SEC Division of Investment Management staff letter: MassMutual Institutional Funds

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SEP 2 8 1995

it
9ur'Ref. No. '$.5,-236,-:CC.
MassMutual 'Institutional

RESPONSE OF THE OFFICE .-oF.. C:aIEF ÇOUNSEL Flip.ds ' . DIVlstON OF INVESTMENT: MAAGEMENT File No.' 811-8274 " . Your.l-etter dat~d Septemb'er.21,. 1995 request"s åur aS$UraIlce.

that. we would 'riot recQmreiidehforce.nerit' ac'tionH to the. .Coniissiori

if MassMutuä.;L Institutional
Funds (the "Trust") ca'lci:lates '. ' standardized' average annual total return in the manner described in your letter and includes these total return figures' in its próspectus, statement of additional information, advertisements, and sales literature. '. .

, .. The Trust is an open-end management investment company with seven series' ("" Funds I,~)., each having foÜr, classes. of . shares. 1./. Each: Fund hàs an inyestment .objective designed to correspond to

the investment obj ective of an existing unregistered, separate

.investment ac'count' ("SI.AII) of MaßsMutual. 2./ Shortly beforethe effective date of the Trust's registration. statE:mEmt, 'the assets

of each SIA were. transferred to the corresponding Fu:qd in e*chatige for' Class.4 shares of. th~ F~nd. Prioi to the public. offering of the Trust's shares, 'the SIAs held all the shares of the Trust (except those held by MassMutual as a result of its

contribution of the Trust's initial capital), and each Fund

contained the same portfolio securities that were held by the

corresponding SIA immediately prior to the transfer of assets.

MassMutual is the investment adviser for each Fund, and has

served as the investment adviser for each SIA from its inception.

Certain of the Funds have sub-advisers, each of which was also

sub-adviser to the corresponding SIA prior to the transfer of

assets. You state that the investment policies , objectives,

guidelines, and restrictions of each Fund are in all material

respects equivalent to those of the corresponding SIA. Moreover,

1./ Shares of Classes 1, 2 and 3 are offered primarily to employer- sponsored defined contribution plans. Class 4 shares are offered only to unregistered separate investment accounts of Massachusetts Mutual Life Insurance Company ("MassMutual") and certain of its affiliated life insurance

companies.
,'*
2./ The SIAs were created as investment vehicles for pension

plans qualified under Section 401 of the Internal Revenue

Code. The SIAs are exempt from registration under the Investment Company Act of 1940 (" 1940 Act Ii) in reliance on
Section 3 (c) (11) . ...

yo~ .alsost,a.te that the ma.nageme,nt. practices of: the each .Fllrid are it':
.;in all' i:~tei:ia'l respects identical'to the. ~,ofFespönding SIA. ;il ...;', You rep:re'sent ,thai . th~ FUnd~. eff~ctively are continuations

.' of pre-existing accounts that,. were created for purpå.sE:s. entire;ty.

.:unrelated to' the estab;Lishrent ,of Çl pe:tformap.ce reco.rd. 'ro 'of " the seven BIAs have e~isted for, more than 20 years, .and two' ',/

òi:hers have existed for more than LO years. Of the other three

SIAs, one was established in 1987, one in'1989, and one in 1991.

You state that, b~fore the t-ransfe.r of assets, only . . iñv~tment ' management fees and custody' charges were paid directly~

Lrom SIA assets. Other fees related to investment in the SIAs

wer~ paid by the p~rticipating pension plans. Therefore, Fund . expenses generally are higher than those tnat were paid by the corresponding. SlA.!:1 . : . .., ,

The Trust proposea toinclude in its .prospectus or statement. of additiona~ information, and its advertisements and' sales'

literature', the performance of the SlAs for the periods prior to"

the date the Trust's registration statement became effective in

calculati~g th~ totai, r~tur~ of each Ci~SB. . Specifically, the

standardized average annual total return of eaoh class will be

calculated for the preceding one, five and ten year periods (or

since inception of the applicable SlA if it has been in existence

. less than five or ten years) by including the corresponding SIA's

\ total return calculated in accordance with Item 22 (b) (i) of Form

N- 1A for periods prior to September 30, 1994. 21 You further

;il As further evidence that the Funds are managed in a

materially equivalent manner to the corresponding SlAs, you

note your belief that, although not required to, the SlAs

likely would have been able to comply with the investment

restrictions imposed by Subchapter M of the Internal Revenue

Code. Telephone conversation with Richard M. Howe on

September 28, 1995.

~I The initial expense level of each Class 4 was equal to the

level of expenses of the corresponding SIA. Telephone

conversation with Richard M. Howe on September 21, 1995.

21 You represent that any quotation of the Trust's performance that includes the performance of the SlAs will be

accompanied by disclosure that: (1) the quoted performance

data includes the performance of the SIAs for periods before

the Trust's registration statement became effective; (2) the

SlAs were not registered under the 1940 Act and therefo~~

were not subj ect to certain investment restrictions that are

imposed by the Act; and (3) if the SIAs had been registered

under the 1940 Act, the SlAs' performance may have been adversely affected.

• 2 .,

.. ., p.opose ,that, , fOT t.his, purpose, the .performance of, the SIAs be ¡¡, adju8t.ed . to i:etlect ,tne 'déduction of the. fee'S. and ,expenses, of ' the

classes' of the c.orresponding' 'Fund as ,stated.in ,the fee table

included in thê"Ttust's prosp,eçtLls dat,ed.,O'~tobe'r 3', "1994, the

effec:tive date' of the Trust' s. registra"tion statèment ~ 'Xou'

maintain 'that omitting th~ S~AS' ,performançe' pr.ior to the " registration 'of the, Trust would deny.' potentìal, investors access 'to. :lrnport"antinvest!lent informati0n.' . ." Rule 482 (e) (3) under the 'Securities :Act of 1933 requires that~ fund advertisements" containing perfÐrmance data include quotations'of åv.erage anriual total return' calculat.ed in accordance with Item 22 (b) (i) of Form N-1A for one, five, and ten year periods. Q/ ' If a fund' s regîst~ation, statement has been in effect for' less than any- of those periods, the time during which

the fund' '8 "registr.a'tion iatateme:pt has peen' in effect must be' sub.stituted for the period OJ: peri,åds' otherwise requir.ed. 1/ The requirement that standardized performance data not include .periods' .prior tÖa, tllnd' s registrà,tion'. is intended in part to preclude an adviser from establishing a number of funds for 'the :purposes of, generating performance, data, and then registering those "ii;cubator funds" with the best performance,records so that the newly registered' funds can use tha't performance: ß.I Under the circumstances set forth in your letter, we would

not recommend enforcement action to the Commission if the SIA

performance data prior to the effective date of the Trust' s

registration statement were included in calculating total return

used in the Trust's prospectus, ~tatement of additional

information, advertisements and sales literature i despite the

61 Item 22 (b) (i) requires a fund that advertises performance data to include in its registrat~on statement average annual

total return quotations calculated in accordance with a

formula set forth in that Item. Rule 34b- 1 under the 1940 Act requires that sales literature (i. e., material that accompanies or follows delivery of a fund's prospectus) that

contains performance data include the total return

information required by Rule 482 (e) (3) .
1.1 Rule 482(e) (3); Instruction 5 to Item 22(b) (i) of Form

N-1A.
ß.I See Lemke, Lins & Smith, Regulation of Investment Companies

§22.01, n.4 (1995). When amendments to Rule 482 were

adopted in 1988, the adopting release stated that a fund

would not be permitted to advertise its performance prior to

the effectiveness of its registration statement becaus~.

"funds are likely to be managed differently before they are

offered to the public." Investment Company Act Rel. No.

16245 (Feb. 2, 1988).

• 3 .,

f~ct ,tha't:. the, SIAs were not" registered, entit,ies. 21 This , it ,positiÒn, i.s~. based, part'icula:ily, on your. rëpr~sentations that (1). each Fund is màna-ged in- a manner that ,:js in ,all :material respects. , 'eguIvalènt to the ma:çageme~t of ,the corresponding SIA, and" (2) ,

the' Funds we-ie, created for. P1lr.pos,es entirely urirelateCl, 'to the :.'~s,tabiishmeilt of a 'performa,nce record. ,,':

'With respect to your proposa.l 'to adjust the performance 'of ,

the SIAs to reflect the fees and expenses of the Funds, the staff

generally takes the position that an investment company may not

recalculate its standçirdized total return to reflect new' ~ule

'l2.b- 1 fees,' or other internal fund expenses, but.'must calculate' , standardized total 'return using the actual' f~es charged to the Funds.' 10/ This position is based, at least in part, on the

rationale that 'reflecting revised expenses in total return might

r~quire frequent arid burdensome recomputations' that could 'not . rèadily be ve:tîfied by Commission examiners.' 111

, , 'While, as a general matter, we continue to adhere to this position, we would. not recommend' enforcement action to the

Commíssion, if, under the circumstances described in your letter, the T:rust, restates. the prior-performance of the corresponding SIAs to reflect the' fees and expenses of each class as stated in

the fee table included in the Trust's initial prospectus. In

reaching this conclusion, we note particularly that: (1) you

propose a one- time recalculation of the SIAs' performance and the

I Trust will not adjust the performance of the SIAs to reflect future changes in the internal expenses of a class; (2) you

represent that it would not be practicable to determine the

actual expenses associated with an investment in the SIAs, as

~I In Growth Stock Outlook Trust, Inc. (pub. avail. Apr. 15,

1986) the staff took the position that a closed-end fund may

include in its prospectus the performance of its investment

adviser's similarly managed private accounts as a substitute

for fund performance during the first year of the fund's

operations. Because each Fund is essentially a continuation

of its corresponding SIA, the limitations set forth in the

Growth Stock letter do not apply here. Accordingly, the

Trust's use in its prospectus of performance data that

incorporate the SIAs' performance need not be limited to the

first year of the Trust's operations.

iol Id. In contrast, the staff has taken the position that an

investment company should use its current sales load in

calculating standardized total return. IDS Financial Corp 28, 1993). ' (Dec. 19, 1994); The Managers Core Trust (pub. avail. Jap.

111 Kidder, Peabody Equity Income Fund, Inc. (pub. avaiL.

Nov. 1, 1991).

• 4 .,

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. ¡

,c~,tain ' of, thc:::e ' expenses were paid, direct;Ly by tne. rel:eva1nt it pJ;a.ns ,raetie.r "t:pan by' the Si~~ ,and, thèse. .exp~nses' va.iec: among . plans';' and.'(3) ýour proposed adjustment to the SlAg" perfó:raace w.ill result in".totaI retura 'fïgures 'for, the,. Funds' that are no ','

, higher than would result from the. use or the: actual expenses paid quto.f the assets of tne SIl\s.. ,12/ , " . , . ., , Yo~ should note ih~t ,because thi~ ~espobse is based on ene ,.. facts and' representations in your letter; different facts or

representations may require a different conclusion. 131 ana M. Cayne" I'.. , ~ttorn~y, , fA, ~tt ltt' ,~~. 121 See note 4 and accompanying text supra.

131 The above analysis also would apply to an investment comgany that relied on the exception for private investment ' companies set forth in Section 3 (c) (1) or the exception for common trust funds set forth in Section 3 (c) (3) of the 1940

Act prior to its registration.

• 5 .,

SENT ,BY:Xerpx Te I ecopier 7021' ;. s-2é-95 ; 5: 23PM ; ".
41374.46210'" 202 a42 ~659;# i . ) , i)
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Septen.ber 21. 1995 ' .

Offce of the Chitf.Counsel

Division of Investment Mariagement

Securities and Exchange CommissÌon
JudiciaI) Plaza
450 Fifth Street, N.W.
Washington. DC 20549
Re: Massachusetts Mutual Life Insurance Company MassMutuaJ Institutional Funds File Nos. 33-73824 and 811-8274 Ladies and Gentlemen:
Massachusetts Mutual Lie Insurance Company ("MassMutual") is the investment adviser to MassMutual Institutional Funds (the "Trust"). The Trust is an open-end, management investment company registered with the Securities and Exchange Commission (the IICommssion") pursuant to the Registration Statement referenced above (the "Registration Statement"). The Trust consists of seven series (the "Fuds"), each having four classes of shares ("Classes"). Class 1, 2 and 3 shares are offered primarily to employer-sponsored defined contribution plans. Class 4 shares are only offered to unregistered separate investment accounts of MassMutuBI Bnd certain' of its affilated life insurance companies. . , Each of the seven Funds has an investment objective, policies and practices designed to correspond to the investment objective, policies and practices of a corresponding MassMutual separate investment account (collectively, the "SIA"). The SIA are lasoMus tI MUløJ Li. 1'''0''' Co",po., o.d ;,ltoted I.."'." "'''pont", Sp,t.gf.ld MA ~ 0101-_ 413 788-84ll

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" ., , It
öffce of Chief Counsel '
MassMutual Institutional Funds
Septi;mbet21, 1995.

Page' 2
not registered investment compånies as they each are exempt from registration under Se.ction 3(1l) of the Investment C;ompany Act of 1940, as amended. Each of the SIA contnbuted al of its portolio securities to the correspondig ,Fund in

exchange for Oass 4 shares. i As a' result of th exchange, the seven' ~IA were

. effectively converted from separate investment accounts having their ow portfolios

. of in-.~stments to separate' investment ac~ounts. investing solely in Class 4 shaes of ., .

the. Funds. Since, thè . SIA' constitute' the predecessors of the' Funds" the Trst's initial prospectus contained historical investment performance for the SIA (adjusted to reflect anticipated expenses, net of management fee waivers) of each Çlass of each Fund. It is 'proposed ~hat the Trust 'calcUlate the performance tor each Class of each Funci or periods commencing prior to the transfer of the SIA assets by including the corresponding SIA's total return adjusted to reflect the deduction of fees and

expenses applicable to each Class as stated in the Fee Table of the Trust's intial rospei:tus which was effective October 3, 1994. Total return would be calculated ursuant to SEe approved methodology as currently set forth in Item 22 of Form I-A. These fees and expenses would include sales charges (if any should be mposed) and Rule 12b-l fees and, in the case of Class 4, any charges at the SIA evel. , y quotation of the performance of the Trust that includes the performance of the !A will be accompanied by disclosure that states that: (1) the quoted performance ata includes the performance of the SIA for periods before the Trst's

egistration Statement became effective; (2) the SIA were not registered under the 940 Act and therefore were not subject to certain investment restrictions that are mposed by the 1940 Act, and (3) if the SIA had been registered under the 1940 ct, the SlAs performance may have been adversely affected. herefare, we hereby respectfully seek the assurance of the SEes Division of nvestment Management (the "Division") that it will not recommend enforcement ction against the Trust or its underwiters, if the perfonnance of each of the SIA re deemed to have been the performance of the corresponding Fund, restated to eflect the fees and charges of each aass of the Fund, for purposes of calculating ,'* 1 The Trust obtained an order from the Commission permitting it to offer ultiple Classes of shares and to transfer assets from the SIA to the corresponding und of the Trust. See, Release No. IC-20455 (August 9, 1994).

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.,:
. Offce' of Chief Cóunsel .. ., :, MassMutual Instîtutiôna1:Fiind~

~èpt~mber 2:1,': 19~.5

the performance of each of the Funds for the use in sales mateiial, including Such tieatient will pro\Ide potential investors with iior~aÙon they should have applicable prospectuses, and state~ents of additional information.z . . '" . .

before investing and is consistent with the Division's positions in analogous situations , and its interpretations of the policies underlyig the Comi~ion's mutual f~nd adverdsing rules. . .' '. ' " .

. Back0lJd he Trust was organized under the laws 'of the .çommonwealth of Massachusetts as a Massachusetts business trust pursuant to an Agreement and Dec.laration of Trust ated May 28, 1993. The Trust consists of se'Vcn series or Fuds, each having four asses of shares. Each Fund has a separate investment objective designed to orrespond to the investment objective, policies and practices of an existing SIA of assMutiial. The assets of the SIA were transferred to the correspondig Funds n September 30, 1994 in exchange for Class 4 shares. The Trust's Registration tatement was declared effective. and the Trust commenced a public offering of its hares, on October 3, 1994. Thus, upon commencement of the public offering of the rust's shares-except for $107,000 of initial capital provided by MassMutual-the !A held all of the shares of the Trst and each Fund's investment portfolio was

dentical to the portfolio of the corresponding SIA immediately prior to the public ffering. assMutual has seived as investment adviser for each of the SIA since their

nception and is the investment adviser to each of the Funds. The investment ub-advisers which served certain of the SIA prior to the exchange of assets, are the nvestment sub-advisers for the corresponding Funds. The investment policies, bjectives, guidelines and restrictions of the Funds are in al material respects quivalent to those of the corresponding SIA. Moreover, the investment

. anagement practices and financial characteristics of each SlA are in all material espects identical to those of the corresponding Fund. As the SIA were nregistered investment camp-anies, fonnal testing of the SIA to ensure compliance 'th provsions the Investment Company Act of 1940 and Sub-Chapter M of the ,. :i We are not asking that the respective Funds be treated as the successors of the orresponding SIA for financial accounting purposes. Thus, any performance igures used in the Trust's financial statements, such as in the Financial Highlights,

11 reflect the actual performance of the Funds from the date of inception, that is s of the Effective Date of the T~sts Registration Statement. ~
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SENTBY:Xerox Teleco~ier 7021 9-28-95;. 5:24PM ~ : 41 3744621 o~ 202 942 ~659;# 5 " Offce ófChef C01,nsel . ii:.

MassMutùal Institutional' lunds

September 2l, 1995.

~aKe 4' .'
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, "

Intemal Revenue Code applicable to registered investment companies, was not' condl:cteq. The SIA' assets, like, those of a registered investment company, are marked-t~-market on a daily basis; The SIA, 'moreover, operate under the federal tax laws and state ,insurance laws so that any income or gain realized, after the deduction for 'exenses,..is allocated to pension' plan investors by way of an increase On the valu~ of the, a plan's unts (i.e..shares) in the SIA.

If a pension plan client purchases a group anuity contract from'MassMutual that .' supported by the SIA, the client would pay MassMutual a .variety of fees related o the operation of the plan., These fees vary depending upo~ the size of the ension . plan,' both .in;, teris of assets and partiCipants, the type of contract

ur~hased, and the level of servce desired. The fees might relate to plan

ecordkeeping, plan participant recordkeeping, anti-discrimination testing under the mployee Retirement Income Security Act ("ERISA"), con'sulting servces and commissions to sales representatives and intermediaries. Investment management ees and custody charges were the only expenses paid by the SIA. It would be

ifficult, if not impossible, to retroactively determine what all the charges and xpemes were for approxately 2000 plans with many diferent contracts with ¡verse fee arrangements and then to recalculate SIA performance to reflect all of hese fees and charges. Therefore, we propose using the exenses associated with lasses 1, 2 and 3 of the Funds as stated in the Fee Table of the Trust's initial rospectus because these expenses approxiate the investment management,

ustody fees and the contract level fees paid by pension plans that invested their ssets in the SIA prior to the establishment of the Trust. We propose using the xpenses associated with Class 4 of the Funds as stated in the Fee Table of the

rust's initial prospectus because these expenses are the same tye of expenses, nvestment management and custody fees, paid by the SIA prior to the

stablishment of the Trust. However, a~ a eractical matter, a pension plan that urchases a SIA product and thus invests indirectly in the underlying Class 4 shares, ays separate and varied contract level charges not at the Fund or SIA levels, but t the contract leveL. This is required because the Class 4 shares are offered only o SIA of MassMutual and because of ERISA limitations on the expenses that auld be charged at the Fund leveL. ince the Trust considers it appropriate to treat each SIA's performance record as he performance record of the corresponding Fund, the Trust's initial prostsectus ated October 3, 1994 set forth the average annual total return and cumulative total eturn for the SIA (adjusted to reflect anticipated expenses, net of management fee aivers, of each Class of each Fund) for the one-, three-, five- and iO-year (or since nception, if less than 10 years) periods ended December 31, 1993. The Trust .,

SEN-T BY:Xerox Te I ecopíer 7021 ; '9-26-95 5: 25PM 413744~210~ 202 942 ~Ø59l# 6; , , . it Offc~ of Chief Coun~ei : '

. MtlssMutualInstitUtional :Funds
SeptelIber 21, .1995 ' ,

. . believes that it is appropriate to continue to include SIA performance data in the Trsts prospectus and statement of additional information beyond .the, initial on~. year perfód. It is propos~d that the Trut calculate the ,performance for each Class

of each Fund for periods commencing prior to the transfer of ~e SlA assets by including the correspondig SIA's total return adjusted to reflect the deduction of. fees and exensés applicable to ea.c~ Clss., These..fees å.dexens~s w:ould include sales' charges. '(if any should be Impos'cd) and- Ride 12b-l fees, :apdin the case of. Class 4, any charges that might be imposed at the SIA leve1.3

Divion Position on Perforance Amrtg . ,

We believe that the policies underlying the Commission~s performanCe advertising'

rules require the Funds to include the SIA' perforinånce prior to 'commencement of the Trust's operations when quoting their own performance. The Commission, in adoptig amendments to the advertising rules in 1988, stated that the amendments ere designed to "prevent misleading performance claims by funds and to permit investors to make meaningf comparisons among fund performance claims in advertising."4 Omitting the SIA' performance would deny potential investors access to information they should have before investing and would be inconsistent with prior positions of the Division and the Commission. A purchaser of a Fund which has, in effect, a ten or twenty year investment track record sh.ould be able to determine what that record 's. In no-action letters issued subsequent to adoption of the 1988 advertising rule endments, the Division has stated that .

it would be inappropriate...to permit a fund to eliminate past performance results from its performance advertising if the SEe's policy is not to be eroded.' J Currently, there are no charges at the SIA level and ERISA does not permit, he SIA to impose any additional investment-related charges at the SIA level eyond those charges paid by the Trust without the approval of the plan fiduçiary. , 4 Advertising by Investment Companies, Securities Act ReI. l-o- 6753, Investment ompany Act ReI. No. 16,245 (February 2, 1988). 5 See, John Hancock Asset Allocation Trust (January 3, 1991); Zweiii Series ru (Jan. 10, 1990) and The Fairmont Fund Trst (December ~ 1988).

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~B:ssMutuai Intitutional Funds'

September 21~ ì995

Påge 6 .
Thus, for example, the Diviion has refused to give no-action assurance where,a fund . wished to exclude from its performance quotations p~rformance from a period .prior to a change in'lnvestment strategies.' The Diviion 'also refued to provide no￾action assurarice"on omitting :prior performance inormation where a new' adviser , had assumed responsibilty for'the fund but an indivdual who was thè prèsident and a director of a predecessor adviei'~as also chef ~cutive ,offcer of the fund dl,rig båthadVisers' tenure.7 In ,contrast, 'the Division 'has allowed funds . with the same investment objectives to excludè performance for periods prior to a change in

'iIvestment advisers pIiy where the new adviser is not affiliated with the previous . A' . , ad~er; , The'reorganizationof: the,SIA into .the Funds is comparable to that descnòed in Managers Core Trust in which a newly-created feeder fund ,in a IIcore and feeder" fund structure was allowed to calculate its performance based on the prior performance of the pre-exsting fund that transferred its assets to the core fud.9 Additional feeder funds were also allowed to use the performance of the core (which in turn was based on, the performance of the pre-exsting transferor), restated to reflect the fees and expenses of the respective feeder. Bach of the key factors emphasized in Manag:ers Core Trst are present in the situation presented here:
(1) The Trust has succeeded to all of the predecessor SIA' net assets and, except for the initial seed capital, these constituted all of the Trust's net assets. (2) The investment policies, objectives, guidelines and restrictions of the SIA and the corresponding Funds are in all material respects equivalent. (3) The investment management practices and financial characteristics of each SIA were in all material respects identical to those of the corresponding 6Id. 7 Zweii: Series Trust (January 10, 1990). . 8 See, Unified Funds (April 23, 1991) where the new' adviser was not dWned,

ontroUed or managed by any prior owner or any principal thereof); Philadelphia
c. (Oct. 17, 1989) and Investment Trust of Bostan Funds (April 13, 1989)_

9 Managers Core Trust (January 28, i993). See also, IDS Financial Com. December 19, 1994)_ .;

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SENT BY:Xerox Telecopier7021 ; 9-26-95 ; .5:26PM 4137446210-+ _ 202 9~2 9659;# 6 '", , Offce .of Chef Counsel , II. MassMutua Institutional Funds Septemb~r' 21, 1995 ..
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Funds.
, (4) Th~ ,in~estment a~~er .ånd' sub-advisers of t;te F~ds ar.~ ideI)tical to the (5) The SIA will continue to ext after th~ reorganization.io investment adviser and investment sub-advisers of the 'prea~cessor. SIA. . . . .. , .

. ' .
Similarly, we believe that it is necessary and appropriate for each Class of each Fund to restate the prior performance of the corresponding SIA to reflect the curent ees ani: expenses of that 'Class and to use such performance dåta wherever it is advertising' the Trust's performanc,e.11 '. ese precedents refleci the common theme that if a fund and its predecessor are 'n reality the same entity over time with the same managers, then its performance hould reflect its entire history. Absent a dramatic change, such as in investment anagement, past performance cannot and should not be excluded from the

resentation of performance data. Performance advertising should accurately reflect he particular investment adviser's performance and the adviser's performance ecord should be availa.ble to potential investors regardless of the legal form of the und - which has little if any relevance to the nature, or quality of the investment anagement servce being provided. Ths is why no-action letters issued subsequent 10 In the case of the Trust, as was the case in Manag:ers Core Trst, the Funds re not merely simar to the corresponding SIA, they are a continuation of the ame investment portfolios. Accordingly, the' one-year limitation for the use of an nvestment adviser's performance of similar accounts should not be applicable to or ppropriate for the Trust's use of the SIA performance history. Growth Stock (April 15, 198§).

11 The Division has taken no-action positions in analogous situations where

egistered investment companies have proposed changes in legal form or domicile, rboth. See, CIGNAA~~ressive Growth Fund. Inc. (February 15,1985) and UnHS(g￾Inc. (September 17, 1984), This analogy is supported by the ollowing facts: (1) the investment objectives, policies, practices and restrictions of he predecessor SIA and Lhe correliponùing Fundg are in all material repets

quìvalent; (2) each Fund succeeded to all of the corresponding SIA's assets and uch assets constituted all of the Fundsl assets (other than seed money); (3) assMutual is the investment adviser for each SIA and for each Fund, and (4) the nvestment sub~advisers which selVed certain of the SIA are the investment sub . dvisers for the corresponding Funds. J- ..

. , SENT BY:~erox Te.1 ecopier 7021 9-28":95'; 5: 27PM.; 4'13.7,4462 1 o~ , 202 942' 9659;# 9

. ., Offc~ of. Oiëf Counel . .,it
MassMutUal Intitutional Funds
. ., September 21, 1995
Pa~e 8
. '. . °t"

to the adoption of the 1988 rule amendments have consistently placed practical reality over legal formality, wl;ether those letters permitted funds to exclude prior .' performance, U , declined to' permt ,funØs' to exclude prior peñörmance,13 or If the SIA had:been registered investnient companies, we' believe their performance ermtted funds to use prior performance.14

, .

o~Id have to be mcluded when the Funds advertise their perfòrtance.TÏere is

no reason in, this case to apply dierent rules merely because the SIA are not registered inYestm~nt companes. The SlA were created years ago to fund:qualied . pension plans ~d represent investmentS by a large number of such plan. Both the group anuity'contracts used to market the SIA and the SIA themselvès were and , are. exempt fróm the regitration requrremeiits òf the secUrities laws. Two of the seven SIA have exsted for over 20'years, two more have existed for more than 10 ears and these four SIA represent almost 80% of the approxiately $2.8 bilion of assets transferred to the Trust. The other three SIA were established in 1987, 1989, and 1991. Because of the nature of the reorganization and the history of the lA, there should be no concern that the investment adviser has engaged in picking

ong a group of incubator funds to enhance its performance record. he Trust is designed as a vehicle for the investment of plan assets which are being ccumulated over the long-term to provide for retirement benefits, and in that ontext consideration of long-term performance by prospective investors is vital. mitting the performance history of the SIA from the Trust's performance record .11 deprive investors of material information regarding long-term performance of ignificant importance to them in making investment decisions, 12 See, Unified Funds (April 23, 1991) (fund had new, unaffiiated investment dviser); Philadelpbja Fund. Inc. (October 17, 1989) and Investment Trust of Boston nds (April 13, 1989). ,

13 See, John Hancock Asset Allocation Trust (January 3, 1991); Zweig Series rust (January 10, 1990) and The Fairmont Fund Trust (December 9, 1988). .;

-l____"see~:a=:::or_~ Trust .~pra.

, , .t ,
Offce of Chief Counsel" ,

MassMutual ,Institutional Funds

Septè~l:er 2i~ i99S ' lag~9 . '. .
Ifyou.have any'questions, or require any additional information regarding t is letter, please 'contact ;Richard, M. Howe at (413) 744-6165. P.lease acknoYlIedge. r ceipt 0 this Ietterby ~ate-stamping the enclosed copy and returning the same to e in the'

stamped, addressed ~nvelope.

Very trulY' yours; ~L..~
Stephen L. Kuhn

Vice President and

Associate General Counsel

iaaOzt 11

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