[Federal Register: December 19, 2002 (Volume 67, Number 244)]
[Notices]
[Page 77821-77823]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19de02-113]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 25846; 812-12870]
The Hartford Series Fund Inc.; Notice of Application
December 12, 2002.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: 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.
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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.
Applicants: The Hartford Series Fund, Inc. (``Hartford Series Fund''),
and the Adviser.
Filing Dates: 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.
ADDRESSES: Secretary, Commission, 450 Fifth Street, NW., Washington, DC
20549-0609; Applicants, 55 Farmington Ave, Hartford, CT 06105.
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).
SUPPLEMENTARY 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).
Applicants' Representations
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
[[Page 77822]]
Accident 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'').\1\ The series of
the HLS Series Fund II proposed to be acquired by the Hartford Funds
are referred to herein as the (''Fortis Funds'').
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\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.
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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.\2\
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\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.
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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.
[[Page 77823]]
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-31933 Filed 12-18-02; 8:45 am]
BILLING CODE 8010-01-P