<PAGE>
As filed with the Securities and Exchange Commission on April 17, 1997
File No. 33-56790
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. 7 [X]
------
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 15 [X]
-------
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT ONE
(Exact Name of Registrant)
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
(Name of Depositor)
P. O. BOX 2999
HARTFORD, CT 06104-2999
(Address of Depositor's Principal Offices)
(860) 843-7563
(Depositor's Telephone Number, Including Area Code)
MARGARET E. HANKARD, 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, 1997 pursuant to paragraph (b) of Rule 485
--------
60 days after filing pursuant to paragraph (a)(1) of Rule 485
--------
on May 1, 1997 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. THE RULE 24F-2
NOTICE FOR THE REGISTRANT'S MOST RECENT FISCAL YEAR WAS FILED ON OR ABOUT
FEBRUARY 28, 1997.
<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 Accumulation Unit Values; Yield
Information
5. General Description of Registrant The Contract, Separate Account One and
the Fixed Account; ITT Hartford Life
and Annuity Insurance Company and the
Funds; Miscellaneous
6. Deductions Charges Under the Contract
7. General Description of Operation of the Contract;
Annuity Contracts Payment of Benefits; The Contract,
Separate Account One and the Fixed
Account
8. Annuity Period Payment of Benefits
9. Death Benefit Payment of Benefits; Operation of the
Contract
10. Purchases and Contract Value Operation of the Contract
11. Redemptions Payment of Benefits
12. Taxes Federal Tax Considerations
13. Legal Proceedings Miscellaneous - Are there any material
legal proceedings affecting the
Separate Account?
14. Table of Contents to the Statement Table of Contents to the Statement
of Additional Information of Additional Information.
<PAGE>
15. Cover Page Part B; Statement of Additional
Information
16. Table of Contents Table of Contents
17. General Information and History Introduction
18. Services None
19. Purchase of Securities Distribution of Contracts
being Offered
20. Underwriters Distribution of Contracts
21. Calculation of Performance Calculation of Yield and Return
Data
22. Annuity Payments Annuity Benefits
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 Persons Controlled by or Under
Under Common Control Common Control with the
with the Depositor or Registrant Depositor or Registrant
27. Number of Contract Owners Number of Contract Owners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Location of Accounts and Records
Records
31. Management Services Management Services
32. Undertakings Undertakings
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT ONE
This Prospectus describes The Director, an individual and group tax-deferred
variable annuity Contract designed for retirement planning purposes (the
"Contracts").
The Contracts are issued by ITT Hartford Life and Annuity Insurance Company
("Hartford"). On January 1, 1998, Hartford's name will change to Hartford Life
and Annuity Insurance Company. Payments for the Contracts will be held in a
series of ITT Hartford Life and Annuity Insurance Company Separate Account One
(the "Separate Account") or in the Fixed Account of Hartford. Allocations to
and transfers to and from the Fixed Account are not permitted in certain states.
The following Sub-Accounts are available under the Contracts. Opposite each
Sub-Account is the name of the underlying investment for that Sub-Account.
Advisers Fund Sub-Account - shares of Hartford Advisers Fund, Inc.
("Advisers Fund")
Bond Fund Sub-Account - shares of Hartford Bond Fund, Inc.
("Bond Fund")
Capital Appreciation Fund - shares of Hartford Capital Appreciation
Sub-Account Fund, Inc. ("Capital Appreciation Fund")
Dividend and Growth Fund - shares of Hartford Dividend and Growth
Sub-Account Fund, Inc. ("Dividend and Growth Fund")
Index Fund Sub-Account - shares of Hartford Index Fund, Inc.
("Index Fund")
International Advisers Fund - shares of Hartford International
Sub-Account Advisers Fund, Inc. ("International
Advisers Fund")
International Opportunities - shares of Hartford International
Fund Sub-Account Opportunities Fund, Inc.
("International Opportunities Fund")
Money Market Fund - shares of HVA Money Market Fund, Inc.
Sub-Account ("Money Market Fund")
Mortgage Securities Fund - shares of Hartford Mortgage Securities
Sub-Account Fund, Inc. ("Mortgage Securities Fund")
Small Company Fund - shares of Hartford Small Company Fund,
Sub-Account Inc. ("Small Company Fund")
Stock Fund Sub-Account - shares of Hartford Stock Fund, Inc.
("Stock Fund")
This Prospectus sets forth the information concerning the Separate Account and
the Fixed
<PAGE>
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Account, where available, 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 ITT Hartford
Life and Annuity Insurance Company, Attn: Individual Annuity Operations, P. O.
Box 5085, Hartford, CT 06102-5085. The Table of Contents for the Statement of
Additional Information may be found on page ____ of this Prospectus. The
Statement of Additional Information is incorporated by reference to this
Prospectus.
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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.
- --------------------------------------------------------------------------------
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, 1997
Statement of Additional Information Dated: May 1, 1997
<PAGE>
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TABLE OF CONTENTS
Page
----
GLOSSARY OF SPECIAL TERMS. . . . . . . . . . . . . . . . . . . . . . .
FEE TABLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ACCUMULATION UNIT VALUES . . . . . . . . . . . . . . . . . . . . . . .
PERFORMANCE RELATED INFORMATION. . . . . . . . . . . . . . . . . . . .
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
THE CONTRACT, SEPARATE ACCOUNT ONE AND THE FIXED ACCOUNT . . . . . . .
What are the Contracts? . . . . . . . . . . . . . . . . . . . . .
Who can buy these Contracts?. . . . . . . . . . . . . . . . . . .
What is the Separate Account and how does it operate? . . . . . .
What is the Fixed Account and how does it operate?. . . . . . . .
May I transfer assets between Sub-Accounts? . . . . . . . . . . .
May I transfer assets between the Fixed Account and the Sub-Accounts?
OPERATION OF THE CONTRACT . . . . . . . . . . . . . . . . . . . . . . . . .
How is my Premium Payment credited? . . . . . . . . . . . . . . .
What size Premium Payments must I make? . . . . . . . . . . . . .
What if I am not satisfied with my purchase?. . . . . . . . . . .
May I assign or transfer my Contract? . . . . . . . . . . . . . .
How do I know what my Contract is worth?. . . . . . . . . . . . .
How is the Accumulation Unit value determined?. . . . . . . . . .
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How are the underlying Fund shares valued?. . . . . . . . . . . .
How is the value of the Fixed Account determined? . . . . . . . .
PAYMENT OF BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . .
What would my Beneficiary receive as a death benefit? . . . . . .
How can a Contract be redeemed or surrendered?. . . . . . . . . .
Can payment of a redemption, surrender or death benefit ever
postponed beyond the seven day period?. . . . . . . . . . . . . .
May I surrender once Annuity payments have started? . . . . . . .
What are my Annuity benefits. . . . . . . . . . . . . . . . . . .
How are Annuity payments determined? . . . . . . . . . . . . . .
CHARGES UNDER THE CONTRACTS. . . . . . . . . . . . . . . . . . . . . .
How are the sales charges under the Contracts made? . . . . . . .
Is there ever a time when the sales charges do not apply? . . . .
What do the sales charges cover?. . . . . . . . . . . . . . . . .
What is the mortality and expense risk charge?. . . . . . . . . .
Are there any administrative charges? . . . . . . . . . . . . . .
How much are the deductions for Premium Taxes? . . . . . . . . .
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY AND THE FUNDS. . . . .
What is Hartford? . . . . . . . . . . . . . . . . . . . . . . . .
What are the Funds? . . . . . . . . . . . . . . . . . . . . . . .
Does Hartford have any interest in the Funds? . . . . . . . . . .
<PAGE>
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FEDERAL TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . .
What are some of the federal tax consequences which affect these
Contracts?. . . . . . . . . . . . . . . . . . . . . . . . . . . .
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What are my voting rights?. . . . . . . . . . . . . . . . . . . .
Will other Contracts be participating in the Separate Account?. .
How are the Contracts sold?. . . . . . . . . . . . . . . . . . .
Who is the custodian of the Separate Account's assets?. . . . . .
Are there any material legal proceedings affecting the Separate Account?
Who has passed on the legal matters affecting the Separate Account?
Are you relying on any experts as to any portion of this Prospectus?
How may I get additional information? . . . . . . . . . . . . . .
APPENDIX I - INFORMATION REGARDING TAX-QUALIFIED PLANS . . . . . . . .
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION. . . . . . .
<PAGE>
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GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT: An accounting unit of measure used to calculate values
before Annuity payments begin.
ANNUITANT: The person or participant upon whose life the Contract is issued.
ANNUITY: A series of payments for life, or for life with a minimum number of
payments or a determinable sum guaranteed, or for a joint lifetime and
thereafter during the lifetime of the survivor, or for a designated period.
ANNUITY COMMENCEMENT DATE: The date on which Annuity payments are to commence.
Under group unallocated Contracts, the date for each Participant is determined
by the Contract Owner in accordance with the terms of the Plan. It will always
be the fifteenth of a calendar month.
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 by the Participant within the Plan
documents/enrollment forms who is entitled to receive benefits 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.
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.
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.
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FIXED ACCOUNT 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 a separate account.
FUNDS: The Funds described commencing on page ____ of this Prospectus and any
additional Funds which may be made available from time to time.
GENERAL ACCOUNT: The General Account of Hartford which consists of all assets
of Hartford other than those allocated to the separate accounts of Hartford.
HOME OFFICE: Currently located at 200 Hopmeadow Street, Simsbury, Connecticut
06089, for all variable annuity Contracts. All correspondence concerning this
Contract should be sent to P. O. Box 5085, Hartford, CT 06102-5085, Attn:
Individual Annuity Operations.
HARTFORD: ITT Hartford Life and Annuity Insurance Company.
MINIMUM DEATH BENEFIT - The minimum amount payable upon the death of a Contract
Owner, Annuitant or Participant, in the case of group Contracts prior to age 85
and before annuity payments have commenced.
NON-QUALIFIED CONTRACT: A Contract which is not classified as a tax-qualified
retirement plan using pre-tax dollars under the Code.
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 Code.
PREMIUM PAYMENT: The payment made to Hartford pursuant to the terms of the
Contract.
PREMIUM TAX: A tax on premiums charged by a state or municipality on Premium
Payments or Contract Values.
QUALIFIED CONTRACT: A Contract which qualifies as a tax-qualified retirement
plan using pre-tax dollars under the Code, such as an employer sponsored Section
401(k) on an Individual Retirement Annuity (IRA).
SEPARATE ACCOUNT: The Hartford separate account entitled "ITT Hartford Life and
Annuity Insurance Company Separate Account One."
SPECIFIED CONTRACT ANNIVERSARY: Every seventh Contract Anniversary (I.E., the
7th, 14th, 21st,
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etc. Contract Anniversaries).
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.
UNALLOCATED CONTRACTS - Contracts issued to employers, or other entity, as
Contract Owner under which no allocation of Contract Values is made for a
specific Participant. 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 (currently 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.
<PAGE>
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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). . . . . . . . . . . . . . . . . . . . . . . . . . . . 7%
Second Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6%
Third Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5%
Fourth Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4%
Fifth Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3%
Sixth Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2%
Seventh Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1%
Eighth Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0%
Annual Contract Fee (2). . . . . . . . . . . . . . . . . . . . . . . . . $25
Annual Expenses-Separate Account
(as a percentage of average account value)
Mortality and Expense Risk. . . . . . . . . . . . . . . . . . . . . . 1.250%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)
<TABLE>
<CAPTION>
Total Fund
Management Other Operating
Fees Expenses Expenses
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Hartford Bond Fund 0.490% 0.030% 0.520%
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Hartford Stock Fund 0.441% 0.016% 0.457%
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HVA Money Market Fund 0.423% 0.021% 0.444%
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Hartford Advisers Fund 0.615% 0.017% 0.632%
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Hartford Capital Appreciation Fund 0.629% 0.017% 0.646%
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Hartford Mortgage Securities Fund 0.424% 0.029% 0.453%
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Hartford Index Fund 0.374% 0.019% 0.393%
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Hartford International Opportunities Fund 0.691% 0.095% 0.786%
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Hartford Dividend & Growth Fund 0.709% 0.017% 0.726%
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Hartford International Advisers Fund 0.746% 0.214% 0.960%
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Hartford Small Company Fund (3) 0.577% 0.150% 0.727%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Length of time from premium payment.
(2) The annual contract fee is a single $25 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 1940 Act, the annual contract
fee has been reflected in the Examples by a method intended to show the
"average" impact of the policy fee on an investment in the Separate
Account. The annual contract fee is deducted only when the accumulated
value is $50,000 or less. In the Example, the annual contract fee is
approximated as a 0.05% annual asset charge based on the experience of the
Contracts.
(3) In 1996 a portion of management fees were waived for the Hartford Small
Company Fund. In the absence of this waiver, the 1996 total expense ratio
would have been .880% (annualized).
(IHLA/56790/Director IV)
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EXAMPLE
<TABLE>
<CAPTION>
If you surrender your Contract If you annuitize your Contract at
at the end of the applicable time the end of the applicable time
period, you would pay the period, you would pay the
following expenses on a $1,000 following expenses on a $1,000
investment, assuming a 5% annual investment, assuming a 5%
return on assets: annual return on assets:
- ----------------------------------------------------------------------------------------------------------------------------
Sub-Account 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Hartford Bond Fund $89 $108 $129 $215 $18 $57 $99 $215
Hartford Stock Fund 88 106 127 208 17 55 95 208
HVA Money Market Fund 88 105 125 207 17 55 95 206
Hartford Advisers Fund 90 111 135 227 19 61 105 227
Hartford Capital Appreciation Fund 90 112 136 229 19 61 105 228
Hartford Mortgage Securities Fund 88 106 126 208 17 55 95 207
Hartford Index Fund 87 104 123 201 17 53 92 201
Hartford International Opportunities Fund 91 116 143 244 21 65 113 243
Hartford Dividend & Growth Fund 91 114 140 237 20 64 110 237
Hartford International Advisers Fund 93 121 152 262 23 71 122 261
Hartford Small Company Fund 91 114 N/A N/A 20 64 N/A N/A
<CAPTION>
If you do not surrender your
Contract, you would pay the
following expenses on a $1,000
investment, assuming a 5%
annual return on assets:
- ---------------------------------------------------------------------------------------
Sub-Account 1 year 3 years 5 years 10 years
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hartford Bond Fund $19 $58 $99 $215
Hartford Stock Fund 18 56 96 208
HVA Money Market Fund 18 55 95 207
Hartford Advisers Fund 20 61 105 227
Hartford Capital Appreciation Fund 20 62 106 229
Hartford Mortgage Securities Fund 18 56 96 208
Hartford Index Fund 17 54 93 201
Hartford International Opportunities Fund 21 66 113 244
Hartford Dividend & Growth Fund 21 64 110 237
Hartford International Advisers Fund 23 71 122 262
Hartford Small Company Fund 21 64 N/A N/A
</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.
<PAGE>
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SUMMARY
A. CONTRACTS OFFERED
Individual and group tax-deferred Variable Annuity Contracts (see "Federal
Tax Considerations -- Taxation of Annuities in General," page ).
Generally, the Contracts are 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. A Contract Owner may at any
time, within ten days of delivery of a Contract sold hereunder, return the
Contract to Hartford at its Home Office and the value of the Contract
(without deduction for any charges normally assessed thereunder) will be
refunded. The Contract Owner bears the investment risk during the period
prior to the Company's receipt of request for cancellation except for
Contract Owners in Georgia, North Carolina, South Carolina, Washington,
West Virginia, Utah, and other states where required by law, who will be
refunded the premium (see "How is my Premium Payment credited?" commencing
on page ___).
B. ELIGIBLE PURCHASERS
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 Code, including individual retirement
annuities ("Qualified Contracts"). (See "Federal Tax Considerations,"
page ___, and Appendix I, page ___.)
C. MINIMUM PREMIUM PAYMENTS
The minimum initial Premium Payment is $2,000. Thereafter, the minimum
payment is $500. Certain plans or programs may make smaller periodic
premium payments. (See "What size Premium Payments must I make?"
commencing on page .)
D. UNDERLYING INVESTMENTS FOR CONTRACTS
Hartford Advisers Fund, Inc., Hartford Bond Fund, Inc., Hartford Capital
Appreciation Fund, Inc., Hartford Dividend and Growth Fund, Hartford Index
Fund, Inc., Hartford International Advisers Fund, Inc., Hartford
International Opportunities Fund, Inc., Hartford Mortgage Securities Fund,
Inc., Hartford Small Company Fund, Inc, Hartford Stock Fund, Inc., HVA
Money Market Fund, Inc., 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. Qualified Contracts issued prior to May 1, 1987 may also have
shares of Hartford U.S. Government Money Market Fund, Inc.
<PAGE>
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E. CHARGES UNDER THE CONTRACTS
1. 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 "Charges
under the Contracts," page ___.)
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) and equals:
CHARGE LENGTH OF TIME FROM PREMIUM PAYMENT
(NUMBER OF YEARS)
7% 1
6% 2
5% 3
4% 4
3% 5
2% 6
1% 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
an Annuity Option Four will be subject to a contingent deferred sales
charge where applicable). (See "Is there ever a time when the sales
charges do not apply?" commencing on page ____.)
2. WITHDRAWAL PRIVILEGE
Withdrawals of up to 10% per year, on a non-cumulative basis, of the
Premium Payments made to a Contract may be made without the imposition
of the contingent deferred sales charge. (See "Is there ever a time
when the sales charges do not apply?" commencing on page ____.)
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3. ANNUAL MAINTENANCE FEE
The Contracts provide for an administrative charge in the amount of
$25.00 to be deducted from Contract Values each Contract Year (not
applicable to Contracts with Account Values of $50,000 or more). (See
"Are there any administrative charges?" commencing on page ___.)
4. MORTALITY AND EXPENSE RISKS
For assuming the mortality and expense risks under the Contracts,
Hartford will make a 1.25% per annum charge against all Contract
Values held in the Separate Account, except the Fixed Account. (See
"What is the mortality and expense risk charge?" commencing on
page ____.)
5. PREMIUM TAXES
A deduction will be made for Premium Taxes for Contracts sold in
certain states. (See "How much are the deductions for Premium Taxes?"
commencing on page ____.)
6. CHARGES BY THE FUNDS
The Funds are subject to certain fees, charges and expenses (see the
prospectus for the Funds accompanying this Prospectus).
F. LIQUIDITY
Subject to any applicable charges, the Contracts may be surrendered, or
portions of the value of such Contracts may be withdrawn, at any time prior
to the Annuity Commencement Date. However, if less than $1,000 remains in
a Contract as a result of a withdrawal, Hartford may terminate the Contract
in its entirety. (See "How can a Contract be redeemed or surrendered?"
commencing on page ____.)
G. MINIMUM DEATH BENEFITS
A Minimum Death Benefit is provided in the event of death of the Annuitant
or Contract Owner prior to age 85 and before Annuity payments have
commenced. (See "What would my Beneficiary receive as a death benefit?"
commencing on page ____.)
H. ANNUITY OPTIONS
The Annuity Commencement Date may not be deferred beyond the Annuitant's
90th birthday, except in certain states, where the Annuitant's Commencement
Date may not be
<PAGE>
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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. (See "What are
my Annuity benefits?" commencing on page ____.)
I. VOTING RIGHTS OF CONTRACT OWNERS
Contract Owners will have the right to vote on matters affecting the
underlying Fund to the extent that proxies are solicited by such Fund. If
a Contract Owner does not vote, Hartford shall vote such interest in the
same proportion as shares of the Fund for which instructions have been
received by Hartford. (See "What are my voting rights?" commencing on
page ____.)
<PAGE>
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ACCUMULATION UNIT VALUES
(For an accumulation unit outstanding throughout the period)
The following information, insofar as it relates to the period ended December
31, 1996, has been examined by Arthur Andersen LLP, independent public
accountants, whose report thereon is included in the Statement of Additional
information, which is incorporated by reference to this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
BOND FUND SUB-ACCOUNT
Accumulation unit value at beginning of period $1.880 $1.607 $1.694 $1.556(a)
Accumulation unit value at end of period $1.922 $1.880 $1.607 $1.694
Number accumulation units outstanding at
end of period (in thousands) 76,247 48,354 33,950 23,803
STOCK FUND SUB-ACCOUNT
Accumulation unit value at beginning of period $2.887 $2.180 $2.250 $1.993(a)
Accumulation unit value at end of period $3.547 $2.887 $2.180 $2.250
Number accumulation units outstanding at
end of period (in thousands) 317,416 186,727 110,928 60,431
MONEY MARKET FUND SUB-ACCOUNT
Accumulation unit value at beginning of period $1.528 $1.462 $1.424 $1.401(a)
Accumulation unit value at end of period $1.587 $1.528 $1.462 $1.424
Number accumulation units outstanding at
end of period (in thousands) 110,350 66,468 30,871 14,881
ADVISERS FUND SUB-ACCOUNT
Accumulation unit value at beginning of period $2.523 $1.991 $2.072 $1.870(a)
Accumulation unit value at end of period $2.905 $2.523 $1.991 $2.072
Number accumulation units outstanding at
end of period (in thousands) 784,326 546,105 414,318 244,980
CAPITAL APPRECIATION FUND SUB-ACCOUNT
Accumulation unit value at beginning of period $3.364 $2.615 $2.583 $2.165(a)
Accumulation unit value at end of period $4.010 $3.364 $2.615 $2.583
Number accumulation units outstanding at
end of period (in thousands) 353,466 216,591 116,535 58,645
MORTGAGE SECURITIES FUND SUB-ACCOUNT
Accumulation unit value at beginning of period $1.878 $1.637 $1.685 $1.604(a)
Accumulation unit value at end of period $1.949 $1.878 $1.637 $1.685
Number accumulation units outstanding at
end of period (in thousands) 38,304 31,288 20,674 28,380
INDEX FUND SUB-ACCOUNT
Accumulation unit value at beginning of period $2.359 $1.750 $1.755 $1.629(a)
Accumulation unit value at end of period $2.845 $2.359 $1.750 $1.755
Number accumulation units outstanding at
end of (in thousands) 77,074 32,779 12,030 7,491
INTERNATIONAL OPPORTUNITIES FUND SUB-ACCOUNT
Accumulation unit value at end of period $1.329 $1.181 $1.220 $0.924(a)
Accumulation unit value at end of period $1.482 $1.329 $1.181 $1.220
Number accumulation units outstanding at
end of period (in thousands) 326,954 222,606 175,763 66,084
<PAGE>
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DIVIDEND & GROWTH FUND SUB-ACCOUNT
Accumulation unit value at beginning of period $1.329 $1.009 $1.000 -(b)
Accumulation unit value at end of period $1.650 $1.359 $1.009 -
Number accumulation units outstanding at
end of period (in thousands) 301,767 101,085 21,973 -
INTERNATIONAL ADVISERS FUND SUB-ACCOUNT
Accumulation unit value at beginning of period $1.146 $1,000 - -(c)
Accumulation unit value at end of period $1.266 $1.146 - -
Number accumulation units outstanding at
end of period (in thousands) 56,743 10,717
SMALL COMPANY FUND SUB-ACCOUNT
Accumulation unit value at beginning of period $ - $ -(d)
Accumulation unit value at end of period $1.066 $ -
Number accumulation units outstanding at
end of period (in thousands) 24,397 0
</TABLE>
(a) Inception date May 1, 1993.
(b) Inception date March 8, 1994.
(c) Inception date March 1, 1995.
(d) Inception date August 9, 1996.
<PAGE>
-17-
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.
The Advisers Fund, Bond Fund, Capital Appreciation Fund, Dividend and Growth
Fund, Index Fund, International Advisers Fund, International Opportunities
Fund, Money Market Fund, Mortgage Securities Fund, Small Company Fund and
Stock Fund Sub-Accounts, may include total return in advertisements or other
sales material.
When a Sub-Account advertises its standardized total return, it will usually be
calculated for one year, five years, and ten years or some other relevant
periods if the Sub-Account has not been in existence for at least ten years.
Total return is measured by comparing the value of an investment in the
Sub-Account at the beginning of the relevant period to the value of the
investment at the end of the period (assuming the deduction of any contingent
deferred sales charge which would be payable if the investment were redeemed at
the end of the period).
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 Bond Fund and Mortgage Securities Fund Sub-Accounts may advertise yield in
addition to total return. The yield will be computed in the following manner:
The net investment income per unit earned during a recent one month period 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.
The Money Market Fund Sub-Account may advertise yield and effective yield.
The yield of this Sub-Account is based upon the income earned by the
Sub-Account over a seven-day period and then annualized, I.E., the income
earned in the period is assumed to be earned every seven days over a 52-week
period and stated as a percentage of the investment. Effective yield is
calculated similarly but when annualized, the income earned by the investment
is assumed to be reinvested in Sub-Account units and thus compounded in the
course of a 52-week period. Yield and effective yield reflect the recurring
charges at the Separate Account level including the Annual Maintenance Fee.
The Separate Account may also disclose yield, standard total return, and
non-standard total return for periods prior to the date the Separate Account
commenced operations. For periods prior to the date the Separate Account
commenced operations, performance information for the
<PAGE>
-18-
Sub-Accounts will be calculated based on the performance of the underlying Funds
and the assumption that the Sub-Accounts were in existence for the same periods
as those of the underlying Funds, with a level of charges equal to those
currently assessed against the Sub-Accounts.
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.
INTRODUCTION
This Prospectus has been designed to provide you with the necessary information
to make a decision on purchasing an individual or group tax-deferred Variable
Annuity Contract offered by Hartford in the Fixed Account and/or a series of
Separate Account One. This Prospectus describes only the elements of the
Contracts pertaining to the Separate Account and the Fixed Account except where
reference to the General Account is specifically made. Please read the
"Glossary of Special Terms," page___, prior to reading this Prospectus to
familiarize yourself with the terms being used.
THE CONTRACT, SEPARATE ACCOUNT ONE,
AND THE FIXED ACCOUNT
What are the Contracts?
The Contract is an individual or group tax-deferred Variable Annuity
Contract designed for retirement planning purposes. 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. Currently, there are
eleven Sub-Accounts, each investing in a different underlying Fund with its
own distinct investment objectives. More Sub-Accounts may be made
available by Hartford at a later time. 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 some limitations on the amounts in each Sub-Account and the Fixed
Account. These limitations are described later in this
<PAGE>
-19-
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
Contracts," page ___, for a description of the charges for redeeming a
Contract and other charges made under the Contract.)
Generally, the Contract contains the five optional Annuity forms described
later in this Prospectus. Options 2, 4 and 5 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 Annuity payments are scheduled to begin. If you do not
elect otherwise, payments will begin at the Annuitant's age 90 under Option
2 with 120 monthly payments certain (Option 1 for Texas Contracts).
When an Annuity is effected under a Contract, unless otherwise specified,
Contract Values held in the Sub-Accounts will be applied to provide a
Variable Annuity based on the pro rata amount in the various Sub-Accounts.
Fixed Account Contract Values will be applied to provide a Fixed Account
Annuity. Variable Annuity payments will vary in accordance with the
investment performance of the Sub-Accounts you have selected. You should
consider the question of allocation of Contract Values among Sub-Accounts
of the Separate Account and the General Account of Hartford to make certain
that Annuity payments are based on the investment alternative best suited
to your needs for retirement. The Contract allows the Contract Owner to
change the Sub-Accounts on which variable payments are based after payments
have commenced once every three months. Any Fixed Account Annuity
allocation may not be changed.
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
<PAGE>
-20-
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.
Who can buy these Contracts?
The individual and group Variable Annuity Contracts offered under this
Prospectus may be purchased by any individual or by a trustee or custodian
for a retirement plan qualified under Sections 401(a) or 403(a) of the
Code; annuity purchase plans adopted by public school systems and certain
tax-exempt organizations according to Section 403(b) of the Code;
Individual Retirement Annuities adopted according to Section 408 of the
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 Code
("Qualified Contracts").
What is the Separate Account and how does it operate?
The Separate Account was established on May 20, 1991, 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 Commission
supervision 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 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, all obligations arising under the
Contracts are general corporate 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 assets of one underlying Fund. Net Premium Payments and
proceeds of transfers between Sub-Accounts 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 Fund are reinvested at net asset value.
The value of your investment will therefore vary in accordance with the net
income and fluctuation in the individual investments within the underlying
Fund portfolio or portfolios. During the Variable Annuity payout period,
both your Annuity payments and reserve values will vary in accordance with
these factors.
<PAGE>
-21-
Hartford does not guarantee the investment results of the Sub-Accounts 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, each is subject to different risks. These risks are more fully
described in the accompanying Fund 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.
What is the Fixed Account and how does it operate?
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
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 law governing the
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
<PAGE>
-22-
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 OWNER ASSUMES THE RISK THAT INTEREST CREDITED TO FIXED
ACCOUNT ALLOCATIONS MAY NOT EXCEED THE MINIMUM GUARANTEE OF 3% FOR ANY
GIVEN YEAR.
May I transfer assets between 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 12 per Contract Year, with no
two transfers occurring on consecutive Valuation Days. Transfers by
telephone may be made by calling (800) 862-6668. Telephone transfers may
not be permitted by some states for their residents who purchase variable
annuities.
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 one business day of receipt of the confirmation.
Hartford will send the Contract Owner a confirmation of the transfer within
five days from the date of any instruction.
Hartford may permit the Contract Owner to preauthorize transfers among Sub-
Accounts and between Sub-Accounts and the Fixed Account under certain
circumstances. 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 on behalf of a Contract Owner identify themselves and the Contract
Owner by name and social security number. All transfer instructions by
telephone are tape recorded.
Subject to the exceptions set forth in the following paragraph the right to
reallocate Contract Values between the Sub-Accounts is subject to
modification if Hartford determines, in its sole opinion, that the exercise
of that right by one or more Contract Owners is, or would be, to the
disadvantage of other Contract Owners. Any modification
<PAGE>
-23-
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.
For Contracts issued in the State of New York, the reservation of rights
set forth in the preceding paragraph is limited to (i) requiring up to a
maximum of ten Valuation Days between each transfer: (ii) limiting the
amount to be transferred on any one Valuation Day to no more than $2
million; and (iii) upon 30 days prior written notice, to only accepting
transfer instructions from the Contract Owner and not from the Contract
Owner's representative, agent or person acting under a power of attorney
for the Contract Owner.
Currently, and with respect to Contracts issued in all states, 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 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 required in any Sub-Account.
May I transfer assets 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 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. Also, if any interest rate is renewed at a rate of 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
60 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.
<PAGE>
-24-
OPERATION OF THE CONTRACT
How is my Premium Payment credited?
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 Home
Office. 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.
If the initial Premium Payment is not credited within five business days,
the Premium Payment will be immediately returned unless you have been
informed of the delay and request that the Premium Payment not be returned.
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.
Subsequent Premium Payments are priced on the Valuation Day received by
Hartford at its Home Office, or other designated administrative offices.
What size Premium Payments must I make?
The minimum initial Premium Payment is $2,000. Thereafter, the minimum
Premium Payment is $500. Certain plans may make smaller periodic payments.
Each Premium Payment may be split among the various Sub-Accounts and/or the
Fixed Account subject to minimum amounts then in effect.
What if I am not satisfied with my purchase?
If you are not satisfied with your purchase you may surrender the Contract
by returning it within ten days (or longer is 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 sum of (i) the
difference between the Premium Payment and the amounts allocated to the
Sub- Account(s) and/or the Fixed Account under the Contract and (ii) the
value of the Contract on the date of surrender attributable to the amounts
so allocated. You bear the investment risk during the period prior to the
Company's receipt of request for cancellation. Hartford will refund the
premium paid only for individual retirement annuities (if returned within
seven days of receipt) and in those states where required by law.
<PAGE>
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May I assign or transfer my Contract?
Ownership of a Contract described herein is generally assignable. However,
if the Contracts are issued pursuant to some form of Qualified Plan, it is
possible that the ownership of the Contracts may not be transferred or
assigned depending on the type of qualified retirement plan involved. An
assignment of a Non-Qualified Contract may subject the assignment proceeds
to income taxes and certain penalty taxes. (See "Federal Tax Considerations
-- Taxation of Annuities in General -- Non-Tax Qualified Purchasers,"
page _____.)
How do I know what my Contract is worth?
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 semiannually 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.
How is the Accumulation Unit value determined?
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. You should refer to the prospectus for
each of the Funds 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.
How are the underlying Fund shares valued?
The shares of the Fund are valued at net asset value on each Valuation Day.
A complete description of the valuation method used in valuing Fund shares
may be found in the accompanying prospectus for the Funds.
<PAGE>
-27-
How is the value of the Fixed Account determined?
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.
PAYMENT OF BENEFITS
What would my Beneficiary receive as a death benefit?
The Contracts provide that in the event the Annuitant dies before the
selected 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 Minimum
Death Benefit as determined on the date of receipt of due proof of death by
Hartford at its Home 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.
However, if, upon death prior to the Annuity Commencement Date, the
Annuitant or Contract Owner, as applicable, had not attained his 85th
birthday, the Beneficiary will receive the greater 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 Contract Value
on the Specified Contract Anniversary immediately preceding the date of
death, increased by the dollar amount of any Premium Payments made and
reduced by the dollar amount of any partial terminations since the
immediately preceding Specified Contract Anniversary.
If the deceased, the Annuitant or Contract Owner, as applicable, had
attained age 85, then the Death Benefit will equal the Contract Value.
Death Benefit proceeds will remain invested in the Separate Account in
accordance with the allocation instructions given by the Certificate Owner
until the proceeds are paid or Hartford receives new instructions from the
Beneficiary. The death benefit may be taken in one sum, payable within
seven days after the date Due Proof of Death is received, or under any of
the settlement options then being offered by the Company 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 five
<PAGE>
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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. Notwithstanding the foregoing, 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 proceeds due on the death may be applied to provide
variable payments, fixed payments, or a combination of variable and fixed
payments.
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.
For a discussion of the manner in which Annuity payments are determined and
may vary from month to month, see "How are Annuity payments determined?"
commencing on page ___.
How can a Contract be redeemed or surrendered?
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.
FULL SURRENDERS
At any time prior to the Annuity Commencement Date (and after the Annuity
Commencement Date with respect to values applied to 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 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
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to the minimum amount rules then in effect. Additionally, if the remaining
Contract Value following a surrender is less than $1,000, Hartford may
terminate the Contract and pay the Termination Value. For Contracts issued
in Texas, there is an additional requirement that the Contract will not be
terminated when the remaining Contract Value after a surrender is less than
$1,000 unless there were no Premium Payments made during the previous two
Contract Years.
Once each Contract Year, on a non-cumulative basis, partial surrenders of
Contract Values of up to 10% of the aggregate Premium Payments made to the
Contract may be made without being subject to the contingent deferred sales
charge. Hartford may permit the Contract Owner to preauthorize partial
surrenders subject to certain limitations then in effect.
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) TERMINATED EMPLOYMENT, C) DIED, D) BECOME DISABLED OR E) EXPERIENCED
FINANCIAL HARDSHIP.
DISTRIBUTIONS 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 AFFECT THE
CONTINUING TAX QUALIFIED STATUS OF SOME Contracts OR PLANS AND MAY RESULT
IN ADVERSE TAX CONSEQUENCES TO THE CONTRACT OWNER. THE CONTRACT OWNER,
THEREFORE, SHOULD CONSULT WITH HIS TAX ADVISER BEFORE UNDERTAKING ANY SUCH
SURRENDER. (SEE "FEDERAL TAX CONSIDERATIONS," PAGE ____.)
Payment on any request for a full or partial surrender from the
Sub-Accounts will be made as soon as possible and in any event no later
than seven days after the written request is received by Hartford at its
Home Office, Attn: Individual Annuity Operations, P. O. Box 5085,
Hartford, CT 06102-5085. 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
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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 Sub-Account(s) and/or the Fixed Account
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 "How are the sales charges under the Contracts made?"
commencing on page ___).
Can payment of a redemption, surrender or death benefit ever be postponed beyond
the seven day period?
Yes. There may be postponement 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 of the amounts or disposal of
securities not reasonably practicable.
May I surrender once Annuity payments have started?
No. Surrenders are not permitted after Annuity payments commence EXCEPT
that a full surrender is allowed when payments for a designated period
(Option 4 or 5) are selected as the Annuity option.
What are my Annuity benefits?
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 the Annuitant's 90th birthday
except for certain states where deferral past age 85 is not permitted. The
Annuity Commencement Date and/or the Annuity option may be changed from
time to time, but any change must be made 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 once every three months. Any Fixed
Annuity allocation may not be changed.
ANNUITY OPTIONS - The Contract contains the five optional Annuity forms
described below. Options 2, 4 and 5 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.
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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
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 Option 1 to provide a
life Annuity.
Under any of the Annuity options excluding Options 4 and 5, no surrenders
are permitted after Annuity payments commence. Only full surrenders are
allowed out of Option 4 and any such surrender will be subject to
contingent deferred sales charges, if applicable. Full or partial
withdrawals may be made from Option 5 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 option 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 due 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 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.
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OPTION 4: PAYMENTS FOR A DESIGNATED PERIOD - An amount payable monthly for
the number of years selected which may be from five 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.
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.
OPTION 5: DEATH BENEFIT REMAINING WITH HARTFORD - 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 options from time to time.
How are Annuity payments determined?
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 "How is the Accumulation
Unit value determined?" commencing on page ) for the day for which the
Annuity Unit value is being calculated, and (2) a factor to neutralize the
assumed investment rate of 4.00% per annum discussed below.
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 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
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Individual Annuity Mortality Table with ages set back one year and with an
assumed investment rate ("A.I.R.") of 4% per annum. 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 Account 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.
LEVEL VARIABLE ANNUITY PAYMENTS WOULD BE PRODUCED IF THE INVESTMENT RATE
REMAINED CONSTANT AND EQUAL TO THE A.I.R. IN FACT, PAYMENTS WILL VARY UP
OR DOWN AS THE INVESTMENT RATE VARIES UP OR DOWN FROM THE A.I.R.
The Annuity payments will be made on the fifteenth day of each month
following selection. 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.
CHARGES UNDER THE CONTRACTS
How are the sales charges under the Contracts made?
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.
A Contract Owner who chooses to surrender a Contract in full who has not
yet withdrawn the Annual Withdrawal Amount during the current Contract Year
(as described at page ___ below under the sub-heading "Is there ever a time
when the sales charges do not apply?") may, depending upon the amount of
investment gain experienced under the
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Contract, reduce the amount of any contingent deferred sales charge paid by
first withdrawing the Annual Withdrawal Amount and then requesting a full
surrender of the Contract. Currently, regardless of whether a Contract
Owner first requests a partial withdrawal of the Annual Withdrawal
Amount, upon receiving a request for a full surrender of a Contract,
Hartford assesses any applicable contingent deferred sales charge
against the surrender proceeds representing the lesser of: (1) aggregate
Premium Payments under the Contract not previously withdrawn; and
(2) the Contract Value, less the Annual Withdrawal Amount available at
the time of the full surrender, less the Annual Maintenance Fee.
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) and equals:
Charge Length of Time fom Premium Payment
------ -----------------------------------
(Number of Years)
7% 1
6% 2
5% 3
4% 4
3% 5
2% 6
1% 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 if Contract Values are applied to an
Annuity option provided for under the Contract (except that a surrender out
of Option 4 will be subject to a contingent deferred sales charge if
applicable) or upon the exercise of the withdrawal privilege. (See "Is
there ever a time when the sales charges do not apply?" commencing on page
.)
In the case of a redemption in which you request a certain dollar amount be
withdrawn, the sales charge is deducted from the amount withdrawn and the
balance is paid to you. Example: You request a total withdrawal of $1,000
and the applicable sales load is 5%. Your Sub-Account(s) and/or the Fixed
Account will be reduced by $1,000 and you will receive $950 (I.E., the
$1,000 total withdrawal less the 5% sales charge). This is the method
applicable on a full surrender of your Contract. In the case of a partial
redemption in which you request to receive a specified amount, the sales
charge will be calculated on the total amount that must be withdrawn from
your Sub-Account(s) and/or the Fixed Account in order to provide you with
the amount requested. Example: You request to receive $1,000 and the
applicable sales charge is 5%. Your Sub-Account(s) and/or the Fixed
Account will be reduced by $1,052.63 (I.E., a total withdrawal of $1,052.63
which results in a $52.63 sales charge ($1,052.63 x 5%) and a net amount
paid to you of $1,000 as requested).
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Is there ever a time when the sales charges do not apply?
Yes. During any Contract Year, 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 made to the Contract (as determined on the date
of the requested withdrawal) without the application of the contingent
deferred sales charge described above (the "Annual Withdrawal Amount").
Any such withdrawal will be deemed to be from Contract Values other than
Premium Payments. From time to time, Hartford may permit the Contract
Owner to preauthorize partial surrenders subject to certain limitations
then in effect. Additional surrenders or any surrender of the Contract
Values in excess of such amount in any Contract Year during the period when
contingent deferred sales charges are applicable will be subject to the
appropriate charge as set forth above.
No contingent deferred sales charges 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 provided for under the Contract,
except that in the case of a surrender out of Annuity Option 4 contingent
deferred sales charges will be assessed, if applicable.
Hartford may offer certain employer sponsored savings plans, in 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 under circumstances which may
result in savings of certain costs and expenses. Reductions in these fees
and charges will not unfairly discriminate against any Contract Owner.
What do the sales charges cover?
The contingent deferred sales charges are used to cover expenses relating
to the sale and distribution of the Contracts, including commissions paid
to any distribution organization and its sales personnel, the cost of
preparing sales literature and other promotional activities. To the extent
that these charges do not cover such distribution expenses they will be
borne by Hartford from its general assets, including surplus. The surplus
might include profits resulting from unused mortality and expense risk
charges.
What is the mortality and expense risk charge?
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 in the Contracts because of the expense
and mortality undertakings by Hartford.
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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 Separate Account during the life of the Contract (estimated at .90% for
mortality and .35% for expense), except for the Fixed Account.
The mortality undertakings provided by Hartford under the Contracts,
assuming the selection of one of the forms of life Annuities, is to make
monthly Annuity payments (determined in accordance with the 1983a
Individual Mortality Annuity 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.
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The 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 Contract
obligations. In that event, a loss will fall on Hartford. Also, in the
event of the death of an Annuitant or Contract Owner prior to age 85 or
before the commencement of Annuity payments, whichever is earlier, Hartford
can, in periods of declining value, experience a loss resulting from the
assumption of the mortality risk relative to the minimum death benefit.
In providing 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.
Are there any administrative charges?
Each year, on each Contract Anniversary on or before the Annuity
Commencement Date, Hartford will deduct an Annual Maintenance Fee 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 $25.00 per Contract Year. The
deduction will be made pro rata according to the value in each Sub-Account
and the Fixed Account under a Contract.
How much are the deductions for Premium Taxes?
A deduction is also made for Premium Tax, if applicable, imposed by a 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, or at the time the Contract
annuitizes.
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY AND THE FUNDS
What is Hartford?
ITT Hartford Life and Annuity Insurance Company ("Hartford") is a stock
life insurance company engaged in the business of writing life insurance
and annuities, both individual and
<PAGE>
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group, in all states of the United States, except New York, and the
District of Columbia. On January 1, 1998, Hartford's name will change
to Hartford Life and Annuity Insurance Company. Hartford was originally
incorporated under the laws of Wisconsin on January 9, 1956, 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 a subsidiary of Hartford Fire
Insurance Company, one of the largest multiple lines insurance carriers
in the United States. Hartford is ultimately owned by ITT Hartford
Group, Inc., a Delaware corporation. Subject to shareholder approval
on May 2, 1997, the name if ITT Hartford Group, Inc. will change
to The Hartford Financial Services Group, Inc.
Hartford is rated A+ (superior) by A.M. Best and Company, Inc., on the
basis of its financial soundness and operating performance. Hartford is
rated AA by Standard & Poor's and AA+ by Duff and Phelps, on the basis of
its claims paying ability. These ratings do not apply to the investment
performance of the Sub-Accounts of the Separate Account. The ratings apply
to Hartford's ability to meet its insurance obligations, including those
described in this Prospectus.
What are the Funds?
Hartford Stock Fund, Inc. was organized on March 11, 1976. Hartford
Advisers Fund, Inc., Hartford Bond Fund, Inc., Hartford U.S. Government
Money Market Fund, Inc., and HVA Money Market Fund, Inc. were all organized
on December 1, 1982. Hartford Capital Appreciation Fund, Inc. was
organized on September 20, 1983. Hartford Mortgage Securities Fund, Inc.
was organized on October 5, 1984. Hartford Index Fund, Inc. was organized
on May 16, 1983. Hartford International Opportunities Fund, Inc. was
organized on January 25, 1990. Hartford Dividend and Growth Fund was
organized on October 21, 1993. Hartford International Advisers Fund, Inc.
was organized on February 15, 1995. Hartford Small Company Fund, Inc. was
organized on August 9, 1996. All of the Funds were incorporated under the
laws of the State of Maryland and are collectively referred to as the
"Funds." The Funds may not be available in all states.
The investment objectives of each of the Funds are as follows:
HARTFORD ADVISERS FUND, INC. - Seeks maximum long-term total rate of return
consistent with prudent investment risk by investing in common stock and
other equity securities, bonds and other debt securities, and money market
instruments.
HARTFORD BOND FUND, INC. - Seeks maximum current income consistent with
preservation of capital by investing primarily in fixed-income securities.
Up to 20% of the total assets of this Fund may be invested in debt
securities rated in the highest category below investment grade ("Ba" by
Moody's Investor Services, Inc. and "BB" by Standard & Poor's) or, if
unrated, are determined to be of comparable quality by the Fund's
investment adviser. Securities rated below investment grade are commonly
referred to as "high yield-high risk securities" or
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"junk bonds." For more information concerning the risks associated with
investing in such securities, please refer to the section in the
accompanying prospectus for the Funds entitled "Hartford Bond Fund, Inc. --
Investment Policies."
HARTFORD CAPITAL APPRECIATION FUND, INC. - Seeks growth of capital by
investing in securities selected solely on the basis of potential for
capital appreciation; income, if any, is an incidental consideration.
HARTFORD DIVIDEND AND GROWTH FUND, INC. - Seeks a high level of current
income consistent with growth of capital and reasonable investment risk.
HARTFORD INDEX FUND, INC. - Seeks to provide investment results which
approximate the price and yield performance of publicly-traded common
stocks in the aggregate, as represented by the Standard & Poor's 500
Composite Stock Price Index.*
HARTFORD INTERNATIONAL ADVISERS FUND, INC. - Seeks maximum long-term total
return consistent with prudent investment risk by investing in a portfolio
of equity, debt and money securities.
HARTFORD INTERNATIONAL OPPORTUNITIES FUND, INC. - Seeks long-term total
return consistent with prudent investment risk through investment primarily
in equity securities issued by non-U.S. companies.
HARTFORD MORTGAGE SECURITIES FUND, INC. - Seeks maximum current income
consistent with safety of principal and maintenance of liquidity by
investing primarily in mortgage-related securities, including securities
issued by the Government National Mortgage Association.
HARTFORD SMALL COMPANY FUND, INC. - Seeks growth of capital by investing
primarily in equity securities selected on the basis of potential for
capital appreciation.
HARTFORD STOCK FUND, INC. - Seeks long-term capital growth primarily
through capital appreciation, with income as a secondary consideration, by
investing primarily in equity securities.
HVA MONEY MARKET FUND, INC. - Seeks maximum current income consistent with
liquidity and preservation of capital.
* "Standard & Poor's-Registered Trademark-", "S&P-Registered Trademark-",
"S&P 500-Registered Trademark-", "Standard & Poor's 500", and "500" are
trademarks of The McGraw-Hill Companies, Inc. and have been licensed for
use by Hartford Life Insurance Company. The Index Fund is not sponsored,
endorsed, sold or promoted by Standard & Poor's and Standard & Poor's
makes no representation regarding the advisability of investing in the
Index Fund.
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ALL FUNDS
All of the Funds are sponsored by Hartford and are incorporated under the
laws of the State of Maryland. The Funds are available only to serve as
the underlying investment for the variable annuity and variable life
insurance Contracts issued by Hartford.
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 Funds'
Board of Directors 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 Directors of the Funds were to conclude that separate funds should
be established for variable life and variable annuity separate accounts,
the variable annuity Contract Owners would not bear any expenses attendant
to the establishment of such separate funds.
HL Investment Advisers, Inc. ("HL Advisors ") serves as the investment
adviser to each of the Funds.
Wellington Management Company, L.L.P. serves as sub-investment adviser for
Hartford Advisers Fund, Hartford Capital Appreciation Fund, Hartford
Dividend and Growth Fund, Hartford International Advisers Fund, Hartford
International Opportunities Fund, Hartford Small Company Fund and Hartford
Stock Fund.
In addition, HL Advisors has entered into an investment services agreement
with The Hartford Investment Management Company, Inc. ("HIMCO"), pursuant
to which HIMCO will provide certain investment services to Hartford Bond
Fund, Hartford Index Fund, Hartford Mortgage Securities Fund and HVA Money
Market Fund.
A full description of the Funds, their investment policies and
restrictions, risks, charges and expenses and all other aspects of their
operation is contained in the accompanying Funds' prospectus, which should
be read in conjunction with this Prospectus before investing, and in the
Funds' Statement of Additional Information which may be ordered from
Hartford. The Funds may not be available in all states.
Does Hartford have any interest in the Funds?
Hartford has no interest in the Funds.
<PAGE>
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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 ,
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 "How is
the Accumulation Unit value determined?" commencing on page ). 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,
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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 is an exception from current inclusion
for certain annuities held by structured settlement companies, certain
annuities held by an employer with respect to a terminated qualified
retirement plan and certain immediate annuities. A non-natural person
which is a tax-exempt entity for federal tax purposes will not be
subject to income tax as a result of this provision.
If the Contract Owner is 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
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aggregation rule applies), then such amount received or
deemed received will not be includable in gross income, and
will simply reduce the "investment in the contract."
iv. The receipt of any amount as a loan under the Contract or
the assignment or pledge of any portion of the value of the
Contract shall be treated as an amount received for purposes
of this subparagraph a. and the next subparagraph b.
v. In general, the transfer of the Contract, without full and
adequate consideration, will be treated as an amount
received for purposes of this subparagraph a. and the next
subparagraph b. This transfer rule does not apply, however,
to certain transfers of property between spouses or incident
to divorce.
b. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE. Annuity payments
made periodically after the Annuity Commencement Date are
includable in gross income to the extent the payments exceed the
amount determined by the application of the ratio of the
"investment in the contract" to the total amount of the payments
to be made after the Annuity Commencement Date (the "exclusion
ratio").
i. When the total of amounts excluded from income by
application of the exclusion ratio is equal to the
investment in the contract as of the Annuity Commencement
Date, any additional payments (including surrenders) will be
entirely includable in gross income.
ii. If the annuity payments cease by reason of the death of the
Annuitant and, as of the date of death, the amount of
annuity payments excluded from gross income by the exclusion
ratio does not exceed the investment in the contract as of
the Annuity Commencement Date, then the remaining portion of
unrecovered investment shall be allowed as a deduction for
the last taxable year of the Annuitant.
iii. Generally, nonperiodic amounts received or deemed received
after the Annuity Commencement Date are not entitled to any
exclusion ratio and shall be fully includable in gross
income. However, upon a full surrender after such date,
only the excess of the amount received (after any surrender
charge) over the remaining "investment in the contract"
shall be includable in gross income (except to the extent
that the aggregation rule referred to in the next
subparagraph c. may apply).
c. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS. Contracts issued
after October 21, 1988 by the same insurer (or affiliated
insurer) to the same Contract Owner within the same calendar year
(other than certain contracts held in connection with a tax-
qualified retirement arrangement) will be treated as one annuity
Contract for the purpose of determining the taxation of
distributions prior to the Annuity Commencement Date.
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An annuity contract received in a tax-free exchange for another
annuity contract or life insurance contract may be treated as a
new Contract for this purpose. Hartford believes that for any
annuity subject to such aggregation, the values under the
Contracts and the investment in the contracts will be added
together to determine the taxation under subparagraph 2.a.,
above, of amounts received or deemed received prior to the
Annuity Commencement Date. Withdrawals will first be treated as
withdrawals of income until all of the income from all such
Contracts is withdrawn. As of the date of this Prospectus, there
are no regulations interpreting this provision.
d. 10% PENALTY TAX -- APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY
PAYMENTS.
i. If any amount is received or deemed received on the Contract
(before or after the Annuity Commencement Date), the Code
applies a penalty tax equal to 10% 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
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deemed received does not exceed such pre-8/14/82 investment, such
amount is not includable in gross income. In addition, to the
extent that such amount received or deemed received does not
exceed the sum of (a) such pre-8/14/82 investment and (b) the
"income on the contract" attributable thereto, such amount is not
subject to the 10% penalty tax. In all other respects, amounts
received or deemed received from such post-exchange Contracts are
generally subject to the rules described in this subparagraph 3.
f. REQUIRED DISTRIBUTIONS
i. Death of Contract Owner or Primary Annuitant
Subject to the alternative election or spouse beneficiary
provisions in ii. or iii., below:
1. If any Contract Owner dies on or after the Annuity
Commencement Date and before the entire interest in the
Contract has been distributed, the remaining portion of
such interest shall be distributed at least as rapidly
as under the method of distribution being used as of
the date of such death;
2. If any Contract Owner dies before the Annuity
Commencement Date, the entire interest in the Contract
will be distributed within five 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
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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 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 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
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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 do not provide guidance regarding
investor control, and as of the date of this Prospectus, no other 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
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being purchased with respect to some form of qualified retirement plan,
please refer to Appendix I, page , 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 advisor regarding U.S.,
state, and foreign taxation with respect to an annuity purchase.
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MISCELLANEOUS
What are my voting rights?
Hartford is the legal owner of all Fund shares held in the Separate
Account. As the owner, HL 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 portion as shares for which
instructions are received.
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 proxies 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. Hartford will vote shares for which no
instructions have been given and shares which are not attributable to
Contract Owners (I.E., shares owned by Hartford) in the same proportion as
it votes shares of that Fund for which it has received instructions.
During the Annuity period under a Contract the number of votes will
decrease as the assets held to fund Annuity benefits decrease.
Will other Contracts be participating in the Separate Account?
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.
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How are the Contracts sold?
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 Life Insurance Company. The
principal business address of HSD is the same as that of Hartford.
The securities will be sold by salesperson of HSD who represent Hartford as
insurance and variable annuity agents and who are registered
representatives of Broker-Dealers who have entered into distribution
agreements with HSD.
HSD is registered with the Commission under the Securities Exchange Act of
1934 as a Broker-Dealer and is a member of the National Association of
Securities Dealers, Inc.
Commissions will be paid by Hartford and will not be more than 6% of
Premium Payments.
From time to time, Hartford may pay or permit other promotional incentives,
in cash or credit or other compensation.
Who is the custodian of the Separate Account's assets?
The assets of the Separate Account are held by Hartford under a safekeeping
arrangement.
Are there any material legal proceedings affecting the Separate Account?
There are no material legal proceedings pending to which the Separate
Account is a party.
Who has passed on the legal matters affecting the Separate Account?
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, General Counsel, Hartford Life Insurance Companies, P. O. Box
2999, Hartford, CT 06104-2999.
Are you relying on any experts as to any portion of this Prospectus?
The audited financial statements 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. Reference is
made to said report on the statutory-basis financial statements of ITT
Hartford Life and Annuity Insurance Company which states the statutory-
basis financial statements are presented in accordance with statutory
accounting practices prescribed or permitted by the National Association of
Insurance Commissioners and the State of Connecticut Insurance Department,
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not presented in accordance with generally accepted accounting
principles. Reference is made to said report on the statutory-basis
financial statements of ITT Hartford Life and Annuity Insurance
Company (the Depositor), which includes an explanatory paragraph with
respect to the change in valuation method in determining aggregate
reserves for future benefits in 1994, as discussed in Note 1 of Notes
to Statutory Financial Statements. The principal business address of
Arthur Andersen LLP is One Financial Plaza, Hartford, CT 06103.
How may I get additional information?
Inquiries will be answered by calling your representative or by writing:
ITT Hartford Life and Annuity Insurance Company
Attn: Individual Annuity Operations
P. O. Box 5085
Hartford, CT 06102-5085
Telephone: (800) 862-6668
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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 specified limits, to distributions in excess of
specified limits, distributions which do not satisfy certain requirements
and certain other transactions with respect to qualified plans.
Accordingly, this summary provides only general information about the tax
rules associated with use of the Contract by a qualified plan. Contract
owners, plan participants, and beneficiaries are cautioned that the rights
and benefits of any person to benefits are controlled by the terms and
conditions of the plan regardless of the terms and conditions of the
Contract. Some qualified plans are subject to distribution and other
requirements which are not incorporated into Hartford's administrative
procedures. 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
advisers as to specific tax consequences.
A. QUALIFIED PENSION PLANS
Provisions of the Code permit eligible employers to establish 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 and the time when distributions must commence.
Corporate employers intending to use these contracts in connection with
such plans should seek competent 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
specified in Section 501(c)(3) of the Code to purchase annuity contracts,
and, subject to certain limitations, exclude such contributions from gross
income. Generally, such contributions may not exceed the lesser of $9,500
or 20% of the employees "includable compensation" for his most recent full
year of employment, subject to other adjustments. Special provisions 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
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CONTRIBUTIONS MADE PURSUANT TO A SALARY REDUCTION AGREEMENT unless such
distribution is made:
(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.
The above restrictions apply to distributions of employee contributions
made after December 31, 1988, earnings on those contributions, and earnings
on amounts attributable to employee contributions held as of December 31,
1988. They do not apply to distributions of any employer or other after-
tax contributions, employee contributions made on or before December 31,
1988, and earnings credited to employee contributions before December 31,
1988.
C. DEFERRED COMPENSATION PLANS UNDER SECTION 457
Employees and independent contractors performing services for such
employers may contribute on a before tax basis to the 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
Deferred Compensation Plans maintained by a State ("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) or other tax-exempt
organization. Generally, the limitation is 33 1/3% of includable
compensation (typically 25% of gross compensation) or $7,500 (indexed),
whichever is less. The 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 a 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 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 does not apply to amounts under a Deferred
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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 a Section 457 Deferred Compensation Plan are
prohibited unless made after the participating employee attains the age
specified in the plan, 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 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.
E. TAX PENALTIES
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 qualified plan before the Participant attains age
59 1/2 are generally subject to an additional 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 at or after age 55. A
life annuity is defined as 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).
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 retirement plan must generally be
distributed, or begin to be distributed, not later than April 1 of the
calendar year following the later of (i) the
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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 this 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. EXCESS DISTRIBUTION TAX
If the aggregate distributions from all IRAs and certain other
qualified plans in a calendar year exceed the greater of (i) $150,000,
or (ii) $112,500 as indexed for inflation, a penalty tax of 15% is
generally imposed on the excess portion of the distribution.
4. WITHHOLDING
Periodic distributions from a qualified plan lasting for a period of
ten or more years are generally subject to voluntary income tax
withholding. 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. Otherwise,
the amount withheld on such distributions is determined at the rate
applicable to wages as if the recipient were married claiming three
exemptions.
<PAGE>
-56-
Nonperiodic distributions from an IRA are subject to income tax
withholding at a flat 10% rate. The recipient may elect not to have
withholding apply.
Nonperiodic distributions from other qualified plans are generally
subject to mandatory income tax withholding at the flat rate of 20%
unless such distributions are:
(1) the non-taxable portion of the distribution;
(2) required minimum distributions;
(3) eligible rollover distributions.
Eligible rollover distributions are direct payments to an IRA or to
another qualified employer plan.
In general, distributions from plans described in Section 457 of the
Code are subject to regular wage withholding rules.
<PAGE>
-57-
TABLE OF CONTENTS
TO
STATEMENT OF ADDITIONAL INFORMATION
Section Page No.
- ------- --------
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DESCRIPTION OF ITT HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . .
SAFEKEEPING OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . .
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . .
DISTRIBUTION OF CONTRACTS. . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
-58-
CALCULATION OF YIELD AND RETURN. . . . . . . . . . . . . . . . . . . .
PERFORMANCE COMPARISONS. . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
-59-
This form must be completed for all tax-sheltered annuities.
SECTION 403(b)(11) ACKNOWLEDGMENT FORM
The Hartford variable annuity Contract which you have recently purchased is
subject to certain restrictions imposed by the Tax Reform Act of 1986.
Contributions to the Contract after December 31, 1988 and any increases in cash
value after December 31, 1988 may not be distributed to you unless you have:
a. attained age 59 1/2
b. terminated employment
c. died, or
d. become disabled.
Distributions of post December 31, 1988 contributions may also be made if you
have experienced a financial hardship.
Also, there may be a 10% penalty tax for distributions made because of financial
hardship or separation from service.
Also, please be aware that your 403(b) Plan may also offer other financial
alternatives other than the Hartford variable annuity. Please refer to your
Plan.
Please complete the following and return to:
ITT Hartford Life and Annuity Insurance Company
Attn: Individual Annuity Operations
P. O. Box 5085
Hartford, CT 06102-5085
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Name of Contract Owner/Participant:
Address:
City or Plan/School District:
Date:
Contract No:
Signature:
<PAGE>
-60-
To Obtain a Statement of Additional Information, please complete the form below
and mail to:
ITT Hartford Life and Annuity Insurance Company
Attn: Individual Annuity Operations
P. O. Box 5085
Hartford, CT 06102-5085
Please send a Statement of Additional Information for the Director to me at the
following address:
- ---------------------------------------------------
Name
- ---------------------------------------------------
Address
- ---------------------------------------------------
City/State Zip Code
- - - - - - - - - - - - - - - - - -
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT ONE
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 ITT Hartford Life and Annuity
Insurance Company, Attn: Individual Annuity Operations, P.O. Box 5085, Hartford,
Connecticut 06102-5085.
Date of Prospectus: May 1, 1997
Date of Statement of Additional Information: May 1, 1997
<PAGE>
-1-
TABLE OF CONTENTS
SECTION PAGE NO.
- ------- --------
INTRODUCTION . . . . . . . . . . . . . . . . . . . . .
DESCRIPTION OF ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SAFEKEEPING OF ASSETS. . . . . . . . . . . . . . . . .
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . .
DISTRIBUTION OF CONTRACTS. . . . . . . . . . . . . . .
CALCULATION OF YIELD AND RETURN. . . . . . . . . . . .
PERFORMANCE COMPARISONS. . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . .
<PAGE>
-2-
INTRODUCTION
The individual and group tax-deferred variable annuity contracts described in
the Prospectus are designed to provide Annuity benefits to individuals who have
established or wish to establish retirement programs which may or may not
qualify for special federal income tax treatment. The Annuitant under these
contracts may receive Annuity benefits in accordance with the Annuity option
selected and the retirement program, if any, under which the contracts have been
purchased. Annuity payments under a contract will begin on a particular future
date which may be selected at any time under the contract or automatically when
the Annuitant reaches age 90, except in certain states where deferral past age
85 is not permitted. There are several alternative annuity payment options
available under the contract (see "Optional Annuity Forms," commencing on
page___ ).
The Premium Payments under a contract, less any applicable Premium Taxes, will
be applied to the Separate Account and/or the Fixed Account. Accordingly, the
net Premium Payment under the contract will be applied to purchase interests in
one or more of the Bond Fund, Stock Fund, HVA Money Market Fund, Advisers Fund,
Capital Appreciation Fund, Mortgage Securities Fund, Index Fund, International
Opportunities Fund, and Dividend and Growth Fund Sub-Accounts.
Shares of the Funds are purchased by the Separate Account without the imposition
of a sales charge. The value of a contract depends on the value of the shares
of the Fund held by the Separate Account pursuant to that contract. As a
result, the Contract Owner bears the investment risk since market value of the
shares may increase or decrease.
There is no assurance that the value of the Contract Owner's contract at any
time will equal or exceed the Premium Payments made. However, if the Annuitant
or Contract Owner dies before the Annuity Commencement Date, the contracts
provide that a death benefit equal to the value of the contract as of the date
due proof of death is received by ITT Hartford Life and Annuity Insurance
Company ("Hartford") shall be payable. This amount is the greater of (a) the
Contract Value on the date of receipt of due proof of death by Hartford, or (b)
100% of the total Premium Payments made to such contract, reduced by any prior
surrenders, or (c) the Contract Value on the Specified Contract Anniversary
immediately preceding the date of death, increased by the dollar amount of any
Premium Payments made and reduced by the dollar amount of any partial
terminations since the immediately preceding Specified Contract Anniversary.
(See "Payments of Benefits" commencing on page ___ of the Prospectus.)
DESCRIPTION OF ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
ITT Hartford Life and Annuity Insurance Company ("Hartford") is a stock life
insurance company engaged in the business of writing life insurance and
annuities, both individual and group, in all states of the United States and the
District of Columbia, except New York. On January 1, 1998, Hartford's name will
change to Hartford Life and Annuity Insurance Company.
<PAGE>
-3-
Hartford was originally incorporated under the laws of Wisconsin on January 9,
1956, 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 a subsidiary of Hartford Fire Insurance
Company, one of the largest multiple lines insurance carriers in the United
States. Hartford is ultimately owned by ITT Hartford Group, Inc., a Delaware
corporation. Subject to shareholder approval on May 2, 1997, the name of ITT
Hartford Group, Inc. will change to The Hartford Financial Services Group, Inc.
Hartford is rated A+ (superior) by A.M. Best and Company, Inc., on the basis of
its financial soundness and operating performance. Hartford is rated AA by
Standard & Poor's and AA+ by Duff and Phelps on the basis of its claims paying
ability. These ratings do not apply to the investment performance of the Sub-
Accounts of the Separate Account. The ratings apply to Hartford's ability to
meet its insurance obligations, including those described in this Prospectus.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited financial statements included in this Statement of Additional
Information 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. Reference is made to
said report on the statutory-basis financial statements of ITT Hartford Life &
Annuity Insurance Company which states the statutory-basis financial statements
are presented in accordance with statutory accounting practices prescribed or
permitted by the National Association of Insurance Commissioners and the State
of Connecticut Insurance Department, not presented in accordance with generally
accepted accounting principles. Reference is made to said report on the
statutory-basis financial statements of ITT Hartford Life & Annuity Insurance
Company (the Depositor), which includes an explanatory paragraph with respect to
the change in valuation method in determining aggregate reserves for future
benefits in 1994, as discussed in Note 1 of Notes to Statutory Financial
Statements. 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 continuous basis.
HSD is a wholly-owned subsidiary of Hartford Life Insurance Company. 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.
<PAGE>
-4-
HSD is registered with the Securities and Exchange Commission under the
Securities and Exchange Act of 1934 as a Broker-Dealer and is a member of the
National Association of Securities Dealers, Inc. ("NASD").
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 ae maintained of all purchases and
redemptions of Fund shares held in each of the Sub-Accounts.
CALCULATION OF YIELD AND RETURN
YIELD OF THE HVA MONEY MARKET FUND. As summarized in the Prospectus under the
heading "Performance Related Information," the yield of the Money Market Fund
Sub-Account for a seven day period (the "base period") will be computed by
determining the "net change in value" (calculated as set forth below) of a
hypothetical account having a balance of one share 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
daily dividends as declared by the underlying funds, less daily expense charges
of the account) for the period, but will not include realized gains or losses or
unrealized appreciation or depreciation on the underlying fund shares.
The Money Market Fund 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 POLICY FEE.
YIELDS OF HARTFORD BOND FUND AND HARTFORD MORTGAGE SECURITIES FUND SUB-ACCOUNTS.
As summarized in the Prospectus under the heading "Performance Related
Information," yields of these two 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 Bond
Fund and Mortgage Securities Fund 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 Bond Fund and Hartford Mortgage
Securities Fund.
<PAGE>
-5-
The yield reflects recurring charges on the Separate Account level, including
the annual policy fee.
At any time in the future, yields and total return may be higher or lower than
past yields and there can be no assurance that any historical results will
continue.
The method of calculating yields described above for these Sub-Accounts differs
from the method used by the Sub-Accounts prior to May 1, 1988. The denominator
of the fraction used to calculate yield was previously the average unit value
for the period calculated. That denominator will hereafter be the unit value of
the Sub-Accounts on the last trading day of the period calculated.
CALCULATION OF TOTAL RETURN. As summarized in the Prospectus under the heading
"Performance Related Information", total return is a measure of the change in
value of an investment in a Sub-Account over the period covered. 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 by the unit value per unit
on the last trading day of the period; (2) assuming redemption at the end of the
period and deducting any applicable contingent deferred sales charge and (3)
dividing this account value for the hypothetical investor by the initial $1,000
investment and annualizing the result for periods of less than one year. 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.
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. Each Sub-Account may from time to time include its
total return in advertisements or in information furnished to present to
prospective shareholders. Each Sub-Account may from time to time include its
yield and total return in advertisements or information furnished to present to
prospective shareholders. Each Sub-Account may from time to time include in
advertisements its total return (and yield in the case of certain Sub-Accounts)
the ranking of those performance figures relative to such figures for groups of
other annuities analyzed by Lipper Analytical Services as having the same
investment objectives.
The total return and yield may also be used to compare the performance of the
Sub-Accounts against certain widely acknowledged outside standards or indices
for stock and bond market performance. The Standard & Poor's Composite Index of
500 Stocks (the "S&P 500") is a market value-weighted and unmanaged index
showing the changes in the aggregate market value of 500 stocks relative to the
base period 1941-43. The S&P 500 is composed almost entirely of common stocks
of companies listed on the New York Stock Exchange, although the common stocks
of a few companies listed on the American Stock Exchange or traded
over-the-counter are included. The 500 companies represented include 400
industrial, 60 transportation and 40 financial services concerns. The S&P 500
represents about 80% of the market value of all issues
<PAGE>
-6-
traded on the New York Stock Exchange.
The NASDAQ-OTC Price Index (The "NASDAQ Index") is a market value-weighted and
unmanaged index showing the changes in the aggregate market value of
approximately 3,500 stocks relative to the base measure of 100.00 on February 5,
1971. The NASDAQ Index is composed entirely of common stocks of companies
traded over-the-counter and often through the National Association of Securities
Dealers Automated Quotations ("NASDAQ") system. Only those over-the-counter
stocks having only one market maker or traded on exchanges are excluded.
The Shearson Lehman Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all
quasi-federal corporations; and all corporate debt guaranteed by the U.S.
Government. Mortgage-backed securities, flower bonds and foreign targeted
issues are not included in the SL Government Index.
The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized rating
agency.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
ITT Hartford Life and Annuity Insurance Company:
We have audited the accompanying statutory-basis balance sheets of ITT Hartford
Life and Annuity Insurance Company (a Connecticut Corporation and wholly owned
subsidiary of Hartford Life Insurance Company) (the Company) as of December 31,
1996 and 1995, and the related statutory-basis statements of income, changes in
capital and surplus, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
statutory-basis 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.
The Company presents its financial statements in conformity with statutory
accounting practices as described in Note 1 of notes to statutory-basis
financial statements. When statutory-basis financial statements are presented
for purposes other than for filing with a regulatory agency, generally accepted
auditing standards require that an auditors' report on them state whether they
are presented in conformity with generally accepted accounting principles. The
accounting practices used by the Company vary from generally accepted accounting
principles as explained and quantified in Note 1. In our opinion, because the
differences in accounting practices as described in Note 1 are material, the
statutory-basis financial statements referred to above do not present fairly, in
accordance with generally accepted accounting principles, the financial position
of the Company as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996.
However, in our opinion, the statutory-basis financial statements referred to
above present fairly, in all material respects, the financial position of the
Company as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 1996
in conformity with statutory accounting practices as described in Note 1.
As discussed in Note 1 of notes to statutory financial statements, during 1994,
the Company changed its valuation method in determining aggregate reserves for
future benefits.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 10, 1997
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATUTORY BASIS STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
($000)
<S> <C> <C> <C>
Revenues
Premiums and Annuity Considerations.... $ 250,244 $ 165,792 $ 442,173
Annuity and Other Fund Deposits........ 1,897,347 1,087,661 608,685
Net Investment Income.................. 98,441 78,787 29,012
Commissions and Expense Allowances on
Reinsurance Ceded..................... 370,637 183,380 154,527
Reserve Adjustment on Reinsurance
Ceded................................. 3,864,395 1,879,785 1,266,926
Other Revenues......................... 161,906 140,796 41,857
---------- ---------- ----------
Total Revenues....................... 6,642,970 3,536,201 2,543,180
---------- ---------- ----------
Benefits and Expenses
Death and Annuity Benefits............. 60,111 53,029 7,948
Surrenders and Other Benefit
Payments.............................. 276,720 221,392 181,749
Commissions and Other Expenses......... 491,720 236,202 186,303
Increase in Reserves for Future
Benefits.............................. 27,351 94,253 416,748
Increase in Liability for Premium and
Other Deposit Funds................... 207,156 460,124 182,934
Net Transfers to Separate Accounts..... 5,492,964 2,414,669 1,541,419
---------- ---------- ----------
Total Benefits and Expenses.......... 6,556,022 3,479,669 2,517,101
---------- ---------- ----------
Net Gain from Operations Before Federal
Income Tax Expense...................... 86,948 56,532 26,079
Federal Income Tax Expense............. 19,360 14,048 24,038
---------- ---------- ----------
Net Gain from Operations................. 67,588 42,484 2,041
Net Realized Capital Gains (Losses).... 407 374 (2)
---------- ---------- ----------
Net Income............................... $ 67,995 $ 42,858 $ 2,039
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATUTORY BASIS BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------
1996 1995
----------- ----------
<S> <C> <C>
($000)
Assets
Bonds........................................... $ 1,268,480 $1,226,489
Common Stocks................................... 44,996 39,776
Policy Loans.................................... 28,853 22,521
Cash and Short-Term Investments................. 176,830 173,304
Other Invested Assets........................... 2,858 13,432
----------- ----------
Total Cash and Invested Assets................ 1,522,017 1,475,522
----------- ----------
Investment Income Due and Accrued............... 14,555 18,021
Premium Balances Receivable..................... 373 402
Receivables from Affiliates..................... 257 8,182
Other Assets.................................... 19,099 25,907
Separate Account Assets......................... 14,619,324 7,324,910
----------- ----------
Total Assets.................................. $16,175,625 $8,852,944
----------- ----------
----------- ----------
Liabilities
Aggregate Reserves for Future Benefits.......... $ 571,970 $ 542,082
Policy and Contract Claims...................... 6,806 8,223
Liability for Premium and Other Deposit Funds... 1,155,143 948,361
Asset Valuation Reserve......................... 7,442 8,010
Payable to Affiliates........................... 10,022 3,682
Other Liabilities............................... (498,195) (220,658)
Separate Account Liabilities.................... 14,619,324 7,324,910
----------- ----------
Total Liabilities............................. 15,872,512 8,614,610
----------- ----------
Capital and Surplus
Common Stock.................................... 2,500 2,500
Gross Paid-In and Contributed Surplus........... 226,043 226,043
Unassigned Funds................................ 74,570 9,791
----------- ----------
Total Capital and Surplus..................... 303,113 238,334
----------- ----------
Total Liabilities and Capital and Surplus....... $16,175,625 $8,852,944
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATUTORY BASIS STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
--------- --------- --------
<S> <C> <C> <C>
($000)
Capital and Surplus -- Beginning of
Year................................... $ 238,334 $ 91,285 $ 88,693
--------- --------- --------
Net Income............................ 67,995 42,858 2,039
Change in Net Unrealized Capital
(Losses) Gains on Common Stocks...... (5,171) 1,709 (133)
Change in Asset Valuation Reserve..... 568 (5,588) (1,356)
Change in Non-Admitted Assets......... 1,387 (1,944) (8,599)
Change in Reserve (Valuation Basis)... -- -- 10,659
Aggregate Write-ins for Surplus....... -- 8,080 (18)
Dividends to Shareholder.............. -- (10,000) --
Paid-In Surplus....................... -- 111,934 --
--------- --------- --------
Change in Capital and Surplus....... 64,779 147,049 2,592
--------- --------- --------
Capital and Surplus -- End of Year...... $ 303,113 $ 238,334 $ 91,285
--------- --------- --------
--------- --------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATUTORY BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
($000)
Operations
Premiums, Annuity Considerations and
Other Fund Deposits.................. $ 2,147,627 $ 1,253,511 $ 1,050,493
Net Investment Income................. 106,178 78,328 24,519
Other Revenues........................ 4,396,892 2,253,466 1,515,700
----------- ----------- -----------
Total Revenues...................... 6,650,697 3,585,305 2,590,712
----------- ----------- -----------
Benefits Paid......................... 338,998 277,965 181,205
Federal Income Taxes Paid on
Operations........................... 28,857 208,423 20,634
Other Expenses........................ 6,254,139 2,664,385 1,832,905
----------- ----------- -----------
Total Benefits and Expenses......... 6,621,994 3,150,773 2,034,744
----------- ----------- -----------
Net Cash from Operations............ 28,703 434,532 555,968
----------- ----------- -----------
Proceeds from Investments
Bonds................................. 871,019 287,941 87,747
Common Stocks......................... 72,100 52 --
Other................................. 10 28 40
----------- ----------- -----------
Total Investment Proceeds........... 943,129 288,021 87,787
----------- ----------- -----------
Taxes (Paid) Received on Capital (Gains)
Losses................................. (936) (226) 96
Paid-In Surplus......................... -- 111,934 --
Other Cash Provided..................... 41,998 28,199 30,554
----------- ----------- -----------
Total Proceeds...................... 1,012,894 862,460 674,405
----------- ----------- -----------
Cost of Investments Acquired
Bonds................................. 914,523 720,521 595,181
Common Stocks......................... 82,495 35,794 808
Miscellaneous Applications............ 130 2,146 2,523
----------- ----------- -----------
Total Investments Acquired.......... 997,148 758,461 598,512
----------- ----------- -----------
Other Cash Applied
Dividends Paid to Shareholders........ -- 10,000 --
Other................................. 12,220 5,007 24,813
----------- ----------- -----------
Total Other Cash Applied............ 12,220 15,007 24,813
----------- ----------- -----------
Total Applications................ 1,009,368 773,468 623,325
----------- ----------- -----------
Net Change in Cash and Short-Term
Investments............................ 3,526 88,992 51,080
Cash and Short-Term Investments,
Beginning of Year...................... 173,304 84,312 33,232
----------- ----------- -----------
Cash and Short-Term Investments, End of
Year................................... $ 176,830 $ 173,304 $ 84,312
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)
- ---------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
ITT Hartford Life and Annuity Insurance Company ("ILA" or "the Company"),
formerly known as ITT Life Insurance Corporation, is a wholly owned subsidiary
of Hartford Life Insurance Company ("HLIC"), which is an indirect subsidiary of
Hartford Life, Inc. ("Hartford Life"), which is ultimately owned by ITT Hartford
Group, Inc. ("The Hartford"), formerly a wholly owned subsidiary of ITT
Corporation ("ITT"). On February 10, 1997, The Hartford announced its plans to
sell up to 20% of Hartford Life to the public. On December 19, 1995, ITT
Corporation distributed all the outstanding shares of The Hartford to ITT
shareholders of record in an action known herein as the "Distribution". As a
result of the Distribution, The Hartford became an independent, publicly traded
company. During 1996, ILA re-domesticated from the State of Wisconsin to the
State of Connecticut.
ILA offers a complete line of ordinary and universal life insurance,
individual annuities and certain supplemental accident and health benefit
coverages.
BASIS OF PRESENTATION
The accompanying ILA statutory-basis financial statements were prepared in
conformity with statutory accounting practices prescribed or permitted by the
National Association of Insurance Commissioners ("NAIC") and the State of
Connecticut Department of Insurance.
The preparation of financial statements in conformity with statutory
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.
Statutory accounting practices and generally accepted accounting principles
("GAAP") differ in certain significant respects. These differences principally
involve:
(1) treatment of policy acquisition costs (commissions, underwriting and
selling expenses, premium taxes, etc.) which are charged to expense when
incurred for statutory purposes rather than on a pro-rata basis over the
expected life of the policy;
(2) recognition of premium revenues, which for statutory purposes are
generally recorded as collected or when due during the premium paying period
of the contract and which for GAAP purposes, generally, for universal life
policies and investment products, are only recorded for policy charges for
the cost of insurance, policy administration and surrender charges assessed
to policy account balances. Also, for GAAP purposes, premiums for
traditional life insurance policies are recognized as revenues when they are
due from policyholders and the retrospective deposit method is used in
accounting for universal life and other types of contracts where the payment
pattern is irregular or surrender charges are a significant source of
profit. The prospective deposit method is used for GAAP purposes where
investment margins are the primary source of profit;
(3) development of liabilities for future policy benefits, which for
statutory purposes predominantly use interest rate and mortality assumptions
prescribed by the NAIC which may vary considerably from interest and
mortality assumptions used for GAAP financial reporting;
(4) providing for income taxes based on current taxable income (tax return)
only for statutory purposes, rather than establishing additional assets or
liabilities for deferred Federal income taxes to recognize the tax effect
related to reporting revenues and expenses in different periods for
financial reporting and tax return purposes;
(5) excluding certain GAAP assets designated as non-admitted assets (e.g.,
past due agents' balances and furniture and equipment) from the balance
sheet for statutory purposes by directly charging surplus;
(6) establishing accruals for post-retirement and post-employment health
care benefits on an option basis, using a twenty year phase-in approach,
whereas GAAP liabilities are required to be recorded;
(7) establishing a formula reserve for realized and unrealized losses due to
default and equity risk associated with certain invested assets (Asset
Valuation Reserve); as well as the deferral and amortization of realized
gains and losses, motivated by changes in interest rates during the period
the asset is held, into income over the remaining life to maturity of the
asset sold (Interest Maintenance Reserve); whereas on a GAAP basis, no such
formula reserve is required and
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
realized gains and losses are recognized in the period the asset is sold;
(8) the reporting of reserves and benefits net of reinsurance ceded, where
risk transfer has taken place; whereas on a GAAP basis, reserves are
reported gross of reinsurance with reserve credits presented as recoverable
assets;
(9) the reporting of fixed maturities at amortized cost, whereas GAAP
requires that fixed maturities be classified as "held-to-maturity",
"available-for-sale" or "trading", based on the Company's intentions with
respect to the ultimate disposition of the security and its ability to
affect those intentions. The Company's fixed maturities were classified on a
GAAP basis as "available-for- sale" and accordingly, those investments were
reflected at fair value with the corresponding impact included as a
component of Stockholder's Equity designated as "Net unrealized capital
(loss)/ gain on investments, net of tax". For statutory reporting purposes,
Net Unrealized Capital Losses (Gains) on Common Stocks represent unrealized
losses (gains) on common stock reported at fair value; and
(10) separate account liabilities are valued on the Commissioner's Annuity
Reserve Valuation Method ("CARVM"), with the surplus generated recorded as a
liability to the general account (and a contra liability on the balance
sheet of the general account), whereas GAAP liabilities are valued at
account value.
As of and for the years ended December 31, 1996, 1995 and 1994, the
significant differences between statutory and GAAP basis net income and capital
and surplus for the Company are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
GAAP Net Income................ $ 41,202 $ 38,821 $ 23,295
Amortization and deferral of
policy acquisition costs...... (341,572) (174,341) (117,863)
Change in unearned revenue
reserve....................... 55,504 32,300 24,494
Deferred taxes................. 2,090 2,801 (9,267)
Separate accounts.............. 306,978 146,635 75,941
Other, net..................... 3,793 (3,358) 5,439
----------- ----------- -----------
Statutory Net Income........... $ 67,995 $ 42,858 $ 2,039
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
GAAP Capital and Surplus....... $ 503,887 $ 455,541 $ 199,785
Deferred policy acquisition
costs......................... (938,114) (596,542) (422,201)
Unearned revenue reserve....... 130,148 74,644 42,344
Deferred taxes................. 12,823 1,493 13,257
Separate accounts.............. 640,101 333,123 186,488
Asset valuation reserve........ (7,442) (8,010) (2,422)
Unrealized gain (loss) on
bonds......................... 5,112 (1,696) 21,918
Adjustment relating to Lyndon
contribution (see Note 3)..... (41,277) (41,277) --
Other, net..................... (2,125) 21,058 52,116
----------- ----------- -----------
Statutory Capital and
Surplus....................... $ 303,113 $ 238,334 $ 91,285
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
AGGREGATE RESERVES AND LIABILITIES FOR PREMIUM AND OTHER DEPOSIT FUNDS
Aggregate reserves for payment of future life, health and annuity benefits
were computed in accordance with actuarial standards. Reserves for life
insurance policies are generally based on the 1958 and 1980 Commissioner's
Standard Ordinary Mortality Tables and various valuation rates ranging from 2.5%
to 5%. Accumulation and on-benefit annuity reserves are based principally on
individual annuity tables at various rates ranging from 2.5% to 8.75% and using
CARVM. Accident and health reserves are established using a two year preliminary
term method and morbidity tables based on Company experience.
ILA has established separate accounts to segregate the assets and
liabilities of certain annuity contracts that must be segregated from the
Company's general assets under the terms of the contracts. The assets consist
primarily of marketable securities reported at market value. Premiums, benefits
and expenses of these contracts are reported in the Statutory Basis Statements
of Income.
During 1994, the Company changed the valuation method on aggregate reserves
for future benefits resulting in a $10.7 million increase in surplus. The new
valuation method is in accordance with presently accepted actuarial standards.
INVESTMENTS
Investments in bonds are carried at amortized cost. Bonds which are deemed
ineligible to be held at amortized cost by the NAIC Securities Valuation Office
("SVO")are carried at the appropriate SVO published value. When a permanent
reduction in the value of publicly traded securities occurs, the decrease is
reported as a realized loss and the carrying value is adjusted accordingly.
Common stocks are carried at market value with the difference from cost
reflected in surplus. Other invested assets are generally recorded at fair
value.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Changes in net unrealized capital (losses)/gains on common stocks are
reported as (reductions)/additions of surplus. The Asset Valuation Reserve
("AVR") is designed to provide a standardized reserving process for realized and
unrealized losses due to default and equity risks associated with invested
assets. The reserve decreased by $568 in 1996 and increased by $5,588 and $1,356
in 1995 and 1994, respectively. Additionally, the Interest Maintenance Reserve
("IMR") captures net realized capital gains and losses, net of applicable income
taxes, resulting from changes in interest rates and amortizes these gains or
losses into income over the remaining life of the mortgage loan or bond sold.
Realized capital gains and losses, net of taxes not included in IMR are reported
in the Statutory Basis Statements of Income. Realized investment gains and
losses are determined on a specific identification basis. The amount of net
capital gains reclassified from the IMR was $1,413 and $39 in 1996 and 1995,
respectively, and the amount of net capital losses was $67 in 1994. The amount
of income amortized was $392, $256 and $114 in 1996, 1995 and 1994,
respectively.
OTHER LIABILITIES
The amount reflected in other liabilities includes a receivable from the
separate accounts of $640 million and $333 million as of December 31, 1996 and
1995, respectively. The balances are classified in accordance with NAIC
accounting practices.
- ---------------------------------------------------
2. INVESTMENTS
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Interest income from
bonds.................... $ 89,940 $ 76,100 $ 28,335
Interest income from
policy loans............. 1,846 1,504 454
Interest and dividends
from other investments... 7,864 2,288 1,069
--------- --------- ---------
Gross investment income... 99,650 79,892 29,858
Less: investment
expenses................. 1,209 1,105 846
--------- --------- ---------
Net investment income..... $ 98,441 $ 78,787 $ 29,012
--------- --------- ---------
--------- --------- ---------
</TABLE>
(B) COMPONENTS OF NET UNREALIZED CAPITAL (LOSSES) GAINS ON COMMON STOCKS
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Gross unrealized capital gains
at end of year............... $ 713 $ 1,724 $ 75
Gross unrealized capital
losses at end of year........ (4,160) -- (60)
--------- --------- ---------
Net unrealized capital
(losses) gains............... (3,447) 1,724 15
Balance at beginning of
year......................... 1,724 15 148
--------- --------- ---------
Change in net unrealized
capital (losses) gains on
common stocks................ $ (5,171) $ 1,709 $ (133)
--------- --------- ---------
--------- --------- ---------
</TABLE>
(C) COMPONENTS OF NET UNREALIZED CAPITAL (LOSSES) GAINS ON BONDS AND SHORT-TERM
INVESTMENTS
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Gross unrealized
capital gains at end
of year............... $ 11,821 $ 22,251 $ 986
Gross unrealized
capital losses at end
of year............... (3,842) (1,374) (34,718)
---------- ---------- ----------
Net unrealized capital
gains (losses) after
tax................... 7,979 20,877 (33,732)
Balance at beginning of
year.................. 20,877 (33,732) 5,232
---------- ---------- ----------
Change in net
unrealized capital
(losses) gains on
bonds and short-term
investments........... $ (12,898) $ 54,609 $ (38,964)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
(D) COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Bonds and short-term
investments.................... $ 2,756 $ 156 $ (101)
Common stocks................... 0 52 0
Real estate and other........... 0 0 34
--------- --------- ---------
Realized capital gains
(losses)....................... 2,756 208 (67)
Capital gains taxes (benefit)... 936 (205) 2
--------- --------- ---------
Net realized capital gains
(losses) after tax............. 1,820 413 (69)
Less: IMR capital gains
(losses)....................... 1,413 39 (67)
--------- --------- ---------
Net realized capital gains
(losses)....................... $ 407 $ 374 $ (2)
--------- --------- ---------
--------- --------- ---------
</TABLE>
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
(E) OFF-BALANCE SHEET INVESTMENTS
The Company had no significant financial instruments with off-balance sheet
risk as of December 31, 1996 and 1995.
(F) CONCENTRATION OF CREDIT RISK
Excluding U.S. government and government agency investments, the Company is
not exposed to any significant concentration of credit risk.
(G) BONDS, SHORT-TERM AND COMMON STOCK INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
------------------------------------------------
GROSS UNREALIZED
AMORTIZED -------------------- FAIR
COST GAINS LOSSES VALUE
------------ --------- --------- ------------
<S> <C> <C> <C> <C>
U.S. government and government agencies and authorities:
(Guaranteed and sponsored)............................................. $ 58,761 $ 6 $ (195) $ 58,572
(Guaranteed and sponsored) -- asset-backed............................. 78,237 1,477 (609) 79,105
States, municipalities and political subdivisions........................ 25,958 163 (2) 26,119
International governments................................................ 7,447 205 -- 7,652
Public utilities......................................................... 70,116 396 (424) 70,088
All other corporate...................................................... 410,530 6,357 (1,355) 415,532
All other corporate -- asset-backed...................................... 485,953 2,654 (1,081) 487,526
Short-term investments................................................... 148,094 -- (66) 148,028
Certificates of deposit.................................................. 83,378 563 (110) 83,831
Parents, subsidiaries and affiliates..................................... 48,100 -- -- 48,100
------------ --------- --------- ------------
Total bonds and short-term investments................................. $ 1,416,574 $ 11,821 $ (3,842) $ 1,424,553
------------ --------- --------- ------------
------------ --------- --------- ------------
Common stock -- unaffiliated............................................. $ 13,064 $ 713 $ 0 $ 13,777
Common stock -- affiliated............................................... 35,379 0 4,160 31,219
------------ --------- --------- ------------
Total common stocks...................................................... $ 48,443 $ 713 $ 4,160 $ 44,996
------------ --------- --------- ------------
------------ --------- --------- ------------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995
----------------------------------------------------
GROSS UNREALIZED
AMORTIZED ------------------------ FAIR
COST GAINS LOSSES VALUE
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
U.S. government and government agencies and authorities:
(Guaranteed and sponsored)........................................... $ 44,268 $ 14 $ (248) $ 44,034
(Guaranteed and sponsored) -- asset-backed........................... 176,160 4,644 (682) 180,122
States, municipalities and political subdivisions...................... 16,948 38 (6) 16,980
International governments.............................................. 5,402 441 -- 5,843
Public utilities....................................................... 108,083 1,652 (90) 109,645
All other corporate.................................................... 374,058 8,145 (248) 381,955
All other corporate -- asset-backed.................................... 410,197 5,841 (89) 415,949
Short-term investments................................................. 139,011 18 -- 139,029
Certificates of deposit................................................ 91,373 1,458 (11) 92,820
------------ ----------- ----------- ------------
Total bonds and short-term investments............................... $ 1,365,500 $ 22,251 $ (1,374) $ 1,386,377
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
Common stock -- unaffiliated........................................... $ 2,668 $ 555 $ -- $ 3,223
Common stock -- affiliated............................................. 35,384 1,169 -- 36,553
------------ ----------- ----------- ------------
Total common stocks.................................................. $ 38,052 $ 1,724 $ -- $ 39,776
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
</TABLE>
The amortized cost and estimated market value of bonds and short-term
investments at December 31, 1996 by management's anticipated maturity are shown
below. Asset-backed securities are distributed to maturity year based on ILA's
estimate of the rate of future prepayments of principal
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
over the remaining life of the securities. Expected maturities differ from
contractual maturities reflecting borrowers' rights to call or prepay their
obligations.
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED FAIR
MATURITY COST VALUE
- ------------------------------ ------------ ------------
<S> <C> <C>
Due in one year or less....... $ 478,095 $ 478,852
Due after one year through
five years................... 622,805 623,105
Due after five years through
ten years.................... 259,479 265,681
Due after ten years........... 56,195 56,915
------------ ------------
Total....................... $ 1,416,574 $ 1,424,553
</TABLE>
Proceeds from sales of investments in bonds and short-term investments
during 1996, 1995 and 1994 were $668,078, $313,961 and $117,912, respectively,
resulting in gross realized gains of $3,675, $1,419 and $518, respectively, and
gross realized losses of $919, $1,263 and $619, respectively, before transfers
to IMR. The Company had realized gains of $52 during 1995 from a capital gain
distribution.
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS
BALANCE SHEET ITEMS (IN MILLIONS):
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Assets
Bonds and short-term
investments......... $ 1,417 $ 1,425 $ 1,366 $ 1,386
Common stocks........ 45 45 40 40
Policy loans......... 29 29 23 23
Other invested
assets.............. 3 3 13 13
Liabilities
Liabilities on
investment
contracts........... $ 1,245 $ 1,191 $ 1,031 $ 981
</TABLE>
The carrying amounts for policy loans approximates fair value. The
liabilities are determined by forecasting future cash flows and discounting the
forecasted cash flows at current market rates.
- ---------------------------------------------------
3. RELATED PARTY TRANSACTIONS
Transactions between the Company and its affiliates within The Hartford
relate principally to tax settlements, reinsurance, service fees, capital
contributions and payments of dividends.
On June 30, 1995, the assets of Lyndon Insurance Company were contributed to
ILA. As a result, ILA received approximately $365 million in bonds and short-
term investments, common stocks and cash, $28 million in policy reserves, $187
million of current tax liability, $26 million in IMR, $8 million in AVR (offset
by an aggregate write-in to surplus), and $4 million of other liabilities. The
assets in excess of liabilities of $112 million were recorded as an increase to
paid-in surplus.
For additional information, see Note 5.
- ---------------------------------------------------
4. FEDERAL INCOME TAXES
The Company and The Hartford have entered into a tax sharing agreement under
which each member in the consolidated U.S. Federal income tax return will make
payments between them such that, with respect to any period, the amount of taxes
to be paid by the Company, subject to certain adjustments, generally will be
determined as though the Company were to file 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 consolidated group of which The Hartford is
the common parent. It is the current 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. Federal income taxes paid by the Company were $29,792, $215,921 and
$20,538 in 1996, 1995 and 1994, respectively. The effective tax rate was 22%,
25% and 92% in 1996, 1995 and 1994, respectively. The following schedule
provides a reconciliation of the tax provision at the U.S. Federal Statutory
rate to Federal income tax expense (in millions).
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- -----
<S> <C> <C> <C>
Tax provision at U.S. Federal statutory rate..... $ 30 $ 20 $ 9
Tax deferred acquisition costs................... 27 8 8
Statutory to tax reserve differences............. -- 3 5
Unrealized (gain)/loss on separate accounts...... (21) (13) 2
Investments and other............................ (17) (4) --
--------- --------- ---
Federal income tax expense....................... $ 19 $ 14 $ 24
--------- --------- ---
--------- --------- ---
</TABLE>
- ---------------------------------------------------
5. CAPITAL AND SURPLUS AND SHAREHOLDER
DIVIDEND RESTRICTIONS
The maximum amount of dividends which can be paid, without prior approval,
by State of Connecticut insurance companies to shareholders is subject to
restrictions relating to statutory surplus. Dividends are paid as determined by
the Board of Directors and are not cumulative. No dividends were paid in 1996 or
1994. ILA paid dividends of $10 million to its parent, HLIC, in 1995. As a
result of the Distribution by ITT, the assets of ITT Lyndon Insurance
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
Company (Lyndon) were contributed to ILA in June 1995. Substantially all the
business was removed from Lyndon prior to the contribution. The amount of assets
which exceeded liabilities at the contribution date ($112 million) was included
in paid-in surplus.
- ---------------------------------------------------
6. PENSION PLANS AND OTHER POST-RETIREMENT
AND POST-EMPLOYMENT BENEFITS
The Company's employees are included in The Hartford's non-contributory
defined benefit pension plans. These plans provide pension benefits that are
based on years of service and the employee's compensation during the last ten
years of employment. The 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 and the maximum amount that can be
deducted for Federal income tax purposes. Generally, pension costs are funded
through the purchase of HLIC's group pension contracts. Pension expense was
$358, $1,034, and $1,211 in 1996, 1995 and 1994, respectively. Liabilities for
the plan are held by The Hartford.
The Company also participates in The Hartford's Investment and Savings Plan,
which includes a deferred compensation option under IRC section 401(k) and an
ESOP allocation under IRC section 404(k). The liabilities for these plans are
included in the financial statements of The Hartford. The cost to ILA was not
material in 1996, 1995 and 1994.
The Company's employees are included in The Hartford's contributory defined
health care and life insurance benefit plans. These plans provide health care
and life insurance benefits for retired employees. Substantially all employees
may become eligible for those benefits if they reach normal or early retirement
age while still working for the Company. 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. Amounts allocated by
The Hartford for post-retirement health care and life insurance benefits expense
(not including provisions for accrual of post-retirement benefit obligations)
are immaterial. The assumed rate of future increases in the per capita cost of
health care (the health care trend rate) was 9.3% for 1996, decreasing ratably
to 6% in the year 2001. Increasing the health care trend rates by one percent
per year would have an immaterial impact on the accumulated post-retirement
benefit obligation and the annual expense. The cost to ILA was not material in
1996, 1995 and 1994.
Post-employment benefits are primarily comprised of obligations to provide
medical and life insurance to employees on long-term disability. Post-employment
benefit expense was not material in 1996, 1995 and 1994.
- ---------------------------------------------------
7. REINSURANCE
The Company cedes insurance to non-affiliated insurers in order to limit its
maximum loss. Such transfer does not relieve ILA of its primary liability. ILA
also assumes insurance from other insurers.
Life insurance net retained premiums were comprised of the following:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Direct premiums................... $ 226,612 $ 159,918 $ 133,180
Premiums assumed.................. 33,817 13,299 960
Premiums ceded.................... (10,185) (7,425) 308,033
---------- ---------- ----------
Premiums and annuity
considerations................... $ 250,244 $ 165,792 $ 442,173
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The Company ceded to a third party, on a modified coinsurance basis, 80% of
the variable annuity business written in 1994. The ceded business includes both
general and separate account liabilities. As a result of the agreement, in
December 1994, ILA transferred approximately $1,352 million in assets and
liabilities. The financial impact of the cession was an increase of
approximately $15 million to net income and surplus in 1994.
In November 1994, the Company ceded, on a modified coinsurance basis, 30% of
the separate account variable annuity business distributed by Paine Webber to
Paine Webber Life Insurance Company ("PWLIC"). As a result of the agreement, ILA
transferred approximately $24 million in assets and liabilities to PWLIC. The
financial impact of the cession was an increase of approximately $765 to net
income and surplus in 1994.
In October 1994, the agreement, effective December 1990, which required ILA
to coinsure 90% of all existing and new business, excluding variable annuity
business, written by the Company to HLIC, was terminated. As a result of the
termination, ILA received approximately $430 million in assets and liabilities
from HLIC. The impact of the transaction was a decrease of approximately $15
million to net income and surplus in 1994.
In November 1993, ILA acquired, through an assumption reinsurance
transaction, substantially all of the individual fixed and variable annuity
business of Hartford Life and Accident, an affiliate. As a result of this
transaction, the assets and liabilities of the Company increased approximately
$1 billion, substantially all of which was transferred to the separate accounts
of the Company. The remaining assets and liabilities (approximately $41 million)
were transferred in October 1995. The impact of these transactions on net income
and surplus was not significant.
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
- ---------------------------------------------------
8. SEPARATE ACCOUNTS
The Company maintains separate account assets and liabilities totaling $14.6
billion and $7.3 billion at December 31, 1996 and 1995, respectively. Separate
account assets are reported at fair value and separate account liabilities are
determined in accordance with CARVM, which approximates the market value less
applicable surrender charges. Separate account assets are segregated from other
investments, the policyholder assumes the investment risk, and the investment
income and gains and losses accrue directly to the policyholder. Separate
account management fees, net of minimum guarantees, were $144 million, $72
million and $42 million in 1996, 1995 and 1994, respectively, and are recorded
as a component of other revenues on the Statutory Basis Statements of Income.
- ---------------------------------------------------
9. COMMITMENTS AND CONTINGENCIES
As of December 31, 1996 and 1995, the Company had no material contingent
liabilities, nor had the Company committed any surplus funds for any contingent
liabilities or arrangements. The Company is involved in various legal actions
which have arisen in the normal course of its business. In the opinion of
management, the ultimate liability with respect to such lawsuits as well as
other contingencies is not considered to be material in relation to the results
of operations and financial position of the Company.
Under insurance guaranty laws in most states, insurers doing business
therein can be assessed up to prescribed limits for policyholder losses incurred
by insolvent companies. The amount of any future assessments on ILA under these
laws cannot be reasonably estimated. Most of the laws do provide, however, that
an assessment may be excused or deferred if it would threaten an insurer's own
financial strength. Additionally, guaranty fund assessments are used to reduce
state premium taxes paid by the Company in certain states. ILA paid guaranty
fund assessments of $1,262, $1,684 and $583 in 1996, 1995 and 1994,
respectively. ILA incurred guaranteed fund expense of $548, $0 and $0 in 1996,
1995 and 1994, respectively.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ITT Hartford Life and Annuity Insurance Company
Separate Account One and to the
Owners of Units of Interest Therein:
We have audited the accompanying statement of assets and liabilities of ITT
Hartford Life and Annuity Insurance Company Separate Account One (the Account)
as of December 31, 1996, 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 ITT Hartford Life and Annuity
Insurance Company Separate Account One as of December 31, 1996, 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 14, 1997
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Separate Account One
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ -------------- ------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 146,680,858
Cost $ 148,239,686
Market Value......... $146,562,046 -- -- --
Hartford Stock Fund,
Inc.
Shares 271,887,690
Cost $ 913,615,438
Market Value......... -- $1,126,351,852 -- --
HVA Money Market Fund,
Inc.
Shares 175,190,619
Cost $ 175,190,619
Market Value......... -- -- $ 175,190,619 --
Hartford Advisers Fund,
Inc.
Shares 1,051,147,592
Cost $1,923,124,930
Market Value......... -- -- -- $2,280,496,234
Hartford Capital
Appreciation Fund,
Inc.
Shares 362,247,751
Cost $1,189,356,294
Market Value......... -- -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 70,696,564
Cost $ 75,908,313
Market Value......... -- -- -- --
Hartford Index Fund,
Inc.
Shares 92,073,741
Cost $ 183,476,281
Market Value......... -- -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares 344,709,798
Cost $ 426,801,178
Market Value......... -- -- -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 321,883,841
Cost $ 426,809,084
Market Value......... -- -- -- --
Hartford International
Advisers Fund, Inc.
Shares 61,562,041
Cost $ 70,125,043
Market Value......... -- -- -- --
Hartford Small Company
Fund, Inc.
Shares 24,332,525
Cost $ 25,804,555
Market Value......... -- -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company..... 231,542 1,132,655 2,178,434 1,927,732
Receivable from fund
shares sold........... -- -- -- --
------------ -------------- ------------- --------------
Total Assets........... 146,793,588 1,127,484,507 177,369,053 2,282,423,966
------------ -------------- ------------- --------------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company..... -- -- -- --
Payable for fund shares
purchased............. 231,377 1,133,406 2,179,631 1,928,798
------------ -------------- ------------- --------------
Total Liabilities...... 231,377 1,133,406 2,179,631 1,928,798
------------ -------------- ------------- --------------
Net Assets (variable
annuity contract
liabilities).......... $146,562,211 $1,126,351,101 $ 175,189,422 $2,280,495,168
------------ -------------- ------------- --------------
------------ -------------- ------------- --------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Units Owned by
Participants.......... 76,247,196 317,415,842 110,350,169 784,325,850
Unit Price............. $ 1.922173 $ 3.546656 $ 1.586516 $ 2.905301
ANNUITY CONTRACTS IN THE
ANNUITY PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Units Owned by
Participants.......... 993 165,311 73,818 616,973
Unit Price............. $ 1.922173 $ 3.546656 $ 1.586516 $ 2.905301
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND INTERNATIONAL
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 146,680,858
Cost $ 148,239,686
Market Value......... -- -- -- -- -- --
Hartford Stock Fund,
Inc.
Shares 271,887,690
Cost $ 913,615,438
Market Value......... -- -- -- -- -- --
HVA Money Market Fund,
Inc.
Shares 175,190,619
Cost $ 175,190,619
Market Value......... -- -- -- -- -- --
Hartford Advisers Fund,
Inc.
Shares 1,051,147,592
Cost $1,923,124,930
Market Value......... -- -- -- -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 362,247,751
Cost $1,189,356,294
Market Value......... $1,417,957,241 -- -- -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 70,696,564
Cost $ 75,908,313
Market Value......... -- $74,639,312 -- -- -- --
Hartford Index Fund,
Inc.
Shares 92,073,741
Cost $ 183,476,281
Market Value......... -- -- $ 219,298,474 -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares 344,709,798
Cost $ 426,801,178
Market Value......... -- -- -- $484,965,320 -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 321,883,841
Cost $ 426,809,084
Market Value......... -- -- -- -- $498,089,494 --
Hartford International
Advisers Fund, Inc.
Shares 61,562,041
Cost $ 70,125,043
Market Value......... -- -- -- -- -- $71,817,046
Hartford Small Company
Fund, Inc.
Shares 24,332,525
Cost $ 25,804,555
Market Value......... -- -- -- -- -- --
Due from ITT Hartford
Life and Annuity
Insurance Company..... 1,472,703 -- 22,023 69,084 823,408 --
Receivable from fund
shares sold........... -- 211,277 -- -- -- 8,352
----------------- --------------- ------------- ------------------ ------------- -------------
Total Assets........... 1,419,429,944 74,850,589 219,320,497 485,034,404 498,912,902 71,825,398
----------------- --------------- ------------- ------------------ ------------- -------------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company..... -- 211,658 -- -- -- 8,339
Payable for fund shares
purchased............. 1,352,793 -- 18,249 69,086 822,396 --
----------------- --------------- ------------- ------------------ ------------- -------------
Total Liabilities...... 1,352,793 211,658 18,249 69,086 822,396 8,339
----------------- --------------- ------------- ------------------ ------------- -------------
Net Assets (variable
annuity contract
liabilities).......... $1,418,077,151 $74,638,931 $ 219,302,248 $484,965,318 $498,090,506 $71,817,059
----------------- --------------- ------------- ------------------ ------------- -------------
----------------- --------------- ------------- ------------------ ------------- -------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Units Owned by
Participants.......... 353,465,926 38,304,268 77,074,176 326,953,712 301,766,912 56,742,550
Unit Price............. $ 4.010163 $ 1.948580 $ 2.845170 $ 1.482397 $ 1.650056 $ 1.265665
ANNUITY CONTRACTS IN THE
ANNUITY PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Units Owned by
Participants.......... 154,899 -- 4,609 195,708 95,876 --
Unit Price............. $ 4.010163 $ -- $ 2.845170 $ 1.482397 $ 1.650056 $ --
<CAPTION>
SMALL
COMPANY FUND
SUB-ACCOUNT
-------------
<S> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford Stock Fund,
Inc.
Shares
Cost
Market Value......... --
HVA Money Market Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford Advisers Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford Capital
Appreciation Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford Mortgage
Securities Fund, Inc.
Shares
Cost
Market Value......... --
Hartford Index Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford International
Opportunities Fund,
Inc.
Shares
Cost
Market Value......... --
Hartford Dividend and
Growth Fund, Inc.
Shares
Cost
Market Value......... --
Hartford International
Advisers Fund, Inc.
Shares
Cost
Market Value......... --
Hartford Small Company
Fund, Inc.
Shares
Cost
Market Value......... $26,015,363
Due from ITT Hartford
Life and Annuity
Insurance Company..... 258,025
Receivable from fund
shares sold........... --
-------------
Total Assets........... 26,273,388
-------------
LIABILITIES:
Due to ITT Hartford
Life and Annuity
Insurance Company..... --
Payable for fund shares
purchased............. 257,859
-------------
Total Liabilities...... 257,859
-------------
Net Assets (variable
annuity contract
liabilities).......... $26,015,529
-------------
-------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Units Owned by
Participants.......... 24,396,916
Unit Price............. $ 1.066345
ANNUITY CONTRACTS IN THE
ANNUITY PERIOD:
INDIVIDUAL SUB-ACCOUNTS:
Units Owned by
Participants.......... --
Unit Price............. $ --
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT ONE
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 7,667,536 $ 12,967,705 $ 7,255,862 $ 53,001,953
EXPENSES:
Mortality and expense
undertakings.......... (1,488,067) (10,228,549) (1,796,887) (22,645,062)
-------------- ------------- ------------- -------------
Net investment income
(loss).............. 6,179,469 2,739,156 5,458,975 30,356,891
-------------- ------------- ------------- -------------
CAPITAL GAINS INCOME..... -- 23,889,792 -- 32,217,082
-------------- ------------- ------------- -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (12,579) 125,474 -- 5,867
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (2,390,902) 143,331,264 -- 201,866,663
-------------- ------------- ------------- -------------
Net realized and
unrealized gain
(loss) on
investments......... (2,403,481) 143,456,738 -- 201,872,530
-------------- ------------- ------------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ $ 3,775,988 $ 170,085,686 $ 5,458,975 $ 264,446,503
-------------- ------------- ------------- -------------
-------------- ------------- ------------- -------------
</TABLE>
* From inception, August 9, 1996, to December 31, 1996.
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- --------------- --------------------- -----------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 7,386,029 $4,153,578 $ 3,067,328 $ 7,701,529 $ 7,499,405
EXPENSES:
Mortality and expense
undertakings.......... (13,299,773) (807,142) (1,842,489) (4,929,997) (3,769,755)
----------------- --------------- --------------- --------------------- -----------------
Net investment income
(loss).............. (5,913,744) 3,346,436 1,224,839 2,771,532 3,729,650
----------------- --------------- --------------- --------------------- -----------------
CAPITAL GAINS INCOME..... 50,334,274 -- 1,690,389 8,880,986 3,429,737
----------------- --------------- --------------- --------------------- -----------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (93,060) 11,668 238,066 7,755 (2,773)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 142,164,193 (882,583) 25,487,376 31,201,375 53,771,055
----------------- --------------- --------------- --------------------- -----------------
Net realized and
unrealized gain
(loss) on
investments......... 142,071,133 (870,915) 25,725,442 31,209,130 53,768,282
----------------- --------------- --------------- --------------------- -----------------
Net increase (decrease)
in net assets
resulting from
operations............ $186,491,663 $2,475,521 $ 28,640,670 $42,861,648 $ 60,927,669
----------------- --------------- --------------- --------------------- -----------------
----------------- --------------- --------------- --------------------- -----------------
<CAPTION>
INTERNATIONAL SMALL
ADVISERS FUND COMPANY FUND
SUB-ACCOUNT SUB-ACCOUNT*
--------------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $2,027,740 $ 19,636
EXPENSES:
Mortality and expense
undertakings.......... (527,485) (53,227)
--------------- ------------
Net investment income
(loss).............. 1,500,255 (33,591)
--------------- ------------
CAPITAL GAINS INCOME..... 1,446,895 --
--------------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... (563) 1,014
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 1,479,032 210,808
--------------- ------------
Net realized and
unrealized gain
(loss) on
investments......... 1,478,469 211,822
--------------- ------------
Net increase (decrease)
in net assets
resulting from
operations............ $4,425,619 $178,231
--------------- ------------
--------------- ------------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Separate Account One
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 6,179,469 $ 2,739,156 $ 5,458,975 $ 30,356,891
Capital gains income... -- 23,889,792 -- 32,217,082
Net realized gain
(loss) on security
transactions.......... (12,579) 125,474 -- 5,867
Net unrealized
appreciation
(depreciation) of
investments during the
period................ (2,390,902) 143,331,264 -- 201,866,663
------------- --------------- ------------- ---------------
Net increase (decrease)
in net assets
resulting from
operations............ 3,775,988 170,085,686 5,458,975 264,446,503
------------- --------------- ------------- ---------------
UNIT TRANSACTIONS:
Purchases.............. 50,521,787 328,658,597 170,409,309 548,125,217
Net transfers.......... 6,860,514 111,488,442 (87,853,221) 158,897,610
Surrenders............. (5,504,050) (23,567,485) (14,470,700) (70,519,197)
Net annuity
transactions.......... 1,807 394,242 8,095 766,829
------------- --------------- ------------- ---------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 51,880,058 416,973,796 68,093,483 637,270,459
------------- --------------- ------------- ---------------
Total increase
(decrease) in net
assets................ 55,656,046 587,059,482 73,552,458 901,716,962
NET ASSETS:
Beginning of period.... 90,906,165 539,291,619 101,636,964 1,378,778,206
------------- --------------- ------------- ---------------
End of period.......... $ 146,562,211 $ 1,126,351,101 $ 175,189,422 $ 2,280,495,168
------------- --------------- ------------- ---------------
------------- --------------- ------------- ---------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- --------------- ------------- ---------------
OPERATIONS:
Net investment income
(loss)................ $ 3,623,445 $ 3,565,344 $ 2,459,135 $ 24,292,959
Capital gains income... -- 10,042,632 -- 10,002,290
Net realized gain
(loss) on security
transactions.......... (1,975) (399) -- (7,267)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 6,900,317 83,219,709 -- 206,272,399
------------- --------------- ------------- ---------------
Net increase (decrease)
in net assets
resulting from
operations............ 10,521,787 96,827,286 2,459,135 240,560,381
------------- --------------- ------------- ---------------
UNIT TRANSACTIONS:
Purchases.............. 25,372,374 158,137,004 80,712,314 270,288,399
Net transfers.......... 4,295,703 52,451,790 (20,394,095) 82,728,374
Surrenders............. (3,251,644) (10,089,748) (6,391,220) (40,365,223)
Net annuity
transactions.......... -- 21,071 103,096 437,471
------------- --------------- ------------- ---------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 26,416,433 200,520,117 54,030,095 313,089,021
------------- --------------- ------------- ---------------
Total increase
(decrease) in net
assets................ 36,938,220 297,347,403 56,489,230 553,649,402
NET ASSETS:
Beginning of period.... 53,967,945 241,944,216 45,147,734 825,128,804
------------- --------------- ------------- ---------------
End of period.......... $ 90,906,165 $ 539,291,619 $ 101,636,964 $ 1,378,778,206
------------- --------------- ------------- ---------------
------------- --------------- ------------- ---------------
</TABLE>
* From inception, August 9, 1996, to December 31, 1996.
** From inception, March 1, 1995, to December 31, 1995.
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND INTERNATIONAL
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ (5,913,744) $ 3,346,436 $ 1,224,839 $ 2,771,532 $ 3,729,650 $ 1,500,255
Capital gains income... 50,334,274 -- 1,690,389 8,880,986 3,429,737 1,446,895
Net realized gain
(loss) on security
transactions.......... (93,060) 11,668 238,066 7,755 (2,773) (563)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 142,164,193 (882,583) 25,487,376 31,201,375 53,771,055 1,479,032
----------------- --------------- ------------- ------------------ ------------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 186,491,663 2,475,521 28,640,670 42,861,648 60,927,669 4,425,619
----------------- --------------- ------------- ------------------ ------------- -------------
UNIT TRANSACTIONS:
Purchases.............. 403,482,054 13,476,913 83,760,185 110,673,155 205,512,019 37,280,366
Net transfers.......... 129,133,556 2,655,230 33,248,800 47,078,167 101,413,217 19,003,957
Surrenders............. (30,210,654) (2,722,173) (3,699,700) (11,782,890) (7,316,597) (1,178,598)
Net annuity
transactions.......... 288,203 -- 203 81,416 146,210 31
----------------- --------------- ------------- ------------------ ------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 502,693,159 13,409,970 113,309,488 146,049,848 299,754,849 55,105,756
----------------- --------------- ------------- ------------------ ------------- -------------
Total increase
(decrease) in net
assets................ 689,184,822 15,885,491 141,950,158 188,911,496 360,682,518 59,531,375
NET ASSETS:
Beginning of period.... 728,892,329 58,753,440 77,352,090 296,053,822 137,407,988 12,285,684
----------------- --------------- ------------- ------------------ ------------- -------------
End of period.......... $1,418,077,151 $74,638,931 $ 219,302,248 $484,965,318 $498,090,506 $71,817,059
----------------- --------------- ------------- ------------------ ------------- -------------
----------------- --------------- ------------- ------------------ ------------- -------------
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND INTERNATIONAL
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT**
----------------- --------------- ------------- ------------------ ------------- -------------
OPERATIONS:
Net investment income
(loss)................ $ (1,415,627) $ 2,738,167 $ 502,406 $ 860,408 $ 1,039,600 $ 242,325
Capital gains income... 17,026,540 -- 8,809 1,900,624 -- --
Net realized gain
(loss) on security
transactions.......... (36,921) 8,806 (2,982) 18,072 (3,380) 560
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 92,059,097 4,247,716 10,397,357 26,882,909 17,906,285 212,972
----------------- --------------- ------------- ------------------ ------------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 107,633,089 6,994,689 10,905,590 29,662,013 18,942,505 455,857
----------------- --------------- ------------- ------------------ ------------- -------------
UNIT TRANSACTIONS:
Purchases.............. 245,731,245 8,572,589 31,929,411 55,473,427 67,833,419 8,715,018
Net transfers.......... 82,630,293 (2,398,278) 14,672,676 9,777,060 30,210,279 3,144,229
Surrenders............. (12,124,223) (2,985,486) (1,214,487) (6,662,350) (1,756,293) (29,420)
Net annuity
transactions.......... 225,634 -- 9,937 147,629 -- --
----------------- --------------- ------------- ------------------ ------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 316,462,949 3,188,825 45,397,537 58,735,766 96,287,405 11,829,827
----------------- --------------- ------------- ------------------ ------------- -------------
Total increase
(decrease) in net
assets................ 424,096,038 10,183,514 56,303,127 88,397,779 115,229,910 12,285,684
NET ASSETS:
Beginning of period.... 304,796,291 48,569,926 21,048,963 207,656,043 22,178,078 --
----------------- --------------- ------------- ------------------ ------------- -------------
End of period.......... $ 728,892,329 $58,753,440 $ 77,352,090 $296,053,822 $137,407,988 $12,285,684
----------------- --------------- ------------- ------------------ ------------- -------------
----------------- --------------- ------------- ------------------ ------------- -------------
<CAPTION>
SMALL
COMPANY FUND
SUB-ACCOUNT*
-------------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $ (33,591)
Capital gains income... --
Net realized gain
(loss) on security
transactions.......... 1,014
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 210,808
-------------
Net increase (decrease)
in net assets
resulting from
operations............ 178,231
-------------
UNIT TRANSACTIONS:
Purchases.............. 14,704,067
Net transfers.......... 11,169,302
Surrenders............. (36,071)
Net annuity
transactions.......... --
-------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 25,837,298
-------------
Total increase
(decrease) in net
assets................ 26,015,529
NET ASSETS:
Beginning of period.... --
-------------
End of period.......... $26,015,529
-------------
-------------
OPERATIONS:
Net investment income
(loss)................
Capital gains income...
Net realized gain
(loss) on security
transactions..........
Net unrealized
appreciation
(depreciation) of
investments during the
period................
Net increase (decrease)
in net assets
resulting from
operations............
UNIT TRANSACTIONS:
Purchases..............
Net transfers..........
Surrenders.............
Net annuity
transactions..........
Net increase (decrease)
in net assets
resulting from unit
transactions..........
Total increase
(decrease) in net
assets................
NET ASSETS:
Beginning of period....
End of period..........
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- ---------------------------------------------------
1. ORGANIZATION:
Separate Account One (the Account) is a separate investment account within
ITT Hartford Life and Annuity Insurance Company (the Company) and is registered
with the Securities and Exchange Commission (SEC) as a unit investment trust
under the Investment Company Act of 1940, as amended. Both the Company and the
Account are subject to supervision and regulation by the Department of Insurance
of the State of Connecticut and the SEC. The Account invests deposits by
variable annuity contractholders of the Company in various mutual funds (the
Funds) as directed by the contractholders.
- ---------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting principles
in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividends 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 investment 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, 1996.
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.
b) DEDUCTION OF ANNUAL MAINTENANCE FEE--Annual maintenance fees are
deducted through termination of units of interest from applicable
contractholders' accounts, in accordance with the terms of the
contracts.
<PAGE>
PART C
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 Individual Flexible Premium Variable Annuity
Contract. (1)
(5) Form of Application. (1)
(6) (a) Certificate of Incorporation of Hartford.
(6) (b) Bylaws of Hartford. (2)
(7) Not applicable.
(8) Not applicable.
(9) Opinion and Consent of Lynda Godkin, General Counsel and
Corporate Secretary.
(10) Consent of Arthur Andersen LLP, Independent Public
Accountants.
(11) No financial statements are omitted.
(12) Not applicable.
(13) Not applicable.
- --------------------
(1) Incorporated by reference to Post-Effective Amendment No. 5, to the
Registration Statement File No. 33-56790, dated May 1, 1995.
(2) Incorporated by reference to Post Effective Amendment No. 6, to the
Registration Statement File No. 33-56790, dated May 1, 1996.
<PAGE>
-2-
(14) Not applicable.
(15) Copy of Power of Attorney.
(16) Organizational Chart.
Item 25. Directors and Officers of the Depositor
- --------------------------------------------------------------------------------
NAME, AGE POSITION WITH HARTFORD
- --------------------------------------------------------------------------------
Wendell J. Bossen Vice President
Gregory A. Boyko Vice President and Controller
Peter W. Cummins Vice President
Ann M. deRaismes Vice President
James R. Dooley Vice President
Timothy M. Fitch Vice President and Actuary
Bruce D. Gardner Director*
Joseph H. Gareau Executive Vice President and Chief
Investment Officer, Director*
Donald J. Gillette Vice President
Lynda Godkin General Counsel and Corporate Secretary
Lois W. Grady Vice President
David A. Hall Senior Vice President and Actuary
Robert A. Kerzner Vice President
William B. Malchodi, Jr. Vice President and Director of Taxes
Thomas M. Marra Executive Vice President and Director
Individual Life and Annuity Division,
Director*
Steven L. Mattieson Vice President
Joseph J. Noto Vice President
Craig D. Raymond Vice President and Chief Actuary
David T. Schrandt Vice President and Treasurer
Lowndes A. Smith President, Chief Executive Officer,
Director*
<PAGE>
-3-
- --------------------------------------------------------------------------------
NAME, AGE POSITION WITH HARTFORD
- --------------------------------------------------------------------------------
Lizabeth H. Zlatkus Vice President, Director*
Unless otherwise indicated, the principal business address of each the
above individuals is P.O. Box 2999, Hartford, CT 06104-2999.
*Denotes date of election to Board of Directors.
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
Filed herewith as Exhibit 26.
Item 27. Number of Contract Owners
As of March 31, 1997, there were 45,003 Contract Owners.
Item 28. Indemnification
Under Section 33-320a of the Connecticut General Statutes, the
Registrant must indemnify a director or officer against judgments,
fines, penalties, amounts paid in settlement and reasonable expenses,
including attorney's fees, for actions brought or threatened to be
brought against him in his capacity as a director or officer when it
is determined by certain disinterested parties that he acted in good
faith and in a manner he reasonably believed to be in the best
interests of the Registrant. In any criminal action or proceeding, it
also must be determined that the director or officer had no reason to
believe his conduct was unlawful. The director or officer must also
be indemnified when he is successful on the merits in the defense of a
proceeding or in circumstances where a court determines that he is
fairly and reasonably entitled to be indemnified, and the court
approves the amount. In shareholder derivative suits, the director or
officer must be fully adjudged not to have breached his duty to the
Registrant or a court must determine that he is fairly and reasonably
entitled to be indemnified and must approve the amount. In a claim
based upon the director's or officer's purchase or sale of the
Registrant's securities, the director or officer may obtain
indemnification only if a court determines that, in view of all the
circumstances, he is fairly and reasonably entitled to be indemnified,
and then for such amount as the court shall determine.
The foregoing statements are specifically made subject to the detailed
provisions of Section 33-320a.
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 ITT Hartford Group, Inc.
and its subsidiaries. Such policy will reimburse the Registrant for
any payments that it shall make to directors and officers pursuant to
law and will,
<PAGE>
-4-
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 (the "Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the
foregoing provisions, 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
ITT Hartford Life and Annuity Insurance Company - Separate
Account One
ITT Hartford Life and Annuity Insurance Company - Putnam Capital
Manager Trust Separate Account Two
ITT Hartford Life and Annuity Insurance Company - Separate
Account Three
ITT Hartford Life and Annuity Insurance Company - Separate
Account Five
ITT Hartford Life and Annuity Insurance Company - Separate
Account Six
American Maturity Life Insurance Company - Separate Account
AMLVA
<PAGE>
-5-
(b) Directors and Officers of HSD
Name and Principal Positions and Offices
Business Address With Underwriter
------------------ ---------------------
Lowndes A. Smith President
John P. Ginnetti Executive Vice President, Director
Thomas M. Marra Executive Vice President, Director
Peter W. Cummins Vice President
Donald E. Waggaman, Jr. Treasurer
Bruce D. Gardner Secretary
George R. Jay Controller
Michael Wilder Director
Unless otherwise indicated, the principal business address of
each of the above individuals is P. O. Box 2999, Hartford,
Connecticut 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
<PAGE>
-6-
reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by Hartford.
The Registrant is relying on the no-action letter issued by the
Division of Investment Management to American Counsel of Life
Insurance, Ref. No. IP-6-88, November 28, 1988. The Registrant
has complied with conditions one through four of the no-action
letter.
33-56790
IHLA/Director
<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 10 day
of April, 1997.
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT ONE
(Registrant)
*By: /s/ Thomas M. Marra *By: /s/ Lynda Godkin
----------------------------------------- -------------------------
Thomas M. Marra, Executive Vice President Lynda Godkin
Attorney-in-Fact
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
(Depositor)
*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 capacity and on
the date indicated.
Bruce D. Gardner, Director *
Joseph H. Gareau, Executive Vice
President & Chief Investment *By: /s/ Lynda Godkin
Officer, Director * -------------------------
Thomas M. Marra, Executive Vice Lynda Godkin
President, Director * Attorney-in-Fact
Lowndes A. Smith, President &
Chief Operating Officer, Dated: April 10, 1997
Director * -------------------------
Lizabeth H. Zlatkus, Vice President,
Director *
33-56790/ILA
<PAGE>
EXHIBIT INDEX
(6)(a) Certificate of Incorporation of Hartford
(9) Opinion and Consent of Lynda Godkin, General Counsel
(10) Consent of Arthur Andersen LLP
(15) Copy of Power of Attorney
(16) Organizational Chart
<PAGE>
EXHIBIT 6(a)
FILING #0001681641 PG 04 OF 05 VOL B-00105
FILED 12/31/1996 10:00 AM PAGE 00897
SECRETARY OF STATE
CONNECTICUT SECRETARY OF THE STATE
CERTIFICATE AMENDING
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
BY ACTIONS OF THE BOARD OF DIRECTORS AND THE SOLE SHAREHOLDER
1. The name of the Corporation is ITT HARTFORD LIFE AND ANNUITY INSURANCE
COMPANY.
2. The Amended and Restated Certificate of Incorporation is amended by the
following resolution of each of the Board of Directors and the Sole
Shareholder:
RESOLVED, that the Amended and Restated Certificate of
Incorporation of the Company, as supplemented and amended to
date, is hereby amended by striking out Section 9 in its entirety
and adding the following Sections 9 and 10. All other sections
of the Amended and Restated Certificate of Incorporation shall
remain unchanged and continue in full force and effect.
"Section 9. The Board of Directors may, at any time, appoint
from among its own members such committees as it
may deem necessary for the proper conduct of the
business of the Company. The Board of Directors
shall be unrestricted as to the powers it may
confer upon such committees."
"Section 10. So much of the charter of said corporation, as
amended, as is inconsistent herewith is repealed,
provided that such repeal shall not invalidate or
otherwise affect any action taken pursuant to the
charter of the corporation, in accordance with its
terms, prior to the effective date of such
repeal."
3. The above resolutions were passed by the Board of Directors and the Sole
Shareholder of the Corporation. The number of shares of the Corporation's
common capital stock entitled to vote thereon was 3,000 and the vote
required for adoption was 2,000 shares. The vote favoring adoption was
3,000 shares, which was the greatest vote required to pass the resolution.
<PAGE>
2
Dated at Simsbury, Connecticut this 30th day of December, 1996.
We hereby declare, under penalty of false statement, that the statements made in
the foregoing Certificate are true.
ITT HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY
/s/Thomas M. Marra
------------------------------------
Thomas M. Marra, Executive Vice
President and Director - Individual
Life and Annuity Division
/s/Lynda Godkin
------------------------------------
Lynda Godkin, General Counsel and
Corporate Secretary
<PAGE>
CERTIFICATE AMENDING AND RESTATING
THE CERTIFICATE OF INCORPORATION BY
ACTION OF THE BOARD OF DIRECTORS AND SHAREHOLDERS
The name of the Corporation is ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY.
2. The Certificate of Incorporation is amended and restated by the following
resolution of the Board of Directors and Shareholder of the Corporation.
RESOLVED, that the Certificate of Incorporation of the Corporation, as
supplemented and amended to date, is further amended and restated to read
as follows:
Section 1. The name of the Corporation is ITT HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY.
Section 2. The address of the Registered Office of the Corporation is
Hartford Plaza, Hartford, Connecticut 06104-2999.
Section 3. The Corporation is a body politic and corporate and shall
have all the powers granted by the general statutes, as now
enacted or hereinafter amended, to corporations formed under
the Stock Corporation Act.
Section 4. The Corporation shall have the purposes and powers to write
any and all forms of insurance which any other corporation
now or hereafter chartered in Connecticut and empowered to
do an insurance business may now or hereafter lawfully do;
to accept and to cede reinsurance; to issue policies and
contracts for any kind or combination of kinds of insurance;
to issue policies or contracts either with or without
participation in profits; to acquire and hold any or all of
the shares or other securities of any insurance corporation
or any other kind of corporation; and to engage in any
lawful act or activity for which corporations may be formed
under the Stock Corporation Act. The corporation is
authorized to exercise the powers herein granted in any
state, territory or jurisdiction of the United States or
in any foreign country.
Section 5. The Corporation shall obtain a license from the insurance
commissioner prior to the commencement of business and
shall be subject to all general statutes applicable to
insurance companies.
Section 6. The aggregate number of shares which the corporation shall
have authority to issue is 3,000 shares consisting of one
class only, designated as Common Shares, of the par value
of $1,250.
Section 7. No shareholder shall, because of his ownership of shares,
have a preemptive or other right to purchase, subscribe for,
or take any part of any shares or any
<PAGE>
2
part of the notes, debentures, bonds, or other securities
convertible into or carrying options or warrants to purchase
shares of this corporation issued, optioned, or sold by it
after its incorporation.
Section 8. The minimum amount of stated capital with which the
corporation shall commence business is One Thousand
Dollars ($1,000.00).
Section 9. So much of the charter of said corporation is amended, as is
inconsistent herewith is repealed, provided such repeal shall
not invalidate or otherwise affect any action taken pursuant
to the charter of the corporation, in accordance with its
terms, prior to the effective date of such repeal.
3. The above resolution was passed by the Board of Directors and the
Shareholder of the Corporation. The number of shares entitled to vote
thereon was 3,000 and the vote required for adoption was 2,000 shares.
The vote favoring adoption was 3,000 which was the greatest vote needed to
pass the resolution.
Dated at Simsbury, Connecticut this 30th day of April, 1996.
We hereby declare, under the penalties of false statement, that the
statements made in the foregoing Certificate are true.
ITT HARTFORD LIFE AND
ANNUITY INSURANCE COMPANY
/s/ Lowndes A. Smith
---------------------------------
Lowndes A. Smith, President
/s/ Lynda Godkin
----------------------------------
Lynda Godkin, General Counsel
and Corporate Secretary
<PAGE>
THE [LOGO]
HARTFORD
April 10, 1997 Lynda Godkin
General Counsel & Secretary
Law Department
Board of Directors
ITT Hartford Life and Annuity Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
RE: SEPARATE ACCOUNT ONE
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
FILE NO. 33-56790
Dear Sir/Madam:
I have acted as General Counsel to ITT Hartford Life and Annuity Insurance
Company (the "Company"), a Connecticut insurance company, and ITT Hartford Life
and Annuity Insurance Company Separate Account One (the "Account") in connection
with the registration of an indefinite amount of securities in the form of tax-
deferred 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.
Hartford Life Insurance Companies
200 Hopmeadow Street
Simsbury, CT 06089
860 843 3153
860 843 8665 Fax
Mailing Address: P.O. Box 2999
Hartford, CT 06104-2999
<PAGE>
Board of Directors
ITT Hartford Life and Annuity Insurance Company
April 10, 1997
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>
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. 33-56970 for ITT Hartford Life and Annuity
Insurance Company Separate Account One on Form N-4.
/s/ Arthur Andersen LLP
Hartford, Connecticut
April 14, 1997
<PAGE>
ITT HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
POWER OF ATTORNEY
Donald R. Frahm
Bruce D. Gardner
Joseph H. Gareau
Joseph Kanarek
Thomas M. Marra
Lowndes A. Smith
Lizabeth H. Zlatkus
do hereby jointly and severally authorize Lynda Godkin and/or Margaret E.
Hankard and Marianne O'Doherty to sign as their agent, any Registration
Statement, pre-effective amendment, post-effective amendment and any application
for exemptive relief of the ITT Hartford Life and Annuity 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/Donald R. Frahm /s/Lowndes A. Smith
- -------------------------------------- -----------------------------------
Donald R. Frahm Lowndes A. Smith
/s/Bruce D. Gardner /s/Lizabeth H. Zlatkus
- -------------------------------------- -----------------------------------
Bruce D. Gardner Lizabeth H. Zlatkus
/s/Joseph H. Gareau
- --------------------------------------
Joseph H. Gareau
/s/Joseph Kanarek
- --------------------------------------
Joseph Kanarek
/s/Thomas M. Marra
- --------------------------------------
Thomas M. Marra
Dated: December 3, 1996
-----------------------
<PAGE>
EXHIBIT 16
<TABLE>
<CAPTION>
<S><C>
ITT Hartford Group, Inc..
(Delaware)
|
- ----------------------------------------------------------------------------------------------------
Nutmeg Insurance Company The Hartford Investment
(Connecticut) Management Company
| (Delaware)
|
Hartford Fire Insurance Company
(Connecticut)
|
Hartford Accident and Indemnity Company
(Connecticut)
|
Hartford Life, Inc.
(Delaware)
|
Hartford Life and Accident Insurance Company
(Connecticut)
|
|
|
- -------------------------------------------------------------------------------------------------------------------
Alpine Life Hartford Financial Hartford Life American Maturity ITT Hartford Canada
Insurance Company Services Life Insurance Company Life Insurance Holdings, Inc.
(New Jersey) Insurance Co. (Connecticut) Company (Canada)
(Connecticut) | (Connecticut) |
| |
| |
| ITT Hartford Life
| Insurance Company
| of Canada
| (Canada)
|
|
- ------------------------------------------------------------------------------------------------------------------
ITT Hartford Life and Annuity ITT Hartford International Hartford Financial Services
Insurance Company Life Reassurance Corporation Corporation
(Connecticut) (Connecticut) (Delaware)
| |
| |
| |
ITT Hartford Life, Ltd. |
(Bermuda) |
|
|
- -----------------------------------------------------------------------------------------------------------------
MS Fund HL Funding HL Investment Hartford Hartford Securities ITT Comp. Emp.
America, Inc. Company, Inc. Advisors, Inc. Equity Sales Distribution Benefits Service
(Delaware) (Connecticut) (Connecticut) Company, Inc. Company, Inc. Company
(Connecticut) (Connecticut) (Connecticut)
</TABLE>
