<PAGE>
Table of Contents
Letter to Shareholders ................................................... 1
MassMutual Prime Fund
Portfolio Manager Report ............................................... 3
Portfolio of Investments ............................................... 5
Financial Statements ................................................... 7
MassMutual Short-Term Bond Fund
Portfolio Manager Report ............................................... 10
Portfolio of Investments ............................................... 13
Financial Statements ................................................... 16
MassMutual Core Bond Fund
Portfolio Manager Report ............................................... 20
Portfolio of Investments ............................................... 23
Financial Statements ................................................... 27
MassMutual Balanced Fund
Portfolio Manager Report ............................................... 31
Portfolio of Investments ............................................... 33
Financial Statements ................................................... 38
MassMutual Value Equity Fund
Portfolio Manager Report ............................................... 42
Portfolio of Investments ............................................... 45
Financial Statements ................................................... 47
MassMutual Small Cap Value Equity Fund
Portfolio Manager Report ............................................... 51
Portfolio of Investments ............................................... 54
Financial Statements ................................................... 56
MassMutual International Equity Fund
Portfolio Manager Report ............................................... 60
Portfolio of Investments ............................................... 63
Financial Statements ................................................... 65
Notes to Financial Statements ............................................ 69
<PAGE>
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MassMutual Institutional Funds - Letter to Shareholders
- --------------------------------------------------------------------------------
To Our
Shareholders
[PHOTO OF STUART H. REESE APPEARS HERE]
Stuart H. Reese
"The same forces that drove the economy's growth in the first half of the year
will shape this year's outcome."
July 31, 1998
The U.S. Economy Continues to Expand
We are now eight years into the current U.S. economic expansion, and judging
from continued strong performance in the first half of 1998, this should be
another year of impressive economic growth. A combination of forces shaped the
first half: strong economic fundamentals, favorable price performance, a
dramatically improved landscape for the nation's budget (now anticipating a
surplus of $80 billion or more for fiscal year 1998), the Federal Reserve's
steady hold on monetary policy, a competitive wage and price environment, and
the economic and financial crisis in Southeast Asia.
Increased spending for consumption, housing and producers' durable equipment
drove expansion in the first six months of the year. Households spent more,
encouraged by low unemployment and growth in personal income. Business
inventories also rose sharply early in the year, contributing to the economy's
growth in the first quarter. Inventory growth has since slowed significantly and
detracted from economic gains in the second quarter. The only other drag on
performance was flat net exports, almost certainly a backlash of the Asian
crisis.
Amidst Troubles in Asia
The economic and financial problems that have plagued Southeast Asia for the
past year have continued to make for volatile and uncertain times in the U.S.
and global financial markets. The key players in the Asian region are Japan and
China, both facing economic hardship and currency devaluation. Though Japan has
been working to restore its failed banking system, the nation faces the bigger
problem of stimulating its economy - now with a budget deficit near 6 percent of
Gross Domestic Product. Clearly, Japan's financial woes are far from being
solved and, as such, the world's economies and markets will sit with a watchful
eye over the coming months.
Large Capitalization U.S. Stocks Soar
During the first six months of 1998, the U.S. stock market continued to make
great strides, with large capitalization stocks leading the pack. As of June 30,
1998, the S&P 500 Index was up 17.71 percent, versus the Russell 2000 Index of
small stocks which returned a modest 4.93 percent.
The "flight to quality" that the market has been experiencing since last year
has continued to benefit large cap growth stocks, while hindering the
performance of smaller, value-oriented stocks. As investors became more
concerned about deteriorating conditions in Asia and the possible impact on
commodity prices, competition and economic activity, they favored large-cap
stocks over small-cap stocks for their durability and liquidity.
Bond Returns Varied
The Treasury yield curve continued to flatten over the past six months, and as a
result, corporate bonds, mortgage-backed and asset-backed securities delivered
varied, and less impressive, returns than U.S. Treasuries.
Even as corporate spreads widened, low interest rates and investor cash flow was
positive for the corporate bond market. New issuance of investment-grade
corporate bonds was extremely high- $197 billion in the first six months of
1998, compared to $272 billion issued in total for 1997.
Managing the Risks Abroad
The same forces that drove the economy's growth in the first half of the year
will shape this year's outcome. However, the instability in Asia, which is far
from being resolved, is becoming more influential to the behavior of the U.S.
dollar, the economy and the financial markets. As the events in Asia
unfold--good or bad--the domestic markets may experience increased levels of
volatility.
(Continued)
1
<PAGE>
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MassMutual Institutional Funds - Letter to Shareholders (Continued)
- --------------------------------------------------------------------------------
How MassMutual and the Sub-Advisors manage these risk factors is to focus, as we
always have, on building portfolios with carefully selected, well-researched
stocks and bonds that represent long-term opportunities. This approach is
designed to help protect capital in bear markets and reap the rewards of bull
markets.
/s/ Stuart H. Reese
Stuart H. Reese
President
MassMutual Institutional Funds
2
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Prime Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment The objective and policies of the Fund are to:
objective and policies . maximize current income to the extent
for the MassMutual consistent with liquidity and the preservation of
Prime Fund? capital
. invest in a diversified portfolio of money
market instruments
. invest in high quality debt instruments with
remaining maturity not to exceed 397 days
Note: This is not a money market fund.
How did the Fund The Fund's Class S shares delivered a return of
perform during the first 2.64 percent for the six-month period, outpacing
half of 1998? Lipper Analytical's Money Market fund average,
which returned 2.42 percent. Over the past six
months, the Fund's Class S shares' total rate of
return for the trailing 12-month period surpassed
the Lipper average by at least 43, to as much as
49 basis points. Our performance is owed to the
Fund's investments in Tier 2 securities (rated A
or BBB for credit quality), which typically pay a
higher level of income than higher rated, Tier 1
securities (rated AA or AAA). This investment
parameter focuses on our analytical strengths
related to credit assessment and selection.
How would you Low interest rates continued to help fuel the U.S.
characterize your expansion, now in its eighth year. The benefit of
market environment low interest rates has been most evident in
during that six-month housing, where low mortgage rates have made buying
period? a home more affordable. Housing had a positive
impact on the economy through increased
construction and consumer buying of everything
from new furniture and appliances to home fix-up
goods. The Federal Fund's rate (the interest rate
charged by banks to other banks for overnight
loans) was held steady at 5.5 percent.
During the first quarter, the economy expanded at
a rate of 5.4 percent, the fastest we have seen in
two years. Inflation remained almost
imperceptible, as increased productivity growth
has helped offset the tight labor markets.
Unemployment fell as low as 4.3 percent-comparable
to the unemployment rate in Japan. This was truly
a record-breaking event, since the U.S.
unemployment rate has historically run four or
more percentage points higher than in Japan.
Another record-breaking event is that the federal
government is approaching its first surplus in
decades. The 30-Year U.S. Treasury bond fell
during the first half of this year to the lowest
yield, 5.57 percent, since the government began
selling the 30-year bond slightly over 20 years
ago.
The Consumer Price Index rose at a 1.5 annual
percentage rate during the first half of 1998,
down modestly from 1997. Meanwhile, the Producer
Price Index has fallen this year, pushed lower by
the strength of the U.S. dollar and lower prices
for imported goods due to the problems in Japan.
What was the Fund's During the first half of 1998, the Fund's holdings
portfolio positioning in Tier 2 commercial paper ranged from a low of 89
during that time, and percent of the portfolio, to a high of 94 percent.
how did it benefit the Conversely, our holdings in Tier 1 commercial
Fund? paper ranged from a low of 6 percent to a high of
11 percent. The portfolio's growth in assets over
1997 year-end increased 9.8 percent for a total of
$250.4 million in assets as of June 30, 1998.
The average life for the portfolio, which we try
to keep in line with the IBC/Donohue Universe, an
index that tracks the performance, assets, average
maturities and portfolio composition of taxable
and tax-free money market funds, ranged between 52
and 57 days, was just short of the IBC average. At
the end of June, the Fund's average maturity was
54 days, versus 57 for the IBC benchmark. We
lengthened our average life in March and April
when commercial paper rates increased slightly.
For the most part, short rates were fairly static
during the first half of 1998, with the average
A2/P2 commercial paper rate for the six months
ended in June ranging from 5.60 to 5.72 percent.
Increasing our average life in the spring helped
us take advantage of the higher yields in the
market, and put us more in line with the
IBC/Donohue universe.
3
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Prime Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
What is your outlook The U.S. domestic economy continues to chug along
for the second half of without any real problems. However, the Asian
1998? problems that started in 1997 continue to be a
controlling factor of our market's direction. The
Japanese Yen and the Japanese economy continue to
be pummeled. While we are reporting our first
surplus in 29 years, Japan is reporting its worst
budget deficit since World War II. Obviously, one
big concern in Japan is the bank loan problem,
which is estimated to be about five times worse
than the U.S. banking crisis of the 1980s which
was also due to loan deterioration. We also have
the other Asian economies--Thailand, Korea and
China,--as well as Russia, to watch in the second
half.
The second half of 1998 will likely be a
continuation of the `flight to quality' story of
the first half--that is, a flight out of the Asian
markets and a flight into U.S. Treasuries and the
U.S. dollar. As always, we will use our credit
expertise to select high quality Tier 2 securities
that allow us to capitalize on the competitive
yields in this market.
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Prime Fund
Class S and 91-day Treasury Bills
------------------------------------------------------------------------------
MassMutual Prime Fund
Total Return Year-to-date One Year Average Annual
1/1/98 - 6/30/98 7/1/97 - 6/30/98 10/3/94 - 6/30/98
Class S 2.64% 5.42% 5.44%
------------------------------------------------------------------------------
91-Day
Treasury Bills 2.55% 5.23% 5.29%
------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
[LINE GRAPH APPEARS HERE]
Date Class S T-Bills
- ---- ------- -------
10/3/94 $10,000 $10,000
12/94 10,126 10,112
6/95 10,419 10,384
12/95 10,711 10,671
6/96 10,982 10,932
12/96 11,272 11,209
6/97 11,566 11,489
12/97 11,880 11,785
6/98 12,194 12,166
Hypothetical Investments in MassMutual Prime Fund
Class A and Class Y and 91-day Treasury Bills
------------------------------------------------------------------------------
MassMutual Prime Fund
Total Return Year-to-date
1/1/98 - 6/30/98
Class A 2.30%
Class Y 2.50%
------------------------------------------------------------------------------
91-Day 2.55%
Treasury Bills
------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date Class A Class S T-Bills
- ---- _______ ------- -------
12/97 $10,000 $10,000 $10,000
1/98 10,040 10,040 10,043
2/98 10,070 10,080 10,083
3/98 10,110 10,130 10,124
4/98 10,150 10,170 10,168
5/98 10,190 10,210 10,211
6/98 10,230 10,250 10,255
Past performance is not predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund, while 91-day Treasury Bills are unmanaged and do not incur
expenses. Treasury Bills are backed by the U.S. Government and offer a fixed
rate of return, while the Fund's shares are not guaranteed.
- --------------------------------------------------------------------------------
4
<PAGE>
- -------------------------------------------------------------------------------
MassMutual Prime Fund - Portfolio of Investments
- -------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1998
Principal
Amount Market Value
------ ------------
SHORT-TERM INVESTMENTS -- 101.0%
Commercial Paper -- 100.5%
AirTouch
Communications, Inc.
5.630% 7/06/1998 $ 1,025,000 $ 1,024,198
AirTouch
Communications, Inc.
5.650% 7/15/1998 5,700,000 5,687,476
Carter Holt Harvey
Limited
5.670% 8/11/1998 1,770,000 1,758,570
Carter Holt Harvey
Limited
5.680% 8/03/1998 3,215,000 3,198,261
Carter Holt Harvey
Limited
5.690% 8/14/1998 4,800,000 4,766,619
Central and South
West Corporation
5.700% 7/14/1998 6,900,000 6,885,798
Comdisco, Inc.
5.650% 10/08/1998 3,690,000 3,632,159
Comdisco, Inc.
5.700% 7/29/1998 470,000 467,917
Comdisco, Inc.
5.730% 7/20/1998 5,700,000 5,682,762
ConAgra, Inc.
5.630% 9/28/1998 6,015,000 5,930,239
Cox Enterprises, Inc.
5.640% 7/24/1998 5,480,000 5,460,253
Cox Enterprises, Inc.
5.650% 7/22/1998 2,795,000 2,785,788
Cox Enterprises, Inc.
5.750% 9/22/1998 2,100,000 2,072,402
Crown Cork & Seal
Company, Inc.
5.650% 7/16/1998 4,000,000 3,990,584
Crown Cork & Seal
Company, Inc.
5.710% 7/08/1998 3,400,000 3,396,225
Crown Cork & Seal
Company, Inc.
5.710% 8/28/1998 2,340,000 2,318,473
CSX Corporation
5.560% 12/23/1998 1,940,000 1,886,246
CSX Corporation
5.610% 10/07/1998 1,820,000 1,791,760
CSX Corporation
5.640% 10/07/1998 6,300,000 6,202,245
Dana Credit
Corporation
5.700% 7/10/1998 215,000 214,694
Dana Credit
Corporation
5.710% 7/27/1998 7,600,000 7,569,864
Dana Credit
Corporation
5.710% 8/06/1998 1,050,000 1,044,171
Dominion Resources,
Inc.
5.650% 8/27/1998 2,320,000 2,299,246
Dominion Resources
Inc.
5.670% 7/23/1998 5,700,000 5,680,250
Enron Corp.
5.600% 9/25/1998 3,800,000 3,748,257
Enron Corp.
5.600% 9/30/1998 4,875,000 4,804,759
Federal Signal Corp.
5.720% 8/06/1998 6,000,000 5,965,680
Finova Capital
Corporation
5.530% 9/11/1998 6,550,000 6,475,330
Finova Capital
Corporation
5.540% 10/23/1998 3,200,000 3,142,240
General Motors
Acceptance
Corporation
5.350% 8/17/1998 6,930,000 6,881,597
Humana, Inc.
5.680% 7/13/1998 3,555,000 3,548,269
Humana, Inc.
5.710% 7/22/1998 3,865,000 3,852,126
Humana, Inc.
5.720% 7/13/1998 2,355,000 2,350,510
IMC Global Inc.
5.700% 7/07/1998 8,915,000 8,906,531
Lockheed Martin
Corporation
5.620% 7/10/1998 2,375,000 2,371,663
Lockheed Martin
Corporation
5.620% 7/21/1998 5,000,000 4,984,389
Lockheed Martin
Corporation
5.640% 7/29/1998 1,270,000 1,264,429
Mallinckrodt Group
Inc.
5.660% 8/10/1998 1,865,000 1,853,271
Mallinckrodt Group
Inc.
5.670% 9/08/1998 4,175,000 4,129,388
Mallinckrodt Group
Inc.
5.690% 8/18/1998 3,965,000 3,934,919
Maytag Corp.
5.700% 8/10/1998 6,255,000 6,215,385
Mead Corporation
5.620% 8/24/1998 3,055,000 3,029,246
ORIX Credit Alliance.
Inc.
5.650% 7/30/1998 6,070,000 6,042,372
Praxair, Inc.
5.620% 8/07/1998 4,735,000 4,707,650
Praxair, Inc.
5.630% 8/28/1998 1,365,000 1,352,619
Public Service
Electric and Gas
Company
5.670% 8/27/1998 2,800,000 2,774,863
Rite Aid Corporation
5.650% 7/08/1998 1,400,000 1,398,462
Rite Aid Corporation
5.660% 8/28/1998 6,210,000 6,153,372
Ryder System, Inc.
5.740% 8/11/1998 3,415,000 3,392,675
Sonat Inc.
5.620% 10/29/1998 6,655,000 6,528,555
(Continued)
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
- -------------------------------------------------------------------------------
MassMutual Prime Fund - Portfolio of Investments (Continued)
- -------------------------------------------------------------------------------
Principal
Amount Market Value
------ ------------
Sonat Inc.
5.630% 7/17/1998 $ 3,775,000 $ 3,765,554
Textron Financial
Corporation
5.670% 10/13/1998 5,580,000 5,488,116
Textron Financial
Corporation
5.700% 9/25/1998 2,720,000 2,682,963
Union Oil Company of
California
5.650% 9/09/1998 5,700,000 5,636,825
Union Oil Company of
California
5.670% 8/20/1998 1,965,000 1,949,526
UOP
5.550% 10/20/1998 2,000,000 1,964,850
UOP
5.600% 8/31/1998 8,685,000 8,601,117
Vastar Resources, Inc.
5.610% 9/04/1998 5,980,000 5,918,456
Vastar Resources, Inc.
5.630% 8/13/1998 2,475,000 2,458,356
VF Corporation
5.650% 7/28/1998 5,000,000 4,978,812
VF Corporation
5.750% 8/19/1998 4,700,000 4,663,216
Western Atlas Inc.
5.710% 9/03/1998 5,520,000 5,464,064
-----------
249,126,612
===========
Discount Note -- 0.5%
Federal Farm Credit
Bank
5.420% 11/20/1998 1,390,000 1,358,648
------------
TOTAL SHORT-TERM
INVESTMENTS 250,485,260
============
(Cost $250,503,307)+
TOTAL INVESTMENTS -- 101.0% 250,485,260
Other Assets/
(Liabilities) - (1.0%) (2,374,776)
------------
NET ASSETS -- 100.0 $248,110,484
============
Notes to Portfolio of Investments
+ Aggregate cost for Federal tax purposes (Note 7)
The remainder of this page intentionally left blank.
6 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Prime Fund - Financial Statements
- --------------------------------------------------------------------------------
Statement of
Assets and
Liabilities
<TABLE>
<CAPTION>
June 30, 1998
(Unaudited)
---------------
<S> <C>
Assets:
Short-term investments, at value (cost $250,503,307) (Note 2) .......... $ 250,485,260
Cash ................................................................... 2,671
Receivables from:
Fund shares sold ..................................................... 744,833
---------------
Total assets ....................................................... 251,232,764
---------------
Liabilities:
Payables for:
Fund shares redeemed ................................................. 2,994,799
Directors' fees and expenses (Note 3) ................................ 5,430
Affiliates (Note 3):
Investment management fees ......................................... 98,543
Administration fees ................................................ 17,099
Service fees ....................................................... 73
Accrued expenses and other liabilities ................................. 6,336
---------------
Total liabilities .................................................. 3,122,280
---------------
Net assets ............................................................. $ 248,110,484
===============
Net assets consist of:
Paid-in capital ........................................................ $ 241,554,696
Undistributed net investment income .................................... 6,593,769
Accumulated net realized loss on investments ........................... (19,934)
Net unrealized depreciation on investments ............................. (18,047)
---------------
$ 248,110,484
===============
Net assets:
Class A ................................................................ $ 116,950
===============
Class Y ................................................................ $ 239,661
===============
Class S ................................................................ $ 247,753,873
===============
Shares outstanding:
Class A ................................................................ 11,431.654
===============
Class Y ................................................................ 23,374.223
===============
Class S ................................................................ 1,600,292.689
===============
Net asset value, offering price and redemption price per share:
Class A ................................................................ $ 10.23
===============
Class Y ................................................................ $ 10.25
===============
Class S ................................................................ $ 154.82
===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Prime Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Six months ended
Operations June 30, 1998
(Unaudited)
----------------
Investment income:
Interest ............................................................... $ 7,281,563
---------------
Expenses (Note 1):
Investment management fees (Note 3) .................................... 564,949
Custody fees ........................................................... 12,308
Audit and legal fees ................................................... 2,795
Directors' fees (Note 3) ............................................... 9,579
---------------
589,631
Administration fees (Note 3):
Class A .............................................................. 277
Class Y .............................................................. 331
Class S .............................................................. 97,412
Service fees (Note 3):
Class A .............................................................. 143
---------------
Total expenses ..................................................... 687,794
---------------
Net investment income .............................................. 6,593,769
---------------
Realized and unrealized gain (loss):
Net realized loss on investment transactions ........................... (1,774)
Net change in unrealized appreciation (depreciation)
on investments ....................................................... 3,111
---------------
Net realized and unrealized gain ................................... 1,337
---------------
Net increase in net assets resulting from operations ................... $ 6,595,106
===============
<CAPTION>
Statements of Six months ended
Changes in Net June 30, 1998 Year ended
Assets (Unaudited) December 31, 1997
---------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income ................................ $ 6,593,769 $ 13,484,123
Net realized loss on investment transactions ......... (1,774) (11,009)
Net change in unrealized appreciation (depreciation)
on investments ..................................... 3,111 (13,070)
---------------- ---------------
Net increase in net assets resulting from operations 6,595,106 13,460,044
---------------- ---------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1(*) ........................................... -- (4,723)
Class 2(*) ........................................... -- (5,393)
Class 3(*) ........................................... -- (5,838)
Class S .............................................. -- (13,552,104)
---------------- ---------------
Total distributions from net investment income ..... -- (13,568,058)
---------------- ---------------
Net fund share transactions (Note 5):
Class 1(*) ........................................... (114,317) 4,723
Class 2(*) ........................................... (116,325) 5,393
Class 3(*) ........................................... (117,417) 5,838
Class A .............................................. 114,317 --
Class Y .............................................. 233,742 --
Class S .............................................. (203,089) (17,250,954)
Increase (Decrease) in net assets from net fund ---------------- ---------------
share transactions ................................ (203,089) (17,235,000)
---------------- ---------------
Total increase (decrease) in net assets ............. 6,392,017 (17,343,014)
Net assets:
Beginning of period .................................. 241,718,467 259,061,481
---------------- ---------------
End of period (including undistributed net investment
income of $6,593,769 and distributions in excess of
net investment income of $18,160, respectively) .... $ 248,110,484 $ 241,718,467
================ ===============
</TABLE>
(*)Effective January 1, 1998, Class 1, Class 2, and Class 3 shares were
terminated (See Note 1).
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
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MassMutual Prime Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class A Class Y
------- -------
Six months Six months
ended 6/30/98 ended 6/30/98
(Unaudited) (Unaudited)
--------- ---------
<S> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.00
-------- --------
Income (loss) from investment operations:
Net investment income 0.23*** 0.25***
Net realized and unrealized gain (loss) on investments -- --
-------- --------
Total income (loss) from investment operations 0.23 0.25
-------- --------
Net asset value, end of period $ 10.23 $ 10.25
======== ========
Total Return 2.30% 2.50%
Ratios / Supplemental Data:
Net assets, end of period (000s) $117 $240
Net expenses to average daily net assets 1.20%* 0.75%*
Net investment income to average daily net assets 4.59%* 5.04%*
</TABLE>
<TABLE>
<CAPTION>
Class S(1)
Six months ----------
ended 6/30/98 Year ended Year ended Year ended Period ended
(Unaudited) 12/31/97 12/31/96 12/31/95 12/31/94/\**
--------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 150.84 $ 151.00 $ 151.06 $ 150.36 $ 150.00
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income 3.98*** 8.14*** 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 3.98 (8.13) 7.91 8.68 1.89
-------- -------- -------- -------- --------
Less distributions to shareholders:
From net investment income -- (8.29) (7.97) (7.98) (1.53)
-------- -------- -------- -------- --------
Net asset value, end of period $ 154.82 $ 150.84 $ 151.00 $ 151.06 $ 150.36
======== ======== ======== ======== ========
Total Return @ 2.64% 5.39% 5.24% 5.78% 1.26%
Ratios / Supplemental Data:
Net assets, end of period (000s) $247,754 $241,370 $258,729 $253,936 $170,548
Net expenses to average daily net assets# 0.5474%* 0.5399% 0.5160% 0.5160% 0.5160%*
Net investment income to average daily net assets 5.25%* 5.25% 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: N/A 0.5515% 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.
(1)Class S shares were previously designated as Class 4 shares.
@ 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 Manager Report
- --------------------------------------------------------------------------------
What are the investment The objective and policies of the Fund are to:
objective and policies
for the MassMutual . achieve a high total rate of return primarily
Short-Term Bond from current income while minimizing fluctuations
Fund? in capital values
. invest primarily in a diversified portfolio of
short-term, investment grade, fixed income
securities
. maintain duration below three years
. diversify investments among market sectors on
the basis of relative value
How did the Fund The Fund delivered a strong performance, returning
perform during the first 3.03 percent for Class S shares for the first six
half of 1998? months of the year. The Fund's Class S shares
outperformed the Lehman Brothers 1-3 Year
Government Bond Index by 3 basis points. We
captured the majority of our return in the first
quarter through the added yield generated by our
corporate holdings. However, as we shortened the
Fund's average duration during the second quarter
as a risk reduction measure, we gave up some of
our lead over the Index as yields continued to
rally.
What were the most In 1998, we have seen an extreme flattening of the
important developments yield curve in response to low inflation rates.
in your market during The yield curve is a graphic representation of how
the past six months? much yield investors demand as they extend into
longer maturity bonds. The flattening occurs when
there is no longer as big an inflation premium to
lend money for a longer time frame. This being the
case in the first half of 1998, we began to
shorten the average duration of the Fund--from 1.7
years at the beginning of the year down to 1.2
years by the end of June.
Our duration target is between zero and three
years, with the objective to capture value based
on the shape of the yield curve. When the yield
curve is very steep, our duration would be at the
maximum three-year duration. When the curve is
flat, as it is today, or when the curve inverts,
we maintain a much shorter duration that can at
times be similar to money market funds.
We take duration risk in the Fund only when we get
paid for it. With the curve as flat as it is, we
did not feel that we were getting paid to be long,
and therefore, we shortened our duration during
the first half of the year.
How was the portfolio One of the biggest changes to our sector
positioned during the diversification during the first half of 1998 was
period, and how did this a decrease in our corporate holdings, down 7.6
help the Fund achieve percent from the end of 1997. We sold or tendered
its investment objective? several corporate issues in the first half,
including W.R. Grace, Rite Aid, U.S. West Capital
Funding and Orchard Supply Hardware Stores. We
sold these bonds at very tight spread levels even
as the spread between corporate securities and
Treasuries was widening due to credit concerns, a
large supply of corporate issuance and the decline
in Treasury issuance.
At the end of June, Treasuries made up 28 percent
of the portfolio, with corporate bonds at 13
percent. Money market securities accounted for 45
percent of our holdings. Compare this to the end
of 1997, when our Treasuries were 25 percent,
corporate bonds were 20 percent and money market
securities were 35 percent of the Fund's holdings.
The most significant change within the three
sectors was the 10 percent increase to our money
market holdings, which reflects our duration
shortening effort of liquidating corporate
securities to increase our money market
allocation.
The primary reason that Treasuries increased
during that period was that we had tremendous
growth in the portfolio. At the end of 1997, the
portfolio asset size was just over $200 million.
Near the end of the first quarter, large cash
flows totaling near $50 million were deposited
into the Fund, so that by the end of June, the
portfolio was up to $258 million in assets.
We also sold some three-year rate reduction bonds
(categorized as asset-backed securities) issued by
Southern California Edison and Pacific Gas &
Electric. These bonds performed extremely well for
us in the short time we held them (first issued in
the fall of 1997). We sold them in May within our
objective to shorten the Fund's average duration.
10
<PAGE>
- -------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Portfolio Manager Report (Continued)
- -------------------------------------------------------------------------------
What changes to the If the shape of the yield curve should become steeper,
portfolio do you we will lengthen the portfolio's duration to capture
anticipate between additional yield. If the curve flattens even more or
now and year-end? inverts over the remainder of the year, we will
continue to shorten the duration just as we have been
doing. This will position us to perform very well if the
market experiences any significant setbacks. However, if
the market continues to rally, we may finish the year
behind the Lehman 1-3 Year Government Bond Index, which
has a current duration of 1.7 years versus our 1.2
years.
Looking ahead, what Over the past nine months, developments in Asia have
is your outlook for been influencing marginal expectations about the U.S.
the economy and the economy and inflation. Treasury yield levels have tended
Fund in the to fall with Asian weakness and to rise with Asian
secondhalf of 1998? optimism. The lowest yields of the year came in early
January near the height of the Asian liquidity crises.
Yields then rose steadily through April as confidence in
Asia improved. Since then, Asia has retracted and our
yields are again down. Most Treasury bonds at quarter
end are now yielding less than the Federal Fund's rate
(the interest rate charged by banks to other banks for
overnight loans) of 5.5 percent.
Our philosophy for managing the Fund is to avoid short-
term market timing. Ours is a cycle strategy, in that we
position the portfolio to perform through a full cycle
of different yield curve environments. Long-term
historical performance, we believe, is the true measure
of the portfolio's value.
11
<PAGE>
- ---------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Portfolio Manager Report (continued)
- ---------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Short-Term
Bond Fund Class S and the Lehman Brothers
1-3 Year Government Bond Index
- ---------------------------------------------------------------------------
MassMutual Short-Term Bond Fund
Total Return
Year-to-date One Year Average Annual
1/1/98 - 6/30/98 7/1/97 - 6/30/98 10/3/94 - 6/30/98
Class S 3.03% 7.31% 7.27%
- ---------------------------------------------------------------------------
Lehman Brothers
3.00% 6.77% 6.55%
1-3 Year
Government Bond Index
- ---------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
[LINE GRAPH APPEARS HERE]
Date Class S Lehman 1-3 Yr.
- ---- ------- --------------
10/3/94 $10,000 $10,000
12/94 10,013 $10,013
6/95 10,816 10,661
12/95 11,192 11,086
6/96 11,380 11,244
12/96 11,816 11,643
6/97 12,119.9 11,976.8
12/97 12,624 12,416
6/98 13,007 12,794
Hypothetical Investments in MassMutual Short-Term
Bond Fund Class A and Class Y and the Lehman Brothers
1-3 Year Government Bond Index
- -------------------------------------
MassMutual Short-Term Bond Fund
Total Return Year-to-date
1/1/98 - 6/30/98
Class A 2.70%
Class Y 3.00%
- -------------------------------------
Lehman Brothers 3.00%
1-3 Year
Government Bond Index
- -------------------------------------
[LINE GRAPH APPEARS HERE]
Date Class A Class Y Lehman 1-3 Yr.
- ---- ------- ------- --------------
12/97 $10,000 $10,000 $10,000
1/98 10,100 10,100 10,096
2/98 10,110 10,120 10,105
3/98 10,150 10,160 10,144
4/98 10,190 10,210 10,193
5/98 10,220 10,240 10,247
6/98 10,270 10,300 10,300
Past performance is not predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund, while the Lehman Brothers 1-3 Year Government Bond Index is
unmanaged and does not incur expenses, and cannot be purchased directly by
investors.
Duration diversification (6/30/98)
MassMutual Short-Term bond Fund
Average Duration = 1.2 years
[PIE CHART APPEARS HERE]
Greater than 10 years 0.3%
7-10 years 3.5%
5-7 years 0.2%
3-5 years 10.1%
1-3 years 30.7%
Less than 1 year 55.2%
Quality Structure (6/30/98)
Mass Mutual Short-Term Bond Fund
[PIE CHART APPEARS HERE]
U.S. Governments Cash Equivalents
Aaa/AAA 87.3%
Baa/BBB 5.4%
BB 0.2%
A/A 5.6%
Aa/AA 1.5%
12
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund -- Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1998
Principal
Amount Market Value
------ ------------
BONDS & NOTES -- 54.9%
ASSET BACKED SECURITIES -- 4.6%
California
Infrastructure PG&E-
1,1997-1, Class A6
6.320% 9/25/2005 $ 250,000 $ 254,373
California
Infrastructure SCE-
1,1997-1, Class A5
6.280% 9/25/2005 300,000 305,733
California
Infrastructure
SDG&E-1,1997-1,
Class A5
6.190% 9/25/2005 200,000 203,130
Capita Equipment
Receivables Trust
1996-1, Class A4
6.280% 6/15/2000 1,000,000 1,003,980
Capita Equipment
Receivables Trust
1997-1, Class A3
6.120% 9/15/2000 1,500,000 1,505,670
Chase Manhattan Auto
Owner Trust 1997-A,
Class A4
6.400% 7/16/2001 1,500,000 1,512,180
Chase Manhattan RV
Owner Trust 1997-A,
Class A7
6.140% 10/16/2006 1,000,000 1,002,460
First Bank Corporate
Card Master Trust
1997-1, Class A
6.400% 2/15/2003 1,000,000 1,011,870
Ford Credit Auto
Owner Trust 1996-B,
Class A-4
6.300% 1/15/2001 2,000,000 2,010,000
Metlife Capital
Equipment Loan Trust
Series 1997-A,
Class A
6.850% 5/20/2008 1,000,000 1,035,434
Railcar Trust No.
1992-1
7.750% 6/01/2004 1,036,005 1,085,650
World Omni 1996-A
Automobile Lease
Securitization Trust,
Class Al
6.300% 6/25/2002 1,056,759 1,059,063
------------
TOTAL ASSET BACKED
SECURITIES 11,989,543
------------
(Cost $11,895,211)
CORPORATE DEBT -- 12.6%
AirTouch
Communications, Inc.
7.500% 7/15/2006 1,000,000 1,073,090
America West Airlines
1996-1, Class A
6.850% 7/02/2009 1,980,748 2,009,033
Analog Devices, Inc.
6.625% 3/01/2000 1,000,000 1,006,960
Associates Corporation
of North America
6.750% 8/01/2001 1,500,000 1,528,545
Bell Atlantic Financial
Services, Inc.
6.610% 2/07/2000 2,000,000 2,023,240
BHP Finance (USA)
Limited
7.875% 12/01/2002 1,000,000 1,056,670
Carlisle Companies
Incorporated
7.250% 1/15/2007 1,000,000 1,048,020
The CIT Group
Holdings, Inc.
6.250% 3/22/1999 2,200,000 2,205,632
CSC Enterprises 144A
6.500% 11/15/2001 2,000,000 2,035,720
First Brands
Corporation
7.250% 3/01/2007 1,500,000 1,548,930
General American
Transportation
Corporation
6.750% 3/01/2006 1,000,000 1,018,130
Heller Financial, Inc.
6.330% 7/28/2000 2,000,000 2,005,620
Korea Development
Bank
7.375% 9/17/2004 600,000 495,192
Lockheed Martin
Corporation
7.700% 6/15/2008 1,000,000 1,098,790
MAPCO Inc.
7.250% 3/01/2009 1,250,000 1,326,613
Norfolk Southern
Corporation
7.350% 5/15/2007 1,000,000 1,072,850
ORIX Credit Alliance,
Inc. 144A
6.480% 4/20/1999 2,000,000 2,007,220
J.C. Penny Company,
Inc.
7.250% 4/01/2002 2,500,000 2,591,550
Union Oil Company of
California
9.875% 8/15/2002 2,500,000 2,853,275
Valero Pass-Through
Asset Trust
1997-1 144A
6.750% 12/15/2002 1,000,000 1,011,660
Walt Disney Company,
The
6.375% 3/30/2001 1,500,000 1,519,140
------------
TOTAL CORPORATE DEBT 32,535,880
------------
(Cost $31,811,344)
(Continued)
The accompanying notes are an integral part of the financial statements. 13
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Market Value
------ ------------
U.S. GOVERNMENT
AGENCY OBLIGATIONS -- 9.7%
Federal Home Loan Mortgage Corporation
(FHLMC) -- 1.6%
Collateralized Mortgage Obligations -- 1.6%
FHLMC Series 1693
Class G
6.000% 7/15/2007 $2,000,000 $ 2,008,120
FHLMC Series 1704
Class PE
6.000% 7/15/2007 2,000,000 2,003,740
------------
4,011,860
------------
Pass-Through Securities -- 0.0%
FHLMC
4.750% 9/01/2006 256,715 249,494
------------
4,261,354
------------
Federal National Mortgage Association
(FNMA) -- 1.4%
Collateralized Mortgage Obligations -- 1.0%
FNMA Series 1993-71
Class PG
6.250% 7/25/2007 2,500,000 2,513,275
------------
Pass-Through Securities -- 0.4%
FNMA
8.000% 5/01/2013 460,480 466,973
FNMA
9.000% 10/01/2009 500,976 529,418
------------
996,391
------------
3,509,666
------------
Government National Mortgage Association
(GNMA) -- 0.5%
Pass-Through Securities -- 0.5%
GNMA
8.000% 5/15/2001 -
11/15/2007 1,253,632 1,320,823
------------
U.S. Government Guaranteed Notes -- 6.2%
1994-A Baxter
Springs. KS
6.310% 8/01/2001 500,000 505,375
1994-A Detroit, MI
6.310% 8/01/2001 450,000 454,838
1994-A Jacksonville,
FL
6.310% 8/01/2001 1,485,000 1,500,964
1994-A Los Angeles
County, CA
6.310% 8/01/2001 225,000 227,419
1994-A Tacoma, WA
6.310% 8/01/2001 195,000 197,096
1994-A Trenton, NJ
6.310% 8/01/2001 145,000 146,559
U.S. Dept. of Housing
and Urban
Development, Series
1995-A
8.080% 8/01/1998 3,000,000 3,008,430
U.S. Dept. of Housing
and Urban
Development, Series
1996-A
6.440% 8/01/1999 2,000,000 2,001,860
U.S. Dept. of Housing
and Urban
Development, Series
1997-A
6.110% 8/01/2000 4,000,000 4,010,000
U.S. Dept. of Housing
and Urban
Development, Series
1997-A
6.230% 8/01/2002 4,000,000 4,035,000
------------
16,087,541
------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 25,179,384
------------
(Cost $24,439,240)
U.S. TREASURY OBLIGATIONS -- 28.0%
U.S. Treasury Notes
U.S. Treasury Note
5.625% 12/31/1999 47,000,000 47,073,320
U.S. Treasury Note
7.125% 2/29/2000 7,000,000 7,175,000
U.S. Treasury Note
8.875% 2/15/1999 17,500,000 17,855,425
------------
TOTAL U.S. TREASURY
OBLIGATIONS 72,103,745
------------
(Cost $72,720,016)
TOTAL BONDS & NOTES 141,808,552
------------
SHORT-TERM INVESTMENTS -- 44.3%
Commercial Paper
AirTouch
Communications, Inc.
5.650% 7/15/1998 4,145,000 4,135,892
Carter Holt Harvey
Limited
5.710% 8/03/1998 2,785,000 2,770,423
Carter Holt Harvey
Limited
5.720% 8/27/1998 1,675,000 1,659,830
Central and South
West Corporation
5.700% 8/19/1998 6,010,000 5,963,373
Comdisco, Inc.
5.660% 7/13/1998 3,855,000 3,847,727
Comdisco, Inc.
5.700% 7/31/1998 6,000,000 5,971,500
Comdisco. Inc.
5.710% 8/04/1998 835,000 830,497
Comdisco, Inc.
5.740% 8/10/1998 100,000 99,362
Cox Enterprises, Inc.
5.650% 7/22/1998 2,185,000 2,177,798
Cox Enterprises, Inc.
5.710% 8/04/1998 2,230,000 2,217,974
Cox Enterprises, Inc.
5.720% 7/29/1998 3,970,000 3,952,338
Crown Cork & Seal
Company, Inc.
5.730% 8/27/1998 795,000 787,787
Crown Cork & Seal
Company, Inc.
5.730% 9/16/1998 5,280,000 5,215,289
Crown Cork & Seal
Company, Inc.
5.750% 9/24/1998 1,815,000 1,790,359
CSX Corporation
5.590% 10/07/1998 5,245,000 5,165,186
Enron Corp.
5.520% 8/17/1998 4,135,000 4,105,200
Enron Corp.
5.620% 9/30/1998 6,000,000 5,914,764
Hercules Incorporated
5.680% 7/06/1998 5,745,000 5,740,468
Humana, Inc.
5.710% 8/12/1998 4,810,000 4,777,957
Humana, Inc.
5.720% 7/17/1998 405,000 403,970
IMC Global Inc.
5.720% 7/22/1998 6,225,000 6,204,229
Lockheed Martin
Corporation
5.790% 9/11/1998 1,085,000 1,072,436
ORIX Credit Alliance,
Inc
5.690% 7/17/1998 860,000 857,825
Public Service
Company of Colorado
5.720% 7/02/1998 3,800,000 3,799,396
Sonat Inc.
5.600% 10/16/1998 7,255,000 7,134,245
Sonat Inc.
5.670% 8/07/1998 2,725,000 2,709,120
Textron Financial
Corporation
5.700% 8/03/1998 2,050,000 2,039,289
(Continued)
14 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Market Value
------ ------------
Union Carbide
Corporation
5.570% 8/21/1998 $ 5,365,000 $ 5,322,665
Union Oil Company of
California
5.700% 10/28/1998 5,420,000 5,317,878
UOP
5.650% 10/30/1998 4,560,000 4,473,405
VF Corporation
5.700% 10/13/1998 7,000,000 6,884,733
VF Corporation
5.750% 8/10/1998 1,025,000 1,018,452
------------
TOTAL SHORT-TERM
INVESTMENTS 114,361,367
------------
(At Amortized Cost)
TOTAL INVESTMENTS -- 99.2% 256,169,919
(Cost $255,227,178)+
Other Assets/
(Liabilities) - 0.8% 2,110,230
------------
Net Assets -- 100.0% $258,280,149
============
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 remainder of this page intentionally left blank.
The accompanying notes are an integral part of the financial statements. 15
<PAGE>
- -------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
June 30, 1998
(Unaudited)
-------------
<S> <C>
Assets:
Investments, at value (cost $140,865,811) (Note 2) ........... $ 141,808,552
Short-term investments, at amortized cost (Note 2) ........... 114,361,367
-------------
Total Investments .......................................... 256,169,919
Receivables from:
Investments sold ........................................... 15,385
Fund shares sold ........................................... 419,893
Interest ................................................... 1,944,070
-------------
Total assets ............................................. 258,549,267
-------------
Liabilities:
Payables for:
Fund shares redeemed ....................................... 138,334
Directors' fees and expenses (Note 3) ...................... 5,430
Affiliates (Note 3):
Investment management fees ............................... 102,718
Administration fees ...................................... 17,825
Service fees ............................................. 78
Accrued expenses and other liabilities ....................... 4,733
-------------
Total liabilities ........................................ 269,118
-------------
Net assets ................................................... $ 258,280,149
=============
Net assets consist of:
Paid-in capital .............................................. $ 249,719,758
Undistributed net investment income .......................... 6,761,363
Accumulated net realized gain on investments ................. 856,287
Net unrealized appreciation on investments ................... 942,741
-------------
$ 258,280,149
=============
Net assets:
Class A ...................................................... $ 125,745
=============
Class Y ...................................................... $ 257,747
=============
Class S ...................................................... $ 257,896,657
=============
Shares outstanding:
Class A ...................................................... 12,238
=============
Class Y ...................................................... 25,033
=============
Class S ...................................................... 24,468,629
=============
Net asset value, offering price and redemption price per share:
Class A ...................................................... $ 10.27
=============
Class Y ...................................................... $ 10.30
=============
Class S ...................................................... $ 10.54
=============
</TABLE>
16 The accompanying notes are an integral part of the financial statements.
<PAGE>
- -------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements (Continued)
- -------------------------------------------------------------------------------
Statement of Operations
Six months ended
June 30, 1998
(Unaudited)
--------------
Investment income:
Interest ................................................ $ 7,335,272
--------------
Expenses (Note 1):
Investment management fees (Note 3) ..................... 522,369
Custody fees ............................................ 9,671
Audit and legal fees .................................... 2,594
Directors' fees (Note 3) ................................ 9,579
--------------
544,213
Administration fees (Note 3):
Class A ............................................... 294
Class Y ............................................... 349
Class S ............................................... 90,050
Service fees (Note 3):
Class A ............................................... 154
--------------
Total expenses ...................................... 635,060
--------------
Net investment income ................................... 6,700,212
--------------
Realized and unrealized gain (loss):
Net realized gain on investment transactions ............ 534,414
Net change in unrealized appreciation (depreciation)
on investments ........................................ (350,598)
--------------
Net realized and unrealized gain .................... 183,816
--------------
Net increase in net assets resulting from operations .... $ 6,884,028
==============
The accompanying notes are an integral part of the financial statements. 17
<PAGE>
- -------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements (Continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
Six months ended
June 30, 1998 Year ended
(Unaudited) December 31, 1997
--------------- ---------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income ..................................... $ 6,700,212 $ 10,621,074
Net realized gain (loss) on investment transactions ....... 534,414 667,141
Net change in unrealized appreciation (depreciation)
on investments ........................................... (350,598) 275,610
--------------- ---------------
Net increase in net assets resulting from operations ..... 6,884,028 11,563,825
--------------- ---------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1* .................................................. -- (5,130)
Class 2* .................................................. -- (5,845)
Class 3* .................................................. -- (6,291)
Class S ................................................... -- (10,576,607)
--------------- ---------------
Total distributions from net investment income ........... -- (10,593,873)
--------------- ---------------
From net realized gains:
Class 1* .................................................. -- (21)
Class 2* .................................................. -- (22)
Class 3* .................................................. -- (22)
Class S ................................................... -- (34,836)
--------------- ---------------
Total distributions from net realized gains .............. -- (34,901)
--------------- ---------------
Net fund share transactions (Note 5):
Class 1* .................................................. (122,380) 5,151
Class 2* .................................................. (124,540) 5,867
Class 3* .................................................. (125,790) 6,313
Class A ................................................... 122,380 --
Class Y ................................................... 250,330 --
Class S ................................................... 50,754,834 54,155,496
--------------- ---------------
Increase in net assets from net fund share transactions .. 50,754,834 54,172,827
--------------- ---------------
Total increase in net assets .............................. 57,638,862 55,107,878
Net assets:
Beginning of period ....................................... 200,641,287 145,533,409
--------------- ---------------
End of period (including undistributed net investment
income of $6,761,363 and $61,151, respectively) ......... $ 258,280,149 $ 200,641,287
=============== ===============
</TABLE>
*Effective January 1, 1998, Class 1, Class 2, and Class 3 shares were
terminated (See Note 1).
18 The accompanying notes are an integral part of the financial statements.
<PAGE>
- -------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements (Continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Financial Highlights
(For a share outstanding throughout each period)
Class A Class Y
------- -------
Six months Six months
ended 6/30/98 ended 6/30/98
(Unaudited) (Unaudited)
----------- ----------
<S> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.00
----------- ----------
Income (loss) from investment operations:
Net investment income 0.26*** 0.28***
Net realized and unrealized gain (loss) on investments 0.01 0.02
----------- ----------
Total income (loss) from investment operations 0.27 0.30
----------- ----------
Net asset value, end of period $ 10.27 $ 10.30
=========== ==========
Total Return 2.70% 3.00%
Ratios / Supplemental Data:
Net assets, end of period (000s) $126 $258
Net expenses to average daily net assets 1.20%* 0.74%*
Net investment income to average daily net assets 5.13%* 5.58%*
Portfolio turnover rate 24% 24%
<CAPTION>
Class S (1)
-----------
Six months
ended 6/30/98 Year ended Year ended Year ended Period ended
(Unaudited) 12/31/97 12/31/96 12/31/95 12/31/94**
--------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.23 $ 10.11 $ 10.15 $ 9.85 $ 10.00
--------- ---------- ---------- --------- ----------
Income (loss) from investment operations:
Net investment income 0.30*** 0.65*** 0.60 0.66 0.16
Net realized and unrealized gain (loss) on investments 0.01 0.04 (0.03) 0.50 (0.15)
--------- ---------- ---------- --------- ----------
Total income (loss) from investment operations 0.31 0.69 0.57 1.16 0.01
--------- ---------- ---------- --------- ----------
Less distributions to shareholders:
From net investment income -- (0.57) (0.60) (0.66) (0.16)
From net realized gains -- 0.00 (0.01) (0.20) --
--------- ---------- ---------- --------- ----------
Total distributions -- (0.57) (0.61) (0.86) (0.16)
--------- ---------- ---------- --------- ----------
Net asset value, end of period $ 10.54 $ 10.23 $ 10.11 $ 10.15 $ 9.85
========= ========== ========== ========= ==========
Total Return @ 3.03% 6.84% 5.57% 11.77% 0.13%
Ratios / Supplemental Data:
Net assets, end of period (000s) $257,897 $200,268 $145,182 $122,904 $106,846
Net expenses to average daily net assets# 0.5465%* 0.5423% 0.5190% 0.5190% 0.5190%*
Net investment income to average daily net assets 5.77%* 6.22% 6.00% 6.32% 6.37%*
Portfolio turnover rate 24% 48% 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: N/A 0.5530% 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.
(1)Class S shares were previously designated as Class 4 shares.
@Employee retirement benefit plans that invest plan assets in the Separate
Investment Accounts (SIAs) may be subject to certain charges as set forth in
their respective Plan Documents. Total return figures would be lower for the
periods presented if they reflected these charges.
The accompanying notes are an integral part of the financial statements. 19
<PAGE>
- -------------------------------------------------------------------------------
MassMutual Core Bond Fund - Portfolio Manager Report
- -------------------------------------------------------------------------------
What are the investment The objective and policies of the Fund are to:
objective and policies
for the MassMutual . achieve a high total rate of return consistent with
Core Bond Fund? prudent investment risk and the preservation of
capital
. invest primarily in a diversified portfolio of
investment grade, fixed income securities
. maintain duration in a targeted range from four to
seven years
. diversify investments by industry sector, maturity,
issuer class, and quality sectors to reduce risk of
capital erosion
How did the Fund We have seen good performance from the Fund so far in
perform during the 1998. Core Bond Fund's year-to-date total return
first half of 1998? through June 30, 1998, was 4.16 percent for Class S
shares. This compares favorably versus the Lehman
Brothers Government/Corporate Bond Index's increase of
4.17 percent. A major factor contributing to the
Fund's performance for the first six months was coupon
income offered by securities which offered a yield
advantage over Treasuries.
Assets under management grew at a nice steady pace
this year, with the Fund's net assets exceeding $500
million by the end of June.
What were the most Events in Asia have been at center stage since October
important developments 1997 and continue to be the most significant factor
in your market during influencing global financial markets. During the first
the past six months? half of this year, Japan's economic slump has worsened
and its currency has weakened materially. The
potential of China devaluing its currency has
heightened as Japan remains unsettled. There has been
an accordion affect between Asian financial markets
and the U.S. bond markets for the past six months.
U.S. Treasury yield levels have tended to fall with
Asian weakness and to rise with Asian optimism.
Another consequence has been a steadily flattening
U.S. yield curve. Currently, most Treasury bonds now
yield about the same as the Federal Fund's rate (the
interest rate charged by banks to other banks for
overnight loans) of 5.5 percent.
Corporate bonds in particular, and mortgage-backed
securities to a lesser extent, have had spread
volatility mirroring Asian volatility. Corporate
spreads have been vulnerable to the simultaneous
double pressure of worries about credit quality and
new issue supply surges when Asia has weakened and
interest rates have fallen. Supply of new investment
grade corporates has grown to slightly under $200
billion this year, compared to $272 billion in all of
1997 (source: Securities Data Corporation). Spread
widening has contributed to marked underperformance of
corporates this year when compared to U.S. Treasuries.
Mortgage-backed securities have been subject to
concerns about prepayments when interest rates have
fallen and as a result many market participants are
now demanding wider spreads on mortgage-backed
products. Due to the yield advantage offered by
mortgages they slightly outperformed Treasuries over
the past six months.
How was the portfolio The portfolio was positioned very similar to year end
positioned during the 1997. We continued our commitment to spread assets,
period, and how did that is, those securities that offer a substantial
this help the Fund yield advantage over Treasuries. As of June 30, 1998
achieve its investment approximately 65.4 percent of our assets were invested
objective? in a combination of agency, mortgage backed
securities, asset backed securities and corporate
securities. This compares with year end 1997 when 71.1
percent of our assets were invested in these sectors.
While owning corporate bonds hurt us to some extent,
it also benefited us -- specifically, issues with
longer maturities have benefited from declining
Treasury rates. Shorter duration issues have also
performed well as yield alternative to Treasuries. New
purchases in the account include the following names:
Boston Scientific, Lasmo PLC (an oil & gas exploration
and production company), ICI Chemicals, Enterprise
Rent-A-Car, Dana Corp and Fletcher Challenge. We also
added a couple of issues with longer maturities:
Hershey Corp and Dover Corporation, both single A
rated issues.
20
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund -- Portfolio Manger Report (Continued)
- --------------------------------------------------------------------------------
Sales of corporate issues occurred as aggressive bids were
received and/or as value was realized. Issues sold included
Rite Aid, Hercules, Petro Geo-Services, and Time Warner. Many
corporations tendered bonds this year as they restructured
their companies. Tendered issues were done at very narrow
yield spread levels compared to U.S. Treasuries. Tendered
issues included: Foodbrands, W.R. Grace, and two issues of
U.S. West.
What changes to We believe that we are poised to take advantage to any spread
the portfolio do widening given our holdings of Treasuries and money market
you anticipate securities. This will allow us to purchase assets that offer
between now and a yield advantage versus Treasuries as attractive pricing is
year-end? achieved.
We do believe that investors will need to be more diligent
about credit quality but not in the immediate future. We
believe that given our analytical strengths we are well
poised to meet this challenge.
The flattening yield curve is another area to give one pause.
Extending durations along the curve becomes difficult as
shorter securities are yielding about the same as longer
maturity issues. We will want to make sure that for the risk
that we are taking we are getting paid for that risk at a
commensurate level.
Looking ahead, The most likely outcome in the U.S. continues to be one of
what is your moderate growth and low inflation. We believe that corporate
outlook for the bonds at now wider spread levels continue to offer
economy and the fundamental value. We are still comfortable with our holdings
Fund in the of corporates, however at these wider levels we view this as
second half? an opportunity to selectively add to our positions in this
sector. As mentioned earlier, the lower interest rate
environment brings many challenges to all market sectors,
particularly the mortgage-backed market. This sector will be
closely monitored for new opportunities.
21
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund -- Portfolio Manger Report (Continued)
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Core Bond
Fund Class S and the Lehman Brothers Government/
Corporate Bond Index
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund
Total Return Year-to-date One Year Average Annual
1/1/98 - 6/30/98 7/1/97 - 6/30/98 10/3/94 - 6/30/98
Class S 4.16% 11.16% 9.47%
- --------------------------------------------------------------------------------
Lehman Brothers
Government/ 4.17% 11.29% 8.82%
Corporate Bond Index
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
[LINE GRAPH APPEARS HERE]
Date Class S Lehman Bros. Gov't/Corp.
- ---- ------- ------------------------
10/3/94 10,000 10,000
12/94 10,020 10,037
6/95 11,212 11,220
12/95 11,940 11,968
6/96 11,695 11,743
12/96 12,274 12,315
6/97 12,626 12,653
12/97 13,474 13,516
6/98 14,035 14,080
Hypothetical Investments in MassMutual Core Bond
Fund Class A and Class Y and the Lehman Brothers
Government/Corporate Bond Index
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund
Total Return Year-to-date
1/1/98 - 6/30/98
Class A 3.80%
Class Y 4.10%
- --------------------------------------------------------------------------------
Lehman Brothers
Government/ 4.17%
Corporate Bond Index
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date Class A Class Y Lehman Bros. Gov't/Corp.
- ---- ------- ------- ------------------------
12/97 10,000 10,000 10,000
1/98 10,130 10,130 10,141
2/98 10,110 10,110 10,120
3/98 10,140 10,150 10,152
4/98 10,180 10,190 10,202
5/98 10,280 10,300 10,312
6/98 10,380 10,410 10,417
Past performance is not predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund, while the Lehman Brothers Government/Corporate Bond Index is
unmanaged and does not incur expenses, and cannot be purchased directly by
investors.
Duration Diversification (6/30/98)
MassMutual Core Bond Fund
Average Duration = 5.6 years
[PIE CHART APPEARS HERE]
Greater than 10 years 2.9%
7-10 years 18.6%
5-7 years 31.7%
3-5 years 17.1%
1-3 years 24.4%
Less than 1 year 5.3%
Quality Structure (6/30/98)
MassMutual Core Bond Fund
U.S. Governments Cash Equivalents
[PIE CHART APPEARS HERE]
Aaa/AAA 60.4%
Baa/BBB 22.9%
Ba/BB 1.1%
A/A 13.5%
Aa/AA 2.1%
22
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1998
Principal
Amount Market Value
------ ------------
BONDS & NOTES -- 88.6%
ASSET BACKED SECURITIES -- 6.6%
California
Infrastructure PG&E-
1,1997-1, Class A6
6.320% 9/25/2005 $ 550,000 $ 559,620
California
Infrastructure SCE-
1,1997-1, Class A5
6.280% 9/25/2005 700,000 713,377
California
Infrastructure
SDG&E-1, 1997-1,
Class A5
6.190% 9/25/2005 500,000 507,825
Capita Equipment
Receivables Trust
1996-1, Class A4
6.280% 6/15/2000 3,000,000 3,011,940
Case Equipment Loan
Trust 1998-A,
Class A4
5.830% 2/15/2005 3,500,000 3,500,735
Caterpillar Financial
Asset Trust, 1997-B
Class A3
6.160% 9/25/2003 3,500,000 3,517,220
Chase Manhattan Auto
Owner Trust 1998-A,
Class A4
5.800% 12/16/2002 3,750,000 3,750,150
Chase Manhattan RV
Owner Trust 1997-A,
Class A7
6.140% 10/16/2006 4,500,000 4,511,070
Ford Credit Auto
Owner Trust 1996-B
Class A-4
6.300% 1/15/2001 5,000,000 5,025,000
Metlife Capital
Equipment Loan Trust
Series 1997-A,
Class A
6.850% 5/20/2008 2,500,000 2,588,585
Railcar Trust No.
1992-1
7.750% 6/01/2004 1,208,673 1,266,592
Travelers Funding Ltd.
Class A-1
6.300% 2/15/2014 3,100,000 3,022,097
World Omni 1995-A
Automobile Lease
Securitization Trust,
Class A
6.050% 11/25/2001 764,266 764,503
World Omni 1996-A
Automobile Lease
Securitization Trust,
Class Al
6.300% 6/25/2002 1,120,166 1,122,608
------------
TOTAL ASSET BACKED
SECURITIES 33,861,322
============
(Cost $33,726,980)
CORPORATE DEBT -- 40.4%
Airgas, Inc.
7.140% 3/08/2004 4,000,000 4,080,836
AirTouch
Communications, Inc.
7.500% 7/15/2006 3,000,000 3,219,270
America West Airlines
1996-1, Class A
6.850% 7/02/2009 3,961,496 4,018,067
American Airlines
1994-A Pass-Through
Trusts, Class A4*
9.780% 11/26/2011 1,951,113 2,342,506
AMR Corporation*
9.000% 8/01/2012 2,000,000 2,359,600
Analog Devices, Inc.*
6.625% 3/01/2000 1,500,000 1,510,440
Archer-Daniels-Midland
Company
6.750% 12/15/2027 2,000,000 2,069,460
Associates Corporation
of North America
6.750% 8/01/2001 2,000,000 2,038,060
Associates Corporation
of North America*
7.875% 9/30/2001 1,500,000 1,577,655
Barrick Gold
Corporation
7.500% 5/01/2007 4,000,000 4,280,200
Bell Atlantic Financial
Services, Inc.
6.610% 2/04/2000 1,750,000 1,770,213
BHP Finance (USA)
Limited
6.420% 3/01/2026 3,500,000 3,495,310
Boston Scientific
Corporation
6.625% 3/15/2005 3,800,000 3,840,204
Capital Cities/ABC,
Inc.
8.875% 12/15/2000 875,000 933,818
Carlisle Companies
Incorporated
7.250% 1/15/2007 2,500,000 2,620,050
Celulosa Arauco
Constitucion
6.950% 9/15/2005 2,000,000 1,918,420
Champion International
Corporation
6.400% 2/15/2026 2,500,000 2,583,600
The Charles Schwab
Corporation
6.250% 1/23/2003 2,500,000 2,517,075
CITGO Petroleum
Corporation
7.875% 5/15/2006 1,000,000 1,055,510
The Columbia Gas
System, Inc.
6.610% 11/28/2002 3,000,000 3,034,050
Comcast Cable
Communications, Inc.
8.375% 5/01/2007 2,500,000 2,795,875
Commercial Credit
Company*
7.750% 3/01/2005 3,000,000 3,262,890
(Continued)
The accompanying notes are an integral part of the financial statements. 23
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Market value
------ ------------
Continental Airlines,
Inc., Series 1996-2B
8.560% 7/02/2014 $1,660,621 $ 1,917,104
Continental Airlines,
Inc., Series 1996-B
7.820% 4/15/2015 1,922,193 2,101,033
Corning Glass Works*
8.873% 3/15/2016 1,000,000 1,240,250
Crown Cork & Seal
Company, Inc.
6.750% 12/15/2003 3,550,000 3,621,781
CSX Corporation
7.250% 5/01/2027 4,000,000 4,516,360
Dana Corporation
6.500% 3/15/2008 1,750,000 1,777,388
Dover Corporation
6.250% 6/01/2008 2,000,000 2,017,420
Dover Corporation
6.650% 6/01/2028 2,000,000 2,037,060
English China Clays
Delaware Inc.*
7.375% 10/01/2002 1,000,000 1,041,460
Equifax Inc.
6.500% 6/15/2003 1,000,000 1,005,910
ERAC USA Finance
Company 144A
6.750% 5/15/2007 3,000,000 3,030,210
FBG Finance Limited
144A
7.875% 6/01/2016 3,000,000 3,403,830
First Brands
Corporation
7.250% 3/01/2007 2,000,000 2,065,240
Fletcher Challenge
Capital Canada Inc.
6.750% 3/24/2005 2,000,000 2,005,540
Fletcher Challenge
Capital Canada Inc.
7.750% 6/20/2006 2,000,000 2,112,120
Foster Wheeler
Corporation
6.750% 11/15/2005 2,000,000 1,989,020
General American
Transportation
Corporation
6.750% 3/01/2006 3,000,000 3,054,390
General Electric
Capital Corporation
6.500% 11/01/2006 1,250,000 1,290,638
General Electric
Capital Corporation
8.750% 5/21/2007 1,500,000 1,777,500
General Mills, Inc.
8.900% 6/15/2006 2,250,000 2,629,530
General Motors
Acceptance
Corporation
8.625% 6/15/1999 4,175,000 4,278,415
The Goldman Sachs
Group, L.P. 144A
6.200% 2/15/2001 2,500,000 2,519,025
Hershey Foods
Corporation
7.200% 8/15/2027 5,000,000 5,564,800
Hilton Hotels
Corporation
7.000% 7/15/2004 1,600,000 1,578,912
ICI Wilmington, Inc.
7.050% 9/15/2007 2,000,000 2,103,740
IMCERA Group Inc.*
6.000% 10/15/2003 1,000,000 956,070
Interpool, Inc.
7.350% 8/01/2007 2,000,000 2,015,462
Korea Development
Bank
7.375% 9/17/2004 1,500,000 1,237,980
LASMO (USA) Inc.
6.750% 12/15/2007 5,000,000 4,949,550
Leucadia National
Corporation
7.750% 8/15/2013 2,500,000 2,655,100
Lockheed Martin
Corporation
7.700% 6/15/2008 3,000,000 3,296,370
MAPCO Inc.*
7.250% 3/01/2009 3,250,000 3,449,193
Millipore Corporation
7.500% 4/01/2007 3,750,000 4,010,813
Mobil Corporation*
8.625% 8/15/2021 4,000,000 5,120,240
Morgan Stanley Group,
Inc.*
6.875% 3/01/2007 5,500,000 5,698,880
Newmont Mining
Corporation*
8.625% 4/01/2002 2,000,000 2,138,960
News America
Holdings Incorporated
9.250% 2/01/2013 3,000,000 3,648,720
Norfolk Southern
Corporation*
7.050% 5/01/2037 5,000,000 5,309,450
North Finance
(Bermuda) Limited
144A
7.000% 9/15/2005 2,000,000 2,074,540
Penske Truck Leasing
Co., L.P.
7.750% 5/15/1999 1,500,000 1,523,745
Ralston Purina Company*
7.750% 10/01/2015 2,000,000 2,229,360
Raytheon Company
6.750% 8/15/2007 2,500,000 2,563,575
Rolls-Royce Capital
Inc.
7.125% 7/29/2003 2,000,000 2,073,920
Scholastic Corporation
7.000% 12/15/2003 3,000,000 3,097,440
Sears Roebuck
Acceptance Corp.
6.750% 9/15/2005 3,500,000 3,604,195
Texaco Inc.
8.500% 2/15/2003 2,500,000 2,746,575
Thomas & Betts
Corporation*
8.250% 1/15/2004 2,500,000 2,717,425
Time Warner Inc.
Pass-Thru Asset
Trust 1997-1 144A
6.100% 12/30/2001 4,000,000 3,980,480
TTX Company 144A
6.290% 5/15/2002 5,000,000 5,018,750
U S West Capital
Funding, Inc.*
6.125% 7/15/2002 2,000,000 2,000,040
United Air Lines. Inc.
10.110% 2/19/2006 907,272 1,031,668
US Air, Inc., Class B
7.500% 10/15/2009 1,409,385 1,493,681
Valassis
Communications, Inc.
9.550% 12/01/2003 2,000,000 2,244,540
Valero Pass-Through
Asset Trust
1997-1 144A
6.750% 12/15/2002 2,000,000 2,023,320
WorldCom, Inc.
7.750% 4/01/2007 2,000,000 2,169,320
WorldCom, Inc.
9.375% 1/15/2004 1,525,000 1,601,738
------------
TOTAL CORPORATE DEBT 206,682,905
============
(Cost $196,417,203)
NON - U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 1.7%
Merrill Lynch Mortgage Investments -- 0.9%
Collateralized Mortgage Obligations
Merrill Lynch
Mortgage Investors,
Inc., Series 1997- Cl-
CTL, A-1
6.310% 11/15/2026 4,426,833 4,454,500
============
(Continued)
24 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Market Value
------ ------------
Prudential Home Mortgage Securities -- 0.8%
Collateralized Mortgage Obligations
Prudential Home
Mortgage Securities
1993-26 Class A6
6.750% 7/25/2008 $ 4,000,000 $ 4,035,000
------------
(Cost $8,382,524) 8,489,500
============
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 16.7%
Federal Home Loan Mortgage Corporation
(FHLMC) -- 1.0%
Collateralized Mortgage Obligations -- 0.9%
FHLMC Series 1322
Class G
7.500% 2/13/2007 2,000,000 2,044,360
FHLMC Series 1460
Class H
7.000% 5/15/2007 2,000,000 2,068,740
FHLMC Series 1490
Class PJ
6.000% 5/15/2007 600,000 600,358
------------
4,713,658
============
Pass-Through Securities -- 0.1%
FHLMC
9.000% 3/01/2017 246,396 261,333
------------
4,974,991
============
Federal National Mortgage Association
(FNMA) -- 3.4%
Collateralized Mortgage Obligations -- 3.3%
FNMA Series 1989-20
Class A
6.750% 4/25/2018 4,068,852 3,940,398
FNMA Series 1993-
134 Class GA
6.500% 2/25/2007 5,000,000 5,073,400
FNMA Series 1993-
191 Class PD
5.400% 3/25/2004 403,287 401,646
FNMA Series 1993-
221 Class D
6.000% 12/25/2008 2,500,000 2,505,450
FNMA Series 1996-54
Class C
6.000% 9/25/2008 5,000,000 4,907,150
------------
16,828,044
============
Pass-Through Securities -- 0.1%
FNMA
8.000% 5/01/2013 306,987 311,315
------------
17,139,359
============
Government National Mortgage Association
(GNMA) -- 11.1%
Collateralized Mortgage Obligations -- 0.3%
JHM Acceptance
Corporation Series E
Class 5
8.960% 4/01/2019 1,376,133 1,419,137
============
Pass-Through Securities -- 10.8%
GNMA
5.500% 10/20/2027 -
12/20/2027 6,676,590 6,737,081
GNMA
6.000% 5/20/2027 -
12/20/2027 20,202,964 20,498,985
GNMA
6.875% 1/20/2027 5,608,210 5,692,333
GNMA
7.000% 8/15/2023 -
11/15/2023 4,724,197 4,806,866
GNMA
7.500% 1/15/2017 -
6/15/2017 6,126,760 6,350,752
GNMA
8.000% 4/15/2001 -
1/15/2009 10,601,522 11,169,764
GNMA
9.000% 12/15/2004 -
10/15/2009 358,041 390,195
------------
55,645,976
------------
57,065,113
============
U.S. Government Guaranteed Notes -- 1.2%
1994-A Baxter
Springs, KS
5.930% 8/01/1999 700,000 700,875
1994-A Erie, PA
5.930% 8/01/1999 1,590,000 1,591,988
1994-A Los Angeles
County, CA
5.930% 8/01/1999 190,000 190,238
1994-A Montgomery
County, PA
5.930% 8/01/1999 150,000 150,188
1994-A Pohatcong
Township, NJ
5.930% 8/01/1999 255,000 255,319
1994-A Rochester, NY
5.930% 8/01/1999 135,000 135,169
1994-A Sacramento,
CA
5.930% 8/01/1999 60,000 60,075
1994-A Santa Ana,
CA
5.930% 8/01/1999 920,000 921,150
U.S. Dept. of Housing
and Urban
Development, Series
1996-A
6.670% 8/01/2001 2,000,000 2,038,740
------------
6,043,742
============
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 85,223,205
============
(Cost $83,019,675)
U.S. TREASURY OBLIGATIONS -- 23.2%
U.S. Treasury Bonds -- 6.8%
U.S. Treasury Bond
7.500% 11/15/2016 4,000,000 4,801,880
U.S. Treasury Bond
8.875% 8/15/2017 21,800,000 29,719,504
------------
34,521,384
============
U.S. Treasury Notes --- 8.3%
U.S. Treasury Note
5.625% 11/30/1999 18,800,000 18,823,500
U.S. Treasury Note
6.250% 2/28/2002 3,750,000 3,836,138
U.S. Treasury Note
7.500% 2/15/2005 5,000,000 5,534,350
U.S. Treasury Note
7.875% 11/15/2004 10,090,000 11,332,281
U.S. Treasury Note
8.000% 5/15/2001 3,000,000 3,194,070
------------
42,720,339
============
U.S. Treasury Strips -- 8.1%
U.S. Treasury Strip
Principal Only
0.000% 8/15/2015 2,250,000 849,465
U.S. Treasury Strip
Principal Only
0.000% 5/15/2016 112,000,000 40,488,000
------------
41,337,465
============
TOTAL U.S. TREASURY
OBLIGATIONS 118,579,188
============
(Cost $114,343,234)
TOTAL BONDS & NOTES 452,836,120
============
SHORT-TERM INVESTMENTS -- 10.9%
Commercial Paper
Carter Holt Harvey
Limited
5.800% 7/07/1998 2,755,000 2,752,337
Central and South
West Corporation
5.700% 7/08/1998 5,570,000 5,563,826
Comdisco, Inc.
5.720% 7/31/1998 680,000 676,759
(Continued)
The accompanying notes are an integral part of the financial statements. 25
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Market Value
------ ------------
ConAgra, Inc.
5.860% 7/10/1998 $3,920,000 $3,914,257
ConAgra, Inc.
5.920% 7/15/1998 4,135,000 4,125,480
CSX Corporation
5.750% 7/16/1998 4,245,000 4,234,830
CSX Corporation
5.900% 7/14/1998 2,380,000 2,374,929
Harris Corporation
5.950% 7/06/1998 3,825,000 3,821,839
Humana, Inc.
5.720% 7/24/1998 3,400,000 3,387,575
Humana, Inc.
5.800% 7/01/1998 5,000,000 5,000,000
Illinois Power
Company
5.750% 7/17/1998 6,700,000 6,682,878
IMC Global Inc.
5.720% 7/09/1998 5,300,000 5,293,263
Pennsylvania Power &
Light Company
5.900% 7/21/1998 4,000,000 3,986,889
Textron Financial
Corporation
7.000% 7/02/1998 4,000,000 3,999,222
------------
TOTAL SHORT-TERM
INVESTMENTS 55,814,084
============
(At Amortized Cost)
TOTAL INVESTMENTS -- 99.5% 508,650,204
(Cost $491,703,700)+
Other Assets/
(Liabilities) - 0.5% 2,327,432
============
Net Assets -- 100.0% $510,977,636
============
Notes to Portfolio of Investments
+Aggregate cost for Federal tax purposes (Note 7)
144A: Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
* All or a portion of this security is segregated to cover forward purchase
commitments. (Note 2).
The remainder of this page intentionally left blank.
26 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund -- Financial Statements
- --------------------------------------------------------------------------------
Statement of
Assets and
Liabilities
June 30, 1998
(Unaudited)
-------------
Assets:
Investments, at value (cost $435,889,616) (Note 2) ........ $452,836,120
Short-term investments, at amortized cost (Note 2) ........ 55,814,084
------------
Total Investments ....................................... 508,650,204
Cash ...................................................... 4,606
Receivables from:
Investments sold ........................................ 5,937
Fund shares sold ........................................ 735,096
Interest ................................................ 5,788,314
------------
Total assets ........................................... 515,184,157
------------
Liabilities:
Payables for:
Investments purchased ................................... 3,410,559
Fund shares redeemed .................................... 478,148
Settlement of investments purchased on a
forward commitment basis (Note 2) ...................... 66,151
Directors' fees and expenses (Note 3) ................... 5,430
Affiliates (Note 3):
Investment management fees ............................. 199,336
Administration fees .................................... 34,517
Service fees ........................................... 84
Accrued expenses and other liabilities .................... 12,296
------------
Total liabilities ...................................... 4,206,521
------------
Net assets ................................................ $510,977,636
============
Net assets consist of:
Paid-in capital ........................................... $473,759,756
Undistributed net investment income ....................... 15,655,732
Accumulated net realized gain on investments .............. 4,681,795
Net unrealized appreciation on investments
and forward commitments ................................ 16,880,353
------------
$510,977,636
============
Net assets:
Class A ................................................... $ 136,157
============
Class Y ................................................... $ 279,141
============
Class S ................................................... $510,562,338
============
Shares outstanding:
Class A ................................................... 13,112
============
Class Y ................................................... 26,824
============
Class S ................................................... 45,359,748
============
Net asset value, offering price and redemption price per share:
Class A ................................................... $ 10.38
============
Class Y ................................................... $ 10.41
============
Class S ................................................... $ 11.26
============
The accompanying notes are an integral part of the financial statements. 27
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund -- Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of
Operations
<TABLE>
<CAPTION>
Six months ended
June 30, 1998
(Unaudited)
----------------
<S> <C>
Investment income:
Interest ........................................................... $ 15,873,811
----------------
Expenses (Note 1):
Investment management fees (Note 3) ................................ 1,083,805
Custody fees ....................................................... 25,839
Audit and legal fees ............................................... 5,308
Directors' fees (Note 3) ........................................... 9,579
----------------
1,124,531
Administration fees (Note 3):
Class A .......................................................... 320
Class Y .......................................................... 384
Class S .......................................................... 186,980
Service fees (Note 3):
Class A .......................................................... 165
----------------
Total expenses .................................................. 1,312,380
----------------
Net investment income .............................................. 14,561,431
----------------
Realized and unrealized gain (loss):
Net realized gain on investment transactions and forward commitments 4,611,985
Net change in unrealized appreciation (depreciation) on
investments and forward commitments .............................. 421,047
----------------
Net realized and unrealized gain ................................ 5,033,032
----------------
Net increase in net assets resulting from operations ............... $ 19,594,463
================
</TABLE>
28 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statements of
Changes in Net
Assets
<TABLE>
<CAPTION>
Six months ended
June 30, 1998 Year ended
(Unaudited) December 31, 1997
---------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income ....................................... $ 14,561,431 $ 26,356,459
Net realized gain on investment transactions
and forward commitments .................................... 4,611,985 2,197,948
Net change in unrealized appreciation (depreciation) on
investments and forward commitments ........................ 421,047 11,750,983
---------------- -----------------
Net increase in net assets resulting from operations ....... 19,594,463 40,305,390
---------------- -----------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1* .................................................... -- (5,999)
Class 2* .................................................... -- (6,818)
Class 3* .................................................... -- (7,342)
Class S .................................................... -- (27,133,147)
---------------- -----------------
Total distributions from net investment income ............. -- (27,153,306)
---------------- -----------------
From net realized gains:
Class 1* .................................................... -- (55)
Class 2* .................................................... -- (55)
Class 3* .................................................... -- (56)
Class S .................................................... -- (196,689)
---------------- -----------------
Total distributions from net realized gains ................ -- (196,855)
---------------- -----------------
Net fund share transactions (Note 5):
Class 1* .................................................... (131,117) 6,094
Class 2* .................................................... (133,440) 6,894
Class 3* .................................................... (134,802) 7,406
Class A ..................................................... 131,117 --
Class Y ..................................................... 268,242 --
Class S ..................................................... 35,053,014 86,289,359
---------------- -----------------
Increase in net assets from net fund share transactions .... 35,053,014 86,309,753
---------------- -----------------
Total increase in net assets ................................ 54,647,477 99,264,982
Net assets:
Beginning of period ......................................... 456,330,159 357,065,177
---------------- -----------------
End of period (including undistributed net investment income
of $15,655,732 and $1,094,301, respectively) ............... $ 510,977,636 $ 456,330,159
================ =================
</TABLE>
* Effective January 1, 1998, Class 1, Class 2, and Class 3 shares were
terminated (See Note 1).
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund -- Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class A Class Y
------- -------
Six months Six months
ended 6/30/98 ended 6/30/98
(Unaudited) (Unaudited)
--------- ---------
<S> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.00
--------- ---------
Income (loss) from investment operations:
Net investment income 0.27 0.30
Net realized and unrealized gain (loss) on investments 0.11 0.11
--------- ---------
Total income (loss) from investment operations 0.38 0.41
--------- ---------
Net asset value, end of period $ 10.38 $ 10.41
========= =========
Total Return 3.80% 4.10%
Ratios / Supplemental Data:
Net assets, end of period (000s) $ 136 $ 279
Net expenses to average daily net assets 1.20%* 0.75%*
Net investment income to average daily net assets 5.39%* 5.84%*
Portfolio turnover rate 20% 20%
</TABLE>
<TABLE>
<CAPTION>
Class S (1)
-----------
Six months
ended 6/30/98 Year ended Year ended Year ended Period ended
(Unaudited) 12/31/97 12/31/96 12/31/95 12/31/94**
--------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.81 $ 10.45 $ 10.75 $ 9.84 $ 10.00
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income 0.32 0.69*** 0.67*** 0.72*** 0.18
Net realized and unrealized gain (loss) on investments 0.13 0.33 (0.37) 1.17 (0.16)
-------- -------- -------- -------- --------
Total income (loss) from investment operations 0.45 1.02 0.30 1.89 0.02
-------- -------- -------- -------- --------
Less distributions to shareholders:
From net investment income -- (0.64) (0.54) (0.65) (0.18)
From net realized gains -- (0.02) (0.06) (0.33) --
-------- -------- -------- -------- --------
Total distributions -- (0.66) (0.60) (0.98) (0.18)
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.26 $ 10.81 $ 10.45 $ 10.75 $ 9.84
======== ======== ======== ======== ========
Total Return @ 4.16% 9.78% 2.80% 19.15% 0.20%
Ratios / Supplemental Data:
Net assets, end of period (000s) $510,562 $455,931 $356,699 $253,540 $194,150
Net expenses to average daily net assets# 0.5446%* 0.5393% 0.5130% 0.5130% 0.5130%*
Net investment income to average daily net assets 6.05%* 6.34% 6.26% 6.56% 6.86%*
Portfolio turnover rate 20% 54% 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: N/A 0.5512% 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.
(1)Class S shares were previously designated as Class 4 shares.
@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.
30 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the The objective and policies of the Fund are to:
investment
objective and . achieve a high total rate of return over an extended period
policies for the of time consistent with the preservation of capital values
MassMutual
Balanced Fund? . invest in a diversified portfolio of equity securities,
fixed income securities and money market instruments
. manage the allocation of investments, under normal
circumstances, in three sectors within the following
ranges:
Prime Sector no more than 35% of net assets
Core Bond Sector no more than 35% of net assets
Value Equity Sector no more than 65% of net assets
How did the Fund During the first half of 1998, large capitalization growth
perform during stocks continued to dominate the marketplace. This put a
the first half negative spin on our performance given that more than half of
of 1998? the portfolio was invested in value-oriented stocks. Class S
shares of the Fund delivered a net return of 6.55 percent,
finishing the period behind the 9.79 percent return of the
Lipper Balanced Fund Index, an unmanaged index of stock and
bonds.
As a balanced Our positioning at the end of June was 53 percent in stocks,
portfolio of 17 percent in bonds and 30 percent in money market
stocks and bonds, securities. This is a slight change from our positioning at
what was the the end of 1997, when stocks, bonds and money market
Fund's percentage securities represented 57, 15 and 28 percent, respectively.
allocation in each
of these The equity component was lowered slightly in March to reflect
categories at the the fact that common stocks are currently at very high
end of the period? valuations. The bond component of the Fund was
Explain any correspondingly modestly increased.
change from last
fiscal year.
Within your stock In contrast to our success in the healthcare sector in 1997,
positioning, in we did not benefit from our healthcare holdings in the first
what types of six months of 1998. Three of our 10 largest stock holdings
stocks did you were healthcare companies: Bristol-Myers, Schering-Plough and
focus your Becton, Dickinson. These were not our best performers as we
investment closed the second quarter.
selection during
the period, and Other sources of the Fund's underperformance across several
how did this different sectors included AMP, an electrical equipment and
contribute to Fund electronics company; Dover Corporation, a machinery company;
performance? Hewlett-Packard, a computer and office equipment provider;
and Minnesota Mining & Manufacturing, a diversified
manufacturer of industrial, commercial and health care
products.
In general, our stock portfolio did not perform well as the
result of investors favoring higher growth, lower
dividend-paying companies. When you review history in terms
of the two distinct styles of investing--growth versus
value--it shows a cyclical inverse relationship between the
two styles. At present, the growth style has been
outperforming value investing in one of the longest periods
of relative outperformance by one of the styles.
How did you Within our bond portfolio, our sector diversification
position the bond remained fairly consistent with last year. We continue to
portfolio, and focus on investment-grade fixed income securities. As of June
what impact did 30, 1998, at least half of our bond holdings were AAA rated
this have on the corporate bonds, while the remainder was invested in A and
Fund? BBB rated bonds. Therefore, the average credit quality rating
of our bond portion was AA.
Do you expect to We continue to carefully study our exposure to the equity
make any markets. However, we are reluctant to lower our stock
significant component any further because our holdings are undervalued
changes to the and the market has not yet recognized what we believe to be
Fund's allocation their true worth. We are waiting to see appropriate
in the near-term? valuations before we make any decisions to sell.
Looking ahead, In spite of the recent strong performance from large,
what is your growth-oriented stocks, we believe that our value-oriented
outlook for the stock selection strategy continues to make sense for the
economy and the Balanced Fund. There is a tremendous amount of value in the
Fund in the second stock component of the portfolio, and we expect that this--in
half of 1998? combination with our fixed income holdings--will benefit the
Fund and our shareholders over the long term.
31
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund -- Portfolio Manger Report (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Balanced
Fund Class S and the Lipper Balanced Fund Index
- --------------------------------------------------------------------------------
MassMutual Balanced Fund
Total Return Year-to-date One Year Average Annual
1/1/98 - 6/30/98 7/1/97 - 6/30/98 10/3/94 - 6/30/98
Class S 6.55% 14.78% 15.87%
- --------------------------------------------------------------------------------
Lipper Balanced 9.79% 18.59% 16.28%
Fund Index
Standard & Poor's 17.71% 30.16% 27.73%
500 Composite Index
Lehman Brothers 4.17% 11.29% 8.82%
Government/Corporate
Bond Index
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
[LINE GRAPH APPEARS HERE]
Lehman Bros
Class S Lipper Balanced Gov't Cap S&P 500 Index
10/3/94 10,000 10,000 10,000 10,000
12/94 10,029 9,880 10,037 9,998
6/95 11,179 11,208 11,220 12,019
12/95 12,164 12,306 11,968 13,755
6/96 12,788 12,860 11,743 15,144
12/96 13,725 13,960 12,315 16,915
6/97 15,126 15,522 12,652 20,401
12/97 16,294 16,612 13,516 22,559
6/98 17,361 18,328 14,080 26,554
Hypothetical Investments in MassMutual Balanced
Fund Class A and Class Y and the Lipper Balanced
Fund Index
- --------------------------------------------------------------------------------
MassMutual Balanced Fund
Total Return Year-to-date
1/1/98 - 6/30/98
Class A 6.20%
Class Y 6.40%
- --------------------------------------------------------------------------------
Lipper Balanced 9.79%
Fund Index
Standard & Poor's 17.71%
500 Composite Index
Lehman Brothers 4.17%
Government/Corporate
Bond Index
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Lehman Bros
Class A Class Y Lipper Balanced Gov't Cap S&P 500 Index
12/97 10,000 10,000 10,000 10,000 10,000
1/98 10,020 10,020 10,071 10,141 10,110
2/98 10,400 10,410 10,470 10,105 10,839
3/98 10,730 10,740 10,790 10,144 11,394
4/98 10,690 10,710 10,865 10,193 11,509
5/98 10,600 10,620 10,782 10,247 11,311
6/98 10,620 10,640 10,979 10,417 11,771
Past performance is not predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund, while the Lipper Balanced Fund Index, the Lehman Brother
Government Corporate Bond Index, and the Standard & Poor's 500 Composite Index
are unmanaged and do not incur expenses, and cannot be purchased directly by
investors.
- --------------------------------------------------------------------------------
MassMutual Balanced Fund
Asset Allocation
on 6/30/98
[PIE CHART APPEARS HERE]
Common Stock 53%
Bonds 17%
Short-term Issues 30%
--------------------------------
MASSMUTUAL BALANCED FUND
LARGEST STOCK HOLDINGS (6/30/98)
--------------------------------
Bristol-Myers Squibb Company
General Electric Company
Becton, Dickinson and Company
ConAgra, Inc.
Goodyear Tire & Rubber Company
Hewlett-Packard Company
Schering-Plough Corp.
The McGraw-Hill Companies, Inc.
International Business Machines
Corporation
Kimberly-Clark Corporation
32
<PAGE>
- -------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio of Investments
- -------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1998
Number of
Shares Market Value
------ ------------
EQUITIES -- 53.0%
Aerospace & Defense -- 1.9%
Raytheon Company
Class A 34,000 $ 1,959,250
Raytheon Company
Class B 92,000 5,439,500
TRW Inc. 108,500 5,926,813
-----------
13,325,563
-----------
Apparel, Textiles & Shoes -- 0.7%
VF Corporation 89,000 4,583,500
-----------
Automotive & Parts-- 2.3%
Ford Motor Company 63,300 3,734,700
Genuine Parts
Company 154,500 5,339,906
Goodyear Tire &
Rubber Company 113,700 7,326,544
-----------
16,401,150
-----------
Banking, Savings & Loans -- 3.5%
The Bank of New
York Company,
Incorporated 101,000 6,129,438
Comerica, Incorporated 79,500 5,266,875
Norwest Corporation 114,000 4,260,750
Pacific Century
Financial Corporation 150,300 3,607,200
Wachovia Corp. 60,100 5,078,450
-----------
24,342,713
-----------
Beverages -- 0.7%
Brown-Forman
Corporation (Class B) 80,700 5,184,975
-----------
Chemicals -- 2.9%
Air Products and
Chemicals, Inc. 96,000 3,840,000
Engelhard Corporation 205,000 4,151,250
The Lubrizol
Corporation 68,300 2,066,075
Nalco Chemical
Company 118,500 4,162,313
Rohm & Haas
Company 60,000 6,236,250
-----------
20,455,888
-----------
Commercial Services -- 0.5%
Pinnacle West Capital
Corporation 76,200 3,429,000
-----------
Computers & Office Equipment -- 4.2%
Electronic Data
Systems Corporation 79,500 3,180,000
Hewlett-Packard
Company 122,000 7,304,750
International Business
Machines Corporation 63,000 7,233,188
Pitney Bowes, Inc. 130,000 6,256,250
Xerox Corporation 62,000 6,300,750
-----------
30,274,938
-----------
Containers -- 1.4%
Bemis Company, Inc. 72,800 2,975,700
Crown Cork & Seal
Company, Inc. 72,000 3,420,000
Temple-Inland, Inc. 63,000 3,394,125
-----------
9,789,825
-----------
Cosmetics & Personal Care -- 1.0%
Kimberly-Clark
Corporation 145,800 6,688,575
-----------
Drugs -- 0.6%
Pharmacia & Upjohn,
Inc. 94,000 4,335,750
-----------
Electric Utilities -- 1.1%
Dominion Resources,
Inc. 90,000 3,667,500
SCANA Corporation 130,500 3,890,531
-----------
7,558,031
-----------
Electrical Equipment &
Electronics -- 3.4%
AMP Incorporated 156,700 5,386,563
General Electric
Company 103,000 9,373,000
Honeywell Inc. 60,400 5,047,175
Hubbell, Incorporated
(Class B) 96,022 3,996,916
-----------
23,803,654
-----------
Energy -- 3.2%
Amoco Corporation 148,000 6,160,500
Kerr-McGee
Corporation 43,500 2,517,563
Mobil Corporation 82,000 6,283,250
Teco Energy, Inc. 117,000 3,137,063
Unocal Corporation 130,000 4,647,500
-----------
22,745,876
-----------
Financial Services -- 0.7%
American Express
Company 41,500 4,731,000
-----------
Foods -- 2.6%
Archer-Daniels-Midland
Company 180,600 3,499,125
BEST FOODS 66,000 3,832,125
ConAgra, Inc. 236,400 7,490,925
General Mills, Inc. 53,000 3,623,875
-----------
18,446,050
-----------
Forest Products & Paper -- 0.6%
Weyerhaeuser Company 84,600 3,907,463
-----------
Hardware & Tools -- 0.5%
The Stanley Works 77,000 3,200,313
-----------
Healthcare -- 4.2%
Becton, Dickinson and
Company 102,000 7,917,750
Bristol-Myers Squibb
Company 123,000 14,137,313
Schering-Plough Corp. 79,600 7,293,350
-----------
29,348,413
===========
(Continued)
The accompanying notes are an integral part of the financial statements
33
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Number of
Shares Market Value
------ ------------
Industrial Distribution -- 0.7%
W.W. Grainger, Inc. 96,000 $ 4,782,000
--------------
Industrial Transportation -- 1.5%
Burlington Northern
Santa Fe Corp. 51,900 5,095,931
Norfolk Southern
Corporation 173,900 5,184,394
--------------
10,280,325
--------------
Insurance -- 3.9%
American General
Corporation 70,000 4,983,125
CIGNA Corporation 30,000 2,070,000
Jefferson-Pilot
Corporation 58,875 3,411,070
Marsh & McLennan
Companies, Inc. 105,000 6,345,938
MBIA, Inc. 76,800 5,750,400
SAFECO Corporation 109,000 4,952,688
--------------
27,513,221
--------------
Machinery & Components -- 0.6%
Dover Corporation 124,000 4,247,000
--------------
Manufacturing -- 0.6%
Armstrong World
Industries, Inc. 61,000 4,109,875
--------------
Miscellaneous -- 0.7%
Minnesota Mining &
Manufacturing
Company 56,200 4,618,938
--------------
Oil & Gas--1.5%
ENI SPA, Sponsored
ADR 62,400 4,056,000
Occidental Petroleum
Corporation 128,500 3,469,500
USX-Marathon Group 83,200 2,854,800
--------------
10,380,300
--------------
Publishing & Printing -- 1.0%
The McGraw-Hill
Companies, Inc. 89,000 7,259,055
--------------
Retail -- 1.5%
The May Department
Stores Company 73,500 4,814,250
Sears Roebuck and Co. 98,000 5,984,125
--------------
10,798,375
--------------
Retail-Grocery -- 1.5%
Albertson's, Inc. 111,100 5,756,369
American Stores
Company 185,000 4,474,688
--------------
10,231,057
--------------
Telecommunications-- 0.9%
GTE Corporation 116,000 6,452,500
--------------
Telephone Utilities -- 1.5%
Ameritech Corporation 122,000 5,474,750
Frontier Corporation 159,500 5,024,250
--------------
10,499,000
--------------
Tobacco -- 1.1%
Fortune Brands, Inc. 105,400 4,051,313
UST Inc. 136,800 3,693,600
--------------
7,744,913
--------------
TOTAL EQUITIES 371,469,236
--------------
(Cost $236,599,921)
Principal
Amount Market Value
------ ------------
BONDS & NOTES -- 16.9%
ASSET BACKED SECURITIES -- 1.2%
California
Infrastructure PG&E-
I,1997-1. Class A6
6.320% 9/25/2005 $ 150,000 $ 152,624
California
Infrastructure SCE-
1,1997-1, Class A5
6.280% 9/25/2005 150,000 152,867
California
Infrastructure
SDG&E-1,1997-l,
Class A5
6.190% 9/25/2005 100,000 101,565
Capita Equipment
Receivables Trust
1996-1, Class A4
6.280% 6/15/2000 1,000,000 1,003,980
Case Equipment Loan
Trust 1998-A,
Class A4
5.830% 2/15/2005 750,000 750,158
Caterpillar Financial
Asset Trust, 1997-B,
Class A3
6.160% 9/25/2003 1,000,000 1,004,920
Chase Manhattan Auto
Owner Trust 1998-A,
Class A4
5.800% 12/16/2002 1,000,000 1,000,040
Chase Manhattan RV
Owner Trust 1997-A,
Class A7
6.140% 10/16/2006 1,000,000 1,002,460
Ford Credit Auto
Owner Trust 1996-B,
Class A-4
6.300% 1/15/2001 1,000,000 1,005,000
Metlife Capital
Equipment Loan Trust
Series 1997-A,
Class A
6.850% 5/20/2008 750,000 776,576
Railcar Trust No.
1992-1
7.750% 6/01/2004 345,335 361,883
Travelers Funding Ltd.
Class A-1
6.300% 2/15/2014 700,000 682,409
World Omni 1996-A
Automobile Lease
Securitization Trust,
Class Al
6.300% 6/25/2002 634,056 635,438
--------------
TOTAL ASSET BACKED
SECURITIES 8,629,920
--------------
(Cost $8,590,435)
CORPORATE DEBT -- 7.3%
AirTouch
Communications, Inc.
7.500% 7/15/2006 1,000,000 1,073,090
America West Airlines
1996-1, Class A
6.850% 7/02/2009 990,374 1,004,517
American Airlines
1994-A Pass-Through
Trusts, Class A4
9.780% 11/26/2011 975,556 1,171,248
AMR Corporation
9.000% 8/01/2012 500,000 589,900
Analog Devices, Inc.
6.625% 3/01/2000 500,000 503,480
Archer-Daniels-Midland
Company
6.750% 12/15/2027 350,000 362,156
Associates Corporation
of North America
6.500% 8/15/2002 500,000 507,020
Associates Corporation
of North America
6.750% 8/01/2001 1,000,000 1,019,030
Barrick Gold
Corporation
7.500% 5/01/2007 1,000,000 1,070,050
Bell Atlantic Financial
Services, Inc.
6.610% 2/04/2000 1,000,000 1,011,550
BHP Finance (USA)
Limited
6.420% 3/01/2026 1,000,000 998,660
Boston Scientific
Corporation
6.625% 3/15/2005 1,000,009 1,010,580
(Continued)
34 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Market Value
------ ------------
Carlisle Companies
Incorporated
7.250% 1/15/2007 $ 750,000 $ 786,015
Celulosa Arauco
Constitucion
6.950% 9/15/2005 500,000 479,605
Champion International
Corporation
6.400% 2/15/2026 1,000,000 1,033,440
The Charles Schwab
Corporation
6.250% 1/23/2003 1,000,000 1,006,830
The CIT Group
Holdings, Inc.
6.375% 10/01/2002 1,000,000 1,009,420
CITGO Petroleum
Corporation
7.875% 5/15/2006 250,000 263,878
Comcast Cable
Communications, Inc.
8.375% 5/01/2007 750,000 838,763
Continental Airlines,
Inc., Series 1996-2B
8.560% 7/02/2014 474,463 547,744
Continental Airlines,
Inc., Series 1996-B
7.820% 4/15/2015 480,548 525,263
Crown Cork & Seal
Company, Inc.
6.750% 12/15/2003 1,000,000 1,020,220
CSX Corporation
7.250% 5/01/2027 1,200,000 1,354,908
Dana Corporation
6.500% 3/15/2008 500,000 507,825
Delta Air Lines, Inc.,
1992, Series C
8.540% 1/02/2007 399,719 440,299
Dover Corporation
6.250% 6/01/2008 500,000 504,355
Dover Corporation
6.650% 6/01/2028 500,000 509,265
English China Clays
Delaware Inc.
7.375% 10/01/2002 500,000 520,730
ERAC USA Finance
Company 144A
6.750% 5/15/2007 1,250,000 1,262,588
FBG Finance Limited
144A
7.875% 6/01/2016 1,000,000 1,134,610
Fletcher Challenge
Capital Canada Inc.
6.750% 3/24/2005 500,000 501,385
Fletcher Challenge
Capital Canada Inc.
7.750% 6/20/2006 500,000 528,030
General American
Transportation
Corporation
6.750% 3/01/2006 1,000,000 1,018,130
General Electric
Capital Corporation
6.500% 11/01/2006 250,000 258,128
General Mills, Inc.
8.900% 6/15/2006 500,000 584,340
The Goldman Sachs
Group, L.P 144A
6.200% 2/15/2001 1,000,000 1,007,610
GTE Corporation
9.100% 6/01/2003 275,000 308,435
Hershey Foods
Corporation
7.200% 8/15/2027 1,250,000 1,391,200
Hilton Hotels
Corporation
7.000% 7/15/2004 450,000 444,069
ICI Wilmington, Inc.
7.050% 9/15/2007 500,000 525,935
Interpool, Inc.
7.350% 8/01/2007 500,000 503,866
Korea Development
Bank
7.375% 9/17/2004 350,000 288,862
LASMO (USA) Inc.
6.750% 12/15/2007 1,250,000 1,237,388
Leucadia National
Corporation
7.750% 8/15/2013 1,000,000 1,062,040
Lockheed Martin
Corporation
7.700% 6/15/2008 1,000,000 1,098,790
MAPCO Inc.
7.250% 3/01/2009 1,000,000 1,061,290
Millipore Corporation
7.500% 4/01/2007 1,000,000 1,069,550
Mobil Corporation
8.625% 8/15/2021 1,000,000 1,280,060
Morgan Stanley Group,
Inc.
6.875% 3/01/2007 500,000 518,080
Newmont Mining
Corporation
8.625% 4/01/2002 1,000,000 1,069,480
News America
Holdings Incorporated
9.250% 2/01/2013 1,000,000 1,216,240
Norfolk Southern
Corporation
7.050% 5/01/2037 1,350,000 1,433,552
North Finance
(Bermuda) Limited
144A
7.000% 9/15/2005 1,000,000 1,037,270
Raytheon Company
6.750% 8/15/2007 500,000 512,715
Rolls-Royce Capital
Inc.
7.125% 7/29/2003 1,000,000 1,036,960
Scholastic Corporation
7.000% 12/15/2003 750,000 774,360
The E. W. Scripps
Company
6.625% 10/15/2007 1,000,000 1,026,230
Thomas & Betts
Corporation
8.250% 1/15/2004 500,000 543,485
Time Warner Inc.
7.750% 6/15/2005 1,000,000 1,073,260
Time Warner Inc.
Pass-Thru Asset
Trust 1997-1 144A
6.100% 12/30/2001 750,000 746,340
US Air, Inc., Class B
7.500% 10/15/2009 469,795 497,894
Valero Pass-Through
Asset Trust
1997-1 144A
6.750% 12/15/2002 500,000 505,830
WorldCom, Inc.
7.750% 4/01/2007 500,000 542,330
WorldCom, Inc.
9.375% 1/15/2004 435,000 456,889
------------
TOTAL Corporate Debt 51,227,062
(Cost $48,257,494) ------------
NON - U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 0.1%
Merrill Lynch Mortgage Investments
Collateralized Mortgage Obligations
Merrill Lynch
Mortgage Investors,
Inc., Series 1997- CI-
CTL, A-I
6.310% 11/15/2026 983,741 989,889
------------
(Cost $983,894)
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 3.6%
Federal Home Loan Mortgage Corporation
(FHLMC) -- 0.6%
Collateralized Mortgage Obligations -- 0.6%
FHLMC Series 1322
Class G
7.500% 2/15/2007 1,000,000 1,022,180
FHR Series 1607,
Class G
6.000% 8/15/2013 3,000,000 2,996,250
------------
4,018,430
------------
(Continued)
The accompanying notes are an integral part of the financial statements. 35
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Market Value
------ ------------
Pass-Through Securities -- 0.0%
FHLMC
9.000% 3/01/2017 $ 123,198 $ 130,666
--------------
4,149,096
--------------
Federal National Mortgage Association
(FNMA) -- 0.7%
Collateralized Mortgage Obligations -- 0.7%
FNMA Series 1993-
134 Class GA
6.500% 2/25/2007 1,000,000 1,014,680
FNMA Series 1993-
191 Class PD
5.400% 3/25/2004 268,858 267,764
FNMA Series 1993-
221 Class D
6.000% 12/25/2008 1,000,000 1,002,180
FNMA Series 1996-54
Class C
6.000% 9/25/2008 2,000,000 1,962,860
--------------
4,247,484
--------------
Pass-Through Securities -- 0.0%
FNMA
8.000% 5/01/2013 306,987 311,315
--------------
4,558,799
--------------
Government National Mortgage Association
(GNMA) -- 1.5%
Pass-Through Securities -- 1.5%
GNMA
5.500% 10/20/2027 -
11/20/2027 1,820,658 1,837,153
GNMA
6.000% 5/20/2027 2,206,362 2,241,510
GNMA
7.000% 8/15/2023 -
10/15/2023 912,892 928,868
GNMA
7.500% 10/15/2006 -
6/15/2017 2,311,315 2,399,820
GNMA
8.000% 11/15/2004 -
1/15/2009 2,481,487 2,614,496
GNMA
9.000% 12/15/2008 -
5/15/2009 403,164 439,366
--------------
10,461,213
--------------
U.S. Government Guaranteed Notes -- 0.8%
1991-A Fairfax
County, VA
8.740% 8/01/2001 200,000 215,436
1991-A Jefferson
Park, CA
8.740% 8/01/2001 1,740,000 1,874,293
1991-A Monroe
County, NY
8.740% 8/01/2001 500,000 538,590
1991-A Rochester, NY
8.740% 8/01/2001 60,000 64,631
U.S. Dept. of Housing
and Urban
Development, Series
1995-A
8.240% 8/01/2002 3,000,000 3,256,710
--------------
5,949,660
--------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 25,118,768
--------------
(Cost $24,219,555)
U.S. TREASURY OBLIGATIONS -- 4.7%
U.S. Treasury Bonds -- 3.0%
U.S. Treasury Bond
7.500% 11/15/2016 10,325,000 12,394,853
U.S. Treasury Bond
8.750% 5/15/2017 6,000.000 8,080,320
--------------
20,475.173
--------------
U.S. Treasury Notes -- 1.4%
U.S. Treasury Note
5.875% 2/15/2004 2,050,000 2,087,802
U.S. Treasury Note
6.250% 2/28/2002 1,000,000 1,022,970
U.S. Treasury Note
6.875% 5/15/2006 1,000,000 1,082,810
U.S. Treasury Note
7.125% 2/29/2000 2,600,000 2,665,000
U.S. Treasury Note
7.500% 2/15/2005 1,250,000 1,383,588
U.S. Treasury Note
7.875% 11/15/2004 470,000 527,866
U.S. Treasury Note
8.000% 5/15/2001 1,000,000 1,064,690
--------------
9,834,726
--------------
U.S. Treasury Strips -- 0.3%
U.S. Treasury Strip
Principal Only
0.000% 2/15/1999 2,250,000 2,176,178
U.S. Treasury Strip
Principal Only
0.000% 8/15/2015 700,000 264,278
--------------
2,440,456
--------------
TOTAL U.S. TREASURY
OBLIGATIONS 32,750,355
--------------
(Cost $31,434,307)
TOTAL BONDS & NOTES 118,715,994
--------------
(Cost $113,485,685)
SHORT-TERM INVESTMENTS -- 29.7%
Commercial Paper
AirTouch
Communications, Inc.
5.700% 9/10/1998 2,715,000 2,684,479
Burlington Northern
Santa Fe Corp.
5.650% 7/01/1998 4,000,000 4,000,000
Carter Holt Harvey
Limited
5.680% 7/28/1998 2,950,000 2,937,433
Carter Holt Harvey
Limited
5.710% 7/27/1998 6,415,000 6,388,545
Carter Holt Harvey
Limited
5.720% 8/17/1998 3,140,000 3,116,551
Central and South
West Corporation
5.700% 7/16/1998 4,650,000 4,638,956
Comdisco, Inc.
5.700% 7/20/1998 2,880,000 2,871,336
Comdisco, Inc.
5.710% 8/04/1998 5,425,000 5,395,744
Comdisco, Inc.
5.720% 8/27/1998 4,930,000 4,885,351
Cox Enterprises, Inc.
5.650% 7/14/1998 5,615,000 5,603,544
Cox Enterprises, Inc.
5.650% 7/24/1998 4,640,000 4,623,251
Cox Enterprises, Inc.
5.720% 7/21/1998 4,550,000 4,535,541
Crown Cork & Seal
Company, Inc.
5.700% 7/23/1998 4,120,000 4,105,649
Crown Cork & Seal
Company, Inc.
5.710% 7/08/1998 5,195,000 5,189,232
Crown Cork & Seal
Company, Inc.
5.710% 8/10/1998 2,560,000 2,543,758
CSX Corporation
5.740% 9/30/1998 4,165,000 4,104,989
Dana Credit
Corporation
5.680% 7/10/1998 7,350,000 7,339,563
Dana Credit
Corporation
5.710% 7/30/1998 2,350,000 2,339,191
Federal Signal Corp.
5.720% 8/06/1998 4,330,000 4,305,232
Federal Signal Corp.
5.730% 8/11/1998 5,880,000 5,841,628
Humana, Inc.
5.700% 7/15/1998 4,910,000 4,899,116
(Continued)
36 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Market Value
------ ------------
Humana, Inc.
5.720% 7/17/1998 $ 5,100,000 $ 5,087,035
Humana, Inc.
5.720% 7/22/1998 3,500,000 3,488,322
Humana, Inc.
5.800% 8/24/1998 2,455,000 2,433,642
IMC Global Inc.
5.700% 7/07/1998 6,065,000 6,059,238
IMC Global Inc.
5.700% 8/03/1998 6,475,000 6,441,168
IMC Global Inc.
5.720% 8/03/1998 4,145,000 4,123,266
Lockheed Martin
Corporation
5.640% 7/29/1998 3,770,000 3,753,462
Lockheed Martin
Corporation
5.680% 8/28/1998 5,980,000 5,925,276
Lockheed Martin
Corporation
5.690% 7/31/1998 3,915,000 3,896,436
Mallinckrodt Group
Inc.
5.700% 8/10/1998 2,000,000 1,987,333
Mallinckrodt Group
Inc.
5.720% 9/08/1998 4,015,000 3,971,136
ORIX Credit Alliance,
Inc.
5.730% 7/09/1998 9,580,000 9,567,802
Praxair, Inc.
5.620% 8/07/1998 6,385,000 6,348,120
Rite Aid Corporation
5.620% 7/02/1998 7,245,000 7,243,869
Ryder System, Inc.
5.690% 8/25/1998 1,420,000 1,407,656
Sonat Inc.
5.700% 7/06/1998 4,325,000 4,321,576
Sonat Inc.
5.700% 8/13/1998 3,150,000 3,128,554
Sonat Inc.
5.700% 8/14/1998 3,700,000 3,674,223
Textron Financial
Corporation
5.710% 8/26/1998 7,845,000 7,775,319
Textron Financial
Corporation
5.720% 8/12/1998 2,630,000 2,612,449
VF Corporation
5.700% 7/13/1998 5,000,000 4,990,500
VF Corporation
5.750% 9/02/1998 4,885,000 4,836,272
VF Corporation
5.750% 9/28/1998 2,370,000 2,336,603
Western Atlas Inc.
5.720% 9/11/1998 5,845,000 5,778,367
Western Atlas Inc.
5.730% 8/05/1998 5,000,000 4,972,146
-------------
TOTAL SHORT-TERM
INVESTMENTS 208,508,859
-------------
(Cost $208,507,330)
TOTAL INVESTMENTS -- 99.6% 698,694,089
(Cost $558,592,936)+
Other Assets/
(Liabilities) - 0.4% 2,602,036
-------------
Net Assets -- 100.0% $701,296,125
=============
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 transac-
tions exempt from registration, normally to
qualified institutional buyers.
The remainder of this page
intentionally left blank.
The accompanying notes are an integral part of the financial statements. 37
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund -- Financial Statements
- --------------------------------------------------------------------------------
Statement of
Assets and
Liabilities
<TABLE>
<CAPTION>
June 30, 1998
(Unaudited)
-------------
<S> <C>
Assets:
Investments, at value (cost $350,085,606) (Note 2) ............. $490,185,230
Short-term investments, at value (cost $208,507,330) (Note 2) .. 208,508,859
------------
Total Investments ............................................ 698,694,089
Cash ........................................................... 3,145
Receivables from:
Investments sold ............................................. 6,110
Fund shares sold ............................................. 820,885
Interest and dividends ....................................... 2,352,309
------------
Total assets ................................................ 701,876,538
------------
Liabilities:
Payables for:
Fund shares redeemed ......................................... 234,058
Directors' fees and expenses (Note 3) ........................ 5,429
Affiliates (Note 3):
Investment management fees .................................. 275,134
Administration fees ......................................... 47,626
Service fees ................................................ 104
Accrued expenses and other liabilities ......................... 18,062
------------
Total liabilities ........................................... 580,413
------------
Net assets ..................................................... $701,296,125
============
Net assets consist of:
Paid-in capital ................................................ $513,229,858
Undistributed net investment income ............................ 11,548,538
Accumulated net realized gain on investments ................... 36,416,576
Net unrealized appreciation on investments ..................... 140,101,153
------------
$701,296,125
============
Net assets:
Class A ........................................................ $ 166,714
============
Class Y ........................................................ $ 341,624
============
Class S ........................................................ $700,787,787
============
Shares outstanding:
Class A ........................................................ 15,698
============
Class Y ........................................................ 32,095
============
Class S ........................................................ 48,412,714
============
Net asset value, offering price and redemption price per share:
Class A ........................................................ $ 10.62
============
Class Y ........................................................ $ 10.64
============
Class S ........................................................ $ 14.48
============
</TABLE>
38 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund -- Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of Six months ended
Operations June 30, 1998
(Unaudited)
--------------
Investment income:
Interest ................................................ $ 9,387,528
Dividends (net of withholding tax of $14,676) ........... 4,010,225
--------------
Total investment income ............................... 13,397,753
--------------
Expenses (Note 1):
Investment management fees (Note 3) ..................... 1,531,675
Custody fees ............................................ 35,018
Audit and legal fees .................................... 7,591
Directors' fees (Note 3) ................................ 9,580
--------------
1,583,864
Administration fees (Note 3):
Class A ............................................... 395
Class Y ............................................... 476
Class S ............................................... 264,276
Service fees (Note 3):
Class A ............................................... 204
--------------
Total expenses ....................................... 1,849,215
--------------
Net investment income ................................ 11,548,538
--------------
Realized and unrealized gain (loss):
Net realized gain on investment transactions ............ 30,220,528
Net change in unrealized appreciation (depreciation) on
investments ........................................... 939,616
--------------
Net realized and unrealized gain ..................... 31,160,144
--------------
Net increase in net assets resulting from operations .... $ 42,708,682
==============
The accompanying notes are an integral part of the financial statements. 39
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund -- Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statements of
Changes in Net
Assets
<TABLE>
<CAPTION>
Six months ended
June 30, 1998 Year ended
(Unaudited) December 31, 1997
---------------- -----------------
<S> <C> <C>
Increase(Decrease) in Net Assets:
Operations:
Net investment income ...................................... $ 11,548,538 $ 22,208,772
Net realized gain on investment transactions ............... 30,220,528 30,475,696
Net change in unrealized appreciation (depreciation) on
investments ............................................... 939,616 53,068,589
---------------- -----------------
Net increase in net assets resulting from operations ...... 42,708,682 105,753,057
---------------- -----------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1* ................................................... -- (3,540)
Class 2* ................................................... -- (4,381)
Class 3* ................................................... -- (4,913)
Class S .................................................... -- (22,163,635)
---------------- -----------------
Total distributions from net investment income ............ -- (22,176,469)
---------------- -----------------
From net realized gains:
Class 1* ................................................... -- (6,158)
Class 2* ................................................... -- (6,204)
Class 3* ................................................... -- (6,230)
Class S .................................................... -- (26,240,454)
---------------- -----------------
Total distributions from net realized gains ............... -- (26,259,046)
---------------- -----------------
Net fund share transactions (Note 5):
Class 1* ................................................... (156,981) 9,696
Class 2* ................................................... (159,715) 10,600
Class 3* ................................................... (161,230) 11,159
Class A .................................................... 156,981 --
Class Y .................................................... 320,945 --
Class S .................................................... 2,974,312 34,578,286
---------------- -----------------
Increase in net assets from net fund share transactions ... 2,974,312 34,609,741
---------------- -----------------
Total increase in net assets ............................... 45,682,994 91,927,283
Net assets:
Beginning of period ........................................ 655,613,131 563,685,848
---------------- -----------------
End of period (including undistributed net investment income
of $11,548,538 and $0, respectively) ...................... $ 701,296,125 $ 655,613,131
================ =================
</TABLE>
* Effective January 1, 1998, Class 1, Class 2, and Class 3 shares were
terminated (See Note 1).
40 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund -- Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class A Class Y
------- -------
Six months Six months
ended 6/30/98 ended 6/30/98
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.00
----------- -----------
Income (loss) from investment operations:
Net investment income 0.14 0.17
Net realized and unrealized gain (loss) on investments 0.48 0.47
----------- -----------
Total income (loss) from investment operations 0.62 0.64
----------- -----------
Net asset value, end of period $ 10.62 $ 10.64
=========== ===========
Total Return 6.20% 6.40%
Ratios / Supplemental Data:
Net assets, end of period (000s) $ 167 $ 342
Net expenses to average daily net assets 1.20%* 0.75%*
Net investment income to average daily net assets 2.74%* 3.19%*
Portfolio turnover rate 16% 16%
</TABLE>
<TABLE>
<CAPTION>
Class S (1)
-----------
Six months
ended 6/30/98 Year ended Year ended Year ended Period ended
(Unaudited) 12/31/97 12/31/96 12/31/95 12/31/94**
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.59 $ 12.34 $ 11.51 $ 9.92 $ 10.00
----------- ---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income 0.24 0.48 0.46 0.44 0.11
Net realized and unrealized gain (loss) on investments 0.65 1.82 1.02 1.68 (0.08)
----------- ---------- ---------- ---------- ----------
Total income (loss) from investment operations 0.89 2.30 1.48 2.12 0.03
----------- ---------- ---------- ---------- ----------
Less distributions to shareholders:
From net investment income -- (0.48) (0.46) (0.44) (0.11)
From net realized gains -- (0.57) (0.19) (0.09) --
----------- ---------- ---------- ---------- ----------
Total distributions -- (1.05) (0.65) (0.53) (0.11)
----------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 14.48 $ 13.59 $ 12.34 $ 11.51 $ 9.92
========== ========== ========== ========== ==========
Total Return @ 6.55% 18.72% 12.83% 21.31% 0.29%
Ratios / Supplemental Data:
Net assets, end of period (000s) $ 700,788 $ 655,135 $ 563,280 $ 456,773 $349,688
Net expenses to average daily net assets# 0.5430%* 0.5389% 0.5120% 0.5120% 0.5120%*
Net investment income to average daily net assets 3.39%* 3.57% 3.83% 4.18% 4.29%*
Portfolio turnover rate 16% 28% 26% 23% 2%
#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: N/A 0.5510% 0.5522% 0.5514% 0.5650%*
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
(1)Class S shares were previously designated as Class 4 shares.
@ 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. 41
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the The objective and policies of the Fund are to:
investment
objective and . achieve long-term growth of capital and income
policies for the
MassMutual Value . invest primarily in a diversified portfolio of equity
Equity Fund? securities of larger, well established companies (generally
companies with market capitalization over $2.0 billion)
. utilize a value-oriented strategy in making investment
decisions
. utilize fundamental analysis to identify companies which
-are of high investment quality
-offer above-average dividend growth potential
-are attractively valued in the marketplace
How did the Fund During the first half of 1998, the Fund lagged the S&P 500
perform during the Index, returning 8.88 percent for Class S shares for the
first half of period. Most value managers underperformed the S&P 500 Index,
1998? which was up 17.71 percent for the six months ended June 30,
1998. There is always a conflict in the marketplace between
the two distinct styles of investing: growth versus value.
The growth style has had the upper hand for the past four and
a half years--the longest period of relative outperformance
by one of the styles since the mid 70's. We believe the odds
increasingly favor a reversion to the mean at some future
point. We believe buying value at this point is buying some
protection. It may be the safer approach at this juncture of
the market.
How did the stock It has been a continuation of the best of all possible worlds
market progress for investors, with high returns from common stocks the order
during the six- of the day. Most of the large capitalization, high multiple,
month period? low income producing securities had an outstanding six-month
period. There has been money coming into the market seeking
quality. Foreign investors have been moving into the U.S.
market even though their own markets have done reasonably
well. So it has been positive in terms of liquidity for the
overall market, both stocks and bonds.
At the same time, most value managers lagged the market
because of a divergence created in the market by growing
concerns about deteriorating economic conditions in Asia and
the impact that those conditions would have on worldwide
commodity prices, competition and economic activity in Europe
and the U.S. It led investors to have concerns about any
companies that had a cyclical orientation, and it forced
investors to focus primarily on the largest, most assured
high-growth companies, regardless of their valuations.
In what areas of We added moderately to our holdings in the chemical industry,
the stock market with our focus on specialty chemical companies that are
did you focus your experiencing stable demand and are able to generate ample
investment cash flow that can be used to increase dividends and buy back
selection and why? shares. One new stock, Bemis Corporation, a food-packaging
manufacturer, has had a pattern of growing demand, revenues
and earnings. It is an extremely well run company that
dominates its markets and does not have the cyclical
characteristics typical of chemical companies.
We have also added Englehard Corporation, a specialty
chemical producer that makes catalytic converters. This stock
has done better than the other chemical industry stocks over
the last six months because of investor perceptions that this
is an improving company with a very productive research
effort and strong growth prospects.
We sometimes buy against trends - in this case, buying
chemical companies when there is a broad perception in the
market that chemical companies are not attractive. We share
that perception about commodity chemical companies but our
focus in this particular industry is on specialty chemical
companies that currently represent exceptional value.
Currently, specialty chemical companies are selling at
between 50 percent and 70 percent of the market multiple.
Normally, at their peak, they sell at 1.5 times the market
multiple.
42
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
How has the Fund The premise of our stock selection, is to try to find good
benefited from companies that are reasonably valued in the marketplace.
this strategy? Typically, the stock's discount is a result of an earnings
glitch or a change in investor perception that we determine
to be temporary. As long as a stock remains undervalued and
the prospect for recovery in the marketplace remains, we will
stay with it. Ultimately, as these factors change over time,
the Fund should see the payoff.
What changes to We do not anticipate making wholesale changes to the
the portfolio do portfolio over the near term. While this recent period of
you anticipate relative underperformance has indeed been disappointing,
between now and shareholders should take comfort in the substantial values
year-end? that exist among the high quality companies comprising the
portfolio.
Going forward, our strategy is to remain alert to upgrade
opportunities where more immediate and clearly definable
improvement in earnings prospects can be obtained for at
least equivalent value and where the stock might be closer to
the value recognition payoff. The portfolio will continue to
possess the quality and value characteristics that we believe
offer the potential of sound investment returns at relatively
low risk.
Looking ahead, We believe the second half of the year will be an environment
what is your in which we will see a slowing of overall economic activity.
outlook for the We continue to see the impact of the Asian markets on
economy and the worldwide economies, and the environment will be one of
Fund in the second difficult earnings progress; that is, we will probably see a
half of 1998? period where any revisions to earnings forecasts are in a
downward direction.
We do, however, believe that this will be an environment
where liquidity continues to flow into the market. Investors
still have a preference for common stocks. Equities have
performed well and investors are acknowledging that. It
should be a good environment for the capital markets,
although it is unreasonable to expect that the stock market
will have another 17 percent gain over the second half of the
year. It is probably going to be a more difficult environment
to generate the kind of performance numbers the overall
markets have shown, but overall it is still a very good
environment for investing in financial assets.
43
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Value Equity
Fund Class S and the Standard & Poor's 500 Composite
Index
MassMutual Value Equity Fund
Total Return Year-to-date One Year Average Annual
1/1/98 - 6/30/98 7/1/97 - 6/30/98 10/3/94 - 6/30/98
Class S 8.88% 20.40% 23.72%
- --------------------------------------------------------------------------------
Standard & Poor's 17.71% 30.16% 27.73%
500 Composite Index
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
[LINE GRAPH APPEARS HERE]
Date Class S S&P 500 Index
---- ------- -------------
10/3/94 $10,000 $10,000
12/94 9,990 9,998
6/95 11,613 12,019
12/95 13,141 13,756
6/96 14,276 15,144
12/98 15,802 16,915
6/97 18,435.1 20,401
12/97 20,386 22,559
6/98 22,196 26,554
Hypothetical Investments in MassMutual Value Equity
Fund Class A and Class Y and the Standard & Poor's 500
Composite Index
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund
Total Return Year-to-date
1/1/98 - 6/30/98
Class A 8.60%
Class Y 8.80%
- --------------------------------------------------------------------------------
Standard & Poor's 17.71%
500 Composite Index
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date Class A Class Y S&P 500 Index
---- ------- ------- -------------
12/97 $10,000 $10,000 $10,000
1/98 9,970 9,980 10,110
2/98 10,610 10,620 10,839
3/98 11,140 11,160 11,994
4/98 11,060 11,070 11,509
5/98 10,850 10,860 11,311
6/98 10,860 10,880 11,771
Past performance is not predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund, while the Standard & Poor's 500 Composite Index is unmanaged and
does not incur expenses, and cannot be purchased directly by investors.
---------------------------------
MassMutual Value Equity Fund
Largest Stock Holdings (6/30/98)
---------------------------------
Bristol-Myers Squibb Company
General Electric Company
Schering-Plough Corp.
Marsh & McLennan Companies, Inc.
Albertson's, Inc.
Becton, Dickinson and Company
Hewlett-Packard Company
ConAgra, Inc.
Goodyear Tire & Rubber Company
International Business Machines
Corporation
44
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund -- Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1998
Number of
Shares Market Value
------ ------------
EQUITIES -- 97.0%
Aerospace & Defense -- 3.2%
Raytheon Company
Class A 283,000 $16,307,875
Raytheon Company
Class B 772,000 45,644,500
TRW Inc. 914,500 49,954,563
------------
111,906,938
------------
Apparel, Textiles & Shoes -- 1.1%
VF Corporation 730,000 37,595,000
------------
Automotive & Parts -- 4.2%
Ford Motor Company 680,300 40,137,700
Genuine Parts
Company 1,290,000 44,585,625
Goodyear Tire &
Rubber Company 955,000 61,537,813
------------
146,261,138
------------
Banking, Savings & Loans -- 5.9%
The Bank of New
York Company,
Incorporated 830,000 50,370,625
Comerica, Incorporated 675,000 44,718,750
Norwest Corporation 970,000 36,253,750
Pacific Century
Financial Corporation 1,261,900 30,285,600
Wachovia Corp. 494,000 41,743,000
------------
203,371,725
------------
Beverages -- 1.3%
Brown-Forman
Corporation (Class B) 682,600 43,857,050
------------
Chemicals -- 5.0%
Air Products and
Chemicals, Inc. 800,000 32,000,000
Engelhard Corporation 1,725,000 34,931,250
The Lubrizol
Corporation 571,200 17,278,800
Nalco Chemical
Company 980,000 34,422,500
Rohm & Haas
Company 503,000 52,280,563
------------
170,913,113
------------
Commercial Services -- 0.8%
Pinnacle West Capital
Corporation 636,868 28,659,060
------------
Computers & Office Equipment -- 7.9%
Electronic Data
Systems Corporation 930,000 37,200,000
Hewlett-Packard
Company 1,120,000 67,060,000
International Business
Machines Corporation 530,000 60,850,625
Pitney Bowes, Inc. 1,084,000 52,167,500
Xerox Corporation 548,000 55,690,500
------------
272,968,625
------------
Containers -- 3.0%
Bemis Company, Inc. 650,500 26,589,188
Crown Cork & Seal
Company, Inc. 1,004,000 47,690,000
Temple-Inland, Inc. 525,000 28,284,375
------------
102,563,563
------------
Cosmetics & Personal Care -- 1.6%
Kimberly-Clark
Corporation 1,231,000 56,472,125
------------
Drugs -- 1.1%
Pharmacia & Upjohns
Inc. 792,000 36,531,000
------------
Electric Utilities -- 1.8%
Dominion Resources,
Inc. 725,000 29,543,750
SCANA Corporation 1,090,600 32,513,513
------------
62,057,263
------------
Electrical Equipment & Electronics -- 6.0%
AMP, Incorporated 1,213,000 41,696,875
General Electric
Company 1,035,000 94,185,000
Honeywell Inc. 403,800 33,742,538
Hubbell, Incorporated
(Class B) 911,471 37,939,980
------------
207,564,393
------------
Energy -- 5.5%
Amoco Corporation 1,230,000 51,198,750
Kerr-McGee
Corporation 360,000 20,835,000
Mobil Corporation 685,000 52,488,125
Teco Energy, Inc. 1,000,000 26,812,500
Unocal Corporation 1,090,000 38,967,500
------------
190,301,875
------------
Financial Services -- 1.6%
American Express
Company 470,000 53,580,000
------------
Foods -- 4.6%
Archer-Daniels-Midland
Company 1,489,005 28,849,472
BEST FOODS 595,000 34,547,188
ConAgra, Inc. 1,990,000 63,058,125
General Mills, Inc. 485,000 33,161,875
------------
159,616,660
------------
Forest Products & Paper -- 1.7%
Westvaco Corporation 855,000 24,153,750
Weyerhaeuser Company 721,900 33,342,756
------------
57,496,506
------------
Hardware & Tools -- 0.8%
The Stanley Works 639,000 26,558,438
------------
(Continued)
The accompanying notes are an integral part of the financial statements.
45
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund -- Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1998
Number of
Shares Market Value
------ ------------
Healthcare --7.9%
Becton, Dickinson and
Company 922,800 $ 71,632,350
Bristol-Myers Squibb
Company 1,025,000 117,810,938
Schering-Plough Corp. 907,200 83,122,200
-------------
272,565,488
-------------
Industrial Distribution -- 1.2%
W.W. Grainger, Inc. 800,000 39,850,000
-------------
Industrial Transportation -- 2.5%
Burlington Northern
Santa Fe Corp. 432,200 42,436,638
Norfolk Southern
Corporation 1,444,900 43,076,075
-------------
85,512,713
-------------
Insurance -- 7.7%
American General
Corporation 585,000 41,644,688
CIGNA Corporation 247,500 17,077,500
Jefferson-Pilot
Corporation 505,500 29,287,406
Marsh & McLennan
Companies, Inc. 1,214,700 73,413,431
MBIA, Inc. 713,500 53,423,313
SAFECO Corporation 1,140,000 51,798,750
-------------
266,645,088
-------------
Machinery & Components -- 1.1%
Dover Corporation 1,080,000 36,990,000
-------------
Manufacturing -- 1.0%
Armstrong World
Industries, Inc. 515,000 34,698,125
-------------
Miscellaneous -- 1.1%
Minnesota Mining &
Manufacturing
Company 479,700 39,425,344
-------------
Oil & Gas--2.5%
ENI SPA, Sponsored
ADR 539,200 35,048,000
Occidental Petroleum
Corporation 1,067,000 28,809,000
USX-Marathon Group 694,100 23,816,306
-------------
87,673,306
-------------
Publishing & Printing -- 2.6%
The McGraw-Hill
Companies, Inc. 740,000 60,356,250
R.R. Donnelley & Sons
Company 630,000 28,822,500
-------------
89,178,750
-------------
Retail -- 2.9%
The May Department
Stores Company 645,000 42,247,500
Sears Roebuck and Co. 973,100 59,419,919
-------------
101,667,419
-------------
Retail-Grocery -- 3.2%
Albertson's, Inc. 1,414,000 73,262,875
American Stores
Company 1,531,600 37,045,575
-------------
110,308,450
-------------
Telecommunications -- 1.6%
GTE Corporation 965,800 53,722,625
-------------
Telephone Utilities -- 2.6%
Ameritech Corporation 1,104,000 49,542,000
Frontier Corporation 1,319,000 41,548,500
-------------
91,090,500
-------------
Tobacco -- 2.0%
Fortune Brands, Inc. 961,300 36,949,969
UST Inc. 1,126,800 30,423,600
-------------
67,373,569
-------------
TOTAL EQUITIES 3,344,975,849
(Cost $2,126,494,708) -------------
Principal
Shares Market Value
------ ------------
SHORT-TERM INVESTMENTS -- 2.8%
Commercial Paper -- 2.6%
Amoco Corporation
5.440% 7/22/1998 $5,742,000 $ 5,723,779
Coca-Cola Company,
The
5.440% 7/27/1998 8,000,000 7,968,569
Coca-Cola Company,
The
5.440% 7/31/1998 4,696,000 4,674,712
First Union National
Bank
5.470% 7/13/1998 4,000,000 3,992,707
First Union National
Bank
5.470% 7/21/1998 2,000,000 1,993,922
First Union National Bank
5.470% 7/28/1998 1,500,000 1,493,846
Ford Motor Credit
Company
5.450% 7/22/1998 7,000,000 6,977,746
General Mills, Inc.
5.470% 7/06/1998 5,292,000 5,287,980
Heinz (H. J.) Company
5.490% 7/28/1998 9,000,000 8,962,943
IBM Credit
Corporation
5.450% 8/31/1998 6,000,000 5,942,050
Lucent Technologies
Inc.
5.490% 7/13/1998 10,000,000 9,981,700
Merck & Co., Inc.
6.050% 7/01/1998 11,444,000 11,444,000
Transamerica Finance
Corporation
5.500% 7/10/1998 13,000,000 12,982,123
Walt Disney Company,
The
5.420% 10/26/1998 3,000,000 2,944,425
--------------
90,370,502
--------------
Discount Note -- 0.2%
Federal Home Loan
Mortgage Corp.
5.320% 10/09/1998 6,975,000 6,864,563
--------------
TOTAL SHORT-TERM
INVESTMENTS 97,235,065
(Cost $97,247,699) --------------
TOTAL INVESTMENTS -- 99.8% 3,442,210,914
(Cost $2,223,742,407)+
Other Assets/
(Liabilities) - 0.2% 5,930,880
--------------
NET ASSETS -- 100.0% $3,448,141,794
--------------
Notes to Portfolio of Investments
+Aggregate cost for Federal tax purposes (Note 7)
The accompanying notes are an integral part of the financial statements.
46
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, 1998
Statement of (Unaudited)
Assets and ----------------
Liabilities
<S> <C>
Assets:
Investments, at value (cost $2,126,494,708) (Note 2) ........... $ 3,344,975,849
Short-term investments, at value (cost $97,247,699) (Note 2) ... 97,235,065
----------------
Total Investments ............................................ 3,442,210,914
Cash ........................................................... 162
Receivables from:
Fund shares sold ............................................. 3,046,498
Interest and dividends ....................................... 6,228,774
----------------
Total assets ................................................ 3,451,486,348
----------------
Liabilities:
Payables for:
Fund shares redeemed ......................................... 1,664,487
Directors' fees and expenses (Note 3) ........................ 5,428
Affiliates (Note 3):
Investment management fees .................................. 1,357,510
Administration fees ......................................... 234,553
Service fees ................................................ 134
Accrued expenses and other liabilities ......................... 82,442
----------------
Total liabilities ........................................... 3,344,554
----------------
Net assets ..................................................... $ 3,448,141,794
================
Net assets consist of:
Paid-in capital ................................................ $ 1,994,245,323
Undistributed net investment income ............................ 29,903,954
Accumulated net realized gain on investments ................... 205,524,010
Net unrealized appreciation on investments ..................... 1,218,468,507
----------------
$ 3,448,141,794
================
Net assets:
Class A ........................................................ $ 212,738
================
Class Y ........................................................ $ 435,928
================
Class S ........................................................ $ 3,447,493,128
================
Shares outstanding:
Class A ........................................................ 19,598
================
Class Y ........................................................ 40,074
================
Class S ........................................................ 186,220,707
================
Net asset value, offering price and redemption price per share:
Class A ........................................................ $ 10.86
================
Class Y ........................................................ $ 10.88
================
Class S ........................................................ $ 18.51
================
</TABLE>
The accompanying notes are an integral part of the financial statements. 47
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Value Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended
June 30, 1998
Statement of (Unaudited)
Operations ---------------
<S> <C>
Investment income:
Dividends (net of withholding tax of $126,820) ........... $ 34,551,502
Interest ................................................. 3,152,880
---------------
Total investment income ................................ 37,704,382
---------------
Expenses (Note 1):
Investment management fees (Note 3) ...................... 7,600,422
Custody fees ............................................. 136,826
Audit and legal fees ..................................... 37,466
Directors' fees (Note 3) ................................. 9,580
---------------
7,784,294
Administration fees (Note 3):
Class A ................................................ 506
Class Y ................................................ 611
Class S ................................................ 1,312,094
Service fees (Note 3):
Class A ................................................ 260
---------------
Total expenses ........................................ 9,097,765
---------------
Net investment income ................................. 28,606,617
---------------
Realized and unrealized gain (loss):
Net realized gain on investment transactions ............. 155,664,125
Net change in unrealized appreciation (depreciation)
on investments ......................................... 99,050,855
---------------
Net realized and unrealized gain ...................... 254,714,980
---------------
Net increase in net assets resulting from operations ..... $ 283,321,597
===============
</TABLE>
48 The accompanying notes are an integral part of the financial statements.
<PAGE>
- -------------------------------------------------------------------------------
MassMutual Value Equity Fund - Financial Statements (Continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended
June 30, 1998 Year ended
Statements of (Unaudited) December 31, 1997
Changes in Net ---------------- ----------------
Assets
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income ........................................... $ 28,606,617 $ 55,504,098
Net realized gain on investment transactions .................... 155,664,125 263,910,119
Net change in unrealized appreciation (depreciation)
on investments ................................................. 99,050,855 407,559,726
---------------- ----------------
Net increase in net assets resulting from operations ........... 283,321,597 726,973,943
---------------- ----------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1* ........................................................ -- (1,299)
Class 2* ........................................................ -- (2,285)
Class 3* ........................................................ -- (2,920)
Class S ......................................................... -- (54,611,119)
---------------- ----------------
Total distributions from net investment income ................. -- (54,617,623)
---------------- ----------------
From net realized gains:
Class 1* ........................................................ -- (13,946)
Class 2* ........................................................ -- (14,077)
Class 3* ........................................................ -- (14,146)
Class S ......................................................... -- (228,186,420)
---------------- ----------------
Total distributions from net realized gains .................... -- (228,228,589)
---------------- ----------------
Net fund share transactions (Note 5):
Class 1* ........................................................ (195,979) 15,245
Class 2* ........................................................ (199,459) 16,362
Class 3* ........................................................ (201,286) 17,066
Class A ......................................................... 195,979 --
Class Y ......................................................... 400,745 --
Class S ......................................................... (33,624,441) 268,059,999
---------------- ----------------
Increase (decrease) in net assets from net fund
share transactions ............................................ (33,624,441) 268,108,672
---------------- ----------------
Total increase in net assets .................................... 249,697,156 712,236,403
Net assets:
Beginning of period ............................................. 3,198,444,638 2,486,208,235
---------------- ----------------
End of period (including undistributed net investment income
of $29,903,954 and $1,297,337, respectively) ................... $ 3,448,141,794 $ 3,198,444,638
================ ================
</TABLE>
* Effective January 1, 1998, Class 1, Class 2, and Class 3 shares were
terminated (See Note 1).
The accompanying notes are an integral part of the financial statements. 49
<PAGE>
- -------------------------------------------------------------------------------
MassMutual Value Equity Fund - Financial Statements (Continued)
- -------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class A Class Y
------- -------
Six months Six months
ended 6/30/98 ended 6/30/98
(Unaudited) (Unaudited)
---------- ----------
<S> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.00
---------- ----------
Income (loss) from investment operations:
Net investment income 0.05 0.08
Net realized and unrealized gain (loss) on investments 0.81 0.80
---------- ----------
Total income (loss) from investment operations 0.86 0.88
---------- ----------
Net asset value, end of period $ 10.86 $ 10.88
========== ==========
Total Return 8.60% 8.80%
Ratios/Supplemental Data:
Net assets, end of period (000s) $213 $436
Net expenses to average daily net assets 1.20%* 0.75%*
Net investment income to average daily net assets 1.03%* 1.48%*
Portfolio turnover rate 9% 9%
</TABLE>
<TABLE>
<CAPTION>
Class S (1)
Six months -----------
ended 6/30/98 Year ended Year ended Year ended Period ended
(Unaudited) 12/31/97 12/31/96 12/31/95 12/31/94**
------------- ----------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.00 $ 14.46 $ 12.63 $ 9.91 $ 10.00
------------- ----------- ----------- ------------ --------------
Income (loss) from investment operations:
Net investment income 0.15 0.32 0.34 0.31 0.08
Net realized and unrealized gain (loss)
on investments 1.36 3.83 2.22 2.82 (0.09)
------------- ----------- ----------- ------------ --------------
Total income (loss) from investment
operations 1.51 4.15 2.56 3.13 (0.01)
------------- ----------- ----------- ------------ --------------
Less distributions to shareholders:
From net investment income -- (0.31) (0.34) (0.31) (0.08)
From net realized gains -- (1.30) (0.39) (0.10) --
------------- ----------- ----------- ------------ --------------
Total distributions -- (1.61) (0.73) (0.41) (0.08)
------------- ----------- ----------- ------------ --------------
Net asset value, end of period $ 18.51 $ 17.00 $ 14.46 $ 12.63 $ 9.91
============= =========== =========== ============ ==============
Total Return @ 8.88% 29.01% 20.24% 31.54% (0.10)%
Ratios / Supplemental Data:
Net assets, end of period (000s) $ 3,447,493 $3,197,848 $2,485,743 $ 2,125,248 $ 1,563,563
Net expenses to average daily net assets# 0.5386%* 0.5378% 0.5067% 0.5067% 0.5067%*
Net investment income to average
daily net assets 1.69%* 1.91% 2.42% 2.72% 3.20%*
Portfolio turnover rate 9% 20% 13% 16% 3%
#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: N/A 0.5512% 0.5534% 0.5528% 0.5681%*
</TABLE>
* Annualized
** For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
(1)Class S shares were previously designated as Class 4 shares.
@ 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.
50 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
What are the investment The objective and policies of the Fund are to:
objective and policies
for the MassMutual . achieve long-term growth of capital and income
Small Cap Value Equity
Fund? . invest primarily in a diversified portfolio of equity securities of smaller
companies (companies with market capitalization, at the time of purchase, of
$750 million or less)
. utilize a value-oriented strategy in making investment decisions
. utilize fundamental analysis to identify companies which
-are of high investment quality or possess a unique product, market position
or operating characteristics
-offer above-average levels of profitability or superior growth potential
-are attractively valued in the marketplace
How did the Fund The first half of 1998 was a challenging period for the Fund, particularly in
perform during the first the second quarter as we began to see fallout in some U.S. stocks from the
half of 1998? troubles in Southeast Asia. For Class S shares, the Fund delivered a net return
of 2.3 percent, mostly the product of a strong first quarter. Influenced by the
same factors, the Russell 2000 Index finished at 4.9 percent for the first half.
How would you In general, we have seen an equity market in which large-cap stocks are up
characterize the market almost 20 percent and small-cap stocks are up only 5 percent. We have seen a
for small cap stocks flight to liquidity and a flight to what people perceive to be quality--that is,
during that six-month eagerly traded, well-known large-cap stocks. This has been influenced by two
period? major global events: the currency turmoil in the Far East, and uncertainty in
Europe over a new, single currency--the Euro.
The fact is, people are afraid of their own currency, both in Europe and in the
Far East. They have seen their currencies decline in value versus the U.S.
dollar. Therefore, if you are a believer in equities and you are afraid of your
own currency, you want to try to invest where you can buy stocks at good
multiples, buy them with the knowledge that you can sell them easily, and buy
them denominated in U.S. dollars.
In what areas of the The Asian economic crises caused several weaknesses for us in April and May.
small cap stock market Basically, investors were beginning to feel the impact of Asia on their earnings
did you focus your streams even though a year had passed from when the first problems surfaced in
investment selection Thailand.
and how did this impact
Fund performance? Though we did not have significant representation in technology stocks, we did
see shortfalls in everything from Intel, at the large end, to some small
semiconductor stocks. We were hurt by our holdings in Dallas Semiconductor,
Helix Technology and Cognex.
The problems in Asia also impacted oil prices. A third of the world's potential
oil consumers are in Asia, and they are out of the market because they do not
have the hard currency to import the rising volumes of oil that people thought
they would need. In the first six months of 1998, the price of oil fell from the
$17 to $18 per barrel threshold. Crude oil hit a new low for the 1990s, dropping
to around $10 in late May. That did not bode well for our holdings in several
oil service companies, including TransCoastal Marine Services, a construction
company operating in the shallow water Gulf of Mexico, and Trico Marine, a boat
service company also located in the Gulf of Mexico.
Although the oil business began to recover toward the end of the second quarter,
anyone owning oil--related stocks, particularly those operating in the shallow
water and offshore Louisiana and Texas, saw underperformance. Surprisingly, the
gas related companies in the portfolio, such as Stone Energy and Houston
Exploration--did quite well because the price of natural gas has risen with the
recent hot weather.
Another theme we saw during the first half was the residual effects of El Nino
on a few of our holdings. The southeast has been very hot and some of the air
conditioning-related stocks, such as Service Experts and Watsco, have done very
well. The hot weather also benefited our holdings in Hughes Supply, a
construction company which had a slow January due to constant rain, but is now
making up for lost construction time in the hot, dry weather in Florida.
</TABLE>
51
<PAGE>
- -------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund - Portfolio Manager Report
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
The strongest performing stocks in our portfolio during the six-month period
were Atlantic Southeast Airlines, up 70 percent; Pomeroy Computer Resources, up
53 percent; Spartech, up 44 percent, and Myers Industries, up 44 percent
year-to-date.
What changes to the During the next six months, we expect to see opportunities in the technology and
portfolio do you energy sectors, and possibly certain areas of the healthcare sector. We may be
anticipate between now shedding our positions in some stocks that have performed very well and
and year-end? reinvesting that money in positions we already own that have not done much so
far this year. We believe this will be a period of picking and choosing rather
than focusing on specific industries.
Looking ahead, what is Overall, small-cap stocks are cheap. We are not quite sure when they will become
your outlook for the more fairly valued and begin to outperform. Right now, we are in a
economy and the Fund liquidity-driven market and we do not see signs of it turning around in the
in the second half of near-term. Our strategy going forward will be one of "picking and poking" among
1998? individual stocks, a change from our industry-driven focus of last year.
</TABLE>
52
<PAGE>
- -------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund - Portfolio Manager Report
- -------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Small Cap
Value Equity Fund Class S and the Russell 2000 Index
- -------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund
Total Return Year-to-date One Year Average Annual
1/1/98 - 6/30/98 7/1/97 - 6/30/98 10/3/94 - 6/30/98
Class S 2.29% 20.07% 20.35%
- -------------------------------------------------------------------------------
Russell
2000 Index 4.93% 16.50% 18.42%
- -------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
[LINE GRAPH APPEARS HERE]
Date Class S Russell 2000
==== ======= =======
10/3/94 10,000 10,000
12/94 9,734 9,813
6/95 10,507 11,228
12/95 11,681 12,604
6/96 12,794 13,910
12/96 14,346 14,683
6/97 16,664.5 16,181.2
12/97 19,562 17,966
6/98 20,010 18,897
Hypothetical Investments in MassMutual Small Cap
Value Equity Fund Class A and Class Y and the
Russell 2000 Index
- -------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund
Total Return Year-to-date
1/1/98 - 6/30/98
Class A 2.00%
Class Y 2.20%
- -------------------------------------------------------------------------------
Russell
2000 Index 4.93%
- -------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date Class A Class Y Russell 2000
==== ======= ======= =======
12/97 10,000 10,000 10,000
1/98 9,700 9,700 9,847
2/98 10,410 10,420 10,586
3/98 10,740 10,750 11,031
4/98 10,830 10,850 11,092
5/98 10,400 10,420 10,496
6/98 10,200 10,220 10,493
Past performance is not predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund, while the Russell 2000 Index is unmanaged and does not incur
expenses, and cannot be purchased directly by investors.
----------------------------------
MassMutual
Small Cap Value Equity Fund
Largest Stock Holdings (6/30/98)
----------------------------------
Graco, Incorporated
Reliance Steel & Aluminum Company
Atlantic Southeast Airlines, Inc.
M. S. Carriers, Inc.
Wausau-Mosinee Paper Corporation
CCB Financial Corporation
Service Experts, Inc.
Harte Hanks Communications, Inc.
Analysts International Corporation
Capital RE Corp.
53
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1998
Number of
Shares Market Value
------ ------------
EQUITIES -- 97.1%
Aerospace & Defense -- 0.5%
TriStar Aerospace Co. 216,000 $ 3,348,000
------------
Air Transportation -- 2.5%
Atlantic Southeast
Airlines, Inc. 365,600 18,142,900
------------
Automotive & Parts -- 4.8%
CSK Auto Corporation* 74,600 1,883,650
Dura Automotive
Systems, Inc.* 194,400 6,245,100
Keystone Automotive
Industries, Inc.* 286,900 6,634,563
Myers Industries, Inc. 353,268 8,478,432
Titan Wheel
International, Inc. 689,500 11,721,500
------------
34,963,245
------------
Banking, Savings & Loans -- 13.7%
Astoria Financial
Corporation 225,900 12,085,650
Bank United Corp.
Class A 173,200 8,291,950
Banknorth Group, Inc. 154,800 5,727,600
CCB Financial
Corporation 139,900 14,864,375
First Colorado
Bancorp, Inc. 254,500 7,062,375
First Republic Bank* 250,100 9,034,863
Keystone Financial,
Inc. 221,150 8,182,550
One Valley Bancorp of
West Virginia, Inc. 229,687 8,354,865
SIS Bancorp, Inc. 131,800 5,107,250
Sovereign Bancorp,
Inc. 517,296 8,454,531
Webster Financial
Corporation 396,000 13,167,000
------------
100,333,009
------------
Beverages -- 0.6%
The Robert Mondavi
Corporation* 164,100 4,656,338
------------
Building Materials & Construction -- 3.8%
Crossmann
Communities, Inc.* 181,800 5,522,175
Group Maintenance
America Corp.* 405,500 7,299,000
Service Experts, Inc.* 426,900 14,728,050
------------
27,549,225
------------
Chemicals -- 3.8%
Cambrex Corporation 300,200 7,880,250
OM Group, Inc. 319,800 13,191,742
Spartech Corporation 324,600 6,958,613
------------
28,030,605
------------
Communications -- 1.9%
True North
Communications, Inc. 478,900 14,007,825
------------
Computer Services -- 1.2%
Pomeroy Computer
Resources, Inc.* 325,900 8,493,769
------------
Computers & Office Equipment -- 0.7%
Cognex Corporation* 285,900 5,289,150
------------
Diversified Operations -- 0.4%
SPS Technologies, Inc.* 50,000 2,925,000
------------
Drugs -- 0.9%
Herbalife International,
Inc. - Cl B 331,533 6,837,868
------------
Electrical Equipment & Electronics -- 5.4%
AFC Cable Systems,
Inc.* 211,075 7,493,163
Altron Incorporated* 604,100 7,777,788
Belden, Inc. 293,700 8,994,563
Dallas Semiconductor
Corporation 186,500 5,781,500
Teleflex, Incorporated 256,200 9,735,600
------------
39,782,614
------------
Financial Services -- 0.5%
Eaton Vance Corp. 82,800 3,834,675
------------
Foods -- 2.4%
International Home
Foods, Inc.* 407,900 9,279,725
Keebler Foods
Company* 49,100 1,350,250
Morrison Health Care,
Inc. 356,400 6,771,600
------------
17,401,575
------------
Forest Products & Paper -- 3.2%
Day Runner, Inc.* 326,300 8,218,681
Wausau-Mosinee Paper
Corporation 654,363 14,968,554
------------
23,187,235
------------
Gas Distribution -- 1.5%
WICOR, Inc. 466,000 10,776,250
------------
Household Products -- 0.3%
Libbey Inc. 54,200 2,076,538
------------
Industrial Transportation -- 2.8%
ABC Rail Products
Corporation* 445,000 7,676,250
Arnold Industries, Inc. 363,800 5,366,050
The Greenbrier
Companies, Inc. 429,400 7,407,150
------------
20,449,450
------------
Insurance -- 6.4%
Capital RE Corp. 202,000 14,468,250
Executive Risk Inc. 84,000 6,195,000
HCC Insurance
Holdings 459,500 10,109,000
Highlands Insurance
Group, Inc.* 445,700 8,245,450
Nationwide Financial
Services, Inc. Class A 146,400 7,466 400
------------
46,484,100
------------
Investment Management Services -- 0.7%
Conning Corporation 257,900 5,029,050
------------
(Continued)
The accompanying notes are an integral part of the financial statements.
54
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Number of
Shares Market Value
------ ------------
Leasing Companies -- 1.8%
Rollins Truck Leasing
Company 1,056,675 $ 13,076,353
------------
Machinery & Components -- 12.5%
Columbus McKinnon
Corporation 263,400 6,848,400
DT Industries, Inc. 380,300 9,222,275
Gleason Corporation 267,800 7,531,875
Graco, Incorporated 632,700 22,065,413
Hardinge, Inc. 328,650 8,010,844
Helix Technology
Corporation 494,600 7,419,000
OmniQuip
International, Inc. 245,800 4,547,300
Regal-Beloit
Corporation 290,750 8,286,375
Roper Industries,
Inc. 335,300 8,759,713
Watsco, Inc. 249,300 8,772,244
------------
91,463,439
============
Marine Services -- 0.2%
Trico Marine Services,
Inc.* 122,400 1,675,350
============
Medical Supplies -- 0.8%
Invacare Corporation 223,800 5,734,875
============
Metals & Mining -- 3.5%
CompX
International Inc.* 323,300 6,991,363
Reliance Steel &
Aluminum Company 489,300 18,899,213
------------
25,890,576
============
Miscellaneous Distributor Wholesale -- 1.9%
Hughes Supply, Inc. 380,100 13,921,163
============
Oil & Gas -- 3.3%
Comstock Resources,
Inc.* 508,400 3,781,225
The Houston
Exploration
Company* 405,100 9,291,981
Stone Energy
Corporation* 268,500 9,548,531
TransCoastal Marine
Services, Inc.* 293,100 1,767,745
------------
24,389,482
============
Other Services -- 3.0%
Analysts
International
Corporation 510,300 14,479,763
Landauer, Inc. 256,800 7,671,900
------------
22,151,663
============
Publishing & Printing -- 6.6%
Banta Corporation 284,250 8,776,219
Harte Hanks
Communications,
Inc. 561,200 14,485,975
Houghton Muffin
Company 346,400 10,998,200
McClatchy
Newspapers, Inc. 402,650 13,941,756
------------
48,202,150
============
Real Estate -- 2.3%
Capital Automotive
REIT 294,500 4,178,219
Captec Net Lease
Realty, Inc. 379,000 5,779,750
Mid-Atlantic Realty
Trust 546,400 6,727,550
------------
16,685,519
============
Transportation -- 3.2%
C.H. Robinson
Worldwide, Inc. 123,000 3,059.625
Hub Group, Inc.
Class A* 237,000 5,006,625
M.S. Carriers,
Inc.* 554,600 15,043,525
------------
23,109,775
============
TOTAL EQUITIES 709,898,766
============
(Cost $508,010,373)
Principal
Amount Market Value
------ ------------
SHORT-TERM INVESTMENTS -- 2.0%
Commercial Paper -- 0.5%
Heinz (H. J.) Company
5.480% 7/13/1998 $ 4,000,000 $ 3,992,693
============
Discount Note -- 1.5%
Federal Home Loan
Mortgage Corporation
5.420% 7/01/1998 11,060,000 11,060,000
------------
TOTAL SHORT-TERM
INVESTMENTS 15,052,693
============
(At Amortized Cost)
TOTAL INVESTMENTS -- 99.1% 724,951,459
(Cost $523,063,066)+
Other Assets/
(Liabilities) - 0.9% 6,846,996
============
NET ASSETS -- 100.0% $731,798,455
============
Notes to Portfolio of Investments
+ Aggregate cost for Federal tax purposes (Note 7)
* Non-income producing security.
The remainder of this page intentionally left blank.
The accompanying notes are an integral part of the financial statements.
55
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund - Financial Statements
- --------------------------------------------------------------------------------
Statement of
Assets and
Liabilities
June 30, 1998
(unaudited)
---------------
Assets:
Investments, at value (cost $508,010,373) (Note 2) ........ $ 709,898,766
Short-term investments, at amortized cost (Note 2) ........ 15,052,693
---------------
Total Investments ....................................... 724,951,459
Cash ...................................................... 2,117
Receivables from:
Investments sold ........................................ 6,309,156
Fund shares sold ........................................ 819,869
Interest and dividends .................................. 568,282
---------------
Total assets ........................................... 732,650,883
---------------
Liabilities:
Payables for:
Fund shares redeemed .................................... 428,977
Directors' fees and expenses (Note 3) ................... 5,429
Affiliates (Note 3):
Investment management fees ............................. 349,296
Administration fees .................................... 49,488
Service fees ........................................... 126
Accrued expenses and other liabilities .................... 19,112
---------------
Total liabilities ...................................... 852,428
---------------
Net assets ................................................ $ 731,798,455
===============
Net assets consist of:
Paid-in capital ........................................... $ 487,034,129
Undistributed net investment income ....................... 2,534,873
Accumulated net realized gain on investments .............. 40,341,060
Net unrealized appreciation on investments ................ 201,888,393
---------------
$ 731,798,455
===============
Net assets:
Class A ................................................... $ 196,261
===============
Class Y ................................................... $ 402,532
===============
Class S ................................................... $ 731,199,662
===============
Shares outstanding:
Class A ................................................... 19,244
===============
Class Y ................................................... 39,393
===============
Class S ................................................... 43,033,037
===============
Net asset value, offering price and redemption price per share:
Class A ................................................... $ 10.20
===============
Class Y ................................................... $ 10.22
===============
Class S ................................................... $ 16.99
===============
56 The accompanying notes are an integral part of the financial statements.
<PAGE>
- -------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund - Financial Statements (Continued)
- -------------------------------------------------------------------------------
Statement of
Operations
Six months ended
June 30, 1998
(Unaudited)
----------------
Investment income:
Dividends .............................................. $ 3,917,204
Interest ............................................... 925,004
----------------
Total investment income .............................. 4,842,208
----------------
Expenses (Note 1):
Investment management fees (Note 3) .................... 1,973,243
Custody fees ........................................... 36,662
Audit and legal fees ................................... 8,022
Directors' fees (Note 3) ............................... 9,580
----------------
2,027,507
Administration fees (Note 3):
Class A .............................................. 477
Class Y .............................................. 573
Class S .............................................. 278,532
Service fees (Note 3):
Class A .............................................. 246
----------------
Total expenses ...................................... 2,307,335
----------------
Net investment income ............................... 2,534,873
----------------
Realized and unrealized gain (loss):
Net realized gain on investment transactions ........... 38,123,301
Net change in unrealized appreciation (depreciation) on
investments .......................................... (25,925,343)
----------------
Net realized and unrealized gain .................... 12,197,958
----------------
Net increase in net assets resulting from operations ... $ 14,732,831
================
The accompanying notes are an integral part of the financial statements.
57
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund -- Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended
June 30, 1998 Year ended
Statements of <S> (Unaudited) December 31, 1997
Changes in Net Increase (Decrease) in Net Assets: ---------------- -----------------
Assets Operations: <C> <C>
Net investment income ................................................... $ 2,534,873 $ 5,076,360
Net realized gain on investment transactions ............................ 38,123,301 56,071,743
Net change in unrealized appreciation (depreciation)
on investments ......................................................... (25,925,343) 116,404,168
--------------- -------------
Net increase in net assets resulting from operations ................... 14,732,831 177,552,271
--------------- -------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1* .............................................................. -- --
Class 2* .............................................................. -- (449)
Class 3* .............................................................. -- (1,067)
Class S ................................................................. -- (5,267,208)
--------------- -------------
Total distributions from net investment income ......................... -- (5,268,724)
--------------- -------------
From net realized gains:
Class 1* .............................................................. -- (16,515)
Class 2* .............................................................. -- (16,672)
Class 3* .............................................................. -- (16,782)
Class S ................................................................. -- (58,776,388)
--------------- -------------
Total distributions from net realized gains ............................ -- (58,826,357)
--------------- -------------
Net fund share transactions (Note 5):
Class 1* .............................................................. (192,437) 16,505
Class 2* .............................................................. (195,907) 17,114
Class 3* .............................................................. (198,023) 17,846
Class A ................................................................. 192,437 --
Class Y ................................................................. 393,930 --
Class S ................................................................. 26,100,967 120,087,619
--------------- -------------
Increase in net assets from net fund share transactions ................ 26,100,967 120,139,084
--------------- -------------
Total increase in net assets ............................................ 40,833,798 233,596,274
Net assets:
Beginning of period ..................................................... 690,964,657 457,368,383
--------------- -------------
End of period (including undistributed net
investment income of $2,534,873 and $0, respectively) .................. $ 731,798,455 $ 690,964,657
=============== =============
</TABLE>
* Effective January 1, 1998, Class 1, Class 2, and Class 3 shares were
terminated (See Note 1).
58 The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class A Class Y
------- -------
Six months Six months
ended 6/30/98 ended 6/30/98
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.00
--------- ---------
Income (loss) from investment operations:
Net investment income 0.00 0.03
Net realized and unrealized gain (loss) on investments 0.20 0.19
--------- ---------
Total income (loss) from investment operations 0.20 0.22
--------- ---------
Net asset value, end of period $ 10.20 $ 10.22
========= =========
Total Return 2.00% 2.20%
Ratios / Supplemental Data:
Net assets, end of period (000s) $196 $403
Net expenses to average daily net assets 1.30%* 0.85%*
Net investment income to average daily net assets 0.05%* 0.50%*
Portfolio turnover rate 16% 16%
</TABLE>
<TABLE>
<CAPTION>
Class S (1)
Six months -----------
ended 6/30/98 Year ended Year ended Year ended Period ended
(Unaudited) 12/31/97 12/31/96 12/31/95 12/31/94**
----------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.61 $ 13.43 $ 11.44 $ 9.69 $ 10.00
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income 0.06 0.13 0.31 0.19 0.04
Net realized and unrealized gain (loss) on investments 0.32 4.73 2.29 1.75 (0.31)
-------- -------- -------- -------- --------
Total income (loss) from investment operations 0.38 4.86 2.60 1.94 (0.27)
-------- -------- -------- -------- --------
Less distributions to shareholders:
From net investment income -- (0.14) (0.30) (0.19) (0.04)
From net realized gains -- (1.54) (0.31) -- --
-------- -------- -------- -------- --------
Total distributions -- (1.68) (0.61) (0.19) (0.04)
-------- -------- -------- -------- --------
Net asset value, end of period $ 16.99 $ 16.61 $ 13.43 $ 11.44 $ 9.69
======== ======== ======== ======== ========
Total Return @ 2.29% 36.36% 22.82% 20.01% (2.66)%
Ratios / Supplemental Data:
Net assets, end of period (000s) $731,200 $690,378 $456,935 $380,398 $310,789
Net expenses to average daily net assets# 0.6428%* 0.6400% 0.6110% 0.6110% 0.6110%*
Net investment income to average daily net assets 0.71%* 0.89% 2.40% 1.78% 1.78%*
Portfolio turnover rate 16% 31% 28% 28% 4%
#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: N/A 0.6515% 0.6546% 0.6553% 0.6681%*
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
(1)Class S shares were previously designated as Class 4 shares.
@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.
59
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment The objective and policies of the Fund are to:
objective and policies . achieve high total rate of return over the
for the MassMutual long term
International Equity . invest in a diversified portfolio of foreign
Fund? and domestic equity securities
. utilize dominant themes to guide investment
decisions with respect to risks of investing
in foreign securities (economic, political and
social influences that are expected to dictate
long-term growth trends)
How did the Fund perform during The Fund performed well, closing in the 32nd
the first half of 1998? percentile of all international equity funds
tracked by Lipper Analytical Services, Inc.
For the six-month period ended June 30,1998,
Class S shares of the Fund provided a total
return of 17.93 percent, surpassing the 15.93
percent gain of the Morgan Stanley EAFE Index,
an unmanaged index of international stocks.
During the same period, the unmanaged Morgan
Stanley U.S. Index, a benchmark of U.S. stock
performance, gained 17.1 percent.
How did different international Japan underperformed relative to the
markets perform during the international market average, finishing up
six-month period? with a 13.9 percent return for the six months
ended June 30, 1998. The MSCI Pacific Free
(ex-Japan) Index, a broad index of all Pacific
Basin countries excluding Japan, was down 18.7
percent for the period. Latin America was down
21 percent, which we believe was due largely
to the region being unfairly penalized on the
basis of investors generally not liking
emerging markets. We do, however, believe that
Latin America's long-term fundamentals are
attractive.
In what regions and in what The reason that we have done well is that we
types of businesses did you had no exposure to Asia other than a low
position the portfolio over weighting of less than 1 percent in Japan. We
the past six months, and believe the fundamentals in Asia will continue
how did this benefit the to deteriorate. Therefore, we have been
Fund? heavily weighted--approximately 80 percent--in
Europe.
We did quite well in the technology area, with
companies such as Altran Technologies and Cap
Germany (both based in France), and Misys, a
UK software company. We have also done well in
European financial companies, including MLP, a
diversified financial group in Germany, and
Credito Italiano, a major Italian bank. In
general, banks and fund managers throughout
Europe were strong stocks in the portfolio.
This was because of a restructuring of
European banks and financial services in
general, combined with a huge asset gathering
wave similar to what has been happening in the
U.S.
We did not do as well in our Latin American
holdings, some of which had specific problems
in terms of earnings disappointments.
It is important that we point out that we have
not really positioned the portfolio in terms
of countries, but rather, according to three
main investment themes: Capital Market
Development, Efficiency Enhancing Technology,
and Telecommunications and Media. Of the three
themes, we added most to the
Telecommunications and Media theme over the
past six months, focusing on digital
telecommunications and digital television
companies in Europe.
What changes to the portfolio We think that the outlook for all three themes
do you anticipate between now continues to be very good. Therefore, we do
and year-end? not see any need to change our theme-driven
investment strategy. The most attractive area
on a long-term basis is Europe, where you have
the combination of great valuation and the
potential for fundamentals to roll out. Once
the emerging markets settle down, we think
that the best area on a three- to five- year
view is Latin America.
We are selectively looking for opportunities
to buy good, sound companies in Asia, but so
far we have not really seen any. What we would
like to see are good businesses with
consistent growth above the global average;
well-rounded, shareholder-oriented businesses
that we feel are running themselves in a way
that will allow them to sustain or improve
margins and offer good prices relative to
assets. Given the region's economic outlook,
it is difficult to see the ability of that in
Asia. Just because prices are down does not
necessarily mean that Asian stocks represent
good value.
60
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
Looking ahead, what is your We believe that the Asian markets will be very
outlook for the international volatile, and can certainly drop even farther.
market environment and the We want to see and analyze what the structural
Fund in the second half of changes in that region will be before we
1998? consider any investments there. We did not
think that the problems in Asia would be
manifested until well into 1998, and we think
that the true extent of the problems, and the
fact that it will take a long time to work out
those problems, is just now showing itself.
The big event of the past six months has been
the formalization of who's into Euro and who's
not, which has bound the Euro Eleven together
and given much more transparency toward
interest rates staying low across the
continent. (The Euro is the new unified
currency introduced by the European Economic
and Monetary Union (EMU), which has been
adopted by 15 European nations.) If the whole
European region is now going to start
competing, the competition is going to be on a
more level playing field which is going to be
good for shareholders.
61
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual International Equity
Fund Class S and the Morgan Stanley Capital International
Index for Europe, Australia and the Far East (MSCI EAFE)
- --------------------------------------------------------------------------------
MassMutual International Equity Fund
Total Return Year-to-date One Year Average Annual
1/1/98 - 6/30/98 7/1/97 - 6/30/98 10/3/94 - 6/30/98
Class S 17.93% 17.15% 12.97%
- --------------------------------------------------------------------------------
MSCI EAFE
Index 15.93% 6.09% 8.52%
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
[LINE GRAPH APPEARS HERE]
Class S MSCI EAFE
10/3/94 10,000 10,000
12/94 9,280 9,898
6/95 9,510 10,155
12/95 9,756 11,007
6/96 10,734 11,504
12/96 11,562 11,672
6/97 13,477 12,981
12/97 13,388 11,880
6/98 15,788 13,772
Hypothetical Investments in MassMutual International
Equity Fund Class A and Class Y and the Morgan Stanley
Capital International Index for Europe, Australia and the
Far East (MSCI EAFE)
- -----------------------------------------------------------
MassMutual International Equity Fund
Total Return Year-to-date
1/1/98 - 6/30/98
Class A 17.60%
Class Y 17.80%
- -----------------------------------------------------------
MSCI EAFE
Index 15.93%
- -----------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Class A Class Y MSCI EAFE
12/97 10,000 10,000 10,000
1/98 10,060 10,060 10,457
2/98 10,460 10,470 11,128
3/98 11,380 11,390 11,471
4/98 11,620 11,630 11,561
5/98 11,980 12,000 11,505
6/98 11,760 11,780 11,593
Past performance is not predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund, while the MSCI EAFE is unmanaged and does not incur expenses, and
cannot be purchased directly by investors.
- ---------------------------------------
MassMutual International Equity Fund
Largest Country Weightings (6/30/98)
- ---------------------------------------
% of Fund
United Kingdom 22.00%
France 16.92%
Switzerland 9.14%
The Netherlands 9.08%
Germany 6.65%
Sweden 6.45%
Italy 5.10%
Brazil 4.60%
Japan 4.29%
Portugal 2.79%
62
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1998
Number of
Shares Market Value
------ ------------
EQUITIES -- 100.4%
Aerospace & Defense -- 0.9%
Sagem SA 8,000 $ 6,224,250
------------
Bank Holding Companies -- 2.3%
BFH-BankAG 130,000 4,922,619
Paribas 100,000 10,701,230
------------
15,623,849
------------
Banking-- 19.2%
Banco Bradesco SA,
Preference 304,756,619 2,529,480
Banco de Galicia y
Buenos Aires SA de
CV, Sponsored ADR 169,225 3,088,356
Banco Espirito Santo
e Comercial de Lisboa,
SA 225,000 6,756,570
Banco Totta &
Acores, SA 170,000 5,152,819
Bank Austria AG 125,000 10,167,125
Bayerische Vereinsbank
AG 100,000 8,503,990
Credit Suisse Group 100,000 22,250,620
Credito Italiano 2,700,000 14,133,690
Liechtenstein Global
Trust AG 10,000 10,944,009
National Bank of
Greece SA 50,400 6,458,180
National Westminster
Bank PLC 600,000 10,721,760
Skandinaviska Enskilda
Banken Group 700,000 11,981,270
Societe Generale 60,000 12,474,295
Unibanco-Uniao de
Banco Brasileiros SA,
Sponsored GDR 190,000 5,605,000
------------
130,767,164
------------
Broadcasting -- 1.2%
Carlton
Communications PLC 900,000 8,033,760
------------
Computer Hardware -- 0.8%
ARM Holdings PLC* 120,000 2,302,524
Eidos PLC* 141,100 1,954,023
Imagineer Co. Ltd. 205,000 1,033,959
Psion PLC* 21,500 233,187
------------
5,523,693
------------
Computer Services -- 1.8%
Cap Gemini SA 77,777 12,220,937
------------
Computer Software -- 5.5%
JBA Holdings PLC 795,000 8,224,037
Misys PLC 405,261 23,023,850
Unit 4 230,000 6,116,827
------------
37,364,714
------------
Conglomerates -- 1.0%
Chargeurs
International SA 80,000 6,609,296
------------
Diversified Financial -- 8.5%
Amsterdam Option
Traders NV 100,000 10,170,960
Argentaria SA 400,000 8,988,160
Gewestelijke
Investeringmaatschappij
voor Vlaanderen NV 45,000 4,649,958
Julius Baer Holding
AG, Cl. B 3,500 10,948,954
UBSAG* 21,538 8,008,702
Van der Moolen
Holdings NV 130,000 14,692,093
------------
57,458,827
------------
Electric Utilities -- 0.5%
Cia Paranaense
Energia, Sponsored
ADR, Preference B
Shares 380,000 3,515,000
------------
Electrical Equipment & Electronics -- 1.6%
Sony Corporation 75,000 6,457,823
STMicroelectronics
NV* 65,000 4,541,875
------------
10,999,698
------------
Energy Services & Producers -- 4.7%
Cie Generale de
Geophysique SA 54,000 7,922,221
Cie Generale de
Geophysique SA,
Sponsored ADR 240,000 7,050,000
Coflexip SA,
Sponsored ADR 200,000 12,225,000
Transocean Offshore
Inc. 100,000 4,450,000
------------
31,647,221
------------
Food & Beverage -- 2.6%
Cadbury Schweppes
PLC 1,125,000 17,409,713
----------
Healthcare/Drugs -- 4.6%
Biocompatibles
International PLC* 1,792,279 3,528,639
Glaxo Welicome PLC 316,814 9,509,584
Novartis AG 6,236 10,376,809
Oxford Molecular
Group PLC* 1,050,000 3,328,605
Torii Pharmaceutical
Co. Ltd. 249,000 4,530,206
------------
31,273,843
------------
Healthcare/Supplies & Services -- 3.9%
Genset Sponsored
ADR 193,000 5,669,379
Medical Invest
Svenska AB Class A* 228,600 3,296,435
Medical Invest
Svenska AB Class B 592,910 9,293,271
Nichii Gakkan
Company 150,000 4,982,520
Novogen Ltd. 1,746,840 3,082,823
------------
26,324,428
------------
Industrial Materials -- 1.2%
Williams PLC 1,300,000 8,350,810
------------
(Continued)
The accompanying notes are an integral part of the financial statements.
63
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund -- Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Number of
Shares Market Value
------ ------------
Industrial Services -- 5.6%
Aegis Group PLC 2,980,000 $ 4,822,832
Bau Holdings AF,
Preference 145,611 6,937,126
Boskalis Westminster 429,298 6,373,315
GEA AG 16,000 6,284,643
LHS Group, Inc.* 110,000 6,819,252
VBH Holding AG 320,000 6,648,064
------------
37,885,232
------------
Insurance -- 4.2%
Instituto Nazionale
delle Assicurazioni 4,750,000 13,494,275
Marschollek,
Lautenschlaeger und
Partner-VO, Non-vtg.
Preferred Stock 4,000 1,961,181
Ockham Holdings PLC 2,200,000 5,395,720
Reinsurance Australia
Corp. Ltd. 3,067,811 7,830,588
------------
28,681,764
------------
Leisure & Entertainment -- 4.9%
Granada Group PLC 800,000 14,709,440
Lusomundo SGPS SA* 400,000 5,954,920
Nintendo Co. Ltd. 133,400 12,351,399
------------
33,015,759
------------
Manufacturing -- 0.4%
Sauer, Inc. 175,000 2,460,938
------------
Media -- 2.6%
Canal Plus* 30,000 5,606,985
Grupo Televisa SA,
Sponsored GDR* 150,000 5,643,750
ProSieben Media AG,
Preferred 58,600 3,045,190
Roto Smeets de Boer 80,000 3,657,416
------------
17,953,341
------------
Non-Durable Household Goods -- 2.1%
WeIIa AG 2,000 1,983,342
Wella AG Preference 10,700 12,092,844
------------
14,076,186
------------
Oil & Gas -- 2.0%
Expro International
Group PLC 900,000 7,463,160
KBC Advanced
Technologies PLC 198,400 695,154
Petroleo Brasileiro
SA, Preference 29,233,000 5,431,491
------------
13,589,805
------------
Publishing/Printing -- 0.3%
Singapore Press
Holdings Ltd. 265,000 1,772,426
------------
Real Estate -- 0.9%
Brazil Realty SA,
GDR 144A 62,000 1,366,920
IRSA Inversiones y
Representaciones, SA 1,690,673 4,971,086
------------
6,338,006
------------
Retail -- 0.6%
SkyePharma PLC 4,000,000 4,271,200
------------
Telecommunications -- 9.6%
Altran Technologies
SA 107,700 24,457,711
British Sky
Broadcasting Group
PLC 1,000,000 7,182,800
Energis PLC* 600,000 9,130,560
Kinnevik Investments
AB Free, Series B 600,000 19,523,580
Tandberg Television
ASA* 685,000 5,757,768
------------
66,052,419
------------
Telephone Utilities -- 2.7%
Telecom Italia SPA,
RNC shares 1,500,000 7,261,350
Telecomunicacoes
Brasileiras SA,
Sponsored ADR 100,000 10,918,750
------------
18,180,100
------------
Transportation -- 3.9%
Internatio-MulIer NV 255,555 8,555,240
MIF Ltd. 282,072 5,513,831
Smit Internationale
NV 462,500 12,527,506
------------
26,596,577
------------
Water Companies -- 0.3%
Cia de Saneamento
Basico do Estado de
Sao Paulo 17,304,800 2,064,463
------------
TOTAL EQUITIES 682,285,419
(Cost $577,840,347) ------------
RIGHTS -- 0.2%
Banking -- 0.2%
Banco Espirito Santo e Comercial de Lisboa,
SA 200,000 1,245,120
Bank Austria AG 100,000 37,970
------------
1,283,090
------------
Telecommunications -- 0.0%
Kinnevik Investments
AB Free, Series B 600,000 --
------------
TOTAL RIGHTS 1,283,090
(Cost $37,667) ------------
Principal
Amount Market Value
------ ------------
WARRANTS -- 0.0%
Healthcare/Drugs -- 0.0%
Biocompatibles
International PLC 358,456 $ 125,567
------------
Healthcare/Supplies & Services -- 0.0%
Novogen Ltd. 43,160 60,135
------------
TOTAL WARRANTS 185,702
(Cost $77,083) ------------
TOTAL INVESTMENTS -- 100.6% 683,754,211
(Cost $577,955,097)+
Other Assets/
(Liabilities) - (0.6%) (3,867,210)
------------
NET ASSETS -- 100.0% $679,887,001
============
Notes to Portfolio of Investments
*Non-income producing security
+Aggregate cost for Federal tax purposes (Note 7)
ADR: American Depository Receipt
Receipt GDR: Global Depository Receipt
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.
64
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Financial Statements
- --------------------------------------------------------------------------------
Statement of
Assets and
Liabilities
<TABLE>
<CAPTION>
June 30, 1998
(Unaudited)
-------------
<S> <C>
Assets:
Investments, at value (cost $577,955,097) (Note 2) ............................... $ 683,754,211
Cash ............................................................................. 14,394
Foreign currency, at value (cost $5,983,243) ..................................... 5,893,799
Receivables from:
Investments sold ............................................................... 25,972,701
Open forward foreign currency contracts (Note 2) ............................... 699,144
Fund shares sold ............................................................... 1,479,094
Dividends ...................................................................... 785,199
Foreign taxes withheld ......................................................... 1,092,434
--------------
Total assets .................................................................. 719,690,976
--------------
Liabilities:
Payables for:
Investments purchased .......................................................... 28,441,719
Borrowings under line of credit (Note 8) ....................................... 9,400,000
Fund shares redeemed ........................................................... 1,264,299
Directors' fees and expenses (Note 3) .......................................... 5,430
Affiliates (Note 3):
Investment management fees .................................................... 505,758
Administration fees ........................................................... 46,184
Service fees .................................................................. 94
Accrued expenses and other liabilities ........................................... 140,491
--------------
Total liabilities ............................................................. 39,803,975
--------------
Net assets ....................................................................... $ 679,887,001
==============
Net assets consist of:
Paid-in capital .................................................................. $ 502,731,017
Undistributed net investment income .............................................. 4,698,055
Accumulated net realized gain on investments and
foreign currency translations .................................................. 66,029,828
Net unrealized appreciation on investments, forward foreign currency
contracts, foreign currency and other assets and liabilities ................... 106,428,101
--------------
$ 679,887,001
==============
Net assets:
Class A .......................................................................... $ 151,581
==============
Class Y .......................................................................... $ 310,139
==============
Class S .......................................................................... $ 679,425,281
==============
Shares outstanding:
Class A .......................................................................... 12,894
==============
Class Y .......................................................................... 26,324
==============
Class S .......................................................................... 46,548,897
==============
Net asset value, offering price and redemption price per share:
Class A .......................................................................... $ 11.76
==============
Class Y .......................................................................... $ 11.78
==============
Class S .......................................................................... $ 14.60
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
65
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of
Operations
<TABLE>
<CAPTION>
Six months ended
June 30, 1998
(Unaudited)
----------------
<S> <C>
Investment income:
Dividends (net of withholding tax of $968,735) ..................... $ 7,129,656
Interest ........................................................... 498,878
------------
Total investment income .......................................... 7,628,534
------------
Expenses (Note 1):
Investment management fees (Note 3) ................................ 2,617,979
Custody fees ....................................................... 293,142
Audit and legal fees ............................................... 6,921
Directors' fees (Note 3) ........................................... 9,579
------------
2,927,621
Administration fees (Note 3):
Class A .......................................................... 335
Class Y .......................................................... 397
Class S .......................................................... 238,224
Service fees (Note 3):
Class A .......................................................... 176
------------
Total operating expenses ........................................ 3,166,753
------------
Interest Expense (Note 8) .......................................... 56,763
------------
Net investment income ........................................... 4,405,018
------------
Realized and unrealized gain (loss) from investments
and foreign currency:
Net realized gain on:
Investment transactions .......................................... 46,661,496
Foreign currency transactions .................................... 3,040,167
------------
Net realized gain ............................................... 49,701,663
------------
Net change in unrealized appreciation (depreciation) on:
Investments ...................................................... 47,082,045
Translation of assets and liabilities in foreign currencies ...... (1,582,886)
------------
Net unrealized gain ............................................. 45,499,159
------------
Net realized and unrealized gain from investments
and foreign currency ........................................... 95,200,822
------------
Net increase in net assets resulting from operations ............... $ 99,605,840
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
66
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statements of
Changes in Net
Assets
<TABLE>
<CAPTION>
Six months ended
June 30, 1998 Year ended
(Unaudited) December 31, 1997
---------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income ........................................... $ 4,405,018 $ 2,575,473
Net realized gain on investments and foreign
currency transactions .......................................... 49,701,663 46,842,567
Net change in unrealized appreciation (depreciation) on
investments and translation of assets and liabilities in
foreign currencies ............................................. 45,499,159 13,026,206
------------- -------------
Net increase in net assets resulting from operations .......... 99,605,840 62,444,246
------------- -------------
Distributions to shareholders (Note 2):
From net investment income:
Class 1* ........................................................ -- (91)
Class 2* ........................................................ -- (133)
Class 3* ........................................................ -- (256)
Class S ......................................................... -- (3,046,471)
------------- -------------
Total distributions from net investment income ................. -- (3,046,951)
------------- -------------
From net realized gains:
Class 1* ........................................................ -- (4,184)
Class 2* ........................................................ -- (4,229)
Class 3* ........................................................ -- (4,243)
Class S ......................................................... -- (17,495,727)
------------- -------------
Total distributions from net realized gains .................... -- (17,508,383)
------------- -------------
Net fund share transactions (Note 5):
Class 1 ......................................................... (128,943) 4,275
Class 2 ......................................................... (131,236) 4,362
Class 3 ......................................................... (132,006) 4,499
Class A ......................................................... 128,943 --
Class Y ......................................................... 263,242 --
Class S ......................................................... 33,099,227 148,628,074
------------- -------------
Increase in net assets from net fund share transactions ........ 33,099,227 148,641,210
------------- -------------
Total increase in net assets .................................... 132,705,067 190,530,122
Net assets:
Beginning of period ............................................. 547,181,934 356,651,812
------------- -------------
End of period (including undistributed net investment
income of $4,698,055 and $293,037, respectively) ............... $ 679,887,001 $ 547,181,934
============= =============
</TABLE>
*Effective January 1, 1998, Class 1, Class 2, and Class 3 shares were
terminated (See Note 1).
The accompanying notes are an integral part of the financial statements.
67
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class A Class Y
------- -------
Six months Six months
ended 6/30/98 ended 6/30/98
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.00
--------- ---------
Income (loss) from investment operations:
Net investment income 0.04 0.07
Net realized and unrealized gain (loss) on investments
and foreign currency 1.72 1.71
--------- ---------
Total income (loss) from investment operations 1.76 1.78
--------- ---------
Net asset value, end of period $ 11.76 $ 11.78
========= =========
Total Return 17.60% 17.80%
Ratios / Supplemental Data:
Net assets, end of period (000s) $152 $310
Net expenses to average daily net assets 1.68%* 1.23%*
Net investment income to average daily net assets 0.77%* 1.22%*
Portfolio turnover rate 38% 38%
</TABLE>
<TABLE>
<CAPTION>
Class S (1)
-----------
Six months
ended 6/30/98 Year ended Year ended Year ended Period ended
(Unaudited) 12/31/97 12/31/96 12/31/95 12/31/94**
----------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.38 $ 11.11 $ 9.58 $ 9.28 $ 10.00
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income 0.09 0.06 0.06 0.07 0.00
Net realized and unrealized gain (loss) on investments
and foreign currency 2.13 1.69 1.71 0.41 (0.72)
-------- -------- -------- -------- --------
Total income (loss) from investment operations 2.22 1.75 1.77 0.48 (0.72)
-------- -------- -------- -------- --------
Less distributions to shareholders:
From net investment income -- (0.07) (0.24) (0.07) --
In excess of net investment income -- -- -- (0.11) --
From net realized gains -- (0.41) -- -- --
-------- -------- -------- -------- --------
Total distributions -- (0.48) (0.24) (0.18) --
-------- -------- -------- -------- --------
Net asset value, end of period $ 14.60 $ 12.38 $ 11.11 $ 9.58 $ 9.28
======== ======== ======== ======== ========
Total Return @ 17.93% 15.79% 18.51% 5.13% (7.20)%
Ratios / Supplemental Data:
Net assets, end of period (000s) $679,425 $546,790 $356,311 $220,718 $150,199
Net expenses to average daily net assets# 1.0279%* 1.0580% 1.0020% 1.0020% 1.0020%*
Net investment income to average daily net assets 1.43%* 0.53% 0.59% 0.76% 0.04%*
Portfolio turnover rate 38% 83% 58% 121% 18%
#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: N/A 1.0684% 1.0718% 1.0920% 1.0877%*
</TABLE>
*Annualized
**For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
(1)Class S shares were previously designated as Class 4
shares.
@Employee retirement benefit plans that invest plan assets in the Separate
Investment Accounts (SIAs) may be subject to certain charges as set forth
in their respective Plan Documents. Total return figures would be lower for
the periods presented if they reflected these charges.
The accompanying notes are an integral part of the financial statements.
68
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
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, 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. On October 3, 1994, the following seven series of
the Trust (each individually referred to as a "Fund" or
collectively as the "Funds") commenced operations: 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"). A new series of the Trust,
MassMutual Indexed Equity Fund ("Indexed Equity Fund"),
commenced operations March 1, 1998. Separate financial
statements are prepared for the Indexed Equity Fund, which
has a February 28 fiscal year end.
Each Fund has three classes of shares: Class A, Class Y, and
Class S. Effective January 1, 1998, Class A and Y shares
began operations, and Class 1 shares of all Funds were
exchanged for Class A shares, and Class 2 and Class 3 shares
of all Funds were exchanged for Class Y shares. The Class 1,
Class 2, and Class 3 shares were subsequently terminated by
the Board of Trustees ("Trustees"). The principal economic
difference among the Classes is the level of service and
administration fees borne by the Classes. Class A shares also
bear a Contingent Deferred Sales Charge (See Note 3). The new
classes of shares are offered to different types of
investors, as outlined in the Trust's Prospectus. Class S
shares of each Fund, which were originally designated as
Class 4 shares, are available only to separate investment
accounts ("SIAs") of Massachusetts Mutual Life Insurance
Company ("MassMutual"). Effective December 1, 1997, Class 4
shares of the Funds were redesignated as Class S shares, and
the expense structure was revised accordingly (see Note 3).
2. Significant The following is a summary of significant accounting policies
Accounting followed consistently by each Fund in the preparation of the
Policies financial statements in conformity with generally accepted
accounting principles. The preparation of the financial
statements in accordance with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from
those estimates.
Investment Equity securities are valued on the basis of valuations
Valuation furnished by a pricing service, authorized by the 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, including restricted securities and securities for
which no market quotation is available, are valued at fair
value in accordance with procedures approved by and
determined in good faith by the Trustees, although the actual
calculation may be done by others.
Portfolio securities traded on more than one national
securities exchange are valued at the last price on the
business day as of which such value is being determined at
the close of the exchange representing the principal market
for such securities. All assets and liabilities expressed in
foreign currencies will be converted into U.S. dollars at the
mean between the buying and selling rates of such currencies
against U.S. dollars last quoted by any major bank. If such
quotations are not available, the rate of exchange will be
determined in accordance with policies established by the
Trustees.
69
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Accounting for Investment transactions are accounted for on the trade date.
Investments Realized gains and losses on sales of investments and
unrealized appreciation and depreciation of investments are
computed on the specific identification cost method.
Interest income, adjusted for amortization of discounts and
premiums on investments, is earned from the settlement date
and is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date.
Federal Income It is each Fund's intent to continue to comply with the
Tax provisions of subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), applicable to a regulated
investment company. Under such provisions, the Funds will not
be subject to federal income taxes on their ordinary income
and net realized capital gain to the extent they are
distributed or deemed to have been distributed to their
shareholders. Therefore, no Federal income tax provision is
required.
Dividends and Dividends from net investment income and distributions of any
Distributions to net realized capital gains of each Fund are declared and paid
Shareholders annually and at other times as may be required to satisfy tax
or regulatory requirements. Distributions to shareholders are
recorded on the ex-dividend date. Income and capital gain
distributions are determined in accordance with income tax
regulations which may differ from generally accepted
accounting principles. These differences are primarily due to
investments in forward contracts, passive foreign investment
companies, the deferral of wash sale losses, and paydowns on
certain mortgage-backed securities. As a result, net
investment income and net realized gain on investment
transactions for a reporting period may differ significantly
from distributions during such period. Accordingly, the Funds
may periodically make reclassifications among certain of
their capital accounts without impacting the net asset value
of the Funds.
Foreign Currency The books and records of the Funds are maintained in U.S.
Translation dollars. The market values of foreign currencies, foreign
securities and other assets and liabilities denominated in
foreign currencies are translated into U.S. dollars at the
mean of the buying and selling rates of such currencies
against the U.S. dollar at the end of each business day.
Purchases and sales of foreign securities and income and
expense items are translated at the rates of exchange
prevailing on the respective dates of such transactions. The
Funds do not isolate that portion of the results of
operations arising from changes in the exchange rates from
that portion arising from changes in the market prices of
securities.
Net realized foreign currency gains and losses resulting from
changes in exchange rates include foreign currency gains and
losses between trade date and settlement date on investment
securities transactions, foreign currency transactions and
the difference between the amounts of dividends recorded on
the books of the Funds and the amount actually received.
Forward Foreign Each Fund may enter into forward foreign currency contracts
Currency 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.
70
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
The notional or contractual amounts of these instruments
represent the investments the Funds have in particular
classes of financial instruments and do not necessarily
represent the amounts potentially subject to risk. The
measurement of the risk associated with these instruments is
meaningful only when all related and offsetting transactions
are considered. A summary of obligations for the
International Equity Fund under these financial instruments
at June 30, 1998 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
07/01/98 Singapore Dollar 1,921,040 $ 1,163,209 $ 1,137,046 $ (26,163)
07/02/98 Singapore Dollar 1,269,893 764,305 751,638 (12,667)
08/18/98 Japanese Yen 3,824,400,000 28,143,351 27,658,728 (484,623)
------------
$ (523,453)
============
SELLS
07/01/98 Swiss Franc 553,453 361,900 364,882 (2,982)
07/31/98 French Franc 16,259,250 2,688,368 2,689,257 (889)
08/18/98 Japanese Yen 3,824,400,000 28,885,196 27,658,728 1,226,468
------------
$ 1,222,597
============
</TABLE>
Forward Each Fund may purchase or sell securities on a "when issued"
Commitments or delayed delivery or on a forward commitment basis. The
Funds use forward commitments to manage interest rate
exposure or as a temporary substitute for purchasing or
selling particular debt securities. 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 counter-
parties 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, 1998, is as follows:
<TABLE>
<CAPTION>
Forward Expiration Aggregate
Commitment of Face Value Market Unrealized
Contracts to Buy Contracts of Contracts Cost Value Depreciation
---------------- --------- ------------ ---- ----- ------------
Core Bond Fund
U.S. Treasury Note
<S> <C> <C> <C> <C> <C>
5.375% 02/15/2001 August 1998 $40,900,000 $40,825,455 $40,759,304 $(66,151)
</TABLE>
71
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
Allocation of In maintaining the records for the Funds, the income and
Operating Activity expense accounts are allocated to each class of shares.
Investment income, unrealized and realized gains or losses
are prorated among the classes of shares based on the
relative net assets of each. Expenses are allocated to each
class of shares depending on the nature of the expenditures.
Administration and 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.
3. Management
Fees and Other
Transactions
With Affiliates
Investment Under an agreement between the Trust and MassMutual,
Management Fees MassMutual is responsible for providing investment management
of each Fund. In return for this service, MassMutual receives
advisory fees monthly based upon each Fund's average daily
net assets at the following annual rates:
Prime Fund .45%
Short-Term Bond Fund .45%
Core Bond Fund .45%
Balanced Fund .45%
Value Equity Fund .45%
Small Cap Value Equity Fund .55%
International Equity Fund .85%
MassMutual has entered into investment sub-advisory
agreements with two subsidiaries: David L. Babson and
Company, Inc. ("Babson") and HarbourView Asset Management
Corporation ("HarbourView"). These agreements provide that
(1) Babson 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 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
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 Under separate administrative and shareholder services
Fees 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:
Class A Class Y Class S
--------- --------- ---------
Prime Fund .4823% .2823% .0777%
Short-Term Bond Fund .4767% .2767% .0777%
Core Bond Fund .4832% .2832% .0777%
Balanced Fund .4852% .2852% .0777%
Value Equity Fund .4875% .2875% .0777%
Small Cap Value Equity Fund .4845% .2845% .0777%
International Equity Fund .4752% .2752% .0774%
72
<PAGE>
Service Fees OppenheimerFunds Distributor, Inc. ("OFDI") acts as
distributor to each Fund. MML Investor Services, Inc.
("MMLISI") serves as sub-distributor to each Fund. MassMutual
has a controlling interest in OFDI and MMLISI is a wholly
owned subsidiary of MassMutual. 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 Adviser receives the Service Fee
and may pay all or a portion to brokers and other financial
intermediaries, including the distributor or the sub-
distributor, for personal services rendered to Investors in
Class A shares and/or maintenance of Class A shareholder
accounts.
Contingent A Class A Contingent Deferred Sales Charge may be deducted
Deferred from the proceeds on any redemption made within 12 months of
Sales Charge the date on which the investor first purchased Class A shares
of any series of the Trust. If imposed, the Class A
Contingent Deferred Sales Charge will be equal to 1.00% of
the lesser of: (1) the aggregate net asset value of the
redeemed shares (not including shares purchased by
reinvestment of dividends or capital gains distributions);
and (2) the original offering price (which is the original
net asset value of the redeemed shares). No Class A
Contingent Deferred Sales Charge is charged on exchange of
shares, as described in the Trust's Prospectus. 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.
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, 1998, MassMutual or separate investment accounts
thereof owned all of the outstanding shares of the Trust.
4. Purchases And Cost of purchases and proceeds from sales of investment
Sales Of securities (excluding short-term investments) for the six
Investments months ended June 30, 1998 were as follows:
<TABLE>
<CAPTION>
Long-term U.S.
Government Other Long-term
Securities Securities
---------------- ----------------
<S> <C> <C>
Purchases Short-Term Bond Fund $ 48,259,797 $ -
Core Bond Fund 98,098,131 46,140,238
Balanced Fund 35,367,466 44,593,515
Value Equity Fund - 292,840,988
Small Cap Value Equity Fund - 130,798,198
International Equity Fund - 359,755,637
Sales Short-Term Bond Fund $ 26,136,023 $ 5,543,039
Core Bond Fund 60,798,691 25,486,516
Balanced Fund 23,293,355 65,399,893
Value Equity Fund - 309,672,029
Small Cap Value Equity Fund - 112,867,085
International Equity Fund - 229,940,029
</TABLE>
<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 each class of shares. Changes in shares outstanding for each Fund are
as follows:
<TABLE>
<CAPTION>
Class 1 Class 2
Six months ended Year ended Six months ended Year ended
June 30, 1998 December 31, 1997 June 30, 1998 December 31, 1997
Shares Amount Shares Amount Shares Amount Shares Amount
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Prime Fund
Sold -- -- -- -- -- -- -- --
Issued as reinvestment
of dividends -- -- 31 $ 4,723 -- -- 36 $ 5,393
Redeemed (758) (114,317) -- -- (770) (116,325) -- --
--------- --------- -------- --------- -------- --------- -------- ---------
Net increase (758) $(114,317) 31 $ 4,723 (770) $(116,325) 36 $ 5,393
========= ========= ======== ========= ======== ========= ======== =========
Short-Term Bond Fund
Sold -- -- -- -- -- -- -- --
Issued as reinvestment
of dividends -- -- 501 5,151 -- -- 571 5,867
Redeemed (11,916) (122,380) -- -- (12,115) (124,540) -- --
--------- --------- -------- --------- -------- --------- -------- ---------
Net increase (11,916) $(122,380) 501 $ 5,151 (12,115) $(124,540) 571 $ 5,867
========= ========= ======== ========= ======== ========= ======== =========
Core Bond Fund
Sold -- -- -- -- -- -- -- --
Issued as reinvestment
of dividends -- -- 561 6,094 -- -- 634 6,894
Redeemed (12,073) (131,117) -- -- (12,265) (133,440) -- --
--------- --------- -------- --------- -------- --------- -------- ---------
Net increase (decrease) (12,073) $(131,117) 561 $ 6,094 (12,265) $(133,440) 634 $ 6,894
========= ========= ======== ========= ======== ========= ======== =========
Balanced Fund
Sold -- -- -- -- -- -- -- --
Issued as reinvestment
of dividends -- -- 722 9,696 -- -- 787 10,600
Redeemed (11,560) (156,981) -- -- (11,735) (159,715) -- --
--------- --------- -------- --------- -------- --------- -------- ---------
Net increase (decrease) (11,560) $(156,981) 722 $ 9,696 (11,735) $(159,715) 787 $ 10,600
========= ========= ======== ========= ======== ========= ======== =========
Value Equity Fund
Sold -- -- -- -- -- -- -- --
Issued as reinvestment
of dividends -- -- 915 15,245 -- -- 979 16,362
Redeemed (11,555) (195,979) -- -- (11,719) (199,459) -- --
--------- --------- -------- --------- -------- --------- -------- ---------
Net increase (11,555) $(195,979) 915 $ 15,245 (11,719) $(199,459) 979 $ 16,362
========= ========= ======== ========= ======== ========= ======== =========
Small Cap Value Equity Fund
Sold -- -- -- -- -- -- -- --
Issued as reinvestment
of dividends -- -- 1,011 16,505 -- -- 1,042 17,114
Redeemed (11,677) (192,437) -- -- (11,809) (195,907) -- --
--------- --------- -------- --------- -------- --------- -------- ---------
Net increase (decrease) (11,677) $(192,437) 1,011 $ 16,505 (11,809) $(195,907) 1,042 $ 17,114
========= ========= ======== ========= ======== ========= ======== =========
International Equity Fund
Sold -- -- -- -- -- -- -- --
Issued as reinvestment
of dividends -- -- 350 4,275 -- -- 354 4,362
Redeemed (10,526) (128,943) -- -- (10,635) (131,236) -- --
--------- --------- -------- --------- -------- --------- -------- ---------
Net increase (decrease) (10,526) $(128,943) 350 $ 4,275 (10,635) $(131,236) 354 $ 4,362
========= ========= ======== ========= ======== ========= ======== =========
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class 3 Class A
Six months ended Year ended Six months ended
June 30, 1998 December 31, 1997 June 30, 1998
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Prime Fund
Sold -- -- -- -- 11,432 $ 114,317
Issued as reinvestment
of dividends -- -- 39 $ 5,838 -- --
Redeemed (777) $(117,417) -- -- -- --
--------- --------- --------- --------- --------- ---------
Net increase (decrease) (777) $(117,417) 39 $ 5,838 11,432 $ 114,317
========= ========= ========= ========= ========= =========
Short-Term Bond Fund
Sold -- -- -- -- 12,238 122,380
Issued as reinvestment
of dividends -- -- 614 6,313 -- --
Redeemed (12,213) (125,790) -- -- -- --
--------- --------- --------- --------- --------- ---------
Net increase (12,213) $(125,790) 614 $ 6,313 12,238 $ 122,380
========= ========= ========= ========= ========= =========
Core Bond Fund
Sold -- -- -- -- 13,112 131,117
Issued as reinvestment
of dividends -- -- 680 7,406 -- --
Redeemed (12,379) (134,802) -- -- -- --
--------- --------- --------- --------- --------- ---------
Net increase (12,379) $(134,802) 680 $ 7,406 13,112 $ 131,117
========= ========= ========= ========= ========= =========
Balanced Fund
Sold -- -- -- -- 15,698 156,981
Issued as reinvestment
of dividends -- -- 826 11,159 -- --
Redeemed (11,820) (161,230) -- -- -- --
--------- --------- --------- --------- --------- ---------
Net increase (11,820) $(161,230) 826 $ 11,159 15,698 $ 156,981
========= ========= ========= ========= ========= =========
Value Equity Fund
Sold -- -- -- -- 19,598 195,979
Issued as reinvestment
of dividends -- -- 1,020 17,066 -- --
Redeemed (11,813) (201,286) -- -- -- --
--------- --------- --------- --------- --------- ---------
Net increase (11,813) $(201,286) 1,020 $ 17,066 19,598 $ 195,979
========= ========= ========= ========= ========= =========
Small Cap Value Equity Fund
Sold -- -- -- -- 19,244 192,437
Issued as reinvestment
of dividends -- -- 1,085 17,846 -- --
Redeemed (11,922) (198,023) -- -- -- --
--------- --------- --------- --------- --------- ---------
Net increase (11,922) $(198,023) 1,085 $ 17,846 19,244 $ 192,437
========= ========= ========= ========= ========= =========
International Equity Fund
Sold -- -- -- -- 12,894 128,943
Issued as reinvestment
of dividends -- -- 365 4,499 -- --
Redeemed (10,680) (132,006) -- -- -- --
--------- --------- --------- --------- --------- ---------
Net increase (10,680) $(132,006) 365 $ 4,499 12,894 $ 128,943
========= ========= ========= ========= ========= =========
</TABLE>
75
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class Y Class S
Six months ended Six months ended Year ended
June 30, 1998 June 30, 1998 December 31, 1997
Shares Amount Shares Amount Shares Amount
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Prime Fund
Sold 23,374 $ 233,742 1,558,056 $ 238,111,316 2,313,757 $ 356,901,047
Issued as reinvestment
of dividends -- -- -- -- 89,849 13,552,104
Redeemed -- -- (1,557,944) (238,314,405) (2,516,899) (387,704,105)
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease) 23,374 $ 233,742 112 $ (203,089) (113,293) $ (17,250,954)
============= ============= ============= ============= ============= =============
Short-Term Bond Fund
Sold 25,033 250,330 8,219,321 85,482,497 9,428,262 98,207,327
Issued as reinvestment
of dividends -- -- -- -- 1,038,249 10,611,443
Redeemed -- -- (3,327,952) (34,727,663) (5,254,453) (54,663,274)
------------- ------------- ------------- ------------- ------------- -------------
Net increase 25,033 $ 250,330 4,891,369 $ 50,754,834 5,212,058 $ 54,155,496
============= ============= ============= ============= ============= =============
Core Bond Fund
Sold 26,824 268,242 9,805,388 107,950,632 18,573,681 200,529,976
Issued as reinvestment
of dividends -- -- -- -- 2,529,434 27,329,767
Redeemed -- -- (6,628,597) (72,897,618) (13,062,080) (141,570,384)
------------- ------------- ------------- ------------- ------------- -------------
Net increase 26,824 $ 268,242 3,176,791 $ 35,053,014 8,041,035 $ 86,289,359
============= ============= ============= ============= ============= =============
Balanced Fund
Sold 32,095 320,945 8,345,206 118,854,508 15,490,780 208,070,969
Issued as reinvestment
of dividends -- -- -- -- 3,601,954 48,404,059
Redeemed -- -- (8,155,994) (115,880,196) (16,501,676) (221,896,742)
------------- ------------- ------------- ------------- ------------- -------------
Net increase 32,095 $ 320,945 189,212 $ 2,974,312 2,591,058 $ 34,578,286
============= ============= ============= ============= ============= =============
Value Equity Fund
Sold 40,074 400,745 21,107,830 383,407,211 42,809,442 708,198,212
Issued as reinvestment
of dividends -- -- -- -- 16,938,371 282,797,539
Redeemed -- -- (22,976,701) (417,031,652) (43,586,898) (722,935,752)
------------- ------------- ------------- ------------- ------------- -------------
Net increase 40,074 $ 400,745 (1,868,871) $ (33,624,441) 16,160,915 $ 268,059,999
============= ============= ============= ============= ============= =============
Small Cap Value Equity Fund
Sold 39,393 393,930 8,122,329 139,548,991 14,575,709 230,041,190
Issued as reinvestment
of dividends -- -- -- -- 3,890,912 64,043,615
Redeemed -- -- (6,654,821) (113,448,024) (10,914,681) (173,997,186)
------------- ------------- ------------- ------------- ------------- -------------
Net increase 39,393 $ 393,930 1,467,508 $ 26,100,967 7,551,940 $ 120,087,619
============= ============= ============= ============= ============= =============
International Equity Fund
Sold 26,324 263,242 10,391,363 142,757,128 22,135,252 274,603,312
Issued as reinvestment
of dividends -- -- -- -- 1,662,863 20,542,197
Redeemed -- -- (8,022,804) (109,657,901) (11,688,395) (146,517,435)
------------- ------------- ------------- ------------- ------------- -------------
Net increase 26,324 $ 263,242 2,368,559 $ 33,099,227 12,109,720 $ 148,628,074
============= ============= ============= ============= ============= =============
</TABLE>
76
<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, 1998, 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 $ 250,503,307 $ 340 $ (18,387) $ (18,047)
Short-Term Bond Fund 255,227,178 1,707,236 (764,495) 942,741
Core Bond Fund 491,703,700 17,540,803 (594,299) 16,946,504
Balanced Fund 558,592,936 142,717,504 (2,616,351) 140,101,153
Value Equity Fund 2,223,742,407 1,239,592,467 (21,123,960) 1,218,468,507
Small Cap Value Equity Fund 523,063,066 226,094,970 (24,206,577) 201,888,393
International Equity Fund 577,955,097 146,931,472 (41,132,358) 105,799,114
</TABLE>
At December 31, 1997, 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
Prime Fund 7,761 December 31, 2005
</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, 1998. Average daily
borrowings for the six months ended June 30, 1998 were $6,454,717 and the
average interest rate was 5.97%. The maximum borrowing outstanding during the
six months ended June 30, 1998 was $13,300,000.
9. Subsequent
Event
Regarding
Affiliated
Transaction
As of the close of business on July 31, 1998, MassMutual separate investment
accounts purchased Class S shares of certain Funds in exchange for the
contribution of securities having equivalent value, as determined in accordance
with the procedures adopted by the Funds to value assets pursuant to Rule 17a-7
under the Investment Company Act of 1940, as amended. These separate investment
accounts had been established and maintained by Connecticut Mutual Life
Insurance Company, which was merged with and into MassMutual as of February 29,
1996. MassMutual succeeded to these separate investment accounts by operation of
law.
Each MassMutual separate investment account had the identical investment
adviser, portfolio manager and similar investment objective as the Fund to which
it contributed securities. MassMutual separate investment accounts purchased
67,513,069 Class S shares of MassMutual Prime Fund in exchange for securities
having a value of $10,497,607, MassMutual separate investment accounts purchased
1,764,834,394 Class S shares of MassMutual Short-Term Bond Fund in exchange for
securities having a value of $18,671,948, MassMutual separate investment
accounts purchased 2,916,145,299 Class S shares of MassMutual Core Bond Fund in
exchange for securities having a value of $32,835,796, MassMutual separate
investment accounts purchased 1,889,423,457 Class S shares of MassMutual Value
Equity Fund in exchange for securities having a value of $33,896,257, and
MassMutual separate investment accounts purchased 1,344,543,249 Class S shares
of MassMutual International Equity Fund in exchange for securities having a
value of $20,006,804.
77
<PAGE>
This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus, containing more
complete information including fees, risks, and expenses. If used as sales
material, this report must be accompanied by a Performance Update for the most
recently completed calendar quarter. The figures in this report reflect past
results. The investment return and principal value of shares will fluctuate with
market conditions so that shares, when redeemed, may be worth more or less than
their original cost. All investments are subject to certain risks. For example,
stocks are sensitive to price changes and bonds are affected by interest rate
fluctuations. Investors should make investment decisions based on an investment
strategy that takes into consideration investment goals, the length of time
money can stay invested, and risk tolerance. Portfolio changes should not be
considered recommendations for action by individual investors.
