<PAGE>
SCHEDULE 14C
(Rule 14c-101)
Information Required in Information Statement
Schedule 14C Information
Information Statement Pursuant to Section 14(c) of the Securities Exchange Act
of 1934 (Amendment No.___)
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Check the appropriate box:
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[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14c-5(d)(2))
[X] Definitive Information Statement
MassMutual Institutional Funds
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Information Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
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<PAGE>
MASSMUTUAL INSTITUTIONAL FUNDS
1295 State Street
Springfield, Massachusetts 01111
MassMutual Prime Fund
MassMutual Short-Term Bond Fund
MassMutual Core Bond Fund
MassMutual Balanced Fund
MassMutual Core Equity Fund
MassMutual Small Cap Value Equity Fund
MassMutual Indexed Equity Fund
MassMutual International Equity Fund
INFORMATION STATEMENT
General Information
This information statement, which is first being mailed on or about
April 2, 1999, is distributed in connection with action taken by written consent
of the Majority Shareholder (as defined below) of the MassMutual Prime Fund (the
"Prime Fund"), MassMutual Short-Term Bond Fund (the "Short-Term Bond Fund"),
MassMutual Core Bond Fund (the "Core Bond Fund"), MassMutual Balanced Fund (the
"Balanced Fund"), MassMutual Core Equity Fund (the "Core Equity Fund"),
MassMutual Small Cap Value Equity Fund (the "Small Cap Value Fund"), MassMutual
Indexed Equity Fund (the "Indexed Equity Fund") and MassMutual International
Equity Fund (the "International Equity Fund"), each a series (and also referred
to herein as a "Fund") of the MassMutual Institutional Funds (the "Trust"),
which will be effective on or about May 3, 1999, all as more fully described
below. THIS DOCUMENT IS REQUIRED UNDER THE FEDERAL SECURITIES LAWS AND IS
PROVIDED SOLELY FOR YOUR INFORMATION. WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY.
The Trustees have set February 1, 1999 (the "Record Date") as the
record date for determining the number of shares and the shareholders of each
Fund entitled to give consent and to receive this information statement. On the
Record Date the number of outstanding shares of each Fund was as follows: Prime
Fund 1,959,486.321; Short-Term Bond Fund 27,579,380.785; Balanced Fund
56,714,165.985; Core Equity Fund 189,861,828.315; Core Bond Fund 61,032,726.943;
Small Cap Value Fund 48,213,419.864; Indexed Equity Fund 31,349,768.242; and
International Equity Fund 57,558,888.159. To the Trust's knowledge, on the
Record Date the Trustees and Officers of the Trust owned less than 1% of each
Fund's outstanding shares. Information concerning the shareholders who were
known to be the beneficial owners of more than 5% of any Fund's shares as of the
Record Date is set forth below.
1
<PAGE>
Name and Address of Name of Fund and Number of Percent of
Beneficial Owner Shares Beneficially Owned Fund's Shares
- -------------------------- -------------------------- -------------
Massachusetts Mutual Life Prime Fund 92.67%
Insurance Company Short-Term Bond Fund 100%
1295 State Street Core Bond Fund 99.94%
Springfield, MA 01111 Balanced Fund 94.47%
("MassMutual", or Core Equity Fund 99.98%
the "Majority Shareholder") Small Cap Value Fund 99.94%
Indexed Equity Fund 99.83%
International Equity Fund 99.95%
The address of the Majority Shareholder listed above is 1295 State
Street, Springfield, Massachusetts 01111.
As described more fully below, the Trustees have proposed taking the
following actions:
Proposal Affected Funds
-------- --------------
(1) Approval of new Investment Core Bond Fund, Core Equity Fund,
Management Agreements Small Cap Value Fund and Balanced
reflecting increased Fund
investment advisory fees
paid to MassMutual
(2) Approval of amendment to All Funds
Administrative and
Shareholder Services Agreements
Under the Investment Company Act of 1940, as amended (the "1940 Act"),
the approval of new Investment Management Agreements requires approval by both
the Trust's Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust or MassMutual, and the shareholders of the
relevant Fund. The Administrative and Shareholder Services Agreements require
approval of the shareholders and a majority of Trustees, including a majority of
Trustees who are not "interested persons" of the Trust or MassMutual, for any
amendments, although such approval is not required by the 1940 Act for such
agreements.
Proposals (1) and (2) were approved on February 1, 1999 by the
Trustees, including a majority of those Trustees who are not "interested
persons" or affiliates (as defined in the 1940 Act) of any party to the
proposals (the "Independent Trustees"). The Majority Shareholder has approved
the Proposals by written consent, which will be effective on or about May 3,
1999.
2
<PAGE>
A copy of each Fund's Annual Report for the most recent fiscal year for
which it is available and a copy of each Fund's Semi-Annual Report for any
subsequent period are available without charge upon request and may be obtained
by calling 1-888-743-5274 or by writing the Trust at the address above.
PROPOSAL (1)
APPROVAL OF NEW INVESTMENT MANAGEMENT AGREEMENTS
BETWEEN TRUST AND MASSMUTUAL
(Core Bond Fund, Core Equity Fund,
Small Cap Value Fund and Balanced Fund only)
Description of Existing Investment Management Agreements
--------------------------------------------------------
MassMutual is the investment manager of the Core Bond Fund, Core Equity
Fund, Small Cap Value Fund and Balanced Fund pursuant to separate, substantially
identical, Investment Management Agreements with the Trust on behalf of each
such Fund (the "Existing Management Agreements"). The Existing Management
Agreements were last approved by MassMutual as the sole initial shareholder of
the Trust on September 26, 1994 in connection with the commencement of the
Trust's operations. The Existing Management Agreements were last approved, in
person, by the Board of Trustees, including a majority of those members of the
Board who are not parties to the Existing Management Agreements or "interested
persons" of any such party, at a meeting called for the purpose of voting on
such approval on May 4, 1998.
Under the terms of the Existing Management Agreements, MassMutual acts
as investment adviser and manager to each of the Funds subject to such general
or specific instructions as may be given by the Board of Trustees. The terms of
the Existing Management Agreements permit MassMutual to enter into investment
sub-advisory agreements for the provision of investment advisory services to
each of the Funds. Under the Existing Management Agreements, MassMutual's
liability regarding its investment management obligations and duties is limited
to situations involving its willful misfeasance, bad faith, gross negligence or
reckless disregard of such obligations and duties.
An Existing Management Agreement may be terminated: (1) by the Trust at
any time without penalty on 60 days' notice, provided that such termination has
been directed or approved by a majority of all of the Trustees of the Trust then
in office or by majority vote of the shares of the relevant Fund; or (2) for
cause by the Trust or MassMutual, or with the consent of the parties and the
Trust, at any time without penalty, upon 60 days' written notice to the other
party and the Trust. In addition, the Existing Management Agreements
automatically terminate: (1) unless their continuance is specifically approved,
at least annually, by the affirmative vote of a majority of the Board of
Trustees, which vote shall include a majority of the Board members who are not
"interested persons" of the Trust or of MassMutual, or by the affirmative vote
of a majority of each Fund's shares; or (2) upon assignment thereof.
3
<PAGE>
For its services rendered under the Existing Management Agreements,
MassMutual is paid at an annual rate of the average daily net assets of each
Fund as follows: .45% for the Core Bond Fund, the Balanced Fund and the Core
Equity Fund; and .55% for the Small Cap Value Fund. For the fiscal year ended
December 31, 1998, the Funds paid the following amounts as investment advisory
fees to MassMutual pursuant to the Existing Management Agreements:
Gross Investment Amount of Net
Fund Advisory Fees Earned Fees Waived Fees Paid
- ---- -------------------- ----------- ---------
Core Bond Fund $ 2,419,080 0 $ 2,419,080
Balanced Fund 3,182,481 0 3,182,481
Core Equity Fund 15,182,885 0 15,182,885
Small Cap Value Fund 3,775,176 0 3,775,176
Total for Four Funds $ 24,559,622 $ 0 $ 24,559,622
============= ============ ==============
The Trust is required under applicable regulations of the Securities
and Exchange Commission to provide the management fee schedules of other mutual
funds managed by MassMutual that have investment objectives similar to those of
the Funds. Accordingly, the following table provides this information,
notwithstanding MassMutual's belief that the management fee schedules of these
mutual funds may not be comparable to those of the Funds. MassMutual has agreed
to bear expenses (other than the management fee, interest, taxes, brokerage
commissions and extraordinary expenses) of MML Managed Bond, MML Blend Fund, MML
Equity and MML Small Cap Value Equity Fund in excess of .11% of the average
daily net asset value through April 30, 2000.
4
<PAGE>
Net Assets as of
MML Series Investment Fund December 31, 1998 Fee Schedule
MML Managed Bond Fund $254,108,680 .50% of the first $100
(similar to Core Bond Fund) million; .45% of the next
$200 million, .40% of the
next $200 million and .35%
of any excess over $500
million.
MML Blend Fund (similar to $2,814,688,910 .50% of the first $100
Balanced Fund) million; .45% of the next
$200 million, .40% of the
next $200 million and .35%
of any excess over $500
million.
MML Equity Fund (similar $2,938,107,464 .50% of the first $100
to Core Equity Fund) million; .45% of the next
$200 million, .40% of the
next $200 million and .35%
of any excess over $500
million.
MML Small Cap Value $10,442,184 .65% of the first $100
Equity Fund (similar to million, .60% of the next
Small Cap Value Fund) $200 million, .55% of the
next $200 million, and
.50% of any excess over
$500 million.
Description of Proposed New Investment Management Agreements
- ------------------------------------------------------------
As indicated above, the Trustees of the Trust are proposing that
shareholders of each of the Core Bond Fund, the Core Equity Fund, the Small Cap
Value Fund and the Balanced Fund approve a new Investment Management Agreement
(each, a "New Management Agreement") between the Trust and MassMutual, to be
effective on May 3, 1999. The New Management Agreements will be identical to the
Existing Management Agreements other than with respect to their effective dates
and the schedule of management fees to be paid thereunder, which fees will be
increased in each instance. A form of the New Management Agreement is attached
to this information statement as Exhibit A.
For its services rendered under the New Management Agreements,
MassMutual will be paid at an annual rate of the average daily net assets of
each Fund as follows: .48% for the Core Bond Fund and the Balanced Fund, .50%
for the Core Equity Fund and .58% for the Small Cap Value Fund. The following
table sets forth for each of the four Funds the actual management fees paid to
MassMutual during the fiscal year ended December 31, 1998 under the Existing
5
<PAGE>
Management Agreements and the fees that would have been paid to MassMutual
during such fiscal year had the New Management Agreements been in effect:
Percentage Increase
-------------------
Fee That Would in Fees Per Proposed
-------------- --------------------
Fund Actual Fee Paid Have Been Paid New Agreement
---- --------------- -------------- -------------
Core Bond Fund $2,419,080 $2,580,352 6.67%
Balanced Fund 3,182,481 3,394,647 6.67%
Core Equity Fund 15,182,885 16,869,872 11.11%
Small Cap Value 3,775,176 3,981,094 5.45%
Equity Fund
Investors in each of these four Funds will pay certain fees and
expenses in connection with their investment. These fees and expenses will vary
depending on the Fund in which the investment is made and the class of shares
that are purchased. The fee tables below show two categories of expenses,
Shareholder Fees and Annual Fund Operating Expenses, on a class by class basis
for each Fund. "Annual Fund Operating Expenses" refers to the costs of operating
the Funds. These costs are deducted from a Fund's assets, which means the
shareholders pay them indirectly. "Shareholder Fees" refers to fees paid
directly from a shareholder's investment. As the tables indicate, holders of
Class A shares may pay a direct fee of 1.00% as a contingent sales charge.
Effective May 3, 1999, this charge will be eliminated. None of the other classes
involves any direct fee paid by Shareholders.
Class S Shares
This table compares the fees and expenses that an investor may pay by investing
in the Class S shares of the Funds under the Existing Management Agreements with
those fees and expenses that might be paid under the New Management Agreements.
The table also reflects the different fees and expenses that an investor may pay
as a result of new fees payable effective May 3, 1999 under the Administrative
and Shareholder Services Agreements, which are described in the next
section.
6
<PAGE>
<TABLE>
<CAPTION>
Existing Management and New Management and
----------------------- ------------------
Administrative Fee Structure Administrative Fee Structure
---------------------------- ----------------------------
Small Small
Cap Cap
Core Core Value Core Core Value
Bond Balanced Equity Equity Bond Balanced Equity Equity
Fund Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Fees
(fees paid directly
from your investment) None None None None None None None None
Annual Fund
Operating Expenses
(expenses that are
deducted from Fund
assets) (% of
average net assets)
Management Fees(1) .45% .45% .45% .55% .48% .48% .50% .58%
Service (Rule 12b-1)
Fees None None None None None None None None
Other Expenses(2) .0954% .0933% .0891% .0934% .11% .10% .08% .10%
Total Annual Fund
Operating Expenses(3) .5454% .5433% .5391% .6434% .59% .58% .58% .68%
</TABLE>
(1) Management Fees reflected under the heading "Existing Management and
Administrative Fee Structure" are based on the Funds' 1998 fiscal year and,
therefore, reflect the existing fees under the Existing Management
Agreements. Management Fees reflected under the heading "New Management and
Administrative Fee Structure" are based upon expenses for the 1999 fiscal
year, as restated to give effect to the proposed increase in fees under the
New Management Agreements as of May 3, 1999.
(2) Other Expenses reflected under the heading "Existing Management and
Administrative Fee Structure" are based on the Funds' 1998 fiscal year and,
therefore, reflect the existing fees under the Administrative and
Shareholder Services Agreements. Other Expenses reflected under the heading
"New Management and Administrative Fee Structure" are based upon estimated
amounts for the 1999 fiscal year, as restated to give effect to the new
fees payable effective May 3, 1999 under the Administrative and Shareholder
Services Agreements. These new fees are described in detail in the next
section.
(3) Employee benefit plans which invest in the Funds through MassMutual
separate investment accounts may pay additional charges under their group
annuity contract or services agreement. Investors who purchase shares
directly from the Funds may also be subject to charges imposed in their
administrative services or other agreement with MassMutual.
7
<PAGE>
EXAMPLES. These examples are intended to help compare the cost of investing in
the Class S shares of the Funds with the cost of investing in other mutual
funds. The examples assume that $10,000 is invested in the Class S shares of the
Funds for the time periods indicated, that investment earns a 5% return each
year and that each Fund's operating expenses remain the same. As with the table
above, the examples also compare the costs under the Existing Management and
Administrative Fee Structure with those under the New Management and
Administrative Fee Structure. Although actual costs may be higher or lower,
based on these assumptions an investor's costs would be:
<TABLE>
<CAPTION>
Existing Management and New Management and
----------------------- ------------------
Administrative Fee Structure Administrative Fee Structure
---------------------------- ----------------------------
Small Small
Cap Cap
Core Core Value Core Core Value
Bond Balanced Equity Equity Bond Balanced Equity Equity
Fund Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $56 $56 $55 $66 $60 $59 $59 $69
3 years $175 $174 $173 $206 $189 $186 $186 $218
5 years $305 $304 $301 $359 $329 $324 $324 $379
10 years $684 $681 $676 $802 $738 $726 $726 $847
</TABLE>
Since the Class S shares do not impose any shareholder fees, the figures shown
would be the same whether an investor sold his or her shares at the end of a
period or kept them.
Class Y Shares
This table compares the fees and expenses that an investor may pay by investing
in the Class Y shares of the Funds under the existing Management Agreements with
those fees and expenses that might be paid under the New Management Agreements.
The table also reflects the different fees and expenses that an investor may pay
as a result of the new fees payable effective May 3, 1999 under the
Administrative and Shareholder Services Agreement, which are described in the
next section.
8
<PAGE>
<TABLE>
<CAPTION>
Existing Management and New Management and
----------------------- ------------------
Administrative Fee Structure Administrative Fee Structure
---------------------------- ----------------------------
Small Small
Cap Cap
Core Core Value Core Core Value
Bond Balanced Equity Equity Bond Balanced Equity Equity
Fund Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Fees (fees paid None None None None None None None None
directly from your
investment)
Annual Fund Operating
Expenses (expenses that are
deducted from Fund assets)
(% of average net assets)
Management Fees(1) .45% .45% .45% .55% .48% .48% .50% .58%
Service (Rule 12b-1) Fees None None None None None None None None
Other Expenses(2) .29% .31% .30% .30% .16% .26% .18% .20%
Total Annual Fund Operating .74% .76% .75% .85% .64% .74% .68% .78%
Expenses(3)
</TABLE>
(1) Management Fees reflected under the heading "Existing Management and
Administrative Fee Structure" are based on the Funds' 1998 fiscal year and,
therefore, reflect the existing fees under the Existing Management
Agreements. Management Fees reflected under the heading "New Management and
Administrative Fee Structure" are based upon expenses for the 1999 fiscal
year, as restated to give effect to the proposed increase in fees under the
New Management Agreements as of May 3, 1999.
(2) Other Expenses reflected under the heading "Existing Management and
Administrative Fee Structure" are based on the Funds' 1998 fiscal year and,
therefore, reflect the existing fees under the Administrative and
Shareholder Services Agreements. Other Expenses reflected under the heading
"New Management and Administrative Fee Structure" are based upon estimated
amounts for the 1999 fiscal year, as restated to give effect to the new
fees payable effective May 3, 1999 under the Administrative and Shareholder
Services Agreements. These new fees are described in detail in the next
section.
(3) Employee benefit plans which invest in the Funds through MassMutual
separate investment accounts may pay additional charges under their group
annuity contract or services agreement. Investors who purchase shares
directly from the Funds may also be subject to charges imposed in their
administrative services or other agreement with MassMutual.
9
<PAGE>
EXAMPLES. These examples are intended to help compare the cost of investing in
the Class Y shares of the Funds with the cost of investing in other mutual
funds. The examples assume that $10,000 is invested in the Class Y shares of the
Funds for the time periods indicated, that investment earns a 5% return each
year and that each Fund's operating expenses remain the same. As with the table
above, the examples also compare the costs under the Existing Management and
Administrative Fee Structure with those under the New Management and
Administrative Fee Structure. Although actual costs may be higher or lower,
based on these assumptions an investor's costs would be:
<TABLE>
<CAPTION>
Existing Management and New Management and
----------------------- ------------------
Administrative Fee Structure Administrative Fee Structure
---------------------------- ----------------------------
Small Small
Cap Cap
Core Core Value Core Core Value
Bond Balanced Equity Equity Bond Balanced Equity Equity
Fund Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $76 $78 $77 $87 $65 $76 $69 $80
3 years $237 $243 $240 $271 $205 $237 $218 $249
5 years $411 $422 $417 $471 $357 $411 $379 $433
10 years $918 $942 $930 $1,049 $798 $918 $847 $966
</TABLE>
Since the Class Y shares do not impose any shareholder fees, the figures shown
would be the same whether an investor sold his or her shares at the end of a
period or kept them.
Class A Shares
This table compares the fees and expenses that an investor may pay by investing
in the Class A shares of the Funds under the Existing Management Agreements with
those fees and expenses that might be paid under the New Management Agreements.
The table also reflects the different fees and expenses that an investor may pay
as a result of new fees payable effective May 3, 1999 under the Administrative
and Shareholder Services Agreements, which are described in the next
section.
10
<PAGE>
<TABLE>
<CAPTION>
Existing Management and New Management and
----------------------- ------------------
Administrative Fee Structure Administrative Fee Structure
---------------------------- ----------------------------
Small Small
Cap Cap
Core Core Value Core Core Value
Bond Balanced Equity Equity Bond Balanced Equity Equity
Fund Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Fees (fees paid
directly from your
investment) None None None None None None None None
Maximum Sales Charge None None None None None None None None
Imposed on Purchases
Maximum Sales Charge None None None None None None None None
Imposed on Reinvested
Dividends
Maximum Deferred Sales 1.00% 1.00% 1.00% 1.00% None None None None
Charge
Exchange Fee None None None None None None None None
Redemption Fee None None None None None None None None
Annual Fund Operating
Expenses (expenses that are
deducted from Fund assets)
(% of average net assets)
Management Fees(1) .45% .45% .45% .55% .48% .48% .50% .58%
Service (Rule 12b-1) Fees .25% .25% .25% .25% .25% .25% .25% .25%
Other Expenses(2) .50% .50% .50% .50% .31% .41% .33% .35%
Total Annual Fund Operating 1.20% 1.20% 1.20% 1.30% 1.04% 1.14% 1.08% 1.18%
Expenses(3)
</TABLE>
(1) Management Fees reflected under the heading "Existing Management and
Administrative Fee Structure" are based on the Funds' 1998 fiscal year and,
therefore, reflect the existing fees under the Existing Management
Agreements. Management Fees reflected under the heading "New Management and
Administrative Fee Structure" are based upon expenses for the 1999 fiscal
year, as restated to give effect to the proposed increase in fees under the
New Management Agreements as of May 3, 1999.
(2) Other Expenses reflected under the heading "Existing Management and
Administrative Fee Structure" are based on the Funds' 1998 fiscal year and,
therefore, reflect the existing fee under the Administrative and
Shareholder Services Agreements. Other Expenses reflected under the heading
"New Management and Administrative Fee Structure" are
11
<PAGE>
based upon estimated amounts for the 1999 fiscal year, as restated to give
effect to the new fees payable effective May 3, 1999 under the
Administrative and Shareholder Services Agreements. These new fees are
described in detail in the next section.
(3) Employee benefit plans which invest in the Funds through MassMutual
separate investment accounts may pay additional charges under their group
annuity contract or services agreement. Investors who purchase shares
directly from the Funds may also be subject to charges imposed in their
administrative services or other agreement with MassMutual.
EXAMPLES. These examples are intended to help compare the cost of investing in
the Class A shares of the Funds with the cost of investing in other mutual
funds. The examples assume that $10,000 is invested in the Class A shares of the
Funds for the time periods indicated, that investment earns a 5% return each
year and that each Fund's operating expenses remain the same. As with the table
above, the examples also compare the costs under the Existing Management and
Administrative Fee Structure with those under the New Management and
Administrative Fee Structure. The first example also assumes that you redeem all
of your shares at the end of the periods indicated. Although actual costs may be
higher or lower, based on these assumptions an investor's costs would be:
12
<PAGE>
<TABLE>
<CAPTION>
Existing Management and New Management and
----------------------- ------------------
Administrative Fee Structure Administrative Fee Structure
---------------------------- ----------------------------
Small Small
Cap Cap
Core Core Value Core Core Value
Bond Balanced Equity Equity Bond Balanced Equity Equity
Fund Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $122 $122 $122 $132 $106 $116 $110 $120
3 years $381 $381 $381 $412 $331 $362 $343 $375
5 years $660 $660 $660 $713 $574 $628 $595 $649
10 years $1,455 $1,455 $1,455 $1,568 $1,271 $1,386 $1,317 $1,432
</TABLE>
Since the Class A Shares do not impose any shareholder fees, the
figures shown would be the same whether an investor sold his or her shares at
the end of a period or kept them.
The Trustees, including the independent Trustees, considered various
matters in determining the reasonableness and fairness of the New Management
Agreements. The Trustees requested and evaluated information provided by
MassMutual which, in its opinion, constituted all the information reasonably
necessary for the Trustees to form a judgment as to whether the New Management
Agreements would be in the best interest of the Core Bond Fund, the Core Equity
Fund, the Balanced Fund and the Small Cap Value Fund, respectively
(collectively, the "Affected Funds").
In reaching their decision to approve and recommend that shareholders
approve the New Management Agreements, the Trustees evaluated the information
and documentation provided by MassMutual and considered such factors as they
deemed appropriate. These factors included, among others: (1) the advisory fees
and other expenses that would be paid by the Affected Funds as compared to those
of similar portfolios managed by other investment advisers; (2) the nature,
quality and extent of the portfolio management and non-advisory services
furnished by MassMutual to the Affected Funds; (3) MassMutual's need to maintain
and enhance its ability to retain and attract capable personnel to serve the
Affected Funds; (4) the fact that, with respect to portfolio management
services, the New Management Agreements would, except as described herein, have
terms and conditions substantially similar to those of the current Management
Agreements; (5) the relationship of the proposed increase in investment
management fees to the investment management fees of comparable mutual funds and
the impact of the New Management Agreements on each Affected Fund's expense
ratio; (6) the performance of the Affected Funds; and (7) the increased cost and
complexity of providing portfolio management services.
The Trustees considered that the shareholders of the Affected Funds
would be subject under the New Management Agreements to an immediate increase in
the management fees. In considering the New Management Agreements, the Trustees
placed primary emphasis upon the nature and quality of the services being
provided on behalf of the Affected Funds by MassMutual, taking into account the
relative complexity of managing the Affected Funds. The
13
<PAGE>
Trustees believe that the New Management Agreements will, over the long term,
enable MassMutual to continue to provide high-quality investment advisory
services to the Affected Funds at reasonable fee rates and the investment
management fee increase will allow MassMutual to provide portfolio management
and non-advisory services to the Affected Funds at levels consistent with the
increased demands of today's investment advisory marketplace.
The Trustees considered the payments made or to be made to MassMutual
for services other than investment advisory services. The Trustees also took
into account the profits of MassMutual in providing services to the Funds and
pro forma projections with respect to the total expenses (as a percentage of net
assets) expected to be borne by each Fund if the relevant New Management
Agreement were adopted by it.
In considering the proposed fee increase, the Trustees determined that
the compensation to be paid to MassMutual under the New Management Agreements is
fair and reasonable, and that the New Management Agreements will enable
MassMutual to receive fees for its services that are competitive with fees paid
by other mutual funds to other investment managers.
PROPOSAL (2)
AMENDMENT TO ADMINISTRATIVE AND SHAREHOLDER
SERVICES AGREEMENTS
MassMutual, in addition to being the investment manager of the Funds,
also provides administrative and shareholder services to the Trust pursuant to
the terms of Administrative and Shareholder Services Agreements with the Trust,
on behalf of each of the Funds. For its services under the Administrative and
Shareholder Services Agreements, MassMutual earned the following fees from the
Funds (other than the Indexed Equity Fund) during the fiscal year ended December
31, 1998 and for the Indexed Equity Fund for the fiscal year ended February 28,
1999 (estimated as of the date hereof):
Class A Class Y Class S
------- ------- -------
Prime Fund $ 563 $1,123 $ 196,947
Short-Term Bond Fund $ 601 $ 693 $ 200,568
Core Bond Fund $ 658 $ 806 $ 417,358
Balanced Fund $ 804 $1,093 $ 549,081
Core Equity Fund $1,018 $1,228 $2,621,067
Small Cap Value Fund $ 887 $1,134 $ 532,878
International Equity Fund $ 655 $ 817 $ 484,690
Indexed Equity Fund $ 819 $1,140 $ 882,486
Among other things, the Administrative and Shareholder Services
Agreements for the Prime Fund, Short-Term Bond Fund, Core Bond Fund, Balanced
Fund, Core Equity Fund, Small
14
<PAGE>
Cap Value Fund and International Equity Fund currently require that shareholders
of the relevant Fund approve any amendments thereto. In addition, the
Administrative and Shareholder Services Agreements for all of the Funds
currently (i) require that Trustees of the relevant Fund approve any amendments
thereto and (ii) provide that the Agreements terminate automatically upon their
"assignment" as defined in the 1940 Act. The proposed amendment to each of the
Administrative and Shareholder Services Agreements would (i) delete the Trustee
approval requirement and (ii) delete the provision terminating the Agreement
upon its assignment, and the proposed amendment to the Administrative and
Shareholder Services Agreements for each Fund, other than the Indexed Equity
Fund, also deletes the shareholder approval requirement. The Administrative and
Shareholder Services Agreement for the Indexed Equity Fund does not contain a
shareholder approval requirement.
The Trustees of the Trust reviewed and approved the proposed amendment
to each of the Administrative and Shareholder Services Agreements in person at a
meeting on February 1, 1999, and have directed that they be submitted to the
shareholders of all of the Funds for their approval. In making this
recommendation, the Trustees considered that the 1940 Act does not require that
shareholders approve amendments to such types of agreements, or that such
agreements terminate automatically upon their assignment. The Trustees also
considered the potential costs that a Fund might incur if it were required to
obtain shareholder approval to amend the Agreement in the future or if it had to
procure a new Agreement in the event that an assignment did occur. The Majority
Shareholder has approved this action by written consent.
In addition to the changes listed above, the Trustees have approved a
change in the fees payable to MassMutual under the Administrative and
Shareholder Services Agreements effective May 3, 1999*. Shareholder approval of
these fee changes is not required. The following table sets forth the existing
fee rate under each such agreement, as well as the new fee rate approved by the
Trustees, effective May 3, 1999*.
<TABLE>
<CAPTION>
Existing Fee New Fee Effective May 3, 1999
(% of average net assets) (% of average net assets)
------------------------- -------------------------
Class A Class Y Class S Class A Class Y Class S
<S> <C> <C> <C> <C> <C> <C>
Prime Fund .4823% .0823% .0777% .3323% .1823% .0823%
Short-Term Bond Fund .4767% .1767% .0777% .3167% .1667% .1167%
Core Bond Fund .4832% .1832% .0777% .2932% .1432% .0932%
Balanced Fund .4852% .2852% .0777% .3952% .2452% .0852%
Core Equity Fund .4875% .2875% .0777% .3175% .1675% .0675%
Small Cap Value Fund .4845% .2845% .0777% .3345% .1845% .0845%
Indexed Equity Fund .7688% .3888% .3588% .5345% .3845% .3545%
International Equity
Fund .4752% .1752% .0774% .2952% .1452% .1152%
</TABLE>
15
* The change in the fees payable to MassMutual under the Administrative and
Shareholder Services Agreement for the Indexed Equity Fund will become effective
April 6, 1999.
<PAGE>
RELATED INFORMATION
Underwriter
- -----------
Effective May 3, 1999, the Trust's principal underwriter will be MML
Distributors, LLC, ("MML Distributors"), whose address is 1414 Main Street,
Springfield, MA 01144. MML Distributors will provide distribution services to
the Trust pursuant to a General Distributor's Agreement effective May 3, 1999.
MML Distributors is an indirect, majority owned subsidiary of MassMutual. The
Trust's principal underwriter is currently OppenheimerFunds Distributor, Inc.,
an indirect, wholly-owned subsidiary of MassMutual. The Trust did not make any
payments to OppenheimerFunds Distributor, Inc. for the fiscal year ended
December 31, 1998.
Affiliated Broker Transactions
- ------------------------------
The brokerage commissions paid by the Funds for the fiscal year ended
December 31, 1998 were as follows: Balanced Fund $212,554.36; Core Equity Fund
$1,030,560.95; Small Cap Value Fund $638,429.88; and International Equity Fund
$2,377,044.12. Approximately $8,193, or .19%, of the brokerage commissions paid
by the Funds for the fiscal year ended December 31, 1998 were paid to Jefferies
& Co., Inc. ("Jefferies") and Advest, Inc. ("Advest"). Jefferies and Advest are
wholly-owned subsidiaries of a company for which one Trustee serves as a
director.
Security Ownership of Certain Beneficial Owners
- -----------------------------------------------
As of the record date, MassMutual, a mutual life insurance company
organized in 1851 under the laws of the Commonwealth of Massachusetts whose
principal executive offices are located at 1295 State Street, Springfield,
Massachusetts 01111, owned, through certain of its separate investment accounts
and/or its provision of seed money and other capital contributions for the
Trust, 100% of the Class A and Class S shares of each Fund. The table on page 2
sets forth information relating to those persons known to the Trust who
beneficially own more than 5% of the shares of each of the Funds.
MassMutual
- ----------
Listed below are the names and principal occupations of the Directors
of MassMutual and of MassMutual's principal executive officer, all of whose
addresses are the same as that of MassMutual.
Name Position with MassMutual and Principal Occupation
Roger G. Ackerman Director of MassMutual; Chairman and Chief Executive
Officer, Corning Incorporated (manufacturer of
specialty materials, communication equipment, and
consumer products)
James R. Birle Director of MassMutual; Founding Chairman of
Resolute Partners, Inc.
Gene Chao Director of MassMutual; President and Chief
Executive Officer, Computer Projections, Inc.
16
<PAGE>
Name Position with MassMutual and Principal Occupation
Patricia D. Dennis Director of MassMutual; Senior Vice President and
Assistant General Counsel, SBC Communications, Inc.
(telecommunications)
Anthony Downs Director of MassMutual; Senior Fellow, Brookings
Institution (non-profit policy research center)
James L. Dunlap Director of MassMutual; Retired (since 1998); Former
President and Chief Operating Officer, Ocean Energy,
Inc. (oil exploration)
William B. Ellis Director of MassMutual; Senior Fellow at Yale
University
Robert M. Furek Director of MassMutual; Partner (since 1997),
Resolute Partners, LLC (private merchant bank)
Charles K. Gifford Director of MassMutual; Chairman and Chief Executive
Officer of Bank of Boston Corporation; Chief
Executive Officer of The First National Bank of
Boston
William N. Griggs Director of MassMutual; Managing Director, Griggs &
Santow, Inc. (business consultants)
George B. Harvey Director of MassMutual; Retired (since 1996); Former
Chairman, President and Chief Executive Officer,
Pitney Bowes, Inc. (office machines manufacturer)
Barbara Barnes Hauptfuhrer Director of MassMutual; Director, The Great Atlantic
and Pacific Tea Company, Inc. (operator of retail
food stores), Knight-Ridder, Inc. (publisher of
daily newspapers and operator of cable television
and business information systems), Raytheon Company
(manufacturer of electronic equipment), Alco
Standard Corp. (diversified manufacturer and
distributor)
Sheldon B. Lubar Director of MassMutual; Chairman, Lubar & Co.,
Incorporated (investment management and advisory
company)
William B. Marx, Jr. Director of MassMutual; Retired (since 1996); Former
Senior Executive Vice President, Lucent
Technologies, Inc. (public telecommunications
systems and software)
John F. Maypole Director of MassMutual; Managing Partner of Peach
State Real Estate Holding Company (real estate
investment company)
Robert J. O'Connell Director and Chief Executive Officer of MassMutual
Thomas B. Wheeler Chairman and Director of MassMutual
Alfred M. Zeien Director of MassMutual; Chairman and Chief Executive
Officer, The Gillette Company (manufacturer of
personal care products)
The following officers and/or Trustees of the Trust are also officers,
employees or directors of MassMutual: Stuart H. Reese (President of the Trust,
Chief Executive Director of MassMutual); Mary Wilson Kibbe (Senior Vice
President of the Trust, Executive Director of MassMutual); Stephen L. Kuhn (Vice
President and Secretary of the Trust, Vice President and Deputy General Counsel
of MassMutual); Charles C. McCobb, Jr. (Vice President of the Trust, Managing
Director of MassMutual; Edmond F. Ryan (Vice President of the Trust, Senior Vice
17
<PAGE>
President of MassMutual); Vernon J. Meyer (Vice President of the Trust, Vice
President of MassMutual); Mark B. Ackerman (Treasurer of the Trust, Investment
Director of MassMutual); Michael D. Hays (Chief Financial Officer of the Trust,
Senior Vice President of MassMutual).
SHAREHOLDER PROPOSALS
The Trust is not required, and does not intend, to hold annual meetings
of shareholders. Shareholders wishing to submit a proposal to be considered for
presentation at the next meeting of shareholders should send their written
proposals to MassMutual Institutional Funds, 1295 State Street, Springfield,
Massachusetts 01111, Attention: Corporate Secretary, so that they are received
within a reasonable time before any such meeting.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
By Order of the
Board of Directors
Stephen L. Kuhn
Vice President and Secretary
Springfield, Massachusetts
April 2, 1999
18
<PAGE>
EXHIBIT A
FORM OF
INVESTMENT MANAGEMENT AGREEMENT
This INVESTMENT MANAGEMENT AGREEMENT (the "Management Agreement"), is
between Massachusetts Mutual Life Insurance Company, a Massachusetts corporation
(the "Manager"), and MassMutual Institutional Funds, a Massachusetts business
trust (the "Trust"), effective this ______ day of ________ , 1999.
WHEREAS, the Trust is an open-end diversified management investment company
registered as such with the Securities and Exchange Commission (the
"Commission") pursuant to the Investment Company Act of 1940, as amended (the
"Act");
WHEREAS, MassMutual ____________ Fund (the "Fund") is a series of the
Trust;
WHEREAS, the Manager is an investment adviser registered with the
Commission as such under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"); and
WHEREAS, the Trust desires to appoint the Manager as its investment manager
for the Fund and the Manager is willing to act in such capacity upon the terms
herein set forth;
NOW THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the Trust and the Manager hereby agree as follows:
1. General Provision.
The Trust hereby employs the Manager and the Manager hereby undertakes to act as
the investment manager of the Fund, to provide investment advice and to perform
for the Fund such other duties and functions as are hereinafter set forth. The
Manager shall, in all matters, give to the Fund and the Trust's Board of
Trustees the benefit of the Manager's best judgment, effort, advice and
recommendations and shall, at all times conform to, and use its best efforts to
enable the Fund to conform to:
(a) the provisions of the Act, the Advisers Act and any rules or
regulations thereunder;
(b) any other applicable provisions of state or federal law;
(c) the provisions of the Agreement and Declaration of Trust and By-Laws of
the Trust as amended from time to time (collectively referred to as the "Trust
Documents");
(d) policies and determinations of the Board of Trustees of the Trust;
(e) the fundamental and non-fundamental policies and investment
restrictions of the Fund as reflected in the Trust's registration statement or
as such policies may, from time to time, be amended by the Board of Trustees, or
where necessary, by the Fund's shareholders; and/or
(f) the Prospectus and Statement of Additional Information of the Fund in
effect from time to time.
A-1
<PAGE>
The appropriate officers and employees of the Manager shall be available
upon reasonable notice for consultation with any of the Trustees and officers of
the Trust and the Trust with respect to any matter dealing with the business and
affairs of the Fund, such as the valuation of portfolio securities of the Fund,
including but not limited to securities that are either not registered for
public sale or securities not traded on any securities market.
2. Duties of the Manager.
(a) The Manager shall, subject to the direction and control by the Trust's
Board of Trustees (i) regularly provide investment advice and recommendations to
the Fund, with respect to the Fund's investments, investment policies and the
purchase and sale of securities; (ii) supervise and monitor continuously the
investment program of the Fund and the composition of its portfolio and
determine what securities shall be purchased or sold by the Fund; (iii) arrange,
subject to the provisions of Section 5 hereof, for the purchase of securities
and other investments for the Fund and the sale of securities and other
investments held in the portfolio of the Fund; and (iv) provide reports on the
foregoing to the Board of Trustees at each Board meeting.
(b) Provided that neither the Trust nor the Fund shall be required to pay
any compensation other than as provided by the terms of this Management
Agreement and subject to the provisions of Section 5 hereof, the Manager may
obtain investment information, research or assistance from any other person,
firm or corporation to supplement, update or otherwise improve its investment
management services.
(c) Provided that nothing herein shall be deemed to protect the Manager
from willful misfeasance, bad faith or gross negligence in the performance of
its duties, or reckless disregard to its obligations and duties under this
Management Agreement, the Manager shall not be liable for any loss sustained by
reason of good faith errors or omissions in connection with any matters to which
this Management Agreement relates.
(d) Nothing in this Management Agreement shall prevent the Manager or any
officer thereof from acting as investment adviser or sub-adviser for any other
person, firm or corporation and shall not in any way limit or restrict the
Manager or any of their respective directors, officers, members, stockholders or
employees from buying, selling, or trading any securities for its own account or
for the account of others for whom it or they may be acting, provided that such
activities will not adversely affect or otherwise impair the performance by any
party of its duties and obligations under this Management Agreement.
(e) The Manager shall cooperate with the Trust by providing the Trust with
any information in the Manager's possession necessary for supervising the
activities of all administrative and clerical personnel as shall be required to
provide corporate administration for the Fund, including the compilation and
maintenance of such records with respect to its operations as may reasonably be
required. The Manager shall, at its own expense, provide such officers for the
Trust as its Board may request.
3. Duties of the Trust.
The Trust shall provide the Manager with the following information about the
Fund:
(a) cash flow estimates on request;
(b) notice of the Fund's "investable funds" by 9:00 a.m. each business
day;
(c) as they are modified, from time to time, current versions of the
documents and policies
A-2
<PAGE>
referred to in Subsections (c), (d), (e) and (f) of Section 1 hereof,
above.
4. Compensation of the Manager.
The Trust agrees to pay the Manager and the Manager agrees to accept as full
compensation for the performance of all functions and duties on its part to be
performed pursuant to the provisions hereof, a fee at the annual rate [varies by
Fund] of the average daily net asset value of the Fund, determined at the close
of the New York Stock Exchange on each day that the Exchange is open for trading
and paid on the last day of each month.
5. Portfolio Transactions and Brokerage.
(a) The Manager is authorized, in arranging the purchase and sale of the
Fund's publicly-traded portfolio securities, to employ or deal with such members
of securities exchanges, brokers or dealers (hereinafter "broker- dealers"),
including "affiliated" broker-dealers, as that term is defined in the Act, as
may, in its best judgment, implement the policy of the Fund to obtain, at
reasonable expense, the best execution (prompt and reliable execution at the
most favorable security price obtainable) of the Fund's portfolio transactions.
(b) The Manager may effect the purchase and sale of securities (which are
otherwise publicly traded) in private transactions on such terms and conditions
as are customary in such transactions, may use a broker in such to effect said
transactions, and may enter into a contract in which the broker acts either as
principal or as agent.
(c) The Manager shall select broker-dealers to effect the Fund's portfolio
transactions on the basis of its estimate of their ability to obtain best
execution of particular and related portfolio transactions. The abilities of a
broker-dealer to obtain best execution of particular portfolio transaction(s)
will be judged by the Manager on the basis of all relevant factors and
considerations including, insofar as feasible, the execution capabilities
required by the transaction or transactions; the ability and willingness of the
broker-dealer to facilitate the Fund's portfolio transactions by participating
therein for its own account; the importance to the Fund of speed, efficiency or
confidentiality; the broker-dealer's apparent familiarity with sources from or
to whom particular securities might be purchased or sold; as well as any other
matters relevant to the selection of a broker-dealer for particular and related
transactions of the Fund.
6. Duration.
Unless terminated earlier pursuant to Section 7 hereof, this Management
Agreement shall remain in effect until two years from the date first above
written. Thereafter it shall continue in effect from year to year, so long as
such continuance shall be approved at least annually by the Trust's Board of
Trustees, including the vote of the majority of the Trustees of the Trust who
are not parties to this Management Agreement or "interested persons" (as defined
in the Act) of any such party cast in person at a meeting called for the purpose
of voting on such approval, or by the holders of a "majority" (as defined in the
Act) of the outstanding voting securities of the Fund.
7. Termination.
This Management Agreement shall terminate automatically upon its assignment or
in the event upon the termination of the Advisory Management Agreement; it may
also be terminated: (i) for cause by the Trust or MassMutual, or with the
consent of the parties and the Trust by the Trust or the Manager at any time
without penalty, upon sixty days' written notice to the other party and the
Trust; or (ii) by the Trust at any
A-3
<PAGE>
time without penalty upon sixty days' written notice to the Trust and the
Manager provided that such termination by the Trust shall be directed or
approved by a vote of a majority of all of the Trustees of the Trust then in
office or by the vote of the holders of a "majority" of the outstanding voting
securities of the Fund (as defined in the Act).
8. Investment Sub-Advisory Contracts.
(a) Subject to the provisions of the Agreement and Declaration of Trust and
the 1940 Act, the Manager, at its expense, may, in its discretion (subject only
to approval by the Trust's Board of Trustees and, if necessary, the Trust's
shareholders) select and contract with an investment sub-adviser (the
"Sub-Adviser") for the Fund. So long as any Sub-Adviser serves as Sub-Adviser to
the Fund, it must be a party to a Sub-Investment Advisory Agreement in
substantially the form attached hereto as Schedule A (the "Sub-Adviser
Agreement") and will be obligated to:
(1) Furnish continuously an investment program as to those assets of
the Trust and the Fund as allocated by the Manager;
(2) In connection therewith, adhere to such guidelines as may be
established by the Manager from time to time to insure compliance with
applicable investment objectives, policies and restrictions of the Trust
and the Fund; and
(3) Place all orders for the purchase and sale of investments of the
Fund.
(b) The Manager will be responsible for payment of all compensation to any
Sub-Adviser and other persons and entities to which Manager delegates any duties
hereunder.
9. Disclaimer of Shareholder Liability.
The Trust and the Manager understand that the obligations of the Trust under
this Management Agreement are not binding upon any Trustee or shareholder of the
Trust personally, but bind only the Trust and the Trust's property. The Manager
represents that it has notice of the provisions of the Trust Documents
disclaiming shareholder and Trustee liability for acts or obligations of the
Trust.
10. Notice.
Any notice under this Management Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party, with a copy to the
Trust, at the addresses below or such other address as such other party may
designate for the receipt of such notice.
If to the Manager: Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
If to the Trust: MassMutual Institutional Funds
1295 State Street
Springfield, MA 01111
Attention: Stephen L. Kuhn,
Vice President and Secretary
A-4
<PAGE>
IN WITNESS WHEREOF, the Trust and the Manager have caused this Management
Agreement to be executed on the day and year first above written.
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: ___________________________________
MASSMUTUAL INSTITUTIONAL FUNDS
on behalf of MASSMUTUAL __________ FUND
By: _____________________________________
A-5
