[Federal Register Volume 64, Number 37 (Thursday, February 25, 1999)]
[Notices]
[Pages 9361-9365]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-4631]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-23 701; File No. 812-11396]
Hartford Life and Annuity Insurance Company, et al.; Notice of
Amended Application
February 19, 1999.
AGENCY: The Securities and Exchange Commission (``Commission'').
ACTION: Notice of amended and restated application for an order
pursuant to Section 26(b) of the Investment Company Act of 1940 (the
``Act'') approving certain substitutions of securities and pursuant to
Section 17(b) of the Act exempting related transactions from Section
17(a) of the Act.
-----------------------------------------------------------------------
SUMMARY OF APPLICATION: Applicants request an order to permit certain
registered unit investment trusts to substitute shares of Bond
Portfolio of One Group Investment Trust (``One Group Trust'') for
shares of Pegasus Variable Fund (``Pegasus Trust'') Bond Fund, shares
of One Group Trust's Diversified Equity Portfolio for shares of Pegasus
Variable Fund's Growth and Value Fund, shares of One Group Trust's
Diversified Mid Cap Portfolio for shares of Pegasus Trust's Mid Cap
Opportunity Fund, shares of One Group Trust's Large Cap Growth
Portfolio for shares of Pegasus Trust's Growth Fund and shares of One
Group Trust's Mid Cap Value Portfolio for shares of Pegasus Trust's
Intrinsic Value Fund currently held by those unit investment trusts,
and to permit certain in-kind redemptions of portfolio securities in
connection with the substitutions.
APPLICANTS: Hartford Life and Annuity Insurance Company (``Hartford''),
ICMG Registered Variable Life Separate Account One (``ICMG Account'')
and Hartford Life and Annuity Insurance Company Separate Account Six
(``Annuity Account,'' together with the ICMG Account, the
``Accounts'').
FILING DATE: The application was filed on November 10, 1998,\1\ and
amended and restated on February 12, 1999.
\1\ The Commission previously published a notice of the
application. Investment Company Act Release No. 23652 (January 13,
1999) [64 FR 3322 (January 21, 1999)] (``Rel. IC-23652'').
Applicants subsequently amended and restated the application. This
release publishes notice of the application as amended and restated,
and supersedes Rel. IC-23652.
---------------------------------------------------------------------------
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 Secretary of the
Commission 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 March 16, 1999, 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 Secretary of the Commission.
ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549. Applicants, c/o Marianne
O'Doherty, Esq., Counsel, Hartford Life and Annuity Insurance Company,
200 Hopmeadow Street, Simsbury, Connecticut 06089, Copies to Stephen E.
Roth, Esq. and David S. Goldstein, Esq., Sutherland Asbill & Brennan
LLP, 1275 Pennsylvania Avenue, N.W., Washington, D.C. 20004-2415.
FOR FURTHER INFORMATION CONTACT: Ethan D. Corey, Senior Counsel, at
(202) 942-0675, or Kevin M. Kirchoff, Branch Chief, at (202) 942-0672,
Office of Insurance Products, Division of Investment Management.
SUPPLEMENTARY INFORMATION: The following is a summary of the
application; the complete application may be obtained for a fee from
the Public Reference Branch of the Commission, 450 5th Street, N.W.,
Washington, D.C. 20549 (tel. (202) 942-8090).
Applicant's Representations
1. Hartford is a stock life insurance company incorporated in
Connecticut. Hartford is engaged in the business of writing individual
and group life insurance and annuity contracts in the District of
Columbia and all states but New York. Hartford is the depositor and
sponsor of the Accounts.
2. The ICMG Account, a segregated investment account established
under Connecticut law, is registered with the Commission as a unit
investment trust. The ICMG Account is currently divided into fourteen
subaccounts, each of which invests exclusively in shares representing
an interest in a separate corresponding investment portfolio (``Fund'')
of one of the three
[[Page 9362]]
management investment companies of the series type (``Management
Companies''), including Pegasus Trust. The assets of the ICMG Account
support flexible premium group variable life insurance contracts
(``ICMG Contracts''), and interests in the Account offered through the
ICMG Contracts have been registered under the Securities Act of 1933
(the ``1933 Act'') on Form S-6.
3. The Annuity Account is currently divided into thirteen
subaccounts. Each subaccount invests exclusively in a corresponding
Fund of one of the same three Management Companies in which the ICMG
Account invests. The assets of the Annuity Account support individual
and group flexible premium deferred variable annuity contracts
(``Annuity Contracts,'' together with the ICMG Contracts,
``Contracts''), and interests in the Account offered through the
Annuity Contracts have been registered under the 1933 Act on Form N-4
(File No. 33-86330).
4. Pegasus Trust, a Delaware business trust, is registered under
the Act as an open-end management investment company (File No. 811-
8854). Pegasus Trust currently comprises five Funds, all of which would
be involved in the proposed substitutions. Pegasus Trust issues a
separate series of shares of beneficial interest in connection with
each Fund. Those shares are registered under the 1933 Act on Form N-1A
(File No. 33-86186). First Chicago NBD Investment Management Company
serves as the investment adviser to Pegasus Trust.
5. One Group Trust, a Massachusetts business trust, is registered
under the Act as an open-end management investment company (File No.
811-7874). One Group Trust currently comprises nine Funds. One Group
Trust issues a separate series of shares of beneficial interest in
connection with each Fund and has registered these shares under the
1933 Act on Form N-1A (File No. 33-66080). Banc One Investment Advisors
Corporation serves as investment adviser to One Group Trust.
6. Pegasus Trust's Bond Fund (``Pegasus Bond Fund'') seeks to
maximize its total rate of return by investing predominantly in
intermediate and long-term debt securities denominated in U.S. dollars.
During normal market conditions, the Fund's average weighted portfolio
maturity is generally 6 to 12 years. Debt securities in which the
Pegasus Bond Fund normally invests include: (a) obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities;
(b) corporate, bank and commercial obligations; (c) securities issued
or guaranteed by foreign governments and their agencies or
instrumentalities; (d) securities issued by supranational banks; (e)
mortgage-backed and other asset-backed securities; and (f) variable
rate bonds, zero coupon bonds, debentures and various types of demand
instruments. Up to 15% of the Pegasus Bond Fund's total assets may be
invested in dollar-denominated debt securities of foreign issuers.
7. One Group Trust's Bond Portfolio (``One Group Bond Portfolio'')
seeks to maximize total return by investing primarily in a diversified
portfolio of intermediate and long-term debt securities. At least 65%
of the One Group Bond Portfolio's total assets is invested in bonds and
at least 65% in debt securities of all types with intermediate to long
maturities. The One Group Bond Portfolio mainly invests in investment
grade bonds and debt securities, which may include mortgage-backed and
other types of asset-backed securities. It also may invest in
convertible securities, preferred stock and loan participations. The
One Group Bond Portfolio normally maintains a weighted average maturity
of between four and twelve years, although it may shorten this maturity
for temporary defensive purposes.
8. Pegasus Trust's Growth and Value Fund (``Pegasus Growth and
Value Fund'') seeks long-term capital growth, with income a secondary
consideration. It invests primarily in equity securities of larger
companies believed by its investment adviser to represent a value of
potential worth that is not fully recognized by prevailing market
prices. It invests in equity securities of companies that its
investment adviser believes have earnings growth expectations that
exceed those implied by the market's current valuation or whose
earnings it expects to increase at a rate in excess of those within the
general equity market.
9. One Group Trust's Diversified Equity Portfolio (``One Group
Diversified Equity Portfolio'') seeks long-term capital growth and
growth of income and secondarily, a moderate level of current income.
It invests primarily in common stocks of overlooked or undervalued
companies that have the potential for earnings growth over time. It
follows a multi-style strategy in that it may invest in securities of
both value and growth-oriented companies of varying levels of
capitalization.
10. Pegasus Trust's Mid Cap Opportunity Fund (``Pegasus Mid Cap
Opportunity Fund'') seeks long-term capital appreciation. It seeks to
achieve its objective by investing primarily in equity securities of
companies with market capitalizations of $500 million to $3 billion.
11. One Group Trust's Diversified Mid Cap Portfolio (``One Group
Diversified Mid Cap Portolio'') seeks long term capital growth by
investing primarily in equity securities of companies with market
capitalizations of between $500 million and $5 billion. The One Group
Diversified Mid Cap Portfolio invests in companies with strong growth
potential, stable market share, and an ability to respond quickly to
new business opportunities. Normally the One Group Diversified Mid Cap
Portfolio invests at least 65% of its total assets in common and
preferred stock, rights, warrants, securities convertible into common
stock, and other equity securities. The One Group Diversified Mid Cap
Portfolio may invest up to 25% of its total assets in foreign
securities and up to 20% of its total assets in investment grade debt
securities, U.S. government securities, cash and cash equivalents.
12. Pegasus Trust's Growth Fund (``Pegasus Growth Fund'') seeks
long-term capital appreciation. It seeks to achieve its objective by
investing primarily in equity securities of domestic issuers believed
by its investment adviser to have above-average growth characteristics.
The investment adviser often considers the following factors in
evaluating growth characteristics: development of new or improved
products, a favorable growth outlook for the issuer's industry,
patterns of increasing sales and earnings, the probability of increased
operating efficiencies, and cyclical conditions.
13. One Group Trust's Large Cap Growth Portfolio (``One Group Large
Cap Growth Portfolio'') seeks long-term capital appreciation and growth
of income by investing primarily in equity securities of large well-
established companies. The weighted average market capitalization of
such companies normally exceeds the median market capitalization of the
Standard & Poor's 500 Composite Stock Price Index. The One Group Large
Cap Growth Portfolio normally invests at least 65% of its total assets
in those types of equity securities.
14. Pegasus Trust's Intrinsic Value Fund (``Pegasus Intrinsic Value
Fund'') seeks long-term capital appreciation. It seeks to achieve its
objective by investing primarily in equity securities of companies that
its investment adviser believes represent a value or potential worth
that it not recognized by prevailing market prices. In selecting
securities, the Fund's investment adviser employs screening techniques
to
[[Page 9363]]
isolate issues that it believes are attractively priced and then
evaluates the underlying earning power and dividend paying ability of
the issuer. The Fund's holdings are usually characterized by lower
price/earnings, price/cash flow and price/book value ratios and by
above-average current dividend yields relative to the equity market.
15. One Group Trust's Mid Cap Value Portolio (``One Group Mid Cap
Value Portfolio'') seeks capital appreciation with a secondary goal of
achieving current income by investing primarily in equity securities.
At least 80% of the One Group Mid Cap Value Portfolio's total assets
are invested in equity securities, including common stock, debt
securities and preferred stock convertible into common stock.
Generally, the One Group Mid Cap Value Portfolio invests in equity
securities of companies with below-average price/earnings and price/
book value ratios and having market capitalizations of $500 million to
$5 billion. The One Group Mid Cap Value Portfolio also considers a
company's financial soundness and earnings prospects. It generally will
sell a security if its investment adviser believes that the issuer's
fundamental business prospects are declining or its ability to pay
dividends is impaired.
16. Banc One Investment Advisors Corporation, investment adviser to
One Group Trust, is an indirect wholly-owned subsidiary of Bank One
Corporation. Until recently, First Chicago NBD Investment Management,
investment adviser to Pegasus Trust, was an indirect wholly-owned
subsidiary of First Chicago NBD Corporation. As of October 2, 1998,
Bank One Corporation and First Chicago NBD Corporation underwent a
merger and have decided to consolidate the mutual fund operations of
First Chicago NBD Investment Management with those of Banc One
Investment Advisors. Applicants assert that in connection with this
consolidation, it has been determined that the organization needs only
one Management Company as an investment vehicle for variable life
insurance and variable annuity contracts and that One Group Trust
rather than Pegasus Trust should be that vehicle. As a result, Pegasus
Trust will be closed down and will therefore be unable to continue to
offer its shares to the Accounts.
17. Under the Contracts, Hartford reserves the right to substitute
shares of one Fund for shares of another, including a Fund of a
different Management Company.
18. Hartford proposes to substitute shares of the One Group Bond
Portfolio for shares of the Pegasus Bond Fund, shares of the One Group
Diversified Equity Portfolio for shares of the Pegasus Growth and Value
Fund, shares of the One Group Diversified Mid Cap Portfolio for shares
of the Pegasus Mid Cap Opportunity Fund, shares of the One Group Large
Cap Growth Portfolio for shares of the Pegasus Growth Fund and shares
of the One Group Mid Cap Value Portfolio for shares of the Pegasus
Intrinsic Value Fund (collectively, ``Substitutions''). Hartford
proposes to carry out certain substitutions by redeeming shares issued
by Pegasus Trust in kind and using the redemption proceeds to purchase
shares issued by One Group Trust.
19. With respect to the proposed substitution of shares of One
Group Bond Portfolio for shares of Pegasus Bond Fund, shares of One
Group Diversified Mid Cap Portfolio for shares of Pegasus Mid Cap
Opportunity Fund, shares of One Group Diversified Equity Portfolio for
shares of Pegasus Growth and Value Fund and shares of One Group Mid Cap
Value Portfolio for shares of Pegasus Intrinsic Value Fund, Applicants
assert that in anticipation of Pegasus Trust's discontinuation, One
Group Trust is in the process of creating new investment portfolios
including the Bond Fund, Diversified Mid Cap Portfolio, Diversified
Equity Portfolio and Mid Cap Value Portfolio. Each of these funds has
been designed as a replacement for its Pegasus Trust counterpart. As
such, each has an investment objective (or objectives) that is
virtually or substantially identical to that of its Pegasus Trust
counterpart and pursues such objective(s) using similar investment
polices. The effect of the foregoing four proposed substitutions would
be to ``transfer'' these Pegasus Trust Funds intact to the One Group
Trust. Banc One Investment Advisors has indicated to Hartford that it
has undertaken to waive the management fee of these four One Group
Trust Funds during their first year of operation to the extent
necessary to limit each Fund's expense ratio as follows: Bond Fund,
0.7%; Diversified Mid Cap Portfolio, 0.95%; Diversified Equity
Portfolio, 0.95%; and Mid Cap Value Portfolio, 0.95%.
20. With respect to the proposed substitution of shares of One
Group Large Cap Growth Portfolio for shares of Pegasus Growth Fund,
Applicants assert that One Group Large Cap Growth Portfolio has
substantially the same investment objective as the Pegasus Growth Fund.
If the proposed substitutions of One Group Large Cap Growth Portfolio
shares for those of Pegasus Growth Fund occurs, Large Cap Growth
Portfolio would increase in size by approximately 15% and be more than
seven times the size of the Growth Fund. This proposed substitution
would move Contract owners currently invested in Pegasus Trust Growth
Fund to a much larger fund with substantially the same risk and reward
characteristics. Applicants assert that although Pegasus Growth Fund
has had somewhat lower expense ratios than One Group Trust Large Cap
Growth Portfolio during the last three years, the immediate increase in
size of the later after the proposed substitution would result in a
lower ratio in fiscal 1999 and that One Group Large Cap Growth
Portfolio has had better cumulative performance over the past thee
fiscal years than has Pegasus Growth Fund.
21. The following charts show the approximate year-end net asset
level, ratio of operating expenses as a percentage of average net
assets, and annual total returns for each of the past three years for
the Pegasus Growth Fund and the One Group Large Cap Growth Portfolio:
----------------------------------------------------------------------------------------------------------------
Net assets at
Pegasus growth fund year-end Expense ratio Total return
----------------------------------------------------------------------------------------------------------------
1995.......................... $6,434,936 .85% (annualized).................. 18.82% (annualized)
1996.......................... 11,542,021 .85%............................... 17.52%
1997.......................... 15,839,911 .91%............................... 24.48%
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Expense
One group large cap growth portfolio Net assets at ratio\2\ Total return
year-end (percent) (percent)
----------------------------------------------------------------------------------------------------------------
1995............................................................ $16,119,036 .90% 24.13
1996............................................................ 42,893,346 .98% 16.67
[[Page 9364]]
1997............................................................ 99,627,641 1.00 31.93
----------------------------------------------------------------------------------------------------------------
\2\ The One Group Trust Large Cap Growth Portfolio's investment adviser voluntarily waived part of its
investment management fee during 1995 and 1996 in order to limit the Fund's expense ratios to the amounts
shown for those years. Absent such waivers, the expense ratios for 1995 and 1996 would have been. 1.64% and
1.16%, respectively
22. By supplements to the various prospectuses for the Contracts
and the Accounts, Hartford will notify all owners of the Contracts of
its intention to effect the Substitutions. The supplements for the
Accounts advise Contract owners that from the date of the supplement
until the date of the Substitutions, owners are permitted to make one
transfer of all amounts under a Contract invested in any one of the
affected subaccounts on the date of the supplement to another
subaccount available under a Contract other than one of the other
affected subaccounts without that transfer counting as a ``free''
transfer permitted under a Contact. The supplements also inform
Contract owners that Hartford will not exercise any rights reserved
under any Contracts to impose additional restrictions on transfers
until at least 30 days after the proposed substitution.
23. The Substitutions will take place at relative net asset value
with no change in the amount of any Contract owner's Contract value,
cash value or death benefit or in the dollar value of his or her
investment in either of the Accounts. Contract owners will not incur
any fees or charges as a result of the Substitutions, nor will their
rights or Hartford's obligations under the Contracts be altered in any
way. All expenses incurred in connection with the substitutions,
including legal, accounting and other fees and expenses, will be paid
by Hartford. In addition, the Substitutions will not impose any tax
liability on contract owners. The Substitutions will not cause the
contract fees and charges currently being paid by existing Contract
owners to be greater after the Substitutions than before the
Substitutions. The Substitutions will not be treated as a transfer for
the purpose of assessing transfer charges or for determining the number
of remaining permissible transfers in a Contract year. Hartford will
not exercise any right it may have under the Contracts to impose
additional restrictions on transfers under any of the Contracts for a
period of at least 30 days following the Substitutions.
24. In addition to the prospectus supplements distributed to owners
of Contracts, within five days after the Substitutions, any Contract
owners who were affected by the Substitutions will be sent a written
notice informing them that the Substitutions were carried out and that
they may make one transfer of all Contract value or cash value under a
Contract invested in any one of the affected subaccounts on the date of
the notice to another subaccount or separate account available under
their Contract without that transfer counting as one of any limited
number of transfers permitted in a Contract year or as one of a limited
number transfers permitted in a Contract year free of charge. The
notice will also reiterate the fact that Hartford will not exercise any
rights reserved by it under the Contracts to impose additional
restrictions on transfers until at least 30 days after the
Substitutions. The notice as delivered in certain states also may
explain that, under the insurance regulations in those states, Contract
owners who are affected by the substitutions may exchange their
Contracts for fixed-benefit life insurance contracts or annuity
contracts, as applicable, issued by Hartford (or one of its affiliates)
during the 60 days following the Substitutions. The notices will be
accompanied by current prospectuses for One Group Trust.
Applicants' Legal Analysis
1. Section 26(b) of the Act requires the depositor of a registered
unit investment trust holding the securities of a single issuer to
obtain Commission approval before substituting the securities held by
the trust. Specifically, Section 26(b) states:
It shall be unlawful for any depositor or trustee of a
registered unit investment trust holding the security of a single
issuer to substitute another security for such security unless the
Commission shall have approved such substitution. The Commission
shall issue an order approving such substitution if the evidence
establishes that it is consistent with the protection of investors
and the purposes fairly intended by the policy and provisions of
this title.
2. Applicants state that the Substitutions appear to involve
substitutions of securities within the meaning of Section 26(b) of the
Act and request that the Commission issue an order pursuant to Section
26(b) of the Act approving the Substitutions.
3. The Contracts expressly reserve for Hartford the right, subject
to Commission approval, to substitute shares of another Management
Company for shares of a Management Company held by a subaccount of the
Accounts. Applicants assert that the prospectuses for the Contracts and
the Accounts contain appropriate disclosure of this right.
4. Applicants request an order of the Commission pursuant to
Section 26(b) of the Act approving the proposed substitutions by
Hartford. Applicants assert that the Substitutions are consistent with
the protection of investors and the purposes fairly intended by the
policy and provisions of the Act.
5. Applicants assert that in the cases of the proposed substitution
of shares of One Group Bond Portfolio for shares of Pegasus Mid Cap
Opportunity Fund, shares of One Group Diversified Equity Portfolio for
shares of Pegasus Growth and Value Fund and shares of One Group Mid Cap
Value Portfolio for shares of Pegasus Intrinsic Value Fund, the Pegasus
Trust Funds would be replaced by essentially the same Fund under a
different name. Although these Funds, in their One Group Trust
incarnation, may not be managed by the same individuals as managed them
for Pegasus Trust, each Fund will maintain its essential character
along with its investment objective(s) and policies. Moreover,
applicants assert that these Funds' prospects for significant future
growth are greater as part of the One Group Trust than they would have
been as part of Pegasus Trust.
6. Applicants assert that in the case of the proposed substitution
of shares of One Group Trust Large Cap Growth Portfolio for shares of
Pegasus Trust Growth Fund, Pegasus Trust Growth Fund would be replaced
by a Fund with very similar investment objectives and policies, but of
much larger size. Although expense ratios over the most recent three
fiscal years have been somewhat lower for Pegasus Growth Fund that for
One Group Trust Large Growth Portfolio, cumulative investment
performance for the later has been better than for the former over the
same periods and investors in Large Cap Growth Portfolio can reasonably
expect a decline in expense ratios as result of the increase in assets
following the proposed substitution. For these reasons, Applicants
assert that Contract
[[Page 9365]]
owners would benefit from the proposed substitution.
7. Applicants assert that they anticipate that Contract owners will
be at least as well off with the array of subaccounts offered after the
proposed substitutions as they have been with the array of subaccounts
offered prior to the substitutions. Applicants assert that the
Substitutions retain for Contract owners the investment flexibility
which is a central feature of the Contracts. If the Substitutions are
carried out, all Contract owners will be permitted to allocate purchase
payments and transfer Contract values and cash values between and among
the same number of subaccounts as they could before the Substitutions.
8. Applicants assert that each of the Substitutions is not the type
of substitution which Section 26(b) was designed to prevent. Unlike
traditional unit investment trusts where a depositor could only
substitute an investment security in a manner which permanently
affected all the investors in the trust, the Contracts provide each
Contract owner with the right to exercise his or her own judgment and
transfer Contract or cash values into other subaccounts. Moreover, the
Contracts will offer Contract owners the opportunity to transfer
amounts out of the affected subaccounts into any of the remaining
subaccounts without cost or other disadvantage. Applicants assert that
the Substitutions, therefore, will not result in the type of costly
forced redemption which Section 26(b) was designed to prevent.
9. Section 17(a)(1) of the Act prohibits any affiliated person or
an affiliate of an affiliated person, of a registered investment
company, from selling any security or other property to such registered
investment company. Section 17(a)(2) of the Act prohibits such
affiliated persons from purchasing any security or other property from
such registered investment company.
10. Section 17(b) of the Act authorizes the Commission to issue an
order exempting a proposed transaction from Section 17(a) if: (a) the
terms of the proposed transaction are fair and reasonable and do not
involve overreaching on the part of any person concerned; (b) the
proposed transaction is consistent with the policy of each registered
investment company concerned; and (c) the proposed transaction is
consistent with the general purposes of the Act.
11. Applicants request an order pursuant to Section 17(b) of the
Act exempting them, Pegasus Trust and One Group from the provisions of
Section 17(a) to the extent necessary to permit Hartford to carry out
the Substitutions.
12. Applicants assert that the terms of the Substitutions,
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 assert that the proposed substitutions by
Hartford are consistent with the policies of: (a) Pegasus Trust and its
Bond Fund, Growth and Value Fund, Mid Cap Opportunity Fund, Growth Fund
and Intrinsic Value Fund; and (b) One Group Trust and of its Bond Fund,
Diversified Equity Portfolio, Diversified Mid Cap Portfolio, Large Cap
Growth Portfolio and Mid Cap Value Portfolio, as recited in the current
registration statement and reports filed by each under the Act.
Finally, Applicants assert that the proposed substitutions are
consistent with the general purposes of the Act.
13. The proposed transactions will be effected at the respective
net asset value. The proposed transactions will not change the amount
of any Contract owner's Contract or cash value or death benefit or in
the dollar value of his or her investment in either of the Accounts.
Applicants also state that the transactions will conform substantially
with the conditions enumerated in Rule 17a-7. Applicants assert that to
the extent that the proposed transactions do not comply fully with the
all of the conditions of Rule 17a-7 and each Trust's procedures
thereunder, the circumstances surrounding the proposed substitutions
will be such as to offer the same degree of protection to each Fund of
Pegasus Trust and the affected Funds of One Group Trust from
overreaching that Rule 17a-7 provides to them generally in connection
with their purchase and sale of securities under that Rule in the
ordinary course of their business.
14. Applicants assert that because of the circumstances surrounding
the proposed Hartford substitutions, Pegasus Trust could not ``dump''
undesirable securities on One Group Trust or have their desirable
securities transferred to other advisory clients of Banc One Investment
Advisors or to Funds other than those in One Group Trust supporting the
Accounts. Nor can Hartford (or any of its affiliates) effect the
proposed transactions at a price that is disadvantageous to any Pegasus
Trust Fund or One Group Trust Fund. Although the transactions may not
be entirely for cash, each will be effected based upon; (a) the
independent market price of the portfolio securities valued as
specified in paragraph (b) of Rule 17a-7; and (b) the net asset value
per share of each Fund involved valued in accordance with the
procedures disclosed in the respective Trust's registration statement
and as required by Rule 22c-1 under the Act. Applicants assert that no
brokerage commission, fee, or other remuneration will be paid to any
party in connection with the proposed transactions. In addition,
Applicants assert that the boards of trustees of each Trust will
subsequently review the Substitutions and make the determinations
required by paragraph (e)(3) of Rule 17a-7.
15. Applicants assert that the proposed transactions are consistent
with the general purposes of the Act and that the proposed transactions
do not present any of the conditions or abuses that the Act was
designed to prevent.
Conclusion
Applicants assert that, for the reasons summarized above, the
substitutions are 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,
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 99-4631 Filed 2-24-99; 8:45 am]
BILLING CODE 8010-01-M
