N-CSR 1 a2152352zn-csr.txt N-CSR UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-02224 ------------------------------------------- MML Series Investment Fund --------------------------------------------------------------------- (Exact name of registrant as specified in charter) 1295 State Street, Springfield, MA 01111 -------------------------------------------------------- (Address of principal executive offices) (Zip code) David W. O'Leary 1295 State Street, Springfield, MA 01111 --------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 413-788-8411 --------------- Date of fiscal year end: 12/31/2004 ------------ Date of reporting period: 12/31/2004 ----------- ITEM 1 REPORTS TO STOCKHOLDERS. (Annual Report for the period 1/1/04 through 12/31/04 is filed herewith) MML SERIES INVESTMENT FUND ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2004 [GRAPHIC] MML MONEY MARKET FUND MML MANAGED BOND FUND MML BLEND FUND MML EQUITY FUND [MASSMUTUAL FINANCIAL GROUP(SM) LOGO] YOU CAN'T PREDICT. YOU CAN PREPARE.(R) [GRAPHIC] TABLE OF CONTENTS LETTER TO SHAREHOLDERS 1 PORTFOLIO OF INVESTMENTS AS OF DECEMBER 31, 2004 MML Money Market Fund 12 MML Managed Bond Fund 13 MML Blend Fund 20 MML Equity Fund 30 STATEMENT OF ASSETS AND LIABILITIES AS OF DECEMBER 31, 2004 36 MML Money Market Fund MML Managed Bond Fund MML Blend Fund MML Equity Fund STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2004 37 MML Money Market Fund MML Managed Bond Fund MML Blend Fund MML Equity Fund STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2004 AND FOR THE YEAR ENDED DECEMBER 31, 2003 38 MML Money Market Fund MML Managed Bond Fund MML Blend Fund MML Equity Fund FINANCIAL HIGHLIGHTS MML Money Market Fund 40 MML Managed Bond Fund 41 MML Blend Fund 42 MML Equity Fund 43 NOTES TO FINANCIAL STATEMENTS 44 INDEPENDENT AUDITORS' REPORT 52 DIRECTORS AND OFFICERS (UNAUDITED) 53 FEDERAL TAX INFORMATION (UNAUDITED) 56 FUND EXPENSES (UNAUDITED) 57
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE MML SERIES INVESTMENT FUND. INVESTORS SHOULD CONSIDER A FUND'S INVESTMENT OBJECTIVE, RISKS AND CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THIS AND OTHER INFORMATION ABOUT THE INVESTMENT COMPANY IS AVAILABLE IN THE PROSPECTUS. READ IT CAREFULLY BEFORE INVESTING. MML SERIES INVESTMENT FUND - LETTER TO SHAREHOLDERS December 31, 2004 TO OUR SHAREHOLDERS [PHOTO OF DAVID W. O'LEARY] DAVID W. O'LEARY "IN MASSMUTUAL'S VIEW, INVESTORS SHOULD FOCUS ON THE LONG TERM, WITH A PORTFOLIO THAT IS APPROPRIATELY DIVERSIFIED BASED ON THEIR FINANCIAL GOALS, TIME HORIZON AND RISK COMFORT LEVEL. STAYING THE COURSE WITH TIME-TESTED PRINCIPLES, SUCH AS DIVERSIFICATION, HAS HISTORICALLY PROVEN TO BE A SOUND STRATEGY." A LOOK BACK AT 2004 During the first half of 2004, the strong market advance of 2003 lost much of its momentum, as unsettling geopolitical developments, a nebulous market environment and the uncertainty surrounding the U.S. presidential election weighed on investors' minds. Although the larger-cap and technology-oriented market indexes lost some traction in the first quarter, the S&P 500 Index(R)* held its ground and small-cap and international stocks advanced. The bond market also benefited from slightly lower interest rates. A seesaw of positives and negatives kept many investors from making definitive moves in the second quarter. Despite stronger economic growth and corporate profits, greater consumer confidence and improving employment statistics, higher oil prices, renewed inflation concerns and continued terrorist threats unnerved investors. As a result, many market indexes turned in nearly flat returns. In the third quarter, stocks lost ground as high energy prices, rising interest rates, presidential election jitters and the worst hurricane season in 40 years kept investors on the defensive. Bonds outperformed stocks, despite two increases in short-term interest rates by the Federal Reserve (Fed). As 2004 drew to a close, many investors saw gains in the major stock indexes for both the fourth quarter and the year itself. The fixed income rally that had buoyed bond prices for a good portion of the year slowed considerably in the middle of the fourth quarter. Underscoring investor preference for technology stocks over blue chips as 2004 wound down, the Nasdaq Composite Index and Dow Jones Industrial Average returned 14.69% and 7.48% for the quarter and 8.59% and 5.29% for the year, respectively. Small-cap stocks easily outdistanced large caps on both a quarterly basis and for the year. International stocks benefited from the continued weakening of the dollar relative to other currencies, as the MSCI EAFE Index outperformed nearly every other major equity index. Despite an investment trend away from fixed income and toward equities, many bond investors still notched positive returns for the year. As with much of the year, economic news in the fourth quarter was generally mixed. Many investors were encouraged by a swift resolution to the presidential election and reports of an overall improvement in economic fundamentals. However, gyrating oil prices, predictions about a weak holiday retailing season, weak statistics for new home sales and mortgage applications and concerns about corporate earnings kept an equity rally from sustaining momentum until the second half of the fourth quarter, when a series of economic reports pointed to solid expansion and an improved outlook. THE ROLE OF THE WEAKENING DOLLAR In the fourth quarter of 2004, the U.S. dollar declined dramatically relative to its key benchmark currencies, including the euro, the Japanese yen and the British pound. The strong performance of international markets in 2004 directly correlates to the dollar's weakness. Currency rates suddenly became a focus for investors, who wondered about the impact to their portfolios and whether a falling dollar could be both negative and positive. The answer seems to be yes - depending on your perspective. Put simply, a dollar that is strengthening can buy more units of a foreign currency; a weakening dollar will buy fewer. When the dollar strengthens, the prices of goods and services produced abroad go down for American consumers, who have more purchasing power to buy foreign securities, and a * Indexes are unmanaged, do not incur fees or expenses and cannot be purchased directly for investment. 1 better rate of exchange when traveling abroad. Viewed differently, a strong dollar means that U.S. companies have greater difficulty doing business internationally, as they must compete with the lower prices of foreign products. Conversely, when the value of the dollar declines, foreign products become more expensive for U.S. buyers, U.S. companies can offer more competitive pricing on products overseas, foreign travelers find the U.S. to be more affordable, and securities denominated in dollars become more attractive. On the other hand, the prices of foreign-produced goods become higher for U.S. buyers - whose travel to other countries may become cost-prohibitive and whose foreign securities purchasing power diminishes. OUTLOOK The weakening dollar notwithstanding, as we look toward 2005, there are various encouraging economic signs on the horizon. Inflation and interest rates are still low and economic expansion has been widely substantiated. Reports on personal income, consumer confidence and durable goods have suggested the economy may sustain above-average growth in the near term, all of which could translate into stronger corporate earnings figures and higher stock prices. The Fed will likely continue to raise interest rates at a measured pace - in tandem with a potentially stronger equity environment, this may present a challenge to bond investors. In summary, MassMutual continues to believe that investors should focus on the long term, with a portfolio that is appropriately diversified based on their financial goals, time horizon and risk comfort level. Staying the course with time-tested principles, such as diversification, has historically helped investors reach their goals, although past performance is no guarantee of future results. /s/ David W. O'Leary David W. O'Leary PRESIDENT THE OPINIONS EXPRESSED HEREIN ARE THOSE OF MASS MUTUAL AS OF JANUARY 1, 2005 AND ARE SUBJECT TO CHANGE WITHOUT NOTICE. THIS INFORMATION IS NOT TO BE CONSTRUED AS TAX, LEGAL OR INVESTMENT ADVICE. 2 MML MONEY MARKET FUND - PORTFOLIO MANAGER REPORT WHAT IS THE INVESTMENT OBJECTIVE OF THE MML MONEY MARKET FUND? This Fund seeks to maximize current income to the extent consistent with liquidity and the preservation of capital by investing in a diversified portfolio of money market instruments. HOW DID THE FUND PERFORM DURING 2004? For the 12 months ended December 31, 2004, the Fund's shares had a return of 0.79%, outperforming the 0.77% return of the Lipper Taxable Money Market Fund Index. WHAT WAS THE INVESTMENT BACKGROUND DURING THE PERIOD? The first quarter of 2004 was characterized by a lackluster stock market, positive total returns for bonds, and a Federal Reserve (Fed) that remained on hold. The biggest factor behind the strong bond performance was anemic job growth, which signaled weak economic expansion and led investors to prefer the relative safety of bonds compared to stocks. Inflation remained in check, despite rising oil and commodity prices. Stock and bond returns were subdued in the second quarter. Stocks DID outperform bonds, however, as bond prices were negatively impacted by higher interest rates. On June 30, the Federal Reserve Open Market Committee (FOMC) raised its target for the federal funds level 0.25% to 1.25%. Bonds performed well during the third quarter of 2004, despite rising oil prices and the FOMC's two interest rate increases. In contrast, both the S&P 500 and the Dow Industrials had negative returns during the period. The final release of second quarter Gross Domestic Product (GDP) was 3.3%, a substantial revision from the earlier estimate of 2.7%. Inventory rebuilding, investment spending and net exports fueled the increase. Bond and money market returns were muted and unexciting during the fourth quarter. The excitement was elsewhere - an active Fed (two rate increases), the U.S. presidential election, a dramatic weakening of the U.S. dollar and a strong rally in the equity markets. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? During the first quarter, short-term yields were at or near historical lows, so the Fund retained a defensive posture from a credit perspective, choosing to give up yield in lieu of holding riskier corporate names. As a result of the turmoil with Fannie Mae and Freddie Mac, the Fund reduced its exposure to the Government Sponsored Enterprises, preferring to hold U.S. Treasury bills. In the second quarter of 2004, the anticipation of Fed rate increases drove rates higher - and prices lower - across the yield curve, but particularly in the shorter and intermediate maturities. Bond prices move in the opposite direction to interest rates (or yields); when yields rise, the prices of existing bonds fall - and vice versa. At June 30, the two-year note yield had risen by 1.10% to 2.67%; three-year notes ended the quarter yielding 3.07% versus 1.94% at the end of March. The five-year Treasury note increased by 1% in yield to 3.76%. Turning to the three months ended September 30, longer-maturity Treasuries outperformed, resulting in a flattening of the yield curve. The two-year note fell by 0.07% to yield 2.61%. In reaction to the Fed's tightening, three- and six-month bill yields rose substantially by 0.44% and 0.35% to yield 1.70% and 1.99%, respectively. In the fourth quarter, corporate bonds, agencies, mortgages and other securitized assets all generally outperformed the total return on Treasuries. Long-maturity corporate bonds were the best-performing sector, outperforming Treasuries of comparable maturity by 2.17%. Once again, lower-credit quality outperformed versus higher-quality bonds. Bonds rated Baa outperformed Treasuries by 1.20% for the quarter, versus the highest-quality bonds, rated Aaa, which outperformed by 0.47%. High-yield outperformed investment-grade corporate bonds. In a period of strong equity market performance, low levels of corporate defaults, and investors' need to reach for yield, risk premiums - the difference in yield attributable to higher-risk investments - continued to decline. WHAT IS YOUR OUTLOOK? Entering 2005, we remain guardedly optimistic that the economy will continue to grow in the 3+% range for the foreseeable future. Additionally, Federal Reserve interest rate increases should work to improve money market yields going forward. 3 MML MONEY MARKET FUND ASSET ALLOCATION (% OF NET ASSETS) ON 12/31/04 Commercial Paper 62.7% Other Short-Term Debt 38.1% Other Assets and Liabilities (0.8)% ----- 100.0% =====
GROWTH OF A $10,000 INVESTMENT Hypothetical Investments in MML Money Market Fund and the Lipper Taxable Money Market Fund Index MML SERIES INVESTMENT FUND TOTAL RETURN
FIVE YEAR TEN YEAR ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL 1/1/04 - 12/31/04 1/1/00 - 12/31/04 1/1/95 - 12/31/04 MML Money Market Fund 0.79% 2.46% 3.79% Lipper Taxable Money Market Fund Index 0.77% 2.44% 3.76%
[CHART] GROWTH OF A $10,000 INVESTMENT FOR THE PAST TEN YEARS
MML MONEY MARKET FUND LIPPER TAXABLE MONEY MARKET FUND INDEX 1/1/95 $ 10,000 $ 10,000 12/95 $ 10,558 $ 10,553 12/96 $ 11,087 $ 11,082 12/97 $ 11,661 $ 11,652 12/98 $ 12,262 $ 12,247 12/99 $ 12,849 $ 12,828 12/00 $ 13,624 $ 13,590 12/01 $ 14,123 $ 14,108 12/02 $ 14,305 $ 14,271 12/03 $ 14,394 $ 14,359 12/04 $ 14,508 $ 14,470
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE; 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. CURRENT PERFORMANCE OF THE FUND MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END MAY BE OBTAINED BY ACCESSING THE WEBSITE AT www.massmutual.com. INVESTORS SHOULD NOTE THAT THE FUND IS A PROFESSIONALLY MANAGED MUTUAL FUND, WHILE THE LIPPER TAXABLE MONEY MARKET FUND INDEX IS UNMANAGED AND DOES NOT INCUR EXPENSES, AND CANNOT BE PURCHASED DIRECTLY BY INVESTORS. INVESTORS SHOULD READ THE FUND'S PROSPECTUS WITH REGARD TO THE FUND'S INVESTMENT OBJECTIVE, RISKS AND CHARGES AND EXPENSES IN CONJUNCTION WITH THESE FINANCIAL STATEMENTS. THE FUND'S RETURN REFLECTS CHANGES IN THE NET ASSET VALUE PER SHARE WITHOUT THE DEDUCTION OF ANY PRODUCT CHARGES. THE INCLUSION OF THESE CHARGES WOULD HAVE REDUCED THE PERFORMANCE SHOWN HERE. PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE; PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. AN INVESTMENT IN THE MML MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND. 4 MML MANAGER BOND FUND - PORTFOLIO MANAGER REPORT WHAT IS THE INVESTMENT OBJECTIVE OF THE MML MANAGED BOND FUND? This Fund seeks to achieve a high total rate of return consistent with prudent investment risk and the preservation of capital by investing primarily in a diversified portfolio of investment-grade fixed-income securities. HOW DID THE FUND PERFORM DURING 2004? For the 12 months ended December 31, 2004, the Fund's shares returned 4.47%, outperforming the 4.34% return of the Lehman Brothers Aggregate Bond Index, an index of fixed-income securities primarily from the Treasury, mortgage-backed, and corporate asset classes. WHAT WAS THE INVESTMENT BACKGROUND DURING THE PERIOD? The first quarter of 2004 was characterized by a lackluster stock market, positive total returns for bonds, and a Federal Reserve (Fed) that remained on hold. The biggest factor behind the strong bond performance was anemic job growth, which signaled weak economic expansion and led investors to prefer the relative safety of bonds compared to stocks. Inflation remained in check, despite rising oil and commodity prices. Stock and bond returns were subdued in the second quarter. Stocks DID outperform bonds, however, as bond prices were negatively impacted by higher interest rates. On June 30, the Federal Reserve Open Market Committee (FOMC) raised its target for the federal funds level 0.25% to 1.25%. Bonds performed well during the third quarter of 2004, despite rising oil prices and the FOMC's two interest rate increases. In contrast, both the S&P 500 and the Dow Industrials had negative returns during the period. The final release of second quarter Gross Domestic Product (GDP) was 3.3%, a substantial revision from the earlier estimate of 2.7%. Inventory rebuilding, investment spending and net exports fueled the increase. Bond market returns were muted and unexciting during the fourth quarter. The excitement was elsewhere - an active Fed (two rate increases), the U.S. presidential election, a dramatic weakening of the U.S. dollar and a strong rally in the equity markets. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? Asset-backed securities made up the best-performing sector in the first quarter. Of note was the remarkably strong performance of Treasury Inflation-Protected Securities (TIPS), with the 30-year benchmark rising in price by approximately 0.09%. In the second quarter, anticipation of Fed action drove bond yields higher - and prices lower - particularly in the shorter and intermediate maturities. Bond prices move in the opposite direction to interest rates (or yields); when yields rise, the prices of existing bonds fall - and vice versa. Mortgages slightly outperformed credit during the period. In general, there were no dramatic performance differences between different fixed-income sectors or between higher- and lower-quality assets. During the third quarter, longer-maturity Treasuries outperformed. The 30-year bond declined by approximately 0.40% to yield 4.89% and the 10-year note closed the quarter with a yield of 4.12%, a decline of 0.46%. The two-year note fell by only 0.07% to yield 2.61%. Corporate bonds were the best-performing sector during the period. Turning to the final quarter of 2004, shorter-maturity bonds rose in yield as a result of the Fed's tightenings. Corporate bonds, agencies, mortgages and other securitized assets generally outperformed the total return on Treasuries. Long-maturity corporate bonds were the best-performing sector, outperforming comparable Treasuries. Lower-credit quality outperformed versus higher-quality bonds. High-yield and emerging-markets debt outpaced investment-grade corporate bonds. In a period of strong equity market performance, low levels of corporate defaults, and investors' need to reach for yield, risk premiums - the difference in yield attributable to higher-risk investments - continued to decline. WHAT IS YOUR OUTLOOK? We remain guardedly optimistic that the economy will continue to grow in the 3+% range for the foreseeable future. This type of growth portends reasonable corporate profitability and suggests to us that it is still fine to own corporate bonds. It is unlikely that the extraordinary performance of bonds over the last two years will be repeated; however, we will continue to upgrade the portfolio where opportunities present themselves. 5 MML MANAGED BOND FUND QUALITY STRUCTURE (% OF NET ASSETS) ON 12/31/04 U.S. Governments, Aaa/AAA 47.4% Aa/AA 2.9% A 12.1% Baa/BBB 29.5% Ba/BB 5.8% B 0.1% Short-Term Investments and Other Assets and Liabilities 2.2% ----- 100.0% =====
GROWTH OF A $10,000 INVESTMENT Hypothetical Investments in MML Managed Bond Fund and the Lehman Brothers Aggregate Bond Index MML SERIES INVESTMENT FUND TOTAL RETURN
FIVE YEAR TEN YEAR ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL 1/1/04 - 12/31/04 1/1/00 - 12/31/04 1/1/95 - 12/31/04 MML Managed Bond Fund 4.47% 7.48% 7.49% Lehman Brothers Aggregate Bond Index 4.34% 7.71% 7.72%
[CHART] GROWTH OF A $10,000 INVESTMENT FOR THE PAST TEN YEARS
MML MANAGED BOND FUND LEHMAN BROTHERS AGGREGATE BOND INDEX 1/1/95 $ 10,000 $ 10,000 12/95 $ 11,914 $ 11,847 12/96 $ 12,301 $ 12,278 12/97 $ 13,521 $ 13,463 12/98 $ 14,621 $ 14,632 12/99 $ 14,354 $ 14,512 12/00 $ 15,959 $ 16,200 12/01 $ 17,218 $ 17,568 12/02 $ 18,665 $ 19,370 12/03 $ 19,709 $ 20,165 12/04 $ 20,590 $ 21,039
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE; 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. CURRENT PERFORMANCE OF THE FUND MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END MAY BE OBTAINED BY ACCESSING THE WEBSITE AT www.massmutual.com. INVESTORS SHOULD NOTE THAT THE FUND IS A PROFESSIONALLY MANAGED MUTUAL FUND, WHILE THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS UNMANAGED AND DOES NOT INCUR EXPENSES, AND CANNOT BE PURCHASED DIRECTLY BY INVESTORS. INVESTORS SHOULD READ THE FUND'S PROSPECTUS WITH REGARD TO THE FUND'S INVESTMENT OBJECTIVE, RISKS AND CHARGES AND EXPENSES IN CONJUNCTION WITH THESE FINANCIAL STATEMENTS. THE FUND'S RETURN REFLECTS CHANGES IN THE NET ASSET VALUE PER SHARE WITHOUT THE DEDUCTION OF ANY PRODUCT CHARGES. THE INCLUSION OF THESE CHARGES WOULD HAVE REDUCED THE PERFORMANCE SHOWN HERE. PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE; PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. 6 MML BLEND FUND - PORTFOLIO MANAGER REPORT WHAT IS THE INVESTMENT OBJECTIVE OF THE MML BLEND FUND? This Fund seeks to achieve a high total rate of return over an extended period of time consistent with the preservation of capital by investing in a diversified portfolio of equity securities, fixed-income securities and money market instruments. HOW DID THE FUND PERFORM DURING 2004? For the 12 months ended December 31, 2004, the Fund's shares returned 8.68%, outperforming the 7.00% return of the Lipper Balanced Fund Index, an unmanaged index of stock and bond portfolios. WHAT WAS THE INVESTMENT BACKGROUND DURING THE PERIOD? Equity markets recorded modest gains in the first quarter of 2004, as renewed concerns over terrorism and rising oil prices dampened investor psychology. Bonds outperformed stocks, also benefiting from lower interest rates. Bond prices move in the opposite direction to interest rates (or yields); when yields fall, the prices of existing bonds rise. During the second quarter, the pace of the economic recovery quickened. In response, interest rates increased by more than 1.00% on two- and three-year Treasuries. The Federal Reserve (Fed) increased the federal funds rate by 0.25% on June 30, a move the bond market had seemingly been anticipating for months. Third quarter equity market performance resembled a roller-coaster ride. Early in the quarter, factors such as higher interest rates, rising oil prices and weak economic data drove markets lower. Things turned around in the middle of August, when interest rates turned decisively lower and bargain hunters feasted on attractive equity valuations. In September, however, headwinds - including record oil prices and presidential election uncertainty - cast a chill on the markets. Equity markets closed 2004 on a strong note, finishing a second straight year in positive territory. With a major element of uncertainty - political leadership - eliminated, investors refocused on major economic indicators, such as strengthening job creation and improved consumer confidence. WHAT ASSET ALLOCATION DECISIONS WERE MADE? We entered the first quarter significantly overweighted in stocks. During January and early February, we shifted to a neutral position based on high valuations and an overly ebullient sentiment. During mid-May, we increased the weight of both bonds and stocks, as the market appeared to be discounting still-higher interest rates. During the third quarter, we were primarily overweighted stocks and bonds on the belief that the financial markets had overly factored the impact of the June 30 interest rate hike. At the end of the quarter, we shifted back to a more neutral posture. During the fourth quarter, we leveraged investor sentiment, selling some stock to bring our equity allocation to a more neutral positioning. HOW DID THE FUND'S STOCK SELECTION AFFECT PERFORMANCE DURING THE PERIOD? During the first quarter, performance drivers came from the financial services, materials and processing, producer durables, consumer discretionary, and health care sectors. In the second quarter, performance was mostly positive, but relatively muted, as the portfolio experienced weakness in the consumer discretionary, technology, producer durables, consumer holdings and health care sectors. Bolstering results were the energy, autos and transportation, materials and processing, technology, utilities, and financial services sectors. In the third quarter, the Fund was relatively strong against the S&P 500 Index on a broad basis. The only sectors showing weakness were consumer staples and financial services. In the fourth quarter, results were highly favorable in consumer sectors, materials and processing, technology, and autos and transportation - while performance trailed the benchmark in financial services, integrated oils, and producer durables. HOW DID THE BOND PORTFOLIO PERFORM? The Fund's bond portfolio slightly underperformed the Lehman Brothers Aggregate Bond Index in the first quarter. Results for the second quarter were relatively in line with the benchmark, as the Fund's reduced exposure to long corporate bonds and its stake in lower-quality corporate bonds contributed. Turning to the third quarter, the Fund's largely favorable results came from our overweighted position in lower-quality corporate bonds, as well as opportunistic yield curve positioning and minimal exposure to U.S. Agency obligations. In the fourth quarter, we continued to benefit from an overweight position in the corporate bond sector, particularly exposure to lower-credit quality issuers. However, our reduced exposure to lower-quality, long-maturity corporates over the latter part of the year - taken in favor of shorter-maturity issues - detracted slightly from performance. WHAT IS YOUR OUTLOOK? As the market faces 2005, there are many potential threats on the horizon, including the level debt in the system, a falling dollar, rising inflation, changes in the tax code, Social Security reform, rising interest rates, and a hard landing in China. However, the most disturbing factor for the market now is the high level of existing bullishness, given the number of issues that could become troublesome. Although we view this as a potentially bearish signal, if the aforementioned threats fail to cause damage and long-term interest rates remain low, stocks could enjoy another bullish year. 7 MML BLEND FUND ASSET ALLOCATION (% OF NET ASSETS) ON 12/31/04 Common Stocks 64.2% Bonds 27.5% Futures 0.0% Short-Term Investments and Other Assets and Liabilities 8.3% ----- 100.0% =====
MML BLEND FUND LARGEST STOCK HOLDINGS (12/31/04) General Electric Co. Exxon Mobil Corp. Citigroup, Inc. Microsoft Corp. Pfizer, Inc. Johnson & Johnson Bank of America Corp. Wal-Mart Stores, Inc. International Business Machines Corp. Intel Corp. GROWTH OF A $10,000 INVESTMENT Hypothetical Investments in MML Blend Fund and the corresponding indices MML SERIES INVESTMENT FUND TOTAL RETURN
FIVE YEAR TEN YEAR ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL 1/1/04 - 12/31/04 1/1/00 - 12/31/04 1/1/95 - 12/31/04 MML Blend Fund 8.68% 1.48% 7.44% Lehman Brothers Aggregate Bond Index 4.34% 7.71% 7.72% Lipper Balanced Fund Index 7.00% 2.57% 9.21% S&P 500 Index 10.88% -2.30% 12.07%
[CHART] GROWTH OF A $10,000 INVESTMENT FOR THE PAST TEN YEARS
MML BLEND FUND LEHMAN BROTHERS AGGREGATE BOND INDEX LIPPER BALANCED FUND INDEX S&P 500 INDEX 1/1/95 $ 10,000 $ 10,000 $ 10,000 $ 10,000 12/95 $ 12,328 $ 11,847 $ 12,459 $ 13,753 12/96 $ 14,048 $ 12,278 $ 14,079 $ 16,909 12/97 $ 16,983 $ 13,463 $ 16,902 $ 22,548 12/98 $ 19,286 $ 14,632 $ 19,500 $ 28,992 12/99 $ 19,047 $ 14,512 $ 21,250 $ 35,092 12/00 $ 19,051 $ 16,200 $ 21,758 $ 31,900 12/01 $ 17,955 $ 17,568 $ 21,054 $ 28,111 12/02 $ 15,885 $ 19,370 $ 18,804 $ 21,901 12/03 $ 18,857 $ 20,165 $ 22,552 $ 28,179 12/04 $ 20,495 $ 21,039 $ 24,130 $ 31,244
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE; 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. CURRENT PERFORMANCE OF THE FUND MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END MAY BE OBTAINED BY ACCESSING THE WEBSITE AT www.massmutual.com. INVESTORS SHOULD NOTE THAT THE FUND IS A PROFESSIONALLY MANAGED MUTUAL FUND, WHILE THE LIPPER BALANCED FUND INDEX, THE S&P 500 INDEX AND THE LEHMAN BROTHERS AGGREGATE BOND INDEX ARE UNMANAGED AND DO NOT INCUR EXPENSES, AND CANNOT BE PURCHASED DIRECTLY BY INVESTORS. INVESTORS SHOULD READ THE FUND'S PROSPECTUS WITH REGARD TO THE FUND'S INVESTMENT OBJECTIVE, RISKS AND CHARGES AND EXPENSES IN CONJUNCTION WITH THESE FINANCIAL STATEMENTS. THE FUND'S RETURN REFLECTS CHANGES IN THE NET ASSET VALUE PER SHARE WITHOUT THE DEDUCTION OF ANY PRODUCT CHARGES. THE INCLUSION OF THESE CHARGES WOULD HAVE REDUCED THE PERFORMANCE SHOWN HERE. PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE; PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. 8 MML EQUITY FUND - PORTFOLIO MANAGER REPORT WHAT IS THE INVESTMENT OBJECTIVE OF THE MML EQUITY FUND? This Fund seeks to achieve long-term growth of capital and income by investing primarily in a diversified portfolio of equity securities of larger, well-established companies. HOW DID THE FUND PERFORM DURING 2004? For the 12 months ended December 31, 2004, the Fund's shares returned 15.85%, exceeding the 10.88% return of the Standard & Poor's 500 Index, but slightly trailing the 16.50% return of the Russell 1000 Value Index. The S&P 500 is a market capitalization-weighted, unmanaged index of 500 common stocks. The Russell 1000 Value Index measures the performance of those companies in the Russell 1000 Index with attributes common to the value universe. The Russell 1000 Index tracks the performance of the 1,000 largest U.S. companies based on total market capitalization. WHAT WAS THE INVESTMENT BACKGROUND DURING THE PERIOD? Equity markets recorded modest gains in the first quarter of 2004, as renewed concerns over terrorism and rising oil prices dampened investor psychology. Bonds outperformed stocks, also benefiting from lower interest rates. Bond prices move in the opposite direction to interest rates (or yields); when yields fall, the prices of existing bonds rise. During the second quarter, the pace of the economic recovery quickened. In response, interest rates increased by more than 1.00% on two- and three-year Treasuries. The Federal Reserve (Fed) increased the federal funds rate by 0.25% on June 30, a move the bond market had seemingly been anticipating for months. Third quarter equity market performance resembled a roller-coaster ride. Early in the quarter, factors such as higher interest rates, rising oil prices and weak economic data drove markets lower. Things turned around in the middle of August, when interest rates turned decisively lower and bargain hunters feasted on attractive equity valuations. In September, however, headwinds - including record oil prices and presidential election uncertainty - cast a chill on the markets. Equity markets closed 2004 on a strong note, finishing a second straight year in positive territory. With a major element of uncertainty - political leadership - eliminated, investors refocused on major economic indicators, such as strengthening job creation and improved consumer confidence. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? During the first quarter, security selection was favorable in the technology, auto/transportation, producer durables, consumer discretionary and utilities sectors. Conversely, the Fund's underweight position in the strongly performing financial services sector hampered relative performance. In the second quarter, favorable stock selection in the technology and producer durables sectors contributed to returns. In addition, strong stock selection within the financial services sector made it one of our largest performance drivers. Areas that detracted were the health care, retail and consumer discretionary sectors. In the three months ended September 30, the Fund benefited from strong stock selection in areas such as consumer discretionary, producer durables and technology. During the fourth quarter, the portfolio generated a positive return in all economic sector categories except health care, where one of our largest holdings, a pharmaceutical company, faced downward pressure. Also detracting from performance was stock selection in the producer durables and materials and processing sectors. WHAT IS YOUR OUTLOOK? Our 2005 outlook for the U.S. stock market assumes that profit growth will decelerate from 2004 levels and settle in the 8% to 10% range. We expect the market to face downward pressure on valuations as interest rates rise. These two trends could provide for a lackluster year for equities. Conversely, the stock market should be able to tolerate rising interest rates, as long as the increases are gradual and inflation does not become troublesome. 9 MML EQUITY FUND INDUSTRY TABLE (% OF NET ASSETS) ON 12/31/04 Banking, Savings & Loans 15.1% Insurance 9.0% Energy 8.1% Pharmaceuticals 5.0% Financial Services 5.0% Electric Utilities 4.3% Broadcasting, Publishing & Printing 4.2% Chemicals 4.0% Foods 3.7% Aerospace & Defense 3.4% Computers & Information 3.4% Telephone Utilities 2.8% Forest Products & Paper 2.7% Beverages 2.6% Industrial - Diversified 2.5% Apparel, Textiles & Shoes 2.3% Transportation 2.2% Commercial Services 2.1% Restaurants 2.1% Photography Equipment/Supplies 2.1% Electrical Equipment & Electronics 1.9% Communications 1.8% Prepackaged Software 1.6% Entertainment & Leisure 1.4% Tobacco 1.2% Data Processing & Preparation 0.9% Retail 0.7% Automotive & Parts 0.6% Metals & Mining 0.5% Household Products 0.4% Computers & Office Equipment 0.4% Cosmetics & Personal Care 0.3% Medical Supplies 0.2% Healthcare 0.2% Computer Integrated Systems Design 0.1% Machinery & Components 0.1% Home Construction, Furnishings & Appliances 0.1% Communications Equipment 0.1% Building Materials & Construction 0.1% Computer Related Services 0.1% Lodging 0.1% Information Retrieval Services 0.1% Advertising 0.0% Containers 0.0% Manufacturing 0.0% Real Estate 0.0% Retail - Grocery 0.0% Toys, Games 0.0% Industrial - Distribution 0.0% Computer Programming Services 0.0% Travel 0.0% Short-Term Investments and Other Assets and Liabilities 0.5% ----- 100.0% =====
MML EQUITY FUND LARGEST STOCK HOLDINGS (12/31/04) Citigroup, Inc. Exxon Mobil Corp. Weyerhaeuser Co. Bank of America Corp. Diageo PLC Sponsored ADR (United Kingdom) Verizon Communications, Inc. American International Group, Inc. Wells Fargo & Co. PPG Industries, Inc. Pfizer, Inc. 10 GROWTH OF A $10,000 INVESTMENT Hypothetical Investments in MML Equity Fund and the S&P 500 Index MML SERIES INVESTMENT FUND TOTAL RETURN
FIVE YEAR TEN YEAR ONE YEAR AVERAGE ANNUAL AVERAGE ANNUAL 1/1/04 - 12/31/04 1/1/00 - 12/31/04 1/1/95 - 12/31/04 MML Equity Fund 15.85% 0.83% 8.97% S&P 500 Index 10.88% -2.30% 12.07%
[CHART] GROWTH OF A $10,000 INVESTMENT FOR THE PAST TEN YEARS
MML EQUITY FUND S&P 500 INDEX 1/1/95 $ 10,000 $ 10,000 12/95 $ 13,113 $ 13,753 12/96 $ 15,769 $ 16,909 12/97 $ 20,277 $ 22,548 12/98 $ 23,561 $ 28,992 12/99 $ 22,661 $ 35,092 12/00 $ 23,308 $ 31,900 12/01 $ 19,878 $ 28,111 12/02 $ 15,992 $ 21,901 12/03 $ 20,388 $ 28,179 12/04 $ 23,618 $ 31,244
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE; 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. CURRENT PERFORMANCE OF THE FUND MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END MAY BE OBTAINED BY ACCESSING THE WEBSITE AT www.massmutual.com. INVESTORS SHOULD NOTE THAT THE FUND IS A PROFESSIONALLY MANAGED MUTUAL FUND, WHILE THE S&P 500 INDEX IS UNMANAGED AND DOES NOT INCUR EXPENSES, AND CANNOT BE PURCHASED DIRECTLY BY INVESTORS. INVESTORS SHOULD READ THE FUND'S PROSPECTUS WITH REGARD TO THE FUND'S INVESTMENT OBJECTIVE, RISKS AND CHARGES AND EXPENSES IN CONJUNCTION WITH THESE FINANCIAL STATEMENTS. THE FUND'S RETURN REFLECTS CHANGES IN THE NET ASSET VALUE PER SHARE WITHOUT THE DEDUCTION OF ANY PRODUCT CHARGES. THE INCLUSION OF THESE CHARGES WOULD HAVE REDUCED THE PERFORMANCE SHOWN HERE. PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE; PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. 11 MML MONEY MARKET FUND - PORTFOLIO OF INVESTMENTS DECEMBER 31, 2004
PRINCIPAL MARKET AMOUNT VALUE ---------------- ---------------- SHORT-TERM INVESTMENTS -- 100.8% COMMERCIAL PAPER -- 62.7% Abbott Laboratories+ 2.050% 01/04/2005 $ 2,760,000 $ 2,759,529 American Honda Finance Corp. 2.140% 01/10/2005 1,450,000 1,449,224 American Honda Finance Corp. 2.270% 01/19/2005 1,450,000 1,448,354 Anheuser-Busch Cos., Inc. 1.950% 01/13/2005 1,700,000 1,698,895 Boston Edison Co. 2.250% 01/06/2005 2,900,000 2,899,094 BP Amoco Capital PLC 2.000% 01/03/2005 1,630,000 1,629,819 Caterpillar Financial Services Corp. 2.260% 01/26/2005 2,825,000 2,820,566 CIT Group, Inc. 2.200% 04/04/2005 1,080,000 1,073,862 Citigroup Global Markets 1.990% 01/18/2005 2,560,000 2,557,594 Colgate-Palmolive Co.+ 2.200% 01/07/2005 2,900,000 2,898,937 E.W. Scripps Co.+ 2.170% 01/26/2005 1,865,000 1,862,190 Eli Lilly & Co.+ 2.270% 02/01/2005 2,850,000 2,844,429 FCAR Owner Trust I 2.440% 04/15/2005 1,565,000 1,553,968 First Data Corp. 2.200% 01/14/2005 2,875,000 2,872,716 Florida Power & Light Co. 2.300% 01/07/2005 2,750,000 2,748,946 Gannett Co., Inc. 2.190% 01/21/2005 1,585,000 1,583,072 Gannett Co., Inc. 2.270% 01/10/2005 1,325,000 1,324,248 General Electric Capital Corp. 2.290% 01/25/2005 2,680,000 2,675,909 Goldman Sachs Group, Inc. 2.340% 01/24/2005 2,900,000 2,895,665 Govco, Inc.+ 2.010% 01/12/2005 2,410,000 2,408,520 Harley-Davidson, Inc.+ 2.190% 01/14/2005 1,250,000 1,249,011 Harley-Davidson, Inc.+ 2.250% 01/11/2005 1,610,000 1,608,994 Hershey Foods Corp.+ 2.170% 01/28/2005 $ 2,900,000 $ 2,895,280 International Business Machines Corp. 2.260% 02/25/2005 2,910,000 2,899,952 Kimberly-Clark Worldwide+ 2.200% 01/28/2005 2,900,000 2,895,215 Kitty Hawk Funding Corp.+ 2.450% 03/21/2005 1,575,000 1,566,532 McCormick & Co., Inc.+ 2.300% 02/22/2005 1,995,000 1,988,372 Minnesota Mining & Manufacturing Co. 2.060% 01/03/2005 2,920,000 2,919,666 Nestle Capital Corp.+ 2.250% 01/31/2005 2,900,000 2,894,563 PepsiCo, Inc. 2.220% 01/10/2005 765,000 764,575 PepsiCo, Inc. 2.250% 01/19/2005 1,405,000 1,403,419 Procter & Gamble Co.+ 2.330% 02/14/2005 1,740,000 1,735,045 Procter & Gamble Co.+ 2.380% 03/15/2005 1,150,000 1,144,450 United Technologies Corp. 2.280% 01/05/2005 2,530,000 2,529,359 ---------------- 72,499,970 ---------------- U.S. TREASURY BILLS -- 38.1% U.S. Treasury Bill 1.615% 01/06/2005 2,265,000 2,264,492 U.S. Treasury Bill 1.637% 02/03/2005 2,630,000 2,626,055 U.S. Treasury Bill 1.704% 02/10/2005 1,650,000 1,646,877 U.S. Treasury Bill 1.720% 01/20/2005 2,575,000 2,572,663 U.S. Treasury Bill 1.783% 01/27/2005 2,520,000 2,516,755 U.S. Treasury Bill 1.859% 02/17/2005 3,100,000 3,092,476 U.S. Treasury Bill 1.869% 02/24/2005 2,770,000 2,762,234 U.S. Treasury Bill 1.939% 03/31/2005 1,200,000 1,194,247 U.S. Treasury Bill 1.960% 03/03/2005 3,505,000 3,493,360 U.S. Treasury Bill 1.975% 01/27/2005 5,320,000 5,312,412 U.S. Treasury Bill 2.120% 03/24/2005 $ 3,175,000 $ 3,159,668 U.S. Treasury Bill 2.130% 02/24/2005 2,700,000 2,691,374 U.S. Treasury Bill 2.153% 04/07/2005 4,340,000 4,315,089 U.S. Treasury Bill 2.280% 04/21/2005 3,745,000 3,718,910 U.S. Treasury Bill 2.515% 06/23/2005 2,670,000 2,637,730 ---------------- 44,004,342 ---------------- TOTAL SHORT-TERM INVESTMENTS (AT AMORTIZED COST)* 116,504,312 ---------------- TOTAL INVESTMENTS -- 100.8% OTHER ASSETS/ (LIABILITIES) -- (0.8%) (887,459) ---------------- NET ASSETS -- 100.0% $ 115,616,853 ================
Notes to Portfolio of Investments * See Note 7 for aggregate cost for Federal tax purposes. + 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. At December 31, 2004, these securities amounted to a value of $30,751,067 or 26.6% of net assets. The accompanying notes are an integral part of the financial statements. 12 MML MANAGED BOND FUND - PORTFOLIO OF INVESTMENTS DECEMBER 31, 2004
PRINCIPAL MARKET AMOUNT VALUE ---------------- ---------------- BONDS & NOTES -- 97.6% ASSET BACKED SECURITIES -- 2.8% Capital Auto Receivables Asset Trust Series 2003-1, Class A2A 2.270% 01/17/2006 $ 924,784 $ 924,496 Chase Mortgage Finance Co. Series 2003-S11, Class 1A-1 5.000% 10/25/2033 2,837,935 2,787,896 Ford Credit Auto Owner Trust Series 2003-A, Class A3A 2.200% 07/17/2006 1,182,440 1,181,517 MMCA Automobile Trust Series 2002-3, Class A3 2.970% 03/15/2007 293,809 293,809 National City Auto Receivables Trust Series 2002-A, Class A4 4.830% 08/15/2009 2,746,862 2,787,636 New Century Home Equity Loan Trust Series 1997-NC5, Class A6 6.700% 10/25/2028 252,387 252,939 Travelers Funding Limited Series 1A, Class A1+ 6.300% 02/18/2014 1,130,991 1,176,231 Vanderbilt Mortgage and Finance, Inc. Series 2002-C, Class A2 4.230% 02/07/2015 1,475,000 1,474,485 ---------------- TOTAL ASSET BACKED SECURITIES (COST $10,910,615) 10,879,009 ---------------- CORPORATE DEBT -- 50.1% Alcan Aluminum Limited 6.250% 11/01/2008 800,000 862,197 Allied Waste North America Series B 5.750% 02/15/2011 350,000 329,000 Allied Waste North America, Inc. 8.875% 04/01/2008 210,000 224,700 American General Finance Corp. 5.875% 07/14/2006 $ 1,000,000 $ 1,036,827 American Greetings Corp. 6.100% 08/01/2028 1,730,000 1,846,775 American Honda Finance Corp.+ 3.850% 11/06/2008 850,000 847,631 American Standard, Inc. 7.625% 02/15/2010 800,000 914,622 Ametek, Inc. 7.200% 07/15/2008 1,150,000 1,246,831 Anheuser-Busch Cos., Inc. 5.050% 10/15/2016 850,000 849,934 Anheuser-Busch Cos., Inc. 6.500% 02/01/2043 965,000 1,099,411 Appalachian Power Co., Series G 3.600% 05/15/2008 560,000 553,312 Aramark Services, Inc. 8.150% 05/01/2005 1,200,000 1,217,518 Archstone-Smith Operating Trust REIT 5.000% 08/15/2007 1,200,000 1,233,420 Australian Gas Light Co. Limited+ 6.400% 04/15/2008 850,000 911,321 Avery-Dennison Corp. 6.760% 04/15/2005 1,200,000 1,212,947 Avnet, Inc. 8.000% 11/15/2006 205,000 221,400 Bank of America Corp. 3.250% 08/15/2008 500,000 491,473 Bank of America Corp. 4.250% 10/01/2010 950,000 947,564 Barrick Gold Corp. 7.500% 05/01/2007 2,000,000 2,167,512 Bausch & Lomb, Inc. 7.125% 08/01/2028 815,000 868,381 Blyth, Inc. 7.900% 10/01/2009 550,000 619,917 Bombardier Capital, Inc.+ 6.125% 06/29/2006 250,000 250,000 Bombardier, Inc.+ +++ 6.750% 05/01/2012 310,000 284,425 BP Capital Markets PLC 2.750% 12/29/2006 2,500,000 2,474,418 Briggs & Stratton Corp. 8.875% 03/15/2011 1,650,000 1,984,125 Buckeye Partners LP 4.625% 07/15/2013 $ 500,000 $ 487,108 Burlington Northern Santa Fe Corp. 6.750% 03/15/2029 740,000 832,812 Cabot Corp.+ 5.250% 09/01/2013 525,000 525,564 Capitol Records, Inc.+ 8.375% 08/15/2009 2,000,000 2,245,000 Carlisle Companies, Inc. 7.250% 01/15/2007 1,100,000 1,170,689 CarrAmerica Realty Corp. 6.625% 03/01/2005 450,000 452,303 Caterpillar Financial Services Corp., Series F 3.625% 11/15/2007 1,340,000 1,341,471 Cendant Corp. 6.875% 08/15/2006 700,000 736,446 Centerpoint Energy, Inc. Series B+++ 5.875% 06/01/2008 1,310,000 1,370,770 Certegy, Inc. 4.750% 09/15/2008 270,000 276,208 Champion International Corp. 6.400% 02/15/2026 1,500,000 1,609,722 Chesapeake Energy Corp. 7.500% 06/15/2014 500,000 546,250 Chevron Phillips Chemical Co. LLC 5.375% 06/15/2007 750,000 777,428 Cingular Wireless 5.625% 12/15/2006 200,000 207,726 CIT Group, Inc. 3.650% 11/23/2007 20,000 19,923 CIT Group, Inc. 4.125% 02/21/2006 1,400,000 1,414,227 CIT Group, Inc. 7.375% 04/02/2007 600,000 647,851 Citigroup, Inc. 6.750% 12/01/2005 2,000,000 2,063,868 CNF, Inc. 8.875% 05/01/2010 600,000 711,879 Colonial Pipeline Co.+ 7.630% 04/15/2032 500,000 644,043 Comcast Cable Communications, Inc. 8.375% 05/01/2007 1,250,000 1,382,438
The accompanying notes are an integral part of the financial statements. 13
PRINCIPAL MARKET AMOUNT VALUE ---------------- ---------------- Consolidated Natural Gas Co. Series C 6.250% 11/01/2011 $ 1,050,000 $ 1,152,506 Constellation Brands, Inc. 8.000% 02/15/2008 260,000 282,750 Cooper Industries Limited 5.250% 07/01/2007 1,500,000 1,554,030 Countrywide Home Loans, Inc. 3.250% 05/21/2008 1,150,000 1,124,501 Cox Communications, Inc.+ 4.625% 01/15/2010 405,000 404,066 Cox Communications, Inc. 6.750% 03/15/2011 475,000 520,122 Cox Enterprises, Inc.+ 4.375% 05/01/2008 750,000 749,320 CSX Corp. 7.250% 05/01/2027 2,000,000 2,322,584 DaimlerChrysler NA Holding Corp. 4.050% 06/04/2008 500,000 498,968 Delhaize America, Inc. 9.000% 04/15/2031 1,280,000 1,656,060 Deutsche Telekom International Finance BV 8.250% 06/15/2005 1,000,000 1,023,304 Dominion Resources, Inc. 2.800% 02/15/2005 900,000 900,488 Dominion Resources, Inc. 7.195% 09/15/2014 320,000 369,761 Dover Corp. 6.250% 06/01/2008 750,000 815,048 DPL, Inc. 8.250% 03/01/2007 1,000,000 1,083,988 Duke Energy Field Services Corp. 7.875% 08/16/2010 800,000 933,050 Ecolab, Inc. 6.875% 02/01/2011 1,100,000 1,224,892 Electronic Data Systems Corp. Series B+++ 6.000% 08/01/2013 430,000 454,033 Emerald Investment Grade CBO Limited+ 3.090% 05/24/2011 903,680 902,550 Enbridge Energy Partners, LP 4.000% 01/15/2009 1,000,000 985,117 Entergy Gulf States, Inc. 5.250% 08/01/2015 $ 2,400,000 $ 2,375,448 Enterprise Products Operating LP+ 4.000% 10/15/2007 150,000 149,634 Enterprise Products Operating LP 7.500% 02/01/2011 1,275,000 1,445,589 EOP Operating, LP 6.750% 02/15/2008 800,000 864,586 Equifax, Inc. 4.950% 11/01/2007 500,000 517,149 ERAC USA Finance Co.+ 6.700% 06/01/2034 880,000 955,740 ERAC USA Finance Co.+ 6.750% 05/15/2007 2,000,000 2,133,558 FedEx Corp. 2.286% 04/01/2005 540,000 540,281 First Industrial LP 7.000% 12/01/2006 1,000,000 1,052,480 FirstEnergy Corp. Series A 5.500% 11/15/2006 610,000 629,720 Fiserv, Inc. 4.000% 04/15/2008 650,000 652,188 Ford Motor Co. 6.375% 02/01/2029 965,000 868,438 Ford Motor Co. 6.625% 02/15/2028 446,000 416,337 FPL Group Capital, Inc. 3.250% 04/11/2006 800,000 800,427 France Telecom SA 9.250% 03/01/2031 830,000 1,125,141 Franklin Resources, Inc. 3.700% 04/15/2008 960,000 957,732 Fred Meyer, Inc. 7.450% 03/01/2008 750,000 826,901 General Mills, Inc. 2.625% 10/24/2006 4,000,000 3,931,988 General Mills, Inc. 8.900% 06/15/2006 1,000,000 1,075,621 General Motors Acceptance Corp. 6.150% 04/05/2007 1,000,000 1,027,672 General Motors Corp.+++ 7.200% 01/15/2011 1,600,000 1,641,027 General Motors Corp. 8.375% 07/15/2033 730,000 756,341 Glencore Funding LLC+ 6.000% 04/15/2014 875,000 846,543 Goldman Sachs Group LP 5.000% 10/01/2014 770,000 768,913 Goodrich (B.F.) Co. 7.500% 04/15/2008 $ 900,000 $ 996,357 GTECH Holdings Corp.+ 4.500% 12/01/2009 315,000 314,979 Harrah's Operating Co., Inc. 5.500% 07/01/2010 425,000 439,928 HCA, Inc. 6.950% 05/01/2012 950,000 1,000,260 Hershey Foods Corp. 7.200% 08/15/2027 1,250,000 1,526,665 Hilton Hotels Corp. 7.625% 05/15/2008 460,000 509,460 Hornbeck Offshore Services, Inc.+ 6.125% 12/01/2014 360,000 361,800 Household Finance Corp. 4.125% 12/15/2008 415,000 416,697 Household Finance Corp. 6.375% 10/15/2011 75,000 82,830 Hughes Supply, Inc.+ 5.500% 10/15/2014 1,450,000 1,431,547 Humana, Inc. 7.250% 08/01/2006 995,000 1,047,513 ICI Wilmington, Inc. 7.050% 09/15/2007 550,000 593,700 Idex Corp. 6.875% 02/15/2008 775,000 832,624 International Paper Co. 3.800% 04/01/2008 920,000 916,220 Interpool, Inc. 7.350% 08/01/2007 500,000 507,500 Ipalco Enterprises, Inc. 8.375% 11/14/2008 1,225,000 1,378,125 iStar Financial, Inc. REIT 7.000% 03/15/2008 400,000 430,722 iStar Financial, Inc. Series B 4.875% 01/15/2009 190,000 192,853 iStar Financial, Inc. Series B 5.700% 03/01/2014 350,000 358,243 J.C. Penney Co., Inc. 7.950% 04/01/2017 490,000 573,300 Jefferies Group, Inc. 7.500% 08/15/2007 300,000 328,287 JP Morgan Chase & Co. 3.125% 12/11/2006 1,000,000 994,829 Kellwood Co. 7.625% 10/15/2017 825,000 907,327 Kellwood Co. 7.875% 07/15/2009 240,000 265,152 Kennametal, Inc. 7.200% 06/15/2012 1,048,000 1,164,574
The accompanying notes are an integral part of the financial statements. 14
PRINCIPAL MARKET AMOUNT VALUE ---------------- ---------------- Kern River Funding Corp.+ 4.893% 04/30/2018 $ 1,024,788 $ 1,043,285 KeySpan Gas East Corp. Series MTNA 6.900% 01/15/2008 1,105,000 1,209,638 Kimco Realty Corp. Series MTNB 7.860% 11/01/2007 1,100,000 1,229,854 Kinder Morgan Energy Partners LP 5.350% 08/15/2007 1,100,000 1,138,738 The Kroger Co. 6.750% 04/15/2012 1,000,000 1,129,063 Lasmo (USA), Inc. 6.750% 12/15/2007 2,000,000 2,159,594 Leucadia National Corp. 7.750% 08/15/2013 2,000,000 2,160,000 Liberty Media Corp. 3.500% 09/25/2006 2,600,000 2,585,554 Marriott International, Inc. Series E 7.000% 01/15/2008 1,445,000 1,575,114 Masco Corp. 6.750% 03/15/2006 1,230,000 1,280,171 May Department Stores Co. (The) 3.950% 07/15/2007 430,000 430,727 MBNA Corp. 4.625% 09/15/2008 650,000 660,175 Meritor Automotive, Inc. 6.800% 02/15/2009 725,000 761,250 MGM Grand, Inc. 6.950% 02/01/2005 750,000 751,875 MGM Mirage, Inc. 6.000% 10/01/2009 360,000 369,000 MGM Mirage, Inc. 6.750% 09/01/2012 100,000 105,250 MidAmerican Energy Holdings Co. 3.500% 05/15/2008 1,300,000 1,273,418 Miller Brewing Co.+ 4.250% 08/15/2008 425,000 428,864 Millipore Corp. 7.500% 04/01/2007 1,000,000 1,059,920 Mobil Corp. 8.625% 08/15/2021 1,000,000 1,388,459 Mohawk Industries, Inc. Series C 6.500% 04/15/2007 350,000 371,866 Mohawk Industries, Inc. Series D 7.200% 04/15/2012 500,000 575,291 Monongahela Power Co.+ +++ 6.700% 06/15/2014 $ 450,000 $ 498,542 National Rural Utilities Cooperative Finance Corp. 4.375% 10/01/2010 500,000 503,404 National Rural Utilities Cooperative Finance Corp. 8.000% 03/01/2032 285,000 371,896 Navistar International Corp.+++ 7.500% 06/15/2011 750,000 804,375 Nevada Power Co.+ 5.875% 01/15/2015 560,000 564,200 Newell Rubbermaid, Inc. 4.000% 05/01/2010 450,000 436,682 News America Holdings, Inc. 8.875% 04/26/2023 2,000,000 2,600,260 Nextel Communications, Inc. 5.950% 03/15/2014 220,000 227,700 Nisource Finance Corp. 3.200% 11/01/2006 570,000 564,883 Norfolk Southern Corp. 6.000% 04/30/2008 550,000 588,829 Norfolk Southern Corp. 7.350% 05/15/2007 750,000 811,725 Northwestern Corp.+ 5.875% 11/01/2014 255,000 260,858 Oak Hill Securities Fund II+ 8.920% 10/15/2006 700,000 719,042 Pacific Bell, Note 6.125% 02/15/2008 350,000 372,517 Pacific Energy Partners, LP/Pacific Energy Finance Corp. 7.125% 06/15/2014 490,000 521,850 Pacific Gas & Electric Co. 6.050% 03/01/2034 645,000 669,907 Park Place Entertainment Corp. 8.500% 11/15/2006 1,000,000 1,082,500 Pearson, Inc.+ 7.375% 09/15/2006 1,000,000 1,062,935 Pentair, Inc. 7.850% 10/15/2009 850,000 971,435 Piedmont Natural Gas Co. Series E 6.000% 12/19/2033 475,000 495,131 Pilgrims Pride Corp. 9.625% 09/15/2011 $ 135,000 $ 151,875 Plains All American Pipeline Co. 5.625% 12/15/2013 590,000 606,879 Potomac Edison Co.+ 5.350% 11/15/2014 425,000 428,307 Precision Castparts Corp. 5.600% 12/15/2013 1,315,000 1,340,882 The Premcor Refining Group, Inc. 6.750% 05/01/2014 280,000 297,500 PSEG Power LLC 5.500% 12/01/2015 725,000 738,840 Qwest Corp.+ 9.125% 03/15/2012 415,000 479,325 Republic Services, Inc. 7.125% 05/15/2009 1,000,000 1,114,897 Rogers Cable, Inc. 5.500% 03/15/2014 500,000 471,250 Rogers Wireless Communications, Inc.+ 5.525% 12/15/2010 250,000 261,875 Rogers Wireless Communications, Inc. 6.375% 03/01/2014 410,000 405,900 Ryder System, Inc. 6.600% 11/15/2005 750,000 770,225 Simon Property Group LP 7.375% 01/20/2006 1,000,000 1,038,798 SLM Corp. 5.000% 10/01/2013 1,450,000 1,468,322 SLM Corp. 5.625% 08/01/2033 700,000 692,444 Smithfield Foods, Inc. 7.000% 08/01/2011 1,025,000 1,094,188 Sonoco Products Co. 6.500% 11/15/2013 1,500,000 1,645,823 Sony Capital Corp.+ 4.950% 11/01/2006 1,500,000 1,538,652 Sprint Capital Corp. 6.900% 05/01/2019 750,000 839,018 Starwood Hotels & Resorts Worldwide, Inc. 7.875% 05/01/2012 620,000 708,350 Steelcase, Inc. 6.375% 11/15/2006 1,430,000 1,476,303 SuperValu, Inc. 7.500% 05/15/2012 400,000 466,866 SuperValu, Inc. 7.875% 08/01/2009 1,500,000 1,720,143 Tampa Electric Co. 5.375% 08/15/2007 875,000 910,239
The accompanying notes are an integral part of the financial statements. 15
PRINCIPAL MARKET AMOUNT VALUE ---------------- ---------------- TCI Communications, Inc. 6.875% 02/15/2006 $ 350,000 $ 362,192 Temple-Inland, Inc. Series MTND 8.125% 12/15/2006 600,000 632,958 Textron Financial Corp. Series E 2.690% 10/03/2006 1,205,000 1,187,913 Thomas & Betts Corp. 6.500% 01/15/2006 400,000 410,996 The Thomson Corp. 5.750% 02/01/2008 955,000 1,005,770 The Thomson Corp. 6.200% 01/05/2012 650,000 714,212 Timken Co. 5.750% 02/15/2010 1,035,000 1,054,323 Timken Co. Series A 6.750% 08/21/2006 600,000 618,431 Toro Co. 7.800% 06/15/2027 1,005,000 1,138,693 Toyota Motor Credit Corp. 4.350% 12/15/2010 1,650,000 1,671,589 TransAlta Corp. 5.750% 12/15/2013 1,200,000 1,235,702 Tricon Global Restaurants, Inc. 8.875% 04/15/2011 530,000 654,825 Tri-State Generation & Transmission Association Series 2003, Class A+ 6.040% 01/31/2018 525,000 554,652 Tri-State Generation & Transmission Association Series 2003, Class B+ 7.144% 07/31/2033 580,000 665,486 Tyco International Group SA 6.375% 02/15/2006 1,100,000 1,136,652 Tyco International Group SA 6.375% 10/15/2011 275,000 303,615 Tyco International Group SA 6.875% 01/15/2029 300,000 343,653 Union Pacific Corp. 6.400% 02/01/2006 950,000 980,885 United Air Lines, Inc. Series 91B* ++ 10.110% 02/19/2006 280,959 109,574 US Airways, Inc. Cl. B* ++ 7.500% 04/15/2008 $ 869,681 $ - USA Interactive 7.000% 01/15/2013 1,000,000 1,103,068 Verizon Global Funding Corp. 7.750% 12/01/2030 795,000 988,444 Verizon New England, Inc. 6.500% 09/15/2011 730,000 803,034 Virginia Electric and Power Co. 5.375% 02/01/2007 660,000 683,667 Vulcan Materials Co. 6.000% 04/01/2009 800,000 853,453 The Walt Disney Co. 6.750% 03/30/2006 800,000 833,532 Washington Mutual, Inc. 2.400% 11/03/2005 1,900,000 1,887,753 Weingarten Realty Investors REIT, Series A 7.500% 12/19/2010 955,000 1,109,744 Weyerhaeuser Co. 5.500% 03/15/2005 330,000 331,520 Williams Gas Pipelines Central, Inc.+ 7.375% 11/15/2006 950,000 1,007,000 Wisconsin Electric Power 3.500% 12/01/2007 845,000 841,607 WPP Finance (USA) Corp. 6.625% 07/15/2005 1,100,000 1,107,983 XTO Energy, Inc. 4.900% 02/01/2014 1,000,000 997,791 ---------------- TOTAL CORPORATE DEBT (COST $186,968,153) 192,860,866 ---------------- NON-U.S. GOVERNMENT AGENCY OBLIGATIONS -- 11.4% ABN AMRO Mortgage Corp. Series 2003-12, Class 1A 5.000% 12/25/2033 1,919,111 1,885,300 AES Eastern Energy LP Series 1999-1, Class A 9.000% 01/02/2017 549,388 623,555 Asset Securitization Corp. Series 1995-MD4, Class A1 7.100% 08/13/2029 493,588 509,544 Bank of America Mortgage Securities, Series 2004-G, Class 2A7 4.635% 08/25/2034 $ 896,435 $ 897,043 Bear Stearns Adjustable Rate Mortgage Trust, Series 2004-5, Class IIA 4.043% 07/25/2034 2,575,877 2,544,418 Countrywide Home Loans, Inc. Series 2003-42, Class 1A1 3.762% 09/25/2033 882,701 876,548 Countrywide Home Loans, Inc. Series 2004-23, Class 1A1 4.325% 02/25/2034 821,637 825,210 CS First Boston Mortgage Securities Corp. Series 1998-C2, Class A1 5.960% 11/11/2030 413,638 423,491 CS First Boston Mortgage Securities Corp. Series 2003-7, Class 1A24 4.500% 02/25/2033 1,051,405 1,050,243 CS First Boston Mortgage Securities Corp. Series 2004-C1, Class A1 2.254% 01/15/2037 1,174,529 1,149,386 GE Capital Commercial Mortgage Corp. Series 2002-1A, Class A1 5.033% 12/10/2035 597,248 609,407 GSR Mortgage Loan Trust Series 2004-9 4.708% 08/25/2034 1,539,173 1,554,408 IndyMac Bancorp, Inc. Mortgage Loan Trust Series 2004-AR4, Class 1A 4.783% 08/25/2034 2,520,055 2,548,197 Kiowa Power Partners LLC+ 4.811% 12/30/2013 400,000 401,068
The accompanying notes are an integral part of the financial statements. 16
PRINCIPAL MARKET AMOUNT VALUE ---------------- ---------------- MASTR Asset Securitization Trust Series 2002-6, Class 6A1 6.500% 10/25/2032 $ 212,430 $ 214,392 MASTR Asset Securitization Trust Series 2003-12, Class 6A1 5.000% 12/25/2033 2,736,358 2,687,900 Merrill Lynch Mortgage Investors, Inc. Series 1998-C1, Class A1 6.310% 11/15/2026 434,639 441,672 Merrill Lynch Mortgage Investors, Inc. Series 2003-A4, Class IA 4.281% 07/25/2033 779,510 782,080 Merrill Lynch Mortgage Investors, Inc. Series 2004-A1, Class IA 4.155% 02/25/2034 420,239 420,640 Morgan Stanley Mortgage Loan Trust Series 2004-2AR, Class 1A 5.218% 02/25/2034 226,463 229,689 Starwood Commercial Mortgage Trust Series 1999-C1A, Class B+ 6.920% 02/03/2014 1,000,000 1,101,342 Structured Adjustable Rate Mortgage Loan Trust Series 2004-2, Class 2A 5.070% 03/25/2034 1,836,062 1,852,139 Structured Asset Securities Corp. Series 2002-11A, Class 2A1 5.600% 06/25/2032 694,339 706,460 Structured Asset Securities Corp. Series 2003-30, Class 1A1 5.500% 10/25/2033 2,059,556 2,067,022 Tenaska Oklahoma+ 6.528% 12/30/2014 500,000 504,615 Vendee Mortgage Trust Series 1992-1, Class 2Z 7.750% 05/15/2022 $ 664,038 $ 724,819 Washington Mutual MSC Mortgage Pass-Through Certificates Series 2004-RA1, Class 2A 7.000% 03/25/2034 1,706,958 1,754,193 Washington Mutual MSC Mortgage Pass-Through Certificates, Series 2004-RA4, Class 2A 6.500% 08/25/2034 633,629 652,803 Washington Mutual, Inc. Series 2003-S11, Class A1 5.000% 11/25/2033 3,507,370 3,445,534 Washington Mutual, Inc. Series 2004-AR2, Class A 2.995% 04/25/2044 2,594,521 2,614,769 Washington Mutual, Series 2004-AR14, Class A1 4.283% 01/25/2035 2,750,000 2,727,549 Wells Fargo Mortgage Backed Securities Trust Series 2004-P, Class 2A1 4.278% 09/25/2034 2,205,626 2,193,401 Wells Fargo Mortgage Backed Securities Trust, Series 2004-Z, Class 2A1 4.605% 12/25/2034 2,715,822 2,718,581 ---------------- TOTAL NON-U.S. GOVERNMENT AGENCY OBLIGATIONS (COST $43,748,622) 43,737,418 ---------------- SOVEREIGN DEBT OBLIGATIONS -- 0.5% Chile Government International Bond 5.500% 01/15/2013 600,000 630,420 Republic of South Africa 6.500% 06/02/2014 825,000 903,375 United Mexican States 8.300% 08/15/2031 $ 500,000 $ 586,000 ---------------- TOTAL SOVEREIGN DEBT OBLIGATIONS (COST $1,934,660) 2,119,795 ---------------- U.S. GOVERNMENT AGENCY OBLIGATIONS -- 18.4% FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) -- 3.0% COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.4% FHLMC Series 2178, Class PB 7.000% 08/15/2029 1,154,522 1,212,229 FHLMC Series W067, Class A 6.420% 12/01/2005 310,916 318,677 ---------------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS 1,530,906 ---------------- PASS-THROUGH SECURITIES -- 2.6% FHLMC 4.250% 07/15/2009 1,860,000 1,892,329 FHLMC 5.500% 11/01/2031 1,277,214 1,301,910 FHLMC 6.000% 09/01/2016- 02/01/2018 768,971 806,097 FHLMC 6.500% 09/01/2016 1,334,381 1,413,922 FHLMC 6.625% 09/15/2009 3,610,000 4,033,452 FHLMC 7.500% 10/01/2030- 03/01/2031 203,232 217,879 FHLMC 8.000% 03/01/2027 276,848 301,332 FHLMC 9.000% 03/01/2017 13,224 14,280 ---------------- TOTAL PASS-THROUGH SECURITIES 9,981,201 ---------------- TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) 11,512,107 ---------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) -- 5.6% PASS-THROUGH SECURITIES FNMA 2.250% 05/15/2006 9,050,000 8,942,747
The accompanying notes are an integral part of the financial statements. 17
PRINCIPAL MARKET AMOUNT VALUE ---------------- ---------------- FNMA 3.875% 11/17/2008 $ 3,600,000 $ 3,579,407 FNMA 4.625% 10/15/2013 3,800,000 3,833,845 FNMA 5.500% 05/01/2033 1,097,208 1,115,338 FNMA 6.000% 06/01/2016 151,043 158,524 FNMA 6.420% 11/01/2008 1,226,349 1,323,724 FNMA 6.500% 07/01/2016 582,876 618,714 FNMA 7.000% 03/01/2031- 04/01/2031 405,147 429,915 FNMA 7.500% 08/01/2029- 06/01/2031 335,879 360,251 FNMA 8.000% 11/01/2029- 09/01/2031 923,476 999,911 FNMA 9.000% 05/01/2009 59,555 63,601 ---------------- TOTAL PASS-THROUGH SECURITIES 21,425,977 ---------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) -- 9.7% PASS-THROUGH SECURITIES GNMA 4.625% 11/20/2025- 11/20/2027 58,455 59,675 GNMA 5.000% 05/15/2033- 02/15/2034 15,823,312 15,849,964 GNMA 5.500% 06/15/2033- 09/15/2034 13,711,855 14,008,880 GNMA 6.000% 02/15/2029- 08/15/2032 3,088,518 3,200,148 GNMA 6.500% 05/15/2023- 11/15/2028 1,796,265 1,904,659 GNMA 7.000% 09/15/2023- 08/15/2032 1,179,502 1,259,261 GNMA 7.250% 11/20/2021- 01/20/2022 294,684 316,518 GNMA 7.500% 03/15/2017- 06/15/2024 503,536 542,319 GNMA 8.000% 08/15/2005- 04/15/2008 $ 418,791 $ 455,762 ---------------- TOTAL PASS-THROUGH SECURITIES 37,597,186 ---------------- OTHER AGENCIES -- 0.1% PASS-THROUGH SECURITIES New Valley Generation IV 4.687% 01/15/2022 536,127 538,180 ---------------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST $70,468,970) 71,073,450 ---------------- U.S. TREASURY OBLIGATIONS -- 14.4% U.S. TREASURY BONDS -- 1.2% U.S. Treasury Bond+++ 6.125% 08/15/2029 3,740,000 4,385,734 ---------------- U.S. TREASURY NOTES -- 10.0% U.S. Treasury Note+++ 2.500% 10/31/2006 5,990,000 5,934,312 U.S. Treasury Note+++ 3.375% 11/15/2008 18,240,000 18,192,975 U.S. Treasury Note 4.000% 02/15/2014 13,345,000 13,159,421 U.S. Treasury Note 5.000% 08/15/2011 1,165,000 1,239,997 ---------------- TOTAL U.S. TREASURY NOTES 38,526,705 ---------------- U.S. TREASURY STRIPS -- 3.2% U.S. Treasury Strips - Principal Only 0.000% 05/15/2016 21,000,000 12,436,448 ---------------- TOTAL U.S. TREASURY OBLIGATIONS (COST $52,357,380) 55,348,887 ---------------- TOTAL BONDS & NOTES (COST $366,388,400) 376,019,425 ---------------- SHORT-TERM INVESTMENTS -- 10.3% CASH EQUIVALENTS -- 8.3%** American AAdvanage Select Money Market Fund 375,043 375,043 Bank of America Bank Note 2.260% 02/15/2005 $ 280,179 280,179 Bank of America Bank Note 2.270% 01/18/2005 653,752 653,752 Bank of America Bank Note 2.270% 03/03/2005 $ 1,214,111 $ 1,214,111 Bank of America Bank Note 2.300% 06/09/2005 653,752 653,752 Bank of Montreal Eurodollar Time Deposit 2.125% 02/02/2005 284,850 284,850 Bank of Montreal Eurodollar Time Deposit 2.260% 01/28/2005 295,980 295,980 BGI Institutional Money Market Fund 3,362,153 3,362,153 BNP Paribas Eurodollar Time Deposit 2.300% 01/03/2005 186,787 186,787 Calyon Eurodollar Time Deposit 2.435% 03/16/2005 799,445 799,445 Canadian Imperial Bank of Commerce Bank Note 2.030% 05/18/2005 1,867,863 1,867,863 Citigroup Eurodollar Time Deposit 2.080% 01/28/2005 733,136 733,136 Den Danske Bank Eurodollar Time Deposit 2.260% 01/20/2005 1,120,718 1,120,718 Dexia Group Eurodollar Time Deposit 2.040% 01/21/2005 373,573 373,573 Federal Home Loan Bank Discount Note 2.184% 01/05/2005 1,160,216 1,160,216 Fortis Bank Eurodollar Time Deposit 2.140% 01/12/2005 373,573 373,573 Fortis Bank Eurodollar Time Deposit 2.200% 02/11/2005 280,179 280,179 Fortis Bank Eurodollar Time Deposit 2.260% 01/05/2005 1,540,987 1,540,987 Freddie Mac Discount Note 2.184% 01/04/2005 1,305,367 1,305,367 Freddie Mac Discount Note 2.228% 02/01/2005 348,491 348,491
The accompanying notes are an integral part of the financial statements. 18
PRINCIPAL MARKET AMOUNT VALUE ---------------- ---------------- Freddie Mac Discount Note 2.277% 02/01/2005 $ 1,630,864 $ 1,630,864 General Electric Capital Corp. 2.294% 01/21/2005 531,843 531,843 General Electric Capital Corp. 2.295% 01/10/2005 909,940 909,940 HBOS Halifax Bank of Scotland Eurodollar Time Deposit 2.025% 01/21/2005 429,608 429,608 Lloyds TSB Bank Eurodollar Time Deposit 2.280% 02/02/2005 457,626 457,626 Merrill Lynch Premier Institutional Money Market Fund 616,397 616,397 Merrimac Cash Fund, Premium Class 1,400,897 1,400,897 Morgan Stanley Dean Witter & Co. 2.393% 07/19/2005 1,232,790 1,232,790 Royal Bank of Canada Eurodollar Time Deposit 2.250% 01/19/2005 933,931 933,931 Royal Bank of Canada Eurodollar Time Deposit 2.260% 02/01/2005 747,145 747,145 Royal Bank of Scotland Eurodollar Time Deposit 2.015% 01/21/2005 1,077,757 1,077,757 Royal Bank of Scotland Eurodollar Time Deposit 2.270% 02/02/2005 560,359 560,359 Royal Bank of Scotland Eurodollar Time Deposit 2.360% 02/17/2005 93,393 93,393 Toronto Dominion Bank Eurodollar Time Deposit 2.420% 03/01/2005 933,931 933,931 Wells Fargo Eurodollar Time Deposit 2.270% 01/25/2005 233,483 233,483 Wells Fargo Eurodollar Time Deposit 2.310% 01/28/2005 933,931 933,931 Wells Fargo Eurodollar Time Deposit 2.320% 01/14/2005 2,237,700 2,237,700 ---------------- 32,171,750 ---------------- COMMERCIAL PAPER -- 2.0% Albertson's, Inc.+ 2.400% 01/03/2005 $ 1,145,000 $ 1,144,847 General Mills, Inc.+ 2.260% 01/06/2005 2,000,000 1,999,372 Kinder Morgan Energy Partners, LP+ 2.400% 01/04/2005 2,600,000 2,599,480 National Fuel Gas Co. 2.400% 01/05/2005 510,000 509,864 Praxair, Inc. 2.290% 01/11/2005 1,335,000 1,334,151 ---------------- 7,587,714 ---------------- TOTAL SHORT-TERM INVESTMENTS (AT AMORTIZED COST) 39,759,464 ---------------- TOTAL INVESTMENTS -- 107.9% (COST $406,147,864)*** 415,778,889 OTHER ASSETS/ (LIABILITIES) -- (7.9%) (30,477,976) ---------------- NET ASSETS -- 100.0% $ 385,300,913 ================
NOTES TO PORTFOLIO OF INVESTMENTS REIT - Real Estate Investment Trust * Non-income producing security. ** Represents investments of security lending collateral. (NOTE 2). *** See Note 7 for aggregate cost for Federal tax purposes. + 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. At December 31, 2004, these securities amounted to a value of $32,397,699 or 8.4% of net assets. ++ Security is currently in default. +++ Denotes all or a portion of security on loan. The accompanying notes are an integral part of the financial statements. 19 MML BLEND FUND - PORTFOLIO OF INVESTMENTS DECEMBER 31, 2004
NUMBER OF MARKET SHARES VALUE ---------------- ---------------- EQUITIES -- 64.2% ADVERTISING -- 0.1% Omnicom Group, Inc. 7,200 $ 607,104 ---------------- AEROSPACE & DEFENSE -- 1.7% Boeing Co. 92,900 4,809,433 General Dynamics Corp. 25,600 2,677,760 Goodrich Corp. 38,800 1,266,432 Honeywell International, Inc. 48,600 1,720,926 Lockheed Martin Corp. 25,400 1,410,970 Northrop Grumman Corp. 21,700 1,179,612 Raytheon Co. 27,200 1,056,176 Rockwell Collins, Inc. 10,100 398,344 United Technologies Corp. 29,000 2,997,150 ---------------- 17,516,803 ---------------- APPAREL, TEXTILES & SHOES -- 0.7% Coach, Inc.* 7,100 400,440 The Gap, Inc.+ 98,700 2,084,544 Jones Apparel Group, Inc. 8,200 299,874 Limited Brands 59,000 1,358,180 Liz Claiborne, Inc. 6,600 278,586 Nike, Inc. Cl. B 17,300 1,568,937 Nordstrom, Inc. 10,200 476,646 Reebok International Limited+ 4,100 180,400 VF Corp.+ 17,500 969,150 ---------------- 7,616,757 ---------------- AUTOMOTIVE & PARTS -- 0.6% AutoNation, Inc.* 10,200 195,942 Cooper Tire & Rubber Co.+ 3,600 77,580 Ford Motor Co.+ 248,200 3,633,648 General Motors Corp.+ 300 12,018 Genuine Parts Co. 15,700 691,742 The Goodyear Tire & Rubber Co.* + 10,000 146,600 Harley-Davidson, Inc. 13,300 807,975 Paccar, Inc.+ 9,875 794,740 ---------------- 6,360,245 ---------------- BANKING, SAVINGS & LOANS -- 7.8% AmSouth Bancorporation+ 34,300 888,370 Bank of America Corp. 245,200 11,521,948 Bank of New York Co., Inc. 28,100 939,102 BB&T Corp. 30,900 1,299,345 Citigroup, Inc. 356,700 17,185,806 Comerica, Inc. 22,500 1,372,950 Fannie Mae 58,300 4,151,543 Fifth Third Bancorp 32,700 1,546,056 First Horizon National Corp.+ 8,000 $ 344,880 Freddie Mac 39,400 2,903,780 Golden West Financial Corp. 17,600 1,080,992 JP Morgan Chase & Co. 214,216 8,356,566 KeyCorp 53,300 1,806,870 M&T Bank Corp. 7,200 776,448 Marshall and Ilsley Corp. 12,800 565,760 Mellon Financial Corp. 26,500 824,415 National City Corp.+ 84,500 3,172,975 North Fork Bancorporation, Inc. 26,850 774,622 Northern Trust Corp. 7,500 364,350 Providian Financial Corp.* + 78,900 1,299,483 Regions Financial Corp. 25,623 911,923 SLM Corp. 25,000 1,334,750 Sovereign Bancorp, Inc.+ 21,500 484,825 State Street Corp. 300 14,736 SunTrust Banks, Inc. 21,600 1,595,808 Synovus Financial Corp.+ 18,600 531,588 U.S. Bancorp 113,200 3,545,424 Wachovia Corp. 96,733 5,088,156 Washington Mutual, Inc. 48,550 2,052,694 Wells Fargo & Co. 58,300 3,623,345 Zions Bancorp 3,400 231,302 ---------------- 80,590,812 ---------------- BEVERAGES -- 1.1% Brown-Forman Corp. Cl. B 7,800 379,704 The Coca-Cola Co. 86,000 3,580,180 Coca-Cola Enterprises, Inc. 29,900 623,415 Coors (Adolph) Co. Cl. B+ 2,300 174,041 The Pepsi Bottling Group, Inc.+ 38,100 1,030,224 PepsiCo, Inc. 108,000 5,637,600 ---------------- 11,425,164 ---------------- BROADCASTING, PUBLISHING & PRINTING -- 1.7% Clear Channel Communications, Inc. 35,500 1,188,895 Comcast Corp. Cl. A* 83,900 2,792,192 Dow Jones & Co., Inc.+ 5,600 241,136 Gannett Co., Inc. 10,500 857,850 Knight Ridder, Inc. 4,700 314,618 The McGraw-Hill Companies, Inc. 14,600 1,336,484 Meredith Corp. 11,200 607,040 New York Times Co. Cl. A+ 9,700 395,760 Time Warner, Inc.* 275,600 5,357,664 Tribune Co. 11,400 $ 480,396 Univision Communications, Inc. Cl. A* + 1,200 35,124 Viacom, Inc. Cl. B 104,500 3,802,755 ---------------- 17,409,914 ---------------- BUILDING MATERIALS & CONSTRUCTION -- 0.2% Louisiana-Pacific Corp.+ 10,500 280,770 Masco Corp. 26,200 957,086 Vulcan Materials Co. 9,700 529,717 ---------------- 1,767,573 ---------------- CHEMICALS -- 1.1% Air Products & Chemicals, Inc. 8,200 475,354 Ashland, Inc. 4,200 245,196 Dow Chemical Co. 56,500 2,797,315 Du Pont (E.I.) de Nemours & Co. 60,100 2,947,905 Eastman Chemical Co. 5,000 288,650 Engelhard Corp. 8,100 248,427 International Flavors & Fragrances, Inc. 5,800 248,472 Monsanto Co. 36,000 1,999,800 PPG Industries, Inc. 16,700 1,138,272 Rohm & Haas Co. 13,600 601,528 ---------------- 10,990,919 ---------------- COMMERCIAL SERVICES -- 1.4% Apollo Group, Inc. Cl. A* 400 32,284 Block (H&R), Inc.+ 11,900 583,100 Cendant Corp. 63,600 1,486,968 Cintas Corp. 10,900 478,074 Convergys Corp.* 8,800 131,912 Donnelley (R.R.) & Sons Co. 5,200 183,508 eBay, Inc.* 39,900 4,639,572 Ecolab, Inc.+ 9,200 323,196 Equifax, Inc. 28,100 789,610 Moody's Corp. 11,700 1,016,145 Paychex, Inc. 19,400 661,152 PerkinElmer, Inc. 79,200 1,781,208 Quest Diagnostics, Inc. 5,500 525,525 Robert Half International, Inc. 5,700 167,751 Ryder System, Inc. 3,700 176,749 Waste Management, Inc. 35,000 1,047,900 ---------------- 14,024,654 ---------------- COMMUNICATIONS -- 1.3% Avaya, Inc.* + 27,800 478,160
The accompanying notes are an integral part of the financial statements. 20
NUMBER OF MARKET SHARES VALUE ---------------- ---------------- Citizens Communications Co. 18,100 $ 249,599 Lucent Technologies, Inc.* + 264,800 995,648 Network Appliance, Inc.* + 22,400 744,128 Nextel Communications, Inc. Cl. A* 18,400 552,000 Qualcomm, Inc. 69,700 2,955,280 SBC Communications, Inc. 262,600 6,767,202 Scientific-Atlanta, Inc. 9,300 306,993 Tellabs, Inc.* 25,600 219,904 ---------------- 13,268,914 ---------------- COMMUNICATIONS EQUIPMENT -- 0.4% Motorola, Inc. 260,100 4,473,720 ---------------- COMPUTER INTEGRATED SYSTEMS DESIGN -- 0.6% Autodesk, Inc. 27,400 1,039,830 Computer Sciences Corp.* 22,100 1,245,777 Parametric Technology Corp.* 120,700 710,923 Sun Microsystems, Inc.* 537,000 2,889,060 Unisys Corp.* 12,200 124,196 ---------------- 6,009,786 ---------------- COMPUTER PROGRAMMING SERVICES -- 0.0% Mercury Interactive Corp.* + 4,700 214,085 ---------------- COMPUTERS & INFORMATION -- 3.0% Apple Computer, Inc.* 23,500 1,513,400 Cisco Systems, Inc.* 416,400 8,036,520 Comverse Technology, Inc.* 10,100 246,945 Dell, Inc.* 150,100 6,325,214 EMC Corp.* 144,600 2,150,202 Gateway, Inc.* 21,300 128,013 International Business Machines Corp. 107,700 10,617,066 International Game Technology 14,300 491,634 Jabil Circuit, Inc.* 12,900 329,982 Lexmark International, Inc.* 8,400 714,000 Solectron Corp.* 2,000 10,660 Symbol Technologies, Inc.+ 12,900 223,170 ---------------- 30,786,806 ---------------- COMPUTERS & OFFICE EQUIPMENT -- 0.7% Electronic Data Systems Corp. 30,700 709,170 Hewlett-Packard Co. 181,900 3,814,443 Pitney Bowes, Inc. 14,400 $ 666,432 Xerox Corp.* 119,700 2,036,097 ---------------- 7,226,142 ---------------- CONTAINERS -- 0.1% Ball Corp. 8,800 387,024 Bemis Co., Inc. 8,700 253,083 Pactiv Corp.* 10,000 252,900 Sealed Air Corp.* 5,500 292,985 Temple-Inland, Inc. 3,400 232,560 ---------------- 1,418,552 ---------------- COSMETICS & PERSONAL CARE -- 1.5% Alberto-Culver Co. 6,000 291,420 Avon Products, Inc. 30,100 1,164,870 The Gillette Co. 63,600 2,848,008 Kimberly-Clark Corp. 31,300 2,059,853 The Procter & Gamble Co. 162,100 8,928,468 ---------------- 15,292,619 ---------------- DATA PROCESSING & PREPARATION -- 0.6% Affiliated Computer Services, Inc. Cl. A* + 8,500 511,615 Automatic Data Processing, Inc. 30,100 1,334,935 Deluxe Corp.+ 9,800 365,834 First Data Corp. 44,100 1,876,014 IMS Health, Inc. 14,700 341,187 NCR Corp.* 21,100 1,460,753 ---------------- 5,890,338 ---------------- ELECTRIC UTILITIES -- 1.8% Ameren Corp. 9,200 461,288 American Electric Power Co. 18,600 638,724 CenterPoint Energy, Inc.+ 18,000 203,400 Cinergy Corp. 8,500 353,855 CMS Energy Corp.* + 4,600 48,070 Consolidated Edison, Inc.+ 11,400 498,750 Constellation Energy Group, Inc. 8,300 362,793 Dominion Resources, Inc. 19,400 1,314,156 DTE Energy Co.+ 8,200 353,666 Duke Energy Corp. 105,000 2,659,650 Edison International 28,900 925,667 Entergy Corp. 10,700 723,213 Exelon Corp.+ 38,700 1,705,509 FirstEnergy Corp. 19,300 762,543 FPL Group, Inc.+ 9,600 717,600 NiSource, Inc. 12,400 282,472 PG&E Corp.* 18,900 628,992 Pinnacle West Capital Corp. 4,300 190,963 PPL Corp. 22,200 $ 1,182,816 Progress Energy, Inc.+ 12,800 579,072 Public Service Enterprise Group, Inc. 21,000 1,087,170 Southern Co.+ 43,300 1,451,416 Teco Energy, Inc.+ 10,300 158,002 TXU Corp.+ 17,400 1,123,344 ---------------- 18,413,131 ---------------- ELECTRICAL EQUIPMENT & ELECTRONICS -- 3.8% Altera Corp.* 3,100 64,170 American Power Conversion Corp. 12,000 256,800 Analog Devices, Inc. 8,800 324,896 Broadcom Corp. Cl. A* 1,500 48,420 Emerson Electric Co. 40,800 2,860,080 Freescale Semiconductor, Inc. Cl. B* 28,718 527,262 General Electric Co. 562,000 20,513,000 Intel Corp. 386,100 9,030,879 Johnson Controls, Inc. 6,800 431,392 Kla-Tencor Corp.* 1,800 83,844 Linear Technology Corp. 19,100 740,316 Maxim Integrated Products, Inc. 3,400 144,126 Micron Technology, Inc.* + 2,000 24,700 National Semiconductor Corp. 800 14,360 Qlogic Corp.* 5,500 202,015 Rockwell Automation, Inc. 26,400 1,308,120 Texas Instruments, Inc. 104,300 2,567,866 Xilinx, Inc. 5,500 163,075 ---------------- 39,305,321 ---------------- ENERGY -- 5.0% Amerada Hess Corp. 10,700 881,466 Anadarko Petroleum Corp. 21,200 1,373,972 Apache Corp. 18,400 930,488 BJ Services Co. 5,900 274,586 Burlington Resources, Inc. 22,300 970,050 ChevronTexaco Corp. 113,200 5,944,132 ConocoPhillips 55,000 4,775,650 Devon Energy Corp. 41,000 1,595,720 Dynegy, Inc. Cl. A* + 21,200 97,944 El Paso Corp. 63,300 658,320 EOG Resources, Inc. 6,600 470,976 Exxon Mobil Corp. 377,000 19,325,020 Halliburton Co. 26,800 1,051,632 Kerr-McGee Corp. 17,800 1,028,662 KeySpan Corp. 9,000 355,050 Kinder Morgan, Inc. 7,500 548,475 Marathon Oil Corp. 19,500 733,395
The accompanying notes are an integral part of the financial statements. 21
NUMBER OF MARKET SHARES VALUE ---------------- ---------------- Nabors Industries Limited* 12,000 $ 615,480 Nicor, Inc.+ 2,500 92,350 Noble Corp.* 10,800 537,192 Occidental Petroleum Corp. 42,400 2,474,464 Peoples Energy Corp. 2,600 114,270 Rowan Companies, Inc.* 8,600 222,740 Schlumberger Limited 21,300 1,426,035 Sempra Energy+ 27,600 1,012,368 Sunoco, Inc. 4,300 351,353 Transocean, Inc.* 16,300 690,957 Unocal Corp. 14,900 644,276 Valero Energy Corp. 24,100 1,094,140 The Williams Companies, Inc. 33,700 548,973 Xcel Energy, Inc.+ 18,800 342,160 ---------------- 51,182,296 ---------------- ENTERTAINMENT & LEISURE -- 0.5% Brunswick Corp. 3,600 178,200 Harrah's Entertainment, Inc.+ 7,600 508,364 News Corp., Inc. Cl. A+ 71,500 1,334,190 The Walt Disney Co. 123,900 3,444,420 ---------------- 5,465,174 ---------------- FINANCIAL SERVICES -- 2.7% American Express Co. 76,300 4,301,031 Apartment Investment & Management Co. Cl. A 5,700 219,678 Bear Stearns Companies, Inc. 9,300 951,483 CIT Group, Inc. 12,100 554,422 Countrywide Financial Corp.+ 20,800 769,808 E Trade Financial Corp.* 12,500 186,875 Federated Investors, Inc. Cl. B 6,700 203,680 Franklin Resources, Inc. 14,900 1,037,785 The Goldman Sachs Group, Inc. 29,300 3,048,372 Huntington Bancshares, Inc.+ 13,200 327,096 Janus Capital Group, Inc. 14,700 247,107 Lehman Brothers Holdings, Inc. 26,300 2,300,724 MBNA Corp. 71,100 2,004,309 Merrill Lynch & Co., Inc. 56,600 3,382,982 Morgan Stanley 66,100 3,669,872 PNC Financial Services Group, Inc. 16,200 930,528 Price (T. Rowe) Group, Inc. 4,600 286,120 ProLogis Trust 11,400 $ 493,962 The Schwab (Charles) Corp. 21,400 255,944 Simon Property Group, Inc. 13,200 853,644 Standard and Poor's Depository Receipts Trust Series 1 15,000 1,813,050 ---------------- 27,838,472 ---------------- FOODS -- 1.1% Archer-Daniels-Midland Co. 42,400 945,944 Campbell Soup Co. 26,100 780,129 ConAgra Foods, Inc. 33,600 989,520 Heinz (H. J.) Co. 13,100 510,769 Hershey Foods Corp. 24,700 1,371,838 Kellogg Co. 25,100 1,120,966 McCormick & Co., Inc. 8,800 339,680 Safeway, Inc.* 30,200 596,148 Sara Lee Corp. 48,600 1,173,204 Starbucks Corp.* 23,900 1,490,404 SuperValu, Inc. 38,100 1,315,212 Wrigley (Wm.) Jr. Co. 8,400 581,196 ---------------- 11,215,010 ---------------- FOREST PRODUCTS & PAPER -- 0.4% Georgia-Pacific Corp. 25,600 959,488 International Paper Co. 100 4,200 MeadWestvaco Corp. 30,300 1,026,867 Neenah Paper, Inc.* + 948 30,905 Plum Creek Timber Co., Inc. 24,700 949,468 Weyerhaeuser Co. 22,800 1,532,616 ---------------- 4,503,544 ---------------- HEALTHCARE -- 0.7% Caremark Rx, Inc.* 28,600 1,127,698 Express Scripts, Inc.* 7,500 573,300 HCA, Inc.+ 25,300 1,010,988 Humana, Inc.* 9,600 285,024 Laboratory Corp. of America Holdings* 13,500 672,570 Manor Care, Inc. 4,800 170,064 UnitedHealth Group, Inc. 39,900 3,512,397 ---------------- 7,352,041 ---------------- HOME CONSTRUCTION, FURNISHINGS & APPLIANCES -- 0.1% Centex Corp.+ 6,000 357,480 KB Home 2,600 271,440 Leggett & Platt, Inc. 8,600 244,498 Pulte Homes, Inc. 4,300 274,340 Whirlpool Corp.+ 3,000 207,630 ---------------- 1,355,388 ---------------- HOUSEHOLD PRODUCTS -- 0.5% Black & Decker Corp.+ 11,200 $ 989,296 The Clorox Co. 9,700 571,621 Corning, Inc.* 83,900 987,503 Fortune Brands, Inc. 6,500 501,670 Newell Rubbermaid, Inc.+ 25,300 612,007 Sherwin-Williams Co. 9,700 432,911 Snap-On, Inc. 3,000 103,080 The Stanley Works+ 23,900 1,170,861 ---------------- 5,368,949 ---------------- INDUSTRIAL - DISTRIBUTION -- 0.0% Grainger (W.W.), Inc. 6,900 459,678 ---------------- INDUSTRIAL - DIVERSIFIED -- 1.5% 3M Co. 25,500 2,092,785 Cooper Industries Limited Cl. A 14,700 997,983 Danaher Corp. 28,200 1,618,962 Eaton Corp. 9,200 665,712 Illinois Tool Works, Inc. 16,900 1,566,292 ITT Industries, Inc. 5,800 489,810 Textron, Inc.+ 18,600 1,372,680 Tyco International Limited 192,231 6,870,336 ---------------- 15,674,560 ---------------- INFORMATION RETRIEVAL SERVICES -- 0.3% Yahoo!, Inc.* 70,000 2,637,600 ---------------- INSURANCE -- 3.5% ACE Limited 17,800 760,950 Aetna, Inc. 9,300 1,160,175 AFLAC, Inc. 18,200 725,088 Allstate Corp. 42,600 2,203,272 Ambac Financial Group, Inc. 6,600 542,058 American International Group, Inc. 114,900 7,545,483 Aon Corp. 19,100 455,726 Chubb Corp. 24,900 1,914,810 Cigna Corp. 19,800 1,615,086 Cincinnati Financial Corp. 6,510 288,133 The Hartford Financial Services Group, Inc. 17,600 1,219,856 Jefferson-Pilot Corp. 8,400 436,464 Lincoln National Corp. 23,700 1,106,316 Loews Corp. 24,000 1,687,200 MBIA, Inc.+ 8,100 512,568 Metlife, Inc. 71,600 2,900,516 MGIC Investment Corp. 10,100 695,991 Principal Financial Group, Inc. 18,800 769,672 Progressive Corp. 12,300 1,043,532 Prudential Financial, Inc. 50,200 2,758,992 Safeco Corp. 8,800 459,712
The accompanying notes are an integral part of the financial statements. 22
NUMBER OF MARKET SHARES VALUE ---------------- ---------------- St. Paul Travelers Companies 40,235 $ 1,491,511 Torchmark Corp. 6,900 394,266 UnumProvident Corp. 18,900 339,066 WellPoint, Inc.* 18,300 2,104,500 XL Capital Limited Cl. A+ 8,700 675,555 ---------------- 35,806,498 ---------------- LODGING -- 0.3% Hilton Hotels Corp. 51,400 1,168,836 Marriott International, Inc. Cl. A 15,700 988,786 Starwood Hotels & Resorts Worldwide, Inc. 14,200 829,280 ---------------- 2,986,902 ---------------- MACHINERY & COMPONENTS -- 0.4% Baker Hughes, Inc. 20,200 861,934 Cummins, Inc. 6,400 536,256 Dover Corp. 11,600 486,504 Ingersoll-Rand Co. Cl. A 9,800 786,940 Pall Corp.+ 8,500 246,075 Parker-Hannifin Corp. 16,200 1,226,988 ---------------- 4,144,697 ---------------- MANUFACTURING -- 0.1% American Standard Companies, Inc.* 12,000 495,840 Applied Materials, Inc.* 48,200 824,220 ---------------- 1,320,060 ---------------- MEDICAL SUPPLIES -- 0.7% Agilent Technologies, Inc.* 4,500 108,450 Applied Biosystems Group-Applera Corp. 13,500 282,285 Bard (C.R.), Inc. 7,000 447,860 Bausch & Lomb, Inc.+ 10,100 651,046 Becton, Dickinson & Co. 25,200 1,431,360 Fisher Scientific International* + 8,200 511,516 Medtronic, Inc. 24,300 1,206,981 St. Jude Medical, Inc.* 23,400 981,162 Tektronix, Inc. 5,600 169,176 Thermo Electron Corp.* 39,300 1,186,467 Waters Corp.* 4,900 229,271 ---------------- 7,205,574 ---------------- METALS & MINING -- 0.4% Alcoa, Inc. 10,200 320,484 Crane Co. 21,800 628,712 Nucor Corp.+ 15,200 795,568 Phelps Dodge Corp. 15,200 1,503,584 United States Steel Corp.+ 13,300 681,625 Worthington Industries, Inc. 5,100 99,858 ---------------- 4,029,831 ---------------- PHARMACEUTICALS -- 5.6% Abbott Laboratories 106,700 $ 4,977,555 AmerisourceBergen Corp.+ 10,100 592,668 Amgen, Inc.* 54,100 3,470,515 Biogen Idec, Inc.* 14,300 952,523 Bristol-Myers Squibb Co. 128,400 3,289,608 Cardinal Health, Inc. 32,300 1,878,245 Eli Lilly & Co. 24,400 1,384,700 Forest Laboratories, Inc.* + 15,300 686,358 Genzyme Corp.* 9,500 551,665 Hospira, Inc.* 7,690 257,615 Johnson & Johnson 202,900 12,867,918 King Pharmaceuticals, Inc.* 18,200 225,680 McKesson Corp. 26,300 827,398 Medco Health Solutions, Inc.* 16,700 694,720 Merck & Co., Inc. 220,300 7,080,442 Pfizer, Inc. 516,000 13,875,240 Sigma-Aldrich Corp. 4,200 253,932 Wyeth 88,000 3,747,920 ---------------- 57,614,702 ---------------- PHOTOGRAPHY EQUIPMENT/SUPPLIES -- 0.1% Eastman Kodak Co.+ 22,000 709,500 ---------------- PREPACKAGED SOFTWARE -- 3.0% Adobe Systems, Inc. 15,200 953,648 BMC Software, Inc.* 68,900 1,281,540 Citrix Systems, Inc.* 53,500 1,312,355 Computer Associates International, Inc.+ 53,800 1,671,028 Compuware Corp.* 24,400 157,868 Intuit, Inc.* 17,100 752,571 Microsoft Corp. 559,800 14,952,258 Novell, Inc.* 14,000 94,500 Oracle Corp.* 434,900 5,966,828 Peoplesoft, Inc.* 13,300 352,184 Siebel Systems, Inc.* 32,300 339,150 SunGard Data Systems, Inc.* 18,400 521,272 Symantec Corp.* 80,400 2,071,104 Veritas Software Corp.* + 24,100 688,055 ---------------- 31,114,361 ---------------- REAL ESTATE -- 0.1% Equity Office Properties Trust+ 26,200 762,944 Equity Residential 10,100 365,418 ---------------- 1,128,362 ---------------- RESTAURANTS -- 0.5% Darden Restaurants, Inc. 11,400 316,236 McDonald's Corp. 118,600 3,802,316 Wendy's International, Inc. 200 $ 7,852 Yum! Brands, Inc. 19,300 910,574 ---------------- 5,036,978 ---------------- RETAIL -- 3.1% AutoZone, Inc.* 5,900 538,729 Best Buy Co., Inc. 23,500 1,396,370 Circuit City Stores, Inc.+ 104,900 1,640,636 Costco Wholesale Corp. 47,000 2,275,270 Dillards, Inc. Cl. A 6,100 163,907 Dollar General Corp. 100 2,077 Federated Department Stores, Inc. 11,600 670,364 The Home Depot, Inc. 141,300 6,039,162 J.C. Penney Co., Inc. 30,300 1,254,420 Kohl's Corp.* 3,300 162,261 Lowe's Companies, Inc. 6,000 345,540 The May Department Stores Co.+ 18,400 540,960 Office Depot, Inc.* 12,800 222,208 RadioShack Corp. 11,600 381,408 Sears, Roebuck and Co. 15,000 765,450 Staples, Inc. 35,800 1,206,818 Target Corp. 35,100 1,822,743 TJX Companies, Inc. 31,400 789,082 Wal-Mart Stores, Inc. 217,900 11,509,478 ---------------- 31,726,883 ---------------- RETAIL - GROCERY -- 0.1% Albertson's, Inc.+ 25,800 616,104 ---------------- TELEPHONE UTILITIES -- 1.6% Alltel Corp. 26,900 1,580,644 AT&T Corp. 101,600 1,936,496 BellSouth Corp. 59,900 1,664,621 CenturyTel, Inc. 12,000 425,640 Qwest Communications International, Inc.* 12,400 55,056 Sprint Corp. (FON Group) 188,000 4,671,800 Verizon Communications, Inc. 153,268 6,208,887 ---------------- 16,543,144 ---------------- TOBACCO -- 0.7% Altria Group, Inc. 81,100 4,955,210 Reynolds American, Inc. 9,700 762,420 UST, Inc. 22,800 1,096,908 ---------------- 6,814,538 ---------------- TOYS, GAMES -- 0.0% Hasbro, Inc. 8,900 172,482 Mattel, Inc. 20,000 389,800 ---------------- 562,282 ----------------
The accompanying notes are an integral part of the financial statements. 23
NUMBER OF MARKET SHARES VALUE ---------------- ---------------- TRANSPORTATION -- 1.0% Burlington Northern Santa Fe Corp. 26,300 $ 1,244,253 Carnival Corp. 500 28,815 CSX Corp. 13,200 529,056 FedEx Corp. 33,800 3,328,962 Norfolk Southern Corp. 45,100 1,632,169 United Parcel Service, Inc. Cl. B 42,900 3,666,234 ---------------- 10,429,489 ---------------- TRAVEL -- 0.0% Sabre Holdings Corp. 5,300 117,448 ---------------- TOTAL EQUITIES (COST $485,223,090) 661,569,424 ---------------- RIGHTS -- 0.0% COMPUTERS & INFORMATION Seagate Technology* ++ 21,700 - ---------------- TOTAL RIGHTS (COST $0) - ---------------- PRINCIPAL AMOUNT ---------------- BONDS & NOTES -- 27.5% ASSET BACKED SECURITIES -- 0.6% Chase Mortgage Finance Co. Series 2003-S11, Class 1A-1 5.000% 10/25/2033 $ 2,425,977 2,383,201 Travelers Funding Limited Series 1A, Class A1+++ 6.300% 02/18/2014 2,746,693 2,856,561 Vanderbilt Mortgage and Finance, Inc. Series 2002-C, Class A2 4.230% 02/07/2015 1,250,000 1,249,564 ---------------- TOTAL ASSET BACKED SECURITIES (COST $6,340,822) 6,489,326 ---------------- CORPORATE DEBT -- 14.1% Allied Waste North America Series B 5.750% 02/15/2011 300,000 282,000 Allied Waste North America, Inc. 8.875% 04/01/2008 140,000 149,800 American General Finance Corp. 5.875% 07/14/2006 $ 775,000 $ 803,541 American Greetings Corp. 6.100% 08/01/2028 1,445,000 1,542,538 American Honda Finance Corp.+++ 3.850% 11/06/2008 700,000 698,049 American Standard, Inc. 7.625% 02/15/2010 700,000 800,295 Ametek, Inc. 7.200% 07/15/2008 1,040,000 1,127,569 Anheuser-Busch Cos., Inc. 5.050% 10/15/2016 725,000 724,943 Anheuser-Busch Cos., Inc. 6.500% 02/01/2043 775,000 882,947 AOL Time Warner, Inc. 5.625% 05/01/2005 2,040,000 2,058,786 Aramark Services, Inc. 8.150% 05/01/2005 750,000 760,949 Australian Gas Light Co. Limited+++ 6.400% 04/15/2008 710,000 761,221 Avnet, Inc. 8.000% 11/15/2006 545,000 588,600 Bank of America Corp. 4.250% 10/01/2010 1,200,000 1,196,923 Bausch & Lomb, Inc. 7.125% 08/01/2028 665,000 708,556 Bombardier Capital, Inc.+++ 6.125% 06/29/2006 210,000 210,000 Bombardier, Inc.+ +++ 6.750% 05/01/2012 245,000 224,788 BP Capital Markets PLC 2.750% 12/29/2006 2,000,000 1,979,534 Briggs & Stratton Corp. 8.875% 03/15/2011 1,370,000 1,647,425 Buckeye Partners LP 4.625% 07/15/2013 350,000 340,975 Burlington Northern Santa Fe Corp. 6.750% 03/15/2029 595,000 669,626 Cabot Corp.+++ 5.250% 09/01/2013 425,000 425,456 Capitol Records, Inc.+++ 8.375% 08/15/2009 995,000 1,116,887 Centerpoint Energy, Inc. Series B 5.875% 06/01/2008 1,085,000 1,135,332 Certegy, Inc. 4.750% 09/15/2008 $ 220,000 $ 225,059 Champion International Corp. 6.400% 02/15/2026 1,000,000 1,073,148 Chesapeake Energy Corp. 7.500% 06/15/2014 440,000 480,700 CIT Group, Inc. 7.375% 04/02/2007 900,000 971,777 Colonial Pipeline Co.+++ 7.630% 04/15/2032 750,000 966,065 Comcast Cable Communications, Inc. 8.375% 05/01/2007 2,500,000 2,764,875 Consolidated Natural Gas Co. Series C 6.250% 11/01/2011 200,000 219,525 Constellation Brands, Inc. 8.000% 02/15/2008 210,000 228,375 Countrywide Home Loans, Inc. 3.250% 05/21/2008 920,000 899,601 COX Communications, Inc.+++ 4.625% 01/15/2010 565,000 563,697 Cox Communications, Inc. 6.750% 03/15/2011 400,000 437,998 CSX Corp. 7.250% 05/01/2027 2,200,000 2,554,842 DaimlerChrysler NA Holding Corp. 4.050% 06/04/2008 2,000,000 1,995,872 Delhaize America, Inc. 9.000% 04/15/2031 915,000 1,183,824 Deutsche Telekom International Finance BV 8.250% 06/15/2005 850,000 869,808 Diageo Finance BV 3.000% 12/15/2006 500,000 495,761 Dominion Resources, Inc. 7.195% 09/15/2014 770,000 889,737 Duke Energy Field Services Corp. 7.875% 08/16/2010 1,800,000 2,099,363 Electronic Data Systems Corp. Series B 6.000% 08/01/2013 310,000 327,326
The accompanying notes are an integral part of the financial statements. 24
PRINCIPAL MARKET AMOUNT VALUE ---------------- ---------------- Emerald Investment Grade CBO Limited+++ 3.090% 05/24/2011 $ 2,711,039 $ 2,707,650 Entergy Gulf States, Inc. 5.250% 08/01/2015 1,675,000 1,657,865 Enterprise Products Operating LP+++ 4.000% 10/15/2007 45,000 44,890 Enterprise Products Operating LP 7.500% 02/01/2011 975,000 1,105,450 ERAC USA Finance Co.+++ 6.700% 06/01/2034 820,000 890,576 ERAC USA Finance Co.+++ 6.750% 05/15/2007 1,000,000 1,066,779 FedEx Corp. 2.286% 04/01/2005 475,000 475,247 First Industrial LP 7.600% 05/15/2007 700,000 758,539 Ford Motor Co. 6.375% 02/01/2029 890,000 800,943 Ford Motor Co. 6.625% 02/15/2028 300,000 280,048 Foster's Finance Corp.+++ 6.875% 06/15/2011 835,000 942,146 France Telecom SA 9.250% 03/01/2031 700,000 948,914 Franklin Resources, Inc. 3.700% 04/15/2008 800,000 798,110 General Mills, Inc. 2.625% 10/24/2006 3,325,000 3,268,465 General Mills, Inc. 8.900% 06/15/2006 2,250,000 2,420,147 General Motors Acceptance Corp. 6.150% 04/05/2007 1,440,000 1,479,848 General Motors Corp.+ 7.200% 01/15/2011 950,000 974,360 General Motors Corp. 8.375% 07/15/2033 520,000 538,763 Glencore Funding LLC+++ 6.000% 04/15/2014 750,000 725,609 Goldman Sachs Group, Inc. 5.150% 01/15/2014 775,000 785,393 Goodrich (B.F.) Co. 7.500% 04/15/2008 1,800,000 1,992,713 Harrah's Operating Co., Inc. 5.500% 07/01/2010 $ 385,000 $ 398,523 HCA, Inc. 6.950% 05/01/2012 825,000 868,647 Household Finance Corp. 4.125% 12/15/2008 875,000 878,578 Household Finance Corp. 6.375% 10/15/2011 750,000 828,297 ICI Wilmington, Inc. 7.050% 09/15/2007 735,000 793,399 Interpool, Inc. 7.350% 08/01/2007 1,000,000 1,015,000 Ipalco Enterprises, Inc. 8.375% 11/14/2008 975,000 1,096,875 iStar Financial, Inc. Series B 4.875% 01/15/2009 165,000 167,478 iStar Financial, Inc. Series B 5.700% 03/01/2014 310,000 317,301 J.C. Penney Co., Inc. 7.950% 04/01/2017 415,000 485,550 JP Morgan Chase & Co. 3.125% 12/11/2006 1,000,000 994,829 Kellwood Co. 7.625% 10/15/2017 635,000 698,367 Kellwood Co. 7.875% 07/15/2009 165,000 182,292 Kennametal, Inc. 7.200% 06/15/2012 920,000 1,022,336 Kern River Funding Corp.+++ 4.893% 04/30/2018 698,719 711,331 Kimco Realty Corp. Series MTNB 7.860% 11/01/2007 1,325,000 1,481,415 The Kroger Co. 6.750% 04/15/2012 1,000,000 1,129,063 Leucadia National Corp. 7.750% 08/15/2013 1,150,000 1,242,000 Liberty Media Corp. 3.500% 09/25/2006 500,000 497,222 Marriott International, Inc. Series E 7.000% 01/15/2008 690,000 752,130 May Department Stores Co. (The) 3.950% 07/15/2007 365,000 365,617 Meritor Automotive, Inc. 6.800% 02/15/2009 655,000 687,750 Merrill Lynch & Co., Inc. 2.940% 01/30/2006 $ 3,150,000 $ 3,139,876 MGM Mirage, Inc. 6.000% 10/01/2009 250,000 256,250 MGM Mirage, Inc. 6.750% 09/01/2012 725,000 763,063 MidAmerican Energy Holdings Co. 3.500% 05/15/2008 1,050,000 1,028,530 Midamerican Funding LLC 6.750% 03/01/2011 145,000 161,360 Millipore Corp. 7.500% 04/01/2007 4,250,000 4,504,660 Mobil Corp. 8.625% 08/15/2021 1,050,000 1,457,882 Mohawk Industries, Inc. Series D 7.200% 04/15/2012 750,000 862,936 Monongahela Power Co.+++ 6.700% 06/15/2014 400,000 443,149 National Rural Utilities Cooperative Finance Corp. 8.000% 03/01/2032 245,000 319,700 Navistar International Corp. 7.500% 06/15/2011 640,000 686,400 Nevada Power Co.+++ 5.875% 01/15/2015 450,000 453,375 Newell Rubbermaid, Inc. 4.000% 05/01/2010 320,000 310,530 News America Holdings, Inc. 8.875% 04/26/2023 2,000,000 2,600,260 Nextel Communications, Inc. 5.950% 03/15/2014 180,000 186,300 Nisource Finance Corp. 3.200% 11/01/2006 480,000 475,691 Norfolk Southern Corp. 6.000% 04/30/2008 450,000 481,769 North Finance (Bermuda) Limited+++ 7.000% 09/15/2005 4,000,000 4,069,352 Northwestern Corp.+++ 5.875% 11/01/2014 205,000 209,709 Oak Hill Securities Fund II+++ 8.920% 10/15/2006 500,000 513,602
The accompanying notes are an integral part of the financial statements. 25
PRINCIPAL MARKET AMOUNT VALUE ---------------- ---------------- Pacific Energy Partners, LP/Pacific Energy Finance Corp. 7.125% 06/15/2014 $ 365,000 $ 388,725 Pacific Gas & Electric Co. 6.050% 03/01/2034 570,000 592,011 Piedmont Natural Gas Co. Series E 6.000% 12/19/2033 400,000 416,953 Pilgrims Pride Corp. 9.625% 09/15/2011 110,000 123,750 Plains All American Pipeline Co. 5.625% 12/15/2013 520,000 534,876 Potomac Edison Co.+++ 5.350% 11/15/2014 325,000 327,529 Precision Castparts Corp. 5.600% 12/15/2013 1,125,000 1,147,142 The Premcor Refining Group, Inc. 6.750% 05/01/2014 230,000 244,375 PSEG Power LLC 5.500% 12/01/2015 600,000 611,453 Qwest Corp.+++ 9.125% 03/15/2012 300,000 346,500 Rogers Cable, Inc. 5.500% 03/15/2014 425,000 400,563 Rogers Wireless Communications, Inc. 6.375% 03/01/2014 350,000 346,500 Ryder System, Inc. 6.600% 11/15/2005 3,500,000 3,594,384 Simon Property Group LP 6.875% 11/15/2006 750,000 794,246 SLM Corp. 5.000% 10/01/2013 1,245,000 1,260,732 SLM Corp. 5.625% 08/01/2033 615,000 608,361 Smithfield Foods, Inc. 7.000% 08/01/2011 860,000 918,050 Sprint Capital Corp. 6.900% 05/01/2019 525,000 587,312 Starwood Hotels & Resorts Worldwide, Inc. 7.875% 05/01/2012 495,000 565,538 Steelcase, Inc. 6.375% 11/15/2006 1,150,000 1,187,237 SuperValu, Inc. 7.875% 08/01/2009 2,000,000 2,293,524 Tampa Electric Co. 5.375% 08/15/2007 700,000 728,191 Textron Financial Corp. Series E 2.690% 10/03/2006 $ 1,710,000 $ 1,685,752 Thomas & Betts Corp. 6.500% 01/15/2006 340,000 349,346 Timken Co. 5.750% 02/15/2010 825,000 840,403 Timken Co. Series A 6.750% 08/21/2006 500,000 515,359 Toro Co. 7.800% 06/15/2027 1,300,000 1,472,936 Toyota Motor Credit Corp. 4.350% 12/15/2010 1,400,000 1,418,318 TransAlta Corp. 5.750% 12/15/2013 1,000,000 1,029,752 Tricon Global Restaurants, Inc. 8.875% 04/15/2011 460,000 568,339 Tri-State Generation & Transmission Association Series 2003, Class A+++ 6.040% 01/31/2018 430,000 454,286 Tri-State Generation & Transmission Association Series 2003, Class B+++ 7.144% 07/31/2033 525,000 602,380 Tyco International Group SA 6.375% 02/15/2006 1,300,000 1,343,316 Tyco International Group SA 6.375% 10/15/2011 1,350,000 1,490,476 Tyco International Group SA 6.875% 01/15/2029 125,000 143,189 Union Pacific Corp. 6.400% 02/01/2006 750,000 774,383 US Airways, Inc. Cl. B* ++++ 7.500% 04/15/2008 869,681 - USA Interactive 7.000% 01/15/2013 900,000 992,761 Verizon Global Funding Corp. 7.750% 12/01/2030 720,000 895,195 Vulcan Materials Co. 6.000% 04/01/2009 1,250,000 1,333,520 The Walt Disney Co. 6.750% 03/30/2006 650,000 677,245 Washington Mutual, Inc. 2.400% 11/03/2005 $ 1,600,000 $ 1,589,686 Weingarten Realty Investors REIT, Series A 7.500% 12/19/2010 770,000 894,768 Weyerhaeuser Co. 5.500% 03/15/2005 255,000 256,174 WPP Finance (USA) Corp. 6.625% 07/15/2005 2,550,000 2,568,505 XTO Energy, Inc. 4.900% 02/01/2014 850,000 848,122 ---------------- TOTAL CORPORATE DEBT (COST $140,671,588) 145,047,105 ---------------- NON-U.S. GOVERNMENT AGENCY OBLIGATIONS -- 3.3% COLLATERALIZED MORTGAGE OBLIGATIONS ABN AMRO Mortgage Corp. Series 2003-12, Class 1A 5.000% 12/25/2033 1,679,222 1,649,638 AES Eastern Energy LP Series 1999-1, Class A 9.000% 01/02/2017 468,174 531,377 Asset Securitization Corp. Series 1995-MD4, Class A1 7.100% 08/13/2029 1,283,328 1,324,815 Countrywide Home Loans, Inc. Series 2003-42, Class 1A1 3.762% 09/25/2033 754,567 749,308 Countrywide Home Loans, Inc. Series 2004-23, Class 1A1 4.325% 02/25/2034 732,004 735,187 CS First Boston Mortgage Securities Corp. Series 1998-C2, Class A1 5.960% 11/11/2030 1,240,913 1,270,472 CS First Boston Mortgage Securities Corp. Series 2003-7, Class 1A24 4.500% 02/25/2033 903,839 902,841
The accompanying notes are an integral part of the financial statements. 26
PRINCIPAL MARKET AMOUNT VALUE ---------------- ---------------- CS First Boston Mortgage Securities Corp. Series 2004-C1, Class A1 2.254% 01/15/2037 $ 1,048,687 $ 1,026,238 GSR Mortgage Loan Trust Series 2004-9 4.708% 08/25/2034 1,316,450 1,329,481 IndyMac Bancorp, Inc. Mortgage Loan Trust Series 2004-AR4, Class 1A 4.783% 08/25/2034 2,172,461 2,196,721 MASTR Asset Securitization Trust Series 2002-6, Class 6A1 6.500% 10/25/2032 212,430 214,392 MASTR Asset Securitization Trust Series 2003-12, Class 6A1 5.000% 12/25/2033 2,736,358 2,687,900 Merrill Lynch Mortgage Investors, Inc. Series 1998-C1, Class A1 6.310% 11/15/2026 1,117,644 1,135,728 Merrill Lynch Mortgage Investors, Inc. Series 2003-A4, Class IA 4.281% 07/25/2033 695,240 697,531 Merrill Lynch Mortgage Investors, Inc. Series 2004-A1, Class IA 4.155% 02/25/2034 367,709 368,061 Morgan Stanley Mortgage Loan Trust Series 2004-2AR, Class 1A 5.218% 02/25/2034 198,155 200,978 Starwood Commercial Mortgage Trust Series 1999-C1A, Class B+++ 6.920% 02/03/2014 3,000,000 3,304,026 Structured Adjustable Rate Mortgage Loan Trust Series 2004-2, Class 2A 5.070% 03/25/2034 1,576,242 1,590,044 Structured Asset Securities Corp. Series 2002-11A, Class 2A1 5.600% 06/25/2032 $ 578,615 $ 588,716 Structured Asset Securities Corp. Series 2003-30, Class 1A1 5.500% 10/25/2033 2,059,556 2,067,022 Vendee Mortgage Trust Series 1992-1, Class 2Z 7.750% 05/15/2022 929,653 1,014,746 Washington Mutual MSC Mortgage Pass- Through Certificates Series 2004-RA1, Class 2A 7.000% 03/25/2034 1,446,575 1,486,604 Washington Mutual MSC Mortgage Pass- Through Certificates, Series 2004-RA4, Class 2A 6.500% 08/25/2034 508,753 528,109 Washington Mutual, Inc. Series 2003-S11, Class A1 5.000% 11/25/2033 3,039,721 2,986,129 Washington Mutual, Inc. Series 2004-AR2, Class A 2.995% 04/25/2044 2,162,305 2,179,180 Wells Fargo Mortgage Backed Securities Trust Series 2004-P, Class 2A1 4.278% 09/25/2034 1,783,272 1,773,388 ---------------- TOTAL NON-U.S. GOVERNMENT AGENCY OBLIGATIONS (COST $34,304,884) 34,538,632 ---------------- SOVEREIGN DEBT OBLIGATIONS -- 0.2% Republic of South Africa 6.500% 06/02/2014 725,000 793,875 United Mexican States 8.375% 01/14/2011 685,000 804,533 ---------------- TOTAL SOVEREIGN DEBT OBLIGATIONS (COST $1,482,802) 1,598,408 ---------------- U.S. GOVERNMENT AGENCY OBLIGATIONS -- 5.7% FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) -- 1.2% COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.1% FHLMC Series W067, Class A 6.420% 12/01/2005 $ 802,728 $ 822,765 ---------------- PASS-THROUGH SECURITIES -- 1.1% FHLMC 4.250% 07/15/2009 3,820,000 3,886,395 FHLMC 6.000% 09/01/2016- 02/01/2018 981,982 1,029,392 FHLMC 6.500% 08/01/2016- 09/01/2016 722,578 765,651 FHLMC 6.625% 09/15/2009 3,250,000 3,631,224 FHLMC 7.500% 02/01/2030- 03/01/2031 1,344,156 1,442,953 FHLMC 8.000% 08/01/2026- 03/01/2028 369,729 402,606 FHLMC 9.000% 03/01/2017 39,671 42,841 ---------------- TOTAL PASS-THROUGH SECURITIES 11,201,062 ---------------- TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) 12,023,827 ================ FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) -- 1.0% PASS-THROUGH SECURITIES FNMA 2.250% 05/15/2006 4,225,000 4,174,929 FNMA 4.625% 10/15/2013 2,900,000 2,925,829 FNMA 6.000% 05/01/2016- 06/01/2016 393,842 413,349 FNMA 7.000% 01/01/2031- 05/01/2031 1,770,107 1,878,318 FNMA 7.500% 09/01/2029- 05/01/2030 573,322 615,122 FNMA 8.000% 05/01/2013- 09/01/2031 528,678 573,302 ---------------- TOTAL PASS-THROUGH SECURITIES 10,580,849 ----------------
The accompanying notes are an integral part of the financial statements. 27
PRINCIPAL MARKET AMOUNT VALUE ---------------- ---------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) -- 3.4% PASS-THROUGH SECURITIES GNMA 5.000% 02/15/2034 $ 5,175,307 $ 5,183,596 GNMA 5.500% 06/15/2033- 09/15/2034 20,032,186 20,468,339 GNMA 6.000% 01/15/2032- 08/15/2032 3,051,147 3,161,482 GNMA 6.500% 10/15/2028- 03/15/2029 2,984,054 3,162,397 GNMA 7.000% 04/15/2023- 08/15/2032 591,259 632,044 GNMA 7.250% 06/20/2021- 05/20/2022 1,351,863 1,451,245 GNMA 7.500% 09/15/2016- 10/15/2017 570,448 614,367 GNMA 8.000% 05/15/2005- 05/15/2008 490,167 533,438 GNMA 9.000% 08/15/2008- 09/15/2009 164,209 174,645 ---------------- TOTAL PASS-THROUGH SECURITIES 35,381,553 ---------------- OTHER AGENCIES -- 0.1% PASS-THROUGH SECURITIES New Valley Generation IV 4.687% 01/15/2022 365,541 366,941 ---------------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST $57,536,430) 58,353,170 ---------------- U.S. TREASURY OBLIGATIONS -- 3.6% U.S. TREASURY BONDS -- 1.8% U.S. Treasury Bond+ 6.125% 08/15/2029 3,235,000 3,793,543 U.S. Treasury Bond** 8.750% 05/15/2017 10,750,000 15,055,040 ---------------- TOTAL U.S. TREASURY BONDS 18,848,583 ---------------- U.S. TREASURY NOTES -- 1.8% U.S. Treasury Note+ 2.500% 10/31/2006 1,150,000 1,139,309 U.S. Treasury Note+ 3.375% 11/15/2008 4,025,000 4,014,623 U.S. Treasury Note 4.000% 02/15/2014 $ 10,210,000 $ 10,068,018 U.S. Treasury Note 5.625% 05/15/2008 2,675,000 2,869,146 ---------------- TOTAL U.S. TREASURY NOTES 18,091,096 ---------------- TOTAL U.S. TREASURY OBLIGATIONS (COST $34,155,471) 36,939,679 ---------------- TOTAL BONDS & NOTES (COST $274,491,997) 282,966,320 ---------------- TOTAL LONG TERM INVESTMENTS (COST $759,715,087) 944,535,744 ---------------- SHORT-TERM INVESTMENTS -- 13.2% CASH EQUIVALENTS -- 4.8%*** American AAdvanage Select Money Market Fund 577,768 577,768 Bank of America Bank Note 2.260% 02/15/2005 $ 431,627 431,627 Bank of America Bank Note 2.270% 01/18/2005 1,007,129 1,007,129 Bank of America Bank Note 2.270% 03/03/2005 1,870,383 1,870,383 Bank of America Bank Note 2.300% 06/09/2005 1,007,129 1,007,129 Bank of Montreal Eurodollar Time Deposit 2.125% 02/02/2005 438,821 438,821 Bank of Montreal Eurodollar Time Deposit 2.260% 01/28/2005 455,968 455,968 BGI Institutional Money Market Fund 5,179,521 5,179,521 BNP Paribas Eurodollar Time Deposit 2.300% 01/03/2005 287,751 287,751 Calyon Eurodollar Time Deposit 2.435% 03/16/2005 1,231,575 1,231,575 Canadian Imperial Bank of Commerce Bank Note 2.030% 05/18/2005 2,877,512 2,877,512 Citigroup Eurodollar Time Deposit 2.080% 01/28/2005 1,129,423 1,129,423 Den Danske Bank Eurodollar Time Deposit 2.260% 01/20/2005 $ 1,726,507 $ 1,726,507 Dexia Group Eurodollar Time Deposit 2.040% 01/21/2005 575,502 575,502 Federal Home Loan Bank Discount Note 2.184% 01/05/2005 1,787,355 1,787,355 Fortis Bank Eurodollar Time Deposit 2.140% 01/12/2005 575,502 575,502 Fortis Bank Eurodollar Time Deposit 2.200% 02/11/2005 431,627 431,627 Fortis Bank Eurodollar Time Deposit 2.260% 01/05/2005 2,373,947 2,373,947 Freddie Mac Discount Note 2.184% 01/04/2005 2,010,965 2,010,965 Freddie Mac Discount Note 2.228% 02/01/2005 536,863 536,863 Freddie Mac Discount Note 2.277% 02/01/2005 2,512,405 2,512,405 General Electric Capital Corp. 2.294% 01/21/2005 819,324 819,324 General Electric Capital Corp. 2.295% 01/10/2005 1,401,797 1,401,797 HBOS Halifax Bank of Scotland Eurodollar Time Deposit 2.025% 01/21/2005 661,828 661,828 Lloyds TSB Bank Eurodollar Time Deposit 2.280% 02/02/2005 704,990 704,990 Merrill Lynch Premier Institutional Money Market Fund 949,583 949,583 Merrimac Cash Fund, Premium Class 2,158,134 2,158,134 Morgan Stanley Dean Witter & Co. 2.393% 07/19/2005 1,899,158 1,899,158 Royal Bank of Canada Eurodollar Time Deposit 2.250% 01/19/2005 1,438,756 1,438,756 Royal Bank of Canada Eurodollar Time Deposit 2.260% 02/01/2005 1,151,005 1,151,005
The accompanying notes are an integral part of the financial statements. 28
PRINCIPAL MARKET AMOUNT VALUE ---------------- ---------------- Royal Bank of Scotland Eurodollar Time Deposit 2.015% 01/21/2005 $ 1,660,324 $ 1,660,324 Royal Bank of Scotland Eurodollar Time Deposit 2.270% 02/02/2005 863,253 863,253 Royal Bank of Scotland Eurodollar Time Deposit 2.360% 02/17/2005 143,876 143,876 Toronto Dominion Bank Eurodollar Time Deposit 2.420% 03/01/2005 1,438,756 1,438,756 Wells Fargo Eurodollar Time Deposit 2.270% 01/25/2005 359,689 359,689 Wells Fargo Eurodollar Time Deposit 2.310% 01/28/2005 1,438,756 1,438,756 Wells Fargo Eurodollar Time Deposit 2.320% 01/14/2005 3,447,259 3,447,259 ---------------- 49,561,768 ---------------- COMMERCIAL PAPER -- 8.4% Albertson's, Inc.+++ 2.150% 01/24/2005 2,900,000 2,896,016 Alcoa, Inc. 2.350% 02/16/2005 4,900,000 4,885,286 Alcoa, Inc. 2.370% 02/07/2005 1,400,000 1,396,590 Autoliv ASP, Inc.+++ 2.310% 01/06/2005 2,500,000 2,499,198 Clorox Co. 2.400% 01/14/2005 1,600,000 1,598,613 Clorox Co. 2.430% 01/13/2005 3,100,000 3,097,489 DaimlerChrysler North America Holding Corp. 2.500% 01/20/2005 3,000,000 2,996,042 DaimlerChrysler North America Holding Corp. 2.540% 01/26/2005 1,210,000 1,207,866 Dominion Resources, Inc.+++ 2.400% 01/12/2005 3,000,000 2,997,800 Dominion Resources, Inc.+++ 2.420% 01/05/2005 3,780,000 3,778,985 Dow Jones & Co., Inc.+++ 2.200% 01/10/2005 2,500,000 2,498,625 Exelon Corp.+++ 2.400% 01/19/2005 2,700,000 2,696,760 Gannett Co., Inc. 2.180% 01/07/2005 $ 4,000,000 $ 3,998,547 General Mills, Inc.+++ 2.300% 01/18/2005 3,000,000 2,996,742 General Mills, Inc.+++ 2.470% 01/10/2005 500,000 499,691 John Deere Capital Corp.+++ 2.370% 01/04/2005 2,775,000 2,774,452 John Deere Capital Corp.+++ 2.420% 01/21/2005 1,585,000 1,582,869 Kellogg Co.+++ 2.400% 01/12/2005 1,250,000 1,249,083 Kellogg Co.+++ 2.400% 01/25/2005 2,575,000 2,570,880 KeySpan Corp.+++ 2.300% 01/19/2005 2,900,000 2,896,665 KeySpan Corp.+++ 2.370% 01/20/2005 1,455,000 1,453,180 KeySpan Corp.+++ 2.440% 01/25/2005 2,500,000 2,495,933 L'Oreal USA, Inc.+++ 2.330% 01/31/2005 4,000,000 3,992,233 National Fuel Gas Co. 2.400% 01/14/2005 1,790,000 1,788,449 OGE Energy Corp.+++ 2.300% 01/03/2005 3,235,000 3,234,587 Reed Elsevier+++ 2.310% 01/03/2005 3,000,000 2,999,615 Textron Financial Corp. 2.360% 01/11/2005 2,700,000 2,698,230 Textron Financial Corp. 2.400% 01/21/2005 1,250,000 1,248,333 Textron Financial Corp. 2.410% 01/28/2005 1,225,000 1,222,786 Textron Financial Corp. 2.430% 02/04/2005 1,410,000 1,406,764 Tribune Co.+++ 2.320% 01/27/2005 1,930,000 1,926,766 Walt Disney Co. 2.200% 01/05/2005 2,310,000 2,309,435 Walt Disney Co. 2.310% 01/19/2005 1,850,000 1,847,863 Walt Disney Co. 2.370% 01/24/2005 1,140,000 1,138,274 WellPoint, Inc.+++ 2.380% 01/13/2005 1,210,000 1,209,040 WellPoint, Inc.+++ 2.410% 01/12/2005 2,010,000 2,008,520 WellPoint, Inc.+++ 2.410% 01/18/2005 $ 2,640,000 $ 2,636,995 ---------------- 86,735,202 ---------------- TOTAL SHORT-TERM INVESTMENTS (AT AMORTIZED COST) 136,296,970 ---------------- TOTAL INVESTMENTS -- 104.9% (COST $896,012,057)**** 1,080,832,714 OTHER ASSETS/ (LIABILITIES) -- (4.9%) (50,791,644) ---------------- NET ASSETS -- 100.0% $ 1,030,041,070 ================
NOTES TO PORTFOLIO OF INVESTMENTS REIT - Real Estate Investment Trust * Non-income producing security. ** This security is held as collateral for open futures contracts. (NOTE 2). *** Represents investments of security lending collateral. (NOTE 2). **** See Note 7 for aggregate cost for Federal tax purposes. + Denotes all or a portion of security on loan. ++ This security is valued in good faith under procedures established by the board of trustees. +++ 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. At December 31, 2004, these securities amounted to a value of $79,530,248 or 7.7% of net assets. ++++ Security is currently in default. The accompanying notes are an integral part of the financial statements. 29 MML EQUITY FUND - PORTFOLIO OF INVESTMENTS DECEMBER 31, 2004
NUMBER OF MARKET SHARES VALUE ---------------- ---------------- EQUITIES -- 99.5% ADVERTISING -- 0.0% Interpublic Group of Companies, Inc.* + 30,600 $ 410,040 Omnicom Group, Inc. 1,900 160,208 ---------------- 570,248 ---------------- AEROSPACE & DEFENSE -- 3.4% Boeing Co. 49,500 2,562,615 General Dynamics Corp. 6,700 700,820 Goodrich Corp. 44,100 1,439,424 Honeywell International, Inc. 16,800 594,888 Lockheed Martin Corp. 269,900 14,992,945 Northrop Grumman Corp. 5,700 309,852 Raytheon Co. 7,200 279,576 Rockwell Collins, Inc. 677,400 26,716,656 United Technologies Corp. 7,600 785,460 ---------------- 48,382,236 ---------------- APPAREL, TEXTILES & SHOES -- 2.3% Coach, Inc.* 1,900 107,160 The Gap, Inc. 25,900 547,008 Jones Apparel Group, Inc. 23,900 874,023 Limited Brands 1,209,500 27,842,690 Liz Claiborne, Inc. 1,700 71,757 Nike, Inc. Cl. B 4,100 371,829 Nordstrom, Inc. 14,500 677,585 Reebok International Limited+ 1,000 44,000 VF Corp.+ 25,300 1,401,114 ---------------- 31,937,166 ---------------- AUTOMOTIVE & PARTS -- 0.6% American Axle & Manufacturing Holdings, Inc. 15,800 484,428 Autoliv, Inc. 19,700 951,510 AutoNation, Inc.* 2,600 49,946 BorgWarner, Inc. 16,200 877,554 Cooper Tire & Rubber Co.+ 900 19,395 Dana Corp. 28,400 492,172 Ford Motor Co.+ 65,100 953,064 General Motors Corp.+ 31,800 1,273,908 Genuine Parts Co. 4,100 180,646 The Goodyear Tire & Rubber Co.* + 2,700 39,582 Harley-Davidson, Inc. 2,700 164,025 Lear Corp. 20,400 1,244,604 Magna International, Inc. Cl. A+ 11,400 941,070 Paccar, Inc. 8,300 $ 667,984 SPX Corp.+ 1,600 64,096 ---------------- 8,403,984 ---------------- BANKING, SAVINGS & LOANS -- 15.1% AmSouth Bancorporation+ 9,000 233,100 Bank of America Corp. 736,400 34,603,436 Bank of New York Co., Inc. 7,400 247,308 BB&T Corp. 8,300 349,015 Capital One Financial Corp. 2,600 218,946 Citigroup, Inc.+ 1,078,500 51,962,130 Comerica, Inc. 28,100 1,714,662 Fannie Mae 27,800 1,979,638 Fifth Third Bancorp 8,600 406,608 First Horizon National Corp.+ 1,900 81,909 Freddie Mac 382,000 28,153,400 Golden West Financial Corp. 4,600 282,532 JP Morgan Chase & Co. 216,952 8,463,298 KeyCorp+ 57,500 1,949,250 M&T Bank Corp. 1,700 183,328 Marshall and Ilsley Corp. 3,400 150,280 Mellon Financial Corp. 6,400 199,104 National City Corp.+ 68,700 2,579,685 North Fork Bancorporation, Inc. 7,050 203,393 Northern Trust Corp. 2,000 97,160 Providian Financial Corp.* + 21,100 347,517 Regions Financial Corp. 44,124 1,570,373 SLM Corp. 381,100 20,346,929 Sovereign Bancorp, Inc. 5,300 119,515 State Street Corp. 100 4,912 SunTrust Banks, Inc. 29,900 2,209,012 Synovus Financial Corp. 4,800 137,184 U.S. Bancorp 124,200 3,889,944 Wachovia Corp. 285,349 15,009,357 Washington Mutual, Inc. 64,200 2,714,376 Wells Fargo & Co. 513,700 31,926,455 Zions Bancorp 1,400 95,242 ---------------- 212,428,998 ---------------- BEVERAGES -- 2.6% Brown-Forman Corp. Cl. B 1,900 92,492 The Coca-Cola Co. 21,700 903,371 Coca-Cola Enterprises, Inc. 7,800 162,630 Coors (Adolph) Co. Cl. B+ 600 45,402 Diageo PLC Sponsored ADR (United Kingdom)+ 580,200 $ 33,581,976 The Pepsi Bottling Group, Inc.+ 10,100 273,104 PepsiCo, Inc. 28,300 1,477,260 ---------------- 36,536,235 ---------------- BROADCASTING, PUBLISHING & PRINTING -- 4.2% Clear Channel Communications, Inc.+ 9,300 311,457 Comcast Corp. Cl. A* 85,700 2,852,096 Dow Jones & Co., Inc.+ 1,400 60,284 Gannett Co., Inc. 308,900 25,237,130 Knight Ridder, Inc.+ 1,300 87,022 The McGraw-Hill Companies, Inc. 3,800 347,852 Meredith Corp. 2,900 157,180 New York Times Co. Cl. A+ 2,300 93,840 Time Warner, Inc.* 167,100 3,248,424 Tribune Co. 2,900 122,206 Univision Communications, Inc. Cl. A* + 400 11,708 Viacom, Inc. Cl. A+ 36,100 1,338,588 Viacom, Inc. Cl. B 676,740 24,626,569 ---------------- 58,494,356 ---------------- BUILDING MATERIALS & CONSTRUCTION -- 0.1% Louisiana-Pacific Corp. 2,800 74,872 Martin Marietta Materials, Inc. 12,000 643,920 Masco Corp. 6,900 252,057 Vulcan Materials Co. 2,500 136,525 ---------------- 1,107,374 ---------------- CHEMICALS -- 4.0% Air Products & Chemicals, Inc. 2,200 127,534 Ashland, Inc. 10,400 607,152 Dow Chemical Co. 435,200 21,546,752 Du Pont (E.I.) de Nemours & Co. 24,000 1,177,200 Eastman Chemical Co. 4,800 277,104 Engelhard Corp. 1,600 49,072 International Flavors & Fragrances, Inc. 1,400 59,976 Monsanto Co. 17,900 994,345 PPG Industries, Inc. 459,700 31,333,152 Rohm & Haas Co. 3,600 159,228 ---------------- 56,331,515 ----------------
The accompanying notes are an integral part of the financial statements. 30
NUMBER OF MARKET SHARES VALUE ---------------- ---------------- COMMERCIAL SERVICES -- 2.1% Apollo Group, Inc. Cl. A* 100 $ 8,071 Block (H&R), Inc.+ 2,900 142,100 Cendant Corp. 30,000 701,400 Cintas Corp. 2,600 114,036 Convergys Corp.* 2,200 32,978 Donnelley (R.R.) & Sons Co. 1,200 42,348 eBay, Inc.* + 10,500 1,220,940 Ecolab, Inc.+ 2,400 84,312 Equifax, Inc. 7,300 205,130 Moody's Corp. 3,100 269,235 Paychex, Inc. 5,100 173,808 PerkinElmer, Inc. 20,700 465,543 Quest Diagnostics, Inc.+ 1,300 124,215 Robert Half International, Inc. 1,300 38,259 Ryder System, Inc. 1,000 47,770 Waste Management, Inc. 885,660 26,516,660 ---------------- 30,186,805 ---------------- COMMUNICATIONS -- 1.8% ADC Telecommunications, Inc.* 246,700 661,156 Avaya, Inc.* + 7,300 125,560 BCE, Inc.+ 732,400 17,672,812 Citizens Communications Co. 4,800 66,192 Lucent Technologies, Inc.* + 209,000 785,840 Network Appliance, Inc.* + 5,200 172,744 Nextel Communications, Inc. Cl. A* 4,800 144,000 Nortel Networks Corp.* 165,400 577,246 Qualcomm, Inc. 18,300 775,920 SBC Communications, Inc. 144,700 3,728,919 Scientific-Atlanta, Inc. 2,400 79,224 Tellabs, Inc.* 118,500 1,017,915 ---------------- 25,807,528 ---------------- COMMUNICATIONS EQUIPMENT -- 0.1% Motorola, Inc. 68,300 1,174,760 ---------------- COMPUTER INTEGRATED SYSTEMS DESIGN -- 0.1% Autodesk, Inc. 7,200 273,240 Computer Sciences Corp.* 5,800 326,946 Parametric Technology Corp.* 31,700 186,713 Sun Microsystems, Inc.* 140,900 758,042 Unisys Corp.* 4,600 46,828 ---------------- 1,591,769 ---------------- COMPUTER PROGRAMMING SERVICES -- 0.0% Mercury Interactive Corp.* + 1,200 54,660 ---------------- COMPUTER RELATED SERVICES -- 0.1% Ingram Micro, Inc. Cl. A* 40,600 $ 844,480 ---------------- COMPUTERS & INFORMATION -- 3.4% Apple Computer, Inc.* 236,400 15,224,160 Cisco Systems, Inc.* 109,200 2,107,560 Comverse Technology, Inc.* 2,400 58,680 Dell, Inc.* 39,300 1,656,102 EMC Corp.* 37,900 563,573 International Business Machines Corp. 268,800 26,498,304 International Game Technology 3,800 130,644 Jabil Circuit, Inc.* 3,200 81,856 Lexmark International, Inc.* 2,100 178,500 Quantum Corp.* 49,300 129,166 Solectron Corp.* 155,700 829,881 Symbol Technologies, Inc.+ 3,000 51,900 Tech Data Corp.* + 17,600 799,040 ---------------- 48,309,366 ---------------- COMPUTERS & OFFICE EQUIPMENT -- 0.4% Electronic Data Systems Corp. 7,400 170,940 Hewlett-Packard Co. 199,124 4,175,630 Pitney Bowes, Inc. 3,500 161,980 Xerox Corp.* 31,400 534,114 ---------------- 5,042,664 ---------------- CONTAINERS -- 0.0% Ball Corp. 3,000 131,940 Bemis Co., Inc. 1,400 40,726 Pactiv Corp.* 2,500 63,225 Sealed Air Corp.* 2,100 111,867 Temple-Inland, Inc. 900 61,560 ---------------- 409,318 ---------------- COSMETICS & PERSONAL CARE -- 0.3% Alberto-Culver Co. 1,500 72,855 Avon Products, Inc. 7,900 305,730 Colgate-Palmolive Co. 300 15,348 The Gillette Co. 16,900 756,782 Kimberly-Clark Corp. 7,900 519,899 The Procter & Gamble Co. 42,600 2,346,408 ---------------- 4,017,022 ---------------- DATA PROCESSING & PREPARATION -- 0.9% Affiliated Computer Services, Inc. Cl. A* + 2,000 120,380 Automatic Data Processing, Inc. 7,900 350,365 Deluxe Corp.+ 2,600 97,058 First Data Corp. 12,500 $ 531,750 Fiserv, Inc.* 262,600 10,553,894 IMS Health, Inc. 3,600 83,556 NCR Corp.* 5,500 380,765 ---------------- 12,117,768 ---------------- ELECTRIC UTILITIES -- 4.3% Alliant Energy Corp. 25,200 720,720 Ameren Corp.+ 2,600 130,364 American Electric Power Co.+ 45,800 1,572,772 CenterPoint Energy, Inc.+ 4,700 53,110 Cinergy Corp. 2,600 108,238 CMS Energy Corp.* + 2,700 28,215 Consolidated Edison, Inc.+ 3,800 166,250 Constellation Energy Group, Inc. 31,500 1,376,865 Dominion Resources, Inc. 5,100 345,474 DTE Energy Co. 2,700 116,451 Duke Energy Corp. 27,500 696,575 Edison International 69,400 2,222,882 Entergy Corp. 324,300 21,919,437 Exelon Corp.+ 403,700 17,791,059 FirstEnergy Corp. 5,100 201,501 FPL Group, Inc. 2,700 201,825 NiSource, Inc. 4,300 97,954 Northeast Utilities 35,125 662,106 NSTAR 178,900 9,710,692 PG&E Corp.* 6,100 203,008 Pinnacle West Capital Corp. 1,300 57,733 PPL Corp. 29,800 1,587,744 Progress Energy, Inc.+ 3,400 153,816 Public Service Enterprise Group, Inc. 5,500 284,735 Southern Co.+ 10,100 338,552 Teco Energy, Inc.+ 2,700 41,418 TXU Corp.+ 4,100 264,696 ---------------- 61,054,192 ---------------- ELECTRICAL EQUIPMENT & ELECTRONICS -- 1.9% Agere Systems, Inc. Cl. A* 216,100 296,057 Altera Corp.* 900 18,630 American Power Conversion Corp. 3,100 66,340 Analog Devices, Inc. 2,300 84,916 Arrow Electronics, Inc.* 30,600 743,580 Avnet, Inc.* 32,800 598,272 Broadcom Corp. Cl. A* 500 16,140 Celestica, Inc.* + 42,800 603,908 Emerson Electric Co. 10,700 750,070 Flextronics International Limited* 53,900 744,898
The accompanying notes are an integral part of the financial statements. 31
NUMBER OF MARKET SHARES VALUE ---------------- ---------------- Freescale Semiconductor, Inc. Cl. B* 7,541 $ 138,453 General Electric Co. 472,000 17,228,000 Hubbell, Inc. Cl. B 16,500 862,950 Intel Corp. 101,300 2,369,407 Johnson Controls, Inc. 1,800 114,192 Kla-Tencor Corp.* 500 23,290 Linear Technology Corp.+ 4,700 182,172 Maxim Integrated Products, Inc. 900 38,151 Micron Technology, Inc.* + 600 7,410 National Semiconductor Corp. 300 5,385 Qlogic Corp.* 1,500 55,095 Rockwell Automation, Inc. 6,900 341,895 Sanmina-SCI Corp.* + 39,000 330,330 Texas Instruments, Inc. 27,300 672,126 Thomas & Betts Corp.* + 19,600 602,700 Xilinx, Inc. 1,500 44,475 ---------------- 26,938,842 ---------------- ENERGY -- 8.1% Amerada Hess Corp. 2,800 230,664 Anadarko Petroleum Corp. 5,500 356,455 Apache Corp. 4,900 247,793 BJ Services Co. 1,600 74,464 BP PLC Sponsored ADR (United Kingdom) 434,800 25,392,320 Burlington Resources, Inc. 6,000 261,000 ChevronTexaco Corp. 116,300 6,106,913 ConocoPhillips 51,347 4,458,460 Devon Energy Corp. 10,700 416,444 Dynegy, Inc. Cl. A* + 5,600 25,872 El Paso Corp. 16,600 172,640 EOG Resources, Inc. 1,600 114,176 Exxon Mobil Corp. 988,000 50,644,880 Halliburton Co. 7,100 278,604 Kerr-McGee Corp. 4,600 265,834 KeySpan Corp. 2,400 94,680 Kinder Morgan, Inc. 2,600 190,138 Marathon Oil Corp. 41,600 1,564,576 Nabors Industries Limited* 3,200 164,128 Nicor, Inc.+ 700 25,858 Noble Corp.* 2,800 139,272 Occidental Petroleum Corp. 324,200 18,920,312 Peoples Energy Corp. 600 26,370 Rowan Companies, Inc.* 2,300 59,570 Schlumberger Limited 5,500 368,225 Sempra Energy+ 40,200 1,474,536 Sunoco, Inc. 1,200 98,052 Transocean, Inc.* 4,100 $ 173,799 Unocal Corp. 3,600 155,664 Valero Energy Corp. 6,300 286,020 The Williams Companies, Inc. 11,200 182,448 Xcel Energy, Inc. 26,400 480,480 ---------------- 113,450,647 ---------------- ENTERTAINMENT & LEISURE -- 1.4% Brunswick Corp. 900 44,550 Harrah's Entertainment, Inc.+ 2,000 133,780 News Corp., Inc. Cl. A+ 18,700 348,942 The Walt Disney Co. 700,600 19,476,680 ---------------- 20,003,952 ---------------- FINANCIAL SERVICES -- 5.0% American Express Co. 467,500 26,352,975 Apartment Investment & Management Co. Cl. A 1,400 53,956 Bear Stearns Companies, Inc. 15,200 1,555,112 CIT Group, Inc. 3,200 146,624 Countrywide Financial Corp. 5,498 203,481 E Trade Financial Corp.* 5,500 82,225 Federated Investors, Inc. Cl. B 1,700 51,680 Franklin Resources, Inc. 3,900 271,635 The Goldman Sachs Group, Inc. 26,000 2,705,040 Huntington Bancshares, Inc.+ 53,000 1,313,340 Janus Capital Group, Inc. 3,900 65,559 Lehman Brothers Holdings, Inc. 27,100 2,370,708 MBNA Corp. 19,200 541,248 Merrill Lynch & Co., Inc. 45,300 2,707,581 Morgan Stanley 561,240 31,160,045 PNC Financial Services Group, Inc. 4,300 246,992 Price (T. Rowe) Group, Inc. 1,200 74,640 ProLogis Trust 2,800 121,324 The Schwab (Charles) Corp. 5,600 66,976 Simon Property Group, Inc. 3,200 206,944 Standard and Poor's Depository Receipts Trust Series 1 4,000 483,600 ---------------- 70,781,685 ---------------- FOODS -- 3.7% Archer-Daniels-Midland Co. 81,600 $ 1,820,496 Campbell Soup Co. 6,800 203,252 ConAgra Foods, Inc. 8,800 259,160 Heinz (H. J.) Co. 643,200 25,078,368 Hershey Foods Corp. 6,400 355,456 Kellogg Co. 452,600 20,213,116 The Kroger Co.* 40,800 715,632 McCormick & Co., Inc. 2,300 88,780 Safeway, Inc.* 74,400 1,468,656 Sara Lee Corp. 53,500 1,291,490 Starbucks Corp.* 6,200 386,632 SuperValu, Inc. 10,000 345,200 Wrigley (Wm.) Jr. Co. 2,200 152,218 ---------------- 52,378,456 ---------------- FOREST PRODUCTS & PAPER -- 2.7% Georgia-Pacific Corp. 45,300 1,697,844 International Paper Co. 100 4,200 MeadWestvaco Corp. 41,300 1,399,657 Neenah Paper, Inc.* 239 7,791 Plum Creek Timber Co., Inc. 6,500 249,860 Weyerhaeuser Co. 516,400 34,712,408 ---------------- 38,071,760 ---------------- HEALTHCARE -- 0.2% Caremark Rx, Inc.* 7,500 295,725 Express Scripts, Inc.* 1,900 145,236 GlaxoSmithKline PLC ADR (United Kingdom)+ 18,700 886,193 HCA, Inc. 6,600 263,736 Humana, Inc.* 2,600 77,194 Laboratory Corp. of America Holdings* 3,500 174,370 Manor Care, Inc. 1,200 42,516 UnitedHealth Group, Inc. 10,400 915,512 ---------------- 2,800,482 ---------------- HOME CONSTRUCTION, FURNISHINGS & APPLIANCES -- 0.1% Centex Corp.+ 1,600 95,328 KB Home 700 73,080 Leggett & Platt, Inc. 37,800 1,074,654 Pulte Homes, Inc. 1,100 70,180 Whirlpool Corp.+ 1,400 96,894 ---------------- 1,410,136 ---------------- HOUSEHOLD PRODUCTS -- 0.4% Black & Decker Corp.+ 2,600 229,658 The Clorox Co. 2,600 153,218 Corning, Inc.* 101,450 1,194,067 Fortune Brands, Inc. 1,900 146,642 Newell Rubbermaid, Inc.+ 62,400 1,509,456
The accompanying notes are an integral part of the financial statements. 32
NUMBER OF MARKET SHARES VALUE ---------------- ---------------- Sherwin-Williams Co. 8,500 $ 379,355 Snap-On, Inc. 800 27,488 The Stanley Works+ 6,900 338,031 Unilever NV NY Shares (Netherlands) 16,200 1,080,702 ---------------- 5,058,617 ---------------- INDUSTRIAL - DISTRIBUTION -- 0.0% Grainger (W.W.), Inc. 1,800 119,916 ---------------- INDUSTRIAL - DIVERSIFIED -- 2.5% 3M Co. 6,700 549,869 Cooper Industries Limited Cl. A 21,800 1,480,002 Danaher Corp. 7,400 424,834 Eaton Corp. 22,500 1,628,100 Illinois Tool Works, Inc. 4,700 435,596 ITT Industries, Inc. 1,400 118,230 Textron, Inc. 26,000 1,918,800 Tyco International Limited 818,600 29,256,764 ---------------- 35,812,195 ---------------- INFORMATION RETRIEVAL SERVICES -- 0.1% Yahoo!, Inc.* 18,400 693,312 ---------------- INSURANCE -- 9.0% ACE Limited 15,500 662,625 Aetna, Inc. 2,500 311,875 AFLAC, Inc. 689,000 27,449,760 Allstate Corp. 378,400 19,570,848 Ambac Financial Group, Inc. 1,800 147,834 American International Group, Inc. 492,500 32,342,475 Aon Corp. 5,000 119,300 Chubb Corp. 21,800 1,676,420 Cigna Corp. 5,200 424,164 Cincinnati Financial Corp. 2,520 111,535 Everest Re Group Limited 147,400 13,201,144 Genworth Financial, Inc. Cl. A 44,000 1,188,000 The Hartford Financial Services Group, Inc. 27,700 1,919,887 Jefferson-Pilot Corp. 2,200 114,312 Lincoln National Corp. 6,200 289,416 Loews Corp.+ 6,300 442,890 Manulife Financial Corp.+ 22,757 1,051,373 MBIA, Inc.+ 2,000 126,560 Metlife, Inc. 51,700 2,094,367 MGIC Investment Corp.+ 18,100 1,247,271 PartnerRe Limited 6,500 402,610 Principal Financial Group, Inc. 4,900 200,606 Progressive Corp. 3,200 $ 271,488 Prudential Financial, Inc. 37,900 2,082,984 Radian Group, Inc. 316,800 16,866,432 Safeco Corp. 2,200 114,928 St. Paul Travelers Companies 17,247 639,346 Torchmark Corp. 1,600 91,424 UnumProvident Corp. 7,800 139,932 WellPoint, Inc.* 4,700 540,500 XL Capital Limited Cl. A+ 14,900 1,156,985 ---------------- 126,999,291 ---------------- LODGING -- 0.1% Hilton Hotels Corp. 13,500 306,990 Marriott International, Inc. Cl. A 3,800 239,324 Starwood Hotels & Resorts Worldwide, Inc. 3,700 216,080 ---------------- 762,394 ---------------- MACHINERY & COMPONENTS -- 0.1% Baker Hughes, Inc. 5,300 226,151 Cummins, Inc. 1,700 142,443 Deere & Co. 100 7,440 Dover Corp. 3,000 125,820 Ingersoll-Rand Co. Cl. A 7,200 578,160 Pall Corp.+ 2,100 60,795 Parker-Hannifin Corp. 3,900 295,386 ---------------- 1,436,195 ---------------- MANUFACTURING -- 0.0% American Standard Companies, Inc.* 3,200 132,224 Applied Materials, Inc.* 12,700 217,170 ---------------- 349,394 ---------------- MEDICAL SUPPLIES -- 0.2% Agilent Technologies, Inc.* 1,200 28,920 Applied Biosystems Group-Applera Corp. 3,300 69,003 Bard (C.R.), Inc. 1,600 102,368 Bausch & Lomb, Inc. 2,700 174,042 Becton, Dickinson & Co. 6,600 374,880 Boston Scientific Corp.* 1,200 42,660 Fisher Scientific International* 2,000 124,760 Guidant Corp. 15,400 1,110,340 Medtronic, Inc. 5,400 268,218 St. Jude Medical, Inc.* + 6,200 259,966 Tektronix, Inc. 1,500 45,315 Thermo Electron Corp.* 10,300 310,957 Waters Corp.* 1,800 84,222 ---------------- 2,995,651 ---------------- METALS & MINING -- 0.5% Alcan, Inc.+ 20,200 $ 990,608 Alcoa, Inc. 16,600 521,572 Crane Co. 5,700 164,388 Nucor Corp.+ 39,600 2,072,664 Phelps Dodge Corp. 4,000 395,680 United States Steel Corp.+ 37,500 1,921,875 Worthington Industries, Inc. 20,300 397,474 ---------------- 6,464,261 ---------------- PHARMACEUTICALS -- 5.0% Abbott Laboratories 33,300 1,553,445 AmerisourceBergen Corp.+ 2,700 158,436 Amgen, Inc.* 14,200 910,930 Biogen Idec, Inc.* 3,700 246,457 Bristol-Myers Squibb Co. 66,000 1,690,920 Cardinal Health, Inc.+ 8,400 488,460 Eli Lilly & Co. 6,400 363,200 Forest Laboratories, Inc.* + 4,000 179,440 Genzyme Corp.* 2,500 145,175 Gilead Sciences, Inc.* 1,200 41,988 Hospira, Inc.* 1,870 62,645 Johnson & Johnson 53,300 3,380,286 King Pharmaceuticals, Inc.* 4,500 55,800 McKesson Corp. 6,900 217,074 Medco Health Solutions, Inc.* 39,600 1,647,360 Merck & Co., Inc. 453,500 14,575,490 Mylan Laboratories, Inc.+ 200 3,536 Pfizer, Inc. 1,158,990 31,165,241 Sanofi-Aventis ADR (France) 25,900 1,037,295 Sigma-Aldrich Corp. 1,000 60,460 Teva Pharmaceutical Sponsored ADR (Israel)+ 403,300 12,042,538 Wyeth 23,100 983,829 ---------------- 71,010,005 ---------------- PHOTOGRAPHY EQUIPMENT/SUPPLIES -- 2.1% Eastman Kodak Co.+ 904,800 29,179,800 ---------------- PREPACKAGED SOFTWARE -- 1.6% Adobe Systems, Inc. 3,700 232,138 BMC Software, Inc.* 18,000 334,800 Citrix Systems, Inc.* 14,000 343,420 Computer Associates International, Inc.+ 14,100 437,946 Compuware Corp.* 6,000 38,820 Intuit, Inc.* 4,500 198,045 Microsoft Corp. 683,000 18,242,930
The accompanying notes are an integral part of the financial statements. 33
NUMBER OF MARKET SHARES VALUE ---------------- ---------------- Novell, Inc.* 5,500 $ 37,125 Oracle Corp.* 114,100 1,565,452 Peoplesoft, Inc.* 5,600 148,288 Siebel Systems, Inc.* 7,400 77,700 SunGard Data Systems, Inc.* 4,400 124,652 Symantec Corp.* 21,200 546,112 Veritas Software Corp.* 6,300 179,865 ---------------- 22,507,293 ---------------- REAL ESTATE -- 0.0% Equity Office Properties Trust 6,100 177,632 Equity Residential 2,700 97,686 ---------------- 275,318 ---------------- RESTAURANTS -- 2.1% Darden Restaurants, Inc. 2,800 77,672 McDonald's Corp. 901,800 28,911,708 Wendy's International, Inc. 100 3,926 Yum! Brands, Inc. 5,500 259,490 ---------------- 29,252,796 ---------------- RETAIL -- 0.7% AutoZone, Inc.* 1,500 136,965 Best Buy Co., Inc. 5,700 338,694 Circuit City Stores, Inc.+ 26,100 408,204 Costco Wholesale Corp. 12,300 595,443 Dillards, Inc. Cl. A 1,500 40,305 Dollar General Corp. 100 2,077 Federated Department Stores, Inc. 2,900 167,591 The Home Depot, Inc. 37,900 1,619,846 J.C. Penney Co., Inc. 7,900 327,060 Kohl's Corp.* 900 44,253 Lowe's Companies, Inc. 1,600 92,144 The May Department Stores Co. 4,900 144,060 Office Depot, Inc.* 51,900 900,984 RadioShack Corp. 2,900 95,352 Sears, Roebuck and Co. 3,700 188,811 Staples, Inc. 8,800 296,648 Target Corp. 26,500 1,376,145 TJX Companies, Inc.+ 8,200 206,066 Wal-Mart Stores, Inc. 57,200 3,021,304 ---------------- 10,001,952 ---------------- RETAIL - GROCERY -- 0.0% Albertson's, Inc.+ 6,200 148,056 ---------------- TELEPHONE UTILITIES -- 2.8% Alltel Corp. 7,000 411,320 AT&T Corp. 26,700 508,902 BellSouth Corp. 69,100 1,920,289 CenturyTel, Inc. 3,200 113,504 Qwest Communications International, Inc.* 3,300 $ 14,652 Sprint Corp. (FON Group) 166,849 4,146,198 Verizon Communications, Inc. 799,400 32,383,694 ---------------- 39,498,559 ---------------- TOBACCO -- 1.2% Altria Group, Inc. 233,900 14,291,290 Reynolds American, Inc.+ 2,400 188,640 UST, Inc. 36,400 1,751,204 ---------------- 16,231,134 ---------------- TOYS, GAMES -- 0.0% Hasbro, Inc. 2,200 42,636 Mattel, Inc. 5,200 101,348 ---------------- 143,984 ---------------- TRANSPORTATION -- 2.2% Burlington Northern Santa Fe Corp. 45,400 2,147,874 Carnival Corp. 100 5,763 CSX Corp. 35,300 1,414,824 FedEx Corp. 8,800 866,712 Norfolk Southern Corp. 59,000 2,135,210 Union Pacific Corp. 352,900 23,732,525 United Parcel Service, Inc. Cl. B 11,300 965,698 ---------------- 31,268,606 ---------------- TRAVEL -- 0.0% Sabre Holdings Corp. 1,400 31,024 ---------------- TOTAL EQUITIES (COST $1,088,843,196) 1,400,878,157 ---------------- PRINCIPAL AMOUNT ---------------- SHORT-TERM INVESTMENTS -- 6.5% CASH EQUIVALENTS** American AAdvanage Select Money Market Fund 1,063,034 1,063,034 Bank of America Bank Note 2.260% 02/15/2005 $ 794,149 794,149 Bank of America Bank Note 2.270% 01/18/2005 1,853,017 1,853,017 Bank of America Bank Note 2.270% 03/03/2005 3,441,315 3,441,315 Bank of America Bank Note 2.300% 06/09/2005 $ 1,853,017 $ 1,853,017 Bank of Montreal Eurodollar Time Deposit 2.125% 02/02/2005 807,385 807,385 Bank of Montreal Eurodollar Time Deposit 2.260% 01/28/2005 838,935 838,935 BGI Institutional Money Market Fund 9,529,796 9,529,796 BNP Paribas Eurodollar Time Deposit 2.300% 01/03/2005 529,433 529,433 Calyon Eurodollar Time Deposit 2.435% 03/16/2005 2,265,973 2,265,973 Canadian Imperial Bank of Commerce Bank Note 2.030% 05/18/2005 5,294,332 5,294,332 Citigroup Eurodollar Time Deposit 2.080% 01/28/2005 2,078,025 2,078,025 Den Danske Bank Eurodollar Time Deposit 2.260% 01/20/2005 3,176,599 3,176,599 Dexia Group Eurodollar Time Deposit 2.040% 01/21/2005 1,058,865 1,058,865 Federal Home Loan Bank Discount Note 2.184% 01/05/2005 3,288,553 3,288,553 Fortis Bank Eurodollar Time Deposit 2.140% 01/12/2005 1,058,866 1,058,866 Fortis Bank Eurodollar Time Deposit 2.200% 02/11/2005 794,149 794,149 Fortis Bank Eurodollar Time Deposit 2.260% 01/05/2005 4,367,823 4,367,823 Freddie Mac Discount Note 2.184% 01/04/2005 3,699,973 3,699,973 Freddie Mac Discount Note 2.228% 02/01/2005 987,775 987,775 Freddie Mac Discount Note 2.277% 02/01/2005 4,622,572 4,622,572 General Electric Capital Corp. 2.294% 01/21/2005 1,507,472 1,507,472
The accompanying notes are an integral part of the financial statements. 34
PRINCIPAL MARKET AMOUNT VALUE ---------------- ---------------- General Electric Capital Corp. 2.295% 01/10/2005 $ 2,579,164 $ 2,579,164 HBOS Halifax Bank of Scotland Eurodollar Time Deposit 2.025% 01/21/2005 1,217,696 1,217,696 Lloyds TSB Bank Eurodollar Time Deposit 2.280% 02/02/2005 1,297,111 1,297,111 Merrill Lynch Premier Institutional Money Market Fund 1,747,137 1,747,137 Merrimac Cash Fund, Premium Class 3,970,748 3,970,748 Morgan Stanley Dean Witter & Co. 2.393% 07/19/2005 3,494,259 3,494,259 Royal Bank of Canada Eurodollar Time Deposit 2.250% 01/19/2005 2,647,166 2,647,166 Royal Bank of Canada Eurodollar Time Deposit 2.260% 02/01/2005 2,117,733 2,117,733 Royal Bank of Scotland Eurodollar Time Deposit 2.015% 01/21/2005 3,054,830 3,054,830 Royal Bank of Scotland Eurodollar Time Deposit 2.270% 02/02/2005 1,588,300 1,588,300 Royal Bank of Scotland Eurodollar Time Deposit 2.360% 02/17/2005 264,716 264,716 Toronto Dominion Bank Eurodollar Time Deposit 2.420% 03/01/2005 2,647,165 2,647,165 Wells Fargo Eurodollar Time Deposit 2.270% 01/25/2005 661,792 661,792 Wells Fargo Eurodollar Time Deposit 2.310% 01/28/2005 2,647,166 2,647,166 Wells Fargo Eurodollar Time Deposit 2.320% 01/14/2005 $ 6,342,607 $ 6,342,607 ---------------- 91,188,648 ---------------- TOTAL SHORT-TERM INVESTMENTS (AT AMORTIZED COST) 91,188,648 ---------------- TOTAL INVESTMENTS -- 106.0% (COST $1,180,031,844)*** 1,492,066,805 OTHER ASSETS/ (LIABILITIES) -- (6.0%) (84,152,188) ---------------- NET ASSETS -- 100.0% $ 1,407,914,617 ================
NOTES TO PORTFOLIO OF INVESTMENTS ADR - American Depository Receipt. * Non-income producing security. ** Represents investments of security lending collateral. (NOTE 2). *** See Note 7 for aggregate cost for Federal tax purposes. + Denotes all or a portion of security on loan. The accompanying notes are an integral part of the financial statements. 35 MML SERIES INVESTMENT FUND - FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2004
MML MML MONEY MANAGED MML MML MARKET BOND BLEND EQUITY FUND FUND FUND FUND ----------------- --------------- --------------- --------------- ASSETS: Investments, at value (NOTE 2)(a) $ - $ 376,019,425 $ 944,535,744 $ 1,400,878,157 Short-term investments, at value (NOTE 2)(b) 116,504,312 39,759,464 136,296,970 91,188,648 ----------------- --------------- --------------- --------------- Total Investments(c) 116,504,312 415,778,889 1,080,832,714 1,492,066,805 ----------------- --------------- --------------- --------------- Cash 834 3,245 17,943 5,139,382 Receivables from: Investments sold - 259 2,161 - Fund shares sold 228,312 335,930 52,792 60,813 Interest and dividends 5 4,083,321 4,237,048 3,367,281 Foreign taxes withheld - - - 17,987 ----------------- --------------- --------------- --------------- Total assets 116,733,463 420,201,644 1,085,142,658 1,500,652,268 ----------------- --------------- --------------- --------------- LIABILITIES: Payables for: Investments purchased - 2,427,581 4,773,726 228,486 Dividends (NOTE 2) 151,518 - - - Fund shares repurchased 873,044 97,681 277,513 702,307 Variation margin on open futures contracts (NOTE 2) - - 2,000 - Securities on loan (NOTE 2) - 32,171,750 49,561,768 91,188,648 Directors' fees and expenses (NOTE 3) 16,138 34,417 103,695 124,289 Affiliates (NOTE 3): Investment management fees 48,654 146,961 343,162 452,131 Accrued expenses and other liabilities 27,256 22,341 39,724 41,790 ----------------- --------------- --------------- --------------- Total liabilities 1,116,610 34,900,731 55,101,588 92,737,651 ----------------- --------------- --------------- --------------- NET ASSETS $ 115,616,853 $ 385,300,913 $ 1,030,041,070 $ 1,407,914,617 ================= =============== =============== =============== NET ASSETS CONSIST OF: Paid-in capital $ 115,793,269 $ 379,861,435 $ 1,105,569,327 $ 1,299,784,474 Undistributed net investment income (distributions in excess of net investment income) 26,416 (1,181,964) (390,072) (106,185) Accumulated net realized loss on investments, futures contracts and foreign currency translations (202,832) (3,009,583) (259,985,494) (203,798,633) Net unrealized appreciation on investments and futures contracts - 9,631,025 184,847,309 312,034,961 ----------------- --------------- --------------- --------------- NET ASSETS $ 115,616,853 $ 385,300,913 $ 1,030,041,070 $ 1,407,914,617 ================= =============== =============== =============== Shares outstanding: 115,738,982 30,911,722 66,401,380 59,495,070 ================= =============== =============== =============== Net asset value, offering price and redemption price per share: $ 1.00 $ 12.46 $ 15.51 $ 23.66 ================= =============== =============== =============== (a) Cost of investments: $ - $ 366,388,400 $ 759,715,087 $ 1,088,843,196 (b) Cost of short-term investments: $ 116,504,312 $ 39,759,464 $ 136,296,970 $ 91,188,648 (c) Securities on loan with market value of: $ - $ 31,472,559 $ 47,537,318 $ 87,746,382
The accompanying notes are an integral part of the financial statements. 36 STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2004
MML MML MONEY MANAGED MML MML MARKET BOND BLEND EQUITY FUND FUND FUND FUND ----------------- --------------- --------------- --------------- INVESTMENT INCOME (NOTE 2): Dividends(a) $ - $ 32,812 $ 13,403,157 $ 32,076,361 Interest(b) 1,657,549 18,179,536 17,094,329 160,670 ----------------- --------------- --------------- --------------- Total investment income 1,657,549 18,212,348 30,497,486 32,237,031 ----------------- --------------- --------------- --------------- EXPENSES (NOTE 2): Investment management fees (NOTE 3) 622,120 1,702,829 4,094,742 5,113,168 Custody fees 8,169 - 124,436 125,230 Trustee reporting 4,481 - 6,356 7,045 Audit and legal fees 24,172 21,593 37,434 42,303 Proxy fees 527 - 127 942 Shareholder reporting fees 2,508 - 20,506 25,953 Directors' fees (NOTE 3) 11,532 20,720 95,017 123,756 ----------------- --------------- --------------- --------------- Total expenses 673,509 1,745,142 4,378,618 5,438,397 ----------------- --------------- --------------- --------------- NET INVESTMENT INCOME 984,040 16,467,206 26,118,868 26,798,634 ----------------- --------------- --------------- --------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investment transactions (2,106) 2,303,471 52,058,864 86,258,160 Closed futures contracts - - (68,739) - Foreign currency transactions - - - 2,579 ----------------- --------------- --------------- --------------- Net realized gain (loss) (2,106) 2,303,471 51,990,125 86,260,739 ----------------- --------------- --------------- --------------- Net change in unrealized appreciation (depreciation) on: Investments - (2,146,074) 7,458,785 84,743,459 Open futures contracts - - 26,652 - ----------------- --------------- --------------- --------------- Net unrealized gain (loss) - (2,146,074) 7,485,437 84,743,459 ----------------- --------------- --------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) (2,106) 157,397 59,475,562 171,004,198 ----------------- --------------- --------------- --------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 981,934 $ 16,624,603 $ 85,594,430 $ 197,802,832 ================= =============== =============== =============== (a) Net of withholding tax of: $ - $ - $ - $ 311,869 (b) Including securities lending income of: $ - $ 41,152 $ 55,740 $ 100,299
The accompanying notes are an integral part of the financial statements. 37 STATEMENTS OF CHANGES IN NET ASSETS
MML MONEY MARKET FUND ------------------------------------- YEAR YEAR ENDED ENDED DECEMBER 31, 2004 DECEMBER 31, 2003 ----------------- ----------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income $ 984,040 $ 1,051,782 Net realized gain (loss) on investment transactions, futures contracts and foreign currency transactions (2,106) 6,912 Net change in unrealized appreciation (depreciation) on investments and futures contracts - - ----------------- ----------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 981,934 1,058,694 DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2): From net investment income (981,495) (1,051,782) NET FUND SHARE TRANSACTIONS (NOTE 5) (26,005,097) (50,637,354) ----------------- ----------------- TOTAL INCREASE (DECREASE) IN NET ASSETS (26,004,658) (50,630,442) NET ASSETS: Beginning of year 141,621,511 192,251,953 ----------------- ----------------- End of year $ 115,616,853 $ 141,621,511 ================= ================= Undistributed net investment income (distributions in excess of net investment income) included in net assets at end of the year $ 26,416 $ 23,871 ================= =================
The accompanying notes are an integral part of the financial statements. 38
MML MANAGED BOND FUND ------------------------------------- YEAR YEAR ENDED ENDED DECEMBER 31, 2004 DECEMBER 31, 2003 ----------------- ----------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income $ 16,467,206 $ 18,209,424 Net realized gain (loss) on investment transactions, futures contracts and foreign currency transactions 2,303,471 4,113,006 Net change in unrealized appreciation (depreciation) on investments and futures contracts (2,146,074) (790,234) ----------------- ----------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 16,624,603 21,532,196 DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2): From net investment income (17,870,402) (20,809,869) NET FUND SHARE TRANSACTIONS (NOTE 5) 7,555,800 (7,958,705) ----------------- ----------------- TOTAL INCREASE (DECREASE) IN NET ASSETS 6,310,001 (7,236,378) NET ASSETS: Beginning of year 378,990,912 386,227,290 ----------------- ----------------- End of year $ 385,300,913 $ 378,990,912 ================= ================= Undistributed net investment income (distributions in excess of net investment income) included in net assets at end of the year $ (1,181,964) $ (1,094,753) ================= ================= MML BLEND FUND ------------------------------------- YEAR YEAR ENDED ENDED DECEMBER 31, 2004 DECEMBER 31, 2003 ----------------- ----------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income $ 26,118,868 $ 25,393,868 Net realized gain (loss) on investment transactions, futures contracts and foreign currency transactions 51,990,125 (7,325,284) Net change in unrealized appreciation (depreciation) on investments and futures contracts 7,485,437 160,549,385 ----------------- ----------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 85,594,430 178,617,969 DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2): From net investment income (27,603,935) (27,002,708 NET FUND SHARE TRANSACTIONS (NOTE 5) (113,091,847) (114,913,552 ----------------- ----------------- TOTAL INCREASE (DECREASE) IN NET ASSETS (55,101,352) 36,701,709 NET ASSETS: Beginning of year 1,085,142,422 1,048,440,713 ----------------- ----------------- End of year $ 1,030,041,070 $ 1,085,142,422 ================= ================= Undistributed net investment income (distributions in excess of net investment income) included in net assets at end of the year $ (390,072) $ (335,246 ================= ================= MML EQUITY FUND ------------------------------------- YEAR YEAR ENDED ENDED DECEMBER 31, 2004 DECEMBER 31, 2003 ----------------- ----------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income $ 26,798,634 $ 21,105,964 Net realized gain (loss) on investment transactions, futures contracts and foreign currency transactions 86,260,739 (81,586,348) Net change in unrealized appreciation (depreciation) on investments and futures contracts 84,743,459 355,529,848 ----------------- ----------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 197,802,832 295,049,464 DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2): From net investment income (26,837,006) (21,136,767) NET FUND SHARE TRANSACTIONS (NOTE 5) (101,489,287) (90,714,246) ----------------- ----------------- TOTAL INCREASE (DECREASE) IN NET ASSETS 69,476,539 183,198,451 NET ASSETS: Beginning of year 1,338,438,078 1,155,239,627 ----------------- ----------------- End of year $ 1,407,914,617 $ 1,338,438,078 ================= ================= Undistributed net investment income (distributions in excess of net investment income) included in net assets at end of the year $ (106,185) $ (69,461) ================= =================
39 MML MONEY MARKET FUND -- FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, BEGINNING OF YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ---------- ---------- ---------- ---------- ---------- INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.01 0.01 0.01 0.04 0.06 Net realized and unrealized gain (loss) on investments (0.00)+ 0.00+ 0.00+ (0.00)+ - ---------- ---------- ---------- ---------- ---------- Total income from investment operations 0.01 0.01 0.01 0.04 0.06 ---------- ---------- ---------- ---------- ---------- LESS DISTRIBUTIONS TO SHAREHOLDERS: From net investment income (0.01) (0.01) (0.01) (0.04) (0.06) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ========== ========== ========== ========== ========== TOTAL RETURN(a) 0.79% 0.62% 1.29% 3.66% 6.03% RATIOS / SUPPLEMENTAL DATA: Net assets, end of year (000's) $ 115,617 $ 141,622 $ 192,252 $ 203,691 $ 182,008 Net expenses to average daily net assets 0.53% 0.52% 0.52% 0.50% 0.51% Net investment income to average daily net assets 0.77% 0.63% 1.27% 3.67% 5.86%
+ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS IS LESS THAN $0.01 PER SHARE. (a) TOTAL RETURN INFORMATION SHOWN IN THE FINANCIAL HIGHLIGHTS TABLE DOES NOT REFLECT EXPENSES THAT APPLY AT THE SEPARATE ACCOUNT LEVEL OR TO RELATED INSURANCE PRODUCTS. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURN FIGURES FOR ALL PERIODS SHOWN. The accompanying notes are an integral part of the financial statements. 40 MML MANAGED BOND FUND -- FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 12/31/04 12/31/03 12/31/02 12/31/01(b) 12/31/00 ---------- ---------- ---------- ----------- ---------- NET ASSET VALUE, BEGINNING OF YEAR $ 12.51 $ 12.49 $ 12.27 $ 12.19 $ 11.61 ---------- ---------- ---------- ----------- ---------- INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.56 0.57 0.67 0.74 0.77* Net realized and unrealized gain (loss) on investments (0.01) 0.11 0.33 0.20 0.50 ---------- ---------- ---------- ----------- ---------- Total income from investment operations 0.55 0.68 1.00 0.94 1.27 ---------- ---------- ---------- ----------- ---------- LESS DISTRIBUTIONS TO SHAREHOLDERS: From net investment income (0.60) (0.66) (0.70) (0.86) (0.69) From net realized gains - - (0.08) - - ---------- ---------- ---------- ----------- ---------- Total distributions (0.60) (0.66) (0.78) (0.86) (0.69) ---------- ---------- ---------- ----------- ---------- NET ASSET VALUE, END OF YEAR $ 12.46 $ 12.51 $ 12.49 $ 12.27 $ 12.19 ========== ========== ========== =========== ========== TOTAL RETURN(a) 4.47% 5.59% 8.40% 7.89% 11.19% RATIOS / SUPPLEMENTAL DATA: Net assets, end of year (000's) $ 385,301 $ 378,991 $ 386,227 $ 293,109 $ 232,431 Net expenses to average daily net assets 0.46% 0.46% 0.47% 0.48% 0.49% Net investment income to average daily net assets 4.38% 4.56% 5.51% 5.98% 6.54% Portfolio turnover rate 102% 77% 41% 53% 20%
* PER SHARE AMOUNT CALCULATED ON THE AVERAGE SHARE METHOD. (a) TOTAL RETURN INFORMATION SHOWN IN THE FINANCIAL HIGHLIGHTS TABLE DOES NOT REFLECT EXPENSES THAT APPLY AT THE SEPARATE ACCOUNT LEVEL OR TO RELATED INSURANCE PRODUCTS. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURN FIGURES FOR ALL PERIODS SHOWN. (b) THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING PREMIUMS AND DISCOUNTS ON DEBT SECURITIES. THE EFFECT OF THIS CHANGE FOR THE YEAR ENDED DECEMBER 31, 2001 WAS A DECREASE TO NET INVESTMENT INCOME PER SHARE OF $0.01, AN INCREASE TO NET REALIZED AND UNREALIZED GAINS AND LOSSES PER SHARE OF $0.01 AND A DECREASE OF THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 6.11% TO 5.98%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO JANUARY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. The accompanying notes are an integral part of the financial statements. 41 MML BLEND FUND -- FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 12/31/04 12/31/03 12/31/02 12/31/01(b) 12/31/00 ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, BEGINNING OF YEAR $ 14.66 $ 12.67 $ 14.76 $ 19.51 $ 23.51 ----------- ----------- ----------- ----------- ----------- INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.38 0.34 0.39 0.47 0.76* Net realized and unrealized gain (loss) on investments 0.87 2.01 (2.08) (1.69) (0.73) ----------- ----------- ----------- ----------- ----------- Total income (loss) from investment operations 1.25 2.35 (1.69) (1.22) 0.03 ----------- ----------- ----------- ----------- ----------- LESS DISTRIBUTIONS TO SHAREHOLDERS: From net investment income (0.40) (0.36) (0.40) (0.56) (0.70) From net realized gains - - - (2.97) (3.33) ----------- ----------- ----------- ----------- ----------- Total distributions (0.40) (0.36) (0.40) (3.53) (4.03) ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF YEAR $ 15.51 $ 14.66 $ 12.67 $ 14.76 $ 19.51 =========== =========== =========== =========== =========== TOTAL RETURN(a) 8.68% 18.71% (11.53)% (5.75)% 0.02% RATIOS / SUPPLEMENTAL DATA: Net assets, end of year (000's) $ 1,030,041 $ 1,085,142 $ 1,048,441 $ 1,451,123 $ 1,836,095 Net expenses to average daily net assets 0.42% 0.42% 0.42% 0.40% 0.39% Net investment income to average daily net assets 2.51% 2.44% 2.80% 2.85% 3.30% Portfolio turnover rate 113% 101% 90% 87% 103%
* PER SHARE AMOUNT CALCULATED USING THE AVERAGE SHARES METHOD. (a) TOTAL RETURN INFORMATION SHOWN IN THE FINANCIAL HIGHLIGHTS TABLE DOES NOT REFLECT EXPENSES THAT APPLY AT THE SEPARATE ACCOUNT LEVEL OR TO RELATED INSURANCE PRODUCTS. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURN FIGURES FOR ALL PERIODS SHOWN. (b) THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING PREMIUM AND DISCOUNTS ON DEBT SECUTITIES. THE EFFECT OF THIS CHARGE FOR THE YEAR ENDED DECEMBER 31, 2001 WAS A DECREASE TO NET INVESTMENT INCOME PER SHARE OF $0.003, AN INCREASE TO NET REALIZED AND UNREALIZED GAINS AND LOSSES OF $0.003 AND A DECREASE OF THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 2.87% TO 2.85%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO JANUARY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. The accompanying notes are an integral part of the financial statements. 42 MML EQUITY FUND -- FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, BEGINNING OF YEAR $ 20.82 $ 16.60 $ 21.28 $ 34.30 $ 36.56 ----------- ----------- ----------- ----------- ----------- INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.46 0.33 0.27 0.35 0.53* Net realized and unrealized gain (loss) on investments 2.84 4.22 (4.41) (5.23) 0.53 ----------- ----------- ----------- ----------- ----------- Total income (loss) from investment operations 3.30 4.55 (4.14) (4.88) 1.06 ----------- ----------- ----------- ----------- ----------- LESS DISTRIBUTIONS TO SHAREHOLDERS: From net investment income (0.46) (0.33) (0.27) (0.62) (0.30) From net realized gains - - (0.27) (7.52) (3.02) ----------- ----------- ----------- ----------- ----------- Total distributions (0.46) (0.33) (0.54) (8.14) (3.32) ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF YEAR $ 23.66 $ 20.82 $ 16.60 $ 21.28 $ 34.30 =========== =========== =========== =========== =========== TOTAL RETURN(a) 15.85% 27.49% (19.55)% (14.72)% 2.86% RATIOS / SUPPLEMENTAL DATA: Net assets, end of year (000's) $ 1,407,915 $ 1,338,438 $ 1,155,240 $ 1,667,665 $ 2,180,741 Net expenses to average daily net assets 0.41% 0.41% 0.42% 0.40% 0.40% Net investment income to average daily net assets 2.01% 1.77% 1.33% 1.22% 1.47% Portfolio turnover rate 36% 61% 67% 101% 69%
* PER SHARE AMOUNT CALCULATED ON THE AVERAGE SHARES METHOD. (a) TOTAL RETURN INFORMATION SHOWN IN THE FINANCIAL HIGHLIGHTS TABLE DOES NOT REFLECT EXPENSES THAT APPLY AT THE SEPARATE ACCOUNT LEVEL OR TO RELATED INSURANCE PRODUCTS. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURN FIGURES FOR ALL PERIODS SHOWN. The accompanying notes are an integral part of the financial statements. 43 NOTES TO FINANCIAL STATEMENTS 1. THE FUND MML Series Investment Fund ("MML Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as a no-load, 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 14, 1993, as amended. The following are four series of the Trust (each individually referred to as a "Fund" or collectively as the "Funds"): MML Money Market Fund ("Money Market Fund"), MML Managed Bond Fund ("Managed Bond Fund"), MML Blend Fund ("Blend Fund") and MML Equity Fund ("Equity Fund"). The MML Trust was established by Massachusetts Mutual Life Insurance Company ("MassMutual") for the purpose of providing vehicles for the investment of assets of various separate investment accounts established by MassMutual and by life insurance companies which are subsidiaries of MassMutual. Shares of MML Trust are not offered to the general public. 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 accounting principles generally accepted in the United States of America ("generally accepted accounting principles"). The preparation of the financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. INVESTMENT VALUATION Equity securities are valued on the basis of valuations furnished by a pricing service, authorized by the Board of Trustees ("Trustees "), which provides the last reported sale price for securities listed on a national securities exchange or the official closing price on the NASDAQ National Market System, or in the case of over-the-counter securities not so listed, the last reported bid price. Debt securities (other than short-term obligations with a remaining maturity of sixty days or less) are valued on the basis of valuations furnished by a pricing service, authorized by the Trustees, which determines valuations taking into account appropriate factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data. For the Managed Bond Fund, Blend Fund and Equity Fund, short-term securities 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. The Money Market Fund's portfolio securities are valued at amortized cost in accordance with Rule 2a-7 under the Investment Company Act of 1940, as amended, pursuant to which the Money Market Fund must adhere to certain conditions. It is the intention of the Money Market Fund to maintain a per-share net asset value of $1.00. 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. Securities are typically valued on the basis of valuations furnished by a primary pricing service or, if no such valuation is available, from a secondary pricing service. However, valuation methods approved by the Trust's Board of Trustees which are intended to reflect fair value may be used when pricing service information is not readily available or when a security's value is believed to have been materially affected by a significant event, such as a natural disaster, an economic event like a bankruptcy filing, or a substantial fluctuation in domestic or foreign markets, that has occurred after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market). In such a case, a Fund's value for a security is likely to be different from the last quoted market price or pricing service information. Due to the subjective and variable nature of fair value pricing, it is possible that the value determined for a particular asset may be materially different from the value realized upon such asset's sale. 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 are 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 is determined in accordance with policies established by the Trustees. 44 SECURITIES LENDING The Managed Bond Fund, Blend Fund and Equity Fund may lend their securities to qualified brokers; however, securities lending cannot exceed 10% of the total assets of the Managed Bond Fund taken at current value, and 33% of the total assets of the Blend Fund and the Equity Fund taken at current value. The loans are collateralized at all times with cash or securities with a market value at least equal to 100% 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 December 31, 2004, the Funds loaned securities having the following market values, collateralized by cash, which was invested in short-term instruments in the following amounts:
SECURITIES ON LOAN COLLATERAL ------------------ -------------- Managed Bond Fund $ 31,472,559 $ 32,171,750 Blend Fund 47,537,318 49,561,768 Equity Fund 87,746,382 91,188,648
REPURCHASE AGREEMENTS The Money Market Fund, Managed Bond Fund and Blend Fund may enter into repurchase agreements with certain banks and broker/dealers whereby a Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. The Funds, through their custodian, take possession of the securities collateralizing the repurchase agreement. The collateral is marked to market daily to ensure that the market value of the underlying assets remains sufficient to protect the Funds in the event of default by the seller. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the Funds and the counterparty. In connection with transactions in repurchase agreements, if the seller defaults and the value of the collateral declines or if the seller enters insolvency proceedings, realization of collateral by the Funds may be delayed or limited. 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 debt securities, 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 gains 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 are declared and paid quarterly for the Managed Bond and Blend Fund and annually for the Equity Fund and at other times as may be required to satisfy tax or regulatory requirements. Dividends from net investment income are declared daily and paid monthly for the Money Market Fund. 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. 45 During the year ended December 31, 2004, the following amounts were reclassified due to the differences between book and tax accounting:
ACCUMULATED NET REALIZED UNDISTRIBUTED PAID-IN GAIN (LOSS) ON NET INVESTMENT CAPITAL INVESTMENTS INCOME ---------- -------------- -------------- Managed Bond Fund $ (5,114) $ (1,310,871) $ 1,315,985 Blend Fund (53,602) (1,376,639) 1,430,241 Equity Fund (10,103) 8,455 1,648
FOREIGN CURRENCY TRANSLATION The books and records of the Funds are maintained in U.S. dollars. The market values of foreign currencies, foreign securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the mean of the buying and selling rates of such currencies against the U.S. dollar at the end of each business day. Purchases and sales of foreign securities and income and expense items are translated at the rates of exchange prevailing on the respective dates of such transactions. The Funds do not isolate that portion of the results of operations arising from changes in the exchange rates from that portion arising from changes in the market prices of securities. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date on investment securities transactions, foreign currency transactions and the difference between the amounts of dividends recorded on the books of the Funds and the amount actually received. FORWARD FOREIGN CURRENCY CONTRACTS The Managed Bond and Blend Funds may enter into forward foreign currency contracts in order to hedge the effect of currency movements of foreign denominated securities or obligations. 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 foreign currency contract fluctuates with changes in foreign currency exchange and interest 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. At December 31, 2004, the Funds had no open forward foreign currency contracts. 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. Forward commitments are valued on the basis of valuations furnished by 46 a pricing service, authorized by the Trustees, which determines valuations taking into account appropriate factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data. 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. The Funds record on a daily basis the unrealized appreciation (depreciation) based upon changes in the value of the forward commitment. When a forward commitment contract is closed, the Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it was extinguished. Forward commitments involve a risk of loss if the value of the security to be purchased declines prior to the settlement date. The Funds could also be exposed to loss if they cannot close out their forward commitments because of an illiquid secondary market, or the inability of counterparties to perform. The Funds monitor exposure to ensure counterparties are creditworthy and concentration of exposure is minimized. At December 31, 2004, the Funds had no open forward commitments. FINANCIAL FUTURES CONTRACTS The Funds may purchase or sell financial futures contracts and options on such futures contracts for the purpose of hedging the market risk on existing securities or as a substitute for the purchase of securities. Futures contracts are contracts for delayed delivery of securities at a specific future date and at a specific price or yield. Upon entering into a contract, the Funds deposit and maintain as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Funds as unrealized gains or losses. When the contract is closed, each Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. A summary of open futures contracts for the Blend Fund at December 31, 2004, is as follows:
NOTIONAL NUMBER OF CONTRACT NET UNREALIZED CONTRACTS TYPE EXPIRATION DATE VALUE APPRECIATION -------------- ------------- --------------- ------------ -------------- MML BLEND FUND BUYS 8 S&P 500 Index 03/17/05 $ 2,427,400 $ 26,652
3. MANAGEMENT FEES AND OTHER TRANSACTIONS INVESTMENT MANAGEMENT FEE Under agreements between the Trust and MassMutual on behalf of each Fund, MassMutual is responsible for providing investment management services for each Fund. In return for this service, MassMutual receives advisory fees monthly from each Fund at the annual rate of 0.50% of the first $100,000,000, 0.45% of the next $200,000,000, 0.40% of the next $200,000,000 and 0.35% of any excess over $500,000,000 of the average daily net asset value of each Fund. MassMutual has entered into investment sub-advisory agreements with Babson Capital Management LLC ("Babson Capital"), (formerly known as David L. Babson & Company Inc.) pursuant to which Babson Capital serves as each Fund's sub-adviser providing day-to-day management of each Fund's investments. Babson Capital is a wholly-owned subsidiary of DLB Acquisition Corporation, which is a controlled subsidiary of MassMutual. Babson Capital receives a fee from MassMutual equal to an annual rate of 0.13% of the average daily net asset value of the portion of the assets of the Equity Fund 47 that Babson Capital manages, 0.13% of the average daily net assets of the Equity Segment of the Blend Fund, 0.09% of the average daily net assets of the Money Market and Bond Segments of the Blend Fund, 0.05% of the average daily net assets of the Money Market Fund and 0.10% of the average daily net assets of the Managed Bond Fund. MassMutual has also entered into an investment sub-advisory agreement with Alliance Capital Management L.P. ("Alliance Capital"). Alliance Capital is a limited partnership, the majority ownership interests in which are held by its affiliates: Alliance Capital Management Holding L.P., a publicly traded partnership; and AXA Financial, Inc. ("AXA Financial") together with certain wholly-owned subsidiaries of AXA Financial. AXA Financial is a wholly-owned subsidiary of AXA. The sub-advisory agreement with Alliance Capital provides that Alliance Capital manage a portion of the investment and reinvestment of the assets of the Equity Fund. MassMutual pays a sub-advisory fee to Alliance Capital based upon the aggregate net assets under management which include (1) the average daily net asset value of the portion of the assets of the Equity Fund that Alliance Capital manages, and (2) the average daily net assets of all other funds or accounts of MassMutual or its affiliates for which Alliance Capital provides sub-advisory services and which have substantially the same investment objectives, policies and investment strategies. EXPENSE WAIVERS MassMutual has agreed, at least through April 30, 2005, to bear the expenses of each Fund to the extent that the aggregate expenses (excluding each Fund's management fee, interest, taxes, brokerage commissions and extraordinary expenses) incurred during the Fund's fiscal year exceed 0.11% of the average daily net asset value of each Fund for such year. No waivers have been required as a result of this agreement for the year ended December 31, 2004. OTHER Certain officers and trustees of the Funds are also officers of MassMutual. The compensation of each trustee who is not an officer or employee of MassMutual is borne by the Funds. DEFERRED COMPENSATION Trustees of the Funds that are not employees of MassMutual or its subsidiaries may elect to defer receipt of their annual fees in accordance with terms of the Non-Qualified Deferred Compensation Plan. Any amounts deferred shall accrue interest at a rate equal to eight percent (8%) per annum. For the year ended December 31, 2004, no significant amounts have been deferred. 4. PURCHASES AND SALES OF INVESTMENTS Cost of purchases and proceeds from sales of investment securities (excluding short-term investments) for the year ended December 31, 2004, were as follows:
LONG-TERM U.S. OTHER LONG-TERM GOVERNMENT SECURITIES SECURITIES --------------------- --------------- PURCHASES Managed Bond Fund $ 261,398,597 $ 121,781,403 Blend Fund 194,403,105 880,394,536 Equity Fund - 473,690,912 SALES Managed Bond Fund $ 258,918,342 $ 109,771,041 Blend Fund 219,185,812 973,430,342 Equity Fund - 567,277,993
48 5. CAPITAL SHARE TRANSACTIONS The Funds are authorized to issue an unlimited number of shares, with no par value in each class of shares. Changes in shares outstanding for each Fund are as follows:
YEAR ENDED DECEMBER 31, 2004 YEAR ENDED DECEMBER 31, 2003 SHARES AMOUNT SHARES AMOUNT --------------- --------------- --------------- --------------- MONEY MARKET FUND Sold 71,129,709 $ 71,054,507 105,705,023 $ 105,590,864 Issued as reinvestment of dividends 887,723 887,133 1,152,760 1,151,593 Redeemed (98,050,412) (97,946,737) (157,549,810) (157,379,811) --------------- --------------- --------------- --------------- Net increase (decrease) (26,032,980) $ (26,005,097) (50,692,027) $ (50,637,354) =============== =============== =============== =============== MANAGED BOND FUND Sold 5,011,724 $ 62,646,073 7,918,246 $ 99,825,935 Issued as reinvestment of dividends 1,433,549 17,870,402 1,653,061 20,809,869 Redeemed (5,825,234) (72,960,675) (10,213,932) (128,594,509) --------------- --------------- --------------- --------------- Net increase (decrease) 620,039 $ 7,555,800 (642,625) $ (7,958,705) =============== =============== =============== =============== BLEND FUND Sold 1,875,417 $ 27,896,784 2,306,539 $ 31,049,864 Issued as reinvestment of dividends 1,834,465 27,603,936 1,979,001 27,002,708 Redeemed (11,332,892) (168,592,567) (12,990,744) (172,966,124) --------------- --------------- --------------- --------------- Net increase (decrease) (7,623,010) $ (113,091,847) (8,705,204) $ (114,913,552) =============== =============== =============== =============== EQUITY FUND Sold 2,161,283 $ 46,694,417 2,869,073 $ 51,938,991 Issued as reinvestment of dividends 1,132,862 26,837,006 1,019,277 21,136,767 Redeemed (8,073,229) (175,020,710) (9,220,071) (163,790,004) --------------- --------------- --------------- --------------- Net increase (decrease) (4,779,084) $ (101,489,287) (5,331,721) $ (90,714,246) =============== =============== =============== ===============
6. FOREIGN SECURITIES The 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 issued by U.S. companies and the U.S. Government. These risks include revaluation of currencies and future adverse political and economic developments. Moreover, securities of many foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. companies and the U.S. Government. 7. FEDERAL INCOME TAX INFORMATION At December 31, 2004, the cost of securities and the unrealized appreciation (depreciation) in the value of investments owned by the Funds, as computed on a Federal income tax basis, were as follows:
FEDERAL TAX BASIS TAX BASIS INCOME TAX UNREALIZED UNREALIZED NET UNREALIZED COST APPRECIATION DEPRECIATION APPRECIATION --------------- --------------- --------------- --------------- Managed Bond Fund $ 407,973,650 $ 9,852,800 $ (2,047,561) $ 7,805,239 Blend Fund 921,468,907 168,020,145 (8,656,338) 159,363,807 Equity Fund 1,195,185,638 304,952,025 (8,070,858) 296,881,167
Note: The aggregate cost for investments for the Money Market Fund as of December 31, 2004, is the same for financial reporting and Federal income tax purposes. 49 At December 31, 2004, the following Funds had available, for Federal income tax purposes, unused capital losses:
EXPIRING EXPIRING EXPIRING EXPIRING 2009 2010 2011 2012 --------------- --------------- ------------- --------------- Money Market Fund $ 200,726 $ - $ - $ 618 Managed Bond Fund - 1,214,149 - - Blend Fund 93,837,108 96,826,930 44,174,039 - Equity Fund - 94,716,471 93,924,996 -
Net capital loss carryforwards may be applied against any net realized taxable gains in each succeeding year, or until their respective expiration dates, whichever occurs first. Certain differences exist from the amounts reflected in the Statement of Changes in Net Assets primarily due to the character of short-term capital gains treated as ordinary income for tax purposes. The tax character of distributions paid during the year ended December 31, 2004 was as follows:
ORDINARY LONG TERM RETURN OF INCOME CAPITAL GAIN CAPITAL --------------- --------------- --------------- Money Market Fund $ 981,495 $ - $ - Managed Bond Fund 17,870,402 - - Blend Fund 27,603,935 - - Equity Fund 26,837,006 - -
The tax character of distributions paid during the year ended December 31, 2003 was as follows:
ORDINARY LONG TERM RETURN OF INCOME CAPITAL GAIN CAPITAL --------------- --------------- --------------- Money Market Fund $ 1,051,782 $ - $ - Managed Bond Fund 20,809,869 - - Blend Fund 27,002,708 - - Equity Fund 21,136,767 - -
At December 31, 2004, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED ORDINARY CAPITAL LOSS OTHER TEMPORARY UNREALIZED INCOME CARRYOVER DIFFERENCES APPRECIATION* --------------- --------------- --------------- --------------- Money Market Fund $ 39,459 $ (201,344) $ (14,531) $ - Managed Bond Fund - (1,214,149) (1,151,612) 7,805,239 Blend Fund 13,814 (234,838,077) (94,453) 159,390,459 Equity Fund 2,631 (188,641,467) (112,188) 296,881,167
* INCLUDES UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS, DERIVATIVES AND FOREIGN CURRENCY DENOMINATED ASSETS AND LIABILITIES IF ANY. The following Funds have elected to defer to January 1, 2005 post-October losses:
AMOUNT --------------- Money Market Fund $ 1,488 Managed Bond Fund 1,120,583
50 8. PROXY VOTING (UNAUDITED) A description of the policies and procedures that each Fund's investment adviser and sub-advisers use to vote proxies relating to the Fund's portfolio securities is available, without charge, upon request, by calling 1-888-309-3539, and on the Securities and Exchange Commission's website at http://www.sec.gov. Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available, without charge, upon request, on the MassMutual website at http://www.massmutual.com/retire and on the Securities and Exchange Commission's website at http://www.sec.gov. 9. QUARTERLY REPORTING (UNAUDITED) The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds' Forms N-Q are available on the SEC website at http://www.sec.gov. The Funds' Forms N-Q may be reviewed and copied at the SEC's Public Reference Room, which may be obtained by calling 1-800-SEC-0330. 51 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF MML SERIES INVESTMENT FUND We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the MML Money Market Fund, the MML Managed Bond Fund, the MML Blend Fund, and the MML Equity Fund (collectively the "Funds") which are components of the MML Series Investment Fund ("The MML Trust"), as of December 31, 2004, and the related statements of operations for the year then ended, the statements of changes in net assets for the two years in the period ended December 31, 2004 and the financial highlights for each of the five years in the period ended December 31, 2004. The financial statements and financial highlights are the responsibility of the MML Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion of the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004 by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Funds as of December 31, 2004, the results of their operations, the changes in their net assets for each of the two years in the period then ended and their financial highlights for each of the five years in the period then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP Deloitte & Touche LLP Boston, Massachusetts February 11, 2005 52 TRUSTEES AND OFFICERS (UNAUDITED) The following table lists the Trust's trustees and officers as of December 31, 2004; their address and age; their position with the Trust; the length of time holding that position with the Trust; their principal occupation(s) during the past five years; the number of portfolios in the fund complex they oversee; and other directorships they hold in companies subject to registration or reporting requirements of the Securities Exchange Act of 1934 (generally called "public companies") or in registered investment companies. The Trust's Statement of Additional Information includes additional information about the Trust's trustees and is available, without charge, upon request by calling 1-888-309-3539 or by writing MML Series Investment Fund, c/o Massachusetts Mutual Life Insurance Company, 1295 State Street, Springfield, Massachusetts 01111-0111, Attention: Retirement Services Marketing. DISINTERESTED TRUSTEES
TERM NUMBER OF OF OFFICE** PORTFOLIOS IN AND FUND POSITION(S) LENGTH PRINCIPAL COMPLEX OTHER NAME, ADDRESS*, HELD WITH OF TIME OCCUPATION(S) DURING OVERSEEN BY DIRECTORSHIPS AND AGE TRUST SERVED PAST 5 YEARS TRUSTEE HELD BY TRUSTEE ------------------------ ----------- ----------- ------------------------ ------------- ------------------------- Richard H. Ayers Trustee of Since Retired 39 Director, Applera Age: 62 the Trust 1999 Corporation; Director (since 2002), Instron Corporation. Mary E. Boland Trustee of Since Attorney at Law (since 39 Director (since 1999), Age: 65 the Trust 1973 2004); Attorney at Law BankNorth Massachusetts; (1965-2004), Egan, Director (since 1999), Flanagan and Cohen, P.C. Massachusetts Educational (law firm), Springfield, Financing Authority. MA. Richard W. Greene Trustee of Since Retired; Vice President 39 Age: 69 the Trust 1999 for Investments and Treasurer (1998-2000), University of Rochester (private university). F. William Marshall, Jr. Trustee of Since Consultant (since 1999); 39 Trustee (since 2000), Age: 62 the Trust 1996 Chairman (1999), Family Board II Oppenheimer Bank, F.S.B. (formerly Funds. SIS Bank); Executive Vice President (1999), Peoples Heritage Financial Group; President, Chief Executive Officer and Director (1993-1999), SIS Bancorp, Inc. and SIS Bank (formerly, Springfield Institution for Savings). Allan W. Blair Trustee of Since President and Chief 39 Director (since 2001), Age: 56 the Trust 2003 Executive Officer (since Future Works, Inc. 1996), Economic Development Council of Western Massachusetts; President and Chief Operating Officer (since 1993), Westmass Area Development Corporation; President and Chief Operating Officer (since 1984), Westover Metropolitan Development Corporation. R. Alan Hunter, Jr. Trustee of Since Retired. 39 Age: 58 the Trust 2003
53 INTERESTED TRUSTEES
TERM NUMBER OF OF OFFICE** PORTFOLIOS IN AND FUND POSITION(S) LENGTH PRINCIPAL COMPLEX OTHER NAME, ADDRESS*, HELD WITH OF TIME OCCUPATION(S) DURING OVERSEEN BY DIRECTORSHIPS AND AGE TRUST SERVED PAST 5 YEARS TRUSTEE HELD BY TRUSTEE ------------------------ ----------- ----------- ------------------------ ------------- ------------------------- Stuart H. Reese Chairman Since Executive Vice President 41 Chairman (since 1999), Age: 49 and 1999 and Chief Investment President (1995-1999), Trustee of Officer (since 1999), MassMutual Corporate the Trust Chief Executive Director Investors and MassMutual (1997-1999), MassMutual; Participation Investors Chairman and Chief (closed-end investment Executive Officer (since companies); Director 2001), President and (since 1999), Merrill Chief Executive Officer Lynch Derivative (1999-2001), Babson Products; Chairman (since Capital Management LLC 1999), Director (since (investment adviser). 1996), Antares Capital Corporation (finance company); Director (since 1996), HYP Management, Inc. (managing member of MassMutual High Yield Partners LLC), and MMHC Investment, Inc. (investor in funds sponsored by MassMutual); Director (since 1994), MassMutual Corporate Value Partners Limited (investor in debt and equity securities) and MassMutual Corporate Value Limited (parent of MassMutual Corporate Value Partners Limited); President (since 1997), MassMutual/ Darby CBO IM Inc. (manager of MassMutual/ Darby CBO LLC, a high yield bond fund); Advisory Board Member (since 1995), Kirtland Capital Partners. Frederick C. Castellani Trustee of Since 2001 Executive Vice President 39 Age: 58 the Trust (since 2001), Senior Vice President (1996-2001), MassMutual.
54
TERM NUMBER OF OF OFFICE** PORTFOLIOS IN AND FUND POSITION(S) LENGTH PRINCIPAL COMPLEX OTHER NAME, ADDRESS*, HELD WITH OF TIME OCCUPATION(S) DURING OVERSEEN BY DIRECTORSHIPS AND AGE TRUST SERVED PAST 5 YEARS TRUSTEE HELD BY TRUSTEE ------------------------ ----------- ----------- ------------------------ ------------- ------------------------- Robert E. Joyal Trustee of Since 2003 Retired; President 41 Trustee (since 2003), Age: 59 the Trust (2001-2003), Managing President (1999-2003), Director (2000-2001) and MassMutual Corporate Executive Director Investors and MassMutual (1999-2000), David L. Participation Investors Babson & Company Inc.; (closed-end investment Executive Director companies); Director (1997-1999), (since 1996), Antares Massachusetts Mutual Life Capital Corporation (bank Insurance Company. loan syndication); Director (since 1996), First Israel Mezzanine Investors Ltd. (general partner and manager of The Israel Mezzanine Fund, L.P.); Director (since 2003), Pemco Aviation Group, Inc.
55 PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF PORTFOLIOS IN FUND POSITION(S) LENGTH PRINCIPAL COMPLEX NAME, ADDRESS*, HELD WITH OF TIME OCCUPATION(S) DURING OVERSEEN BY AND AGE TRUST SERVED PAST 5 YEARS TRUSTEE ------------------------ ------------ ----------- -------------------------------------------------- ------------- David W. O'Leary President Since Senior Vice President (since 2001), MassMutual; 14 Age: 44 of the Trust 2004 Senior Vice President (1999-2001), Vice President (1996-1999), Aetna Financial Services. James S. Collins Chief Since Vice President (since 1999), Second Vice President 39 Age: 46 Financial 2000 (1990-1999), MassMutual. Officer and Treasurer of Trust Thomas M. Kinzler Vice Since Vice President and Associate General Counsel 59 Age: 49 President 1999 (since 1999), Second Vice President and Associate and General Counsel (1996-1999), MassMutual. Secretary of the Trust Toby Slodden Vice Since Executive Vice President (since 2003), Senior Vice 39 Age: 47 President of 2003 President (1999-2003), Vice President (1997-1999), the Trust MassMutual. Michael A. Chong Vice Since Vice President, Compliance (since 2004), Vice 59 Age: 47 President 2004 President and Associate General Counsel and Chief (1999-2004), Second Vice President (1996-1999), Compliance MassMutual. Officer of the Trust Ian W. Sheridan Vice Since Vice President (since 2003), MassMutual; Vice 39 Age: 39 President 2004 President of Marketing and Business Development of the Trust (1999-2003), Automatic Data Processing (ADP).
* The address of each Trustee and Principal Officer is the same as that for the Trust; 1295 State Street, Springfield, Massachusetts 01111. ** Each Trustee of the Trust serves until the next meeting of shareholders called for the purpose of electing Trustees and until the election and qualification of his successor or until he dies, resigns or is removed. Notwithstanding the foregoing, a Trustee shall retire and cease to serve as a Trustee as of the first board meeting following the date on which the Trustee attains the age of seventy-two FEDERAL TAX INFORMATION (UNAUDITED) For corporate shareholders, a portion of the ordinary dividends paid during the Fund's year ended December 31, 2004 qualified for the dividends received deduction, as follows: Managed Bond Fund 0.19% Blend Fund 46.00% Equity Fund 100.00%
56 OTHER INFORMATION (UNAUDITED) FUND EXPENSES DECEMBER 31, 2004 EXPENSE EXAMPLES The following information is in regards to expenses for the six month period ended December 31, 2004: As a shareholder of the Funds, you incur ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested for the six month period ended December 31, 2004. ACTUAL EXPENSES The first line of each table on the following pages provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Operating Expenses Incurred" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of each table on the following pages provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The Funds incur ongoing operating expenses during the normal course of business, such as management fees and other expenses. The following tables, assuming a $1,000 investment in a class of shares, disclose the ending account value and operating expenses incurred for the six months ended December 31, 2004, based on, (1) the Fund's actual return and actual expenses, and (2) a hypothetical annualized 5% return and the Fund's actual expenses: 57 MONEY MARKET FUND
OPERATING BEGINNING ENDING EXPENSE VALUE VALUE INCURRED* ------------- ------------- ---------- 1) Actual $ 1,000.00 $ 1,005.50 $ 2.67 2) Hypothetical 1,000.00 1,022.47 2.69
* EXPENSES ARE CALCULATED USING THE ANNUALIZED EXPENSE FOR THE SIX MONTHS ENDED DECEMBER 31, 2004 OF 0.53%, MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS IN THE PERIOD, DIVIDED BY THE NUMBER OF DAYS IN THE YEAR. MANAGED BOND FUND
OPERATING BEGINNING ENDING EXPENSE VALUE VALUE INCURRED* ------------- ------------- ---------- 1) Actual $ 1,000.00 $ 1,041.70 $ 2.36 2) Hypothetical 1,000.00 1,022.82 2.34
* EXPENSES ARE CALCULATED USING THE ANNUALIZED EXPENSE FOR THE SIX MONTHS ENDED DECEMBER 31, 2004 OF 0.46%, MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS IN THE PERIOD, DIVIDED BY THE NUMBER OF DAYS IN THE YEAR. BLEND FUND
OPERATING BEGINNING ENDING EXPENSE VALUE VALUE INCURRED* ------------- ------------- ---------- 1) Actual $ 1,000.00 $ 1,060.40 $ 2.18 2) Hypothetical 1,000.00 1,023.03 2.14
* EXPENSES ARE CALCULATED USING THE ANNUALIZED EXPENSE FOR THE SIX MONTHS ENDED DECEMBER 31, 2004 OF 0.42%, MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS IN THE PERIOD, DIVIDED BY THE NUMBER OF DAYS IN THE YEAR. EQUITY FUND
OPERATING BEGINNING ENDING EXPENSE VALUE VALUE INCURRED* ------------- ------------- ---------- 1) Actual $ 1,000.00 $ 1,118.40 $ 2.18 2) Hypothetical 1,000.00 1,023.08 2.08
* EXPENSES ARE CALCULATED USING THE ANNUALIZED EXPENSE FOR THE SIX MONTHS ENDED DECEMBER 31, 2004 OF 0.41%, MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS IN THE PERIOD, DIVIDED BY THE NUMBER OF DAYS IN THE YEAR. 58 [This page is intentionally left blank.] [MASSMUTUAL FINANCIAL GROUP(SM) LOGO] Massachusetts Mutual Life Insurance Company and affiliates, Springfield, MA 01111-0001 www.massmutual.com MassMutual Financial Group is a marketing designation (or fleet name) for Massachusetts Mutual Life Insurance Company (MassMutual) and its affiliates. L4540 205 ITEM 2 CODE OF ETHICS. As of December 31, 2004, the Registrant adopted a Code of Ethics that applies to the Principal Executive Officer and Principal Financial Officer pursuant to the Sarbanes-Oxley Act of 2002. For the year ended December 31, 2004, there were no amendments to a provision of the Code of Ethics. A copy of its Code of Ethics is filed with this Form N-CSR under item 10 (a). ITEM 3 AUDIT COMMITTEE FINANCIAL EXPERT. The Registrant's Board of Trustees has determined that Richard H. Ayers and Richard W. Greene, both members of the Audit Committee, are audit committee financial experts as defined by the Securities and Exchange Commission (the "SEC"). Mr. Ayers and Mr. Greene are "independent" as defined by the SEC for purposes of audit committee financial expert determinations. ITEM 4 PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) AUDIT FEES: The aggregate fees paid and accrued by the Registrant for professional services rendered by its independent auditors, Deloitte & Touche LLP, for the audit of the Registrant's annual financial statements for 2004 and 2003 were $76,300 and $74,871, respectively. (b) AUDIT RELATED FEES: No such fees were billed to the Registrant by Deloitte & Touche LLP for 2004 and 2003. (c) TAX FEES: The aggregate fees paid or accrued by the Registrant for professional services rendered by Deloitte & Touche LLP for the review of Form 1120-RIC, Form 8613, excise distribution projections, distribution calculation and reasonable out of pocket expenses for 2004 and 2003 were $10,829 and $12,114, respectively. (d) ALL OTHER FEES: No such fees were billed to the Registrant by Deloitte & Touche LLP for 2004 or 2003. (e) (1) AUDIT COMMITTEE PRE-APPROVAL POLICY: All services to be performed for the Registrant by Deloitte & Touche LLP must be pre-approved by the audit committee. All services performed during 2004 and 2003 were pre-approved by the committee. (2) Not applicable. (f) Not applicable. (g) Not applicable. (h) Not applicable. ITEM 5 AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable to this filing. ITEM 6 SCHEDULE OF INVESTMENTS Not applicable to this filing. ITEM 7 DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to this filing. ITEM 8 PURCHASE OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable to this filing. ITEM 9 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable to this filing. ITEM 10 CONTROLS AND PROCEDURES. (a) The Registrant's Principal Executive Officer and Principal Financial Officer concluded that the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) were effective based as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"), based on their evaluation of the effectiveness of the Registrant's disclosure controls and procedures as of the Evaluation Date. (b) There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the Registrant's last fiscal half-year (the Registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 11 (EXHIBITS): (a)(1) Code of Ethics Described in Item 2 is attached. (a)(2) Certifications of the Principal Executive Officer and Principal Financial Officer of the Registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a) are attached hereto as Exhibit 99CERT. (a)(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act (17 CFR 270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 as required by Rule 30a-2(b), under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)), Rule 15d-14(b) under the Securities Exchange Act of 1934 (17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) is attached hereto as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) MML Series Investment Fund By (Signature and Title): /s/ David W. O'Leary -------------------------------------------------- David W. O'Leary, President and Principal Executive Officer Date 2/24/05 -------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities, and on the dates indicated. By (Signature and Title): /s/ David W. O'Leary -------------------------------------------------- David W. O'Leary, President and Principal Executive Officer Date 2/24/05 -------- By (Signature and Title): /s/ James S. Collins --------------------------------------------------- James S. Collins, Treasurer and Principal Financial Officer Date 3/1/05 --------