<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.___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] 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
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
<PAGE>
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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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 Diversified Bond Fund
MassMutual Balanced Fund
MassMutual Core Equity Fund
MassMutual Indexed Equity Fund
MassMutual Growth Equity Fund
MassMutual Small Cap Value Equity Fund
MassMutual Mid Cap Growth Equity Fund
MassMutual Small Cap Growth Equity Fund
MassMutual International Equity Fund
INFORMATION STATEMENT
General Information
This Information Statement, which is first being mailed to shareholders
on or about April 14, 2000, is distributed in connection with certain actions to
be 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 Diversified Bond Fund (the "Diversified Bond Fund"), MassMutual
Balanced Fund (the "Balanced Fund"), MassMutual Core Equity Fund (the "Core
Equity Fund"), MassMutual Indexed Equity Fund (the "Indexed Equity Fund"),
MassMutual Growth Equity Fund (the "Growth Equity Fund"), MassMutual Small Cap
Value Equity Fund (the "Small Cap Value Equity Fund"), MassMutual Mid Cap Growth
Equity Fund (the "Mid Cap Growth Equity Fund"), MassMutual Small Cap Growth
Equity Fund (the "Small Cap Growth Equity Fund") and MassMutual International
Equity Fund (the "International Equity Fund"), each a series (and also referred
to herein as a "Fund" and collectively, the "Funds") of the MassMutual
Institutional Funds (the "Trust"), which will be effective on or about May 1,
2000 (the "Effective Date"), 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.
<PAGE>
The Trustees have set February 14, 2000 as the record date (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 with respect
to each of the matters. On the Record Date the number of outstanding shares of
each Fund was as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Prime Fund 2,628,847 Indexed Equity Fund 65,929,270
Short-Term Bond Fund 21,670,708 Growth Equity Fund 10,210,512
Core Bond Fund 58,437,503 Small Cap Value Equity Fund 45,270,445
Diversified Bond Fund 2,651,739 Mid Cap Growth Equity Fund 9,042,817
Balanced Fund 49,427,456 Small Cap Growth Equity Fund 11,482,830
Core Equity Fund 61,563,559 International Equity Fund 72,339,679
</TABLE>
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 all classes of a Fund's shares as of the Record Date, is set forth
below.
<TABLE>
<CAPTION>
Number of Shares of Percent of All
Name and Address of All Classes Classes
Beneficial Owner Name of Fund Beneficially Owned Beneficially Owned
----------------- ------------ ------------------ ------------------
<S> <C> <C>
Massachusetts Mutual Life Prime Fund 2,052,813 78.09%
Insurance Company Short-Term Bond Fund 21,648,179 99.90%
1295 State Street Core Bond Fund 57,547,694 98.48%
Springfield, MA 01111-0001 Diversified Bond Fund 2,651,739 100%
("MassMutual" or the "Majority Balanced Fund 49,406,316 99.96%
Shareholder") Core Equity Fund 160,961,051 99.63%
Indexed Equity Fund 64,070,034 97.18%
Growth Equity Fund 8,348,708 81.77%
Small Cap Value Equity Fund 44,420,160 98.12%
Mid Cap Growth Equity Fund 6,246,961 69.08%
Small Cap Growth Equity Fund 10,747,671 93.60%
International Equity Fund 71,216,020 98.45%
Investors Bank & Trust Company, as Prime Fund 133,553 5.08%*
Trustee on behalf of Kaiser Growth Equity Fund 1,861,803 18.23%
Aerospace Electronics Savings and Mid Cap Growth Equity Fund 2,777,418 30.71%
Profit Sharing Plan Small Cap Growth Equity Fund 733,529 6.39%
200 Clarendon Street
Boston, MA 02116
Wendel & Co., as Trustee for the Prime Fund 433,596 16.49%*
Investment Committee of the Kaiser
Aerospace Plan
c/o Bank of New York
P.O. Box 1066 Wall Street Sta.
New York, NY 10286
</TABLE>
* These related Plans hold an aggregate of 567,149 shares of the Prime Fund,
representing 21.57% of the Fund's total outstanding shares.
<PAGE>
As described more fully below, the Trustees, at a meeting of the
Trustees called for the purpose, and the Majority Shareholder, acting by written
consent, have approved taking the following actions:
<TABLE>
<CAPTION>
Proposal Affected Funds
-------- --------------
<C> <S>
(1) Approval of new Investment Management Agreement Indexed Equity Fund
with MassMutual and Investment Sub-Advisory
Agreement between MassMutual and Bankers Trust
Company
(2) Approval of Investment Sub-Advisory Agreement Indexed Equity Fund
between MassMutual and Bankers Trust Company
(3) Approval to permit MassMutual to enter into new All Funds
or amended investment sub-advisory agreements in
the future on behalf of a Fund without
shareholder approval
(4) Ratification of Deloitte & Touche, LLP as auditor All Funds
</TABLE>
Proposal (1)
Under the Investment Company Act of 1940, as amended (the "1940 Act"), the
approval of a new Investment Management Agreement between MassMutual, as
investment adviser, and the Trust on behalf of the Indexed Equity Fund (the "New
Investment Management Agreement") requires (i) the approval of the Trust's Board
of Trustees, including a majority of the Trustees who are not "interested
persons" (as that term is defined in the 1940 Act) of the Trust or of MassMutual
or of any party to the transactions to be voted on (the "Independent Trustees"),
and (ii) approval by vote of a majority of the outstanding shares of the Indexed
Equity Fund.
Proposal (1) was approved by the Trustees, including a majority of the
Independent Trustees, at a meeting of Trustees held on February 14, 2000. The
Majority Shareholder of the Indexed Equity Fund has approved Proposal (1) by
written consent, which will be effective on the Effective Date.
Proposal (2)
Under the 1940 Act, the approval of a new Investment Sub-Advisory Agreement
between MassMutual and Bankers Trust Company with respect to the Indexed Equity
Fund (the "Investment Sub-Advisory Agreement"), requires (i) the approval of the
Trust's Board of Trustees, including the Independent Trustees", and (ii)
approval by vote of a majority of the outstanding shares of the Indexed Equity
Fund.
<PAGE>
Proposal (2) was approved by the Trustees, including a majority of the
Independent Trustees, at a meeting of Trustees held on February 14, 2000. The
Majority Shareholder of the Indexed Equity Fund has approved Proposal (2) by
written consent, which will be effective on the Effective Date.
Proposal (3)
At a meeting held on February 14, 2000, the Trustees, including a majority of
the Independent Trustees, authorized MassMutual, subject to the receipt of an
exemptive order or other exemptive relief (the "Order") from the Securities and
Exchange Commission (the "Commission"), to enter into new or amended investment
sub-advisory agreements with a sub-adviser with respect to any Fund, and to
permit such sub-adviser to manage the assets of the Fund in accordance with such
agreements, without obtaining shareholder approval of such agreements. The Trust
expects that approval of Proposal (3) by a majority of each affected Fund's
outstanding voting securities will be a condition to receipt of the Order. The
Majority Shareholder has approved Proposal (3) with respect to each Fund by its
written consent, which will be effective upon the Effective Date. The ability of
MassMutual to engage in transactions described in Proposal (3) is subject to the
receipt of an Order and satisfaction of such other conditions as may be
contained in such Order.
Proposal (4)
The approval of the Trust's auditors requires approval by the Trustees,
including a majority of the Independent Trustees, and ratification of the
Trust's auditors requires approval by vote of a majority of the outstanding
shares of the Funds. Proposal (4) was approved by the Trustees of the Trust,
including a majority of the Independent Trustees, after recommendation by the
Trust's Audit Committee, at a special meeting of the Trustees held on March 26,
1999. The Trust's auditors were reconfirmed for the fiscal year ending December
31, 2000 at a meeting of the Trustees on February 14, 2000. The Majority
Shareholder has approved Proposal (4) by written consent, which will be
effective as of the Effective Date.
A copy of the Trust's Annual Report for the fiscal year ended December
31, 1999 is available without charge upon request and may be obtained by calling
1-888-309-3539 or by writing the Trust at the address above.
<PAGE>
PROPOSAL (1)
APPROVAL OF NEW INVESTMENT MANAGEMENT AGREEMENT
BETWEEN THE TRUST AND MASSMUTUAL
Description of Existing Master-Feeder Arrangement
The Indexed Equity Fund is currently in a "master-feeder" structure.
The Fund invests all of its assets in the S&P 500 Index(R) Master Portfolio (the
"Master Portfolio"). The Master Portfolio is a portfolio of Master Investment
Portfolio, an open-end management investment company. Barclays Global Fund
Advisors ("BGFA") currently provides investment management services to the
Master Portfolio. Consequently, the Indexed Equity Fund does not have its own
investment adviser.
MassMutual, however, is currently responsible for providing
administrative and shareholder services for the Indexed Equity Fund. For its
services under its Administrative and Shareholder Services Agreement with the
Fund, MassMutual earned the following fees from the Fund during the fiscal year
ended December 31, 1999: .3545% of the average daily net asset assets for Class
S shares; .3845% of the average daily net assets for Class Y shares; and .5345%
of the average daily net assets for Class L shares and Class A shares. The
existing Administrative and Shareholder Services Agreement for the Fund was last
approved by the Trustees of the Trust, including a majority of the Independent
Trustees, at a meeting of the Trustees called for the purpose on February 14,
2000.
Description of Proposed New Investment Management Agreement
The Trustees of the Trust, including a majority of the Independent
Trustees, have approved a number of changes to the Indexed Equity Fund. First,
the Trustees have determined that it would be in the best interests of
shareholders of the Fund to convert the Fund from a master-feeder fund to one
that purchases portfolio securities directly. As a result, the Trustees,
including a majority of the Independent Trustees, have determined that it is in
the best interests of Fund shareholders to appoint MassMutual as investment
adviser to the Fund, and have approved the New Investment Management Agreement
with MassMutual. A form of the New Investment Management Agreement is attached
to this Information Statement as Exhibit A. The New Investment Management
Agreement is substantially similar to the investment management agreements
between MassMutual and the Trust on behalf of the other Funds.
The Majority Shareholder, by its written consent, has approved the
terms of the New Investment Management Agreement and the Investment Sub-Advisory
Agreement.
The New Investment Management Agreement authorizes MassMutual to
appoint investment sub-advisers with the approval of the Fund's shareholders,
when required under the 1940 Act, and with the approval of the Fund's Trustees,
including a majority of the Independent Trustees. As discussed under Proposal
(2), MassMutual has appointed Bankers Trust Company (the "Sub-Adviser") as
investment sub-adviser with respect to the Indexed Equity Fund. The Trustees,
including a majority of the Independent
<PAGE>
Trustees, have approved the appointment of Bankers Trust Company as investment
sub-adviser to the Fund and have approved the terms of the Investment
Sub-Advisory Agreement.
The Majority Shareholder, by its written consent, has approved the
terms of the New Investment Management Agreement and the Investment Sub-Advisory
Agreement.
Investment Objective of the Indexed Equity Fund
As investment adviser, MassMutual, is generally responsible for
providing a continuous investment program for the Fund in accordance with the
Fund's investment objective. MassMutual is permitted under the New Investment
Management Agreement, and has proposed, to delegate that responsibility. As the
Fund's appointed sub-adviser, Bankers Trust Company will also be responsible for
providing a continuous investment program for the Fund in accordance with its
investment objective, which is to seek to match, as closely as possible (before
the deduction of expenses), the performance of the S&P 500 Index(R), which
emphasizes stocks of large U.S. companies.
Unlike a fund which is "actively managed", which involves the
investment adviser buying and selling securities based on research and analysis,
an index fund, such as the Fund, tries to match, as closely as possible, the
performance of a target index by generally holding all the securities in the
index. Indexing is appealing for the following reasons: indexing provides
simplicity because it is a straightforward market-matching strategy; index funds
generally provide diversification by investing in a wide variety of companies
and industries; an index fund's performance is predictable in that the fund's
value is expected to move in the same direction, up or down, as the target
index; index funds try to minimize their trading costs, including brokerage
commissions, and other expenses which would keep them from matching the
performance of the target index; and index funds generally realize low capital
gains.
To attempt to match the risk and return characteristics of the S&P 500
Index(R) as closely as possible, the Fund invests in securities of the companies
in the S&P 500 Index(R) generally in proportion to their index weightings.
MassMutual seeks a correlation between the performance of the Fund, before
expenses, and the Index of 98% or better. A figure of 100% would indicate
perfect correlation. However, the Fund may not hold every one of the stocks in
the S&P 500 Index(R). In an effort to run an efficient and effective strategy,
the Fund may use the process of "optimization", a statistical sampling
technique. Optimization entails that the Fund first buys the stocks that make up
the larger portions of the relevant Index's value in roughly the same proportion
as the Index. Second, smaller stocks are analyzed and selected. In selecting
smaller stocks, Bankers Trust Company tries to match the industry and risk
characteristics of all of the smaller companies in the Index without buying all
of those stocks. This approach attempts to maximize the Fund's liquidity and
returns while minimizing its costs.
Please note that the Fund is not sponsored, endorsed, sold or promoted
by Standard & Poor's Corporation ("S&P"). S&P makes no representation or
warranty, express or implied, to shareholders of the Fund regarding the
advisability of investing in securities generally or in the Fund particularly or
the ability of the S&P 500 Index(R) to track general stock market performance.
S&P's only relationship to the Fund is the licensing of certain trademarks and
trade names of S&P and of the S&P 500 Index(R), which is determined, composed
and calculated without regard to the Fund. S&P does not guarantee the accuracy
and/or completeness of the S&P 500 Index(R) or any data included therein.
<PAGE>
General Information Concerning the New Investment Management Agreement
Under the terms of the New Investment Management Agreement, MassMutual
will act as investment adviser and manager to the Indexed Equity Fund subject to
such general or specific instructions as may be given by the Board of Trustees.
Under the Investment Management Agreement, 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. The New Investment Management Agreement also
permits MassMutual to terminate an investment sub-adviser and/or retain new or
additional investment sub-advisers without shareholder approval when it is not
required under the 1940 Act. See Proposal (3) for further discussion of this
matter.
The New Investment 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 Indexed
Equity Fund; or (2) for cause or with the consent of the parties and the Trust
by the Trust or MassMutual at any time without penalty upon 60 days' written
notice to the other party and the Trust. In addition, the New Investment
Management Agreement will automatically terminate: (1) unless its 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 Independent
Trustees, or by the affirmative vote of a majority of the Fund's shares; or (2)
upon assignment thereof.
<PAGE>
For its services rendered under the New Investment Management
Agreement, MassMutual will be paid at an annual rate of .10% of the average
daily net assets of the Indexed Equity Fund.
<PAGE>
For the fiscal year ended December 31, 1999, the Fund paid
administrative fees to MassMutual pursuant to the Administrative and Shareholder
Servicing Agreement as follows:
Class S shares $ 1,851,125
Class Y shares $ 54,801
Class L shares $ 1,681
Class A shares $ 2,961
Upon the Effective Date of the New Investment Management Agreement and
the Investment Sub-Advisory Agreement discussed in Proposal (2), in addition to
MassMutual receiving an investment advisory fee from the Fund, the
administrative and shareholder servicing fee payable to MassMutual by each class
of shares of the Indexed Equity Fund will be reduced. The following table
compares the existing administrative and shareholder servicing fee payable to
MassMutual, and the new administrative and shareholder servicing fee:
<TABLE>
<CAPTION>
- -------------------- ---------------------- --------------------- ------------------- -------------------- -----------------------
Actual New
Administrative and Administrative and
Indexed Equity Fund Shareholder Shareholder Investment Total Fees payable Percentage Increase
Servicing Fee Paid Servicing Fee Management Fee to MassMutual in Fees paid to
for year ending payable to payable to under New MassMutual under
December 31, 1999 MassMutual MassMutual Arrangement New Arrangement
- -------------------- ---------------------- --------------------- ------------------- -------------------- -----------------------
<S> <C> <C> <C> <C> <C>
Class S .3545% .2997% .10% .3997% 12.75%
- -------------------- ---------------------- --------------------- ------------------- -------------------- -----------------------
Class Y .3845% .3297% .10% .4297% 11.76%
- -------------------- ---------------------- --------------------- ------------------- -------------------- -----------------------
Class L .5345% .4797% .10% .5797% 8.46%
- -------------------- ---------------------- --------------------- ------------------- -------------------- -----------------------
Class A .7845%* .4797%* .10% .8297%* 5.76%*
- -------------------- ---------------------- --------------------- ------------------- -------------------- -----------------------
</TABLE>
* includes Class A .25% Distribution and Service (Rule 12b-1) fees
<PAGE>
The Trust is required under applicable regulations of the Commission to
provide the management fee schedules of other mutual funds managed by MassMutual
that have investment objectives similar to those of the Fund. 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.
Net Assets as of
December 31, 1999 Investment Management Fee*
----------------- --------------------------
MML Equity Index Fund* $95,049,261 .10%
* Pro Forma to reflect decrease in investment management fee effective May 1,
2000.
The following table sets forth for comparison the aggregate investment
advisory, administrative and shareholder service fees, including fees pursuant
to applicable Rule 12b-1 Plans, paid to MassMutual by the Indexed Equity Fund
during the fiscal year ended December 31, 1999, and the fees that would have
been paid to MassMutual during such fiscal year had the New Investment
Management Agreement (and lower fees under the Administrative Shareholder
Servicing Agreement) been in effect:
<TABLE>
<CAPTION>
- -------------------------------- -------------------------- ------------------------- ---------------------------
Percentage Increase
Indexed Equity Fund Actual Fees Paid to Fees That Would in Fees paid to
MassMutual (in dollar Have Been Paid under MassMutual under
amounts) New Arrangement New Arrangement
- -------------------------------- -------------------------- ------------------------- ---------------------------
<S> <C> <C> <C>
Class S $1,851,125 $2,087,150 12.75%
- -------------------------------- -------------------------- ------------------------- ---------------------------
Class Y 54,801 61,243 11.76%
- -------------------------------- -------------------------- ------------------------- ---------------------------
Class L 1,681 1,823 8.46%
- -------------------------------- -------------------------- ------------------------- ---------------------------
Class A 4,333 4,583 5.77%
- -------------------------------- -------------------------- ------------------------- ---------------------------
</TABLE>
The following Tables compare the fees and expenses you may pay by investing in
the Indexed Equity Fund under the existing master-feeder arrangement as of
December 31, 1999, and the fees and expenses you may pay by investing in the
Indexed Equity Fund after the New Investment Management Agreement is effective
(these fees will also reflect reductions in the administrative and shareholder
servicing fee payable by each class of the Fund's shares).
<PAGE>
Existing Master-Feeder Arrangement
<TABLE>
<CAPTION>
Class S Class Y Class L Class A
------- ------- ------- -------
<S> <C> <C> <C> <C>
Shareholder Fees None None None None
Annual Fund Operating
Expenses (% of average net
assets)
Management Fees .05% .05% .05% .05%
Service (Rule 12b-1) Fees None None None .25%
Other Expenses (1) .37% .40% .55% .55%
Total Annual Fund
Operating Expenses .42% .45% .60% .85%
</TABLE>
(1) Other Expenses are based on the Fund's 1999 fiscal year.
EXAMPLES. These examples are intended to help you compare the cost of investing
in the Indexed Equity Fund with the cost of investing in other mutual funds. The
examples assume that you invest $10,000 in each class of shares of the Fund for
the time periods indicated, that your investment earns a 5% return each year and
that the Fund's operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
Class S Class Y Class L Class A
<S> <C> <C> <C> <C>
1 year $ 43 $ 46 $ 61 $ 87
3 years $ 135 $ 144 $ 192 $ 271
5 years $ 235 $ 252 $ 335 $ 471
10 years $ 530 $ 567 $ 750 $1,049
</TABLE>
Since the Fund does not impose any shareholder fees on any class of shares, the
figures shown would be the same whether you sold your shares at the end of a
period or kept them.
New Investment Management Arrangement
<TABLE>
<CAPTION>
Class S Class Y Class L Class A
------- ------- ------- -------
<S> <C> <C> <C> <C>
Shareholder Fees None None None None
Annual Fund Operating
Expenses (% of average net
assets)
Management Fees .10% .10% .10% .10%
Service (Rule 12b-1) Fees None None None .25%
Other Expenses (1) .31% .34% .49% .49%
Total Annual Fund
Operating Expenses .41% .44% .59% .84%
</TABLE>
(1) Other Expenses are based on the Fund's 1999 fiscal year, adjusted to
reflect the new administrative and shareholder servicing fees as of May 1,
2000.
<PAGE>
EXAMPLES. These examples are intended to help you compare the cost of investing
in the Indexed Equity Fund with the cost of investing in other mutual funds. The
examples assume that you invest $10,000 in each class of shares of the Fund for
the time periods indicated, that your investment earns a 5% return each year and
that the Fund's operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
Class S Class Y Class L Class A
<S> <C> <C> <C> <C>
1 year $ 42 $ 45 $ 60 $ 86
3 years $ 132 $ 141 $ 189 $ 268
5 years $ 230 $ 246 $ 329 $ 466
10 years $ 517 $ 554 $ 737 $ 1,036
</TABLE>
Since the Fund does not impose any shareholder fees on any class of shares, the
figures shown would be the same whether you sold your shares at the end of a
period or kept them.
<PAGE>
Trustee Review
In approving the New Investment Management Agreement for the Indexed
Equity Fund, the Trustees requested and evaluated information provided by
MassMutual which, in their opinion, constituted all the information reasonably
necessary for the Trustees to form a judgment as to whether the New Investment
Management Agreement would be in the best interests of the Fund and its
shareholders. In recommending that shareholders approve the New Investment
Management Agreement, the Trustees took into account all factors which they
deemed relevant, including (i) the advisory fees and other expenses that would
be paid by the Fund under the New Investment Management Agreement as compared to
those of similar funds managed by other investment advisers; (ii) the nature,
quality and extent of the advisory and non-advisory services furnished by
MassMutual; (iii) MassMutual's need to maintain and enhance its ability to
retain and attract capable personnel to serve the Fund; (iv) the nature of
MassMutual's research and analysis capabilities and the related benefits to the
Fund; (v) the fact that the New Investment Management Agreement would, except as
described herein, have terms and conditions substantially identical to those of
the other Funds of the Trust for which MassMutual serves as investment adviser;
(vi) the relationship of the proposed advisory and sub-advisory fee structure to
the fee structures of comparable mutual funds and the impact of the proposed
changes in advisory, sub-advisory and administrative fees on the Fund's expense
ratio; (vii) the performance of the Fund; and (viii) the cost and complexity of
providing investment management and portfolio management services to the Fund.
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 the Fund
if the New Investment Management Agreement were adopted by it. The Trustees also
took into account other benefits received from the Trust by MassMutual and its
affiliates.
In considering the proposed investment advisory fee to be borne
directly by the Fund, rather than indirectly by the Fund purchasing shares in
the Master Portfolio, the Trustees placed primary emphasis upon the nature and
quality of the services being provided on behalf of the Fund by MassMutual,
taking into account the relative complexity of managing the Fund versus serving
solely as the Fund's administrator. With respect to services to be provided on
behalf of the Fund, the Trustees determined that the compensation to be paid to
MassMutual under the New Investment Management Agreement is fair and reasonable,
and that the New Investment Management Agreement will enable MassMutual to
receive fees for its services that are competitive with fees paid by other
mutual funds to other investment managers.
A critical factor which the Trustees considered in approving the New
Investment Management Agreement was MassMutual's rationale for terminating the
"master-feeder" structure for the Fund. MassMutual highlighted the fact that the
Fund commenced operations in March 1998, and that, since the end of the Fund's
first fiscal year ending February 28, 1999, the Fund's assets had grown from
$427
<PAGE>
million to more than $860 million as of December 31, 1999. MassMutual explained
that MassMutual, and therefore the Fund, could command lower sub-advisory fees
by directly retaining an investment sub-adviser rather than by investing in a
master-feeder arrangement. For example, the Fund currently pays, indirectly,
advisory fees of .05%, but, as explained below, would pay .01% to Bankers Trust
Company as an investment sub-adviser. The Trustees also considered the fact that
MassMutual would likely select one investment sub-adviser to manage other funds
with investment objectives designed to replicate other broadly based indices in
addition to the S&P 500(R) Index. The Trustees recognized that the Fund and its
shareholders may ultimately receive better services and more favorable fees as
all MassMutual's index fund assets are consolidated with one indexing investment
sub-adviser.
PROPOSAL (2)
APPROVAL OF INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN
MASSMUTUAL AND BANKERS TRUST COMPANY WITH
RESPECT TO THE INDEXED EQUITY FUND
Description of Proposed New Investment Management
Agreement and
Investment Sub-Advisory Agreement
As discussed under Proposal (1), the New Investment Management
Agreement authorizes MassMutual to appoint investment sub-advisers with the
approval of the Fund's shareholders, when required under the 1940 Act, and with
the approval of the Fund's Trustees, including a majority of the Independent
Trustees. MassMutual has appointed Bankers Trust Company (the "Sub-Adviser") as
investment sub-adviser with respect to the Indexed Equity Fund. The Trustees,
including a majority of the Independent Trustees, have approved the appointment
of Bankers Trust Company as investment sub-adviser to the Fund and have approved
the terms of the Investment Sub-Advisory Agreement.
The Majority Shareholder, by its written consent, has approved the
terms of the New Investment Management Agreement and the Investment Sub-Advisory
Agreement.
General Information Concerning the Investment Sub-Advisory Agreement
--------------------------------------------------------------------
The Investment Sub-Advisory Agreement generally provides that, subject
to the direction and control by the Trustees and MassMutual, the Sub-Adviser
shall regularly provide investment advice and recommendations to the Fund with
respect to the Fund's investments, investment policies and the purchase, sale or
other disposition of other investments, supervise and monitor continuously the
investment program of the Fund and the composition of its portfolio and arrange
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. The
Sub-Adviser provides such services in accordance with the Fund's investment
objective, investment policies and investment restrictions as stated in the
Trust's registration statement filed with the Commission, as supplemented and
amended from time to time.
The Investment Sub-Advisory Agreement provides that it will continue in
effect for a period of two years from its effective date and thereafter on an
annual basis, provided such continuance is approved at least annually (a) by the
vote of a majority of
<PAGE>
the Board of Trustees, including the vote of a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on such
approval, or (b) by the vote of a "majority" of the outstanding voting
securities of the Fund, within the meaning of the 1940 Act. The Investment
Sub-Advisory Agreement provides that it may not be materially amended without a
majority vote of the outstanding voting securities of the Fund, except to the
extent permitted by the terms of any exemptive relief that may be granted by the
Commission, and also provides that it terminates automatically in the event of
its assignment (as defined by the 1940 Act).
The Investment Sub-Advisory Agreement may be terminated by MassMutual
or the Trustees (i) immediately upon notice if the Sub-Adviser's registration
under the New Investment Adviser's Act of 1940 is suspended, terminated, lapsed
or not renewed, (ii) immediately upon notice if the Sub-Adviser is bankrupt or
insolvent, seeks an arrangement with creditors, is dissolved or terminated or
ceases to exist, (iii) immediately upon notice if MassMutual determines in good
faith, for any reason, that such termination is appropriate for the protection
of the Fund, including without limitation a good faith determination by
MassMutual or the Trustees that the Sub-Adviser has breached an obligation or
duty under the Investment Sub-Advisory Agreement, or (iv) in their sole
discretion, without penalty, upon 90 days prior written notice to the
Sub-Adviser. The Investment Sub-Advisory Agreement may also be terminated at any
time, without penalty, by vote of the holders of a "majority" of the outstanding
voting securities of the Fund (within the meaning of the 1940 Act) or by the
Sub-Adviser, upon 90 days' written notice to MassMutual and the Fund.
The Investment Sub-Advisory Agreement provides that the Sub-Adviser
shall not be liable for any loss sustained by reason of good faith errors or
omissions in connection with any matters to which the Investment Sub-Advisory
Agreement relates, although the Agreement also provides that nothing therein
shall be deemed to protect the Sub-Adviser from acts or omissions in breach of
such Agreement or from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or reckless disregard to its obligations and duties
under the Investment Sub-Advisory Agreement.
The Investment Sub-Advisory Agreement also provides that the
Sub-Adviser shall indemnify and hold harmless MassMutual and the Fund (and any
of their controlling persons, shareholders, partners, directors, officers and/or
employees), against any loss, claim, damage, liability or expense (a "Loss") to
which such persons may become subject, insofar as such Loss arises out of or is
based on claims or certain other proceedings relating to the Investment
Sub-Advisory Agreement or the sub-advisory services provided to the Fund by the
Sub-Adviser, provided that the Loss is related to, is based upon or arises out
of an act or omission of the Sub-Adviser or its officers, directors, employees,
affiliates or controlling persons that constitutes willful misfeasance, bad
faith, gross negligence, fraud, willful misconduct, a material breach of the
Investment Sub-Advisory Agreement, or a violation of applicable federal or state
securities laws, rules and regulations. In addition, the Investment Sub-Advisory
Agreement Principal Occupation provides that MassMutual shall indemnify and hold
harmless the Sub-Adviser (and any of its controlling persons, shareholders,
partners, directors, officers and/or employees), against any Loss to which such
persons may become subject, insofar as such Loss arises out of or is based on
claims or certain other proceedings relating to the Investment Sub-Advisory
Agreement, the sub-advisory services provided to the Fund by the Sub-Adviser,
the operation of the Fund, or the content of certain disclosure or omission of
the Sub-Adviser or its officers, directors, employees, affiliates or controlling
persons that constitutes willful misfeasance, bad faith, gross negligence,
fraud, willful misconduct, a material breach of the Investment Sub-Advisory
Agreement, or a violation of applicable federal or state securities laws, rules
and regulations.
Under the terms of the Investment Sub-Advisory Agreement, the
Sub-Adviser is permitted to
<PAGE>
select broker-dealers to effect the Fund's portfolio transactions and is to seek
to obtain the best execution of orders. In making this determination, the
Sub-Adviser is permitted to consider the provision of brokerage research
services (as such term is defined in Section 28(e) of the Securities Exchange
Act of 1934) in allocating brokerage transactions for the Fund. The Sub-Adviser
will also be permitted to use brokers or dealers that are affiliated with
Bankers Trust Company, the Fund or MassMutual, so long as it follows certain
procedures adopted by the Fund's Trustees.
Under the Investment Sub-Advisory Agreement, MassMutual will pay
Bankers Trust Company an investment sub-advisory fee at an annual rate of .01%
of the first $1,000,000,000 in Aggregate Assets, and at an annual rate of .0075%
of Aggregate Assets in excess of $1,000,000,000.00. "Aggregate Assets" means the
average daily net assets of the Indexed Equity Fund and of each other fund with
substantially the same investment objective as the Fund (including the MML
Equity Index Fund, a series of the MML Series Investment Fund, another mutual
fund for which MassMutual serves as investment adviser) for which Bankers Trust
Company provides investment advisory services. Aggregate Assets include equity
securities and securities convertible into equity securities, but do not include
cash or cash equivalents.
Information About the New Sub-Adviser
The table below provides certain information concerning each person who
serves on the board of directors and as a principal executive officer of Bankers
Trust Company.
<TABLE>
<CAPTION>
Name/Address Principal Occupation
- ------------ --------------------
<S> <C>
Josef Ackermann Chairman of the Board, Chief Executive
Taunusanlage 12 Officer and President, Bankers Trust Company;
D-60262 Frankfurt am Main Member, Board of Managing Directors, Deutsche
Federal Republic of Germany Bank AG
Hans Angermueller Director, Bankers Trust Company; Of Counsel,
599 Lexington Avenue Sherman & Sterling
New York, NY 10022
George B. Beitzel Director, Bankers Trust Company; Director of
29 King Street various corporations
Chappaqua, NY 10514-3432
William R. Howell Director, Bankers Trust Company; Chairman
P.O. Box 10001 Emeritus, J.C. Penney Company, Inc.; Director
Dallas, TX 75301-1109 of various corporations
Hermann-Josef Lamberti Member, Board of Managing Directors, Deutsche
Taunusanlage 12 Bank AG
D-60262 Frankfurt am Main
Federal Republic of Germany
John A. Ross Regional Chief Executive Officer, Deutsche
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
31 West 52nd Street Bank Americas Holding Corp.
New York, NY 10019
Ronaldo H. Schmitz Member, Board of Managing Directors, Deutsche
Taunusanlage 12 Bank AG
D-60262 Frankfurt am Main
Federal Republic of Germany
</TABLE>
Bankers Trust Company is a New York banking corporation with principal
offices at 130 Liberty Street, New York, New York 10006. Bankers Trust Company
is a wholly-owned subsidiary of Deutsche Bank AG ("Deutsche Bank"), a banking
company with limited liability organized under the laws of the Federal Republic
of Germany. Deutsche Bank is a major global banking institution that is engaged
in a wide range of financial services, including investment management, mutual
funds, retail and commercial banking and insurance. The principal address of
Deutsche Bank is Taunusanlage 12, D-60262 Frankfurt am Main, Federal Republic of
Germany. As of December 31, 1999, Deutsche Bank and its affiliates had assets
under management in excess of $654 billion. Bankers Trust Company manages
directly or sub-advises in excess of $259 billion in funds or portfolios.
Bankers Trust Company provides its investment advisory services under the
marketing name of "Deutsche Asset Management."
Set forth below is a list of mutual funds for which Bankers Trust
provides investment advisory or investment sub-advisory services with the
substantially similar investment objectives and policies to those of the Fund -
namely to replicate the S&P 500 Index(R). Information on the approximate size of
each of the funds as of December 31, 1999 and the annual rate at which adviser
or sub-adviser fees are paid (as a percentage of the daily average net asset
value of each fund) is set forth below.
<TABLE>
<CAPTION>
Advised Funds Net Assets as of 12/31/1999 Advisory Fee
------------- --------------------------- ------------
<S> <C> <C>
Equity 500 Index Portfolio: .075% (all funds)
o BT Investment Equity 500 Index Fund $1,036,353,861.34
o BT Institutional Equity 500 Index Fund $2,990,891,250.01
o Scudder S&P 500 Index Fund $328,368,095.06
o American AAdvantage S&P 500 Index Fund $574,818,268.91
o American AAdvantage S&P 500 Index $4,685,537.83
Mileage Fund
o USAA S&P 500 Index Fund $3,196,482,672.84
o Homestead Stock Index Fund $8,311,461.08
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sub-Advised Funds Net Assets as of 12/31/1999 Sub-Advisory Fee
----------------- --------------------------- ----------------
<S> <C> <C>
Fidelity Commonwealth Trust $9,819,983,112.52 .006% (.6 basis points)
Spartan Market Index Fund
Fidelity Variable Insurance Products Fund II - $5,227,582,593.85 .006% (.6 basis points)
Index 500 Portfolio
Fidelity Concord Street Trust - Spartan U.S. $18,843,254,307.68 .006% (.6 basis points)
Equity Index Fund
EQ Advisors Trust - BT Equity 500 Index $681,641,364 .05%
Portfolio
Scudder AARP Growth Trust - AARP U.S. Stock $736,519,937.67 .07% on the first $100
Index Fund million of assets; .03% of
the next $100 million of
assets, and .01% on assets
in excess of $200 million
(with minimum fee of
$75,000)
Scudder Kemper Variable Series - Kemper Index $31,597,882.46 $.08% on the first $200
500 Portfolio million of assets, .05% on
the next $550 million of
assets, and .025% on assets
in excess of $750 million
(with minimum fee of
$100,000)
</TABLE>
On March 11, 1999, Bankers Trust Company announced that it had reached
an agreement with the United States Attorney's Office in the Southern District
of New York to resolve an investigation concerning inappropriate transfers of
unclaimed funds and related recordkeeping problems that occurred between 1994
and early 1996. Pursuant to its agreement with the U.S. Attorney's Office,
Bankers Trust Company pleaded guilty to misstating entries in the bank's books
and records and agreed to pay a $60 million fine to federal authorities.
Separately, Bankers Trust Company agreed to pay a $3.5 million fine to the State
of New York. On July 26, 1999, the Federal criminal proceedings were concluded
with Bankers Trust Company's formal plea. The events leading up to the guilty
plea did not arise out of the investment advisory or mutual fund management
activities of Bankers Trust Company or its affiliates.
As a result of the plea, under the provisions of the 1940 Act, absent
an order from the Commission, Bankers Trust Company would not be able to provide
sub-advisory services to the Fund. The Commission has granted a temporary order
to permit Bankers Trust Company and its affiliates to continue to provide
investment advisory services to registered investment companies, and this
temporary order would allow Bankers Trust Company to provide the services to the
Fund contemplated by the Investment Sub-Advisory Agreement. However, there can
be no assurance that the Commission will grant
<PAGE>
a permanent order and the failure by Bankers Trust Company to receive such a
permanent order could result in Bankers Trust Company not being able to provide
sub-advisory services to the Fund.
Trustee Review
In approving the investment Sub-Advisory Agreement for the Indexed
Equity Fund, the Trustees requested and evaluated information provided by
MassMutual which, in their opinion, constituted all the information reasonably
necessary for the Trustees to form a judgment as to whether the Investment
Sub-Advisory Agreement would be in the best interests of the Fund and its
shareholders. In recommending that shareholders approve the Investment
Sub-Advisory Agreement, the Trustees took into account all factors which they
deemed relevant, including (i) the sub-advisory fees to be paid to the
investment sub-adviser, as compared to those of similar funds managed by other
investment advisers; (ii) the nature, quality and extent of the advisory and
non-advisory services furnished by Bankers Trust Company to the Fund; (iii) the
nature of the sub-adviser's research and analysis capabilities and the related
benefits to the Fund; (iv) the fact that the Investment Sub-Advisory Agreement
would have terms and conditions similar to those of the other Funds of the Trust
for which MassMutual has contracted for investment sub-advisory services; (v)
the relationship of the proposed advisory and sub-advisory fee structure to the
fee structures of comparable mutual funds and the impact of the proposed changes
in advisory, sub-advisory and administrative fees on the Fund's expense ratio;
(vi) the performance of the sub-adviser for similarly managed funds; and (vii)
the cost and complexity of providing investment management and portfolio
management services to the Fund.
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 the Fund
if the Investment Sub-Advisory Agreement were adopted by it. The Trustees also
took into account other benefits received from the Trust by MassMutual and its
affiliates.
As discussed under Proposal (1), a critical factor which the Trustees
considered in approving the Investment Sub-Advisory Agreement was MassMutual's
rationale for terminating the "master-feeder" structure for the Fund and
directly hiring an investment sub-adviser. The critical factor in selecting
Bankers Trust Company as sub-adviser for the Fund was that Bankers Trust Company
had indexing capabilities beyond those available through BGFA, and that
MassMutual desired retaining Bankers Trust Company for all these various index
mandates. For example, Bankers Trust Company has been appointed as investment
sub-adviser to a new series of the Trust, the MassMutual OTC 100 Fund (expected
to begin operations May 1, 2000), which has an investment objective of
replicating the risk and return characteristics of the NASDAQ 100 Index(R).
Bankers Trust Company has also been appointed as investment sub-adviser under
the same indexing strategy to a series of another registered investment company
for which MassMutual serves as investment adviser. The Trustees recognized that
the Fund and its shareholders may ultimately receive better services and more
favorable fees as all index fund assets are consolidated with one indexing
investment sub-adviser.
<PAGE>
PROPOSAL (3)
APPROVAL OF ARRANGEMENT TO PERMIT INVESTMENT
ADVISER TO ENTER INTO NEW OR AMENDED INVESTMENT
SUB-ADVISORY AGREEMENTS IN THE FUTURE
WITHOUT SHAREHOLDER APPROVAL
The Board of Trustees proposed that shareholders grant approval to
permit MassMutual to enter into new or amended investment sub-advisory
agreements with a sub-adviser with respect to a Fund without obtaining
shareholder approval of such investment sub-advisory agreements, and to permit
such sub-adviser to manage the assets of the Funds pursuant to such agreements.
MassMutual would be able to take these actions only to the extent permitted by
any exemption or exemptions that may be granted upon application made to the
Commission or by any applicable Commission rule.
This Proposal was approved by the shareholders of the Funds, acting
through the Majority Shareholder, as required by the terms of an exemptive
application which the Trust and MassMutual expect to file with the Commission
(the "Exemption Request") and will not become effective unless and until the
Commission has granted the relief requested in the Exemption Request.
The 1940 Act generally provides that an investment adviser or
sub-adviser to a mutual fund may act as such only pursuant to a written
agreement which has been approved by a vote of a majority of the outstanding
voting securities of the fund as well as by a vote of a majority of the trustees
of the fund who are not parties to such agreement or Interested Persons of any
party to such agreement. The Trust and MassMutual, however, have filed with the
Commission the Exemption Request. If the Exemption Request is granted,
MassMutual would be permitted, under specified conditions, to enter into new and
amended investment sub-advisory agreements for the management of the Funds,
including agreements with new sub-advisers and agreements with existing
sub-advisers if there is a material change in the terms of the investment
sub-advisory agreement or if there is an "assignment," as defined in the 1940
Act, or other event causing termination of the existing investment sub-advisory
agreement, without obtaining the approval of the Funds' shareholders of such new
or amended investment sub-advisory agreements. Such agreements must nevertheless
be approved by the Independent Trustees, in accordance with the requirements of
the 1940 Act. While the conditions will be established in the course of the
exemption process, prior exemptive orders suggest that one of the conditions of
the Exemption Request would be that within 90 days after entering into a new or
amended agreement without shareholder approval, the Funds must provide to
shareholders an information statement setting forth substantially the
information that would be required to be contained in a proxy statement for a
meeting of shareholders to vote on the approval of the agreement. Furthermore,
shareholder approval would still be required to amend the Investment Management
Agreement with the Funds (including any amendment to raise the management fee
rate payable under the Investment Management Agreement) or to enter into a new
Investment Management Agreement with MassMutual or any other adviser.
The Trust requested shareholder approval of this Proposal (3) for
several reasons. The Investment Management Agreement permits the Funds to
utilize an adviser/sub-adviser management structure whereby MassMutual, acting
as the Funds' investment adviser, delegates day-to-day portfolio management
responsibilities to a sub-adviser. Under such a structure, each Fund's
sub-adviser acts in a capacity similar to a manager of a mutual fund who is
employed by such mutual fund's investment
<PAGE>
adviser and who manages the portfolio under the oversight and supervision of the
investment adviser. If MassMutual were to change sub-advisers for the Funds,
MassMutual would continue in its role as adviser and would continue to exercise
oversight and supervision of the Funds' investment affairs as conducted by the
new sub-adviser. The Trust believes that these situations are analogous to a
situation where an investment adviser of a mutual fund replaces an employee who
manages the fund's investment portfolio with a different manager, which does not
require shareholder approval under the 1940 Act.
In addition, the shareholder approval requirement under the 1940 Act
may cause the Funds' shareholders to incur unnecessary expenses, such as the
expenses involved in holding, and soliciting proxies for, a shareholder meeting,
and could hinder the prompt implementation of sub-advisory changes that are in
the best interest of the shareholders, such as prompt engagement or replacement
of a sub-adviser if circumstances so warrant. The Trustees believe that without
the ability to promptly retain a new sub-adviser and/or replace an existing
sub-adviser, or to reapprove existing investment sub-advisory agreements, as the
case may be, investors' expectations may be frustrated. For instance, the Funds
and their shareholders could be disadvantaged under the following circumstances:
(i) where MassMutual determines to terminate a Fund's sub-adviser due to
unsatisfactory performance or another appropriate reason, (ii) where a Fund's
sub-adviser resigns, ceases operations or is otherwise incapable of providing
portfolio management services on behalf of the Fund, or (iii) where there has
been an assignment of an investment sub-advisory agreement with a current
sub-adviser (for instance, due to a change in control of the sub-adviser) or
some other event to cause the termination of the investment sub-advisory
agreement. In many cases, these events are beyond the control of the Trust and
the Fund. For example, there may be a change in control of a sub-adviser
resulting from a merger or acquisition. This causes an automatic termination of
the sub-advisory contract under the 1940 Act. In such circumstances, MassMutual
may deem it in the best interests of a Fund to retain a new sub-adviser or to
reinstate a terminated investment sub-advisory agreement with a current
sub-adviser promptly. For these reasons, the Trustees believe that approval of
the Proposal would benefit shareholders.
By approving the Proposal, shareholders will forego any benefits
associated with shareholder review of proposed investment sub-advisory
agreements, such as the ability to consider a sub-adviser's performance record.
One of the most important factors in the Trustees' determination to
recommend this Proposal was MassMutual's demonstrated capabilities in overseeing
its sub-advisers to ensure consistency of each Fund's investment objectives,
policies and investment strategies and satisfactory performance. The Trustees
noted that the large majority of shareholders of the Funds are institutional
investors and retirement savings plans that demand style consistency for the
Funds they choose as well as top-notch performance against their benchmarks. The
Trustees recognized the value of this Proposal 2 in that it would provide
MassMutual with the flexibility and means to replace an investment sub-adviser
which fails to maintain style consistency or achieve demonstrated performance
results.
In deciding to recommend the Proposal, the Trustees also considered,
among other matters, that the Proposal would be beneficial to the Funds by
reducing or eliminating the costs of shareholder meetings and the possible
negative impact caused by a delay in replacing or hiring a new sub-adviser, or
reapproving existing investment sub-advisory arrangements. They also considered
that the Funds would forego any benefits associated with shareholder scrutiny of
proposed investment sub-advisory agreements. To this end, the Trustees
considered that, even in the absence of shareholder scrutiny and approval, any
proposal to add or replace a sub-adviser, or to materially amend an investment
sub-advisory agreement
<PAGE>
with an existing sub-adviser, would receive careful review. First, MassMutual
would assess a Fund's needs and, if it believed that the Fund would benefit from
a new or replacement sub-adviser, MassMutual would review the relevant universe
of available investment managers. Second, any recommendations made by MassMutual
would have to be approved by a majority of the Trustees, including a majority of
the Independent Trustees. Finally, in the absence of shareholder approval, any
retention of a new or replacement sub-adviser or any amendment of an existing
investment sub-advisory agreement would have to comply with conditions contained
in the Exemption Request, assuming it is granted.
There is no assurance that the Commission will grant the Exemption
Request, and the Trust reserves the right to withdraw the Exemption Request if
the Trustees believe such action is in the best interest of the Funds and their
shareholders.
PROPOSAL (4)
RATIFICATION OF AUDITORS
At a special meeting of the Board of Trustees on March 26, 1999 called
for the particular purpose, the Trustees of the Trust, including a majority of
the Independent Trustees, on the recommendation of the Trust's Audit Committee,
approved the appointment of Deloitte & Touche LLP as the Trust's principal
auditors for the fiscal years ended 1998 and 1999. The change in auditors
occurred after the Trust's former auditors, PricewaterhouseCoopers LLP ("PwC"),
resigned effective February 23, 1999, after consulting with the staff of the
Commission regarding its independence from the Trust. PwC's previous reports on
the Trust's financial statements for the fiscal years 1996 and 1997 did not
contain an adverse opinion or a disclaimer of opinion, and were not qualified or
modified as to uncertainty, audit scope or accounting principles. In addition,
for those periods, and prior to PwC's resignation, the Trust and PwC did not
have any disagreements on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure that either (1)
have not been resolved to PwC's satisfaction or (2) if not resolved to PwC's
satisfaction, would have caused it to make a reference to the subject matter of
the disagreement in connection with its report.
The Majority Shareholder has approved, by written consent, the
selection of Deloitte & Touche, LLP as the Trust's principal auditors.
Deloitte & Touche, LLP has since been reapproved by the Trustees,
including a majority of the Independent Trustees, at a meeting of the Trustees
on February 14, 2000 called for the purpose.
RELATED INFORMATION
Underwriter
The Trust's principal underwriter is MML Distributors, LLC ("MML
Distributors"), whose address is 1414 Main Street, Springfield, Massachusetts,
O1144-1013. MML Distributors is an indirect, majority owned subsidiary of
MassMutual. MML Distributors provides distribution services to the Trust
pursuant to a General Distributor's Agreement dated May 3, 1999 and a
Distribution and Service Plan and
<PAGE>
Agreement, as amended and restated from time to time, with respect to Class A
shares of each Fund. The Trust did not make any payments to MML Distributors for
the fiscal year ended December 31, 1999
Affiliated Broker Transactions
The brokerage commissions paid by the Funds for the fiscal year ended December
31, 1999 were:
<TABLE>
<CAPTION>
<S> <C> <C>
Balanced Fund $ 157,213 Mid Cap Growth Equity Fund $ 121,696
Core Equity Fund $1,551,814 Small Cap Growth Equity Fund $ 126,461
Growth Equity Fund $ 42,261 International Equity Fund $2,084,702
Small Cap Value Equity Fund $ 708,752
</TABLE>
Approximately $51,635.87 and $1,968 or 1% and .04% of the brokerage commissions
paid by the Funds for the fiscal year ended December 31, 1999 was paid to
Jefferies & Co., Inc. ("Jefferies") and Advest, Inc. ("Advest"), respectively.
Jefferies and Advest are wholly-owned subsidiaries of a company for which one
Trustee serves as a director. Approximately $377 or .3% of the brokerage
commisions paid by the Small Cap Growth Equity Fund for the fiscal year ended
December 31, 1999 was paid to affiliates of J. P. Morgan & Co. ("J.P. Morgan").
J.P. Morgan is affiliated with J.P. Morgan Investment Management, Inc., one of
the Small Cap Growth Equity Fund's investment sub-advisers.
Security Ownership of Certain Beneficial Owners
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 01111-0001, owned,
through certain of its separate investment accounts and/or its capital
contributions to the Trust, the number of shares of each Fund as of the Record
Date identified in the Table on page 2. That Table also 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.
Listed below are the names and principal occupations of the Directors of
MassMutual and of MassMutual's principal executive officers (other than
Directors), all of whose addresses are the same as that of MassMutual.
<TABLE>
<CAPTION>
Name Position with MassMutual and Principal Occupation
- ---- -------------------------------------------------
<S> <C>
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, LLC (private
merchant bank)
Gene Chao Director of MassMutual; Chairman, President and Chief Executive Officer,
Computer Projections, Inc.
Patricia Diaz Dennis Director of MassMutual; Senior Vice President - Regulatory and Public
Affairs, SBC Communications, Inc. (telecommunications)
Anthony Downs Director of MassMutual; Senior Fellow, The Brookings Institution (non-profit
policy research center)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Name Position with MassMutual and Principal Occupation
- ---- -------------------------------------------------
<S> <C>
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, Yale University School of Forestry
and Environmental Studies
Robert M. Furek Director of MassMutual; Partner (since 1997), Resolute Partners, LLC
(private merchant bank)
Charles K. Gifford Director of MassMutual; President and Chief Operating Officer, FleetBoston
Financial (banking and financial services)
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 of various companies
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, Peach State Real Estate Holding
Company (real estate investment company)
Robert J. O'Connell Chairman of the Board, Chief Executive Officer and President of MassMutual
Thomas B. Wheeler Director of MassMutual; Former Chairman, President and Chief Executive
Officer, MassMutual
Alfred M. Zeien Director of MassMutual; Chairman and Chief Executive Officer, The Gillette
Company (manufacturer of personal care products)
Lawrence V. Burkett, Jr. Executive Vice President and General Counsel
Robert W. Crispin Executive Vice President
James E. Miller Executive Vice President
Christine Modie Executive Vice President and Chief Information Officer
John V. Murphy Executive Vice President
Stuart H. Reese Executive Vice President and Chief Investment Officer
</TABLE>
<PAGE>
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 01111-0001, Attn: 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
/s/ Thomas M Kinzler
Thomas M. Kinzler
Vice President and Secretary
Springfield, Massachusetts
April 14, 2000
<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 1st day of May , 2000.
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 Indexed Equity 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
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(f) the Prospectus and Statement of Additional Information of the Fund
in effect from time to time.
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.
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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 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 Sub-Adviser 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 of .10% 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
<PAGE>
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 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
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.
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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
Attention: Vernon J. Meyer
Vice President
If to the Trust: MassMutual Institutional Funds
1295 State Street
Springfield, MA 01111
Attention: Thomas M. Kinzler
Vice President and Secretary
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: _______________________________
Name:
Title
MASSMUTUAL INSTITUTIONAL FUNDS
on behalf of MASSMUTUAL INDEXED EQUITY FUND
By: _______________________________
Name:
Title:
<PAGE>
EXHIBIT B
FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT
This Investment Sub-Advisory Agreement (this "Sub-Advisory Agreement"), is by
and between Bankers Trust Company (the "Sub-Adviser") and Massachusetts Mutual
Life Insurance Company, a mutual life insurance company organized under the laws
of the Commonwealth of Massachusetts ("MassMutual"), for the MassMutual Indexed
Equity Fund (the "Fund"), a series of MassMutual Institutional Funds (the
"Trust"), a Massachusetts business trust which 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"), effective as of the 1st day of May, 2000.
WHEREAS, the Trust has appointed MassMutual as the investment adviser for the
Fund pursuant to the terms of an Investment Advisory Agreement (the "Advisory
Agreement");
WHEREAS, the Advisory Agreement provides that MassMutual may, at its option,
subject to approval by the Trustees of the Trust and, to the extent necessary,
the shareholders of the Fund, appoint a sub-adviser to assume certain
responsibilities and obligations of MassMutual under the Advisory Agreement;
WHEREAS, MassMutual is an investment adviser registered with the Commission as
such under the Investment Advisers Act of 1940, as amended (the "Advisers Act"),
and at the date hereof, Sub-Adviser is not required to register under the
Advisers Act; and
WHEREAS, MassMutual desires to appoint the Sub-Adviser as its sub-adviser for
the Fund and the Sub-Adviser 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, MassMutual, the Fund and the Sub-Adviser, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. General Provision.
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(a) MassMutual hereby employs the Sub-Adviser and the Sub-Adviser
hereby undertakes to act as the investment sub-adviser of the Fund to provide
investment advice and to perform for the Fund such other duties and functions as
are hereinafter set forth. The Sub-Adviser shall, in all matters, give to the
Fund and the Trust's Board of Trustees, directly or through MassMutual, the
benefit of the Sub-Adviser's best judgment, effort, advice and recommendations
and shall, at all times conform to, and use its best efforts to ensure the Fund
conforms to:
(i) the provisions of the Act and any rules or regulations
thereunder;
(ii) any other applicable provisions of state or federal law;
(iii) the provisions of the Agreement and Declaration of Trust
and Bylaws of the
<PAGE>
Trust, as amended from time to time (collectively referred to as the
"Trust Documents");
(iv) policies and determinations of the Board of Trustees of
the Trust and MassMutual;
(v) the fundamental and non-fundamental policies and
investment restrictions of the Fund as reflected in the Trust's
registration statement under the Act or as such policies may, from time
to time, be amended by the Fund's shareholders; and
(vi) the Prospectus and Statement of Additional Information of
the Fund in effect from time to time (collectively referred to as the
"Disclosure Documents").
(b) The appropriate officers and employees of the Sub-Adviser shall be
available upon reasonable notice for consultation with any of the Trustees and
officers of the Trust and MassMutual with respect to any matter dealing with the
business and affairs of the Fund, such as the valuation of portfolio securities
of the Fund.
2. Duties of the Sub-Adviser.
-------------------------
(a) The Sub-Adviser shall, subject to the direction and control by the
Trust's Board of Trustees or MassMutual, to the extent MassMutual's direction is
not inconsistent with that of the Board of Trustees, (i) regularly provide
investment advice and recommendations to the Fund, directly or through
MassMutual, with respect to the Fund's investments, investment policies and the
purchase, sale or other disposition of securities and other investments; (ii)
supervise and monitor continuously the investment program of the Fund and the
composition of its portfolio and determine what securities or other investments
shall be purchased or sold by the Fund; (iii) arrange, subject to the provisions
of Section 6 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; (iv) provide reports on the foregoing to the Board of Trustees at
each Board meeting; and (v) undertake to do anything incidental to the foregoing
to facilitate the performance of the Sub-Adviser's obligations hereunder,
including voting or exercising any consent rights with respect to such
securities or investments.
(b) The Sub-Adviser shall provide to MassMutual such reports for the
Fund, and in such time frames, as MassMutual shall reasonably request or as
required by applicable law or regulation.
(c) Provided that none of MassMutual, the Fund or the Trust shall be
required to pay any compensation other than as provided by the terms of this
Sub-Advisory Agreement and subject to the provisions of Section 5 hereof, the
Sub-Adviser may obtain investment information, research or assistance from any
other person, firm or corporation to supplement, update or otherwise improve its
investment management services.
(d) Provided that nothing herein shall be deemed to protect the
Sub-Adviser from acts or omissions in material breach of this Sub-Advisory
Agreement or from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or reckless disregard to its obligations and duties
under this Sub-Advisory Agreement, the Sub-Adviser shall not be liable for any
loss sustained by reason of good faith errors or omissions in connection with
any matters to which this Sub-Advisory Agreement relates.
<PAGE>
(e) The Sub-Adviser shall make all material disclosures to MassMutual
and the Fund regarding itself and its partners, officers, directors,
shareholders, employees, affiliates or any person who controls any of the
foregoing, including, but not limited to, information regarding any change in
control in the Sub-Adviser or any change in its key personnel (being defined as
those persons who have oversight of, or substantial involvement in, the
day-to-day portfolio transactions for the Fund), information regarding any
material adverse change in the condition (financial or otherwise) of the
Sub-Adviser or any person who controls the Sub-Adviser, information regarding
the investment performance and general investment methods of the Sub-Adviser,
its principals and affiliates, information that MassMutual reasonably deems
material to the Fund or necessary to enable MassMutual to monitor the
performance of the Sub-Adviser and information that is required, in the
reasonable judgment of MassMutual, to be disclosed in any filings required by
any governmental agency or by any applicable law, regulation, rule or order.
(f) The Sub-Adviser shall provide MassMutual with any information in
the Sub-Adviser's possession necessary for supervising the activities of its
personnel, including professional, administrative and clerical personnel,
including the compilation and maintenance of such records with respect to the
Fund's operations as may reasonably be required.
(g) The Sub-Adviser shall provide MassMutual, upon reasonable prior
written request by MassMutual to the Sub-Adviser, with access to inspect at the
Sub-Adviser's office the books and records of the Sub-Adviser relating to the
Fund and the Sub-Adviser's performance hereunder and such other books and
records of the Sub-Adviser as are necessary to confirm that the Sub-Adviser has
complied with its obligations and duties under this Sub-Advisory Agreement.
3. Other Activities.
----------------
(a) Nothing in this Sub-Advisory Agreement shall prevent MassMutual or
the Sub-Adviser or any officer thereof from acting as investment adviser or
sub-adviser for any other person, firm, corporation or other entity and shall
not in any way limit or restrict MassMutual or the Sub-Adviser or any of their
respective directors, officers, members, stockholders, partners 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 are in compliance with U.S. federal and state securities laws,
regulations and rules and will not adversely affect or otherwise impair the
performance by any party of its duties and obligations under this Sub-Advisory
Agreement.
(b) The Sub-Adviser agrees that it will not knowingly or deliberately
favor any other account managed or controlled by it or any of its principals or
affiliates over the Fund. The Sub-Adviser, upon reasonable request and receipt
of adequate assurances of confidentiality, shall provide MassMutual with an
explanation of the differences, if any, in performance between the Fund and any
other account with investment objectives and policies similar to the Fund for
which the Sub-Adviser, or any one of its principals or affiliates, acts as
investment adviser. To the extent that a particular investment is suitable for
both the Fund and the Sub-Adviser's other clients, such investment will be
allocated among the Fund and such other clients in a manner that is fair and
equitable in the circumstances. Notwithstanding the foregoing or any other
provision herein, no provision of this Sub-Advisory Agreement shall require
Sub-Adviser to breach the terms of any agreement or agreements with its other
clients regarding confidentiality. Upon Sub-Adviser's provision to MassMutual of
reasonable evidence that provision of
<PAGE>
the information identified under this Section would breach such confidentiality
provisions, MassMutual shall not require Sub-Adviser to produce such
information.
4 Compensation of the Sub-Adviser.
-------------------------------
MassMutual agrees to pay the Sub-Adviser and the Sub-Adviser 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 paid quarterly, in
arrears, at the following rate: an annual rate of .01% on the first $1 billion
of Aggregate Assets; and .0075% on Aggregate Assets in excess of $1 billion. For
the purposes of this Sub-Advisory Agreement, "Aggregate Assets" shall mean the
aggregate of (i) the average daily net assets of the Fund determined at the
close of the New York Stock Exchange (the "Exchange") on each day that the
Exchange is open for trading, and (ii) the average daily net assets of all other
funds or accounts of MassMutual or its affiliates, including other funds
registered under the Act, for which the Sub-Adviser provides investment advisory
services determined at the close of the Exchange on each day that the Exchange
is open for trading. MassMutual shall pay the Sub-Adviser such fee not later
than the tenth (10th) business day immediately following the end of each
calendar quarter. Aggregate Assets for which the Sub-Adviser provides investment
advisory services shall mean only equity securities and securities convertible
into equity securities, but shall not include cash or cash equivalents.
5. Portfolio Transactions and Brokerage.
------------------------------------
(a) The Sub-Adviser 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"), 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 reasonable expense) of the Fund's portfolio transactions. Such
brokers and dealers may include brokers or dealers that are "affiliated persons"
(as such term is defined in the Act) of the Trust, the Sub-Adviser or
MassMutual, provided that the Sub-Adviser shall only place orders on behalf of
the Fund with such affiliated persons in accordance with procedures adopted by
the Trustees pursuant to Rule 17e-1 under the Act.
(b) The Sub-Adviser 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 to effect
such transactions, and may enter into a contract in which the broker acts either
as principal or as agent.
(c) The Sub-Adviser 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 Sub-Adviser 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;
other matters involved in the receipt of brokerage and research services in
accordance with Section 28(e) of the Securities Exchange Act of 1934, as
amended; as well as any other matters relevant to the selection of a
broker-dealer for particular and related transactions of the Fund; and such
<PAGE>
other considerations as the Board of Trustees of the Trust or MassMutual
determine and provide to the Sub-Adviser from time to time.
6. Representations And Warranties of The Sub-Adviser.
-------------------------------------------------
The Sub-Adviser hereby represents and warrants to the Fund and MassMutual that:
(a) The Sub-Adviser has obtained all required governmental and
regulatory licenses, registrations and approvals required by law as may be
necessary to perform its obligations under this Sub-Advisory Agreement and to
act as contemplated by the Trust Documents and the Disclosure Documents,
including without limitation registration as an investment adviser under the
Advisers Act, as applicable, and will maintain, obtain and/or renew any required
licenses, registrations, approvals and memberships during the term of this
Sub-Advisory Agreement.
(b) Except as described in Section 6(c), there is no pending, or to the
best of its knowledge, threatened or contemplated action, suit or proceeding
before or by any court, governmental, administrative or self-regulatory body or
arbitration panel to which the Sub-Adviser or any of its principals or
affiliates is a party, or to which any of the assets of the Sub-Adviser is
subject, which reasonably might be expected to (i) result in any material
adverse change in the Sub-Adviser's condition (financial or otherwise), business
or prospects, (ii) affect adversely in any material respect any of the
Sub-Adviser's assets or (iii) materially impair the Sub-Adviser's ability to
discharge its obligations under this Sub-Advisory Agreement; and the Sub-Adviser
has not received any notice of an investigation by the Securities and Exchange
Commission or any state regarding U.S. federal or state securities laws,
regulations or rules.
(c) As a result of Sub-Adviser's March 11, 1999 guilty plea,
Sub-Adviser would not be able to provide sub-advisory services to the Fund. The
Securities and Exchange Commission ("SEC") has granted a temporary order to
permit Sub-Adviser and its affiliates to continue to provide investment advisory
services to registered investment companies, and this temporary order would
allow Sub-Adviser to provide the services to the Fund hereunder. However, there
is no assurance that the SEC will grant a permanent order and the failure by
Sub-Adviser to receive such permanent order could result in Sub-Adviser not
being able to provide the services contemplated hereunder.
(d) All references in the Disclosure Documents concerning the
Sub-Adviser and its affiliates and the controlling persons, affiliates,
stockholders, directors, officers and employees of any of the foregoing are
accurate in all material respects and do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make such
information not misleading.
(e) Subject to adequate assurances of confidentiality, the Sub-Adviser
has supplied or will supply to, or has made or will make available for review
by, MassMutual (and if requested by MassMutual to its designated auditor) all
documents, statements and workpapers reasonably requested by it relating to the
Fund and the Sub-Adviser's performance results. Notwithstanding the foregoing or
any other provision herein, no provision of this Sub-Advisory Agreement shall
require Sub-Adviser to breach the terms of any agreement or agreements with its
other clients regarding confidentiality. Upon Sub-Adviser's provision to
MassMutual of reasonable evidence that provision of the information identified
under this Section would breach such confidentiality provisions, MassMutual
shall not require Sub-Adviser to produce such information.
<PAGE>
The foregoing representations and warranties shall be continuing during the term
of this Sub-Advisory Agreement.
7. Covenants of the Sub-Adviser.
----------------------------
(a) If at any time during the term of this Sub-Advisory Agreement, the
Sub-Adviser discovers any fact or omission, or any event or change of
circumstances occurs, which would make the Sub-Adviser's representations and
warranties in Section 6 inaccurate or incomplete in any material respect, or
which might render the Disclosure Documents untrue or misleading in any material
respect, the Sub-Adviser will provide prompt written notification to the Fund
and MassMutual of any such fact, omission, event or change of circumstances, and
the facts related thereto.
(b) The Sub-Adviser agrees that, during the term of this Sub-Advisory
Agreement, and for so long as investment in the Fund is being offered for sale,
it will provide the Fund and the Sub-Adviser with updated information relating
to the Sub-Adviser's performance results as reasonably required from time to
time by the Fund and MassMutual. The Sub-Adviser shall use its best efforts to
provide such information within a reasonable period of time after the end of the
month to which such updated information relates and the information is available
to it.
8. Confidentiality.
---------------
All information and advice furnished by one party to the other party (including
their respective agents, employees and representatives) hereunder shall be
treated as confidential and shall not be disclosed to third parties, except as
may be necessary to comply with applicable laws, rules and regulations,
subpoenas or court orders.
9. Duration.
--------
Unless terminated earlier pursuant to Section 10 hereof, this Sub-Advisory
Agreement shall remain in effect for a period of two years from the date hereof.
Thereafter it shall continue in effect from year to year, unless terminated
pursuant to Section 10 hereof, 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 Sub-Advisory
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.
10. Termination.
-----------
(a) This Sub-Advisory Agreement shall terminate automatically upon its
unauthorized assignment (within the meaning of the Act), the termination of the
Advisory Agreement or the dissolution of the Fund.
(b) The Sub-Advisory Agreement may be terminated by MassMutual or the
Board of Trustees of the Trust: (i) by written notice to the Sub-Adviser with
immediate effect, if the Sub-Adviser's registration under the Adviser's Act is
suspended, terminated, lapsed or not renewed; (ii) by written notice to the
Sub-Adviser with immediate effect, if the Sub-Adviser is bankrupt or insolvent,
<PAGE>
seeks an arrangement with creditors, is dissolved or terminated or ceases to
exist; (iii) by written notice to the Sub-Adviser with immediate effect, if
MassMutual determines in good faith, for any reason, that such termination is
appropriate for the protection of the Fund, including without limitation a good
faith determination by MassMutual or the Board of Trustees of the Trust that the
Sub-Adviser has breached an obligation or duty under this Sub-Advisory
Agreement; or (iv) in their sole discretion, without penalty, upon ninety days
prior written notice to Sub-Adviser. This Sub-Advisory Agreement also may be
terminated at any time, without penalty, by the vote of the holders of a
"majority" of the outstanding voting securities of the Fund (as defined in the
Act).
(c) The Sub-Advisory Agreement may be terminated by the Sub-Adviser,
without penalty at any time, upon ninety days' prior written notice, to
MassMutual and the Trust.
11. Indemnification.
---------------
(a) In any action in which MassMutual or the Fund or any of its or
their controlling persons, or any shareholders, partners, directors, officers
and/or employees of any of the foregoing, are parties, the Sub-Adviser agrees to
indemnify and hold harmless the foregoing persons against any loss, claim,
settlement, damage, charge, liability or expense (including, without limitation,
reasonable attorneys' and accountants' fees) to which such persons may become
subject, insofar as such loss, claim, settlement, damage, charge, liability or
expense arises out of or is based upon any demands, claims, liabilities,
expenses, lawsuits, actions or proceedings relating to this Sub-Advisory
Agreement or to the advisory services for the account of the Fund provided by
the Sub-Adviser, provided that the loss, claim, settlement, damage, charge,
liability, cost or expense related to, was based upon, or arose out of (i) an
act or omission of the Sub-Adviser or its officers, directors, employees,
affiliates or controlling persons and (ii) constituted willful misfeasance, bad
faith, gross negligence, fraud, willful misconduct, a material breach of this
Sub-Advisory Agreement, or a violation of applicable federal or state securities
laws, rules and regulations by the Sub-Adviser.
(b) In any action in which the Sub-Adviser or any of its controlling
persons, or any shareholders, partners, directors, officers and/or employees of
any of the foregoing, are parties, MassMutual agrees to indemnify and hold
harmless the foregoing persons against any loss, claim, settlement, damage,
charge, liability or expense (including, without limitation, reasonable
attorneys' and accountants' fees) to which such persons may become subject,
insofar as such loss, claim, settlement, damage, charge, liability or expense
arises out of or is based upon any demands, claims, liabilities, expenses,
lawsuits, actions or proceedings relating to this Sub-Advisory Agreement, the
advisory services for the account of the Fund provided by the Sub-Adviser, the
operation of the Fund or the contents of the Disclosure Documents, provided that
the loss, claim, settlement, damage, charge, liability, cost or expense did not
relate to, or was not based upon, or did not arise out of an act or omission of
the Sub-Adviser, its shareholders, or any of its partners, officers, directors,
employees, agents or controlling persons constituting willful misfeasance, bad
faith, gross negligence, fraud, willful misconduct, a material breach of this
Sub-Advisory Agreement, or a violation of applicable federal or state securities
laws, rules and regulations.
(c) Promptly after receipt by an indemnified party under this Section
11 of notice of any claim or dispute or commencement of any action or
litigation, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party under this Section 11, notify the
indemnifying party of the commencement thereof; but the omission to notify the
indemnifying party will
<PAGE>
not relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 11 except to the extent, if any, that such
failure or delay prejudiced the other party in defending against the claim. In
case any such claim, dispute, action or litigation is brought or asserted
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, to assume the defense thereof, with
counsel specially approved in writing by such indemnified party, such approval
not to be unreasonably withheld, following notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof; in
which event, the indemnifying party will not be liable to such indemnified party
under this Section 11 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof, but shall
continue to be liable to the indemnified party in all other respects as
heretofore set forth in this Section 11. Notwithstanding any other provisions of
this Section 11, if, in any claim, dispute, action or litigation as to which
indemnity is or may be available, any indemnified party reasonably determines
that its interests are or may be, in whole or in part, adverse to the interests
of the indemnifying party, the indemnified party may retain its own counsel,
with the choice of counsel subject to the consent of the indemnifying party
(which consent shall not be withheld unreasonably), in connection with such
claim, dispute, action or litigation and shall continue to be indemnified by the
indemnifying party for any legal or any other expenses reasonably incurred in
connection with investigating or defending such claim, dispute, action or
litigation.
12. Disclaimer of Shareholder Liability.
-----------------------------------
MassMutual and the Sub-Adviser understand that the obligations of the Trust
under this Sub-Advisory Agreement are not binding upon any Trustee or
shareholder of the Trust personally, but bind only the Trust and the Trust's
property. MassMutual and the Sub-Adviser represent that each has notice of the
provisions of the Trust Documents disclaiming shareholder and Trustee liability
for acts or obligations of the Trust.
<PAGE>
13. Notice.
------
Any notice under this Sub-Advisory 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 MassMutual: Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attention: Vernon J. Meyer
Vice President
If to the Sub-Adviser: Bankers Trust Company
130 Liberty Street
New York, NY 10006
Attention: Robert Laverty, 35th Floor
If to either MassMutual or the Sub-Adviser, copies to:
MassMutual Institutional Funds
1295 State Street
Springfield, MA 01111
Attention: Thomas M. Kinzler
Vice President and Secretary
14. No Assignment.
-------------
No assignment (within the meaning of the Act) of this Sub-Advisory Agreement may
be made without the express written consent of all parties hereto.
15. Amendments to this Sub-Advisory Agreement.
-----------------------------------------
This Sub-Advisory Agreement may be amended only by a written instrument approved
in writing by all parties hereto.
16. Governing Law.
-------------
This Sub-Advisory Agreement shall be governed by and construed in accordance
with the internal laws of the Commonwealth of Massachusetts, without giving
effect to principles of conflict of laws.
17. Survival.
--------
The provisions of this Sub-Advisory Agreement shall survive the termination or
other expiration of this Sub-Advisory Agreement with respect to any matter
arising while this Sub-Advisory Agreement was in effect.
18. Successors.
----------
<PAGE>
This Sub-Advisory Agreement shall be binding upon and inure to the benefit of
the parties hereto and their successors and permitted assigns.
19. Entire Agreement.
----------------
This Sub-Advisory Agreement constitutes the entire agreement among the parties
hereto with respect to the matters referred to herein, and no other agreement,
oral or otherwise, shall be binding on the parties hereto.
20. No Waiver.
---------
No failure or delay on the part of any party hereto in exercising any right,
power or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or remedy preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
Any waiver granted hereunder must be in writing and shall be valid only in the
specific instance in which given.
21. Severability.
------------
If any one or more provisions in this Sub-Advisory Agreement shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not effect any other provision
of this Sub-Advisory Agreement, but this Sub-Advisory Agreement shall be
construed so as to effectuate the intent of the parties hereto as nearly as
possible without giving effect to such invalid, illegal or unenforceable
provision had never been contained herein.
22. Use of Names. Neither the Trust nor MassMutual will use the name of the
Sub-Adviser, or any affiliate of the Sub-Adviser, in any prospectus,
advertisement, sales literature or other communication to the public except with
the prior approval of the Sub-Adviser. The Sub-Adviser will not use the name of
the MassMutual, the Trust, the Fund or any of their affiliates in any
prospectus, advertisement, sales literature or other communication to the public
except with the prior approval of MassMutual.
<PAGE>
23. Counterparts.
------------
This Sub-Advisory Agreement may be executed in any number of counterparts, each
of which shall constitute an original, but all of which when taken together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Fund, MassMutual and the Sub-Adviser have caused this
Sub-Advisory Agreement to be executed as of the day and year first above
written.
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: ______________________________
Name:
Title:
BANKERS TRUST COMPANY
By: ______________________________
Name:
Title:
ACKNOWLEDGED:
MASSMUTUAL INSTITUTIONAL FUNDS
on behalf of MassMutual Indexed Equity Fund
By: _____________________________
Name:
Title:
