1 year 6.6%
</TABLE>
21
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1997
<TABLE>
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C>
BONDS & NOTES - 95.2%
ASSET BACKED SECURITIES -- 5.9%
Capita Equipment
Receivables Trust
1996-1, Class A4
6.280% 6/15/2000 $3,000,000 $ 2,997,180
Chase Manhattan Auto
Grantor Trust 1996-B,
Class A
6.610% 9/15/2002 3,763,036 3,777,147
Daimler-Benz Auto
Grantor Trust 1995-A,
Class A
5.850% 5/15/2002 1,802,634 1,800,381
Ford Credit 1994-B
Grantor Trust
7.300% 10/15/1999 373,641 376,791
Ford Credit Auto
Owner Trust 1996-B
Class A-4
6.300% 1/15/2001 5,000,000 4,990,600
Keystone Auto
Grantor Trust 1996-B,
Class A 144A
6.150% 4/15/2003 2,220,084 2,216,776
Metlife Capital
Equipment Loan Trust
Series 1997-A, Class A
6.850% 5/20/2008 1,500,000 1,492,605
Nissan Auto
Receivables 1994-A
Grantor Trust, Class A
6.450% 9/15/1999 800,586 801,587
Railcar Trust No.
1992-1
7.750% 6/01/2004 1,332,468 1,381,596
World Omni 1995-A
Automobile Lease
Securitization Trust,
Class A
6.050% 11/25/2001 2,258,513 2,259,913
World Omni 1996-A
Automobile Lease
Securitization Trust,
Class A1
6.300% 6/25/2002 $2,571,622 $ 2,578,051
--------------
TOTAL ASSET BACKED
SECURITIES 24,672,627
--------------
(Cost $24,704,112)
CORPORATE DEBT -- 42.1%
Airgas, Inc.
7.140% 3/08/2004 4,000,000 4,012,744
AirTouch
Communications, Inc.
7.500% 7/15/2006 3,000,000 3,063,600
America West Airlines
1996-1, Class A
6.850% 7/02/2009 4,000,000 3,895,000
American Airlines
1994-A Pass-Through
Trusts, Class A4 ++
9.780% 11/26/2011 2,000,000 2,275,000
AMR Corporation ++
9.000% 8/01/2012 2,000,000 2,240,280
Analog Devices, Inc. ++
6.625% 3/01/2000 1,500,000 1,491,465
Associates Corporation
of North America
6.750% 8/01/2001 2,000,000 2,002,480
Associates Corporation
of North America ++
7.875% 9/30/2001 1,500,000 1,563,300
Barrick Gold
Corporation
7.500% 5/01/2007 4,000,000 4,092,280
Bell Atlantic Financial
Services, Inc.
6.610% 2/04/2000 1,750,000 1,754,130
BHP Finance (USA)
Limited
6.420% 3/01/2026 3,500,000 3,429,580
Capital Cities/ABC,
Inc.
8.875% 12/15/2000 875,000 931,184
Carlisle Companies
Incorporated
7.250% 1/15/2007 $2,500,000 $2,495,275
Champion International
Corporation
6.400% 2/15/2026 2,500,000 2,379,350
The Charles Schwab
Corporation
6.250% 1/23/2003 2,500,000 2,406,250
Chrysler Corporation
10.400% 8/01/1999 1,500,000 1,504,935
CITGO Petroleum
Corporation
7.875% 5/15/2006 1,000,000 1,033,200
The Columbia Gas
System, Inc.
6.610% 11/28/2002 3,000,000 2,966,100
Comcast Cable
Communications, Inc.
144A
8.375% 5/01/2007 2,500,000 2,644,675
Commercial Credit
Company ++
7.750% 3/01/2005 3,000,000 3,117,120
Continental Airlines,
Inc., Series 1996-2B
8.560% 1/02/2016 1,701,186 1,835,155
Continental Airlines,
Inc., Series 1996-B
7.820% 4/15/2015 1,960,784 2,022,000
Corning Glass Works ++
8.875% 3/15/2016 1,000,000 1,113,940
Crown Cork & Seal
Company Inc.
6.750% 12/15/2003 3,550,000 3,498,419
CSX Corporation 144A
7.250% 5/01/2027 4,000,000 4,081,040
English China Clays
Delaware Inc. ++
7.375% 10/01/2002 1,000,000 1,017,100
Equifax Inc.
6.500% 6/15/2003 1,000,000 976,130
</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>
ERAC USA Finance
Company 144A
6.950% 1/15/2006 $1,500,000 $ 1,467,345
FBG Finance Limited
144A
7.875% 6/01/2016 3,000,000 3,012,090
First Brands
Corporation
7.250% 3/01/2007 2,000,000 1,996,960
Fletcher Challenge Ltd.
7.750% 6/20/2006 2,000,000 2,058,840
Foodbrands America,
Inc.
10.750% 5/15/2006 3,000,000 3,516,960
Foster Wheeler
Corporation
6.750% 11/15/2005 2,000,000 1,937,060
General American
Transportation
Corporation
6.750% 3/01/2006 3,000,000 2,903,160
General Electric
Capital Corporation
8.750% 5/21/2007 1,500,000 1,689,060
General Mills, Inc.
8.900% 6/15/2006 2,250,000 2,506,613
General Motors
Acceptance
Corporation
8.625% 6/15/1999 4,175,000 4,343,127
General Telephone
Company of Florida
7.500% 8/01/2002 1,000,000 1,014,420
The Goldman Sachs
Group, L.P. 144A
6.200% 2/15/2001 2,500,000 2,460,100
Harrahs Operating Inc.
8.750% 3/15/2000 1,100,000 1,122,000
Hercules Incorporated ++
6.625% 6/01/2003 1,000,000 985,850
Hilton Hotels
Corporation
7.375% 6/01/2002 1,750,000 1,762,548
IMCERA Group Inc. ++
6.000% 10/15/2003 1,000,000 953,810
Leucadia National
Corporation
7.750% 8/15/2013 2,500,000 2,436,950
Lockheed Martin
Corporation
7.700% 6/15/2008 3,000,000 3,129,120
MAPCO Inc.
7.250% 3/01/2009 3,250,000 3,252,990
McDonnell Douglas
Corporation ++
9.250% 4/01/2002 1,500,000 1,649,310
MFS Communications
Company, Inc.
(Step Up)
0.000% 1/15/2004 1,750,000 1,628,900
Millipore Corporation
7.500% 4/01/2007 3,750,000 3,799,350
Mobil Corporation
8.625% 8/15/2021 4,000,000 4,605,360
Newmont Mining
Corporation ++
8.625% 4/01/2002 2,000,000 2,130,760
News America
Holdings Incorporated
9.250% 2/01/2013 3,000,000 3,344,910
Norfolk Southern
Corporation
7.050% 5/01/2037 5,000,000 5,074,700
North Finance
(Bermuda) Limited
144A
7.000% 9/15/2005 2,000,000 1,970,000
Orchard Supply
Hardware Stores
Corporation
9.375% 2/15/2002 3,871,000 4,057,543
Penske Truck Leasing
Co., L.P.
7.750% 5/15/1999 1,500,000 1,537,080
Petroleum Geo-
Services ASA
7.500% 3/31/2007 750,000 755,693
Ralston Purina
Company
7.750% 10/01/2015 2,000,000 2,027,600
Rite Aid Corporation
6.700% 12/15/2001 2,000,000 1,984,820
Rolls-Royce Capital
Inc.
7.125% 7/29/2003 2,000,000 2,008,060
Scholastic Corporation
7.000% 12/15/2003 4,000,000 3,968,840
Texaco Inc.
8.500% 2/15/2003 2,500,000 2,696,700
Thomas & Betts
Corporation ++
8.250% 1/15/2004 2,500,000 2,640,825
Time Warner Inc.
7.750% 6/15/2005 3,000,000 3,048,750
Time Warner Inc.
Pass-Thru Asset
Trust 1997-1 144A
6.100% 12/30/2001 4,000,000 3,831,520
United Air Lines, Inc.
10.110% 2/19/2006 924,283 1,026,056
US Air, Inc., Class B
7.500% 10/15/2009 1,443,239 1,452,259
The US West Capital
Funding, Inc.
6.850% 1/15/2002 3,750,000 3,745,988
Valassis
Communications, Inc.
9.550% 12/01/2003 2,000,000 2,130,340
Westinghouse Electric
Corporation
8.375% 6/15/2002 1,000,000 1,032,480
WorldCom, Inc.
7.750% 4/01/2007 2,000,000 2,045,360
W.R. Grace & Co.
8.000% 8/15/2004 5,000,000 5,233,900
--------------
TOTAL CORPORATE DEBT 175,817,839
--------------
(Cost $172,717,962)
NON - U.S. GOVERNMENT
AGENCY OBLIGATIONS -- 1.0%
Collateralized Mortgage Obligations
Prudential Home
Mortgage Securities
1993-26 Class A6
6.750% 7/25/2008 4,000,000 3,975,000
--------------
(Cost $3,955,000)
U.S. GOVERNMENT
AGENCY OBLIGATIONS -- 19.2%
Federal Home Loan Mortgage Corporation
(FHLMC) -- 3.8%
Collateralized Mortgage Obligations -- 3.7%
FHLMC Series 1080
Class D
7.000% 7/15/2020 2,352,997 2,376,527
FHLMC Series 1322
Class G
7.500% 2/15/2007 2,000,000 2,040,620
FHLMC Series 1460
Class H
7.000% 5/15/2007 2,000,000 2,007,500
FHLMC Series 1490
Class PJ
6.000% 5/15/2007 600,000 585,936
FHLMC Series 1612
Class PD
5.750% 5/15/2006 4,976,042 4,901,401
FHLMC Series 1625
Class EA
5.750% 3/15/2007 3,500,000 3,444,210
--------------
15,356,194
--------------
Pass-Through Securities -- 0.1%
FHLMC
9.000% 3/01/2017 339,937 361,727
--------------
15,717,921
--------------
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements. 23
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
Federal National Mortgage Association
(FNMA) -- 4.5%
Collateralized Mortgage Obligations -- 4.4%
FNMA Series 1989-20
Class A
6.750% 4/25/2018 $4,203,676 $ 4,019,765
FNMA Series 1993-
134 Class GA
6.500% 2/25/2007 5,000,000 4,954,650
FNMA Series 1993-
175 Class PL
5.000% 10/25/2002 468,248 466,052
FNMA Series 1993-
191 Class PD
5.400% 3/25/2004 1,500,000 1,488,750
FNMA Series 1993-
221 Class D
6.000% 12/25/2008 2,487,500 2,378,672
FNMA Series 1996-54
Class C
6.000% 9/25/2008 5,000,000 4,793,750
--------------
18,101,639
--------------
Pass-Through Securities -- 0.1%
FNMA
8.000% 5/01/2013 462,130 470,346
--------------
18,571,985
--------------
Government National Mortgage Association
(GNMA) -- 9.5%
Collateralized Mortgage Obligations -- 0.4%
JHM Acceptance
Corporation Series E
Class 5
8.960% 4/01/2019 1,603,881 1,676,553
--------------
Pass-Through Securities -- 9.1%
GNMA
6.000% 1/20/2027 -
5/20/2027 11,973,792 12,046,389
GNMA
6.875% 12/20/2025 5,112,361 5,237,000
GNMA
7.000% 7/20/2025 -
9/20/2025 4,942,952 5,077,456
GNMA
7.500% 1/15/2017 -
6/15/2017 6,828,298 6,922,118
GNMA
8.000% 4/15/2001 -
3/15/2008 7,917,527 8,190,677
GNMA
9.000% 12/15/2004 -
10/15/2009 465,099 496,400
--------------
37,970,040
--------------
39,646,593
--------------
U.S. Government Guaranteed Notes -- 1.4%
1994-A Baxter
Springs, KS
5.930% 8/01/1999 700,000 695,625
1994-A Erie, PA
5.930% 8/01/1999 1,590,000 1,580,063
1994-A Los Angeles
County, CA
5.930% 8/01/1999 190,000 188,813
1994-A Montgomery
County, PA
5.930% 8/01/1999 150,000 149,063
1994-A Pohatcong
Township, NJ
5.930% 8/01/1999 255,000 253,406
1994-A Rochester, NY
5.930% 8/01/1999 135,000 134,156
1994-A Sacramento, CA
5.930% 8/01/1999 60,000 59,625
1994-A Santa Ana, CA
5.930% 8/01/1999 920,000 914,250
U.S. Dept. of Housing
and Urban
Development, Series
1996-A
6.670% 8/01/2001 2,000,000 2,010,000
--------------
TOTAL U.S. Government
Guaranteed Notes 5,985,001
--------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 79,921,500
--------------
(Cost $78,353,097)
U.S. TREASURY OBLIGATIONS -- 27.0%
U.S. Treasury Bonds -- 14.7%
U.S. Treasury Bond
7.250% 5/15/2016 27,550,000 28,729,416
U.S. Treasury Bond
8.875% 8/15/2017 26,750,000 32,580,698
--------------
61,310,114
--------------
U.S. Treasury Notes -- 7.9%
U.S. Treasury Note
6.375% 5/15/1999 14,500,000 14,572,500
U.S. Treasury Note
7.250% 8/15/2004 17,500,000 18,243,750
--------------
32,816,250
--------------
U.S. Treasury Strips -- 4.4%
U.S. Treasury Strip -- Principal Only
0.000% 2/15/1999 19,500,000 17,710,485
U.S. Treasury Strip -- Principal Only
0.000% 2/15/2015 2,750,000 816,530
--------------
18,527,015
--------------
TOTAL U.S. TREASURY
OBLIGATIONS 112,653,379
--------------
(Cost $113,665,970)
TOTAL BONDS & NOTES 397,040,345
--------------
(Cost $393,396,141)
SHORT-TERM INVESTMENTS -- 1.7%
Commercial Paper
ConAgra, Inc.
5.800% 7/02/1997 337,000 336,946
Maytag Corporation
6.450% 7/01/1997 2,690,000 2,690,000
Service Corporation
International
5.900% 7/03/1997 4,000,000 3,998,689
--------------
TOTAL SHORT-TERM
INVESTMENTS 7,025,635
--------------
(At Amortized Cost)
TOTAL INVESTMENTS -- 96.9% 404,065,980
(Cost $400,421,776)+
Other Assets/
(Liabilities) - 3.1% 12,996,873
--------------
NET ASSETS -- 100.0% $417,062,853
==============
</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).
24 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, 1997
(Unaudited)
-----------------
<S> <C>
Statement of Assets and Liabilities
Assets:
Investments, at value (cost $393,396,141) (Note 2).......... $ 397,040,345
Short-term investments, at amortized cost (Note 2).......... 7,025,635
-----------------
Total Investments......................................... 404,065,980
Cash........................................................ 1,302
Receivables from:
Investments sold.......................................... 1,009,917
Fund shares sold.......................................... 6,398,717
Interest.................................................. 6,039,483
-----------------
Total assets........................................... 417,515,399
-----------------
Liabilities:
Payables for:
Investments purchased..................................... 135,859
Settlement of investments purchased on a
forward commitment basis (Note 2)...................... 23,599
Fund shares redeemed...................................... 92,829
Directors' fees and expenses (Note 3)..................... 5,317
Affiliates (Note 3):
Investment management fees............................. 151,927
Administration fees.................................... 28,550
Service and distribution fees.......................... 243
Accrued expenses and other liabilities...................... 14,222
-----------------
Total liabilities...................................... 452,546
-----------------
Net assets.................................................. $ 417,062,853
=================
Net assets consist of:
Paid-in capital............................................. $ 401,263,451
Undistributed net investment income......................... 14,267,081
Accumulated net realized loss on investments................ (2,088,284)
Net unrealized appreciation on investments
and forward commitments................................ 3,620,605
-----------------
$ 417,062,853
=================
Net assets:
Class 1..................................................... $ 123,665
=================
Class 2..................................................... $ 125,495
=================
Class 3..................................................... $ 126,549
=================
Class 4..................................................... $ 416,687,144
=================
Shares outstanding:
Class 1..................................................... 11,512
=================
Class 2..................................................... 11,631
=================
Class 3..................................................... 11,699
=================
Class 4..................................................... 38,753,822
=================
Net asset value, offering price and
redemption price per share:
Class 1..................................................... $ 10.74
=================
Class 2..................................................... $ 10.79
=================
Class 3..................................................... $ 10.82
=================
Class 4..................................................... $ 10.75
=================
</TABLE>
The accompanying notes are an integral part of the financial statements. 25
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended
June 30, 1997
(Unaudited)
-----------------
<S> <C>
Statement of Operations
Investment income:
Interest..................................................... $ 13,415,692
-----------------
Expenses (Note 1):
Investment management fees (Note 3).......................... 848,056
Custody fees................................................. 20,260
Audit and legal fees......................................... 5,012
Directors' fees (Note 3)..................................... 10,526
Fees waived by the investment manager (Note 3)............... (49,361)
-----------------
834,493
Administration fees (Note 3):
Class 1.................................................... 342
Class 2.................................................... 316
Class 3.................................................... 197
Class 4.................................................... 158,527
Distribution and service fees (Note 3):
Class 1.................................................... 391
Class 2.................................................... 91
-----------------
Net expenses............................................. 994,357
-----------------
Net investment income.................................... 12,421,335
-----------------
Realized and unrealized gain (loss):
Net realized loss on investment transactions and forward
commitments................................................ (202,403)
Net change in unrealized appreciation (depreciation) on
investments and forward commitments........................ (1,087,718)
-----------------
Net realized and unrealized loss......................... (1,290,121)
-----------------
Net increase in net assets resulting from operations......... $ 11,131,214
=================
</TABLE>
26 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended
June 30, 1997 Year ended
(Unaudited) December 31, 1996
--------------- -----------------
<S> <C> <C>
Statements of Changes in Net Assets
Increase (Decrease) in Net Assets:
Operations:
Net investment income........................................... $ 12,421,335 $ 19,120,753
Net realized loss on investment transactions
and forward commitments........................................ (202,403) (1,886,093)
Net change in unrealized appreciation (depreciation) on
investments and forward commitments............................ (1,087,718) (6,456,882)
--------------- ----------------
Net increase in net assets resulting from operations........... 11,131,214 10,777,778
--------------- ----------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1......................................................... -- (4,416)
Class 2......................................................... -- (5,227)
Class 3......................................................... -- (5,674)
Class 4......................................................... -- (17,374,307)
--------------- ----------------
Total distributions from net investment income................. -- (17,389,624)
--------------- ----------------
From net realized gains:
Class 1......................................................... -- (740)
Class 2......................................................... -- (714)
Class 3......................................................... -- (715)
Class 4......................................................... -- (1,942,817)
--------------- ----------------
Total distributions from net realized gains.................... -- (1,944,986)
--------------- ----------------
Net fund share transactions (Note 5):
Class 1......................................................... -- (45,858)
Class 2......................................................... -- 5,941
Class 3......................................................... -- 6,389
Class 4......................................................... 48,866,462 111,704,711
--------------- ----------------
Increase in net assets from net fund share transactions........ 48,866,462 111,671,183
--------------- ----------------
Total increase in net assets.................................... 59,997,676 103,114,351
Net assets:
Beginning of period............................................. 357,065,177 253,950,826
--------------- ----------------
End of period (including undistributed net investment income
of $14,267,081 and $1,845,746 respectively).................... $ 417,062,853 $ 357,065,177
=============== ================
</TABLE>
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 1
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.50 $ 10.79 $ 9.90 $ 10.00
------------- ------------- ------------- -------------
Income (loss) from investment operations:
Net investment income 0.28*** 0.53*** 0.50 0.10
Net realized and unrealized gain (loss) on investments (0.04) (0.36) 1.26 (0.10)
------------- ------------- ------------- -------------
Total income (loss) from investment operations 0.24 0.17 1.76 --
------------- ------------- ------------- -------------
Less distributions to shareholders:
From net investment income -- (0.40) (0.54) (0.10)
From net realized gains -- (0.06) (0.33) --
------------- ------------- ------------- -------------
Total distributions -- (0.46) (0.87) (0.10)
------------- ------------- ------------- -------------
Net asset value, end of period $ 10.74 $ 10.50 $ 10.79 $ 9.90
============= ============= ============= =============
Total Return 2.29% 1.60% 17.81% 0.00%
Ratios / Supplemental Data:
Net assets, end of period (000's) $124 $121 $171 $101
Net expenses to average daily net assets# 1.66%* 1.65% 1.65% 1.65%*
Net investment income to average daily net assets 5.45%* 5.10% 5.39% 5.91%*
Portfolio turnover rate 22% 54% 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% 1.69% 1.71%*
<CAPTION>
Class 2
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
------------- ------------- ------------- -------------
Net asset value, beginning of period $ 10.51 $ 10.82 $ 9.90 $ 10.00
------------- ------------- ------------- -------------
Income (loss) from investment operations:
Net investment income 0.31*** 0.60*** 0.64 0.11
Net realized and unrealized gain (loss) on investments (0.03) (0.38) 1.19 (0.10)
------------- ------------- ------------- -------------
Total income (loss) from investment operations 0.28 0.22 1.83 0.01
------------- ------------- ------------- -------------
Less distributions to shareholders:
From net investment income -- (0.47) (0.58) (0.11)
From net realized -- (0.06) (0.33) --
------------- ------------- ------------- -------------
Total distributions -- (0.53) (0.91) (0.11)
------------- ------------- ------------- -------------
Net asset value, end of period $ 10.79 $ 10.51 $ 10.82 $ 9.90
============= ============= ============= =============
Total Return 2.66% 2.07% 18.51% 0.08%
Ratios / Supplemental Data:
Net assets, end of period (000's) $125 $122 $120 $101
Net expenses to average daily net assets# $1.11%* 1.10% 1.10% 1.10%*
Net investment income to average daily net assets 6.00%* 5.67% 5.97% 6.46%*
Portfolio turnover rate 22% 54% 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% 1.14% 1.16%*
</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.
28 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 3
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.52 $ 10.82 $ 9.90 $ 10.00
------------ ------------ ------------ ------------
Income (loss) from investment operations:
Net investment income 0.33*** 0.64*** 0.68 0.11
Net realized and unrealized gain (loss) on investments (0.03) (0.37) 1.19 (0.10)
------------ ------------ ------------ ------------
Total income (loss) from investment operations 0.30 0.27 1.87 0.01
------------ ------------ ------------ ------------
Less distributions to shareholders:
From net investment income -- (0.51) (0.62) (0.11)
From net realized gains -- (0.06) (0.33) --
------------ ------------ ------------ ------------
Total distributions -- (0.57) (0.95) (0.11)
------------ ------------ ------------ ------------
Net asset value, end of period $ 10.82 $ 10.52 $ 10.82 $ 9.90
============ ============ ============ ============
Total Return 2.85% 2.52% 18.87% 0.09%
Ratios / Supplemental Data:
Net assets, end of period (000's) $127 $123 $120 $101
Net expenses to average daily net assets# 0.76%* 0.75% 0.75% 0.75%*
Net investment income to average daily net assets 6.35%* 6.01% 6.32% 6.83%*
Portfolio turnover rate 22% 54% 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% 0.79% 0.81%*
</TABLE>
<TABLE>
<CAPTION>
Class 4
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.45 $ 10.75 $ 9.84 $ 10.00
------------ ------------ ------------ ------------
Income (loss) from investment operations:
Net investment income 0.34*** 0.67*** 0.72*** 0.18
Net realized and unrealized gain (loss) on investments (0.04) (0.37) 1.17 (0.16)
------------ ------------ ------------ ------------
Total income (loss) from investment operations 0.30 0.30 1.89 0.02
------------ ------------ ------------ ------------
Less distributions to shareholders:
From net investment income -- (0.54) (0.65) (0.18)
From net realized gains -- (0.06) (0.33) --
------------ ------------ ------------ ------------
Total distributions -- (0.60) (0.98) (0.18)
------------ ------------ ------------ ------------
Net asset value, end of period $ 10.75 $ 10.45 $ 10.75 $ 9.84
============ ============ ============ ============
Total Return@ 2.87% 2.80% 19.15% 0.20%
Ratios / Supplemental Data:
Net assets, end of period (000's) $416,687 $356,699 $253,540 $194,150
Net expenses to average daily net assets# 0.5270%* 0.5130% 0.5130% 0.5130%*
Net investment income to average daily net assets 6.59%* 6.26% 6.56% 6.86%*
Portfolio turnover rate 22% 54% 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%* 0.5550% 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.
The accompanying notes are an integral part of the financial statements. 29
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment objective and policies for the MassMutual Balanced Fund?
The objective and policies of the Fund are to:
. achieve high total rate of return over the long term 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:
Prime Sector no more than 35% of net assets
Core Bond Sector no more than 35% of net assets
Value Equity Sector no more than 65% of net assets
How did the Fund perform over the past six months?
The Fund has done very well, both in absolute terms and relative to the average
for balanced funds. Our combination of the benefits of strong stock selection
during a very bullish market and a timely bond strategy allowed us to come close
to matching in six months our performance for the entire year of 1996.
What types of stocks worked well for you during the period?
This has been a market in which the largest stocks have performed best. Since
the market has basically doubled in the past two and a half years, and the
economy has been growing far longer than expected, investors have been willing
to pay high prices to own the largest companies. They're attracted by these
firms' reliable, growing earnings and hope to be protected from any weakness in
future earnings should the economy change.
We take a relatively conservative approach to the market, emphasizing high
quality companies selling at relatively low prices compared to their earnings.
This generally keeps us from chasing the large growth companies that have pushed
the major indices to new highs so far this year. Even so, two such companies
were both our two largest positions and our top two performers during the
period. We've performed extremely well with our holdings in Bristol-Myers and GE
- -- each a high growth company with excellent earnings and a beneficiary of the
current market psychology.
We also added some strong stocks during the temporary decline that followed the
Federal Reserve's interest rate increase at the end of March. One such stock,
Burlington Northern, a Fort Worth-based railroad system, purchased the Santa Fe
system and received favorable investor response. However, expected cost
reductions came more slowly than expected, and weather problems hurt normally
stable revenues. We saw Burlington Northern as a major player in coal and grain
haulage, and expected the stock was poised for a rebound. This purchase has
worked out very well for us so far this year.
How was your bond portfolio positioned?
Our bond portfolio was very well-positioned for the trading range market that
defined the first half of the year. Our strategy over the period was to look for
securities that offered a generous yield spread over Treasuries. Mortgage-backed
securities, approximately 19 percent of the bond portfolio, performed very well
for us. They offer higher yields than Treasuries and tend to outperform other
fixed income products when interest rates are increasing. This characteristic
made them an excellent asset class to own during the full period, and especially
after the Federal Reserve's tightening at the end of the first quarter.
Another asset class with a spread advantage over Treasuries was corporate bonds.
By June 30, we'd increased our allocation to corporate bonds from 35.4 percent
of the bond portfolio at the beginning of the year to 39.8 percent. Beyond just
owning corporate bonds, due to the strength of both the economy and the stock
market as well as the financial health of corporate America, we felt confident
enough to move some of our assets into the higher-yielding areas of investment
grade corporate bonds. Our increased exposure to corporate bonds in general
coupled with a thoroughly-researched move toward higher-yielding bonds provided
a significant boost to performance.
Are you making any changes to either your portfolio holdings or allocations at
this time?
Nothing significant other than keeping vigilant for any new opportunities in
both stocks and bonds. In terms of our asset allocation, while we review it
weekly, we see nothing on the horizon to suggest the need to alter it at this
time. Our current allocation, 53.4 percent stocks, 16.5 percent bonds and 30.1
percent cash and short-term securities is slightly more aggressive than what
we'd originally set as a target. This is because we've allowed our stock
position to grow on the strength of the market. A higher allocation to stocks
has helped performance so far this year, and we're still quite comfortable with
it.
What is your outlook for the next several months?
Because the economy continues to be strong, with none of the classic signs of
either a slowdown or an increase in inflation on the horizon, our outlook
remains very favorable for both the stock and bond markets. In this environment,
and especially with stocks at their current record highs, we believe a
relatively conservative balanced fund like this one makes sense as a way to both
capture gains and limit risk.
30
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Balanced Fund Classes 1-4 and the Lipper
Balanced Fund Index
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund
Total Return Year to Date One Year Average Annual
1/1/97 - 6/30/97 7/1/96 - 6/30/97 10/3/94 - 6/30/97
<S> <C> <C> <C>
Class 1 9.47% 16.86% 14.95%
Class 2 9.78% 17.52% 15.56%
Class 3 10.01% 17.96% 16.00%
Class 4 10.21% 18.29% 16.27%
- --------------------------------------------------------------------------------
Lipper Balanced 11.19% 20.47% 17.34%
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]
<TABLE>
<CAPTION>
Lipper
Class 1 Class 2 Class 3 Class 4 Balanced
<S> <C> <C> <C> <C> <C>
10/3/94 10,000 10,000 10,000 10,000 10,000
12/94 10,000 10,017 10,028 10,029 9,880
6/95 11,086 11,124 11,158 11,179 11,203
12/95 11,992 12,070 12,132 12,164 12,306
6/96 12,544 12,656 12,741 12,788 12,860
12/96 13,391 13,548 13,662 13,725 13,390
6/97 14,659 14,873 15,028 15,126 15,522
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MassMutual Balanced Fund
Asset Allocation
on 6/30/97
[PIE CHART APPEARS HERE]
Common Stocks - 53%
Bonds - 17%
Short-term issues - 30%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MassMutual Balanced Fund
Largest Stock Holdings (6/30/97)
Bristol-Myers Squibb Company
General Electric Company
Marsh & McLennan Companies, Inc.
Goodyear Tire & Rubber Company
Xerox Corporation
SAFECO Corporation
Hewlett-Packard Company
AMP Incorporated
Bank of New York Company Incorporated
Amoco Corporation
- --------------------------------------------------------------------------------
31
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1997
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
EQUITIES -- 53.4%
Aerospace & Defense -- 1.6%
Boeing Company 54,000 $ 2,865,375
Raytheon Company 92,000 4,692,000
TRW Inc. 48,200 2,738,363
------------
10,295,738
------------
Agribusiness -- 0.6%
Pioneer Hi-Bred
International, Inc. 45,500 3,640,000
------------
Apparel, Textiles & Shoes -- 0.6%
VF Corporation 44,500 3,771,375
------------
Automotive & Parts -- 2.6%
Ford Motor Company 97,300 3,673,075
Genuine Parts
Company 154,500 5,233,688
Goodyear Tire &
Rubber Company 113,700 7,198,631
------------
16,105,394
------------
Banking, Savings & Loans -- 3.6%
The Bank of New
York Company,
Incorporated 150,000 6,525,000
Comerica, Incorporated 53,000 3,604,000
CoreStates Financial
Corp. 81,500 4,380,625
Norwest Corporation 57,000 3,206,250
Pacific Century
Financial Corporation 25,600 1,184,000
Wachovia Corp. 60,100 3,504,581
------------
22,404,456
------------
Beverages -- 1.0%
Brown-Forman
Corporation (Class B) 66,600 3,250,913
PepsiCo, Inc 84,000 3,155,250
------------
6,406,163
------------
Chemicals -- 2.5%
E. I. du Pont de
Nemours and Company 66,000 4,149,750
The Lubrizol
Corporation 68,300 2,864,331
Nalco Chemical
Company 81,500 3,147,938
Rohm & Haas
Company 60,000 5,403,750
------------
15,565,769
------------
Commercial Services -- 0.3%
Pinnacle West Capital
Corporation 70,500 $ 2,119,406
------------
Communications -- 0.2%
AT & T Corporation 27,000 946,688
------------
Computers & Office Equipment -- 4.0%
Hewlett-Packard
Company 122,000 6,832,000
International Business
Machines Corporation 70,000 6,313,125
Pitney Bowes, Inc. 84,000 5,838,000
Xerox Corporation 90,000 7,098,750
------------
26,081,875
------------
Containers -- 0.5%
Temple-Inland, Inc. 63,000 3,402,000
------------
Cosmetics & Personal Care -- 0.8%
Kimberly-Clark
Corporation 96,800 4,815,800
------------
Drugs -- 0.5%
Pharmacia & Upjohn,
Inc. 94,000 3,266,500
------------
Electric Utilities -- 0.8%
New England Electric
System 6,000 222,000
NIPSCO Industries,
Inc. 40,000 1,652,500
SCANA Corporation 130,500 3,238,031
------------
5,112,531
------------
Electrical Equipment & Electronics-- 3.9%
AMP, Incorporated 156,700 6,542,225
General Electric
Company 164,000 10,721,500
Honeywell Inc. 44,000 3,338,500
Hubbell, Incorporated
(Class B) 96,023 4,224,994
------------
24,827,219
------------
Energy -- 3.1%
Amoco Corporation 74,000 6,433,375
Kerr-McGee
Corporation 43,500 2,756,813
Mobil Corporation 70,000 4,891,250
Teco Energy, Inc. 95,700 2,446,331
Unocal Corporation 68,900 2,674,181
------------
19,201,950
------------
Financial Services -- 0.9%
American Express
Company 76,500 $ 5,699,250
------------
Foods -- 1.7%
Archer-Daniels-Midland
Company 12,400 291,400
ConAgra, Inc. 74,200 4,758,075
CPC International, Inc. 61,000 5,631,063
------------
10,680,538
------------
Forest Products & Paper -- 1.2%
Westvaco Corporation 101,500 3,190,906
Weyerhaeuser Company 84,600 4,399,200
------------
7,590,106
------------
Hardware & Tools -- 0.5%
The Stanley Works 77,000 3,080,000
------------
Healthcare -- 4.4%
Becton, Dickinson and
Company 102,000 5,163,750
Bristol-Myers Squibb
Company 178,000 14,418,000
Pfizer, Incorporated 22,500 2,688,750
Schering-Plough Corp. 119,600 5,725,850
------------
27,996,350
------------
Industrial Distribution -- 0.6%
W.W. Grainger, Inc. 48,000 3,753,000
------------
Industrial Transportation -- 1.5%
Burlington Northern
Santa Fe Corporation 51,900 4,664,513
Norfolk Southern
Corporation 48,000 4,836,000
------------
9,500,513
------------
Insurance -- 3.9%
Jefferson-Pilot
Corporation 52,250 3,650,969
Marsh & McLennan
Companies, Inc. 110,000 7,851,250
MBIA, Inc. 51,500 5,809,844
SAFECO Corporation 149,000 6,956,438
------------
24,268,501
------------
Machinery & Components -- 1.1%
Dover Corporation 62,000 3,813,000
Parker-Hannifin
Corporation 48,000 2,913,000
------------
6,726,000
------------
(Continued)
</TABLE>
32 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
Manufacturing -- 0.4%
Pall Corporation 99,600 $ 2,315,700
------------
Miscellaneous -- 1.0%
Harsco Corporation 69,000 2,794,500
Minnesota Mining &
Manufacturing
Company 34,200 3,488,400
------------
6,282,900
------------
Oil & Gas -- 1.2%
ENI SPA, Sponsored
ADR 31,900 1,814,313
Occidental Petroleum
Corporation 128,500 3,220,531
Union Pacific
Resources Group Inc. 108,300 2,693,963
------------
7,728,807
------------
Photography -- 0.6%
Eastman Kodak
Company 49,300 3,783,775
------------
Publishing & Printing -- 1.3%
The McGraw-Hill
Companies, Inc. 89,000 5,234,313
R.R. Donnelley & Sons
Company 75,500 2,765,188
------------
7,999,501
------------
Retail -- 1.4%
The May Department
Stores Company 98,500 4,654,125
Sears Roebuck and Co. 78,000 4,192,500
------------
8,846,625
------------
Retail-Grocery -- 1.5%
Albertson's, Inc. 169,100 6,172,150
American Stores
Company 61,900 3,056,313
------------
9,228,463
------------
Telecommunications -- 0.8%
GTE Corporation 116,000 5,089,500
------------
Telephone Utilities -- 1.4%
Ameritech Corporation 44,500 3,023,219
Frontier Corporation 159,500 3,180,031
Southern New England
Telecommunications
Corporation 63,200 2,456,900
------------
8,660,150
------------
Tobacco -- 1.4%
Fortune Brands, Inc. 88,500 3,302,156
Gallaher Group PLC,
ADR* 88,500 1,631,719
UST Inc. 136,800 3,796,200
------------
8,730,075
------------
TOTAL EQUITIES $335,922,618
------------
(Cost $214,936,985)
Principal
Amount Market Value
--------- ------------
BONDS & NOTES -- 16.5%
ASSET BACKED SECURITIES -- 1.2%
Capita Equipment
Receivables Trust
1996-1, Class A4
6.280% 6/15/2000 $1,000,000 $ 999,060
Chase Manhattan Auto
Grantor Trust 1996-B,
Class A
6.610% 9/15/2002 1,881,518 1,888,573
Daimler-Benz Auto
Grantor Trust 1995-A,
Class A
5.850% 5/15/2002 801,171 800,169
Ford Credit 1994-B
Grantor Trust
7.300% 10/15/1999 249,094 251,194
Ford Credit Auto
Owner Trust 1996-B,
Class A-4
6.300% 1/15/2001 1,000,000 998,120
Metlife Capital
Equipment Loan Trust
Series 1997-A, Class A
6.850% 5/20/2008 500,000 497,535
Nissan Auto
Receivables 1994-A
Grantor Trust, Class A
6.450% 9/15/1999 280,204 280,555
Railcar Trust No.
1992-1
7.750% 6/01/2004 380,705 394,742
World Omni 1996-A
Automobile Lease
Securitization Trust,
Class A1
6.300% 6/25/2002 1,455,635 1,459,274
------------
TOTAL ASSET BACKED
SECURITIES 7,569,222
------------
(Cost $7,572,210)
CORPORATE DEBT -- 6.6%
AirTouch
Communications, Inc.
7.500% 7/15/2006 1,000,000 1,021,200
America West Airlines
1996-1, Class A
6.850% 7/02/2009 1,000,000 973,750
American Airlines
1994-A Pass-Through
Trusts, Class A4 ++
9.780% 11/26/2011 1,000,000 1,137,500
AMR Corporation ++
9.000% 8/01/2012 500,000 560,070
Analog Devices, Inc.
6.625% 3/01/2000 500,000 497,155
Associates Corporation
of North America
6.750% 8/01/2001 1,000,000 1,001,240
Barrick Gold
Corporation
7.500% 5/01/2007 1,000,000 1,023,070
Bell Atlantic Financial
Services, Inc. ++
6.610% 2/04/2000 1,000,000 1,002,352
BHP Finance (USA)
Limited
6.420% 3/01/2026 1,000,000 979,880
Carlisle Companies
Incorporated
7.250% 1/15/2007 500,000 499,055
Champion International
Corporation
6.400% 2/15/2026 1,000,000 951,740
The Charles Schwab
Corporation
6.250% 1/23/2003 1,000,000 962,500
CITGO Petroleum
Corporation
7.875% 5/15/2006 250,000 258,300
Comcast Cable
Communications, Inc.
144A
8.375% 5/01/2007 750,000 793,403
Continental Airlines,
Inc., Series 1996-2B
8.560% 1/02/2016 486,053 524,330
Continental Airlines,
Inc., Series 1996-B
7.820% 4/15/2015 490,196 505,500
Crown Cork & Seal
Company Inc.
6.750% 12/15/2003 1,000,000 985,470
CSX Corporation 144A
7.250% 5/01/2027 1,200,000 1,224,312
Delta Air Lines, Inc.,
1992, Series C
8.540% 1/02/2007 419,455 446,170
(Continued)
</TABLE>
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>
English China Clays
Delaware Inc. ++
7.375% 10/01/2002 $ 500,000 $ 508,550
ERAC USA Finance
Company 144A
6.950% 1/15/2006 500,000 489,115
FBG Finance Limited
144A
7.875% 6/01/2016 1,000,000 1,004,030
Fletcher Challenge Ltd.
7.750% 6/20/2006 500,000 514,710
Foodbrands America, Inc.
10.750% 5/15/2006 1,000,000 1,172,320
General American
Transportation
Corporation
6.750% 3/01/2006 1,000,000 967,720
General Mills, Inc.
8.900% 6/15/2006 500,000 557,025
The Goldman Sachs
Group, L.P. 144A
6.200% 2/15/2001 1,000,000 984,040
GTE Corporation
9.100% 6/01/2003 500,000 553,055
Hilton Hotels
Corporation
7.375% 6/01/2002 500,000 503,585
Leucadia National
Corporation
7.750% 8/15/2013 1,000,000 974,780
Lockheed Martin
Corporation
7.700% 6/15/2008 1,000,000 1,043,040
MAPCO Inc.
7.250% 3/01/2009 1,000,000 1,000,920
McDonnell Douglas
Corporation ++
9.250% 4/01/2002 500,000 549,770
MFS Communications
Company, Inc. (Step Up)
0.000% 1/15/2004 500,000 465,400
Millipore Corporation
7.500% 4/01/2007 1,000,000 1,013,160
Mobil Corporation
8.625% 8/15/2021 1,000,000 1,151,340
Newmont Mining
Corporation ++
8.625% 4/01/2002 1,000,000 1,065,380
News America
Holdings Incorporated
9.250% 2/01/2013 1,000,000 1,114,970
Norfolk Southern
Corporation
7.050% 5/01/2037 1,350,000 1,370,169
North Finance
(Bermuda) Limited
144A
7.000% 9/15/2005 1,000,000 985,000
Petroleum Geo-
Services ASA
7.500% 3/31/2007 250,000 251,898
Rite Aid Corporation
6.700% 12/15/2001 500,000 496,205
Rolls-Royce Capital
Inc.
7.125% 7/29/2003 1,000,000 1,004,030
Scholastic Corporation
7.000% 12/15/2003 1,000,000 992,210
Thomas & Betts
Corporation
8.250% 1/15/2004 500,000 528,165
Time Warner Inc.
7.750% 6/15/2005 1,000,000 1,016,250
Time Warner Inc.
Pass-Thru Asset
Trust 1997-1 144A
6.100% 12/30/2001 750,000 718,410
US Air, Inc., Class B
7.500% 10/15/2009 481,080 484,086
The US West Capital
Funding, Inc.
6.850% 1/15/2002 1,000,000 998,930
WorldCom, Inc.
7.750% 4/01/2007 500,000 511,340
W.R. Grace & Co.
8.000% 8/15/2004 1,000,000 1,046,780
------------
TOTAL CORPORATE DEBT 41,383,380
------------
(Cost $40,328,848)
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 4.2%
Federal Home Loan Mortgage Corporation (FHLMC) -- 0.8%
Collateralized Mortgage Obligations -- 0.7%
FHLMC Series 1322
Class G
7.500% 2/15/2007 1,000,000 1,020,310
FHLMC Series 1625
Class D
5.250% 7/15/2004 3,100,000 3,074,797
FHLMC Series 1625
Class EA
5.750% 3/15/2007 1,000,000 984,060
------------
5,079,167
------------
Pass-Through Securities -- 0.1%
FHLMC
9.000% 3/01/2017 169,969 180,864
------------
5,260,031
------------
Federal National Mortgage Association
(FNMA) -- 0.9%
Collateralized Mortgage Obligations -- 0.8%
FNMA Series 1993-134
Class GA
6.500% 2/25/2007 1,000,000 990,930
FNMA Series 1993-191
Class PD
5.400% 3/25/2004 1,000,000 992,500
FNMA Series 1993-221
Class D
6.000% 12/25/2008 995,000 951,469
FNMA Series 1996-54
Class C
6.000% 9/25/2008 2,000,000 1,917,500
------------
4,852,399
------------
Pass-Through Securities -- 0.1%
FNMA
8.000% 5/01/2013 462,130 470,346
------------
5,322,745
------------
Government National Mortgage Association
(GNMA) -- 1.6%
Pass-Through Securities
GNMA
6.000% 5/20/2027 2,472,203 2,479,941
GNMA
6.875% 12/20/2025 426,030 436,417
GNMA
7.000% 7/20/2025 1,651,054 1,696,194
GNMA
7.500% 10/15/2006 -
6/15/2017 2,798,797 2,844,158
GNMA
8.000% 11/15/2004 -
7/15/2008 1,653,057 1,710,087
GNMA
9.000% 12/15/2008 -
5/15/2009 561,048 598,805
------------
9,765,602
------------
U.S. Government Guaranteed Notes -- 0.9%
1991-A Fairfax
County, VA
8.740% 8/01/2001 200,000 213,750
1991-A Jefferson
Park, CA
8.740% 8/01/2001 1,740,000 1,859,625
1991-A Monroe
County, NY
8.740% 8/01/2001 500,000 534,375
1991-A Rochester, NY
8.740% 8/01/2001 60,000 64,125
U.S. Dept. of Housing
and Urban
Development, Series
1995-A ++
8.240% 8/01/2002 3,000,000 3,215,760
------------
5,887,635
------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 26,236,013
------------
(Cost $25,577,145)
(Continued)
</TABLE>
34 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>
U.S. TREASURY OBLIGATIONS -- 4.5%
U.S. Treasury Bonds -- 2.4%
U.S. Treasury Bond
7.250% 5/15/2016 $ 7,750,000 $ 8,081,778
U.S. Treasury Bond
8.750% 5/15/2017 6,000,000 7,218,720
------------
15,300,498
------------
U.S. Treasury Notes -- 1.8%
U.S. Treasury Note
5.875% 1/31/1999 4,000,000 3,991,880
U.S. Treasury Note
7.250% 8/15/2004 7,125,000 7,427,813
------------
11,419,693
------------
U.S. Treasury Strip -- 0.3%
U.S. Treasury Strip -- Principal Only
0.000% 2/15/1999 2,250,000 2,043,518
------------
TOTAL U.S. TREASURY
OBLIGATIONS 28,763,709
------------
(Cost $28,715,544)
TOTAL BONDS & NOTES 103,952,324
------------
(Cost $102,193,747)
SHORT-TERM INVESTMENTS -- 30.0%
Commercial Paper
Boston Scientific
Corporation
5.800% 7/01/1997 4,745,000 4,745,000
Boston Scientific
Corporation
5.820% 8/06/1997 3,155,000 3,136,638
Boston Scientific
Corporation
5.870% 7/10/1997 1,895,000 1,892,219
Burlington Northern
Santa Fe Corporation
5.750% 8/04/1997 6,725,000 6,688,479
Carter Holt Harvey
Limited
5.800% 7/18/1997 2,730,000 2,722,523
Carter Holt Harvey
Limited
5.820% 7/08/1997 4,540,000 4,534,862
Comdisco, Inc.
5.770% 7/29/1997 2,400,000 2,389,229
Comdisco, Inc.
5.800% 8/18/1997 5,060,000 5,020,869
Comdisco, Inc.
5.810% 8/15/1997 3,555,000 3,529,182
Cox Enterprises, Inc.
5.800% 7/17/1997 5,560,000 5,545,668
Crown Cork & Seal
Company Inc.
5.840% 8/26/1997 4,070,000 4,033,026
CSX Corporation
5.760% 8/11/1997 6,185,000 6,144,426
CSX Corporation
5.810% 7/03/1997 5,465,000 5,463,236
Dana Credit
Corporation
5.790% 7/28/1997 2,270,000 2,259,777
Dominion Resources,
Inc.
5.780% 7/30/1997 4,670,000 4,648,256
Dominion Resources,
Inc.
5.820% 7/21/1997 3,585,000 3,572,829
Enron Corp.
5.780% 8/01/1997 6,275,000 6,243,768
Federal Signal Corp.
5.760% 7/02/1997 6,715,000 6,713,926
Harris Corporation
5.790% 8/13/1997 4,155,000 4,126,265
Illinois Power
Company
5.780% 7/24/1997 2,200,000 2,191,876
Illinois Power
Company
5.780% 7/31/1997 2,935,000 2,920,863
Illinois Power
Company
5.820% 8/05/1997 5,285,000 5,255,096
Lockheed Martin
Corporation
5.810% 8/25/1997 4,100,000 4,063,607
Lockheed Martin
Corporation
5.900% 7/10/1997 5,800,000 5,792,390
Mattel, Inc.
5.780% 7/25/1997 3,280,000 3,267,361
Mattel, Inc.
5.780% 8/22/1997 1,605,000 1,591,600
ORIX Credit Alliance, Inc.
5.820% 7/09/1997 2,155,000 2,152,213
ORIX Credit Alliance, Inc.
5.850% 7/15/1997 4,660,000 4,649,399
ORIX Credit Alliance, Inc.
5.880% 7/16/1997 6,000,000 5,985,300
Praxair, Inc.
5.760% 8/14/1997 4,945,000 4,910,187
Public Service
Company of Colorado
5.800% 8/19/1997 6,055,000 6,007,199
Public Service
Company of Colorado
5.840% 9/19/1997 3,980,000 3,929,144
Public Service
Electric and Gas
Company
5.780% 7/23/1997 2,750,000 2,740,286
Public Service
Electric and Gas
Company
5.820% 7/07/1997 3,460,000 3,456,644
Rite Aid Corporation
5.780% 7/22/1997 2,100,000 2,092,920
Rite Aid Corporation
5.800% 7/14/1997 3,295,000 3,288,099
Textron Financial
Corporation
5.800% 7/11/1997 6,700,000 6,689,205
Textron Financial
Corporation
5.820% 7/02/1997 2,465,000 2,464,602
Union Pacific
Corporation
5.850% 8/07/1997 4,675,000 4,646,892
Union Pacific
Corporation
5.850% 9/11/1997 5,400,000 5,337,900
Union Pacific
Corporation
5.850% 9/15/1997 4,535,000 4,479,950
UOP
5.830% 8/08/1997 5,090,000 5,058,677
Whirlpool Financial
Corporation
5.800% 8/12/1997 6,620,000 6,575,205
Whirlpool Financial
Corporation
5.800% 8/20/1997 5,375,000 5,331,701
------------
TOTAL SHORT-TERM
INVESTMENTS 188,288,494
------------
(Cost $188,285,661)
TOTAL INVESTMENTS -- 99.9% 628,163,436
(Cost $505,416,393)+
Other Assets/
(Liabilities) 0.1% 527,625
------------
NET ASSETS -- 100.0% $628,691,061
------------
</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. 144A: These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
*Non-income producing security
++ All or a portion of this security is segregated to cover forward purchase
commitments. (Note 2).
The accompanying notes are an integral part of the financial statements. 35
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
June 30, 1997
(Unaudited)
----------------
<S> <C>
Assets:
Investments, at value (cost $317,130,732) (Note 2)..................... $ 439,874,942
Short-term investments, at value (cost $188,285,661) (Note 2).......... 188,288,494
----------------
Total Investments.................................................... 628,163,436
Cash................................................................... 8,223
Receivables from:
Investments sold..................................................... 1,158,998
Fund shares sold..................................................... 830,703
Interest and dividends............................................... 2,214,668
----------------
Total assets...................................................... 632,376,028
----------------
Liabilities:
Payables for:
Investments purchased................................................ 3,102,397
Settlement of investments purchased on a
forward commitment basis (Note 2)................................. 4,847
Fund shares redeemed................................................. 272,626
Directors' fees and expenses (Note 3)................................ 5,316
Affiliates (Note 3):
Investment management fees........................................ 238,126
Administration fees............................................... 45,229
Service and distribution fees..................................... 281
Accrued expenses and other liabilities................................. 16,145
----------------
Total liabilities................................................. 3,684,967
----------------
Net assets............................................................. $ 628,691,061
================
Net assets consist of:
Paid-in capital........................................................ $ 483,414,936
Undistributed net investment income.................................... 10,713,433
Accumulated net realized gain on investments........................... 11,820,496
Net unrealized appreciation on investments
and forward commitments........................................... 122,742,196
----------------
$ 628,691,061
================
Net assets:
Class 1................................................................ $ 146,563
================
Class 2................................................................ $ 148,717
================
Class 3................................................................ $ 149,854
================
Class 4................................................................ $ 628,245,927
================
Shares outstanding:
Class 1................................................................ 10,838
================
Class 2................................................................ 10,948
================
Class 3................................................................ 10,994
================
Class 4................................................................ 46,209,722
================
Net asset value, offering price and
redemption price per share:
Class 1................................................................ $ 13.52
================
Class 2................................................................ $ 13.58
================
Class 3................................................................ $ 13.63
================
Class 4................................................................ $ 13.60
================
</TABLE>
36 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of Operations
<TABLE>
<CAPTION>
Six months ended
June 30, 1997
(Unaudited)
---------------
<S> <C>
Investment income:
Interest................................................................ $ 8,622,309
Dividends............................................................... 3,596,262
---------------
Total investment income............................................... 12,218,571
---------------
Expenses (Note 1):
Investment management fees (Note 3)..................................... 1,309,860
Custody fees............................................................ 29,090
Audit and legal fees.................................................... 7,400
Directors' fees (Note 3)................................................ 10,526
Fees waived by the investment manager (Note 3).......................... (74,994)
---------------
1,281,882
Administration fees (Note 3):
Class 1............................................................... 393
Class 2............................................................... 363
Class 3............................................................... 227
Class 4............................................................... 247,822
Distribution and service fees (Note 3):
Class 1............................................................... 448
Class 2............................................................... 105
---------------
Net expenses........................................................ 1,531,240
---------------
Net investment income............................................... 10,687,331
---------------
Realized and unrealized gain (loss):
Net realized gain on investment transactions and forward commitments.... 9,899,503
Net change in unrealized appreciation (depreciation) on
investments and forward commitments................................... 36,649,248
---------------
Net realized and unrealized gain.................................... 46,548,751
---------------
Net increase in net assets resulting from operations.................... $ 57,236,082
================
</TABLE>
The accompanying notes are an integral part of the financial statements. 37
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended
Statements of June 30, 1997 Year ended
Changes in Net (Unaudited) December 31, 1996
Assets ----------------- ------------------
<S> <C> <C>
Increase(Decrease) in Net Assets:
Operations:
Net investment income ...................................... $ 10,687,331 $ 19,347,629
Net realized gain on investment transactions
and forward commitments ................................... 9,899,503 8,885,806
Net change in unrealized appreciation (depreciation) on
investments and forward commitments ....................... 36,649,248 33,108,845
----------------- ------------------
Net increase in net assets resulting from operations ...... 57,236,082 61,342,280
----------------- ------------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1 .................................................... -- (3,204)
Class 2 .................................................... -- (4,068)
Class 3 .................................................... -- (4,538)
Class 4 .................................................... -- (19,441,756)
----------------- ------------------
Total distributions from net investment income............. -- (19,453,566)
----------------- ------------------
From net realized gains:
Class 1 .................................................... -- (1,969)
Class 2 .................................................... -- (1,970)
Class 3 .................................................... -- (1,972)
Class 4 .................................................... -- (7,883,759)
----------------- ------------------
Total distributions from net realized gains................ -- (7,889,670)
----------------- ------------------
Net fund share transactions (Note 5):
Class 1 .................................................... -- (49,367)
Class 2 .................................................... -- 6,038
Class 3 .................................................... -- 6,510
Class 4 .................................................... 7,769,131 72,536,092
----------------- ------------------
Increase in net assets from net fund share transactions ... 7,769,131 72,499,273
----------------- ------------------
Total increase in net assets ............................... 65,005,213 106,498,317
Net assets:
Beginning of period ........................................ 563,685,848 457,187,531
----------------- ------------------
End of period (including undistributed net investment income
of $10,713,433 and $26,102, respectively) ................. $ 628,691,061 $ 563,685,848
================= ==================
</TABLE>
38 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Financial Highlights
(For a share outstanding throughout each period)
Class 1
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.35 $ 11.50 $ 9.94 $ 10.00
------------ ------------ ------------ ------------
Income (loss) from investment operations:
Net investment income 0.16 0.34 0.28 0.06
Net realized and unrealized gain (loss) on investments 1.01 1.01 1.70 (0.06)
------------ ------------ ------------ ------------
Total income (loss) from investment operations 1.17 1.35 1.98 --
------------ ------------ ------------ ------------
Less distributions to shareholders:
From net investment income -- (0.31) (0.33) (0.06)
From net realized gains -- (0.19) (0.09) --
------------ ------------ ------------ ------------
Total distributions -- (0.50) (0.42) (0.06)
------------ ------------ ------------ ------------
Net asset value, end of period $ 13.52 $ 12.35 $ 11.50 $ 9.94
============ ============ ============ ============
Total Return 9.47% 11.67% 19.92% 0.00%
Ratios / Supplemental Data:
Net assets, end of period (000's) $147 $134 $173 $100
Net expenses to average daily net assets# 1.66%* 1.65% 1.65% 1.65%*
Net investment income to average daily net assets 2.54%* 2.71% 3.03% 3.39%*
Portfolio turnover rate 13% 26% 23% 2%
Average broker commission rate (a) $ 0.0593 $ 0.0594 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%* 1.69% 1.69% 1.71%*
<CAPTION>
Class 2
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.37 $ 11.53 $ 9.95 $ 10.00
------------ ------------ ------------ ------------
Income (loss) from investment operations:
Net investment income 0.20 0.39 0.39 0.06
Net realized and unrealized gain (loss) on investments 1.01 1.03 1.65 (0.04)
------------ ------------ ------------ ------------
Total income (loss) from investment operations 1.21 1.42 2.04 0.02
------------ ------------ ------------ ------------
Less distributions to shareholders:
From net investment income -- (0.39) (0.37) (0.07)
From net realized gains -- (0.19) (0.09) --
------------ ------------ ------------ ------------
Total distributions -- (0.58) (0.46) (0.07)
------------ ------------ ------------ ------------
Net asset value, end of period $ 13.58 $ 12.37 $ 11.53 $ 9.95
============ ============ ============ ============
Total Return 9.78% 12.25% 20.50% 0.17%
Ratios / Supplemental Data:
Net assets, end of period (000's) $149 $135 $121 $100
Net expenses to average daily net assets# 1.11%* 1.10% 1.10% 1.10%*
Net investment income to average daily net assets 3.09%* 3.23% 3.60% 3.94%*
Portfolio turnover rate 13% 26% 23% 2%
Average broker commission rate (a) $ 0.0593 $ 0.0594 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% 1.14% 1.16%*
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
(a)Average commission rate paid is computed by dividing the total amount of
commissions paid during the fiscal year by the total number of shares
purchased and sold during the fiscal year for which commissions were charged.
For fiscal years beginning on or after September 1, 1995, a Fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged.
The accompanying notes are an integral part of the financial statements. 39
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Financial Highlights
(For a share outstanding throughout each period)
Class 3
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.39 $ 11.55 $ 9.96 $ 10.00
------------ ------------ ------------ ------------
Income (loss) from investment operations:
Net investment income 0.22 0.44 0.43 0.07
Net realized and unrealized gain (loss) on investments 1.02 1.02 1.66 (0.04)
------------ ------------ ------------ ------------
Total income (loss) from investment operations 1.24 1.46 2.09 0.03
------------ ------------ ------------ ------------
Less distributions to shareholders:
From net investment income -- (0.43) (0.41) (0.07)
From net realized gains -- (0.19) (0.09) --
------------ ------------ ------------ ------------
Total distributions -- (0.62) (0.50) (0.07)
------------ ------------ ------------ ------------
Net asset value, end of period $ 13.63 $ 12.39 $ 11.55 $ 9.96
============ ============ ============ ============
Total Return 10.01% 12.61% 20.96% 0.28%
Ratios / Supplemental Data:
Net assets, end of period (000's) $150 $136 $121 $100
Net expenses to average daily net assets# 0.76%* 0.75% 0.75% 0.75%*
Net investment income to average daily net assets 3.43%* 3.60% 3.94% 4.32%*
Portfolio turnover rate 13% 26% 23% 2%
Average broker commission rate (a) $ 0.0593 $ 0.0594 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% 0.79% 0.81%*
<CAPTION>
Class 4
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.34 $ 11.51 $ 9.92 $ 10.00
------------ ------------ ------------ ------------
Income (loss) from investment operations:
Net investment income 0.23 0.46 0.44 0.11
Net realized and unrealized gain (loss) on investments 1.03 1.02 1.68 (0.08)
------------ ------------ ------------ ------------
Total income (loss) from investment operations 1.26 1.48 2.12 0.03
------------ ------------ ------------ ------------
Less distributions to shareholders:
From net investment income -- (0.46) (0.44) (0.11)
From net realized gains -- (0.19) (0.09) --
------------ ------------ ------------ ------------
Total distributions -- (0.65) (0.53) (0.11)
------------ ------------ ------------ ------------
Net asset value, end of period $ 13.60 $ 12.34 $ 11.51 $ 9.92
============ ============ ============ ============
Total Return@ 10.21% 12.83% 21.31% 0.29%
Ratios / Supplemental Data:
Net assets, end of period (000's) $628,246 $563,280 $456,773 $349,688
Net expenses to average daily net assets# 0.5256%* 0.5120% 0.5120% 0.5120%*
Net investment income to average daily net assets 3.67%* 3.83% 4.18% 4.29%*
Portfolio turnover rate 13% 26% 23% 2%
Average broker commission rate (a) $ 0.0593 $ 0.0594 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: 0.5514%* 0.5522% 0.5514% 0.5650%*
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
(a)Average commission rate paid is computed by dividing the total amount of
commissions paid during the fiscal year by the total number of shares
purchased and sold during the fiscal year for which commissions were charged.
For fiscal years beginning on or after September 1, 1995, a Fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged.
@ 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.
40 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment objective and policies for the MassMutual Value Equity
Fund?
The objective and policies of the Fund are to:
. achieve long-term growth of capital and income
. 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 performed over the past six months?
Even though the Fund has a relatively conservative approach to the stock market,
the Fund participated considerably in the market's strong upswing. The
portfolio's total return for the six months ended June 30, 1997 is lower than
that of the S&P 500, which we'd expect during a strong bull market. Still, we've
outperformed many of our value-oriented peers, and in six months have already
surpassed the historical average one-year return on stock investments.
How would you characterize the equity market over the period?
This has been a market in which the largest stocks have performed best. The fact
that the largest companies in the major indices such as the S&P and the Dow
Jones Industrial Average have appreciated dramatically has skewed the indices'
returns, giving the impression that all stocks are doing remarkably well. This
market has basically doubled in the past two and a half years, and the economy
has been growing far longer than historical cyclical patterns. As a result,
investors have been willing to pay high prices to own the largest companies.
They're attracted by these firms' reliable, growing earnings and hope to be
protected from any weakness in future earnings should the economy change.
What investment decisions were most successful during the period?
As always, we've emphasized high quality companies selling at reasonable prices
compared to their earnings. In the past six months, we've been very pleased that
our two largest positions have been among our top performers. We've done
extremely well with our holdings in Bristol-Myers and GE -- two strong companies
with excellent earnings that have been beneficiaries of the current market
psychology.
Even though the market has done very well over the first half of 1997, there was
a temporary dip after the Federal Reserve's interest rate increase at the end of
March. We used this as an opportunity to buy new stocks when they were selling
far from their recent highs. One example, Burlington Northern, a Fort
Worth-based railroad system, purchased the Santa Fe system and received
favorable investor response. However, expected cost reductions came more slowly
than expected, and weather problems hurt normally stable revenues. We saw
Burlington Northern as a major player in coal and grain haulage, and expected
the stock was poised for a rebound. This purchase has worked out very well for
us so far this year.
Are you making any changes to the portfolio at this time?
The portfolio is already well diversified, and we feel it is structured
appropriately to prosper in the future. On the margin, we have reduced our
health care holdings, since their price performance has been so strong.
Two areas that were relatively weak so far in 1997 are telecommunications and
electric utility stocks. We're currently making a gradual increase to our
electric utility holdings. We believe selected electric stocks -- those with low
operating costs, strong competitive positions and the ability to increase
dividend payments -- offer good total return potential with relatively low risk.
What is your outlook for the next several months?
Because the economy continues to be strong, with none of the classic signs of a
slowdown on the horizon, our outlook is encouraging. Added to that is the fact
that corporate managements are making better business decisions now in terms of
focussing on their competitive advantages and placing great emphasis on
shareholder value.
Within this positive outlook, however, there is a risk that the Federal Reserve
will make another upward adjustment to interest rates. This market, while
incredibly strong over the past several years, is very sensitive to interest
rates, as we saw in March. That's why we believe a strategy like ours, with a
value focus that can limit price risk, is an intelligent way to approach the
stock market in any environment.
41
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Equity Fund Classes 1-4 and the Standard
& Poor's 500 Composite Index
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund
Total Return Year to Date One Year Average Annual
1/1/97 - 6/30/97 7/1/96 - 6/30/97 10/3/94 - 6/30/97
<S> <C> <C> <C>
Class 1 16.00% 27.63% 23.53%
Class 2 16.38% 28.37% 24.24%
Class 3 16.56% 28.89% 24.67%
Class 4 16.67% 29.14% 24.96%
- --------------------------------------------------------------------------------
Standard & Poor's 20.61% 34.71% 29.60%
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 incur expenses.
[GRAPH APPEARS HERE]
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
<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
6/95 11,507 11,566 11,590 11,613 12,019
12/95 12,959 13,052 13,106 13,141 13,756
6/96 13,995 14,135 14,213 14,276 15,144
12/96 15,399 15,591 15,716 15,802 16,915
6/97 17,862 18,144 18,319 18,435 20,401
</TABLE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund
Largest Stock Holdings (6/30/97)
- --------------------------------------------------------------------------------
Bristol-Myers Squibb Company
General Electric Company
Marsh & McLennan Companies, Inc.
Goodyear Tire & Rubber Company
SAFECO Corporation
Hewlett-Packard Company
Xerox Corporation
Bank of New York Company Incorporated
Amoco Corporation
International Business Machines Corporation
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1997
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
EQUITIES -- 95.3%
Aerospace & Defense -- 2.9%
Boeing Company 460,000 $ 24,408,750
Raytheon Company 772,000 39,372,000
TRW Inc. 396,600 22,531,838
------------
86,312,588
------------
Agribusiness -- 1.0%
Pioneer Hi-Bred
International, Inc. 385,000 30,800,000
------------
Apparel, Textiles & Shoes -- 1.1%
VF Corporation 365,000 30,933,750
------------
Automotive & Parts -- 4.8%
Ford Motor Company 945,300 35,685,075
Genuine Parts
Company 1,290,000 43,698,750
Goodyear Tire &
Rubber Company 955,000 60,463,438
------------
139,847,263
------------
Banking, Savings & Loans -- 6.4%
The Bank of New
York Company,
Incorporated 1,265,000 55,027,500
Comerica, Incorporated 450,000 30,600,000
CoreStates Financial
Corp. 700,000 37,625,000
Norwest Corporation 485,000 27,281,250
Pacific Century
Financial Corporation 214,600 9,925,250
Wachovia Corp. 494,000 28,806,375
------------
189,265,375
------------
Beverages -- 1.8%
Brown-Forman
Corporation (Class B) 575,000 28,067,188
PepsiCo, Inc 700,000 26,293,750
------------
54,360,938
------------
Chemicals -- 4.4%
E. I. du Pont de
Nemours and Company 550,000 34,581,250
The Lubrizol
Corporation 571,200 23,954,700
Nalco Chemical
Company 680,000 26,265,000
Rohm & Haas
Company 503,000 45,301,438
------------
130,102,388
------------
Commercial Services -- 0.6%
Pinnacle West Capital
Corporation 588,792 17,700,560
------------
Communications -- 0.3%
AT & T Corporation 224,800 7,882,050
------------
Computers & Office Equipment -- 7.3%
Hewlett-Packard
Company 1,020,000 57,120,000
International Business
Machines Corporation 582,000 52,489,125
Pitney Bowes, Inc. 700,000 48,650,000
Xerox Corporation 723,000 57,026,625
------------
215,285,750
------------
Containers -- 1.0%
Temple-Inland, Inc. 525,000 28,350,000
------------
Cosmetics & Personal Care -- 1.4%
Kimberly-Clark
Corporation 806,000 40,098,500
------------
Drugs -- 0.9%
Pharmacia & Upjohn,
Inc. 792,000 27,522,000
------------
Electric Utilities -- 1.4%
New England Electric
System 52,000 1,924,000
NIPSCO Industries,
Inc. 330,000 13,633,125
SCANA Corporation 1,090,600 27,060,513
------------
42,617,638
------------
Electrical Equipment & Electronics -- 6.9%
AMP, Incorporated 1,213,000 50,642,750
General Electric
Company 1,360,000 88,910,000
Honeywell Inc. 365,000 27,694,375
Hubbell, Incorporated
(Class B) 800,071 35,203,142
------------
202,450,267
------------
Energy -- 5.4%
Amoco Corporation 615,000 53,466,563
Kerr-McGee
Corporation 360,000 22,815,000
Mobil Corporation 580,000 40,527,500
Teco Energy, Inc. 818,700 20,928,019
Unocal Corporation 574,900 22,313,306
------------
160,050,388
------------
Financial Services -- 1.7%
American Express
Company 665,000 49,542,500
------------
Foods -- 2.9%
Archer-Daniels-Midland
Company 102,600 2,411,100
ConAgra, Inc. 613,000 39,308,625
CPC International, Inc. 462,500 42,694,531
------------
84,414,256
------------
Forest Products & Paper -- 2.2%
Westvaco Corporation 855,000 26,879,063
Weyerhaeuser Company 721,900 37,538,800
------------
64,417,863
------------
Hardware & Tools -- 0.9%
The Stanley Works 639,000 25,560,000
------------
Healthcare -- 7.7%
Becton, Dickinson and
Company 850,000 43,031,250
Bristol-Myers Squibb
Company 1,500,000 121,500,000
Pfizer, Incorporated 184,130 22,003,535
Schering-Plough Corp. 907,200 43,432,200
------------
229,966,985
------------
Industrial Distribution -- 1.1%
W.W. Grainger, Inc. 400,000 31,275,000
------------
Industrial Transportation -- 2.7%
Burlington Northern
Santa Fe Corporation 432,200 38,843,975
Norfolk Southern
Corporation 400,000 40,300,000
------------
79,143,975
------------
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements. 43
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
Insurance -- 6.9%
Jefferson-Pilot
Corporation 437,000 $ 30,535,375
Marsh & McLennan
Companies, Inc. 909,800 64,936,975
MBIA, Inc. 435,000 49,073,438
SAFECO Corporation 1,240,000 57,892,500
------------
202,438,288
------------
Machinery & Components -- 2.0%
Dover Corporation 540,000 33,210,000
Parker-Hannifin
Corporation 400,000 24,275,000
------------
57,485,000
------------
Manufacturing -- 0.7%
Pall Corporation 830,500 19,309,117
------------
Miscellaneous -- 1.8%
Harsco Corporation 600,000 24,300,000
Minnesota Mining &
Manufacturing
Company 279,700 28,529,400
------------
52,829,400
------------
Oil & Gas -- 2.2%
ENI SPA, Sponsored
ADR 266,700 15,168,563
Occidental Petroleum
Corporation 1,067,000 26,741,688
Union Pacific
Resources Group Inc. 897,700 22,330,288
------------
64,240,539
------------
Photography -- 1.1%
Eastman Kodak
Company 413,600 31,743,800
------------
Publishing & Printing -- 2.3%
The McGraw-Hill
Companies, Inc. 740,000 43,521,250
R.R. Donnelley & Sons
Company 630,000 23,073,750
------------
66,595,000
------------
Retail -- 2.5%
The May Department
Stores Company 825,000 38,981,250
Sears Roebuck and Co. 648,100 34,835,375
------------
73,816,625
------------
Retail-Grocery -- 2.6%
Albertson's, Inc. 1,414,000 51,611,000
American Stores
Company 518,300 25,591,063
------------
77,202,063
------------
Telecommunications -- 1.4%
GTE Corporation 965,800 $ 42,374,475
------------
Telephone Utilities -- 2.5%
Ameritech Corporation 372,000 25,272,750
Frontier Corporation 1,319,000 26,297,563
Southern New England
Telecommunications
Corporation 531,000 20,642,625
------------
72,212,938
------------
Tobacco -- 2.5%
Fortune Brands, Inc. 735,000 27,424,688
Gallaher Group PLC,
ADR ++ 735,000 13,551,563
UST Inc. 1,126,800 31,268,700
------------
72,244,951
------------
TOTAL EQUITIES $2,800,392,230
--------------
(Cost $1,787,766,969)
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 4.9%
Commercial Paper
Abbott Laboratories
5.460% 7/10/1997 $ 5,000,000 $ 4,993,175
Abbott Laboratories
5.470% 7/09/1997 2,015,000 2,012,551
American International
Group, Inc.
5.520% 7/23/1997 10,000,000 9,966,267
Anheuser-Busch
Companies, Inc.
5.540% 7/07/1997 7,000,000 6,993,537
Anheuser-Busch
Companies, Inc.
6.000% 7/01/1997 7,766,000 7,766,000
AT & T Corporation
5.240% 7/18/1997 3,000,000 2,992,577
AT & T Corporation
5.240% 8/21/1997 8,000,000 7,940,613
Coca-Cola Company,
The
5.490% 8/22/1997 13,000,000 12,896,910
Eastman Kodak
Company
5.525% 7/21/1997 9,338,000 9,309,338
E. I. du Pont de
Nemours and Company
5.490% 8/11/1997 $7,000,000 $ 6,956,233
E. I. du Pont de
Nemours and Company
5.610% 11/17/1997 1,419,000 1,387,496
E. I. du Pont de
Nemours and Company
5.630% 11/12/1997 4,000,000 3,914,389
Ford Motor Credit
Company
5.580% 12/09/1997 5,000,000 4,871,424
Ford Motor Credit
Company
5.630% 12/05/1997 5,000,000 4,874,618
General Electric
Capital Corporation
5.580% 12/08/1997 4,000,000 3,897,778
IBM Credit
Corporation
5.520% 8/25/1997 3,000,000 2,974,700
IBM Credit
Corporation
5.520% 7/22/1997 8,000,000 7,974,238
J.P. Morgan & Co.,
Inc.
5.510% 7/28/1997 7,000,000 6,971,073
J.P. Morgan & Co.,
Inc.
5.530% 7/25/1997 5,872,000 5,850,352
PepsiCo, Inc
5.500% 7/14/1997 10,000,000 9,980,139
Procter & Gamble
Company, The
5.520% 9/17/1997 5,000,000 4,937,708
Toys "R" Us, Inc.
5.480% 7/09/1997 7,015,000 7,006,457
Weyerhaeuser Company
5.530% 8/06/1997 8,354,000 8,307,802
------------
TOTAL SHORT-TERM
INVESTMENTS 144,775,375
------------
(Cost $144,789,861)
TOTAL INVESTMENTS -- 100.2% 2,945,167,605
(Cost $1,932,556,830)+
Other Assets/
(Liabilities) - (0.2%) (5,563,503)
------------
NET ASSETS -- 100.0% $2,939,604,102
--------------
</TABLE>
Notes to Portfolio of Investments
+Aggregate cost for Federal tax purposes (Note 7)
++Non-Income producing security
44 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of June 30, 1997
Assets and (Unaudited)
Liabilities -----------------
<S> <C>
Assets:
Investments, at value (cost $1,787,766,969) (Note 2) ...................... $ 2,800,392,230
Short-term investments, at value (cost $144,789,861) (Note 2) ............. 144,775,375
-----------------
Total Investments ....................................................... 2,945,167,605
Cash....................................................................... 925
Receivables from:
Investments sold ........................................................ 9,540,659
Fund shares sold ........................................................ 7,984,118
Interest and dividends .................................................. 5,038,019
-----------------
Total assets ......................................................... 2,967,731,326
-----------------
Liabilities:
Payables for:
Investments purchased ................................................... 25,412,280
Fund shares redeemed .................................................... 1,309,733
Directors' fees and expenses (Note 3) ................................... 5,317
Affiliates (Note 3):
Investment management fees ........................................... 1,109,735
Administration fees .................................................. 223,358
Service and distribution fees ........................................ 333
Accrued expenses and other liabilities .................................... 66,468
-----------------
Total liabilities .................................................... 28,127,224
-----------------
Net assets ................................................................ $ 2,939,604,102
=================
Net assets consist of:
Paid-in capital ........................................................... $ 1,796,583,622
Undistributed net investment income ....................................... 26,785,147
Accumulated net realized gain on investments .............................. 103,624,558
Net unrealized appreciation on investments ................................ 1,012,610,775
-----------------
$ 2,939,604,102
=================
Net assets:
Class 1 ................................................................... $ 178,268
=================
Class 2 ................................................................... $ 180,894
=================
Class 3 ................................................................... $ 182,261
=================
Class 4 ................................................................... $ 2,939,062,679
=================
Shares outstanding:
Class 1 ................................................................... 10,640
=================
Class 2 ................................................................... 10,740
=================
Class 3 ................................................................... 10,793
=================
Class 4 ................................................................... 174,174,339
=================
Net asset value, offering price and
redemption price per share:
Class 1 ................................................................... $ 16.75
=================
Class 2 ................................................................... $ 16.84
=================
Class 3 ................................................................... $ 16.89
=================
Class 4 ................................................................... $ 16.87
=================
</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, 1997
(Unaudited)
----------------
<S> <C>
Investment income:
Dividends........................................................ $ 30,007,475
Interest......................................................... 3,288,686
----------------
Total investment income........................................ 33,296,161
----------------
Expenses (Note 1):
Investment management fees (Note 3).............................. 5,958,697
Custody fees..................................................... 109,941
Audit and legal fees............................................. 33,755
Directors' fees (Note 3)......................................... 10,526
Fees waived by the investment manager (Note 3)................... (391,015)
----------------
5,721,904
Administration fees (Note 3):
Class 1........................................................ 471
Class 2........................................................ 437
Class 3........................................................ 276
Class 4........................................................ 1,198,138
Distribution and service fees (Note 3):
Class 1........................................................ 527
Class 2........................................................ 123
----------------
Net expenses................................................. 6,921,876
----------------
Net investment income........................................ 26,374,285
----------------
Realized and unrealized gain (loss):
Net realized gain on investment transactions..................... 89,446,203
Net change in unrealized appreciation (depreciation)
on investments................................................. 300,752,849
----------------
Net realized and unrealized gain............................. 390,199,052
----------------
Net increase in net assets resulting from operations............. $ 416,573,337
================
</TABLE>
46 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, 1997 Year ended
(Unaudited) December 31, 1996
---------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income......................................... $ 26,374,285 $ 55,712,269
Net realized gain on investment transactions.................. 89,446,203 74,040,546
Net change in unrealized appreciation (depreciation)
on investments............................................... 300,752,849 296,454,766
---------------- ----------------
Net increase in net assets resulting from operations......... 416,573,337 426,207,581
---------------- ----------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1....................................................... -- (1,849)
Class 2....................................................... -- (2,628)
Class 3....................................................... -- (3,152)
Class 4....................................................... -- (55,920,646)
---------------- ----------------
Total distributions from net investment income............... -- (55,928,275)
---------------- ----------------
From net realized gains:
Class 1....................................................... -- (4,035)
Class 2....................................................... -- (4,054)
Class 3....................................................... -- (4,061)
Class 4....................................................... -- (64,653,761)
---------------- ----------------
Total distributions from net realized gains.................. -- (64,665,911)
---------------- ----------------
Net fund share transactions (Note 5):
Class 1....................................................... -- 5,884
Class 2....................................................... -- 6,682
Class 3....................................................... -- 7,213
Class 4....................................................... 36,822,530 54,936,919
---------------- ----------------
Increase in net assets from net fund share transactions...... 36,822,530 54,956,698
---------------- ----------------
Total increase in net assets.................................. 453,395,867 360,570,093
Net assets:
Beginning of period........................................... 2,486,208,235 2,125,638,142
---------------- ----------------
End of period (including undistributed net investment income
of $26,785,147 and $410,862, respectively)................... $ 2,939,604,102 $ 2,486,208,235
================ ================
</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
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.44 $ 12.63 $ 9.92 $ 10.00
---------- ---------- ---------- -----------
Income (loss) from investment operations:
Net investment income 0.06 0.17 0.18 0.04
Net realized and unrealized gain (loss) on investments 2.25 2.21 2.81 (0.08)
---------- ---------- ---------- -----------
Total income (loss) from investment operations 2.31 2.38 2.99 (0.04)
---------- ---------- ---------- -----------
Less distributions to shareholders:
From net investment income -- (0.18) (0.18) (0.04)
From net realized gains -- (0.39) (0.10) --
---------- ---------- ---------- -----------
Total distributions -- (0.57) (0.28) (0.04)
---------- ---------- ---------- -----------
Net asset value, end of period $ 16.75 $ 14.44 $ 12.63 $ 9.92
========== ========== ========== ===========
Total Return 16.00% 18.83% 30.10% (0.39)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $178 $154 $129 $99
Net expenses to average daily net assets# 1.66%* 1.65% 1.65% 1.65%*
Net investment income to average daily net assets 0.85%* 1.28% 1.58% 2.31%*
Portfolio turnover rate 9% 13% 16% 3%
Average broker commission rate (a) $ 0.0593 $ .0585 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%* 1.69% 1.70% 1.71%*
<CAPTION>
Class 2
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.47 $ 12.65 $ 9.93 $ 10.00
---------- ---------- ---------- -----------
Income (loss) from investment operations:
Net investment income 0.11 0.25 0.24 0.05
Net realized and unrealized gain (loss) on investments 2.26 2.22 2.82 (0.07)
---------- ---------- ---------- -----------
Total income (loss) from investment operations 2.37 2.47 3.06 (0.02)
---------- ---------- ---------- -----------
Less distributions to shareholders:
From net investment income -- (0.26) (0.24) (0.05)
From net realized gains -- (0.39) (0.10) --
---------- ---------- ---------- -----------
Total distributions -- (0.65) (0.34) (0.05)
---------- ---------- ---------- -----------
Net asset value, end of period $ 16.84 $ 14.47 $ 12.65 $ 9.93
========== ========== ========== ===========
Total Return 16.38% 19.46% 30.80% (0.22)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $181 $155 $130 $99
Net expenses to average daily net assets# 1.11%* 1.10% 1.10% 1.10%*
Net investment income to average daily net assets 1.40%* 1.82% 2.13% 2.86%*
Portfolio turnover rate 9% 13% 16% 3%
Average broker commission rate (a) $ 0.0593 $ 0.0585 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% 1.15% 1.16%*
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations)
through December 31, 1994.
(a)Average commission rate paid is computed by dividing the total amount of
commissions paid during the fiscal year by the total number of shares
purchased and sold during the fiscal year for which commissions were charged.
For fiscal years beginning on or after September 1, 1995, a Fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged.
The accompanying notes are an integral part of the financial statements.
48
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 3
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.49 $ 12.66 $ 9.93 $ 10.00
---------- ---------- ---------- -----------
Income (loss) from investment operations:
Net investment income 0.13 0.30 0.28 0.05
Net realized and unrealized gain (loss) on investments 2.27 2.23 2.83 (0.07)
---------- ---------- ---------- -----------
Total income (loss) from investment operations 2.40 2.53 3.11 (0.02)
---------- ---------- ---------- -----------
Less distributions to shareholders:
From net investment income -- (0.31) (0.28) (0.05)
From net realized gains -- (0.39) (0.10) --
---------- ---------- ---------- -----------
Total distributions -- (0.70) (0.38) (0.05)
---------- ---------- ---------- -----------
Net asset value, end of period $ 16.89 $ 14.49 $ 12.66 $ 9.93
========== ========== ========== ===========
Total Return 16.56% 19.92% 31.30% (0.18)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $182 $156 $130 $99
Net expenses to average daily net assets# 0.77%* 0.75% 0.75% 0.75%*
Net investment income to average daily net assets 1.75%* 2.17% 2.48% 3.23%*
Portfolio turnover rate 9% 13% 16% 3%
Average broker commission rate (a) $ 0.0593 $ 0.0585 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% 0.80% 0.81%*
<CAPTION>
Class 4
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.46 $ 12.63 $ 9.91 $ 10.00
---------- ---------- ---------- -----------
Income (loss) from investment operations:
Net investment income 0.15 0.34 0.31 0.08
Net realized and unrealized gain (loss) on investments 2.26 2.22 2.82 (0.09)
---------- ---------- ---------- -----------
Total income (loss) from investment operations 2.41 2.56 3.13 (0.01)
---------- ---------- ---------- -----------
Less distributions to shareholders:
From net investment income -- (0.34) (0.31) (0.08)
From net realized gains -- (0.39) (0.10) --
---------- ---------- ---------- -----------
Total distributions -- (0.73) (0.41) (0.08)
---------- ---------- ---------- -----------
Net asset value, end of period $ 16.87 $ 14.46 $ 12.63 $ 9.91
========== ========== ========== ===========
Total Return@ 16.67% 20.24% 31.54% (0.10)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $2,939,063 $2,485,743 $2,125,248 $1,563,563
Net expenses to average daily net assets# 0.5226%* 0.5067% 0.5067% 0.5067%*
Net investment income to average daily net assets 1.99%* 2.42% 2.72% 3.20%*
Portfolio turnover rate 9% 13% 16% 3%
Average broker commission rate (a) $ 0.0593 $ 0.0585 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: 0.5521%* 0.5534% 0.5528% 0.5681%*
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
(a)Average commission rate paid is computed by dividing the total amount of
commissions paid during the fiscal year by the total number of shares
purchased and sold during the fiscal year for which commissions were charged.
For fiscal years beginning on or after September 1, 1995, a Fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged.
@ 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>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment objective and policies for the MassMutual Small Cap
Value Equity Fund?
The objective and policies of the Fund are to:
. achieve long-term growth of capital and income
. invest primarily in a diversified portfolio of equity securities of smaller
companies (market capitalization less than $750 million)
. utilize a value-oriented, risk-averse strategy in making investment decisions
. utilize fundamental analysis to identify companies which
- are of high investment quality or possess a unique product, market position
or operating characteristic,
- offer above-average level of profitability or superior growth potential and
- are attractively valued
How has the Fund performed over the past six months?
The Fund has done very well. For the first half of 1997, it is significantly
ahead of the small cap Russell 2000 Index and the one year historical average
return for stocks. Most of the returns for the period for both the Fund and the
Index were captured during the strong second quarter, when the market rebounded
from some late first quarter problems in technology stocks as well as the
Federal Reserve's interest rate increase.
What features defined the equity market over the period?
For the first six months of the year, we were navigating what was still
primarily a large cap market, where outstanding performance by a relatively
small number of stocks set the pace. Investors continued to focus narrowly on
very large growth companies with stable earnings. As a result, forty or fifty
companies like Coca Cola, GE and the large pharmaceutical firms led the market,
and it's only been recently -- as their prices have climbed higher and higher --
that investors have begun to look for better values.
While small cap stocks have lagged large stocks, they've still performed
extremely well year-to-date. We'd expect this to continue, especially as
excellent small companies attract attention from investors looking for
better-valued alternatives.
What investment decisions were most successful during the period?
Bank and financial services stocks were some of the best performers over the
period, due in part to an increase in takeover activity. Security Capital
Corporation was one of our banking holdings that was targeted, and the stock
performed quite well as a result. Other financial stocks that were strong
holdings over the period included Bank United Corporation, Astoria Financial
Corporation and Keystone Financial.
Outside of financial services, we owned two other companies that were takeovers
or takeover targets. One was our long-time holding Wyle Laboratories, an
electronics distributor that agreed to be taken over by a German firm, and the
other was Riser Foods, scheduled to be purchased by supermarket chain Giant
Eagle. Being involved in three takeovers is unusual for us, and we benefited
from the exposure.
Are you making any changes to the portfolio at this time?
We're not making any dramatic changes to the makeup of the portfolio. However,
we have begun building our positions in some new holdings we think offer
excellent potential. Several of our newer holdings are companies involved in
offshore oil exploration in the Gulf of Mexico. Existing leases in the Gulf are
expiring, and there are currently shortages of boats, rigs and crews in the
area. We think well-equipped, well-managed companies should be able to make
substantial profits there.
In financial services, which we believe will continue to be a good industry
group going forward, we've purchased St. Paul Bancorp, a Minnesota-based company
whose stock was selling at what we consider an excellent value. We've also been
buying Nationwide Financial Services, a spinoff of Nationwide Insurance
representing their variable annuity business. We believe that annuities offer
the stable business and steady cashflows of some other areas of financial
services, but with less risk than brokerage firms, and at better prices than
mutual fund companies.
50
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
What is your outlook for the next several months?
Even though this has been another banner year for the stock market so far, we
see no reason for it to turn materially weaker in the coming months. The economy
continues to be strong, and prices of commodities and gold -- plus the fact that
the Federal Reserve has not raised interest rates since the March move --
suggest that inflation remains under control. Another strong positive is that
even as the market reaches new highs, cash keeps flowing into it. We expect that
under these conditions, the broad market could close the year at another new
high, and that the struggle to find cheap stocks in this environment may benefit
smaller company stocks.
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Small Cap
Value Equity Fund Classes 1-4 and the Frank Russell
2000 Index
- ---------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund
Total Return
Year to Date One Year Average Annual
1/1/97 - 6/30/97 7/1/97 - 6/30/97 10/3/94 - 6/30/97
Class 1 15.46% 28.79% 19.06%
Class 2 15.80% 29.47% 19.74%
Class 3 15.92% 30.00% 20.15%
Class 4 16.16% 30.25% 20.45%
- ---------------------------------------------------------------------------
Frank Russell 10.20% 16.32% 19.13%
2000 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 Frank Russell 2000 Index 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 Russell 2000
<S> <C> <C> <C> <C> <C>
10/3/94 10,000 10,000 10,000 10,000 10,000
12/94 9,711 9,728 9,732 9,734 9,813
6/95 10,422 10,470 10,495 10,507 11,229
12/95 11,515 11,601 11,642 11,681 12,605
6/96 12,535 12,665 12,731 12,794 13,912
12/96 13,983 14,161 14,277 14,346 14,683
6/97 16,144 16,398 16,550 16,664 16,181
</TABLE>
MassMutual
Small Cap Value Equity Fund
Largest Stock Holdings (6/30/97)
Dallas Semiconductor Corporation
Graco, Incorporated
Reliance Steel & Aluminum Company
Frontier Insurance Group, Inc.
Titan Wheel International, Inc.
McClarchy Newspapers, Inc.
True North Communications, Inc.
Harte Hanks Communications, Inc.
Astoria Financial Corporation
Houghton Mifflin Company
51
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1997
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
EQUITIES -- 92.7%
Air Transportation -- 1.3%
Atlantic Southeast
Airlines, Inc. 247,800 $ 7,093,275
------------
Apparel, Textiles & Shoes -- 1.1%
Culp, Inc. 55,000 996,875
Unitog Company 203,500 5,494,500
------------
6,491,375
------------
Automotive & Parts -- 6.1%
Amcast Industrial
Corporation 228,100 5,702,500
Excel Industries, Inc. 355,100 6,924,450
Keystone Automotive
Industries, Inc. ++ 250,000 4,250,000
Myers Industries, Inc. 321,154 5,419,469
Titan Wheel
International, Inc. 698,500 12,311,063
------------
34,607,482
------------
Banking, Savings & Loans -- 12.1%
Astoria Financial
Corporation 245,900 11,680,250
Bank United Corp.
Class A 173,200 6,581,600
CCB Financial
Corporation 139,900 10,230,188
First Colorado
Bancorp, Inc. 284,200 5,435,325
Keystone Financial,
Inc. 221,150 6,910,938
One Valley Bancorp of
West Virginia, Inc. 183,750 7,717,500
Security Capital
Corporation 102,800 9,714,600
Sovereign Bancorp,
Inc. 431,080 6,573,966
St. Paul Bancorp, Inc. 11,000 364,375
Webster Financial
Corporation 75,500 3,435,250
------------
68,643,992
------------
Beverages -- 1.3%
The Robert Mondavi
Corporation ++ 158,400 $ 7,484,400
------------
Building Materials & Construction -- 0.6%
Apogee Enterprises,
Inc. 153,600 3,302,400
------------
Chemicals -- 1.9%
OM Group, Inc. 319,800 10,593,375
------------
Communications -- 2.1%
True North
Communications, Inc. 483,500 11,966,625
------------
Computer Services -- 0.9%
Pomeroy Computer
Resources, Inc. ++ 200,000 4,950,000
------------
Computers & Office Equipment -- 1.3%
Cognex Corporation ++ 285,900 7,576,350
------------
Diversified Operations -- 0.3%
SPS Technologies, Inc. ++ 25,000 1,768,750
------------
Electrical Equipment & Electronics -- 7.9%
AFC Cable Systems,
Inc. ++ 147,500 3,982,500
Belden, Inc. 293,700 10,004,156
Dallas Semiconductor
Corporation 345,800 13,572,650
Teleflex, Incorporated 256,200 8,006,250
Wyle Laboratories 227,200 8,974,400
------------
44,539,956
------------
Energy -- 1.0%
NGC Corporation 176,041 2,717,633
TNP Enterprises, Inc. 137,100 3,179,006
------------
5,896,639
------------
Financial Services -- 0.1%
Eaton Vance Corp. 25,900 720,344
------------
Foods -- 1.4%
JP Foodservice, Inc. ++ 42,800 $ 1,227,825
Midwest Grain
Products, Inc. ++ 49,850 660,513
Morrison Health Care,
Inc. 367,200 5,852,250
------------
7,740,588
------------
Forest Products & Paper -- 2.1%
Mosinee Paper
Corporation 218,749 5,359,351
Wausau Paper Mills
Company 357,775 6,753,003
------------
12,112,354
------------
Gas Distribution -- 1.6%
WICOR, Inc. 237,300 9,239,869
------------
Industrial Transportation -- 3.2%
ABC Rail Products
Corporation ++ 445,000 7,620,625
Arnold Industries, Inc. 371,300 6,312,100
The Greenbrier
Companies, Inc. 385,300 4,358,706
------------
18,291,431
------------
Insurance -- 8.2%
ALLIED Group,
Incorporated 271,950 10,334,100
Capital RE Corp. 205,300 10,983,550
Executive Risk, Inc. 172,900 8,990,800
Frontier Insurance
Group, Inc. 190,680 12,346,530
Nationwide Financial
Services, Inc. Class A 152,000 4,037,500
------------
46,692,480
------------
Leasing Companies -- 1.9%
Rollins Truck Leasing
Company 715,750 10,646,781
------------
</TABLE>
(Continued)
52 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
Machinery & Components -- 14.0%
Columbus McKinnon
Corporation 266,500 $ 5,063,500
DT Industries, Inc. 269,200 9,623,900
Graco, Incorporated 427,000 12,863,375
Greenfield Industries,
Inc. 413,200 11,156,400
Hardinge, Inc. 224,300 6,560,775
Helix Technology
Corporation 247,300 10,015,650
OmniQuip
International, Inc. ++ 292,600 6,766,375
Regal-Beloit
Corporation 297,750 7,797,328
Roper Industries, Inc. 171,100 8,875,813
-------------
78,723,116
-------------
Medical Supplies -- 0.9%
Invacare Corporation 223,800 5,231,325
-------------
Metals & Mining -- 2.2%
Reliance Steel &
Aluminum Company 489,300 12,721,800
-------------
Miscellaneous -- 2.0%
Trimas Corporation 407,100 11,449,688
-------------
Miscellaneous Distributor Wholesale -- 1.9%
Hughes Supply, Inc. 266,600 10,664,000
-------------
Office Products -- 0.8%
American Business
Products, Inc. 197,700 4,497,675
-------------
Oil & Gas -- 2.2%
The Houston
Exploration Company ++ 261,800 4,074,263
Parker Drilling
Company ++ 400,000 4,450,000
Stone Energy
Corporation ++ 138,800 3,799,650
-------------
12,323,913
-------------
Other Services -- 2.9%
Analysts International
Corporation 340,200 11,396,700
Landauer, Inc. 206,200 4,781,263
-------------
16,177,963
-------------
Publishing & Printing -- 7.6%
Banta Corporation 284,250 7,710,281
Harte Hanks
Communications, Inc. 398,300 11,749,850
Houghton Mifflin
Company 173,200 11,561,100
McClatchy
Newspapers, Inc. 409,250 12,021,719
-------------
43,042,950
-------------
Retail -- 1.8%
Arbor Drugs, Inc. 502,250 10,107,781
-------------
TOTAL EQUITIES $525,298,677
-------------
(Cost $360,676,948)
Principal
Amount Market Value
------ ------------
SHORT-TERM INVESTMENTS -- 7.7%
Commercial Paper
Abbott Laboratories
5.470% 7/09/1997 $2,315,000 $ 2,312,186
American International
Group, Inc.
6.100% 7/01/1997 4,000,000 4,000,000
AT & T Corporation
5.430% 7/10/1997 4,000,000 3,994,570
Eastman Kodak
Company
5.500% 7/10/1997 2,644,000 2,640,364
E. I. du Pont de
Nemours and Company
6.000% 7/01/1997 4,000,000 4,000,000
Ford Motor Credit
Company
5.520% 7/31/1997 4,000,000 3,981,600
IBM Credit
Corporation
5.510% 7/11/1997 4,000,000 3,993,878
J.P. Morgan & Co.,
Inc.
5.510% 7/28/1997 4,000,000 3,983,470
PepsiCo, Inc
5.500% 7/14/1997 2,000,000 1,996,028
PepsiCo, Inc
6.050% 7/01/1997 2,016,000 2,016,000
Transamerica
Corporation
6.200% 7/01/1997 4,000,000 4,000,000
Walt Disney Company,
The
6.100% 7/01/1997 4,000,000 4,000,000
Weyerhaeuser Company
5.540% 7/23/1997 2,500,000 2,491,536
-------------
TOTAL SHORT-TERM
INVESTMENTS 43,409,632
-------------
(At Amortized Cost)
TOTAL INVESTMENTS -- 100.4% 568,708,309
(Cost $404,086,580) +
Other Assets/
(Liabilities) - (0.4%) (2,545,251)
-------------
NET ASSETS -- 100.0% $566,163,058
-------------
</TABLE>
Notes to Portfolio of Investments
+ Aggregate cost for Federal tax purposes (Note 7)
++ Non-income producing security.
The accompanying notes are an integral part of the financial statements. 53
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of June 30, 1997
Assets and (Unaudited)
Liabilities ----------------
<S> <C>
Assets:
Investments, at value (cost $360,676,948) (Note 2) ..... $ 525,298,677
Short-term investments, at amortized cost (Note 2) ..... 43,409,632
----------------
Total Investments .................................... 568,708,309
Cash ................................................... 839
Receivables from:
Investments sold ..................................... 446,235
Fund shares sold ..................................... 1,952,959
Interest and dividends ............................... 553,997
----------------
Total assets ...................................... 571,662,339
----------------
Liabilities:
Payables for:
Investments purchased ................................ 4,764,297
Fund shares redeemed ................................. 421,324
Directors' fees and expenses (Note 3) ................ 5,317
Affiliates (Note 3):
Investment management fees ........................ 254,735
Administration fees ............................... 40,085
Service and distribution fees ..................... 302
Accrued expenses and other liabilities ................. 13,221
----------------
Total liabilities ................................. 5,499,281
----------------
Net assets ............................................. $ 566,163,058
================
Net assets consist of:
Paid-in capital ........................................ $ 372,384,505
Undistributed net investment income .................... 2,631,716
Accumulated net realized gain on investments ........... 26,525,108
Net unrealized appreciation on investments ............. 164,621,729
----------------
$ 566,163,058
================
Net assets:
Class 1 ................................................ $ 164,885
================
Class 2 ................................................ $ 167,340
================
Class 3 ................................................ $ 168,863
================
Class 4 ................................................ $ 565,661,970
================
Shares outstanding:
Class 1 ................................................ 10,666
================
Class 2 ................................................ 10,767
================
Class 3 ................................................ 10,837
================
Class 4 ................................................ 36,265,588
================
Net asset value, offering price and
redemption price per share:
Class 1 ................................................ $ 15.46
================
Class 2 ................................................ $ 15.54
================
Class 3 ................................................ $ 15.58
================
Class 4 ................................................ $ 15.60
================
</TABLE>
54 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended
June 30, 1997
Statement of (Unaudited)
Operations -------------
Investment income:
<S> <C>
Dividends .............................................................. $ 3,447,513
Interest ............................................................... 500,472
-------------
Total investment income $ 3,947,985
-------------
Expenses (Note 1):
Investment management fees (Note 3) .................................... 1,324,751
Custody fees ........................................................... 23,791
Audit and legal fees ................................................... 6,172
Directors' fees (Note 3) ............................................... 10,526
Fees waived by the investment manager (Note 3) ......................... (65,671)
-------------
1,299,569
Administration fees (Note 3):
Class 1 .............................................................. 417
Class 2 .............................................................. 386
Class 3 .............................................................. 242
Class 4 .............................................................. 207,434
Distribution and service fees (Note 3):
Class 1 .............................................................. 473
Class 2 .............................................................. 111
-------------
Net expenses ........................................................ 1,508,632
-------------
Net investment income ............................................... 2,439,353
-------------
Realized and unrealized gain (loss):
Net realized gain on investment transactions ........................ 21,552,734
Net change in unrealized appreciation (depreciation) on
investments ....................................................... 53,212,161
-------------
Net realized and unrealized gain .................................... 74,764,895
-------------
Net increase in net assets resulting from operations ................... $ 77,204,248
=============
</TABLE>
The accompanying notes are an integral part of the financial statements. 55
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended
Statements of June 30, 1997 Year ended
Changes in Net (Unaudited) December 31, 1996
Assets ---------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income ...................................... $ 2,439,353 $ 10,013,929
Net realized gain on investment transactions ............... 21,552,734 15,188,213
Net change in unrealized appreciation (depreciation)
on investments ............................................ 53,212,161 63,151,095
---------------- -----------------
Net increase in net assets resulting from operations ...... 77,204,248 88,353,237
---------------- -----------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1 .................................................... -- (1,430)
Class 2 .................................................... -- (2,382)
Class 3 .................................................... -- (2,845)
Class 4 .................................................... -- (9,914,239)
---------------- -----------------
Total distributions from net investment income ............ -- (9,920,896)
---------------- -----------------
From net realized gains:
Class 1 .................................................... -- (3,230)
Class 2 .................................................... -- (3,240)
Class 3 .................................................... -- (3,251)
Class 4 .................................................... -- (10,172,978)
---------------- -----------------
Total distributions from net realized gains ............... -- (10,182,699)
---------------- -----------------
Net fund share transactions (Note 5):
Class 1 .................................................... -- (49,286)
Class 2 .................................................... -- 5,622
Class 3 .................................................... -- 6,096
Class 4 .................................................... 31,590,427 8,348,780
---------------- -----------------
Increase in net assets from net fund share transactions ... 31,590,427 8,311,212
---------------- -----------------
Total increase in net assets ............................... 108,794,675 76,560,854
Net assets:
Beginning of period ........................................ 457,368,383 380,807,529
---------------- -----------------
End of period (including undistributed net investment income
of $2,631,716 and $192,363, respectively) ................. $ 566,163,058 $ 457,368,383
================ =================
</TABLE>
56 The accompanying notes are an intrgral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Financial Highlights
(For a share outstanding throughout each period)
Class 1
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.39 $ 11.40 $ 9.69 $ 10.00
------------ ------------ ------------ ------------
Income (loss) from investment operations:
Net investment income (0.01) 0.21 0.06 0.02
Net realized and unrealized gain (loss) on investments 2.08 2.23 1.74 (0.31)
------------ ------------ ------------ ------------
Total income (loss) from investment operations 2.07 2.44 1.80 (0.29)
------------ ------------ ------------ ------------
Less distributions to shareholders:
From net investment income -- (0.14) (0.09) (0.02)
From net realized gains -- (0.31) -- --
------------ ------------ ------------ ------------
Total distributions -- (0.45) (0.09) (0.02)
------------ ------------ ------------ ------------
Net asset value, end of period $ 15.46 $ 13.39 $ 11.40 $ 9.69
============ ============ ============ ============
Total Return 15.46% 21.43% 18.58% (2.89)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $165 $143 $172 $99
Net expenses to average daily net assets# 1.76%* 1.75% 1.75% 1.75%*
Net investment income to average daily net assets (0.13)%* 1.56% 0.63% 1.14%*
Portfolio turnover rate 17% 28% 28% 4%
Average broker commission rate (a) $ 0.0543 $ 0.0585 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% 1.79% 1.81%*
<CAPTION>
Class 2
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.42 $ 11.44 $ 9.70 $ 10.00
------------ ------------ ------------ ------------
Income (loss) from investment operations:
Net investment income 0.03 0.22 0.13 0.03
Net realized and unrealized gain (loss) on investments 2.09 2.30 1.74 (0.30)
------------ ------------ ------------ ------------
Total income (loss) from investment operations 2.12 2.52 1.87 (0.27)
------------ ------------ ------------ ------------
Less distributions to shareholders:
From net investment income -- (0.23) (0.13) (0.03)
From net realized gains -- (0.31) -- --
------------ ------------ ------------ ------------
Total distributions -- (0.54) (0.13) (0.03)
------------ ------------ ------------ ------------
Net asset value, end of period $ 15.54 $ 13.42 $ 11.44 $ 9.70
============ ============ ============ ============
Total Return 15.80% 22.07% 19.25% (2.72)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $167 $145 $118 $99
Net expenses to average daily net assets# 1.21%* 1.20% 1.20% 1.20%*
Net investment income to average daily net assets 0.42%* 1.81% 1.19% 1.69%*
Portfolio turnover rate 17% 28% 28% 4%
Average broker commission rate (a) $ 0.0543 $ 0.0585 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% 1.24% 1.26%*
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
(a)Average commission rate paid is computed by dividing the total amount of
commissions paid during the fiscal year by the total number of shares purchased
and sold during the fiscal year for which commissions were charged. For fiscal
years beginning on or after September 1, 1995, a Fund is required to disclose
its average commission rate per share for security trades on which commissions
are charged.
The accompanying notes are an integral part of the financial statements. 57
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Financial Highlights
(For a share outstanding throughout each period)
Class 3
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.44 $ 11.44 $ 9.70 $ 10.00
------------ ------------ ------------ ------------
Income (loss) from investment operations:
Net investment income 0.05 0.27 0.16 0.03
Net realized and unrealized gain (loss) on investments 2.09 2.31 1.74 (0.30)
------------ ------------ ------------ ------------
Total income (loss) from investment operations 2.14 2.58 1.90 (0.27)
------------ ------------ ------------ ------------
Less distributions to shareholders:
From net investment income -- (0.27) (0.16) (0.03)
From net realized gains -- (0.31) -- --
------------ ------------ ------------ ------------
Total distributions -- (0.58) (0.16) (0.03)
------------ ------------ ------------ ------------
Net asset value, end of period $ 15.58 $ 13.44 $ 11.44 $ 9.70
============ ============ ============ ============
Total Return 15.92% 22.64% 19.62% (2.68)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $169 $146 $119 $99
Net expenses to average daily net assets# 0.86%* 0.85% 0.85% 0.85%*
Net investment income to average daily net assets 0.77%* 2.16% 1.54% 2.09%*
Portfolio turnover rate 17% 28% 28% 4%
Average broker commission rate (a) $ 0.0543 $ 0.0585 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% 0.89% 0.91%*
<CAPTION>
Class 4
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.43 $ 11.44 $ 9.69 $ 10.00
------------ ------------ ------------ ------------
Income (loss) from investment operations:
Net investment income 0.07 0.31 0.19 0.04
Net realized and unrealized gain (loss) on investments 2.10 2.29 1.75 (0.31)
------------ ------------ ------------ ------------
Total income (loss) from investment operations 2.17 2.60 1.94 (0.27)
------------ ------------ ------------ ------------
Less distributions to shareholders:
From net investment income -- (0.30) (0.19) (0.04)
From net realized gains -- (0.31) -- --
------------ ------------ ------------ ------------
Total distributions -- (0.61) (0.19) (0.04)
------------ ------------ ------------ ------------
Net asset value, end of period $ 15.60 $ 13.43 $ 11.44 $ 9.69
============ ============ ============ ============
Total Return@ 16.16% 22.82% 20.01% (2.66)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $565,662 $456,935 $380,398 $310,789
Net expenses to average daily net assets# 0.6257%* 0.6110% 0.6110% 0.6110%*
Net investment income to average daily net assets 1.01%* 2.40% 1.78% 1.78%*
Portfolio turnover rate 17% 28% 28% 4%
Average broker commission rate (a) $ 0.0543 $ 0.0585 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: 0.6530%* 0.6546% 0.6553% 0.6681%*
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
(a)Average commission rate paid is computed by dividing the total amount of
commissions paid during the fiscal year by the total number of shares
purchased and sold during the fiscal year for which commissions were charged.
For fiscal years beginning on or after September 1, 1995, a Fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged.
@ 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.
58 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment objective and policies for the MassMutual International
Equity Fund?
The objective and policies of the Fund are to:
. achieve high total rate of return over the long term
. 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 performed over the past six months?
The Fund has performed very well. Due to our theme-focused investment strategy
and careful stock and country selection, the Fund has performed significantly
better than both the Morgan Stanley EAFE Index, which tracks performance across
most major international markets, and also its peers as measured by Lipper
Analytical. Our strong performance during the first half of the year placed the
Fund in the 11th percentile for all international equity funds.
How have international markets performed in comparison with the U.S. Market?
The EAFE Index posted a return of 11.21 percent for the six months ended June
30, 1997. During the same period, the U.S. market, as represented by the MSCI
U.S. Index returned 20.04 percent. While this has been another excellent period
for the U.S., the EAFE's results belie the fact that many international markets
have been as strong as or stronger than the domestic market this year. For
example, Japan, Spain, Switzerland and most of Latin America have seen dramatic
appreciation over the past six months.
But, in the same way that Japan had in recent years, Southeast Asia is currently
restraining the Index due to economic weakness there. Singapore, Malaysia, the
Philippines, and Thailand have all posted negative returns so far this year,
tempering positive results elsewhere. Still, where the Index simply reports
results from all the markets it measures, as an active manager, we were able to
strategically avoid some of the pitfalls the EAFE reflects and take greater
advantage of many of the strengths.
What types of stocks worked best for the Fund over the period?
Some of our best stocks over the period fell under our Emerging Consumer
Markets, Efficiency Enhancing Technology, Natural Resources and Healthcare
themes. Luxury goods companies have worked well for us for some time, and during
the past six months, Bulgari and Gucci were strong performers. Ordina, a Dutch
information technology firm, and SAP, a leading German software firm were
outstanding investments. Similarly, we profited from having invested in a number
of Brazil's privatizing telecommunications companies, such as Telebras. Some of
our Natural Resources successes were in oil services, specifically the French
company, Geophysique. Ares Sorono, Novartis and Altana, three pharmaceutical
firms, were some of the best of our Healthcare holdings.
Are you making any changes to the portfolio at this time?
We are not changing our exposure across themes at this time, believing our
current mix will continue to serve us well. Within themes, however, we are
carefully evaluating what we consider to be the best companies in the best
countries, selling at the best prices.
One change we're making as a result of this evaluation is that after such a
strong run in luxury goods, we're taking profits in some of our holdings there.
Much of the recent earnings growth in the luxury goods sector has come from
demand from the Far East. With the economic difficulties we see unfolding there,
profit margins may be squeezed, so we think better opportunities can be found
elsewhere.
Regionally, we continue to avoid Southeast Asia and to overweight the portfolio
in favor of South America, Europe and Japan, where valuations permit. We believe
especially good opportunities continue to exist in Brazil -- both in
telecommunications and in banking. In Japan, though the market is relatively
high-priced, we look favorably on stocks like games firms Nintendo and
Imagineer, and healthcare firms Nichii Gakken and Torii Pharmaceutical.
59
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
What is your outlook at this time?
We continue to believe our thematic approach to international investing will
allow us to make the most of the opportunities that exist outside the U.S., and
with the exception of Southeast Asia, we have a very positive outlook for
international markets on the whole. Emerging markets in areas such as South
America are growing faster than the U.S., and positive changes are taking place
in more established markets as well. In Europe, for example, we're beginning to
see corporations follow the path that allowed corporate America to become so
competitive over the past 10 years. Strategic restructuring, refocusing on
profitability and selling off underperforming and non-core businesses is
underway, which should lead to heightened profits.
The Fund has performed well over the past six months, but backed by favorable
overseas interest rates, fiscal policies and exchange rates, we're finding
outstanding opportunities in many markets and look forward to the rest of the
year.
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothectical Investments in MassMutual International Equity Fund Classes 1-4
and the Morgan Stanley Capital International Index for Europe, Australia and the
Far East (MSCI EAFE)
- --------------------------------------------------------------------------------
MassMutual International Equity Fund
<TABLE>
<CAPTION>
Total Return Year to Date One Year Average Annual
1/1/97-6/30/97 7/1/97-6/30/97 10/3/94-6/30/97
<S> <C> <C> <C>
Class 1 15.90% 24.12% 10.18%
Class 2 16.23% 24.83% 10.82%
Class 3 16.31% 25.09% 11.08%
Class 4 16.56% 25.55% 11.48%
- --------------------------------------------------------------------------------
MSCI EAFE 11.21% 12.84% 9.95%
Index
- --------------------------------------------------------------------------------
</TABLE>
Past performance is non predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund, while the MSCI EAFE is unmanaged and does not incur expenses.
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
[LINE GRAPH APPEARS HERE]
<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
6/95 9,420 9,460 9,480 9,510 10,155
12/95 9,616 9,679 9,713 9,756 11,007
6/96 10,513 10,620 10,667 10,734 11,504
12/96 11,259 11,406 11,473 11,562 11,672
6/97 13,049 13,257 13,343 13,476 12,981
</TABLE>
MassMutual International Equity Fund
Largest Country Weightings (6/30/97)
<TABLE>
<CAPTION>
% of fund
<S> <C>
Japan 13.45%
France 12.02%
Germany 10.89%
United Kingdom 10.51%
Brazil 8.05%
The Netherlands 6.92%
Switerland 5.83%
Sweden 4.82%
Austria 4.39%
Norway 3.06%
</TABLE>
60
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1997
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
EQUITIES -- 98.9%
Aerospace & Defense -- 0.6%
Rolls-Royce PLC 750,000 $ 2,858,400
--------------
Automobiles -- 1.8%
Orbital Engine Corp.
Ltd. ++ 2,000,000 1,318,400
Porsche AG,
Preference 6,000 7,816,201
--------------
9,134,601
--------------
Banking -- 9.2%
ABN Amro Holding
NV 163,184 3,048,261
Banco Bradesco SA,
Preference 292,260,951 2,922,610
Banco de Galicia y
Buenos Aires SA de
CV, Sponsored ADR 127,000 3,349,625
Bank of Scotland 4,647 29,853
Credit Suisse Group 80,000 10,289,120
HSBC Holdings PLC 161,214 4,848,511
Merita Ltd., Cl A 1,399,600 4,661,508
Societe Generale 100,000 11,173,680
Turkiye Garanti
Bankasi (New), ADR 560,000 2,112,375
Unibanco-Uniao de
Banco Brasileiros SA,
Sponsored GDR ++ 140,000 5,197,500
--------------
47,633,043
--------------
Computer Hardware -- 3.5%
Canon, Inc. 177,000 4,825,994
Eidos PLC ++ 225,000 2,752,335
Imagineer Co. Ltd. 205,000 6,897,225
PT Multipolar
Corporation 4,866,000 3,401,821
--------------
17,877,375
--------------
Computer Software -- 4.8%
JBA Holdings PLC 525,000 7,689,045
Misys PLC 450,872 10,137,677
SAP AG, Preference 33,600 6,931,969
--------------
24,758,691
--------------
Diversified Financial -- 2.9%
Cie Financiere de
Paribas, Series A 150,000 10,373,130
ING Groep NV 100,000 4,618,940
--------------
14,992,070
--------------
Electric Utilities -- 0.8%
Capex SA, GDR 76,000 $ 1,450,840
Electricidade de
Portugal SA 65,000 1,194,317
First Philippine
Holdings Corp., B
Shares 1,250,000 1,729,750
--------------
4,374,907
--------------
Electrical Equipment & Electronics -- 5.1%
Austria Mikro
Systeme International
AG 59,150 5,017,204
Getronics NV 40,166 1,299,695
Keyence Corp. 22,000 3,268,373
LEM Holdings SA 11,192 2,456,657
Rohm Co. 40,000 4,124,788
SGS-Thomson
Microelectronics NV ++ 58,800 4,704,000
Sony Corporation 60,000 5,238,132
--------------
26,108,849
--------------
Energy Services & Producers -- 5.3%
Cie Generale de
Geophysique SA ++ 54,000 5,261,166
Cie Generale de
Geophysique SA,
Sponsored ADR ++ 350,000 6,737,500
Coflexip SA,
Sponsored ADR 200,000 6,025,000
PTT Exploration & Production Public Co.
Ltd. 93,000 1,349,849
Smedvig AS 165,000 4,124,538
Smedvig AS, Series B 160,000 3,933,984
--------------
27,432,037
--------------
Food & Beverage -- 1.2%
Hellenic Bottling Co.,
SA 70,000 2,589,895
Remy Cointreau 120,000 2,884,032
Serm Suk Public Co.
Ltd. 50,000 617,640
--------------
6,091,567
--------------
Healthcare/Drugs -- 12.9%
Altana AG 15,000 $ 16,097,243
Ares-Serono Group, Cl
B 7,550 10,953,286
Biocompatibles
International PLC ++ 483,258 10,520,043
Glaxo Wellcome PLC 305,000 6,307,065
Novartis AG 4,264 6,826,611
Oxigene, Inc. ++ 26,400 863,795
Takeda Chemical
Industries Ltd. 350,000 9,848,790
Torii Pharmaceutical
Co. Ltd. 228,800 5,378,585
--------------
66,795,418
--------------
Healthcare/Supplies & Services -- 2.4%
Medical Invest
Svenska AB Class A ++ 114,300 4,582,413
Medical Invest
Svenska AB Class B ++ 39,755 1,624,672
Nichii Gakkan
Company 110,000 6,152,223
--------------
12,359,308
--------------
Household Products -- 0.1%
Srithai Superware Co.
Ltd. 169,000 391,421
Industrial Services -- 8.7%
Axime ++ 51,000 6,037,365
Bau Holdings AF,
Preference 170,611 9,267,334
Bau Holdings AG 21,501 1,551,942
Boskalis Westminster 351,631 6,909,408
Fugro NV 220,000 5,670,324
Internatio-Muller NV 102,500 3,238,231
Ordina Beheer NV ++ 208,000 3,768,648
PT Citra Marga
Nusaphala Persada 3,270,000 2,958,059
VBH Holding AG 125,000 2,711,563
Vedior NV-CVA ++ 100,000 2,648,870
--------------
44,761,744
--------------
</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>
Insurance -- 7.0%
Marschollek,
Lautenschlaeger und
Partner-VO, Non-vtg.
Preferred Stock 44,000 $ 10,605,241
Norwich Union PLC ++ 550,000 2,910,820
Ockham Holdings PLC 1,000,000 1,331,400
Reinsurance Australia
Corp. Ltd. 2,910,000 8,741,640
Skandia Forsakrings
AB 338,400 12,472,713
--------------
36,061,814
--------------
Leisure & Entertainment -- 5.1%
Lusomundo SGPS SA ++ 528,500 4,780,177
Nintendo Co. Ltd. 255,000 21,392,970
--------------
26,173,147
--------------
Manufacturing -- 3.6%
Chargeurs
International SA 168,000 9,689,215
Powerscreen
International PLC 349,900 3,811,391
Stork NV 123,157 5,028,550
--------------
18,529,156
--------------
Metals & Mining -- 1.6%
Cia de Minas
Buenaventura SA,
Sponsored ADR 200,000 3,937,500
M. I. M. Holdings Ltd. 3,000,000 4,404,900
--------------
8,342,400
--------------
Non-Durable Household Goods -- 1.6%
Wella AG 2,000 1,342,872
Wella AG Preference 10,000 6,760,268
--------------
8,103,140
--------------
Oil & Gas -- 4.1%
Belle Corp. ++ 7,500,000 2,189,250
Expro International
Group PLC 875,000 6,662,338
Novus Petroleum
Limited 2,500,000 8,521,500
Petroleo Brasileiro
SA, Preference 14,733,000 4,036,842
--------------
21,409,930
--------------
Real Estate -- 1.2%
Brazil Realty SA,
GDR 144A 62,000 $ 1,537,687
IRSA Inversiones y
Representaciones, SA 1,014,404 4,443,597
--------------
5,981,284
--------------
Retail -- 0.6%
Fila Holding SPA,
Sponsored ADR 58,000 1,939,375
PT Matahari Putra
Prima 700,000 1,403,454
--------------
3,342,829
--------------
Specialty Retail -- 2.0%
Adidas AG 42,200 4,722,429
FamilyMart Co. 66,000 3,241,451
Giordano International
Ltd. 3,500,000 2,394,350
--------------
10,358,230
--------------
Telecommunications -- 2.8%
Korea Mobile
Telecommunications
Corp. 4,429 3,248,056
Millicom International
Cellular SA ++ 100,000 4,775,000
Tandberg Television
ASA ++ 300,000 2,233,350
Telecom Italia Mobile
SpA 1,299,900 4,201,797
--------------
14,458,203
--------------
Telephone Utilities -- 7.8%
CPT Telefonica del
Peru SA, Cl. B 1,600,000 4,204,160
Telecomunicacoes
Brasileiras SA,
Sponsored ADR 120,000 18,209,992
Telecomunicacoes de
Sao Paulo SA ++ 299,993 88,048
Telecomunicacoes de
Sao Paulo SA,
Preference 12,522,000 4,070,902
Telecomunicacoes do
Rio de Janeiro SA,
Preference 40,357,620 6,033,464
Telefonica de Espana,
ADS 150,000 4,344,855
Videsh Sanchar Nigam
Ltd., GDR ++ 160,000 3,172,000
--------------
40,123,421
--------------
Transportation -- 2.2%
Argonaut AB-B Shares ++ 1,100,000 $ 1,991,550
Frontline AB ++ 1,075,000 3,684,133
MIF Ltd. ++ 391,000 5,714,773
--------------
11,390,456
--------------
TOTAL EQUITIES 509,843,441
--------------
(Cost $410,706,769)
RIGHTS -- 0.5%
Computer Hardware -- 0.4%
PT Multipolar
Corporation ++ 10,778,060 2,216,795
--------------
Industrial Services -- 0.1%
PT Citra Marga
Nusaphala Persada ++ 3,270,000 672,839
--------------
TOTAL RIGHTS 2,889,634
--------------
(Cost $2,889,179)
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 2.0%
Commercial Paper
Associates Corporation
of North America
6.250% 7/01/1997 $10,500,000 $ 10,500,000
--------------
TOTAL SHORT-TERM
INVESTMENTS 10,500,000
--------------
(At Amortized Cost)
TOTAL INVESTMENTS -- 101.4% 523,233,075
(Cost $424,095,948)+
Other Assets/
(Liabilities) - (1.4%) (7,059,212)
--------------
NET ASSETS -- 100.0% $516,173,863
--------------
</TABLE>
Notes to Portfolio of Investments
++Non-income producing security
+Aggregate cost for Federal tax purposes (Note 7)
ADR: American Depository Receipt
GDR: Global Depository Receipt
ADS: American Depository Shares
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.
62 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, 1997
(Unaudited)
---------------
Statement of Assets and Liabilities
<S> <C>
Assets:
Investments, at value (cost $413,595,948) (Note 2)...... $ 512,733,075
Short-term investments, at amortized cost (Note 2)...... 10,500,000
Cash.................................................... 297,491
Foreign currency, at value (cost $3,368,844)............ 3,524,157
Receivables from:
Investments sold...................................... 11,567,046
Fund shares sold...................................... 4,045,977
Interest and dividends................................ 1,009,538
Foreign taxes withheld................................ 475,673
---------------
Total assets....................................... 544,152,957
---------------
Liabilities:
Payables for:
Investments purchased................................. 24,152,987
Open forward foreign currency contracts (Note 2)...... 2,866,843
Fund shares redeemed.................................. 500,320
Directors' fees and expenses (Note 3)................. 5,318
Affiliates (Note 3):
Investment management fees......................... 361,138
Administration fees................................ 41,464
Service and distribution fees...................... 248
Accrued expenses and other liabilities.................. 50,776
---------------
Total liabilities.................................. 27,979,094
---------------
Net assets.............................................. $ 516,173,863
===============
Net assets consist of:
Paid-in capital......................................... $ 413,449,144
Undistributed net investment income..................... 2,786,109
Accumulated net realized gain on investments and
foreign currency translations......................... 3,725,014
Net unrealized appreciation on investments, forward
foreign currency contracts, foreign currency and
other assets and liabilities.......................... 96,213,596
---------------
$ 516,173,863
===============
Net assets:
Class 1................................................. $ 130,571
===============
Class 2................................................. $ 132,483
===============
Class 3................................................. $ 133,169
===============
Class 4................................................. $ 515,777,640
===============
Shares outstanding:
Class 1................................................. 10,176
===============
Class 2................................................. 10,281
===============
Class 3................................................. 10,315
===============
Class 4................................................. 39,835,590
===============
Net asset value, offering price and
redemption price per share:
Class 1................................................. $ 12.83
===============
Class 2................................................. $ 12.89
===============
Class 3................................................. $ 12.91
===============
Class 4................................................. $ 12.95
===============
</TABLE>
The accompanying notes are an integral part of these financial statements. 63
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended
June 30, 1997
(Unaudited)
----------------
Statement of Operations
<S> <C>
Investment income:
Dividends (net of withholding tax of $538,484)...... $ 4,722,527
Interest............................................ 173,527
----------------
Total investment income........................... 4,896,054
----------------
Expenses (Note 1):
Investment management fees (Note 3)................. 1,804,870
Custody fees........................................ 195,684
Audit and legal fees................................ 5,235
Directors' fees (Note 3)............................ 10,526
Fees waived by the investment manager (Note 3)...... (50,753)
----------------
1,965,562
Administration fees (Note 3):
Class 1........................................... 355
Class 2........................................... 330
Class 3........................................... 270
Class 4........................................... 206,216
Distribution and service fees (Note 3):
Class 1........................................... 388
Class 2........................................... 91
----------------
Net operating expenses......................... 2,173,212
----------------
Interest Expense (Note 8)........................... 50,711
----------------
Net investment income.......................... 2,672,131
----------------
Realized and unrealized gain (loss) from investments
and foreign currency:
Net realized gain on:
Investment transactions........................... 12,990,196
Foreign currency transactions..................... 3,090,300
Net realized gain............................... 16,080,496
----------------
Net change in unrealized appreciation
(depreciation) on:
Investments....................................... 51,844,408
Translation of assets and liabilities in foreign
currencies....................................... (3,533,548)
Net unrealized gain............................... 48,310,860
----------------
Net realized and unrealized gain from investments
and foreign currency............................. 64,391,356
----------------
Net increase in net assets resulting from operations $ 67,063,487
================
</TABLE>
64 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended
June 30, 1997 Year ended
(Unaudited) December 31, 1996
---------------- -----------------
<S> <C> <C>
Statements of Changes in Net Assets
Increase (Decrease) in Net Assets:
Operations:
Net investment income............................................. $ 2,672,131 $ 1,651,003
Net realized gain on investments and foreign
currency transactions............................................ 16,080,496 10,732,352
Net change in unrealized appreciation (depreciation) on
investments and translation of assets and liabilities in
foreign currencies............................................... 48,310,860 36,530,674
---------------- -----------------
Net increase in net assets resulting from operations............ 67,063,487 48,914,029
---------------- -----------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1........................................................... -- (263)
Class 2........................................................... -- (433)
Class 3........................................................... -- (501)
Class 4........................................................... -- (1,825,896)
---------------- -----------------
Total distributions from net investment income................... -- (1,827,093)
---------------- -----------------
In excess of net investment income:
Class 1........................................................... -- (794)
Class 2........................................................... -- (1,308)
Class 3........................................................... -- (1,513)
Class 4........................................................... -- (5,515,423)
---------------- -----------------
Total distributions in excess of net investment income........... -- (5,519,038)
---------------- -----------------
Net fund share transactions (Note 5):
Class 1........................................................... -- (13,956)
Class 2........................................................... -- 1,742
Class 3........................................................... -- 2,018
Class 4........................................................... 92,458,564 94,070,522
---------------- -----------------
Increase in net assets from net fund share transactions.......... 92,458,564 94,060,326
---------------- -----------------
Total increase in net assets...................................... 159,522,051 135,628,224
Net assets:
Beginning of period............................................... 356,651,812 221,023,588
---------------- -----------------
End of period (including undistributed net investment income
of $2,786,109 and $113,978, respectively)........................ $ 516,173,863 $ 356,651,812
================ =================
</TABLE>
The accompanying notes are an integral part of the financial statements. 65
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 1
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.07 $ 9.54 $ 9.25 $ 10.00
----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income 0.00 (0.07) (0.03) (0.02)
Net realized and unrealized gain (loss) on investments
and foreign currency 1.76 1.70 0.40 (0.73)
----------- ----------- ----------- -----------
Total income (loss) from investment operations 1.76 1.63 0.37 (0.75)
----------- ----------- ----------- -----------
Less distributions to shareholders:
From net investment income -- (0.10) -- --
In excess of net investment income -- -- (0.08) --
----------- ----------- ----------- -----------
Total distributions -- (0.10) (0.08) --
----------- ----------- ----------- -----------
Net asset value, end of period $ 12.83 $ 11.07 $ 9.54 $ 9.25
=========== =========== =========== ===========
Total Return 15.90% 17.09% 3.96% (7.50)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $131 $113 $112 $93
Net expenses to average daily net assets# 2.17%* 2.15% 2.15% 2.15%*
Net investment income to average daily net assets 0.03%* (0.51)% (0.40)% (1.10)%*
Portfolio turnover rate 36% 58% 121% 18%
Average broker commission rate (a) $ 0.0058 $ 0.0254 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: 2.19%* 2.22% 2.24% 2.24%*
</TABLE>
<TABLE>
<CAPTION>
Class 2
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.09 $ 9.56 $ 9.26 $ 10.00
----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income 0.03 0.00 0.02 (0.01)
Net realized and unrealized gain (loss) on investments
and foreign currency 1.77 1.70 0.40 (0.73)
----------- ----------- ----------- -----------
Total income (loss) from investment operations 1.80 1.70 0.42 (0.74)
----------- ----------- ----------- -----------
Less distributions to shareholders:
From net investment income -- (0.17) (0.02) --
In excess of net investment income -- -- (0.10) --
----------- ----------- ----------- -----------
Total distributions -- (0.17) (0.12) --
----------- ----------- ----------- -----------
Net asset value, end of period $ 12.89 $ 11.09 $ 9.56 $ 9.26
=========== =========== =========== ===========
Total Return 16.23% 17.85% 4.52% (7.40)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $132 $114 $97 $93
Net expenses to average daily net assets# 1.62%* 1.60% 1.60% 1.60%*
Net investment income to average daily net assets 0.58%* 0.02% 0.19% (0.55)%*
Portfolio turnover rate 36% 58% 121% 18%
Average broker commission rate (a) $ 0.0058 $ 0.0254 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: 1.64%* 1.67% 1.69% 1.69%*
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
(a)Average commission rate paid is computed by dividing the total amount of
commissions paid during the fiscal year by the total number of shares purchased
and sold during the fiscal year for which commissions were charged. For fiscal
years beginning on or after September 1, 1995, a Fund is required to disclose
its average commission rate per share for security trades on which commissions
are charged. The average broker commission rate will vary depending on the
markets in which trades are executed.
The accompanying notes are an integral part of the financial statements.
66
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 3
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.10 $ 9.57 $ 9.27 $ 10.00
------------- ------------- ------------- -------------
Income (loss) from investment operations:
Net investment income 0.05 0.03 0.04 (0.00)
Net realized and unrealized gain (loss) on investments
and foreign currency 1.76 1.70 0.40 (0.73)
------------- ------------- ------------- -------------
Total income (loss) from investment operations 1.81 1.73 0.44 (0.73)
------------- ------------- ------------- -------------
Less distributions to shareholders:
From net investment income -- (0.20) (0.05) --
In excess of net investment income -- -- (0.09) --
------------- ------------- ------------- -------------
Total distributions -- (0.20) (0.14) --
------------- ------------- ------------- -------------
Net asset value, end of period $ 12.91 $ 11.10 $ 9.57 $ 9.27
============= ============= ============= =============
Total Return 16.31% 18.11% 4.78% (7.30)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $133 $114 $97 $93
Net expenses to average daily net assets# 1.37%* 1.35% 1.35% 1.35%*
Net investment income to average daily net assets 0.83%* 0.27% 0.45% (0.30)%*
Portfolio turnover rate 36% 58% 121% 18%
Average broker commission rate (a) $ 0.0058 $ 0.0254 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: 1.39%* 1.42% 1.44% 1.44%*
<CAPTION>
Class 4
-------
Six months ended
6/30/97 Year ended Year ended Period ended
(Unaudited) 12/31/96 12/31/95 12/31/94**
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.11 $ 9.58 $ 9.28 $ 10.00
------------- ------------- ------------- -------------
Income (loss) from investment operations:
Net investment income 0.07 0.06 0.07 0.00
Net realized and unrealized gain (loss) on investments
and foreign currency 1.77 1.71 0.41 (0.72)
------------- ------------- ------------- -------------
Total income (loss) from investment operations 1.84 1.77 0.48 (0.72)
------------- ------------- ------------- -------------
Less distributions to shareholders:
From net investment income -- (0.24) (0.07) --
In excess of net investment income -- -- (0.11) --
------------- ------------- ------------- -------------
Total distributions -- (0.24) (0.18) --
------------- ------------- ------------- -------------
Net asset value, end of period $ 12.95 $ 11.11 $ 9.58 $ 9.28
============= ============= ============= =============
Total Return@ 16.56% 18.51% 5.13% (7.20)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $515,778 $356,311 $220,718 $150,199
Net expenses to average daily net assets# 1.0229%* 1.0020% 1.0020% 1.0020%*
Net investment income to average daily net assets 1.26%* 0.59% 0.76% 0.04%*
Portfolio turnover rate 36% 58% 121% 18%
Average broker commission rate (a) $ 0.0058 $ 0.0254 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: 1.0468%* 1.0718% 1.0920% 1.0877%*
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
(a)Average commission rate paid is computed by dividing the total amount of
commissions paid during the fiscal year by the total number of shares
purchased and sold during the fiscal year for which commissions were charged.
For fiscal years beginning on or after September 1, 1995, a Fund is required
to disclose its average commission rate per share for security trades on
which commissions are charged. The average broker commission rate will vary
depending on the markets in which trades are executed.
@ 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. 67
<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"),
all of which commenced operations on October 3, 1994.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed
consistently by each Fund in the preparation of the financial statements in
conformity with generally accepted accounting principles. 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 Valuation
Equity securities are valued on the basis of valuations furnished by a pricing
service, authorized by the Board of Trustees ("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 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.
68
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
Accounting for Investments
Investment transactions are accounted for on the trade date. Realized gains and
losses on sales of investments and unrealized appreciation and depreciation of
investments are computed on the specific identification cost method. Interest
income, adjusted for amortization of discounts and premiums on investments, is
earned from the settlement date and is recorded on the accrual basis. Dividend
income is recorded on the ex-dividend date.
Federal Income Tax
It is each Fund's intent to continue to comply with the provisions of subchapter
M of the Code applicable to a regulated investment company. Under such
provisions, the Funds will not be subject to federal income taxes on their
ordinary income and net realized capital gain to the extent they are distributed
or deemed to have been distributed to their shareholders. Therefore, no Federal
income tax provision is required.
Dividends and Distributions to Shareholders
Dividends from net investment income and distributions of any net realized
capital gains of each Fund are declared and paid annually and at other times as
may be required to satisfy tax or regulatory requirements. Distributions to
shareholders are recorded on the ex-dividend date. Income and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to investments in forward contracts, passive foreign investment
companies, the deferral of wash sale losses, and paydowns on certain
mortgage-backed securities. As a result, net investment income (loss) and net
realized gain (loss) on investment transactions for a reporting period may
differ significantly from distributions during such period. Accordingly, the
Funds may periodically make reclassifications among certain of their capital
accounts without impacting the net asset value of the Funds.
Foreign Currency Translation
The books and records of the Funds are maintained in U.S. dollars. The market
values of foreign currencies, foreign securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
at the mean of the buying and selling rates of such currencies against the U.S.
dollar at the end of each business day. Purchases and sales of foreign
securities and income and expense items are translated at the rates of exchange
prevailing on the respective dates of such transactions. The Funds do not
isolate that portion of the results of operations arising from changes in the
exchange rates from that portion arising from changes in the market prices of
securities.
Net realized foreign currency gains and losses resulting from changes in
exchange rates include foreign currency gains and losses between trade date and
settlement date on investment securities transactions, foreign currency
transactions and the difference between the amounts of dividends recorded on the
books of the Funds and the amount actually received.
Forward Foreign Currency Contracts
Each Fund may enter into forward foreign currency contracts in order to convert
foreign denominated securities or obligations to U.S. dollar denominated
investments. The International Equity Fund may engage in such transactions to
manage the value of portfolio holdings against future movements in certain
foreign currency exchange rates. A forward foreign currency contract is an
agreement between two parties to buy and sell a currency at a set price on a
future date. The market value of a forward currency contract fluctuates with
changes in forward foreign currency exchange rates. Forward foreign currency
contracts are marked to market daily and the change in their value is recorded
by the Funds as an unrealized gain or loss. When a forward foreign currency
contract is extinguished, through delivery or offset by entering into another
forward foreign currency contract, the Funds record a realized gain or loss
equal to the difference between the value of the contract at the time it was
opened and the value of the contract at the time it was extinguished or offset.
Forward foreign currency contracts involve a risk of loss from the potential
inability of counterparties to meet the terms of their contracts and from
unanticipated movements in foreign currency values and interest rates.
69
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
The notional or contractual amounts of these instruments represent the
investments the Funds have in particular classes of financial instruments and do
not necessarily represent the amounts potentially subject to risk. The
measurement of the risk associated with these instruments is meaningful only
when all related and offsetting transactions are considered. A summary of
obligations for the International Equity Fund under these financial instruments
at June 30, 1997 is as follows:
<TABLE>
<CAPTION>
In
Contracts Exchange Unrealized
Settlement to Units of for U.S. Contracts at Appreciation
Date Deliver/Receive Currency Dollars Value (Depreciation)
- --------- ----------------- ---------- --------- ------------- --------------
<S> <C> <C> <C> <C> <C>
BUYS
07/02/97 French Franc 13,258,256 $ 2,276,994 $ 2,258,300 $ (18,694)
07/01/97 Japanese Yen 7,449,428 64,964 65,108 144
07/01/97 Netherlands Guilder 4,986,916 2,566,871 2,545,254 (21,617)
07/01/97 Swedish Krona 4,120,261 535,273 532,857 (2,416)
--------------
(42,583)
--------------
SELLS
07/31/97 Japanese Yen 4,007,200,000 32,316,129 35,141,013 (2,824,884)
07/01/97 Netherlands Guilder 143,992 74,116 73,492 624
--------------
(2,824,260)
--------------
$ (2,866,843)
==============
</TABLE>
Forward Commitments
Each Fund may purchase or sell securities on a "when issued" or delayed delivery
or on a forward commitment basis. The Funds use forward commitments to manage
interest rate exposure or as a temporary substitute for purchasing or selling
particular debt securities. Forward commitments are not used for purposes of
trading. 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, 1997, is as follows:
<TABLE>
<CAPTION>
Forward Expiration Aggregate
Commitment of Face Value Market Unrealized
Contracts to Buy Contracts of Contracts Cost Value (Depreciation)
---------------- --------- ------------ ---- ----- --------------
<S> <C> <C> <C> <C> <C>
Core Bond Fund
U.S. Treasury Note
5.875% 11/15/1999 August 1997 $ 9,250,000 $ 9,210,977 $ 9,187,378 ($23,599)
Balanced Fund
U.S. Treasury Note
5.875% 11/15/1999 August 1997 $1,900,000 $1,891,984 $1,887,137 ($ 4,847)
</TABLE>
70
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
Allocation of Operating Activity
In maintaining the records for the Funds, the 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 Management Fees
Under an agreement between the Trust and 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:
<TABLE>
<CAPTION>
<S> <C>
Prime Fund .45%
Short-Term Bond Fund .45%
Core Bond Fund .45%
Balanced Fund .45%
Value Equity Fund .45%
Small Cap Value Equity Fund .55%
International Equity Fund .85%
</TABLE>
MassMutual has entered into investment sub-advisory agreements with two
subsidiaries: David L. Babson & Company, Inc. ("Babson") and HarbourView Asset
Management Corporation ("HarbourView"). These agreements provide that (1)
effective January 1, 1997, Babson 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.
Prior to January 1, 1997, Concert Capital Management ("Concert Capital") served
as the investment sub-advisor to the Value Equity Fund, the Small Cap Value
Equity Fund and the Value Equity sector of the Balanced Fund. On January 1,
1996, the employees of Concert Capital became co-employees of Babson. At the
time, both Concert Capital and Babson were wholly-owned subsidiaries of DLB
Acquisition Corporation, a controlled subsidiary of MassMutual. Concert Capital
merged with and into Babson effective December 31, 1996.
MassMutual pays Babson a fee equal to an annual rate of .13% of the average
daily net asset value of the Value Equity Fund and the Value Equity sector of
the Balanced Fund and .25% of the average daily net asset value of the Small Cap
Value Equity Fund. MassMutual pays HarbourView a fee equal to an annual rate of
.50% of the average daily net asset value of the International Equity Fund.
Administration Fees
Under separate administrative and shareholder services agreements between each
Fund and MassMutual, MassMutual provides certain administrative and shareholder
services and bears some class specific administrative expenses. In return for
these services, MassMutual receives an administrative services fee monthly based
upon the average daily net assets of the applicable class of shares of the Fund
at the following annual rates:
<TABLE>
<CAPTION>
Class 1 Class 2 Class 3 Class 4
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Prime Fund .5628% .5128% .3152% .0812%
Short-Term Bond Fund .5568% .5068% .3092% .0782%
Core Bond Fund .5688% .5188% .3212% .0842%
Balanced Fund .5708% .5208% .3232% .0852%
Value Equity Fund .5814% .5314% .3338% .0905%
Small Cap Value Equity Fund .5728% .5228% .3252% .0862%
International Equity Fund .5948% .5448% .4448% .0972%
</TABLE>
71
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
Distribution and Service Fees
OppenheimerFunds Distributor, Inc. ("Oppenheimer") acts as distributor to each
Fund. MML Investor Services, Inc. (AMMLISI") serves as subBdistributor 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 12bB1 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
For the period January 1, 1997 to April 30, 1997, MassMutual voluntarily agreed
to waive a portion of its management fee to the extent that the aggregate annual
operating expenses incurred during the year exceed the following percentages of
the average daily net assets:
<TABLE>
<CAPTION>
Class 1 Class 2 Class 3 Class 4
------- ------- ------- -------
<S> <C> <C> <C> <C>
Prime Fund 1.65% 1.10% .75% .5160%
Short-Term Bond Fund 1.65% 1.10% .75% .5190%
Core Bond Fund 1.65% 1.10% .75% .5130%
Balanced Fund 1.65% 1.10% .75% .5120%
Value Equity Fund 1.65% 1.10% .75% .5067%
Small Cap Value Equity Fund 1.75% 1.20% .85% .6110%
International Equity Fund 2.15% 1.60% 1.35% 1.002%
</TABLE>
MassMutual's voluntary agreement to waive a portion of its management fee
terminated May 1, 1997. MassMutual's management fee for the six months ended
June 30, 1997 was $12,168,769, of which $679,798 was reimbursed to the Funds.
Other
Certain officers and directors of the Funds are also officers of MassMutual. The
compensation of unaffiliated directors of the Funds is borne by the Funds.
At June 30, 1997, MassMutual or separate investment accounts thereof owned all
of the outstanding shares of the Trust.
4. Purchases And Sales Of Investments
Cost of purchases and proceeds from sales of investment securities (excluding
short-term investments) for the six months ended June 30, 1997 were as follows:
<TABLE>
<CAPTION>
Long-term U.S.
Government Other Long-term
Securities Securities
-------------- ------------------
<S> <C> <C> <C>
Purchases Short-Term Bond Fund $ 18,507,923 $ 16,509,283
Core Bond Fund 47,633,441 78,499,107
Balanced Fund 20,660,889 47,510,855
Value Equity Fund - 275,356,822
Small Cap Value Equity Fund - 79,346,567
International Equity Fund - 243,114,678
Sales Short-Term Bond Fund $ 2,362,891 $ 9,230,657
Core Bond Fund 57,991,171 21,845,637
Balanced Fund 16,398,490 33,414,775
Value Equity Fund - 231,667,406
Small Cap Value Equity Fund - 78,679,629
International Equity Fund - 151,990,672
</TABLE>
72
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
5. Capital Share Transactions
The Funds are authorized to issue an unlimited number of 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
Six months ended Year ended
June 30, 1997 December 31, 1996
Shares Amount Shares Amount
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Prime Fund
Sold - - - -
Issued as reinvestment
of dividends - - 28 4,288
Redeemed - - - -
--------- --------- --------- ----------
Net increase - $ - 28 $ 4,288
========= ========= ========= ==========
Short-Term Bond Fund
Sold - - - -
Issued as reinvestment
of dividends - - 519 5,285
Redeemed - - - -
--------- --------- --------- ----------
Net increase - $ - 519 $ 5,285
========= ========= ========= ==========
Core Bond Fund
Sold - - 429 4,520
Issued as reinvestment
of dividends - - 489 5,156
Redeemed - - (5,250) (55,534)
--------- --------- --------- ----------
Net increase (decrease) - $ - (4,332) $ (45,858)
========= ========= ========= ==========
Balanced Fund
Sold - - 931 10,969
Issued as reinvestment
of dividends - - 416 5,173
Redeemed - - (5,552) (65,509)
--------- --------- --------- ----------
Net increase (decrease) - $ - (4,205) $ (49,367)
========= ========= ========= ==========
Value Equity Fund
Sold - - - -
Issued as reinvestment
of dividends - - 403 5,884
Redeemed - - - -
--------- --------- --------- ----------
Net increase - $ - 403 $ 5,884
========= ========= ========= ==========
Small Cap Value Equity Fund
Sold - - 4,373 54,090
Issued as reinvestment
of dividends - - 349 4,660
Redeemed - - (9,150) (108,036)
--------- --------- --------- ----------
Net increase (decrease) - $ - (4,428) $ (49,286)
========= ========= ========= ==========
International Equity Fund
Sold - - 5,377 55,098
Issued as reinvestment
of dividends - - 100 1,065
Redeemed - - (7,009) (70,119)
--------- --------- --------- ----------
Net increase - $ - (1,532) $ (13,956)
========= ========= ========= ==========
</TABLE>
<TABLE>
<CAPTION>
Class 2
Six months ended Year ended
June 30, 1997 December 31, 1996
Shares Amount Shares Amount
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Prime Fund
Sold - - - -
Issued as reinvestment
of dividends - - 33 4,922
Redeemed - - - -
---------- ---------- ---------- ----------
Net increase - $ - 33 $ 4,922
========== ========== ========== ==========
Short-Term Bond Fund
Sold - - - -
Issued as reinvestment
of dividends - - 584 5,951
Redeemed - - - -
---------- ---------- ---------- ----------
Net increase - $ - 584 $ 5,951
========== ========== ========== ==========
Core Bond Fund
Sold - - - -
Issued as reinvestment
of dividends - - 562 5,941
Redeemed - - - -
---------- ---------- ---------- ----------
Net increase (decrease) - $ - 562 $ 5,941
========== ========== ========== ==========
Balanced Fund
Sold - - - -
Issued as reinvestment
of dividends - - 484 6,038
Redeemed - - - -
---------- ---------- ---------- ----------
Net increase (decrease) - $ - 484 $ 6,038
========== ========== ========== ==========
Value Equity Fund
Sold - - - -
Issued as reinvestment
of dividends - - 456 6,682
Redeemed - - - -
---------- ---------- ---------- ----------
Net increase - $ - 456 $ 6,682
========== ========== ========== ==========
Small Cap Value Equity Fund
Sold - - - -
Issued as reinvestment
of dividends - - 420 5,622
Redeemed - - - -
---------- ---------- ---------- ----------
Net increase (decrease) - $ - 420 $ 5,622
========== ========== ========== ==========
International Equity Fund
Sold - - - -
Issued as reinvestment
of dividends - - 161 1,742
Redeemed - - - -
---------- ---------- ---------- ----------
Net increase - $ - 161 $ 1,742
========== ========== ========== ==========
</TABLE>
73
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class 3
Six months ended Year ended
June 30, 1997 December 31, 1996
Shares Amount Shares Amount
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Prime Fund
Sold - - - -
Issued as reinvestment
of dividends - - 35 5,335
Redeemed - - - -
---------- ---------- ---------- ----------
Net increase - $ - 35 $ 5,335
========== ========== ========== ==========
Short-Term Bond Fund
Sold - - - -
Issued as reinvestment
of dividends - - 625 6,381
Redeemed - - - -
---------- ---------- ---------- ----------
Net increase - $ - 625 $ 6,381
========== ========== ========== ==========
Core Bond Fund
Sold - - - -
Issued as reinvestment
of dividends - - 604 6,389
Redeemed - - - -
---------- ---------- ---------- ----------
Net increase - $ - 604 $ 6,389
========== ========== ========== ==========
Balanced Fund
Sold - - - -
Issued as reinvestment
of dividends - - 521 6,510
Redeemed - - - -
---------- ---------- ---------- ----------
Net increase - $ - 521 $ 6,510
========== ========== ========== ==========
Value Equity Fund
Sold - - - -
Issued as reinvestment
of dividends - - 492 7,213
Redeemed - - - -
---------- ---------- ---------- ----------
Net increase (decrease) - $ - 492 $ 7,213
========== ========== ========== ==========
Small Cap Value Equity Fund
Sold - - - -
Issued as reinvestment
of dividends - - 455 6,096
Redeemed - - - -
---------- ---------- ---------- ----------
Net increase - $ - 455 $ 6,096
========== ========== ========== ==========
International Equity Fund
Sold - - - -
Issued as reinvestment
of dividends - - 186 2,018
Redeemed - - - -
---------- ---------- ---------- ----------
Net increase - $ - 186 $ $2,018
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Class 4
Six months ended Year ended
June 30, 1997 December 31, 1996
Shares Amount Shares Amount
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Prime Fund
Sold 1,255,263 191,777,654 2,391,584 370,653,176
Issued as reinvestment
of dividends - - 86,522 13,067,477
Redeemed (1,389,966) (212,526,347) (2,445,697) (378,881,926)
------------ ------------ ------------ ------------
Net increase (134,703) $ 20,748,693) 32,409 $ 4,838,727
============ ============ ============ ============
Short-Term Bond Fund
Sold 4,745,250 48,620,824 6,074,656 62,871,971
Issued as reinvestment
of dividends - - 808,935 8,206,104
Redeemed (2,523,313) (25,793,936) (4,631,745) (47,999,711)
------------ ------------ ------------ ------------
Net increase 2,221,937 $ 22,826,888 2,251,846 $ 23,078,364
============ ============ ============ ============
Core Bond Fund
Sold 9,449,800 99,663,183 15,244,478 161,638,362
Issued as reinvestment
of dividends - - 1,838,613 19,317,124
Redeemed (4,837,900) (50,796,721) (6,519,179) (69,250,775)
------------ ------------ ------------ ------------
Net increase 4,611,900 $ 48,866,462 10,563,912 $111,704,711
============ ============ ============ ============
Balanced Fund
Sold 8,196,028 105,127,519 16,529,257 200,170,935
Issued as reinvestment
of dividends - - 2,193,746 27,325,515
Redeemed (7,618,750) (97,358,388) (12,780,860) (154,960,358)
------------ ------------ ------------ ------------
Net increase 577,278 $ 7,769,131 5,942,143 $ 72,536,092
============ ============ ============ ============
Value Equity Fund
Sold 22,591,959 348,496,543 42,761,147 585,609,490
Issued as reinvestment
of dividends - - 8,235,214 120,574,407
Redeemed (20,346,283) (311,674,013) (47,300,940) (651,246,978)
------------ ------------ ------------ ------------
Net increase (decrease) 2,245,676 $ 36,822,530 3,695,421 $ 54,936,919
============ ============ ============ ============
Small Cap Value Equity Fund
Sold 6,601,406 91,460,706 10,428,037 129,033,258
Issued as reinvestment
of dividends - - 1,500,824 20,087,217
Redeemed (4,349,407) (59,870,279) (11,168,365) (140,771,695)
------------ ------------ ------------ ------------
Net increase 2,251,999 $ 31,590,427 760,496 $ 8,348,780
============ ============ ============ ============
International Equity Fund
Sold 12,137,572 144,485,007 14,964,804 154,912,942
Issued as reinvestment
of dividends - - 672,906 7,341,306
Redeemed (4,372,600) (52,026,443) (6,611,341) (68,183,726)
------------ ------------ ------------ ------------
Net increase 7,764,972 $ 92,458,564 9,026,369 $ 94,070,522
============ ============ ============ ============
</TABLE>
74
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
6. Foreign Securities
The International Equity Fund invests substantially all of its assets in foreign
securities. The other Funds may also invest in foreign securities, subject to
certain percentage restrictions. Investing in securities of foreign companies
and foreign governments involves special risks and considerations not typically
associated with investing in securities of U.S. companies and the U.S.
Government. These risks include revaluation of currencies and future adverse
political and economic developments. Moreover, securities of many foreign
companies and foreign governments and their markets may be less liquid and their
prices more volatile than those of securities of comparable U.S. companies and
the U.S. Government.
7. Federal Income Tax Information
At June 30, 1997, the cost of securities and the unrealized appreciation
(depreciation) in the value of investments owned by the Funds, as computed on a
Federal income tax basis, are as follows:
<TABLE>
<CAPTION>
Federal Tax Basis Tax Basis Net Unrealized
Income Tax Unrealized Unrealized Appreciation
Cost Appreciation Depreciation (Depreciation)
------------------ ----------------- -------------- -----------------
<S> <C> <C> <C> <C>
Prime Fund $ 244,588,726 $ 13,049 $ (5,212) $ 7,837
Short-Term Bond Fund 164,941,091 890,098 (647,903) 242,195
Core Bond Fund 400,421,776 6,269,978 (2,625,774) 3,644,204
Balanced Fund 505,416,393 124,999,570 (2,252,527) 122,747,043
Value Equity Fund 1,932,556,830 1,026,193,157 (13,582,382) 1,012,610,775
Small Cap Value Equity Fund 404,086,580 168,930,386 (4,308,657) 164,621,729
International Equity Fund 424,095,948 109,456,956 (10,319,829) 99,137,127
</TABLE>
At December 31, 1996, the following Funds had available, for Federal income tax
purposes, unused capital losses:
<TABLE>
<CAPTION>
Amount Expiration Date
--------------------------------------
<S> <C> <C>
Prime Fund $ 2,082 December 31, 2003
Prime Fund 2,368 December 31, 2004
Short-Term Bond Fund 295,197 December 31, 2004
Core Bond Fund 1,885,881 December 31, 2004
International Equity Fund 11,789,843 December 31, 2003
</TABLE>
8. Line of Credit
The Trust, on behalf of each Fund, maintains a discretionary line of credit
agreement with PNC Bank, N.A. Each Fund may borrow under the line of credit,
provided that the Trust's borrowings do not exceed $50,000,000 in the aggregate
at any one time. Interest is charged based on outstanding borrowings at the
Federal Funds Rate plus .45%. Only the International Equity Fund utilized the
line of credit during the six months ended June 30, 1997. Average daily
borrowings for the six months ended June 30, 1997 were $6,904,444 and the
average interest rate was 5.85%. The maximum borrowing outstanding during the
six months ended June 30, 1997 was $31,600,000.
75
<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.
