[Federal Register Volume 67, Number 17 (Friday, January 25, 2002)]
[Notices]
[Pages 3743-3745]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-1898]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25372; 812-12702]


The Hartford Mutual Funds Inc.; Notice of Application

January 18, 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 Application: Applicants request an order to permit 
certain registered open-end investment companies advised by HL 
Investment Advisors, LLC and Hartford Investment Financial Services, 
LLC (together, the ``Hartford Advisers'') not to reconstitute their 
boards of trustees 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 Mutual Funds, Inc., (``Mutual Funds''), 
Hartford Series Fund, Inc., (``Series Fund''), Hartford Advisers HLS 
Fund, Inc., (``Advisers HLS''), Hartford Money Market HLS Fund, Inc., 
(``Money Market HLS''), Hartford Bond HLS Fund, Inc., (``Bond HLS''), 
Hartford Index HLS Fund, Inc., (``Index HLS'') (collectively, the 
``Hartford Funds''), and the Hartford Advisers.

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    Filing Dates: The application was filed on November 21, 2001, and 
amended on January 16, 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 February 12, 2002, 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, 60 South Sixth Street, Minneapolis, MN 55402.

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 Funds are open-end management investment companies 
registered under the Act. Mutual Funds, a Maryland corporation, 
consists of 23 series. Series Fund, a Maryland corporation, consists of 
14 series. Advisers HLS, Money Market HLS, Bond HLS, and Index HLS are 
all Maryland corporations. The Hartford Advisers, indirect subsidiaries 
of the Hartford Life and Accident Insurance Company (``Hartford Life'') 
serve as investment advisers to the Hartford Funds. The Hartford 
Advisers are registered under the Investment Advisers Act of 1940 (the 
``Advisers Act'').
    2. Hartford-Fortis Series Fund, Inc. (``Hartford-Fortis Series 
Fund''), a Maryland corporation, offers 14 separate series. Fortis 
Series Fund, Inc. (``Fortis Series Fund''), a Minnesota corporation, 
offers 23 separate series. At the time of the Acquisition (as defined 
below), Fortis Advisers Inc. (``Fortis'') (now known as Hartford 
Administrative Services Company) served as investment adviser to the 
Hartford-Fortis Series Fund and the Fortis Series Fund. 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 approved an investment management agreement with the 
Hartford Advisers at a shareholder meeting held on May 31, 2001. It is 
now proposed that certain series of the Hartford Funds would acquire 
the assets of six series of the Hartford-Fortis Series Fund, and seven 
series of Fortis Series Fund (the ``Reorganization'').\1\ The series of 
the Hartford-Fortis Series Fund and the Fortis Series Fund proposed to 
be acquired by the Hartford Funds are referred to as the ``Fortis 
Funds.''
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    \1\ Applicants state that it is not anticipated that any of the 
remaining series of the Hartford-Fortis Series Fund or the Fortis 
Series Fund not party to the Reorganization will be reorganized into 
the Hartford Funds 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 until 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 9, 2001 and August 2, 2001, the Hartford Funds' Boards 
(including all of the directors who are not ``interested persons'' of 
the Hartford Advisers) and the Fortis Funds' Boards (all of whom are 
not ``interested persons'' of the Hartford Advisers or the Hartford 
Funds), 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' Boards have called a special meeting of the Hartford-Fortis 
Series Fund's shareholders to be held on January 31, 2002, and intend 
to call a special meeting of the Fortis Series Fund's shareholders to 
be held in April 2002, for the purpose of considering the 
Reorganization. If approved by shareholders, the Reorganization is 
scheduled to be effective on or about February 19, 2002, in the case of 
the Hartford-Fortis Series Fund, and in the case of Fortis Series Fund 
is proposed to be effective in April 2002.
    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 Boards of Directors of the Hartford Funds, which have identical 
membership, 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 
December 31, 2001, Fortis Funds had approximately

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$2,345,000,000 in aggregate net assets. Applicants also state that, as 
of December 31, 2001, the aggregate net assets of the Hartford Funds 
were approximately $33,077,000,000. Applicants thus assert that the 
Fortis Funds' assets would represent approximately 7.09% of the 
aggregate net assets of the Hartford Funds.
    5. Applicants state that two of the seven directors who serve on 
the Boards of Hartford Funds are ``interested persons,'' within the 
meaning of section 2(a)(19) of the Act, of the Hartford Advisers. 
Applicants state that none of the directors owns any interest in or is 
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 Funds would have to alter the composition of their 
Boards, either by asking experienced directors to resign or by adding a 
new director. Applicants, further state that adding a new director 
could require a shareholder vote, not only of shareholders of the 
acquiring Hartford Funds but also the shareholders of the other series 
of the Hartford Funds not otherwise affected by the Reorganization. 
Applicants assert that adding an additional non-interested director to 
the Boards of Hartford Funds could entail a lengthy process and 
increase the ongoing costs of Hartford 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.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-1898 Filed 1-24-02; 8:45 am]
BILLING CODE 8010-01-P