[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]
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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'').
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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.
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\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.)
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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
