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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (NO. 33-73824) UNDER THE
SECURITIES ACT OF 1933
Investment Company Act File No. 811-8274
Pre-Effective Amendment No.
Post-Effective Amendment No. 13
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 15
MASSMUTUAL INSTITUTIONAL FUNDS
(Exact Name of Registrant as Specified in Declaration of Trust)
1295 State Street, Springfield, Massachusetts 01111
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including area code (413) 788-8411
Name and Address of Agent for Service
Stephen L. Kuhn, Esq.
Vice President and Secretary
MassMutual Institutional Funds
1295 State Street
Springfield, Massachusetts 01111
Copy to:
J.B. Kittredge, Esq.
Ropes & Gray
One International Place
Boston, MA 02110
Approximate Date of Proposed Public Offering: As soon as practical after the
effective date of this Registration Statement.
It is proposed that this filing become effective (check appropriate line)
[_] immediately upon filing pursuant to paragraph (b)
[X] on July 1, 1999 pursuant to paragraph (b)
[_] 60 days after filing to pursuant to paragraph (a) of Rule 485
[_] on [date] pursuant to paragraph (a)(1) of rule 485
[_] 75 days after filing pursuant to paragraph (a)(2)
[_] on [date] pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
[__] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
TO: THE SECURITIES AND EXCHANGE COMMISSION
Registrant submits this Post-Effective Amendment No. 13 to its Registration
Statement No. 33-73824 under the Securities Act of 1933 and this Amendment No.
15 to its Registration Statement No. 811-2224 under the Investment Company Act
of 1940. This Post-Effective Amendment relates to MassMutual Indexed Equity
Fund. No other information relating to any other series of Registrant is amended
or superceded hereby.
We have elected to register an indefinite number of shares pursuant to
Regulation 24f-2 under the Investment Company Act of 1940. We filed our Rule
24f-2 notice for the period ended February 28, 1999, on May 27, 1999.
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MASSMUTUAL INDEXED EQUITY FUND
This Prospectus describes MassMutual Indexed Equity Fund (the "Fund"), one of
the series of the MassMutual Institutional Funds.
The Fund seeks to approximate as closely as practicable (before fees and
expenses) the total return of publicly traded common stocks represented by the
S&P 500(R) Index/1/. The Fund is a "feeder" fund and seeks to achieve its
investment objective by investing in the S&P 500(R) Index Master Portfolio (the
"Master Portfolio"), one of the portfolios of Master Investment Portfolio.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any statement to the
contrary is a crime.
PROSPECTUS July 1, 1999.
/1/"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," and "Standard & Poor's
500(R)," are trademarks of McGraw-Hill, Inc. and have been licensed for use by
the Fund and the Master Portfolio. The Fund and the Master Portfolio are not
sponsored, endorsed, sold, or promoted by Standard & Poor's, a division of
McGraw Hill Companies ("S&P"). S&P makes no representation or warranty, express
or implied, regarding the advisability of investing in the Fund and the Master
Portfolio.
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Table Of Contents Page
About the Fund
Investment Objective ............................................ 4
Principal Investment Strategies ................................. 4
Principal Investment Risks ...................................... 4
Annual Performance .............................................. 5
Average Annual Total Returns .................................... 5
Expense Information ............................................. 5
Management and Administration of The Fund and The Master Portfolio ....... 6
Fund Administration ............................................. 6
About the Classes of Shares - Multiple Class Information ................. 7
Class S Shares .................................................. 7
Class Y Shares .................................................. 7
Class L Shares .................................................. 8
Class A Shares .................................................. 8
Compensation to Intermediaries .................................. 9
Investing in the Fund .................................................... 10
Buying, Redeeming and Exchanging Shares ......................... 10
Determining Net Asset Value ..................................... 10
How to Invest ................................................... 11
Taxation and Distributions ...................................... 11
Financial Highlights ..................................................... 13
Appendix - Additional Investment Policies and Risk Considerations ........ 14
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MassMutual Indexed Equity Fund
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Investment Objective
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The Fund seeks to approximate as closely as practicable (before fees and
expenses) the capitalization-weighted total rate of return of that portion of
the U.S. market for publicly-traded common stocks composed of larger-capitalized
companies.
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Principal Investment Strategies
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The Fund invests all of its assets in the S&P 500(R) Index Master Portfolio (the
"Master Portfolio") of Master Investment Portfolio, an open-end management
investment company, rather than in a portfolio of securities. The Fund's
investment experience corresponds directly with that of the Master Portfolio.
The Master Portfolio has substantially the same investment objective as the
Fund. The Master Portfolio pursues its objectives by investing in all the
securities that make up the S&P 500(R) Index. The S&P 500(R) Index is a widely
recognized, unmanaged index of common stocks of the 500 largest capitalized U.S.
companies. The Index does not incur expenses and cannot be purchased directly by
Investors.
The Master Portfolio purchases securities in proportions that match their index
weights. This is the basis of achieving capitalization-weighted total rate of
return. Each company's shares contribute to the Master Portfolio's, and hence
the Fund's, overall return in the same proportion as the value of its shares
contributes to the S&P 500(R) Index.
The Master Portfolio seeks to come within 95% of S&P 500(R) Index's total
return, before fees and expenses, in falling as well as rising markets. It does
not seek to "beat" the market it tracks. Barclays Global Fund Advisors (BGFA),
the Master Portfolio's investment adviser, makes no attempt to apply economic,
financial or market analysis when managing the Master Portfolio.
The Master Portfolio may also use derivatives such as index futures contracts
and options, as described in the Appendix. These investments help the Master
Portfolio approach the returns of a fully invested portfolio while keeping cash
on hand.
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Principal Investment Risks
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The factors that may affect the Fund as a whole are called "principal risks" and
are summarized below. Your investment in the Fund may also be subject to certain
other risks, as well as the risks of the Master Portfolio. These are described
in more detail in the Appendix under "Additional Investment Policies and Risk
Considerations" and in the Statement of Additional Information. Although the
Fund strives to reach its stated goals, it cannot offer guaranteed results. You
have the potential to make money in the Fund but you can also lose money.
The principal risks of investing in this Fund are based on the following
principal risks of the Master Portfolio:
Equity Market Risk. Equity market risk is the possibility that stock market
prices in general will decline over short or even extended periods. Changes in
the value of the Master Portfolio's investments will result in changes in the
value of its shares and affect the Fund's total return to investors. Equity
stock prices can fall for any number of factors, including general economic and
market conditions, prospects of the securities issuer, changing interest rates,
and real or perceived economic and competitive industry conditions.
Growth Company Risk. Market risk is particularly pronounced for "growth"
companies. The prices of growth company securities may fall to a greater extent
than other stocks in the S&P 500(R) Index. Growth company securities tend to be
more volatile in terms of price swings and trading volume.
Derivatives Risk. Derivatives can be sensitive to changes in interest rates or
to sudden fluctuations in market prices. They may also include the credit risk
of the counterparty, the risk of mispricing or improper valuation and the risk
that changes in the value of the derivative may not correlate perfectly with
relevant assets, rates and indices. In addition, the Master Portfolio's use of
derivatives may affect the timing and amount of taxes payable by
shareholders.
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Annual Performance*
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The bar chart shows the risks of investing in the Fund because the returns vary
from year to year.
Class S Shares
[BAR GRAPH APPEARS HERE]
1989 N/A
1990 N/A
1991 N/A
1992 N/A
1993 N/A
1994 0.56%
1995 36.93%
1996 22.40%
1997 32.85%
1998 28.08%
During the period shown above, the highest quarterly return for the Fund is
21.24% for the quarter ended 12/31/98 and the lowest quarterly return is -9.96%
for the quarter ended 9/30/98.
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Average Annual Total Returns*
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(for the periods ended February 28, 1999)
The table shows the risk of investing in the Fund because the Fund's returns
will differ from the S&P 500(R) Index, due, in part, to the fees and expenses of
the Fund.
<TABLE>
<CAPTION>
Since
One Five Inception
Year Years (7/93)
<S> <C> <C> <C>
Class S 19.13% 23.49% 21.53%
Class Y+ 18.98% 23.29% 21.33%
Class L+ 18.94% 23.31% 21.34%
Class A+ 18.40% 22.81% 20.84%
S&P 500(R)Index 19.74% 24.15% 22.18%
</TABLE>
*The Fund commenced operations on March 1, 1998. The performance for periods
prior to March 1, 1998 is calculated by including the corresponding total return
of the Master Portfolio (which includes, for the period from July 2, 1993
through May 25, 1994, the performance of its predecessor) adjusted to reflect
the Fund's fees and expenses. Performance shown does not reflect fees that may
be paid by investors for administrative services or group annuity contract
charges.
+Performance for Class Y and Class A shares of the Fund is based on Class S
shares for the 5-year and since inception periods, adjusted to reflect Class Y
and Class A expenses. Performance for Class L shares of the Fund is based on
Class S shares for all periods shown, adjusted to reflect Class L expenses.
Past performance is not an indication of future performance. Investment returns
for the Fund assume the reinvestment of dividends and capital gains
distributions. There is no assurance that the Fund's investment objective will
be achieved, and you can lose money by investing in the Fund.
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Expense Information
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As an investor, you pay certain fees and expenses in connection with your
investment. These fees and expenses will vary depending on the class of shares
you purchase. The fee table shows two categories of expenses, Shareholder Fees
and Annual Fund Operating Expenses. Shareholder Fees refer to fees paid directly
from your investment, such as up front or contingent sales charges. The Fund
does not charge any Shareholder Fees for any class of share. Annual Fund
Operating Expenses refer to the costs of operating the Fund. These costs are
deducted from the Fund's assets, which means you pay them indirectly. These
expenses include indirect expenses incurred by the Master Portfolio in which the
Fund invests.
<TABLE>
<CAPTION>
Class S Class Y Class L Class A
<S> <C> <C> <C> <C>
Shareholder Fees (fees paid
directly from your investment) None None None None
Annual Fund Operating
Expenses (expenses that are
deducted from Fund Assets)
Management Fees .05% .05% .05% .05%
Distribution and Service
(Rule 12b-1) Fees None None None .25%
Other Expenses .37% .40% .55% .55%
Total Annual Fund
Operating Expenses(1)(2) .42% .45% .60% .85%
</TABLE>
(1) The expenses in the above table are based on expenses for the Fund and the
Master Portfolio for the fiscal year ended February 28, 1999, but restated
to give effect to a change in the administrative fees effective on April 6,
1999.
(2) Employee benefit plans which invest in the Fund through MassMutual separate
investment accounts may pay additional charges under their group annuity
contract or services agreement. Investors who purchase shares directly from
the Fund may also be subject to charges imposed in their administrative
services or other agreement with MassMutual or MassMutual affiliate. None of
these charges are deducted from Fund assets.
Examples. These examples are intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The examples
assume that you invest $10,000 in each share class of the Fund for the time
periods indicated, that your investment earns a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
Class S $43 $135 $235 $ 530
Class Y $46 $144 $252 $ 567
Class L $61 $192 $335 $ 750
Class A $87 $271 $471 $1,049
Since the Fund does not impose any shareholder fees, the figures shown would be
the same whether you sold your shares at the end of a period or kept them.
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Management And Administration of The Fund and
The Master Portfolio
MassMutual Indexed Equity Fund is a feeder fund that invests all of its assets
in a separate mutual fund, called the Master Portfolio. Consequently, the Fund
does not have its own investment adviser. Barclays Global Fund Advisors ("BGFA")
serves as the Master Portfolio's Investment Adviser and provides investment
guidance and policy direction for the Master Portfolio. For its services to the
Fund in the last fiscal year, BGFA received an annual fee of .05% based on the
Master Portfolio's average daily net assets.
Unlike many traditional active investment funds, there is no single portfolio
manager who makes investment decisions for the Master Portfolio. Instead, the
Master Portfolio tracks the S&P 500(R) Index. The process reflects BGFA's
commitment to an objective and consistent investment management structure.
The Master Portfolio's predecessor, a regulated investment company that
commenced operations on July 2, 1993, converted into a master/feeder structure
on May 25, 1994 by exchanging all of its assets for beneficial interests in the
Master Portfolio. The Master Portfolio commenced operations on May 26, 1994,
with the same investment adviser, the same investment objective and
substantially similar investment policies as its predecessor.
BGFA is located at 45 Fremont Street, San Francisco, California 94105. It is a
wholly-owned subsidiary of Barclays Global Investors, N.A. ("BGI") which in turn
is an indirect subsidiary of Barclays Bank PLC. BGI is the world's largest
manager of institutional investment assets. As of December 31, 1998, BGI and its
affiliates, including BGFA, managed more than $615 billion of assets. BGI, BGFA,
Barclays Bank and their affiliates deal, trade and invest for their own accounts
in the types of securities in which the Master Portfolio may also invest. BGFA
does not obtain or use inside information in making investment decisions on
behalf of the Master Portfolios.
Asset allocation and modeling strategies are used by BGFA for other investment
companies and accounts advised or sub-advised by BGFA. If these strategies
indicate particular securities should be bought or sold at the same time by the
Master Portfolio and one or more of these investment companies or accounts,
available investments or opportunities for sales will be allocated equitably to
each by BGFA. In some cases, these procedures may adversely affect the size of
the position obtained or disposed of by the Master Portfolio or the price paid
or received by the Master Portfolio.
Fund Administration
MassMutual is responsible for providing all administrative services for the
Fund. Founded in 1851, MassMutual is a mutual life insurance company that
provides a broad range of insurance, money management, retirement and asset
accumulation products and services for individuals and businesses. MassMutual,
together with its subsidiaries, has assets of $67 billion and assets under
management in excess of $176 billion. The Fund pays MassMutual an administrative
and shareholder services fee at an annual rate based on a percentage of its
average daily net assets for the applicable class of shares. For the fiscal year
ending February 28, 1999, the Fund paid fees of .3588% for Class S shares;
.3888% for Class Y shares; and .7688% for Class A shares.
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About the Classes of Shares - Multiple Class Information
The Fund offers four classes of shares: Class S, Class Y, Class L and Class A.
The shares offered by this Prospectus are Class S, Class Y, Class L and Class A
shares. None of the Classes of shares has up-front or deferred sales charges.
Only Class A shares charge a Rule 12b-1 fee.
Class S, Class Y and Class L shares are primarily offered to institutional
investors through institutional distribution channels, such as
employer-sponsored retirement plans or through broker-dealers, financial
institutions or insurance companies. Class A shares are primarily offered
through retail distribution channels, such as broker-dealers or financial
institutions. The different Classes have different fees, expenses and/or minimum
investor size requirements. The difference in the fee structures among the
Classes is the result of their separate arrangements for shareholder and
distribution services and not the result of any difference in amounts charged
for investment advisory services. Accordingly, investment advisory expenses do
not vary by Class. Different fees and expenses of a Class will affect
performance of that Class. For additional information, call us at 1-888-743-5274
or contact a sales representative or financial intermediary who offers the
Classes.
Except as described below, all Classes of shares of the Fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences among the various Classes are: (a) each Class
may be subject to different expenses specific to that Class; (b) each Class has
a different Class designation; (c) each Class has exclusive voting rights with
respect to matters solely affecting such Class; (d) each Class offered in
connection with a Rule 12b-1 Plan will bear the expense of the payments that
would be made pursuant to that Rule 12b-1 Plan, and only that Class will be
entitled to vote on matters pertaining to that Rule 12b-1 Plan; and (e) each
Class will have different exchange privileges.
Each Class of the Fund's shares invests in the same portfolio of securities.
Because each Class will have different expenses, they will likely have different
share prices. All Classes of shares are available for purchase by insurance
company separate investment accounts. Each class of shares of the Fund may also
be purchased by the following Eligible Purchasers:
Class S Shares
Eligible Purchasers. Class S shares may be purchased by:
. Qualified plans under Section 401(a) of the Internal Revenue Code of 1986
(the "Code"), Code Section 403(b) plans, Code Section 457 plans and other
retirement plans, where plan assets of the employer generally or are
expected to exceed $100 million;
. Registered mutual funds; and
. Other institutional investors with assets generally in excess of $100
million.
These Eligible Purchasers must have an agreement with MassMutual or a MassMutual
affiliate to purchase Class S Shares.
Shareholder and Distribution Fees. Class S shares of the Fund are purchased
directly from the Trust without a front-end sales charge. Therefore, 100% of
your money is invested in the Fund. Class S shares do not have deferred sales
charges or any Rule 12b-1 distribution or service fees.
Class Y Shares
Eligible Purchasers. Class Y shares may be purchased by:
. Non-qualified deferred compensation plans;
. Registered mutual funds;
. Qualified plans under Code Section 401(a), Code Section 403(b) plans, Code
Section 457 plans and other retirement plans, where plan assets of the
employer generally or are expected to exceed $5 million; and
. Other institutional investors with assets generally in excess of $5 million.
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<PAGE>
These Eligible Purchasers must have an agreement with MassMutual or a MassMutual
affiliate to purchase Class Y Shares.
Shareholder and Distribution Fees. The Class Y shares are 100% no load, so you
pay no fees (sales loads) when you buy or sell Class Y shares. Therefore, all of
your money is invested in the Fund. Class Y shares do not have any Rule 12b-1
distribution or service fees.
Class L Shares
Eligible Purchasers. Class L shares may be purchased by:
. Non-qualified deferred compensation plans;
. Qualified plans under Code Section 401(a), Code Section 403(b) plans, Code
Section 457 plans, and other retirement plans, where plan assets of the
employer generally or are expected to exceed $1 million; and
. Other institutional investors with assets generally in excess of $1 million.
These Eligible Purchasers must have an agreement with MassMutual or a MassMutual
affiliate to purchase Class L Shares. Class L shares are generally sold in
connection with the use of an intermediary performing third party administration
and/or other shareholder services.
Shareholder and Distribution Fees. Class L shares of the Fund are purchased
directly from the Trust without a front-end sales charge. Therefore, 100% of
your money is invested in the Fund. Class L shares do not have deferred sales
charges or any Rule 12b-1 distribution or service fees.
Class A Shares
Eligible Purchasers. Class A shares may be purchased by:
. Qualified plans under Code Section 401(a), Code Section 403(b) plans, Code
Section 457 plans and other retirement plans;
. Individual retirement accounts described in Code Section 408;
. Other institutional investors, nonqualified deferred compensation plans, and
voluntary employees' beneficiary associations described in Code Section
501(c)(9).
These Eligible Purchasers must have an agreement with MassMutual or a MassMutual
affiliate to purchase Class A Shares. There is no minimum plan or institutional
investor size to purchase Class A shares.
Class A shares may be offered to present or former officers, directors,
trustees, and employees (and their spouses, parents, children and siblings) of
the Fund, MassMutual and its affiliates and retirement plans established by
them for their employees.
Distribution and Service (Rule 12b-1) Fees. The Fund has adopted a Rule 12b-1
Plan for Class A shares of the Fund. Under the Plan, the Fund is permitted to
pay distribution and service fees at the annual rate of .25%, in the aggregate,
of the Fund's average daily net assets attributable to Class A shares.
Distribution fees may be paid to brokers or other financial intermediaries for
providing services in connection with the distribution and marketing of Class A
shares and for related expenses. Service fees may be paid to brokers or other
financial intermediaries for providing personal services to Class A shareholders
and/or maintaining Class A shareholder accounts and for related expenses.
All compensation under the Plan for service fees will be paid to MassMutual and
all compensation under the Plan for distribution fees will be paid to the
Distributor. MassMutual and the Distributor will be entitled to retain a portion
of the fees generated by an account, or may reallow the full amount to the
brokers or other intermediaries.
Because these fees are paid out of the Fund's assets on an ongoing basis, over
time these fees will increase the costs of your investment in the Class A shares
and may cost you more than other types of sales charges.
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<PAGE>
Compensation to Intermediaries
MassMutual may directly, or through the Distributor, pay cash compensation to
persons who provide services on behalf of Class L or Class Y shares. This
compensation is paid by MassMutual, not from Fund assets. MassMutual may pay
intermediaries up to .15% of the amount invested for Class L shares, as
compensation for performing third party administration and/or other shareholder
services. MassMutual may also pay intermediaries up to .15% of the amount
invested for the servicing of Class Y shares. The payments on account of Class L
or Class Y shares will be based on criteria established by MassMutual. In the
event that amounts paid by the Fund to MassMutual as administrative fees are
deemed indirect financing of distribution or servicing costs for Class L or
Class Y shares, the Fund has adopted distribution and servicing plans
authorizing such payments. No additional fees are paid by the Fund under these
plans. Compensation paid to brokers or other intermediaries for selling or
providing services on account of Class A shares is described above under
"Distribution and Service (Rule 12b-1) Fees". Where Class L or Class Y shares
are sold in connection with nonqualified deferred compensation plans where the
employer sponsor has an administrative services agreement with MassMutual or its
affiliate, additional compensation may be paid as determined by MassMutual from
time to time according to established criteria. As of the date of this
Prospectus, aggregate annual compensation in such cases does not exceed .50%.
Annual compensation paid on account of Class A, Class L or Class Y shares will
be paid quarterly, in arrears.
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Investing In The Fund
Buying, Redeeming and Exchanging Shares
The Fund sells its shares at a price equal to their net asset value (NAV). The
Fund generally determines its NAV at 4:00 p.m. Eastern time every day the New
York Stock Exchange is open. Your purchase order will be priced at the next net
asset value calculated after the transfer agent accepts your purchase order. The
Fund will suspend selling its shares during any period when the determination of
NAV is suspended. The Fund can reject any purchase order and can suspend
purchases if it is in its best interest.
The Fund redeems its shares at their next NAV computed after the Fund's transfer
agent receives your redemption request. You will usually receive payment for
your shares within 7 days after the transfer agent receives your written
redemption request. If, however, you request redemption of shares recently
purchased by check, you may not receive payment until the check has been
collected, which may take up to 15 days from receipt of the check. The Fund can
also suspend or postpone payment, when permitted by applicable law and
regulations.
You can exchange shares of one Fund for the same class of shares of another Fund
in the MassMutual Institutional Funds series. An exchange is treated as a sale
of shares in one Fund, and a purchase of shares in another Fund at the NAV next
determined after the transfer agent received the exchange request. Your right to
exchange shares is subject to applicable regulatory requirements or contractual
obligations. The Fund may limit or refuse exchanges, if, in the opinion of
MassMutual:
. you have engaged in excessive trading;
. the Fund receives or expects simultaneous orders affecting significant
portions of the Fund's assets;
. a pattern of exchanges occurs which coincides with a market timing strategy
which may be disruptive to the Fund; or
. the Fund would be unable to invest the Funds effectively based on its
investment objectives and policies, or if the Fund would be adversely
affected.
The Fund reserves the right to modify or terminate the exchange privilege on 60
days' written notice.
The Fund does not accept purchase, redemption or exchange orders or compute its
NAV on days when the NYSE is closed. This includes: weekends, Good Friday and
all federal holidays other than Columbus Day and Veterans Day. Certain foreign
markets may be open on days when the Fund does not accept orders or price its
shares. As a result, the NAV of the Fund's shares may change on days when you
will not be able to buy or sell shares.
Determining Net Asset Value
We calculate the net asset value of each class of shares of the Fund separately.
The NAV for shares of a Class of the Fund is determined by adding the current
value of all of the Fund's assets attributable to that Class, subtracting the
liabilities attributable to that Class and then dividing the resulting number by
the total outstanding shares of the Class. The only assets of this Fund are its
investments in the Master Portfolio. The Fund's investment in the Master
Portfolio is valued at the Fund's proportionate interest in the NAV of the
Master Portfolio. The Master Portfolio calculates the NAV of its shares on the
same days and at the same time as the Fund.
The Master Portfolio's assets are valued based on current market prices. If such
prices are not readily available, BGFA estimates the securities' fair value in
accordance with guidelines approved by the Master Portfolio's Board of Trustees.
Bonds and notes with remaining maturities of 60 days or less are valued using
the amortized cost method.
The amortized cost method marks down any premium on short-term debt that the
Master Portfolio buys, or makes up any discount at a constant rate until
maturity. It does not reflect daily fluctuations in market value.
For further information regarding the methods employed in valuing the Master
Portfolio's
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<PAGE>
investments, see "Valuation of Portfolio Securities" in the Statement of
Additional Information.
How to Invest
When you buy shares of the Fund through an agreement with MassMutual, your
agreement will describe how you need to submit buy, sell and exchange orders.
Purchase orders must be accompanied by sufficient funds. You can pay by check or
federal funds wire transfer. You must submit any buy, sell or exchange orders in
"good form" as described in your agreement.
Taxation and Distributions
The Fund intends to continue to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code. As a regulated investment company,
the Fund will not be subject to Federal income taxes on its ordinary income and
net realized capital gain distributed to its shareholders. In general, if the
Fund fails to distribute at least 98% of such income and gain in the calendar
year in which it is earned, it will be subject to a 4% excise tax on the
undistributed amount.
The Fund seeks to qualify as a regulated investment company by investing all of
its assets in the Master Portfolio. Based upon the classification of the Master
Portfolio as a non-publicly traded partnership for federal income tax purposes,
the Master Investment Portfolio believes that the Master Portfolio will not be
subject to federal income tax and will be deemed to "pass through" any interest,
dividends, gains and losses of the Master Portfolio to the Fund in proportion to
the Fund's interest in the Master Portfolio. If the Master Portfolio were to
accrue but not distribute any interest, dividends or gains, the Fund would be
deemed to have recognized its allocable share of such income, regardless of
whether or not such income has been distributed by the Master Portfolio.
However, the Master Portfolio has represented that it seeks to minimize
recognition by the Fund and other investors of interest, dividends and gains
without a corresponding distribution.
Many investors, including most tax qualified plan investors, may be eligible for
preferential federal income tax treatment on distributions received from the
Fund and dispositions of Fund shares. This Prospectus does not attempt to
describe in any respect such preferential tax treatment. Any prospective
investor that is a trust or other entity eligible for special tax treatment
under the Code that is considering purchasing shares of the Fund, including
either directly or indirectly through a life insurance company separate
investment account, should consult its tax advisers about the federal, state,
local and foreign tax consequences particular to it, as should persons
considering whether to have amounts held for their benefit by such trusts or
other entities investing in shares of the Fund.
Investors that do not receive preferential tax treatment are subject to federal
income taxes on distributions received in respect of their shares. Distributions
of the Fund's ordinary income and short-term capital gains (i.e., gains from
capital assets held for one year or less) are taxable to the shareholder as
ordinary income whether received in cash or additional shares. Certain
designated dividends may be eligible for the dividends-received deduction for
corporate shareholders. Designated capital gain dividends (relating to gains
from capital assets held for more than one year) are taxable as long-term
capital gains in the hands of the investor whether distributed in cash or
additional shares and regardless of how long the investor has owned shares of
the Fund. Distributions are taxable to a shareholder even though they are paid
from income or gains earned by the Fund prior to the shareholder's investment
and thus were included in the NAV paid by the shareholder.
Any gain resulting from the exchange or redemption of an investor's shares in
the Fund will generally be subject to tax. A loss incurred with respect to
shares of the Fund held for six months or less will be treated as a long-term
capital loss to the extent of long-term capital gains distributions with respect
to such shares.
-11-
<PAGE>
The Master Portfolio's investments in foreign securities may be subject to
foreign withholding taxes. In that case, the Master Portfolio's yield on those
securities would be decreased. Shareholders of the Fund generally will not be
entitled to claim a credit or deduction with respect to foreign taxes. In
addition, the Master Portfolio's investments in foreign securities or foreign
currencies may increase or accelerate the Master Portfolio's recognition of
ordinary income and may affect the timing or amount of the Master Portfolio's,
and hence the Fund's, distributions.
Shareholders should consult their tax adviser for more information on their own
tax situation, including possible state, local and foreign taxes.
-12-
<PAGE>
Financial Highlights
The financial highlights table is intended to help you understand the Fund's
financial performance since its inception on March 1, 1998. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned on an investment in
the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, whose report, along with
the Fund's financial statements, are included in the Annual Report, which is
available on request.
Class A Class Y Class S
------- ------- -------
Year ended Year ended Year ended
02/28/99 02/28/99 02/28/99
------------ ----------- -----------
Net asset value, begining of period $ 10.00 $ 10.00 $ 10.00
------------ ----------- -----------
Income (loss) from investment operations:
Net investment income 0.06* 0.12* 0.13*
Net realized and unrealized gain 1.78 1.78 1.78
------------ ----------- -----------
Total income from investment
operations 1.84 1.90 1.91
------------ ----------- -----------
Less distributions to shareholders:
From net investment income (0.03) (0.11) (0.09)
------------ ----------- -----------
Net asset value, end of period $ 11.81 $ 11.79 $ 11.82
============ =========== ===========
Total Return 18.40% 18.98% 19.13%@
Ratios/Supplemental Data:
Net assets, end of period (000's) $118 $859 $426,687
Net expenses to average daily net
assets 1.09% 0.52% 0.4254%
Net investment income to
average daily net assets 0.57% 1.09% 1.23%
* 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 the
operations.
@ Employee retirement benefit plans that invest plan assets in the Separate
Investment Accounts (SIAs) may be subject to certain charges as set forth
in the respective Plan Documents. Total return figures would be lower for
the periods presented if they reflected these charges.
-13-
<PAGE>
APPENDIX
ADDITIONAL INVESTMENT POLICIES
AND RISK CONSIDERATIONS
Year 2000 Issue
Like other businesses and governments around the world, the Fund and the Master
Portfolio could be adversely affected if the computer systems used by the Fund's
and the Master Portfolio's service providers and those with which they do
business do not properly recognize the year 2000. This is commonly known as the
"Year 2000 issue."
In 1996, MassMutual, the Fund's administrator, began an enterprise-wide process
of identifying, evaluating and implementing changes to its computer systems to
address the Year 2000 issue. MassMutual is addressing the Year 2000 issue
internally with modifications to existing programs and conversions to new
programs. MassMutual has advised the Fund that the Year 2000 issue is one of
MassMutual's highest business operational priorities. MassMutual is also seeking
assurances from the Fund's other service providers, including the Master
Portfolio, and others with which MassMutual and the Fund conduct business in
order to identify and resolve Year 2000 issues. The Master Portfolio has advised
MassMutual that its principal service providers are working on the changes
necessary and they expect their systems to be ready in time. But there can, of
course, be no assurance of success. Moreover, since the changes will affect
virtually every organization, the companies or entities in which the Master
Portfolio invests could also be negatively affected.
The Master Portfolio may invest in a wide range of investments and engage in
various investment-related transactions and practices. These practices are
pursuant to non-Fundamental policies and therefore may be changed by the Board
of Trustees without the consent of shareholders. Some of the more significant
practices and associated risks are discussed below.
U.S. Government Securities
The Master Portfolio may invest in securities issued or guaranteed by the U.S.
Treasury or other government agencies or federally-chartered corporate entities
referred to as "instrumentalities." Obligations issued or guaranteed by U.S.
government agencies or instrumentalities include direct obligations and
mortgage-related securities that have different levels of credit support from
the U.S. Government. Some are backed by the full faith and credit of the United
States (e.g., direct pass-through certificates of Government National Mortgage
Association); some are supported by the right of the issuer to borrow from the
U.S. Government (e.g., obligations of Federal Home Loan Mortgage Corporation);
some are supported by the right of the issuer to borrower from the U.S. Treasury
in certain circumstances; and some are backed by only the credit of the issuer
itself (e.g., Federal National Mortgage Association). There is no guarantee that
the U.S. Government will pay interest and principal on securities on which it is
not legally obligated to do so.
As a general matter, the value of debt instruments, including U.S. Government
securities, declines when market interest rates increase and rises when market
interest rates decrease. Certain types of U.S. Government obligations are
subject to fluctuations in yield or value due to their structure or contract
terms.
Foreign Securities
Since the stocks of some foreign issuers are included in the S&P 500(R) Index,
the Master Portfolio may purchase securities of such foreign issuers.
Investments in foreign securities, however, entail certain risks, such as: the
imposition of dividend or interest withholding or confiscatory taxes; currency
blockages or transfer restrictions; expropriation, nationalization, military
coups or other adverse political or economic developments; less government
supervision and regulation of securities exchanges, brokers and listed
companies; and
-14-
<PAGE>
the difficulty of enforcing obligations in other countries. Certain markets may
require payment for securities before delivery. The Master Portfolio's ability
and decision to purchase and sell portfolio securities may be affected by laws
or regulations relating to the convertibility of currencies and repatriation of
assets. Further, it may be more difficult for the Master Portfolio's agents to
keep currently informed about corporate actions that may affect the prices of
portfolio securities. Communications between the United States and foreign
countries may be less reliable than within the United States, thus increasing
the risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities.
Obligations of Foreign Governments, Banks and Corporations
The Master Portfolio may invest in U.S. dollar-denominated short-term
obligations issued or guaranteed by foreign governments or any of their
political subdivisions, agencies or instrumentalities that are determined by
BGFA to be of comparable quality to the other obligations in which the Master
Portfolio may invest. The Master Portfolio may also invest in debt obligations
of supranational entities, such as the World Bank, the European Coal and Steel
Community, the Asian Development Bank, and the InterAmerican Development Bank.
The percentage of the Master Portfolio's assets invested in obligations of
foreign governments and supranational entities will vary depending on the
relative yields of such securities, the economic and financial markets of the
countries in which the investments are made and the interest rate climate of
such countries.
The Master Portfolio may invest in high-quality, short-term (one year or less)
debt obligations of foreign branches of U.S. banks or U.S. branches of foreign
banks that are denominated in U.S. dollars. These types of securities are more
completely described in the Statement of Additional Information.
American Depositary Receipts and Similar Instruments
To the extent necessary to replicate the investment characteristics of the S&P
500(R) Index, the Master Portfolio may invest in foreign securities through
American Depositary Receipts ("ADRs") and similar instruments convertible into
securities of foreign issuers. ADRs represent securities or a pool of securities
of an underlying foreign issuer. They are subject to many of the same risks as
foreign securities. ADRs are more completely described in the Statement of
Additional Information.
Repurchase Agreements
The Master Portfolio may enter into repurchase agreements. A repurchase
agreement is a contract pursuant to which the Master Portfolio agrees to
purchase a security and simultaneously agrees to resell it at an agreed-upon
price at a stated time. The Statement of Additional Information provides a
detailed description of repurchase agreements.
Cash Positions
The Master Portfolio may hold cash or cash equivalents to provide for expenses
and anticipated redemption payments and so that an orderly investment program
may be carried out in accordance with the Master Portfolio's investment
policies. To provide liquidity, the Master Portfolio may invest in investment
grade debt securities, government obligations, or money market instruments.
Where cash is held for liquidity purposes, the Master Portfolio may invest in
repurchase agreements.
Investment Company Securities
The Master Portfolio may invest in securities issued by other open-end
investment companies (mutual funds) that invest in the same type of securities
in which the Master Portfolio invests. Applicable regulatory requirements limit
the Master Portfolio's investment in such securities to, subject to certain
exceptions, (i) 3% of the total voting stock of any one investment company, (ii)
5% of the Master Portfolio's net assets with respect to any one investment
company and (iii) 10% of the Master Portfolio's net assets in the aggregate.
Investments in the securities of other investment companies generally will
involve duplication of advisory
-15-
<PAGE>
fees and certain other expenses. The Master Portfolio may also purchase shares
of exchange-listed closed-end funds.
Bank Obligations
The Master Portfolio may invest in bank obligations, including certificates of
deposit, time deposits, bankers' acceptances and other short-term obligations of
domestic banks, foreign subsidiaries of domestic banks, foreign branches of
domestic banks, and domestic and foreign branches of foreign banks, domestic
savings and loan associations and other banking institutions. The Statement of
Additional Information provides a more detailed description of these securities.
Commercial Paper and Short-Term Corporate Debt Instruments
The Master Portfolio may invest in commercial paper (including variable amount
master demand notes) consisting of short-term, unsecured promissory notes issued
by corporations to finance short-term credit needs. Commercial paper is usually
sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangements between the issuer and a commercial
bank acting as agent for the payee of such notes, whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes. The
investment adviser to the Master Portfolio monitors on an ongoing basis the
ability of an issuer of a demand instrument to pay principal and interest on
demand.
The Master Portfolio also may invest in non-convertible corporate debt
securities (e.g., bonds and debentures) with not more than one year remaining to
maturity at the date of settlement. The Master Portfolio will invest only in
such corporate bonds and debentures that are rated at the time of purchase at
least "Aa" by Moody's or "AA" by S&P. Subsequent to its purchase by the Master
Portfolio, an issue of securities may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by the Master Portfolio.
The investment adviser to the Master Portfolio will consider such an event in
determining whether the Master Portfolio should continue to hold the obligation.
To the extent the Master Portfolio continues to hold such obligations, it may be
subject to additional risk of default.
Illiquid Securities
The Master Portfolio may hold up to 15% of the value of its net assets in
restricted or illiquid securities. Such investments include securities that are
not readily marketable, such as privately issued securities and other securities
subject to legal or contractual restrictions on resale, or other types of
securities for which there is no secondary market.
Securities Lending
The Master Portfolio may seek additional income by making loans of portfolio
securities of not more than one-third of its total assets taken at current
value. Lending portfolio securities may involve the risk of delay in recovery of
the securities loaned or possible loss of rights in the collateral should the
borrower fail financially. The Master Portfolio will not enter into any
portfolio security lending arrangement having a duration of longer than one
year.
Under applicable regulatory requirements and securities lending agreements
(which are subject to change), the loan collateral received by the Master
Portfolio when it lends portfolio securities must, on each business day, be at
least equal to the value of the loaned securities. The Master Portfolio may pay
reasonable administrative and custodial fees in connection with loans of
portfolio securities and may pay a portion of the interest or fee earned to the
borrower or a placing broker.
Derivatives
The Master Portfolio may use derivatives, which are financial contracts whose
value depends on, or is derived from, the value of an underlying asset, interest
rate or index.
Futures and Options. The Master Portfolio may invest in index futures contracts
and options on futures contracts. This tactic can reduce the costs associated
with direct investing.
-16-
<PAGE>
Index futures contracts are contracts to pay a fixed amount for each point
change in a particular market index between the purchase date and the
agreed-upon delivery date. The seller never actually delivers "shares" of the
index or shares of all the stocks in the index. Instead, the buyer and the
seller settle the difference in cash between the contract price and the market
price on the agreed-upon date - the buyer paying the difference if the actual
price is lower than the contract price and the seller paying the difference if
the actual price is higher.
Unlike futures, which obligate both buyer and seller, options obligate only one
of the parties to the transaction, either the buyer or the seller. They grant
the other party a right, for a price, either to buy or sell a security, an index
or a futures contract at a fixed sum any time up to an agreed-upon expiration
date.
Index futures contracts and options on index futures contracts are generally
considered derivatives - they derive their value from the prices of the indexes.
Compared to conventional securities, derivatives can be more sensitive to
changes in interest rates or to sudden fluctuations in market prices. The Master
Portfolio offsets this exposure to increased loss with bank deposits or money
market investments, stable holdings that offset the potential volatility of
their derivative investments, as required by the Securities and Exchange
Commission.
-17-
<PAGE>
MASSMUTUAL INSTITUTIONAL FUNDS
1295 State Street
Springfield, Massachusetts 01111
Learning More About the Fund
You can learn more about the Fund by reading the Fund's Annual and Semiannual
Reports and the Statement of Additional Information (SAI). This information is
available free upon request. In the Annual and Semiannual Reports, you will find
a discussion of market conditions and investment strategies that significantly
affected the Fund's performance during the period covered by the Report and a
listing of portfolio securities. The SAI will provide you more detail regarding
the organization and operation of the Fund, including its investment strategy.
The SAI is incorporated by reference into this Prospectus and is therefore
legally considered a part of this Prospectus.
How to Obtain Information
From MassMutual Institutional Funds: You may request information about the Fund
(including the Annual/Semiannual Reports and the SAI) or make shareholder
inquiries by calling 1-888-743-5274 or by writing MassMutual Institutional Funds
c/o Massachusetts Mutual Life Insurance Company, 1295 State Street, Springfield,
Massachusetts 01111-0111, Attention: MassMutual Institutional Funds Coordinator,
MIP C218.
From the SEC: You may review information about the Fund (including the SAI) at
the SEC's Public Reference Room in Washington, D.C. (call 1-800-SEC-0330 for
information regarding the operation of the SEC's public reference room). You can
get copies of this information, upon payment of a copying fee, by writing to the
SEC's Public Reference Section, Washington, D.C. 20549-6009. Alternatively, if
you have access to the Internet, you may obtain information about the Fund from
the SEC's Internet site at http://www.sec.gov. When obtaining information about
the Fund from the SEC, you may find it useful to reference the Fund's SEC file
number: 881-8274.
<PAGE>
MASSMUTUAL INDEXED EQUITY FUND
1295 State Street
Springfield, Massachusetts 01111
THIS STATEMENT OF ADDITIONAL INFORMATION ("SAI") IS NOT A PROSPECTUS. IT SHOULD
BE READ IN CONJUNCTION WITH THE PROSPECTUS OF MASSMUTUAL INDEXED EQUITY FUND
(THE "FUND"), A SERIES OF MASSMUTUAL INSTITUTIONAL FUNDS (THE "TRUST"), DATED
JULY 1, 1999, AS AMENDED FROM TIME-TO-TIME, (THE "PROSPECTUS"). THIS STATEMENT
OF ADDITIONAL INFORMATION INCORPORATES HEREIN THE FINANCIAL STATEMENTS OF THE
FUND BY REFERENCE TO THE FUND'S ANNUAL REPORT AS OF FEBRUARY 28, 1999 (THE
"ANNUAL REPORT"). TO OBTAIN A PROSPECTUS OR THE FUND'S ANNUAL REPORT AT NO
CHARGE, CALL 1-888-743-5274, OR WRITE THE TRUST AT THE ABOVE ADDRESS.
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in this
SAI or in the related Prospectus, in connection with the offer contained herein,
and, if given or made, such other information or representation must not be
relied upon as having been authorized by the Trust or the Distributor. This SAI
and the related Prospectus do not constitute an offer by the Trust or by the
Distributor to sell or a solicitation of any offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom it is unlawful to make
such offer in such jurisdiction.
DATED JULY 1, 1999
B-1
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
GENERAL INFORMATION ................................................... B-3
ADDITIONAL INVESTMENT POLICIES ........................................ B-3
FUNDAMENTAL INVESTMENT RESTRICTIONS OF THE FUND ....................... B-9
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS OF THE FUND ................... B-10
FUNDAMENTAL INVESTMENT RESTRICTIONS OF THE MASTER PORTFOLIO ........... B-l1
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS OF THE MASTER PORTFOLIO ....... B-12
MANAGEMENT OF THE TRUST ............................................... B-12
COMPENSATION .......................................................... B-17
CONTROL PERSON AND PRINCIPAL HOLDER OF SECURITIES ..................... B-18
MANAGEMENT OF THE FUND ................................................ B-18
FUND ADMINISTRATOR AND SUB-ADMINISTRATOR .............................. B-19
THE DISTRIBUTOR ....................................................... B-19
CLASS A DISTRIBUTION AND SERVICE PLAN ................................. B-19
CUSTODIAN, DIVIDEND DISBURSING AGENT AND TRANSFER AGENT ............... B-20
INDEPENDENT PUBLIC ACCOUNTANT ......................................... B-20
INVESTMENT ADVISER AND OTHER MASTER PORTFOLIO SERVICE PROVIDERS ....... B-20
PORTFOLIO TRANSACTIONS AND BROKERAGE .................................. B-22
SHAREHOLDER INVESTMENT ACCOUNT ........................................ B-23
REDEMPTION OF SHARES .................................................. B-23
VALUATION OF PORTFOLIO SECURITIES ..................................... B-23
DESCRIPTION OF FUND SHARES ............................................ B-24
MASTER PORTFOLIO ORGANIZATION ......................................... B-24
INVESTMENT PERFORMANCE ................................................ B-25
TAXATION .............................................................. B-27
EXPERTS ............................................................... B-28
APPENDIX - DESCRIPTION OF SECURITIES RATINGS .......................... B-29
B-2
<PAGE>
GENERAL INFORMATION
MassMutual Institutional Funds (the "Trust") is a professionally managed,
open-end investment company. This SAI describes MassMutual Indexed Equity Fund,
a separate, diversified series of shares of the Trust (the "Fund"). The Trust is
organized under the laws of The Commonwealth of Massachusetts as a Massachusetts
business trust pursuant to an Agreement and Declaration of Trust dated May 28,
1993, as amended from time-to-time (the "Declaration of Trust").
ADDITIONAL INVESTMENT POLICIES
The Fund has a distinct investment objective which it pursues, as described in
the Prospectus and below. The investment objective, fundamental investment
policies and fundamental investment restrictions of the Fund may not be changed
without the vote of a majority of the Fund's outstanding shares (which, under
the Investment Company Act of 1940 (the "1940 Act") and the rules thereunder and
as used in this Statement of Additional Information and in the Prospectus, means
the lesser of (1) 67% of the shares of the Fund present at a meeting if the
holders of more than 50% of the outstanding shares of the Fund are present in
person or by proxy, or (2) more than 50% of the outstanding shares of the Fund).
The Board of Trustees of the Trust may adopt new or amend or delete existing
non-fundamental investment policies and restrictions without shareholder
approval.
The investment objective of the Fund is to seek to approximate as closely as
practicable (before fees and expenses) the capitalization-weighted total return
of that portion of the U.S. market for publicly-traded common stocks composed of
larger-capitalized companies. The Fund seeks to achieve its investment objective
by investing all of its assets in the S&P 500(R) Index Master Portfolio (the
"Master Portfolio"), which is a series of Master Investment Portfolio ("MIP"),
an open-end, management investment company, rather than in a portfolio of
securities. Investment of the Fund's assets in the Master Portfolio is not a
fundamental policy of the Fund and a shareholder vote is not required for the
Fund to withdraw its investment from the Master Portfolio.
The following discussion elaborates on the presentation of the types of
securities in which the Master Portfolio may invest and further describes the
Master Portfolio's investment policies contained in the Prospectus. For a
description of the ratings of corporate debt securities and money market
instruments in which the Master Portfolio may invest, reference should be made
to the Appendix to this Statement of Additional Information.
Portfolio Securities
Bank Obligations. The Master Portfolio may invest in bank obligations, including
certificates of deposit, time deposits, bankers' acceptances and other
short-term obligations of domestic banks, foreign subsidiaries of domestic
banks, foreign branches of domestic banks, and domestic and foreign branches of
foreign banks, domestic savings and loan associations and other banking
institutions.
Certificates of deposit ("CD's") are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time. Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. Time
deposits which may be held by the Master Portfolio will not benefit from
insurance from the Bank Insurance Fund or the Savings Association Insurance Fund
administered by the Federal Deposit Insurance Corporation. Bankers' acceptances
are credit instruments evidencing the obligation of a bank to pay a draft drawn
on it by a customer. These instruments reflect the obligation both of the bank
and of the drawer to pay the face amount of the instrument upon maturity. The
other short-term obligations may include uninsured, direct obligations, bearing
fixed, floating- or variable-interest rates.
Short-Term Instruments and Temporary Investments. The Master Portfolio may
invest in high-quality money market instruments on an ongoing basis to provide
liquidity or for temporary purposes when there is an unexpected level of
shareholder purchases or redemptions. The instruments in which the Master
Portfolio may invest include: (i) short-term obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities (including
government-sponsored enterprises); (ii) CDs, bankers' acceptances, fixed time
deposits and other obligations of domestic banks (including foreign branches)
that have more than $1 billion in total assets at the time of investment
B-3
<PAGE>
and that are members of the Federal Reserve System or are examined by the
Comptroller of the Currency or whose deposits are insured by the FDIC; (iii)
commercial paper rated at the date of purchase "Prime-1" by Moody's or "A-1+" or
"A-1" by S&P, or, if unrated, of comparable quality as determined by BGFA; (iv)
non-convertible corporate debt securities (e.g., bonds and debentures) with
remaining maturities at the date of purchase of not more than one year that are
rated at least "Aa" by Moody's or "AA" by S&P; (v) repurchase agreements; and
(vi) short-term, U.S. dollar-denominated obligations of foreign banks (including
U.S. branches) that, at the time of investment have more than $10 billion, or
the equivalent in other currencies, in total assets and in the opinion of BGFA
are of comparable quality to obligations of U.S. banks which may be purchased by
the Master Portfolio.
Commercial Paper and Short-Term Corporate Debt Instruments. The Master Portfolio
may invest in commercial paper (including variable amount master demand notes)
consisting of short-term, unsecured promissory notes issued by corporations to
finance short-term credit needs. Commercial paper is usually sold on a discount
basis and has a maturity at the time of issuance not exceeding nine months.
Variable amount master demand notes are demand obligations that permit the
investment of fluctuating amounts at varying market rates of interest pursuant
to arrangements between the issuer and a commercial bank acting as agent for the
payee of such notes whereby both parties have the right to vary the amount of
the outstanding indebtedness on the notes. The investment adviser to the Master
Portfolio monitors on an ongoing basis the ability of an issuer of a demand
instrument to pay principal and interest on demand. The Master Portfolio also
may invest in non-convertible corporate debt securities (e.g., bonds and
debentures) with not more than one year remaining to maturity at the date of
settlement. The Master Portfolio will invest only in such corporate bonds and
debentures that are rated at the time of purchase at least "Aa" by Moody's or
"AA" by S&P. Subsequent to its purchase by the Master Portfolio, an issue of
securities may cease to be rated or its rating may be reduced below the minimum
rating required for purchase by the Master Portfolio. The investment adviser to
the Master Portfolio will consider such an event in determining whether the
Master Portfolio should continue to hold the obligation. To the extent the
Master Portfolio continues to hold such obligations, it may be subject to
additional risk of default.
Obligations of Foreign Governments, Banks and Corporations. The Master Portfolio
may invest in U.S. dollar-denominated short-term obligations issued or
guaranteed by one or more foreign governments or any of their political
subdivisions, agencies or instrumentalities that are determined by BGFA to be of
comparable quality to the other obligations in which the Master Portfolio may
invest. The Master Portfolio may also invest in debt obligations of
supranational entities. Supranational entities include international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and international banking institutions
and related government agencies. Examples include the International Bank for
Reconstruction and Development (the World Bank), the European Coal and Steel
Community, the Asian Development Bank, and the InterAmerican Development Bank.
The percentage of the Master Portfolio's assets invested in obligations of
foreign governments and supranational entities will vary depending on the
relative yields of such securities, the economic and financial markets of the
countries in which the investments are made and the interest rate climate of
such countries.
The Master Portfolio may invest a portion of its total assets in high-quality,
short-term (one year or less) debt obligations of foreign branches of U.S. banks
or U.S. branches of foreign banks that are denominated in and pay interest in
U.S. dollars.
American Depositary Receipts and Similar Instruments. To the extent necessary to
replicate the investment characteristics of the S&P 500(R) Index, the Master
Portfolio may invest in foreign securities through American Depositary Receipts
("ADRs") and similar instruments convertible into securities of foreign issuers.
ADRs represent securities or a poo1 of securities of an underlying foreign
issuer. They are subject to many of the same risks as foreign securities.
These securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs (sponsored or unsponsored) are
receipts typically issued by a U.S. bank or trust company and traded on a U.S.
Stock Exchange that evidence ownership of underlying foreign securities. Issuers
of unsponsored ADRs are not contractually obligated to disclose material
information in the U.S. and, therefore, such information may not correlate to
the market value of the unsponsored ADR.
B-4
<PAGE>
Management Policies
Repurchase Agreements. The Master Portfolio may engage in a repurchase agreement
with respect to any security in which it is authorized to invest, although the
underlying security may mature in more than thirteen months. The Master
Portfolio may enter into repurchase agreements wherein the seller of a security
to the Master Portfolio agrees to repurchase that security from the Master
Portfolio at a mutually agreed-upon time and price that involves the acquisition
by the Master Portfolio of an underlying debt instrument, subject to the
seller's obligation to repurchase, and the Master Portfolio's obligation to
resell, the instrument at a fixed price usually not more than one week after its
purchase. The Master Portfolio's custodian has custody of, and holds in a
segregated account, securities acquired as collateral by the Master Portfolio
under a repurchase agreement. Repurchase agreements are considered by the staff
of the Securities and Exchange Commissions (the "SEC") to be loans by the Master
Portfolio under the 1940 Act. The Master Portfolio may enter into repurchase
agreements only with respect to securities of the type in which it may invest,
including government securities and mortgage-related securities, regardless of
their remaining maturities, and requires that additional securities be deposited
with the custodian if the value of the securities purchased should decrease
below resale price. BGFA monitors on an ongoing basis the value of the
collateral to assure that it always equals or exceeds the repurchase price.
Certain costs may be incurred by the Master Portfolio in connection with the
sale of the underlying securities if the seller does not repurchase them in
accordance with the repurchase agreement. In addition, if bankruptcy proceedings
are commenced with respect to the seller of the securities, disposition of the
securities by the Master Portfolio may be delayed or limited. While it does not
presently appear possible to eliminate all risks from these transactions
(particularly the possibility of a decline in the market value of the underlying
securities, as well as delay and costs to the Master Portfolio in connection
with insolvency proceedings), it is the policy of the Master Portfolio to limit
repurchase agreements to selected creditworthy securities dealers or domestic
banks or other recognized financial institutions. The Master Portfolio considers
on an ongoing basis the creditworthiness of the institutions with which it
enters into repurchase agreements.
Floating- and Variable-Rate Obligations. The Master Portfolio may purchase debt
instruments with interest rates that are periodically adjusted at specified
intervals or whenever a benchmark rate or index changes. These adjustments
generally limit the increase or decrease in the amount of interest received on
the debt instruments. The floating- and variable-rate instruments that the
Master Portfolio may purchase include certificates of participation in such
instruments. Floating- and variable-rate instruments are subject to
interest-rate risk and credit risk.
The Master Portfolio may purchase floating- and variable-rate demand notes and
bonds, which are obligations ordinarily having stated maturities in excess of
thirteen months, but which permit the holder to demand payment of principal at
any time, or at specified intervals not exceeding thirteen months. Variable rate
demand notes include master demand notes that are obligations that permit the
Master Portfolio to invest fluctuating amounts, which may change daily without
penalty, pursuant to direct arrangements between the Master Portfolio, as
lender, and the borrower. The interest rates on these notes fluctuate from time
to time. The issuer of such obligations ordinarily has a corresponding right,
after a given period, to prepay in its discretion the outstanding principal
amount of the obligations plus accrued interest upon a specified number of days'
notice to the holders of such obligations. The interest rate on a floating-rate
demand obligation is based on a known lending rate, such as a bank's prime rate,
and is adjusted automatically each time such rate is adjusted. The interest rate
on a variable-rate demand obligation is adjusted automatically at specified
intervals. Frequently, such obligations are secured by letters of credit or
other credit support arrangements provided by banks. Because these obligations
are direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there generally
is no established secondary market for these obligations, although they are
redeemable at face value. Accordingly, where these obligations are not secured
by letters of credit or other credit support arrangements, the Master
Portfolio's right to redeem is dependent on the ability of the borrower to pay
principal and interest on demand. Such obligations frequently are not rated by
credit rating agencies and the Master Portfolio may invest in obligations which
are not so rated only if BGFA determines that at the time of investment the
obligations are of comparable quality to the other obligations in which the
Master Portfolio may invest. BGFA, on behalf of the Master Portfolio, considers
on an ongoing basis the creditworthiness of the issuers of the floating- and
variable-rate demand obligations in the Master Portfolio's portfolio. The Master
Portfolio will not invest more than 10% of the value of its total net assets in
floating- or variable-rate demand obligations whose demand feature is not
exercisable within seven days. Such obligations may be treated as liquid,
provided that an active secondary market exists.
B-5
<PAGE>
Futures Contracts and Options on Futures Contracts. The Master Portfolio may
enter into futures contracts and may purchase and write options thereon. The
Master Portfolio may use futures contracts as a hedge against the effects of
interest rate changes or changes in the market value of stocks comprising the
index in which the Master Portfolio invests. In managing its cash flows, the
Master Portfolio may use futures contracts as a substitute for holding the
designated securities underlying the futures contract. The Master Portfolio may
also use futures contracts as a substitute for a comparable market position in
the underlying securities.
A futures contract is an agreement between two parties, a buyer and a seller, to
exchange a particular commodity or financial instrument at a specific price on a
specific date in the future. An option transaction generally involves a right,
which may or may not be exercised, to buy or sell a commodity or financial
instrument at a particular price on a specified future date. At the time it
enters into a futures transaction, the Master Portfolio is required to make a
performance deposit (initial margin) of cash or liquid securities in a
segregated account in the name of the futures broker. Subsequent payments of
"variation margin" are then made on a daily basis, depending on the value of the
futures position which is continually "marked to market." Futures contracts and
exchange-traded options are standardized and traded on exchanges, where the
exchange serves as the ultimate counterparty for all contracts. Consequently,
the primary credit risk on futures contracts is the creditworthiness of the
exchange. Futures contracts are subject to market risk (i.e., exposure to
adverse price changes).
Upon exercise of an option on a futures contract, the writer of the option
delivers to the holder of the option the futures position and the accumulated
balance in the writer's futures margin account, which represents the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of options on
futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the time of
sale, there are no daily cash payments to reflect changes in the value of the
underlying contract; however, the value of the option does change daily and that
change would be reflected in the net asset value of the Master Portfolio.
Transactions by the Master Portfolio in futures contracts involve certain risks.
One risk in employing futures contracts as a hedge against cash market price
volatility is the possibility that futures prices will correlate imperfectly
with the behavior of the prices of the securities in the Master Portfolio's
investment portfolio. Similarly, in employing futures contracts as a substitute
for purchasing the designated underlying securities, there is a risk that the
performance of the futures contract may correlate imperfectly with the
performance of the direct investments for which the futures contract is a
substitute. Although the Master Portfolio intends to purchase or sell futures
contracts only if there is an active market for such contracts, no assurance can
be given that a liquid market will exist for any particular contract at any
particular time. Many futures exchanges and boards of trade limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
Once the daily limit has been reached in a particular contract, no trades may be
made that day at a price beyond that limit or trading may be suspended for
specified periods during the trading day. Futures contract prices could move to
the limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and potentially
subjecting the Master Portfolio to substantial losses. If it is not possible, or
if the Master Portfolio determines not to close a futures position in
anticipation of adverse price movements, the Master Portfolio will be required
to make daily cash payments on variation margin.
In order to comply with undertakings made by the Master Portfolio pursuant to
Commodity Futures Trading Commission ("CFTC") Regulation 4.5, the Master
Portfolio will use futures and option contracts solely for bona fide hedging
purposes within the meaning and intent of CFTC Reg. 1.3(z); provided, however,
that in addition, with respect to positions in commodity futures or commodity
option contracts which do not come within the meaning and intent of CFTC Reg.
1.3(z), the aggregate initial margin and premiums required to establish such
positions will not exceed 5% of the liquidation value of the Master Portfolio's
portfolio, after taking into account unrealized profits and unrealized losses on
any such contract it has entered into; and provided further, that in the case of
an option that is in-the-money at the time of purchase, the in-the-money amount
as defined in CFTC Reg. 190.01(x) may be excluded in computing such 5%.
Stock Index Futures and Options on Stock Index Futures. The Master Portfolio may
invest in stock index futures contracts and options on stock index futures
contracts as a substitute for a comparable market position in the underlying
securities. A stock index future obligates the seller to deliver (and the
purchaser to take), effectively, an amount of cash equal to a specific dollar
amount times the difference between the value of a specific stock index at
B-6
<PAGE>
the close of the last trading day of the contract and the price at which the
agreement is made. No physical delivery of the underlying stocks in the index is
made. With respect to stock indices that are permitted investments, the Master
Portfolio intends to purchase and sell futures contracts on the stock index for
which it can obtain the best price with consideration also given to liquidity.
There can be no assurance that a liquid market will exist at the time when the
Master Portfolio seeks to close out a futures contract or a futures option
position. Lack of a liquid market may prevent liquidation of an unfavorable
position.
Future Developments. The Master Portfolio may take advantage of opportunities in
the area of options and futures contracts and options on futures contracts and
any other derivative investments which are not presently contemplated for use by
the Master Portfolio or which are not currently available but which may be
developed, to the extent such opportunities are both consistent with the Master
Portfolio's investment objective and legally permissible for the Master
Portfolio. Before entering into such transactions or making any such investment,
the Master Portfolio will provide appropriate disclosure in its prospectus.
Loans of Portfolio Securities. The Master Portfolio may lend securities from its
portfolio to brokers, dealers and financial institutions (but not individuals)
if cash, U.S. Government securities or other high quality debt obligations equal
to at least 100% of the current market value of the securities loaned (including
accrued interest thereon) plus the interest payable to the Master Portfolio with
respect to the loan is maintained with the Master Portfolio. In determining
whether or not to lend a security to a particular broker, dealer or financial
institution, the Master Portfolio's investment adviser, BGFA, considers all
relevant facts and circumstances, including the size, creditworthiness and
reputation of the broker, dealer, or financial institution. Any loans of
portfolio securities are fully collateralized based on values that are marked to
market daily. The Master Portfolio does not enter into any portfolio security
lending arrangements having a duration longer than one year. Any securities that
the Master Portfolio receives as collateral do not become part of its portfolio
at the time of the loan and, in the event of a default by the borrower, the
Master Portfolio will, if permitted by law, dispose of such collateral except
for such part thereof that is a security in which the Master Portfolio is
permitted to invest. During the time securities are on loan, the borrower will
pay the Master Portfolio any accrued income on those securities, and the Master
Portfolio may invest the cash collateral and earn income or receive an
agreed-upon fee from a borrower that has delivered cash-equivalent collateral.
The Master Portfolio will not lend securities having a value that exceeds
one-third of the current value of its total assets. Loans of securities by the
Master Portfolio are subject to termination at the Master Portfolio's or the
borrower's option. The principal risk of portfolio lending is potential default
or insolvency of the borrower. In either of these cases, the Master Portfolio
could experience delays in recovering securities or collateral or could lose all
or part of the value of the loan securities. The Master Portfolio may pay
reasonable administrative and custodial fees in connection with a securities
loan and may pay a negotiated portion of the interest or fee earned with respect
to the collateral to the borrower or the placing broker. Borrowers and placing
brokers are not permitted to be affiliated, directly or indirectly, to the
Master Portfolio, BGFA, MIP or Stephens, Inc. ("Stephens"), the Master
Portfolio's placement agent and co-administrator.
Investments in Warrants. The Master Portfolio may invest up to 5% of its net
assets at the time of purchase in warrants. Warrants represent rights to
purchase securities at a specific price valid for a specific period of time. The
prices of warrants do not necessarily correlate with the prices of the
underlying securities. The Master Portfolio may only purchase warrants on
securities in which the Master Portfolio may invest directly.
Unrated, Downgraded and Below Investment Grade Investments. The Master Portfolio
may purchase instruments that are not rated if, in the opinion of BGFA, such
obligations are of investment quality comparable to other rated investments that
are permitted to be purchased by the Master Portfolio. After purchase by the
Master Portfolio, a security may cease to be rated or its rating may be reduced
below the minimum required for purchase by the Master Portfolio. Neither event
will require a sale of such security by the Master Portfolio provided that the
amount of such securities held by the Master Portfolio does not exceed 5% of the
Master Portfolio's net assets. To the extent the ratings given by Moody's or S&P
may change as a result of changes in such organizations or their rating systems,
the Master Portfolio will attempt to use comparable ratings as standards for
investments in accordance with the investment policies contained in the
Prospectus and in this Statement of Additional Information. The ratings of
Moody's and S&P are more fully described in the Appendix to this Statement of
Additional Information.
Because the Master Portfolio is not required to sell downgraded securities, the
Master Portfolio could hold up to 5% of its net assets in debt securities rated
below "Baa" by Moody's or below "BBB" by S&P or in unrated, low quality (below
investment grade) securities. Although they may offer higher yields than do
higher rated securities, low
B-7
<PAGE>
rated, and unrated, low quality debt securities generally involve greater
volatility of price and risk of principal and income, including the possibility
of default by, or bankruptcy of, the issuers of the securities. In addition, the
markets in which low rated and unrated, low quality debt are traded are more
limited than those in which higher rated securities are traded. The existence of
limited markets for particular securities may diminish the Master Portfolio's
ability to sell the securities at fair value either to meet redemption requests
or to respond to changes in the economy or in the financial markets and could
adversely affect and cause fluctuations in the daily net asset value of the
Master Portfolio's shares.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of low rated or unrated, low
quality debt securities, especially in a thinly traded market. Analysis of the
creditworthiness of issuers of low rated or unrated, low quality debt securities
may be more complex than for issuers of higher rated securities, and the ability
of the Master Portfolio to achieve its investment objective may, to the extent
it holds low rated or unrated low quality debt securities, be more dependent
upon such creditworthiness analysis than would be the case if the Master
Portfolio held exclusively higher rated or higher quality securities.
Low rated or unrated low quality debt securities may be more susceptible to real
or perceived adverse economic and competitive industry conditions than
investment grade securities. The prices of such debt securities have been found
to be less sensitive to interest rate changes than higher rated or higher
quality investments, but more sensitive to adverse economic downturns or
individual corporate developments. A projection of an economic downturn or of a
period of rising interest rates, for example, could cause a decline in low rated
or unrated, low quality debt securities prices because the advent of a recession
could dramatically lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If the issuer of the
debt securities defaults, the Master Portfolio may incur additional expenses to
seek recovery.
Letters of Credit. Certain of the debt obligations (including municipal
securities, certificates of participation, commercial paper and other short-term
obligations) which the Master Portfolio may purchase may be backed by an
unconditional and irrevocable letter of credit of a bank, savings and loan
association or insurance company which assumes the obligation for payment of
principal and interest in the event of default by the issuer. Only banks,
savings and loan associations and insurance companies which, in the opinion of
BGFA, as investment advisor, are of comparable quality to issuers of other
permitted investments of the Master Portfolio may be used for letter of
credit-backed investments.
Forward Commitments, When-Issued Purchases and Delayed-Delivery Transactions.
The Master Portfolio may purchase or sell securities on a when-issued or
delayed-delivery basis and make contracts to purchase or sell securities for a
fixed price at a future date beyond customary settlement time. Securities
purchased or sold on a when-issued, delayed-delivery or forward commitment basis
involve a risk of loss if the value of the security to be purchased declines, or
the value of the security to be sold increases, before the settlement date.
Although the Master Portfolio will generally purchase securities with the
intention of acquiring them, the Master Portfolio may dispose of securities
purchased on a when-issued, delayed-delivery or a forward commitment basis
before settlement when deemed appropriate by BGFA.
The Master Portfolio may purchase securities on a when-issued basis, in which
case delivery and payment normally take place within 45 days after the date of
the commitment to purchase. When-issued securities are subject to market
fluctuation, and no income accrues to the purchaser during the period prior to
issuance. The purchase price and the interest rate that will be received on debt
securities are fixed at the time the purchaser enters into the commitment.
Purchasing a security on a when-issued basis can involve a risk that the market
price at the time of delivery may be lower than the agreed-upon purchase price,
in which case there could be an unrealized loss at the time of delivery. The
Master Portfolio currently does not intend on investing more than 5% of its
assets in when-issued securities during the coming year. The Master Portfolio
will establish a segregated account in which it will maintain cash or liquid
securities in an amount at least equal in value to the Master Portfolio's
commitments to purchase when-issued securities. If the value of these assets
declines, the Master Portfolio will place additional liquid assets in the
account on a daily basis so that the value of the assets in the account is equal
to the amount of such commitments.
Borrowing Money. As a fundamental policy, the Master Portfolio is permitted to
borrow to the extent permitted under the 1940 Act. However, the Master Portfolio
currently intends to borrow money only for temporary or emergency (not
leveraging) purposes, and may borrow up to one-third of the value of its total
assets (including the
B-8
<PAGE>
amount borrowed) valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) at the time the borrowing is made. While
borrowings exceed 5% of the Master Portfolio's total assets, the Master
Portfolio will not make any new investments.
Glass-Steagall Act Considerations. Independent legal counsel to MIP and special
counsel to BGFA has advised MIP and BGFA that BGFA and its affiliates may
perform the services contemplated by the Investment Advisory Contract and the
Prospectus without violation of the Glass-Steagall Act. However, there are no
controlling judicial or administrative interpretations or decisions and that
future interpretations of, or decisions relating to, present federal or state
statutes, including the Glass-Steagall Act, and relating to the permissible
activities of banks and their subsidiaries or affiliates, as well as future
changes in such statutes, regulations and judicial or administrative decisions
or interpretations, could prevent such entities from continuing to perform, in
whole or in part, such services. If any such entity were prohibited from
performing any such services, it is expected that new agreements would be
proposed or entered into with another entity or entities qualified to perform
such services.
Banking Relationships. BGFA, Barclays and their affiliates deal, trade and
invest for their own account in the types of securities in which the Master
Portfolio may invest and may have deposit, loan and commercial banking
relationships with the issuers of securities purchased by the Master Portfolio.
Disclaimer
NEITHER THE FUND NOR THE MASTER PORTFOLIO IS SPONSORED, ENDORSED, SOLD OR
PROMOTED BY STANDARD & POOR'S ("S&P"). S&P MAKES NO REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, TO THE FUND, THE MASTER PORTFOLIO OR ANY MEMBER OF THE
PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN SECURITIES GENERALLY OR IN THE
FUND PARTICULARLY OR THE ABILITY OF THE S&P 500(R) INDEX TO TRACK GENERAL STOCK
MARKET PERFORMANCE. S&P'S ONLY RELATIONSHIP TO THE FUND IS THE LICENSING OF
CERTAIN TRADEMARKS AND TRADE NAMES OF S&P WITHOUT REGARD TO THE FUND. S&P HAS NO
OBLIGATION TO TAKE THE NEEDS OF THE FUND INTO CONSIDERATION IN DETERMINING,
COMPOSING OR CALCULATING THE S&P 500(R) INDEX. S&P IS NOT RESPONSIBLE FOR AND
HAS NOT PARTICIPATED IN THE DETERMINATION OF THE PRICES AND AMOUNT OF THE FUND'S
SHARES OR THE TIMING OF THE ISSUANCE OR SALE OF THE FUND'S SHARES OR IN THE
DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE FUND'S SHARES ARE TO
BE CONVERTED INTO CASH. S&P HAS NO OBLIGATION OR LIABILITY IN CONNECTION WITH
THE ADMINISTRATION, MARKETING OR TRADING OF THE FUND'S SHARES.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500(R)
INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE FUND, OR ANY OTHER PERSON OR ENTITY
FROM THE USE OF THE S&P 500(R) INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
S&P 500(R) INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE,
INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.
FUNDAMENTAL INVESTMENT RESTRICTIONS OF THE FUND
-----------------------------------------------
The Fund is subject to certain fundamental restrictions on its investments,
which may not be changed without the affirmative vote of a majority of the
outstanding shares of the Fund. Investment restrictions that appear below or
elsewhere in this Statement of Additional Information and in the Prospectus
which involve a maximum percentage of securities or assets shall not be
considered to be violated (except with respect to restriction No. 7 below)
unless an
B-9
<PAGE>
excess over the percentage occurs immediately after, and is caused by, an
acquisition or encumbrance of securities or assets of, or borrowings by or on
behalf of, the Fund. The Trust may not, on behalf of the Fund:
(1) purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a
result thereof, the value of the Fund's investments in that industry would
be 25% or more of the current value of the Fund's total assets, provided
that there is no limitation with respect to investments in (i) obligations
of the U.S. Government, its agencies or instrumentalities and (ii) any
industry in which the S&P 500(R) Index becomes concentrated to the same
degree during the same period, and provided further, that the Fund may
invest all its assets in a diversified open-end management investment
company, or series thereof, with substantially the same investment
objective, policies and restrictions as the Fund, without regard for the
limitations set forth in this paragraph (1);
(2) purchase or sell real estate or real estate limited partnerships (other
than securities secured by real estate or interests therein or securities
issued by companies that invest in real estate or interests therein);
(3) purchase commodities or commodity contracts, except that the Fund may
purchase securities of an issuer which invests or deals in commodities or
commodity contracts, and except that the Fund may purchase and sell (i.e.,
write) options, forward contracts, futures contracts, including those
relating to indexes, and options on futures contracts or indexes;
(4) purchase securities on margin (except for short-term credit necessary
for the clearance of transactions and except for margin deposits in
connection with options, forward contracts, futures contracts, including
those related to indexes, and options on futures contracts or indexes);
(5) act as an underwriter of securities of other issuers, except to the
extent that the Fund may be deemed an underwriter under the Securities Act
of 1933, as amended (the "1933 Act"), by virtue of disposing of portfolio
securities and provided further, that the purchase by the Fund of
securities issued by a diversified, open-end management investment company,
or a series thereof, with substantially the same investment objective,
policies and restrictions as the Fund shall not constitute acting as an
underwriter for purposes of this paragraph (5);
(6) issue senior securities, except as permitted by the 1940 Act;
(7) borrow money, except as permitted by the 1940 Act. The 1940 Act
currently permits the Fund to borrow from any bank; provided, that
immediately after any such borrowing there is an asset coverage of at least
300 per centum for all borrowings of the Fund; and provided further, that
in the event that such asset coverage shall at any time fall below 300 per
centum the Fund shall, within three days thereafter (not including Sundays
and holidays) or such longer period as the SEC may prescribe by rules and
regulations, reduce the amount of its borrowings to an extent that the
asset coverage of such borrowings shall be at least 300 per centum. For
purposes of this investment restriction, the Fund's entry into options,
forward contracts, futures contracts, including those relating to indexes,
and options on futures contracts or indexes shall not constitute borrowing
to the extent certain segregated accounts are established and maintained by
the Fund;
(8) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities or
other investment companies) if, as a result, with respect to 75% of its
total assets, (i) more than 5% of the value of the Fund's total assets
would be invested in the securities of that issuer or, (ii) the Fund's
ownership would be more than 10% of the outstanding voting securities of
such issuer; or
(9) make loans, except that the Fund may purchase or hold debt instruments
or lend its portfolio securities in accordance with its investment
policies, and may enter into repurchase agreements.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS OF THE FUND
---------------------------------------------------
In addition to the fundamental investment restrictions described above, the
Trustees of the Trust have voluntarily adopted certain policies and restrictions
which are observed in the conduct of the affairs of the Fund. These represent
intentions of the Trustees based upon current circumstances. They differ from
fundamental investment restrictions in that the following additional investment
restrictions may be changed or amended by action of the Trustees without
requiring prior notice to or approval of shareholders.
B-10
<PAGE>
In accordance with such policies and guidelines, the Fund:
(1) may not, unless required by its investment strategy of replicating the
composition of a published market index, purchase securities of issuers
who, with their predecessors, have been in existence less than three
years, unless the securities are fully guaranteed or insured by the
U.S. Government, a state, commonwealth, possession, territory, the
District of Columbia or by an entity in existence at least three years,
or the securities are backed by the assets and revenues of any of the
foregoing if, by reason thereof, the value of its aggregate investments
in such securities will exceed 5% of its total assets, provided that
this restriction does not affect the Fund's ability to invest all or a
portion of its assets in the Master Portfolio;
(2) reserves the right to invest up to 15% of the current value of its net
assets in fixed time deposits that are subject to withdrawal penalties
and that have maturities of more than seven days, repurchase agreements
maturing in more than seven days or other illiquid securities, provided
that in circumstances where fluctuations in value result in the Fund's
investment in illiquid securities constituting more than 15% of the
current value of its net assets, the Fund will take reasonable steps to
reduce its investments in illiquid securities until such investments
constitute no more than 15% of the Fund's net assets;
(3) may not purchase, sell or write puts, calls or combinations thereof,
except as may be described in this Statement of Additional Information
and the Fund's Prospectus; and
(4) may invest in shares of other open-end, management investment
companies, subject to the limitations of Section 12(d)(l) of the 1940
Act.
FUNDAMENTAL INVESTMENT RESTRICTIONS OF THE MASTER PORTFOLIO
-----------------------------------------------------------
The Master Portfolio is subject to the following investment limitations which
cannot be changed without approval of a majority (as defined in the 1940 Act) of
the Master Portfolio's outstanding voting securities.
The Master Portfolio may not:
(1) invest more than 5% of its assets in the obligations of any single
issuer, except that up to 25% of the value of its total assets may be
invested, and securities issued or guaranteed by the U.S. Government,
or its agencies or instrumentalities may be purchased, without regard
to any such limitation;
(2) hold more than 10% of the outstanding voting securities of any single
issuer. This investment restriction applies only with respect to 75% of
its total assets;
(3) invest in commodities, except that the Master Portfolio may purchase
and sell (i.e., write) options, forward contracts, futures contracts,
including those relating to indexes, and options on futures contracts
or indexes;
(4) purchase, hold or deal in real estate, or oil, gas or other mineral
leases or exploration or development programs, but the Master Portfolio
may purchase and sell securities that are secured by real estate or
issued by companies that invest or deal in real estate;
(5) borrow money, except to the extent permitted under the 1940 Act, and
except that the Master Portfolio may borrow up to 20% of the current
value of its net assets for temporary purposes only in order to meet
redemptions, and these borrowings may be secured by the pledge of up to
20% of the current value of its net assets (but investments may not be
purchased while any such outstanding borrowing in excess of 5% of its
net assets exists);
(6) make loans to others, except through the purchase of debt obligations
and the entry into repurchase agreements. However, the Master Portfolio
may lend its portfolio securities in an amount not to exceed one-third
of the value of its total assets. Any loans of portfolio securities
will be made according to guidelines established by the SEC and MIP's
Board of Trustees;
(7) act as an underwriter of securities of other issuers, except to the
extent the Master Portfolio may be deemed an underwriter under the 1933
Act by virtue of disposing of portfolio securities;
(8) invest 25% or more of its total assets in the securities of issuers in
any particular industry or group of closely related industries and
except that there shall be no limitation with respect to investments in
(i) obligations of the U.S. Government, its agencies or
instrumentalities; and (ii) any industry in which the S&P 500(R) Index
becomes concentrated to the same degree during the same period (the
Master Portfolio will be concentrated as specified above only to the
extent the percentage of its assets invested in those categories of
investments is sufficiently large that 25% or more of its total assets
would be invested in a single industry);
B-11
<PAGE>
(9) issue any senior security (as such term is defined in Section 18(f) of
the 1940 Act), except to the extent the activities permitted in
paragraphs (3) and (5) above may be deemed to give rise to a senior
security; or
(10)purchase securities on margin, but the Master Portfolio may make
margin deposits in connection with transactions in options, forward
contracts, futures contracts, including those related to indexes, and
options on futures contracts or indexes.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS OF THE MASTER PORTFOLIO
---------------------------------------------------------------
The Master Portfolio is subject to the following non-fundamental operating
policies which may be changed by the Board of Trustees of the Master Portfolio
without the approval of the holders of the Master Portfolio's outstanding
securities.
(1) The Master Portfolio may invest in shares of other open-end
management investment companies, subject to the limitations of Section 12(d)(1)
of the 1940 Act. Under the 1940 Act, the Master Portfolio's investment in such
securities currently is limited, subject to certain exceptions, to (i) 3% of the
total voting stock of any one investment company, (ii) 5% of the Master
Portfolio's net assets with respect to any one investment company, and (iii) 10%
of the Master Portfolio's net assets in the aggregate. Other investment
companies in which the Master Portfolio invests can be expected to charge fees
for operating expenses, such as investment advisory and administration fees,
that would be in addition to those charged by the Master Portfolio.
(2) The Master Portfolio may not invest more than 15% of its net assets in
illiquid securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale, (b) fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days, and (c) repurchase agreements not terminable with seven
days.
(3) The Master Portfolio may lend securities from its portfolio to brokers,
dealer and financial institutions, in amounts not to exceed (in the aggregate)
one-third of the Master Portfolio's total assets. Any such loans of portfolio
securities will be fully collateralized based on values that are marked to
market daily. The Master Portfolio will not enter into any portfolio security
lending arrangement having a duration of longer than one year.
MANAGEMENT OF THE TRUST
-----------------------
The Trust has a Board of Trustees, a majority of which must not be "Interested
Persons" as defined in the 1940 Act. The Trustees and principal officers of the
Trust are listed below together with information on their positions with the
Trust, address, age, principal occupations during the past five years and other
principal business affiliations.
Stuart H. Reese* Chairman, Trustee and President of the Trust
1295 State Street
Springfield, MA 01111
Age: 44
Chief Investment Officer (since 1999), Chief Executive Director
(1997-1999), Executive Director (1996-1997), Senior Vice President
(1993-1997), MassMutual; President (since 1995), Executive Vice
President (1993-1995), MassMutual Corporate Investors and MassMutual
Participation Investors (closed-end investment companies); Director
(since 1996), Antares Capital Corporation (finance company) and Charter
* Trustee who is an "interested person" of the Trust within the definition set
forth in Section 2(a)(19) of the 1940 Act.
B-12
<PAGE>
Oak Capital Management, Inc. (investment adviser); President and
Director (since 1996), HYP Management, Inc. (managing member of
MassMutual High Yield Partners II LLC), and MMHC Investment, Inc.
(investor in funds sponsored by MassMutual); Director (since 1994),
MassMutual Corporate Value Partners Limited (investor in debt and
equity securities) and MassMutual Corporate Value Limited (parent of
MassMutual Corporate Value Partners Limited); Director (1994-1996),
Pace Industries (aluminum die caster); Advisory Board Member (since
1995), Kirtland Capital Partners; President (since 1994), Chairman and
Trustee (since 1999) MML Series Investment Fund (open-end investment
company).
Ronald J. Abdow Trustee of the Trust
1400 Elm Street
West Springfield, MA 01089
Age: 68
President, Abdow Corporation (operator of restaurants); General
Partner, Grove Investment Group (apartment building syndicator);
Trustee, Abdow G&R Trust and Abdow G&R Co. (owners and operators of
restaurant properties); Partner, Abdow Partnership, Abdow Auburn
Associates, and Abdow Hazard Associates (owners and operators of
restaurant properties); Trustee (since 1993), MML Series Investment
Fund (open-end investment company).
Richard H. Ayers Trustee of the Trust
176 Sewall Road
Wolfreboro, NH 03894
Age: 57
Retired; former adviser to Chairman (since 1997), Chairman and Chief
Executive Officer (1989-1996) and Director (1985-1996), The Stanley
Works (manufacturer of tools, hardware and specialty hardware
products); Director, Southern New England Telecommunications Corp. and
Perkin Elmer Corp.; Trustee (since 1999), Advisory Board Member
(1996-1999), MML Series Investment Fund (open-end investment company).
Mary E. Boland Trustee of the Trust
67 Market Street
Springfield, MA 01102
Age: 60
Attorney at Law, Egan, Flanagan and Cohen, P.C. (law firm),
Springfield, MA; Director (1995-1999), Trustee (until 1995), SIS Bank
(formerly, Springfield Institution for Savings); Director (since 1999),
SIS and Family Bank, F.S.B. (formerly SIS Bank); Trustee (since 1973),
MML Series Investment Fund (open-end investment company).
David E.A. Carson Trustee of the Trust
850 Main Street
Bridgeport, CT 06604
Age: 65
Chairman and Chief Executive Officer (since 1997), President and Chief
Executive Officer (1985-1997), People's Bank; Director, United
Illuminating Co. (electric utility); Trustee, American Skandia Trust
(open-end investment company); Trustee (since 1999), Advisory Board
Member (1996-1999), MML Series Investment Fund (open-end investment
company).
B-13
<PAGE>
Richard G. Dooley* Trustee of the Trust
1295 State Street
Springfield, MA 01111
Age: 70
Consultant (since 1993), MassMutual; Director (since 1996), Investment
Technology Group Inc.; Director, The Advest Group, Inc. (financial
services holding company), HSB Group Inc. (formerly known as Hartford
Steam Boiler Inspection and Insurance Co.), Nellie Mae; Director, Kimco
Realty Corp. (shopping center ownership and management); Director
(since 1993), Jefferies Group, Inc. (financial services holding
company); Vice Chairman (since 1995), Chairman (1982-1995), Director
(since 1974), MassMutual Corporate Investors, and Vice Chairman (since
1995), Director (since 1988), Chairman (1988-1995), MassMutual
Participation Investors (closed-end investment companies); Vice
Chairman (since 1995), Chairman (1988-1995), Trustee (since 1995) MML
Series Investment Fund (open-end investment company); Director (since
1996), Charter Oak Capital Management, Inc.
Richard W. Greene Trustee of the Trust
University Of Rochester
Rochester, NY 14627
Age: 63
Vice President for Investments and Treasurer (since 1998); Executive
Vice President and Treasurer (1986-1998), University of Rochester
(private university); Trustee (since 1999), Advisory Board Member
(1996-1999), MML Series Investment Fund (open-end investment company).
Beverly L. Hamilton Trustee of the Trust
515 South Flower Street
Los Angeles, CA 90017
Age: 53
President (since 1991), ARCO Investment Management Co.; Director,
Connecticut Natural Gas; Director, Emerging Markets Growth Fund
(closed-end investment company); Director (since 1997), United Asset
Management Corp. (investment management); Trustee (since 1999),
Advisory Board Member (1996-1999), MML Series Investment Fund (open-end
investment company).
F. William Marshall, Jr. Trustee of the Trust
1441 Main Street
Springfield, MA 01102
Age: 57
Chairman, SIS and Family F.S.B. (formerly SIS Bank); President, Chief
Executive Officer and Director (1993-1999), SIS Bancorp, Inc. and SIS
Bank (formerly, Springfield Institution for Savings); Director (since
1999), People's Heritage Financial Group; Chairman and Chief Executive
Officer (1990-1993), Bank of Ireland First Holdings, Inc. and First New
Hampshire Banks; Trustee (since 1996), MML Series Investment Fund
(open-end investment company).
Charles J. McCarthy Trustee of the Trust
181 Eton Road
Longmeadow, MA 01106
Age: 76
Proprietor, Synectics Financial Company (venture capital activities,
business consulting and investments); Trustee, MML Series Investment
Fund (open-end investment company).
- ----------------
* Trustee who is an "interested person" of the Trust within the definition set
forth in Section 2(a)(19) of the 1940 Act.
B-14
<PAGE>
Trustee of the Trust
Robert J. O'Connell*
1295 State Street
Springfield, MA 01111
Age: 56
President, Chief Executive Officer, Director, Member, Board Affairs
Committee and Dividend Policy Committee, Chairman Investment Committee
of MassMutual (since 1999); Director, C.M. Life Insurance Company and
MML Bay State Life Insurance Company (wholly-owned insurance company
subsidiaries of MassMutual), Cornerstone Real Estate Advisers, Inc.
(wholly-owned real estate investment advisory subsidiary of MassMutual
Holding Trust I), One Financial Plaza, Suite 1700, Hartford,
Connecticut; DLB Acquisition Corporation (holding company for
investment advisers), MassMutual Holding MSC, Inc., Trustee, MassMutual
Holding Trust II (wholly-owned holding company subsidiaries of
MassMutual Holding Co.), MassMutual Holding Trust I (wholly-owned
holding company subsidiary of MassMutual Holding Co.), Director,
MassMutual International, Inc., (wholly-owned subsidiary of MassMutual
Holding Company to act as service provider for international insurance
companies, MassMutual Holding Company (wholly-owned holding company
subsidiary of MassMutual), MassMutual Benefits Management, Inc., Life
Office Management Association (since 1999); Director, President and
Chief Executive Officer (1991-1998), AIG Life Insurance Company,
American International Life Assurance of New York, Delaware American
Life Insurance Co., Pacific Union Assurance Company; Director
(1991-1998) AIG Life Insurance Company of Puerto Rico; Senior Vice
President (1991-1998), Life Insurance of American International Group,
Inc., American Life Insurance Company, DE; Senior Vice President, Group
Management Division (1991-1998) of American International Group, Inc.;
Trustee (since 1999), MML Series Investment Fund (open-end investment
company).
John H. Southworth Trustee of the Trust
195 Eton Road
Longmeadow, MA 01106
Age: 71
Chairman (since 1994), Southworth Company (manufacturer of paper and
calendars); Director (since 1995), Trustee (until 1995), SIS Bank
(formerly, Springfield Institution for Savings); Trustee, MML Series
Investment Fund (open-end investment company).
Michael D. Hays Chief Financial Officer of the Trust
1295 State Street
Springfield, MA 01111
Age: 56
Senior Vice President (since 1998), Senior Vice President and Actuary
(1986-1998), MassMutual.
Mary Wilson Kibbe Senior Vice President of the Trust
1295 State Street
Springfield, MA 01111
Age: 45
Executive Director (since 1982), Senior Managing Director (1996-1997),
Vice President and Managing Director (1991-1996), MassMutual; Senior
Vice President (since 1996), HYP Management, Inc. (managing member of
MassMutual High Yield Partners II LLC) and MMHC Investment, Inc.
(investor in funds sponsored by MassMutual); Senior Vice President
(since 1994), MML Series Investment Fund (open-end investment company);
Vice President, MassMutual Participation Investors and MassMutual
Corporate Investors (closed-end investment companies); Vice President
(1991-1995), Oppenheimer Investment Grade Bond Fund (open-end
investment company).
- -------------------
* Trustee who is an "interested person" of the Trust within the definition set
forth in Section 2(a)(19) of the 1940 Act.
B-15
<PAGE>
Stephen L. Kuhn Vice President and Secretary of the Trust
1295 State Street
Springfield, MA 01111
Age: 52
Senior Vice President and Deputy General Counsel (since 1999),
MassMutual; Vice President and Associate General Counsel (1992-1998),
MassMutual; Vice President and Secretary, MassMutual Participation
Investors and MassMutual Corporate Investors (closed-end investment
companies); Assistant Secretary (since 1996), Antares Capital
Corporation (finance company); Chief Legal Officer and Assistant
Secretary (since 1995), DLB Acquisition Corporation (holding company
for investment advisers); Assistant Secretary (since 1997), Oppenheimer
Acquisition Corporation (holding company for investment advisers); Vice
President and Secretary (since 1989), MML Series Investment Company
(open-end investment company).
Charles C. McCobb, Jr. Vice President of the Trust
1295 State Street
Springfield, MA 01111
Age: 55
Managing Director (since 1997), MassMutual; Managing Director and Vice
President (1994-1997), Citicorp, Inc. (banking); Managing Director
(1985-1994), Aetna Life & Casualty Company (insurance company); Vice
President (since 1996), and Chief Financial Officer (since 1998),
MassMutual Corporate Investors and MassMutual Participation Investors
(closed-end investment companies); Chief Financial Officer (since 1998)
MMHC Investment Inc., HYP Management, Inc. MMCI Subsidiary Trust and
MMPI Subsidiary Trust (wholly-owned subsidiaries of MassMutual
Corporate Investors and MassMutual Participation Investors,
respectively).
Edmond F. Ryan Vice President of the Trust
1295 State Street
Springfield, MA 01111
Age: 50
Senior Vice President (since 1995), Vice President (1985-1995),
MassMutual.
Vernon J. Meyer Vice President of the Trust
1295 State Street
Springfield, MA 01111
Age: 35
Vice President (since 1998); Second Vice President (1994-1998),
Assistant Vice President and Director (1993-1994), MassMutual.
Mark B. Ackerman Treasurer of the Trust
1295 State Street
Springfield, MA 01111
Age: 33
Investment Director (since 1996), Associate Investment Director
(1994-1996), MassMutual; Controller (1998), Treasurer (since 1998),
Associate Treasurer (1995-1997), MassMutual Participation Investors and
MassMutual Corporate Investors (closed-end investment companies);
Comptroller (since 1997), Associate Treasurer (1995-1996), MML Series
Investment Fund (open-end investment company); Vice President (since
1998), HYP Management, Inc.; Comptroller (1998), Treasurer (since
1998), MMCI Subsidiary Trust and MMPI Subsidiary Trust (wholly-owned
subsidiaries of MassMutual Corporate Investors and MassMutual
Participation Investors, respectively).
B-16
<PAGE>
The Audit Committee makes recommendations to the Trustees as to the engagement
or discharge of the Trust's independent auditors, supervises investigations into
matters relating to audit functions, reviews with the Trust's independent
auditors the results of the audit engagement, and considers the audit fees. The
Nominating Committee consists of Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust or any adviser and considers making all
nominations for non-interested members of the Board of Trustees. The selection
and nomination of management nominees for such vacancies is committed to the
discretion of the Nominating Committee. The Investment Pricing Committee
determines the fair value of securities for which market quotations are not
readily available.
COMPENSATION
------------
The Trust, on behalf of the Fund, pays each of its Trustees who is not an
officer or employee of Massachusetts Mutual Life Insurance Company
("MassMutual") a fee of $2,000 per quarter plus $2,000 per meeting attended.
Such Trustees who serve on the Audit Committee of the Trust are paid an
additional fee of $1,000 per year. Such Trustees who serve on the Nominating
Committee or the Investment Pricing Committee are paid an additional fee of $500
per meeting attended. In addition, the Trust reimburses out-of-pocket business
travel expenses to such Trustees. Trustees who are officers or employees of
MassMutual receive no fees from the Trust.
The following table discloses the compensation paid to the Registrant's
non-interested trustees for the fiscal year ended December 31, 1998. The
Registrant has no pension, retirement, or deferred compensation plans. All of
the non-interested Trustees also serve as Trustees of one other investment
company managed by MassMutual. Total Compensation from Registrant and Fund
Complex reflects compensation paid in the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Total Compensation
From Registrant and
Aggregate Fund Complex (includes compensation
Name/Position Compensation from Registrant from one other investment company)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Ronald J. Abdow
Trustee $16,000 $32,000
- ----------------------------------------------------------------------------------------------
Richard H. Ayers
Trustee 16,000 32,000
- ----------------------------------------------------------------------------------------------
Mary E. Boland
Trustee 16,000 32,000
- ----------------------------------------------------------------------------------------------
David E. A. Carson
Trustee 16,000 32,000
- ----------------------------------------------------------------------------------------------
Richard W. Greene
Trustee 16,000 32,000
- ----------------------------------------------------------------------------------------------
Beverly L. Hamilton
Trustee 16,000 32,000
- ----------------------------------------------------------------------------------------------
F. William Marshall, Jr.
Trustee 16,000 32,000
- ----------------------------------------------------------------------------------------------
Charles J. McCarthy
Trustee 17,000 34,000
- ----------------------------------------------------------------------------------------------
John H. Southworth
Trustee 17,000 34,000
- ----------------------------------------------------------------------------------------------
</TABLE>
The officers and Trustees of the Trust as a group own less than 1% of any class
of any series of outstanding shares of the Trust.
The Trust's shareholders have the right, upon the declaration in writing or vote
of at least two-thirds of the votes represented by its outstanding shares, to
remove a Trustee. The Trustees shall call a meeting of shareholders to vote on
the removal of a Trustee upon the written request of the record holders of
shares representing at least
B-17
<PAGE>
10% of all of the votes represented by all outstanding shares of the Trust. In
addition, whenever ten or more shareholders of record who have been such for at
least six months preceding the date of application, and who hold in the
aggregate either shares having a net asset value of at least $25,000 or at least
1% of the Trust's outstanding shares, whichever is less, shall apply to the
Trustees in writing, stating that they wish to communicate with other
shareholders with a view to obtaining signatures for a request for a meeting for
the purpose of voting upon the question of removal of any Trustee or Trustees
and accompanied by the form of communication and request which they wish to
transmit, the Trustees shall within five business days after receipt of such
application either: (1) afford to such applicants access to a list of the names
and addresses of all shareholders as recorded on the books of the Trust; or (2)
inform such applicants as to the approximate number of shareholders of record,
and the approximate cost of mailing to them the proposed communication and form
of request. If the Trustees elect to follow the latter course, the Trustees,
upon the written request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing, shall, with
reasonable promptness, mail such material to all shareholders of record at their
addresses as recorded on the books of the Trust, unless within five business
days after such tender the Trustees shall mail to such applicants and file with
the SEC, together with a copy of the material to be mailed, a written statement
signed by at least a majority of the Trustees to the effect that in their
opinion either such material contains untrue statements of fact or omits to
state facts necessary to make the statements contained therein not misleading,
or would be in violation of applicable law, and specifying the basis of such
opinion.
After opportunity for hearing regarding the objections specified in the written
statement so filed, the SEC may, and if demanded by the Trustees or by such
applicants shall, enter an order either sustaining one or more of such
objections, or refusing to sustain any of them. If the SEC shall enter an order
refusing to sustain any such objections or if, after the entry of an order
sustaining one or more of such objections, the SEC shall find, after notice and
opportunity for hearing, that all objections so sustained have been met, and
shall enter an order so declaring, the Trustees shall mail copies of such
material to all shareholders with reasonable promptness after the entry of such
order and the renewal of such tender.
On any matters submitted to a vote of shareholders, all shares of the Trust then
entitled to vote shall be voted in the aggregate as a single class without
regard to series of the Trust or class, except that: (i) when required by the
1940 Act or when the Trustees shall have determined that the matter affects one
or more of the series or classes materially differently, shares will be voted by
individual series or class; and (ii) when the Trustees have determined that any
matter affects only the interests of one or more series or classes, then only
shareholders of such series or class shall be entitled to vote thereon.
Shareholder inquiries should be directed to MassMutual Institutional Funds, 1295
State Street, Springfield, Massachusetts 01111.
CONTROL PERSON AND PRINCIPAL HOLDER OF SECURITIES
-------------------------------------------------
MassMutual may be deemed a control person (as that term is defined in the 1940
Act) of the Trust in that certain of its separate accounts and its provision of
seed money for the Trust together constituted 100% of the shares of the Class A,
Class S and Class L shares of the Fund of the Trust as of June 1, 1999.
The following shareholders may be deemed control persons (as defined in the Act)
of the Trust in that they beneficially own more than 5% of the Class Y shares of
the Fund as of June 1, 1999: Novus International, Inc., 530 Maryville Center
Drive, St. Louis, Missouri 63141, owned 14.91% of the Class Y shares of the
Fund; Novus International, Inc. SERP, 530 Maryville Center Drive, St. Louis,
Missouri 63141, owned 5.96% of the Class Y shares of the Fund; CGF Enterprises,
Inc., P.O. Box 249, Mandeville, Louisiana 70470-0249, owned 6.00% of the Class Y
shares of the Fund; Zen-Noh Grain Corporation, P.O. Box 249, Mandeville,
Louisiana 70470-0249, owned 5.20% of the Class Y shares of the Fund; Arthur J.
Gallagher & Co., Two Pierce Place, Itasca, Illinois 60143, owned 12.25% of the
Class Y shares of the Fund.
MANAGEMENT OF THE FUND
----------------------
The Fund has not retained the services of an investment adviser because the
Fund's assets are invested in the Master Portfolio, which has retained
investment advisory services. See "Investment Adviser to the Master Portfolio"
below. The Fund bears a pro rata portion of the investment advisory and certain
other fees paid by the Master Portfolio, such as accounting, legal and SEC
registration fees. The Fund is also responsible for its own expenses
B-18
<PAGE>
relating to, among other things, administrative, custodial and fund accounting
services, and transfer and dividend-disbursing agency services.
FUND ADMINISTRATOR AND SUB-ADMINISTRATOR
----------------------------------------
MassMutual has entered into an administrative services agreement
("Administrative Services Agreement") with the Fund pursuant to which MassMutual
is obligated to provide all necessary administrative and shareholder services
and to bear some Class expenses, such as federal and state registration fees,
printing and postage. MassMutual may, at its expense, employ others to supply
all or any part of the services to be provided to the Fund pursuant to the
Administrative Services Agreement. The Trust, on behalf of the Fund, pays
MassMutual an administrative services fee monthly at an annual rate based upon
the average daily net assets of the applicable class of shares of the Fund equal
to .5345% for Class A shares; .5345% for Class L shares; .3845% for Class Y
shares; and .3545% for Class S shares. MassMutual has entered into a
sub-administration agreement with Investors Bank & Trust Company ("IBT"). As
sub-administrator, IBT generally assists in all aspects of fund administration.
IBT is compensated by MassMutual for providing administrative services to the
Fund. IBT also serves as the sub-administrator to the Master Portfolio and is
compensated by BGI (defined below) for providing administrative services to the
Master Portfolio.
The Fund commenced operations on March 1, 1998, and for fiscal year ending
February 28, 1999, the Fund paid $884,446 in administrative fees to MassMutual.
THE DISTRIBUTOR
---------------
The Trust's shares are continuously distributed by MML Distributors, LLC (the
"Distributor") pursuant to a General Distribution Agreement with the Trust dated
May 3, 1999 (the "Distribution Agreement"). The Distributor pays commissions to
its selling dealers as well as the cost of printing and mailing Prospectuses to
potential investors and of any advertising incurred by it in connection with
distribution of shares of the Fund. The Distributor is a majority-owned
subsidiary of MassMutual.
The Distribution Agreement has an initial two-year term and will continue in
effect for successive one-year periods, provided that each such continuance is
specifically approved (i) by the vote of a majority of the Trustees or by a vote
of a majority of the shares of the Trust; and (ii) by a majority of the Trustees
who are not parties to the Distribution Agreement or interested persons (as
defined in the 1940 Act) of any such person, cast in person at a meeting called
for the purpose of voting on such approval.
CLASS A DISTRIBUTION AND SERVICE PLAN
-------------------------------------
The Trust has adopted, with respect to the Class A shares of the Fund, an
Amended and Restated Distribution and Service Plan and Agreement (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. The Trustees of the Trust, including
a majority of the Trustees who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the Plan, by
vote cast in person at a meeting called for the purpose of voting on the Plan,
approved the Plan on May 3, 1999. Under the terms of the Plan, the Trust is
permitted to compensate, out of the assets attributable to the Class A shares of
the Fund, in an amount up to .25%, in the aggregate, on an annual basis of the
average daily net assets attributable to that Class, (i) the Distributor for
services provided and expenses incurred by it in connection with the
distribution of Class A shares of the Fund ("Distribution Fee") and (ii)
MassMutual for services provided and expenses incurred by it for purposes of
maintaining or providing personal services (the "Servicing Fee") to Class A
shareholders. The Distribution Fee may be spent by the Distributor on any
activities or expenses primarily intended to result in the sale of Class A
shares of the Fund, including, but not limited to, compensation to, and expenses
(included overhead and telephone expenses) of, financial consultants or other
employees of the Distributor or of participating or introducing brokers who
engage in the distribution of Class A shares, preparing, printing and delivering
prospectuses and reports for other than existing Class A shareholders, providing
facilities to answer questions from other than existing Class A shareholders,
advertising and preparation, printing and distribution of sales literature,
receiving and answering correspondence, including requests for prospectuses and
statements of additional information, and complying with Federal and state
securities laws pertaining to the sale of Class A shares.
B-19
<PAGE>
The Servicing Fee may be spent by MassMutual on personal services rendered to
Class A shareholders of the Fund and/or maintenance of Class A shareholder
accounts. MassMutual's Servicing Fee expenditures may include, but shall not be
limited to, compensation to, and expenses (included overhead and telephone
expenses) of, financial consultants or other employees of the Distributor or of
participating or introducing brokers and other financial intermediaries who
assist investors in completing account forms and selecting dividend and other
account options; who aid in the process of redemption requests for Class A
shares or the processing of dividend payments with respect to Class A shares;
who prepare, print and deliver prospectuses of Class A shares; who provide
information periodically to Class A shareholders showing their position in Class
A shares; who issue account statements to Class A shareholders; who furnish
shareholding sub-accounting; who forward communications from the Fund to Class A
shareholders; who render advice regarding particular shareholder account options
offered by the Fund in light of shareholder needs; who provide and maintain
elective shareholder services; who provide and maintain pre-authorized
investment plans for Class A shareholders; who respond to inquiries from Class A
shareholders relating to such services; and/or who provide such similar services
as permitted under applicable statutes, rules or regulations.
The Plan provides that it may not be amended to materially increase the costs
which Class A shareholders may bear under the Plan without the approval of a
majority of the outstanding Class A shares of the Fund.
The Plan provides that it may not take effect until approved by vote of a
majority of both (i) the Trustees of the Trust and (ii) the Trustees of the
Trust who are not interested persons of the Trust and have no direct or indirect
financial interest in the operation of the Plan or any agreements related to it.
The Plan provides that it shall continue in effect so long as such continuance
is specifically approved at least annually by (i) Trustees of the Trust and (ii)
the Trustees of the Trust who are not interested persons of the Trust and have
no direct or indirect financial interest in the operation of the Plan or any
agreements related to it. The Plan provides that MassMutual shall provide to the
Trustees, and the Board shall review at least quarterly, a written report of the
amounts so expended and the purposes for which such expenditures were made.
The Conduct Rules of the NASD limit the amount of distribution fees that may be
paid by mutual funds. "Service fees," defined to mean fees paid for providing
shareholder services or the maintenance of accounts (but not transfer agency
services) are not subject to the limits. The Trust believes that the fees paid
to MassMutual pursuant to the Plan will qualify as "service fees" and therefore
will not be limited by NASD rules.
The Fund did not commence operations until March 1, 1998. Under a previous 12b-l
service plan for Class A shares of the Fund that was adopted as of March 1,
1998, the Trust paid service fees for the fiscal year ending February 28, 1999
of approximately $266.
CUSTODIAN, DIVIDEND DISBURSING AGENT AND TRANSFER AGENT
-------------------------------------------------------
IBT, located at 200 Clarendon Street, Boston, Massachusetts 02116, is the
custodian of the Fund's investments (the "Custodian") and is the Fund's transfer
agent and dividend disbursing agent (the "Transfer Agent"). The Custodian and
the Transfer Agent do not assist in, and are not responsible for, the investment
decisions and policies of the Fund.
INDEPENDENT PUBLIC ACCOUNTANT
-----------------------------
Deloitte & Touche LLP, located at Two World Financial Center, New York, New York
10281, is the Trust's independent public accountant. PricewaterhouseCoopers
("PwC") resigned as the Trust's independent public accountant, effective
February 23, 1999, after consultation with the staff of the Securities and
Exchange Commission ("SEC") on the issue of its independence to the Trust.
Deloitte & Touche LLP was approved as the Trust's independent public accountant
by the Board of Trustees for fiscal years 1998 and 1999. PwC did not resign as a
result of a disagreement on any matters relating to the accounting principles or
practices, financial statement disclosures or auditing scope procedures.
INVESTMENT ADVISER AND OTHER MASTER PORTFOLIO SERVICE PROVIDERS
---------------------------------------------------------------
The following information supplements and should be read in conjunction with
information set forth in the Prospectus regarding the investment adviser and
other service providers of the Master Portfolio.
B-20
<PAGE>
Investment Adviser to the Master Portfolio
BGFA provides investment advisory services to the Master Portfolio pursuant to
an Investment Advisory Contract (the "BGFA Advisory Contract") with MIP, dated
January 1, 1996. For providing these investment advisory services, BGFA is
entitled to receive monthly fees at the annual rate of 0.05% of the average
daily net assets of the Master Portfolio. As to the Master Portfolio, the BGFA
Advisory Contract is subject to annual approval by (i) MIP's Board of Trustees
or (ii) vote of a majority of the outstanding voting securities of the Master
Portfolio, provided that in either event the continuance also is approved by a
majority of MIP's Board of Trustees who are not "interested persons" (as defined
in the 1940 Act) of MIP or BGFA, by vote cast in person at a meeting called for
the purpose of voting on such approval. As to the Master Portfolio, the BGFA
Advisory Contract is terminable without penalty, on 60 days' written notice, by
either party. The BGFA Advisory Contract will terminate automatically, in the
event of its assignment (as defined in the 1940 Act).
For the fiscal years ended February 28, 1997, February 28, 1998 and February 28,
1999, the Master Portfolio paid the following advisory fees to BGFA, without
waivers:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
February 28, 1997 February 28, 1998 February 28, 1999
----------------- ----------------- -----------------
<S> <C> <C>
$577,637 $939,051 $1,353,414
</TABLE>
Other Service Providers
Co-Administrators. Stephens and Barclays Global Investors, N.A. ("BGI") are the
Master Portfolio's co-administrators. Stephens and BGI provide the Master
Portfolio with administrative services, including general supervision of the
Master Portfolio's non-investment operations, coordination of the other services
provided to the Master Portfolio, compilation of information for reports to the
SEC and the state securities commissions, preparation of proxy statements and
shareholder reports, and general supervision of data compilation in connection
with preparing periodic reports to MIP's trustees and officers. Stephens also
furnishes office space and certain facilities to conduct the Master Portfolio's
business, and compensates MIP's trustees, officers and employees who are
affiliated with Stephens. Stephens and BGI are not entitled to compensation for
providing administration services to the Master Portfolio. BGI has delegated
certain of its duties as co-administrator to IBT. IBT, as sub-administrator, is
compensated by BGI for performing certain administration services.
Placement Agent. Stephens is the placement agent for the Master Portfolio.
Stephens is a full service broker/dealer and investment advisory firm located at
111 Center Street, Little Rock, Arkansas 72201. Stephens and its predecessor
have been providing securities and investment services for more than 60 years,
including discretionary portfolio management services since 1983. Stephens
currently manages investment portfolios for pension and profit sharing plans,
individual investors, foundations, insurance companies and university
endowments. Stephens does not receive compensation for acting as placement
agent. Registered broker/dealers and investment companies, insurance company
separate accounts, common and commingled trust funds, group trust and similar
organizations and entities which constitute accredited investors, as defined in
the regulations adopted under the Securities Act of 1933, as amended, may
continuously invest in the Master Portfolio of MIP.
Custodian. IBT currently acts as the Master Portfolio's custodian. The principal
business address of IBT is 200 Clarendon Street, Boston, Massachusetts 02116.
The custodian, among other things, maintains a custody account or accounts in
the name of the Master Portfolio, receives and delivers all assets for the
Master Portfolio upon purchase and upon sale or maturity, collects and receives
all income and other payments and distributions on account of the assets of the
Master Portfolio and pays all of its expenses. The custodian is in no way
responsible for any of the investment policies or
B-21
<PAGE>
decisions of the Fund or the Master Portfolio. IBT is not entitled to receive
compensation for its services as custodian so long as it is entitled to receive
fees from BGI for providing sub-administration services to the Master Portfolio.
Transfer and Dividend Disbursing Agent. IBT also acts as the Master Portfolio's
transfer and dividend disbursing agent. Prior to March 2, 1998, Wells Fargo Bank
served as transfer and dividend disbursing agent.
Independent Auditor. KPMG LLP has been selected as the independent auditor for
MIP. KPMG LLP's address is Three Embarcadero Center, San Francisco, California
94111.
PORTFOLIO TRANSACTIONS AND BROKERAGE
------------------------------------
BGFA assumes general supervision over placing orders on behalf of the Master
Portfolio for the purchase or sale of portfolio securities. Allocation of
brokerage transactions, including their frequency, is made in the best judgment
of BGFA and in a manner deemed fair and reasonable to shareholders. In executing
portfolio transactions and selecting brokers or dealers, BGFA seeks to obtain
the best overall terms available for the Master Portfolio. In assessing the best
overall terms available for any transaction, BGFA considers factors deemed
relevant, including the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker or
dealer, and the reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis. The primary consideration is prompt
execution of orders at the most favorable net price. Certain of the brokers or
dealers with whom the Master Portfolio may transact business offer commission
rebates to the Master Portfolio. BGFA considers such rebates in assessing the
best overall terms available for any transaction. The overall reasonableness of
brokerage commissions paid is evaluated by BGFA based upon its knowledge of
available information as to the general level of commissions paid by other
institutional investors for comparable services.
Brokers also are selected because of their ability to handle special executions
such as are involved in large block trades or broad distributions, provided the
primary consideration is met. Portfolio turnover may vary from year to year, as
well as within a year. High turnover rates over 100% are likely to result in
comparatively greater brokerage expenses.
Brokerage Commissions. For the fiscal years ended February 28, 1997, February
28, 1998 and February 28, 1999, the Master Portfolio paid the dollar amounts of
brokerage commissions indicated below. None of these brokerage commissions were
paid to affiliated brokers.
<TABLE>
<CAPTION>
Commissions Paid
Year Ended Year Ended Year Ended
February 29, 1997 February 27, 1998 February 28, 1999
----------------- ----------------- -----------------
<S> <C> <C>
$69,826 $112,100 $366,484
</TABLE>
Securities of Regular Broker/Dealers. As of February 28, 1999, the Master
Portfolio owned securities of its "regular brokers or dealers" or their parents,
as defined in the 1940 Act, as follows:
<TABLE>
<CAPTION>
Broker/Dealer Amount
------------- ------
<S> <C>
Lehman Brothers Holding Inc. $ 2,116,979
Merrill Lynch & Co. $ 9,327,888
J.P. Morgan $ 6,682,126
Morgan Stanley Dean Witter $303,929,129
</TABLE>
B-22
<PAGE>
SHAREHOLDER INVESTMENT ACCOUNT
------------------------------
A Shareholder Investment Account is established for each Investor in the
Fund./1/ Each account contains a record of the shares of the Fund maintained by
the Fund's Transfer Agent. No share certificate will be issued. Whenever a
transaction takes place in the Shareholder Investment Account, the Investor will
be mailed a statement showing the transaction and the status of the account.
REDEMPTION OF SHARES
--------------------
With respect to the Fund, the Trustees may suspend the right of redemption,
postpone the date of payment or suspend the determination of net asset value (a)
for any period during which the New York Stock Exchange ("NYSE") is closed
(other than for customary weekend and holiday closing), (b) for any period
during which trading in the markets the Fund normally uses is restricted, (c)
when an emergency exists as determined by the SEC so that disposal of the Fund's
investments or a determination of its net asset value is not reasonably
practicable, or (d) for such other periods as the SEC by order may permit for
the protection of the Trust's shareholders. While the Trust's Declaration of
Trust would permit it to redeem shares in cash or other assets of the Fund or
both, the Trust has filed an irrevocable election with the SEC to pay in cash
all requests for redemption received from any shareholder if the aggregate
amount of such requests in any 90-day period does not exceed the lesser of
$250,000 or 1% of the Fund's net assets.
VALUATION OF PORTFOLIO SECURITIES
---------------------------------
The net asset value per share of the Fund is determined by the Fund's Custodian
at 4:00 p.m., Eastern Time, on each day the NYSE is open for trading and the
Custodian is open for business. The NYSE currently is not open for trading on
New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day
and on occasion is closed early or entirely due to weather or other conditions.
The securities of the Master Portfolio, including covered call options written
by the Master Portfolio, are valued as discussed below. Domestic securities are
valued at the last sale price on the domestic securities or commodities exchange
or national securities market on which such securities primarily are traded.
Securities not listed on a domestic exchange or national securities market, or
securities in which there were no transactions, are valued at the most recent
bid prices. Portfolio securities which are traded primarily on foreign
securities or commodities exchanges generally are valued at the preceding
closing values of such securities on their respective exchanges, except that
when an occurrence subsequent to the time a value was so established is likely
to have changed such value, then the fair value of those securities is
determined by BGFA in accordance with guidelines approved by MIP's Board of
Trustees. Short-term investments are carried at amortized cost, which
approximates value. Any securities or other assets for which recent market
quotations are not readily available are valued at fair value as determined in
good faith by BGFA in accordance with such guidelines.
Restricted securities, as well as securities or other assets for which market
quotations are not readily available, or are not valued by a pricing service
approved by MIP's Board of Trustees, are valued at fair value as determined in
good faith by BGFA in accordance with guidelines approved by MIP's Board of
Trustees. BGFA and MIP's Board of Trustees periodically review the method of
valuation. In making its good faith valuation of restricted securities, BGFA
generally takes the following factors into consideration: restricted securities
which are, or are convertible into, securities of the same class of securities
for which a public market exists usually will be valued at market value less the
same percentage discount at which purchased. This discount is revised
periodically if it is believed that the discount no longer reflects the value of
the restricted securities. Restricted securities not of the same class as
securities for which a public market exists usually are valued initially at
cost. Any subsequent adjustment from cost is based upon considerations deemed
relevant by MIP's Board of Trustees.
- -----------------------
/1/ "Investor" includes a plan sponsor, plan fiduciary, trustee, institutional
investor, insurance company separate investment account and/or any other person
or entity described in the Prospectus as an eligible purchaser of shares, that
purchases shares of the Trust.
B-23
<PAGE>
The proceeds received by the Fund for each issue or sale of its shares, and all
net investment income, realized and unrealized gain will be specifically
allocated to the Fund and constitute the underlying assets of the Fund. The
underlying assets of the Fund will be segregated on the books of account, and
will be charged with the liabilities in respect of the Fund and with a share of
the general liabilities of the Trust. Expenses with respect to any two or more
series of the Trust are to be allocated in proportion to the net asset values of
the respective series except where allocations of direct expenses can otherwise
be fairly made. Each class of shares of the Fund will be charged with
liabilities directly attributable to such class, and other Fund expenses are to
be allocated in proportion to the net asset values of the respective classes.
DESCRIPTION OF FUND SHARES
--------------------------
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the Trust's
Declaration of Trust disclaims liability of the shareholders, Trustees, or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust, and requires that notice of such
disclaimer be given in each agreement, obligation, or instrument entered into or
executed by the Trust or the Trustees. The Trust's Declaration of Trust provides
for indemnification out of the Trust property for all loss and expense of any
shareholder held personally liable for the obligations of the Trust. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is considered remote since it is limited to circumstances in which the
disclaimer is inoperative and the Trust itself is unable to meet its
obligations.
MASTER PORTFOLIO ORGANIZATION
-----------------------------
The Master Portfolio is a series of MIP, an open-end, series management
investment company organized as a Delaware business trust. MIP was organized on
October 21, 1993. In accordance with Delaware law and in connection with the tax
treatment sought by MIP, MIP's Declaration of Trust provides that its investors
are personally responsible for MIP liabilities and obligations, but only to the
extent MIP's property is insufficient to satisfy such liabilities and
obligations. MIP's Declaration of Trust also provides that MIP must maintain
appropriate insurance (for example, fidelity bonding and errors and omissions
insurance) for the protection of MIP, its investors, trustees, officers,
employees and agents covering possible tort and other liabilities, and that
investors will be indemnified to the extent they are held liable for a
disproportionate share of MIP's obligations. Thus, the risk of an investor
incurring financial loss on account of investor liability is limited to
circumstances in which both inadequate insurance existed and MIP itself was
unable to meet its obligations.
MIP's Declaration of Trust further provides that obligations of MIP are not
binding upon its trustees individually but only upon the property of MIP and
that the trustees will not be liable for any action or failure to act, but
nothing in the Declaration of Trust protects a trustee against any liability to
which the trustee would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of the trustee's office.
Pursuant to MIP's Declaration of Trust, MIP's Trustees are authorized to issue
shares of beneficial interests in the Master Portfolio. Investors are entitled
to participate pro rata in distributions of taxable income, loss, gain and
credit of the Master Portfolio. Upon liquidation or dissolution of the Master
Portfolio, investors are entitled to share pro rata in the Master Portfolio's
net assets available for distribution to its investors. Investments in the
Master Portfolio have no preference, preemptive, conversion or similar rights
and are fully paid and non-assessable, except as set forth below. Investments in
the Master Portfolio may not be transferred. No certificates are issued.
Each investor is entitled to vote, with respect to matters affecting MIP's
portfolios, in proportion to the amount of its investment in MIP. Investors in
MIP do not have cumulative voting rights, and investors holding more than 50% of
the aggregate beneficial interest in MIP may elect all of the Trustees of MIP if
they choose to do so and in such event the other investors in MIP would not be
able to elect any Trustee. MIP is not required to hold annual meetings of
investors but MIP may hold special meetings of investors when in the judgment of
MIP's Trustees it is necessary or desirable to submit matters for an investor
vote.
B-24
<PAGE>
Rule 18f-2 under the 1940 Act provides that any matter required to be submitted
under the provisions of the 1940 Act or applicable state law or otherwise to the
holders of the outstanding voting securities of an investment company, such as
MIP, will not be deemed to have been effectively acted upon unless approved by
the holders of a majority of the outstanding shares of each series of MIP
affected by such matter. Rule 18f-2 further provides that the Master Portfolio
shall be deemed to be affected by a matter unless it is clear that the interests
of the Master Portfolio in the matter are identical or that the matter does not
affect any interest of the Master Portfolio. However, the Rule exempts the
selection of independent accountants and the election of trustees from the
separate voting requirements of the Rule.
Whenever the Fund is requested to vote on a matter with respect to the Master
Portfolio, the Fund will either hold a meeting of Fund shareholders and will
cast its votes as instructed by such shareholders, or vote the shares of the
Master Portfolio held by it in the same proportion as the vote of all other
holders of such security. If the Fund is requested to vote on matters pertaining
to the Master Portfolio and the Fund holds a meeting of the Fund's shareholders,
the Trustees of the Trust will vote shares for which they receive no voting
instructions in the same proportion as the shares for which they do receive
voting instructions.
INVESTMENT PERFORMANCE
----------------------
The total return figures for the Fund may be provided in reports, sales
literature and advertisements. Total return quotations will be based upon a
stated period and will be computed by determining the average annual compounded
rate of return over the stated period that would equate an initial amount
invested to the ending redeemable value of the investment (assuming reinvestment
of all distributions), according to the following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value at the end of the stated
period of a hypothetical $1000 payment
ERV = made at the beginning of the stated period.
For periods prior to March 1, 1998 (the commencement of the Fund's operations),
the Fund calculates the performance of each class by including the corresponding
total return of the Master Portfolio and its predecessor adjusted to reflect the
deduction of fees and expenses applicable to each class of the Fund as stated in
the Fee Table contained in the Prospectus.
The Fund's total return is not fixed or guaranteed and the Fund's principal is
not insured. Investment performance quotations should not be considered to be
representations of the performance for any period in the future. Total return is
a function of the value of the Fund's investment in the Master Portfolio over
time, which may be expected to fluctuate, as well as of income earned by the
Fund on such securities and of the Fund's operating expenses.
Performance Comparisons. From time-to-time and only to the extent the comparison
is appropriate for the Fund, the Trust may quote the performance of the Fund in
advertising and other types of literature and may compare the performance of the
Fund to the performance of various indices and investments for which reliable
performance data is available. The performance of the Fund may be compared in
advertising and other literature to averages, performance rankings and other
information prepared by recognized mutual fund statistical services.
Performance information for the Fund may be compared, in reports and promotional
literature, to the S&P 500(R) Index, the Russell 2000 Index, the Lehman Brothers
20+ Treasury Index, Donoghue's Money Fund Averages, the Lehman Brothers 5-7 Year
Treasury Index, Lehman Brothers Government Bond Index, Lehman Brothers Treasury
Bond Index, Lipper Balanced Fund Average, Lipper Growth Fund Average, Lipper
Flexible Portfolio Fund Average, Lehman Brothers Intermediate Treasury Index,
91-Day Treasury Bill Average, Morgan Stanley Capital International Index for
Europe, Australia and the Far East ("MSCI EAFE Index") or other appropriate
managed or unmanaged indices of the performance of various types of investments,
so that
B-25
<PAGE>
investors may compare the Fund's results with those of indices widely regarded
by investors as representative of the security markets in general. Unmanaged
indices may assume the reinvestment of dividends, but generally do not reflect
deductions for administrative and management costs and expenses. Managed indices
generally do reflect such deductions.
The Trust also may use the following information in advertisements and other
types of literature, only to the extent the information is appropriate for the
Fund: (1) the Consumer Price Index may be used to assess the real rate of return
from an investment in the Fund; (2) other government statistics, including, but
not limited to, The Survey of Current Business, may be used to illustrate
investment attributes of the Fund or the general economic, business, investment,
or financial environment in which the Fund operates; (3) the effect of
tax-deferred compounding on the investment returns of the Fund, or on returns in
general, may be illustrated by graphs, charts, etc., where such graphs or charts
would compare, at various points in time, the return from an investment in the
Fund (or returns in general) on a tax-deferred basis (assuming reinvestment of
capital gains and dividends and assuming one or more tax rates) with the return
on a taxable basis; and (4) the sectors or industries in which the Fund invests
may be compared to relevant indices of stocks or surveys (e.g., S&P Industry
Surveys) to evaluate the Fund's historical performance or current or potential
value with respect to the particular industry or sector.
The Fund's performance also may be compared to those of other mutual funds
having similar objectives. This comparative performance could be expressed as a
ranking prepared by Lipper Analytical Services, Inc., (including the Lipper
General Bond Fund Average, the Lipper Intermediate Investment Grade Debt Fund
Average, the Lipper Bond Fund Average, the Lipper Growth Fund Average, the
Lipper Flexible Fund Average), Donoghue's Money Fund Report, including
Donoghue's Taxable Money Market Fund Average, or Morningstar, Inc., independent
services which monitor the performance of mutual funds. The Fund's performance
will be calculated by relating net asset value per share at the beginning of a
stated period to the net asset value of the investment, assuming reinvestment of
all gains distributions and dividends paid, at the end of the period. Any such
comparisons may be useful to investors who wish to compare the Fund's past
performance with that of its competitors. Of course, past performance cannot be
a guarantee of future results.
In addition, MIP also may use, in advertisements and other types of literature,
information and statements: (1) showing that bank savings accounts offer a
guaranteed return of principal and a fixed rate of interest, but no opportunity
for capital growth; and (2) describing BGFA, and its affiliates and
predecessors, as one of the first investment managers to advise investment
accounts using asset allocation and index strategies. MIP also may include in
advertising and other types of literature information and other data from
reports and studies prepared by the Tax Foundation, including information
regarding federal and state tax levels and the related "Tax Freedom Day." MIP
also may disclose in advertising and other types of sales literature the assets
and categories of assets under management by the Master Portfolio's investment
adviser, any sub-investment adviser or their affiliates.
The quoted performance data includes the performance of the Master Portfolio and
its predecessor (adjusted as described above) for all periods before March 1,
1999. Past performance is not predictive of future performance. Employee benefit
plans that invest Plan Assets in MassMutual SIAs that purchase Class S shares
may be subject to certain other charges as set forth in their respective Plan
Documents. Investors that enter into an administrative services or other
agreement with MassMutual may also be subject to certain charges as set forth in
their respective agreements.
Average Annual Total Return for the year ended February 28, 1999.
- ---------------------------
- --------------------------------------------------------------------------------
Class A+ Class L+ Class Y+ Class S
1 Year 18.40% 18.94% 18.98% 19.12%
3 Years 25.53% 26.04% 26.03% 26.22%
5 Years 22.81% 23.31% 23.29% 23.49%
Since Inception (July 2, 1993) 20.84% 21.34% 21.33% 21.33%
- --------------------------------------------------------------------------------
+ Performance for Class Y and Class A shares of the Fund is based on Class S
shares for the 3- and 5-year periods, adjusted to reflect Class Y and Class A
expenses. Performance for Class L shares is based on Class S shares for all
periods shown, adjusted to reflect Class L expenses. The performance shown
does not reflect fees that may be paid by investors for administrative
services or group annuity contract charges.
B-26
<PAGE>
Other Advertising Items. The Trust may discuss in advertising and other types of
literature that the Fund has been assigned a rating by a nationally recognized
statistical rating organization ("NRSRO"), such as Standard & Poor's
Corporation. Such rating would assess the creditworthiness of the investments
held by the Fund. The assigned rating would not be a recommendation to purchase,
sell or hold the Fund's shares since the rating would not comment on the market
price of the Fund's shares or the suitability of the Fund for a particular
investor. In addition, the assigned rating would be subject to change,
suspension or withdrawal as a result of changes in, or unavailability of,
information relating to the Fund or its investments. The Trust may compare the
Fund's performance with other investments which are assigned ratings by NRSROs.
Any such comparisons may be useful to investors who wish to compare the Fund's
past performance with other rated investments. Of course past performance cannot
be a guarantee of future results. General mutual fund statistics provided by the
Investment Company Institute may also be used.
TAXATION
--------
The Fund intends to qualify each year and elect to be taxed as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). The Fund seeks to qualify as a regulated investment
company by investing all of its assets in the Master Portfolio and consequently,
all references to the Fund's assets and activities will be to those of the
Master Portfolio. In order to qualify as a "regulated investment company," the
Fund must, among other things: (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, gains from the
sale or other disposition of stock, securities, or foreign currencies, and other
income (including gains from forward contracts) derived with respect to its
business of investing in such stock, securities, or currencies; and (b)
diversify its holdings so that, at the close of each quarter of its taxable
year, (i) at least 50% of the value of its total assets consists of cash, cash
items, U.S. Government securities, and other securities limited generally with
respect to any one issuer to not more than 5% of the total assets of the Fund
and not more than 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of its total assets is invested in the
securities of any issuer (other than U.S. Government securities). If the Fund
fails to qualify as a regulated investment company, it will be treated as an
ordinary corporation for federal income tax purposes.
As a regulated investment company electing to have its tax liability determined
under Subchapter M, in general the Fund will not be subject to federal income
tax on its ordinary income or capital gains that are distributed. As a
Massachusetts business trust, the Fund under present law will not be subject to
any excise or income taxes imposed by Massachusetts.
An excise tax at the rate of 4% will be imposed on the excess, if any, of the
Fund's "required distribution" over its actual distributions in any calendar
year. Generally, the "required distribution" is 98% of the Fund's ordinary
income for the calendar year plus 98% of its capital gain net income recognized
during the one-year period ending on October 31 (or December 31, if the Fund so
elects) plus undistributed amounts from prior years. The Fund intends to make
distributions sufficient to avoid imposition of the excise tax. Distributions
declared by the Fund during October, November or December to shareholders of
record on a date in any such month and paid by the Fund during the following
January will be treated for federal tax purposes as paid by the Fund and
received by shareholders on December 31 of the year in which declared.
Except in the case of certain shareholders eligible for preferential tax
treatment, e.g., qualified retirement or pension trusts, shareholders of the
Fund will be subject to federal income taxes on distributions made by the Fund
whether received in cash or additional shares of the Fund. Distributions by the
Fund of net income and short-term capital gains, if any, will be taxable to
shareholders as ordinary income. Designated distributions of long-term capital
gains, if any, will be taxable to shareholders as long-term capital gains,
without regard to how long a shareholder has held shares of the Fund. Under the
Taxpayer Relief Act of 1997, long-term capital gains generally will be subject
to a 28% or 20% tax rate, depending on the holding period of the portfolio
investment.
Dividends and distributions on Fund shares received shortly after their
purchase, although in effect a return of capital, are subject to federal income
taxes. Investment income and gains received by the Fund from sources outside the
United States might be subject to foreign taxes which are withheld at the
source. The effective rate of these foreign taxes cannot be determined in
advance because it depends on the specific countries in which its
B-27
<PAGE>
assets will be invested, the amount of the assets invested in each such country
and the possible applicability of treaty relief.
Redemptions and exchanges of the Fund's shares are taxable events and,
accordingly, shareholders subject to federal income taxes may realize gains and
losses on these transactions. If shares have been held for more than one year,
gain or loss realized will be long-term capital gain or loss, provided the
shareholder holds the shares as a capital asset. Under the Taxpayer Relief Act
of 1997, long-term capital gains generally will be subject to a 28% or 20% tax
rate depending on the investor's holding period in Fund shares. However, a loss
on the sale of shares held for six months or less will be treated as a long-term
capital loss to the extent of any long-term capital gain dividend paid to the
shareholder with respect to such shares. Furthermore, no loss will be allowed on
the sale of Fund shares to the extent the shareholder acquired other shares of
the same Fund within 30 days prior to the sale of the loss shares or 30 days
after such sale. The state and local tax effects of distributions received from
the Fund, and any special tax considerations associated with foreign investments
of the Fund, should be examined by investors with regard to their own tax
situation.
The Fund's transactions through the Master Portfolio in foreign
currency-denominated debt instruments and its hedging activities will likely
produce a difference between its book income and its taxable income. This
difference may cause a portion of the Fund's distributions of book income to
constitute returns of capital for tax purposes or require the Fund to make
distributions exceeding book income in order to permit the Fund to continue to
qualify, and be taxed under Subchapter M of the Code, as a regulated investment
company.
Under federal income tax law, a portion of the difference between the purchase
price of zero-coupon securities in which the Fund has invested through the
Master Portfolio and their face value ("original issue discount") is considered
to be income to the Fund each year even though the Fund will not receive cash
interest payments from these securities. This original issue discount (imputed
income) will make up a part of the net investment income of the Fund which must
be distributed to shareholders in order to maintain the qualification of the
Fund as a regulated investment company and to avoid federal income tax at the
level of the Fund.
The foregoing is a general and abbreviated summary of the applicable provisions
of the Code and regulations currently in effect, For the complete provisions,
reference should be made to the pertinent Code sections and regulations. The
Code and regulations are subject to change by legislative or administrative
action. This discussion of the federal income tax treatment of the Fund and its
shareholders does not describe in any respect the tax treatment of any
particular arrangement, e.g., tax-exempt trusts or insurance products, pursuant
to which or by which investments in the Fund may be made.
EXPERTS
-------
The financial statements of the Fund are set forth in the Fund's Annual Reports
as of February 28, 1999, and are incorporated herein by reference in reliance on
the report of Deloitte & Touche LLP, independent accountants, given on the
authority of that firm as experts in accounting and auditing. A copy of the
Fund's Annual Report as of February 28, 1999 is available, without charge, upon
request.
The name MassMutual Institutional Funds is the designation of the Trustees under
a Declaration of Trust dated May 28, 1993, as amended from time to time. The
obligations of the Trust are not personally binding upon, nor shall resort be
had to the property of any of the Trustees, shareholders, officers, employees or
agents of the Trust, but only the property of the relevant series of the Trust
shall be bound.
B-28
<PAGE>
APPENDIX - DESCRIPTION OF SECURITIES RATINGS
Although the ratings of fixed-income securities by Standard & Poor's Ratings
Group ("S&P") and Moody's Investors Service, Inc. ("Moody's") are a generally
accepted measurement of credit risk, they are subject to certain limitations.
For example, ratings are based primarily upon historical events and do not
necessarily reflect the future. Furthermore, there is a period of time between
the issuance of a rating and the update of the rating, during which time a
published rating may be inaccurate.
The descriptions of the S&P and Moody's commercial paper, bond and municipal
securities ratings are set forth below.
Commercial Paper Ratings:
S&P commercial paper ratings are graded into four categories, ranging from A for
the highest quality obligations to D for the lowest. Issues assigned the highest
rating are regarded as having the greatest capacity for timely payment. Issues
in this category are further refined with the designations 1, 2, and 3 to
indicate the relative degree of safety. The A-l and A-2 categories are described
as follows:
A-1 This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics will be noted with a plus (+) sign designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated A-1.
Moody's employs three designations, all judged to be investment grade, to
indicate the relative repayment ability of rated issuers. The two highest
designations are as follows:
Issuers (or supporting institutions) rated Prime-1 (or P-1) have a superior
ability for repayment of senior short-term debt obligations. Prime-l (or P-I)
repayment ability will normally be evidenced by many of the following
characteristics:
. Leading market positions in well-established industries.
. High rates of return on funds employed.
. Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
. Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
. Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers (or supporting institutions) rated Prime-2 (or P-2) have a strong
ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Bond Ratings:
S&P describes its four highest ratings for corporate debt as follows:
AAA Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in a small
degree.
A Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas such debt normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
B-29
<PAGE>
The ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.
Moody's describes its four highest corporate bond ratings as follows:
Aaa Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt-edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they compose what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes
and may be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment in the
future.
Baa Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
B-30
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PART C: OTHER INFORMATION
ITEM 23 EXHIBITS
- ------------------------------------------
Exhibit A: Copy of Registrant's Agreement and Declaration of Trust amended
June 14, 1993./1/
Exhibit B: Copy of Registrant's By-Laws, as now in effect./1/
Exhibit C: None.
Exhibit D: None.
Exhibit E: (1) Copy of General Distributors Agreement between the Trust and MML
Distributors, LLC, incorporated by reference to Exhibit E(1) to Registrant's PEA
No. 11 to the Registration Statement filed via EDGAR on April 30, 1999.
Exhibit F: None.
Exhibit G: (1) Copy of Custodian Agreement between the Trust and Investors Bank
& Trust Company ("IBT")./1/
(2) Administrative and Shareholder Services Agreement between Registrant, on
behalf of MassMutual Indexed Equity Fund (the "Fund") and MassMutual for the
provision of administrative and shareholder services, incorporated by reference
to Exhibit G(3) to Registrant's PEA No. 11 to the Registration Statement filed
via EDGAR on April 30, 1999.
(3) Copy of Amended and Restated Transfer Agency Agreement among the Trust,
MassMutual and IBT./3/
Exhibit H: Third Party Feeder Fund Agreement with Master Investment Portfolio
and Barclays Global Fund Advisers./3/
Exhibit I: Opinion of Counsel./4/
Exhibit J:(1) Consent of Ropes & Gray./4/
(2) Consent of Independent Auditors./5/
(3) Powers of Attorney for Ronald J. Abdow, Charles J. McCarthy, John H.
Southworth, Mary E. Boland./1/
(4) Powers of Attorney for Richard H. Ayers, David E.A. Carson, Richard G.
Dooley, Richard W. Greene, Beverly L. Hamilton, and F. William Marshall, Jr./2/
(5) Power of Attorney for Robert J. O'Connell./5/
(6) Powers of Attorney for Master Investment Portfolio./3/
Exhibit K: None.
Exhibit L: None.
Exhibit M:(1) Form of Rule 12b-1 Plan for Class A shares of the Funds./5/
C-1
<PAGE>
(2) Form of Rule 12b-1 Plan for Class Y shares of the Fund, previously filed as
exhibit M(4) to Registrant's PEA No. 11 to the Registration Statement filed via
EDGAR on April 30, 1999.
(3) Form of Rule 12b-1 Plan for Class L shares of the Fund, previously filed as
exhibit M(5) to Registrant's PEA No. 11 to the Registration Statement filed via
EDGAR on April 30, 1999.
(4) Form of Rule 12b-1 Plan for Class S shares of the Fund, previously filed as
exhibit M(6) to Registrant's PEA No. 11 to the Registration Statement filed
via EDGAR on April 30, 1999.
Exhibit O: Amended Rule 18f-3 Plan./5/
Exhibit 27: Financial Data Schedules./5/
_____________
/1/Incorporated by reference to Registrant's Post-Effective Amendment ("PEA")
No. 4 to the Registration Statement filed via EDGAR on October 2, 1997.
/2/Incorporated by reference to Registrant's PEA No. 3 to the Registration
Statement filed via EDGAR on April 28, 1997.
/3/Incorporated by reference to Registrant's PEA No. 7 to the Registration
Statement filed via EDGAR on February 6, 1998.
/4/Previously filed as Exhibit 10 to Registrant's PEA No. 7 to the Registration
Statement filed via EDGAR on February 6, 1998.
/5/Filed herewith.
ITEM 24 PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
- ---------------------------------------------------------------------
At the date of this Post-Effective Amendment to the Registration Statement,
Registrant did not, directly or indirectly, control any person. Registrant was
organized by MassMutual primarily to offer investors both the opportunity to
pursue long-term investment goals and the flexibility to respond to changes in
their investment objectives and economic and market conditions. Currently, the
Registrant provides a vehicle for the investment of assets of various separate
investment accounts established by MassMutual. The assets in such separate
accounts are, under state law, assets of the life insurance companies that have
established such accounts. Thus, at any time MassMutual and its life insurance
company subsidiaries will own such outstanding shares of Registrant's series as
are purchased with separate account assets. As a result, MassMutual will own
substantially all of the shares of Registrant, probably for a number of years.
The following entities are, or may be deemed to be, controlled by MassMutual
through the direct or indirect ownership of such entities' stock.
1. CM Assurance Company, a Connecticut corporation that operates as a life and
health insurance company, all the stock of which is owned by MassMutual. This
subsidiary is inactive.
2. CM Benefit Insurance Company, a Connecticut corporation that operates as a
life and health insurance company, all the stock of which is owned by
MassMutual. This subsidiary is inactive.
3. C.M. Life Insurance Company, a Connecticut corporation that operates as a
life and health insurance company, all the stock of which is owned by
MassMutual.
C-2
<PAGE>
4. MML Bay State Life Insurance Company, a Connecticut corporation that operates
as a life and health insurance company, all the stock of which is owned by
MassMutual.
5. MML Distributors, LLC, a Connecticut limited liability company that operates
as a securities broker-dealer. MassMutual has a 99% ownership interest and G.R.
Phelps & Co. has a 1% ownership interest.
6. MassMutual Holding Company, a Delaware corporation that operates as a holding
company for certain MassMutual entities, all the stock of which is owned by
MassMutual.
7. MassMutual of Ireland, Limited, a corporation organized in the Republic of
Ireland that formerly operated to provide claims service to holders of
MassMutual group life and health insurance contracts. This subsidiary is
inactive and will be dissolved in the near future. All of the stock of this
company is owned by MassMutual.
8. MML Series Investment Fund, a Massachusetts business trust that operates as
an open-end investment company. All the shares issued by the Trust are owned by
MassMutual and certain of its affiliates.
9. MassMutual Institutional Funds, a Massachusetts business trust that operates
as an open-end investment company, all of the shares of which are owned by
MassMutual.
10. G.R. Phelps & Co., Inc., a Connecticut corporation that formerly operated as
a securities broker-dealer, all the stock of which is owned by MassMutual
Holding Company. This subsidiary is inactive and expected to be dissolved.
11. MassMutual Mortgage Finance, LLC, a Delaware limited liability company that
makes, acquires, holds and sells mortgage loans.
12. MML Investors Services, Inc., a Massachusetts corporation that operates as a
securities broker-dealer. MassMutual Holding Company owns 86% of the capital
stock and G.R. Phelps & Co. Inc., owns 14% of the capital stock of MML Investor
Services, Inc.
13. MassMutual Holding MSC, Inc., a Massachusetts corporation, that acts as a
holding company for MassMutual positions in investment entities organized
outside the United States. MassMutual Holding Company owns all the outstanding
shares of MassMutual Holding MSC, Inc. This subsidiary qualifies as a
"Massachusetts Security Corporation" under Chapter 63 of Massachusetts General
Laws.
14. MassMutual Holding Trust I, a Massachusetts business trust, that operates as
a holding company for separately staffed MassMutual investment subsidiaries.
MassMutual Holding Company owns all the outstanding shares of MassMutual Holding
Trust I.
15. MassMutual Holding Trust II, a Massachusetts business trust, that operates
as a holding company for non-staffed MassMutual investment subsidiaries.
MassMutual Holding Company owns all the outstanding shares of MassMutual Holding
Trust II.
16. MassMutual International, Inc., a Delaware corporation that operates as a
holding company for those entities constituting MassMutual's international
insurance operations, all of the stock of which is owned by MassMutual Holding
Company.
17. MML Insurance Agency, Inc., a Massachusetts corporation that operates as an
insurance broker, all of the stock of which is owned by MML Investors Services,
Inc.
18. MML Securities Corporation, a Massachusetts corporation that operates as a
"Massachusetts Securities Corporation", under Section 63 of the Massachusetts
General Laws, all of the stock of which is owned by MML Investors Services, Inc.
C-3
<PAGE>
19. DISA Insurance Services of America, Inc., an Alabama corporation that
operates as an insurance broker. MML Insurance Agency, Inc. owns all the shares
of outstanding stock.
20. Diversified Insurance Services of America, Inc., a Hawaii corporation that
operates as an insurance broker. MML Insurance Agency, Inc. owns all the shares
of outstanding stock.
21. MML Insurance Agency of Mississippi, P.C., a Mississippi corporation that
operates as an insurance broker and is controlled by MML Insurance Agency, Inc.
22. MML Insurance Agency of Nevada, Inc., a Nevada corporation that operates as
an insurance broker, all of the stock of which is owned by MML Insurance Agency,
Inc.
23. MML Insurance Agency of Ohio, Inc., an Ohio corporation that operates as an
insurance broker and is controlled by MML Insurance Agency, Inc. through a
voting trust agreement.
24. MML Insurance Agency of Texas, Inc., a Texas corporation that operates as an
insurance broker and is controlled by MML Insurance Agency, Inc. through an
irrevocable proxy arrangement.
25. MassMutual Corporate Value Limited, a Cayman Islands corporation which holds
88.33% ownership interest in MassMutual Corporate Value Partners Limited,
another Cayman Islands Corporation operating as a high yield bond fund
(MassMutual Holding MSC, Inc. 46.41%).
26. MassMutual Corporate Value Partners Limited, a Cayman Islands corporation
that operates as a high yield bond fund. MassMutual Corporate Value Limited
holds approximately 88% ownership interest in this company and MassMutual holds
approximately 5% ownership interest in this company.
27. 9048-5434 Quebec, Inc., a Canadian corporation, that operates as the owner
of Hotel du Parc in Montreal, Quebec, Canada. MassMutual Holding MSC, Inc. owns
all the shares of 9048-5434 Quebec, Inc.
28. 1279342 Ontario Limited, a Canadian corporation, that operates as the owner
of Deerhurst Resort in Huntsville Ontario, Canada. MassMutual Holding MSC, Inc.
owns all of the shares of 1279342 Ontario Limited.
29. Antares Capital Corporation, a Delaware corporation that operates as a
finance company. MassMutual Holding Trust I owns approximately 99% of the
capital stock of Antares.
30. Charter Oak Capital Management, Inc., a Delaware corporation that operates
as a manager of institutional investment portfolios. MassMutual Holding Trust I
owns 80% of the capital stock of Charter Oak.
31. Cornerstone Real Estate Advisers, Inc., a Massachusetts corporation that
operates as an investment adviser, all the stock of which is owned by MassMutual
Holding Trust I.
32. DLB Acquisition Corporation ("DLB") is a Delaware corporation, that operates
as a holding company for David L. Babson and Company Inc. MassMutual Holding
Trust I owns 85% of the outstanding capital stock of DLB.
33. Oppenheimer Acquisition Corporation ("OAC") is a Delaware corporation, that
operates as a holding company for the Oppenheimer companies. MassMutual Holding
Trust I owns 89% of the capital stock of OAC.
34. David L. Babson and Company Incorporated, a Massachusetts corporation that
operates as an investment adviser, all of the stock of which is owned by DLB.
C-4
<PAGE>
35. Babson Securities Corporation, a Massachusetts corporation that operates as
a securities broker-dealer, all of the stock of which is owned by David L.
Babson and Company Incorporated.
36. Babson-Stewart-Ivory International, a Massachusetts general partnership,
that operates as an investment adviser. David L. Babson and Company
Incorporated holds a 50% ownership interest in the partnership.
37. Potomac Babson Incorporated, a Massachusetts corporation that operates as an
investment adviser. David L. Babson and Company Incorporated owns 60% of the
outstanding shares of Potomac Babson Incorporated.
38. OppenheimerFunds, Inc., a Colorado corporation that operates as an
investment adviser to the OppenheimerFunds, all of the stock of which is owned
by OAC.
39. Centennial Asset Management Corporation, a Delaware corporation that
operates as the investment adviser and general distributor of the Centennial
Funds. OppenheimerFunds, Inc. owns all the stock of Centennial Asset Management
Corporation.
40. HarbourView Asset Management Corporation, a New York corporation that
operates as an investment adviser, all the stock of which is owned by
OppenheimerFunds, Inc.
41. OppenheimerFunds Distributor, Inc., a New York corporation, that operates as
a securities broker dealer, all the stock of which is owned by OppenheimerFunds,
Inc.
42. Oppenheimer Partnership Holdings, Inc., a Delaware corporation that operates
as a holding company, all the stock of which is owned by OppenheimerFunds, Inc.
43. Oppenheimer Real Asset Management, Inc., a Delaware corporation which is the
sub-adviser to a mutual fund investing in the commodities markets, all the stock
of which is owned by OppenheimerFunds, Inc.
44. Shareholder Financial Services, Inc., a Colorado corporation that operates
as a transfer agent for mutual funds, all the stock of which is owned by
OppenheimerFunds, Inc.
45. Shareholder Services, Inc., a Colorado corporation that operates as a
transfer agent for various Oppenheimer and MassMutual funds, all the stock of
which is owned by OppenheimerFunds, Inc.
46. Centennial Capital Corporation, a Delaware corporation that formerly
sponsored a unit investment trust. Centennial Asset Management Corporation owns
all the outstanding shares of Centennial Capital Corporation.
47. Cornerstone Office Management, LLC, a Delaware limited liability company
which serves as the general partner of Cornerstone Suburban Office, LP that is
50% owned by Cornerstone Real Estate Advisers, Inc. and 50% owned by MML Realty
Management Corporation.
48. Cornerstone Suburban Office Investors, LP, a Delaware limited partnership,
that operates as a real estate operating company. Cornerstone Office Management,
LLC holds a 1% general partnership interest in this fund and MassMutual holds a
99% limited partnership interest.
49. CM Advantage, Inc., a Connecticut corporation that serves as a general
partner in real estate limited partnerships. This subsidiary is largely inactive
and will be dissolved in the near future. MassMutual Holding Trust II owns all
of the outstanding stock.
50. CM International,Inc., a Delaware corporation which is the issuer of
collateralized mortgage obligation securities. MassMutual Holding Trust II owns
all the outstanding stock of CM International, Inc.
C-5
<PAGE>
51. CM Property Management, Inc., a Connecticut corporation which serves as the
General Partner of Westheimer 335 Suites Limited Partnership. The Partnership
holds a ground lease with respect to hotel property in Houston, Texas, all the
stock of which is owned by MassMutual Holding Trust II.
52. HYP Management, Inc., a Delaware corporation that operates as the "LLC
Manager" of MassMutual High Yield Partners II LLC, a high yield bond fund.
MassMutual Holding Trust II owns all the outstanding stock of HYP Management,
Inc.
53. MMHC Investment, Inc., a Delaware corporation that is a passive investor in
MassMutual/Darby CBO IM, Inc., MassMutual/Darby CBO, LLC, Somers CDO, Limited,
MassMutual High Yield Partners II, LLC and other MassMutual investments.
MassMutual Holding Trust II owns all the outstanding stock of MMHC Investment,
Inc.
54. MassMutual High Yield Partners II LLC, a Delaware limited liability company,
that operates as a high yield bond fund. MassMutual holds approximately 2.52%,
MMHC Investment Inc. holds approximately 34.87% , and HYP Management, Inc. holds
approximately 3.82%, for an approximate total of 41.21% of the ownership
interest in this company.
55. MML Realty Management Corporation, a Massachusetts Corporation that formerly
operated as a manager of properties owned by MassMutual, all the stock of which
is owned by MassMutual Holding Trust II.
56. MassMutual Benefits Management, Inc., (formerly Westheimer 335 Suites,
Inc.) a Delaware Corporation which supports MassMutual with benefit plan
administration and planning services. MassMutual Holding Trust II owns all of
the outstanding stock.
57. Somers CDO, Limited, a Cayman Islands corporation that operates as a fund
investing in high yield debt securities of primarily U.S. issues. MMHC
Investment Inc. holds 38.10% of the subordinated notes of this issue which are
treated as equity for tax purposes. MassMutual is the collateral manager of
Somers CDO, Limited.
58. 505 Waterford Park Limited Partnership, a Delaware limited partnership,
which holds title to an office building in Minneapolis, Minnesota. MML Realty
Management Corporation holds a 1% general partnership interest and MassMutual
holds a 99% limited partnership interest.
59. MassMutual/Darby CBO IM Inc., a Delaware corporation that operates as the
LLC Manager of MassMutual/Darby CBO LLC, a collateralized bond obligation fund.
MMHC Investment, Inc. owns 50% of the capital stock of this company.
60. MassMutual/Darby CBO LLC, a Delaware limited liability company that operates
as a fund investing in high yield debt securities of U.S. and emerging market
issuers. MassMutual holds 1.79%, MMHC Investment Inc. holds 44.91% and
MassMutual High Yield Partners LLC, holds 2.39% of the ownership interest in
this company.
61. Urban Properties, Inc., a Delaware corporation that serves as a General
Partner of real estate limited partnerships and as a real estate holding
company, all the stock of which is owned by MassMutual Holding Trust II.
62. Westheimer 335 Suites Limited Partnership, a Texas limited partnership of
which MassMutual Benefits Management is the general partner.
C-6
<PAGE>
63. MassMutual Internacional (Argentina) S.A., a corporation organized in the
Argentine Republic, that operates as a holding company. MassMutual
International Inc. owns 99% of the outstanding shares and MassMutual Holding
Company owns the remaining 1% of the shares.
64. MassMutual Internacional (Chile) S.A., a corporation organized in the
Republic of Chile, that operates as a holding company. MassMutual International
Inc. owns 99% of the outstanding shares and MassMutual Holding Company owns the
remaining 1% of the shares.
65. MassMutual International (Bermuda) Ltd., a corporation organized in Bermuda,
that operates as a life insurance company, all of the stock of which is owned by
MassMutual International Inc.
66. MassMutual International (Luxembourg) S.A., a corporation organized in the
Grand Duchy of Luxembourg, that operates as a life insurance company. MassMutual
International Inc. owns 99% of the outstanding shares and MassMutual Holding
Company owns the remaining 1% of the shares.
67. MassLife Seguros de Vida S.A., a corporation organized in the Argentine
Republic, that operates as a life insurance company. MassMutual International
Inc. owns 99.9% of the outstanding capital stock of MassLife Seguros de Vida
S.A.
68. MassMutual Services, S.A., a corporation organized in the Argentine Republic
that operates as a service company. MassMutual Internacional (Argentina) S.A.
owns 99% of the outstanding shares and MassMutual International, Inc. owns 1% of
the shares.
69. Mass Seguros de Vida S.A., a corporation organized in the Republic of Chile,
that operates as a life insurance company. MassMutual International (Chile)
S.A. owns 33.5% of the outstanding capital stock of Mass Seguros de Vida S.A.
70. Origen Inversiones S.A., a corporation organized in the Republic of Chile
that operates as a holding company. MassMutual Internacional (Chile) S.A. holds
a 33.5% ownership interest in this corporation.
71. Compania de Seguros VidaCorp, S.A., a corporation organized in the Republic
of Chile, that operates as an insurance company. Origen Inversiones S.A. owns
99% of the outstanding shares of this company.
72. Oppenheimer Series Fund Inc., a Maryland corporation that operates as an
investment company of which MassMutual and its affiliates own a majority of
certain series of shares issued by the fund.
73. Panorama Series Fund, Inc., a Maryland corporation that operates as an open-
end investment company. All shares issued by the fund are owned by MassMutual
and certain affiliates.
74. The DLB Fund Group, a Massachusetts business trust that operates as an open-
end investment company advised by David L. Babson and Company Incorporated.
MassMutual owns at least 25% of each series of shares issued by the fund.
75. Saar Holdings CDO, Limited, a Cayman Islands corporation that operates as a
collateralized debt obligation fund investing in high yield debt securities of
primarily U.S. issuers including, to a limited extent, convertible high yield
bonds. MMHC Investment Inc. holds 40% of the mandatorily redeemable preferred
shares of this issuer. Such preferred shares are treated as equity for tax
purposes. MassMutual is the collateral manager of Saar Holdings CDO, Limited.
76. Enhanced Mortgage-Backed Securities Fund Limited, a special purpose company
incorporated with limited liability in the Cayman Islands investing primarily in
residential and commercial mortgage backed securities and through the
application of various portfolio optimization techniques. Massachusetts Mutual
Life Insurance Company is the Investment Manager and Valuation Agent and holds
all of the Class B notes
C-7
<PAGE>
and 48% of the Class C Certificates and at least 25% of the aggregate principal
amount of Class C Certificates directly or through a wholly owned affiliate.
77. Perseus CDO I, Limited is a Cayman Island Corporation that operates as a
collateralized debt obligation fund investing in a diversified portfolio of
assets including high yield bonds, senior secured loans, a limited amount of
equity securities and certain other assets. MMHC Investment, Inc. holds 33.4%
of the Class D subordinated notes issued by Perseus CDO I Limited. Such notes
are treated as equity for tax purposes. MassMutual is the portfolio manager and
Perseus Advisors, L.L.C. is the portfolio advisor of Perseus CDO I, Limited.
78. MassMutual Global CBO I Limited is a Cayman Island Corporation that operates
as a collateralized bond obligation fund investing in emerging market securities
and high yield bonds. As of the closing date of this fund (June 16, 1999),
MassMutual and its indirect subsidiary, MMHC Investment, Inc., hold in the
aggregate approximately 39.7% of the subordinated notes that are treated as
equity for tax purposes. MassMutual is the Collateral Manager of MassMutual
Global CBO I Limited.
MassMutual acts as the investment adviser of the following investment companies,
and as such may be deemed to control them.
1. MML Series Investment Fund, a Massachusetts business trust that operates as
an open-end investment company. All shares issued by the trust are owned by
MassMutual and certain of its affiliates.
2. MassMutual Corporate Investors, a Massachusetts business trust that operates
as a closed-end investment company. MassMutual serves as Investment Adviser to
the Trust.
3. MassMutual Corporate Value Partners Limited, a Cayman Islands corporation
that operates as a high-yield bond fund. MassMutual Corporate Value Limited
holds an approximately 93% ownership interest in this company.
4. MassMutual High Yield Partners LLC, a Delaware limited liability company,
that operates as a high yield bond fund. MassMutual holds approximately 2.52%,
MMHC Investment Inc. holds approximately 34.87%, and HYP Management, Inc. holds
approximately 3.82% for an approximate total of 41.21% of the ownership interest
in this company.
5. MassMutual Institutional Funds, a Massachusetts business trust that operates
as an open-end investment company, all of the shares of which are owned by
MassMutual.
6. MassMutual Participation Investors, a Massachusetts business trust that
operates as a closed-end investment company. MassMutual serves as investment
adviser to the Trust.
7. MassMutual/Darby CBO, LLC, a Delaware limited liability Company that operates
as a fund investing in high yield debt securities of U.S. and emerging market
issuers. MassMutual owns 1.79%, MMHC Investment, Inc. owns 44.91% and MassMutual
High Yield Partners LLC owns 2.39% of the ownership interest in this company.
8. Somers CDO, Limited, a Cayman Islands corporation that operates as a fund
investing in high yield debt securities of primarily U.S. issues. MMHC
Investment Inc. holds 38.10% of the subordinated notes of this issue which are
treated as equity for tax purposes. MassMutual is the collateral manager of
Somers CDO, Limited.
9. Enhanced Mortgage-Backed Securities Fund Limited, a special purpose company
incorporated with limited liability in the Cayman Islands investing primarily in
residential and commercial mortgage backed securities and through the
application of various portfolio optimization techniques. MassMutual is the
Investment Manager and Valuation Agent and holds all of the Class B notes and
48% of the Class C
C-8
<PAGE>
Certificates and at least 25% of the aggregate principal amount of Class C
Certificates directly or through a wholly owned affiliate.
10. Saar Holdings CDO, Limited, a Cayman Islands corporation that operates as a
collateralized debt obligation fund investing in high yield debt securities of
primarily U.S. issuers including, to a limited extent, convertible high yield
bonds. MMHC Investment Inc. holds 40% of the mandatorily redeemable preferred
shares of this issuer. Such preferred shares are treated as equity for tax
purposes. MassMutual is the collateral manager of Saar Holdings CDO, Limited.
11. Perseus CDO I, Limited is a Cayman Island Corporation that operates as a
collateralized debt obligation fund investing in a diversified portfolio of
assets including high yield bonds, senior secured loans, a limited amount of
equity securities and certain other assets. MMHC Investment, Inc. holds 33.4%
of the Class D subordinated notes issued by Perseus CDO I Limited. Such notes
are treated as equity for tax purposes. MassMutual is the portfolio manager and
Perseus Advisors, L.L.C. is the portfolio advisor of Perseus CDO I, Limited.
12. MassMutual Global CDO I Limited is a Cayman Island Corporation that operates
as a collateralized bond obligation fund investing in emerging market securities
and high yield bonds. As of the closing date of this fund (June 16, 1999),
MassMutual and its indirect subsidiary, MMHC Investment, Inc. hold in the
aggregate approximately 39.7% of the subordinated notes that are treated as
equity for tax purposes. MassMutual is the Collateral Manager of MassMutual
Global CDO I Limited.
Item 25: Indemnification
- ------------------------
Article VIII of Registrant's Agreement and Declaration of Trust provides for the
indemnification of Registrant's Trustees and officers. Registrant undertakes to
apply the indemnification provisions of its Agreement and Declaration of Trust
in a manner consistent with Securities and Exchange Commission Release No. IC-
11330 so long as the interpretation of Section 17(h) and 17(i) of the Investment
Company Act of 1940 (the "1940 Act") set forth in such Release shall remain in
effect and be consistently applied.
Trustees and officers of Registrant are also indemnified by MassMutual pursuant
to its by-laws which apply to subsidiaries, including Registrant. No
indemnification is provided with respect to any liability to any entity which is
registered as an investment company under the 1940 Act or to the security
holders thereof, where the basis for such liability is willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of office.
MassMutual's directors' and officers' liability insurance program, which covers
Registrant's Trustees and officers, consists of two distinct coverages. The
first coverage reimburses MassMutual, subject to specified limitations, for
amounts which MassMutual is legally obligated to pay out under its
indemnification by-law, discussed above. The second coverage directly protects a
Trustee or officer of Registrant against liability from shareholder derivative
and similar lawsuits which are indemnifiable under the law. There are, however,
specific acts giving rise to liability which are excluded from this coverage.
For example, no Trustee or officer is insured against personal liability for
libel or slander, acts of deliberate dishonesty, fines or penalties, illegal
personal profit or advantage at the expense of Registrant or its shareholders,
violation of employee benefit plans, regulatory statutes, and similar acts which
would traditionally run contrary to public policy and hence reimbursement by
insurance.
MassMutual's present insurance coverage has an overall limit of $75 million
annually ($15 million of which is underwritten by Continental Casualty Company,
$20 million of which is underwritten by Executive Risk Indemnity, Inc., $25
million of which is underwritten by Federal Insurance Co. ("Chubb"), and $15
million of which is underwritten by Sargasso Mutual Insurance Company). There
is a deductible of $200,000 per claim under the corporate coverage. There is no
deductible for individual trustees or officers.
C-9
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "1933 Act") may be permitted to trustees, officers and controlling
persons of Registrant pursuant to the foregoing provisions, or otherwise,
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1933 Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a Trustee, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such Trustee, officer or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
Item 26: Business and Other Connections of the Investment Adviser
- -----------------------------------------------------------------
The Fund currently does not retain an investment adviser because the Fund's
assets are invested in the S&P 500 Index Master Portfolio (the "Master
Portfolio") of Master Investment Portfolio ("MIP"). Barclays Global Fund
Advisors ("BGFA") serves as the investment adviser to the Master Portfolio.
BGFA's business is that of a registered investment adviser to certain open-end,
management investment companies and various other institutional investors. The
directors and officers of BGFA consist primarily of persons who during the past
two years have been active in the investment management business of the former
sub-adviser to the Master Portfolio, Wells Fargo Nikko Investment Advisors
("WFNIA") and, in some cases, the service business of Barclays Global Investors,
N.A. ("BGI"). Each of the directors and executive officers of BGFA also have
substantial responsibilities as directors and/or officers of BGI. To the
knowledge of the Registrant, except as set forth below, none of the directors or
executive officers of BGFA is or has been at any time during the past two fiscal
years engaged in any other business, profession, vocation or employment of a
substantial nature.
Principal Business(es) During at Least the
Name and Position at BGFA Last Two Fiscal Years
- ------------------------- ---------------------
Garrett Bouton Chairman and Chief Executive Officer of
Chairman and Chief BGFA; Director and Chief Operating
Executive Officer Officer of BGI.
Patricia C. Dunn Director of BGFA and Managing Director;
Director of BGFA and Chairman and Director of BGI.
Managing Director
Lawrence G. Tint Director and Managing Director of BGFA
Director and Managing Director and Managing Director of BGI
Director of BGFA
Geoffrey Fletcher Chief Financial Officer of BGFA and BGI.
Chief Financial Officer
Andrea M. Zulberti Chief Administrative Officer of BGFA and
Chief Administrative Officer BGI.
Joanne T. Medero Secretary of BGFA and BGI.
Secretary
C-10
<PAGE>
Theda R. Haber Assistant Secretary of BGFA and BGI.
Assistant Secretary
Terri L. Slane Assistant Secretary of BGFA and BGI.
Assistant Secretary
ITEM 27: PRINCIPAL UNDERWRITERS
- -------------------------------
(a) Effective May 3, 1999, MML Distributors, LLC became general distributor for
the MassMutual Institutional Funds (the "Trust"), a Massachusetts business trust
registered as an investment company under the Investment Company Act of 1940.
There are twelve separate series of the Trust:
(1) MassMutual Prime Fund
(2) MassMutual Short-Term Bond Fund
(3) MassMutual Core Bond Fund
(4) MassMutual Diversified Bond Fund
(5) MassMutual Balanced Fund
(6) MassMutual Core Equity Fund
(7) MassMutual Growth Equity Fund
(8) MassMutual Small Cap Value Equity Fund
(9) MassMutual Mid Cap Growth Equity Fund
(10) MassMutual Small Cap Growth Equity Fund
(11) MassMutual International Equity Fund
(12) MassMutual Indexed Equity Fund
(b) The following are names and positions of Officers and Member
Representatives of MML Distributors, LLC:
Kenneth M. Rickson
Member representative of G.R. Phelps & Co. Inc. (5/96); President (5/1/96);
CEO (12/22/97); Main OSJ Supervisor (12/22/97) 1414 Main Street,
Springfield, MA 01144.
Margaret Sperry
Member representative of Massachusetts Mutual Life Insurance Co. (5/1/96)
1295 State Street, Springfield, MA 01111.
Ronald E. Thomson
Vice President (5/1/96) 1414 Main Street, Springfield, MA 01144.
John E. Forrest
Vice President (12/22/97) 1414 Main Street, Springfield, MA 01144.
Michael L. Kerley
Vice President, Assistant Secretary (5/1/96) 1414 Main Street, Springfield,
MA 01144.
C-11
<PAGE>
James T. Bagley
Treasurer (12/22/97) 1414 Main Street, Springfield, MA 01144.
Bruce Frisbie
Assistant Treasurer (5/1/96) 1295 State Street, Springfield, MA 01144.
Raymond W. Anderson
Assistant Treasurer (5/1/96) 1295 State Street, Springfield, MA 01111.
Ann F. Lomeli
Secretary (1/96) 1295 State Street, Springfield, MA 01111.
Marilyn Sponzo
Chief Legal Officer (12/22/97); Assistant Secretary (4/9/98) 1414 Main
Street, Springfield, MA 01144.
Robert Rosenthal
Compliance Officer (12/22/97) 1414 Main Street, Springfield, MA 01144.
Kathleen Dansereau
Registration Manager (4/14/99) 1414 Main Street, Springfield, MA 01144.
Peter Cuozzo
Variable Life Supervisor and Hartford OSJ Supervisor 140 Garden Street,
Springfield, MA 01111.
Ann Melissa Dowling
Large Corporate Marketing Supervisor (12/97) 140 Garden Street,
Springfield, MA 01111
c) Not Applicable
ITEM 28: LOCATION OF ACCOUNTS AND RECORDS
- -----------------------------------------
Each account, book or other document required to be maintained by Registrant
pursuant to Section 31 (a) of the Investment Company Act of 1940 and Rules 31a-1
to 31a-3 thereunder are maintained as follows:
(Declaration of Trust and Bylaws)
MassMutual Institutional Funds
1295 State Street
Springfield, Massachusetts 01111
(With respect to its services as Administrator)
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, Massachusetts 01111
C-12
<PAGE>
(With respect to its services as Distributor)
MML Distributors, LLC.
1414 Main Street
Springfield, MA 01144
(With respect to its services as Sub-Administrator, Transfer Agent and
Custodian)
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
(With respect to their services as counsel)
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Item 29: Management Services
- ----------------------------
Not Applicable.
ITEM 30: UNDERTAKINGS
- ---------------------
(a) The Registrant hereby undertakes to call a meeting of shareholders for the
purposes of voting upon the question of removal of a trustee or trustees, and to
assist in communications with other shareholders as required by Section 16(c) of
the Securities Act of 1933, as amended, but only where it is requested to do so
by the holders of at least 10% of the Registrant's outstanding voting
securities.
(b) The Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
C-13
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
post-effective amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Springfield
and the Commonwealth of Massachusetts on the 30th day of June, 1999.
MASSMUTUAL INSTITUTIONAL FUNDS
By: /s/ Stuart H. Reese
----------------------
Stuart H. Reese
President, Chairman & Trustee
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 30th day of June, 1999.
Signature Title
/s/ Stephen L. Kuhn* Trustee
- --------------------
Richard G. Dooley
/s/ Stephen L. Kuhn* Trustee
- -------------------
Ronald J. Abdow
/s/ Stephen L. Kuhn* Trustee
- -------------------
Richard H. Ayers
/s/ Stephen L. Kuhn* Trustee
- -------------------
Mary E. Boland
/s/ Stephen L. Kuhn* Trustee
- -------------------
David E. A. Carson
/s/ Stephen L. Kuhn* Trustee
- -------------------
Richard W. Greene
/s/ Stephen L. Kuhn* Trustee
- -------------------
Beverly L. Hamilton
/s/ Stephen L. Kuhn* Trustee
- -------------------
F. William Marshall, Jr.
/s/ Stephen L. Kuhn* Trustee
- -------------------
Charles J. McCarthy
s/ Stephen L. Kuhn* Trustee
- ------------------
Robert J. O'Connell
/s/ Stephen L. Kuhn* Trustee
- -------------------
John H. Southworth
C-14
<PAGE>
/s/ Michael D. Hays Vice President
- ------------------- and Chief Financial Officer
Michael D. Hays
/s/ Mark B. Ackerman Treasurer
- --------------------
Mark B. Ackerman
/s/ Stephen L. Kuhn*
- -------------------
*Stephen L. Kuhn, as Attorney-in-fact pursuant to Powers of Attorney granted on
or about August 5, 1994, April 18, 1996, April 21, 1997, April 12, 1999, and
June 23, 1999.
C-15
<PAGE>
SIGNATURES
Master Investment Portfolio has duly caused this Post-Effective Amendment
to the Registration Statement on Form N-1A of The MassMutual Indexed Equity Fund
to be signed on its behalf by the undersigned, thereto duly authorized, in the
City of Little Rock, and State of Arkansas on the 30th day of June, 1999.
MASTER INVESTMENT PORTFOLIO -
S&P 500 INDEX MASTER PORTFOLIO
By:__________________________________
Richard H. Blank, Jr.
Secretary and Treasurer
(and Principal Financial Officer)
This Post-Effective Amendment to the Registration Statement on Form N-1A of
The MassMutual Indexed Equity Fund has been signed below by the following
persons in the capacities indicated on June 30, 1999.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
Chairman, President (Principal Executive June 30, 1999
______________________________ Officer), and Trustee
R. Greg Feltus*
Secretary and Treasurer (Principal June 30, 1999
______________________________ Financial Officer)
Richard H. Blank, Jr.
Trustee June 30, 1999
______________________________
Jack S. Euphrat*
Trustee June 30, 1999
______________________________
W. Rodney Hughes*
</TABLE>
By:_______________________________________________________________________
Richard H. Blank, Jr.
Attorney-in-Fact pursuant to powers of attorney previously filed
C-16
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. TITLE of EXHIBIT
- ----------- ----------------
J(2) Consent of Independent Auditors
J(5) Power of Attorney for Robert J. O'Connell
M(2) Copy of Class A Rule 12b-1 Plans for the Fund.
O Amended and Restated Rule 18f-3 Plan.
27.1 Financial Data Schedules, Indexed Equity Fund, CLASS A
27.2 Financial Data Schedules, Indexed Equity Fund, CLASS Y
27.3 Financial Data Schedules, Indexed Equity Fund, CLASS S
C-17
<PAGE>
Exhibit J(2)
CONSENT OF INDEPENDENT AUDITORS
MassMutual Institutional Funds:
We consent to the use of our report dated April 8, 1999 appearing in the Annual
Report to Shareholders which has been incorporated by reference in Post-
Effective Amendment No. 13 to Registration Statement No. 33-73824 in the
Statement of Additional Information, which is a part of such Registration
Statement, and to the reference to us under the caption "Financial Highlights"
appearing in the Prospectus, which also is a part of such Registration
Statement.
DELOITTE & TOUCHE LLP
New York, New York
June 28, 1999
C-18
<PAGE>
Exhibit J(5)
POWER OF ATTORNEY
-----------------
The undersigned, Trustee of MassMutual Institutional Funds (the "Trust"),
does hereby constitute and appoint Stephen L. Kuhn, Jaqueline M. Hummel and J.B.
Kittredge, and each of them individually, as his true and lawful attorneys and
agents.
Such attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the undersigned's
behalf as Trustee of the Trust that said attorneys and agents may deem necessary
or advisable to enable the Trust to comply with the Securities Act of 1933, as
amended (the "1933 Act"), the Investment Company Act of 1940, as amended (the
"1940 Act"), and any rules, regulations, orders or other requirements of the
Securities and Exchange Commission (the "Commission") thereunder. This power of
attorney applies to the registration, under the 1933 Act and the 1940 Act, of
shares of beneficial interest of the Trust to be offered by the Trust. It
specifically authorizes such attorneys and agents to sign the undersigned's name
on his behalf as Trustee to the Registration Statements and to any instruments
or documents filed or to be filed with the Commission under the 1933 Act and the
1940 Act in connection with such Registration Statements, including any and all
amendments to such statements, documents, or instruments.
The undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the undersigned has set his hand this 23rd day of June 1999.
/s/ Robert J. O'Connell
- -----------------------
Robert J. O'Connell
Trustee
Witness:
Ann F. Lomeli
C-19
<PAGE>
EXHIBIT M(2)
MASSMUTUAL INSTITUTIONAL FUNDS
Form of Amended and Restated Distribution and Service Plan and Agreement
This Plan and Agreement (the "Plan") constitutes the Distribution and Service
Plan of the Class A shares of the [Fund] (the "Fund"), a series of the
MassMutual Institutional Funds, a Massachusetts business trust (the "Trust"),
adopted pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act") and the related agreement between the Trust and MML
Distributors, LLC, the principal underwriter of the Trust's shares (the
"Distributor"). During the effective term of this Plan, the Trust may make
payments to the Distributor or to Massachusetts Mutual Life Insurance Company,
the Fund's Administrator ("MassMutual"), upon the terms and conditions
hereinafter set forth:
Section 1. The Trust will pay (a) distribution fees to the Distributor for
services provided and expenses incurred by it in connection with the
distribution of Class A shares of the Fund (the "Distribution Fee"), and (b)
service fees to MassMutual for services provided and expenses incurred by it for
purposes of maintaining or providing personal services to Class A shareholders
(the "Servicing Fee"). The amount of such payments and the purposes for which
they are made shall be determined by the Qualified Trustees (as defined below).
The Distribution Fee may be spent by the Distributor on any activities or
expenses primarily intended to result in the sale of Class A shares of the Fund,
including, but not limited to, compensation to, and expenses (included overhead
and telephone expenses) of, financial consultants or other employees of the
Distributor or of participating or introducing brokers who engage in the
distribution of Class A shares, preparing, printing and delivering prospectuses
and reports for other than existing Class A shareholders, providing facilities
to answer questions from other than existing Class A shareholders, advertising
and preparation, printing and distribution of sales literature, receiving and
answering correspondence, including requests for prospectuses and statements of
additional information, and complying with Federal and state securities laws
pertaining to the sale of Class A shares. The Servicing Fee may be spent by
MassMutual on account of personal services rendered to Class A shareholders of
the Fund and/or maintenance of Class A shareholder accounts. MassMutual's
Servicing Fee expenditures may include, but shall not be limited to,
compensation to, and expenses (including telephone and overhead expenses) of
agents or employees of MassMutual, the Fund's Distributor or Sub-Distributor,
pension consultants or participating or introducing brokers and other financial
intermediaries who assist investors in completing account forms and selecting
dividend and other account options; who aid in the processing of redemption
requests for Class A shares or the processing of dividend payments with respect
to Class A shares; who provide information periodically to Class A shareholders
showing their position in Class A shares; who prepare, print and deliver
prospectuses and shareholder reports to Class A shareholders; who oversee
compliance with federal and state laws pertaining to the sale of Class A shares;
who issue account statements to Class A shareholders; who forward communications
from the Fund to Class A shareholders; who render advice regarding the
particular shareholder account options offered by the Fund in light of
shareholder needs; who provide and maintain elective shareholder services; who
furnish shareholder sub-accounting; who provide and maintain pre-authorized
investment plans for Class A shareholders; who respond to inquiries from Class A
shareholders relating to such services; and/or who provide such similar services
as permitted under applicable statutes, rules or regulations.
The aggregate payments under this Section 1 of the Plan of Servicing Fees and
Distribution Fees shall not exceed in any fiscal year the annual rate of .25% of
the Fund's average daily net assets attributable to Class A shares. A majority
of the Qualified Trustees may, at any time and from time to time, reduce the
amount of such payments, or may suspend the operation of the Plan for such
period or periods of time as they may determine. The respective Servicing Fees
and Distribution Fees shall be accrued daily and paid to MassMutual or the
Distributor, as the case may be, as soon as practicable after the end of the
calendar month in which they accrue.
Section 2. This Plan shall not take effect until it has been approved,
together with any related agreements, by votes of the majority (or whatever
greater percentage may, from time to time, be required by Section 12(b) of
C-20
<PAGE>
the Act or the rules and regulations thereunder) of both (i) the Trustees of the
Trust, and (ii) the Qualified Trustees of the Trust, cast in person at a meeting
called for the purpose of voting on this Plan or such agreement.
Section 3. This Plan shall continue in effect for a period of more than one
year after it takes effect only so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
Section 2.
Section 4. MassMutual shall provide to the Trustees of the Trust, and the
Trustees shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
Section 5. This Plan may be terminated at any time by vote of a majority of the
Qualified Trustees, or by vote of a majority of the outstanding Class A shares
of the Fund.
Section 6. All agreements with any person relating to implementation of this
Plan shall be in writing, and any agreement related to this Plan shall provide:
(a) that such agreement may be terminated at any time, without payment
of any penalty, by vote of a majority of the Qualified Trustees or by
vote of a majority of the outstanding Class A shares of the Fund, on not
more than 60 days' written notice to any other party to the agreement;
and
(b) that such agreement shall terminate automatically in the event of
its assignment.
Section 7. This Plan may not be amended to increase materially the amount
permitted pursuant to Section 1 hereof without the approval of a majority of the
outstanding Class A shares of the Fund, and all material amendments to this Plan
shall be approved in the manner provided for approval of this Plan in Section 2.
Section 8. As used in this Plan, (a) the term "Qualified Trustees" shall mean
those Trustees of the Trust who are not interested persons of the Trust, and
have no direct or indirect financial interest in the operation of this Plan or
any agreements related to it, and (b) the terms "interested person" and "vote of
a majority of the outstanding voting securities" shall have the respective
meanings specified in the Act and the rules and regulations thereunder, subject
to such exemptions as may be granted by the Securities and Exchange Commission.
Section 9. A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of State of The Commonwealth of Massachusetts and notice
is hereby given that this instrument is executed on behalf of the Trustees of
the Trust as Trustees and not individually, and that the obligations of or
arising out of this instrument are not binding upon any of the Trustees,
officers or shareholders individually but are binding only upon the assets and
property attributable to the Class A shares of the Fund.
C-21
<PAGE>
Effective as of the 3rd day of May, 1999.
MASSMUTUAL INSTITUTIONAL MASSACHUSETTS MUTUAL LIFE
FUNDS on behalf of MASSMUTUAL INSURANCE COMPANY
_____________ FUND
By: /s/ Stuart H. Reese By: /s/ Vernon Meyer
------------------- ----------------
Name: Stuart H. Reese Name: Vernon Meyer
Title: President Title: Second Vice President
MML DISTRIBUTORS, LLC
By: /s/ Kenneth Rickson
--------------------
Name: Kenneth Rickson
Title: President
C-22
<PAGE>
Exhibit O
MASSMUTUAL INSTITUTIONAL FUNDS
FORM OF AMENDED AND RESTATED
RULE 18f-3 PLAN
Adopted February 1, 1999
Amended May 3, 1999
Introduction
MassMutual Institutional Funds (the "Trust") is a Massachusetts business trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. Massachusetts Mutual Life
Insurance Company (the "Adviser") is a mutual life insurance company organized
under Massachusetts law. MML Distributors, LLC (the "Distributor") is a
registered broker-dealer which serves as principal underwriter to the Trust.
The Trust consists of sixteen separate, authorized series and may add additional
series from time to time in the future (the "Funds"), each of which has and will
have separate investment objectives. Prior to the adoption of this Second
Amended and Restated Rule 18f-3 Plan, each Fund had three (3) classes of shares
- - Class A, Class Y and Class S. Upon the Effective Date of this Second Amended
and Restated Rule 18f-3 Plan, each Fund will have four (4) classes of shares -
Class S, Class Y, Class L and Class A.
This plan is prepared, and is being adopted by the Board of Trustees, pursuant
to the requirements of Rule 18f-3 under the 1940 Act (the "Rule 18f-3 Plan").
Description of Classes
Class S. Class S shares are available to separate investment accounts of the
Adviser and life insurance company affiliates of the Adviser ("Separate
Accounts"). Interests in the Separate Accounts are generally offered only to
defined contribution plans and defined benefit plans under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code") and certain other plans
in accordance with the Federal securities laws and the rules and regulations
thereunder. In addition, Class S shares may also be purchased by defined
contribution and defined benefit plans under Code Section 401(a), and by other
retirement plans, which in either case have plan assets in excess of
$100,000,000, as well as other institutional investors with assets generally in
excess of $100,000,000, as provided for in the Prospectus and/or Statement of
Additional Information contained in the Trust's Registration Statement, as
amended from time to time (the "current Prospectus and/or SAI"). Class S shares
are offered at net asset value without a front-end or contingent deferred sales
charge.
Class Y. Class Y shares are marketed primarily to nonqualified deferred
compensation plans whereby the employer sponsor enters into an administrative
services agreement with the Adviser, or an affiliate of the Adviser, with
respect to administration of the plan. Class Y shares may also be marketed to
defined contribution plans and defined benefit plans under Code Section 401(a),
tax-sheltered annuity plans under Code Section 403(b) and other retirement
plans, in each case with plan assets in excess of a determined amount as
provided for in the current Prospectus and/or SAI, and which enter into an
administrative services or other agreement with the Adviser, or an affiliate of
the Adviser. Class Y shares may also be marketed to other institutional
investors, including the Adviser and Separate Accounts of the Adviser, and other
registered investment companies (or any series thereof) advised by the Adviser
or an affiliate of the Adviser, in each
C-23
<PAGE>
case as provided for in the current Prospectus and/or SAI. Class Y shares are
offered at net asset value without a front-end or contingent deferred sales
charge.
Class L. Class L Shares are marketed primarily to defined contribution and
defined benefit plans that qualify under Code Section 401(a), tax sheltered
annuity plans, and other retirement plans, in each case with plan assets in
excess of a determined amount as provided for in the current Prospectus and/or
SAI, and other institutional holders with plan assets in excess of a determined
amount as provided for in the current Prospectus and/or SAI, that in each case
generally use the services of an intermediary performing third party
administration, advisory and other shareholder services. Class L shares may
also be marketed to Separate Accounts of the Adviser, as provided for in the
current Prospectus and/or SAI. Class L shares may also be marketed to
nonqualified deferred compensation plans whereby the employer sponsor enters
into an administrative services agreement with the Adviser, or an affiliate of
the Adviser, with respect to administration of the plan, and where the
intermediary may provide additional administration, advisory and shareholder
services. Class L shares are offered at net asset value without a front-end or
contingent deferred sales charge.
Class A. Class A shares are marketed primarily to defined contribution plans
and defined benefit plans that under Code Section 401(a), individual retirement
accounts described in Code Section 408, and tax-sheltered annuity custodial
accounts described in Code Section 403(b)(7), in each case as provided for in
the current Prospectus and/or SAI. Class A shares may also be marketed to other
institutional investors such as deferred compensation plans described in Code
Section 457, voluntary employees' beneficiary associations described in Code
section 501(c)(9), other non-qualified deferred compensation plans or other
institutional or sophisticated investors, in each case, as provided for in the
current Prospectus and/or SAI. Class L shares may also be sold to Separate
Accounts of the Adviser, as provided for in the current Prospectus and/or SAI.
Class A shares may also be offered to present or former officers, directors,
trustees and employees (and their spouses, parents, children and siblings) of
the Trust, the Adviser and its affiliates and retirement plans established by
them for their employees.
Class A shares may be offered with a front-end sales charge, provided that any
such front-end sales charge is in accordance with the current Prospectus and/or
SAI, and, provided further, that any such front-end sales charge shall not
exceed 5.75%. In cases where a front-end sales charge is not imposed and Class
A shares are offered at net asset value, there may be contingent deferred sales
charges applied for redemptions occurring in the 12 month period occurring after
the first purchase of Class A shares.
Distribution and Servicing Arrangements
Class S. Class S shares may be sold to Separate Accounts and to certain large
benefit and retirement plans and other institutional investors as described
above under "Description of Classes". Where Class S shares are sold "direct" by
employees of the Adviser to such benefit plans, retirement plans and
institutional investors, employees of the Adviser shall be registered
representatives of a broker-dealer affiliate of the Adviser. Sales of interests
in the Separate Accounts need not be made by registered representatives.
Class Y. It is anticipated that Class Y shares will be marketed primarily
through "direct" sales efforts of employees of the Adviser. In such cases,
employees of the Adviser shall be registered representatives of a broker-dealer
affiliate of the Adviser. Class Y shares may also be marketed through
independent and affiliated broker/dealers with the assistance of independent
intermediaries. There will not be any direct sales by employees of the Adviser
when Class Y shares are sold to Separate Accounts of the Adviser, and sales of
interests in the Separate Accounts need not be made by registered
representatives.
Class L. It is anticipated that Class L shares will be marketed primarily
through independent and/or affiliated intermediaries acting as third party
administrators, investment advisers and/or shareholder servicing agents. In
such cases, these intermediaries shall be registered representatives of a
broker. In addition, there may also be "direct" sales of Class L shares by
employees of the Adviser, in which case such employees of the Adviser shall be
registered representatives of a broker-dealer affiliate of the Adviser. There
will not be any
C-24
<PAGE>
direct sales by employees of the Adviser when Class L shares are sold to
Separate Accounts of the Adviser, and sales of interests in the Separate
Accounts need not be made by registered representatives.
Class A. It is anticipated that Class A shares will primarily be marketed both
through independent and affiliated broker/dealers with the assistance of
independent intermediaries, but Class A shares also may be sold directly by
employees of the Adviser. In addition, there may also be "direct" sales of
Class A shares by employees of the Adviser in the case of Class A shares which
are sold to participants of qualified plans who roll their plan distributions
into individual retirement accounts. In either case, such employees of the
Adviser shall be registered representatives of a broker-dealer affiliate of the
Adviser. There will not be any direct sales by employees of the Adviser when
Class A shares are sold to Separate Accounts of the Adviser, and sales of
interests in the Separate Accounts need not be made by registered
representatives.
Distribution and Servicing Arrangements -- Fees
In General. Each Fund has adopted or will adopt with respect to Class A shares
a Distribution and Service Plan and Agreement pursuant to Rule 12b-1 under the
1940 Act (a "Plan") which will provide for payment of service fees to the
Adviser (the "Class A Service Fee") for rendering personal services to Class A
shareholders and/or maintenance of Class A shareholder accounts and distribution
fees to the Distributor for the distribution of Class A shares (the "Class A
Distribution Fee"). Neither the Adviser nor the Distributor will use the Rule
12b-1 Plan fees charged to Class A shares within a Fund to support the
distribution, marketing or shareholder services of any other class within the
Fund. A defensive Rule 12b-1 Plan has been adopted for Class L and Class Y
shares of each Fund. Each Fund has also approved or will approve with respect
to Class L shares a Class L Shareholder Service Agreement which will provide for
payment of shareholder service fees to the Adviser (the "Class L Service Fee")
for rendering or causing others to render personal services to Class L
Shareholders and/or for maintaining Class L shareholder accounts.
Class A. The Class A Distribution and Service Plan provides that the Class A
Service Fee and the Class A Distribution Fee will be paid to the Adviser and the
Distributor, respectively, at an annual rate not to exceed .25% in the aggregate
for both fees of the average daily net asset value of the Class A shares.
Class L. The Class L Shareholder Service Agreement provides that the Class L
Service Fee in effect from time to time will be paid to the Adviser (currently
at an annual rate not to exceed .15% of the average daily net asset value of the
Class L shares). The Class also has a defensive 12b-1 plan. Any expenses
related to sales and distribution would be borne by the Adviser and not by the
Trust.
Class Y. Class Y shares are not subject to any service fees; although the Class
does have a defensive 12b-1 Plan. Any expenses related to sales and distribution
would be borne by the Adviser and not by the Trust.
Class S. Class S shares are not subject to Rule 12b-1 fees because there are
not expected to be any distribution or service expenses attributable to Class S
due to the nature of the investors eligible to purchase Class S shares.
Administrative Arrangements
The Adviser has entered into a separate Administrative and Shareholder Services
Agreement for each Fund pursuant to which the Adviser is compensated for
administrative and shareholder services rendered and expenses incurred by it in
the rendering of such services and for the cost of bearing some Class expenses,
such as Federal and state registration fees, printing and postage. It is
anticipated that the Adviser will provide extensive services to Class A
shareholders, specialized and targeted third party administration, advisory
and/or other services to Class L shareholders, modest services to Class Y
shareholders and limited services to Class S shareholders. The Trust, on behalf
of each Fund, pays the Adviser a monthly fee for the services performed at an
annual rate of the average daily net assets of the applicable class of shares of
the Fund within the range specified in the current Prospectus and/or SAI. The
administrative services fee is an Identifiable Class Expense.
C-25
<PAGE>
Also, as described above in the section entitled Servicing Arrangement -- Fees,
Class A and Class L shares will bear a service fee which is used to compensate
the Adviser for rendering personal services to shareholders and for expenses
incurred by it in the rendering of such services.
Administrative Arrangements - Fees
Each class of each Fund shall bear an administrative fee as set forth in each
Fund's Administrative and Shareholder Services Agreement. Such fees will vary
from class to class and from Fund to Fund. Set forth below is the range of
administrative fees paid by each class of the existing twelve Funds on the
effective date of this Rule 18f-3 Plan: MassMutual Prime Fund; MassMutual
Short-Term Bond Fund; MassMutual Core Bond Fund; MassMutual Balanced Fund;
MassMutual Core Equity Fund; MassMutual Small Cap Value Equity Fund; MassMutual
International Equity Fund; MassMutual Indexed Equity Fund; MassMutual
Diversified Bond Fund; MassMutual Growth Equity Fund; MassMutual Mid Cap Growth
Equity Fund; and MassMutual Small Cap Growth Equity Fund.
The MassMutual Balanced Fund is identified separately. That Fund is an asset
allocation Fund comprised of three separate portfolios. That arrangement
necessitates that additional administrative services be provided.
The MassMutual Indexed Equity Fund is identified separately. That Fund is a
spoke of an unaffiliated Master Portfolio. MassMutual is the administrator of
the MassMutual Indexed Equity Fund and incurs higher administrative services in
connection with the hub-spoke arrangement.
The MassMutual Small Cap Growth Equity Fund is identified separately. The
Manager has appointed two sub-advisers for that Fund, each of which will manage
50% of the Fund's portfolio. This arrangement will necessitate that additional
administrative services be provided.
Class A. Class A shares will bear an annual administrative service fee not to
exceed a range of between .2323% and .3345%. The annual administrative service
fee for the MassMutual Balanced Fund is .3952%. The annual administrative
service fee for the MassMutual Indexed Equity Fund is .5345%. The annual
administrative service fee for the MassMutual Small Cap Growth Equity Fund is
.4075%.
Class L. Class L shares will bear an annual administrative service fee not to
exceed a range of between .2323% and .3345%. The annual administrative service
fee for the MassMutual Balanced Fund is .3952%. The annual administrative
service fee for the MassMutual Indexed Equity Fund is .5345%. The annual
administrative service fee for the MassMutual Small Cap Growth Equity Fund is
.4075%.
Class Y. Class Y shares will bear an annual administrative service fee not to
exceed a range of between .1432% and .1845%. The annual administrative service
fee for the MassMutual Balanced Fund is .2452%. The annual administrative
service fee for the MassMutual Indexed Equity Fund is .3845%. The annual
administrative service fee for the MassMutual Small Cap Growth Equity Fund is
.2575%.
Class S. Class S shares will bear an annual administrative service fee not to
exceed a range of between .0675% and .1232%. The annual administrative service
fee for the MassMutual Balanced Fund is .0852%. The annual administrative
service fee for the MassMutual Indexed Equity Fund is .3545%. The annual
administrative service fee for the MassMutual Small Cap Growth Equity Fund is
.1175%.
Voting and Other Rights and Obligations
Each share of the Trust, regardless of class, will have identical voting,
dividend, liquidation and other rights, preferences, powers, restrictions,
limitations, qualifications, designations and terms and conditions, except that:
(a) each class will have a different class designation;
C-26
<PAGE>
(b) each class offered in connection with a Rule 12b-1 Plan will bear the
expense of the payments that would be made pursuant to such Rule 12b-1
Plan;
(c) each class will also bear certain other expenses that are directly
attributable only to the class (the "Identifiable Class Expenses," as
described in more detail under "Allocation of Fund Expenses - Identifiable
Class Expenses");
(d) only the holders of the shares of the appropriate class involved will be
entitled to vote on matters pertaining to a Rule 12b-1 Plan relating to
such class (e.g., the adoption, amendment or termination of a Rule 12b-1
Plan) in accordance with the requirements and procedures set forth in Rule
12b-1;
(e) each class will have separate voting rights on any matter submitted to
shareholders in which the interest of one class differs from the interest
of any other class; and
(f) each class will have different exchange privileges described below.
Dividends paid by a Fund with respect to each class of shares, to the extent any
dividends are paid, will be calculated in the same manner, at the same time, on
the same day and will be in the same amount, except that fee payments made under
the Rule 12b-1 Plans relating to a particular class of shares will be borne
exclusively by such class and except that any Identifiable Class Expenses may be
borne by the applicable class of shares.
Allocation of Fund Expenses
Unattributed Expenses. All expenses of the Trust that cannot be attributed
directly to any one Fund will be allocated to each Fund based on the relative
net assets of such Fund. All expenses of a Fund that cannot be allocated to any
one particular class will be allocated to each class based on the relative net
assets of such class. An independent expert previously reviewed the methodology
and procedures for the proper allocation of expenses among the former Class 1,
Class 2, Class 3 and Class 4 shares and the expert rendered a report that
demonstrated that such methodology and procedures were adequate to ensure that
such allocations will be made in an appropriate manner, subject to the
conditions and limitations in the report. The methodology and procedures for the
proper allocation of expenses among Class A, Class L, Class Y and Class S shares
will be the same as those reviewed by the independent expert for the Class 1,
Class 2, Class 3 and Class 4 shares.
Identifiable Class Expenses. Identifiable Class Expenses will be allocated to a
particular class of a Fund and are limited to:
(a) transfer agency fees attributable to a specific class of shares;
(b) printing and postage expenses related to preparing and distributing
materials such as shareholder reports, prospectuses and proxies to current
shareholders of a specific class;
(c) Blue Sky registration fees incurred by a class of shares;
(d) SEC registration fees incurred by a class of shares;
(e) shareholder and administrative service fees payable under each Fund's
respective administrative service agreement or shareholder service agreement,
as applicable; and
(f) any other incremental expenses subsequently identified that should be
properly allocated to one class which shall be approved by the Board and is
consistent with Rule 18f-3 and any SEC interpretations thereof.
C-27
<PAGE>
Waivers and Reimbursements of Expenses
The Adviser may choose to reimburse or waive the Identifiable Class Expenses of
certain classes on a voluntary, temporary basis. The amount of such expenses
waived or reimbursed by the Adviser may vary from class to class. In addition,
the Adviser may waive or reimburse expenses attributable to the Trust generally
and/or expenses attributable to a Fund (with or without a waiver or
reimbursement of Identifiable Class Expenses) but only if the same proportionate
amount of such expenses are waived or reimbursed for each class. Thus, any
expenses attributable to the Trust generally that are waived or reimbursed would
be credited to each class of a Fund based on the relative net assets of the
classes.
Similarly, any expenses attributable to a Fund that are waived or reimbursed
would be credited to each class of that Fund according to the relative net
assets of the classes. The Adviser's flexibility to waive expenses may be
subject to tax considerations.
No Conversion Provision
In General. Class A, Class L, Class Y and Class S shares of the Funds do not
have a conversion feature.
Exchange Provision
Class A. Shareholders of Class A shares of each Fund will generally be entitled
to exchange those shares at net asset value for Class A shares of other Funds
that offer Class A shares. Shareholders of Class A shares continue to be
subject to the Rule 12b-1 Plan fee applicable to Class A shares after the
exchange.
Class L. Shareholders of Class L shares of each Fund will generally be entitled
to exchange those shares at net asset value for Class L shares of other Funds
that offer Class L shares.
Class Y. Shareholders of Class Y shares of each Fund will generally be entitled
to exchange those shares at net asset value for Class Y shares of other Funds
that offer Class Y shares.
Class S. Shareholders of Class S shares of each Fund will generally be entitled
to exchange those shares at net asset value for Class S shares of other Funds
that offer Class S shares.
Effective Date
This Amended and Restated Rule 18f-3 Plan shall become effective on May 3, 1999.
C-28
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from MassMutual
Institutional Funds Form N-SAR for the year ended February 28, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> INDEXED EQUITY FUND, CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> FEB-28-1999
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 426,835,528
<RECEIVABLES> 1,413,251
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 428,248,779
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 584,840
<TOTAL-LIABILITIES> 584,840
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 387,423,086
<SHARES-COMMON-STOCK> 10,026
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 631,540
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,030,590
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 37,578,723
<NET-ASSETS> 118,393
<DIVIDEND-INCOME> 922
<INTEREST-INCOME> 209
<OTHER-INCOME> 0
<EXPENSES-NET> 1,157
<NET-INVESTMENT-INCOME> (26)
<REALIZED-GAINS-CURRENT> 2,940
<APPREC-INCREASE-CURRENT> 14,841
<NET-CHANGE-FROM-OPS> 17,755
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 306
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 26
<NET-CHANGE-IN-ASSETS> 118,393
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,048,763
<AVERAGE-NET-ASSETS> 107,452
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.06
<PER-SHARE-GAIN-APPREC> 1.78
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.03)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.81
<EXPENSE-RATIO> 1.09
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from MassMutual
Institutional Funds Form N-SAR for the year ended February 28, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> INDEXED EQUITY FUND, CLASS Y
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> FEB-28-1999
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 426,835,528
<RECEIVABLES> 1,413,251
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 428,248,779
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 584,840
<TOTAL-LIABILITIES> 584,840
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 387,423,086
<SHARES-COMMON-STOCK> 72,852
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 631,540
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,030,590
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 37,578,723
<NET-ASSETS> 858,791
<DIVIDEND-INCOME> 6,691
<INTEREST-INCOME> 1,513
<OTHER-INCOME> 0
<EXPENSES-NET> 1,297
<NET-INVESTMENT-INCOME> 6,907
<REALIZED-GAINS-CURRENT> (6,312)
<APPREC-INCREASE-CURRENT> 61,396
<NET-CHANGE-FROM-OPS> 61,991
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,865
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 72,879
<NUMBER-OF-SHARES-REDEEMED> 524
<SHARES-REINVESTED> 497
<NET-CHANGE-IN-ASSETS> 858,791
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,048,763
<AVERAGE-NET-ASSETS> 251,910
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.12
<PER-SHARE-GAIN-APPREC> 1.78
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.11)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.79
<EXPENSE-RATIO> .52
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from MassMutual
Institutional Funds Form N-SAR for the year ended February 28, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> INDEXED EQUITY FUND, CLASS S
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> FEB-28-1999
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 426,835,528
<RECEIVABLES> 1,413,251
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 428,248,779
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 584,840
<TOTAL-LIABILITIES> 584,840
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 387,423,086
<SHARES-COMMON-STOCK> 36,085,949
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 631,540
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,030,590
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 37,578,723
<NET-ASSETS> 426,686,755
<DIVIDEND-INCOME> 3,324,627
<INTEREST-INCOME> 751,937
<OTHER-INCOME> 0
<EXPENSES-NET> 1,046,309
<NET-INVESTMENT-INCOME> 3,030,255
<REALIZED-GAINS-CURRENT> 2,033,962
<APPREC-INCREASE-CURRENT> 37,502,486
<NET-CHANGE-FROM-OPS> 42,566,703
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,399,425
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 46,076,164
<NUMBER-OF-SHARES-REDEEMED> 10,192,698
<SHARES-REINVESTED> 202,483
<NET-CHANGE-IN-ASSETS> 426,686,755
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,048,763
<AVERAGE-NET-ASSETS> 247,993,280
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> 1.78
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.09)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.82
<EXPENSE-RATIO> .43
</TABLE>
