<PAGE>
As filed with the Securities and Exchange Commission on April 15, 1998.
File No. 33-73566
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. 17 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 25 [X]
HARTFORD LIFE INSURANCE COMPANY
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT
(Exact Name of Registrant)
HARTFORD LIFE 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 INSURANCE COMPANIES
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, 1998 pursuant to paragraph (b) of Rule 485
----
60 days after filing pursuant to paragraph (a)(1) of Rule 485
----
on May 1, 1998 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)(1) UNDER THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES.
1
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
N-4 Item No. Prospectus Heading
- ------------------------------- --------------------------
1. Cover Page __ Cover Page
2. Definitions Glossary of Special Terms
3. Synopsis or Highlights Summary
4. Condensed Financial Information Statement of Additional Information
5. General Description of Registrant, The Contract; The Separate Account;
Depositor, and Portfolio Companies The Fixed Account; Hartford Life
Insurance Company; The Funds;
General Matters
6. Deductions Charges Under the Contract
7. General Description of Operation of the Contract
Annuity Contracts Accumulation Period; Death Benefit;
The Contract; The Separate Account;
General Matters
8. Annuity Period Annuity Benefits
9. Death Benefit Death Benefit
10. Purchases and Contract Value Operation of the Contract/
Accumulation Period
11. Redemptions Operation of the Contract/
Accumulation Period
12. Taxes Federal Tax Considerations
13. Legal Proceedings General Matters - Legal Proceedings
14. Table of Contents of the Statement Table of Contents to Statement of
of Additional Information Additional Information
15. Cover Page __ Part B; Statement of Additional
Information
16. Table of Contents Table of Contents
17. General Information and History None
18. Services None
<PAGE>
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 None
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 Depositor Common Control with the 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 Records Location of Accounts and Records
31. Management Services Management Services
32. Undertakings Undertakings
2
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT
P.O. BOX 5085
HARTFORD, CONNECTICUT 06102-5085
TELEPHONE: 1-800-521-0538
This Prospectus describes the Putnam Hartford Capital Manager Variable Annuity,
a flexible premium tax deferred variable annuity contract ("Contract") issued by
Hartford Life Insurance Company ("Hartford"). Payments for the Contract will be
held in a series of Hartford Life Insurance Company - Putnam Capital Manager
Trust Separate Account (the "Separate Account"). Allocations to and transfers to
and from the Fixed Account are not permitted in certain states.
There are currently twenty (20) Sub-Accounts available under the Contract. The
following underlying investment portfolios ("Funds") of Class IA shares of
Putnam Variable Trust are available under the Contracts: Putnam VT Asia Pacific
Growth Fund, Putnam VT Diversified Income Fund, Putnam VT The George Putnam Fund
of Boston, Putnam VT Global Asset Allocation Fund, Putnam VT Global Growth Fund,
Putnam VT Growth and Income Fund, Putnam VT Health Sciences Fund, Putnam VT High
Yield Fund, Putnam VT International Growth Fund, Putnam VT International Growth
and Income Fund, Putnam VT International New Opportunities Fund, Putnam VT
Investors Fund, Putnam VT Money Market Fund, Putnam VT New Opportunities Fund,
Putnam VT New Value Fund, Putnam VT OTC & Emerging Growth Fund, Putnam VT U.S.
Government and High Quality Bond Fund, Putnam VT Utilities Growth and Income
Fund, Putnam VT Vista Fund, and Putnam VT Voyager Fund.
This Prospectus sets forth the information concerning the Separate Account and
the Fixed Account that investors should know before investing. This Prospectus
should be kept for future reference. Additional information about the Separate
Account and the Fixed Account has been filed with the Securities and Exchange
Commission and is available without charge upon request. To obtain the Statement
of Additional Information send a written request to Hartford Life Insurance
Company, Attn: Annuity Marketing Services, P.O. Box 5085, Hartford, CT
06102-5085, or call the telephone number shown above. The Table of Contents for
the Statement of Additional Information may be found on page 62 of this
Prospectus. The Statement of Additional Information is incorporated by reference
into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS IS ACCOMPANIED BY A CURRENT PROSPECTUS FOR FUNDS AND IS VALID
ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE FUNDS.
3
<PAGE>
VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED
BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
Prospectus Dated: May 1, 1998
Statement of Additional Information Dated: May 1, 1998
4
<PAGE>
Table of Contents
Page
GLOSSARY OF SPECIAL TERMS................................................ 7
FEE TABLE................................................................10
SUMMARY..................................................................15
PERFORMANCE RELATED INFORMATION..........................................17
ACCUMULATION UNIT VALUES.................................................19
INTRODUCTION.............................................................24
THE CONTRACT.............................................................24
Right to Cancel Period.................................................25
THE SEPARATE ACCOUNT.....................................................25
THE FIXED ACCOUNT........................................................26
HARTFORD LIFE INSURANCE COMPANY..........................................28
THE FUNDS................................................................28
OPERATION OF THE CONTRACT/ACCUMULATION PERIOD............................32
Premium Payments.......................................................32
Value of Accumulation Units............................................33
Value of the Fixed Account.............................................33
Value of the Contract..................................................33
Transfers Among Sub-Accounts...........................................33
Transfers Between the Fixed Account and the Sub-Accounts...............34
Redemption/Surrender of a Contract.....................................35
DEATH BENEFIT............................................................37
CHARGES UNDER THE CONTRACT...............................................38
Contingent Deferred Sales Charges......................................38
Payments Not Subject to Sales Charges..................................39
Waivers of Sales Charges...............................................40
Mortality and Expense Risk Charge......................................40
Annual Maintenance Fee.................................................41
Administration Charge..................................................42
Premium Taxes..........................................................42
Exceptions to Charges Under the Contracts..............................42
SETTLEMENT PROVISIONS....................................................42
Annuity Options........................................................43
Annuity Proceeds Settlement Option.....................................44
The Annuity Unit and Valuation.........................................44
Determination of Payment Amount........................................44
FEDERAL TAX CONSIDERATIONS...............................................46
A. General..........................................................46
B. Taxation of Hartford and the Separate Account....................46
C. Taxation of Annuities - General Provisions Affecting Purchasers
Other Than Qualified Retirement Plans............................46
5
<PAGE>
D. Federal Income Tax Withholding...................................52
E. General Provisions Affecting Qualified Retirement Plans..........52
F. Annuity Purchases by Nonresident Aliens and Foreign Corporations.52
GENERAL MATTERS..........................................................53
Assignment.............................................................53
Modification...........................................................53
Delay of Payments......................................................53
Voting Rights..........................................................53
Distribution of the Contracts..........................................54
Other Contracts Offered................................................55
Custodian of Separate Account Assets...................................55
Legal Proceedings......................................................55
Legal Counsel..........................................................55
Experts................................................................55
Additional Information.................................................55
APPENDIX I...............................................................57
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION.................62
6
<PAGE>
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT: An accounting unit of measure used to calculate values before
Annuity payments begin.
ADMINISTRATIVE OFFICE OF HARTFORD: Currently located at 200 Hopmeadow Street,
Simsbury, CT 06089. All correspondence concerning the Contract should be sent to
P.O. Box 5085, Hartford, CT 06102-5085, Attn: Individual Annuity Services,
except for overnight or express mail packages, which should be sent to: 200
Hopmeadow Street, Simsbury, CT 06089.
ANNUAL MAINTENANCE FEE: An annual $30 charge on a Contract having a Contract
Value of less than $50,000, as determined on the most recent Contract
Anniversary or upon full surrender of the Contract. The charge is deducted
proportionately from the Sub-Accounts in use at the time of such deduction.
ANNUAL WITHDRAWAL AMOUNT: The amount which can be withdrawn in any Contract Year
prior to incurring surrender charges.
ANNUITANT: The person or Participant upon whose life the Contract is issued.
ANNUITY: A contract issued by an insurance company that provides, in exchange
for Premium Payments, a series of income payments. This Prospectus describes a
deferred annuity contract in which Premium Payments accumulate tax-deferred
until a partial or full surrender is taken or until the Annuity Commencement
Date. Annuity payments under the Contract will begin as of the Annuity
Commencement Date in accordance with the Annuity payment option selected.
ANNUITY COMMENCEMENT DATE: The date on which Annuity payments are to commence.
Under a group unallocated Contract, the date for each Participant is determined
by the Contract Owner in accordance with the terms of the Plan.
ANNUITY UNIT: An accounting unit of measure used to calculate the value of
Annuity payments.
BENEFICIARY: The person(s) who receive Contract Values in the event of the
Annuitant's or Contract Owner's death under certain conditions. Under a group
unallocated Contract, the person named within the Plan documents/enrollment
forms by each Participant entitled to receive benefits as per the terms of the
Contract in case of the death of the Participant.
CODE: The Internal Revenue Code of 1986, as amended.
COMMISSION: Securities and Exchange Commission.
CONTINGENT ANNUITANT: The person so designated by the Contract Owner, who upon
the Annuitant's death, prior to the Annuity Commencement Date, becomes the
Annuitant.
7
<PAGE>
CONTRACT: For an Annuity issued to an individual, the Contract is the individual
Annuity and any endorsements or riders. For a group Annuity, the Contract is a
certificate evidencing a participatory interest in a group Annuity and any
endorsements or riders. Any reference in this Prospectus to a Contract includes
the certificate.
CONTRACT ANNIVERSARY: The anniversary of the Contract Date.
CONTRACT OWNER(S): The owner(s) of the Contract, trustee or other entity,
sometimes herein referred to as "you".
CONTRACT VALUE: The aggregate value of any Sub-Account Accumulation Units held
under the Contract plus the value of the Fixed Account.
CONTRACT YEAR: A period of 12 months commencing with the Contract Date or any
anniversary thereof.
DEATH BENEFIT: The amount payable upon the death of a Contract Owner, Annuitant,
or Participant, in the case of group Contracts, before annuity payments have
started.
DUE PROOF OF DEATH: A certified copy of a death certificate, an order or a court
of competent jurisdiction, a statement from a physician who attended the
deceased or any other proof acceptable to Hartford.
FIXED ACCOUNT: Part of the General Account of Hartford to which a Contract Owner
may allocate all or a portion of his Premium Payment or Contract Value.
FIXED ANNUITY: An Annuity providing for guaranteed payments which remain fixed
in amount throughout the payment period and which do not vary with the
investment experience of the Separate Account.
FUNDS: Currently, the portfolios of Putnam Variable Trust described on page 28
of this Prospectus.
GENERAL ACCOUNT: The General Account of Hartford which consists of all assets of
Hartford Life Insurance Company other than those allocated to the separate
accounts of Hartford Life Insurance Company.
HARTFORD: Hartford Life Insurance Company.
MAXIMUM ANNIVERSARY VALUE: A value used in determining the death benefit. It is
based on a series of calculations of Contract Values on Contract Anniversaries,
premium payments and partial surrenders, as described on page 33.
NON-QUALIFIED CONTRACT: A Contract which is not part of a tax-qualified
retirement plan or arrangement which qualifies for special tax treatment under
the Code.
8
<PAGE>
PARTICIPANT (FOR GROUP UNALLOCATED CONTRACTS ONLY): Any eligible employee of an
employer/Contract Owner participating in the Plan.
PLAN: A voluntary Plan of an Employer which qualifies for special tax treatment
under a section of the Internal Revenue Code.
PREMIUM PAYMENT: A payment made to Hartford pursuant to the terms of the
Contract.
PREMIUM TAX: A tax charged by a state or municipality on Premium Payments or
Contract Values.
QUALIFIED CONTRACT: A Contract which is part of a tax-qualified retirement plan
or arrangement which qualifies for special tax treatment under the Code, such as
an employer-sponsored 401(k) plan or an Individual Retirement Annuity (IRA).
SEPARATE ACCOUNT: The Hartford separate account entitled "Hartford Life
Insurance Company Putnam Capital Manager Trust Separate Account".
SUB-ACCOUNT: Accounts established within the Separate Account with respect to
a Fund.
TERMINATION VALUE: The Contract Value upon termination of the Contract prior to
the Annuity Commencement Date, less any applicable Premium Taxes, the Annual
Maintenance Fee and any applicable contingent deferred sales charges.
TRUST: Putnam Variable Trust.
UNALLOCATED CONTRACTS: Contracts issued to employers or such other entities as
Contract Owners with no allocation to a specific Participant, as defined herein.
The Plans will be responsible for the individual allocations.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Separate Account is determined at the close of the New York Stock
Exchange (generally 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
VARIABLE ANNUITY: An Annuity providing for payments varying in amount in
accordance with the investment experience of the assets of the Separate Account.
9
<PAGE>
FEE TABLE
SUMMARY
CONTRACT OWNER TRANSACTION EXPENSES (ALL SUB-ACCOUNTS)
Sales Load Imposed on Purchases (as a percentage of Premium Payments) None
Exchange Fee......................................................... $0
Deferred Sales Load (as a percentage of amounts withdrawn)
First Year (1)................................................... 6%
Second Year...................................................... 6%
Third Year....................................................... 5%
Fourth Year...................................................... 5%
Fifth Year....................................................... 4%
Sixth Year....................................................... 3%
Seventh Year..................................................... 2%
Eighth Year...................................................... 0%
Annual Maintenance Fee (2)........................................... $30
Annual Expenses-Separate Account (as percentage of average account
value)
Mortality and Expense Risk....................................... 1.250%
Administration Fees.............................................. 0.150%
Total............................................................ 1.400%
(1) Length of time from premium payment.
(2) The Annual Maintenance Fee is a single $30 charge on a
Contract. It is deducted proportionally from the investment options
in use at the time of the charge. Pursuant to requirements of the
Investment Company Act of 1940, 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. The Annual Maintenance Fee is deducted only when
the accumulated value is less than $50,000. In the Example, the
Annual Maintenance Fee is approximated as a 0.08% annual asset
charge based on the experience of the Contracts.
10
<PAGE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
- -------------------------------------------------------------------------------
Total Fund
Operating
Management Other Expenses
Fees Expenses (after any
(after any (after any fee waivers
fee expense and expense
waivers) reimbursement) reimbursement)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Putnam VT Asia Pacific Growth Fund 0.80% 0.27% 1.07%
- -------------------------------------------------------------------------------
Putnam VT Diversified Income Fund 0.69% 0.11% 0.80%
- -------------------------------------------------------------------------------
Putnam VT The George Putnam Fund of
Boston (1) 0.49% 0.36% 0.85%
- -------------------------------------------------------------------------------
Putnam VT Global Asset Allocation Fund 0.66% 0.11% 0.77%
- -------------------------------------------------------------------------------
Putnam VT Global Growth Fund 0.60% 0.15% 0.75%
- -------------------------------------------------------------------------------
Putnam VT Growth and Income Fund 0.47% 0.04% 0.51%
- -------------------------------------------------------------------------------
Putnam VT Health Sciences Fund (1) 0.56% 0.34% 0.90%
- -------------------------------------------------------------------------------
Putnam VT High Yield Fund 0.66% 0.06% 0.72%
- -------------------------------------------------------------------------------
Putnam VT International Growth Fund (1) 0.73% 0.47% 1.20%
- -------------------------------------------------------------------------------
Putnam VT International Growth and
Income Fund 0.80% 0.32% 1.12%
- -------------------------------------------------------------------------------
Putnam VT International New
Opportunities Fund (1) 0.92% 0.68% 1.60%
- -------------------------------------------------------------------------------
Putnam VT Investors Fund (1) 0.52% 0.33% 0.85%
- -------------------------------------------------------------------------------
Putnam VT Money Market Fund 0.45% 0.09% 0.54%
- -------------------------------------------------------------------------------
Putnam VT New Opportunities Fund 0.58% 0.05% 0.63%
- -------------------------------------------------------------------------------
Putnam VT New Value Fund 0.70% 0.15% 0.85%
- -------------------------------------------------------------------------------
Putnam VT OTC & Emerging Growth Fund(1) 0.56% 0.34% 0.90%
- -------------------------------------------------------------------------------
Putnam VT U.S. Government and High
Quality Bond Fund 0.61% 0.08% 0.69%
- -------------------------------------------------------------------------------
Putnam VT Utilities Growth and Income
Fund 0.67% 0.07% 0.74%
- -------------------------------------------------------------------------------
Putnam VT Vista Fund 0.65% 0.22% 0.87%
- -------------------------------------------------------------------------------
Putnam VT Voyager Fund 0.54% 0.05% 0.59%
- -------------------------------------------------------------------------------
</TABLE>
(1) The Management Fees and Other Expenses shown in the table above reflect an
expense limitation. In the absence of an expense limitation, Management
Fees, Other Expenses, and Total Fund Operating Expenses would have been:
11
<PAGE>
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT FEES OTHER EXPENSES OPERATING EXPENSES
<S> <C> <C> <C>
Putnam VT The George 0.65 0.36 1.01
Putnam Fund of Boston*
Putnam VT Health 0.70 0.34 1.04
Sciences Fund*
Putnam VT International 0.80 0.47 1.27
Growth Fund
Putnam VT International 1.20 0.68 1.88
New Opportunities Fund
Putnam VT Investors 0.65 0.33 0.98
Fund*
Putnam VT OTC & 0.70 0.34 1.04
Emerging Growth Fund*
</TABLE>
*Estimated Management Fees, Other Expenses, and Total Fund Operating Expenses.
12
<PAGE>
<TABLE>
<CAPTION>
Example
- ---------------------------------------------------------------------------------------------------------------------------
If you surrender your Contract If you annuitize your Contract If you do not surrender your
at the end of the applicable at the end of the applicable Contract, you would pay the
time period, you would pay the time period, you would pay the following expenses on a $1,000
following expenses on a $1,000 following expenses on a $1,000 investment, assuming a 5% annual
investment, assuming a 5% annual investment, assuming a 5% annual return on assets:
return on assets: return on assets:
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sub-Account 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
- ---------------------------------------------------------------------------------------------------------------------------
Putnam $ 80 $ 128 $ 176 $ 289 $ 25 $ 79 $ 135 $ 289 $ 26 $ 80 $ 136 $ 289
Asia
Pacific
Growth
Sub-Account
- ---------------------------------------------------------------------------------------------------------------------------
Putnam 77 119 162 262 23 71 122 261 23 71 122 262
Diversified
Income
Sub-Account
- ---------------------------------------------------------------------------------------------------------------------------
The 78 121 n/a n/a 23 72 n/a n/a 24 73 n/a n/a
George
Putnam
Fund
Sub-Account
- ---------------------------------------------------------------------------------------------------------------------------
Putnam 77 118 161 259 22 70 120 258 23 70 121 259
Global
Asset
Allocation
Sub-Account
- ---------------------------------------------------------------------------------------------------------------------------
Putnam 77 118 160 257 22 69 119 256 23 70 120 257
Global
Growth
Sub-Account
- ---------------------------------------------------------------------------------------------------------------------------
Putnam 80 112 147 231 20 62 106 230 20 62 107 231
Growth
and
Income
Sub-Account
- ---------------------------------------------------------------------------------------------------------------------------
Putnam 78 122 n/a n/a 24 74 n/a n/a 24 74 n/a n/a
Health
Sciences
Sub-Account
- ---------------------------------------------------------------------------------------------------------------------------
Putnam 76 117 158 253 22 68 117 253 22 69 118 253
High
Yield
Sub-Account
- ---------------------------------------------------------------------------------------------------------------------------
Putnam 81 132 183 302 27 83 142 302 27 84 143 302
International
Growth
Sub-Account
- ---------------------------------------------------------------------------------------------------------------------------
Putnam 80 129 179 294 26 81 138 294 26 81 139 294
International
Growth
and
Income
Sub-Account
- ---------------------------------------------------------------------------------------------------------------------------
Putnam 85 144 203 341 31 95 162 341 31 96 163 341
International
New
Opportunities
Sub-Account
- ---------------------------------------------------------------------------------------------------------------------------
Putnam 78 121 n/a n/a 23 72 n/a n/a 24 73 n/a n/a
Investors
Sub-Account
- ---------------------------------------------------------------------------------------------------------------------------
Putnam 75 111 149 234 20 63 108 234 21 63 109 234
Money
Market
Sub-Account
- ---------------------------------------------------------------------------------------------------------------------------
Putnam 75 114 153 244 21 65 113 243 21 66 113 244
New
Opportunities
Sub-Account
- ---------------------------------------------------------------------------------------------------------------------------
Putnam 78 121 165 267 23 72 124 266 24 73 125 267
New
Value
Sub-Account
- ---------------------------------------------------------------------------------------------------------------------------
Putnam 78 122 n/a n/a 24 74 n/a n/a 24 74 n/a n/a
OTC &
Emerging
Growth
Sub-Account
- ---------------------------------------------------------------------------------------------------------------------------
Putnam 76 116 157 250 21 67 116 249 22 68 117 250
U.S
Government
and
High
Quality
Bond
Sub-Account
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Putnam 77 118 159 255 22 69 118 255 23 70 119 255
Utilities
Growth
and
Income
Sub-Account
- ---------------------------------------------------------------------------------------------------------------------------
Putnam 78 122 166 269 23 73 125 268 24 74 126 269
Vista
Sub-Account
- ---------------------------------------------------------------------------------------------------------------------------
Putnam 75 122 166 269 23 73 125 268 24 74 126 269
Voyager
Sub-Account
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The purpose of this table is to assist the Contract Owner in understanding
various costs and expenses that a Contract Owner will bear directly or
indirectly. The table reflects expenses of the Separate Account and underlying
Funds. Premium taxes may also be applicable.
This EXAMPLE should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
14
<PAGE>
SUMMARY
WHAT IS THE CONTRACT AND HOW MAY I PURCHASE ONE?
The Contract offered is a tax deferred variable annuity. (see "Taxation of
Annuities in General," page 46). Generally, the Contract is purchased by
completing an application or an order to purchase a Contract and submitting it,
along with the initial Premium Payment, to Hartford for its approval. The
minimum initial Premium Payment is $1,000. Certain plans may make smaller
initial and subsequent periodic Premium Payments. Subsequent Premium Payments,
if made, must be a minimum of $500 ($50 if you are enrolled in the InvestEase
program). Generally, a Contract Owner may exercise his right to cancel the
Contract within 10 days of receipt of the Contract by returning the Contract to
Hartford at its Administrative Office. If the Contract Owner exercises his right
to cancel, Hartford will return either the Contract Value or the original
Premium Payment to the Contract Owner. The duration of the right to cancel
period and Hartford's obligation to either return the Contract Value or the
original Premium will depend on state law.
(See "Right to Cancel Period," page 25.)
WHO MAY PURCHASE THE CONTRACT?
Any individual, group or trust may purchase the Contract, including any trustee
or custodian for a retirement plan which qualifies for special federal tax
treatment under the Internal Revenue Code, including individual retirement
annuities. (See "Federal Tax Considerations" commencing on page 46 and Appendix
I commencing on page 57.)
WHAT TYPES OF INVESTMENTS ARE AVAILABLE UNDER THE CONTRACT?
The underlying investments for the Contract are shares of Putnam Variable Trust,
an open-end series investment company with multiple portfolios ("the Funds") as
follows: Putnam VT Asia Pacific Growth Fund, Putnam VT Diversified Income Fund,
Putnam VT The George Putnam Fund of Boston, Putnam VT Global Asset Allocation
Fund, Putnam VT Global Growth Fund, Putnam VT Growth and Income Fund, Putnam VT
Health Sciences Fund, Putnam VT High Yield Fund, Putnam VT International Growth
Fund, Putnam VT International Growth and Income Fund, Putnam VT International
New Opportunities Fund, Putnam VT Investors Fund, Putnam VT Money Market Fund,
Putnam VT New Opportunities Fund, Putnam VT New Value Fund, Putnam VT OTC &
Emerging Growth Fund, Putnam VT U.S. Government and High Quality Bond Fund,
Putnam VT Utilities Growth and Income Fund, Putnam VT Vista Fund, Putnam VT
Voyager Fund, and such other Funds as shall be offered from time to time, and
the Fixed Account, or a combination of the Funds and the Fixed Account. (See
"The Funds" commencing on page 28 and
15
<PAGE>
"The Fixed Account" commencing on page 26.)
WHAT ARE THE CHARGES UNDER THE CONTRACTS?
SALES EXPENSES There is no deduction for sales expenses from Premium Payments
when made. However, a contingent deferred sales charge may be assessed against
Contract Values when they are surrendered. (See "Contingent Deferred Sales
Charges" commencing on page 38.) The length of time from receipt of a Premium
Payment to the time of surrender determines the contingent deferred sales
charge. For this purpose, Premium Payments will be deemed to be surrendered in
the order in which they are received and all surrenders will be first from
Premium Payments and then from other Contract Values. The charge is a
percentage of the amount withdrawn (not to exceed the aggregate amount of the
Premium Payments made). The charge is as follows:
CHARGE LENGTH OF TIME
FROM PREMIUM
PAYMENT (NUMBER OF
YEARS)
6% 1
6% 2
5% 3
5% 4
4% 5
3% 6
2% 7
0% 8 or more
No contingent deferred sales charge will be assessed in the event of death of
the Annuitant or Contract Owner, or upon the exercise of the withdrawal
privilege or if Contract Values are applied to an Annuity option provided for
under the Contract (except that a surrender out of Annuity Option Four will be
subject to a contingent deferred sales charge where applicable). (See
"Contingent Deferred Sales Charges" commencing on page 38.)
FREE WITHDRAWAL PRIVILEGE Withdrawals of up to 10% per Contract Year, on a
noncumulative basis, of the Premium Payments made to a Contract may be made
without the imposition of the contingent deferred sales charge during the first
seven Contract Years. (See "Contingent Deferred Sales Charges" commencing on
page 38.) Certain plans or programs may have different withdrawal privileges.
MORTALITY AND EXPENSE RISKS For assuming the mortality and expense risks under
the Contract, Hartford will impose a 1.25% per annum charge against all Contract
Values held in the Sub-Accounts. (See "Mortality and Expense Risk Charge,"
page 40.)
ADMINISTRATION CHARGE AND ANNUAL MAINTENANCE FEE The Contract provides for
administration charges and an Annual Maintenance Fee. For administration, the
charge is .15% per annum against all Contract Values held in the Separate
Account. For Contract maintenance, the
16
<PAGE>
fee is $30 annually. (See "Administration and Maintenance Fees," page 41.)
Contracts with a Contract Value of $50,000 or more at time of Contract
Anniversary will not be assessed this charge.
PREMIUM TAXES A deduction will be made for Premium Taxes for Contracts sold in
certain states. (See "Premium Taxes," page 42.)
CHARGES BY THE FUNDS The Funds are subject to certain fees, charges and
expenses. (See the prospectus for the Trust accompanying this Prospectus.)
CAN I GET MY MONEY IF I NEED IT?
Subject to any applicable charges, the Contract may be surrendered, or portions
of the value of such Contract may be withdrawn, at any time prior to the Annuity
Commencement Date. However, if less than $500 remains in a Contract as a result
of a withdrawal, Hartford may terminate the Contract in its entirety. (See
"Redemption/Surrender of a Contract," page 35.)
DOES THE CONTRACT PAY ANY DEATH BENEFITS?
A Death Benefit is provided in the event of death of the Annuitant or Contract
Owner or Joint Contract Owner before Annuity payments have commenced. (See
"Death Benefit," page 37.)
WHAT ARE THE AVAILABLE ANNUITY OPTIONS UNDER THE CONTRACT? There are four
available Annuity Options and the Annuity Proceeds Settlement Option under the
Contract which are described on page 43. The Annuity Commencement Date may not
be deferred beyond the Annuitant's 90th birthday except in certain states where
the Annuity Commencement Date may not be deferred beyond the Annuitant's 85th
birthday. If a Contract Owner does not elect otherwise, the Contract Value less
applicable premium taxes will be applied on the Annuity Commencement Date under
the second option to provide a life annuity with 120 monthly payments certain.
DOES THE CONTRACT OWNER HAVE ANY VOTING RIGHTS UNDER THE CONTRACT? Contract
Owners will have the right to vote on matters affecting an underlying Fund to
the extent that proxies are solicited by such Fund. If a Contract Owner does not
vote, Hartford shall vote such interests in the same proportion as shares of the
Fund for which instructions have been received by Hartford. (See "Voting
Rights," page 53.)
PERFORMANCE RELATED INFORMATION
The Separate Account may advertise certain performance related information
concerning its 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.
Putnam Asia Pacific Growth Sub-Account, Putnam Diversified Income Sub-Account,
Putnam The George Putnam Fund Sub-Account of Boston, Putnam Global Asset
Allocation Sub-Account, Putnam Global Growth Sub-Account, Putnam Growth and
Income Sub-Account, Putnam Health Sciences Sub-Account, Putnam High Yield
Sub-Account, Putnam International Growth Sub-Account, Putnam International
Growth and Income Sub-Account, Putnam International New
17
<PAGE>
Opportunities Sub-Account, Putnam Investors Sub-Account, Putnam Money Market
Sub-Account, Putnam New Opportunities Sub-Account, Putnam New Value Sub-Account,
Putnam OTC & Emerging Growth Sub-Account, Putnam U.S. Government and High
Quality Bond Sub-Account, Putnam Utilities Growth and Income Sub-Account, Putnam
Vista Sub-Account, and Putnam Voyager Sub-Account may include total return in
advertisements or other sales material.
When a Sub-Account advertises its 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 (assuming the deduction of any contingent deferred sales charge which
would be payable if the investment were redeemed at the end of the period).
Putnam Diversified Income Sub-Account, Putnam Growth and Income Sub-Account,
Putnam International Growth and Income Sub-Account, Putnam High Yield
Sub-Account, and Putnam U.S. Government and High Quality Bond Sub-Account 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 is 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.
Putnam Money Market Sub-Account may advertise yield and effective yield. The
yield 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 reflects the
recurring charges at the Separate Account level including the Annual Maintenance
Fee.
Total return at the Separate Account level includes all Contract charges: sales
charges, mortality and expense risk charges, and the Annual Maintenance Fee, and
is therefore lower than total return at the Fund level, with no comparable
charges. Likewise, yield at the Separate Account level includes all recurring
charges (except sales charges), and is therefore lower than yield at the Fund
level, with no comparable charges.
Hartford 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-
advantaged 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.
18
<PAGE>
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. The George Putnam Fund
Sub-Account, Putnam Health Sciences Sub-Account, Putnam Investors Sub-Account,
and Putnam OTC & Emerging Growth Sub-Account are new Sub-Accounts and are not
shown below.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PUTNAM ASIA
PACIFIC
GROWTH
SUB-ACCOUNT
(Inception
date May 1,
1995)
Accumulation
unit value
at
beginning
of period $ 10.903 $ 10.135 $ 10.000 - - - - - - -
Accumulation
unit value
at end of
period $ 9.176 $ 10.903 $ 10.135 - - - - - - -
Number of
accumulation
units
outstanding
at end of
period (in
thousands) 4,108 4,437 1,040 - - - - - - -
PUTNAM
DIVERSIFIED
INCOME
SUB-ACCOUNT
(Inception
date
September
15, 1993)
Accumulation
unit value
at
beginning
of period $ 12.127 $ 11.302 $ 9.622 $ 10.18 $ 10.000 - - - - -
Accumulation
unit value
at end of
period $ 12.841 $ 12.127 $ 11.302 $ 9.622 $ 10.188 - - - - -
Number of
accumulation
units
outstanding
at end of
period (in
thousands) 24,442 20,955 14,967 13,403 4,428 - - - - -
PUTNAM
GLOBAL
ASSET
ALLOCATION
SUB-ACCOUNT
(Inception
date
February 1,
1988)
Accumulation
unit value
at
beginning
of period $ 22.902 $ 20.087 $ 16.355 $ 16.98 $ 14.665 $ 13.992 $ 11.92 $ 12.068 10.545 $ 10.000
Accumulation
unit value
at end of
period $ 27.026 $ 22.902 $ 20.087 $ 16.35 $ 16.988 $ 14.665 $ 13.99 $ 11.922 12.068 $ 10.545
Number of
accumulation
units
outstanding
at end of
period (in
thousands) 17,958 17,521 16,019 16,507 12,914 8,580 5,829 4,300 3,293 2,274
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PUTNAM
GLOBAL
GROWTH
SUB-ACCOUNT
(Inception
date May 1,
1990)
Accumulation
unit value
at
beginning
of period $ 17.29 4$14.963 $ 13.119 $ 13.43 $ 10.289 $ 10.472 $ 9.23 $ 10.000 - -
Accumulation
unit value
at end of
period $ 19.497 $ 17.294 $ 14.963 $ 13.11 $ 13.432 $ 10.289 $ 10.47 $ 9.233 - -
Number of
accumulation
units
outstanding
at end of
period (in
thousands) 36,912 36,757 29,701 30,285 17,711 7,638 3,800 1,405 - -
PUTNAM
GROWTH AND
INCOME
SUB-ACCOUNT
(Inception
date
February 1,
1988)
Accumulation
unit value
at
beginning
of period $ 32.703 $ 27.201 $ 20.17 $ 20.39 $ 18.096 $ 16.720 $ 14.24 $ 14.16 11.848 $ 10.000
Accumulation
unit value
at end of
period $ 40.036 $ 32.703 $ 27.201 $ 20.17 $ 20.390 $ 18.096 $ 16.72 $ 14.243 14.166 $ 11.848
Number of
accumulation
units
outstanding
at end of
period (in
thousands) 108,147 96,383 76,865 67,016 53,464 32,856 19,420 10,888 7,037 2,187
PUTNAM HIGH
YIELD
SUB-ACCOUNT
(Inception
date
February 1,
1988)
Accumulation
unit value
at
beginning
of period $ 22.682 $ 20.390 $ 17.476 $ 17.89 $ 15.173 $ 12.932 $ 9.055 $ 10.200 10.624 $ 10.000
Accumulation
unit value
at end of
period $ 25.575 $ 22.682 $ 20.390 $ 17.47 $ 17.890 $ 15.173 $ 12.93 $ 9.055 10.200 $ 10.624
Number of
accumulation
units
outstanding
at end of
period (in
thousands) 17,697 16,479 13,646 11,462 11,174 7,076 3,296 2,072 2,680 1,822
PUTNAM
INTERNATIONAL
GROWTH
SUB-ACCOUNT
(Inception
date
January 2,
1997)
Accumulation
unit value
at
beginning
of period $ 10.000 - - - - - - - - -
Accumulation
unit value
at end of
period $ 11.451 - - - - - - - - -
Number of
accumulation
units
outstanding
at end of
period (in
thousands) 4,787 - - - - - - - - -
PUTNAM
INTERNATIONAL
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GROWTH AND
INCOME
SUB-ACCOUNT
(Inception
date
January 2,
1997)
Accumulation
unit value
at
beginning
of period $ 10.000 - - - - - - - - -
Accumulation
unit value
at end of
period $ 11.776 - - - - - - - - -
Number of
accumulation
units
outstanding
at end of
period (in
thousands) 7,320 - - - - - - - - -
PUTNAM
INTERNATIONAL
NEW
OPPORTUNITIES
SUB-ACCOUNT
(Inception
date
January 2,
1997)
Accumulation
unit value
at
beginning
of period $ 10.000 - - - - - - - - -
Accumulation
unit value
at end of
period $ 9.850 - - - - - - - - -
Number of
accumulation
units
outstanding
at end of
period (in
thousands) 4,026 - - - - - - - - -
PUTNAM
MONEY
MARKET
SUB-ACCOUNT
(Inception
date
February 1,
1988)
Accumulation
unit value
at
beginning
of period $ 1.429 $ 1.379 $ 1.325 $ 1.294 $ 1.277 $ 1.250 $ 1.197 $ 1.124 1.045 $ 1.000
Accumulation
unit value
at end of
period $ 1.483 $ 1.429 $ 1.379 $ 1.325 $ 1.294 $ 1.277 $ 1.250 $ 1.197 1.124 $ 1.045
Number of
accumulation
units
outstanding
at end of
period (in
thousands) 136,311 140,033 107,934 144,95 86,677 80,182 62,638 64,849 21,986 13,212
PUTNAM NEW
OPPORTUNITIES
SUB-ACCOUNT
(Inception
date May 2,
1994)
Accumulation
unit value
at
beginning
of period $ 16.635 $ 15.312 $ 10.718 $ 10.000 - - - - - -
Accumulation
unit value
at end of
period $ 20.223 $ 16.635 $ 15.312 $ 10.718 - - - - - -
Number of
accumulation
units
outstanding
at end of
period (in
thousands) 42,525 38,289 15,860 3,681 - - - - - -
PUTNAM NEW
VALUE
SUB-ACCOUNT
</TABLE>
21
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Inception
date
January 2,
1997)
Accumulation
unit value
at
beginning
of period $ 10.000 - - - - - - - - -
Accumulation
unit value
at end of
period $ 11.597 - - - - - - - - -
Number of
accumulation
units
outstanding
at end of
period (in
thousands) 6,466 - - - - - - - - -
PUTNAM U.S.
GOVERNMENT
AND HIGH
QUALITY
BOND
SUB-ACCOUNT
(Inception
date
February 1,
1988)
Accumulation
unit value
at
beginning
of period $ 18.631 $ 18.448 $ 15.533 $ 16.27 $ 14.833 $ 13.994 $ 12.10 $ 11.414 10.150 $ 10.000
Accumulation
unit value
at end of
period $ 19.959 $ 18.631 $ 18.448 $ 15.53 $ 16.277 $ 14.833 $ 13.99 $ 12.100 11.414 $ 10.150
Number of
accumulation
units
outstanding
at end of
period (in
thousands 26,461 29,395 30,489 33,516 37,806 27,611 16,368 8,107 5,399 2,786
PUTNAM
UTILITIES
GROWTH AND
INCOME
SUB-ACCOUNT
(Inception
date May 4,
1992)
Accumulation
unit value
at
beginning
of period $ 16.072 $ 14.075 $ 10.889 $ 11.87 $ 10.618 $ 10.000 - - - -
Accumulation
unit value
at end of
period $ 20.143 $ 16.072 $ 14.075 $ 10.88 $ 11.876 $ 10.618 - - - -
Number of
accumulation
units
outstanding
at end of
period (in
thousands) 22,198 23,096 22,892 23,090 26,176 5,956 - - - -
PUTNAM
VISTA
SUB-ACCOUNT
(Inception
date
January 2,
1997)
Accumulation
unit value
at
beginning
of period $ 10.000 - - - - - - - - -
Accumulation
unit value
at end of
period $ 12.151 - - - - - - - - -
Number of
accumulation
units
outstanding
at end of
period (in
thousands) 5,662 - - - - - - - - -
PUTNAM
VOYAGER
SUB-ACCOUNT
(Inception
date
February 1,
1988)
Accumulation
unit value
at
beginning
of period $ 36.228 $ 32.520 $ 23.445 $ 23.53 $ 20.102 $ 18.472 $ 12.82 $ 13.272 10.170 $ 10.000
22
<PAGE>
Accumulation
unit value
at end of
period $ 45.197 $ 36.228 $ 32.520 $ 23.44 $ 23.530 $ 20.102 $ 18.47 $ 12.822 13.272 $ 10.17
Number of
accumulation
units
outstanding
at end of
period (in
thousands) 47,284 45,912 36,379 29,315 21,915 14,667 8,419 3,714 2,968 762
</TABLE>
23
<PAGE>
INTRODUCTION
This Prospectus has been designed to provide you with the necessary information
to make a decision on purchasing a tax deferred variable annuity offered by
Hartford and funded by the Fixed Account and/or a series of the Separate
Account. Please read the Glossary of Special Terms on pages and prior to reading
this Prospectus to familiarize yourself with the terms being used.
THE CONTRACT
The Putnam Hartford Capital Manager is a tax deferred variable annuity Contract.
Payments for the Contract will be held in the Fixed Account and/or a series of
the Separate Account. Initially there are no deductions from your Premium
Payments (except for Premium Taxes, if applicable) so your entire Premium
Payment is put to work in the investment Sub-Account(s) of your choice or the
Fixed Account. Each Sub-Account invests in a different underlying Fund with its
own distinct investment objectives. You pick the Sub-Account(s) with the
investment objectives that meet your needs. You may select one or more
Sub-Accounts and/or the Fixed Account and determine the percentage of your
Premium Payment that is put into a Sub-Account or the Fixed Account. You may
also transfer assets among the Sub-Accounts and the Fixed Account so that your
investment program meets your specific needs over time. There are minimum
requirements for investing in each Sub-Account and the Fixed Account which are
described later in this Prospectus. In addition, there are certain other
limitations on withdrawals and transfers of amounts in the Sub-Accounts and the
Fixed Account as described in this Prospectus. See "Charges Under the Contract"
for a description of the charges for redeeming a Contract and other charges made
under the Contract.
Generally, the Contract contains four optional forms of Annuity and the Annuity
Proceeds Settlement Option described later in this Prospectus. Annuity Options
2, 4, and the Annuity Proceeds Settlement Option are available with respect to
Qualified Contracts only if the guaranteed payment period is less than the life
expectancy of the Annuitant at the time the option becomes effective. Such life
expectancy shall be computed on the basis of the mortality table prescribed by
the IRS, or if none is prescribed, the mortality table then in use by Hartford.
The Contract Owner may select an Annuity Commencement Date and an Annuity option
which may be on a fixed or variable basis, or a combination thereof. The Annuity
Commencement Date may not be deferred beyond the Annuitant's 90th birthday
except in certain states where the Annuity Commencement Date may not be deferred
beyond the Annuitant's 85th birthday.
The Annuity Commencement Date and/or the Annuity option may be changed from time
to time, but any such change must be made at least 30 days prior to the date on
which payments are scheduled to begin. If you do not elect otherwise, payments
will begin at the Annuitant's age 90 under Annuity Option 2 with 120 monthly
payments certain (Annuity Option 1 for Contracts issued in Texas).
When an Annuity option is effected under a Contract, unless otherwise specified,
Contract Values held in the Sub-Accounts will be applied to provide a variable
annuitization based on the pro rata
24
<PAGE>
amount in the various Sub-Accounts. Fixed Account Contract Values will be
applied to provide a fixed annuitization. Variable Annuity payments will vary in
accordance with the investment performance of the Sub-Accounts you have
selected. The Contract allows the Contract Owner to change the Sub-Accounts on
which variable payments are based after payments have commenced once every three
(3) months. Any fixed Annuity allocation may not be changed.
The Contract offered under this Prospectus may be purchased by any individual
("Non-Qualified Contract") or by an individual, trustee or custodian for a
retirement plan qualified under Sections 401(a) or 403(a) of the Internal
Revenue Code; annuity purchase plans adopted by public school systems and
certain tax-exempt organizations according to Section 403(b) of the Internal
Revenue Code; Individual Retirement Annuities adopted according to Section 408
of the Internal Revenue Code; 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 certain eligible
deferred compensation plans as defined in Section 457 of the Internal Revenue
Code ("Qualified Contracts").
RIGHT TO CANCEL PERIOD
If you are not satisfied with your purchase you may surrender the Contract by
returning it within ten days (or longer in some states) after you receive it. A
written request for cancellation must accompany the Contract. In such event,
Hartford will, without deduction for any charges normally assessed thereunder,
pay you an amount equal to the Contract Value on the date of receipt of the
request for cancellation. You bear the investment risk during the period prior
to the Hartford's receipt of request for cancellation. Hartford will refund the
Premium Payment for individual retirement annuities (if returned within seven
days of receipt) and in those states where required by law.
THE SEPARATE ACCOUNT
The Separate Account was established on June 22, 1987, in accordance with
authorization by the Board of Directors of Hartford. It is the Separate Account
in which Hartford sets aside and invests the assets attributable to variable
annuity Contracts, including the Contracts sold under this Prospectus. Although
the Separate Account is an integral part of Hartford, it is registered as a unit
investment trust under the Investment Company Act of 1940. This registration
does not, however, involve supervision by the Commission of the management or
the investment practices or policies of the Separate Account or Hartford. The
Separate Account meets the definition of "separate account" under federal
securities law.
Under Connecticut law, the assets of the Separate Account attributable to the
Contracts offered under this Prospectus are held for the benefit of the owners
of, and the persons entitled to payments under, those Contracts. Income, gains,
and losses, whether or not realized, from assets allocated to the Separate
Account, are, in accordance with the Contracts, credited to or charged against
the Separate Account. Also, the assets in the Separate Account are not
chargeable with liabilities
25
<PAGE>
arising out of any other business Hartford may conduct. So Contract Values
allocated to the Sub-Accounts will not be affected by the rate of return of
Hartford's General Account, nor by the investment performance of any of
Hartford's other separate accounts. However, the obligations arising under the
Contracts are general obligations of Hartford.
Your investment in the Separate Account is allocated to one or more Sub-Accounts
as per your specifications. Each Sub-Account is invested exclusively in the
shares of one underlying Fund. Net Premium Payments and proceeds of transfers
between Funds are applied to purchase shares in the appropriate Fund at net
asset value determined as of the end of the Valuation Period during which the
payments were received or the transfer made. All distributions from the Funds
are reinvested at net asset value. The value of your investment will therefore
vary in accordance with the net income and the market value of the portfolios of
the underlying Fund(s). During the variable Annuity payout period, both your
Annuity payments and reserve values will vary in accordance with these factors.
Hartford does not guarantee the investment results of the Funds or any of the
underlying investments. There is no assurance that the value of a Contract
during the years prior to retirement or the aggregate amount of the variable
Annuity payments will equal the total of Premium Payments made under the
Contract. Since each underlying Fund has different investment objectives and
policies, each is subject to different risks. These risks are more fully
described in the accompanying Trust prospectus.
Hartford reserves the right, subject to compliance with the law, to substitute
the shares of any other registered investment company for the shares of any Fund
held by the Separate Account. Substitution may occur only if shares of the
Fund(s) become unavailable or if there are changes in applicable law or
interpretations of law. Current law requires notification to you of any such
substitution and approval of the Commission.
The Separate Account may be subject to liabilities arising from a Series of the
Separate Account whose assets are attributable to other variable annuity
Contracts or variable life insurance policies offered by the Separate Account
which are not described in this Prospectus.
THE FIXED ACCOUNT
THAT PORTION OF THE CONTRACT RELATING TO THE FIXED ACCOUNT IS NOT REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("1933 ACT") AND THE FIXED ACCOUNT IS NOT
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940
("1940 ACT"). ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS THEREIN
ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT,
AND THE DISCLOSURE REGARDING THE FIXED ACCOUNT HAS NOT BEEN REVIEWED BY THE
STAFF OF THE SECURITIES AND EXCHANGE COMMISSION. THE FOLLOWING DISCLOSURE ABOUT
THE FIXED ACCOUNT MAY BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF
THE FEDERAL
26
<PAGE>
SECURITIES LAWS REGARDING THE ACCURACY AND COMPLETENESS OF DISCLOSURE.
Premium Payments and Contract Values allocated to the Fixed Account become a
part of the general assets of Hartford. Hartford invests the assets of the
General Account in accordance with applicable laws governing investments of
Insurance Company General Accounts.
Currently, Hartford guarantees that it will credit interest at a rate of not
less than 3% per year, compounded annually, to amounts allocated to the Fixed
Account under the Contracts. However, Hartford reserves the right to change the
rate according to state insurance law. Hartford may credit interest at a rate in
excess of 3% per year; however, Hartford is not obligated to credit any interest
in excess of 3% per year. There is no specific formula for the determination of
excess interest credits. Some of the factors that Hartford may consider in
determining whether to credit excess interest to amounts allocated to the Fixed
Account and the amount thereof, are general economic trends, rates of return
currently available and anticipated on Hartford's investments, regulatory and
tax requirements and competitive factors. ANY INTEREST CREDITED TO AMOUNTS
ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF 3% PER YEAR WILL BE DETERMINED IN
THE SOLE DISCRETION OF HARTFORD. THE CONTRACT OWNER ASSUMES THE RISK THAT
INTEREST CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE MINIMUM
GUARANTEE OF 3% FOR ANY GIVEN YEAR.
DOLLAR COST AVERAGING PLUS PROGRAM From time to time, Hartford may credit
increased interest rates to Contract Owners under certain programs established
at the discretion of Hartford. Effective February 25, 1998, Contract Owners may
enroll in a special pre-authorized transfer program known as Hartford's Dollar
Cost Averaging Bonus Program (the "Program"). Under this Program, Contract
Owners who enroll may allocate a minimum of $5,000 of their Premium Payment into
the Program (Hartford 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 Premium
Payments and accrued interest must be transferred 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 Premium 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.
The pre-authorized transfers will begin within 15 days after the initial Program
Premium Payment and complete enrollment instructions are received by Hartford.
If complete Program enrollment instructions are not received by Hartford within
15 days of receipt of the initial Program Premium Payment, the Program will be
voided and the entire balance in the Program will be credited with the
non-Program interest rate then in effect for the Fixed Account.
Any subsequent Premium Payments received by Hartford within the Program period
selected will
27
<PAGE>
be allocated to the Sub-Accounts over the remainder of that Program transfer
period, unless otherwise directed by the Contract Owner.
A Contract Owner may only have one dollar cost averaging program in place at one
time, this includes one standard dollar cost averaging plan or one Dollar Cost
Averaging Plus Program.
Contract Owners may elect to terminate the pre-authorized transfers by calling
or writing Hartford of their intent to cancel their enrollment in the Program.
Upon cancellation of enrollment in the Program, Contract Owners will no longer
receive the increased interest rate. Hartford reserves 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. This Program may not be available in all states; please
contact Hartford to determine if it is available in your state.
HARTFORD LIFE INSURANCE COMPANY
Hartford Life Insurance Company ("Hartford") is a stock life insurance company
engaged in the business of writing life insurance, both individual and group, in
all states of the United States and the District of Columbia. Hartford was
originally incorporated under the laws of Massachusetts on June 5, 1902, and was
subsequently redomiciled to Connecticut. Its offices are located in Simsbury,
Connecticut; however, its mailing address is P.O. Box 2999, Hartford, CT
06104-2999. Hartford is ultimately controlled by The Hartford Financial Services
Group, Inc., one of the largest financial service providers in the United
States.
HARTFORD RATINGS
- -------------------------------------------------------------------------------
EFFECTIVE
DATE OF
RATING AGENCY RATING RATING BASIS OF RATING
- -------------------------------------------------------------------------------
A.M. Best and Company, Inc. 9/9/97 A+ Financial soundness and
operating performance.
- -------------------------------------------------------------------------------
Standard & Poor"s 1/23/98 AA Claims paying ability
- -------------------------------------------------------------------------------
Duff & Phelps 1/23/98 AA+ Claims paying ability
- -------------------------------------------------------------------------------
THE FUNDS
The underlying investments for the Contracts are shares of Putnam Variable
Trust, an open-end series investment company with multiple portfolios ("Funds").
The underlying Funds corresponding to each Sub-Account and their investment
objectives are described below. Hartford reserves the right, subject to
compliance with the law, to offer additional funds with differing investment
objectives. The Funds may not be available in all states.
PUTNAM VT ASIA PACIFIC GROWTH FUND
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Seeks capital appreciation by investing primarily in securities of companies
located in Asia and in the Pacific Basin. The fund's investments will normally
include common stocks, preferred stocks, securities convertible into common
stocks or preferred stocks, and warrants to purchase common stocks or preferred
stocks.
PUTNAM VT DIVERSIFIED INCOME FUND
Seeks high current income consistent with capital preservation by investing in
the following three sectors of the fixed income securities markets: a U.S.
Government and Investment Grade Sector, a High Yield Sector (which invests
primarily in securities commonly known as "junk bonds"), and an International
Sector. See the special considerations for investments in high yield securities
described in the Fund prospectus.
PUTNAM VT THE GEORGE PUTNAM FUND OF BOSTON
Seeks to provide a balanced investment composed of a well-diversified portfolio
of stocks and bonds which will produce both capital growth and current income.
PUTNAM VT GLOBAL ASSET ALLOCATION FUND
Seeks a high level of long-term total return consistent with preservation of
capital by investing in U.S. equities, international equities, U.S. fixed
income securities, and international fixed income securities.
PUTNAM VT GLOBAL GROWTH FUND
Seeks capital appreciation through a globally diversified portfolio of common
stocks.
PUTNAM VT GROWTH AND INCOME FUND
Seeks capital growth and current income by investing primarily in common stocks
that offer potential for capital growth, current income, or both.
PUTNAM VT HEALTH SCIENCES FUND
Seeks capital appreciation by investing at least 80% of its assets (other than
assets invested in U.S. government securities, short-term debt obligations, and
cash or money market instruments) in common stocks and other securities of
companies in the health sciences industries.
PUTNAM VT HIGH YIELD FUND
Seeks high current income and, when consistent with this objective, a secondary
objective of capital growth, by investing primarily in high-yielding,
lower-rated fixed income securities, constituting a portfolio which Putnam
Management believes does not involve undue risk to income or principal. See the
special considerations for investments in high yield securities described in the
Fund prospectus.
PUTNAM VT INTERNATIONAL GROWTH FUND
Seeks capital appreciation by investing primarily in equity securities of
companies located in a country other than the United States.
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PUTNAM VT INTERNATIONAL GROWTH AND INCOME FUND
Seeks capital growth, and a secondary objective of high current income by
investing primarily in common stocks that offer potential for capital growth and
may, when consistent with its investment objectives, invest in common stocks
that offer potential for current income. Under normal market conditions, the
fund expects to invest substantially all of its assets in securities principally
traded on markets outside the United States.
PUTNAM VT INTERNATIONAL NEW OPPORTUNITIES FUND
Seeks long term capital appreciation by investing in companies that have
above-average growth prospects due to the fundamental growth of their market
sector. Under normal market conditions, the fund expects to invest substantially
all of its total assets, other than cash or short-term investments held pending
investment, in common stocks, preferred stocks, convertible preferred stocks,
covertible bonds and other equity securities principally traded in securities
markets outside the United States.
PUTNAM VT INVESTORS FUND
Seeks long-term growth of capital and any increased income that results from
this growth by investing primarily in common stocks that Putnam Management
believes afford the best opportunity for capital growth over the long term.
PUTNAM VT MONEY MARKET FUND
Seeks as high a rate of current income as Putnam Management believes is
consistent with preservation of capital and maintenance of liquidity by
investing in high-quality money market instruments.
PUTNAM VT NEW OPPORTUNITIES FUND
Seeks long-term capital appreciation by investing principally in common stocks
of companies in sectors of the economy which Putnam Management believes possess
above-average long-term growth potential.
PUTNAM VT NEW VALUE FUND
Seeks long-term capital appreciation by investing primarily in common stocks
that Putnam Management believes are undervalued at the time of purchase and have
the potential for long-term capital appreciation.
PUTNAM VT OTC & EMERGING GROWTH FUND
Seeks capital appreciation by investing primarily in common stocks that Putnam
Management believes have potential for capital appreciation significantly
greater than that of market averages.
PUTNAM VT U.S. GOVERNMENT AND HIGH QUALITY BOND FUND
Seeks current income consistent with preservation of capital by investing
primarily in securities issued or guaranteed as to principal and interest by the
U.S. Government or by its agencies or
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instrumentalities and in other debt obligations rated at least A by a nationally
recognized securities rating agency such as Standard & Poor's or Moody's
Investor Services, Inc. or, if not rated, determined by Putnam Management to be
of comparable quality.
PUTNAM VT UTILITIES GROWTH AND INCOME FUND
Seeks capital growth and current income by concentrating its investments in debt
and equity securities issued by companies in the public utilities industries.
PUTNAM VT VISTA FUND
Seeks capital appreciation by investing in a diversified portfolio of common
stocks which Putnam Management believes have the potential for above-average
capital appreciation.
PUTNAM VT VOYAGER FUND
Seeks capital appreciation by investing primarily in common stocks of companies
that Putnam Management believes have potential for capital appreciation that is
significantly greater than that of market averages.
Putnam VT Asia Pacific Growth Fund, Putnam VT Diversified Income Fund, Putnam VT
The George Putnam Fund of Boston, Putnam VT Global Growth Fund, Putnam VT Growth
and Income Fund, Putnam VT Health Sciences Fund, Putnam VT High Yield Fund,
Putnam VT International Growth Fund, Putnam VT International Growth and Income
Fund, Putnam VT International New Opportunities Fund, Putnam VT Investors Fund,
Putnam VT Money Market Fund, Putnam VT New Opportunities Fund, Putnam VT New
Value Fund, Putnam VT OTC & Emerging Growth Fund, Putnam VT U.S. Government and
High Quality Bond Fund, Putnam VT Utilities Growth and Income Fund, Putnam VT
Vista Fund, and Putnam VT Voyager Fund are generally managed in styles similar
to other open-end investment companies which are managed by Putnam Management
and whose shares are generally offered to the public. These other Putnam funds
may, however, employ different investment practices and may invest in securities
different from those in which their counterpart Funds invest, and consequently
will not have identical portfolios or experience identical investment results.
The Funds are available only to serve as the underlying investment for variable
annuity and variable life Contracts. A full description of the Funds, their
investment objectives, policies and restrictions, risks, charges and expenses
and other aspects of their operation are contained in the accompanying Trust
prospectus which should be read in conjunction with this Prospectus before
investing, and in the Trust's Statement of Additional Information which may be
ordered without charge from Putnam Investor Services, Inc.
It is conceivable that in the future it may be disadvantageous for variable
annuity separate accounts and variable life insurance separate accounts to
invest in the Funds simultaneously. Although Hartford and the Funds do not
currently foresee any such disadvantages either to variable annuity Contract
Owners or to variable life insurance policy owners, the Trust's Board of
Trustees intends to monitor events in order to identify any material conflicts
between such Contract Owners and policy owners and to determine what action, if
any, should be taken in response thereto. If the Board of Trustees of the Funds
were to conclude that separate funds should be established for
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variable life and variable annuity separate accounts, the variable annuity
Contract Owners would not bear any expenses attendant upon establishment of such
separate funds.
Putnam Management, One Post Office Square, Boston, MA, 02109, serves as the
investment manager for the Funds. An affiliate, Putnam Advisory Company, Inc.,
manages domestic and foreign institutional accounts and mutual funds. Another
affiliate, Putnam Fiduciary Trust Company, provides investment advice to
institutional clients under its banking and fiduciary policies. Putnam
Management and its affiliates are wholly-owned subsidiaries of Marsh & McLennan
Companies, Inc., a publicly owned holding company whose principal businesses are
international insurance brokerage and employee benefit consulting.
Subject to the general oversight of the Trustees of the Trust, Putnam Management
manages the Funds' portfolios in accordance with their stated investment
objectives and policies, makes investment decisions for the Funds, places orders
to purchase and sell securities on behalf of the Funds, and administers the
affairs of the Funds. For its services, the Funds pay Putnam Management a
quarterly fee. See the accompanying Trust prospectus for a more complete
description of Putnam Management and the respective fees of the Funds.
OPERATION OF THE CONTRACT/
ACCUMULATION PERIOD
PREMIUM PAYMENTS
The balance of each initial Premium Payment remaining after the deduction of any
applicable Premium Tax is credited to your Contract within two business days of
receipt of a properly completed application or an order to purchase a Contract
and the initial Premium Payment by Hartford at its Administrative Office, P.O.
Box 5085, Hartford, CT 06102-5085. It will be credited to the Sub-Account(s)
and/or the Fixed Account in accordance with your election. If the application or
other information is incomplete when received, the balance of each initial
Premium Payment, after deduction of any applicable Premium Tax, will be credited
to the Sub-Account(s) or the Fixed Account within five business days of receipt
or the entire Premium Payment will be immediately returned unless you have been
informed of the delay and request that the Premium Payment not be returned.
Subsequent Premium Payments are priced on the Valuation Day received by Hartford
in its Administrative Office or other designated administrative office.
The number of Accumulation Units in each Sub-Account to be credited to a
Contract will be determined by dividing the portion of the Premium Payment being
credited to each Sub-Account by the value of an Accumulation Unit in that
Sub-Account on that date.
The minimum initial Premium Payment is $1,000. Subsequent Premium Payments, if
made, must be a minimum of $500 ($50 if you are in the InvestEase program).
Certain plans may make smaller initial and subsequent periodic payments. Each
Premium Payment may be split among the various
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Sub-Accounts and the Fixed Account subject to minimum amounts then in effect.
VALUE OF ACCUMULATION UNITS
The Accumulation Unit value for each Sub-Account will vary to reflect the
investment experience of the applicable Fund and will be determined on each
Valuation Day by multiplying the Accumulation Unit value of the particular
Sub-Account on the preceding Valuation Day by a "Net Investment Factor" for that
Sub-Account for the Valuation Period then ended. The "Net Investment Factor" for
each of the Sub-Accounts is equal to the net asset value per share of the
corresponding Fund at the end of the Valuation Period (plus the per share amount
of any dividends or capital gains distributed by that Fund if the ex-dividend
date occurs in the Valuation Period then ended) divided by the net asset value
per share of the corresponding Fund at the beginning of the Valuation Period,
minus the mortality and expense risk charge and the administration charge. You
should refer to the Trust prospectus which accompanies this Prospectus for a
description of how the assets of each Fund are valued since each determination
has a direct bearing on the Accumulation Unit value of the Sub-Account and
therefore the value of a Contract. The Accumulation Unit value is affected by
the performance of the underlying Fund(s), expenses and deduction of the charges
described in this Prospectus.
The shares of the Fund are valued at net asset value on each Valuation Day. A
description of the valuation methods used in valuing Fund shares may be found in
the accompanying Trust prospectus.
VALUE OF THE FIXED ACCOUNT
Hartford will determine the value of the Fixed Account by crediting interest to
amounts allocated to the Fixed Account. The minimum Fixed Account interest rate
is 3%, compounded annually. Hartford may credit a lower minimum interest rate
according to state law. Hartford also may credit interest at rates greater than
the minimum Fixed Account interest rate.
VALUE OF THE CONTRACT
The value of the Sub-Account investments under your Contract at any time prior
to the commencement of Annuity payments can be determined by multiplying the
total number of Accumulation Units credited to your Contract in each Sub-Account
by the then current Accumulation Unit values for the applicable Sub-Account. The
value of the Fixed Account under your Contract will be the amount allocated to
the Fixed Account plus interest credited. You will be advised at least
semi-annually of the number of Accumulation Units credited to each Sub-Account,
the current Accumulation Unit values, the Fixed Account value, and the total
value of your Contract.
TRANSFERS AMONG SUB-ACCOUNTS
You may transfer the values of your Sub-Account allocations from one or more
Sub-Accounts to another free of charge. However, Hartford reserves the right to
limit the number of transfers to
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twelve (12) per Contract Year, with no two (2) transfers occurring on
consecutive Valuation Days. Transfers by telephone may be made by calling (800)
521-0538. Telephone transfers may not be permitted by some states for their
residents who purchase variable annuities.
The policy of Hartford and its agents and affiliates is that they will not be
responsible for losses resulting from acting upon telephone requests reasonably
believed to be genuine. Hartford will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine; otherwise, Hartford may
be liable for any losses due to unauthorized or fraudulent instructions. The
procedures Hartford follows for transactions initiated by telephone include
requirements that callers provide certain information for identification
purposes. All transfer instructions by telephone are tape recorded.
Hartford may permit the Contract Owner to preauthorize transfers among
Sub-Accounts and between the Sub-Accounts and the Fixed Account under certain
circumstances. Transfers between the Sub-Accounts may be made both before and
after Annuity payments commence (limited to once a quarter) provided that the
minimum allocation to any Sub-Account may not be less than $500. No minimum
balance is presently required in any Sub-Account.
It is the responsibility of the Contract Owner or Participant to verify the
accuracy of all confirmations of transfers and to promptly advise Hartford of
any inaccuracies within 30 days of receipt of the confirmation. Hartford will
send the Contract Owner a confirmation of transfer within 5 days from the
date of any instruction.
The right to reallocate Contract Values between the Sub-Accounts is subject to
modification if Hartford determines, in its sole discretion, 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 Sub-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 and the Fixed Account by a Contract
Owner at any one time. Such restrictions may be applied in any manner reasonably
designed to prevent any use of the transfer right which is considered by
Hartford to be to the disadvantage of other Contract Owners.
Currently the only restriction in effect is that Hartford 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 Hartford.
TRANSFERS BETWEEN THE FIXED
ACCOUNT AND THE SUB-ACCOUNTS
Subject to the restrictions set forth above, transfers from the Fixed Account
into a Sub-Account may be made at any time during the Contract Year. The maximum
amount which may be transferred from the Fixed Account during any Contract Year
is the greater of 30% of the Fixed
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Account balance as of the last Contract Anniversary or the greatest amount of
any prior transfer from the Fixed Account. If Hartford permits preauthorized
transfers from the Fixed Account to the Sub-Accounts, this restriction is
inapplicable. However, if any interest rate is renewed at a rate at least one
percentage point less than the previous rate, the Contract Owner may elect to
transfer up to 100% of the funds receiving the reduced rate within sixty days of
notification of the interest rate decrease. Generally, transfers may not be made
from any Sub-Account into the Fixed Account for the six-month period following
any transfer from the Fixed Account into one or more of the Sub-Accounts.
Hartford reserves the right to modify the limitations on transfers from the
Fixed Account and to defer transfers from the Fixed Account for up to six months
from the date of request.
REDEMPTION/SURRENDER OF A CONTRACT
At any time prior to the Annuity Commencement Date, you have the right, subject
to any IRS provisions applicable thereto, to surrender the value of the Contract
in whole or in part. Under any of the Annuity options excluding Annuity Options
4 or the Annuity Proceeds Settlement Option, no surrenders are permitted after
Annuity payments commence. Only full surrenders are allowed out of Annuity
Option 4 and any such surrender will be subject to contingent deferred sales
charges, if applicable. Full or partial withdrawals may be made from the Annuity
Proceeds Settlement Option at any time and contingent deferred sales charges
will not be applied.
FULL SURRENDERS. At any time prior to the Annuity Commencement Date (and after
the Annuity Commencement Date with respect to values applied to Annuity Option
4), the Contract Owner has the right to terminate the Contract. In such event,
the Termination Value of the Contract may be taken in the form of a lump sum
cash settlement. The Termination Value of the Contract is equal to the Contract
Value less any applicable Premium Taxes, the Annual Maintenance Fee, if
applicable, and any applicable contingent deferred sales charges. The
Termination Value may be more or less than the amount of the Premium Payments
made to a Contract.
PARTIAL SURRENDERS. The Contract Owner may make a partial surrender of Contract
Values at any time prior to the Annuity Commencement Date so long as the amount
surrendered is at least equal to the minimum amount rules then in effect.
Additionally, if the remaining Contract Value following a surrender is less than
$500 (and, for Texas Contracts, there were no Premium Payments made during the
preceding two Contract Years), Hartford may terminate the Contract and pay the
Termination Value.
Certain plans or programs may have different withdrawal privileges. Hartford may
permit the Contract Owner to preauthorize partial surrenders subject to certain
limitations then in effect.
TELEPHONE SURRENDER PRIVILEGES. Hartford permits partial surrenders by telephone
subject to dollar amount limitations in effect at the time a Contract Owner
requests the surrender. To request partial surrenders by telephone, a Contract
Owner must have completed and returned to Hartford a Telephone Redemption
Program Enrollment Form authorizing telephone surrenders. If there are joint
Contract Owners, both must authorize Hartford to accept telephone instructions
and agree that Hartford may accept telephone instructions for partial surrenders
from either Contract Owner. Partial surrender requests will not be honored until
Hartford receives all
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required documents in proper form.
Telephone authorization will remain valid until (a) Hartford receives written
notice of revocation by a Contract Owner, or, in the case of joint Contract
Owners, written notice from either Contract Owner; (b) Hartford discontinues the
privilege; or (c) Hartford has reason to believe that a Contract Owner has
entered into a market timing agreement with an investment adviser and/or
broker/dealer.
Hartford may record any telephone calls to verify data concerning
transactions and may adopt other procedures to confirm that telephone
instructions are genuine. Hartford 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, Hartford must receive
telephone surrender instructions prior to the close of trading on the New York
Stock Exchange (generally 4:00 p.m.).
Hartford may modify, suspend, or terminate telephone transaction privileges at
any time.
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).
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%.
HARTFORD WILL NOT ASSUME ANY RESPONSIBILITY IN DETERMINING WHETHER A WITHDRAWAL
IS PERMISSIBLE, WITH OR WITHOUT TAX PENALTY, IN ANY PARTICULAR SITUATION; OR IN
MONITORING WITHDRAWAL REQUESTS REGARDING PRE OR POST JANUARY 1, 1989 ACCOUNT
VALUES.
ANY SUCH FULL OR PARTIAL SURRENDER DESCRIBED ABOVE MAY RESULT IN ADVERSE TAX
CONSEQUENCES TO THE CONTRACT OWNER. THE CONTRACT OWNER, THEREFORE, SHOULD
CONSULT WITH HIS TAX ADVISER BEFORE UNDERTAKING ANY SUCH SURRENDER. (SEE
"FEDERAL TAX CONSIDERATIONS" COMMENCING ON PAGE 46.)
Payment on any request for a full or partial surrender from the Sub-Accounts
and/or the Fixed Account will be made as soon as possible and in any event no
later than seven days after the written
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<PAGE>
request is received by Hartford at its Administrative Office. Hartford may defer
payment of any amounts from the Fixed Account for up to six months from the date
of the request for surrender. If Hartford defers payment for more than 30 days,
Hartford will pay interest of at least 3% per annum on the amount deferred. In
requesting a partial withdrawal you should specify the Fixed Account and/or the
Sub-Account(s) from which the partial withdrawal is to be taken. Otherwise, such
withdrawal and any applicable contingent deferred sales charges will be effected
on a pro rata basis according to the value in the Fixed Account and each
Sub-Account under a Contract. Within this context, the contingent deferred sales
charges are taken from the Premium Payments in the order in which they were
received, from the earliest Premium Payments to the latest Premium Payments.
(See "Contingent Deferred Sales Charges," page 38.)
DEATH BENEFIT
The Contracts provide that in the event the Annuitant dies before the Annuity
Commencement Date, the Contingent Annuitant will become the Annuitant. If the
Annuitant dies before the Annuity Commencement Date and either (a) there is no
designated Contingent Annuitant, (b) the Contingent Annuitant predeceases the
Annuitant, or (c) if any Contract Owner dies before the Annuity Commencement
Date, the Beneficiary as determined under the Contract Control Provisions, will
receive the Death Benefit as determined on the date of receipt of Due Proof of
Death by Hartford in its Administrative Office. With regard to Joint Contract
Owners, at the first death of a Joint Contract Owner prior to the Annuity
Commencement Date, the Beneficiary will be the surviving Contract Owner
notwithstanding that the beneficiary designation may be different.
GUARANTEED DEATH BENEFIT - If the Annuitant dies before the Annuity Commencement
Date and there is no designated Contingent Annuitant surviving, or if the
Contract Owner dies before the Annuity Commencement Date, the Beneficiary will
receive the greatest of (a) the Contract Value determined as of the day written
proof of death of such person is received by Hartford, or (b) 100% of the total
Premium Payments made to such Contract, reduced by any prior surrenders, or (c)
the Maximum Anniversary Value immediately preceding the date of death. The
Maximum Anniversary Value is equal to the greatest Anniversary Value attained
from the following:
As of the date of receipt of Due Proof of Death, Hartford will calculate an
Anniversary Value for each Contract Anniversary prior to the deceased's attained
age 81. The Anniversary Value is equal to the Contract Value on 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.
If the Annuitant or Contract Owner, as applicable, dies after the Annuity
Commencement Date, then the Death Benefit will equal the present value of any
remaining payments under the elected Annuity Option.
PAYMENT OF DEATH BENEFIT - The calculated Death Benefit will remain invested
in the Separate Account in accordance with the allocation instructions given
by the Contract Owner until the proceeds are paid or Hartford receives new
instructions from the Beneficiary. During the time period between Hartford's
receipt of written notification of Due Proof of Death and Hartford's receipt
of the completed settlement instructions, the calculated Death Benefit will
remain invested in the Sub-Account(s) previously elected by the Contract
Owner and will be subject to market fluctuations. The Death Benefit may be
taken in
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one sum, payable within 7 days after the date due proof of death is received, or
under any of the settlement options then being offered by Hartford provided,
however, that: (a) in the event of the death of any Contract Owner prior to the
Annuity Commencement Date, the entire interest in the Contract will be
distributed within 5 years after the death of the Contract Owner, and (b) in the
event of the death of any Contract Owner or Annuitant which occurs on or after
the Annuity Commencement Date, any remaining interest in the Contract will be
paid at least as rapidly as under the method of distribution in effect at the
time of death, or, if the benefit is payable over a period not extending beyond
the life expectancy of the Beneficiary or over the life of the Beneficiary, such
distribution must commence within one year of the date of death. The proceeds
due on the death may be applied to provide variable payments, fixed payments, or
a combination of variable and fixed payments. However, in the event of the
Contract Owner's death where the sole Beneficiary is the spouse of the Contract
Owner and the Annuitant or Contingent Annuitant is living, such spouse may
elect, in lieu of receiving the death benefit, to be treated as the Contract
Owner. The Contract Value and the Maximum Anniversary Value of the Contract will
be unaffected by treating the spouse as the Contract Owner.
If the Contract is owned by a corporation or other non-individual, the Death
Benefit payable upon the death of the Annuitant prior to the Annuity
Commencement Date will be payable only as one sum or under the same settlement
options and in the same manner as if an individual Contract Owner died on the
date of the Annuitant's death.
There may be postponement in the payment of Death Benefits whenever (a) the New
York Stock Exchange is closed, except for holidays or weekends, or trading on
the New York Stock Exchange is restricted as determined by the Securities and
Exchange Commission; (b) the Securities and Exchange Commission permits
postponement and so orders; or (c) the Securities and Exchange Commission
determines that an emergency exists making valuation of the amounts or disposal
of securities not reasonably practicable.
GROUP UNALLOCATED CONTRACTS - For Group Unallocated Contracts Hartford requires
that detailed accounting of cumulative purchase payments, cumulative gross
surrenders, and current Contract Value attached to each Plan Participant be
submitted on an annual basis by the Contract Owner. Failure to submit accurate
data satisfactory to Hartford will give Hartford the right to terminate this
extension of benefits.
CHARGES UNDER THE CONTRACT
CONTINGENT DEFERRED SALES CHARGES ("SALES CHARGES"):
PURPOSE OF SALES CHARGES - Sales Charges cover expenses relating to the sale and
distribution of the Contracts, including commissions paid to distributing
organizations and its sales personnel, the cost of preparing sales literature
and other promotional activities. If these charges are not sufficient to cover
sales and distribution expenses, Hartford will pay them from its general assets,
including surplus. Surplus might include profits resulting from unused mortality
and expense risk charges.
ASSESSMENT OF SALES CHARGES - There is no deduction for sales expenses from
Premium Payments
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when made, however, a Sales Charge may be assessed against Premium Payments
when surrendered. The length of time from receipt of a Premium Payment to the
time of surrender determines the percentage of the Sales Charge. Premium
payments are deemed to be surrendered in the order in which they were received.
During the first seven years from each Premium Payment, a Sales Charge will be
assessed against the surrender of Premium Payments. During this time, all
surrenders in excess of the Annual Withdrawal Amount will be first from Premium
Payments and then from earnings. The Annual Withdrawal Amount is first from
earnings and then from Premium Payments. After the seventh Contract Year, all
surrenders will first be taken from earnings and then from Premium Payments and
a Sales Charge will not be assessed against the surrender of earnings. If an
amount equal to all earnings has been surrendered, a Sales Charge will not be
assessed against Premium Payments received more than seven years prior to
surrender, but will be assessed against Premium Payments received less than
seven years prior to surrender. For additional information, see Federal Tax
Considerations, page 46.
Upon receipt of a request for a full surrender, Hartford will assess any
applicable Sales Charge against the surrender proceeds representing the lesser
of: (1) aggregate Premium Payments not previously withdrawn or (2) the Contract
Value, less the Annual Withdrawal Amount available at the time of the full
surrender, less the Annual Maintenance Fee, if applicable. Taking the Annual
Withdrawal Amount prior to the full surrender may, depending upon the amount of
investment gain experienced, reduce the amount of any Sales Charge paid.
The Sales Charge is a percentage of the amount surrendered (not to exceed the
aggregate amount of the Premium Payments made) and equals:
CHARGE LENGTH OF TIME
FROM PREMIUM
PAYMENT
(NUMBER OF YEARS)
6% 1
6% 2
5% 3
5% 4
4% 5
3% 6
2% 7
0% 8 or more
PAYMENTS NOT SUBJECT TO SALES CHARGES:
ANNUAL WITHDRAWAL AMOUNT - During the first seven years from each Premium
Payment, on a non-cumulative basis, a Contract Owner may make a partial
surrender of Contract Values of up to 10% of the aggregate Premium Payments, as
determined on the date of the requested surrender,
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without the application of the Sales Charge. After the seventh year from each
Premium Payment, also on a non-cumulative basis, the Contract Owner may make a
partial surrender of 10% 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.
EXTENDED WITHDRAWAL PRIVILEGE - This privilege allows Annuitants who attain age
701/2 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 a Sales Charge or not subject to a Sales Charge.
WAIVERS OF SALES CHARGES:
CONFINEMENT IN A HOSPITAL, LONG TERM CARE FACILITY OR NURSING HOME - Hartford
will waive any Sales Charge applicable to a partial or full surrender if the
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 cannot be confined at the time the Contract was 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; must provide written proof
of confinement satisfactory to Hartford; and 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 Hartford to determine availability.
DEATH OF THE ANNUITANT OR CONTRACT OWNER OR PAYMENTS UNDER AN ANNUITY OPTION
- - No Sales Charge 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 out of Option 4) provided for under
the Contract.
OTHER PLANS OR PROGRAMS - Certain plans or programs established by Hartford from
time to time may have different surrender privileges.
MORTALITY AND EXPENSE RISK CHARGE
For assuming these risks under the Contracts, Hartford will make a daily charge
at the rate of 1.25% per annum against all Contract Values held in the
Sub-Accounts during the life of the Contract (estimated at .90% for mortality
and .35% for expense). 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) Hartford's actual mortality experience among Annuitants before
or after the Annuity Commencement Date or (b) Hartford's actual expenses, if
greater than the deductions provided for
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in the Contracts because of the expense and mortality undertakings by Hartford.
There are two types of mortality undertakings: those made during the
accumulation or deferral phase and those made during the annuity payout phase.
The mortality undertaking made by Hartford in the accumulation phase is that
Hartford may experience a loss resulting from the assumption of the mortality
risk relative to the guaranteed death benefit in event of the death of an
Annuitant or Contract Owner before commencement of Annuity payments, in periods
of declining value or in periods where the contingent deferred sales charges
would have been applicable. The mortality undertakings provided by Hartford
during the annuity payout phase are 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. Hartford also assumes the liability for payment of a minimum death benefit
under the Contract. These mortality undertakings are based on Hartford's
determination of expected mortality rates among all Annuitants. If actual
experience among Annuitants during the Annuity payment period deviates from
Hartford's actuarial determination of expected mortality rates among Annuitants
because, as a group, their longevity is longer than anticipated, Hartford must
provide amounts from its general funds to fulfill its contractual obligations.
Hartford will bear the loss in such a situation.
During the accumulation phase, Hartford also provides an expense undertaking.
Hartford assumes the risk that the contingent deferred sales charges and 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, Hartford will deduct an Annual Maintenance Fee, if applicable, from
Contract Values to reimburse it for expenses relating to the maintenance of
the Contract, the Fixed Account, and the Sub-Account(s) thereunder. If during a
Contract Year the Contract is surrendered for its full value, Hartford will
deduct the Annual Maintenance Fee at the time of such surrender. The fee is a
flat fee which 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 $30.00 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 Sub-Account and the Fixed 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, Hartford 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 the Contract Owner has multiple contracts
with a combined Contract Value of $100,000 or greater, Hartford will waive the
Annual Maintenance Fee on all Contracts. However, Hartford reserves the right to
limit the number of Annual Maintenance Fee waivers to a total of six Contracts.
Hartford reserves the right to waive the Annual Maintenance Fee under other
circumstances.
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ADMINISTRATION CHARGE
For administration, Hartford makes a daily charge at the rate of .15% per annum
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.
The types of expenses incurred by the Separate Account include, but are not
limited to, expenses of issuing the Contract and expenses for confirmations,
Contract quarterly statements, processing of transfers and surrenders,
responding to Contract Owner inquiries, reconciling and depositing cash
receipts, calculation and monitoring daily Sub-Account unit values, Separate
Account reporting, including semiannual and annual reports and mailing and
tabulation of shareholder proxy solicitations.
You should refer to the Trust prospectus for a description of deductions and
expenses paid out of the assets of the Trust'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. Hartford will pay
Premium Taxes at the time imposed under applicable law. At its sole discretion,
Hartford may deduct Premium Taxes at the time Hartford pays 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.
EXCEPTIONS TO CHARGES UNDER THE CONTRACTS
Hartford may offer, at its discretion, reduced fees and charges including, but
not limited to, the contingent deferred sales charges, the mortality and expense
risk charge and the 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.
SETTLEMENT PROVISIONS
You select an Annuity Commencement Date and an Annuity option which may be on a
fixed or variable basis, or a combination thereof. The Annuity Commencement Date
will not be deferred beyond age 90 of the Annuitant. The Annuity Commencement
Date and/or the Annuity option may be changed from time to time, but any change
must be at least 30 days prior to the date on which Annuity payments are
scheduled to begin. The Contract allows the Contract Owner to change the
Sub-Accounts on which variable payments are based after payments have commenced
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once every three (3) months. Any Fixed Annuity allocation may not be changed.
ANNUITY OPTIONS
The Contract contains the four Annuity payment options and the Annuity Proceeds
Settlement Option. Annuity Options 2, 4, and the Annuity Proceeds Settlement
Option are available to Qualified Contracts only if the guaranteed payment
period is less than the life expectancy of the Annuitant at the time the option
becomes effective. Such life expectancy shall be computed on the basis of the
mortality table prescribed by the IRS, or if none is prescribed, the mortality
table then in use by Hartford. With respect to Non-Qualified Contracts, if you
do not elect otherwise, payments in most states will automatically begin at the
Annuitant's age 90 (with the exception of states that do not allow deferral past
age 85) under Annuity Option 2 with 120 monthly payments certain. For Qualified
Contracts and Contracts issued in Texas, if you do not elect otherwise, payments
will begin automatically at the Annuitant's age 90 under Annuity Option 1 to
provide a life Annuity.
Under any of the Annuity options excluding Annuity Options 4 and the Annuity
Proceeds Settlement Option, no surrenders are permitted after Annuity payments
commence. Only full surrenders are allowed out of Annuity Option 4 and any such
surrender will be subject to contingent deferred sales charges, if applicable.
Full or partial withdrawals may be made from Annuity Proceeds Settlement Option
at any time and contingent deferred sales charges will not be applied.
OPTION 1: LIFE ANNUITY A life Annuity is an Annuity payable during the lifetime
of the Annuitant and terminating with the last payment preceding the death of
the Annuitant. This options offers the largest payment amount of any of the life
Annuity options since there is no guarantee of a minimum number of payments nor
a provision for a death benefit payable to a Beneficiary.
It would be possible under this option for an Annuitant to receive only one
Annuity payment if he died prior to the due date of the second Annuity payment,
two if he died before the date of the third Annuity payment, etc.
OPTION 2: LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS CERTAIN
This Annuity option is an Annuity payable monthly during the lifetime of an
Annuitant with the provision that payments will be made for a minimum of 120,
180 or 240 months, as elected. If, at the death of the Annuitant, payments have
been made for less than the minimum elected number of months, then the present
value as of the date of the Annuitant's death, of any remaining guaranteed
payments will be paid in one sum to the Beneficiary or Beneficiaries designated
unless other provisions have been made and approved by Hartford.
OPTION 3: JOINT AND LAST SURVIVOR ANNUITY
An Annuity payable monthly during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining lifetime of the
survivor, ceasing with the last payment prior to the death of the survivor.
Based on the options currently offered by Hartford, the Annuitant may elect that
the payment to the survivor be less than the payment made during the joint
lifetime
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of the Annuitant and a designated second person.
It would be possible under this option for an Annuitant and designated second
person to receive only one payment in the event of the common or simultaneous
death of the parties prior to the due date for the second payment and so on.
OPTION 4: PAYMENTS FOR A DESIGNATED PERIOD
An amount payable monthly for the number of years selected which may be from 5
to 30 years. Under this option, you may, at any time, surrender the Contract and
receive, within seven days, the Termination Value of the Contract as determined
by Hartford.
In the event of the Annuitant's death prior to the end of the designated period,
the present value as of the date of the Annuitant's death, of any remaining
guaranteed payments will be paid in one sum to the Beneficiary or Beneficiaries
designated unless other provisions have been made and approved by Hartford.
Annuity Option 4 is an option that does not involve life contingencies and thus
no mortality guarantee. Charges made for the mortality undertaking under the
Contracts thus provide no real benefit to a Contract Owner.
ANNUITY PROCEEDS SETTLEMENT OPTION
Proceeds from the Death Benefit may be left with Hartford for a period not to
exceed five years from the date of the Contract Owner's death prior to the
Annuity Commencement Date. These proceeds will remain in the Sub-Account(s) to
which they were allocated at the time of death unless the Beneficiary elects to
reallocate them. Full or partial withdrawals may be made at any time. In the
event of withdrawals, the remaining value will equal the Contract Value of the
proceeds left with Hartford, minus any withdrawals.
Hartford may offer other annuity or settlement options from time to time.
THE ANNUITY UNIT AND VALUATION
The value of the Annuity Unit for each Sub-Account in the Separate Account for
any day is determined by multiplying the value for the preceding day by the
product of (1) the net investment factor (See "Value of Accumulation Units"
commencing on page 14) for the day for which the Annuity Unit value is being
calculated and (2) a factor to neutralize the assumed investment rate of 5.00%
per annum discussed below.
DETERMINATION OF PAYMENT AMOUNT
When Annuity payments are to commence, the value of the Contract is determined
as the sum of the value of the Fixed Account no earlier than the close of
business on the fifth Valuation Day preceding the date the first Annuity payment
is due plus the product of the value of the Accumulation Unit of each
Sub-Account on that same day, and the number of Accumulation Units
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credited to each Sub-Account as of the date the Annuity is to commence.
The Contract contains tables indicating the minimum dollar amount of the first
monthly payment under the optional forms of Annuity for each $1,000 of value of
a Sub-Account under a Contract. The first monthly payment varies according to
the form and type of Annuity selected. The Contract contains Annuity tables
derived from the 1983a Individual Annuity Mortality Table with ages set back one
year and with an assumed investment rate ("A.I.R.") of 3% per annum for the
Fixed Annuity and 5% per annum for the Variable Annuity.
The total first monthly Variable Annuity payment is determined by multiplying
the value (expressed in thousands of dollars) of a Sub-Account (less any
applicable Premium Taxes) by the amount of the first monthly payment per $1,000
of value obtained from the tables in the Contracts.
Fixed Annuity payments are determined at annuitization by multiplying the values
allocated to the Fixed Account (less applicable Premium Taxes) by a rate to be
determined by Hartford which is no less than the rate specified in the Annuity
tables in the Contract. The Annuity payment will remain level for the duration
of the Annuity.
The amount of the first monthly Variable Annuity payment, determined as
described above, is divided by the value of an Annuity Unit for the appropriate
Sub-Account no earlier than the close of business on the fifth Valuation Day
preceding the day on which the payment is due in order to determine the number
of Annuity Units represented by the first payment. This number of Annuity Units
remains fixed during the Annuity payment period, and in each subsequent month
the dollar amount of the variable Annuity payment is determined by multiplying
this fixed number of Annuity Units by the then current Annuity Unit value.
THE A.I.R. ASSUMED IN THE MORTALITY TABLES WOULD PRODUCE LEVEL VARIABLE ANNUITY
PAYMENTS IF THE INVESTMENT RATE REMAINED CONSTANT. IN FACT, PAYMENTS WILL VARY
UP OR DOWN AS THE INVESTMENT RATE VARIES UP OR DOWN FROM THE A.I.R.
The Annuity Unit value used in calculating the amount of the Variable Annuity
payments will be based on an Annuity Unit value determined as of the close of
business on a day no earlier than the fifth Valuation Day preceding the date of
the Annuity payment.
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 the
Contract Owner. Available payment frequencies include monthly, quarterly,
semi-annual and annual. The payment frequency may not be changed by the Contract
Owner after payout has begun.
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FEDERAL TAX CONSIDERATIONS
What are some of the federal tax consequences which affect these Contracts?
A. GENERAL
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING TO
THE ACTUAL STATUS OF THE CONTRACT OWNER INVOLVED AND THE TYPE OF PLAN UNDER
WHICH THE CONTRACT IS PURCHASED, LEGAL AND TAX ADVICE MAY BE NEEDED BY A PERSON,
TRUSTEE OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A CONTRACT DESCRIBED
HEREIN.
It should be understood that any detailed description of the federal income tax
consequences regarding the purchase of these Contracts cannot be made in this
Prospectus and that special tax rules may be applicable with respect to certain
purchase situations not discussed herein. In addition, no attempt is made here
to consider any applicable state or other tax laws. For detailed information, a
qualified tax adviser should always be consulted. The discussion here and in
Appendix I, commencing on page 57, is based on Hartford's understanding of
existing federal income tax laws as they are currently interpreted.
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" commencing
on page 33). 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. Section 72 contains provisions
for Contract Owners which are non-natural persons. Non-natural persons
include corporations, trusts, limited liability companies and
partnerships. The annual net increase in the value of the Contract is
currently includable 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 (i)
certain annuities held by
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structured settlement companies, (ii) certain annuities held by an
employer with respect to a terminated qualified retirement plan and (iii)
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 not an individual, the primary Annuitant shall be
treated as the Contract Owner for purposes of making distributions which
are required to be made upon the death of the Contract Owner. If there is
a change in the primary Annuitant, such change shall be 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
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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
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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 for the life (or life
expectancy) of the recipient (or the joint lives or life
expectancies of the recipient and the recipient's
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
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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. The election and
payments must begin within a year of the 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.
3. DIVERSIFICATION REQUIREMENTS. Section 817 of the Code 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 in accordance with
regulations prescribed by the Treasury Department. If a Contract is not
treated as an annuity contract, the Contract Owner will be subject to
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income tax on the annual increases in cash value.
The Treasury Department has issued diversification regulations which
generally 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 addition, in the case of government securities, each
government agency or instrumentality shall be 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 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.
Hartford monitors the diversification of investments in the separate
accounts and tests for diversification as required by the Code. Hartford
intends 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 segregated
asset accounts supporting the variable contract must be considered to be
owned by the insurance company and not by the variable contract owner. The
Internal Revenue Service ("IRS") has issued several rulings which discuss
investor control. The IRS has ruled 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.
Further, in the explanation to the temporary Section 817 diversification
regulations, the Treasury Department noted 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, no other
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such guidance has been issued. Further, Hartford does not know if or in what
form such guidance will be issued. In addition, although regulations are
generally issued with prospective effect, it is possible that regulations may be
issued with retroactive effect. Due to the lack of specific guidance regarding
the issue of investor control, there is necessarily some uncertainty regarding
whether a Contract Owner could be considered the owner of the assets for tax
purposes. Hartford reserves the right to modify the contracts, as necessary, to
prevent Contract Owners from being considered the owners of the assets in the
separate accounts.
D. FEDERAL INCOME TAX WITHHOLDING
The portion of a distribution which is taxable income to the recipient will be
subject to federal income tax withholding, pursuant to Section 3405 of the Code.
The application of this provision is summarized below:
1. NON-PERIODIC DISTRIBUTIONS. The portion of a non-periodic distribution
which constitutes taxable income will be subject to federal income tax
withholding unless the recipient elects not to have taxes withheld. If an
election not to have taxes withheld is not provided, 10% of the taxable
distribution will be withheld as federal income tax. Election forms will
be provided at the time distributions are requested. If the necessary
election forms are not submitted to Hartford, Hartford will automatically
withhold 10% of the taxable distribution.
2. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER THAN
ONE YEAR). The portion of a periodic distribution which constitutes
taxable income will be subject to federal income tax withholding as if the
recipient were married claiming three exemptions. A recipient may elect
not to have income taxes withheld or have income taxes withheld at a
different rate by providing a completed election form. 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 commencing on page 57 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
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<PAGE>
foreign taxation with respect to an annuity purchase.
GENERAL MATTERS
ASSIGNMENT
Ownership of a Contract described herein is generally assignable. However, if
the Contracts are issued pursuant to some form of qualified retirement plan, it
is possible that the ownership of the Contracts may not be transferred or
assigned depending on the type of qualified retirement plan involved. An
assignment of a Non-Qualified Contract may subject the assignment proceeds to
income taxes and certain penalty taxes. (See "Taxation of Annuities
Provisions Affecting Purchasers Other Than Qualified Retirement Plans,"
page 46.)
MODIFICATION
Hartford reserves the right to modify the Contract, but only if such
modification: (i) is necessary to make the Contract or the Separate Account
comply with any law or regulation issued by a governmental agency to which
Hartford is subject; or (ii) is necessary to assure continued qualification of
the Contract under the Code or other federal or state laws relating to
retirement annuities or annuity Contracts; or (iii) is necessary to reflect a
change in the operation of the Separate Account or the Sub-Account(s) or (iv)
provides additional Separate Account options or (v) withdraws Separate Account
options. In the event of any such modification Hartford will provide notice to
the Contract Owner or to the payee(s) during the Annuity period. Hartford may
also make appropriate endorsement in the Contract to reflect such modification.
DELAY OF PAYMENTS
There may be postponement of a surrender payment or death benefit whenever (a)
the New York Stock Exchange is closed, except for holidays or weekends, or
trading on the New York Stock Exchange is restricted as determined by the
Commission; (b) the Commission permits postponement and so orders; or (c) the
Commission determines that an emergency exists making valuation or disposal of
securities not reasonably practicable.
VOTING RIGHTS
Hartford is the legal owner of all Fund shares held in the Separate Account. As
the owner, Hartford has the right to vote at the Funds' shareholder meetings.
However, to the extent required by federal securities laws or regulations,
Hartford will:
1. Vote all Fund shares attributable to a Contract according to instructions
received from the Contract Owner, and
2. Vote shares attributable to a Contract for which no voting instructions are
received in the same proportion as shares for which instructions are
received.
53
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If any federal securities laws or regulations, or their present interpretation
change to permit Hartford to vote Fund shares in its own right, Hartford may
elect to do so.
Hartford will notify you of any Fund shareholders' meeting if the shares held
for your account may be voted at such meetings. Hartford will also send proxy
materials and a form of instruction by means of which you can instruct Hartford
with respect to the voting of the Fund shares held for your account.
In connection with the voting of Fund shares held by it, Hartford will arrange
for the handling and tallying of voting instructions received from Contract
Owners. Hartford, as such, shall have no right, except as hereinafter provided,
to vote any Fund shares held by it hereunder which may be registered in its name
or the names of its nominees. Hartford will, however, vote the Fund shares held
by it in accordance with the instructions received from the Contract Owners for
whose accounts the Fund shares are held. If a Contract Owner desires to attend
any meeting at which shares held for the Contract Owner's benefit may be voted,
the Contract Owner may request Hartford to furnish a proxy or otherwise arrange
for the exercise of voting rights with respect to the Fund shares held for such
Contract Owner's account. In the event that the Contract Owner gives no
instructions or leaves the manner of voting discretionary, Hartford will vote
such shares of the appropriate Fund in the same proportion as shares of that
Fund for which instructions have been received. During the Annuity period under
a Contract the number of votes will decrease as the assets held to fund Annuity
benefits decrease.
DISTRIBUTION OF THE CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account.
HSD is a wholly-owned subsidiary of Hartford. The principal business address
of HSD is the same as 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 6% 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
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<PAGE>
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 Putnam Investment Management, Inc.; 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.
OTHER CONTRACTS OFFERED
In addition to the Contracts described in this Prospectus, it is contemplated
that other forms of group or individual variable Annuities may be sold providing
benefits which vary in accordance with the investment experience of the Separate
Account.
CUSTODIAN OF SEPARATE ACCOUNT ASSETS
The assets of the Separate Account are held by Hartford under a safekeeping
arrangement.
LEGAL PROCEEDINGS
There are no material legal proceedings pending to which the Separate Account is
a party.
LEGAL COUNSEL
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
Insurance Company, P.O. Box 2999, Hartford, Connecticut 06104-2999.
EXPERTS
The audited financial statements and financial statement schedules included in
this prospectus and elsewhere in the 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. The principal business
address of Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut
06103.
ADDITIONAL INFORMATION
Inquiries will be answered by calling your representative or by writing:
Hartford Life Insurance Company
55
<PAGE>
Attn: Individual Annuity Services
P.O. Box 5085
Hartford, CT 06102-5085
Telephone: (800) 521-0538
56
<PAGE>
APPENDIX I
INFORMATION REGARDING TAX-QUALIFIED PLANS
The tax rules applicable to tax-qualified contract owners, including
restrictions on contributions and distributions, taxation of distributions and
tax penalties, vary according to the type of plan as well as the terms and
conditions of the plan itself. Various tax penalties may apply to contributions
in excess of applicable limits, distributions prior to age 592 (subject to
certain exceptions), distributions which do not conform to applicable
commencement and minimum distribution rules, and certain other transactions with
respect to tax-qualified plans. Therefore, this summary does not attempt to
provide more than general information about the tax rules associated with use of
a Contract by a tax-qualified retirement plan. Contract owners, plan
participants and beneficiaries are cautioned that the rights and benefits of any
person to benefits may be controlled by the terms and conditions of the
tax-qualified retirement plan itself, regardless of the terms and conditions of
a Contract, but that Hartford is not bound by the terms and conditions of such
plans to the extent such terms conflict with a Contract, unless Hartford
specifically consents to be bound. Additionally, some tax-qualified retirement
plans are subject to distribution and other requirements which are not
incorporated into Hartford's administrative procedures. Contract owners,
participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions comply with applicable law.
Because of the complexity of these rules, owners, participants and beneficiaries
are encouraged to consult their own tax advisors as to specific tax
consequences.
A. TAX-QUALIFIED PENSION OR PROFIT-SHARING PLANS Provisions of the Code permit
eligible employers to establish tax-qualified pension or profit sharing plans
(described in Section 401(a) and 401(k), if applicable, and exempt from
taxation under Section 501(a) of the Code), and Simplified Employee Pension
Plans (described in Section 408(k)). Such 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 these contracts in connection with tax-qualified pension or
profit-sharing plans should seek competent tax and other legal advice.
B. TAX SHELTERED ANNUITIES UNDER SECTION 403(b) Section 403(b) of the Code
permits public school employees and employees of certain types of charitable,
educational and scientific organizations, as specified in Section 501(c)(3)
of the Code, to purchase annuity contracts, and, subject to certain
limitations, to exclude such contributions from gross income. Generally, such
contributions may not exceed the lesser of $10,000 (indexed) or 20% of an
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:
57
<PAGE>
(1) after the participating employee attains age 59 1/2;
(2) upon separation from service;
(3) upon death or disability; or
(4) 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.
C. DEFERRED COMPENSATION PLANS UNDER SECTION 457 Employees and independent
contractors performing services for eligible employers may have contributions
made to an Eligible Deferred Compensation Plan of their employer in
accordance with the employer's plan and Section 457 of the Code. Section 457
places limitations on contributions to Eligible Deferred Compensation Plans
maintained by a State or other tax-exempt organization. For these purposes,
the term "State" means a State, a political sub-division of a State, and an
agency or instrumentality of a State or political sub-division of a State .
Generally, the limitation is 33 1/3% of includable compensation (typically
25% of gross compensation) or, for 1998, $8,000 (indexed), whichever is
less. Such a plan may also provide for additional "catch-up" deferrals
during the three taxable years ending before a Participant attains normal
retirement age.
An employee electing to participate in an Eligible Deferred Compensation Plan
should understand that his or her rights and benefits are governed strictly
by the terms of the plan and that the employer is the legal owner of any
contract issued with respect to the plan. The employer, as owner of the
contract(s), retains all voting and redemption rights which may accrue to the
contract(s) issued with respect to the plan. The participating employee
should look to the terms of his or her plan for any charges in regard to
participating therein other than those disclosed in this Prospectus.
Participants should also be aware that effective August 20, 1996, the Small
Business Job Protection Act of 1996 requires that all assets and income of an
Eligible Deferred Compensation Plan established by a governmental employer
which is a State, a political subdivision of a State, or any agency or
instrumentality of a State or political subdivision of a State, must be held
in trust (or under certain specified annuity contracts or custodial accounts)
for the exclusive benefit of participants and their beneficiaries. Special
transition rules apply to such Eligible governmental Deferred Compensation
Plans already in existence on August 20, 1996, and provide that such plans
need not establish a trust before January 1, 1999. However, this requirement
of a trust does not apply to amounts under an Eligible Deferred Compensation
Plan of a tax-exempt (non-governmental) organization, and such amounts will
be subject to the claims of such tax-exempt 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. Present federal tax law does not allow
tax-free transfers or rollovers for amounts accumulated in a
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Section 457 plan except for transfers to other Section 457 plans in limited
cases.
D. INDIVIDUAL RETIREMENT ANNUITIES UNDER SECTION 408 Section 408 of the Code
permits eligible individuals to establish individual retirement programs
through the purchase of Individual Retirement Annuities ("IRAs"). IRAs are
subject to limitations on the amount that may be contributed, the
contributions that may be deducted from taxable income, the persons who may
be eligible and the time when distributions may commence. Also, distributions
from certain qualified plans may be "rolled-over" on a tax-deferred basis
into an IRA.
The Contracts may be offered as SIMPLE IRAs in connection with a SIMPLE IRA
plan of an employer. 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 regular IRA only after two years
have expired since the participant first commenced participation in your
employer*s SIMPLE IRA plan. Amounts cannot be rolled over to a SIMPLE IRA
from a qualified plan or a regular IRA. Hartford is a non-designated
financial institution.
Beginning in 1998, the Contracts may be offered as ROTH IRAs under Section
408A of the Code. Contributions to a ROTH IRA are not deductible. Subject to
special limitations, a regular IRA may be converted into a ROTH IRA or a
distribution from a regular IRA may be rolled over to a ROTH IRA. However, a
conversion or a rollover from a regular 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.
E. FEDERAL TAX PENALTIES AND WITHHOLDING Distributions from retirement plans are
generally taxed 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 which bears the same ratio as the after-tax
contributions bear to the expected return.
1. PREMATURE DISTRIBUTION Distributions from a tax-qualified plan before the
Participant attains age 59 1/2 are generally subject to an additional
penalty tax equal to 10% of the taxable portion of the distribution. The
10% penalty does not apply to distributions made after the employee's
death, on account of disability, for eligible medical expenses and
distributions in the form of a life annuity and, except in the case of an
IRA, certain distributions after separation from service after age 55. For
these purposes, a life annuity means a scheduled series of substantially
equal periodic payments for the life or life expectancy of the Participant
(or the joint lives or life expectancies of the Participant and
Beneficiary).
In addition, effective for distributions made from an IRA after December
31, 1997, there is no such penalty tax on distributions that do not exceed
the amount of certain qualifying higher education expenses, as defined by
Section 72(t)(7) of the Code, or which are qualified first-time homebuyer
distributions meeting the requirements of Section 72(t)(8) of the Code.
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If you are a participant in a SIMPLE IRA plan, you should be aware that
the 10% penalty tax discussed above is increased to 25% with respect to
non-exempt premature 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.
2. MINIMUM DISTRIBUTION Tax If the amount distributed is less than the
minimum required distribution for the year, the Participant is subject to
a 50% 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 April 1 of
the calendar year following the later of (i) the calendar year in which
the individual attains age 70 1/2 or (ii) the calendar year in which the
individual retires from service with the employer sponsoring the plan
("required beginning date"). However, 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 a period which may not extend beyond a
maximum of the life expectancy of the Participant and a 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 (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.
3. WITHHOLDING In general, distributions from IRAs and plans described in
Section 457 of the Code are subject to regular wage withholding rules.
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
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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.
Other distributions from such other tax-qualified retirement plans are
generally subject to mandatory income tax withholding at the flat rate of
20% unless such distributions are:
a) the non-taxable portion of the distribution;
b) required minimum distributions; or
c) direct transfer distributions.
Direct transfer distributions are direct payments to an IRA or to another
eligible retirement plan under Code section 401(a)(31).
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TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION
SECTION PAGE
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY.........................
SAFEKEEPING OF ASSETS..................................................
INDEPENDENT PUBLIC ACCOUNTANTS.........................................
DISTRIBUTION OF CONTRACTS..............................................
CALCULATION OF YIELD AND RETURN........................................
PERFORMANCE COMPARISONS................................................
FINANCIAL STATEMENTS...................................................
62
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To Obtain a Statement of Additional Information, please complete the form below
and mail to:
Hartford Life Insurance Company
Attn: Individual Annuity Operations
P.O. Box 5085
Hartford, CT 06102-5085
Please send a Statement of Additional Information for the Putnam Hartford
Capital Manager Variable Annuity to me at the following address:
--------------------------------------------------
Name
--------------------------------------------------
Address
--------------------------------------------------
City/State Zip Code
63
<PAGE>
-1-
PART B
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LIFE INSURANCE COMPANY
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT
PUTNAM HARTFORD CAPITAL MANAGER VARIABLE ANNUITY
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: Annuity Marketing Services, P.O. Box 5085, Hartford, CT
06102-5085.
Date of Prospectus: May 1, 1998
Date of Statement of Additional Information: May 1, 1998
33-73566
<PAGE>
-2-
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY..........................
SAFEKEEPING OF ASSETS...................................................
INDEPENDENT PUBLIC ACCOUNTANTS..........................................
DISTRIBUTION OF CONTRACTS...............................................
CALCULATION OF YIELD AND RETURN.........................................
PERFORMANCE COMPARISONS.................................................
FINANCIAL STATEMENTS....................................................
<PAGE>
-3-
DESCRIPTION OF HARTFORD LIFE INSURANCE COMPANY
Hartford Life Insurance Company ("Hartford") is a stock life insurance company
engaged in the business of writing life insurance, both individual and group, in
all states of the United States and the District of Columbia. Hartford was
originally incorporated under the laws of Massachusetts on June 5, 1902, and was
subsequently redomiciled to Connecticut. Its offices are located in Simsbury,
Connecticut; however, its mailing address is P.O. Box 2999, Hartford, CT
06104-2999. Hartford is ultimately controlled by The Hartford Financial Services
Group, Inc., one of the largest financial service providers in the United
States.
Hartford Ratings
- -------------------------------------------------------------------------------
Effective
Date of
Rating Agency Rating Rating Basis of Rating
- -------------------------------------------------------------------------------
A.M. Best and Company, Inc. 9/9/97 A+ Financial soundness and
operating performance.
- -------------------------------------------------------------------------------
Standard & Poor*s 1/23/98 AA Claims paying ability
- -------------------------------------------------------------------------------
Duff & Phelps 1/23/98 AA+ Claims paying ability
- -------------------------------------------------------------------------------
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 and financial statement schedules included in
this prospectus and elsewhere in the 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. The principal business
address of Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut
06103.
DISTRIBUTION OF CONTRACTS
Hartford Securities Distribution Company, Inc. ("HSD") serves as Principal
Underwriter for the securities issued with respect to the Separate Account and
will offer the Contracts on a continous basis. HSD is a wholly-owned subsidiary
of Hartford. The principal business address of HSD is the same as 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
<PAGE>
-4-
entered into distribution agreements with HSD.
HSD is registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 as a Broker-Dealer and is a member of the
National Association of Securities Dealers, Inc. ("NASD").
Commissions will be paid by Hartford and will not be more than 6% of premium
payments from time to time, Hartford may pay or permit other promotion
incentives in cash or other compensation.
CALCULATION OF YIELD AND RETURN
YIELD OF THE PUTNAM MONEY MARKET SUB-ACCOUNT. As summarized in the Prospectus
under the heading "Performance Related Information," the yield of the
Sub-Account for a seven day period (the "base period") will be computed by
determining the "net change in value" of a hypothetical account having a
balance of one unit at the beginning of the period, dividing the net change
in account value by the value of the account at the beginning of the base
period to obtain the base period return, and 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 dividends as declared
by the underlying funds, less expense and Contract 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:
365/7
Effective Yield = [(Base Period Return + 1) ] - 1
THE PUTNAM 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.
The yield and effective yield for the seven day period ending December 31, 1997
for the PCM Money Market Fund Sub-Account was as follows ($30 Annual Maintenance
Fee):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SUB-ACCOUNTS YIELD EFFECTIVE YIELD
- -------------------------------------------------------------------------------
<S> <C> <C>
Putnam Money Market Fund * 3.94% 4.02%
- -------------------------------------------------------------------------------
</TABLE>
* Yield and effective yield for the seven day period ending December 31, 1997.
YIELDS OF PUTNAM GROWTH AND INCOME, PUTNAM GLOBAL ASSET ALLOCATION, PUTNAM
HIGH
<PAGE>
-5-
YIELD, PUTNAM UTILITIES GROWTH AND INCOME, PUTNAM U.S. GOVERNMENT AND HIGH
QUALITY BOND, AND PUTNAM DIVERSIFIED INCOME SUB-ACCOUNTS. As summarized
in the Prospectus under the heading "Performance Related Information," yields of
the above 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 interests earned
during the period by the maximum offering price per unit on the last day of the
period, according to the following formula:
Example:
6
Current Yield Formula for the Sub-Account 2[((A-B)/(CD) + 1) - 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.
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.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SUB-ACCOUNTS YIELD
- -------------------------------------------------------------------------------
<S> <C>
Putnam Growth and Income ** .41%
- -------------------------------------------------------------------------------
Putnam Global Asset Allocation ** 1.08%
- -------------------------------------------------------------------------------
Putnam High Yield ** 7.61%
- -------------------------------------------------------------------------------
Putnam Utilities Growth and Income ** 1.67%
- -------------------------------------------------------------------------------
Putnam U.S. Government and High Quality Bond** 4.08%
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
-6-
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
<S> <C>
Putnam Diversified Income ** 6.64%
- -------------------------------------------------------------------------------
</TABLE>
** Yield quotation based on a 30 day period ended December 31, 1997.
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. 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 the $30.00 Annual Maintenance Fee (if applicable) 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. Total
return will be calculated 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.
For the fiscal year ended December 31, 1997, standardized average annual total
return quotations for the Sub-Accounts listed below were as follows:
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
10 YEAR OR
SINCE
SUB-ACCOUNTS INCEPTION DATE 1 YEAR 5 YEAR INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Putnam Asia
Pacific Growth 5/1/95 -23.89% na -8.12%
- -------------------------------------------------------------------------------
Putnam
Diversified
Income 9/15/93 -3.12% na 1.67%
- -------------------------------------------------------------------------------
Putnam The George
Putnam Fund of
Boston na na na na
- -------------------------------------------------------------------------------
Putnam Global
Asset
Allocation 2/1/88 9.01% 9.85% 8.17%
- -------------------------------------------------------------------------------
Putnam Global
Growth 5/1/90 3.74% 10.72% 6.29%
- -------------------------------------------------------------------------------
Putnam Growth and
Income 2/1/88 13.42% 14.21% 13.05%
- -------------------------------------------------------------------------------
Putnam Health
Sciences na na na na
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
-7-
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Putnam High Yield 2/1/88 3.75% 7.82% 7.42%
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Putnam
International
Growth 1/2/97 na na 5.51%
- -------------------------------------------------------------------------------
Putnam
International
Growth and
Income 1/2/97 na na 8.76%
- -------------------------------------------------------------------------------
Putnam
International
New Opportunities 1/2/97 na na -10.50%
- -------------------------------------------------------------------------------
Putnam Investors na na na na
- -------------------------------------------------------------------------------
Putnam New
Opportunities 6/20/94 12.57% na 17.69%
- -------------------------------------------------------------------------------
Putnam New Value 1/2/97 na na 6.97%
- -------------------------------------------------------------------------------
Putnam OTC &
Emerging
Growth na na na na
- -------------------------------------------------------------------------------
Putnam U.S.
Government and
High Quality
Bond 2/1/88 -1.87% 2.58% 4.74%
- -------------------------------------------------------------------------------
Putnam Utilities
Growth and
Income Bond 5/1/92 16.33% 10.40% 9.99%
- -------------------------------------------------------------------------------
Putnam Vista 1/2/97 na na 12.51%
- -------------------------------------------------------------------------------
Putnam Voyager 2/1/88 15.76% 14.68% 14.46%
- -------------------------------------------------------------------------------
Putnam Money
Market 2/1/88 -5.24% -.76% 1.27%
- -------------------------------------------------------------------------------
</TABLE>
*Figures represent performance since inception for Sub-Accounts in existence for
less than 10 years, or performance for 10 years for Sub-Accounts in existence
for more than 10 years.
<PAGE>
-8
In addition to the standardized total return, the Sub-Account may advertise a
non-standardized total return. This figure will usually be calculated 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 for the fiscal year ended December 31, 1997.
NON-STANDARDIZED ANNUALIZED TOTAL RETURN FOR YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
10 YEAR OR
SINCE
SUB-ACCOUNTS INCEPTION DATE 1 YEAR 5 YEAR INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Putnam Asia
Pacific Growth
5/1/95 -15.84% na -3.17%
- -------------------------------------------------------------------------------
Putnam
Diversified
Income 9/15/93 5.88% na 5.94%
- -------------------------------------------------------------------------------
Putnam The George
Putnam Fund of
Boston na na na na
- -------------------------------------------------------------------------------
Putnam Global
Asset
Allocation 2/1/88 18.01% 13.01% 10.55%
- -------------------------------------------------------------------------------
Putnam Global
Growth 5/1/90 12.74% 13.64% 9.10%
- -------------------------------------------------------------------------------
Putnam Growth and
Income 2/1/88 22.42% 17.21% 15.01%
- -------------------------------------------------------------------------------
Putnam Health
Sciences na na na na
- -------------------------------------------------------------------------------
Putnam High Yield 2/1/88 12.75% 11.01% 9.93%
- -------------------------------------------------------------------------------
Putnam
International
Growth 1/2/97 na na 14.51%
- -------------------------------------------------------------------------------
Putnam
International
Growth and
Income 1/2/97 na na 17.76%
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
-9-
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Putnam
International
New Opportunities 1/2/97 na na -1.50%
- -------------------------------------------------------------------------------
Putnam Investors na na na na
- -------------------------------------------------------------------------------
Putnam New
Opportunities 6/20/94 21.57% na 21.18%
- -------------------------------------------------------------------------------
Putnam New Value 1/2/97 na na 15.97%
- -------------------------------------------------------------------------------
Putnam OTC &
Emerging
Growth na na na na
- -------------------------------------------------------------------------------
Putnam U.S.
Government and
High Quality
Bond 2/1/88 7.13% 6.12% 7.22%
- -------------------------------------------------------------------------------
Putnam Utilities
Growth and
Income Bond 5/1/92 25.33% 13.66% 13.15%
- -------------------------------------------------------------------------------
Putnam Vista 1/2/97 na na 21.51%
- -------------------------------------------------------------------------------
Putnam Voyager 2/1/88 24.76% 17.59% 16.43%
- -------------------------------------------------------------------------------
Putnam Money
Market 2/1/88 3.76% 3.04% 4.05%
- -------------------------------------------------------------------------------
</TABLE>
*Figures represent performance since inception for Sub-Accounts in existence for
less than 10 years, or performance for 10 years for Sub-Accounts in existence
for more than 10 years.
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. 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. Index performance is not representative of the performance of
the Sub-Account to which it is compared and is not adjusted for commissions
and other costs.
<PAGE>
-10-
Portfolio holdings of the Sub-Account will differ from those of the index to
which it is compared. Performance comparison indices include the following:
The Consumer Price Index, prepared by the U.S. Bureau of Labor Statistics, is a
commonly used measure of the rate of inflation. The index shows the average
change in the cost of selected consumer goods and services and does not
represent a return on an investment vehicle.
The Dow Jones Industrial Average is an unmanaged list of 30 common stocks
frequently used as a general measure of stock market performance. Its
performance figures reflect changes of market prices and reinvestment of all
distributions.
Lehman Brothers Corporate Bond Index is an unmanaged list of publicly issued,
fixed-rate, non-convertible investment-grade domestic corporate debt
securities frequently used as a general measure of the performance of
fixed-income securities. The average quality of bonds included in the index
may be higher than the average quality of those bonds in which Putnam VT High
Yield Fund customarily invests. The index does not include bonds in certain
of the lower rating classifications in which the Fund may invest. The
performance figures of the index reflect changes in market prices and
reinvestment of all interest payments.
The Lehman Brothers 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 Lehman Brothers 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 index does not include bonds in certain of the
lower-rating classifications in which Putnam VT High Yield Fund invests. Its
performance figures reflect changes in market prices and reinvestment of all
interest payments.
Morgan Stanley Capital International World Index is an unmanaged list of
approximately 1,450 equity securities listed on the stock exchanges of the
United States, Europe, Canada, Australia, New Zealand and the Far East, with all
values expressed in U.S. dollars. Performance figures reflect changes in market
prices and reinvestment of distributions net of withholding taxes. The
securities in the index change over time to maintain representativeness.
The NASDAQ-OTC Industrial Average (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
<PAGE>
-11-
those over-the-counter stocks having only one market maker or traded on
exchanges are excluded. Its performance figures reflect changes of market prices
but do not reflect reinvestment of cash dividends.
Salomon Brothers Long-Term High-Grade Corporate Bond Index is an unmanaged
list of publicly traded corporate bonds having a rating of at least AA by
Standard & Poor's or Aa by Moody's and is frequently used as general measure
of the performance of fixed-income securities. The average quality of bonds
included in the index may be higher than the average quality of those bonds
in which Putnam VT High Yield customarily invests. The index does not include
bonds in certain of the lower rating classifications in which the Fund may
invest. Performance figures for the index reflect changes of market prices
and reinvestment of all distributions.
The Salomon Brothers 7-10 Year Government Bond Index is an unmanaged list of
U.S. Government and government agency securities with maturities of 7 to 10
years. Performance figures for the index reflect changes of market prices and
reinvestment of all interest payments.
The Standard & Poor's Composite Index of 500 stocks (the "S&P 500") is a market
value-weighted and unmanaged index showing 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. Its performance figures reflect changes
of market prices and reinvestment of all regular cash dividends.
The Standard & Poor's 40 Utilities Index is unmanaged list of 40 utility
stocks. The Index assumes reinvestment of all distributions and reflects
changes in market prices but does not take into account brokerage commissions
or other fees. Putnam VT Utilities Growth and Income Fund's telephone and
electric utility stocks are generally held in the same proportion as the
telephone and electric stocks in the S&P Utilities Index. However, there are
some utility stocks held by the Fund that are not part of the Index.
<PAGE>
Report of Independent Public Accountants
To Hartford Life Insurance Company Putnam Capital Manager Trust Separate
Account and to the Owners of Units of Interest therein:
We have audited the accompanying statement of assets and liabilities of
Hartford Life Insurance Company Putnam Capital Manager Trust Separate
Account (the Account) as of December 31, 1997, and the related statement
of operations for the year then ended and statements of changes in net
assets for each of the two years in the period then ended. 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 Hartford
Life Insurance Company Putnam Capital Manager Trust Separate Account as
of December 31, 1997, the results of its operations for the year then
ended and the changes in its net assets for each of the two years in the
period then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 16, 1998
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT -- HARTFORD LIFE INSURANCE COMPANY
Statement of Assets and Liabilities
- -------------------------------------------------------------------------------------------------------
December 31, 1997 Asia Pacific Diversified Global Asset Global
Growth Income Allocation Growth
Fund Fund Fund Fund
Sub-Account Sub-Account Sub-Account Sub-Account
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments:
.......................................................................................................
Putnam VT Asia Pacific
Growth Fund
Shares 3,982,438
Cost $41,847,839
.......................................................................................................
Market Value: $37,707,127 $ -- $ -- $ --
.......................................................................................................
Putnam VT Diversified
Income Fund
Shares 27,773,427
Cost $289,417,701
.......................................................................................................
Market Value: -- 314,117,464 -- --
.......................................................................................................
Putnam VT Global
Asset Allocation Fund
Shares 25,951,826
Cost $348,329,674
.......................................................................................................
Market Value: -- -- 486,856,253 --
.......................................................................................................
Putnam VT Global
Growth Fund
Shares 39,377,645
Cost $521,408,963
.......................................................................................................
Market Value: -- -- -- 722,186,005
.......................................................................................................
Putnam VT Growth and
Income Fund
Shares 153,139,691
Cost $2,874,168,517
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT High
Yield Fund
Shares 33,295,156
Cost $382,788,853
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT International
Growth Fund
Shares 4,798,625
Cost $53,588,319
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT International
Growth and Income Fund
Shares 7,481,844
Cost $84,008,899
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Due From Hartford Life
Insurance Company 22,815 116,697 92,110 --
.......................................................................................................
Receivable from fund
shares sold -- -- -- 2,027,891
- -------------------------------------------------------------------------------------------------------
Total Assets 37,729,942 314,234,161 486,948,363 724,213,896
- -------------------------------------------------------------------------------------------------------
Liabilities
Due to Hartford Life
Insurance Company -- -- -- 2,028,912
.......................................................................................................
Payable for fund
shares purchased 22,791 115,945 92,103 --
.......................................................................................................
Total Liabilities 22,791 115,945 92,103 2,028,912
- -------------------------------------------------------------------------------------------------------
Net Assets (variable
annuity contract
liabilities) $37,707,151 $314,118,216 $486,856,260 $722,184,984
- -------------------------------------------------------------------------------------------------------
<CAPTION>
Statement of Assets and Liabilities (Continued)
- -------------------------------------------------------------------------------------------------------
December 31, 1997 Growth High Yield International International
and Income Fund Growth Growth
Fund Sub-Account Fund and Income
Sub-Account Sub-Account Fund
Sub-Account
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments:
.......................................................................................................
Putnam VT Asia Pacific
Growth Fund
Shares 4,098,601
Cost $42,687,379
.......................................................................................................
Market Value: $ -- $ -- $ -- $ --
.......................................................................................................
Putnam VT Diversified
Income Fund
Shares 27,773,427
Cost $289,417,701
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT Global
Asset Allocation Fund
Shares 25,951,826
Cost $348,329,674
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT Global
Growth Fund
Shares 39,377,645
Cost $521,408,963
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT Growth and
Income Fund
Shares 153,139,691
Cost $2,874,168,517
.......................................................................................................
Market Value: 4,336,916,046 -- -- --
.......................................................................................................
Putnam VT High
Yield Fund
Shares 33,295,156
Cost $382,788,853
.......................................................................................................
Market Value: -- 453,480,021 -- --
.......................................................................................................
Putnam VT International
Growth Fund
Shares 4,798,625
Cost $53,588,319
.......................................................................................................
Market Value: -- -- 54,848,282 --
.......................................................................................................
Putnam VT International
Growth and Income Fund
Shares 7,481,844
Cost $84,008,899
.......................................................................................................
Market Value: -- -- -- 86,266,118
.......................................................................................................
Due From Hartford Life
Insurance Company 1,259,790 -- 155,639 --
.......................................................................................................
Receivable from fund
shares sold -- 81,181 -- 866,081
- -------------------------------------------------------------------------------------------------------
Total Assets 4,338,175,836 453,561,202 55,003,921 87,132,199
- -------------------------------------------------------------------------------------------------------
Liabilities
Due to Hartford Life
Insurance Company 1 92,602 -- 865,856
.......................................................................................................
Payable for fund
shares purchased 1,259,978 -- 155,637 --
.......................................................................................................
Total Liabilities 1,259,979 92,602 155,637 865,856
- -------------------------------------------------------------------------------------------------------
Net Assets (variable
annuity contract
liabilities) $4,336,915,857 $453,468,600 $54,848,284 $86,266,343
- -------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT -- HARTFORD LIFE INSURANCE COMPANY
Statement of Assets and Liabilities
- -------------------------------------------------------------------------------------------------------
December 31, 1997 International Money New New
New Market Opportunities Value
Opportunities Fund Fund Fund
Fund Sub-Account Sub-Account Sub-Account
Sub-Account
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments:
.......................................................................................................
Putnam VT International
New Opportunities Fund
Shares 4,098,601
Cost $42,687,379
.......................................................................................................
Market Value: $39,665,081 $ -- $ -- $ --
.......................................................................................................
Putnam VT Money
Market Fund
Shares 202,287,317
Cost $202,287,317
.......................................................................................................
Market Value: -- 202,287,317 -- --
.......................................................................................................
Putnam VT New
Opportunities Fund
Shares 40,534,671
Cost $638,785,981
.......................................................................................................
Market Value: -- -- 860,551,061 --
.......................................................................................................
Putnam VT New
Value Fund
Shares 6,380,084
Cost $70,145,369
.......................................................................................................
Market Value: -- -- -- 75,029,788
.......................................................................................................
Putnam VT U. S. Government
High Quality Bond Fund
Shares 39,413,018
Cost $469,686,284
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT Utilities
Growth and Income Fund
Shares 26,120,146
Cost $300,886,355
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT Vista Fund
Shares 5,592,998
Cost $61,075,852
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT Voyager Fund
Shares 54,861,955
Cost $1,272,718,315
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Due From Hartford Life
Insurance Company 3,043 2,297,880 -- 233,591
.......................................................................................................
Receivable from fund
shares sold -- -- 878,238 --
- -------------------------------------------------------------------------------------------------------
Total Assets 39,668,124 204,585,197 861,429,299 75,263,379
- -------------------------------------------------------------------------------------------------------
Liabilities
Due to Hartford Life
Insurance Company -- -- 877,100 --
.......................................................................................................
Payable for fund
shares purchased 3,043 2,296,934 -- 232,998
.......................................................................................................
Total Liabilities 3,043 2,296,934 877,100 232,998
- -------------------------------------------------------------------------------------------------------
Net Assets (variable
annuity contract
liabilities) $39,665,081 $202,288,263 $860,552,199 $75,030,381
- -------------------------------------------------------------------------------------------------------
<CAPTION>
Statement of Assets and Liabilities (Continued)
- -------------------------------------------------------------------------------------------------------
December 31, 1997 U.S.Government Utilities Vista Voyager
and High Growth Fund Fund
Quality Bond and Income Sub-Account Sub-Account
Fund Fund
Sub-Account Sub-Account
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments:
.......................................................................................................
Putnam VT International
New Opportunities Fund
Shares 4,098,601
Cost $42,687,379
.......................................................................................................
Market Value: $ -- $ -- $ -- $ --
.......................................................................................................
Putnam VT Money
Market Fund
Shares 202,287,317
Cost $202,287,317
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT New
Opportunities Fund
Shares 40,534,671
Cost $638,785,981
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT New
Value Fund
Shares 6,380,084
Cost $70,145,369
.......................................................................................................
Market Value: -- -- -- --
.......................................................................................................
Putnam VT U. S. Government
High Quality Bond Fund
Shares 39,413,018
Cost $469,686,284
.......................................................................................................
Market Value: 528,922,698 -- -- --
.......................................................................................................
Putnam VT Utilities
Growth and Income Fund
Shares 26,120,146
Cost $300,886,355
.......................................................................................................
Market Value: -- 447,699,299 -- --
.......................................................................................................
Putnam VT Vista Fund
Shares 5,592,998
Cost $61,075,852
.......................................................................................................
Market Value: -- -- 68,905,735 --
.......................................................................................................
Putnam VT Voyager Fund
Shares 54,861,955
Cost $1,272,718,315
.......................................................................................................
Market Value: -- -- -- 2,144,005,195
.......................................................................................................
Due From Hartford Life
Insurance Company 240,123 566,406 6,712 830,236
.......................................................................................................
Receivable from fund
shares sold -- -- -- 1
- -------------------------------------------------------------------------------------------------------
Total Assets 529,162,821 448,265,705 68,912,447 2,144,835,432
- -------------------------------------------------------------------------------------------------------
Liabilities
Due to Hartford Life
Insurance Company -- -- -- 1
.......................................................................................................
Payable for fund
shares purchased 240,113 563,009 5,735 830,698
.......................................................................................................
Total Liabilities 240,113 563,009 5,735 830,699
- -------------------------------------------------------------------------------------------------------
Net Assets (variable
annuity contract
liabilities) $528,922,708 $447,702,696 $68,906,712 $2,144,004,733
- -------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT -- HARTFORD LIFE INSURANCE COMPANY
Statement of Assets and Liabilities (continued)
- ----------------------------------------------------------------------------------------------------------------------
December 31, 1997 Units Unit Contract
Owned by Price Liability
Participants
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred annuity contracts in the accumulation period:
Individual Sub-Accounts:
......................................................................................................................
Asia Pacific Growth Fund Sub-Account 4,107,754 $ 9.175966 $ 37,692,611
......................................................................................................................
Asia Pacific Growth Fund .40% 994 9.424285 9,372
......................................................................................................................
Diversified Income Fund Sub-Account 24,441,598 12.840701 313,847,251
......................................................................................................................
Diversified Income Fund .40% 1,031 13.668241 14,087
......................................................................................................................
Global Asset Allocation Sub-Account 17,958,360 27.026081 485,344,086
......................................................................................................................
Global Asset Allocation Fund .40% 2,169 17.329681 37,584
......................................................................................................................
Global Growth Fund Sub-Account 36,912,422 19.497474 719,698,987
......................................................................................................................
Global Growth Fund .40% 1,490 15.678431 23,365
......................................................................................................................
Growth and Income Fund Sub-Account 108,147,425 40.036154 4,329,806,953
......................................................................................................................
Growth and Income Fund .40% 2,254 20.951776 47,220
......................................................................................................................
High Yield Fund Sub-Account 17,697,396 25.574900 452,609,127
......................................................................................................................
High Yield Fund .40% 1,039 15.008166 15,586
......................................................................................................................
International Growth Fund Sub-Account 4,786,530 11.450726 54,809,249
......................................................................................................................
International Growth Fund Sub-Account .40% 2,835 11.566445 32,787
......................................................................................................................
International Growth and Income Fund Sub-Account 7,320,004 11.776424 86,203,472
......................................................................................................................
International Growth and Income Fund Sub-Account .40% 1,147 11.895920 13,644
......................................................................................................................
International New Opportunities Fund Sub-Account 4,025,544 9.849814 39,650,857
......................................................................................................................
International New Opportunities Fund Sub-Account .40% 1,158 9.949999 11,524
......................................................................................................................
Money Market Fund Sub-Account 136,310,783 1.482672 202,104,182
......................................................................................................................
Money Market Fund .40% 10,302 1.176698 12,122
......................................................................................................................
New Opportunities Fund Sub-Account 42,524,777 20.223432 859,996,936
......................................................................................................................
New Opportunities Fund .40% 1,235 22.671011 27,999
......................................................................................................................
New Value Fund Sub-Account 6,466,377 11.597024 74,990,731
......................................................................................................................
New Value Fund Sub-Account .40% 1,000 11.713440 11,713
......................................................................................................................
U.S. Government and High Quality Bond Fund Sub-Account 26,461,156 19.958881 528,135,070
......................................................................................................................
U.S. Government and High Quality Bond Fund .40% 1,028 13.267727 13,640
......................................................................................................................
Utilities Growth and Income Fund Sub-Account 22,197,997 20.143040 447,135,141
......................................................................................................................
Utilities Growth and Income Fund .40% 1,024 19.441319 19,914
......................................................................................................................
Vista Fund Sub-Account 5,662,338 12.151064 68,803,429
......................................................................................................................
Vista Fund Sub-Account .40% 1,000 12.272040 12,272
......................................................................................................................
Voyager Fund Sub-Account 47,283,830 45.196582 2,137,067,493
......................................................................................................................
Voyager Fund .40% 2,850 22.202727 63,281
......................................................................................................................
Sub-total Individual Sub-Accounts: 10,838,261,685
......................................................................................................................
Annuity contracts in the annuity period:
Individual Sub-Accounts:
......................................................................................................................
Asia Pacific Growth Fund Sub-Account 563 9.175966 5,168
......................................................................................................................
Diversified Income Fund Sub-Account 20,005 12.840701 256,878
......................................................................................................................
Global Asset Allocation Sub-Account 54,562 27.026081 1,474,590
......................................................................................................................
Global Growth Fund Sub-Account 126,305 19.497474 2,462,632
......................................................................................................................
Growth and Income Fund Sub-Account 176,383 40.036154 7,061,684
......................................................................................................................
High Yield Fund Sub-Account 29,496 25.574900 754,363
......................................................................................................................
High Yield Fund .40% 5,965 15.008166 89,524
......................................................................................................................
International Growth Fund Sub-Account 546 11.450726 6,248
......................................................................................................................
International Growth and Income Fund Sub-Account 4,180 11.776424 49,227
......................................................................................................................
International New Opportunities Fund Sub-Account 274 9.849814 2,700
......................................................................................................................
Money Market Fund Sub-Account 115,980 1.482672 171,959
......................................................................................................................
New Opportunities Fund Sub-Account 26,072 20.223432 527,264
......................................................................................................................
New Value Fund Sub-Account 2,409 11.597024 27,937
......................................................................................................................
U.S. Government and High Quality Bond Fund Sub-Account 38,780 19.958881 773,998
......................................................................................................................
Utilities Growth and Income Fund Sub-Account 27,188 20.143040 547,641
......................................................................................................................
Vista Fund Sub-Account 7,490 12.151064 91,011
......................................................................................................................
Voyager Fund Sub-Account 152,090 45.196582 6,873,959
......................................................................................................................
Sub-total Individual Sub-Accounts: 21,176,783
- ----------------------------------------------------------------------------------------------------------------------
Grand Total: $10,859,438,468
- ----------------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCCOUNT -- HARTFORD LIFE INSURANCE COMPANY
Statement of Operations
- ----------------------------------------------------------------------------------------------------------------
For the year ended Asia Pacific Diversified Global Asset Global
December 31, 1997 Growth Income Allocation Growth
Fund Fund Fund Fund
Sub-Account Sub-Account Sub-Account Sub-Account
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends $ 947,927 $14,920,402 $14,108,533 $15,601,436
................................................................................................................
Expenses:
Mortality and expense
undertakings (661,211) (3,984,702) (6,374,137) (10,017,282)
................................................................................................................
Capital gains income -- 2,352,102 24,114,921 16,781,057
................................................................................................................
Net realized and
unrealized gain (loss)
on investments:
................................................................................................................
Net realized gain (loss)
on security transactions (317,227) (2,032) 382,203 1,854,347
................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (7,411,215) 3,452,605 41,346,816 58,240,028
................................................................................................................
Net gain (loss) on investments (7,728,442) 3,450,573 41,729,019 60,094,375
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations $(7,441,726) $16,738,375 $73,578,336 $82,459,586
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Statement of Operations (continued)
- ----------------------------------------------------------------------------------------------------------------
For the year ended Growth High Yield International International
December 31, 1997 and Income Fund Growth Growth
Fund Sub-Account Fund and Income
Sub-Account Sub-Account* Fund
Sub-Account*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends $ 70,091,982 $26,842,081 $ 822,115 $2,886,627
................................................................................................................
Expenses:
Mortality and expense
undertakings (53,992,227) (5,621,185) (391,031) (629,720)
................................................................................................................
Capital gains income 170,606,295 3,112,539 -- --
................................................................................................................
Net realized and
unrealized gain (loss)
on investments:
................................................................................................................
Net realized gain (loss)
on security transactions (549,025) 667,197 225,798 52,035
................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 566,542,304 22,952,048 1,259,962 2,257,219
................................................................................................................
Net gain (loss) on investments 565,993,279 23,619,245 1,485,760 2,309,254
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations $752,699,329 $47,952,680 $1,916,844 $4,566,161
- ----------------------------------------------------------------------------------------------------------------
*From inception, January 2, 1997 to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCCOUNT -- HARTFORD LIFE INSURANCE COMPANY
Statement of Operations (continued)
- ----------------------------------------------------------------------------------------------------------------
For the year ended International Money New New
December 31, 1997 New Market Opportunities Value
Opportunities Fund Fund Fund
Fund Sub-Account Sub-Account Sub-Account*
Sub-Account*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends $ 114,396 $11,687,092 $ -- $ --
................................................................................................................
Expenses:
Mortality and expense
undertakings (385,192) (3,215,954) (10,320,489) (571,860)
................................................................................................................
Capital gains income -- -- -- --
................................................................................................................
Net realized and
unrealized gain (loss)
on investments:
................................................................................................................
Net realized gain (loss)
on security transactions 8,774 -- (2,114,704) (22,915)
................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (2,182,759) -- 155,175,963 4,884,420
................................................................................................................
Net gain (loss) on investments (2,173,985) -- 153,061,259 4,861,505
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations $(2,444,781) $ 8,471,138 $142,740,770 $4,289,645
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Statement of Operations (continued)
- ----------------------------------------------------------------------------------------------------------------
For the year ended U.S.Government Utilities Vista Voyager
December 31, 1997 and High Growth Fund Fund
Quality Bond and Income Sub-Account* Sub-Account
Fund Fund
Sub-Account Sub-Account
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends $34,307,649 $13,727,770 $ 5,472 $ 3,567,783
................................................................................................................
Expenses:
Mortality and expense
undertakings (7,406,918) (5,429,363) (524,031) (26,331,715)
................................................................................................................
Capital gains income -- 18,719,685 -- 76,888,318
................................................................................................................
Net realized and
unrealized gain (loss)
on investments:
................................................................................................................
Net realized gain (loss)
on security transactions 1,827,985 1,649,879 (123,252) (585,530)
................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 7,319,022 62,148,682 7,829,883 359,796,040
................................................................................................................
Net gain (loss) on investments 9,147,007 63,798,561 7,706,631 359,210,510
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations $36,047,738 $90,816,653 $7,188,072 $413,334,896
- ----------------------------------------------------------------------------------------------------------------
*From inception, January 2, 1997 to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT -- HARTFORD LIFE INSURANCE COMPANY
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------
For the year ended Asia Pacific Diversified Global Asset Global
December 31, 1997 Growth Income Allocation Growth
Fund Fund Fund Fund
Sub-Account Sub-Account Sub-Account Sub-Account
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 286,716 $ 10,935,700 $ 7,734,396 $ 5,584,154
................................................................................................................
Capital gains income -- 2,352,102 24,114,921 16,781,057
................................................................................................................
Net realized gain (loss)
on security transactions (317,227) (2,032) 382,203 1,854,347
................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (7,411,215) 3,452,605 41,346,816 58,240,028
................................................................................................................
Net increase (decrease)
in net assets resulting
from operations (7,441,726) 16,738,375 73,578,336 82,459,586
................................................................................................................
Unit Transactions:
Purchases 6,824,313 54,269,125 39,248,244 60,530,559
................................................................................................................
Net transfers (7,793,253) 6,390,705 2,130,067 (14,835,954)
................................................................................................................
Surrenders (2,299,932) (17,669,198) (30,639,160) (43,839,765)
................................................................................................................
Net annuity transactions 6,521 103,403 2,282 109,879
................................................................................................................
Net increase (decrease)
in net assets resulting
from unit transactions (3,262,351) 43,094,035 10,741,433 1,964,719
................................................................................................................
Total increase (decrease)
in net assets (10,704,077) 59,832,410 84,319,769 84,424,305
................................................................................................................
Net Assets
Beginning of period 48,411,228 254,285,806 402,536,491 637,760,679
- ----------------------------------------------------------------------------------------------------------------
End of period $37,707,151 $314,118,216 $486,856,260 $722,184,984
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Statement of Changes in Net Assets (continued)
- ----------------------------------------------------------------------------------------------------------------
For the year ended Growth High Yield International International
December 31, 1997 and Income Fund Growth Growth
Fund Sub-Account Fund and Income
Sub-Account Sub-Account* Fund
Sub-Account*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 16,099,755 $ 21,220,896 $ 431,084 $ 2,256,907
................................................................................................................
Capital gains income 170,606,295 3,112,539 -- --
................................................................................................................
Net realized gain (loss)
on security transactions (549,025) 667,197 225,798 52,035
................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 566,542,304 22,952,048 1,259,962 2,257,219
................................................................................................................
Net increase (decrease)
in net assets resulting
from operations 752,699,329 47,952,680 1,916,844 4,566,161
................................................................................................................
Unit Transactions:
Purchases 539,289,509 71,464,742 27,282,314 42,203,655
................................................................................................................
Net transfers 132,038,932 (2,036,158) 27,001,396 41,543,461
................................................................................................................
Surrenders (244,974,411) (38,465,815) (1,358,447) (2,094,535)
................................................................................................................
Net annuity transactions 635,758 313,873 6,177 47,601
................................................................................................................
Net increase (decrease)
in net assets resulting
from unit transactions 426,989,788 31,276,642 52,931,440 81,700,182
................................................................................................................
Total increase (decrease)
in net assets 1,179,689,117 79,229,322 54,848,284 86,266,343
................................................................................................................
Net Assets
Beginning of period 3,157,226,740 374,239,278 -- --
- ----------------------------------------------------------------------------------------------------------------
End of period $4,336,915,857 $453,468,600 $54,848,284 $86,266,343
- ----------------------------------------------------------------------------------------------------------------
*From inception, January 2, 1997 to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT -- HARTFORD LIFE INSURANCE COMPANY
Statement of Changes in Net Assets (continued)
- ----------------------------------------------------------------------------------------------------------------
For the year ended International Money New New
December 31, 1997 New Market Opportunities Value
Opportunities Fund Fund Fund
Fund Sub-Account Sub-Account Sub-Account*
Sub-Account*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ (270,796) $ 8,471,138 $(10,320,489) $ (571,860)
................................................................................................................
Capital gains income -- -- -- --
................................................................................................................
Net realized gain (loss)
on security transactions 8,774 -- (2,114,704) (22,915)
................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (2,182,759) -- 155,175,963 4,884,420
................................................................................................................
Net increase (decrease)
in net assets resulting
from operations (2,444,781) 8,471,138 142,740,770 4,289,645
................................................................................................................
Unit Transactions:
Purchases 23,052,814 77,901,178 115,804,514 34,449,270
................................................................................................................
Net transfers 20,167,867 (22,892,448) 4,241,130 38,150,975
................................................................................................................
Surrenders (1,113,600) (61,475,251) (39,637,945) (1,885,996)
................................................................................................................
Net annuity transactions 2,781 118,204 224,473 26,487
................................................................................................................
Net increase (decrease)
in net assets resulting
from unit transactions 42,109,862 (6,348,317) 80,632,172 70,740,736
................................................................................................................
Total increase (decrease)
in net assets 39,665,081 2,122,821 223,372,942 75,030,381
................................................................................................................
Net Assets
Beginning of period -- 200,165,442 637,179,257 --
- ----------------------------------------------------------------------------------------------------------------
End of period $39,665,081 $202,288,263 $860,552,199 $75,030,381
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Statement of Changes in Net Assets (continued)
- ----------------------------------------------------------------------------------------------------------------
For the year ended U.S.Government Utilities Vista Voyager
December 31, 1997 and High Growth Fund Fund
Quality Bond and Income Sub-Account* Sub-Account
Fund Fund
Sub-Account Sub-Account
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 26,900,731 $ 8,298,407 $ (518,559) $ (22,763,932)
................................................................................................................
Capital gains income -- 18,719,685 -- 76,888,318
................................................................................................................
Net realized gain (loss)
on security transactions 1,827,985 1,649,879 (123,252) (585,530)
................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 7,319,022 62,148,682 7,829,883 359,796,040
................................................................................................................
Net increase (decrease)
in net assets resulting
from operations 36,047,738 90,816,653 7,188,072 413,334,896
................................................................................................................
Unit Transactions:
Purchases 31,430,418 28,593,076 32,854,577 197,024,558
................................................................................................................
Net transfers (38,035,230) (17,843,601) 30,909,118 (13,299,198)
................................................................................................................
Surrenders (48,896,007) (25,522,719) (2,131,040) (121,850,857)
................................................................................................................
Net annuity transactions 34,145 72,442 85,985 6,165
................................................................................................................
Net increase (decrease)
in net assets resulting
from unit transactions (55,466,674) (14,700,802) 61,718,640 61,880,668
................................................................................................................
Total increase (decrease)
in net assets (19,418,936) 76,115,851 68,906,712 475,215,564
................................................................................................................
Net Assets
Beginning of period 548,341,644 371,586,845 -- 1,668,789,169
- ----------------------------------------------------------------------------------------------------------------
End of period $528,922,708 $447,702,696 $68,906,712 $2,144,004,733
- ----------------------------------------------------------------------------------------------------------------
*From inception, January 2, 1997 to December 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT -- HARTFORD LIFE INSURANCE COMPANY
Statement of Changes in Net Assets (continued)
- ----------------------------------------------------------------------------------------------------------------
For the year ended Asia Pacific Diversified Global Asset Global
December 31, 1997 Growth Income Allocation Growth
Fund Fund Fund Fund
Sub-Account Sub-Account Sub-Account Sub-Account
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ (137,843) $ 8,534,227 $ 10,574,919 $ 2,735,317
................................................................................................................
Capital gains income -- -- 10,208,810 14,952,454
................................................................................................................
Net realized gain (loss)
on security transactions 180,349 (9,498) 11,236 (368,347)
................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 2,188,856 7,589,668 26,749,142 60,231,105
................................................................................................................
Net increase (decrease)
in net assets resulting
from operations 2,231,362 16,114,397 47,544,107 77,550,529
................................................................................................................
Unit Transactions:
Purchases 24,103,150 78,745,859 49,901,252 102,414,450
................................................................................................................
Net transfers 12,679,087 1,285,402 4,108,990 38,279,315
................................................................................................................
Surrenders (1,160,030) (11,170,399) (21,942,668) (26,697,907)
................................................................................................................
Net annuity transactions -- 26,491 315,926 (360,949)
................................................................................................................
Net increase (decrease)
in net assets resulting
from unit transactions 35,622,207 68,887,353 32,383,500 113,634,909
................................................................................................................
Total increase (decrease)
in net assets 37,853,569 85,001,750 79,927,607 191,185,438
................................................................................................................
Net Assets
Beginning of period 10,557,659 169,284,056 322,608,884 446,575,241
- ----------------------------------------------------------------------------------------------------------------
End of period $48,411,228 $254,285,806 $402,536,491 $637,760,679
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Statement of Changes in Net Assets (continued)
- ----------------------------------------------------------------------------------------------------------------
For the year ended Growth High Yield Money New
December 31, 1997 and Income Fund Market Opportunities
Fund Sub-Account Fund Fund
Sub-Account Sub-Account Sub-Account
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 63,144,879 $ 15,598,437 $ 7,033,009 $ (6,560,512)
................................................................................................................
Capital gains income 44,966,829 -- -- --
................................................................................................................
Net realized gain (loss)
on security transactions (119,281) 604,070 -- (537,118)
................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 375,339,725 17,363,712 -- 19,710,674
................................................................................................................
Net increase (decrease)
in net assets resulting
from operations 483,332,152 33,566,219 7,033,009 12,613,044
................................................................................................................
Unit Transactions:
Purchases 623,379,338 81,521,969 125,814,162 302,081,027
................................................................................................................
Net transfers 87,339,610 5,520,147 (50,945,524) 98,087,677
................................................................................................................
Surrenders (132,049,687) (25,045,085) (30,618,592) (18,683,639)
................................................................................................................
Net annuity transactions 242,494 69,497 (22,317) (4,351)
................................................................................................................
Net increase (decrease)
in net assets resulting
from unit transactions 578,911,755 62,066,528 44,227,729 381,480,714
................................................................................................................
Total increase (decrease)
in net assets 1,062,243,907 95,632,747 51,260,738 394,093,758
................................................................................................................
Net Assets
Beginning of period 2,094,982,833 278,606,531 148,904,704 243,085,499
- ----------------------------------------------------------------------------------------------------------------
End of period $3,157,226,740 $374,239,278 $200,165,442 $637,179,257
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Statement of Changes in Net Assets Assets (continued)
- ----------------------------------------------------------------------------------------------
For the year ended U.S.Government Utilities Voyager
December 31, 1997 and High Growth Fund
Quality Bond and Income Sub-Account
Fund Fund
Sub-Account Sub-Account
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income (loss) $ 25,865,267 $ 7,750,056 $ 4,886,439
..............................................................................................
Capital gains income -- -- 49,032,686
..............................................................................................
Net realized gain (loss)
on security transactions 413,617 264,294 (1,123,420)
..............................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (21,471,355) 38,048,693 88,321,232
..............................................................................................
Net increase (decrease)
in net assets resulting
from operations 4,807,529 46,063,043 141,116,937
..............................................................................................
Unit Transactions:
Purchases 65,538,442 42,225,920 352,615,157
..............................................................................................
Net transfers (41,339,935) (20,057,197) 50,130,623
..............................................................................................
Surrenders (43,800,649) (19,191,965) (63,033,275)
..............................................................................................
Net annuity transactions 279,752 52,741 (914,363)
..............................................................................................
Net increase (decrease)
in net assets resulting
from unit transactions (19,322,390) 3,029,499 338,798,142
..............................................................................................
Total increase (decrease)
in net assets (14,514,861) 49,092,542 479,915,079
..............................................................................................
Net Assets
Beginning of period 562,856,505 322,494,303 1,188,874,090
- ----------------------------------------------------------------------------------------------
End of period $548,341,644 $371,586,845 $1,668,789,169
- ----------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT --
HARTFORD LIFE INSURANCE COMPANY
Notes to Financial Statements
December 31, 1997
1. ORGANIZATION:
Putnam Capital Manager Trust Separate Account (the Account) is a
separate investment account within Hartford Life 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 the various mutual 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). Cost of
investments sold is determined on the basis of identified cost. Dividend
and capital gains income are 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, 1997.
C) 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.
D) 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:
A) Mortality and Expense Undertakings -- The Company, as issuer of
variable annuity contracts, provides the mortality and expense
undertakings and, with respect to the Account, receives a maximum annual
fee of 1.25% of the Account's average daily net assets. The Company also
provides administrative services and receives an annual fee of 0.15% of
the Account's average daily net assets.
B) Deduction of other Fees -- Annual maintenance fees and state premium
taxes are deducted through termination of units of interest from
applicable contract owners' accounts, in accordance with the terms of
the contracts.
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company:
We have audited the accompanying Consolidated Balance Sheets of Hartford Life
Insurance Company (the "Company") and subsidiaries as of December 31, 1997 and
1996, and the related Consolidated Statements of Income, Stockholder's Equity
and Cash Flows for each of the three years in the period ended December 31,
1997. These consolidated financial statements and the schedules referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedules 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Hartford Life
Insurance Company and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in Index to
Consolidated Financial Statements and Schedules are presented for the purpose of
complying with the Securities and Exchange Commission's rules and are not part
of the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
January 27, 1998
<PAGE>
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1997 1996 1995
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Premiums and other considerations............... $1,637 $1,705 $1,487
Net investment income........................... 1,368 1,397 1,328
Net realized capital gains (losses)............. 4 (213) (11)
------ ------ ------
Total revenues................................ 3,009 2,889 2,804
------ ------ ------
Benefits, claims and expenses
Benefits, claims and claim adjustment
expenses....................................... 1,379 1,535 1,422
Amortization of deferred policy acquisition
costs.......................................... 335 234 199
Dividends to policyholders...................... 240 635 675
Other expenses.................................. 586 427 317
------ ------ ------
Total benefits, claims and expenses........... 2,540 2,831 2,613
------ ------ ------
Income before income tax expense................ 469 58 191
Income tax expense.............................. 167 20 62
------ ------ ------
Net income........................................ $ 302 $ 38 $ 129
------ ------ ------
------ ------ ------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
-----------------
1997 1996
------- -------
<S> <C> <C>
(IN MILLIONS,
EXCEPT FOR SHARE
DATA)
Assets
Investments
Fixed maturities, available for sale, at fair
value (amortized cost of $13,885 and
$13,579)....................................... $14,176 $13,624
Equity securities, at fair value................ 180 119
Policy loans, at outstanding balance............ 3,756 3,836
Other investments, at cost...................... 47 56
------- -------
Total investments............................. 18,159 17,635
Cash............................................ 54 43
Premiums receivable and agents' balances........ 18 137
Accrued investment income....................... 330 407
Reinsurance recoverables........................ 6,325 6,259
Deferred policy acquisition costs............... 3,315 2,760
Deferred income tax............................. 348 474
Other assets.................................... 352 357
Separate account assets......................... 69,055 49,690
------- -------
Total assets.................................. $97,956 $77,762
------- -------
------- -------
Liabilities
Future policy benefits.......................... $ 3,270 $ 2,474
Other policyholder funds........................ 21,034 22,134
Other liabilities............................... 2,254 1,572
Separate account liabilities.................... 69,055 49,690
------- -------
Total liabilities............................. 95,613 75,870
------- -------
Stockholder's Equity
Common stock -- 1,000 shares authorized, issued
and outstanding, par value $5,690.............. 6 6
Additional paid in capital...................... 1,045 1,045
Net unrealized capital gains on securities, net
of tax......................................... 179 30
Retained earnings............................... 1,113 811
------- -------
Total stockholder's equity.................... 2,343 1,892
------- -------
Total liabilities and stockholder's equity...... $97,956 $77,762
------- -------
------- -------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
NET UNREALIZED
CAPITAL GAINS
ADDITIONAL (LOSSES) ON TOTAL
COMMON PAID IN SECURITIES, RETAINED STOCKHOLDER'S
STOCK CAPITAL NET OF TAX EARNINGS EQUITY
------ -------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
Balance, December 31, 1994.............. $6 $ 826 $(654) $ 644 $ 822
Net income............................ -- -- -- 129 129
Capital contribution.................. -- 181 -- -- 181
Change in net unrealized capital gains
(losses) on securities, net of tax... -- -- 597 -- 597
--
------ ------ ----------- ------
Balance, December 31, 1995.............. 6 1,007 (57) 773 1,729
Net income............................ -- -- -- 38 38
Capital contribution.................. -- 38 -- -- 38
Change in net unrealized capital gains
(losses) on securities, net of tax... -- -- 87 -- 87
--
------ ------ ----------- ------
Balance, December 31, 1996.............. 6 1,045 30 811 1,892
Net income............................ -- -- -- 302 302
Change in net unrealized capital gains
(losses) on securities, net of tax... -- -- 149 -- 149
--
------ ------ ----------- ------
Balance, December 31, 1997.............. $6 $1,045 $179 $1,113 $2,343
--
--
------ ------ ----------- ------
------ ------ ----------- ------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
------------------------------
1997 1996 1995
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Operating Activities
Net income............................ $ 302 $ 38 $ 129
Adjustments to reconcile net income to
cash provided by operating activities
Depreciation and amortization......... 8 14 21
Net realized capital (gains) losses... (4) 213 11
Decrease (increase) in deferred income
taxes................................ 40 (102) (172)
Increase in deferred policy
acquisition costs.................... (555) (572) (379)
Decrease (increase) in premiums
receivable and agents' balances...... 119 10 (81)
Decrease (increase) in accrued
investment income.................... 77 (13) (16)
Decrease (increase) in other assets... 52 (132) (177)
(Increase) decrease in reinsurance
recoverables......................... (416) 179 (35)
Increase (decrease) in liabilities for
future policy benefits............... 796 (92) 483
Increase in other liabilities......... 379 477 281
-------- -------- --------
Cash provided by operating
activities......................... 798 20 65
-------- -------- --------
Investing Activities
Purchases of fixed maturity
investments.......................... (6,231) (5,747) (6,228)
Sales of fixed maturity investments... 4,232 3,459 4,845
Maturities and principal paydowns of
fixed maturity investments........... 2,329 2,693 1,741
Net sales (purchases) of other
investments.......................... 24 (107) (871)
Net (purchases) sales of short-term
investments.......................... (638) 84 (24)
-------- -------- --------
Cash (used for) provided by
investing activities............... (284) 382 (537)
-------- -------- --------
Financing Activities
Capital contribution.................. -- 38 --
Net (disbursements for) receipts from
investment and universal life-type
contracts (charged against) credited
to policyholder accounts............. (503) (443) 498
-------- -------- --------
Cash (used for) provided by
financing activities............... (503) (405) 498
-------- -------- --------
Increase (decrease) in cash........... 11 (3) 26
Cash -- beginning of year............. 43 46 20
-------- -------- --------
Cash -- end of year................... $ 54 $ 43 $ 46
-------- -------- --------
-------- -------- --------
Supplemental Disclosure of Cash Flow
Information:
Net Cash Paid During the Year for:
Income taxes.......................... $ 9 $ 189 $ 162
Noncash Financing Activities:
Capital contribution.................. $ -- $ -- $ 181
-------- -------- --------
-------- -------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS EXCEPT PER SHARE DATA UNLESS OTHERWISE STATED)
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
These consolidated financial statements include Hartford Life Insurance
Company and its wholly-owned subsidiaries (the "Company"), ITT Hartford Life and
Annuity Insurance Company ("ILA") and ITT Hartford International Life
Reassurance Corporation ("HLRe"), formerly American Skandia Life Reinsurance
Corporation. The Company is a wholly-owned subsidiary of Hartford Life and
Accident Insurance Company ("HLA"), a wholly-owned subsidiary of Hartford Life,
Inc. ("Hartford Life"). Hartford Life is a direct subsidiary of Hartford
Accident and Indemnity Company ("HA&I"), an indirect subsidiary of The Hartford
Financial Services Group, Inc. ("The Hartford"). On February 10, 1997, Hartford
Life filed a registration statement, as amended, with the Securities and
Exchange Commission relating to an Initial Public Offering ("IPO") of the
Hartford Life's Class A Common Stock. Pursuant to the IPO on May 22, 1997,
Hartford Life sold to the public 26 million shares at $28.25 per share and
received net proceeds of $687. Of the proceeds, $527 was used to retire debt
related to Hartford Life's outstanding promissory notes and line of credit with
the remaining $160 contributed by Hartford Life to HLA to support growth in its
core businesses.
On December 19, 1995, ITT Industries, Inc. (formerly ITT Corporation)
("ITT") distributed all the outstanding shares of capital stock of The Hartford
to ITT stockholders of record on such date. As a result, The Hartford became an
independent, publicly traded company.
Along with its parent, the Company is a leading insurance and financial
services company which provides (a) investment products such as individual
variable annuities and fixed market value adjusted annuities, deferred
compensation and retirement plan services and mutual funds for savings and
retirement needs; (b) life insurance for income protection and estate planning;
and (c) employee benefits products such as group life and group disability
insurance and corporate owned life insurance.
2. SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
These consolidated financial statements present the financial position,
results of operations and cash flows of the Company. All material intercompany
transactions and balances between the Company, its subsidiaries and affiliates
have been eliminated. The consolidated financial statements are prepared on the
basis of generally accepted accounting principles which differ materially from
the statutory accounting practices prescribed by various insurance regulatory
authorities.
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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The most
significant estimates include those used in determining deferred policy
acquisition costs and the liability for future policy benefits and other
policyholder funds. Although some variability is inherent in these estimates,
management believes the amounts provided are adequate.
Certain reclassifications have been made to prior year financial information
to conform to the current year presentation.
(B) CHANGES IN ACCOUNTING PRINCIPLES
In December 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") No. 97-3 "Accounting by Insurance
and Other Enterprises for Insurance Related Assessments". This SOP provides
guidance on accounting by insurance and other enterprises for assessments
related to insurance activities. Specifically, the SOP provides guidance on when
a guaranty fund or other assessment should be recognized, how to measure the
liability, and what information should be disclosed. This SOP will be effective
for fiscal years beginning after December 15, 1998. Adoption of SOP 97-3 is not
expected to have a material impact on the Company's financial condition or
results of operations.
On November 14, 1996, the Emerging Issues Task Force ("EITF") reached a
consensus on Issue No. 96-12, "Recognition of Interest Income and Balance Sheet
Classification of Structured Notes". This EITF issue requires companies to
record income on certain structured securities on a retrospective interest
method. The Company adopted EITF No. 96-12 for structured securities acquired
after November 14, 1996. Adoption of EITF No. 96-12 did not have a material
effect on the Company's financial condition or results of operations.
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities"
which is effective for transfers and servicing of financial
<PAGE>
- --------------------------------------------------------------------------------
assets and extinguishments of liabilities occurring after December 31, 1996.
This statement established criteria for determining whether transferred assets
should be accounted for as sales or secured borrowings. Subsequently, in
December 1996, the FASB issued SFAS No. 127, "Deferral of Effective Date of
Certain Provisions of FASB Statement No. 125", which defers the effective date
of certain provisions of SFAS No. 125 for one year. Adoption of SFAS No. 125 is
not expected to have a material effect on the Company's financial condition or
results of operations.
Effective January 1, 1996, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of". This statement establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. Adoption of SFAS No. 121 did not
have a material effect on the Company's financial condition or results of
operations.
The Company's cash flows were not impacted by these changes in accounting
principles.
(C) REVENUE RECOGNITION
Revenues for universal life-type policies and investment products consist of
policy charges for the cost of insurance, policy administration and surrender
charges assessed to policy account balances and are recognized in the period in
which services are provided. Premiums for traditional life insurance and
disability policies are recognized as revenues when they are due from
policyholders.
(D) FUTURE POLICY BENEFITS AND OTHER POLICYHOLDER FUNDS
Liabilities for future policy benefits are computed by the net level premium
method using interest rate assumptions varying from 3% to 11% and withdrawal and
mortality assumptions appropriate at the time the policies were issued. Health
reserves, which are the result of sales of group long-term and short-term
disability, stop loss, Medicare Supplement and individual disability products,
are stated at amounts determined by estimates on individual cases and estimates
of unreported claims based on past experience. Liabilities for universal
life-type and investment contracts are stated at policyholder account values
before surrender charges.
(E) POLICYHOLDER REALIZED CAPITAL GAINS AND LOSSES
Realized capital gains and losses on security transactions associated with
the Company's immediate participation guaranteed contracts are excluded from
revenues and deferred over the expected maturity of the securities, since under
the terms of the contracts the realized gains and losses will be credited to
policyholders in future years as they are entitled to receive them.
(F) INVESTMENTS
The Company's investments in fixed maturities include bonds and commercial
paper which are considered "available for sale" and accordingly are carried at
fair value with the after-tax difference from cost reflected as a component of
Stockholder's Equity designated "Net unrealized capital gains (losses) on
securities, net of tax". Equity securities, which include common and
non-redeemable preferred stocks, are carried at fair values with the after-tax
difference from cost reflected in Stockholder's Equity. Policy loans are carried
at outstanding balance which approximates fair value. Net realized capital gains
and losses, after deducting pension policyholders' share, are reported as a
component of revenue and are determined on a specific identification basis.
The Company's accounting policy for impairment requires recognition of an
other than temporary impairment charge on a security if it is determined that
the Company is unable to recover all amounts due under the contractual
obligations of the security. In addition, for securities expected to be sold, an
other than temporary impairment charge is recognized if the Company does not
expect the fair value of a security to recover to cost or amortized cost prior
to the expected date of sale. Once an impairment charge has been recorded, the
Company then continues to review the other than temporarily impaired securities
for appropriate valuation on an on-going basis.
During 1996, it was determined that certain individual securities within the
investment portfolio supporting the Company's block of guaranteed rate contract
business written prior to 1995 ("Closed Book GRC") could not recover to
amortized cost prior to sale. Therefore, an other than temporary impairment loss
of $88, after-tax, was recorded.
(G) DERIVATIVE INSTRUMENTS
The Company uses a variety of derivative instruments including swaps, caps,
floors, forwards and exchange traded financial futures and options as part of an
overall risk management strategy. These instruments are used as a means of
hedging exposure to price, foreign currency and/ or interest rate risk on
planned investment purchases or existing assets and liabilities. The Company
does not hold or issue derivative instruments for trading purposes. The
Company's accounting for derivative instruments used to manage risk is in
accordance with the concepts established in SFAS No. 80, "Accounting for Futures
Contracts", SFAS No. 52, "Foreign Currency Translation", AICPA SOP 86-2,
"Accounting for Options" and various EITF pronouncements. Written options are
used, in all cases in conjunction with other assets and derivatives, as part of
the Company's asset and liability management strategy. Derivative instruments
are carried at values consistent with the asset or liability being hedged.
Derivative instruments used to hedge fixed maturities or equity securities are
carried at fair value
<PAGE>
- --------------------------------------------------------------------------------
with the after-tax difference from cost reflected in Stockholder's Equity.
Derivative instruments used to hedge other invested assets or liabilities are
carried at cost.
Derivative instruments must be designated at inception as a hedge and
measured for effectiveness both at inception and on an on-going basis. The
Company's minimum correlation threshold for hedge designation is 80%. If
correlation, which is assessed monthly and measured based on a rolling three
month average, falls below 80%, hedge accounting will be terminated. Derivative
instruments used to create a synthetic asset must meet synthetic accounting
criteria including designation at inception and consistency of terms between the
synthetic and the instrument being replicated. Consistent with industry
practice, synthetic instruments are accounted for like the financial instrument
it is intended to replicate. Derivative instruments which fail to meet risk
management criteria, subsequent to acquisition, are marked to market with the
impact reflected in the Consolidated Statements of Income.
Gains or losses on financial futures contracts entered into in anticipation
of the investment of future receipt of product cash flows are deferred and, at
the time of the ultimate investment purchase, reflected as an adjustment to the
cost basis of the purchased asset. Gains or losses on futures used in invested
asset risk management are deferred and adjusted into the cost basis of the
hedged asset when the contract futures are closed, except for futures used in
duration hedging which are deferred and basis adjusted on a quarterly basis. The
basis adjustments are amortized into net investment income over the remaining
asset life.
Open forward commitment contracts are marked to market through Stockholder's
Equity. Such contracts are accounted for at settlement by recording the purchase
of the specified securities at the previously committed price. Gains or losses
resulting from the termination of forward commitment contracts before the
delivery of the securities are recognized immediately in the Consolidated
Statements of Income as a component of net investment income.
The cost of options entered into as part of a risk management strategy are
basis adjusted to the underlying asset or liability and amortized over the
remaining life of the option. Gains or losses on expiration or termination are
adjusted into the basis of the underlying asset or liability and amortized over
the remaining asset life.
Interest rate swaps involve the periodic exchange of payments without the
exchange of underlying principal or notional amounts. Net receipts or payments
are accrued and recognized over the life of the swap agreement as an adjustment
to investment income. Should the swap be terminated, the gain or loss is
adjusted into the basis of the asset or liability and amortized over the
remaining life. Should the hedged asset be sold or liability terminated without
terminating the swap position, any swap gains or losses are immediately
recognized in net investment income. Interest rate swaps purchased in
anticipation of an asset purchase ("anticipatory transaction") are recognized
consistent with the underlying asset components such that the settlement
component is recognized in the Consolidated Statements of Income while the
change in market value is recognized as an unrealized capital gain or loss.
Premiums paid on purchased floor or cap agreements and the premium received
on issued cap or floor agreements (used for risk management) are adjusted into
the basis of the applicable asset and amortized over the asset life. Gains or
losses on termination of such positions are adjusted into the basis of the asset
or liability and amortized over the remaining asset life. Net payments are
recognized as an adjustment to income or basis adjusted and amortized depending
on the specific hedge strategy.
Forward exchange contracts and foreign currency swaps are accounted for in
accordance with SFAS No. 52. Changes in the spot rate of instruments designated
as hedges of the net investment in a foreign subsidiary are reflected in the
cumulative translation adjustments component of Stockholder's Equity. Cash flows
from futures, options, and swaps, accounted for as hedges, are included with the
cash flows of the item being hedged.
(H) SEPARATE ACCOUNTS
The Company maintains separate account assets and liabilities which are
reported at fair value. Separate account assets are segregated from other
investments, and investment income and gains and losses accrue directly to the
policyholders. Separate accounts reflect two categories of risk assumption:
non-guaranteed separate accounts, wherein the policyholder assumes the
investment risk, and guaranteed separate account assets, wherein the Company
contractually guarantees either a minimum return or account value to the
policyholder.
(I) DEFERRED POLICY ACQUISITION COSTS
Policy acquisition costs, which include commissions and certain underwriting
expenses associated with acquiring business, are deferred and amortized over the
estimated lives of the contracts, generally 20 years. Generally, acquisition
costs are deferred and amortized using the retrospective deposit method. Under
the retrospective deposit method, acquisition costs are amortized in proportion
to the present value of expected gross profits from surrender charges,
investment, mortality and expense margins. Actual gross profits can vary from
management's estimates resulting in increases or decreases in the rate of
amortization. Management periodically updates these estimates, when appropriate,
and evaluates the recoverability of the deferred acquisition cost asset. When
appropriate, management revises its assumptions on the estimated gross profits
of these contracts and the cumulative amortization
<PAGE>
- --------------------------------------------------------------------------------
for the books of business are reestimated and adjusted by a cumulative charge or
credit to income.
The Company's other expenses include the following:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Commissions........................... $ 976 $ 848 $ 619
Deferred acquisition costs............ (862) (823) (618)
Other................................. 472 402 316
--------- --------- ---------
Total other expenses.............. $ 586 $ 427 $ 317
--------- --------- ---------
--------- --------- ---------
</TABLE>
(J) DIVIDENDS TO POLICYHOLDERS
Certain life insurance policies contain dividend payment provisions that
enable the policyholder to participate in the earnings of the life insurance
subsidiaries of the Company. The participating insurance in force accounted for
55%, 44%, and 41% in 1997, 1996, and 1995, respectively, of total insurance in
force.
3. INITIAL PUBLIC OFFERING
On February 10, 1997, Hartford Life filed a registration statement, as
amended, with the Securities and Exchange Commission, relating to the IPO of
Hartford Life's Class A Common Stock. Pursuant to the IPO on May 22, 1997,
Hartford Life sold to the public 26 million shares at $28.25 per share and
received proceeds, net of offering expenses, of $687. Of the proceeds, $527 was
used to retire debt related to Hartford Life's promissory notes outstanding and
line of credit. The remaining $160 was contributed by Hartford Life to HLA to
support growth in its core businesses. The 26 million shares sold in the
Offering represent approximately 18.6% of the equity ownership in Hartford Life
and approximately 4.4% of the combined voting power of Hartford Life's Class A
and Class B Common Stock. The Hartford owns all of the 114 million outstanding
shares of Class B Common Stock of Hartford Life, representing approximately
81.4% of the equity ownership in Hartford Life and approximately 95.6% of the
combined voting power of Hartford Life's Class A and Class B Common Stock.
Holders of Class A Common Stock generally have identical rights to the holders
of Class B Common Stock except that the holders of Class A Common Stock are
entitled to one vote per share while holders of Class B Common Stock are
entitled to five votes per share on all matters submitted to a vote of Hartford
Life's stockholders.
4. INVESTMENTS AND DERIVATIVE INSTRUMENTS
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Interest income from fixed
maturities......................... $ 932 $ 918 $ 996
Interest income from policy loans... 425 477 342
Income from other investments....... 26 15 1
--------- --------- ---------
Gross investment income............. 1,383 1,410 1,339
Less: Investment expenses........... 15 13 11
--------- --------- ---------
Net investment income............... $ 1,368 $ 1,397 $ 1,328
--------- --------- ---------
--------- --------- ---------
</TABLE>
(B) COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------------
1997 1996 1995
----- --------- ---------
<S> <C> <C> <C>
Fixed maturities......................... $ (7) $ (201) $ 23
Equity securities........................ 12 2 (6)
Real estate and other.................... (1) (4) (25)
Less: Increase in liability to
policyholders for realized capital
gains................................... -- (10) (3)
--- --------- ---------
Net realized capital gains (losses) $ 4 $ (213) $ (11)
--- --------- ---------
--- --------- ---------
</TABLE>
(C) NET UNREALIZED CAPITAL GAINS (LOSSES) ON EQUITY SECURITIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Gross unrealized capital gains.............. $ 14 $ 13 $ 4
Gross unrealized capital losses............. -- (1) (2)
--- --- ---
Net unrealized capital gains................ 14 12 2
Deferred income tax expense................. 5 4 1
--- --- ---
Net unrealized capital gains, net of tax.... 9 8 1
Balance -- beginning of year................ 8 1 (6)
--- --- ---
Net change in unrealized capital gains
(losses) on equity securities.............. $ 1 $ 7 $ 7
--- --- ---
--- --- ---
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
(D) NET UNREALIZED CAPITAL GAINS (LOSSES) ON FIXED MATURITIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Gross unrealized capital gains................................... $ 371 $ 386 $ 529
Gross unrealized capital losses.................................. (80) (341) (569)
Unrealized capital (gains) losses credited to policyholders...... (30) (11) (52)
----- ----- -----
Net unrealized capital gains (losses)............................ 261 34 (92)
Deferred income tax expense (benefit)............................ 91 12 (34)
----- ----- -----
Net unrealized capital gains (losses), net of tax................ 170 22 (58)
Balance -- beginning of year..................................... 22 (58) (648)
----- ----- -----
Net change in unrealized capital gains (losses) on fixed
maturities...................................................... $ 148 $ 80 $ 590
----- ----- -----
----- ----- -----
</TABLE>
(E) FIXED MATURITY INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored)...................................... $ 217 $ 3 $ (1) $ 219
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored) -- asset backed...................... 1,175 64 (35) 1,204
States, municipalities and political subdivisions................ 211 7 (1) 217
International governments........................................ 376 20 (3) 393
Public utilities................................................. 871 26 (3) 894
All other corporate including international...................... 5,033 200 (25) 5,208
All other corporate -- asset backed.............................. 4,091 41 (8) 4,124
Short-term investments........................................... 1,318 -- -- 1,318
Certificates of deposit.......................................... 593 10 (4) 599
---------- ----- ----- ----------
Total fixed maturities....................................... $13,885 $371 $(80) $14,176
---------- ----- ----- ----------
---------- ----- ----- ----------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored)...................................... $ 166 $ 12 $ (3) $ 175
U.S. gov't and gov't agencies and authorities
(guaranteed and sponsored) -- asset backed...................... 1,970 161 (128) 2,003
States, municipalities and political subdivisions................ 373 6 (11) 368
International governments........................................ 281 12 (4) 289
Public utilities................................................. 877 12 (8) 881
All other corporate including international...................... 4,656 120 (107) 4,669
All other corporate -- asset backed.............................. 3,601 49 (59) 3,591
Short-term investments........................................... 1,655 14 (21) 1,648
---------- ----- ----------- ----------
Total fixed maturities....................................... $13,579 $386 $(341) $13,624
---------- ----- ----------- ----------
---------- ----- ----------- ----------
</TABLE>
The amortized cost and estimated fair value of fixed maturity investments at
December 31, 1997 by estimated maturity year are shown below. Expected
maturities differ from contractual maturities due to call or prepayment
provisions. Asset backed securities, including MBS and CMO's, are distributed to
maturity year based on the Company's estimates of the rate of future prepayments
of principal over the remaining lives of the securities. These estimates are
developed using prepayment speeds provided in broker consensus data. Such
estimates are derived from prepayment speeds experienced at the interest rate
levels projected for the applicable underlying collateral and can be expected to
vary from actual experience.
MATURITY
<TABLE>
<CAPTION>
AMORTIZED
COST FAIR VALUE
----------- -----------
<S> <C> <C>
One year or less......................... $ 2,838 $ 2,867
Over one year through five years......... 5,528 5,595
Over five years through ten years........ 3,094 3,156
Over ten years........................... 2,425 2,558
----------- -----------
Total................................ $ 13,885 $ 14,176
----------- -----------
----------- -----------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Sales of fixed maturities, excluding short-term fixed maturities, for the
years ended December 31, 1997, 1996 and 1995 resulted in proceeds of $4.2
billion, $3.5 billion and $4.8 billion, gross realized capital gains of $169,
$87 and $91, gross realized capital losses (including writedowns) of $176, $298
and $72, respectively. Sales of equity security investments for the years ended
December 31, 1997, 1996 and 1995 resulted in proceeds of $132, $74 and $64,
gross realized capital gains of $12, $2 and $28 and gross realized capital
losses of $0, $0 and $59, respectively.
(F) CONCENTRATION OF CREDIT RISK
Excluding investments in U.S. government and agencies, the Company has not
invested in the securities of a single issuer in amounts greater than 10% of
stockholder's equity at December 31, 1997.
(G) DERIVATIVE INSTRUMENTS
The Company utilizes a variety of derivative instruments, including swaps,
caps, floors, forwards and exchange traded futures and options, in accordance
with Company policy and in order to achieve one of three Company approved
objectives: to hedge risk arising from interest rate, price or currency exchange
rate volatility; to manage liquidity; or, to control transactions costs. The
Company utilizes derivative instruments to manage market risk through four
principal risk management strategies: hedging anticipated transactions, hedging
liability instruments, hedging invested assets and hedging portfolios of assets
and/or liabilities. The Company does not trade in these instruments for the
express purpose of earning trading profits.
The Company maintains a derivatives counterparty exposure policy which
establishes market-based credit limits, favors long-term financial stability and
creditworthiness, and typically requires credit enhancement/credit risk reducing
agreements. Credit risk is measured as the amount owed to the Company based on
current market conditions and potential payment obligations between the Company
and its counterparties. Credit exposures are quantified weekly and netted, and
collateral is pledged to or held by the Company to the extent the current value
of derivatives exceed exposure policy thresholds.
The Company's derivative program is monitored by an internal compliance unit
and is reviewed by senior management and Hartford Life's Finance Committee.
Notional amounts, which represent the basis upon which pay or receive amounts
are calculated and are not reflective of credit risk, pertaining to derivative
financial instruments (excluding the Company's guaranteed separate account
derivative investments), totaled $6.5 billion and $9.9 billion ($4.6 billion and
$7.4 billion related to the Company's investments, $1.9 billion and $2.5 billion
on the Company's liabilities) at December 31, 1997 and 1996, respectively.
The table below provides a summary of derivative instruments held by the
Company at December 31, 1997 and 1996, segregated by major investment and
liability category:
<TABLE>
<CAPTION>
1997 -- AMOUNT HEDGED (NOTIONAL AMOUNTS)
----------------------------------------------------------------------------------
PURCHASED
CAPS, FOREIGN
TOTAL ISSUED FLOORS INTEREST CURRENCY TOTAL
CARRYING CAPS & AND FUTURES RATE SWAPS NOTIONAL
ASSETS HEDGED VALUE FLOORS OPTIONS (2) SWAPS (3) AMOUNT
- ----------------------------------- -------- -------- ---------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset backed securities (excluding
inverse floaters and
anticipatory)..................... $ 5,253 $ 500 $ 1,404 $ 28 $ 221 $-- $ 2,153
Inverse floaters (1)............... 75 47 80 -- 25 -- 152
Anticipatory (4)................... -- -- -- -- -- -- --
Other bonds and notes.............. 7,531 462 460 22 1,258 91 2,293
Short-term investments............. 1,317 -- -- -- -- -- --
-------- -------- ---------- --- ---------- --- ----------
Total fixed maturities......... 14,176 1,009 1,944 50 1,504 91 4,598
Equity securities, policy loans and
other investments................. 3,983 -- -- -- -- -- --
-------- -------- ---------- --- ---------- --- ----------
Total investments.............. $ 18,159 $ 1,009 $ 1,944 $ 50 $ 1,504 $91 $ 4,598
Long term debt................. -- -- -- -- -- -- --
Other policy claims............ -- 10 150 -- 1,747 -- 1,907
-------- -------- ---------- --- ---------- --- ----------
Total derivatives -- notional
value........................... $ 1,019 $ 2,094 $ 50 $ 3,251 $91 $ 6,505
-------- -------- ---------- --- ---------- --- ----------
Total derivatives -- fair value.... $ (8) $ 23 $ -- $ 19 $(6) $ 28
-------- -------- ---------- --- ---------- --- ----------
-------- -------- ---------- --- ---------- --- ----------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 --AMOUNT HEDGED (NOTIONAL AMOUNTS)
--------------------------------------------------------------------------
FOREIGN
TOTAL ISSUED PURCHASED INTEREST CURRENCY TOTAL
CARRYING CAPS & CAPS, FLOORS RATE SWAPS NOTIONAL
ASSETS HEDGED VALUE FLOORS AND OPTIONS FUTURES (2) SWAPS (3) AMOUNT
- ----------------------------------- -------- ------- ------------ ----------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset backed securities (excluding
inverse floaters and
anticipatory)..................... $ 5,242 $ 500 $ 2,454 $ -- $ 941 $ -- $3,895
Inverse floaters (1)............... 352 98 856 -- 346 -- 1,300
Anticipatory (4)................... -- -- -- 132 -- -- 132
Other bonds and notes.............. 7,369 425 440 5 1,079 125 2,074
Short-term investments............. 661 -- -- -- -- -- --
-------- ------- ------------ ----- --------- -------- -------
Total fixed maturities......... 13,624 1,023 3,750 137 2,366 125 7,401
Equity securities, policy loans and
other investments................. 4,011 -- -- -- 19 -- 19
-------- ------- ------------ ----- --------- -------- -------
Total investments.............. $ 17,635 $ 1,023 $ 3,750 $ 137 $ 2,385 $ 125 $7,420
Long term debt................. -- -- -- -- -- -- --
Other policy claims............ -- 10 150 -- 2,351 -- 2,511
-------- ------- ------------ ----- --------- -------- -------
Total derivatives -- notional
value......................... $ 1,033 $ 3,900 $ 137 $ 4,736 $ 125 $9,931
-------- ------- ------------ ----- --------- -------- -------
Total derivatives -- fair
value......................... $ (10) $ 38 $ -- $ 2 $ (9 ) $ 21
-------- ------- ------------ ----- --------- -------- -------
-------- ------- ------------ ----- --------- -------- -------
</TABLE>
- ---------
(1) Inverse floaters are variations of collateralized mortgage obligations
("CMO's") for which the coupon rates move inversely with an index rate such as
the London interbank offered rate ("LIBOR"). The risk to principal is considered
negligible as the underlying collateral for the securities is guaranteed or
sponsored by government agencies. To address the volatility risk created by the
coupon variability, the Company uses a variety of derivative instruments,
primarily interest rate swaps, caps and floors.
(2) As of December 31, 1997 and 1996, over 44% and 39% , respectively, of
the notional futures contracts expire within one year.
(3) As of December 31, 1997 and 1996, over 16% and 42%, respectively, of
foreign currency swaps expire within one year; the balance matures over the
succeeding 9 years.
(4) Deferred gains and losses on anticipatory transactions are included in
the carrying value of fixed maturities in the Consolidated Balance Sheets. At
the time of the ultimate purchase, they are reflected as a basis adjustment to
the purchased asset. At December 31, 1997, the Company had $0 deferred gains and
losses. At December 31, 1996, the Company had $0.9 in net deferred gains for
futures, interest rate swaps and purchased options of which $2.0 was basis
adjusted in 1997.
The following is a reconciliation of notional amounts by derivative type and
strategy as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 MATURITIES/ DECEMBER 31, 1997
NOTIONAL AMOUNT ADDITIONS TERMINATIONS (1) NOTIONAL AMOUNT
----------------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
BY DERIVATIVE TYPE
Caps......................................... $1,755 $ 14 $ 530 $1,239
Floors....................................... 3,168 28 1,332 1,864
Swaps/Forwards............................... 4,861 941 2,460 3,342
Futures...................................... 137 131 218 50
Options...................................... 10 -- -- 10
------- -------- ------- -------
Total.................................... $9,931 $1,114 $4,540 $6,505
------- -------- ------- -------
BY STRATEGY
Liability.................................... $2,511 $ 191 $ 795 $1,907
Anticipatory................................. 132 4 136 --
Asset........................................ 2,112 739 1,046 1,805
Portfolio.................................... 5,176 180 2,563 2,793
------- -------- ------- -------
Total.................................... $9,931 $1,114 $4,540 $6,505
------- -------- ------- -------
------- -------- ------- -------
</TABLE>
- ---------
(1) During 1997, the Company had no significant gains or losses on terminations
of hedge positions using derivative financial instruments.
<PAGE>
- --------------------------------------------------------------------------------
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 "Disclosure about Fair
Value of Financial Instruments" requires disclosure of fair value information of
financial instruments. For certain financial instruments where quoted market
prices are not available, other independent valuation techniques and assumptions
are used. Because considerable judgment is used, these estimates are not
necessarily indicative of amounts that could be realized in a current market
exchange. SFAS No. 107 excludes certain financial instruments from disclosure,
including insurance contracts.
For cash, short-term investments, accounts receivable, policy loans,
mortgage loans and other liabilities, carrying amounts on the Consolidated
Balance Sheets approximate fair value.
Fair value for fixed maturities and marketable equity securities are based
upon quoted market prices. Fair value for securities that are not publicly
traded are analytically determined. These amounts are disclosed in Note 4 of
Notes to Consolidated Financial Statements.
The fair value of derivative financial instruments, including swaps, caps,
floors, futures, options and forward commitments, is determined using a pricing
model which is validated through quarterly comparison to dealer quoted prices.
Amounts are disclosed in Note 4 of Notes to Consolidated Financial Statements.
Fair value for partnerships and trusts are based on external market
valuations from partnership and trust management.
Other policy claims and benefits payable fair value information is
determined by estimating future cash flows, discounted at the current market
rate.
The carrying amount and fair values of the Company's financial instruments
at December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- ------- --------- -------
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities..................................... $ 14,176 $14,176 $ 13,624 $13,624
Equity securities.................................... 180 180 119 119
Policy loans......................................... 3,756 3,756 3,836 3,836
Mortgage loans....................................... -- -- 2 2
Investments in partnerships, trusts and other........ 47 91 54 104
LIABILITIES
Other policy benefits................................ $ 11,769 $11,755 $ 11,707 $11,469
</TABLE>
6. SEPARATE ACCOUNTS
The Company maintained separate account assets and liabilities totaling
$69.1 billion and $49.7 billion at December 31, 1997 and 1996, respectively,
which are reported at fair value. Separate account assets are segregated from
other investments and net investment income and net realized capital gains and
losses accrue directly to the policyholder. Separate accounts reflect two
categories of risk assumption: non-guaranteed separate accounts totaling $58.6
billion and $39.4 billion at December 31, 1997 and 1996, respectively, wherein
the policyholder assumes the investment risk, and guaranteed separate accounts
totaling $10.5 and $10.3 billion at December 31, 1997 and 1996, respectively,
wherein the Company contractually guarantees either a minimum return or account
value to the policyholder. Included in the non-guaranteed category were policy
loans totaling $1.9 billion and $2.0 billion at December 31, 1997 and 1996,
respectively. Net investment income (including net realized capital gains and
losses) and interest credited to policyholders on separate account assets are
not reflected in the Consolidated Statements of Income.
Separate account management fees were $699, $538 and $387 in 1997, 1996 and
1995, respectively. The guaranteed separate accounts include fixed market value
adjusted individual annuity and modified guaranteed life insurance. The average
credited interest rate on these contracts was 6.52% at December 31, 1997. The
assets that support these liabilities were comprised of $10.2 billion in fixed
maturities as of December 31, 1997. The portfolios are segregated from other
investments and are managed to minimize liquidity and interest rate risk. In
order to minimize the risk of disintermediation associated with early
withdrawals, fixed MVA annuity and modified guaranteed life insurance contracts
carry a graded surrender charge as well as a market value adjustment. Additional
investment risk is hedged using a variety of derivatives which totaled $119 in
carrying value and $3.0 billion in notional amounts as of December 31, 1997.
<PAGE>
- --------------------------------------------------------------------------------
7. INCOME TAX
Hartford Life 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 beneficially own, directly or
indirectly, at least 80% of the combined voting power and 80% of the value of
the outstanding capital stock of Hartford Life, the Company will be included for
Federal income tax purposes in the affiliated group of which The Hartford is the
common parent. To the extent allowed by law, it is the intention of The Hartford
and its subsidiaries to continue to file a single consolidated Federal income
tax return. The Company will continue to remit (receive from) The Hartford a
current income tax provision (benefit) computed in accordance with such tax
sharing agreement. The Company's effective tax rate was 36%, 35% and 32% in
1997, 1996 and 1995, respectively.
Income tax expense is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------
1997 1996 1995
---- ------ ------
<S> <C> <C> <C>
Current...................................... $119 $ 122 $ 211
Deferred..................................... 48 (102) (149)
---- ------ ------
Income tax expense......................... $167 $ 20 $ 62
---- ------ ------
---- ------ ------
</TABLE>
A reconciliation of the tax provision at the U.S. Federal statutory rate to
the provision for income taxes is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
--------- ----- -----
<S> <C> <C> <C>
Tax provision at the U.S. Federal statutory
rate...................................... $ 164 $ 20 $ 67
Tax-exempt income.......................... -- -- (3)
Foreign tax credit......................... -- -- (4)
Other...................................... 3 -- 2
--------- --- ---
Total.................................... $ 167 $ 20 $ 62
--------- --- ---
--------- --- ---
</TABLE>
Deferred tax assets include the following at December 31:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Tax return deferred acquisition costs............ $ 639 $ 514
Financial statement deferred acquisition costs
and reserves.................................... (366) (242)
Employee benefits................................ 5 8
Net unrealized capital gains on securities....... (96) (16)
Investments and other............................ 166 210
--------- ---------
Total.......................................... $ 348 $ 474
--------- ---------
--------- ---------
</TABLE>
Income taxes paid were $9, $189 and $162 in 1997, 1996 and 1995,
respectively. The Company had a current tax payment of $27 due to The Hartford
at December 31, 1997 and a tax refund due from The Hartford of $72 at December
31, 1996.
Prior to the Tax Reform Act of 1984, the Life Insurance Company Income Tax
Act of 1959 permitted the deferral from taxation of a portion of statutory
income under certain circumstances. In these situations, the deferred income was
accumulated in a "Policyholders' Surplus Account" and will be taxable in the
future only under conditions which management considers to be remote; therefore,
no Federal income taxes have been provided on this deferred income. The balance
for tax return purposes of the Policyholders' Surplus Account as of December 31,
1997 was $37.
8. POSTRETIREMENT BENEFIT AND SAVINGS PLANS
(A) PENSION PLANS
The Company's employees are included in The Hartford's noncontributory
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 Company'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 the Company's group pension contracts. The
cost to the Company was approximately $5, $5 and $2 in 1997, 1996 and 1995,
respectively.
The Company also provides, through The Hartford, certain health care and
life insurance benefits for eligible retired employees. A substantial portion of
the Company's employees may become eligible for these benefits upon retirement.
The Company's contribution for health care benefits will depend on the retiree's
date of retirement and years of service. In addition, the plan has a defined
dollar cap which limits average Company contributions. The Company 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 by The
Hartford, was immaterial to the results of operations for 1997, 1996 and 1995,
respectively.
The assumed rate in the per capita cost of health care (the health care
trend rate) was 8.5% for 1997, decreasing ratably to 6.0% in the year 2001.
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,
<PAGE>
- --------------------------------------------------------------------------------
the effect will be amortized over the average future service of covered
employees.
(B) INVESTMENT AND SAVINGS PLAN
Substantially all employees of the Company 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 Hartford Life or
certain other investments, are matched, up to 3% of compensation, by the
Company. The cost to the Company for the above-mentioned plans was approximately
$2 in 1997.
9. STOCK COMPENSATION PLANS
During the second quarter of 1997, Hartford Life adopted the 1997 HLI
Incentive Stock Plan (the "Plan"). Under the Plan, options granted may be either
non-qualified options or incentive stock options qualifying under Section 422A
of the Internal Revenue Code. The aggregate number of shares of Class A Common
Stock which may be awarded in any one year shall be subject to an annual limit.
The maximum number of shares of Class A Common Stock which may be granted under
the Plan in each year shall be 1.5% of the total issued and outstanding shares
of Hartford Life Class A Common Stock and treasury stock as reported in the
Annual Report on Hartford Life's Form 10-K for the preceding year plus unused
portions of such limit from prior years. In addition, no more than 5,000,000
shares of Class A Common Stock shall be cumulatively available for awards of
incentive stock options under the Plan, and no more than 20% of the total number
of shares on a cumulative basis shall be available for restricted stock and
performance shares.
All options granted have an exercise price equal to the market price of
Hartford Life's stock on the date of grant and an option's maximum term is ten
years. Certain nonperformance based options become exercisable upon the
attainment of specified market price appreciation of Hartford Life's common
shares or at seven years after the date of grant, while the remaining
nonperformance based options become exercisable over a three year period
commencing with the date of grant.
Also included in the Plan are long term performance awards which become
payable upon the attainment of specific performance goals achieved over a three
year period.
During the second quarter of 1997, Hartford Life established the HLI
Employee Stock Purchase Plan ("ESPP"). Under this plan, eligible employees of
Hartford Life and the Company may purchase Class A Common Stock of Hartford Life
at a 15% discount from the lower of the market price at the beginning or end of
the quarterly offering period. Hartford Life may sell up to 2,700,000 shares of
stock to eligible employees. Hartford Life sold 54,316 shares under the ESPP in
1997.
10. REINSURANCE
The Company cedes insurance to other insurers, including its parent HLA, in
order to limit its maximum loss. Such transfer does not relieve the Company of
its primary liability. The Company also assumes insurance from other insurers.
Failure of reinsurers to honor their obligations could result in losses to the
Company. The Company evaluates the financial condition of its reinsurers and
monitors concentration of credit risk.
Net premiums and other considerations were comprised of the following:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Gross premiums............................... $ 2,164 $ 2,138 $ 1,545
Assumed...................................... 159 190 591
Ceded........................................ (686) (623) (649)
--------- --------- ---------
Net premiums and other considerations...... $ 1,637 $ 1,705 $ 1,487
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company ceded approximately $76, $100 and $101 of group life premium in
1997, 1996 and 1995, respectively, representing $33.6 billion, $33.3 billion and
$32.3 billion of insurance in force, respectively. The Company ceded $339, $318
and $320 of accident and health premium to HLA in 1997, 1996 and 1995,
respectively. The Company assumed $89, $101 and $103 of premium in 1997, 1996
and 1995, respectively, representing $8.2 billion, $8.5 billion and $8.5 billion
of individual life insurance in force, respectively, from HLA.
Life reinsurance recoveries, which reduce death and other benefits,
approximated $158, $140 and $220 for the years ended December 31, 1997, 1996 and
1995, respectively.
As of December 31, 1997, the Company had reinsurance recoverables of $5.0
billion from Mutual Benefit Life Assurance Corporation ("Mutual Benefit"),
supported by assets in a security trust of $5.0 billion (including policy loans
and accrued interest of $4.5 billion). The risk of Mutual Benefit becoming
insolvent is mitigated by the reinsurance agreement's requirement that the
assets be kept in a security trust with the Company as sole beneficiary. The
Company has no other significant reinsurance-related concentrations of credit
risk.
11. RELATED PARTY TRANSACTIONS
Transactions of the Company with HA&I and its affiliates relate principally
to tax settlements, reinsurance, insurance coverage, rental and service fees,
payment of dividends and capital contributions. 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 employee
benefit plan expenses, are initially paid by The Hartford. Direct expenses are
allocated to the Company using specific identification, and indirect expenses
are allocated using other applicable methods. Indirect expenses include those
for corporate areas which,
<PAGE>
- --------------------------------------------------------------------------------
depending on type, are allocated based on either a percentage of direct expenses
or on utilization. Indirect expenses allocated to the Company by The Hartford
were $34, $40, and $45 in 1997, 1996 and 1995, respectively. Management believes
that the methods used are reasonable.
The rent paid to Hartford Fire for space occupied by the Company was $7 in
1997, and $3 in 1996 and 1995. The Company expects to pay annual rent of $7 in
1998 and 1999, respectively, $12 in 2000 and 2001, respectively, $13 in 2002 and
$87 thereafter, over the remaining term of the sublease, which expires on
December 31, 2009. Rental expense is recognized over a level basis over the term
of the sublease and amounted to approximately $9 in 1997 and $8 in 1996 and
1995.
12. STATUTORY RESULTS
The domestic insurance subsidiaries of Hartford Life prepare their statutory
financial statements in accordance with accounting practices prescribed by the
State of Connecticut Insurance Department. Prescribed statutory accounting
practices include publications of the National Association of Insurance
Commissioners ("NAIC"), as well as state laws, regulations, and general
administrative rules.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Statutory net income......................... $ 214 $ 144 $ 112
------ ------ ------
Statutory surplus............................ $1,441 $1,207 $1,125
------ ------ ------
------ ------ ------
</TABLE>
A significant percentage of the consolidated statutory surplus is
permanently reinvested or is subject to various state regulatory restrictions
which limit the payment of dividends without prior approval. The total amount of
statutory dividends which may be paid by the insurance subsidiaries of the
Company in 1998 is estimated to be $144.
13. 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 monetary and punitive damages have
been asserted. Although there can be no assurances, management, at the present
time, does not anticipate that the ultimate liability arising from such pending
or threatened litigation will have a material effect on the financial condition
or operating results 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. A large part of the
assessments paid by the Company's insurance subsidiaries pursuant to these laws
may be used as credits for a portion of the Company's insurance subsidiaries'
premium taxes. The Company paid guaranty fund assessments of approximately $15,
$11 and $10 in 1997, 1996 and 1995, respectively, of which $4, $5, and $6 were
estimated to be creditable against premium taxes.
14. BUSINESS SEGMENT INFORMATION
The Company, along with its parent, sells financial products such as fixed
and variable annuities, retirement plan services, and life and disability
insurance on both an individual and a group basis. The Company divides its core
businesses into three segments: Annuity, Individual Life Insurance, and Employee
Benefits. The Company also maintains a Guaranteed Investment Contracts segment,
which is primarily comprised of guaranteed rate contract business written prior
to 1995 and a Corporate Operation. The Annuity segment offers individual
variable annuities and fixed market value adjusted annuities, deferred
compensation and retirement plan services, mutual funds, investment management
services and other financial products. The Individual Life Insurance segment
sells a variety of individual life insurance products, including variable life,
universal life, interest-sensitive whole life, and term life policies. The
Employee Benefits segment sells group insurance products, including group life,
group short and long-term disability and corporate owned life insurance, and
engages in certain international operations. The Guaranteed Investment Contracts
segment sells a limited amount of guaranteed investment contracts and contains
Closed Book GRC. Through its Corporate Operation, the Company reports items that
are not directly allocable to any of its business segments. Included in the
Corporate Operation are unallocated income and expense and certain other items
not directly allocable to any segment. Net realized capital gains and losses are
recognized in the period of realization, but are allocated to the segments
utilizing durations of the segment portfolios.
<PAGE>
- --------------------------------------------------------------------------------
The following table outlines revenues, operating income and assets by
business segment:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Annuity.............................................. $ 1,269 $ 968 $ 759
Individual Life Insurance............................ 487 440 383
Employee Benefits.................................... 972 1,366 1,273
Guaranteed Investment Contracts...................... 241 34 337
Corporate Operation.................................. 40 81 52
-------- -------- --------
Total revenues..................................... $ 3,009 $ 2,889 $ 2,804
-------- -------- --------
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)
Annuity.............................................. $ 317 $ 226 $ 171
Individual Life Insurance............................ 85 68 56
Employee Benefits.................................... 53 44 37
Guaranteed Investment Contracts...................... -- (346) (103)
Corporate Operation.................................. 14 66 30
-------- -------- --------
Total income before income tax expense............. $ 469 $ 58 $ 191
-------- -------- --------
-------- -------- --------
ASSETS
Annuity $ 69,152 $ 52,877 $ 39,732
Individual Life Insurance............................ 4,918 3,753 3,173
Employee Benefits.................................... 18,196 14,708 13,494
Guaranteed Investment Contracts...................... 3,347 4,533 6,069
Corporate Operation.................................. 2,343 1,891 1,729
-------- -------- --------
Total assets....................................... $ 97,956 $ 77,762 $ 64,197
-------- -------- --------
-------- -------- --------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
SCHEDULE I -- SUMMARY OF INVESTMENTS OTHER THAN INVESTMENTS IN AFFILIATES
AS OF DECEMBER 31, 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
AMOUNT AT
WHICH
FAIR SHOWN ON
TYPE OF INVESTMENT COST VALUE BALANCE SHEET
- --------------------------------------------- ------- ------- --------------
<S> <C> <C> <C>
Fixed Maturities
Bonds and Notes
U. S. gov't and gov't agencies and
authorities (guaranteed and sponsored) $ 217 $ 219 $ 219
U. S. gov't and gov't agencies and
authorities (guaranteed and sponsored) --
asset-backed.............................. 1,175 1,204 1,204
States, municipalities and political
subdivisions.............................. 211 217 217
International governments.................. 376 393 393
Public utilities........................... 871 894 894
All other corporate including
international............................. 5,033 5,208 5,208
All other corporate -- asset-backed........ 4,091 4,124 4,124
Short-term investments..................... 1,318 1,318 1,318
Certificates of deposit...................... 593 599 599
------- ------- -------
Total fixed maturities....................... 13,885 14,176 14,176
------- ------- -------
Equity Securities
Common Stocks
Public utilities........................... -- -- --
Banks, trusts and insurance companies...... -- -- --
Industrial and miscellaneous............... 166 180 180
Nonredeemable preferred stocks............. -- -- --
------- ------- -------
Total equity securities...................... 166 180 180
------- ------- -------
Total fixed maturities and equity
securities.................................. 14,051 14,356 14,356
------- ------- -------
Real Estate.................................. -- -- --
Other Investments
Mortgage loans on real estate.............. -- -- --
Policy loans............................... 3,756 3,756 3,756
Investments in partnerships, trusts and
other..................................... 47 91 47
------- ------- -------
Total other investments...................... 3,803 3,847 3,803
------- ------- -------
Total investments............................ $17,854 $18,203 $18,159
------- ------- -------
------- ------- -------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
FUTURE
POLICY
BENEFITS,
UNPAID OTHER
DEFERRED CLAIMS POLICY
POLICY AND CLAIM CLAIMS AND PREMIUMS NET
ACQUISITION ADJUSTMENT BENEFITS AND OTHER INVESTMENT
SEGMENT COSTS EXPENSES PAYABLE CONSIDERATIONS INCOME
- --------------------------------------------- ----------- --------- ---------- --------------- ---------
<S> <C> <C> <C> <C> <C>
1997
Annuity...................................... $2,478 $2,070 $ 6,838 $ 769 $ 500
Individual Life Insurance.................... 837 392 2,182 323 164
Employee Benefits............................ -- 780 9,232 541 431
Guaranteed Investment Contracts.............. -- -- 2,782 2 239
Corporate Operation.......................... -- 28 -- 2 34
----------- --------- ---------- ------ ---------
Consolidated operations...................... $3,315 $3,270 $21,034 $1,637 $1,368
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
1996
Annuity...................................... $2,030 $1,526 $ 6,016 $ 535 $ 433
Individual Life Insurance.................... 730 346 2,160 287 153
Employee Benefits............................ -- 574 9,834 881 485
Guaranteed Investment Contracts.............. -- -- 4,124 2 251
Corporate Operation.......................... -- 28 -- -- 75
----------- --------- ---------- ------ ---------
Consolidated operations...................... $2,760 $2,474 $22,134 $1,705 $1,397
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
1995
Annuity...................................... $1,561 $1,314 $ 5,661 $ 319 $ 400
Individual Life Insurance.................... 615 706 1,932 246 137
Employee Benefits............................ 12 325 9,285 922 351
Guaranteed Investment Contracts.............. -- 28 5,720 -- 377
Corporate Operation.......................... -- -- -- -- 63
----------- --------- ---------- ------ ---------
Consolidated operations...................... $2,188 $2,373 $22,598 $1,487 $1,328
----------- --------- ---------- ------ ---------
----------- --------- ---------- ------ ---------
<CAPTION>
NET BENEFITS, AMORTIZATION
REALIZED CLAIMS AND OF DEFERRED
CAPITAL CLAIM POLICY
GAINS ADJUSTMENT ACQUISITION DIVIDENDS TO OTHER
SEGMENT (LOSSES) EXPENSES COSTS POLICYHOLDERS EXPENSES
- --------------------------------------------- ----------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
1997
Annuity...................................... $ -- $ 445 $250 $ -- $ 257
Individual Life Insurance.................... -- 242 83 -- 77
Employee Benefits............................ -- 425 2 240 252
Guaranteed Investment Contracts.............. -- 232 -- -- 9
Corporate Operation.......................... 4 35 -- -- (9)
----------- ----------- ----- ----- -----
Consolidated operations...................... $ 4 $1,379 $335 $240 $ 586
----------- ----------- ----- ----- -----
----------- ----------- ----- ----- -----
1996
Annuity...................................... $ -- $ 412 $174 $ -- $ 156
Individual Life Insurance.................... -- 245 59 -- 68
Employee Benefits............................ -- 546 -- 635 141
Guaranteed Investment Contracts.............. (219) 332 1 -- 47
Corporate Operation.......................... 6 -- -- -- 15
----------- ----------- ----- ----- -----
Consolidated operations...................... $(213) $1,535 $234 $635 $ 427
----------- ----------- ----- ----- -----
----------- ----------- ----- ----- -----
1995
Annuity...................................... $ -- $ 317 $117 $ -- $ 114
Individual Life Insurance.................... -- 203 70 -- 54
Employee Benefits............................ -- 424 -- 675 137
Guaranteed Investment Contracts.............. -- 453 12 -- 15
Corporate Operation.......................... (11) 25 -- -- (3)
----------- ----------- ----- ----- -----
Consolidated operations...................... $ (11) $1,422 $199 $675 $ 317
----------- ----------- ----- ----- -----
----------- ----------- ----- ----- -----
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
SCHEDULE IV -- REINSURANCE
(IN MILLIONS)
<TABLE>
<CAPTION>
CEDED TO ASSUMED FROM PERCENTAGE
GROSS OTHER OTHER NET OF AMOUNT
AMOUNT COMPANIES COMPANIES AMOUNT ASSUMED TO NET
-------- -------------- -------------- -------- ---------------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1997
Life insurance in force........................... $245,487 $ 178,771 $ 33,156 $ 99,872 33.2%
Insurance revenues
Life insurance and annuities.................... 1,818 340 157 1,635 9.6%
Accident and health insurance................... 346 346 2 2 100.0%
-------- -------------- ------- --------
Total insurance revenues.......................... $ 2,164 $ 686 $ 159 $ 1,637 9.7%
-------- -------------- ------- --------
-------- -------------- ------- --------
For the year ended December 31, 1996
Life insurance in force......................... $177,094 $ 106,146 $ 31,957 $102,905 31.1%
Insurance revenues
Life insurance and annuities.................... 1,801 298 169 1,672 10.1%
Accident and health insurance................... 337 325 21 33 63.6%
-------- -------------- ------- --------
Total insurance revenues.......................... $ 2,138 $ 623 $ 190 $ 1,705 11.1%
-------- -------------- ------- --------
-------- -------------- ------- --------
For the year ended December 31, 1995
Life insurance in force......................... $182,716 $ 112,774 $ 26,996 $ 96,938 27.8%
Insurance revenues
Life insurance and annuities.................... 1,232 325 574 1,481 38.8%
Accident and health insurance................... 313 324 17 6 283.3%
-------- -------------- ------- --------
Total insurance revenues.......................... $ 1,545 $ 649 $ 591 $ 1,487 39.7%
-------- -------------- ------- --------
-------- -------------- ------- --------
</TABLE>
<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
Insurance Company ("Hartford") authorizing the establishment of
the Separate Account. (1)
(2) Not applicable.
(3) (a) Principal Underwriter Agreement. (2)
(3) (b) Form of Dealer Agreement. (2)
(4) Form of the Individual Flexible Premium Variable Annuity
Contract. (1)
(5) Form of Application. (1)
(6) (a) Articles of Incorporation of Hartford. (3)
(6) (b) Bylaws of Hartford. (1)
(7) Not applicable.
(8) Form of Participation Agreement.
(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.
- --------
(1) Incorporated by reference to Post-Effective Amendment No. 2, to the
Registration Statement File No. 33-73566, dated May 1, 1995.
(2) Incorporated by reference to Post-Effective Amendment No. 3, to the
Registration Statement File No. 33-73566, dated May 1, 1996.
(3) Incorporated by reference to Post-Effective Amendment No. 16, to the
Registration Statement File No. 33-73566, filed on April 17, 1997.
<PAGE>
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Copy of Power of Attorney.
(16) Organizational Chart.
Item 25. Directors and Officers of the Depositor
- --------------------------------------------------------------------------------
NAME POSITION WITH HARTFORD
- --------------------------------------------------------------------------------
Dong H. Ahn Vice President
- --------------------------------------------------------------------------------
Wendell J. Bossen Vice President
- --------------------------------------------------------------------------------
Gregory A. Boyko Senior Vice President, Chief Financial Officer
and Treasurer
- --------------------------------------------------------------------------------
Peter W. Cummins Senior Vice President
- --------------------------------------------------------------------------------
Ann M. deRaismes Senior Vice President
- --------------------------------------------------------------------------------
Timothy M. Fitch Vice President and Actuary
- --------------------------------------------------------------------------------
David T. Foy Vice President
- --------------------------------------------------------------------------------
Bruce D. Gardner Vice President
- --------------------------------------------------------------------------------
J. Richard Garrett Vice President and Assistant Treasurer
- --------------------------------------------------------------------------------
John P. Ginnetti Executive Vice President and Director, Asset
Management Services, Director*
- --------------------------------------------------------------------------------
William A. Godfrey, III SeniorVice President
- --------------------------------------------------------------------------------
Lynda Godkin Senior Vice President, General Counsel and
Corporate Secretary, Director*
- --------------------------------------------------------------------------------
Lois W. Grady Senior Vice President
- --------------------------------------------------------------------------------
Christopher Graham Vice President
- --------------------------------------------------------------------------------
Mark E. Hunt Vice President
- --------------------------------------------------------------------------------
Stephen T. Joyce Vice President
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
NAME POSITION WITH HARTFORD
- --------------------------------------------------------------------------------
Michael D. Keeler Vice President
- --------------------------------------------------------------------------------
Robert A. Kerzner Senior Vice President
- --------------------------------------------------------------------------------
David N. Levenson Vice President
- --------------------------------------------------------------------------------
Steven M. Maher Vice President and Actuary
- --------------------------------------------------------------------------------
William B. Malchodi, Jr. Vice President
- --------------------------------------------------------------------------------
Raymond J. Marra Vice President
- --------------------------------------------------------------------------------
Thomas M. Marra Executive Vice President and Director Individual
Life and Annuity Division, Director*
- --------------------------------------------------------------------------------
Robert F. Nolan Vice President
- --------------------------------------------------------------------------------
Joseph J. Noto Vice President
- --------------------------------------------------------------------------------
Michael C. O'Halloran Vice President
- --------------------------------------------------------------------------------
Lawrence M. O'Rourke Vice President
- --------------------------------------------------------------------------------
Daniel E. O'Sullivan Vice President
- --------------------------------------------------------------------------------
Craig D. Raymond Senior Vice President and Chief Actuary
- --------------------------------------------------------------------------------
Mary P. Robinson Vice President
- --------------------------------------------------------------------------------
Donald A. Salama Vice President
- --------------------------------------------------------------------------------
Timothy P. Schiltz Vice President
- --------------------------------------------------------------------------------
Lowndes A. Smith President and Chief Operating Officer, Director*
- --------------------------------------------------------------------------------
Keith A. Stevenson Vice President
- --------------------------------------------------------------------------------
Edward A. Sweeney Vice President
- --------------------------------------------------------------------------------
Judith V. Tilber Vice President
- --------------------------------------------------------------------------------
Raymond P. Welnicki Senior Vice President and Director, Employee
Benefit Division, Director*
- --------------------------------------------------------------------------------
Walter C. Welsh Senior Vice President
- --------------------------------------------------------------------------------
Lizabeth H. Zlatkus Senior Vice President, Director*
- --------------------------------------------------------------------------------
David M. Znamieroski Senior Vice President, Director*
- --------------------------------------------------------------------------------
Unless otherwise indicated, the principal business address of each the above
individuals is P.O.
<PAGE>
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 February 28, 1998, there were 118,530 Contract Owners.
Item 28. Indemnification
Under Section 33-772 of the Connecticut General Statutes, unless
limited by its certificate of incorporation, the Registrant must
indemnify a director who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party
because he is or was a director of the corporation against reasonable
expenses incurred by him in connection with the proceeding.
The Registrant may indemnify an individual made a party to a proceeding
because he is or was a director against liability incurred in the
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
Registrant, and, with respect to any criminal proceeding, had no reason
to believe his conduct was unlawful. Conn. Gen. Stat. ss. 33-771(a).
Additionally, pursuant to Conn. Gen. Stat. ss. 33-776, the Registrant
may indemnify officers and employees or agents for liability incurred
and for any expenses to which they becomes subject by reason of being
or having been an employees or officers of the Registrant. Connecticut
law does not prescribe standards for the indemnification of officers,
employees and agents and expressly states that their indemnification
may be broader than the right of indemnification granted to directors.
The foregoing statements are specifically made subject to the detailed
provisions of Section 33-770 et seq.
Notwithstanding the fact that Connecticut law obligates the Registrant
to indemnify a only a director that was successful on the merits in a
suit, under Article VIII, Section 1 of the Registrant=s bylaws, the
Registrant must indemnify both directors and officers of the Registrant
for (1) any claims and liabilities to which they become subject by
reason of being or having been a directors or officers of the company
and legal and (2) other expenses incurred in defending against such
claims, in each case, to the extent such is consistent with statutory
provisions.
Additionally, the directors and officers of Hartford and Hartford
Securities Distribution Company, Inc. ("HSD") are covered under a
directors and officers liability insurance policy issued to The
Hartford Financial Services Group, Inc. and its subsidiaries. Such
policy will reimburse the Registrant for any payments that it shall
make to
<PAGE>
directors and officers pursuant to law and will, subject to certain
exclusions contained in the policy, further pay any other costs,
charges and expenses and settlements and judgments arising from any
proceeding involving any director or officer of the Registrant in his
past or present capacity as such, and for which he may be liable,
except as to any liabilities arising from acts that are deemed to be
uninsurable.
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.
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 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
American Maturity Life Insurance Company - Separate Account AMLVA
(b) Directors and Officers of HSD
Name and Principal Positions and Offices
Business Address With Underwriter
---------------- ----------------
<PAGE>
Lowndes A. Smith President and Chief Executive Officer,
Director
John P. Ginnetti Executive Vice President & Director
Thomas M. Marra Executive Vice President & Director
Peter W. Cummins Senior Vice President
Lynda Godkin Senior Vice President, General Counsel and
Corporate Secretary
Donald E. Waggaman, Jr. Treasurer
George R. Jay Controller
Unless otherwise indicated, the principal business address of each 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.
(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
<PAGE>
Management to American Council 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 duly caused this Registration Statement to be signed
on its behalf, in the City of Hartford, and State of Connecticut on this 10th
day of April, 1998.
HARTFORD LIFE INSURANCE COMPANY -
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT
(Registrant)
*By: /s/ Thomas M. Marra
---------------------------------------------
Thomas M. Marra, Executive Vice President
HARTFORD LIFE INSURANCE COMPANY *By: /s/ Lynda Godkin
(Depositor) ------------------------------
Lynda Godkin
Attorney-in-Fact
*By: /s/ Thomas M. Marra
---------------------------------------------
Thomas M. Marra, Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons and in the capacities and on
the dates indicated.
Gregory A. Boyko, Senior Vice President,
Chief Financial Officer & Treasurer, Director*
John P. Ginnetti, Executive Vice
President, Director *
Lynda Godkin, Senior Vice President,
General Counsel & Corporate Secretary
Thomas M. Marra, Executive Vice *By: /s/ Lynda Godkin
President, Director * -----------------
Lowndes A. Smith, President & Lynda Godkin
Chief Operating Officer, Director * Attorney-In-Fact
Raymond P. Welnicki, Senior Vice
President, Director * Dated: April 10, 1998
Lizabeth H. Zlatkus, Senior Vice President,
Director *
David M. Znamierowski, Senior Vice President,
Director*
<PAGE>
EXHIBIT INDEX
(8) Form of Participation Agreement
(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>
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this [DAY] day of [MONTH], [YEAR], between [FUND NAME],
an open-end management investment company organized as a Massachusetts business
trust (the "Trust"), its investment adviser [ADVISOR NAME] ("Adviser"), HARTFORD
LIFE INSURANCE COMPANY and HARTFORD LIFE AND ANNUITY INSURANCE COMPANY, each a
life insurance company organized under the laws of the State of Connecticut
(collectively, the "Company"), on its own behalf and on behalf of each
segregated asset account of the Company or of such affiliated life insurance
companies set forth on Schedule A, as may be amended from time to time (the
"Accounts").
W I T N E S S E T H:
--------------------
WHEREAS, the Trust has registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and has registered the offer
and sale of its shares under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Trust (the "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets (the "Funds"); and
WHEREAS, the Trust has received an order from the Securities and Exchange
Commission, dated [DATE AND FILE NUMBER OF EXEMPTION ORDER], granting the
variable annuity and variable life insurance separate accounts participating in
the Trust exemptions from the provisions of Sections 9(a), 13(a), 15(a) and
15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to
the extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Exemptive Order"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the 1940 Act and the sale of its shares is registered under the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Company has registered or will register (unless registration
is not required under applicable law) certain variable life insurance policies
and/or variable annuity contracts under the 1933 Act (the "Contracts"); and
WHEREAS, the Company has registered or will register (unless registration
is not
<PAGE>
required under applicable law) each Account as a unit investment trust
under the 1940 Act; and
WHEREAS, the Company desires to utilize shares of one or more Funds on
behalf of each of the Accounts to fund certain of the Contracts;
NOW THEREFORE, in consideration of their mutual promises, the parties agree
as follows:
ARTICLE I
SALE OF TRUST SHARES
1.1 The Trust shall make shares of its Funds available to the Accounts at
the net asset value next computed after receipt of such purchase order by the
Trust (or its agent), as established in accordance with the provisions of the
then current prospectus of the Trust. Shares of a particular Portfolio of the
Trust shall be ordered in such quantities and at such times as determined by the
Company to be necessary to meet the requirements of the Contracts. The Trustees
of the Trust (the "Trustees") may refuse to sell shares of any Portfolio to any
person, or suspend or terminate the offering of shares of any Portfolio if such
action is required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the Trustees acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Portfolio.
1.2 The Trust will redeem any full or fractional shares of any Portfolio
when requested by the Company on behalf of an Account at the net asset value
next computed after receipt by the Trust (or its agent) of the request for
redemption, as established in accordance with the provisions of the then current
prospectus of the Trust. The Trust shall make payment for such shares in the
manner established from time to time by the Trust, but in no event shall payment
be delayed for a greater period than is permitted by the 1940 Act.
1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby appoints
the Company as its agent for the limited purpose of receiving and accepting
purchase and redemption orders resulting from investment in and payments under
the Contracts. Receipt by the Company shall constitute receipt by the Trust
provided that i) such orders are received by the Company in good order prior to
the time the net asset value of each Portfolio is priced in accordance with its
prospectus and ii) the Trust receives notice of such orders by 11:00 a.m. New
York time on the next following Business Day. "Business Day" shall mean any day
on which the New York Stock Exchange is open for trading and on which the Trust
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
1.4 Purchase orders that are transmitted to the Trust in accordance with
Section 1.3 shall be paid no later than 12:00 noon New York time on the next
Business Day after the Trust receives notice of the order. Payments shall be
made in federal funds transmitted by wire.
1.5 Issuance and transfer of the Trust's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Trust will
<PAGE>
be recorded in the appropriate title for each Account or the appropriate
subaccountof each Account.
1.6 The Trust shall furnish prompt notice to the Company of any income
dividends or capital gain distributions payable on the Trust's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional shares of
that Portfolio. The Trust shall notify the Company of the number of shares so
issued as payment of such dividends and distributions.
1.7 The Trust shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available by 7 p.m. New York time.
1.8 The Trust agrees that its shares will be sold only to Participating
Insurance Companies and their separate accounts and to certain qualified pension
and retirement plans to the extent permitted by the Exemptive Order. No shares
of any Portfolio will be sold directly to the general public. The Company
agrees that Trust shares will be used only for the purposes of funding the
Contracts and Accounts listed in Schedule A, as amended from time to time.
1.9 The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and conflicts
of interest corresponding to those contained in Section 2.10 and Article IV of
this Agreement.
ARTICLE II
OBLIGATIONS OF THE PARTIES
2.1 The Trust shall prepare and be responsible for filing with the
Securities and Exchange Commission and any state regulators requiring such
filing all shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and statements
of additional information of the Trust. The Trust shall bear the costs of
registration and qualification of its shares, preparation and filing of the
documents listed in this Section 2.1 and all taxes to which an issuer is subject
on the issuance and transfer of its shares.
2.2 At the option of the Company, the Trust shall either (a) provide the
Company (at the Company's expense) with as many copies of the Trust's current
prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments or supplements to any of the foregoing,
as the Company shall reasonably request; or (b) provide the Company with a
camera ready copy of such documents in a form suitable for printing. The Trust
shall provide the Company with a copy of its statement of additional information
in a form suitable for duplication by the Company. The Trust (at its expense)
shall provide the Company with copies of any Trust-sponsored proxy materials in
such quantity as the Company shall reasonably require for distribution to
Contract owners.
<PAGE>
2.3 The Company shall bear the costs of printing and distributing the
Trust's prospectus, statement of additional information, shareholder reports and
other shareholder communications to owners of and applicants for policies for
which the Trust is serving or is to serve as an investment vehicle. The Company
shall bear the costs of distributing proxy materials (or similar materials such
as voting solicitation instructions) to Contract owners. The Company assumes
sole responsibility for ensuring that such materials are delivered to Contract
owners in accordance with applicable federal and state securities laws.
2.4 The Company shall furnish, or cause to be furnished, to the Trust or
its designee, a copy of each Contract prospectus or statement of additional
information in which the Trust or its investment adviser is named prior to the
filing of such document with the Securities and Exchange Commission. The
Company shall furnish, or shall cause to be furnished, to the Trust or its
designee, each piece of sales literature or other promotional material in which
the Trust or its investment adviser is named, at least ten Business Days prior
to it use. No such material shall be used if the Trust or its designee
reasonably objects to such use within ten Business Days after receipt of such
material.
2.5 The Trust and the Underwriter shall pay no fee or other compensation
to the Company or its Affiliates under this Agreement, except as set forth in
Section 2.7 and except that if the Trust or any Fund adopts and implements a
plan pursuant to Rule 12b-1 to finance distribution expenses, the Underwriter or
the Trust may make payments to the Company in amounts consistent with that 12b-1
plan, subject to review by the trustees of the Trust.
2.6 All expenses incident to performance by the Trust under this Agreement
shall be paid by the Trust. The Trust shall see to it that any offering of its
shares is registered and that all of its shares are authorized for issuance in
accordance with applicable federal law and, if and to the extent deemed
advisable by the Trust, in accordance with applicable state laws prior to their
sale. The Trust shall bear the cost of registration and qualification of the
Trust's shares, preparation and filing of the Trust's prospectus and
registration statement, proxy materials and reports, setting the prospectus in
type, setting in type and printing the proxy materials and reports to
shareholders, the preparation of all statements and notices required by any
federal or state law, and all taxes on the issuance or transfer of the Trust's
shares.
2.7 The Company bears the responsibility and correlative expense for
administrative and support services for Contract owners. The Adviser recognizes
the Company as the sole shareholder of shares of the Trust issued under this
Agreement.
2.8 The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust or its investment
adviser in connection with the sale of the Contracts other than information or
representations contained in and accurately derived from the registration
statement or prospectus for the Trust shares (as such registration statement and
prospectus may be amended or supplemented from time to time), reports of the
Trust, Trust-sponsored proxy statements, or in sales literature or other
promotional material approved by the Trust or its designee, except as required
by legal process or regulatory authorities or with the written permission of the
Trust or its designee.
<PAGE>
2.9 The Trust shall not give any information or make any representations
or statements on behalf of the Company or its Affiliates or concerning the
Company or its Affiliates, the Accounts or the Contracts other than information
or representations contained in and accurately derived from the registration
statement or prospectus for the Contracts (as such registration statement and
prospectus may be amended or supplemented from time to time), or in materials
approved by the Company or its Affiliates for distribution including sales
literature or other promotional materials, except as required by legal process
or regulatory authorities or with the written permission of the Company or its
Affiliates.
2.10 The phrase "sales literature or other promotional material" includes,
but is not limited to, advertisements (such as material published, or designed
for use in a newspaper, magazine or other periodical, radio, television,
telephone or tape recording, videotape display, signs or billboards, motion
pictures, or other public media), sales literature (i.e., any written
communication distributed or made generally available to customers or the
public, including brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training materials or other
communications distributed or made generally available to some or all registered
representatives.
2.11 So long as, and to the extent that the Securities and Exchange
Commission interprets the 1940 Act to require pass-through voting privileges for
variable policyowners, the Company will provide pass-through voting privileges
to owners of policies whose cash values are invested, through the Accounts, in
shares of the Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each registered
Account, the Company will vote shares of the Trust held by the Account and for
which no timely voting instructions from policyowners are received as well as
shares its owns that are held by that Account, in the same proportion as those
shares for which voting instructions are received. With respect to unregistered
Accounts, the Company will vote shares in proportion to all other votes cast by
other Accounts. The Company and its agents will in no way recommend or oppose
or interfere with the solicitation of proxies for Trust shares held by Contract
owners without the prior written consent of the Trust, which consent may be
withheld in the Trust's sole discretion.
2.12 The Company shall notify the Trust of any applicable state insurance
laws that restrict the Funds' investments or otherwise affect the operation of
the Trust and shall notify the Trust of any changes in such laws.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Each Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of Connecticut
and that it has legally and validly established each Account as a segregated
asset account under such law.
<PAGE>
3.2 The Company represents and warrants that each Account (1) has been
registered or, prior to any issuance or sale of the Contracts, will be
registered as a unit investment trust in accordance with the provisions of the
1940 Act or, alternatively (2) has not been registered in proper reliance upon
an exclusion from registration under the 1940 Act.
3.3 The Company represents and warrants that the Contracts or interests in
the Accounts (1) are or, prior to issuance, will be registered as securities
under the 1933 Act or, alternatively (2) are not registered because they are
properly exempt from registration under the 1933 Act or will be offered
exclusively in transactions that are properly exempt from registration under the
1933 Act. The Company further represents and warrants that the Contracts will
be issued and sold in compliance in all material respects with all applicable
federal and state laws; and the sale of the Contracts shall comply in all
material respects with state insurance suitability requirements.
3.4 The Trust represents and warrants that it is duly organized and
validly existing under the laws of the State of Massachusetts.
3.5 The Trust represents and warrants that the Trust shares offered and
sold pursuant to this Agreement will be registered under the 1933 Act and the
Trust shall be registered under the 1940 Act prior to any issuance or sale of
such shares. The Trust shall amend its registration statement under the 1933
Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Trust shall register and qualify its
shares for sale in accordance with the laws of the various states only if and to
the extent deemed advisable by the Trust.
3.6 The Trust represents and warrants that it is currently qualified as a
Regulated Investment company under Subchapter M of the Code and that the
investments of each Portfolio will comply with the diversification requirements
set forth in Section 817(h) of the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder.
3.7 The Trust may elect to make payments to finance distribution expenses
pursuant to Rule 12b-1 under the 1940 Act. To the extent that it decides to
finance distribution expenses pursuant to Rule 12b-1, the Trust undertakes to
have a board of trustees, a majority of whom are not interested persons of the
trust, formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
3.8 For unregistered Accounts, the Company represents and agrees that:
(1) Hartford Securities Distribution Company or Hartford Equity Sales
Company, as applicable, each is the principal underwriter for the
applicable unregistered Accounts and its subdivisions and a
registered broker-dealer under the Securities Exchange Act of
1934;
(2) the Trust shares are and will continue to be the only investment
securities held by the corresponding Account sub-account; and
<PAGE>
(3) with regard to each Series of the Trust, the Company, on behalf
of the corresponding Account sub-account, will:
(a) vote such shares held by it in the same proportion as the
vote of all other holders of such shares; and
(b) refrain from substituting shares of another security for
such shares unless the Securities and Exchange Commission
has approved such substitution in the manner provided in
Section 26 of the 1940 Act.
3.9 The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
The Trust shall not be responsible, and each Company shall take full
responsibility, for determining any jurisdiction in which any qualification or
registration of Trust shares or the Trust by the Trust may be required in
connection with the sale of the Contracts or the indirect interest of any
Contract in the shares of the Trust and advising the Trust thereof at such time
and in such manner as is necessary to permit the Trust to comply.
ARTICLE IV
POTENTIAL CONFLICTS
4.1 The parties acknowledge that the Trust's shares may be made available
for investment to other Participating Insurance Companies. In such event, the
Trustees will monitor the Trust for the existence of any material irreconcilable
conflict between the interests of the contract owners of all Participating
Insurance Companies. An irreconcilable material conflict may arise for a
variety of reasons, including: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial decision in
any relevant proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting instructions given by
variable annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of contract owners.
The Trustees shall promptly inform the Company if they determine that an
irreconcilable material conflict exists and the implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Exemptive Order by
providing the Trustees with all information reasonably necessary for the
Trustees to consider any issues raised including, but not limited to,
information as to a decision by the Company to disregard Contract owner voting
instructions.
4.3 If it is determined by a majority of the Trustees, or a majority of
its disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation with
other Participating Insurance Companies whose contract owners are also affected,
at its expense and to the extent reasonably practicable (as determined by
<PAGE>
the Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing
the assets allocable to some or all of the Accounts from the Trust or any
Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Trust, or submitting the
question of whether or not such segregation should be implemented to a vote of
all affected Contract owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
Contract owners the option of making such a change; and (b) establishing a new
registered management investment company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust gives written
notice that this provision is being implemented. Until the end of such six (6)
month period, the Trust shall continue to accept and implement orders by the
Company for the purchase and redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Trust and terminate this Agreement with
respect to such Account within six (6) months after the Trustees inform the
Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. Until the end of such six (6) month period, the Trust shall continue
to accept and implement orders by the Company for the purchase and redemption of
shares of the Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Company be required to establish a new funding medium for the Contracts if
an offer to do so has been declined by vote of a majority of Contract owners
materially adversely affected by the irreconcilable material conflict. In the
event that the Trustees determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement within six (6)
months after the Trustees inform the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested Trustees.
<PAGE>
4.7 The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonable request so that the
Trustees may fully carry out the duties imposed upon them by the Exemptive
Order, and said reports, materials and data shall be submitted more frequently
if deemed appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Exemptive Order) on terms and conditions materially different
from those contained in the Exemptive Order, then the Trust and/or the
Participating Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3,
as adopted, to the extent such rules are applicable.
ARTICLE V
INDEMNIFICATION
5.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Trust and each of its Trustees, officers, employees and agents
and each person, if any, who controls the Trust within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Article V) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in a registration statement or
prospectus for the Contracts or in the Contracts themselves or in sales
literature generated or approved by the Company on behalf of the Contracts of
Accounts (or any amendment or supplement to any of the foregoing) (collectively,
"Company Documents" for the purposes of this Article V), or arise out of or are
based upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, provided that this indemnity shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement or omission was
made in reliance upon and was accurately derived from written information
furnished to the Company by or on behalf of the Trust for use in Company
Documents or otherwise for use in connection with the sale of the Contracts or
Trust shares; or
(b) arise out of or result from statements or representations (other than
statements or representations contained in and accurately derived from Trust
Documents as defined in Section 5.2(a) or wrongful conduct of the Company or
persons under its control, with respect to the sale or acquisition of the
Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Trust Documents as defined in Section
5.2(a) or the omission or
<PAGE>
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading if such statement or
omission was made in reliance upon and accurately derived from written
information furnished to the Trust by or on behalf of the Company; or
(d) arise out of or result from any failure by the Company to provide the
services or furnish the materials required under the terms of this
Agreement; or
(e) arise out of or result from any material breach of any representation
and/or warranty made by the Company in this Agreement or arise out of or
result from any other material breach of this Agreement by the Company.
5.2 INDEMNIFICATION BY THE ADVISER. The Adviser agrees to indemnify and
hold harmless the Company and each of its directors, officers, employees and
agents and each person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of this Article V) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Trust) or
expenses (including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal counsel
fees incurred in connection therewith) (collectively, "Losses"), to which the
Indemnified Parties may become subject under any statute or regulation, or at
common law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the registration statement or
prospectus for the Trust (or any amendment or supplement thereto),
(collectively, "Trust Documents" for the purposes of this Article V), or arise
out of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement or
omission was made in reliance upon and was accurately derived from written
information furnished to the Trust by or on behalf of the Company for use in
Trust Documents or otherwise for use in connection with the sale of the
Contracts or Trust shares; or
(b) arise out of or result from statements or representations (other than
statements or representations contained in and accurately derived from Company
Documents) or wrongful conduct of the Trust or persons under its control, with
respect to the sale or acquisition of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Company Documents or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading if such statement or
omission was made in reliance upon and accurately derived from written
information furnished to the Company by or on behalf of the Trust; or
(d) arise out of or result from any failure by the Trust to provide the
services or
<PAGE>
furnish the materials required under the terms of this Agreement; or
(e) arise out of or result from any material breach of any representation
and/or warranty made by the Trust in this Agreement or arise out of or result
from any other material breach of this Agreement by the Trust.
5.3 Neither the Company nor the Adviser shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any Losses incurred or assessed against an Indemnified Party that arise from
such Indemnified party's willful misfeasance, bad faith or negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
5.4 Neither the Company nor the Adviser shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified the other party in writing within a reasonable time after
the summons, or other first written notification, giving information of the
nature of the claim shall have been served upon or otherwise received by such
Indemnified Party (or after such Indemnified Party shall have received notice of
service upon or other notification to any designated agent), but failure to
notify the party against whom indemnification is sought of any such claim shall
not relieve that party from any liability which it may have to the Indemnified
party in the absence of Sections 5.1 and 5.2.
5.5 In case any such action is brought against the Indemnified Parties,
the indemnifying party shall be entitled to participate, at its own expense, in
the defense of such action. The indemnifying party also shall be entitled to
assume the defense thereof, with counsel reasonably satisfactory to the party
named in the action. After notice from the indemnifying party to the
Indemnified Party of an election to assume such defense, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the indemnifying party will not be liable to the Indemnified party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
ARTICLE VI
TERMINATION
6.1 This Agreement may be terminated by either party for any reason on any
day after [DATE], upon one year's advance written notice delivered to the other
party.
6.2 Notwithstanding any termination of this Agreement, the Trust shall, at
the option of the Company, continue to make available additional shares of the
Trust (or any Portfolio) pursuant to the terms and conditions of this Agreement
for all Contracts in effect on the effective date of termination of this
Agreement, provided that the Company continues to pay the costs set forth in
Section 2.3.
6.3 The provisions of Article V shall survive the termination of this
Agreement, and
<PAGE>
the provision of Article IV and Section 2.8 shall survive the termination of
this Agreement as long as shares of the Trust are held on behalf of Contract
owners in accordance with Section 6.2.
ARTICLE VII
NOTICES
7.1 Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust:
[FUND] [ADVISOR]
If to the Company:
Hartford Life Insurance Company and Hartford Life and Annuity
200 Hopmeadow Street Insurance Company
Simsbury, CT 06089 200 Hopmeadow Street
Attention: Lynda Godkin Simsbury, CT 06089
General Counsel Attention: Lynda Godkin
General Counsel
ARTICLE VIII
MISCELLANEOUS
8.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Connecticut.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
<PAGE>
8.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Securities and
Exchange Commission, the National Association of Securities Dealers, Inc., and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with an investigation or inquiry relating
to this Agreement or the transactions contemplated hereby.
8.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
8.8 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect. This Agreement replaces and
supersedes any prior Fund Participation Agreement between the parties.
8.9 Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the other party.
8.10 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers to
execute this Participation Agreement as of the date and year first above
written.
[FUND] [ADVISOR]
By: By:
-------------------------------- -------------------------------
[NAME] [NAME]
[TITLE] [TITLE]
HARTFORD LIFE AND
ANNUITY INSURANCE
COMPANY HARTFORD LIFE INSURANCE COMPANY
By: By:
-------------------------------- -------------------------------
Peter W. Cummins Peter W. Cummins
Senior Vice President Senior Vice President
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
[NAMES OF SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS]
<PAGE>
EXHIBIT 9
[LOGO]
HARTFORD LIFE
April 10, 1998 Lynda Godkin
Senior Vice President, General
Counsel & Corporate Secretary
Law Department
Board of Directors
Hartford Life Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
RE: PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT
HARTFORD LIFE INSURANCE COMPANY
FILE NO. 33-73566
Dear Sir/Madam:
I have acted as General Counsel to Hartford Life Insurance Company (the
"Company"), a Connecticut insurance company, and Hartford Life Insurance Company
Putnam Capital Manager Trust Separate Account (the "Account") in connection 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 validly 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.
<PAGE>
Board of Directors
Hartford Life Insurance Company
April 10, 1998
Page 2
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,
/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. 33-73566 for Hartford Life Insurance
Company Putnam Capital Manager Trust Separate Account on Form N-4.
/s/ Arthur Andersen LLP
Hartford, Connecticut
April 13, 1998
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
POWER OF ATTORNEY
-----------------
Gregory A. Boyko
John P. Ginnetti
Lynda Godkin
Thomas M. Marra
Lowndes A. Smith
Raymond P. Welnicki
Lizabeth H. Zlatkus
David M. Znamierowski
do hereby jointly and severally authorize Lynda Godkin, Marianne O'Doherty,
and Leslie T. Soler to sign as their agent, any Registration Statement,
pre-effective amendment, post-effective amendment and any application for
exemptive relief of the Hartford Life Insurance Company and Hartford Life and
Accident Insurance Company under the Securities Act of 1933 and/or the
Investment Company Act of 1940.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney for
the purpose herein set forth.
/s/ Gregory A. Boyko Dated as of March 16, 1998
- --------------------------------------- --------------------------
Gregory A. Boyko
/s/ John P. Ginnetti Dated as of March 16, 1998
- --------------------------------------- --------------------------
John P. Ginnetti
/s/ Lynda Godkin Dated as of March 16, 1998
- --------------------------------------- --------------------------
Lynda Godkin
/s/ Thomas M. Marra Dated as of March 16, 1998
- --------------------------------------- --------------------------
Thomas M. Marra
/s/ Lowndes A. Smith Dated as of March 16, 1998
- --------------------------------------- --------------------------
Lowndes A. Smith
/s/ Raymond P. Welnicki Dated as of March 16, 1998
- --------------------------------------- --------------------------
Raymond P. Welnicki
/s/ Lizabeth H. Zlatkus Dated as of March 16, 1998
- --------------------------------------- --------------------------
Lizabeth H. Zlatkus
/s/ David M. Znamierowski Dated as of March 16, 1998
- --------------------------------------- --------------------------
David M. Znamierowski
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
THE HARTFORD
The Hartford Financial Services Group, Inc.
(Delaware)
|
- -------------------------------------------------------------------------------------------------------------
Nutmeg Insurance Company The Hartford Investment
(Connecticut) Management Company
| (Delaware)
Hartford Fire Insurance Company |
(Connecticut) Hartford Investment
| Services, Inc.
Hartford Accident and Indemnity Company (Connecticut)
(Connecticut)
|
Hartford Life, Inc.
(Delaware)
|
Hartford Life and Accident Insurance Company
(Connecticut)
|
|
|
- -------------------------------------------------------------------------------------------------------------
Alpine Life Hartford Financial Hartford Life American Maturity ITT Hartford Canada
Insurance Services Life Insurance Company Life Insurance Holdings, Inc.
Company Insurance Co. (Connecticut) Company (Canada)
(New Jersey) (Connecticut) | (Connecticut) |
| | |
| AML Financial, Inc. |
| (Connecticut) Hartford Life
| Insurance Company
| of Canada
| (Canada)
|
|
- -------------------------------------------------------------------------------------------------------------
Hartford Life and Annuity ITT Hartford International Hartford Financial Services Royal Life
Insurance Company Life Reassurance Corporation Corporation Insurance
(Connecticut) (Connecticut) (Delaware) Company of
| | America
| | (Connecticut)
| |
ITT Hartford Life, Ltd. |
(Bermuda) |
|
|
- -------------------------------------------------------------------------------------------------------------
MS Fund HL Funding HL Investment Hartford Hartford Securities Hartford-Comp. Emp.
America Company, Inc. Advisors, Inc. Equity Sales Distribution Benefit Service
1993-K, Inc. (Connecticut) (Connecticut) Company, Inc. Company, Inc. Company
(Delaware) | (Connecticut) (Connecticut) (Connecticut)
|
Hartford Investment
Financial Services
Company
(Delaware)
</TABLE>
