<PAGE>
As filed with the Securities and Exchange Commission on April 7, 2000.
File No. 333-76419
811-09295
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
-------
Post-Effective Amendment No. 3 [X]
--------
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 16 [X]
----
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT SEVEN
(Exact Name of Registrant)
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
(Name of Depositor)
P.O. Box 2999
Hartford, CT 06104-2999
(Address of Depositor's Principal Offices)
(860) 843-6733
(Depositor's Telephone Number, Including Area Code)
Marianne O'Doherty, Esq.
Hartford Life, Inc.
P.O. Box 2999
Hartford, CT 06104-2999
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
_X_ on May 1, 2000 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on , 2000 pursuant to paragraph (a)(1) of Rule 485
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Pursuant to Rule 24F-2(a) under the Investment Company Act of 1940, the
Registration has registered an indefinite amount of securities.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(A)
<TABLE>
<CAPTION>
N-4 Item No. Prospectus Heading
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<S> <C>
1. Cover Page Hartford Life and Annuity Insurance Company -
Separate Account Seven
2. Definitions Glossary of Special Terms
3. Synopsis or Highlights Summary
4. Condensed Financial Yield Information
Information
5. General Description of Hartford Life and Annuity Insurance Company,
Registrant The Separate Account, The Fixed Account, and
The Funds
6. Deductions Contract Charges
7. General Description of The Contract, The Separate Account, The
Annuity Contracts Fixed Account, and Surrenders
8. Annuity Period Settlement Provisions
9. Death Benefit Death Benefits
10. Purchases and Contract Value The Contract, The Contract Offered, and
Contract Value
11. Redemptions Surrenders
12. Taxes Federal Tax Considerations
13. Legal Proceedings Legal Matters and Experts
14. Table of Contents of the Table of Contents to
Statement of Additional Statement of Additional
Information Information
15. Cover Page Part B; Statement of Additional
Information
16. Table of Contents Table of Contents
17. General Information and History Summary
<PAGE>
18. Services None
19. Purchase of Securities Distribution of Contracts
being Offered
20. Underwriters Distribution of Contracts
21. Calculation of Performance Data Calculation of Yield and Return
22. Annuity Payments Settlement Provisions
23. Financial Statements Financial Statements
24. Financial Statements and Financial Statements and
Exhibits Exhibits
25. Directors and Officers of the Directors and Officers of the
Depositor Depositor
26. Persons Controlled by or Under Persons Controlled by or Under
Common Control with the Common Control with the Depositor
Depositor or Registrant or Registrant
27. Number of Contract Owners Number of Contract Owners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Location of Accounts and Records
Records
31. Management Services Management Services
32. Undertakings Undertakings
</TABLE>
<PAGE>
PART A
<PAGE>
<TABLE>
<S> <C>
HARTFORD LEADERS
SEPARATE ACCOUNT SEVEN
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
P.O. BOX 5085
HARTFORD, CONNECTICUT 06102-5085
TELEPHONE: 1-800-862-6668 (CONTRACT OWNERS)
1-800-862-7155 (REGISTERED REPRESENTATIVES) [LOGO]
</TABLE>
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This Prospectus describes information you should know before you purchase
Hartford Leaders variable annuity. Please read it carefully.
Hartford Leaders variable annuity is a Contract between you and Hartford Life
and Annuity Insurance Company where you agree to make at least one payment to us
and we agree to make a series of annuity payments to you at a later date. This
annuity is a flexible premium, tax-deferred, variable annuity offered to both
individuals and groups. It is:
x Flexible, because you may add premium payments at any time.
x Tax-deferred, which means you don't pay taxes until you take money out or
until we start to make annuity payments to you.
x Variable, because the value of your annuity will fluctuate with the
performance of the underlying funds.
- --------------------------------------------------------------------------------
At purchase, you allocate your premium payment, which is any purchase payment
less any Premium Taxes, to "Sub-Accounts". These are subdivisions of our
Separate Account, an account that keeps your annuity assets separate from our
company assets. The Sub-Accounts then purchase shares of mutual funds set up
exclusively for variable annuity or variable life insurance products. These are
not the same mutual funds that you buy through your stockbroker or through a
retail mutual fund. They may have similar investment strategies and the same
portfolio managers as retail mutual funds. This annuity offers you funds with
investment strategies ranging from conservative to aggressive and you may pick
those funds that meet your investment goals and risk tolerance. The Sub-Accounts
and the funds are listed below:
- - AMERICAN FUNDS ASSET ALLOCATION FUND SUB-ACCOUNT which purchases Class 2
shares of the Asset Allocation Fund of American Funds Insurance Series (also
known as American Variable Insurance Series) ("American Funds Asset Allocation
Fund")
- - AMERICAN FUNDS BOND FUND SUB-ACCOUNT which purchases Class 2 shares of the
Bond Fund of American Funds Insurance Series ("American Funds Bond Fund")
- - AMERICAN FUNDS GLOBAL GROWTH FUND SUB-ACCOUNT which purchases Class 2 shares
of the Global Growth Fund of American Funds Insurance Series ("American Funds
Global Growth Fund")
- - AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION FUND SUB-ACCOUNT which purchases
Class 2 shares of the Global Small Capitalization Fund of American Funds
Insurance Series ("American Funds Global Small Capitalization Fund")
- - AMERICAN FUNDS GROWTH FUND SUB-ACCOUNT which purchases Class 2 shares of the
Growth Fund of American Funds Insurance Series ("American Funds Growth Fund")
- - AMERICAN FUNDS GROWTH-INCOME FUND SUB-ACCOUNT which purchases Class 2 shares
of the Growth-Income Fund of American Funds Insurance Series ("American Funds
Growth-Income Fund")
- - AMERICAN FUNDS INTERNATIONAL FUND SUB-ACCOUNT which purchases Class 2 shares
of the International Fund of American Funds Insurance Series ("American Funds
International Fund")
- - AMERICAN FUNDS NEW WORLD FUND SUB-ACCOUNT which purchases Class 2 shares of
the New World Fund of American Funds Insurance Series ("American Funds New
World Fund")
- - FRANKLIN REAL ESTATE FUND SUB-ACCOUNT which purchases Class 2 shares of the
Franklin Real Estate Fund of the Franklin Templeton Variable Insurance
Products Trust ("Franklin Real Estate Fund")
- - FRANKLIN SMALL CAP FUND SUB-ACCOUNT which purchases Class 2 shares of the
Small Cap Fund of the Franklin Templeton Variable Insurance Products Trust
("Franklin Small Cap Fund")
- - FRANKLIN STRATEGIC INCOME SECURITIES FUND SUB-ACCOUNT (FORMERLY FRANKLIN
STRATEGIC INCOME INVESTMENTS FUND SUB-ACCOUNT) which purchases Class 1 shares
of the Franklin Strategic Income Securities Fund (formerly Franklin Strategic
Income Investments Fund) of the Franklin Templeton Variable Insurance Products
Trust
- - HARTFORD MONEY MARKET HLS FUND SUB-ACCOUNT which purchases Class IA shares of
the Hartford Money Market HLS Fund
- - MFS CAPITAL OPPORTUNITIES SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark-Capital Opportunities Series of the
MFS-Registered Trademark- Variable Insurance Trust-SM-
<PAGE>
- - MFS EMERGING GROWTH SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- Emerging Growth Series of the
MFS-Registered Trademark- Variable Insurance Trust-SM-
- - MFS GLOBAL EQUITY SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- Global Equity Series of the
MFS-Registered Trademark- Variable Insurance Trust-SM-
- - MFS GROWTH SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- Growth Series of the MFS-Registered Trademark-
Variable Insurance Trust-SM-
- - MFS GROWTH WITH INCOME SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- Growth with Income Series of the
MFS-Registered Trademark- Variable Insurance Trust-SM-
- - MFS HIGH INCOME SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- High Income Series of the MFS-Registered Trademark-
Variable Insurance Trust-SM-
- - MFS NEW DISCOVERY SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- New Discovery Series of the
MFS-Registered Trademark- Variable Insurance Trust-SM-
- - MFS TOTAL RETURN SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- Total Return Series of the MFS-Registered Trademark-
Variable Insurance Trust-SM-
- - MUTUAL SHARES SECURITIES FUND SUB-ACCOUNT which purchases Class 2 shares of
Mutual Shares Securities Fund of the Franklin Templeton Variable Insurance
Products Trust
- - TEMPLETON ASSET STRATEGY FUND SUB-ACCOUNT (FORMERLY TEMPLETON ASSET ALLOCATION
FUND SUB-ACCOUNT) which purchases Class 2 shares of the Templeton Asset
Strategy Fund (formerly Templeton Asset Allocation Fund) of the Franklin
Templeton Variable Insurance Products Trust
- - TEMPLETON DEVELOPING MARKETS SECURITIES FUND SUB-ACCOUNT (FORMERLY TEMPLETON
DEVELOPING MARKETS EQUITY FUND SUB-ACCOUNT) which purchases Class 1 shares of
the Templeton Developing Markets Securities Fund (formerly Templeton
Developing Markets Equity Fund) of the Franklin Templeton Variable Insurance
Products Trust
- - TEMPLETON GROWTH SECURITIES FUND SUB-ACCOUNT (FORMERLY TEMPLETON GLOBAL GROWTH
FUND SUB-ACCOUNT) which purchases Class 2 shares of the Templeton Growth
Securities Fund (formerly Templeton Global Growth Fund) of the Franklin
Templeton Variable Insurance Products Trust
- - TEMPLETON INTERNATIONAL SECURITIES FUND SUB-ACCOUNT (FORMERLY TEMPLETON
INTERNATIONAL FUND SUB-ACCOUNT) which purchases Class 2 shares of the
Templeton International Securities Fund (formerly Templeton International
Fund) of the Franklin Templeton Variable Insurance Products Trust
You may also allocate some or all of your premium payment to one of the "Fixed
Accumulation Features", which pays an interest rate guaranteed for a certain
time period from the time the payment is made. Premium payments put in a Fixed
Accumulation Feature are not segregated from our company assets like the assets
of the Separate Account.
If you decide to buy this annuity, you should keep this Prospectus for your
records. You can also call us at 1-800-862-6668 to get a Statement of Additional
Information, free of charge. The Statement of Additional Information contains
more information about this annuity and, like this Prospectus, is filed with the
Securities and Exchange Commission. We have included the Table of Contents for
the Statement of Additional Information at the end of this Prospectus.
Although we file the Prospectus and the Statement of Additional Information with
the Securities and Exchange Commission, the Commission doesn't approve or
disapprove these securities or determine if the information is truthful or
complete. Anyone who represents that the Securities and Exchange Commission does
these things may be guilty of a criminal offense.
This Prospectus and the Statement of Additional Information can also be obtained
from the Securities and Exchange Commission's website (HTTP://WWW.SEC.GOV).
This annuity IS NOT:
- A bank deposit or obligation
- Federally insured
- Endorsed by any bank or governmental agency
This annuity may not be available for sale in all states.
- --------------------------------------------------------------------------------
PROSPECTUS DATED: MAY 1, 2000
STATEMENT OF ADDITIONAL INFORMATION DATED: MAY 1, 2000
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
- ----------------------------------------------------------------------
GLOSSARY OF SPECIAL TERMS 4
- ----------------------------------------------------------------------
FEE TABLE 5
- ----------------------------------------------------------------------
ACCUMULATION UNIT VALUES 11
- ----------------------------------------------------------------------
SUMMARY 14
- ----------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 16
- ----------------------------------------------------------------------
THE SEPARATE ACCOUNT 16
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THE FUNDS 16
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PERFORMANCE RELATED INFORMATION 19
- ----------------------------------------------------------------------
THE FIXED ACCUMULATION FEATURES 19
- ----------------------------------------------------------------------
THE CONTRACT 20
- ----------------------------------------------------------------------
Contract Value -- Before the Annuity Commencement Date 21
- ----------------------------------------------------------------------
Contract Value Transfers Before and After the Annuity
Commencement Date 21
- ----------------------------------------------------------------------
Surrenders 22
- ----------------------------------------------------------------------
Contract Charges 23
- ----------------------------------------------------------------------
Death Benefits 25
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SETTLEMENT PROVISIONS 27
- ----------------------------------------------------------------------
Annuity Payments 28
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Other Information 30
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FEDERAL TAX CONSIDERATIONS 30
- ----------------------------------------------------------------------
A. General 30
- ----------------------------------------------------------------------
B. Taxation of Hartford and the Separate Account 30
- ----------------------------------------------------------------------
C. Taxation of Annuities -- General Provisions Affecting
Purchasers Other Than Qualified Retirement Plans 30
- ----------------------------------------------------------------------
D. Federal Income Tax Withholding 33
- ----------------------------------------------------------------------
E. General Provisions Affecting Qualified Retirement Plans 33
- ----------------------------------------------------------------------
F. Annuity Purchases By Nonresident Aliens and Foreign
Corporations 33
- ----------------------------------------------------------------------
G. Generation-Skipping Transfers 33
- ----------------------------------------------------------------------
MISCELLANEOUS 33
- ----------------------------------------------------------------------
How Contracts Are Sold 33
- ----------------------------------------------------------------------
Legal Matters 34
- ----------------------------------------------------------------------
Experts 34
- ----------------------------------------------------------------------
More Information 34
- ----------------------------------------------------------------------
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION 35
- ----------------------------------------------------------------------
APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED RETIREMENT
PLANS 36
- ----------------------------------------------------------------------
APPENDIX II -- OPTIONAL DEATH BENEFIT -- EXAMPLES 39
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
GLOSSARY OF SPECIAL TERMS
ACCOUNT: Any of the Sub-Accounts or Fixed Accumulation Features.
ACCUMULATION UNIT: A unit of measure we use to calculate values before we begin
to make annuity payments to you.
ADMINISTRATIVE OFFICE: Located at 200 Hopmeadow Street, Simsbury, Connecticut
06089. The mailing address is: Investment Product Services, P.O. Box 5085,
Hartford, Connecticut 06102-5085.
ANNIVERSARY VALUE: The value equal to the Contract Value as of a Contract
Anniversary, increased by the dollar amount of any premium payments made since
that anniversary and reduced by the dollar amount of any partial Surrenders
since that anniversary.
ANNUAL MAINTENANCE FEE: An annual $30 charge for annuities having a value of
less than $50,000 on the most recent Contract Anniversary or when the annuity is
Surrendered in full. The charge is deducted proportionately from the funds in
use at the time.
ANNUITANT: The person on whose life the Contract is based. The Annuitant may not
be changed.
ANNUITY: A Contract issued by us that provides, in exchange for premium
payments, a series of annuity payments.
ANNUITY CALCULATION DATE: The date we calculate your first annuity payment.
ANNUITY COMMENCEMENT DATE: The date we start to make annuity payments to you.
ANNUITY UNIT: A unit of measure we use to calculate the value of the annuity
payments we make to you.
ASSUMED INVESTMENT RETURN ("AIR"): The investment return, either 3%, 5% or 6%,
which we base your variable dollar amount payments on. You select the AIR before
we start to make annuity payments.
BENEFICIARY: The person or persons you designate to receive payment of the death
benefit upon the death of the Contract Owner.
CODE: The Internal Revenue Code of 1986, as amended.
COMMUTED VALUE: The present value of any remaining guaranteed Annuity Payouts.
This amount is calculated using the Assumed Investment Return for variable
dollar amount Annuity Payouts or the underlying rate of return for fixed dollar
amount Annuity Payouts.
CONTINGENT ANNUITANT: The person you may designate to become the Annuitant if
the original Annuitant dies before we begin making annuity payments.
CONTRACT: The contract is the individual Annuity contract and any endorsements
or riders. If you have a group annuity, you will receive a certificate rather
than a contract.
CONTRACT ANNIVERSARY: The annual anniversary of the date we issued your annuity.
If your contract anniversary falls on a day that is not a Valuation Day, then
the next Valuation Day will be your Contract Anniversary for that year.
CONTRACT OWNER(S) OR YOU: The owner(s) or holder(s) of this Annuity.
CONTRACT VALUE: The total value of your Annuity that we get by adding up the
value of each of your Sub-Accounts and Fixed Accumulation Features on any
Valuation Day.
CONTRACT YEAR: The 12 months following the date you purchased your annuity and
from any Contract Anniversary.
DOLLAR COST AVERAGING ("DCA"): Systematic transfers from one Account to another.
DCA PROGRAM FIXED ACCUMULATION FEATURES: Fixed Accumulation Features we
establish to use for dollar cost averaging programs. These are part of our
General Account.
DEATH BENEFIT: The amount we pay when the Contract Owner or the Annuitant dies.
DUE PROOF OF DEATH: A certified copy of a death certificate, an order of a court
of competent jurisdiction, or any other proof acceptable to us.
FIXED ACCUMULATION FEATURE: This is an account that is part of our General
Account. You may allocate all or a portion of your premium payments or transfer
of Contract Value to this account. In your contract this is defined as "The
Fixed Account".
GENERAL ACCOUNT: Our General Account that includes our company assets and your
annuity assets allocated to any of the Fixed Accumulation Features or DCA
Program Fixed Accumulation Features.
HARTFORD OR WE: Hartford Life and Annuity Insurance Company.
MAXIMUM ANNIVERSARY VALUE: This is the highest Anniversary Value prior the
deceased's 81st birthday or the date of death, if earlier.
PAYEE: The person or party designated by you to receive annuity payments.
PREMIUM TAX: A tax charged by a state or municipality on premium payments.
SEPARATE ACCOUNT: An account that we establish to separate the assets for your
annuity Sub-Accounts from our company assets.
SURRENDER: A complete or partial withdrawal or distribution from your annuity.
SURRENDER VALUE: What we pay you if you terminate your annuity before we begin
to make annuity payments.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Separate Account is determined as of the close of the New York
Stock Exchange (generally 4:00 p.m. Eastern Time).
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
- --------------------------------------------------------------------------------
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C>
SALES CHARGE IMPOSED ON PURCHASES (as a percentage of
Premium Payments) None
- ---------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE (as a percentage of Premium
Payments) (1)
First Year (2) 7%
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Second Year 6%
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Third Year 6%
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Fourth Year 5%
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Fifth Year 4%
- ---------------------------------------------------------------------
Sixth Year 3%
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Seventh Year 2%
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Eighth Year 0%
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ANNUAL MAINTENANCE FEE (3) $30
- ---------------------------------------------------------------------
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average
daily Sub-Account Value)
Mortality and Expense Risk Charge 1.25%
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Administrative Fees 0.15%
- ---------------------------------------------------------------------
Total Separate Account Annual Expenses 1.40%
- ---------------------------------------------------------------------
OPTIONAL CHARGES (as a percentage of average daily
Sub-Account Value)
Optional Death Benefit Charge 0.15%
- ---------------------------------------------------------------------
Total Separate Account Annual Expenses with the Optional
Death Benefit Charge 1.55%
- ---------------------------------------------------------------------
</TABLE>
(1) Each Premium Payment has its own Contingent Deferred Sales Charge schedule.
See "Charges and Fees -- The Contingent Deferred Sales Charge." The
Contingent Deferred Sales Charge is not assessed on partial Surrenders which
do not exceed the Annual Withdrawal Amount.
(2) Length of time from each Premium Payment.
(3) An annual $30 charge deducted on a Contract Anniversary or upon Surrender if
the Contract Value at either of those times is less than $50,000. It is
deducted proportionately from the Accounts in which you are invested at the
time of the charge.
The purpose of the Fee Table and Examples is to assist you in understanding
various costs and expenses that you will pay directly or indirectly. The Fee
Table and Examples reflect expenses of the Separate Account and underlying
Funds. We will deduct any Premium Taxes that apply.
The Examples should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown. The Annual
Maintenance Fee has been reflected in the Examples by a method intended to show
the "average" impact of the Annual Maintenance Fee on an investment in the
Separate Account. We do this by approximating an "average" 0.06% annual charge.
<PAGE>
6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
as of the Fund's Year End
(as a percentage of net assets)
<TABLE>
<CAPTION>
TOTAL FUND
OPERATING
12B-1 DISTRIBUTION OTHER EXPENSES
MANAGEMENT FEES AND/OR SERVICING EXPENSES (INCLUDING ANY
(INCLUDING ANY FEES (INCLUDING (INCLUDING ANY WAIVERS AND ANY
WAIVERS) WAIVERS) REIMBURSEMENTS) REIMBURSEMENTS)
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
American Funds Asset Allocation Fund 0.43% 0.25% 0.01% 0.69%
- --------------------------------------------------------------------------------------------------------------------------
American Funds Bond Fund 0.51% 0.25% 0.02% 0.78%
- --------------------------------------------------------------------------------------------------------------------------
American Funds Global Growth Fund 0.68% 0.25% 0.03% 0.96%
- --------------------------------------------------------------------------------------------------------------------------
American Funds Global Small Capitalization Fund 0.79% 0.25% 0.03% 1.07%
- --------------------------------------------------------------------------------------------------------------------------
American Funds Growth Fund 0.38% 0.25% 0.01% 0.64%
- --------------------------------------------------------------------------------------------------------------------------
American Funds Growth-Income Fund 0.34% 0.25% 0.01% 0.60%
- --------------------------------------------------------------------------------------------------------------------------
American Funds International Fund 0.55% 0.25% 0.05% 0.85%
- --------------------------------------------------------------------------------------------------------------------------
American Funds New World Fund (1) 0.89% 0.25% 0.06% 1.20%
- --------------------------------------------------------------------------------------------------------------------------
Franklin Real Estate Fund -- Class 2 (2)(3) 0.56% 0.25% 0.02% 0.83%
- --------------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund -- Class 2 (2)(4) 0.55% 0.25% 0.27% 1.07%
- --------------------------------------------------------------------------------------------------------------------------
Franklin Strategic Income Securities Fund
(formerly Franklin Strategic Income
Investments Fund) (5) 0.43% N/A 0.32% 0.75%
- --------------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS Fund 0.45% N/A 0.02% 0.47%
- --------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Capital Opportunities
Series (6)(7) 0.75% N/A 0.16% 0.91%
- --------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Emerging Growth
Series (6) 0.75% N/A 0.09% 0.84%
- --------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Global Equity
Series (6)(7) 1.00% N/A 0.21% 1.21%
- --------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth Series (6)(7) 0.75% N/A 0.16% 0.91%
- --------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth with Income
Series (6) 0.75% N/A 0.13% 0.88%
- --------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- High Income
Series (6)(7) 0.75% N/A 0.16% 0.91%
- --------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- New Discovery
Series (6)(7) 0.90% N/A 0.17% 1.07%
- --------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Total Return
Series (6) 0.75% N/A 0.15% 0.90%
- --------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2 (2)(8) 0.60% 0.25% 0.19% 1.04%
- --------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund (formerly
Templeton Asset Allocation Fund) --
Class 2 (2)(9) 0.60% 0.25% 0.18% 1.03%
- --------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund
(formerly Templeton Developing Markets Equity
Fund) -- Class 1 (10) 1.25% N/A 0.31% 1.56%
- --------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund (formerly
Templeton Global Growth Fund) --
Class 2 (2)(11) 0.83% 0.25% 0.05% 1.13%
- --------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund
(formerly Templeton International Fund) --
Class 2 (2)(12) 0.69% 0.25% 0.19% 1.13%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) These expenses are annualized. The Fund began operations on June 17, 1999.
(2) The Fund's Class 2 distribution plan or "Rule 12b-1 Plan" is described in
the Fund's prospectus. While the maximum amount payable under the Fund's
Class 2 Rule 12b-1 Plan is 0.35% per year of the Fund's average daily net
assets, the Board of Trustees of Franklin Templeton Variable Insurance
Products Trust has set the current rate at 0.25% per year through at least
April 30, 2001.
(3) The fund administration fee is paid indirectly through the management fees.
(4) On 2/8/00, a merger and reorganization was approved that combined the assets
of the Franklin Small Cap Fund with a similar fund of the Templeton Variable
Products Series Fund, effective 5/1/00. On 2/8/00, fund shareholders
approved new management fees, which apply to the combined fund effective
5/1/00. The table shows restated total expenses based on the new fees and
assets of the fund as of 12/31/99, and not the assets of the combined fund.
However, if the table reflected both the new fees and the
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
- --------------------------------------------------------------------------------
combined assets, the fund's expenses after 5/1/00 would be estimated as:
Management Fees 0.55%, Distribution and Service Fees 0.25%, Other Expenses
0.27%, and Total Fund Operating Expenses 1.07%.
(5) The management fees shown are based on the fund's maximum contractual
amount. Other expenses are estimated. The manager and administrator have
agreed in advance to waive or limit their respective fees and the manager to
assume as its own expense certain expenses otherwise payable by the fund so
that total annual fund operating expenses do not exceed 0.75% for the
current fiscal year. After December 31, 2001, the manager and administrator
may end this arrangement at any time. Without this reduction Total Fund
Operating Expenses were:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES 12B-1 FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Franklin Strategic Income Securities Fund 0.43% N/A 0.52% 0.95%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(6) Each Series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend disbursing agent. Each series may enter into
other such arrangements and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. After these
reductions, the Total Fund Operating Expenses would be:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES 12B-1 FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Capital Opportunities Series 0.75% N/A 0.15% 0.90%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Emerging Growth Series 0.75% N/A 0.08% 0.83%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Global Equity Series 1.00% N/A 0.15% 1.15%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth Series 0.75% N/A 0.15% 0.90%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth with Income Series 0.75% N/A 0.12% 0.87%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- High Income Series 0.75% N/A 0.15% 0.90%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- New Discovery Series 0.90% N/A 0.15% 1.05%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Total Return Series 0.75% N/A 0.14% 0.89%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(7) MFS has contractually agreed, subject to reimbursement, to bear expenses for
these series such that each such series' "Other Expenses" (after taking into
account the expense offset arrangement described above), do not exceed 0.15%
of the average daily net assets of the series during the current fiscal
year. These contractual fee arrangements will continue until at least
May 1, 2001, unless changed with the consent of the board of trustees which
oversees the series. Without this waiver, "Total Fund Operating Expenses"
would have been:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES 12B-1 FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Capital Opportunities Series 0.75% N/A 0.27% 1.02%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Global Equity Series 1.00% N/A 3.39% 4.39%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth Series 0.75% N/A 0.71% 1.46%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- High Income Series 0.75% N/A 0.22% 0.97%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- New Discovery Series 0.90% N/A 1.59% 2.49%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(8) On 2/8/00, a merger and reorganization was approved that combined the Mutual
Shares Securities Fund with a similar fund of Templeton Variable Products
Series Fund, effective 5/1/00. The table shows total expenses based on the
fund's assets as of 12/31/99, and not the assets of the combined fund.
However, if the table reflected combined assets, the fund's expenses after
5/1/00 would be estimated as: Management Fees 0.60%, Distribution and
Service Fees 0.25%, Other Expenses 0.19%, and Total Fund Operating Expenses
1.04%.
(9) On 2/8/00, shareholders approved a merger and reorganization that combined
the Templeton Asset Strategy Fund with the Templeton Global Asset Allocation
Fund, effective 5/1/00. The shareholders of that fund had approved new
management fees, which apply to the combined fund effective 5/1/00. The
table shows restated total expenses based on the new fees and the assets of
the fund as of 12/31/99, and not the assets of the combined fund. However,
if the table reflected both the new fees and the combined assets, the fund's
expenses after 5/1/00 would be estimated as: Management Fees 0.60%,
Distribution and Service Fees 0.25%, Other Expenses 0.14%, and Total Fund
Operating Expenses 0.99%.
(10) On 2/8/00, shareholders approved a merger and reorganization that combined
the Developing Markets Securities Fund with the Templeton Developing Markets
Equity Fund, effective 5/1/00. The shareholders of that fund had approved
new management fees, which apply to the combined fund effective 5/1/00. The
table shows restated total expenses based on the new fees and the assets
<PAGE>
8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
of the fund as of 12/31/99, and not the assets of the combined fund.
However, if the table reflected both the new fees and the combined assets,
the fund's expenses after 5/1/00 would be estimated as: Management Fees
1.25%, Other Expenses 0.29%, and Total Fund Operating Expenses 1.54%.
(11) On 2/8/00, a merger and reorganization was approved that combined the
Templeton Growth Securities Fund with a similar fund of Templeton Variable
Products Series Fund, effective 5/1/00. The table shows total expenses based
on the fund's assets as of 12/31/99, and not the assets of the combined
fund. However, if the table reflected combined assets, the fund's expenses
after 5/1/00 would be estimated as: Management Fees 0.80%, Distribution and
Service Fees 0.25%, Other Expenses 0.05%, and Total Fund Operating Expenses
1.10%.
(12) On 2/8/00, shareholders approved a merger and reorganization that combined
the Templeton International Securities Fund with the Templeton International
Equity Fund, effective 5/1/00. The shareholders of that fund had approved
new management fees, which apply to the combined fund effective 5/1/00. The
table shows restated total expenses based on the new fees and the assets of
the fund as of 12/31/99, and not the assets of the combined fund. However,
if the table reflected both the new fees and the combined assets, the fund's
expenses after 5/1/00 would be estimated as: Management Fees 0.65%,
Distribution and Service Fees 0.25%, Other Expenses 0.20%, and Total Fund
Operating Expenses 1.10%.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
- --------------------------------------------------------------------------------
EXAMPLE
THE FOLLOWING EXAMPLE ASSUMES THE OPTIONAL DEATH BENEFIT IS NOT SELECTED:
<TABLE>
<CAPTION>
If you Surrender your Contract at the If you annuitize your Contract at the
end of the applicable time period you end of the applicable time period you
would pay the following expenses on would pay the following expenses on
a $1,000 investment, assuming a 5% a $1,000 investment, assuming a 5%
annual return on assets: annual return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
American Funds Asset
Allocation Fund $83 $124 $156 $250 $21 $67 $116 $249
- --------------------------------------------------------------------------------------------------------------------
American Funds Bond Fund $84 $126 $161 $260 $22 $70 $120 $259
- --------------------------------------------------------------------------------------------------------------------
American Funds Global Growth
Fund $86 $132 $170 $278 $24 $76 $130 $277
- --------------------------------------------------------------------------------------------------------------------
American Funds Global Small
Capitalization Fund $87 $135 $175 $289 $25 $79 $135 $289
- --------------------------------------------------------------------------------------------------------------------
American Funds Growth Fund $82 $122 $154 $245 $21 $66 $113 $244
- --------------------------------------------------------------------------------------------------------------------
American Funds Growth-Income
Fund $82 $121 $152 $241 $21 $65 $111 $240
- --------------------------------------------------------------------------------------------------------------------
American Funds International
Fund $85 $128 $164 $267 $23 $72 $124 $266
- --------------------------------------------------------------------------------------------------------------------
American Funds New World Fund $88 $139 $181 $302 $27 $83 $142 $302
- --------------------------------------------------------------------------------------------------------------------
Franklin Real Estate Fund --
Class 2 $84 $128 $163 $265 $23 $72 $123 $264
- --------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund --
Class 2 $87 $135 $175 $289 $25 $79 $135 $289
- --------------------------------------------------------------------------------------------------------------------
Franklin Strategic Income
Securities Fund $84 $126 $159 $257 $22 $69 $119 $256
- --------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS
Fund $81 $117 $145 $227 $19 $61 $104 $226
- --------------------------------------------------------------------------------------------------------------------
MFS Capital Opportunities
Series $85 $130 $167 $273 $24 $74 $127 $272
- --------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series $84 $128 $164 $266 $23 $72 $124 $265
- --------------------------------------------------------------------------------------------------------------------
MFS Global Equity Series $88 $139 $182 $303 $27 $83 $143 $303
- --------------------------------------------------------------------------------------------------------------------
MFS Growth Series $85 $130 $167 $273 $24 $74 $127 $272
- --------------------------------------------------------------------------------------------------------------------
MFS Growth with Income Series $85 $129 $166 $270 $23 $73 $126 $269
- --------------------------------------------------------------------------------------------------------------------
MFS High Income Series $85 $130 $167 $273 $24 $74 $127 $272
- --------------------------------------------------------------------------------------------------------------------
MFS New Discovery Series $87 $135 $175 $289 $25 $79 $135 $289
- --------------------------------------------------------------------------------------------------------------------
MFS Total Return Series $85 $130 $167 $272 $24 $74 $127 $271
- --------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities
Fund -- Class 2 $87 $134 $174 $286 $25 $78 $134 $285
- --------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy
Fund -- Class 2 $86 $134 $173 $285 $25 $78 $133 $284
- --------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets
Securities Fund -- Class 1 $92 $149 $199 $337 $30 $94 $160 $337
- --------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities
Fund -- Class 2 $87 $137 $178 $295 $26 $81 $138 $295
- --------------------------------------------------------------------------------------------------------------------
Templeton International
Securities Fund -- Class 2 $87 $137 $178 $295 $26 $81 $138 $295
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
If you do not Surrender your
Contract, you would pay the
following expenses on a $1,000
investment, assuming a 5% annual
return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- -----------------------------
American Funds Asset
Allocation Fund $22 $68 $117 $250
- -----------------------------
American Funds Bond Fund $23 $71 $121 $260
- -----------------------------
American Funds Global Growth
Fund $25 $76 $130 $278
- -----------------------------
American Funds Global Small
Capitalization Fund $26 $80 $136 $289
- -----------------------------
American Funds Growth Fund $22 $66 $114 $245
- -----------------------------
American Funds Growth-Income
Fund $21 $65 $112 $241
- -----------------------------
American Funds International
Fund $24 $73 $125 $267
- -----------------------------
American Funds New World Fund $27 $84 $143 $302
- -----------------------------
Franklin Real Estate Fund --
Class 2 $23 $72 $124 $265
- -----------------------------
Franklin Small Cap Fund --
Class 2 $26 $80 $136 $289
- -----------------------------
Franklin Strategic Income
Securities Fund $23 $70 $120 $257
- -----------------------------
Hartford Money Market HLS
Fund $20 $61 $105 $227
- -----------------------------
MFS Capital Opportunities
Series $24 $75 $128 $273
- -----------------------------
MFS Emerging Growth Series $24 $73 $124 $266
- -----------------------------
MFS Global Equity Series $27 $84 $143 $303
- -----------------------------
MFS Growth Series $24 $75 $128 $273
- -----------------------------
MFS Growth with Income Series $24 $74 $126 $270
- -----------------------------
MFS High Income Series $24 $75 $128 $273
- -----------------------------
MFS New Discovery Series $26 $80 $136 $289
- -----------------------------
MFS Total Return Series $24 $74 $127 $272
- -----------------------------
Mutual Shares Securities
Fund -- Class 2 $26 $79 $135 $286
- -----------------------------
Templeton Asset Strategy
Fund -- Class 2 $26 $78 $134 $285
- -----------------------------
Templeton Developing Markets
Securities Fund -- Class 1 $31 $95 $161 $337
- -----------------------------
Templeton Growth Securities
Fund -- Class 2 $27 $82 $139 $295
- -----------------------------
Templeton International
Securities Fund -- Class 2 $27 $82 $139 $295
- ---------------------------------------------------------------------------------
</TABLE>
<PAGE>
10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
THE FOLLOWING EXAMPLE ASSUMES THE OPTIONAL DEATH BENEFIT IS SELECTED:
<TABLE>
<CAPTION>
If you Surrender your Contract at the If you annuitize your Contract at the
end of the applicable time period you end of the applicable time period you
would pay the following expenses on would pay the following expenses on
a $1,000 investment, assuming a 5% a $1,000 investment, assuming a 5%
annual return on assets: annual return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
American Funds Asset
Allocation Fund $84 $128 $164 $266 $23 $72 $124 $265
- --------------------------------------------------------------------------------------------------------------------
American Funds Bond Fund $85 $131 $168 $275 $24 $75 $128 $274
- --------------------------------------------------------------------------------------------------------------------
American Funds Global Growth
Fund $87 $136 $177 $293 $26 $80 $137 $293
- --------------------------------------------------------------------------------------------------------------------
American Funds Global Small
Capitalization Fund $88 $139 $182 $304 $27 $84 $143 $304
- --------------------------------------------------------------------------------------------------------------------
American Funds Growth Fund $84 $127 $161 $261 $22 $70 $121 $260
- --------------------------------------------------------------------------------------------------------------------
American Funds Growth-Income
Fund $84 $126 $159 $257 $22 $69 $119 $256
- --------------------------------------------------------------------------------------------------------------------
American Funds International
Fund $86 $133 $172 $282 $25 $77 $132 $281
- --------------------------------------------------------------------------------------------------------------------
American Funds New World Fund $90 $143 $189 $317 $28 $88 $150 $316
- --------------------------------------------------------------------------------------------------------------------
Franklin Real Estate Fund --
Class 2 $86 $132 $171 $280 $24 $76 $131 $279
- --------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund --
Class 2 $88 $139 $182 $304 $27 $84 $143 $304
- --------------------------------------------------------------------------------------------------------------------
Franklin Strategic Income
Securities Fund $85 $130 $167 $272 $24 $74 $127 $271
- --------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS
Fund $82 $122 $153 $243 $21 $65 $112 $242
- --------------------------------------------------------------------------------------------------------------------
MFS Capital Opportunities
Series $87 $135 $175 $288 $25 $79 $135 $288
- --------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series $86 $133 $171 $281 $24 $77 $131 $280
- --------------------------------------------------------------------------------------------------------------------
MFS Global Equity Series $90 $143 $189 $318 $28 $88 $150 $317
- --------------------------------------------------------------------------------------------------------------------
MFS Growth Series $87 $135 $175 $288 $25 $79 $135 $288
- --------------------------------------------------------------------------------------------------------------------
MFS Growth with Income Series $86 $134 $173 $285 $25 $78 $133 $284
- --------------------------------------------------------------------------------------------------------------------
MFS High Income Series $87 $135 $175 $288 $25 $79 $135 $288
- --------------------------------------------------------------------------------------------------------------------
MFS New Discovery Series $88 $139 $182 $304 $27 $84 $143 $304
- --------------------------------------------------------------------------------------------------------------------
MFS Total Return Series $87 $134 $174 $287 $25 $78 $134 $287
- --------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities
Fund -- Class 2 $88 $138 $181 $301 $27 $83 $141 $300
- --------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy
Fund -- Class 2 $88 $138 $180 $300 $26 $82 $141 $300
- --------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets
Securities Fund -- Class 1 $93 $154 $206 $352 $32 $99 $168 $351
- --------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities
Fund -- Class 2 $89 $141 $185 $310 $27 $85 $146 $309
- --------------------------------------------------------------------------------------------------------------------
Templeton International
Securities Fund -- Class 2 $89 $141 $185 $310 $27 $85 $146 $309
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
If you do not Surrender your
Contract, you would pay the
following expenses on a $1,000
investment, assuming a 5% annual
return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- -----------------------------
American Funds Asset
Allocation Fund $24 $73 $124 $266
- -----------------------------
American Funds Bond Fund $24 $75 $129 $275
- -----------------------------
American Funds Global Growth
Fund $26 $81 $138 $293
- -----------------------------
American Funds Global Small
Capitalization Fund $27 $84 $144 $304
- -----------------------------
American Funds Growth Fund $23 $71 $122 $261
- -----------------------------
American Funds Growth-Income
Fund $23 $70 $120 $257
- -----------------------------
American Funds International
Fund $25 $78 $132 $282
- -----------------------------
American Funds New World Fund $29 $88 $150 $317
- -----------------------------
Franklin Real Estate Fund --
Class 2 $25 $77 $131 $280
- -----------------------------
Franklin Small Cap Fund --
Class 2 $27 $84 $144 $304
- -----------------------------
Franklin Strategic Income
Securities Fund $24 $74 $127 $272
- -----------------------------
Hartford Money Market HLS
Fund $21 $66 $113 $243
- -----------------------------
MFS Capital Opportunities
Series $26 $79 $136 $288
- -----------------------------
MFS Emerging Growth Series $25 $77 $132 $281
- -----------------------------
MFS Global Equity Series $29 $89 $151 $318
- -----------------------------
MFS Growth Series $26 $79 $136 $288
- -----------------------------
MFS Growth with Income Series $26 $78 $134 $285
- -----------------------------
MFS High Income Series $26 $79 $136 $288
- -----------------------------
MFS New Discovery Series $27 $84 $144 $304
- -----------------------------
MFS Total Return Series $26 $79 $135 $287
- -----------------------------
Mutual Shares Securities
Fund -- Class 2 $27 $83 $142 $301
- -----------------------------
Templeton Asset Strategy
Fund -- Class 2 $27 $83 $142 $300
- -----------------------------
Templeton Developing Markets
Securities Fund -- Class 1 $32 $99 $168 $352
- -----------------------------
Templeton Growth Securities
Fund -- Class 2 $28 $86 $147 $310
- -----------------------------
Templeton International
Securities Fund -- Class 2 $28 $86 $147 $310
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
- --------------------------------------------------------------------------------
ACCUMULATION UNIT VALUES
(For an Accumulation Unit outstanding throughout the period)
The following information has been derived from the audited financial statements
of the Separate Account, which have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and should be read in conjunction with those statements which are
included in the Statement of Additional Information, which is incorporated by
reference in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
<S> <C>
- --------------------------------------------------------------------------------
AMERICAN FUNDS ASSET ALLOCATION SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 9.776
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 876
- --------------------------------------------------------------------------------
AMERICAN FUNDS BOND SUB-ACCOUNT (INCEPTION DATE JULY 1,
1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.106
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 261
- --------------------------------------------------------------------------------
AMERICAN FUNDS GLOBAL GROWTH SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $13.980
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 643
- --------------------------------------------------------------------------------
AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION SUB-ACCOUNT
(INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $13.784
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 406
- --------------------------------------------------------------------------------
AMERICAN FUNDS GROWTH SUB-ACCOUNT (INCEPTION DATE JULY 1,
1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $12.518
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 3,037
- --------------------------------------------------------------------------------
AMERICAN FUNDS GROWTH-INCOME SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 9.591
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 3,468
- --------------------------------------------------------------------------------
AMERICAN FUNDS INTERNATIONAL SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $14.663
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 764
- --------------------------------------------------------------------------------
AMERICAN FUNDS NEW WORLD SUB-ACCOUNT (INCEPTION DATE JULY 1,
1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $11.659
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 318
- --------------------------------------------------------------------------------
FRANKLIN REAL ESTATE FUND SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 8.842
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 36
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
<S> <C>
- --------------------------------------------------------------------------------
FRANKLIN SMALL CAP FUND SUB-ACCOUNT (INCEPTION DATE JULY 1,
1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $16.658
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 127
- --------------------------------------------------------------------------------
FRANKLIN STRATEGIC INCOME SECURITIES FUND SUB-ACCOUNT
(INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.189
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 44
- --------------------------------------------------------------------------------
HARTFORD MONEY MARKET HLS FUND SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 1.018
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 1,637
- --------------------------------------------------------------------------------
MUTUAL SHARES SECURITIES SUB-ACCOUNT (INCEPTION DATE JULY 1,
1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 9.796
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 297
- --------------------------------------------------------------------------------
MFS CAPITAL OPPORTUNITIES SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $12.219
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 316
- --------------------------------------------------------------------------------
MFS EMERGING GROWTH SUB-ACCOUNT (INCEPTION DATE JULY 1,
1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $15.422
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 510
- --------------------------------------------------------------------------------
MFS GLOBAL EQUITY SUB-ACCOUNT (INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $11.600
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 15
- --------------------------------------------------------------------------------
MFS GROWTH SUB-ACCOUNT (INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $12.016
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 604
- --------------------------------------------------------------------------------
MFS GROWTH WITH INCOME SUB-ACCOUNT (INCEPTION DATE JULY 1,
1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 9.963
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 635
- --------------------------------------------------------------------------------
MFS HIGH INCOME SUB-ACCOUNT (INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.053
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 127
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
<S> <C>
- --------------------------------------------------------------------------------
MFS NEW DISCOVERY SUB-ACCOUNT (INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $14.336
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 76
- --------------------------------------------------------------------------------
MFS TOTAL RETURN SUB-ACCOUNT (INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 9.700
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 194
- --------------------------------------------------------------------------------
TEMPLETON ASSET STRATEGY FUND SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.869
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 73
- --------------------------------------------------------------------------------
TEMPLETON DEVELOPING MARKETS SECURITIES FUND SUB-ACCOUNT
(INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $11.123
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 56
- --------------------------------------------------------------------------------
TEMPLETON GROWTH SECURITIES FUND SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.619
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 154
- --------------------------------------------------------------------------------
TEMPLETON INTERNATIONAL SECURITIES FUND SUB-ACCOUNT
(INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.960
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 84
- --------------------------------------------------------------------------------
</TABLE>
Accumulation Unit Values do not include the Optional Death Benefit Charge. If
you elect the Optional Death Benefit, Accumulation Unit Values would be lower.
<PAGE>
14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
SUMMARY
HOW DO I PURCHASE THIS ANNUITY?
You must complete our application or order request and submit it to us for
approval with your first premium payment. Your first premium payment must be at
least $1,000 and subsequent premium payments must be at least $500. The minimum
premium payment requirements may differ if you are participating in our
automatic investing ("InvestEase-Registered Trademark-") program.
- For a limited time, usually within ten days after you receive your annuity,
you may cancel your annuity without paying a Contingent Deferred Sales
Charge. You bear the investment risk for your premium payment prior to our
receipt of your request for cancellation.
WHAT TYPE OF SALES CHARGE WILL I PAY?
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
You don't pay a sales charge when you purchase your Annuity. We may charge you a
CDSC when you partially or fully Surrender your Annuity. The CDSC will depend on
the amount you choose to Surrender and the length of time the Premium Payments
you made have been in your Annuity. The percentage used to calculate the CDSC is
equal to:
<TABLE>
<CAPTION>
NUMBER OF YEARS
FROM PREMIUM CONTINGENT DEFERRED
PAYMENT SALES CHARGE
<S> <C>
- ----------------------------------------
One Year 7%
- ----------------------------------------
Two Years 6%
- ----------------------------------------
Three Years 6%
- ----------------------------------------
Four Years 5%
- ----------------------------------------
Five Years 4%
- ----------------------------------------
Six Years 3%
- ----------------------------------------
Seven Years 2%
- ----------------------------------------
Eight Years 0%
- ----------------------------------------
</TABLE>
IS THERE AN ANNUAL MAINTENANCE FEE?
Yes. We deduct this $30 fee each year on your Contract Anniversary or when you
completely Surrender your annuity, if, on either of those dates, the value of
your annuity is less than $50,000.
WHAT CHARGES WILL I PAY ON AN ANNUAL BASIS?
In addition to the Annual Maintenance Fee, you pay three different types of
charges each year. The first type of charge is the fee you pay for insurance.
This charge is:
A mortality and expense risk charge that is subtracted daily and is equal to an
annual charge of 1.25% of your Contract Value invested in the Funds.
The second type of charge is the fee you pay for the Separate Account. This
charge is:
An administrative fee of .15% per year of the Contract Value held in the
Separate Account.
The third type of charge is the fee you pay for the Funds. See the Annual
Operation Expense Table for more complete information and the funds'
prospectuses attached to this Prospectus.
If you elect the Optional Death Benefit, we will deduct an additional charge
daily from your Contract Value which is equal to 0.15% per year of your Contract
Value invested in the Funds.
CAN I TAKE OUT ANY OF MY MONEY?
You can partially or fully Surrender your Contract subject to a Contingent
Deferred Sales Charge (CDSC). You can partially Surrender your Contract without
any CDSC applied to the Surrender under the following conditions:
- - Surrenders which don't exceed 15% of premium payments per Contract Year
(Annual Withdrawal Amount);
- - Surrenders made from premium payments invested more than seven years; 100%
Surrender of earnings after the seventh Contract Year;
- - Surrenders under the nursing home waiver (described as Eligible Confinement in
the Contract); or
- - Surrenders eligible for disability waiver under a group qualified plan.
WILL HARTFORD PAY A DEATH BENEFIT?
Your Contract has a Death Benefit and we offer an Optional Interest Accumulation
Death Benefit ("Optional Death Benefit") that you can elect for an additional
fee. There is a Death Benefit if the Contract Owner, joint owner or Annuitant,
die before we begin to make annuity payments. The Death Benefit will remain
invested in the Sub-Accounts according to your last instructions (unless
otherwise mutually specified by your Beneficiaries) and will be subject to
market fluctuations.
IF YOU DO NOT ELECT THE OPTIONAL DEATH BENEFIT, the Death Benefit, which we will
calculate as of the date we receive Due Proof of Death, will be the greater of:
- - 100% of the total premium payments you have made to us reduced by any
subsequent Surrenders;
- - The Contract Value of your annuity, or
- - Your Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries, of Contract Values, premium payments and partial Surrenders. We
will calculate an Anniversary Value for each Contract Anniversary prior to the
deceased's 81st birthday or date of death. The Anniversary Value is equal to the
Contract Value as of a Contract Anniversary, increased by the dollar amount of
any premium payments made since that anniversary and reduced by the dollar
amount of any partial Surrenders since that anniversary. The Maximum Anniversary
Value is equal to the greatest Anniversary Value attained from this series of
calculations.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
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IF YOU ELECT THE OPTIONAL DEATH BENEFIT, the Death Benefit, which we will
calculate as of the date we receive Due Proof of Death, will be the greater of:
- - 100% of the total premium payments you have made to us reduced by any
subsequent Surrenders;
- - The Contract Value of your annuity;
- - Your Maximum Anniversary Value, which is the highest Anniversary Value before
the deceased's 81st birthday or date of death; or
- - Your Interest Accumulation Value.
The INTEREST ACCUMULATION VALUE is calculated by accumulating interest on your
premium payments at a rate of 5% per year up to the deceased's 81st birthday or
date of death, assuming you have not taken any Surrenders. If you have taken any
Surrenders, the 5% will be accumulated on your premium payments, but there will
be an adjustment for any of the Surrenders. This adjustment will reduce the
Optional Death Benefit proportionally for the Surrenders. The Optional Death
Benefit is limited to a maximum of 200% of premium payments, less proportional
adjustments for any Surrenders. For examples on how the Optional Death Benefit
is calculated see "Appendix II". If you elect the Optional Death Benefit, we
will deduct an additional charge daily from your Contract Value equal to .15% of
the Sub-Account value. The Optional Death Benefit may not be available if the
Contract Owner or Annuitant is age 75 or older. For Contracts issued in the
state of Washington, the Optional Death Benefit is not available.
If you elect the Optional Death Benefit at any time after you purchase your
annuity, the Optional Death Benefit calculation will be different.
SPOUSAL CONTRACT CONTINUATION -- If a Beneficiary is the Contract Owner's
spouse, that portion of the Contract for which the spouse is considered the
Beneficiary will continue with the spouse as Contract Owner, unless the spouse
elects to receive the Death Benefit as a lump sum payment or an annuity payment
option. If the Contract continues with the spouse as Contract Owner, we will
adjust the Contract Value to the amount that we would have paid as the Death
Benefit payment, had the spouse elected to receive the Death Benefit as a lump
sum payment or as an annuity payment option. Spousal Contract Continuation will
only apply one time for each Contract.
WHAT ANNUITY PAYMENT OPTIONS ARE AVAILABLE?
When you purchase your annuity, you may choose one of the following annuity
payment options, or receive a lump sum payment:
LIFE ANNUITY where we make scheduled payments for the Annuitant's life.
- Payments under this option stop upon the death of the Annuitant, even if the
Annuitant dies after one payment.
LIFE ANNUITY WITH CASH REFUND where we make payments during the life of the
Annuitant and when the Annuitant dies, we pay the remaining value to the
Beneficiary. The remaining value is calculated at the time we receive Due Proof
of Death by subtracting the annuity payments already made from the Contract
Value, less any applicable Premium Taxes, applied to this annuity payment
option.
- This option is only available if you select a variable dollar amount payment
with the 5% AIR or fixed dollar amount annuity payments.
LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN where we make payments for the
life of the Annuitant but you are at least guaranteed payments for a time period
you select which is a minimum of 5 years and a maximum of 100 years minus your
annuitant's age.
- If the Annuitant dies prior to the end of the period selected, we will pay
the value of the remaining payments to your Beneficiary, either in a lump
sum or we will continue payments until the end of the period selected.
JOINT AND LAST SURVIVOR ANNUITY where we make payments during the lifetimes of
the Annuitant and another designated individual called the Joint Annuitant. At
the time of electing this annuity payment option, the Contract Owner may elect
reduced payments over the remaining lifetime of the survivor.
- Payments under this option STOP UPON THE DEATH OF THE ANNUITANT AND JOINT
ANNUITANT, even if the Annuitant and Joint Annuitant die after one payment.
JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN where we
make payments during the lifetime of the Annuitant and a Joint Annuitant, and we
guarantee that those payments for a time period you select which is a minimum of
5 years and a maximum 100 years minus the younger Annuitant's age. At the time
of electing this Annuity Option, the Contract Owner may elect reduced payments
over the remaining lifetime of the survivor.
- If the Annuitant and the Joint Annuitant die prior to the end of the period
selected, we will pay the value of the remaining payments to your
Beneficiary, either in a lump sum or we will continue payments until the end
of the period selected.
PAYMENTS FOR A PERIOD CERTAIN where we agree to make payments for a specified
time. The minimum period that you can select is 10 years during the first two
Contract Years and 5 years after the second Contract Anniversary. The maximum
period that you can select is 100 years minus your Annuitant's age.
- If you select this option under a variable dollar amount payment, YOU MAY
SURRENDER YOUR ANNUITY after annuity payments have started and we will give
you the present value of the remaining payments less any applicable
Contingent Deferred Sales Charge.
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16 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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- If the Annuitant dies prior to the end of the period selected, we will pay
the value of the remaining payments to your Beneficiary, either in a lump
sum or we will continue payments until the end of the period selected.
You must begin to take payments before the Annuitant's 90th birthday or the end
of the 10th Contract Year, which ever comes later, unless you elect a later date
to begin receiving payments subject to the laws and regulations then in effect
and our approval. If you do not tell us what annuity payment option you want
before that time, we will pay you under the Life Annuity with a 10 year period
certain.
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both individual
and group, in all states of the United States, the District of Columbia and
Puerto Rico, except New York. On January 1, 1998, Hartford's name changed from
ITT Hartford Life and Annuity Insurance Company to Hartford Life and Annuity
Insurance Company. We were originally incorporated under the laws of Wisconsin
on January 9, 1956, and subsequently redomiciled to Connecticut; however, our
mailing address is P.O. Box 2999, Hartford, CT 06104-2999. We are ultimately
controlled by The Hartford Financial Services Group, Inc., one of the largest
financial service providers in the United States.
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
EFFECTIVE DATE
RATING AGENCY OF RATING RATING BASIS OF RATING
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
A.M. Best and
Company, Inc. 1/1/99 A+ Financial performance
- --------------------------------------------------------------------------------
Standard & Poor's 8/1/99 AA Insurer financial strength
- --------------------------------------------------------------------------------
Duff & Phelps 7/1/99 AA+ Claims paying ability
- --------------------------------------------------------------------------------
</TABLE>
THE SEPARATE ACCOUNT
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The Separate Account is where we set aside and invest the assets of some of our
annuity contracts, including this Contract. The Separate Account was established
on April 1, 1999 and is registered as a unit investment trust under the
Investment Company Act of 1940. This registration does not involve supervision
by the Commission of the management or the investment practices of the Separate
Account or Hartford. The Separate Account meets the definition of "Separate
Account" under federal securities law. This Separate Account holds only assets
for variable annuity contracts. The Separate Account:
- - Holds assets for the benefit of you and other Contract Owners, and the persons
entitled to the payments described in the Contract.
- - Is not subject to the liabilities arising out of any other business Hartford
may conduct.
- - Is not affected by the rate of return of Hartford's General Account or by the
investment performance of any of Hartford's other Separate Accounts.
- - May be subject to liabilities from a Sub-Account of the Separate Account which
holds assets of other variable annuity contracts offered by the Separate
Account which are not described in this Prospectus.
- - Is credited with income and gains, and takes losses, whether or not realized,
from the assets it holds.
We do not guarantee the investment results of the Separate Account. There is no
assurance that the value of your Annuity will equal the total of the payments
you make to us.
THE FUNDS
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The American Funds Asset Allocation Fund, American Funds Bond Fund, American
Fund Global Growth Fund, American Funds Global Small Capitalization Fund,
American Funds Growth Fund, American Funds Growth-Income Fund, American Funds
International Fund and American Funds New World Fund are all part of American
Funds Insurance Series. American Funds Insurance Series is a fully managed,
diversified, open-end investment company organized as a Massachusetts business
trust in 1983. American Funds Insurance Series offers two classes of fund
shares: Class 1 shares and Class 2 shares. This Annuity invests only in Class 2
shares of American Funds Insurance Series. The investment adviser for each of
the funds of American Funds Insurance Series is Capital Research and Management
Company located at 333 South Hope Street, Los Angeles, California 90071. Capital
Research and Management Company is a wholly owned subsidiary of The Capital
Group Companies, Inc.
Hartford Money Market HLS Fund is sponsored and administered by Hartford Life
Insurance Company. HL Investment Advisers, LLC located at 200 Hopmeadow Street,
Simsbury, Connecticut, serves as the investment adviser to the Fund. Hartford
Investment Management Company serves as sub-investment adviser and provides day
to day investment services. The Fund is a separate Maryland corporation
registered with the
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
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Securities and Exchange Commission as an open-end management investment company.
Shares of the Fund have been divided into Class IA and Class IB. Only Class IA
shares are available in this Annuity.
The MFS-Registered Trademark- Capital Opportunities Series,
MFS-Registered Trademark- Emerging Growth Series, MFS-Registered Trademark-
Global Equity Series, MFS-Registered Trademark- Growth Series,
MFS-Registered Trademark- Growth with Income Series, MFS-Registered Trademark-
High Income Series, MFS-Registered Trademark- New Discovery Series, and
MFS-Registered Trademark- Total Return Series are series of the
MFS-Registered Trademark- Variable Insurance Trust-SM-. The MFS Variable
Insurance Trust-SM- is a professionally managed open-end management investment
company. The MFS Variable Insurance Trust-SM- is registered as a Massachusetts
business trust. MFS Investment Management-Registered Trademark- serves as the
investment adviser to each of the Series of the MFS-Registered Trademark-
Variable Insurance Trust-SM-. MFS Investment Management-Registered Trademark- is
located at 500 Boylston Street, Boston, Massachusetts 02116.
Franklin Real Estate Fund, Franklin Small Cap Fund, Franklin Strategic Income
Securities Fund, Templeton Asset Strategy Fund, Templeton International
Securities Fund, Mutual Shares Securities Fund, Templeton Developing Markets
Securities Fund, and Templeton Growth Securities Fund are all part of the
Franklin Templeton Variable Insurance Products Trust. The Franklin Templeton
Variable Insurance Products Trust is an open-end managed investment company
which was organized as a Massachusetts business trust on April 26, 1988.
Franklin Templeton Variable Insurance Products Trust currently offers Class 1
and Class 2 shares. Class 2 shares of each Fund are available in this Annuity,
except that Class 1 shares of Franklin Strategic Income Securities Fund and
Templeton Developing Markets Securities Fund are available. The investment
manager of the Franklin Real Estate Fund, Franklin Small Cap Fund, and the
Franklin Strategic Income Securities Fund is Franklin Advisers, Inc. located at
777 Mariners Island Blvd. P.O. Box 7777, San Mateo, California 94403-777. The
investment manager of Mutual Shares Securities Fund is Franklin Mutual Advisers,
LLC, located at 51 John F. Kennedy Parkway, Short Hills, New Jersey, 07078. The
investment manager of Templeton Growth Securities Fund is Templeton Global
Advisers Limited, located at Lyford Cay, Nassau, N.P. Bahamas. The investment
manager of Templeton Developing Markets Securities Fund is Templeton Asset
Management Ltd., located at 7 Temasek Blvd. #38-03, Suntec Tower One, Singapore,
038987.
The investment manager of Templeton Asset Strategy Fund and Templeton
International Securities Fund is Templeton Investment Counsel, Inc. located at
500 East Broward Boulevard, Fort Lauderdale, Florida 33394-3091. Templeton
Investment Counsel, Inc., Franklin Advisers, Inc., Franklin Mutual Advisers,
LLC, Templeton Global Advisers Limited, and Templeton asset Management, Ltd. are
wholly owned by Franklin Resources, Inc. a publicly owned company engaged in the
financial services industry through its subsidiaries.
We do not guarantee the investment results of any of the underlying Funds. Since
each underlying Fund has different investment objectives, each is subject to
different risks. These risks and the Funds' expenses are more fully described in
the accompanying Funds' prospectus and Statement of Additional Information,
which may be ordered from us. The Funds' prospectus should be read in
conjunction with this Prospectus before investing.
The Funds may not be available in all states contact your registered
representative for current information about availability.
The investment goals of each of the Funds are as follows:
AMERICAN FUNDS ASSET ALLOCATION FUND -- Seeks high total return, including
income and capital gains, consistent with the preservation of capital over the
long term through a diversified portfolio that can include common stocks and
other equity-type securities, bonds and other intermediate and long-term fixed
income securities and money market instruments in any combination.
AMERICAN FUNDS BOND FUND -- Seeks to provide as high a level of current income
as is consistent with the preservation of capital by investing primarily in
fixed-income securities.
AMERICAN FUNDS GLOBAL GROWTH FUND -- Seeks long-term growth of capital by
investing primarily in common stocks of issuers domiciled around the world.
AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION FUND -- Seeks long-term growth of
capital by investing primarily in equity securities of smaller companies located
around the world that typically have market capitalizations of $50 million to
$1.5 billion.
AMERICAN FUNDS GROWTH FUND -- Seeks long-term growth of capital by investing
primarily in common stocks which demonstrate the potential for appreciation.
AMERICAN FUNDS GROWTH-INCOME FUND -- Seeks growth of capital and income by
investing primarily in common stocks or other securities which demonstrate the
potential for appreciation and/or dividends.
AMERICAN FUNDS INTERNATIONAL FUND -- Seeks long-term growth of capital by
investing primarily in common stocks of issuers domiciled outside of the United
States.
AMERICAN FUNDS NEW WORLD FUND -- Seeks long-term growth of capital by investing
primarily in common stocks of issuers with significant exposure to countries
with developing economies and/or markets. The Fund may also invest in debt
securities, including high-yield, high risk bonds.
FRANKLIN REAL ESTATE FUND -- Seeks capital appreciation. Its secondary goal is
to earn current income.
FRANKLIN SMALL CAP FUND -- Seeks long-term capital growth.
FRANKLIN STRATEGIC INCOME SECURITIES FUND (FORMERLY FRANKLIN STRATEGIC INCOME
INVESTMENTS FUND) -- Seeks to earn a high level of current income. Its secondary
goal is long-term capital appreciation.
HARTFORD MONEY MARKET HLS FUND -- Seeks maximum current income consistent with
liquidity and preservation of capital.
MFS-REGISTERED TRADEMARK- CAPITAL OPPORTUNITIES SERIES -- Seeks capital
appreciation.
<PAGE>
18 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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MFS-REGISTERED TRADEMARK- EMERGING GROWTH SERIES -- Seeks to provide long-term
growth of capital.
MFS-REGISTERED TRADEMARK- GLOBAL EQUITY SERIES -- Seeks capital appreciation.
MFS-REGISTERED TRADEMARK- GROWTH SERIES -- Seeks to provide long-term growth of
capital and future income rather than current income.
MFS-REGISTERED TRADEMARK- GROWTH WITH INCOME SERIES -- Seeks to provide
reasonable current income and long-term growth of capital and income.
MFS-REGISTERED TRADEMARK- HIGH INCOME SERIES -- Seeks high current income by
investing primarily in a professionally managed diversified portfolio of fixed
income securities, some of which may involve equity features.
MFS-REGISTERED TRADEMARK- NEW DISCOVERY SERIES -- Seeks capital appreciation.
MFS-REGISTERED TRADEMARK- TOTAL RETURN SERIES -- Seeks primarily to provide
above-average income (compared to a portfolio invested in equity securities)
consistent with the prudent employment of capital, and secondarily to provide a
reasonable opportunity for growth of capital and income.
MUTUAL SHARES SECURITIES FUND -- Seeks capital appreciation. Its secondary goal
is income.
TEMPLETON ASSET STRATEGY FUND (FORMERLY TEMPLETON ASSET ALLOCATION
FUND) -- Seeks high total return.
TEMPLETON DEVELOPING MARKETS SECURITIES FUND (FORMERLY TEMPLETON DEVELOPING
MARKETS EQUITY FUND) -- Seeks long-term capital appreciation.
TEMPLETON GROWTH SECURITIES FUND (FORMERLY TEMPLETON GLOBAL GROWTH
FUND) -- Seeks long-term capital growth.
TEMPLETON INTERNATIONAL SECURITIES FUND (FORMERLY TEMPLETON INTERNATIONAL
FUND) -- Seeks long-term capital growth.
MIXED AND SHARED FUNDING -- Shares of the Funds are sold to our other Separate
Accounts and our insurance company affiliates or other unaffiliated insurance
companies to serve as the underlying investment for both variable annuity
contracts and variable life insurance contracts, a practice known as "mixed and
shared funding." As a result, there is a possibility that a material conflict
may arise between the interests of Contract Owners, and of owners of other
contracts whose contract values are allocated to one or more of these other
Separate Accounts investing in any one of the Funds. In the event of any such
material conflicts, we will consider what action may be appropriate, including
removing the Fund from the Separate Account or replacing the Fund with another
Fund. There are certain risks associated with mixed and shared funding, as
disclosed in the funds' prospectus.
VOTING RIGHTS -- We are the legal owners of all Fund shares held in the Separate
Account and we have the right to vote at the Fund's shareholder meetings. To the
extent required by federal securities laws or regulations, we will:
- - Notify you of any Fund shareholders' meeting if the shares held for your
Contract may be voted.
- - Send proxy materials and a form of instructions that you can use to tell us
how to vote the Fund shares held for your Contract.
- - Arrange for the handling and tallying of proxies received from Contract
Owners.
- - Vote all Fund shares attributable to your Contract according to instructions
received from you, and
- - Vote all Fund shares for which no voting instructions are received in the same
proportion as shares for which instructions have been received.
If any federal securities laws or regulations, or their present interpretation,
change to permit us to vote Fund shares on our own, we may decide to do so. You
may attend any Shareholder Meeting at which shares held for your Contract may be
voted. After we begin to make Annuity Payments to you, the number of votes you
have will decrease.
SUBSTITUTIONS, ADDITIONS, OR DELETIONS OF FUNDS -- We reserve the right, subject
to any applicable law, to make certain changes to the Funds offered under your
Contract. We may, in our sole discretion, establish new Funds. New Funds will be
will be made available to existing Contract Owners as we determined appropriate.
We may also close one or more Funds to additional payments or transfers from
existing Sub-Accounts.
We reserve the right to eliminate the shares of any of the Funds for any reason
and to substitute shares of another registered investment company for the shares
of any Fund already purchased or to be purchased in the future by the Separate
Account. To the extent required by the 1940 Act, substitutions of shares
attributable to your interest in a Fund will not be made until we have the
approval of the Commission and we have notified you of the change.
In the event of any substitution or change, We may, by appropriate endorsement,
make such changes in the Contract as may be necessary or appropriate to reflect
such substitution or change. If we decide that it is in the best interest of the
Contract Owners, the Separate Account may be operated as a management company
under the 1940 Act or any other form permitted by law, may be de-registered
under the 1940 Act in the event such registration is no longer required, or may
be combined with one or more other Separate Accounts.
ADMINISTRATIVE SERVICES -- Hartford has entered into agreements with the
investment advisers or distributors of many of the Funds. Under the terms of
these agreements, Hartford provides administrative services and the Funds pay a
fee to Hartford that is usually based on an annual percentage of the average
daily net assets of the Funds. These agreements may be different for each Fund
or each Fund family.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
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PERFORMANCE RELATED INFORMATION
The Separate Account may advertise certain performance-related information
concerning the Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
When a Sub-Account advertises its STANDARDIZED TOTAL RETURN, it will usually be
calculated for one year, five years, and ten years or some other relevant
periods if the Sub-Account has not been in existence for at least ten years.
Total return is measured by comparing the value of an investment in the
Sub-Account at the beginning of the relevant period to the value of the
investment at the end of the period and assumes that the Optional Death Benefit
has not been elected.
The Separate Account may also advertise NON-STANDARD TOTAL RETURNS THAT PRE-DATE
THE INCEPTION DATE OF THE SEPARATE ACCOUNT. These non-standardized total returns
are calculated by assuming that the Sub-Accounts have been in existence for the
same periods as the underlying Funds and by taking deductions for charges equal
to those currently assessed against the Sub-Accounts. These non-standardized
returns must be accompanied by standardized total returns.
If applicable, the Sub-Accounts may advertise YIELD IN ADDITION TO TOTAL RETURN.
The yield will be computed in the following manner: The net investment income
per unit earned during a recent one month period, divided by the unit value on
the last day of the period. This figure reflects the recurring charges at the
Separate Account level including the Annual Maintenance Fee.
The HARTFORD MONEY MARKET HLS FUND SUB-ACCOUNT may advertise yield and effective
yield. The yield of a Sub-Account is based upon the income earned by the
Sub-Account over a seven-day period and then annualized, i.e. the income earned
in the period is assumed to be earned every seven days over a 52-week period and
stated as a percentage of the investment. Effective yield is calculated
similarly but when annualized, the income earned by the investment is assumed to
be reinvested in Sub-Account units and thus compounded in the course of a
52-week period. Yield and effective yield reflect the recurring charges at the
Separate Account level including the Annual Maintenance Fee.
We may provide information on various topics to Contract Owners and prospective
Contract Owners in advertising, sales literature or other materials. These
topics may include the relationship between sectors of the economy and the
economy as a whole and its effect on various securities markets, investment
strategies and techniques (such as value investing, dollar cost averaging and
asset allocation), the advantages and disadvantages of investing in tax-deferred
and taxable instruments, customer profiles and hypothetical purchase scenarios,
financial management and tax and retirement planning, and other investment
alternatives, including comparisons between the Contracts and the
characteristics of and market for such alternatives.
THE FIXED ACCUMULATION FEATURES
- --------------------------------------------------------------------------------
IMPORTANT INFORMATION YOU SHOULD KNOW: THIS PORTION OF THE CONTRACT RELATING TO
THE FIXED ACCUMULATION FEATURES IS NOT REGISTERED UNDER THE SECURITIES ACT OF
1933 ("1933 ACT") AND THE FIXED ACCUMULATION FEATURES ARE NOT REGISTERED AS
INVESTMENT COMPANIES UNDER THE INVESTMENT COMPANY ACT OF 1940 ("1940 ACT"). NONE
OF THE FIXED ACCUMULATION FEATURES OR ANY OF THEIR INTERESTS ARE SUBJECT TO THE
PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT, AND THE STAFF OF THE
SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED THE DISCLOSURE REGARDING THE
FIXED ACCUMULATION FEATURES. THE FOLLOWING DISCLOSURE ABOUT THE FIXED
ACCUMULATION FEATURES MAY BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS
OF THE FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND COMPLETENESS OF
DISCLOSURE.
Payments and Contract Values allocated to a Fixed Accumulation Feature become a
part of our general assets. We invest the assets of the General Account in
accordance with applicable law governing the investments of insurance company
General Accounts. We have more than one Fixed Accumulation Feature. The standard
Fixed Accumulation Feature (the "Fixed Accumulation Feature") and then a number
of DCA Program Fixed Accumulation Features, which we collectively refer to as
the "Fixed Accumulation Features".
Currently, we guarantee that we will credit interest at a rate of not less than
3% per year, compounded annually, to amounts you allocate to the Fixed
Accumulation Feature. We reserve the right, in our sole discretion, to credit
interest at a rate in excess of 3% per year. You assume the risk that interest
credited to the Fixed Accumulation Feature may not exceed the minimum guarantee
of 3% for any given year.
We will periodically publish the Fixed Accumulation Feature interest rates
currently in effect. There is no specific formula for the determination of
interest rates. Some of the factors that we may consider in determining whether
to credit excess interest are: general economic trends, rates of return
currently available and anticipated on our investments, regulatory and tax
requirements and competitive factors. We will account for any deductions,
Surrenders or transfers from the Fixed Accumulation Feature on a "first-in",
"first-out" basis.
From time to time, we may credit increased interest rates to Contract Owners
under certain programs established at our sole discretion.
<PAGE>
20 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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DOLLAR COST AVERAGING PLUS ("DCA PLUS") PROGRAMS -- These programs will use
designated DCA Program Fixed Accumulation Features. Currently, Contract Owners
may enroll in a special pre-authorized transfer program known as our Dollar Cost
Averaging Plus Program (the "Program"). Under this Program, Contract Owners who
enroll may allocate a minimum of $5,000 of their payment into the appropriate
DCA Program Fixed Accumulation Feature (we may allow a lower minimum premium
payment for qualified plan transfers or rollovers, including IRAs) and
pre-authorize transfers to any of the Sub-Accounts under either the 6-Month
Transfer Program or 12-Month Transfer Program. The 6-Month Transfer Program and
the 12-Month Transfer Program will generally have different credited interest
rates. Under the 6-Month Transfer Program, the interest rate can accrue up to 6
months and all payments and accrued interest must be transferred from the DCA
Program Fixed Accumulation Feature in use to the selected Sub-Accounts in 3 to 6
months. Under the 12-Month Transfer Program, the interest rate can accrue up to
12 months and all payments and accrued interest must be transferred to the
selected Sub-Accounts in 7 to 12 months. This will be accomplished by monthly
transfers for the period selected and a final transfer of the entire amount
remaining in the Program, which will generally be less than the prior monthly
transfer amounts.
The pre-authorized transfers will begin within 15 days after we receive the
initial Program payment and complete enrollment instructions. If We do not
receive complete Program enrollment instructions within 15 days of receipt of
the initial Program payment, the Program will be voided and the entire balance
in the Program will be transferred to the Accounts designated by you. If you do
not designate an Account, we will transfer any remaining amounts to the Fixed
Accumulation Feature and you will receive the Fixed Accumulation Feature's
current effective interest rate. Any subsequent payments we receive within the
Program period selected will be allocated to the Sub-Accounts over the remainder
of that Program transfer period, unless otherwise directed by You.
You may only have one dollar cost averaging program in place at one time, this
means one standard dollar cost averaging plan or one Dollar Cost Averaging Plus
Program.
You may elect to terminate the pre-authorized transfers by calling or writing us
of your intent to cancel enrollment in the Program. Upon cancellation of
enrollment in the Program, you will no longer receive the increased interest
rate and unless we receive instructions to the contrary, the amounts remaining
in the DCA Program Fixed Accumulation Feature may be transferred to the Fixed
Accumulation Feature and accrue the interest rate currently in effect.
Transfers made under a Dollar Cost Averaging Program do not count towards the
twelve transfers each Contract Year that we allow without charge and are not
subject to our rule that prohibits any two transfers from occurring on
Consecutive Valuation Days.
We reserve the right to discontinue, modify or amend the Program or any other
interest rate program established by Hartford. Any change to the Program will
not affect Contract Owners currently enrolled in the Program.
THE CONTRACT
- --------------------------------------------------------------------------------
THE CONTRACT OFFERED -- The Contracts are individual or group tax-deferred
variable annuity contracts. They are designed for retirement planning purposes
and may be purchased by any individual, group or trust, including; (a) any
trustee or custodian for a retirement plan qualified under Sections 401(a), or
403(a) of the Internal Revenue Code (which includes Section 401(k));
(b) annuity purchase plans adopted by public school systems and certain
tax-exempt organizations according to Section 403(b) of the Code;
(c) Individual Retirement Annuities adopted according to Section 408 of the
Code; (d) employee pension plans established for employees by a state, a
political subdivision of a state, or an agency or instrumentality of either a
state or a political subdivision of a state, and (e) certain eligible deferred
compensation plans as defined in Section 457 of the Code ("Qualified
Contracts"). If you are purchasing the Contract for use in an IRA or other
qualified retirement plan, you should consider other features of the Contract
besides tax deferral, since any investment vehicle used within an IRA or other
qualified plan receives tax deferred treatment under the Code.
PURCHASING A CONTRACT -- A prospective Contract Owner may purchase a Contract by
completing and submitting an application or an order request along with an
initial premium payment to the Administrative Office of the Company. The maximum
age for Annuitant, Owner and Joint Owner on the Contract Issue Date is 85.
Generally, the minimum premium payment is $1,000. The minimum subsequent premium
payment is $500. Certain plans may be allowed to make smaller periodic premium
payments. Unless we give our prior approval, we will not accept a premium
payment in excess of $1,000,000. Each premium payment, which is your premium
payment after the deduction of any applicable Premium Taxes, may be split among
the various Accounts subject to minimum amounts then in effect. For Contracts
issued in Oregon, premium payments will only be accepted prior to the third
Contract Anniversary. For Contracts issued in Massachusetts, subsequent premium
payments will only be accepted until the Annuitant's 63rd birthday or the third
Contract Anniversary, whichever is later. We will send you a confirmation notice
upon receipt and acceptance of your premium payment.
In Oregon, Premium Payments are only allowed in the first three Contract Years.
In Massachusetts, Premium Payments are only allowed in the first three Contract
Years or until the Contract Owner turns 63, whichever is later.
RIGHT TO EXAMINE THE CONTRACT -- If you are not satisfied with your purchase,
you may cancel the Contract by returning it
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 21
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within 10 days (or longer in some states) after you receive it. You must send a
written request for cancellation along with the Contract. We will, without
deduction for any CDSC normally assessed, pay you an amount equal to the
Contract Value. YOU BEAR THE INVESTMENT RISK DURING THE PERIOD PRIOR TO OUR
RECEIPT OF YOUR REQUEST FOR CANCELLATION. We will refund the premium paid only
for Individual Retirement Annuities, if returned within seven days of receipt,
and in those states where required by law.
CREDITING AND VALUATION -- Your premium payment, which is the balance remaining
after the deduction of any Premium Tax, is credited to your Contract within two
business days of receipt by us at our Administrative Office of a properly
completed application or an order to purchase a Contract and the premium
payment. The payment will be credited to the Accounts according to the
instructions we receive from you.
If your application or other information is incomplete when received, your
payment will be credited to the Accounts within five business days of receipt of
complete information. If the payment is not credited within five business days,
it will be immediately returned to you unless you have been informed of the
delay and tell us not to return it.
Subsequent premium payments are priced on the Valuation Day we receive the
payment in our Administrative Office, provided it is received before the New
York Stock Exchange closes. Unless otherwise specified, We will allocate any
subsequent payments to Accounts according to your most recent instructions.
CONTRACT VALUE -- BEFORE THE ANNUITY
COMMENCEMENT DATE
Your Contract Value reflects interest rate credited any amounts allocated to the
Fixed Accumulation Features and the investment performance of the Sub-Accounts
where you have payments allocated.
SUB-ACCOUNT VALUES -- Your Sub-Account Values on the date we issue your Contract
is the amount of your premium payment allocated to any Sub-Account. After that,
we determine your Sub-Account value by determining the Accumulation Unit value
for each Sub-Account, and then multiplying that value by the number of those
units. Sub-Account Value reflects any variation of the interest income,
dividends, net capital gains or losses, realized or unrealized, and any amounts
transferred into or out of that Sub-Account.
ACCUMULATION UNITS -- When Premium Payments are credited to your Sub-Accounts,
they are converted into accumulation Units by dividing the amount of your
Premium Payments, minus any Premium Taxes, by the Accumulation Unit Value for
that day. The more Premium Payments you put into your Contract, the more
Accumulation Units you will own. You decrease the number of Accumulation Units
you have by requesting Surrenders, transferring money out of an Account,
settling a Death Benefit claim or by annuitizing your Contract.
ACCUMULATION UNIT VALUE -- The Accumulation Unit value for each Sub-Account was
arbitrarily set initially at $1 when the Sub-Account began operations. After
that, the Accumulation Unit value for each Sub-Account will equal (a) the
Accumulation Unit value at the end of the preceding Valuation Day multiplied by
(b) the Net Investment Factor (see the definition below) for the Valuation Day
for which the Accumulation Unit value is being calculated.
You will be advised, at least semiannually, of the number of Accumulation Units
credited to each Sub-Account, the current Accumulation Unit values, and the
total value of your Contract.
THE NET INVESTMENT FACTOR (BEFORE AND AFTER THE ANNUITY COMMENCEMENT
DATE) -- The Net Investment Factor is an index applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. For each
Sub-Account, the Net Investment Factor reflects the investment performance of
the Fund in which that Sub-Account invests and the charges assessed against that
Sub-Account for a Valuation Period. The Net Investment Factor is calculated by
dividing (a) by (b) and subtracting (c) from the result, where:
(a) Is the Net Asset Value of the Fund held in that Sub-Account, determined at
the end of the current Valuation Period (plus the per share amount of any
dividends or capital gains distributions made by that Fund);
(b) Is the Net Asset Value of the Fund held in the Sub-Account, determined at
the beginning of the Valuation Period;
(c) Is a daily factor representing the mortality and expense risk charge and any
optional charges deducted from the Sub-Account, adjusted for the number of
days in the Valuation Period.
CONTRACT VALUE TRANSFERS BEFORE AND AFTER THE ANNUITY COMMENCEMENT DATE
You may transfer your Contract Values from one or more Accounts to another
Account free of charge. WE RESERVE THE RIGHT TO LIMIT THE NUMBER OF TRANSFERS TO
12 PER CONTRACT YEAR, WITH NO 2 TRANSFERS OCCURRING ON CONSECUTIVE VALUATION
DAYS. There may be limitations on transfers to and from the Fixed Accumulation
Features that are described in your Contract. Some states may allow us to limit
the dollar amount transferred.
TELEPHONE AND INTERNET TRANSFERS -- In most states, you, or your
attorney-in-fact acting pursuant to a power of attorney, can make transfers:
- - By calling us at (800) 862-6668
- - Electronically, when available, by the Internet through our website at
http://online.hartford.com
Transfer instructions received by telephone on any Valuation Day before the
close of the New York Stock Exchange will be carried out that day. Otherwise,
the instructions will be carried out at the close of the New York Stock Exchange
on the next Valuation Day.
<PAGE>
22 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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Transfer instructions you send electronically are considered to be received by
Hartford at the time and date stated on the electronic acknowledgement Hartford
returns to you. If the time and date indicated on the acknowledgement is before
the close of the New York Stock Exchange on a Valuation Day, the instructions
will be carried out that day. Otherwise, the instructions will be carried out at
the close of the New York Stock Exchange the next Valuation Day. If you do not
receive an electronic acknowledgement, you should telephone us as soon as
possible.
We will send you a confirmation when we process your transfer. You are
responsible for verifying transfer confirmations and promptly advising us of any
errors within 30 days of receiving the confirmation.
Telephone or Internet transfer requests may currently only be cancelled by
calling us at (800)862-6668 before the close of the New York Stock Exchange.
Hartford, our agents or our affiliates are NOT responsible for losses resulting
from telephone or electronic requests that we believe are genuine. We will use
reasonable procedures to confirm that instructions received by telephone or
through our website are genuine, including a requirement that contract owners
provide certain identification information, including a personal identification
number. We record all telephone transfer instructions. We reserve the right to
suspend, modify, or terminate telephone or electronic transfer privileges at any
time.
We may permit you to pre-authorize transfers under certain circumstances.
Transfers between the Accounts may be made both before and after the Annuity
Commencement Date. Generally, the minimum allocation to any Sub-Account may not
be less than $500. All percentage (%) allocations must be in whole numbers
(e.g., 1%). No minimum balance is presently required in any Account.
The right to reallocate Contract Values is subject to modification if we
determine, in our sole opinion, that the exercise of that right by one or more
Contract Owners is, or would be, to the disadvantage of other Contract Owners.
Any modification could be applied to transfers to or from some or all of the
Accounts and could include, but not be limited to, the requirement of a minimum
time period between each transfer, not accepting transfer requests of an agent
acting under a power of attorney on behalf of more than one Contract Owner, or
limiting the dollar amount that may be transferred between the Sub-Accounts by
you at any one time. SUCH RESTRICTIONS MAY BE APPLIED IN ANY MANNER REASONABLY
DESIGNED TO PREVENT ANY USE OF THE TRANSFER RIGHT WHICH WE CONSIDER TO BE TO THE
DISADVANTAGE OF OTHER CONTRACT OWNERS.
For Contracts issued in THE STATES OF FLORIDA, MARYLAND OR OREGON, the
reservation of rights set forth in the preceding paragraph is limited to:
(i) requiring up to a maximum of 10 Valuation Days between each transfer;
(ii) limiting the amount to be transferred on any one Valuation Day to no more
than $2 million; and (iii) upon 30 days prior written notice, to only accepting
transfer instructions from you and not from your representative, agent or person
acting under a power of attorney for you.
Currently, we will not accept instructions from agents acting under a power of
attorney of multiple Contract Owners whose Accounts aggregate more than $2
million, unless the agent has entered into a third party transfer services
agreement with us.
Transfers made under a Dollar Cost Averaging Program do not count towards the
twelve transfers each Contract Year that we allow without charge and are not
subject to our rule that prohibits any two transfers from occurring on
Consecutive Valuation Days.
SURRENDERS
Contract Owners should consult their qualified tax adviser regarding the tax
consequences of a Surrender.
- A Surrender made before age 59 1/2 may result in adverse tax consequences,
including a penalty tax of 10% of the taxable portion of the Surrender
Value. (See "Federal Tax Considerations")
PAYMENT OF SURRENDER AMOUNTS -- Payment of any request for a full or partial
Surrender from the Accounts will be made as soon as possible and in any event no
later than seven days after we receive the request at our Administrative Office.
There may be postponement in the payment of Surrender Amounts whenever (a) the
New York Stock Exchange is closed; (b) trading on the New York Stock Exchange is
restricted as determined by the Commission; (c) the Commission permits
postponement and so orders; or (d) the Commission determines that an emergency
exists making valuation of the amounts or disposal of securities not reasonably
practicable.
FULL SURRENDERS PRIOR TO THE ANNUITY COMMENCEMENT DATE -- At any time prior to
the Annuity Commencement Date, you have the right to fully Surrender the
Contract. In such event, the Surrender Value of the Contract may be taken in the
form of a lump sum cash payment.
The Surrender Value of the Contract is equal to the Contract Value less any
Premium Taxes, the Annual Maintenance Fee and any Contingent Deferred Sales
Charge, if applicable. The Surrender Value may be more or less than the amount
of the payments made to your Contract.
PARTIAL SURRENDERS PRIOR TO THE ANNUITY COMMENCEMENT DATE -- You may make a
partial Surrender of your Contract Value at any time prior to the Annuity
Commencement Date so long as the amount Surrendered is at least equal to our
minimum amount rules then in effect. Additionally, if the remaining Contract
Value following a Surrender is less than $500, we may terminate the Contract and
pay the Surrender Value. For Contracts issued in Texas, the Contract will not be
terminated when the remaining Contract Value after a Surrender is less than $500
unless there were no payments made during the previous 2 Contract Years.
WHEN REQUESTING A PARTIAL SURRENDER, YOU SHOULD SPECIFY THE ACCOUNT(S) FROM
WHICH THE PARTIAL SURRENDER WILL BE TAKEN; OTHERWISE, THE SURRENDER WILL BE
TAKEN ON A PRO RATA BASIS ACCORDING TO THE VALUE IN EACH ACTIVE ACCOUNT.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 23
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We may permit you to pre-authorize partial Surrenders subject to certain
limitations then in effect. We permit partial Surrenders by telephone subject to
dollar amount limitations in effect at the time you request the Surrender. To
request partial Surrenders by telephone, you must have completed and returned to
us a Telephone Redemption Program Enrollment Form authorizing telephone
Surrenders. If there are joint Contract Owners, both must authorize us to accept
telephone instructions and agree that We may accept telephone instructions for
partial Surrenders from either Contract Owner. Partial Surrender requests will
not be honored until we receive all required documents in proper form.
Telephone authorization will remain valid until (a) we receive written notice of
revocation by you, or, in the case of joint Contract Owners, written notice from
either Contract Owner; (b) we discontinue the privilege; or (c) we have reason
to believe that you have entered into a market timing agreement with an
investment adviser and/or broker/dealer.
We may record any telephone calls to verify data concerning transactions and may
adopt other procedures to confirm that telephone instructions are genuine. We
will not be liable for losses or expenses arising out of telephone instructions
reasonably believed to be genuine.
In order to obtain that day's unit values on Surrender, We must receive
telephone Surrender instructions prior to the close of trading on the New York
Stock Exchange (generally 4:00 p.m.).
We may modify, suspend, or terminate telephone transaction privileges at any
time.
SURRENDERS AFTER THE ANNUITY COMMENCEMENT DATE -- You may fully Surrender your
Contract on or after the Annuity Commencement Date if you elect the Payment For
a Period Certain Settlement Option. We pay you the commuted value that is equal
to the present value of the remaining payments we are scheduled to make less any
applicable Contingent Deferred Sales Charge. The commuted value is determined as
of the date we receive your written request for Surrender at our Administrative
Office.
Partial Surrenders are permitted after the Annuity Commencement Date if you
elect a variable dollar amount payment under the Payments for a Period Certain
Settlement Option, but check with your qualified tax adviser because there may
be adverse tax consequences.
IMPORTANT TAX INFORMATION -- There are certain restrictions on section 403(b)
tax-sheltered annuities. As of December 31, 1988, all section 403(b) annuities
have limits on full and partial Surrenders. Contributions to the Contract made
after December 31, 1988 and any increases in cash value after December 31, 1988
may not be distributed unless the Contract Owner/employee has a) attained age
59 1/2, b) separated from service, c) died, d) become disabled or
e) experienced financial hardship (cash value increases may not be distributed
for hardships prior to age 59 1/2). Distributions prior to age 59 1/2 due to
financial hardship or separation from service may still be subject to a penalty
tax of 10%. We will not assume any responsibility for determining whether a
surrender is permissible, with or without tax penalty, in any particular
situation; or in monitoring Surrender requests regarding pre or post January 1,
1989 Contract Values. Any full or partial Surrender described above may affect
the continuing tax-qualified status of some Contracts or plans and may result in
adverse tax consequences to the Contract Owner. The Contract Owner, therefore,
should consult with a tax adviser before undertaking any such Surrender. (See
"Federal Tax Considerations").
CONTRACT CHARGES
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
The CDSC covers some of the expenses relating to the sale and distribution of
the Contract, including commissions paid to registered representatives and the
cost of preparing sales literature and other promotional activities.
We may assess a CDSC when you request a full or partial Surrender. The CDSC is
based on the amount you choose to Surrender and how long your Premium Payments
have been in the Contract. Each Premium Payment has its own CDSC schedule.
Premium Payments are Surrendered in the order in which they were received. The
longer you leave your Premium Payments in the Contract, the lower the CDSC will
be when you Surrender. The amount assessed a CDSC will not exceed your total
Premium Payments.
The percentage used to calculate the CDSC is equal to:
<TABLE>
<CAPTION>
NUMBER OF YEARS
FROM PREMIUM CONTINGENT DEFERRED
PAYMENT SALES CHARGE
<S> <C>
- ----------------------------------------
1 7%
- ----------------------------------------
2 6%
- ----------------------------------------
3 6%
- ----------------------------------------
4 5%
- ----------------------------------------
5 4%
- ----------------------------------------
6 3%
- ----------------------------------------
7 2%
- ----------------------------------------
8 or more 0%
- ----------------------------------------
</TABLE>
For example, you made an initial Premium Payment of $10,000 five years ago and
an additional Premium Payment of $20,000 one year ago. If you request a partial
withdrawal of $15,000 and you have not taken your Annual Withdrawal Amount for
the year, we will deduct a CDSC as follows.
- - Hartford will Surrender the Annual Withdrawal Amount which is equal to 15% of
your total Premium Payments or $4,500 without charging a CDSC.
- - We will then Surrender the Premium Payments that have been in the Annuity the
longest.
<PAGE>
24 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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- - That means we would Surrender the entire $10,000 initial Premium Payment and
deduct a CDSC of 4% on that amount or $400.00.
- - The remaining $500 will come from the additional Premium Payment made one year
ago and we will deduct a CDSC of 7% of the $500 or $35.00.
- - Your CDSC is $435.00
If you have any questions about these charges, please contact your financial
adviser or Hartford.
PAYMENTS NOT SUBJECT TO CDSC
ANNUAL WITHDRAWAL AMOUNT -- During the first seven Contract years, you may make
a partial Surrender of Contract Values of up to 15% of the premium payments each
Contract Year on a non-cumulative basis, as determined on the date of the
requested Surrender, without the application of the CDSC. After the seventh
Contract Year, you may make a partial Surrender each Contract Year of 15% of
premium payments made during the seven years prior to the Surrender and 100% of
the Contract Value less the premium payments made during the seven years prior
to the Surrender. These amounts are different for group unallocated Contracts
and Contracts issued to a Charitable Remainder Trust.
EXTENDED SURRENDER PRIVILEGE -- This privilege allows Annuitants who attain age
70 1/2 with a Contract held under an Individual Retirement Account or
403(b) plan to Surrender an amount equal to the required minimum distribution
for the stated Contract without incurring any CDSC.
WAIVERS OF CDSC
CONFINEMENT IN A NURSING HOME, HOSPITAL OR LONG TERM CARE FACILITY (DESCRIBED AS
ELIGIBLE CONFINEMENT IN THE CONTRACT) -- We will waive any CDSC applicable to a
partial or full Surrender if the Annuitant, Contract Owner or joint annuitant is
confined, at the recommendation of a physician for medically necessary reasons,
for at least 180 calendar days to: a hospital recognized as a general hospital
by the proper authority of the state in which it is located; or a hospital
recognized as a general hospital by the Joint Commission on the Accreditation of
Hospitals; or a facility certified as a hospital or long-term care facility; or
a nursing home licensed by the state in which it is located and offers the
services of a registered nurse 24 hours a day.
The Annuitant, Contract Owner or joint annuitant cannot be confined at the time
the Contract is purchased in order to receive this waiver and the Contract
Owner(s) must have been the Contract Owner(s) continuously since the Contract
issue date. You must provide written proof of confinement satisfactory to
Hartford and you must request the partial or full Surrender within 91 calendar
days of the last day of confinement.
This waiver may not be available in all states. Please contact your registered
representative or contact Us to determine availability.
DEATH OF THE ANNUITANT OR CONTRACT OWNER OR PAYMENTS UNDER AN ANNUITY
OPTION -- No CDSC otherwise applicable will be assessed in the event of death of
the Annuitant, death of the Contract Owner or if payments are made under an
Annuity option (other than a Surrender of variable payments for a Period Certain
Annuity option) provided for under the Contract.
OTHER PLANS OR PROGRAMS -- Certain plans or programs established by us from time
to time may have different Surrender privileges.
MORTALITY AND EXPENSE RISK CHARGE -- For assuming risks under the Contract, We
deduct a daily charge at the rate of 1.25% per year against all Contract Values
held in the Accounts during the life of the Contract. Although variable annuity
payments made under the Contracts will vary in accordance with the investment
performance of the underlying Fund shares held in the Sub-Account(s), the
payments will not be affected by (a) our actual mortality experience among
Annuitants before or after the Annuity Commencement Date or (b) our actual
expenses, if greater than the deductions provided for in the Contracts because
of the expense and mortality undertakings by us.
There are two types of mortality risks: those made during the accumulation or
deferral phase and those made during the annuity payout phase. The mortality
risk we take in the accumulation phase is that we may experience a loss
resulting from the assumption of the mortality risk relative to the death
benefit in event of the death of an Annuitant or Contract Owner before
commencement of Annuity payments, in periods of declining value. The mortality
risk we take during the annuity payout phase is to make monthly Annuity payments
(determined in accordance with the 1983a Individual Annuity Mortality Table and
other provisions contained in the Contract) to Annuitants regardless of how long
an Annuitant may live, and regardless of how long all Annuitants as a group may
live. These mortality undertakings are based on our determination of expected
mortality rates among all Annuitants. If actual experience among Annuitants
during the Annuity payment period deviates from our actuarial determination of
expected mortality rates among Annuitants because, as a group, their longevity
is longer than anticipated, we must provide amounts from our general funds to
fulfill our contractual obligations. We will bear the loss in such a situation.
During the accumulation phase, we also provide an expense undertaking. We assume
the risk that the Annual Maintenance Fee for maintaining the Contracts prior to
the Annuity Commencement Date may be insufficient to cover the actual cost of
providing such items.
ANNUAL MAINTENANCE FEE -- Each year, on each Contract Anniversary on or before
the Annuity Commencement Date, we will deduct an Annual Maintenance Fee, if
applicable, from Contract Values to reimburse us for expenses relating to the
maintenance of the Contract and Accounts. If during a Contract Year the Contract
is Surrendered for its full value, we will deduct the Annual Maintenance Fee at
the time of such Surrender. The fee is a flat fee that will be due in the full
amount regardless of the time of the Contract Year that Contract Values are
Surrendered. The Annual Maintenance Fee is $30 per Contract Year for Contracts
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 25
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with less than $50,000 Contract Value on the Contract Anniversary. Fees will be
deducted on a pro rata basis according to the value in each Account under a
Contract.
WAIVERS OF THE ANNUAL MAINTENANCE FEE -- Annual Maintenance Fees are waived for
Contracts with Contract Value equal to or greater than $50,000. In addition, we
will waive one Annual Maintenance Fee for Contract Owners who own one or more
Contracts with a combined Contract Value of $50,000 up to $100,000. If you have
multiple Contracts with a combined Contract Value of $100,000 or greater, we
will waive the Annual Maintenance Fee on all Contracts. However, we reserve the
right to limit the number of Annual Maintenance Fee waivers to a total of six
Contracts. We reserve the right to waive the Annual Maintenance Fee under other
conditions.
ADMINISTRATIVE CHARGE -- For administration, we apply a daily charge at the rate
of .15% per year against all Contract Values held in the Separate Account during
both the accumulation and annuity phases of the Contract. There is not
necessarily a relationship between the amount of administrative charge imposed
on a given Contract and the amount of expenses that may be attributable to that
Contract; expenses may be more or less than the charge.
You should refer to the Fund prospectus for a description of deductions and
expenses paid out of the assets of the Fund's portfolios.
PREMIUM TAXES -- Charges are also deducted for Premium Tax, if applicable,
imposed by state or other governmental entity. Certain states impose a Premium
Tax, currently ranging up to 3.5%. Some states assess the tax at the time
purchase payments are made; others assess the tax at the time of annuitization.
We will pay Premium Taxes at the time imposed under applicable law. At our sole
discretion, we may deduct Premium Taxes at the time we pay such taxes to the
applicable taxing authorities, at the time the Contract is Surrendered, at the
time a death benefit is paid, or at the time the Contract annuitizes.
OPTIONAL DEATH BENEFIT FEE -- If you elect the Optional Death Benefit, we will
deduct daily from your Contract Value an additional charge which equals .15% per
year of the Sub-Account value.
EXCEPTIONS TO CHARGES UNDER THE CONTRACT -- We may offer, at our discretion,
reduced fees and charges including, but not limited to, CDSC, the mortality and
expense risk charge, administration charges, optional charges and the Annual
Maintenance Fee for certain sales (including employer sponsored savings plans)
under circumstances which may result in savings of certain costs and expenses.
Reductions in these fees and charges will not be unfairly discriminatory against
any Contract Owner.
DEATH BENEFITS
DEATH BEFORE THE ANNUITY COMMENCEMENT DATE
DETERMINATION OF THE BENEFICIARY -- If the Contract Owner or the Annuitant dies
before the Annuity Commencement Date, we will pay a Death Benefit to the
Beneficiary.
- IF THE CONTRACT OWNER DIES before the Annuity Commencement Date, any
surviving joint Contract Owner becomes the Beneficiary. If there is no
surviving joint Contract Owner, the designated Beneficiary will be the
Beneficiary. If the Contract Owner's spouse is the sole Beneficiary, the
spouse may elect, in lieu of receiving the Death Benefit, to be treated as
the Contract Owner. If the Annuitant is not living and there is no
Contingent Annuitant, the spouse will be presumed to be the Contingent
Annuitant. If no Beneficiary designation is in effect or if the Beneficiary
has predeceased the Contract Owner, the Contract Owner's estate will be the
Beneficiary.
- IF THE ANNUITANT DIES before the Annuity Commencement Date, the Contingent
Annuitant will become the Annuitant. If either (a) there is no Contingent
Annuitant, (b) the Contingent Annuitant predeceases the Annuitant, or
(c) if any sole Contract Owner dies before the Annuity Commencement Date,
the Beneficiary, as determined under the Contract control provisions, will
receive the Death Benefit. However, if the Annuitant dies prior to the
Annuity Commencement Date and the Contract Owner is living, the Contract
Owner shall be the Beneficiary. In that case, the rights of any designated
Beneficiary shall be void.
DETERMINATION OF THE DEATH BENEFIT
IF YOU DID NOT ELECT THE OPTIONAL DEATH BENEFIT, Your Death Benefit, which we
will calculate as of the date we receive Due Proof of Death, will be calculated
as follows:
If the deceased HAD NOT REACHED THEIR 81ST BIRTHDAY, the Death Benefit is the
greater of:
- - 100% of the total premium payments made to the Contract, reduced by any
subsequent Surrenders, or
- - The Contract Value of your annuity, or
- - Your Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries of Contract Values, premium payments and partial Surrenders. We
will calculate an Anniversary Value for each Contract Anniversary prior to the
deceased's 81st birthday or date of death. The Anniversary Value is equal to the
Contract Value as of a Contract Anniversary, increased by the dollar amount of
any premium payments made since that anniversary and reduced by the dollar
amount of any partial Surrenders since that anniversary. The Maximum Anniversary
Value is equal to the greatest Anniversary Value attained from this series of
calculations.
IF THE DECEASED REACHED THEIR 81ST BIRTHDAY, then the Death Benefit is the
greater of:
- - 100% of the total premium payments made to us, reduced by any subsequent
Surrenders, or
- - The Contract Value of your annuity, or
<PAGE>
26 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- - The Maximum Anniversary Value.
If you did elect the Optional Death Benefit, the Death Benefit, which we will
calculate as of the date we receive Due Proof of Death, will be the greater of:
- - 100% of the total premium payments made to us, reduced by any subsequent
Surrenders;
- - The Contract Value of your annuity;
- - The Maximum Anniversary Value; or
- - The Interest Accumulation Value, which is described below.
The Interest Accumulation Value is calculated by accumulating interest on your
premium payments at a rate of 5% per year up to the deceased's 81st birthday or
date of death, assuming you have not taken any Surrenders. If you have taken any
Surrenders, the 5% will be accumulated on your premium payments, but there will
be an adjustment for any of the Surrenders. This adjustment will reduce the
Optional Death Benefit proportionally for the Surrenders. We stop compounding
interest on the deceased's 81st birthday or date of death. After that date, the
Interest Accumulation Value will be adjusted by adding any subsequent payments
and subtracting proportional adjustments for any partial Surrenders. The
Optional Death Benefit is limited to a maximum of 200% of premium payments, less
proportional adjustments for any Surrenders. For examples on how the Optional
Death Benefit is calculated see "Appendix II". The Optional Death Benefit may
not be available if the Contract Owner or Annuitant is age 75 or older. For
Contracts issued in the state of Washington, the Optional Death Benefit is not
available.
If you elect to add the Optional Death Benefit after you purchase your annuity,
the Interest Accumulation Value calculation will be:
- - Your Contract Value on the date we add the Optional Death Benefit to your
annuity;
- - Plus any Premium Payments made after the Optional Death Benefit is added;
- - Minus any partial Surrenders after the Optional Death Benefit is added;
- - Compounded daily at an annual interest rate of 5%.
SPOUSAL CONTRACT CONTINUATION -- If a Beneficiary is the Contract Owner's
spouse, that portion of the Contract for which the spouse is considered the
Beneficiary will continue with the spouse as Contract Owner, unless the spouse
elects to receive the Death Benefit as a lump sum payment or as an annuity
payment option. If the Contract continues with the spouse as Contract Owner, we
will adjust the Contract Value to the amount that we would have paid as the
Death Benefit payment, had the spouse elected to receive the Death Benefit as a
lump sum payment. Spousal Contract Continuation will only apply one time for
each Contract.
CALCULATION OF THE DEATH BENEFIT -- If the Contract Owner or Annuitant dies
before the Annuity Commencement Date and a Death Benefit is payable to the
Beneficiary, the Death Benefit will be calculated as of the date we receive
written notification of Due Proof of Death. THE DEATH BENEFIT REMAINS INVESTED
IN THE SEPARATE ACCOUNT ACCORDING TO YOUR LAST INSTRUCTIONS UNTIL THE PROCEEDS
ARE PAID OR WE RECEIVE NEW SETTLEMENT INSTRUCTIONS FROM THE BENEFICIARY. DURING
THE TIME PERIOD BETWEEN OUR RECEIPT OF WRITTEN NOTIFICATION OF DUE PROOF OF
DEATH AND OUR RECEIPT OF THE COMPLETE SETTLEMENT INSTRUCTIONS, THE CALCULATED
DEATH BENEFIT WILL BE SUBJECT TO MARKET FLUCTUATIONS. UPON RECEIPT OF COMPLETE
SETTLEMENT INSTRUCTIONS, WE WILL CALCULATE THE PAYABLE AMOUNT.
Any Annuity payments made on or after the date of death, but before receipt of
written notification of Due Proof of Death will be recovered by us from the
Payee.
DEATH ON OR AFTER THE ANNUITY COMMENCEMENT DATE
If, on or after the Annuity Commencement Date, the Contract Owner dies and the
Annuitant is living, the Beneficiary becomes the Contract Owner. If the
Annuitant dies and the Contract Owner is living, the Contract Owner becomes the
Beneficiary.
If the Annuitant dies on or after the Annuity Commencement Date, a Death Benefit
may be paid or payments may continue under the following annuity payment
options:
- - Life Annuity with Cash Refund
- - Life Annuity with payments for a Period Certain
- - Joint and Last Survivor Life Annuity with payments for a Period Certain and
- - Payments for a Period Certain.
Proceeds from the Death Benefit may be left with us for at least 5 years from
the date of the Contract Owner's death if the death occurs prior to the Annuity
Commencement Date. These proceeds will remain in the Account(s) to which they
were allocated at the time of death unless the Beneficiary elects to reallocate
them. Full or partial Surrenders may be made at any time. In the event of a
complete Surrender, the remaining value will equal the Contract Value of the
proceeds left with us, minus any partial Surrenders. This option may not be
available under certain Contracts issued in connection with Qualified Plans.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 27
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SETTLEMENT PROVISIONS
You select an Annuity Commencement Date which will not be deferred beyond the
Valuation Day immediately following the later of the Annuitant's 90th birthday
or the end of the tenth Contract Year. You may elect a later Annuity
Commencement Date if we allow and subject to the laws and regulations then in
effect. If the Contract is sold as part of a Charitable Remainder Trust, the
Annuity Commencement Date may be deferred to the Annuitant's 100th birthday. The
Annuity Commencement Date may be changed from time to time, but ANY CHANGE MUST
BE WITHIN 30 DAYS PRIOR TO THE DATE ON WHICH ANNUITY PAYMENTS ARE SCHEDULED TO
BEGIN.
You also elect in writing an annuity payment option, which may be any of the
options described below or any annuity payment option then being offered by us.
The annuity payment option may not be changed on or after the Annuity
Commencement Date. The Contract contains the six annuity payment options
described below and the Annuity Proceeds Settlement Option.
For Qualified Contracts, the following annuity payment options are only
available if the guaranteed payment period is less than the life expectancy of
the Annuitant at the time the option becomes effective. The Annuity Proceeds
Settlement option is available for Qualified Contracts only if the guaranteed
payment period is less than the life expectancy of the Beneficiary at the time
the option becomes effective. Such life expectancies are computed on the basis
of the mortality table prescribed by the IRS, or if none is prescribed, the
mortality table in use by us. If you do not elect otherwise, fixed dollar amount
annuity payments will begin automatically on the Annuity Commencement Date,
under the Life Annuity Payment Option.
For Non-Qualified Contracts, if you do not elect otherwise, fixed dollar amount
annuity payments will automatically begin on the Annuity Commencement Date under
the annuity payment option Life Annuity with payments for a Period Certain of 10
years. For Qualified Contracts and Contracts issued in Texas, if you do not
elect otherwise, fixed dollar amount annuity payments will begin automatically
on the Annuity Commencement Date, under the Life Annuity Payment Option.
With the exception of the option Payments for a Period Certain, if the variable
dollar amount payment is selected, no Surrenders are permitted after annuity
payments begin.
ANNUITY PAYMENT OPTIONS
LIFE ANNUITY
where we make Annuity payments for as long as the Annuitant lives.
- Payments under this option STOP UPON THE DEATH OF THE ANNUITANT, even if the
Annuitant dies after one payment.
LIFE ANNUITY WITH CASH REFUND
where we make payments during the life of the Annuitant and when the Annuitant
dies, we pay the remaining value to the Beneficiary. The remaining value is
calculated at the time we receive Due Proof of Death by subtracting the annuity
payments already made from the Contract Value less any applicable Premium Taxes
applied to this annuity payment option.
- This option is only available if you select payments using a VARIABLE DOLLAR
AMOUNT PAYMENT OPTION WITH THE 5% AIR OR FIXED DOLLAR AMOUNT ANNUITY
PAYMENTS.
LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN
where we make payments to you for the life of the Annuitant but you are at least
guaranteed payments for a time period you select which is a minimum of 5 years
and a maximum of 100 years minus your Annuitant's age.
- If the Annuitant dies prior to the end of the period selected, we will pay
your Beneficiary the present value of the remaining payments, either in a
lump sum payment or we will continue payments until the end of the period
selected.
JOINT AND LAST SURVIVOR ANNUITY
where we make payments during the lifetimes of the Annuitant and another
designated individual called the Joint Annuitant At the time of electing this
Annuity Option, the Contract Owner may elect reduced payments over the remaining
lifetime of the survivor.
- Payments under this option stop UPON THE DEATH OF THE ANNUITANT AND JOINT
ANNUITANT, even if the Annuitant and Joint Annuitant die after one payment.
JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN
where we make payments during the lifetime of the Annuitant and a Joint
Annuitant, and we guarantee that those payments for a time period you select
which is not less than 5 years and no more than 100 years minus the younger
Annuitant's age. At the time of electing this Annuity Option, the Contract Owner
may elect reduced payments over the remaining lifetime of the survivor.
- If the Annuitant and Joint Annuity die prior to the end of the period
selected, we will pay your Beneficiary the present value of the remaining
payments, either in a lump sum payment or We will continue payments until
the end of the period selected.
PAYMENTS FOR A PERIOD CERTAIN
where we agree to make payments for a specified time. The minimum period that
you can select is 10 years during the first two Contract years and 5 years after
the second Contract Anniversary. The maximum period that you can select is 100
years minus your Annuitant's age.
- If you select this option under a variable dollar amount payment, YOU MAY
SURRENDER YOUR ANNUITY after
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28 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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annuity payments have started and we will give you the present value of the
remaining payments less any applicable Contingent Deferred Sales Charge.
- If the Annuitant dies prior to the end of the period selected, we will pay
your Beneficiary the present value of the remaining payments, either in a
lump sum payment or we will continue payments until the end of the period
selected.
- For Contracts issued in the state of Oregon, Payments for a Period Certain
may be selected as follows: For fixed annuity payments, the minimum period
that you can select is 10 years at any time and 5 years on or after the 2nd
Contract Anniversary. For variable annuity payments, the minimum period that
you can select is 5 years on or after the 10th Contract Anniversary. Under
an Annuity payable with variable annuity payments, you may surrender the
Contract after payments have begun by submitting a written request to us.
The amount available to you is the Commuted Value.
WE MAY OFFER OTHER ANNUITY PAYMENT OPTIONS FROM TIME TO TIME.
ANNUITY PAYMENTS
When you decide to begin to take payments, we calculate your Contract Value
minus any Premium Tax which we must pay and, unless you instruct us otherwise,
we apply that amount to a variable annuity with the same Sub-Account values. You
may however, choose to have your Contract Value applied to a fixed annuity
instead.
IMPORTANT: YOU SHOULD CONSIDER THE QUESTION OF ALLOCATION OF CONTRACT VALUES
(LESS APPLICABLE PREMIUM TAXES) AMONG ACCOUNTS TO MAKE CERTAIN THAT ANNUITY
PAYMENTS ARE BASED ON THE INVESTMENT ALTERNATIVE BEST SUITED TO YOUR NEEDS FOR
RETIREMENT.
ANNUITY PAYMENTS -- The minimum Annuity payment is $50. No election may be made
which results in a first payment of less than $50. If at any time Annuity
payments are or become less than $50, we have the right to change the frequency
of payment to intervals so that payments will at least be $50. If any amount due
is less than the minimum amount per year, we may make such other settlement as
may be equitable to the Payee.
All Annuity payments under any option will occur the same day of the month as
the Annuity Commencement Date, based on the payment frequency selected by you.
Available payment frequencies include monthly, quarterly, semi-annual and
annual. The payment frequency may be changed within 30 days prior to the
anniversary of your Annuity Commencement Date.
ANNUITY COMMENCEMENT DATE -- You select the Annuity Commencement Date in your
application or order request. The Annuity Calculation Date will be no more than
five Valuation Days before the Annuity Commencement Date.
ANNUITY CALCULATION DATE -- On the Annuity Calculation Date, your Contract Value
less any applicable Premium Tax is applied to purchase Annuity Units of the
Sub-Accounts selected by you. The first Annuity payment is computed using the
value of these Annuity Units as of the Annuity Calculation Date.
INCOME PAYMENT DATES -- All Annuity payments after the first Annuity payment are
computed and payable as of the Income Payment Dates. These dates are the same
day of the month as the Annuity Commencement Date, based on the Annuity payment
frequency selected by you. They are also shown on the specification page of your
Contract. You may choose from monthly, quarterly, semi-annual and annual
payments. The Annuity payment frequency may not be changed once selected by you.
IN THE EVENT THAT YOU DO NOT SELECT A PAYMENT FREQUENCY, ANNUITY PAYMENTS WILL
BE MADE MONTHLY.
VARIABLE ANNUITY PAYMENTS
THE FIRST VARIABLE ANNUITY PAYMENT -- Variable Annuity payments are periodic
payments we pay to your designated Payee, the amount of which varies from one
Income Payment Date to the next as a function of the net investment performance
of the Sub-Accounts selected by you. The dollar amount of the first Variable
Annuity payment depends on the annuity payment option chosen, the age of the
Annuitant, the gender of the Annuitant (if applicable), the amount of Contract
Value less applicable Premium Tax applied to purchase the Annuity payments, and
the applicable annuity purchase rates based on the 1983a Individual Annuity
Mortality table using projection scale G projected to the year 2000 and an AIR
of not less than 3.0%.
The dollar amount of the first Variable Annuity payment attributable to each
Sub-Account is determined by dividing the dollar amount of the Contract Value
less applicable Premium Tax applied to that Sub-Account on the Annuity
Calculation Date by $1,000 and multiplying the result by the payment factor in
the Contract for the selected annuity payment option. The dollar value of the
first Variable Annuity payment is the sum of the first Variable Annuity payments
attributable to each Sub-Account.
ANNUITY UNITS -- The number of Annuity Units attributable to a Sub-Account is
derived by dividing the first Variable Annuity payment attributable to that
Sub-Account by the Annuity Unit value for that Sub-Account for the Valuation
Period ending on the Annuity Calculation Date or during which the Annuity
Calculation Date falls if the Valuation Period does not end on such date. The
number of Annuity Units attributable to each Sub-Account under a Contract
remains fixed unless there is a transfer of Annuity Units between Sub-Accounts.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 29
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SUBSEQUENT VARIABLE ANNUITY PAYMENTS -- The dollar amount of each subsequent
Variable Annuity payment attributable to each Sub-Account is calculated on the
Income Payment Date. It is determined by multiplying (a) by (b), where:
(a) is the number of Annuity Units of each Sub-Account credited under the
Contract and
(b) is the Annuity Unit value (described below) for that Sub-Account.
The total subsequent Variable Annuity payments equal the sum of the amounts
attributable to each Sub-Account.
When an Income Payment Date falls on a day that is not a Valuation Day, the
Income Payment is computed as of the prior Valuation Day. If the date of the
month elected does not occur in a given month, i.e., the 29th, 30th, or 31st of
a month, the payment will be computed as of the last Valuation Day of the month.
When an Income Payment Date falls on a day that is not a Valuation Day, the
Income Payment is computed as of the prior Valuation Day. If the date of the
month elected does not occur in a given month, i.e., the 29th, 30th, or 31st of
a month, the payment will be computed as of the last Valuation Day of the month.
The Annuity Unit value of each Sub-Account for any Valuation Period is equal to
(a) multiplied by (b) multiplied by (c) where:
(a) is the Net Investment Factor for the Valuation Period for which the Annuity
Unit value is being calculated;
(b) is the Annuity Unit value for the preceding Valuation Period; and
(c) is the Annuity Unit Factor
The Annuity Unit Factor neutralizes the AIR percentage (3%, 5%, or 6%). The
daily Annuity Unit Factor corresponding to the AIR percentages of 3%, 5%, and 6%
are 0.999919, 0.999866, and 0.999840, respectively.
THE ASSUMED INVESTMENT RETURN (AIR) -- The Annuity Unit value will increase or
decrease from one Income Payment Date to the next in direct proportion to the
net investment return of the Sub-Account(s) supporting the Variable Annuity
payments, less an adjustment to neutralize the selected AIR. Dividing what would
otherwise be the Annuity Unit value by the AIR factor is necessary in order to
adjust the change in the Annuity Unit value (resulting from the Net Investment
Factor) so that the Annuity Unit value only changes to the extent that the Net
Investment Factor represents a rate of return greater than or less than the AIR
selected by you. Without this adjustment, the Net Investment Factor would
decrease the Annuity Unit value to the extent that such value represented an
annualized rate of return of less than 0.0% and increase the Annuity Unit value
to the extent that such value represented an annualized rate of return of
greater than 0.0%.
The Contract permits Contract Owners to select one of three AIRs: 3%, 5% or 6%.
A higher AIR will result in a higher initial payment, a more slowly rising
series of subsequent payments when actual investment performance (minus any
deductions and expenses) exceeds the AIR, and a more rapid drop in subsequent
payments when actual investment performance (minus any deductions and expenses)
is less than the AIR. The 6% AIR is not available in the states of Oklahoma,
Oregon, New Jersey or Texas. The following examples may help clarify the impact
of selecting one AIR over another:
- - If you select a 3% AIR and if the net investment return of the Sub-Account for
an Annuity payment period is equal to the pro-rated portion of the 3% AIR, the
Variable Annuity payment attributable to that Sub-Account for that period will
equal the Annuity payment for the prior period. To the extent that such net
investment return EXCEEDS an annualized rate of return of 3% for a payment
period, the Annuity payment for that period will be greater than the Annuity
payment for the prior period and to the extent that such return for a period
falls short of an annualized rate of 3%, the Annuity payment for that period
will be less than the Annuity payment for the prior period.
- - If you select a 5% AIR and if the net investment return of the Sub-Account for
an Annuity payment period is equal to the pro-rated portion of the 5% AIR, the
Variable Annuity payment attributable to that Sub-Account for that period will
equal the Annuity payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of return of 5% for a payment
period, the Annuity payment for that period will be greater than the Annuity
payment for the prior period and to the extent that such return for a period
falls short of an annualized rate of 5%, the Annuity payment for that period
will be less than the Annuity payment for the prior period.
- - If you select a 6% AIR and if the net investment return of the Sub-Account for
an Annuity payment period is equal to the pro-rated portion of the 6% AIR, the
Variable Annuity payment attributable to that Sub-Account for that period will
equal the Annuity payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of return of 6% for a payment
period, the Annuity payment for that period will be greater than the Annuity
payment for the prior period and to the extent that such return for a period
falls short of an annualized rate of 6%, the Annuity payment for that period
will be less than the Annuity payment for the prior period.
LEVEL VARIABLE ANNUITY PAYMENTS WOULD BE PRODUCED IF THE INVESTMENT RATE RETURNS
REMAINED CONSTANT AND EQUAL TO THE AIR. IN FACT, PAYMENTS WILL VARY UP OR DOWN
AS THE INVESTMENT RATE VARIES UP OR DOWN FROM THE AIR.
EXCHANGE (TRANSFER) OF ANNUITY UNITS -- After the Annuity Calculation Date, you
may exchange (i.e., transfer) the dollar value of a designated number of Annuity
Units of a particular Sub-Account for an equivalent dollar amount of Annuity
Units of another Sub-Account. On the date of the transfer, the dollar
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30 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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amount of a Variable Annuity payment generated from the Annuity Units of either
Sub-Account would be the same. Transfers are executed as of the day Hartford
receives a written request for a transfer. For guidelines refer to Sub-Account
Value Transfers Before and After the Annuity Commencement Date.
FIXED DOLLAR ANNUITY -- Fixed Annuity payments are determined at annuitization
by multiplying the Contract Value (less applicable Premium Taxes) by a rate to
be determined by Hartford which is no less than the rate specified in the Fixed
Annuity option tables in the Contract. The Annuity payment will remain level for
the duration of the Annuity. Any Fixed Annuity allocation may not be changed.
OTHER INFORMATION
ASSIGNMENT -- Ownership of this Contract is generally assignable. However, if
the Contracts are issued pursuant to some form of Qualified Plan, it is possible
that the ownership of the Contracts may not be transferred or assigned depending
on the type of tax-qualified retirement plan involved. An assignment of a
Non-Qualified Contract may subject the Contract Values or assignment proceeds to
income taxes and certain penalty taxes.
CONTRACT MODIFICATION -- The Annuitant may not be changed; however, the
Contingent Annuitant may be changed at any time prior to the Annuity
Commencement Date by sending us written notice. We may modify the Contract, but
no modification will effect the amount or term of any Contract unless a
modification is required to conform the Contract to applicable Federal or State
law. No modification will effect the method by which Contract Values are
determined.
FEDERAL TAX CONSIDERATIONS
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What are some of the federal tax consequences which affect these Contracts?
A. GENERAL
Since federal tax law is complex, the tax consequences of purchasing this
contract will vary depending on your situation. You may need tax or legal advice
to help you determine whether purchasing this contract is right for you.
Our general discussion of the tax treatment of this contract is based on our
understanding of federal income tax laws as they are currently interpreted. A
detailed description of all federal income tax consequences regarding the
purchase of this contract cannot be made in the prospectus. We also do not
discuss state, municipal or other tax laws that may apply to this contract. For
detailed information, you should consult with a qualified tax adviser familiar
with your situation.
B. TAXATION OF HARTFORD AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford which is taxed as a life
insurance company in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the Separate Account will not be taxed as a
"regulated investment company" under subchapter M of Chapter 1 of the Code.
Investment income and any realized capital gains on the assets of the Separate
Account are reinvested and are taken into account in determining the value of
the Accumulation and Annuity Units (See "Value of Accumulation Units"). As a
result, such investment income and realized capital gains are automatically
applied to increase reserves under the Contract.
No taxes are due on interest, dividends and short-term or long-term capital
gains earned by the Separate Account with respect to Qualified or Non-Qualified
Contracts.
C. TAXATION OF ANNUITIES -- GENERAL PROVISIONS AFFECTING PURCHASERS OTHER THAN
QUALIFIED RETIREMENT PLANS
Section 72 of the Code governs the taxation of annuities in general.
1. NON-NATURAL PERSONS, CORPORATIONS, ETC.
Code Section 72 contains provisions for contract owners which are not natural
persons. Non-natural persons include corporations, trusts, limited liability
companies, partnerships and other types of legal entities. The tax rules for
contracts owned by non-natural persons are different from the rules for
contracts owned by individuals. For example, the annual net increase in the
value of the contract is currently includible in the gross income of a
non-natural person, unless the non-natural person holds the contract as an agent
for a natural person. There are additional exceptions from current inclusion
for:
- - certain annuities held by structured settlement companies,
- - certain annuities held by an employer with respect to a terminated qualified
retirement plan and
- - certain immediate annuities.
A non-natural person which is a tax-exempt entity for federal tax purposes will
not be subject to income tax as a result of this provision.
If the contract owner is a non-natural person, the primary annuitant is treated
as the contract owner in applying mandatory distribution rules. These rules
require that certain distributions be made upon the death of the contract owner.
A change in the primary annuitant is also treated as the death of the contract
owner.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS).
A Contract Owner is not taxed on increases in the value of the Contract until an
amount is received or deemed received, e.g., in the form of a lump sum payment
(full or partial value of a
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 31
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Contract) or as Annuity payments under the settlement option elected.
The provisions of Section 72 of the Code concerning distributions are summarized
briefly below. Also summarized are special rules affecting distributions from
Contracts obtained in a tax-free exchange for other annuity contracts or life
insurance contracts which were purchased prior to August 14, 1982.
a. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less amounts received which were not includable in
gross income equal the "investment in the contract" under Section 72 of the
Code.
ii. To the extent that the value of the Contract (ignoring any surrender
charges except on a full surrender) exceeds the "investment in the
contract," such excess constitutes the "income on the contract."
iii. Any amount received or deemed received prior to the Annuity Commencement
Date (e.g., upon a partial surrender) is deemed to come first from any
such "income on the contract" and then from "investment in the contract,"
and for these purposes such "income on the contract" shall be computed by
reference to any aggregation rule in subparagraph 2.c. below. As a result,
any such amount received or deemed received (1) shall be includable in
gross income to the extent that such amount does not exceed any such
"income on the contract," and (2) shall not be includable in gross income
to the extent that such amount does exceed any such "income on the
contract." If at the time that any amount is received or deemed received
there is no "income on the contract" (e.g., because the gross value of the
Contract does not exceed the "investment in the contract" and no
aggregation rule applies), then such amount received or deemed received
will not be includable in gross income, and will simply reduce the
"investment in the contract."
iv. The receipt of any amount as a loan under the Contract or the assignment or
pledge of any portion of the value of the Contract shall be treated as an
amount received for purposes of this subparagraph a. and the next
subparagraph b.
v. In general, the transfer of the Contract, without full and adequate
consideration, will be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b. This transfer rule does not
apply, however, to certain transfers of property between spouses or incident
to divorce.
b. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE.
Annuity payments made periodically after the Annuity Commencement Date are
includable in gross income to the extent the payments exceed the amount
determined by the application of the ratio of the "investment in the contract"
to the total amount of the payments to be made after the Annuity Commencement
Date (the "exclusion ratio").
i. When the total of amounts excluded from income by application of the
exclusion ratio is equal to the investment in the contract as of the
Annuity Commencement Date, any additional payments (including surrenders)
will be entirely includable in gross income.
ii. If the annuity payments cease by reason of the death of the Annuitant and,
as of the date of death, the amount of annuity payments excluded from gross
income by the exclusion ratio does not exceed the investment in the
contract as of the Annuity Commencement Date, then the remaining portion of
unrecovered investment shall be allowed as a deduction for the last taxable
year of the Annuitant.
iii. Generally, nonperiodic amounts received or deemed received after the
Annuity Commencement Date are not entitled to any exclusion ratio and
shall be fully includable in gross income. However, upon a full surrender
after such date, only the excess of the amount received (after any
surrender charge) over the remaining "investment in the contract" shall be
includable in gross income (except to the extent that the aggregation
rule referred to in the next subparagraph c. may apply).
c. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS.
Contracts issued after October 21, 1988 by the same insurer (or affiliated
insurer) to the same Contract Owner within the same calendar year (other than
certain contracts held in connection with a tax-qualified retirement
arrangement) will be treated as one annuity Contract for the purpose of
determining the taxation of distributions prior to the Annuity Commencement
Date. An annuity contract received in a tax-free exchange for another annuity
contract or life insurance contract may be treated as a new Contract for this
purpose. Hartford believes that for any annuity subject to such aggregation, the
values under the Contracts and the investment in the contracts will be added
together to determine the taxation under subparagraph 2.a., above, of amounts
received or deemed received prior to the Annuity Commencement Date. Withdrawals
will first be treated as withdrawals of income until all of the income from all
such Contracts is withdrawn. As of the date of this Prospectus, there are no
regulations interpreting this provision.
d. 10% PENALTY TAX -- APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY
PAYMENTS.
i. If any amount is received or deemed received on the Contract (before or
after the Annuity Commencement Date), the Code applies a penalty tax equal
to ten percent of the portion of the amount includable in gross income,
unless an exception applies.
ii. The 10% penalty tax will not apply to the following distributions
(exceptions vary based upon the precise plan involved):
1. Distributions made on or after the date the recipient has attained the
age of 59 1/2.
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32 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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2. Distributions made on or after the death of the holder or where the
holder is not an individual, the death of the primary annuitant.
3. Distributions attributable to a recipient's becoming disabled.
4. A distribution that is part of a scheduled series of substantially equal
periodic payments (not less frequently than annually) for the life (or
life expectancy) of the recipient (or the joint lives or life
expectancies of the recipient and the recipient's designated
Beneficiary).
5. Distributions of amounts which are allocable to the "investment in the
contract" prior to August 14, 1982 (see next subparagraph e.).
e. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED THROUGH A TAX-FREE
EXCHANGE OF OTHER ANNUITY OR LIFE INSURANCE CONTRACTS PURCHASED PRIOR TO
AUGUST 14, 1982.
If the Contract was obtained by a tax-free exchange of a life insurance or
annuity Contract purchased prior to August 14, 1982, then any amount received or
deemed received prior to the Annuity Commencement Date shall be deemed to come
(1) first from the amount of the "investment in the contract" prior to August
14, 1982 ("pre-8/14/82 investment") carried over from the prior Contract,
(2) then from the portion of the "income on the contract" (carried over to, as
well as accumulating in, the successor Contract) that is attributable to such
pre-8/14/82 investment, (3) then from the remaining "income on the contract" and
(4) last from the remaining "investment in the contract." As a result, to the
extent that such amount received or deemed received does not exceed such
pre-8/14/82 investment, such amount is not includable in gross income., In
addition, to the extent that such amount received or deemed received does not
exceed the sum of (a) such pre-8/14/82 investment and (b) the "income on the
contract" attributable thereto, such amount is not subject to the 10% penalty
tax. In all other respects, amounts received or deemed received from such post-
exchange Contracts are generally subject to the rules described in this
subparagraph 3.
f. REQUIRED DISTRIBUTIONS.
i. Death of Contract Owner or Primary Annuitant
Subject to the alternative election or spouse beneficiary provisions in ii
or iii below:
1. If any Contract Owner dies on or after the Annuity Commencement Date and
before the entire interest in the Contract has been distributed, the
remaining portion of such interest shall be distributed at least as
rapidly as under the method of distribution being used as of the date of
such death;
2. If any Contract Owner dies before the Annuity Commencement Date, the
entire interest in the Contract will be distributed within 5 years after
such death; and
3. If the Contract Owner is not an individual, then for purposes of 1. or
2. above, the primary annuitant under the Contract shall be treated as
the Contract Owner, and any change in the primary annuitant shall be
treated as the death of the Contract Owner. The primary annuitant is the
individual, the events in the life of whom are of primary importance in
affecting the timing or amount of the payout under the Contract.
ii. Alternative Election to Satisfy Distribution Requirements
If any portion of the interest of a Contract Owner described in i. above is
payable to or for the benefit of a designated beneficiary, such beneficiary
may elect to have the portion distributed over a period that does not extend
beyond the life or life expectancy of the beneficiary. Distributions must
begin within a year of the Contract Owner's death.
iii. Spouse Beneficiary
If any portion of the interest of a Contract Owner is payable to or for the
benefit of his or her spouse, and the Annuitant or Contingent Annuitant is
living, such spouse shall be treated as the Contract Owner of such portion
for purposes of section i. above. This spousal continuation shall apply only
once for this contract.
3. DIVERSIFICATION REQUIREMENTS.
The Code requires that investments supporting your contract be adequately
diversified. Code Section 817 provides that a variable annuity contract will not
be treated as an annuity contract for any period during which the investments
made by the separate account or underlying fund are not adequately diversified.
If a contract is not treated as an annuity contract, the contract owner will be
subject to income tax on annual increases in cash value.
The Treasury Department's diversification regulations require, among other
things, that:
- - no more than 55% of the value of the total assets of the segregated asset
account underlying a variable contract is represented by any one investment,
- - no more than 70% is represented by any two investments,
- - no more than 80% is represented by any three investments and
- - no more than 90% is represented by any four investments.
In determining whether the diversification standards are met, all securities of
the same issuer, all interests in the same real property project, and all
interests in the same commodity are each treated as a single investment. In the
case of government securities, each government agency or instrumentality is
treated as a separate issuer.
A separate account must be in compliance with the diversification standards on
the last day of each calendar quarter or within 30 days after the quarter ends.
If an insurance company inadvertently fails to meet the diversification
requirements, the company may still comply within a reasonable period and avoid
the
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 33
- --------------------------------------------------------------------------------
taxation of contract income on an ongoing basis. However, either the company or
the contract owner must agree to pay the tax due for the period during which the
diversification requirements were not met.
We monitor the diversification of investments in the separate accounts and test
for diversification as required by the Code. We intend to administer all
contracts subject to the diversification requirements in a manner that will
maintain adequate diversification.
4. OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT.
In order for a variable annuity contract to qualify for tax deferral, assets in
the separate accounts supporting the contract must be considered to be owned by
the insurance company and not by the contract owner. It is unclear under what
circumstances an investor is considered to have enough control over the assets
in the separate account to be considered the owner of the assets for tax
purposes.
The IRS has issued several rulings discussing investor control. These rulings
say that certain incidents of ownership by the contract owner, such as the
ability to select and control investments in a separate account, will cause the
contract owner to be treated as the owner of the assets for tax purposes.
In its explanation of the diversification regulations, the Treasury Department
recognized that the temporary regulations "do not provide guidance concerning
the circumstances in which investor control of the investments of a segregated
asset account may cause the investor, rather than the insurance company, to be
treated as the owner of the assets in the account." The explanation further
indicates that "the temporary regulations provide that in appropriate cases a
segregated asset account may include multiple sub-accounts, but do not specify
the extent to which policyholders may direct their investments to particular
sub-accounts without being treated as the owners of the underlying assets.
Guidance on this and other issues will be provided in regulations or revenue
rulings under Section 817(d), relating to the definition of variable contract."
The final regulations issued under Section 817 did not provide guidance
regarding investor control, and as of the date of this prospectus, guidance has
yet to be issued. We do not know if additional guidance will be issued. If
guidance is issued, we do not know if it will have a retroactive effect.
Due to the lack of specific guidance on investor control, there is some
uncertainty about when a contract owner is considered the owner of the assets
for tax purposes. We reserve the right to modify the contract, as necessary, to
prevent you from being considered the owner of assets in the separate account.
D. FEDERAL INCOME TAX WITHHOLDING
Any portion of a distribution that is (or is deemed to be) current taxable
income to the Contract Owner will be subject to federal income tax withholding
and reporting under the Code. Generally, however, a Contract Owner may elect not
to have income taxes withheld or to have income taxes withheld at a different
rate by filing a completed election form with us. Election forms will be
provided at the time distributions are requested.
E. GENERAL PROVISIONS AFFECTING QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to Appendix I for information relative to the types of plans
for which it may be used and the general explanation of the tax features of such
plans.
F. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal income
tax consequences to annuity purchasers that are U.S. citizens or residents.
Purchasers that are not U.S. citizens or residents will generally be subject to
U.S. federal income tax and withholding on annuity distributions at a 30% rate,
unless a lower treaty rate applies. In addition, purchasers may be subject to
state premium tax, other state and/or municipal taxes, and taxes that may be
imposed by the purchaser's country of citizenship or residence. Prospective
purchasers are advised to consult with a qualified tax adviser regarding U.S.,
state, and foreign taxation with respect to an annuity purchase.
G. GENERATION-SKIPPING TRANSFERS
Under certain circumstances, the Internal Revenue Code may impose a
"generation-skipping transfer tax" when all or part of an annuity is transferred
to, or a death benefit is paid to, an individual two or more generations younger
than the owner. Federal tax law may require us to deduct the tax from your
contract, or from any applicable payment, and pay it directly to the Internal
Revenue Service.
MISCELLANEOUS
- --------------------------------------------------------------------------------
HOW CONTRACTS ARE SOLD
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account. HSD
is an affiliate of Hartford. Both HSD and Hartford are ultimately controlled by
The Hartford Financial Services Group, Inc. The principal business address of
HSD is the same as that of Hartford.
The securities will be sold by salesperson of HSD who represent Hartford as
insurance and variable annuity agents and who are registered representatives of
Broker-Dealers who have entered into distribution agreements with HSD.
HSD is registered with the Commission under the Securities Exchange Act of 1934
as a Broker-Dealer and is a member of the National Association of Securities
Dealers, Inc.
<PAGE>
34 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Commissions will be paid by Hartford and will not be more than 7% of premium
payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.
Broker-dealers or financial institutions are compensated according to a schedule
set forth by HSD and any applicable rules or regulations for variable insurance
compensation. Compensation is generally based on premium payments made by
policyholders or contract owners. This compensation is usually paid from the
sales charges described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or contract
owners to purchase, hold or Surrender variable insurance products.
The Contract may be sold directly to certain individuals under certain
circumstances that do not involve payment of any sales compensation to a
registered representative. In such case, Hartford will credit the Contract with
an additional 5.0% of the Premium Payment. This additional percentage of Premium
Payment in no way affects present or future charges, rights, benefits or current
values of other Contract Owners. The following class of individuals are eligible
for this feature: (1) current or retired officers, directors, trustees and
employees (and their families) of the ultimate parent and affiliates of
Hartford; and (2) employees and registered representatives (and their families)
of registered broker-dealers (or their financial institutions) that have a sales
agreement with Hartford and its principal underwriter to sell the Contracts.
LEGAL MATTERS
There are no material legal proceedings pending to which the Separate Account is
a party.
Counsel with respect to federal laws and regulations applicable to the issue and
sale of the Contracts and with respect to Connecticut law is Lynda Godkin,
Senior Vice President, General Counsel and Corporate Secretary, Hartford Life
and Annuity Insurance Company, P.O. Box 2999, Hartford, Connecticut 06104-2999.
EXPERTS
The audited financial statements included in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
Hartford Life and Annuity Insurance Company which states the statutory financial
statements are presented in accordance with statutory accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
and the State of Connecticut Insurance Department, and are not presented in
accordance with generally accepted accounting principles. The principal business
address of Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut
06103.
MORE INFORMATION
You may call your Representative if you have any questions or write or call us
at the address below:
Hartford Life and Annuity Insurance Company
Attn: Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Telephone: 1-800-862-6668 (Contract Owners)
1-800-862-7155 (Registered Representatives)
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 35
- --------------------------------------------------------------------------------
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
SECTION
<S> <C>
- ----------------------------------------------------------------------
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- ----------------------------------------------------------------------
SAFEKEEPING OF ASSETS
- ----------------------------------------------------------------------
INDEPENDENT PUBLIC ACCOUNTANTS
- ----------------------------------------------------------------------
DISTRIBUTION OF CONTRACTS
- ----------------------------------------------------------------------
CALCULATION OF YIELD AND RETURN
- ----------------------------------------------------------------------
PERFORMANCE COMPARISONS
- ----------------------------------------------------------------------
FINANCIAL STATEMENTS
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
36 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED
RETIREMENT PLANS
This summary does not attempt to provide more than general information about the
federal income tax rules associated with use of a Contract by a tax-qualified
retirement plan. Because of the complexity of the federal tax rules, owners,
participants and beneficiaries are encouraged to consult their own tax advisors
as to specific tax consequences.
The federal tax rules applicable to owners of Contracts under tax-qualified
retirement plans vary according to the type of plan as well as the terms and
conditions of the plan itself. Contract owners, plan participants and
beneficiaries are cautioned that the rights and benefits of any person may be
controlled by the terms and conditions of the tax-qualified retirement plan
itself, regardless of the terms and conditions of a Contract. We are not bound
by the terms and conditions of such plans to the extent such terms conflict with
a Contract, unless we specifically consent to be bound.
Some tax-qualified retirement plans are subject to distribution and other
requirements that are not incorporated into our administrative procedures.
Contract owners, participants and beneficiaries are responsible for determining
that contributions, distributions and other transactions comply with applicable
law. Tax penalties may apply to transactions with respect to tax-qualified
retirement plans if applicable federal income tax rules and restrictions are not
carefully observed.
We do not currently offer the Contracts in connection with all of the types of
tax-qualified retirement plans discussed below and may not offer the Contracts
for all types of tax-qualified retirement plans in the future.
1. TAX-QUALIFIED PENSION OR PROFIT-SHARING PLANS -- Eligible employers can
establish certain tax-qualified pension and profit-sharing plans under
section 401 of the Code. Rules under section 401(k) of the Code govern certain
"cash or deferred arrangements" under such plans. Rules under section 408(k)
govern "simplified employee pensions". Tax-qualified pension and profit-sharing
plans are subject to limitations on the amount that may be contributed, the
persons who may be eligible to participate and the time when distributions must
commence. Employers intending to use the Contracts in connection with
tax-qualified pension or profit-sharing plans should seek competent tax and
other legal advice.
2. TAX SHELTERED ANNUITIES UNDER SECTION 403(b) -- Public schools and certain
types of charitable, educational and scientific organizations, as specified in
section 501(c)(3) of the Code, can purchase tax-sheltered annuity contracts for
their employees. Tax-deferred contributions can be made to tax-sheltered annuity
contracts under section 403(b) of the Code, subject to certain limitations.
Generally, such contributions may not exceed the lesser of $10,500 (indexed) or
20% of the employee's "includable compensation" for such employee's most recent
full year of employment, subject to other adjustments. Special provisions under
the Code may allow some employees to elect a different overall limitation.
Tax-sheltered annuity programs under section 403(b) are subject to a PROHIBITION
AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO CONTRIBUTIONS MADE
PURSUANT TO A SALARY REDUCTION AGREEMENT, unless such distribution is made:
- - after the participating employee attains age 59 1/2;
- - upon separation from service;
- - upon death or disability; or
- - in the case of hardship (and in the case of hardship, any income attributable
to such contributions may not be distributed).
Generally, the above restrictions do not apply to distributions attributable to
cash values or other amounts held under a section 403(b) contract as of December
31, 1988.
3. DEFERRED COMPENSATION PLANS UNDER SECTION 457 -- A governmental employer or a
tax-exempt employer other than a governmental unit can establish a Deferred
Compensation Plan under section 457 of the Code. For these purposes, a
"governmental employer" is a State, a political subdivision of a State, or an
agency or an instrumentality of a State or political subdivision of a State.
Employees and independent contractors performing services for a governmental or
tax-exempt employer can elect to have contributions made to a Deferred
Compensation Plan of their employer in accordance with the employer's plan and
section 457 of the Code.
Deferred Compensation Plans that meet the requirements of section 457(b) of the
Code are called "eligible" Deferred Compensation Plans. Section 457(b) limits
the amount of contributions that can be made to an eligible Deferred
Compensation Plan on behalf of a participant. Generally, the limitation on
contributions is 33 1/3% of a participant's includable compensation (typically
25% of gross compensation) or, for 2000, $8,000 (indexed), whichever is less.
The plan may provide for additional "catch-up" contributions during the three
taxable years ending before the year in which the participant attains normal
retirement age.
All of the assets and income of an eligible Deferred Compensation Plan of a
governmental employer must be held in trust for the exclusive benefit of
participants and their beneficiaries. For this purpose, custodial accounts and
certain annuity contracts are treated as trusts. The requirement of a trust does
not apply to amounts under a Deferred Compensation Plan of a tax-exempt
(non-governmental) employer. In addition, the requirement of a trust does not
apply to amounts under a Deferred Compensation Plan of a governmental employer
if the Deferred Compensation Plan is not an eligible plan within the meaning of
section 457(b) of the Code. In the absence of such a trust,
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 37
- --------------------------------------------------------------------------------
amounts under the plan will be subject to the claims of the employer's general
creditors.
In general, distributions from an eligible Deferred Compensation Plan are
prohibited under section 457 of the Code unless made after the participating
employee:
- - attains age 70 1/2,
- - separates from service,
- - dies, or
- - suffers an unforeseeable financial emergency as defined in the Code.
Under present federal tax law, amounts accumulated in a Deferred Compensation
Plan under section 457 of the Code cannot be transferred or rolled over on a
tax-deferred basis except for certain transfers to other Deferred Compensation
Plans under section 457 in limited cases.
4. INDIVIDUAL RETIREMENT ANNUITIES ("IRAS") UNDER SECTION 408
TRADITIONAL IRAS -- Eligible individuals can establish individual retirement
programs under section 408 of the Code through the purchase of an IRA.
Section 408 imposes limits with respect to IRAs, including limits on the amount
that may be contributed to an IRA, the amount of such contributions that may be
deducted from taxable income, the persons who may be eligible to contribute to
an IRA, and the time when distributions commence from an IRA. Distributions from
certain tax-qualified retirement plans may be "rolled-over" to an IRA on a
tax-deferred basis.
SIMPLE IRAS -- Eligible employees may establish SIMPLE IRAs in connection with a
SIMPLE IRA plan of an employer under section 408(p) of the Code. Special
rollover rules apply to SIMPLE IRAs. Amounts can be rolled over from one SIMPLE
IRA to another SIMPLE IRA. However, amounts can be rolled over from a SIMPLE IRA
to a Traditional IRA only after two years have expired since the employee first
commenced participation in the employer's SIMPLE IRA plan. Amounts cannot be
rolled over to a SIMPLE IRA from a qualified plan or a Traditional IRA. Hartford
is a non-designated financial institution for purposes of the SIMPLE IRA rules.
ROTH IRAS -- Eligible individuals may establish Roth IRAs under section 408A of
the Code. Contributions to a Roth IRA are not deductible. Subject to special
limitations, a Traditional IRA may be converted into a Roth IRA or a
distribution from a Traditional IRA may be rolled over to a Roth IRA. However, a
conversion or a rollover from a Traditional IRA to a Roth IRA is not excludable
from gross income. If certain conditions are met, qualified distributions from a
Roth IRA are tax-free.
5. FEDERAL TAX PENALTIES AND WITHHOLDING -- Distributions from tax-qualified
retirement plans are generally taxed as ordinary income under section 72 of the
Code. Under these rules, a portion of each distribution may be excludable from
income. The excludable amount is the portion of the distribution that bears the
same ratio as the after-tax contributions bear to the expected return.
(a) PENALTY TAX ON EARLY DISTRIBUTIONS Section 72(t) of the Code imposes an
additional penalty tax equal to 10% of the taxable portion of a distribution
from certain tax-qualified retirement plans. However, the 10% penalty tax
does not apply to a distributions that is:
- - Made on or after the date on which the employee reaches age 59 1/2;
- - Made to a beneficiary (or to the estate of the employee) on or after the death
of the employee;
- - Attributable to the employee's becoming disabled (as defined in the Code);
- - Part of a series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the employee or the
joint lives (or joint life expectancies) of the employee and his or her
designated beneficiary;
- - Except in the case of an IRA, made to an employee after separation from
service after reaching age 55; or
- - Not greater than the amount allowable as a deduction to the employee for
eligible medical expenses during the taxable year.
IN ADDITION, THE 10% PENALTY TAX DOES NOT APPLY TO A DISTRIBUTION FROM AN IRA
THAT IS:
- - Made after separation from employment to an unemployed IRA owner for health
insurance premiums, if certain conditions are met;
- - Not in excess of the amount of certain qualifying higher education expenses,
as defined by section 72(t)(7) of the Code; or
- - A qualified first-time homebuyer distribution meeting the requirements
specified at section 72(t)(8) of the Code.
If you are a participant in a SIMPLE IRA plan, you should be aware that the 10%
penalty tax is increased to 25% with respect to non-exempt early distributions
made from your SIMPLE IRA during the first two years following the date you
first commenced participation in any SIMPLE IRA plan of your employer.
(b) MINIMUM DISTRIBUTION PENALTY TAX If the amount distributed is less than the
minimum required distribution for the year, the Participant is subject to a
50% penalty tax on the amount that was not properly distributed.
An individual's interest in a tax-qualified retirement plan generally must be
distributed, or begin to be distributed, not later than the Required Beginning
Date. Generally, the Required Beginning Date is April 1 of the calendar year
following the later of:
- - the calendar year in which the individual attains age 70 1/2; or
- - the calendar year in which the individual retires from service with the
employer sponsoring the plan.
<PAGE>
38 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
The Required Beginning Date for an individual who is a five (5) percent owner
(as defined in the Code), or who is the owner of an IRA, is April 1 of the
calendar year following the calendar year in which the individual attains age
70 1/2.
The entire interest of the Participant must be distributed beginning no later
than the Required Beginning Date over:
- - the life of the Participant or the lives of the Participant and the
Participant's designated beneficiary, or
- - over a period not extending beyond the life expectancy of the Participant or
the joint life expectancy of the Participant and the Participant's designated
beneficiary.
Each annual distribution must equal or exceed a "minimum distribution amount"
which is determined by dividing the account balance by the applicable life
expectancy. This account balance is generally based upon the account value as of
the close of business on the last day of the previous calendar year. In
addition, minimum distribution incidental benefit rules may require a larger
annual distribution.
If an individual dies before reaching his or her Required Beginning Date, the
individual's entire interest must generally be distributed within five years of
the individual's death. However, this rule will be deemed satisfied, if
distributions begin before the close of the calendar year following the
individual's death to a designated beneficiary and distribution is over the life
of such designated beneficiary (or over a period not extending beyond the life
expectancy of the beneficiary). If the beneficiary is the individual's surviving
spouse, distributions may be delayed until the individual would have attained
age 70 1/2.
If an individual dies after reaching his or her Required Beginning Date or after
distributions have commenced, the individual's interest must generally be
distributed at least as rapidly as under the method of distribution in effect at
the time of the individual's death.
(c) WITHHOLDING In general, regular wage withholding rules apply to
distributions from IRAs and plans described in section 457 of the Code.
Periodic distributions from other tax-qualified retirement plans that are
made for a specified period of 10 or more years or for the life or life
expectancy of the participant (or the joint lives or life expectancies of
the participant and beneficiary) are generally subject to federal income tax
withholding as if the recipient were married claiming three exemptions. The
recipient of periodic distributions may generally elect not to have
withholding apply or to have income taxes withheld at a different rate by
providing a completed election form.
Mandatory federal income tax withholding at a flat rate of 20% will generally
apply to other distributions from such other tax-qualified retirement plans
unless such distributions are:
- - the non-taxable portion of the distribution;
- - required minimum distributions; or
- - direct transfer distributions.
Direct transfer distributions are direct payments to an IRA or to another
eligible retirement plan under Code section 401(a)(31).
Certain states require withholding of state taxes when federal income tax is
withheld.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 39
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APPENDIX II -- OPTIONAL DEATH BENEFIT -- EXAMPLES
EXAMPLE 1
Assume that you make a Premium Payment of $100,000. On the first Contract
Anniversary assume your Contract Value is $108,000.00. The Interest Accumulation
Value is $105,000 or 5% accumulation on the $100,000 Premium Payment.
<TABLE>
<C> <S>
$100,000 Premium Payment
$ 5,000 Interest of 5%
- --------
$105,000 Interest Accumulation Value
</TABLE>
If you request a partial Surrender of $10,000 the next day, your Interest
Accumulation Value will change. The adjustment for the partial Surrender is
determined by dividing the partial Surrender amount by the Contract Value prior
to the Surrender and multiplying that amount by the Interest Accumulation Value
prior to the Surrender. To determine the new Interest Accumulation Value, that
total is then subtracted from the Interest Accumulation Value prior to the
Surrender.
<TABLE>
<C> <S>
$ 10,000 partial Surrender divided by
$108,000 Contract Value prior to Surrender equals
.09259 multiplied by
$105,000 Interest Accumulation Value for a total of
$ 9,722 to be deducted from the Interest Accumulation Value equals
$ 95,278 the new Interest Accumulation Value
</TABLE>
EXAMPLE 2
Assume that you make a Premium Payment of $100,000. On the first Contract
Anniversary assume your Contract Value is $92,000.00. The Interest Accumulation
Value is $105,000 or 5% accumulation on the $100,000 Premium Payment.
<TABLE>
<C> <S>
$100,000 Premium Payment
$ 5,000 Interest of 5%
- --------
$105,000 Interest Accumulation Value
</TABLE>
If you request a partial Surrender of $10,000 the next day, your Interest
Accumulation Value will change. The adjustment for the partial Surrender is
determined by dividing the partial Surrender amount by the Contract Value prior
to the Surrender and multiplying that amount by the Interest Accumulation Value
prior to the Surrender. To determine the new Interest Accumulation Value, that
total is then subtracted from the Interest Accumulation Value prior to the
Surrender.
<TABLE>
<C> <S>
$ 10,000 partial Surrender divided by
$ 92,000 Contract Value prior to Surrender equals
.10870 multiplied by
$105,000 Interest Accumulation Value for a total of
$ 11,413 to be deducted from the Interest Accumulation Value equals
$ 93,587 the New Interest Accumulation Value
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
This form must be completed for all tax sheltered annuities.
SECTION 403(b)(11) ACKNOWLEDGMENT FORM
The variable annuity Contract which you have recently purchased is subject to
certain restrictions imposed by the Tax Reform Act of 1986. Contributions to the
Contract after December 31, 1988 and any increases in cash value after
December 31, 1988 may not be distributed unless the Contract Owner has:
- - attained age 59 1/2,
- - separated from service,
- - died, or
- - become disabled.
Distributions of post December 31, 1988 contributions (excluding any income
thereon) may also be made if you have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made prior to age 59 1/2
because of financial hardship or separation from service.
Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than your annuity. Please refer to your Plan.
Please complete the following and return to:
Hartford Life and Annuity Insurance Company
Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Name of Contract Owner/Participant: ___________________________________________
Address: ______________________________________________________________________
City or Plan/School District: _________________________________________________
Date: _________________________________________________________________________
Contract No.: _________________________________________________________________
Signature: ____________________________________________________________________
<PAGE>
To obtain a Statement of Additional Information, please complete the form below
and mail to:
Hartford Life and Annuity Insurance Company
Attn: Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Please send a Statement of Additional Information for Hartford Leaders variable
annuity to me at the following address:
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City/State Zip Code
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT SEVEN
HARTFORD LEADERS
This Statement of Additional Information is not a prospectus. The information
contained herein should be read in conjunction with the prospectus.
To obtain a prospectus, send a written request to Hartford Life and Annuity
Insurance Company Attn: Investment Product Services, P.O. Box 5085, Hartford,
Connecticut 06102-5085.
Date of Prospectus: May 1, 2000
Date of Statement of Additional Information: May 1, 2000
333-69419
<PAGE>
-2-
TABLE OF CONTENTS
SECTION PAGE
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY........... 3
SAFEKEEPING OF ASSETS ............................................... 3
INDEPENDENT PUBLIC ACCOUNTANTS ...................................... 3
DISTRIBUTION OF CONTRACTS............................................ 4
CALCULATION OF YIELD AND RETURN...................................... 5
PERFORMANCE COMPARISONS.............................................. 10
FINANCIAL STATEMENTS ................................................
<PAGE>
-3-
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both individual
and group, in all states of the United States, the District of Columbia and
Puerto Rico, except New York. On January 1, 1998, Hartford's name changed from
ITT Hartford Life and Annuity Insurance Company to Hartford Life and Annuity
Insurance Company. We were originally incorporated under the laws of Wisconsin
on January 9, 1956, and subsequently redomiciled to Connecticut. Our offices are
located in Simsbury, Connecticut; however, our mailing address is P.O. Box 2999,
Hartford, CT 06104-2999. We are ultimately controlled by The Hartford Financial
Services Group, Inc., one of the largest financial service providers in the
United States.
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Rating Agency Effective Rating Basis of Rating
Date of Rating
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A.M. Best and Company, Inc. 1/1/99 A+ Financial performance
- -------------------------------------------------------------------------------------------------------
Standard & Poor's 8/1/99 AA Insurer financial strength
- -------------------------------------------------------------------------------------------------------
Duff & Phelps 7/1/99 AA+ Claims paying ability
- -------------------------------------------------------------------------------------------------------
</TABLE>
SAFEKEEPING OF ASSETS
Title to the assets of the Separate Account is held by Hartford. The assets are
kept physically segregated and are held separate and apart from Hartford's
general corporate assets. Records are maintained of all purchases and
redemptions of Fund shares held in each of the Sub-Accounts.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited financial statements included in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
Hartford Life and Annuity Insurance Company which states the statutory financial
statements are presented in accordance with statutory accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
and the State of Connecticut Insurance Department, and are not presented in
accordance with generally accepted accounting principles. The principal business
address of Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut
06103.
<PAGE>
-4-
DISTRIBUTION OF CONTRACTS
HOW CONTRACTS ARE SOLD
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account. HSD
is an affiliate of Hartford. Both HSD and Hartford are ultimately controlled by
The Hartford Financial Services Group, Inc. The principal business address of
HSD is the same as that of Hartford.
The securities will be sold by salespersons of HSD who represent Hartford as
insurance and variable annuity agents and who are registered representatives of
Broker-Dealers who have entered into distribution agreements with HSD.
HSD is registered with the Commission under the Securities Exchange Act of 1934
as a Broker-Dealer and is a member of the National Association of Securities
Dealers, Inc.
Commissions will be paid by Hartford and will not be more than 7% of premium
payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.
Broker-dealers or financial institutions are compensated according to a schedule
set forth by HSD and any applicable rules or regulations for variable insurance
compensation. Compensation is generally based on premium payments made by
policyholders or contract owners. This compensation is usually paid from the
sales charges described in the prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or contract
owners to purchase, hold or Surrender variable insurance products.
Hartford currently pays HSD underwriting commissions for its role as Principal
Underwriter of all variable annuities associated with this Separate Account. For
the past three years, the aggregate dollar amount of underwriting commissions
paid to and retained by HSD in its role as Principal Underwriter has been: 1999:
$16,156,318.29; 1998: $0 and 1997: $0. HSD has retained none of these
commissions.
<PAGE>
-5-
CALCULATION OF YIELD AND RETURN
YIELD OF A MONEY MARKET SUB-ACCOUNT. As summarized in the prospectus under the
heading "Performance Related Information," the yield of a Money Market
Sub-Account for a seven day period (the "base period") will be computed by
determining the "net change in value" (calculated as set forth below) of a
hypothetical account having a balance of one accumulation unit of the
Sub-Account at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from Contract Owner accounts, and dividing the difference
by the value of the account at the beginning of the base period to obtain the
base period return, and then multiplying the base period return by 365/7 with
the resulting yield figure carried to the nearest hundredth of one percent. Net
changes in value of a hypothetical account will include net investment income of
the account (accrued daily dividends as declared by the underlying funds, less
daily expense charges of the account) for the period, but will not include
realized gains or losses or unrealized appreciation or depreciation on the
underlying fund shares.
The effective yield is calculated by compounding the base period return by
adding 1, raising the sum to a power equal to 365/7 and subtracting 1 from the
result, according to the following formula:
Effective Yield = [(Base Period Return + 1)TO THE POWER OF 365/7] - 1
A MONEY MARKET SUB-ACCOUNT'S YIELD AND EFFECTIVE YIELD WILL VARY IN RESPONSE TO
FLUCTUATIONS IN INTEREST RATES AND IN THE EXPENSES OF THE SUB-ACCOUNT. THE
CURRENT YIELD AND EFFECTIVE YIELD REFLECT RECURRING CHARGES ON THE SEPARATE
ACCOUNT LEVEL, INCLUDING THE MAXIMUM ANNUAL MAINTENANCE FEE.
YIELD AND EFFECTIVE YIELD FOR THE SEVEN-DAY PERIOD ENDING DECEMBER 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SUB-ACCOUNT YIELD EFFECTIVE YIELD
- -------------------------------------------------------------------------------
<S> <C> <C>
Hartford Money Market HLS Fund 3.94% 4.02%
- -------------------------------------------------------------------------------
</TABLE>
YIELD OF SUB-ACCOUNTS. As summarized in the prospectus under the heading
"Performance Related Information," yields of Sub-Accounts will be computed by
annualizing a recent month's net investment income, divided by a Fund share's
net asset value on the last trading day of that month. Net changes in the value
of a hypothetical account will assume the change in the underlying mutual fund's
"net asset value per share" for the same period in addition to the daily expense
charge assessed, at the sub-account level for the respective period. The
Sub-Accounts' yields will vary from time to time depending upon market
conditions and, the composition of the underlying funds' portfolios. Yield
should also be considered relative to changes in the
<PAGE>
-6-
value of the Sub-Accounts' shares and to the relative risks associated with the
investment objectives and policies of the underlying Fund.
THE YIELD REFLECTS RECURRING CHARGES ON THE SEPARATE ACCOUNT LEVEL, INCLUDING
THE ANNUAL MAINTENANCE FEE.
Yield calculations of the Sub-Accounts used for illustration purposes reflect
the interest earned by the Sub-Accounts, less applicable asset charges assessed
against a Contract Owner's account over the base period. Yield quotations based
on a 30 day period were computed by dividing the dividends and interest earned
during the period by the maximum offering price per unit on the last day of the
period, according to the following formula:
Example:
Current Yield Formula for the Sub-Account 2[((A-B)/(CD) + 1)TO THE
POWER OF 6 - 1]
Where A = Dividends and interest earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of units outstanding during the
period that were entitled to receive dividends.
D = The maximum offering price per unit on the last day of the
period.
YIELD QUOTATION BASED ON A 30-DAY PERIOD ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SUB-ACCOUNT YIELD
- -------------------------------------------------------------------------------
<S> <C>
American Funds Bond Fund N/A
- -------------------------------------------------------------------------------
MFS High Income Series N/A
- -------------------------------------------------------------------------------
</TABLE>
At any time in the future, yields and total return may be higher or lower than
past yields and there can be no assurance that any historical results will
continue.
The method of calculating yields described above for these Sub-Accounts differs
from the method used by the Sub-Accounts prior to May 1, 1988. The denominator
of the fraction used to calculate yield was previously the average unit value
for the period calculated. That denominator will hereafter be the unit value of
the Sub-Accounts on the last trading day of the period calculated.
CALCULATION OF TOTAL RETURN. As summarized in the prospectus under the heading
"Performance Related Information," total return is a measure of the change in
value of an investment in a Sub-Account over the period covered and assumes that
the Optional
<PAGE>
-7-
Death Benefit has not been elected. The formula for total return used herein
includes three steps: (1) calculating the value of the hypothetical initial
investment of $1,000 as of the end of the period by multiplying the total number
of units owned at the end of the period by the unit value per unit on the last
trading day of the period; (2) assuming redemption at the end of the period and
deducting any applicable contingent deferred sales charge and (3) dividing this
account value for the hypothetical investor by the initial $1,000 investment and
annualizing the result for periods of less than one year. Standardized total
return will be calculated since the inception of the Separate Account for one
year, five years and ten years or some other relevant periods if a Sub-Account
has not been in existence for at least ten years.
The following are the standardized average annual total return quotations for
the Sub-Accounts.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
SEPARATE SINCE INCEPTION OF
SUB-ACCOUNT ACCOUNT 1 YEAR 5 YEAR 10 YEAR SEPARATE
INCEPTION DATE ACCOUNT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
American Funds Asset Allocation 04/01/1999 N/A N/A N/A -6.94%
Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Bond Fund 04/01/1999 N/A N/A N/A -9.13%
- -------------------------------------------------------------------------------------------------------------------
American Funds Global Growth 04/01/1999 N/A N/A N/A 43.79%
Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Global Small 04/01/1999 N/A N/A N/A 61.73%
Capitalization Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Growth Fund 04/01/1999 N/A N/A N/A 32.45%
- -------------------------------------------------------------------------------------------------------------------
American Funds Growth-Income 04/01/1999 N/A N/A N/A -2.64%
Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds International 04/01/1999 N/A N/A N/A 50.90%
Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds New World Fund 04/01/1999 N/A N/A N/A 7.46%
- -------------------------------------------------------------------------------------------------------------------
Franklin Real Estate Fund 04/01/1999 N/A N/A N/A -12.13%
- -------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund 04/01/1999 N/A N/A N/A 82.62%
- -------------------------------------------------------------------------------------------------------------------
Franklin Strategic Income 07/01/1999 N/A N/A N/A -8.11%
Securities Fund (FORMERLY
FRANKLIN STRATEGIC INCOME FUND)
- -------------------------------------------------------------------------------------------------------------------
<PAGE>
-8-
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
SEPARATE SINCE INCEPTION OF
SUB-ACCOUNT ACCOUNT 1 YEAR 5 YEAR 10 YEAR SEPARATE
INCEPTION DATE ACCOUNT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS Fund 04/01/1999 N/A N/A N/A -7.39%
- -------------------------------------------------------------------------------------------------------------------
MFS Capital Opportunities Series 04/01/1999 N/A N/A N/A 29.20%
- -------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series 04/01/1999 N/A N/A N/A 57.45%
- -------------------------------------------------------------------------------------------------------------------
MFS Global Equity Series 05/03/1999 N/A N/A N/A 12.69%
- -------------------------------------------------------------------------------------------------------------------
MFS Growth Series 05/03/1999 N/A N/A N/A 28.71%
- -------------------------------------------------------------------------------------------------------------------
MFS Growth with Income Series 04/01/1999 N/A N/A N/A -5.62%
- -------------------------------------------------------------------------------------------------------------------
MFS High Income Series 04/01/1999 N/A N/A N/A -9.71%
- -------------------------------------------------------------------------------------------------------------------
MFS New Discovery Series 04/01/1999 N/A N/A N/A 62.97%
- -------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 04/01/1999 N/A N/A N/A -7.91%
- -------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund 04/01/1999 N/A N/A N/A -0.62%
- -------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund 04/01/1999 N/A N/A N/A 8.85%
(FORMERLY TEMPLETON ASSET
ALLOCATION FUND)
- -------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets 04/01/1999 N/A N/A N/A 29.13%
Securities Fund (FORMERLY
TEMPLETON DEVELOPING MARKETS
EQUITY FUND)
- -------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities 04/01/1999 N/A N/A N/A 8.69%
Fund (FORMERLY TEMPLETON GLOBAL
GROWTH FUND)
- -------------------------------------------------------------------------------------------------------------------
Templeton International 04/01/1999 N/A N/A N/A 10.25%
Securities Fund (FORMERLY
TEMPLETON INTERNATIONAL FUND)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Performance figures above do not reflect any deductions for Optional Death
Benefit charges. Performance would have been lower had the Optional Death
Benefit been available and been chosen.
In addition to the standardized total return, the Sub-Account may advertise a
non-standardized total return. This figure will usually be calculated since the
inception of the underlying fund for one year, five years, and ten years or
other periods. Non-standardized total return is measured in the same manner as
the standardized
<PAGE>
-9-
total return described above, except that the contingent deferred sales charge
and the Annual Maintenance Fee are not deducted. Therefore, non-standardized
total return for a Sub-Account is higher than standardized total return for a
Sub-Account. The following are the non-standardized annualized total return
quotations for the Sub-Accounts.
NON-STANDARDIZED ANNUALIZED TOTAL RETURN THAT PRE-DATE THE
INCEPTION DATE OF THE SEPARATE ACCOUNT FOR YEAR ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FUND INCEPTION SINCE INCEPTION OF
SUB-ACCOUNT DATE 1 YEAR 5 YEAR 10 YEAR FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
American Funds Asset Allocation 08/01/1989 5.43% 15.08% 10.31% N/A
Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Bond Fund 01/02/1996 1.13% N/A N/A 4.03%
- -------------------------------------------------------------------------------------------------------------------
American Funds Global Growth 04/30/1997 67.31% N/A N/A 36.14%
Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Global Small 04/30/1998 88.71% N/A N/A 47.54%
Capitalization Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Growth Fund 02/08/1984 55.09% 31.07% 19.36% N/A
- -------------------------------------------------------------------------------------------------------------------
American Funds Growth-Income 02/08/1984 9.65% 19.27% 12.74% N/A
Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds International 05/01/1990 73.53% 23.25% N/A 14.84%
Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds New World Fund 06/17/1999 N/A N/A N/A 17.46%
- -------------------------------------------------------------------------------------------------------------------
Franklin Real Estate Fund 01/24/1989 -7.66% 6.47% 7.48% N/A
- -------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund 11/01/1995 93.63% N/A N/A 28.51%
- -------------------------------------------------------------------------------------------------------------------
Franklin Strategic Income 07/01/1999 N/A N/A N/A 1.89%
Securities Fund (FORMERLY
FRANKLIN STRATEGIC INCOME FUND)
- -------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS Fund 06/30/1980 3.44% 3.82% 3.64% N/A
- -------------------------------------------------------------------------------------------------------------------
MFS Capital Opportunities Series 08/14/1996 45.39% N/A N/A 30.40%
- -------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series 07/24/1995 74.26% N/A N/A 34.51%
- -------------------------------------------------------------------------------------------------------------------
MFS Global Equity Series 05/03/1999 N/A N/A N/A 22.69%
- -------------------------------------------------------------------------------------------------------------------
MFS Growth Series 05/03/1999 N/A N/A N/A 38.71%
- -------------------------------------------------------------------------------------------------------------------
<PAGE>
-10-
- -------------------------------------------------------------------------------------------------------------------
FUND INCEPTION SINCE INCEPTION OF
SUB-ACCOUNT DATE 1 YEAR 5 YEAR 10 YEAR FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MFS Growth with Income Series 10/09/1995 5.20% N/A N/A 19.43%
- -------------------------------------------------------------------------------------------------------------------
MFS High Income Series 07/26/1995 4.96% N/A N/A 6.73%
- -------------------------------------------------------------------------------------------------------------------
MFS New Discovery Series 05/01/1998 71.00% N/A N/A 38.94%
- -------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 01/03/1995 1.62% N/A N/A 13.80%
- -------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund 11/01/1996 12.01% N/A N/A 9.31%
- -------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund 08/24/1988 21.93% 15.50% 11.53% N/A
(FORMERLY TEMPLETON ASSET
ALLOCATION FUND)
- -------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets 03/15/1994 52.49% 5.23% N/A 3.49%
Securities Fund (FORMERLY
TEMPLETON DEVELOPING MARKETS
EQUITY FUND)
- -------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities 03/15/1994 19.16% 13.77% N/A 12.15%
Fund (FORMERLY TEMPLETON GLOBAL
GROWTH FUND)
- -------------------------------------------------------------------------------------------------------------------
Templeton International 05/01/1992 21.52% 15.40% N/A 13.64%
Securities Fund (FORMERLY
TEMPLETON INTERNATIONAL FUND)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Performance figures above do not reflect any deductions for Optional Death
Benefit charges. Performance would have been lower had the Optional Death
Benefit been available and been chosen.
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. Each Sub-Account may from time to time include its total
return in advertisements or in information furnished to present or prospective
shareholders. Each Sub-Account may from time to time include its yield and total
return in advertisements or information furnished to present or prospective
shareholders. Each Sub-Account may from time to time include in advertisements
its total return (and yield in the case of certain Sub-Accounts) the ranking of
those performance figures relative to such figures for groups of other annuities
analyzed by Lipper Analytical Services and Morningstar, Inc. as having the same
investment objectives.
The total return and yield may also be used to compare the performance of the
<PAGE>
-11-
Sub-Accounts against certain widely acknowledged outside standards or indices
for stock and bond market performance. The Standard & Poor's Composite Index of
500 Stocks (the "S&P 500") is a market value-weighted and unmanaged index
showing the changes in the aggregate market value of 500 stocks relative to the
base period 1941-43. The S&P 500 is composed almost entirely of common stocks of
companies listed on the New York Stock Exchange, although the common stocks of a
few companies listed on the American Stock Exchange or traded over-the-counter
are included. The 500 companies represented include 400 industrial, 60
transportation and 40 financial services concerns. The S&P 500 represents about
80% of the market value of all issues traded on the New York Stock Exchange.
The NASDAQ-OTC Composite Price Index (The "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of approximately 3,500 stocks relative to the base measure of 100.00 on
February 5, 1971. The NASDAQ Index is composed entirely of common stocks of
companies traded over-the-counter and often through the National Association of
Securities Dealers Automated Quotations ("NASDAQ") system. Only those
over-the-counter stocks having only one market maker or traded on exchanges are
excluded.
The Morgan Stanley Capital International EAFE Index (the "EAFE Index") is an
unmanaged index, which includes over 1,000 companies representing the stock
markets of Europe, Australia, New Zealand, and the Far East. The EAFE Index is
weighted by market capitalization, and therefore, it has a heavy representation
in countries with large stock markets, such as Japan.
The Shearson Lehman Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted issues
are not included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized rating
agency.
<PAGE>
<TABLE>
<S> <C>
HARTFORD LEADERS SOLUTION
SEPARATE ACCOUNT SEVEN
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
P.O. BOX 5085
HARTFORD, CONNECTICUT 06102-5085
TELEPHONE: 1-800-862-6668 (CONTRACT OWNERS)
1-800-862-7155 (REGISTERED REPRESENTATIVES) [LOGO]
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Prospectus describes information you should know before you purchase
Hartford Leaders Solution variable annuity. Please read it carefully.
Hartford Leaders Solution variable annuity is a Contract between you and
Hartford Life and Annuity Insurance Company where you agree to make at least one
payment to us and we agree to make a series of annuity payments to you at a
later date. This annuity is a flexible premium, tax-deferred, variable annuity
offered to both individuals and groups. It is:
x Flexible, because you may add premium payments at any time.
x Tax-deferred, which means you don't pay taxes until you take money out or
until we start to make annuity payments to you.
x Variable, because the value of your annuity will fluctuate with the
performance of the underlying funds.
- --------------------------------------------------------------------------------
At purchase, you allocate your premium payment, which is any purchase payment
less any Premium Taxes, to "Sub-Accounts". These are subdivisions of our
Separate Account, an account that keeps your annuity assets separate from our
company assets. The Sub-Accounts then purchase shares of mutual funds set up
exclusively for variable annuity or variable life insurance products. These are
not the same mutual funds that you buy through your stockbroker or through a
retail mutual fund. They may have similar investment strategies and the same
portfolio managers as retail mutual funds. This annuity offers you funds with
investment strategies ranging from conservative to aggressive and you may pick
those funds that meet your investment goals and risk tolerance. The Sub-Accounts
and the funds are listed below:
- - MERRILL LYNCH GLOBAL GROWTH FOCUS FUND SUB-ACCOUNT which purchases Class A
shares of Merrill Lynch Global Growth Focus Fund of Merrill Lynch Variable
Series Funds, Inc.
- - MERCURY V.I. U.S. LARGE CAP FUND SUB-ACCOUNT which purchases Class A shares of
Mercury V.I. U.S. Large Cap Fund of Mercury Asset Management V.I. Funds, Inc.
- - AMERICAN FUNDS ASSET ALLOCATION FUND SUB-ACCOUNT which purchases Class 2
shares of the Asset Allocation Fund of American Funds Insurance Series (also
known as American Variable Insurance Series) ("American Funds Asset Allocation
Fund")
- - AMERICAN FUNDS BOND FUND SUB-ACCOUNT which purchases Class 2 shares of the
Bond Fund of American Funds Insurance Series ("American Funds Bond Fund")
- - AMERICAN FUNDS GLOBAL GROWTH FUND SUB-ACCOUNT which purchases Class 2 shares
of the Global Growth Fund of American Funds Insurance Series ("American Funds
Global Growth Fund")
- - AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION FUND SUB-ACCOUNT which purchases
Class 2 shares of the Global Small Capitalization Fund of American Funds
Insurance Series ("American Funds Global Small Capitalization Fund")
- - AMERICAN FUNDS GROWTH FUND SUB-ACCOUNT which purchases Class 2 shares of the
Growth Fund of American Funds Insurance Series ("American Funds Growth Fund")
- - AMERICAN FUNDS GROWTH-INCOME FUND SUB-ACCOUNT which purchases Class 2 shares
of the Growth-Income Fund of American Funds Insurance Series ("American Funds
Growth-Income Fund")
- - AMERICAN FUNDS INTERNATIONAL FUND SUB-ACCOUNT which purchases Class 2 shares
of the International Fund of American Funds Insurance Series ("American Funds
International Fund")
- - AMERICAN FUNDS NEW WORLD FUND SUB-ACCOUNT which purchases Class 2 shares of
the New World Fund of American Funds Insurance Series ("American Funds New
World Fund")
- - FRANKLIN REAL ESTATE FUND SUB-ACCOUNT which purchases Class 2 shares of the
Franklin Real Estate Fund of the Franklin Templeton Variable Insurance
Products Trust ("Franklin Real Estate Fund")
- - FRANKLIN SMALL CAP FUND SUB-ACCOUNT which purchases Class 2 shares of the
Small Cap Fund of the Franklin Templeton Variable Insurance Products Trust
("Franklin Small Cap Fund")
- - FRANKLIN STRATEGIC INCOME SECURITIES FUND SUB-ACCOUNT (FORMERLY FRANKLIN
STRATEGIC INCOME INVESTMENTS FUND SUB-ACCOUNT) which purchases Class 1 shares
of the Franklin Strategic Income Securities Fund (formerly Franklin Strategic
Income Investments Fund) of the Franklin Templeton Variable Insurance Products
Trust
<PAGE>
- - HARTFORD MONEY MARKET HLS FUND SUB-ACCOUNT which purchases Class IA shares of
the Hartford Money Market HLS Fund
- - MFS CAPITAL OPPORTUNITIES SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- Capital Opportunities Series of the
MFS-Registered Trademark- Variable Insurance Trust-SM-
- - MFS EMERGING GROWTH SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- Emerging Growth Series of the
MFS-Registered Trademark- Variable Insurance Trust-SM-
- - MFS GLOBAL EQUITY SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- Global Equity Series of the
MFS-Registered Trademark- Variable Insurance Trust-SM-
- - MFS GROWTH SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- Growth Series of the MFS-Registered Trademark-
Variable Insurance Trust-SM-
- - MFS GROWTH WITH INCOME SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- Growth with Income Series of the
MFS-Registered Trademark- Variable Insurance Trust-SM-
- - MFS HIGH INCOME SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- High Income Series of the MFS-Registered Trademark-
Variable Insurance Trust-SM-
- - MFS NEW DISCOVERY SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- New Discovery Series of the
MFS-Registered Trademark- Variable Insurance Trust-SM-
- - MFS TOTAL RETURN SERIES SUB-ACCOUNT which purchases shares of the
MFS-Registered Trademark- Total Return Series of the MFS-Registered Trademark-
Variable Insurance Trust-SM-
- - MUTUAL SHARES SECURITIES FUND SUB-ACCOUNT which purchases Class 2 shares of
Mutual Shares Securities Fund of the Franklin Templeton Variable Insurance
Products Trust
- - TEMPLETON ASSET STRATEGY FUND SUB-ACCOUNT (FORMERLY TEMPLETON ASSET ALLOCATION
FUND SUB-ACCOUNT) which purchases Class 2 shares of the Templeton Asset
Strategy Fund (formerly Templeton Asset Allocation Fund) of the Franklin
Templeton Variable Insurance Products Trust
- - TEMPLETON DEVELOPING MARKETS SECURITIES FUND SUB-ACCOUNT (FORMERLY TEMPLETON
DEVELOPING MARKETS EQUITY FUND SUB-ACCOUNT) which purchases Class 1 shares of
the Templeton Developing Markets Securities Fund (formerly Templeton
Developing Markets Equity Fund) of the Franklin Templeton Variable Insurance
Products Trust
- - TEMPLETON GROWTH SECURITIES FUND SUB-ACCOUNT (FORMERLY TEMPLETON GLOBAL GROWTH
FUND SUB-ACCOUNT) which purchases Class 2 shares of the Templeton Growth
Securities Fund (formerly Templeton Global Growth Fund) of the Franklin
Templeton Variable Insurance Products Trust
- - TEMPLETON INTERNATIONAL SECURITIES FUND SUB-ACCOUNT (FORMERLY TEMPLETON
INTERNATIONAL FUND SUB-ACCOUNT) which purchases Class 2 shares of the
Templeton International Securities Fund (formerly Templeton International
Fund) of the Franklin Templeton Variable Insurance Products Trust
You may also allocate some or all of your premium payment to one of the "Fixed
Accumulation Features", which pays an interest rate guaranteed for a certain
time period from the time the payment is made. Premium payments put in a Fixed
Accumulation Feature are not segregated from our company assets like the assets
of the Separate Account.
If you decide to buy this annuity, you should keep this Prospectus for your
records. You can also call us at 1-800-862-6668 to get a Statement of Additional
Information, free of charge. The Statement of Additional Information contains
more information about this annuity and, like this Prospectus, is filed with the
Securities and Exchange Commission. We have included the Table of Contents for
the Statement of Additional Information at the end of this Prospectus.
Although we file the Prospectus and the Statement of Additional Information with
the Securities and Exchange Commission, the Commission doesn't approve or
disapprove these securities or determine if the information is truthful or
complete. Anyone who represents that the Securities and Exchange Commission does
these things may be guilty of a criminal offense.
This Prospectus and the Statement of Additional Information can also be obtained
from the Securities and Exchange Commission's website (HTTP://WWW.SEC.GOV).
This annuity IS NOT:
- A bank deposit or obligation
- Federally insured
- Endorsed by any bank or governmental agency
This annuity may not be available for sale in all states.
- --------------------------------------------------------------------------------
PROSPECTUS DATED: MAY 1, 2000
STATEMENT OF ADDITIONAL INFORMATION DATED: MAY 1, 2000
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
- ----------------------------------------------------------------------
GLOSSARY OF SPECIAL TERMS 4
- ----------------------------------------------------------------------
FEE TABLE 5
- ----------------------------------------------------------------------
ACCUMULATION UNIT VALUES 11
- ----------------------------------------------------------------------
SUMMARY 14
- ----------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 16
- ----------------------------------------------------------------------
THE SEPARATE ACCOUNT 16
- ----------------------------------------------------------------------
THE FUNDS 16
- ----------------------------------------------------------------------
PERFORMANCE RELATED INFORMATION 19
- ----------------------------------------------------------------------
THE FIXED ACCUMULATION FEATURES 19
- ----------------------------------------------------------------------
THE CONTRACT 20
- ----------------------------------------------------------------------
Contract Value -- Before the Annuity Commencement Date 21
- ----------------------------------------------------------------------
Contract Value Transfers Before and After the Annuity
Commencement Date 22
- ----------------------------------------------------------------------
Surrenders 22
- ----------------------------------------------------------------------
Contract Charges 23
- ----------------------------------------------------------------------
Death Benefits 25
- ----------------------------------------------------------------------
SETTLEMENT PROVISIONS 27
- ----------------------------------------------------------------------
Annuity Payments 28
- ----------------------------------------------------------------------
Other Information 30
- ----------------------------------------------------------------------
FEDERAL TAX CONSIDERATIONS 30
- ----------------------------------------------------------------------
A. General 30
- ----------------------------------------------------------------------
B. Taxation of Hartford and the Separate Account 30
- ----------------------------------------------------------------------
C. Taxation of Annuities -- General Provisions Affecting
Purchasers Other Than Qualified Retirement Plans 30
- ----------------------------------------------------------------------
D. Federal Income Tax Withholding 33
- ----------------------------------------------------------------------
E. General Provisions Affecting Qualified Retirement Plans 33
- ----------------------------------------------------------------------
F. Annuity Purchases By Nonresident Aliens and Foreign
Corporations 33
- ----------------------------------------------------------------------
G. Generation-Skipping Transfers 33
- ----------------------------------------------------------------------
MISCELLANEOUS 34
- ----------------------------------------------------------------------
How Contracts Are Sold 34
- ----------------------------------------------------------------------
Legal Matters 34
- ----------------------------------------------------------------------
Experts 34
- ----------------------------------------------------------------------
More Information 34
- ----------------------------------------------------------------------
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION 35
- ----------------------------------------------------------------------
APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED RETIREMENT
PLANS 36
- ----------------------------------------------------------------------
APPENDIX II -- OPTIONAL DEATH BENEFIT -- EXAMPLES 39
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
GLOSSARY OF SPECIAL TERMS
ACCOUNT: Any of the Sub-Accounts or Fixed Accumulation Features.
ACCUMULATION UNIT: A unit of measure we use to calculate values before we begin
to make annuity payments to you.
ADMINISTRATIVE OFFICE: Located at 200 Hopmeadow Street, Simsbury, Connecticut
06089. The mailing address is: Investment Product Services, P.O. Box 5085,
Hartford, Connecticut 06102-5085.
ANNIVERSARY VALUE: The value equal to the Contract Value as of a Contract
Anniversary, increased by the dollar amount of any premium payments made since
that anniversary and reduced by the dollar amount of any partial Surrenders
since that anniversary.
ANNUAL MAINTENANCE FEE: An annual $30 charge for annuities having a value of
less than $50,000 on the most recent Contract Anniversary or when the annuity is
Surrendered in full. The charge is deducted proportionately from the funds in
use at the time.
ANNUITANT: The person on whose life the Contract is based. The Annuitant may not
be changed.
ANNUITY: A Contract issued by us that provides, in exchange for premium
payments, a series of annuity payments.
ANNUITY CALCULATION DATE: The date we calculate your first annuity payment.
ANNUITY COMMENCEMENT DATE: The date we start to make annuity payments to you.
ANNUITY UNIT: A unit of measure we use to calculate the value of the annuity
payments we make to you.
ASSUMED INVESTMENT RETURN ("AIR"): The investment return, either 3%, 5% or 6%,
which we base your variable dollar amount payments on. You select the AIR before
we start to make annuity payments.
BENEFICIARY: The person or persons you designate to receive payment of the death
benefit upon the death of the Contract Owner.
CODE: The Internal Revenue Code of 1986, as amended.
COMMUTED VALUE: The present value of any remaining guaranteed Annuity Payouts.
This amount is calculated using the Assumed Investment Return for variable
dollar amount Annuity Payouts or the underlying rate of return for fixed dollar
amount Annuity Payouts.
CONTINGENT ANNUITANT: The person you may designate to become the Annuitant if
the original Annuitant dies before we begin making annuity payments.
CONTRACT: The contract is the individual Annuity contract and any endorsements
or riders. If you have a group annuity, you will receive a certificate rather
than a contract.
CONTRACT ANNIVERSARY: The annual anniversary of the date we issued your annuity.
If your contract anniversary falls on a day that is not a Valuation Day, then
the next Valuation Day will be your Contract Anniversary for that year.
CONTRACT OWNER(S) OR YOU: The owner(s) or holder(s) of this Annuity.
CONTRACT VALUE: The total value of your Annuity that we get by adding up the
value of each of your Sub-Accounts and Fixed Accumulation Features on any
Valuation Day.
CONTRACT YEAR: The 12 months following the date you purchased your annuity and
from any Contract Anniversary.
DOLLAR COST AVERAGING ("DCA"): Systematic transfers from one Account to another.
DCA PROGRAM FIXED ACCUMULATION FEATURES: Fixed Accumulation Features we
establish to use for dollar cost averaging programs. These are part of our
General Account.
DEATH BENEFIT: The amount we pay when the Contract Owner or the Annuitant dies.
DUE PROOF OF DEATH: A certified copy of a death certificate, an order of a court
of competent jurisdiction, or any other proof acceptable to us.
FIXED ACCUMULATION FEATURE: This is an account that is part of our General
Account. You may allocate all or a portion of your premium payments or transfer
of Contract Value to this account. In your contract this is defined as "The
Fixed Account."
GENERAL ACCOUNT: Our General Account that includes our company assets and your
annuity assets allocated to any of the Fixed Accumulation Features or DCA
Program Fixed Accumulation Features.
HARTFORD OR WE: Hartford Life and Annuity Insurance Company.
MAXIMUM ANNIVERSARY VALUE: This is the highest Anniversary Value prior the
deceased's 81st birthday or the date of death, if earlier.
PAYEE: The person or party designated by you to receive annuity payments.
PREMIUM TAX: A tax charged by a state or municipality on premium payments.
SEPARATE ACCOUNT: An account that we establish to separate the assets for your
annuity Sub-Accounts from our company assets.
SURRENDER: A complete or partial withdrawal or distribution from your annuity.
SURRENDER VALUE: What we pay you if you terminate your annuity before we begin
to make annuity payments.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Separate Account is determined as of the close of the New York
Stock Exchange (generally 4:00 p.m. Eastern Time).
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
- --------------------------------------------------------------------------------
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C>
SALES CHARGE IMPOSED ON PURCHASES (as a percentage of
Premium Payments) None
- ---------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE (as a percentage of Premium
Payments) (1)
First Year (2) 7%
- ---------------------------------------------------------------------
Second Year 6%
- ---------------------------------------------------------------------
Third Year 6%
- ---------------------------------------------------------------------
Fourth Year 5%
- ---------------------------------------------------------------------
Fifth Year 4%
- ---------------------------------------------------------------------
Sixth Year 3%
- ---------------------------------------------------------------------
Seventh Year 2%
- ---------------------------------------------------------------------
Eighth Year 0%
- ---------------------------------------------------------------------
ANNUAL MAINTENANCE FEE (3) $30
- ---------------------------------------------------------------------
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average
daily Sub-Account Value)
Mortality and Expense Risk Charge 1.25%
- ---------------------------------------------------------------------
Administrative Fees 0.15%
- ---------------------------------------------------------------------
Total Separate Account Annual Expenses 1.40%
- ---------------------------------------------------------------------
OPTIONAL CHARGES (as a percentage of average daily
Sub-Account Value)
Optional Death Benefit Charge 0.15%
- ---------------------------------------------------------------------
Total Separate Account Annual Expenses with the Optional
Death Benefit Charge 1.55%
- ---------------------------------------------------------------------
</TABLE>
(1) Each Premium Payment has its own Contingent Deferred Sales Charge schedule.
See "Charges and Fees -- The Contingent Deferred Sales Charge." The
Contingent Deferred Sales Charge is not assessed on partial Surrenders which
do not exceed the Annual Withdrawal Amount.
(2) Length of time from each Premium Payment.
(3) An annual $30 charge deducted on a Contract Anniversary or upon Surrender if
the Contract Value at either of those times is less than $50,000. It is
deducted proportionately from the Accounts in which you are invested at the
time of the charge.
The purpose of the Fee Table and Examples is to assist you in understanding
various costs and expenses that you will pay directly or indirectly. The Fee
Table and Examples reflect expenses of the Separate Account and underlying
Funds. We will deduct any Premium Taxes that apply.
The Examples should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown. The Annual
Maintenance Fee has been reflected in the Examples by a method intended to show
the "average" impact of the Annual Maintenance Fee on an investment in the
Separate Account. We do this by approximating an "average" 0.06% annual charge.
<PAGE>
6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
as of the Fund's Year End
(as a percentage of net assets)
<TABLE>
<CAPTION>
TOTAL FUND
OPERATING
12B-1 DISTRIBUTION OTHER EXPENSES
MANAGEMENT FEES AND/OR SERVICING EXPENSES (INCLUDING ANY
(INCLUDING ANY FEES (INCLUDING (INCLUDING ANY WAIVERS AND ANY
WAIVERS) ANY WAIVERS) REIMBURSEMENTS) REIMBURSEMENTS)
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Global Growth Focus Fund 0.75% N/A 0.12% 0.87%
- --------------------------------------------------------------------------------------------------------------------------
Mercury V.I. U.S. Large Cap Fund 0.65% N/A 2.18% 2.83%
- --------------------------------------------------------------------------------------------------------------------------
American Funds Asset Allocation Fund 0.43% 0.25% 0.01% 0.69%
- --------------------------------------------------------------------------------------------------------------------------
American Funds Bond Fund 0.51% 0.25% 0.02% 0.78%
- --------------------------------------------------------------------------------------------------------------------------
American Funds Global Growth Fund 0.68% 0.25% 0.03% 0.96%
- --------------------------------------------------------------------------------------------------------------------------
American Funds Global Small Capitalization Fund 0.79% 0.25% 0.03% 1.07%
- --------------------------------------------------------------------------------------------------------------------------
American Funds Growth Fund 0.38% 0.25% 0.01% 0.64%
- --------------------------------------------------------------------------------------------------------------------------
American Funds Growth-Income Fund 0.34% 0.25% 0.01% 0.60%
- --------------------------------------------------------------------------------------------------------------------------
American Funds International Fund 0.55% 0.25% 0.05% 0.85%
- --------------------------------------------------------------------------------------------------------------------------
American Funds New World Fund (1) 0.89% 0.25% 0.06% 1.20%
- --------------------------------------------------------------------------------------------------------------------------
Franklin Real Estate Fund -- Class 2 (2)(3) 0.56% 0.25% 0.02% 0.83%
- --------------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund -- Class 2 (2)(4) 0.55% 0.25% 0.27% 1.07%
- --------------------------------------------------------------------------------------------------------------------------
Franklin Strategic Income Securities Fund
(formerly Franklin Strategic Income
Investments Fund) (5) 0.43% N/A 0.32% 0.75%
- --------------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS Fund 0.45% N/A 0.02% 0.47%
- --------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Capital Opportunities
Series (6)(7) 0.75% N/A 0.16% 0.91%
- --------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Emerging Growth
Series (6) 0.75% N/A 0.09% 0.84%
- --------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Global Equity
Series (6)(7) 1.00% N/A 0.21% 1.21%
- --------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth Series (6)(7) 0.75% N/A 0.16% 0.91%
- --------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth with Income
Series (6) 0.75% N/A 0.13% 0.88%
- --------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- High Income
Series (6)(7) 0.75% N/A 0.16% 0.91%
- --------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- New Discovery
Series (6)(7) 0.90% N/A 0.17% 1.07%
- --------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Total Return
Series (6) 0.75% N/A 0.15% 0.90%
- --------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2 (2)(8) 0.60% 0.25% 0.19% 1.04%
- --------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund (formerly
Templeton Asset Allocation Fund) --
Class 2 (2)(9) 0.60% 0.25% 0.18% 1.03%
- --------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund
(formerly Templeton Developing Markets Equity
Fund) -- Class 1 (10) 1.25% N/A 0.31% 1.56%
- --------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund (formerly
Templeton Global Growth Fund) --
Class 2 (2)(11) 0.83% 0.25% 0.05% 1.13%
- --------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund
(formerly Templeton International Fund) --
Class 2 (2)(12) 0.69% 0.25% 0.19% 1.13%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) These expenses are annualized. The Fund began operations on June 17, 1999.
(2) The Fund's Class 2 distribution plan or "Rule 12b-1 Plan" is described in
the Fund's prospectus. While the maximum amount payable under the Fund's
Class 2 Rule 12b-1 Plan is 0.35% per year of the Fund's average daily net
assets, the Board of Trustees of Franklin Templeton Variable Insurance
Products Trust has set the current rate at 0.25% per year through at least
April 30, 2001.
(3) The fund administration fee is paid indirectly through the management fees.
(4) On 2/8/00, a merger and reorganization was approved that combined the assets
of the Franklin Small Cap Fund with a similar fund of the Templeton Variable
Products Series Fund, effective 5/1/00. On 2/8/00, fund shareholders
approved new management fees,
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
- --------------------------------------------------------------------------------
which apply to the combined fund effective 5/1/00. The table shows restated
total expenses based on the new fees and assets of the fund as of 12/31/99,
and not the assets of the combined fund. However, if the table reflected
both the new fees and the combined assets, the fund's expenses after 5/1/00
would be estimated as: Management Fees 0.55%, Distribution and Service Fees
0.25%, Other Expenses 0.27%, and Total Fund Operating Expenses 1.07%.
(5) The management fees shown are based on the fund's maximum contractual
amount. Other expenses are estimated. The manager and administrator have
agreed in advance to waive or limit their respective fees and the manager to
assume as its own expense certain expenses otherwise payable by the fund so
that total annual fund operating expenses do not exceed 0.75% for the
current fiscal year. After December 31, 2001, the manager and administrator
may end this arrangement at any time. Without this reduction Total Fund
Operating Expenses were:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES 12B-1 FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Franklin Strategic Income Securities Fund 0.43% N/A 0.52% 0.95%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(6) Each Series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend disbursing agent. Each series may enter into
other such arrangements and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. After these
reductions, the Total Fund Operating Expenses would be:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES 12B-1 FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Capital Opportunities Series 0.75% N/A 0.15% 0.90%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Emerging Growth Series 0.75% N/A 0.08% 0.83%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Global Equity Series 1.00% N/A 0.15% 1.15%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth Series 0.75% N/A 0.15% 0.90%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth with Income Series 0.75% N/A 0.12% 0.87%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- High Income Series 0.75% N/A 0.15% 0.90%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- New Discovery Series 0.90% N/A 0.15% 1.05%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Total Return Series 0.75% N/A 0.14% 0.89%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(7) MFS has contractually agreed, subject to reimbursement, to bear expenses for
these series such that each such series' "Other Expenses" (after taking into
account the expense offset arrangement described above), do not exceed 0.15%
of the average daily net assets of the series during the current fiscal
year. These contractual fee arrangements will continue until at least
May 1, 2001, unless changed with the consent of the board of trustees which
oversees the series. Without this waiver, "Total Fund Operating Expenses"
would have been:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES 12B-1 FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Capital Opportunities Series 0.75% N/A 0.27% 1.02%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Global Equity Series 1.00% N/A 3.39% 4.39%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth Series 0.75% N/A 0.71% 1.46%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- High Income Series 0.75% N/A 0.22% 0.97%
- -------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- New Discovery Series 0.90% N/A 1.59% 2.49%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(8) On 2/8/00, a merger and reorganization was approved that combined the Mutual
Shares Securities Fund with a similar fund of Templeton Variable Products
Series Fund, effective 5/1/00. The table shows total expenses based on the
fund's assets as of 12/31/99, and not the assets of the combined fund.
However, if the table reflected combined assets, the fund's expenses after
5/1/00 would be estimated as: Management Fees 0.60%, Distribution and
Service Fees 0.25%, Other Expenses 0.19%, and Total Fund Operating Expenses
1.04%.
(9) On 2/8/00, shareholders approved a merger and reorganization that combined
the Templeton Asset Strategy Fund with the Templeton Global Asset Allocation
Fund, effective 5/1/00. The shareholders of that fund had approved new
management fees, which apply to the combined fund effective 5/1/00. The
table shows restated total expenses based on the new fees and the assets of
the fund as of 12/31/99, and not the assets of the combined fund. However,
if the table reflected both the new fees and the combined assets, the fund's
expenses after 5/1/00 would be estimated as: Management Fees 0.60%,
Distribution and Service Fees 0.25%, Other Expenses 0.14%, and Total Fund
Operating Expenses 0.99%.
<PAGE>
8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
(10) On 2/8/00, shareholders approved a merger and reorganization that combined
the Developing Markets Securities Fund with the Templeton Developing Markets
Equity Fund, effective 5/1/00. The shareholders of that fund had approved
new management fees, which apply to the combined fund effective 5/1/00. The
table shows restated total expenses based on the new fees and the assets of
the fund as of 12/31/99, and not the assets of the combined fund. However,
if the table reflected both the new fees and the combined assets, the fund's
expenses after 5/1/00 would be estimated as: Management Fees 1.25%, Other
Expenses 0.29%, and Total Fund Operating Expenses 1.54%.
(11) On 2/8/00, a merger and reorganization was approved that combined the
Templeton Growth Securities Fund with a similar fund of Templeton Variable
Products Series Fund, effective 5/1/00. The table shows total expenses based
on the fund's assets as of 12/31/99, and not the assets of the combined
fund. However, if the table reflected combined assets, the fund's expenses
after 5/1/00 would be estimated as: Management Fees 0.80%, Distribution and
Service Fees 0.25%, Other Expenses 0.05%, and Total Fund Operating Expenses
1.10%.
(12) On 2/8/00, shareholders approved a merger and reorganization that combined
the Templeton International Securities Fund with the Templeton International
Equity Fund, effective 5/1/00. The shareholders of that fund had approved
new management fees, which apply to the combined fund effective 5/1/00. The
table shows restated total expenses based on the new fees and the assets of
the fund as of 12/31/99, and not the assets of the combined fund. However,
if the table reflected both the new fees and the combined assets, the fund's
expenses after 5/1/00 would be estimated as: Management Fees 0.65%,
Distribution and Service Fees 0.25%, Other Expenses 0.20%, and Total Fund
Operating Expenses 1.10%.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
- --------------------------------------------------------------------------------
EXAMPLE
THE FOLLOWING EXAMPLE ASSUMES THE OPTIONAL DEATH BENEFIT IS NOT SELECTED:
<TABLE>
<CAPTION>
If you Surrender your Contract at the If you annuitize your Contract at the
end of the applicable time period you end of the applicable time period you
would pay the following expenses on would pay the following expenses on
a $1,000 investment, assuming a 5% a $1,000 investment, assuming a 5%
annual return on assets: annual return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Merrill Lynch Global Growth
Focus Fund $ 85 $129 $165 $269 $23 $ 73 $125 $268
- --------------------------------------------------------------------------------------------------------------------
Mercury V.I. U.S. Large Cap
Fund $105 $186 $258 $452 $43 $132 $222 $451
- --------------------------------------------------------------------------------------------------------------------
American Funds Asset
Allocation Fund $ 83 $124 $156 $250 $21 $ 67 $116 $249
- --------------------------------------------------------------------------------------------------------------------
American Funds Bond Fund $ 84 $126 $161 $260 $22 $ 70 $120 $259
- --------------------------------------------------------------------------------------------------------------------
American Funds Global Growth
Fund $ 86 $132 $170 $278 $24 $ 76 $130 $277
- --------------------------------------------------------------------------------------------------------------------
American Funds Global Small
Capitalization Fund $ 87 $135 $175 $289 $25 $ 79 $135 $289
- --------------------------------------------------------------------------------------------------------------------
American Funds Growth Fund $ 82 $122 $154 $245 $21 $ 66 $113 $244
- --------------------------------------------------------------------------------------------------------------------
American Funds Growth-Income
Fund $ 82 $121 $152 $241 $21 $ 65 $111 $240
- --------------------------------------------------------------------------------------------------------------------
American Funds International
Fund $ 85 $128 $164 $267 $23 $ 72 $124 $266
- --------------------------------------------------------------------------------------------------------------------
American Funds New World Fund $ 88 $139 $181 $302 $27 $ 83 $142 $302
- --------------------------------------------------------------------------------------------------------------------
Franklin Real Estate Fund $ 84 $128 $163 $265 $23 $ 72 $123 $264
- --------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund $ 87 $135 $175 $289 $25 $ 79 $135 $289
- --------------------------------------------------------------------------------------------------------------------
Franklin Strategic Income
Securities Fund $ 84 $126 $159 $257 $22 $ 69 $119 $256
- --------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS
Fund $ 81 $117 $145 $227 $19 $ 61 $104 $226
- --------------------------------------------------------------------------------------------------------------------
MFS Capital Opportunities
Series $ 85 $130 $167 $273 $24 $ 74 $127 $272
- --------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series $ 84 $128 $164 $266 $23 $ 72 $124 $265
- --------------------------------------------------------------------------------------------------------------------
MFS Global Equity Series $ 88 $139 $182 $303 $27 $ 83 $143 $303
- --------------------------------------------------------------------------------------------------------------------
MFS Growth Series $ 85 $130 $167 $273 $24 $ 74 $127 $272
- --------------------------------------------------------------------------------------------------------------------
MFS Growth with Income Series $ 85 $129 $166 $270 $23 $ 73 $126 $269
- --------------------------------------------------------------------------------------------------------------------
MFS High Income Series $ 85 $130 $167 $273 $24 $ 74 $127 $272
- --------------------------------------------------------------------------------------------------------------------
MFS New Discovery Series $ 87 $135 $175 $289 $25 $ 79 $135 $289
- --------------------------------------------------------------------------------------------------------------------
MFS Total Return Series $ 85 $130 $167 $272 $24 $ 74 $127 $271
- --------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund $ 87 $134 $174 $286 $25 $ 78 $134 $286
- --------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund $ 86 $134 $173 $285 $25 $ 78 $133 $284
- --------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets
Securities Fund $ 92 $149 $199 $337 $30 $ 94 $160 $337
- --------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities
Fund $ 87 $137 $178 $295 $26 $ 81 $138 $295
- --------------------------------------------------------------------------------------------------------------------
Templeton International
Securities Fund $ 87 $137 $178 $295 $26 $ 81 $138 $295
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
If you do not Surrender your
Contract, you would pay the
following expenses on a $1,000
investment, assuming a 5% annual
return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- -----------------------------
Merrill Lynch Global Growth
Focus Fund $24 $ 74 $126 $269
- -----------------------------
Mercury V.I. U.S. Large Cap
Fund $44 $133 $223 $452
- -----------------------------
American Funds Asset
Allocation Fund $22 $ 68 $117 $250
- -----------------------------
American Funds Bond Fund $23 $ 71 $121 $260
- -----------------------------
American Funds Global Growth
Fund $25 $ 76 $130 $278
- -----------------------------
American Funds Global Small
Capitalization Fund $26 $ 80 $136 $289
- -----------------------------
American Funds Growth Fund $22 $ 66 $114 $245
- -----------------------------
American Funds Growth-Income
Fund $21 $ 65 $112 $241
- -----------------------------
American Funds International
Fund $24 $ 73 $125 $267
- -----------------------------
American Funds New World Fund $27 $ 84 $143 $302
- -----------------------------
Franklin Real Estate Fund $23 $ 72 $124 $265
- -----------------------------
Franklin Small Cap Fund $26 $ 80 $136 $289
- -----------------------------
Franklin Strategic Income
Securities Fund $23 $ 70 $120 $257
- -----------------------------
Hartford Money Market HLS
Fund $20 $ 61 $105 $227
- -----------------------------
MFS Capital Opportunities
Series $24 $ 75 $128 $273
- -----------------------------
MFS Emerging Growth Series $24 $ 73 $124 $266
- -----------------------------
MFS Global Equity Series $27 $ 84 $143 $303
- -----------------------------
MFS Growth Series $24 $ 75 $128 $273
- -----------------------------
MFS Growth with Income Series $24 $ 74 $126 $270
- -----------------------------
MFS High Income Series $24 $ 75 $128 $273
- -----------------------------
MFS New Discovery Series $26 $ 80 $136 $289
- -----------------------------
MFS Total Return Series $24 $ 74 $127 $272
- -----------------------------
Mutual Shares Securities Fund $26 $ 79 $135 $286
- -----------------------------
Templeton Asset Strategy Fund $26 $ 78 $134 $285
- -----------------------------
Templeton Developing Markets
Securities Fund $31 $ 95 $161 $337
- -----------------------------
Templeton Growth Securities
Fund $27 $ 82 $139 $295
- -----------------------------
Templeton International
Securities Fund $27 $ 82 $139 $295
- ---------------------------------------------------------------------------------
</TABLE>
<PAGE>
10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
THE FOLLOWING EXAMPLE ASSUMES THE OPTIONAL DEATH BENEFIT IS SELECTED:
<TABLE>
<CAPTION>
If you Surrender your Contract at the If you annuitize your Contract at the
end of the applicable time period you end of the applicable time period you
would pay the following expenses on would pay the following expenses on
a $1,000 investment, assuming a 5% a $1,000 investment, assuming a 5%
annual return on assets: annual return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Merrill Lynch Global Growth
Focus Fund $ 86 $133 $173 $284 $25 $ 78 $133 $283
- --------------------------------------------------------------------------------------------------------------------
Mercury V.I. U.S. Large Cap
Fund $106 $190 $265 $464 $45 $137 $229 $464
- --------------------------------------------------------------------------------------------------------------------
American Funds Asset
Allocation Fund $ 84 $128 $164 $266 $23 $ 72 $124 $265
- --------------------------------------------------------------------------------------------------------------------
American Funds Bond Fund $ 85 $131 $168 $275 $24 $ 75 $128 $274
- --------------------------------------------------------------------------------------------------------------------
American Funds Global Growth
Fund $ 87 $136 $177 $293 $26 $ 80 $137 $293
- --------------------------------------------------------------------------------------------------------------------
American Funds Global Small
Capitalization Fund $ 88 $139 $182 $304 $27 $ 84 $143 $304
- --------------------------------------------------------------------------------------------------------------------
American Funds Growth Fund $ 84 $127 $161 $261 $22 $ 70 $121 $260
- --------------------------------------------------------------------------------------------------------------------
American Funds Growth-Income
Fund $ 84 $126 $159 $257 $22 $ 69 $119 $256
- --------------------------------------------------------------------------------------------------------------------
American Funds International
Fund $ 86 $133 $172 $282 $25 $ 77 $132 $281
- --------------------------------------------------------------------------------------------------------------------
American Funds New World Fund $ 90 $143 $189 $317 $28 $ 88 $150 $316
- --------------------------------------------------------------------------------------------------------------------
Franklin Real Estate Fund $ 86 $132 $171 $280 $24 $ 76 $131 $279
- --------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund $ 88 $139 $182 $304 $27 $ 84 $143 $304
- --------------------------------------------------------------------------------------------------------------------
Franklin Strategic Income
Securities Fund $ 85 $130 $167 $272 $24 $ 74 $127 $271
- --------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS
Fund $ 82 $122 $153 $243 $21 $ 65 $112 $242
- --------------------------------------------------------------------------------------------------------------------
MFS Capital Opportunities
Series $ 87 $135 $175 $288 $25 $ 79 $135 $288
- --------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series $ 86 $133 $171 $281 $24 $ 77 $131 $280
- --------------------------------------------------------------------------------------------------------------------
MFS Global Equity Series $ 90 $143 $189 $318 $28 $ 88 $150 $317
- --------------------------------------------------------------------------------------------------------------------
MFS Growth Series $ 87 $135 $175 $288 $25 $ 79 $135 $288
- --------------------------------------------------------------------------------------------------------------------
MFS Growth with Income Series $ 86 $134 $173 $285 $25 $ 78 $133 $284
- --------------------------------------------------------------------------------------------------------------------
MFS High Income Series $ 87 $135 $175 $288 $25 $ 79 $135 $288
- --------------------------------------------------------------------------------------------------------------------
MFS New Discovery Series $ 88 $139 $182 $304 $27 $ 84 $143 $304
- --------------------------------------------------------------------------------------------------------------------
MFS Total Return Series $ 87 $134 $174 $287 $25 $ 78 $134 $287
- --------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund $ 88 $138 $181 $301 $27 $ 83 $141 $301
- --------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund $ 88 $138 $180 $300 $26 $ 82 $141 $300
- --------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets
Securities Fund $ 93 $154 $206 $352 $32 $ 99 $168 $351
- --------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities
Fund $ 89 $141 $185 $310 $27 $ 85 $146 $309
- --------------------------------------------------------------------------------------------------------------------
Templeton International
Securities Fund $ 89 $141 $185 $310 $27 $ 85 $146 $309
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
If you do not Surrender your
Contract, you would pay the
following expenses on a $1,000
investment, assuming a 5% annual
return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- -----------------------------
Merrill Lynch Global Growth
Focus Fund $25 $ 78 $134 $284
- -----------------------------
Mercury V.I. U.S. Large Cap
Fund $46 $137 $230 $464
- -----------------------------
American Funds Asset
Allocation Fund $24 $ 73 $124 $266
- -----------------------------
American Funds Bond Fund $24 $ 75 $129 $275
- -----------------------------
American Funds Global Growth
Fund $26 $ 81 $138 $293
- -----------------------------
American Funds Global Small
Capitalization Fund $27 $ 84 $144 $304
- -----------------------------
American Funds Growth Fund $23 $ 71 $122 $261
- -----------------------------
American Funds Growth-Income
Fund $23 $ 70 $120 $257
- -----------------------------
American Funds International
Fund $25 $ 78 $132 $282
- -----------------------------
American Funds New World Fund $29 $ 88 $150 $317
- -----------------------------
Franklin Real Estate Fund $25 $ 77 $131 $280
- -----------------------------
Franklin Small Cap Fund $27 $ 84 $144 $304
- -----------------------------
Franklin Strategic Income
Securities Fund $24 $ 74 $127 $272
- -----------------------------
Hartford Money Market HLS
Fund $21 $ 66 $113 $243
- -----------------------------
MFS Capital Opportunities
Series $26 $ 79 $136 $288
- -----------------------------
MFS Emerging Growth Series $25 $ 77 $132 $281
- -----------------------------
MFS Global Equity Series $29 $ 89 $151 $318
- -----------------------------
MFS Growth Series $26 $ 79 $136 $288
- -----------------------------
MFS Growth with Income Series $26 $ 78 $134 $285
- -----------------------------
MFS High Income Series $26 $ 79 $136 $288
- -----------------------------
MFS New Discovery Series $27 $ 84 $144 $304
- -----------------------------
MFS Total Return Series $26 $ 79 $135 $287
- -----------------------------
Mutual Shares Securities Fund $27 $ 83 $142 $301
- -----------------------------
Templeton Asset Strategy Fund $27 $ 83 $142 $300
- -----------------------------
Templeton Developing Markets
Securities Fund $32 $ 99 $168 $352
- -----------------------------
Templeton Growth Securities
Fund $28 $ 86 $147 $310
- -----------------------------
Templeton International
Securities Fund $28 $ 86 $147 $310
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
- --------------------------------------------------------------------------------
ACCUMULATION UNIT VALUES
(For an Accumulation Unit outstanding throughout the period)
The following information has been derived from the audited financial statements
of the Separate Account, which have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and should be read in conjunction with those statements which are
included in the Statement of Additional Information, which is incorporated by
reference in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
<S> <C>
- --------------------------------------------------------------------------------
MERRILL LYNCH GLOBAL GROWTH FOCUS FUND (INCEPTION DATE
MAY 11, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $12.489
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) --
- --------------------------------------------------------------------------------
MERCURY V.I. U.S. LARGE CAP FUND (INCEPTION DATE MAY 11,
1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $11.050
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) --
- --------------------------------------------------------------------------------
AMERICAN FUNDS ASSET ALLOCATION SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 9.776
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 876
- --------------------------------------------------------------------------------
AMERICAN FUNDS BOND SUB-ACCOUNT (INCEPTION DATE JULY 1,
1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.106
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 261
- --------------------------------------------------------------------------------
AMERICAN FUNDS GLOBAL GROWTH SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $13.980
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 643
- --------------------------------------------------------------------------------
AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION SUB-ACCOUNT
(INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $13.784
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 406
- --------------------------------------------------------------------------------
AMERICAN FUNDS GROWTH SUB-ACCOUNT (INCEPTION DATE JULY 1,
1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $12.518
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 3,037
- --------------------------------------------------------------------------------
AMERICAN FUNDS GROWTH-INCOME SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 9.591
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 3,468
- --------------------------------------------------------------------------------
AMERICAN FUNDS INTERNATIONAL SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $14.663
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 764
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
<S> <C>
- --------------------------------------------------------------------------------
AMERICAN FUNDS NEW WORLD SUB-ACCOUNT (INCEPTION DATE JULY 1,
1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $11.659
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 318
- --------------------------------------------------------------------------------
FRANKLIN REAL ESTATE FUND SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 8.842
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 36
- --------------------------------------------------------------------------------
FRANKLIN SMALL CAP FUND SUB-ACCOUNT (INCEPTION DATE JULY 1,
1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $16.658
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 127
- --------------------------------------------------------------------------------
FRANKLIN STRATEGIC INCOME SECURITIES FUND SUB-ACCOUNT
(INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.189
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 44
- --------------------------------------------------------------------------------
HARTFORD MONEY MARKET HLS FUND SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $ 1.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 1.018
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 1,637
- --------------------------------------------------------------------------------
MUTUAL SHARES SECURITIES SUB-ACCOUNT (INCEPTION DATE JULY 1,
1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 9.796
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 297
- --------------------------------------------------------------------------------
MFS CAPITAL OPPORTUNITIES SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $12.219
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 316
- --------------------------------------------------------------------------------
MFS EMERGING GROWTH SUB-ACCOUNT (INCEPTION DATE JULY 1,
1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $15.422
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 510
- --------------------------------------------------------------------------------
MFS GLOBAL EQUITY SUB-ACCOUNT (INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $11.600
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 15
- --------------------------------------------------------------------------------
MFS GROWTH SUB-ACCOUNT (INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $12.016
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 604
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
<S> <C>
- --------------------------------------------------------------------------------
MFS GROWTH WITH INCOME SUB-ACCOUNT (INCEPTION DATE JULY 1,
1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 9.963
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 635
- --------------------------------------------------------------------------------
MFS HIGH INCOME SUB-ACCOUNT (INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.053
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 127
- --------------------------------------------------------------------------------
MFS NEW DISCOVERY SUB-ACCOUNT (INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $14.336
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 76
- --------------------------------------------------------------------------------
MFS TOTAL RETURN SUB-ACCOUNT (INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $ 9.700
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 194
- --------------------------------------------------------------------------------
TEMPLETON ASSET STRATEGY FUND SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.869
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 73
- --------------------------------------------------------------------------------
TEMPLETON DEVELOPING MARKETS SECURITIES FUND SUB-ACCOUNT
(INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $11.123
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 56
- --------------------------------------------------------------------------------
TEMPLETON GROWTH SECURITIES FUND SUB-ACCOUNT (INCEPTION DATE
JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.619
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 154
- --------------------------------------------------------------------------------
TEMPLETON INTERNATIONAL SECURITIES FUND SUB-ACCOUNT
(INCEPTION DATE JULY 1, 1999)
Accumulation Unit Value at beginning of period $10.000
- --------------------------------------------------------------------------------
Accumulation Unit Value at end of period $10.960
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Number Accumulation Units outstanding at end of period (in
thousands) 84
- --------------------------------------------------------------------------------
</TABLE>
Accumulation Unit Values do not include the Optional Death Benefit Charge. If
you elect the Optional Death Benefit, Accumulation Unit Values would be lower.
<PAGE>
14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
SUMMARY
HOW DO I PURCHASE THIS ANNUITY?
You must complete our application or order request and submit it to us for
approval with your first premium payment. Your first premium payment must be at
least $1,000 and subsequent premium payments must be at least $500. The minimum
premium payment requirements may differ if you are participating in our
automatic investing ("InvestEase-Registered Trademark-") program.
- For a limited time, usually within ten days after you receive your annuity,
you may cancel your annuity without paying a Contingent Deferred Sales
Charge. You bear the investment risk for your premium payment prior to our
receipt of your request for cancellation.
WHAT TYPE OF SALES CHARGE WILL I PAY?
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
You don't pay a sales charge when you purchase your Annuity. We may charge you a
CDSC when you partially or fully Surrender your Annuity. The CDSC will depend on
the amount you choose to Surrender and the length of time the Premium Payments
you made have been in your Annuity. The percentage used to calculate the CDSC is
equal to:
<TABLE>
<CAPTION>
NUMBER OF YEARS CONTINGENT
FROM PREMIUM DEFERRED
PAYMENT SALES CHARGE
<S> <C>
- ---------------------------------
One Year 7%
- ---------------------------------
Two Years 6%
- ---------------------------------
Three Years 6%
- ---------------------------------
Four Years 5%
- ---------------------------------
Five Years 4%
- ---------------------------------
Six Years 3%
- ---------------------------------
Seven Years 2%
- ---------------------------------
Eight Years 0%
- ---------------------------------
</TABLE>
IS THERE AN ANNUAL MAINTENANCE FEE?
Yes. We deduct this $30 fee each year on your Contract Anniversary or when you
completely Surrender your annuity, if, on either of those dates, the value of
your annuity is less than $50,000.
WHAT CHARGES WILL I PAY ON AN ANNUAL BASIS?
In addition to the Annual Maintenance Fee, you pay three different types of
charges each year. The first type of charge is the fee you pay for insurance.
This charge is:
A mortality and expense risk charge that is subtracted daily and is equal to an
annual charge of 1.25% of your Contract Value invested in the Funds.
The second type of charge is the fee you pay for the Separate Account. This
charge is:
An administrative fee of .15% per year of the Contract Value held in the
Separate Account.
The third type of charge is the fee you pay for the Funds. See the Annual
Operation Expense Table for more complete information and the funds'
prospectuses attached to this Prospectus.
If you elect the Optional Death Benefit, we will deduct an additional charge
daily from your Contract Value which is equal to 0.15% per year of your Contract
Value invested in the Funds.
CAN I TAKE OUT ANY OF MY MONEY?
You can partially or fully Surrender your Contract subject to a Contingent
Deferred Sales Charge (CDSC). You can partially Surrender your Contract without
any CDSC applied to the Surrender under the following conditions:
- - Surrenders which don't exceed 15% of premium payments per Contract Year
(Annual Withdrawal Amount);
- - Surrenders made from premium payments invested more than seven years; 100%
Surrender of earnings after the seventh Contract Year;
- - Surrenders under the nursing home waiver (described as Eligible Confinement in
the Contract); or
- - Surrenders eligible for disability waiver under a group qualified plan.
WILL HARTFORD PAY A DEATH BENEFIT?
Your Contract has a Death Benefit and we offer an Optional Interest Accumulation
Death Benefit ("Optional Death Benefit") that you can elect for an additional
fee. There is a Death Benefit if the Contract Owner, joint owner or Annuitant,
die before we begin to make annuity payments. The Death Benefit will remain
invested in the Sub-Accounts according to your last instructions (unless
otherwise mutually specified by your Beneficiaries) and will be subject to
market fluctuations.
IF YOU DO NOT ELECT THE OPTIONAL DEATH BENEFIT, the Death Benefit, which we will
calculate as of the date we receive Due Proof of Death, will be the greater of:
- - 100% of the total premium payments you have made to us reduced by any
subsequent Surrenders;
- - The Contract Value of your annuity, or
- - Your Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries, of Contract Values, premium payments and partial Surrenders. We
will calculate an Anniversary Value for each Contract Anniversary prior to the
deceased's 81st birthday or date of death. The Anniversary Value is equal to the
Contract Value as of a Contract Anniversary, increased by the dollar amount of
any premium payments made since that anniversary and reduced by the dollar
amount of any partial Surrenders since that anniversary. The Maximum Anniversary
Value is equal to the greatest Anniversary Value attained from this series of
calculations.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
- --------------------------------------------------------------------------------
IF YOU ELECT THE OPTIONAL DEATH BENEFIT, the Death Benefit, which we will
calculate as of the date we receive Due Proof of Death, will be the greater of:
- - 100% of the total premium payments you have made to us reduced by any
subsequent Surrenders;
- - The Contract Value of your annuity;
- - Your Maximum Anniversary Value, which is the highest Anniversary Value before
the deceased's 81st birthday or date of death; or
- - Your Interest Accumulation Value.
The INTEREST ACCUMULATION VALUE is calculated by accumulating interest on your
premium payments at a rate of 5% per year up to the deceased's 81st birthday or
date of death, assuming you have not taken any Surrenders. If you have taken any
Surrenders, the 5% will be accumulated on your premium payments, but there will
be an adjustment for any of the Surrenders. This adjustment will reduce the
Optional Death Benefit proportionally for the Surrenders. The Optional Death
Benefit is limited to a maximum of 200% of premium payments, less proportional
adjustments for any Surrenders. For examples on how the Optional Death Benefit
is calculated see "Appendix II". If you elect the Optional Death Benefit, we
will deduct an additional charge daily from your Contract Value equal to .15% of
the Sub-Account value. The Optional Death Benefit may not be available if the
Contract Owner or Annuitant is age 75 or older. For Contracts issued in the
state of Washington, the Optional Death Benefit is not available.
If you elect the Optional Death Benefit at any time after you purchase your
annuity, the Optional Death Benefit calculation will be different.
SPOUSAL CONTRACT CONTINUATION -- If a Beneficiary is the Contract Owner's
spouse, that portion of the Contract for which the spouse is considered the
Beneficiary will continue with the spouse as Contract Owner, unless the spouse
elects to receive the Death Benefit as a lump sum payment or an annuity payment
option. If the Contract continues with the spouse as Contract Owner, we will
adjust the Contract Value to the amount that we would have paid as the Death
Benefit payment, had the spouse elected to receive the Death Benefit as a lump
sum payment or as an annuity payment option. Spousal Contract Continuation will
only apply one time for each Contract.
WHAT ANNUITY PAYMENT OPTIONS ARE AVAILABLE?
When you purchase your annuity, you may choose one of the following annuity
payment options, or receive a lump sum payment:
LIFE ANNUITY where we make scheduled payments for the Annuitant's life.
- Payments under this option stop upon the death of the Annuitant, even if the
Annuitant dies after one payment.
LIFE ANNUITY WITH CASH REFUND where we make payments during the life of the
Annuitant and when the Annuitant dies, we pay the remaining value to the
Beneficiary. The remaining value is calculated at the time we receive Due Proof
of Death by subtracting the annuity payments already made from the Contract
Value, less any applicable Premium Taxes, applied to this annuity payment
option.
- This option is only available if you select a variable dollar amount payment
with the 5% AIR or fixed dollar amount annuity payments.
LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN where we make payments for the
life of the Annuitant but you are at least guaranteed payments for a time period
you select which is a minimum of 5 years and a maximum of 100 years minus your
annuitant's age.
- If the Annuitant dies prior to the end of the period selected, we will pay
the value of the remaining payments to your Beneficiary, either in a lump
sum or we will continue payments until the end of the period selected.
JOINT AND LAST SURVIVOR ANNUITY where we make payments during the lifetimes of
the Annuitant and another designated individual called the Joint Annuitant. At
the time of electing this annuity payment option, the Contract Owner may elect
reduced payments over the remaining lifetime of the survivor.
- Payments under this option STOP UPON THE DEATH OF THE ANNUITANT AND JOINT
ANNUITANT, even if the Annuitant and Joint Annuitant die after one payment.
JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN where we
make payments during the lifetime of the Annuitant and a Joint Annuitant, and we
guarantee that those payments for a time period you select which is a minimum of
5 years and a maximum 100 years minus the younger Annuitant's age. At the time
of electing this Annuity Option, the Contract Owner may elect reduced payments
over the remaining lifetime of the survivor.
- If the Annuitant and the Joint Annuitant die prior to the end of the period
selected, we will pay the value of the remaining payments to your
Beneficiary, either in a lump sum or we will continue payments until the end
of the period selected.
PAYMENTS FOR A PERIOD CERTAIN where we agree to make payments for a specified
time. The minimum period that you can select is 10 years during the first two
Contract Years and 5 years after the second Contract Anniversary. The maximum
period that you can select is 100 years minus your Annuitant's age.
- If you select this option under a variable dollar amount payment, YOU MAY
SURRENDER YOUR ANNUITY after annuity payments have started and we will give
you the present value of the remaining payments less any applicable
Contingent Deferred Sales Charge.
<PAGE>
16 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- If the Annuitant dies prior to the end of the period selected, we will pay
the value of the remaining payments to your Beneficiary, either in a lump
sum or we will continue payments until the end of the period selected.
You must begin to take payments before the Annuitant's 90th birthday or the end
of the 10th Contract Year, which ever comes later, unless you elect a later date
to begin receiving payments subject to the laws and regulations then in effect
and our approval. If you do not tell us what annuity payment option you want
before that time, we will pay you under the Life Annuity with a 10 year period
certain.
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both individual
and group, in all states of the United States, the District of Columbia and
Puerto Rico, except New York. On January 1, 1998, Hartford's name changed from
ITT Hartford Life and Annuity Insurance Company to Hartford Life and Annuity
Insurance Company. We were originally incorporated under the laws of Wisconsin
on January 9, 1956, and subsequently redomiciled to Connecticut; however, our
mailing address is P.O. Box 2999, Hartford, CT 06104-2999. We are ultimately
controlled by The Hartford Financial Services Group, Inc., one of the largest
financial service providers in the United States.
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
EFFECTIVE DATE
RATING AGENCY OF RATING RATING BASIS OF RATING
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
A.M. Best and
Company, Inc. 1/1/99 A+ Financial performance
- --------------------------------------------------------------------------------
Standard & Poor's 8/1/99 AA Insurer financial strength
- --------------------------------------------------------------------------------
Duff & Phelps 7/1/99 AA+ Claims paying ability
- --------------------------------------------------------------------------------
</TABLE>
THE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
The Separate Account is where we set aside and invest the assets of some of our
annuity contracts, including this Contract. The Separate Account was established
on April 1, 1999 and is registered as a unit investment trust under the
Investment Company Act of 1940. This registration does not involve supervision
by the Commission of the management or the investment practices of the Separate
Account or Hartford. The Separate Account meets the definition of "Separate
Account" under federal securities law. This Separate Account holds only assets
for variable annuity contracts. The Separate Account:
- - Holds assets for the benefit of you and other Contract Owners, and the persons
entitled to the payments described in the Contract.
- - Is not subject to the liabilities arising out of any other business Hartford
may conduct.
- - Is not affected by the rate of return of Hartford's General Account or by the
investment performance of any of Hartford's other Separate Accounts.
- - May be subject to liabilities from a Sub-Account of the Separate Account which
holds assets of other variable annuity contracts offered by the Separate
Account which are not described in this Prospectus.
- - Is credited with income and gains, and takes losses, whether or not realized,
from the assets it holds.
We do not guarantee the investment results of the Separate Account. There is no
assurance that the value of your Annuity will equal the total of the payments
you make to us.
THE FUNDS
- --------------------------------------------------------------------------------
Mercury V.I. U.S. Large Cap Fund, a series of Mercury Asset Management VI Funds,
Inc., a Maryland corporation registered with the Securities and Exchange
Commission as an open-end management investment company, is managed by Mercury
Asset Management International Ltd.
Merrill Lynch Global Growth Focus Fund, a series of Merrill Lynch Variable
Series Funds, Inc., a Maryland corporation registered with the Securities and
Exchange Commission as an open-end management investment company, is advised by
Merrill Lynch Asset Management, L.P., an indirect wholly-owned subsidiary of
Merrill Lynch & Co.
The American Funds Asset Allocation Fund, American Funds Bond Fund, American
Fund Global Growth Fund, American Funds Global Small Capitalization Fund,
American Funds Growth Fund, American Funds Growth-Income Fund, American Funds
International Fund and American Funds New World Fund are all part of American
Funds Insurance Series. American Funds Insurance Series is a fully managed,
diversified, open-end investment company organized as a Massachusetts business
trust in 1983. American Funds Insurance Series offers two classes of fund
shares: Class 1 shares and Class 2 shares. This Annuity invests only in Class 2
shares of American Funds Insurance Series. The investment adviser for each of
the funds of American Funds
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
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Insurance Series is Capital Research and Management Company located at 333 South
Hope Street, Los Angeles, California 90071. Capital Research and Management
Company is a wholly owned subsidiary of The Capital Group Companies, Inc.
Hartford Money Market HLS Fund is sponsored and administered by Hartford Life
Insurance Company. HL Investment Advisers, LLC located at 200 Hopmeadow Street,
Simsbury, Connecticut, serves as the investment adviser to the Fund. Hartford
Investment Management Company serves as sub-investment adviser and provides day
to day investment services. The Fund is a separate Maryland corporation
registered with the Securities and Exchange Commission as an open-end management
investment company. Shares of the Fund have been divided into Class IA and
Class IB. Only Class IA shares are available in this Annuity.
The MFS-Registered Trademark- Capital Opportunities Series,
MFS-Registered Trademark- Emerging Growth Series,
MFS-Registered Trademark-Global Equity Series, MFS-Registered Trademark- Growth
Series, MFS-Registered Trademark- Growth with Income Series,
MFS-Registered Trademark- High Income Series, MFS-Registered Trademark- New
Discovery Series, and MFS-Registered Trademark- Total Return Series are series
of the MFS-Registered Trademark- Variable Insurance Trust-SM-. The MFS Variable
Insurance Trust SM is a professionally managed open-end management investment
company. The MFS Variable Insurance Trust-SM- is registered as a Massachusetts
business trust. MFS Investment Management-Registered Trademark- serves as the
investment adviser to each of the Series of the MFS-Registered Trademark-
Variable Insurance Trust SM. MFS Investment Management-Registered Trademark- is
located at 500 Boylston Street, Boston, Massachusetts 02116.
Franklin Real Estate Fund, Franklin Small Cap Fund, Franklin Strategic Income
Securities Fund, Templeton Asset Strategy Fund, Templeton International
Securities Fund, Mutual Shares Securities Fund, Templeton Developing Markets
Securities Fund, and Templeton Growth Securities Fund are all part of the
Franklin Templeton Variable Insurance Products Trust. The Franklin Templeton
Variable Insurance Products Trust is an open-end managed investment company
which was organized as a Massachusetts business trust on April 26, 1988.
Franklin Templeton Variable Insurance Products Trust currently offers Class 1
and Class 2 shares. Class 2 shares of each Fund are available in this Annuity,
except that Class 1 shares of Franklin Strategic Income Securities Fund and
Templeton Developing Markets Securities Fund are available. The investment
manager of the Franklin Real Estate Fund, Franklin Small Cap Fund, and the
Franklin Strategic Income Securities Fund is Franklin Advisers, Inc. located at
777 Mariners Island Blvd. P.O. Box 7777, San Mateo, California 94403-777. The
investment manager of Mutual Shares Securities Fund is Franklin Mutual Advisers,
LLC, located at 51 John F. Kennedy Parkway, Short Hills, New Jersey, 07078. The
investment manager of Templeton Growth Securities Fund is Templeton Global
Advisers Limited, located at Lyford Cay, Nassau, N.P. Bahamas. The investment
manager of Templeton Developing Markets Securities Fund is Templeton Asset
Management Ltd., located at 7 Temasek Blvd. #38-03, Suntec Tower One, Singapore,
038987.
The investment manager of Templeton Asset Strategy Fund and Templeton
International Securities Fund is Templeton Investment Counsel, Inc. located at
500 East Broward Boulevard, Fort Lauderdale, Florida 33394-3091. Templeton
Investment Counsel, Inc., Franklin Advisers, Inc., Franklin Mutual Advisers,
LLC, Templeton Global Advisers Limited, and Templeton asset Management, Ltd. are
wholly owned by Franklin Resources, Inc. a publicly owned company engaged in the
financial services industry through its subsidiaries.
We do not guarantee the investment results of any of the underlying Funds. Since
each underlying Fund has different investment objectives, each is subject to
different risks. These risks and the Funds' expenses are more fully described in
the accompanying Funds' prospectus and Statement of Additional Information,
which may be ordered from us. The Funds' prospectus should be read in
conjunction with this Prospectus before investing.
The Funds may not be available in all states contact your registered
representative for current information about availability.
The investment goals of each of the Funds are as follows:
MERRILL LYNCH GLOBAL GROWTH FOCUS FUND -- Seeks to achieve long-term growth of
capital by investing in a diversified portfolio of equity securities of issuers
located in various foreign countries and the United States, placing particular
emphasis on companies that have exhibited above-average growth rates in
earnings.
MERCURY V.I. U.S. LARGE CAP FUND -- Seeks to achieve long-term capital growth
through investments primarily in a diversified portfolio of large capitalization
equity securities of companies located in the U.S. and to a lesser extent in
Canada. In selecting securities, the Portfolio emphasizes those securities that
the Portfolio's management believes to be undervalued or have good prospects for
earnings growth.
AMERICAN FUNDS ASSET ALLOCATION FUND -- Seeks high total return, including
income and capital gains, consistent with the preservation of capital over the
long term through a diversified portfolio that can include common stocks and
other equity-type securities, bonds and other intermediate and long-term fixed
income securities and money market instruments in any combination.
AMERICAN FUNDS BOND FUND -- Seeks to provide as high a level of current income
as is consistent with the preservation of capital by investing primarily in
fixed-income securities.
AMERICAN FUNDS GLOBAL GROWTH FUND -- Seeks long-term growth of capital by
investing primarily in common stocks of issuers domiciled around the world.
AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION FUND -- Seeks long-term growth of
capital by investing primarily in equity securities of smaller companies located
around the world that typically have market capitalizations of $50 million to
$1.5 billion.
AMERICAN FUNDS GROWTH FUND -- Seeks long-term growth of capital by investing
primarily in common stocks which demonstrate the potential for appreciation.
<PAGE>
18 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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AMERICAN FUNDS GROWTH-INCOME FUND -- Seeks growth of capital and income by
investing primarily in common stocks or other securities which demonstrate the
potential for appreciation and/or dividends.
AMERICAN FUNDS INTERNATIONAL FUND -- Seeks long-term growth of capital by
investing primarily in common stocks of issuers domiciled outside of the United
States.
AMERICAN FUNDS NEW WORLD FUND -- Seeks long-term growth of capital by investing
primarily in common stocks of issuers with significant exposure to countries
with developing economies and/or markets. The Fund may also invest in debt
securities, including high-yield, high risk bonds.
FRANKLIN REAL ESTATE FUND -- Seeks capital appreciation. Its secondary goal is
to earn current income.
FRANKLIN SMALL CAP FUND -- Seeks long-term capital growth.
FRANKLIN STRATEGIC INCOME SECURITIES FUND (FORMERLY FRANKLIN STRATEGIC INCOME
INVESTMENTS FUND) -- Seeks to earn a high level of current income. Its secondary
goal is long-term capital appreciation.
HARTFORD MONEY MARKET HLS FUND -- Seeks maximum current income consistent with
liquidity and preservation of capital.
MFS-REGISTERED TRADEMARK- CAPITAL OPPORTUNITIES SERIES -- Seeks capital
appreciation.
MFS-REGISTERED TRADEMARK- EMERGING GROWTH SERIES -- Seeks to provide long-term
growth of capital.
MFS-REGISTERED TRADEMARK- GLOBAL EQUITY SERIES -- Seeks capital appreciation.
MFS-REGISTERED TRADEMARK- GROWTH SERIES -- Seeks to provide long-term growth of
capital and future income rather than current income.
MFS-REGISTERED TRADEMARK- GROWTH WITH INCOME SERIES -- Seeks to provide
reasonable current income and long-term growth of capital and income.
MFS-REGISTERED TRADEMARK- HIGH INCOME SERIES -- Seeks high current income by
investing primarily in a professionally managed diversified portfolio of fixed
income securities, some of which may involve equity features.
MFS-REGISTERED TRADEMARK- NEW DISCOVERY SERIES -- Seeks capital appreciation.
MFS-REGISTERED TRADEMARK- TOTAL RETURN SERIES -- Seeks primarily to provide
above-average income (compared to a portfolio invested in equity securities)
consistent with the prudent employment of capital, and secondarily to provide a
reasonable opportunity for growth of capital and income.
MUTUAL SHARES SECURITIES FUND -- Seeks capital appreciation. Its secondary goal
is income.
TEMPLETON ASSET STRATEGY FUND (FORMERLY TEMPLETON ASSET ALLOCATION
FUND) -- Seeks high total return.
TEMPLETON DEVELOPING MARKETS SECURITIES FUND (FORMERLY TEMPLETON DEVELOPING
MARKETS EQUITY FUND) -- Seeks long-term capital appreciation.
TEMPLETON GROWTH SECURITIES FUND (FORMERLY TEMPLETON GLOBAL GROWTH
FUND) -- Seeks long-term capital growth.
TEMPLETON INTERNATIONAL SECURITIES FUND (FORMERLY TEMPLETON INTERNATIONAL
FUND) -- Seeks long-term capital growth
MIXED AND SHARED FUNDING -- Shares of the Funds are sold to our other Separate
Accounts and our insurance company affiliates or other unaffiliated insurance
companies to serve as the underlying investment for both variable annuity
contracts and variable life insurance contracts, a practice known as "mixed and
shared funding." As a result, there is a possibility that a material conflict
may arise between the interests of Contract Owners, and of owners of other
contracts whose contract values are allocated to one or more of these other
Separate Accounts investing in any one of the Funds. In the event of any such
material conflicts, we will consider what action may be appropriate, including
removing the Fund from the Separate Account or replacing the Fund with another
Fund. There are certain risks associated with mixed and shared funding, as
disclosed in the funds' prospectus.
VOTING RIGHTS -- We are the legal owners of all Fund shares held in the Separate
Account and we have the right to vote at the Fund's shareholder meetings. To the
extent required by federal securities laws or regulations, we will:
- - Notify you of any Fund shareholders' meeting if the shares held for your
Contract may be voted.
- - Send proxy materials and a form of instructions that you can use to tell us
how to vote the Fund shares held for your Contract.
- - Arrange for the handling and tallying of proxies received from Contract
Owners.
- - Vote all Fund shares attributable to your Contract according to instructions
received from you, and
- - Vote all Fund shares for which no voting instructions are received in the same
proportion as shares for which instructions have been received.
If any federal securities laws or regulations, or their present interpretation,
change to permit us to vote Fund shares on our own, we may decide to do so. You
may attend any Shareholder Meeting at which shares held for your Contract may be
voted. After we begin to make Annuity Payments to you, the number of votes you
have will decrease.
SUBSTITUTIONS, ADDITIONS, OR DELETIONS OF FUNDS -- We reserve the right, subject
to any applicable law, to make certain changes to the Funds offered under your
Contract. We may, in our sole discretion, establish new Funds. New Funds will be
will be made available to existing Contract Owners as we determined appropriate.
We may also close one or more Funds to additional payments or transfers from
existing Sub-Accounts.
We reserve the right to eliminate the shares of any of the Funds for any reason
and to substitute shares of another registered
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
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investment company for the shares of any Fund already purchased or to be
purchased in the future by the Separate Account. To the extent required by the
1940 Act, substitutions of shares attributable to your interest in a Fund will
not be made until we have the approval of the Commission and we have notified
you of the change.
In the event of any substitution or change, We may, by appropriate endorsement,
make such changes in the Contract as may be necessary or appropriate to reflect
such substitution or change. If we decide that it is in the best interest of the
Contract Owners, the Separate Account may be operated as a management company
under the 1940 Act or any other form permitted by law, may be de-registered
under the 1940 Act in the event such registration is no longer required, or may
be combined with one or more other Separate Accounts.
ADMINISTRATIVE SERVICES -- Hartford has entered into agreements with the
investment advisers or distributors of many of the Funds. Under the terms of
these agreements, Hartford provides administrative services and the Funds pay a
fee to Hartford that is usually based on an annual percentage of the average
daily net assets of the Funds. These agreements may be different for each Fund
or each Fund family.
PERFORMANCE RELATED INFORMATION
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The Separate Account may advertise certain performance-related information
concerning the Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
When a Sub-Account advertises its STANDARDIZED TOTAL RETURN, it will usually be
calculated for one year, five years, and ten years or some other relevant
periods if the Sub-Account has not been in existence for at least ten years.
Total return is measured by comparing the value of an investment in the
Sub-Account at the beginning of the relevant period to the value of the
investment at the end of the period and assumes that the Optional Death Benefit
has not been elected.
The Separate Account may also advertise NON-STANDARD TOTAL RETURNS THAT PRE-DATE
THE INCEPTION DATE OF THE SEPARATE ACCOUNT. These non-standardized total returns
are calculated by assuming that the Sub-Accounts have been in existence for the
same periods as the underlying Funds and by taking deductions for charges equal
to those currently assessed against the Sub-Accounts. These non-standardized
returns must be accompanied by standardized total returns.
If applicable, the Sub-Accounts may advertise YIELD IN ADDITION TO TOTAL RETURN.
The yield will be computed in the following manner: The net investment income
per unit earned during a recent one month period, divided by the unit value on
the last day of the period. This figure reflects the recurring charges at the
Separate Account level including the Annual Maintenance Fee.
The HARTFORD MONEY MARKET HLS FUND SUB-ACCOUNT may advertise yield and effective
yield. The yield of a Sub-Account is based upon the income earned by the
Sub-Account over a seven-day period and then annualized, i.e. the income earned
in the period is assumed to be earned every seven days over a 52-week period and
stated as a percentage of the investment. Effective yield is calculated
similarly but when annualized, the income earned by the investment is assumed to
be reinvested in Sub-Account units and thus compounded in the course of a
52-week period. Yield and effective yield reflect the recurring charges at the
Separate Account level including the Annual Maintenance Fee.
We may provide information on various topics to Contract Owners and prospective
Contract Owners in advertising, sales literature or other materials. These
topics may include the relationship between sectors of the economy and the
economy as a whole and its effect on various securities markets, investment
strategies and techniques (such as value investing, dollar cost averaging and
asset allocation), the advantages and disadvantages of investing in tax-deferred
and taxable instruments, customer profiles and hypothetical purchase scenarios,
financial management and tax and retirement planning, and other investment
alternatives, including comparisons between the Contracts and the
characteristics of and market for such alternatives.
THE FIXED ACCUMULATION FEATURES
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IMPORTANT INFORMATION YOU SHOULD KNOW: THIS PORTION OF THE CONTRACT RELATING TO
THE FIXED ACCUMULATION FEATURES IS NOT REGISTERED UNDER THE SECURITIES ACT OF
1933 ("1933 ACT") AND THE FIXED ACCUMULATION FEATURES ARE NOT REGISTERED AS
INVESTMENT COMPANIES UNDER THE INVESTMENT COMPANY ACT OF 1940 ("1940 ACT"). NONE
OF THE FIXED ACCUMULATION FEATURES OR ANY OF THEIR INTERESTS ARE SUBJECT TO THE
PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT, AND THE STAFF OF THE
SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED THE DISCLOSURE REGARDING THE
FIXED ACCUMULATION FEATURES. THE FOLLOWING DISCLOSURE ABOUT THE FIXED
ACCUMULATION FEATURES MAY BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS
OF THE FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND COMPLETENESS OF
DISCLOSURE.
Payments and Contract Values allocated to a Fixed Accumulation Feature become a
part of our general assets. We invest the assets of the General Account in
accordance with applicable law
<PAGE>
20 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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governing the investments of insurance company General Accounts. We have more
than one Fixed Accumulation Feature. The standard Fixed Accumulation Feature
(the "Fixed Accumulation Feature") and then a number of DCA Program Fixed
Accumulation Features, which we collectively refer to as the "Fixed Accumulation
Features".
Currently, we guarantee that we will credit interest at a rate of not less than
3% per year, compounded annually, to amounts you allocate to the Fixed
Accumulation Feature. We reserve the right, in our sole discretion, to credit
interest at a rate in excess of 3% per year. You assume the risk that interest
credited to the Fixed Accumulation Feature may not exceed the minimum guarantee
of 3% for any given year.
We will periodically publish the Fixed Accumulation Feature interest rates
currently in effect. There is no specific formula for the determination of
interest rates. Some of the factors that we may consider in determining whether
to credit excess interest are: general economic trends, rates of return
currently available and anticipated on our investments, regulatory and tax
requirements and competitive factors. We will account for any deductions,
Surrenders or transfers from the Fixed Accumulation Feature on a "first-in",
"first-out" basis.
From time to time, we may credit increased interest rates to Contract Owners
under certain programs established at our sole discretion.
DOLLAR COST AVERAGING PLUS ("DCA PLUS") PROGRAMS -- These programs will use
designated DCA Program Fixed Accumulation Features. Currently, Contract Owners
may enroll in a special pre-authorized transfer program known as our Dollar Cost
Averaging Plus Program (the "Program"). Under this Program, Contract Owners who
enroll may allocate a minimum of $5,000 of their payment into the appropriate
DCA Program Fixed Accumulation Feature (we may allow a lower minimum premium
payment for qualified plan transfers or rollovers, including IRAs) and
pre-authorize transfers to any of the Sub-Accounts under either the 6-Month
Transfer Program or 12-Month Transfer Program. The 6-Month Transfer Program and
the 12-Month Transfer Program will generally have different credited interest
rates. Under the 6-Month Transfer Program, the interest rate can accrue up to 6
months and all payments and accrued interest must be transferred from the DCA
Program Fixed Accumulation Feature in use to the selected Sub-Accounts in 3 to 6
months. Under the 12-Month Transfer Program, the interest rate can accrue up to
12 months and all payments and accrued interest must be transferred to the
selected Sub-Accounts in 7 to 12 months. This will be accomplished by monthly
transfers for the period selected and a final transfer of the entire amount
remaining in the Program, which will generally be less than the prior monthly
transfer amounts.
The pre-authorized transfers will begin within 15 days after we receive the
initial Program payment and complete enrollment instructions. If We do not
receive complete Program enrollment instructions within 15 days of receipt of
the initial Program payment, the Program will be voided and the entire balance
in the Program will be transferred to the Accounts designated by you. If you do
not designate an Account, we will transfer any remaining amounts to the Fixed
Accumulation Feature and you will receive the Fixed Accumulation Feature's
current effective interest rate. Any subsequent payments we receive within the
Program period selected will be allocated to the Sub-Accounts over the remainder
of that Program transfer period, unless otherwise directed by You.
You may only have one dollar cost averaging program in place at one time, this
means one standard dollar cost averaging plan or one Dollar Cost Averaging Plus
Program.
You may elect to terminate the pre-authorized transfers by calling or writing us
of your intent to cancel enrollment in the Program. Upon cancellation of
enrollment in the Program, you will no longer receive the increased interest
rate and unless we receive instructions to the contrary, the amounts remaining
in the DCA Program Fixed Accumulation Feature may be transferred to the Fixed
Accumulation Feature and accrue the interest rate currently in effect.
Transfers made under a Dollar Cost Averaging Program do not count towards the
twelve transfers each Contract Year that we allow without charge and are not
subject to our rule that prohibits any two transfers from occurring on
Consecutive Valuation Days.
We reserve the right to discontinue, modify or amend the Program or any other
interest rate program established by Hartford. Any change to the Program will
not affect Contract Owners currently enrolled in the Program.
THE CONTRACT
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THE CONTRACT OFFERED -- The Contracts are individual or group tax-deferred
variable annuity contracts. They are designed for retirement planning purposes
and may be purchased by any individual, group or trust, including; (a) any
trustee or custodian for a retirement plan qualified under Sections 401(a), or
403(a) of the Internal Revenue Code (which includes Section 401(k));
(b) annuity purchase plans adopted by public school systems and certain
tax-exempt organizations according to Section 403(b) of the Code;
(c) Individual Retirement Annuities adopted according to Section 408 of the
Code; (d) employee pension plans established for employees by a state, a
political subdivision of a state, or an agency or instrumentality of either a
state or a political subdivision of a state, and (e) certain eligible deferred
compensation plans as defined in Section 457 of the Code ("Qualified
Contracts"). If you are purchasing the Contract for use in an IRA or other
qualified retirement plan, you should consider other features of the Contract
besides tax deferral, since any investment vehicle used within an IRA or other
qualified plan receives tax deferred treatment under the Code.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 21
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PURCHASING A CONTRACT -- A prospective Contract Owner may purchase a Contract by
completing and submitting an application or an order request along with an
initial premium payment to the Administrative Office of the Company. The maximum
age for Annuitant, Owner and Joint Owner on the Contract Issue Date is 85.
Generally, the minimum premium payment is $1,000. The minimum subsequent premium
payment is $500. Certain plans may be allowed to make smaller periodic premium
payments. Unless we give our prior approval, we will not accept a premium
payment in excess of $1,000,000. Each premium payment, which is your premium
payment after the deduction of any applicable Premium Taxes, may be split among
the various Accounts subject to minimum amounts then in effect. For Contracts
issued in Oregon, premium payments will only be accepted prior to the third
Contract Anniversary. For Contracts issued in Massachusetts, subsequent premium
payments will only be accepted until the Annuitant's 63rd birthday or the third
Contract Anniversary, whichever is later. We will send you a confirmation notice
upon receipt and acceptance of your premium payment.
In Oregon, Premium Payments are only allowed in the first three Contract Years.
In Massachusetts, Premium Payments are only allowed in the first three Contract
Years or until the Contract Owner turns 63, whichever is later.
RIGHT TO EXAMINE THE CONTRACT -- If you are not satisfied with your purchase,
you may cancel the Contract by returning it within 10 days (or longer in some
states) after you receive it. You must send a written request for cancellation
along with the Contract. We will, without deduction for any CDSC normally
assessed, pay you an amount equal to the Contract Value. YOU BEAR THE INVESTMENT
RISK DURING THE PERIOD PRIOR TO OUR RECEIPT OF YOUR REQUEST FOR CANCELLATION. We
will refund the premium paid only for Individual Retirement Annuities, if
returned within seven days of receipt, and in those states where required by
law.
CREDITING AND VALUATION -- Your premium payment, which is the balance remaining
after the deduction of any Premium Tax, is credited to your Contract within two
business days of receipt by us at our Administrative Office of a properly
completed application or an order to purchase a Contract and the premium
payment. The payment will be credited to the Accounts according to the
instructions we receive from you.
If your application or other information is incomplete when received, your
payment will be credited to the Accounts within five business days of receipt of
complete information. If the payment is not credited within five business days,
it will be immediately returned to you unless you have been informed of the
delay and tell us not to return it.
Subsequent premium payments are priced on the Valuation Day we receive the
payment in our Administrative Office, provided it is received before the New
York Stock Exchange closes. Unless otherwise specified, We will allocate any
subsequent payments to Accounts according to your most recent instructions.
CONTRACT VALUE -- BEFORE THE ANNUITY
COMMENCEMENT DATE
Your Contract Value reflects interest rate credited any amounts allocated to the
Fixed Accumulation Features and the investment performance of the Sub-Accounts
where you have payments allocated.
SUB-ACCOUNT VALUES -- Your Sub-Account Values on the date we issue your Contract
is the amount of your premium payment allocated to any Sub-Account. After that,
we determine your Sub-Account value by determining the Accumulation Unit value
for each Sub-Account, and then multiplying that value by the number of those
units. Sub-Account Value reflects any variation of the interest income,
dividends, net capital gains or losses, realized or unrealized, and any amounts
transferred into or out of that Sub-Account.
ACCUMULATION UNITS -- When Premium Payments are credited to your Sub-Accounts,
they are converted into accumulation Units by dividing the amount of your
Premium Payments, minus any Premium Taxes, by the Accumulation Unit Value for
that day. The more Premium Payments you put into your Contract, the more
Accumulation Units you will own. You decrease the number of Accumulation Units
you have by requesting Surrenders, transferring money out of an Account,
settling a Death Benefit claim or by annuitizing your Contract.
ACCUMULATION UNIT VALUE -- The Accumulation Unit value for each Sub-Account was
arbitrarily set initially at $1 when the Sub-Account began operations. After
that, the Accumulation Unit value for each Sub-Account will equal (a) the
Accumulation Unit value at the end of the preceding Valuation Day multiplied by
(b) the Net Investment Factor (see the definition below) for the Valuation Day
for which the Accumulation Unit value is being calculated.
You will be advised, at least semiannually, of the number of Accumulation Units
credited to each Sub-Account, the current Accumulation Unit values, and the
total value of your Contract.
THE NET INVESTMENT FACTOR (BEFORE AND AFTER THE ANNUITY COMMENCEMENT
DATE) -- The Net Investment Factor is an index applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. For each
Sub-Account, the Net Investment Factor reflects the investment performance of
the Fund in which that Sub-Account invests and the charges assessed against that
Sub-Account for a Valuation Period. The Net Investment Factor is calculated by
dividing (a) by (b) and subtracting (c) from the result, where:
(a) Is the Net Asset Value of the Fund held in that Sub-Account, determined at
the end of the current Valuation Period (plus the per share amount of any
dividends or capital gains distributions made by that Fund);
(b) Is the Net Asset Value of the Fund held in the Sub-Account, determined at
the beginning of the Valuation Period;
(c) Is a daily factor representing the mortality and expense risk charge and any
optional charges deducted from the Sub-
<PAGE>
22 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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Account, adjusted for the number of days in the Valuation Period.
CONTRACT VALUE TRANSFERS BEFORE AND AFTER THE ANNUITY COMMENCEMENT DATE
You may transfer your Contract Values from one or more Accounts to another
Account free of charge. WE RESERVE THE RIGHT TO LIMIT THE NUMBER OF TRANSFERS TO
12 PER CONTRACT YEAR, WITH NO 2 TRANSFERS OCCURRING ON CONSECUTIVE VALUATION
DAYS. There may be limitations on transfers to and from the Fixed Accumulation
Features that are described in your Contract. Some states may allow us to limit
the dollar amount transferred.
TELEPHONE AND INTERNET TRANSFERS -- In most states, you, or your
attorney-in-fact acting pursuant to a power of attorney, can make transfers:
- - By calling us at (800) 862-6668
- - Electronically, when available, by the Internet through our website at
http://online.hartford.com
Transfer instructions received by telephone on any Valuation Day before the
close of the New York Stock Exchange will be carried out that day. Otherwise,
the instructions will be carried out at the close of the New York Stock Exchange
on the next Valuation Day.
Transfer instructions you send electronically are considered to be received by
Hartford at the time and date stated on the electronic acknowledgement Hartford
returns to you. If the time and date indicated on the acknowledgement is before
the close of the New York Stock Exchange on a Valuation Day, the instructions
will be carried out that day. Otherwise, the instructions will be carried out at
the close of the New York Stock Exchange the next Valuation Day. If you do not
receive an electronic acknowledgement, you should telephone us as soon as
possible.
We will send you a confirmation when we process your transfer. You are
responsible for verifying transfer confirmations and promptly advising us of any
errors within 30 days of receiving the confirmation.
Telephone or Internet transfer requests may currently only be cancelled by
calling us at (800) 862-6668 before the close of the New York Stock Exchange.
Hartford, our agents or our affiliates are NOT responsible for losses resulting
from telephone or electronic requests that we believe are genuine. We will use
reasonable procedures to confirm that instructions received by telephone or
through our website are genuine, including a requirement that contract owners
provide certain identification information, including a personal identification
number. We record all telephone transfer instructions. We reserve the right to
suspend, modify, or terminate telephone or electronic transfer privileges at any
time.
We may permit you to pre-authorize transfers under certain circumstances.
Transfers between the Accounts may be made both before and after the Annuity
Commencement Date. Generally, the minimum allocation to any Sub-Account may not
be less than $500. All percentage (%) allocations must be in whole numbers
(e.g., 1%). No minimum balance is presently required in any Account.
The right to reallocate Contract Values is subject to modification if we
determine, in our sole opinion, that the exercise of that right by one or more
Contract Owners is, or would be, to the disadvantage of other Contract Owners.
Any modification could be applied to transfers to or from some or all of the
Accounts and could include, but not be limited to, the requirement of a minimum
time period between each transfer, not accepting transfer requests of an agent
acting under a power of attorney on behalf of more than one Contract Owner, or
limiting the dollar amount that may be transferred between the Sub-Accounts by
you at any one time. SUCH RESTRICTIONS MAY BE APPLIED IN ANY MANNER REASONABLY
DESIGNED TO PREVENT ANY USE OF THE TRANSFER RIGHT WHICH WE CONSIDER TO BE TO THE
DISADVANTAGE OF OTHER CONTRACT OWNERS.
For Contracts issued in THE STATES OF FLORIDA, MARYLAND OR OREGON, the
reservation of rights set forth in the preceding paragraph is limited to:
(i) requiring up to a maximum of 10 Valuation Days between each transfer;
(ii) limiting the amount to be transferred on any one Valuation Day to no more
than $2 million; and (iii) upon 30 days prior written notice, to only accepting
transfer instructions from you and not from your representative, agent or person
acting under a power of attorney for you.
Currently, we will not accept instructions from agents acting under a power of
attorney of multiple Contract Owners whose Accounts aggregate more than $2
million, unless the agent has entered into a third party transfer services
agreement with us.
Transfers made under a Dollar Cost Averaging Program do not count towards the
twelve transfers each Contract Year that we allow without charge and are not
subject to our rule that prohibits any two transfers from occurring on
Consecutive Valuation Days.
SURRENDERS
Contract Owners should consult their qualified tax adviser regarding the tax
consequences of a Surrender.
- A Surrender made before age 59 1/2 may result in adverse tax consequences,
including a penalty tax of 10% of the taxable portion of the Surrender
Value. (See "Federal Tax Considerations")
PAYMENT OF SURRENDER AMOUNTS -- Payment of any request for a full or partial
Surrender from the Accounts will be made as soon as possible and in any event no
later than seven days after we receive the request at our Administrative Office.
There may be postponement in the payment of Surrender Amounts whenever (a) the
New York Stock Exchange is closed; (b) trading on the New York Stock Exchange is
restricted as determined by the Commission; (c) the Commission permits
postponement and so orders; or (d) the Commission determines
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 23
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that an emergency exists making valuation of the amounts or disposal of
securities not reasonably practicable.
FULL SURRENDERS PRIOR TO THE ANNUITY COMMENCEMENT DATE -- At any time prior to
the Annuity Commencement Date, you have the right to fully Surrender the
Contract. In such event, the Surrender Value of the Contract may be taken in the
form of a lump sum cash payment.
The Surrender Value of the Contract is equal to the Contract Value less any
Premium Taxes, the Annual Maintenance Fee and any Contingent Deferred Sales
Charge, if applicable. The Surrender Value may be more or less than the amount
of the payments made to your Contract.
PARTIAL SURRENDERS PRIOR TO THE ANNUITY COMMENCEMENT DATE -- You may make a
partial Surrender of your Contract Value at any time prior to the Annuity
Commencement Date so long as the amount Surrendered is at least equal to our
minimum amount rules then in effect. Additionally, if the remaining Contract
Value following a Surrender is less than $500, we may terminate the Contract and
pay the Surrender Value. For Contracts issued in Texas, the Contract will not be
terminated when the remaining Contract Value after a Surrender is less than $500
unless there were no payments made during the previous 2 Contract Years.
WHEN REQUESTING A PARTIAL SURRENDER, YOU SHOULD SPECIFY THE ACCOUNT(S) FROM
WHICH THE PARTIAL SURRENDER WILL BE TAKEN; OTHERWISE, THE SURRENDER WILL BE
TAKEN ON A PRO RATA BASIS ACCORDING TO THE VALUE IN EACH ACTIVE ACCOUNT.
We may permit you to pre-authorize partial Surrenders subject to certain
limitations then in effect. We permit partial Surrenders by telephone subject to
dollar amount limitations in effect at the time you request the Surrender. To
request partial Surrenders by telephone, you must have completed and returned to
us a Telephone Redemption Program Enrollment Form authorizing telephone
Surrenders. If there are joint Contract Owners, both must authorize us to accept
telephone instructions and agree that We may accept telephone instructions for
partial Surrenders from either Contract Owner. Partial Surrender requests will
not be honored until we receive all required documents in proper form.
Telephone authorization will remain valid until (a) we receive written notice of
revocation by you, or, in the case of joint Contract Owners, written notice from
either Contract Owner; (b) we discontinue the privilege; or (c) we have reason
to believe that you have entered into a market timing agreement with an
investment adviser and/or broker/dealer.
We may record any telephone calls to verify data concerning transactions and may
adopt other procedures to confirm that telephone instructions are genuine. We
will not be liable for losses or expenses arising out of telephone instructions
reasonably believed to be genuine.
In order to obtain that day's unit values on Surrender, We must receive
telephone Surrender instructions prior to the close of trading on the New York
Stock Exchange (generally 4:00 p.m.).
We may modify, suspend, or terminate telephone transaction privileges at any
time.
SURRENDERS AFTER THE ANNUITY COMMENCEMENT DATE -- You may fully Surrender your
Contract on or after the Annuity Commencement Date if you elect the Payment For
a Period Certain Settlement Option. We pay you the commuted value that is equal
to the present value of the remaining payments we are scheduled to make less any
applicable Contingent Deferred Sales Charge. The commuted value is determined as
of the date we receive your written request for Surrender at our Administrative
Office.
Partial Surrenders are permitted after the Annuity Commencement Date if you
elect a variable dollar amount payment under the Payments for a Period Certain
Settlement Option, but check with your qualified tax adviser because there may
be adverse tax consequences.
IMPORTANT TAX INFORMATION -- There are certain restrictions on section 403(b)
tax-sheltered annuities. As of December 31, 1988, all section 403(b) annuities
have limits on full and partial Surrenders. Contributions to the Contract made
after December 31, 1988 and any increases in cash value after December 31, 1988
may not be distributed unless the Contract Owner/employee has a) attained age
59 1/2, b) separated from service, c) died, d) become disabled or
e) experienced financial hardship (cash value increases may not be distributed
for hardships prior to age 59 1/2). Distributions prior to age 59 1/2 due to
financial hardship or separation from service may still be subject to a penalty
tax of 10%. We will not assume any responsibility for determining whether a
surrender is permissible, with or without tax penalty, in any particular
situation; or in monitoring Surrender requests regarding pre or post January 1,
1989 Contract Values. Any full or partial Surrender described above may affect
the continuing tax-qualified status of some Contracts or plans and may result in
adverse tax consequences to the Contract Owner. The Contract Owner, therefore,
should consult with a tax adviser before undertaking any such Surrender. (See
"Federal Tax Considerations").
CONTRACT CHARGES
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
The CDSC covers some of the expenses relating to the sale and distribution of
the Contract, including commissions paid to registered representatives and the
cost of preparing sales literature and other promotional activities.
We may assess a CDSC when you request a full or partial Surrender. The CDSC is
based on the amount you choose to Surrender and how long your Premium Payments
have been in the Contract. Each Premium Payment has its own CDSC schedule.
Premium Payments are Surrendered in the order in which they were received. The
longer you leave your Premium Payments in the Contract, the lower the CDSC will
be when you Surrender. The amount assessed a CDSC will not exceed your total
Premium Payments.
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24 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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The percentage used to calculate the CDSC is equal to:
<TABLE>
<CAPTION>
NUMBER OF YEARS CONTINGENT
FROM PREMIUM DEFERRED
PAYMENT SALES CHARGE
<S> <C>
- ---------------------------------
1 7%
- ---------------------------------
2 6%
- ---------------------------------
3 6%
- ---------------------------------
4 5%
- ---------------------------------
5 4%
- ---------------------------------
6 3%
- ---------------------------------
7 2%
- ---------------------------------
8 or more 0%
- ---------------------------------
</TABLE>
For example, you made an initial Premium Payment of $10,000 five years ago and
an additional Premium Payment of $20,000 one year ago. If you request a partial
withdrawal of $15,000 and you have not taken your Annual Withdrawal Amount for
the year, we will deduct a CDSC as follows.
- - Hartford will Surrender the Annual Withdrawal Amount which is equal to 15% of
your total Premium Payments or $4,500 without charging a CDSC.
- - We will then Surrender the Premium Payments that have been in the Annuity the
longest.
- - That means we would Surrender the entire $10,000 initial Premium Payment and
deduct a CDSC of 4% on that amount or $400.00.
- - The remaining $500 will come from the additional Premium Payment made one year
ago and we will deduct a CDSC of 7% of the $500 or $35.00.
- - Your CDSC is $435.00
If you have any questions about these charges, please contact your financial
adviser or Hartford.
PAYMENTS NOT SUBJECT TO CDSC
ANNUAL WITHDRAWAL AMOUNT -- During the first seven Contract years, you may make
a partial Surrender of Contract Values of up to 15% of the premium payments each
Contract Year on a non-cumulative basis, as determined on the date of the
requested Surrender, without the application of the CDSC. After the seventh
Contract Year, you may make a partial Surrender each Contract Year of 15% of
premium payments made during the seven years prior to the Surrender and 100% of
the Contract Value less the premium payments made during the seven years prior
to the Surrender. These amounts are different for group unallocated Contracts
and Contracts issued to a Charitable Remainder Trust.
EXTENDED SURRENDER PRIVILEGE -- This privilege allows Annuitants who attain age
70 1/2 with a Contract held under an Individual Retirement Account or 403(b)
plan to Surrender an amount equal to the required minimum distribution for the
stated Contract without incurring any CDSC.
WAIVERS OF CDSC
CONFINEMENT IN A NURSING HOME, HOSPITAL OR LONG TERM CARE FACILITY (DESCRIBED AS
ELIGIBLE CONFINEMENT IN THE CONTRACT) -- We will waive any CDSC applicable to a
partial or full Surrender if the Annuitant, Contract Owner or joint annuitant is
confined, at the recommendation of a physician for medically necessary reasons,
for at least 180 calendar days to: a hospital recognized as a general hospital
by the proper authority of the state in which it is located; or a hospital
recognized as a general hospital by the Joint Commission on the Accreditation of
Hospitals; or a facility certified as a hospital or long-term care facility; or
a nursing home licensed by the state in which it is located and offers the
services of a registered nurse 24 hours a day.
The Annuitant, Contract Owner or joint annuitant cannot be confined at the time
the Contract is purchased in order to receive this waiver and the Contract
Owner(s) must have been the Contract Owner(s) continuously since the Contract
issue date. You must provide written proof of confinement satisfactory to
Hartford and you must request the partial or full Surrender within 91 calendar
days of the last day of confinement.
This waiver may not be available in all states. Please contact your registered
representative or contact Us to determine availability.
DEATH OF THE ANNUITANT OR CONTRACT OWNER OR PAYMENTS UNDER AN ANNUITY
OPTION -- No CDSC otherwise applicable will be assessed in the event of death of
the Annuitant, death of the Contract Owner or if payments are made under an
Annuity option (other than a Surrender of variable payments for a Period Certain
Annuity option) provided for under the Contract.
OTHER PLANS OR PROGRAMS -- Certain plans or programs established by us from time
to time may have different Surrender privileges.
MORTALITY AND EXPENSE RISK CHARGE -- For assuming risks under the Contract, We
deduct a daily charge at the rate of 1.25% per year against all Contract Values
held in the Accounts during the life of the Contract. Although variable annuity
payments made under the Contracts will vary in accordance with the investment
performance of the underlying Fund shares held in the Sub-Account(s), the
payments will not be affected by (a) our actual mortality experience among
Annuitants before or after the Annuity Commencement Date or (b) our actual
expenses, if greater than the deductions provided for in the Contracts because
of the expense and mortality undertakings by us.
There are two types of mortality risks: those made during the accumulation or
deferral phase and those made during the annuity payout phase. The mortality
risk we take in the accumulation phase is that we may experience a loss
resulting from the assumption of the mortality risk relative to the death
benefit in event of the death of an Annuitant or Contract Owner before
commencement of Annuity payments, in periods of declining value. The mortality
risk we take during the annuity payout phase is to make monthly Annuity payments
(determined in accordance with the 1983a Individual Annuity Mortality Table and
other provisions contained in the Contract) to Annuitants regardless of how long
an Annuitant may live, and regardless of
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 25
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how long all Annuitants as a group may live. These mortality undertakings are
based on our determination of expected mortality rates among all Annuitants. If
actual experience among Annuitants during the Annuity payment period deviates
from our actuarial determination of expected mortality rates among Annuitants
because, as a group, their longevity is longer than anticipated, we must provide
amounts from our general funds to fulfill our contractual obligations. We will
bear the loss in such a situation.
During the accumulation phase, we also provide an expense undertaking. We assume
the risk that the Annual Maintenance Fee for maintaining the Contracts prior to
the Annuity Commencement Date may be insufficient to cover the actual cost of
providing such items.
ANNUAL MAINTENANCE FEE -- Each year, on each Contract Anniversary on or before
the Annuity Commencement Date, we will deduct an Annual Maintenance Fee, if
applicable, from Contract Values to reimburse us for expenses relating to the
maintenance of the Contract and Accounts. If during a Contract Year the Contract
is Surrendered for its full value, we will deduct the Annual Maintenance Fee at
the time of such Surrender. The fee is a flat fee that will be due in the full
amount regardless of the time of the Contract Year that Contract Values are
Surrendered. The Annual Maintenance Fee is $30 per Contract Year for Contracts
with less than $50,000 Contract Value on the Contract Anniversary. Fees will be
deducted on a pro rata basis according to the value in each Account under a
Contract.
WAIVERS OF THE ANNUAL MAINTENANCE FEE -- Annual Maintenance Fees are waived for
Contracts with Contract Value equal to or greater than $50,000. In addition, we
will waive one Annual Maintenance Fee for Contract Owners who own one or more
Contracts with a combined Contract Value of $50,000 up to $100,000. If you have
multiple Contracts with a combined Contract Value of $100,000 or greater, we
will waive the Annual Maintenance Fee on all Contracts. However, we reserve the
right to limit the number of Annual Maintenance Fee waivers to a total of six
Contracts. We reserve the right to waive the Annual Maintenance Fee under other
conditions.
ADMINISTRATIVE CHARGE -- For administration, we apply a daily charge at the rate
of .15% per year against all Contract Values held in the Separate Account during
both the accumulation and annuity phases of the Contract. There is not
necessarily a relationship between the amount of administrative charge imposed
on a given Contract and the amount of expenses that may be attributable to that
Contract; expenses may be more or less than the charge.
You should refer to the Fund prospectus for a description of deductions and
expenses paid out of the assets of the Fund's portfolios.
PREMIUM TAXES -- Charges are also deducted for Premium Tax, if applicable,
imposed by state or other governmental entity. Certain states impose a Premium
Tax, currently ranging up to 3.5%. Some states assess the tax at the time
purchase payments are made; others assess the tax at the time of annuitization.
We will pay Premium Taxes at the time imposed under applicable law. At our sole
discretion, we may deduct Premium Taxes at the time we pay such taxes to the
applicable taxing authorities, at the time the Contract is Surrendered, at the
time a death benefit is paid, or at the time the Contract annuitizes.
OPTIONAL DEATH BENEFIT FEE -- If you elect the Optional Death Benefit, we will
deduct daily from your Contract Value an additional charge which equals .15% per
year of the Sub-Account value.
EXCEPTIONS TO CHARGES UNDER THE CONTRACT -- We may offer, at our discretion,
reduced fees and charges including, but not limited to, CDSC, the mortality and
expense risk charge, administration charges, optional charges and the Annual
Maintenance Fee for certain sales (including employer sponsored savings plans)
under circumstances which may result in savings of certain costs and expenses.
Reductions in these fees and charges will not be unfairly discriminatory against
any Contract Owner.
DEATH BENEFITS
DEATH BEFORE THE ANNUITY COMMENCEMENT DATE
DETERMINATION OF THE BENEFICIARY -- If the Contract Owner or the Annuitant dies
before the Annuity Commencement Date, we will pay a Death Benefit to the
Beneficiary.
- IF THE CONTRACT OWNER DIES before the Annuity Commencement Date, any
surviving joint Contract Owner becomes the Beneficiary. If there is no
surviving joint Contract Owner, the designated Beneficiary will be the
Beneficiary. If the Contract Owner's spouse is the sole Beneficiary, the
spouse may elect, in lieu of receiving the Death Benefit, to be treated as
the Contract Owner. If the Annuitant is not living and there is no
Contingent Annuitant, the spouse will be presumed to be the Contingent
Annuitant. If no Beneficiary designation is in effect or if the Beneficiary
has predeceased the Contract Owner, the Contract Owner's estate will be the
Beneficiary.
- IF THE ANNUITANT DIES before the Annuity Commencement Date, the Contingent
Annuitant will become the Annuitant. If either (a) there is no Contingent
Annuitant, (b) the Contingent Annuitant predeceases the Annuitant, or
(c) if any sole Contract Owner dies before the Annuity Commencement Date,
the Beneficiary, as determined under the Contract control provisions, will
receive the Death Benefit. However, if the Annuitant dies prior to the
Annuity Commencement Date and the Contract Owner is living, the Contract
Owner shall be the Beneficiary. In that case, the rights of any designated
Beneficiary shall be void.
<PAGE>
26 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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DETERMINATION OF THE DEATH BENEFIT
IF YOU DID NOT ELECT THE OPTIONAL DEATH BENEFIT, Your Death Benefit, which we
will calculate as of the date we receive Due Proof of Death, will be calculated
as follows:
If the deceased HAD NOT REACHED THEIR 81ST BIRTHDAY, the Death Benefit is the
greater of:
- - 100% of the total premium payments made to the Contract, reduced by any
subsequent Surrenders, or
- - The Contract Value of your annuity, or
- - Your Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries of Contract Values, premium payments and partial Surrenders. We
will calculate an Anniversary Value for each Contract Anniversary prior to the
deceased's 81st birthday or date of death. The Anniversary Value is equal to the
Contract Value as of a Contract Anniversary, increased by the dollar amount of
any premium payments made since that anniversary and reduced by the dollar
amount of any partial Surrenders since that anniversary. The Maximum Anniversary
Value is equal to the greatest Anniversary Value attained from this series of
calculations.
IF THE DECEASED REACHED THEIR 81ST BIRTHDAY, then the Death Benefit is the
greater of:
- - 100% of the total premium payments made to us, reduced by any subsequent
Surrenders, or
- - The Contract Value of your annuity, or
- - The Maximum Anniversary Value.
If you did elect the Optional Death Benefit, the Death Benefit, which we will
calculate as of the date we receive Due Proof of Death, will be the greater of:
- - 100% of the total premium payments made to us, reduced by any subsequent
Surrenders;
- - The Contract Value of your annuity;
- - The Maximum Anniversary Value; or
- - The Interest Accumulation Value, which is described below.
The Interest Accumulation Value is calculated by accumulating interest on your
premium payments at a rate of 5% per year up to the deceased's 81st birthday or
date of death, assuming you have not taken any Surrenders. If you have taken any
Surrenders, the 5% will be accumulated on your premium payments, but there will
be an adjustment for any of the Surrenders. This adjustment will reduce the
Optional Death Benefit proportionally for the Surrenders. We stop compounding
interest on the deceased's 81st birthday or date of death. After that date, the
Interest Accumulation Value will be adjusted by adding any subsequent payments
and subtracting proportional adjustments for any partial Surrenders. The
Optional Death Benefit is limited to a maximum of 200% of premium payments, less
proportional adjustments for any Surrenders. For examples on how the Optional
Death Benefit is calculated see "Appendix II". The Optional Death Benefit may
not be available if the Contract Owner or Annuitant is age 75 or older. For
Contracts issued in the state of Washington, the Optional Death Benefit is not
available.
If you elect to add the Optional Death Benefit after you purchase your annuity,
the Interest Accumulation Value calculation will be:
- - Your Contract Value on the date we add the Optional Death Benefit to your
annuity;
- - Plus any Premium Payments made after the Optional Death Benefit is added;
- - Minus any partial Surrenders after the Optional Death Benefit is added;
- - Compounded daily at an annual interest rate of 5%.
SPOUSAL CONTRACT CONTINUATION -- If a Beneficiary is the Contract Owner's
spouse, that portion of the Contract for which the spouse is considered the
Beneficiary will continue with the spouse as Contract Owner, unless the spouse
elects to receive the Death Benefit as a lump sum payment or as an annuity
payment option. If the Contract continues with the spouse as Contract Owner, we
will adjust the Contract Value to the amount that we would have paid as the
Death Benefit payment, had the spouse elected to receive the Death Benefit as a
lump sum payment. Spousal Contract Continuation will only apply one time for
each Contract.
CALCULATION OF THE DEATH BENEFIT -- If the Contract Owner or Annuitant dies
before the Annuity Commencement Date and a Death Benefit is payable to the
Beneficiary, the Death Benefit will be calculated as of the date we receive
written notification of Due Proof of Death. THE DEATH BENEFIT REMAINS INVESTED
IN THE SEPARATE ACCOUNT ACCORDING TO YOUR LAST INSTRUCTIONS UNTIL THE PROCEEDS
ARE PAID OR WE RECEIVE NEW SETTLEMENT INSTRUCTIONS FROM THE BENEFICIARY. DURING
THE TIME PERIOD BETWEEN OUR RECEIPT OF WRITTEN NOTIFICATION OF DUE PROOF OF
DEATH AND OUR RECEIPT OF THE COMPLETE SETTLEMENT INSTRUCTIONS, THE CALCULATED
DEATH BENEFIT WILL BE SUBJECT TO MARKET FLUCTUATIONS. UPON RECEIPT OF COMPLETE
SETTLEMENT INSTRUCTIONS, WE WILL CALCULATE THE PAYABLE AMOUNT.
Any Annuity payments made on or after the date of death, but before receipt of
written notification of Due Proof of Death will be recovered by us from the
Payee.
DEATH ON OR AFTER THE ANNUITY COMMENCEMENT DATE
If, on or after the Annuity Commencement Date, the Contract Owner dies and the
Annuitant is living, the Beneficiary becomes the Contract Owner. If the
Annuitant dies and the Contract Owner is living, the Contract Owner becomes the
Beneficiary.
If the Annuitant dies on or after the Annuity Commencement Date, a Death Benefit
may be paid or payments may continue under the following annuity payment
options:
- - Life Annuity with Cash Refund
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 27
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- - Life Annuity with payments for a Period Certain
- - Joint and Last Survivor Life Annuity with payments for a Period Certain and
- - Payments for a Period Certain.
Proceeds from the Death Benefit may be left with us for at least 5 years from
the date of the Contract Owner's death if the death occurs prior to the Annuity
Commencement Date. These proceeds will remain in the Account(s) to which they
were allocated at the time of death unless the Beneficiary elects to reallocate
them. Full or partial Surrenders may be made at any time. In the event of a
complete Surrender, the remaining value will equal the Contract Value of the
proceeds left with us, minus any partial Surrenders. This option may not be
available under certain Contracts issued in connection with Qualified Plans.
SETTLEMENT PROVISIONS
- --------------------------------------------------------------------------------
You select an Annuity Commencement Date which will not be deferred beyond the
Valuation Day immediately following the later of the Annuitant's 90th birthday
or the end of the tenth Contract Year. You may elect a later Annuity
Commencement Date if we allow and subject to the laws and regulations then in
effect. If the Contract is sold as part of a Charitable Remainder Trust, the
Annuity Commencement Date may be deferred to the Annuitant's 100th birthday. The
Annuity Commencement Date may be changed from time to time, but ANY CHANGE MUST
BE WITHIN 30 DAYS PRIOR TO THE DATE ON WHICH ANNUITY PAYMENTS ARE SCHEDULED TO
BEGIN.
You also elect in writing an annuity payment option, which may be any of the
options described below or any annuity payment option then being offered by us.
The annuity payment option may not be changed on or after the Annuity
Commencement Date. The Contract contains the six annuity payment options
described below and the Annuity Proceeds Settlement Option.
For Qualified Contracts, the following annuity payment options are only
available if the guaranteed payment period is less than the life expectancy of
the Annuitant at the time the option becomes effective. The Annuity Proceeds
Settlement option is available for Qualified Contracts only if the guaranteed
payment period is less than the life expectancy of the Beneficiary at the time
the option becomes effective. Such life expectancies are computed on the basis
of the mortality table prescribed by the IRS, or if none is prescribed, the
mortality table in use by us. If you do not elect otherwise, fixed dollar amount
annuity payments will begin automatically on the Annuity Commencement Date,
under the Life Annuity Payment Option.
For Non-Qualified Contracts, if you do not elect otherwise, fixed dollar amount
annuity payments will automatically begin on the Annuity Commencement Date under
the annuity payment option Life Annuity with payments for a Period Certain of 10
years. For Qualified Contracts and Contracts issued in Texas, if you do not
elect otherwise, fixed dollar amount annuity payments will begin automatically
on the Annuity Commencement Date, under the Life Annuity Payment Option.
With the exception of the option Payments for a Period Certain, if the variable
dollar amount payment is selected, no Surrenders are permitted after annuity
payments begin.
ANNUITY PAYMENT OPTIONS
LIFE ANNUITY
where we make Annuity payments for as long as the Annuitant lives.
- Payments under this option STOP UPON THE DEATH OF THE ANNUITANT, even if the
Annuitant dies after one payment.
LIFE ANNUITY WITH CASH REFUND
where we make payments during the life of the Annuitant and when the Annuitant
dies, we pay the remaining value to the Beneficiary. The remaining value is
calculated at the time we receive Due Proof of Death by subtracting the annuity
payments already made from the Contract Value less any applicable Premium Taxes
applied to this annuity payment option.
- This option is only available if you select payments using a VARIABLE DOLLAR
AMOUNT PAYMENT OPTION WITH THE 5% AIR OR FIXED DOLLAR AMOUNT ANNUITY
PAYMENTS.
LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN
where we make payments to you for the life of the Annuitant but you are at least
guaranteed payments for a time period you select which is a minimum of 5 years
and a maximum of 100 years minus your Annuitant's age.
- If the Annuitant dies prior to the end of the period selected, we will pay
your Beneficiary the present value of the remaining payments, either in a
lump sum payment or we will continue payments until the end of the period
selected.
JOINT AND LAST SURVIVOR ANNUITY
where we make payments during the lifetimes of the Annuitant and another
designated individual called the Joint Annuitant at the time of electing this
Annuity Option, the Contract Owner may elect reduced payments over the remaining
lifetime of the survivor.
- Payments under this option stop UPON THE DEATH OF THE ANNUITANT AND JOINT
ANNUITANT, even if the Annuitant and Joint Annuitant die after one payment.
<PAGE>
28 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN
where we make payments during the lifetime of the Annuitant and a Joint
Annuitant, and we guarantee that those payments for a time period you select
which is not less than 5 years and no more than 100 years minus the younger
Annuitant's age. At the time of electing this Annuity Option, the Contract Owner
may elect reduced payments over the remaining lifetime of the survivor.
- If the Annuitant and Joint Annuity die prior to the end of the period
selected, we will pay your Beneficiary the present value of the remaining
payments, either in a lump sum payment or We will continue payments until
the end of the period selected.
PAYMENTS FOR A PERIOD CERTAIN
where we agree to make payments for a specified time. The minimum period that
you can select is 10 years during the first two Contract years and 5 years after
the second Contract Anniversary. The maximum period that you can select is 100
years minus your Annuitant's age.
- If you select this option under a variable dollar amount payment, YOU MAY
SURRENDER YOUR ANNUITY after annuity payments have started and we will give
you the present value of the remaining payments less any applicable
Contingent Deferred Sales Charge.
- If the Annuitant dies prior to the end of the period selected, we will pay
your Beneficiary the present value of the remaining payments, either in a
lump sum payment or we will continue payments until the end of the period
selected.
- For Contracts issued in the state of Oregon, Payments for a Period Certain
may be selected as follows: For fixed annuity payments, the minimum period
that you can select is 10 years at any time and 5 years on or after the 2nd
Contract Anniversary. For variable annuity payments, the minimum period that
you can select is 5 years on or after the 10th Contract Anniversary. Under
an Annuity payable with variable annuity payments, you may surrender the
Contract after payments have begun by submitting a written request to us.
The amount available to you is the Commuted Value.
WE MAY OFFER OTHER ANNUITY PAYMENT OPTIONS FROM TIME TO TIME.
ANNUITY PAYMENTS
When you decide to begin to take payments, we calculate your Contract Value
minus any Premium Tax which we must pay and, unless you instruct us otherwise,
we apply that amount to a variable annuity with the same Sub-Account values. You
may however, choose to have your Contract Value applied to a fixed annuity
instead.
IMPORTANT: YOU SHOULD CONSIDER THE QUESTION OF ALLOCATION OF CONTRACT VALUES
(LESS APPLICABLE PREMIUM TAXES) AMONG ACCOUNTS TO MAKE CERTAIN THAT ANNUITY
PAYMENTS ARE BASED ON THE INVESTMENT ALTERNATIVE BEST SUITED TO YOUR NEEDS FOR
RETIREMENT.
ANNUITY PAYMENTS -- The minimum Annuity payment is $50. No election may be made
which results in a first payment of less than $50. If at any time Annuity
payments are or become less than $50, we have the right to change the frequency
of payment to intervals so that payments will at least be $50. If any amount due
is less than the minimum amount per year, we may make such other settlement as
may be equitable to the Payee.
All Annuity payments under any option will occur the same day of the month as
the Annuity Commencement Date, based on the payment frequency selected by you.
Available payment frequencies include monthly, quarterly, semi-annual and
annual. The payment frequency may be changed within 30 days prior to the
anniversary of your Annuity Commencement Date.
ANNUITY COMMENCEMENT DATE -- You select the Annuity Commencement Date in your
application or order request. The Annuity Calculation Date will be no more than
five Valuation Days before the Annuity Commencement Date.
ANNUITY CALCULATION DATE -- On the Annuity Calculation Date, your Contract Value
less any applicable Premium Tax is applied to purchase Annuity Units of the
Sub-Accounts selected by you. The first Annuity payment is computed using the
value of these Annuity Units as of the Annuity Calculation Date.
INCOME PAYMENT DATES -- All Annuity payments after the first Annuity payment are
computed and payable as of the Income Payment Dates. These dates are the same
day of the month as the Annuity Commencement Date, based on the Annuity payment
frequency selected by you. They are also shown on the specification page of your
Contract. You may choose from monthly, quarterly, semi-annual and annual
payments. The Annuity payment frequency may not be changed once selected by you.
IN THE EVENT THAT YOU DO NOT SELECT A PAYMENT FREQUENCY, ANNUITY PAYMENTS WILL
BE MADE MONTHLY.
VARIABLE ANNUITY PAYMENTS
THE FIRST VARIABLE ANNUITY PAYMENT -- Variable Annuity payments are periodic
payments we pay to your designated Payee, the amount of which varies from one
Income Payment Date to the next as a function of the net investment performance
of the Sub-Accounts selected by you. The dollar amount of the first Variable
Annuity payment depends on the annuity payment option chosen, the age of the
Annuitant, the gender of the Annuitant (if applicable), the amount of Contract
Value less applicable Premium Tax applied to purchase the Annuity payments, and
the applicable annuity purchase rates based on the 1983a Individual Annuity
Mortality table using projection scale G projected to the year 2000 and an AIR
of not less than 3.0%.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 29
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The dollar amount of the first Variable Annuity payment attributable to each
Sub-Account is determined by dividing the dollar amount of the Contract Value
less applicable Premium Tax applied to that Sub-Account on the Annuity
Calculation Date by $1,000 and multiplying the result by the payment factor in
the Contract for the selected annuity payment option. The dollar value of the
first Variable Annuity payment is the sum of the first Variable Annuity payments
attributable to each Sub-Account.
ANNUITY UNITS -- The number of Annuity Units attributable to a Sub-Account is
derived by dividing the first Variable Annuity payment attributable to that
Sub-Account by the Annuity Unit value for that Sub-Account for the Valuation
Period ending on the Annuity Calculation Date or during which the Annuity
Calculation Date falls if the Valuation Period does not end on such date. The
number of Annuity Units attributable to each Sub-Account under a Contract
remains fixed unless there is a transfer of Annuity Units between Sub-Accounts.
SUBSEQUENT VARIABLE ANNUITY PAYMENTS -- The dollar amount of each subsequent
Variable Annuity payment attributable to each Sub-Account is calculated on the
Income Payment Date. It is determined by multiplying (a) by (b), where:
(a) is the number of Annuity Units of each Sub-Account credited under the
Contract and
(b) is the Annuity Unit value (described below) for that Sub-Account.
The total subsequent Variable Annuity payments equal the sum of the amounts
attributable to each Sub-Account.
When an Income Payment Date falls on a day that is not a Valuation Day, the
Income Payment is computed as of the prior Valuation Day. If the date of the
month elected does not occur in a given month, i.e., the 29th, 30th, or 31st of
a month, the payment will be computed as of the last Valuation Day of the month.
When an Income Payment Date falls on a day that is not a Valuation Day, the
Income Payment is computed as of the prior Valuation Day. If the date of the
month elected does not occur in a given month, i.e., the 29th, 30th, or 31st of
a month, the payment will be computed as of the last Valuation Day of the month.
The Annuity Unit value of each Sub-Account for any Valuation Period is equal to
(a) multiplied by (b) multiplied by (c) where:
(a) is the Net Investment Factor for the Valuation Period for which the Annuity
Unit value is being calculated;
(b) is the Annuity Unit value for the preceding Valuation Period; and
(c) is the Annuity Unit Factor.
The Annuity Unit Factor neutralizes the AIR percentage (3%, 5%, or 6%). The
daily Annuity Unit Factor corresponding to the AIR percentages of 3%, 5%, and 6%
are 0.999919, 0.999866, and 0.999840, respectively.
THE ASSUMED INVESTMENT RETURN (AIR) -- The Annuity Unit value will increase or
decrease from one Income Payment Date to the next in direct proportion to the
net investment return of the Sub-Account(s) supporting the Variable Annuity
payments, less an adjustment to neutralize the selected AIR. Dividing what would
otherwise be the Annuity Unit value by the AIR factor is necessary in order to
adjust the change in the Annuity Unit value (resulting from the Net Investment
Factor) so that the Annuity Unit value only changes to the extent that the Net
Investment Factor represents a rate of return greater than or less than the AIR
selected by you. Without this adjustment, the Net Investment Factor would
decrease the Annuity Unit value to the extent that such value represented an
annualized rate of return of less than 0.0% and increase the Annuity Unit value
to the extent that such value represented an annualized rate of return of
greater than 0.0%.
The Contract permits Contract Owners to select one of three AIRs: 3%, 5% or 6%.
A higher AIR will result in a higher initial payment, a more slowly rising
series of subsequent payments when actual investment performance (minus any
deductions and expenses) exceeds the AIR, and a more rapid drop in subsequent
payments when actual investment performance (minus any deductions and expenses)
is less than the AIR. The 6% AIR is not available in the states of Oklahoma,
Oregon, New Jersey or Texas. The following examples may help clarify the impact
of selecting one AIR over another:
- - If you select a 3% AIR and if the net investment return of the Sub-Account for
an Annuity payment period is equal to the pro-rated portion of the 3% AIR, the
Variable Annuity payment attributable to that Sub-Account for that period will
equal the Annuity payment for the prior period. To the extent that such net
investment return EXCEEDS an annualized rate of return of 3% for a payment
period, the Annuity payment for that period will be greater than the Annuity
payment for the prior period and to the extent that such return for a period
falls short of an annualized rate of 3%, the Annuity payment for that period
will be less than the Annuity payment for the prior period.
- - If you select a 5% AIR and if the net investment return of the Sub-Account for
an Annuity payment period is equal to the pro-rated portion of the 5% AIR, the
Variable Annuity payment attributable to that Sub-Account for that period will
equal the Annuity payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of return of 5% for a payment
period, the Annuity payment for that period will be greater than the Annuity
payment for the prior period and to the extent that such return for a period
falls short of an annualized rate of 5%, the Annuity payment for that period
will be less than the Annuity payment for the prior period.
- - If you select a 6% AIR and if the net investment return of the Sub-Account for
an Annuity payment period is equal to the pro-rated portion of the 6% AIR, the
Variable Annuity payment attributable to that Sub-Account for that period will
equal the Annuity payment for the prior period. To the extent
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30 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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that such net investment return exceeds an annualized rate of return of 6% for
a payment period, the Annuity payment for that period will be greater than the
Annuity payment for the prior period and to the extent that such return for a
period falls short of an annualized rate of 6%, the Annuity payment for that
period will be less than the Annuity payment for the prior period.
LEVEL VARIABLE ANNUITY PAYMENTS WOULD BE PRODUCED IF THE INVESTMENT RATE RETURNS
REMAINED CONSTANT AND EQUAL TO THE AIR. IN FACT, PAYMENTS WILL VARY UP OR DOWN
AS THE INVESTMENT RATE VARIES UP OR DOWN FROM THE AIR.
EXCHANGE (TRANSFER) OF ANNUITY UNITS -- After the Annuity Calculation Date, you
may exchange (i.e., transfer) the dollar value of a designated number of Annuity
Units of a particular Sub-Account for an equivalent dollar amount of Annuity
Units of another Sub-Account. On the date of the transfer, the dollar amount of
a Variable Annuity payment generated from the Annuity Units of either
Sub-Account would be the same. Transfers are executed as of the day Hartford
receives a written request for a transfer. For guidelines refer to Sub-Account
Value Transfers Before and After the Annuity Commencement Date.
FIXED DOLLAR ANNUITY -- Fixed Annuity payments are determined at annuitization
by multiplying the Contract Value (less applicable Premium Taxes) by a rate to
be determined by Hartford which is no less than the rate specified in the Fixed
Annuity option tables in the Contract. The Annuity payment will remain level for
the duration of the Annuity. Any Fixed Annuity allocation may not be changed.
OTHER INFORMATION
ASSIGNMENT -- Ownership of this Contract is generally assignable. However, if
the Contracts are issued pursuant to some form of Qualified Plan, it is possible
that the ownership of the Contracts may not be transferred or assigned depending
on the type of tax-qualified retirement plan involved. An assignment of a
Non-Qualified Contract may subject the Contract Values or assignment proceeds to
income taxes and certain penalty taxes.
CONTRACT MODIFICATION -- The Annuitant may not be changed; however, the
Contingent Annuitant may be changed at any time prior to the Annuity
Commencement Date by sending us written notice. We may modify the Contract, but
no modification will effect the amount or term of any Contract unless a
modification is required to conform the Contract to applicable Federal or State
law. No modification will effect the method by which Contract Values are
determined.
FEDERAL TAX CONSIDERATIONS
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What are some of the federal tax consequences which affect these Contracts?
A. GENERAL
Since federal tax law is complex, the tax consequences of purchasing this
contract will vary depending on your situation. You may need tax or legal advice
to help you determine whether purchasing this contract is right for you.
Our general discussion of the tax treatment of this contract is based on our
understanding of federal income tax laws as they are currently interpreted. A
detailed description of all federal income tax consequences regarding the
purchase of this contract cannot be made in the prospectus. We also do not
discuss state, municipal or other tax laws that may apply to this contract. For
detailed information, you should consult with a qualified tax adviser familiar
with your situation.
B. TAXATION OF HARTFORD AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford which is taxed as a life
insurance company in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the Separate Account will not be taxed as a
"regulated investment company" under subchapter M of Chapter 1 of the Code.
Investment income and any realized capital gains on the assets of the Separate
Account are reinvested and are taken into account in determining the value of
the Accumulation and Annuity Units (See "Value of Accumulation Units"). As a
result, such investment income and realized capital gains are automatically
applied to increase reserves under the Contract.
No taxes are due on interest, dividends and short-term or long-term capital
gains earned by the Separate Account with respect to Qualified or Non-Qualified
Contracts.
C. TAXATION OF ANNUITIES -- GENERAL PROVISIONS AFFECTING PURCHASERS OTHER THAN
QUALIFIED RETIREMENT PLANS
Section 72 of the Code governs the taxation of annuities in general.
1. NON-NATURAL PERSONS, CORPORATIONS, ETC.
Code Section 72 contains provisions for contract owners which are not natural
persons. Non-natural persons include corporations, trusts, limited liability
companies, partnerships and other types of legal entities. The tax rules for
contracts owned by non-natural persons are different from the rules for
contracts owned by individuals. For example, the annual net increase in the
value of the contract is currently includible in the gross income of a
non-natural person, unless the non-natural person holds the contract as an agent
for a natural person. There are additional exceptions from current inclusion
for:
- - certain annuities held by structured settlement companies,
- - certain annuities held by an employer with respect to a terminated qualified
retirement plan and
- - certain immediate annuities.
A non-natural person which is a tax-exempt entity for federal tax purposes will
not be subject to income tax as a result of this provision.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 31
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If the contract owner is a non-natural person, the primary annuitant is treated
as the contract owner in applying mandatory distribution rules. These rules
require that certain distributions be made upon the death of the contract owner.
A change in the primary annuitant is also treated as the death of the contract
owner.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS).
A Contract Owner is not taxed on increases in the value of the Contract until an
amount is received or deemed received, e.g., in the form of a lump sum payment
(full or partial value of a Contract) or as Annuity payments under the
settlement option elected.
The provisions of Section 72 of the Code concerning distributions are summarized
briefly below. Also summarized are special rules affecting distributions from
Contracts obtained in a tax-free exchange for other annuity contracts or life
insurance contracts which were purchased prior to August 14, 1982.
a. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less amounts received which were not includable in
gross income equal the "investment in the contract" under Section 72 of the
Code.
ii. To the extent that the value of the Contract (ignoring any surrender
charges except on a full surrender) exceeds the "investment in the
contract," such excess constitutes the "income on the contract."
iii. Any amount received or deemed received prior to the Annuity Commencement
Date (e.g., upon a partial surrender) is deemed to come first from any
such "income on the contract" and then from "investment in the contract,"
and for these purposes such "income on the contract" shall be computed by
reference to any aggregation rule in subparagraph 2.c. below. As a result,
any such amount received or deemed received (1) shall be includable in
gross income to the extent that such amount does not exceed any such
"income on the contract," and (2) shall not be includable in gross income
to the extent that such amount does exceed any such "income on the
contract." If at the time that any amount is received or deemed received
there is no "income on the contract" (e.g., because the gross value of the
Contract does not exceed the "investment in the contract" and no
aggregation rule applies), then such amount received or deemed received
will not be includable in gross income, and will simply reduce the
"investment in the contract."
iv. The receipt of any amount as a loan under the Contract or the assignment or
pledge of any portion of the value of the Contract shall be treated as an
amount received for purposes of this subparagraph a. and the next
subparagraph b.
v. In general, the transfer of the Contract, without full and adequate
consideration, will be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b. This transfer rule does not
apply, however, to certain transfers of property between spouses or incident
to divorce.
b. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE.
Annuity payments made periodically after the Annuity Commencement Date are
includable in gross income to the extent the payments exceed the amount
determined by the application of the ratio of the "investment in the contract"
to the total amount of the payments to be made after the Annuity Commencement
Date (the "exclusion ratio").
i. When the total of amounts excluded from income by application of the
exclusion ratio is equal to the investment in the contract as of the
Annuity Commencement Date, any additional payments (including surrenders)
will be entirely includable in gross income.
ii. If the annuity payments cease by reason of the death of the Annuitant and,
as of the date of death, the amount of annuity payments excluded from gross
income by the exclusion ratio does not exceed the investment in the
contract as of the Annuity Commencement Date, then the remaining portion of
unrecovered investment shall be allowed as a deduction for the last taxable
year of the Annuitant.
iii. Generally, nonperiodic amounts received or deemed received after the
Annuity Commencement Date are not entitled to any exclusion ratio and
shall be fully includable in gross income. However, upon a full surrender
after such date, only the excess of the amount received (after any
surrender charge) over the remaining "investment in the contract" shall be
includable in gross income (except to the extent that the aggregation
rule referred to in the next subparagraph c. may apply).
c. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS.
Contracts issued after October 21, 1988 by the same insurer (or affiliated
insurer) to the same Contract Owner within the same calendar year (other than
certain contracts held in connection with a tax-qualified retirement
arrangement) will be treated as one annuity Contract for the purpose of
determining the taxation of distributions prior to the Annuity Commencement
Date. An annuity contract received in a tax-free exchange for another annuity
contract or life insurance contract may be treated as a new Contract for this
purpose. Hartford believes that for any annuity subject to such aggregation, the
values under the Contracts and the investment in the contracts will be added
together to determine the taxation under subparagraph 2.a., above, of amounts
received or deemed received prior to the Annuity Commencement Date. Withdrawals
will first be treated as withdrawals of income until all of the income from all
such Contracts is withdrawn. As of the date of this Prospectus, there are no
regulations interpreting this provision.
d. 10% PENALTY TAX -- APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY
PAYMENTS.
i. If any amount is received or deemed received on the Contract (before or
after the Annuity Commencement Date),
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32 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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the Code applies a penalty tax equal to ten percent of the portion of the
amount includable in gross income, unless an exception applies.
ii. The 10% penalty tax will not apply to the following distributions
(exceptions vary based upon the precise plan involved):
1. Distributions made on or after the date the recipient has attained the
age of 59 1/2.
2. Distributions made on or after the death of the holder or where the
holder is not an individual, the death of the primary annuitant.
3. Distributions attributable to a recipient's becoming disabled.
4. A distribution that is part of a scheduled series of substantially equal
periodic payments (not less frequently than annually) for the life (or
life expectancy) of the recipient (or the joint lives or life
expectancies of the recipient and the recipient's designated
Beneficiary).
5. Distributions of amounts which are allocable to the "investment in the
contract" prior to August 14, 1982 (see next subparagraph e.).
e. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED THROUGH A TAX-FREE
EXCHANGE OF OTHER ANNUITY OR LIFE INSURANCE CONTRACTS PURCHASED PRIOR TO
AUGUST 14, 1982.
If the Contract was obtained by a tax-free exchange of a life insurance or
annuity Contract purchased prior to August 14, 1982, then any amount received or
deemed received prior to the Annuity Commencement Date shall be deemed to come
(1) first from the amount of the "investment in the contract" prior to August
14, 1982 ("pre-8/14/82 investment") carried over from the prior Contract,
(2) then from the portion of the "income on the contract" (carried over to, as
well as accumulating in, the successor Contract) that is attributable to such
pre-8/14/82 investment, (3) then from the remaining "income on the contract" and
(4) last from the remaining "investment in the contract." As a result, to the
extent that such amount received or deemed received does not exceed such
pre-8/14/82 investment, such amount is not includable in gross income., In
addition, to the extent that such amount received or deemed received does not
exceed the sum of (a) such pre-8/14/82 investment and (b) the "income on the
contract" attributable thereto, such amount is not subject to the 10% penalty
tax. In all other respects, amounts received or deemed received from such post-
exchange Contracts are generally subject to the rules described in this
subparagraph 3.
f. REQUIRED DISTRIBUTIONS.
i. Death of Contract Owner or Primary Annuitant
Subject to the alternative election or spouse beneficiary provisions in ii
or iii below:
1. If any Contract Owner dies on or after the Annuity Commencement Date and
before the entire interest in the Contract has been distributed, the
remaining portion of such interest shall be distributed at least as
rapidly as under the method of distribution being used as of the date of
such death;
2. If any Contract Owner dies before the Annuity Commencement Date, the
entire interest in the Contract will be distributed within 5 years after
such death; and
3. If the Contract Owner is not an individual, then for purposes of 1. or
2. above, the primary annuitant under the Contract shall be treated as
the Contract Owner, and any change in the primary annuitant shall be
treated as the death of the Contract Owner. The primary annuitant is the
individual, the events in the life of whom are of primary importance in
affecting the timing or amount of the payout under the Contract.
ii. Alternative Election to Satisfy Distribution Requirements
If any portion of the interest of a Contract Owner described in i. above is
payable to or for the benefit of a designated beneficiary, such beneficiary
may elect to have the portion distributed over a period that does not extend
beyond the life or life expectancy of the beneficiary. Distributions must
begin within a year of the Contract Owner's death.
iii. Spouse Beneficiary
If any portion of the interest of a Contract Owner is payable to or for the
benefit of his or her spouse, and the Annuitant or Contingent Annuitant is
living, such spouse shall be treated as the Contract Owner of such portion
for purposes of section i. above. This spousal continuation shall apply only
once for this contract.
3. DIVERSIFICATION REQUIREMENTS.
The Code requires that investments supporting your contract be adequately
diversified. Code Section 817 provides that a variable annuity contract will not
be treated as an annuity contract for any period during which the investments
made by the separate account or underlying fund are not adequately diversified.
If a contract is not treated as an annuity contract, the contract owner will be
subject to income tax on annual increases in cash value.
The Treasury Department's diversification regulations require, among other
things, that:
- - no more than 55% of the value of the total assets of the segregated asset
account underlying a variable contract is represented by any one investment,
- - no more than 70% is represented by any two investments,
- - no more than 80% is represented by any three investments and
- - no more than 90% is represented by any four investments.
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 33
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In determining whether the diversification standards are met, all securities of
the same issuer, all interests in the same real property project, and all
interests in the same commodity are each treated as a single investment. In the
case of government securities, each government agency or instrumentality is
treated as a separate issuer.
A separate account must be in compliance with the diversification standards on
the last day of each calendar quarter or within 30 days after the quarter ends.
If an insurance company inadvertently fails to meet the diversification
requirements, the company may still comply within a reasonable period and avoid
the taxation of contract income on an ongoing basis. However, either the company
or the contract owner must agree to pay the tax due for the period during which
the diversification requirements were not met.
We monitor the diversification of investments in the separate accounts and test
for diversification as required by the Code. We intend to administer all
contracts subject to the diversification requirements in a manner that will
maintain adequate diversification.
4. OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT.
In order for a variable annuity contract to qualify for tax deferral, assets in
the separate accounts supporting the contract must be considered to be owned by
the insurance company and not by the contract owner. It is unclear under what
circumstances an investor is considered to have enough control over the assets
in the separate account to be considered the owner of the assets for tax
purposes.
The IRS has issued several rulings discussing investor control. These rulings
say that certain incidents of ownership by the contract owner, such as the
ability to select and control investments in a separate account, will cause the
contract owner to be treated as the owner of the assets for tax purposes.
In its explanation of the diversification regulations, the Treasury Department
recognized that the temporary regulations "do not provide guidance concerning
the circumstances in which investor control of the investments of a segregated
asset account may cause the investor, rather than the insurance company, to be
treated as the owner of the assets in the account." The explanation further
indicates that "the temporary regulations provide that in appropriate cases a
segregated asset account may include multiple sub-accounts, but do not specify
the extent to which policyholders may direct their investments to particular
sub-accounts without being treated as the owners of the underlying assets.
Guidance on this and other issues will be provided in regulations or revenue
rulings under Section 817(d), relating to the definition of variable contract."
The final regulations issued under Section 817 did not provide guidance
regarding investor control, and as of the date of this prospectus, guidance has
yet to be issued. We do not know if additional guidance will be issued. If
guidance is issued, we do not know if it will have a retroactive effect.
Due to the lack of specific guidance on investor control, there is some
uncertainty about when a contract owner is considered the owner of the assets
for tax purposes. We reserve the right to modify the contract, as necessary, to
prevent you from being considered the owner of assets in the separate account.
D. FEDERAL INCOME TAX WITHHOLDING
Any portion of a distribution that is (or is deemed to be) current taxable
income to the Contract Owner will be subject to federal income tax withholding
and reporting under the Code. Generally, however, a Contract Owner may elect not
to have income taxes withheld or to have income taxes withheld at a different
rate by filing a completed election form with us. Election forms will be
provided at the time distributions are requested.
E. GENERAL PROVISIONS AFFECTING QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to Appendix I for information relative to the types of plans
for which it may be used and the general explanation of the tax features of such
plans.
F. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal income
tax consequences to annuity purchasers that are U.S. citizens or residents.
Purchasers that are not U.S. citizens or residents will generally be subject to
U.S. federal income tax and withholding on annuity distributions at a 30% rate,
unless a lower treaty rate applies. In addition, purchasers may be subject to
state premium tax, other state and/or municipal taxes, and taxes that may be
imposed by the purchaser's country of citizenship or residence. Prospective
purchasers are advised to consult with a qualified tax adviser regarding U.S.,
state, and foreign taxation with respect to an annuity purchase.
G. GENERATION-SKIPPING TRANSFERS
Under certain circumstances, the Internal Revenue Code may impose a
"generation-skipping transfer tax" when all or part of an annuity is transferred
to, or a death benefit is paid to, an individual two or more generations younger
than the owner. Federal tax law may require us to deduct the tax from your
contract, or from any applicable payment, and pay it directly to the Internal
Revenue Service.
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34 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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MISCELLANEOUS
HOW CONTRACTS ARE SOLD
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account. HSD
is an affiliate of Hartford. Both HSD and Hartford are ultimately controlled by
The Hartford Financial Services Group, Inc. The principal business address of
HSD is the same as that of Hartford.
The securities will be sold by salesperson of HSD who represent Hartford as
insurance and variable annuity agents and who are registered representatives of
Broker-Dealers who have entered into distribution agreements with HSD.
HSD is registered with the Commission under the Securities Exchange Act of 1934
as a Broker-Dealer and is a member of the National Association of Securities
Dealers, Inc.
Commissions will be paid by Hartford and will not be more than 7% of premium
payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.
Broker-dealers or financial institutions are compensated according to a schedule
set forth by HSD and any applicable rules or regulations for variable insurance
compensation. Compensation is generally based on premium payments made by
policyholders or contract owners. This compensation is usually paid from the
sales charges described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or contract
owners to purchase, hold or Surrender variable insurance products.
The Contract may be sold directly to certain individuals under certain
circumstances that do not involve payment of any sales compensation to a
registered representative. In such case, Hartford will credit the Contract with
an additional 5.0% of the Premium Payment. This additional percentage of Premium
Payment in no way affects present or future charges, rights, benefits or current
values of other Contract Owners. The following class of individuals are eligible
for this feature: (1) current or retired officers, directors, trustees and
employees (and their families) of the ultimate parent and affiliates of
Hartford; and (2) employees and registered representatives (and their families)
of registered broker-dealers (or their financial institutions) that have a sales
agreement with Hartford and its principal underwriter to sell the Contracts.
LEGAL MATTERS
There are no material legal proceedings pending to which the Separate Account is
a party.
Counsel with respect to federal laws and regulations applicable to the issue and
sale of the Contracts and with respect to Connecticut law is Lynda Godkin,
Senior Vice President, General Counsel and Corporate Secretary, Hartford Life
and Annuity Insurance Company, P.O. Box 2999, Hartford, Connecticut 06104-2999.
EXPERTS
The audited financial statements included in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
Hartford Life and Annuity Insurance Company which states the statutory financial
statements are presented in accordance with statutory accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
and the State of Connecticut Insurance Department, and are not presented in
accordance with generally accepted accounting principles. The principal business
address of Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut
06103.
MORE INFORMATION
You may call your Representative if you have any questions or write or call us
at the address below:
Hartford Life and Annuity Insurance Company
Attn: Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Telephone: 1-800-862-6668 (Contract Owners)
1-800-862-7155 (Registered Representatives)
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 35
- --------------------------------------------------------------------------------
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
SECTION
<S> <C>
- ----------------------------------------------------------------------
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- ----------------------------------------------------------------------
SAFEKEEPING OF ASSETS
- ----------------------------------------------------------------------
INDEPENDENT PUBLIC ACCOUNTANTS
- ----------------------------------------------------------------------
DISTRIBUTION OF CONTRACTS
- ----------------------------------------------------------------------
CALCULATION OF YIELD AND RETURN
- ----------------------------------------------------------------------
PERFORMANCE COMPARISONS
- ----------------------------------------------------------------------
FINANCIAL STATEMENTS
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
36 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED
RETIREMENT PLANS
This summary does not attempt to provide more than general information about the
federal income tax rules associated with use of a Contract by a tax-qualified
retirement plan. Because of the complexity of the federal tax rules, owners,
participants and beneficiaries are encouraged to consult their own tax advisors
as to specific tax consequences.
The federal tax rules applicable to owners of Contracts under tax-qualified
retirement plans vary according to the type of plan as well as the terms and
conditions of the plan itself. Contract owners, plan participants and
beneficiaries are cautioned that the rights and benefits of any person may be
controlled by the terms and conditions of the tax-qualified retirement plan
itself, regardless of the terms and conditions of a Contract. We are not bound
by the terms and conditions of such plans to the extent such terms conflict with
a Contract, unless we specifically consent to be bound.
Some tax-qualified retirement plans are subject to distribution and other
requirements that are not incorporated into our administrative procedures.
Contract owners, participants and beneficiaries are responsible for determining
that contributions, distributions and other transactions comply with applicable
law. Tax penalties may apply to transactions with respect to tax-qualified
retirement plans if applicable federal income tax rules and restrictions are not
carefully observed.
We do not currently offer the Contracts in connection with all of the types of
tax-qualified retirement plans discussed below and may not offer the Contracts
for all types of tax-qualified retirement plans in the future.
1. TAX-QUALIFIED PENSION OR PROFIT-SHARING PLANS -- Eligible employers can
establish certain tax-qualified pension and profit-sharing plans under
section 401 of the Code. Rules under section 401(k) of the Code govern certain
"cash or deferred arrangements" under such plans. Rules under section 408(k)
govern "simplified employee pensions". Tax-qualified pension and profit-sharing
plans are subject to limitations on the amount that may be contributed, the
persons who may be eligible to participate and the time when distributions must
commence. Employers intending to use the Contracts in connection with
tax-qualified pension or profit-sharing plans should seek competent tax and
other legal advice.
2. TAX SHELTERED ANNUITIES UNDER SECTION 403(b) -- Public schools and certain
types of charitable, educational and scientific organizations, as specified in
section 501(c)(3) of the Code, can purchase tax-sheltered annuity contracts for
their employees. Tax-deferred contributions can be made to tax-sheltered annuity
contracts under section 403(b) of the Code, subject to certain limitations.
Generally, such contributions may not exceed the lesser of $10,500 (indexed) or
20% of the employee's "includable compensation" for such employee's most recent
full year of employment, subject to other adjustments. Special provisions under
the Code may allow some employees to elect a different overall limitation.
Tax-sheltered annuity programs under section 403(b) are subject to a PROHIBITION
AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO CONTRIBUTIONS MADE
PURSUANT TO A SALARY REDUCTION AGREEMENT, unless such distribution is made:
- - after the participating employee attains age 59 1/2;
- - upon separation from service;
- - upon death or disability; or
- - in the case of hardship (and in the case of hardship, any income attributable
to such contributions may not be distributed).
Generally, the above restrictions do not apply to distributions attributable to
cash values or other amounts held under a section 403(b) contract as of
December 31, 1988.
3. DEFERRED COMPENSATION PLANS UNDER SECTION 457 -- A governmental employer or a
tax-exempt employer other than a governmental unit can establish a Deferred
Compensation Plan under section 457 of the Code. For these purposes, a
"governmental employer" is a State, a political subdivision of a State, or an
agency or an instrumentality of a State or political subdivision of a State.
Employees and independent contractors performing services for a governmental or
tax-exempt employer can elect to have contributions made to a Deferred
Compensation Plan of their employer in accordance with the employer's plan and
section 457 of the Code.
Deferred Compensation Plans that meet the requirements of section 457(b) of the
Code are called "eligible" Deferred Compensation Plans. Section 457(b) limits
the amount of contributions that can be made to an eligible Deferred
Compensation Plan on behalf of a participant. Generally, the limitation on
contributions is 33 1/3% of a participant's includable compensation (typically
25% of gross compensation) or, for 2000, $8,000 (indexed), whichever is less.
The plan may provide for additional "catch-up" contributions during the three
taxable years ending before the year in which the participant attains normal
retirement age.
All of the assets and income of an eligible Deferred Compensation Plan of a
governmental employer must be held in trust for the exclusive benefit of
participants and their beneficiaries. For this purpose, custodial accounts and
certain annuity contracts are treated as trusts. The requirement of a trust does
not apply to amounts under a Deferred Compensation Plan of a tax-exempt
(non-governmental) employer. In addition, the requirement of a trust does not
apply to amounts under a Deferred Compensation Plan of a governmental employer
if the Deferred Compensation Plan is not an eligible plan within the meaning of
section 457(b) of the Code. In the absence of such a trust,
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 37
- --------------------------------------------------------------------------------
amounts under the plan will be subject to the claims of the employer's general
creditors.
In general, distributions from an eligible Deferred Compensation Plan are
prohibited under section 457 of the Code unless made after the participating
employee:
- - attains age 70 1/2,
- - separates from service,
- - dies, or
- - suffers an unforeseeable financial emergency as defined in the Code.
Under present federal tax law, amounts accumulated in a Deferred Compensation
Plan under section 457 of the Code cannot be transferred or rolled over on a
tax-deferred basis except for certain transfers to other Deferred Compensation
Plans under section 457 in limited cases.
4. INDIVIDUAL RETIREMENT ANNUITIES ("IRAS") UNDER SECTION 408
TRADITIONAL IRAS -- Eligible individuals can establish individual retirement
programs under section 408 of the Code through the purchase of an IRA. Section
408 imposes limits with respect to IRAs, including limits on the amount that may
be contributed to an IRA, the amount of such contributions that may be deducted
from taxable income, the persons who may be eligible to contribute to an IRA,
and the time when distributions commence from an IRA. Distributions from certain
tax-qualified retirement plans may be "rolled-over" to an IRA on a tax-deferred
basis.
SIMPLE IRAS -- Eligible employees may establish SIMPLE IRAs in connection with a
SIMPLE IRA plan of an employer under section 408(p) of the Code. Special
rollover rules apply to SIMPLE IRAs. Amounts can be rolled over from one SIMPLE
IRA to another SIMPLE IRA. However, amounts can be rolled over from a SIMPLE IRA
to a Traditional IRA only after two years have expired since the employee first
commenced participation in the employer's SIMPLE IRA plan. Amounts cannot be
rolled over to a SIMPLE IRA from a qualified plan or a Traditional IRA. Hartford
is a non-designated financial institution for purposes of the SIMPLE IRA rules.
ROTH IRAS -- Eligible individuals may establish Roth IRAs under section 408A of
the Code. Contributions to a Roth IRA are not deductible. Subject to special
limitations, a Traditional IRA may be converted into a Roth IRA or a
distribution from a Traditional IRA may be rolled over to a Roth IRA. However, a
conversion or a rollover from a Traditional IRA to a Roth IRA is not excludable
from gross income. If certain conditions are met, qualified distributions from a
Roth IRA are tax-free.
5. FEDERAL TAX PENALTIES AND WITHHOLDING -- Distributions from tax-qualified
retirement plans are generally taxed as ordinary income under section 72 of the
Code. Under these rules, a portion of each distribution may be excludable from
income. The excludable amount is the portion of the distribution that bears the
same ratio as the after-tax contributions bear to the expected return.
(a) PENALTY TAX ON EARLY DISTRIBUTIONS Section 72(t) of the Code imposes an
additional penalty tax equal to 10% of the taxable portion of a distribution
from certain tax-qualified retirement plans. However, the 10% penalty tax
does not apply to a distributions that is:
- - Made on or after the date on which the employee reaches age 59 1/2;
- - Made to a beneficiary (or to the estate of the employee) on or after the death
of the employee;
- - Attributable to the employee's becoming disabled (as defined in the Code);
- - Part of a series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the employee or the
joint lives (or joint life expectancies) of the employee and his or her
designated beneficiary;
- - Except in the case of an IRA, made to an employee after separation from
service after reaching age 55; or
- - Not greater than the amount allowable as a deduction to the employee for
eligible medical expenses during the taxable year.
IN ADDITION, THE 10% PENALTY TAX DOES NOT APPLY TO A DISTRIBUTION FROM AN IRA
THAT IS:
- - Made after separation from employment to an unemployed IRA owner for health
insurance premiums, if certain conditions are met;
- - Not in excess of the amount of certain qualifying higher education expenses,
as defined by section 72(t)(7) of the Code; or
- - A qualified first-time homebuyer distribution meeting the requirements
specified at section 72(t)(8) of the Code.
If you are a participant in a SIMPLE IRA plan, you should be aware that the 10%
penalty tax is increased to 25% with respect to non-exempt early distributions
made from your SIMPLE IRA during the first two years following the date you
first commenced participation in any SIMPLE IRA plan of your employer.
(b) MINIMUM DISTRIBUTION PENALTY TAX If the amount distributed is less than the
minimum required distribution for the year, the Participant is subject to a
50% penalty tax on the amount that was not properly distributed.
An individual's interest in a tax-qualified retirement plan generally must be
distributed, or begin to be distributed, not later than the Required Beginning
Date. Generally, the Required Beginning Date is April 1 of the calendar year
following the later of:
- - the calendar year in which the individual attains age 70 1/2; or
- - the calendar year in which the individual retires from service with the
employer sponsoring the plan.
The Required Beginning Date for an individual who is a five (5) percent owner
(as defined in the Code), or who is the owner
<PAGE>
38 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
of an IRA, is April 1 of the calendar year following the calendar year in which
the individual attains age 70 1/2.
The entire interest of the Participant must be distributed beginning no later
than the Required Beginning Date over:
- - the life of the Participant or the lives of the Participant and the
Participant's designated beneficiary, or
- - over a period not extending beyond the life expectancy of the Participant or
the joint life expectancy of the Participant and the Participant's designated
beneficiary.
Each annual distribution must equal or exceed a "minimum distribution amount"
which is determined by dividing the account balance by the applicable life
expectancy. This account balance is generally based upon the account value as of
the close of business on the last day of the previous calendar year. In
addition, minimum distribution incidental benefit rules may require a larger
annual distribution.
If an individual dies before reaching his or her Required Beginning Date, the
individual's entire interest must generally be distributed within five years of
the individual's death. However, this rule will be deemed satisfied, if
distributions begin before the close of the calendar year following the
individual's death to a designated beneficiary and distribution is over the life
of such designated beneficiary (or over a period not extending beyond the life
expectancy of the beneficiary). If the beneficiary is the individual's surviving
spouse, distributions may be delayed until the individual would have attained
age 70 1/2.
If an individual dies after reaching his or her Required Beginning Date or after
distributions have commenced, the individual's interest must generally be
distributed at least as rapidly as under the method of distribution in effect at
the time of the individual's death.
(c) WITHHOLDING In general, regular wage withholding rules apply to
distributions from IRAs and plans described in section 457 of the Code.
Periodic distributions from other tax-qualified retirement plans that are
made for a specified period of 10 or more years or for the life or life
expectancy of the participant (or the joint lives or life expectancies of
the participant and beneficiary) are generally subject to federal income tax
withholding as if the recipient were married claiming three exemptions. The
recipient of periodic distributions may generally elect not to have
withholding apply or to have income taxes withheld at a different rate by
providing a completed election form.
Mandatory federal income tax withholding at a flat rate of 20% will generally
apply to other distributions from such other tax-qualified retirement plans
unless such distributions are:
- - the non-taxable portion of the distribution;
- - required minimum distributions; or
- - direct transfer distributions.
Direct transfer distributions are direct payments to an IRA or to another
eligible retirement plan under Code section 401(a)(31).
Certain states require withholding of state taxes when federal income tax is
withheld.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 39
- --------------------------------------------------------------------------------
APPENDIX II -- OPTIONAL DEATH BENEFIT -- EXAMPLES
EXAMPLE 1
Assume that you make a Premium Payment of $100,000. On the first Contract
Anniversary assume your Contract Value is $108,000.00. The Interest Accumulation
Value is $105,000 or 5% accumulation on the $100,000 Premium Payment.
<TABLE>
<C> <S>
$100,000 Premium Payment
$ 5,000 Interest of 5%
- --------
$105,000 Interest Accumulation Value
</TABLE>
If you request a partial Surrender of $10,000 the next day, your Interest
Accumulation Value will change. The adjustment for the partial Surrender is
determined by dividing the partial Surrender amount by the Contract Value prior
to the Surrender and multiplying that amount by the Interest Accumulation Value
prior to the Surrender. To determine the new Interest Accumulation Value, that
total is then subtracted from the Interest Accumulation Value prior to the
Surrender.
<TABLE>
<C> <S>
$ 10,000 partial Surrender divided by
$108,000 Contract Value prior to Surrender equals
.09259 multiplied by
$105,000 Interest Accumulation Value for a total of
$ 9,722 to be deducted from the Interest Accumulation Value equals
$ 95,278 the new Interest Accumulation Value
</TABLE>
EXAMPLE 2
Assume that you make a Premium Payment of $100,000. On the first Contract
Anniversary assume your Contract Value is $92,000.00. The Interest Accumulation
Value is $105,000 or 5% accumulation on the $100,000 Premium Payment.
<TABLE>
<C> <S>
$100,000 Premium Payment
$ 5,000 Interest of 5%
- --------
$105,000 Interest Accumulation Value
</TABLE>
If you request a partial Surrender of $10,000 the next day, your Interest
Accumulation Value will change. The adjustment for the partial Surrender is
determined by dividing the partial Surrender amount by the Contract Value prior
to the Surrender and multiplying that amount by the Interest Accumulation Value
prior to the Surrender. To determine the new Interest Accumulation Value, that
total is then subtracted from the Interest Accumulation Value prior to the
Surrender.
<TABLE>
<C> <S>
$ 10,000 partial Surrender divided by
$ 92,000 Contract Value prior to Surrender equals
.10870 multiplied by
$105,000 Interest Accumulation Value for a total of
$ 11,413 to be deducted from the Interest Accumulation Value equals
$ 93,587 the New Interest Accumulation Value
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
This form must be completed for all tax sheltered annuities.
SECTION 403(b)(11) ACKNOWLEDGMENT FORM
The variable annuity Contract which you have recently purchased is subject to
certain restrictions imposed by the Tax Reform Act of 1986. Contributions to the
Contract after December 31, 1988 and any increases in cash value after
December 31, 1988 may not be distributed to you unless you have:
- - attained age 59 1/2,
- - separated from service,
- - died, or
- - become disabled.
Distributions of post December 31, 1988 contributions (excluding any income
thereon) may also be made if you have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made prior to age 59 1/2
because of financial hardship or separation from service.
Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than your annuity. Please refer to your Plan.
Please complete the following and return to:
Hartford Life and Annuity Insurance Company
Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Name of Contract Owner/Participant: ___________________________________________
Address: ______________________________________________________________________
City or Plan/School District: _________________________________________________
Date: _________________________________________________________________________
Contract No.: _________________________________________________________________
Signature: ____________________________________________________________________
<PAGE>
To obtain a Statement of Additional Information, please complete the form below
and mail to:
Hartford Life and Annuity Insurance Company
Attn: Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Please send a Statement of Additional Information for Hartford Leaders Solution
variable annuity to me at the following address:
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City/State Zip Code
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT SEVEN
HARTFORD LEADERS SOLUTION
This Statement of Additional Information is not a prospectus. The information
contained herein should be read in conjunction with the prospectus.
To obtain a prospectus, send a written request to Hartford Life Insurance
Company Attn: Investment Product Services, P.O. Box 5085, Hartford,
Connecticut 06102-5085.
Date of Prospectus: May 1, 2000.
Date of Statement of Additional Information: May 1, 2000.
333-76419
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY ...........
SAFEKEEPING OF ASSETS ................................................
INDEPENDENT PUBLIC ACCOUNTANTS .......................................
DISTRIBUTION OF CONTRACTS.............................................
CALCULATION OF YIELD AND RETURN.......................................
PERFORMANCE COMPARISONS...............................................
FINANCIAL STATEMENTS .................................................
<PAGE>
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both individual
and group, in all states of the United States, the District of Columbia and
Puerto Rico, except New York. On January 1, 1998, Hartford's name changed from
ITT Hartford Life and Annuity Insurance Company to Hartford Life and Annuity
Insurance Company. We were originally incorporated under the laws of Wisconsin
on January 9, 1956, and subsequently redomiciled to Connecticut. Our offices are
located in Simsbury, Connecticut; however, our mailing address is P.O. Box 2999,
Hartford, CT 06104-2999. We are ultimately controlled by The Hartford Financial
Services Group, Inc., one of the largest financial service providers in the
United States.
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Rating Agency Effective Rating Basis of Rating
Date of Rating
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A.M. Best and Company, Inc. 1/1/99 A+ Financial performance
- -----------------------------------------------------------------------------------------------
Standard & Poor's 8/1/99 AA Insurer financial strength
- -----------------------------------------------------------------------------------------------
Duff & Phelps 7/1/99 AA+ Claims paying ability
- -----------------------------------------------------------------------------------------------
</TABLE>
SAFEKEEPING OF ASSETS
Title to the assets of the Separate Account is held by Hartford. The assets are
kept physically segregated and are held separate and apart from Hartford's
general corporate assets. Records are maintained of all purchases and
redemptions of Fund shares held in each of the Sub-Accounts.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited financial statements included in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
Hartford Life and Annuity Insurance Company which states the statutory financial
statements are presented in accordance with statutory accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
and the State of Connecticut Insurance Department, and are not presented in
accordance with generally accepted accounting principles. The principal business
address of Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut
06103.
<PAGE>
DISTRIBUTION OF CONTRACTS
HOW CONTRACTS ARE SOLD
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account. HSD
is an affiliate of Hartford. Both HSD and Hartford are ultimately controlled by
The Hartford Financial Services Group, Inc. The principal business address of
HSD is the same as that of Hartford.
The securities will be sold by salespersons of HSD who represent Hartford as
insurance and variable annuity agents and who are registered representatives of
Broker-Dealers who have entered into distribution agreements with HSD.
HSD is registered with the Commission under the Securities Exchange Act of 1934
as a Broker-Dealer and is a member of the National Association of Securities
Dealers, Inc.
Commissions will be paid by Hartford and will not be more than 7% of premium
payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.
Broker-dealers or financial institutions are compensated according to a schedule
set forth by HSD and any applicable rules or regulations for variable insurance
compensation. Compensation is generally based on premium payments made by
policyholders or contract owners. This compensation is usually paid from the
sales charges described in the prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or contract
owners to purchase, hold or Surrender variable insurance products.
Hartford currently pays HSD underwriting commissions for its role as Principal
Underwriter of all variable annuities associated with this Separate Account. For
the past three years, the aggregate dollar amount of underwriting commissions
paid to and retained by HSD in its role as Principal Underwriter has been: 1999:
$16,156,318.29; 1998: $0 and 1997: $0. HSD has retained none of these
commissions.
<PAGE>
CALCULATION OF YIELD AND RETURN
YIELD OF A MONEY MARKET SUB-ACCOUNT. As summarized in the prospectus under the
heading "Performance Related Information," the yield of a Money Market
Sub-Account for a seven day period (the "base period") will be computed by
determining the "net change in value" (calculated as set forth below) of a
hypothetical account having a balance of one accumulation unit of the
Sub-Account at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from Contract Owner accounts, and dividing the difference
by the value of the account at the beginning of the base period to obtain the
base period return, and then multiplying the base period return by 365/7 with
the resulting yield figure carried to the nearest hundredth of one percent. Net
changes in value of a hypothetical account will include net investment income of
the account (accrued daily dividends as declared by the underlying funds, less
daily expense charges of the account) for the period, but will not include
realized gains or losses or unrealized appreciation or depreciation on the
underlying fund shares.
The effective yield is calculated by compounding the base period return by
adding 1, raising the sum to a power equal to 365/7 and subtracting 1 from the
result, according to the following formula:
Effective Yield = [(Base Period Return + 1)TO THE POWER OF 365/7] - 1
A MONEY MARKET SUB-ACCOUNT'S YIELD AND EFFECTIVE YIELD WILL VARY IN RESPONSE TO
FLUCTUATIONS IN INTEREST RATES AND IN THE EXPENSES OF THE SUB-ACCOUNT. THE
CURRENT YIELD AND EFFECTIVE YIELD REFLECT RECURRING CHARGES ON THE SEPARATE
ACCOUNT LEVEL, INCLUDING THE MAXIMUM ANNUAL MAINTENANCE FEE.
YIELD AND EFFECTIVE YIELD FOR THE SEVEN-DAY PERIOD ENDING DECEMBER 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
SUB-ACCOUNT YIELD EFFECTIVE YIELD
- ------------------------------------------------------------------------------
<S> <C> <C>
Hartford Money Market HLS Fund 3.94% 4.02%
- ------------------------------------------------------------------------------
</TABLE>
YIELD OF SUB-ACCOUNTS. As summarized in the prospectus under the heading
"Performance Related Information," yields of Sub-Accounts will be computed by
annualizing a recent month's net investment income, divided by a Fund share's
net asset value on the last trading day of that month. Net changes in the value
of a hypothetical account will assume the change in the underlying mutual fund's
"net asset value per share" for the same period in addition to the daily expense
charge assessed, at the sub-account level for the respective period. The
Sub-Accounts' yields will vary from time to time depending upon market
conditions and, the composition of the underlying funds' portfolios. Yield
should also be considered relative to changes in the
<PAGE>
value of the Sub-Accounts' shares and to the relative risks associated with the
investment objectives and policies of the underlying Fund.
THE YIELD REFLECTS RECURRING CHARGES ON THE SEPARATE ACCOUNT LEVEL, INCLUDING
THE ANNUAL MAINTENANCE FEE.
Yield calculations of the Sub-Accounts used for illustration purposes reflect
the interest earned by the Sub-Accounts, less applicable asset charges assessed
against a Contract Owner's account over the base period. Yield quotations based
on a 30 day period were computed by dividing the dividends and interest earned
during the period by the maximum offering price per unit on the last day of the
period, according to the following formula:
Example:
Current Yield Formula for the Sub-Account 2[((A-B)/(CD) + 1)TO THE
POWER OF 6 - 1]
Where A = Dividends and interest earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of units outstanding during the
period that were entitled to receive dividends.
D = The maximum offering price per unit on the last day of the
period.
YIELD QUOTATION BASED ON A 30-DAY PERIOD ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
SUB-ACCOUNT YIELD
- ----------------------------------------------------------------------------
<S> <C>
American Funds Bond Fund N/A
- ----------------------------------------------------------------------------
MFS High Yield Series N/A
- ----------------------------------------------------------------------------
</TABLE>
At any time in the future, yields and total return may be higher or lower than
past yields and there can be no assurance that any historical results will
continue.
The method of calculating yields described above for these Sub-Accounts differs
from the method used by the Sub-Accounts prior to May 1, 1988. The denominator
of the fraction used to calculate yield was previously the average unit value
for the period calculated. That denominator will hereafter be the unit value of
the Sub-Accounts on the last trading day of the period calculated.
CALCULATION OF TOTAL RETURN. As summarized in the prospectus under the heading
"Performance Related Information," total return is a measure of the change in
value of an investment in a Sub-Account over the period covered and assumes that
the Optional
<PAGE>
Death Benefit has not been elected. The formula for total return used herein
includes three steps: (1) calculating the value of the hypothetical initial
investment of $1,000 as of the end of the period by multiplying the total number
of units owned at the end of the period by the unit value per unit on the last
trading day of the period; (2) assuming redemption at the end of the period and
deducting any applicable contingent deferred sales charge and (3) dividing this
account value for the hypothetical investor by the initial $1,000 investment and
annualizing the result for periods of less than one year. Standardized total
return will be calculated since the inception of the Separate Account for one
year, five years and ten years or some other relevant periods if a Sub-Account
has not been in existence for at least ten years.
The following are the standardized average annual total return quotations for
the Sub-Accounts.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
SEPARATE SINCE INCEPTION OF
SUB-ACCOUNT ACCOUNT 1 YEAR 5 YEAR 10 YEAR SEPARATE
INCEPTION DATE ACCOUNT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Merrill Lynch Global Growth 04/01/1999 N/A N/A N/A 21.44%
Focus Fund
- -------------------------------------------------------------------------------------------------------------------
Mercury V.I. U.S. Large Cap Fund 04/30/1999 N/A N/A N/A 9.81%
- -------------------------------------------------------------------------------------------------------------------
American Funds Asset Allocation 04/01/1999 N/A N/A N/A -6.94%
Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Bond Fund 04/01/1999 N/A N/A N/A -9.13%
- -------------------------------------------------------------------------------------------------------------------
American Funds Global Growth 04/01/1999 N/A N/A N/A 43.79%
Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Global Small 04/01/1999 N/A N/A N/A 61.73%
Capitalization Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Growth Fund 04/01/1999 N/A N/A N/A 32.45%
- -------------------------------------------------------------------------------------------------------------------
American Funds Growth-Income 04/01/1999 N/A N/A N/A -2.64%
Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds International 04/01/1999 N/A N/A N/A 50.90%
Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds New World Fund 04/01/1999 N/A N/A N/A 7.46%
- -------------------------------------------------------------------------------------------------------------------
Franklin Real Estate Fund 04/01/1999 N/A N/A N/A -12.13%
- -------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund 04/01/1999 N/A N/A N/A 82.62%
- -------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
SEPARATE SINCE INCEPTION OF
SUB-ACCOUNT ACCOUNT 1 YEAR 5 YEAR 10 YEAR SEPARATE
INCEPTION DATE ACCOUNT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Franklin Strategic Income 07/01/1999 N/A N/A N/A -8.11%
Securities Fund (FORMERLY
FRANKLIN STRATEGIC INCOME FUND)
- -------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS Fund 04/01/1999 N/A N/A N/A -7.39%
- -------------------------------------------------------------------------------------------------------------------
MFS Capital Opportunities Series 04/01/1999 N/A N/A N/A 29.20%
- -------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series 04/01/1999 N/A N/A N/A 57.45%
- -------------------------------------------------------------------------------------------------------------------
MFS Global Equity Series 05/03/1999 N/A N/A N/A 12.69%
- -------------------------------------------------------------------------------------------------------------------
MFS Growth Series 05/03/1999 N/A N/A N/A 28.71%
- -------------------------------------------------------------------------------------------------------------------
MFS Growth with Income Series 04/01/1999 N/A N/A N/A -5.62%
- -------------------------------------------------------------------------------------------------------------------
MFS High Income Series 04/01/1999 N/A N/A N/A -9.71%
- -------------------------------------------------------------------------------------------------------------------
MFS New Discovery Series 04/01/1999 N/A N/A N/A 62.97%
- -------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 04/01/1999 N/A N/A N/A -7.91%
- -------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund 04/01/1999 N/A N/A N/A -0.62%
- -------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund 04/01/1999 N/A N/A N/A 8.85%
(FORMERLY TEMPLETON ASSET
ALLOCATION FUND)
- -------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets 04/01/1999 N/A N/A N/A 29.13%
Securities Fund (FORMERLY
TEMPLETON DEVELOPING MARKETS
EQUITY FUND)
- -------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities 04/01/1999 N/A N/A N/A 8.69%
Fund (FORMERLY TEMPLETON GLOBAL
GROWTH FUND)
- -------------------------------------------------------------------------------------------------------------------
Templeton International 04/01/1999 N/A N/A N/A 10.25%
Securities Fund (FORMERLY
TEMPLETON INTERNATIONAL FUND)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Performance figures above do not reflect any deductions for Optional Death
Benefit charges. Performance would have been lower had the Optional Death
Benefit been available and been chosen.
<PAGE>
In addition to the standardized total return, the Sub-Account may advertise a
non-standardized total return. This figure will usually be calculated since the
inception of the underlying fund for one year, five years, and ten years or
other periods. Non-standardized total return is measured in the same manner as
the standardized total return described above, except that the contingent
deferred sales charge and the Annual Maintenance Fee are not deducted.
Therefore, non-standardized total return for a Sub-Account is higher than
standardized total return for a Sub-Account. The following are the
non-standardized annualized total return quotations for the Sub-Accounts.
NON-STANDARDIZED ANNUALIZED TOTAL RETURN THAT PRE-DATE THE
INCEPTION DATE OF THE SEPARATE ACCOUNT FOR YEAR ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FUND INCEPTION SINCE INCEPTION OF
SUB-ACCOUNT DATE 1 YEAR 5 YEAR 10 YEAR FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Merrill Lynch Global Growth 06/05/1998 36.76% N/A N/A 27.65%
Focus Fund
- -------------------------------------------------------------------------------------------------------------------
Mercury V.I. U.S. Large Cap Fund 04/30/1999 N/A N/A N/A 19.81%
- -------------------------------------------------------------------------------------------------------------------
American Funds Asset Allocation 08/01/1989 5.43% 15.08% 10.31% N/A
Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Bond Fund 01/02/1996 1.13% N/A N/A 4.03%
- -------------------------------------------------------------------------------------------------------------------
American Funds Global Growth 04/30/1997 67.31% N/A N/A 36.14%
Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Global Small 04/30/1998 88.71% N/A N/A 47.54%
Capitalization Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds Growth Fund 02/08/1984 55.09% 31.07% 19.36% N/A
- -------------------------------------------------------------------------------------------------------------------
American Funds Growth-Income 02/08/1984 9.65% 19.27% 12.74% N/A
Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds International 05/01/1990 73.53% 23.25% N/A 14.84%
Fund
- -------------------------------------------------------------------------------------------------------------------
American Funds New World Fund 06/17/1999 N/A N/A N/A 17.46%
- -------------------------------------------------------------------------------------------------------------------
Franklin Real Estate Fund 01/24/1989 -7.66% 6.47% 7.48 N/A
- -------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund 11/01/1995 93.63% N/A N/A 28.51%
- -------------------------------------------------------------------------------------------------------------------
Franklin Strategic Income 07/01/1999 N/A N/A N/A 1.89%
Securities Fund (FORMERLY
FRANKLIN STRATEGIC INCOME FUND)
- -------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FUND INCEPTION SINCE INCEPTION OF
SUB-ACCOUNT DATE 1 YEAR 5 YEAR 10 YEAR FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Hartford Money Market HLS Fund 06/30/1980 3.44% 3.82% 3.64% N/A
- -------------------------------------------------------------------------------------------------------------------
MFS Capital Opportunities Series 08/14/1996 45.39% N/A N/A 30.40%
- -------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series 07/24/1995 74.26% N/A N/A 34.51%
- -------------------------------------------------------------------------------------------------------------------
MFS Global Equity Series 05/03/1999 N/A N/A N/A 22.69%
- -------------------------------------------------------------------------------------------------------------------
MFS Growth Series 05/03/1999 N/A N/A N/A 38.71%
- -------------------------------------------------------------------------------------------------------------------
MFS Growth with Income Series 10/09/1995 5.20% N/A N/A 19.43%
- -------------------------------------------------------------------------------------------------------------------
MFS High Income Series 07/26/1995 4.96% N/A N/A 6.73%
- -------------------------------------------------------------------------------------------------------------------
MFS New Discovery Series 05/01/1998 71.00% N/A N/A 38.94%
- -------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 01/03/1995 1.62% N/A N/A 13.80%
- -------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund 11/01/1996 12.01% N/A N/A 9.31%
- -------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund 08/24/1988 21.93% 15.50% 11.53% N/A
(FORMERLY TEMPLETON ASSET
ALLOCATION FUND)
- -------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets 03/15/1994 52.49% 5.23% N/A 3.49%
Securities Fund (FORMERLY
TEMPLETON DEVELOPING MARKETS
EQUITY FUND)
- -------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities 03/15/1994 19.16% 13.77% N/A 12.15%
Fund (FORMERLY TEMPLETON GLOBAL
GROWTH FUND)
- -------------------------------------------------------------------------------------------------------------------
Templeton International 05/01/1992 21.52% 15.40% N/A 13.64%
Securities Fund (FORMERLY
TEMPLETON INTERNATIONAL FUND)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Performance figures above do not reflect any deductions for Optional Death
Benefit charges. Performance would have been lower had the Optional Death
Benefit been available and been chosen.
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. Each Sub-Account may from time to time include its total
return in advertisements or in information furnished to present or prospective
shareholders. Each Sub-Account may from time to time include its yield and total
return
<PAGE>
in advertisements or information furnished to present or prospective
shareholders. Each Sub-Account may from time to time include in advertisements
its total return (and yield in the case of certain Sub-Accounts) the ranking of
those performance figures relative to such figures for groups of other annuities
analyzed by Lipper Analytical Services and Morningstar, Inc. as having the same
investment objectives.
The total return and yield may also be used to compare the performance of the
Sub-Accounts against certain widely acknowledged outside standards or indices
for stock and bond market performance. The Standard & Poor's Composite Index of
500 Stocks (the "S&P 500") is a market value-weighted and unmanaged index
showing the changes in the aggregate market value of 500 stocks relative to the
base period 1941-43. The S&P 500 is composed almost entirely of common stocks of
companies listed on the New York Stock Exchange, although the common stocks of a
few companies listed on the American Stock Exchange or traded over-the-counter
are included. The 500 companies represented include 400 industrial, 60
transportation and 40 financial services concerns. The S&P 500 represents about
80% of the market value of all issues traded on the New York Stock Exchange.
The NASDAQ-OTC Composite Price Index (The "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of approximately 3,500 stocks relative to the base measure of 100.00 on
February 5, 1971. The NASDAQ Index is composed entirely of common stocks of
companies traded over-the-counter and often through the National Association of
Securities Dealers Automated Quotations ("NASDAQ") system. Only those
over-the-counter stocks having only one market maker or traded on exchanges are
excluded.
The Morgan Stanley Capital International EAFE Index (the "EAFE Index") is an
unmanaged index, which includes over 1,000 companies representing the stock
markets of Europe, Australia, New Zealand, and the Far East. The EAFE Index is
weighted by market capitalization, and therefore, it has a heavy representation
in countries with large stock markets, such as Japan.
The Shearson Lehman Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted issues
are not included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL
<PAGE>
Government/Corporate Index, an issue must have amounts outstanding in excess of
$1 million, have at least one year to maturity and be rated "Baa" or higher
("investment grade") by a nationally recognized rating agency.
<PAGE>
<TABLE>
<S> <C>
DIRECTOR FOCUS
SEPARATE ACCOUNT SEVEN
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
P.O. BOX 5085
HARTFORD, CONNECTICUT 06102-5085
TELEPHONE: 1-800-862-6668 (CONTRACT OWNERS)
1-800-862-7155 (REGISTERED REPRESENTATIVES) [LOGO]
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This prospectus describes information you should know before you purchase
Director FOCUS variable annuity. Please read it carefully.
Director FOCUS variable annuity is a Contract between you and Hartford Life and
Annuity Insurance Company where you agree to make at least one payment to us and
we agree to make a series of annuity payments to you at a later date. This
annuity is a flexible premium, tax-deferred, variable annuity offered to both
individuals and groups. It is:
x Flexible, because you may add premium payments at any time.
x Tax-deferred, which means you don't pay taxes until you take money out or
until we start to make annuity payments to you.
x Variable, because the value of your annuity will fluctuate with the
performance of the underlying funds.
- --------------------------------------------------------------------------------
At purchase, you allocate your premium payment, which is any purchase payment
less any Premium Taxes, to "Sub-Accounts". These are subdivisions of our
Separate Account, an account that keeps your annuity assets separate from our
company assets. The Sub-Accounts then purchase shares of mutual funds set up
exclusively for variable annuity or variable life insurance products. These are
not the same mutual funds that you buy through your stockbroker or through a
retail mutual fund. They may have similar investment strategies and the same
portfolio managers as retail mutual funds. This annuity offers you funds with
investment strategies ranging from conservative to aggressive and you may pick
those funds that meet your investment goals and risk tolerance. The Sub-Accounts
and the funds are listed below:
- - SALOMON BROTHERS VARIABLE CAPITAL FUND SUB-ACCOUNT which purchases shares of
Salomon Brothers Variable Capital Fund
- - SALOMON BROTHERS VARIABLE INVESTORS FUND SUB-ACCOUNT which purchases shares of
Salomon Brothers Variable Investors Fund
- - SALOMON BROTHERS VARIABLE TOTAL RETURN FUND SUB-ACCOUNT which purchases shares
of Salomon Brothers Variable Total Return Fund
- - SALOMON BROTHERS VARIABLE HIGH YIELD BOND FUND SUB-ACCOUNT which purchases
shares of Salomon Brothers Variable High Yield Bond Fund
- - HARTFORD ADVISERS HLS FUND SUB-ACCOUNT which purchases shares of Class IB of
Hartford Advisers HLS Fund, Inc.
- - HARTFORD BOND HLS FUND SUB-ACCOUNT which purchases shares of Class IB of
Hartford Bond HLS Fund, Inc.
- - HARTFORD CAPITAL APPRECIATION HLS FUND SUB-ACCOUNT which purchases shares of
Class IB of Hartford Capital Appreciation HLS Fund, Inc.
- - HARTFORD DIVIDEND AND GROWTH HLS FUND SUB-ACCOUNT which purchases shares of
Class IB of Hartford Dividend and Growth HLS Fund, Inc.
- - HARTFORD GLOBAL HEALTH HLS FUND SUB-ACCOUNT which purchases shares of Class IB
of Hartford Global Health HLS Fund of Hartford Series Fund, Inc.
- - HARTFORD GLOBAL LEADERS HLS FUND SUB-ACCOUNT which purchases shares of Class
IB of Hartford Global Leaders HLS Fund of Hartford Series Fund, Inc.
- - HARTFORD GLOBAL TECHNOLOGY HLS FUND SUB-ACCOUNT which purchases shares of
Class IB of Hartford Global Technology HLS Fund of Hartford
Series Fund, Inc.
- - HARTFORD GROWTH AND INCOME HLS FUND SUB-ACCOUNT which purchases shares of
Class IB of Hartford Growth and Income HLS Fund of Hartford
Series Fund, Inc.
- - HARTFORD HIGH YIELD HLS FUND SUB-ACCOUNT which purchases shares of Class IB of
Hartford High Yield HLS Fund of Hartford Series Fund, Inc.
- - HARTFORD INDEX HLS SUB-ACCOUNT which purchases shares of Class IB of Hartford
Index HLS Fund, Inc.
- - HARTFORD INTERNATIONAL ADVISERS HLS FUND SUB-ACCOUNT which purchases shares of
Class IB of Hartford International Advisers HLS Fund, Inc.
<PAGE>
- - HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND SUB-ACCOUNT which purchases
shares of Class IB of Hartford International Opportunities HLS Fund, Inc.
- - HARTFORD MIDCAP HLS FUND SUB-ACCOUNT which purchases shares of Class IB of
Hartford MidCap HLS Fund, Inc.
- - HARTFORD MONEY MARKET HLS FUND SUB-ACCOUNT which purchases shares of Class IB
of Hartford Money Market HLS Fund, Inc.
- - HARTFORD MORTGAGE SECURITIES HLS FUND SUB-ACCOUNT that purchases shares of
Class IB of Hartford Mortgage Securities HLS Fund, Inc.
- - HARTFORD SMALL COMPANY HLS FUND SUB-ACCOUNT which purchases shares of Class IB
of Hartford Small Company HLS Fund, Inc.
- - HARTFORD STOCK HLS FUND SUB-ACCOUNT which purchases of Class IB of Hartford
Stock HLS Fund, Inc.
You may also allocate some or all of your premium payment to one of the "Fixed
Accumulation Features", which pays an interest rate guaranteed for a certain
time period from the time the payment is made. Premium payments put in a Fixed
Accumulation Feature are not segregated from our company assets like the assets
of the Separate Account.
If you decide to buy this annuity, you should keep this Prospectus for your
records. You can also call us at 1-800-862-6668 to get a Statement of Additional
Information, free of charge. The Statement of Additional Information contains
more information about this annuity and, like this Prospectus, is filed with the
Securities and Exchange Commission. We have included the Table of Contents for
the Statement of Additional Information at the end of this Prospectus.
Although we file the Prospectus and the Statement of Additional Information with
the Securities and Exchange Commission, the Commission doesn't approve or
disapprove these securities or determine if the information is truthful or
complete. Anyone who represents that the Securities and Exchange Commission does
these things may be guilty of a criminal offense.
This Prospectus and the Statement of Additional Information can also be obtained
from the Securities and Exchange Commission's website (HTTP://WWW.SEC.GOV).
This annuity IS NOT:
- A bank deposit or obligation
- Federally insured
- Endorsed by any bank or governmental agency
This annuity may not be available for sale in all states.
- --------------------------------------------------------------------------------
PROSPECTUS DATED: MAY 1, 2000
STATEMENT OF ADDITIONAL INFORMATION DATED: MAY 1, 2000
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 3
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
- ----------------------------------------------------------------------
GLOSSARY OF SPECIAL TERMS 4
- ----------------------------------------------------------------------
FEE TABLE 5
- ----------------------------------------------------------------------
SUMMARY 9
- ----------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
- ----------------------------------------------------------------------
THE SEPARATE ACCOUNT 11
- ----------------------------------------------------------------------
THE FUNDS 11
- ----------------------------------------------------------------------
PERFORMANCE RELATED INFORMATION 14
- ----------------------------------------------------------------------
THE FIXED ACCUMULATION FEATURES 14
- ----------------------------------------------------------------------
THE CONTRACT 15
- ----------------------------------------------------------------------
Contract Value -- Before the Annuity Commencement Date 16
- ----------------------------------------------------------------------
Contract Value Transfers Before and After the Annuity
Commencement Date 16
- ----------------------------------------------------------------------
Surrenders 17
- ----------------------------------------------------------------------
Contract Charges 18
- ----------------------------------------------------------------------
Death Benefits 20
- ----------------------------------------------------------------------
SETTLEMENT PROVISIONS 21
- ----------------------------------------------------------------------
Annuity Payments 23
- ----------------------------------------------------------------------
Other Information 24
- ----------------------------------------------------------------------
FEDERAL TAX CONSIDERATIONS 25
- ----------------------------------------------------------------------
A. General 25
- ----------------------------------------------------------------------
B. Taxation of Hartford and the Separate Account 25
- ----------------------------------------------------------------------
C. Taxation of Annuities -- General Provisions Affecting
Purchasers Other Than Qualified Retirement Plans 25
- ----------------------------------------------------------------------
D. Federal Income Tax Withholding 28
- ----------------------------------------------------------------------
E. General Provisions Affecting Qualified Retirement Plans 28
- ----------------------------------------------------------------------
F. Annuity Purchases By Nonresident Aliens and Foreign
Corporations 28
- ----------------------------------------------------------------------
G. Generation-Skipping Transfers 28
- ----------------------------------------------------------------------
MISCELLANEOUS 28
- ----------------------------------------------------------------------
How Contracts Are Sold 28
- ----------------------------------------------------------------------
Legal Matters 29
- ----------------------------------------------------------------------
Experts 29
- ----------------------------------------------------------------------
More Information 29
- ----------------------------------------------------------------------
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION 30
- ----------------------------------------------------------------------
APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED RETIREMENT
PLANS 31
- ----------------------------------------------------------------------
APPENDIX II -- OPTIONAL DEATH BENEFIT -- EXAMPLES 34
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
4 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
GLOSSARY OF SPECIAL TERMS
ACCOUNT: Any of the Sub-Accounts or Fixed Accumulation Features.
ACCUMULATION UNIT: A unit of measure we use to calculate values before we begin
to make annuity payments to you.
ADMINISTRATIVE OFFICE: Located at 200 Hopmeadow Street, Simsbury, Connecticut
06089. The mailing address is: Investment Product Services, P.O. Box 5085,
Hartford, Connecticut 06102-5085.
ANNIVERSARY VALUE: The value equal to the Contract Value as of a Contract
Anniversary, increased by the dollar amount of any premium payments made since
that anniversary and reduced by the dollar amount of any partial Surrenders
since that anniversary.
ANNUAL MAINTENANCE FEE: An annual $30 charge for annuities having a value of
less than $50,000 on the most recent Contract Anniversary or when the annuity is
Surrendered in full. The charge is deducted proportionately from the funds in
use at the time.
ANNUITANT: The person on whose life the Contract is based. The Annuitant may not
be changed.
ANNUITY: A Contract issued by us that provides, in exchange for premium
payments, a series of annuity payments.
ANNUITY CALCULATION DATE: The date we calculate your first annuity payment.
ANNUITY COMMENCEMENT DATE: The date we start to make annuity payments to you.
ANNUITY UNIT: A unit of measure we use to calculate the value of the annuity
payments we make to you.
ASSUMED INVESTMENT RETURN ("AIR"): The investment return, either 3%, 5% or 6%,
which we base your variable dollar amount payments on. You select the AIR before
we start to make annuity payments.
BENEFICIARY: The person or persons you designate to receive payment of the death
benefit upon the death of the Contract Owner.
CODE: The Internal Revenue Code of 1986, as amended.
COMMUTED VALUE: The present value of any remaining guaranteed Annuity Payouts.
This amount is calculated using the Assumed Investment Return for variable
dollar amount Annuity Payouts or the underlying rate of return for fixed dollar
amount Annuity Payouts.
CONTINGENT ANNUITANT: The person you may designate to become the Annuitant if
the original Annuitant dies before we begin making annuity payments.
CONTRACT: The contract is the individual Annuity contract and any endorsements
or riders. If you have a group annuity, you will receive a certificate rather
than a contract.
CONTRACT ANNIVERSARY: The annual anniversary of the date we issued your annuity.
If your contract anniversary falls on a day that is not a Valuation Day, then
the next Valuation Day will be your Contract Anniversary for that year.
CONTRACT OWNER(S) OR YOU: The owner(s) or holder(s) of this Annuity.
CONTRACT VALUE: The total value of your Annuity that we get by adding up the
value of each of your Sub-Accounts and Fixed Accumulation Features on any
Valuation Day.
CONTRACT YEAR: The 12 months following the date you purchased your annuity and
from any Contract Anniversary.
DOLLAR COST AVERAGING ("DCA"): Systematic transfers from one Account to another.
DCA PROGRAM FIXED ACCUMULATION FEATURES: Fixed Accumulation Features we
establish to use for dollar cost averaging programs. These are part of our
General Account.
DEATH BENEFIT: The amount we pay when the Contract Owner or the Annuitant dies.
DUE PROOF OF DEATH: A certified copy of a death certificate, an order of a court
of competent jurisdiction, or any other proof acceptable to us.
FIXED ACCUMULATION FEATURE: This is an account that is part of our General
Account. You may allocate all or a portion of your premium payments or transfer
of Contract Value to this account. In your contract this is defined as "The
Fixed Account."
GENERAL ACCOUNT: Our General Account that includes our company assets and your
annuity assets allocated to any of the Fixed Accumulation Features or DCA
Program Fixed Accumulation Features.
HARTFORD OR WE: Hartford Life and Annuity Insurance Company.
MAXIMUM ANNIVERSARY VALUE: This is the highest Anniversary Value prior the
deceased's 81st birthday or the date of death, if earlier.
PAYEE: The person or party designated by you to receive annuity payments.
PREMIUM TAX: A tax charged by a state or municipality on premium payments.
SEPARATE ACCOUNT: An account that we establish to separate the assets for your
annuity Sub-Accounts from our company assets.
SURRENDER: A complete or partial withdrawal or distribution from your annuity.
SURRENDER VALUE: What we pay you if you terminate your annuity before we begin
to make annuity payments.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Separate Account is determined as of the close of the New York
Stock Exchange (generally 4:00 p.m. Eastern Time).
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 5
- --------------------------------------------------------------------------------
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C>
SALES CHARGE IMPOSED ON PURCHASES (as a percentage of
Premium Payments) None
- ---------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE (as a percentage of Premium
Payments) (1)
First Year (2) 7%
- ---------------------------------------------------------------------
Second Year 6%
- ---------------------------------------------------------------------
Third Year 6%
- ---------------------------------------------------------------------
Fourth Year 5%
- ---------------------------------------------------------------------
Fifth Year 4%
- ---------------------------------------------------------------------
Sixth Year 3%
- ---------------------------------------------------------------------
Seventh Year 2%
- ---------------------------------------------------------------------
Eighth Year 0%
- ---------------------------------------------------------------------
ANNUAL MAINTENANCE FEE (3) $30
- ---------------------------------------------------------------------
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average
daily Sub-Account Value)
Mortality and Expense Risk Charge 1.25%
- ---------------------------------------------------------------------
Administrative Fees 0.15%
- ---------------------------------------------------------------------
Total Separate Account Annual Expenses 1.40%
- ---------------------------------------------------------------------
OPTIONAL CHARGES (as a percentage of average daily
Sub-Account Value)
Optional Death Benefit Charge 0.15%
- ---------------------------------------------------------------------
Total Separate Account Annual Expenses with the Optional
Death Benefit Charge 1.55%
- ---------------------------------------------------------------------
</TABLE>
(1) Each Premium Payment has its own Contingent Deferred Sales Charge schedule.
See "Charges and Fees -- The Contingent Deferred Sales Charge." The
Contingent Deferred Sales Charge is not assessed on partial Surrenders which
do not exceed the Annual Withdrawal Amount.
(2) Length of time from each Premium Payment.
(3) An annual $30 charge deducted on a Contract Anniversary or upon Surrender if
the Contract Value at either of those times is less than $50,000. It is
deducted proportionately from the Accounts in which you are invested at the
time of the charge.
The purpose of the Fee Table and Examples is to assist you in understanding
various costs and expenses that you will pay directly or indirectly. The Fee
Table and Examples reflect expenses of the Separate Account and underlying
Funds. We will deduct any Premium Taxes that apply.
The Examples should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown. The Annual
Maintenance Fee has been reflected in the Examples by a method intended to show
the "average" impact of the Annual Maintenance Fee on an investment in the
Separate Account. We do this by approximating an "average" 0.06% annual charge.
<PAGE>
6 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
as of the Fund's Year End
(as a percentage of net assets)
<TABLE>
<CAPTION>
TOTAL FUND
OPERATING
12B-1 DISTRIBUTION OTHER EXPENSES
MANAGEMENT FEES AND/OR SERVICING EXPENSES (INCLUDING ANY
(INCLUDING ANY FEES (INCLUDING (INCLUDING ANY WAIVERS AND ANY
WAIVERS) WAIVERS)(1) REIMBURSEMENTS) REIMBURSEMENTS)
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable Capital Fund (2) 0.85% 0.00% 1.14% 1.99%
- --------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable Investors Fund (2) 0.70% 0.00% 0.45% 1.15%
- --------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable Total Return Fund (2) 0.80% 0.00% 0.85% 1.65%
- --------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable High Yield Bond Fund
(2) 0.75% 0.00% 1.05% 1.80%
- --------------------------------------------------------------------------------------------------------------------------
Hartford Advisers HLS Fund 0.63% 0.18% 0.02% 0.83%
- --------------------------------------------------------------------------------------------------------------------------
Hartford Bond HLS Fund 0.49% 0.18% 0.03% 0.70%
- --------------------------------------------------------------------------------------------------------------------------
Hartford Capital Appreciation HLS Fund 0.64% 0.18% 0.02% 0.84%
- --------------------------------------------------------------------------------------------------------------------------
Hartford Dividend and Growth HLS Fund 0.65% 0.18% 0.03% 0.86%
- --------------------------------------------------------------------------------------------------------------------------
Hartford Global Health HLS Fund (3) 0.85% 0.18% 0.25% 1.28%
- --------------------------------------------------------------------------------------------------------------------------
Hartford Global Leaders HLS Fund 0.74% 0.18% 0.12% 1.04%
- --------------------------------------------------------------------------------------------------------------------------
Hartford Global Technology HLS Fund (3) 0.85% 0.18% 0.25% 1.28%
- --------------------------------------------------------------------------------------------------------------------------
Hartford Growth and Income HLS Fund 0.78% 0.18% 0.04% 1.00%
- --------------------------------------------------------------------------------------------------------------------------
Hartford High Yield HLS Fund 0.66% 0.18% 0.06% 0.90%
- --------------------------------------------------------------------------------------------------------------------------
Hartford Index HLS Fund 0.40% 0.18% 0.03% 0.61%
- --------------------------------------------------------------------------------------------------------------------------
Hartford International Advisers HLS Fund 0.76% 0.18% 0.09% 1.03%
- --------------------------------------------------------------------------------------------------------------------------
Hartford International Opportunities HLS Fund 0.69% 0.18% 0.09% 0.96%
- --------------------------------------------------------------------------------------------------------------------------
Hartford MidCap HLS Fund 0.76% 0.18% 0.03% 0.97%
- --------------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS Fund 0.45% 0.18% 0.02% 0.65%
- --------------------------------------------------------------------------------------------------------------------------
Hartford Mortgage Securities HLS Fund 0.45% 0.18% 0.03% 0.66%
- --------------------------------------------------------------------------------------------------------------------------
Hartford Small Company HLS Fund 0.75% 0.18% 0.03% 0.96%
- --------------------------------------------------------------------------------------------------------------------------
Hartford Stock HLS Fund 0.46% 0.18% 0.02% 0.66%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Class IB shares of the Funds sponsored by Hartford are subject to fees
imposed under a distribution plan (herein, the "Distribution Plan") adopted
by the Funds pursuant to Rule 12b-1 of the 1940 Act. The Distribution Plan
provides that the Funds sponsored by Hartford may pay annually up to 0.25%
of the average daily net assets of a Fund attributable to its Class IB
shares to certain distributors with respect to activities primarily intended
to result in the sale of the Class IB shares. Hartford has agreed to waive
0.07% of this fee through at least April 30, 2001. Absent such waiver, the
12b-1 Distribution and/or Servicing Fees would be 0.25% and the Total Fund
Operating Expenses would be as follows: Hartford Advisers HLS Fund -- 0.90%;
Hartford Bond HLS Fund -- 0.77%; Hartford Capital Appreciation HLS Fund --
0.91%; Hartford Dividend and Growth HLS Fund -- 0.93%; Hartford Global
Health HLS Fund -- 1.35%; Hartford Global Leaders HLS Fund -- 1.11%;
Hartford Global Technology HLS Fund -- 1.35%; Hartford Growth and Income HLS
Fund -- 1.07%; Hartford High Yield HLS Fund -- 0.97%; Hartford Index HLS
Fund -- 0.68%; Hartford International Advisers HLS Fund -- 1.10%; Hartford
International Opportunities HLS Fund -- 1.03%; Hartford MidCap HLS Fund --
1.04%; Hartford Money Market HLS Fund -- 0.72%; Hartford Mortgage Securities
HLS Fund -- 0.73%; Hartford Small Company HLS Fund -- 1.03%; Hartford Stock
HLS Fund -- 0.73%.
(2) Including management fee waivers and expense reimbursements, total fund
operating expenses would have been:
<TABLE>
<CAPTION>
12B-1 DISTRIBUTION TOTAL FUND
AND/OR SERVICING OTHER OPERATING
MANAGEMENT FEES FEES (1) EXPENSES EXPENSES
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable Capital Fund 0.85% 0.00% 0.15% 1.00%
- ----------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable Investors Fund 0.70% 0.00% 0.28% 0.98%
- ----------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable Total Return Fund 0.80% 0.00% 0.20% 1.00%
- ----------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable High Yield Bond Fund 0.75% 0.00% 0.25% 1.00%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(3) Hartford Global Health HLS Fund and Hartford Global Technology HLS Fund are
new Funds. "Total Fund Operating Expenses" are based on annualized estimates
of such expenses to be incurred during the current fiscal year.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 7
- --------------------------------------------------------------------------------
EXAMPLE
THE FOLLOWING EXAMPLE ASSUMES THE OPTIONAL DEATH BENEFIT IS NOT SELECTED:
<TABLE>
<CAPTION>
If you Surrender your Contract at the If you annuitize your Contract at the
end of the applicable time period you end of the applicable time period you
would pay the following expenses on would pay the following expenses on
a $1,000 investment, assuming a 5% a $1,000 investment, assuming a 5%
annual return on assets: annual return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable
Capital Fund $96 $162 $219 $378 $35 $107 $181 $377
- --------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable
Investors Fund $88 $137 $179 $297 $26 $ 81 $139 $297
- --------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable
Total Return Fund $93 $152 $203 $346 $31 $ 97 $165 $345
- --------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable
High Yield Bond Fund $94 $156 $210 $360 $33 $101 $172 $360
- --------------------------------------------------------------------------------------------------------------------
Hartford Advisers HLS Fund $84 $128 $163 $265 $23 $ 72 $123 $264
- --------------------------------------------------------------------------------------------------------------------
Hartford Bond HLS Fund $83 $124 $157 $251 $22 $ 68 $116 $251
- --------------------------------------------------------------------------------------------------------------------
Hartford Capital Appreciation
HLS Fund $84 $128 $164 $266 $23 $ 72 $124 $265
- --------------------------------------------------------------------------------------------------------------------
Hartford Dividend and Growth
HLS Fund $85 $129 $165 $268 $23 $ 73 $125 $267
- --------------------------------------------------------------------------------------------------------------------
Hartford Global Health HLS
Fund $89 $141 N/A N/A $27 $ 85 N/A N/A
- --------------------------------------------------------------------------------------------------------------------
Hartford Global Leaders HLS
Fund $87 $134 $174 $286 $25 $ 78 $134 $286
- --------------------------------------------------------------------------------------------------------------------
Hartford Global Technology
HLS Fund $89 $141 N/A N/A $27 $ 85 N/A N/A
- --------------------------------------------------------------------------------------------------------------------
Hartford Growth and Income
HLS Fund $86 $133 $172 $282 $25 $ 77 $132 $281
- --------------------------------------------------------------------------------------------------------------------
Hartford High Yield HLS Fund $85 $130 $167 $272 $24 $ 74 $127 $271
- --------------------------------------------------------------------------------------------------------------------
Hartford Index HLS Fund $82 $121 $152 $242 $21 $ 65 $112 $241
- --------------------------------------------------------------------------------------------------------------------
Hartford International
Advisers HLS Fund $86 $134 $173 $285 $25 $ 78 $133 $284
- --------------------------------------------------------------------------------------------------------------------
Hartford International
Opportunities HLS Fund $86 $132 $170 $278 $24 $ 76 $130 $277
- --------------------------------------------------------------------------------------------------------------------
Hartford MidCap HLS Fund $86 $132 $170 $279 $24 $ 76 $130 $278
- --------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS
Fund $83 $123 $154 $246 $21 $ 66 $114 $245
- --------------------------------------------------------------------------------------------------------------------
Hartford Mortgage Securities
HLS Fund $83 $123 $155 $247 $21 $ 66 $114 $246
- --------------------------------------------------------------------------------------------------------------------
Hartford Small Company HLS
Fund $86 $132 $170 $278 $24 $ 76 $130 $277
- --------------------------------------------------------------------------------------------------------------------
Hartford Stock HLS Fund $83 $123 $155 $247 $21 $ 66 $114 $246
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
If you do not Surrender your
Contract, you would pay the
following expenses on a $1,000
investment, assuming a 5% annual
return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- -----------------------------
Salomon Brothers Variable
Capital Fund $35 $108 $182 $378
- -----------------------------
Salomon Brothers Variable
Investors Fund $27 $ 82 $140 $297
- -----------------------------
Salomon Brothers Variable
Total Return Fund $32 $ 97 $165 $346
- -----------------------------
Salomon Brothers Variable
High Yield Bond Fund $33 $102 $173 $360
- -----------------------------
Hartford Advisers HLS Fund $23 $ 72 $124 $265
- -----------------------------
Hartford Bond HLS Fund $22 $ 68 $117 $251
- -----------------------------
Hartford Capital Appreciation
HLS Fund $24 $ 73 $124 $266
- -----------------------------
Hartford Dividend and Growth
HLS Fund $24 $ 73 $125 $268
- -----------------------------
Hartford Global Health HLS
Fund $28 $ 86 N/A N/A
- -----------------------------
Hartford Global Leaders HLS
Fund $26 $ 79 $135 $286
- -----------------------------
Hartford Global Technology
HLS Fund $28 $ 86 N/A N/A
- -----------------------------
Hartford Growth and Income
HLS Fund $25 $ 78 $132 $282
- -----------------------------
Hartford High Yield HLS Fund $24 $ 74 $127 $272
- -----------------------------
Hartford Index HLS Fund $21 $ 66 $112 $242
- -----------------------------
Hartford International
Advisers HLS Fund $26 $ 78 $134 $285
- -----------------------------
Hartford International
Opportunities HLS Fund $25 $ 76 $130 $278
- -----------------------------
Hartford MidCap HLS Fund $25 $ 77 $131 $279
- -----------------------------
Hartford Money Market HLS
Fund $22 $ 67 $114 $246
- -----------------------------
Hartford Mortgage Securities
HLS Fund $22 $ 67 $115 $247
- -----------------------------
Hartford Small Company HLS
Fund $25 $ 76 $130 $278
- -----------------------------
Hartford Stock HLS Fund $22 $ 67 $115 $247
- ---------------------------------------------------------------------------------
</TABLE>
<PAGE>
8 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
THE FOLLOWING EXAMPLE ASSUMES THE OPTIONAL DEATH BENEFIT IS SELECTED:
<TABLE>
<CAPTION>
If you Surrender your Contract at the If you annuitize your Contract at the
end of the applicable time period you end of the applicable time period you
would pay the following expenses on would pay the following expenses on
a $1,000 investment, assuming a 5% a $1,000 investment, assuming a 5%
annual return on assets: annual return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable
Capital Fund $98 $166 $226 $392 $36 $112 $189 $391
- --------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable
Investors Fund $89 $142 $186 $312 $28 $ 86 $147 $311
- --------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable
Total Return Fund $94 $156 $210 $360 $33 $101 $172 $360
- --------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable
High Yield Bond Fund $96 $161 $217 $374 $34 $106 $179 $373
- --------------------------------------------------------------------------------------------------------------------
Hartford Advisers HLS Fund $86 $132 $171 $280 $24 $ 76 $131 $279
- --------------------------------------------------------------------------------------------------------------------
Hartford Bond HLS Fund $85 $128 $164 $267 $23 $ 72 $124 $266
- --------------------------------------------------------------------------------------------------------------------
Hartford Capital Appreciation
HLS Fund $86 $133 $171 $281 $24 $ 77 $131 $280
- --------------------------------------------------------------------------------------------------------------------
Hartford Dividend and Growth
HLS Fund $86 $133 $172 $283 $25 $ 77 $132 $282
- --------------------------------------------------------------------------------------------------------------------
Hartford Global Health HLS
Fund $91 $145 N/A N/A $29 $ 90 N/A N/A
- --------------------------------------------------------------------------------------------------------------------
Hartford Global Leaders HLS
Fund $88 $138 $181 $301 $27 $ 83 $141 $301
- --------------------------------------------------------------------------------------------------------------------
Hartford Global Technology
HLS Fund $91 $145 N/A N/A $29 $ 90 N/A N/A
- --------------------------------------------------------------------------------------------------------------------
Hartford Growth and Income
HLS Fund $88 $137 $179 $297 $26 $ 81 $139 $297
- --------------------------------------------------------------------------------------------------------------------
Hartford High Yield HLS Fund $87 $134 $174 $287 $25 $ 78 $134 $287
- --------------------------------------------------------------------------------------------------------------------
Hartford Index HLS Fund $84 $126 $160 $258 $22 $ 69 $119 $257
- --------------------------------------------------------------------------------------------------------------------
Hartford International
Advisers HLS Fund $88 $138 $180 $300 $26 $ 82 $141 $300
- --------------------------------------------------------------------------------------------------------------------
Hartford International
Opportunities HLS Fund $87 $136 $177 $293 $26 $ 80 $137 $293
- --------------------------------------------------------------------------------------------------------------------
Hartford MidCap HLS Fund $87 $136 $178 $294 $26 $ 81 $138 $294
- --------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS
Fund $84 $127 $162 $262 $23 $ 71 $122 $261
- --------------------------------------------------------------------------------------------------------------------
Hartford Mortgage Securities
HLS Fund $84 $127 $162 $263 $23 $ 71 $122 $262
- --------------------------------------------------------------------------------------------------------------------
Hartford Small Company HLS
Fund $87 $136 $177 $293 $26 $ 80 $137 $293
- --------------------------------------------------------------------------------------------------------------------
Hartford Stock HLS Fund $84 $127 $162 $263 $23 $ 71 $122 $262
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
If you do not Surrender your
Contract, you would pay the
following expenses on a $1,000
investment, assuming a 5% annual
return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- -----------------------------
Salomon Brothers Variable
Capital Fund $37 $112 $189 $392
- -----------------------------
Salomon Brothers Variable
Investors Fund $28 $ 87 $148 $312
- -----------------------------
Salomon Brothers Variable
Total Return Fund $33 $102 $173 $360
- -----------------------------
Salomon Brothers Variable
High Yield Bond Fund $35 $106 $180 $374
- -----------------------------
Hartford Advisers HLS Fund $25 $ 77 $131 $280
- -----------------------------
Hartford Bond HLS Fund $24 $ 73 $125 $267
- -----------------------------
Hartford Capital Appreciation
HLS Fund $25 $ 77 $132 $281
- -----------------------------
Hartford Dividend and Growth
HLS Fund $25 $ 78 $133 $283
- -----------------------------
Hartford Global Health HLS
Fund $30 $ 91 N/A N/A
- -----------------------------
Hartford Global Leaders HLS
Fund $27 $ 83 $142 $301
- -----------------------------
Hartford Global Technology
HLS Fund $30 $ 91 N/A N/A
- -----------------------------
Hartford Growth and Income
HLS Fund $27 $ 82 $140 $297
- -----------------------------
Hartford High Yield HLS Fund $26 $ 79 $135 $287
- -----------------------------
Hartford Index HLS Fund $23 $ 70 $120 $258
- -----------------------------
Hartford International
Advisers HLS Fund $27 $ 83 $142 $300
- -----------------------------
Hartford International
Opportunities HLS Fund $26 $ 81 $138 $293
- -----------------------------
Hartford MidCap HLS Fund $26 $ 81 $139 $294
- -----------------------------
Hartford Money Market HLS
Fund $23 $ 71 $122 $262
- -----------------------------
Hartford Mortgage Securities
HLS Fund $23 $ 72 $123 $263
- -----------------------------
Hartford Small Company HLS
Fund $26 $ 81 $138 $293
- -----------------------------
Hartford Stock HLS Fund $23 $ 72 $123 $263
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 9
- --------------------------------------------------------------------------------
SUMMARY
HOW DO I PURCHASE THIS ANNUITY?
You must complete our application or order request and submit it to us for
approval with your first premium payment. Your first premium payment must be at
least $1,000 and subsequent premium payments must be at least $500. The minimum
premium payment requirements may differ if you are participating in our
automatic investing ("InvestEase-Registered Trademark-") program.
- For a limited time, usually within ten days after you receive your annuity,
you may cancel your annuity without paying a Contingent Deferred Sales
Charge. You bear the investment risk for your premium payment prior to our
receipt of your request for cancellation.
WHAT TYPE OF SALES CHARGE WILL I PAY?
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
You don't pay a sales charge when you purchase your Annuity. We may charge you a
CDSC when you partially or fully Surrender your Annuity. The CDSC will depend on
the amount you choose to Surrender and the length of time the Premium Payments
you made have been in your Annuity. The percentage used to calculate the CDSC is
equal to:
<TABLE>
<CAPTION>
NUMBER OF YEARS CONTINGENT
FROM PREMIUM DEFERRED
PAYMENT SALES CHARGE
<S> <C>
- ---------------------------------
One Year 7%
- ---------------------------------
Two Years 6%
- ---------------------------------
Three Years 6%
- ---------------------------------
Four Years 5%
- ---------------------------------
Five Years 4%
- ---------------------------------
Six Years 3%
- ---------------------------------
Seven Years 2%
- ---------------------------------
Eight Years 0%
- ---------------------------------
</TABLE>
IS THERE AN ANNUAL MAINTENANCE FEE?
Yes. We deduct this $30 fee each year on your Contract Anniversary or when you
completely Surrender your annuity, if, on either of those dates, the value of
your annuity is less than $50,000.
WHAT CHARGES WILL I PAY ON AN ANNUAL BASIS?
In addition to the Annual Maintenance Fee, you pay three different types of
charges each year. The first type of charge is the fee you pay for insurance.
This charge is:
A mortality and expense risk charge that is subtracted daily and is equal to an
annual charge of 1.25% of your Contract Value invested in the Funds.
The second type of charge is the fee you pay for the Separate Account. This
charge is:
An administrative fee of .15% per year of the Contract Value held in the
Separate Account.
The third type of charge is the fee you pay for the Funds. See the Annual
Operation Expense Table for more complete information and the funds'
prospectuses attached to this Prospectus.
If you elect the Optional Death Benefit, we will deduct an additional charge
daily from your Contract Value which is equal to 0.15% per year of your Contract
Value invested in the Funds.
CAN I TAKE OUT ANY OF MY MONEY?
You can partially or fully Surrender your Contract subject to a Contingent
Deferred Sales Charge (CDSC). You can partially Surrender your Contract without
any CDSC applied to the Surrender under the following conditions:
- - Surrenders which don't exceed 15% of premium payments per Contract Year
(Annual Withdrawal Amount);
- - Surrenders made from premium payments invested more than seven years; 100%
Surrender of earnings after the seventh Contract Year;
- - Surrenders under the nursing home waiver (described as Eligible Confinement in
the Contract); or
- - Surrenders eligible for disability waiver under a group qualified plan.
WILL HARTFORD PAY A DEATH BENEFIT?
Your Contract has a Death Benefit and we offer an Optional Interest Accumulation
Death Benefit ("Optional Death Benefit") that you can elect for an additional
fee. There is a Death Benefit if the Contract Owner, joint owner or Annuitant,
die before we begin to make annuity payments. The Death Benefit will remain
invested in the Sub-Accounts according to your last instructions (unless
otherwise mutually specified by your Beneficiaries) and will be subject to
market fluctuations.
IF YOU DO NOT ELECT THE OPTIONAL DEATH BENEFIT, the Death Benefit, which we will
calculate as of the date we receive Due Proof of Death, will be the greater of:
- - 100% of the total premium payments you have made to us reduced by any
subsequent Surrenders;
- - The Contract Value of your annuity, or
- - Your Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries, of Contract Values, premium payments and partial Surrenders. We
will calculate an Anniversary Value for each Contract Anniversary prior to the
deceased's 81st birthday or date of death. The Anniversary Value is equal to the
Contract Value as of a Contract Anniversary, increased by the dollar amount of
any premium payments made since that anniversary and reduced by the dollar
amount of any partial Surrenders since that anniversary. The Maximum Anniversary
Value is equal to the greatest Anniversary Value attained from this series of
calculations.
<PAGE>
10 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
IF YOU ELECT THE OPTIONAL DEATH BENEFIT, the Death Benefit, which we will
calculate as of the date we receive Due Proof of Death, will be the greater of:
- - 100% of the total premium payments you have made to us reduced by any
subsequent Surrenders;
- - The Contract Value of your annuity;
- - Your Maximum Anniversary Value, which is the highest Anniversary Value before
the deceased's 81st birthday or date of death; or
- - Your Interest Accumulation Value.
The INTEREST ACCUMULATION VALUE is calculated by accumulating interest on your
premium payments at a rate of 5% per year up to the deceased's 81st birthday or
date of death, assuming you have not taken any Surrenders. If you have taken any
Surrenders, the 5% will be accumulated on your premium payments, but there will
be an adjustment for any of the Surrenders. This adjustment will reduce the
Optional Death Benefit proportionally for the Surrenders. The Optional Death
Benefit is limited to a maximum of 200% of premium payments, less proportional
adjustments for any Surrenders. For examples on how the Optional Death Benefit
is calculated see "Appendix II". If you elect the Optional Death Benefit, we
will deduct an additional charge daily from your Contract Value equal to .15% of
the Sub-Account value. The Optional Death Benefit may not be available if the
Contract Owner or Annuitant is age 75 or older. For Contracts issued in the
state of Washington, the Optional Death Benefit is not available.
If you elect the Optional Death Benefit at any time after you purchase your
annuity, the Optional Death Benefit calculation will be different.
SPOUSAL CONTRACT CONTINUATION -- If a Beneficiary is the Contract Owner's
spouse, that portion of the Contract for which the spouse is considered the
Beneficiary will continue with the spouse as Contract Owner, unless the spouse
elects to receive the Death Benefit as a lump sum payment or an annuity payment
option. If the Contract continues with the spouse as Contract Owner, we will
adjust the Contract Value to the amount that we would have paid as the Death
Benefit payment, had the spouse elected to receive the Death Benefit as a lump
sum payment or as an annuity payment option. Spousal Contract Continuation will
only apply one time for each Contract.
WHAT ANNUITY PAYMENT OPTIONS ARE AVAILABLE?
When you purchase your annuity, you may choose one of the following annuity
payment options, or receive a lump sum payment:
LIFE ANNUITY where we make scheduled payments for the Annuitant's life.
- Payments under this option stop upon the death of the Annuitant, even if the
Annuitant dies after one payment.
LIFE ANNUITY WITH CASH REFUND where we make payments during the life of the
Annuitant and when the Annuitant dies, we pay the remaining value to the
Beneficiary. The remaining value is calculated at the time we receive Due Proof
of Death by subtracting the annuity payments already made from the Contract
Value, less any applicable Premium Taxes, applied to this annuity payment
option.
- This option is only available if you select a variable dollar amount payment
with the 5% AIR or fixed dollar amount annuity payments.
LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN where we make payments for the
life of the Annuitant but you are at least guaranteed payments for a time period
you select which is a minimum of 5 years and a maximum of 100 years minus your
annuitant's age.
- If the Annuitant dies prior to the end of the period selected, we will pay
the value of the remaining payments to your Beneficiary, either in a lump
sum or we will continue payments until the end of the period selected.
JOINT AND LAST SURVIVOR ANNUITY where we make payments during the lifetimes of
the Annuitant and another designated individual called the Joint Annuitant. At
the time of electing this annuity payment option, the Contract Owner may elect
reduced payments over the remaining lifetime of the survivor.
- Payments under this option STOP UPON THE DEATH OF THE ANNUITANT AND JOINT
ANNUITANT, even if the Annuitant and Joint Annuitant die after one payment.
JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN where we
make payments during the lifetime of the Annuitant and a Joint Annuitant, and we
guarantee that those payments for a time period you select which is a minimum of
5 years and a maximum 100 years minus the younger Annuitant's age. At the time
of electing this Annuity Option, the Contract Owner may elect reduced payments
over the remaining lifetime of the survivor.
- If the Annuitant and the Joint Annuitant die prior to the end of the period
selected, we will pay the value of the remaining payments to your
Beneficiary, either in a lump sum or we will continue payments until the end
of the period selected.
PAYMENTS FOR A PERIOD CERTAIN where we agree to make payments for a specified
time. The minimum period that you can select is 10 years during the first two
Contract Years and 5 years after the second Contract Anniversary. The maximum
period that you can select is 100 years minus your Annuitant's age.
- If you select this option under a variable dollar amount payment, YOU MAY
SURRENDER YOUR ANNUITY after annuity payments have started and we will give
you the present value of the remaining payments less any applicable
Contingent Deferred Sales Charge.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 11
- --------------------------------------------------------------------------------
- If the Annuitant dies prior to the end of the period selected, we will pay
the value of the remaining payments to your Beneficiary, either in a lump
sum or we will continue payments until the end of the period selected.
You must begin to take payments before the Annuitant's 90th birthday or the end
of the 10th Contract Year, which ever comes later, unless you elect a later date
to begin receiving payments subject to the laws and regulations then in effect
and our approval. If you do not tell us what annuity payment option you want
before that time, we will pay you under the Life Annuity with a 10 year period
certain.
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both individual
and group, in all states of the United States, the District of Columbia and
Puerto Rico, except New York. On January 1, 1998, Hartford's name changed from
ITT Hartford Life and Annuity Insurance Company to Hartford Life and Annuity
Insurance Company. We were originally incorporated under the laws of Wisconsin
on January 9, 1956, and subsequently redomiciled to Connecticut; however, our
mailing address is P.O. Box 2999, Hartford, CT 06104-2999. We are ultimately
controlled by The Hartford Financial Services Group, Inc., one of the largest
financial service providers in the United States.
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
EFFECTIVE DATE
RATING AGENCY OF RATING RATING BASIS OF RATING
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
A.M. Best and
Company, Inc. 1/1/99 A+ Financial performance
- --------------------------------------------------------------------------------
Standard & Poor's 8/1/99 AA Insurer financial strength
- --------------------------------------------------------------------------------
Duff & Phelps 7/1/99 AA+ Claims paying ability
- --------------------------------------------------------------------------------
</TABLE>
THE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
The Separate Account is where we set aside and invest the assets of some of our
annuity contracts, including this Contract. The Separate Account was established
on April 1, 1999 and is registered as a unit investment trust under the
Investment Company Act of 1940. This registration does not involve supervision
by the Commission of the management or the investment practices of the Separate
Account or Hartford. The Separate Account meets the definition of "Separate
Account" under federal securities law. This Separate Account holds only assets
for variable annuity contracts. The Separate Account:
- - Holds assets for the benefit of you and other Contract Owners, and the persons
entitled to the payments described in the Contract.
- - Is not subject to the liabilities arising out of any other business Hartford
may conduct.
- - Is not affected by the rate of return of Hartford's General Account or by the
investment performance of any of Hartford's other Separate Accounts.
- - May be subject to liabilities from a Sub-Account of the Separate Account which
holds assets of other variable annuity contracts offered by the Separate
Account which are not described in this Prospectus.
- - Is credited with income and gains, and takes losses, whether or not realized,
from the assets it holds.
We do not guarantee the investment results of the Separate Account. There is no
assurance that the value of your Annuity will equal the total of the payments
you make to us.
THE FUNDS
- --------------------------------------------------------------------------------
Salomon Brothers Variable Series Funds Inc. (the "Company") in part consists of
Salomon Brothers Variable Investors Fund ("Investors Fund"), Salomon Brothers
Variable Capital Fund ("Capital Fund"), Salomon Brothers Variable Total Return
Fund ("Total Return Fund"), Salomon Brothers Variable High Yield Bond Fund
("High Yield Bond Fund"). Each of the funds is an investment portfolio of the
Company, an open-end investment company incorporated in Maryland on October 1,
1997.
Salomon Brothers Asset Management Inc. ("SBAM") provides investment advisory
services for each of the Funds. Shares of the funds are sold only to
(i) separate accounts of Participating Insurance Companies to fund the benefits
for VA contracts and VL I policies; and (ii) Qualified Pension and Retirement
Plans ("Plans"). Each of the funds, except Capital Fund, is classified as a
diversified fund under the Investment Company Act 1940, as amended (the "1940
Act").
Hartford HLS Funds are sponsored and administered by Hartford Life Insurance
Company. HL Investment Advisors, LLC ("HL Advisors") serves as the investment
adviser to each of the Hartford HLS Funds. Wellington Management Company, LLP
("Wellington Management") and Hartford Investment Management Company ("HIMCO")
serve as sub-investment advisors and provide day to day investment services.
<PAGE>
12 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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Each Hartford HLS Fund, except for Hartford Global Health HLS Fund, Hartford
Global Leaders HLS Fund, Hartford Global Technology HLS Fund, Hartford Growth
and Income HLS Fund and Hartford High Yield HLS Fund, is a separate Maryland
corporation registered with the Securities and Exchange Commission as an
open-end management investment company. Hartford Global Leaders HLS Fund,
Hartford Growth and Income HLS Fund and Hartford High Yield HLS Fund are
diversified series of Hartford Series Fund, Inc., a Maryland corporation, also
registered with the Securities and Exchange Commission as an open-end management
investment company. Hartford Global Health HLS Fund and Hartford Global
Technology HLS Fund are non-diversified series of Hartford Series Fund, Inc. The
shares of each Fund have been divided into Class IA and Class IB. Only Class IB
shares are available in this Annuity.
We do not guarantee the investment results of any of the underlying Funds. Since
each underlying Fund has different investment objectives, each is subject to
different risks. These risks and the Funds' expenses are more fully described in
the accompanying Funds' prospectus and Statement of Additional Information,
which may be ordered from us. The Funds' prospectus should be read in
conjunction with this Prospectus before investing.
The Funds may not be available in all states.
The investment goals of each of the Funds are as follows:
SALOMON BROTHERS VARIABLE CAPITAL FUND -- Seeks capital appreciation through
investments in securities which the manager believes have above-average capital
appreciation potential. Managed by Salomon Brothers Asset Management Inc.
("SBAM").
SALOMON BROTHERS VARIABLE INVESTORS FUND -- Seeks long-term growth of capital.
Current income is a secondary objective. Managed by Salomon Brothers Asset
Management Inc. ("SBAM").
SALOMON BROTHERS VARIABLE TOTAL RETURN FUND -- Seeks to obtain above-average
income (compared to a portfolio entirely invested in equity securities). The
fund's secondary objective is to take advantage of opportunities to achieve
growth of capital and income. Managed by Salomon Brothers Asset Management Inc.
("SBAM").
SALOMON BROTHERS VARIABLE HIGH YIELD BOND FUND -- Seeks to maximize current
income. As a secondary objective, the fund seeks capital appreciation. Managed
by Salomon Brothers Asset Management Inc. ("SBAM").
HARTFORD ADVISERS HLS FUND -- Seeks maximum long-term total rate of return by
investing in common stocks and other equity securities, bonds and other debt
securities, and money market instruments. Sub-advised by Wellington Management.
HARTFORD BOND HLS FUND -- Seeks maximum current income consistent with
preservation of capital by investing primarily in investment grade fixed-income
securities. Up to 20% of the total assets of this Fund may be invested in debt
securities rated in the highest category below investment grade ("Ba" by Moody's
Investor Services, Inc. or "BB" by Standard & Poor's) or, if unrated, are
determined to be of comparable quality by the Fund's investment adviser.
Securities rated below investment grade are commonly referred to as "high
yield-high risk securities" or "junk bonds." For more information concerning the
risks associated with investing in such securities, please refer to the section
in the accompanying prospectus for the Funds entitled "Hartford Bond HLS Fund,
Inc." Sub-advised by HIMCO.
HARTFORD CAPITAL APPRECIATION HLS FUND -- Seeks growth of capital by investing
in equity securities selected solely on the basis of potential for capital
appreciation. Sub-advised by Wellington Management.
HARTFORD DIVIDEND AND GROWTH HLS FUND -- Seeks a high level of current income
consistent with growth of capital by investing primarily in dividend paying
equity securities. Sub-advised by Wellington Management.
HARTFORD GLOBAL HEALTH HLS FUND -- Seeks long-term capital appreciation by
investing in equity securities of health care companies worldwide. Sub-advised
by Wellington Management.
HARTFORD GLOBAL LEADERS HLS FUND -- Seeks growth of capital by investing
primarily in equity securities issued by high quality growth companies worldwide
that, in the opinion of Wellington Management, are leaders within their
respective industries as indicated by an established market presence and strong
competitive position on a global, regional or country basis. Sub-advised by
Wellington Management.
HARTFORD GLOBAL TECHNOLOGY HLS FUND -- Seeks long-term capital appreciation by
investing in equity securities technology companies worldwide. Sub-advised by
Wellington Management.
HARTFORD GROWTH AND INCOME HLS FUND -- Seeks growth of capital and current
income by investing primarily in equity securities with earnings growth
potential and steady or rising dividends. Sub-advised by Wellington Management.
HARTFORD HIGH YIELD HLS FUND -- Seeks high current income by investing in
non-investment grade fixed-income securities. Growth of capital is a secondary
objective. Securities rated below investment grade are commonly referred to as
"high yield-high risk securities" or "junk bonds." For more information
concerning the risks associated with investing in such securities, please refer
to the section in the accompanying prospectus for the Funds entitled "Hartford
High Yield HLS Fund." Sub-advised by HIMCO.
HARTFORD INDEX HLS FUND -- Seeks to provide investment results that approximate
the price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock Price
Index.* Sub-advised by HIMCO.
* "Standard & Poor's," "S&P-Registered Trademark-," "S&P
500-Registered Trademark-," "Standard & Poor's 500," and "500" are trademarks
of The McGraw-Hill Companies, Inc. and have been licensed for use by Hartford.
The Index Fund is not sponsored, endorsed, sold or promoted by Standard &
Poor's and Standard & Poor's makes no representation regarding the
advisability of investing in the Index Fund.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 13
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HARTFORD INTERNATIONAL ADVISERS HLS FUND -- Seeks maximum long-term total return
by investing in a portfolio of equity, debt and money market securities.
Securities in which the Fund invests primarily will be denominated in non-U.S.
currencies and will be traded in non-U.S. markets. Sub-advised by Wellington
Management.
HARTFORD INTERNATIONAL OPPORTUNITIES HLS FUND -- Seeks growth of capital by
investing primarily in equity securities issued by non-U.S. companies.
Sub-advised by Wellington Management.
HARTFORD MIDCAP HLS FUND -- Seeks to achieve long-term capital growth through
capital appreciation by investing primarily in equity securities of companies
with market capitalizations within the range represented by the Standard &
Poor's MidCap 400 Index. Sub-advised by Wellington Management.
HARTFORD MONEY MARKET HLS FUND -- Seeks maximum current income consistent with
liquidity and preservation of capital. Sub-advised by HIMCO.
HARTFORD MORTGAGE SECURITIES HLS FUND -- Seeks maximum current income consistent
with safety of principal and maintenance of liquidity by investing primarily in
mortgage-related securities. Sub-advised by HIMCO.
HARTFORD SMALL COMPANY HLS FUND -- Seeks growth of capital by investing
primarily in equity securities within the range represented by the Russell 2000
Index selected on the basis of potential for capital appreciation. Sub-advised
by Wellington Management.
HARTFORD STOCK HLS FUND -- Seeks long-term growth by investing primarily in
equity securities. Sub-advised by Wellington Management.
MIXED AND SHARED FUNDING -- Shares of the Funds are sold to our other Separate
Accounts and our insurance company affiliates or other unaffiliated insurance
companies to serve as the underlying investment for both variable annuity
contracts and variable life insurance contracts, a practice known as "mixed and
shared funding." As a result, there is a possibility that a material conflict
may arise between the interests of Contract Owners, and of owners of other
contracts whose contract values are allocated to one or more of these other
Separate Accounts investing in any one of the Funds. In the event of any such
material conflicts, we will consider what action may be appropriate, including
removing the Fund from the Separate Account or replacing the Fund with another
Fund. There are certain risks associated with mixed and shared funding, as
disclosed in the funds' prospectus.
VOTING RIGHTS -- We are the legal owners of all Fund shares held in the Separate
Account and we have the right to vote at the Fund's shareholder meetings. To the
extent required by federal securities laws or regulations, we will:
- - Notify you of any Fund shareholders' meeting if the shares held for your
Contract may be voted.
- - Send proxy materials and a form of instructions that you can use to tell us
how to vote the Fund shares held for your Contract.
- - Arrange for the handling and tallying of proxies received from Contract
Owners.
- - Vote all Fund shares attributable to your Contract according to instructions
received from you, and
- - Vote all Fund shares for which no voting instructions are received in the same
proportion as shares for which instructions have been received.
If any federal securities laws or regulations, or their present interpretation,
change to permit us to vote Fund shares on our own, we may decide to do so. You
may attend any Shareholder Meeting at which shares held for your Contract may be
voted. After we begin to make Annuity Payments to you, the number of votes you
have will decrease.
SUBSTITUTIONS, ADDITIONS, OR DELETIONS OF FUNDS -- We reserve the right, subject
to any applicable law, to make certain changes to the Funds offered under your
Contract. We may, in our sole discretion, establish new Funds. New Funds will be
made available to existing Contract Owners as we determined appropriate. We may
also close one or more Funds to additional payments or transfers from existing
Sub-Accounts.
We reserve the right to eliminate the shares of any of the Funds for any reason
and to substitute shares of another registered investment company for the shares
of any Fund already purchased or to be purchased in the future by the Separate
Account. To the extent required by the 1940 Act, substitutions of shares
attributable to your interest in a Fund will not be made until we have the
approval of the Commission and we have notified you of the change.
In the event of any substitution or change, We may, by appropriate endorsement,
make such changes in the Contract as may be necessary or appropriate to reflect
such substitution or change. If we decide that it is in the best interest of the
Contract Owners, the Separate Account may be operated as a management company
under the 1940 Act or any other form permitted by law, may be de-registered
under the 1940 Act in the event such registration is no longer required, or may
be combined with one or more other Separate Accounts.
ADMINISTRATIVE SERVICES -- Hartford has entered into agreements with the
investment advisers or distributors of many of the Funds. Under the terms of
these agreements, Hartford provides administrative services and the Funds pay a
fee to Hartford that is usually based on an annual percentage of the average
daily net assets of the Funds. These agreements may be different for each Fund
or each Fund family.
<PAGE>
14 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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PERFORMANCE RELATED INFORMATION
The Separate Account may advertise certain performance-related information
concerning the Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
When a Sub-Account advertises its STANDARDIZED TOTAL RETURN, it will usually be
calculated for one year, five years, and ten years or some other relevant
periods if the Sub-Account has not been in existence for at least ten years.
Total return is measured by comparing the value of an investment in the
Sub-Account at the beginning of the relevant period to the value of the
investment at the end of the period and assumes that the Optional Death Benefit
has not been elected.
The Separate Account may also advertise NON-STANDARD TOTAL RETURNS THAT PRE-DATE
THE INCEPTION DATE OF THE SEPARATE ACCOUNT. These non-standardized total returns
are calculated by assuming that the Sub-Accounts have been in existence for the
same periods as the underlying Funds and by taking deductions for charges equal
to those currently assessed against the Sub-Accounts. These non-standardized
returns must be accompanied by standardized total returns.
If applicable, the Sub-Accounts may advertise YIELD IN ADDITION TO TOTAL RETURN.
The yield will be computed in the following manner: The net investment income
per unit earned during a recent one month period, divided by the unit value on
the last day of the period. This figure reflects the recurring charges at the
Separate Account level including the Annual Maintenance Fee.
The HARTFORD MONEY MARKET HLS FUND SUB-ACCOUNT may advertise yield and effective
yield. The yield of a Sub-Account is based upon the income earned by the
Sub-Account over a seven-day period and then annualized, i.e. the income earned
in the period is assumed to be earned every seven days over a 52-week period and
stated as a percentage of the investment. Effective yield is calculated
similarly but when annualized, the income earned by the investment is assumed to
be reinvested in Sub-Account units and thus compounded in the course of a
52-week period. Yield and effective yield reflect the recurring charges at the
Separate Account level including the Annual Maintenance Fee.
We may provide information on various topics to Contract Owners and prospective
Contract Owners in advertising, sales literature or other materials. These
topics may include the relationship between sectors of the economy and the
economy as a whole and its effect on various securities markets, investment
strategies and techniques (such as value investing, dollar cost averaging and
asset allocation), the advantages and disadvantages of investing in tax-deferred
and taxable instruments, customer profiles and hypothetical purchase scenarios,
financial management and tax and retirement planning, and other investment
alternatives, including comparisons between the Contracts and the
characteristics of and market for such alternatives.
THE FIXED ACCUMULATION FEATURES
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IMPORTANT INFORMATION YOU SHOULD KNOW: THIS PORTION OF THE CONTRACT RELATING TO
THE FIXED ACCUMULATION FEATURES IS NOT REGISTERED UNDER THE SECURITIES ACT OF
1933 ("1933 ACT") AND THE FIXED ACCUMULATION FEATURES ARE NOT REGISTERED AS
INVESTMENT COMPANIES UNDER THE INVESTMENT COMPANY ACT OF 1940 ("1940 ACT"). NONE
OF THE FIXED ACCUMULATION FEATURES OR ANY OF THEIR INTERESTS ARE SUBJECT TO THE
PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT, AND THE STAFF OF THE
SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED THE DISCLOSURE REGARDING THE
FIXED ACCUMULATION FEATURES. THE FOLLOWING DISCLOSURE ABOUT THE FIXED
ACCUMULATION FEATURES MAY BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS
OF THE FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND COMPLETENESS OF
DISCLOSURE.
Payments and Contract Values allocated to a Fixed Accumulation Feature become a
part of our general assets. We invest the assets of the General Account in
accordance with applicable law governing the investments of insurance company
General Accounts. We have more than one Fixed Accumulation Feature. The standard
Fixed Accumulation Feature (the "Fixed Accumulation Feature") and then a number
of DCA Program Fixed Accumulation Features, which we collectively refer to as
the "Fixed Accumulation Features".
Currently, we guarantee that we will credit interest at a rate of not less than
3% per year, compounded annually, to amounts you allocate to the Fixed
Accumulation Feature. We reserve the right, in our sole discretion, to credit
interest at a rate in excess of 3% per year. You assume the risk that interest
credited to the Fixed Accumulation Feature may not exceed the minimum guarantee
of 3% for any given year.
We will periodically publish the Fixed Accumulation Feature interest rates
currently in effect. There is no specific formula for the determination of
interest rates. Some of the factors that we may consider in determining whether
to credit excess interest are: general economic trends, rates of return
currently available and anticipated on our investments, regulatory and tax
requirements and competitive factors. We will account for any deductions,
Surrenders or transfers from the Fixed Accumulation Feature on a "first-in",
"first-out" basis.
From time to time, we may credit increased interest rates to Contract Owners
under certain programs established at our sole discretion.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 15
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DOLLAR COST AVERAGING PLUS ("DCA PLUS") PROGRAMS -- These programs will use
designated DCA Program Fixed Accumulation Features. Currently, Contract Owners
may enroll in a special pre-authorized transfer program known as our Dollar Cost
Averaging Plus Program (the "Program"). Under this Program, Contract Owners who
enroll may allocate a minimum of $5,000 of their payment into the appropriate
DCA Program Fixed Accumulation Feature (we may allow a lower minimum premium
payment for qualified plan transfers or rollovers, including IRAs) and
pre-authorize transfers to any of the Sub-Accounts under either the 6-Month
Transfer Program or 12-Month Transfer Program. The 6-Month Transfer Program and
the 12-Month Transfer Program will generally have different credited interest
rates. Under the 6-Month Transfer Program, the interest rate can accrue up to 6
months and all payments and accrued interest must be transferred from the DCA
Program Fixed Accumulation Feature in use to the selected Sub-Accounts in 3 to 6
months. Under the 12-Month Transfer Program, the interest rate can accrue up to
12 months and all payments and accrued interest must be transferred to the
selected Sub-Accounts in 7 to 12 months. This will be accomplished by monthly
transfers for the period selected and a final transfer of the entire amount
remaining in the Program, which will generally be less than the prior monthly
transfer amounts.
The pre-authorized transfers will begin within 15 days after we receive the
initial Program payment and complete enrollment instructions. If We do not
receive complete Program enrollment instructions within 15 days of receipt of
the initial Program payment, the Program will be voided and the entire balance
in the Program will be transferred to the Accounts designated by you. If you do
not designate an Account, we will transfer any remaining amounts to the Fixed
Accumulation Feature and you will receive the Fixed Accumulation Feature's
current effective interest rate. Any subsequent payments we receive within the
Program period selected will be allocated to the Sub-Accounts over the remainder
of that Program transfer period, unless otherwise directed by You.
You may only have one dollar cost averaging program in place at one time, this
means one standard dollar cost averaging plan or one Dollar Cost Averaging Plus
Program.
You may elect to terminate the pre-authorized transfers by calling or writing us
of your intent to cancel enrollment in the Program. Upon cancellation of
enrollment in the Program, you will no longer receive the increased interest
rate and unless we receive instructions to the contrary, the amounts remaining
in the DCA Program Fixed Accumulation Feature may be transferred to the Fixed
Accumulation Feature and accrue the interest rate currently in effect.
Transfers made under a Dollar Cost Averaging Program do not count towards the
twelve transfers each Contract Year that we allow without charge and are not
subject to our rule that prohibits any two transfers from occurring on
Consecutive Valuation Days.
We reserve the right to discontinue, modify or amend the Program or any other
interest rate program established by Hartford. Any change to the Program will
not affect Contract Owners currently enrolled in the Program.
THE CONTRACT
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THE CONTRACT OFFERED -- The Contracts are individual or group tax-deferred
variable annuity contracts. They are designed for retirement planning purposes
and may be purchased by any individual, group or trust, including; (a) any
trustee or custodian for a retirement plan qualified under Sections 401(a), or
403(a) of the Internal Revenue Code (which includes Section 401(k));
(b) annuity purchase plans adopted by public school systems and certain
tax-exempt organizations according to Section 403(b) of the Code;
(c) Individual Retirement Annuities adopted according to Section 408 of the
Code; (d) employee pension plans established for employees by a state, a
political subdivision of a state, or an agency or instrumentality of either a
state or a political subdivision of a state, and (e) certain eligible deferred
compensation plans as defined in Section 457 of the Code ("Qualified
Contracts"). If you are purchasing the Contract for use in an IRA or other
qualified retirement plan, you should consider other features of the Contract
besides tax deferral, since any investment vehicle used within an IRA or other
qualified plan receives tax deferred treatment under the Code.
PURCHASING A CONTRACT -- A prospective Contract Owner may purchase a Contract by
completing and submitting an application or an order request along with an
initial premium payment to the Administrative Office of the Company. The maximum
age for Annuitant, Owner and Joint Owner on the Contract Issue Date is 85.
Generally, the minimum premium payment is $1,000. The minimum subsequent premium
payment is $500. Certain plans may be allowed to make smaller periodic premium
payments. Unless we give our prior approval, we will not accept a premium
payment in excess of $1,000,000. Each premium payment, which is your premium
payment after the deduction of any applicable Premium Taxes, may be split among
the various Accounts subject to minimum amounts then in effect. For Contracts
issued in Oregon, premium payments will only be accepted prior to the third
Contract Anniversary. For Contracts issued in Massachusetts, subsequent premium
payments will only be accepted until the Annuitant's 63rd birthday or the third
Contract Anniversary, whichever is later. We will send you a confirmation notice
upon receipt and acceptance of your premium payment.
In Oregon, Premium Payments are only allowed in the first three Contract Years.
In Massachusetts, Premium Payments are only allowed in the first three Contract
Years or until the Contract Owner turns 63, whichever is later.
RIGHT TO EXAMINE THE CONTRACT -- If you are not satisfied with your purchase,
you may cancel the Contract by returning it
<PAGE>
16 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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within 10 days (or longer in some states) after you receive it. You must send a
written request for cancellation along with the Contract. We will, without
deduction for any CDSC normally assessed, pay you an amount equal to the
Contract Value. YOU BEAR THE INVESTMENT RISK DURING THE PERIOD PRIOR TO OUR
RECEIPT OF YOUR REQUEST FOR CANCELLATION. We will refund the premium paid only
for Individual Retirement Annuities, if returned within seven days of receipt,
and in those states where required by law.
CREDITING AND VALUATION -- Your premium payment, which is the balance remaining
after the deduction of any Premium Tax, is credited to your Contract within two
business days of receipt by us at our Administrative Office of a properly
completed application or an order to purchase a Contract and the premium
payment. The payment will be credited to the Accounts according to the
instructions we receive from you.
If your application or other information is incomplete when received, your
payment will be credited to the Accounts within five business days of receipt of
complete information. If the payment is not credited within five business days,
it will be immediately returned to you unless you have been informed of the
delay and tell us not to return it.
Subsequent premium payments are priced on the Valuation Day we receive the
payment in our Administrative Office, provided it is received before the New
York Stock Exchange closes. Unless otherwise specified, We will allocate any
subsequent payments to Accounts according to your most recent instructions.
CONTRACT VALUE -- BEFORE THE ANNUITY
COMMENCEMENT DATE
Your Contract Value reflects interest rate credited any amounts allocated to the
Fixed Accumulation Features and the investment performance of the Sub-Accounts
where you have payments allocated.
SUB-ACCOUNT VALUES -- Your Sub-Account Values on the date we issue your Contract
is the amount of your premium payment allocated to any Sub-Account. After that,
we determine your Sub-Account value by determining the Accumulation Unit value
for each Sub-Account, and then multiplying that value by the number of those
units. Sub-Account Value reflects any variation of the interest income,
dividends, net capital gains or losses, realized or unrealized, and any amounts
transferred into or out of that Sub-Account.
ACCUMULATION UNITS -- When Premium Payments are credited to your Sub-Accounts,
they are converted into accumulation Units by dividing the amount of your
Premium Payments, minus any Premium Taxes, by the Accumulation Unit Value for
that day. The more Premium Payments you put into your Contract, the more
Accumulation Units you will own. You decrease the number of Accumulation Units
you have by requesting Surrenders, transferring money out of an Account,
settling a Death Benefit claim or by annuitizing your Contract.
ACCUMULATION UNIT VALUE -- The Accumulation Unit value for each Sub-Account was
arbitrarily set initially at $1 when the Sub-Account began operations. After
that, the Accumulation Unit value for each Sub-Account will equal (a) the
Accumulation Unit value at the end of the preceding Valuation Day multiplied by
(b) the Net Investment Factor (see the definition below) for the Valuation Day
for which the Accumulation Unit value is being calculated.
You will be advised, at least semiannually, of the number of Accumulation Units
credited to each Sub-Account, the current Accumulation Unit values, and the
total value of your Contract.
THE NET INVESTMENT FACTOR (BEFORE AND AFTER THE ANNUITY COMMENCEMENT
DATE) -- The Net Investment Factor is an index applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. For each
Sub-Account, the Net Investment Factor reflects the investment performance of
the Fund in which that Sub-Account invests and the charges assessed against that
Sub-Account for a Valuation Period. The Net Investment Factor is calculated by
dividing (a) by (b) and subtracting (c) from the result, where:
(a) Is the Net Asset Value of the Fund held in that Sub-Account, determined at
the end of the current Valuation Period (plus the per share amount of any
dividends or capital gains distributions made by that Fund);
(b) Is the Net Asset Value of the Fund held in the Sub-Account, determined at
the beginning of the Valuation Period;
(c) Is a daily factor representing the mortality and expense risk charge and any
optional charges deducted from the Sub-Account, adjusted for the number of
days in the Valuation Period.
CONTRACT VALUE TRANSFERS BEFORE AND AFTER THE ANNUITY COMMENCEMENT DATE
You may transfer your Contract Values from one or more Accounts to another
Account free of charge. WE RESERVE THE RIGHT TO LIMIT THE NUMBER OF TRANSFERS TO
12 PER CONTRACT YEAR, WITH NO 2 TRANSFERS OCCURRING ON CONSECUTIVE VALUATION
DAYS. There may be limitations on transfers to and from the Fixed Accumulation
Features that are described in your Contract. Some states may allow us to limit
the dollar amount transferred.
TELEPHONE AND INTERNET TRANSFERS -- In most states, you, or your
attorney-in-fact acting pursuant to a power of attorney, can make transfers:
- - By calling us at (800) 862-6668
- - Electronically, when available, by the Internet through our website at
http://online.hartford.com
Transfer instructions received by telephone on any Valuation Day before the
close of the New York Stock Exchange will be carried out that day. Otherwise,
the instructions will be carried out at the close of the New York Stock Exchange
on the next Valuation Day.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 17
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Transfer instructions you send electronically are considered to be received by
Hartford at the time and date stated on the electronic acknowledgement Hartford
returns to you. If the time and date indicated on the acknowledgement is before
the close of the New York Stock Exchange on a Valuation Day, the instructions
will be carried out that day. Otherwise, the instructions will be carried out at
the close of the New York Stock Exchange the next Valuation Day. If you do not
receive an electronic acknowledgement, you should telephone us as soon as
possible.
We will send you a confirmation when we process your transfer. You are
responsible for verifying transfer confirmations and promptly advising us of any
errors within 30 days of receiving the confirmation.
Telephone or Internet transfer requests may currently only be cancelled by
calling us at (800) 862-6668 before the close of the New York Stock Exchange.
Hartford, our agents or our affiliates are not responsible for losses resulting
from telephone or electronic requests that we believe are genuine. We will use
reasonable procedures to confirm that instructions received by telephone or
through our website are genuine, including a requirement that contract owners
provide certain identification information, including a personal identification
number. We record all telephone transfer instructions. We reserve the right to
suspend, modify, or terminate telephone or electronic transfer privileges at any
time.
We may permit you to pre-authorize transfers under certain circumstances.
Transfers between the Accounts may be made both before and after the Annuity
Commencement Date. Generally, the minimum allocation to any Sub-Account may not
be less than $500. All percentage (%) allocations must be in whole numbers
(e.g., 1%). No minimum balance is presently required in any Account.
The right to reallocate Contract Values is subject to modification if we
determine, in our sole opinion, that the exercise of that right by one or more
Contract Owners is, or would be, to the disadvantage of other Contract Owners.
Any modification could be applied to transfers to or from some or all of the
Accounts and could include, but not be limited to, the requirement of a minimum
time period between each transfer, not accepting transfer requests of an agent
acting under a power of attorney on behalf of more than one Contract Owner, or
limiting the dollar amount that may be transferred between the Sub-Accounts by
you at any one time. SUCH RESTRICTIONS MAY BE APPLIED IN ANY MANNER REASONABLY
DESIGNED TO PREVENT ANY USE OF THE TRANSFER RIGHT WHICH WE CONSIDER TO BE TO THE
DISADVANTAGE OF OTHER CONTRACT OWNERS.
For Contracts issued in THE STATES OF FLORIDA, MARYLAND OR OREGON, the
reservation of rights set forth in the preceding paragraph is limited to:
(i) requiring up to a maximum of 10 Valuation Days between each transfer;
(ii) limiting the amount to be transferred on any one Valuation Day to no more
than $2 million; and (iii) upon 30 days prior written notice, to only accepting
transfer instructions from you and not from your representative, agent or person
acting under a power of attorney for you.
Currently, we will not accept instructions from agents acting under a power of
attorney of multiple Contract Owners whose Accounts aggregate more than $2
million, unless the agent has entered into a third party transfer services
agreement with us.
Transfers made under a Dollar Cost Averaging Program do not count towards the
twelve transfers each Contract Year that we allow without charge and are not
subject to our rule that prohibits any two transfers from occurring on
Consecutive Valuation Days.
SURRENDERS
Contract Owners should consult their qualified tax adviser regarding the tax
consequences of a Surrender.
- A Surrender made before age 59 1/2 may result in adverse tax consequences,
including a penalty tax of 10% of the taxable portion of the Surrender
Value. (See "Federal Tax Considerations")
PAYMENT OF SURRENDER AMOUNTS -- Payment of any request for a full or partial
Surrender from the Accounts will be made as soon as possible and in any event no
later than seven days after we receive the request at our Administrative Office.
There may be postponement in the payment of Surrender Amounts whenever (a) the
New York Stock Exchange is closed; (b) trading on the New York Stock Exchange is
restricted as determined by the Commission; (c) the Commission permits
postponement and so orders; or (d) the Commission determines that an emergency
exists making valuation of the amounts or disposal of securities not reasonably
practicable.
FULL SURRENDERS PRIOR TO THE ANNUITY COMMENCEMENT DATE -- At any time prior to
the Annuity Commencement Date, you have the right to fully Surrender the
Contract. In such event, the Surrender Value of the Contract may be taken in the
form of a lump sum cash payment.
The Surrender Value of the Contract is equal to the Contract Value less any
Premium Taxes, the Annual Maintenance Fee and any Contingent Deferred Sales
Charge, if applicable. The Surrender Value may be more or less than the amount
of the payments made to your Contract.
PARTIAL SURRENDERS PRIOR TO THE ANNUITY COMMENCEMENT DATE -- You may make a
partial Surrender of your Contract Value at any time prior to the Annuity
Commencement Date so long as the amount Surrendered is at least equal to our
minimum amount rules then in effect. Additionally, if the remaining Contract
Value following a Surrender is less than $500, we may terminate the Contract and
pay the Surrender Value. For Contracts issued in Texas, the Contract will not be
terminated when the remaining Contract Value after a Surrender is less than $500
unless there were no payments made during the previous 2 Contract Years.
WHEN REQUESTING A PARTIAL SURRENDER, YOU SHOULD SPECIFY THE ACCOUNT(S) FROM
WHICH THE PARTIAL SURRENDER WILL BE TAKEN; OTHERWISE, THE SURRENDER WILL BE
TAKEN ON A PRO RATA BASIS ACCORDING TO THE VALUE IN EACH ACTIVE ACCOUNT.
<PAGE>
18 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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We may permit you to pre-authorize partial Surrenders subject to certain
limitations then in effect. We permit partial Surrenders by telephone subject to
dollar amount limitations in effect at the time you request the Surrender. To
request partial Surrenders by telephone, you must have completed and returned to
us a Telephone Redemption Program Enrollment Form authorizing telephone
Surrenders. If there are joint Contract Owners, both must authorize us to accept
telephone instructions and agree that We may accept telephone instructions for
partial Surrenders from either Contract Owner. Partial Surrender requests will
not be honored until we receive all required documents in proper form.
Telephone authorization will remain valid until (a) we receive written notice of
revocation by you, or, in the case of joint Contract Owners, written notice from
either Contract Owner; (b) we discontinue the privilege; or (c) we have reason
to believe that you have entered into a market timing agreement with an
investment adviser and/or broker/dealer.
We may record any telephone calls to verify data concerning transactions and may
adopt other procedures to confirm that telephone instructions are genuine. We
will not be liable for losses or expenses arising out of telephone instructions
reasonably believed to be genuine.
In order to obtain that day's unit values on Surrender, We must receive
telephone Surrender instructions prior to the close of trading on the New York
Stock Exchange (generally 4:00 p.m.).
We may modify, suspend, or terminate telephone transaction privileges at any
time.
SURRENDERS AFTER THE ANNUITY COMMENCEMENT DATE -- You may fully Surrender your
Contract on or after the Annuity Commencement Date if you elect the Payment For
a Period Certain Settlement Option. We pay you the commuted value that is equal
to the present value of the remaining payments we are scheduled to make less any
applicable Contingent Deferred Sales Charge. The commuted value is determined as
of the date we receive your written request for Surrender at our Administrative
Office.
Partial Surrenders are permitted after the Annuity Commencement Date if you
elect a variable dollar amount payment under the Payments for a Period Certain
Settlement Option, but check with your qualified tax adviser because there may
be adverse tax consequences.
IMPORTANT TAX INFORMATION -- There are certain restrictions on section 403(b)
tax-sheltered annuities. As of December 31, 1988, all section 403(b) annuities
have limits on full and partial Surrenders. Contributions to the Contract made
after December 31, 1988 and any increases in cash value after December 31, 1988
may not be distributed unless the Contract Owner/employee has a) attained age
59 1/2, b) separated from service, c) died, d) become disabled or
e) experienced financial hardship (cash value increases may not be distributed
for hardships prior to age 59 1/2). Distributions prior to age 59 1/2 due to
financial hardship or separation from service may still be subject to a penalty
tax of 10%. We will not assume any responsibility for determining whether a
surrender is permissible, with or without tax penalty, in any particular
situation; or in monitoring Surrender requests regarding pre or post January 1,
1989 Contract Values. Any full or partial Surrender described above may affect
the continuing tax-qualified status of some Contracts or plans and may result in
adverse tax consequences to the Contract Owner. The Contract Owner, therefore,
should consult with a tax adviser before undertaking any such Surrender. (See
"Federal Tax Considerations").
CONTRACT CHARGES
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
The CDSC covers some of the expenses relating to the sale and distribution of
the Contract, including commissions paid to registered representatives and the
cost of preparing sales literature and other promotional activities.
We may assess a CDSC when you request a full or partial Surrender. The CDSC is
based on the amount you choose to Surrender and how long your Premium Payments
have been in the Contract. Each Premium Payment has its own CDSC schedule.
Premium Payments are Surrendered in the order in which they were received. The
longer you leave your Premium Payments in the Contract, the lower the CDSC will
be when you Surrender. The amount assessed a CDSC will not exceed your total
Premium Payments.
The percentage used to calculate the CDSC is equal to:
<TABLE>
<CAPTION>
NUMBER OF YEARS CONTINGENT
FROM PREMIUM DEFERRED
PAYMENT SALES CHARGE
<S> <C>
- ---------------------------------
1 7%
- ---------------------------------
2 6%
- ---------------------------------
3 6%
- ---------------------------------
4 5%
- ---------------------------------
5 4%
- ---------------------------------
6 3%
- ---------------------------------
7 2%
- ---------------------------------
8 or more 0%
- ---------------------------------
</TABLE>
For example, you made an initial Premium Payment of $10,000 five years ago and
an additional Premium Payment of $20,000 one year ago. If you request a partial
withdrawal of $15,000 and you have not taken your Annual Withdrawal Amount for
the year, we will deduct a CDSC as follows.
- - Hartford will Surrender the Annual Withdrawal Amount which is equal to 15% of
your total Premium Payments or $4,500 without charging a CDSC.
- - We will then Surrender the Premium Payments that have been in the Annuity the
longest.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 19
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- - That means we would Surrender the entire $10,000 initial Premium Payment and
deduct a CDSC of 4% on that amount or $400.00.
- - The remaining $500 will come from the additional Premium Payment made one year
ago and we will deduct a CDSC of 7% of the $500 or $35.00.
- - Your CDSC is $435.00
If you have any questions about these charges, please contact your financial
adviser or Hartford.
PAYMENTS NOT SUBJECT TO CDSC
ANNUAL WITHDRAWAL AMOUNT -- During the first seven Contract years, you may make
a partial Surrender of Contract Values of up to 15% of the premium payments each
Contract Year on a non-cumulative basis, as determined on the date of the
requested Surrender, without the application of the CDSC. After the seventh
Contract Year, you may make a partial Surrender each Contract Year of 15% of
premium payments made during the seven years prior to the Surrender and 100% of
the Contract Value less the premium payments made during the seven years prior
to the Surrender. These amounts are different for group unallocated Contracts
and Contracts issued to a Charitable Remainder Trust.
EXTENDED SURRENDER PRIVILEGE -- This privilege allows Annuitants who attain age
70 1/2 with a Contract held under an Individual Retirement Account or
403(b) plan to Surrender an amount equal to the required minimum distribution
for the stated Contract without incurring any CDSC.
WAIVERS OF CDSC
CONFINEMENT IN A NURSING HOME, HOSPITAL OR LONG TERM CARE FACILITY (DESCRIBED AS
ELIGIBLE CONFINEMENT IN THE CONTRACT) -- We will waive any CDSC applicable to a
partial or full Surrender if the Annuitant, Contract Owner or joint annuitant is
confined, at the recommendation of a physician for medically necessary reasons,
for at least 180 calendar days to: a hospital recognized as a general hospital
by the proper authority of the state in which it is located; or a hospital
recognized as a general hospital by the Joint Commission on the Accreditation of
Hospitals; or a facility certified as a hospital or long-term care facility; or
a nursing home licensed by the state in which it is located and offers the
services of a registered nurse 24 hours a day.
The Annuitant, Contract Owner or joint annuitant cannot be confined at the time
the Contract is purchased in order to receive this waiver and the Contract
Owner(s) must have been the Contract Owner(s) continuously since the Contract
issue date. You must provide written proof of confinement satisfactory to
Hartford and you must request the partial or full Surrender within 91 calendar
days of the last day of confinement.
This waiver may not be available in all states. Please contact your registered
representative or contact Us to determine availability.
DEATH OF THE ANNUITANT OR CONTRACT OWNER OR PAYMENTS UNDER AN ANNUITY
OPTION -- No CDSC otherwise applicable will be assessed in the event of death of
the Annuitant, death of the Contract Owner or if payments are made under an
Annuity option (other than a Surrender of variable payments for a Period Certain
Annuity option) provided for under the Contract.
OTHER PLANS OR PROGRAMS -- Certain plans or programs established by us from time
to time may have different Surrender privileges.
MORTALITY AND EXPENSE RISK CHARGE -- For assuming risks under the Contract, We
deduct a daily charge at the rate of 1.25% per year against all Contract Values
held in the Accounts during the life of the Contract. Although variable annuity
payments made under the Contracts will vary in accordance with the investment
performance of the underlying Fund shares held in the Sub-Account(s), the
payments will not be affected by (a) our actual mortality experience among
Annuitants before or after the Annuity Commencement Date or (b) our actual
expenses, if greater than the deductions provided for in the Contracts because
of the expense and mortality undertakings by us.
There are two types of mortality risks: those made during the accumulation or
deferral phase and those made during the annuity payout phase. The mortality
risk we take in the accumulation phase is that we may experience a loss
resulting from the assumption of the mortality risk relative to the death
benefit in event of the death of an Annuitant or Contract Owner before
commencement of Annuity payments, in periods of declining value. The mortality
risk we take during the annuity payout phase is to make monthly Annuity payments
(determined in accordance with the 1983a Individual Annuity Mortality Table and
other provisions contained in the Contract) to Annuitants regardless of how long
an Annuitant may live, and regardless of how long all Annuitants as a group may
live. These mortality undertakings are based on our determination of expected
mortality rates among all Annuitants. If actual experience among Annuitants
during the Annuity payment period deviates from our actuarial determination of
expected mortality rates among Annuitants because, as a group, their longevity
is longer than anticipated, we must provide amounts from our general funds to
fulfill our contractual obligations. We will bear the loss in such a situation.
During the accumulation phase, we also provide an expense undertaking. We assume
the risk that the Annual Maintenance Fee for maintaining the Contracts prior to
the Annuity Commencement Date may be insufficient to cover the actual cost of
providing such items.
ANNUAL MAINTENANCE FEE -- Each year, on each Contract Anniversary on or before
the Annuity Commencement Date, we will deduct an Annual Maintenance Fee, if
applicable, from Contract Values to reimburse us for expenses relating to the
maintenance of the Contract and Accounts. If during a Contract Year the Contract
is Surrendered for its full value, we will deduct the Annual Maintenance Fee at
the time of such Surrender. The fee is a flat fee that will be due in the full
amount regardless of the time of the Contract Year that Contract Values are
Surrendered. The Annual Maintenance Fee is $30 per Contract Year for Contracts
<PAGE>
20 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
with less than $50,000 Contract Value on the Contract Anniversary. Fees will be
deducted on a pro rata basis according to the value in each Account under a
Contract.
WAIVERS OF THE ANNUAL MAINTENANCE FEE -- Annual Maintenance Fees are waived for
Contracts with Contract Value equal to or greater than $50,000. In addition, we
will waive one Annual Maintenance Fee for Contract Owners who own one or more
Contracts with a combined Contract Value of $50,000 up to $100,000. If you have
multiple Contracts with a combined Contract Value of $100,000 or greater, we
will waive the Annual Maintenance Fee on all Contracts. However, we reserve the
right to limit the number of Annual Maintenance Fee waivers to a total of six
Contracts. We reserve the right to waive the Annual Maintenance Fee under other
conditions.
ADMINISTRATIVE CHARGE -- For administration, we apply a daily charge at the rate
of .15% per year against all Contract Values held in the Separate Account during
both the accumulation and annuity phases of the Contract. There is not
necessarily a relationship between the amount of administrative charge imposed
on a given Contract and the amount of expenses that may be attributable to that
Contract; expenses may be more or less than the charge.
You should refer to the Fund prospectus for a description of deductions and
expenses paid out of the assets of the Fund's portfolios.
PREMIUM TAXES -- Charges are also deducted for Premium Tax, if applicable,
imposed by state or other governmental entity. Certain states impose a Premium
Tax, currently ranging up to 3.5%. Some states assess the tax at the time
purchase payments are made; others assess the tax at the time of annuitization.
We will pay Premium Taxes at the time imposed under applicable law. At our sole
discretion, we may deduct Premium Taxes at the time we pay such taxes to the
applicable taxing authorities, at the time the Contract is Surrendered, at the
time a death benefit is paid, or at the time the Contract annuitizes.
OPTIONAL DEATH BENEFIT FEE -- If you elect the Optional Death Benefit, we will
deduct daily from your Contract Value an additional charge which equals .15% per
year of the Sub-Account value.
EXCEPTIONS TO CHARGES UNDER THE CONTRACT -- We may offer, at our discretion,
reduced fees and charges including, but not limited to, CDSC, the mortality and
expense risk charge, administration charges, optional charges and the Annual
Maintenance Fee for certain sales (including employer sponsored savings plans)
under circumstances which may result in savings of certain costs and expenses.
Reductions in these fees and charges will not be unfairly discriminatory against
any Contract Owner.
DEATH BENEFITS
DEATH BEFORE THE ANNUITY COMMENCEMENT DATE
DETERMINATION OF THE BENEFICIARY -- If the Contract Owner or the Annuitant dies
before the Annuity Commencement Date, we will pay a Death Benefit to the
Beneficiary.
- IF THE CONTRACT OWNER DIES before the Annuity Commencement Date, any
surviving joint Contract Owner becomes the Beneficiary. If there is no
surviving joint Contract Owner, the designated Beneficiary will be the
Beneficiary. If the Contract Owner's spouse is the sole Beneficiary, the
spouse may elect, in lieu of receiving the Death Benefit, to be treated as
the Contract Owner. If the Annuitant is not living and there is no
Contingent Annuitant, the spouse will be presumed to be the Contingent
Annuitant. If no Beneficiary designation is in effect or if the Beneficiary
has predeceased the Contract Owner, the Contract Owner's estate will be the
Beneficiary.
- IF THE ANNUITANT DIES before the Annuity Commencement Date, the Contingent
Annuitant will become the Annuitant. If either (a) there is no Contingent
Annuitant, (b) the Contingent Annuitant predeceases the Annuitant, or
(c) if any sole Contract Owner dies before the Annuity Commencement Date,
the Beneficiary, as determined under the Contract control provisions, will
receive the Death Benefit. However, if the Annuitant dies prior to the
Annuity Commencement Date and the Contract Owner is living, the Contract
Owner shall be the Beneficiary. In that case, the rights of any designated
Beneficiary shall be void.
DETERMINATION OF THE DEATH BENEFIT
IF YOU DID NOT ELECT THE OPTIONAL DEATH BENEFIT, Your Death Benefit, which we
will calculate as of the date we receive Due Proof of Death, will be calculated
as follows:
If the deceased HAD NOT REACHED THEIR 81ST BIRTHDAY, the Death Benefit is the
greater of:
- - 100% of the total premium payments made to the Contract, reduced by any
subsequent Surrenders, or
- - The Contract Value of your annuity, or
- - Your Maximum Anniversary Value, which is described below.
The Maximum Anniversary Value is based on a series of calculations on Contract
Anniversaries of Contract Values, premium payments and partial Surrenders. We
will calculate an Anniversary Value for each Contract Anniversary prior to the
deceased's 81st birthday or date of death. The Anniversary Value is equal to the
Contract Value as of a Contract Anniversary, increased by the dollar amount of
any premium payments made since that anniversary and reduced by the dollar
amount of any partial Surrenders since that anniversary. The Maximum Anniversary
Value is equal to the greatest Anniversary Value attained from this series of
calculations.
IF THE DECEASED REACHED THEIR 81ST BIRTHDAY, then the Death Benefit is the
greater of:
- - 100% of the total premium payments made to us, reduced by any subsequent
Surrenders, or
- - The Contract Value of your annuity, or
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 21
- --------------------------------------------------------------------------------
- - The Maximum Anniversary Value.
If you did elect the Optional Death Benefit, the Death Benefit, which we will
calculate as of the date we receive Due Proof of Death, will be the greater of:
- - 100% of the total premium payments made to us, reduced by any subsequent
Surrenders;
- - The Contract Value of your annuity;
- - The Maximum Anniversary Value; or
- - The Interest Accumulation Value, which is described below.
The Interest Accumulation Value is calculated by accumulating interest on your
premium payments at a rate of 5% per year up to the deceased's 81st birthday or
date of death, assuming you have not taken any Surrenders. If you have taken any
Surrenders, the 5% will be accumulated on your premium payments, but there will
be an adjustment for any of the Surrenders. This adjustment will reduce the
Optional Death Benefit proportionally for the Surrenders. We stop compounding
interest on the deceased's 81st birthday or date of death. After that date, the
Interest Accumulation Value will be adjusted by adding any subsequent payments
and subtracting proportional adjustments for any partial Surrenders. The
Optional Death Benefit is limited to a maximum of 200% of premium payments, less
proportional adjustments for any Surrenders. For examples on how the Optional
Death Benefit is calculated see "Appendix II". The Optional Death Benefit may
not be available if the Contract Owner or Annuitant is age 75 or older. For
Contracts issued in the state of Washington, the Optional Death Benefit is not
available.
If you elect to add the Optional Death Benefit after you purchase your annuity,
the Interest Accumulation Value calculation will be:
- - Your Contract Value on the date we add the Optional Death Benefit to your
annuity;
- - Plus any Premium Payments made after the Optional Death Benefit is added;
- - Minus any partial Surrenders after the Optional Death Benefit is added;
- - Compounded daily at an annual interest rate of 5%.
SPOUSAL CONTRACT CONTINUATION -- If a Beneficiary is the Contract Owner's
spouse, that portion of the Contract for which the spouse is considered the
Beneficiary will continue with the spouse as Contract Owner, unless the spouse
elects to receive the Death Benefit as a lump sum payment or as an annuity
payment option. If the Contract continues with the spouse as Contract Owner, we
will adjust the Contract Value to the amount that we would have paid as the
Death Benefit payment, had the spouse elected to receive the Death Benefit as a
lump sum payment. Spousal Contract Continuation will only apply one time for
each Contract.
CALCULATION OF THE DEATH BENEFIT -- If the Contract Owner or Annuitant dies
before the Annuity Commencement Date and a Death Benefit is payable to the
Beneficiary, the Death Benefit will be calculated as of the date we receive
written notification of Due Proof of Death. THE DEATH BENEFIT REMAINS INVESTED
IN THE SEPARATE ACCOUNT ACCORDING TO YOUR LAST INSTRUCTIONS UNTIL THE PROCEEDS
ARE PAID OR WE RECEIVE NEW SETTLEMENT INSTRUCTIONS FROM THE BENEFICIARY. DURING
THE TIME PERIOD BETWEEN OUR RECEIPT OF WRITTEN NOTIFICATION OF DUE PROOF OF
DEATH AND OUR RECEIPT OF THE COMPLETE SETTLEMENT INSTRUCTIONS, THE CALCULATED
DEATH BENEFIT WILL BE SUBJECT TO MARKET FLUCTUATIONS. UPON RECEIPT OF COMPLETE
SETTLEMENT INSTRUCTIONS, WE WILL CALCULATE THE PAYABLE AMOUNT.
Any Annuity payments made on or after the date of death, but before receipt of
written notification of Due Proof of Death will be recovered by us from the
Payee.
DEATH ON OR AFTER THE ANNUITY COMMENCEMENT DATE
If, on or after the Annuity Commencement Date, the Contract Owner dies and the
Annuitant is living, the Beneficiary becomes the Contract Owner. If the
Annuitant dies and the Contract Owner is living, the Contract Owner becomes the
Beneficiary.
If the Annuitant dies on or after the Annuity Commencement Date, a Death Benefit
may be paid or payments may continue under the following annuity payment
options:
- - Life Annuity with Cash Refund
- - Life Annuity with payments for a Period Certain
- - Joint and Last Survivor Life Annuity with payments for a Period Certain and
- - Payments for a Period Certain.
Proceeds from the Death Benefit may be left with us for at least 5 years from
the date of the Contract Owner's death if the death occurs prior to the Annuity
Commencement Date. These proceeds will remain in the Account(s) to which they
were allocated at the time of death unless the Beneficiary elects to reallocate
them. Full or partial Surrenders may be made at any time. In the event of a
complete Surrender, the remaining value will equal the Contract Value of the
proceeds left with us, minus any partial Surrenders. This option may not be
available under certain Contracts issued in connection with Qualified Plans.
SETTLEMENT PROVISIONS
- --------------------------------------------------------------------------------
You select an Annuity Commencement Date which will not be deferred beyond the
Valuation Day immediately following the later of the Annuitant's 90th birthday
or the end of the tenth Contract Year. You may elect a later Annuity
Commencement Date if we allow and subject to the laws and regulations then in
effect. If the Contract is sold as part of a Charitable Remainder Trust, the
Annuity Commencement Date may be deferred to the Annuitant's 100th birthday. The
Annuity Commencement Date may be changed from time to time, but ANY CHANGE MUST
BE
<PAGE>
22 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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WITHIN 30 DAYS PRIOR TO THE DATE ON WHICH ANNUITY PAYMENTS ARE SCHEDULED TO
BEGIN.
You also elect in writing an annuity payment option, which may be any of the
options described below or any annuity payment option then being offered by us.
The annuity payment option may not be changed on or after the Annuity
Commencement Date. The Contract contains the six annuity payment options
described below and the Annuity Proceeds Settlement Option.
For Qualified Contracts, the following annuity payment options are only
available if the guaranteed payment period is less than the life expectancy of
the Annuitant at the time the option becomes effective. The Annuity Proceeds
Settlement option is available for Qualified Contracts only if the guaranteed
payment period is less than the life expectancy of the Beneficiary at the time
the option becomes effective. Such life expectancies are computed on the basis
of the mortality table prescribed by the IRS, or if none is prescribed, the
mortality table in use by us. If you do not elect otherwise, fixed dollar amount
annuity payments will begin automatically on the Annuity Commencement Date,
under the Life Annuity Payment Option.
For Non-Qualified Contracts, if you do not elect otherwise, fixed dollar amount
annuity payments will automatically begin on the Annuity Commencement Date under
the annuity payment option Life Annuity with payments for a Period Certain of 10
years. For Qualified Contracts and Contracts issued in Texas, if you do not
elect otherwise, fixed dollar amount annuity payments will begin automatically
on the Annuity Commencement Date, under the Life Annuity Payment Option.
With the exception of the option Payments for a Period Certain, if the variable
dollar amount payment is selected, no Surrenders are permitted after annuity
payments begin.
ANNUITY PAYMENT OPTIONS
LIFE ANNUITY
where we make Annuity payments for as long as the Annuitant lives.
- Payments under this option STOP UPON THE DEATH OF THE ANNUITANT, even if the
Annuitant dies after one payment.
LIFE ANNUITY WITH CASH REFUND
where we make payments during the life of the Annuitant and when the Annuitant
dies, we pay the remaining value to the Beneficiary. The remaining value is
calculated at the time we receive Due Proof of Death by subtracting the annuity
payments already made from the Contract Value less any applicable Premium Taxes
applied to this annuity payment option.
- This option is only available if you select payments using a VARIABLE DOLLAR
AMOUNT PAYMENT OPTION WITH THE 5% AIR OR FIXED DOLLAR AMOUNT ANNUITY
PAYMENTS.
LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN
where we make payments to you for the life of the Annuitant but you are at least
guaranteed payments for a time period you select which is a minimum of 5 years
and a maximum of 100 years minus your Annuitant's age.
- If the Annuitant dies prior to the end of the period selected, we will pay
your Beneficiary the present value of the remaining payments, either in a
lump sum payment or we will continue payments until the end of the period
selected.
JOINT AND LAST SURVIVOR ANNUITY
where we make payments during the lifetimes of the Annuitant and another
designated individual called the Joint Annuitant At the time of electing this
Annuity Option, the Contract Owner may elect reduced payments over the remaining
lifetime of the survivor.
- Payments under this option stop UPON THE DEATH OF THE ANNUITANT AND JOINT
ANNUITANT, even if the Annuitant and Joint Annuitant die after one payment.
JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN
where we make payments during the lifetime of the Annuitant and a Joint
Annuitant, and we guarantee that those payments for a time period you select
which is not less than 5 years and no more than 100 years minus the younger
Annuitant's age. At the time of electing this Annuity Option, the Contract Owner
may elect reduced payments over the remaining lifetime of the survivor.
- If the Annuitant and Joint Annuity die prior to the end of the period
selected, we will pay your Beneficiary the present value of the remaining
payments, either in a lump sum payment or We will continue payments until
the end of the period selected.
PAYMENTS FOR A PERIOD CERTAIN
where we agree to make payments for a specified time. The minimum period that
you can select is 10 years during the first two Contract years and 5 years after
the second Contract Anniversary. The maximum period that you can select is 100
years minus your Annuitant's age.
- If you select this option under a variable dollar amount payment, YOU MAY
SURRENDER YOUR ANNUITY after annuity payments have started and we will give
you the present value of the remaining payments less any applicable
Contingent Deferred Sales Charge.
- If the Annuitant dies prior to the end of the period selected, we will pay
your Beneficiary the present value of the remaining payments, either in a
lump sum payment or we will continue payments until the end of the period
selected.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 23
- --------------------------------------------------------------------------------
- For Contracts issued in the state of Oregon, Payments for a Period Certain
may be selected as follows: For fixed annuity payments, the minimum period
that you can select is 10 years at any time and 5 years on or after the 2nd
Contract Anniversary. For variable annuity payments, the minimum period that
you can select is 5 years on or after the 10th Contract Anniversary. Under
an Annuity payable with variable annuity payments, you may surrender the
Contract after payments have begun by submitting a written request to us.
The amount available to you is the Commuted Value.
WE MAY OFFER OTHER ANNUITY PAYMENT OPTIONS FROM TIME TO TIME.
ANNUITY PAYMENTS
When you decide to begin to take payments, we calculate your Contract Value
minus any Premium Tax which we must pay and, unless you instruct us otherwise,
we apply that amount to a variable annuity with the same Sub-Account values. You
may however, choose to have your Contract Value applied to a fixed annuity
instead.
IMPORTANT: YOU SHOULD CONSIDER THE QUESTION OF ALLOCATION OF CONTRACT VALUES
(LESS APPLICABLE PREMIUM TAXES) AMONG ACCOUNTS TO MAKE CERTAIN THAT ANNUITY
PAYMENTS ARE BASED ON THE INVESTMENT ALTERNATIVE BEST SUITED TO YOUR NEEDS FOR
RETIREMENT.
ANNUITY PAYMENTS -- The minimum Annuity payment is $50. No election may be made
which results in a first payment of less than $50. If at any time Annuity
payments are or become less than $50, we have the right to change the frequency
of payment to intervals so that payments will at least be $50. If any amount due
is less than the minimum amount per year, we may make such other settlement as
may be equitable to the Payee.
All Annuity payments under any option will occur the same day of the month as
the Annuity Commencement Date, based on the payment frequency selected by you.
Available payment frequencies include monthly, quarterly, semi-annual and
annual. The payment frequency may be changed within 30 days prior to the
anniversary of your Annuity Commencement Date.
ANNUITY COMMENCEMENT DATE -- You select the Annuity Commencement Date in your
application or order request. The Annuity Calculation Date will be no more than
five Valuation Days before the Annuity Commencement Date.
ANNUITY CALCULATION DATE -- On the Annuity Calculation Date, your Contract Value
less any applicable Premium Tax is applied to purchase Annuity Units of the
Sub-Accounts selected by you. The first Annuity payment is computed using the
value of these Annuity Units as of the Annuity Calculation Date.
INCOME PAYMENT DATES -- All Annuity payments after the first Annuity payment are
computed and payable as of the Income Payment Dates. These dates are the same
day of the month as the Annuity Commencement Date, based on the Annuity payment
frequency selected by you. They are also shown on the specification page of your
Contract. You may choose from monthly, quarterly, semi-annual and annual
payments. The Annuity payment frequency may not be changed once selected by you.
IN THE EVENT THAT YOU DO NOT SELECT A PAYMENT FREQUENCY, ANNUITY PAYMENTS WILL
BE MADE MONTHLY.
VARIABLE ANNUITY PAYMENTS
THE FIRST VARIABLE ANNUITY PAYMENT -- Variable Annuity payments are periodic
payments we pay to your designated Payee, the amount of which varies from one
Income Payment Date to the next as a function of the net investment performance
of the Sub-Accounts selected by you. The dollar amount of the first Variable
Annuity payment depends on the annuity payment option chosen, the age of the
Annuitant, the gender of the Annuitant (if applicable), the amount of Contract
Value less applicable Premium Tax applied to purchase the Annuity payments, and
the applicable annuity purchase rates based on the 1983a Individual Annuity
Mortality table using projection scale G projected to the year 2000 and an AIR
of not less than 3.0%.
The dollar amount of the first Variable Annuity payment attributable to each
Sub-Account is determined by dividing the dollar amount of the Contract Value
less applicable Premium Tax applied to that Sub-Account on the Annuity
Calculation Date by $1,000 and multiplying the result by the payment factor in
the Contract for the selected annuity payment option. The dollar value of the
first Variable Annuity payment is the sum of the first Variable Annuity payments
attributable to each Sub-Account.
ANNUITY UNITS -- The number of Annuity Units attributable to a Sub-Account is
derived by dividing the first Variable Annuity payment attributable to that
Sub-Account by the Annuity Unit value for that Sub-Account for the Valuation
Period ending on the Annuity Calculation Date or during which the Annuity
Calculation Date falls if the Valuation Period does not end on such date. The
number of Annuity Units attributable to each Sub-Account under a Contract
remains fixed unless there is a transfer of Annuity Units between Sub-Accounts.
SUBSEQUENT VARIABLE ANNUITY PAYMENTS -- The dollar amount of each subsequent
Variable Annuity payment attributable to each Sub-Account is calculated on the
Income Payment Date. It is determined by multiplying (a) by (b), where:
(a) is the number of Annuity Units of each Sub-Account credited under the
Contract and
(b) is the Annuity Unit value (described below) for that Sub-Account.
The total subsequent Variable Annuity payments equal the sum of the amounts
attributable to each Sub-Account.
When an Income Payment Date falls on a day that is not a Valuation Day, the
Income Payment is computed as of the prior Valuation Day. If the date of the
month elected does not occur in a given month, i.e., the 29th, 30th, or 31st of
a month, the payment will be computed as of the last Valuation Day of the month.
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24 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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When an Income Payment Date falls on a day that is not a Valuation Day, the
Income Payment is computed as of the prior Valuation Day. If the date of the
month elected does not occur in a given month, i.e., the 29th, 30th, or 31st of
a month, the payment will be computed as of the last Valuation Day of the month.
The Annuity Unit value of each Sub-Account for any Valuation Period is equal to
(a) multiplied by (b) multiplied by (c) where:
(a) is the Net Investment Factor for the Valuation Period for which the Annuity
Unit value is being calculated;
(b) is the Annuity Unit value for the preceding Valuation Period; and
(c) is the Annuity Unit Factor.
The Annuity Unit Factor neutralizes the AIR percentage (3%, 5%, or 6%). The
daily Annuity Unit Factor corresponding to the AIR percentages of 3%, 5%, and 6%
are 0.999919, 0.999866, and 0.999840, respectively.
THE ASSUMED INVESTMENT RETURN (AIR) -- The Annuity Unit value will increase or
decrease from one Income Payment Date to the next in direct proportion to the
net investment return of the Sub-Account(s) supporting the Variable Annuity
payments, less an adjustment to neutralize the selected AIR. Dividing what would
otherwise be the Annuity Unit value by the AIR factor is necessary in order to
adjust the change in the Annuity Unit value (resulting from the Net Investment
Factor) so that the Annuity Unit value only changes to the extent that the Net
Investment Factor represents a rate of return greater than or less than the AIR
selected by you. Without this adjustment, the Net Investment Factor would
decrease the Annuity Unit value to the extent that such value represented an
annualized rate of return of less than 0.0% and increase the Annuity Unit value
to the extent that such value represented an annualized rate of return of
greater than 0.0%.
The Contract permits Contract Owners to select one of three AIRs: 3%, 5% or 6%.
A higher AIR will result in a higher initial payment, a more slowly rising
series of subsequent payments when actual investment performance (minus any
deductions and expenses) exceeds the AIR, and a more rapid drop in subsequent
payments when actual investment performance (minus any deductions and expenses)
is less than the AIR. The 6% AIR is not available in the states of Oklahoma,
Oregon, New Jersey or Texas. The following examples may help clarify the impact
of selecting one AIR over another:
- - If you select a 3% AIR and if the net investment return of the Sub-Account for
an Annuity payment period is equal to the pro-rated portion of the 3% AIR, the
Variable Annuity payment attributable to that Sub-Account for that period will
equal the Annuity payment for the prior period. To the extent that such net
investment return EXCEEDS an annualized rate of return of 3% for a payment
period, the Annuity payment for that period will be greater than the Annuity
payment for the prior period and to the extent that such return for a period
falls short of an annualized rate of 3%, the Annuity payment for that period
will be less than the Annuity payment for the prior period.
- - If you select a 5% AIR and if the net investment return of the Sub-Account for
an Annuity payment period is equal to the pro-rated portion of the 5% AIR, the
Variable Annuity payment attributable to that Sub-Account for that period will
equal the Annuity payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of return of 5% for a payment
period, the Annuity payment for that period will be greater than the Annuity
payment for the prior period and to the extent that such return for a period
falls short of an annualized rate of 5%, the Annuity payment for that period
will be less than the Annuity payment for the prior period.
- - If you select a 6% AIR and if the net investment return of the Sub-Account for
an Annuity payment period is equal to the pro-rated portion of the 6% AIR, the
Variable Annuity payment attributable to that Sub-Account for that period will
equal the Annuity payment for the prior period. To the extent that such net
investment return exceeds an annualized rate of return of 6% for a payment
period, the Annuity payment for that period will be greater than the Annuity
payment for the prior period and to the extent that such return for a period
falls short of an annualized rate of 6%, the Annuity payment for that period
will be less than the Annuity payment for the prior period.
LEVEL VARIABLE ANNUITY PAYMENTS WOULD BE PRODUCED IF THE INVESTMENT RATE RETURNS
REMAINED CONSTANT AND EQUAL TO THE AIR. IN FACT, PAYMENTS WILL VARY UP OR DOWN
AS THE INVESTMENT RATE VARIES UP OR DOWN FROM THE AIR.
EXCHANGE (TRANSFER) OF ANNUITY UNITS -- After the Annuity Calculation Date, you
may exchange (i.e., transfer) the dollar value of a designated number of Annuity
Units of a particular Sub-Account for an equivalent dollar amount of Annuity
Units of another Sub-Account. On the date of the transfer, the dollar amount of
a Variable Annuity payment generated from the Annuity Units of either
Sub-Account would be the same. Transfers are executed as of the day Hartford
receives a written request for a transfer. For guidelines refer to Sub-Account
Value Transfers Before and After the Annuity Commencement Date.
FIXED DOLLAR ANNUITY -- Fixed Annuity payments are determined at annuitization
by multiplying the Contract Value (less applicable Premium Taxes) by a rate to
be determined by Hartford which is no less than the rate specified in the Fixed
Annuity option tables in the Contract. The Annuity payment will remain level for
the duration of the Annuity. Any Fixed Annuity allocation may not be changed.
OTHER INFORMATION
ASSIGNMENT -- Ownership of this Contract is generally assignable. However, if
the Contracts are issued pursuant to some form of Qualified Plan, it is possible
that the ownership of the Contracts may not be transferred or assigned depending
on the type of tax-qualified retirement plan involved. An assignment of a
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 25
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Non-Qualified Contract may subject the Contract Values or assignment proceeds to
income taxes and certain penalty taxes.
CONTRACT MODIFICATION -- The Annuitant may not be changed; however, the
Contingent Annuitant may be changed at any time prior to the Annuity
Commencement Date by sending us written notice. We may modify the Contract, but
no modification will effect the amount or term of any Contract unless a
modification is required to conform the Contract to applicable Federal or State
law. No modification will effect the method by which Contract Values are
determined.
FEDERAL TAX CONSIDERATIONS
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What are some of the federal tax consequences which affect these Contracts?
A. GENERAL
Since federal tax law is complex, the tax consequences of purchasing this
contract will vary depending on your situation. You may need tax or legal advice
to help you determine whether purchasing this contract is right for you.
Our general discussion of the tax treatment of this contract is based on our
understanding of federal income tax laws as they are currently interpreted. A
detailed description of all federal income tax consequences regarding the
purchase of this contract cannot be made in the prospectus. We also do not
discuss state, municipal or other tax laws that may apply to this contract. For
detailed information, you should consult with a qualified tax adviser familiar
with your situation.
B. TAXATION OF HARTFORD AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford which is taxed as a life
insurance company in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the Separate Account will not be taxed as a
"regulated investment company" under subchapter M of Chapter 1 of the Code.
Investment income and any realized capital gains on the assets of the Separate
Account are reinvested and are taken into account in determining the value of
the Accumulation and Annuity Units (See "Value of Accumulation Units"). As a
result, such investment income and realized capital gains are automatically
applied to increase reserves under the Contract.
No taxes are due on interest, dividends and short-term or long-term capital
gains earned by the Separate Account with respect to Qualified or Non-Qualified
Contracts.
C. TAXATION OF ANNUITIES -- GENERAL PROVISIONS AFFECTING PURCHASERS OTHER THAN
QUALIFIED RETIREMENT PLANS
Section 72 of the Code governs the taxation of annuities in general.
1. NON-NATURAL PERSONS, CORPORATIONS, ETC.
Code Section 72 contains provisions for contract owners which are not natural
persons. Non-natural persons include corporations, trusts, limited liability
companies, partnerships and other types of legal entities. The tax rules for
contracts owned by non-natural persons are different from the rules for
contracts owned by individuals. For example, the annual net increase in the
value of the contract is currently includible in the gross income of a
non-natural person, unless the non-natural person holds the contract as an agent
for a natural person. There are additional exceptions from current inclusion
for:
- - certain annuities held by structured settlement companies,
- - certain annuities held by an employer with respect to a terminated qualified
retirement plan and
- - certain immediate annuities.
A non-natural person which is a tax-exempt entity for federal tax purposes will
not be subject to income tax as a result of this provision.
If the contract owner is a non-natural person, the primary annuitant is treated
as the contract owner in applying mandatory distribution rules. These rules
require that certain distributions be made upon the death of the contract owner.
A change in the primary annuitant is also treated as the death of the contract
owner.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS).
A Contract Owner is not taxed on increases in the value of the Contract until an
amount is received or deemed received, e.g., in the form of a lump sum payment
(full or partial value of a Contract) or as Annuity payments under the
settlement option elected.
The provisions of Section 72 of the Code concerning distributions are summarized
briefly below. Also summarized are special rules affecting distributions from
Contracts obtained in a tax-free exchange for other annuity contracts or life
insurance contracts which were purchased prior to August 14, 1982.
a. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less amounts received which were not includable in
gross income equal the "investment in the contract" under Section 72 of the
Code.
ii. To the extent that the value of the Contract (ignoring any surrender
charges except on a full surrender) exceeds the "investment in the
contract," such excess constitutes the "income on the contract."
iii. Any amount received or deemed received prior to the Annuity Commencement
Date (e.g., upon a partial surrender) is deemed to come first from any
such "income on the contract" and then from "investment in the contract,"
and for these purposes such "income on the contract" shall be
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26 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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computed by reference to any aggregation rule in subparagraph 2.c. below. As
a result, any such amount received or deemed received (1) shall be
includable in gross income to the extent that such amount does not exceed
any such "income on the contract," and (2) shall not be includable in
gross income to the extent that such amount does exceed any such "income
on the contract." If at the time that any amount is received or deemed
received there is no "income on the contract" (e.g., because the gross
value of the Contract does not exceed the "investment in the contract" and
no aggregation rule applies), then such amount received or deemed received
will not be includable in gross income, and will simply reduce the
"investment in the contract."
iv. The receipt of any amount as a loan under the Contract or the assignment or
pledge of any portion of the value of the Contract shall be treated as an
amount received for purposes of this subparagraph a. and the next
subparagraph b.
v. In general, the transfer of the Contract, without full and adequate
consideration, will be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b. This transfer rule does not
apply, however, to certain transfers of property between spouses or incident
to divorce.
b. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE.
Annuity payments made periodically after the Annuity Commencement Date are
includable in gross income to the extent the payments exceed the amount
determined by the application of the ratio of the "investment in the contract"
to the total amount of the payments to be made after the Annuity Commencement
Date (the "exclusion ratio").
i. When the total of amounts excluded from income by application of the
exclusion ratio is equal to the investment in the contract as of the
Annuity Commencement Date, any additional payments (including surrenders)
will be entirely includable in gross income.
ii. If the annuity payments cease by reason of the death of the Annuitant and,
as of the date of death, the amount of annuity payments excluded from gross
income by the exclusion ratio does not exceed the investment in the
contract as of the Annuity Commencement Date, then the remaining portion of
unrecovered investment shall be allowed as a deduction for the last taxable
year of the Annuitant.
iii. Generally, nonperiodic amounts received or deemed received after the
Annuity Commencement Date are not entitled to any exclusion ratio and
shall be fully includable in gross income. However, upon a full surrender
after such date, only the excess of the amount received (after any
surrender charge) over the remaining "investment in the contract" shall be
includable in gross income (except to the extent that the aggregation
rule referred to in the next subparagraph c. may apply).
c. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS.
Contracts issued after October 21, 1988 by the same insurer (or affiliated
insurer) to the same Contract Owner within the same calendar year (other than
certain contracts held in connection with a tax-qualified retirement
arrangement) will be treated as one annuity Contract for the purpose of
determining the taxation of distributions prior to the Annuity Commencement
Date. An annuity contract received in a tax-free exchange for another annuity
contract or life insurance contract may be treated as a new Contract for this
purpose. Hartford believes that for any annuity subject to such aggregation, the
values under the Contracts and the investment in the contracts will be added
together to determine the taxation under subparagraph 2.a., above, of amounts
received or deemed received prior to the Annuity Commencement Date. Withdrawals
will first be treated as withdrawals of income until all of the income from all
such Contracts is withdrawn. As of the date of this Prospectus, there are no
regulations interpreting this provision.
d. 10% PENALTY TAX -- APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY
PAYMENTS.
i. If any amount is received or deemed received on the Contract (before or
after the Annuity Commencement Date), the Code applies a penalty tax equal
to ten percent of the portion of the amount includable in gross income,
unless an exception applies.
ii. The 10% penalty tax will not apply to the following distributions
(exceptions vary based upon the precise plan involved):
1. Distributions made on or after the date the recipient has attained the
age of 59 1/2.
2. Distributions made on or after the death of the holder or where the
holder is not an individual, the death of the primary annuitant.
3. Distributions attributable to a recipient's becoming disabled.
4. A distribution that is part of a scheduled series of substantially equal
periodic payments (not less frequently than annually) for the life (or
life expectancy) of the recipient (or the joint lives or life
expectancies of the recipient and the recipient's designated
Beneficiary).
5. Distributions of amounts which are allocable to the "investment in the
contract" prior to August 14, 1982 (see next subparagraph e.).
e. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED THROUGH A TAX-FREE
EXCHANGE OF OTHER ANNUITY OR LIFE INSURANCE CONTRACTS PURCHASED PRIOR TO
AUGUST 14, 1982.
If the Contract was obtained by a tax-free exchange of a life insurance or
annuity Contract purchased prior to August 14, 1982, then any amount received or
deemed received prior to the Annuity Commencement Date shall be deemed to come
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 27
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(1) first from the amount of the "investment in the contract" prior to August
14, 1982 ("pre-8/14/82 investment") carried over from the prior Contract,
(2) then from the portion of the "income on the contract" (carried over to, as
well as accumulating in, the successor Contract) that is attributable to such
pre-8/14/82 investment, (3) then from the remaining "income on the contract" and
(4) last from the remaining "investment in the contract." As a result, to the
extent that such amount received or deemed received does not exceed such
pre-8/14/82 investment, such amount is not includable in gross income., In
addition, to the extent that such amount received or deemed received does not
exceed the sum of (a) such pre-8/14/82 investment and (b) the "income on the
contract" attributable thereto, such amount is not subject to the 10% penalty
tax. In all other respects, amounts received or deemed received from such post-
exchange Contracts are generally subject to the rules described in this
subparagraph 3.
f. REQUIRED DISTRIBUTIONS.
i. Death of Contract Owner or Primary Annuitant
Subject to the alternative election or spouse beneficiary provisions in ii
or iii below:
1. If any Contract Owner dies on or after the Annuity Commencement Date and
before the entire interest in the Contract has been distributed, the
remaining portion of such interest shall be distributed at least as
rapidly as under the method of distribution being used as of the date of
such death;
2. If any Contract Owner dies before the Annuity Commencement Date, the
entire interest in the Contract will be distributed within 5 years after
such death; and
3. If the Contract Owner is not an individual, then for purposes of 1. or
2. above, the primary annuitant under the Contract shall be treated as
the Contract Owner, and any change in the primary annuitant shall be
treated as the death of the Contract Owner. The primary annuitant is the
individual, the events in the life of whom are of primary importance in
affecting the timing or amount of the payout under the Contract.
ii. Alternative Election to Satisfy Distribution Requirements
If any portion of the interest of a Contract Owner described in i. above is
payable to or for the benefit of a designated beneficiary, such beneficiary
may elect to have the portion distributed over a period that does not extend
beyond the life or life expectancy of the beneficiary. Distributions must
begin within a year of the Contract Owner's death.
iii. Spouse Beneficiary
If any portion of the interest of a Contract Owner is payable to or for the
benefit of his or her spouse, and the Annuitant or Contingent Annuitant is
living, such spouse shall be treated as the Contract Owner of such portion
for purposes of section i. above. This spousal continuation shall apply only
once for this contract.
3. DIVERSIFICATION REQUIREMENTS.
The Code requires that investments supporting your contract be adequately
diversified. Code Section 817 provides that a variable annuity contract will not
be treated as an annuity contract for any period during which the investments
made by the separate account or underlying fund are not adequately diversified.
If a contract is not treated as an annuity contract, the contract owner will be
subject to income tax on annual increases in cash value.
The Treasury Department's diversification regulations require, among other
things, that:
- - no more than 55% of the value of the total assets of the segregated asset
account underlying a variable contract is represented by any one investment,
- - no more than 70% is represented by any two investments,
- - no more than 80% is represented by any three investments and
- - no more than 90% is represented by any four investments.
In determining whether the diversification standards are met, all securities of
the same issuer, all interests in the same real property project, and all
interests in the same commodity are each treated as a single investment. In the
case of government securities, each government agency or instrumentality is
treated as a separate issuer.
A separate account must be in compliance with the diversification standards on
the last day of each calendar quarter or within 30 days after the quarter ends.
If an insurance company inadvertently fails to meet the diversification
requirements, the company may still comply within a reasonable period and avoid
the taxation of contract income on an ongoing basis. However, either the company
or the contract owner must agree to pay the tax due for the period during which
the diversification requirements were not met.
We monitor the diversification of investments in the separate accounts and test
for diversification as required by the Code. We intend to administer all
contracts subject to the diversification requirements in a manner that will
maintain adequate diversification.
4. OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT.
In order for a variable annuity contract to qualify for tax deferral, assets in
the separate accounts supporting the contract must be considered to be owned by
the insurance company and not by the contract owner. It is unclear under what
circumstances an investor is considered to have enough control over the assets
in the separate account to be considered the owner of the assets for tax
purposes.
The IRS has issued several rulings discussing investor control. These rulings
say that certain incidents of ownership by the contract owner, such as the
ability to select and control investments in a separate account, will cause the
contract owner to be treated as the owner of the assets for tax purposes.
<PAGE>
28 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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In its explanation of the diversification regulations, the Treasury Department
recognized that the temporary regulations "do not provide guidance concerning
the circumstances in which investor control of the investments of a segregated
asset account may cause the investor, rather than the insurance company, to be
treated as the owner of the assets in the account." The explanation further
indicates that "the temporary regulations provide that in appropriate cases a
segregated asset account may include multiple sub-accounts, but do not specify
the extent to which policyholders may direct their investments to particular
sub-accounts without being treated as the owners of the underlying assets.
Guidance on this and other issues will be provided in regulations or revenue
rulings under Section 817(d), relating to the definition of variable contract."
The final regulations issued under Section 817 did not provide guidance
regarding investor control, and as of the date of this prospectus, guidance has
yet to be issued. We do not know if additional guidance will be issued. If
guidance is issued, we do not know if it will have a retroactive effect.
Due to the lack of specific guidance on investor control, there is some
uncertainty about when a contract owner is considered the owner of the assets
for tax purposes. We reserve the right to modify the contract, as necessary, to
prevent you from being considered the owner of assets in the separate account.
D. FEDERAL INCOME TAX WITHHOLDING
Any portion of a distribution that is (or is deemed to be) current taxable
income to the Contract Owner will be subject to federal income tax withholding
and reporting under the Code. Generally, however, a Contract Owner may elect not
to have income taxes withheld or to have income taxes withheld at a different
rate by filing a completed election form with us. Election forms will be
provided at the time distributions are requested.
E. GENERAL PROVISIONS AFFECTING QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to Appendix I for information relative to the types of plans
for which it may be used and the general explanation of the tax features of such
plans.
F. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal income
tax consequences to annuity purchasers that are U.S. citizens or residents.
Purchasers that are not U.S. citizens or residents will generally be subject to
U.S. federal income tax and withholding on annuity distributions at a 30% rate,
unless a lower treaty rate applies. In addition, purchasers may be subject to
state premium tax, other state and/or municipal taxes, and taxes that may be
imposed by the purchaser's country of citizenship or residence. Prospective
purchasers are advised to consult with a qualified tax adviser regarding U.S.,
state, and foreign taxation with respect to an annuity purchase.
G. GENERATION-SKIPPING TRANSFERS
Under certain circumstances, the Internal Revenue Code may impose a
"generation-skipping transfer tax" when all or part of an annuity is transferred
to, or a death benefit is paid to, an individual two or more generations younger
than the owner. Federal tax law may require us to deduct the tax from your
contract, or from any applicable payment, and pay it directly to the Internal
Revenue Service.
MISCELLANEOUS
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HOW CONTRACTS ARE SOLD
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account. HSD
is an affiliate of Hartford. Both HSD and Hartford are ultimately controlled by
The Hartford Financial Services Group, Inc. The principal business address of
HSD is the same as that of Hartford.
The securities will be sold by salesperson of HSD who represent Hartford as
insurance and variable annuity agents and who are registered representatives of
Broker-Dealers who have entered into distribution agreements with HSD.
HSD is registered with the Commission under the Securities Exchange Act of 1934
as a Broker-Dealer and is a member of the National Association of Securities
Dealers, Inc.
Commissions will be paid by Hartford and will not be more than 7% of premium
payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.
Broker-dealers or financial institutions are compensated according to a schedule
set forth by HSD and any applicable rules or regulations for variable insurance
compensation. Compensation is generally based on premium payments made by
policyholders or contract owners. This compensation is usually paid from the
sales charges described in this Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or contract
owners to purchase, hold or Surrender variable insurance products.
The Contract may be sold directly to certain individuals under certain
circumstances that do not involve payment of any sales
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HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 29
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compensation to a registered representative. In such case, Hartford will credit
the Contract with an additional 5.0% of the Premium Payment. This additional
percentage of Premium Payment in no way affects present or future charges,
rights, benefits or current values of other Contract Owners. The following class
of individuals are eligible for this feature: (1) current or retired officers,
directors, trustees and employees (and their families) of the ultimate parent
and affiliates of Hartford; and (2) employees and registered representatives
(and their families) of registered broker-dealers (or their financial
institutions) that have a sales agreement with Hartford and its principal
underwriter to sell the Contracts.
LEGAL MATTERS
There are no material legal proceedings pending to which the Separate Account is
a party.
Counsel with respect to federal laws and regulations applicable to the issue and
sale of the Contracts and with respect to Connecticut law is Lynda Godkin,
Senior Vice President, General Counsel and Corporate Secretary, Hartford Life
and Annuity Insurance Company, P.O. Box 2999, Hartford, Connecticut 06104-2999.
EXPERTS
The audited financial statements included in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
Hartford Life and Annuity Insurance Company which states the statutory financial
statements are presented in accordance with statutory accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
and the State of Connecticut Insurance Department, and are not presented in
accordance with generally accepted accounting principles. The principal business
address of Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut
06103.
MORE INFORMATION
You may call your Representative if you have any questions or write or call us
at the address below:
Hartford Life and Annuity Insurance Company
Attn: Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Telephone: 1-800-862-6668 (Contract Owners)
1-800-862-7155 (Registered Representatives)
<PAGE>
30 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
SECTION
<S> <C>
- ----------------------------------------------------------------------
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- ----------------------------------------------------------------------
SAFEKEEPING OF ASSETS
- ----------------------------------------------------------------------
INDEPENDENT PUBLIC ACCOUNTANTS
- ----------------------------------------------------------------------
DISTRIBUTION OF CONTRACTS
- ----------------------------------------------------------------------
CALCULATION OF YIELD AND RETURN
- ----------------------------------------------------------------------
PERFORMANCE COMPARISONS
- ----------------------------------------------------------------------
FINANCIAL STATEMENTS
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 31
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APPENDIX I -- INFORMATION REGARDING TAX-QUALIFIED
RETIREMENT PLANS
This summary does not attempt to provide more than general information about the
federal income tax rules associated with use of a Contract by a tax-qualified
retirement plan. Because of the complexity of the federal tax rules, owners,
participants and beneficiaries are encouraged to consult their own tax advisors
as to specific tax consequences.
The federal tax rules applicable to owners of Contracts under tax-qualified
retirement plans vary according to the type of plan as well as the terms and
conditions of the plan itself. Contract owners, plan participants and
beneficiaries are cautioned that the rights and benefits of any person may be
controlled by the terms and conditions of the tax-qualified retirement plan
itself, regardless of the terms and conditions of a Contract. We are not bound
by the terms and conditions of such plans to the extent such terms conflict with
a Contract, unless we specifically consent to be bound.
Some tax-qualified retirement plans are subject to distribution and other
requirements that are not incorporated into our administrative procedures.
Contract owners, participants and beneficiaries are responsible for determining
that contributions, distributions and other transactions comply with applicable
law. Tax penalties may apply to transactions with respect to tax-qualified
retirement plans if applicable federal income tax rules and restrictions are not
carefully observed.
We do not currently offer the Contracts in connection with all of the types of
tax-qualified retirement plans discussed below and may not offer the Contracts
for all types of tax-qualified retirement plans in the future.
1. TAX-QUALIFIED PENSION OR PROFIT-SHARING PLANS -- Eligible employers can
establish certain tax-qualified pension and profit-sharing plans under
section 401 of the Code. Rules under section 401(k) of the Code govern certain
"cash or deferred arrangements" under such plans. Rules under section 408(k)
govern "simplified employee pensions". Tax-qualified pension and profit-sharing
plans are subject to limitations on the amount that may be contributed, the
persons who may be eligible to participate and the time when distributions must
commence. Employers intending to use the Contracts in connection with
tax-qualified pension or profit-sharing plans should seek competent tax and
other legal advice.
2. TAX SHELTERED ANNUITIES UNDER SECTION 403(b) -- Public schools and certain
types of charitable, educational and scientific organizations, as specified in
section 501(c)(3) of the Code, can purchase tax-sheltered annuity contracts for
their employees. Tax-deferred contributions can be made to tax-sheltered annuity
contracts under section 403(b) of the Code, subject to certain limitations.
Generally, such contributions may not exceed the lesser of $10,500 (indexed) or
20% of the employee's "includable compensation" for such employee's most recent
full year of employment, subject to other adjustments. Special provisions under
the Code may allow some employees to elect a different overall limitation.
Tax-sheltered annuity programs under section 403(b) are subject to a PROHIBITION
AGAINST DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO CONTRIBUTIONS MADE
PURSUANT TO A SALARY REDUCTION AGREEMENT, unless such distribution is made:
- - after the participating employee attains age 59 1/2;
- - upon separation from service;
- - upon death or disability; or
- - in the case of hardship (and in the case of hardship, any income attributable
to such contributions may not be distributed).
Generally, the above restrictions do not apply to distributions attributable to
cash values or other amounts held under a section 403(b) contract as of December
31, 1988.
3. DEFERRED COMPENSATION PLANS UNDER SECTION 457 -- A governmental employer or a
tax-exempt employer other than a governmental unit can establish a Deferred
Compensation Plan under section 457 of the Code. For these purposes, a
"governmental employer" is a State, a political subdivision of a State, or an
agency or an instrumentality of a State or political subdivision of a State.
Employees and independent contractors performing services for a governmental or
tax-exempt employer can elect to have contributions made to a Deferred
Compensation Plan of their employer in accordance with the employer's plan and
section 457 of the Code.
Deferred Compensation Plans that meet the requirements of section 457(b) of the
Code are called "eligible" Deferred Compensation Plans. Section 457(b) limits
the amount of contributions that can be made to an eligible Deferred
Compensation Plan on behalf of a participant. Generally, the limitation on
contributions is 33 1/3% of a participant's includable compensation (typically
25% of gross compensation) or, for 2000, $8,000 (indexed), whichever is less.
The plan may provide for additional "catch-up" contributions during the three
taxable years ending before the year in which the participant attains normal
retirement age.
All of the assets and income of an eligible Deferred Compensation Plan of a
governmental employer must be held in trust for the exclusive benefit of
participants and their beneficiaries. For this purpose, custodial accounts and
certain annuity contracts are treated as trusts. The requirement of a trust does
not apply to amounts under a Deferred Compensation Plan of a tax-exempt
(non-governmental) employer. In addition, the requirement of a trust does not
apply to amounts under a Deferred Compensation Plan of a governmental employer
if the Deferred Compensation Plan is not an eligible plan within the meaning of
section 457(b) of the Code. In the absence of such a trust,
<PAGE>
32 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
amounts under the plan will be subject to the claims of the employer's general
creditors.
In general, distributions from an eligible Deferred Compensation Plan are
prohibited under section 457 of the Code unless made after the participating
employee:
- - attains age 70 1/2,
- - separates from service,
- - dies, or
- - suffers an unforeseeable financial emergency as defined in the Code.
Under present federal tax law, amounts accumulated in a Deferred Compensation
Plan under section 457 of the Code cannot be transferred or rolled over on a
tax-deferred basis except for certain transfers to other Deferred Compensation
Plans under section 457 in limited cases.
4. INDIVIDUAL RETIREMENT ANNUITIES ("IRAS") UNDER SECTION 408
TRADITIONAL IRAS -- Eligible individuals can establish individual retirement
programs under section 408 of the Code through the purchase of an IRA.
Section 408 imposes limits with respect to IRAs, including limits on the amount
that may be contributed to an IRA, the amount of such contributions that may be
deducted from taxable income, the persons who may be eligible to contribute to
an IRA, and the time when distributions commence from an IRA. Distributions from
certain tax-qualified retirement plans may be "rolled-over" to an IRA on a
tax-deferred basis.
SIMPLE IRAS -- Eligible employees may establish SIMPLE IRAs in connection with a
SIMPLE IRA plan of an employer under section 408(p) of the Code. Special
rollover rules apply to SIMPLE IRAs. Amounts can be rolled over from one SIMPLE
IRA to another SIMPLE IRA. However, amounts can be rolled over from a SIMPLE IRA
to a Traditional IRA only after two years have expired since the employee first
commenced participation in the employer's SIMPLE IRA plan. Amounts cannot be
rolled over to a SIMPLE IRA from a qualified plan or a Traditional IRA. Hartford
is a non-designated financial institution for purposes of the SIMPLE IRA rules.
ROTH IRAS -- Eligible individuals may establish Roth IRAs under section 408A of
the Code. Contributions to a Roth IRA are not deductible. Subject to special
limitations, a Traditional IRA may be converted into a Roth IRA or a
distribution from a Traditional IRA may be rolled over to a Roth IRA. However, a
conversion or a rollover from a Traditional IRA to a Roth IRA is not excludable
from gross income. If certain conditions are met, qualified distributions from a
Roth IRA are tax-free.
5. FEDERAL TAX PENALTIES AND WITHHOLDING -- Distributions from tax-qualified
retirement plans are generally taxed as ordinary income under section 72 of the
Code. Under these rules, a portion of each distribution may be excludable from
income. The excludable amount is the portion of the distribution that bears the
same ratio as the after-tax contributions bear to the expected return.
(a) PENALTY TAX ON EARLY DISTRIBUTIONS Section 72(t) of the Code imposes an
additional penalty tax equal to 10% of the taxable portion of a distribution
from certain tax-qualified retirement plans. However, the 10% penalty tax
does not apply to a distributions that is:
- - Made on or after the date on which the employee reaches age 59 1/2;
- - Made to a beneficiary (or to the estate of the employee) on or after the death
of the employee;
- - Attributable to the employee's becoming disabled (as defined in the Code);
- - Part of a series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the employee or the
joint lives (or joint life expectancies) of the employee and his or her
designated beneficiary;
- - Except in the case of an IRA, made to an employee after separation from
service after reaching age 55; or
- - Not greater than the amount allowable as a deduction to the employee for
eligible medical expenses during the taxable year.
IN ADDITION, THE 10% PENALTY TAX DOES NOT APPLY TO A DISTRIBUTION FROM AN IRA
THAT IS:
- - Made after separation from employment to an unemployed IRA owner for health
insurance premiums, if certain conditions are met;
- - Not in excess of the amount of certain qualifying higher education expenses,
as defined by section 72(t)(7) of the Code; or
- - A qualified first-time homebuyer distribution meeting the requirements
specified at section 72(t)(8) of the Code.
If you are a participant in a SIMPLE IRA plan, you should be aware that the 10%
penalty tax is increased to 25% with respect to non-exempt early distributions
made from your SIMPLE IRA during the first two years following the date you
first commenced participation in any SIMPLE IRA plan of your employer.
(b) MINIMUM DISTRIBUTION PENALTY TAX If the amount distributed is less than the
minimum required distribution for the year, the Participant is subject to a
50% penalty tax on the amount that was not properly distributed.
An individual's interest in a tax-qualified retirement plan generally must be
distributed, or begin to be distributed, not later than the Required Beginning
Date. Generally, the Required Beginning Date is April 1 of the calendar year
following the later of:
- - the calendar year in which the individual attains age 70 1/2; or
- - the calendar year in which the individual retires from service with the
employer sponsoring the plan.
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY 33
- --------------------------------------------------------------------------------
The Required Beginning Date for an individual who is a five (5) percent owner
(as defined in the Code), or who is the owner of an IRA, is April 1 of the
calendar year following the calendar year in which the individual attains age
70 1/2.
The entire interest of the Participant must be distributed beginning no later
than the Required Beginning Date over:
- - the life of the Participant or the lives of the Participant and the
Participant's designated beneficiary, or
- - over a period not extending beyond the life expectancy of the Participant or
the joint life expectancy of the Participant and the Participant's designated
beneficiary.
Each annual distribution must equal or exceed a "minimum distribution amount"
which is determined by dividing the account balance by the applicable life
expectancy. This account balance is generally based upon the account value as of
the close of business on the last day of the previous calendar year. In
addition, minimum distribution incidental benefit rules may require a larger
annual distribution.
If an individual dies before reaching his or her Required Beginning Date, the
individual's entire interest must generally be distributed within five years of
the individual's death. However, this rule will be deemed satisfied, if
distributions begin before the close of the calendar year following the
individual's death to a designated beneficiary and distribution is over the life
of such designated beneficiary (or over a period not extending beyond the life
expectancy of the beneficiary). If the beneficiary is the individual's surviving
spouse, distributions may be delayed until the individual would have attained
age 70 1/2.
If an individual dies after reaching his or her Required Beginning Date or after
distributions have commenced, the individual's interest must generally be
distributed at least as rapidly as under the method of distribution in effect at
the time of the individual's death.
(c) WITHHOLDING In general, regular wage withholding rules apply to
distributions from IRAs and plans described in section 457 of the Code.
Periodic distributions from other tax-qualified retirement plans that are
made for a specified period of 10 or more years or for the life or life
expectancy of the participant (or the joint lives or life expectancies of
the participant and beneficiary) are generally subject to federal income tax
withholding as if the recipient were married claiming three exemptions. The
recipient of periodic distributions may generally elect not to have
withholding apply or to have income taxes withheld at a different rate by
providing a completed election form.
Mandatory federal income tax withholding at a flat rate of 20% will generally
apply to other distributions from such other tax-qualified retirement plans
unless such distributions are:
- - the non-taxable portion of the distribution;
- - required minimum distributions; or
- - direct transfer distributions.
Direct transfer distributions are direct payments to an IRA or to another
eligible retirement plan under Code section 401(a)(31).
Certain states require withholding of state taxes when federal income tax is
withheld.
<PAGE>
34 HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
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APPENDIX II -- OPTIONAL DEATH BENEFIT -- EXAMPLES
EXAMPLE 1
Assume that you make a Premium Payment of $100,000. On the first Contract
Anniversary assume your Contract Value is $108,000.00. The Interest Accumulation
Value is $105,000 or 5% accumulation on the $100,000 Premium Payment.
<TABLE>
<C> <S>
$100,000 Premium Payment
$ 5,000 Interest of 5%
- --------
$105,000 Interest Accumulation Value
</TABLE>
If you request a partial Surrender of $10,000 the next day, your Interest
Accumulation Value will change. The adjustment for the partial Surrender is
determined by dividing the partial Surrender amount by the Contract Value prior
to the Surrender and multiplying that amount by the Interest Accumulation Value
prior to the Surrender. To determine the new Interest Accumulation Value, that
total is then subtracted from the Interest Accumulation Value prior to the
Surrender.
<TABLE>
<C> <S>
$ 10,000 partial Surrender divided by
$108,000 Contract Value prior to Surrender equals
.09259 multiplied by
$105,000 Interest Accumulation Value for a total of
$ 9,722 to be deducted from the Interest Accumulation Value equals
$ 95,278 the new Interest Accumulation Value
</TABLE>
EXAMPLE 2
Assume that you make a Premium Payment of $100,000. On the first Contract
Anniversary assume your Contract Value is $92,000.00. The Interest Accumulation
Value is $105,000 or 5% accumulation on the $100,000 Premium Payment.
<TABLE>
<C> <S>
$100,000 Premium Payment
$ 5,000 Interest of 5%
- --------
$105,000 Interest Accumulation Value
</TABLE>
If you request a partial Surrender of $10,000 the next day, your Interest
Accumulation Value will change. The adjustment for the partial Surrender is
determined by dividing the partial Surrender amount by the Contract Value prior
to the Surrender and multiplying that amount by the Interest Accumulation Value
prior to the Surrender. To determine the new Interest Accumulation Value, that
total is then subtracted from the Interest Accumulation Value prior to the
Surrender.
<TABLE>
<C> <S>
$ 10,000 partial Surrender divided by
$ 92,000 Contract Value prior to Surrender equals
.10870 multiplied by
$105,000 Interest Accumulation Value for a total of
$ 11,413 to be deducted from the Interest Accumulation Value equals
$ 93,587 the New Interest Accumulation Value
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
This form must be completed for all tax sheltered annuities.
SECTION 403(b)(11) ACKNOWLEDGMENT FORM
The variable annuity Contract which you have recently purchased is subject to
certain restrictions imposed by the Tax Reform Act of 1986. Contributions after
December 31, 1988 and any increases in cash value after December 31, 1988 may
not be distributed unless the contract owner has:
- - attained age 59 1/2,
- - separated from service,
- - died, or
- - become disabled.
Distributions post December 31, 1988 contributions (excluding any income
thereon) may also be made if you have experienced a financial hardship.
Also, there may be a 10% Federal Income penalty tax for distributions made prior
to age 59 1/2 because of financial hardship or separation from service.
Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than your annuity. Please refer to your Plan.
Please complete the following and return to:
Hartford Life and Annuity Insurance Company
Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Name of Contract Owner/Participant: ___________________________________________
Address: ______________________________________________________________________
City or Plan/School District: _________________________________________________
Date: _________________________________________________________________________
Contract No.: _________________________________________________________________
Signature: ____________________________________________________________________
<PAGE>
To obtain a Statement of Additional Information, please complete the form below
and mail to:
Hartford Life and Annuity Insurance Company
Attn: Investment Product Services
P.O. Box 5085
Hartford, Connecticut 06102-5085
Please send a Statement of Additional Information for Director FOCUS variable
annuity to me at the following address:
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City/State Zip Code
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT SEVEN
DIRECTOR FOCUS
This Statement of Additional Information is not a prospectus. The information
contained herein should be read in conjunction with the prospectus.
To obtain a prospectus, send a written request to Hartford Life and Annuity
Insurance Company Attn: Investment Product Services, P.O. Box 5085, Hartford,
Connecticut 06102-5085.
Date of Prospectus: May 1, 2000
Date of Statement of Additional Information: May 1, 2000
333-76419
<PAGE>
-2-
TABLE OF CONTENTS
SECTION PAGE
DESCRIPTION OF HARTFORD LIFE AND ANNUITY INSURANCE COMPANY............. 3
SAFEKEEPING OF ASSETS ................................................. 3
INDEPENDENT PUBLIC ACCOUNTANTS ........................................ 3
DISTRIBUTION OF CONTRACTS.............................................. 4
CALCULATION OF YIELD AND RETURN........................................ 5
PERFORMANCE COMPARISONS................................................ 10
FINANCIAL STATEMENTS ..................................................
<PAGE>
-3-
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
Hartford Life and Annuity Insurance Company is a stock life insurance company
engaged in the business of writing life insurance and annuities, both individual
and group, in all states of the United States, the District of Columbia and
Puerto Rico, except New York. On January 1, 1998, Hartford's name changed from
ITT Hartford Life and Annuity Insurance Company to Hartford Life and Annuity
Insurance Company. We were originally incorporated under the laws of Wisconsin
on January 9, 1956, and subsequently redomiciled to Connecticut. Our offices are
located in Simsbury, Connecticut; however, our mailing address is P.O. Box 2999,
Hartford, CT 06104-2999. We are ultimately controlled by The Hartford Financial
Services Group, Inc., one of the largest financial service providers in the
United States.
HARTFORD'S RATINGS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Rating Agency Effective Rating Basis of Rating
Date of Rating
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A.M. Best and Company, Inc. 1/1/99 A+ Financial performance
- -------------------------------------------------------------------------------------------------
Standard & Poor's 8/1//99 AA Insurer financial strength
- -------------------------------------------------------------------------------------------------
Duff & Phelps 7/1/99 AA+ Claims paying ability
- -------------------------------------------------------------------------------------------------
</TABLE>
SAFEKEEPING OF ASSETS
Title to the assets of the Separate Account is held by Hartford. The assets are
kept physically segregated and are held separate and apart from Hartford's
general corporate assets. Records are maintained of all purchases and
redemptions of Fund shares held in each of the Sub-Accounts.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited financial statements included in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Reference is made to the report on the statutory financial statements of
Hartford Life and Annuity Insurance Company which states the statutory financial
statements are presented in accordance with statutory accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
and the State of Connecticut Insurance Department, and are not presented in
accordance with generally accepted accounting principles. The principal
<PAGE>
-4-
business address of Arthur Andersen LLP is One Financial Plaza, Hartford,
Connecticut 06103.
DISTRIBUTION OF CONTRACTS
HOW CONTRACTS ARE SOLD
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account. HSD
is an affiliate of Hartford. Both HSD and Hartford are ultimately controlled by
The Hartford Financial Services Group, Inc. The principal business address of
HSD is the same as that of Hartford.
The securities will be sold by salespersons of HSD who represent Hartford as
insurance and variable annuity agents and who are registered representatives of
Broker-Dealers who have entered into distribution agreements with HSD.
HSD is registered with the Commission under the Securities Exchange Act of 1934
as a Broker-Dealer and is a member of the National Association of Securities
Dealers, Inc.
Commissions will be paid by Hartford and will not be more than 7% of premium
payments. From time to time, Hartford may pay or permit other promotional
incentives, in cash or credit or other compensation.
Broker-dealers or financial institutions are compensated according to a schedule
set forth by HSD and any applicable rules or regulations for variable insurance
compensation. Compensation is generally based on premium payments made by
policyholders or contract owners. This compensation is usually paid from the
sales charges described in the prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HSD, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or financial institutions based on
total sales by the broker-dealer or financial institution of insurance products.
These payments, which may be different for different broker-dealers or financial
institutions, will be made by HSD, its affiliates or Hartford out of their own
assets and will not effect the amounts paid by the policyholders or contract
owners to purchase, hold or Surrender variable insurance products.
The Contract may be sold directly to certain individuals under certain
circumstances that do not involve payment of any sales compensation to a
registered representative. In such case, Hartford will credit the Contract with
an additional 5.0% of the premium payment. This additional percentage of premium
payment in no way affects present or
<PAGE>
-5-
future charges, rights, benefits or current values of other Contract Owners. The
following class of individuals are eligible for this feature: (1) current or
retired officers, directors, trustees and employees (and their families) of the
ultimate parent and affiliates of Hartford; and (2) employees and registered
representatives (and their families) of registered broker-dealers (or financial
institutions affiliated therewith) that have a sales agreement with Hartford and
its principal underwriter to sell the Contracts.
Hartford currently pays HSD underwriting commissions for its role as Principal
Underwriter of all variable annuities associated with this Separate Account. For
the past three years, the aggregate dollar amount of underwriting commissions
paid to and retained by HSD in its role as Principal Underwriter has been: 1999:
$16,156,318.29; 1998: $0 and 1997: $0. HSD has retained none of these
commissions.
CALCULATION OF YIELD AND RETURN
YIELD OF A MONEY MARKET SUB-ACCOUNT. As summarized in the prospectus under the
heading "Performance Related Information," the yield of a Money Market
Sub-Account for a seven day period (the "base period") will be computed by
determining the "net change in value" (calculated as set forth below) of a
hypothetical account having a balance of one accumulation unit of the
Sub-Account at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from Contract Owner accounts, and dividing the difference
by the value of the account at the beginning of the base period to obtain the
base period return, and then multiplying the base period return by 365/7 with
the resulting yield figure carried to the nearest hundredth of one percent. Net
changes in value of a hypothetical account will include net investment income of
the account (accrued daily dividends as declared by the underlying funds, less
daily expense charges of the account) for the period, but will not include
realized gains or losses or unrealized appreciation or depreciation on the
underlying fund shares.
The effective yield is calculated by compounding the base period return by
adding 1, raising the sum to a power equal to 365/7 and subtracting 1 from the
result, according to the following formula:
Effective Yield = [(Base Period Return + 1)TO THE POWER OF 365/7] - 1
A MONEY MARKET SUB-ACCOUNT'S YIELD AND EFFECTIVE YIELD WILL VARY IN RESPONSE TO
FLUCTUATIONS IN INTEREST RATES AND IN THE EXPENSES OF THE SUB-ACCOUNT. THE
CURRENT YIELD AND EFFECTIVE YIELD REFLECT RECURRING CHARGES ON THE SEPARATE
ACCOUNT LEVEL, INCLUDING THE MAXIMUM ANNUAL MAINTENANCE FEE.
<PAGE>
-6-
YIELD AND EFFECTIVE YIELD FOR THE SEVEN-DAY PERIOD ENDING DECEMBER 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
SUB-ACCOUNT YIELD EFFECTIVE YIELD
- ------------------------------------------------------------------------------
<S> <C> <C>
Hartford Money Market HLS Fund 3.76% 3.83%
- ------------------------------------------------------------------------------
</TABLE>
YIELD OF SUB-ACCOUNTS. As summarized in the prospectus under the heading
"Performance Related Information," yields of Sub-Accounts will be computed by
annualizing a recent month's net investment income, divided by a Fund share's
net asset value on the last trading day of that month. Net changes in the value
of a hypothetical account will assume the change in the underlying mutual fund's
"net asset value per share" for the same period in addition to the daily expense
charge assessed, at the sub-account level for the respective period. The
Sub-Accounts' yields will vary from time to time depending upon market
conditions and, the composition of the underlying funds' portfolios. Yield
should also be considered relative to changes in the value of the Sub-Accounts'
shares and to the relative risks associated with the investment objectives and
policies of the underlying Fund.
THE YIELD REFLECTS RECURRING CHARGES ON THE SEPARATE ACCOUNT LEVEL, INCLUDING
THE ANNUAL MAINTENANCE FEE.
Yield calculations of the Sub-Accounts used for illustration purposes reflect
the interest earned by the Sub-Accounts, less applicable asset charges assessed
against a Contract Owner's account over the base period. Yield quotations based
on a 30 day period were computed by dividing the dividends and interest earned
during the period by the maximum offering price per unit on the last day of the
period, according to the following formula:
Example:
Current Yield Formula for the Sub-Account 2[((A-B)/(CD) + 1)TO THE
POWER OF 6 - 1]
Where A = Dividends and interest earned during the period.
B = Expenses accrued for the period (net of reimbursements).
C = The average daily number of units outstanding during the
period that were entitled to receive dividends.
D = The maximum offering price per unit on the last day of the
period.
<PAGE>
-7-
YIELD QUOTATION BASED ON A 30-DAY PERIOD ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
SUB-ACCOUNT YIELD
- ------------------------------------------------------------------------------
<S> <C>
Hartford Bond HLS Fund 5.35%
- ------------------------------------------------------------------------------
Hartford High Yield HLS Fund 7.95%
- ------------------------------------------------------------------------------
Hartford Mortgage Securities HLS Fund 5.17%
- ------------------------------------------------------------------------------
Salomon Brothers Variable High Yield Bond Fund 9.37%
- ------------------------------------------------------------------------------
</TABLE>
At any time in the future, yields and total return may be higher or lower than
past yields and there can be no assurance that any historical results will
continue.
The method of calculating yields described above for these Sub-Accounts differs
from the method used by the Sub-Accounts prior to May 1, 1988. The denominator
of the fraction used to calculate yield was previously the average unit value
for the period calculated. That denominator will hereafter be the unit value of
the Sub-Accounts on the last trading day of the period calculated.
CALCULATION OF TOTAL RETURN. As summarized in the prospectus under the heading
"Performance Related Information," total return is a measure of the change in
value of an investment in a Sub-Account over the period covered and assumes that
the Optional Death Benefit has not been elected. The formula for total return
used herein includes three steps: (1) calculating the value of the hypothetical
initial investment of $1,000 as of the end of the period by multiplying the
total number of units owned at the end of the period by the unit value per unit
on the last trading day of the period; (2) assuming redemption at the end of the
period and deducting any applicable contingent deferred sales charge and (3)
dividing this account value for the hypothetical investor by the initial $1,000
investment and annualizing the result for periods of less than one year.
Standardized total return will be calculated since the inception of the Separate
Account for one year, five years and ten years or some other relevant periods if
a Sub-Account has not been in existence for at least ten years.
The following are the standardized average annual total return quotations for
the Sub-Accounts. No information is shown for Hartford Global Health HLS Fund
and Hartford Global Technology HLS Fund Sub-Accounts because, as of December 31,
1999, the Sub-Accounts had not yet commenced operations.
<PAGE>
-8-
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
SEPARATE SINCE INCEPTION OF
SUB-ACCOUNT ACCOUNT 1 YEAR 5 YEAR 10 YEAR SEPARATE
INCEPTION DATE ACCOUNT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Hartford Advisers HLS Fund 4/1/99 N/A N/A N/A -3.04%
- -------------------------------------------------------------------------------------------------------------------
Hartford Bond HLS Fund 4/1/99 N/A N/A N/A -10.84%
- -------------------------------------------------------------------------------------------------------------------
Hartford Capital Appreciation 4/1/99 N/A N/A N/A 16.49%
HLS Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford Dividend and Growth 4/1/99 N/A N/A N/A -5.51%
HLS Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford Global Leaders HLS Fund 4/1/99 N/A N/A N/A 27.62%
- -------------------------------------------------------------------------------------------------------------------
Hartford Growth and Income HLS 4/1/99 N/A N/A N/A 5.71%
Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford High Yield HLS Fund 4/1/99 N/A N/A N/A -9.83%
- -------------------------------------------------------------------------------------------------------------------
Hartford Index HLS Fund 4/1/99 N/A N/A N/A 3.93%
- -------------------------------------------------------------------------------------------------------------------
Hartford International Advisers 4/1/99 N/A N/A N/A 7.67%
HLS Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford International 4/1/99 N/A N/A N/A 20.89%
Opportunities HLS Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford MidCap HLS Fund 4/1/99 N/A N/A N/A 31.19%
- -------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS Fund 4/1/99 N/A N/A N/A -6.54%
- -------------------------------------------------------------------------------------------------------------------
Hartford Mortgage Securities 4/1/99 N/A N/A N/A -9.59%
HLS Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford Small Company HLS Fund 4/1/99 N/A N/A N/A 51.48%
- -------------------------------------------------------------------------------------------------------------------
Hartford Stock HLS Fund 4/1/99 N/A N/A N/A 2.83%
- -------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable Capital 4/1/99 N/A N/A N/A 13.26%
Fund
- -------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable High 4/1/99 N/A N/A N/A -1.62%
Yield Bond Fund
- -------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable 4/1/99 N/A N/A N/A -9.56%
Investors Fund
- -------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable Total 4/1/99 N/A N/A N/A -7.34%
Return Fund
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
-9-
Performance figures above do not reflect any deductions for Optional Death
Benefit charges. Performance would have been lower had the Optional Death
Benefit been available and been chosen.
In addition to the standardized total return, the Sub-Account may advertise a
non-standardized total return. This figure will usually be calculated since the
inception of the underlying fund for one year, five years, and ten years or
other periods. Non-standardized total return is measured in the same manner as
the standardized total return described above, except that the contingent
deferred sales charge and the Annual Maintenance Fee are not deducted.
Therefore, non-standardized total return for a Sub-Account is higher than
standardized total return for a Sub-Account.
The following are the non-standardized annualized total return quotations for
the Sub-Accounts. No information is shown for Hartford Global Health HLS Fund
and Hartford Global Technology HLS Fund Sub-Accounts because, as of December 31,
1999, the Sub-Accounts had not yet commenced operations.
NON-STANDARDIZED ANNUALIZED TOTAL RETURN THAT PRE-DATE THE
INCEPTION DATE OF THE SEPARATE ACCOUNT FOR YEAR ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
SUB-ACCOUNT FUND INCEPTION SINCE INCEPTION OF
DATE 1 YEAR 5 YEAR 10 YEAR FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Hartford Advisers HLS Fund 3/31/83 8.85% 18.87% 12.20% N/A
- -------------------------------------------------------------------------------------------------------------------
Hartford Bond HLS Fund 8/31/77 -3.55% 5.99% 5.72% N/A
- -------------------------------------------------------------------------------------------------------------------
Hartford Capital Appreciation 4/2/84 35.30% 23.05% 17.89% N/A
HLS Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford Dividend and Growth 3/8/94 3.66% 20.15% N/A 17.22%
HLS Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford Global Leaders HLS Fund 10/1/98 48.01% N/A N/A 70.26%
- -------------------------------------------------------------------------------------------------------------------
Hartford Growth and Income HLS 5/29/98 19.92% N/A N/A 24.33%
Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford High Yield HLS Fund 10/1/98 3.06% N/A N/A 5.23%
- -------------------------------------------------------------------------------------------------------------------
Hartford Index HLS Fund 5/1/87 18.60% 25.81% 15.59% N/A
- -------------------------------------------------------------------------------------------------------------------
Hartford International Advisers 3/1/95 21.23% N/A N/A 12.49%
HLS Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford International 7/2/90 37.67% 13.55% N/A 8.64%
Opportunities HLS Fund
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
-10-
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
SUB-ACCOUNT FUND INCEPTION SINCE INCEPTION OF
DATE 1 YEAR 5 YEAR 10 YEAR FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Hartford MidCap HLS Fund 7/30/97 49.43% N/A N/A 34.21%
- -------------------------------------------------------------------------------------------------------------------
Hartford Money Market HLS Fund 6/30/80 3.25% 3.63% 3.45% N/A
- -------------------------------------------------------------------------------------------------------------------
Hartford Mortgage Securities 1/1/85 -0.07% 5.90% 5.43% N/A
HLS Fund
- -------------------------------------------------------------------------------------------------------------------
Hartford Small Company HLS Fund 8/9/96 63.23% N/A N/A 26.57%
- -------------------------------------------------------------------------------------------------------------------
Hartford Stock HLS Fund 8/31/77 17.91% 26.48% 16.03% N/A
- -------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable Capital 2/17/98 20.04% N/A N/A 19.77%
Fund
- -------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable High 5/1/98 3.96% N/A N/A 1.86%
Yield Bond Fund
- -------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable 2/17/98 9.73% N/A N/A 10.17%
Investors Fund
- -------------------------------------------------------------------------------------------------------------------
Salomon Brothers Variable Total 2/17/98 -0.43% N/A N/A 2.18%
Return Fund
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Performance figures above do not reflect any deductions for Optional Death
Benefit charges. Performance would have been lower had the Optional Death
Benefit been available and been chosen.
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. Each Sub-Account may from time to time include its total
return in advertisements or in information furnished to present or prospective
shareholders. Each Sub-Account may from time to time include its yield and total
return in advertisements or information furnished to present or prospective
shareholders. Each Sub-Account may from time to time include in advertisements
its total return (and yield in the case of certain Sub-Accounts) the ranking of
those performance figures relative to such figures for groups of other annuities
analyzed by Lipper Analytical Services and Morningstar, Inc. as having the same
investment objectives.
The total return and yield may also be used to compare the performance of the
Sub-Accounts against certain widely acknowledged outside standards or indices
for stock and bond market performance. The Standard & Poor's Composite Index of
500 Stocks (the "S&P 500") is a market value-weighted and unmanaged index
showing the changes in the aggregate market value of 500 stocks relative to the
base period 1941-43. The S&P 500 is composed almost entirely of common stocks of
companies listed on the New York Stock Exchange, although the common stocks of a
few
<PAGE>
-11-
companies listed on the American Stock Exchange or traded over-the-counter
are included. The 500 companies represented include 400 industrial, 60
transportation and 40 financial services concerns. The S&P 500 represents about
80% of the market value of all issues traded on the New York Stock Exchange.
The NASDAQ-OTC Composite Price Index (The "NASDAQ Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of approximately 3,500 stocks relative to the base measure of 100.00 on
February 5, 1971. The NASDAQ Index is composed entirely of common stocks of
companies traded over-the-counter and often through the National Association of
Securities Dealers Automated Quotations ("NASDAQ") system. Only those
over-the-counter stocks having only one market maker or traded on exchanges are
excluded.
The Morgan Stanley Capital International EAFE Index (the "EAFE Index") is an
unmanaged index, which includes over 1,000 companies representing the stock
markets of Europe, Australia, New Zealand, and the Far East. The EAFE Index is
weighted by market capitalization, and therefore, it has a heavy representation
in countries with large stock markets, such as Japan.
The Shearson Lehman Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted issues
are not included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized rating
agency.
The Composite Index for Hartford Advisers HLS Fund is comprised of the S&P 500
(55%), the Lehman Government/Corporate Bond Index (35%), both mentioned above,
and 90 Days U.S. Treasury Bills (10%).
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
TO HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT SEVEN AND TO THE
OWNERS OF UNITS OF INTEREST THEREIN:
We have audited the accompanying statements of assets and liabilities of
Hartford Life and Annuity Insurance Company Separate Account Seven (Hartford
Money Market HLS, American Funds Asset Allocation, American Funds Bond, American
Funds Global Growth, American Funds Global Small Capitalization, American Funds
Growth, American Funds Growth-Income, American Funds International, American
Funds New World, Franklin Real Estate Securities, Franklin Small Cap, Mutual
Shares Securities, Franklin Strategic Income Investments, MFS Capital
Opportunities, MFS Emerging Growth, MFS Global Equity, MFS Growth, MFS Growth
with Income, MFS High Income, MFS New Discovery, MFS Total Return, Templeton
Asset Allocation, Templeton International, Templeton Developing Markets Equity,
and Templeton Global Growth sub-accounts), (collectively, the Account) as of
December 31, 1999, and the related statements of operations and the statements
of changes in net assets for the period presented. These financial statements
are the responsibility of the Account's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1999, and the results of its operations and the changes in its net assets for
the period presented in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 17, 2000 ARTHUR ANDERSEN LLP
_____________________________________ SA-1 _____________________________________
<PAGE>
SEPARATE ACCOUNT SEVEN
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
HARTFORD AMERICAN FUNDS
MONEY MARKET ASSET AMERICAN FUNDS AMERICAN FUNDS
HLS ALLOCATION BOND GLOBAL GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in the Hartford
Money Market HLS Fund:
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 4,834,594
Cost $4,834,594
Market Value.............. $4,834,594 -- -- --
Investments in American Funds
Insurance Series:
Asset Allocation Fund
Shares 750,527
Cost $11,826,994
Market Value.............. -- $11,302,929 -- --
Bond Fund
Shares 403,982
Cost $3,967,969
Market Value.............. -- -- $3,934,782 --
Global Growth Fund
Shares 577,199
Cost $10,475,370
Market Value.............. -- -- -- $12,357,820
Global Small Capitalization
Fund
Shares 467,904
Cost $7,471,027
Market Value.............. -- -- -- --
Growth Fund
Shares 714,974
Cost $49,188,239
Market Value.............. -- -- -- --
Growth-Income Fund
Shares 1,508,680
Cost $55,632,088
Market Value.............. -- -- -- --
International Fund
Shares 635,091
Cost $14,985,288
Market Value.............. -- -- -- --
New World Fund
Shares 409,985
Cost $4,245,642
Market Value.............. -- -- -- --
Investments in the Franklin
Templeton Variable Insurance
Products Trust:
Real Estate Securities Fund
Shares 26,404
Cost $388,845
Market Value.............. -- -- -- --
Small Cap Fund
Shares 128,525
Cost $2,708,869
Market Value.............. -- -- -- --
Mutual Shares Securities
Fund
Shares 290,756
Cost $3,811,532
Market Value.............. -- -- -- --
Investments in the Templeton
Variable Products Series
Fund:
Franklin Strategic Income
Investments Fund
Shares 90,218
Cost $902,687
Market Value.............. -- -- -- --
Due from Hartford Life and
Annuity Insurance Company.... -- 108,667 5,554 122,562
Receivable for fund shares
sold......................... 8,193 -- -- --
---------- ----------- ---------- -----------
Total Assets.................. 4,842,787 11,411,596 3,940,336 12,480,382
---------- ----------- ---------- -----------
LIABILITIES:
Due to Hartford Life and
Annuity Insurance Company.... 8,112 -- -- --
Payable for fund shares
purchased.................... -- 108,673 5,555 122,564
---------- ----------- ---------- -----------
Total Liabilities............. 8,112 108,673 5,555 122,564
---------- ----------- ---------- -----------
Net Assets (variable annuity
contract liabilities)........ $4,834,675 $11,302,923 $3,934,781 $12,357,818
========== =========== ========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-2
-------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FUNDS FRANKLIN
GLOBAL SMALL AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS REAL ESTATE
CAPITALIZATION GROWTH GROWTH-INCOME INTERNATIONAL NEW WORLD SECURITIES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- -------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in the Hartford
Money Market HLS Fund:
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 4,834,594
Cost $4,834,594
Market Value.............. -- -- -- -- -- --
Investments in American Funds
Insurance Series:
Asset Allocation Fund
Shares 750,527
Cost $11,826,994
Market Value.............. -- -- -- -- -- --
Bond Fund
Shares 403,982
Cost $3,967,969
Market Value.............. -- -- -- -- -- --
Global Growth Fund
Shares 577,199
Cost $10,475,370
Market Value.............. -- -- -- -- -- --
Global Small Capitalization
Fund
Shares 467,904
Cost $7,471,027
Market Value.............. $ 8,122,818 -- -- -- -- --
Growth Fund
Shares 714,974
Cost $49,188,239
Market Value.............. -- $50,455,740 -- -- -- --
Growth-Income Fund
Shares 1,508,680
Cost $55,632,088
Market Value.............. -- -- $49,892,033 -- -- --
International Fund
Shares 635,091
Cost $14,985,288
Market Value.............. -- -- -- $16,975,973 -- --
New World Fund
Shares 409,985
Cost $4,245,642
Market Value.............. -- -- -- -- $4,825,525 --
Investments in the Franklin
Templeton Variable Insurance
Products Trust:
Real Estate Securities Fund
Shares 26,404
Cost $388,845
Market Value.............. -- -- -- -- -- $392,897
Small Cap Fund
Shares 128,525
Cost $2,708,869
Market Value.............. -- -- -- -- -- --
Mutual Shares Securities
Fund
Shares 290,756
Cost $3,811,532
Market Value.............. -- -- -- -- -- --
Investments in the Templeton
Variable Products Series
Fund:
Franklin Strategic Income
Investments Fund
Shares 90,218
Cost $902,687
Market Value.............. -- -- -- -- -- --
Due from Hartford Life and
Annuity Insurance Company.... 83,195 705,288 325,330 561,199 13,833 --
Receivable for fund shares
sold......................... -- -- -- -- -- --
----------- ----------- ----------- ----------- ---------- --------
Total Assets.................. 8,206,013 51,161,028 50,217,363 17,537,172 4,839,358 392,897
----------- ----------- ----------- ----------- ---------- --------
LIABILITIES:
Due to Hartford Life and
Annuity Insurance Company.... -- -- -- -- -- 30
Payable for fund shares
purchased.................... 83,194 705,279 325,325 561,200 13,833 --
----------- ----------- ----------- ----------- ---------- --------
Total Liabilities............. 83,194 705,279 325,325 561,200 13,833 30
----------- ----------- ----------- ----------- ---------- --------
Net Assets (variable annuity
contract liabilities)........ $ 8,122,819 $50,455,749 $49,892,038 $16,975,972 $4,825,525 $392,867
=========== =========== =========== =========== ========== ========
<CAPTION>
FRANKLIN
FRANKLIN MUTUAL SHARES STRATEGIC
SMALL CAP SECURITIES INCOME INVESTMENTS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------- ------------------
<S> <C> <C> <C>
ASSETS:
Investments in the Hartford
Money Market HLS Fund:
Hartford Money Market HLS
Fund, Inc. - Class IA
Shares 4,834,594
Cost $4,834,594
Market Value.............. -- -- --
Investments in American Funds
Insurance Series:
Asset Allocation Fund
Shares 750,527
Cost $11,826,994
Market Value.............. -- -- --
Bond Fund
Shares 403,982
Cost $3,967,969
Market Value.............. -- -- --
Global Growth Fund
Shares 577,199
Cost $10,475,370
Market Value.............. -- -- --
Global Small Capitalization
Fund
Shares 467,904
Cost $7,471,027
Market Value.............. -- -- --
Growth Fund
Shares 714,974
Cost $49,188,239
Market Value.............. -- -- --
Growth-Income Fund
Shares 1,508,680
Cost $55,632,088
Market Value.............. -- -- --
International Fund
Shares 635,091
Cost $14,985,288
Market Value.............. -- -- --
New World Fund
Shares 409,985
Cost $4,245,642
Market Value.............. -- -- --
Investments in the Franklin
Templeton Variable Insurance
Products Trust:
Real Estate Securities Fund
Shares 26,404
Cost $388,845
Market Value.............. -- -- --
Small Cap Fund
Shares 128,525
Cost $2,708,869
Market Value.............. $3,443,182 -- --
Mutual Shares Securities
Fund
Shares 290,756
Cost $3,811,532
Market Value.............. -- $3,852,516 --
Investments in the Templeton
Variable Products Series
Fund:
Franklin Strategic Income
Investments Fund
Shares 90,218
Cost $902,687
Market Value.............. -- -- $898,571
Due from Hartford Life and
Annuity Insurance Company.... -- 20,083 --
Receivable for fund shares
sold......................... 64,584 -- --
---------- ---------- --------
Total Assets.................. 3,507,766 3,872,599 898,571
---------- ---------- --------
LIABILITIES:
Due to Hartford Life and
Annuity Insurance Company.... 64,586 -- 37
Payable for fund shares
purchased.................... -- 20,083 --
---------- ---------- --------
Total Liabilities............. 64,586 20,083 37
---------- ---------- --------
Net Assets (variable annuity
contract liabilities)........ $3,443,180 $3,852,516 $898,534
========== ========== ========
</TABLE>
------------------------------------------------- SA-3
-------------------------------------------------
<PAGE>
SEPARATE ACCOUNT SEVEN
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
MFS
CAPITAL MFS MFS MFS
OPPORTUNITIES EMERGING GROWTH GLOBAL EQUITY GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- --------------- ------------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments in the MFS
Variable Insurance Trust:
Captial Opportunities Series
Shares 265,821
Cost $4,927,430
Market Value.............. $5,776,295 -- -- --
Emerging Growth Series
Shares 270,260
Cost $7,633,757
Market Value.............. -- $10,253,678 -- --
Global Equity Series
Shares 23,361
Cost $257,939
Market Value.............. -- -- $281,497 --
Growth Series
Shares 748,472
Cost $9,051,819
Market Value.............. -- -- -- $10,441,189
Growth with Income Series
Shares 458,720
Cost $9,293,484
Market Value.............. -- -- -- --
High Income Series
Shares 164,933
Cost $1,866,207
Market Value.............. -- -- -- --
New Discovery Series
Shares 109,051
Cost $1,543,273
Market Value.............. -- -- -- --
Total Return Series
Shares 155,736
Cost $2,740,072
Market Value.............. -- -- -- --
Investments in the Templeton
Variable Products Series
Fund:
Templeton Asset Allocation
Fund
Shares 43,631
Cost $946,759
Market Value............ -- -- -- --
Templeton International
Fund
Shares 95,280
Cost $1,910,697
Market Value.............. -- -- -- --
Investments in the Franklin
Templeton Variable
Insurance Products Trust:
Templeton Developing Markets
Equity Fund
Shares 97,163
Cost $890,346
Market Value.............. -- -- -- --
Templeton Global Growth Fund
Shares 141,277
Cost $2,054,554
Market Value.............. -- -- -- --
Due from Hartford Life and
Annuity Insurance
Company.................... 129,008 220,700 206 97,731
Receivable for fund shares
sold....................... -- -- -- --
---------- ----------- -------- -----------
Total Assets................ 5,905,303 10,474,378 281,703 10,538,920
---------- ----------- -------- -----------
LIABILITIES:
Due to Hartford Life and
Annuity Insurance
Company.................... -- -- -- --
Payable for fund shares
purchased.................. 128,996 220,693 206 97,730
---------- ----------- -------- -----------
Total Liabilities........... 128,996 220,693 206 97,730
---------- ----------- -------- -----------
Net Assets (variable annuity
contract liabilities)...... $5,776,307 $10,253,685 $281,497 $10,441,190
========== =========== ======== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-4
-------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
MFS MFS TEMPLETON
GROWTH MFS NEW MFS ASSET TEMPLETON
WITH INCOME HIGH INCOME DISCOVERY TOTAL RETURN ALLOCATION INTERNATIONAL
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in the MFS
Variable Insurance Trust:
Captial Opportunities Series
Shares 265,821
Cost $4,927,430
Market Value.............. -- -- -- -- -- --
Emerging Growth Series
Shares 270,260
Cost $7,633,757
Market Value.............. -- -- -- -- -- --
Global Equity Series
Shares 23,361
Cost $257,939
Market Value.............. -- -- -- -- -- --
Growth Series
Shares 748,472
Cost $9,051,819
Market Value.............. -- -- -- -- -- --
Growth with Income Series
Shares 458,720
Cost $9,293,484
Market Value.............. $9,775,327 -- -- -- -- --
High Income Series
Shares 164,933
Cost $1,866,207
Market Value.............. -- $1,895,083 -- -- -- --
New Discovery Series
Shares 109,051
Cost $1,543,273
Market Value.............. -- -- $1,883,312 -- -- --
Total Return Series
Shares 155,736
Cost $2,740,072
Market Value.............. -- -- -- $2,764,321 -- --
Investments in the Templeton
Variable Products Series
Fund:
Templeton Asset Allocation
Fund
Shares 43,631
Cost $946,759
Market Value............ -- -- -- -- $1,015,298 --
Templeton International
Fund
Shares 95,280
Cost $1,910,697
Market Value.............. -- -- -- -- -- $2,108,545
Investments in the Franklin
Templeton Variable
Insurance Products Trust:
Templeton Developing Markets
Equity Fund
Shares 97,163
Cost $890,346
Market Value.............. -- -- -- -- -- --
Templeton Global Growth Fund
Shares 141,277
Cost $2,054,554
Market Value.............. -- -- -- -- -- --
Due from Hartford Life and
Annuity Insurance
Company.................... 45,162 11,772 9,698 17,626 10,057 16,229
Receivable for fund shares
sold....................... -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Assets................ 9,820,489 1,906,855 1,893,010 2,781,947 1,025,355 2,124,774
---------- ---------- ---------- ---------- ---------- ----------
LIABILITIES:
Due to Hartford Life and
Annuity Insurance
Company.................... -- -- -- -- -- --
Payable for fund shares
purchased.................. 45,165 11,772 9,698 17,625 10,058 16,230
---------- ---------- ---------- ---------- ---------- ----------
Total Liabilities........... 45,165 11,772 9,698 17,625 10,058 16,230
---------- ---------- ---------- ---------- ---------- ----------
Net Assets (variable annuity
contract liabilities)...... $9,775,324 $1,895,083 $1,883,312 $2,764,322 $1,015,297 $2,108,544
========== ========== ========== ========== ========== ==========
<CAPTION>
TEMPLETON
DEVELOPING TEMPLETON
MARKETS EQUITY GLOBAL GROWTH
SUB-ACCOUNT SUB-ACCOUNT
-------------- -------------
<S> <C> <C>
ASSETS:
Investments in the MFS
Variable Insurance Trust:
Captial Opportunities Series
Shares 265,821
Cost $4,927,430
Market Value.............. -- --
Emerging Growth Series
Shares 270,260
Cost $7,633,757
Market Value.............. -- --
Global Equity Series
Shares 23,361
Cost $257,939
Market Value.............. -- --
Growth Series
Shares 748,472
Cost $9,051,819
Market Value.............. -- --
Growth with Income Series
Shares 458,720
Cost $9,293,484
Market Value.............. -- --
High Income Series
Shares 164,933
Cost $1,866,207
Market Value.............. -- --
New Discovery Series
Shares 109,051
Cost $1,543,273
Market Value.............. -- --
Total Return Series
Shares 155,736
Cost $2,740,072
Market Value.............. -- --
Investments in the Templeton
Variable Products Series
Fund:
Templeton Asset Allocation
Fund
Shares 43,631
Cost $946,759
Market Value............ -- --
Templeton International
Fund
Shares 95,280
Cost $1,910,697
Market Value.............. -- --
Investments in the Franklin
Templeton Variable
Insurance Products Trust:
Templeton Developing Markets
Equity Fund
Shares 97,163
Cost $890,346
Market Value.............. $1,019,242 --
Templeton Global Growth Fund
Shares 141,277
Cost $2,054,554
Market Value.............. -- $2,203,925
Due from Hartford Life and
Annuity Insurance
Company.................... 25,971 --
Receivable for fund shares
sold....................... -- --
---------- ----------
Total Assets................ 1,045,213 2,203,925
---------- ----------
LIABILITIES:
Due to Hartford Life and
Annuity Insurance
Company.................... -- 87
Payable for fund shares
purchased.................. 25,972 --
---------- ----------
Total Liabilities........... 25,972 87
---------- ----------
Net Assets (variable annuity
contract liabilities)...... $1,019,241 $2,203,838
========== ==========
</TABLE>
------------------------------------------------- SA-5
-------------------------------------------------
<PAGE>
SEPARATE ACCOUNT SEVEN
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ ---------- ------------
<S> <C> <C> <C>
DEFERRED ANNUITY CONTRACTS IN THE
ACCUMULATION PERIOD:
Hartford Money Market HLS Fund
1.5%............................ 2,074,158 $ 1.016961 $ 2,109,338
Hartford Money Market HLS Fund
1.65%........................... 71,247 1.016589 72,429
Hartford Money Market HLS Fund
1.4%............................ 764,248 1.017478 777,606
Hartford Money Market HLS Fund
.80%............................ 206,879 1.009271 208,797
Hartford Money Market HLS Fund
1.25%........................... 1,636,654 1.018239 1,666,505
Asset Allocation Fund 1.5%....... 87,462 9.763857 853,968
Asset Allocation Fund 1.65%...... 375 9.760205 3,662
Asset Allocation Fund 1.25%...... 876,015 9.776112 8,564,018
Asset Allocation Fund 1.4%....... 175,200 9.768759 1,711,489
Asset Allocation Fund .80%....... 15,779 10.542607 166,355
Asset Allocation Fund .95%....... 326 10.539231 3,431
Bond Funds 1.5%.................. 52,995 10.093283 534,893
Bond Funds 1.65%................. 296 10.089521 2,985
Bond Funds 1.25%................. 260,877 10.105950 2,636,406
Bond Funds 1.4%.................. 74,247 10.098350 749,774
Bond Funds .80%.................. 1,050 10.215146 10,723
Global Growth Fund 1.5%.......... 104,986 13.962993 1,465,922
Global Growth Fund 1.65%......... 67 13.957799 935
Global Growth Fund 1.25%......... 642,755 13.980455 8,986,014
Global Growth Fund 1.4%.......... 121,545 13.969976 1,697,976
Global Growth Fund .80%.......... 14,192 13.738117 194,966
Global Growth Fund .95%.......... 874 13.733732 12,005
Global Small Capitalization Fund
1.5%............................ 83,214 13.767193 1,145,626
Global Small Capitalization Fund
1.65%........................... 203 13.762055 2,798
Global Small Capitalization Fund
1.25%........................... 405,681 13.784415 5,592,081
Global Small Capitalization Fund
1.4%............................ 96,623 13.774075 1,330,898
Global Small Capitalization Fund
.80%............................ 3,875 12.864359 49,845
Global Small Capitalization Fund
.95%............................ 122 12.860263 1,571
Growth Fund 1.5%................. 249,621 12.502121 3,120,797
Growth Fund 1.65%................ 896 12.497460 11,193
Growth Fund 1.25%................ 3,037,420 12.517781 38,021,763
Growth Fund 1.4%................. 669,105 12.508384 8,369,423
Growth Fund .80%................. 68,214 12.865591 877,609
Growth Fund .95%................. 4,274 12.861482 54,964
Growth-Income Fund 1.5%.......... 420,107 9.579464 4,024,401
Growth-Income Fund 1.65%......... 1,108 9.575882 10,606
Growth-Income Fund 1.25%......... 3,467,764 9.591485 33,261,005
Growth-Income Fund 1.4%.......... 1,221,950 9.584268 11,711,494
Growth-Income Fund .80%.......... 73,889 10.667962 788,243
Growth-Income Fund .95%.......... 9,029 10.664545 96,289
International Fund 1.5%.......... 173,580 14.644814 2,542,043
International Fund 1.65%......... 265 14.639368 3,885
International Fund 1.25%......... 763,939 14.663115 11,201,728
International Fund 1.4%.......... 211,632 14.652129 3,100,853
International Fund .80%.......... 6,859 13.799473 94,647
International Fund .95%.......... 2,379 13.795072 32,816
New World Fund 1.5%.............. 34,388 11.644005 400,413
New World Fund 1.25%............. 318,002 11.658593 3,707,459
New World Fund 1.4%.............. 43,228 11.649838 503,596
New World Fund .80%.............. 13,865 12.227288 169,536
New World Fund .95%.............. 3,642 12.223385 44,521
Real Estate Securities Fund
1.4%............................ 8,001 8.834957 70,687
Real Estate Securities Fund
1.5%............................ 556 8.830523 4,914
Real Estate Securities Fund
1.25%........................... 35,883 8.841604 317,266
Small Cap Fund 1.65%............. 68 16.630728 1,129
Small Cap Fund 1.4%.............. 55,787 16.645221 928,593
Small Cap Fund .80%.............. 3,281 15.792122 51,819
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-6
-------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ ---------- ------------
<S> <C> <C> <C>
Small Cap Fund 1.25%............. 127,349 $16.657685 $ 2,121,333
Small Cap Fund 1.5%.............. 20,455 16.636909 340,306
Mutual Shares Securities Fund
1.5%............................ 37,456 9.783931 366,469
Mutual Shares Securities Fund
1.4%............................ 58,310 9.788843 570,787
Mutual Shares Securities Fund
.80%............................ 878 10.820902 9,501
Mutual Shares Securities Fund
1.25%........................... 296,621 9.796213 2,905,759
Franklin Strategic Income
Investments Fund 1.5%........... 18,907 10.176193 192,402
Franklin Strategic Income
Investments Fund 1.4%........... 25,087 10.181293 255,423
Franklin Strategic Income
Investments Fund 1.25%.......... 44,235 10.188959 450,709
Capital Opportunities Series
1.5%............................ 26,869 12.203397 327,891
Capital Opportunities Series
1.65%........................... 613 12.198850 7,476
Capital Opportunities Series
1.4%............................ 115,379 12.209515 1,408,719
Capital Opportunities Series
.80%............................ 9,747 12.923763 125,969
Capital Opportunities Series
.95%............................ 251 12.919637 3,244
Capital Opportunities Series
1.25%........................... 315,840 12.218688 3,859,154
Emerging Growth Series 1.5%...... 48,459 15.402545 746,394
Emerging Growth Series 1.65%..... 216 15.396821 3,324
Emerging Growth Series 1.4%...... 97,184 15.410232 1,497,633
Emerging Growth Series .80%...... 6,126 15.486126 94,865
Emerging Growth Series 1.25%..... 510,071 15.421795 7,866,218
Global Equity Series 1.5%........ 3,841 11.585770 44,498
Global Equity Series 1.4%........ 5,874 11.591574 68,094
Global Equity Series 1.25%....... 14,560 11.600282 168,905
Growth Series 1.5%............... 48,051 12.001263 576,670
Growth Series 1.65%.............. 178 11.996788 2,141
Growth Series 1.4%............... 206,422 12.007270 2,478,566
Growth Series .80%............... 6,787 12.475323 84,672
Growth Series .95%............... 127 12.471334 1,581
Growth Series 1.25%.............. 603,672 12.016294 7,253,905
Growth with Income Series 1.5%... 57,782 9.950259 574,945
Growth with Income Series 1.4%... 260,156 9.955242 2,589,914
Growth with Income Series .80%... 24,789 11.140286 276,154
Growth with Income Series .95%... 682 11.136718 7,596
Growth with Income Series
1.25%........................... 635,038 9.962740 6,326,715
High Income Series 1.5%.......... 18,321 10.039968 183,942
High Income Series 1.65%......... 199 10.036216 1,993
High Income Series 1.4%.......... 38,888 10.044992 390,628
High Income Series .80%.......... 4,284 10.256453 43,934
High Income Series 1.25%......... 126,792 10.052557 1,274,586
New Discovery Series 1.5%........ 18,944 14.318332 271,245
New Discovery Series 1.4%........ 34,123 14.325485 488,834
New Discovery Series .80%........ 2,276 15.447904 35,156
New Discovery Series 1.25%....... 75,897 14.336247 1,088,077
Total Return Series 1.5%......... 27,654 9.688322 267,922
Total Return Series 1.65%........ 512 9.684701 4,956
Total Return Series 1.4%......... 52,252 9.693183 506,484
Total Return Series .80%......... 10,142 10.346954 104,938
Total Return Series 1.25%........ 193,807 9.700481 1,880,022
Templeton Asset Allocation Fund
1.5%............................ 5,725 10.855332 62,148
Templeton Asset Allocation Fund
1.4%............................ 12,669 10.860766 137,594
Templeton Asset Allocation Fund
.80%............................ 2,261 11.197144 25,315
Templeton Asset Allocation Fund
1.25%........................... 72,706 10.868937 790,240
Templeton International Fund
1.5%............................ 78,674 10.946563 861,205
Templeton International Fund
1.65%........................... 97 10.942481 1,058
Templeton International Fund
1.4%............................ 15,020 10.952050 164,501
Templeton International Fund
.80%............................ 83 11.343193 937
Templeton International Fund
1.25%........................... 83,869 10.960275 919,230
Templeton Developing Markets
Equity Fund 1.5%................ 17,367 11.108629 192,923
</TABLE>
------------------------------------------------- SA-7
-------------------------------------------------
<PAGE>
SEPARATE ACCOUNT SEVEN
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES -- (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
UNITS
OWNED BY UNIT CONTRACT
PARTICIPANTS PRICE LIABILITY
------------ ---------- ------------
<S> <C> <C> <C>
Templeton Developing Markets
Equity Fund 1.4%................ 15,369 11.114200 170,818
Templeton Developing Markets
Equity Fund .80%................ 2,331 12.735770 29,681
Templeton Developing Markets
Equity Fund 1.25%............... 56,266 11.122555 625,819
Templeton Global Growth Fund
1.5%............................ 33,037 10.605862 350,387
Templeton Global Growth Fund
1.4%............................ 18,982 10.611177 201,425
Templeton Global Growth Fund
.80%............................ 1,356 11.265124 15,279
Templeton Global Growth Fund
1.25%........................... 154,132 10.619149 1,636,747
------------
SUB-TOTAL INDIVIDUAL............. 220,412,664
------------
ANNUITY CONTRACTS IN THE ANNUITY
PERIOD:
Capital Opportunities............ 3,589 12.218688 43,854
Emerging Growth.................. 2,934 15.421795 45,251
Growth........................... 3,633 12.016294 43,655
Templeton International Fund..... 14,745 10.960275 161,613
------------
SUB-TOTAL........................ 294,373
------------
GRAND TOTAL:....................... $220,707,037
============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-8
-------------------------------------------------
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
SEPARATE ACCOUNT SEVEN
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM INCEPTION, JULY 1, 1999, TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
HARTFORD AMERICAN FUNDS
MONEY MARKET ASSET AMERICAN FUNDS AMERICAN FUNDS
HLS ALLOCATION BOND GLOBAL GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends..................... $ 46,468 $ 107,085 $ 70,666 $ 48,518
EXPENSES:
Mortality and expense
undertakings................. (12,396) (24,079) (7,701) (21,470)
-------- --------- -------- ----------
Net investment income
(loss)..................... 34,072 83,006 62,965 27,048
-------- --------- -------- ----------
CAPITAL GAINS INCOME............ 2 625,352 -- 432,861
-------- --------- -------- ----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized (loss) gain on
security transactions........ -- (693) 80 4,145
Net unrealized (depreciation)
appreciation of investments
during the period............ -- (524,065) (33,186) 1,882,450
-------- --------- -------- ----------
Net (loss) gain on
investments................ -- (524,758) (33,106) 1,886,595
-------- --------- -------- ----------
Net increase in net assets
resulting from
operations................. $ 34,074 $ 183,600 $ 29,859 $2,346,504
======== ========= ======== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-10
-------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FUNDS FRANKLIN
GLOBAL SMALL AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS REAL ESTATE
CAPITALIZATION GROWTH GROWTH-INCOME INTERNATIONAL NEW WORLD SECURITIES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- -------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends..................... $ -- $ -- $ 217,556 $ 50,483 $ 16,169 $ 247
EXPENSES:
Mortality and expense
undertakings................. (17,908) (84,203) (107,465) (29,283) (13,461) (870)
---------- ---------- ----------- ---------- -------- ------
Net investment income
(loss)..................... (17,908) (84,203) 110,091 21,200 2,708 (623)
---------- ---------- ----------- ---------- -------- ------
CAPITAL GAINS INCOME............ 620,472 5,334,235 7,081,509 1,256,215 1,824 343
---------- ---------- ----------- ---------- -------- ------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized (loss) gain on
security transactions........ 1,272 1,809 52 1,316 (210) 3
Net unrealized (depreciation)
appreciation of investments
during the period............ 651,790 1,267,501 (5,740,055) 1,990,685 579,884 4,051
---------- ---------- ----------- ---------- -------- ------
Net (loss) gain on
investments................ 653,062 1,269,310 (5,740,003) 1,992,001 579,674 4,054
---------- ---------- ----------- ---------- -------- ------
Net increase in net assets
resulting from
operations................. $1,255,626 $6,519,342 $ 1,451,597 $3,269,416 $584,206 $3,774
========== ========== =========== ========== ======== ======
<CAPTION>
FRANKLIN
FRANKLIN MUTUAL SHARES STRATEGIC
SMALL CAP SECURITIES INCOME INVESTMENTS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------- ------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends..................... $ 24 $33,504 $ 23,286
EXPENSES:
Mortality and expense
undertakings................. (4,718) (12,650) (1,838)
-------- ------- --------
Net investment income
(loss)..................... (4,694) 20,854 21,448
-------- ------- --------
CAPITAL GAINS INCOME............ 3 -- --
-------- ------- --------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized (loss) gain on
security transactions........ 1,333 27 8
Net unrealized (depreciation)
appreciation of investments
during the period............ 734,313 40,984 (4,116)
-------- ------- --------
Net (loss) gain on
investments................ 735,646 41,011 (4,108)
-------- ------- --------
Net increase in net assets
resulting from
operations................. $730,955 $61,865 $ 17,340
======== ======= ========
</TABLE>
------------------------------------------------- SA-11
-------------------------------------------------
<PAGE>
SEPARATE ACCOUNT SEVEN
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE PERIOD FROM INCEPTION, JULY 1, 1999, TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
MFS
CAPITAL MFS MFS MFS
OPPORTUNITIES EMERGING GROWTH GLOBAL EQUITY GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- --------------- ------------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends..................... $ -- $ -- $ 342 $ 15,377
EXPENSES:
Mortality and expense
undertakings................. (10,787) (18,890) (556) (26,124)
-------- ---------- ------- ----------
Net investment (loss)....... (10,787) (18,890) (214) (10,747)
-------- ---------- ------- ----------
CAPITAL GAINS INCOME............ -- -- 6,678 20,089
-------- ---------- ------- ----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized (loss) gain on
security transactions........ (178) 14,860 21 699
Net unrealized appreciation of
investments during the
period....................... 848,865 2,619,921 23,558 1,389,371
-------- ---------- ------- ----------
Net gain on investments..... 848,687 2,634,781 23,579 1,390,070
-------- ---------- ------- ----------
Net increase in net assets
resulting from
operations................. $837,900 $2,615,891 $30,043 $1,399,412
======== ========== ======= ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-12
-------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
MFS MFS TEMPLETON
GROWTH MFS NEW MFS ASSET TEMPLETON
WITH INCOME HIGH INCOME DISCOVERY TOTAL RETURN ALLOCATION INTERNATIONAL
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends..................... $ -- $-- $ -- $-- $-- $--
EXPENSES:
Mortality and expense
undertakings................. (22,828) (4,690) (2,645) (6,708) (1,875) (6,084)
-------- ------- -------- ------- ------- --------
Net investment (loss)....... (22,828) (4,690) (2,645) (6,708) (1,875) (6,084)
-------- ------- -------- ------- ------- --------
CAPITAL GAINS INCOME............ -- -- 30,240 -- -- --
-------- ------- -------- ------- ------- --------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized (loss) gain on
security transactions........ 710 28 346 (779) 28 4,720
Net unrealized appreciation of
investments during the
period....................... 481,842 28,875 340,039 24,249 68,538 197,847
-------- ------- -------- ------- ------- --------
Net gain on investments..... 482,552 28,903 340,385 23,470 68,566 202,567
-------- ------- -------- ------- ------- --------
Net increase in net assets
resulting from
operations................. $459,724 $24,213 $367,980 $16,762 $66,691 $196,483
======== ======= ======== ======= ======= ========
<CAPTION>
TEMPLETON
DEVELOPING TEMPLETON
MARKETS EQUITY GLOBAL GROWTH
SUB-ACCOUNT SUB-ACCOUNT
-------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends..................... $ 280 $ 2,556
EXPENSES:
Mortality and expense
undertakings................. (1,763) (5,111)
-------- --------
Net investment (loss)....... (1,483) (2,555)
-------- --------
CAPITAL GAINS INCOME............ -- 12,366
-------- --------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized (loss) gain on
security transactions........ 219 44
Net unrealized appreciation of
investments during the
period....................... 128,896 149,371
-------- --------
Net gain on investments..... 129,115 149,415
-------- --------
Net increase in net assets
resulting from
operations................. $127,632 $159,226
======== ========
</TABLE>
------------------------------------------------- SA-13
-------------------------------------------------
<PAGE>
SEPARATE ACCOUNT SEVEN
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION, JULY 1, 1999, TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
HARTFORD AMERICAN FUNDS
MONEY MARKET ASSET AMERICAN FUNDS AMERICAN FUNDS
HLS ALLOCATION BOND GLOBAL GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)....................... $ 34,072 $ 83,006 $ 62,965 $ 27,048
Capital gains income.......... 2 625,352 -- 432,861
Net realized (loss) gain on
security transactions........ -- (693) 80 4,145
Net unrealized (depreciation)
appreciation of investments
during the period............ -- (524,065) (33,186) 1,882,450
---------- ----------- ---------- -----------
Net increase in net assets
resulting from operations.... 34,074 183,600 29,859 2,346,504
---------- ----------- ---------- -----------
UNIT TRANSACTIONS:
Purchases..................... 7,967,520 7,618,821 2,124,047 6,076,761
Net transfers................. (3,055,671) 3,527,799 1,800,607 3,965,843
Surrenders for benefit
payments and fees............ (111,248) (27,297) (19,732) (31,290)
Net annuity transactions...... -- -- -- --
---------- ----------- ---------- -----------
Net increase in net assets
resulting from unit
transactions................. 4,800,601 11,119,323 3,904,922 10,011,314
---------- ----------- ---------- -----------
Net increase in net assets.... 4,834,675 11,302,923 3,934,781 12,357,818
NET ASSETS:
Beginning of period........... -- -- -- --
---------- ----------- ---------- -----------
End of period................. $4,834,675 $11,302,923 $3,934,781 $12,357,818
========== =========== ========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-14
-------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FUNDS FRANKLIN
GLOBAL SMALL AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS REAL ESTATE
CAPITALIZATION GROWTH GROWTH-INCOME INTERNATIONAL NEW WORLD SECURITIES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- -------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)....................... $ (17,908) $ (84,203) $ 110,091 $ 21,200 $ 2,708 $ (623)
Capital gains income.......... 620,472 5,334,235 7,081,509 1,256,215 1,824 343
Net realized (loss) gain on
security transactions........ 1,272 1,809 52 1,316 (210) 3
Net unrealized (depreciation)
appreciation of investments
during the period............ 651,790 1,267,501 (5,740,055) 1,990,685 579,884 4,051
---------- ----------- ----------- ----------- ---------- --------
Net increase in net assets
resulting from operations.... 1,255,626 6,519,342 1,451,597 3,269,416 584,206 3,774
---------- ----------- ----------- ----------- ---------- --------
UNIT TRANSACTIONS:
Purchases..................... 4,912,426 29,873,970 30,646,309 9,369,647 3,017,760 198,158
Net transfers................. 2,009,812 14,242,350 17,985,180 4,406,012 1,232,526 194,010
Surrenders for benefit
payments and fees............ (55,045) (179,913) (191,048) (69,103) (8,967) (3,075)
Net annuity transactions...... -- -- -- -- -- --
---------- ----------- ----------- ----------- ---------- --------
Net increase in net assets
resulting from unit
transactions................. 6,867,193 43,936,407 48,440,441 13,706,556 4,241,319 389,093
---------- ----------- ----------- ----------- ---------- --------
Net increase in net assets.... 8,122,819 50,455,749 49,892,038 16,975,972 4,825,525 392,867
NET ASSETS:
Beginning of period........... -- -- -- -- -- --
---------- ----------- ----------- ----------- ---------- --------
End of period................. $8,122,819 $50,455,749 $49,892,038 $16,975,972 $4,825,525 $392,867
========== =========== =========== =========== ========== ========
<CAPTION>
FRANKLIN
FRANKLIN MUTUAL SHARES STRATEGIC
SMALL CAP SECURITIES INCOME INVESTMENTS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------- ------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)....................... $ (4,694) $ 20,854 $ 21,448
Capital gains income.......... 3 -- --
Net realized (loss) gain on
security transactions........ 1,333 27 8
Net unrealized (depreciation)
appreciation of investments
during the period............ 734,313 40,984 (4,116)
---------- ---------- --------
Net increase in net assets
resulting from operations.... 730,955 61,865 17,340
---------- ---------- --------
UNIT TRANSACTIONS:
Purchases..................... 1,410,520 2,491,146 436,025
Net transfers................. 1,321,166 1,310,620 449,194
Surrenders for benefit
payments and fees............ (19,461) (11,115) (4,025)
Net annuity transactions...... -- -- --
---------- ---------- --------
Net increase in net assets
resulting from unit
transactions................. 2,712,225 3,790,651 881,194
---------- ---------- --------
Net increase in net assets.... 3,443,180 3,852,516 898,534
NET ASSETS:
Beginning of period........... -- -- --
---------- ---------- --------
End of period................. $3,443,180 $3,852,516 $898,534
========== ========== ========
</TABLE>
------------------------------------------------- SA-15
-------------------------------------------------
<PAGE>
SEPARATE ACCOUNT SEVEN
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE PERIOD FROM INCEPTION, JULY 1, 1999, TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
MFS
CAPITAL MFS MFS MFS
OPPORTUNITIES EMERGING GROWTH GLOBAL EQUITY GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- --------------- ------------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment (loss)......... $ (10,787) $ (18,890) $ (214) $ (10,747)
Capital gains income.......... -- -- 6,678 20,089
Net realized (loss) gain on
security transactions........ (178) 14,860 21 699
Net unrealized appreciation of
investments during the
period....................... 848,865 2,619,921 23,558 1,389,371
---------- ----------- -------- -----------
Net increase in net assets
resulting from operations.... 837,900 2,615,891 30,043 1,399,412
---------- ----------- -------- -----------
UNIT TRANSACTIONS:
Purchases..................... 3,171,521 4,835,008 158,130 6,014,916
Net transfers................. 1,789,502 2,803,121 95,487 3,039,764
Surrenders for benefit
payments and fees............ (65,866) (44,896) (2,163) (56,152)
Net annuity transactions...... 43,250 44,561 -- 43,250
---------- ----------- -------- -----------
Net increase in net assets
resulting from unit
transactions................. 4,938,407 7,637,794 251,454 9,041,778
---------- ----------- -------- -----------
Net increase in net assets.... 5,776,307 10,253,685 281,497 10,441,190
NET ASSETS:
Beginning of period........... -- -- -- --
---------- ----------- -------- -----------
End of period................. $5,776,307 $10,253,685 $281,497 $10,441,190
========== =========== ======== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
------------------------------------------------- SA-16
-------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
MFS MFS TEMPLETON
GROWTH MFS NEW MFS ASSET TEMPLETON
WITH INCOME HIGH INCOME DISCOVERY TOTAL RETURN ALLOCATION INTERNATIONAL
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment (loss)......... $ (22,828) $ (4,690) $ (2,645) $ (6,708) $ (1,875) $ (6,084)
Capital gains income.......... -- -- 30,240 -- -- --
Net realized (loss) gain on
security transactions........ 710 28 346 (779) 28 4,720
Net unrealized appreciation of
investments during the
period....................... 481,842 28,875 340,039 24,249 68,538 197,847
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations.... 459,724 24,213 367,980 16,762 66,691 196,483
---------- ---------- ---------- ---------- ---------- ----------
UNIT TRANSACTIONS:
Purchases..................... 5,093,520 1,427,075 764,906 1,487,466 394,881 812,666
Net transfers................. 4,249,461 455,887 752,518 1,271,385 559,125 1,116,318
Surrenders for benefit
payments and fees............ (27,381) (12,092) (2,092) (11,291) (5,400) (164,889)
Net annuity transactions...... -- -- -- -- -- 147,966
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from unit
transactions................. 9,315,600 1,870,870 1,515,332 2,747,560 948,606 1,912,061
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets.... 9,775,324 1,895,083 1,883,312 2,764,322 1,015,297 2,108,544
NET ASSETS:
Beginning of period........... -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
End of period................. $9,775,324 $1,895,083 $1,883,312 $2,764,322 $1,015,297 $2,108,544
========== ========== ========== ========== ========== ==========
<CAPTION>
TEMPLETON
DEVELOPING TEMPLETON
MARKETS EQUITY GLOBAL GROWTH
SUB-ACCOUNT SUB-ACCOUNT
-------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment (loss)......... $ (1,483) $ (2,555)
Capital gains income.......... -- 12,366
Net realized (loss) gain on
security transactions........ 219 44
Net unrealized appreciation of
investments during the
period....................... 128,896 149,371
---------- ----------
Net increase in net assets
resulting from operations.... 127,632 159,226
---------- ----------
UNIT TRANSACTIONS:
Purchases..................... 485,858 1,217,309
Net transfers................. 410,542 836,607
Surrenders for benefit
payments and fees............ (4,791) (9,304)
Net annuity transactions...... -- --
---------- ----------
Net increase in net assets
resulting from unit
transactions................. 891,609 2,044,612
---------- ----------
Net increase in net assets.... 1,019,241 2,203,838
NET ASSETS:
Beginning of period........... -- --
---------- ----------
End of period................. $1,019,241 $2,203,838
========== ==========
</TABLE>
------------------------------------------------- SA-17
-------------------------------------------------
<PAGE>
SEPARATE ACCOUNT SEVEN
- --------------------------------------------------------------------------------
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. ORGANIZATION:
Separate Account Seven (the Account) is a separate investment account within
Hartford Life and Annuity Insurance Company (the Company) and is registered
with the Securities and Exchange Commission (SEC) as a unit investment trust
under the Investment Company Act of 1940, as amended. Both the Company and
the Account are subject to supervision and regulation by the Department of
Insurance of the State of Connecticut and the SEC. The Account invests
deposits by variable annuity contractholders of the Company in various
mutual funds (the Funds) as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting
principles in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Realized gains and
losses on the sales of securities are computed on the basis of identified
cost of the fund shares sold. Dividend and capital gains income is
accrued as of the ex-dividend date. Capital gains income represents
dividends from the Funds which are characterized as capital gains under
tax regulations.
b) SECURITY VALUATION--The investments in shares of the Funds are valued at
the closing net asset value per share as determined by the appropriate
Fund as of December 31, 1999.
c) UNIT TRANSACTIONS--Unit transactions are executed based on the unit
values calculated at the close of the business day.
d) FEDERAL INCOME TAXES--The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no
Federal income taxes are payable with respect to the operations of the
Account.
e) USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported
amounts of income and expenses during the period. Operating results in
the future could vary from the amounts derived from management's
estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
Deductions and Charges -- Certain amounts are deducted from the Contracts,
as described below:
a) MORTALITY AND EXPENSE RISK CHARGES--The Company will make deductions at a
maximum annual rate of 1.25% of the contract's value for the mortality
and expense risks which the company undertakes.
b) TAX EXPENSE CHARGE--If applicable, the Company will make deductions at a
maximum rate of 3.5% of the contract's value to meet premium tax
requirements. An additional tax charge based on a percentage of the
contract's value may be assessed to partial withdrawals or surrenders.
These expenses are included in surrenders for benefit payments and fees
on the accompanying statements of changes in net assets.
c) ADMINISTRATIVE CHARGE--The Company will make deductions to cover
administrative expenses at a maximum annual rate of 0.15% of the
contract's value. These expenses are included in surrenders for benefit
payments and fees on the accompanying statements of changes in net
assets.
d) ANNUAL MAINTENANCE FEE--An annual maintenance fee in the amount of $30
may be deducted from the contract's value each contract year. However,
this fee is not applicable to contracts with values of $50,000 or more,
as determined on the most recent contract anniversary. These expenses are
included in surrenders for benefit payments and fees on the accompanying
statements of changes in net assets.
_____________________________________ SA-18 ____________________________________
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------------------
To the Board of Directors of
Hartford Life and Annuity Insurance Company:
We have audited the accompanying statutory balance sheets of Hartford Life and
Annuity Insurance Company (a Connecticut Corporation and wholly owned subsidiary
of Hartford Life Insurance Company) (the Company) as of December 31, 1999 and
1998, and the related statutory statements of operations, changes in capital and
surplus, and cash flows for each of the three years in the period ended December
31, 1999. These statutory financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
statutory financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
The Company presents its financial statements in conformity with statutory
accounting practices as described in Note 2 of notes to statutory financial
statements. When financial statements are presented for purposes other than for
filing with a regulatory agency, auditing standards generally accepted in the
United States require that an auditors' report on them state whether they are
presented in conformity with accounting principles generally accepted in the
United States. The accounting practices used by the Company vary from accounting
principles generally accepted in the United States as explained and quantified
in Note 2.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the statutory financial statements referred to above do not present
fairly, in conformity with accounting principles generally accepted in the
United States, the financial position of the Company as of December 31, 1999 and
1998, or the results of its operations or its cash flows for each of the three
years in the period ended December 31, 1999.
In our opinion, the statutory financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with statutory accounting practices as described in Note 2.
Hartford, Connecticut
January 31, 2000 ARTHUR ANDERSEN LLP
F-1
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
BALANCE SHEETS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
<S> <C> <C>
- ------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Bonds $ 1,465,815 $ 1,453,792
Common stocks 42,430 40,650
Mortgage loans 63,784 59,548
Policy loans 59,429 47,212
Cash and short-term investments 267,579 469,955
- ------------------------------------------------------------------------------------------------
Other invested assets 2,892 2,188
- ------------------------------------------------------------------------------------------------
Total cash and invested assets 1,901,929 2,073,345
Investment income due and accrued 21,069 20,126
Other assets 39,576 45,691
Separate account assets 44,865,042 32,876,278
- ------------------------------------------------------------------------------------------------
TOTAL ASSETS $46,827,616 $35,015,440
- ------------------------------------------------------------------------------------------------
LIABILITIES
Aggregate reserves for future benefits $ 591,621 $ 579,140
Policy and contract claim liabilities 7,677 5,667
Liability for premium and other deposit funds 1,969,262 2,011,672
Asset valuation reserve 4,935 21,782
Payable to affiliates 14,084 19,271
Accrued expense allowances and other amounts due from
separate accounts (1,377,927) (1,173,513)
Remittances and items not allocated 111,582 87,449
Other liabilities 118,464 111,182
Separate account liabilities 44,865,042 32,876,278
- ------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 46,304,740 34,538,928
- ------------------------------------------------------------------------------------------------
CAPITAL AND SURPLUS
Common stock 2,500 2,500
Gross paid-in and contributed surplus 226,043 226,043
Unassigned funds 294,333 247,969
- ------------------------------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS 522,876 476,512
- ------------------------------------------------------------------------------------------------
TOTAL LIABILITIES, CAPITAL AND SURPLUS $46,827,616 $35,015,440
- ------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-2
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Premiums and annuity considerations $ 621,789 $ 469,343 $ 296,645
Annuity and other fund deposits 2,991,363 2,051,251 1,981,246
Net investment income 122,322 129,982 102,285
Commissions and expense allowances on reinsurance ceded 379,905 444,241 396,921
Reserve adjustment on reinsurance ceded 1,411,342 3,185,590 3,672,076
Fee income 647,565 448,260 290,675
Other revenues 842 9,930 (2,043)
- -------------------------------------------------------------------------------------------------------
TOTAL REVENUES 6,175,128 6,738,597 6,737,805
- -------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Death and annuity benefits 47,372 43,152 65,961
Disability and other benefits 6,270 6,352 7,532
Surrenders and other fund withdrawals 1,250,813 739,663 454,417
Commissions 467,338 435,994 470,334
Increase (Decrease) in aggregate reserves for future
benefits 12,481 (10,711) 33,213
(Decrease) Increase in liability for premium and other
deposit funds (47,852) 218,642 640,840
General insurance expenses 192,196 190,979 77,237
Net transfers to separate accounts 4,160,501 4,956,007 4,914,980
Other expenses 35,385 22,091 15,671
- -------------------------------------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES 6,124,504 6,602,169 6,680,185
- -------------------------------------------------------------------------------------------------------
NET GAIN FROM OPERATIONS
Before federal income tax (benefit) expense 50,624 136,428 57,620
Federal income tax (benefit) expense (10,231) 35,887 (14,878)
- -------------------------------------------------------------------------------------------------------
NET GAIN FROM OPERATIONS 60,855 100,541 72,498
Net realized capital (losses) gains, after tax (36,428) 2,085 1,544
- -------------------------------------------------------------------------------------------------------
NET INCOME $ 24,427 $ 102,626 $ 74,042
- -------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-3
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
Beginning and end of year $ 2,500 $ 2,500 $ 2,500
- -------------------------------------------------------------------------------------------------
GROSS PAID-IN AND CONTRIBUTED SURPLUS
Beginning and end of year 226,043 226,043 226,043
- -------------------------------------------------------------------------------------------------
UNASSIGNED FUNDS
Balance, beginning of year 247,969 143,257 74,570
Net income 24,427 102,626 74,042
Change in net unrealized capital gains on common stocks
and other invested assets 2,258 1,688 2,186
Change in asset valuation reserve 16,847 (8,112) (6,228)
Change in non-admitted assets 6,557 (1,277) (1,313)
Credit on reinsurance ceded (3,725) 9,787 --
- -------------------------------------------------------------------------------------------------
Balance, end of year 294,333 247,969 143,257
- -------------------------------------------------------------------------------------------------
CAPITAL AND SURPLUS,
End of year $522,876 $476,512 $371,800
- -------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-4
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(STATUTORY BASIS)
($000)
--------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums and annuity considerations $3,613,217 $2,520,655 $2,277,874
Net investment income 122,998 127,425 101,991
Fee income 647,565 448,260 290,675
Other income 1,799,323 3,644,704 4,091,043
- -------------------------------------------------------------------------------------------------------
Total income 6,183,103 6,741,044 6,761,583
- -------------------------------------------------------------------------------------------------------
Benefits paid 1,303,801 790,051 529,733
Federal income tax (recoveries) payments (8,815) 25,780 (14,499)
Net transfers to separate accounts 4,364,914 5,222,144 5,199,354
Other expenses 669,525 626,240 547,692
- -------------------------------------------------------------------------------------------------------
Total benefits and expenses 6,329,425 6,664,215 6,262,280
- -------------------------------------------------------------------------------------------------------
NET CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES (146,322) 76,829 499,303
- -------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
PROCEEDS FROM INVESTMENTS SOLD
Bonds 753,358 633,926 614,413
Common stocks 939 34,010 11,481
Mortgage loans 53,704 85,275 --
Other 1,490 19,990 152
- -------------------------------------------------------------------------------------------------------
NET INVESTMENT PROCEEDS 809,491 773,201 626,046
- -------------------------------------------------------------------------------------------------------
COST OF INVESTMENTS ACQUIRED
Bonds 804,947 586,913 848,267
Common stocks 464 7,012 28,302
Mortgage loans 57,665 59,702 85,103
Other 14,211 11,847 26,227
- -------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS ACQUIRED 877,287 665,474 987,899
- -------------------------------------------------------------------------------------------------------
NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES $ (67,796) $ 107,727 $ (361,853)
- -------------------------------------------------------------------------------------------------------
FINANCING AND MISCELLANEOUS ACTIVITIES
Net other cash provided (used) 11,742 (24,033) (4,848)
- -------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) FINANCING
AND MISCELLANEOUS ACTIVITIES 11,742 (24,033) (4,848)
- -------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and short-term investments (202,376) 160,523 132,602
Cash and short-term investments, beginning of year 469,955 309,432 176,830
- -------------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS, END OF YEAR $ 267,579 $ 469,955 $ 309,432
- -------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
F-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(STATUTORY BASIS)
DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND DESCRIPTION OF BUSINESS:
Hartford Life and Annuity Insurance Company (the "Company") is a wholly owned
subsidiary of Hartford Life Insurance Company ("HLIC"), which is an indirect
subsidiary of Hartford Life, Inc. ("HLI"). HLI is indirectly majority owned by
The Hartford Financial Services Group, Inc. ("The Hartford"). On February 10,
1997, HLI filed a registration statement, as amended, with the Securities and
Exchange Commission relating to the initial public offering of HLI Class A
Common Stock (the "Offering"). Pursuant to the Offering on May 22, 1997, HLI
sold to the public 26 million shares, representing approximately 18.6% of the
equity ownership of HLI.
In 1998, the Company changed its name to Hartford Life and Annuity Insurance
Company from ITT Hartford Life and Annuity Insurance Company.
The Company offers a complete line of fixed and variable annuities, as well as
variable, universal and traditional individual life insurance.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying statutory basis financial statements of the Company were
prepared in conformity with statutory accounting practices prescribed or
permitted by the National Association of Insurance Commissioners ("NAIC") and
the State of Connecticut Department of Insurance. Certain reclassifications have
been made to prior year financial information to conform to the current year
presentation.
Current prescribed statutory accounting practices include accounting
publications of the NAIC, as well as state laws, regulations and general
administrative rules. Permitted statutory accounting practices encompass
accounting practices approved by state insurance departments. The Company does
not follow any permitted statutory accounting practices that have a material
effect on statutory surplus, statutory net income or risk-based capital.
The preparation of financial statements in conformity with statutory accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reported periods. Actual results could
differ from those estimates. The most significant estimates include those used
in determining the liability for aggregate reserves for future benefits and the
liability for premium and other deposit funds. Although some variability is
inherent in these estimates, management believes the amounts provided are
adequate.
STATUTORY ACCOUNTING PRACTICES VERSUS GAAP
Statutory accounting practices and generally accepted accounting principles
("GAAP") differ in certain significant respects. These differences principally
involve:
(1) treatment of policy acquisition costs (commissions, underwriting and selling
expenses, etc.) which are charged to expense when incurred for statutory
purposes rather than on a pro-rata basis over the expected life and gross
profit stream of the policy for GAAP purposes;
(2) recognition of premium revenues, which for statutory purposes are generally
recorded as collected or when due during the premium paying period of the
contract and which for GAAP purposes, for universal life policies and
investment products, generally only consist of charges assessed to policy
account balances for cost of insurance, policy administration and
surrenders. When policy charges received relate to coverage or services to
be provided in the future, the charges are recognized as revenue on a
pro-rata basis over the expected life and gross profit stream of the policy.
Also, for GAAP purposes, premiums for traditional life insurance policies
are recognized as revenues when they are due from policyholders;
(3) development of liabilities for future policy benefits, which for statutory
purposes predominantly use interest rate and mortality assumptions
prescribed by the NAIC which may vary considerably from interest and
mortality assumptions used under GAAP;
(4) providing for income taxes based on current taxable income only for
statutory purposes, rather than establishing additional assets or
liabilities for deferred Federal income taxes to recognize the tax effect
related to reporting revenues and expenses in different periods for
financial reporting and tax return purposes or required under GAAP;
(5) excluding certain assets designated as non-admitted assets (e.g., negative
Interest Maintenance Reserve, and past due agents' balances) from the
balance sheet for statutory purposes by directly charging surplus;
(6) the calculation of post retirement benefits obligation which, for statutory
accounting, excludes non-vested employees whereas GAAP liabilities include a
provision for such employees; statutory and GAAP accounting permit either
immediate recognition of the liability or straight-line amortization of the
liability over a period not to exceed 20 years. For GAAP, The Hartford's
obligation was immediately recognized, whereas for statutory accounting, the
obligation is being recognized ratably over a 20 year period;
F-6
<PAGE>
(7) establishing a formula reserve for realized and unrealized losses due to
default and equity risk associated with certain invested assets (Asset
Valuation Reserve) for statutory purposes; as well as the deferral and
amortization of realized gains and losses, caused by changes in interest
rates during the period the asset is held, into income over the remaining
life to maturity of the asset sold (Interest Maintenance Reserve) for
statutory purposes; whereas on a GAAP basis, no such formula reserve is
required and realized gains and losses are recognized in the period the
asset is sold;
(8) the reporting of reserves and benefits net of reinsurance ceded for
statutory purposes; whereas on a GAAP basis, reserves are reported gross of
reinsurance with reserve credits presented as recoverable assets;
(9) the reporting of fixed maturities at amortized cost for statutory purposes,
whereas GAAP requires that fixed maturities be classified as
"held-to-maturity," "available-for-sale" or "trading," based on the
Company's intentions with respect to the ultimate disposition of the
security and its ability to affect those intentions. The Company's bonds
were classified on a GAAP basis as available-for-sale and accordingly, those
investments and common stocks were reflected at fair value with the
corresponding impact included as a separate component of Stockholder's
Equity; as well as the change in the basis of the Company's other invested
assets, which consist primarily of limited partnership investments, which is
recognized as income under GAAP and as a change in surplus under statutory
accounting; and
(10) statutory accounting calculates separate account liabilities using
prescribed actuarial methodologies, which approximate the market value of
separate account assets less applicable surrender charges. The separate
account surplus generated by these reserving methods is recorded as an
amount due to or from the separate account on the statutory basis balance
sheet, with changes reflected in the statutory basis results of operations.
On a GAAP basis, separate account assets and liabilities are held at fair
value.
As of and for the years ended December 31, the significant differences between
Statutory and GAAP basis net income and capital and surplus for the Company are
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
----------------------------------------
GAAP Net Income $ 75,654 $ 74,525 $ 58,050
Deferral and amortization of policy
acquisition costs, net (272,171) (331,882) (345,657)
Change in unearned revenue reserve (64,915) 23,118 4,058
Deferred taxes 57,833 2,476 47,092
Separate account expense allowance 214,388 259,287 282,818
Asset impairments and write-downs (17,250) 17,250 --
Benefit reserve adjustment 11,491 5,360 24,666
Gain on commutation of reinsurance
(Note 4) -- 52,026 --
Prepaid reinsurance premium (3,524) -- --
Statutory voluntary reserve (6,286) -- --
Other, net 29,207 466 3,015
----------------------------------------
STATUTORY NET INCOME $ 24,427 $ 102,626 $ 74,042
----------------------------------------
GAAP Stockholder's Equity $ 676,428 $ 648,097 $ 570,469
Deferred policy acquisition costs (1,887,824) (1,615,653) (1,283,771)
Unearned revenue reserve 95,965 160,951 134,789
Deferred taxes 122,105 68,936 64,522
Separate account expense allowance 1,398,030 1,183,642 924,355
Asset impairments and write-downs -- 17,250 --
Unrealized losses (gains) on
investments 26,292 (24,955) (21,451)
Benefit reserve adjustment 81,111 69,233 16,378
Asset valuation reserve (4,935) (21,782) (13,670)
Adjustment relating to Lyndon
contribution (Note 4) -- -- (23,671)
Prepaid reinsurance premium (7,728) (4,204) --
Statutory voluntary reserve (6,286) -- --
Other, net 29,718 (5,003) 3,850
----------------------------------------
STATUTORY CAPITAL AND SURPLUS $ 522,876 $ 476,512 $ 371,800
----------------------------------------
</TABLE>
F-7
<PAGE>
AGGREGATE RESERVES FOR FUTURE BENEFITS AND LIABILITY FOR PREMIUM AND OTHER
DEPOSIT FUNDS
Aggregate reserves for payment of future life, health and annuity benefits were
computed in accordance with applicable actuarial standards. Reserves for life
insurance policies are generally based on the 1958 and 1980 Commissioner's
Standard Ordinary Mortality Tables and various valuation rates ranging from 2.5%
to 6%. Accumulation and on-benefit annuity reserves are based principally on
individual annuity tables at various rates ranging from
2.5% to 8.75% and using the Commissioners Annuity Reserve Valuation Method
("CARVM").
The Company has established separate accounts to segregate the assets and
liabilities of certain life insurance and annuity contracts that must be
segregated from the Company's general assets under the terms of its contracts.
The assets consist primarily of marketable securities and are reported at market
value. Premiums, benefits and expenses of these contracts are reported in the
statutory basis statements of operations.
An analysis of Annuity Actuarial Reserves and Deposit Liabilities by Withdrawal
Characteristics as of December 31, 1999 (including general and separate account
liabilities) is as follows:
<TABLE>
<CAPTION>
% of
Amount Total
<S> <C> <C>
--------------------
Subject to discretionary withdrawal:
--------------------
With market value adjustment $ 4,564 0.0%
At book value less current surrender charge of 5% or more 1,427,302 3.2%
At market value 42,431,996 95.4%
--------------------
Total with adjustment or at market value 43,863,862 98.6%
At book value without adjustment (minimal or no charge or
adjustment): 573,583 1.3%
Not subject to discretionary withdrawal: 34,816 0.1%
--------------------
Total, gross 44,472,261 100.0%
Reinsurance ceded --
------------
Total, net $44,472,261
------------
</TABLE>
INVESTMENTS
Investments in bonds are carried at amortized cost. Bonds that are deemed
ineligible to be held at amortized cost by the NAIC Securities Valuation Office
("SVO") are carried at the appropriate SVO published value. When a reduction in
the value of a security is deemed to be unrecoverable, the decline in value is
reported as a realized loss and the carrying value is adjusted accordingly.
Short-term investments consist of money market funds and are stated at cost,
which approximates fair value. Common stocks are carried at fair value with the
current year change in the difference from cost reflected in surplus. Mortgage
loans, which are carried at cost and approximate fair value, include investments
in assets backed by mortgage loan pools. Other invested assets are generally
recorded at fair value.
The Asset Valuation Reserve ("AVR") is designed to provide a standardized
reserving process for realized and unrealized losses due to default and equity
risks associated with invested assets. The AVR balances were $4,935 and $21,782
as of December 31, 1999 and 1998, respectively. Additionally, the Interest
Maintenance Reserve ("IMR") captures net realized capital gains and losses, net
of applicable income taxes, resulting from changes in interest rates and
amortizes these gains or losses into income over the life of the bond or
mortgage sold. The IMR balance as of December 31, 1999 is an asset balance of
$981 and is reflected as a component of non-admitted assets in Unassigned Funds
in accordance with statutory accounting practices. The IMR balance as of
December 31, 1998 is a liability balance of $452 and is reflected as an other
liability. The net capital (losses) gains transferred to the IMR in 1999, 1998
and 1997 were $(1,255), $852 and $(719), respectively. The amount of income
(expense) amortized from the IMR in 1999, 1998 and 1997 included in the
Company's Statements of Operations, was $178, $(207), and $(85), respectively.
Realized capital gains and losses, net of taxes, not included in the IMR are
reported in the statutory basis statements of operations. Realized investment
gains and losses are determined on a specific identification basis.
CODIFICATION
The NAIC adopted the Codification of Statutory Accounting Principles in March
1998. The proposed effective date for this statutory accounting guidance is
January 1, 2001. It is expected that Connecticut, the Company's domiciliary
state, will adopt these accounting standards and, therefore, the Company will
make the necessary accounting and reporting changes required for implementation.
The Company has not yet determined the impact that these new accounting
standards will have on its statutory basis financial statements.
F-8
<PAGE>
3. INVESTMENTS:
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
-----------------------------
Interest income from bonds and short-term investments $113,646 $123,370 $100,475
Interest income from policy loans 3,494 3,133 1,958
Interest and dividends from other investments 6,371 4,482 1,005
-----------------------------
Gross investment income 123,511 130,985 103,438
Less: investment expenses 1,189 1,003 1,153
-----------------------------
NET INVESTMENT INCOME $122,322 $129,982 $102,285
-----------------------------
</TABLE>
(B) COMPONENTS OF NET UNREALIZED CAPITAL (LOSSES) GAINS ON BONDS AND
SHORT-TERM INVESTMENTS
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
-----------------------------
Gross unrealized capital gains $ 561 $ 10,905 $23,357
Gross unrealized capital losses (6,441) (833) (1,906)
-----------------------------
Net unrealized capital (losses) gains (5,880) 10,072 21,451
Balance, beginning of year 10,072 21,451 7,979
-----------------------------
CHANGE IN NET UNREALIZED CAPITAL (LOSSES) GAINS ON BONDS AND
SHORT-TERM INVESTMENTS $(15,952) $(11,379) $13,472
-----------------------------
</TABLE>
(C) COMPONENTS OF NET UNREALIZED CAPITAL GAINS (LOSSES) ON COMMON STOCKS
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
--------------------------
Gross unrealized capital gains $2,508 $ 2,204 $ 537
Gross unrealized capital losses (24) (1,871) (1,820)
--------------------------
Net unrealized capital gains (losses) 2,484 333 (1,283)
Balance, beginning of year 333 (1,283) (3,447)
--------------------------
CHANGE IN NET UNREALIZED CAPITAL GAINS ON COMMON STOCKS $2,151 $ 1,616 $ 2,164
--------------------------
</TABLE>
(D) COMPONENTS OF NET REALIZED CAPITAL (LOSSES) GAINS
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
--------------------------
Bonds and short-term investments $(37,959) $1,314 $ (120)
Common stocks 104 1,624 421
Other invested assets 172 (1) (307)
--------------------------
Realized capital (losses) gains (37,683) 2,937 (6)
Capital gains benefit -- -- (831)
--------------------------
Net realized capital (losses) gains (37,683) 2,937 825
Less: amounts transferred to the IMR (1,255) 852 (719)
--------------------------
NET REALIZED CAPITAL (LOSSES) GAINS $(36,428) $2,085 $1,544
--------------------------
</TABLE>
Sales and maturities of investments in bonds and short-term investments for the
years ended December 31, 1999, 1998 and 1997 resulted in proceeds of $1,367,027,
$1,354,563 and $1,435,820, gross realized capital gains of $1,106, $1,705, and
$964 and gross realized capital losses of $39,065, $391, and $1,084,
respectively, before transfers to the IMR. Sale of common stocks for the years
ended December 31, 1999, 1998 and 1997 resulted in proceeds of $939, $33,088,
and $10,168, gross realized capital gains of $115, $1,688, and $421 and gross
realized capital losses of $11, $64, and $0, respectively.
(E) DERIVATIVE INVESTMENTS
The Company had no significant derivative holdings as of December 31, 1999, 1998
or 1997.
(F) CONCENTRATION OF CREDIT RISK
Excluding U.S. government and government agency investments, the Company is not
exposed to any significant concentrations of credit risk in fixed maturities of
a single issuer greater than 10% of capital and surplus as of December 31, 1999.
F-9
<PAGE>
(G) BONDS, SHORT-TERM INVESTMENTS AND COMMON STOCKS
<TABLE>
<CAPTION>
1999
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
----------------------------------------------
U.S. government and government agencies and authorities:
-- Guaranteed and sponsored $ 4,768 $ 1 $ (37) $ 4,732
-- Guaranteed and sponsored -- asset backed 170,746 -- -- 170,746
States, municipalities and political subdivisions 10,401 -- (48) 10,353
International governments 7,351 94 (15) 7,430
Public utilities 18,413 92 (73) 18,432
All other corporate -- excluding asset-backed 592,233 374 (6,194) 586,413
All other corporate -- asset-backed 539,688 -- -- 539,688
Short-term investments 228,105 -- -- 228,105
Certificates of deposit 5,158 -- (74) 5,084
Parents, subsidiaries and affiliates 117,057 -- -- 117,057
----------------------------------------------
TOTAL BONDS AND SHORT-TERM INVESTMENTS $1,693,920 $561 $(6,441) $1,688,040
----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
--------------------------------------------
Common stock -- unaffiliated $ 4,562 $1,105 $ (24) $ 5,643
Common stock -- affiliated 35,384 1,403 -- 36,787
--------------------------------------------
TOTAL COMMON STOCKS $39,946 $2,508 $ (24) $42,430
--------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1999
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
----------------------------------------------
U.S. government and government agencies and authorities:
-- Guaranteed and sponsored $ 4,982 $ 35 $ (2) $ 5,015
-- Guaranteed and sponsored -- asset-backed 75,615 -- -- 75,615
States, municipalities and political subdivisions 10,402 415 -- 10,817
International governments 7,466 568 -- 8,034
Public utilities 94,475 1,330 (39) 95,766
All other corporate -- excluding asset-backed 607,679 8,473 (792) 615,360
All other corporate -- asset-backed 505,900 -- -- 505,900
Short-term investments 343,783 -- -- 343,783
Certificates of deposit 130,216 84 -- 130,300
Parents, subsidiaries and affiliates 117,057 -- -- 117,057
----------------------------------------------
TOTAL BONDS AND SHORT-TERM INVESTMENTS $1,897,575 $10,905 $(833) $1,907,647
----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
--------------------------------------------
Common stock -- unaffiliated $ 4,933 $ 290 $ (50) $ 5,173
Common stock -- affiliated 35,384 1,914 (1,821) 35,477
--------------------------------------------
TOTAL COMMON STOCKS $40,317 $2,204 $(1,871) $40,650
--------------------------------------------
</TABLE>
The amortized cost and estimated fair value of bonds and short-term investments
as of December 31, 1999 by estimated maturity year are shown below. Asset-backed
securities, including mortgage-backed securities and collaterialized mortgage
obligations, are distributed to maturity year based on the Company's estimates
of the rate of
F-10
<PAGE>
future prepayments of principal over the remaining lives of the securities.
Expected maturities differ from contractual maturities due to call or prepayment
provisions.
<TABLE>
<CAPTION>
Amortized Estimated
Maturity Cost Fair Value
<S> <C> <C>
--------------------------
One year or less $ 545,290 $ 543,397
Over one year through five years 692,881 690,476
Over five years through ten years 370,835 369,548
Over ten years 84,914 84,619
--------------------------
TOTAL $1,693,920 $1,688,040
--------------------------
</TABLE>
Bonds with a carrying value of $10,457 were on deposit as of December 31, 1999
with various regulatory authorities as required.
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS-BALANCE SHEET ITEMS (IN MILLIONS):
<TABLE>
<CAPTION>
1999 1998
------------------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
------------------------------------------------------
ASSETS
Bonds and short-term investments $1,694 $1,688 $1,898 $1,908
Common stocks 42 42 41 41
Policy loans 59 59 47 47
Mortgage loans 64 64 60 60
Other invested assets 3 3 2 2
LIABILITIES
Deposit funds and other benefits $2,051 $2,017 $2,078 $2,053
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments: fair value of bonds, short-term
investments, common stock, and other invested assets approximate those
quotations published by the NAIC; policy loans and mortgage loans carrying
amounts approximates fair value; and fair value of liabilities on deposit funds
and other benefits is determined by forecasting future cash flows and
discounting the forecasted cash flows at current market rates.
4. REINSURANCE:
The Company cedes insurance to other insurers in order to limit its maximum
losses. Such transfer does not relieve the Company of its primary liability to
the policyholder. Failure of reinsurers to honor their obligations could result
in losses to the Company. The Company reduces this risk by evaluating the
financial condition of reinsurers and monitoring for possible concentrations of
credit risk.
The Company cedes significant portions of its variable annuity business written
since 1994 to RGA Reinsurance Company ("RGA"). Certain core annuity products
were excluded from this reinsurance arrangement beginning in the second quarter
of 1999 and, as such, the amounts ceded to RGA have declined significantly.
In 1995, The Hartford was "spun-off" from ITT Industries, Inc. and became its
own, autonomous entity. In conjunction with this spin-off, the assets and
liabilities of Lyndon Insurance Company (Lyndon) were merged into the Company.
The statutory net assets contributed to the Company as a result of this
transaction were approximately $112 million and were reflected as an increase in
Gross Paid-In and Contributed Surplus at December 31, 1995. This amount was
approximately $41 million lower than the value of net assets contributed on a
GAAP basis.
The majority of the business written in Lyndon was assumed from an unaffiliated
insurer. In 1998, this unaffiliated insurer recaptured the inforce blocks of
business it had been ceding to the Company through Lyndon. In conjunction with
this commutation transaction, the Company transferred statutory basis reserves
of $26,404. Additionally, the Company received fair value consideration for the
bonds it transferred which exceeded the statutory statement value of these
assets by $25,622. As a result of this activity, the Company recognized a
pre-tax gain from this transaction of $52,026 in its 1998 Statements of
Operations.
There were no material reinsurance recoverables from reinsurers outstanding as
of and for the years ended, December 31, 1999 and 1998.
F-11
<PAGE>
The effect of reinsurance as of and for the years ended December 31, is
summarized as follows:
<TABLE>
<CAPTION>
1999 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Aggregate Reserves for Future
Benefits $ 784,502 $ 53 $ (192,934) $ 591,621
Policy and Contract Claim
Liabilities $ 7,827 $ 203 $ (353) $ 7,677
Premium and Annuity Considerations $ 674,219 $ 1,261 $ (53,691) $ 621,789
Annuity and Other Fund Deposits $6,195,917 $ -- $(3,204,554) $2,991,363
Death, Annuity, Disability and
Other Benefits $ 65,251 $ 1,104 $ (12,713) $ 53,642
Surrenders $2,541,449 $ -- $(1,290,636) $1,250,813
</TABLE>
<TABLE>
<CAPTION>
1998 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Aggregate Reserves for Future
Benefits $ 713,375 $ 50 $ (134,285) $ 579,140
Policy and Contract Claim
Liabilities $ 5,895 $ 85 $ (313) $ 5,667
Premium and Annuity Considerations $ 483,328 $24,954 $ (38,939) $ 469,343
Annuity and Other Fund Deposits $6,461,470 $ -- $(4,410,219) $2,051,251
Death, Annuity, Disability and
Other Benefits $ 64,331 $ 1,574 $ (16,401) $ 49,504
Surrenders $1,481,797 $ -- $ (742,134) $ 739,663
</TABLE>
<TABLE>
<CAPTION>
1997 Direct Assumed Ceded Net
<S> <C> <C> <C> <C>
------------------------------------------------------
Premium and Annuity Considerations $ 266,427 $51,630 $ (21,412) $ 296,645
Annuity and Other Fund Deposits $6,515,347 $ -- $(4,534,101) $1,981,246
Death, Annuity, Disability and
Other Benefits $ 79,779 $ 839 $ (7,126) $ 73,492
Surrenders $ 882,094 $ -- $ (427,677) $ 454,417
</TABLE>
5. RELATED PARTY TRANSACTIONS:
Transactions between the Company and its affiliates, relate principally to tax
settlements, reinsurance, insurance coverages, rental and service fees, capital
contributions and payments of dividends. In addition, certain affiliated
insurance companies purchased group annuity contracts from the Company to fund
pension costs and claim annuities to settle casualty claims. Substantially all
general insurance expenses related to the Company, including rent and benefit
plan expenses, are initially paid by The Hartford. Direct expenses are allocated
using specific identification and indirect expenses are allocated using other
applicable methods. Indirect expenses include those for corporate areas which,
depending on type, are allocated based on either a percentage of direct expenses
or on utilization.
The Company has also invested in bonds of its affiliates, Hartford Financial
Services Corporation and HL Investment Advisors, Inc., and common stock of its
subsidiary, Hartford Life, LTD.
For additional information, see Notes 4, 6, and 8.
6. FEDERAL INCOME TAXES:
The Company and The Hartford have entered into a tax sharing agreement under
which each member in the consolidated U.S. Federal income tax return will make
payments between them such that, with respect to any period, the amount of taxes
to be paid by the Company, subject to certain adjustments, generally will be
determined as though the Company were filing separate Federal, state and local
income tax returns.
As long as The Hartford continues to own at least 80% of the combined voting
power and 80% of the value of the outstanding capital stock of HLI, the Company
will be included for Federal income tax purposes in the affiliated group of
which The Hartford is the common parent. The Hartford and its non-life
subsidiaries filed a single consolidated Federal income tax return for 1998 and
1997 and intend to file a separate consolidated Federal income tax return for
1999. The life insurance companies filed a separate consolidated Federal income
tax return for 1998 and 1997 and intend to file a separate consolidated Federal
income tax return for 1999. Federal income taxes (received) paid by the Company
for operations and capital gains (losses) were $(8,815), $25,780, and $(14,499)
in 1999, 1998 and 1997, respectively. The effective tax rate was (73)%, 27%, and
(28)% in 1999, 1998 and 1997, respectively.
F-12
<PAGE>
The following schedule provides a reconciliation of the tax provision (including
realized capital gains(losses)) at the U.S. Federal Statutory rate to Federal
income tax (benefit) expense (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
------------------
Tax provision at U.S. Federal Statutory rate $ 5 $48 $ 20
Tax deferred acquisition costs 31 25 25
Statutory to tax reserve differences (7) 8 1
Investments (31) (60) (61)
Other (8) 15 (1)
------------------
FEDERAL INCOME TAX (BENEFIT) EXPENSE $(10) $36 $(16)
------------------
</TABLE>
7. CAPITAL AND SURPLUS AND SHAREHOLDER DIVIDEND RESTRICTIONS:
The maximum amount of dividends which can be paid to shareholders by Connecticut
domiciled insurance companies, without prior approval, is generally restricted
to the greater of 10% of surplus as of the preceding December 31st or the net
gain from operations for the previous year. Dividends are paid as determined by
the Board of Directors and are not cumulative. No dividends were paid in 1999,
1998 or 1997. The amount available for dividend in 2000 is approximately
$60,855.
8. PENSION, RETIREMENT, AND OTHER POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS:
All employees that work for The Hartford's life insurance companies are included
in The Hartford's non-contributory defined benefit pension plans. These plans
provide pension benefits that are based on years of service and the employee's
compensation during the last ten years of employment. The Hartford's funding
policy is to contribute annually an amount between the minimum funding
requirements set forth in the Employee Retirement Income Security Act of 1974,
as amended, and the maximum amount that can be deducted for U.S. Federal income
tax purposes. Generally, pension costs are funded through the purchase of group
pension contracts sold by affiliates. The costs that were allocated to the
Company for pension related expenses were $762, $1,045 and $840 for 1999, 1998
and 1997, respectively.
Employees of The Hartford's life insurance companies are also provided, through
The Hartford, certain health care and life insurance benefits for eligible
retired employees. The contribution for health care benefits depends on the
retiree's date of retirement and years of service. In addition, this benefit
plan has a defined dollar cap, which limits average company contributions. The
Hartford has prefunded a portion of the health care and life insurance
obligations through trust funds where such prefunding can be accomplished on a
tax effective basis. Postretirement health care and life insurance benefits
expense allocated to the Company was not material to the results of operations
for 1999, 1998 or 1997.
The assumed rate in the per capita cost of health care (the health care trend
rate) was 7.1% for 1999, decreasing ratably to 5.0% in the year 2003. Increasing
the health care trend rates by one percent per year would have an immaterial
impact on the accumulated postretirement benefit obligation and the annual
expense. To the extent that the actual experience differs from the inherent
assumptions, the effect will be amortized over the average future service of
covered employees.
Substantially all of The Hartford's life insurance companies' employees are
eligible to participate in The Hartford's Investment and Savings Plan. Under
this plan, designated contributions, which may be invested in Class A Common
Stock of HLI or certain other investments, are matched to a limit of 3% of
compensation.
9. SEPARATE ACCOUNTS:
The Company maintains separate account assets totaling $44.9 billion and $32.9
billion as of December 31, 1999 and 1998, respectively. Separate account assets
are segregated from other investments and reported at fair value. Separate
account liabilities are determined in accordance with prescribed actuarial
methodologies, which approximate the market value less applicable surrender
charges. The resulting surplus is recorded in the general account statement of
operations as a component of Net Transfers to Separate Accounts. The Company's
separate accounts are non-guaranteed, wherein the policyholder assumes
substantially all the investment risk and rewards. Investment income (including
investment gains and losses) and interest credited to policyholders on separate
account assets are not separately reflected in the statutory statements of
operations.
Separate account management fees, net of minimum guarantees, were $493 million,
$363 million, and $252 million in 1999, 1998 and 1997, respectively, and are
recorded as a component of fee income on the Company's statutory basis
Statements of Operations.
F-13
<PAGE>
10. COMMITMENTS AND CONTINGENT LIABILITIES:
(A) LITIGATION
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for alleged economic and punitive damages
have been asserted. Some of these cases have been filed as purported class
actions and some cases have been filed in certain jurisdictions that permit
punitive damage awards disproportionate to the actual damages incurred. Although
there can be no assurances, at the present time, the Company does not anticipate
that the ultimate liability, arising from such pending or threatened litigation,
will have a material adverse effect on the statutory capital and surplus of the
Company.
(B) GUARANTY FUNDS
Under insurance guaranty fund laws in each state, the District of Columbia and
Puerto Rico, insurers licensed to do business can be assessed by state insurance
guaranty associations for certain obligations of insolvent insurance companies
to policyholders and claimants. Recent regulatory actions against certain large
life insurers encountering financial difficulty have prompted various state
insurance guaranty associations to begin assessing life insurance companies for
the deemed losses. Most of these laws do provide, however, that an assessment
may be excused or deferred if it would threaten an insurer's solvency and
further provide annual limits on such assessments. Part of the assessments paid
by the Company pursuant to these laws may be used as credits for a portion of
the associated premium taxes. The Company paid guaranty fund assessments of
approximately $523, $1,043 and $1,544 in 1999, 1998, and 1997, respectively, of
which $318, $995, and $548 in 1999, 1998 and 1997, respectively were estimated
to be creditable against premium taxes.
(C) TAX MATTERS
The Company's Federal income tax returns are routinely audited by the Internal
Revenue Service ("IRS"). The Company's 1997 and 1996 Federal income tax returns
are currently under audit by the IRS. As of March 31, 2000, the audit was in its
initial stage and no material issues had been raised.
F-14
<PAGE>
PART C
<PAGE>
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) All financial statements are included in Part A and Part B of the
Registration Statement.
(b) (1) Resolution of the Board of Directors of Hartford Life and Annuity
Insurance Company ("Hartford") authorizing the establishment of
the Separate Account.(4)
(2) Not applicable.
(3) (a) Form of Principal Underwriter Agreement.(4)
(3) (b) Form of Dealer Agreement.(1)
(4) Form of Individual Flexible Premium Variable Annuity Contract.(2)
(5) Form of Application.(2)
(6) (a) Certificate of Incorporation of Hartford.(3)
(6) (b) Bylaws of Hartford.(1)
(7) Not applicable.
(8) Form of Fund Participation Agreement.(5)
(9) Opinion and Consent of Lynda Godkin, Senior Vice President,
General Counsel, and Corporate Secretary.
(10) Consent of Arthur Andersen LLP, Independent Public Accountants.
(11) No financial statements are omitted.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Copy of Power of Attorney.
(16) Organizational Chart.
- --------------
(1) Incorporated by reference to Post-Effective Amendment No. 3 to the
Registration Statement on Form N-4, File No. 33-73568, dated May 1, 1996.
(2) Incorporated by reference to Post-Effective Amendment No. 2 to the
Registration Statement on Form N-4, File No. 33-73568, dated May 1, 1995.
(3) Incorporated by reference to the initial filing of the Registration
Statement on Form N-4, File No. 333-45303, dated January 30, 1998.
(4) Incorporated by reference to Pre-Effective Amendment No. to the
Registration Statement on Form N-4, File No. 333-76419, dated July 1, 1999.
(5) Incorporated by reference to Post-Effective Amendment No. 2 to the
Registration Statement on Form N-4, File No. 333-76419, dated December 15,
1999.
<PAGE>
Item 25. Directors and Officers of the Depositor
<TABLE>
<CAPTION>
- --------------------------------------------- ----------------------------------------------------------------------
NAME POSITION WITH HARTFORD
- --------------------------------------------- ----------------------------------------------------------------------
<S> <C>
David A. Carlson Vice President
- --------------------------------------------- ----------------------------------------------------------------------
Peter W. Cummins Senior Vice President
- --------------------------------------------- ----------------------------------------------------------------------
Bruce W. Ferris Vice President
- --------------------------------------------- ----------------------------------------------------------------------
Timothy M. Fitch Vice President & Actuary
- --------------------------------------------- ----------------------------------------------------------------------
Mary Jane B. Fortin Vice President & Chief Accounting Officer
- --------------------------------------------- ----------------------------------------------------------------------
David T. Foy Senior Vice President, Chief Financial Officer & Treasurer, Director*
- --------------------------------------------- ----------------------------------------------------------------------
Lynda Godkin Senior Vice President, General Counsel, and Corporate Secretary,
Director*
- --------------------------------------------- ----------------------------------------------------------------------
Lois W. Grady Senior Vice President
- --------------------------------------------- ----------------------------------------------------------------------
Stephen T. Joyce Senior Vice President
- --------------------------------------------- ----------------------------------------------------------------------
Michael D. Keeler Vice President
- --------------------------------------------- ----------------------------------------------------------------------
Robert A. Kerzner Senior Vice President
- --------------------------------------------- ----------------------------------------------------------------------
Thomas M. Marra President, Director*
- --------------------------------------------- ----------------------------------------------------------------------
Steven L. Matthiesen Vice President
- --------------------------------------------- ----------------------------------------------------------------------
Deanne Osgood Vice President
- --------------------------------------------- ----------------------------------------------------------------------
Craig R. Raymond Senior Vice President and Chief Actuary
- --------------------------------------------- ----------------------------------------------------------------------
Lowndes A. Smith Chief Executive Officer, Director*
- --------------------------------------------- ----------------------------------------------------------------------
David M. Znamierowski Senior Vice President & Chief Investment Officer, Director*
- --------------------------------------------- ----------------------------------------------------------------------
</TABLE>
Unless otherwise indicated, the principal business address of each of the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
*Denotes Board of Directors.
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
Filed herewith as Exhibit 16.
Item 27. Number of Contract Owners
As of January 31, 2000, there were 4,674 Contract Owners.
Item 28. Indemnification
<PAGE>
Sections 33-770 to 33-778, inclusive, of the Connecticut General
Statutes ("CGS") provide that a corporation may provide indemnification
of or advance expenses to a director, officer, employee or agent.
Reference is hereby made to Section 33-771(e) of CGS regarding
indemnification of directors and Section 33-776(d) of CGS regarding
indemnification of officers, employees and agents of Connecticut
corporations. These statutes provide, in general, that Connecticut
corporations incorporated prior to January 1, 1997 shall, except to the
extent that their certificate of incorporation expressly provides
otherwise, indemnify their directors, officers, employees and agents
against "liability" (defined as the obligation to pay a judgment,
settlement, penalty, fine, including an excise tax assessed with
respect to an employee benefit plan, or reasonable expenses incurred
with respect to a proceeding) when (1) a determination is made pursuant
to Section 33-775 that the party seeking indemnification has met the
standard of conduct set forth in Section 33-771 or (2) a court has
determined that indemnification is appropriate pursuant to Section
33-774. Under Section 33-775, the determination of and the
authorization for indemnification are made (a) by the disinterested
directors, as defined in Section 33-770(3); (b) by special counsel; (c)
by the shareholders; or (d) in the case of indemnification of an
officer, agent or employee of the corporation, by the general counsel
of the corporation or such other officer(s) as the board of directors
may specify. Also, Section 33-772 provides that a corporation shall
indemnify an individual who was wholly successful on the merits or
otherwise against reasonable expenses incurred by him in connection
with a proceeding to which he was a party because he was a director of
the corporation. In the case of a proceeding by or in the right of the
corporation or with respect to conduct for which the director, officer,
agent or employee was adjudged liable on the basis that he received a
financial benefit to which he was not entitled, indemnification is
limited to reasonable expenses incurred in connection with the
proceeding against the corporation to which the individual was named a
party.
Under the Depositor's bylaws, the Depositor must indemnify both
directors and officers of the Depositor for (1) any claims and
liabilities to which they become subject by reason of being or having
been directors or officers of the Depositor and (2) legal and other
expenses incurred in defending against such claims, in each case, to
the extent such is consistent with statutory provisions.
Section 33-777 of CGS specifically authorizes a corporation to procure
indemnification insurance on behalf of an individual who was a
director, officer, employer or agent of the corporation. Consistent
with the statute, the directors and officers of the Depositor and
Hartford Securities Distribution Company, Inc. ("HSD") are covered
under a directors and
<PAGE>
officers liability insurance policy issued to The Hartford Financial
Services Group, Inc. and its subsidiaries.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
<PAGE>
Item 29. Principal Underwriters
(a) HSD acts as principal underwriter for the following investment
companies:
Hartford Life Insurance Company - Separate Account One
Hartford Life Insurance Company - Separate Account Two
Hartford Life Insurance Company - Separate Account Two (DC
Variable Account I)
Hartford Life Insurance Company - Separate Account Two (DC Variable
Account II)
Hartford Life Insurance Company - Separate Account Two (QP Variable
Account)
Hartford Life Insurance Company - Separate Account Two (Variable
Account "A")
Hartford Life Insurance Company - Separate Account Two (NQ Variable
Account)
Hartford Life Insurance Company - Putnam Capital Manager Trust Separate
Account
Hartford Life Insurance Company - Separate Account Three
Hartford Life Insurance Company - Separate Account Five
Hartford Life Insurance Company - Separate Account Seven
Hartford Life and Annuity Insurance Company - Separate Account One
Hartford Life and Annuity Insurance Company - Putnam Capital Manager
Trust Separate Account Two
Hartford Life and Annuity Insurance Company - Separate Account Three
Hartford Life and Annuity Insurance Company - Separate Account Five
Hartford Life and Annuity Insurance Company - Separate Account Six
Hartford Life and Annuity Insurance Company - Separate Account Seven
<PAGE>
Hart Life Insurance Company - Separate Account One
Hart Life Insurance Company - Separate Account Two
American Maturity Life Insurance Company - Separate Account AMLVA
Servus Life Insurance Company - Separate Account One
Servus Life Insurance Company - Separate Account Two
(b) Directors and Officers of HSD
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address With Underwriter
---------------- ----------------
<S> <C>
David A. Carlson Vice President
Peter W. Cummins Senior Vice President
David T. Foy Treasurer
Lynda Godkin Senior Vice President, General Counsel and
Corporate Secretary
George R. Jay Controller
Robert A. Kerzner Executive Vice President
Thomas M. Marra Executive Vice President, Director
Paul E. Olson Supervising Registered Principal
Lowndes A. Smith President and Chief Executive Officer, Director
</TABLE>
Unless otherwise indicated, the principal business address of
each of the above individuals is P.O. Box 2999, Hartford, CT
06104-2999.
Item 30. Location of Accounts and Records
All of the accounts, books, records or other documents required to be
kept by Section 31(a) of the Investment Company Act of 1940 and rules
thereunder, are maintained by Hartford at 200 Hopmeadow Street,
Simsbury, Connecticut 06089.
Item 31. Management Services
All management contracts are discussed in Part A and Part B of this
Registration Statement.
Item 32. Undertakings
(a) The Registrant hereby undertakes to file a post-effective
amendment to this Registration Statement as frequently as is
necessary to ensure that the audited financial statements in the
Registration Statement are never more than 16 months old so long
as payments under the variable annuity Contracts may be accepted.
<PAGE>
(b) The Registrant hereby undertakes to include either (1) as part of
any application to purchase a Contract offered by the Prospectus,
a space that an applicant can check to request a Statement of
Additional Information, or (2) a post card or similar written
communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statement of Additional
Information.
(c) The Registrant hereby undertakes to deliver any Statement of
Additional Information and any financial statements required to be
made available under this Form promptly upon written or oral
request.
(d) Hartford hereby represents that the aggregate fees and charges
under the Contract are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks
assumed by Hartford.
The Registrant is relying on the no-action letter issued by the Division of
Investment Management to American Counsel of Life Insurance, Ref. No. IP-6-88,
November 28, 1988. The Registrant has complied with conditions one through four
of the no-action letter.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets all the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has caused this Registration Statement to be signed
on its behalf, in the Town of Simsbury, and State of Connecticut on this 7th
day of April, 2000.
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY -
SEPARATE ACCOUNT SEVEN
(Registrant)
By: Thomas M. Marra *By: /s/ Marianne O'Doherty
------------------------------------------ ------------------------
Thomas M. Marra, President* Marianne O'Doherty
Attorney-in-Fact
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
(Depositor)
By: Thomas M. Marra
------------------------------------------
Thomas M. Marra, President*
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons and in the
capacity and on the date indicated.
David T. Foy, Senior Vice President, Chief
Financial Officer and Treasurer, Director*
Lynda Godkin, Senior Vice President, General
Counsel and Corporate Secretary, Director*
Thomas M. Marra, President, Director* By: /s/ Marianne O'Doherty
Lowndes A. Smith, Chief Executive Officer, ----------------------
Director* Marianne O'Doherty
David M. Znamierowski, Senior Vice President Attorney-in-Fact
And Chief Investment Officer, Director*
Date: April 7, 2000
<PAGE>
EXHIBIT INDEX
(9) Opinion and Consent of Lynda Godkin, Senior Vice President, General
Counsel, and Corporate Secretary
(10) Consent of Arthur Andersen LLP, Independent Public Accountants
(15) Copy of Power of Attorney
(16) Organizational Chart
<PAGE>
EXHIBIT 9
[LOGO]
[HARTFORD LIFE]
April 6, 2000
LYNDA GODKIN
Senior Vice President, General Counsel
& Corporate Secretary
Board of Directors
Hartford Life and Annuity Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
RE: Hartford Life and Annuity Insurance Company Separate Account Seven
File No. 333-76419
Dear Sir/Madam:
I have acted as General Counsel to Hartford Life and Annuity Insurance Company
(the "Company"), a Connecticut insurance company, and Separate Account Seven
(the "Account") in Connecticut with the registration of an indefinite amount of
securities in the form of variable annuity contracts (the "Contracts") with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended. I have examined such documents (including the Form N-4 registration
statement) and reviewed such questions of law as I considered necessary and
appropriate, and on the basis of such examination and review, it is my opinion
that:
1. The Company is a corporation duly organized and validly existing as
a stock life insurance company under the laws of the State of
Connecticut and is duly authorized by the Insurance Department of
the State of Connecticut to issue the Contracts.
2. The Account is a duly authorized and existing separate account
established pursuant to the provisions of Section 38a-433 of the
Connecticut Statutes.
3. To the extent so provided under the Contracts, that portion of the
assets of the Account equal to the reserves and other contract
liabilities with respect to the Account will not be chargeable with
liabilities arising out of any other business that the Company may
conduct.
4. The Contracts, when issued as contemplated by the Form N-4
Registration Statement, will constitute legal, validly issued and
binding obligations of the Company.
I hereby consent to the filing of this opinion as an exhibit to the Form N-4
registration statement for the Contracts and the Account.
Sincerely yours,
/s/ Lynda Godkin
Lynda Godkin
<PAGE>
EXHIBIT 10
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
Registration Statement File No. 333-76419 for Hartford Life and Annuity
Insurance Company Separate Account Seven on Form N-4.
/s/ Arthur Andersen LLP
Hartford, Connecticut
April 7, 2000
<PAGE>
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
POWER OF ATTORNEY
David T. Foy
Lynda Godkin
Thomas M. Marra
Lowndes A. Smith
David M. Znamierowski
do hereby jointly and severally authorize Lynda Godkin, Christine Repasy,
Marianne O'Doherty, Thomas S. Clark and Marta Czekajewski to sign as their agent
any Registration Statement, pre-effective amendment, post-effective amendment
and any application for exemptive relief of the Hartford Life and Annuity
Insurance Company under the Securities Act of 1933 and/or the Investment Company
Act of 1940, and do hereby ratify such signatures heretofore made by such
persons.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for the
purpose herein set forth.
/s/ David T. Foy
- -------------------------------- Dated as of January 15, 2000
David T. Foy
/s/ Lynda Godkin
- -------------------------------- Dated as of January 15, 2000
Lynda Godkin
/s/ Thomas M. Marra
- -------------------------------- Dated as of January 15, 2000
Thomas M. Marra
/s/ Lowndes A. Smith
- -------------------------------- Dated as of January 15, 2000
Lowndes A. Smith
/s/ David M. Znamierowski
- -------------------------------- Dated as of January 15, 2000
David M. Znamierowski
<PAGE>
ORGANIZATIONAL CHART
<TABLE>
<CAPTION>
<S> <C>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(DELAWARE)
|
---------------------------------------------
NUTMEG INSURANCE COMPANY |
(CONNECTICUT) THE HARTFORD INVESTMENT
| MANAGEMENT COMPANY
HARTFORD FIRE INSURANCE COMPANY (DELAWARE)
(CONNECTICUT) |
| |
HARTFORD ACCIDENT AND INDEMNITY COMPANY HARTFORD INVESTMENT
(CONNECTICUT) SERVICES, INC.
| (CONNECTICUT)
HARTFORD LIFE, INC.
(DELAWARE)
|
HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY
(CONNECTICUT)
|
|
|
-------------------------------------------------------------------------------------------------------------------------
| | | | | | | | |
HARTFORD LIFE | | | | | | PLANCO PLANCO
INTERNATIONAL, LTD.| | | | | | FINANCIAL INCORPORATED
(CONNECTICUT) | | | | | | SERVICES, (PENNSYLVANIA)
| | | | | | INCORPORATED
| | | | | | (PENNSYLVANIA)
| | | | | |
| HART LIFE HARTFORD FINANCIAL HARTFORD LIFE HARTFORD AMERICAN
| INSURANCE SERVICES LIFE INSURANCE COMPANY FINANCIAL MATURITY LIFE
| COMPANY INSURANCE COMPANY (CONNECTICUT) SERVICES, LLC INSURANCE COMPANY
| (CONNECTICUT) (CONNECTICUT) | (DELAWARE) (CONNECTICUT)
| | | |
| ------------------------------------- | AML FINANCIAL, INC.
| | | | | (CONNECTICUT)
|SERVUS LIFE HARTFORD HARTFORD |
| INSURANCE INTERNATIONAL LIFE AND |
| COMPANY LIFE REASSURANCE ANNUITY INSURANCE |
|(CONNECTICUT) CORPORATION COMPANY |
| (CONNECTICUT) (CONNECTICUT) |
| | |
| | |
| HARTFORD |
| LIFE, LTD. |
| (BERMUDA) |
| |
| |
----------| -----------------------------------------------------------------------
| | | | |
INTERNATIONAL HL INVESTMENT HARTFORD HARTFORD SECURITIES HARTFORD-COMPREHENSIVE
CORPORATE ADVISORS, LLC EQUITY SALES DISTRIBUTION EMPLOYEE
MARKETING GROUP, INC. (CONNECTICUT) COMPANY, INC. COMPANY, INC. BENEFIT SERVICE
(CONNECTICUT) | (CONNECTICUT) (CONNECTICUT) COMPANY
| | (CONNECTICUT)
| |
THE EVERGREEN HARTFORD INVESTMENT
GROUP, INC. FINANCIAL SERVICES
(NEW YORK) COMPANY
(DELAWARE)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(DELAWARE)
|
NUTMEG INSURANCE COMPANY
(CONNECTICUT)
|
HARTFORD FIRE INSURANCE COMPANY
(CONNECTICUT)
|
----------------------------------------------------------------------------------------------------------------------------
| | |
| | Hartford Accidental and Indemnity Company
| | (Connecticut)
| | |
| | Hartford Life, Inc
| | (Delaware)
| | |
| | Hartford Life and Accident Insurance Company
| | (Connecticut)
| | |
| | HARTFORD LIFE
| | -------INTERNATIONAL LTD.
| | | (CONNECTICUT)
| | | |
| | | ITT HARTFORD
| | | ----SUDAMERICANA
| | | | HOLDING S.A.
| | | | (ARGENTINA)
| | | |------------------------------------------------------
| | | | | |
| | | | ITT HARTFORD GALICIA INSTITUTO DE
| | | | SEGUROS VIDA COMPANIA SALTA COMPANIA DE
| | | |------DE VIDA S.A. DE SEGUROS S.A. SEGUROS DE VIDA S.A.
| | | | (URUGUAY) (ARGENTINA) (ARGENTINA)
| | | |
| | ICATU | | HARTFORD
| | HARTFORD | |---SEGUROS DE VIDA S.A.
| | SEGUROS S.A.----------| | (ARGENTINA)
| | (BRAZIL) |
| | | |
| | | | HARTFORD
| | -- ----------| |-------SEGUROS DE
| | | | | RETIRO S.A.
| | | | | (ARGENTINA)
|-----------|----------------|-------------------|--------------------------------------------------------------------------
| | | | |
| | | ICATU HARTFORD | CONSULTORA DE CAPITALES
| | | FUNDO DE PENSAO | S.A. SOCIEDAD GERENTE
| | | (BRAZIL) |----DE FONDOS COMUNES
| | | | | DE ENVERSION
| | | | | (ARGENTINA)
| | | ICATU HARTFORD |
| | | CAPITALIZACAO S.A. | CLARIDAD
| | | (BRAZIL) | ADMINISTRADORA DE
| | | | |---FONDOS DE JUBILACIONES
| | | BRAZILCAP | Y PENSIONES S.A.
| | | CAPITALIZACAO S.A. | (ARGENTINA)
| | | (BRAZIL) |
| | | |
| | -------------------------- |
| |--------------- | |
| | | |
HARTFORD FIRE HARTFORD FIRE | |------- SEGPOOL S.A.
INTERNATIONAL------------INTERNATIONAL, LTD. | | (ARGENTINA)
(GERMANY) GMBH (CONNECTICUT) | |
(WEST GERMANY) | |
| |
ICATU HARTFORD | | THESIS S.A.
ADMINISTRACAO | |-------- (ARGENTINA)
DE BENEFICIOS LTDA-- | |
(BRAZIL) |
|
|
|
|--------- U.O.R., S.A.
(ARGENTINA)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(DELAWARE)
|
NUTMEG INSURANCE COMPANY
(CONNECTICUT)
|
HARTFORD FIRE INSURANCE COMPANY
(CONNECTICUT)
|
- --------------------------------------------------------------------------------------------------------------------------------|
| |
THE HARTFORD INTERNATIONAL |
|-----------------------------------------------------------------------FINANCIAL SERVICES GROUP, INC. |
| | | (DELAWARE) |
| | | ----------------------|----------------- |
| | | | | | | |
ZWOLSCHE | | ITT HARTFORD LONDON AND | HARTFORD |
ALGEMEENE N.V. | | INTERNATIONAL, LTD. EDINBURGH | EUROPE, INC. |
(NETHERLANDS) | | (U.K.) INSURANCE GROUP, LTD.| (DELAWARE) |
| | | (U.K.) | |
| | | | | |
| | | ------------- | |
| | | | | |
| ITT ASSURANCES HARTFORD INTERNATIONAL | LONDON AND -THE HARTFORD |
| S.A. INSURANCE CO., N.V. |--- EDINBURGH INTERNATIONAL |
| ZWOLSCHE ALGEMEENE (FRANCE) (BELGIUM) | INSURANCE CO., LTD. FINANCIAL |
|----SCHADEVERZEKERING | | (U.K.) SERVICES |
--------| N.V.----------------------------------- | | | GROUP CIA |
| | (NETHERLANDS) | | | | DE SEGUROS Y |
Z.A. | | | | EXCESS INSURANCE REASEGUROS S.A.|
- --VERZEKERINGEN | | | | COMPANY LTD. (SPAIN) |
| N.V. | ZWOLSCHE ALGEMEENE | | | (U.K.) |
| (BELGIUM) |------HERVERZEKERING B.V. | | | |
| | -----| (NETHERLANDS) | | | LONDON AND |
| | | | | | |--- EDINBURGH LIFE |
| Z.A. LUX S.A. | | | | ASSURANCE CO., LTD. |
| (LUXEMBURG) | ZWOLSCHE ALGEMEENE | | | (U.K.) |
| |--LEVENS-VERZEKERING N.V.------------ | | | |
| | (NETHERLANDS) | | | | |
- ----------------|------------------------------------|------------|------|--------------|---------------------------------------|
| | | | | | |
| -------- | | | | |
| | | | | | | |
| ZWOLSCHE | ZWOLSCHE ALGEMEENE ZWOLSCHE ALGEMEENE | | | |
| ALGEMEENE |-----HYPOTHEKEN N.V. BELEGGINGEN III B.V. | | | |
| EUROPA B.V. | (NETHERLANDS) (NETHERLANDS) | | | |
| (NETHERLANDS) | ---------- | | |
- --------| | | | | |
| EXPLOITATIEMAAT- BELEGGINGSMAAT- | | |
|----- SCHAPPIJ SCHAPPIJ | | |
| BUIZERDLAAN B.V. BUIZERDLAAN B.V. | | |
| (NETHERLANDS) (NETHERLANDS) | | |
| | | |
| | | -----
| HOLLAND | |-------------------------- |
|---- BELEGGINGSGROEP B.V. | | | |
(NETHERLANDS) | |----------------- | |
| -------| | | |
| | | | | |
| | | | | |
F.A. KNIGHT | MACALISTER & LONDON AND | HARTFORD FIRE
& SON N.V. | DUNDAS, LTD. EDINBURGH | INTERNATIONAL
(BELGIUM) | (SCOTLAND) TRUSTEES, LTD. | SERVICIOS
| (U.K.) | (SPAIN)
------------------------- -----------
| | |
FENCOURT QUOTEL LONDON AND
PRINTERS, LTD. INSURANCE EDINBURGH
(U.K.) SYSTEMS, LTD. SERVICES, LTD.
(U.K.) (U.K.)
|
EUROSURE
INSURANCE
MARKETING, LTD.
(U.K.)
</TABLE>
