Securities and Exchange Commission (“Commission” or “SEC”).
Notice of application under section 6(c) of the Investment Company Act of 1940 (“Act”) exempting applicants from section 15(a) of the Act and rule 18f-2 under the Act.
SUMMARY OF APPLICATION:
Applicants request an order to permit them to enter into and materially amend sub-advisory agreements without shareholder approval.
Mass Mutual Institutional Funds (“MMIF”), MML Series Investment Fund (“MML Series,” and together with MMIF, the “Trusts”), Massachusetts Mutual Life Insurance Company (the “Manager”).
The application was filed on June 30, 2000 and amendments thereto on December 13, 2000 and October 16, 2001.
HEARING OR NOTIFICATION OF HEARING:
An order granting the application will be issued unless the SEC orders a hearing. Interested persons may request a hearing by writing to the SEC's Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the SEC by 5:30 p.m. on November 8, 2001, and should be accompanied by proof of service on applicants, in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the writer's interest, the reason for the request, and the issues contested. Persons may request notification of a hearing by writing to the SEC's Secretary.
Secretary, SEC, 450 Fifth Street, NW, Washington, DC 20549-Start Printed Page 536480609. Applicants, 1295 State Street, B379, Springfield, MA 01111-0001.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Mary Kay Frech, Branch Chief, at (202) 942-0564 (Division of Investment Management, Office of Investment Company Regulation).End Further Info End Preamble Start Supplemental Information
The following is a summary of the application. The complete application may be obtained for a fee at the SEC's Public Reference Branch, 450 Fifth Street, NW., Washington, DC 20549-0102 (tel. 202-942-8090).
1. The Trusts, organized as Massachusetts business trusts, are registered under the Act as open-end management investment companies. MMIF and MML Series currently are comprised of eighteen and eleven series, respectively (each a “Fund,” and together, the “Funds”), each with its own investment objectives, policies and restrictions. Shares of MML Series are offered solely to separate accounts established by the Manager and its life insurance company subsidiaries, including MML Bay State Life Insurance Company and C.M. Life Insurance Company. The Manager, a mutual life insurance company organized under the laws of The Commonwealth of Massachusetts, serves as the investment manager to the Funds and is registered under the Investment Advisers Act of 1940 (“Advisers Act”).
2. The Manager serves as investment manager to each Fund pursuant to separate investment management agreements (“Management Agreements”) between the Trusts and the Manager that were approved by the board of trustees of each Trust (each, the “Board,” and collectively, the “Boards”), including a majority of the trustees who are not “interested persons” as defined in section 2(a)(19) of the Act (“Independent Trustees”), and each Fund's shareholders. Under the terms of the Management Agreements, the Manager provides investment management services to each Fund while delegating the day-to-day portfolio management for each Fund to one or more sub-advisers (“Sub-Advisers”) pursuant to separate investment sub-advisory agreements (“Sub-Advisory Agreements”). Each Sub-Adviser is an investment adviser registered under the Advisers Act, and any future Sub-Adviser will be registered under the Advisers Act. The Manager selects each Sub-Adviser, subject to approval by the respective Board, and compensates the Sub-Advisers out of fees paid to the Manager by the respective Fund.
3. The Manager monitors each Fund's performance and the Sub-Advisers and makes recommendations to the Board regarding allocation, and reallocation, of assets among Sub-Advisers to the extent the Manager deems appropriate in order to achieve the overall objectives of the Fund. The Manager also is responsible for recommending whether to employ, terminate or replace a particular Sub-Adviser. The Manager recommends the selection of a Sub-Adviser based on a number of factors, including whether the Sub-Adviser has displayed discipline and thoroughness in pursuit of its stated investment objectives, has maintained consistently above-average performance over time, and has demonstrated a high level of services to clients.
4. Applicants request relief to permit the Manager, subject to approval by the Boards, to enter into and materially amend Sub-Advisory Agreements without seeking shareholder approval. The requested relief will not extend to a Sub-Adviser that is an affiliated person, as defined in section 2(a)(3) of the Act, of either Trust or the Manager, other than by reason of serving as a Sub-Adviser to one or more of the Funds (“Affiliated Sub-Adviser”).
Applicants' Legal Analysis
1. Section 15(a) of the Act provides, in relevant part, that it is unlawful for any person to act as an investment adviser to a registered investment company except pursuant to a written contract that has been approved by the vote of the company's outstanding voting securities. Rule 18f-2 under the Act provides that each series or class of stock in a series company affected by a matter must approve such matter if the Act requires shareholder approval.
2. Section 6(c) of the Act provides that the Commission may exempt any person, security, or transaction or any class or classes of persons, securities, or transactions from any provision of the Act, or from any rule thereunder, if such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policies and provisions of the Act. Applicants believe that their requested relief meets this standard for the reasons discussed below.
3. Applicants state that the structure of each Trust is different from that of traditional investment companies. Applicants assert that the investors are relying on the Manager's experience to select one or more Sub-Advisers best suited to achieve a Fund's desired investment objectives. Applicants assert that, from the perspective of the investors, the role of Sub-Advisers is comparable to that of individual portfolio managers employed by other investment advisory firms. Applicants contend that requiring shareholder approval of Sub-Advisory Agreements may impose unnecessary costs and delays on the Funds, and may preclude the Manager from acting promptly in a manner considered advisable by the Board. Applicants note that the Management Agreements will remain subject to the requirements of section 15(a) of the Act and rule 18f-2 under the Act.
Applicants agree that the order granting the requested relief will be subject to the following conditions:
1. Before a Fund may rely on the order, the operation of the Fund in the manner described in the application will be approved by a majority of the outstanding voting securities of the Fund (or, if the Fund serves as a funding medium for any sub-account of a registered separate account, pursuant to voting instructions provided by the unitholders of the sub-account), as defined in the Act, or, in the case of a Fund created in the future whose public shareholders (or variable contract owners through a separate account) purchased shares on the basis of a prospectus containing the disclosure contemplated by condition (2) below, by the sole initial shareholder(s) before offering shares of that Fund to the public (or the variable contract owners through a separate account).
2. Each Trust will disclose in its prospectuses the existence, substance, and effect of any order granted pursuant to the application. In addition, each Fund relying on the requested order will hold itself out to the public as employing the management structure described in the application. The Start Printed Page 53649prospectuses will prominently disclose that the Manager has the ultimate responsibility (subject to oversight by the Boards) to oversee the Sub-Advisers and recommend their hiring, termination, and replacement.
3. Within ninety (90) days of the hiring of any new Sub-Adviser, the Manager will furnish shareholders (or, if the Fund serves as a funding medium for any sub-account of a registered separate account, the unitholders of the sub-account) with the information about the new Sub-Adviser that would be included in a proxy statement. This information will include any change in such disclosure caused by the addition of a new Sub-Adviser. The Manager will meet this condition by providing shareholders (or, if the Fund serves as a funding medium for any sub-account of a registered separate account, the unitholders of the sub-account) within ninety (90) days of the hiring of a Sub-Adviser with an information statement meeting the requirements of Regulation 14C, Schedule 14C and Item 22 of Schedule 14A under the Securities Exchange Act of 1934.
4. The Manager will not enter into a Sub-Advisory Agreement with any Affiliated Sub-Adviser without that Sub-Advisory Agreement, including the compensation to be paid thereunder, being approved by the Fund's shareholders (or, if the Fund serves as a funding medium for any sub-account of a registered separate account, pursuant to voting instructions provided by the unitholders of the sub-account).
5. At all times, a majority of each Board will be Independent Trustees, and the nomination of new or additional Independent Trustees will be at the discretion of the then-existing Independent Trustees.
6. When a Sub-Adviser change is proposed for a Fund with an Affiliated Sub-Adviser, the Board, including a majority of the Independent Trustees, will make a separate finding, reflected in the Board minutes, that the change is in the best interests of the Fund and its shareholders (or, if the Fund serves as a funding medium for any sub-account of a registered separate account, in the best interests of the Fund and the unit-holders of any sub-account) and does not involve a conflict of interest from which the Manager or the Affiliated Sub-Adviser derives an inappropriate advantage.
7. The Manager will provide general management services to each Trust and the Funds relying on the requested order, including overall supervisory responsibility for the general management and investment of each Fund's assets and, subject to review and approval by the Boards, will: (a) Set each Fund's overall investment strategies; (b) evaluate, select, and recommend Sub-Advisers to manage all or a part of a Fund's assets; (c) allocate and, when appropriate, reallocate a Fund's assets among multiple Sub-Advisers; (d) monitor and evaluate the performance of Sub-Advisers; and (e) ensure that the Sub-Advisers comply with the relevant Fund's investment objective, policies, and restrictions by, among other things, implementing procedures reasonably designed to ensure compliance.
8. No director, trustee or officer of either Trust or director or officer of the Manager will own directly or indirectly (other than through a pooled investment vehicle that is not controlled by such person) any interest in any Sub-Adviser except for: (a) Ownership of interests in the Manager or any entity that controls, is controlled by, or is under common control with the Manager; or (b) ownership of less than 1% of the outstanding securities of any class of equity or debt of a publicly-traded company that is either a Sub-Adviser or an entity that controls, is controlled by or is under common control with a Sub-Adviser.Start Signature
For the Commission by the Division of Investment Management, under delegated authority.
Margaret H. McFarland,
1. Applicants also request relief with respect to future series of the Trusts and all future registered open-end management investment companies or series thereof that (a) are advised by the Manager or any entity controlling, controlled by, or under common control with the Manager, (b) use the multi-manager structure described in the application; and (c) comply with the terms and conditions in the application (“Future Funds”, and together with the Funds, the “Funds”). The Trusts are the only existing registered open-end management investment companies that currently intend to rely on the requested order. If the name of any Fund contains the name of a Sub-Adviser, as defined below, it will be preceded by, the name of the Manager or the name of the entity controlling, controlled by, or under common control with the Manager that serves as primary adviser to such Fund.Back to Citation
2. The term “shareholders” includes variable contract owners, as applicable.Back to Citation
[FR Doc. 01-26590 Filed 10-22-01; 8:45 am]
BILLING CODE 8010-01-M