<PAGE>
MASSMUTUAL INDEXED EQUITY FUND
This Prospectus describes Class Y shares of the MassMutual Indexed Equity Fund
(the "Fund"), one of the series of the MassMutual Institutional Funds.
The Fund seeks to approximate as closely as practicable (before fees and
expenses) the total return of publicly traded common stocks represented by the
S&P 500(R) Index./1/ The Fund is a "feeder" fund and seeks to achieve its
investment objective by investing in the S&P 500(R) Index Master Portfolio (the
"Master Portfolio"), one of the portfolios of Master Investment Portfolio.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any statement to the
contrary is a crime.
PROSPECTUS July 1, 1999.
CLASS Y SHARES
- --------------------------
/1/ "Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," and "Standard & Poor's
500(R)," are trademarks of McGraw-Hill, Inc. and have been licensed for use by
the Fund and the Master Portfolio. The Fund and the Master Portfolio are not
sponsored, endorsed, sold or promoted by Standard & Poor's, a division of McGraw
Hill Companies ("S&P"). S&P makes no representation or warranty, express or
implied, regarding the advisability of investing in the Fund and the Master
Portfolio.
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE>
Table Of Contents Page
About the Fund
Investment Objective ............................................. 4
Principal Investment Strategies .................................. 4
Principal Investment Risks ....................................... 4
Annual Performance ............................................... 5
Average Annual Total Returns ..................................... 5
Expense Information .............................................. 5
Management and Administration of The Fund and The Master Portfolio ........ 6
Fund Administration .............................................. 6
About the Classes of Shares - Multiple Class Information .................. 7
Class Y Shares ................................................... 7
Compensation to Intermediaries ................................... 7
Investing in the Fund ..................................................... 9
Buying, Redeeming and Exchanging Shares .......................... 9
Determining Net Asset Value ...................................... 9
How to Invest .................................................... 9
Taxation and Distributions ....................................... 10
Financial Highlights ...................................................... 11
Appendix - Additional Investment Policies and Risk Considerations ......... 12
-3-
<PAGE>
MassMutual Indexed Equity Fund
- --------------------------------------------------------------------------------
Investment Objective
- --------------------------------------------------------------------------------
The Fund seeks to approximate as closely as practicable (before fees and
expenses) the capitalization-weighted total rate of return of that portion of
the U.S. market for publicly-traded common stocks composed of larger-capitalized
companies.
- --------------------------------------------------------------------------------
Principal Investment Strategies
- --------------------------------------------------------------------------------
The Fund invests all of its assets in the S&P 500(R) Index Master Portfolio (the
"Master Portfolio") of Master Investment Portfolio, an open-end management
investment company, rather than in a portfolio of securities. The Fund's
investment experience corresponds directly with that of the Master Portfolio.
The Master Portfolio has substantially the same investment objective as the
Fund. The Master Portfolio pursues its objectives by investing in all the
securities that make up the S&P 500(R) Index. The S&P 500(R) Index is a widely
recognized, unmanaged index of common stocks of the 500 largest capitalized U.S.
companies. The Index does not incur expenses and cannot be purchased directly by
Investors.
The Master Portfolio purchases securities in proportions that match their index
weights. This is the basis of achieving capitalization-weighted total rate of
return. Each company's shares contribute to the Master Portfolio's, and hence
the Fund's, overall return in the same proportion as the value of its shares
contributes to the S&P 500(R) Index.
The Master Portfolio seeks to come within 95% of S&P 500(R) Index's total
return, before fees and expenses, in falling as well as rising markets. It does
not seek to "beat" the market it tracks. Barclays Global Fund Advisors (BGFA),
the Master Portfolio's investment adviser, makes no attempt to apply economic,
financial or market analysis when managing the Master Portfolio.
The Master Portfolio may also use derivatives such as index futures contracts
and options, as described in the Appendix. These investments help the Master
Portfolio approach the returns of a fully invested portfolio while keeping cash
on hand.
- --------------------------------------------------------------------------------
Principal Investment Risks
- --------------------------------------------------------------------------------
The factors that may affect the Fund as a whole are called "principal risks" and
are summarized below. Your investment in the Fund may also be subject to certain
other risks, as well as the risks of the Master Portfolio. These are described
in more detail in the Appendix under "Additional Investment Policies and Risk
Considerations" and in the Statement of Additional Information. Although the
Fund strives to reach its stated goals, it cannot offer guaranteed results. You
have the potential to make money in the Fund but you can also lose money.
The principal risks of investing in this Fund are based on the following
principal risks of the Master Portfolio:
Equity Market Risk. Equity market risk is the possibility that stock market
prices in general will decline over short or even extended periods. Changes in
the value of the Master Portfolio's investments will result in changes in the
value of its shares and affect the Fund's total return to investors. Equity
stock prices can fall for any number of factors, including general economic and
market conditions, prospects of the securities issuer, changing interest rates,
and real or perceived economic and competitive industry conditions.
Growth Company Risk. Market risk is particularly pronounced for "growth"
companies. The prices of growth company securities may fall to a greater extent
than other stocks in the S&P 500(R) Index. Growth company securities tend to be
more volatile in terms of price swings and trading volume.
Derivatives Risk. Derivatives can be sensitive to changes in interest rates or
to sudden fluctuations in market prices. They may also include the credit risk
of the counterparty, the risk of mispricing or improper valuation and the risk
that changes in the value of the derivative may not correlate perfectly with
relevant assets, rates and indices. In addition, the Master Portfolio's use of
derivatives may affect the timing and amount of taxes payable by shareholders.
-4-
<PAGE>
- --------------------------------------------------------------------------------
Annual Performance*
- --------------------------------------------------------------------------------
The bar chart shows the risks of investing in the Fund because the returns vary
from year-to-year.
Class Y Shares
[BAR CHART APPEARS HERE]
1989 N/A
1990 N/A
1991 N/A
1992 N/A
1993 N/A
1994 0.33%
1995 16.72%
1996 22.19%
1997 32.04%
1998 27.76%
During the period shown above, the highest quarterly return for the Fund is
21.09% for the quarter ended 12/31/98 and the lowest quarterly return is
- - 10.05% for the quarter ended 9/30/98.
- --------------------------------------------------------------------------------
Average Annual Total Returns*
- --------------------------------------------------------------------------------
(for the periods ended February 28, 1999)
The table shows the risk of investing in the Fund because the Fund's returns
will differ from the S&P 500(R) Index, due, in part, to the fees and expenses of
the Fund.
Since
One Five Inception
Year Years (7/93)
Class Y+ 18.98% 23.29% 21.33%
S&P 500(R)Index 19.74% 24.15% 22.19%
* The Fund commenced operations on March 1, 1998. The performance for periods
prior to March 1, 1998 is calculated by including the corresponding total return
of the Master Portfolio (which includes, for the period from July 2, 1993
through May 25, 1994, the performance of its predecessor) adjusted to reflect
the Fund's fees and expenses. Performance shown does not reflect fees that may
be paid by investors for administrative services or group annuity contract
charges.
+ Performance for Class Y shares of the Fund is based on Class S shares for the
5-year and since inception periods, adjusted to reflect Class Y expenses.
Past performance is not an indication of future performance. Investment returns
for the Fund assume the reinvestment of dividends and capital gains
distributions. There is no assurance that the Fund's investment objective will
be achieved, and you can lose money by investing in the Fund.
- --------------------------------------------------------------------------------
Expense Information
- --------------------------------------------------------------------------------
As an investor, you pay certain fees and expenses in connection with your
investment. These fees and expenses will vary depending on the class of shares
you purchase. The fee table shows two categories of expenses, Shareholder Fees
and Annual Fund Operating Expenses. Shareholder Fees refer to fees paid directly
from your investment, such as up front or contingent sales charges. The Fund
does not charge any Shareholder Fees for any class of share. Annual Fund
Operating Expenses refer to the costs of operating the Fund. These costs are
deducted from the Fund's assets, which means you pay them indirectly. These
expenses include indirect expenses incurred by the Master Portfolio in which the
Fund invests.
Class Y
Shareholder Fees (fees paid directly None
from your investment)
Annual Fund Operating Expenses
(expenses that are deducted from Fund
Assets)
Management Fees .05%
Distribution and Service (Rule 12b-1) None
Fees
Other Expenses .40%
Total Annual Fund Operating .45%
Expenses(1)(2)
(1) The expenses in the above table are based on expenses for the Fund and the
Master Portfolio for the fiscal year ended February 28, 1999, but restated
to give effect to a change in the administrative fees effective on April 6,
1999.
(2) Employee benefit plans which invest in the Fund through MassMutual separate
investment accounts may pay additional charges under their group annuity
contract or services agreement. Investors who purchase shares directly from
the Fund may also be subject to charges imposed in their administrative
services or other agreement with MassMutual or MassMutual affiliate. None of
these charges are deducted from Fund assets.
Examples. These examples are intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The examples
assume that you invest $10,000 in Class Y shares of the Fund for the time
periods indicated, that your investment earns a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
Class Y $46 $144 $252 $ 567
Since the Fund does not impose any shareholder fees, the figures shown would be
the same whether you sold your shares at the end of a period or kept them.
-5-
<PAGE>
Management And Administration of The Fund and The Master Portfolio
MassMutual Indexed Equity Fund is a feeder fund that invests all of its assets
in a separate mutual fund, called the Master Portfolio. Consequently, the Fund
does not have its own investment adviser. Barclays Global Fund Advisors ("BGFA")
serves as the Master Portfolio's Investment Adviser and provides investment
guidance and policy direction for the Master Portfolio. For its services to the
Fund in the last fiscal year, BGFA received an annual fee of .05% based on the
Master Portfolio's average daily net assets.
Unlike many traditional active investment funds, there is no single portfolio
manager who makes investment decisions for the Master Portfolio. Instead, the
Master Portfolio tracks the S&P 500(R) Index. The process reflects BGFA's
commitment to an objective and consistent investment management structure.
The Master Portfolio's predecessor, a regulated investment company that
commenced operations on July 2, 1993, converted into a master/feeder structure
on May 25, 1994 by exchanging all of its assets for beneficial interests in the
Master Portfolio. The Master Portfolio commenced operations on May 26, 1994,
with the same investment adviser, the same investment objective and
substantially similar investment policies as its predecessor.
BGFA is located at 45 Fremont Street, San Francisco, California 94105. It is a
wholly-owned subsidiary of Barclays Global Investors, N.A. ("BGI") which in turn
is an indirect subsidiary of Barclays Bank PLC. BGI is the world's largest
manager of institutional investment assets. As of December 31, 1998, BGI and its
affiliates, including BGFA, managed more than $615 billion of assets. BGI, BGFA,
Barclays Bank and their affiliates deal, trade and invest for their own accounts
in the types of securities in which the Master Portfolio may also invest. BGFA
does not obtain or use inside information in making investment decisions on
behalf of the Master Portfolios.
Asset allocation and modeling strategies are used by BGFA for other investment
companies and accounts advised or sub-advised by BGFA. If these strategies
indicate particular securities should be bought or sold at the same time by the
Master Portfolio and one or more of these investment companies or accounts,
available investments or opportunities for sales will be allocated equitably to
each by BGFA. In some cases, these procedures may adversely affect the size of
the position obtained or disposed of by the Master Portfolio or the price paid
or received by the Master Portfolio.
Fund Administration
MassMutual is responsible for providing all administrative services for the
Fund. Founded in 1851, MassMutual is a mutual life insurance company that
provides a broad range of insurance, money management, retirement and asset
accumulation products and services for individuals and businesses. MassMutual,
together with its subsidiaries, has assets of $67 billion and assets under
management in excess of $176 billion. The Fund pays MassMutual an administrative
and shareholder services fee at an annual rate based on a percentage of its
average daily net assets for the applicable class of shares. For the fiscal year
ending February 28, 1999, the Fund paid fees of .3588% for Class S shares;
.3888% for Class Y shares; and .7688% for Class A shares.
-6-
<PAGE>
About the Classes of Shares - Multiple Class Information
The Fund offers four Classes of shares: Class S, Class Y, Class L and Class A.
The shares offered by this Prospectus are Class Y shares. None of the Classes of
shares has up-front or deferred sales charges. Only Class A shares charge a
distribution and service (Rule 12b-1) fee.
Class S, Class Y and Class L shares are primarily offered to institutional
investors through institutional distribution channels, such as
employer-sponsored retirement plans or through broker-dealers, financial
institutions or insurance companies. Class A shares are primarily offered
through retail distribution channels, such as broker-dealers or financial
institutions. The different Classes have different fees, expenses and/or minimum
investor size requirements. The difference in the fee structures among the
Classes is the result of their separate arrangements for shareholder and
distribution services and not the result of any difference in amounts charged
for investment advisory services. Accordingly, investment advisory expenses do
not vary by Class. Different fees and expenses of a Class will affect
performance of that Class. For additional information about the other Classes
not offered by this Prospectus, call us at 1-888-743-5274 or contact a sales
representative or financial intermediary who offers the Classes.
Except as described below, all Classes of shares of the Fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences among the various Classes are: (a) each Class
may be subject to different expenses specific to that Class; (b) each Class has
a different Class designation; (c) each Class has exclusive voting rights with
respect to matters solely affecting such Class; (d) each Class offered in
connection with a Rule 12b-1 Plan will bear the expense of the payments that
would be made pursuant to that Rule 12b-1 Plan, and only that Class will be
entitled to vote on matters pertaining to that Rule 12b-1 Plan; and (e) each
Class will have different exchange privileges.
Each Class of the Fund's shares invests in the same portfolio of securities.
Because each Class will have different expenses, they will likely have different
share prices. All Classes of shares are available for purchase by insurance
company separate investment accounts.
Class Y Shares
Eligible Purchasers. Class Y shares may be purchased by:
. Non-qualified deferred compensation plans;
. Registered mutual funds;
. Qualified plans under Code Section 401(a), Code Section 403(b) plans, Code
Section 457 plans and other retirement plans, where plan assets of the
employer generally or are expected to exceed $5 million; and
. Other institutional investors with assets generally in excess of $5
million.
These Eligible Purchasers must have an agreement with MassMutual or a MassMutual
affiliate to purchase Class Y Shares.
Shareholder and Distribution Fees. The Class Y shares are 100% no load, so you
pay no fees (sales loads) when you buy or sell Class Y shares. Therefore, all of
your money is invested in the Fund. Class Y shares do not have any Rule 12b-1
distribution or service fees.
Compensation to Intermediaries
MassMutual may directly, or through the Distributor, pay cash compensation to
persons who provide services on behalf of Class Y shares. This compensation is
paid by MassMutual, not from Fund assets. MassMutual may pay intermediaries up
to .15% of the amount invested for the servicing of Class Y shares. The payments
on account of Class Y shares will be based on criteria established by
MassMutual. In the event that amounts paid by the Fund to MassMutual as
administrative fees are deemed indirect financing of distribution or servicing
costs for Class Y shares, the Fund has
-7-
<PAGE>
adopted distribution and servicing plans authorizing such payments. No
additional fees are paid by the Fund under these plans. Where Class Y shares are
sold in connection with nonqualified deferred compensation plans where the
employer sponsor has an administrative services agreement with MassMutual or its
affiliate, additional compensation may be paid as determined by MassMutual from
time to time according to established criteria. As of the date of this
Prospectus, aggregate annual compensation in such cases does not exceed .50%.
Annual compensation paid on account of Class Y shares will be paid quarterly, in
arrears.
-8-
<PAGE>
Investing In The Fund
Buying, Redeeming and Exchanging Shares
The Fund sells its shares at a price equal to their net asset value (NAV). The
Fund generally determines its NAV at 4:00 p.m. Eastern time every day the New
York Stock Exchange is open. Your purchase order will be priced at the next net
asset value calculated after the transfer agent accepts your purchase order. The
Fund will suspend selling its shares during any period when the determination of
NAV is suspended. The Fund can reject any purchase order and can suspend
purchases if it is in its best interest.
The Fund redeems its shares at their next NAV computed after the Fund's transfer
agent receives your redemption request. You will usually receive payment for
your shares within 7 days after the transfer agent receives your written
redemption request. If, however, you request redemption of shares recently
purchased by check, you may not receive payment until the check has been
collected, which may take up to 15 days from receipt of the check. The Fund can
also suspend or postpone payment, when permitted by applicable law and
regulations.
You can exchange shares of one Fund for the same class of shares of another Fund
in the MassMutual Institutional Funds series. An exchange is treated as a sale
of shares in one Fund, and a purchase of shares in another Fund at the NAV next
determined after the transfer agent received the exchange request. Your right to
exchange shares is subject to applicable regulatory requirements or contractual
obligations. The Fund may limit or refuse exchanges, if, in the opinion of
MassMutual:
. you have engaged in excessive trading;
. the Fund receives or expects simultaneous orders affecting significant
portions of the Fund's assets;
. a pattern of exchanges occurs which coincides with a market timing strategy
which may be disruptive to the Fund; or
. the Fund would be unable to invest the Funds effectively based on its
investment objectives and policies, or if the Fund would be adversely
affected.
The Fund reserves the right to modify or terminate the exchange privilege on 60
days' written notice.
The Fund does not accept purchase, redemption or exchange orders or compute its
NAV on days when the NYSE is closed. This includes: weekends, Good Friday and
all federal holidays other than Columbus Day and Veterans Day. Certain foreign
markets may be open on days when the Fund does not accept orders or price its
shares. As a result, the NAV of the Fund's shares may change on days when you
will not be able to buy or sell shares.
Determining Net Asset Value
We calculate the net asset value of each class of shares of the Fund separately.
The NAV for shares of a Class of the Fund is determined by adding the current
value of all of the Fund's assets attributable to that Class, subtracting the
liabilities attributable to that Class and then dividing the resulting number by
the total outstanding shares of the Class. The only assets of this Fund are its
investments in the Master Portfolio. The Fund's investment in the Master
Portfolio is valued at the Fund's proportionate interest in the NAV of the
Master Portfolio. The Master Portfolio calculates the NAV of its shares on the
same days and at the same time as the Fund.
The Master Portfolio's assets are valued based on current market prices. If such
prices are not readily available, BGFA estimates the securities' fair value in
accordance with guidelines approved by the Master Portfolio's Board of Trustees.
Bonds and notes with remaining maturities of 60 days or less are valued using
the amortized cost method.
The amortized cost method marks down any premium on short-term debt that the
Master Portfolio buys, or makes up any discount at a constant rate until
maturity. It does not reflect daily fluctuations in market value.
For further information regarding the methods employed in valuing the Master
Portfolio's investments, see "Valuation of Portfolio Securities" in the
Statement of Additional Information.
How to Invest
When you buy shares of the Fund through an agreement with MassMutual, your
agreement will describe how you need to submit buy, sell and exchange orders.
Purchase orders must be
-9-
<PAGE>
accompanied by sufficient funds. You can pay by check or federal funds wire
transfer. You must submit any buy, sell or exchange orders in "good form" as
described in your agreement.
Taxation and Distributions
The Fund intends to continue to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code. As a regulated investment company,
the Fund will not be subject to Federal income taxes on its ordinary income and
net realized capital gain distributed to its shareholders. In general, if the
Fund fails to distribute at least 98% of such income and gain in the calendar
year in which it is earned, it will be subject to a 4% excise tax on the
undistributed amount.
The Fund seeks to qualify as a regulated investment company by investing all of
its assets in the Master Portfolio. Based upon the classification of the Master
Portfolio as a non-publicly traded partnership for federal income tax purposes,
the Master Investment Portfolio believes that the Master Portfolio will not be
subject to federal income tax and will be deemed to "pass through" any interest,
dividends, gains and losses of the Master Portfolio to the Fund in proportion to
the Fund's interest in the Master Portfolio. If the Master Portfolio were to
accrue but not distribute any interest, dividends or gains, the Fund would be
deemed to have recognized its allocable share of such income, regardless of
whether or not such income has been distributed by the Master Portfolio.
However, the Master Portfolio has represented that it seeks to minimize
recognition by the Fund and other investors of interest, dividends and gains
without a corresponding distribution.
Many investors, including most tax qualified plan investors, may be eligible for
preferential federal income tax treatment on distributions received from the
Fund and dispositions of Fund shares. This Prospectus does not attempt to
describe in any respect such preferential tax treatment. Any prospective
investor that is a trust or other entity eligible for special tax treatment
under the Code that is considering purchasing shares of the Fund, including
either directly or indirectly through a life insurance company separate
investment account, should consult its tax advisers about the federal, state,
local and foreign tax consequences particular to it, as should persons
considering whether to have amounts held for their benefit by such trusts or
other entities investing in shares of the Fund.
Investors that do not receive preferential tax treatment are subject to federal
income taxes on distributions received in respect of their shares. Distributions
of the Fund's ordinary income and short-term capital gains (i.e., gains from
capital assets held for one year or less) are taxable to the shareholder as
ordinary income whether received in cash or additional shares. Certain
designated dividends may be eligible for the dividends-received deduction for
corporate shareholders. Designated capital gain dividends (relating to gains
from capital assets held for more than one year) are taxable as long-term
capital gains in the hands of the investor whether distributed in cash or
additional shares and regardless of how long the investor has owned shares of
the Fund. Distributions are taxable to a shareholder even though they are paid
from income or gains earned by the Fund prior to the shareholder's investment
and thus were included in the NAV paid by the shareholder.
Any gain resulting from the exchange or redemption of an investor's shares in
the Fund will generally be subject to tax. A loss incurred with respect to
shares of the Fund held for six months or less will be treated as a long-term
capital loss to the extent of long-term capital gains distributions with respect
to such shares.
The Master Portfolio's investments in foreign securities may be subject to
foreign withholding taxes. In that case, the Master Portfolio's yield on those
securities would be decreased. Shareholders of the Fund generally will not be
entitled to claim a credit or deduction with respect to foreign taxes. In
addition, the Master Portfolio's investments in foreign securities or foreign
currencies may increase or accelerate the Master Portfolio's recognition of
ordinary income and may affect the timing or amount of the Master Portfolio's,
and hence the Fund's, distributions.
Shareholders should consult their tax adviser for more information on their own
tax situation, including possible state, local and foreign taxes.
-10-
<PAGE>
Financial Highlights
The financial highlights table is intended to help you understand the Fund's
financial performance for Class Y shares since its inception on March 1, 1998.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that an investor would have earned
on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Deloitte & Touche LLP,
whose report, along with the Fund's financial statements, are included in the
Annual Report, which is available on request. Financial information for the
other share classes of the Fund is also available in the Fund's Annual Report.
Class Y
-------
Year ended
02/28/99
-------------
Net asset value, beginning of period $ 10.00
-------------
Income (loss) from investment operations:
Net investment income 0.12 *
Net realized and unrealized gain 1.78
-------------
Total income from investment operations 1.90
-------------
Less distributions to shareholders:
From net investment income (0.11)
-------------
Net asset value, end of period $ 11.79
=============
Total Return 18.98 %
Ratios/Supplemental Data:
Net assets, end of period (000's) $859
Net expenses to average daily net assets 0.52%
Net investment income to average daily net assets 1.09%
* 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.
-11-
<PAGE>
APPENDIX
ADDITIONAL INVESTMENT POLICIES
AND RISK CONSIDERATIONS
Year 2000 Issue
Like other businesses and governments around the world, the Fund and the Master
Portfolio could be adversely affected if the computer systems used by the Fund's
and the Master Portfolio's service providers and those with which they do
business do not properly recognize the year 2000. This is commonly known as the
"Year 2000 issue."
In 1996, MassMutual, the Fund's administrator, began an enterprise-wide process
of identifying, evaluating and implementing changes to its computer systems to
address the Year 2000 issue. MassMutual is addressing the Year 2000 issue
internally with modifications to existing programs and conversions to new
programs. MassMutual has advised the Fund that the Year 2000 issue is one of
MassMutual's highest business operational priorities. MassMutual is also seeking
assurances from the Fund's other service providers, including the Master
Portfolio, and others with which MassMutual and the Fund conduct business in
order to identify and resolve Year 2000 issues. The Master Portfolio has advised
MassMutual that its principal service providers are working on the changes
necessary and they expect their systems to be ready in time. But there can, of
course, be no assurance of success. Moreover, since the changes will affect
virtually every organization, the companies or entities in which the Master
Portfolio invests could also be negatively affected.
The Master Portfolio may invest in a wide range of investments and engage in
various investment-related transactions and practices. These practices are
pursuant to non-Fundamental policies and therefore may be changed by the Board
of Trustees without the consent of shareholders. Some of the more significant
practices and associated risks are discussed below.
U.S. Government Securities
The Master Portfolio may invest in securities issued or guaranteed by the U.S.
Treasury or other government agencies or federally-chartered corporate entities
referred to as "instrumentalities." Obligations issued or guaranteed by U.S.
government agencies or instrumentalities include direct obligations and
mortgage-related securities that have different levels of credit support from
the U.S. Government. Some are backed by the full faith and credit of the United
States (e.g., direct pass-through certificates of Government National Mortgage
Association); some are supported by the right of the issuer to borrow from the
U.S. Government (e.g., obligations of Federal Home Loan Mortgage Corporation);
some are supported by the right of the issuer to borrower from the U.S. Treasury
in certain circumstances; and some are backed by only the credit of the issuer
itself (e.g., Federal National Mortgage Association). There is no guarantee that
the U.S. Government will pay interest and principal on securities on which it is
not legally obligated to do so.
As a general matter, the value of debt instruments, including U.S. Government
securities, declines when market interest rates increase and rises when market
interest rates decrease. Certain types of U.S. Government obligations are
subject to fluctuations in yield or value due to their structure or contract
terms.
Foreign Securities
Since the stocks of some foreign issuers are included in the S&P 500(R) Index,
the Master Portfolio may purchase securities of such foreign issuers.
Investments in foreign securities, however, entail certain risks, such as: the
imposition of dividend or interest withholding or confiscatory taxes; currency
blockages or transfer restrictions; expropriation, nationalization, military
coups or other adverse political or economic developments; less government
supervision and regulation of securities exchanges, brokers and listed
companies; and
-12-
<PAGE>
the difficulty of enforcing obligations in other countries. Certain markets may
require payment for securities before delivery. The Master Portfolio's ability
and decision to purchase and sell portfolio securities may be affected by laws
or regulations relating to the convertibility of currencies and repatriation of
assets. Further, it may be more difficult for the Master Portfolio's agents to
keep currently informed about corporate actions that may affect the prices of
portfolio securities. Communications between the United States and foreign
countries may be less reliable than within the United States, thus increasing
the risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities.
Obligations of Foreign Governments, Banks and Corporations
The Master Portfolio may invest in U.S. dollar-denominated short-term
obligations issued or guaranteed by foreign governments or any of their
political subdivisions, agencies or instrumentalities that are determined by
BGFA to be of comparable quality to the other obligations in which the Master
Portfolio may invest. The Master Portfolio may also invest in debt obligations
of supranational entities, such as the World Bank, the European Coal and Steel
Community, the Asian Development Bank, and the InterAmerican Development Bank.
The percentage of the Master Portfolio's assets invested in obligations of
foreign governments and supranational entities will vary depending on the
relative yields of such securities, the economic and financial markets of the
countries in which the investments are made and the interest rate climate of
such countries.
The Master Portfolio may invest in high-quality, short-term (one year or less)
debt obligations of foreign branches of U.S. banks or U.S. branches of foreign
banks that are denominated in U.S. dollars. These types of securities are more
completely described in the Statement of Additional Information.
American Depositary Receipts and Similar Instruments
To the extent necessary to replicate the investment characteristics of the S&P
500(R) Index, the Master Portfolio may invest in foreign securities through
American Depositary Receipts ("ADRs") and similar instruments convertible into
securities of foreign issuers. ADRs represent securities or a pool of securities
of an underlying foreign issuer. They are subject to many of the same risks as
foreign securities. ADRs are more completely described in the Statement of
Additional Information.
Repurchase Agreements
The Master Portfolio may enter into repurchase agreements. A repurchase
agreement is a contract pursuant to which the Master Portfolio agrees to
purchase a security and simultaneously agrees to resell it at an agreed-upon
price at a stated time. The Statement of Additional Information provides a
detailed description of repurchase agreements.
Cash Positions
The Master Portfolio may hold cash or cash equivalents to provide for expenses
and anticipated redemption payments and so that an orderly investment program
may be carried out in accordance with the Master Portfolio's investment
policies. To provide liquidity, the Master Portfolio may invest in investment
grade debt securities, government obligations, or money market instruments.
Where cash is held for liquidity purposes, the Master Portfolio may invest in
repurchase agreements.
Investment Company Securities
The Master Portfolio may invest in securities issued by other open-end
investment companies (mutual funds) that invest in the same type of securities
in which the Master Portfolio invests. Applicable regulatory requirements limit
the Master Portfolio's investment in such securities to, subject to certain
exceptions, (i) 3% of the total voting stock of any one investment company, (ii)
5% of the Master Portfolio's net assets with respect to any one investment
company and (iii) 10% of the Master Portfolio's net assets in the aggregate.
Investments in the securities of other investment companies generally will
involve duplication of advisory
-13-
<PAGE>
fees and certain other expenses. The Master Portfolio may also purchase shares
of exchange-listed closed-end funds.
Bank Obligations
The Master Portfolio may invest in bank obligations, including certificates of
deposit, time deposits, bankers' acceptances and other short-term obligations of
domestic banks, foreign subsidiaries of domestic banks, foreign branches of
domestic banks, and domestic and foreign branches of foreign banks, domestic
savings and loan associations and other banking institutions. The Statement of
Additional Information provides a more detailed description of these securities.
Commercial Paper and Short-Term Corporate Debt Instruments
The Master Portfolio may invest in commercial paper (including variable amount
master demand notes) consisting of short-term, unsecured promissory notes issued
by corporations to finance short-term credit needs. Commercial paper is usually
sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangements between the issuer and a commercial
bank acting as agent for the payee of such notes, whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes. The
investment adviser to the Master Portfolio monitors on an ongoing basis the
ability of an issuer of a demand instrument to pay principal and interest on
demand.
The Master Portfolio also may invest in non-convertible corporate debt
securities (e.g., bonds and debentures) with not more than one year remaining to
maturity at the date of settlement. The Master Portfolio will invest only in
such corporate bonds and debentures that are rated at the time of purchase at
least "Aa" by Moody's or "AA" by S&P. Subsequent to its purchase by the Master
Portfolio, an issue of securities may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by the Master Portfolio.
The investment adviser to the Master Portfolio will consider such an event in
determining whether the Master Portfolio should continue to hold the obligation.
To the extent the Master Portfolio continues to hold such obligations, it may be
subject to additional risk of default.
Illiquid Securities
The Master Portfolio may hold up to 15% of the value of its net assets in
restricted or illiquid securities. Such investments include securities that are
not readily marketable, such as privately issued securities and other securities
subject to legal or contractual restrictions on resale, or other types of
securities for which there is no secondary market.
Securities Lending
The Master Portfolio may seek additional income by making loans of portfolio
securities of not more than one-third of its total assets taken at current
value. Lending portfolio securities may involve the risk of delay in recovery of
the securities loaned or possible loss of rights in the collateral should the
borrower fail financially. The Master Portfolio will not enter into any
portfolio security lending arrangement having a duration of longer than one
year.
Under applicable regulatory requirements and securities lending agreements
(which are subject to change), the loan collateral received by the Master
Portfolio when it lends portfolio securities must, on each business day, be at
least equal to the value of the loaned securities. The Master Portfolio may pay
reasonable administrative and custodial fees in connection with loans of
portfolio securities and may pay a portion of the interest or fee earned to the
borrower or a placing broker.
Derivatives
The Master Portfolio may use derivatives, which are financial contracts whose
value depends on, or is derived from, the value of an underlying asset, interest
rate or index.
Futures and Options. The Master Portfolio may invest in index futures contracts
and options on futures contracts. This tactic can reduce the costs associated
with direct investing.
-14-
<PAGE>
Index futures contracts are contracts to pay a fixed amount for each point
change in a particular market index between the purchase date and the
agreed-upon delivery date. The seller never actually delivers "shares" of the
index or shares of all the stocks in the index. Instead, the buyer and the
seller settle the difference in cash between the contract price and the market
price on the agreed-upon date - the buyer paying the difference if the actual
price is lower than the contract price and the seller paying the difference if
the actual price is higher.
Unlike futures, which obligate both buyer and seller, options obligate only one
of the parties to the transaction, either the buyer or the seller. They grant
the other party a right, for a price, either to buy or sell a security, an index
or a futures contract at a fixed sum any time up to an agreed-upon expiration
date.
Index futures contracts and options on index futures contracts are generally
considered derivatives - they derive their value from the prices of the indexes.
Compared to conventional securities, derivatives can be more sensitive to
changes in interest rates or to sudden fluctuations in market prices. The Master
Portfolio offsets this exposure to increased loss with bank deposits or money
market investments, stable holdings that offset the potential volatility of
their derivative investments, as required by the Securities and Exchange
Commission.
-15-
<PAGE>
MASSMUTUAL INSTITUTIONAL FUNDS
1295 State Street
Springfield, Massachusetts 01111
Learning More About the Fund
You can learn more about the Fund by reading the Fund's Annual and Semiannual
Reports and the Statement of Additional Information (SAI). This information is
available free upon request. In the Annual and Semiannual Reports, you will find
a discussion of market conditions and investment strategies that significantly
affected the Fund's performance during the period covered by the Report and a
listing of portfolio securities. The SAI will provide you more detail regarding
the organization and operation of the Fund, including its investment strategy.
The SAI is incorporated by reference into this Prospectus and is therefore
legally considered a part of this Prospectus.
How to Obtain Information
From MassMutual Institutional Funds: You may request information about the Fund
(including the Annual/Semiannual Reports and the SAI) or make shareholder
inquiries by calling 1-888-743-5274 or by writing MassMutual Institutional Funds
c/o Massachusetts Mutual Life Insurance Company, 1295 State Street, Springfield,
Massachusetts 01111-0111, Attention: MassMutual Institutional Funds Coordinator,
MIP C218.
From the SEC: You may review information about the Fund (including the SAI) at
the SEC's Public Reference Room in Washington, D.C. (call 1-800-SEC-0330 for
information regarding the operation of the SEC's public reference room). You can
get copies of this information, upon payment of a copying fee, by writing to the
SEC's Public Reference Section, Washington, D.C. 20549-6009. Alternatively, if
you have access to the Internet, you may obtain information about the Fund from
the SEC's Internet site at http://www.sec.gov. When obtaining information about
the Fund from the SEC, you may find it useful to reference the Fund's SEC file
number: 881-8274.
