[Federal Register Volume 64, Number 246 (Thursday, December 23, 1999)]
[Notices]
[Pages 72114-72118]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33341]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-24205; File No. 812-11708]


Hartford Life and Annuity Insurance Company, et al.; Notice of 
Application

December 17, 1999.
AGENCY: The Securities and Exchange Commission (``SEC'' or 
``Commission'').

ACTION: Notice of application for an order pursuant to section 26(b) 
and 17(b) of the Investment Company Act of 1940 (the ``Act'').

-----------------------------------------------------------------------

SUMMARY OF APPLICATION: Applicants request an order to permit certain 
unit investment trusts to substitute shares of Evergreen Variable 
Annuity Trust's (``Evergreen Trust'') Evergreen VA Capital Growth Fund 
for shares of Mentor Variable Investment Portfolios' (``Mentor Trust'') 
Mentor VIP Capital Growth Portfolio, shares of Evergreen Trust's 
Evergreen VA Growth Fund for shares of Mentor Trust's Mentor VIP Growth 
Portfolio, shares of Evergreen Trust's Evergreen VA High Income Fund 
for shares of Mentor Trust's Mentor VIP High Income Portfolio and 
shares of Evergreen Trust's Evergreen VA Perpetual International Fund 
for shares of Mentor Trust's Mentor VIP Perpetual International 
Portfolio currently held by those unit investment trusts to support 
certain deferred premium variable annuity contracts (``Contracts''). 
Applicants also request an order exempting them from Section 17(a) of 
the Act to the extent necessary to permit certain in-kind redemption 
and purchase transactions in connection with the substitutions.

APPLICANTS: Hartford Life and Annuity Insurance Company (``Hartford 
Life and Annuity''), Hartford Life and Annuity Insurance Company 
Separate Account One (``Hartford Life and Annuity Account''), Hartford 
Life Insurance Company (``Hartford Life''), Hartford Life Insurance 
Company Separate Account Two (``Hartford Life Account''), PFL Life 
Insurance Company (``PPL'') and PFL Retirement Builder Variable Annuity 
Account (``PFL Account'', and together with Hartford Life and Annuity 
Account and Hartford Life Account, the ``Accounts''), Mentor Variable 
Investment Portfolios and Evergreen Variable Annuity Trust.

FILING DATE: The application was filed on July 23, 1999 and amended on 
December 9, 1999.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
person may request a hearing on the application 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 January 11, 2000, 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 Secretary of the 
Commission.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth 
Street, NW., Washington, DC 20549-0609. Applicants: Marianne O'Doherty, 
Counsel, Hartford Life and Annuity Insurance Company, Hartford Life 
Insurance Company, 200 Hopmeadow Street, Simsbury, Connecticut 06089; 
Frank A. Camp, PFL Life Insurance Company, 4333 Edgewood Road, NE., 
Cedar Rapids, Iowa 52499; Michael H. Koonce, Mentor Variable Investment 
Portfolios, Evergreen Variable Annuity Trust, 200 Berkeley Street, 
Boston, Massachusetts 02116. Copies to Robert N. Hickey, Sullivan & 
Worcester LL, 1025 Connecticut Avenue, NW., Washington, DC 20036.

FOR FURTHER INFORMATION CONTACT:
Joyce M. Pickholz, Senior Counsel, or Susan M. Olson, Branch Chief, 
Office of Insurance Products, Division of Investment Management at 
(202) 942-0670.

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 Fifth Street, NW, 
Washington, DC 20542-0102 (tel. (202) 942-8090).

Applicants' Representations

    1. Hartford Life and Annuity is a stock life insurance company 
incorporated in Connecticut. Hartford Life and Annuity is engaged in 
the business of writing individual and group life insurance and annuity 
contracts in the District of Columbia and all states except New York. 
Hartford Life and Annuity is the depositor and sponsor of the Hartford 
Life and Annuity Account. Hartford Life and Annuity is ultimately 
controlled by Hartford Financial Services Group, Inc.
    2. Hartford Life is a stock life insurance company incorporated in 
Connecticut. Hartford Life is engaged in the business of writing 
individual and group life insurance and annuity contracts in the 
District of Columbia and all states. Hartford Life is the depositor

[[Page 72115]]

and sponsor of the Hartford Life Account. Hartford Life is ultimately 
controlled by Hartford Financial Services Group, Inc.
    3. PFL is a stock life insurance company incorporated in Iowa. PFL 
is principally engaged in the sale of life insurance and annuity 
policies in the District of Columbia, Guam, and all states except New 
York. PFL is the depositor and sponsor of the PFL Account. PFL is a 
wholly-owned indirect subsidiary of AEGON USA, Inc., which in turn is 
indirectly owned by AEGON, N.V.
    4. The Hartford Life and Annuity Account is registered under the 
Act as a unit investment trust (File No. 811-7426). The assets of the 
Hartford Life and Annuity Account support certain Contracts, and 
interests in the Hartford Life and Annuity Account offered through such 
Contracts have been registered under the Securities Act of 1933 (``1933 
Act'') on Form N-4 (File No. 333-69487). The Hartford Life and Annuity 
Account currently has eighteen subaccounts. Each subaccount invests 
exclusively in shares representing an interest in a separate 
corresponding investment portfolio (``Fund'') of one of two series-type 
management investment companies (``Management Companies'') and twelve 
separate management investment companies. One of these Management 
Companies is Mentor Trust.
    5. The Hartford Life Account is registered under the Act as a unit 
investment trust (File No. 811-4732). The assets of the Hartford Life 
Account support certain Contracts, and interests in the Hartford Life 
Account offered through such Contracts have been registered under the 
1933 Act on Form N-4 (File No. 333-69485). The Hartford Life Account 
currently has eighteen sub-accounts. Each sub-account invests 
exclusively in shares of a corresponding Fund of one of two Management 
Companies and twelve separate investment management companies. One of 
the Management Companies is Mentor Trust.
    6. The PFL Account is registered under the Act as a unit investment 
trust (File No. 811-7689). The assets of the PFL Account support 
certain Contracts, and interests in the PFL Account offered through 
such policies have been registered under the 1933 Act on Form N-4 (File 
No. 333-7509). The PFL Account currently has sixty-two sub-accounts. 
Each sub-account invests exclusively in shares of a corresponding Fund 
of one of thirteen Management Companies. Two of these Management 
Companies are Mentor Trust and Evergreen Trust.
    7. Mentor Trust, a Massachusetts business trust, is registered 
under the Act as an open-end management investment company (File No. 
811-8153). Mentor Trust comprises five Funds, four of which currently 
offer shares to the Hartford Life and Annuity Account and the Hartford 
Life Account and three of which currently offer shares to the PFL 
Account. Such Funds would be involved in the proposed substitutions. 
Mentor Trust issues a separate series of shares of beneficial interest 
in connection with each Fund. Those shares are registered under the 
1993 Act on Form N-1A (File No. 333-23939). Mentor Investment Advisors, 
LLC (``Mentor Advisors'') serves as the investment adviser to Mentor 
VIP Capital Growth Portfolio, Mentor VIP Growth Portfolio and Mentor 
VIP High Income Portfolio. Mentor Perpetual Advisors, LLC (``Mentor 
Perpetual'') serves as the investment adviser to the Mentor VIP 
Perpetual International Portfolio.
    8. Mentor Advisors is an indirect wholly-owned subsidiary of First 
Union Capital Markets Corp. First Union Capital Markets Corp. is a 
wholly-owned subsidiary of First Union Corporation (``First Union'').
    9. Mentor Perpetual is owned equally by Perpetual PLC and Mentor 
Advisors.
    10. Mentor VIP Capital Growth Portfolio seeks capital growth and 
current income. Mentor VIP Growth Portfolio seeks long-term capital 
growth. Mentor VIP High Income Portfolio seeks high current income; 
capital growth is a secondary objective when consistent with the 
objective of seeking high current income. Mentor VIP Perpetual 
International Portfolio seeks long-term capital appreciation.
    11. Evergreen Trust, a Delaware business trust, is registered under 
the Act as a diversified, open-end management investment company (File 
No. 811-8716). Evergreen Trust currently comprises fifteen Funds. 
Evergreen 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. 33-83100). Investment 
advisory affiliates of First Union serve as investment advisers to 
Evergreen Trust.
    12. As part of the process of combining the Mentor fund family with 
the Evergreen fund family, Evergreen Trust has filed a post-effective 
amendment to its registration statement to register the shares of four 
new series: Evergreen VA Capital Growth Fund, Evergreen VA Growth Fund, 
Evergreen VA High Income Fund and Evergreen VA Perpetual International 
Fund. The investment objective(s) and policies of each of these new 
series are substantially identical to those of the corresponding series 
of Mentor Trust. Mentor Advisors or Mentor Perpetual, as the case may 
be, is the investment adviser of each new Evergreen Trust series.
    13. Mentor Advisors and Mentor Perpetual, as affiliates of First 
Union, have received an order from the Commission (the ``Multi-Manager 
Order'') that permits each investment adviser, or any entity 
controlling, controlled by, or under common control (within the meaning 
of Section 2(a)(9) of the Act) with Mentor Advisors or Mentor 
Perpetual, subject to certain conditions, including approval of the 
Board of Trustees of Evergreen Trust, and without the approval of 
shareholders to: (a) Employ a new sub-adviser or adviser for any 
portfolio pursuant to the terms of a new subadvisory agreement, in each 
case either as a replacement for an existing sub-adviser or as an 
additional sub-adviser; (b) change the terms of any sub-advisory 
agreement; and (c) continue the employment of an existing sub-adviser 
on the same contract terms where a contract has been assigned because 
of a change of control to the sub-advisers.\1\ In such circumstances, 
contract owners would receive notice of any such action, including 
information concerning any new-subadviser that normally is provided in 
proxy materials.
---------------------------------------------------------------------------

    \1\ See Evergreen Equity Trust, et al., Investment Company Act 
Rel. No. 23636 (January 8, 1999) (order) and Investment Company Act 
Rel. No. 23605 (December 16, 1998) (notice). Before any of the new 
Evergreen Trust Funds may rely on the Multi-Manager Order, the 
operation of such Fund as a multi-manager fund, as described in the 
application for the Multi-Manager Order, will be approved following 
the substitutions proposed in this application, by a majority of 
that Fund's outstanding voting securities in a manner consistent 
with an order received from the Commission granting exemptions from 
the Act to permit shares of Evergreen Trust to be offered to 
separate accounts of affiliated and unaffiliated insurance companies 
that offer either variable life insurance policies or annuity 
contracts. See Evergreen Variable Annuity Trust, et al., Investment 
Company Act Rel. No. 21806 (March 5, 1996) (order) and Investment 
Company Act Rel. No. 21734 (February 5, 1996) (notice.)
---------------------------------------------------------------------------

    14. The Contracts are flexible premium individual and group 
flexible premium deferred variable annuity contracts. The Contracts 
provide for the accumulation of values on a variable basis, fixed 
basis, or both, during the accumulation period, and provide for 
settlement or annuity payment options on a variable basis, fixed basis, 
or both. Under the Contracts issued by Hartford Life and Annuity and 
Hartford Life, a Contract owner or certificate owner (together, 
``Contract owner'') may make

[[Page 72116]]

unlimited transfers of at least $500 between the sub-accounts available 
under the Contract or the relevant insurance company's general account. 
Although there is no charge for transfers, Hartford Life and Annuity 
and Hartford Life each reserves the right to limit the number of such 
transfers to twelve per Contract year. Under the PFL Contracts, an 
unlimited amount of transfers of cash value can be made between the 
sub-accounts available under the Contracts without the imposition of a 
transfer charge. Transfers are subject to a minimum amount of the 
lesser of $500 or the entire sub-account value. All of the PFL 
Contracts reserve to PFL the right to restrict transfers, or to charge 
up to $10 for any transfer in excess of twelve per Contract year.
    15. Except with respect to Mentor Perpetual, the investment 
advisers to the Funds comprising the Evergreen Trust and Mentor Trust 
are, or are in the process of becoming, wholly-owned subsidiaries of 
First Union. Mentor Perpetual is owned 50% by an unaffiliated person 
and 50% by a subsidiary of First Union. First Union has determined to 
consolidate the fund operations of Mentor Advisors and Mentor Perpetual 
with those of its other affiliates. In connection with this 
consolidation, it has been determined that the First Union mutual fund 
organization needs only one Management Company as an investment vehicle 
for variable life insurance and variable annuity contracts and that 
Evergreen Trust, rather than Mentor Trust, should be that vehicle. As a 
result, Mentor Trust will be terminated and will therefore be unable to 
continue to offer its shares to the Accounts.
    16. Under the Contracts, Hartford Life and Annuity, Hartford Life 
and PFL reserve the right to substitute shares of one Fund for shares 
of another, including a Fund of a different Management Company. The 
prospectuses for the Contracts issued through Hartford Life and Annuity 
and Hartford Life, and the Statement of Additional Information for the 
Contracts issued through PFL, disclose this right.
    17. Hartford Life and Annuity, Hartford Life and PFL propose, as 
applicable, to substitute shares of Evergreen Trust's Evergreen VA 
Capital Growth Fund for shares of Mentor Trust's Mentor VIP Capital 
Growth Portfolio, shares of Evergreen Trust's Evergreen VA Growth Fund 
for shares of Mentor Trust's Mentor VIP Growth Portfolio, shares of 
Evergreen Trust's Evergreen VA High Income Fund for shares of Mentor 
Trust's VIP High Income Portfolio and shares of Evergreen Trust's 
Evergreen Perpetual International Fund for shares of Mentor Trust's 
Mentor VIP Perpetual International Portfolio. Hartford Life and 
Annuity, Hartford Life and PFL propose to carry out the substitutions 
by redeeming shares issued by the Mentor Trust Funds in kind and using 
the redemption proceeds to purchase shares issued by the counterpart 
Evergreen Trust Funds.
    18. With respect to the proposed substitutions, Applicants assert 
that in anticipation of Mentor Trust's termination, Evergreen Trust has 
established four new investment portfolios, the Evergreen VA Capital 
Growth Fund, Evergreen VA Growth Fund, Evergreen VA High Income Fund 
and Evergreen VA Perpetual International Fund. Each of these Funds has 
been designated as a replacement for its Mentor Trust counterpart. As 
such, each has an investment objective (or objectives) that is 
virtually or substantially identical to that of its Mentor Trust 
counterpart and pursues such objective(s) using substantially identical 
investment policies. The effect of the foregoing four proposed 
substitutions would be to ``transfer'' these Mentor Trust Funds intact 
to the Evergreen Trust. Each of the new Evergreen Trust Funds will be 
advised by the same investment adviser which provided investment 
advisory services to the former Funds comprising Mentor Trust. Mentor 
Advisors and Mentor Perpetual have informed the Applicants that the 
contractual advisory fees for each of the new Evergreen Trust Funds 
will be the same percentage of assets as that for its Mentor Trust Fund 
counterpart.
    19. For the fiscal year ended December 31, 1998, the total 
operating expenses of each of the Mentor Trust Funds, after waivers and 
reimbursements, were as follows: Mentor VIP Capital Growth Portfolio, 
1.05%; Mentor VIP Growth Portfolio, .97%; Mentor VIP Perpetual 
International Portfolio, 1.60%. Mentor VIP High Income Portfolio 
commenced operations on June 30, 1999 and its expenses for the fiscal 
year ended December 31, 1999, after waivers and reimbursements are 
estimated to be 1.00%. Without waivers and reimbursements, for the 
fiscal year ended December 31, 1998, the total operating expenses of 
each of the Mentor Trust Funds were as follows: Mentor VIP Capital 
Growth, 1.36%; Mentor VIP Growth Portfolio, 1.77%; mentor VIP Perpetual 
International Portfolio, 2.79%. Without waivers and reimbursements, the 
total annual operating expenses of Mentor VIP High Income Portfolio are 
estimated to be 1.77% for the fiscal year ended December 31, 1999.
    20. Without waivers and reimbursements, for the fiscal year ended 
December 31, 2000, the total operating expenses of each of the 
Evergreen Trust Funds are anticipated to be as follows: Evergreen VA 
Capital Growth Fund, 1.14%; Evergreen VA Growth Fund, 1.04%; Evergreen 
VA Perpetual International Fund, 1.45%; and Evergreen VA High Income 
Fund, 1.31%.
    21. Applicants state that each investment adviser has undertaken to 
waive its management fee and/or reimburse expenses for the counterpart 
Evergreen Trust Fund during the Fund's first year of operations to the 
extent necessary to limit the Fund's total expenses for the fiscal year 
ended December 31, 2000, to the amounts set forth above (after waivers 
and reimbursements) for the fiscal year ended December 1998 for the 
Mentor VIP Capital Growth Portfolio, Mentor VIP Growth Portfolio and 
Mentor VIP Perpetual International Portfolio and, in the case of the 
counterpart to the Mentor VIP High Income Portfolio, 1.00%.
    22. By supplements to the various prospectuses for the Contracts 
and the Accounts, Hartford Life and Annuity, Hartford Life and PFL will 
each notify all owners of the Contracts of its intention to take the 
necessary actions, including seeking the order requested by the 
application, to substitute shares of the Funds as described herein. The 
prospectus supplements for the Accounts will advise Contract owners 
that from the date of the supplement until the date of the proposed 
substitution, owners are permitted to make one transfer of all amounts 
under a Contract invested in any one of the affected sub-accounts to 
another sub-account available under a Contract other than one of the 
other affected sub-accounts without that transfer counting as a 
``free'' transfer permitted under a Contract. The supplements will also 
inform Contract owners that Hartford Life and Annuity, Hartford Life 
and PFL will not exercise any rights reserved under any Contract to 
impose additional restrictions on transfers until at least 30 days 
after the proposed substitution.
    23. Before the date of the proposed substitutions, affected 
Contract owners will also be provided with a prospectus for the 
Evergreen VA Capital Growth, Evergreen VA Growth, Evergreen VA High 
Income and Evergreen VA Perpetual International Funds. Thus, any owner 
affected by the substitutions will have received prospectus disclosure 
for the Evergreen VA Capital

[[Page 72117]]

Growth, Evergreen VA Growth, Evergreen VA High Income and Evergreen VA 
Perpetual International Funds in advance of the proposed substitutions.
    24. On the date of the proposed substitutions, shares of each 
Mentor Trust Fund held by the Accounts will be redeemed by Hartford 
Life and Annuity, Hartford Life and PFL, as applicable. The proceeds of 
such redemptions, which to the extent practical will be effected 
substantially inkind, will then be used to purchase the appropriate 
number of shares of each counterpart Evergreen Trust Fund. The Accounts 
will redeem all of their shares of the Mentor Trust Funds. Each Mentor 
Trust Fund will transfer the redemption proceeds (securities and cash) 
to the Evergreen Trust, and shares of each Evergreen Trust Fund, as the 
case may be, of equal value will be issued to the Accounts. The purpose 
of transferring assets in-kind is to avoid commission expenses.
    25. The proposed substitutions will take place at relative net 
asset value with no change in the amount of any Contract owner's cash 
value or death benefit or in the dollar value of his or her investment 
in any of the Accounts. Contract owners will not incur any fees or 
charges as a result of the substitutions, or will their rights or 
Hartford Life and Annuity's, Hartford Life's or PFL's obligations under 
the Contracts be altered in any way. All expenses incurred in 
connection with the proposed substitutions, including legal, accounting 
and other fees and expenses, will be paid by First Union or one of its 
advisory affiliates. In addition, the proposed substitutions will not 
impose any tax liability on Contract owners. The proposed substitutions 
will not cause the Contract fees and charges currently being paid by 
existing Contract owners to be greater after the proposed substitutions 
than before the substitutions. The proposed 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. Neither Hartford Life and Annuity, Hartford Life nor PFL 
will 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 proposed substitutions.
    26. In addition to the prospectus supplements distributed to owners 
of Contracts, within five days after the proposed substitutions, any 
Contract owners who were affected by the proposed substitutions will be 
sent a written notice informing them that the proposed substitutions 
were carried out and that they may transfer all Contract value or cash 
value under a Contract invested in each of the affected sub-accounts to 
other available sub-account(s). The notice will also reiterate the fact 
that neither Hartford Life and Annuity, Hartford Life nor PFL will 
exercise any rights reserved by it under the Contracts to impose 
additional restrictions on transfers until at least 30 days after the 
proposed substitutions. The notice as delivered in certain states may 
also 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 issued by Hartford Life and Annuity, Hartford Life or PFL (or 
one of the affiliates) during the 60 days following the proposed 
substitutions. The notices will be accompanied by current prospectuses 
for Evergreen 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 proposed 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 proposed substitutions.
    3. The Contracts expressly reserve for Hartford Life and Annuity, 
Hartford Life and PFL 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 statements of additional information and 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 Life and Annuity, Hartford Life and PFL. Applicants assert 
that the proposed 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 Evergreen Trust's Evergreen VA Capital Growth Fund, 
Evergreen VA Growth Fund, Evergreen VA High Income Fund and Evergreen 
VA Perpetual International Fund for shares of Mentor Trust's VIP 
Capital Growth Portfolio, Mentor VIP Growth Portfolio, Mentor VIP High 
Income Portfolio and Mentor VIP Perpetual International Portfolio, 
respectively, the Mentor Trust Funds would be replaced by essentially 
the same Fund under a different name. As noted above, Evergreen Trust 
has established four new Funds to mirror the current investment 
objectives and policies of each of the Mentor Trust Funds. Not only 
will the investment objectives, investment adviser, portfolio managers 
and fees of each of the new Evergreen Trust Funds be identical to those 
of the replaced counterpart mentor Trust Fund, but also, following the 
in-kind redemption and purchase procedure described herein, the 
investment securities held by each new Evergreen Trust Fund on the 
substitution date will be substantially similar in composition to those 
held by the counterpart Mentor Trust Fund on the previous business day.
    6. Applicants assert that they anticipate that Contract owners will 
be at least as well off with the array of sub-accounts offered after 
the proposed substitutions as they have been with the array of sub-
accounts offered prior to the substitutions. Applicants assert that the 
proposed substitutions retain for Contract owners the investment 
flexibility which is a central feature of the Contracts. If the 
proposed 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 sub-accounts as 
they could before the proposed substitutions.
    7. Applicants assert that each of the proposed 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 that

[[Page 72118]]

each Contract owner has the right to exercise his or her own judgment 
and transfer Contract or cash value into other sub-accounts. Moreover, 
the Contracts will offer Contract owners the opportunity to transfer 
amounts out of the affected sub-accounts into any of the remaining sub-
accounts without cost or other disadvantage. Applicants assert that the 
proposed substitutions, therefore, will not result in the type of 
costly forced redemption which Section 26(b) was designed to prevent.
    8. 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.
    9. Section 17(b) of the Act authorizes the Commission to issue an 
order exempting any transaction from the prohibitions of 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.
    10. Mentor Trust, Evergreen Trust, Hartford Life and Annuity, 
Hartford Life and Annuity Account, Hartford Life and Hartford Life 
Account (the ``Section 17 Applicants'') request an order pursuant to 
Section 17(b) of the Act exempting them, Mentor Trust and Evergreen 
Trust from the provisions of Section 17(a) to the extent necessary to 
permit Hartford Life and Annuity and Hartford Life to carry out the 
proposed substitutions.
    11. The Section 17 Applicants assert that the terms of the proposed 
substitutions by Hartford Life and Annuity and Hartford Life including 
the consideration to be paid and received, are reasonable and fair and 
do not involve overreaching on the part of any person concerned. The 
Section 17 Applicants also assert that the proposed substitutions by 
Hartford Life and Annuity and Hartford Life are consistent with the 
policies of: (1) Mentor trust and of its Mentor VIP Capital Growth 
Portfolio, Mentor VIP Growth Portfolio, Mentor VIP High Income 
Portfolio and Mentor VIP Perpetual International Portfolio; and (2) 
Evergreen Trust and of its Evergreen VA Capital Growth Fund, Evergreen 
VA Growth Fund, Evergreen VA High Income Fund and Evergreen VA 
Perpetual International Fund, as recited in the current registered 
statements and reports filed by each under the Act. Finally, the 
Section 17 Applicants submit that the proposed substitutions are 
consistent with the general purposes of the Act.
    12. The boards of trustees of Mentor Trust and Evergreen Trust have 
adopted procedures, as required by paragraph (e)(1) of Rule 17a-7, 
pursuant to which the Funds of each may purchase and sell securities to 
and from their affiliates. Hartford Life and Annuity, Hartford Life, 
Mentor Trust and Evergreen Trust will carry out the proposed Hartford 
Life and Annuity and Hartford Life substitutions in conformity with all 
of the conditions of Rule 17a-7 and each Trust's procedures thereunder, 
except that the consideration paid for the securities being purchased 
or sold may not be entirely cash. The Section 17 Applicants also state 
that the transactions will conform substantially with the conditions 
enumerated in Rule 17a-7. The Section 17 Applicants assert that to the 
extent that the proposed transactions do not comply fully with 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 Mentor Trust 
and the affected Funds of Evergreen 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.
    13. The Section 17 Applicants assert that because of the 
circumstances surrounding the proposed Hartford Life and Annuity and 
Hartford Life substitutions, Mentor Trust could not ``dump'' 
undesirable securities on Evergreen Trust or have their desirable 
securities transferred to other advisory client of First Union and its 
advisory affiliates or to Funds other than those in Evergreen Trust 
supporting the Accounts. Nor can Hartford Life and Annuity and Hartford 
Life (or any of their affiliates) effect the purpose transactions at a 
price that is disadvantageous to any Mentor Trust Fund or Evergreen 
Trust Fund. Although the transactions may not be entirely for cash, 
each will be effected based upon: (a) The indepdent 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. The 
Section 17 Applicants assert that no brokerage commission, fee, or 
other remuneration will be paid to any party in connection with the 
proposed transactions. In addition, the Section 17 Applicants assert 
that the boards of trustees of each Trust will subsequently review and 
proposed substitutions and make the determinations required by 
paragraph (e)(3) of Rule 17a-7.
    14. the Section 17 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 
proposed substitutions are consistent with 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.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-33341 Filed 12-22-99; 8:45 am]
BILLING CODE 8010-01-M