[Federal Register Volume 59, Number 63 (Friday, April 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-7825]


[[Page Unknown]]

[Federal Register: April 1, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20169; 812-8658]

 

Hartford Bond/Debt Securities Fund, Inc., et al.; Application

March 28, 1994.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for exemption under the Investment 
Company Act of 1940 (the ``Act'').

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APPLICANTS: Hartford Bond/Debt Securities Fund, Inc., HVA Money Market 
Fund, Inc., Hartford U.S. Government Money Market Fund, Inc., Hartford 
GNMA/Mortgage Securities Fund, Inc., Hartford Money Market Fund, Inc., 
and Hartford Index Fund, Inc. (collectively, the ``Funds'') and 
Hartford Investment Company, Inc. (the ``Adviser'').

RELEVANT ACT SECTIONS: Section 17(d) of the Act and rule 17d-1 
thereunder.

SUMMARY OF APPLICATION: Applicants seek an order that would permit the 
Funds to deposit their uninvested cash balances into a joint trading 
account through which the cash would be invested in repurchase 
agreements.

FILING DATE: The application was filed on October 29, 1993, and amended 
on January 28, 1994. Applicants have agreed to file an additional 
amendment, the substance of which is incorporated herein, during the 
notice period.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the SEC orders a hearing. Interested persons may 
request a hearing by writing to the SEC's Secretary and serving 
applicants with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on April 22, 1994, 
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 may request 
notification of a hearing by writing to the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 5th Street NW., Washington, DC 20549. 
Applicants, Hartford Plaza, P.O. Box 2999, Hartford, CT 06104-2999.

FOR FURTHER INFORMATION CONTACT:Elaine M. Boggs, Staff Attorney, at 
(202) 272-3026, or Robert A. Robertson, Branch Chief, at (202) 272-3030 
(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 
SEC's Public Reference Branch.

Applicants' Representations

    1. Each of the Funds is a registered open-end management investment 
company and is authorized to invest in repurchase agreements. 
Applicants request that relief be extended to future funds and future 
services of existing Funds for which the Adviser, or any entity under 
common control or controlled by the Adviser, serves as investment 
adviser. (The term ``Funds'' will include these future funds and 
series.) The Adviser serves as investment adviser or investment manager 
to the Funds and is ultimately owned by ITT Corporation.
    2. At the end of each trading day, each Fund is expected to have 
uninvested case balances in its account at its custodial bank that 
otherwise would not be invested in portfolio securities. Generally, 
such assets are, or would be, invested in short-term liquid assets, 
including repurchase agreements. Presently, the Adviser must purchase 
such instruments separately on behalf of each Fund.
    3. Applicants propose to deposit the daily uninvested cash balances 
of the Funds into one joint account. The daily balances of the proposed 
joint account would be invested in one or more repurchase agreements. 
Under the general provisions of each Fund's agreement with the Adviser, 
the Adviser would share the responsibility for investing monies in the 
joint account, establishing accounting and control procedures, ensuring 
the equal treatment of each Fund, and ensuring that the assets of the 
Funds continue to be held under proper bank custodial procedures.
    4. Each of the Funds has established quality standards for issuers 
of the repurchase agreements and requires that the repurchase 
agreements will be ``collateralized fully'' as that term is defined in 
rule 2a-7 under the Act. All joint repurchase agreement transactions 
will be effected in accordance with Investment Company Act Release No. 
13005 (Feb. 2, 1983) and with other existing and future positions taken 
by the SEC or its staff by rule, release, letter, or otherwise relating 
to repurchase agreement transactions. Applicants acknowledge that they 
have a continuing obligation to monitor published statements of the SEC 
on repurchase agreements, and in the event the SEC sets forth different 
or additional requirements, each Fund will modify its systems and 
standards accordingly.
    5. The joint accounts would not differ from any other account 
maintained by a Fund with a custodian bank except that monies from each 
Fund could be deposited on a commingled basis. The account would not 
have any indicia of a separate legal entity and only would exist to 
provide a convenient way of aggregating the individual daily 
transactions necessary to manage the Funds' respective daily uninvested 
cash balances. Each of the Funds participating in a proposed joint 
account would participate in that account on the same basis as every 
other participating Fund, and in conformity with each Fund's 
fundamental investment objectives and policies.

Applicants' Legal Analysis

    1. Section 17(d) of the Act and rule 17d-1 thereunder prohibit an 
affiliated person of an investment company, acting as principal, from 
participating in or effecting any transaction in connection with any 
joint enterprise or joint arrangement in which the investment company 
participates. Each Fund participating in the proposed joint account and 
the Adviser could be deemed to be ``a joint participant'' in a 
transaction within the meaning of section 17(d). In addition, the 
proposed account could be deemed to be a ``joint enterprise or other 
joint arrangement'' within the meaning of rule 17d-1.
    2. The Funds' board of directors are satisfied that the proposed 
method of operating the joint account would not result in any conflicts 
of interest among the joint participants. The boards also considered 
the fact that although the Adviser would gain some benefit through 
administrative convenience and some possible reduction in clerical 
costs, the primary beneficiaries would be the participating Funds and 
their shareholders since the joint account may earn higher returns for 
the Funds and would be a more efficient means of administering daily 
investment transactions. Accordingly, applicants believe that the 
criteria for issuance of an order are met.

Applicants' Conditions

    Applicants agree to the following conditions in any order of the 
SEC granting the requested relief:
    1. A separate custodian cash account will be established at the 
custodian bank into which each Fund will cause its uninvested net cash 
balances to be deposited daily.
    2. Cash in the joint account will be invested solely in repurchase 
agreements collateralized by suitable U.S. government obligations 
(i.e., obligations issued or guaranteed as to principal and interest by 
the U.S. government or by any of its agencies or instrumentalities). 
Each repurchase agreement will satisfy the most restrictive standards 
for repurchase agreement transactions set by any Fund participating in 
a particular repurchase agreement transaction. Each repurchase 
agreement will have, with rare exceptions, an overnight or over-the-
weekend duration, and in no event will it have a duration of more than 
seven days.
    3. Each Fund relying on rule 2a-7 under the Act, in order to value 
its assets on the basis of amortized cost, will use the average 
maturity of the joint account for the purpose of computing the Fund's 
average portfolio maturity with respect to the portion of its assets 
held in the account on that day.
    4. To eliminate the possibility of one Fund using any part of the 
balance of the joint account credited to another Fund, no Fund will be 
allowed to create a negative balance in the joint account; provided, 
however, that a Fund will be permitted to draw down its entire balance 
at any time. Each Fund's decision to invest in the joint account will 
be solely at the Fund's option. A Fund will not be required either to 
invest a minimum amount or to maintain a minimum balance. Each Fund 
will retain sole ownership rights to all of its assets invested in the 
joint account, including interest payable on such assets. Each Fund's 
investment in the joint account will be documented daily on the books 
of both the Fund and the custodian bank.
    5. A fund will participate in the instruments held in the joint 
account and any interest earned or accrued thereon on the basis of its 
percentage share of the account's then total balance.
    6. No adviser will collect an additional fee from any Fund for 
managing the joint account.
    7. The administration of the joint account will be within the 
fidelity bond coverage required by section 17(g) of the Act and rule 
17g-1 thereunder.
    8. The board of directors of each Fund participating in the joint 
trading account will adopt procedures pursuant to which the joint 
trading account will operate, which will be reasonably designed to 
provide that the requirements of the application will be met. The board 
will make and approve such changes as it deems necessary to ensure that 
such procedures are followed. In addition, the board will determine, no 
less frequently than annually, whether the joint trading account has 
been operated in accordance with such procedures.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-7825 Filed 3-31-94; 8:45 am]
BILLING CODE 8010-01-M