[Federal Register Volume 62, Number 39 (Thursday, February 27, 1997)]
[Notices]
[Pages 9004-9006]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4858]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 22523; 812-10424]
HVA Money Market Fund, Inc. and Hartford U.S. Government Money
Market Fund, Inc.; Notice of Application
February 21, 1997.
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: HVA Money Market Fund, Inc. (``HVA Fund'') and Hartford
U.S. Government Money Market Fund, Inc. (``U.S. Government Fund'').
RELEVANT ACT SECTIONS: Order requested under section 17(b) of the Act
granting an exemption from section 17(a).
SUMMARY OF APPLICATION: Applicants request an order to permit the HVA
Fund to acquire substantially all of the assets of the U.S. Government
Fund (together, the ``Funds''). Because of certain affiliations, the
Funds may not rely on rule 17a-8 under the Act.
FILING DATES: The application was filed on November 8, 1996 and amended
on February 10, 1997.
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 March 18, 1997,
and should be accompanied by proof of service on the 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 SEC's
Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicants: c/o ITT Hartford Group, Inc., Hartford Plaza,
Hartford, Connecticut 06115.
FOR FURTHER INFORMATION CONTACT:
Kathleen L. Knisely, Staff Attorney, at (202) 942-0517, or Mary Kay
Frech, Branch Chief, at (202) 942-0564 (Office of Investment Company
Regulation, Division of Investment Management).
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.
Applicant's Representations
1. The HVA Fund is a Maryland corporation registered under the Act
as an open-end, diversified management investment company. Shares of
the HVA Fund are sold to separate accounts of Hartford Life Insurance
Company (``Hartford Life'') and ITT Hartford Life and Annuity Insurance
Company (``Hartford Life and Annuity'') to fund benefits under variable
annuity contracts and variable insurance policies issued by Hartford
Life and Hartford Life and Annuity.
2. The U.S. Government Fund is a Maryland corporation registered
under the Act as an open-end, diversified management investment
company. Shares of the U.S. Government Fund are sold to separate
accounts of Hartford Life.
3. The HVA Fund has sold shares to the following separate accounts:
Hartford Life Separate Account One, Hartford Life and Annuity Separate
Account One, Hartford Life Separate Account Two, and Hartford Life DC
Variable Account I (the ``Variable Annuity Separate Accounts''), which
are separate accounts established to receive and invest premiums paid
under variable annuity contracts issued by Hartford Life and/or
Hartford Life and Annuity; and variable life separate accounts of
Hartford Life.
4. The U.S. Government Fund currently sells its shares only to
Hartford Life Separate Account Two and Hartford Life DC Variable
Account I, two of the Variable Annuity Separate Accounts.
5. The variable insurance policies and variable annuity contracts
offered through the separate accounts are referred to collectively as,
``Contracts.'' Owners of Contracts (``Contractowners'') offered through
Hartford Life Separate Account Two and Hartford Life DC Variable
Account I may choose to have Contract value allocated to sub-accounts
of such accounts. These sub-accounts invest in shares of the Funds.
6. Hartford Fire Insurance Company is a wholly-owned subsidiary of
ITT Hartford Group, Inc. (``ITT Hartford''). Hartford Life is a wholly-
owned subsidiary of Hartford Fire Insurance Company. Hartford Life and
Annuity is a wholly-owned subsidiary of Hartford Life. The Hartford
Investment Management Company (the ``Adviser'') is registered under the
Investment Advisers Act of 1940 and serves as investment adviser to the
Funds.
7. Pursuant to the Agreement and Plan of Reorganization (the
``Plan''), applicants propose that the U.S. Government Fund will
transfer all of its
[[Page 9005]]
existing assets to the HVA Fund. In consideration thereof, the HVA Fund
agrees (a) to assume and pay all of the obligations and liabilities of
the U.S. Government Fund to the extent that they exist on or after the
closing date (as defined below) of the reorganization and (b) to
deliver to the U.S. Government Fund full and fractional shares of
common stock of the HVA Fund equal to that number of full and
fractional shares of the U.S. Government Fund then outstanding as
determined based on the relative net asset value per share of the funds
as of the close of the New York Stock Exchange on the last business day
immediately preceding the reorganization (the ``Closing Date''). At the
Closing Date, the U.S. Government Fund will liquidate and distribute
pro rata to its shareholders the HVA Fund shares received pursuant to
the reorganization.
8. The reorganization will also require the consolidation of the
corresponding sub-accounts of the Variable Annuity Separate Accounts.
Hartford Life will carry out this consolidation on the Closing Date
immediately after the completion of the HVA Fund's acquisition of the
U.S. Government Fund, by issuing units of interest in the HVA Fund sub-
accounts on a pro rata basis to owners of Contracts who, prior to the
reorganization, owned units in the U.S. Government Fund sub-accounts,
in exchange for their units of the disappearing sub-accounts. Although
this ``exchange'' would be nothing more than a bookkeeping exercise,
applicants believe that it conceivably could be considered to involve
the issuance of new units of the HVA Fund sub-accounts in exchange for
the assets of the U.S. Government Fund sub-accounts. The number of full
and fractional units of interest of the HVA Fund sub-accounts to be
issued will be determined by dividing the aggregate value of the HVA
Fund shares issued to the U.S. Government Fund sub-account, by the unit
value of the HVA Fund sub-account computed on the Closing Date using
the valuation methods set forth in the above-noted separate accounts'
current prospectuses.
9. The boards of directors of the Funds (the ``Boards'') have
determined that the interests of existing Contractowners indirectly
invested in the Funds will not be diluted under the Plan and that the
reorganization would be in the best interests of the funds and their
shareholders. In addition, the directors of the U.S. Government Fund
noted, in particular, (a) potential benefits of the reorganization to
shareholders of the U.S. Government Fund and Contractowners with
Contract values allocated to Hartford Life DC Variable Account I and
Hartford Life Separate Account Two; (b) the compatibility of investment
objectives, policies, restrictions, and investment holdings of the U.S.
Government Fund and the HVA Fund; (c) the terms and conditions of the
Plan which might affect the price of outstanding shares of the U.S.
Government Fund or interests of Contractowners indirectly invested
therein; and (d) direct or indirect costs to be incurred by the U.S.
Government Fund or shareholders thereof or Contractowners who have
indirectly invested thereon (all of which will be borne by Hartford
Life or Hartford Life and Annuity). Finally, applicants note that the
larger aggregate net assets resulting from the reorganization should
enable the combined entities to realize significant benefits associated
with economies of scale, increased investment opportunities, and
enhanced portfolio diversification and liquidity.
10. The Boards, including a majority of those directors who are not
``interested persons'' (as defined in the Act), unanimously approved
the Plan on October 22, 1996. The Plan is subject to the approval of
shareholders of the U.S. Government Fund, and a special meeting of the
shareholders is scheduled to be held on June 17, 1997.
11. Applicants agree not to make any material changes to the Plan
that affect the application without the prior approval of the
Commission. Applicants also will not waive, amend, or modify any
provision of the Plan that is required by state or federal law in order
to effect the reorganization.
Applicants' Legal Analysis
1. Section 17(a)(1) of the Act, in relevant part, prohibits any
affiliated person of a registered investment company, or any affiliated
person of such a person, acting as principal, from knowingly selling
any security or other property to that company. Section 17(a)(2) of the
Act generally prohibits the persons described above, acting as
principals, from knowingly purchasing any security or other property
from the registered investment company.
2. Section 2(a)(3) of the Act defines the term ``affiliated
person'' of another person, in relevant part, as: (a) any person
directly or indirectly owning, controlling, or holding with power to
vote, 5% or more of the outstanding voting securities of such other
person; (b) any person 5% or more of whose outstanding voting
securities are directly or indirectly owned, controlled, or held with
power to vote, by such person; and (c) any person directly or
indirectly controlling, controlled by, or under common control with,
such other person.
3. Rule 17a-8 under the Act exempts from section 17(a) mergers,
consolidations or purchases or sales of substantially all of the assets
involving registered investment companies which may be affiliated
persons, or affiliated persons of affiliated persons, solely by reason
of having a common investment adviser, common directors and/or common
officers.
4. ITT Hartford (through the separate accounts) technically owns
100% of the shares of each Fund. ITT Hartford therefore may be an
affiliated person of each Fund and the Funds may each be ``second-
tier'' affiliates of one another. Moreover, the Funds may be direct
affiliates of each other if they are considered under the ``common
control'' of ITT Hartford. Because of these potential affiliations, the
Funds may not be able to rely on rule 17a-8. In addition, the separate
accounts cannot rely on rule 17a-8 because they do not have boards of
directors/trustees to make the findings required by rule 17a-8.
5. Section 17(b) of the Act provides that the Commission may, upon
application, grant an order exempting any transaction from the
prohibitions of section 17(a) if the evidence establishes that the
terms of the proposed transaction, including the consideration to be
paid, are reasonable and fair and do not involve overreaching on the
part of any person concerned, and that the proposed transaction is
consistent with the policy of the registered investment company
concerned and with the general purposes of the Act.
6. Applicants believe that the terms of the proposed reorganization
as set forth in the Plan, including the consideration to be paid and
received, are reasonable and fair and do not involve overreaching on
the part of any person concerned. Applicants also believe that the
proposed reorganization of the Funds is consistent with the investment
policies of the Funds as recited in their registration statements and
with the general purposes of the Act.
7. Applicants submit that the terms of the proposed
reorganizations, including the consideration to be paid and received,
are reasonable and fair to the applicable separate accounts, including
the sub-accounts investing in the Funds and to shareholders and
Contractowners invested therein, and do not involve overreaching on the
part of any person concerned. Furthermore, the proposed reorganizations
will be consistent with the policies of the separate accounts as
recited in their registration statements
[[Page 9006]]
and with the general purposes of the Act.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-4858 Filed 2-26-97; 8:45 am]
BILLING CODE 8010-01-M