Securities and Exchange Commission (“Commission”).
Notice of an application for an order under section 6(c) of the Investment Company Act of 1940 (the “Act”) for an exemption from section 15(f)(1)(A) of the Act.
Summary of The Application:
Applicants request an order to permit a registered open-end investment company advised by HL Investment Advisors, LLC (the “Adviser”) not to reconstitute its board of directors to meet the 75 percent non-interested director requirement of section 15(f)(1)(A) of the Act, following the acquisition of the assets of certain other registered open-end investment companies.
The Hartford Series Fund, Inc. (“Hartford Series Fund”), and the Adviser.
The application was filed on August 21, 2002, and amended on December 9, 2002.
Hearing or Notification of Hearing:
An order granting the application will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission's Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on January 6, 2003, and should be accompanied by proof of service on applicants, in the form of an affidavit, or, for lawyers, a certificate of service. Hearing requests should state the nature of the writer's interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Commission's Secretary.
Secretary, Commission, 450 Fifth Street, NW., Washington, DC 20549-0609; Applicants, 55 Farmington Ave, Hartford, CT 06105.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Deepak T. Pai, Senior Counsel, at (202) 942-0574 or Janet M. Grossnickle, Branch Chief, at (202) 942-0564, (Division of Investment Management, Office of Investment Company Regulation).End Further Info End Preamble Start Supplemental Information
The following is a summary of the application. The complete application may be obtained for a fee at the Commission's Public Reference Branch, 450 Fifth Street, NW., Washington, DC 20549-0102 (telephone (202) 942-8090).
1. The Hartford Series Fund is an open-end management investment company registered under the Act and is a Maryland corporation, consisting of 26 series. The Adviser, an indirect subsidiary of the Hartford Life and Start Printed Page 77822Accident Insurance Company (“Hartford Life”) serves as investment adviser to the Hartford Series Fund. The Adviser is registered under the Investment Advisers Act of 1940 (the “Advisers Act”).
2. Hartford HLS Series Fund II, (“HLS Series Fund II”), a Maryland corporation, offers 16 separate series. At the time of the Acquisition (as defined below), Fortis Advisers Inc. (now known as Hartford Administrative Services Company) (“Fortis”) served as investment adviser to the HLS Series Fund II, formerly known as Fortis Series Fund, Inc. Fortis was registered under the Advisers Act.
3. Hartford Life purchased all of the outstanding stock of Fortis on April 2, 2001, (the “Acquisition”), and shareholders of each of the Fortis Funds (as defined below) approved an investment management agreement with the Adviser at a shareholder meeting held on May 31, 2001. It is now proposed that certain series of the Hartford Series Funds (“Hartford Funds”) would acquire the assets of certain series of the HLS Series Fund II (the “Reorganization”). The series of the HLS Series Fund II proposed to be acquired by the Hartford Funds are referred to herein as the (”Fortis Funds”).
4. Applicants state that the Acquisition resulted in a change of control of Fortis and an assignment under the Act of the investment advisory agreements between the Fortis Funds and Fortis, resulting in their automatic termination in accordance with their terms, as required by section 15(a)(4) of the Act. The boards of directors (“Boards”) of the Fortis Funds, at a meeting held on March 23, 2001, approved interim advisory agreements which remained in effect from the date of the Acquisition, April 2, 2001, until definitive investment advisory agreements for each of the Fortis Funds were approved by their shareholders on May 31, 2001 in reliance on rule 15a-4 under the Act.
5. On August 1, 2002, the Hartford Funds' Board (including all of the directors who are not “interested persons” of the Adviser) and the Fortis Funds” Board (75% of whom are not “interested persons” of the Adviser or the Hartford Series Fund), respectively, unanimously approved the proposed Reorganization. Participation in the Reorganization will require approval by a majority of the outstanding shares of each of the Fortis Funds. The Fortis Funds' Board has called a special meeting of the Fortis Fund's shareholders to be held on January 15, 2003, for the purpose of considering the Reorganization. If approved by shareholders, the Reorganization is scheduled to be effective on or about January 24, 2003.
6. In connection with the Acquisition and the Reorganization, Applicants have determined to seek to comply with the “safe harbor” provisions of section 15(f) of the Act. Applicants state that following consummation of the Reorganization, more than twenty-five percent of the Board of the Hartford Series Funds would be “interested persons” for purposes of section 15(f)(1)(A) of the Act.
Applicants' Legal Analysis
1. Section 15(f) of the Act is a safe harbor that permits an investment adviser to a registered investment company (or an affiliated person of the investment adviser) to realize a profit on the sale of its business if certain conditions are met. One of these conditions, set forth in section 15(f)(1)(A), provides that, for a period of three years after the sale, at least seventy-five percent of the board of directors of the investment company may not be “interested persons” with respect to either the predecessor or successor adviser of the investment company. Applicants state that, without the requested exemption, following the Reorganization, Hartford Funds would have to reconstitute their Boards to meet the seventy-five percent non-interested director requirement of section 15(f)(1)(A).
2. Section 15(f)(3)(B) of the Act provides that if the assignment of an investment advisory contract results from the merger of, or sale of substantially all of the assets by a registered company with or to another registered investment company with assets substantially greater in amount, such discrepancy in size shall be considered by the Commission in determining whether, or to what extent, to grant exemptive relief under section 6(c) from section 15(f)(1)(A).
3. Section 6(c) of the Act permits the Commission to exempt any person or transaction from any provision of the Act, or any rule or regulation under the Act, if the exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act.
4. Applicants request an exemption under section 6(c) of the Act from section 15(f)(1)(A) of the Act. Applicants state that, as of November 30, 2002, Fortis Funds had approximately $84,215,775 in aggregate net assets. Applicants also state that, as of November 30, 2002, the aggregate net assets of the Hartford Series Funds were approximately $39,739,679,245. Applicants thus assert that the Fortis Funds' assets would represent approximately 0.21% of the aggregate net assets of the Hartford Series Funds.
5. Applicants state that three of the nine directors who serve on the Board of Hartford Series Fund are “interested persons,” within the meaning of section 2(a)(19) of the Act, of the Adviser. Applicants also state that prior to the Acquisition none of the directors owned any interest in or was otherwise an “interested person” of Fortis or the Fortis Funds.
6. Applicants state that to comply with section 15(f)(1)(A) of the Act, Hartford Series Funds would have to alter the composition of its Board, either by asking an experienced director to resign or by adding three new disinterested directors. Applicants state that adding three additional directors would also add unnecessarily to the expenses of the Reorganization and the ongoing expenses of Hartford Series Funds. Applicants also assert that removing an interested director would deny shareholders the valued services, insight and experience such a director contributes and that it would be unfair to require the twenty-two series of Hartford Series Fund which are not involved in the Reorganization to reconstitute its Board to effect the acquisition of the relatively few Fortis Funds.
7. For the reasons stated above, applicants submit that the requested relief is necessary and appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act.Start Signature
For the Commission, by the Division of Investment Management, under delegated authority.
Margaret H. McFarland,
1. Applicants were party to a similar application for an order of exemption from section 15(f)(1)(A) of the Act. The Hartford Mutual Funds, Inc. et al., Investment Company Act Rels. No. 25372 (January 18, 2002) (notice) and 25419 (February 13, 2002) (order) (“Previous Application”). Applicants do not anticipate that any of the remaining series of the HLS Series Fund II or Hartford-Fortis Series Fund, Inc. not party to the Reorganization will be reorganized into the Hartford Funds (as defined in the Previous Application) within the three years following the Acquisition.Back to Citation
2. Applicants also state that the combined aggregate net assets of the Fortis Funds referred to in this application and the Fortis Funds referred to in the Previous Application would have represented approximately 7.40% of the aggregate net assets of the Hartford Funds referred to in the Previous Application as of December 31, 2001.Back to Citation
[FR Doc. 02-31933 Filed 12-18-02; 8:45 am]
BILLING CODE 8010-01-P