

[Federal Register: August 28, 2007 (Volume 72, Number 166)]
[Notices]               
[Page 49324-49335]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28au07-151]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-27933; File No. 812-13267]

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

August 22, 2007.
AGENCY: U.S. Securities and Exchange Commission (the ``Commission'').

ACTION: Notice of application for an order under the Investment Company 
Act of 1940, as amended (the ``Act'').

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APPLICANTS: Hartford Life Insurance Company (``Hartford Life''), 
Hartford Life Insurance Company Separate Account DC-I (``Account DC-
I''), Hartford Life Insurance Company Separate Account Two (``Account 
Two''), Hartford Life Insurance Company Separate Account Eleven 
(``Account Eleven'') (together with Account DC-I and Account Two, the 
``Registered Accounts''), and Hartford Securities Distribution Company, 
Inc. (``HSD'').

SUMMARY: Applicants request an order of the Commission pursuant to 
section 11(a) of the Act approving the terms of the proposed offers of 
exchange described in this application. Applicants propose to make the 
following exchange offers: (1) Group variable annuity contracts issued 
by Hartford Life offering interests in Account Eleven (the ``New 
Contracts'') for certain group variable annuity contracts issued by 
Hartford Life (the ``Modified Old Contracts'') offering interests in 
both Account DC-I and Account Two as well as certain other separate 
accounts not registered as investment companies under the Act; (2) 
interests in Account DC-I and Account Two, as originally offered to 
contract owners, (``Original Old Contracts'') for interests in the

[[Page 49325]]

Unregistered DC Accounts under Modified Old Contracts; (3) New 
Contracts for certain group variable annuity contracts issued by 
Hartford Life (``457 Contracts'') offering interests in Hartford Life 
Insurance Company Separate Account 457 (``Account 457''); and (4) 
Original Old Contracts offering interests in Account DC-I and Account 
Two for 457 Contracts offering interests in Account 457.

DATES: The application was filed on March 2, 2006, and amended on 
August 21, 2007.

Hearing or Notification of Hearing: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's Secretary 
and serving Applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on September 17, 2007, and should be accompanied by proof of 
service on the Applicants, in the form of an affidavit or, for lawyers, 
a certificate of service. Hearing requests should state the nature of 
the writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street, 
NE., Washington, DC 20549-1090. Applicants, 200 Hopmeadow Street, 
Simsbury, Connecticut 06089; copies to David S. Goldstein, Sutherland 
Asbill & Brennan LLP, 1275 Pennsylvania Avenue, NW., Washington, DC 
20004-2415.

FOR FURTHER INFORMATION CONTACT: Michael L. Kosoff, Staff Attorney, at 
(202) 551-6754, or Harry Eisenstein, Branch Chief, at (202) 551-6795, 
Office of Insurance Products, Division of Investment Management.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
Application. The complete Application is available for a fee from the 
SEC's Public Reference Branch, 100 F Street, NE., Washington, DC 20549 
((202) 551-8090).

Applicants' Representations

    1. Hartford Life is a stock life insurance company originally 
incorporated under the laws of the Commonwealth of Massachusetts on 
June 5, 1902, and subsequently re-domiciled to the state of 
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. As of December 31, 2006, Hartford 
Life had assets of approximately $214 billion. For purposes of the Act, 
Hartford Life is the depositor and sponsor of Account DC-I, Account Two 
and Account Eleven, as those terms have been interpreted by the 
Commission with respect to variable annuity separate accounts 
registered under the Act as unit investment trusts.
    2. Hartford Life established Account DC-I on or about March 31, 
1988, Account Two on June 2, 1986 and Account Eleven on December 1, 
2000, as segregated asset accounts under Connecticut law. Under 
Connecticut law, the assets of Account DC-I and Account Two, including 
assets attributable to the Original Old Contracts and the Modified Old 
Contracts, are owned by Hartford Life, but are held separately from all 
other assets of Hartford Life for the benefit of the owners of, and the 
persons entitled to payment under, variable annuity contracts issued by 
Hartford Life through Account DC-I and Account Two, including the 
Original Old Contracts and Modified Old Contracts. Likewise, the assets 
of Account Eleven, including assets attributable to the New Contracts, 
are owned by Hartford Life, but are held separately from all other 
assets of Hartford Life for the benefit of the owners of, and the 
persons entitled to payment under variable annuity contracts issued by 
Hartford Life through Account Eleven, including the New Contracts. 
Consequently, assets in each Account are not chargeable with 
liabilities arising out of any other business that Hartford Life may 
conduct. Income, gains and loses, realized and unrealized, from the 
assets of each Account are credited to or charged against that Account 
without regard to the income, gains or loses arising out of any other 
business that Hartford Life may conduct. Each Registered Account is a 
``separate account'' as defined by Rule 0-1(e) under the Act, and is 
registered with the Commission as a unit investment trust.
    3. The assets of Account DC-I and Account Two support Original Old 
Contracts as well as Modified Old Contracts. Hartford Life issued the 
Original Old Contracts to, among other parties, (a) Sponsors of non-
qualified deferred compensation plans established by certain tax-exempt 
organizations (``tax-exempt plan sponsors'') pursuant to section 457(b) 
and section 457(e)(1)(B) of the Internal Revenue Code of 1986, as 
amended (the ``IRC''), as well as (b) trustees of trusts created to 
hold assets for non-qualified deferred compensation plans established 
by state and municipal governments, or instrumentalities thereof, 
pursuant to section 457(b) and section 457(e)(1)(A) of the IRC 
(``government plan trustees''). Interests in Account DC-I and Account 
Two offered through Original Old Contracts have been registered under 
the Securities Act of 1933 (the ``1933 Act'') on Form N-4.\1\
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    \1\ See 1933 Act File Nos. 33-19944, 33-19946, 33-19947 and 33-
19949.
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    4. The New Contracts will be issued through Account Eleven. 
Hartford Life currently issues other group variable annuity contracts 
similar to the New Contracts through Account Eleven to a variety of 
applicants including tax-exempt plan sponsors, government plan 
trustees, retirement plans qualified under sections 401(a) and 403(a) 
of the IRC, and annuity purchase plans adopted by public school systems 
and certain tax-exempt organizations pursuant to section 403(b) of the 
IRC. Interests in Account Eleven offered through such group variable 
annuity contracts have been registered under the 1933 Act on Form N-
4.\2\ Likewise, interests in Account Eleven to be issued through the 
New Contracts will be registered under the 1933 Act on a Form N-4 
registration statement to be filed shortly with the Commission.
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    \2\ See 1933 Act File No. 333-72042.
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    5. HSD is a Connecticut corporation registered with the Commission 
as a broker-dealer under the Securities Exchange Act of 1934 and is a 
member of the Financial Industry Regulatory Authority, Inc. HSD is the 
principal underwriter for the Original Old Contracts, Modified Old 
Contracts, 457 Contracts and New Contracts and for other Hartford Life 
variable annuity contracts. HSD is an affiliated person of Hartford 
Life.
    6. Hartford Life established Separate Account DC-III, Separate 
Account DC-IV, Separate Account DC-V and Separate Account DC-VI, as 
segregated asset accounts under Connecticut law (``Unregistered DC 
Accounts''). Each of the Unregistered DC Accounts is divided into 
several sub-accounts. Hartford Life added endorsements to the Original 
Old Contracts to make available to owners of such contracts one or more 
sub-accounts of the Unregistered DC Accounts as investment options. The 
Modified Old Contracts are those Original Old Contracts issued to tax-
exempt plan sponsors to which the endorsements were added.
    7. Under Connecticut law, the assets of each Unregistered DC 
Account attributable to Modified Old Contracts are owned by Hartford 
Life, but are held separately from all other assets of

[[Page 49326]]

Hartford Life for the benefit of the owners of, and the persons 
entitled to payment under the Modified Old Contracts. Consequently, 
such assets in each Unregistered DC Account are not chargeable with 
liabilities arising out of any other business that Hartford Life may 
conduct. Income, gains and loses, realized and unrealized, from the 
assets of each Unregistered DC Account are credited to or charged 
against that Account without regard to the income, gains or loses 
arising out of any other business that Hartford Life may conduct. 
Hartford Life has not registered any Unregistered DC Account as an 
investment company under the Act in reliance upon the exclusion from 
the definition of investment company found in section 3(c)(11) of the 
Act.
    8. Hartford Life established Account 457 on December 1, 1998, as a 
segregated asset account under Connecticut law. Under Connecticut law, 
the assets of Account 457, including assets attributable to the 457 
Contracts, are owned by Hartford Life, but are held separately from all 
other assets of Hartford Life for the benefit of the owners of, and the 
persons entitled to payment under variable annuity contracts issued by 
Hartford Life through Account 457, including the 457 Contracts. 
Consequently, such assets in Account 457 are not chargeable with 
liabilities arising out of any other business that Hartford Life may 
conduct. Income, gains and loses, realized and unrealized, from the 
assets of Account 457 are credited to or charged against the separate 
account without regard to the income, gains or loses arising out of any 
other business that Hartford Life may conduct. Hartford Life has not 
registered Account 457 as an investment company under the Act in 
reliance upon the exclusion from the definition of investment company 
found in section 3(c)(11) of the Act.
    9. Hartford Life has not registered interests in the Unregistered 
DC Accounts offered through Modified Old Contracts as securities under 
the 1933 Act in reliance upon the exemption from registration found in 
section 3(a)(2) of the 1933 Act. Likewise, Hartford life has not 
registered interests in Account 457 offered through the 457 Contracts 
as securities under the 1933 Act.

Description of the Contracts

    10. During the accumulation period, the Original Old Contracts, 
Modified Old Contracts, 457 Contracts, and New Contracts (together, the 
``Contracts'') each provides for the allocation of purchase payments 
and transfer of Contract values between and among various sub-accounts 
of the separate account through which each is issued. Each sub-account 
invests in shares of a particular open-end management investment 
company (a ``mutual fund'') which serves as an investment option under 
the Contract. The Contracts also offer a ``fixed'' interest investment 
option supported by Hartford Life's general account. During the annuity 
payment period, the Contracts all provide a variety of settlement or 
annuity payment options on a variable basis, fixed basis, or both. 
Owners of Contracts may withdraw some or all of their Contract's value 
at any time during the accumulation period or apply such values to the 
``purchase'' of a settlement or annuity payment option. The Contracts 
incorporate many other features, including ``death benefits'' payable 
upon the death of a plan participant (or beneficiary) and certain fees 
and charges.
    11. The Original Old Contracts, Modified Old Contracts and New 
Contracts do not impose any fees or charges in connection with purchase 
payments. The tables below describe the fees and charges deducted from 
separate account assets on an ongoing basis during both the 
accumulation and annuity payment periods, and the fees and charges 
payable by a Contract owner upon the withdrawal or surrender of 
Contract value during the accumulation period. The tables also indicate 
the annual rate of interest guaranteed for the ``fixed'' option under 
each Contract and identify the number of sub-accounts available as 
investment options under the Contract, along with the minimum and 
maximum total annual operating expenses for the mutual funds in which 
such sub-accounts invest as of December 31, 2006. The letter 
designation in the left-hand column represents different Contract 
variations.

                                                                 Original Old Contracts
                                                             [Account DC-I and Account Two]
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                                                M&E risk and
                                               administrative      M&E risk and                                            Minimum total   Maximum total
                                                   charge         administrative         Minimum                              annual          annual
                                   Number of       (payout        charge  (pay-in      guaranteed     CDSC  (% of amount     portfolio       portfolio
        Type of contract             mutual    period)  (% of     period)  (% of         annual          surrendered)      expenses  (%    expenses  (%
                                     funds      average daily   average daily sub-    interest rate                         of average      of average
                                                 sub-account      account assets)                                            daily net       daily net
                                                   assets)                                                                 asset value)    asset value)
--------------------------------------------------------------------------------------------------------------------------------------------------------
A...............................           10            1.25  0.75 to 0.90........               4  N/A................            0.34            0.91
B...............................           10            1.25  0.75 to 0.90........               4  N/A................            0.34            0.91
C...............................           10            1.25  0.75 to 0.90........               4  N/A................            0.34            0.91
D...............................           10            1.25  0.75 to 0.90........               4  N/A................            0.34            0.91
E...............................           10            1.25  0.75 to 0.90........               4  N/A................            0.34            0.91
F...............................           10            1.25  0.75 to 0.90........               4  N/A................            0.34            0.91
G...............................           10            1.25  0.75 to 0.90........               4  N/A................            0.34            0.91
H...............................           10            1.25  0.75 to 0.90........               4  N/A................            0.34            0.91
I...............................           10            1.25  0.75 to 0.90........               4  N/A................            0.34            0.91
J...............................           10            1.25  0.75 to 0.90........               4  N/A................            0.34            0.91
K...............................           10            1.25  0.75 to 0.90........               4  N/A................            0.34            0.91
L...............................           10            1.25  0.75 to 0.90........               4  N/A................            0.34            0.91
M...............................           10            1.25  0.75 to 0.90........               4  12 YR..............            0.34            0.91
N...............................           10            1.25  0.75 to 0.90........               4  12 YR..............            0.34            0.91
O...............................           10            1.25  0.75 to 0.90........               3  7 YR...............            0.34            0.91
P...............................           10            1.25  0.75 to 0.90........               4  7 YR...............            0.34            0.91
Q...............................           10            1.25  0.75 to 0.90........               4  N/A................            0.34            0.91
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[[Page 49327]]


                                                                 Modified Old Contracts
                                                [Account DC-I, Account Two and Unregistered DC Accounts]
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                                                M&E risk and
                                               administrative      M&E risk and                                            Minimum total   Maximum total
                                                   charge         administrative         Minimum                              annual          annual
                                   Number of       (payout        charge  (pay-in      guaranteed     CDSC  (% of amount     portfolio       portfolio
        Type of contract             mutual    period)  (% of     period)  (% of         annual          surrendered)      expenses  (%    expenses  (%
                                     funds      average daily   average daily sub-    interest rate                         of average      of average
                                                 sub-account      account assets)                                            daily net       daily net
                                                   assets)                                                                 asset value)    asset value)
--------------------------------------------------------------------------------------------------------------------------------------------------------
A...............................           23            1.25  0.75 to 0.90........               4  N/A................            0.34            1.73
B...............................           24            1.25  0.75 to 0.90........               4  N/A................            0.34            1.73
C...............................           24            1.25  0.75 to 0.90........               4  N/A................            0.34            1.73
D...............................           24            1.25  0.75 to 0.90........               4  N/A................            0.34            1.73
E...............................           25            1.25  0.75 to 0.90........               4  N/A................            0.34            1.73
F...............................           25            1.25  0.75 to 0.90........               4  N/A................            0.34            1.73
G...............................           25            1.25  0.75 to 0.90........               4  N/A................            0.34            1.73
H...............................           25            1.25  0.75 to 0.90........               4  N/A................            0.34            1.73
I...............................           26            1.25  0.75 to 0.90........               4  N/A................            0.34            1.73
J...............................           26            1.25  0.75 to 0.90........               4  N/A................            0.34            1.73
K...............................           26            1.25  0.75 to 0.90........               4  N/A................            0.34            1.73
L...............................           27            1.25  0.75 to 0.90........               4  N/A................            0.34            1.73
M...............................           23            1.25  0.75 to 0.90........               4  12 YR..............            0.34            1.73
N...............................           26            1.25  0.75 to 0.90........               4  12 YR..............            0.34            1.73
O...............................           23            1.25  0.75 to 0.90........               3  7 YR...............            0.34            1.73
P...............................           23            1.25  0.75 to 0.90........               4  7 YR...............            0.34            1.73
Q...............................           24            1.25  0.75 to 0.90........               4  N/A................            0.34            1.73
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                      New Contracts
                                                                    [Account Eleven]
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                                                M&E risk and
                                               administrative      M&E risk and                                            Minimum total   Maximum total
                                                   charge         administrative         Minimum                              annual          annual
                                   Number of       (payout        charge  (pay-in      guaranteed     CDSC  (% of amount     portfolio       portfolio
        Type of contract             mutual    period)  (% of     period)  (% of         annual          surrendered)      expenses  (%    expenses  (%
                                     funds      average daily   average daily sub-    interest rate                         of average      of average
                                                 sub-account      account assets)                                            daily net       daily net
                                                   assets)                                                                 asset value)    asset value)
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New Contract....................           48            0.70  0.70................               4  N/A................            0.34            1.49
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    12. Hartford Life does not assess a CDSC under Modified Old 
Contracts A, B, C, D, E, F, G, H, I, J, K, L and Q and corresponding 
Original Old Contracts A, B, C, D, E, F, G, H, I, J, K, L and Q. Under 
Modified Old Contracts M, N, O and P and corresponding Original Old 
Contracts M, N, O and P, a contingent deferred sales charge (``CDSC'') 
may be assessed against the amount withdrawn or surrendered by a 
Contract owner. However, those who will be moved to the Original Old 
Contracts or from the Modified Old Contracts will not be subject to a 
CDSC.
    13. As the tables indicate, the mortality and expense risk and 
administrative charge during the accumulation period under the New 
Contracts is less than that imposed under the Original Old Contracts 
and the Modified Old Contracts. The mortality and expense risk and 
administrative charge during the annuity payment period under the New 
Contracts is substantially less than that imposed under the Original 
Old Contracts and the Modified Old Contracts.
    14. Hartford Life may deduct a charge corresponding to any 
applicable state or municipal premium taxes under each Contract. 
Hartford Life may deduct the charge for premium taxes at the time of 
payment of such taxes to the appropriate taxing authority, surrender of 
the Contract, upon payment of a death benefit or upon the commencement 
of annuity payments to a participant (or beneficiary).
    15. Under the Original Old Contracts and the Modified Old 
Contracts, Hartford Life reserves the right to deduct a $5 fee for each 
transfer of Contract value between or among sub-accounts in a Contract 
year. Under New Contracts, Hartford Life reserves the right to deduct a 
$5 fee for each transfer in excess of twelve transfers of Contract 
value within a participant account by a participant between or among 
the sub-accounts in any participant account year. Currently, the 
Company does not assess a transfer fee under any Contract.
    16. The sub-accounts of Account Eleven offered by the New Contracts 
invest in all of the mutual funds in which the sub-accounts of Account 
DC-I and Account Two offered by the Original Old Contracts and the 
Modified Old Contracts invest, and many of the mutual funds (or 
variable insurance fund counterpart) in which sub-accounts of the 
Unregistered DC Accounts offered by the Modified Old Contracts invest. 
In most cases, where a particular mutual fund available under a 
Modified Old Contract (or its variable insurance fund counterpart) is 
not available as an investment option under the New Contract, a mutual 
fund with substantially identical or closely comparable investment 
objectives and principal strategies would be available under the New 
Contract. In all but four

[[Page 49328]]

cases, these alternative mutual funds had the same or lower total 
expenses during their most recent fiscal year. Notwithstanding this, 
for each sub-account available under the New Contract that has a 
counterpart under an Original Old Contract or a Modified Old Contract, 
the annual mortality and expense risk and administrative charge when 
combined with the annual expense ratio of the mutual in which such sub-
account invests, is less under the New Contract than under either the 
Original Old Contract or the Modified Old Contract.
    17. The Original Old Contracts, 457 Contracts and New Contracts do 
not impose any fees or charges in connection with purchase payments. 
The tables below describe the fees and charges deducted from separate 
account assets on an ongoing basis during both the accumulation and 
annuity payment periods, and the fees and charges payable by a Contract 
owner upon the withdrawal or surrender of Contract value during the 
accumulation period. The tables also indicate the annual rate of 
interest guaranteed for the ``fixed'' option under each Contract and 
identify the number of sub-accounts available as investment options 
under the Contract, along with the minimum and maximum total annual 
operating expenses for the mutual funds in which such sub-accounts 
invest as of December 31, 2006. The letter designation in the left-hand 
column represents different Contract variations, with type A 
corresponding to type U and type B corresponding to type V, etc.

                                                                      457 Contracts
                                                                      [Account 457]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                M&E risk and
                                               administrative      M&E risk and                                            Minimum total   Maximum total
                                                   charge         administrative         Minimum                              annual          annual
                                   Number of       (payout        charge  (pay-in      guaranteed     CDSC  (% of amount     portfolio       portfolio
        Type of contract             mutual    period)  (% of     period)  (% of         annual          surrendered)      expenses  (%    expenses  (%
                                     funds      average daily   average daily sub-    interest rate                         of average      of average
                                                 sub-account      account assets)                                            daily net       daily net
                                                   assets)                                                                 asset value)    asset value)
--------------------------------------------------------------------------------------------------------------------------------------------------------
A...............................           27            1.25  0.75 to 0.90........               4  N/A................            0.34            1.73
B...............................           24            1.25  0.75 to 0.90........               4  12 YR..............            0.34            1.73
C...............................           47            1.25  0.75 to 0.90........               4  12 YR..............            0.34            1.73
D...............................           47            1.25  0.75 to 0.90........               4  7 YR...............            0.34            1.73
E...............................           51            1.25  0.45................               4  N/A................            0.34            1.73
F...............................           47            1.25  0.75 to 0.90........               4  N/A................            0.34            1.73
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                 Original Old Contracts
                                                             [Account DC-I and Account Two]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                M&E risk and
                                               administrative      M&E risk and                                            Minimum total   Maximum total
                                                   charge         administrative         Minimum                              annual          annual
                                   Number of       (payout        charge  (pay-in      guaranteed     CDSC  (% of amount     portfolio       portfolio
        Type of contract             mutual    period)  (% of     period)  (% of         annual          surrendered)      expenses  (%    expenses  (%
                                     funds      average daily   average daily sub-    interest rate                         of average      of average
                                                 sub-account      account assets)                                            daily net       daily net
                                                   assets)                                                                 asset value)    asset value)
--------------------------------------------------------------------------------------------------------------------------------------------------------
U...............................           10            1.25  0.75 to 0.90........               4  N/A................            0.34            0.91
V...............................           10            1.25  0.75 to 0.90........               4  12 YR..............            0.34            0.91
W...............................           10            1.25  0.75 to 0.90........               4  12 YR..............            0.34            0.91
X...............................           10            1.25  0.75 to 0.90........               4  7 YR...............            0.34            0.91
Y...............................           10            1.25  0.45................               4  N/A................            0.34            0.91
Z...............................           10            1.25  0.75 to 0.90........               4  N/A................            0.34            0.91
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                      New Contracts
                                                                    [Account Eleven]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                M&E risk and
                                               administrative      M&E risk and                                            Minimum total   Maximum total
                                                   charge         administrative         Minimum                              annual          annual
                                   Number of       (payout        charge  (pay-in      guaranteed     CDSC  (% of amount     portfolio       portfolio
        Type of contract             mutual    period)  (% of     period)  (% of         annual          surrendered)      expenses  (%    expenses  (%
                                     funds      average daily   average daily sub-    interest rate                         of average      of average
                                                 sub-account      account assets)                                            daily net       daily net
                                                   assets)                                                                 asset value)    asset value)
--------------------------------------------------------------------------------------------------------------------------------------------------------
New Contract....................           48            0.70  0.70................               4  N/A................            0.34            1.49
--------------------------------------------------------------------------------------------------------------------------------------------------------

    18. Hartford Life does not assess a CDSC under Original Old 
Contracts U, Y and Z and 457 Contracts A, E and F. Likewise, Hartford 
Life does not assess a CDSC under the New Contract. Under the Original 
Old Contracts V, W and X,

[[Page 49329]]

and the 457 Contracts B, C and D, a CDSC may be assessed against the 
amount withdrawn or surrendered by a Contract owner. However, those who 
will be moved to the Original Old Contracts or from the Modified Old 
Contracts will not be subject to a CDSC.
    19. As the tables indicate, with two exceptions, the mortality and 
expense risk and administrative charge during the accumulation period 
under the New Contracts is less than that imposed under the Original 
Old Contracts and the 457 Contracts. The mortality and expense risk and 
administrative charge during the annuity payment period under the New 
Contracts is substantially less than that imposed under the Original 
Old Contracts and the 457 Contracts.
    20. Hartford Life may deduct a charge corresponding to any 
applicable state or municipal premium taxes under each Contract. 
Hartford Life may deduct the charge for premium taxes at the time of 
payment of such taxes to the appropriate taxing authority, surrender of 
the Contract, upon payment of a death benefit or upon the commencement 
of annuity payments to a participant (or beneficiary).
    21. Under the Original Old Contracts and the 457 Contracts, 
Hartford Life reserves the right to deduct a $5 fee for each transfer 
Contract value between or among sub-accounts in a Contract year. Under 
New Contracts, Hartford Life reserves the right to deduct a $5 fee for 
each transfer in excess of twelve transfers of Contract value within a 
participant account by a participant between or among the sub-accounts 
in any participant account year. Currently, the Company does not assess 
a transfer fee under any Contract.
    22. The sub-accounts of Account Eleven offered by the New Contracts 
invest in all but a few of the mutual funds (or variable insurance fund 
counterparts) in which the sub-accounts of Account 457 invest. In most 
cases, where a particular mutual fund available under a 457 Contract 
(or its variable insurance fund counterpart) is not available as an 
investment option under the New Contract, a mutual fund with 
substantially identical or closely comparable investment objectives and 
principal strategies would be available under the New Contract. In all 
but five cases, these alternative mutual funds had the same or lower 
total expenses during their most recent fiscal year. In all but four 
cases, these alternative mutual funds have the same investment adviser 
as the fund they would ``replace.'' Notwithstanding this, with two 
exceptions, for each sub-account available under the New Contract that 
has a counterpart under an Original Old Contract or a 457 Contract, the 
annual mortality and expense risk and administrative charge when 
combined with the annual expense ratio of the mutual fund in which such 
sub-account invests, is less under the New Contract than under either 
the Original Old Contract or the 457 Contract.
    23. As explained in more detail immediately below, this Application 
relates to Modified Old Contracts and 457 Contracts sold to tax-exempt 
plan sponsors. In each case, a tax-exempt plan sponsor purchased a 
Contract to fund its obligations to participants in a non-qualified 
deferred compensation plan established by it pursuant to IRC sections 
457(b) and 457(e)(1)(B).\3\ Also, in each case, the plan participants 
are employees, past employees, or beneficiaries of employees or past 
employees of the tax-exempt plan sponsor.
---------------------------------------------------------------------------

    \3\ In contrast, issuers may rely on section 3(a)(2) of the 1933 
Act in connection with the offer and sale of unregistered securities 
to government plan trustees, because non-qualified deferred 
compensation plans established by state and municipal governments, 
or instrumentalities thereof, pursuant to IRC sections 457(b) and 
457(e)(1)(A) come within the definition of a ``governmental plan'' 
in section 3(a)(2)(C) of the 1933 Act. See Mass Mutual Life 
Insurance Company, et al., (Aug. 10, 1998).
---------------------------------------------------------------------------

    24. Taken together, IRC sections 457(b) and 457(e)(1)(B) permit a 
tax-exempt employer to enter into an agreement with one or more of its 
employees pursuant to which compensation otherwise payable to the 
employee is withheld by the employer and paid to the employee at a 
future time. By this mechanism, the employee defers receipt of the 
compensation for federal income tax purposes until such time as the 
employer actually pays the compensation to the employee. Typically, 
deferred compensation agreements between tax-exempt employers and their 
employees provide for the employer to pay the deferred amount plus 
interest at a specified rate to the employee at specific date in the 
future or, subject to certain limitations, within a specified period 
time after the employee requests payment. In lieu of paying interest on 
the deferred amount, the agreement may call for payment of the deferred 
amount plus or minus the performance of a specified measure, such as a 
securities index or a mutual fund. Under sections 457(b) and 
457(e)(1)(B), the employer is fully responsible for making the payments 
required by the deferred compensation agreement. In this regard, the 
deferred compensation agreements are, in effect, promissory notes 
issued by the employer, and the employees to whom the deferred 
compensation is owed are general creditors of the employer. Employees 
having deferred compensation agreements with a tax-exempt employer are 
not preferred creditors of the employer and have no security interest 
in the deferred amounts held by the employer.
    25. Tax-exempt plan sponsors are not required to invest the 
compensation deferred by their employees pursuant to deferred 
compensation agreements. They are free to bear the risk that they will 
not have sufficient assets to make payment of the deferred amounts plus 
earnings (or minus losses) owed to employees under the deferred 
compensation agreements. Many tax-exempt employers, however, choose to 
invest the deferred amounts in a manner that will ensure that they can 
make payment under deferred compensation agreements which they have 
entered into. The Original Old Contracts, Modified Old Contracts and 
the 457 Contracts were designed as investment vehicles for this purpose 
and the tax-exempt plan sponsors use their Original Old Contract, 
Modified Old Contract or 457 Contract to fund their obligations to 
their employees (or employees' beneficiaries) or to past employees (or 
beneficiaries of past employees) under the sponsors' non-qualified 
deferred compensation plans.
    26. Consistent with the foregoing, the Modified Old Contracts and 
the 457 Contracts provide the owner with all the rights and privileges 
of ownership and do not reserve any such rights and privileges to the 
employees with whom the employer has deferred compensation agreements 
(i.e., the participants in the non-qualified deferred compensation 
plan).
    27. During the period from the early 1980s through April 2001, 
Hartford Life issued the Original Old Contracts to both tax-exempt plan 
sponsors and government plan trustees. Beginning in May 1992, Hartford 
Life began offering endorsements to the Original Old Contracts to make 
available to owners of such Contracts sub-accounts of one or more of 
the Unregistered DC Accounts as investment options. At that time and 
thereafter, Hartford Life intended only to issue the Unregistered DC 
Account endorsements to Original Old Contracts held by government plan 
trustees and not to Contracts held by tax-exempt plan sponsors. 
Unfortunately, Hartford Life inadvertently issued endorsements offering 
the sub-accounts of one or more of the Unregistered DC Accounts as 
investment options to certain tax-exempt plan sponsors in connection 
with their Original Old Contracts. In most cases, tax-exempt plan 
sponsors

[[Page 49330]]

holding Modified Old Contracts have (usually pursuant to participant 
instructions) invested some or all of their tax-exempt plan's assets in 
one or more sub-accounts of the Unregistered DC Accounts. As of the 
date of this Application, seventy-one Modified Old Contracts held by 
tax-exempt plan sponsors have Contract value allocated to sub-accounts 
of one or more of the Unregistered DC Accounts.
    28. Unfortunately, issuers, such as insurance companies and their 
separate accounts, may not rely on the exemption from registration 
provisions of the 1933 Act provided by section 3(a)(2) of the 1933 Act 
when offering and selling securities to tax-exempt plan sponsors as 
funding vehicles for such sponsors' non-qualified deferred compensation 
plans established pursuant to IRC sections 457(b) and 457(e)(1)(B). As 
a result, through the seventy-one Modified Old Contracts, Separate 
Account DC-III, Separate Account DC-IV, Separate Account DC-V and 
Separate Account DC-VI issued interests to the tax-exempt plan sponsors 
holding such Contracts that should have been registered under the 1933 
Act, but were not.
    29. In addition, from the time Hartford Life invested the first 
purchase payment under a Modified Original Contract held by a tax-
exempt plan sponsor in an Unregistered DC Account, that Account has 
failed to meet the requirements for relying on section 3(c)(11) of the 
Act. This is because reliance on section 3(c)(11) requires, among other 
things, that the assets of the separate account be derived solely from:
     Contributions from pension and profit sharing plans 
meeting the requirements of IRC section 401, or the requirements for 
the deduction of the employer's contribution under IRC section 
404(a)(2);
     Contributions under government plans in connection with 
which interests, participations, or securities are exempted from the 
registration provisions of the 1933 Act by section 3(a)(2)(C) thereof; 
and
     Advances made by the insurance company in connection with 
the operation of the separate account.

Some of each Unregistered DC Account's assets were derived from 
contributions from tax-exempt plans rather than the specified pension 
and profit-sharing plans or government plans. As a result, each of the 
Unregistered DC Accounts should have been registered as an investment 
company under the Act, but was not.
    30. Applicant's state that in order to restore the ability of the 
Unregistered DC Accounts to rely on section 3(c)(11) of the Act, as 
well as to mitigate any potential liability under the 1933 Act and the 
Act, Hartford Life proposes to remove from each Unregistered DC Account 
all assets attributable to purchase payments under Modified Old 
Contracts held by tax-exempt plan sponsors via the rescission offer 
described below.
    31. From August 11, 2001 through November 15, 2003, Hartford Life 
inadvertently issued fourteen 457 Contracts to tax-exempt plan sponsors 
that owned Original Old Contracts or Modified Old Contracts. The 457 
Contracts were new contracts and not endorsements to either an Original 
Old Contract or a Modified Old Contract. During the period that 
Hartford Life issued the 457 Contracts, it was undergoing a conversion 
from one electronic data processing system used to administer its group 
variable annuity contracts business to a new and better system. Among 
other things, the conversion involved the replacement of most Original 
Old Contracts and Modified Old Contracts held by government plan 
trustees with 457 Contracts. The replacement of Original Old Contracts 
and Modified Old Contracts with 457 Contracts entailed the transfer of 
Contract value from sub-accounts of Account DC-I, Account Two, and one 
or more of the Unregistered DC Accounts, to corresponding sub-accounts 
of Account 457. The replacement of Original Old Contracts and Modified 
Old Contracts with the 457 Contracts also entailed the investment of 
subsequent purchase payments in sub-accounts of Account 457 rather than 
sub-accounts of Account DC-I, Account Two, and one or more of the 
Unregistered DC Accounts.
    32. Hartford Life did not intend to permit, in connection with the 
system conversion, tax-exempt plan sponsors to replace their Original 
Old Contracts or Modified Old Contracts with 457 Contracts. 
Nevertheless, during the period when approximately 1,000 government 
plan trustees replaced their Old Original Contracts and Modified Old 
Contracts with 457 Contracts, fourteen tax-exempt plan sponsors did 
likewise. As in the case of interests in the Unregistered DC Accounts 
made available to tax-exempt plan sponsors under Modified Old 
Contracts, Account 457 issued interests to tax-exempt plan sponsors 
through 457 Contracts that should have been registered as securities 
under the 1933 Act but were not. Similarly, from the time Hartford Life 
invested the first purchase payment under a 457 Contract held by a tax-
exempt plan sponsor in Account 457, that Account has failed to meet the 
requirements for relying on section 3(c)(11) of the Act. As a result, 
Account 457 should have been registered as an investment company under 
the Act, but was not.
    33. Applicants believe that in order to restore the ability of 
Account 457 to rely on section 3(c)(11) of the Act, as well as to 
mitigate any potential liability under the 1933 Act and the Act, 
Hartford Life proposes to remove from the Account 457 all assets 
attributable to purchase payments under the 457 Contracts held by tax-
exempt plan sponsors via the rescission offer described below.

Proposed Rescission Offers

    34. Hartford Life believes that it must take all action reasonably 
practicable to mitigate or reverse any adverse consequences to tax-
exempt plan sponsors and their participants arising from investment in 
the Unregistered DC Accounts under Modified Old Contracts. Therefore, 
Hartford Life proposes to offer each affected tax-exempt plan sponsor 
the opportunity to (1) Exchange its Modified Old Contract for a New 
Contract, or (2) surrender the endorsement attached to the Modified Old 
Contracts and either (a) exchange its interests in the Unregistered DC 
Accounts for interests in Account DC-I and/or Account Two by 
transferring all contract value from the sub-accounts of the 
Unregistered DC Accounts to the sub-accounts of Account DC-I and/or 
Account Two, or (b) exchange its interests in the Unregistered DC 
Accounts for interests in Account DC-I and/or Account two by accepting 
a new contract value equal to the contract value as of a stated 
reinstatement date plus interest invested in Account DC-I and/or 
Account two, as described below. The second option would have the 
effect, more or less, of ``restoring'' the Original Old Contract. 
Alternatively, each tax-exempt plan sponsor may elect to surrender its 
Modified Old Contract. Expressed in more detail, the options are:
     To exchange their Modified Old Contract for a New Contract 
(``Option 1'');
     To transfer contract values under their Modified Old 
Contract that are invested in Separate Account DC-III, Separate Account 
DC-IV, Separate Account DC-V and Separate Account DC-VI to 
corresponding or sponsor-designated investment options under their 
Modified Old Contract in Account DC-I and/or Account Two or, if it 
would result in a greater contract value, to ``reinstate'' all contract 
values as they were under their Original Old Contract at the time 
contract values were first

[[Page 49331]]

invested in Separate Account DC-III, Separate Account DC-IV, Separate 
Account DC-V or Separate Account DC-VI (the ``Option 2 reinstatement 
date'') and crediting such contract values with interest for the period 
from the Option 2 reinstatement date until the date a plan sponsor 
elects Option 2 at an annual rate of 3%, as described below (``Option 
2''); or
     To surrender their Modified Old Contract for its full 
contract value without the imposition of any surrender or withdrawal 
charges (``Option 3'').

If a sponsor does not elect one of the foregoing options, Hartford Life 
would consider Option 1 as the default option.
    35. Hartford Life would credit interest under Option 2 in a manner 
that makes appropriate adjustments to take into account purchase 
payments and withdrawals made after the Option 2 reinstatement date by 
crediting interest each month at a rate of 0.247% (the monthly 
equivalent of an annual rate of 3%) on the amount equal to the total 
contract value under a Modified Old Contract as of the Option 2 
reinstatement date, and for each subsequent month until the date on 
which the sponsor elects an Option:
     Plus purchase payments allocated to the contract during 
the prior month;
     Less withdrawals from the contract during the prior month.

Purchase payments made under the contract and withdrawals from the 
contract would be treated as if each occurred in the middle of the 
month and will be credited with interest for one-half of the month in 
which the transaction occurs.
    36. As in the case of the Modified Old Contracts, Hartford Life 
believes that it must take all action reasonably practicable to 
mitigate or reverse any adverse consequences to tax-exempt plan 
sponsors and their participants arising from investment in Account 457 
under the 457 Contracts. Therefore, Hartford Life proposes to offer 
each affected tax-exempt plan sponsor the opportunity to (1) Exchange 
its 457 Contract for a New Contract, (2) exchange its 457 Contract for 
its Original Old Contract and transfer all contract value from sub-
accounts of Account 457 under its 457 Contract to sub-accounts of 
Account DC-I and/or Account Two, or (3) exchange its 457 Contract for 
its Original Old Contract with contract value equal to the contract 
value under the Original Old Contract at the time it was first invested 
in (a) an Unregistered DC Account, or (b) Account 457, plus interest, 
as described below. The second option would have the effect, more or 
less, of reinstating the Original Old Contract. Alternatively, each 
tax-exempt plan sponsor may elect to surrender its 457 Contract. 
Expressed in more detail, the options are:
     To exchange their 457 Contract for a New Contract 
(``Option 1'');
     To exchange their 457 Contract for (or ``reinstate'') 
their Original Old Contract by having their 457 Contract values 
transferred to corresponding or sponsor-designated investment options 
under their Original Old Contract in Account DC-I and/or Account Two 
or, if it would result in a greater contract value, to ``reinstate'' 
all contract values under their Original Old Contract by reinstating 
such values as they were at the time that contract values were first 
invested in Separate Account DC-III, Separate Account DC-IV, Separate 
Account DC-V, Separate Account DC-VI, or Account 457 (the ``Option 2 
reinstatement date'') and crediting such contract values with interest 
for the period from the Option 2 reinstatement date until the date a 
plan sponsor elects Option 2 at an annual rate of 3%, as described 
below (``Option 2''); or
     To surrender their 457 Contract for its full contract 
value without the imposition of any surrender or withdrawal charges 
(``Option 3'').

If a sponsor does not elect one of the foregoing options, Hartford Life 
would consider Option 1 as the default option.
    37. Hartford Life would credit interest under Option 2 in a manner 
that makes appropriate adjustments to take into account purchase 
payments and withdrawals made under the 457 Contracts (or under the 
Modified Old Contracts and the 457 Contracts) after the Option 2 
reinstatement date by crediting interest each month at a rate of 0.247% 
(the monthly equivalent of an annual rate of 3%) on the amount equal to 
the contract value as of the Option 2 reinstatement date, and for each 
subsequent month until the date on which the sponsor elects an Option:
     Plus purchase payments made during the prior month;
     Less withdrawals of contract value from during the prior 
month.

Purchase payments and withdrawals would be treated as if each occurred 
in the middle of the month and will be credited with interest for one-
half of the month in which the transaction occurs.
    38. Hartford Life proposes to make each of the above offers to 
essentially ``rescind'' the Modified Old Contracts and 457 Contracts 
issued to tax-exempt plan sponsors and put each tax-exempt plan sponsor 
and plan (including plan participants) in at least as favorable a 
position as each would have been had no Modified Old Contract or 457 
Contract been issued. Unlike many conventional rescission offers, 
Hartford Life would not offer an option whereby the tax-exempt plan 
sponsor could elect to retain its current investment (i.e., a Modified 
Old Contract or 457 Contract). In this regard, Hartford Life's goal is 
to remove from the Unregistered DC Accounts all of the assets 
represented by Modified Old Contracts held by tax-exempt plan sponsors 
and from Account 457 all of the assets represented by 457 Contracts 
held by tax-exempt plan sponsors. Hartford Life believes that the 
offers described in this Application are necessary to restore the 
status of each Unregistered DC Account and Account 457 as a separate 
account excluded from the definition of an investment company pursuant 
to section 3(c)(11) of the Act. Similarly, Hartford Life believes that 
the offers described in this Application are necessary to mitigate any 
potential liability to itself, the Unregistered DC Accounts and Account 
457 that may arise under the 1933 Act and/or the Act as a result of the 
events described above.
    39. Hartford Life proposes to make the exchange offers through a 
supplement to the prospectuses for the New Contracts to be included 
with such prospectuses in the Form N-4 registration statement for the 
New Contracts and Separate Account Eleven. Hartford Life intends to use 
two such supplements: One to make an exchange offer to tax-exempt plan 
sponsors that currently own Modified Old Contracts, and another to make 
an exchange offer to tax-exempt plan sponsors that own 457 Contracts 
(including such tax-exempt plan sponsors that previously owned Modified 
Old Contracts). The supplements will notify tax-exempt plan sponsors of 
the exchange offer being made to them and explain the terms of the 
offer in detail. Among other matters, each supplement will describe the 
following:
     The purpose of the exchange offer;
     The material terms of the exchange offer, such as the 
expiration date and the specifics of each option a tax-exempt sponsor 
may elect;
     The material differences between the Contract held by the 
tax-exempt plan sponsor and the New Contract or Original Old Contract, 
as applicable, including but not limited to, fees and charges, number 
of sub-accounts available under each Contract and the mutual funds in 
which each invests, and the minimum and maximum total annual operating 
expenses for such funds;
     Procedures for electing an exchange offer option; and

[[Page 49332]]

     The advantages and disadvantages of each of the exchange 
offer options.
    40. Each supplement will clearly disclose the fact that Option 1 
will apply in the event the tax-exempt plan sponsor fails to elect 
another option by the expiration date. If an election form is 
incomplete, Hartford Life will contact the tax-exempt plan sponsor by 
telephone and facsimile for instructions. Included in either the 
supplement or an accompanying letter will be each tax-exempt plan 
sponsor's Option 2 reinstatement date and Option 2 reinstatement value. 
Also included with the accompanying letter will be information 
identifying each mutual fund available under the Modified Old Contracts 
or the 457 Contracts that is not available under the New Contract along 
with an explanation that if a tax-exempt plan sponsor does not provide 
instructions as to reallocating contract value in sub-accounts invested 
in such funds, then such contract value will be allocated under the New 
Contract by default to a sub-account investing in a money market mutual 
fund. In addition, the letter will also identify each fund offered 
under the New Contract that is a variable insurance product ``clone'' 
of a fund available under the Modified Old Contracts or the 457 
Contracts.
    41. Tax-exempt plan sponsors and their plans will not incur any 
fees or charges in connection with any of the proposed exchange offer 
options. Hartford Life will bear all costs associated with 
administering the exchange offers. In addition, tax-exempt plan 
sponsors that elect an exchange offer option or have Option 1 imposed 
on them by default, will not thereby subject their plans to any adverse 
tax consequences. Hartford Life will not compensate any broker-dealer 
or agent in connection with the proposed exchange offers.
    42. Under each Option 1, the exchange of Modified Old Contracts for 
New Contracts or 457 Contracts for New Contracts would occur at the 
relative net asset value of the Contracts with no change in aggregate 
contract value, the number or size of annuity payments being made under 
a Contract, or the amount or value of death benefits available under a 
Contract. Hartford Life would waive any CDSC otherwise applicable upon 
the exchange of a Modified Old Contract or a 457 Contract for a New 
Contract.
    43. Upon exchange of a Modified Old Contract or 457 Contract for a 
New Contract, Hartford Life would transfer contract value from each 
sub-account under a Modified Old Contract or a 457 Contract (``old sub-
account'') to a sub-account under the New Contract that invests in the 
same underlying mutual fund as the old sub-account (``corresponding new 
sub-account''). If there is no corresponding new sub-account for one or 
more old sub-accounts under the Modified Old Contract or 457 Contract, 
Hartford Life would transfer Contract value from the old sub-accounts 
under the Modified Old Contract or 457 Contract to sub-accounts under 
the New Contract upon the direction of the tax-exempt plan sponsor. If 
the tax-exempt plan sponsor does not provide such direction, Hartford 
Life would transfer contract value from old sub-accounts under the 
Modified Old Contract or 457 Contract to a sub-account under the New 
Contract that invests in a money market mutual fund.
    44. Under Option 2 relating to the Modified Old Contract offers, 
the transfer of contract value from sub-accounts of the Unregistered DC 
Accounts to sub-accounts of Account DC-I and/or Account Two would occur 
at the relative net asset value of the Contracts with no change in 
aggregate contract value, the number or size of annuity payments being 
made under a Contract, or the amount of death benefits available under 
a Contract. Hartford Life also would waive any CDSC remaining under the 
Modified Old Contract in the future. Under Option 2 relating to the 457 
Contract offers, the exchange of 457 Contracts for reinstated Original 
Old Contracts and the related transfer of contract value from sub-
accounts of Account 457 to sub-accounts of Account DC-I and/or Account 
Two under Original Old Contracts would occur at the relative net asset 
value of the Contracts with no change in aggregate contract value, the 
number or size of annuity payments being made under a Contract, or the 
amount of death benefits available under a Contract. Hartford Life 
would waive any CDSC otherwise applicable upon the exchange of 457 
Contracts for reinstated Original Old Contracts and the related 
transfer of contract value from sub-accounts of Account 457 to sub-
accounts of Account DC-I and/or Account Two. Likewise, Hartford Life 
would waive any CDSC under the reinstated Original Old Contract that 
would otherwise apply in the future.
    45. Under Option 2 relating to both the Modified Old Contract 
offers and the 457 Contract offers, Hartford Life would transfer 
contract value from each sub-account under a Modified Old Contract or 
457 Contract to a sub-account of Account DC-I and/or Account Two that 
invests in the same underlying mutual fund as the sub-account from 
which such value was transferred. If there is no corresponding sub-
account for one or more sub-accounts under the Modified Old Contract or 
457 Contract, Hartford Life would transfer contract value from the sub-
accounts under the Modified Old Contract or 457 Contract to sub-
accounts of Account DC-I and/or Account Two upon the direction of the 
tax-exempt plan sponsor. If the tax-exempt plan sponsor does not 
provide such direction, Hartford Life would transfer contract value 
from sub-accounts under the Modified Old Contract or 457 Contract to a 
sub-account of Account DC-I and/or Account Two that invests in a money 
market mutual fund.
    46. Alternatively, under Option 2 relating to both the Modified Old 
Contract offers and the 457 Contract offers, Hartford Life would 
reinstate contract value under the Original Old Contract at the amount 
existing in sub-accounts of Account DC-I and/or Account Two immediately 
before the tax-exempt plan sponsor first invested contract value in one 
of the Unregistered DC Accounts or Account 457 and credit such contract 
value with interest at an annual effective rate of 3% for the period 
from that date until the date of the tax-exempt plan sponsor's election 
of Option 2. As described above, adjustments would be made to reflect 
subsequent purchase payments and withdrawals made since the 
reinstatement date. With regard to Option 2, Hartford Life would only 
implement the interest rate alternative if a tax-exempt plan sponsor 
elects Option 2 and the interest rate alternative would result in a 
greater reinstated contract value for the tax-exempt plan sponsor than 
the primary Option 2 alternative.
    47. Under the interest rate alternative for Option 2, Hartford Life 
would waive any CDSC otherwise applicable upon the exchange of a 457 
Contract for a reinstated Original Old Contract and would waive any 
CDSC under the reinstated Original Old Contract that would otherwise 
apply in the future.
    48. Under Options 1 and 2, for Contracts pursuant to which Hartford 
Life maintains individual participant accounts, exercise of the 
exchange offer options would not alter the value of such accounts, the 
number or size of annuity payments being made in connection with such 
accounts, or the amount of death benefits available in connection with 
such accounts.
    49. For the reasons set forth below, Applicants believe the 
proposed exchanges will benefit the tax-exempt plan sponsors and their 
plans. Except for: (1) The number of sub-accounts available and the 
particular mutual funds in which such sub-accounts

[[Page 49333]]

invest; and (2) small variations in the fees and charges, the Original 
Old Contracts, Modified Old Contracts, 457 Contracts and New Contracts 
are substantially the same in most material respects. In particular, 
all four types of Contracts offer the same surrender, withdrawal, 
dollar cost averaging, general account investment option, death benefit 
and annuity payment option features. Therefore, except as described 
below in connection with mutual fund investment options and fee and 
charge variations, the tax-exempt plan sponsors and their plans should 
be in at least as favorable a position after electing an exchange offer 
option (or defaulting into Option 1) as they were before the proposed 
exchange offers. Moreover, for tax-exempt plan sponsors that elect a 
New Contract, they and their plans should be better off than they would 
have been had they continued to hold their Modified Old Contract or 457 
Contract.
    50. The mortality and expense risk and administrative charge under 
the New Contracts is lower than the mortality and expense risk and 
administrative charges assessed under the Modified Old Contracts and, 
with one exception, lower than the mortality and expense risk and 
administrative charges assessed under the 457 Contracts.\4\ Under 
Modified Old Contracts and 457 Contracts, Hartford Life assesses a 
mortality and expense risk charge during the accumulation period at 
annual rates ranging from .75% to .90% of average daily sub-account net 
assets. (The rate for any Modified Old Contract or 457 Contract may 
also be a function of reductions due either to experience rating or 
reductions negotiated by the tax-exempt plan sponsor with Hartford 
Life.) Under Modified Old Contracts and 457 Contracts, the mortality 
and expense risk charge during the annuity payment period is at an 
annual rate of 1.25% of average daily sub-account net assets. Under New 
Contracts, the mortality and expense risk and administrative charge is 
a flat annual rate of 0.70% of average daily sub-account net assets 
during both the accumulation period and the annuity payment period.\5\ 
Reductions in the mortality and expense risk and administrative charge 
charges due to experience rating and negotiated rates are available 
under the New Contracts on the same basis as the same are available 
under the Modified Old Contracts and the 457 Contracts.
---------------------------------------------------------------------------

    \4\ The exception is the type E 457 Contract, which has a charge 
of 0.45% of average daily sub-account net assets. The rate for type 
E Contracts was the result of experience ratings or negotiation, or 
both. There are two type E 457 Contracts outstanding.
    \5\ However, to preserve prior experience ratings and/or 
negotiated rates, any New Contract issued to a holder of a type E 
457 Contract will have a mortality and expense risk and 
administrative charge of 0.45% of average daily sub-account net 
assets.
---------------------------------------------------------------------------

    51. The vast majority of underlying mutual funds available under 
the New Contracts have total operating expenses that are lower (in many 
cases, substantially lower) than the total operating expenses of the 
corresponding underlying mutual funds available under the Modified Old 
Contracts and the 457 Contracts. Most significantly, as a result of the 
lower mortality and expense risk and administrative charge rates under 
the New Contracts, for any sub-account of Account Eleven available 
under the New Contracts, the aggregate of such charges on an annual 
basis and the total annual expenses of the mutual fund in which that 
sub-account invests, will be less than the same aggregate for the 
corresponding sub-account of either Account DC-I or Account Two 
available under the Modified Old Contracts or the corresponding sub-
account of Account 457 available under the 457 Contracts.
    52. If a tax-exempt plan sponsor elects Option 1 under either the 
Modified Old Contract exchange offer or the 457 Contract exchange 
offer, it will have available as investment options for itself and 
participants in its plan, 48 sub-accounts offering an indirect 
investment in 48 mutual funds. This array of mutual funds represents 
the most attractive line-up of funds offered by Hartford Life to 
government plan trustees, tax-exempt plan sponsors and other retirement 
plan sponsors in its latest and most attractive group variable annuity 
contracts. In the event that a tax-exempt plan sponsor elects Option 2 
under an offer, the sponsor and its plan (including plan participants) 
would be in the same position vis-a-vis available sub-account 
investment options as they would have been had no 457 Contracts or 
Modified Old Contracts been issued.
    53. Under Options 1 and 2 relating to the Modified Old Contract 
offers, a tax-exempt plan sponsor would replace interests in one or 
more of the Unregistered DC Accounts that are not registered as 
securities under the 1933 Act with interests in Account DC-I, Account 
Two or Account Eleven which would be registered as securities under the 
1933 Act. Likewise, under Options 1 and 2 relating to the 457 Contract 
offers, a tax-exempt plan sponsor would replace interests in Account 
457 that are not registered as securities under the 1933 Act with 
interests in Account DC-I, Account Two or Account Eleven which would be 
registered as securities under the 1933 Act. As a result, such tax-
exempt plan sponsors would, among other things, receive prospectuses 
and other disclosure documents at regular intervals in a prescribed 
format and otherwise obtain the protections of the 1933 Act and rules 
and regulations thereunder. Similarly, such tax-exempt plan sponsors 
would be exchanging interests in one or more of the Unregistered DC 
Accounts or Account 457 which are not registered as investment 
companies under the Act, for interests in Account DC-I, Account Two or 
Account Eleven which are each registered as an investment company under 
the Act and thereby obtain for themselves and the participants in their 
plans the considerable protections of the Act.

Applicants' Legal Analysis

    1. Section 11(a) of the Act makes it unlawful for any registered 
open-end investment company, or any principal underwriter for such an 
investment company, to make an offer to the holder of a security of 
such investment company, or of any other open-end investment company, 
to exchange his or her security for a security in the same or another 
such company on any basis other than the relative net asset values of 
the respective securities, unless the terms of the offer have first 
been submitted to and approved by the Commission or are in accordance 
with Commission rules adopted under section 11. Section 11(c) of the 
Act provides the provisions of section 11(a) are applicable to any 
offer of exchange of the securities of a registered unit investment 
trust for the securities of any other investment company regardless of 
the basis of the exchange. As a result, the Commission must approve any 
such offer unless the offer satisfies an applicable rule adopted under 
section 11.
    2. Applicants state that the primary purpose of section 11 of the 
Act is to prevent ``switching''--the practice of inducing security 
holders of one investment company to exchange their securities for 
those of a different investment company ``solely for the purpose of 
exacting additional selling charges.'' In the 1930s prior to adoption 
of the Act, Congress found evidence of widespread ``switching'' 
operations. The legislative history of section 11 makes it clear that 
the potential for harm to investors perceived in switching was its use 
to extract additional sales charges from those investors. Accordingly, 
applications under section 11(a) and orders granting those applications 
appropriately have focused on sales loads or sales load differentials 
and administrative fees to be imposed for effecting a proposed exchange 
and have

[[Page 49334]]

ignored other fees and charges, such as the respective advisory fee 
charges of the exchanged and acquired securities.
    3. The Applicant states that section 11(c) of the Act requires 
Commission approval (by order or by rule) of any exchange, regardless 
of its basis, involving securities issued by a unit investment trust, 
because Congress found investors in unit investment trusts to be 
particularly vulnerable to switching operations. As noted by the 
Commission, ``In order to earn another sales commission, a [unit 
investment trust] sponsor would often pressure unitholders into 
exchanging their units for those of another of the sponsor's trusts.''
    4. The Commission adopted Rule 11a-2 under Section 11 of the Act in 
1983. By its terms, the Rule permits certain offers of exchange of one 
variable annuity contract for another or interests in one registered 
separate account through which variable annuity contracts are issued 
for interests in another registered separate account. More 
specifically, Rule 11a-2 permits exchange offers involving variable 
annuity contracts provided that the only variance from a relative net 
asset value exchange is an administrative fee disclosed in the 
registration statement of the offering separate account and/or a sales 
load or sales load differential calculated according to methods 
prescribed in the rule.
    5. Under Option 1 of the Modified Old Contract offers, a tax-exempt 
plan sponsor that exchanges a Modified Old Contract for a New Contract 
would effect a transfer of assets held in Account DC-I, Account Two 
and/or the Unregistered DC Accounts to Account Eleven. Likewise, under 
Option 1 of the 457 Contract offers, a tax-exempt plan sponsor that 
exchanges a 457 Contract for a New Contract would effect a transfer of 
assets from Account 457 to Account Eleven. Along with the transfer of 
assets to Account Eleven, such a tax-exempt plan sponsor would receive 
an interest in Account Eleven equal to the contract value in its New 
Contract.
    6. Election of Option 2 of the Modified Old Contract offers by a 
tax-exempt plan sponsor would result in a transfer of assets 
representing contract value under the sponsor's Modified Old Contract 
from one or more of the Unregistered Accounts to Account DC-I and/or 
Account Two. Likewise, election of Option 2 of the 457 Contract offers 
by a tax-exempt plan sponsor would result in a transfer of assets 
representing contract value under the sponsor's 457 Contract from 
Account 457 to Account DC-I and/or Account Two. Along with the transfer 
of assets to Account DC-I and/or Account Two, such a tax-exempt plan 
sponsor would receive an interest in Account DC-I and/or Account Two 
equal to the contract value in its New Contract.
    7. Account DC-I, Account Two and Account Eleven is each registered 
with the Commission under the Act as a unit investment trust. Each of 
the Unregistered Accounts and Account 457, not currently being able to 
rely on the section 3(c)(11) exclusion from the definition of an 
investment company, are investment companies; though not registered as 
such under the Act. Accordingly, Hartford Life's proposed offer to 
exchange interests in each for interests held by the tax-exempt plan 
sponsors in the Unregistered Accounts or Account 457, would constitute 
an offer to exchange securities of a registered unit investment trust 
for securities of another investment company. Thus, unless the terms of 
each proposed offer are consistent with those permitted by a Commission 
rule, Applicants may only make the proposed offers pursuant to a 
Commission order under section 11(a) approving the terms of the offers.
    8. Applicants assert that the terms of the exchange offers proposed 
in this application are such that the offers would not involve any of 
the practices section 11 of the Act was designed to prevent and are 
otherwise fair and equitable to the tax-exempt plan sponsors and their 
plans (including plan participants) because:
     Tax-exempt plan sponsors would receive full disclosure of 
all material aspects of the proposed exchange offers including:
    [cir] Complete discussion of each Option available;
    [cir] A complete discussion of their rights in connection with the 
offers; and
    [cir] Prospectuses for New Contracts and Original Old Contracts;
     No charges (including any CDSC) would be imposed in 
connection with the proposed exchange offers and therefore the 
exchanges would be made on the basis of the relative net asset value;
     Tax-exempt plan sponsors and their plans (including plan 
participants) would not be subject to a CDSC or any other sales charge 
under the New Contracts or Original Old Contracts;
     In all material respects, the New Contracts would be at 
least as favorable, if not more favorable, to tax-exempt plan sponsors 
and their plans (including plan participants) as either the 457 
Contracts or the Modified Old Contracts;
     Most of the mutual funds available to tax-exempt plan 
sponsors and their plans (including plan participants) as investment 
options under Modified Old Contracts and 457 Contracts would be 
available under the New Contracts (or their variable insurance fund 
counterparts would be available), and to the extent that some funds, or 
their variable insurance fund counterparts, are not available under the 
New Contracts, alternative mutual funds with substantially the same or 
similar investment objectives and strategies would be available as 
investment options;
     Tax-exempt plan sponsors that do not elect another Option, 
may elect to surrender their Modified Old Contract or 457 Contract 
without the imposition of any surrender or withdrawal charge; and
     Based on their review of existing federal income tax laws 
and regulations, Applicants believe that tax-exempt plan sponsors and 
their plans (including plan participants) would not suffer any adverse 
tax consequences as a result of electing any Option in connection with 
the proposed exchange offers.
    9. Applicants believe that the terms of the exchange offers 
proposed in this application meet the standards established by the 
Commission for exchange offers to holders of group variable annuity 
contracts issued through separate accounts registered as unit 
investment trusts under the Act. The conditions of Rule 11a-2 reflect 
theses standards and the terms of the proposed exchange offers meet the 
conditions of the Rule. In fact, Applicants would be able to rely on 
Rule 11a-2 if the Unregistered DC Accounts and Account 457 were 
registered with the Commission as investment companies under the Act. 
Applicants submit that, in making exchange offers proposed herein, they 
should not be subject to conditions more stringent than those found in 
Rule 11a-2.
    10. Applicants further submit that the specific terms of the 
process by which tax-exempt plan sponsors would elect an Option in 
response to the proposed offers, including the implementation of Option 
1 as a default option in the event that a tax-exempt plan sponsor does 
not affirmatively elect any Option, would satisfy the standards of 
section 11. The Commission has broad authority to approve the terms of 
an exchange offer under Section 11 that is fair and does not result in 
switching or the other types of potential abuses at which Section 11 is 
directed. There are no statutory standards relating to requirements 
for, or the manner of obtaining, elections or approvals from parties in 
situations similar to those of the Applicants explained above when

[[Page 49335]]

conducting an exchange subject to section 11. This is supported by Rule 
11a-2 which sets forth a number of specific requirements under which 
exchanges offers involving variable annuity contracts (and interests in 
separate accounts through which such contracts are issued) are 
permissible. All of the applicable requirements of the Rule concern the 
basis of the exchange and/or the fees that may be imposed, but the Rule 
does not regulate the manner by which investors may elect an option 
under an exchange offer. Accordingly, the Commission may find, and in 
the past has found, that a default election in an exchange offer is 
permissible if the application sets forth facts that demonstrate that 
the offeror cannot permit an offeree to retain its current investment 
and that the overall terms of the offer are otherwise fair and 
equitable to investors.
    11. Moreover, Applicants state that the Commission staff has 
consistently taken ``no-action'' positions under section 22(e) of the 
Act with respect to the analogous issue of forced redemptions of mutual 
fund shares when certain conditions were met. In these situations, a 
basic investment decision (i.e., the decision to redeem) was permitted 
to be made on behalf of investors on the basis of informed, implied 
consent. These letters, in effect, permit such forced redemptions on 
the basis of notice to shareholders and prospectus disclosure of those 
events which may trigger such a redemption (i.e., account falling below 
a certain value, failure to provide a taxpayer identification number, 
negative balances in other accounts, etc.) and the absence of any 
action by a shareholder to take an available alternative route within a 
specified time period. Applicants submit that the communications which 
will be made to tax-exempt plan sponsors with respect to their rights 
under all of the Options to provide for timely and extensive disclosure 
comparable to that which is required for these automatic redemptions of 
mutual fund shares.
    12. Applicants believe that the legislative history of section 11 
makes it clear that Congress believed the potential harm to investors 
from ``switching'' was its use to extract additional sales charges from 
those investors. Consequently, prior applications under section 11(a) 
(and orders granted in response to those applications) appropriately 
focused on sales loads or sales load differentials and administrative 
fees to be imposed in connection with a proposed exchange offer. In 
granting approval orders requested in prior section 11 applications 
involving the exchange of one variable annuity contract for another, or 
the exchange of interests in one registered separate account for 
another, the Commission staff has considered whether or not the 
consummation of the exchange would have inequitable results for 
contract owners, and has viewed the absence of duplication of sales 
loads and administrative fees in effecting the exchanges as persuasive 
evidence that the proposed exchange does not present the abuses section 
11 of the Act designed to prevent.
    13. Applicants state that in the event that the Commission does not 
issue an order under section 11 approving the proposed exchange offers, 
Hartford Life will be forced, at great expense, to register the 
Unregistered DC Accounts and Account 457 as investment companies under 
the Act and to register interests issued in such Accounts issued 
through Modified Old Contracts and the Tax-Exempt 457 Contracts as 
securities under the 1933 Act. Registration of the Unregistered DC 
Accounts and Account 457 as investment companies would be particularly 
burdensome because each would have to comply with the extensive 
regulatory regime imposed by the Act. Applicants submit that any 
benefit to the government plan trustees and their plans (including plan 
participants) from such registration could not justify the great 
expense and other considerable burdens attendant to such registration. 
Because the government plan trustees and their plans make up the 
overwhelming majority of investors in each Unregistered DC Account and 
Account 457, Applicants believe that the proposed exchange offers 
represent a far more efficient, reasonable and balanced response to the 
inadvertent issuance of the Modified Old Contracts and the 457 
Contracts to tax-exempt plan sponsors.

Conclusion

    Applicants submit that, for the reasons discussed above, the terms 
of the proposed exchange offers are such that the offers would not 
entail any of the practices section 11 was intended to prevent and are 
otherwise fair and equitable to the tax-exempt plan sponsors, their 
plans and participants in their plans. For these reasons, Applicants 
submit that the terms of the proposed offers are consistent with the 
protection of investors, the standards that the Commission has applied 
to prior applications for orders under section 11(a) of the Act, and 
the purposes fairly intended by the public policies underlying section 
11 of the Act.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-16959 Filed 8-27-07; 8:45 am]

BILLING CODE 8010-01-P
