Securities and Exchange Commission (“SEC” or “Commission”).
Notice of application for an order under section 6(c) of the Investment Company Act of 1940 (the “Act”) to amend a prior order that granted an exemption from section 15(a) of the Act and rule 18f-2 under the Act.
Summary of the Application:
Applicants request an order to amend a prior order (“Prior Order”) that permits them to enter into and materially amend sub-advisory agreements without shareholder approval. The amended order would exempt applicants from certain disclosure requirements.
MassMutual Institutional Funds (“MMIF”), MML Series Investment Fund (“MML Series,” and together with MMIF, the “Trusts”) and Massachusetts Mutual Life Insurance Company (the “Manager”).
The application was filed on December 17, 2001, and amended on July 11, 2002.
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 applicant with a copy of the request, personally or by mail. Hearing requests should be received by the SEC by 5:30 p.m. on Start Printed Page 48229August 12, 2002, and should be accompanied by proof of service on applicant, 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 5th Street, NW., Washington, DC 20549-0609. Applicants, 1295 State Street, B379, Springfield, MA 01111-0001.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Bruce R. MacNeil, Senior Counsel, at (202) 942-0634 or 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 5th Street, NW., Washington, DC 20549-0102 (telephone (202) 942-8090).
1. The Trusts are registered under the Act as open-end management investment companies and are comprised of multiple series (each a “Fund” and together the “Funds”). The Manager serves as the investment manager to each Fund pursuant to separate investment management agreements between each Trust and the Manager (“Management Agreements”) that were approved by the board of trustees of the relevant 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”). The Prior Order permits the Manager, subject to approval by the respective Board, to enter into and materially amend Sub-Advisory Agreements without seeking shareholder approval. The Prior Order does not extend to a Sub-Advisory Agreement with any Sub-Adviser that is an affiliated person, as defined in section 2(a)(3) of the Act, of a Fund or the Manager (other than by reason of serving as a Sub-Adviser to a Fund) (“Affiliated Sub-Adviser”).
2. Applicants request an order that would amend the Prior Order to exempt the Funds from the various disclosure provisions described below. These provisions may require the Funds to disclose the fees paid by the Manager to each Sub-Adviser. An exemption is requested to permit the Funds to disclose (as both a dollar amount and as a percentage of a Fund's net assets): (a) Aggregate fees paid to the Manager and Affiliated Sub-Advisers; and (b) aggregate fees paid to Sub-Advisers other than Affiliated Sub-Advisers (“Aggregate Fee Disclosure”). If a Fund employs an Affiliated Sub-Adviser, the Fund will provide separate disclosure of any fees paid to the Affiliated Sub-Adviser.
Applicants' Legal Analysis
1. Form N-1A is the registration statement used by open-end investment companies. Item 15(a)(3) of Form N-1A requires disclosure of the method and amount of the investment adviser's compensation.
2. Rule 20a-1 under the Act requires proxies solicited with respect to an investment company to comply with Schedule 14A under the Securities Exchange Act of 1934. Items 22(c)(1)(ii), 22(c)(1)(iii), 22(c)(8), and 22(c)(9) of Schedule 14A, taken together, require a proxy statement for a shareholder meeting at which the advisory contract will be voted upon to include the “rate of compensation of the investment adviser,” the “aggregate amount of the investment adviser's fees,” a description of “the terms of the contract to be acted upon,” and, if a change in the advisory fee is proposed, the existing and proposed fees and the difference between the two fees.
3. Form N-SAR is the semi-annual report filed with the Commission by registered investment companies. Item 48 of Form N-SAR requires investment companies to disclose the rate schedule for fees paid to their investment advisers, including the Sub-Advisers.
4. Regulation S-X sets forth the requirements for financial statements required to be included as part of investment company registration statements and shareholder reports filed with the Commission. Sections 6-07(2)(a), (b), and (c) of Regulation S-X require that investment companies include in their financial statements information about investment advisory fees.
5. 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.
6. Applicants assert that many Sub-Advisers charge their customers for advisory services according to a “posted” rate schedule. Applicants state that while Sub-Advisers are willing to negotiate fees lower than those posted in the schedule, particularly with large institutional clients, they are reluctant to do so when the fees are disclosed to other prospective and existing customers. Applicants submit that the relief will encourage Sub-Advisers to negotiate lower fees with the Manager, the benefits of which are likely to be passed on to a Fund's shareholders.
Applicants agree that any order granting the requested relief will be subject to the conditions contained in the Prior Order and the following additional conditions:
1. With respect to the Funds relying on the requested relief, the Manager will provide the Board, no less frequently than quarterly, with information about the Manager's profitability on a per Fund basis. This information will reflect the impact on profitability of the hiring or termination of any Sub-Adviser during the applicable quarter.
2. Whenever a Sub-Adviser is hired or terminated, the Manager will provide the relevant Board with information showing the expected impact on the Manager's profitability.
3. Each Trust will disclose in its registration statement the Aggregate Fee Disclosure.
4. Independent counsel knowledgeable about the Act and the Start Printed Page 48230duties of Independent Trustees will be engaged to represent the Independent Trustees. The selection of such counsel will be within the discretion of the then-existing Independent Trustees.Start Signature
For the Commission, by the Division of Investment Management, under delegated authority.
Margaret H. McFarland,
1. MassMutual Institutional Funds, et al., Investment Company Act Release Nos. 25211 (Oct. 16, 2001) (notice) and 25260 (Nov. 9, 2001) (order).Back to Citation
2. 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 and the Prior Order (“Future Funds,” and together with the Funds, the “Funds”). The Trusts are the only existing investment companies that currently intend to rely on the requested order.Back to Citation
3. If the name of any Fund contains the name of a Sub-Adviser, the name of the Fund also will contain the name of the Manager (or an acronym of the name of the Manager), or the name of the entity controlling, controlled by, or under common control with the Manager to the Funds, which will appear before the name of the Sub-Adviser.Back to Citation
[FR Doc. 02-18564 Filed 7-22-02; 8:45 am]
BILLING CODE 8010-01-P