<PAGE>
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MASSMUTUAL INSTITUTIONAL FUNDS
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[GRAPHIC APPEARS HERE]
. MassMutual Prime Fund
. MassMutual Short-Term Bond Fund
. MassMutual Core Bond Fund
. MassMutual Diversified Bond Fund
. MassMutual Balanced Fund
. MassMutual Core Equity Fund
. MassMutual Growth Equity Fund
. MassMutual Small Cap Value Equity Fund
. MassMutual Mid Cap Growth Equity Fund
. MassMutual Small Cap Growth Equity Fund
. MassMutual International Equity Fund
Semiannual Report . June 30, 1999
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Letter to Shareholders ......................................................... 1
MassMutual Prime Fund
Portfolio Manager Report ................................................... 3
Portfolio of Investments ................................................... 6
Financial Statements ....................................................... 8
MassMutual Short-Term Bond Fund
Portfolio Manager Report ................................................... 12
Portfolio of Investments ................................................... 15
Financial Statements ....................................................... 18
MassMutual Core Bond Fund
Portfolio Manager Report ................................................... 22
Portfolio of Investments ................................................... 25
Financial Statements ....................................................... 29
MassMutual Diversified Bond Fund
Portfolio Manager Report ................................................... 33
Portfolio of Investments ................................................... 36
Financial Statements ....................................................... 38
MassMutual Balanced Fund
Portfolio Manager Report ................................................... 42
Portfolio of Investments ................................................... 45
Financial Statements ....................................................... 50
MassMutual Core Equity Fund (Formerly known as the MassMutual Value Equity Fund)
Portfolio Manager Report ................................................... 54
Portfolio of Investments ................................................... 57
Financial Statements ....................................................... 59
MassMutual Growth Equity Fund
Portfolio Manager Report ................................................... 63
Portfolio of Investments ................................................... 66
Financial Statements ....................................................... 68
MassMutual Small Cap Value Equity Fund
Portfolio Manager Report ................................................... 72
Portfolio of Investments ................................................... 75
Financial Statements ....................................................... 77
MassMutual Mid Cap Growth Equity Fund
Portfolio Manager Report ................................................... 81
Portfolio of Investments ................................................... 84
Financial Statements ....................................................... 86
MassMutual Small Cap Growth Equity Fund
Portfolio Manager Report ................................................... 90
Portfolio of Investments ................................................... 93
Financial Statements ....................................................... 96
MassMutual International Equity Fund
Portfolio Manager Report ................................................... 100
Portfolio of Investments ................................................... 103
Financial Statements ....................................................... 105
Notes to Financial Statements .................................................. 109
</TABLE>
<PAGE>
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MassMutual Institutional Funds - Letter to Shareholders
- --------------------------------------------------------------------------------
July 30, 1999
To Our Shareholders
[PHOTO OF STUART H. REESE APPEARS HERE]
Stuart H. Reese
"The solid fundamentals that have been powering this historic bull market are
still very much intact."
U.S. Economy Keeps Growing
The most surprising economic development during the first half of 1999 was the
continued strong growth of the U.S. economy. Confounding those who had been
looking for slower growth--perhaps even a recession--as a result of the Asian
financial crisis and last fall's credit crunch, the U.S. economy stormed ahead
in the first quarter, with GDP growing a robust 4.3%. Consumption and fixed
investment were both strong, although surging imports exacerbated the trade
deficit, thereby offsetting some of the gains in other sectors. The housing
market also exhibited strength, as did auto and truck sales. As expected, growth
eased somewhat in the second quarter but was still sufficient to yield an
annualized growth rate of 3.30% for the first half overall.
For the first time since the problems in Asia surfaced in the fall of 1997,
inflation returned as a source of widespread concern. Although the labor market
showed no worrisome increases in wages, Federal Reserve Board (Fed) Chairman
Alan Greenspan remarked in his June testimony to Congress that such rises were
"inevitable" given the relative shortage of qualified workers. Moreover, the
Consumer Price Index (CPI) for April was much higher than expected, although the
CPI for May failed to confirm April's gains. The bottom line: there was little
hard evidence of inflationary pressures, but there was enough to make investors
worry that the Fed, which has often stated its commitment to acting
preemptively, would raise interest rates before there were clear signs of
trouble. This part of the scenario played out as expected, with the Fed hiking
short-term rates by .25% on the last day of June. Nonetheless, investors were
pleased when the Fed also announced a return to a neutral bias with respect to
future changes in interest rates.
Asian and Latin American Markets Rebound
Most stock markets in Asia saw healthy gains in the first half of the year,
mirroring investors' expectations that the region's economies had hit bottom and
were on the rebound. Japan, for example, reported a sharp surge in first quarter
GDP. Other economic data, though, failed to confirm the GDP number. Similarly,
other countries in the Pacific Basin announced a variety of initiatives to help
make companies in that region more competitive, but it remains to be seen how
many of these initiatives will come to fruition. Until we see more tangible
evidence of much needed structural changes, prospects for meaningful recovery in
the region remain suspect.
In January, Brazil became the latest emerging market to suffer a devaluation of
its currency. Subsequently, interest rates fell significantly there and stocks
rallied strongly, along with equities in most other South American countries. On
the other hand, European share prices recorded modest gains and economic growth
remained weak, making it unlikely that exports to Europe would provide much help
for the U.S. economy over the next six months.
Cyclical Shares Lead Stocks Higher
During the first quarter, U.S. stock investors had a defensive mindset. This was
reflected in a tiered market, with positive performance for the most part
limited to a small group of large-capitalization growth stocks whose underlying
companies were perceived as being capable of delivering consistent earnings
growth. However, as the year progressed, better than expected growth in the U.S.
and improving prospects overseas led analysts to roughly double their estimates
for 1999 corporate earnings growth.
With investors' confidence returning, the second quarter saw a significant rally
in cyclical stocks--those that are most sensitive to fluctuations in economic
activity. Small- and mid-cap stocks, largely ignored in the first quarter, also
advanced sharply. Although concerns about inflation, rising interest rates, and
a possible Fed tightening limited gains to some extent, the improving earnings
picture enabled many of the popular averages to close the period near their
all-time highs.
(Continued)
1
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MassMutual Institutional Funds - Letter to Shareholders (Continued)
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Rising Rates Hurt Bonds
The Treasury yield curve, which began the year relatively flat, steepened
noticeably during the first half of the year. Yields advanced all along the
curve, particularly in the two to ten-year maturities, making it a less than
ideal environment for credit market investors.
Spreads between corporates and Treasuries began the year at fairly modest
levels, widened around the middle of the period, and narrowed again near the
end. Overall, spread product--that is, fixed-income investments offering a yield
advantage over Treasury securities--performed somewhat better than Treasuries.
Supply and demand in the investment-grade corporate market was robust and well
balanced, except near the end of the period, when many buyers sat on the
sidelines to see what the Fed would do about interest rates. Activity in
high-yield securities, however, was well behind the pace of last year, as
investors remained cautious following last fall's damage to the high-yield
market.
Second-Half Prospects
Although the second half will likely bring further slowing in the U.S. economy,
it would not be surprising to see the Fed raise interest rates once more this
year. For one thing, we are likely to see further evidence of inflationary
pressures, though those should be mild. Furthermore, the rate cuts of last fall
were a response to hemorrhaging financial markets. Now that the markets seem to
be out of danger, the Fed may be inclined to "take back" all or most of those
reductions. Finally, given the uncertainties of the Year 2000 (Y2K) phenomenon,
it is likely that if the Fed does raise rates, the announcement will be made at
its August or October meeting rather than later in the year.
Regarding Y2K, no one can predict how investors will react as the end of the
year draws closer. It's worth recalling, though, that MassMutual's focus has
always been on investing for the long term, not trying to respond to short-term
market events. The solid fundamentals that have been powering this historic bull
market--strong economic growth, low interest rates, and low inflation--are still
very much intact.
- --------------------------------------------------------------------------------
Year 2000 Readiness Statement
Like other businesses and governments around the world, MassMutual Institutional
Funds could be adversely affected if the computer systems used by the Funds'
service providers and those with which they do business do not properly
recognize the Year 2000. This is commonly referred to as the "Year 2000 issue."
In 1996, MassMutual 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
Funds that the Year 2000 issue is one of MassMutual's highest business
operational priorities. MassMutual is also seeking assurances from the Funds'
other service providers in order to identify and resolve Year 2000 issues. In
addition, because the Year 2000 issue affects virtually all organizations, the
companies in which the Funds invest could be adversely impacted by the Year 2000
issue. The extent of such impact cannot be predicted.
- --------------------------------------------------------------------------------
/s/Stuart H. Reese
Stuart H. Reese
President and Chairman of the Board of Trustees
MassMutual Institutional Funds
2
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MassMutual Prime Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment objective and policies for the MassMutual Prime Fund?
The objective and policies of the Fund are to:
. maximize current income to the extent consistent with liquidity and the
preservation of capital
. invest in a diversified portfolio of money market instruments
. invest in high quality debt instruments with remaining maturity not to
exceed 397 days
Note: This is not a money market fund.
How did the Fund perform during the first half of 1999?
The Fund's Class S shares had a net return of 2.33%, which bettered the 2.25%
return available from 91-day T-bills.
What factors influenced the Fund's performance?
Rising interest rates had a limiting effect on the Fund's absolute returns,
although its emphasis on Tier 2 commercial paper securities enabled it to
slightly outperform T-bills. We are able to do this without a significant
increase in risk because of MassMutual's strength in credit analysis.
What was the investment background during the period?
Although the first half of 1999 was decidedly less eventful than the latter half
of 1998, there were some significant developments. Most credit market
participants had been looking for slower economic growth--perhaps even a
recession--throughout most of 1998. However, as the U.S. economy continued to
show better than expected growth and battered Asian economies began to look as
if they might be starting on the road to recovery, inflation returned to center
stage as bond investors' prime concern.
A sharp run-up in the price of crude oil added to worries about inflation, as
did several economic reports during the period--most notably, a much higher than
expected Consumer Price Index (CPI) for the month of April. Although the May CPI
fell back to benign levels, anticipation that the Federal Reserve Board (Fed)
might raise short-term interest rates continued to build throughout the first
six months of 1999, especially in the second quarter. On June 30, the Fed
fulfilled expectations by boosting the federal funds rate by .25%. The surprise
was that there was also a shift back to a neutral bias toward future rate
changes, which caused bond prices to advance sharply from their levels just
before the Fed announcement.
What effect did these developments have on the Fund's investments?
The prospect of a Fed move to raise interest rates resulted in an increase in
the rates on both Tier 1 and Tier 2 securities, most of which occurred in June.
There was also a slightly larger spread, or difference in yield, between Tier 2
and Tier 1 securities compared to what we had seen for most of the period. The
reason: as it became more likely that the Fed would raise rates, buyers demanded
more of a premium for purchasing lower-quality Tier 2 securities.
In addition, the prospect of a Fed tightening provided an incentive to issuers
of Tier 2 securities to bring them to market before the rate hike actually took
place. Consequently, there was a generous supply of Tier 2 paper, especially as
the end of the period drew nearer. The Fund took advantage of this situation by
bringing its percentage of Tier 2 securities up to 94% as of June 30, compared
to 85% at the end of 1998.
The Fund's average life remained consistently close to that of the IBC/Donohue
Universe, our benchmark index for that purpose. During the period, the average
life of the Fund's holdings fluctuated from a low of 56 days in January to a
high of 62 days in May.
3
<PAGE>
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MassMutual Prime Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
What is your outlook for the rest of 1999?
Now that we have seen one increase by the Fed, one question on everyone's mind
going forward will be whether there are more rate hikes on the near term
horizon. In that regard, the second quarter economic numbers will be crucial.
The Fed has made it clear that its policy is to be "preemptive" in fighting
inflation, meaning that it will act before inflation becomes obvious.
The Year 2000 (Y2K) issue may also play an important role in the second half of
the year. To the extent possible, we are seeking assurances of readiness from
the companies in which we invest. On a broader level, it's possible that the
credit markets will be affected by individual investors' desire for greater
liquidity near the end of the year. If people decide to make significantly
higher than normal withdrawals from their money market funds in order to have
more cash on hand, this Fund and others like it could well feel the effects.
Most likely, those effects would be very short term in nature.
Y2K aside, we will stick to our overall strategy of using MassMutual's strength
in credit analysis to pursue our goal of investing substantially in high quality
Tier 2 paper, rather than solely in Tier 1 paper as with money market funds. In
this way, we believe we are able to provide the Fund's investors with returns
that exceed those of other Funds which primarily hold money market instruments.
4
<PAGE>
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MassMutual Prime Fund - Portfolio Manager Report (Continued)
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- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Prime Fund
Class S and 91-day Treasury Bills
- --------------------------------------------------------------------------------
MassMutual Prime Fund
Total Return Year-to-Date One Year Average Annual
1/1/99-6/30/99 7/1/98-6/30/99 10/03/94-6/30/99
Class S 2.33% 5.07% 5.36%
- --------------------------------------------------------------------------------
91-Day
Treasury Bills 2.25% 4.73% 5.24%
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
Class S T-Bills
------- -------
10/3/94 10,000 10,000
12/94 10,126 10,112
6/95 10,419 10,385
12/95 10,711 10,672
6/96 10,982 10,932
12/96 11,272 11,209
6/97 11,565 11,489
12/97 11,880 11,785
6/98 12,194 12,166
12/98 12,520 12,380
6/99 12,812 12,744
Hypothetical Investments in MassMutual Prime Fund
Class A, Class Y and 91-day Treasury Bills
- --------------------------------------------------------------------------------
MassMutual Prime Fund
Total Return Year-to-Date One Year Average Annual
1/1/99-6/30/99 7/1/98-6/30/99 1/01/98-6/30/99
Class A 2.12% 4.42% 4.51%
Class Y 2.41% 5.05% 5.07%
- --------------------------------------------------------------------------------
91-Day
Treasury Bills 2.25% 4.73% 4.88%
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Class A Class Y T-Bills
------- ------- -------
12/97 10,000 10,000 10,000
3/98 10,110 10,130 10,128
6/98 10,230 10,250 10,255
9/98 10,350 10,380 10,386
12/98 10,460 10,514 10,505
3/99 10,576 10,647 10,622
6/99 10,682 10,767 10,742
Hypothetical Investments in MassMutual Prime Fund
Class L and 91-day Treasury Bills
- --------------------------------------------------------------------------------
MassMutual Prime Fund
Total Return Since Inception
5/3/99-6/30/99
Class L 0.73%
- --------------------------------------------------------------------------------
91-Day
Treasury Bills 0.76%
- --------------------------------------------------------------------------------
Class L T-Bills
------- -------
5/3/99 10,000 10,000
5/31/99 10,034 10,038
6/30/99 10,073 10,076
Past performance is not predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund, while 91-day Treasury Bills are unmanaged and do not incur
expenses. Treasury Bills are backed by the U.S. Government and offer a fixed
rate of return, while the Fund's shares are not guaranteed.
5
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Prime Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1999
Principal
Amount Market Value
--------- ------------
SHORT-TERM INVESTMENTS -- 99.8%
Commercial Paper -- 97.8%
Aristar, Inc.
5.050% 09/17/1999 $ 3,785,000 $ 3,740,305
Burlington Northern
Santa Fe Corp.
5.000% 08/05/1999 7,135,000 7,100,316
Burlington Northern
Santa Fe Corp.
5.120% 10/15/1999 1,100,000 1,082,251
Case Credit
Corporation
5.000% 07/07/1999 5,225,000 5,220,646
Central and South
West Corporation
4.980% 07/27/1999 5,400,000 5,380,578
Central and South
West Corporation
5.000% 07/15/1999 3,215,000 3,208,749
Comdisco, Inc.
5.100% 07/08/1999 7,000,000 6,993,058
Comdisco, Inc.
5.100% 07/20/1999 2,800,000 2,792,463
ConAgra, Inc.
5.070% 08/31/1999 9,500,000 9,412,270
Cox Enterprises, Inc.
5.000% 07/28/1999 645,000 642,581
Cox Enterprises, Inc.
5.010% 07/20/1999 1,740,000 1,735,399
Cox Enterprises, Inc.
5.020% 07/16/1999 1,770,000 1,766,298
Cox Enterprises, Inc.
5.100% 08/30/1999 4,200,000 4,164,300
Crown Cork & Seal
Company, Inc.
5.130% 08/18/1999 3,830,000 3,803,803
Crown Cork & Seal
Company, Inc.
5.250% 09/17/1999 155,000 153,170
CSX Corporation
5.290% 08/25/1999 6,845,000 6,789,679
Dana Credit
Corporation
5.080% 07/12/1999 9,000,000 8,986,030
Dominion Resources,
Inc
5.000% 07/23/1999$ 6,950,000$ 6,928,764
Eastman Chemical
Company
5.120% 07/22/1999 9,000,000 8,973,120
Federal Signal Corp.
5.270% 08/17/1999 4,230,000 4,200,896
Federated Department
Stores, Inc.
5.280% 07/21/1999 10,155,000 10,125,212
Finova Capital
Corporation
4.880% 07/13/1999 2,260,000 2,256,324
Ford Motor Credit
Corporation
4.780% 09/24/1999 6,230,000 6,153,215
Houston Industries
Finance Co. L.P.
4.990% 07/26/1999 7,700,000 7,673,318
Houston Industries
Finance Co. L.P.
5.060% 08/26/1999 620,000 615,120
IMC Global Inc.
5.070% 07/16/1999 1,955,000 1,950,870
IMC Global Inc.
5.800% 02/18/2000 4,175,000 4,025,674
IMC Global Inc.
5.850% 02/01/2000 5,300,000 5,124,327
Kerr-McGee Credit
Corporation
5.350% 10/15/1999 5,700,000 5,608,027
Kerr-McGee Credit
Corporation
5.500% 08/24/1999 1,235,000 1,224,811
Lockheed Martin
Corporation
4.990% 07/13/1999 815,000 813,645
Lockheed Martin
Corporation
5.300% 10/01/1999 5,040,000 4,969,418
Penny (J. C.) Funding
Corporation
5.020% 10/22/1999 2,800,000 2,751,837
Penny (J. C.) Funding
Corporation
5.070% 08/04/1999 8,000,000 7,961,693
Praxair, Inc.
4.950% 08/26/1999 3,800,000 3,770,740
Praxair, Inc.
5.130% 07/30/1999 4,600,000 4,580,991
Public Service
Company of Colorado
5.130% 09/07/1999 6,925,000 6,853,711
Public Service Electric
and Gas Company
4.930% 07/19/1999 3,900,000 3,890,386
Public Service Electric
and Gas Company
5.050% 08/13/1999 415,000 412,497
Public Service Electric
and Gas Company
5.100% 08/12/1999 5,200,000 5,169,060
Raytheon Company
5.100% 07/02/1999 8,965,000 8,963,730
Ryder System, Inc.
5.000% 08/06/1999 590,000 587,050
Ryder System, Inc.
5.260% 09/17/1999 3,355,000 3,315,383
Ryder System, Inc.
5.300% 09/10/1999 4,515,000 4,467,806
Ryder System, Inc.
5.320% 09/03/1999 2,800,000 2,772,871
Safeway Inc.
5.040% 08/16/1999 8,200,000 8,147,192
Service Corporation
International
5.040% 09/07/1999 4,400,000 4,354,706
Service Corporation
International
5.070% 07/09/1999 4,330,000 4,325,122
Sonat Inc.
4.920% 08/13/1999 8,300,000 8,251,223
Sonat Inc.
5.250% 07/06/1999 1,955,000 1,953,574
Textron Financial
Corporation
4.950% 07/28/1999 4,900,000 4,881,809
(Continued)
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
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MassMutual Prime Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Market Value
------------ -------------
TRW Inc.
5.070% 11/30/1999 $ 4,395,000 $ 4,292,938
TRW Inc.
5.080% 08/06/1999 720,000 716,342
TRW Inc.
5.110% 07/29/1999 3,130,000 3,117,560
Union Oil Company of
California
5.310% 02/11/2000 5,650,000 5,454,016
Union Oil Company of
California
5.720% 03/07/2000 5,500,000 5,288,021
US West Capital
Funding
4.980% 07/27/1999 1,125,000 1,120,954
US West Capital
Funding
5.000% 08/27/1999 3,900,000 3,869,125
Vastar Resources, Inc.
5.060% 09/02/1999 9,500,000 9,409,394
VF Corporation
5.050% 07/13/1999 8,653,000 8,638,434
------------
272,932,802
------------
Discount Note - 2.0%
Federal Farm Credit
Bank
4.650% 12/23/1999 5,700,000 5,563,770
------------
TOTAL SHORT-TERM
INVESTMENTS 278,496,572
------------
(Cost $278,539,449)***
TOTAL INVESTMENTS - 99.8% 278,496,572
Other Assets/(Liabilities) - 0.2% 436,941
------------
NET ASSETS - 100.0% $278,933,513
============
Notes To Portfolio of Investments
*** Aggregate cost for Federal tax purposes (Note 7)
The remainder of this page intentionally left blank.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
MassMutual Prime Fund - Financial Statements
- --------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities
June 30, 1999
(Unaudited)
-----------------
<S> <C>
Assets:
Short-term investments, at value (cost $278,539,449) (Note 2) .......... $ 278,496,572
Cash ................................................................... 7,098
Receivables from:
Fund shares sold ................................................... 3,751,363
-----------------
Total assets ................................................... 282,255,033
-----------------
Liabilities:
Payables for:
Fund shares redeemed ............................................... 3,212,655
Directors' fees and expenses (Note 3) .............................. 1,915
Affiliates (Note 3):
Investment management fees ..................................... 82,717
Administration fees ............................................ 19,700
Service fees ................................................... 76
Accrued expenses and other liabilities ................................. 4,457
-----------------
Total liabilities .............................................. 3,321,520
-----------------
Net assets .............................................................. $ 278,933,513
=================
Net assets consist of:
Paid-in capital ........................................................ $ 273,450,481
Undistributed net investment income .................................... 5,549,133
Accumulated net realized loss on investments ........................... (23,224)
Net unrealized depreciation on investments ............................. (42,877)
-----------------
$ 278,933,513
=================
Net assets:
Class A ................................................................ $ 123,124
=================
Class L ................................................................ $ 101,754
=================
Class Y ................................................................ $ 1,977,082
=================
Class S ................................................................ $ 276,731,553
=================
Shares outstanding:
Class A ................................................................ 800.124
=================
Class L ................................................................ 660.303
=================
Class Y ................................................................ 12,819.866
=================
Class S ................................................................ 1,794,018.678
=================
Net asset value, offering price and redemption price per share:
Class A ................................................................ $ 153.88
=================
Class L ................................................................ $ 154.10
=================
Class Y ................................................................ $ 154.22
=================
Class S ................................................................ $ 154.25
=================
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
MassMutual Prime Fund - Financial Statements (Continued)
- -----------------------------------------------------------------------------------------------------------
Statement of Operations
Six months ended
June 30, 1999
(Unaudited)
--------------------
<S> <C>
Investment income: (Note 2)
Interest ................................................................ $ 6,135,489
------------------
Expenses: (Note 2)
Investment management fees (Note 3) ..................................... 488,133
Custody fees ............................................................ 12,605
Audit and legal fees .................................................... 3,135
Directors' fees (Note 3) ................................................ 8,187
------------------
512,060
Administration fees (Note 3):
Class A ............................................................. 260
Class L * ........................................................... 54
Class Y ............................................................. 681
Class S ............................................................. 92,263
Service fees (Note 3):
Class A ............................................................. 150
------------------
Total expenses ................................................. 605,468
------------------
Net investment income ........................................... 5,530,021
------------------
Realized and unrealized gain (loss):
Net realized loss on investment transactions ............................ (2,540)
Net change in unrealized appreciation (depreciation)
on investments ...................................................... (83,778)
------------------
Net realized and unrealized loss ................................ (86,318)
------------------
Net increase in net assets resulting from operations .................... $ 5,443,703
==================
</TABLE>
* For the period from May 3, 1999 (commencement of operations) through June 30,
1999.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
MassMutual Prime Fund - Financial Statements (Continued)
- -------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
Six months ended
June 30, 1999 Year ended
(Unaudited) December 31, 1998
---------------- ------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income ...................................................... $ 5,530,021 $ 13,297,412
Net realized loss on investment transactions ............................... (2,540) (2,524)
Net change in unrealized appreciation (depreciation)
on investments ......................................................... (83,778) 62,059
---------------- ------------------
Net increase in net assets resulting from operations ................... 5,443,703 13,356,947
---------------- ------------------
Distributions to shareholders (Note 2):
From net investment income:
Class A .................................................................... -- (94,659)
Class L * ................................................................. -- --
Class Y .................................................................... -- (440,359)
Class S .................................................................... -- (12,743,282)
---------------- ------------------
Total distributions from net investment income ......................... -- (13,278,300)
---------------- ------------------
Net fund share transactions (Note 5):
Class 1 **.................................................................. -- (114,315)
Class 2 ** ................................................................. -- (116,323)
Class 3 ** ................................................................. -- (117,416)
Class A .................................................................... 1,000 208,974
Class L *................................................................... 101,020 --
Class Y .................................................................... 1,398,012 973,553
Class S .................................................................... 19,557,285 9,800,906
---------------- ------------------
Increase in net assets from net fund share transactions ................ 21,057,317 10,635,379
---------------- ------------------
Total increase in net assets ............................................... 26,501,020 10,714,026
Net assets:
Beginning of period ........................................................ 252,432,493 241,718,467
---------------- ------------------
End of period (including undistributed net investment income of $5,549,133
and $19,112, respectively) ............................................. $ 278,933,513 $ 252,432,493
================ ==================
</TABLE>
* For the period from May 3, 1999 (commencement of operations) through June 30,
1999.
** Effective January 1, 1998, Class 1, Class 2, and Class 3 shares were
terminated (See Note 1).
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Prime Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights (For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class A Class L Class Y
------- ------- -------
Six months Period Six months
ended 6/30/99 Year ended ended 6/30/99 ended 6/30/99 Year ended
(Unaudited) 12/31/98+ (Unaudited)** (Unaudited) 12/31/98+
------------- ---------- -------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 150.83 $ 691.21 $ 152.99 $ 150.73 $ 690.78
------------- ---------- -------------- ------------- ----------
Income (loss) from investment operations:
Net investment income 3.10*** 32.03*** 1.14 3.54*** 36.67***
Net realized and unrealized gain (loss) on
investments (0.05) (0.09) (0.03) (0.05) (1.30)
------------- ---------- -------------- ------------- ----------
Total income (loss) from investment operations 3.05 31.94 1.11 3.49 35.37
------------- ---------- -------------- ------------- ----------
Less distributions to shareholders:
From net investment income -- (572.32) -- -- (575.42)
------------- ---------- -------------- ------------- ----------
Net asset value, end of period $ 153.88 $ 150.83 $ 154.10 $ 154.22 $ 150.73
============= ========== ============== ============= ==========
Total Return 2.12% 4.60% 0.73% 2.41% 5.14%
Ratios / Supplemental Data:
Net assets, end of period (000's) $123 $120 $102 $1,977 $556
Net expenses to average daily net assets 1.12%* 1.20% 0.72%* 0.55%* 0.74%
Net investment income to average daily net assets 4.11%* 4.59% 4.59%* 4.66%* 5.21%
<CAPTION>
Class S (1)
------------
Six months
ended 6/30/99 Year ended Year ended Year ended Year ended Period ended
(Unaudited) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94++****
------------- ---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 150.74 $ 150.84 $ 151.00 $ 151.06 $ 150.36 $ 150.00
------------- ----------- ----------- ------------ ----------- -------------
Income (loss) from investment operations:
Net investment income 3.57*** 8.10*** 8.14*** 7.85*** 8.70*** 1.55
Net realized and unrealized gain (loss)
on investments (0.06) 0.03 (0.01) 0.06 (0.02) 0.34
------------- ----------- ----------- ------------ ----------- ------------
Total income (loss) from investment
operations 3.51 8.13 (8.13) 7.91 8.68 1.89
------------- ----------- ----------- ------------ ----------- ------------
Less distributions to shareholders:
From net investment income -- (8.23) (8.29) (7.97) (7.98) (1.53)
------------- ----------- ----------- ------------ ----------- ------------
Net asset value, end of period $ 154.25 $ 150.74 $ 150.84 $ 151.00 $ 151.06 $ 150.36
============= =========== =========== ============ =========== ============
Total Return @ 2.33% 5.39% 5.39% 5.24% 5.78% 1.26%
Ratios / Supplemental Data:
Net assets, end of period (000's) $276,732 $251,757 $241,370 $258,729 $253,936 $170,548
Net expenses to average daily net assets # 0.5168%* 0.5482% 0.5399% 0.5160% 0.5160% 0.5160%*
Net investment income to average daily net
assets 4.72%* 5.23% 5.25% 5.10% 5.61% 5.01%*
# Computed after giving effect to the voluntary partial waiver of
management fee by MassMutual, which terminated May 1, 1997. Without this
partial waiver of fees by MassMutual, the ratio of expenses
to average daily net assets would have been: N/A N/A 0.5515% 0.5509% 0.5468% 0.5605%*
</TABLE>
* Annualized
** For the period from May 3, 1999 (commencement of operations) through
June 30, 1999.
*** Per share amount calculated on the average shares method, which more
appropriately presents the per share data for the period since the use
of the undistributed income method does not accord with the results of
operations.
+ Amounts have been restated to reflect reverse stock splits (See Note
9).
**** For the period from October 3, 1994 (commencement of operations)
through December 31,1994.
++ All per share amounts for the period have been restated to reflect a
1-for-15 reverse stock split effective December 16, 1994.
(1) Class S shares were previously designated as Class 4 shares.
@ Employee retirement benefit plans that invest plan assets in the
Separate Investment Accounts (SIAs) may be subject to certain charges
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment objective and policies for the MassMutual Short-Term
Bond Fund?
The objective and policies of the Fund are to:
. achieve a high total return primarily from current income while minimizing
fluctuations in capital values
. invest primarily in a diversified portfolio of short-term,
investment-grade, fixed-income securities
. maintain duration below three years
. diversify investments among market sectors on the basis of relative merit
How did the Fund perform during the first half of 1999?
The Fund's Class S shares returned 1.46% for the six months ended June 30, 1999,
bettering the 1.14% return of the Lehman Brothers 1-3 Year Government Bond Index
(the Index).
What factors influenced the Fund's performance?
Interest rates rose during the period due to renewed concerns about inflation,
as the U.S. economy continued to display surprisingly strong growth and many
depressed economies in Asia seemed to be turning the corner to better times. A
surge in crude oil prices added to the list of reasons to be worried about
inflation. On the last day of the period, in a widely anticipated move, the
Federal Reserve Board ("Fed") raised short-term interest rates by 25 basis
points (.25%) while retreating to a neutral bias toward future interest rate
changes.
Rising interest rates hampered the Fund's absolute returns. However, the Fund
enjoyed better protection than the Index from the damage inflicted by climbing
rates because the average duration of the Fund's holdings was shorter than the
duration of the Index, especially in the first quarter. The shorter the duration
of a security, the more muted are the effects on it of fluctuations in interest
rates--up or down.As a result, the Fund was able to outperform the Index.
Why was the Fund's average duration shorter than that of the Index?
It was a function of the strategy we use to manage the Fund: the yield
preference strategy. This strategy takes its cues from the shape of the yield
curve, which depicts graphically how the yields demanded by fixed-income
investors change as the duration of their investment lengthens. When the yield
curve is relatively flat--that is, when the yields of long-term securities are
closer to those of issues with shorter maturities--the yield preference strategy
calls for shortening the average duration of the Fund's holdings. When the yield
curve steepens, on the other hand, and there is a larger spread between
comparable securities with different maturities, the strategy favors lengthening
average duration to take advantage of the higher yields.
At the beginning of the year, with the yield curve fairly flat, the Fund's
average duration was 1.09 years, compared to 1.68 for the Index. By the end of
June, the yield curve had steepened considerably, with rate increases
particularly noteworthy in the two-year maturity. In accordance with the
strategy, we lengthened the Fund's average duration to 1.63 years by the end of
the period, which was more in line with the Index's duration of 1.69 years.
How did the Fund's holdings change during the period?
The biggest increase occurred in Treasuries, which rose from 30% of assets at
the end of 1998 to 39% on June 30. Corporate securities also increased--from 16%
to 21%--while asset-backed securities grew from 4% to 9%. These purchases were
funded primarily by reducing money market holdings from 41% to 21%.
In most cases, purchases were made with the intent of increasing the Fund's
average duration. For example, we did four different swaps of Treasuries,
exchanging one-year for two-year notes. In the asset-backed category, we
invested in four attractive issues with maturities of one, three, and five
years. Corporate purchases included a three-year Bombardier Capital note with a
BBB+ rating and a five year note from Dana Corp. with an A- rating. We also
swapped a three-year Valero Energy credit for a five-year credit--both with BBB-
ratings.
12
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
We sold our eight-year A+ First Brands paper when the company was acquired by
Clorox. It did well on the acquisition news, and we felt that there was little
upside potential left. Other sales in the corporate sector were issues we'd
purchased from J. C. Penney and Lockheed Martin. In the former case, we
correctly anticipated deteriorating credit conditions for the company, and its
credit rating was downgraded after we sold our holdings. The Lockheed Martin
sale was prompted when the company posted disappointing earnings and our view of
the overall prospects for the defense industry dimmed.
What is your outlook for 1999?
Economic growth and inflation will determine whether the Fed raises rates
further in the second half of the year. Our job, though, is not to guess what
the Fed will do, but rather to respond to changes in the yield curve. Over brief
periods of time, the yield preference strategy might lag our benchmark Index.
However, we believe that over longer periods of three to five-years, the
strategy should outperform one of simply matching the duration of the Index.
[PIE CHART APPEARS HERE]
Duration Diversification (6/30/99)
MassMutual Short-Term Bond Fund
Average Duration = 1.63 years
Less than 1 year 39.9%
1-3 years 44.6%
3-5 years 8.5%
5-10 years 7.0%
[PIE CHART APPEARS HERE]
Quality Structure (6/30/99)
MassMutual Short-Term Bond Fund
U.S. Governments Cash Equivalents
Aaa/AAA 79.9%
Baa/BBB 10.0%
A/A 9.5%
Aa/AA 0.6%
13
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund -- Portfolio Manager Report (continued)
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Short-Term Bond Fund Class S and the
Lehman Brothers 1-3 Year Government Bond Index.
MassMutual Short-Term Bond Fund
Total Return Year-to-Date One Year Average Annual
1/1/99 - 6/30/99 7/1/98 - 6/30/99 10/3/94 - 6/30/99
Class S 1.46% 4.67% 6.72%
Lehman Brothers
1-3 Year 1.14% 5.05% 6.42%
Government Bond Index
[LINE GRAPH APPEARS HERE]
GROWTH OF $10,000 INVESTMENT SINCE INCEPTION
Class S Lehman 1-3 Yr.
10/3/94 10,000 10,000
12/94 10,013 10,000
6/95 10,816 10,659
12/95 11,192 11,084
6/96 11,380 11,244
12/96 11,816 11,643
6/97 12,119 11,976
12/97 12,624 12,416
6/98 13,007 12,794
12/98 13,418 13,281
6/99 13,614 13,440
Hypothetical Investments in MassMutual Short-Term Bond Fund Class A, Class Y and
the Lehman Brothers 1-3 Year Government Bond Index
MassMutual Short-Term Bond Fund
Total Return Year-to-Date One Year Average Annual
1/1/99 - 6/30/99 7/1/98 - 6/30/99 1/1/98 - 6/30/99
Class A 1.08% 4.08% 4.55%
Class Y 1.42% 4.49% 5.03%
Lehman Brothers
1-3 Year Government
Bond Index 1.14% 5.05% 5.39%
[LINE GRAPH APPEARS HERE]
Class A Class Y Lehman 1-3 Yr.
12/97 10,000 10,000 10,000
3/98 10,150 10,160 10,144
6/98 10,270 10,300 10,300
9/98 10,471 10,511 10,616
12/98 10,575 10,612 10,697
3/99 10,658 10,711 10,762
6/99 10,689 10,763 10,819
Hypothetical Investments in MassMutual Short-Term Bond Fund Class L and the
Lehman Brothers 1-3 Year Government Bond Index
MassMutual Short-Term Bond Fund
Total Return Since Inception
5/3/99 - 6/30/99
Class L 0.10%
Lehman Brothers
1-3 Year 0.22%
Government Bond Index
[LINE GRAPH APPEARS HERE]
Class L Lehman 1-3 Yr.
5/3/99 10,000 10,000
5/31/99 9,981 9,993
6/30/99 10,010 10,022
Past performance is not predictive of future results. The investment return and
principal value of the Fund will fluctuate with market conditions so that shares
of the Fund, when redeemed, may be worth more or less than their original cost.
Investors should note that the Fund is a professionally managed mutual fund
while the Lehman Brothers 1-3 Year Government Bond Index is unmanaged and does
not incur expenses, and cannot be purchased directly by investors.
14
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1999
Principal
Amount Market Value
--------- ------------
BONDS & NOTES -- 82.2%
ASSET BACKED SECURITIES -- 9.5%
California
Infrastructure PG&
E-1, 1997-1, Class A6
6.320% 09/25/2005 $ 250,000 $ 249,850
California
Infrastructure SCE-1,
1997-1, Class A5
6.280% 09/25/2005 300,000 299,148
California
Infrastructure
SDG&E-1,1997-1,
Class A5
6.190% 09/25/2005 200,000 198,794
Capita Equipment
Receivables Trust
1996-1, Class A4
6.280% 06/15/2000 685,242 686,099
Capita Equipment
Receivables Trust
1997-1, Class A3
6.120% 09/15/2000 1,500,000 1,503,315
Chase Manhattan Auto
Owner Trust 1997-A,
Class A4
6.400% 07/16/2001 1,500,000 1,506,555
Chase Manhattan RV
Owner Trust 1997-A,
Class A7
6.140% 10/16/2006 1,000,000 1,000,540
First Bank Corporate
Card Master Trust
1997-1, Class A
6.400% 02/15/2003 1,000,000 997,810
First Security Auto
Owner Trust 1999-1,
Class A4
5.740% 06/15/2004 5,000,000 4,931,900
Ford Credit Auto
Owner Trust Series
1999-A, Class A3
5.310% 04/16/2001 2,500,000 2,496,875
Ford Credit Auto
Owner Trust,
1996-B, Class A-4
6.300% 01/15/2001 1,740,733 1,744,528
Metlife Capital
Equipment Loan
Trust Series 1997-A,
Class A
6.850% 05/20/2008 1,000,000 1,018,810
Peco Energy
Transition Trust
Series 1999-A,
Class A4
5.800% 03/01/2007 2,000,000 1,935,000
Railcar Trust No.
1992-1
7.750% 06/01/2004 893,115 920,614
Rental Car Finance
Corp. Series 1999-1A,
Class A+
5.900% 02/25/2007 1,000,000 984,470
Student Loan
Marketing
Association Series
1998-1, Class A1
5.599% 01/25/2007 1,608,569 1,604,258
-----------
TOTAL ASSET BACKED
SECURITIES 22,078,566
(Cost $22,182,144) -----------
CORPORATE DEBT -- 21.9%
AirTouch
Communications,
Inc
7.500% 07/15/2006 1,000,000 1,038,710
America West Airlines
1996-1, Class A
6.850% 07/02/2009 1,929,915 1,869,683
Analog Devices, Inc.
6.625% 03/01/2000 1,000,000 1,004,440
Associates Corporation
of North America
6.750% 08/01/2001 1,500,000 1,516,260
AT&T Corp.
5.625% 03/15/2004 3,000,000 2,902,890
Bell Atlantic Financial
Services, Inc.
6.610% 02/07/2000 2,000,000 2,008,520
BHP Finance (USA)
Limited
7.875% 12/01/2002 1,000,000 1,035,870
Bombardier Capital
Inc.+
6.000% 01/15/2002 2,000,000 1,966,876
Carlisle Companies
Incorporated
7.250% 01/15/2007 1,000,000 983,940
CSC Enterprises+
6.500% 11/15/2001 2,000,000 2,024,020
CSX Corporation
7.050% 05/01/2002 2,900,000 2,933,089
Dana Corporation
6.250% 03/01/2004 5,000,000 4,888,800
Emerald Investment
Grade CBO+
5.644% 05/24/2011 2,000,000 1,992,500
General American
Transportation
Corporation
6.750% 03/01/2006 1,000,000 956,090
Heller Financial, Inc.
6.250% 03/01/2001 2,000,000 2,000,920
Heller Financial, Inc.
6.330% 07/28/2000 2,000,000 2,004,640
IMC Global Inc.
6.625% 10/15/2001 1,500,000 1,498,005
MAPCO Inc.
7.250% 03/01/2009 1,250,000 1,232,338
Norfolk Southern
Corporation
7.350% 05/15/2007 1,000,000 1,020,930
Occidental Petroleum
Corporation
6.750% 11/15/2002 2,900,000 2,875,002
Joseph E. Seagram &
Sons, Inc.
6.250% 12/15/2001 3,200,000 3,175,734
Union Oil Company of
California
9.875% 08/15/2002 2,500,000 2,704,325
Valero Energy
Corporation
7.375% 03/15/2006 1,000,000 970,765
Vulcan Materials
Company
5.750% 04/01/2004 5,000,000 4,856,700
Walt Disney Company,
The
6.375% 03/30/2001 1,500,000 1,509,615
-----------
TOTAL CORPORATE DEBT 50,970,662
(Cost $51,435,502) -----------
(Continued)
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Market Value
--------- ------------
NON-U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 2.8%
Collateralized Mortgage Obligations
Asset Securitization
Corporation Series
1995-MD4, Class A1
7.100% 08/13/2029 $ 2,404,021 $ 2,426,546
Merrill Lynch
Mortgage Investors,
Inc. Series 1998-
ASPI, Class C +
5.890% 10/01/2003 4,000,000 4,000,000
------------
TOTAL NON-U.S. GOVERNMENT
AGENCY OBLIGATIONS 6,426,546
(Cost $6,524,409) ------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 7.2%
Federal Home Loan Mortgage Corporation
(FHLMC) -- 1.6%
Collateralized Mortgage Obligations -- 1.5%
FHLMC Series 1693
Class G
6.000% 07/15/2007 2,000,000 1,990,620
FHLMC Series 1704
Class PE
6.000% 07/15/2007 1,649,300 1,651,361
------------
3,641,981
------------
Pass-Through Securities -- 0.1%
FHLMC
4.750% 09/01/2006 170,006 165,489
------------
3,807,470
------------
Federal National Mortgage Association
(FNMA) -- 1.3%
Collateralized Mortgage Obligations -- 1.0%
FNMA Series 1993-71
Class PG
6.250% 07/25/2007 2,500,000 2,496,075
------------
Pass-Through Securities -- 0.3%
FNMA
8.000% 05/01/2013 293,302 295,909
FNMA
9.000% 10/01/2009 276,470 290,902
------------
586,811
------------
3,082,886
------------
Government National Mortgage Association
(GNMA) -- 0.4%
Pass-Through Securities
GNMA
8.000% 05/15/2001-
11/15/2007 933,702 960,125
------------
U.S. Government Guaranteed Notes -- 3.9%
1994-A Baxter
Springs, KS
6.310% 08/01/2001 500,000 502,215
1994-A Detroit, MI
6.310% 08/01/2001 450,000 451,994
1994-A Jacksonville,
FL
6.310% 08/01/2001 1,485,000 1,491,579
1994-A Los Angeles
County, CA
6.310% 08/01/2001 225,000 225,997
1994-A Tacoma, WA
6.310% 08/01/2001 195,000 195,864
1994-A Trenton, NJ
6.310% 08/01/2001 145,000 145,642
U.S. Dept. of Housing
and Urban
Development, Series
1996-A
6.440% 08/01/1999 2,000,000 2,002,500
U.S. Dept. of Housing
and Urban
Development, Series
1997-A
6.110% 08/01/2000 4,000,000 4,010,000
------------
9,025,791
------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 16,876,272
(Cost $16,268,526) ------------
U.S. TREASURY OBLIGATIONS -- 40.8%
U.S. Treasury Notes
U.S. Treasury Note
5.625% 12/31/1999 20,000,000 20,046,800
U.S. Treasury Note
5.625% 11/30/2000 64,100,000 64,270,506
U.S. Treasury Note
6.125% 08/15/2007 4,500,000 4,548,510
U.S. Treasury Note
6.500% 10/15/2006 6,000,000 6,195,000
------------
TOTAL U.S. TREASURY
OBLIGATIONS 95,060,816
(Cost $95,620,768) ------------
TOTAL BONDS & NOTES 191,412,862
(Cost $192,031,349) ------------
SHORT-TERM INVESTMENTS -- 21.6%
Commercial Paper -- 21.0%
Crown Cork & Seal
Company, Inc.
5.100% 08/30/1999 5,700,000 5,648,224
Crown Cork & Seal
Company, Inc.
5.120% 08/18/1999 535,000 531,347
Crown Cork & Seal
Company, Inc.
5.170% 08/18/1999 665,000 660,416
Dana Credit
Corporation
5.300% 08/06/1999 4,045,000 4,023,561
Houston Industries
Finance Co. L.P.
4.980% 07/21/1999 3,635,000 3,624,943
Kerr-McGee Credit
Corporation
5.500% 08/24/1999 5,360,000 5,315,780
Mallinckrodt Group
Inc.
5.000% 07/14/1999 4,700,000 4,691,514
Ohio Power Company
5.820% 02/04/2000 1,515,000 1,464,083
Ryder System, Inc.
5.000% 08/06/1999 275,000 273,625
Ryder System, Inc.
5.310% 09/17/1999 255,000 251,989
Ryder System, Inc.
5.350% 09/17/1999 130,000 128,493
Ryder System, Inc.
5.470% 08/20/1999 184,000 182,602
Safeway Inc.
5.060% 08/16/1999 4,385,000 4,356,649
Service Corporation
International
5.040% 11/02/1999 2,655,000 2,604,703
Service Corporation
International
5.050% 10/06/1999 3,925,000 3,867,227
TRW Inc.
5.070% 09/07/1999 1,525,000 1,509,301
Vastar Resources, Inc.
5.320% 09/17/1999 1,010,000 998,074
VF Corporation
5.050% 07/29/1999 5,115,000 5,094,909
VF Corporation
5.120% 08/23/1999 3,645,000 3,617,525
------------
48,844,965
------------
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Market Value
--------- ------------
Discount Note -- 0.6%
Federal National
Mortgage Association
4.480% 11/02/1999 $ 1,490,000 $ 1,464,819
-------------
TOTAL SHORT-TERM
INVESTMENTS 50,309,784
(Cost $50,322,850) -------------
Total Investments -- 103.8% 241,722,646
(Cost $242,354,199)(***)
Other Assets/(Liabilities) -- (3.8%) (8,825,279)
-------------
Net Assets-- 100.0% $ 232,897,367
=============
Notes to Portfolio of Investments
***Aggregate cost for Federal tax purposes (Note 7)
+ Securities exempt from registration under rule
144A of the Securities Act of 1933. The
securities may be resold in transactions exempt
from registration, normally to qualified
institutional buyers.
The remainder of this page intentionally left blank.
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
June 30, 1999
(Unaudited)
--------------
<S> <C>
Assets:
Investments, at value (cost $192,031,349) (Note 2) ................ $ 191,412,861
Short-term investments, at value (cost $50,322,850) (Note 2) ...... 50,309,785
--------------
Total Investments ............................................. 241,722,646
--------------
Cash .............................................................. 3,479
Receivables from:
Investments sold .............................................. 5,390
Fund shares sold .............................................. 2,324
Interest ...................................................... 1,803,922
--------------
Total assets .............................................. 243,537,761
--------------
Liabilities:
Payables for:
Fund shares redeemed .......................................... 10,511,849
Directors' fees and expenses (Note 3) ......................... 1,915
Affiliates (Note 3):
Investment management fees ................................ 90,121
Administration fees ....................................... 26,344
Service fees .............................................. 82
Accrued expenses and other liabilities ............................ 10,083
--------------
Total liabilities ......................................... 10,640,394
--------------
Net assets ......................................................... $ 232,897,367
==============
Net assets consist of:
Paid-in capital ................................................... $ 226,266,704
Undistributed net investment income ............................... 6,959,536
Accumulated net realized gain on investments ...................... 302,680
Net unrealized depreciation on investments ........................ (631,553)
--------------
$ 232,897,367
==============
Net assets:
Class A ........................................................... $ 131,856
==============
Class L ........................................................... $ 102,074
==============
Class Y ........................................................... $ 175,106
==============
Class S ........................................................... $ 232,488,331
==============
Shares outstanding:
Class A ........................................................... 12,638
==============
Class L ........................................................... 9,783
==============
Class Y ........................................................... 16,754
==============
Class S ........................................................... 22,239,465
==============
Net asset value, offering price and redemption price per share:
Class A ........................................................... $ 10.43
==============
Class L ........................................................... $ 10.43
==============
Class Y ........................................................... $ 10.45
==============
Class S ........................................................... $ 10.45
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of Operations
Six months ended
June 30, 1999
(Unaudited)
-----------
Investment income: (Note 2)
Interest ............................................. $ 7,682,289
-----------
Expenses: (Note 2)
Investment management fees (Note 3) .................. 577,414
Custody fees ......................................... 13,822
Audit and legal fees ................................. 3,659
Directors' fees (Note 3) ............................. 8,186
-----------
603,081
Administration fees (Note 3):
Class A .......................................... 275
Class L (*) ...................................... 52
Class Y .......................................... 217
Class S .......................................... 118,966
Service fees (Note 3):
Class A .......................................... 162
-----------
Total expenses ............................... 722,753
-----------
Net investment income ........................ 6,959,536
-----------
Realized and unrealized gain (loss):
Net realized gain on investment transactions ......... 378,341
Net change in unrealized appreciation (depreciation)
on investments ................................... (3,476,313)
-----------
Net realized and unrealized loss ............. (3,097,972)
-----------
Net increase in net assets resulting from operations . $ 3,861,564
===========
* For the period from May 3, 1999 (commencement of operations) through June 30,
1999.
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION> Six months ended
June 30, 1999 Year ended
(Unaudited) December 31, 1998
Increase (Decrease) in Net Assets: ------------------ -------------------
<S> <C> <C>
Operations:
Net investment income ....................................................... $ 6,959,536 $ 14,427,598
Net realized gain (loss) on investment transactions ......................... 378,341 (104,694)
Net change in unrealized appreciation (depreciation) on investments ......... (3,476,313) 1,551,421
------------------ -------------------
Net increase in net assets resulting from operations .................... 3,861,564 15,874,325
------------------ -------------------
Distributions to shareholders (Note 2):
From net investment income:
Class A ..................................................................... - (6,032)
Class L *.................................................................... - -
Class Y ..................................................................... - (13,681)
Class S ..................................................................... - (14,459,636)
------------------ -------------------
Total distributions from net investment income .......................... - (14,479,349)
------------------ -------------------
From net realized gains:
Class A ..................................................................... - (137)
Class L * ................................................................... - -
Class Y ..................................................................... - (279)
Class S ..................................................................... - (321,463)
------------------ -------------------
Total distributions from net realized gains ............................. - (321,879)
------------------ -------------------
Net fund share transactions (Note 5):
Class 1 ** .................................................................. - (122,436)
Class 2 ** .................................................................. - (124,585)
Class 3 ** .................................................................. - (125,819)
Class A ..................................................................... 1,000 128,605
Class L * ................................................................... 101,940 -
Class Y ..................................................................... (97,430) 267,365
Class S ..................................................................... (55,041,039) 82,333,818
------------------ -------------------
Increase (decrease) in net assets from net fund share transactions ...... (55,035,529) 82,356,948
------------------ -------------------
Total increase (decrease) in net assets ..................................... (51,173,965) 83,430,045
Net assets:
Beginning of period ......................................................... 284,071,332 200,641,287
------------------ -------------------
End of period (including undistributed net investment income of
$6,959,536 and $0, respectively) ...................................... $ 232,897,367 $ 284,071,332
================== ===================
</TABLE>
* For the period from May 3, 1999 (commencement of operations) through
June 30, 1999.
** Effective January 1, 1998, Class 1, Class 2, and Class 3 shares were
terminated (See Note 1).
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
- -------------------------------------------------------------------------------
MassMutual Short-Term Bond Fund - Financial Statements (Continued)
- -------------------------------------------------------------------------------
Financial Highlights (For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class A Class L Class Y
------- ------- -------
Six months Period Six months
ended 6/30/99 Year ended ended 6/30/99 ended 6/30/99 Year ended
(Unaudited) 12/31/98 + (Unaudited)** (Unaudited) 12/31/98 +
------------- ---------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.31 $ 10.25 $ 10.42 $ 10.31 $ 10.24
------------- ---------- ------------- ------------- ----------
Income (loss) from investment operations:
Net investment income 0.24 0.52*** 0.09 0.39 0.57***
Net realized and unrealized gain (loss) on investments (0.12) 0.05 (0.08) (0.25) 0.06
------------- ---------- ------------- ------------- ----------
Total income (loss) from investment operations 0.12 0.57 0.01 0.14 0.63
------------- ---------- ------------- ------------- ----------
Less distributions to shareholders:
From net investment income - (0.50) - - (0.55)
From net realized gains - (0.01) - - (0.01)
------------- ---------- ------------- ------------- ----------
Total distributions - (0.51) - - (0.56)
------------- ---------- ------------- ------------- ----------
Net asset value, end of period $ 10.43 $ 10.31 $ 10.43 $ 10.45 $ 10.31
============= ========== ============= ============= ==========
Total Return 1.08% 5.75% 0.10% 1.42% 6.12%
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 132 $ 129 $ 102 $ 175 $ 269
Net expenses to average daily net assets 1.13%* 1.20% 0.71%* 0.63%* 0.74%
Net investment income to average daily net assets 4.66%* 4.95% 5.21%* 5.12%* 5.40%
Portfolio turnover rate 42% 44% 42% 42% 44%
<CAPTION>
Class S (1)
-----------
Six months
ended 6/30/99 Year ended Year ended Year ended Year ended Period ended
(Unaudited) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94****
------------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.30 $ 10.23 $ 10.11 $ 10.15 $ 9.85 $ 10.00
------------- ---------- ---------- ---------- ---------- ------------
Income (loss) from investment operations:
Net investment income 0.31 0.56 0.65*** 0.60 0.66 0.16
Net realized and unrealized gain (loss) on
investments (0.16) 0.08 0.04 (0.03) 0.50 (0.15)
------------- ---------- ---------- ---------- ---------- ------------
Total income (loss) from investment
operations 0.15 0.64 0.69 0.57 1.16 0.01
------------- ---------- ---------- ---------- ---------- ------------
Less distributions to shareholders:
From net investment income - (0.56) (0.57) (0.60) (0.66) (0.16)
From net realized gains - (0.01) 0.00 (0.01) (0.20) -
------------- ---------- ---------- ---------- ---------- ------------
Total distributions - (0.57) (0.57) (0.61) (0.86) (0.16)
------------- ---------- ---------- ---------- ---------- ------------
Net asset value, end of period $ 10.45 $ 10.30 $ 10.23 $ 10.11 $ 10.15 $ 9.85
============= ========== ========== ========== ========== ============
Total Return @ 1.46% 6.29% 6.84% 5.57% 11.77% 0.13%
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 232,488 $ 283,673 $ 200,268 $ 145,182 $ 122,904 $ 106,846
Net expenses to average daily net assets # 0.5436%* 0.5482% 0.5423% 0.5190% 0.5190% 0.5190%*
Net investment income to average daily net
assets 5.24%* 5.58% 6.22% 6.00% 6.32% 6.37%*
Portfolio turnover rate 42% 44% 48% 61% 114% 15%
# Computed after giving effect to the voluntary partial waiver of
management fee by MassMutual, which terminated May 1, 1997. Without this
partial waiver of fees by MassMutual, the ratio of expense
to avearage daily net assets would have been: N/A N/A 0.5530% 0.5545% 0.5524% 0.5654%*
</TABLE>
* Annualized
** For the period from May 3, 1999 (commencement of operations) through
June 30, 1999.
*** Per share amount calculated on the average shares method, which more
appropriately presents the per share data for the period since the use
of the undistributed income method does not accord with the results of
operations.
+ Amounts have been restated to reflect reverse stock splits (See Note 9).
**** For the period from October 3, 1994 (commencement of operations)
through December 31, 1994.
(1) Class S shares were previously designated as Class 4 shares.
@ Employee retirement benefit plans that invest plan assets in the
Separate Investment Accounts (SIAs) may be subject to certain charges
as set forth in their respective Plan Documents. Total return figures
would be lower for the periods presented if they reflected these
charges.
The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment objective and policies for the MassMutual Core Bond
Fund?
The objective and policies of the Fund are to:
. achieve a high total rate of return consistent with prudent investment risk
and the preservation of capital
. invest primarily in a diversified portfolio of investment grade,
fixed-income securities
. maintain duration in a targeted range from four to seven years
. diversify investments by industry, sector, maturity, issuer class, and
quality sectors to reduce risk of capital erosion
How did the Fund perform during the first half of 1999?
For the six months ended June 30, 1999, the Fund's Class S shares returned
- -2.26%. The Lehman Brothers Government/Corporate Bond Index (the Index) returned
- -2.27%.
What factors influenced the Fund's performance?
Rising interest rates made it difficult for the Fund to make much headway.
Yields increased all along the yield curve, especially in the two to ten-year
range, where most of the Fund's purchases are typically concentrated. While
investors had anticipated an economic slowdown and possibly a recession for most
of 1998, concerns shifted back to a possible return of inflation in 1999. This
was due to several factors, including ongoing strength in the U.S. economy,
signs of a possible recovery in the depressed Asian economies and a surge in
crude oil prices.
On the inflation front, several economic reports during the first half were
worrisome to investors, particularly a much higher than expected Consumer Price
Index for the month of April. As a result, there was increasing speculation that
the Federal Reserve Board (Fed) would raise short-term interest rates at its
June 29-30 meeting. As expected, the Fed announced a .25% hike in the federal
funds rate on June 30. However, investors were cheered by the news that the Fed
retreated to a neutral bias regarding future changes in rates.
Helping the Fund's performance relative to the Index was the Fund's heavier
weighting in corporate securities, especially those with BBB ratings, which
offer higher yields than Treasury securities. On the negative side, the Fund's
longer-duration Treasury holdings detracted from performance, since issues with
longer maturities generally suffer the most in a period of rising rates.
How was the Fund positioned during the period?
Corporate securities were the largest sector allocation for the Fund, comprising
approximately 40% of assets for most of the period. Treasury securities were the
second-largest category, at 29.2% on June 30. After rapid growth in the Fund's
assets during 1998, there was some backtracking during the first half of 1999.
To meet these redemption needs, the Fund sold some Treasuries in February, which
had the effect of simultaneously reducing the percentage of Treasuries and
increasing the percentage of corporates. However, by the end of the period, the
Fund's sector allocations were close to what they had been at the beginning of
the year.
The Fund's overall credit quality remained AA, with new corporate purchases
focused on issues with a BBB rating. Attractive additions to the portfolio
included securities from Kroger (a grocery chain), Marsh & McLennan (insurance),
Sealed Air Corp. (packaging), Republic Services (waste disposal) and Union Tank
Car (transportation). Mortgage-backed securities were the third largest sector
for the Fund, at around 18% of assets. The biggest component in that sector was
current coupon pass-throughs backed by government agencies Fannie Mae, Ginnie
Mae and Freddie Mac.
As before, our duration strategy is to target the average duration of the Fund
at plus or minus 5% of the duration of our benchmark Index.
22
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund -- Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
What is your outlook for the rest of 1999?
The supply of corporate securities was near record high levels during the first
six months of the year, and we anticipate more of the same in the third quarter.
For one thing, supply dropped off noticeably in the last two weeks of June, as
buyers sat on the sidelines to see what the Fed would do about interest rates.
Now that the Fed has played its hand, we expect a resurgence of activity in the
corporate market. We will also continue to look for opportunities in
asset-backed securities, which tend to have attractive yields relative to their
shorter maturities.
Further movements in interest rates will depend on economic developments in the
U.S. and overseas. However, the Fed has made it clear that it intends to be
"preemptive" in fighting inflation. That means it would probably hike short-term
rates again at the slightest hint of rising inflation.
Another concern we have is the slight deterioration in overall credit quality we
have seen for the past two years or so. With more companies announcing earnings
shortfalls or other disappointments, there is a greater need to be diligent in
the selection of corporate securities. However, with the credit analysis
capabilities of MassMutual, we are confident that we can continue to add value
for the Fund's shareholders.
[PIE CHART APPEARS HERE]
Duration Diversification (6/30/99)
MassMutual Core Bond Fund
Average Duration=5.6 years
Less than 1 year 8.7%
1-3 years 14.0%
3-5 years 22.2%
5-10 years 45.8%
10-20 years 9.3%
[PIE CHART APPEARS HERE]
Quality Structure (6/30/99)
MassMutual Core Bond Fund
U.S. Governments Cash Equivalents
Aa/AA 4.7%
A/A 13.7%
Baa/BBB 21.3%
Ba/BB 1.6%
Aaa/AAA 58.7%
23
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund -- Portfolio Manager Report (continued)
- --------------------------------------------------------------------------------
Growth of $10,000 Investment
Hypothetical Investments in MassMutual Core Bond Fund Class S and the Lehman
Brothers Government/Corporate Bond Index
MassMutual Core Bond Fund
Total Return Year-to-date One Year Average Annual
1/1/99 - 6/30/99 7/1/98 - 6/30/99 10/3/94 - 6/30/99
Class S -2.26% 1.76% 7.80%
Lehman Brothers
Government/Corporate
Bond Index -2.27% 2.70% 8.07%
[LINE GRAPH APPEARS HERE]
GROWTH OF $10,000 INVESTMENT SINCE INCEPTION
Class S Lehman Bros.gov't Corp
10/3/94 10,000 10,000
12/94 10,020 10,037
6/95 11,212 11,220
12/95 11,940 11,968
6/96 11,695 11,743
12/96 12,274 12,315
6/97 12,626 12,653
12/97 13,474 13,516
6/98 14,035 14,080
12/98 14,611 14,796
6/99 14,281 14,460
Hypothetical Investments in MassMutual Core Bond Fund Class A, Class Y and the
Lehman Brothers Government/Corporate Bond Index
MassMutual Core Bond Fund
Total return Year-to-Date One Year Average Annual
1/1/99 - 6/30/99 7/1/98 - 6/30/99 1/1/98 - 6/30/99
Class A -2.44% 1.27% 3.40%
Class Y -2.31% 1.58% 3.81%
Lehman Brothers
Government/Corporate -2.27% 2.70% 4.60%
Bond Index
[LINE GRAPH APPEARS HERE]
CLASS A Class Y Lehman Bros. Gov't Corp.
12/97 10,000 10,000 10,000
3/98 10,140 10,150 10,152
6/98 10,380 10,410 10,417
9/98 10,796 10,831 10,933
12/98 10,775 10,825 10,947
3/99 10,649 10,702 10,816
6/99 10,512 10,575 10,698
Hypothetical Investments in MassMutual Core Bond fund Class L and the Lehman
Brothers Government/Corporate Bond index
MassMutual Core Bond Fund
Total Return Since Inception
5/3/99 - 6/30/99
Class L -1.55%
Lehman Brothers
Government/Corporate -1.34%
Bond Index
[LINE GRAPH APPEARS HERE]
Class L Lehman Bros. Gov't Corp.
5/3/99 10,000 10,000
5/31/99 9,881 9,897
6/30/99 9,845 9,866
Past performance is not predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund, while the Lehman Brothers Government/Corporate Bond Index is
unmanaged and does not incur expenses, and cannot be purchased directly by
investors.
24
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1999
Principal
Amount Market Value
----------- --------------
BONDS & NOTES -- 95.5%
ASSET BACKED SECURITIES -- 7.5%
California
Infrastructure PG&
E-1, 1997-1, Class A6
6.320% 09/25/2005 $ 550,000 $ 549,670
California
Infrastructure SCE-1,
1997-1, Class A5
6.280% 09/25/2005 700,000 698,012
California
Infrastructure
SDG&E-1,1997-1,
Class A5
6.190% 09/25/2005 500,000 496,985
Capita Equipment
Receivables Trust
1996-1, Class A4
6.280% 06/15/2000 2,055,727 2,058,297
Case Equipment Loan
Trust 1998-A,
Class A4
5.830% 02/15/2005 3,500,000 3,478,195
Caterpillar Financial
Asset Trust, 1997-B,
Class A3
6.160% 09/25/2003 3,500,000 3,507,700
Chase Manhattan Auto
Owner Trust 1998-A,
Class A4
5.800% 12/16/2002 3,750,000 3,729,563
Chase Manhattan RV
Owner Trust 1997-A,
Class A7
6.140% 10/16/2006 4,500,000 4,502,430
Community Program
Loan Trust, 1987-A,
Class A4
4.500% 10/01/2018 825,540 731,419
Ford Credit Auto
Owner Trust,
1996-B, Class A-4
6.300% 01/15/2001 4,351,834 4,361,321
Metlife Capital
Equipment Loan
Trust Series 1997-A,
Class A
6.850% 05/20/2008 2,500,000 2,547,025
Peco Energy
Transition Trust
Series 1999-A,
Class A6
6.050% 03/01/2009 2,300,000 2,202,963
Peco Energy
Transition Trust
Series 1999-A,
Class A7
6.130% 03/01/2009 1,200,000 1,140,372
Premier Auto Trust
Series 1998-4,
Class A3
5.690% 06/08/2002 4,000,000 3,989,760
Premier Auto Trust
Series 1998-5,
Class A3
5.070% 07/08/2002 2,000,000 1,975,780
Railcar Trust No.
1992-1
7.750% 06/01/2004 1,041,968 1,074,050
Rental Car Finance
Corp. Series 1999-1A,
Class A+
5.900% 02/25/2007 2,000,000 1,968,940
Textron Financial
Corporation
5.890% 01/15/2005 3,500,000 3,479,980
Toyota Auto Lease
Trust Series 1998-B,
Class A1
5.350% 07/25/2002 3,500,000 3,464,300
Travelers Funding Ltd. 3,100,000 2,875,250
----------
TOTAL ASSET BACKED
SECURITIES 48,832,012
==========
(Cost $49,309,098)
CORPORATE DEBT -- 41.5%
AirTouch
Communications,
Inc.
7.500% 07/15/2006 3,000,000 3,116,130
Alcan Aluminum
Limited
6.250% 11/01/2008 2,500,000 2,340,550
America West Airlines
1996-1, Class A
6.850% 07/02/2009 4,342,309 4,206,786
American Airlines
1994-A Pass Through
Trusts, Class A4
9.780% 11/26/2011 1,732,579 1,977,981
American General
Finance Corporation
5.750% 11/01/2003 2,000,000 1,938,000
AMR Corporation
9.000% 08/01/2012 2,000,000 2,189,240
Analog Devices, Inc.
6.625% 03/01/2000 1,500,000 1,506,660
Anheuser-Busch
Companies, Inc.
5.375% 09/15/2008 3,500,000 3,155,180
Archer-Daniels-
Midland Company
6.750% 12/15/2027 2,000,000 1,866,320
Associates Corporation
of North America
6.750% 08/01/2001 2,000,000 2,021,680
Associates Corporation
of North America
7.875% 09/30/2001 1,500,000 1,551,525
Barrick Gold
Corporation
7.500% 05/01/2007 4,000,000 3,973,754
Bell Atlantic Financial
Services, Inc.
6.610% 02/04/2000 1,750,000 1,757,333
BHP Finance (USA)
Limited
6.420% 03/01/2026 3,500,000 3,465,805
Bombardier Capital
Inc.+
6.000% 01/15/2002 4,000,000 3,933,752
Boston Scientific
Corporation
6.625% 03/15/2005 6,300,000 5,868,198
Cable & Wireless
Communications plc
6.750% 12/01/2008 3,000,000 2,869,131
Carlisle Companies
Incorporated
7.250% 01/15/2007 2,665,000 2,622,200
Celulosa Arauco
Constitucion
6.950% 09/15/2005 2,000,000 1,768,740
(Continued)
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Market Value
---------- ------------
Champion
International
Corporation
6.400% 02/15/2026 $2,500,000 $2,411,725
The Charles Schwab
Corporation
6.250% 01/23/2003 2,500,000 2,460,925
The CIT Group, Inc.
5.500% 02/15/2004 4,000,000 3,817,360
The Columbia Gas
System, Inc.
6.610% 11/28/2002 3,000,000 2,995,890
Comcast Cable
Communications,
Inc
8.375% 05/01/2007 2,500,000 2,677,450
Commercial Credit
Company
7.750% 03/01/2005 3,000,000 3,149,070
ConAgra, Inc.
7.000% 10/01/2028 3,000,000 2,808,150
Continental Airlines,
Inc., Series 1996-2B
8.560% 07/02/2014 1,627,412 1,735,635
Continental Airlines,
Inc., Series 1996-B
7.820% 04/15/2015 1,861,056 1,903,637
Crown Cork & Seal
Company, Inc.
6.750% 12/15/2003 3,550,000 3,504,063
CSX Corporation
7.050% 05/01/2002 3,000,000 3,034,230
CSX Corporation
7.250% 05/01/2027 4,000,000 3,927,320
Dana Corporation
6.500% 03/15/2008 1,750,000 1,669,745
Dana Corporation
7.000% 03/01/2029 1,600,000 1,470,384
Dover Corporation
6.250% 06/01/2008 2,000,000 1,889,660
Dover Corporation
6.650% 06/01/2028 2,000,000 1,786,380
Emerald Investment
Grade CBO +
5.644% 05/24/2011 3,000,000 2,988,750
Equifax Inc.
6.500% 06/15/2003 1,000,000 996,220
ERAC USA Finance
Company +
6.750% 05/15/2007 3,000,000 2,859,030
FBG Finance Limited +
7.875% 06/01/2016 3,000,000 3,145,500
Fletcher Challenge
Capital Canada Inc.
6.750% 03/24/2005 2,000,000 1,916,920
Fletcher Challenge
Capital Canada Inc.
7.750% 06/20/2006 2,500,000 2,506,825
Foster Wheeler
Corporation
6.750% 11/15/2005 2,000,000 1,772,580
General American
Transportation
Corporation
6.750% 03/01/2006 3,000,000 2,868,270
General Electric
Capital Corporation
6.500% 11/01/2006 1,250,000 1,247,538
General Electric
Capital Corporation
8.750% 05/21/2007 1,500,000 1,700,730
General Mills, Inc.
8.900% 06/15/2006 2,250,000 2,489,018
The Goldman Sachs
Group, L.P. +
6.200% 02/15/2001 2,500,000 2,493,950
Halliburton Company
5.625% 12/01/2008 2,750,000 2,503,358
Heller Financial, Inc.
6.250% 03/01/2001 2,500,000 2,501,150
Hershey Foods
Corporation
7.200% 08/15/2027 5,000,000 4,959,050
Household Finance
Corporation
6.500% 11/15/2008 2,400,000 2,288,424
ICI Wilmington, Inc.
7.050% 09/15/2007 2,000,000 1,975,960
IMC Global Inc.
6.625% 10/15/2001 3,000,000 2,996,010
IMCERA Group Inc.
6.000% 10/15/2003 1,000,000 948,280
Interpool, Inc.
7.350% 08/01/2007 2,000,000 1,883,746
The Kroger Co. +
7.700% 06/01/2029 1,500,000 1,493,475
Lafarge Corporation
6.375% 07/15/2005 2,000,000 1,920,720
LASMO (USA) Inc.
6.750% 12/15/2007 5,000,000 4,562,915
Leucadia National
Corporation
7.750% 08/15/2013 2,500,000 2,242,475
MAPCO Inc.
7.250% 03/01/2009 3,250,000 3,204,078
Marsh & McLennan
Companies, Inc.
7.125% 06/15/2009 2,000,000 2,015,820
MCI Communications
Corporation
7.125% 01/20/2000 500,000 504,400
Meritor Automotive
Inc.
6.800% 02/15/2009 4,000,000 3,794,600
Midway Airlines Pass
Through Certificates
Class B +
8.140% 01/02/2013 2,766,000 2,614,644
Millipore Corporation
7.500% 04/01/2007 3,750,000 3,578,888
Mobil Corporation
8.625% 08/15/2021 4,500,000 5,295,015
Morgan Stanley Dean
Witter & Co.
5.625% 01/20/2004 5,500,000 5,301,120
Morton International
9.250% 06/01/2020 500,000 579,649
Newmont Mining
Corporation
8.625% 04/01/2002 2,000,000 2,062,180
News America
Holdings
Incorporated
9.250% 02/01/2013 3,000,000 3,372,390
Norfolk Southern
Corporation
7.050% 05/01/2037 5,000,000 5,080,900
Norsk Hydro ASA +
8.750% 10/23/2001 500,000 521,925
North Finance
(Bermuda) Limited +
7.000% 09/15/2005 2,000,000 1,972,860
Norwest Financial, Inc.
5.375% 09/30/2003 1,500,000 1,439,520
Occidental Petroleum
Corporation
7.375% 11/15/2008 6,000,000 5,899,800
Pepsi Bottling
Holdings Inc. +
5.625% 02/17/2009 2,000,000 1,817,190
PHH Corporation
6.500% 02/01/2000 500,000 502,015
Ralston Purina
Company
7.750% 10/01/2015 2,000,000 2,074,880
Raytheon Company
6.750% 08/15/2007 2,500,000 2,474,550
Reed Elsevier Inc.
6.625% 10/15/2023 300,000 263,808
Republic Services, Inc.
7.125% 05/15/2009 3,750,000 3,672,713
Rolls-Royce Capital
Inc.
7.125% 07/29/2003 2,000,000 2,007,000
Ryder System, Inc.
6.600% 11/15/2005 3,800,000 3,678,134
Scholastic Corporation
7.000% 12/15/2003 3,000,000 2,991,720
Joseph E. Seagram &
Sons, Inc.
7.500% 12/15/2018 4,500,000 4,349,790
Sealed Air Corporation +
6.950% 05/15/2009 2,500,000 2,421,575
(Continued)
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
- --------------------------------------------------------------------------------
MassMutual CoreBond Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Market Value
----------- --------------
Sears Roebuck
Acceptance Corp.
6.750% 09/15/2005 $ 3,500,000 $ 3,491,075
Sprint Capital
Corporation
6.125% 11/15/2008 2,000,000 1,845,780
Sprint Capital
Corporation
6.875% 11/15/2028 2,000,000 1,813,240
Texaco Inc.
5.500% 01/15/2009 5,000,000 4,585,230
Texaco Inc.
8.500% 02/15/2003 2,500,000 2,668,250
Thomas & Betts
Corporation
8.250% 01/15/2004 2,500,000 2,578,700
Time Warner Inc. Pass
Through Asset Trust
1997-1 +
6.100% 12/30/2001 4,000,000 3,983,160
TTX Company +
6.290% 05/15/2002 5,000,000 4,922,950
Union Tank Car
6.790% 05/01/2010 4,800,000 4,694,880
United Air Lines, Inc.
10.110% 02/19/2006 707,153 781,489
US Air, Inc., Class B
7.500% 10/15/2009 1,378,814 1,324,031
US West Capital
Funding
6.125% 07/15/2002 2,000,000 1,973,260
Valero Energy
Corporation
7.375% 03/15/2006 2,000,000 1,941,530
Vulcan Materials
Company
6.000% 04/01/2009 3,000,000 2,830,350
WorldCom, Inc.
7.750% 04/01/2007 2,000,000 2,094,500
WPP Finance (USA)
Corporation
6.625% 07/15/2005 2,250,000 2,151,124
-----------
TOTAL CORPORATE DEBT 267,802,196
(Cost $272,259,658) -----------
NON-U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 4.1%
Collateralized Mortgage Obligations
Asset Securitization
Corporation Series
1995-MD4, Class A1
7.100% 08/13/2029 6,309,024 6,368,140
Chase Commercial
Mortgage Securities
Corp. Series 1998-2,
Class A1
6.025% 08/18/2007 2,887,155 2,806,834
CS First Boston
Mortgage Securities
Corp. Series 1998-C2,
Class A1
5.960% 12/15/2007 2,899,998 2,816,275
Merrill Lynch
Mortgage Investors,
Inc., Series
1997- Cl-CTL, A-1
6.310% 11/15/2026 4,094,304 4,056,636
Merrill Lynch Trust
Series 43, Class E
6.500% 08/27/2015 334,630 333,165
Prudential Home
Mortgage Securities
1993-26 Class A6
6.750% 07/25/2008 4,000,000 4,000,000
Salomon Brothers
Mortgage Securities
1997-TZH, Class B +
7.491% 03/25/2022 3,000,000 3,061,920
Starwood Commercial
Mortgage Trust
Series 1999-C1A,
Class B +
6.920% 02/05/2009 3,000,000 2,895,000
-----------
TOTAL NON-U.S. GOVERNMENT
AGENCY OBLIGATIONS 26,337,970
(Cost $26,999,013) -----------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 13.9%
Federal Home Loan Mortgage Corporation
(FHLMC) -- 2.3%
Collateralized Mortgage Obligations -- 1.5%
FHLMC Series 1322
Class G
7.500% 02/15/2007 1,279,304 1,298,084
FHLMC Series 1337
Class D
6.000% 08/15/2007 1,000,000 980,620
FHLMC Series 1460
Class H
7.000% 05/15/2007 2,000,000 2,026,860
FHLMC Series 1490
Class PJ
6.000% 05/15/2007 600,000 598,308
FHLMC Series 1667
Class PE
6.000% 03/15/2008 5,000,000 4,976,550
FHLMC Series B
Class 3
12.500% 09/30/2013 97,370 107,289
----------
9,987,711
----------
Pass-Through Securities -- 0.8%
FHLMC
6.420% 12/01/2005 4,803,831 4,764,800
FHLMC
9.000% 03/01/2017 178,772 189,346
----------
4,954,146
----------
14,941,857
----------
Federal National Mortgage Association
(FNMA) -- 6.6%
Collateralized Mortgage Obligations -- 2.6%
FNMA Series 1989-20
Class A
6.750% 04/25/2018 3,924,208 3,923,816
FNMA Series 1993-134
Class GA
6.500% 02/25/2007 5,000,000 5,021,850
FNMA Series 1993-221
Class D
6.000% 12/25/2008 2,500,000 2,464,050
FNMA Series 1994-43
Class PE
6.000% 12/25/2019 416,560 416,297
FNMA Series 1996-54
Class C
6.000% 09/25/2008 5,000,000 4,879,650
----------
16,705,663
----------
Pass-Through Securities -- 4.0%
FNMA
6.000% 10/01/2028-
02/01/2029 12,914,776 12,135,240
FNMA
6.500% 11/01/2028 13,754,723 13,273,858
FNMA
8.000% 05/01/2013 195,535 197,273
----------
25,606,371
----------
42,312,034
----------
Government National Mortgage Association
(GNMA) -- 4.4%
Collateralized Mortgage Obligations -- 0.1%
JHM Acceptance
Corporation Series E
Class 5
8.960% 04/01/2019 938,047 947,128
----------
Pass-Through Securities -- 4.3%
GNMA
6.125% 12/20/2027 1,155,152 1,163,816
GNMA
6.375% 01/20/2027 3,126,641 3,150,091
GNMA
6.625% 08/20/2027-
09/20/2027 5,490,965 5,545,874
(Continued)
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
- --------------------------------------------------------------------------------
MassMutual CoreBond Fund - of Investments (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Market Value
----------- --------------
GNMA
7.000% 08/15/2023-
11/15/2023 $ 3,751,798 $ 3,715,442
GNMA
7.500% 01/15/2017-
06/15/2017 4,816,981 4,883,745
GNMA
8.000% 04/15/2001-
01/15/2009 8,511,998 8,752,890
GNMA
9.000% 12/15/2004-
10/15/2009 260,663 274,946
GNMA
11.000% 08/15/2000-
02/15/2001 33,097 34,067
------------
27,520,871
------------
28,467,999
------------
U.S. Government Guaranteed Notes -- 0.6%
1994-A Baxter
Springs, KS
5.930% 08/01/1999 700,000 700,434
1994-A Erie, PA
5.930% 08/01/1999 1,590,000 1,590,986
1994-A Los Angeles
County, CA
5.930% 08/01/1999 190,000 190,118
1994-A Montgomery
County, PA
5.930% 08/01/1999 150,000 150,093
1994-A Pohatcong
Township, NJ
5.930% 08/01/1999 255,000 255,158
1994-A Rochester, NY
5.930% 08/01/1999 135,000 135,084
1994-A Sacramento,
CA
5.930% 08/01/1999 60,000 60,037
1994-A Santa Ana, CA
5.930% 08/01/1999 920,000 920,570
------------
4,002,480
------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 89,724,370
------------
(Cost $89,962,894)
U.S. TREASURY OBLIGATIONS -- 28.5%
U.S. Treasury Bonds -- 7.0%
U.S. Treasury Bond
7.500% 11/15/2016 15,120,000 17,040,694
U.S. Treasury Bond
8.875% 08/15/2017 21,800,000 27,849,500
------------
44,890,194
------------
U.S. Treasury Notes -- 18.1%
U.S. Treasury Note
4.750% 11/15/2008 500,000 459,140
U.S. Treasury Note
5.250% 08/15/2003 13,000,000 12,778,610
U.S. Treasury Note
5.875% 02/15/2004 2,000,000 2,012,820
U.S. Treasury Note
6.125% 08/15/2007 2,000,000 2,021,560
U.S. Treasury Note
6.500% 10/15/2006 61,800,000 63,808,500
U.S. Treasury Note
6.625% 05/15/2007 16,000,000 16,662,560
U.S. Treasury Note
6.875% 05/15/2006 8,000,000 8,422,480
U.S. Treasury Note
7.875% 11/15/2004 10,000,000 10,937,500
------------
117,103,170
------------
U.S. Treasury Strip -- 3.4%
U.S. Treasury Strip - Principal Only
0.000% 05/15/2016 63,000,000 21,709,800
------------
TOTAL U.S. TREASURY
OBLIGATIONS 183,703,164
------------
(Cost $187,111,137)
TOTAL BONDS & NOTES 616,399,712
------------
(Cost $625,641,800)
SHORT-TERM INVESTMENTS -- 20.3%
Cash Equivalents -- 17.3%
Bank of Nova Scotia
Eurodollar Time
Deposit**
5.500% 07/01/1999 30,000,000 30,000,000
BankBoston
Eurodollar Time
Deposit**
5.995% 10/29/1999 13,322,475 13,322,475
Harris Trust & Savings
Bank Eurodollar
Time Deposit**
5.875% 07/01/1999 20,000,000 20,000,000
Janus Money Market
Fund** 20,000,000 20,000,000
Frank Russell Money
Market Fund(**) 27,931,900 27,931,900
------------
111,254,375
------------
Commercial Paper -- 3.0%
American Electric
Power Company
6.000% 07/09/1999 4,000,000 3,994,667
Dana Credit
Corporation
5.330% 07/06/1999 259,000 258,808
Indiana Michigan
Power Company
5.800% 07/02/1999 4,975,000 4,974,198
Lockheed Martin
Corporation
5.500% 07/01/1999 3,805,000 3,805,000
Public Service
Company of Colorado
5.820% 07/07/1999 3,100,000 3,096,993
Sonat Inc.
5.050% 07/06/1999 3,465,000 3,462,570
------------
19,592,236
------------
TOTAL SHORT-TERM
INVESTMENTS 130,846,611
------------
(At Amortized Cost)
TOTAL INVESTMENTS -- 115.8% 747,246,323
(Cost $756,488,411)***
Other Assets/
(Liabilities) --(15.8%) (101,982,346)
------------
Net Assets-- 100.0% $ 645,263,977
============
Notes to Portfolio of Investments
***Aggregate cost for Federal tax purposes (Note 7)
+ Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
** Represents investment of security lending collateral. (Note 2).
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Financial Statements
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
June 30, 1999
(Unaudited)
-------------
<S> <C>
Assets:
Investments, at value (cost $625,641,800) (Note 2) ................ $ 616,399,712
Short-term investments, at amortized cost (Note 2) ................ 130,846,611
-------------
Total Investments ............................................. 747,246,323
Cash .............................................................. 19,759
Receivables from:
Investments sold .............................................. 820,946
Fund shares sold .............................................. 5,852,216
Interest ...................................................... 8,315,846
-------------
Total assets ............................................. 762,255,090
-------------
Liabilities:
Payables for:
Investments purchased ......................................... 3,661,612
Fund shares redeemed .......................................... 1,724,376
Securities on loan (Note 2) ................................... 111,254,375
Directors' fees and expenses (Note 3) ......................... 1,917
Affiliates (Note 3):
Investment management fees ............................... 270,881
Administration fees ...................................... 52,687
Service fees ............................................. 87
Accrued expenses and other liabilities ............................ 25,178
-------------
Total liabilities ........................................ 116,991,113
-------------
Net assets ........................................................ $ 645,263,977
=============
Net assets consist of:
Paid-in capital ................................................... $ 637,725,924
Undistributed net investment income ............................... 18,941,509
Accumulated net realized loss on investments ...................... (2,161,368)
Net unrealized depreciation on investments ........................ (9,242,088)
-------------
$ 645,263,977
=============
Net assets:
Class A ........................................................... $ 138,841
=============
Class L ........................................................... $ 100,618
=============
Class Y ........................................................... $ 1,104,040
=============
Class S ........................................................... $ 643,920,478
=============
Shares outstanding:
Class A ........................................................... 12,865
=============
Class L ........................................................... 9,315
=============
Class Y ........................................................... 102,178
=============
Class S ........................................................... 59,562,818
=============
Net asset value, offering price and redemption price per share:
Class A ........................................................... $ 10.79
=============
Class L ........................................................... $ 10.80
=============
Class Y ........................................................... $ 10.81
=============
Class S ........................................................... $ 10.81
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
- --------------------------------------------------------------------------------
MassMutual CoreBond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of Operations
<TABLE>
<CAPTION>
Six months ended
June 30, 1999
(Unaudited)
------------------
<S> <C>
Investment income: (Note 2)
Interest (including securities lending income of $42,444) ............... $ 20,728,810
-------------
Expenses: (Note 2) ............................................................
Investment management fees (Note 3) ..................................... 1,472,160
Custody fees ............................................................ 33,705
Audit and legal fees .................................................... 7,849
Directors' fees (Note 3) ................................................ 8,186
-------------
1,521,900
Administration fees (Note 3):
Class A ............................................................. 292
Class L * ........................................................... 48
Class Y ............................................................. 675
Class S ............................................................. 264,213
Service fees (Note 3):
Class A ............................................................. 173
-------------
Total expenses ................................................. 1,787,301
-------------
Net investment income .......................................... 18,941,509
-------------
Realized and unrealized gain (loss):
Net realized loss on investment transactions ............................ (2,654,809)
Net change in unrealized appreciation (depreciation) on investments ..... (30,577,123)
-------------
Net realized and unrealized loss ................................ (33,231,932)
-------------
Net decrease in net assets resulting from operations .................... $(14,290,423)
=============
</TABLE>
* For the period from May 3, 1999 (commencement of operations) through
June 30, 1999.
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six months ended
June 30, 1999 Year ended
Increase (Decrease) in Net Assets: (Unaudited) December 31, 1998
------------------ -----------------
<S> <C> <C>
Operations:
Net investment income ................................................... $ 18,941,509 $ 31,816,454
Net realized gain (loss) on investment transactions ..................... (2,654,809) 6,573,153
Net change in unrealized appreciation (depreciation)
on investment transactions ......................................... (30,577,123) 4,875,729
-------------- --------------
Net increase (decrease) in net assets resulting from operations ..... (14,290,423) 43,265,336
-------------- --------------
Distributions to shareholders (Note 2):
From net investment income:
Class A ................................................................. - (6,554)
Class L* ................................................................ - -
Class Y ................................................................. - (18,553)
Class S ................................................................. - (32,902,152)
-------------- --------------
Total distributions from net investment income ...................... - (32,927,259)
-------------- --------------
From net realized gains:
Class A ................................................................. - (1,221)
Class L* ................................................................ - -
Class Y ................................................................. - (3,456)
Class S ................................................................. - (6,128,341)
-------------- --------------
Total distributions from net realized gains ......................... - (6,133,018)
-------------- --------------
Net fund share transactions (Note 5):
Class 1** ............................................................... - (131,171)
Class 2** ............................................................... - (133,481)
Class 3** ............................................................... - (134,838)
Class A ................................................................. 1,000 138,831
Class L* ................................................................ 102,180 -
Class Y ................................................................. 721,492 400,648
Class S ................................................................. (51,271,130) 249,325,651
-------------- --------------
Increase (decrease) in net assets from net fund share transactions .. (50,446,458) 249,465,640
-------------- --------------
Total increase (decrease) in net assets ................................. (64,736,881) 253,670,699
Net assets:
Beginning of period ..................................................... 710,000,858 456,330,159
-------------- --------------
End of period (including undistributed net investment income of
$18,941,509 and $0, respectively) ................................... $ 645,263,977 $ 710,000,858
============== ==============
</TABLE>
* For the period from May 3, 1999 (commencement of operations) through
June 30, 1999.
** Effective January 1, 1998, Class 1, Class 2, and Class 3 shares were
terminated (See Note 1).
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights (For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class A Class L Class Y
------- ------- -------
Six months Period Six months
ended 6/30/99 Year ended ended 6/30/99 ended 6/30/99 Year ended
(Unaudited) 12/31/98 + (Unaudited)** (Unaudited) 12/31/98 +
------------- ---------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.06 $ 10.85 $ 10.97 $ 11.06 $ 10.86
------------- ---------- ------------- ------------- ----------
Income (loss) from investment operations:
Net investment income 0.29 0.59*** 0.10 0.28 0.65***
Net realized and unrealized gain (loss) on investments (0.56) 0.25 (0.27) (0.53) 0.25
------------- ---------- ------------- ------------- ----------
Total income (loss) from investment operations (0.27) 0.84 (0.17) (0.25) 0.90
------------- ---------- ------------- ------------- ----------
Less distributions to shareholders:
From net investment income - (0.52) - - (0.59)
From net realized gains - (0.11) - - (0.11)
------------- ---------- ------------- ------------- ----------
Total distributions - (0.63) - - (0.70)
------------- ---------- ------------- ------------- ----------
Net asset value, end of period $ 10.79 $ 11.06 $ 10.80 $ 10.81 $ 11.06
============= ========== ============= ============= ==========
Total Return (2.44)% 7.75% (1.55)% (2.31)% 8.25%
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 139 $ 141 $ 101 $ 1,104 $ 400
Net expenses to average daily net assets 1.15%* 1.20% 0.76%* 0.65%* 0.74%
Net investment income to average daily net assets 5.33%* 5.26% 5.97%* 5.87%* 5.73%
Portfolio turnover rate 33% 51% 33% 33% 51%
Class S (1)
-----------
Six months
ended 6/30/99 Year ended Year ended Year ended Year ended Period ended
(Unaudited) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94****
------------- ---------- ---------- ---------- ---------- ------------
Net asset value, beginning of period $ 11.06 $ 10.81 $ 10.45 $ 10.75 $ 9.84 $ 10.00
------------- ---------- ---------- ---------- ---------- ------------
Income (loss) from investment operations:
Net investment income 0.32 0.67*** 0.69*** 0.67*** 0.72*** 0.18
Net realized and unrealized gain (loss) on
investments (0.57) 0.24 0.33 (0.37) 1.17 (0.16)
------------- ---------- ---------- ---------- ---------- ------------
Total income (loss) from investment
operations (0.25) 0.91 1.02 0.30 1.89 0.02
------------- ---------- ---------- ---------- ---------- ------------
Less distributions to shareholders:
From net investment income - (0.56) (0.64) (0.54) (0.65) (0.18)
From net realized gains - (0.10) (0.02) (0.06) (0.33) -
------------- ---------- ---------- ---------- ---------- ------------
Total distributions - (0.66) (0.66) (0.60) (0.98) (0.18)
------------- ---------- ---------- ---------- ---------- ------------
Net asset value, end of period $ 10.81 $ 11.06 $ 10.81 $ 10.45 $ 10.75 $ 9.84
============= ========== ========== ========== ========== ============
Total Return @ (2.26)% 8.44% 9.78% 2.80% 19.15% 0.20%
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 643,920 $ 709,459 $ 455,931 $ 356,699 $ 253,540 $ 194,150
Net expenses to average daily net assets # 0.5576%* 0.5454% 0.5393% 0.5130% 0.5130% 0.5130%*
Net investment income to average daily net
assets 5.91%* 5.92% 6.34% 6.26% 6.56% 6.86%*
Portfolio turnover rate 33% 51% 54% 54% 104% 7%
# Computed after giving effect to the voluntary partial waiver of
management fee by MassMutual, which terminated May 1, 1997. Without this
partial waiver of fees by MassMutual, the ratio of expenses
to avearage daily net assets would have been: N/A N/A 0.5512% 0.5550% 0.5553% 0.5672%*
</TABLE>
* Annualized
** For the period from May 3, 1999 (commencement of operations) through
June 30, 1999.
*** Per share amount calculated on the average shares method, which more
appropriately presents the per share data for the period since the use of
the undistributed income method does not accord with the results of
operations.
+ Amounts have been restated to reflect reverse stock splits (See Note 9).
****For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
(1) Class S shares were previously designated as Class 4 shares.
@ Employee retirement benefit plans that invest plan assets in the Separate
Investment Accounts (SIAs) may be subject to certain charges as set forth
in their respective Plan Documents. Total return figures would be lower
for the periods presented if they reflected these charges.
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Diversified Bond Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment objective and policies for the MassMutual Diversified
Bond Fund?
The objective and policies of the Fund are to:
. achieve a superior total return by investing in a variety of types of fixed
income investments including, public and private bonds, mortgage and
asset-backed securities, residential and commercial mortgage loans, U.S.
Treasury futures and forward contracts, fully hedged foreign securities,
interest rate and currency swaps, commercial paper and options on fixed
income investments.
. maintain duration roughly comparable to that of the Lehman Brothers
Intermediate Aggregate Bond Index
. maintain overall credit quality not less than BBB-/Baa3
How did the Fund perform?
The Fund began operations on May 3, 1999. From inception through June 30, 1999,
the Fund's Class S shares returned -1.10%, compared to -0.81% for the Lehman
Brothers Intermediate Aggregate Bond Index.
What factors influenced the Fund's performance?
Like most fixed-income funds, we were hurt by the climate of rising interest
rates. Rates in the one to ten-year maturities, where the Fund's purchases are
concentrated, saw particularly sharp increases in May and June.
Several factors contributed to the increase in rates, including ongoing strength
in the U.S. economy, signs of a possible recovery in the depressed Asian
economies, and strength in crude oil prices. As the period progressed, there was
increasing speculation that the Federal Reserve Board (Fed) would raise rates at
its June 29-30 meeting. As expected, the Fed announced a .25% hike in the
federal funds rate on June 30. Initially, however, investors concentrated more
on the positive news that the Fed had returned to a neutral bias regarding
future changes in rates.
In general, spread product--that is, fixed-income investments offering a yield
advantage over Treasury securities--helped the Fund's performance. However, as
interest rates inched up toward the end of the period, spreads on
mortgage-backed corporate securities widened considerably, which hurt the Fund's
performance.
How was the Fund positioned during the period?
Mortgage-backed securities, at 39.6%, represented the biggest sector allocation
for the Fund. These purchases consisted entirely of agency-backed passthroughs
with coupons ranging from 6% to 7.5%. Corporate securities, at 25.9%, were the
next biggest category for the Fund, with investment-grade securities comprising
a little over half of that category. Some investment-grade purchases included
News America, Kroger, Dana Corp and Associates Corp.
The rest of the Fund's corporate holdings consisted of high-yield securities.
The supply of high-yield paper has been noticeably lower since last fall's
extreme volatility, but with patience and careful analysis, we were able to find
some attractive opportunities. Examples included issues from Lyondell (a
chemical company), Northwest Airlines, Contifinancial (financial services), and
Pacer International (transportation-related services).
Finally, the Fund had 21.5% invested in Treasuries with relatively short
maturities and 12.2% in money market securities at the end of the period. In
part, these investments were designed to reduce the average duration of the
Fund's investments to acceptable levels. The Fund typically targets average
duration to be within 5% of the Lehman Brothers Intermediate Aggregate Index. At
the end of June, the Index had a duration of 3.6 years. Since most of our
investments in the corporate and mortgage-backed sectors tend to have maturities
in the eight to ten-year range, we used short-term Treasury and money market
investments as a counterbalancing tool.
33
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Bond Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
What is your outlook for the rest of 1999?
Looking ahead, we plan to add to the Fund's high-yield holdings as opportunities
permit. To use a baseball metaphor, we are committed to waiting for good pitches
to swing at rather than chasing balls out of the strike zone. This approach is
especially important when dealing with high-yield investments, particularly in
view of the relatively limited supply we've had this year.
Further movements in interest rates will depend on economic developments in the
U.S. and overseas. Although we would not be surprised to see U.S. economic
growth slow during the second half from what it was in the first half of 1999,
we cannot rule out another increase in interest rates by the Fed this year. That
would make for a challenging environment for fixed-income investments over the
near term.
If we begin to see any deterioration in the economy, the high-yield market will
be one of the first to feel the effects. Our careful credit analysis will
therefore continue to be a critical factor in achieving our goal of competitive
returns for the Fund over the long term.
[PIE CHART APPEARS HERE]
Duration Diversification (6/30/99)
MassMutual Diversified Bond Fund
Average Duration = 4.1 years
Less than 1 year 13.1%
1-3 years 26.3%
3-5 years 30.9%
5-10 years 29.7%
[PIE CHART APPEARS HERE]
Quality Structure (6/30/99)
MassMutual Diversified Bond Fund
U.S. Government Cash Equivalents
Aaa/AAA 74.0%
CCC 0.4%
B 6.3%
Aa/AA 2.0%
A/A 3.9%
Baa/BBB 8.0%
Ba/BB 5.4%
34
<PAGE>
- --------------------------------------------------------------------------------
Mass Mutual Diversified Bond Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Diversified Bond Fund Class S, Class A,
Class Y, Class L and the Lehman Bros. Intermediate Aggregate.
MassMutual Diversified Bond Fund
Total Return Year-to-Date
5/3/99-6/30/99
Class S -1.10%
Class A -1.20%
Class Y -1.10%
Class L -1.10%
Lehman Brothers
Intermediate -0.78%
Aggregate
[LINE GRAPH APPEARS HERE]
Lehman Bros.
Date Class S Class A Class Y Class L Inter. Aggr.
- ---- ------- ------- ------- ------- ------------
5/3/99 10,000 10,000 10,000 10,000 10,000
5/31/99 9,910 9,910 9,910 9,910 9,912
6/30/99 9,890 9,880 9,890 9,890 9,922
Past performance is not predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund, while the Lehman Brothers Intermediate Aggregate Index is unmanaged
and does not incur expenses, and cannot be purchased directly by investors.
35
<PAGE>
- ------------------------------------------------------------------------------
MassMutual Diversified Bond Fund - Portfolio of Investments
- ------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1999
Principal
Amount Market Value
----------- --------------
BONDS & NOTES -- 86.9%
CORPORATE DEBT -- 25.9%
Aes Corporation
9.500% 06/01/2009 $200,000 $206,000
Archibald Candy Corp.
+
10.250%
07/01/2004 125,000 126,250
Associates Corporation
of North America
5.800% 04/20/2004 500,000 481,845
AT&T Corp.
5.625% 03/15/2004 250,000 241,908
Boston Scientific
Corporation
6.625% 03/15/2005 250,000 232,865
Brand Scaffold
Services, Inc.
10.250%
02/15/2008 125,000 121,250
Century
Communications
Corp. Zero Coupon
Series B
0.000% 01/15/2008 125,000 55,000
ContiFinancial
Corporation
8.125% 04/01/2008 125,000 107,500
CSX Corporation
6.250% 10/15/2008 250,000 233,708
Dana Corporation
6.250% 03/01/2004 250,000 244,440
Derby Cycle
Corporation
10.000%
05/15/2008 125,000 100,625
Diageo Capital PLC
6.125% 08/15/2005 500,000 484,444
Elgin National
Industries Series B
11.000%
11/01/2007 125,000 123,750
Express Scripts, Inc. +
9.625% 06/15/2009 125,000 126,563
Gulf Canada Resources
Limited
9.250% 01/15/2004 125,000 126,244
Haynes International
Inc
11.625%
09/01/2004 125,000 116,719
International Game
Technology +
8.375% 05/15/2009 125,000 122,813
JL French Automotive
Casting +
11.500%
06/01/2009 125,000 127,500
Kitty Hawk, Inc.
9.950% 11/15/2004 125,000 125,000
The Kroger Co.
7.650% 04/15/2007 250,000 258,508
LDM Technologies
Series B
10.750%
01/15/2007 125,000 123,750
Leviathan Gas Pipeline
Finance Corp. +
10.375%
06/01/2009 125,000 127,500
Lyondell Chemical
Company Series A +
9.625% 05/01/2007 125,000 130,000
Lyondell Chemical
Company Series B +
9.875% 05/01/2007 125,000 128,125
News America
Holdings Inc.
8.625% 02/01/2003 250,000 265,008
Northwest Airlines Inc.
7.875% 03/15/2008 250,000 217,503
Pacer International,
Inc. +
11.750%
06/01/2007 125,000 121,250
Pepsi Bottling
Holdings Inc. +
5.625% 02/17/2009 250,000 227,149
Petroleos Mexicanos+
9.500% 09/15/2027 125,000 105,000
Primark Corporation
9.250% 12/15/2008 125,000 121,250
Raytheon Company
6.500% 07/15/2005 250,000 247,083
Sealed Air Corporation +
6.950% 05/15/2009 250,000 242,158
Sprint Capital Corp.
5.875% 05/01/2004 250,000 239,583
URS Corp. +
12.250%
05/01/2009 100,000 101,500
Western Gas
Resources +
10.000%
06/15/2009 125,000 127,500
Worldtex, Inc. Series B
9.625% 12/15/2007 125,000 109,375
----------
TOTAL CORPORATE DEBT 6,396,666
----------
(Cost $6,507,120)
U.S. GOVERNMENT
AGENCY OBLIGATIONS -- 39.5%
Federal Home Loan Mortgage Corporation
(FHLMC) -- 9.1%
Pass-Through Securities
FHLMC
7.500% 06/01/2024-
04/01/2028 2,229,504 2,255,308
----------
(Continued)
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
- ---------------------------------------------------------------------------
MassMutual Diversified Bond Fund - Portfolio of Investments (Continued)
- ---------------------------------------------------------------------------
Principal
Amount Market Value
----------- --------------
Federal National Mortgage Association
(FNMA) -- 18.0%
Pass-Through Securities
FNMA
6.000% 11/01/2028-
04/01/2029 $ 1,697,057 $ 1,594,622
FNMA
6.500% 04/01/2029
06/01/2029 2,996,622 2,891,861
-----------
4,486,483
-----------
Government National Mortgage Association
(GNMA) -- 12.4%
PassThrough Securities
GNMA
7.000% 10/15/2027-
05/15/2029 2,291,946 2,263,113
GNMA
8.000% 08/15/2026-
03/15/2027 774,131 796,805
-----------
3,059,918
-----------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 9,801,709
-----------
(Cost $10,045,547)
U.S. TREASURY OBLIGATIONS -- 21.5%
U.S. Treasury Note
7.500% 11/15/2001 5,100,000 5,312,772
-----------
(Cost $5,378,367)
TOTAL BONDS & NOTES 21,511,147
-----------
(Cost $21,931,034)
SHORT-TERM INVESTMENTS -- 12.2%
Commercial Paper
Cox Enterprises, Inc.
5.700% 07/08/1999 730,000 729,191
Dana Credit
Corporation
5.450% 07/12/1999 100,000 99,833
Florida Power
Corporation
4.970% 07/06/1999 740,000 739,490
Lockheed Martin
Corporation
5.550% 07/01/1999 700,000 700,000
Sonat Inc.
5.250% 07/06/1999 740,000 739,460
-----------
TOTAL SHORT-TERM
INVESTMENTS 3,007,974
-----------
(At Amortized Cost)
Total Investments -- 99.1% 24,519,120
(Cost $24,939,008)***
Other Assets/(Liabilities) -- 0.9% 211,751
-----------
Net Assets -- 100.0% $24,730,871
===========
Notes to Portfolio of Investments
***Aggregate cost for Federal tax purposes (Note 7)
+ Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Diversified Bond Fund - Financial Statements
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
June 30, 1999
(Unaudited)
-------------
<S> <C>
Assets:
Investments, at value (cost $21,931,034) (Note 2) ...................... $ 21,511,146
Short-term investments, at amortized cost (Note 2) ..................... 3,007,974
-------------
Total Investments .................................................. 24,519,120
Cash ................................................................... 3,784
Receivables from:
Investments sold ................................................... 96
Interest ........................................................... 226,115
-------------
Total assets ................................................... 24,749,115
-------------
Liabilities:
Payables for:
Directors' fees and expenses (Note 3) .............................. 2,994
Affiliates (Note 3):
Investment management fees ..................................... 11,146
Administration fees ............................................ 2,787
Service fees ................................................... 37
Accrued expenses and other liabilities ................................. 1,280
-------------
Total liabilities .............................................. 18,244
-------------
Net assets .............................................................. $ 24,730,871
=============
Net assets consist of:
Paid-in capital ........................................................ $ 25,004,000
Undistributed net investment income .................................... 236,202
Accumulated net realized loss on investments ........................... (89,443)
Net unrealized depreciation on investments ............................. (419,888)
-------------
$ 24,730,871
=============
Net assets:
Class A ................................................................ $ 99,828
=============
Class L ................................................................ $ 99,866
=============
Class Y ................................................................ $ 99,888
=============
Class S ................................................................ $ 24,431,289
=============
Shares outstanding:
Class A ................................................................ 10,100
=============
Class L ................................................................ 10,100
=============
Class Y ................................................................ 10,100
=============
Class S ................................................................ 2,470,100
=============
Net asset value, offering price and redemption price per share:
Class A ................................................................ $ 9.88
=============
Class L ................................................................ $ 9.89
=============
Class Y ................................................................ $ 9.89
=============
Class S ................................................................ $ 9.89
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Diversified Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of Operations
Period Ended
June 30, 1999
(Unaudited)*
-------------
Investment income: (Note 2)
Interest ................................................ $ 265,523
-------------
Expenses: (Note 2)
Investment management fees (Note 3) ..................... 20,011
Custody fees ............................................ 388
Audit and legal fees .................................... 891
Directors' fees (Note 3) ................................ 2,994
-------------
24,284
Administration fees (Note 3):
Class A ............................................. 49
Class L ............................................. 49
Class Y ............................................. 26
Class S ............................................. 4,875
Service fees (Note 3):
Class A ............................................. 38
-------------
Total expenses .................................. 29,321
-------------
Net investment income ........................... 236,202
-------------
Realized and unrealized gain (loss):
Net realized loss on investment transactions ............ (89,443)
Net change in unrealized appreciation (depreciation)
on investments ...................................... (419,888)
-------------
Net realized and unrealized loss ................ (509,331)
-------------
Net decrease in net assets resulting from operations .... $(273,129)
=============
* For the period from May 3, 1999 (commencement of operations) through June 30,
1999.
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Bond Fund Financial (Continued)
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Period Ended
June 30, 1999
(Unaudited)*
-------------
<S> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income ........................................... $ 236,202
Net realized loss on investment transactions .................... (89,443)
Net change in unrealized appreciation (depreciation)
on investments .............................................. (419,888)
-------------
Net decrease in net assets resulting from operations ........ (273,129)
-------------
Net fund share transactions (Note 5):
Class A ......................................................... 101,000
Class L ......................................................... 101,000
Class Y ......................................................... 101,000
Class S ......................................................... 24,701,000
-------------
Increase in net assets from net fund share transactions ..... 25,004,000
-------------
Total increase in net assets .................................... 24,730,871
Net assets:
Beginning of period ............................................. -
-------------
End of period (including undistributed net investment income
of $236,202) ................................................ $ 24,730,871
=============
</TABLE>
* For the period from May 3, 1999 (commencement of operations) through June 30,
1999.
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Diversified Bond Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights (For a share outstanding throughout the period)
<TABLE>
<CAPTION>
Class A Class L Class Y Class S
------- ------- ------- -------
Period Period Period Period
ended 6/30/99 ended 6/30/99 ended 6/30/99 ended 6/30/99
(Unaudited) ** (Unaudited) ** (Unaudited) ** (Unaudited) **
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
-------------- -------------- -------------- --------------
Income (loss) from investment operations:
Net investment income 0.08 0.09 0.09 0.09
Net realized and unrealized gain (loss) on investments (0.20) (0.20) (0.20) (0.20)
-------------- -------------- -------------- --------------
Total income (loss) from investment operations (0.12) (0.11) (0.11) (0.11)
-------------- -------------- -------------- --------------
Net asset value, end of period $ 9.88 $ 9.89 $ 9.89 $ 9.89
============== ============== ============== ==============
Total Return (1.20)% (1.10)% (1.10)% (1.10)%@
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 100 $ 100 $ 100 $ 24,431
Net expenses to average daily net assets 1.19%* 0.94%* 0.79%* 0.7299%*
Net investment income to average daily net assets 5.62%* 5.87%* 6.02%* 5.90%*
Portfolio turnover rate 25% 25% 25% 25%
</TABLE>
* Annualized
** For the period from May 3, 1999 (commencement of operations) through
June 30, 1999.
@ Employee retirement benefit plans that invest plan assets in the Separate
Investment Accounts (SIAs) may be subject to certain charges as set forth
in their respective Plan Documents. Total return figures would be lower
for the periods presented if they reflected these charges.
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment objective and policies for the MassMutual Balanced Fund?
The objective and policies of the Fund are to:
. achieve a high total rate of return over an extended period of time
consistent with the preservation of capital values
. invest in a diversified portfolio of equity securities, fixed-income
securities and money market instruments
. manage the allocation of investments, under normal circumstances, in three
segments within the following ranges:
Prime Segment no more than 35% of net assets
Core Bond Segment no more than 35% of net assets
Core Equity Segment no more than 65% of net assets
How did the Fund perform during the first half of 1999?
For the six months ended June 30, 1999, the Fund's Class S shares returned
3.94%, trailing the 6.16% gain recorded by the Lipper Balanced Fund Index, an
unmanaged index of portfolios managed in a blend or balanced style.
What were the Fund's allocations among the three asset classes during the
period?
The Fund began the period with targets of 53% stocks, 21% bonds, and 26% money
market securities. In April, when cyclical stocks began their rally, we
marginally increased the stock target allocation to 54%. However, the Fund was
still slightly below the midpoint of our target range for equities of 45% to
65%. Our cautious weighting of equities was a result of our belief that the
stock market was overvalued and might be vulnerable to a correction. We also
slightly increased the Fund's bond target allocation to 22%. This reflected our
judgment that bonds were a good value.
What factors affected the Fund's performance?
With respect to the Fund's equity holdings, it's useful to divide the period
into two roughly equal parts. During the first quarter, our value-oriented
management style met with considerable difficulty, as investor interest was
largely confined to a select group of large-capitalization growth stocks whose
underlying companies were perceived as being capable of delivering consistent
earnings growth.
In the second quarter, things changed dramatically for the better. Surprising
strength in the U.S. economy and signs of a possible turnaround in Asia,
together with rising oil prices, led to a strong rally in value stocks of all
kinds. During this period, the Fund's investments in technology,
telecommunications, basic materials and energy were especially beneficial.
Rising interest rates made it difficult for the Fund's bond holdings to make
much headway during the first half of 1999. Several economic reports added to
investors' worries about inflation, particularly a much higher than expected
Consumer Price Index for the month of April. As expected, the Federal Reserve
Board (Fed) announced a .25% hike in the federal funds rate on June 30. However,
investors were cheered by the news that the Fed retreated to a neutral bias
regarding future changes in rates.
Returns for the Fund's bond portfolio were helped by its holdings of corporate
securities, which typically offer higher yields than Treasury securities. On the
negative side, the Fund's longer-duration Treasury holdings detracted from
performance, since issues with longer maturities generally suffer more than
those with shorter maturities in a period of rising rates.
What stock holdings had the biggest impact on the Fund's performance?
One of our best contributors was IBM, one of the Fund's largest holdings; "Big
Blue" rose a little over 40% during the period on the strength of solid first
quarter earnings. Marsh & McLennan rose partly on the continued rapid asset
growth of Putnam Investments, its mutual fund subsidiary. BP Amoco was one
beneficiary of the surge in crude oil prices. On the downside, Schering Plough
struggled in the first half of 1999, as investors shifted their interest away
from pharmaceutical stocks.
42
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
How was the bond segment positioned?
Once again, corporate securities were the largest segment allocation for the
Fund, representing approximately 40% of its bond assets for most of the period.
Treasury securities were the second-largest category at 29.2% on June 30.
The Fund's overall credit quality remained AA, with new corporate purchases
focused on issues with a BBB rating. Attractive additions to the portfolio
included securities from Kroger (a grocery chain), Marsh & McLennan (insurance),
Sealed Air Corp. (packaging), Republic Services (waste disposal), and Union Tank
Car (transportation).
Mortgage-backed securities were the third largest sector for the Fund at around
18% of assets. The biggest component in that sector was current coupon
pass-throughs backed by government agencies Fannie Mae, Ginnie Mae and Freddie
Mac.
What is your outlook?
The big surprise so far this year has been the strong economy and the higher
earnings estimates that resulted from it. The Fund's relatively heavy weighting
in bonds reflects our belief that growth for the remainder of 1999 will be
modest compared to the first half of the year, with inflation remaining well
under control. In an environment of slower growth bonds should do well, while
stocks, which are already overvalued by many measures, may languish. In the
event of a pullback in stocks, however, the Fund's emphasis on the value side of
the market should help to cushion any losses.
Now that the Fed has played its hand, we expect a resurgence of corporate bond
issuance, and we will be surveying the upcoming opportunities carefully. We will
also continue to look for opportunities in asset-backed securities, which tend
to have attractive yields relative to their shorter maturities.
As the second half of the year progresses, we will monitor the economic data and
make adjustments as necessary in the allocation of the Fund's assets. On the
level of individual securities, the Fund should continue to benefit from the
meticulous research that goes into each purchase, as well as a strong emphasis
on value and investing for the long term.
[PIE CHART APPEARS HERE]
MassMutual Balanced Fund Asset Allocation on 6/30/99
Common Stocks 53%
Short-term Issues 25%
Bonds 22%
MassMutual Balanced Fund Largest Stock Holdings (6/30/99)
Bristol-Myers Squibb Company
International Business Machines Corporation
Hewlett-Packard Company
Albertson's Inc.
General Electric Company
The McGraw-Hill Companies, Inc.
Pitney Bowes, Inc.
Xerox Corporation
Kimberly-Clark Corporation
Frontier Corporation
43
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Hypothetical Investments in MassMutual Balanced Fund Class S and the Lipper
Balanced Fund Index
- --------------------------------------------------------------------------------
MassMutual Balanced Fund
Total Return Year-to-Date One Year Average Annual
1/1/99-6/30/99 7/1/98-6/30/99 1/1/98-6/30/99
Class S 3.94% 10.73% 14.77%
- --------------------------------------------------------------------------------
Lipper Balanced
Fund Index 6.16% 11.56% 16.25%
Standard &
Poor's 500 12.38% 22.76% 28.24%
Composite Index
Lehman Brothers
Government/ -2.27% 2.70% 8.07%
Corporate
Bond Index
- --------------------------------------------------------------------------------
Hypothetical Investments in MassMutual Balanced Fund Class A, Class Y the
Lipper Balanced Fund Index
- --------------------------------------------------------------------------------
MassMutual Balanced Fund
Total Return Year-to-Date One Year Average Annual
1/1/99-6/30/99 7/1/98-6/30/99 1/1/98-6/30/99
Class A 3.57% 9.99% 10.94%
Class Y 3.82% 10.49% 11.42%
- --------------------------------------------------------------------------------
Lipper Balanced
Fund Index 6.16% 11.56% 14.47%
Standard &
Poor's 500 12.38% 22.76% 27.81%
Composite Index
Lehman Brothers
Government/ -2.27% 2.70% 4.60%
Corporate
Bond Index
- --------------------------------------------------------------------------------
Hypothetical Investments in MassMutual Balanced Fund Class L and the Lipper
Balanced Fund Index
- --------------------------------------------------------------------------------
MassMutual Balanced Fund
Total Return Since Inception
5/3/99-6/30/99
Class L 0.82%
- --------------------------------------------------------------------------------
Lipper Balanced
Fund Index 1.17%
Standard &
Poor's 500 3.06%
Composite Index
Lehman Brothers
Government/ -1.34%
Corporate
Bond Index
- --------------------------------------------------------------------------------
[LINE GRAPHS APPEAR HERE]
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
Lipper Lehman Bros. S&P 500
Class S Balanced Gov't/Corp Index
------- -------- ----------- -------
10/3/94 10000 10000 10000 10000
12/94 10029 9880 10037 9999
6/95 11179 11206 11220 12019
12/95 12164 12309 11968 13756
6/96 12788 12860 11743 15144
12/96 13725 13960 12316 16914
6/97 15126 15522 12653 20400
12/97 16294 16612 13517 22558
6/98 17361 18328 14081 26553
12/98 18494 19165 14797 29006
6/99 19223 20446 14461 32596
Lipper Lehman Bros. S&P 500
Class A Class Y Balanced Gov't/Corp Index
------- ------- -------- ----------- -------
12/97 10000 10000 10000 10000 10000
3/98 10730 10740 10790 10152 11395
6/98 10620 10640 10979 10417 11771
9/98 10333 10363 10346 10933 10600
12/98 11278 11323 11537 10947 12858
3/99 11101 11149 11722 10816 13498
6/99 11681 11756 12248 10698 14450
Lipper Lehman Bros. S&P 500
Class L Balanced Gov't/Corp Index
------- -------- ---------- -------
5/3/99 10000 10000 10000 10000
5/31/99 9925 9846 9897 9764
6/30/99 10082 10117 9866 10306
Past performance is not predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund, while the Lipper Balanced Fund Index, the Lehman Brothers
Government/Corporate Bond Index, and the Standard & Poor's 500 Composite Index
are unmanaged and do not incur expenses, and cannot be purchased directly by
investors.
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund -- Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1999
Number of
Shares Market Value
--------- ------------
EQUITIES -- 53.3%
Aerospace & Defense -- 1.9%
Raytheon Company
Cl. A 32,600 $ 2,245,325
Raytheon Company
Cl. B 99,600 7,009,350
TRW Inc. 121,000 6,639,875
-----------
15,894,550
-----------
Agribusiness -- 0.4%
Archer-Daniels-
Midland Company 193,130 2,981,444
-----------
Apparel, Textiles & Shoes -- 0.5%
VF Corporation 95,000 4,061,250
-----------
Automotive & Parts -- 1.9%
Delphi Automotive
Systems Corporation 224,100 4,159,856
Ford Motor Company 85,700 4,836,694
Goodyear Tire &
Rubber Company 125,000 7,351,563
-----------
16,348,113
-----------
Banking, Savings & Loans -- 3.4%
The Bank of New York
Company,
Incorporated 213,100 7,818,106
Comerica,
Incorporated 87,800 5,218,613
Pacific Century
Financial
Corporation 216,300 4,663,969
Wachovia Corp. 66,300 5,672,794
Wells Fargo &
Company 121,000 5,172,750
-----------
28,546,232
-----------
Beverages -- 0.7%
Brown-Forman
Corporation Cl. B 93,700 6,108,069
-----------
Chemicals -- 2.1%
Air Products and
Chemicals, Inc. 114,200 4,596,550
Engelhard Corporation 235,400 5,325,925
Rohm & Haas
Company 189,600 8,129,100
-----------
18,051,575
-----------
Communications -- 1.0%
GTE Corporation 111,400 8,438,550
-----------
Computers & Office Equipment -- 6.1%
Electronic Data
Systems Corporation 76,300 4,315,719
Hewlett-Packard
Company 125,300 12,592,650
International Business
Machines
Corporation 124,800 16,130,400
Pitney Bowes, Inc. 147,800 9,496,150
Xerox Corporation 154,600 9,131,063
-----------
51,665,982
-----------
Containers -- 1.3%
Bemis Company, Inc. 98,900 3,931,275
Crown Cork & Seal
Company, Inc. 108,500 3,092,250
Temple-Inland, Inc. 60,500 4,129,125
-----------
11,152,650
-----------
Cosmetics & Personal Care -- 1.1%
Kimberly-Clark
Corporation 159,200 9,074,400
-----------
Electric Utilities -- 1.2%
Dominion Resources,
Inc. 86,400 3,742,200
Pinnacle West Capital
Corporation 86,700 3,489,675
Teco Energy, Inc. 136,300 3,100,825
-----------
10,332,700
-----------
Electrical Equipment & Electronics -- 2.8%
General Electric
Company 98,900 11,175,700
Honeywell Inc. 58,000 6,720,750
Hubbell, Incorporated
Cl. B 118,122 5,359,786
-----------
23,256,236
-----------
Energy -- 5.1%
Apache Corporation 48,600 1,895,400
BP Amoco plc
Sponsored ++ 81,318 8,823,003
Burlington Resources
Inc. 105,400 4,558,550
Conoco Inc. Cl. A 90,500 2,522,688
ENI SPA Sponsored
++ 70,000 4,200,000
Mobil Corporation 88,300 8,741,700
Unocal Corporation 146,900 5,820,913
USEC Inc. 228,200 3,394,475
USX-Marathon Group 92,400 3,008,775
-----------
42,965,504
-----------
Financial Services -- 0.7%
American Express
Company 45,000 5,855,625
The Goldman Sachs
Group, L.P. 6,000 433,500
-----------
6,289,125
-----------
Foods -- 1.7%
Bestfoods 72,000 3,564,000
ConAgra, Inc. 222,200 5,916,075
General Mills, Inc. 55,700 4,476,888
-----------
13,956,963
-----------
Forest Products & Paper -- 0.8%
Weyerhaeuser
Company 95,600 6,572,500
-----------
Healthcare -- 4.5%
Becton, Dickinson and
Company 195,800 5,874,000
Bristol-Myers Squibb
Company 236,200 16,637,338
Pharmacia & Upjohn,
Inc. 120,500 6,845,906
Schering-Plough Corp. 152,800 8,098,400
-----------
37,455,644
-----------
Industrial -- Diversified -- 0.5%
Tyco International Ltd. 40,826 3,868,264
-----------
Industrial Distribution -- 0.7%
W.W. Grainger, Inc. 109,000 5,865,563
-----------
Industrial Transportation -- 1.1%
Burlington Northern
Santa Fe Corp. 149,500 4,634,500
Norfolk Southern
Corporation 166,900 5,027,863
-----------
9,662,363
-----------
Insurance -- 3.6%
American General
Corporation 87,100 6,565,163
CIGNA Corporation 28,800 2,563,200
The Hartford Financial
Services Group, Inc. 78,800 4,595,025
Jefferson-Pilot
Corporation 63,675 4,214,489
Marsh & McLennan
Companies, Inc. 110,900 8,372,950
MBIA, Inc. 80,300 5,199,425
-----------
31,510,252
-----------
(Continued)
The accompanying notes are an integral part of the financial statements.
45
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Number of
Shares Market Value
---------- ------------
Machinery & Components -- 0.6%
Dover Corporation 137,300 $ 4,805,500
------------
Miscellaneous -- 0.7%
Armstrong World
Industries, Inc. 23,600 1,364,375
Minnesota Mining &
Manufacturing
Company 54,000 4,694,625
------------
6,059,000
------------
Pharmaceuticals -- 1.0%
American Home
Products Corporation 141,400 8,130,500
------------
Publishing & Printing -- 1.2%
The McGraw-Hill
Companies, Inc. 187,200 10,097,100
------------
Retail -- 1.6%
The May Department
Stores Company 105,900 4,328,663
Newell Rubbermaid
Inc. 100,600 4,677,900
Sears Roebuck and Co. 94,100 4,193,331
------------
13,199,894
------------
Retail--Grocery -- 1.4%
Albertson's, Inc. 223,250 11,511,328
------------
Telephone Utilities -- 2.1%
Ameritech Corporation 117,100 8,606,850
Frontier Corporation 153,100 9,032,900
------------
17,639,750
------------
Tobacco -- 1.1%
Fortune Brands, Inc. 131,900 5,457,363
UST Inc. 131,300 3,840,525
------------
9,297,888
------------
Transportation -- 0.5%
Galileo International
Inc. 72,100 3,852,844
------------
TOTAL EQUITIES 448,651,733
------------
(Cost $263,030,386)
Principal
Amount Market Value
------------ ------------
BONDS & NOTES -- 21.9%
ASSET BACKED SECURITIES -- 1.5%
California
Infrastructure PG&
E-1, 1997-1, Class A6
6.320% 09/25/2005 $ 150,000 149,910
California
Infrastructure SCE-1,
1997-1, Class A5
6.280% 09/25/2005 150,000 149,574
California
Infrastructure
SDG&E-1,1997-1,
Class A5
6.190% 09/25/2005 100,000 99,397
Capita Equipment
Receivables Trust
1996-1, Class A4
6.280% 06/15/2000 685,242 686,099
Case Equipment Loan
Trust 1998-A,
Class A4
5.830% 02/15/2005 750,000 745,328
Caterpillar Financial
Asset Trust, 1997-B,
Class A3
6.160% 09/25/2003 1,000,000 1,002,200
Chase Manhattan Auto
Owner Trust 1998-A,
Class A4
5.800% 12/16/2002 1,000,000 994,550
Chase Manhattan RV
Owner Trust 1997-A,
Class A7
6.140% 10/16/2006 1,000,000 1,000,540
Ford Credit Auto
Owner Trust, 1996-B,
Class A-4
6.300% 01/15/2001 870,367 872,264
Metlife Capital
Equipment Loan
Trust Series 1997-A,
Class A
6.850% 05/20/2008 750,000 764,108
Peco Energy
Transition Trust
Series 1999-A,
Class A6
6.050% 03/01/2009 650,000 622,577
Peco Energy
Transition Trust
Series 1999-A,
Class A7
6.130% 03/01/2009 350,000 332,609
Premier Auto Trust
Series 1998-4,
Class A3
5.690% 06/08/2002 1,000,000 997,440
Premier Auto Trust
Series 1998-5,
Class A3
5.070% 07/08/2002 500,000 493,945
Railcar Trust No
1992-1
7.750% 06/01/2004 297,705 306,871
Rental Car Finance
Corp. Series 1999-1A,
Class A +
5.900% 02/25/2007 600,000 590,682
Textron Financial
Corporation
5.890% 01/15/2005 1,000,000 994,280
Toyota Auto Lease
Trust Series 1998-B,
Class A1
5.350% 07/25/2002 1,000,000 989,800
Travelers Funding Ltd.
Class A-1
6.300% 02/15/2014 700,000 649,250
------------
TOTAL ASSET BACKED
SECURITIES 12,441,424
(Cost $12,558,408) ------------
CORPORATE DEBT -- 8.3%
AirTouch
Communications,
Inc
7.500% 07/15/2006 1,000,000 1,038,710
Alcan Aluminum
Limited
6.250% 11/01/2008 500,000 468,110
America West Airlines
1996-1, Class A
6.850% 07/02/2009 964,958 934,841
American Airlines
1994-A Pass Through
Trusts, Class A4 *
9.780% 11/26/2011 866,293 988,995
American General
Finance Corporation
5.750% 11/01/2003 500,000 484,500
AMR Corporation *
9.000% 08/01/2012 500,000 547,310
Analog Devices, Inc.
6.625% 03/01/2000 500,000 502,220
Anheuser-Busch
Companies, Inc.
5.375% 09/15/2008 1,000,000 901,480
Archer-Daniels-
Midland Company
6.750% 12/15/2027 350,000 326,606
Associates Corporation
of North America *
6.500% 08/15/2002 500,000 502,235
Associates Corporation
of North America
6.750% 08/01/2001 1,000,000 1,010,840
AT&T Corp.
5.625% 03/15/2004 1,000,000 967,630
Barrick Gold
Corporation
7.500% 05/01/2007 1,000,000 993,440
Bell Atlantic Financial
Services, Inc. *
6.610% 02/04/2000 1,000,000 1,004,190
(Continued)
The accompanying notes are an integral part of the financial statements.
46
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Market Value
---------- ------------
BHP Finance (USA)
Limited
6.420% 03/01/2026 $1,000,000 $ 990,230
Bombardier Capital
Inc. +
6.000% 01/15/2002 1,000,000 983,438
Boston Scientific
Corporation
6.625% 03/15/2005 2,000,000 1,862,920
Cable & Wireless
Communications plc
6.750% 12/01/2008 1,300,000 1,243,290
Carlisle Companies
Incorporated
7.250% 01/15/2007 750,000 737,955
Celulosa Arauco
Constitucion
6.950% 09/15/2005 500,000 442,185
Champion International
Corporation
6.400% 02/15/2026 1,000,000 964,690
The Charles Schwab
Corporation
6.250% 01/23/2003 1,000,000 984,370
The CIT Group, Inc.
5.625% 10/15/2003 500,000 481,590
The CIT Group, Inc.
6.375% 10/01/2002 1,000,000 997,620
Comcast Cable
Communications, Inc.
8.375% 05/01/2007 750,000 803,235
ConAgra, Inc.
7.000% 10/01/2028 750,000 702,038
Continental Airlines,
Inc., Series 1996-2B
8.560% 07/02/2014 464,975 495,896
Continental Airlines,
Inc., Series 1996-B
7.820% 04/15/2015 465,264 475,909
Crown Cork & Seal
Company, Inc.
6.750% 12/15/2003 1,000,000 987,060
CSX Corporation
7.050% 05/01/2002 500,000 505,705
CSX Corporation
7.250% 05/01/2027 1,200,000 1,178,196
Dana Corporation
6.500% 03/15/2008 500,000 477,070
Dana Corporation
7.000% 03/01/2029 300,000 275,697
Delta Air Lines, Inc.,
1992, Series C
8.540% 01/02/2007 378,297 401,956
Dover Corporation
6.250% 06/01/2008 500,000 472,415
Dover Corporation
6.650% 06/01/2028 500,000 446,595
Emerald Investment
Grade CBO +
5.644% 05/24/2011 1,000,000 996,250
ERAC USA Finance
Company+
6.750% 05/15/2007 1,250,000 1,191,263
FBG Finance Limited+
7.875% 06/01/2016 1,000,000 1,048,500
Fletcher Challenge
Capital Canada Inc.
6.750% 03/24/2005 500,000 479,230
Fletcher Challenge
Capital Canada Inc.
7.750% 06/20/2006 500,000 501,365
General American
Transportation
Corporation
6.750% 03/01/2006 1,000,000 956,090
General Electric
Capital Corporation
6.500% 11/01/2006 250,000 249,508
General Mills, Inc.
8.900% 06/15/2006 500,000 553,115
The Goldman Sachs
Group, L.P.+
6.200% 02/15/2001 1,000,000 997,580
GTE Corporation
9.100% 06/01/2003 275,000 297,094
Halliburton Company
5.625% 12/01/2008 750,000 682,734
Heller Financial, Inc.
6.250% 03/01/2001 500,000 500,230
Hershey Foods
Corporation
7.200% 08/15/2027 1,250,000 1,239,746
Household Finance
Corporation
6.500% 11/15/2008 500,000 476,755
ICI Wilmington, Inc.
7.050% 09/15/2007 500,000 493,990
IMC Global Inc.
6.625% 10/15/2001 500,000 499,335
Interpool, Inc.
7.350% 08/01/2007 500,000 470,937
The Kroger Co. +
7.700% 06/01/2029 700,000 696,955
LASMO (USA) Inc.
6.750% 12/15/2007 1,250,000 1,140,729
Leucadia National
Corporation
7.750% 08/15/2013 1,000,000 896,990
MAPCO Inc.
7.250% 03/01/2009 1,000,000 985,870
Marsh & McLennan
Companies, Inc.
7.125% 06/15/2009 500,000 503,955
Meritor Automotive
Inc
6.800% 02/15/2009 1,000,000 948,650
Midway Airlines Pass
Through Certificates
Class B +
8.140% 01/02/2013 500,000 472,640
Millipore Corporation
7.500% 04/01/2007 1,000,000 954,370
Mobil Corporation
8.625% 08/15/2021 1,000,000 1,176,670
Morgan Stanley Dean
Witter & Co.
5.625% 01/20/2004 1,000,000 963,840
Newmont Mining
Corporation *
8.625% 04/01/2002 1,000,000 1,031,090
News America
Holdings
Incorporated
9.250% 02/01/2013 1,000,000 1,124,130
Norfolk Southern
Corporation
7.050% 05/01/2037 1,350,000 1,371,843
North Finance
(Bermuda) Limited +
7.000% 09/15/2005 1,000,000 986,430
Occidental Petroleum
Corporation
7.375% 11/15/2008 1,500,000 1,474,950
Pepsi Bottling
Holdings Inc. +
5.625% 02/17/2009 500,000 454,298
Raytheon Company
6.750% 08/15/2007 500,000 494,910
Republic Services, Inc.
7.125% 05/15/2009 1,000,000 979,390
Rolls-Royce Capital
Inc.
7.125% 07/29/2003 1,000,000 1,003,500
Ryder System, Inc.
6.600% 11/15/2005 750,000 725,948
Scholastic Corporation
7.000% 12/15/2003 750,000 747,930
The E.W. Scripps
Company
6.625% 10/15/2007 1,000,000 958,760
Joseph E. Seagram &
Sons, Inc.
7.500% 12/15/2018 1,000,000 966,620
Sealed Air Corporation +
6.950% 05/15/2009 750,000 726,473
Sprint Capital
Corporation
6.125% 11/15/2008 500,000 461,445
Sprint Capital
Corporation
6.875% 11/15/2028 500,000 453,310
(Continued)
The accompanying notes are an integral part of the financial statements.
47
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Market Value
----------- ------------
Texaco Inc.
5.500% 01/15/2009 $ 1,000,000 $ 917,046
Thomas & Betts
Corporation
8.250% 01/15/2004 500,000 515,740
Time Warner Inc. Pass
Through Asset Trust
1997-1 +
6.100% 12/30/2001 750,000 746,843
Time Warner, Inc.
7.750% 06/15/2005 1,000,000 1,029,250
Union Oil Company of
California
7.500% 02/15/2029 750,000 728,867
Union Tank Car
6.790% 05/01/2010 1,000,000 978,100
US Air, Inc., Class B
7.500% 10/15/2009 459,605 441,344
Valero Energy
Corporation
7.375% 03/15/2006 500,000 485,383
Vulcan Materials
Company
6.000% 04/01/2009 1,000,000 943,450
WorldCom, Inc.
7.750% 04/01/2007 500,000 523,625
WPP Finance (USA)
Corporation
6.625% 07/15/2005 375,000 358,521
------------
TOTAL CORPORATE DEBT 69,584,754
------------
(Cost $70,393,270)
NON-U.S. GOVERNMENT
AGENCY OBLIGATIONS -- 0.6%
Collateralized Mortgage Obligations
Asset Securitization
Corporation Series
1995-MD4, Class A1
7.100% 08/13/2029 1,412,468 1,425,703
Chase Commercial
Mortgage Securities
Corp. Series 1998-2,
Class A1
6.025% 08/18/2007 721,789 701,709
CS First Boston
Mortgage Securities
Corp. Series
1998-C2, Class A1
5.960% 12/15/2007 725,000 704,069
Merrill Lynch
Mortgage Investors,
Inc., Series 1997-
Cl-CTL, A-1
6.310% 11/15/2026 909,845 901,475
Salomon Brothers
Mortgage Securities
1997-TZH, Class B +
7.491% 03/25/2022 750,000 765,480
Starwood Commercial
Mortgage Trust
Series 1999-C1A,
Class B +
6.920% 02/05/2009 1,000,000 965,000
------------
TOTAL NON-U.S. GOVERNMENT
AGENCY OBLIGATIONS 5,463,436
------------
(Cost $5,640,531)
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 2.6%
Federal Home Loan Mortgage Corporation
(FHLMC) -- 0.6%
Collateralized Mortgage Obligations -- 0.4%
FHLMC Series 1322
Class G
7.500% 02/15/2007 639,652 649,042
FHLMC Series 1607
Class G
6.000% 08/15/2013 3,000,000 2,946,540
------------
3,595,582
------------
Pass-Through Securities -- 0.2%
FHLMC
6.420% 12/01/2005 1,248,996 1,238,848
FHLMC
9.000% 03/01/2017 89,386 94,673
------------
1,333,521
------------
4,929,103
------------
Federal National Mortgage Association
(FNMA) -- 0.9%
Collateralized Mortgage Obligations -- 0.7%
FNMA Series 1993-134
Class GA
6.500% 02/25/2007 1,000,000 1,004,370
FNMA Series 1993-221
Class D
6.000% 12/25/2008 1,000,000 985,620
FNMA Series 1993-231
Class M
6.000% 12/25/2008 2,500,000 2,447,650
FNMA Series 1996-54
Class C
6.000% 09/25/2008 2,000,000 1,951,860
------------
6,389,500
------------
Pass-Through Securities -- 0.2%
FNMA
6.000% 11/01/2028 1,017,086 955,694
FNMA
6.000% 11/01/2028 478,350 449,477
FNMA
8.000% 05/01/2013 195,535 197,273
------------
1,602,444
------------
7,991,944
------------
Government National Mortgage Association
(GNMA) -- 0.8%
Pass-Through Securities
GNMA
6.500% 10/15/28 1,756,596 1,690,583
GNMA
7.000% 08/15/2023-
10/15/2023 793,481 785,792
GNMA
7.500% 10/15/2006-
06/15/2017 1,679,360 1,704,983
GNMA
8.000% 11/15/2004
01/15/2009 1,823,087 1,874,682
GNMA
9.000% 12/15/2008-
05/15/2009 317,801 335,216
------------
6,391,256
------------
U.S. Government Guaranteed Notes -- 0.3%
1991-A Fairfax County,
VA
8.740% 08/01/2001 200,000 211,250
1991-A Jefferson Park,
CA
8.740% 08/01/2001 1,740,000 1,837,875
1991-A Monroe
County, NY
8.740% 08/01/2001 500,000 528,125
1991-A Rochester, NY
8.740% 08/01/2001 60,000 63,375
------------
2,640,625
------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 21,952,928
------------
(Cost $21,862,158)
U.S. TREASURY OBLIGATIONS -- 8.9%
U.S. Treasury Bonds -- 1.9%
U.S. Treasury Bond
7.500% 11/15/2016 8,075,000 9,100,767
U.S. Treasury Bond
8.750% 05/15/2017 5,750,000 7,258,455
------------
16,359,222
------------
U.S. Treasury Notes -- 7.0%
U.S. Treasury Note
5.250% 08/15/2003 500,000 491,485
U.S. Treasury Note
5.875% 02/15/2004 1,250,000 1,258,013
U.S. Treasury Note
6.500% 08/15/2005 14,315,000 14,755,616
U.S. Treasury Note
6.500% 10/15/2006 5,000,000 5,162,500
U.S. Treasury Note
6.875% 05/15/2006 32,650,000 34,374,247
U.S. Treasury Note
7.500% 02/15/2005 1,700,000 1,830,152
------------
57,872,013
------------
(Continued)
The accompanying notes are an integral part of the financial statements.
48
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Market Value
--------- ------------
U.S. Treasury Strip -- 0.0%
U.S. Treasury Strip -- Principal Only
0.000% 08/15/2015 $ 700,000 $ 253,085
------------
TOTAL U.S. TREASURY
OBLIGATIONS 74,484,320
(Cost $77,179,715) ------------
TOTAL BONDS & NOTES 183,926,862
(Cost $187,634,082) ------------
SHORT-TERM INVESTMENTS -- 31.0%
Cash Equivalents -- 6.4%
Bank of Nova Scotia
Eurodollar Time
Deposit **
5.500% 07/01/1999 4,000,000 4,000,000
BankBoston
Eurodollar Time
Deposit **
5.995% 10/29/1999 647,241 647,241
General America Life
Insurance Company
Funding
Agreement**
5.120% 01/22/2000 10,000,000 10,000,000
The Goldman Sachs
Group, L.P. Master
Note **
4.900% 02/04/2000 25,000,000 25,000,000
Harris Trust & Savings
Bank Eurodollar
Time Deposit **
5.875% 07/01/1999 1,000,000 1,000,000
Janus Money Market
Fund ** 11,000,000 11,000,000
Frank Russell Money
Market Fund ** 2,500,000 2,500,000
------------
54,147,241
------------
Commercial Paper -- 24.6%
Burlington Northern
Santa Fe Corp.
5.000% 07/09/1999 3,030,000 3,026,635
Case Credit
Corporation
4.980% 07/28/1999 3,700,000 3,686,180
Case Credit
Corporation
5.000% 07/20/1999 3,260,000 3,251,397
Central and South
West Corporation
4.980% 07/23/1999 4,270,000 4,257,005
Central and South
West Corporation
5.000% 07/16/1999 4,800,000 4,790,000
Comdisco, Inc.
5.120% 08/12/1999 6,090,000 6,053,622
Comdisco, Inc.
5.130% 08/26/1999 4,245,000 4,211,125
Cox Enterprises, Inc.
5.000% 07/07/1999 2,975,000 2,972,521
Cox Enterprises, Inc.
5.000% 07/13/1999 5,345,000 5,336,092
Cox Enterprises, Inc.
5.280% 08/16/1999 3,055,000 3,034,389
Cox Enterprises, Inc.
5.320% 08/10/1999 1,330,000 1,322,138
Crown Cork & Seal
Company, Inc.
5.030% 07/14/1999 3,815,000 3,808,070
Crown Cork & Seal
Company, Inc.
5.120% 08/18/1999 5,515,000 5,477,351
Crown Cork & Seal
Company, Inc.
5.400% 08/23/1999 5,400,000 5,357,070
CSX Corporation
5.290% 08/25/1999 4,550,000 4,513,227
Dana Credit
Corporation
5.170% 08/09/1999 3,420,000 3,400,845
Dana Credit
Corporation
5.230% 08/06/1999 3,415,000 3,397,139
Dana Credit
Corporation
5.650% 09/08/1999 5,720,000 5,660,250
Eastman Chemical
Company
5.140% 08/02/1999 4,935,000 4,912,453
Federal Signal Corp.
5.270% 08/17/1999 5,675,000 5,635,954
Houston Industries
Finance Co. L.P.
4.990% 07/29/1999 5,725,000 5,702,781
Houston Industries
Finance Co. L.P.
4.990% 07/30/1999 4,980,000 4,959,982
IMC Global Inc.
5.050% 08/30/1999 5,000,000 4,954,583
IMC Global Inc.
5.070% 07/12/1999 4,460,000 4,453,091
Kerr-McGee Credit
Corporation
5.500% 08/24/1999 5,530,000 5,484,377
Praxair, Inc.
5.000% 08/31/1999 4,765,000 4,720,997
Public Service
Company of Colorado
5.130% 09/07/1999 3,450,000 3,414,484
Public Service Electric
and Gas Company
5.100% 08/13/1999 400,000 397,563
Raytheon Company
5.020% 07/01/1999 4,935,000 4,935,000
Ryder System, Inc.
4.980% 08/13/1999 3,400,000 3,379,776
Ryder System, Inc.
5.310% 09/10/1999 7,635,000 7,552,934
Safeway Inc.
4.980% 07/08/1999 5,000,000 4,995,159
Safeway Inc.
5.000% 08/20/1999 5,800,000 5,759,722
Service Corporation
International
5.000% 07/15/1999 6,780,000 6,766,817
Sonat Inc.
5.030% 07/19/1999 4,425,000 4,413,871
Sonat Inc.
5.040% 08/27/1999 4,185,000 4,151,604
Sonat Inc.
5.270% 08/19/1999 3,510,000 3,484,823
TRW Inc.
5.280% 07/21/1999 7,500,000 7,478,000
UOP
5.400% 08/05/1999 5,960,000 5,928,710
US West Capital
Funding
4.980% 07/06/1999 2,530,000 2,528,250
US West Capital
Funding
5.000% 08/03/1999 3,800,000 3,782,583
Vastar Resources, Inc.
5.000% 07/02/1999 4,940,000 4,939,314
Vastar Resources, Inc.
5.310% 09/15/1999 6,165,000 6,094,068
VF Corporation
5.020% 07/26/1999 7,130,000 7,105,144
VF Corporation
5.020% 07/27/1999 1,135,000 1,130,885
VF Corporation
5.080% 07/22/1999 3,715,000 3,703,991
------------
206,321,972
------------
TOTAL SHORT-TERM
INVESTMENTS 260,469,213
(Cost $260,469,213) ------------
TOTAL INVESTMENTS - 106.2% 893,047,808
(Cost $711,133,681) ***
Other Assets/(Liabilities) - (6.2%) (51,882,298)
------------
Net Assets - 100.0% $841,165,510
============
Notes to Portfolio of Investments
*** Aggregate cost for Federal tax purposes (Note 7)
++ American Depository Receipt.
+ Securities exempt from registration under Rule 114A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
* All or a portion of this security is segregated to cover forward purchase
commitments. (Note 2).
** Represents investment of security lending collateral. (Note 2).
The accompanying notes are an integral part of the financial statements.
49
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Financial Statements
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
June 30, 1999
(Unaudited)
-------------
<S> <C>
Assets:
Investments, at value (cost $450,664,468) (Note 2) ...................... $632,578,595
Short-term investments, at value (cost $260,469,213) (Note 2) ........... 260,469,213
------------
Total Investments ................................................... 893,047,808
Cash .................................................................... 320
Receivables from:
Investments sold .................................................... 229,960
Fund shares sold .................................................... 837,542
Interest and dividends .............................................. 3,152,243
------------
Total assets .................................................... 897,267,873
------------
Liabilities:
Payables for:
Investments purchased ............................................... 547,056
Fund shares redeemed ................................................ 873,636
Securities on loan (Note 2) ......................................... 54,147,241
Settlement of investments purchased on a
forward commitment basis (Note 2) ............................... 73,433
Directors' fees and expenses (Note 3) ............................... 1,916
Affiliates (Note 3):
Investment management fees ...................................... 358,924
Administration fees ............................................. 72,808
Service fees .................................................... 113
Accrued expenses and other liabilities .................................. 27,236
------------
Total liabilities ............................................... 56,102,363
------------
Net assets .............................................................. $841,165,510
============
Net assets consist of:
Paid-in capital ......................................................... $635,991,616
Undistributed net investment income ..................................... 13,136,329
Accumulated net realized gain on investments ............................ 10,207,660
Net unrealized appreciation on investments .............................. 181,829,905
------------
$841,165,510
============
Net assets:
Class A ................................................................. $ 184,437
============
Class L ................................................................. $ 101,825
============
Class Y ................................................................. $ 63,067,310
============
Class S ................................................................. $777,811,938
============
Shares outstanding:
Class A ................................................................. 12,534
============
Class L ................................................................. 6,908
============
Class Y ................................................................. 4,278,711
============
Class S ................................................................. 52,710,856
============
Net asset value, offering price and redemption price per share:
Class A ................................................................. $ 14.71
============
Class L ................................................................. $ 14.74
============
Class Y ................................................................. $ 14.74
============
Class S ................................................................. $ 14.76
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
50
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of Operations
<TABLE>
<CAPTION>
Six months ended
June 30, 1999
(Unaudited)
----------------
<S> <C>
Investment income: (Note 2)
Interest (including securities lending income of $38,262) ...... $11,118,034
Dividends (net of withholding tax of $27,592) .................. 4,240,573
-----------
Total investment income .................................... 15,358,607
-----------
Expenses: (Note 2)
Investment management fees (Note 3) ............................ 1,836,957
Custody fees ................................................... 36,339
Audit and legal fees ........................................... 9,626
Directors' fees (Note 3) ....................................... 8,186
-----------
1,891,108
Administration fees (Note 3):
Class A .................................................... 402
Class L* ................................................... 65
Class Y .................................................... 61,972
Class S .................................................... 301,502
Service fees (Note 3):
Class A .................................................... 221
-----------
Total expenses ........................................ 2,255,270
-----------
Net investment income ................................. 13,103,337
-----------
Realized and unrealized gain (loss):
Net realized gain on investment transactions ................... 1,823,201
Net change in unrealized appreciation (depreciation)
on investments ............................................. 17,728,882
-----------
Net realized and unrealized gain ....................... 19,552,083
-----------
Net increase in net assets resulting from operations ........... $32,655,420
===========
</TABLE>
* For the period from May 3, 1999 (commencement of operations) through June 30,
1999.
The accompanying notes are an integral part of the financial statements.
51
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six months ended
June 30, 1999 Year ended
(Unaudited) December 31, 1998
---------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income ............................................... $ 13,103,337 $ 24,183,950
Net realized gain on investment transactions ........................ 1,823,201 38,995,138
Net change in unrealized appreciation (depreciation)
on investments .................................................. 17,728,882 24,939,485
------------- -------------
Net increase in net assets resulting from operations ............ 32,655,420 88,118,573
------------- -------------
Distributions to shareholders (Note 2):
From net investment income:
Class A ............................................................. - (6,590)
Class L*............................................................. - -
Class Y ............................................................. - (45,079)
Class S ............................................................. - (24,100,466)
------------- -------------
Total distributions from net investment income .................. - (24,152,135)
------------- -------------
From net realized gains:
Class A ............................................................. - (11,583)
Class L*............................................................. - -
Class Y ............................................................. - (61,093)
Class S ............................................................. - (36,732,877)
------------- -------------
Total distributions from net realized gains ..................... - (36,805,553)
------------- -------------
Net fund share transactions (Note 5):
Class 1**............................................................ - (156,975)
Class 2**............................................................ - (159,724)
Class 3**............................................................ - (161,227)
Class A ............................................................. 1,000 175,148
Class L*............................................................. 101,000 -
Class Y ............................................................. 58,798,081 1,104,224
Class S ............................................................. (23,381,610) 89,416,157
------------- -------------
Increase in net assets from net fund share transactions ......... 35,518,471 90,217,603
------------- -------------
Total increase in net assets ........................................ 68,173,891 117,378,488
Net assets:
Beginning of period ................................................. 772,991,619 655,613,131
------------- -------------
End of period (including undistributed net investment income
of $13,136,329 and $32,992, respectively) ....................... $ 841,165,510 $ 772,991,619
============= =============
</TABLE>
* For the period from May 3, 1999 (commencement of operations) through
June 30, 1999.
** Effective January 1, 1998, Class 1, Class 2, and Class 3 shares were
terminated (See Note 1).
The accompanying notes are an integral part of the financial statements.
52
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Balanced Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights (For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class A Class L Class Y
Six months Period Six months
ended 6/30/99 Year ended ended 6/30/99 ended 6/30/99 Year ended
(Unaudited) 12/31/98 + (Unaudited)** (Unaudited) 12/31/98 +
----------- ---------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.20 $ 14.03 $ 14.62 14.20 14.06
----------- ---------- ------------- ------------- ----------
Income (loss) from investment operations:
Net investment income 0.19 0.41*** 0.07 0.22*** 0.48***
Net realized and unrealized gain
(loss) on investments 0.32 1.36 0.05 0.32 1.36
----------- ---------- ------------- ------------- ----------
Total income (loss) from
investment operations 0.51 1.77 0.12 0.54 1.84
----------- ---------- ------------- ------------- ----------
Less distributions to shareholders:
From net investment income - (0.58) - - (0.67)
From net realized gains - (1.02) - - (1.03)
----------- ---------- ------------- ------------- ----------
Total distributions - (1.60) - - (1.70)
----------- ---------- ------------- ------------- ----------
Net asset value, end of period $ 14.71 $ 14.20 $ 14.74 14.74 14.20
=========== ========== ============= ============= ==========
Total Return 3.57% 12.78% 0.82% 3.82% 13.23%
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 184 $ 177 $ 102 $ 63,067 $ 1,051
Net expenses to average daily
net assets 1.18%* 1.20% 0.91%* 0.75%* 0.76%
Net investment income to average
daily net assets 2.67%* 2.76% 3.14%* 3.16%* 3.21%
Portfolio turnover rate 7% 30% 7% 7% 30%
Class S (1)
Six months
ended 6/30/99 Year ended Year ended Year ended Year ended Period ended
(Unaudited) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94****
----------- ---------- ------------- ------------- ---------- ------------
Net asset value, beginning of period $ 14.20 $ 13.59 $ 12.34 $ 11.51 $ 9.92 $ 10.00
----------- ---------- ------------- ------------- ---------- ------------
Income (loss) from investment operations:
Net investment income 0.23 0.49*** 0.48 0.46 0.44 0.11
Net realized and unrealized gain
(loss) on investments 0.33 1.33 1.82 1.02 1.68 (0.08)
----------- ---------- ------------- ------------- ---------- ------------
Total income (loss) from
investment operations 0.56 1.82 2.30 1.48 2.12 0.03
----------- ---------- ------------- ------------- ---------- ------------
Less distributions to shareholders:
From net investment income - (0.48) (0.48) (0.46) (0.44) (0.11)
From net realized gains - (0.73) (0.57) (0.19) (0.09) -
----------- ---------- ------------- ------------- ---------- ------------
Total distributions - (1.21) (1.05) (0.65) (0.53) (0.11)
----------- ---------- ------------- ------------- ---------- ------------
Net asset value, end of period $ 14.76 $ 14.20 $ 13.59 $ 12.34 $ 11.51 9.92
=========== ========== ============= ============= ========== ============
Total Return @ 3.94% 13.50% 18.72% 12.83% 21.31% 0.29%
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 777,812 $ 771,763 $ 655,135 $ 563,280 $ 456,773 $ 349,688
Net expenses to average daily
net assets # 0.5533%* 0.5433% 0.5389% 0.5120% 0.5120% 0.5120%*
Net investment income to average
daily net assets 3.29%* 3.42% 3.57% 3.83% 4.18% 4.29%*
Portfolio turnover rate 7% 30% 28% 26% 23% 2%
#Computed after giving effect to the voluntary
partial waiver of management fee by MassMutual,
which terminated May 1, 1997. Without this
partial waiver of fees by MassMutual, the ratio
of expenses to avearage daily net assets would
have been: N/A N/A 0.5510% 0.5522% 0.5514% 0.5650%*
</TABLE>
* Annualized
** For the period from May 3, 1999 (commencement of operations) through
June 30, 1999.
*** Per share amount calculated on the average shares method, which more
appropriately presents the per share data for the period since the use
of the undistributed income method does not accord with the results of
operations.
**** For the period from October 3, 1994 (commencement of operations)
through December 31, 1994.
+ Amounts have been restated to reflect reverse stock splits (See Note
9).
(1) Class S shares were previously designated as Class 4 shares.
@ Employee retirement benefit plans that invest plan assets in the
Separate Investment Accounts (SIAs) may be subject to certain charges
as set forth in their respective Plan Documents. Total return figures
would be lower for the periods presented if they reflected these
charges.
The accompanying notes are an integral part of the financial statements.
53
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Equity Fund - Portfolio Manager Report
(Formerly known as MassMutual Value Equity Fund)
- --------------------------------------------------------------------------------
What are the investment objective and policies for the MassMutual Core Equity
Fund?
The objective and policies of the Fund are to:
. achieve long-term growth of capital and income
. invest primarily in a diversified portfolio of equity securities of larger,
well-established companies (generally companies with market capitalization
over $2.0 billion)
. use a value-oriented strategy in making investment decisions
. use fundamental analysis to identify companies which
-are of high investment quality
-offer above-average dividend growth potential
-are attractively valued in the marketplace
How did the Fund perform during the first half of 1999?
For the six months ended June 30, 1999, the Fund's Class S shares had a return
of 7.50%, which trailed the 12.38% return of the Standard & Poor's 500 Index
(the Index), a market capitalization-weighted, unmanaged index of 500 common
stocks. The Fund also lagged the 11.04% return of the average diversified equity
fund monitored by Lipper, Inc.
What factors influenced the Fund's performance?
It's useful to divide the period into two parts that correspond roughly to the
first and second quarters of the year. For the first quarter, value stocks were
ignored for the most part, as investors, still fearing a slowdown in the
economy, continued to focus on a select group of large-capitalization growth
stocks with reputations for consistent earnings growth. As a result, the Fund's
return was slightly negative for the first quarter, while the S&P 500 gained
4.9%. As our investment strategy is value-oriented, we were precluded from
investing in the growth stocks which dominated the market during the first part
of the year. Hence, our underperformance is primarily attributable to our
investment style.
In the second quarter, things changed dramatically for the better, in spite of
rising interest rates. Ongoing strength in the U.S. economy, signs of a possible
turnaround in Asia, and higher oil prices led to a broadening of investor
interest beyond the large cap growth stocks where most of the buying had been
concentrated. Analysts increased their earnings expectations for stocks in
general to roughly double what had been forecast earlier in the year. With
investors once again showing interest in value stocks, the Fund posted a gain of
10.6% for the second quarter, handily beating the 7.05% gain of the S&P 500.
During this period, the Fund's investments in technology, telecommunications,
basic materials, and energy were especially beneficial. On the other hand, our
health care holdings suffered, as investors jettisoned stocks in that formerly
popular sector as part of the overall move away from growth stocks.
What stocks performed well?
One of our best contributors was IBM, one of the Fund's largest holdings. "Big
Blue" rose a little over 40% during the period on the strength of solid first
quarter earnings. Another stalwart, Hewlett-Packard, had a similar gain. After a
sluggish 1998, HP's personal computer and printer businesses appears to be
recovering. The company's new server business also seems to be doing well. Marsh
& McLennan rose partly on the continued rapid asset growth of Putnam
Investments, its mutual fund subsidiary. BP Amoco was one beneficiary of the
surge in crude oil prices. Finally, Frontier Corporation is a telecommunications
company with business interests in the fast-growing Internet and
teleconferencing areas. The stock, which rose 72% during the period, was helped
when both Global Crossings and Qwest Communications expressed interest in
acquiring the company.
Which stocks were disappointing?
Schering Plough exemplified the weak health care sector. The stock, which had
been one of the Fund's best-performing holdings during 1998, struggled in the
first half of 1999. In the retail food sector, Albertsons was disappointing. The
stock suffered from delays in completing the company's acquisition of competitor
American Stores. Crown, Cork & Seal, a container company with a strong cash
flow, failed to match earnings estimates for the last several quarters.
54
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Equity Fund - Portfolio Manager Report (Continued)
(Formerly known as MassMutual Value Equity Fund)
- --------------------------------------------------------------------------------
What is your outlook?
The stronger than expected economy and the increased earnings estimates that
resulted from it, were the keys to the improving outlook for value stocks that
we witnessed in the second half of the period. Going forward, we see a
reasonably supportive environment for the rest of the year. Advances in stock
prices are ultimately tied to rising earnings, and rising earnings depend on a
growing economy. As long as economic growth continues at something near its
recent pace, we believe the Fund should do reasonably well.
The pattern for the past few years has been for economic growth to be
exceptionally strong during the first quarter and then to tail off the rest of
the year. We would not be surprised to see that pattern repeat in 1999. If so,
there would be less reason for the Federal Reserve Board to raise interest rates
in the second half of the year as a way of counteracting inflationary forces.
There is still overcapacity in many industries, a factor that helps ensure
adequate supply and keep prices from rising. Stiff global competition also
remains a powerful incentive for most companies not to raise prices. Our view is
that inflation will not be a major problem any time soon.
----------------------------------------------------------
MassMutual Core Equity Fund
Largest Stock Holdings (6/30/99)
----------------------------------------------------------
International Business Machines Corporation
Bristol-Myers Squibb Company
Hewlett-Packard Company
General Electric Company
Marsh & McLennan Companies, Inc.
BP Amoco plc Sponsored (American Depository Receipt)
Albertson's, Inc.
Schering-Plough Corp.
American Corporation
The McGraw-Hill Companies, Inc.
55
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Equity Fund - Portfolio Manager Report (Continued)
(Formerly known as MassMutual Value Equity Fund)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Core Equity Fund Class S and the Standard
& Poor's 500 Composite Index
- --------------------------------------------------------------------------------
MassMutual Core Equity Fund
Total Return Year-to-Date One Year Average Annual
1/1/99-6/30/99 7/1/98-6/30/99 10/03/94-6/30/99
Class S 7.50% 15.27% 21.89%
- --------------------------------------------------------------------------------
Standard &
Poor's 500 12.38% 22.76% 28.24%
Composite Index
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
Date Class S S&P 500 Index
- ------ ------- -------------
10/3/94 10,000 10,000
12/94 9,990 9,998
6/95 11,613 12,021
12/95 13,141 13,756
6/96 14,276 15,144
12/96 15,802 16,915
6/97 18,435 20,401
12/97 20,386 22,559
6/98 22,196 26,554
12/98 23,801 29,006
6/99 25,584 32,596
Hypothetical Investments in MassMutual Core Equity Fund Class A, Class Y and the
Standard & Poor's 500 Composite Index
- --------------------------------------------------------------------------------
MassMutual Core Equity Fund
Total Return Year-to-Date One Year Average Annual
1/1/99-6/30/99 7/1/98-6/30/99 1/01/98-6/30/99
Class A 7.20% 14.46% 15.66%
Class Y 7.46% 15.05% 16.20%
- --------------------------------------------------------------------------------
Standard &
Poor's 500 12.38% 22.76% 27.81%
Composite Index
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date Class A Class Y S&P 500 Index
- ------ ------- ------- -------------
12/97 10,000 10,000 10,000
3/98 11,140 11,160 11,395
6/98 10,860 10,880 11,771
9/98 9,970 10,005 10,600
12/98 11,596 11,649 12,858
3/99 11,252 11,314 13,498
6/99 12,431 12,518 14,450
Hypothetical Investments in MassMutual Core Equity Fund Class L and the Standard
& Poor's 500 Composite Index
- --------------------------------------------------------------------------------
MassMutual Core Equity Fund
Total Return Since Inception
5/3/99-6/30/99
Class L 2.07%
- --------------------------------------------------------------------------------
Standard &
Poor's 500 3.06%
Composite Index
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date Class L S&P 500
------- ------- -------
5/3/99 10,000 10,000
5/31/99 9,912 9,764
6/30/99 10,207 10,306
Past performance is not predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund,while the Standard & Poor's 500 Composite Index is unmanaged and
does not incur expenses, and cannot be purchased directly by investors.
58
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Equity Fund - Portfolio of Investments
(Formerly known as MassMutual Value Equity Fund)
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1999
Number of
Shares Market Value
---------- ------------
EQUITIES -- 99.2%
Aerospace & Defense -- 3.3%
Raytheon Company
Cl. A 200,000 $ 13,775,000
Raytheon Company
Cl. B 780,200 54,906,575
TRW Inc. 921,500 50,567,313
------------
119,248,888
------------
Agribusiness -- 0.6%
Archer-Daniels-
Midland Company 1,425,425 22,004,998
------------
Apparel, Textiles & Shoes -- 0.9%
VF Corporation 735,400 31,438,350
------------
Automotive & Parts -- 2.9%
Delphi Automotive
Systems Corporation 535,100 9,932,794
Ford Motor Company 680,300 38,394,431
Goodyear Tire &
Rubber Company 962,500 56,607,031
------------
104,934,256
------------
Banking, Savings & Loans -- 5.8%
The Bank of New York
Company,
Incorporated 1,673,000 61,378,188
Comerica,
Incorporated 630,200 37,457,513
Pacific Century
Financial
Corporation 1,271,600 27,418,875
Wachovia Corp. 450,000 38,503,125
Wells Fargo &
Company 977,700 41,796,675
------------
206,554,376
------------
Beverages -- 1.3%
Brown-Forman
Corporation Cl. B 688,100 44,855,519
------------
Chemicals -- 3.9%
Air Products and
Chemicals, Inc. 806,300 $32,453,575
Engelhard Corporation 1,779,700 40,265,713
Rohm & Haas
Company 1,520,700 65,200,013
------------
137,919,301
------------
Communications -- 2.1%
GTE Corporation 973,500 73,742,625
------------
Computers & Office Equipment -- 11.9%
Electronic Data
Systems Corporation 837,000 47,342,813
Hewlett-Packard
Company 1,128,500 113,414,250
International Business
Machines
Corporation 1,000,084 129,260,857
Pitney Bowes, Inc. 1,092,400 70,186,700
Xerox Corporation 1,104,600 65,240,438
------------
425,445,058
------------
Containers -- 2.7%
Bemis Company, Inc. 782,100 31,088,475
Crown Cork & Seal
Company, Inc. 1,091,900 31,119,150
Temple-Inland, Inc. 528,800 36,090,600
------------
98,298,225
------------
Cosmetics & Personal Care -- 2.0%
Kimberly-Clark
Corporation 1,240,600 70,714,200
------------
Electric Utilities -- 2.2%
Dominion Resources,
Inc. 730,600 31,644,113
Pinnacle West Capital
Corporation 641,668 25,827,137
Teco Energy, Inc. 1,007,800 22,927,450
------------
80,398,700
------------
Electrical Equipment & Electronics -- 5.5%
General Electric
Company 950,000 $107,350,000
Honeywell Inc. 407,000 47,161,125
Hubbell, Incorporated
Cl. B 918,471 41,675,622
------------
196,186,747
------------
Energy -- 9.7%
Apache Corporation 472,700 18,435,300
BP Amoco plc
Sponsored ++ 820,334 89,006,239
Burlington Resources
Inc. 626,600 27,100,450
Conoco Inc. Cl. A 708,400 19,746,650
ENI SPA, Sponsored ++ 543,200 32,592,000
Mobil Corporation 690,400 68,349,600
Unocal Corporation 1,097,600 43,492,400
USEC Inc. 2,023,800 30,104,018
USX-Marathon Group 699,800 22,787,238
------------
351,613,895
------------
Financial Services -- 1.5%
American Express
Company 400,000 52,050,000
The Goldman Sachs
Group, L.P. 46,700 3,374,075
------------
55,424,075
------------
Foods -- 3.4%
Bestfoods 599,400 29,670,300
ConAgra, Inc. 2,005,000 53,383,125
General Mills, Inc. 489,000 39,303,375
------------
122,356,800
------------
Forest Products & Paper -- 2.1%
Westvaco Corporation 855,000 24,795,000
Weyerhaeuser
Company 727,700 50,029,375
------------
74,824,375
------------
(Continued)
The accompanying notes are an integral part of the financial statements.
57
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Equity Fund - Portfolio of Investments (Continued)
(Formerly known as MassMutual Value Equity Fund)
- --------------------------------------------------------------------------------
Number of
Shares Market Value
---------- ------------
Healthcare -- 8.7%
Becton, Dickinson and
Company 1,859,600 $ 55,788,000
Bristol-Myers Squibb
Company 1,700,000 119,743,750
Pharmacia & Upjohn,
Inc 896,200 50,915,363
Schering-Plough Corp. 1,591,000 84,323,000
-------------
310,770,113
-------------
Industrial -- Diversified -- 0.5%
Tyco International Ltd. 181,713 17,217,307
-------------
Industrial Distribution -- 1.2%
W.W. Grainger, Inc. 806,300 43,389,019
-------------
Industrial Transportation -- 2.3%
Burlington Northern
Santa Fe Corp. 1,296,600 40,194,600
Norfolk Southern
Corporation 1,456,100 43,865,013
-------------
84,059,613
-------------
Insurance -- 7.3%
American General
Corporation 589,600 44,441,100
CIGNA Corporation 149,300 13,287,700
The Hartford Financial
Services Group, Inc. 568,200 33,133,163
Jefferson-Pilot
Corporation 509,600 33,729,150
Marsh & McLennan
Companies, Inc. 1,224,300 92,434,650
MBIA, Inc. 675,200 43,719,200
-------------
260,744,963
-------------
Machinery & Components -- 1.1%
Dover Corporation 1,087,900 38,076,500
-------------
Miscellaneous -- 0.4%
Armstrong World
Industries, Inc. 228,400 13,204,375
------------
Pharmaceuticals -- 1.0%
American Home
Products Corporation 605,600 34,822,000
-------------
Publishing & Printing -- 2.8%
The McGraw-Hill
Companies, Inc. 1,491,400 80,442,388
R.R. Donnelley & Sons
Company 500,000 18,531,250
-------------
98,973,638
-------------
Retail -- 3.1%
The May Department
Stores Company 975,000 39,853,125
Newell Rubbermaid
Inc 900,000 41,850,000
Sears Roebuck and
Co 630,500 28,096,656
-------------
109,799,781
-------------
Retail--Grocery -- 2.4%
Albertson's, Inc. 1,672,668 86,246,944
-------------
Telephone Utilities -- 3.8%
Ameritech Corporation 1,112,600 81,776,100
Frontier Corporation 929,400 54,834,600
-------------
136,610,700
-------------
Tobacco -- 2.0%
Fortune Brands, Inc. 968,900 40,088,238
UST Inc. 1,126,800 32,958,900
-------------
73,047,138
-------------
Transportation -- 0.8%
Galileo International
Inc. 513,100 27,418,781
-------------
TOTAL EQUITIES 3,550,341,260
-------------
(Cost $2,020,506,955)
SHORT-TERM INVESTMENTS -- 3.8%
Cash Equivalents -- 3.5%
Bank of Nova Scotia
Eurodollar Time
Deposit**
5.500% 07/01/1999 5,000,000 5,000,000
BankBoston
Eurodollar Time
Deposit**
5.995% 10/29/1999 3,868,456 3,868,456
General America Life
Insurance Company
Funding
Agreement**
5.120% 01/22/2000 50,000,000 50,000,000
The Goldman Sachs
Group, L.P. Master
Note**
4.900% 02/04/2000 55,000,000 55,000,000
Harris Trust & Savings
Bank Eurodollar
Time Deposit**
5.875% 07/01/1999 1,000,000 1,000,000
Janus Money Market
Fund** 11,000,000 11,000,000
-------------
125,868,456
-------------
Discount Note -- 0.3%
Federal Home Loan
Bank
4.490% 07/01/1999 9,335,000 9,335,000
-------------
TOTAL SHORT-TERM
INVESTMENTS 135,203,456
-------------
(At Amortized Cost)
TOTAL INVESTMENTS -- 103.0% 3,685,544,716
(Cost $2,155,710,411) ***
Other Assets/
(Liabilities)-- (3.0%) (105,905,250)
-------------
NET ASSETS-- 100.0% $3,579,639,466
=============
Notes to Portfolio of Investments
*** Aggregate cost for Federal tax purposes(Note 7)
++ American Depository Receipt.
** Represents investment of security lending collateral. (Note 2).
The accompanying notes are an integral part of the financial statements.
58
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Equity Fund - Financial Statements (Continued)
(Formerly known as MassMutual Value Equity Fund)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
June 30, 1999
(Unaudited)
---------------
<S> <C>
Assets:
Investments, at value (cost $2,020,506,955) (Note 2) .............. $3,550,341,260
Short-term investments, at amortized cost (Note 2) ................ 135,203,456
---------------
Total Investments ............................................. 3,685,544,716
Cash .............................................................. 1,478
Receivables from:
Investments sold .............................................. 28,480,004
Fund shares sold .............................................. 4,295,282
Interest and dividends ........................................ 4,925,083
---------------
Total assets ............................................. 3,723,246,563
---------------
Liabilities:
Payables for:
Investments purchased ......................................... 12,203,540
Fund shares redeemed .......................................... 3,597,243
Securities on loan (Note 2) ................................... 125,868,456
Directors' fees and expenses (Note 3) ......................... 1,917
Affiliates (Note 3):
Investment management fees ............................... 1,597,081
Administration fees ...................................... 215,819
Service fees ............................................. 148
Accrued expenses and other liabilities ............................ 122,893
---------------
Total liabilities ........................................ 143,607,097
---------------
Net assets ........................................................ $3,579,639,466
===============
Net assets consist of:
Paid-in capital ................................................... $1,900,313,829
Undistributed net investment income ............................... 25,656,687
Accumulated net realized gain on investments ...................... 123,834,645
Net unrealized appreciation on investments ........................ 1,529,834,305
---------------
$3,579,639,466
===============
Net assets:
Class A ........................................................... $ 244,669
===============
Class L ........................................................... $ 104,094
===============
Class Y ........................................................... $ 2,195,170
===============
Class S ........................................................... $3,577,095,533
===============
Shares outstanding:
Class A ........................................................... 12,406
===============
Class L ........................................................... 5,268
===============
Class Y ........................................................... 111,112
===============
Class S ........................................................... 180,921,712
===============
Net asset value, offering price and redemption price per share:
Class A ........................................................... $ 19.72
===============
Class L ........................................................... $ 19.76
===============
Class Y ........................................................... $ 19.76
===============
Class S ........................................................... $ 19.77
===============
</TABLE>
The accompanying notes are an integral part of the financial statements
59
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Equity Fund - Financial Statements (Continued)
(Formerly known as MassMutual Value Equity Fund)
- --------------------------------------------------------------------------------
Statement of Operations
<TABLE>
<CAPTION>
Six months ended
June 30, 1999
(Unaudited)
----------------
<S> <C>
Investment income: (Note 2)
Dividends (net of withholding tax of $239,478) ................ $ 34,285,077
Interest (including securities lending income of $176,398)..... 723,256
----------------
Total investment income ................................... 35,008,333
----------------
Expenses: (Note 2)
Investment management fees (Note 3) ........................... 7,987,925
Custody fees .................................................. 140,089
Audit and legal fees .......................................... 39,922
Directors' fees (Note 3) ...................................... 8,186
----------------
8,176,122
Administration fees (Note 3):
Class A ................................................... 489
Class L* .................................................. 53
Class Y ................................................... 1,203
Class S ................................................... 1,270,812
Service fees (Note 3):
Class A ................................................... 285
----------------
Total operating expenses .................................. 9,448,964
----------------
Interest Expense (Note 8) ..................................... 9,036
----------------
Net investment income ..................................... 25,550,333
----------------
Realized and unrealized gain (loss):
Net realized gain on investment transactions .................. 102,794,788
Net change in unrealized appreciation (depreciation)
on investments ............................................ 118,678,280
----------------
Net realized and unrealized gain .......................... 221,473,068
----------------
Net increase in net assets resulting from operations .......... $ 247,023,401
================
</TABLE>
* For the period from May 3, 1999 (commencement of operations) through June 30,
1999.
The accompanying notes are an integral part of the financial statements.
60
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Equity Fund - Financial Statements (Continued)
(Formerly known as MassMutual Value Equity Fund)
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six months ended
June 30, 1999 Year ended
(Unaudited) December 31, 1998
------------------ -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income ..................................................... $ 25,550,333 $ 56,478,560
Net realized gain on investment transactions .............................. 102,794,788 173,983,787
Net change in unrealized appreciation (depreciation)
on investments ........................................................ 118,678,280 291,738,373
------------------ -----------------
Net increase in net assets resulting from operations .................. 247,023,401 522,200,720
------------------ -----------------
Distributions to shareholders (Note 2):
From net investment income:
Class A ................................................................... - (4,908)
Class L* .................................................................. - -
Class Y ................................................................... - (20,187)
Class S ................................................................... - (57,644,450)
------------------ -----------------
Total distributions from net investment income ........................ - (57,669,545)
------------------ -----------------
From net realized gains:
Class A ................................................................... - (21,970)
Class L* .................................................................. - -
Class Y ................................................................... - (65,959)
Class S ................................................................... - (202,715,885)
------------------ -----------------
Total distributions from net realized gains ........................... - (202,803,814)
------------------ -----------------
Net fund share transactions (Note 5):
Class 1** ................................................................. - (196,012)
Class 2** ................................................................. - (199,451)
Class 3** ................................................................. - (201,310)
Class A ................................................................... 1,000 222,890
Class L* .................................................................. 102,000 -
Class Y ................................................................... 1,351,332 764,794
Class S ................................................................... (255,997,149) 126,595,972
------------------ -----------------
Decrease in net assets from net fund share transactions ............... (254,542,817) 126,986,883
------------------ -----------------
Total decrease in net assets .............................................. (7,519,416) 388,714,244
Net assets:
Beginning of period ....................................................... 3,587,158,882 3,198,444,638
------------------ -----------------
End of period (including undistributed net investment income
of $25,656,687 and $106,352 respectively) ............................. $ 3,579,639,466 $ 3,587,158,882
================== =================
</TABLE>
* For the period from May 3, 1999 (commencement of operations) through June
30, 1999.
** Effective January 1, 1998, Class 1, Class 2, and Class 3 shares were
terminated (See Note 1).
The accompanying notes are an integral part of the financial statements.
61
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Core Equity Fund - Financial Statements (Continued)
(Formerly known as MassMutual Value Equity Fund)
- --------------------------------------------------------------------------------
Financial Highlights (For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class A Class L Class Y
------- ------- -------
Six months Period Six months
ended 6/30/99 Year ended ended 6/30/99 ended 6/30/99 Year ended
(Unaudited) 12/31/98 + (Unaudited) ** (Unaudited) 12/31/98 +
------------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 18.40 $ 18.02 $ 19.36 $ 18.39 $ 18.03
------------- ------------ ------------- ------------- ------------
Income (loss) from investment operations:
Net investment income 0.08 0.19 *** 0.05 0.27 0.27 ***
Net realized and unrealized gain (loss)
on investments 1.24 2.60 0.35 1.10 2.63
------------- ------------ ------------- ------------- ------------
Total income (loss) from investment
operations 1.32 2.79 0.40 1.37 2.90
------------- ------------ ------------- ------------- ------------
Less distributions to shareholders:
From net investment income - (0.43) - - (0.56)
From net realized gains - (1.98) - - (1.98)
------------- ------------ ------------- ------------- ------------
Total distributions - (2.41) - - (2.54)
------------- ------------ ------------- ------------- ------------
Net asset value, end of period $ 19.72 $ 18.40 $ 19.76 $ 19.76 $ 18.39
============= ============ ============= ============= ============
Total Return 7.20% 15.96% 2.07% 7.46% 16.49%
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 245 $ 227 $ 104 $ 2,195 $ 754
Net expenses to average daily net assets 1.16% * 1.20% 0.85% * 0.72% * 0.75%
Net investment income to average daily
net assets 0.89% * 1.01% 1.46% * 1.30% * 1.43%
Portfolio turnover rate 4% 12% 4% 4% 12%
</TABLE>
<TABLE>
<CAPTION>
Class S (1)
-----------
Six months
Ended 6/30/99 Year ended Year ended Year ended Year ended Period ended
(Unaudited) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94****
------------ ------------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 18.39 $ 17.00 $ 14.46 $ 12.63 $ 9.91 $ 10.00
------------ ------------- ------------- ------------ ------------- -------------
Income (loss) from investment operations:
Net investment income 0.14 0.31 0.32 0.34 0.31 0.08
Net realized and unrealized gain (loss) 1.24 2.49 3.83 2.22 2.82 (0.09)
on investments ------------ ------------- ------------- ------------ ------------- -------------
Total income (loss) from investment 1.38 2.80 4.15 2.56 3.13 (0.01)
operations ------------ ------------- ------------- ------------ ------------- -------------
Less distributions to shareholders:
From net investment income - (0.31) (0.31) (0.34) (0.31) (0.08)
From net realized gains - (1.10) (1.30) (0.39) (0.10) -
------------ ------------- ------------- ------------ ------------- -------------
Total distributions - (1.41) (1.61) (0.73) (0.41) (0.08)
------------ ------------- ------------- ------------ ------------- -------------
Net asset value, end of period $ 19.77 $ 18.39 $ 17.00 $ 14.46 $ 12.63 $ 9.91
============ ============= ============= ============ ============= =============
Total Return@ 7.50% 16.75% 29.01% 20.24% 31.54% 0.10%
Ratios / Supplemental Data:
Net assets, end of period (000's) $3,577,096 $3,586,177 $3,197,848 $2,485,743 $2,125,248 $1,563,563
Net expenses to average daily net assets # 0.5520% * 0.5391% 0.5378% 0.5067% 0.5067% 0.5067% *
Net investment income to average daily 1.49% * 1.67% 1.91% 2.42% 2.72% 3.20% *
net assets
Portfolio turnover rate 4% 12% 20% 13% 16% 3%
#Computed after giving effect to the voluntary
partial waiver of management fee by MassMutual,
which terminated May 1, 1997. Without this
partial waiver of fees by MassMutual, the ratio
of expenses to average daily net assets would
have been: N/A N/A 0.5512% 0.5534% 0.5528% 0.5681%
</TABLE>
* Annualized
** For the period from May 3, 1999 (commencement of operations) through
June 30, 1999.
*** Per share amount calculated on the average shares method, which more
appropriately presents the per share data for the period since the use
of the undistributed income method does not accord with the results of
operations.
**** For the period from October 3, 1994 (commencement of operations)
through December 31, 1994.
+ Amounts have been restated to reflect reverse stock splits
(See Note 9).
(1) Class S shares were previously designated as Class 4 shares.
@ Employee retirement benefit plans that invest plan assets in the
Separate Investment Accounts (SIAs) may be subject to certain charges
as set forth in their respective Plan Documents. Total return figures
would be lower for the periods presented if they reflected these
charges.
62
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Growth Equity Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment objective and policies for the MassMutual Growth Equity
Fund?
The objective and policies of the Fund are to:
. achieve long-term growth of capital and future income
. invest primarily in a diversified portfolio of equity securities and
securities convertible into equity securities, which may consist of up to
30% foreign securities (including those of companies in emerging markets)
. use fundamental analysis to identify companies which demonstrate
-a strong franchise, strong cash flows and a recurring revenue stream
-a strong industry position, where there is potential for high profit
margins and/or substantial barriers to new entry in the industry
-a strong management with a clearly defined strategy
-new products or services
This is a new fund. How did it perform?
The Fund did well. From inception on May 3, 1999 through June 30, 1999, the
Fund's Class S shares posted a return of 6.50%, handily beating the 1.58% return
of the Standard & Poor's 500 Index.
What factors contributed to the Fund's performance?
During May, stocks pulled back from their recent highs on the heels of a much
higher than expected Consumer Price Index (CPI) report for April. However, in
spite of a growing certainty that the Federal Reserve Board (Fed) would raise
short-term interest rates, investors seemed more focused on the prospects for
solid second quarter earnings reports. As a result, most of the popular stock
indexes trended higher throughout the month, finishing near their highs.
Overweightings in technology, telecommunications and leisure stocks helped
performance, as did stock selection in those areas. Within the technology
sector, the Fund was helped by its investments in the shares of semiconductor
and enterprise software companies. Semiconductors are the microprocessing chips
that operate everything from computers to cellular phones, while enterprise
software controls a company's most critical systems. On the down side, the Fund
was hurt by its relatively low representation in the strong energy and basic
industry sectors.
Can you talk about your strategy for managing the Fund?
We look for investments based on a "bottom-up" approach, with a strong focus on
a company's basic business prospects. Some of the characteristics we look for
are superior management, sustainable competitive advantage, expanding profit
margins, increasing market share, and mismatches in supply and demand.
We seek to buy stocks whose price-to-earnings ratios are below their earnings
growth rates. Furthermore, we spend a lot of time with corporate managements in
an effort to keep our information as current as possible and head off trouble.
Under normal circumstances, we expect to have somewhere between 110 and 125
stocks in the portfolio. We generally limit initial positions to no more than 5%
of assets, with most falling below that level.
What stocks did well for the Fund?
One stock that performed well and reflected our interest in the semiconductor
industry was LSI Logic. After several rough years, demand for semiconductors is
picking up, and supplies are tight. Enterprise software provider Oracle also
contributed positively to performance. Stocks in that industry had been beaten
down excessively earlier this year because most companies had completed their
Year 2000 upgrades, and many investors believed that demand for enterprise
software would slow. In May and June, however, the stocks recovered. In the
leisure sector, Royal Carribean and Carnival Cruise Lines were helpful holdings.
Cruise line stocks, which had been under pressure because the fighting in Kosovo
was reducing demand for normally popular Mediterranean cruises, advanced on news
that the hostilities had ceased. And Tyco International, the Fund's largest
holding at the end of the period, benefited from renewed investor interest in
some previously neglected segments of the market.
63
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Growth Equity Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
What stocks hurt the Fund's performance?
Cadence Software detracted from performance. The company, which makes design
automation software for the semiconductor industry, was hurt by the news that it
may have overstated earnings due to some accounting problems. Rite-Aid was a
victim of overly aggressive expansion. The company was engaged in a store
expansion program at the same time it was implementing a new distribution system
and making a key acquisition. When some of these projects ran into unanticipated
difficulties, Rite-Aid stock declined and we trimmed the Fund's position.
Finally, Elan is a pharmaceutical company whose stock weakened because of delays
in getting two of its new products approved by the Food and Drug Administration,
as well as questions by the SEC about the company's accounting practices.
What is your outlook?
At this point, stock valuations are fairly rich, especially in the
large-capitalization sector. Accordingly, we anticipate focusing on the smaller
end of the large-cap arena, rather than the mega-cap stocks as we look for good
growth stories in slightly smaller stocks. On a long-term basis, we still
believe that the outlook for stocks is very favorable, based on powerful
long-term demographic and economic trends.
Regarding the much discussed Year 2000 (Y2K) issue, we view it as a one-time
event that, if it does have much impact, will likely create some solid
opportunities for the Fund.
---------------------------------------
MassMutual Growth Equity Fund
Largest Stock Holdings (6/30/99)
---------------------------------------
Tyco International Ltd.
Microsoft Corp.
Time Warner Inc.
MCI WORLDCOM Inc.
Motorola Inc.
Cisco Systems, Inc.
Texas Instruments Inc.
Analog Devices, Inc.
CVS Corporation
BMC Software Inc.
64
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Growth Equity Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Growth Equity Fund
Class S, Class A, Class Y, Class L and the Standard & Poor's 500
Composite Index
- --------------------------------------------------------------------------------
MassMutual Growth Equity Fund
Total Return Year-to-Date
5/3/99-6/30/99
Class S 6.50%
Class A 6.40%
Class Y 6.50%
Class L 6.50%
- --------------------------------------------------------------------------------
Standard & Poor's
500 Composite Index 3.06%
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
Class S Class A Class Y Class L S&P 500 Index
------- ------- ------- ------- -------------
5/3/98 10,000 10,000 10,000 10,000 10,000
5/31/99 9,870 9,870 9,870 9,870 9,764
6/30/99 10,650 10,640 10,650 10,650 10,306
Past performance is not predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund, while the Standard & Poor's 500 Composite Index is unmanaged and
does not incur expenses, and cannot be purchased directly by investors.
65
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Growth Equity Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1999
<TABLE>
<CAPTION>
Number of
Shares Market Value
---------- ------------
<S> <C> <C>
EQUITIES -- 94.9%
Advertising -- 1.4%
The Interpublic Group
Companies, Inc. 2,100 $ 181,913
Young & Rubicam Inc. 4,500 204,469
-----------
386,382
===========
Aerospace & Defense -- 2.2%
AlliedSignal Inc. 3,300 207,900
Gulfstream Aerospace
Corp.* 2,600 175,663
Raytheon Company
Cl. A 2,900 199,738
-----------
583,301
===========
Banking, Savings & Loans -- 3.9%
Associates First Capital
Corporation 6,400 283,600
The Bank of New York
Company,
Incorporated 3,000 110,063
Citigroup Inc. 7,100 337,250
Providian Financial
Corp. 900 84,150
Wells Fargo &
Company 5,200 222,300
-----------
1,037,363
===========
Beverages -- 0.6%
Anheuser-Busch
Companies, Inc. 2,400 170,250
===========
Building Materials
& Construction --
0.9%
Lowe's Companies 4,400 249,425
===========
Commercial Services -- 1.5%
Ariba, Inc.* 50 4,863
Cendant Corporation* 5,200 106,600
Concord EFS Inc.* 1,900 80,394
Republic Services Inc.
Cl. A* 8,000 198,000
-----------
389,857
===========
Communications -- 3.2%
Lucent Technologies
Inc. 2,600 175,338
Nortel Networks
Corporation 2,300 199,669
Qualcomm Inc.* 300 43,050
Telefonaktiebolaget
LM Ericsson 6,300 207,506
Tellabs Inc.* 3,500 236,469
-----------
862,032
===========
Computer Software & Processing -- 14.0%
Affiliated Computer
Services Cl. A* 5,200 263,250
BMC Software Inc.* 7,000 378,000
Computer Associates
International 4,700 258,500
Computer Sciences
Corp.* 2,900 200,644
Compuware Corp.* 9,500 302,219
DST Systems Inc.* 2,400 150,900
First Data Corp. 7,300 357,244
Microsoft Corp.* 11,900 1,073,231
Oracle Corporation* 5,900 219,038
Sun Microsystems
Inc.* 3,900 268,613
Sungard Data Systems
Inc.* 3,600 124,200
Synopsys Inc.* 500 27,594
Teradyne Inc.* 1,700 121,975
-----------
3,745,408
===========
Computers & Information -- 2.5%
Cisco Systems, Inc.* 7,600 490,200
EMC Corp.* 3,300 181,500
-----------
671,700
===========
Computers & Office Equipment -- 1.2%
Xerox Corporation 5,500 324,844
===========
Cosmetics & Personal Care -- 0.4%
Colgate-Palmolive
Company 500 49,375
Gillette Company 1,100 45,100
-----------
94,475
===========
Electric Utilities -- 1.0%
AES Corp.* 4,400 255,750
===========
Electrical Equipment & Electronics -- 9.8%
Altera Corp.* 3,600 132,525
Analog Devices, Inc.* 8,600 431,598
Atmel Corp.* 7,000 183,313
Emerson Electric Co. 1,400 88,025
General Electric
Company 2,400 271,200
Globespan Inc.* 50 1,988
Honeywell Inc. 1,000 115,875
LSI Logic Corp.* 7,100 327,488
Motorola Inc. 6,300 596,925
Texas Instruments Inc. 3,100 449,500
-----------
2,598,437
===========
Energy -- 2.3%
Apache Corporation 3,700 144,300
BP Amoco plc
Sponsored++ 2,700 292,950
Burlington Resources
Inc. 2,100 90,825
Mobil Corporation 800 79,200
-----------
607,275
===========
Entertainment & Leisure -- 4.2%
AT&T - Liberty Media
Group* 6,200 227,850
Harrah's
Entertainment Inc.* 4,900 107,800
Time Warner Inc. 10,600 779,100
-----------
1,114,750
===========
Financial Services -- 1.5%
American Express
Company 1,900 247,238
Morgan Stanley Dean
Witter & Co. 1,400 143,500
-----------
390,738
===========
Foods -- 2.0%
The Kroger Co.* 11,400 318,488
Nabisco Holdings
Corp. Cl. A 2,900 125,425
Safeway Inc.* 2,000 99,000
-----------
542,913
===========
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
66
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Growth Equity Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Market Value
---------- ------------
<S> <C> <C>
Healthcare -- 2.8%
Becton, Dickinson and
Company 2,500 $ 75,000
Bristol-Myers Squibb
Company 5,300 373,319
Healthsouth Corp.* 10,000 149,375
Pharmacia & Upjohn,
Inc. 2,500 142,031
-----------
739,725
-----------
Home Construction, Furnishings &
Appliances -- 0.2%
Gemstar International
Group Ltd.* 1,000 65,250
-----------
Household Products -- 0.1%
The Clorox Company 300 32,044
-----------
Industrial -- Diversified -- 5.9%
Illinois Tool Works 1,700 139,400
Tyco International Ltd. 15,000 1,421,250
-----------
1,560,650
-----------
Insurance -- 4.3%
American
International Group 2,900 339,481
AON Corp. 1,800 74,250
CIGNA Corporation 3,500 311,500
Lincoln National
Corp.* 1,800 94,163
United Healthcare
Corp. 5,400 338,175
-----------
1,157,569
-----------
Machinery & Components -- 2.0%
Applied Materials
Inc.* 3,600 265,950
Danaher Corporation 1,100 63,938
Mannesmann AG 1,300 194,395
-----------
524,283
-----------
Media -- Broadcasting & Publishing -- 3.8%
CBS Corp.* 3,100 134,656
Clear Channel
Communications* 1,500 103,406
Comcast Corp. Cl. A 2,200 84,563
Infinity Broadcasting
Corp.* 10,200 303,450
MediaOne Group Inc.* 3,500 260,313
Univision
Communications
Inc.* 2,100 138,600
-----------
1,024,988
-----------
Medical Supplies -- 2.0%
Bausch & Lomb Inc. 1,800 $ 137,700
Guidant Corp. 3,300 169,744
Medtronic Inc. 2,800 218,050
-----------
525,494
-----------
Oil & Gas -- 0.6%
Baker Hughes, Inc. 500 16,750
Schlumberger Ltd. 1,100 70,056
The Williams
Companies, Inc. 1,500 63,844
-----------
150,650
-----------
Packaging -- 0.5%
Sealed Air
Corporation* 2,100 136,238
-----------
Pharmaceuticals -- 2.4%
American Home
Products Corporation 5,600 322,000
Cardinal Health Inc. 3,500 224,438
Elan Corp. Plc* 3,200 88,800
-----------
635,238
-----------
Restaurants -- 1.3%
McDonald's Corp. 5,900 243,744
Wendy's International
Inc. 3,800 107,588
-----------
351,332
-----------
Retail -- 6.4%
CVS Corporation 8,300 424,338
Dayton-Hudson Corp. 1,000 65,000
Newell Rubbermaid
Inc. 5,300 246,450
Office Depot Inc.* 9,400 207,388
Rite Aid Corp. 10,000 246,250
TJX Companies Inc. 8,300 276,494
Wal-Mart Stores, Inc. 5,000 241,250
-----------
1,707,170
-----------
Telecommunications -- 2.0%
Nextel
Communications Inc.
Cl. A* 1,700 85,319
Nokia Corp.
Sponsored++* 2,400 219,750
Vodafone AirTouch
PLC Sponsored++ 1,200 236,400
-----------
541,469
-----------
Telephone Utilities -- 5.4%
CenturyTel Inc. 900 35,775
Frontier Corporation 4,400 259,600
Global Telesystems
Group Inc. 1,300 105,300
MCI WORLDCOM Inc.* 8,900 767,625
Sprint Corp. (PCS
Group)* 4,300 245,638
Viatel Inc.* 300 16,838
-----------
1,430,776
-----------
Transportation -- 2.6%
Carnival Corp. 3,000 145,500
Galileo International
Inc. 4,200 224,438
Kansas City Southern
Industries 2,500 159,531
Royal Caribbean Ltd. 3,900 170,625
-----------
700,094
-----------
TOTAL EQUITIES 25,307,870
-----------
(Cost $23,378,939)***
TOTAL INVESTMENTS -- 94.9% 25,307,870
Other Assets/(Liabilities) -- 5.1% 1,362,352
-----------
NET ASSETS-- 100.0% $26,670,222
===========
</TABLE>
Notes to Portfolio of Investments
*** Aggregate cost for Federal tax purposes (Note 7)
* Non-income producing security.
++ American Depository Receipt.
The accompanying notes are an integral part of the financial statements.
67
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Growth Equity Fund - Financial Statements
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
June 30, 1999
(Unaudited)
-------------
<S> <C>
Assets:
Investments, at value (cost $23,378,939) (Note 2) ..... $ 25,307,870
Cash .................................................. 1,072,560
Receivables from:
Investments sold .................................. 721,475
Fund shares sold .................................. 26,032
Interest and dividends ............................ 12,976
-------------
Total assets .................................. 27,140,913
-------------
Liabilities:
Payables for:
Investments purchased ............................. 448,749
Directors' fees and expenses (Note 3) ............. 2,994
Affiliates (Note 3):
Investment management fees .................... 15,579
Administration fees ........................... 2,049
Service fees .................................. 39
Accrued expenses and other liabilities ................ 1,281
-------------
Total liabilities ............................. 470,691
-------------
Net assets ............................................ $ 26,670,222
=============
Net assets consist of:
Paid-in capital ....................................... $ 25,030,552
Undistributed net investment income ................... 13,711
Accumulated net realized loss on investments .......... (302,971)
Net unrealized appreciation on investments ............ 1,928,930
-------------
$ 26,670,222
=============
Net assets:
Class A ............................................... $ 107,539
=============
Class L ............................................... $ 108,133
=============
Class Y ............................................... $ 107,604
=============
Class S ............................................... $ 26,346,946
=============
Shares outstanding:
Class A ............................................... 10,100
=============
Class L ............................................... 10,152
=============
Class Y ............................................... 10,100
=============
Class S ............................................... 2,472,544
=============
Net asset value, offering price and redemption price per share:
Class A ............................................... $ 10.65
=============
Class L ............................................... $ 10.65
=============
Class Y ............................................... $ 10.65
=============
Class S ............................................... $ 10.66
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
68
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Growth Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of Operations
<TABLE>
<CAPTION>
Period ended
June 30, 1999
(Unaudited)*
-------------
<S> <C>
Investment income:(Note 2)
Interest ............................................... $ 29,377
Dividends (net of withholding tax of $81) .............. 20,025
-------------
Total investment income ............................ 49,402
-------------
Expenses:(Note 2) .............................................
Investment management fees(Note 3) ..................... 27,736
Custody fees ........................................... 388
Audit and legal fees ................................... 891
Directors' fees(Note 3) ................................ 2,994
-------------
32,009
Administration fees(Note 3):
Class A ............................................ 46
Class L ............................................ 46
Class Y ............................................ 23
Class S ............................................ 3,528
Service fees(Note 3):
Class A ............................................ 39
-------------
Total expenses ..................................... 35,691
-------------
Net investment income .............................. 13,711
-------------
Realized and unrealized gain (loss):
Net realized loss on investment transactions ........... (302,971)
Net change in unrealized appreciation (depreciation)
on investments ..................................... 1,928,930
-------------
Net realized and unrealized gain ................... 1,625,959
-------------
Net increase in net assets resulting from operations ... $ 1,639,670
=============
</TABLE>
* For the period from May 3,1999 (commencement of operations) through June 30,
1999.
The accompanying notes are an integral part of the financial statements.
69
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Growth Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Period ended
June 30, 1999
(Unaudited)*
-------------
<S> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income .................................. $ 13,711
Net realized loss on investment transactions ........... (302,971)
Net change in unrealized appreciation (depreciation)
on investments ..................................... 1,928,930
-------------
Net increase in net assets resulting from
operations ..................................... 1,639,670
-------------
Net fund share transactions (Note 5):
Class A ................................................ 101,000
Class L ................................................ 101,520
Class Y ................................................ 101,000
Class S ................................................ 24,727,032
-------------
Increase in net assets from net fund share transactions 25,030,552
-------------
Total increase in net assets ........................... 26,670,222
Net assets:
Beginning of period .................................... -
-------------
End of period (including undistributed net investment
income of $13,711) ................................. $ 26,670,222
=============
</TABLE>
* For the period from May 3, 1999 (commencement of operations) through June 30,
1999.
The accompanying notes are an integral part of the financial statements.
70
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Growth Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights (For a share outstanding throughout the period)
<TABLE>
<CAPTION>
Class A Class L Class Y Class S
------- ------- ------- -------
Period Period Period Period
ended 6/30/99 ended 6/30/99 ended 6/30/99 ended 6/30/99
(Unaudited)** (Unaudited)** (Unaudited)** (Unaudited)**
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
------------- ------------- ------------- -------------
Income (loss) from investment operations:
Net investment income (loss) 0.00 *** 0.00 *** 0.00 *** 0.01
Net realized and unrealized gain (loss) on investments 0.65 0.65 0.65 0.65
------------- ------------- ------------- -------------
Total income (loss) from investment operations 0.65 0.65 0.65 0.66
------------- ------------- ------------- -------------
Net asset value, end of period $ 10.65 $ 10.65 $ 10.65 $ 10.66
============= ============= ============= =============
Total Return 6.40% 6.50% 6.50% 6.50%@
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 108 $ 108 $ 108 $ 26,347
Net expenses to average daily net assets 1.30%* 1.09%* 0.94%* 0.8721%*
Net investment income (loss) to average daily net assets (0.27)%* (0.02)%* 0.13%* 0.34%*
Portfolio turnover rate 24% 24% 24% 24%
</TABLE>
* Annualized
** For the period from May 3, 1999 (commencement of operations) through
June 30, 1999.
*** Net investment income is less than $0.01 per share.
@ Employee retirement benefit plans that invest plan assets in the Separate
Investment Accounts (SIAs) may be subject to certain charges as set forth
in their respective Plan Documents. Total return figures would be lower for
the periods presented if they reflected these charges.
The accompanying notes are an integral part of the financial statements.
71
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment objective and policies for the MassMutual Small Cap
Value Equity Fund?
The objective and policies of the Fund are to:
. achieve long-term growth of capital and income
. invest primarily in a diversified portfolio of equity securities of smaller
companies (companies with market capitalization, at the time of purchase, of
$750 million or less)
. use a value-oriented strategy in making investment decisions
. use fundamental analysis to identify companies which
-are of high investment quality or possess a unique product, market position
or operating characteristics
-offer above-average levels of profitability or superior growth potential
-are attractively valued in the marketplace
How did the Fund perform during the first half of 1999?
For the six months ended June 30, 1999, the Fund's Class S shares had a return
of 5.19%, compared to 9.25% for the Russell 2000 Index (the Index), a broadly
based, unmanaged index of 2000 medium and small capitalization common stocks.
What factors contributed to the Fund's performance?
From January until mid-April, the environment was a difficult one for the Fund,
as large-capitalization stocks generally outperformed small-cap shares and
growth stocks outperformed value-oriented equities. As a result, the Fund was
down more than 10% in the first quarter, while the Index lost about half of
that. The Index's heavier weighting in technology stocks, many of which were too
richly valued for us to buy, largely explained its superior performance.
From mid-April through the end of June, there was a dramatic shift in favor of
value stocks of all kinds, including cyclical stocks--that is, those that are
especially sensitive to fluctuations in the economy--and small-cap shares. The
reasons for this shift included ongoing strength in the U.S. economy and signs
of a potential rebound in Southeast Asia, as well as continued firming in oil
prices. In such an environment, investors felt comfortable owning a much broader
range of holdings, rather than focusing mainly on a select few large-cap growth
stocks of companies with a reputation for consistently strong earnings growth.
Consequently, the Fund bounced back in the second quarter with a 17.1% gain,
bettering the 15.6% advance of the Index. Gains came from a variety of sectors,
especially technology and telecommunications.
What stocks helped performance?
Helix Technology was one of the Fund's better performers. The company makes
vacuum-generating systems for semiconductor capital equipment manufacturers
(microprocessing chips must be made in a vacuum). The stock benefited from an
upswing in the semiconductor cycle after several lean years, mostly because of
demand from the telecommunications sector. Also benefiting from burgeoning
demand in the telecommunications area was Unitrode, which makes analog
semiconductor power supplies that are used in a wide variety of applications.
Another strong contributor was Calpine, one of a relatively new class of
companies made possible by the deregulation of the electrical utility market in
the United States. Although not a utility, Calpine specializes in building
low-cost power plants and selling the electricity in the free market. Finally,
ABC Rail Products, a maker of trackwork and wheels for the railroad industry,
was a merger target and the stock rose as a result. Investors also responded
positively to cost-cutting and other improvements brought about by the
management of Naco, the company's merger partner.
Which stocks detracted from performance?
HA-LO Industries, a leading manufacturer of advertising specialties, reported
disappointing results because of growing pains. Having made a number of
acquisitions during the past year or so, and branching out into the more
strategic aspects of advertising, the company experienced unanticipated
difficulties in assimilating all the changes. Myers Industries makes storage
shelves and drawers for both the commercial and retail markets. The company
simply experienced a quarter of mediocre earnings--not the beginning of a trend,
in our opinion. Another disappointment was Herbalife International, a company
that sells vitamins, herbs, and personal care products through multi-level
marketing. The stock was hurt by lower demand for the company's products from
Southeast Asia and delays in getting the company's new Russian operations up to
speed.
72
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
What is your outlook?
With the stock market hitting new all-time highs and interest rates creeping up,
there is reason to be a little cautious about valuations at this juncture.
Fortunately, with the broadening that has taken place over the past few months,
it's possible to achieve competitive results with a portfolio of value stocks.
We think that this broadening of investor interest is an important trend that
should continue at least for the remainder of the year. That bodes well for the
Fund.
The Year 2000 (Y2K) issue may also play a part in how stocks perform during the
second half of 1999. While we routinely check with the companies in which the
Fund invests to verify their Y2K readiness, trying to anticipate Y2K's effects
on the market as a whole falls under the category of market timing, which we do
not attempt. However, our best guess is that, as a one-time event, Y2K will have
only a very short-term influence on the general market, if that. We believe that
the best way to add value for our shareholders is to keep our focus firmly on
the long term.
--------------------------------------
MassMutual Small Cap Value Equity Fund
Largest Stock Holdings (6/30/99)
--------------------------------------
Reliance Steel & Aluminum Company
Graco, Incorporated
Houghton Mifflin Company
M.S. Carriers, Inc.
Roper Industries, Inc.
CCB Financial Corporation
True North Communications, Inc.
Calpine Corporation
Ct Communications Inc.
WICOR, Inc.
73
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Small Cap
Value Equity Fund Class S and the Russell 2000 Index
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund
Total Return Year-to-Date One Year Average Annual
1/1/99-6/30/99 7/1/98-6/30/99 10/03/94-6/30/99
Class S 5.19% -6.44% 14.13%
- --------------------------------------------------------------------------------
Russell
2000 Index 9.28% 1.47% 14.64%
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
Class S Russell 2000
------- ------------
10/3/94 10,000 10,000
12/94 9,734 9,813
6/95 10,507 11,228
12/95 11,681 12,604
6/96 12,794 13,912
12/96 14,346 14,683
6/97 16,664 16,181
12/97 19,562 17,966
6/98 20,010 18,897
12/98 17,797 17,508
6/99 18,721 19,134
Hypothetical Investments in MassMutual Small Cap
Value Equity Fund Class A, Class Y and the Russell
2000 Index
- --------------------------------------------------------------------------------
MassMutual Small Cap Equity Fund
Total Return Year-to-Date One Year Average Annual
1/1/99-6/30/99 7/1/98-6/30/99 1/01/98-6/30/99
Class A 4.81% -7.09% -3.53%
Class Y 5.12% -6.66% -3.10%
- --------------------------------------------------------------------------------
Russell
2000 Index 9.28% 1.47% 4.29%
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Class A Class Y Russell 2000
------- ------- ------------
12/97 10,000 10,000 10,000
3/98 10,740 10,750 11,006
6/98 10,200 10,220 10,493
9/98 8,245 8,276 8,379
12/98 9,042 9,075 9,745
3/99 8,102 8,139 9,217
6/99 9,477 9,540 10,650
Hypothetical Investments in MassMutual Small Cap
Value Equity Fund Class L and the Russell 2000 Index
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund
Total Return Since Inception
5/3/99-6/30/99
Class L 8.13%
- --------------------------------------------------------------------------------
Russell
2000 Index 6.05%
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Class L Russell 2000
------- ------------
5/3/99 10,000 10,000
5/31/99 10,249 10,146
6/30/99 10,813 10,605
Past performance is not predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund, while the Russell 2000 Index is unmanaged and does not incur
expenses, and cannot be purchased directly by investors.
74
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1999
Number of
Shares Market Value
--------- ------------
EQUITIES -- 94.9%
Advertising -- 0.8%
HA-LO Industries, Inc.* 546,000 $ 5,391,750
------------
Automotive & Parts -- 3.3%
Dura Automotive
Systems, Inc.* 271,400 9,024,050
Keystone Automotive
Industries, Inc.* 397,500 6,906,563
Myers Industries, Inc. 362,268 7,245,360
------------
23,175,973
------------
Banking, Savings & Loans -- 11.4%
Astoria Financial
Corporation 165,000 7,249,688
Banknorth Group, Inc. 217,800 7,187,400
CCB Financial
Corporation 279,800 14,794,425
Commercial Federal
Corporation 257,006 5,959,330
First Republic Bank* 230,600 6,672,988
Keystone Financial,
Inc. 155,050 4,583,666
One Valley Bancorp of
West Virginia, Inc. 159,587 5,984,513
Pacific Capital
Bancorp 45,200 1,423,800
Peoples Heritage
Financial Group, Inc. 499,525 9,397,314
Sovereign Bancorp,
Inc. 530,396 6,431,052
Webster Financial
Corporation 381,400 10,345,475
------------
80,029,651
------------
Building Materials & Construction -- 1.7%
Service Experts, Inc.* 537,500 11,791,406
------------
Chemicals -- 4.1%
Olin Corp. 302,100 3,983,944
OM Group, Inc. 349,100 12,043,950
Spartech Corporation 403,200 12,751,200
------------
28,779,094
------------
Commercial Services -- 1.6%
ABM Industries Inc. 179,000 5,493,063
Ritchie Bros
Auctioneers, Inc.* 150,000 5,718,750
------------
11,211,813
------------
Communications -- 2.1%
True North
Communications,
Inc. 491,000 14,730,000
------------
Computers & Office Equipment -- 1.3%
Cognex Corporation* 293,100 9,250,969
------------
Containers -- 1.2
U.S. Can Corporation* 384,500 8,555,125
------------
Diversified Operations -- 0.6%
SPS Technologies,
Inc.* 120,400 4,515,000
------------
Electric Utilities -- 1.9%
Calpine Corporation* 252,000 13,608,000
------------
Electrical Equipment & Electronics -- 6.8%
AFC Cable Systems,
Inc.* 279,175 9,858,367
Benchmark
Electronics Inc.* 73,000 2,623,438
Dallas Semiconductor
Corporation 169,100 8,539,550
Oak Industries Inc.* 46,400 2,027,100
Teleflex, Incorporated 262,700 11,411,031
Unitrode Corporation* 439,400 12,605,288
------------
47,064,774
------------
Financial Services -- 3.5%
Donaldson, Lufkin &
Jenrette, Inc.* 58,500 1,725,750
Eaton Vance Corp. 285,800 9,842,238
Healthcare Realty
Trust Incorporated 294,100 6,176,100
The Pioneer Group,
Inc.* 395,000 6,813,750
------------
24,557,838
------------
Foods -- 4.4%
International Home
Foods, Inc.* 418,200 7,710,563
Morrison Health Care,
Inc. 438,800 10,970,000
Richfood Holdings,
Inc. 683,300 12,043,163
------------
30,723,726
------------
Forest Products & Paper -- 0.5%
Wausau-Mosinee
Paper Corporation 178,063 3,205,134
------------
Gas Distribution -- 1.9%
WICOR, Inc. 477,800 13,348,528
------------
Healthcare -- 0.8%
Herbalife
International, Inc. -
Cl. B 683,733 5,897,197
------------
Industrial Transportation -- 1.5%
ABC Rail Products
Corporation* 529,300 10,850,650
Insurance -- 2.3%
HCC Insurance
Holdings 471,200 10,690,350
Highlands Insurance
Group, Inc.* 508,100 5,335,050
------------
16,025,400
------------
Investment Management Services -- 1.0%
Conning Corporation 420,600 6,834,750
------------
Machinery & Components -- 10.4%
Asyst Technologies
Inc.* 158,300 4,739,106
Graco, Incorporated 648,700 19,055,563
Hardinge, Inc. 378,550 6,648,284
Helix Technology
Corporation 507,100 12,138,706
Regal-Beloit
Corporation 298,150 7,043,794
Roper Industries, Inc. 513,000 16,416,000
Watsco, Inc. 383,450 6,278,994
------------
72,320,447
------------
(Continued)
The accompanying notes are an integral part of the financial statements.
75
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Number of
Shares Market Value
---------- ------------
Medical Supplies -- 1.8%
Bacou USA, Inc.* 272,800 $ 4,654,650
Invacare Corporation 305,100 8,161,425
------------
12,816,075
------------
Metals & Mining -- 3.9%
CompX International
Inc.* 446,300 7,977,613
Reliance Steel &
Aluminum Company 501,700 19,566,300
------------
27,543,913
------------
Miscellaneous -- 1.7%
The Boyds Collection,
Ltd.* 304,300 5,268,194
Crossmann
Communities, Inc.* 224,200 6,515,813
------------
11,784,007
------------
Miscellaneous Distributor Wholesale -- 1.6%
Hughes Supply, Inc. 389,700 11,569,219
------------
Oil & Gas -- 3.2%
Newfield Exploration
Company* 387,200 11,011,000
Stone Energy
Corporation* 275,300 11,665,838
------------
22,676,838
------------
Other Services -- 2.4%
Landauer, Inc. 263,300 7,767,350
Rollins Truck Leasing
Company 845,975 9,411,472
------------
17,178,822
------------
Pharmaceuticals -- 0.7%
Bindley Western
Industries, Inc. 225,061 5,190,470
------------
Publishing & Printing -- 6.8%
Banta Corporation 291,450 6,120,450
Day Runner, Inc.* 543,700 6,728,288
Harte Hanks
Communications,
Inc. 388,800 10,546,200
Houghton Mifflin
Company 355,200 16,716,600
McClatchy
Newspapers, Inc. 201,950 6,689,594
------------
46,801,132
------------
Real Estate -- 1.6%
Captec Net Lease
Realty, Inc. 388,600 5,270,388
Mid-Atlantic Realty
Trust 560,300 6,233,338
------------
11,503,726
------------
Restaurants -- 1.1%
IHOP Corp.* 333,400 8,022,438
------------
Telecommunications -- 1.9%
Ct Communications
Inc. 327,800 13,480,775
------------
Transportation -- 5.1%
C.H. Robinson
Worldwide, Inc. 344,400 12,656,700
Hub Group, Inc. Cl. A* 252,200 5,658,738
M.S. Carriers, Inc.* 554,600 16,447,384
------------
34,762,822
------------
TOTAL EQUITIES 665,197,462
(Cost $517,535,907) ------------
Principal
Amount Market Value
------------- ------------
SHORT-TERM INVESTMENTS -- 8.1%
Cash Equivalents -- 1.9%
Bank of Nova Scotia
Eurodollar Time
Deposit**
5.500% 07/01/1999 $ 5,000,000 $ 5,000,000
BankBoston
Eurodollar Time
Deposit**
5.995% 10/29/1999 1,664,900 1,664,900
Harris Trust & Savings
Bank Eurodollar
Time Deposit**
5.875% 07/01/1999 1,000,000 1,000,000
Janus Money Market
Fund** 3,000,000 3,000,000
Frank Russell Money
Market Fund** 2,500,000 2,500,000
------------
13,164,900
------------
Commercial Paper -- 6.2%
Abbott Laboratories
4.920% 07/19/1999 4,822,000 4,810,138
Ameritech Corporation
4.840% 07/06/1999 7,000,000 6,995,294
Fortune Brands, Inc.
4.860% 08/18/1999 5,000,000 4,967,600
Gillette Company
5.650% 07/01/1999 3,875,000 3,875,000
Kellogg Co.
4.940% 07/06/1999 6,000,000 5,995,883
Lucent Technologies
Inc.
4.890% 07/12/1999 7,000,000 6,989,541
Motorola Inc.
4.780% 07/29/1999 6,000,000 5,977,694
Xerox Corporation
4.820% 08/09/1999 4,000,000 3,979,113
------------
43,590,263
------------
TOTAL SHORT-TERM
INVESTMENTS 56,755,163
(Cost $56,755,163) ------------
TOTAL INVESTMENTS -- 103.0% 721,952,625
(Cost $574,291,070)***
Other Assets/
(Liabilities) -- (3.0%) (20,647,430)
------------
NET ASSETS -- 100.0% $701,305,195
============
Notes to Portfolio of Investments
***Aggregate cost for Federal tax purposes (Note 7)
* Non-income producing security.
** Represents investment of security lending collateral. (Note 2).
The accompanying notes are an integral part of the financial statements.
76
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund - Financial Statements
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
June 30, 1999
(Unaudited)
-------------
Assets:
Investments, at value (cost $517,535,907) (Note 2) ..... $ 665,197,462
Short-term investments (cost $56,755,163) (Note 2) ..... 56,755,163
-------------
Total Investments .................................. 721,952,625
Cash ................................................... 284
Receivables from:
Investments sold ................................... 2,072,594
Fund shares sold ................................... 439,790
Interest and dividends ............................. 493,029
-------------
Total assets ................................... 724,958,322
-------------
Liabilities:
Payables for:
Investments purchased .............................. 5,430,443
Fund shares redeemed ............................... 4,621,370
Securities on loan (Note 2) ........................ 13,164,900
Directors' fees and expenses (Note 3) .............. 1,916
Affiliates (Note 3):
Investment management fees ..................... 360,501
Administration fees ............................ 52,655
Service fees ................................... 106
Accrued expenses and other liabilities ................. 21,236
-------------
Total liabilities .............................. 23,653,127
-------------
Net assets ............................................. $ 701,305,195
=============
Net assets consist of:
Paid-in capital ........................................ $ 545,984,034
Undistributed net investment income .................... 3,722,927
Accumulated net realized gain on investments ........... 3,936,679
Net unrealized appreciation on investments ............. 147,661,555
=============
$ 701,305,195
=============
Net assets:
Class A ................................................ $ 183,478
=============
Class L ................................................ $ 110,050
=============
Class Y ................................................ $ 832,030
=============
Class S ................................................ $ 700,179,637
=============
Shares outstanding:
Class A ................................................ 12,438
=============
Class L ................................................ 7,451
=============
Class Y ................................................ 56,310
=============
Class S ................................................ 47,349,059
=============
Net asset value, offering price and redemption price per share:
Class A ................................................ $ 14.75
=============
Class L ................................................ $ 14.77
=============
Class Y ................................................ $ 14.78
=============
Class S ................................................ $ 14.79
=============
The accompanying notes are an integral part of the financial statements.
77
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of Operations
Six months ended
June 30, 1999
(Unaudited)
----------------
Investment income: (Note 2)
Dividends ............................................. $ 4,082,065
Interest (including securities lending income
of $14,241)........................................ 1,621,049
----------------
Total investment income ........................... 5,703,114
----------------
Expenses: (Note 2) ..........................................
Investment management fees (Note 3) ................... 1,802,863
Custody fees .......................................... 29,412
Audit and legal fees .................................. 7,976
Directors' fees (Note 3) .............................. 8,186
----------------
1,848,437
Administration fees (Note 3):
Class A ........................................... 357
Class L* .......................................... 57
Class Y ........................................... 850
Class S ........................................... 257,157
Service fees (Note 3):
Class A ........................................... 206
----------------
Total expenses ................................ 2,107,064
----------------
Net investment income ......................... 3,596,050
----------------
Realized and unrealized gain (loss):
Net realized gain on investment transactions .......... 3,277,741
Net change in unrealized appreciation (depreciation) on
investments ....................................... 28,502,638
----------------
Net realized and unrealized gain .............. 31,780,379
----------------
Net increase in net assets resulting from operations .. $ 35,376,429
================
* For the period from May 3, 1999 (commencement of operations) through June
30, 1999.
The accompanying notes are an integral part of the financial statements.
78
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six months ended
June 30, 1999 Year ended
Increase (Decrease) in Net Assets: (Unaudited) December 31, 1998
----------------- -------------------
<S> <C> <C>
Operations:
Net investment income ............................ $ 3,596,050 $ 5,897,091
Net realized gain on investment transactions ..... 3,277,741 38,416,378
Net change in unrealized appreciation
(depreciation) on investments .................. 28,502,638 (108,654,819)
----------------- -------------------
Net increase (decrease) in net assets
resulting from operations .................. 35,376,429 (64,341,350)
----------------- -------------------
Distributions to shareholders (Note 2):
From net investment income:
Class A .......................................... -- (1,413)
Class L* ......................................... -- --
Class Y .......................................... -- (7,850)
Class S .......................................... -- (5,891,102)
----------------- -------------------
Total distributions from net investment income -- (5,900,365)
----------------- -------------------
From net realized gains:
Class A .......................................... -- (17,099)
Class L* ......................................... -- --
Class Y .......................................... -- (54,356)
Class S .......................................... -- (39,773,593)
----------------- -------------------
Total distributions from net realized gains .. -- (39,845,048)
----------------- -------------------
Net fund share transactions (Note 5):
Class 1** ........................................ -- (192,471)
Class 2** ........................................ -- (195,879)
Class 3** ........................................ -- (198,007)
Class A .......................................... 1,000 210,983
Class L* ......................................... 101,780 --
Class Y .......................................... 194,685 654,505
Class S .......................................... (17,688,484) 102,162,760
----------------- -------------------
Increase (decrease) in net assets from net
fund share transactions .................... (17,391,019) 102,441,891
----------------- -------------------
Total increase (decrease) in net assets .......... 17,985,410 (7,644,872)
Net assets:
Beginning of period .............................. 683,319,785 690,964,657
----------------- -------------------
End of period (including undistributed net
investment income of $3,722,927 and
$126,877, respectively) ........................ $ 701,305,195 $ 683,319,785
================= ===================
</TABLE>
* For the period from May 3, 1999 (commencement of operations) through June
30, 1999.
** Effective January 1, 1998, Class 1, Class 2, and Class 3 shares were
terminated (See Note 1).
The accompanying notes are an integral part of the financial statements.
79
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Value Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights (For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class A Class L Class Y
------- ------- -------
Six months Period Six months
ended 6/30/99 Year ended ended 6/30/99 ended 6/30/99 Year ended
(Unaudited) 12/31/98 + (Unaudited) ** (Unaudited) 12/31/98 +
------------- ----------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.07 17.48 13.66 $ 14.06 17.51
------------- ----------- ------------- ------------- -----------
Income (loss) from investment operations:
Net investment income 0.03 0.03 *** 0.02 0.06 *** 0.11 ***
Net realized and unrealized gain
(loss) on investments 0.65 (1.78) 1.09 0.66 (1.81)
------------- ----------- ------------- ------------- -----------
Total income (loss) from
investment operations 0.68 (1.75) 1.11 0.72 (1.70)
------------- ----------- ------------- ------------- -----------
Less distributions to shareholders:
From net investment income -- (0.12) -- -- (0.21)
From net realized gains -- (1.54) -- -- (1.54)
------------- ----------- ------------- ------------- -----------
Total distributions -- (1.66) -- -- (1.75)
------------- ----------- ------------- ------------- -----------
Net asset value, end of period $ 14.75 14.07 14.77 $ 14.78 14.06
============= =========== ============= ============= ===========
Total Return 4.81% (9.58)% 8.13% 5.12% (9.25)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $183 $174 $110 $832 $568
Net expenses to average daily
net assets # 1.26%* 1.30% 0.95%* 0.82%* 0.85%
Net investment income to average
daily net assets 0.51%* 0.19% 0.87%* 0.94%* 0.67%
Portfolio turnover rate 13% 31% 13% 13% 31%
<CAPTION>
Six months Class S (1)
ended 6/30/99 Year ended Year ended Year ended Year ended Period ended
(Unaudited) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94****
------------- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.06 $ 16.61 $ 13.43 $ 11.44 $ 9.69 $ 10.00
------------- ---------- ---------- ---------- ---------- -------------
Income (loss) from investment operations:
Net investment income 0.08 0.13 0.13 0.31 0.19 0.04
Net realized and unrealized gain
(loss) on investments 0.65 (1.67) 4.73 2.29 1.75 (0.31)
------------- ---------- ---------- ---------- ---------- -------------
Total income (loss) from
investment operations 0.73 (1.54) 4.86 2.60 1.94 (0.27)
------------- ---------- ---------- ---------- ---------- -------------
Less distributions to shareholders:
From net investment income -- (0.13) (0.14) (0.30) (0.19) (0.04)
From net realized gains -- (0.88) (1.54) (0.31) -- --
------------- ---------- ---------- ---------- ---------- -------------
Total distributions -- (1.01) (1.68) (0.61) (0.19) (0.04)
------------- ---------- ---------- ---------- ---------- -------------
Net asset value, end of period $ 14.79 $ 14.06 $ 16.61 $ 13.43 $ 11.44 $ 9.69
============= ========== ========== ========== ========== =============
Total Return @ 5.19% (9.02)% 36.36% 22.82% 20.01% (2.66)%
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 700,180 $ 682,578 $ 690,378 $ 456,935 $ 380,398 $ 310,789
Net expenses to average daily net assets # 0.6544%* 0.6434% 0.6400% 0.6110% 0.6110% 0.6110%*
Net investment income to average daily
net assets 1.12%* 0.86% 0.89% 2.40% 1.78% 1.78%*
Portfolio turnover rate 13% 31% 31% 28% 28% 4%
# Computed after giving effect to the
voluntary partial waiver of management
fee by MassMutual, which terminated
May 1, 1997. Without this partial waiver
of fees by MassMutual, the ratio of
expenses to average daily net assets
would have been: N/A N/A 0.6515% 0.6546% 0.6553% 0.6681%*
</TABLE>
* Annualized
** For the period from May 3, 1999 (commencement of operations) through June
30, 1999.
*** Per share amount calculated on the average shares method, which more
appropriately presents the per share data for the period since the use of
the undistributed income method does not accord with the results of
operations.
**** For the period from October 3, 1994 (commencement of operations) through
December 31, 1994.
+ Amounts have been restated to reflect reverse stock splits (See Note 9).
(1) Class S shares were previously designated as Class 4 shares.
@ Employee retirement benefit plans that invest plan assets in the Separate
Investment Accounts (SIAs) may be subject to certain charges as set forth
in their respective Plan Documents. Total return figures would be lower for
the periods presented if they reflected these charges.
The accompanying notes are an integral part of the financial statements.
80
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Mid Cap Growth Equity Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment objective and policies for the MassMutual Mid Cap Growth
Equity Fund?
The objective and policies of the Fund are to:
. achieve long-term capital growth
. invest primarily in common stocks and other equity securities of companies
having capitalizations in the range of companies included in the S&P Mid
Cap 400 Index
. look for companies that are expected to exceed stock analysts earnings
growth expectations
. use a strict sell policy when valuations exceed growth prospects
This is a new fund.
How did it perform?
The Fund trailed its benchmark, the Russell 2500 Index (the Index), a broadly
based, unmanaged index of 2,500 medium and small capitalization common stocks.
From inception on May 3, 1999 through June 30, 1999, the Fund's Class S shares
returned 3.40%, compared to 5.92% for the Index.
What factors affected the Fund's performance?
Relative to the Index, the Fund was overweighted in the media and entertainment
sector, which helped performance. Other positive influences were the
semiconductor part of the technology sector, the telecommunications equipment
area and the energy sector. On the negative side, our Internet holdings
struggled, as the entire sector went through a correction process after outsized
gains in the first quarter. Healthcare holdings also hurt performance. Formerly
considered stable growth investments when investors were in a more defensive
mindset, healthcare stocks suffered from the shift towards more economically
sensitive investments, as well as from concerns about adverse changes in the
government's Medicare reimbursement policies.
Can you talk about your strategy for managing the Fund?
Our goal is to find companies that have earnings growth of at least 15%
annually. In addition, we look for stable businesses with rising profitability
and rising earnings estimates. We tend to favor a mix of stable growth stocks
and more aggressive holdings that offer greater risk but also much greater
potential rewards. There is no attempt to mirror the sector weightings of the
Index. However, as a risk management tool, we allocate no more than 20% of the
Fund's assets to a sector, except for technology, which we allow to grow as
large as 25% of assets. We use a quantitative model to screen potential
investments for further investigation. The stocks that pass our quantitative
screen are then analyzed by rigorous fundamental methods to come up with our
final choices. At the end of June, we had about 90 holdings in the Fund's
portfolio, and we expect that number to remain relatively stable going forward.
What stocks did well for the Fund?
In the media and entertainment sector, Jones Intercable contributed positively
to performance. Cable shares were aided by high expectations for the
profitability of new services such as digital television and high-speed Internet
access, as well as by ongoing industry consolidation. Another holding that did
well was Broadcom, a semiconductor stock. Broadcom is a dominant player in the
manufacturing of computer chips used in digital cable television. Qualcomm,
which makes computer chips for the wireless telecommunications market, saw its
stock strengthen on increasing acceptance of its CDMA technology as the standard
for wireless communications. Finally, Barrett Resources, a natural gas and oil
exploration and production stock, exemplified the strong energy sector.
What stocks hurt the Fund's performance?
Lincare, a healthcare stock, was the holding that detracted most from
performance. Although the company continued to beat its earnings estimates and
has been growing 20% to 30% per year, the recent controversy about Medicare
reimbursement concerned investors. In the weak Internet group, examples of
lackluster performers included eBay, eToys, TCI Music, Telebank and Knight
Trimark.
81
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Mid Cap Growth Equity Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
What is your outlook?
The most important consideration for the second half of 1999 will be the
economy. If we continue to see strong economic growth, we will maintain our
focus on stocks that are more economically sensitive. If we get a slowdown in
the economy, we believe stocks in healthcare, cable and other less cyclical
sectors should do well.
The Federal Reserve Board (Fed) is obviously an important factor here. We
believe that as long as the Fed is perceived as being preemptive and able to act
in advance of real economic problems--growth that is either too slow or too
fast--the stock market should do reasonably well.
The Year 2000 (Y2K) issue will also be on investors' minds as we move through
the second half of the year. For our part, we are avoiding the stocks of
enterprise software vendors--companies that supply the "mission-critical"
software for corporations' most important operations. Those stocks have hit a
weak period now that most companies have completed their Y2K upgrades and other
remediation measures. Of course, we routinely verify the Y2K readiness of the
companies in which the Fund invests, and we've tightened our financial standards
somewhat. If there are Y2K-related problems, a company with a solid balance
sheet and great cash flow should weather the storm better than one without those
advantages.
----------------------------------------
MassMutual Mid Cap Growth Equity Fund
Largest Stock Holdings (6/30/99)
----------------------------------------
Qualcomm Inc.
United Rentals Inc.
Lincare Holdings Inc.
Broadcom Corp. Cl. A
AT&T- Liberty Media Group
General Instrument Corp.
Uniphase Corp.
Premier Parks Inc.
Baker Hughes, Inc.
Inktomi Corp.
82
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Mid Cap Growth Equity Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Mid Cap Growth Equity Fund Class S, Class
A, Class Y, Class L and the Russell 2500 Index
- --------------------------------------------------------------------------------
MassMutual Mid Cap Growth Equity Fund
Total Return Year-to-Date
5/3/99-6/31/99
Class S 3.40%
Class A 3.30%
Class Y 3.40%
Class L 3.50%
- --------------------------------------------------------------------------------
Russell
2500 Index 6.84%
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
[LINE GRAPH APPEARS HERE]
Class S Class A Class Y Class L Russell 2500 Index
------- ------- ------- ------- ------------------
5/3/99 10,000 10,000 10,000 10,000 10,000
5/31/99 9,700 9,700 9,700 9,700 10,155
6/30/99 10,340 10,330 10,340 10,350 10,684
Past performance is not predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund, while the Russell 2500 Index is unmanaged and does not incur
expenses, and cannot be purchased directly by investors.
83
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Mid Cap Growth Equity Fund - Financial Statements
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1999
Number of
Shares Market Value
--------- ------------
EQUITIES -- 95.9%
Advertising -- 1.9%
Doubleclick Inc.* 1,800 $ 165,150
Young & Rubicam Inc. 7,300 331,694
------------
496,844
------------
Aerospace & Defense -- 1.1%
Gulfstream Aerospace Corp.* 4,200 283,763
------------
Apparel, Textiles & Shoes -- 0.8%
Abercrombie & Fitch Co. Cl. A* 4,300 206,400
------------
Banking, Savings & Loans -- 6.6%
First Tennessee National Corp. 6,700 256,694
Heller Financial Inc. 7,700 214,156
National Commerce Bancorp 10,300 225,313
NextCard, Inc.* 3,100 105,206
Providian Financial Corp. 2,800 261,800
Telebanc Financial Corp* 3,800 147,250
Toronto-Dominion Bank 5,900 268,450
Zions Bancorporation 3,700 234,950
------------
1,713,819
------------
Beverages -- 1.0%
Beringer Wine Estates Holdings * 5,900 246,510
------------
Chemicals -- 1.8%
Cytec Industries Inc.* 8,300 264,563
Witco Corp. 9,800 196,000
------------
460,563
------------
Commercial Services -- 10.1%
Allied Waste Industries Inc.* 12,900 254,775
Apollo Group Inc.* 6,900 183,281
Browning-Ferris Industries Inc. 5,700 245,100
Cintas Corp. 2,900 194,844
Concord EFS Inc.* 3,600 152,325
Dycom Industries Inc.* 6,000 336,000
Medquist Inc.* 7,800 341,250
Sotheby's Holdings 4,100 156,313
United Rentals Inc.* 18,100 533,950
Valassis Communications Inc.* 6,150 225,244
------------
2,623,082
------------
Communications -- 7.1%
ADC Telecommunications Inc.* 5,700 259,706
Broadcast.com Inc.* 1,700 227,056
General Instrument Corp.* 10,200 433,500
Mcleodusa Inc. 4,900 269,500
Qualcomm Inc.* 4,400 631,400
------------
1,821,162
------------
Computer Software & Processing -- 9.1%
Adobe Systems Inc. 2,900 238,253
At Home Corp. Series A* 4,166 224,704
Fiserv Inc.* 10,700 335,032
Inktomi Corp.* 2,800 365,575
Intuit, Inc.* 1,800 162,225
Pixar Inc.* 3,100 133,688
Rational Software Corp.* 7,400 243,738
Sapient Corp.* 3,100 175,538
Softnet Systems* 6,400 178,400
Verio Inc.* 1,700 118,150
Yahoo! Inc.* 1,000 172,250
------------
2,347,553
------------
Cosmetics & Personal Care-- 2.2%
Dial Corp 8,200 304,938
Estee Lauder Companies Inc. Cl. A 5,400 270,675
------------
575,613
------------
Electrical Equipment & Electronics -- 9.9%
Broadcom Corp. Cl. A* 3,600 520,425
Kla-Tencor Corp.* 5,300 343,838
Linear Technology Corp. 4,500 302,625
PMC - Sierra, Inc.* 3,500 206,281
Uniphase Corp.* 2,400 398,400
Visx Inc.* 2,300 182,131
Vitesse Semiconductor Corp.* 4,700 316,956
Xilinx Inc.* 5,400 309,150
------------
2,579,806
------------
Entertainment & Leisure -- 5.9%
AT&T - Liberty Media Group * 13,800 507,150
Cinar Corporation* 11,000 269,500
Hollywood Entertainment Corp.* 10,700 209,319
Imax Corp.* 6,600 148,500
Premier Parks Inc.* 10,700 393,225
------------
1,527,694
------------
Financial Services -- 3.8%
E*trade Group Inc.* 6,400 255,600
Franklin Resources Inc 4,400 178,750
Knight/Trimark Group Inc.* 3,300 199,031
Price (T. Rowe) Associates 5,000 191,875
TD Waterhouse Group, Inc.* 5,900 147,869
------------
973,125
------------
Healthcare -- 2.9%
Health Management Associates Cl. A* 19,500 219,375
Lincare Holdings Inc.* 21,000 525,000
------------
744,375
------------
(Continued)
The accompanying notes are an integral part of the financial statements.
84
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Mid Cap Growth Equity Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Number of
Shares Market Value
--------- ------------
Insurance -- 0.8%
Foundation Health Systems* 13,200 $ 198,000
------------
Internet Software -- 2.0%
Concentric Network Corp.* 6,000 238,500
Infoseek Corporation* 500 23,969
Northpoint Communications Group* 6,700 244,550
------------
507,019
------------
Machinery & Components -- 1.7%
Cooper Cameron Corp.* 6,200 229,788
Danaher Corporation 3,500 203,438
------------
433,226
------------
Media -- Broadcasting & Publishing -- 7.9%
Citadel Communications Corp.* 4,700 170,081
Fox Entertainment Group Inc. Cl. A* 6,400 172,400
Hispanic Broadcasting Corp.* 4,300 326,263
Jones Intercable Inc. Cl. A* 6,600 323,400
TCI Music Inc. Cl. A* 5,900 208,713
Tv Guide Inc. Cl. A* 8,500 311,313
Univision Communications Inc.* 4,100 270,600
USA Networks Inc.* 7,100 284,888
------------
2,067,658
------------
Metals & Mining -- 0.6%
Stillwater Mining Company* 4,600 150,363
------------
Oil & Gas -- 5.4%
Baker Hughes, Inc. 11,000 368,500
Barrett Resources Corp.* 7,800 299,325
BJ Services Co.* 11,800 347,363
Grey Wolf Inc.* 81,300 203,250
Nabors Industries Inc.* 6,900 168,619
------------
1,387,057
------------
Publishing & Printing -- 0.9%
Houghton Mifflin Company 4,800 225,900
------------
Retail -- 1.8%
Cheap Tickets, Inc.* 400 14,600
Ebay Inc.* 1,200 181,200
Tandy Corp. 5,600 273,700
------------
469,500
------------
Retail -- Internet -- 1.3%
barnesandnoble.com Inc.* 8,400 151,200
eToys Inc.* 4,400 179,300
------------
330,500
------------
Telephone Utilities -- 8.1%
Cincinnati Bell Inc. 10,500 261,844
Frontier Corporation 4,700 277,300
Globalstar Telecommunication* 8,500 197,094
Loral Space & Communications* 10,400 187,200
Nextlink Communications* 3,500 260,313
RSL Communications Ltd.* 7,400 142,913
Sprint Corp. (PCS Group)* 4,300 245,638
Voicestream Wireless Corporation* 9,400 267,313
Western Wireless Corporation Cl. A* 9,000 243,000
------------
2,082,615
------------
Transportation -- 1.2%
CNF Transportation Inc. 7,900 303,163
------------
TOTAL EQUITIES 24,755,310
------------
TOTAL INVESTMENTS -- 95.9% 24,755,310
(Cost $23,747,458)***
Other Assets/(Liabilities) -- 4.1% 1,064,278
------------
NET ASSETS -- 100.0% $ 25,819,588
============
Notes to Portfolio of Investments
*** Aggregate cost for Federal tax purposes (Note 7)
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
85
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Mid Cap Growth Equity Fund - Financial Statements
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
June 30, 1999
(Unaudited)
------------
<S> <C>
Assets:
Investments, at value (cost $23,747,458) (Note 2) ........... $ 24,755,310
Cash ........................................................ 1,403,560
Receivables from:
Investments sold ........................................ 743,635
Interest and dividends .................................. 12,534
------------
Total assets ........................................ 26,915,039
------------
Liabilities:
Payables for:
Investments purchased ................................... 1,073,642
Directors' fees and expenses (Note 3) ................... 2,994
Affiliates (Note 3):
Investment management fees .......................... 15,512
Administration fees ................................. 1,985
Service fees ........................................ 38
Accrued expenses and other liabilities ...................... 1,280
------------
Total liabilities ................................... 1,095,451
------------
Net assets ................................................... $ 25,819,588
============
Net assets consist of:
Paid-in capital ............................................. $ 25,004,120
Undistributed net investment loss ........................... (5,655)
Accumulated net realized loss on investments ................ (186,729)
Net unrealized appreciation on investments .................. 1,007,852
------------
$ 25,819,588
============
Net assets:
Class A ..................................................... $ 104,266
============
Class L ..................................................... $ 104,430
============
Class Y ..................................................... $ 104,328
============
Class S ..................................................... $ 25,506,564
============
Shares outstanding:
Class A ..................................................... 10,100
============
Class L ..................................................... 10,102
============
Class Y ..................................................... 10,100
============
Class S ..................................................... 2,470,100
============
Net asset value, offering price and redemption price per share:
Class A ..................................................... $ 10.32
============
Class L ..................................................... $ 10.34
============
Class Y ..................................................... $ 10.33
============
Class S ..................................................... $ 10.33
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
86
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Mid Cap Growth Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of Operations
<TABLE>
<CAPTION>
Period ended
June 30, 1999
(Unaudited)*
-------------
<S> <C>
Investment income: (Note 2)
Interest ........................................... $ 16,866
Dividends .......................................... 13,306
-------------
Total investment income ........................ 30,172
-------------
Expenses: (Note 2)
Investment management fees (Note 3) ................ 27,946
Custody fees ....................................... 388
Audit and legal fees ............................... 891
Directors' fees (Note 3) ........................... 2,994
-------------
32,219
Administration fees (Note 3):
Class A ........................................ 46
Class L ........................................ 46
Class Y ........................................ 24
Class S ........................................ 3,454
Service fees (Note 3):
Class A ........................................ 38
-------------
Total expenses ................................. 35,827
-------------
Net investment loss ............................ (5,655)
-------------
Realized and unrealized gain (loss):
Net realized loss on investment transactions ....... (186,729)
Net change in unrealized appreciation
on investments ................................. 1,007,852
-------------
Net realized and unrealized gain ............... 821,123
-------------
Net increase in net assets resulting from operations $ 815,468
=============
</TABLE>
* For the period from May 3, 1999 (commencement of operations) through
June 30, 1999.
The accompanying notes are an integral part of the financial statements.
87
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Mid Cap Growth Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Period ended
June 30, 1999
(Unaudited) *
-------------
<S> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment loss ....................................... $ (5,655)
Net realized loss on investment transactions .............. (186,729)
Net change in unrealized appreciation
on investments ........................................ 1,007,852
------------
Net increase in net assets resulting from operations .. 815,468
------------
Net fund share transactions (Note 5):
Class A ................................................... 101,000
Class L ................................................... 101,120
Class Y ................................................... 101,000
Class S ................................................... 24,701,000
------------
Increase in net assets from net fund share transactions 25,004,120
------------
Total increase in net assets .............................. 25,819,588
Net assets:
Beginning of period ....................................... --
------------
End of period (including undistributed net investment
loss of $5,655) ....................................... $ 25,819,588
============
</TABLE>
* For the period from May 3, 1999 (commencement of operations) through
June 30, 1999.
The accompanying notes are an integral part of the financial statements.
88
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Mid Cap Growth Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights (For a share outstanding throughout the period)
<TABLE>
<CAPTION>
Class A Class L Class Y Class S
Period Period Period Period
ended 6/30/99 ended 6/30/99 ended 6/30/99 ended 6/30/99
(Unaudited)** (Unaudited)** (Unaudited)** (Unaudited)**
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
------------- ------------- ------------- -------------
Income (loss) from investment operations:
Net investment loss (0.01) (0.01) (0.01) 0.00 ***
Net realized and unrealized gain (loss) on investments 0.33 0.35 0.34 0.33
------------- ------------- ------------- -------------
Total income (loss) from investment operations 0.32 0.34 0.33 0.33
------------- ------------- ------------- -------------
Net asset value, end of period $ 10.32 $ 10.34 $ 10.33 $ 10.33
============= ============= ============= =============
Total Return 3.30% 3.50% 3.40% 3.40%@
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 104 $ 104 $ 104 $ 25,507
Net expenses to average daily net assets 1.38%* 1.13%* 0.98%* 0.8944%*
Net investment income (loss) to average daily net assets (0.80)%* (0.54)%* (0.40)%* (0.14)%*
Portfolio turnover rate 21% 21% 21% 21%
</TABLE>
* Annualized
** For the period from May 3, 1999 (commencement of operations) through June
30, 1999.
*** Net investment income is less than $0.01 per share.
@ Employee retirement benefit plans that invest plan assets in the Separate
Investment Accounts (SIAs) may be subject to certain charges as set forth
in their respective Plan Documents. Total return figures would be lower for
the periods presented if they reflected these charges.
The accompanying notes are an integral part of the financial statements.
89
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Growth Equity Fund - Portfolio Manager Report
- --------------------------------------------------------------------------------
Note to shareholders:
The MassMutual Small Cap Growth Equity Fund is managed by two sub-advisors: J.P.
Morgan Investment Management, Inc. and Waddell & Reed Investment Asset
Management Company.
What are the investment objective and policies for the MassMutual Small Cap
Growth Equity Fund?
The objective and policies of the Fund are to:
. achieve long-term capital appreciation
. invest primarily in equity securities of smaller companies (companies with
market capitalization, at the time of purchase, of $100 million to $1.5
billion)
. use a growth-oriented strategy in making investment decisions
. J.P. Morgan looks to companies' real growth potential by forecasting
prospects over periods up to 5 years; in addition, J.P. Morgan focuses on
high growth sectors such as technology, healthcare, and consumer services
. Waddell & Reed uses a bottom-up process which generally emphasizes long-term
growth potential and superior financial characteristics
This is a new fund.
How did it perform?
The Fund outperformed its benchmark, the Russell 2000 Index (the Index), which
measures the performance of small-cap U.S. companies. From inception on May 3,
1999 through June 30, 1999 the Fund's Class S shares returned 9.30%, compared to
5.93% for the Index.
Areas of strength for the Fund included telecommunications, semiconductor
capital equipment, and specialty software stocks. Negative influences included
holdings in healthcare, education, biotechnology and personal computer hardware.
What was the investment environment during the period?
May began with the market on the defensive because of the feared inflationary
implications of a much higher than expected Consumer Price Index (CPI) for
April. In June, the market firmed when the May CPI fell back to benign levels,
and stock investors began to sense that credit market participants were being
overly pessimistic about the upcoming decision on interest rates by the Federal
Reserve Board (Fed).
On June 30(th) the Fed raised short-term rates by .25%, but what moved the
markets was the positive news that the Fed had reverted to a neutral bias
regarding future interest rate changes.
In a reversal of recent trends, growth stocks took a back seat to value stocks
during much of May and June. Nevertheless, the Fund's strong stock selection
enabled it to outperform the Index.
Can you talk about your strategy for managing the Fund?
We consider ourselves primarily stock pickers, not market timers. The three
sectors that we think currently have the most growth potential are consumer and
business services, technology and telecommunications. In Internet stocks, we
favor companies that provide outsourcing and infrastructure services for other
companies rather than retailers and other "pure" Internet plays. Our thinking
here is that outsourcing and infrastructure investments provide much safer bets
in what is already a volatile sector.
We do not limit ourselves to consideration of the stocks in the Index. There are
between 6,000 and 7,000 stocks in our investment universe, with the total number
of holdings in the Fund typically averaging somewhere between 200 and 250.
Generally speaking, we do not make an attempt to mirror the sector weightings of
the Index. To help control risk, we typically will not invest more than 3% of
the Fund's assets in any one position at the time of purchase, although price
appreciation may result in a position growing to as much as 5% before we will
scale it back.
90
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Growth Equity Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
What stocks did well for the Fund?
MicroStrategy was one of the best performers. The company makes software that
automatically extracts useful marketing information from customer databases.
Also performing well in the specialty software area were Dendrite International
and Citrix Systems. Dendrite makes software to help pharmaceutical sales
representatives assess their competitive position and make smarter decisions
about how to service prospects in their territories. Citrix makes software
called Metaframe for server-based computer systems.
Telecommunications, where the Fund managers believe we have an information edge
because of strong research capabilities, also contributed positively to
performance. Global Crossings, which offered to buy Frontier and Metronet was
bought by AT&T Canada. We sold both stocks because the acquisitions increased
their capitalizations beyond the Fund's limits. Finally, we'll mention one
Internet IPO, Careinsite, which benefited from the trend toward moving
healthcare transactions of all kinds to the Internet.
What stocks disappointed you?
Racing Champions failed to perform up to expectations. The company, which makes
die-cast replicas of NASCAR champion cars, had trouble assimilating an ambitious
acquisition, and we sold the stock. Resortquest International, a vacation
timeshare operation, also ran into trouble. The company had plans for a
secondary stock offering but was forced to cancel it because of deteriorating
profitability. We liquidated that position too.
What is your outlook?
During the second half of 1999, we will be closely watching the direction of
interest rates. Small-cap growth stocks have historically not done well in an
environment of rising interest rates. However, we believe that the increase that
occurred at the end of June does not represent the beginning of a significant
trend.
We continue to see good opportunity in the small-cap market. One positive
development is that institutions have become more willing to include small-cap
stocks in their portfolios. Another positive sign for small-cap stocks is the
healthy merger and acquisition activity.
------------------------------------------
MassMutual Small Cap Growth Equity Fund
Largest Stock Holdings (6/30/99)
------------------------------------------
Intermedia Communications
USinternetworking Inc.
Broadvision, Inc.
Incyte Pharmaceuticals, Inc.
Careinsite Inc.
Dendrite International Inc.
Citrix Systems Inc.
O'Reilly Automotive, Inc.
American Italian Pasta Co. Cl. A
Shared Medical Systems Corp.
91
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Growth Equity Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual Small Cap Growth Equity Fund Class S,
Class A, Class Y, Class L and the Russel 2000 Index
- --------------------------------------------------------------------------------
MassMutual Small Cap Growth Equity Fund
Total Return Year-to-Date
5/3/99-6/30/99
Class S 9.30%
Class A 9.30%
Class Y 9.30%
Class L 9.30%
- --------------------------------------------------------------------------------
Russell 2000
Index 6.05%
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
[LINE GRAPH APPEARS HERE]
Class S Class A Class Y Class L Russell 2000 Index
------- ------- ------- ------- ------------------
5/3/99 10,000 10,000 10,000 10,000 10,000
5/31/99 10,130 10,130 10,130 10,130 10,146
6/30/99 10,930 10,930 10,930 10,930 10.605
- --------------------------------------------------------------------------------
Past performance is not predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund, while the Russell 2000 Small Stock Index is unmanaged and does not
incur expenses, and cannot be purchased directly by investors.
92
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Growth Equity Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1999
Number of
Shares Market Value
--------- ------------
EQUITIES -- 78.9%
Advertising -- 1.1%
Getty Images Inc.* 12,000 $ 226,500
TMP Worldwide Inc.* 1,100 69,850
XOOM.com, Inc.* 300 15,750
------------
312,100
------------
Aerospace & Defense -- 0.5%
Alliant Techsystems Inc.* 900 77,850
Orbital Sciences Corp.* 2,200 51,975
------------
129,825
------------
Air Transportation -- 1.1%
Alaska Airgroup Inc.* 800 33,400
Midwest Express Holdings* 7,700 261,800
------------
295,200
------------
Apparel, Textiles & Shoes -- 1.4%
bebe stores, inc.* 2,100 71,400
The Buckle Inc.* 1,000 28,750
The Finish Line Cl. A* 1,700 19,125
Nautica Enterprises Inc.* 4,200 70,875
Steven Madden Ltd.* 7,000 94,938
Talbots Inc. 2,600 99,125
------------
384,213
------------
Banking, Savings & Loans -- 2.8%
Bank United Corp. Cl. A 3,000 120,563
Banknorth Group, Inc. 600 19,800
Centennial Bancorp* 500 6,906
The Colonial BancGroup, Inc. 900 12,544
Commercial Federal Corporation 1,600 37,100
Creditrust Corp.* 1,200 33,300
Financial Federal Corp.* 5,200 114,400
FNB Financial Services Corp. 1,200 18,300
Hamilton Bancorp Inc.* 1,000 24,000
Heller Financial Inc. 1,700 47,281
Independent Bank Corporation 1,400 24,325
National Commerce Bancorp 6,700 146,563
Ocwen Financial Corp.* 2,400 21,300
Prime Bancshares Inc. 1,200 21,450
Sterling Bancshares Inc/Tx 3,200 42,800
Sun Bancorp Inc. NJ* 1,575 27,563
Webster Financial Corporation 1,400 37,975
------------
756,170
------------
Beverages -- 0.3%
The Robert Mondavi Corporation* 2,000 72,750
------------
Chemicals -- 2.1%
Albemarile Corp. 5,600 129,500
Bush Boake Allen Inc.* 2,000 58,500
General Checmical Group Inc. 5,700 17,813
Geon Company 3,400 109,650
Georgia Gulf Corp. 4,600 77,625
Olin Corp. 4,300 56,706
Wellman Inc. 8,100 129,094
------------
578,888
------------
Commercial Services -- 11.9%
Affymetrix Inc.* 2,200 108,625
AppNet Systems, Inc.* 1,600 21,500
Bright Horizons Family Solution Inc.* 3,400 64,175
Carriage Services, Inc. Cl. A* 1,200 22,500
Central Parking Corp. 700 23,975
Condor Technology Solutions Inc.* 4,900 22,969
Diamond Technology Partners Inc.* 3,100 69,363
Education Management Inc.* 6,100 126,575
Incyte Pharmaceuticals, Inc.* 13,400 354,263
Kendle International Inc.* 1,900 30,400
Maximus Inc.* 9,400 270,250
Medquist Inc.* 2,200 96,250
MemberWorks Incorporated* 8,000 232,000
The Metzler Group, Inc.* 2,100 58,013
Millennium Pharmaceuticals* 3,800 136,800
Newgen Results Corporation* 200 2,400
NFront, Inc.* 700 10,631
Nielsen Media Research* 5,400 157,950
On Assignment Inc.* 3,900 101,888
Primark Corp.* 10,000 280,625
Profit Recovery Group International* 1,300 61,506
Provant Inc.* 4,600 71,588
ShowCase Corporation* 14,700 126,788
Steiner Leisure Ltd.* 3,400 103,063
Stewart Enterprises, Inc. Cl. A 14,000 203,875
Superior Consultant Holdings Inc.* 3,300 81,469
Superior Services Inc.* 10,000 266,875
Sylvan Learning Systems Inc.* 1,700 46,219
US Bioscience Inc.* 11,200 109,200
------------
3,261,735
------------
Communications -- 1.5%
Concord Communications Inc.* 2,000 90,000
L-3 Communications Holdings Inc.* 3,800 183,588
Polycom Inc.* 3,400 132,600
------------
406,188
------------
Computer Software & Processing -- 17.7%
Actuate Software Corporation* 700 18,550
Acxiom Corp.* 1,800 44,888
(Continued)
The accompanying notes are an integral part of the financial statements.
93
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Growth Equity Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Number of
Shares Market Value
--------- ------------
Aspen Technology Inc.* 5,700 $ 66,975
Avid Technology Inc.* 1,900 30,638
Best Software Inc.* 13,200 212,850
Beyond.com, Corporation* 1,300 37,294
Broadvision, Inc.* 5,000 368,750
CAIS Internet, Inc.* 900 16,538
CBT Group Public Limited Company Sponsored ++* 4,700 77,550
Cerner Corporation* 11,000 230,657
CheckFree Holdings Corporation* 10,000 275,625
Citrix Systems Inc.* 5,500 310,750
Dendrite International Inc.* 9,000 325,125
drkoop. com, Inc.* 500 7,969
Exchange Applications Inc.* 2,400 97,800
Informatica Corp.* 1,100 39,188
Macromedia Inc.* 1,500 52,875
Mapics Inc.* 7,500 79,219
Mediconsult.com, Inc.* 1,400 14,613
MicroStrategy Inc.* 6,200 234,825
Mpath Interactive Inc.* 2,000 44,000
Multex.com, Inc.* 1,800 47,025
National Computer SYS Inc. 2,000 67,500
NEON Systems* 6,000 200,250
New ERA Of Networks Inc.* 1,500 65,906
Peregrine Systems, Inc.* 1,800 46,238
Pixar Inc.* 1,800 77,625
PLX Technology Inc.* 3,000 142,125
Private Business, Inc.* 3,900 39,488
Prodigy Communications Corp.* 2,500 64,688
Radiant Systems Inc.* 7,400 105,450
Saleslogix Corp.* 2,500 37,188
Security First Technologies Corporation* 3,500 157,938
Shared Medical Systems Corp. 4,500 293,625
Software.com, Inc.* 300 6,956
Sykes Enterprises, Incorporated* 2,300 76,763
Tenfold Corp.* 3,700 117,475
Transaction Systems Architects Cl. A* 7,400 288,600
Unify Corp.* 3,400 45,900
USWeb Corporation* 10,000 221,875
Verio Inc.* 1,000 69,500
Visio Corp.* 3,100 117,994
------------
4,876,788
------------
Computers & Information -- 1.5%
Brocade Communications Systems, Inc.* 100 9,644
Computer Network Technology Corporation* 2,400 51,900
Creative Technology Ltd. 2,200 29,563
InFocus Systems Inc.* 6,300 94,500
Safeguard Scientifics Inc.* 1,700 105,400
Sandisk Corp.* 2,800 126,000
------------
417,007
------------
Computers & Office Equipment -- 0.4%
Cognex Corporation* 3,500 110,469
Electrical Equipment & Electronics -- 6.5%
Applied Micro Circuits Corp.* 2,300 189,175
ATMI Inc.* 9,400 279,650
Cymer, Inc.* 2,000 50,000
Cypress Semiconductor Corp.* 7,100 117,150
Exar Corp.* 2,400 59,400
Galileo Technology Ltd.* 1,400 63,438
Gentex Corp.* 8,000 224,000
HI/FN Inc.* 1,400 106,575
Integrated Device Technology Inc.* 6,100 66,338
Intevac Inc.* 6,900 37,950
Maker Communications, Inc.* 1,200 37,200
Microchip Technology Inc.* 1,600 75,800
MKS Instruments Inc.* 5,100 94,988
MMC Networks Inc.* 1,700 76,075
Rambus Inc.* 2,500 230,469
Veeco Instruments Inc.* 1,600 54,400
------------
1,762,608
------------
Entertainment & Leisure -- 1.7%
American Classic Voyages Co.* 1,400 33,600
Anchor Gaming* 800 38,450
Cinar Corporation* 8,700 213,150
Pegasus Systems Inc.* 2,400 89,850
Premier Parks Inc.* 2,800 102,900
------------
477,950
------------
Financial Services -- 1.0%
Allied Capital Corp. 3,700 88,800
Gabelli Asset Management Inc. Cl. A* 2,000 31,625
IndyMac Mortgage Holdings, Inc. 1,600 25,600
Macerich Company (The) 400 10,500
TD Waterhouse Group, Inc.* 700 17,544
Wit Capital Group, Inc.* 3,000 102,000
------------
276,069
------------
Foods -- 1.4%
American Italian Pasta Co. Cl. A* 9,900 300,688
General Nutrition Companies* 700 16,319
Keebler Foods Company* 2,100 63,788
------------
380,795
------------
Forest Products & Paper -- 0.9%
Ivex Packaging Corp.* 4,900 107,800
Universal Forest Products 6,300 135,450
------------
243,250
------------
Healthcare -- 1.3%
Accredo Health Inc.* 200 6,550
Human Genome Sciences Inc.* 4,700 185,650
Idexx Laboratories Inc.* 5,400 125,888
LCA-Vision Inc.* 3,500 32,594
------------
350,682
------------
Home Construction, Furnishings &
Appliances -- 0.3%
Furniture Brands International* 1,500 41,813
HON Industries 400 11,675
Miller (Herman) Inc. 1,700 35,700
------------
89,188
------------
Industrial -- Diversified -- 0.4%
Blyth Industries Inc.* 500 17,188
Gentek, Inc. 5,900 81,863
------------
99,051
------------
Insurance -- 0.5%
Fremont General Corporation 3,100 58,513
Renaissancere Holdings Ltd. 1,800 66,600
------------
125,113
------------
(Continued)
The accompanying notes are an integral part of the financial statements.
94
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Growth Equity Fund - Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Number of
Shares Market Value
--------- ------------
Internet Content -- 1.3%
Ask Jeeves, Inc. 100 $ 1,400
Careinsite Inc.* 7,400 349,650
Media Metrix, Inc.* 100 5,325
------------
356,375
------------
Internet Software -- 3.5%
Concentric Network Corp.* 5,300 210,675
Covad Communications Group Inc.* 950 50,647
Exodus Communications Inc.* 2,300 275,856
Northpoint Communications Group* 450 16,425
Rhythms Netconnections Inc.* 400 23,350
USinternetworking Inc.* 8,800 369,600
------------
946,553
------------
Lodging -- 0.7%
MGM Grand Inc.* 1,400 68,600
Sun International Hotels Ltd.* 1,400 62,650
Vail Resorts Inc.* 3,200 56,000
------------
187,250
------------
Machinery & Components -- 2.1%
Agco Corp. 2,300 26,019
Brooks Automation Inc.* 1,700 46,006
Cooper Cameron Corp.* 2,100 77,831
Gasonics International Corp.* 3,600 50,400
Kennametal Inc. 1,600 49,600
Lam Research Corp.* 3,000 140,063
Milacron Inc. 2,000 37,000
New Holland NV 4,000 68,500
Smith International Inc.* 1,800 78,188
------------
573,607
------------
Media -- Broadcasting & Publishing -- 1.5%
Emmis Communications Corp.* 5,700 281,438
Entercom Communications Corp.* 1,900 81,225
Radio One, Inc.* 300 13,950
Scholastic Corporation* 500 25,313
------------
401,926
------------
Medical Supplies -- 0.3%
Closure Medical Corporation* 1,400 42,000
Novoste Corporation* 900 18,900
Sunrise Technologies International* 900 11,025
------------
71,925
------------
Metals & Mining -- 0.4%
Mueller Industries.* 2,400 81,450
RTI International Metals Inc.* 1,500 22,031
------------
103,481
------------
Oil & Gas -- 1.0%
Devon Energy Corporation 4,800 171,600
National-Oilwell Inc.* 3,500 44,406
Tesoro Petroleum Corp. Convertible Preferred
Stock 1,400 22,050
Valero Energy Corp. 2,100 45,019
------------
283,075
------------
Pharmaceuticals -- 1.0%
Algos Pharmaceuticals Corp.* 800 17,650
Idec Pharmaceuticals Corp.* 1,000 77,063
Ligand Pharmaceuticals Inc. Cl. B* 9,300 103,463
NCS Healthcare Inc. Cl. A* 15,000 81,563
------------
279,739
------------
Real Estate -- 0.2%
Realty Information Group Inc.* 950 41,325
------------
Restaurants -- 0.2%
Foodmaker Inc.* 1,600 45,400
------------
Retail -- 1.9%
Hibbett Sporting Goods Inc.* 2,200 48,400
Kenneth Cole
Productions Cl. A* 1,200 33,450
MSC Industrial Direct Co. Cl. A* 12,000 123,000
O'Reilly Automotive, Inc.* 6,000 302,250
------------
507,100
------------
Retail -- Internet -- 0.1%
eToys Inc.* 600 24,450
------------
Retail -- Office Supplies -- 0.9%
School Specialty Inc.* 16,100 258,606
------------
Telecommunications -- 2.6%
Act Networks Inc.* 3,400 58,013
Allegiance Telecom Inc.* 3,600 197,550
American Mobile Satellite Corp.* 3,500 57,313
CapRock Communications Corp.* 3,100 125,550
Excel Switching Corporation* 6,200 185,613
Juniper Networks* 250 37,250
Network Plus Corporation* 400 8,350
Winstar Communications Inc.* 1,000 48,750
------------
718,389
------------
Telephone Utilities -- 4.9%
Intermedia Communications* 14,200 426,000
Nextlink Communications* 2,900 215,688
RCN Corporation* 5,500 228,938
Voicestream Wireless Corporation* 8,000 227,500
Western Wireless Corporation Cl. A* 9,000 243,000
------------
1,341,126
------------
TOTAL EQUITIES 21,546,366
(Cost $19,434,932)*** ------------
TOTAL INVESTMENTS -- 78.9% 21,546,366
Other Assets/(Liabilities)-- 21.1% 5,775,122
------------
NET ASSETS-- 100.0% $ 27,321,488
============
Notes to Portfolio of Investments
*** Aggregate cost for Federal tax purposes (Note 7)
* Non-income producing security.
++ American Depository Receipt.
The accompanying notes are an integral part of the financial statements.
95
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Growth Equity Fund - Financial Statements
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
June 30, 1999
(Unaudited)
-------------
Assets:
Investments, at value (cost $19,434,932) (Note 2) ..... $ 21,546,366
Cash .................................................. 5,963,628
Receivables from:
Investments sold .................................. 368,618
Interest and dividends ............................ 26,796
Foreign taxes withheld ............................ 181
-------------
Total assets .................................. 27,905,589
-------------
Liabilities:
Payables for:
Investments purchased ............................. 557,961
Directors' fees and expenses (Note 3) ............. 2,994
Affiliates (Note 3):
Investment management fees .................... 19,032
Administration fees ........................... 2,795
Service fees .................................. 39
Accrued expenses and other liabilities ................ 1,280
-------------
Total liabilities ............................. 584,101
-------------
Net assets ............................................. $ 27,321,488
=============
Net assets consist of:
Paid-in capital ....................................... $ 25,004,340
Undistributed net investment income ................... 24,545
Accumulated net realized gain on investments .......... 181,169
Net unrealized appreciation on investments ............ 2,111,434
-------------
$ 27,321,488
=============
Net assets:
Class A ............................................... $ 110,937
=============
Class L ............................................... $ 111,351
=============
Class Y ............................................... $ 111,004
=============
Class S ............................................... $ 26,988,196
=============
Shares outstanding:
Class A ............................................... 10,160
=============
Class L ............................................... 10,195
=============
Class Y ............................................... 10,160
=============
Class S ............................................... 2,469,919
=============
Net asset value, offering price and redemption price per share:
Class A ............................................... $ 10.92
=============
Class L ............................................... $ 10.92
=============
Class Y ............................................... $ 10.93
=============
Class S ............................................... $ 10.93
=============
The accompanying notes are an integral part of the financial statements.
96
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Growth Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statement of Operations
Period ended
June 30, 1999
(Unaudited) *
--------------
Investment income: (Note 2)
Interest ........................................... $ 55,831
Dividends (net of withholding tax of $272) ......... 11,753
--------------
Total investment income ........................ 67,584
--------------
Expenses: (Note 2)
Investment management fees (Note 3) ................ 33,774
Custody fees ....................................... 388
Audit and legal fees ............................... 892
Directors' fees (Note 3) ........................... 2,994
--------------
38,048
Administration fees (Note 3):
Class A ........................................ 64
Class L ........................................ 64
Class Y ........................................ 40
Class S ........................................ 4,784
Service fees (Note 3):
Class A ........................................ 39
--------------
Total expenses ................................. 43,039
--------------
Net investment income .......................... 24,545
--------------
Realized and unrealized gain (loss):
Net realized gain on investment transactions ....... 181,169
Net change in unrealized appreciation (depreciation)
on investments ................................. 2,111,434
--------------
Net realized and unrealized gain ............... 2,292,603
--------------
Net increase in net assets resulting from
operations...................................... $ 2,317,148
==============
* For the period from May 3, 1999 (commencement of operations) through June
30, 1999.
The accompanying notes are an integral part of the financial statements.
97
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Growth Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Period ended
June 30, 1999
(Unaudited) *
-------------
Increase (Decrease) in Net Assets:
<S> <C>
Operations:
Net investment income ...................................... $ 24,545
Net realized gain on investment transactions ............... 181,169
Net change in unrealized appreciation (depreciation)
on investments ......................................... 2,111,434
-------------
Net increase in net assets resulting from operations ... 2,317,148
-------------
Net fund share transactions (Note 5):
Class A .................................................... 101,000
Class L .................................................... 101,340
Class Y .................................................... 101,000
Class S .................................................... 24,701,000
-------------
Increase in net assets from net fund share transactions 25,004,340
-------------
Total increase in net assets ............................... 27,321,488
Net assets:
Beginning of period ........................................ --
-------------
End of period (including undistributed net investment income
of $24,545) ............................................ $ 27,321,488
=============
</TABLE>
* For the period from May 3, 1999 (commencement of operations) through June
30, 1999.
The accompanying notes are an integral part of the financial statements.
98
<PAGE>
- --------------------------------------------------------------------------------
MassMutual Small Cap Growth Equity Fund - Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights (For a share outstanding throughout the period)
<TABLE>
<CAPTION>
Class A Class L Class Y Class S
------- ------- ------- -------
Period Period Period Period
ended 6/30/99 ended 6/30/99 ended 6/30/99 ended 6/30/99
(Unaudited)** (Unaudited)** (Unaudited)** (Unaudited)**
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
------------ ------------ ------------ ------------
Income (loss) from investment operations:
Net investment income 0.00 *** 0.00 *** 0.01 0.01
Net realized and unrealized gain (loss) on investments 0.92 0.92 0.92 0.92
------------ ------------ ------------ ------------
Total income (loss) from investment operations 0.92 0.92 0.93 0.93
------------ ------------ ------------ ------------
Net asset value, end of period $ 10.92 $ 10.92 $ 10.93 $ 10.93
============ ============ ============ ============
Total Return 9.30% 9.30% 9.30% 9.30%@
Ratios/Supplemental Data:
Net assets, end of period (000's) $ 111 $ 111 $ 111 $ 26,988
Net expenses to average daily net assets 1.60%* 1.35%* 1.20%* 1.0411%*
Net investment income to average daily net assets 0.00%* 0.25%* 0.40%* 0.60%*
Portfolio turnover rate 20% 20% 20% 20%
</TABLE>
* Annualized
** For the period from May 3, 1999 (commencement of operations) through June
30, 1999.
*** Net investment income is less than $0.01 per share.
@ Employee retirement benefit plans that invest plan assets in the Separate
Investment Accounts (SIAs) may be subject to certain charges as set forth
in their respective Plan Documents. Total return figures would be lower for
the periods presented if they reflected these charges.
The accompanying notes are an integral part of the financial statements.
99
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund -- Portfolio Manager Report
- --------------------------------------------------------------------------------
What are the investment objective and policies for the MassMutual International
Equity Fund?
The objective and policies of the Fund are to:
. achieve a high total rate of return over the long term
. invest in a diversified portfolio of foreign and domestic equity securities
. use dominant themes to guide investment decisions with respect to risks of
investing in foreign securities (economic, political and social influences
that are expected to dictate long-term growth trends)
How did the Fund perform during the past six months?
The Fund outperformed the return of its benchmark. For the six months ended June
30, 1999, the Fund's Class S shares had a total return of 6.68%, compared to the
3.97% return of the Morgan Stanley Europe, Australia, Far East Index (the
Index), a market capitalization-weighted, unmanaged index of over 1,000 foreign
stocks.
What factors affected the Fund's performance relative to the index?
Being overweighted in Latin America was a positive influence. The Mexican stock
market, for example, was up almost 50%, and Brazil also had a healthy gain
despite a devaluation in its currency early in the year. The Fund also had a
heavier weighting of European stocks than the Index did. Although this
overweighting hurt performance versus the Index--gains in European stocks were
largely offset by a decline in the euro against the U.S. dollar--the Fund was
helped by favorable stock selection in Europe. Less emphasis on Asia hurt the
Fund relative to the Index. Markets throughout Asia experienced strong rallies
as investors began to see signs that those economies might have bottomed.
Can you explain the changes you've made in the way you categorize the Fund's
investments?
We've reorganized our investment themes under four headings instead of the eight
we used previously. The themes we have now highlight the same types of
investments as before, and we want to stress that we haven't changed our
management style. We've just consolidated our categories a bit. The four themes,
and the approximate percentages of assets committed to them, are as follows: New
Technologies--40%, Mass Affluence--24%, Restructuring--20%, and Aging--12%.
These are simply four areas that we've identified as having long-term growth
potential. By combining a value-oriented approach to selecting individual stocks
with the growth prospects inherent in our investment themes, we believe we're
managing with a style that is likely to produce competitive returns over the
long run.
Which stocks did well for the Fund, and which were disappointing?
Nichii Gakkan is a Japanese company involved in healthcare information
processing and nursing services. The stock more than doubled on news of positive
changes in the company's reimbursement arrangements, as well as an acceleration
in plans to add capacity in the home health area. Unibanco, a high-quality
Brazilian bank, benefited from sharply falling interest rates and a recovering
stock market following the devaluation of the Brazilian currency in January.
Another stock that helped performance was Televisa, a Mexican holding that rose
in response to significant growth in the company's television advertising
revenues.
As a group, healthcare was disappointing, as were a lot of the Fund's small-cap
growth stocks. Both categories were hurt by the renewed focus on value stocks
that accompanied the worldwide rally in cyclical shares--that is, those that are
especially sensitive to economic fluctuations. Two examples of underperforming
small-cap stocks were Halma PLC, a UK specialty engineering company, and Roto
Smeets de Boer, Europe's largest contract printer. We still own both stocks
because we believe that the market has overlooked the value inherent in them.
100
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund -- Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
What is your outlook?
We continue to underweight Asia because we feel that many of the region's
long-term financial problems have not been adequately addressed. We therefore
believe that the strength in Asian stock markets is not justified by the basic
business prospects of most companies in the region.
On the other hand, the economic picture in Latin America is improving. Interest
rates are still falling, valuations are relatively modest, and corporate
managements are of a high caliber overall. Moreover, many Latin American stocks
are traded on the New York Stock Exchange and are therefore subject to the
Exchange's quarterly financial reporting requirements. That gives us a higher
degree of confidence in the accuracy of the results provided to us by those
companies.
Finally, we remain positive on Europe. Restructuring is taking place there at
both the macro level (through tax cuts and deregulation) and at the micro level
(through mergers and acquisitions, cost-cutting, investments in technology,
etc.). Those factors, together with a heightened global and regional competitive
ability due in part to the weak euro, should contribute to a favorable
environment for European stocks for the balance of the year.
--------------------------------------------
MassMutual International Equity Fund
Largest Country Weightings (6/30/99)
--------------------------------------------
% of Fund
United Kingdom 26.74%
France 14.16%
The Netherlands 12.75%
Japan 7.43%
Brazil 6.24%
Germany 4.67%
Switzerland 4.31%
Austria 4.28%
Italy 3.12%
Portugal 2.82%
101
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Portfolio Manager Report (Continued)
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
Hypothetical Investments in MassMutual International Equity Fund Class S and the
Morgan Stanley Capital International Index for Europe, Australia and the Far
East (MSCI EAFE)
- --------------------------------------------------------------------------------
MassMutual International Equity Fund
Total Return Year-to-Date One Year Average Annual
1/1/99-6/30/99 7/1/98-6/30/99 10/03/94-6/30/99
Class S 6.68% -4.97% 8.93%
- --------------------------------------------------------------------------------
MSCI EAFE
Index 3.97% 7.49% 8.63%
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
[LINE GRAPH APPEARS HERE]
Class S MSCI EAFE
------- ---------
10/3/94 10,000 10,000
12/94 9,280 9,898
6/95 9,510 10,155
12/95 9,756 11,008
6/96 10,734 11,504
12/96 11,562 11,672
6/97 13,476 12,981
12/97 13,388 11,880
6/98 15,788 13,772
12/98 14,064 14,255
6/99 15,004 14,821
Hypothetical Investments in MassMutual International Equity Fund Class A, Class
Y and the Morgan Stanley Capital International Index for Europe, Australia and
the Far East (MSCI EAFE)
- --------------------------------------------------------------------------------
MassMutual International Equity Fund
Total Return Year-to-Date One Year Average Annual
1/1/99-6/30/99 7/1/98-6/30/99 1/01/98-6/30/99
Class A 6.46% -5.49% 7.32%
Class Y 6.75% -5.00% 7.81%
- --------------------------------------------------------------------------------
MSCI EAFE
Index 3.97% 7.49% 15.89%
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
[LINE GRAPH APPEARS HERE]
Class A Class Y MSCI EAFE
------- ------- ---------
12/97 10,000 10,000 10,000
3/98 11,380 11,390 11,471
6/98 11,760 11,780 11,593
9/98 9,208 9,242 9,945
12/98 10,440 10,484 11,999
3/99 10,766 10,831 12,166
6/99 11,114 11,192 12,475
Hypothetical Investments in MassMutual International Equity Fund Class L
Y and the Morgan Stanley Capital International Index for Europe, Australia and
the Far East (MSCI EAFE)
Class L and 91-day Treasury Bills
- --------------------------------------------------------------------------------
MassMutual International Equity Fund
Total Return Since Inception
5/3/99-6/30/99
Class L 0.92%
- --------------------------------------------------------------------------------
MSCI EAFE
Index -1.45%
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
[LINE GRAPH APPEARS HERE]
Class L MSCI EAFE
------- ---------
5/3/99 10,000 10,000
5/31/99 9,692 9,485
6/30/99 10,092 9,855
Past performance is not predictive of future results. The investment return and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost. Investors should note that the Fund is a professionally managed
mutual fund, while the MSCI EAFE is unmanaged and does not incur expenses, and
cannot be purchased directly by investors.
102
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund - Portfolio of Investments
- --------------------------------------------------------------------------------
Portfolio of Investments (Unaudited)
June 30, 1999
Number of
Shares Market Value
------ ------------
EQUITIES -- 95.3%
Aerospace & Defense -- 0.3%
Aerospatiale Matra* 64,275 $ 1,481,468
Embraer - Empresa Brasileira de
Aeronautica SA 545,000 922,195
-------------
2,403,663
-------------
Autos & Housing -- 0.8%
Ducati Motor Holding SpA* 2,141,000 5,608,135
-------------
Banking -- 4.9%
Banco Espirito Santo e Comercial de
Lisboa, SA 232,000 5,397,596
Espirito Santo Financial Group, ++ 85,900 1,406,613
National Westminster Bank PLC 285,242 6,047,473
Societe Generale 40,000 7,049,780
Unibanco-Uniao de Banco Brasileiros SA,
Sponsored +++ 622,500 14,978,906
-------------
34,880,368
-------------
Computer Hardware -- 1.8%
Imagineer Co. Ltd. 205,000 1,795,329
Psion PLC 882,100 11,401,760
-------------
13,197,089
-------------
Computer Software/Services -- 7.5%
Cap Gemini SA 49,500 7,779,712
Computer Service Solutions Holding NV 235,000 3,368,415
Equant NV* 80,000 7,530,000
Getronics NV 184,125 7,082,644
Lernout & Hauspie Speech Products NV* 158,900 5,631,019
Misys PLC 1,365,790 11,690,206
Solution 6 Holdings Ltd.* 1,867,641 4,326,764
Unit 4* 316,300 6,246,577
-------------
53,655,337
-------------
Diversified Financial -- 1.9%
Julius Baer Holding AG, Cl. B 2,220 6,326,170
Singer & Friedlander Group PLC 3,133,400 7,062,997
-------------
13,389,167
-------------
Electric Utilities -- 0.4%
Cia Paranaense Energia, Sponsored++,
Preference B Shares 380,000 3,182,500
-------------
Electrical Equipment -- 0.9
Halma PLC 3,792,900 6,337,557
-------------
Electronics -- 4.5%
Sony Corporation 78,000 8,409,882
STMicroelectronics NV, NY Shares 348,600 24,184,125
-------------
32,594,007
-------------
Energy Services & Producers -- 1.3%
Coflexip SA, Sponsored ++ 210,000 9,135,000
-------------
Food & Beverage -- 2.0%
Allied Domecq PLC 811,900 7,832,399
Cadbury Schweppes PLC 1,000,000 6,368,300
-------------
14,200,699
-------------
Healthcare/Drugs -- 5.8%
Biocompatibles International PLC* 4,725,626 7,672,526
Eisai Co. Ltd. 497,000 9,793,335
Genset Sponsored ++* 289,000 4,515,625
Glaxo Wellcome PLC 238,848 6,637,634
Novartis AG 2,376 3,469,417
Oxford Molecular Group PLC* 1,153,000 854,258
PowderJect Pharmaceuticals PLC* 683,625 8,987,139
-------------
41,929,934
-------------
Healthcare/Supplies & Services -- 5.2%
Fresenius Medical Care AG Preference 198,000 7,146,711
Nichii Gakkan Company 89,500 9,760,718
Novogen Ltd.* 3,885,000 7,637,522
Ortivus AB, A Shares* 228,600 1,075,540
Ortivus AB, B Shares* 689,010 3,809,054
Pliva d.d., Sponsored++++ 548,550 8,159,188
-------------
37,588,733
-------------
Industrial Services -- 5.6%
Aegis Group PLC 5,891,400 13,001,142
Boskalis Westminster 516,752 7,780,528
Falck A/S* 36,000 2,878,278
ICTS International NV* 245,000 1,378,125
Securicor PLC 1,047,000 9,184,389
VBH Holding AG 352,000 5,808,141
-------------
40,030,603
-------------
Insurance -- 2.0%
Axa 56,500 6,892,972
Ceres, Inc., Preferred Callable Stocks 900,000 3,600,000
Ockham Holdings PLC 2,777,000 3,808,378
-------------
14,301,350
-------------
Leisure & Entertainment-- 5.4%
Granada Group PLC 551,882 10,239,122
Lusomundo SGPS SA* 588,400 8,179,701
Nintendo Co. Ltd. 44,400 6,239,821
Sony Music Entertainment (Japan), Inc. 44,000 3,744,334
Village Roadshow Ltd., Preference A Shares 7,035,000 10,523,657
-------------
38,926,635
-------------
Manufacturing -- 2.6%
Chargeurs International SA 63,600 3,541,801
Sauer, Inc. 200,000 2,050,000
Williams PLC 2,002,725 13,227,398
-------------
18,819,199
-------------
Media -- 8.6%
Canal Plus 52,300 14,675,861
Grupo Televisa SA, Sponsored +++* 318,200 14,259,338
ProSieben Media AG, Preferred 186,300 8,588,039
Reed International Plc 2,000,000 13,343,400
-------------
Roto Smeets de Boer 135,000 3,946,941
-------------
TeleWest Communications PLC* 1,527,555 6,850,473
-------------
61,664,052
-------------
Media -- 0.2
Telefonica Publicidad e Inforacion, SA* 84,500 1,686,206
-------------
(Continued)
The accompanying notes are an integral part of the financial statements.
103
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund -- Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
Number of
Shares Market Value
------ ------------
Manufacturing -- 1.8%
Sidel SA 105,000 $ 12,766,635
---------------
Non--Durable Household Goods -- 1.5%
Wella AG 2,000 1,293,216
Wella AG Preference 12,900 9,179,345
---------------
10,472,561
---------------
Oil & Gas -- 1.6%
Expro International Group PLC 1,175,000 6,260,283
Petroleo Brasileiro SA, Preference 33,233,000 5,117,882
---------------
11,378,165
---------------
Publishing & Printing -- 1.2%
Singapore Press Holdings Ltd. 519,700 8,852,622
---------------
Real Estate -- 1.3%
Brazil Realty SA, ++++ 176,000 2,193,858
IRSA Inversiones y Representaciones, SA 2,399,326 7,390,884
9,584,742
---------------
Retail: General -- 2.6%
Gucci Group NV 72,900 5,103,000
SkyePharma PLC* 9,875,700 7,784,027
Sonae Investimentos 169,000 5,747,927
---------------
18,634,954
---------------
Retail: Specialty -- 1.1%
Dixons Group PLC 438,645 8,193,538
---------------
Telecommunications -- 10.1%
Altran Technologies SA 110,500 29,172,641
Ascom Holding AG 3,840 7,657,325
Cable & Wireless Optus Limited* 3,000,000 6,831,000
Nippon Telegraph & Telephone Corp. 9,500 11,145,426
Sonera Group OYJ 415,550 9,085,170
Tandberg Television ASA* 785,000 8,077,101
---------------
71,968,663
---------------
Telephone Utilities -- 7.3%
ASM Lithography Holding NV* 154,300 8,926,934
COLT Telecom Group PLC* 293,000 6,147,316
Embratel Partipacoes SA 137,000 1,900,875
Energis PLC* 177,000 4,221,344
Tele Centro Oeste Celular Participacoes SA 45 177
Tele Centro Sul Participacoes SA 27,400 1,520,700
Tele Norte Leste Participacoes SA 137,000 2,543,063
Tele Sudeste Celular Participacoes SA 27,400 794,600
Telecom Italia Mobile SpA 605,000 3,612,516
Telecom Italia SPA, RNC shares* 1,300,000 7,051,850
Telecomunicacoes Brasileiras SA,
Sponsored ++ 137,000 8,563
Telefonica de Espana * 76,500 3,685,059
Telesp Celular Partcipacoes SA 54,800 1,465,900
Telesp Celular SA, Cl. B 68,680,000 3,564,492
Telesp Participacoes SA 137,000 3,133,875
Videsh Sanchar Nigam Ltd., +++ 401,300 4,229,582
---------------
52,806,846
---------------
Tobacco -- 1.7%
Compagnie Financiere Richemont AG, A Units 6,290 12,097,789
Transportation -- 3.2%
Internatio- Mueller NV 238,799 5,257,805
MIF Ltd.* 334,194 6,367,866
Smit Internationale NV 497,368 11,617,671
---------------
23,243,342
---------------
Water Companies -- 0.2%
CIA de Saneamento Basico do Estado
de Sao Paulo 17,304,800 $ 1,415,533
---------------
TOTAL EQUITIES 684,945,624
---------------
(Cost $653,345,777)
Prinicipal
Amount Market Value
------ ------------
SHORT-TERM INVESTMENTS -- 16.1%
Cash Equivalents -- 12.0%
Bank of Nova Scotia
Eurodollar Time Deposit**
5.500% 07/01/1999 6,000,00 $ 6,000,000
BankBoston
Eurodollar Time Deposit**
5.995% 10/29/1999 5,461,225 5,461,225
---------------
The Goldman Sachs Group,
L.P. Master Note**
4.900% 02/04/2000 35,000,000 35,000,000
Harris Trust & Savings
Bank Eurodollar Time Deposit**
5.875% 07/01/1999 2,000,000 2,000,000
Janus Money Market Fund** 31,000,000 31,000,000
Frank Russell Money Market Fund** 7,068,100 7,068,100
---------------
86,529,325
---------------
Commercial Paper -- 4.1%
Ford Motor Credit Corporation
4.950% 07/16/1999 5,000,000 4,989,688
General Electric Capital Corporation
5.700% 07/01/1999 9,400,000 9,400,000
Homeside Lending
5.040% 07/14/1999 5,000,000 4,990,900
Prudential Funding Corporation
5.010% 07/30/1999 5,000,000 4,979,821
Salomon Smith Barney Holdings
4.900% 07/08/1999 5,000,000 4,995,236
---------------
29,355,645
---------------
TOTAL SHORT-TERM 115,884,970
---------------
(At Amortized Cost)
TOTAL INVESTMENTS -- 111.4% 800,830,594
(Cost $769,230,747)***
Other Assets/(Liabilities) -- (11.4%) (82,039,162)
---------------
NET ASSETS -- 100.0%
$ 718,791,432
===============
Notes to Portfolio of Investments
***Aggregate cost for Federal tax purposes (Note 7)
*Non-income producing security.
++American Depository Receipt
+++Global Depository Receipt
+ Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
** Represents investment of security lending collateral. (Note 2).
The accompanying notes are an integral part of the financial statements.
104
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund -- Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
June 30, 1999
(Unaudited)
----------------
<S> <C>
Assets:
Investments, at value (cost $653,345,777) (Note 2) ................. $ 684,945,624
Short-term investments, at amortized cost (Note 2) ................. 115,884,970
--------------
Total Investments .............................................. 800,830,594
Cash ............................................................... 17,459
Foreign currency, at value (cost $1,885,067) ....................... 1,893,002
Receivables from:
Investments sold ............................................... 13,303,886
Open forward foreign currency contracts (Note 2) ............... 48,262
Fund shares sold ............................................... 1,388,285
Interest and dividends ......................................... 1,410,887
Foreign taxes withheld ......................................... 845,268
--------------
Total assets .............................................. 819,737,643
--------------
Liabilities:
Payables for:
Investments purchased .......................................... 11,363,802
Fund shares redeemed ........................................... 2,335,047
Securities on loan (Note 2) .................................... 86,529,325
Directors' fees and expenses (Note 3) .......................... 1,489
Affiliates (Note 3):
Investment management fees ................................ 541,266
Administration fees ....................................... 73,317
Service fees .............................................. 89
Accrued expenses and other liabilities ............................. 101,876
--------------
Total liabilities ......................................... 100,946,211
--------------
Net assets ......................................................... $ 718,791,432
==============
Net assets consist of:
Paid-in capital .................................................... $ 655,603,638
Undistributed net investment income ................................ 3,016,562
Accumulated net realized gain on investments and
foreign currency translations .................................. 28,625,628
Net unrealized appreciation on investments, forward foreign currency
contracts, foreign currency and other assets and liabilities ... 31,545,604
--------------
$ 718,791,432
==============
Net assets:
Class A ............................................................ $ 144,289
==============
Class L ............................................................ $ 103,462
==============
Class Y ............................................................ $ 999,879
==============
Class S ............................................................ $ 717,543,802
==============
Shares outstanding:
Class A ............................................................ 11,917
==============
Class L ............................................................ 8,540
==============
Class Y ............................................................ 82,432
==============
Class S ............................................................ 59,129,928
==============
Net asset value, offering price and redemption price per share:
Class A ............................................................ $ 12.11
==============
Class L ............................................................ $ 12.12
==============
Class Y ............................................................ $ 12.13
==============
Class S ............................................................ $ 12.14
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
105
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund -- Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Operations
Six months ended
June 30, 1999
(Unaudited)
--------------
<S> <C>
Investment income: (Note 2)
Dividends (net of withholding tax of $688,446) ................... $ 5,950,402
Interest (including securities lending income of $155,294) ....... 605,671
---------------
Total investment income .................................. 6,556,073
---------------
Expenses: (Note 2)
Investment management fees (Note 3) .............................. 2,883,632
Custody fees ..................................................... 326,205
Audit and legal fees ............................................. 8,195
Directors' fees (Note 3) ......................................... 8,298
--------------
3,226,330
Administration fees (Note 3):
Class A ...................................................... 286
Class L* ..................................................... 49
Class Y ...................................................... 605
Class S ...................................................... 305,091
Service fees (Note 3):
Class A ...................................................... 172
--------------
Total operating expenses ................................. 3,532,533
--------------
Interest Expense (Note 8) ........................................ 6,978
--------------
Net investment income .................................... 3,016,562
--------------
Realized and unrealized gain (loss) from investments and foreign currency:
Net realized gain (loss) on:
Investment transactions ...................................... 24,326,647
Foreign currency transactions ................................ (884,309)
--------------
Net realized gain ........................................ 23,442,338
--------------
Net change in unrealized appreciation (depreciation) on:
Investments .................................................. 18,724,222
Translation of assets and liabilities in foreign currencies .. (129,261)
--------------
Net unrealized gain ...................................... 18,594,961
--------------
Net realized and unrealized gain from investments
and foreign currency ................................... 42,037,299
--------------
Net increase in net assets resulting from operations .............. $ 45,053,861
===============
</TABLE>
*For the period from May 3, 1999 (commencement of operations) through
June 30,1999.
The accompanying notes are an integral part of the financial statements.
106
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund -- Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
Six months ended
June 30, 1999 Year ended
(Unaudited) December 31, 1998
-------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income ............................................. $ 3,016,562 $ 4,552,704
Net realized gain on investments and foreign currency transactions 23,442,338 65,598,162
Net change in unrealized appreciation (depreciation) on investments
and translation of assets and liabilities in foreign currencies 18,594,961 (47,978,299)
-------------- -----------------
Net increase in net assets resulting from operations .......... 45,053,861 22,172,567
-------------- -----------------
Distributions to shareholders (Note 2):
From net investment income:
Class A ........................................................... -- (1,652)
Class L* .......................................................... -- --
Class Y ........................................................... -- (6,174)
Class S ........................................................... -- (7,863,557)
-------------- -----------------
Total distributions from net investment income ................ -- (7,871,383)
-------------- -----------------
From net realized gains:
Class A ........................................................... -- (15,476)
Class L* .......................................................... -- --
Class Y ........................................................... -- (57,831)
Class S ........................................................... -- (73,650,942)
-------------- -----------------
Total distributions from net realized gains ................... -- (73,724,249)
-------------- -----------------
Net fund share transactions (Note 5):
Class 1** ......................................................... -- (128,942)
Class 2** ......................................................... -- (131,194)
Class 3** ......................................................... -- (132,039)
Class A ........................................................... 1,000 149,376
Class L* .......................................................... 102,480 --
Class Y ........................................................... 444,401 549,024
Class S ........................................................... 32,054,340 153,070,256
------------- -----------------
Increase in net assets from net fund share transactions ....... 32,602,221 153,376,481
------------- -----------------
Total increase in net assets ...................................... 77,656,082 93,953,416
Net assets:
Beginning of period ............................................... 641,135,350 547,181,934
-------------- -----------------
End of period (including undistributed net investment
income of $3,016,562 and $0, respectively) .................... $ 718,791,432 $ 641,135,350
=============== =================
</TABLE>
* For the period from May 3, 1999 (commencement of operations) through
June 30, 1999.
** Effective January 1, 1998, Class 1, Class 2, and Class 3 shares were
terminated (See Note 1).
The accompanying notes are an integral part of the financial statements.
107
<PAGE>
- --------------------------------------------------------------------------------
MassMutual International Equity Fund -- Financial Statements (Continued)
- --------------------------------------------------------------------------------
Financial Highlights (For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Class A Class L Class Y
------------------------- ------------ -------------------------
Six months Period Six months
ended 6/30/99 Year ended ended 6/30/99 ended 6/30/99 Year ended
(Unaudited) 12/31/98+ (Unaudited)** (Unaudited) 12/31/98+
----------- ---------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.37 $ 12.81 12.00 11.37 12.83
----------- ---------- ------------- ------------- ----------
Income (loss) from investment operations:
Net investment income 0.02 0.01*** 0.04 0.06*** 0.06***
Net realized and unrealized gain (loss) on investments
and foreign currency 0.72 0.53 0.08 0.70 0.55
----------- ---------- ------------- ------------- ----------
Total income (loss) from investment operations 0.74 0.54 0.12 0.76 0.61
----------- ---------- ------------- ------------- ----------
Less distributions to shareholders:
From net investment income -- (0.12) -- -- (0.21)
From net realized gains -- (1.86) -- -- (1.86)
----------- ---------- ------------- ------------- ----------
Total distributions -- (1.98) -- -- (2.07)
----------- ---------- ------------- ------------- ----------
Net asset value, end of period $ 12.11 $ 11.37 12.12 12.13 11.37
=========== ========== ============= ============= ==========
Total Return 6.46% 4.40% 0.92% 6.75% 4.84%
Ratios / Supplemental Data:
Net assets, end of period (000's) $ 144 $ 135 $ 103 $ 1,000 $ 503
Net expenses to average daily net assets 1.62%* 1.69% 1.29%* 1.12%* 1.23%
Net investment income to average daily net assets 0.31%* 0.10% 1.83%* 0.97%* 0.43%
Portfolio turnover rate 35% 80% 35% 35% 80%
</TABLE>
<TABLE>
<CAPTION>
Class S (1)
-----------
Six months
ended 6/30/99 Year ended Year ended Year ended Year ended Period ended
(Unaudited) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94****
------------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.37 $ 12.38 $ 11.11 $ 9.58 $ 9.28 $ 10.00
------------- ---------- ---------- ---------- ---------- ------------
Income (loss) from investment operations:
Net investment income 0.05 0.10 0.06 0.06 0.07 0.00
Net realized and unrealized gain (loss) on investments
and foreign currency 0.72 0.51 1.69 1.71 0.41 (0.72)
------------- ---------- ---------- ---------- ---------- ------------
Total income (loss) from investment operations 0.77 0.61 1.75 1.77 0.48 (0.72)
------------- ---------- ---------- ---------- ---------- ------------
Less distributions to shareholders:
From net investment income -- (0.17) (0.07) (0.24) (0.07) --
In excess of net investment income -- -- -- -- (0.11) --
From net realized gains -- (1.45) (0.41) -- -- --
------------- ---------- ---------- ---------- ---------- ------------
Total distributions -- (1.62) (0.48) (0.24) (0.18) --
------------- ---------- ---------- ---------- ---------- ------------
Net asset value, end of period $ 12.14 $ 11.37 $ 12.38 $ 11.11 $ 9.58 $ 9.28
============= ========== ========== ========== ========== ============
Total Return @ 6.68% 5.05% 15.79% 18.51% 5.13% (7.20)%
Ratios / Supplemental Data:
Net assets, end of period (000's) $717,544 $640,498 $546,790 $356,311 $220,718 $150,199
Net expenses to average daily net assets # 1.0412%* 1.0389% 1.0580% 1.0020% 1.0020% 1.0020%*
Net investment income to average daily net assets 0.89%* 0.73% 0.53% 0.59% 0.76% 0.04%*
Portfolio turnover rate 35% 80% 83% 58% 121% 18%
# Computed after giving effect to the voluntary partial waiver of
management fee by MassMutual, which terminated May 1, 1997. Without this
partial waiver of fees by MassMutual, the ratio of expenses
to average daily net assets would have been: N/A N/A 1.0684% 1.0718% 1.0920% 1.0877%*
</TABLE>
* Annualized
** For the period from May 3, 1999 (commencement of operations) through
June 30, 1999.
*** Per share amount calculated on the average shares method, which more
appropriately presents the per share data for the period since the use
of the undistributed income method does not accord with the results of
operations.
**** For the period from October 3, 1994 (commencement of operations)
through December 31, 1994.
+ Amounts have been restated to reflect reverse stock splits (See Note 9).
(1) Class S shares were previously designated as Class 4 shares.
@ Employee retirement benefit plans that invest plan assets in the
Separate Investment Accounts (SIAs) may be subject to certain charges
as set forth in their respective Plan Documents. Total return figures
would be lower for the periods presented if they reflected these
charges.
The accompanying notes are an integral part of the financial statements.
108
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. The Fund
MassMutual Institutional Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end, management
investment company. The Trust is organized under the laws of the Commonwealth of
Massachusetts as a Massachusetts business trust pursuant to an Agreement and
Declaration of Trust dated May 28, 1993, as amended. On October 3, 1994, the
following seven series of the Trust (each individually referred to as a "Fund"
or collectively as the "Funds") commenced operations: MassMutual Prime Fund
("Prime Fund"), MassMutual Short-Term Bond Fund ("Short-Term Bond Fund"),
MassMutual Core Bond Fund ("Core Bond Fund"), MassMutual Balanced Fund
("Balanced Fund"), MassMutual Core Equity Fund ("Core Equity Fund") formerly
known as MassMutual Value Equity Fund, MassMutual Small Cap Value Equity Fund
("Small Cap Value Equity Fund") and MassMutual International Equity Fund
("International Equity Fund"). On May 3, 1999, four new series of the Trust
commenced operations: MassMutual Diversified Bond Fund ("Diversified Bond
Fund"), MassMutual Growth Equity Fund ("Growth Equity Fund"), MassMutual Mid Cap
Growth Equity Fund ("Mid Cap Growth Equity Fund") and MassMutual Small Cap
Growth Equity Fund ("Small Cap Growth Equity Fund"). Additionally, MassMutual
Indexed Equity Fund ("Indexed Equity Fund") commenced operations March 1, 1998.
Separate financial statements are prepared for the Indexed Equity Fund, which
has a February 28 fiscal year end.
During the reporting period, each Fund had four classes of shares: Class A,
Class Y, Class S, and Class L. Class L shares began operations May 3, 1999.
Class A and Y shares began operations and Class 4 shares of the Funds were
redesignated as Class S shares effective January 1, 1998. The Class 1, Class 2,
and Class 3 shares were subsequently terminated by the Board of Trustees
("Trustees"). The principal economic difference among the Classes is the level
of service and administration fees borne by the Classes. The classes of shares
are offered to different types of investors, as outlined in each Funds'
Prospectus.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed
consistently by each Fund in the preparation of the financial statements in
conformity with generally accepted accounting principles. The preparation of the
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Investment Valuation
Equity securities are valued on the basis of valuations furnished by a pricing
service, authorized by the Trustees, which provides the last reported sale price
for securities listed on a national securities exchange or on the NASDAQ
National Market System, or in the case of over-the-counter securities not so
listed, the last reported bid price. Debt securities (other than short-term
obligations with a remaining maturity of sixty days or less) are valued on the
basis of valuations furnished by a pricing service, authorized by the Trustees,
which determines valuations taking into account appropriate factors such as
institutionalsize trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data. Money market obligations with a remaining maturity of sixty days or less
are valued at either amortized cost or at original cost plus accrued interest,
whichever approximates current market value. All other securities and other
assets, including debt securities for which the prices supplied by a pricing
agent are deemed by MassMutual not to be representative of market values,
including restricted securities and securities for which no market quotation is
available, are valued at fair value in accordance with procedures approved by
and determined in good faith by the Trustees, although the actual calculation
may be done by others.
Portfolio securities traded on more than one national securities exchange are
valued at the last price on the business day as of which such value is being
determined at the close of the exchange representing the principal market for
such securities. All assets and liabilities expressed in foreign currencies will
be converted into U.S. dollars at the mean between the buying and selling rates
of such currencies against U.S. dollars last quoted by any major bank. If such
quotations are not available, the rate of exchange will be determined in
accordance with policies established by the Trustees.
109
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
Securities Lending
Each Fund may lend its securities to qualified brokers. The loans are
collateralized at all times with cash or securities with a market value at least
equal to 102% of the market value of the securities on loan. As with other
extensions of credit, the Funds may bear the risk of delay in recovery or even
loss of rights in the collateral should the borrower of the securities fail
financially. The Funds receive compensation for lending their securities. At
June 30, 1999, the Funds loaned securities having the following market values,
collateralized by cash, which were invested in short-term instruments in the
following amounts:
Securities Collateral
on loan
Core Bond $108,712,145 $111,254,375
Balanced 52,633,046 54,147,241
Core Equity 122,388,701 125,868,456
Small Cap Value Equity 12,543,269 13,164,900
International Equity 82,073,640 86,529,325
Accounting for Investments
Investment transactions are accounted for on the trade date. Realized gains and
losses on sales of investments and unrealized appreciation and depreciation of
investments are computed on the specific identification cost method. Interest
income, adjusted for amortization of discounts and premiums on investments, is
earned from the settlement date and is recorded on the accrual basis. Dividend
income is recorded on the ex-dividend date.
Federal Income Tax
It is each Fund's intent to continue to comply with the provisions of subchapter
M of the Internal Revenue Code of 1986, as amended (the "Code"), applicable to a
regulated investment company. Under such provisions, the Funds will not be
subject to federal income taxes on their ordinary income and net realized
capital gain to the extent they are distributed or deemed to have been
distributed to their shareholders. Therefore, no Federal income tax provision is
required.
Dividends and Distributions to Shareholders
Dividends from net investment income and distributions of any net realized
capital gains of each Fund are declared and paid annually and at other times as
may be required to satisfy tax or regulatory requirements. Distributions to
shareholders are recorded on the ex-dividend date. Income and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to investments in forward contracts, passive foreign investment
companies, the deferral of wash sale losses, and paydowns on certain mortgage-
backed securities. As a result, net investment income and net realized gain on
investment transactions for a reporting period may differ significantly from
distributions during such period. Accordingly, the Funds may periodically make
reclassifications among certain of their capital accounts without impacting the
net asset value of the Funds.
Foreign Currency Translation
The books and records of the Funds are maintained in U.S. dollars. The market
values of foreign currencies, foreign securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
at the mean of the buying and selling rates of such currencies against the U.S.
dollar at the end of each business day. Purchases and sales of foreign
securities and income and expense items are translated at the rates of exchange
prevailing on the respective dates of such transactions. The Funds do not
isolate that portion of the results of operations arising from changes in the
exchange rates from that portion arising from changes in the market prices of
securities.
Net realized foreign currency gains and losses resulting from changes in
exchange rates include foreign currency gains and losses between trade date and
settlement date on investment securities transactions, foreign currency
transactions and the difference between the amounts of dividends recorded on the
books of the Funds and the amount actually received.
110
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
Forward Foreign Currency Contracts
Each Fund may enter into forward foreign currency contracts in order to convert
foreign denominated securities or obligations to U.S. dollar denominated
investments. The International Equity Fund may engage in such transactions to
manage the value of portfolio holdings against future movements in certain
foreign currency exchange rates. A forward foreign currency contract is an
agreement between two parties to buy and sell a currency at a set price on a
future date. The market value of a forward currency contract fluctuates with
changes in forward foreign currency exchange rates. Forward foreign currency
contracts are marked to market daily and the change in their value is recorded
by the Funds as an unrealized gain or loss. When a forward foreign currency
contract is extinguished, through delivery or offset by entering into another
forward foreign currency contract, the Funds record a realized gain or loss
equal to the difference between the value of the contract at the time it was
opened and the value of the contract at the time it was extinguished or offset.
Forward foreign currency contracts involve a risk of loss from the potential
inability of counterparties to meet the terms of their contracts and from
unanticipated movements in foreign currency values and interest rates.
The notional or contractual amounts of these instruments represent the
investments the Funds have in particular classes of financial instruments and do
not necessarily represent the amounts potentially subject to risk. The
measurement of the risk associated with these instruments is meaningful only
when all related and offsetting transactions are considered. A summary of the
obligations for the International Equity Fund under these financial instruments
at June 30, 1999 is as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
In
Contracts Exchange Unrealized
Settlement to Units of for U.S. Contracts at Appreciation
Date Deliver/Receive Currency Dollars Value (Depreciation)
BUYS
<S> <C> <C> <C> <C> <C>
07/01/99 Euro 4,654,563 $ 4,827,712 $ 4,799,785 $ (27,927)
07/01/99 Japanese Yen 100,592,828 832,171 831,097 (1,074)
-----------
$ (29,001)
SELLS
07/01/99 Great British Pound 1,458,720 2,316,885 2,299,380 17,505
07/02/99 Great British Pound 1,669,445 2,642,397 2,631,546 10,851
07/30/99 Euro 391,718 410,912 403,940 6,972
----------
$ 77,263
- ----------------------------------------------------------------------------------------------
</TABLE>
Forward Commitments
Each Fund may purchase or sell securities on a "when issued" or delayed delivery
or on a forward commitment basis. The Funds use forward commitments to manage
interest rate exposure or as a temporary substitute for purchasing or selling
particular debt securities. Delivery and payment for securities purchased on a
forward commitment basis can take place a month or more after the date of the
transaction. The Funds instruct the custodian to segregate assets in a separate
account with a current market value at least equal to the amount of its forward
purchase commitments. The price of the underlying security and the date when the
securities will be delivered and paid for are fixed at the time the transaction
is negotiated. The value of the forward commitment is determined by management
using a commonly accepted pricing model and fluctuates based upon changes in the
value of the underlying security and market repurchase rates. Such rates equate
the counterparty's cost to purchase and finance the underlying security to the
earnings received on the security and forward delivery proceeds. The Funds
record on a daily basis the unrealized appreciation/depreciation based upon
changes in the value of the forward commitment. When a forward commitment
contract is closed, the Funds record a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value of the contract at the time it was extinguished. Forward commitments
involve a risk of loss if the value of the
111
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
security to be purchased declines prior to the settlement date. The Funds could
also be exposed to loss if they cannot close out their forward commitments
because of an illiquid secondary market, or the inability of counterparties to
perform. The Funds monitor exposure to ensure counterparties are creditworthy
and concentration of exposure is minimized. A summary of open obligations under
these forward commitments at June 30, 1999 is as follows.
<TABLE>
<CAPTION>
Forward Expiration Aggregate
Commitment of Face Value Market Unrealized
Contracts to buy Contracts of Contracts Cost Value (Depreciation)
- ------------------ ------------ -------------- ---------- ---------- ----------------
Balanced Fund
GNMA
<S> <C> <C> <C> <C> <C>
6.5% 7/31/1999 July 1999 $4,000,000 $3,920,313 $3,846,880 $(73,433)
- ----------------------------------------------------------------------------------------------
</TABLE>
Allocation of Operating Activity
In maintaining the records for the Funds, the income and expense accounts are
allocated to each class of shares. Investment income, unrealized and realized
gains or losses are prorated among the classes of shares based on the relative
net assets of each. Expenses are allocated to each class of shares depending on
the nature of the expenditures. Administration and service fees, which are
directly attributable to a class of shares, are charged to that class'
operations. Expenses of the Fund not directly attributable to the operations of
any class of shares or Fund are prorated among the Funds and classes to which
the expense relates based on the relative net assets of each.
3. Management Fees and Other Transactions With Affiliates
Investment Management Fees
Under an agreement between the Trust and MassMutual, MassMutual is responsible
for providing investment management for each Fund. In return for this service,
MassMutual receives advisory fees monthly based upon each Fund's average daily
net assets at the following annual rates:
Prime Fund .35%
Short-Term Bond Fund .40%
Core Bond Fund .48%
Diversified Bond .50%
Balanced Fund .48%
Core Equity Fund .50%
Growth Equity .68%
Small Cap Value Equity Fund .58%
Mid Cap Growth Equity .70%
Small Cap Growth Equity .82%
International Equity Fund .85%
Prior to May 3, 1999, MassMutual received advisory fees based upon each Fund's
average daily net assets at the following annual rates: .45% for Prime Fund,
Short-Term Bond Fund, Core Bond Fund, Balanced Fund, and Core Equity Fund, .55%
for Small Cap Value Equity Fund, and .85% for International Equity Fund.
MassMutual has entered into investment sub-advisory agreements with two of its
subsidiaries: David L. Babson and Company, Inc. ("Babson") and HarbourView Asset
Management Corporation ("HarbourView"). These agreements provide that (1) Babson
manage the investment and reinvestment of the assets of the Core Equity Fund,
the Small Cap Value Equity Fund and the Core Equity segment of the Balanced
Fund, and (2) HarbourView manage the investment and reinvestment of the assets
of the International Equity Fund.
112
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
MassMutual pays Babson a fee equal to an annual rate of .13% of the average
daily net asset value of the Core Equity Fund and the Core Equity segment of the
Balanced Fund and .25% of the average daily net asset value of the Small Cap
Value Equity Fund. MassMutual pays HarbourView a fee equal to an annual rate of
.50% of the average daily net asset value of the International Equity Fund.
MassMutual has also entered into investment sub-advisory agreements with
Massachusetts Financial Services Company ("MFS"), Miller Anderson & Sherrerd,
LLP ("MAS"), J.P. Morgan Investment Management, Inc. ("J.P. Morgan"), and
Waddell & Reed Investment Management Company ("Waddell & Reed"). These
agreements, respectively, provide that (1) MFS manage the investment and
reinvestment of the assets of the Growth Equity Fund, (2) MAS manage the
investment and reinvestment of the assets of the Mid Cap Growth Equity Fund, and
(3) J.P. Morgan and Waddell & Reed each manage the investment and reinvestment
of a portion of the assets of the Small Cap Growth Equity Fund. Initially, J.P.
Morgan and Waddell & Reed will be allocated its portion of the Fund's net assets
based on cash flow received by the Fund. Annually, the Fund's portfolio will be
re-balanced so that each sub-adviser's allocation is 50% of net assets.
MassMutual pays MFS, MAS, J.P. Morgan, and Waddell & Reed a sub-advisory fee
based upon (1) the average daily net assets of the specified Fund plus (2) the
average daily net assets of all other funds or accounts of MassMutual or its
affiliates for which the sub-advisor provides sub-advisory services.
MassMutual pays MFS a fee equal to an annual rate of .40% of the first
$300,000,000, .37% of the next $300,000,000, .35% of the next $300,000,000, .32%
of the next $600,000,000, and .25% of assets over $1.5 billion. MFS also
provides investment sub-advisory services for MML Growth Equity Fund, a series
of MML Series Investment Fund, an open-end investment company for which
MassMutual acts as investment manager.
MassMutual pays MAS a fee equal to an annual rate of .55% of the first
$150,000,000 and .50% of assets over $150,000,000.
MassMutual pays J.P. Morgan a fee equal to an annual rate of .60% of the first
$200,000,000 and .50% of assets over $200,000,000. J.P. Morgan also provides
investment sub-advisory services for MML Small Cap Growth Equity Fund, a series
of MML Series Investment Fund, an open-end investment company for which
MassMutual acts as investment manager.
MassMutual pays Waddell & Reed a fee equal to an annual rate of .75% of the
first $100,000,000 and .70% of assets over $100,000,000. Waddell & Reed also
provides investment sub-advisory services for MML Small Cap Growth Equity Fund,
a series of MML Series Investment Fund, an open-end investment company for which
MassMutual acts as investment manager.
Administration Fees
Under separate administrative and shareholder services agreements between each
Fund and MassMutual, MassMutual provides certain administrative and shareholder
services and bears some class specific administrative expenses. In return for
these services, MassMutual receives an administrative services fee monthly based
upon the average daily net assets of the applicable class of shares of the Fund
at the following annual rates:
<TABLE>
<CAPTION>
Class A Class L Class Y Class S
------- ------- ------- -------
<S> <C> <C> <C> <C>
Prime Fund 0.3323% 0.3323% 0.1823% 0.0823%
Short-Term Bond Fund 0.3167% 0.3167% 0.1667% 0.1167%
Core Bond Fund 0.2932% 0.2932% 0.1432% 0.0932%
Diversified Bond Fund 0.3232% 0.3232% 0.1732% 0.1232%
Balanced Fund 0.3952% 0.3952% 0.2452% 0.0852%
Core Equity Fund 0.3175% 0.3175% 0.1675% 0.0675%
Growth Equity Fund 0.2975% 0.2975% 0.1475% 0.0875%
Small Cap Value Equity Fund 0.3345% 0.3345% 0.1845% 0.0845%
Mid Cap Growth Equity Fund 0.3075% 0.3075% 0.1575% 0.0875%
Small Cap Growth Equity Fund 0.4075% 0.4075% 0.2575% 0.1175%
International Equity Fund 0.2952% 0.2952% 0.1452% 0.1152%
</TABLE>
113
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
Prior to May 3, 1999, MassMutual received an administrative services fee at the
following annual rates:
Class A Class Y Class S
------- ------- -------
Prime Fund .4823% .0823% .0777%
Short-Term Bond Fund .4767% .1767% .0777%
Core Bond Fund .4832% .1832% .0777%
Balanced Fund .4852% .2852% .0777%
Core Equity Fund .4875% .2875% .0777%
Small Cap Value Equity Fund .4845% .2845% .0777%
International Equity Fund .4752% .1752% .0774%
Prior to December 1, 1998, the administrative services fee for Class Y shares of
the MassMutual Prime Fund, Short Term-Bond Fund, Core Bond Fund and
International Equity Fund was .2823%, .2767%, .2832% and .2752% respectively.
Service Fees
MML Distributors, LLC (the "Distributor") acts as distributor to each Fund.
Pursuant to separate Rule 12b-1 Plans adopted by the Funds, Class A shares of
each Fund pay a fee of .25% to (i) the Distributor for services provided and
expenses incurred by it connection with the distribution of Class A shares of
the Fund and (ii) MassMutual for services provided and expenses incurred by it
for purposes of maintaining or providing personal services 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. The servicing fee may be spent by MassMutual on personal
services rendered to Class A shareholders of a Fund and/or maintenance of Class
A shareholder accounts. The Distributor is a majority-owned subsidiary of
MassMutual.
Other
Certain officers and trustees of the Trust are also officers of MassMutual. The
compensation of unaffiliated directors of the Trust is borne by the Funds.
At June 30, 1999, MassMutual or separate investment accounts thereof owned
98.19% of the outstanding shares of the Trust.
4. Purchases And Sales Of Investments
Cost of purchases and proceeds from sales of investment securities (excluding
short-term investments) for the Investments six months ended June 30, 1999
were as follows:
<TABLE>
<CAPTION>
Long-Term U.S.
Government Other Long-Term
Purchases Securities Securities
------------- ---------------
<S> <C> <C>
Short-Term Bond Fund $ 75,555,140 $ 28,460,867
Core Bond Fund 123,562,578 79,364,400
Diversified Bond Fund 11,300,820 16,666,567
Balanced Fund 32,193,781 37,625,416
Core Equity Fund -- 119,668,983
Growth Equity Fund -- 29,485,433
Small Cap Value Equity Fund -- 117,216,437
Mid Cap Growth Equity Fund -- 29,278,158
Small Cap Growth Equity Fund -- 23,469,992
International Equity Fund -- 241,844,949
Sales
Short-Term Bond Fund $ 64,448,293 $ 12,231,171
Core Bond Fund 127,858,919 69,259,507
Diversified Bond Fund -- 5,947,159
Balanced Fund 12,455,750 26,716,537
Core Equity Fund -- 345,737,442
Growth Equity Fund -- 5,916,787
Small Cap Value Equity Fund -- 78,582,405
Mid Cap Growth Equity Fund -- 5,156,684
Small Cap Growth Equity Fund -- 4,207,585
International Equity Fund -- 231,575,085
</TABLE>
114
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
5. Capital Share The Funds are authorized to issue an unlimited number of
Transactions shares, with no par value in each class of shares.
Changes in shares outstanding for each Fund are as
follows:
<TABLE>
<CAPTION>
Class 1 Class 2 Class 3
Year ended Year ended Year ended
December 31, 1998 December 31, 1998 December 31, 1998
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Prime Fund
----------
Sold -- -- -- -- -- --
Issued as reinvestment of dividends -- -- -- -- -- --
Redeemed (758) $(114,315) (770) $(116,323) (777) $(117,416)
---------- ----------- ----------- ----------- ----------- -----------
Net increase (758) $(114,315) (770) $(116,323) (777) $(117,416)
========== =========== =========== =========== =========== ===========
Short-Term Bond Fund
--------------------
Sold -- -- -- -- -- --
Issued as reinvestment of dividends -- -- -- -- -- --
Redeemed (11,916) (122,436) (12,115) (124,585) (12,213) (125,819)
---------- ----------- ----------- ----------- ----------- -----------
Net increase (11,916) $(122,436) (12,115) $(124,585) (12,213) $(125,819)
========== =========== =========== =========== =========== ===========
Core Bond Fund
--------------
Sold -- -- -- -- -- --
Issued as reinvestment of dividends -- -- -- -- -- --
Redeemed (12,073) (131,171) (12,265) (133,481) (12,379) (134,838)
---------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) (12,073) $(131,171) (12,265) $(133,481) (12,379) $(134,838)
========== =========== =========== =========== =========== ===========
Diversified Bond Fund
---------------------
Sold -- -- -- -- -- --
Issued as reinvestment of dividends -- -- -- -- -- --
Redeemed -- -- -- -- -- --
---------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) -- $ -- -- $ -- -- $ --
========== =========== =========== =========== =========== ===========
Balanced Fund
-------------
Sold -- -- -- -- -- --
Issued as reinvestment of dividends -- -- -- -- -- --
Redeemed (11,560) (156,975) (11,735) (159,724) (11,820) (161,227)
---------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) (11,560) $(156,975) (11,735) $(159,724) (11,820) $(161,227)
========== =========== =========== =========== =========== ===========
Core Equity Fund
----------------
Sold -- -- -- -- -- --
Issued as reinvestment of dividends -- -- -- -- -- --
Redeemed (11,555) (196,012) (11,719) (199,451) (11,813) (201,310)
---------- ----------- ----------- ----------- ----------- -----------
Net increase (11,555) $(196,012) (11,719) $(199,451) (11,813) $(201,310)
========== =========== =========== =========== =========== ===========
Growth Equity Fund
------------------
Sold -- -- -- -- -- --
Issued as reinvestment of dividends -- -- -- -- -- --
Redeemed -- -- -- -- -- --
---------- ----------- ----------- ----------- ----------- -----------
Net increase -- $ -- -- $ -- -- $ --
========== =========== =========== =========== =========== ===========
Small Cap Value Equity Fund
---------------------------
Sold -- -- -- -- -- --
Issued as reinvestment of dividends -- -- -- -- -- --
Redeemed (11,677) (192,471) (11,809) (195,879) (11,922) (198,007)
---------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) (11,677) $(192,471) (11,809) $(195,879) (11,922) $(198,007
========== =========== =========== =========== =========== ===========
Mid Cap Growth Equity Fund
--------------------------
Sold -- -- -- -- -- --
Issued as reinvestment of dividends -- -- -- -- -- --
Redeemed -- -- -- -- -- --
---------- ----------- ----------- ----------- ----------- -----------
Net increase -- $ -- -- $ -- -- $ --
========== =========== =========== =========== =========== ===========
Small Cap Growth Equity Fund
----------------------------
Sold -- -- -- -- -- --
Issued as reinvestment of dividends -- -- -- -- -- --
Redeemed -- -- -- -- -- --
---------- ----------- ----------- ----------- ----------- -----------
Net increase -- $ -- -- $ -- -- $ --
========== =========== =========== =========== =========== ===========
International Equity Fund
-------------------------
Sold -- -- -- -- -- --
Issued as reinvestment of dividends -- -- -- -- -- --
Redeemed (10,526) (128,942) (10,635) (131,194) (10,680) (132,039)
---------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) (10,526) $(128,942) (10,635) $(131,194) (10,680) $(132,039)
========== =========== =========== =========== =========== ===========
</TABLE>
115
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class L
Six months ended Year ended Six months ended
June 30, 1999 December 31, 1998 June 30, 1999
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Prime Fund
----------
Sold 7 $ 1,000 165 $114,317 660 $101,020
Issued as reinvestment of dividends -- -- 629 94,657 -- --
Redeemed -- -- -- -- -- --
--------- ---------- --------- ---------- --------- ----------
Net increase (decrease) 7 $ 1,000 794 $208,974 660 $101,020
========= ========== ========= ========== ========= ==========
Short-Term Bond Fund
--------------------
Sold 97 1,000 11,943 122,436 9,783 101,940
Issued as reinvestment of dividends -- -- 598 6,169 -- --
Redeemed -- -- -- -- -- --
--------- ---------- --------- ---------- --------- ----------
Net increase 97 $ 1,000 12,541 $128,605 9,783 $101,940
========= ========== ========= ========== ========= ==========
Core Bond Fund
--------------
Sold 91 1,000 12,081 131,171 9,315 102,180
Issued as reinvestment of dividends -- -- 693 7,660 -- --
Redeemed -- -- -- -- -- --
--------- ---------- --------- ---------- --------- ----------
Net increase 91 $ 1,000 12,774 $138,831 9,315 $102,180
========= ========== ========= ========== ========= ==========
Diversified Bond Fund
---------------------
Sold 10,100 101,000 -- -- 10,100 101,000
Issued as reinvestment of dividends -- -- -- -- -- --
Redeemed -- -- -- -- -- --
--------- ---------- --------- ---------- --------- ----------
Net increase 10,100 $101,000 -- $ -- 10,100 $101,000
========= ========== ========= ========== ========= ==========
Balanced Fund
-------------
Sold 69 1,000 11,185 156,981 6,908 101,000
Issued as reinvestment of dividends -- -- 1,280 18,167 -- --
Redeemed -- -- -- -- -- --
--------- ---------- --------- ---------- --------- ----------
Net increase 69 $ 1,000 12,465 $175,148 6,908 $101,000
========= ========== ========= ========== ========= ==========
Core Equity Fund
----------------
Sold 52 1,000 10,877 195,979 5,268 102,000
Issued as reinvestment of dividends -- -- 1,477 26,911 -- --
Redeemed -- -- -- -- -- --
--------- ---------- --------- ---------- --------- ----------
Net increase 52 $ 1,000 12,354 $222,890 5,268 $102,000
========= ========== ========= ========== ========= ==========
Growth Equity Fund
------------------
Sold 10,100 101,000 -- -- 10,152 101,520
Issued as reinvestment of dividends -- -- -- -- -- --
Redeemed -- -- -- -- -- --
--------- ---------- --------- ---------- --------- ----------
Net increase 10,100 $101,000 -- $ -- 10,152 $101,520
========= ========== ========= ========== ========= ==========
Small Cap Value Equity Fund
---------------------------
Sold 74 1,000 11,008 192,471 7,451 101,780
Issued as reinvestment of dividends -- -- 1,356 18,512 -- --
Redeemed -- -- -- -- -- --
--------- ---------- --------- ---------- --------- ----------
Net increase 74 $ 1,000 12,364 $210,983 7,451 $101,780
========= ========== ========= ========== ========= ==========
Mid Cap Growth Equity Fund
--------------------------
Sold 10,100 101,000 -- -- 10,102 101,120
Issued as reinvestment of dividends -- -- -- -- -- --
Redeemed -- -- -- -- -- --
--------- ---------- --------- ---------- --------- ----------
Net increase 10,100 $101,000 -- $ -- 10,102 $101,120
========= ========== ========= ========== ========= ==========
Small Cap Growth Equity Fund
----------------------------
Sold 10,160 101,000 -- -- 10,195 101,340
Issued as reinvestment of dividends -- -- -- -- -- --
Redeemed -- -- -- -- -- --
--------- ---------- --------- ---------- --------- ----------
Net increase 10,160 $101,000 -- $ -- 10,195 $101,340
========= ========== ========= ========== ========= ==========
International Equity Fund
-------------------------
Sold 83 1,000 10,066 128,943 8,540 102,480
Issued as reinvestment of dividends -- -- 1,768 20,433 -- --
Redeemed -- -- -- -- -- --
--------- ---------- --------- ---------- --------- ----------
Net increase 83 $ 1,000 11,834 $149,376 8,540 $102,480
========= ========== ========= ========== ========= ==========
</TABLE>
116
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class Y
Six months ended Year ended
June 30, 1999 December 31, 1998
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Prime Fund
----------
Sold 153,891 $ 22,929,990 3,752 $ 2,693,260
Issued as reinvestment of dividends -- -- 2,924 440,359
Redeemed (144,760) (21,531,978) (2,987) (2,160,066)
---------- ------------- ---------- -------------
Net increase (decrease) 9,131 $ 1,398,012 3,689 $ 973,553
========== ============= ========== =============
Short-Term Bond Fund
--------------------
Sold 2,338 24,285 24,718 253,405
Issued as reinvestment of dividends -- -- 1,355 13,960
Redeemed (11,657) (121,715) -- --
---------- ------------- ---------- -------------
Net increase (9,319) $ (97,430) 26,073 $ 267,365
========== ============= ========== =============
Core Bond Fund
--------------
Sold 78,141 854,383 34,044 376,986
Issued as reinvestment of dividends -- -- 2,137 23,662
Redeemed (12,144) (132,891) -- --
---------- ------------- ---------- -------------
Net increase 65,997 $ 721,492 36,181 $ 400,648
========== ============= ========== =============
Diversified Bond Fund
---------------------
Sold 10,100 101,000 -- --
Issued as reinvestment of dividends -- -- -- --
Redeemed -- -- -- --
---------- ------------- ---------- -------------
Net increase 10,100 $ 101,000 -- $ --
========== ============= ========== =============
Balanced Fund
-------------
Sold 4,213,335 58,924,701 66,553 998,046
Issued as reinvestment of dividends -- -- 7,477 106,178
Redeemed (8,654) (126,621) -- --
---------- ------------- ---------- -------------
Net increase 4,204,681 $ 58,798,080 74,030 $ 1,104,224
========== ============= ========== =============
Core Equity Fund
----------------
Sold 77,174 1,487,686 36,358 680,054
Issued as reinvestment of dividends -- -- 4,711 86,146
Redeemed (7,055) (136,354) (76) (1,406)
---------- ------------- ---------- -------------
Net increase 70,119 $ 1,351,332 40,993 $ 764,794
========== ============= ========== =============
Growth Equity Fund
------------------
Sold 10,100 101,000 -- --
Issued as reinvestment of dividends -- -- -- --
Redeemed -- -- -- --
---------- ------------- ---------- -------------
Net increase 10,100 $ 101,000 -- $ --
========== ============= ========== =============
Small Cap Value Equity Fund
---------------------------
Sold 30,819 401,058 35,834 592,343
Issued as reinvestment of dividends -- -- 4,565 62,162
Redeemed (14,908) (206,373) -- --
---------- ------------- ---------- -------------
Net increase 15,911 $ 194,685 40,399 $ 654,505
========== ============= ========== =============
Mid Cap Growth Equity Fund
--------------------------
Sold 10,100 101,000 -- --
Issued as reinvestment of dividends -- -- -- --
Redeemed -- -- -- --
---------- ------------- ---------- -------------
Net increase 10,100 $ 101,000 -- $ --
========== ============= ========== =============
Small Cap Growth Equity Fund
----------------------------
Sold 10,160 101,000 -- --
Issued as reinvestment of dividends -- -- -- --
Redeemed -- -- -- --
---------- ------------- ---------- -------------
Net increase 10,160 $ 101,000 -- $ --
========== ============= ========== =============
International Equity Fund
-------------------------
Sold 52,035 610,181 38,055 478,075
Issued as reinvestment of dividends -- -- 6,192 70,949
Redeemed (13,850) (165,780) -- --
---------- ------------- ---------- -------------
Net increase 38,185 $ 444,401 44,247 $ 549,024
========== ============= ========== =============
</TABLE>
117
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class S
Six months ended Year ended
June 30, 1999 December 31, 1998
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Prime Fund
----------
Sold 3,286,786 $ 501,763,683 4,115,282 $ 638,299,753
Issued as reinvestment of dividends -- -- 84,589 12,743,282
Redeemed (3,162,877) (482,206,398) (4,129,942) (641,242,129)
------------- --------------- ------------- ---------------
Net increase (decrease) 123,909 $ 19,557,285 69,929 $ 9,800,906
============= =============== ============= ===============
Short-Term Bond Fund
--------------------
Sold 2,891,193 30,016,928 17,247,226 181,488,648
Issued as reinvestment of dividends -- -- 1,435,196 14,781,099
Redeemed (8,181,663) (85,057,967) (10,729,747) (113,935,929)
------------- --------------- ------------- ---------------
Net increase (5,290,470) $ (55,041,039) 7,952,675 $ 82,333,818
============= =============== ============= ===============
Core Bond Fund
--------------
Sold 15,058,722 164,313,384 38,073,055 432,227,434
Issued as reinvestment of dividends -- -- 3,534,486 39,029,032
Redeemed (19,654,625) (215,584,514) (19,631,777) (221,930,815)
------------- --------------- ------------- ---------------
Net increase (4,595,903) $ (51,271,130) 21,975,764 $ 249,325,651
============= =============== ============= ===============
Diversified Bond Fund
---------------------
Sold 2,500,100 25,001,000 -- --
Issued as reinvestment of dividends -- -- -- --
Redeemed (30,000) (300,000) -- --
------------- --------------- ------------- ---------------
Net increase 2,470,100 $ 24,701,000 -- $ --
============= =============== ============= ===============
Balanced Fund
-------------
Sold 9,146,316 130,527,094 20,316,077 292,097,210
Issued as reinvestment of dividends -- -- 4,299,084 60,833,346
Redeemed (10,801,042) (153,908,704) (18,473,081) (263,514,399)
------------- --------------- ------------- ---------------
Net increase (1,654,726) $ (23,381,610) 6,142,080 $ 89,416,157
============= =============== ============= ===============
Core Equity Fund
----------------
Sold 20,313,758 376,489,507 44,529,203 800,704,772
Issued as reinvestment of dividends -- -- 14,432,891 260,360,335
Redeemed (34,370,078) (632,486,657) (52,073,640) (934,469,135)
------------- --------------- ------------- ---------------
Net increase (14,056,320) $(255,997,150) 6,888,454 $ 126,595,972
============= =============== ============= ===============
Growth Equity Fund
------------------
Sold 2,502,544 25,027,032 -- --
Issued as reinvestment of dividends -- -- -- --
Redeemed (30,000) (300,000) -- --
------------- --------------- ------------- ---------------
Net increase 2,472,544 $ 24,727,032 -- $ --
============= =============== ============= ===============
Small Cap Value Equity Fund
---------------------------
Sold 10,079,227 134,241,262 17,908,247 280,817,097
Issued as reinvestment of dividends -- -- 3,355,752 45,664,695
Redeemed (11,274,941) (151,929,746) (14,284,755) (224,319,032)
------------- --------------- ------------- ---------------
Net increase (1,195,714) $ (17,688,484) 6,979,244 $ 102,162,760
============= =============== ============= ===============
Mid Cap Growth Equity Fund
--------------------------
Sold 2,500,100 25,001,000 -- --
Issued as reinvestment of dividends -- -- -- --
Redeemed (30,000) (300,000) -- --
------------- --------------- ------------- ---------------
Net increase 2,470,100 $ 24,701,000 -- $ --
============= =============== ============= ===============
Small Cap Growth Equity Fund
----------------------------
Sold 2,500,100 25,001,000 -- --
Issued as reinvestment of dividends -- -- -- --
Redeemed (30,181) (300,000) -- --
------------- --------------- ------------- ---------------
Net increase 2,469,919 $ 24,701,000 -- $ --
============= =============== ============= ===============
International Equity Fund
-------------------------
Sold 15,980,801 186,951,813 24,866,276 327,156,692
Issued as reinvestment of dividends -- -- 7,099,782 81,504,250
Redeemed (13,203,030) (154,897,473) (19,794,239) (255,590,686)
------------- --------------- ------------- ---------------
Net increase 2,777,771 $ 32,054,340 12,171,819 $ 153,070,256
============= =============== ============= ===============
</TABLE>
118
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
6. Foreign The International Equity Fund invests substantially all
Securities of its assets in foreign securities. The other Funds may
also invest in foreign securities, subject to certain
percentage restrictions. Investing in securities of
foreign companies and foreign governments involves
special risks and considerations not typically
associated with investing in securities of U.S.
companies and the U.S. Government. These risks include
revaluation of currencies and future adverse political
and economic developments. Moreover, securities of many
foreign companies and foreign governments and their
markets may be less liquid and their prices more
volatile than those of securities of comparable U.S.
companies and the U.S. Government.
7. Federal Income At June 30, 1999, the cost of securities and the
Tax Information unrealized appreciation (depreciation) in the value of
investments owned by the Funds, as computed on a Federal
income tax basis, are as follows:
<TABLE>
<CAPTION>
Federal Tax Basis Tax Basis Net Unrealized
Income Tax Unrealized Unrealized Appreciation
Cost Appreciation Depreciation (Depreciation)
---------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Prime Fund $ 278,539,449 $ 22,715 $ (65,592) $ (42,877)
Short-Term Bond Fund 242,354,199 1,007,480 (1,639,033) (631,553)
Core Bond Fund 756,488,411 6,054,689 (15,296,777) (9,242,088)
Diversified Bond Fund 24,939,008 39,119 (459,007) (419,888)
Balanced Fund 711,133,681 191,793,465 (9,879,338) 181,914,127
Core Equity Fund 2,155,710,411 1,575,096,337 (45,262,032) 1,529,834,305
Growth Equity Fund 23,378,939 2,192,696 (263,765) 1,928,931
Small Cap Value 574,291,070 182,136,339 (34,474,784) 147,661,555
Equity Fund
Mid Cap Growth 23,747,458 2,192,743 (1,184,891) 1,007,852
Equity Fund
Small Cap Growth 19,434,932 3,034,835 (923,401) 2,111,434
Equity Fund
International Equity 769,230,747 107,645,822 (76,045,975) 31,599,847
Fund
</TABLE>
At December 31, 1998, the following Funds had available,
for Federal income tax purposes, unused capital losses:
Amount Expiration Date
------------- --------------------
Prime Fund $ 2,082 December 31, 2003
Prime Fund 2,368 December 31, 2004
Prime Fund 7,761 December 31, 2005
Prime Fund 8,471 December 31, 2006
Short-Term Bond Fund 75,661 December 31, 2006
8. Line of Credit The Trust, on behalf of each Fund, maintained a
discretionary line of credit agreement with PNC Bank,
N.A. Each Fund was permitted to borrow under the line of
credit, provided that the Trust's borrowings did not
exceed $25,000,000 in the aggregate at any one time.
Interest was charged based on outstanding borrowings at
the Federal Funds Rate plus .45%. The Core Equity Fund
and the International Equity Fund utilized the line of
credit during the six months ended June 30, 1999.
Average daily borrowings for the Core Equity Fund for
the six months ended June 30, 1999 were $15,875,000 and
the average interest rate was 5.14%. Average daily
borrowings for the International Equity Fund for the six
months ended June 30, 1999 were $4,381,818 and the
average interest rate was 5.21%. The maximum borrowing
outstanding during the six months ended June 30, 1999 by
the Trust was $25,000,000. During the period, the
Trust's line of credit agreement with PNC Bank, N.A. was
terminated. There was no balance outstanding as of June
30, 1999.
119
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
9. Reverse Stock On February 1, 1999, the Trustees of the Funds approved
Split a reverse stock split for Class A and Class Y shares of
the Prime Fund, Short-Term Bond Fund, Core Bond Fund,
Balanced Fund, Core Equity Fund, Small Cap Value Equity
Fund and International Equity Fund. The reverse stock
split was effective as of February 5, 1999. The reverse
stock split for Class A and Class Y shares was effected
in connection with MassMutual's decision to adjust the
net asset value ("NAV") for each Class A and Class Y
share of each of those Funds to the NAV for the Class S
share of the applicable Fund. Each Fund's Class A and
Class Y shares were given a conversion factor based on
the closing NAV for that Fund's Class S shares on
February 4, 1999. The conversion factors for Class A and
Class Y shares of each Fund are as follows:
Name of Fund and Share Class Conversion Factor
- ------------------------------------------- ---------------------
Prime Fund Class A .014467354962913
Prime Fund Class Y .014476455941847
Short-Term Bond Fund Class A .975895602770351
Short-Term Bond Fund Class Y .976348446108085
Core Bond Fund Class A .921339124098803
Core Bond Fund Class Y .920821459897991
Balanced Fund Class A .712545629080524
Balanced Fund Class Y .711379099293889
Core Equity Fund Class A .555030465318217
Core Equity Fund Class Y .554699319689711
Small Cap Value Equity Fund Class A .572029161851185
Small Cap Value Equity Fund Class Y .571097238765261
International Equity Fund Class A .780667933040925
International Equity Fund Class Y .779709996060320
Each shareholder may determine the number of shares it
owns as a result of the reverse stock split by
multiplying the number of shares owned immediately prior
to the reverse stock split by the above conversion
factor. The reverse stock split did not result in a
change to shareholder account balances.
10. Change in After consultation with the staff of the Securities and
Independent Exchange Commission (SEC) as a result of concerns
Accountants regarding its independence with respect to the Funds,
PricewaterhouseCoopers LLP ("PwC") resigned as auditors
of the Funds, effective February 23, 1999. PwC's report
on the financial statements for the fiscal years 1996
and 1997 did not contain an adverse opinion or a
disclaimer of opinion, and was not qualified or modified
as to uncertainty, audit scope or accounting principles.
The Trust's Audit Committee recommended engaging
Deloitte & Touche LLP as the principal accountant to
audit the Funds' financial statements for fiscal years
1998 and 1999. The Board of Trustees approved the
appointment of Deloitte & Touche LLP at a special
meeting held on March 26, 1999.
For fiscal years 1997 and 1998, and during the period
prior to PwC's resignation, the Trust and PwC did not
have any disagreements on any matter of accounting
principles or practices, financial statement
disclosures, or auditing scope or procedure, that either
(1) have not been resolved to PwC's satisfaction and or
(2) if not resolved to PwC's satisfaction, would have
caused it to make a reference to the subject matter of
the disagreement in connection with its report.
Moreover, PwC's report on the Funds' financial
statements for the fiscal years 1997 and 1998 did not
contain an adverse opinion or a disclaimer of opinion,
and was not qualified or modified as to uncertainty,
audit scope or accounting principles.
120
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
11. New Investment On or about April 2, 1999, the Funds distributed an
Management, information statement disclosing action taken by written
Administrative, consent of the majority shareholders of each of the
and Shareholder following Funds: MassMutual Prime Fund, MassMutual
Services Short-Term Bond Fund, MassMutual Core Bond Fund,
Agreements. MassMutual Balanced Fund, MassMutual Core Equity Fund,
MassMutual Small Cap Value Equity Fund and MassMutual
International Equity Fund. MassMutual was the majority
shareholder of these Funds as of February 1, 1999, the
record date set by the Board of Trustees. (The record
date is the date for determining the number of shares
and the shareholders of each Fund entitled to give
consent and to receive the information statement.) On
the record date, MassMutual owned the following
percentages of each of the Funds:
Percentage of Fund's Shares
Name of Fund Owned by MassMutual
------------ -------------------
Prime Fund 92.67%
Short-Term Bond Fund 100%
Core Bond Fund 99.94%
Balanced Fund 94.47%
Core Equity Fund 99.98%
Small Cap Value Fund 99.94%
Indexed Equity Fund 99.83%
International Equity Fund 99.95%
The Trustees approved the following proposals on
February 1, 1999:
(1) New Investment Management Agreements reflecting
increased investment advisory fees paid to
MassMutual, as Investment Manager, for the
following Funds: Core Bond Fund, Core Equity
Fund, Small Cap Value Equity Fund and Balanced
Fund. MassMutual, as investment adviser, will be
paid at an annual rate of the average daily net
assets of each Fund, as follows: .48% for Core
Bond Fund and Balanced Fund (up from .45%), .50%
for Core Equity Fund (up from .45%); .58% for
the Small Cap Value Fund (up from .55%).
(2) Amendment to each Administrative and Shareholder
Services Agreement for the Prime Fund, Short-
Term Bond Fund, Core Bond Fund, Balanced Fund,
Core Equity Fund, Small Cap Value Equity Fund,
and International Equity Fund to (i) delete the
requirement that Trustees approve any amendments
thereto, and (ii) delete the provision
terminating the agreement upon its assignment.
MassMutual, as majority shareholder, approved both
proposals by written consent effective May 3, 1999.
121
<PAGE>
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<PAGE>
This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus, containing more
complete information including fees, risks, and expenses. If used as sales
material, this report must be accompanied by a Performance Update for the most
recently completed calendar quarter. The figures in this report reflect past
results. The investment return and principal value of shares will fluctuate with
market conditions so that shares, when redeemed, may be worth more or less than
their original cost. All investments are subject to certain risks. For example,
stocks are sensitive to price changes and bonds are affected by interest rate
fluctuations. Investors should make investment decisions based on an investment
strategy that takes into consideration investment goals, the length of time
money can stay invested, and risk tolerance. Portfolio changes should not be
considered recommendations for action by individual investors.
<PAGE>
Distributor
MML Distributors, LLC
1414 Main Street
Springfield, MA 01144-1014
August 27, 1999
L4543 899
