<PAGE>
Filed pursuant
to Rule 497(c)
File No. 811-8274
MASSMUTUAL INSTITUTIONAL FUNDS
1295 STATE STREET
SPRINGFIELD, MASSACHUSETTS 01111
(413) 788-8411
MassMutual Institutional Funds (the "Trust") is a professionally managed open-
end investment company designed to offer investors both the opportunity to
pursue long-term investment goals and the flexibility to respond to changes in
their investment objectives and economic and market conditions. This Prospectus
describes seven separate, diversified series of shares of the Trust (the
"Funds"). Each Fund has a distinct investment objective.
(1) MassMutual Prime Fund-Seeks to maximize current income to the extent
consistent with liquidity and the preservation of capital by investing
in a diversified portfolio of money market instruments. The Prime Fund
is not a money market fund.
(2) MassMutual Short-Term Bond Fund-Seeks to achieve a high total rate of
return primarily from current income while minimizing fluctuations in
capital values by investing primarily in a diversified portfolio of
short-term investment grade fixed income securities.
(3) MassMutual Core Bond Fund-Seeks to achieve a high total rate of return
consistent with prudent investment risk and the preservation of capital
by investing primarily in a diversified portfolio of investment grade
fixed income securities.
(4) MassMutual Balanced Fund-Seeks to achieve a high total rate of return
over an extended period of time consistent with the preservation of
capital values by investing in a diversified portfolio of equity
securities, fixed income securities and money market instruments.
(5) MassMutual Value Equity Fund-Seeks to achieve long-term growth of
capital and income by investing primarily in a diversified portfolio of
equity securities of larger well-established companies.
(6) MassMutual Small Cap Value Equity Fund-Seeks to achieve long-term
growth of capital and income by investing primarily in a diversified
portfolio of equity securities of smaller companies.
(7) MassMutual International Equity Fund-Seeks to achieve a high total rate
of return over the long term by investing in a diversified portfolio of
foreign and domestic equity securities.
This Prospectus sets forth concisely the information about the Funds and the
Trust that a prospective investor should know before investing. Please read it
carefully and retain it for future reference. Certain additional information
about the Funds and the Trust is contained in a Statement of Additional
Information dated December 1, 1997, which has been filed with the Securities
and Exchange Commission and is incorporated herein by reference. This additional
information is available without charge by writing to the Secretary, MassMutual
Institutional Funds, 1295 State Street, Springfield, MA 01111.
Massachusetts Mutual Life Insurance Company ("MassMutual" or the "Adviser") is
the investment manager to each of the Funds. David L. Babson and Company, Inc.
("Babson") is the investment sub-adviser to the Value Equity Fund, the Small Cap
Value Equity Fund and the Value Equity Sector of the Balanced Fund. HarbourView
Asset Management Corporation ("HarbourView") is the investment sub-adviser to
the International Equity Fund. Babson and HarbourView are both indirect
subsidiaries of the Adviser and are hereinafter collectively referred to as the
"Sub-Adviser."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
DISTRIBUTOR
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
Two World Trade Center
New York, New York 10048
PROSPECTUS December 1, 1997.
<PAGE>
<TABLE>
<CAPTION>
Table Of Contents
Page
<S> <C>
Expense Information........................................................ 3
Financial Highlights....................................................... 7
Line of Credit............................................................. 13
The Trust.................................................................. 14
Investment Objectives And Policies Of The Funds............................ 14
Investment Practices Of The Funds And Related Risks........................ 17
How To Purchase, Exchange, And Redeem Shares............................... 20
Investment Manager And Sub-Advisers........................................ 23
Distributor, Sub-Distributor, Transfer Agent, Dividend Disbursing Agent,
Custodian, and Sub-Administrator........................................... 24
Control Person And Principal Holder Of Securities.......................... 24
Description Of Shares...................................................... 24
How Fund Shares Are Priced................................................. 24
Distributions And Taxation................................................. 25
Investment Performance..................................................... 25
Glossary................................................................... 28
</TABLE>
2
<PAGE>
Expense Information
The following information is provided in order to assist you in understanding
the various costs and expenses that you, as an investor in the Funds, will bear
directly or indirectly.
- --------------------------------------------------------------------------------
CLASS A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP
SHORT-TERM CORE VALUE VALUE INTERNATIONAL
PRIME BOND BOND BALANCED EQUITY EQUITY EQUITY
FUND FUND FUND FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed
on Purchases....................... None None None None None None None
Maximum Sales Charge Imposed
on Reinvested Dividends............ None None None None None None None
Maximum Deferred Sales Charge /(1)/. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Exchange Fee........................ None None None None None None None
Redemption Fee...................... None None None None None None None
ANNUAL OPERATING EXPENSES
(As a percentage of average.net assets)
Management Fees..................... .45% .45% .45% .45% .45% .55% .85%
Rule 12b-1 Fees..................... .25% .25% .25% .25% .25% .25% .25%
Other Expenses/(2)/................. .50% .50% .50% .50% .50% .50% .60%
=================================================================================================================================
TOTAL OPERATING EXPENSES/(2)/ 1.20% 1.20% 1.20% 1.20% 1.20% 1.30% 1.70%
=================================================================================================================================
</TABLE>
(1) You may have to pay a contingent deferred sales charge of up to 1% if you
sell any Class A shares within 12 months of the date on which you first
purchased Class A shares. See "How to Purchase, Exchange, and Redeem
Shares," for more information on the contingent deferred sales charge.
(2) Since the Class A shares are new and have not been offered prior to the date
of this Prospectus, Other Expenses and Total Operating Expenses are based on
estimated amounts for the 1998 fiscal year. Management Fees and Rule 12b-1
Fees stated above reflect contract amounts. See "Investment Manager and Sub-
Advisers" and "How to Purchase, Exchange, and Redeem Shares -- Class A
Shares."
EXAMPLES: An investor would pay the following expenses on an investment of
$1,000 in the Fund assuming: (a) a 5% annual return and (b)
redemption at the end of each time period.
<TABLE>
<CAPTION>
SMALL CAP
SHORT-TERM CORE VALUE VALUE INTERNATIONAL
PRIME BOND BOND BALANCED EQUITY EQUITY EQUITY
FUND FUND FUND FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $22.61 $22.61 $22.61 $22.61 $22.61 $23.62 $27.62
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
3 Years $38.11 $38.11 $38.11 $38.11 $38.11 $41.23 $53.60
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
5 Years $65.96 $65.96 $65.96 $65.96 $65.96 $71.28 $92.28
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
10 Years $145.25 $145.25 $145.25 $145.25 $145.25 $156.53 $200.48
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
An investor would pay the following expenses on the same investment, assuming no
redemption:
<TABLE>
<CAPTION>
SMALL CAP
SHORT-TERM CORE VALUE VALUE INTERNATIONAL
PRIME BOND BOND BALANCED EQUITY EQUITY EQUITY
FUND FUND FUND FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $12.24 $12.24 $12.24 $12.24 $12.24 $13.25 $17.30
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
3 Years $38.11 $38.11 $38.11 $38.11 $38.11 $41.23 $53.60
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
5 Years $65.96 $65.96 $65.96 $65.96 $65.96 $71.28 $92.28
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
10 Years $145.25 $145.25 $145.25 $145.25 $145.25 $156.53 $200.48
- -------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLES ARE BASED ON EACH FUND'S "TOTAL OPERATING EXPENSES," AS DESCRIBED
ABOVE. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE RETURNS
OR EXPENSES. ACTUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
4
<PAGE>
CLASS Y
<TABLE>
<CAPTION>
SMALL CAP
SHORT-TERM CORE VALUE VALUE INTERNATIONAL
PRIME BOND BOND BALANCED EQUITY EQUITY EQUITY
FUND FUND FUND FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(As a percentage of offering price)
Maximum Sales Charge
Imposed on Purchases................. None None None None None None None
Maximum Sales Charges Imposed
on Reinvested Dividends.............. None None None None None None None
Maximum Deferred Sales Charge......... None None None None None None None
Exchange Fee.......................... None None None None None None None
Redemption Fee........................ None None None None None None None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fees....................... .45% .45% .45% .45% .45% .55% .85%
Rule 12b-1 Fees....................... None None None None None None None
Other Expenses........................ .30% .30% .30% .30% .30% .30% .40%
=================================================================================================================================
TOTAL OPERATING EXPENSES/(1)(2)/ .75% .75% .75% .75% .75% .85% 1.25%
=================================================================================================================================
</TABLE>
(1) Class Y Investors may also be subject to charges imposed in their
administrative services or other agreement with the Adviser. See "How to
Purchase, Exchange and Redeem Shares-Features and Eligibility Requirements
of each Class."
(2) Since the Class Y shares are new and have not been offered prior to the date
of this Prospectus, Other Expenses and Total Operating Expenses are based on
estimated amounts for the 1998 fiscal year. The Management Fees stated above
reflect contract amounts. See "Investment Manager and Sub-Advisor."
EXAMPLE: An investor would pay the following expenses on an investment of
$1,000 in the Fund assuming: (a) a 5% annual return and (b) redemption
at the end of each time period.
<TABLE>
<CAPTION>
SMALL CAP
SHORT-TERM CORE VALUE VALUE INTERNATIONAL
PRIME BOND BOND BALANCED EQUITY EQUITY EQUITY
FUND FUND FUND FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 7.66 $ 7.66 $7.66 $7.66 $7.66 $ 8.68 $ 12.74
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
3 Years $23.97 $23.97 $23.97 $23.97 $23.97 $ 27.12 $ 39.66
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
5 Years $41.68 $41.68 $41.68 $41.68 $41.68 $ 47.12 $ 68.60
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
10 Years $92.92 $92.92 $92.92 $92.92 $92.92 $104.75 $150.86
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE IS BASED ON EACH FUND'S "TOTAL OPERATING EXPENSES," AS DESCRIBED
ABOVE. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE RETURNS
OR EXPENSES. ACTUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
5
<PAGE>
CLASS S/(1)/
<TABLE>
<CAPTION>
SMALL CAP
SHORT-TERM CORE VALUE VALUE INTERNATIONAL
PRIME BOND BOND BALANCED EQUITY EQUITY EQUITY
FUND FUND FUND FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(As a percentage of offering price)
Maximum Sales Charge
Imposed on Purchases............. None None None None None None None
Maximum Sales Charges Imposed
on Reinvested Dividends.......... None None None None None None None
Maximum Deferred Sales Charge..... None None None None None None None
Exchange Fee...................... None None None None None None None
Redemption Fee.................... None None None None None None None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fees................... .45% .45% .45% .45% .45% .55% .85%
Rule 12b1 Fees.................... None None None None None None None
Other Expenses.................... .0954%% .1010% .0945% .0925% .0902% .0932% .2022%
==================================================================================================================================
TOTAL OPERATING EXPENSES/(2)(3)/ .5454%% .5510% .5445% .5425% .5402% .6432% 1.0522%
==================================================================================================================================
</TABLE>
(1) Class S shares were previously designated as Class 4 shares.
(2) There are no current client expenses for separate investment accounts, but
employee benefit plans that invest in the separate investment accounts are
subject to charges imposed in their group annuity contracts, as set forth in
their respective Plan Documents. See the Glossary for a definition of Plan
Documents.
(3) The expenses in the above table are based on expenses for the fiscal year
ended December 31, 1996 but without giving effect to MassMutual's voluntary
undertaking to waive a portion of its management fee which terminated May 1,
1997, and adjusted for new fund custody and fund administrative fees.
EXAMPLE: An investor would pay the following expenses on an investment of
$1,000 in the Fund assuming: (a) a 5% annual return and (b) redemption
at the end of each time period.
<TABLE>
<CAPTION>
SMALL CAP
SHORT-TERM CORE VALUE VALUE INTERNATIONAL
PRIME BOND BOND BALANCED EQUITY EQUITY EQUITY
FUND FUND FUND FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 5.58 $ 5.63 $ 5.57 $ 5.55 $ 5.52 $ 6.57 $ 10.74
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
3 Years $17.48 $17.66 $17.45 $17.39 $17.32 $20.59 $ 33.48
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
5 Years $30.46 $30.77 $30.41 $30.30 $30.18 $35.84 $ 58.03
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
10 Years $68.30 $68.98 $68.19 $67.95 $67.67 $80.13 $128.31
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE IS BASED ON EACH FUND'S "TOTAL OPERATING EXPENSES", AS DESCRIBED
ABOVE, THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE RETURNS
OR EXPENSES. ACTUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
6
<PAGE>
FINANCIAL HIGHLIGHTS
The information in the following tables applies only to the Class S shares of
the Funds (which were previously designated Class 4 shares.) Similar
information does not exist for the Class A and Class Y shares, which were not
outstanding during the periods covered by the financial statements.
The financial highlights for each of the periods through December 31, 1996, have
been derived from the Funds' financial statements, which have been audited by
Coopers & Lybrand L.L.P., independent accountants. The information for the
six-month period ended June 30, 1997 is unaudited. The financial highlights
should be read in conjunction with the financial statements, the notes thereto,
and the unqualified report of independent accountants, which are contained in
the Statement of Additional Information.
Further information about the performance of the Class S shares of the Funds is
contained in the Trust's most recent Annual Report and Semiannual Report. The
Statement of Additional Information, the Annual Report and Semiannual Report may
be obtained without charge by writing to the Trust's Secretary.
MassMutual Prime Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
CLASS S
----------------------------------------------------------
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 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 voluntary partial
waiver of management fee by MassMutual, which
terminated May 1, 1997. Without this partial waiver
of fees by MassMutual, 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 for15
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.
7
<PAGE>
MassMutual ShortTerm Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
CLASS S
---------------------------------------------------------
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 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 voluntary partial
waiver of management fee by MassMutual, which
terminated May 1, 1997. Without this partial waiver
of fees by MassMutual, 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.
8
<PAGE>
MassMutual Core Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
CLASS S
---------------------------------------------------------
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 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 voluntary partial
waiver of management fee by MassMutual, which
terminated May 1, 1997. Without this partial waiver
of fees by MassMutual, 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.
9
<PAGE>
MassMutual Balanced Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
CLASS S
---------------------------------------------------------
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 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 voluntary partial
waiver of management fee by MassMutual, which
terminated May 1, 1997. Without this partial waiver
of fees by MassMutual, 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.
@ 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.
(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.
10
<PAGE>
MassMutual Value Equity Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
CLASS S
----------------------------------------------------------
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 $ 12.63 $ 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 voluntary partial
waiver of management fee by MassMutual, which
terminated May 1, 1997. Without this partial waiver
of fees by MassMutual, 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.
@ 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.
(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.
11
<PAGE>
MassMutual Small Cap Value Equity Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
CLASS S
-------------------------------------------------------
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 voluntary partial
waiver of management fee by MassMutual, which
terminated May 1, 1997. Without this partial waiver
of fees by MassMutual, 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.
@ 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.
(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.
12
<PAGE>
MassMutual International Equity Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
CLASS S
----------------------------------------------------------
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 voluntary partial
waiver of management fee by MassMutual, which
terminated May 1, 1997. Without this partial waiver
of fees by MassMutual, 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.
@ 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.
(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.
LINE OF CREDIT
On January 11, 1996, the Trust, on behalf of each Fund, entered into 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 0.45%. Only the
International Equity Fund utilized the line of credit during the year ended
December 31, 1996 and the six months ended June 30, 1997. The table below sets
forth information regarding the International Equity Fund's utilization of the
line of credit during these periods.
<TABLE>
<CAPTION>
AVERAGE NUMBER OF AVERAGE AMOUNT OF DEBT
AMOUNT OF DEBT AVERAGE AMOUNT OF INTERNATIONAL EQUITY FUND'S PER SHARE OF
OUTSTANDING AT DEBT OUTSTANDING SHARES OUTSTANDING INTERNATIONAL EQUITY FUND
PERIOD END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
-------- -------------- ----------------- --------------------------- -------------------------
<S> <C> <C> <C> <C>
Year ended
December 31,
1996 $1,600,000 $3,517,944 27,151,338 $0.13
Six months
ended June 30,
1997 $ 0 $6,904,444 35,867,968 $0.19
</TABLE>
13
<PAGE>
THE TRUST
The Trust is an open-end, management investment company designed to offer
investors both the opportunity to pursue long-term investment goals and the
flexibility to respond to changes in their investment objectives and economic
and market conditions. This Prospectus describes seven separate, diversified
series of shares of the Trust (the "Funds"). The Funds have three classes of
shares offered to different types of investors and having different expenses.
For information regarding the classes of shares of the Funds, see "How to
Purchase, Exchange, and Redeem Shares" below.
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 from time to time (the "Declaration of Trust").
Each share of a Fund represents an investment in that Fund's portfolio of
securities. The value of an investment in a Fund will vary as the value of the
underlying portfolio increases or decreases. Dividends paid for a class of a
Fund will vary in relation to the expenses each class incurs.
The Board of Trustees of the Trust is generally responsible for management of
the business and affairs of the Trust. Trustees formulate the general policies
of the Trust and the Funds, approve contracts and authorize Trust officers to
carry out the decisions of the Board. As Adviser and Sub-Advisers to the Funds,
MassMutual, Babson and HarbourView may be considered part of the management of
the Trust. For more information concerning the management of the Trust,
reference should be made to the Statement of Additional Information.
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
Each Fund has a separate investment objective, which may not be changed without
the vote of a majority of that Fund's outstanding voting shares./1/ There can
be no assurance that a Fund will achieve its investment objective; the success
of a Fund depends to a great extent upon changes in market conditions.
(1) MASSMUTUAL PRIME FUND
THE INVESTMENT OBJECTIVE OF THE PRIME FUND IS TO MAXIMIZE CURRENT INCOME TO THE
EXTENT CONSISTENT WITH LIQUIDITY AND THE PRESERVATION OF CAPITAL BY INVESTING IN
A DIVERSIFIED PORTFOLIO OF MONEY MARKET INSTRUMENTS.
The Fund invests in high quality debt instruments having a remaining maturity
not exceeding 397 days. It is the Fund's policy to invest in the following
types of short-term instruments:
(a) Commercial paper and obligations of corporate issuers that at the date of
acquisition are rated in one of the two highest ratings of at least one
nationally recognized statistical rating organization ("NRSRO") or, if
unrated, are judged by MassMutual to be of equivalent quality./2/
(b) U.S. Government Securities./3/
(c) Bank participation certificates that represent interests in all or part
of specific bank loans, provided that at the date of acquisition (1) they
have a remaining maturity of 397 days or less; and (2) each of the
underlying loans is made to an issuer of securities rated in one of the
two highest ratings of at least one NRSRO or, if unrated, are judged by
MassMutual to be of equivalent quality.
(d) Certificates of deposit and bankers' acceptances of banks and savings and
loan associations having deposits of at least $1 billion as of their most
recently published financial statements.
(e) Obligations of foreign issuers, payable in U.S. dollars, provided that no
such investment will be made if as a result more than 25% of the Fund's
total assets would be invested in such securities.
The Fund will make portfolio investments primarily in response to changing
economic and money market conditions and trends. Trading activity is expected to
be low. It is anticipated, however, that from time to time the Fund will take
advantage of temporary disparities in the yield relationships among the
different segments of the money market or among particular instruments within
the same segment of the market to make purchases and sales when management deems
that such transactions will improve the yield or the quality of the portfolio.
The Fund is not a money market fund as defined in Rule 2a-7 under the Investment
Company Act of 1940 (the "1940 Act"). The portfolio of the Fund is managed by
Mary E. Wilson, Executive Director of MassMutual, with which she has been
associated since 1982.
(2) MASSMUTUAL SHORT-TERM BOND FUND
THE INVESTMENT OBJECTIVE OF THE SHORT-TERM BOND FUND IS TO ACHIEVE A HIGH TOTAL
RATE OF RETURN PRIMARILY FROM CURRENT INCOME WHILE MINIMIZING FLUCTUATIONS IN
CAPITAL VALUES BY INVESTING PRIMARILY IN A DIVERSIFIED PORTFOLIO OF SHORT-TERM
INVESTMENT GRADE FIXED INCOME SECURITIES.
- ----------------------
/1/ As used in this Prospectus, a majority of the outstanding voting shares of
any Fund means the lesser of (a) 67% of that Fund's outstanding shares present
at a meeting of shareholders if more than 50% of the outstanding shares are
present in person or by proxy, or (b) more than 50% of that Fund's outstanding
shares.
/2/ For a description of the ratings of two NRSROs. Standard & Poor's Ratings
Group ("S&P") and Moody's Investors Service, Inc. ("Moody's"), see the Appendix
to the Statement of Additional Information. For example, the two highest ratings
of Moody's for commercial paper are P-1 and P-2.
/3/ See the Glossary for a definition of U.S. Government Securities.
14
<PAGE>
The Fund invests in investment grade fixed income securities. Investment grade
fixed income securities are securities that at the date of acquisition are rated
in one of the four highest ratings of at least one NRSRO or, if unrated, are
judged by MassMutual to be of equivalent quality./4/ For example, the Fund may
invest in the following types of debt instruments:
(a) Corporate securities.
(b) U.S. Government Securities.
(c) Obligations issued or guaranteed as to principal and interest by the
Government of Canada, a Province of Canada, or any instrumentality or
political subdivision thereof, provided that no such investment will be
made if as a result more than 25% of the Fund's total assets would be
invested in such securities.
(d) Obligations (including certificates of deposit, time deposits or bankers'
acceptances) of U.S. or Canadian chartered banks having total deposits in
excess of $1 billion, U.S. branches of foreign banks having total
deposits in excess of $1 billion, U.S. savings and loan associations
having total deposits in excess of $1 billion, and Eurodollar
certificates of deposit issued by foreign branches of U.S. banks having
total deposits in excess of $1 billion.
(e) Publicly traded debt securities issued or guaranteed by a national or
state bank or bank holding company (as defined in the Federal Bank
Holding Company Act, as amended) that at the date of acquisition are
rated in one of the three highest ratings of at least one NRSRO or, if
unrated, are judged by MassMutual to be of equivalent quality, and
certificates of deposit of such banks.
(f) Commercial paper that at the date of investment is rated in the two
highest ratings of at least one NRSRO or, if unrated, is judged by
MassMutual to be of equivalent quality.
(g) Bank participation certificates that represent interests in all or part
of specific bank loans, provided that at the date of investment each of
the underlying loans is made to an issuer of securities rated in one of
the two highest short-term debt ratings of at least one NRSRO or, if
unrated, are judged by MassMutual to be of equivalent quality.
(h) Certificates of deposit and bankers' acceptances of banks and savings and
loan associations having deposits of at least $1 billion as of their most
recently published financial statements.
(i) Securities of foreign issuers (other than those listed in (c) or (d)
above) that meet credit quality requirements similar to those above,
provided that no such investment will be made if as a result more than
25% of the Fund's total assets would be invested in such securities.
Under normal market conditions, the Fund generally will have an average
effective portfolio Duration of no more than three years./5/ Portfolio Duration
changes may be accomplished primarily through the reinvestment of cash flows and
selective trading. Neither market timing nor interest rate anticipation methods
are employed in managing the Fund. The portfolio of the Fund is managed by
Ronald E. Desautels, Managing Director of MassMutual, with which he has been
associated since 1989.
(3) MASSMUTUAL CORE BOND FUND
THE INVESTMENT OBJECTIVE OF THE CORE BOND FUND IS TO ACHIEVE A HIGH TOTAL RATE
OF RETURN CONSISTENT WITH PRUDENT INVESTMENT RISK AND THE PRESERVATION OF
CAPITAL BY INVESTING PRIMARILY IN A DIVERSIFIED PORTFOLIO OF INVESTMENT GRADE
FIXED INCOME SECURITIES.
The Fund invests in investment grade, publicly traded, readily marketable, fixed
income securities of such maturities as MassMutual deems appropriate from time
to time in light of market conditions and prospects. Investment grade fixed
income securities are securities that at the date of acquisition are rated in
one of the four highest ratings of at least one NRSRO or, if unrated, are judged
by MassMutual to be of equivalent quality. For example, the Fund may invest in
the following types of debt instruments:
(a) Corporate securities.
(b) U.S. Government Securities.
(c) Obligations issued or guaranteed as to principal and interest by the
Government of Canada, a Province of Canada, or any instrumentality or
political subdivision thereof, provided that no such investment will be
made if as a result more than 25% of the Fund's total assets would be
invested in such securities.
- ------------------
/4/ For example, the four highest ratings of Moody's for debt obligations are
Aaa, Aa, A, and Baa (including Baa3).
/5/ See the Glossary for a definition of Duration.
15
<PAGE>
(d) Obligations (including certificates of deposit, time deposits or bankers'
acceptances) of U.S. or Canadian chartered banks having total deposits in
excess of $1 billion, U.S. branches of foreign banks having total
deposits in excess of $1 billion, U.S. savings and loan associations
having total deposits in excess of $1 billion, and Eurodollar
certificates of deposit issued by foreign branches of U.S. banks having
total deposits in excess of $1 billion.
(e) Publicly traded debt securities issued or guaranteed by a national or
state bank or bank holding company (as defined in the Federal Bank
Holding Company Act, as amended) having a rating within the three highest
ratings as determined by at least one NRSRO or, if unrated, are judged by
MassMutual to be of equivalent quality, and certificates of deposit of
such banks.
(f) Securities of foreign issuers (other than those listed in (c) or (d)
above) that at the date of acquisition are rated in one of the four
highest ratings of at least one NRSRO or, if unrated, are judged by
MassMutual to be of equivalent quality, provided that no such investment
will be made if as a result more than 25% of the Fund's total assets
would be invested in such securities.
Normally, the Fund's portfolio Duration will range from four to seven years.
Portfolio Duration changes will be accomplished primarily through the
reinvestment of cash flows and selective trading. The portfolio of the Fund is
managed by Mary E. Wilson, Executive Director of MassMutual, with which
she has been associated since 1982.
(4) MASSMUTUAL BALANCED FUND
THE INVESTMENT OBJECTIVE OF THE BALANCED FUND IS TO ACHIEVE A HIGH TOTAL RATE OF
RETURN OVER AN EXTENDED PERIOD OF TIME CONSISTENT WITH THE PRESERVATION OF
CAPITAL VALUES BY INVESTING IN A DIVERSIFIED PORTFOLIO OF EQUITY SECURITIES,
FIXED INCOME SECURITIES AND MONEY MARKET INSTRUMENTS.
The Fund invests in three market sectors:
THE PRIME SECTOR - The Prime Sector invests in accordance with the
investment objective and policies of the Prime Fund.
THE CORE BOND SECTOR - The Core Bond Sector invests in accordance with the
investment objective and policies of the Core Bond Fund.
THE VALUE EQUITY SECTOR - The Value Equity Sector invests in accordance
with the investment objective and policies of the Value Equity Fund.
The Fund adjusts the mix of investments among its three market sectors to
capitalize on perceived variations in return potential produced by the
interaction of changing financial market and economic conditions. The Fund
expects that such adjustments normally will be made in a gradual manner over a
period of time. Under normal circumstances at least 25% of the Fund's total
assets will be invested in senior fixed income securities (including short-term
money market instruments). In addition, under normal circumstances, no
investment will be made that would result in more than 35% of the Fund's net
assets being invested in the Prime Sector, more than 35% in the Core Bond Sector
or more than 65% in the Value Equity Sector. In unusual circumstances, the Fund
may invest up to 70% of its total assets in the Equity Sector or up to 50% of
its total assets in the Bond Sector. MassMutual is the Fund's adviser and
Babson is the Sub-Adviser to the Value Equity Sector. The portfolio of the Fund
is managed by a committee of MassMutual and Babson investment professionals.
(5) MASSMUTUAL VALUE EQUITY FUND
THE INVESTMENT OBJECTIVE OF THE VALUE EQUITY FUND IS TO ACHIEVE LONG-TERM GROWTH
OF CAPITAL AND INCOME BY INVESTING PRIMARILY IN A DIVERSIFIED PORTFOLIO OF
EQUITY SECURITIES OF LARGER WELL-ESTABLISHED COMPANIES.
The Fund invests primarily in common stocks, securities convertible into common
stocks, and other equity securities (such as warrants and stock rights) which
are normally cash dividend-paying and listed on a national securities exchange
or traded in the over-the-counter market. The issuers of securities in which the
Fund will invest generally are companies with market capitalizations in excess
of $2 billion and a history of operations of five years or more. MassMutual is
the Fund's adviser and its Sub-Adviser is Babson.
The Fund utilizes a value-oriented strategy in making investment decisions. As
such, investments are made in securities of companies which, in the opinion of
Babson, are of high quality, offer above-average dividend growth potential and
are attractively valued in the marketplace. Investment quality and dividend
growth potential are evaluated using fundamental analysis emphasizing each
issuer's historical financial performance, balance sheet strength, management
capability and competitive position. Various valuation parameters are examined
to determine the attractiveness of individual securities. On average, the
Fund's portfolio securities will have price/earnings ratios and price/book value
ratios below those of the Standard & Poor's 500 Composite Stock Price Index (the
"S&P 500 Stock Index"). Consideration also is given to securities of companies
whose current prices do not adequately reflect, in the opinion of Babson, the
ongoing business value of the enterprise. The Fund's portfolio is managed by
James W. MacAllen, Executive Vice President and Chief Investment Officer of
Babson. Mr. MacAllen has been associated with Babson since January 1, 1996.
During 1996, Mr. MacAllen was also Senior Vice President of Concert Capital
Management, Inc., which was then an indirect subsidiary of MassMutual ("Concert
Capital"), and, as such, managed the portfolio of the Fund. Formerly, Mr.
MacAllen was associated with Hagler, Mastrovita and Hewitt and prior to that was
President and Chief Investment Officer of Wilmington Capital Management.
16
<PAGE>
(6) MASSMUTUAL SMALL CAP VALUE EQUITY FUND
THE INVESTMENT OBJECTIVE OF THE SMALL CAP VALUE EQUITY FUND IS TO ACHIEVE
LONG-TERM GROWTH OF CAPITAL AND INCOME BY INVESTING PRIMARILY IN A DIVERSIFIED
PORTFOLIO OF EQUITY SECURITIES OF SMALLER COMPANIES.
The Fund invests primarily in common stocks, securities convertible into common
stocks and other equity securities (such as warrants and stock rights) which are
issued by companies with a market capitalization, at the time of purchase, of
$750 million or less and which are listed on a national securities exchange or
traded in the over-the-counter market. MassMutual is the Fund's adviser and its
Sub-Adviser is Babson.
The Fund utilizes a value-oriented strategy in making investment decisions. As
such, investments are made in securities of companies that, in the opinion of
Babson, are of high quality or possess a unique product, market position or
operating characteristics which result in above-average levels of profitability
or superior growth potential and are attractively valued in the marketplace.
Traditional fundamental research techniques are employed to determine investment
quality and growth potential, emphasizing each issuer's historic financial
performance, balance sheet strength, management capability and competitive
position. Valuation parameters are examined to determine the attractiveness of
individual securities. On average, the Fund's holdings will have price/earnings
ratios and price/book value ratios below those of the S&P 500 Stock Index.
Consideration also is given to securities of companies whose current prices do
not adequately reflect, in the opinion of Babson, the ongoing business value of
the enterprise.
The Fund may purchase securities with above-average volatility relative to
indices like the S&P 500 Stock Index. While such volatility frequently may
involve the opportunity for greater gain, it also generally involves greater
risk of loss and, as a result, the Fund's shares are suitable only for those
investors who are in a financial position to assume such risk. The Fund's
portfolio is managed by George M. Ulrich, Senior Vice President of Babson. Mr.
Ulrich has been associated with Babson since 1996, Concert Capital (as Senior
Vice President) from 1993 through 1996 and with MassMutual from 1983 to
1993.
(7) MASSMUTUAL INTERNATIONAL EQUITY FUND
THE INVESTMENT OBJECTIVE OF THE INTERNATIONAL EQUITY FUND IS TO ACHIEVE A HIGH
TOTAL RATE OF RETURN OVER THE LONG TERM BY INVESTING IN A DIVERSIFIED PORTFOLIO
OF FOREIGN AND DOMESTIC EQUITY SECURITIES.
The Fund invests primarily in common stocks, securities convertible into common
stocks, and other equity securities, (such as warrants and stock rights). The
Fund generally will have at least 75% of its total assets invested in foreign
securities, including securities of foreign issuers represented by American
Depository Receipts or traded in the U.S. over-the-counter market or listed on a
U.S. securities exchange. Under normal market conditions, the Fund's assets
will be invested in securities traded in markets in at least three different
countries, excluding the United States. In an uncertain market or economic
environment when it would be appropriate to maintain a defensive position, the
Fund may invest up to 100% of its assets in debt securities, such as rated or
unrated bonds and debentures, cash equivalents and preferred stocks. It is
expected that short-term debt securities (i.e., those maturing in one year or
less from the date of purchase) will be emphasized for defensive or liquidity
purposes, since such securities usually may be disposed of quickly at prices not
involving significant losses. When circumstances warrant, securities may be
sold without regard to the length of time held, although short-term trading may
increase brokerage costs borne by the Fund.
The share price of the International Equity Fund will reflect the movements of
both the prices of the portfolio securities and the currencies in which the
securities are denominated. Depending upon the extent of the Fund's investments
abroad, changes in the relative value of the U.S. dollar to the securities'
denominated currencies may have a positive or negative impact on the Fund's
share price.
The Fund's investment policies involve special risks. Risks of investing in
foreign securities include foreign taxation, changes in currency rates or
currency blockage, currency exchange costs, and differences between domestic and
foreign legal, accounting, auditing, brokerage and economic standards. See
"Investment Practices Of The Funds And Related Risks" below and "Foreign
Securities" in the Statement of Additional Information for further discussion of
the possible risks and rewards of investing in foreign securities. MassMutual
is the Fund's adviser and its Sub-Adviser is HarbourView. The portfolio of the
Fund is managed by a committee composed of HarbourView investment
professionals.
INVESTMENT PRACTICES OF THE FUNDS AND RELATED RISKS
The Funds may invest in a wide range of investments and engage in various
investment-related transactions and practices. These practices are pursuant to
non-fundamental policies and therefore may be changed by the Board of Trustees
without the consent of shareholders. Some of the more significant practices are
discussed below.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
Each Fund may engage in repurchase agreements and reverse repurchase agreements.
A repurchase agreement is a contract pursuant to which a Fund agrees to purchase
a security and simultaneously agrees to resell it at an agreed-upon price at a
stated time, thereby determining the yield during the Fund's holding period. A
reverse repurchase agreement is a contract pursuant to which a Fund agrees to
sell a security and simulta-
17
<PAGE>
neously agrees to repurchase it at an agreed-upon price at a stated time. For a
more detailed description of repurchase agreements and reverse repurchase
agreements and related risks, see the Statement of Additional Information.
SECURITIES LENDING
Each Fund may seek additional income by making loans of portfolio securities of
not more than 33% of its total assets taken at current value. Although lending
portfolio securities may involve the risk of delay in recovery of the securities
loaned or possible loss of rights in the collateral should the borrower fail
financially, loans will be made only to borrowers deemed by the Adviser or
Sub-Advisor to be in good standing.
HEDGING INSTRUMENTS AND DERIVATIVES
Each Fund may buy or sell forward contracts and other similar instruments and
may engage in foreign currency transactions (collectively referred to as
"hedging instruments" or "derivatives"), as more fully discussed in the
Statement of Additional Information. Derivatives normally are used by a
portfolio manager to (a) protect against possible declines in the market value
of a Fund's portfolio resulting from downward trends in the relevant markets
(for example, in the debt securities markets generally due to increasing
interest rates); (b) protect a Fund's unrealized gains or limit its unrealized
losses; and (c) manage a Fund's exposure to changing security prices.
Derivatives also may be used to establish a position in the debt or equity
securities markets as a temporary substitute for purchasing or selling
particular debt or equity securities and to manage the effective maturity or
Duration of fixed income securities in a Fund's portfolio.
(1) Forward Contracts - Each Fund may purchase or sell securities on a "when
issued" or delayed delivery basis or may purchase or sell securities on a
forward commitment basis ("forward contracts"). When such transactions are
negotiated, the price is fixed at the time of commitment, but delivery and
payment for the securities can take place a month or more after the
commitment date. The securities so purchased or sold are subject to market
fluctuations and no interest accrues to the purchaser during this period.
While a Fund also may enter into forward contracts with the initial
intention of acquiring securities for its portfolio, it may dispose of a
commitment prior to settlement if the Adviser or Sub-Adviser deems it
appropriate to do so.
(2) Currency Transactions/6/ - The International Equity Fund may, but will not
necessarily, engage in foreign currency transactions with counter-parties in
order to hedge the value of portfolio holdings denominated in particular
currencies against fluctuations in relative value. The Short-Term Bond
Fund, the Core Bond Fund and the Core Bond Sector of the Balanced Fund may
invest in foreign securities that are not denominated in U.S. dollars only
if the Fund contemporaneously enters into a foreign currency transaction to
hedge the currency risk associated with the particular foreign
security.
Certain limitations apply to the use of forward contracts by the Funds. For
example, a Fund will not enter into a forward contract if as a result more than
25% of its total assets would be held in a segregated account covering such
contracts. For more information about forward contracts and currency
transactions and the extent to which tax considerations may limit a Fund's use
of such instruments, see the Statement of Additional Information.
There can be no assurance that the use of hedging instruments and derivatives by
a Fund will assist it in achieving its investment objective. Risks inherent in
the use of these instruments include: (a) the risk that interest rates and
securities prices will not move in the direction anticipated; (b) the imperfect
correlation between the prices of a forward contract and the price of the
securities being hedged; and (c) the fact that skills needed to use these
strategies are different from those needed to select portfolio securities. As
to forward contracts, the risk exists that the counterparty to the transaction
will be incapable of meeting its commitment, in which case the desired hedging
protection may not be obtained and the Fund may be exposed to risk of loss. As
to currency transactions, risks exist that purchases and sales of currency and
related instruments can be negatively affected by government exchange controls,
blockages, and manipulations or exchange restrictions imposed by governments
which could result in losses to the Fund if it is unable to deliver or receive
currency or funds in settlement of obligations. It also could cause hedges it
has entered into to be rendered useless, resulting in full currency exposure as
well as incurring transaction costs.
- ----------------------
/6/ See the Glossary for a definition of Currency Transactions.
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<PAGE>
RESTRICTED AND ILLIQUID SECURITIES
None of the Funds currently expect to invest in restricted or illiquid
securities. However, each Fund may invest not more than 15% of its net assets
in illiquid securities. These policies do not limit the purchase of securities
eligible for resale to qualified institutional buyers pursuant to Rule 144A
under the Securities Act of 1933, as amended, provided that such securities are
determined to be liquid by the Board of Trustees, or by the Adviser or
Sub-Adviser pursuant to Board-approved guidelines. If there is a lack of trading
interest in particular Rule 144A securities, a Fund's holdings of those
securities may be illiquid, resulting in the possibility of undesirable delays
in selling these securities at prices representing fair value.
FOREIGN SECURITIES
Investments in foreign securities offer potential benefits not available from
investing solely in securities of domestic issuers, such as the opportunity to
invest in foreign issuers that appear to offer growth potential, or to invest in
foreign countries with economic policies or business cycles different from those
of the United States or foreign stock markets that do not move in a manner
parallel to U.S. markets, thereby diversifying risks of fluctuations in
portfolio value.
Investments in foreign securities entail certain risks, such as the possibility
of one or more of the following: imposition of dividend or interest withholding
or confiscatory taxes; currency blockages or transfer restrictions;
expropriation, nationalization, military coups or other adverse political or
economic developments; less government supervision and regulation of securities
exchanges, brokers and listed companies, and the difficulty of enforcing
obligations in other countries. Certain markets may require payment for
securities before delivery. A Fund's ability and decisions to purchase and sell
portfolio securities may be affected by laws or regulations relating to the
convertibility of currencies and repatriation of assets. Further, it may be
more difficult for a Fund's agents to keep currently informed about corporate
actions which may affect the prices of portfolio securities. Communications
between the United States and foreign countries may be less reliable than within
the United States, thus increasing the risk of delayed settlements of portfolio
transactions or loss of certificates for portfolio securities.
PORTFOLIO MANAGEMENT
MassMutual, Babson and HarbourView may use trading as a means of managing the
portfolios of the Funds in seeking to achieve their investment objectives.
Transactions will occur when the Adviser or Sub-Adviser believe that the trade,
net of transaction costs, will improve interest income or capital appreciation
potential, or will lessen capital loss potential. Whether the goals discussed
above will be achieved through trading depends on the Adviser's or Sub-Advisor's
ability to evaluate particular securities and anticipate relevant market
factors, including interest rate trends and variations from such trends. If
such evaluations and expectations prove to be incorrect, a Fund's income or
capital appreciation may be reduced and its capital losses may be increased. In
addition, high turnover in any Fund could result in additional brokerage
commissions to be paid by the Fund. See also "Distribution And Taxation"
below.
The Funds may pay brokerage commissions to Advest, Inc. and Jefferies & Co.,
Inc. A trustee of the Trust is a director of the respective parent companies of
Advest, Inc. and Jefferies & Co., Inc.
CASH POSITIONS
Each Fund may hold cash or cash equivalents to provide for expenses and
anticipated redemption payments and so that an orderly investment program may be
carried out in accordance with the Fund's investment policies. To provide
liquidity or for temporary defensive purposes, each Fund may invest in
investment grade debt securities, government obligations, or money market
instruments.
INDUSTRY DIVERSIFICATION
As a general rule, a Fund will not acquire securities of issuers in any one
industry (as determined by the Board of Trustees) if as a result more than 25%
of the value of the total assets of the Fund would be invested in such industry,
with the following exceptions:
(1) There is no limitation for U.S. Government Securities.
(2) In the case of the Prime Fund and the Short-Term Bond Fund, there is no
industry concentration limitation for certificates of deposit and bankers'
acceptances.
CERTAIN DEBT SECURITIES
While the Funds, except for the Prime Fund, may invest in investment grade debt
securities that are rated in the fourth highest rating category by at least one
NRSRO (e.g., Baa3 by Moody's) or, if unrated, are judged by MassMutual to be of
equivalent quality, such securities have speculative characteristics, are
subject to greater credit risk, and may be subject to greater market risk than
higher rated investment grade securities.
FUNDAMENTAL INVESTMENT RESTRICTIONS
For a description of fundamental investment restrictions of the Funds which may
not be changed without the affirmative vote of a majority of the outstanding
voting shares of the Fund, reference should be made to the Statement of
Additional Information.
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<PAGE>
HOW TO PURCHASE, EXCHANGE, AND REDEEM SHARES
FEATURES AND ELIGIBILITY REQUIREMENTS OF EACH CLASS
Each of the Funds offers three different classes of shares to investors: Class
A, Class Y and Class S. The different classes of a Fund's shares represent
investments in the same portfolio of securities but are subject to different
expenses and will likely have different share prices. The Class A, Class Y and
Class S shares are offered as follows.
CLASS A SHARES - Class A shares of each Fund may be purchased by: defined
contribution plans and defined benefit plans that qualify under section 401(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), with Plan
Assets/7/ in excess of $2.5 million; tax sheltered annuity plans under Code
section 403(b) with Plan Assets in excess of $2.5 million; and individual
retirement accounts described in Code section 408, the assets of which are
rolled over from qualified plans in connection with a program sponsored by the
Adviser ("Rollover IRAs"). Class A shares may also be purchased by other
institutional investors, such as deferred compensation plans described in Code
section 457, voluntary employees' beneficiary associations described in Code
section 509(c)(9), other nonqualified deferred compensation plans and other
institutional or sophisticated investors, in each case with assets in excess of
$2.5 million or which enter into an agreement with the Adviser or an affiliate
of the Adviser for those purchases. In addition, Class A shares may be offered
to present or former officers, directors, trustees and employees (and their
spouses, parents, children and siblings) of the Trust, the Adviser and its
affiliates, and retirement plans established by them for their employees.
CLASS Y SHARES - Class Y shares of each Fund may be purchased by nonqualified
deferred compensation plans where the employer sponsor enters into an
administrative services agreement with the Adviser, or an affiliate of the
Adviser, with respect to the administration of the Plan. Class Y shares may
also be purchased by defined contribution plans and defined benefit plans under
Code section 401(a), and tax sheltered annuity plans under Code section 403(b),
in each case with Plan Assets in excess of $10 million and which enter into an
administrative services or other agreement with the Adviser or an affiliate of
the Adviser. Class Y shares may also be purchased by: certain other
institutional investors with assets in excess of $10 million which enter into
an agreement with the Adviser or an affiliate of the Adviser; and other
registered investment companies managed by the Adviser or an affiliate of the
Adviser, including other series of the Trust.
CLASS S SHARES - Class S shares of each Fund are available only to separate
investment accounts of MassMutual ("SIAs") in which corporate qualified plans,
including defined contribution plans and defined benefit plans, certain
governmental plans and church or other plans, are or may be permitted to invest
pursuant to the issuance of group annuity contracts.
CLASS A SHARES - SALES CHARGES AND 12B-1 FEES
Class A shares are sold at net asset value per share without an initial sales
charge. However, if an Investor/8/ redeems any Class A shares within 12 months
of the date on which the Investor first purchased Class A shares of any series
of the trust, a contingent deferred sales charge (called the "Class A Contingent
Deferred Sales Charge") may be deducted from the redemption proceeds. If
imposed, the Class A Contingent Deferred Sales Charge will be equal to 1.0% of
the lesser of: (1) the aggregate net asset value of the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions); and (2) the original offering price (which is the original net
asset value of the redeemed shares). The Class A Contingent Deferred Sales
Charge will not exceed the aggregate commissions paid on account of all Class A
shares of all series of the Trust an Investor purchased subject to the Class A
Contingent Deferred Sales Charge.
In determining whether a Class A Contingent Deferred Sales Charge is payable,
the Fund will first redeem shares that are not subject to the sales charge,
including shares purchased by reinvestment of dividends and capital gains, and
then will redeem other shares in the order purchased.
No Class A Contingent Deferred Sales Charge is charged on exchanges of shares
under "Exchange Privileges and Procedures" (described below). However, if the
shares acquired by exchange are redeemed within 12 months of the initial
purchase of the exchanged shares, the Class A Contingent Deferred Sales Charge
will apply.
The Class A Contingent Deferred Sales Charge is waived in certain cases
described below.
WAIVERS OF THE CLASS A CONTINGENT DEFERRED SALES CHARGES FOR CERTAIN PURCHASERS.
Class A shares purchased by the following Investors are not subject to any Class
A Contingent Deferred Sales Charge:
(1) the Adviser or its affiliates;
(2) present or former officers, directors, trustees and employees (and their
spouses, parents, children and siblings) of the Trust, the Adviser and its
affiliates, and retirement plans established by them for their
employees;
- ------------
/7/ See the Glossary for a definition of Plan Assets.
/8/ See the Glossary for a definition of Investor.
20
<PAGE>
(3) registered management investment companies, unit investment trusts, or
separate investment accounts of insurance companies having an agreement
with the Adviser or the Distributor for those purchases;
(4) dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for
their employees;
(5) dealers, brokers, banks or registered investment advisers that have
entered into an agreement with the Distributor providing specifically for
the use of shares of the Fund in particular investment products made
available to their clients (those clients may be charged a transaction fee
by their dealer, broker or adviser for the purchase or sale of Fund
shares); and
(6) deferred compensation plans or other Investors, in each case if those
purchases are made through a broker or agent or other financial
intermediary that has made special arrangements with the Distributor for
those purchases.
WAIVERS OF THE CLASS A CONTINGENT DEFERRED SALES CHARGE IN CERTAIN TRANSACTIONS.
Class A shares issued or purchased in the following transactions are not subject
to the Class A Contingent Deferred Sales Charge:
(1) shares issued in plans of reorganization, such as mergers;
(2) asset acquisitions and exchange offers to which any Fund is a party;
(3) shares purchased by the reinvestment of loan repayments by a participant
in a retirement plan for which the Adviser or its affiliates acts as
sponsor; and
(4) shares purchased by the reinvestment of dividends or other distributions
reinvested from the Funds or unit investment trusts for which reinvestment
arrangements have been made with the Distributor.
WAIVERS OF THE CLASS A CONTINGENT DEFERRED SALES CHARGE FOR CERTAIN REDEMPTIONS.
The Class A Contingent Deferred Sales Charge is also waived if shares that would
otherwise be subject to the Class A Contingent Deferred Sales Charge are
redeemed in the following cases:
(1) involuntary redemptions of shares by operation of law;
(2) if, at the time of purchase of shares the dealer agrees in writing to
accept the dealer's portion of the sales commission in installments of
1/12th of the commission per month (and no further commission will be
payable if the shares are redeemed within 12 months of purchase); and
(3) for distributions from Plans /9/ for any of the following purposes: (a)
following the death or disability (as defined in the Code) of the
participant or beneficiary (the death or disability must occur after the
participant's account was established); (b) to return excess
contributions; (c) to return contributions made due to a mistake of fact;
(d) hardship withdrawals, as defined in the Plan; (e) under a Qualified
Domestic Relations Order, as defined in the Code; (f) to meet the minimum
distribution requirements of the Code; (g) to establish "substantially
equal periodic payments" as described in Section 72(t) of the Code; (h)
for retirement distributions or loans to participants or beneficiaries;
(i) separation from service; (j) participant directed redemptions to
purchase shares of a mutual fund (other than a fund managed by the Adviser
or its subsidiaries) offered as an investment option in a Plan in which
the Funds are also offered as investment options under a special
arrangement with the Adviser or the Distributor; or (k) Plan termination
or "in service distributions", if the redemption proceeds are rolled over
directly to a Rollover IRA, the assets of which are invested in the
Trust.
CLASS A SERVICE PLAN. Pursuant to separate Rule 12b-1 Plans adopted by the
Funds, Class A shares of each Fund pay a service fee (the "Service Fee") at the
annual rate of .25% of the Fund's average, daily net assets attributable to the
Class A shares. The Trust's Adviser receives the Service Fees and may pay all or
a portion of them to brokers and other financial intermediaries, including the
Distributor or Sub-Distributor, for personal services rendered to Investors in
Class A shares and/or maintenance of Class A shareholder accounts.
The Class A Service Plans are of a type known as a compensation plan. This means
that although the Trustees are expected to take into account the expenses of
MassMutual, the fees are payable to compensate MassMutual for services rendered
even if the amount paid by a Fund exceeds MassMutual's expenses. See Statement
of Additional Information for description of types of permissable Service Fee
expenditures by MassMutual.
CLASS Y SHARES - NO SALES CHARGES
Class Y shares of each Fund are not subject to front-end sales charges.
Therefore, 100% of an Investor's money is invested in the Fund or Funds of its
choice. In addition, Class Y shares of each Fund are not subject to deferred
sales charges or to any distribution or service fees.
CLASS S SHARES - NO SALES CHARGES
SIAs purchase Class S shares directly from the Fund without a front-end sales
charge. Therefore, 100% of an SIA Investor's money is invested in the Fund or
Funds of its choice. In addition, Class S shares of each Fund are not subject
to any deferred sales charges or any distribution or service fees.
- ----------------
/9/ See Glossary for a definition of Plans.
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<PAGE>
PURCHASE OF SHARES
Shares of the Trust are offered on each day the New York Stock Exchange ("NYSE")
is open for trading (a "Business Day"). Purchase orders received by the
Transfer Agent from MassMutual (as servicing agent of the Distributor) on a
Business Day prior to the close of the NYSE (normally, 4:00 p.m. Eastern Time)
will be processed based on that day's closing net asset value.
Plan Investors purchasing group annuity contracts from MassMutual which have one
or more of the Funds as investment options under their Plans ("Group Annuity
Investors") and Rollover IRAs must place their purchase orders with MassMutual
(as servicing agent of the Distributor) at its home office and must be
accompanied by sufficient funds. Acceptable methods of payment include checks,
federal funds wires, and automated clearing house transactions ("ACH").
MassMutual, on behalf of the Distributor, will not transmit a purchase order to
the Trust's Transfer Agent until MassMutual has determined that the purchase
order is in good form. Generally, a purchase order will be determined by
MassMutual to be in good form if such order: (1) includes all information and
documentation necessary to make appropriate Investor, Plan, trustee and/or Plan
Participant/10/ (if applicable) allocations to the various Funds and/or other
investment options under the Plan and (2) is received by MassMutual at its home
office prior to the close of the NYSE. Purchase orders by wire will be in good
form only upon receipt by MassMutual of: (1) immediately available funds,
deposited to the appropriate MassMutual account; and (2) a confirmation of the
wire receipt. Any order to purchase Fund shares which is received by MassMutual
after the close of the NYSE on a Business Day will be transmitted to the Trust's
Transfer Agent on the next Business Day. For more specific information regarding
what information and documentation are necessary for MassMutual to determine
that a purchase order is in good form with respect to a particular plan, Plan
Investors should refer to Plan Documents./11/
For non-qualified deferred compensation plans eligible to purchase Class Y
shares that have entered into an administrative services agreement with the
Adviser, Class Y shares will be purchased directly by the Plan's trustee
pursuant to the terms of the administrative services agreement. Investors Bank &
Trust Company may serve as a Plan's trustee under the terms of the
administrative services agreement. Other Investors eligible to Purchase Class A
and Class Y shares that have entered into an administrative services or other
agreement with the Adviser must place purchase orders in accordance with the
terms of such administrative services or other agreement. All other Investors
must place purchase orders with the Distributor unless the Investor has entered
into an agreement permitting direct purchases from the Trust.
The sale of Trust shares will be suspended during any period when the
determination of net asset value is suspended. The sale of Trust shares also
may be suspended by the Board of Trustees whenever the Board determines that it
is in the Trust's best interest to do so. The Trust, in its complete
discretion, may reject any order for purchase of its shares.
EXCHANGE PRIVILEGES AND PROCEDURES
Investors have the privilege of exchanging shares of one Fund for the same class
of shares of another series of the Trust, subject to the provisions of Plan
Documents, any administrative services or other agreement with MassMutual, and
applicable laws, including and state insurance laws. However, exchanges may be
restricted or refused by a Fund if, in the opinion of the Adviser: (1) an
Investor has engaged in excessive trading; (2) the Fund receives or anticipates
simultaneous orders affecting significant portions of the Fund's assets; or (3)
a pattern of exchanges coincides with a "market timing" strategy that might be
disruptive to the Fund. Each Fund also reserves the right to refuse exchange
purchases by any person or group of persons, if, in the Adviser's judgment, the
Fund would be unable to invest the funds effectively in accordance with its
investment objectives and policies, or otherwise potentially would be adversely
affected. The Trust reserves the right on 60 days' written notice to modify or
terminate the exchange privilege. Furthermore, any exchange limits imposed by a
Fund may be modified, in the sole discretion of the Fund, for Plan Investors so
that the Fund's exchange privileges are consistent with Plan or group annuity
contract exchange limits as set forth in Plan Documents and Department of Labor
regulations. Plan Investors and Plan Participants should refer to Plan Documents
and related materials to determine what, if any, exchange limitations apply to
them.
For Group Annuity Investors and Rollover IRAs, exchange requests must be
delivered to MassMutual at its home office. An Investor that has entered into an
administrative services or other agreement with the Adviser must deliver
exchange requests in good form pursuant to the terms of its administrative
services or other agreement. All other Investors must deliver exchange requests
in good form to the Distributor,or the Trust if the Investor has entered into an
agreement permitting direct purchases form the Trust.
Any exchange will involve the redemption of shares and the purchase of shares in
another Fund on the basis of the next calculated net asset value per share of
each Fund after the exchange request is received by the Transfer Agent. Exchange
requests will not be transmitted to the Transfer Agent until determined to be in
good form./12/
REDEEMING SHARES
For Group Annuity Investors and Rollover IRAs, Redemption requests must be
sent to MassMutual at its home office. An Investor that has entered into an
administrative services or other agreement with the Adviser must deliver
redemption requests in good form pursuant to the terms of its administrative
services or other agreement. All other Investors must deliver redemption
requests in good form to the Distributor, or the Trust if the Investor has
entered into an agreement permitting direct purchases from the Trust.
Each Fund redeems its shares at their net asset value as next computed after
receipt by the Transfer Agent of a request for redemption.
- ---------------
/10/ See the Glossary for a definition of Plan Participant.
/11/ See the Glossary for a definition of Plan Documents.
/12/ See "Purchase of Shares" above for a discussion of the term "in good
form."
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<PAGE>
Redemption requests will not be transmitted to the Trust's Transfer Agent until
determined to be in good form. Redemption payments will be made within seven
days after receipt of the written request therefor by the Trust, except that the
right of redemption may be suspended or payments postponed when permitted by
applicable law and regulations. When redemption is requested of shares recently
purchased by check, payment may be delayed until the check has been collected,
which may take up to 15 days from receipt of the check.
The Class A Contingent Deferred Sales Charge may be imposed on certain
redemptions of Class A shares. For information regarding the Class A Contingent
Deferred Sales Charge, see "Class A Shares - Sales Charges and 12b-1 Fees"
above.
INVESTMENT MANAGER AND SUB-ADVISERS
INVESTMENT MANAGER
MassMutual is the investment manager to the Funds and is responsible for
providing all necessary investment management and administrative services.
MassMutual is a mutual life insurance company organized in 1851 under the laws
of The Commonwealth of Massachusetts. MassMutual is licensed to transact a life
insurance and annuity business in all states of the United States, the District
of Columbia, Puerto Rico and certain Provinces of Canada. As of June 30, 1997,
MassMutual had consolidated assets in excess of $58.3 billion and consolidated
assets under management in excess of $139 billion, in each case based on
financial statements prepared in accordance with statutory accounting.
The persons responsible for management of the bond and money market portfolios
of MassMutual are also responsible for managing such investments of the Funds.
Gary E. Wendlandt, Chairman, CEO and Trustee of the Trust, and John V. Murphy,
Trustee of the Trust, are officers of MassMutual, as are Stuart H. Reese,
President of the Trust, Hamline C. Wilson, Vice President and Chief Accounting
and Financial Officer of the Trust, Stephen L. Kuhn, Vice President and
Secretary of the Trust, and Raymond B. Woolson, Treasurer of the Trust.
MassMutual serves as investment manager of each Fund pursuant to a separate
investment management agreement pursuant to which MassMutual is responsible for
providing investment management of the Fund and is authorized to engage in
portfolio transactions on behalf of the Fund, subject to such general or
specific instructions as may be given by the Board of Trustees of the Trust.
MassMutual may, at its expense, employ sub-advisers to manage the investments of
the Funds.
The Trust, on behalf of each Fund, pays MassMutual an investment advisory fee
monthly for the investment advisory services performed and the facilities
furnished at an annual rate of the average daily net assets of that Fund as
follows:
(1) .45% for the Prime Fund, the Short-Term Bond Fund, the Core Bond Fund, the
Balanced Fund and the Value Equity Fund.
(2) .55% for the Small Cap Value Equity Fund.
(3) .85% for the International Equity Fund.
For the fiscal year ended December 31, 1996, MassMutual received fees (after
giving effect to a fee waiver) based upon each Fund's average daily net assets,
as follows: Prime Fund .41%; Short-Term Bond Fund .41%; Core Bond Fund .41%;
Balanced Fund .41%; Value Equity Fund .40%; Small Cap Value Equity Fund .51%;
International Equity Fund .78%. The fee waiver terminated on May 1, 1997.
In addition, MassMutual has entered into a separate administrative services
agreement with each Fund pursuant to which MassMutual is obligated to provide
all necessary administrative and shareholder services and to bear some Class
expenses, such as federal and state registration fees, printing and postage.
The Funds are responsible for certain other expenses including brokerage, taxes,
interest, fees and expenses of non-interested trustees, legal fees, custody and
audit fees. MassMutual may, at its expense, employ others to supply all or any
part of the services to be provided to the Funds pursuant to the administrative
services agreements. The Trust, on behalf of each Fund, pays MassMutual an
administrative services fee monthly for the administrative services performed at
annual rates of the average daily net assets of the applicable class of shares
of the Fund which range from .4752% to .4875% for Class A shares, .2752% to
.2875% for Class Y shares and .0774% to .0777% for Class S shares. Refer to
"Expense Information" for more detailed information.
INVESTMENT SUB-ADVISERS
MassMutual has entered into investment sub-advisory agreements with Babson and
HarbourView. These agreements provide that (1) 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.
MassMutual pays Babson a fee equal to an annual rate of .13% of the average
daily net asset value of the Value Equity Fund, .13% of the average daily net
asset value of 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
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<PAGE>
.50% of the average daily net asset value of the International Equity Fund.
Babson is a wholly-owned subsidiary of DLB Acquisition Corporation,
a controlled subsidiary of MassMutual. Babson is a registered
investment adviser that has been providing investment counseling to institutions
and individuals for over 50 years. As of December 31, 1996, Babson had over $7.6
billion of assets under management. Babson serves as investment sub-adviser to
the MML Equity Fund and the Equity Sector of MML Blend Fund of MML Series
Investment Fund, a registered investment company managed by MassMutual.
HarbourView is a wholly-owned subsidiary of OppenheimerFunds, Inc. ("OFI"),
which is a wholly-owned subsidiary of Oppenheimer Acquisition Corporation, a
holding company owned in part by senior management of OFI and ultimately
controlled by MassMutual. HarbourView has operated as an investment adviser
since 1986. As of April 10, 1997, HarbourView managed assets of approximately
$700 million, including assets of the International Equity Fund and certain
separate investment accounts of MassMutual.
DISTRIBUTOR, SUB-DISTRIBUTOR, TRANSFER AGENT, DIVIDEND DISBURSING AGENT,
CUSTODIAN, AND SUB-ADMINISTRATOR
OppenheimerFunds Distributor, Inc. ("Oppenheimer") acts as Distributor to each
Fund. MML Investors Services, Inc. ("MMLISI") serves as Sub-Distributor for each
Fund. MassMutual ultimately has a controlling interest in Oppenheimer. MMLISI is
a wholly-owned subsidiary of MassMutual. Both Oppenheimer and MMLISI may serve
as distributors of securities issued by other investment companies.
Investors Bank & Trust Company serves as each Fund's Transfer Agent, Dividend
Disbursing Agent and Custodian. As Custodian, Investors Bank & Trust Company has
custody of the Funds' securities, and maintains certain financial and accounting
books and records. In addition, Mass Mutual has entered into a sub-
administration agreement with Investors Bank & Trust Company. As Sub-
administrator, Investors Bank & Trust Company generally assists in all aspects
of fund administration and is compensated by Mass Mutual for providing
administrative services to the Funds.
CONTROL PERSON AND PRINCIPAL HOLDER OF SECURITIES
MassMutual may be deemed a control person of the Trust in that certain separate
investment accounts of MassMutual and the Trust's seed money provided by
MassMutual together constitute 100% of the shares of each class of each Fund of
the Trust as of November 30, 1997.
DESCRIPTION OF SHARES
The Trust is a series company which is authorized to issue shares in separate
series of multiple classes. The Trust may issue an unlimited number of shares
of multiple classes, in one or more series as the Trustees may authorize, with
or without par value as the Trustees may prescribe. Each share of a particular
class of a Fund represents an equal proportionate interest in that Fund with
each other share of the same class, none having priority or preference over
another. Each Fund is preferred over all other Funds in respect of the assets
allocated to that Fund. Each share of a particular class of a Fund is entitled
to a pro rata share of any distributions declared in respect of that class and,
in the event of liquidation, a pro rata share of the net assets of that class
remaining after satisfaction of outstanding liabilities. When issued, shares
are fully paid and nonassessable and have no preemptive or subscription rights.
Under the Trust's Declaration of Trust, the Board of Trustees is authorized to
create new series and classes without shareholder approval. Shares of each Fund
entitle their holder to one vote for each dollar (or proportionate fractional
vote for each fraction of a dollar) of net asset value per share of each Fund or
class for each share held as to any matter on which such shares are entitled to
vote.
The Trust is not required to hold annual meetings of shareholders. Special
meetings may be called for such purposes as electing Trustees, voting on
management agreements, and with respect to such additional matters relating to
the Trust as may be required by the Trust's Declaration of Trust and the 1940
Act. Shareholder inquiries should be directed to MassMutual Institutional
Funds, 1295 State Street, Springfield, Massachusetts 01111-0001.
HOW FUND SHARES ARE PRICED
The net asset value (closing price) of each Fund is determined once daily as of
the close of trading on the NYSE (currently 4:00 p.m. Eastern Time) on each day
on which the Exchange is open for trading. Net asset value for shares of a
class is determined by dividing the total market value of a Fund's portfolio
investments and other assets attributable to that class, less any liabilities,
by the total outstanding shares of the class.
Securities which are traded on a national securities exchange or on the NASDAQ
national market system generally are valued at the last sale price. Debt
securities normally are valued at the last reported bid price on the primary
market for those securities. To the extent authorized by the Board of Trustees,
portfolio securities may be valued by a pricing service that determines values
based on market transactions for normal institutional-size trading units. Money
market obligations having a maturity of 60 days or less are generally valued at
amortized cost when the Board of Trustees of the Trust believes that amortized
cost approximates market value. In all other cases, assets and other securities
for which no quotations are readily available (including some restricted
securities) are valued at fair value as determined in good faith by the Board of
Trustees, although the actual calculations may be made by persons acting
pursuant to the direction of the Board.
A dealer or other organization selling shares of the Funds may receive different
levels of compensation for selling one class
24
<PAGE>
of shares over another. Class A shares of the Funds, which may be purchased at
the net asset value per share next determined after receipt of a purchase
request in good order, are subject to the service fees under Rule 12b-1, as set
forth and expressed on an annual basis under "Expense Information".
MassMutual may directly, or through the Distributor, pay cash compensation to
registered representatives who are not employees of MassMutual who sell Class A
and Y shares of the Funds. A registered representative selling Class A shares
may receive: (1) compensation in the first year in an amount equal to 1% of all
first year contributions; and (2) in each subsequent year, annual compensation
in an amount equal to 0.25% of the amount invested. A registered representative
selling Class Y shares to Investors, other than in connection with certain
non-qualified deferred compensation plans, may receive annual compensation in an
amount equal to: (1) 0.10% of the amount invested if the investment is equal to
or less than $10 million; or (2) if the investment exceeds $10 million, the sum
of 0.10% of the first $10 million invested and 0.05% on amounts in excess of $10
million. In connection with the sale of Class y shares to non-qualified deferred
compensation plans that enter into an administrative services agreement with the
Adviser, additional compensation may be paid. In such cases, the aggregate
annual compensation will be in an amount equal to 0.25% of the amount invested.
Annual compensation paid on account of sales of Class A and Class Y shares will
be paid quarterly, in arrears.
DISTRIBUTIONS AND TAXATION
Each Fund intends to continue to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986 (the "Code"). As a regulated
investment company, a Fund will not be subject to Federal income taxes on its
ordinary income and net realized capital gain distributed to its shareholders.
In general, a Fund that fails to distribute at least 98% of such income and gain
in the calendar year in which earned will be subject to a 4% excise tax on the
undistributed amount.
Many Investors, including most tax qualified Plan Investors, may be eligible for
preferential federal income tax treatment on distributions received from a Fund
and dispositions of Fund shares. This Prospectus does not attempt to describe in
any respect such preferential tax treatment. Any prospective Investor that is a
trust or other entity eligible for special tax treatment under the Code that is
considering purchasing shares of a Fund, either directly or indirectly through a
life insurance company separate investment account, should consult its tax
advisers about the federal, state and local tax consequences particular to it,
as should persons considering whether to have amounts held for their benefit by
such trusts or other entities invested in shares of a Fund. Investors that do
not receive preferential tax treatment are subject to federal income taxes on
distributions received in respect of their shares. Distributions of the Fund's
ordinary income and shortterm capital gains are taxable to the shareholder as
ordinary income whether received in cash or additional shares. Designated long-
term capital gains distributions are taxable as long-term capital gain whether
distributed in cash or additional shares and regardless of how long the Investor
has owned shares of the Fund; however, a loss recognized from the sale of Fund
shares held for six months or less will be treated as a long-term capital loss
to the extent of long-term capital gains distributions. Under the Taxpayer
Relief Act of 1997, long-term capital gains generally will be subject to a 28%
or 20% tax rate, depending on the holding period in the portfolio investments.
Certain designated dividends may be eligible for the dividends-received
deduction for corporate shareholders. Investors should consult with their tax
advisers for additional information concerning the federal, state and local tax
consequences of purchasing shares of a Fund.
Dividends from net investment income and distributions of any net realized
capital gains of each Fund are declared and paid annually or at other times as
necessary to meet regulatory requirements. Distributions shall be paid in full
and fractional shares of the applicable Class of the applicable Fund at net
asset value on the first Business Day after the record date for the
distribution, unless, subject to such terms and conditions of any underlying
Plan Documents or any administrative services or other agreement with the
Adviser, the Investor has elected to receive dividend payments in cash.
INVESTMENT PERFORMANCE
The Trust commenced operations on October 3, 1994 subsequent to the transfer of
assets by each of seven SIAs to the Fund having corresponding investment
objectives, policies and limitations in exchange for shares of such Fund. While
the SIAs continue to exist, their assets consist solely of shares of the
corresponding Fund. Except for the seed capital provided by MassMutual, each
Fund's portfolio of investments on October 3, 1994 was the same as the portfolio
of the corresponding SIA immediately prior to the transfer.
The SIAs are not registered investment companies as they each are exempt from
registration under the 1940 Act. Since, in a practical sense, the SIAs
constitute "predecessors" of the Funds, the Trust calculates the performance for
each Class of each Fund for periods commencing prior to the transfer of the SIA
assets to the Funds by including the corresponding SIA's total return adjusted
to reflect the deduction of fees and expenses applicable to each Class as set
forth (1) in the case of Class A and Class Y shares, under "Expense
Information," and (2) in the case of Class S shares, in the Fee Table of the
Trust's initial prospectus which was effective October 3, 1994. The anticipated
expenses of the Class S shares of each Fund as set forth in the Trust's initial
prospectus, without giving effect to the voluntary fee waiver described in such
prospectus, were as follows: 0.557% for the Prime Fund, the Short-Term Bond
Fund, the Core Bond Fund, the Balanced Fund, and the Value Equity Fund; 0.657%
for the Small Cap Value Equity Fund; and 1.059% for the International Equity
Fund. The fees and expenses used to adjust each SIA's total return (as described
above) include, in the case of Class A shares, Rule 12b-1 fees and contingent
deferred sales charges, and in the case of Class S shares, any charges at the
SIA level.
Performance data for Class A and Class Y shares for the period from October 3,
1994 until the date on which such class is initially offered for sale will be
based on the performance of Class S shares adjusted downward to take into
account the deduction of the higher operating expenses to which Class A and
Class Y shares are subject.
The quoted performance data includes the performance of the SIAs for periods
before the Trust's Registration Statement became effective. As noted above, the
SIAs were not registered under the 1940 Act and thus were not subject to certain
investment restrictions that are imposed by the 1940 Act. If the SIAs had been
registered under the 1940 Act, the SIAs performance
25
<PAGE>
might have been adversely affected. Employee benefit plans that invest plan
assets in the SIAs may be subject to certain charges as set forth in their
respective Plan Documents. Investors that enter into an administrative services
or other agreement with the Adviser may also be subject to certain charges as
set forth in their respective agreements. Total return figures would be lower if
they reflected these charges.
Each of the Funds from time to time may advertise certain investment performance
figures. These figures are based on historical earnings but past performance
data is not necessarily indicative of future performance of the Funds. All
performance information with respect to Class S shares will be provided net of
the Fund and any SIA expenses. Each of the Funds may quote yield in conformance
with current Securities and Exchange Commission guidelines. Currently, the
yield for each Fund refers to the net investment income earned by the Fund over
a 30-day period, as defined in the advertisement. This income is then assumed to
be earned for a full year and to be reinvested each month for six months. The
resulting semi-annual yield is doubled.
Each of the Funds may advertise its total return and its holding period return
for various periods of time. Total return is calculated by determining, over a
period of time as stated in the advertisement, the average annual compounded
rate of return that an investment in the Fund earned over that period, assuming
reinvestment of all distributions. Holding period return refers to the
percentage change in the value of an investment in a Fund over a period of time
(as stated in the advertisement), assuming reinvestment of all distributions.
Total return and holding period return differ from yield in that the return
figures include capital changes in an investment while yield measures the rate
of net income generated by a Fund. Total return differs from holding period
return principally in that total return is an average annual figure while
holding period return is an aggregate figure for the entire period.
26
<PAGE>
Average Annual Total Return for the periods ended December 31, 1996. All returns
- ---------------------------
take into account the Adviser's voluntary fee waiver, which was in effect from
October 3 until May 1, 1997 and is described in the "Financial Highlights."
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
1 YEAR
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Class A Class Y Class S
<S> <C> <C> <C>
Prime Fund and its predecessor SIA G 3.58% 5.03% 5.24%
Short-Term Bond Fund and its predecessor SIA F 3.92% 5.37% 5.57%
Core Bond Fund and its predecessor SIA E 1.14% 2.59% 2.80%
Balanced Fund and its predecessor SIA M 11.17% 12.62% 12.83%
Value Equity Fund and its predecessor SIA A 18.58% 20.03% 20.24%
Small Cap Value Equity Fund and its predecessor SIA S 21.16% 22.61% 22.82%
International Equity Fund and its predecessor SIA I 16.86% 18.31% 18.51%
- ------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------
3 YEARS
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
CLASS A CLASS Y CLASS S
<S> <C> <C> <C>
Prime Fund and its predecessor SIA G 4.34% 4.79% 5.00%
Short-Term Bond Fund and its predecessor SIA F 4.66% 5.11% 5.31%
Core Bond Fund and its predecessor SIA E 4.84% 5.29% 5.50%
Balanced Fund and its predecessor SIA M 11.26% 11.71% 11.92%
Value Equity Fund and its predecessor SIA A 17.40% 17.85% 18.06%
Small Cap Value Equity Fund and its predecessor SIA S 11.43% 11.88% 12.09%
International Equity Fund and its predecessor SIA I 5.13% 5.58% 5.78%
- ------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------
5 YEARS
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
CLASS A CLASS Y CLASS S
<S> <C> <C> <C>
Prime Fund and its predecessor SIA G 3.66% 4.11% 4.31%
Short-Term Bond Fund and its predecessor SIA F 5.43% 5.88% 6.08%
Core Bond Fund and its predecessor SIA E 6.27% 6.72% 6.93%
Balanced Fund and its predecessor SIA M 10.06% 10.51% 10.72%
Value Equity Fund and its predecessor SIA A 14.11% 14.56% 14.77%
Small Cap Value Equity Fund and its predecessor SIA S 12.80% 13.25% 13.45%
International Equity Fund and its predecessor SIA I 12.39% 12.84% 13.04%
- ------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------
10 YEARS (or since inception)
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
CLASS A CLASS Y CLASS S
<S> <C> <C> <C>
Prime Fund and its predecessor SIA G 5.21% 5.66% 5.87%
Short-term Bond Fund and its predecessor SIA F (April 30, 1989) 6.96% 7.41% 7.61%
Core Bond Fund and its predecessor SIA E 7.54% 7.99% 8.20%
Balanced Fund and its predecessor SIA M (October 10, 1987) 10.88% 11.33% 11.54%
Value Equity Fund and its predecessor SIA A 13.06% 13.51% 13.72%
Small Cap Value Equity Fund and its predecessor SIA S 13.51% 13.96% 14.17%
International Equity Fund and its predecessor SIA I (July 31,
1991) 12.36% 12.81% 13.01%
- ------------------------------------------------------------------------------------------------
</TABLE>
The quoted performance data includes the performance of the Separate Investment
Accounts (SIAs) for the period before the Trust's Registration Statement became
effective. The SIAs were not registered under the 1940 Act and therefore were
not subject to certain investment restrictions imposed by the Act. If the SIAs
had been registered under the 1940 Act, their performance may have been
adversely affected.
27
<PAGE>
GLOSSARY
CURRENCY TRANSACTIONS: include forward currency contracts, exchange listed
currency futures, exchange listed and OTC options on currencies, and currency
swaps. A forward currency contract involves a privately negotiated obligation
to purchase or sell (with delivery generally required) a specific currency at a
future date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. A
currency swap is an agreement to exchange cash flows based on the notional
difference among two or more currencies and operates similarly to an interest
rate swap.
DURATION: indicates how interest rate changes will affect a debt instrument's
price. As a measure of a fixed-income security's cash flow, duration is an
alternative to the concept of "term to maturity" in assessing the price
volatility associated with changes in interest rates. Generally, the longer the
duration, the more volatility an investor should expect. For example, the
market price of a bond with a duration of two years would be expected to decline
2% if interest rates rose 1%. Conversely, the market price of the same bond
would be expected to increase 2% if interest rates fell 1%. The market price of
a bond with a duration of four years would be expected to increase or decline
twice as much as the market price of a bond with a two-year duration. Duration
measures a security's maturity in terms of the average time required to receive
the present value of all interest and principal payments as opposed to its term
to maturity. The maturity of a security measures only the time until final
payment is due; it does not take account of the pattern of a security's cash
flow over time, which would include how cash flow is affected by prepayments and
by changes in interest rates. Incorporating a security's yield, coupon interest
payments, final maturity and option features into one measure, duration is
computed by determining the weighted average maturity of a bond's cash flows,
where the present values of the cash flows serve as weights. Determining
duration may involve the Adviser's estimates of future economic parameters,
which may vary from actual future values.
FOREIGN SECURITIES: include debt, equity, and hybrid instruments, obligations
and securities of foreign issuers, including governments of countries other than
the United States and companies organized under the laws of countries other than
the United States that are traded on foreign securities exchanges or foreign
over-the-counter markets. Foreign securities also include securities of foreign
issuers (i) represented by American Depository Receipts, (ii) traded in the
United States over-the-counter markets, or (iii) listed on a U.S. securities
exchange.
INVESTOR: includes a plan sponsor, plan fiduciary, trustee, institutional
investor, insurance company separate investment account and/or any other person
or entity described in the Prospectus as an eligible purchaser of shares, that
purchases shares of the Trust and is hereinafter referred to as Investor or
collectively referred to as Investors. An Investor that is a separate
investment account of MassMutual is referred to as an SIA Investor to the extent
it invests in the Trust. Investors that are purchasing shares of a Fund on
behalf of a Plan are sometimes referred to as Plan Investors. The term Investor
does not include a Plan Participant.
NRSRO: means a nationally recognized statistical rating organization. For a
description of the ratings of two NRSROs, Standard & Poor's Ratings Group
("S&P") and Moody's Investors Service, Inc. ("Moody's"), see Appendix A to the
Statement of Additional Information. For example, the four investment grade
ratings in descending order for debt securities as rated by Moody's are Aaa, Aa,
A and Baa -- including Baa3. The four investment grade ratings for debt
securities as rated by S&P are AAA, AA, A and BBB -- including BBB-. For
commercial paper, Moody's two highest ratings are P-1 and P-2 and S&P's two
highest ratings are A-1 and A-2.
PLAN: refers to all defined contribution and defined benefit retirement plans
and any other employee retirement arrangement that invests in the Funds,
including non-qualified deferred compensation plans and tax sheltered annuity
plans.
PLAN ASSETS: assets held by the Plan trustee of a particular Plan.
PLAN PARTICIPANT: includes active, deferred and suspended Plan Participants on
whose behalf Plan Assets are invested, as well as any other individual included
in the computation of active participants under the appropriate Form 5500 filed
with the Internal Revenue Service, if applicable.
PLAN DOCUMENTS: refer to the documents that created and are related to a
particular employee retirement benefit plan. These documents might include
trust documents, insurance contracts (including group annuity contracts),
administrative service agreements and other agreements providing for the
provision of services or benefits for the plan and its participants.
U.S. GOVERNMENT SECURITIES: include obligations issued, sponsored, assumed or
guaranteed as to principal and interest by the Government of the United States,
its agencies and instrumentalities, and securities backed by such obligations,
including FHA/VA guaranteed mortgages.
THE NAME MASSMUTUAL INSTITUTIONAL FUNDS IS THE DESIGNATION OF THE TRUST UNDER A
DECLARATION OF TRUST DATED MAY 28, 1993, AS AMENDED. THE OBLIGATIONS OF SUCH
TRUST ARE NOT PERSONALLY BINDING UPON, NOR SHALL RESORT BE HAD TO THE PROPERTY
OF, ANY OF THE TRUSTEES, SHAREHOLDERS, OFFICERS, EMPLOYEES OR AGENTS OF SUCH
TRUST, BUT ONLY THE PROPERTY OF THE RELEVANT FUND SHALL BE BOUND.
28
<PAGE>
MASSMUTUAL INSTITUTIONAL FUNDS
1295 State Street
Springfield, Massachusetts 01111
INVESTMENT MANAGER
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
1295 State Street
Springfield, Massachusetts 01111
INVESTMENT SUB-ADVISERS
HARBOURVIEW ASSET MANAGEMENT CORPORATION
Two World Trade Center
New York, New York 10048
DAVID L. BABSON AND COMPANY, INC.
One Memorial Drive
Cambridge, Massachusetts 02142
DISTRIBUTOR
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
Two World Trade Center
New York, New York 10048
SUB-DISTRIBUTOR
MML INVESTORS SERVICES, INC.
1414 Main Street
Springfield, Massachusetts 01144
SUB-ADMINISTRATOR, TRANSFER AGENT
and CUSTODIAN
INVESTORS BANK & TRUST COMPANY
200 Clarendon Street
Boston, Massachusetts 02116
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
2300 Bay Bank Tower,
1500 Main Street
Springfield, Massachusetts 01101
LEGAL COUNSEL
ROPES & GRAY
One International Place
Boston, Massachusetts 02110
29
<PAGE>
FILED PURSUANT TO RULE 497 (C)
MASSMUTUAL INSTITUTIONAL FUNDS
1295 State Street
Springfield, Massachusetts 01111
STATEMENT OF ADDITIONAL INFORMATION
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUS OF MASSMUTUAL INSTITUTIONAL FUNDS (THE
"TRUST") DATED DECEMBER 1, 1997 (THE "PROSPECTUS"). TO OBTAIN A PROSPECTUS,
CALL YOUR REGISTERED REPRESENTATIVE, AT (413) 788-8411, OR WRITE THE TRUST.
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Statement of Additional Information or in the related Prospectus, in connection
with the offer contained herein, and, if given or made, such other information
or representation must not be relied upon as having been authorized by the Trust
or the Distributor. This Statement of Additional Information and the related
Prospectus do not constitute an offer by the Trust or by the Distributor to sell
or a solicitation of any offer to buy any of the securities offered hereby in
any jurisdiction to any person to whom it is unlawful to make such offer in such
jurisdiction.
This Statement of Additional Information relates to the following Funds:
. MassMutual Prime Fund
. MassMutual Short-Term Bond Fund
. MassMutual Core Bond Fund
. MassMutual Balanced Fund
. MassMutual Value Equity Fund
. MassMutual Small Cap Value Equity Fund
. MassMutual International Equity Fund
DATED DECEMBER 1, 1997
B-1
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
GENERAL INFORMATION........................................................ B-3
ADDITIONAL INVESTMENT POLICIES............................................. B-3
FUNDAMENTAL INVESTMENT RESTRICTIONS........................................ B-8
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS..................................... B-9
MANAGEMENT OF THE TRUST.................................................... B-10
COMPENSATION............................................................... B-14
COMPENSATION TABLE......................................................... B-14
CONTROL PERSON AND PRINCIPAL HOLDERS OF SECURITIES......................... B-15
INVESTMENT MANAGER AND SUB-ADVISERS........................................ B-15
THE DISTRIBUTOR............................................................ B-18
CLASS A SERVICE PLANS...................................................... B-18
CUSTODIAN, DIVIDEND DISBURSING AGENT AND TRANSFER AGENT.................... B-19
INDEPENDENT PUBLIC ACCOUNTANT.............................................. B-19
PORTFOLIO TRANSACTIONS AND BROKERAGE....................................... B-19
SHAREHOLDER INVESTMENT ACCOUNT............................................. B-20
REDEMPTION OF SHARES....................................................... B-20
VALUATION OF PORTFOLIO SECURITIES.......................................... B-20
DESCRIPTION OF SHARES...................................................... B-21
INVESTMENT PERFORMANCE..................................................... B-21
TAXATION................................................................... B-23
EXPERTS.................................................................... B-25
APPENDIX - DESCRIPTION OF SECURITIES RATINGS............................... B-26
REPORT OF INDEPENDENT ACCOUNTANTS.......................................... B-28
AUDITED FINANCIAL STATEMENTS - DECEMBER 31, 1996........................... B-29
UNAUDITED FINANCIAL STATEMENTS - JUNE 30, 1997............................. B-88
</TABLE>
B-2
<PAGE>
GENERAL INFORMATION
-------------------
MassMutual Institutional Funds (the "Trust") is a professionally managed, open-
end investment company. This Statement of Additional Information describes the
following seven separate, diversified series of the Trust: (1) MassMutual Prime
Fund, (2) MassMutual ShortTerm Bond Fund, (3) MassMutual Core Bond Fund, (4)
MassMutual Balanced Fund, (5) MassMutual Value Equity Fund, (6) MassMutual Small
Cap Value Equity Fund, and (7) MassMutual International Equity Fund (each
individually referred to as a "Fund" or collectively as the "Funds"). Additional
series may be created by the Trustees from time to time.
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 from time to time (the "Declaration of Trust").
The investment manager for each Fund is Massachusetts Mutual Life Insurance
Company ("MassMutual"). The investment sub-adviser for the Value Equity Fund,
the Small Cap Value Equity Fund and the Equity Sector of the Balanced Fund is
David L. Babson and Company, Inc. ("Babson"). The investment sub-adviser for the
International Equity Fund is HarbourView Asset Management Corporation
("HarbourView"). Babson and HarbourView are each indirect subsidiaries of
MassMutual. MassMutual, Babson and HarbourView are sometimes referred to herein
as the "advisers."
ADDITIONAL INVESTMENT POLICIES
------------------------------
Each Fund has a distinct investment objective which it pursues through separate
investment policies, as described in the Prospectus and below. The investment
objective, fundamental investment policies and fundamental investment
restrictions of a Fund may not be changed without the vote of a majority of that
Fund's outstanding shares (which, under the Investment Company Act of 1940 (the
"1940 Act") and the rules thereunder and as used in this Statement of Additional
Information and in the Prospectus, means the lesser of (1) 67% of the shares of
that Fund present at a meeting if the holders of more than 50% of the
outstanding shares of that Fund are present in person or by proxy, or (2) more
than 50% of the outstanding shares of that Fund). The Board of Trustees of the
Trust may adopt new or amend or delete existing non-fundamental investment
policies and restrictions without shareholder approval.
The following discussion, when applicable, elaborates on the presentation of
each Fund's investment policies contained in the Prospectus. For a description
of the ratings of corporate debt securities and money market instruments in
which the various Funds may invest, reference should be made to the Appendix.
PRIME FUND
An instrument in which the Prime Fund may invest will be considered to be
short-term if its remaining maturity on the date of its purchase is 397 days or
less. In the case of a variable or floating rate obligation, the remaining
maturity will be deemed to be the period remaining until the next readjustment
of the interest rate or until maturity, whichever is less. In the case of an
obligation with a demand feature, the remaining maturity will be deemed to be
the period remaining until the principal amount may be recovered through the
demand provision or until the next readjustment of the interest rate or until
maturity, whichever is the shortest.
Certain money market instruments are available only in relatively large
denominations, and others may carry higher yields if purchased in relatively
large denominations. Also, it is believed by MassMutual that an institutional
purchaser of money market instruments who has the ability to invest relatively
large sums on a regular basis may have investment opportunities that are not
available to those who invest smaller sums less frequently. Certain of the Prime
Fund's investment restrictions limit the percentage of the Fund's assets which
may be invested in certain industries or in securities of any issuer.
Accordingly, if the Fund has relatively small net assets and net cash flow from
sales and redemptions of shares, the Fund may be unable to invest in money
market instruments paying the highest yield available at a particular time.
SHORT-TERM BOND FUND
The Fund's duration management strategy currently utilizes a quantitative,
risk-averse discipline that balances generating a high total rate of return
primarily from current income with minimizing fluctuations in capital values.
The duration of the portfolio will be lengthened by extending average maturities
when sufficient additional yield can
B-3
<PAGE>
be obtained. Conversely, the duration will be shortened when adequate
compensation for the additional risk associated with longer maturities cannot be
realized.
CORE BOND FUND
The Core Bond Fund's duration management strategy is to match (within 10%) the
duration of the Lehman Brothers Government/Corporate Bond Index. MassMutual
seeks to add value compared to this index through the use of sector rotation,
yield curve management and asset selection. Neither market timing nor interest
rate anticipation methods are employed in managing the Fund.
INTERNATIONAL EQUITY FUND
The Trustees are authorized to determine what constitutes a "foreign security"
and to modify any such definition as they deem appropriate. Opportunities for
longterm capital appreciation will be stressed.
Currency Transactions - The Fund may, but will not necessarily, engage in
currency transactions with counterparties in order to hedge the value of
portfolio holdings denominated in particular currencies against fluctuations in
relative value.
FIXED INCOME SECURITIES
While the Prime Fund invests in high quality securities and the Short-Term Bond
Fund, the Core Bond Fund and the Core Bond Sector of the Balanced Fund invest in
investment grade securities, an investment in these Funds is not without risk.
The debt securities in which the Funds invest may not offer as high a yield as
may be achieved from lower quality instruments having less safety. If the Prime
Fund, the ShortTerm Bond Fund or the Core Bond Fund dispose of an obligation
prior to maturity, it may realize a loss or a gain. An increase in interest
rates will generally reduce the value of portfolio investments, and a decline in
interest rates will generally increase the value of portfolio investments. In
addition, investments are subject to the ability of the issuer to make payment
at maturity. If an investment of the ShortTerm Bond Fund or the Core Bond Fund
is downgraded below investment-grade level, the adviser will normally dispose of
such security in a reasonable period of time. In special circumstances the
adviser may determine that it is in the Fund's best interest to continue to hold
the security.
WARRANTS AND RIGHTS
A warrant typically gives the holder the right to purchase underlying stock at a
specified price for a designated period of time. Warrants may be a relatively
volatile investment. The holder of a warrant takes the risk that the market
price of the underlying stock may never equal or exceed the exercise price of
the warrant. A warrant will expire without value if it is not exercised or sold
during its exercise period. Rights are similar to warrants, but normally have a
short duration and are distributed directly by the issuer to its shareholders.
Warrants and rights have no voting rights, receive no dividends, and have no
rights to the assets of the issuer.
The Equity Sector of the Balanced Fund, the Value Equity Fund, the Small Cap
Value Equity Fund and the International Equity Fund may each invest up to 5% of
the value of their respective assets in warrants in an effort to build a
position in the underlying common stocks and, of such 5%, no more than 2% may be
invested in warrants that are not listed on the New York Stock Exchange or the
American Stock Exchange.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
In a repurchase agreement transaction, a Fund acquires a security from, and
simultaneously resells it to, an approved vendor (a U.S. commercial bank or the
U.S. branch of a foreign bank, or a broker-dealer which has been designated a
primary dealer in government securities and which must meet the credit
requirements set by the Trust's Board of Trustees from time to time) for
delivery on an agreed-upon future date. The resale price exceeds the purchase
price by an amount that reflects an agreed-upon interest rate effective for the
period during which the repurchase agreement is in effect. The majority of these
agreements run from day to day, and delivery pursuant to the resale agreement
typically will occur within one to five days of the purchase. Repurchase
agreements are considered "loans" under the 1940 Act, collateralized by the
underlying security. A Fund's repurchase agreements require that at all times
while the repurchase agreement is in effect, the value of the collateral must
equal or exceed the repurchase price to fully collateralize the loan.
Additionally, a Fund's adviser will impose creditworthiness requirements to
confirm that the vendor is financially sound
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and will continuously monitor the collateral's value. However, if the seller
defaults, the Fund could realize a loss on the sale of the underlying security.
In addition, if the seller should be involved in bankruptcy or insolvency
proceedings, the Fund may incur delay and costs in selling the underlying
security or may suffer a loss of principal and interest if the Fund is treated
as an unsecured creditor and required to return the underlying securities to the
seller's estate.
A reverse repurchase agreement is a contract pursuant to which a Fund agrees to
sell a security and simultaneously agrees to repurchase it at an agreed-upon
price at a stated time. A Fund engaging in reverse repurchase agreements will
maintain a segregated account with its custodian containing cash or liquid
securities, having a current market value at all times in an amount sufficient
to repurchase securities pursuant to outstanding reverse repurchase agreements.
Reverse repurchase agreements are borrowings subject to Restriction (2) under
"Fundamental Investment Restrictions."
CERTAIN DEBT SECURITIES
Some U.S. Government Securities are backed by the full faith and credit of the
U.S. Government; others are secured by the right of the issuer to borrow from
the U.S. Treasury; while others are supported only by the credit of the issuing
agency or instrumentality. There can be no assurance that the U.S. Government
will pay interest and principal on securities on which it is not legally
obligated to do so.
The Funds will limit their investments in certificates of deposit and bankers'
acceptances to U.S. dollar denominated obligations of U.S. banks and savings and
loan associations, London branches of U.S. banks ("Eurodollar obligations") and
U.S. branches of foreign banks ("Yankeedollar obligations"). In the case of
foreign banks, the $1 billion deposit requirement will be computed using
exchange rates in effect at the time of the banks' most recently published
financial statements. Eurodollar obligations and Yankeedollar obligations will
not be acquired if as a result more than 25% of a Fund's net assets would be
invested in such obligations. Obligations of foreign banks and of foreign
branches of U.S. banks may be affected by foreign governmental action, including
imposition of currency controls, interest limitations, withholding taxes,
seizure of assets or the declaration of a moratorium or restriction on payments
of principal or interest. Foreign banks and foreign branches of U.S. banks may
provide less public information than, and may not be subject to the same
accounting, auditing and financial recordkeeping standards as, domestic banks.
SECURITIES LENDING
A Fund may seek additional income by making loans of portfolio securities of not
more than 33% of its net assets taken at current market value. Under applicable
regulatory requirements and securities lending agreements (which are subject to
change), the loan collateral must, on each business day, be at least equal to
the value of the loaned securities and must consist of cash, bank letters of
credit or securities of the U.S. Government (or its agencies or
instrumentalities), or other cash equivalents in which the Fund is permitted to
invest. The terms of a Fund's loans must also meet certain tests under the
Internal Revenue Code and permit the Fund to reacquire loaned securities on five
business days' notice or in time to vote on any important matter.
HEDGING INSTRUMENTS AND DERIVATIVES
The Funds currently may use the hedging instruments and derivatives discussed
below. In the future, a Fund may employ hedging instruments and strategies that
are not currently contemplated but which may be developed, to the extent such
investment methods are consistent with the Fund's investment objective, legally
permissible and adequately disclosed.
(1) FORWARD CONTRACTS -- Each Fund may purchase or sell securities on a forward
commitment basis ("forward contracts"). When such transactions are negotiated,
the price is fixed at the time of commitment, but delivery and payment for the
securities can take place a month or more after the commitment date. The
securities so purchased or sold are subject to market fluctuations and no
interest accrues to the purchaser during this period. At the time of delivery
the securities may be worth more or less than the purchase or sale price. While
a Fund also may enter into forward contracts with the initial intention of
acquiring securities for its portfolio, it may dispose of a commitment prior to
settlement if MassMutual deems it appropriate to do so. The Funds may realize
short-term gains or losses upon the sale of forward contracts. If a Fund enters
into a forward contract, it will establish a segregated account with its
custodian consisting of cash or liquid securities, having a current market value
equal to or greater than the aggregate amount of that Fund's commitment under
forward contracts (that is, the purchase price of the underlying
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security on the delivery date). As an alternative to maintaining all or part of
the segregated account, a Fund could buy call or put options to "cover" the
forward contracts. A Fund will not enter into a forward contract if as a result
more than 25% of its total assets would be held in a segregated account covering
such contracts.
(2) CURRENCY TRANSACTIONS -- Each Fund may engage in currency transactions with
counterparties in order to convert foreign denominated securities or obligations
to U.S. dollar denominated investments. Further, the International Equity Fund
may engage in currency transactions to hedge the value of portfolio holdings
denominated in particular currencies against fluctuations in relative value.
Currency transactions include forward currency contracts, exchange listed
currency futures, exchange listed and OTC options on currencies, and currency
swaps. A forward currency contract involves a privately negotiated obligation to
purchase or sell (with delivery generally required) a specific currency at a
future date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. A
currency swap is an agreement to exchange cash flows based on the notional
difference among two or more currencies and operates similarly to an interest
rate swap. A Fund may enter into currency transactions with counterparties which
have received (or the guarantors of the obligations of which have received) a
credit rating of A-1 or P-1 by Standard & Poor's Ratings Group ("S&P") or
Moody's Investors Service ("Moody's"), respectively, or that have an equivalent
rating from a nationally recognized statistical rating organization ("NRSRO") or
(except for OTC currency options) are determined to be of equivalent credit
quality by the adviser.
The International Equity Fund's dealings in forward currency contracts and other
currency transactions such as futures, options, options on futures, and swaps
will be limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of a Fund, which will generally arise
in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency. For example, if the Fund believes that a
foreign currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency. The Funds may also cross-hedge
currencies by entering into transactions to purchase or sell one or more
currencies that are expected to decline in value relative to other currencies to
which the Fund has or in which the Fund expects to have portfolio exposure.
A Fund will not enter into a transaction to hedge currency exposure to an extent
greater, after netting all transactions intended wholly or partially to offset
other transactions, than the aggregate market value (at the time of entering
into the transaction) of the securities held in its portfolio that are
denominated or generally quoted in or currently convertible into such currency,
other than with respect to proxy hedging as described below.
To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, the Funds may also engage in proxy
hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering into a forward contract to sell a currency whose
changes in value are generally considered to be linked to a currency or
currencies in which some or all of the Fund's portfolio securities are or are
expected to be denominated, and to buy U.S. dollars. The amount of the contract
would not exceed the value of the Fund's securities denominated in linked
currencies. For example, if the adviser considers that the Austrian schilling is
linked to the German deutsche mark (the "D-mark"), the Fund holds securities
denominated in schillings and the adviser believes that the value of schillings
will decline against the U.S. dollar, the adviser may enter into a contract to
sell D-marks and buy dollars. Currency hedging involves some of the same risks
and considerations as other transactions with similar instruments. Currency
transactions can result in losses to the Fund if the currency being hedged
fluctuates in value to a degree or in a direction that is not anticipated.
Further, there is the risk that the perceived linkage between various currencies
may not be present during the particular time that the Fund is engaging in proxy
hedging.
(3) RISKS REGARDING HEDGING INSTRUMENTS AND DERIVATIVES
Some of the general risks associated with hedging and the use of derivatives
include: (a) the possible absence of a liquid secondary market for any
particular hedging instrument at any time; (b) these instruments can be highly
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volatile; and (c) the possible need to defer closing out certain positions to
avoid adverse tax consequences. More specific risks are set forth below.
(A) FORWARD CONTRACTS: Forward contracts involve a risk of loss if the
value of the security to be purchased declines prior to the settlement
date, which risk is in addition to the risk of decline in value of the
Funds' other assets.
(B) CURRENCY TRANSACTIONS: Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency
control is of great importance to the issuing governments and influences
economic planning and policy, purchases and sales of currency and related
instruments can be negatively affected by government exchange controls,
blockages, and manipulations or exchange restrictions imposed by
governments. These can result in losses to a Fund if it is unable to
deliver or receive currency or funds in settlement of obligations and could
also cause hedges it has entered into to be rendered useless, resulting in
full currency exposure as well as incurring transaction costs. Buyers and
sellers of currency futures are subject to the same risks that apply to the
use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in
the issuing nation. Trading options on currency futures is relatively new,
and the ability to establish and close out positions on such options is
subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic
to that country's economy.
RESTRICTED AND ILLIQUID SECURITIES
None of the Funds currently expect to invest in restricted or illiquid
securities, although, as a non-fundental policy, each Fund may invest no more
than 15% of its net assets in illiquid securities. However, this policy does not
limit the purchases of securities eligible for resale to qualified institutional
buyers pursuant to Rule 144A under the Securities Act of 1933, provided that
such securities are determined to be liquid by the Board of Trustees, or the
adviser if such determination is pursuant to Board-approved guidelines. Such
guidelines shall take into account trading activity for such securities and the
availability of reliable pricing information, among other factors. If there is a
lack of trading interest in particular Rule 144A securities, a Fund's holdings
of those securities may be illiquid, resulting in undesirable delays in selling
these securities at prices representing fair value.
FOREIGN SECURITIES
The International Equity Fund and to a lesser extent each of the other Funds are
permitted to invest in foreign securities. With the exception of the
International Equity Fund, each Fund intends to invest in foreign securities
only if: (i) such securities are U.S. denominated; or (ii) if such securities
are not U.S. denominated, the Fund contemporaneously enters into a foreign
currency transaction to hedge the currency risk associated with the particular
foreign security. If a Fund's securities are held abroad, the countries in which
such securities may be held and the sub-custodian holding them must be approved
by the Board of Trustees or its delegate under applicable rules adopted by the
Securities and Exchange Commission (the "SEC"). In buying foreign securities, a
Fund may convert U.S. dollars into foreign currency, but only to effect
securities transactions on foreign securities exchanges and not to hold such
currency as an investment.
Investments in foreign securities involve special risks and considerations. As
foreign companies are not generally subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to domestic companies, there may be less publicly available
information about a foreign company than about a domestic company. For example,
foreign markets have different clearance and settlement procedures. Delays in
settlement could result in temporary periods when assets of a Fund are
uninvested. The inability of a Fund to make intended security purchases due to
settlement problems could cause it to miss certain investment opportunities.
They may also entail certain other risks, such as the possibility of one or more
of the following: imposition of dividend or interest withholding or confiscatory
taxes, higher brokerage costs, thinner trading markets, currency blockages or
transfer restrictions, expropriation, nationalization, military coups or other
adverse political or economic developments; less government supervision and
regulation of securities exchanges, brokers and listed companies; and the
difficulty of enforcing obligations in other countries. Purchases of foreign
securities are usually made in foreign currencies and, as a result, a Fund may
incur currency conversion costs and may be affected favorably or unfavorably by
changes in the value of foreign currencies against the U.S. dollar. Further, it
may be more difficult for a Fund's agents to keep currently informed about
corporate actions which may affect the prices of
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portfolio securities. Communications between the United States and foreign
countries may be less reliable than within the United States, thus increasing
the risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities. Certain markets may require payment for
securities before delivery. A Fund's ability and decisions to purchase and sell
portfolio securities may be affected by laws or regulations relating to the
convertibility of currencies and repatriation of assets.
A number of current significant political, demographic and economic developments
may affect investments in foreign securities and in securities of companies with
operations overseas. Such developments include dramatic political changes in
government and economic policies in several Eastern European countries and the
republics composing the former Soviet Union, as well as the unification of the
European Economic Community. The course of any one or more of these events and
the effect on trade barriers, competition and markets for consumer goods and
services are uncertain. Similar considerations are of concern with respect to
developing countries. For example, the possibility of revolution and the
dependence on foreign economic assistance may be greater in these countries than
in developed countries. Management seeks to mitigate the risks associated with
these considerations through diversification and active professional management.
SHORT SALES AGAINST-THE-BOX
Selling short "against-the-box" refers to the sale of securities actually owned
by the seller but held in safekeeping. In such short sales, while the short
position is open, a Fund must own an equal amount of such securities, or by
virtue of ownership of securities have the right, without payment of further
consideration, to obtain an equal amount of securities sold short. Short sales
against-the-box generally produce current recognition of gain for federal income
tax purposes on the constructive sale of securities "in the box" prior to the
time the short position is closed out. None of the Funds currently intend to
engage in short sales against-the-box.
INVESTMENT BASKET
Notwithstanding any Fund's fundamental investment restrictions (except those
imposed as a matter of law), the Board of Trustees may authorize one or more of
the Funds to invest in any security or investment-related instrument, or to
engage in investment-related transactions or practices, such as newly developed
debt securities or hedging programs, provided that the Board of Trustees has
determined that to do so is consistent with the Fund's investment objectives and
policies and has adopted reasonable guidelines for use by the Fund's advisers,
and provided further that at the time of making such investment or entering into
such transaction, such investments or instruments account for not more than 10%
of the Fund's total assets. The Trust has no current intention of using this
investment basket authority.
FUNDAMENTAL INVESTMENT RESTRICTIONS
-----------------------------------
Each Fund is subject to certain fundamental restrictions on its investments,
which may not be changed without the affirmative vote of a majority of the
outstanding shares of that Fund. Investment restrictions that appear below or
elsewhere in this Statement of Additional Information and in the Prospectus
which involve a maximum percentage of securities or assets shall not be
considered to be violated unless an excess over the percentage occurs
immediately after, and is caused by, an acquisition or encumbrance of securities
or assets of, or borrowings by or on behalf of, a Fund. The Trust may not, on
behalf of any Fund:
(1) Purchase any security (other than U.S. Treasury securities or U.S.
Government Securities) if as a result, with respect to 75% of the Fund's
assets, more than 5% of the value of the total assets (determined at the
time of investment) of a Fund would be invested in the securities of a
single issuer.
(2) Borrow money, except from banks for temporary or emergency purposes not
in excess of one-third of the value of a Fund's assets, except that a Fund
may enter into reverse repurchase agreements or roll transactions. For
purposes of calculating this limitation, entering into portfolio lending
agreements shall not be deemed to constitute borrowing money. A Fund would
not make any additional investments while its borrowings exceeded 5% of its
assets.
(3) Issue senior securities (as defined in the 1940 Act) except for
securities representing indebtedness not prevented by paragraph (2) above.
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(4) Make short sales, except for sales "against the box."
(5) Act as an underwriter, except to the extent that, in connection with
the disposition of portfolio securities, a Fund may be deemed an
underwriter under applicable laws.
(6) Invest in oil, gas or other mineral leases, rights, royalty contracts
or exploration or development programs, real estate or real estate mortgage
loans. This restriction does not prevent a Fund from purchasing readily
marketable securities secured or issued by companies investing or dealing
in real estate and by companies that are not principally engaged in the
business of buying and selling such leases, rights, contracts or programs.
(7) Purchase physical commodities or commodity contracts (except futures
contracts, including but not limited to contracts for the future delivery
of securities and futures contracts based on securities indices).
(8) Make loans other than by investing in obligations in which a Fund may
invest consistent with its investment objective and policies and other than
repurchase agreements and loans of portfolio securities.
(9) Pledge, mortgage or hypothecate assets taken at market to an extent
greater than 15% of the total assets of the Fund except in connection with
permitted transactions in options, futures contracts and options on futures
contracts, reverse repurchase agreements and securities lending.
(10) Purchase any security (other than securities issued, guaranteed or
sponsored by the U.S. Government or its agencies or instrumentalities) if,
as a result, a Fund would hold more than 10% of the outstanding voting
securities of an issuer.
(11) Purchase or retain securities of any issuer if, to the knowledge of
the Trust, more than 5% of such issuer's securities are beneficially owned
by officers and trustees of the Trust or officers and directors of its
adviser who individually beneficially own more than 1/2 of 1% of the
securities of such issuer.
Notwithstanding any fundamental investment restriction set forth above or in the
Prospectus, each Fund may: (1) engage in hedging transactions, techniques, and
practices using forward contracts and similar instruments, to the extent and in
a manner permitted by law; and (2) invest in any security or investment-related
instrument, or engage in any investment-related transaction or practice,
provided that the Board of Trustees has determined that to do so is consistent
with the investment objective and policies of the Fund and has adopted
reasonable guidelines for use by the Fund's adviser, and provided further that
at the time of entering into such investment or transaction, such investments or
instruments account for no more than 10% of the Fund's total assets. For the
foreseeable future, the Funds do not expect to engage in futures and options
transactions or interest rate swap agreements.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS
--------------------------------------
In addition to the investment restrictions described above and those contained
in the Prospectus, the Trustees of the Trust have voluntarily adopted certain
policies and restrictions which are observed in the conduct of the affairs of
the Funds. These represent intentions of the Trustees based upon current
circumstances. They differ from fundamental investment policies in that the
following additional investment restrictions may be changed or amended by action
of the Trustees without requiring prior notice to or approval of shareholders.
In accordance with such policies and guidelines, each Fund may not:
(1) Invest for the purpose of exercising control over, or management of,
any company.
(2) Invest in securities of other investment companies, except by purchase
in the open market where no commission or profit to a sponsor or dealer
results from such purchase other than the customary broker's commission,
except when such purchase is part of a plan of merger, consolidation,
reorganization or acquisition or except shares of money market funds
advised by MassMutual or an affiliate thereof. It is expected that a Fund
would purchase shares of such money market funds only if arrangements are
made to eliminate duplicate advisory and distribution fees.
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(3) To the extent that shares of a Fund are purchased or otherwise acquired
by an acquiring company that is part of the same group of investment
companies as the Trust in reliance on Section 12(d)(1)(G) of the 1940 Act,
acquire any securities of registered open-end investment companies or
registered unit investment trusts in reliance or Section 12(d)(1)(F) or
Section 12 (d)(1)(G) of the 1940 Act.
MANAGEMENT OF THE TRUST
-----------------------
The Trust has a Board of Trustees, a majority of which must not be "Interested
Persons" as defined in the 1940 Act. The Trustees and principal officers of the
Trust are listed below together with information on their positions with the
Trust, address, age, principal occupations during the past five years and other
principal business affiliations.
GARY E. WENDLANDT* Chairman, Chief Executive Officer
1295 State Street and Trustee of the Trust
Springfield, MA 01111
Age: 47
Chief Investment Officer (since 1993), Executive Vice President (since
1992), Senior Vice President (1983-1992), MassMutual; Chairman (since
1995), Vice Chairman (1993-1995) and President (1988-1993), MML Series
Investment Fund (openend investment company); Chairman (since 1995),
President (1983-1995) and Trustee: MassMutual Corporate Investors and
Chairman (since 1995), President (1988-1995) and Trustee, MassMutual
Participation Investors (closed-end investment companies); Chairman (since
1996), Antares Leveraged Capital Corp. (finance company); Chairman, HYP
Management, Inc. (managing member of MassMutual High Yield Partners LLC)
and MMHC Investment, Inc. (investor in MassMutual High Yield Partners LLC);
Advisory Board Member (since 1996), MassMutual High Yield Partners LLC
(high yield bond fund); President and Director (since 1995), DLB
Acquisition Corporation (holding company for investment advisers); Director
(since 1990), Oppenheimer Acquisition Corporation (investment advisory
holding company); Supervisory Director (since 1991) MassMutual/Carlson CBO
N.V. (collateralized bond fund); Director (since 1994), MassMutual
Corporate Value Partners Limited (investor in debt and equity securities)
and MassMutual Corporate Value Limited (parent of MassMutual Corporate
Value Partners Limited); Chairman (since 1994) and Director (since 1993),
MML Realty Management Corporation; Chairman (since 1994) and Chief
Executive Officer (1994-1996), Cornerstone Real Estate Advisers, Inc.
(wholly-owned real estate investment adviser subsidiary of MassMutual
Holding Company); Director (since 1992), Merrill Lynch Derivative Products,
Inc.; Chairman (1994-1995) and Director (1993-1995), MML Real Estate
Corporation.
RONALD J. ABDOW Trustee of the Trust
1400 Elm Street
West Springfield, MA 01089
Age: 66
President, Abdow Corporation (operator of restaurants); General Partner,
Grove Investment Group (apartment building syndicator); Trustee, Abdow G&R
Trust and Abdow G&R Co. (owners and operators of restaurant properties);
Partner, Abdow Partnership, Abdow Auburn Associates, and Abdow Hazard
Associates (owners and operators of restaurant properties); Trustee (since
1993) MML Series Investment Fund (open-end investment company).
RICHARD H. AYERS Trustee of the Trust
1000 Stanley Drive
New Britain, CT 06053
Age: 55
Adviser to Chairman (since 1997), Chairman and Chief Executive Officer
(1989-1996) and Director (since 1985), The Stanley Works (manufacturer of
tools, hardware, specialty hardware and specialty hardware products);
Director (since 1986), Southern New England Telecommunications Corp.;
Director, (since 1988) Perkin Elmer Corp.; Advisory Board Member (since
1996), MML Series Investment Fund (openend investment company).
- ---------------
* Trustee who is an "interested person" of the Trust within the definition set
forth in Section 2(a)(19) of the 1940 Act.
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MARY E. BOLAND Trustee of the Trust
67 Market Street
Springfield, MA 01118
Age: 58
Attorney at Law, Egan, Flanagan and Cohen, P.C. (law firm), Springfield,
MA; Director (since 1995), Trustee (until 1995), SIS Bank (formerly,
Springfield Institution for Savings); Trustee, MML Series Investment Fund
(open-end investment company).
DAVID E.A. CARSON Trustee of the Trust
850 Main Street
Bridgeport, CT 06604
Age: 63
President and Chief Executive Officer (since 1985), People's Bank;
Director, United Illuminating Co.; Trustee, American Skandia Trust (open-
end investment company). Advisory Board Member (since 1996), MML Series
Investment Fund (open-end investment company).
RICHARD G. DOOLEY* Trustee of the Trust
1295 State Street
Springfield, Massachusetts 01111
Age: 68
Consultant (since 1993), Executive Vice President and Chief Investment
Officer (1978-1993), MassMutual; Director (since 1996), Investment
Technology Group Inc.; Director, The Advest Group, Inc. (financial services
holding company), Hartford Steam Boiler Inspection and Insurance Co., New
England Education Loan Marketing Corporation; Director (since 1992), Kimco
Realty Corp. (shopping center ownership and management); Director (since
1993), Jefferies Group, Inc. (financial services holding company); Director
and Vice President, Oppenheimer Acquisition Corporation (investment
advisory holding company); Vice Chairman (since 1995), Chairman (1982-
1995), MassMutual Corporate Investors, and Vice Chairman (since 1995),
Chairman (1988-1995), MassMutual Participation Investors (closed-end
investment companies); Director (1993-1995), Luxonen S.A. (Swedish
investment fund); Supervisory Director (1991-1995), MassMutual/Carlson CBO
N.V. (collateralized bond fund); Director (1984-1993), MML Real Estate
Corporation (real estate management subsidiary of MassMutual Holding
Company) and MML Realty Management Corporation (subsidiary of MassMutual
Holding Company to manage real estate projects); Vice Chairman (since
1995), Chairman (1988-1995), MML Series Investment Fund (open-end
investment company).
RICHARD W. GREENE Trustee of the Trust
University Of Rochester
Rochester, NY 14627
Age: 62
Executive Vice President and Treasurer (since 1986), University of
Rochester (private university). Advisory Board Member (since 1996), MML
Series Investment Fund (open-end investment company).
BEVERLY C.L. HAMILTON Trustee of the Trust
515 South Flower Street
Los Angeles, CA 90017
Age: 51
President (since 1991), ARCO Investment Management Co.; Vice President
(since 1991), Atlantic Richfield Company; Director (since 1992),
Connecticut Natural Gas; Director (since 1991), Emerging Markets Growth
Fund (closed-end investment company). Advisory Board Member (since 1996),
MML Series Investment Fund (open-end investment company).
- ---------------
* Trustee who is an "interested person" of the Trust within the definition set
forth in Section 2(a)(19) of the 1940 Act.
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F. WILLIAM MARSHALL, JR. Trustee of the Trust
1441 Main Street
Springfield, MA 01102
Age: 55
President, Chief Executive Officer and Director (since 1993), SIS Bank
(formerly, Springfield Institution for Savings); Chairman and Chief
Executive Officer (1990-1993), Bank of Ireland First Holdings, Inc. and
First New Hampshire Banks; Trustee (since 1996), MML Series Investment Fund
(open-end investment company).
CHARLES J. MCCARTHY Trustee of the Trust
181 Eton Road
Longmeadow, MA 01106
Age: 74
Proprietor, Synectics Financial Company (venture capital activities,
business consulting and investments); Trustee, MML Series Investment Fund
(open-end investment company).
JOHN V. MURPHY* Trustee of the Trust
1295 State Street
Springfield, Massachusetts 01111
Age: 48
Executive Vice President (since 1997) of MassMutual; Executive Vice
President, Director and Chief Operating Officer (1995-1997), David L.
Babson and Company Incorporated; Chief Operating Officer (1993-1996),
Concert Capital Management, Inc.; Senior Vice President and Director
(1995-1997), Potomac Babson Incorporated; Chief Financial Officer (1985-
1993), Liberty Financial Companies (financial services); Director, Emerald
Isle Bancorp and Hibernian Savings Bank (wholly-owned subsidiary of Emerald
Isle Bancorp).
JOHN H. SOUTHWORTH Trustee of the Trust
195 Eton Road
Longmeadow, MA 01106
Age: 70
Chairman (since 1993) and President (1984-1992), Southworth Company
(manufacturer of paper and calendars); Director (since 1995), Trustee
(until 1995), SIS Bank (formerly, Springfield Institution for Savings);
Trustee, MML Series Investment Fund (open-end investment company).
STUART H. REESE President of the Trust
1295 State Street
Springfield, MA 01111
Age: 42
Chief Executive Director (since 1997), Senior Vice President (1993-1997),
MassMutual; President (since 1993), MML Series Investment Fund; President
(since 1995), Executive Vice President (1993-1995), MassMutual Corporate
Investors and MassMutual Participation Investors (close-end investment
companies); Director (since 1996), Antares Leveraged Capital Corp. (finance
company) and Charter Oak Capital Management, Inc. (investment adviser);
President and Director (since 1996) HYP Management, Inc. (managing member
of MassMutual High Yield Partners LLC), and MMHC Investment, Inc. (investor
in MassMutual High Yield Partners LLC); Director (since 1994), MassMutual
Corporate Value Partners Limited (investor in debt and equity securities)
and MassMutual Corporate Value Limited (parent of MassMutual Corporate
Value Partners Limited); Supervisory Director (since 1994),
MassMutual/Carlson CBO (collateralized bond fund); Director and Member of
Investment Committee (since 1994), MML Bay State Life Insurance Company
(wholly-owned insurance subsidiary of MassMutual); Director and Member
of Investment and Auditing Committees, MML Pension Insurance Company
(wholly-owned insurance subsidiary of MassMutual Holding Company Two MSC,
Inc.); Director (since 1994), Pace Industries (aluminum die caster); Vice
President and Managing Director (1990-1992), Capital Markets Group of Aetna
Life & Casualty Company; Chairman and President (1990-1993), Aetna
Financial Services, Inc.
- ---------------
* Trustee who is an "interested person" of the Trust within the definition set
forth in Section 2(a)(19) of the 1940 Act.
B-12
<PAGE>
HAMLINE C. WILSON Vice President and Chief Financial
1295 State Street Officer of the Trust
Springfield, MA 01111
Age: 60
Senior Managing Director (since 1996), Vice President and Managing Director
(1989-1996), MassMutual; Vice President and Chief Financial Officer, MML
Series Investment Fund, MassMutual Corporate Investors and MassMutual
Participation Investors.
STEPHEN L. KUHN Vice President and Secretary
1295 State Street of the Trust
Springfield, MA 01111
Age: 50
Vice President and Associate General Counsel (since 1992), Second Vice
President and Associate General Counsel (1988-1992), MassMutual; Vice
President and Secretary, MML Series Investment Fund, MassMutual
Participation Investors and MassMutual Corporate Investors; President,
MassMutual/Carlson CBO Incorporated; Chief Legal Officer and Assistant
Secretary (since 1995), DLB Acquisition Corporation (holding company for
investment advisers); Assistant Secretary (since 1997), Oppenheimer
Acquisition Corporation (investment advisor holding company).
CHARLES C. MCCOBB, JR. Vice President of the Trust
1295 State Street
Springfield, MA 01111
Age: 53
Managing Director (since 1997), MassMutual; Managing Director/Vice
President (1994-1997) Citicorp; Managing Director/Vice President (1973-
1994) Aetna Life & Casualty Company.
EDMOND F. RYAN Vice President of the Trust
1295 State Street
Springfield, MA 01111
Age: 49
Senior Vice President (since 1995), Vice President (1985-1995) MassMutual.
RAYMOND B. WOOLSON Treasurer of the Trust
1295 State Street
Springfield, MA 01111
Age: 38
Senior Managing Director (since 1996), Second Vice President (1992-1996),
Director/Fund Account Administration (1989-1992), MassMutual; Treasurer,
MassMutual Corporate Investors and MassMutual Participation Investors;
Treasurer (since 1996), MML Series Investment Fund (open-end investment
company).
MARK B. ACKERMAN Comptroller of the Trust
1295 State Street
Springfield, MA 01111
Age: 32
Investment Director (since 1996), Associate Director (1993-1996),
MassMutual; Controller (since 1997) Associate Treasurer (1995-1997),
MassMutual Participation Investors and MassMutual Corporate Investors;
Comptroller (since 1997), Associate Treasurer (1995-1996), MML Series
Investment Fund (open-end investment company).
The Audit Committee makes recommendations to the Trustees as to the engagement
or discharge of the Trust's independent auditors, supervises investigations into
matters relating to audit functions, reviews with the Trust's independent
auditors the results of the audit engagement, and considers the audit fees. The
Nominating Committee consists of Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust or any adviser and considers making all
nominations for non-interested members of the Board of Trustees. The selection
and nomination of management nominees for such vacancies is committed to the
discretion of the Nominating Committee. The Investment Pricing Committee
determines the fair value of securities for which market quotations are not
readily available.
B-13
<PAGE>
COMPENSATION
------------
The Trust, on behalf of each Fund, pays each of its Trustees who is not an
officer or employee of MassMutual a fee of $2,000 per quarter plus $2,000 per
meeting attended. Such Trustees who serve on the Audit Committee of the Trust
are paid an additional fee of $1,000 per year. Such Trustees who serve on the
Nominating Committee or the Investment Pricing Committee are paid an additional
fee of $500 per meeting attended. In addition, the Trust reimburses out-of-
pocket business travel expenses to such Trustees. Trustees who are officers or
employees of MassMutual receive no fees from the Trust.
COMPENSATION TABLE
------------------
The following table discloses the compensation paid to the Registrant's
non-interested trustees for the 1996 fiscal year. The Registrant has no pension,
retirement, or deferred compensation plans. All of the non-interested Trustees
also serve as Trustees or Advisory Board Members of one other investment company
managed by MassMutual. Total Compensation from Registrant and Fund Complex
reflects compensation paid in the 1996 fiscal year.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
TOTAL COMPENSATION
AGGREGATE FROM REGISTRANT AND
NAME/POSITION COMPENSATION FROM REGISTRANT FUND COMPLEX
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ronald J. Abdow
Trustee $16,000 $32,000
- ------------------------------------------------------------------------------------------------------------
Richard H. Ayers
Trustee $ 2,000 6,000
- ------------------------------------------------------------------------------------------------------------
Mary E. Boland
Trustee 16,000 32,000
- ------------------------------------------------------------------------------------------------------------
David E.A. Carson
Trustee 2,000 6,000
- ------------------------------------------------------------------------------------------------------------
Richard W. Greene
Trustee 2,000 6,000
- ------------------------------------------------------------------------------------------------------------
Beverly C.L. Hamilton
Trustee 2,000 6,000
- ------------------------------------------------------------------------------------------------------------
F. William Marshall, Jr.
Trustee 12,000 23,333
- ------------------------------------------------------------------------------------------------------------
Charles J. McCarthy
Trustee 17,000 34,000
- ------------------------------------------------------------------------------------------------------------
John H. Southworth
Trustee 17,000 73,246*
* Includes deferred compensation plan benefits received from other investment company's Fund Complex.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The officers and Trustees of the Trust as a group own less than 1% of any series
of outstanding shares of the Trust.
The Trust's shareholders have the right, upon the declaration in writing or vote
of at least two-thirds of the votes represented by its outstanding shares, to
remove a Trustee. The Trustees shall call a meeting of shareholders to vote on
the removal of a Trustee upon the written request of the record holders of
shares representing at least 10% of all of the votes represented by all
outstanding shares of the Trust. In addition, whenever ten or more shareholders
of record who have been such for at least six months preceding the date of
application, and who hold in the aggregate either shares having a net asset
value of at least $25,000 or at least 1% of the Trust's outstanding shares,
whichever is less, shall apply to the Trustees in writing, stating that they
wish to communicate with other shareholders with a view to obtaining signatures
for a request for a meeting for the purpose of voting upon the question of
removal of any Trustee or Trustees and accompanied by the form of communication
and request which they wish to transmit, the Trustees shall within five business
days after receipt of such application either: (1) afford to such applicants
access to a list of the names and addresses of all shareholders as recorded on
the books of the Trust; or (2) inform such applicants as to the approximate
number of shareholders of record, and the
B-14
<PAGE>
approximate cost of mailing to them the proposed communication and form of
request. If the Trustees elect to follow the latter course, the Trustees, upon
the written request of such applicants, accompanied by a tender of the material
to be mailed and of the reasonable expenses of mailing, shall, with reasonable
promptness, mail such material to all shareholders of record at their addresses
as recorded on the books of the Trust, unless within five business days after
such tender the Trustees shall mail to such applicants and file with the SEC,
together with a copy of the material to be mailed, a written statement signed by
at least a majority of the Trustees to the effect that in their opinion either
such material contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or would be
in violation of applicable law, and specifying the basis of such opinion.
After opportunity for hearing regarding the objections specified in the written
statement so filed, the SEC may, and if demanded by the Trustees or by such
applicants shall, enter an order either sustaining one or more of such
objections, or refusing to sustain any of them. If the SEC shall enter an order
refusing to sustain any such objections or if, after the entry of an order
sustaining one or more of such objections, the SEC shall find, after notice and
opportunity for hearing, that all objections so sustained have been met, and
shall enter an order so declaring, the Trustees shall mail copies of such
material to all shareholders with reasonable promptness after the entry of such
order and the renewal of such tender.
On any matters submitted to a vote of shareholders, all shares of the Trust then
entitled to vote shall be voted in the aggregate as a single class without
regard to series or class, except that: (i) when required by the 1940 Act or
when the Trustees shall have determined that the matter affects one or more of
the series or classes materially differently, shares will be voted by individual
series or class; and (ii) when the Trustees have determined that any matter
affects only the interests of one or more series or classes, then only
shareholders of such series or class shall be entitled to vote thereon.
Shareholder inquiries should be directed to MassMutual Institutional Funds, 1295
State Street, Springfield, MA 01111.
CONTROL PERSON AND PRINCIPAL HOLDER OF SECURITIES
-------------------------------------------------
MassMutual may be deemed a control person of the Trust in that certain of its
separate investment accounts and its provision of seed money for the Trust
together constitute 100% of the shares of each class of each Fund of the Trust
as of November 30, 1997.
INVESTMENT MANAGER AND SUBADVISERS
----------------------------------
INVESTMENT MANAGER
MassMutual serves as investment manager to each Fund pursuant to an Investment
Management Agreement with the Trust on behalf of each Fund dated September 30,
1994 (each an "Advisory Agreement"). Under each Advisory Agreement, MassMutual
is obligated to provide for the management of each Fund's portfolio of
securities and makes investment decisions with respect to the purchase and sale
of investments for the Prime Fund, the Short-Term Bond Fund, the Core Bond Fund
and the Prime and Core Bond Sectors of the Balanced Fund, subject to policies
established by the Trustees of the Trust and in accordance with each Fund's
investment objective, policies and restrictions as set forth herein and in the
Prospectus.
Each Advisory Agreement may be terminated at any time without the payment of any
penalty by the Trustees, or by vote of a majority of the outstanding shares of
the Fund, or by MassMutual, on sixty days' written notice. In addition, each
Advisory Agreement automatically terminates if it is assigned or if its
continuance is not specifically approved at least annually (1) by the
affirmative vote of a majority of the Trustees or by the affirmative vote of a
majority of the Fund's shares, and (2) by an affirmative vote of a majority of
the Trustees who are not "interested persons" (as defined in the 1940 Act) of
the Trust. Under the terms of each Advisory Agreement, a Fund recognizes
MassMutual's control of the name "MassMutual" and the Trust agrees that its
right to use such name is non-exclusive and can be terminated by MassMutual at
any time. MassMutual's liability regarding its investment management obligations
and duties is limited to situations involving its willful misfeasance, bad
faith, gross negligence or reckless disregard of such obligations and duties.
MassMutual also serves as investment adviser to: MassMutual Corporate Investors
and MassMutual Participation Investors, closed-end management investment
companies; MML Money Market Fund, MML Equity Fund, MML Managed Bond Fund, MML
Blend Fund, and MML Equity Index Fund, which are series of MML Series Investment
Fund, an open-end management investment company; certain wholly owned
subsidiaries of MassMutual; MassMutual/Carlson CBO N.Y., a corporation that
issued Collateralized Bond Obligations on or about May 1, 1991;
B-15
<PAGE>
MassMutual Corporate Value Partners, a partnership formed in 1994 to provide
investment opportunities on a leverage basis in the public or private high yield
markets; MassMutual High Yield Partners LLC, a limited liability company formed
in 1996 to invest in publicly traded high yield bonds, high yield syndicated
bank debt and public convertible securities; and various employee benefit plans.
The Trust, on behalf of each Fund, pays MassMutual an investment advisory fee
monthly, at an annual rate based upon the average daily net assets of that Fund
as follows: .45% for the Prime Fund, the Short-Term Bond Fund, the Core Bond
Fund, the Balanced Fund and the Value Equity Fund; .55% for the Small Cap Value
Equity Fund; and .85% for the International Equity Fund.
For the last three fiscal periods, the Funds have paid the following amounts as
investment advisory fees to MassMutual pursuant to each Advisory Agreement:
<TABLE>
<CAPTION>
Gross Waiver** Net
PRIME FUND
<S> <C> <C> <C>
Period ended 12/31/94* $ 161,361 $ (15,967) $ 145,394
Year ended 12/31/95 1,027,586 (70,814) 956,772
Year ended 12/31/96 1,150,292 (89,223) 1,061,069
SHORT-TERM BOND FUND
Period ended 12/31/94* 123,543 (12,731) 110,812
Year ended 12/31/95 528,655 (39,446) 489,209
Year ended 12/31/96 606,206 (47,791) 558,415
CORE BOND FUND
Period ended 12/31/94* 231,644 (27,892) 203,752
Year ended 12/31/95 964,830 (91,069) 873,761
Year ended 12/31/96 1,375,667 (128,270) 1,247,397
BALANCED FUND
Period ended 12/31/94* 395,156 (46,523) 348,633
Year ended 12/31/95 1,801,770 (165,250) 1,636,520
Year ended 12/31/96 2,271,174 (203,071) 2,068,103
VALUE EQUITY FUND
Period ended 12/31/94* 1,792,257 (244,445) 1,547,812
Year ended 12/31/95 8,289,231 (852,771) 7,436,460
Year ended 12/31/96 10,377,627 (1,077,667) 9,299,960
SMALL CAP VALUE EQUITY FUND
Period ended 12/31/94* 433,941 (45,051) 388,890
Year ended 12/31/95 1,928,743 (155,450) 1,773,293
Year ended 12/31/96 2,298,488 (182,305) 2,116,183
INTERNATIONAL EQUITY FUND
Period ended 12/31/94* 331,042 (33,401) 297,641
Year ended 12/31/95 1,580,088 (170,788) 1,409,300
Year ended 12/31/96 2,398,114 (196,769) 2,201,345
</TABLE>
*The Funds commenced operations on October 3, 1994.
**MassMutual's voluntary agreement to waive a portion of its management fee
terminated May 1, 1997. See "Financial Highlights" in the Prospectus.
In addition, MassMutual has entered into a separate administrative services
agreement ("Administrative Services Agreement") with each Fund pursuant to which
MassMutual is obligated to provide all necessary administrative and shareholder
services and to bear some Class expenses, such as federal and state registration
fees, printing and
B-16
<PAGE>
postage. MassMutual may, at its expense, employ others to supply all or any part
of the services to be provided to the Funds pursuant to the Administrative
Services Agreements. The Trust, on behalf of each Fund, pays MassMutual an
administrative services fee monthly at an annual rate based upon the average
daily net assets of the applicable class of shares of the Fund which range from
.4752% to .4875% for Class A shares; .2752% to .2875% for Class Y shares; and
.0774% to .0777% for Class S shares. MassMutual has entered into a
sub-administrative agreement with Investors Bank & Trust Company. As
sub-administrator, Investors Bank & Trust Company generally assists in all
aspects of fund administration and is compensated by MassMutual for providing
administrative services to the Funds.
For the last three fiscal periods, the Funds have paid the following amounts as
administrative services fees to MassMutual pursuant to each Administrative
Services Agreement:
<TABLE>
<CAPTION>
PRIME FUND
<S> <C>
Period ended 12/31/94* $ 29,307
Year ended 12/31/95 186,608
Year ended 12/31/96 208,805
SHORT-TERM BOND FUND
Period ended 12/31/94* 21,656
Year ended 12/31/95 93,087
Year ended 12/31/96 106,637
CORE BOND FUND
Period ended 12/31/94* 43,535
Year ended 12/31/95 181,925
Year ended 12/31/96 258,828
BALANCED FUND
Period ended 12/31/94* 75,006
Year ended 12/31/95 342,532
Year ended 12/31/96 431,541
VALUE EQUITY FUND
Period ended 12/31/94* 360,634
Year ended 12/31/95 1,668,405
Year ended 12/31/96 2,088,712
SMALL CAP VALUE EQUITY FUND
Period ended 12/31/94* 68,195
Year ended 12/31/95 303,658
Year ended 12/31/96 361,815
INTERNATIONAL EQUITY FUND
Period ended 12/31/94* 38,056
Year ended 12/31/95 181,945
Year ended 12/31/96 275,670
</TABLE>
*The Funds commenced operations on October 3, 1994.
INVESTMENT SUBADVISERS
Securities held by the Funds are also frequently held by MassMutual investment
accounts and by other investment companies and accounts for which MassMutual,
Babson or HarbourView act as investment adviser or sub-adviser. If the same
security is purchased or sold for any Fund and such accounts or companies at or
about the same time, such purchases or sales normally will be combined, to the
extent practicable, and will be allocated as nearly as practicable on a pro rata
basis in proportion to the amounts to be purchased or sold for each. In
determining the amounts to be purchased and sold, the main factors to be
considered will be the investment objectives of the respective portfolios, the
relative size of portfolio holdings of the same or comparable security,
availability of cash for investment by the various portfolios and the size of
their respective investment commitments. It is believed that the ability of the
Funds to participate in larger volume transactions will, in most cases, produce
better execution for
B-17
<PAGE>
the Funds. In some cases, however, this procedure could have a detrimental
effect on the price and amount of a security available to a Fund or the price at
which a security may be sold. It is the opinion of the Trust's management that
such execution advantage and the desirability of retaining MassMutual, Babson,
and HarborView as advisers of the Funds outweigh the disadvantages, if any,
which might result from this procedure.
Babson is a wholly-owned subsidiary of DLB Acquisition Corporation, an indirect,
controlled subsidiary of MassMutual. HarbourView is a wholly owned subsidiary
of OppenheimerFunds, Inc. ("OFI"), which is a wholly owned subsidiary of
Oppenheimer Acquisition Corporation, a holding company owned in part by senior
management of OFI and ultimately controlled by MassMutual. MassMutual, Babson
and HarbourView are each registered with the SEC as investment advisers.
THE DISTRIBUTOR
---------------
The Trust's shares are continuously distributed by OppenheimerFunds Distributor,
Inc. (the "Distributor") pursuant to an Amended and Restated Distribution
Agreement with the Trust dated December 1,1997 (the "Distribution Agreement").
The Distributor pays commissions to its selling dealers as well as the cost of
printing and mailing Prospectuses to potential investors and of any advertising
incurred by it in connection with distribution of shares of the Funds. MML
Investor Services, Inc. serves as the sub-distributor to the Trust pursuant to
an agreement with the Distributor dated September 8, 1994.
The Distribution Agreement will continue in effect for successive one-year
periods, provided that each such continuance is specifically approved (i) by the
vote of a majority of the Trustees or by a vote of a majority of the shares of
the Trust; and (ii) by a majority of the Trustees who are not parties to the
Distribution Agreement or interested persons (as defined in the 1940 Act) of any
such person, cast in person at a meeting called for the purpose of voting on
such approval.
CLASS A SERVICE PLANS
---------------------
The Trust has adopted, with respect to the Class A shares of each Fund, a
Service Plan and Agreement (each such plan, a "Plan") pursuant to Rule 12b-1
under the 1940 Act. The Trustees of the Trust, including a majority of the
Trustees who are not interested persons of the Trust and who have no direct or
indirect financial interest in the operation of the Plans, by vote cast in
person at a meeting called for the purpose of voting on such Plans, approved the
Plan on August 4, 1997. Under the terms of each Plan, the Trust is permitted to
compensate, out of the assets attributable to the Class A shares of the
applicable Fund, in an amount up to 0.25% on an annual basis of the average
daily net assets attributable to that class, MassMutual for services provided
and expenses incurred by it for purposes of maintaining or providing personal
services (the "Servicing Fee") to Class A shareholders. The Servicing Fee may be
spent by MassMutual on personal services rendered to Class A shareholders of a
Fund and/or maintenance of Class A shareholder accounts. MassMutual's Servicing
Fee expenditures may include, but shall not be limited to, compensation to, and
expenses (including telephone and overhead expenses) of agents or employees of
MassMutual, the Distributor or Sub-Distributor, pension consultants or
participanting or introducing brokers and other financial intermediaries who
assist investors in completing account forms and selecting dividend and other
account options; who aid in the processing of redemption requests for Class A
shares or the processing of dividend payments with respect to Class A shares;
who prepare, print and deliver prospectuses and shareholder reports to
shareholders; who oversee compliance with federal and state laws pertaining to
the sale of Class A shares; who provide information periodically to Class A
shareholders showing their position in Class A shares; who issue account
statements to Class A shareholders; who furnish shareholder sub-accounting; who
forward communications from a Fund to Class A shareholders; who render advice
regarding the particular shareholder account options offered by a Fund in light
of shareholder needs; who provide and maintain elective shareholder services;
who provide and maintain pre-authorized investment plans for Class A
shareholders; who respond to inquiries form Class A shareholders relating to
such services; and/or who provide such similar services as permitted under
applicable statutes, rules or regulations.
Each Plan provides that it may not be amended to materially increase the costs
which Class A shareholders may bear under the Plan without the approval of a
majority of the outstanding Class A shares of the Fund.
Each Plan provides that it may not take effect until approved by vote of
majority of both (i) the Trustees of the Trust and (ii) the Trustees of the
Trust who are not interested persons of the Trust and have no direct or indirect
financial interest in the operation of the Plan or any agreements related to it.
Each Plan provides that it shall continue in effect so long as such continuance
is specifically approved at least annually by (i) Trustees of the Trust and (ii)
the Trustees of the Trust who are not interested persons of the Trust and have
no direct or indirect financial interest in the operation of the Plan or any
agreements related to it. Each Plan provides that MassMutual shall provide to
the Trustee, and the Board shall review at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures were made.
The Conduct Rules of the NASD limit the amount of distribution fees that may be
paid by mutual funds. "Service fees," defined to mean fees paid for providing
shareholder services or the maintenance of accounts (but not transfer agency
services) are not subject to the limits. The Trust believes that all of the fees
paid pursuant to the Plans will qualify as "service fees" and therefore will not
be limited by NASD rules.
The Plans were not in effect prior to the date of this Statement of
Additional Information and no payments were made thereunder in prior fiscal
periods.
B-18
<PAGE>
CUSTODIAN, DIVIDEND DISBURSING AGENT AND TRANSFER AGENT
-------------------------------------------------------
Investors Bank & Trust Company, located at 200 Clarendon Street, Boston,
Massachusetts 02116, is the custodian of the Funds' investments (the
"Custodian") and is the Funds' transfer agent and dividend disbursing agent (the
"Transfer Agent"). The Custodian and the Transfer Agent do not assist in, and
are not responsible for, the investment decisions and policies of the
Funds.
INDEPENDENT PUBLIC ACCOUNTANT
-----------------------------
Coopers & Lybrand L.L.P., located at 2300 Bay Bank Tower, 1500 Main Street,
Springfield, Massachusetts 01101, is the Trust's independent public accountants.
PORTFOLIO TRANSACTIONS AND BROKERAGE
------------------------------------
Purchases and sales of securities on a securities exchange are effected by
brokers, and each Fund which purchases or sells securities on a securities
exchange pays a brokerage commission for this service. In transactions on stock
exchanges in the United States, these commissions are negotiated, whereas on
many foreign stock exchanges these commissions are fixed. In the over-the-
counter markets, securities are generally traded on a "net" basis with dealers
acting as principal for their own accounts without a stated commission, although
the price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are purchased at a fixed price which includes
an amount of compensation to the underwriter, generally referred to as the
underwriter's concession or discount. On occasion, certain money market
instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid.
The primary consideration in placing portfolio security transactions with
broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. Each adviser attempts to achieve this result by selecting
broker-dealers to execute portfolio transactions on the basis of their
professional capability, the value and quality of their brokerage services and
the level of their brokerage commissions.
Under each Advisory Agreement and as permitted by Section 28(e) of the
Securities Exchange Act of 1934, an adviser may cause a Fund to pay a broker-
dealer which provides brokerage and research services to the adviser an amount
of commission for effecting a securities transaction for a Fund in excess of the
amount other broker-dealers would have charged for the transaction if the
adviser determines in good faith that the greater commission is reasonable in
relation to the value of the brokerage and research services provided by the
executing broker-dealer viewed in terms of either a particular transaction or
the adviser's overall responsibilities to the Trust and to its other clients.
The term "brokerage and research services" includes; advice as to the value of
securities, the advisability of investing in, purchasing, or selling securities,
and the availability of securities or of purchasers or sellers of securities;
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts;
and effecting securities transactions and performing functions incidental
thereto such as clearance and settlement.
Although commissions paid on every transaction will, in the judgment of the
adviser, be reasonable in relation to the value of the brokerage services
provided, commissions exceeding those which another broker might charge may be
paid to broker-dealers (except the Distributor) who were selected to execute
transactions on behalf of the Trust and the adviser's other clients in part for
providing advice as to the availability of securities or of purchasers or
sellers of securities and services in effecting securities transactions and
performing functions incidental thereto such as clearance and settlement.
Broker-dealers may be willing to furnish statistical, research and other factual
information or services ("Research") to an adviser for no consideration other
than brokerage or underwriting commissions. Securities may be bought or sold
through such brokerdealers, but at present, unless otherwise directed by the
Trust, a commission higher than one charged elsewhere will not be paid to such a
firm solely because it provided Research to the adviser. Research provided by
brokers is used for the benefit of all of the adviser's clients and not solely
or necessarily for the benefit of the Trust. The adviser attempts to evaluate
the quality of Research provided by brokers. Results of this effort are
sometimes used by the adviser as a consideration in the selection of brokers to
execute portfolio transactions.
B-19
<PAGE>
The investment advisory fee that the Trust pays on behalf of each Fund to
MassMutual will not be reduced as a consequence of an adviser's receipt of
brokerage and research services. To the extent the Trust's portfolio
transactions are used to obtain such services, the brokerage commissions paid by
the Trust will exceed those that might otherwise be paid, by an amount which
cannot now be determined. Such services would be useful and of value to an
adviser in serving both the Trust and other clients and, conversely, such
services obtained by the placement of brokerage business of other clients would
be useful to an adviser in carrying out its obligations to the Trust.
Brokerage commissions paid by the Funds for the fiscal years ended December 31,
1996 and December 31, 1995 and for the period ended December 31, 1994,
respectively, were as follows: Balanced Fund $115,756, $87,156 and $20,315;
Value Equity Fund $933,716, $643,882 and $128,536; Small Cap Value Equity Fund
$430,964, $291,912 and $50,261; and International Equity Fund $1,103,103,
$1,218,802 and $55,656. Approximately $24,000 of the brokerage commissions paid
by the Funds for the fiscal year ended December 31, 1996 were paid to Jefferies
& Co., Inc. A Trustee of the Trust is a director of the parent company of
Jefferies & Co., Inc.
The Prime Fund, ShortTerm Bond Fund and the Core Bond Fund did not incur
brokerage commissions during these periods.
SHAREHOLDER INVESTMENT ACCOUNT
------------------------------
A Shareholder Investment Account is established for each Investor in the
Funds./1/ Each account contains a record of the shares of each Fund maintained
by the Transfer Agent. No share certificate will be issued. Whenever a
transaction takes place in the Shareholder Investment Account, the Investor will
be mailed a statement showing the transaction and the status of the account.
REDEMPTION OF SHARES
--------------------
With respect to each Fund, the Trustees may suspend the right of redemption,
postpone the date of payment or suspend the determination of net asset value (a)
for any period during which the New York Stock Exchange ("NYSE") is closed
(other than for customary weekend and holiday closing), (b) for any period
during which trading in the markets the Fund normally uses is restricted, (c)
when an emergency exists as determined by the SEC so that disposal of the Fund's
investments or a determination of its net asset value is not reasonably
practicable, or (d) for such other periods as the SEC by order may permit for
the protection of the Trust's shareholders. While the Trust's Declaration of
Trust would permit it to redeem shares in cash or other assets of the Fund or
both, the Trust has filed an irrevocable election with the SEC to pay in cash
all requests for redemption received from any shareholder if the aggregate
amount of such requests in any 90day period does not exceed the lesser of
$250,000 or 1% of a Fund's net assets.
VALUATION OF PORTFOLIO SECURITIES
---------------------------------
The net asset value per share of each Fund is determined by the Transfer Agent
as of the close of the NYSE, currently 4:00 p.m., Eastern Time, on each day the
NYSE is open for trading and the Custodian is open for business. The NYSE is
not open for trading on New Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day and on occasion is closed early or entirely due to weather or
other conditions.
Equity securities are valued on the basis of valuations furnished by a pricing
service, authorized by the Board of Trustees, which provides the last reported
sale price for securities listed on a national securities exchange or on the
NASDAQ national market system, or in the case of overthecounter securities not
so listed, the last reported bid price. Debt securities (other than shortterm
obligations with a remaining maturity of sixty days or less) are valued on the
basis of valuations furnished by a pricing service, authorized by the Board of
Trustees, which determines valuations taking into account appropriate factors
such as institutionalsize 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 amortized cost unless such value does not
- -------------------------------
/1/ "Investor" includes a plan sponsor, plan fiduciary, trustee, institutional
investor, insurance company separate investment account and/or any other person
or entity described in the Prospectus as an eligible purchaser of shares, that
purchases shares of the Trust. An Investor that is a separate investment account
of MassMutual is referred to as a "SIA Investor." Investors that are purchasing
shares of a fund on behalf of a Plan are sometimes referred to as "Plan
Investors." The term Investor does not include a Plan Participant.
B-20
<PAGE>
represent fair value. All other securities and other assets, including debt
securities the prices for which supplied by a pricing agent are deemed by
MassMutual not to be representative of market values, but excluding money market
instruments with a remaining maturity of sixty days or less and including some
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 U.S. national securities exchange
or foreign securities exchange are valued at the last price on the business day
as of which such value is being determined at the close of the exchange
representing the principal market for such securities. All assets and
liabilities expressed in foreign currencies will be converted into U.S. dollars
at the mean between the buying and selling rates of such currencies against U.S.
dollars last quoted by any major bank. If such quotations are not available,
the rate of exchange will be determined in accordance with policies established
by the Trustees.
The proceeds received by each Fund for each issue or sale of its shares, and all
net investment income, realized and unrealized gain will be specifically
allocated to such Fund and constitute the underlying assets of that Fund. The
underlying assets of each Fund will be segregated on the books of account, and
will be charged with the liabilities in respect of such Fund and with a share of
the general liabilities of the Trust. Expenses with respect to any two or more
Funds are to be allocated in proportion to the net asset values of the
respective Funds except where allocations of direct expenses can otherwise be
fairly made. Each class of shares of a Fund will be charged with liabilities
directly attributable to such class, and other Fund expenses are to be allocated
in proportion to the net asset values of the respective classes.
DESCRIPTION OF SHARES
---------------------
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the Trust's
Declaration of Trust disclaims liability of the shareholders, Trustees, or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust, and requires that notice of such
disclaimer be given in each agreement, obligation, or instrument entered into or
executed by the Trust or the Trustees. The Trust's Declaration of Trust
provides for indemnification out of the Trust property for all loss and expense
of any shareholder held personally liable for the obligations of the Trust.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is considered remote since it is limited to circumstances
in which the disclaimer is inoperative and the Trust itself would be unable to
meet its obligations.
INVESTMENT PERFORMANCE
----------------------
The yield of the Prime Fund, the Short-Term Bond Fund and the Core Bond Fund, as
well as total return figures for all of the Funds, may be provided in reports,
sales literature and advertisements. Any performance information with respect
to Class S shares will be provided net of any SIA and Fund expenses.
Yield for each class of shares of such Funds will be based upon a stated 30-day
period and will be computed by dividing the net investment income per share
earned during the period by the maximum offering price per share on the last day
of the period, according to the following formula:
YIELD = 2 [(a-b + 1)/6/ - 1]
-------
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements, if
any).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price (which is the net asset value) per
share on the last day of the period.
B-21
<PAGE>
Each of the Funds may also advertise its total return for each class of shares.
Total return quotations will be based upon a stated period and will be computed
by determining the average annual compounded rate of return over the stated
period that would equate an initial amount invested to the ending redeemable
value of the investment (assuming reinvestment of all distributions), according
to the following formula:
P(1 + T)/n/ = ERV
Where: P = a hypothetical initial payment of $1000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value at the end of the stated period of a
hypothetical $1000 payment made at the beginning of the
stated period.
The Funds may show total return calculated without giving effect to the
voluntary partial waiver of management fee by Mass Mutual, which terminated May
1, 1997 ("Standardized Total Return Without Reduction in Management Fee"). See
"Financial Highlights" in the Prospectus. Each investment performance figure
will be carried to the nearest hundredth of one percent.
A Fund's yield or total return is not fixed or guaranteed and the Fund's
principal is not insured. Investment performance quotations should not be
considered to be representations of the performance for any period in the
future. The yield is a function of available interest rates on securities in
which the Fund invests, which can be expected to fluctuate, as well as of the
quality, maturity and types of portfolio instruments held by the Fund and of the
Fund's operating expenses. The yield may be affected if, through net sales of
its shares, there is a net investment of new money in the Fund which the Fund
invests at returns different from those being earned on current portfolio
instruments. Yield may also vary if the Fund experiences net redemptions, which
may require the disposition of some of the Fund's current portfolio instruments.
Total return is a function of the value of the Fund's portfolio securities over
time, which may be expected to fluctuate, as well as of income earned by the
Fund on such securities and of the Fund's operating expenses.
Set forth below is the yield for Class S shares of the Prime Fund, Short-Term
Bond Fund and Core Bond Fund for the 30day period ended June 30, 1997.
YIELD FOR THE 30-DAY PERIOD ENDED JUNE 30, 1997
Class S Shares* (Unaudited)
<TABLE>
<CAPTION>
Fund Yield
<S> <C>
Prime Fund 5.44%
Short-Term Bond Fund 5.72%
Core Bond Fund 6.20%
</TABLE>
*Yield for Class A and Y shares may differ due to different expense structures.
PERFORMANCE COMPARISONS
From time-to-time and only to the extent the comparison is appropriate for the
Funds, the Trust may quote the performance of the Funds in advertising and other
types of literature and may compare the performance of the Funds to the
performance of various indices and investments for which reliable performance
data is available. The performance of the Funds may be compared in advertising
and other literature to averages, performance rankings and other information
prepared by recognized mutual fund statistical services.
Performance information for the Funds may be compared, in reports and
promotional literature, to the S&P 500 Index, the Wilshire 5000 Equity Index,
the Lehman Brothers 20+ Treasury Index, Donoghue's Money Fund Averages, the
Lehman Brothers 5-7 Year Treasury Index, Lehman Brothers Government Bond Index,
Lehman Brothers Treasury Bond Index, Lipper Balanced Fund Average, Lipper Growth
Fund Average, Lipper Flexible Portfolio Fund Average, Lehman Brothers
Intermediate Treasury Index, 91-Day Treasury Bill Average, or other appropriate
managed or unmanaged indices of the performance of various types of investments,
so that investors may compare a Fund's results with those of indices widely
regarded by investors as representative of the security markets in general.
Unmanaged indices may assume the reinvestment of dividends, but generally do not
reflect deductions for administrative and management costs and expenses.
Managed indices generally do reflect such deductions.
The Trust also may use the following information in advertisements and other
types of literature, but only to the extent the information is appropriate for
the Funds: (1) the Consumer Price Index may be used to assess the real rate of
return from an investment in a Fund; (2) other government statistics, including,
but not limited to, The Survey of Current Business, may be used to illustrate
investment attributes of a Fund or the general economic, business, investment,
or financial environment in which the Fund operates; (3) the effect of tax-
deferred compounding on the investment returns of a Fund, or on returns in
general, may be illustrated by graphs, charts, etc., where such graphs or charts
would compare, at various points in time, the return from an investment in the
Fund (or returns in general) on a tax-deferred basis (assuming reinvestment of
capital gains and dividends and assuming one or more tax rates) with the return
on a taxable basis; and (4) the sectors or industries in which a Fund invests
may be compared to relevant indices of stocks or surveys (e.g., S&P Industry
Surveys) to evaluate the Fund's historical performance or current or potential
value with respect to the particular industry or sector.
Each of the Fund's performance also may be compared to those of other mutual
funds having similar objectives. This comparative performance could be
expressed as a ranking prepared by Lipper Analytical Services, Inc., (including
the Lipper General Bond Fund Average, the Lipper Intermediate Investment Grade
Debt Fund Average, the Lipper Bond Fund Average, the Lipper Growth Fund Average,
the Lipper Flexible Fund Average), Donoghue's Money Fund Report, including
Donoghue's Taxable Money Market Fund Average or Morningstar, Inc., independent
services which monitor the performance of mutual funds. Any such comparisons
may be useful to investors who wish to compare a Fund's past performance with
that of its competitors. Of course, past performance cannot be a guarantee of
future results.
OTHER ADVERTISING ITEMS
The Trust may discuss in advertising and other types of literature that a Fund
has been assigned a rating by a nationally recognized statistical rating
organization ("NRSRO"), such as Standard & Poor's Corporation. Such rating
would assess the creditworthiness of the investments held by such Fund. The
assigned rating would not be a recommendation to purchase, sell or hold the
Fund's shares since the rating would not comment on the market price of the
Fund's shares or the suitability of the Fund for a particular investor. In
addition, the assigned rating would be subject to change, suspension or
withdrawal as a result of changes in, or unavailability of, information relating
to the Fund or its investments. The Trust may compare a Fund's performance with
other investments which are assigned ratings by NRSROs. Any such comparisons
may be useful to investors who wish to compare a Fund's past performance with
other rated investments. Of course past performance cannot be a guarantee of
future results. General mutual fund statistics provided by the Investment
Company Institute may also be used.
TAXATION
--------
Each Fund intends to qualify each year and elect to be taxed as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). In order to qualify as a "regulated investment company,"
a Fund must, among other things: (a) derive at least 90% of its gross income
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities, or foreign currencies, and
other income (including gains from forward contracts) derived with respect to
its business of investing in such stock, securities, or currencies; and (b)
diversify its holdings so that, at the close of each quarter of its taxable
year, (i) at least 50% of the value of its total assets consists of cash, cash
items, U.S. Government securities, and other securities limited generally with
respect to any one issuer to not more than 5% of the total assets of the Fund
and not more than 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of its total assets is invested in the
securities of any issuer (other than U.S. Government securities). If a Fund
fails to qualify as a regulated investment company, it will be treated as an
ordinary corporation for federal income tax purposes.
B-22
<PAGE>
As a regulated investment company electing to have its tax liability determined
under Subchapter M, in general a Fund will not be subject to federal income tax
on its ordinary income or capital gains that are distributed. As a
Massachusetts business trust, a Fund under present law will not be subject to
any excise or income taxes imposed by Massachusetts.
An excise tax at the rate of 4% will be imposed on the excess, if any, of each
Fund's "required distribution" over its actual distributions in any calendar
year. Generally, the "required distribution" is 98% of the Fund's ordinary
income for the calendar year plus 98% of its capital gain net income recognized
during the one-year period ending on October 31 (or December 31, if the Fund so
elects) plus undistributed amounts from prior years. Each Fund intends to make
distributions sufficient to avoid imposition of the excise tax. Distributions
declared by a Fund during October, November or December to shareholders of
record on a date in any such month and paid by the Fund during the following
January will be treated for federal tax purposes as paid by the Fund and
received by shareholders on December 31 of the year in which declared.
Except in the case of certain shareholders eligible for preferential tax
treatment, e.g., qualified retirement or pension trusts, shareholders of each
Fund will be subject to federal income taxes on distributions made by the Fund
whether received in cash or additional shares of the Fund. Distributions by
each Fund of net income and short-term capital gains, if any, will be taxable to
shareholders as ordinary income. Designated distributions of long-term capital
gains, if any, will be taxable to shareholders as long-term capital gains,
without regard to how long a shareholder has held shares of the Fund. Under the
Taxpayer Relief Act of 1997, long-term capital gains generally will be subject
to a 28% or 20% tax rate, depending on the holding period in the portfolio
investment.
Dividends and distributions on Fund shares received shortly after their
purchase, although in effect a return of capital, are subject to federal income
taxes. Investment income and gains received by a Fund from sources outside the
United States might be subject to foreign taxes which are withheld at the
source. The effective rate of these foreign taxes cannot be determined in
advance because it depends on the specific countries in which its assets will be
invested, the amount of the assets invested in each such country and the
possible applicability of treaty relief.
The International Equity Fund may be eligible to make an election under Section
853 of the Code so that any of its shareholders subject to federal income taxes
will be able to claim a credit or deduction on their income tax returns for, and
will be required to treat as part of the amounts distributed to them, their pro
rata portion of qualified taxes paid by the Fund to foreign countries. The
ability of shareholders of the Fund to claim a foreign tax credit is subject to
certain limitations imposed by Section 904 of the Code, which in general limits
the amount of foreign tax that may be used to reduce a shareholder's U.S. tax
liability to that amount of U.S. tax which would be imposed on the amount and
type of income in respect of which the foreign tax was paid. In addition, the
ability of shareholders to claim a foreign tax credit is subject to a holding
period requirement. A shareholder who for U.S. income tax purposes claims a
foreign tax credit in respect of Fund distributions may not claim a deduction
for foreign taxes paid by the Fund, regardless of whether the shareholder
itemizes deductions. Also, under Section 63 of the Code, no deduction for
foreign taxes may be claimed by shareholders who do not itemize deductions on
their federal income tax returns. It should also be noted that a tax-exempt
shareholder, like other shareholders, will be required to treat as part of the
amounts distributed to it a pro rata portion of the income taxes paid by the
Fund to foreign countries. However, that income will generally be exempt from
U.S. taxation by virtue of such shareholder's tax-exempt status and such a
shareholder will not be entitled to either a tax credit or a deduction with
respect to such income. The International Equity Fund will notify shareholders
each year of the amount of dividends and distributions and the shareholder's pro
rata share of qualified taxes paid by the Fund to foreign countries. Investment
by a Fund in "passive foreign investment companies" could subject the Fund to
a U.S. federal income tax or other charge on the proceeds from the sale of its
investment in such a company; however, this tax can be avoided by making an
election to mark such investments to market annually or to treat the passive
foreign investment company as a "qualified electing fund."
Redemptions and exchanges of each Fund's shares are taxable events and,
accordingly, shareholders subject to federal income taxes may realize gains and
losses on these transactions. If shares have been held for more than one
year, gain or loss realized will be long-term capital gain or loss, provided the
shareholder holds the shares as a capital asset. Under the Taxpayer Relief Act
of 1997, long-term capital gains generally will be subject to a 28% or 20% tax
rate depending on the Investor's holding period in Fund shares. However, a loss
on the sale of shares held for six months or less will be treated as a long-term
capital loss to the extent of any long-term capital gain dividend
B-23
<PAGE>
paid to the shareholder with respect to such shares. Furthermore, no loss will
be allowed on the sale of Fund shares to the extent the shareholder acquired
other shares of the same Fund within 30 days prior to the sale of the loss
shares or 30 days after such sale. The state and local tax effects of
distributions received from a Fund, and any special tax considerations
associated with foreign investments of the Fund, should be examined by investors
with regard to their own tax situation.
A Fund's transactions in foreign currency-denominated debt instruments and its
hedging activities will likely produce a difference between its book income and
its taxable income. This difference may cause a portion of the Fund's
distributions of book income to constitute returns of capital for tax purposes
or require the Fund to make distributions exceeding book income in order to
permit the Fund to continue to qualify, and be taxed under Subchapter M of the
Code, as a regulated investment company.
Under federal income tax law, a portion of the difference between the purchase
price of zero-coupon securities in which a Fund has invested and their face
value ("original issue discount") is considered to be income to the Fund each
year even though the Fund will not receive cash interest payments from these
securities. This original issue discount (imputed income) will make up a part of
the net investment income of the Fund which must be distributed to shareholders
in order to maintain the qualification of the Fund as a regulated investment
company and to avoid federal income tax at the level of the Fund.
The foregoing is a general and abbreviated summary of the applicable provisions
of the Code and regulations currently in effect. For the complete provisions,
reference should be made to the pertinent Code sections and regulations. The
Code and regulations are subject to change by legislative or administrative
action. This discussion of the federal income tax treatment of the Fund and its
shareholders does not describe in any respect the tax treatment of any
particular arrangement, e.g., tax-exempt trusts or insurance products, pursuant
to which or by which investments in the Fund may be made.
EXPERTS
-------
The financial statements of the MassMutual Prime Fund, MassMutual Short-Term
Bond Fund, MassMutual Core Bond Fund, MassMutual Balanced Fund, MassMutual Value
Equity Fund, MassMutual Small Cap Value Equity Fund, and MassMutual
International Equity Fund included in this Statement of Additional Information
for each period through December 31, 1996 have been included herein in reliance
on the report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
THE NAME MASSMUTUAL INSTITUTIONAL FUNDS IS THE DESIGNATION OF THE TRUSTEES UNDER
A DECLARATION OF TRUST DATED MAY 28, 1993, AS AMENDED FROM TIME TO TIME. THE
OBLIGATIONS OF SUCH TRUST ARE NOT PERSONALLY BINDING UPON, NOR SHALL RESORT BE
HAD TO THE PROPERTY OF ANY OF THE TRUSTEES, SHAREHOLDERS, OFFICERS, EMPLOYEES OR
AGENTS OF SUCH TRUST, BUT ONLY THE PROPERTY OF THE RELEVANT FUND SHALL BE BOUND.
B-24
<PAGE>
APPENDIX - DESCRIPTION OF SECURITIES RATINGS
Although the ratings of fixed-income securities by Standard & Poor's Ratings
Group ("S&P") and Moody's Investors Service, Inc. ("Moody's") are a
generally accepted measurement of credit risk, they are subject to certain
limitations. For example, ratings are based primarily upon historical events
and do not necessarily reflect the future. Furthermore, there is a period of
time between the issuance of a rating and the update of the rating, during which
time a published rating may be inaccurate.
The descriptions of the S&P and Moody's commercial paper, bond and municipal
securities ratings are set forth below.
COMMERCIAL PAPER RATINGS:
S&P commercial paper ratings are graded into four categories, ranging from A for
the highest quality obligations to D for the lowest. The A, A-1 and A-w
categories are described as follows:
A Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designations 1, 2, and 3 to indicate the relative degree of safety.
A-1 This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be noted with a plus (+) sign
designation.
A-2 Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
Moody's employs three designations, all judged to be investment grade, to
indicate the relative repayment ability of rated issuers. The two highest
designations are as follows:
Issuers (or supporting institutions) rated Prime-1 (or P-1) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 (or P-1)
repayment ability will normally be evidenced by many of the following
characteristics:
. Leading market positions in well-established industries.
. High rates of return on funds employed.
. Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
. Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
. Well-established access to a range of financial markets and assured sources
of alternate liquidity.
Issuers (or supporting institutions) rated Prime-2 (or P-2) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
BOND RATINGS:
S&P describes its four highest ratings for corporate debt as follows:
AAA Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in a small degree.
A Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas such debt normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
B-25
<PAGE>
The ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.
Moody's describes its four highest corporate bond ratings as follows:
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they compose what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and may
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment in the future.
Baa Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
B-26
<PAGE>
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of the MassMutual Institutional Funds:
We have audited the accompanying statements of assets and liabilities of the
MassMutual Institutional Funds, comprising, respectively, the Prime, Short-Term
Bond, Core Bond, Balanced, Value Equity, Small Cap Value Equity and
International Equity Funds, (the "Funds"), including the portfolios of
investments, as of December 31, 1996, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended and the financial highlights for each of the
two years in the period then ended and for the period from October 3, 1994
(commencement of operations) through December 31, 1994. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds constituting the MassMutual Institutional Funds as of
December 31, 1996 and the results of their operations for the year then ended,
the changes in their net assets for each of the two years in the period then
ended, and their financial highlights for each of the two years in the period
then ended and for the period from October 3, 1994 (commencement of operations)
through December 31, 1994, in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand L.L.P.
Springfield, Massachusetts
February 14, 1997
75
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Prime Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1996
<TABLE>
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 100.4%
Commercial Paper -- 99.8%
American Brands, Inc.
5.320% 2/10/1997 $ 4,925,000 $ 4,895,888
Aristar, Inc.
5.380% 1/28/1997 4,445,000 4,427,064
Baxter International
Inc.
5.500% 3/21/1997 4,425,000 4,370,622
Burlington Northern
Santa Fe Corp.
5.850% 1/30/1997 8,800,000 8,758,530
Carter Holt Harvey
Limited
5.560% 3/11/1997 5,270,000 5,213,435
Carter Holt Harvey
Limited
5.700% 1/10/1997 3,855,000 3,849,507
Central and South
West Corporation
5.520% 1/14/1997 9,435,000 9,416,193
Comdisco, Inc.
5.520% 2/13/1997 4,015,000 3,988,528
Comdisco, Inc.
5.580% 3/14/1997 5,000,000 4,944,000
ConAgra, Inc.
5.500% 2/18/1997 7,750,000 7,693,167
Cox Enterprises, Inc.
5.480% 2/24/1997 4,185,000 4,150,599
Cox Enterprises, Inc.
5.530% 3/07/1997 1,250,000 1,237,361
Crown Cork & Seal
Company Inc.
5.650% 3/06/1997 2,865,000 2,836,477
CSX Corporation
5.470% 1/31/1997 4,980,000 4,957,299
CSX Corporation
5.470% 2/14/1997 4,450,000 4,420,249
Dana Credit
Corporation
5.470% 1/21/1997 4,165,000 4,152,343
Dana Credit
Corporation
5.550% 1/10/1997 890,000 888,765
Dean Witter, Discover
& Company
5.380% 1/31/1997 4,955,000 4,932,785
Dominion Resources,
Inc.
5.500% 1/29/1997 7,000,000 6,970,055
Dominion Resources,
Inc.
5.500% 2/20/1997 2,300,000 2,282,431
Federal Signal Corp.
5.450% 1/07/1997 4,670,000 4,665,758
Frontier Corporation
5.600% 2/14/1997 5,385,000 5,348,143
General Motors
Acceptance
Corporation
5.822% 2/04/1997 7,690,000 7,881,516
Illinois Power
Company
5.590% 2/12/1997 1,140,000 1,132,565
Illinois Power
Company
5.680% 2/19/1997 7,800,000 7,739,697
ITT Corporation
5.720% 2/06/1997 4,870,000 4,842,144
ITT Corporation
5.730% 1/13/1997 4,900,000 4,890,641
Kerr-McGee Credit
Corporation
5.700% 2/11/1997 6,475,000 6,432,966
Lockheed Martin
Corporation
5.480% 3/07/1997 4,700,000 4,652,478
Lockheed Martin
Corporation
5.720% 1/24/1997 2,290,000 2,281,632
Lockheed Martin
Corporation
5.750% 2/07/1997 2,495,000 2,480,256
NYNEX Corporation
5.420% 3/26/1997 5,690,000 5,615,651
ORIX Credit Alliance,
Inc.
5.530% 2/28/1997 4,700,000 4,658,125
ORIX Credit Alliance,
Inc.
5.550% 1/16/1997 4,780,000 4,768,947
Praxair, Inc.
5.450% 2/25/1997 3,835,000 3,803,069
Praxair, Inc.
5.450% 2/27/1997 2,660,000 2,637,046
Praxair, Inc.
5.450% 3/27/1997 2,985,000 2,945,532
Public Service
Company of Colorado
5.600% 2/07/1997 4,870,000 4,841,971
Public Service
Electric and Gas
Company
5.520% 1/24/1997 410,000 408,554
Ralston Purina
Company
5.500% 1/06/1997 1,475,000 1,473,873
Rite Aid Corporation
5.600% 3/04/1997 5,510,000 5,456,859
Service Corporation
International
5.480% 2/03/1997 7,170,000 7,133,983
Texas Utilities
Electric Co.
5.590% 2/12/1997 8,800,000 8,742,609
Textron Financial
Corporation
5.550% 3/03/1997 1,325,000 1,312,427
Textron Financial
Corporation
5.670% 3/24/1997 8,700,000 8,589,027
Timken Company
5.510% 3/04/1997 5,000,000 4,951,778
Tyson Foods, Inc.
5.720% 1/22/1997 2,300,000 2,292,326
Union Camp Corp.
5.475% 2/26/1997 3,390,000 3,361,128
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Prime Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
Union Pacific
Corporation
5.620% 3/18/1997 $ 7,635,000 $ 7,544,737
UOP
5.620% 2/26/1997 1,645,000 1,630,619
UOP
5.650% 3/05/1997 7,425,000 7,352,235
UOP
6.000% 2/10/1997 3,150,000 3,129,000
Western Resources
Inc.
5.470% 2/27/1997 490,000 485,756
Western Resources
Inc.
5.600% 1/15/1997 8,625,000 8,606,217
Whirlpool Financial
Corporation
5.600% 1/17/1997 10,070,000 10,044,936
-------------
258,519,499
-------------
Discount Note -- 0.6%
Federal Farm Credit
Bank
5.230% 8/19/1997 1,530,000 1,475,260
-------------
TOTAL SHORT-TERM
INVESTMENTS 259,994,759
=============
(Cost $260,002,847)+
TOTAL INVESTMENTS-- 100.4% 259,994,759
Other Assets/
(Liabilities) - (0.4%) (933,278)
-------------
NET ASSETS-- 100.0% $259,061,481
=============
</TABLE>
Notes to Portfolio of Investments
+Aggregate cost for Federal tax purposes (Note 7)
[The remainder of this page intentionally left blank.]
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Prime Fund - Financial Statements
- --------------------------------------------------------------------------------
December 31, 1996
-----------------
Statement of Assets and Liabilities
<TABLE>
<S> <C>
Assets:
Short-term investments, at value (cost $260,002,847) (Note 2)............ $ 259,994,759
Cash..................................................................... 1,293
Receivables from:
Fund shares sold....................................................... 967,627
Investment manager (Note 3)............................................ 9,209
-------------------
Total assets......................................................... 260,972,888
-------------------
Liabilities:
Payables for:
Fund shares redeemed................................................... 1,784,741
Directors' fees and expenses (Note 3).................................. 5,177
Affiliates (Note 3):
Investment management fees........................................... 95,194
Administration fees.................................................. 17,288
Service and distribution fees........................................ 220
Accrued expenses and other liabilities................................... 8,787
-------------------
Total liabilities.................................................... 1,911,407
-------------------
Net assets............................................................... $ 259,061,481
===================
Net assets consist of:
Paid-in capital.......................................................... $ 258,996,044
Undistributed net investment income...................................... 80,676
Accumulated net realized loss on investments............................. (7,151)
Net unrealized depreciation on investments............................... (8,088)
-------------------
$ 259,061,481
===================
Net assets:
Class 1.................................................................. $ 109,724
===================
Class 2.................................................................. $ 111,039
===================
Class 3.................................................................. $ 111,694
===================
Class 4.................................................................. $ 258,729,024
===================
Shares outstanding:
Class 1.................................................................. 726.501
===================
Class 2.................................................................. 734.255
===================
Class 3.................................................................. 738.294
===================
Class 4.................................................................. 1,713,473.880
===================
Net asset value, offering price and
redemption price per share:
Class 1.................................................................. $ 151.03
===================
Class 2.................................................................. $ 151.23
===================
Class 3.................................................................. $ 151.29
===================
Class 4.................................................................. $ 151.00
===================
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Prime Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended
December 31, 1996
-----------------
Statement of Operations
<S> <C>
Investment income:
Interest...................................................... $ 14,350,850
-------------------
Expenses (Note 1):
Investment management fees (Note 3)........................... 1,150,292
Custody fees.................................................. 26,962
Audit and legal fees.......................................... 8,160
Directors' fees (Note 3)...................................... 15,247
Fees waived by the investment manager (Note 3)................ (89,223)
-------------------
1,111,438
Administration fees (Note 3):
Class 1..................................................... 605
Class 2..................................................... 557
Class 3..................................................... 344
Class 4..................................................... 207,299
Distribution and service fees (Note 3):
Class 1..................................................... 699
Class 2..................................................... 163
-------------------
Net expenses.............................................. 1,321,105
-------------------
Net investment income..................................... 13,029,745
-------------------
Realized and unrealized gain (loss):
Net realized loss on investment transactions.................. (5,068)
Net change in unrealized appreciation (depreciation)
on investments.............................................. 11,447
-------------------
Net realized and unrealized gain.......................... 6,379
-------------------
Net increase in net assets resulting from operations.......... $ 13,036,124
===================
<CAPTION>
Year ended Year ended
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Statements of Changes in Net Assets
Increase (Decrease) in Net Assets:
Operations:
Net investment income.............................................. $ 13,029,745 $ 12,817,140
Net realized loss on investment transactions....................... (5,068) (1,781)
Net change in unrealized appreciation (depreciation)
on investments.................................................... 11,447 (15,459)
------------------- -------------------
Net increase in net assets resulting from operations........... 13,036,124 12,799,900
------------------- -------------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1............................................................ (4,288) (4,178)
Class 2............................................................ (4,922) (4,746)
Class 3............................................................ (5,335) (5,095)
Class 4............................................................ (13,067,477) (12,693,331)
------------------- -------------------
Total distributions from net investment income................. (13,082,022) (12,707,350)
------------------- -------------------
Net fund share transactions (Note 5):
Class 1............................................................ 4,288 4,178
Class 2............................................................ 4,922 4,746
Class 3............................................................ 5,335 5,095
Class 4............................................................ 4,838,727 83,297,102
------------------- -------------------
Increase in net assets from net fund share transactions........ 4,853,272 83,311,121
------------------- -------------------
Total increase in net assets....................................... 4,807,374 83,403,671
Net assets:
Beginning of period................................................ 254,254,107 170,850,436
------------------- -------------------
End of period (including undistributed net investment income
of $80,676 and $132,953, respectively)............................ $ 259,061,481 $ 254,254,107
=================== ===================
</TABLE>
The accompanying notes are an integral part of the financial statements. 7
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Prime Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 1
------------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94+**
----------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 151.05 $ 150.39 $ 150.00
----------- ------------ ------------
Income (loss) from investment operations:
Net investment income 6.09*** 6.90 *** 1.02
Net realized and unrealized gain (loss) on investments 0.03 (0.01) 0.42
----------- ------------ ------------
Total income (loss) from investment operations 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 $ 151.03 $ 151.05 $ 150.39
=========== ============ ============
Total Return 4.05% 4.58% 0.96%
Ratios / Supplemental Data:
Net assets, end of period (000's) $110 $105 $101
Net expenses to average daily net assets# 1.65% 1.65% 1.65%*
Net investment income to average daily net assets 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% 1.69%*
<CAPTION>
Class 2
------------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94+**
----------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 151.24 $ 150.56 $ 150.00
----------- ------------ ------------
Income (loss) from investment operations:
Net investment income 6.96*** 7.78 *** 1.16
Net realized and unrealized gain (loss) on investments 0.04 (0.02) 0.57
----------- ------------ ------------
Total income (loss) from investment operations 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 $ 151.23 $ 151.24 $ 150.56
=========== ============ ============
Total Return 4.63% 5.16% 1.15%
Ratios / Supplemental Data:
Net assets, end of period (000's) $111 $106 $101
Net expenses to average daily net assets# 1.10% 1.10% 1.10%*
Net investment income to average daily net assets 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% 1.14%*
</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.
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 3
------------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94+**
----------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 151.32 $ 150.61 $ 150.00
----------- ------------ ------------
Income (loss) from investment operations:
Net investment income 7.51*** 8.33 *** 1.21
Net realized and unrealized gain (loss) on investments 0.05 (0.01) 0.61
----------- ------------ ------------
Total income (loss) from investment operations 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 $ 151.29 $ 151.32 $ 150.61
=========== ============ ============
Total Return 5.00% 5.53% 1.21%
Ratios / Supplemental Data:
Net assets, end of period (000's) $112 $106 $101
Net expenses to average daily net assets# 0.75% 0.75% 0.75%*
Net investment income to average daily net assets 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% 0.79%*
<CAPTION>
Class 4
------------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94+**
----------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 151.06 $ 150.36 $ 150.00
----------- ------------ ------------
Income (loss) from investment operations:
Net investment income 7.85*** 8.70 *** 1.55
Net realized and unrealized gain (loss) on investments 0.06 (0.02) 0.34
----------- ------------ ------------
Total income (loss) from investment operations 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 $ 151.00 $ 151.06 $ 150.36
=========== ============ ============
Total Return@ 5.24% 5.78% 1.26%
Ratios / Supplemental Data:
Net assets, end of period (000's) $258,729 $253,936 $170,548
Net expenses to average daily net assets# 0.5160% 0.5160% 0.5160%*
Net investment income to average daily net assets 5.10% 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: 0.5509% 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.
The accompanying notes are an integral part of the financial statements. 9
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1996
<TABLE>
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
BONDS & NOTES - 83.9%
ASSET BACKED SECURITIES -- 7.6%
Capita Equipment
Receivables Trust
1996-1, Class A4
6.280% 6/15/2000 $1,000,000 $ 1,001,560
Chase Manhattan Auto
Grantor Trust 1996-B,
Class A
6.610% 9/15/2002 1,829,055 1,841,621
Ford Credit 1994-B
Grantor Trust
7.300% 10/15/1999 357,498 361,520
Ford Credit Auto
Loan Master Trust,
Series 1992-1
6.875% 1/15/1999 1,500,000 1,500,465
Ford Credit Auto
Owner Trust 1996-B,
Class A-4
6.300% 1/15/2001 2,000,000 2,007,980
Nissan Auto
Receivables 1994-A
Grantor Trust,
Class A
6.450% 9/15/1999 626,917 628,484
Railcar Trust No.
1992-1
7.750% 6/01/2004 1,196,415 1,250,254
World Omni 1996-A
Automobile Lease
Securitization Trust,
Class A1
6.300% 6/25/2002 2,500,000 2,508,575
------------
TOTAL ASSET BACKED
SECURITIES 11,100,459
------------
(Cost $11,074,953)
CORPORATE DEBT -- 16.1%
AirTouch
Communications, Inc.
7.500% 7/15/2006 1,000,000 1,026,480
America West Airlines
1996-1, Class A
6.850% 7/02/2009 2,000,000 1,960,000
Analog Devices, Inc.
6.625% 3/01/2000 1,000,000 987,300
Associates Corporation
of North America
6.750% 8/01/2001 1,500,000 1,505,505
Bell Atlantic Financial
Services, Inc.
6.610% 2/07/2000 2,000,000 2,012,380
CSC Enterprises 144A
6.500% 11/15/2001 2,000,000 1,992,380
Ford Motor Credit
Company
9.350% 6/10/1997 1,000,000 1,015,200
General American
Transportation
Corporation
6.750% 3/01/2006 1,000,000 971,900
Lockheed Martin
Corporation
7.700% 6/15/2008 1,000,000 1,046,230
McDonnell Douglas
Corporation
6.875% 11/01/2006 1,000,000 981,260
Norfolk Southern
Corporation
7.400% 9/15/2006 1,000,000 1,015,570
NYNEX Capital
Funding Company
7.450% 5/01/1997 1,000,000 1,005,680
ORIX Credit Alliance,
Inc. 144A
6.480% 4/20/1999 2,000,000 1,997,600
Polaroid Corporation
7.250% 1/15/1997 1,500,000 1,500,330
Rite Aid Corporation
6.700% 12/15/2001 1,000,000 998,090
W.R. Grace & Co.
8.000% 8/15/2004 3,240,000 3,430,253
------------
TOTAL CORPORATE DEBT 23,446,158
------------
(Cost $23,230,308)
U.S. GOVERNMENT
AGENCY OBLIGATIONS -- 16.9%
Federal Home Loan Mortgage Corporation
(FHLMC) -- 3.0%
Collateralized Mortgage Obligations -- 2.7%
FHLMC Series 1693
Class G
6.000% 7/15/2007 2,000,000 1,946,240
FHLMC Series 1704
Class PE
6.000% 7/15/2007 2,000,000 1,972,500
------------
3,918,740
------------
Pass-Through Securities -- 0.3%
FHLMC
4.750% 2/01/1997 -
9/01/2006 531,541 508,060
------------
4,426,800
------------
Federal National Mortgage Association
(FNMA) -- 3.9%
Collateralized Mortgage Obligations -- 2.7%
FNMA Series 1992-86
Class C
7.000% 6/25/2003 57,873 57,709
FNMA Series 1993-175
Class PL
5.000% 10/25/2002 1,390,909 1,381,770
FNMA Series 1993-71
Class PG
6.250% 7/25/2007 2,500,000 2,471,875
------------
3,911,354
------------
Pass-Through Securities -- 1.2%
FNMA
8.000% 5/01/2013 832,639 856,772
FNMA
9.000% 10/01/2009 864,176 918,023
------------
1,774,795
------------
5,686,149
------------
</TABLE>
(Continued)
12 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
Government National Mortgage Association
(GNMA) -- 1.3%
Pass-Through Securities -- 1.3%
GNMA
8.000% 5/15/2001 -
11/15/2007 $1,808,533 $ 1,868,991
-------------
U.S. Government Guaranteed Notes -- 8.7%
1991-A Jacksonville,
FL
8.400% 8/01/1997 1,150,000 1,167,250
1991-A St. Louis, MO
8.400% 8/01/1997 3,350,000 3,400,250
1994-A Baxter
Springs, KS
6.310% 8/01/2001 500,000 497,390
1994-A Detroit, MI
6.310% 8/01/2001 450,000 447,651
1994-A Jacksonville,
FL
6.310% 8/01/2001 1,485,000 1,477,248
1994-A Los Angeles
County, CA
6.310% 8/01/2001 225,000 223,826
1994-A Tacoma, WA
6.310% 8/01/2001 195,000 193,982
1994-A Trenton, NJ
6.310% 8/01/2001 145,000 144,243
U.S. Dept. of Housing
and Urban
Development, Series
1995-A
8.080% 8/01/1998 3,000,000 3,090,000
U.S. Dept. of Housing
and Urban
Development, Series
1996-A
6.440% 8/01/1999 2,000,000 2,012,500
-------------
12,654,340
-------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 24,636,280
-------------
(Cost $24,077,001)
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 43.3%
U.S. Treasury Notes
U.S. Treasury Note
5.750% 8/15/2003 $ 6,000,000 $ 5,820,000
U.S. Treasury Note
7.125% 2/29/2000 22,000,000 22,649,660
U.S. Treasury Note
7.250% 5/15/2004 15,200,000 15,993,288
U.S. Treasury Note
8.875% 2/15/1999 17,500,000 18,514,475
-------------
TOTAL U.S. TREASURY
OBLIGATIONS 62,977,423
-------------
(Cost $62,760,329)
TOTAL BONDS & NOTES 122,160,320
-------------
(Cost $121,142,591)
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 14.7%
Commercial Paper
Bausch & Lomb Inc.
5.600% 1/24/1997 $ 4,435,000 $ 4,419,133
Countrywide Home
Loans, Inc.
5.970% 1/14/1997 780,000 778,318
Crown Cork & Seal
Company Inc.
5.720% 1/09/1997 490,000 489,377
Crown Cork & Seal
Company Inc.
5.830% 2/13/1997 1,480,000 1,469,694
Crown Cork & Seal
Company Inc.
5.950% 2/13/1997 520,000 516,304
Dana Credit
Corporation
5.650% 1/30/1997 510,000 507,679
Illinois Power
Company
5.540% 1/16/1997 5,360,000 5,347,628
NYNEX Corporation
6.250% 1/03/1997 4,360,000 4,358,486
ORIX Credit Alliance,
Inc.
6.080% 2/03/1997 1,210,000 1,203,256
Public Service
Company of Colorado
5.550% 1/03/1997 472,000 471,855
Public Service
Electric and Gas
Company
5.600% 1/09/1997 1,840,000 1,837,710
-------------
TOTAL SHORT-TERM
INVESTMENTS 21,399,440
-------------
(At Amortized Cost)
TOTAL INVESTMENTS -- 98.6% 143,559,760
(Cost $142,542,031)[
Other Assets/
(Liabilities) - 1.4% 1,973,649
-------------
NET ASSETS-- 100.0% $145,533,409
-------------
</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.
The accompanying notes are an integral part of the financial statements. 13
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1996
-----------------
<S> <C>
Statement of Assets and Liabilities
Assets:
Investments, at value (cost $121,142,591) (Note 2)......................... $ 122,160,320
Short-term investments, at amortized cost (Note 2)......................... 21,399,440
-------------------
Total Investments........................................................ 143,559,760
Cash....................................................................... 1,576
Receivables from:
Fund shares sold......................................................... 25,221
Interest................................................................. 2,325,244
Investment manager (Note 3).............................................. 7,243
-------------------
Total assets........................................................... 145,919,044
-------------------
Liabilities:
Payables for:
Fund shares redeemed..................................................... 305,355
Directors' fees and expenses (Note 3).................................... 5,177
Affiliates (Note 3):
Investment management fees............................................. 57,775
Administration fees.................................................... 10,156
Service and distribution fees.......................................... 232
Accrued expenses and other liabilities..................................... 6,940
-------------------
Total liabilities...................................................... 385,635
-------------------
Net assets................................................................. $ 145,533,409
-------------------
Net assets consist of:
Paid-in capital............................................................ $ 144,792,097
Undistributed net investment income........................................ 18,783
Accumulated net realized loss on investments............................... (295,200)
Net unrealized appreciation on investments................................. 1,017,729
-------------------
$ 145,533,409
===================
Net assets:
Class 1.................................................................... $ 115,863
===================
Class 2.................................................................... $ 117,250
===================
Class 3.................................................................... $ 118,001
===================
Class 4.................................................................... $ 145,182,295
===================
Shares outstanding:
Class 1.................................................................... 11,415
===================
Class 2.................................................................... 11,544
===================
Class 3.................................................................... 11,599
===================
Class 4.................................................................... 14,365,202
===================
Net asset value, offering price and
redemption price per share:
Class 1.................................................................... $ 10.15
===================
Class 2.................................................................... $ 10.16
===================
Class 3.................................................................... $ 10.17
===================
Class 4.................................................................... $ 10.11
===================
</TABLE>
14 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended
December 31, 1996
-----------------
<S> <C>
Statement of Operations
Investment income:
Interest....................................................................... $ 8,783,175
-------------------
Expenses (Note 1):
Investment management fees (Note 3)............................................ 606,206
Custody fees................................................................... 15,494
Audit and legal fees........................................................... 4,657
Directors' fees (Note 3)....................................................... 15,247
Fees waived by the investment manager (Note 3)................................. (47,791)
-------------------
593,813
Administration fees (Note 3):
Class 1...................................................................... 628
Class 2...................................................................... 577
Class 3...................................................................... 353
Class 4...................................................................... 105,079
Distribution and service fees (Note 3):
Class 1...................................................................... 733
Class 2...................................................................... 171
-------------------
Net expenses............................................................... 701,354
-------------------
Net investment income...................................................... 8,081,821
-------------------
Realized and unrealized gain (loss):
Net realized loss on investment transactions................................... (274,845)
Net change in unrealized appreciation (depreciation)
on investments............................................................... (384,702)
-------------------
Net realized and unrealized loss........................................... (659,547)
-------------------
Net increase in net assets resulting from operations........................... $ 7,422,274
===================
</TABLE>
The accompanying notes are an integral part of the financial statements. 15
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1996 December 31, 1995
----------------- -----------------
Statements of Changes in Net Assets
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income $ 8,081,821 $ 7,424,141
Net realized gain (loss) on investment transactions (274,845) 2,489,218
Net change in unrealized appreciation (depreciation)
on investments (384,702) 2,855,699
----------------- -----------------
Net increase in net assets resulting from operations 7,422,274 12,769,058
----------------- -----------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1 (5,225) (5,481)
Class 2 (5,891) (6,066)
Class 3 (6,321) (6,421)
Class 4 (8,133,246) (7,354,246)
----------------- -----------------
Total distributions from net investment income (8,150,683) (7,372,214)
----------------- -----------------
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) (2,049)
Class 2 (59) (2,050)
Class 3 (59) (2,046)
Class 4 (71,288) (2,256,969)
----------------- -----------------
Total distributions from net realized gains (71,465) (2,263,114)
----------------- -----------------
Net fund share transactions (Note 5):
Class 1 5,285 7,530
Class 2 5,951 8,116
Class 3 6,381 8,467
Class 4 23,078,364 12,933,618
----------------- -----------------
Increase in net assets from net fund share transactions 23,095,981 12,957,731
----------------- -----------------
Total increase in net assets 22,294,535 16,091,461
Net assets:
Beginning of period 123,238,874 107,147,413
----------------- -----------------
End of period (including undistributed net investment
income of $18,783 and $68,862, respectively) $ 145,533,409 $ 123,238,874
================= =================
</TABLE>
16 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 1
------------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
----------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.19 $ 9.89 $ 10.00
----------- ------------ ------------
Income (loss) from investment operations:
Net investment income 0.50 0.55 0.09
Net realized and unrealized gain (loss) on investments (0.05) 0.49 (0.11)
----------- ------------ ------------
Total income (loss) from investment operations 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 $ 10.15 $ 10.19 $ 9.89
=========== ============ ============
Total Return 4.35% 10.54% (0.17)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $116 $111 $100
Net expenses to average daily net assets# 1.65% 1.65% 1.65%*
Net investment income to average daily net assets 4.86% 5.20% 5.45%*
Portfolio turnover rate 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% 1.70%*
</TABLE>
<TABLE>
<CAPTION>
Class 2
------------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
----------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.19 $ 9.89 $ 10.00
----------- ------------ ------------
Income (loss) from investment operations:
Net investment income 0.56 0.61 0.10
Net realized and unrealized gain (loss) on investments (0.04) 0.49 (0.11)
----------- ------------ ------------
Total income (loss) from investment operations 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 $ 10.16 $ 10.19 $ 9.89
=========== ============ ============
Total Return 5.02% 11.11% (0.09)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $117 $112 $101
Net expenses to average daily net assets# 1.10% 1.10% 1.10%*
Net investment income to average daily net assets 5.41% 5.75% 5.99%*
Portfolio turnover rate 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% 1.15%*
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
The accompanying notes are an integral part of the financial statements. 17
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 3
------------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
----------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.21 $ 9.91 $ 10.00
----------- ------------ ------------
Income (loss) from investment operations:
Net investment income 0.60 0.64 0.10
Net realized and unrealized gain (loss) on investments (0.05) 0.49 (0.09)
----------- ------------ ------------
Total income (loss) from investment operations 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 $ 10.17 $ 10.21 $ 9.91
=========== ============ ============
Total Return 5.28% 11.46% 0.13%
Ratios / Supplemental Data:
Net assets, end of period (000's) $118 $112 $100
Net expenses to average daily net assets# 0.75% 0.75% 0.75%*
Net investment income to average daily net assets 5.76% 6.10% 6.36%*
Portfolio turnover rate 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% 0.78% 0.80%*
<CAPTION>
Class 4
------------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
----------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.15 $ 9.85 $ 10.00
----------- ------------ ------------
Income (loss) from investment operations:
Net investment income 0.60 0.66 0.16
Net realized and unrealized gain (loss) on investments (0.03) 0.50 (0.15)
----------- ------------ ------------
Total income (loss) from investment operations 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 $ 10.11 $ 10.15 $ 9.85
========== ============ ============
Total Return@ 5.57% 11.77% 0.13%
Ratios / Supplemental Data:
Net assets, end of period (000's) $145,182 $122,904 $106,846
Net expenses to average daily net assets# 0.5190% 0.5190% 0.5190%*
Net investment income to average daily net assets 6.00% 6.32% 6.37%*
Portfolio turnover rate 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: 0.5545% 0.5524% 0.5654%*
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
@Employee retirement benefit plans that invest plan assets in the Separate
Investment Accounts (SIAs) may be subject to certain charges as set forth in
their respective Plan Documents. Total return figures would be lower for the
periods presented if they reflected these charges.
18 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1996
<TABLE>
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
BONDS & NOTES - 97.0%
ASSET BACKED SECURITIES -- 8.1%
Capita Equipment
Receivables Trust
1996-1, Class A4
6.280% 6/15/2000 $3,000,000 $ 3,004,680
Chase Manhattan Auto
Grantor Trust 1996-B,
Class A
6.610% 9/15/2002 4,572,639 4,604,053
Daimler-Benz Auto
Grantor Trust 1995-A,
Class A
5.850% 5/15/2002 2,505,290 2,503,712
Daimler-Benz Vehicle
Trust 1994-A
5.950% 12/15/2000 220,873 221,079
Ford Credit 1994-B
Grantor Trust
7.300% 10/15/1999 536,247 542,280
Ford Credit Auto
Loan Master Trust,
Series 1992-1
6.875% 1/15/1999 2,000,000 2,000,620
Ford Credit Auto
Owner Trust 1996-B,
Class A-4
6.300% 1/15/2001 5,000,000 5,019,950
Keystone Auto
Grantor Trust 1996-B,
Class A 144A
6.150% 4/15/2003 2,801,590 2,799,349
Nissan Auto
Receivables 1994-A
Grantor Trust,
Class A
6.450% 9/15/1999 1,253,833 1,256,967
Railcar Trust No.
1992-1
7.750% 6/01/2004 1,395,818 1,458,629
World Omni 1995-A
Automobile Lease
Securitization Trust,
Class A
6.050% 11/25/2001 2,835,307 2,838,852
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
World Omni 1996-A
Automobile Lease
Securitization Trust,
Class A1
6.300% 6/25/2002 2,650,000 2,659,090
------------
TOTAL ASSET BACKED
SECURITIES 28,909,261
------------
(Cost $28,855,243)
CORPORATE DEBT -- 33.0%
AirTouch
Communications, Inc.
7.500% 7/15/2006 3,000,000 3,079,440
America West Airlines
1996-1, Class A
6.850% 7/02/2009 4,000,000 3,920,000
American Airlines, Inc.
9.780% 11/26/2011 2,000,000 2,277,500
AMR Corporation (D)
9.000% 8/01/2012 2,000,000 2,263,880
Analog Devices, Inc. (D)
6.625% 3/01/2000 1,500,000 1,480,950
Associates Corporation
of North America
6.750% 8/01/2001 2,000,000 2,007,340
Associates Corporation
of North America (D)
7.875% 9/30/2001 1,500,000 1,573,275
Bell Atlantic Financial
Services, Inc.
6.610% 2/04/2000 1,750,000 1,760,868
BHP Finance (USA)
Limited
6.420% 3/01/2026 3,500,000 3,464,685
Capital Cities/ABC,
Inc.
8.875% 12/15/2000 875,000 944,151
Champion International
Corporation
6.400% 2/15/2026 2,500,000 2,386,725
The Charles Schwab
Corporation
6.250% 1/23/2003 2,500,000 2,409,375
Chrysler Corporation
10.400% 8/01/1999 1,500,000 1,537,440
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
CITGO Petroleum
Corporation
7.875% 5/15/2006 1,000,000 1,019,600
Columbia Gas System,
Inc.
6.610% 11/28/2002 3,000,000 2,976,750
Commercial Credit
Company (D)
7.750% 3/01/2005 3,000,000 3,133,380
Continental Airlines,
Inc., Series 1996-2B
8.560% 7/02/2014 1,749,640 1,904,921
Continental Airlines,
Inc., Series 1996-B
7.820% 10/15/2013 2,000,000 2,067,400
Corning Glass Works (D)
8.875% 3/15/2016 1,000,000 1,128,240
English China Clays
Delaware Inc. (D)
7.375% 10/01/2002 1,000,000 1,027,760
Equifax Inc.
6.500% 6/15/2003 1,000,000 973,260
ERAC USA Finance
Company 144A
6.950% 1/15/2006 1,500,000 1,475,625
FBG Finance Ltd.
144A
7.875% 6/01/2016 3,000,000 3,049,830
Fletcher Challenge Ltd
7.750% 6/20/2006 2,000,000 2,074,100
Foster Wheeler
Corporation
6.750% 11/15/2005 2,000,000 1,932,440
General American
Transportation
Corporation
6.750% 3/01/2006 3,000,000 2,915,700
General Electric
Capital Corporation
8.750% 5/21/2007 1,500,000 1,700,370
General Telephone
Company of Florida
7.500% 8/01/2002 1,000,000 1,011,310
The Goldman Sachs
Group, L.P. 144A
6.200% 2/15/2001 2,500,000 2,450,000
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements. 21
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
Harrahs Operating Inc.
8.750% 3/15/2000 $1,100,000 $ 1,113,750
Hercules Incorporated (D)
6.625% 6/01/2003 2,000,000 1,979,860
IMCERA Group Inc. (D)
6.000% 10/15/2003 1,000,000 957,700
Leucadia National
Corporation
7.750% 8/15/2013 2,500,000 2,471,425
Lockheed Martin
Corporation
7.700% 6/15/2008 3,000,000 3,138,690
McDonnell Douglas
Corporation
6.875% 11/01/2006 3,000,000 2,943,780
McDonnell Douglas
Corporation (D)
9.250% 4/01/2002 1,500,000 1,675,350
Newmont Mining
Corporation
8.625% 4/01/2002 2,000,000 2,111,380
News America
Holdings Incorporated
9.250% 2/01/2013 3,000,000 3,360,870
Norfolk Southern
Corporation
7.220% 9/15/2006 3,000,000 3,056,580
Norfolk Southern
Corporation
7.400% 9/15/2006 2,000,000 2,031,140
North Finance
(Bermuda) Limited
144A
7.000% 9/15/2005 2,000,000 1,970,000
Pearson Inc. 144A
7.375% 9/15/2006 3,000,000 3,012,900
Penske Truck Leasing
Co., L.P.
7.750% 5/15/1999 1,500,000 1,548,210
Ralston Purina
Company
7.750% 10/01/2015 2,000,000 2,050,920
Rite Aid Corporation
6.700% 12/15/2001 2,000,000 1,996,180
Rolls-Royce Capital
Inc.
7.125% 7/29/2003 2,000,000 2,002,980
Scholastic Corporation
7.000% 12/15/2003 4,000,000 3,992,280
Thomas & Betts
Corporation (D)
8.250% 1/15/2004 2,500,000 2,597,825
Time Warner Inc.
7.750% 6/15/2005 3,000,000 3,017,790
United Air Lines, Inc.
10.110% 2/19/2006 939,710 1,040,390
US Air, Inc.
7.500% 10/15/2009 1,461,057 1,475,667
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
Valassis
Communications, Inc.
9.550% 12/01/2003 $ 2,000,000 $ 2,081,280
Westinghouse Electric
Corporation
8.375% 6/15/2002 1,000,000 1,019,670
W.R. Grace & Co.
8.000% 8/15/2004 5,000,000 5,293,600
------------
TOTAL CORPORATE DEBT 117,886,532
------------
(Cost $114,776,584)
NON - U.S. GOVERNMENT
AGENCY OBLIGATIONS -- 1.1%
Collateralized Mortgage Obligation
Prudential Home
Mortgage Securities
1993-26 Class A6
6.750% 7/25/2008 4,000,000 4,008,720
------------
(Cost $3,955,000)
U.S. GOVERNMENT
AGENCY OBLIGATIONS -- 20.2%
Federal Home Loan Mortgage Corporation
(FHLMC) -- 4.6%
Collateralized Mortgage Obligations -- 4.5%
FHLMC Series 1080
Class D
7.000% 7/15/2020 2,900,319 2,933,847
FHLMC Series 1322
Class G
7.500% 2/15/2007 2,000,000 2,048,120
FHLMC Series 1460
Class H
7.000% 5/15/2007 2,000,000 2,020,000
FHLMC Series 1490
Class PJ
6.000% 5/15/2007 600,000 589,122
FHLMC Series 1612
Class PD
5.750% 5/15/2006 5,000,000 4,915,600
FHLMC Series 1625
Class EA
5.750% 3/15/2007 3,500,000 3,436,545
------------
15,943,234
------------
Pass-Through Securities -- 0.1%
FHLMC
9.000% 3/01/2017 368,612 392,225
------------
16,335,459
------------
Federal National Mortgage
Association (FNMA) -- 5.6%
Collateralized Mortgage Obligations -- 5.4%
FNMA Series 1989-20
Class A
6.750% 4/25/2018 4,267,616 4,107,580
FNMA Series 1992-86
Class C
7.000% 6/25/2003 115,745 115,419
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
FNMA Series 1993-134
Class GA
6.500% 2/25/2007 $ 5,000,000 $ 4,964,050
FNMA Series 1993-175
Class PL
5.000% 10/25/2002 1,390,909 1,381,770
FNMA Series 1993-191
Class PD
5.400% 3/25/2004 1,500,000 1,487,340
FNMA Series 1993-221
Class D
6.000% 12/25/2008 2,500,000 2,390,625
FNMA Series 1996-54
Class C
6.000% 9/25/2008 5,000,000 4,800,000
------------
19,246,784
------------
Pass-Through Securities -- 0.2%
FNMA
8.000% 5/01/2013 555,094 571,180
------------
19,817,964
------------
Government National Mortgage
Association (GNMA) -- 8.3%
Collateralized Mortgage Obligation -- 0.5%
JHM Acceptance
Corporation Series E
Class 5
8.960% 4/01/2019 1,633,748 1,718,491
-----------
Pass-Through Securities -- 7.8%
GNMA
6.000% 12/20/2025 5,579,916 5,706,355
GNMA
7.000% 7/20/2025 -
9/20/2025 5,474,412 5,591,443
GNMA
7.500% 1/15/2017 -
6/15/2017 7,142,857 7,188,784
GNMA
8.000% 4/15/2001 -
3/15/2008 8,808,388 9,102,855
GNMA
9.000% 12/15/2004 -
10/15/2009 500,156 532,822
------------
28,122,259
------------
29,840,750
------------
U.S. Government Guaranteed Notes -- 1.7%
1994-A Baxter
Springs, KS
5.930% 8/01/1999 700,000 696,500
1994-A Erie, PA
5.930% 8/01/1999 1,590,000 1,582,050
1994-A Los Angeles
County, CA
5.930% 8/01/1999 190,000 189,050
</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>
1994-A Montgomery
County, PA
5.930% 8/01/1999 $ 150,000 $ 149,250
1994-A Pohatcong
Township, NJ
5.930% 8/01/1999 255,000 253,725
1994-A Rochester, NY
5.930% 8/01/1999 135,000 134,325
1994-A Sacramento,
CA
5.930% 8/01/1999 60,000 59,700
1994-A Santa Ana,
CA
5.930% 8/01/1999 920,000 915,400
U.S. Dept. of Housing
and Urban
Development, Series
1996-A
6.670% 8/01/2001 2,000,000 2,020,000
------------
6,000,000
------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 71,994,173
------------
(Cost $70,455,483)
U.S. TREASURY OBLIGATIONS -- 34.6%
U.S. Treasury Bonds -- 15.4%
U.S. Treasury Bond
7.250% 5/15/2016 20,700,000 21,857,958
U.S. Treasury Bond
8.875% 8/15/2017 26,750,000 33,040,530
------------
54,898,488
------------
U.S. Treasury Notes -- 13.6%
U.S. Treasury Note
5.875% 4/30/1998 7,000,000 7,010,920
U.S. Treasury Note
6.375% 5/15/1999 23,500,000 23,701,865
U.S. Treasury Note
8.875% 11/15/1998 17,000,000 17,887,230
------------
48,600,015
------------
U.S. Treasury Strips -- 5.6%
U.S. Treasury Strip -- Principal Only
0.000% 2/15/1999 19,500,000 17,237,220
U.S. Treasury Strip -- Principal Only
0.000% 2/15/2015 9,250,000 2,708,308
------------
19,945,528
------------
TOTAL U.S. TREASURY
OBLIGATIONS 123,444,031
------------
(Cost $123,480,345)
TOTAL BONDS & NOTES 346,242,717
------------
(Cost $341,522,655)
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 1.8%
Commercial Paper
Bausch & Lomb Inc.
6.850% 1/08/1997 1,140,000 1,138,482
Indiana Michigan
Power Company
6.700% 1/03/1997 3,000,000 2,998,883
Lockheed Martin
Corporation
7.000% 1/02/1997 2,355,000 2,354,542
------------
TOTAL SHORT-TERM
INVESTMENTS 6,491,907
------------
(At Amortized Cost)
TOTAL INVESTMENTS -- 98.8% 352,734,624
(Cost $348,014,562)[
Other Assets/
(Liabilities) - 1.2% 4,330,553
------------
NET ASSETS-- 100.0% $357,065,177
------------
</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.
(D) 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. 23
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1996
----------------
Statement of Assets and Liabilities
<S> <C>
Assets:
Investments, at value (cost $341,522,655) (Note 2)..... $ 346,242,717
Short-term investments, at amortized cost (Note 2)..... 6,491,907
----------------
Total Investments.................................... 352,734,624
Cash................................................... 4,936
Receivables from:
Fund shares sold..................................... 380,193
Interest............................................. 4,574,725
Investment manager (Note 3).......................... 17,663
----------------
Total assets....................................... 357,712,141
----------------
Liabilities:
Payables for:
Investments purchased................................ 142,615
Settlement of investments purchased on a
forward commitment basis (Note 2).................. 11,739
Fund shares redeemed................................. 306,112
Directors' fees and expenses (Note 3)................ 5,176
Affiliates (Note 3):
Investment management fees......................... 139,334
Administration fees................................ 26,194
Service and distribution fees...................... 243
Accrued expenses and other liabilities................. 15,551
----------------
Total liabilities.................................. 646,964
----------------
Net assets............................................. $ 357,065,177
================
Net assets consist of:
Paid-in capital........................................ 352,396,989
Undistributed net investment income.................... 1,845,746
Accumulated net realized loss on investments........... (1,885,881)
Net unrealized appreciation on investments
and forward commitments............................ 4,708,323
----------------
$ 357,065,177
================
Net assets:
Class 1................................................ $ 120,838
================
Class 2................................................ $ 122,293
================
Class 3................................................ $ 123,107
================
Class 4................................................ $ 356,698,939
================
Shares outstanding:
Class 1................................................ 11,512
================
Class 2................................................ 11,631
================
Class 3................................................ 11,699
================
Class 4................................................ 34,141,922
================
Net asset value, offering price and
redemption price per share:
Class 1................................................ $ 10.50
================
Class 2................................................ $ 10.51
================
Class 3................................................ $ 10.52
================
Class 4................................................ $ 10.45
================
</TABLE>
24 The accompanying notes are an integral part of the finanial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended
December 31, 1996
-----------------
Statement of Operations
<S> <C>
Investment income:
Interest........................................... $ 20,691,459
-----------------
Expenses (Note 1):
Investment management fees (Note 3)................ 1,375,667
Custody fees....................................... 38,056
Audit and legal fees............................... 10,158
Directors' fees (Note 3)........................... 15,247
Fees waived by the investment manager (Note 3)..... (128,270)
-----------------
1,310,858
Administration fees (Note 3):
Class 1.......................................... 737
Class 2.......................................... 614
Class 3.......................................... 382
Class 4.......................................... 257,095
Distribution and service fees (Note 3):
Class 1.......................................... 842
Class 2.......................................... 178
-----------------
Net expenses................................... 1,570,706
-----------------
Net investment income.......................... 19,120,753
-----------------
Realized and unrealized gain (loss):
Net realized loss on investment transactions
and forward commitments............................ (1,886,093)
Net change in unrealized appreciation
(depreciation) on
investments and forward commitments.............. (6,456,882)
-----------------
Net realized and unrealized loss............... (8,342,975)
-----------------
Net increase in net assets resulting from
operations......................................... $ 10,777,778
=================
</TABLE>
The accompanying notes are an integral part of the financial statements. 25
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1996 December 31, 1995
----------------- -----------------
Statements of Changes in Net Assets
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income................................................ $ 19,120,753 $ 14,053,804
Net realized gain (loss) on investment transactions
and forward commitments............................................. (1,886,093) 9,143,745
Net change in unrealized appreciation (depreciation) on
investments and forward commitments................................. (6,456,882) 14,064,619
----------------- -----------------
Net increase in net assets resulting from operations................ 10,777,778 37,262,168
----------------- -----------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1.............................................................. (4,416) (7,975)
Class 2.............................................................. (5,227) (5,956)
Class 3.............................................................. (5,674) (6,329)
Class 4.............................................................. (17,374,307) (13,924,661)
----------------- -----------------
Total distributions from net investment income...................... (17,389,624) (13,944,921)
----------------- -----------------
From net realized gains:
Class 1.............................................................. (740) (4,784)
Class 2.............................................................. (714) (3,332)
Class 3.............................................................. (715) (3,329)
Class 4.............................................................. (1,942,817) (7,028,844)
----------------- -----------------
Total distributions from net realized gains......................... (1,944,986) (7,040,289)
----------------- -----------------
Net fund share transactions (Note 5):
Class 1.............................................................. (45,858) 61,915
Class 2.............................................................. 5,941 9,288
Class 3.............................................................. 6,389 9,658
Class 4.............................................................. 111,704,711 43,139,641
----------------- -----------------
Increase in net assets from net fund share transactions............. 111,671,183 43,220,502
----------------- -----------------
Total increase in net assets......................................... 103,114,351 59,497,460
Net assets:
Beginning of period.................................................. 253,950,826 194,453,366
----------------- -----------------
End of period (including undistributed net investment income
of $1,845,746 and $114,829, respectively)........................... $ 357,065,177 $ 253,950,826
================= =================
</TABLE>
26 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 1
------------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
----------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.79 $ 9.90 $ 10.00
----------- ------------ ------------
Income (loss) from investment operations:
Net investment income 0.53*** 0.50 0.10
Net realized and unrealized gain (loss) on investments (0.36) 1.26 (0.10)
----------- ------------ ------------
Total income (loss) from investment operations 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 $ 10.50 $ 10.79 $ 9.90
=========== ============ ============
Total Return 1.60% 17.81% 0.00%
Ratios / Supplemental Data:
Net assets, end of period (000's) $121 $171 $101
Net expenses to average daily net assets# 1.65% 1.65% 1.65%*
Net investment income to average daily net assets 5.10% 5.39% 5.91%*
Portfolio turnover rate 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% 1.71%*
<CAPTION>
Class 2
------------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
----------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.82 $ 9.90 $ 10.00
----------- ------------ ------------
Income (loss) from investment operations:
Net investment income 0.60*** 0.64 0.11
Net realized and unrealized gain (loss) on investments (0.38) 1.19 (0.10)
----------- ------------ ------------
Total income (loss) from investment operations 0.22 1.83 0.01
----------- ------------ ------------
Less distributions to shareholders:
From net investment income (0.47) (0.58) (0.11)
From net realized gains (0.06) (0.33) --
----------- ------------ ------------
Total distributions (0.53) (0.91) (0.11)
----------- ------------ ------------
Net asset value, end of period $ 10.51 $ 10.82 $ 9.90
=========== ============ ============
Total Return 2.07% 18.51% 0.08%
Ratios / Supplemental Data:
Net assets, end of period (000's) $122 $120 $101
Net expenses to average daily net assets# 1.10% 1.10% 1.10%*
Net investment income to average daily net assets 5.67% 5.97% 6.46%*
Portfolio turnover rate 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% 1.16%*
</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.
The accompanying notes are an integral part of the financial statesments. 27
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 3
------------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
----------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.82 $ 9.90 $ 10.00
----------- ------------ ------------
Income (loss) from investment operations:
Net investment income 0.64*** 0.68 0.11
Net realized and unrealized gain (loss) on investments (0.37) 1.19 (0.10)
----------- ------------ ------------
Total income (loss) from investment operations 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 $ 10.52 $ 10.82 $ 9.90
=========== ============ ============
Total Return 2.52% 18.87% 0.09%
Ratios / Supplemental Data:
Net assets, end of period (000's) $123 $120 $101
Net expenses to average daily net assets# 0.75% 0.75% 0.75%*
Net investment income to average daily net assets 6.01% 6.32% 6.83%*
Portfolio turnover rate 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% 0.81%*
<CAPTION>
Class 4
------------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
----------- ------------ ------------
Net asset value, beginning of period $ 10.75 $ 9.84 $ 10.00
----------- ------------ ------------
Income (loss) from investment operations:
Net investment income 0.67*** 0.72*** 0.18
Net realized and unrealized gain (loss) on investments (0.37) 1.17 (0.16)
----------- ------------ ------------
Total income (loss) from investment operations 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 $ 10.45 $ 10.75 $ 9.84
=========== ============ ============
Total Return/@/ 2.80% 19.15% 0.20%
Ratios / Supplemental Data:
Net assets, end of period (000's) $356,699 $253,540 $194,150
Net expenses to average daily net assets# 0.5130% 0.5130% 0.5130%*
Net investment income to average daily net assets 6.26% 6.56% 6.86%*
Portfolio turnover rate 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: 0.5550% 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.
28 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1996
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
EQUITIES -- 50.2%
Aerospace & Defense -- 0.9%
Boeing Company 27,000 $ 2,872,125
Raytheon Company 1,200 57,750
TRW, Inc. 48,200 2,385,900
------------
5,315,775
------------
Agribusiness -- 0.6%
Pioneer Hi-Bred
International, Inc. 45,500 3,185,000
------------
Apparel, Textiles & Shoes -- 0.5%
VF Corporation 44,500 3,003,750
------------
Automotive & Parts -- 2.4%
Ford Motor Company 97,300 3,101,438
Genuine Parts
Company 103,000 4,583,500
Goodyear Tire &
Rubber Company 113,700 5,841,338
------------
13,526,276
------------
Banking, Savings & Loans -- 3.2%
The Bank of New
York Company,
Incorporated 170,000 5,737,500
Comerica, Incorporated 41,500 2,173,563
CoreStates Financial
Corp. 81,500 4,227,813
Norwest Corporation 57,000 2,479,500
Wachovia Corp. 60,100 3,395,650
------------
18,014,026
------------
Beverages -- 1.0%
Brown-Forman
Corporation (Class B) 66,600 3,046,950
Pepsico, Inc. 84,000 2,457,000
------------
5,503,950
------------
Chemicals -- 2.0%
E. I. du Pont de
Nemours and Company 33,000 3,114,375
The Lubrizol
Corporation 63,300 1,962,300
Nalco Chemical
Company 81,500 2,944,188
Rohm & Haas
Company 39,000 3,183,375
------------
11,204,238
------------
Communications -- 0.6%
AT & T Corporation 84,000 3,654,000
------------
Computers & Office Equipment -- 3.7%
Hewlett-Packard
Company 122,000 6,130,500
International Business
Machines Corporation 35,000 5,285,000
Pitney Bowes, Inc. 84,000 4,578,000
Xerox Corporation 90,000 4,736,250
------------
20,729,750
------------
Containers -- 0.6%
Temple-Inland, Inc. 63,000 3,409,875
------------
Cosmetics & Personal Care -- 0.8%
Kimberly-Clark
Corporation 48,400 4,610,100
------------
Drugs -- 0.6%
Pharmacia & Upjohn,
Inc. 85,000 3,368,125
------------
Electric Utilities -- 0.6%
NIPSCO Industries,
Inc. 40,000 1,585,000
SCANA Corporation 75,000 2,006,250
------------
3,591,250
------------
Electrical Equipment & Electronics -- 3.8%
AMP, Incorporated 156,700 6,013,363
General Electric
Company 82,000 8,107,750
Honeywell Inc. 44,000 2,893,000
Hubbell, Incorporated
(Class B) 96,023 4,152,986
------------
21,167,099
------------
Energy -- 4.3%
Amoco Corporation 74,000 5,957,000
Atlantic Richfield
Company 20,300 2,689,750
Chevron Corporation 70,500 4,582,500
Kerr-McGee
Corporation 43,500 3,132,000
Mobil Corporation 35,000 4,278,750
Teco Energy, Inc. 57,000 1,375,125
Unocal Corporation 68,900 2,799,063
------------
24,814,188
------------
Financial Services -- 0.8%
American Express
Company 76,500 4,322,250
Foods -- 1.4%
ConAgra, Inc. 62,200 3,094,450
CPC International, Inc. 61,000 4,727,500
------------
7,821,950
------------
Forest Products & Paper -- 1.3%
Westvaco Corporation 101,500 2,918,125
Weyerhaeuser Company 90,400 4,282,700
------------
7,200,825
------------
Hardware & Tools -- 0.6%
The Stanley Works 123,000 3,321,000
------------
Healthcare -- 4.4%
Becton, Dickinson and
Company 102,000 4,424,250
Bristol-Myers Squibb
Company 89,000 9,678,750
Pfizer, Incorporated 74,000 6,132,750
Schering-Plough Corp. 69,800 4,519,550
------------
24,755,300
------------
Industrial Distribution -- 0.7%
W.W. Grainger, Inc. 48,000 3,852,000
------------
Industrial Transportation -- 0.7%
Norfolk Southern
Corporation 48,000 4,200,000
------------
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements. 31
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
Insurance -- 4.0%
Allstate Corporation 36,544 $ 2,114,984
Jefferson-Pilot
Corporation 39,750 2,250,844
Marsh & McLennan
Companies, Inc. 55,000 5,720,000
MBIA, Inc. 51,500 5,214,375
SAFECO Corporation 149,000 5,876,188
Unitrin, Inc. 28,500 1,588,875
------------
22,765,266
------------
Machinery & Components -- 0.9%
Dover Corporation 62,000 3,115,500
Parker-Hannifin
Corporation 48,000 1,860,000
------------
4,975,500
------------
Miscellaneous -- 1.4%
Harsco Corporation 34,500 2,363,250
Minnesota Mining &
Manufacturing
Company 68,000 5,635,500
------------
7,998,750
------------
Oil & Gas -- 1.0%
Occidental Petroleum
Corporation 128,500 3,003,688
Union Pacific
Resources Group Inc. 89,500 2,617,875
------------
5,621,563
------------
Photography -- 0.7%
Eastman Kodak
Company 49,300 3,956,325
------------
Publishing & Printing -- 1.1%
The McGraw-Hill
Companies, Inc. 89,000 4,105,125
R.R. Donnelley & Sons
Company 75,500 2,368,813
------------
6,473,938
------------
Retail -- 1.0%
The May Department
Stores Company 70,500 3,295,875
Sears Roebuck and Co. 48,000 2,214,000
------------
5,509,875
------------
Retail-Grocery -- 1.0%
Albertson's, Inc. 119,000 4,239,375
American Stores
Company 31,900 1,303,913
------------
5,543,288
------------
Telecommunications -- 0.5%
GTE Corporation 57,000 2,593,500
------------
Telephone Utilities -- 1.5%
Ameritech Corporation 44,500 2,697,813
Frontier Corporation 134,500 3,043,063
Southern New England
Telecommunications
Corporation 66,000 2,565,750
------------
8,306,626
------------
Tobacco -- 1.6%
American Brands, Inc. 88,500 4,391,813
UST Inc. 135,000 4,370,625
------------
8,762,438
------------
TOTAL EQUITIES 283,077,796
------------
(Cost $198,917,229)
Principal
Amount Market Value
------ ------------
<S> <C> <C>
BONDS & NOTES -- 15.9%
ASSET BACKED SECURITIES -- 1.5%
Capita Equipment
Receivables Trust
1996-1, Class A4
6.280% 6/15/2000 $1,000,000 $ 1,001,560
Chase Manhattan Auto
Grantor Trust 1996-B,
Class A
6.610% 9/15/2002 2,286,319 2,302,026
Daimler-Benz Auto
Grantor Trust 1995-A,
Class A
5.850% 5/15/2002 1,113,462 1,112,761
Daimler-Benz Vehicle
Trust 1994-A
5.950% 12/15/2000 147,249 147,386
Ford Credit 1994-B
Grantor Trust
7.300% 10/15/1999 357,498 361,520
Ford Credit Auto
Owner Trust 1996-B,
Class A-4
6.300% 1/15/2001 1,000,000 1,003,990
Nissan Auto
Receivables 1994-A
Grantor Trust, Class A
6.450% 9/15/1999 438,841 439,939
Railcar Trust No.
1992-1
7.750% 6/01/2004 398,805 416,751
World Omni 1996-A
Automobile Lease
Securitization Trust,
Class A1
6.300% 6/25/2002 1,500,000 1,505,145
------------
TOTAL ASSET BACKED
SECURITIES 8,291,078
------------
(Cost $8,269,339)
CORPORATE DEBT -- 5.6%
AirTouch
Communications, Inc.
7.500% 7/15/2006 1,000,000 1,026,480
America West Airlines
1996-1, Class A
6.850% 7/02/2009 1,000,000 980,000
American Airlines,
Inc. (D)
9.780% 11/26/2011 1,000,000 1,138,750
AMR Corporation (D)
9.000% 8/01/2012 500,000 565,970
Analog Devices, Inc.
6.625% 3/01/2000 500,000 493,650
Associates Corporation
of North America
6.750% 8/01/2001 1,000,000 1,003,670
Bell Atlantic Financial
Services, Inc. (D)
6.610% 2/04/2000 1,000,000 1,006,210
BHP Finance (USA)
Limited
6.420% 3/01/2026 1,000,000 989,910
Cardinal Distribution,
Inc.
8.000% 3/01/1997 500,000 501,565
Champion International
Corporation
6.400% 2/15/2026 1,000,000 954,690
The Charles Schwab
Corporation
6.250% 1/23/2003 1,000,000 963,750
CITGO Petroleum
Corporation
7.875% 5/15/2006 250,000 254,900
Continental Airlines,
Inc., Series 1996-2B
8.560% 7/02/2014 499,897 544,263
Continental Airlines,
Inc., Series 1996-B
7.820% 10/15/2013 500,000 516,850
Delta Air Lines, Inc.
8.540% 1/02/2007 437,643 465,066
English China Clays
Delaware Inc. (D)
7.375% 10/01/2002 500,000 513,880
ERAC USA Finance
Company 144A
6.950% 1/15/2006 500,000 491,875
FBG Finance Ltd.
144A
7.875% 6/01/2016 1,000,000 1,016,610
Fletcher Challenge Ltd.
7.750% 6/20/2006 500,000 518,525
General American
Transportation
Corporation
6.750% 3/01/2006 1,000,000 971,900
</TABLE>
(Continued)
32 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
The Goldman Sachs
Group, L.P. 144A
6.200% 2/15/2001 $1,000,000 $ 980,000
GTE Corporation
9.100% 6/01/2003 500,000 557,745
Leucadia National
Corporation
7.750% 8/15/2013 1,000,000 988,570
Lockheed Martin
Corporation
7.700% 6/15/2008 1,000,000 1,046,230
McDonnell Douglas
Corporation
6.875% 11/01/2006 500,000 490,630
McDonnell Douglas
Corporation (D)
9.250% 4/01/2002 500,000 558,450
Newmont Mining
Corporation (D)
8.625% 4/01/2002 1,000,000 1,055,690
News America
Holdings Incorporated
9.250% 2/01/2013 1,000,000 1,120,290
Norfolk Southern
Corporation
7.220% 9/15/2006 850,000 866,031
Norfolk Southern
Corporation
7.400% 9/15/2006 1,000,000 1,015,570
North Finance
(Bermuda) Limited
144A
7.000% 9/15/2005 1,000,000 985,000
Pearson Inc. 144A
7.375% 9/15/2006 500,000 502,150
Polaroid Corporation
7.250% 1/15/1997 1,000,000 1,000,220
Rite Aid Corporation
6.700% 12/15/2001 500,000 499,045
Rolls-Royce Capital
Inc.
7.125% 7/29/2003 1,000,000 1,001,490
Scholastic Corporation
7.000% 12/15/2003 1,000,000 998,070
Thomas & Betts
Corporation
8.250% 1/15/2004 500,000 519,565
Time Warner Inc.
7.750% 6/15/2005 1,000,000 1,005,930
US Air, Inc.
7.500% 10/15/2009 487,019 491,889
W.R. Grace & Co.
8.000% 8/15/2004 1,000,000 1,058,720
------------
TOTAL CORPORATE DEBT 31,659,799
------------
(Cost $30,638,759)
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 4.4%
Federal Home Loan Mortgage Corporation (FHLMC) -- 0.9%
Collateralized Mortgage Obligations -- 0.8%
FHLMC Series 1322
Class G
7.500% 2/15/2007 $1,000,000 $ 1,024,060
FHLMC Series 1625
Class D
5.250% 7/15/2004 3,100,000 3,067,047
FHLMC Series 1625
Class EA
5.750% 3/15/2007 1,000,000 981,870
------------
5,072,977
------------
Pass-Through Securities -- 0.1%
FHLMC
9.000% 3/01/2017 184,306 196,112
------------
5,269,089
------------
Federal National Mortgage Association
(FNMA) -- 1.0%
Collateralized Mortgage Obligations -- 0.9%
FNMA Series 1993-134
Class GA
6.500% 2/25/2007 1,000,000 992,810
FNMA Series 1993-191
Class PD
5.400% 3/25/2004 1,000,000 991,560
FNMA Series 1993-221
Class D
6.000% 12/25/2008 1,000,000 956,250
FNMA Series 1996-54
Class C
6.000% 9/25/2008 2,000,000 1,920,000
------------
4,860,620
------------
Pass-Through Securities -- 0.1%
FNMA
8.000% 5/01/2013 555,094 571,180
------------
5,431,800
------------
Government National Mortgage Association (GNMA) -- 1.4%
Pass-Through Securities
GNMA
6.000% 12/20/2025 464,993 475,530
GNMA
7.000% 7/20/2025 1,837,048 1,876,085
GNMA
7.500% 10/15/2006 -
6/15/2017 3,020,543 3,054,435
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
GNMA
8.000% 11/15/2004 -
7/15/2008 $1,863,588 $ 1,925,887
GNMA
9.000% 12/15/2008 -
5/15/2009 607,143 646,796
------------
7,978,733
------------
U.S. Government Guaranteed Notes -- 1.1%
1991-A Fairfax
County, VA
8.740% 8/01/2001 200,000 216,374
1991-A Jefferson
Park, CA
8.740% 8/01/2001 1,740,000 1,882,454
1991-A Monroe
County, NY
8.740% 8/01/2001 500,000 540,935
1991-A Rochester, NY
8.740% 8/01/2001 60,000 64,912
U.S. Dept. of Housing
and Urban
Development, Series
1995-A (D)
8.240% 8/01/2002 3,000,000 3,255,060
------------
5,959,735
------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 24,639,357
------------
(Cost $23,963,711)
U.S. TREASURY OBLIGATIONS -- 4.4%
U.S. Treasury Bonds -- 2.7%
U.S. Treasury Bond
7.250% 5/15/2016 5,250,000 5,543,685
U.S. Treasury Bond
8.750% 5/15/2017 8,250,000 10,066,320
------------
15,610,005
------------
U.S. Treasury Notes -- 1.3%
U.S. Treasury Note
6.125% 3/31/1998 3,700,000 3,717,908
U.S. Treasury Note
7.125% 2/29/2000 3,300,000 3,397,449
------------
7,115,357
------------
U.S. Treasury Strip -- 0.4%
U.S. Treasury Strip -- Principal Only
0.000% 2/15/1999 2,250,000 1,988,910
TOTAL U.S. TREASURY
OBLIGATIONS 24,714,272
------------
(Cost $24,499,494)
TOTAL BONDS & NOTES 89,304,506
------------
(Cost $87,371,303)
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements. 33
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 30.2%
Commercial Paper
Burlington Northern
Santa Fe Corp.
5.500% 1/21/1997 $ 7,090,000 $ 7,068,336
Burlington Northern
Santa Fe Corp.
5.970% 1/03/1997 4,290,000 4,288,577
Carter Holt Harvey
Limited
5.500% 1/23/1997 3,750,000 3,737,396
Central and South
West Corporation
5.520% 1/14/1997 3,140,000 3,133,741
Central and South
West Corporation
5.620% 2/07/1997 3,470,000 3,449,957
Central and South
West Corporation
5.630% 1/17/1997 5,550,000 5,536,113
Comdisco, Inc.
5.520% 1/15/1997 2,790,000 2,784,011
Comdisco, Inc.
5.820% 1/29/1997 5,530,000 5,504,968
ConAgra, Inc.
5.490% 2/04/1997 4,135,000 4,113,560
Cox Enterprises, Inc.
5.470% 2/28/1997 3,000,000 2,973,562
Cox Enterprises, Inc.
5.480% 2/05/1997 2,680,000 2,665,722
Cox Enterprises, Inc.
5.500% 2/13/1997 6,170,000 6,129,467
Crown Cork & Seal
Company Inc.
5.800% 2/11/1997 4,000,000 3,973,578
CSX Corporation
5.800% 2/20/1997 5,990,000 5,941,747
Dana Credit
Corporation
5.460% 1/02/1997 4,320,000 4,319,345
Dana Credit
Corporation
5.530% 1/31/1997 2,635,000 2,622,857
Dominion Resources,
Inc.
5.470% 1/22/1997 4,300,000 4,286,279
Dominion Resources,
Inc.
5.520% 1/27/1997 5,915,000 5,891,419
Dominion Resources,
Inc.
5.520% 1/28/1997 3,335,000 3,321,193
ORIX Credit Alliance,
Inc.
5.490% 2/03/1997 3,685,000 3,666,455
ORIX Credit Alliance,
Inc.
5.520% 1/08/1997 2,230,000 2,227,606
ORIX Credit Alliance,
Inc.
5.620% 1/14/1997 170,000 169,655
ORIX Credit Alliance,
Inc.
5.800% 1/06/1997 5,335,000 5,330,702
ORIX Credit Alliance,
Inc.
5.850% 3/03/1997 3,750,000 3,714,417
ORIX Credit Alliance,
Inc.
6.020% 2/27/1997 2,285,000 2,263,220
Praxair, Inc.
5.650% 2/21/1997 3,435,000 3,407,506
Public Service
Company of Colorado
5.470% 1/17/1997 2,355,000 2,349,275
Public Service
Company of Colorado
5.800% 2/25/1997 4,200,000 4,162,783
Public Service
Electric and Gas
Company
5.470% 1/10/1997 3,955,000 3,949,592
Public Service
Electric and Gas
Company
5.470% 1/24/1997 2,360,000 2,351,753
Public Service
Electric and Gas
Company
5.490% 1/13/1997 3,655,000 3,648,311
Public Service
Electric and Gas
Company
5.570% 2/06/1997 5,655,000 5,623,502
Rayonier Inc.
5.540% 1/07/1997 3,000,000 2,997,230
Rite Aid Corporation
5.600% 3/04/1997 4,900,000 4,852,742
Sonat Inc.
5.650% 1/09/1997 5,030,000 5,023,685
Texas Utilities
Electric Co.
5.590% 2/14/1997 4,500,000 4,469,255
Texas Utilities
Electric Co.
5.600% 2/10/1997 3,800,000 3,776,356
Textron Financial
Corporation
5.500% 1/16/1997 1,642,000 1,638,237
Textron Financial
Corporation
5.500% 2/18/1997 3,000,000 2,978,000
Textron Financial
Corporation
5.560% 2/12/1997 2,800,000 2,781,837
Union Pacific
Corporation
5.650% 1/30/1997 2,920,000 2,906,710
Union Pacific
Corporation
5.800% 2/24/1997 2,550,000 2,527,815
UOP
5.600% 1/31/1997 3,255,000 3,239,810
UOP
5.620% 2/26/1997 4,635,000 4,594,478
UOP
5.750% 2/19/1997 4,125,000 4,092,716
=============
TOTAL SHORT-TERM
INVESTMENTS 170,485,476
=============
(Cost $170,483,887)
TOTAL INVESTMENTS -- 96.3% 542,867,778
(Cost $456,772,419)+
Other Assets/
(Liabilities) - 3.7% 20,818,070
============
NET ASSETS-- 100.0% $563,685,848
============
</TABLE>
Notes to Portfolio of Investments
+Aggregate cost for Federal tax purposes (Note 7)
144A: Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
. All or a portion of this security is segregated to cover forward purchase
commitments. (Note 2).
34 The accompanying notes are an integral part of the financial statements.
<PAGE>
- -------------------------------------------------------------------------------
MassMutual Balanced Fund - Financial Statements
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1996
-------------------
<S> <C>
Statement of
Assets and Assets:
Liabilities Investments, at value (cost $286,288,532) (Note 2)....................... $ 372,382,302
Short-term investments, at value (cost $170,483,887) (Note 2)............ 170,485,476
-------------------
Total Investments...................................................... 542,867,778
Cash..................................................................... 1,546
Receivables from:
Investments sold....................................................... 246,752
Fund shares sold....................................................... 19,719,860
Interest and dividends................................................. 1,898,035
Investment manager (Note 3)............................................ 22,488
-------------------
Total assets......................................................... 564,756,459
-------------------
Liabilities:
Payables for:
Investments purchased.................................................. 87,044
Settlement of investments purchased on a
forward commitment basis (Note 2).................................... 2,411
Fund shares redeemed................................................... 702,735
Directors' fees and expenses (Note 3).................................. 5,176
Affiliates (Note 3):
Investment management fees........................................... 213,324
Administration fees.................................................. 40,525
Service and distribution fees........................................ 266
Accrued expenses and other liabilities................................... 19,130
-------------------
Total liabilities.................................................... 1,070,611
-------------------
Net assets............................................................... $ 563,685,848
===================
Net assets consist of:
Paid-in capital.......................................................... $ 475,645,805
Undistributed net investment income...................................... 26,102
Accumulated net realized gain on investments............................. 1,920,993
Net unrealized appreciation on investments
and forward commitments.............................................. 86,092,948
-------------------
$ 563,685,848
===================
Net assets:
Class 1.................................................................. $ 133,821
===================
Class 2.................................................................. $ 135,418
===================
Class 3.................................................................. $ 136,218
===================
Class 4.................................................................. $ 563,280,391
===================
Shares outstanding:
Class 1.................................................................. 10,838
===================
Class 2.................................................................. 10,948
===================
Class 3.................................................................. 10,994
===================
Class 4.................................................................. 45,632,444
===================
Net asset value, offering price and
redemption price per share:
Class 1.................................................................. $ 12.35
===================
Class 2.................................................................. $ 12.37
===================
Class 3.................................................................. $ 12.39
===================
Class 4.................................................................. $ 12.34
===================
</TABLE>
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended
December 31, 1996
-------------------
<S> <C>
Statement of
Operations Investment income:
Interest................................................................. $ 15,133,862
Dividends................................................................ 6,800,485
-------------------
Total investment income................................................ 21,934,347
-------------------
Expenses (Note 1):
Investment management fees (Note 3)...................................... 2,271,174
Custody fees............................................................. 53,996
Audit and legal fees..................................................... 16,737
Directors' fees (Note 3)................................................. 15,247
Fees waived by the investment manager (Note 3)........................... (203,071)
-------------------
2,154,083
Administration fees (Note 3):
Class 1................................................................ 794
Class 2................................................................ 661
Class 3................................................................ 412
Class 4................................................................ 429,674
Distribution and service fees (Note 3):
Class 1................................................................ 903
Class 2................................................................ 191
-------------------
Net expenses......................................................... 2,586,718
-------------------
Net investment income................................................ 19,347,629
-------------------
Realized and unrealized gain (loss):
Net realized gain on investment transactions and forward commitments..... 8,885,806
Net change in unrealized appreciation (depreciation) on
investments and forward commitments.................................... 33,108,845
-------------------
Net realized and unrealized gain..................................... 41,994,651
-------------------
Net increase in net assets resulting from operations.................... $ 61,342,280
===================
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1996 December 31, 1995
------------------- ------------------
<S> <C> <C>
Statements of
Changes in Net Increase(Decrease) in Net Assets:
Assets Operations:
Net investment income............................................ $ 19,347,629 $ 16,724,229
Net realized gain on investment transactions
and forward commitments......................................... 8,885,806 4,359,989
Net change in unrealized appreciation (depreciation) on
investments and forward commitments............................. 33,108,845 55,498,858
------------------- ------------------
Net increase in net assets resulting from operations............ 61,342,280 76,583,076
------------------- ------------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1.......................................................... (3,204) (4,846)
Class 2.......................................................... (4,068) (3,751)
Class 3.......................................................... (4,538) (4,120)
Class 4.......................................................... (19,441,756) (16,528,781)
------------------- ------------------
Total distributions from net investment income.................. (19,453,566) (16,541,498)
------------------- ------------------
From net realized gains:
Class 1.......................................................... (1,969) (1,239)
Class 2.......................................................... (1,970) (859)
Class 3.......................................................... (1,972) (857)
Class 4.......................................................... (7,883,759) (3,230,318)
------------------- ------------------
Total distributions from net realized gains..................... (7,889,670) (3,233,273)
------------------- ------------------
Net fund share transactions (Note 5):
Class 1.......................................................... (49,367) 55,401
Class 2.......................................................... 6,038 4,610
Class 3.......................................................... 6,510 4,977
Class 4.......................................................... 72,536,092 50,326,522
------------------- ------------------
Increase in net assets from net fund share transactions......... 72,499,273 50,391,510
------------------- ------------------
Total increase in net assets..................................... 106,498,317 107,199,815
Net assets:
Beginning of period.............................................. 457,187,531 349,987,716
------------------- ------------------
End of period (including undistributed net investment income
of $26,102 and $179,574, respectively)......................... $ 563,685,848 $ 457,187,531
=================== ==================
</TABLE>
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 1
------------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
----------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.50 $ 9.94 $ 10.00
----------- ------------ ------------
Income (loss) from investment operations:
Net investment income 0.34 0.28 0.06
Net realized and unrealized gain (loss) on investments 1.01 1.70 (0.06)
----------- ------------ ------------
Total income (loss) from investment operations 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 $ 12.35 $ 11.50 $ 9.94
=========== ============ ============
Total Return 11.67% 19.92% 0.00%
Ratios / Supplemental Data:
Net assets, end of period (000's) $134 $173 $100
Net expenses to average daily net assets# 1.65% 1.65% 1.65%*
Net investment income to average daily net assets 2.71% 3.03% 3.39%*
Portfolio turnover rate 26% 23% 2%
Average broker commission rate (a) $ .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% 1.71%*
<CAPTION>
Class 2
__________
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
----------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.53 $ 9.95 $ 10.00
----------- ------------ ------------
Income (loss) from investment operations:
Net investment income 0.39 0.39 0.06
Net realized and unrealized gain (loss) on investments 1.03 1.65 (0.04)
----------- ------------ ------------
Total income (loss) from investment operations 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 $ 12.37 $ 11.53 $ 9.95
=========== ============ ============
Total Return 12.25% 20.50% 0.17%
Ratios / Supplemental Data:
Net assets, end of period (000's) $135 $121 $100
Net expenses to average daily net assets# 1.10% 1.10% 1.10%*
Net investment income to average daily net assets 3.23% 3.60% 3.94%*
Portfolio turnover rate 26% 23% 2%
Average broker commission rate (a) $ .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% 1.16%*
</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.
38
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 3
------------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
----------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.55 $ 9.96 $ 10.00
----------- ------------ ------------
Income (loss) from investment operations:
Net investment income 0.44 0.43 0.07
Net realized and unrealized gain (loss) on investments 1.02 1.66 (0.04)
----------- ------------ ------------
Total income (loss) from investment operations 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 $ 12.39 $ 11.55 $ 9.96
=========== ============ ============
Total Return 12.61% 20.96% 0.28%
Ratios / Supplemental Data:
Net assets, end of period (000's) $136 $121 $100
Net expenses to average daily net assets# 0.75% 0.75% 0.75%*
Net investment income to average daily net assets 3.60% 3.94% 4.32%*
Portfolio turnover rate 26% 23% 2%
Average broker commission rate (a) $ .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% 0.81%*
<CAPTION>
Class 4
------------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
----------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.51 $ 9.92 $ 10.00
----------- ------------ ------------
Income (loss) from investment operations:
Net investment income 0.46 0.44 0.11
Net realized and unrealized gain (loss) on investments 1.02 1.68 (0.08)
----------- ------------ ------------
Total income (loss) from investment operations 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 $ 12.34 $ 11.51 $ 9.92
=========== ============ ============
Total Return@ 12.83% 21.31% 0.29%
Ratios / Supplemental Data:
Net assets, end of period (000's) $563,280 $456,773 $349,688
Net expenses to average daily net assets# 0.5120% 0.5120% 0.5120%*
Net investment income to average daily net assets 3.83% 4.18% 4.29%*
Portfolio turnover rate 26% 23% 2%
Average broker commission rate (a) $ .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: 0.5522% 0.5514% 0.5650%*
</TABLE>
*Annualized
** For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
@ Employee retirement benefit plans that invest plan assets in the Separate
Investment Accounts (SIAs) may be subject to certain charges as set forth in
their respective Plan Documents. Total return figures would be lower for the
periods presented if they reflected these charges.
(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 Value Equity Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1996
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
EQUITIES - 95.2%
Aerospace & Defense -- 1.8%
Boeing Company 230,000 $ 24,466,250
Raytheon Company 10,000 481,250
TRW, Inc. 396,600 19,631,700
------------
44,579,200
============
Agribusiness -- 1.1%
Pioneer Hi-Bred
International, Inc. 385,000 26,950,000
------------
Apparel, Textiles & Shoes -- 1.0%
VF Corporation 365,000 24,637,500
============
Automotive & Parts -- 4.7%
Ford Motor Company 945,300 30,131,438
Genuine Parts
Company 860,000 38,270,000
Goodyear Tire &
Rubber Company 955,000 49,063,125
------------
117,464,563
============
Banking, Savings & Loans -- 6.1%
The Bank of New
York Company,
Incorporated 1,440,000 48,600,000
Comerica, Incorporated 338,000 17,702,750
CoreStates Financial
Corp. 700,000 36,312,500
Norwest Corporation 485,000 21,097,500
Wachovia Corp. 494,000 27,911,000
------------
151,623,750
------------
Beverages -- 1.9%
Brown-Forman
Corporation (Class B) 575,000 26,306,250
Pepsico, Inc. 700,000 20,475,000
------------
46,781,250
============
Chemicals -- 3.7%
E. I. du Pont de
Nemours and Company 275,000 25,953,125
The Lubrizol
Corporation 529,500 16,414,500
Nalco Chemical
Company 680,000 24,565,000
Rohm & Haas
Company 315,000 25,711,875
------------
92,644,500
------------
Communications -- 1.2%
AT & T Corporation 700,000 30,450,000
============
Computers & Office Equipment -- 6.9%
Hewlett-Packard
Company 1,020,000 51,255,000
International Business
Machines Corporation 291,000 43,941,000
Pitney Bowes, Inc. 700,000 38,150,000
Xerox Corporation 723,000 38,047,875
------------
171,393,875
============
Containers -- 1.1%
Temple-Inland, Inc. 525,000 28,415,625
------------
Cosmetics & Personal Care -- 1.5%
Kimberly-Clark
Corporation 403,000 38,385,750
============
Drugs -- 1.2%
Pharmacia & Upjohn,
Inc. 725,000 28,728,125
============
Electric Utilities -- 1.2%
NIPSCO Industries,
Inc. 330,000 13,076,250
SCANA Corporation 625,000 16,718,750
============
29,795,000
------------
Electrical Equipment & Electronics -- 7.0%
AMP, Incorporated 1,313,000 50,386,375
General Electric
Company 680,000 67,235,000
Honeywell Inc. 365,000 23,998,750
Hubbell, Incorporated
(Class B) 800,071 34,603,088
============
176,223,213
============
Energy -- 8.3%
Amoco Corporation 615,000 49,507,500
Atlantic Richfield
Company 168,000 22,260,000
Chevron Corporation 600,000 39,000,000
Kerr-McGee
Corporation 360,000 25,920,000
Mobil Corporation 290,000 35,452,500
Teco Energy, Inc. 487,700 11,765,763
Unocal Corporation 574,900 23,355,313
------------
207,261,076
============
Financial Services -- 1.5%
American Express
Company 665,000 37,572,500
------------
Foods -- 2.5%
ConAgra, Inc. 518,000 25,770,500
CPC International, Inc. 462,500 35,843,748
============
61,614,248
============
Forest Products & Paper -- 2.5%
Westvaco Corporation 855,000 24,581,250
Weyerhaeuser Company 775,000 36,715,625
------------
61,296,875
============
Hardware & Tools -- 1.1%
The Stanley Works 1,030,000 27,810,000
============
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
Healthcare -- 8.3%
Becton, Dickinson and
Company 850,000 $ 36,868,750
Bristol-Myers Squibb
Company 750,000 81,562,500
Pfizer, Incorporated 610,000 50,553,750
Schering-Plough Corp. 565,600 36,622,600
--------------
205,607,600
--------------
Industrial Distribution -- 1.3%
W.W. Grainger, Inc. 400,000 32,100,000
--------------
Industrial Transportation -- 1.4%
Norfolk Southern
Corporation 400,000 35,000,000
--------------
Insurance -- 7.7%
Allstate Corporation 305,921 17,705,178
Jefferson-Pilot
Corporation 345,000 19,535,625
Marsh & McLennan
Companies, Inc. 454,900 47,309,600
MBIA, Inc. 435,000 44,043,750
SAFECO Corporation 1,240,000 48,902,500
Unitrin, Inc. 234,950 13,098,463
--------------
190,595,116
--------------
Machinery & Components -- 1.7%
Dover Corporation 540,000 27,135,000
Parker-Hannifin
Corporation 400,000 15,500,000
--------------
42,635,000
--------------
Miscellaneous -- 2.7%
Harsco Corporation 300,000 20,550,000
Minnesota Mining &
Manufacturing
Company 565,000 46,824,375
--------------
67,374,375
--------------
Oil & Gas -- 1.9%
Occidental Petroleum
Corporation 1,067,000 24,941,125
Union Pacific
Resources Group Inc. 729,700 21,343,725
--------------
46,284,850
--------------
Photography -- 1.3%
Eastman Kodak
Company 413,600 33,191,400
--------------
Publishing & Printing -- 2.2%
The McGraw-Hill
Companies, Inc. 740,000 34,132,500
R.R. Donnelley & Sons
Company 630,000 19,766,250
--------------
53,898,750
--------------
Retail -- 1.9%
The May Department
Stores Company 600,000 28,050,000
Sears Roebuck and Co. 400,000 18,450,000
--------------
46,500,000
--------------
Retail-Grocery -- 1.9%
Albertson's, Inc. 1,000,001 35,625,010
American Stores
Company 262,300 10,721,513
--------------
46,346,523
--------------
Telecommunications -- 0.9%
GTE Corporation 475,300 21,626,150
--------------
Telephone Utilities -- 2.8%
Ameritech Corporation 372,000 22,552,500
Frontier Corporation 1,112,200 25,163,525
Southern New England
Telecommunications
Corporation 555,000 21,575,625
--------------
69,291,650
--------------
Tobacco -- 2.9%
American Brands, Inc. 735,000 36,474,375
UST Inc. 1,111,000 35,968,625
--------------
72,443,000
--------------
TOTAL EQUITIES 2,366,521,464
(Cost $1,654,626,282) --------------
<CAPTION>
Principal
Amount Market Value
------ ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 4.6%
Commercial Paper
AIG Funding Inc.
5.280% 2/28/1997 5,668,000 5,619,784
CoreStates Capital
Corporation
5.270% 4/28/1997 2,000,000 1,963,600
E. I. du Pont de
Nemours and Company
5.250% 5/09/1997 5,000,000 4,900,444
E. I. du Pont de
Nemours and Company
5.250% 5/19/1997 9,000,000 8,806,800
First Union
Corporation
5.270% 4/23/1997 3,000,000 2,947,733
First Union
Corporation
5.280% 3/28/1997 5,000,000 4,933,111
Ford Motor Credit
Company
5.290% 3/10/1997 14,000,000 13,851,912
Heinz (H.J.) Company
5.330% 1/21/1997 3,000,000 2,991,117
Heinz (H.J.) Company
5.400% 1/21/1997 8,000,000 7,976,000
J. P. Morgan &
Company Incorporated
5.280% 2/03/1997 14,000,000 13,932,240
Shell Oil Company
6.500% 1/02/1997 6,861,000 6,859,761
Sunoco Credit
Corporation
5.320% 2/04/1997 8,000,000 7,959,804
Sunoco Credit
Corporation
5.370% 1/21/1997 6,000,000 5,982,100
Transamerica
Financial Corporation
5.270% 3/14/1997 2,595,000 2,565,936
The Walt Disney
Company
5.320% 1/24/1997 10,000,000 9,966,011
Weyerhaeuser Company
5.300% 2/10/1997 9,000,000 8,947,000
Weyerhaeuser Company
5.300% 2/12/1997 4,000,000 3,975,267
--------------
TOTAL SHORT-TERM
INVESTMENTS 114,178,620
(Cost $114,215,876) --------------
TOTAL INVESTMENTS -- 99.8% 2,480,700,084
(Cost $1,768,842,158)+
Other Assets/
(Liabilities) - 0.2% 5,508,151
--------------
NET ASSETS-- 100.0% $2,486,208,235
--------------
</TABLE>
Notes to Portfolio of Investments
+Aggregate cost for Federal tax purposes (Note 7)
The accompanying notes are an integral part of the financial statements.
43
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Financial Statements
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
December 31, 1996
-----------------
<S> <C>
Assets:
Investments, at value (cost $1,654,626,282) (Note 2)..... $ 2,366,521,464
Short-term investments, at value (cost $114,215,876) (Note 2) 114,178,620
-----------------
Total Investments...................................... 2,480,700,084
Cash..................................................... 190
Receivables from:
Investments sold....................................... 2,044,107
Fund shares sold....................................... 1,696,480
Interest and dividends................................. 5,329,158
Investment manager (Note 3)............................ 106,983
-----------------
Total assets......................................... 2,489,877,002
-----------------
Liabilities:
Payables for:
Investments purchased.................................. 481,850
Fund shares redeemed................................... 1,916,768
Directors' fees and expenses (Note 3).................. 5,176
Affiliates (Note 3):
Investment management fees........................... 987,506
Administration fees.................................. 198,758
Service and distribution fees........................ 303
Accrued expenses and other liabilities................... 78,406
-----------------
Total liabilities.................................... 3,668,767
-----------------
Net assets............................................... $ 2,486,208,235
=================
Net assets consist of:
Paid-in capital.......................................... $ 1,759,761,092
Undistributed net investment income...................... 410,862
Accumulated net realized gain on investments............. 14,178,355
Net unrealized appreciation on investments............... 711,857,926
-----------------
$ 2,486,208,235
=================
Net assets:
Class 1.................................................. $ 153,607
=================
Class 2.................................................. $ 155,446
=================
Class 3.................................................. $ 156,351
=================
Class 4.................................................. $ 2,485,742,831
=================
Shares outstanding:
Class 1.................................................. 10,640
=================
Class 2.................................................. 10,740
=================
Class 3.................................................. 10,793
=================
Class 4.................................................. 171,928,663
=================
Net asset value, offering price and
redemption price per share:
Class 1.................................................. $ 14.44
=================
Class 2.................................................. $ 14.47
=================
Class 3.................................................. $ 14.49
=================
Class 4.................................................. $ 14.46
=================
</TABLE>
The accompanying notes are an integral part of the financial statements.
44
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of Operations
<TABLE>
<CAPTION>
Year ended
December 31, 1996
-----------------
<S> <C>
Investment income:
Dividends................................................ $ 56,941,194
Interest................................................. 10,459,062
----------------
Total investment income................................ 67,400,256
----------------
Expenses (Note 1):
Investment management fees (Note 3)...................... 10,377,627
Custody fees............................................. 205,814
Audit and legal fees..................................... 77,183
Directors' fees (Note 3)................................. 15,195
Fees waived by the investment manager (Note 3)........... (1,077,667)
----------------
9,598,152
Administration fees (Note 3):
Class 1................................................ 814
Class 2................................................ 751
Class 3................................................ 474
Class 4................................................ 2,086,673
Distribution and service fees (Note 3):
Class 1................................................ 911
Class 2................................................ 212
----------------
Net expenses......................................... 11,687,987
----------------
Net investment income................................ 55,712,269
----------------
Realized and unrealized gain (loss):
Net realized gain on investment transactions............. 74,040,546
Net change in unrealized appreciation (depreciation)
on investments......................................... 296,454,766
----------------
Net realized and unrealized gain..................... 370,495,312
----------------
Net increase in net assets resulting from operations..... $ 426,207,581
================
</TABLE>
The accompanying notes are an integral part of the financial statements. 45
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income........................................... $ 55,712,269 $ 50,082,342
Net realized gain on investment transactions.................... 74,040,546 21,371,652
Net change in unrealized appreciation (depreciation)
on investments................................................. 296,454,766 429,724,511
----------------- ----------------
Net increase in net assets resulting from operations........... 426,207,581 501,178,505
----------------- ----------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1......................................................... (1,849) (1,761)
Class 2......................................................... (2,628) (2,382)
Class 3......................................................... (3,152) (2,774)
Class 4......................................................... (55,920,646) (49,597,273)
----------------- ----------------
Total distributions from net investment income................. (55,928,275) (49,604,190)
----------------- ----------------
From net realized gains:
Class 1......................................................... (4,035) (990)
Class 2......................................................... (4,054) (990)
Class 3......................................................... (4,061) (988)
Class 4......................................................... (64,653,761) (16,056,271)
----------------- ----------------
Total distributions from net realized gains.................... (64,665,911) (16,059,239)
----------------- ----------------
Net fund share transactions (Note 5):
Class 1......................................................... 5,884 2,751
Class 2......................................................... 6,682 3,372
Class 3......................................................... 7,213 3,763
Class 4......................................................... 54,936,919 126,252,551
----------------- ----------------
Increase in net assets from net fund share transactions........ 54,956,698 126,262,437
----------------- ----------------
Total increase in net assets.................................... 360,570,093 561,777,513
Net assets:
Beginning of period............................................. 2,125,638,142 1,563,860,629
----------------- ----------------
End of period (including undistributed net investment income
of $410,862 and $626,868, respectively)........................ $ 2,486,208,235 $ 2,125,638,142
================= ================
</TABLE>
46 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 1
----------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 12.63 $ 9.92 $ 10.00
---------- ---------- ----------
Income (loss) from investment operations:
Net investment income 0.17 0.18 0.04
Net realized and unrealized gain (loss) on investments 2.21 2.81 (0.08)
---------- ---------- ----------
Total income (loss) from investment operations 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 $ 14.44 $ 12.63 $ 9.92
========== ========== ==========
Total Return 18.83% 30.10% (0.39)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $154 $129 $99
Net expenses to average daily net assets# 1.65% 1.65% 1.65%*
Net investment income to average daily net assets 1.28% 1.58% 2.31%*
Portfolio turnover rate 13% 16% 3%
Average broker commission rate (a) $ .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% 1.70% 1.71%*
<CAPTION>
Class 2
----------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 12.65 $ 9.93 $ 10.00
---------- ---------- ----------
Income (loss) from investment operations:
Net investment income 0.25 0.24 0.05
Net realized and unrealized gain (loss) on investments 2.22 2.82 (0.07)
---------- ---------- ----------
Total income (loss) from investment operations 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 $ 14.47 $ 12.65 $ 9.93
========== ========== ==========
Total Return 19.46% 30.80% (0.22)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $155 $130 $99
Net expenses to average daily net assets# 1.10% 1.10% 1.10%*
Net investment income to average daily net assets 1.82% 2.13% 2.86%*
Portfolio turnover rate 13% 16% 3%
Average broker commission rate (a) $ .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% 1.15% 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. 47
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 3
----------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 12.66 $ 9.93 $ 10.00
---------- ---------- ----------
Income (loss) from investment operations:
Net investment income 0.30 0.28 0.05
Net realized and unrealized gain (loss) on investments 2.23 2.83 (0.07)
---------- ---------- ----------
Total income (loss) from investment operations 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 $ 14.49 $ 12.66 $ 9.93
========== ========== ==========
Total Return 19.92% 31.30% (0.18)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $156 $130 $99
Net expenses to average daily net assets# 0.75% 0.75% 0.75%*
Net investment income to average daily net assets 2.17% 2.48% 3.23%*
Portfolio turnover rate 13% 16% 3%
Average broker commission rate (a) $ .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: 0.80% 0.80% 0.81%*
<CAPTION>
Class 4
----------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 12.63 $ 9.91 $ 10.00
---------- ---------- ----------
Income (loss) from investment operations:
Net investment income 0.34 0.31 0.08
Net realized and unrealized gain (loss) on investments 2.22 2.82 (0.09)
---------- ---------- ----------
Total income (loss) from investment operations 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 $ 14.46 $ 12.63 $ 9.91
========== ========== ==========
Total Return@ 20.24% 31.54% (0.10)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $2,485,743 $2,125,248 $1,563,563
Net expenses to average daily net assets# 0.5067% 0.5067% 0.5067%*
Net investment income to average daily net assets 2.42% 2.72% 3.20%*
Portfolio turnover rate 13% 16% 3%
Average broker commission rate (a) $ .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: 0.5534% 0.5528% 0.5681%*
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
@Employee retirement benefit plans that invest plan assets in the Separate
Investment Accounts (SIAs) may be subject to certain charges as set forth in
their respective Plan Documents. Total return figures would be lower for the
periods presented if they reflected these charges.
(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.
48 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1996
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
EQUITIES - 98.4%
Air Transportation -- 1.4%
Atlantic Southeast
Airlines, Inc. 297,800 $ 6,514,375
------------
Apparel, Textiles & Shoes -- 1.2%
Unitog Company 206,500 5,627,125
------------
Automotive & Parts -- 5.7%
Amcast Industrial
Corporation 228,100 5,645,475
Excel Industries, Inc. 355,100 5,903,538
Myers Industries, Inc. 321,154 5,419,469
Titan Wheel
International, Inc. 698,500 8,905,875
------------
25,874,357
------------
Banking, Savings & Loans -- 10.9%
Astoria Financial
Corporation 293,000 10,804,375
Bank United Corp.
Class A 173,200 4,633,100
CCB Financial
Corporation 139,900 9,548,175
First Colorado
Bancorp, Inc. 284,200 4,831,400
Keystone Financial,
Inc. 221,150 5,528,750
One Valley Bancorp of
West Virginia, Inc. 183,750 6,821,719
Security Capital
Corporation 102,800 7,581,500
------------
49,749,019
------------
Building Materials & Construction -- 0.7%
Apogee Enterprises,
Inc. 76,800 3,052,800
------------
Chemicals -- 1.1%
OM Group, Inc. 188,100 5,078,700
------------
Communications -- 2.3%
True North
Communications, Inc. 483,500 10,576,563
------------
Computers & Office Equipment -- 1.0%
Cognex Corporation. (D) 238,500 4,412,250
------------
Containers -- 1.7%
Rock-Tenn Company
(Class A) 391,490 7,731,928
------------
Electrical Equipment & Electronics -- 8.2%
Belden, Inc. 293,700 10,866,900
Dallas Semiconductor
Corporation 468,600 10,777,800
Teleflex, Incorporated 128,100 6,677,213
Wyle Laboratories 227,200 8,974,390
------------
37,296,303
------------
Energy -- 3.2%
NGC Corporation 165,595 3,850,084
Production Operators
Corp. 156,100 7,258,650
TNP Enterprises, Inc. 137,100 3,753,113
------------
14,861,847
------------
Foods -- 3.2%
Midwest Grain
Products, Inc. (D) 167,100 2,840,700
Morrison Health Care,
Inc. 377,200 5,563,700
Riser Foods, Inc.
Class A 197,700 6,276,975
------------
14,681,375
------------
Forest Products & Paper -- 2.4%
Mosinee Paper
Corporation 125,833 4,467,072
Wausau Paper Mills
Company 357,775 6,618,838
------------
11,085,910
------------
Gas Distribution -- 1.9%
WICOR, Inc. 237,300 8,513,138
------------
Healthcare -- 1.0%
Beckman Instruments,
Inc. 113,800 4,367,075
------------
Industrial Transportation -- 3.1%
ABC Rail Products
Corporation . (D) 115,000 $ 2,285,625
Arnold Industries, Inc. 511,500 8,120,063
The Greenbrier
Companies, Inc. 385,300 3,997,488
------------
14,403,176
------------
Insurance -- 11.7%
ALLIED Group,
Incorporated 346,350 11,299,669
Capital RE Corp. 334,500 15,596,063
Executive Risk, Inc. 172,900 6,397,300
Frontier Insurance
Group, Inc. 290,080 11,095,560
Orion Capital
Corporation 147,137 8,993,749
------------
53,382,341
------------
Leasing Companies -- 2.0%
Rollins Truck Leasing
Company 715,750 9,036,344
------------
Machinery & Components -- 13.3%
Columbus McKinnon
Corporation 266,500 4,164,063
DT Industries, Inc. 269,200 9,422,000
The Gorman-Rupp
Company 257,825 3,512,866
Graco, Incorporated 427,000 10,461,500
Greenfield Industries,
Inc. 327,600 10,032,750
Hardinge, Inc. 224,300 5,971,988
Helix Technology
Corporation 247,300 7,171,700
Regal-Beloit
Corporation 297,750 5,843,344
Roper Industries, Inc. 109,200 4,272,450
------------
60,852,661
------------
Metals & Mining -- 1.8%
Reliance Steel &
Aluminum Company 229,600 8,036,000
------------
</TABLE>
The accompanying notes are an integral part of the financial statement.
51
<PAGE>
- -------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Portfolio of Investments (Continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
--------- ------------
<S> <C> <C>
Miscellaneous -- 2.1%
Trimas Corporation 407,100 $ 9,719,513
Miscellaneous Distributor Wholesale -- 1.2%
Hughes Supply, Inc. 130,200 5,614,875
Office Products -- 1.1%
American Business
Products, Inc. 197,700 4,967,213
Oil & Gas -- 2.9%
The Houston
Exploration Company. 261,800 4,581,500
Stone Energy
Corporation. 211,000 6,303,625
Titan Exploration, Inc. 200,000 2,400,000
------------
13,285,125
------------
Other Services -- 3.0%
Analysts International
Corporation 340,200 9,610,650
Landauer, Inc. 173,900 4,260,550
------------
13,871,200
------------
Publishing & Printing -- 8.4%
Banta Corporation 284,250 6,502,219
Harte Hanks
Communications, Inc. 398,300 11,052,825
Houghton Mifflin
Company 173,200 9,807,450
McClatchy
Newspapers, Inc. 327,400 11,459,000
------------
38,821,494
------------
Retail -- 1.9%
Arbor Drugs, Inc. 502,250 8,726,594
------------
TOTAL EQUITIES 450,139,301
------------
(Cost $338,729,733)
<CAPTION>
Principal
Amount Market Value
--------- ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 1.4%
Commercial Paper
Ford Motor Credit
Company
5.330% 1/29/1997 1,000,000 995,854
Shell Oil Company
6.500% 1/02/1997 4,350,000 4,349,215
Sunoco Credit
Corporation
5.370% 1/21/1997 1,000,000 997,017
-----------
TOTAL SHORT-TERM
INVESTMENTS 6,342,086
-----------
(At Amortized Cost)
TOTAL INVESTMENTS -- 99.8% 456,481,387
(Cost $345,071,819)+
Other Assets/
(Liabilities) - .2% 886,996
-----------
NET ASSETS--100.0% $ 457,368,383
------------
</TABLE>
Notes to Portfolio of Investments
+Aggregate cost for Federal tax purposes (Note 7)
(D) Non-income producing security.
The accompanying notes are an integral part of the financial statements.
52
<PAGE>
- -------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Financial Statements
- -------------------------------------------------------------------------------
Statement of
Assets and
Liabilities
<TABLE>
<CAPTION>
December 31, 1996
-----------------
<S> <C>
Assets:
Investments, at value (cost $338,729,733) (Note 2)..... $ 450,139,301
Short-term investments, at amortized cost (Note 2)..... 6,342,086
----------------
Total Investments.................................... 456,481,387
Cash................................................... 16,575
Receivables from:
Investments sold..................................... 590,252
Fund shares sold..................................... 391,223
Interest and dividends............................... 614,637
Investment manager (Note 3).......................... 20,289
----------------
Total assets....................................... 458,114,363
----------------
Liabilities:
Payables for:
Investments purchased................................ 124,059
Fund shares redeemed................................. 349,247
Directors' fees and expenses (Note 3)................ 5,176
Affiliates (Note 3):
Investment management fees......................... 216,574
Administration fees................................ 34,087
Service and distribution fees...................... 274
Accrued expenses and other liabilities................. 16,563
----------------
Total liabilities.................................. 745,980
----------------
Net assets............................................. $ 457,368,383
================
Net assets consist of:
Paid-in capital........................................ $ 340,794,078
Undistributed net investment income.................... 192,363
Accumulated net realized gain on investments........... 4,972,374
Net unrealized appreciation on investments............. 111,409,568
----------------
$ 457,368,383
================
Net assets:
Class 1................................................ $ 142,813
================
Class 2................................................ $ 144,545
================
Class 3................................................ $ 145,609
================
Class 4................................................ $ 456,935,416
================
Shares outstanding:
Class 1................................................ 10,666
================
Class 2................................................ 10,767
================
Class 3................................................ 10,837
================
Class 4................................................ 34,013,589
================
Net asset value, offering price and
redemption price per share:
Class 1................................................ $ 13.39
================
Class 2................................................ $ 13.42
================
Class 3................................................ $ 13.44
================
Class 4................................................ $ 13.43
================
</TABLE>
The accompanying notes are an integral part of the financial statement.
53
<PAGE>
- -------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Financial Statements (Continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended
December 31, 1996
-----------------
<S> <C>
Statement of Operations
Investment income:
Dividends.............................................. $ 10,401,752
Interest............................................... 2,168,316
-----------------
Total investment income.............................. 12,570,068
-----------------
Expenses (Note 1):
Investment management fees (Note 3).................... 2,298,488
Custody fees........................................... 47,464
Audit and legal fees................................... 14,282
Directors' fees (Note 3)............................... 15,246
Fees waived by the investment manager (Note 3)......... (182,305)
-----------------
2,193,175
-----------------
Administration fees (Note 3):
Class 1.............................................. 844
Class 2.............................................. 667
Class 3.............................................. 417
Class 4.............................................. 359,887
Distribution and service fees (Note 3):
Class 1.............................................. 958
Class 2.............................................. 191
-----------------
Net expenses....................................... 2,556,139
-----------------
Net investment income............................... 10,013,929
-----------------
Realized and unrealized gain (loss):
Net realized gain on investment transactions........... 15,188,213
Net change in unrealized appreciation (depreciation) on
investments.......................................... 63,151,095
-----------------
Net realized and unrealized gain.................... 78,339,308
-----------------
Net increase in net assets resulting from operations... $ 88,353,237
=================
</TABLE>
The accompanying notes are an integral part of the financial statements.
54
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statements of
Changes in Net
Assets
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income................................................. $ 10,013,929 $ 6,234,130
Net realized gain on investment transactions.......................... 15,188,213 776,790
Net change in unrealized appreciation (depreciation)
on investments....................................................... 63,151,095 57,391,484
----------------- ----------------
Net increase in net assets resulting from operations................. 88,353,237 64,402,404
----------------- ----------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1............................................................... (1,430) (1,356)
Class 2............................................................... (2,382) (1,300)
Class 3............................................................... (2,845) (1,672)
Class 4............................................................... (9,914,239) (6,159,231)
----------------- ----------------
Total distributions from net investment income....................... (9,920,896) (6,163,559)
----------------- ----------------
From net realized gains:
Class 1............................................................... (3,230) --
Class 2............................................................... (3,240) --
Class 3............................................................... (3,251) --
Class 4............................................................... (10,172,978) --
----------------- ----------------
(10,182,699) --
----------------- ----------------
Total distributions from net realized gains
Net fund share
transactions (Note 5):
Class 1............................................................... (49,286) 51,075
Class 2............................................................... 5,622 1,300
Class 3............................................................... 6,096 1,672
Class 4............................................................... 8,348,780 11,428,353
Increase in net assets from net fund share transactions.............. 8,311,212 11,482,400
----------------- ----------------
Total increase in net assets.......................................... 76,560,854 69,721,245
----------------- ----------------
Net assets:
Beginning of period................................................... 380,807,529 311,086,284
End of period (including undistributed net investment income
of $192,363 and $99,330, respectively)............................... $ 457,368,383 $ 380,807,529
================= =================
</TABLE>
The accompanying notes are an integral part of the financial statements.
55
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 1
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
---------- ----------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.40 $ 9.69 $ 10.00
---------- ----------- -----------
Income (loss) from investment operations:
Net investment income 0.21 0.06 0.02
Net realized and unrealized gain (loss) on investments 2.23 1.74 (0.31)
---------- ----------- -----------
Total income (loss) from investment operations 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 $ 13.39 $ 11.40 $ 9.69
========== =========== ===========
Total Return 21.43% 18.58% (2.89)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $143 $172 $99
Net expenses to average daily net assets# 1.75% 1.75% 1.75%*
Net investment income to average daily net assets 1.56% 0.63% 1.14%*
Portfolio turnover rate 28% 28% 4%
Average broker commission rate (a) $ .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% 1.81%*
Class 2
-----------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
---------- ----------- -----------
Net asset value, beginning of period $ 11.44 $ 9.70 $ 10.00
---------- ----------- -----------
Income (loss) from investment operations:
Net investment income 0.22 0.13 0.03
Net realized and unrealized gain (loss) on investments 2.30 1.74 (0.30)
---------- ----------- -----------
Total income (loss) from investment operations 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 $ 13.42 $ 11.44 $ 9.70
========== =========== ===========
Total Return 22.07% 19.25% (2.72)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $145 $118 $99
Net expenses to average daily net assets# 1.20% 1.20% 1.20%*
Net investment income to average daily net assets 1.81% 1.19% 1.69%*
Portfolio turnover rate 28% 28% 4%
Average broker commission rate (a) $ .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% 1.26%*
</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.
56
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 3
---------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
----------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.44 $ 9.70 $ 10.00
----------- ------------ ------------
Income (loss) from investment operations:
Net investment income 0.27 0.16 0.03
Net realized and unrealized gain (loss) on investments 2.31 1.74 (0.30)
----------- ------------ ------------
Total income (loss) from investment operations 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 $ 13.44 $ 11.44 $ 9.70
=========== ============ ============
Total Return 22.64% 19.62% (2.68)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $146 $119 $99
Net expenses to average daily net assets# 0.85% 0.85% 0.85%*
Net investment income to average daily net assets 2.16% 1.54% 2.09%*
Portfolio turnover rate 28% 28% 4%
Average broker commission rate (a) $ .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% 0.91%*
<CAPTION>
Class 4
---------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
----------- ------------ ------------
Net asset value, beginning of period $ 11.44 $ 9.69 $ 10.00
----------- ------------ ------------
Income (loss) from investment operations:
Net investment income 0.31 0.19 0.04
Net realized and unrealized gain (loss) on investments 2.29 1.75 (0.31)
----------- ------------ ------------
Total income (loss) from investment operations 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 $ 13.43 $ 11.44 $ 9.69
=========== ============ ============
Total Return@ 22.82% 20.01% (2.66)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $456,935 $380,398 $310,789
Net expenses to average daily net assets# 0.6110% 0.6110% 0.6110%*
Net investment income to average daily net assets 2.40% 1.78% 1.78%*
Portfolio turnover rate 28% 28% 4%
Average broker commission rate (a) $ .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: 0.6546% 0.6553% 0.6681%*
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
@Employee retirement benefit plans that invest plan assets in the Separate
Investment Accounts (SIAs) may be subject to certain charges as set forth in
their respective Plan Documents. Total return figures would be lower for the
periods presented if they reflected these charges.
(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 International Equity Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1996
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
EQUITIES - 99.9%
Automobiles -- 2.8%
Ciadea SA (D) 280,885 $ 1,334,428
Mahindra & Mahindra
Ltd., GDR 140,683 1,653,025
Orbital Engine
Corporation Ltd. (D) 2,000,000 1,509,000
Porsche AG,
Preference 6,000 5,353,287
-------------
9,849,740
-------------
Banking -- 8.3%
Banco Bradesco SA,
Preference 230,260,951 1,657,879
Banco de Galicia y
Buenos Aires SA de
CV, Sponsored ADR 127,000 3,079,750
Banco Frances del Rio
de la Plata SA, ADR 57,500 1,581,250
Bank of Scotland 1,250,000 6,588,500
Bil GT Gruppe AG 2,500 1,277,256
Development Bank of
Singapore Limited 200,000 2,702,260
HSBC Holdings PLC 261,214 5,588,987
Skandinaviska Enskilda
Banken Group 150,000 1,537,770
Standard Chartered
Bank PLC 350,000 4,294,500
Turkiye Garanti
Bankasi, ADR 252,000 1,131,808
-------------
29,439,960
-------------
Commercial Services -- 0.3%
Adecco SA 4,000 1,000,952
-------------
Computer Hardware -- 0.8%
Canon, Inc. 100,000 2,205,560
PT Multipolar
Corporation 933,000 533,116
-------------
2,738,676
-------------
Computer Services -- 1.1%
Sligos SA 30,000 3,924,027
-------------
Computer Software -- 7.4%
Ines Corp. 42,000 611,524
Misys PLC 450,872 8,572,204
Nintendo Co. Ltd. 185,000 13,213,144
SAP AG, Preference 30,000 4,123,002
-------------
26,519,874
-------------
Conglomerates -- 2.1%
Chargeurs
International SA (D) 120,000 $ 5,932,200
First Philippine
Holdings Corp., B
Shares 700,000 1,596,910
-------------
7,529,110
-------------
Diversified Financial -- 5.8%
ABN Amro Holding
NV 101,630 6,604,009
ING Groep NV 137,500 4,944,390
IRSA Inversiones y
Representaciones, SA 1,014,404 3,256,744
Nomura Securities
Company Ltd. 250,000 3,747,725
Societe Generale de
Paris 20,000 2,158,216
-------------
20,711,084
-------------
Drugs -- 9.3%
Altana AG 6,000 4,668,067
Ares-Serono Group B 10,500 9,986,057
Biocompatibles
International PLC (D) 411,665 5,762,651
Glaxo Wellcome PLC,
Sponsored ADR 250,000 4,064,325
Sanofi SA 35,000 3,473,918
Takeda Chemical
Industries Ltd. 250,000 5,233,900
-------------
33,188,918
-------------
Electric Utilities -- 0.4%
Capex SA, GDR 76,000 1,262,360
-------------
Electrical Equipment & Electronics -- 6.5%
Austria Mikro
Systeme International
AG 54,800 4,226,450
Keyence Corporation 20,000 2,464,030
LEM Holdings SA 11,192 2,258,868
Matsushita Electric
Industrial Company
Ltd. 175,000 2,849,560
Rohm Company 40,000 2,619,108
SGS-Thomson
Microelectronics NV (D) 58,800 4,116,000
Yamatake-Honeywell
Co., Ltd. 70,000 1,127,763
Yokogawa Electric
Corp. 400,000 3,446,160
-------------
23,107,939
-------------
Energy Services & Producers -- 1.0%
Compagnie Generale de
Geophysique SA (D) 50,000 $ 3,462,375
-------------
Engineering -- 1.7%
Fugro NV 200,000 3,549,660
Internatio-Muller NV 100,000 2,509,050
-------------
6,058,710
-------------
Financial Services -- 3.8%
Compagnie Bancaire
SA 35,000 4,133,693
CS Holding AG 40,000 4,096,156
Merita Ltd.
A Shares (D) 1,399,600 4,342,399
Van der Hoop
Effektenbank NV 145,000 1,106,524
-------------
13,678,772
-------------
Food & Beverage -- 2.5%
Hellenic Bottling Co.,
SA 70,000 2,242,912
Remy Cointreau 120,000 3,393,120
Sermsuk Public
Company Limited 50,000 725,425
South African
Breweries Limited 100,000 2,533,400
-------------
8,894,857
-------------
Healthcare -- 1.4%
Novartis AG 4,264 4,868,254
-------------
Hotel/Gaming -- 0.8%
Lusomundo, SGPS,
SA (D) 257,500 2,962,280
-------------
Household Products -- 0.2%
Srithai Superware Co.
Ltd. 175,000 846,318
-------------
Industrial Services -- 3.2%
Boskalis Westminster 347,290 7,027,135
PT Citra Marga
Nusaphala Persada 2,120,000 1,660,106
VBH - Vereinigter
Baubeschlag Handel
AG 125,000 2,778,025
-------------
11,465,266
-------------
</TABLE>
(Continued)
60 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
------ ------------
<S> <C> <C>
Insurance -- 7.1%
AXA SA 75,000 $ 4,760,768
Marschollek,
Lautenschlaeger und
Partner AG 44,000 6,109,884
National Mutual Asia
Ltd. 1,816,000 1,725,563
Ockham Holdings PLC 1,000,000 1,283,400
Reinsurance Australia
Corp. Ltd. 2,910,000 11,325,138
-------------
25,204,753
-------------
Manufacturing -- 3.8%
Bucher Holding AG, B
Shares 1,750 1,199,057
Powerscreen
International PLC 494,100 4,777,354
Rolls-Royce PLC 750,000 3,298,500
SMH AG (Registered) 30,000 4,267,449
-------------
13,542,360
-------------
Medical Products -- 0.4%
Elekta Instrument AB
Free, Series B 40,000 1,420,612
Metals & Mining -- 2.1%
Boehler-Uddeholm AG 12,000 857,970
Boehler-Uddeholm AG
144A . 24,000 1,715,946
Compania de Minas
Buenaventura SA,
Sponsored ADR 200,000 3,375,000
Hoganas AB Cl. B 40,000 1,400,108
-------------
7,349,024
-------------
Non-Durable Household Goods -- 1.8%
Wella AG 2,000 1,057,680
Wella AG Preference 10,000 5,320,843
-------------
6,378,523
-------------
Oil & Gas -- 5.2%
Belle Corporation . 5,000,000 1,387,500
Coflexip SA,
Sponsored ADR 90,000 2,362,500
Expro International
Group PLC 775,000 6,266,495
Hong Kong and China
Gas Company Ltd. 720,000 1,391,544
PTT Exploration and
Production 50,000 721,525
Smedvig ASA A
Shares 165,000 3,617,625
Smedvig ASA B
Shares . 160,000 3,282,496
-------------
19,029,685
-------------
Publishing & Printing-- 0.9%
News Corp. Ltd., ADR 150,000 3,131,250
-------------
Real Estate -- 1.3%
Brazil Realty SA,
GDR 144A 59,000 1,121,000
MRC Allied Industries,
Inc. . 4,000,000 532,000
Sun Hung Kai
Properties Ltd. 250,000 3,062,375
-------------
4,715,375
-------------
Retail -- 2.4%
Autobacs Seven Co.
Limited 50,000 3,528,040
PT Matahari Putra
Prima 700,000 818,518
Vendex International
NV 100,000 4,272,320
-------------
8,618,878
-------------
Shipping -- 0.2%
Lisnave-Estaleiros
Navais de Lisbona SA . 306,300 806,917
-------------
Specialty Retail -- 3.7%
Adidas AG 42,200 3,641,919
FamilyMart Co. 60,000 2,393,382
Giordano International
Ltd. 1,500,000 1,279,800
Jusco Co. 100,000 3,385,880
Moebel Walther AG,
Preference 40,000 2,621,488
-------------
13,322,469
-------------
Telecommunications -- 4.0%
CPT Telefonica del
Peru SA, Cl. B 1,600,000 2,994,080
Korea Mobile
Telecommunications
Corporation 4,300 4,368,962
Millicom International
Cellular SA . 37,500 1,204,688
Portugal Telecom SA 86,000 2,448,437
Telecom Italia Mobile
SpA 1,299,900 3,278,478
-------------
14,294,645
-------------
Telephone Utilities -- 1.4%
Telecomunicacoes
Brasileiras S/A-
Telebras 18,500 1,415,250
Telefonica de Espana
ADS 150,000 3,476,835
-------------
4,892,085
-------------
Television -- 0.7%
Groupe AB SA . 165,000 2,371,875
-------------
Textiles -- 1.9%
Bulgari SpA 225,000 4,557,690
Gucci Group NV 35,000 2,235,625
-------------
6,793,315
-------------
Tobacco -- 0.4%
Compagnie Financiere
Richemont AG 1,000 1,400,141
-------------
Transportation -- 3.2%
Argonaut AB-B Shares . 1,100,000 2,207,040
East Japan Railway Co. 750 3,366,503
Frontline AB . 650,000 2,246,595
MIF Ltd. 250,000 3,719,425
-------------
11,539,563
-------------
TOTAL EQUITIES 356,320,942
-------------
(Cost $309,944,622)
WARRANTS -- 0.3%
Drugs -- 0.3%
Biocompatibles
International PLC . 71,593 912,676
-------------
Oil & Gas -- 0.0%
Hong Kong and China
Gas Company Ltd. . 72,000 3,723
-------------
TOTAL WARRANTS 916,399
-------------
(Cost $0)
TOTAL INVESTMENTS -- 100.2% 357,237,341
-------------
(Cost $309,944,622)+
Other Assets/
(Liabilities) - (0.2%) (585,529)
-------------
NET ASSETS-- 100.0% $356,651,812
-------------
</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.
The accompanying notes are an integral part of the financial statements. 61
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1996
-----------------
<S> <C>
Statement of Assets and Liabilities
Assets:
Investments, at value (cost $309,944,622) (Note 2)....................... $ 357,237,341
Cash..................................................................... 83,359
Foreign currency, at value (cost $4,918,907)............................. 4,903,738
Receivables from:
Investments sold....................................................... 1,783,534
Open forward foreign currency contracts (Note 2)....................... 612,258
Fund shares sold....................................................... 216,824
Interest and dividends................................................. 267,791
Foreign taxes withheld................................................. 274,223
Investment manager (Note 3)............................................ 54,877
-------------------
Total assets......................................................... 365,433,945
-------------------
Liabilities:
Payables for:
Investments purchased.................................................. 6,371,010
Borrowings under line of credit (Note 8)............................... 1,600,000
Fund shares redeemed................................................... 456,891
Directors' fees and expenses (Note 3).................................. 5,177
Affiliates (Note 3):
Investment management fees........................................... 254,834
Administration fees.................................................. 29,289
Service and distribution fees........................................ 219
Accrued expenses and other liabilities................................... 64,713
-------------------
Total liabilities.................................................... 8,782,133
-------------------
Net assets............................................................... $ 356,651,812
===================
Net assets consist of:
Paid-in capital.......................................................... $ 320,990,580
Undistributed net investment income...................................... 113,978
Accumulated net realized loss on investments and
foreign currency translations.......................................... (12,355,482)
Net unrealized appreciation on investments, forward foreign currency
contracts, foreign currency and other assets and liabilities........... 47,902,736
-------------------
$ 356,651,812
===================
Net assets:
Class 1.................................................................. $ 112,681
===================
Class 2.................................................................. $ 114,019
===================
Class 3.................................................................. $ 114,468
===================
Class 4.................................................................. $ 356,310,644
===================
Shares outstanding:
Class 1.................................................................. 10,176
===================
Class 2.................................................................. 10,281
===================
Class 3.................................................................. 10,315
===================
Class 4.................................................................. 32,070,618
===================
Net asset value, offering price and
redemption price per share:
Class 1.................................................................. $ 11.07
===================
Class 2.................................................................. $ 11.09
===================
Class 3.................................................................. $ 11.10
===================
Class 4.................................................................. $ 11.11
===================
</TABLE>
62 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended
December 31, 1996
----------------
<S> <C>
Statement of Operations
Investment income:
Dividends (net of withholding tax of $468,717)............................ $ 4,155,451
Interest.................................................................. 350,237
-------------------
Total investment income................................................. 4,505,688
-------------------
Expenses (Note 1):
Investment management fees (Note 3)....................................... 2,398,114
Custody fees.............................................................. 319,874
Audit and legal fees...................................................... 9,403
Excise taxes.............................................................. 6,854
Directors' fees (Note 3).................................................. 15,246
Fees waived by the investment manager (Note 3)............................ (196,769)
-------------------
2,552,722
Administration fees (Note 3):
Class 1................................................................. 698
Class 2................................................................. 569
Class 3................................................................. 465
Class 4................................................................. 273,938
Distribution and service fees (Note 3):
Class 1................................................................. 763
Class 2................................................................. 157
-------------------
Net operating expenses................................................ 2,829,312
Interest expense (Note 8)................................................. 25,373
-------------------
Net investment income................................................. 1,651,003
-------------------
Realized and unrealized gain (loss) from investments
and foreign currency:
Net realized gain on:
Investment transactions................................................. 5,099,336
Foreign currency transactions........................................... 5,633,016
-------------------
Net realized gain..................................................... 10,732,352
-------------------
Net change in unrealized appreciation
(depreciation) on:
Investments............................................................. 36,945,058
Translation of assets and liabilities in foreign currencies............. (414,384)
-------------------
Net unrealized gain................................................... 36,530,674
-------------------
Net realized and unrealized gain from investments
and foreign currency................................................. 47,263,026
-------------------
Net increase in net assets resulting from operations...................... $ 48,914,029
===================
</TABLE>
The accompanying notes are an integral part of the financial statements. 63
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Statements of Changes in Net Assets
Increase (Decrease) in Net Assets:
Operations:
Net investment income.............................................. $ 1,651,003 $ 1,410,289
Net realized gain (loss) on investment and foreign
currency transactions............................................. 10,732,352 (11,680,240)
Net change in unrealized appreciation (depreciation) on
investments and translation of assets and liabilities in
foreign currencies................................................ 36,530,674 19,939,116
------------------- -------------------
Net increase in net assets resulting from operations........... 48,914,029 9,669,165
------------------- -------------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1............................................................ (263) --
Class 2............................................................ (433) (195)
Class 3............................................................ (501) (467)
Class 4............................................................ (1,825,896) (1,565,611)
------------------- -------------------
Total distributions from net investment income................. (1,827,093) (1,566,273)
------------------- -------------------
In excess of net investment income:
Class 1............................................................ (794) (830)
Class 2............................................................ (1,308) (952)
Class 3............................................................ (1,513) (947)
Class 4............................................................ (5,515,423) (2,389,653)
------------------- -------------------
Total distributions in excess of net investment income......... (5,519,038) (2,392,382)
------------------- -------------------
Net fund share transactions (Note 5):
Class 1............................................................ (13,956) 16,103
Class 2............................................................ 1,742 1,191
Class 3............................................................ 2,018 1,430
Class 4............................................................ 94,070,522 64,817,475
------------------- -------------------
Increase in net assets from net fund share transactions........... 94,060,326 64,836,199
------------------- -------------------
Total increase in net assets....................................... 135,628,224 70,546,709
Net assets:
Beginning of period................................................ 221,023,588 150,476,879
------------------- -------------------
End of period (including undistributed net investment income
of $113,978 and distributions in excess of net investment
income of $215,389)................................................ $ 356,651,812 $ 221,023,588
=================== ===================
</TABLE>
64 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class 1
----------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
---------- ---------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.54 $ 9.25 $ 10.00
---------- ---------- -----------
Income (loss) from investment operations:
Net investment income (0.07) (0.03) (0.02)
Net realized and unrealized gain (loss) on investments
and foreign currency 1.70 0.40 (0.73)
---------- ---------- -----------
Total income (loss) from investment operations 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 $ 11.07 $ 9.54 $ 9.25
========== ========== ===========
Total Return 17.09% 3.96% (7.50)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $113 $112 $93
Net expenses to average daily net assets# 2.15% 2.15% 2.15%*
Net investment income to average daily net assets (0.51)% (0.40)% (1.10)%*
Portfolio turnover rate 58% 121% 18%
Average broker commission rate (a) $ .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: 2.22% 2.24% 2.24%*
<CAPTION>
Class 2
----------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
---------- ---------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.56 $ 9.26 $ 10.00
---------- ---------- ----------
Income (loss) from investment operations:
Net investment income 0.00 0.02 (0.01)
Net realized and unrealized gain (loss) on investments
and foreign currency 1.70 0.40 (0.73)
---------- ---------- ----------
Total income (loss) from investment operations 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 $ 11.09 $ 9.56 $ 9.26
========== ========== ==========
Total Return 17.85% 4.52% (7.40)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $114 $97 $93
Net expenses to average daily net assets# 1.60% 1.60% 1.60%*
Net investment income to average daily net assets 0.02% 0.19% (0.55)%*
Portfolio turnover rate 58% 121% 18%
Average broker commission rate (a) $ .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: 1.67% 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 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 3
----------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
---------- ---------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.57 $ 9.27 $ 10.00
---------- ---------- -----------
Income (loss) from investment operations:
Net investment income 0.03 0.04 (0.00)
Net realized and unrealized gain (loss) on investments
and foreign currency 1.70 0.40 (0.73)
---------- ---------- -----------
Total income (loss) from investment operations 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 $ 11.10 $ 9.57 $ 9.27
========== ========== ===========
Total Return 18.11% 4.78% (7.30)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $114 $97 $93
Net expenses to average daily net assets# 1.35% 1.35% 1.35%*
Net investment income to average daily net assets 0.27% 0.45% (0.30)%*
Portfolio turnover rate 58% 121% 18%
Average broker commission rate (a) $ .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: 1.42% 1.44% 1.44%*
<CAPTION>
Class 4
-------
Year ended Year ended Period Ended
12/31/96 12/31/95 12/31/94**
---------- ---------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.58 $ 9.28 $ 10.00
---------- ---------- -----------
Income (loss) from investment operations:
Net investment income 0.06 0.07 0.00
Net realized and unrealized gain (loss) on investments
and foreign currency 1.71 0.41 (0.72)
---------- ---------- -----------
Total income (loss) from investment operations 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 $ 11.11 $ 9.58 $ 9.28
========== ========== ===========
Total Return@ 18.51% 5.13% (7.20)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $356,311 $220,718 $150,199
Net expenses to average daily net assets# 1.0020% 1.0020% 1.0020%*
Net investment income to average daily net assets 0.59% 0.76% 0.04%*
Portfolio turnover rate 58% 121% 18%
Average broker commission rate (a) $ .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: 1.0718% 1.0920% 1.0877%*
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
@ Employee retirement benefit plans that invest plan assets in the Separate
Investment Accounts (SIAs) may be subject to certain charges as set forth in
their respective Plan Documents. Total return figures would be lower for the
periods presented if they reflected these charges.
(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.
66 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. The Trust
MassMutual Institutional Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end, diversified
management investment company. The Trust is organized under the laws of the
Commonwealth of Massachusetts as a Massachusetts business trust pursuant to an
Agreement and Declaration of Trust dated May 28, 1993, as amended. The Trust
consists of seven separate series of shares (each individually referred to as a
"Fund" or collectively as the "Funds"), each having four classes of shares:
Class 1, Class 2, Class 3 and Class 4. Class 1, Class 2 and Class 3 shares of
each Fund are offered primarily to employer-sponsored defined contribution plans
that satisfy the qualification requirements of Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). Class 4 shares of each Fund are
available only to separate investment accounts ("SIAs") of Massachusetts Mutual
Life Insurance Company ("MassMutual") in which corporate qualified plans
including defined contribution plans and defined benefit plans are permitted to
invest pursuant to the issuance of group annuity contracts. The Funds are
MassMutual Prime Fund ("Prime Fund"), MassMutual Short-Term Bond Fund
("Short-Term Bond Fund"), MassMutual Core Bond Fund ("Core Bond Fund"),
MassMutual Balanced Fund ("Balanced Fund"), MassMutual Value Equity Fund ("Value
Equity Fund"), MassMutual Small Cap Value Equity Fund ("Small Cap Value Equity
Fund"), and MassMutual International Equity Fund ("International Equity Fund"),
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.
67
<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.
68
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
The notional or contractual amounts of these instruments represent the
investments the Funds have in particular classes of financial instruments and do
not necessarily represent the amounts potentially subject to risk. The
measurement of the risk associated with these instruments is meaningful only
when all related and offsetting transactions are considered. A summary of
obligations for the International Equity Fund under these financial instruments
at December 31, 1996 is as follows:
<TABLE>
<CAPTION>
In
Contracts Exchange Unrealized
Settlement to Units of for U.S. Contracts at Appreciation
Date Deliver/Receive Currency Dollars Value (Depreciation)
- ---------- --------------- -------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
BUYS
01/13/97 Austrian Schilling 2,124,732 $ 196,807 $ 196,017 $ (790)
SELLS
01/02/97 British Pound 114,041 190,471 195,147 (4,676)
01/03/97 British Pound 334,350 562,433 572,139 (9,706)
01/07/97 British Pound 110,538 188,114 189,153 (1,039)
01/27/97 Japanese Yen 4,007,200,000 35,305,727 34,677,258 628,469
---------------
613,048
---------------
$ 612,258
===============
</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
December 31, 1996, 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 February 1997 $ 9,250,000 $ 9,215,674 $ 9,203,935 ($11,739)
Balanced Fund
U.S. Treasury Note
5.875% 11/15/1999 February 1997 $1,900,000 $1,892,949 $1,890,538 ($ 2,411)
</TABLE>
69
<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>
<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>
70
<PAGE>
Notes to Financial Statements (Continued)
Distribution and Service Fees
OppenheimerFunds Distributor, Inc. ("Oppenheimer") acts as distributor to each
Fund. MML Investor Services, Inc. ("MMLISI") serves as sub-distributor to each
Fund. MassMutual has a controlling interest in OppenheimerFunds and MMLISI is a
wholly owned subsidiary of MassMutual. Oppenheimer is paid a distribution fee
with respect to Class 1 and Class 2 at the annual rate of .40% and .15%,
respectively, of the value of average daily net assets attributable to those
classes of shares of which a portion is subsequently allocated to MMLISI. The
Funds do not pay any fees directly to MMLISI. MassMutual is also paid a fee for
shareholder services with respect to Class 1 shares of the Funds at the annual
rate of .25% of the value of the average daily net assets of the respective
class of each Fund. These fees are authorized pursuant to separate service and
distribution plans for each of the classes of shares adopted by the Funds
pursuant to Rule 12b-1 under the Investment Company Act and are used by
Oppenheimer to cover expenses primarily intended to result in the sale of those
shares of the Funds.
Expense Limitations
MassMutual has voluntarily agreed to waive a portion of its management fee to
the extent that the aggregate annual operating expenses incurred during the year
exceed the following percentages of the average daily net assets:
<TABLE>
<CAPTION>
Class 1 Class 2 Class 3 Class 4
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Prime Fund 1.65% 1.10% .75% .5160%
Short-Term Bond Fund 1.65% 1.10% .75% .5190%
Core Bond Fund 1.65% 1.10% .75% .5130%
Balanced Fund 1.65% 1.10% .75% .5120%
Value Equity Fund 1.65% 1.10% .75% .5067%
Small Cap Value Equity Fund 1.75% 1.20% .85% .6110%
International Equity Fund 2.15% 1.60% 1.35% 1.002%
</TABLE>
MassMutual's management fee for the year ended December 31, 1996 was
$20,477,568, of which $1,925,096 was reimbursed to the Funds.
Other
Certain officers and directors of the Funds are also officers of
MassMutual. The compensation of unaffiliated directors of the Funds is borne by
the Funds.
At December 31, 1996, 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 year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Long-term U.S.
Government Other Long-term
Securities Securities
--------------------- ----------------------
Purchases
<S> <C> <C>
Short-Term Bond Fund $ 102,126,595 $ 32,662,257
Core Bond Fund 168,040,130 117,409,164
Balanced Fund 48,825,564 81,833,743
Value Equity Fund -- 366,428,008
Small Cap Value Equity Fund -- 126,866,361
International Equity Fund -- 255,790,219
Sales
Short-Term Bond Fund $ 39,099,687 $ 14,835,789
Core Bond Fund 111,228,535 37,231,689
Balanced Fund 39,076,581 45,001,025
Value Equity Fund -- 281,828,695
Small Cap Value Equity Fund -- 107,156,414
International Equity Fund -- 161,400,001
</TABLE>
71
<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
Year ended Year ended
December 31, 1996 December 31, 1995
Shares Amount Shares Amount
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Prime Fund
Sold -- -- -- --
Issued as reinvestment
of dividends 28 4,288 28 4,178
Redeemed -- -- -- --
-------- -------- -------- --------
Net increase 28 $ 4,288 28 $ 4,178
======== ======== ======== ========
Short-Term Bond Fund
Sold -- -- -- --
Issued as reinvestment
of dividends 519 5,285 740 7,530
Redeemed -- -- -- --
-------- -------- -------- --------
Net increase 519 $ 5,285 740 $ 7,530
======== ======== ======== ========
Core Bond Fund
Sold 429 4,520 4,457 49,156
Issued as reinvestment
of dividends 489 5,156 1,186 12,759
Redeemed (5,250) (55,534) -- --
-------- -------- -------- --------
Net increase (decrease) (4,332) $(45,858) 5,643 $ 61,915
======== ======== ======== ========
Balanced Fund
Sold 931 10,969 4,480 49,577
Issued as reinvestment
of dividends 416 5,173 530 6,084
Redeemed (5,552) (65,509) (23) (260)
-------- -------- -------- --------
Net increase (decrease) (4,205) $(49,367) 4,987 $ 55,401
======== ======== ======== ========
Value Equity Fund
Sold -- -- -- --
Issued as reinvestment
of dividends 403 5,884 219 2,751
Redeemed -- -- -- --
-------- -------- -------- --------
Net increase 403 $ 5,884 219 $ 2,751
======== ======== ======== ========
Small Cap Value Equity Fund
Sold 4,373 54,090 4,740 49,719
Issued as reinvestment
of dividends 349 4,660 119 1,356
Redeemed (9,150) (108,036) -- --
-------- -------- -------- --------
Net increase (decrease) (4,428) $(49,286) 4,859 $ 51,075
======== ======== ======== ========
International Equity Fund
Sold 5,377 55,098 1,610 15,218
Issued as reinvestment
of dividends 100 1,065 93 885
Redeemed (7,009) (70,119) -- --
-------- -------- -------- --------
Net increase (decrease) (1,532) $(13,956) 1,703 $ 16,103
======== ======== ======== ========
<CAPTION>
Class 2
Year ended Year ended
December 31, 1996 December 31, 1995
Shares Amount Shares Amount
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Prime Fund
Sold -- -- -- --
Issued as reinvestment
of dividends 33 4,922 32 4,746
Redeemed -- -- -- --
-------- -------- -------- -------
Net increase 33 $ 4,922 32 $ 4,746
======== ======== ======== =======
Short-Term Bond Fund
Sold -- -- -- --
Issued as reinvestment
of dividends 584 5,951 796 8,116
Redeemed -- -- -- --
-------- -------- -------- -------
Net increase 584 $ 5,951 796 $ 8,116
======== ======== ======== =======
Core Bond Fund
Sold -- -- -- --
Issued as reinvestment
of dividends 562 5,941 861 9,288
Redeemed -- -- -- --
-------- -------- -------- -------
Net increase (decrease) 562 $ 5,941 861 $ 9,288
======== ======== ======== =======
Balanced Fund
Sold -- -- -- --
Issued as reinvestment
of dividends 484 6,038 401 4,610
Redeemed -- -- -- --
-------- -------- -------- -------
Net increase (decrease) 484 $ 6,038 401 $ 4,610
======== ======== ======== =======
Value Equity Fund
Sold -- -- -- --
Issued as reinvestment
of dividends 456 6,682 267 3,372
Redeemed -- -- -- --
-------- -------- -------- -------
Net increase 456 $ 6,682 267 $ 3,372
======== ======== ======== =======
Small Cap Value Equity Fund
Sold -- -- -- --
Issued as reinvestment
of dividends 420 5,622 114 1,300
Redeemed -- -- -- --
-------- -------- -------- -------
Net increase (decrease) 420 $ 5,622 114 $ 1,300
======== ======== ======== =======
International Equity Fund
Sold -- -- -- --
Issued as reinvestment
of dividends 161 1,742 124 1,191
Redeemed -- -- -- --
-------- -------- -------- -------
Net increase (decrease) 161 $ 1,742 124 $ 1,191
======== ======== ======== =======
</TABLE>
72
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class 3
Year ended Year ended
December 31, 1996 December 31, 1995
Shares Amount Shares Amount
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Prime Fund
Sold -- -- -- --
Issued as reinvestment
of dividends 35 5,335 34 5,095
Redeemed -- -- -- --
-------- -------- -------- --------
Net increase 35 $ 5,335 34 $ 5,095
======== ======== ======== ========
Short-Term Bond Fund
Sold -- -- -- --
Issued as reinvestment
of dividends 625 6,381 830 8,467
Redeemed -- -- -- --
-------- -------- -------- --------
Net increase 625 $ 6,381 830 $ 8,467
======== ======== ======== ========
Core Bond Fund
Sold -- -- -- --
Issued as reinvestment
of dividends 604 6,389 894 9,658
Redeemed -- -- -- --
-------- -------- -------- --------
Net increase 604 $ 6,389 894 $ 9,658
======== ======== ======== ========
Balanced Fund
Sold -- -- -- --
Issued as reinvestment
of dividends 521 6,510 433 4,977
Redeemed -- -- -- --
-------- -------- -------- --------
Net increase 521 $ 6,510 433 $ 4,977
======== ======== ======== ========
Value Equity Fund
Sold -- -- -- --
Issued as reinvestment
of dividends 492 7,213 299 3,763
Redeemed -- -- -- --
-------- -------- -------- --------
Net increase 492 $ 7,213 299 $ 3,763
======== ======== ======== ========
Small Cap Value Equity Fund
Sold -- -- -- --
Issued as reinvestment
of dividends 455 6,096 146 1,672
Redeemed -- -- -- --
-------- -------- -------- --------
Net increase 455 $ 6,096 146 $ 1,672
======== ======== ======== ========
International Equity Fund
Sold -- -- -- --
Issued as reinvestment
of dividends 186 2,018 149 1,430
Redeemed -- -- -- --
-------- -------- -------- --------
Net increase 186 $ 2,018 149 $ 1,430
======== ======== ======== ========
<CAPTION>
Class 4
Year ended Year ended
December 31, 1996 December 31, 1995
Shares Amount Shares Amount
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Prime Fund
Sold 2,391,584 370,653,176 1,826,450 281,187,060
Issued as reinvestment
of dividends 86,522 13,067,477 84,068 12,693,332
Redeemed (2,445,697) (378,881,926) (1,363,706) (210,583,290)
---------- ------------- ---------- -------------
Net increase 32,409 $ 4,838,727 546,812 $ 83,297,102
========== ============= ========== =============
Short-Term Bond Fund
Sold 6,074,656 62,871,971 5,136,925 53,696,509
Issued as reinvestment
of dividends 808,935 8,206,104 947,825 9,611,215
Redeemed (4,631,745) (47,999,711) (4,819,336) (50,374,106)
---------- ------------- ---------- -------------
Net increase 2,251,846 $ 23,078,364 1,265,414 $ 12,933,618
========== ============= ========== =============
Core Bond Fund
Sold 15,244,478 161,638,362 8,241,236 89,191,723
Issued as reinvestment
of dividends 1,838,613 19,317,124 1,952,750 20,953,505
Redeemed (6,519,179) (69,250,775) (6,340,632) (67,005,587)
---------- ------------- ---------- -------------
Net increase 10,563,912 $ 111,704,711 3,853,354 $ 43,139,641
========== ============= ========== =============
Balanced Fund
Sold 16,529,257 200,170,935 17,612,664 191,493,187
Issued as reinvestment
of dividends 2,193,746 27,325,515 1,722,693 19,759,099
Redeemed (12,780,860) (154,960,358) (14,889,389) (160,925,764)
---------- ------------- ---------- -------------
Net increase 5,942,143 $ 72,536,092 4,445,968 $ 50,326,522
========== ============= ========== =============
Value Equity Fund
Sold 42,761,147 585,609,490 39,224,457 451,052,424
Issued as reinvestment
of dividends 8,235,214 120,574,407 5,223,526 65,653,544
Redeemed (47,300,940) (651,246,978) (34,020,780) (390,453,417)
---------- ------------- ---------- -------------
Net increase 3,695,421 $ 54,936,919 10,427,203 $ 126,252,551
========== ============= ========== =============
Small Cap Value Equity Fund
Sold 10,428,037 129,033,258 9,765,741 102,623,894
Issued as reinvestment
of dividends 1,500,824 20,087,217 539,817 $6,159,231
Redeemed (11,168,365) (140,771,695) (9,110,662) (97,354,772)
---------- ------------- ---------- -------------
Net increase 760,496 $ 8,348,780 1,194,896 $ 11,428,353
========== ============= ========== =============
International Equity Fund
Sold 14,964,804 154,912,942 11,931,440 112,672,627
Issued as reinvestment
of dividends 672,906 7,341,306 412,266 3,955,148
Redeemed (6,611,341) (68,183,726) (5,487,562) (51,810,300)
---------- ------------- ---------- -------------
Net increase 9,026,369 $ 94,070,522 6,856,144 $ 64,817,475
========== ============= ========== =============
</TABLE>
73
<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 December 31, 1996, 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 $ 260,002,847 $ 2,614 $ (10,702) $ (8,088)
Short-Term Bond Fund 142,542,031 1,257,932 (240,203) 1,017,729
Core Bond Fund 348,014,562 6,739,419 (2,019,357) 4,720,062
Balanced Fund 456,772,419 86,711,748 (616,389) 86,095,359
Value Equity Fund 1,768,842,158 713,420,243 (1,562,317) 711,857,926
Small Cap Value Equity Fund 345,263,421 119,498,338 (8,280,372) 111,217,966
International Equity Fund 309,948,749 59,397,218 (12,108,626) 47,288,592
</TABLE>
At December 31, 1996, the following Funds have 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
On January 11, 1996, the Trust, on behalf of each Fund, entered into 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 year ended
December 31, 1996. Average daily borrowings for the year ended December 31, 1996
were $3,517,944 and the average interest rate was 5.77%. The maximum borrowing
outstanding during the year ended December 31, 1996 was $9,870,500.
74
<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 voluntary
partial waiver of management fee by MassMutual,
which terminated May 1, 1997. Without this
partial waiver of fees by MassMutual, 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 voluntary
partial waiver of management fee by MassMutual,
which terminated May 1, 1997. Without this
partial waiver of fees by MassMutual, 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 voluntary
partial waiver of management fee by
MassMutual, which terminated May 1, 1997. Without
this partial waiver of fees by MassMutual,
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 voluntary
partial waiver of management fee by MassMutual,
which terminated May 1, 1997. Without this partial
waiver of fees by MassMutual, 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 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 voluntary partial
waiver of management fee by MassMutual, which terminated
May 1, 1997. Without this partial waiver of
fees by MassMutual, 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 voluntary partial
waiver of management fee by MassMutual, which terminated
May 1, 1997. Without this partial waiver of
fees by MassMutual, 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 voluntary partial waiver
of management fee by MassMutual, which terminated May 1, 1997.
Without this partial waiver of fees by MassMutual, 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 voluntary partial waiver
of management fee by MassMutual, which terminated May 1, 1997.
Without this partial waiver of fees by MassMutual, 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 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 voluntary partial waiver
of management fee by MassMutual, which terminated May 1, 1997.
Without this partial waiver of fees by MassMutual, 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 gains -- (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 voluntary partial waiver
of management fee by MassMutual, which terminated May 1, 1997.
Without this partial waiver of fees by MassMutual, 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 voluntary
partial waiver of management fee by MassMutual,
which terminated May 1, 1997. Without this
partial waiver of fees by MassMutual, 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 voluntary
partial waiver of management fee by MassMutual,
which terminated May 1, 1997. Without this
partial waiver of fees by MassMutual, 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 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 voluntary partial waiver
of management fee by MassMutual, which terminated May 1, 1997.
Without this partial waiver of fees by MassMutual, 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 voluntary partial waiver
of management fee by MassMutual, which terminated May 1, 1997.
Without this partial waiver of fees by MassMutual, 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 voluntary
partial waiver of management fee by
MassMutual, which terminated May 1, 1997.
Without this partial waiver of fees
by MassMutual, 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 voluntary
partial waiver of management fee by
MassMutual, which terminated May 1, 1997.
Without this partial waiver of fees
by MassMutual, 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 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 voluntary
partial waiver of management fee by MassMutual,
which terminated May 1, 1997. Without this
partial waiver of fees by MassMutual, 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 voluntary
partial waiver of management fee by MassMutual,
which terminated May 1, 1997. Without this
partial waiver of fees by MassMutual, 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 voluntary
partial waiver of management fee by MassMutual,
which terminated May 1, 1997. Without this
partial waiver of fees by MassMutual, 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 voluntary
partial waiver of management fee by MassMutual,
which terminated May 1, 1997. Without this
partial waiver of fees by MassMutual, 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 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 voluntary partial
waiver of management fee by MassMutual, which terminated
May 1, 1997. Without this partial waiver of fees by
MassMutual, 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 voluntary partial
waiver of management fee by MassMutual, which terminated
May 1, 1997. Without this partial waiver of fees by
MassMutual, 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 voluntary
partial waiver of management fee by MassMutual,
which terminated May 1, 1997. Without this
partial waiver of fees by MassMutual,
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 voluntary
partial waiver of management fee by MassMutual,
which terminated as of May 1, 1997. Without this
partial waiver of management fees by MassMutual,
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 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
Total Investments..................................... 523,233,075
---------------
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 voluntary partial
waiver of management fee by MassMutual, which terminated
May 1, 1997. Without this partial waiver of fees by
MassMutual, 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 voluntary partial
waiver of management fee by MassMutual, which terminated
May 1, 1997. Without this partial waiver of fees by
MassMutual, 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 voluntary partial
waiver of management fee by MassMutual, which terminated
May 1, 1997. Without this partial waiver of fees by
MassMutual, 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 voluntary partial
waiver of management fee by MassMutual, which terminated
May 1, 1997. Without this partial waiver of fees by
MassMutual, 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. ("MMLISI") serves as sub-distributor to each
Fund. MassMutual has a controlling interest in OppenheimerFunds, and MMLISI is a
wholly owned subsidiary of MassMutual. Oppenheimer is paid a distribution fee
with respect to Class 1 and Class 2 at the annual rate of .40% and .15%,
respectively, of the value of average daily net assets attributable to those
classes of shares of which a portion is subsequently allocated to MMLISI. The
Funds do not pay any fees directly to MMLISI. MassMutual is also paid a fee for
shareholder services with respect to Class 1 shares of the Funds at the annual
rate of .25% of the value of the average daily net assets of the respective
class of each Fund. These fees are authorized pursuant to separate service and
distribution plans for each of the classes of shares adopted by the Funds
pursuant to Rule 12b-1 under the Investment Company Act and are used by
Oppenheimer to cover expenses primarily intended to result in the sale of those
shares of the Funds.
Expense Limitations
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
